<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1998
REGISTRATION NOS. 333-47925
333-47925-01
333-47925-02
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
YORKSHIRE POWER GROUP YORKSHIRE POWER FINANCE YORKSHIRE CAPITAL TRUST
LIMITED LIMITED I
(EXACT NAME OF (EXACT NAME OF (EXACT NAME OF
REGISTRANT AS SPECIFIED REGISTRANT AS SPECIFIED REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER) IN TRUST AGREEMENT)
ENGLAND AND WALES CAYMAN ISLANDS DELAWARE
(STATE OR OTHER (STATE OR OTHER (STATE OR OTHER
JURISDICTION OF JURISDICTION OF JURISDICTION OF
INCORPORATION OR INCORPORATION OR INCORPORATION OR
ORGANIZATION) ORGANIZATION) ORGANIZATION)
4911 4911 4911
(PRIMARY STANDARD (PRIMARY STANDARD (PRIMARY STANDARD
INDUSTRIAL INDUSTRIAL INDUSTRIAL
CLASSIFICATION CODE CLASSIFICATION CODE CLASSIFICATION CODE
NUMBER) NUMBER) NUMBER)
NOT APPLICABLE NOT APPLICABLE TO BE APPLIED FOR
(I.R.S EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NUMBER) IDENTIFICATION NUMBER) IDENTIFICATION NUMBER)
WETHERBY ROAD, SCARCROFT WETHERBY ROAD, SCARCROFT 1 RIVERSIDE PLAZA
LEEDS LS14 3HS, ENGLAND LEEDS LS14 3HS ENGLAND COLUMBUS, OHIO 43215
011-44-113-289-2123 011-44-113-289-2123 614-223-1000
(ADDRESS, INCLUDING ZIP (ADDRESS, INCLUDING ZIP (ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE CODE, AND TELEPHONE CODE, AND TELEPHONE
NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S CODE, OF REGISTRANT'S CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE PRINCIPAL EXECUTIVE PRINCIPAL EXECUTIVE
OFFICES) OFFICES) OFFICES)
--------------
ARMANDO A. PENA RICHARD C. KELLY
SENIOR VICE PRESIDENT, TREASURER AND EXECUTIVE VICE PRESIDENT, FINANCE
CHIEF FINANCIAL OFFICER AND SUPPORT SERVICES
AMERICAN ELECTRIC POWER SERVICE AND CHIEF FINANCIAL OFFICER
CORPORATION NEW CENTURY ENERGIES, INC.
1 RIVERSIDE PLAZA 1225 SEVENTEENTH STREET
COLUMBUS, OHIO 43215 DENVER, COLORADO 80502
614-223-2850 303-294-8989
(NAMES, ADDRESSES, INCLUDING ZIP CODES, AND TELEPHONE NUMBERS, INCLUDING AREA
CODES, OF AGENTS FOR SERVICE)
It is respectfully requested that the Commission send copies of all notices,
orders and communications to:
E. N. ELLIS, IV, ESQ. ROGER DICKINSON, L.L.B.
DEWEY BALLANTINE LLP YORKSHIRE ELECTRICITY GROUP PLC
1301 AVENUE OF THE AMERICAS WETHERBY ROAD, SCARCROFT
NEW YORK, NEW YORK 10019 LEEDS LS14 3HS, ENGLAND
212-259-8000 011-44-113-289-5055
TODD W. ECKLAND, ESQ.
MARK WELLING, ESQ. WINTHROP, STIMSON, PUTNAM & ROBERTS
ALLEN & OVERY ONE BATTERY PARK PLAZA
ONE NEW CHANGE NEW YORK, NEW YORK 10004
LONDON EC4M 9QQ, ENGLAND 212-858-1000
011-44-171-330-3000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
--------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 13, 1998
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
11,000,000 % TRUST SECURITIES
YORKSHIRE CAPITAL TRUST I
(LIQUIDATION AMOUNT $25 PER TRUST SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
YORKSHIRE POWER GROUP LIMITED
-----------
The % Trust Securities (the "Trust Securities") offered hereby represent
undivided beneficial interests in the assets of Yorkshire Capital Trust I, a
statutory business trust created under the laws of the State of Delaware (the
"Trust"). The Trust was created for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in an equivalent amount of %
Junior Subordinated Deferrable Interest Debentures, Series A due , 2038 (the
"Junior Subordinated Debentures"), to be issued by Yorkshire Power Finance
Limited, a private company with limited liability incorporated under the laws
of the Cayman Islands ("Yorkshire Finance"). The Junior Subordinated Debentures
will be redeemable, at the option of Yorkshire Finance, as described herein.
Yorkshire Power Group Limited, a private company with limited liability
incorporated under the laws of England and Wales ("Yorkshire Group") and parent
of Yorkshire Finance, will fully and unconditionally guarantee, as set forth
herein, all payments on the Trust Securities (the "Trust Securities
Guarantee"). Yorkshire Group will irrevocably and unconditionally guarantee all
payments on the Junior Subordinated Debentures when due and payable (the
"Debentures Guarantee").
(Continued on next page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE TRUST SECURITIES.
Application has been made to list the Trust Securities on the New York Stock
Exchange (the "NYSE"). If accepted, trading on the NYSE would commence within
the 30-day period after the initial delivery of the Trust Securities. See
"Underwriting".
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE COMMISSION(1) THE TRUST(2)(3)
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<S> <C> <C> <C>
Per Trust Security............................. $25.00 (2) $25.00
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Total.......................................... $275,000,000 (2) $275,000,000
</TABLE>
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(1) Yorkshire Finance and Yorkshire Group have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds from the sale of the Trust Securities
will be used to purchase the Junior Subordinated Debentures from Yorkshire
Finance, the Underwriting Agreement provides that Yorkshire Finance will
pay to the Underwriters, as compensation ("Underwriters' Compensation") for
arranging the investment therein of such proceeds, $ per Trust Security
(or $ in the aggregate); provided that such compensation will be $
per Trust Security for sales of 10,000 or more Trust Securities to a single
purchaser. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount specified
in the preceding sentence. See "Underwriting".
(3) Expenses of the offering, which are payable pursuant to the Agreement as to
Expenses and Liabilities, are estimated to be $ .
-----------
The Trust Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Trust Securities will be only in book-entry form
through the facilities of The Depository Trust Company ("DTC"), on or about
, 1998, against payment therefor in immediately available funds.
-----------
MERRILL LYNCH & CO.
-----------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TRUST
SECURITIES, INCLUDING BY ENTERING STABILIZING BIDS, PURCHASING TRUST
SECURITIES TO COVER SYNDICATE SHORT POSITIONS, AND IMPOSING PENALTY BIDS. FOR
A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING".
---------------
(Continued from previous page)
Holders of the Trust Securities will be entitled to receive, to the extent
of funds held by the Trust and available therefor, periodic cash distributions
accumulating from the date of original issuance and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing , 1998, at the rate of % per annum of the liquidation amount of
$25 per Trust Security (the "Distributions"). So long as no Event of Default
(as defined under "Description of the Junior Subordinated Debentures--
Indenture Event of Defaults") under the Indenture (as defined under "Summary--
The Offering") has occurred and is continuing, Yorkshire Finance has the right
to defer the payment of interest ("Interest Payments") on the Junior
Subordinated Debentures at any time or from time to time, for up to 20
consecutive quarters (each an "Extension Period"). An Extension Period,
however, cannot extend beyond the Stated Maturity (as defined below) of the
Junior Subordinated Debentures. If Interest Payments on the Junior
Subordinated Debentures are so deferred, Distributions on the Trust Securities
will also be deferred. Until all deferred Interest Payments and interest
thereon have been paid in full, Interest Payments on the Junior Subordinated
Debentures will continue to accrue (and the Trust Securities will accumulate
additional Distributions thereon) at the rate of % per annum, compounded
quarterly. During any Extension Period, holders of Trust Securities will be
required to accrue deferred interest as original issue discount ("OID"), and
to include such OID in their gross income for US Federal income tax purposes
in advance of the receipt of the cash distributions with respect to such
deferred Interest Payments. There could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures.
During an Extension Period, neither Yorkshire Finance nor Yorkshire Group will
be permitted, subject to certain exceptions set forth herein, to (i) declare
or pay any cash distributions with respect to its capital stock, (ii) make any
payments on its debt securities that rank pari passu with or junior to the
Junior Subordinated Debentures or the Debentures Guarantee, respectively,
(iii) make any payments with respect to any guarantee that ranks pari passu
with or junior to the Junior Subordinated Debentures or the Debentures
Guarantee, respectively, or (iv) make any payments on its debt securities held
by, make any loans or advances to, or make payments with respect to any
guarantee of the debt of, any affiliate. See "Description of the Junior
Subordinated Debentures--Option to Defer Payment of Interest". During an
Extension Period, Yorkshire Group's obligations to make payments under the
Trust Securities Guarantee and the Debentures Guarantee will be suspended.
Pursuant to the Trust Securities Guarantee, Yorkshire Group will guarantee
the payment of Distributions and payments on liquidation of the Trust or
redemption of the Trust Securities, but only in each case to the extent of
sufficient funds held by the Trust and available therefor. If Yorkshire
Finance does not make payments of principal of or interest on the Junior
Subordinated Debentures or Yorkshire Group does not make payments pursuant to
the Debentures Guarantee, the Trust will have insufficient funds to pay
Distributions on the Trust Securities or amounts payable on redemption thereof
or otherwise. The Trust Securities Guarantee does not cover payment of
Distributions or amounts when the Trust does not have sufficient funds
available to pay such amounts. See "Description of the Trust Securities
Guarantee". In such event, the remedy of a holder of Trust Securities will be
to enforce its rights under the Debentures Guarantee. See "Description of the
Junior Subordinated Debentures" and "Description of the Debentures Guarantee".
The Junior Subordinated Debentures will be unsecured and subordinate
obligations and junior in right of payment to all Senior Debt (as defined
under "Description of the Junior Subordinated Debentures--Subordination") of
Yorkshire Finance. The Trust Securities Guarantee and the Debentures Guarantee
will be unsecured and subordinate obligations and junior in right of payment
to all Senior Debt of Yorkshire Group and the Trust Securities Guarantee will
rank pari passu (equal in priority) with the most senior preferred stock of
Yorkshire Group. As of December 31, 1997, Yorkshire Group had (i)
approximately (Pounds)1,034 million ($1,699 million) of Senior Debt
outstanding, a portion of which will be repaid with proceeds of this offering
and (ii) no senior preferred stock outstanding with which the Trust Securities
Guarantee would rank pari passu. The terms of the Junior Subordinated
Debentures and the Trust Securities Guarantee and the Debentures Guarantee
will not place any limitation on the amount of Senior Debt that may be
incurred by Yorkshire Finance and Yorkshire Group, respectively. In addition,
Yorkshire Group's obligations under the Debentures Guarantee and the Trust
Securities Guarantee will be effectively subordinated to all existing and
future
2
<PAGE>
indebtedness and liabilities of its subsidiaries, including Yorkshire
Electricity Group plc ("Yorkshire"). At December 31, 1997, the direct and
indirect subsidiaries of Yorkshire Group had total indebtedness (excluding
indebtedness owed to Yorkshire Group) of approximately (Pounds)476 million
($782 million). See "Risk Factors", "Description of the Junior Subordinated
Debentures--Subordination", "Description of the Debentures Guarantee" and
"Description of the Trust Securities Guarantee".
AEP Resources, Inc., an Ohio corporation ("AEP Resources"), and New Century
International, Inc., a Delaware corporation ("New Century International" and,
with AEP Resources, collectively, the "US Affiliates"), will unconditionally
guarantee certain expenses and liabilities of the Trust (other than
obligations of the Trust to pay the holders of the Trust Securities the
amounts due such holders pursuant to the terms of the Trust Securities)
pursuant to the Agreement as to Expenses and Liabilities (as defined under
"Description of the Trust Securities Guarantee--The Agreement as to Expenses
and Liabilities"). See "Description of the Trust Securities Guarantee--The
Agreement as to Expenses and Liabilities". The Trust Securities Guarantee, the
Debentures Guarantee, the Indenture, the Junior Subordinated Debentures, the
Trust Agreement (as defined under "Summary--The Offering") and the Agreement
as to Expenses and Liabilities when taken together, will effectively provide a
full and unconditional guarantee, on a subordinated basis, of the Trust's
obligations under the Trust Securities. See "Relationship Among the Trust
Securities, the Junior Subordinated Debentures, the Trust Securities Guarantee
and the Debentures Guarantee".
The Trust Securities are subject to mandatory redemption, in whole or in
part, upon redemption of the Junior Subordinated Debentures in an amount equal
to the aggregate principal amount of Junior Subordinated Debentures being
redeemed at a price equal to the aggregate liquidation amount of such Trust
Securities plus accumulated and unpaid Distributions thereon to the date fixed
for redemption (the "Redemption Price"). The Trust Securities will also be
redeemed in whole at the Redemption Price at the Stated Maturity of the Junior
Subordinated Debentures. See "Description of the Trust Securities--
Redemptions". The Junior Subordinated Debentures will mature on , 2038
(the "Stated Maturity"). The Junior Subordinated Debentures are redeemable at
the option of Yorkshire Finance (i) on or after , 2003, in whole at any
time or in part from time to time, at a price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed
for redemption plus 100% of the aggregate principal amount thereof (the
"Debenture Redemption Price"), (ii) at any time, in whole (but not in part),
upon the occurrence and continuation of a Special Event (as defined under
"Description of the Trust Securities--Redemptions"), at the Debenture
Redemption Price or (iii) at any time, in whole (but not in part), if
Yorkshire Finance or Yorkshire Group has or will become obligated to pay
Additional Amounts (as defined under "Summary--The Offering"), as provided
under "Description of the Junior Subordinated Debentures--Optional Tax
Redemption", at the Debenture Redemption Price.
At any time, the Control Party (as defined under "Summary--The Offering"),
as the holder of the Control Certificate (as defined under "Summary--The
Offering") of the Trust, will have the right to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust, if any, as provided by
applicable law, cause a Like Amount (as defined under "Description of the
Trust Securities--Redemptions") of Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description of the Trust Securities--Distribution of Junior
Subordinated Debentures".
In the event of the dissolution and liquidation of the Trust, after
satisfaction of liabilities to creditors of the Trust, if any, as provided by
applicable law, the holders of the Trust Securities will receive a Like Amount
of Junior Subordinated Debentures unless, in certain circumstances, such
distribution is determined not to be practical, in which event holders will be
entitled to receive a liquidation amount of $25 per Trust Security plus
accumulated and unpaid Distributions thereon to the date of payment. See
"Description of the Trust Securities--Liquidation Distribution upon
Dissolution".
In addition to applying to list the Trust Securities on the NYSE,
application will be made to list the Junior Subordinated Debentures on the
Luxembourg Stock Exchange. If the Junior Subordinated Debentures are
distributed to the holders of the Trust Securities upon the liquidation of the
Trust, Yorkshire Finance will use its best efforts to also list the Junior
Subordinated Debentures on the NYSE or such other stock exchanges or other
organizations, if any, on which the Trust Securities are then listed.
The Trust Securities will be represented by global certificates registered
in the name of a nominee of DTC. Beneficial interests in the Trust Securities
will be shown on, and transfers thereof will be effected only through, records
maintained by Participants (as defined under "Description of the Trust
Securities--Book-Entry Issuance") in DTC. Except as described under
"Description of the Trust Securities--Book-Entry Issuance", Trust Securities
in definitive form registered in the names of the beneficial owners thereof
will not be issued in exchange for the global certificates.
3
<PAGE>
AVAILABLE INFORMATION
Following this offering, Yorkshire Group will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission (http://www.sec.gov).
Yorkshire Group, Yorkshire Finance and the Trust, collectively, have filed
with the Commission a registration statement on Form S-1 (herein, together
with all amendments and exhibits thereto, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
No separate financial statements of Yorkshire Finance or the Trust have been
included herein. Yorkshire Group does not consider that such financial
statements would be material to holders of the Trust Securities because
Yorkshire Finance and the Trust are newly formed special purpose entities,
have no operating history or independent operations and are not engaged in and
do not propose to engage in any activity other than acting as financing
subsidiaries of Yorkshire Group and its affiliates. See "Summary", "Yorkshire
Capital Trust I", "Description of the Trust Securities", "Description of the
Junior Subordinated Debentures", "Description of the Trust Securities
Guarantee" and "Description of the Debentures Guarantee". In addition,
Yorkshire Group does not expect that the Trust or Yorkshire Finance will file
reports, proxy statements and other information under the Exchange Act with
the Commission.
ENFORCEABILITY OF CIVIL LIABILITIES
Yorkshire Group is a private company with limited liability incorporated
under the laws of England and Wales. Yorkshire Finance is a limited liability
company incorporated under the laws of the Cayman Islands. Substantially all
the assets of Yorkshire Group and Yorkshire Finance are located outside the
United States of America (the "US"). As a result, it may not be possible for
investors to effect service of process within the US upon Yorkshire Group and
Yorkshire Finance or to enforce against it judgments of US courts predicated
upon civil liabilities under US Federal securities laws. There is doubt as to
the enforceability in England and the Cayman Islands, in original actions or
in actions for enforcement of judgments of US courts, of civil liabilities
predicated upon US Federal securities laws.
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware. The Trust
Securities Guarantee, the Debentures Guarantee, the Indenture and the Junior
Subordinated Debentures will be governed by, and will be construed in
accordance with, the laws of the State of New York. Yorkshire Group and
Yorkshire Finance have submitted to the non-exclusive jurisdiction of the
Supreme Court of New York, New York County and the United States District
Court for the Southern District of New York and any appellate court from
either thereof for any legal suit, action or proceeding against Yorkshire
Group and Yorkshire Finance or their properties, assets or revenues with
respect to their obligations, liabilities or any other matter arising out of
or in connection with the Trust Securities Guarantee, the Debentures
Guarantee, the Indenture and the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--Governing Law; Submission
to Jurisdiction".
4
<PAGE>
PRESENTATION OF CERTAIN INFORMATION AND EXCHANGE RATES
Yorkshire Group will publish its consolidated financial statements in pounds
sterling. In this Prospectus, references to "pounds sterling," "pence" or
"(Pounds)" are to currency of the United Kingdom ("UK") and references to "US
dollars", "US$" or "$" are to US currency. As used herein, "US GAAP" means US
generally accepted accounting principles. References to "Lv" are to low volts,
"MW" are to megawatts, "kW" are to kilowatts, "kWh" are to kilowatt hours,
"kV" are to kilovolts, "GWh" are to gigawatt hours and "km" are to kilometers.
All references herein to "Fiscal Year" mean a year ended March 31.
For the convenience of the reader, this Prospectus contains translations of
certain pounds sterling amounts into US dollars at specified rates, or, if not
so specified, the noon buying rate in New York City for cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve Bank
of New York (the "Noon Buying Rate") on December 31, 1997 of $1.64 =
(Pounds)1. No representation is made that the pounds sterling amounts have
been, could have been or could be converted into US dollars at the rates
indicated or at any other rates.
The following table sets out, for the periods indicated, certain information
concerning the exchange rates between UK Pounds sterling and US dollars based
on the Noon Buying Rates:
<TABLE>
<CAPTION>
FISCAL YEAR PERIOD END AVERAGE(1) HIGH LOW
----------- -------------------- ---------- ---- ----
($ PER (Pounds)1.00)
<S> <C> <C> <C> <C>
1993.............................. 1.50 1.68 2.00 1.42
1994.............................. 1.49 1.50 1.59 1.46
1995.............................. 1.62 1.56 1.65 1.49
1996.............................. 1.53 1.56 1.62 1.50
1997.............................. 1.65 1.60 1.71 1.50
1998 through December 31, 1997.... 1.64 1.64 1.70 1.58
==== ==== ==== ====
</TABLE>
- --------
(1) The average of the Noon Buying Rates in effect on the last business day of
each month during the relevant period.
On , 1998, the Noon Buying Rate was $ = (Pounds)1.
UK SELLING RESTRICTIONS
There are restrictions on the offer and sale of the Trust Securities in the
UK. All applicable provisions of the Financial Services Act 1986 and the
Public Offers of Securities Regulations 1995 with respect to anything done by
any person in relation to the Trust Securities, in, from or otherwise
involving the UK must be complied with. See "Underwriting".
5
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "Summary", "Risk
Factors", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business", "The Electric Utility Industry in Great
Britain" and elsewhere constitute forward looking statements. Such forward
looking statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance or
achievements of the Yorkshire Group or any of its subsidiaries or industry
results, to differ materially from any future results, performance or
achievements expressed or implied by such forward looking statements. Such
risks, uncertainties and other important factors include, among others:
general economic and business conditions in the UK, the Franchise Area (as
defined under "Summary--Yorkshire Electricity Group plc") and elsewhere;
currency fluctuations; governmental, statutory, regulatory or administrative
initiatives affecting Yorkshire Group, Yorkshire or the UK electric and gas
utilities industries; general industry trends; competition; the cost and
availability of electricity, gas and other alternative energy sources; hedging
costs; changes in business strategy, development plans or vendor
relationships; availability, terms and deployment of capital; availability of
qualified personnel; increased rates of taxes or other changes in tax law;
changes in, or the failure or inability to comply with, governmental
regulation, including, without limitation, environmental regulations; and
other factors referenced in this Prospectus. These forward looking statements
speak only as of the date of this Prospectus.
6
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed financial and other information contained
elsewhere in this Prospectus.
YORKSHIRE POWER GROUP LIMITED
Yorkshire Group was incorporated as a private company with limited liability
under the laws of England and Wales in July 1996 and is indirectly owned by
American Electric Power Company, Inc. ("AEP") and New Century Energies, Inc.
("NCE" and, together with AEP, the "US Parents"). Each of the US Parents
indirectly owns 50% of the outstanding shares of the Yorkshire Group. In 1997,
Yorkshire Group was utilized in connection with the joint acquisition of
Yorkshire by the US Parents for approximately (Pounds)1.5 billion (the
"Acquisition"). Yorkshire Group holds all the outstanding shares of Yorkshire
Holdings plc ("Yorkshire Holdings"), which is its primary asset. Yorkshire
Holdings, in turn, beneficially owns all the outstanding shares of Yorkshire.
See "Yorkshire Group and the US Parents".
YORKSHIRE POWER FINANCE LIMITED
Yorkshire Finance, a subsidiary of Yorkshire Group, was incorporated as a
company with limited liability under the laws of the Cayman Islands in August
1997. Yorkshire Finance exists solely for the purpose of operating as a
financing vehicle for Yorkshire Group and its affiliates. See "Yorkshire Group
and the US Parents".
YORKSHIRE ELECTRICITY GROUP PLC
Yorkshire is one of twelve regional electricity companies ("RECs") in England
and Wales licensed to distribute, supply and, to a limited extent, generate
electricity. Yorkshire's two principal businesses are the "distribution
business" and the "supply business". Yorkshire's distribution business consists
of the distribution of electricity to approximately two million residential,
commercial and industrial customers in its Franchise Area. Substantially all of
the distribution business is a regulated monopoly. Yorkshire's supply business
consists of the purchase and supply of electricity primarily to customers
within the Franchise Area.
Yorkshire generated total operating income of (Pounds)52 million ($85
million) in Fiscal Year 1997. During Fiscal Year 1997, however, Yorkshire
recorded a (Pounds)78 million ($128 million) provision for uneconomic gas and
electricity contracts and a (Pounds)50 million ($82 million) charge for
information system development costs to prepare for the opening of the
competitive electricity market in 1998 for Franchise Supply Customers (as
defined below). Excluding these charges, total operating income would have been
(Pounds)180 million ($295 million) in Fiscal Year 1997, including (Pounds)140
million ($230 million) (78% of total) associated with the core distribution
business and (Pounds)29 million ($48 million) (16% of total) associated with
the supply business. As discussed below under "Business--Business
Restructuring", beginning in 1998, Yorkshire will operate the distribution and
supply businesses as self-sufficient businesses.
Yorkshire is authorized under its Public Electricity Supply License (the "PES
License") to distribute and supply electricity in an area covering
approximately 10,000 square km (3,860 square miles), which encompasses the
counties of West Yorkshire, East Yorkshire and almost all of South Yorkshire,
together with parts of North Yorkshire, Derbyshire, Nottinghamshire,
Lincolnshire and Lancashire (the "Franchise Area"). The resident population of
the Franchise Area served by Yorkshire is approximately 4.4 million. The
regional economy is diverse, including traditional heavy industries such as
iron, steel and coal mining, as well as growing service
7
<PAGE>
sector activities such as finance, retailing and leisure. Centrally located in
the UK, the region is also well served by roads, railways, airports and ports
which provide access to other European markets.
Pursuant to its PES License, Yorkshire owns, manages and operates the
electricity distribution network within the Franchise Area. The primary
activity of the distribution business is the receipt of electricity from the
national grid transmission system and its distribution to end users connected
to Yorkshire's distribution network. Since the distribution business is
substantially a regulated monopoly, virtually all electricity supplied (whether
by Yorkshire's supply business or by any other suppliers) to consumers within
the Franchise Area is transported through Yorkshire's distribution network.
Yorkshire Group believes that economic, environmental and regulatory factors
are likely to prevent competitors from entering the distribution business in
the Franchise Area. See "Business--Distribution Business" and "--Business
Restructuring".
Yorkshire's supply business consists of selling electricity to end users and
purchasing such electricity and arranging for its distribution to those end
users. Within the Franchise Area, Yorkshire has an exclusive right to supply
electricity to consumers who, within the most recent twelve-month period, have
had an average peak demand ("Peak Demand") of not more than 100 kW in the three
months of highest maximum demand during such period ("Franchise Supply
Customers"). This exclusive right will continue until September 1998 when the
supply market for these customers is currently scheduled to become competitive
over a six-month phase-in period. The supply of electricity to Non-Franchise
Supply Customers (as defined below) is currently open to competition and
Yorkshire is able to competitively bid or negotiate to supply electricity to
such customers. By purchasing electricity at competitive rates from most of the
major power generators in the UK and providing high quality customer service,
Yorkshire has been able to sustain its position as one of the largest national
suppliers of electricity. "Non-Franchise Customers" are consumers, both inside
and outside of Yorkshire's Franchise Area, who, within the most recent twelve
month period, have had an average Peak Demand of more than 100 kW in the three
months of highest maximum demand during such period. See "Business--Supply
Business" and "--Business Restructuring".
The operations of Yorkshire are regulated under its PES License, pursuant to
which income generated by Yorkshire's distribution business and income derived
from Franchise Supply Customers are subject to a price cap regulatory framework
providing economic incentives to operate in a cost-effective manner, and, to a
limited extent, to increase the volume of electricity distributed. See "The
Electric Utility Industry in Great Britain".
Yorkshire also conducts ancillary business activities apart from the
distribution and supply businesses that are not subject to price regulation,
such as owning an interest in an off-shore gas field, supplying gas in the
competitive market and holding interests in power generation. See "Business--
Affiliate Businesses and Other Investments" and "--Business Restructuring".
YORKSHIRE CAPITAL TRUST I
The Trust is a statutory business trust created under the Delaware Business
Trust Act (the "Delaware Act") pursuant to the filing of a certificate of trust
with the Delaware Secretary of State on February 4, 1998. The Trust exists for
the exclusive purposes of (i) issuing and selling the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary,
appropriate, convenient or incidental thereto. See "Yorkshire Capital Trust I".
8
<PAGE>
THE OFFERING
As used herein, (i) the term "Indenture" means the Subordinated Indenture, as
the same may be amended and supplemented from time to time, among Yorkshire
Finance, Yorkshire Group, The Bank of New York, as Indenture Trustee, principal
paying agent, registrar and transfer agent (the "Indenture Trustee"), and
Banque Generale du Luxembourg, as paying agent and transfer agent, pursuant to
which the Junior Subordinated Debentures and the Debentures Guarantee will be
issued, and (ii) the term "Trust Agreement" means the Amended and Restated
Trust Agreement, among AEP Resources, Inc., as depositor, the Control Party, as
holder of the Control Certificate, The Bank of New York (Delaware), as Delaware
Trustee, The Bank of New York, as Property Trustee, the administrative trustees
named therein and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust. Each of the other capitalized terms used
in this Prospectus and not otherwise defined has the meaning set forth in the
Indenture or the Trust Agreement, as the case may be.
Securities Offered ......... % Trust Securities (Liquidation Amount $25 Per
Trust Security).
Offering Price ............. $25 per Trust Security.
Distribution Dates ......... March 31, June 30, September 30 and December 31
of each year, commencing , 1998.
Record Date................. The record date for each Distribution Date (as
defined under "Description of the Trust
Securities--Distributions") will be the close of
business on the 15th calendar day prior to such
Distribution Date.
Ratings.....................
The Trust Securities are expected to be assigned
ratings of BBB by Standard & Poor's Ratings
Services ("S&P"), BBB by Duff & Phelps Credit
Rating Company ("DCR") and "baa2" by Moody's
Investors Service, Inc. ("Moody's"). These
ratings will have been obtained with the
understanding that S&P, DCR and Moody's will
continue to monitor the credit rating of the
registrants and will make future adjustments to
the extent warranted. A rating reflects only the
views of S&P, DCR or Moody's, as the case may be,
and is not a recommendation to buy, sell or hold
the Trust Securities. There is no assurance that
any such rating will be retained for any given
period of time or that it will not be revised
downward or withdrawn entirely by S&P, DCR or
Moody's, as the case may be, if, in their
respective judgments, circumstances so warrant.
Deferral of Interest So long as no Event of Default under the
Payments.................... Indenture has occurred and is continuing,
Yorkshire Finance has the right to defer Interest
Payments on the Junior Subordinated Debentures,
at any time or from time to time, for up to 20
consecutive quarters; provided, however,
Yorkshire Finance cannot defer Interest Payments
beyond the Stated Maturity of the Junior
Subordinated Debentures. If Interest Payments on
the Junior Subordinated Debentures are so
deferred, Distributions on the Trust Securities
will also be deferred. During an Extension
Period, Yorkshire Group's obligations to make
payments under the Trust Securities Guarantee and
the Debentures Guarantee will be suspended. See
"Description of the Junior Subordinated
Debentures--Option to Defer Payment of Interest".
9
<PAGE>
Ranking of Junior
Subordinated Debentures and
Debentures Guarantee........
The Junior Subordinated Debentures and the
Debentures Guarantee will be unsecured and
subordinated obligations of Yorkshire Finance and
Yorkshire Group, respectively, and will be junior
in right of payment to all Senior Debt of
Yorkshire Finance and Yorkshire Group,
respectively, to the extent and in the manner set
forth in the Indenture. At December 31, 1997,
Senior Debt of Yorkshire Group aggregated
approximately (Pounds)1,034 million ($1,699
million), a portion of which will be repaid with
proceeds of this offering. Because Yorkshire
Group is a holding company, Yorkshire Group's
obligations under the Debentures Guarantee will
be effectively subordinated to all existing and
future indebtedness and liabilities of Yorkshire
Group, including Yorkshire. At December 31, 1997,
the direct and indirect subsidiaries of Yorkshire
Group had total indebtedness (excluding
indebtedness owed to Yorkshire Group) of
approximately (Pounds)476 million ($782 million).
See "Risk Factors--Factors Relating to the Trust
Securities and the Junior Subordinated
Debentures--Subordination of and Rights under the
Debentures Guarantee", "Description of the Junior
Subordinated Debentures--Subordination" and
"Description of the Debentures Guarantee".
Trust Securities Guarantee
and Debentures Guarantee....
The payment of Distributions and payments on
liquidation of the Trust or redemption of the
Trust Securities are guaranteed by Yorkshire
Group under the Trust Securities Guarantee, but
only to the extent of sufficient funds held by
the Trust and available therefor. The Trust
Securities Guarantee will be an unsecured and
subordinate obligation and junior in right of
payment to all Senior Debt of Yorkshire Group and
will rank pari passu with the most senior
preferred stock of Yorkshire Group. At December
31, 1997, Yorkshire Group had no senior preferred
stock outstanding with which the Trust Securities
Guarantee would rank pari passu. See "Risk
Factors--Factors Relating to the Trust Securities
and the Junior Subordinated Debentures--
Subordination of and Limitation of Funds
Available to Trust under the Trust Securities
Guarantee".
If Yorkshire Finance does not make payments of
principal of or interest on the Junior
Subordinated Debentures or Yorkshire Group does
not make payments pursuant to the Debentures
Guarantee, the Trust will not have sufficient
funds to pay Distributions on the Trust
Securities or amounts payable on redemption
thereof or otherwise. In such event, the Trust
Securities Guarantee will not apply to such
Distributions of such amounts until the Trust has
sufficient funds available therefor. The remedy
of a holder of Trust Securities, accordingly,
will be to enforce its rights under the
Debentures Guarantee.
Pursuant to the Debentures Guarantee, Yorkshire
Group will irrevocably and unconditionally
guarantee all payments on the Junior Subordinated
Debentures when and as the same shall become
10
<PAGE>
due and payable, whether at Stated Maturity, upon
redemption or otherwise. See "Description of the
Debentures Guarantee".
During an Extension Period, Yorkshire Group's
obligations to make payments under the Trust
Securities Guarantee and the Debentures Guarantee
will be suspended. See "Description of the Junior
Subordinated Debentures--Option to Defer Payment
of Interest".
The Trust Securities Guarantee, the Debentures
Guarantee, the Indenture, the Junior Subordinated
Debentures, the Trust Agreement and the Agreement
as to Expenses and Liabilities, when taken
together, will effectively provide a full and
unconditional guarantee, on a subordinated basis,
of the Trust's obligations under the Trust
Securities.
Redemption.................. The Trust Securities are subject to mandatory
redemption, (i) in whole or in part, upon
redemption of the Junior Subordinated Debentures
in an amount equal to the aggregate principal
amount of Junior Subordinated Debentures being
redeemed and (ii) in whole, at the Stated
Maturity of the Junior Subordinated Debentures,
in each case at the Redemption Price. The Junior
Subordinated Debentures are redeemable at the
option of Yorkshire Finance (i) on or after
, 2003, in whole at any time or in part from time
to time, (ii) at any time, in whole (but not in
part), upon the occurrence and continuation of a
Special Event or (iii) at any time, in whole (but
not in part), if Yorkshire Finance or Yorkshire
Group has or will become obligated to pay
Additional Amounts, as provided under
"Description of the Junior Subordinated
Debentures--Optional Tax Redemption", in each
case at the Debenture Redemption Price. See
"Description of the Trust Securities--
Redemptions--Mandatory Redemption", "--Optional
Redemption of Junior Subordinated Debentures" and
"--Special Event Redemption of Junior
Subordinated Debentures".
Distribution of Junior
Subordinated Debentures.....
The Control Party will have the right at any time
to dissolve the Trust and, after satisfaction of
liabilities to creditors of the Trust, if any,
cause a Like Amount of Junior Subordinated
Debentures to be distributed to the holders of
the Trust Securities in liquidation of the Trust.
See "Description of the Trust Securities--
Distribution of Junior Subordinated Debentures".
Additional Amounts.......... Subject to certain exceptions as set forth under
"Description of the Junior Subordinated
Debentures--Additional Amounts", all payments in
respect of the Junior Subordinated Debentures and
the Debentures Guarantee and, therefore, the
Trust Securities will be made free and clear of,
and without withholding or deductions for or on
account of, any Gross-Up Taxes (as defined under
"Description of the Junior Subordinated
Debentures--Additional Amounts"), unless such
withholding or deduction is required by law. In
the event of any such withholding or deduction,
subject to certain exceptions, Yorkshire Finance
or Yorkshire Group will pay such additional
amounts (the "Additional Amounts") as will result
11
<PAGE>
in receipt by the holder of the Junior
Subordinated Debentures and, therefore, the
holders of the Trust Securities, of such amounts
as would have been received by it had no such
withholding or deduction been required. See
"Description of the Junior Subordinated
Debentures--Additional Amounts". Any reference in
this Prospectus to any payments with respect to
the Junior Subordinated Debentures or any
payments pursuant to the Debentures Guarantee
shall be deemed to include any such Additional
Amounts payable in connection therewith.
Listing..................... Application has been made to list the Trust
Securities on the NYSE and to list the Junior
Subordinated Debentures on the Luxembourg Stock
Exchange. If the Junior Subordinated Debentures
are distributed to the holders of the Trust
Securities upon the liquidation of the Trust,
Yorkshire Finance will use its best efforts to
also list the Junior Subordinated Debentures on
the NYSE, or such other stock exchanges or other
organizations, if any, on which the Trust
Securities are then listed.
Use of Proceeds ............ The proceeds to the Trust from the sale of the
Trust Securities will be invested by the Trust in
the Junior Subordinated Debentures to be issued
by Yorkshire Finance to the Trust. In turn,
Yorkshire Finance intends to loan the net
proceeds from such issuance to Yorkshire Group
and certain of its affiliates with such loans to
be evidenced by promissory notes issued by
Yorkshire Group and such affiliates (collectively
the "Intercompany Notes"). The proceeds therefrom
will be used for the working capital of such
affiliates and for the repayment of certain
indebtedness of Yorkshire Group. See "Use of
Proceeds" and "Capitalization".
Governing Law .............. The Trust Agreement and the Trust Securities will
be governed by, and construed in accordance with,
the laws of the State of Delaware. The Trust
Securities Guarantee, the Debentures Guarantee,
the Indenture and the Junior Subordinated
Debentures will be governed by, and construed in
accordance with, the laws of the State of New
York.
The Trustees................ The Bank of New York will act as property trustee
(the "Property Trustee") of the Trust. Four
employees of the US Parents also will act as
trustees (the "Administrative Trustees") of the
Trust. The Bank of New York (Delaware) will be an
additional trustee (the "Delaware Trustee") of
the Trust. The Property Trustee, the
Administrative Trustees and the Delaware Trustee
are herein, collectively, referred to as the
"Securities Trustees". The Bank of New York will
also act as Indenture Trustee under the Indenture
pursuant to which the Junior Subordinated
Debentures and the Debentures Guarantee will be
issued and will act as trustee under the Trust
Securities Guarantee (the "Guarantee Trustee").
12
<PAGE>
Control of the Trust........ A wholly-owned subsidiary of Yorkshire Group
designated pursuant to the Trust Agreement (the
"Control Party") will retain the voting control
and appointment power with respect to the Trust
by virtue of its possession of the Trust's
control certificate (the "Control Certificate").
The Control Certificate shall not provide any
economic interest in the Trust to the Control
Party. See "Yorkshire Capital Trust I".
Expenses of the Trust....... Pursuant to the Agreement as to Expenses and
Liabilities, the US Affiliates will irrevocably
and unconditionally guarantee to each person or
entity to whom the Trust becomes indebted or
liable the full payment of any indebtedness,
expenses or liabilities of the Trust (other than
obligations of the Trust to pay to the holders of
the Trust Securities the amounts due such holders
pursuant to the terms of the Trust Securities).
13
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary consolidated financial data for
Yorkshire Power Group Limited after March 31, 1997 ("Yorkshire Group" or the
"Successor Company") and Yorkshire Electricity Group plc ("Yorkshire" or the
"Predecessor Company") for each of the five Fiscal Years ended March 31, 1997
prepared in accordance with US GAAP. For a description of the financial
statements and records from which the following financial data have been
derived, see "Selected Consolidated Financial Data". This information should be
read in conjunction with "Capitalization", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto of the Successor Company and the
Predecessor Company included elsewhere in this Prospectus.
The summary unaudited pro forma consolidated income statement data for the
Successor Company for Fiscal Year 1997 presented below reflect the Acquisition
as if it had occurred as of April 1, 1996. Such data have been prepared by the
Successor Company based upon assumptions deemed proper in accordance with the
purchase method of accounting for business combinations and have been adjusted
to reflect (i) interest expense of (Pounds)74 million incurred as a result of
the financing of the Acquisition, (ii) amortization of (Pounds)24 million
related to goodwill recorded in connection with the Acquisition, (iii)
additional depreciation expense of (Pounds)6 million as a result of the
revaluation of certain fixed assets in connection with the Acquisition and (iv)
removal of the effect of recording the provision of (Pounds)78 million of
certain uneconomic gas and electricity contracts, the loss of (Pounds)7 million
on certain interest rate swap agreements and the write-down of (Pounds)6
million relating to non-operational property. Such data are shown for
illustrative purposes only and are not necessarily indicative of the future
results of operations of the Successor Company or of the results of operations
of the Successor Company that would have actually occurred had the Acquisition
occurred at the beginning of the period presented. Such data should be read in
conjunction with the unaudited pro forma consolidated statement of income and
notes thereto of the Successor Company included elsewhere in this Prospectus.
14
<PAGE>
PREDECESSOR COMPANY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DA-
TA:
Operating revenues.............. 1,325 1,308 1,464 1,431 1,331
Operating income (1)............ 146 156 215 214 52
Other income (loss), net (2).... 15 (8) 16 313 20
Interest expense, net........... (7) (5) (12) (20) (33)
Provision for income taxes (3).. (54) (50) (78) (114) (13)
----- ----- ----- ----- -----
Net income...................... 100 93 141 393 26
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets.................... 613 701 747 769 796
Total assets.................... 1,214 1,241 1,367 1,408 1,375
Total shareholders' equity...... 561 612 517 399 359
Long-term debt.................. 104 126 305 424 419
Short-term debt and current por-
tion of long-term debt......... 217 99 91 90 87
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT (4)........................ 161 148 231 527 72
EBITDA (4)...................... 193 182 272 569 122
Cash flow from operations....... 187 237 201 222 96
Cash used in investing activi-
ties........................... (137) (201) (101) (8) (51)
Cash provided by (used in) fi-
nancing activities............. 129 (139) (67) (114) (76)
Ratio of earnings to fixed
charges (5).................... 6.6 6.8 10.5 12.0 1.8
</TABLE>
15
<PAGE>
SUCCESSOR COMPANY
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Operating revenues............. 1,331 2,183 974 909 1,493
Operating income (1)........... 106 174 120 123 202
Other income, net (2).......... 20 33 17 2 3
Interest expense, net.......... (100) (164) (20) (78) (128)
Provision for income taxes..... (17) (28) (40) (5) (8)
----- ----- --- ------ ------
Income before extraordinary
item.......................... 9 15 77 42 69
Extraordinary item (7)......... -- -- -- (134) (220)
----- ----- --- ------ ------
Net income (loss).............. 9 15 77 (92) (151)
===== ===== === ====== ======
<CAPTION>
SUCCESSOR SUCCESSOR
APRIL 1, DECEMBER 31,
1997 1997
-------------- ---------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets................... 939 1,540 1,001 1,644
Total assets................... 2,591 4,249 2,522 4,143
Total shareholders' equity..... -- -- 330 542
Long-term debt................. 433 710 429 705
Accrued liability to purchase
Yorkshire..................... 1,496 2,453 -- --
Short-term debt and current
portion of long-term debt..... 87 143 1,081 1,776
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT before extraordinary item
(4)(7)........................ 126 207 137 125 205
EBITDA before extraordinary
item (4)(7)................... 206 338 169 183 300
Cash flow from operations...... 149 63 103
Cash used in investing
activities.................... (99) (1,575) (2,586)
Cash provided by (used in)
financing activities.......... (49) 1,409 2,314
Ratio of earnings to fixed
charges (5)................... 1.2 4.6 1.5
</TABLE>
16
<PAGE>
PREDECESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution.................... 332 348 362 334 308
Supply.......................... 1,206 1,220 1,343 1,309 1,178
Other........................... 182 162 162 163 172
Intrabusiness eliminations (8).. (395) (422) (403) (375) (327)
----- ----- ----- ----- -----
1,325 1,308 1,464 1,431 1,331
===== ===== ===== ===== =====
OPERATING INCOME (LOSS):
Distribution.................... 135 133 176 164 127
Supply (1)...................... 10 14 23 30 (132)
Other........................... 1 9 16 20 10
Intrabusiness eliminations
(1)(8)......................... -- -- -- -- 47
----- ----- ----- ----- -----
146 156 215 214 52
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution.................... 476 513 556 589 643
Supply.......................... 177 161 198 212 178
Other and unallocated........... 561 567 613 607 554
----- ----- ----- ----- -----
1,214 1,241 1,367 1,408 1,375
===== ===== ===== ===== =====
</TABLE>
17
<PAGE>
SUCCESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ --------------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ ---------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution............... 308 505 225 224 368
Supply..................... 1,178 1,932 868 799 1,312
Other...................... 172 282 136 141 232
Intrabusiness eliminations
(8)....................... (327) (536) (255) (255) (419)
----- ----- ---- -------- --------
1,331 2,183 974 909 1,493
===== ===== ==== ======== ========
OPERATING INCOME (LOSS):
Distribution............... 97 159 99 89 146
Supply (1)................. (7) (11) 1 14 23
Other...................... 16 26 20 20 33
----- ----- ---- -------- --------
106 174 120 123 202
===== ===== ==== ======== ========
<CAPTION>
SUCCESSOR SUCCESSOR
APRIL 1, 1997 DECEMBER 31, 1997
-------------- --------------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- ---------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution............... 1,802 2,955 1,754 2,881
Supply..................... 187 307 180 296
Other and unallocated...... 602 987 588 966
----- ----- -------- --------
2,591 4,249 2,522 4,143
===== ===== ======== ========
</TABLE>
18
<PAGE>
(1) Notable operating expenses include:
Fiscal Year 1997--(i) a provision of (Pounds)78 million for uneconomic gas
and electricity contracts (the effect of which is removed from the
Successor Company's unaudited pro forma consolidated statement of income
for Fiscal Year 1997), which resulted in a charge of (Pounds)125 million to
the supply business offset by an intrabusiness elimination of (Pounds)47
million and (ii) a charge of (Pounds)50 million for information system
development costs to prepare for the opening of the competitive electricity
market in 1998 for Franchise Supply Customers, of which (Pounds)37 million
was charged to the supply business and (Pounds)13 million was charged to
the distribution business.
Fiscal Years 1993, 1994 and 1995--reorganization costs of (Pounds)18
million, (Pounds)44 million and (Pounds)8 million, respectively.
(2) Other income (loss) principally represents income from Yorkshire's
investment in National Grid Group plc ("NGG") and, in Fiscal Year 1996, a
gain resulting from the NGG Transaction (as defined herein) and earnings
and losses from Yorkshire's investments in joint ventures and minority
holdings. Notable items include:
Fiscal Year 1997--gain on sale of Yorkshire's investment in Torch Telecom
of (Pounds)15 million.
Fiscal Year 1996--income from investment in NGG and gain in respect of the
NGG Transaction as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Introduction--NGG
Transaction".
Fiscal Year 1995--one-time termination payment received from Stockholm
Stadhus AB of (Pounds)17 million.
Fiscal Year 1994--loss on sale of Yorkshire's investment in Homepower
Retail Limited of (Pounds)18 million.
(3) Fiscal Year 1996 includes a tax charge of (Pounds)38 million relating to
the NGG Transaction.
(4) EBIT represents income before the sum of interest expense and income taxes.
EBITDA represents income before the sum of interest expense, income taxes,
depreciation and amortization. EBIT and EBITDA are provided for
informational purposes only and such measures should not be construed as
alternatives to operating income (as determined in accordance with US GAAP)
as indicators of operating performance, or as alternatives to cash flows
from operating activities (as determined in accordance with US GAAP) as
measures of liquidity. EBIT and EBITDA are widely accepted financial
indicators of a company's ability to incur and service debt. However, the
measures of EBIT and EBITDA presented herein may not be comparable to
similar measures presented by other companies.
(5) The ratio of earnings to fixed charges is computed as the sum of pre-tax
income (before extraordinary item), plus fixed charges divided by fixed
charges. Fixed charges consist of interest expense and amortization of debt
expense.
(6) Solely for the convenience of the reader, pounds sterling amounts have been
translated into US dollar amounts at the Noon Buying Rate on December 31,
1997 of $1.64 = (Pounds)1. See "Presentation of Certain Information and
Exchange Rates".
(7) Represents the windfall tax imposed by the UK government, which was not
deductible for UK corporation tax purposes.
(8) Intrabusiness eliminations consist primarily of intracompany transactions
between the distribution business and the supply business and interbusiness
transactions between ancillary businesses. Pursuant to the UK regulatory
framework, charges by the distribution business for electricity in respect
of supply customers in the Franchise Area are billed to the supply
business, which in turn incorporates the distribution charge into the bill
sent to the final end user.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Trust Securities.
FACTORS RELATING TO YORKSHIRE'S BUSINESS
Substantial Leverage
Upon completion of this offering, Yorkshire Group will continue to have
substantial indebtedness. At December 31, 1997 (after the effect of the
windfall tax on shareholder's equity), on a pro forma basis after giving
effect to the Senior Notes and the Guaranteed Eurobonds (each as defined under
"Capitalization"), both issued in February 1998, and the issuance of the Trust
Securities offered hereby, the ratio of Yorkshire Group's consolidated debt to
total capitalization was approximately 73%. See "Capitalization". The degree
to which Yorkshire Group is leveraged could affect its ability to service its
indebtedness, to make capital investments, to take advantage of certain
business opportunities, to respond to competitive pressures or to obtain
additional financing. Yorkshire Group believes that, following this offering,
it will be able to make payments on its obligations (including its obligations
under the Trust Securities Guarantee and the Debentures Guarantee) with those
funds subsequently being made available to make payments of principal of and
interest on the Junior Subordinated Debentures and the Trust Securities, as
applicable, from funds derived from the operations of Yorkshire and its
subsidiaries. The ability of Yorkshire Finance to pay amounts due on the
Junior Subordinated Debentures is solely dependent upon Yorkshire Group making
payments to Yorkshire Finance as and when required.
Unexpected declines in Yorkshire's future business, especially in light of
the increasingly competitive environment in the UK electric and gas utility
industries, increases in operating or capital costs, or the inability to
borrow additional funds, could impair Yorkshire Group's ability to meet its
debt service obligations, and, therefore, could adversely affect Yorkshire
Finance's ability to make payments of principal of and interest on the Junior
Subordinated Debentures and, ultimately, the Trust's ability to make payments
on the Trust Securities. No assurance can be given that additional financing
will be available when needed, or, if available, will be obtainable on terms
that are favorable to Yorkshire Group or Yorkshire Finance.
Price Regulation of the Distribution Business
The distribution business of Yorkshire is regulated under its PES License
pursuant to which charges by the distribution business to its customers are
controlled by the Distribution Price Control Formula (as defined under "The
Electric Utility Industry in Great Britain--Distribution of Electricity"). The
Distribution Price Control Formula determines the maximum allowable average
price per unit of electricity (expressed in kWh, a "unit") that a PES License
holder may charge in any year. The elements used in the Distribution Price
Control Formula (which includes the UK Retail Price Index) are established for
a five year period and are subject to review by the Director General of
Electricity Supply for the UK (the "Regulator") at the end of each five year
period and at other times at the discretion of the Regulator. At each review,
the Regulator can adjust the value of certain elements in the Distribution
Price Control Formula.
Following a review by the Regulator in July 1994, a 14% below inflation
price reduction was set for Yorkshire's allowed distribution revenues
effective April 1, 1995. Such adjustment was the principal reason for the
reduction of Yorkshire's distribution operating revenues to (Pounds)334
million ($548 million) for Fiscal Year 1996 from (Pounds)362 million ($594
million) for Fiscal Year 1995. In July 1995, a further review of distribution
prices was concluded by the Regulator for Fiscal Years 1997 to 2000. As a
result of this further review of Yorkshire's distribution prices, a further
13% below inflation reduction became effective April l, 1996 with a further 3%
below inflation reduction effective in each of the three following years. This
review was the principal reason for the reduction in distribution operating
revenues for Fiscal Year 1997 to (Pounds)308 million ($505 million). There can
be no assurance that any future review by the Regulator, the next of which is
scheduled for 2000, will not adversely affect Yorkshire. See "The Electric
Utility Industry in Great Britain--Distribution of Electricity--Price
Control".
Competition in and Price Regulation of the Supply Business
Each PES License holder currently has an exclusive right, subject to price
cap regulation, to supply Franchise Supply Customers in its franchise area.
However, the supply market is being progressively opened to
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full competition. The market for customers with a Peak Demand above 1 MW has
been open to competition for suppliers of electricity since privatization in
1990 while, for Non-Franchise Supply Customers, the market became competitive
in April 1994. The final stage of this process is currently scheduled to occur
over a period of six months commencing September 1998, when competition in the
supply of Franchise Supply Customers will be fully phased in and the exclusive
right to supply Franchise Supply Customers is scheduled to end. Yorkshire's
strategy to meet expanded competition in its supply business will focus on
active marketing and customer service to protect and sustain its position in
the electricity market in its Franchise Area. Furthermore, Yorkshire will seek
to expand market share outside its Franchise Area to the extent that such
business is profitable. There can be no assurance that this strategy will be
successful in avoiding loss of existing customers, or achieving gains of new
customers of Yorkshire's supply business. See "Business--Supply Business" and
"--Business Restructuring".
In October 1997, the Regulator published proposals for new transitional
supply price restraints to apply from April 1, 1998 to residential and small
business customers for an initial period of two years and until an adequate
level of competition is established. Yorkshire subsequently indicated its
acceptance of such proposals. The proposals (when taken together with the
reduction in the Fossil Fuel Levy (as defined under "The Electric Utility
Industry in Great Britain--Fossil Fuel Levy"), which became effective on April
1, 1998) resulted in the implementation of small reductions, also effective
April 1, 1998, in the tariffs for Yorkshire's residential and small business
customers in its Franchise Area compared to the corresponding tariffs in
effect in August 1997. The proposals also require an additional 3% below
inflation reduction effective April 1, 1999. See "The Electric Utility
Industry in Great Britain--Supply of Electricity--Price Regulation".
The license modifications that have been implemented to effect the new
controls also discontinued the automatic pass-through of all costs currently
passed through to residential and small business customers, consisting
primarily of purchased power costs. This change will increase the importance
to Yorkshire of effective power purchasing and hedging activities. See "--Pool
Purchase Price Volatility; Hedging Activities", "The Electric Utility Industry
in Great Britain--Supply or Electricity--Price Regulation" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
The transition to competition in supply with respect to Franchise Supply
Customers requires each REC to provide additional data management services to
all suppliers. Assuming that such competition starts as currently scheduled in
September 1998 for Franchise Supply Customers, Yorkshire Group presently
estimates that costs totalling (Pounds)75 million will have been incurred for
re-engineering and information technology work. Of such amount, approximately
(Pounds)19 million was expensed in Fiscal Year 1997. The Regulator has made
proposals (which have been accepted by Yorkshire) to allow Yorkshire recovery
of (Pounds)23 million over a five year period ending March 31, 2003. A further
(Pounds)7 million is expected to be recovered through Pool cost recovery and
other national mechanisms and (Pounds)8 million is expected to be capitalized
as such amount is expected to provide future benefits to the supply business.
As a result of the above, the residual amount of approximately (Pounds)18
million, which will not be recovered or capitalized, will be expensed in
Fiscal Years 1998 and 1999 as incurred.
The Regulator has also made proposals (which have been accepted by
Yorkshire) to provide an annual allowance of (Pounds)3 million for the period
1998 through 2000 to cover operating costs. This allowance will be reviewed at
the time of the Distribution Price Control Formula review in 2000.
The October 1997 proposals therefore will allow Yorkshire to recover up to
50% of its forecasted set-up and operating costs over a five year period. The
shortfall could be higher if: (i) operating costs are higher than anticipated
(e.g., there is a higher level of customer activity); (ii) recovery of
operating costs is disallowed or reduced when the Distribution Price Control
Formula is reviewed for the period beginning April 1, 2000; or (iii) the
integrated national systems do not work as contemplated or require substantial
redevelopment.
The Regulator's proposals also provide that a REC should be penalized (i)
where it starts to open its market more than three months after the market
opening by the first REC; (ii) where it opens successive tranches of its
market more than three months after the opening of the corresponding tranche
by the first REC; and (iii) where the market opening of the first REC has been
delayed beyond April 1, 1998. The penalties will be calculated at
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1% of the operating revenues of the supply business per month of delay,
weighted by the proportion of customers affected and applied as a reduction in
allowed distribution business income. If Yorkshire did not open its market for
Franchise Supply Customers to competition until after April 1, 1999, it would
incur a penalty of approximately (Pounds)6 million. It is now apparent that
some penalty will be incurred due to the delay in the opening of the
competitive market for Franchise Supply Customers until September 1998.
Yorkshire Group expects that Yorkshire will be prepared to open its Franchise
Area to competition in September 1998.
Regulatory Policies Affecting Yorkshire Group
Certain modifications to Yorkshire's PES License following Yorkshire Group's
acquisition of Yorkshire imposed certain conditions designed to assure the
continued financial soundness of Yorkshire, including undertakings which
Yorkshire was required to obtain from AEP and NCE that they will refrain, and
cause their subsidiaries to refrain, from taking any action that would likely
result in Yorkshire breaching its obligations under its PES License and the
Electricity Act 1989 (the "Electricity Act") and an undertaking by Yorkshire
to use reasonable endeavors to maintain an investment grade rating of its debt
securities. Such conditions could have an effect on Yorkshire's dividend
payments which will constitute the principal source of funds for payment of
principal of and interest on the Junior Subordinated Debentures.
On February 24, 1998, following publication of the Monopolies and Mergers
Commission's (the "MMC") report in connection with the proposed
PacificCorp/The Energy Group merger, the Regulator issued a consultation paper
proposing modifications to licenses of public electricity suppliers ("PESs")
which had been subject to takeovers.
The main proposals are:
(1) to allow for a PES generation business to be carried on in an affiliate
which is not a subsidiary and in such cases for the generation business
to be conducted outside the scope of the modifications to the PES
license which have been brought into effect to ensure that the Regulator
can regulate a company effectively after it has been taken over and to
help ensure the financial stability of the PES (the "Ring-Fencing
Conditions");
(2) to restrict further the provisions of existing PES licenses allowing
PESs to carry out certain otherwise restricted activities provided they
do not exceed 5 percent of the revenues of the supply, second-tier
supply and distribution businesses, by introducing an additional test
based on cumulative investment;
(3) to extend to all PESs that have been acquired the condition contained in
the licenses of London Electricity plc, Northern Electric plc and
Yorkshire to use reasonable endeavours to maintain an investment grade
rating of corporate debt;
(4) to prohibit PESs from accepting "cross-default" provisions in borrowing
agreements; and
(5) to make the payment of dividends and other distributions by a PES
expressly conditional on compliance with the Ring-Fencing Conditions in
the license.
Comments were due with respect to the proposals in the consultation paper by
March 27, 1998. Yorkshire provided comments on the consultation paper on March
25, 1998. In its response, Yorkshire indicated that it did not consider the
proposed modifications described in paragraphs (1), (4) and (5) immediately
above to be necessary. Further proposals are expected to be made by the
Regulator in the light of this consultation paper that may result in further
modifications to PES licenses. There can be no assurance that any such
modifications to Yorkshire's PES License that result from such proposals will
not have a material adverse effect on Yorkshire. See "The Electric Utility
Industry in Great Britain--Regulation under the Electricity Act--Modifications
to Licenses".
The ability of AEP or NCE to contribute additional equity capital to
Yorkshire Group is currently subject to regulation of the Commission under the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act"). The
Commission limits the aggregate amount that either AEP or NCE may invest in
foreign utility companies and exempt wholesale generators to specified
percentages of average consolidated retained earnings at the time an
investment is made. This regulation could delay or limit the making of loans
or the contributions of equity by AEP or NCE to Yorkshire Group to enable
Yorkshire Group to meet its obligations or to contribute additional equity
capital to Yorkshire.
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Governmental Review of Utility Regulation
On June 30, 1997, the new Labour government announced a comprehensive review
of the regulation of the electric, gas, water and telecommunications
industries to be directed by the Department of Trade and Industry. Generally,
the review has focused on whether the current system of regulation in the
utility industries is designed to ensure open and predictable regulation,
fairness to consumers and shareholders and the promotion of a competitive
environment. Particularly, the review has examined whether the current system
of price regulation delivers, over time, the greatest benefits to consumers
while maintaining proper incentives for innovation and investment and an
adequate return to shareholders.
The review culminated, in March 1998, with the publication by the Government
of a Green Paper entitled "A Fair Deal for Consumers: Modernising the
Framework for Utility Regulation" (the "March Green Paper"). The March Green
Paper sets forth a number of proposals of the UK Government designed to
reexamine utility regulation in the UK. Among the main proposals contained
within the March Green Paper are the retention of "RPI-X" as the fundamental
basis for price regulation; increased transparency and consistency of
regulation; the merger of the Office of Electricity Regulation ("OFFER") and
the Office of Gas Regulation ("OFGAS"); the separate licensing of the
distribution and supply businesses of the PESs; amendment of the statutory
duties of utility regulators to provide a new primary duty to exercise their
functions in the manner best calculated to protect the interests of consumers
in the short and long term, wherever possible through promoting competition;
and adopting price regulation to distinguish between income earned through
companies' own efforts and income which results from other factors. Some of
these proposals would require primary legislation. Responses to the March
Green Paper by interested parties have been requested by May 31, 1998.
In October 1997, the UK government invited the Regulator to consider
parameters for a review of electricity trading arrangements. Such a review
would focus on the wholesale trading market for electricity within England and
Wales (the "Pool"), trading arrangements outside the Pool and price setting
mechanisms. The review was launched in January 1998 with an announcement that
the Regulator and an independent panel had been asked to report to the Energy
Minister by July 1998. In December 1997, the UK government announced a review
of energy sources for power generation, including fuel diversity, sustainable
development and the role of coal. Representations of interested parties were
submitted in mid-February 1998. While the review is underway, the Secretary of
State has deferred decisions on most outstanding or new applications for the
construction of generating stations. An Energy Select Committee Report on the
Coal Industry issued in April 1998 recommended that such deferral, as it
relates to gas-fired generation, be lifted as soon as possible. The Trade and
Industry Select Committee is undertaking an inquiry into a number of aspects
of UK energy policy. Yorkshire Group cannot predict the results of any of
these reviews or the ultimate effects on Yorkshire or Yorkshire Group. See
"The Electric Utility Industry in Great Britain--Regulation under the
Electricity Act--The Regulator".
Pool Purchase Price Volatility; Hedging Activities
Yorkshire's supply business to Non-Franchise Supply Customers generally
involves entering into fixed price contracts to supply electricity to its
customers. Yorkshire obtains the electricity to satisfy its obligations under
such contracts primarily by purchases from the Pool. See "The Electric Utility
Industry in Great Britain". Because the price of electricity purchased from
the Pool can be volatile (due to the fact the price is set every half hour),
to the extent that Yorkshire purchases electricity from the Pool, Yorkshire is
exposed to risk arising from differences between the fixed price at which it
sells and the fluctuating prices at which it purchases electricity unless it
can effectively hedge such exposure. Although Yorkshire is currently party to
a series of contracts for differences ("CFDs") (most with terms of twelve
months) that limit such exposure, Yorkshire's ability to manage such risk at
acceptable levels will depend, in part, on the specific terms of the supply
contracts that Yorkshire enters into, Yorkshire's ability to implement and
manage an appropriate hedging strategy and the continued availability of
appropriate hedging instruments. No assurance can be given that this risk will
be effectively mitigated. In addition, under the supply price restraint
proposal published by the Regulator in October 1997 (and accepted by
Yorkshire), costs of power purchases from the Pool and related hedging
activities which
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are currently passed through to residential and small business customers will
no longer be automatically passed through to such customers. See "Business--
Supply Business".
Currency Risks; Hedging Transactions
Yorkshire Group's revenues generated by Yorkshire will be primarily in
pounds sterling while the interest and principal payment obligations with
respect to Junior Subordinated Debentures and the Trust Securities will be
payable in US dollars. As a result, any change in the currency exchange rate
that reduces the amount in pounds sterling obtained upon conversion of the US
dollar-based net proceeds of the Junior Subordinated Debentures and the Trust
Securities or that increases the effective principal and interest payment
obligations represented by the Junior Subordinated Debentures and the Trust
Securities upon conversion of pounds sterling-based revenues into US dollars
may, if not appropriately hedged, have a material adverse effect on Yorkshire
Group, Yorkshire Finance and the Trust or on their ability to make payments on
the Trust Securities. See "Presentation of Certain Information and Exchange
Rates" for certain information concerning the Noon Buying Rate for pounds
sterling expressed in US dollars. Although Yorkshire Group has entered into
certain transactions to hedge risks associated with exchange rate
fluctuations, there can be no assurance that any such transactions will be
successful in reducing such risks.
Working Capital Deficiency
Yorkshire Group had a working capital deficiency at December 31, 1997 of
(Pounds)1,099 million ($1,805 million), primarily as a result of the initial
financing structure of the Acquisition. This deficiency was largely
attributable to the 1997 Credit Facility (as defined under "Use of Proceeds")
which matures on July 30, 1998. For a discussion of the 1997 Credit Facility,
see Note 11, "Acquisition", to Yorkshire Group's consolidated balance sheet as
of April 1, 1997 included elsewhere in this Prospectus. Yorkshire Group has
partly refinanced the 1997 Credit Facility through the February 1998 issuances
of (Pounds)200 million of Guaranteed Eurobonds due in 2028, (Pounds)213
million of Senior Notes due 2003 and (Pounds)183 million of Senior Notes due
in 2008. It is proposed that the balance of the 1997 Credit Facility be
refinanced through the issuance of (Pounds)168 million of the Trust Securities
offered hereby, the potential issuance of additional senior notes, the
entering into of additional credit facilities, if available and on terms
acceptable to Yorkshire Group, and from the proceeds of the currently
contemplated transfer of Yorkshire Group's generation assets to an entity or
entities other than Yorkshire Group or its subsidiaries. Yorkshire Group is
currently in negotiations with respect to the replacement of the 1997 Credit
Facility. There can be no assurance that the balance of the 1997 Credit
Facility can be refinanced as planned. It is also possible that the terms
under which the balance of the 1997 Credit Facility is refinanced could result
in an increase in Yorkshire Group's financing costs.
FACTORS RELATING TO THE TRUST SECURITIES AND THE JUNIOR SUBORDINATED
DEBENTURES
Subordination of and Rights under the Debentures Guarantee
Yorkshire Group is a non-operating holding company, conducting substantially
all of its business through Yorkshire and its subsidiaries. Except to the
extent that Yorkshire Group may receive funds from the US Parents in the
future, Yorkshire Group will rely on dividends, indirectly, from Yorkshire to
meet its corporate expenses and outstanding obligations, including any
payments necessary pursuant to the Debentures Guarantee. Furthermore,
Yorkshire Group's obligations under the Debentures Guarantee will effectively
be subordinated to all existing and future indebtedness and liabilities of the
subsidiaries of Yorkshire Group, including Yorkshire. As a result, the rights
of holders of the Trust Securities, as beneficiaries of the Debentures
Guarantee, in respect of claims on the assets of each of Yorkshire Group's
subsidiaries upon any liquidation or administration are structurally
subordinated to, and therefore will be subject to the prior claims of, the
creditors of Yorkshire and its subsidiaries (including trade creditors),
except to the extent that Yorkshire Group may itself be a creditor with
recognized claims against Yorkshire and its subsidiaries. At December 31,
1997, the direct and indirect subsidiaries of Yorkshire Group had total
indebtedness (excluding indebtedness owed to Yorkshire Group) of approximately
(Pounds)476 million ($782 million).
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Yorkshire Finance exists solely for the purpose of operating as a finance
vehicle for Yorkshire Group and its affiliates. Accordingly, Yorkshire Finance
will rely on funds from Yorkshire Group and its affiliates to meet its
corporate expenses and outstanding obligations, including payments on the
Junior Subordinated Debentures. If Yorkshire Finance does not receive such
funds from Yorkshire Group or its affiliates and Yorkshire Group does not make
payments pursuant to the Debentures Guarantee, there will not be sufficient
funds to make payments on the Junior Subordinated Debentures. If the Trust, as
holder of the Junior Subordinated Debentures, does not receive such funds, the
Trust will not have sufficient funds to pay Distributions on the Trust
Securities or amounts payable on redemption thereof or otherwise. The Trust
Securities Guarantee does not cover payment of Distributions or any such
amounts when the Trust does not have sufficient funds available to pay such
Distributions. In such event, the remedy of a holder of Trust Securities will
be to enforce its rights under the Debentures Guarantee. The Debentures
Guarantee will be an unsecured and subordinate obligation and junior in right
of payment to all present and future Senior Debt of Yorkshire Group, to the
extent and in the manner set forth in the Indenture. As of December 31, 1997,
Yorkshire Group had approximately (Pounds)1,034 million ($1,699 million)
principal amount of Senior Debt outstanding, a portion of which will be repaid
with proceeds of this offering.
There are no terms of the Trust Securities, the Trust Agreement, the
Indenture, the Junior Subordinated Debentures, the Trust Securities Guarantee
or the Debentures Guarantee that limit Yorkshire Finance's or Yorkshire
Group's ability to incur additional indebtedness, including Senior Debt. See
"Description of the Trust Securities", "Description of the Trust Securities
Guarantee", "Description of the Junior Subordinated Debentures--Subordination"
and "Description of the Debentures Guarantee".
Subordination of and Limitation of Funds Available to Trust under the Trust
Securities Guarantee
The Trust Securities Guarantee will be an unsecured and subordinate
obligation and junior in right of payment to all Senior Debt of Yorkshire
Group and will rank pari passu with the most senior preferred stock issued by
Yorkshire Group. If Yorkshire Finance does not make Interest Payments or other
payments with respect to the Junior Subordinated Debentures or Yorkshire Group
does not make payments pursuant to the Debentures Guarantee, the Trust will
have insufficient funds available to pay Distributions or amounts payable on
redemption thereof or otherwise. In such event, holders of the Trust
Securities would not be able to rely upon the Trust Securities Guarantee for
payment of such amounts. See "Description of the Trust Securities Guarantee".
Option to Defer Payment of Interest; Potential Market Volatility During
Extension Period; Tax Consequences of Deferral
So long as no Event of Default under the Indenture has occurred and is
continuing, Yorkshire Finance has the right under the Indenture to defer
Interest Payments on the Junior Subordinated Debentures, at any time or from
time to time, for up to 20 consecutive quarters; provided, however, Yorkshire
Finance cannot defer Interest Payments beyond the Stated Maturity of the
Junior Subordinated Debentures. During such Extension Period, quarterly
Distributions on the Trust Securities would also be deferred (but would
continue to accumulate additional Distributions thereon) at the rate of %
per annum, compounded quarterly, by the Trust until all deferred Interest
Payments, together with interest thereon, have been paid in full. Further,
during an Extension Period, Yorkshire Group's obligations to make payments
under the Trust Securities Guarantee and the Debentures Guarantee will be
suspended.
During an Extension Period, neither Yorkshire Finance nor Yorkshire Group
will be permitted, subject to certain exceptions set forth herein, to (i)
declare or pay any cash distributions with respect to its capital stock, (ii)
make any payments on its debt securities that rank pari passu with or junior
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior to the Junior Subordinated Debentures or the
Debentures Guarantee, respectively, or (iv) make any payments on its debt
securities held by, make any loans or advances to, or make payments with
respect to any guarantee of the debt of, any affiliate. Prior to the
termination of any such Extension Period, Yorkshire Finance may further extend
the interest payment period; provided that, such
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Extension Period, together with all such previous and further extensions
within such Extension Period, may not exceed 20 consecutive quarters or the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, Yorkshire
Finance may commence a new Extension Period, subject to the above
requirements. As a result, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures. See
"Description of the Trust Securities--Distributions" and "Description of the
Junior Subordinated Debentures--Option to Defer Payment of Interest".
In the event Yorkshire Finance exercises its right to defer Interest
Payments on the Junior Subordinated Debentures, the market price of the Trust
Securities is likely to be affected. A holder that disposes of its Trust
Securities during such a deferral, therefore, might not receive the same
return on its investment as a holder that continues to hold its Trust
Securities. In addition, the market price of the Trust Securities may be more
volatile than the market prices of other securities that are not subject to
such deferrals.
In the event Yorkshire Finance exercises its rights to defer Interest
Payments on the Junior Subordinated Debentures, each holder of Trust
Securities will be required to include income in the form of OID in its gross
income for US Federal income tax purposes in respect of the deferred interest
(including interest thereon) allocable to its Trust Securities. As a result, a
holder of Trust Securities will recognize income for US Federal income tax
purposes in advance of the receipt of cash. Such holder will not receive the
cash from the Trust related to such income if such holder disposes of its
Trust Securities prior to the record date for the date on which Distributions
of such amounts are made. Such holder will increase its adjusted basis in its
Trust Securities by the amount of OID so included in income in respect of such
deferral and, to the extent that the adjusted tax basis exceeds the amount
realized on the sale or other disposition of such holder's Trust Securities,
recognize a capital loss. If the holder disposes of a Trust Security prior to
the occurrence of an Extension Period, any portion of the amount received from
the purchaser that is attributable to accrued interest will be treated as
interest income to the holder (that will only be includible as income to the
extent it previously has not been included in the holder's taxable income) and
will not be treated as part of the amount realized for purposes of determining
gain or loss on the disposition of the Trust Security. Subject to certain
limitations, capital losses cannot be applied to offset ordinary income for US
Federal income tax purposes. See "Material Income Tax Considerations--US
Federal Income Tax Considerations--Original Issue Discount" and "--Disposition
of Trust Securities.". INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE TRUST SECURITIES.
Yorkshire Finance currently has no intention of exercising its right to
defer Interest Payments on the Junior Subordinated Debentures. Moreover,
because of the consequences of exercising such right, including a prohibition
on the payment of cash distributions by Yorkshire Finance and Yorkshire Group
with respect to their capital stock, Yorkshire Finance believes the likelihood
of such exercise is remote.
Special Event Redemption; Distribution of Junior Subordinated Debentures
Upon the occurrence and continuation of a Special Event, as described under
"Description of the Trust Securities--Redemptions--Special Event Redemption of
Junior Subordinated Debentures", Yorkshire Finance has the right to redeem the
Junior Subordinated Debentures in whole (but not in part) at the Debenture
Redemption Price, and thereby cause a mandatory redemption of the Trust
Securities, at the Redemption Price, within 90 days following the occurrence
of such Special Event.
In addition, at any time, the Control Party will have the right to dissolve
the Trust and, after satisfaction of liabilities to creditors, if any, of the
Trust as provided by applicable law, cause a Like Amount of Junior
Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. See "Description of the Trust
Securities--Distribution of Junior Subordinated Debentures".
Under current US Federal income tax law, a distribution of Junior
Subordinated Debentures upon a liquidation of the Trust would not be a taxable
event to holders of the Trust Securities. If, however, the Trust
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were characterized for US Federal income tax purposes as an association
taxable as a corporation at the time of such liquidation, the distribution of
the Junior Subordinated Debentures would be a taxable event to holders of
Trust Securities. Under current US Federal income tax law, the redemption of
the Junior Subordinated Debentures upon occurrence of a Special Event or a
liquidation of the Trust in which holders of the Trust Securities receive cash
would be a taxable event to such holders. See "Material Income Tax
Considerations--US Federal Income Tax Considerations--Receipt of Junior
Subordinated Debentures or Cash in Certain Circumstances".
There can be no assurance as to the market prices for the Junior
Subordinated Debentures that may be distributed in exchange for the Trust
Securities if a liquidation of the Trust were to occur. Accordingly, the
Junior Subordinated Debentures that a holder of the Trust Securities may
receive upon liquidation of the Trust could trade at a discount to the price
that the investor paid to purchase the Trust Securities offered hereby.
Because holders of the Trust Securities may receive the Junior Subordinated
Debentures, if the Control Party exercises its right to dissolve the Trust,
prospective purchasers of the Trust Securities are also making an investment
decision with regard to the Junior Subordinated Debentures and the Debentures
Guarantee and should carefully review all the information regarding the Junior
Subordinated Debentures and the Debentures Guarantee contained herein. See
"Description of the Junior Subordinated Debentures--Distribution of the Junior
Subordinated Debentures" and "Description of the Debentures Guarantee".
No Protection in the Event of a Change in Control, etc.
Neither holders of the Junior Subordinated Debentures nor holders of the
Trust Securities are afforded protection in the event of a highly leveraged
transaction, a change in control or other similar transactions involving
Yorkshire Finance or Yorkshire Group that may adversely affect such holders.
See "Description of the Junior Subordinated Debentures--Consolidation, Merger,
Sale of Assets and Other Transactions".
No Prior Market for the Trust Securities
The Trust Securities constitute a new issue of securities with no
established trading market. Application has been made to list the Trust
Securities on the NYSE. Assuming approval for listing by the NYSE, however,
there can be no assurance that an active market for the Trust Securities will
develop or be sustained in the future. Although the Underwriters have
indicated that they intend to make a market in the Trust Securities, as
permitted by applicable laws and regulations, they are not obligated to do so
and may discontinue any such market making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of the trading
market for the Trust Securities.
27
<PAGE>
YORKSHIRE GROUP AND THE US PARENTS
YORKSHIRE GROUP
Yorkshire Group was incorporated as a private company with limited liability
under the laws of England and Wales in July 1996. In 1997, Yorkshire Group was
utilized in connection with the Acquisition by the US Parents of Yorkshire,
one of the twelve RECs in England and Wales. Yorkshire Group gained effective
control of Yorkshire on April 1, 1997. Yorkshire Group's primary asset is the
outstanding shares of Yorkshire Holdings, a public limited company
incorporated under the laws of England and Wales, which in turn beneficially
owns all of the outstanding shares of Yorkshire. Yorkshire Holdings was
organized as a wholly-owned subsidiary of Yorkshire Group solely for holding
the share capital of Yorkshire and has no other significant operations.
Each of the US Parents holds an indirect 50% interest in Yorkshire Group.
AEP holds such interest through its wholly-owned subsidiary, AEP Resources.
NCE holds its 50% indirect interest in Yorkshire Group through its wholly-
owned subsidiary, Public Service Company of Colorado, a Colorado corporation,
which in turn wholly-owns New Century International.
YORKSHIRE FINANCE
Yorkshire Finance was incorporated under the laws of the Cayman Islands in
August 1997. Yorkshire Finance exists solely for the purpose of operating as a
financing vehicle for Yorkshire Group and its affiliates. Yorkshire Finance
does not, and does not expect to, prepare or publish any financial statements.
The registered office of Yorkshire Finance is P.O. Box 309, George Town, Grand
Cayman Island, British West Indies. The principal executive offices of
Yorkshire Finance are located at Wetherby Road, Scarcroft, Leeds LS14 3HS,
England, telephone number 011-44-113-289-2123.
YORKSHIRE
Yorkshire's principal businesses are the distribution of electricity to
approximately two million customers in its Franchise Area and the supply of
electricity primarily within its Franchise Area. Yorkshire generated total
operating income of (Pounds)52 million ($85 million) in Fiscal Year 1997.
During Fiscal Year 1997, however, Yorkshire recorded a (Pounds)78 million
($128 million) provision for uneconomic gas and electricity contracts and a
(Pounds)50 million ($82 million) charge for information system development
costs to prepare for the opening of the competitive electricity market in 1998
for Franchise Supply Customers (as defined herein). Excluding these charges,
total operating income would have been (Pounds)180 million ($295 million) in
Fiscal Year 1997, including (Pounds)140 million ($230 million) (78% of total)
associated with the core distribution business and (Pounds)29 million ($48
million) (16% of total) associated with the supply business. As discussed
below under "Business--Business Restructuring", beginning in 1998, Yorkshire
will operate the distribution and supply businesses as self-sufficient
businesses.
The registered office and principal executive offices of Yorkshire Group and
Yorkshire are located at Wetherby Road, Scarcroft, Leeds LS14 3HS, England,
telephone number 011-44-113-289-2123.
THE US PARENTS
AEP
AEP is an electric utility holding company registered under the 1935 Act.
AEP owns all of the outstanding common stock of AEP Generating Company,
Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan
Power Company, Kentucky Power Company, Kingsport Power Company, Ohio Power
Company and Wheeling Power Company. These eight utility subsidiaries are
engaged in the generation, purchase, transmission, distribution and sale of
electricity to over 2.9 million retail customers in portions of the states of
Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia. AEP
also owns all the outstanding common stock of AEP Resources and AEP Resources
International, Limited whose primary
28
<PAGE>
businesses are the development of, and investment in, exempt wholesale
generators, foreign utility companies, qualifying cogeneration facilities and
other power projects. In the year ended December 31, 1997, AEP generated
consolidated operating revenues of $6.2 billion and had consolidated assets of
approximately $16.6 billion.
On December 22, 1997, AEP announced the signing of a merger agreement with
Central and South West Corporation, a Dallas, Texas based electric utility
holding company that is registered under the 1935 Act ("CSW"). CSW owns four
electric operating subsidiaries serving 1.7 million customers in Texas,
Oklahoma, Louisiana and Arkansas. CSW also owns SEEBOARD plc, a REC which
serves the southeast coast of England. Under the merger agreement, each share
of CSW common stock will be converted into 0.6 share of AEP common stock.
Based on the price of AEP's common stock on December 19, 1997, the transaction
would be valued at $6.6 billion. The combined company will be named American
Electric Power Company, Inc. and will be based in Columbus, Ohio. The merger
is conditioned upon, among other things, the approvals of the shareholders of
AEP and CSW and various state and federal regulatory agencies. Assuming the
receipt of all required approvals, the merger is currently expected to be
consummated within twelve to eighteen months of its announcement.
NCE
NCE is also an electric utility holding company registered under the 1935
Act. NCE owns all the outstanding common stock of Public Service Company of
Colorado, Cheyenne Light, Fuel and Power Company and Southwestern Public
Service Company, which serve approximately 1.6 million retail electric
customers in portions of the states of Colorado, Texas, New Mexico, Oklahoma,
Kansas and Wyoming and approximately 1 million retail gas customers in
portions of the states of Colorado and Wyoming. These three electric and gas
utility subsidiaries are principally engaged in the generation, purchase,
transmission, distribution and sale of electricity and in the purchase,
transmission, distribution, sale and transportation of natural gas. In the
year ended December 31, 1997, NCE generated consolidated operating revenues of
$3.3 billion and had consolidated assets of approximately $7.3 billion.
29
<PAGE>
The following organizational chart illustrates the ownership structure of
Yorkshire, Yorkshire Group, Yorkshire Finance and the Trust:
New Century
Energies, Inc.
("NCE")
American Electric Public Service
Power Company, Inc. Company of Colorado
("AEP")
AEP Resources, Inc. New Century
("AEP Resources") International, Inc.
50% 50%
Yorkshire Power Group Limited
("Yorkshire Group") Trust
Securities
Guarantee
Debentures
Guarantee
Yorkshire Holdings The Control Yorkshire Power
plc Party Finance Limited
("Yorkshire Holdings") ("Yorkshire Finance")
ARROW UP
$
ARROW UP ARROW DOWN
Yorkshire Electricity Junior
Group plc Control Subordinated
("Yorkshire") Certificate Debentures
ARROW DOWN
Yorkshire Capital Trust I
(the "Trust")
ARROW UP
$ ARROW DOWN
ARROW DOWN
Holders Trust
Securities
30
<PAGE>
YORKSHIRE CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State
on February 4, 1998. The Trust's business is defined in a trust agreement,
executed by AEP Resources, as Depositor, The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware trustee, and Stephan T.
Haynes, as initial Administrative Trustee thereunder. This trust agreement
will be amended and restated in its entirety prior to the issuance of the
Trust Securities. The Trust exists for the exclusive purposes of (i) issuing
and selling the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Junior Subordinated Debentures and (iii) engaging in only
those other activities necessary, appropriate, convenient or incidental
thereto. The Trust will terminate on , 2043, but may dissolve earlier, as
provided in the Trust Agreement.
Promptly after its creation, the Trust issued the Control Certificate to AEP
Resources for a nominal amount. AEP Resources transferred such Control
Certificate to Yorkshire Group. Yorkshire Group, in turn, will transfer such
Control Certificate to the Control Party. By holding the Control Certificate,
the Control Party will retain voting control and appointment power with
respect to the Trust. In certain circumstances, the holders of a majority in
liquidation amount of the Trust Securities will be entitled to appoint a
substitute Property Trustee. See "Description of the Trust Securities--Voting
Rights; Amendment of Trust Agreement".
The Trust's business and affairs will be conducted by the Securities
Trustees. Four employees of the US Parents initially will serve as
Administrative Trustees. The Bank of New York will serve as Property Trustee.
The Bank of New York (Delaware) will serve as Delaware Trustee.
The Property Trustee will hold the Book-Entry Interests (as defined under
"Description of the Junior Subordinated Debentures--Form, Book-Entry
Procedures and Transfer"), representing a 100% beneficial interest in the
Junior Subordinated Debentures, for the benefit of the Trust and the holders
of the Trust Securities and accordingly will have the power to exercise all
rights, powers and privileges under the Deposit Agreement (as defined under
"Description of the Junior Subordinated Debentures--Form, Book-Entry
Procedures and Transfer") and, indirectly, under the Indenture. The Property
Trustee will make payments of Distributions and payments on liquidation,
redemption and otherwise to the holders of the Trust Securities. Subject to
the right of the holders of the Trust Securities to appoint a substitute
Property Trustee in certain instances the Control Party as the holder of the
Control Certificate, will have the right to appoint, remove or replace all the
Securities Trustees.
The Junior Subordinated Debentures will constitute substantially all of the
assets of the Trust. Other assets that may constitute property of the Trust
include any cash on deposit in, or owing to, the payment account as
established under the Trust Agreement. In addition, the Trust may, from time
to time, receive cash pursuant to the Agreement as to Expenses and
Liabilities.
The rights of the holders of the Trust Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware Business Trust Act and the Trust Indenture Act of
1939, as amended (the "1939 Act"). See "Description of the Trust Securities".
The principal place of business of the Trust is c/o American Electric Power
Service Corporation, 1 Riverside Plaza, Columbus, Ohio 43215, telephone 614-
223-1000, Attn: Corporate Finance Director.
US ACCOUNTING TREATMENT
For US financial reporting purposes, the Trust will be treated as a
subsidiary of Yorkshire Group and, accordingly, the accounts of the Trust will
be included in the consolidated financial statements of Yorkshire Group. The
Trust Securities will be presented as a separate line item in the consolidated
balance sheet of Yorkshire Group entitled "Company-Obligated Mandatorily
Redeemable Trust Securities of Subsidiary Holding Solely Junior Subordinated
Deferrable Interest Debentures" and appropriate disclosures about the Trust
Securities, the Trust Securities Guarantee, the Debentures Guarantee and the
Junior Subordinated Debentures will be included in the notes to the
consolidated financial statements. For financial reporting purposes, Yorkshire
Group will record Distributions payable on the Trust Securities as an expense.
31
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Securities will be invested
by the Trust in the Junior Subordinated Debentures issued by Yorkshire Finance
to the Trust. In turn, Yorkshire Finance will loan the net proceeds to
Yorkshire Group and certain of its affiliates with such loans to be evidenced
by the Intercompany Notes. Such proceeds will be used for the working capital
of certain affiliates, and for the repayment of approximately (Pounds)162
million ($265 million) of Yorkshire Group's indebtedness under the Credit
Facility, dated July 31, 1997, between Yorkshire Group and Union Bank of
Switzerland (the "1997 Credit Facility"), which, at December 31, 1997, had an
outstanding balance of (Pounds)1,034 million ($1,699 million) and bore
interest at rates between 7.49% and 7.57%. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
CAPITALIZATION
The following table sets forth, at December 31, 1997 (i) the actual
consolidated capitalization of Yorkshire Group and (ii) the consolidated
capitalization of Yorkshire Group adjusted to reflect (A) the issuance of the
Trust Securities offered hereby and the application of the net proceeds
thereof, as described under "Use of Proceeds", (B) the issuance in February
1998 of (Pounds)200 million ($328 million) aggregate principal amount of
Yorkshire Finance's 7.25% Guaranteed Bonds due 2028 (the "Guaranteed
Eurobonds"), unconditionally and irrevocably guaranteed by Yorkshire Group,
and the application of the net proceeds thereof to reduce amounts outstanding
under the 1997 Credit Facility and (C) the issuance in February 1998 of
$350,000,000 aggregate principal amount of Yorkshire Finance's 6.154% Senior
Notes due 2003 (the "2003 Notes") and $300,000,000 aggregate principal amount
of Yorkshire Finance's 6.496% Senior Notes due 2008 (the "2008 Notes" and,
together with the 2003 Notes, the "Senior Notes"), each series unconditionally
and irrevocably guaranteed by Yorkshire Group, and the application of the net
proceeds thereof to reduce amounts outstanding under the 1997 Credit Facility.
This table should be read in conjunction with "Selected Consolidated Financial
Data", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------
ACTUAL AS ADJUSTED
------------------------ ------------------------
((Pounds)) $(1) % ((Pounds)) $(1) %
(AMOUNTS IN MILLIONS, EXCEPT %)
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
1997 Credit Facility....... (Pounds)1,034 $1,699 56% (Pounds) 281 $ 461 15%
Other short-term debt...... 47 77 2 47 77 3
Long-term debt:
European Investment
Bank.................... 69 113 4 69 113 4
Eurobonds................ 359 590 20 359 590 19
Senior Notes............. -- -- -- 396 650 21
Guaranteed Eurobonds..... -- -- -- 200 328 11
Other debt............... 1 2 * 1 2 *
Company-obligated
Mandatorily Redeemable
Trust Securities of
Subsidiary Holding Solely
Junior Subordinated
Deferrable Interest
Debentures(2)............. -- -- -- 168 275 9
Total shareholders'
equity.................... 330 542 18 330 542 18
------------- ------ --- ------------- ------ ---
Total capitalization....... (Pounds)1,840 $3,023 100% (Pounds)1,851 $3,038 100%
============= ====== === ============= ====== ===
</TABLE>
- --------
(1) Solely for convenience of the reader, UK pounds sterling amounts have
been translated into US dollars at the Noon Buying Rate on December 31,
1997 of $1.64 = (Pounds) 1. See "Presentation of Certain Information and
Exchange Rates".
(2) As described under "Yorkshire Capital Trust I", substantially all of the
Trust's assets will consist of $275,000,000 aggregate principal amount of
Yorkshire Finance's % Junior Subordinated Deferrable Interest
Debentures, Series A due , 2038.
* Less than 1%.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated income statement data, other consolidated data and certain
business segment data of the Predecessor Company for each of the five Fiscal
Years ended March 31, 1997 and the consolidated balance sheet data and certain
business segment data of the Predecessor Company at the end of each such
Fiscal Year presented below have been derived from the audited consolidated
financial statements of the Predecessor Company. The consolidated balance
sheet data and certain business segment data of the Successor Company as of
April 1, 1997 presented below have been derived from the audited consolidated
balance sheet of the Successor Company. The consolidated income statement
data, other consolidated data and certain business segment data for the nine
months ended December 31, 1997 and 1996 of the Successor Company and the
Predecessor Company presented below have been derived from the condensed
unaudited consolidated financial statements of the Successor Company and the
Predecessor Company, respectively. The consolidated balance sheet data and
certain business segment data at December 31, 1997 of the Successor Company
presented below have been derived from the condensed unaudited consolidated
financial statements of the Successor Company. In the opinion of the
management of Yorkshire Group, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation of the
condensed unaudited consolidated financial statements have been included and
the accompanying condensed unaudited consolidated financial statements present
fairly the financial position and the results of operations for the interim
periods presented. The selected consolidated financial data presented below
that were derived from the audited consolidated financial statements of the
Predecessor Company and the Successor Company have been prepared in accordance
with US GAAP and audited by Deloitte & Touche. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and notes thereto of the Predecessor Company
and the Successor Company included elsewhere in this Prospectus.
The unaudited pro forma consolidated income statement data for the Successor
Company for Fiscal Year 1997 presented below reflect the Acquisition as if it
had occurred as of April 1, 1996. Such data have been prepared by the
Successor Company based upon assumptions deemed proper in accordance with the
purchase method of accounting for business combinations and have been adjusted
to reflect (i) interest expense of (Pounds)74 million incurred as a result of
the financing of the Acquisition, (ii) amortization of (Pounds)24 million
related to goodwill recorded in connection with the Acquisition, (iii)
additional depreciation expense of (Pounds)6 million as a result of the
revaluation of certain fixed assets in connection with the Acquisition and
(iv) removal of the effect of recording the provision of (Pounds)78 million
for certain uneconomic gas and electricity contracts, the loss of (Pounds)7
million on certain interest rate swap agreements and the write-down of
(Pounds)6 million relating to non-operational property. Such data are shown
for illustrative purposes only and are not necessarily indicative of the
future results of operations of the Successor Company or of the results of
operations of the Successor Company that would have actually occurred had the
Acquisition occurred at the beginning of the period presented. Such data
should be read in conjunction with the unaudited pro forma consolidated
statement of income and notes thereto of the Successor Company included
elsewhere in this Prospectus.
33
<PAGE>
PREDECESSOR COMPANY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DA-
TA:
Operating revenues.............. 1,325 1,308 1,464 1,431 1,331
Operating income (1)............ 146 156 215 214 52
Other income (loss), net (2).... 15 (8) 16 313 20
Interest expense, net........... (7) (5) (12) (20) (33)
Provision for income taxes (3).. (54) (50) (78) (114) (13)
----- ----- ----- ----- -----
Net income...................... 100 93 141 393 26
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets.................... 613 701 747 769 796
Total assets.................... 1,214 1,241 1,367 1,408 1,375
Total shareholders' equity...... 561 612 517 399 359
Long-term debt.................. 104 126 305 424 419
Short-term debt and current por-
tion of long-term debt......... 217 99 91 90 87
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT (4)........................ 161 148 231 527 72
EBITDA (4)...................... 193 182 272 569 122
Cash flow from operations....... 187 237 201 222 96
Cash used in investing activi-
ties........................... (137) (201) (101) (8) (51)
Cash provided by (used in) fi-
nancing activities............. 129 (139) (67) (114) (76)
Ratio of earnings to fixed
charges (5).................... 6.6 6.8 10.5 12.0 1.8
</TABLE>
34
<PAGE>
SUCCESSOR COMPANY
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Operating revenues............. 1,331 2,183 974 909 1,493
Operating income (1)........... 106 174 120 123 202
Other income, net (2).......... 20 33 17 2 3
Interest expense, net.......... (100) (164) (20) (78) (128)
Provision for income taxes..... (17) (28) (40) (5) (8)
----- ----- --- ------ ------
Income before extraordinary
item.......................... 9 15 77 42 69
Extraordinary item (7)......... -- -- -- (134) (220)
----- ----- --- ------ ------
Net income (loss).............. 9 15 77 (92) (151)
===== ===== === ====== ======
<CAPTION>
SUCCESSOR SUCCESSOR
APRIL 1, DECEMBER 31,
1997 1997
-------------- ---------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets................... 939 1,540 1,001 1,644
Total assets................... 2,591 4,249 2,522 4,143
Total shareholders' equity..... -- -- 330 542
Long-term debt................. 433 710 429 705
Accrued liability to purchase
Yorkshire..................... 1,496 2,453 -- --
Short-term debt and current
portion of long-term debt..... 87 143 1,081 1,776
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT before extraordinary item
(4)(7)........................ 126 207 137 125 205
EBITDA before extraordinary
item (4)(7)................... 206 338 169 183 300
Cash flow from operations...... 149 63 103
Cash used in investing activi-
ties.......................... (99) (1,575) (2,586)
Cash provided by (used in) fi-
nancing activities............ (49) 1,409 2,314
Ratio of earnings to fixed
charges (5)................... 1.2 4.6 1.5
</TABLE>
35
<PAGE>
PREDECESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution.................... 332 348 362 334 308
Supply.......................... 1,206 1,220 1,343 1,309 1,178
Other........................... 182 162 162 163 172
Intrabusiness eliminations (8).. (395) (422) (403) (375) (327)
----- ----- ----- ----- -----
1,325 1,308 1,464 1,431 1,331
===== ===== ===== ===== =====
OPERATING INCOME (LOSS):
Distribution.................... 135 133 176 164 127
Supply (1)...................... 10 14 23 30 (132)
Other........................... 1 9 16 20 10
Intrabusiness eliminations
(1)(8)......................... -- -- -- -- 47
----- ----- ----- ----- -----
146 156 215 214 52
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution.................... 476 513 556 589 643
Supply.......................... 177 161 198 212 178
Other and unallocated........... 561 567 613 607 554
----- ----- ----- ----- -----
1,214 1,241 1,367 1,408 1,375
===== ===== ===== ===== =====
</TABLE>
36
<PAGE>
SUCCESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ --------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- -----
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution..................... 308 505 225 224 368
Supply........................... 1,178 1,932 868 799 1,312
Other............................ 172 282 136 141 232
Intrabusiness eliminations(8).... (327) (536) (255) (255) (419)
----- ----- ---- ----- -----
1,331 2,183 974 909 1,493
===== ===== ==== ===== =====
OPERATING INCOME (LOSS):
Distribution..................... 97 159 99 89 146
Supply(1)........................ (7) (11) 1 14 23
Other............................ 16 26 20 20 33
----- ----- ---- ----- -----
106 174 120 123 202
===== ===== ==== ===== =====
<CAPTION>
SUCCESSOR
SUCCESSOR DECEMBER 31,
APRIL 1, 1997 1997
-------------- --------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- -------- -----
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution..................... 1,802 2,955 1,754 2,881
Supply........................... 187 307 180 296
Other and unallocated............ 602 987 588 966
----- ----- ----- -----
2,591 4,249 2,522 4,143
===== ===== ===== =====
</TABLE>
37
<PAGE>
(1)Notable operating expenses include:
Fiscal Year 1997--(i) a provision of (Pounds)78 million for uneconomic gas
and electricity contracts (the effect of which is removed from the
Successor Company's unaudited pro forma consolidated statement of income
for Fiscal Year 1997), which resulted in a charge of (Pounds)125 million to
the supply business offset by an intrabusiness elimination of (Pounds)47
million and (ii) a charge of (Pounds)50 million for information system
development costs to prepare for the opening of the competitive electricity
market in 1998 for Franchise Supply Customers, of which (Pounds)37 million
was charged to the supply business and (Pounds)13 million was charged to
the distribution business.
Fiscal Years 1993, 1994 and 1995--reorganization costs of (Pounds)18
million, (Pounds)44 million and (Pounds)8 million, respectively.
(2) Other income (loss) principally represents income from Yorkshire's
investment in NGG and, in Fiscal Year 1996, a gain resulting from the NGG
Transaction and earnings and losses from Yorkshire's investments in joint
ventures and minority holdings. Notable items include:
Fiscal Year 1997--gain on sale of Yorkshire's investment in Torch Telecom
of (Pounds)15 million.
Fiscal Year 1996--income from investment in NGG and gain in respect of the
NGG Transaction as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Introduction--NGG
Transaction".
Fiscal Year 1995--one-time termination payment received from Stockholm
Stadhus AB of (Pounds)17 million.
Fiscal Year 1994--loss on sale of Yorkshire's investment in Homepower
Retail Limited of (Pounds)18 million.
(3) Fiscal Year 1996 includes a tax charge of (Pounds)38 million relating to
the NGG Transaction.
(4) EBIT represents income before the sum of interest expense and income
taxes. EBITDA represents income before the sum of interest expense, income
taxes, depreciation and amortization. EBIT and EBITDA are provided for
informational purposes only and such measures should not be construed as
alternatives to operating income (as determined in accordance with US
GAAP) as indicators of operating performance, or as alternatives to cash
flows from operating activities (as determined in accordance with US GAAP)
as measures of liquidity. EBIT and EBITDA are widely accepted financial
indicators of a company's ability to incur and service debt. However, the
measures of EBIT and EBITDA presented herein may not be comparable to
similar measures presented by other companies.
(5) The ratio of earnings to fixed charges is computed as the sum of pre-tax
income (before extraordinary item), plus fixed charges divided by fixed
charges. Fixed charges consist of interest expense and amortization of
debt expense.
(6) Solely for the convenience of the reader, pounds sterling amounts have
been translated into US dollar amounts at the Noon Buying Rate on December
31, 1997 of $1.64 = (Pounds)1. See "Presentation of Certain Information
and Exchange Rates".
(7) Represents the windfall tax imposed by the UK government, which was not
deductible for UK corporation tax purposes.
(8) Intrabusiness eliminations consist primarily of intracompany transactions
between the distribution business and the supply business and
interbusiness transactions between ancillary businesses. Pursuant to the
UK regulatory framework, charges by the distribution business for
electricity in respect of supply customers in the Franchise Area are
billed to the supply business, which in turn incorporates the distribution
charge into the bill sent to the final end user.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
and condensed consolidated financial statements and the notes thereto of the
Successor Company and with the consolidated and condensed financial statements
and the notes thereto of the Predecessor Company and "Selected Consolidated
Financial Data" included elsewhere in this Prospectus. The consolidated and
condensed financial statements of the Successor Company and the Predecessor
Company discussed herein are presented in accordance with US GAAP.
INTRODUCTION
Background
Yorkshire Group is indirectly equally owned by AEP and NCE. Yorkshire Group
was incorporated as a limited company under the laws of England and Wales in
July 1996. Effective April 1, 1997, Yorkshire Group, through its wholly owned
subsidiary Yorkshire Holdings, gained effective control of Yorkshire.
Yorkshire Group's primary asset is the stock of Yorkshire Holdings. Yorkshire
Holdings, which owns all the outstanding stock of Yorkshire, has no
significant operations outside of its investment in Yorkshire.
Financing the Acquisition
Yorkshire Group indirectly acquired ownership of Yorkshire by means of a
cash offer commenced on February 24, 1997 and declared wholly unconditional on
April 1, 1997. The Acquisition was completed through the payment of cash
consideration of (Pounds)1,457 million and the issuance of loan notes in the
amount of (Pounds)22 million. The total consideration, including acquisition
costs, was (Pounds)1,496 million. The Acquisition was financed by cash
contributions of (Pounds)220 million from each of AEP and NCE and from
borrowings under a (Pounds)1,140 million five year term loan and revolving
facility agreement dated February 24, 1997. On July 31, 1997, this term loan
and revolving facility agreement was replaced by the 1997 Credit Facility.
Accounting for the Acquisition
The recorded assets and liabilities of Yorkshire at March 31, 1997 were
(Pounds)1,375 million and (Pounds)1,016 million, respectively. In accordance
with the purchase method of accounting, the assets and liabilities acquired
have been recorded based on an allocation of the purchase price. The final
purchase price allocation report has not yet been completed. However, the
Successor Company does not anticipate any material changes based on currently
available information. Effective April 1, 1997, Yorkshire's assets were
increased by (Pounds)222 million to their fair value of (Pounds)1,597 million,
reflecting principally: (a) an increase of (Pounds)138 million in the value of
Yorkshire's distribution network in excess of its depreciated cost basis; (b)
an increase in the pension asset for the defined benefit pension plan of
(Pounds)55 million; and (c) an increase in the value of an equity investment
in Ionica Group plc ("Ionica") of (Pounds)23 million. Yorkshire's liabilities
were increased by (Pounds)79 million to their fair value of (Pounds)1,095
million, reflecting principally: (a) an increase in the deferred tax liability
of (Pounds)67 million; and (b) an increase of (Pounds)14 million in the market
value of long-term borrowings. The excess of the purchase price plus
Acquisition costs, totalling (Pounds)1,496 million, over the fair value of
assets acquired net of liabilities assumed, totalling (Pounds)502 million,
resulted in goodwill of (Pounds)994 million which is being amortized over a 40
year period. The consolidated financial statements of the Predecessor Company
discussed below do not reflect the foregoing adjustments.
NGG Transaction
During Fiscal Year 1996, Yorkshire, together with the other 11 RECs in the
UK, distributed the majority of its shares in NGG to its shareholders. This
transaction, together with certain related transactions (collectively, the
"NGG Transaction"), had a material impact on Yorkshire's financial results for
that year. The related transactions included: (a) Yorkshire's receipt of
special and ordinary dividends; (b) the receipt by each Yorkshire residential
customer of a one-time discount pursuant to an agreement among the
shareholders of NGG; and
39
<PAGE>
(c) Yorkshire's receipt of an in-kind dividend of approximately 9.2% of the
shares of PSB Holdings Limited ("PSB"), the holding company of First Hydro
Limited, which shares were subsequently converted to cash upon PSB's
liquidation.
SIGNIFICANT FACTORS AND KNOWN TRENDS
Competition and Industry Challenges
On April 1, 1995 and 1996, certain reductions in allowed distribution
revenues were made by the Regulator. Yorkshire's allowed distribution revenues
were impacted by a 14% below inflation reduction and a 13% below inflation
reduction on April 1, 1995 and 1996, respectively, following reviews by the
Regulator. On April 1, 1997 and April 1, 1998, Yorkshire's allowed
distribution revenues were decreased by an additional 3% below inflation
reduction, and there will be a further 3% below inflation reduction on April
1, 1999.
The potential exists for additional distribution price reductions based upon
further review by the Regulator. The next scheduled Distribution Price Control
Formula review will be in 2000. Future cost efficiency initiatives may not
result in sufficient savings to offset price reductions. Price reductions are
mitigated by the inclusion of the UK Retail Price Index in the determination
of the Distribution Price Control Formula. Because the maximum average price
in any year is based in part on the maximum average price in the preceding
year, a price reduction in any given year has an ongoing effect on the maximum
average price for all subsequent years. See "The Electric Utility Industry in
Great Britain--Distribution of Electricity--Price Control".
Yorkshire currently has an exclusive right to supply electricity to its
Franchise Supply Customers. Competition in supply to such customers was
scheduled to be phased in over a six month period commencing on April 1, 1998.
In October 1997, the Regulator published proposals for new transitional supply
price restraints to apply from April 1, 1998 to residential and small business
customers for an initial period of two years and until an adequate level of
competition is established. Yorkshire subsequently indicated its acceptance of
such proposals. The proposals (when taken together with the reduction in the
Fossil Fuel Levy, which became effective on April 1, 1998) resulted in the
implementation of small reductions, effective April 1, 1998, in the tariffs
for Yorkshire's residential and small business customers in its Franchise Area
compared to the corresponding tariffs in effect in August 1997. The proposals
also require an additional 3% below inflation reduction effective April 1,
1999. See "The Electric Utility Industry in Great Britain--Supply of
Electricity--Price Regulation".
Following an announcement in January 1998 by the Regulator, competition in
supply to Franchise Supply Customers has been delayed until September 1998.
Assuming that such competition starts as currently scheduled in September 1998
for Franchise Supply Customers, Yorkshire Group presently estimates that costs
totalling (Pounds)75 million will have been incurred for re-engineering and
information technology work. Of such amount, approximately (Pounds)19 million
was expensed in Fiscal Year 1997. The Regulator has made proposals (which have
been accepted by Yorkshire) to allow Yorkshire recovery of (Pounds)23 million
over a five year period ending March 31, 2003. A further (Pounds)7 million is
expected to be recovered through Pool cost recovery and other national
mechanisms and (Pounds)8 million is expected to be capitalized as such amount
is expected to provide future benefits to the supply business. As a result of
the above, the residual amount of approximately (Pounds)18 million, which will
not be recovered or capitalized, will be expensed in Fiscal Years 1998 and
1999 as incurred.
The Regulator has also made proposals (which have been accepted by
Yorkshire) to provide an annual allowance of (Pounds)3 million for the period
1998 through 2000 to cover operating costs. The allowance will be reviewed at
the time of the Distribution Price Formula Control review in 2000.
The October 1997 proposals therefore will allow Yorkshire to recover up to
50% of its forecasted set-up and operating costs over a five year period. The
shortfall could be higher if: (i) operating costs are higher than anticipated
(e.g., there is a higher level of customer activity); (ii) recovery of
operating costs is disallowed or reduced when the Distribution Price Control
Formula is reviewed for the period beginning April 1, 2000; or (iii) the
integrated national systems do not work as contemplated or require substantial
redevelopment.
40
<PAGE>
The Regulator's proposals also provided that a REC should be penalized: (i)
where it starts to open its market more than three months after the market
opening by the first REC; (ii) where it opens successive tranches of its
market more than three months after the opening of the corresponding tranche
by the first REC; and (iii) where the market opening of the first REC has been
delayed beyond April 1, 1998. The penalties will be calculated at 1% of the
operating revenues of the supply business for Franchise Supply Customers per
month of delay, weighted by the proportion of customers affected and applied
as a reduction in allowed distribution business income. If Yorkshire does not
open its market for Franchise Supply Customers to competition until after
April 1, 1999, it would incur a penalty of approximately (Pounds)6 million. It
is now apparent that some penalty will be incurred due to the delay in the
opening of the competitive market for Franchise Supply Customers until
September 1998. Yorkshire Group expects that Yorkshire will be prepared to
open its Franchise Area to such competition in September 1998.
Factors Affecting Revenues
Two principal factors determine the amount of revenues produced by the
distribution business: the unit price of electricity distributed (which is
controlled by the Distribution Price Control Formula) and the number of
electricity units distributed (which depends upon customer demands as
influenced in part by economic activity and weather conditions).
Two principal factors determine the amount of revenues produced by the
supply business: the unit price of the electricity supplied (which, in the
case of the Franchise Supply Customers, is controlled by the Supply Price
Control Formula) and the number of electricity units supplied. Yorkshire is
currently expected to have the exclusive right to supply all Franchise Supply
Customers in its Franchise Area until September 1998.
UK Tax Law Changes
On July 2, 1997, the UK government enacted certain changes in tax law,
including a one-time windfall tax on privatized industries and a reduction in
rates of corporation tax on income from 33% to 31%. The windfall tax on
Yorkshire is (Pounds)134 million and will not be deductible for UK corporation
tax purposes. The windfall tax has been recorded as an extraordinary charge in
the nine month period ended December 31, 1997. The tax is payable in two equal
installments on December 1, 1997 and 1998. During the nine month period ended
December 31, 1997, Yorkshire Group estimated the impact of the reduction in
corporation tax rates, which resulted in a one-time reduction in deferred
income tax liabilities and a corresponding reduction in income tax expense of
approximately (Pounds)12 million.
Business Restructuring
In December 1997, Yorkshire announced a planned business restructuring
intended to enable it to meet increased competition and react to potential
regulatory developments in the energy markets in the UK. The restructuring
will result in the distribution and supply businesses becoming self-sufficient
businesses. As part of the restructuring, an alternative ownership structure
will be pursued for the generation business. Yorkshire currently contemplates
transferring such assets to an entity or entities other than Yorkshire Group
or its subsidiaries. It is expected that proceeds from the transfer of these
assets will be used to reduce debt of Yorkshire Group. See "Certain
Relationships and Related Transactions".
Total assets less current liabilities employed by the generation business at
December 31, 1997 were (Pounds)168 million. Operating income attributable to
the generation business in the nine months ended December 31, 1997 was
(Pounds)12 million.
As a result of this restructuring, approximately 160 positions will be
eliminated. A provision of approximately (Pounds)10 million was recorded in
the nine month period ended December 31, 1997 to reflect the cost of these
workforce reductions.
41
<PAGE>
Investment in Ionica
Yorkshire has an equity investment in Ionica, a telecommunications company.
The holding in Ionica was initially included in Yorkshire Group's consolidated
balance sheet at its fair value at acquisition on April 1, 1997 of (Pounds)54
million, plus a subsequent additional investment of (Pounds)1 million.
Following an announcement in November 1997 by Ionica of a temporary delay in
its roll out program due to problems in upgrading software, the fair value of
Yorkshire Group's investment in Ionica decreased to (Pounds)30 million at
December 31, 1997. At April 30, 1998, the fair value of Yorkshire Group's
investment in Ionica was valued at (Pounds)19 million ($31 million). This
reduction below the recorded book value has not been included as a charge
against earnings in Yorkshire Group's consolidated financial statements as the
diminution in value is not considered permanent.
Derivative Financial Instruments and Interest Rates
Derivative financial instruments are used by Yorkshire on a limited basis
and are utilized only to mitigate business risks and not for speculative
purposes.
Yorkshire Group maintains its cash balances in pounds sterling. However,
Yorkshire Group's obligations related to the issuance of the Senior Notes will
be payable in US dollars. Yorkshire Group is not currently engaged in any
hedging of currency risks, although it expects to utilize derivative financial
instruments to hedge a portion of the currency risks associated with this
exposure.
Changes in interest rates have not had a significant impact on Yorkshire in
the last three years. However, Yorkshire has entered into debt facilities
which bear interest at variable rates. As part of its risk management policy
and to mitigate the effects of interest rate changes, Yorkshire Group enters
into interest rate swap agreements under which counterparties have agreed to
pay amounts to Yorkshire Group equal to variable interest obligations in
consideration of amounts payable by Yorkshire Group equivalent to fixed rates
of interest. If the counterparty to the interest rate swap was to default on
contractual payments, Yorkshire Group could be exposed to increased costs
related to replacing the original agreement. See Note 7, "Financial
Instruments", to Yorkshire's consolidated financial statements for the three
years ended March 31, 1997 and Note 6, "Interest Rate Swaps", to Yorkshire
Group's condensed consolidated financial statements for the nine months ended
December 31, 1997 included elsewhere in this Prospectus for additional
information on such agreements.
Environmental Factors
Yorkshire's businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The principal laws which have
environmental implications for Yorkshire are the Electricity Act, the
Environmental Protection Act 1990, the New Road and Street Works Act 1991 and
the Environment Act 1995. Yorkshire believes that it has taken, and intends to
continue taking, measures to comply with the applicable law and government
regulations for the protection of the environment. There are no material legal
or administrative proceedings pending against Yorkshire with respect to any
environmental matter.
Inflation
Inflation neither has had a significant impact on Yorkshire in the last
three years, nor is expected to do so in the foreseeable future. Yorkshire's
revenues from regulated activities are adjusted based on factors which include
an index for inflation in costs of operations.
Year 2000 Issues
Yorkshire Group is currently evaluating its business systems and processes
to determine the extent to which modifications are required to prevent
problems related to the year 2000, and the resources which will be required to
make such modifications. Yorkshire Group has established a dedicated team to
coordinate and control all date conformity work within a structured program
framework. Yorkshire Group estimates that the costs associated with year 2000
modifications will be approximately (Pounds)26 million, of which (Pounds)17
million will be expensed as incurred, and (Pounds)9 million will be
capitalized.
42
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended December 31, 1997 for the Successor Company Compared with
Nine Months Ended December 31, 1996 for the Predecessor Company
Earnings
Income from operations increased by (Pounds)3 million (3%) from (Pounds)120
million for the nine months ended December 31, 1996 to (Pounds)123 million for
the nine months ended December 31, 1997. This increase was principally due to
a decrease in net periodic pension costs of (Pounds)9 million, due to an
increase in the market value of the pension fund, other cost savings, and a
(Pounds)24 million charge in the nine months ended December 31, 1996 relating
to the replacement of billing and debt collection systems partially offset by
a provision of (Pounds)10 million for restructuring costs, amortization of
goodwill of (Pounds)18 million and additional depreciation of (Pounds)5
million arising from the revaluation of distribution network assets in
connection with the Acquisition.
Income from operations by segments for the nine months ended December 31,
1997 was (Pounds)89 million, (Pounds)14 million and (Pounds)20 million for the
distribution, supply and other segments, respectively. Income from those
segments in the nine months ended December 31, 1996 was (Pounds)99 million,
(Pounds)1 million and (Pounds)20 million, respectively.
Net interest expense rose from (Pounds)20 million for the nine months ended
December 31, 1996 to (Pounds)78 million for the nine months ended December 31,
1997 principally as a result of the financing costs associated with the
increased amount of debt incurred in connection with the Acquisition.
Net income decreased by (Pounds)169 million, from (Pounds)77 million in the
nine months ended December 31, 1996 due to a loss of (Pounds)92 million in the
nine months ended December 31, 1997. In addition to the variances discussed
above, the net loss for the nine months ended December 31, 1997 includes an
extraordinary charge of (Pounds)134 million for the windfall tax enacted by
the UK government in July 1997. The windfall tax is not deductible for UK
corporation tax purposes. Net income before this extraordinary charge for the
nine months ended December 31, 1997 was (Pounds)42 million.
Revenues
Operating revenues decreased by (Pounds)65 million (7%) from (Pounds)974
million in the nine months ended December 31, 1996 to (Pounds)909 million
during the nine months ended December 31, 1997 as follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
INCREASE (DECREASE)
FROM NINE MONTHS ENDED
DECEMBER 31, 1996
TO NINE MONTHS ENDED
DECEMBER 31, 1997
----------------------
(Pounds) MILLIONS
<S> <C>
Distribution........................................ (1)
Supply.............................................. (69)
Other............................................... 5
---
Total operating revenues.......................... (65)
===
</TABLE>
Revenues from the distribution business decreased by (Pounds)1 million from
(Pounds)225 million for the nine months ended December 31, 1996 to (Pounds)224
million for the nine months ended December 31, 1997 due to a decrease in the
maximum allowable average price of units distributed as a result of the
application of the revised Distribution Price Control Formula. Units
distributed increased by 1% in the nine months ended December 31, 1997
partially offsetting such decrease.
Franchise Supply Customers, who are generally residential and small
commercial customers, comprised 51% of total sales volume for the nine months
ended December 31, 1997. The volume of unit sales of electricity
43
<PAGE>
for Franchise Supply Customers is influenced largely by the number of
customers in the Franchise Area, weather conditions and prevailing economic
conditions. Unit sales to Non-Franchise Supply Customers, who are typically
large commercial and industrial businesses, constituted 49% of total sales
volume for the nine months ended December 31, 1997. Sales to Non-Franchise
Supply Customers are determined primarily by the success of the supply
business in contracting to supply electricity to customers who are located
both inside and outside the Franchise Area.
During the nine months ended December 31, 1997, the number of electricity
units supplied decreased by 4% and total revenues produced by the supply
business decreased by (Pounds)69 million (8%) to (Pounds)799 million from
(Pounds)868 million for the nine months ended December 31, 1996. Revenues
decreased partly due to a reduction of 10% in sales to Non-Franchise Supply
Customers as a result of increased competition and partly due to reduced
purchase of electricity costs, the benefits of which are passed on to
customers.
Cost of Sales
Cost of sales decreased by (Pounds)63 million (9%) from (Pounds)681 million
in the nine months ended December 31, 1996 to (Pounds)618 million in the nine
months ended December 31, 1997. This decrease was due principally to the
reduction in units supplied. Additionally, electricity purchase costs
decreased due primarily to reductions in the Fossil Fuel Levy.
Operating Expenses
Operating expenses decreased by (Pounds)5 million (3%) from (Pounds)173
million in the nine months ended December 31, 1996 to (Pounds)168 million in
the nine months ended December 31, 1997. This decrease was principally due to
a reduction in pension costs of (Pounds)9 million, other cost savings and the
recording of a (Pounds)24 million charge relating to the replacement of
billing and debt collection systems in the nine months ended December 31, 1996
partially offset by a provision of (Pounds)10 million for restructuring and an
increase of (Pounds)23 million relating to increased depreciation and
amortization of goodwill due to the Acquisition.
Net Interest Expense
Net interest expense increased by (Pounds)58 million from (Pounds)20 million
during the nine months ended December 31, 1996 to (Pounds)78 million in the
nine months ended December 31, 1997, principally as a result of the financing
costs associated with the 1997 Credit Facility entered into to finance the
Acquisition.
Income Taxes
Yorkshire Group's effective income tax rate, excluding the windfall tax,
decreased from 34% for the nine months ended December 31, 1996 to 11% for the
nine months ended December 31, 1997. The effective rate in the 1997 period was
affected by the (Pounds)12 million favorable impact of the reduction in the UK
corporation tax rate from 33% to 31% as discussed above, partially offset by
the amortization of goodwill, which is not deductible for UK income tax
purposes.
Windfall Tax
Yorkshire Group recorded a one-time extraordinary charge of (Pounds)134
million during the nine months ended December 31, 1997 for the windfall tax
enacted by the UK government in July 1997. This windfall tax is not deductible
for UK corporation tax purposes.
Fiscal Year 1997 Compared with Fiscal Year 1996
Earnings
Income from operations was (Pounds)52 million in Fiscal Year 1997, a
decrease of (Pounds)162 million from (Pounds)214 million in Fiscal Year 1996.
The following items reduced Fiscal Year 1997 income from operations: (i) a
(Pounds)78 million provision for uneconomic gas and electricity contracts,
which resulted in a charge of (Pounds)125 million to the supply
44
<PAGE>
business offset by an intrabusiness elimination of (Pounds)47 million; (ii) a
(Pounds)50 million charge for information system development costs to prepare
for the opening of the competitive electricity market in 1998 for Franchise
Supply Customers, of which (Pounds)37 million was charged to the supply
business and (Pounds)13 million was charged to the distribution business;
(iii) a (Pounds)26 million decrease in distribution revenues as a consequence
of price reductions imposed by the Regulator; (iv) a (Pounds)8 million charge
incurred for advisers' fees in respect of the Acquisition; and (v) a (Pounds)6
million write-down of the value of non-operational property.
Income (loss) from operations by segments for Fiscal Year 1997 were
(Pounds)127 million, (Pounds)(132) million and (Pounds)10 million for the
distribution, supply and other segments, respectively. Income from operations
from those segments in Fiscal Year 1996 were (Pounds)164 million, (Pounds)30
million and (Pounds)20 million, respectively.
Net income was (Pounds)26 million in Fiscal Year 1997, a decrease of
(Pounds)367 million from (Pounds)393 million in Fiscal Year 1996, principally
due to the NGG Transaction in Fiscal Year 1996 and the charges recorded in
Fiscal Year 1997 discussed above.
Revenues
Operating revenues decreased by (Pounds)100 million (7%) from (Pounds)1,431
million in Fiscal Year 1996 to (Pounds)1,331 million in Fiscal Year 1997 as
follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
INCREASE (DECREASE)
FROM FISCAL YEAR 1996
TO FISCAL YEAR 1997
---------------------
(Pounds) MILLIONS
<S> <C>
Distribution......................................... (26)
Supply............................................... (131)
Other................................................ 9
Intrabusiness........................................ 48
----
Total operating revenues........................... (100)
====
</TABLE>
Revenues from the distribution business decreased by (Pounds)26 million (8%)
from (Pounds)334 million for Fiscal Year 1996 to (Pounds)308 million for
Fiscal Year 1997, principally due to a decrease in the maximum allowable
average price of units distributed as a result of the application of the
revised Distribution Price Control Formula. Units distributed increased by
0.5% in Fiscal Year 1997 partially offsetting such decrease.
During Fiscal Year 1997, the number of electricity units supplied decreased
by 6% while total revenues produced by the supply business decreased by
(Pounds)131 million (10%) to (Pounds)1,178 million from (Pounds)1,309 million
for Fiscal Year 1996. The reduction was partly due to a decrease of 12% in
units supplied to Non-Franchise Supply Customers, which was largely offset by
a corresponding reduction in cost of sale, and partly due to reduced charges
from the distribution business, the benefits of which are passed on to
customers, resulting in lower average unit prices. Franchise Supply Customers
and Non-Franchise Supply Customers each comprised 50% of total sales volume in
Fiscal Year 1997.
Cost of Sales
Cost of sales decreased by (Pounds)81 million (8%) from (Pounds)1,013
million in Fiscal Year 1996 to (Pounds)932 million in Fiscal Year 1997. This
reduction was the result of a decrease in supply business sales volumes and
reduced charges from the distribution business.
Operating Expenses
Operating expenses increased by (Pounds)143 million (70%) from (Pounds)204
million in Fiscal Year 1996 to (Pounds)347 million in Fiscal Year 1997.
Operating costs in Fiscal Year 1997 included: (i) a (Pounds)78 million
provision for uneconomic
45
<PAGE>
gas and electricity contracts made for the net present value of expected
future payments in excess of anticipated recoverable amounts, reflecting
expectations of market prices for electricity following the opening of the
competitive electricity market in 1998 for Franchise Supply Customers and
future gas prices; (ii) a (Pounds)50 million charge for information system
development costs, including (Pounds)19 million relating to the opening of the
competitive electricity market in 1998 for Franchise Supply Customers and a
(Pounds)31 million charge relating to the replacement of billing and debt
collection systems; (iii) a (Pounds)8 million charge incurred for advisers'
fees in respect of the Acquisition; and (iv) a (Pounds)6 million write-down of
the value of non-operational property.
Other Income
Other income was (Pounds)20 million in Fiscal Year 1997, a decrease of
(Pounds)293 million from (Pounds)313 million in Fiscal Year 1996. Other income
in Fiscal Year 1996 included the NGG Transaction, totalling (Pounds)300
million as described under "--Fiscal Year 1996 Compared with Fiscal Year
1995--Other Income". Following the NGG Transaction, ordinary dividends
received from NGG decreased from (Pounds)21 million in Fiscal Year 1996 to
(Pounds)2 million in Fiscal Year 1997. Other income for Fiscal Year 1997 also
includes the effect of the (Pounds)15 million gain on disposal by Yorkshire of
its share of a joint venture investment.
Net Interest Expense
Net interest expense increased by (Pounds)13 million from (Pounds)20 million
in Fiscal Year 1996 to (Pounds)33 million in Fiscal Year 1997, including a
(Pounds)7 million charge in relation to the termination of interest rate swap
agreements. Increased financing costs arising from the payment of a special
dividend of (Pounds)185 million in January 1996 were partly mitigated by the
effects of asset sales.
Income Taxes
The effective income tax rate of 22% in Fiscal Year 1996 increased to 33%
for Fiscal Year 1997. The effective income tax rate in Fiscal Year 1996 was
reduced principally due to the lower tax rate on gains arising from the NGG
Transaction. See Note 6, "Income Taxes", to Yorkshire's consolidated financial
statements for the three years ended March 31, 1997 included elsewhere in this
Prospectus for additional information.
Fiscal Year 1996 Compared with Fiscal Year 1995
Earnings
Income from operations was (Pounds)214 million in Fiscal Year 1996, a
decrease of (Pounds)1 million from Fiscal Year 1995. Distribution revenues
decreased by (Pounds)28 million, principally due to a reduction in the maximum
allowable average price of units distributed as a result of the application of
the revised Distribution Price Control Formula. This decrease was largely
offset by cost savings.
Income from operations by segments for Fiscal Year 1996 were (Pounds)164
million, (Pounds)30 million, and (Pounds)20 million for the distribution,
supply and other segments, respectively. Income from operations from those
segments in Fiscal Year 1995 were (Pounds)176 million, (Pounds)23 million, and
(Pounds)16 million, respectively.
Other income was (Pounds)313 million in Fiscal Year 1996, an increase of
(Pounds)297 million from (Pounds)16 million in Fiscal Year 1995 due to the NGG
Transaction totalling (Pounds)300 million which are described in detail below.
Income taxes increased by (Pounds)36 million, from (Pounds)78 million in
Fiscal Year 1995 to (Pounds)114 million in Fiscal Year 1996, including taxes
relating to the NGG Transaction.
Net income increased by (Pounds)252 million from (Pounds)141 million in
Fiscal Year 1995 to (Pounds)393 million in Fiscal Year 1996, principally due
to increased other income as a result of the NGG Transaction offset by the
income taxes discussed above.
46
<PAGE>
Revenues
Operating revenues decreased by (Pounds)33 million (2%) from (Pounds)1,464
million in Fiscal Year 1995 to (Pounds)1,431 million in Fiscal Year 1996 as
follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
INCREASE (DECREASE)
FROM FISCAL YEAR 1995
TO FISCAL YEAR 1996
---------------------
(Pounds) MILLIONS
<S> <C>
Distribution......................................... (28)
Supply............................................... (34)
Other................................................ 1
Intrabusiness........................................ 28
---
Total operating revenues........................... (33)
===
</TABLE>
Revenues from the distribution business decreased by (Pounds)28 million (8%)
from (Pounds)362 million for Fiscal Year 1995 to (Pounds)334 million for
Fiscal Year 1996, principally due to a decrease in the maximum allowable
average price of units distributed as a result of the application of the
revised Distribution Price Control Formula. A 3% increase in sales volume
partially offset the average price decrease.
Revenues from the supply business decreased by (Pounds)34 million (3%) from
(Pounds)1,343 million in Fiscal Year 1995 to (Pounds)1,309 million in Fiscal
Year 1996 as a result of lower average unit prices, principally due to reduced
charges from the distribution business, the benefits of which are passed on to
customers, and a decrease in units sold of 1%. Franchise Supply Customers
comprised 46% of total sales volume in Fiscal Year 1996 and Non-Franchise
Supply Customers comprised 54%.
Cost of Sales
Cost of sales decreased by (Pounds)12 million (1%) from (Pounds)1,025
million in Fiscal Year 1995 to (Pounds)1,013 million in Fiscal Year 1996 as a
result of the decrease in units sold.
Operating Expenses
Operating expenses decreased by (Pounds)20 million (9%) from (Pounds)224
million in Fiscal Year 1995 to (Pounds)204 million in Fiscal Year 1996 as a
result of cost savings, principally due to a reduction in the number of
employees from 4,567 at the end of Fiscal Year 1995 to 3,907 at the end of
Fiscal Year 1996.
Other Income
Other income increased by (Pounds)297 million from (Pounds)16 million in
Fiscal Year 1995 to (Pounds)313 million in Fiscal Year 1996. During Fiscal
Year 1996, Yorkshire, together with the other 11 RECs in the UK, distributed
the majority of its shares in NGG to its shareholders in connection with the
NGG Transaction. The NGG Transaction had a material impact on Yorkshire's
financial results for that year. The NGG Transaction included the following:
(a) Yorkshire received special dividends totalling (Pounds)118 million.
(b) At April 1, 1995, Yorkshire held 9.2% of the issued share capital of
NGG, which was recorded on its balance sheet at (Pounds)72 million.
Additional share capital of NGG, totalling (Pounds)16 million, was
subscribed for by Yorkshire during Fiscal Year 1996. In December 1995, when
NGG became a company listed on the London Stock Exchange, Yorkshire
revalued its interest in NGG to its market value of (Pounds)321 million.
Also in December 1995, Yorkshire made a distribution in-kind to its
shareholders of approximately 90% of its interest in NGG. A further 2%,
approximately, was distributed to Yorkshire's optionholders. The aggregate
gain arising from these distributions totalled (Pounds)215 million.
47
<PAGE>
(c) Each Yorkshire residential customer received a one-time discount as
part of an agreement among the shareholders of NGG, which stipulated that
each REC would provide such discount. The net cost of such discount was
(Pounds)85 million.
(d) Yorkshire received an in-kind dividend of approximately 9.2% of the
shares of PSB, which shares were subsequently converted to cash upon PSB's
liquidation, resulting in a gain of (Pounds)56 million.
(e) Legal and other expenses relating to these transactions totalled
(Pounds)4 million.
Other income in Fiscal Year 1995 also included a one-time termination
payment of (Pounds)17 million received from Stockholm Stadshus AB and a one-
time loss of (Pounds)18 million following the disposal of the business and
certain of the assets of Homepower Retail Limited, Yorkshire's retailing joint
venture.
Net Interest Expense
Net interest expense increased by (Pounds)8 million from (Pounds)12 million
in Fiscal Year 1995 to (Pounds)20 million in Fiscal Year 1996, principally as
a result of substantially more long-term debt outstanding during Fiscal Year
1996 than during Fiscal Year 1995 due to the payment of a special dividend of
(Pounds)188 million in January 1995.
Income Taxes
The effective income tax rate decreased from 36% to 22% from Fiscal Year
1995 to Fiscal Year 1996, principally due to a lower effective income tax rate
on the NGG Transaction. See Note 6, "Income Taxes", to Yorkshire's
consolidated financial statements for the three years ended March 31, 1997
included elsewhere in this Prospectus for additional information.
LIQUIDITY AND CAPITAL RESOURCES
Yorkshire Group's sole investment and only significant asset is the entire
share capital of Yorkshire Holdings, which, in turn, owns the entire share
capital of Yorkshire. Yorkshire Group is therefore dependent upon dividends
from Yorkshire for its cash flow.
At December 31, 1997, in addition to cash flow from Yorkshire's operations
available for distribution indirectly to Yorkshire Group, Yorkshire Group had
(Pounds)300 million available under existing bank facilities, including
(Pounds)50 million under the 1997 Credit Facility, as its primary source of
liquidity.
Yorkshire Group will be required to refinance the 1997 Credit Facility,
which matures on July 30, 1998. For a discussion of the 1997 Credit Facility,
see Note 11, "Acquisition", to Yorkshire Group's consolidated balance sheet as
of April 1, 1997 included elsewhere in this Prospectus. Yorkshire Group
currently expects to refinance the 1997 Credit Facility through a series of
transactions, including the February 1998 issuance of (Pounds)200 million of
the Guaranteed Eurobonds, the February 1998 issuance of (Pounds)396 million of
the Senior Notes, the issuance of (Pounds)168 million of the Trust Securities
offered hereby, the potential issuance of additional senior notes, the
entering into of additional credit facilities, if available and on terms
acceptable to Yorkshire Group, and from the proceeds of the currently
contemplated transfer of Yorkshire Group's generation assets to an entity or
entities other than Yorkshire Group or its subsidiaries. Yorkshire Group is
currently in negotiations with respect to the replacement of the 1997 Credit
Facility.
Yorkshire Group also will be required to fund its ongoing capital
expenditures, fund its debt service (including with respect to the Trust
Securities) and the final windfall tax payment and cover its seasonal working
capital needs. Yorkshire Group expects to fund these ongoing cash requirements
through a combination of available cash flow from Yorkshire's operations and
amounts available under the committed bank facilities of (Pounds)300 million.
The principal sources of funds of the Successor Company during the nine
months ended December 31, 1997 were (Pounds)63 million from operations, which
reflects interest paid of (Pounds)66 million and tax paid of (Pounds)71
million, including the first installment of the windfall tax of (Pounds)67
million. Yorkshire Group raised (Pounds)1,034 million from
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<PAGE>
the 1997 Credit Facility and (Pounds)440 million in equity. During this
period, Yorkshire Group utilized (Pounds)1,474 million to acquire Yorkshire,
(Pounds)129 million for capital expenditures and (Pounds)61 million to repay
short-term loans.
The principal sources of funds of Yorkshire during Fiscal Year 1997 were
(Pounds)96 million from operations, which reflects interest paid of (Pounds)42
million and tax paid of (Pounds)30 million. During Fiscal Year 1997, Yorkshire
invested (Pounds)121 million in capital expenditures and long-term investments
and paid dividends of (Pounds)71 million. Proceeds from asset sales totalled
(Pounds)73 million.
The principal sources of funds of Yorkshire during Fiscal Year 1996 were
(Pounds)222 million from operations, which reflects interest paid of
(Pounds)46 million and tax paid of (Pounds)98 million. During Fiscal Year
1996, Yorkshire invested (Pounds)126 million in capital expenditures and long-
term investments and paid dividends of (Pounds)243 million, including a
special dividend of (Pounds)185 million. Proceeds from asset sales, including
PSB, totalled (Pounds)119 million. Yorkshire raised (Pounds)150 million from
the issuance of Eurobonds.
At December 31, 1997, the Successor Company had net current liabilities of
(Pounds)1,099 million, primarily as a result of the initial financing
structure of the Acquisition. To meet short-term cash needs, the Successor
Company had (Pounds)118 million of cash and cash equivalents at December 31,
1997.
Yorkshire's capital expenditures are primarily related to the distribution
business and include expenditures for load-related, non-load-related and non-
operational capital assets. Load-related capital expenditures are largely
required by new business growth. Customer contributions are normally received
where capital expenditures are made to extend or upgrade service to customers
(except to the extent that such capital expenditures are made to enhance
Yorkshire's distribution network generally). Non-load-related capital
expenditures include asset replacement which is expected to continue until at
least the next decade. Other non-load-related expenditures include system
upgrade work that provides for load growth and has the additional benefit of
improving network security and reliability. Non-operational capital
expenditures are for assets such as fixtures and equipment. For Fiscal Years
1996 and 1997 capital expenditures, net of customer contributions, were
(Pounds)91 million and (Pounds)126 million, respectively. Yorkshire is
required to file five year projections with the Regulator for gross capital
expenditures related to its regulated distribution network and updates of such
projections annually. The most recent projection was for the five year period
ended March 31, 2000 and was filed in July 1997. This filing indicated
Yorkshire's current projection of approximately (Pounds)575 million in capital
expenditures for the five year period. Approximately (Pounds)180 million has
already been spent in Fiscal Year 1996 and Fiscal Year 1997 related to this
five year projection.
To reduce the impact of interest rate changes, Yorkshire Group has entered
into several interest rate swap agreements with total notional amount of
(Pounds)650 million currently outstanding and with maturity dates ranging from
January 2008 to February 2008. The interest rate swaps are from a LIBOR
variable rate to an average fixed rate of approximately 7.3%. See Note 6,
"Interest Rate Swaps", to Yorkshire Group's condensed consolidated financial
statements for the nine months ended December 31, 1997 included elsewhere in
this Prospectus for further information on such agreements.
Yorkshire Group does not have any foreign currency hedging contracts in
place; however, to the extent that it becomes economically desirable, it may
swap some or all of any US dollar liabilities associated with security
issuances back to pounds sterling to hedge the currency risk associated
therewith.
Demand for electricity in the UK, including the Franchise Area, is seasonal,
with demand being higher in the winter months and lower in the summer months.
Yorkshire bills the majority of its Franchise Supply Customers on a staggered
quarterly basis while it is generally required to pay related expenses
(principally the cost of purchased electricity) on 28-day terms. However,
approximately 50% of the Franchise Supply Customers settle their accounts
using regular payment plans based on prepayment or spreading of the cost of
their annual bill evenly throughout the year. A majority of Yorkshire's supply
revenues are based on a fixed price per unit. The cost of supply to Yorkshire
from the Pool, if not covered by hedging mechanisms, varies throughout the
49
<PAGE>
year, generally being higher in winter months and lower in summer months.
Yorkshire balances the effect of these influences on its working capital needs
with drawings under its available credit facilities.
Yorkshire's supply business to Non-Franchise Supply Customers generally
involves entering into fixed price contracts to supply electricity to its
customers. The electricity is obtained primarily by purchases from the Pool.
Because the price of electricity purchased from the Pool can be volatile due
to the fact that the price is set every half hour, Yorkshire is exposed to
risk arising from differences between the fixed price at which it sells
electricity and the fluctuating prices at which it purchases electricity
unless it can effectively hedge such exposure. To mitigate its exposure to
volatility, Yorkshire utilizes CFDs and power purchase contracts with major UK
power generators to stabilize the price of electricity. Yorkshire had entered
into CFDs and power purchase contracts for 17,882 GWh of electricity for the
nine months ended December 31, 1997. Yorkshire's electricity sales volumes
were 22,391 GWh and 21,116 GWh for Fiscal Year 1996 and Fiscal Year 1997,
respectively.
Management believes that cash flow from operations, together with its
existing sources of credit and the proceeds from the Offering and the
refinancing of the 1997 Credit Facility, will provide sufficient financial
resources to meet Yorkshire Group's projected capital needs and other
expenditure requirements for the foreseeable future. Following the
Acquisition, Yorkshire agreed to an amendment to its PES License to the effect
that it will use all reasonable endeavours to ensure that it maintains an
investment grade credit rating on its long-term debt.
50
<PAGE>
BUSINESS
INTRODUCTION
Yorkshire's principal businesses are the distribution of electricity and the
supply of electricity to approximately two million customers. Yorkshire also
conducts ancillary business activities apart from the distribution and supply
businesses that are not subject to price regulation, such as owning an
interest in an off-shore gas field, supplying gas in the competitive market
and holding interests in power generation. See "--Business Restructuring".
DISTRIBUTION BUSINESS
Yorkshire's distribution business consists of the ownership, management and
operation of the electricity distribution network within Yorkshire's Franchise
Area. The primary activity of the distribution business is the receipt of
electricity from the national grid transmission system (the "Grid") and the
distribution of electricity to end users connected to Yorkshire's power lines.
Because Yorkshire's distribution business is substantially a regulated
monopoly, virtually all electricity supplied (whether by Yorkshire's supply
business or by other suppliers) to consumers in the Franchise Area is
transported through its distribution network, thus providing Yorkshire with a
stable distribution volume unaffected by customer choice of supplier. As a
holder of a PES License, Yorkshire is subject to a price cap regulatory
framework providing economic incentives to operate in a cost effective manner
and, to a limited extent, to increase the volume of electricity distributed.
See "The Electric Utility Industry in Great Britain".
Distribution Business Customers, Units Distributed, Revenues and Operating
Profit
Yorkshire's Franchise Area covers approximately 10,000 square km (3,860
square miles) from the Pennine uplands in the west, and the cities of Leeds,
Bradford and Sheffield, to the City of Hull, the ports of the Humber estuary
and the eastern coastline. It encompasses the counties of West Yorkshire, East
Yorkshire and almost all of South Yorkshire, together with parts of North
Yorkshire, Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The
regional economy is diverse. The traditional heavy industries of iron and
steel, coal mining, textiles and engineering continue to contribute to the
regional economy, but their overall significance has declined, particularly in
the last decade. During this period, other industries, such as chemicals and
food and drink, have expanded, as have service sector activities such as
finance, retailing and leisure. The region is well served by road and rail
networks, has three regional airports, and the ports of the Humber estuary
provide access to European markets.
51
<PAGE>
The following table sets out details of Yorkshire's distribution customers
and the volume of electricity distributed, as well as distribution operating
revenues and operating income at the dates and for the periods presented:
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
NUMBER OF CUSTOMERS CONNECTED
Residential.............................. 1,879,944 1,896,470 1,910,752
Commercial............................... 125,350 125,827 126,003
Industrial............................... 22,151 21,924 21,889
----------- ----------- -----------
Total.................................. 2,027,445 2,044,221 2,058,644
=========== =========== ===========
<CAPTION>
FISCAL YEAR
-----------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
ELECTRICITY DISTRIBUTED (GWH)
Residential.............................. 6,806 7,110 7,196
Commercial............................... 5,207 5,383 5,580
Industrial............................... 10,618 10,729 10,566
----------- ----------- -----------
Total.................................. 22,631 23,222 23,342
=========== =========== ===========
<CAPTION>
(IN MILLIONS)
-----------------------------------
<S> <C> <C> <C>
Distribution operating revenues.......... (Pounds)362 (Pounds)334 (Pounds)308
Distribution operating income............ (Pounds)176 (Pounds)164 (Pounds)127
</TABLE>
Competition in the Distribution Business
Yorkshire has not experienced significant competition in its distribution
business. Yorkshire believes that the cost of providing a duplicate
distribution network connected to the Grid would be prohibitive. To the extent
a customer may invest in its own on-site electric generating plants, however,
such customer would no longer require distribution and related services from
Yorkshire except for standby connection to the Grid. The distribution business
is subject to marginal loss of income from related services, such as metering.
For a discussion of certain recently announced proposals impacting metering,
see "The Electric Utility Industry in Great Britain--Distribution of
Electricity--Price Control".
Strategy for the Distribution Business
Yorkshire's distribution strategy consists of maintaining a reliable and
safe distribution system which meets customer expectations while maximizing
its operating efficiencies and fulfilling its regulatory obligations.
To implement its strategy, Yorkshire is taking a number of steps. Yorkshire
intends to maintain a sufficient level of investment in the distribution
system to ensure its continued reliability and safety. In Fiscal Year 1997,
Yorkshire invested (Pounds)169 million in the distribution system, of which
(Pounds)96 million represented capital improvements in new substations, cables
and overhead lines and (Pounds)73 million represented expenditures related to
the operation, repair and maintenance of the distribution system. Yorkshire is
currently investing in a Distribution Asset Management System ("DAMS") that
centralizes information currently stored in over sixty computerized and paper-
based systems into one integrated computerized system. The centralization of
such information is intended to improve both access to and quality of
information which is vital to the operation of an efficient distribution
system.
Yorkshire is also concentrating on maintaining and improving its responses
to system faults. In Fiscal Year 1997, Yorkshire restored services to 95% of
all customers affected by faults within three hours and on average a
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<PAGE>
Yorkshire customer was without power for only 59.7 minutes. Furthermore,
Yorkshire has introduced a new toll-free phone number available for customers
who have lost power. Such direct access is intended to permit Yorkshire to
respond more effectively and rapidly to power loss situations. Finally,
Yorkshire publishes a Quality of Supply Report which details the manner in
which Yorkshire intends to improve both the availability and quality of
electricity supply in its region in order to inform both its customers and
OFFER as to its plans for the period to April 2000.
Distribution Facilities
Electricity is transported across the Grid at 400 kV or 275 kV to 21 grid
supply points within Yorkshire's distribution network, where the National Grid
Company transforms the voltage to 132 kV, 66 kV and 33 kV for entry into
Yorkshire's distribution system.
At March 31, 1997, Yorkshire's distribution system consisted of:
<TABLE>
<CAPTION>
LV 11 KV ABOVE 11 KV
--------- --------- -----------
<S> <C> <C> <C>
Number of metered supplies................... 2,057,173 1,455 16
Total length of circuits..................... 30,350 km 18,011 km 4,676 km
Percentage underground....................... 92% 50% 28%
</TABLE>
The primary distribution system consists of 21 grid supply points from the
Grid, an additional 68 supply points and 357 primary substations. At March 31,
1997, the installed transformer capacity with a secondary voltage higher than
650 v at these substations was 20,527,000 kVA. Remote control facilities
enable the real time monitoring and operation of most of these larger
substations from one central control room.
Yorkshire's distribution substations amount to 12,849 indoor substations,
2,774 outdoor substations and 16,618 pole mounted substations. At March 31,
1997, the installed transformer capacity with a secondary voltage less than
650 v was 9,251,220 kVA.
SUPPLY BUSINESS
Yorkshire's supply business consists of selling electricity to end users,
purchasing such electricity and arranging for its distribution to those end
users. Under its PES License, Yorkshire has an exclusive right to supply
electricity to Franchise Supply Customers. This exclusive right is currently
scheduled to continue until September 1998. The supply business to Non-
Franchise Supply Customers, both inside and outside Yorkshire's Franchise
Area, is open to competition.
The following table sets forth the volume of electricity sold, by Non-
Franchise Supply Customer and Franchise Supply Customer, as well as supply
operating revenues and operating income (loss):
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Volume (GWh):
Non-Franchise Supply
Customers.................... 12,572 12,046 10,627
Franchise Supply Customers.... 10,148 10,345 10,489
------------- ------------- -------------
Total....................... 22,720 22,391 21,116
============= ============= =============
<CAPTION>
(IN MILLIONS)
-----------------------------------------
<S> <C> <C> <C>
Supply operating revenues....... (Pounds)1,343 (Pounds)1,309 (Pounds)1,178
Supply operating income (loss).. (Pounds) 23 (Pounds) 30 (Pounds) (132)
</TABLE>
53
<PAGE>
Competition in the Supply Business
The supply business is currently divided between Franchise Supply Customers
within the Franchise Area, and Non-Franchise Supply Customers, inside and
outside the Franchise Area. The non-franchise threshold was lowered to 100 kW
in April 1994 allowing competition in supply for these customers while
Franchise Supply Customers remained subject to regulation. Competition in
supply to Franchise Supply Customers is currently scheduled to be phased in
over a six-month period commencing in September 1998, at which time the
exclusive right of Yorkshire to supply the Franchise Area will cease. The
Regulator, however, proposed transitional price regulation for smaller
consumption Franchise Supply Customers for an initial period of two years
until an adequate level of competition is established. Yorkshire subsequently
indicated its acceptance of such proposals. The proposals (when taken together
with the reduction in the Fossil Fuel Levy which became effective on April 1,
1998) resulted in the implementation of small reductions, effective April 1,
1998, in the tariffs for Yorkshire's residential and small business customers
in its Franchise Area compared to the corresponding tariffs in effect in
August 1997. The proposals also require an additional 3% below inflation
reduction effective April 1, 1999. See "The Electric Utility Industry in Great
Britain--Industry Structure" and "--Supply of Electricity".
Strategy for the Supply Business
Yorkshire's supply strategy consists of (i) protecting and sustaining
Yorkshire's electricity market position within the Franchise Area, (ii) cross-
selling gas to its existing customer base, (iii) securing market share for gas
and electricity supply outside the Franchise Area to the extent that such
contracts are profitable and (iv) seeking marketing and strategic alliances in
the supply business.
To implement its strategy, Yorkshire is taking a number of steps. Yorkshire
is endeavoring to retain its existing Non-Franchise Supply Customers in the
Franchise Area by purchasing electricity at competitive rates from power
generators in the UK and providing high quality customer service. In doing so,
in Fiscal Year 1997, Yorkshire maintained a significant portion of its
existing business. Yorkshire has also applied this strategy to Non-Franchise
Supply Customers outside of its Franchise Area and to gas customers. For
example, in Fiscal Year 1997, Yorkshire was awarded new contracts with such
entities as East Midlands Airport, Lancashire County Council, South
Staffordshire Water and a number of Ministry of Defense sites. Furthermore, in
addition to marketing gas and electricity under the Yorkshire brand name,
Yorkshire intends to enter into "channel partnerships" with various business
and commercial entities (a "channel partner") whereby Yorkshire markets energy
to customers outside of its Franchise Area under the name of the channel
partner or in the joint name of Yorkshire and the channel partner. Yorkshire
is currently negotiating to establish a "channel partnership" with a chain of
retail appliance stores. Yorkshire expects to maintain this strategy for all
business customers and potential business customers after competition
commences for both gas and electricity and to extend this approach to the
residential market. There is no assurance that Yorkshire will be able to enter
into such "channel partnerships" and, if it does, that they will be
successful.
As discussed under "--Affiliate Businesses and Other Investments--Gas
Sourcing and Supply", Yorkshire has taken significant steps toward developing
its gas supply capabilities. Currently, gas may be sold to residential
customers in selected regional markets that have been opened to competition.
By retaining its existing customer base and, eventually, expanding into new
markets which will be open to competition, Yorkshire intends to be in a
position to offer those customers both electricity and gas. In offering such
flexibility, Yorkshire intends to solidify its relationship with these
customers and provide an established market base for its developing gas supply
business.
In a joint statement issued in January 1998, the Regulator and OFGAS asked
each of the RECs and BG Centrica plc (the former supply business of British
Gas plc) ("Centrica") to give undertakings to stop "dual fuel" offers to
supply gas and electricity. In addition, OFGAS asked the RECs to undertake not
to market gas to residential customers in areas where their respective markets
are not open to competition except where contracts have already been signed.
The regulators also made proposals concerning competition in meter reading.
Following discussions with the regulators, it was announced that the RECs had
agreed only to provide additional dual fuel benefits to customers once their
individual franchise area is opened to electricity competition and that OFGAS
had agreed that RECs' gas supply businesses should be permitted to continue to
compete in the gas
54
<PAGE>
market both within and outside their franchise areas on the basis that there
are no undue restrictions or distortions in the gas market in those areas. The
RECs also agreed to work with the Regulator and OFGAS to ensure measures to
limit distortion of the meter reading market.
AFFILIATE BUSINESSES AND OTHER INVESTMENTS
Yorkshire's ancillary business activities have primarily included, among
other things, gas sourcing and supply and holding interests in power
generation.
Gas Sourcing and Supply
Recognizing the long-term opportunities in the competitive gas supply
market, in April 1994, Yorkshire acquired a 6.97% equity stake in the Armada
off-shore gas field (the "Armada Field") for approximately (Pounds)27.8
million. As of December 31, 1997, the Armada Field, which has a production
life of approximately 15 years, had proven resources of approximately 1.2
trillion cubic feet (84 billion cubic feet net to Yorkshire) of gas and 68
million barrels of oil and oil equivalents (4.8 million barrels net to
Yorkshire). Delivery of such gas from the Armada Field to Yorkshire began, on
schedule, in October 1997. The development costs associated with the Armada
Field have been lower than originally anticipated. As of December 31, 1997,
Yorkshire had invested (Pounds)62 million in the Armada Field.
Yorkshire markets gas to industrial and commercial customers and, with the
gradual removal of the residential franchise of Centrica, has recently started
marketing gas to residential customers. By the end of March 1998, Yorkshire
had entered into contracts for the supply of gas to more than 200,000
residential customers. Gas is sourced from Yorkshire's interest in the Armada
Field and through swing contracts and purchases on the spot markets which are
designed to give Yorkshire a balanced purchase portfolio. Yorkshire utilizes
risk management methods, in relation to gas purchasing and supply, similar to
electricity purchasing and supply, which are designed to maximize its return
consistent with an acceptable level of risk.
The Regulator and OFGAS recently proposed to restrict the ability of the
RECs, including Yorkshire, to provide "dual fuel" offers to supply gas and
electricity to residential customers in areas which are not open to
competition. See "--Supply Business--Strategy for the Supply Business".
Power Generation
Through its wholly-owned subsidiary, Yorkshire Electric Power Limited
("YEPL"), Yorkshire has invested in various power generation projects.
Yorkshire's PES License currently enables it and its affiliates to make
investments of up to 800 MW of electricity generation. Currently, Yorkshire
and its subsidiaries own, or have committed to, investments in 519 MW of power
generation assets. See "--Business Restructuring" for a discussion of the
proposed transfer of Yorkshire's current ownership interests in generation
assets.
The centerpiece of Yorkshire's generation activities is a 272 MW combined
cycle gas turbine ("CCGT") generating station at Brigg in north Lincolnshire
developed and operated by Regional Power Generators Limited ("RPG"). YEPL owns
a 75% interest in RPG with IVO Energy Limited holding the remaining 25%.
Yorkshire holds a power purchase agreement for 100% of the output of the
station.
Yorkshire CoGen Limited ("YCL"), a YEPL subsidiary, constructed and
currently operates combined heat and power ("CHP") plants at St. James's
Hospital, Leeds (4.5 MW), A. H. Marks, a chemical company based in Bradford
(4.5 MW) and Queen's Medical Centre, Nottingham (4.9 MW). YCL is also
constructing a 56 MW CHP plant at the premises of Hays Chemicals, a Cheshire
based company, and is nearing completion of a 50 MW CCGT plant at Thornhill.
YCL also owns and operates 52.6 MW of diesel fired peaking plants. YCL has
submitted an application to the UK's Department of Trade and Industry to
construct a 56 MW CHP plant at the premises of Hickson and Welch Chemicals in
Yorkshire. Further small scale (50 MW) embedded plants (including cogeneration
plants) are also planned. All of the above plants provide an opportunity for
Yorkshire's
55
<PAGE>
electricity supply business to purchase the power offtake and a partial
strategic hedge in the event that electricity prices rise and reduce profit
margins of Yorkshire's supply business.
In addition, YEPL owns a 50% interest in a company which owns two windfarms
at Ovenden Moor (9.2 MW) and at Royd Moor (6.5 MW). All of the output from
these windfarms is sold to The Non-Fossil Fuel Purchasing Agency under an
agreement which expires on December 31, 1998.
YCL's generation portfolio has concentrated on smaller scale projects which
export less than 50 MW, principally because in doing so YCL is not required to
obtain a generation license and such smaller scale projects are not required
to trade in the Pool. Trading outside the Pool means that the export power has
a higher value and provides YCL with increased operational flexibility.
CUSTOMER SERVICE
As part of Yorkshire's commitment to delivering high levels of customer
service, Yorkshire launched its Customer Service Initiative in 1995. Virtually
all of its employees have attended training sessions aimed at developing a
company culture consistent with Yorkshire's corporate mission to be a leader
in the market of electricity distribution and electricity and gas supply,
while consistently providing high levels of customer service. These employees
have been trained in the values and behavior which need to be adopted to
achieve this corporate mission.
Improvements to customer service which have been implemented as a result of
this initiative include the provision of a toll-free service for account
inquiries and fault reporting, as described under "--Distribution Business--
Strategy for Distribution Business", and an increase in the number of bill
payment outlets for the convenience of customers.
Yorkshire continues to seek to improve the service it provides to its
customers and, to do so, continues to train employees further. A customer
service tracking system has been put in place to ensure that directors and
managers of Yorkshire gain regular feedback from customers on the service they
receive.
RISK MANAGEMENT
Yorkshire's risk management efforts are primarily focused on the supply
business and intended to hedge the risks associated with the purchase and sale
of electricity resulting from Pool price volatility. Virtually all electricity
generated in England and Wales is sold by generators and bought by suppliers
through the Pool. The most common contracts for supply to Non-Franchise Supply
Customers are for twelve-month terms and contain fixed rates. Yorkshire is
exposed to purchase price risk (the risk associated with fluctuations in the
cost of purchased electricity relative to the price received from the supply
customer) to the extent that it has not hedged such risk. Yorkshire
substantially hedges purchasing price risk by employing a variety of risk
management tools, including management of its supply contract portfolio,
hedging contracts and other means which mitigate the risk of Pool price
volatility. Yorkshire employs risk management methods to maximize its return
consistent with an acceptable level of risk.
Until March 31, 1998, regulations governing the franchise supply market
permitted the pass-through to customers of prudent purchase costs which
included the cost of arrangements such as CFDs to hedge against Pool price
volatility. Under the supply price restraint proposals published by the
Regulator in October 1997, and accepted by Yorkshire, effective April 1, 1998,
such purchase costs are no longer automatically passed through to such
customers. CFDs are contracts predominantly between generators and suppliers
which fix the major elements of the price of electricity for a contracted
quantity of electricity over a specific time period. Differences between the
actual price set by the Pool and the agreed prices give rise to difference
payments between the parties to the particular CFD. At the present time,
Yorkshire expects its supply demand for the calendar year 1998 to be
substantially hedged through various types of agreements, including CFDs.
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Yorkshire's ability to manage its purchase price risk depends, in part, on
the continuing availability of properly priced risk management mechanisms such
as CFDs. No assurance can be given that an adequate, transparent market for
such products will in fact be available.
BUSINESS RESTRUCTURING
In December 1997, Yorkshire announced a planned business restructuring
intended to enable it to meet increased competition and react to potential
regulatory developments in the energy markets in the UK. The restructuring
will result in the distribution and supply businesses of Yorkshire becoming
self-sufficient businesses. As part of the restructuring, an alternative
ownership structure will be pursued for the generation business. Yorkshire
currently contemplates transferring such assets to an entity or entities other
than Yorkshire Group or its subsidiaries. It is expected that proceeds from
the transfer of these assets will be used to reduce debt of Yorkshire Group.
See "Certain Relationships and Related Transactions".
Total assets less current liabilities employed by the generation business at
December 31, 1997 were (Pounds)168 million. Operating income attributable to
the generation business in the nine months ended December 31, 1997 was
(Pounds)12 million.
As a result of this restructuring, approximately 160 positions will be
eliminated. A provision of approximately (Pounds)10 million was recorded in
the nine months ended December 31, 1997 to reflect the cost of these work
force reductions.
UK ENVIRONMENTAL REGULATION
Yorkshire's businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The principal laws which have
environmental implications for Yorkshire are the Electricity Act, the
Environmental Protection Act 1990, the New Road and Street Works Act 1991 and
the Environment Act 1995.
The Electricity Act requires Yorkshire to consider the preservation of
natural beauty and the conservation of natural and man-made features of
particular interest when it formulates proposals for development in connection
with certain of its activities. Environmental assessments are required to be
carried out in certain cases including overhead line constructions at higher
voltages and generating station developments. Yorkshire has produced a
Corporate Environmental Policy Statement and an Electricity Act Schedule 9
Statement which sets out the manner in which it intends to comply with its
environmental obligations.
Possible adverse effects of electro-magnetic fields ("EMFs") from various
sources, including transmission and distribution lines, have been the subject
of a number of studies and increasing public discussion. The current
scientific research is inconclusive as to whether EMFs may cause adverse
health effects. There is the possibility that the passage of legislation and
changing regulatory standards would require measures to mitigate EMFs, with
resulting increases in capital and operational costs. In addition, the
potential exists for public liability with respect to lawsuits brought by
plaintiffs alleging damages caused by EMFs. The only UK standards for exposure
to power frequency EMFs are those promulgated by the National Radiological
Protection Board and relate to the levels above which physiological effects
have been observed. Yorkshire fully complies with these standards.
Yorkshire believes that it has taken, and intends to continue taking,
measures to comply with the applicable law and government regulations for the
protection of the environment. There are no material legal or administrative
proceedings pending against Yorkshire with respect to any environmental
matter. Yorkshire estimates (Pounds)7 million was spent on environmental
compliance in Fiscal Year 1998, approximately half of which was of a capital
nature. This level of expenditures is expected to continue in future Fiscal
Years.
UK AND EU COMPETITION LAW
Yorkshire's businesses are subject to the competition rules of both the UK
and the European Community.
The UK Restrictive Trade Practices Act 1976 stipulates that failure to
furnish to the Office of Fair Trading an agreement that is registrable under
such Act renders unenforceable certain restrictions contained in such
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agreement. Briefly stated, the Fair Trading Act 1973 and the Competition Act
1980 both regulate the activities of companies with market power. UK
competition law, particularly the law relating to restrictive agreements, is
in the process of reform and is likely to follow the approach of European
Community law.
The Treaty of Rome contains provisions which prohibit anti-competitive
agreements and practices, including the abuse of a dominant position within
the European Union ("EU") or a substantial part of it. Penalties for violation
of these provisions include fines, third party damages and infringing
contractual provisions being unenforceable.
In January 1993, the UK implemented the EU Utilities Directive on the
procedures to be followed for the award of supply and works contracts by
utility companies, including electricity utilities. This directive was
replaced by EU Directive 93/36, which was implemented by the UK in December
1996 and which covers service contracts as well as supply and work contracts.
Those contracts that exceed the relevant financial thresholds have to be
advertised in the Official Journal of the European Communities. Suppliers and
contractors who believe they have suffered harm from failure to implement the
correct procedure in awarding the contract are able to institute proceedings
in the English High Court. The European Commission also has the power to
intervene prior to the award of a contract. Yorkshire Group believes that
Yorkshire has complied with any obligations it may have under those
regulations but the interpretation and application of those regulations and of
the European Union directives which they implement is not free from doubt and
no assurance can be given that any claim for damages against Yorkshire for
breach of the rules would be unsuccessful.
EMPLOYEES
Yorkshire had approximately 4,000 employees (approximately 3,800 full-time
equivalent) at the end of Fiscal Year 1997. Yorkshire Group has no employees
because it is a holding company with no operations. Approximately 62% of
Yorkshire's employees are represented by labor unions. All Yorkshire employees
who are not party to a personal employment contract are subject to a
collective bargaining agreement called The Electricity Business Agreement.
This Agreement may be amended by agreement between Yorkshire and the unions
and is terminable with 12 months' notice by either side. Yorkshire believes
that its relations with its employees are favorable. See "--Business
Restructuring" for a discussion of planned staffing reductions.
PROPERTY
Yorkshire owns the freehold of its principal offices north of Leeds.
Yorkshire has both network and non-network land and buildings.
Network Land and Buildings
At March 31, 1997, Yorkshire had interests in approximately 15,000 network
properties, comprising principally sub-station sites.
Non-Network Land and Buildings
At March 31, 1997, Yorkshire had freehold and leasehold interests in non-
network properties comprising chiefly offices, depots, warehouses, workshops
and a number of former retail outlets. The net book value of total non-network
land and buildings at March 31, 1997 was (Pounds)52 million.
LEGAL PROCEEDINGS
Yorkshire is routinely a party to legal proceedings arising in the ordinary
course of business which are not material, either individually or in the
aggregate. Yorkshire currently is not a party to any material legal
proceedings nor is it aware of any threatened material legal proceedings.
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Litigation is ongoing with respect to another corporation's use of actuarial
surpluses declared in the Electricity Supply Pension Scheme ("ESPS"). The
Pension Ombudsman (a UK arbitrator appointed by statute) has issued a "final
determination" in favor of complaints made by members of the ESPS relating to
another corporation's use of the ESPS surplus to offset such corporation's
additional costs of early payment of pensions as a result of reorganization or
redundancy, together with additional contributions required after a valuation.
Under that determination, the Pension Ombudsman directed such corporation to
pay into ESPS the amount of that use of the surplus plus interest. The Pension
Ombudsman's final determination has been successfully challenged in the
courts. At the same time, the courts also considered other areas of
uncertainty relating to the uses made of actuarial surpluses arising in the
ESPS, including the ability to reduce or suspend standard employer
contributions to reduce such surpluses. The courts ruled that such reductions
were permissible. The final decisions of the courts are subject to appeal. If
any of the decisions are reversed on appeal they may have an adverse effect on
Yorkshire, which has made similar use of its actuarial surplus, but no
assurance can be given as to the extent of that effect.
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THE ELECTRIC UTILITY INDUSTRY IN GREAT BRITAIN
The information set forth below relating to the electric utility industry in
Great Britain has been derived from publicly available sources.
SUMMARY
The following summarizes the general structure of the electric utility
industry in England and Wales as it has developed since the privatization of
the industry in 1990. The electric utility industry in England and Wales is
divided into various functions, with different companies participating in the
respective functions. This is in contrast to the US utility industry, in which
vertically integrated companies generally participate in all functions.
<TABLE>
<CAPTION>
FUNCTION DESCRIPTION OF ELECTRICITY MAJOR PARTICIPANTS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Generation Power station production of electricity National Power plc, PowerGen, plc
British Energy plc, The Energy Group
plc, First Hydro Company
- -----------------------------------------------------------------------------------------------------------------------
Wholesale Trading The Pool is a single market for a bulk trading All generators and suppliers of electricity.
(buying and selling) of virtually all the
electricity generated in England and Wales.
- -----------------------------------------------------------------------------------------------------------------------
Transmission Bulk transfer of electricity across the Grid, The National Grid Company ("NGC")
which is a high voltage open-acccess system
from generators to RECs.
- -----------------------------------------------------------------------------------------------------------------------
Distribution A REC's transfer of electricity from NGC's high Yorkshire and the 11 other RECs
voltage transmission system across the REC's
low voltage distribution system to end-user
consumers.
Each REC has a substantially regulated
monopoly for distribution of electricity in
its franchise area. Accordingly, a REC is
the exclusive distributor of electricity
within its franchise area regardless of
the identity of the generator or supplier
actually selling the electricity at retail
to the end-user. This regulated monopoly
in the distribution business can be
distinguished from the efforts to introduce
competition in the supply business.
- -----------------------------------------------------------------------------------------------------------------------
Supply The retail sale of electricity to end-user Yorkshire, the 11 other RECs and a
consumers. It is generally similar to power- variety of other companies holding
marketing in the US. End-user consumers are supply licenses issued by the Regulator.
divided into two groups: Other companies include the generators
and other energy providers
(i) Franchise Supply Customers. Currently
they must buy their electricity from their
local REC. Starting in September 1998, they
will be allowed to buy from any licensed
supplier. However, the local REC will still
distribute their electricity.
(ii) Non-Franchise Supply Customers.
Currently, they can purchase their electricity
from any licensed supplier although it is
distributed by the local REC.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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INDUSTRY STRUCTURE
Great Britain has two separate but connected electricity markets, each with
a different commercial framework. In England and Wales electricity is produced
by generators, the largest of which are National Power plc ("National Power"),
PowerGen plc ("PowerGen") and Nuclear Electric plc, a subsidiary of British
Energy plc ("British Energy"). Electricity is transmitted through the Grid by
NGC and distributed by the twelve RECs in their respective franchise areas.
Most customers are currently supplied with electricity by their local REC,
although there are other suppliers holding second-tier supply licenses,
including other generators and RECs, who can compete to supply customers with
higher Peak Demand in such REC's franchise area.
In Scotland there are two vertically integrated companies, Scottish Power
plc ("Scottish Power") and Scottish Hydro Electric plc ("Hydro Electric"),
each generating, transmitting, distributing and supplying electricity within
their respective franchise areas as well as competing to supply electricity
elsewhere. Scottish Nuclear, another subsidiary of British Energy, sells all
the electricity it generates to Scottish Power and Hydro Electric.
The interconnection between the two transmission systems, owned by Scottish
Power and NGC, is capable of transferring electricity between Scotland and
England. There is also an interconnection with France, owned by NGC and
Electricite de France, through which electricity can be transferred between
France and England and Wales.
Virtually all electricity generated in England and Wales is sold by
generators and bought by suppliers through the Pool. A generator which is also
a licensed supplier must nevertheless sell all the electricity it generates
into the Pool and purchase all the electricity which it supplies from the
Pool. Because Pool prices fluctuate, generators and suppliers may enter into
bilateral arrangements, such as CFDs, to provide a degree of protection
against such fluctuations. See "Business--Risk Management".
There is no equivalent to the Pool in Scotland, but Scottish Power and Hydro
Electric are obligated by their licenses to offer electricity for sale to
second-tier suppliers. They are also required to provide access to their
transmission and distribution systems on a non-discriminatory basis to
competing suppliers and generators.
INDUSTRY BACKGROUND
The industry structure described above was put in place in March 1990 in
order to introduce competition into the generation and supply of electricity.
At the same time, a licensing regime was introduced for the electricity
industry both in England and Wales as well as in Scotland.
The RECs, which at that time collectively owned NGG, NGC's holding company,
were privatized in December 1990. National Power and PowerGen were partly
privatized in March 1991 (with the balance of the UK government's holdings
being sold to investors in March 1995). Scottish Power and Hydro Electric were
privatized in June 1991 and British Energy was privatized in July 1996. By
December 1995, most of the RECs ownership of NGG had been publicly sold, and
NGG was listed on the London Stock Exchange. Since the summer of 1995, 11 of
the RECs have been acquired by other companies. Yorkshire was indirectly
acquired by Yorkshire Group in April 1997.
In 1990, the vast majority of generating capacity in England and Wales was
owned by three generators. However, since that time competition in generation
has increased as RECs and other new entrant generators have constructed new
plants and as imports through the interconnections with Scotland and France
have grown. In addition, pursuant to undertakings given to the Regulator,
National Power and PowerGen have disposed of an aggregate of 6,000 MW of
generating capacity to The Energy Group plc ("Energy Group").
Competition in supply has been progressively introduced both in England and
Wales and in Scotland. The RECs in England and Wales, and Scottish Power and
Hydro Electric in Scotland, are subject to competition from second-tier
suppliers for the supply of electricity to larger customers in their
respective franchise areas. In April
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1990, electricity users with a Peak Demand in excess of 1 MW became Non-
Franchise Customers of a REC and therefore were allowed to choose their
electricity supplier. In April 1994, the Non-Franchise Customer class was
expanded to include users with a Peak Demand in excess of 100 kW. Currently,
all electricity customers in Great Britain are scheduled to be able to choose
their electricity supplier over a six month phase in the period beginning in
September 1998, according to customers' designated postal codes.
DISTRIBUTION OF ELECTRICITY
Accessibility Requirements
Each of the RECs is required to offer terms for connection to its
distribution system to any person, for use of its distribution system to any
authorized electricity operator and for the provision of supplemental and
backup supplies to any person. In providing use of its distribution system, a
REC must not discriminate between its own supply business and that of any
other authorized electricity operator, or between those of other authorized
electricity operators; nor may its charges differ except where justified by
differences in cost. Similar principles apply to the provision of supplemental
and backup supplies of electricity, and in the carrying out of connection
works. Disputes over the terms of offers may be determined by the Regulator.
Price Control
Revenue from the distribution business is controlled by a formula
principally based on P x (1+(RPI-Xd)) where Xd is currently 3% (the
"Distribution Price Control Formula"). P is the previous year's maximum
average price per unit of electricity distributed. Because the maximum average
price in any year is therefore based in part on the maximum average price in
the preceding year, a price reduction in any given year has an ongoing effect
on the maximum average price for all subsequent years. RPI is a measure of
inflation, and equals the percentage change in the UK Retail Price Index
between the six month period of July to December of the two previous years.
Because RPI is based on a weighted average of the prices of goods and services
purchased by a typical household, which bear little resemblance to the inputs
contributing to Yorkshire's business costs, the RPI calculation may not
accurately reflect the price changes affecting Yorkshire. The Xd factor is
established by the Regulator following review. This formula determines the
maximum average price per unit of electricity distributed (in pence per
kilowatt hour) which a REC is entitled to charge. This price, when multiplied
by the expected number of units to be distributed, determines the expected
distribution revenues of the REC for the relevant year. The current
Distribution Price Control Formula permits RECs to partially retain additional
revenues due to increased distributions of units and allows for a pound for
pound increase in operating profit for efficient operations and reduction of
expenses within a review period. However, during the next Distribution Price
Control Formula review, the Regulator may reduce any such increase in
operating profit to the extent he determines it not to be a function of
efficiency savings or, if genuine efficiency savings have been made, he
determines that customers should benefit through lower prices in the future.
Upon privatization, the Regulator set different Xd factors for each of the
RECs to permit annual price increases by the RECs of between 0% and 2.5% (1.3%
for Yorkshire) greater than RPI for the five year period ending on March 31,
1995. Following a scheduled distribution price review by the Regulator of all
twelve RECs in August 1994, the Regulator required an overall real reduction
in regulated distribution prices for Fiscal Year 1996 of between 11% and 17%
(14% for Yorkshire) from the previous year, and set the Xd factor for the
subsequent four year period ending on March 31, 2000 to subtract 2% from RPI
in each such year. Also in connection with the August 1994 distribution price
review, the Regulator, (i) halved from 100% to 50% the extent to which
distribution revenues would be allowed to vary with the number of units of
electricity distributed and (ii) determined numbers of Franchise Area
customers based on REC forecasts for each year through and including Fiscal
Year 2000, allowing distribution revenues to vary by 50% of the predetermined
annual change in such forecast numbers. The stated intention of the Regulator
in introducing this change was "to remove any artificial incentive on the
companies to sell more electricity, while retaining a general incentive for
companies to seek out and meet the needs of their customers". In light of
information concerning the financial position of the RECs that emerged during
the unsuccessful bid by Trafalgar House plc for Northern Electric plc (one of
the
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RECs) and representations by Consumers' Committees and others, the Regulator
conducted an unscheduled distribution price review of all twelve RECs in July
1995. As a result of this unscheduled review, the Regulator revised regulated
distribution prices for the four year period ending on March 31, 2000,
requiring an overall real reduction in regulated distribution prices for
Fiscal Year 1997 of between 10% and 13% (13% for Yorkshire) from the previous
year, and resetting the Xd factor for the remaining three year period ending
on March 31, 2000 to subtract 3% from RPI in each such year.
The Distribution Price Control Formula is expected to be further reviewed
with effect from April 1, 2000. Following the review, the Regulator will make
a proposal for a revised formula to apply from that date. If a REC does not
agree with the proposal the Regulator may refer the proposal to the MMC and,
following the publication of the report of the MMC, the Regulator may make
appropriate modifications to the REC's PES License.
In setting the distribution charges each year, each REC must project the
permitted maximum average charge per unit to be distributed in that year. The
projection will have to take account of forecasts of units distributed,
distribution line losses, the actual change in RPI and NGC exit charges.
Failure to forecast accurately may result in overcharging or undercharging,
which is taken into account in the following year through a correction factor
in the Distribution Price Control Formula. If a REC has overcharged in the
previous year, the maximum average charge per unit distributed is reduced by
an amount to reflect the excess income received, to which is added interest.
In the event of undercharging, the Distribution Price Control Formula allows
the licensee to recover the shortfall in income plus interest.
In certain instances, however, overcharging or undercharging by a REC above
specific percentage thresholds may result in adjustments by the Regulator. If,
in any year, the average charge per unit distributed exceeds the permitted
maximum average charge per unit distributed by more than 3%, then, in the next
following year, the REC may not increase distribution charges unless it has
satisfied the Regulator that the average charge per unit in that next
following year is not likely to exceed the permitted maximum average charge.
If, with respect to any two successive years, the sum of the amounts by which
the average charge per unit distributed has exceeded the permitted maximum
average charge per unit distributed in the second of those years is more than
4% of that permitted maximum average charge, then, in the next following year,
the REC may be required by the Regulator to adjust its charges so that they
fall within the maximum permitted average charge. If, with respect to two
successive years, the licensee undercharges by more than 10% of the maximum
average charge, the Regulator may, by directions to the licensee, limit the
amount by which such undercharging may be recovered.
Since April 1995, the Distribution Price Control Formula has been notionally
divided into metering and non-metering components, with the metering component
equal to about 10% of each REC's allowed revenue. However, the Regulator
indicated when making these proposals that there should be no presumption that
this sum would be assigned to a metering business.
Operations related to the metering of network connections to non half-hourly
metered customers (generally residential and other small customers) are
subject to the metering component of the Distribution Price Control Formula.
Such price controls are scheduled to be disapplied from April 1, 2000, at
which time competitive market pricing is scheduled to be introduced. In a
joint statement issued in January 1998, the Regulator and OFGAS made proposals
concerning competition in meter reading. See "Business--Supply Business--
Strategy for the Supply Business". Competitive market pricing already exists
for operations related to the metering of network connections to half-hourly
metered customers.
Connection charges are levied when a customer first connects to a REC's
distribution system or makes a material change in electricity supply
requirements. These charges are excluded from the Distribution Price Control
Formula. In the August 1994 distribution review, the Regulator introduced the
concept of competition in providing connections to new customers and limited
the extent to which, and the circumstances in which, customers wishing to be
connected would be required to pay for the costs of reinforcement of the
distribution system.
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Data Management Services
Beginning in September 1998, the electricity supply market for Franchise
Supply Customers is currently scheduled to be opened to competition and
customers will be able to select the supplier of their choice. Significant
additional costs have been, and will be, incurred by the distribution business
to develop new systems to facilitate competition. The new services, termed
"data management services" include meter operation, data retrieval, processing
and aggregation, meter point administration and distribution use of system
billing.
Assuming that competition in supply starts as currently scheduled in
September 1998 for Franchise Supply Customers, Yorkshire Group presently
estimates that costs totalling (Pounds)75 million will have been incurred for
re-engineering and information technology work. Of such amount, approximately
(Pounds)19 million was expensed in Fiscal Year 1997. The Regulator has made
proposals (which have been accepted by Yorkshire) to allow Yorkshire recovery
of (Pounds)23 million over a five year period ending March 31, 2003. A further
(Pounds)7 million is expected to be recovered through Pool cost recovery and
other national mechanisms and (Pounds)8 million is expected to be capitalized
as such amount is expected to provide future benefits to the supply business.
As a result of the above, the residual amount of approximately (Pounds)18
million, which will not be recovered or capitalized, will be expensed in
Fiscal Years 1998 and 1999 as incurred.
The Regulator has also made proposals (which have been accepted by
Yorkshire) to provide an annual allowance of (Pounds)3 million for the period
1998 through 2000 to cover operating costs. This allowance will be reviewed at
the time of the Distribution Price Control Formula Review in 2000.
Such proposals therefore will allow Yorkshire to recover up to 50% of its
forecasted set-up and operating costs over a five year period. The shortfall
could be higher if: (i) operating costs are higher than anticipated (e.g.,
there is a higher level of customer activity); (ii) recovery of operating
costs is disallowed or reduced when the Distribution Price Control Formula is
reviewed for the period beginning April 1, 2000; or (iii) the integrated
national systems do not work as contemplated or require substantial
redevelopment.
SUPPLY OF ELECTRICITY
Licensed Suppliers
Subject to minor exceptions, all electricity customers in Great Britain must
be supplied by a licensed supplier. Licensed suppliers purchase electricity
and make open access use of the transmission and distribution networks to
achieve delivery to customers' premises.
There are two types of licensed suppliers: public electricity (or first-
tier) suppliers, also known as PESs, and second-tier suppliers. PESs include
the RECs, Scottish Power and Hydro Electric each supplying in its respective
franchise area. Second-tier suppliers include National Power, PowerGen,
Nuclear Electric, Scottish Power, Hydro Electric and other PESs (including
RECs supplying outside their respective franchise areas) and a number of
independent second-tier suppliers.
At present, a Franchise Supply Customer can only buy electricity from the
REC authorized to supply the relevant franchise area. Franchise Supply
Customers typically include residential and small commercial and industrial
customers. Non-Franchise Supply Customers are not limited to buying
electricity from the local REC and can choose to buy from a second-tier
supplier. Such customers are typically larger commercial and industrial
electricity users. Second-tier suppliers compete with one another and with the
local REC to supply customers in this competitive (or "non-franchise") sector
of the market.
Price Regulation
The supply of electricity to Franchise Supply Customers currently remains
subject to price control. The maximum average charge per unit of electricity
supplied (in pence per kilowatt hour) was controlled by a formula principally
based upon (P X (1 + (RPI-Xs)) + Y) (the "Supply Price Control Formula") where
Xs was
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2%. The initial value of Xs was set at 0 for all the RECs on March 31, 1990.
The Supply Price Control Formula was reviewed by the Regulator with effect
from April 1, 1994, when the Xs factor was set at 2% for all the RECs. This
applied until March 31, 1998. P was the previous year's maximum average price
per unit of electricity supplied (in pence per kilowatt hour) that relates to
the REC supply business's own costs and margin. RPI was a measure of
inflation, equaling the percentage change in the UK Retail Price Index between
the six month period of July to December of the two previous years. Because
RPI is based on a weighted average of the prices of goods and services
purchased by a typical household, which bear little resemblance to the inputs
contributing to Yorkshire's business costs, the RPI calculation may not
accurately reflect the price changes affecting Yorkshire. The Y factor was a
pass-through of certain costs which are either largely outside the management
control of the REC or have been regulated elsewhere. The Y factor thus covered
the REC's electricity purchase costs, including both direct Pool purchase
costs and costs of hedging, transmission charges made by NGC, REC distribution
charges and the Fossil Fuel Levy (described below) or amounts equivalent
thereto in respect of the purchase of non-leviable electricity which are
attributable to Franchise Supply Customers. The Supply Price Control Formula
was therefore designed to focus downward pressure on costs and working
capital, which are viewed as being within suppliers' direct control.
As with the Distribution Price Control Formula, there was a correction
factor in the Supply Price Control Formula in the event of overcharging or
undercharging. If a REC had overcharged in the previous year, the maximum
average charge per unit supplied was reduced by an amount to reflect the
excess income received, to which was added interest. In the event of
undercharging, the Supply Price Control Formula allowed the licensee to
recover the shortfall in income plus interest.
Under the current licensing regime, over a six-month period currently
scheduled to commence in September 1998 all customers, including those who are
currently Franchise Supply Customers, will be permitted to choose their
electricity supplier. The Regulator indicated in his supply price restraint
proposals published in October 1997, which proposals Yorkshire accepted, that
price regulation for supply to all residential and smaller business customers
within Yorkshire's former Franchise Area, whose annual consumption is under
12,000 kWh, would be extended beyond March 31, 1998 until an adequate level of
competition is established, and, at least, until March 31, 2000. The Regulator
has indicated that the nature and extent of possible restraints after that
date will be reviewed in the light of experience and prospects and that such
review would take place concurrently with the ongoing review of the
Distribution Price Control Formula.
The license modifications that have been implemented to effect the new
controls take the form of a series of price caps on the tariffs applicable to
residential and small business customers. The new controls (when taken
together with the reduction in the Fossil Fuel Levy which became effective on
April 1, 1998) have resulted in the implementation of small reductions,
effective April 1, 1998, in the tariffs for Yorkshire's residential and small
business customers compared to the corresponding tariffs in effect in August
1997. See "Fossil Fuel Levy". The new controls also require an additional 3%
below inflation reduction effective April 1, 1999. The license modifications
also discontinued the automatic pass-through of costs currently passed through
to residential and small business customers, consisting primarily of purchased
power costs.
In addition, the license modifications provide for an allowable charge to
cover the additional cost of providing data management services that will be
required to be provided by each REC. For a discussion of the costs associated
with these data management services, see"--Distribution of Electricity--Data
Management Services". The duration and level of the allowances for operating
costs are likely to be reviewed at the time of the next Distribution Price
Control Formula review. The license modifications also provide for restraints
on pre-payment meter charges.
Further, the license modifications stipulated that a REC should be
penalized: (i) where it starts to open its market more than three months after
the market opening by the first REC; (ii) where it opens successive tranches
of its market more than three months after the opening of the corresponding
tranche by the first REC; and (iii) where the market opening of the first REC
has been delayed beyond April 1998. The penalties will be calculated
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at 1% of the operating revenues of the supply business for Franchise Supply
Customers per month of delay, weighted by the proportion of customers affected
and applied as a reduction is allowed for distribution business income. If
Yorkshire does not open its market to competition until after April 1999, it
would incur a penalty of approximately (Pounds)6 million. It is now apparent
that some penalty will be incurred due to the delay in the opening of the
competitive market for Franchise Supply Customers until September 1998.
Yorkshire Group expects that Yorkshire will be prepared to open its Franchise
Area to such competition in September 1998.
THE POOL
The Pool was established in April 1990 for bulk trading of electricity in
England and Wales between generators and suppliers. The Pool reflects two
principal characteristics of the physical generation and supply of electricity
from a particular generator to a particular supplier. First, it is not
possible to trace electricity from a particular generator to a particular
supplier. Second, it is not practicable to store electricity in significant
quantities, creating the need for a constant matching of supply and demand.
Subject to certain exceptions, all electricity generated in England and Wales
must be sold and purchased through the Pool. All licensed generators and
suppliers must become signatories to the Pooling and Settlement Agreement,
which governs the constitution and operation of the Pool and the calculation
of payments due to and from generators and suppliers. The Pool also provides
centralized settlement of accounts and clearing. The Pool does not itself buy
or sell electricity.
Prices for electricity are set by the Pool daily for each half hour of the
following day based on the bids of the generators and a complex set of
calculations matching supply and demand and taking account of system
stability, security and other costs. Each day, generators inform NGC of the
amount of electricity which each of their generating units will be able to
provide the next day and the price at which they are willing to operate each
such unit. NGC uses this information to construct a "merit order" which ranks
each generating unit in order of increasing price. NGC then schedules the
stations to operate according to such merit order, calling into service the
least expensive generating units first and continuing to call generating units
into service until enough are operating to meet the demand of all suppliers.
Factors which may constrain NGC's ability to order stations into operation in
strict observance of the merit order include transmission system constraints
and the inflexibility of some generating units. A computerized system (the
settlement system) is used to calculate prices and to process metered,
operational and other data and to carry out the other procedures necessary to
calculate the payments due under the Pool trading arrangements. The settlement
system is administered on a day to day basis by NGC Settlements Limited, a
subsidiary of NGC, as settlement system administrator.
The UK government recently invited the Regulator to review these electricity
wholesale trading arrangements, trading arrangements outside the Pool and
price setting mechanisms. The review was launched in January 1998 with an
announcement that the Regulator and an independent panel had been asked to
report to the Energy Minister by July 1998.
FOSSIL FUEL LEVY
All the RECs are obligated to obtain a specified amount of generating
capacity from non-fossil fuel sources (the "NFFOs"). Because electricity
generated from non-fossil fuel plants is generally more expensive than
electricity from fossil fuel plants, a levy system (the "Fossil Fuel Levy")
has been instituted to reimburse the generators and the RECs for the extra
costs involved. The Regulator sets the rate of the Fossil Fuel Levy annually.
The current Fossil Fuel Levy is 0.9% of the value of sales of electricity made
in England and Wales and 0.8% of the value of sales of electricity made in
Scotland.
REGULATION UNDER THE ELECTRICITY ACT
The Regulator
The principal legislation governing the structure and regulation of the
electricity industry in Great Britain is the Electricity Act. The Electricity
Act established the industry structure described above so as to enable
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privatization to take place. The Electricity Act also created the
institutional framework under which the industry is currently regulated,
including the office of the Regulator, who is appointed by the Secretary of
State. The present Regulator, Professor Stephen Littlechild, was appointed for
a five year term commencing September 1, 1989 and he was reappointed in 1994
for a further five year term ending on August 31, 1999. Professor Littlechild
holds the formal title of Director General of Electricity Supply and is head
of OFFER.
The Regulator's functions under the Electricity Act include granting
licenses to generate, transmit or supply electricity (a function which he
exercises under a general authority from the Secretary of State); proposing
modifications to licenses and, in case of non-acceptance of such proposals by
licensees, making license modification references to the MMC; enforcing
compliance with license conditions; advising the Secretary of State in respect
of the setting of each NFFO round; calculating the Fossil Fuel Levy rate and
collecting the levy; determining certain disputes between electricity
licensees and customers; and setting standards of performance for electricity
licensees. The term "supply" as used in the context of the Electricity Act and
the PES License covers both distribution and supply activities.
The Regulator exercises concurrently with the Director General of Fair
Trading certain functions relating to monopoly situations under the Fair
Trading Act 1973 and certain functions relating to courses of conduct which
have, or are intended or likely to have, the effect of restricting, distorting
or preventing competition in the generation, transmission or supply of
electricity under the Competition Act 1980.
The Electricity Act requires the Regulator and the Secretary of State to
exercise their functions in the manner each considers is best calculated to
ensure that all reasonable demands for electricity are satisfied, secure that
license holders are able to finance their licensed activities and promote
competition in the generation and supply of electricity.
Subject to these duties, the Secretary of State and the Regulator are
required to exercise their functions in the manner which each considers is
best calculated: to protect the interests of consumers of electricity supplied
by licensed suppliers in respect of price, continuity of supply, and the
quality of electricity supply services; to promote efficiency and economy on
the part of licensed electricity suppliers and the efficient use of
electricity supplied to consumers; to promote research and development by
persons authorized by license to generate, transmit or supply electricity; to
protect the public from the dangers arising from the generation, transmission
or supply of electricity; and to secure the establishment and maintenance of
machinery for promoting the health and safety of workers in the electricity
industry. The Secretary of State and the Regulator also have a duty to take
into account the effect on the physical environment of activities connected
with the generation, transmission or supply of electricity.
In performing their duties to protect the interests of consumers in respect
of prices and other terms of supply, the Secretary of State and the Regulator
are required to take into account in particular the interests of consumers in
rural areas. In performing their duties to protect the interests of consumers
in respect of the quality of electricity supply services, they are required to
take into account in particular the interests of those who are disabled or of
pensionable age.
On June 30, 1997, the UK government announced its intention to conduct a
comprehensive review of the regulatory framework governing the electricity
distribution and supply businesses in England and Wales, as well as the
regulatory framework applicable to other privatized utilities. The review
culminated in the March Green Paper which sets forth a number of proposals of
the UK Government designed to reexamine utility regulation in the UK. Among
the main proposals contained within the March Green Paper are the retention of
"RPI-X" as the fundamental basis for price regulation; increased transparency
and consistency of regulation; the merger of OFFER and OFGAS; the separate
licensing of the distribution and supply businesses of the PESs; amendment of
the statutory duties of utility regulators to provide a new primary duty to
exercise their functions in the manner best calculated to protect the
interests of the consumers in the short and long term, wherever possible
through promoting competition; and adopting price regulation to distinguish
between income earned through companies' own efforts and income which results
from other factors. Some of these proposals would require primary legislation.
Responses to the March Green Paper by interested parties have been requested
by May 31, 1998. See "Risk Factors--Factors Relating to Yorkshire's Business--
Governmental Review of Utility Regulation".
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In October 1997, the UK government invited the Regulator to consider
parameters for a review of electricity trading arrangements. Such a review
would focus on the wholesale electricity market in England and Wales and would
likely cover existing trading within the Pool, trading arrangements outside
the Pool and price setting mechanisms. The impact on, and possible need for
change to, the framework of regulatory controls could also be considered,
including Pool governance, regulation of and access to the Grid, licenses, the
Electricity Act and the implications of European Union law. A review of
certain of these issues was launched in January 1998 with an announcement that
the Regulator and an independent panel had been asked to report to the Energy
Minister by July 1998.
In December 1997, the UK government announced a review of energy sources for
power generation, including fuel diversity, sustainable development and the
role of coal. Representations of interested parties were to be submitted by
mid-February 1998. While the review is underway, the Secretary of State has
deferred decisions on most outstanding or new applications for the
construction of generating stations. An Energy Select Committee Report on the
Coal Industry issued in April 1998 recommended that such deferral, as it
relates to the construction of gas fired generating stations, be lifted as
soon as possible. The Trade and Industry Select Committee is also undertaking
an inquiry into a number of aspects of UK energy policy.
CONSUMERS' COMMITTEE
The Regulator is required under the Electricity Act to establish a
consumers' committee for the franchise area of each PES License holder (or, if
the Secretary of State so determines, for the franchise areas of two or more
such suppliers). Each committee comprises a chairman appointed by the
Regulator after consultation with the Secretary of State and between 10 and 20
other members appointed by the Regulator after consultation with the committee
chairman. The duties of each committee are to make representations to, and
consult with, their allocated PES License holders about matters affecting the
interests of customers or potential customers of such supplier(s), to review
matters affecting the interests of electricity consumers in such committee's
area, and to advise the Regulator on any other matter which warrants
discussion or which is referred to them by the Regulator.
LICENSES
Generation Licenses
Unless covered by an exemption, all electricity generators engaging in the
construction, expansion or operation of a power station in Great Britain are
required to have a generation license. There are currently 51 generation
license holders, including RPG, in Great Britain. Although generation is not
subject to price control, generators are not permitted to discriminate between
customers or cross subsidize their licensed activities. The conditions
attached to a generation license in England and Wales require the holder,
among other things, to comply with the Grid Code, to comply with any REC's
distribution code to the extent applicable, to be a member of the Pool and to
submit relevant generating sets for central dispatch. The conditions attached
to a generation license in Scotland require the holder, among other things, to
comply with the Scottish Grid Code. Failure to comply with any of the
generation license conditions may subject the licensee to a variety of
sanctions, including enforcement orders by the Regulator or license revocation
if the license holder is not in compliance with an enforcement order.
PES Licenses
Each of the RECs, Scottish Power and Scottish Hydro Electric has a PES
License for its Franchise Area and is required, under the Electricity Act, to
supply electricity upon request to any premises in that area, except in
specified circumstances. Each PES is also required not to discriminate between
its own supply business and other users of its distribution system and the PES
License prohibits cross subsidy between the various regulated businesses. As
described above, PESs are subject to separate price controls on the amounts
they may charge for the use of their distribution system by all customers in
their Franchise Area and for the supply of electricity to Franchise Supply
Customers. The PES Licenses also require the licensee to procure electricity
at the best price reasonably obtainable having regard to the sources
available.
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As part of his continued monitoring of the electric utility industry, the
Regulator published on August 15, 1996 comparative information relating to the
RECs' economic purchasing performance. The publication entitled "Yardstick of
Electricity Purchase Costs", compared in yardstick value terms, the generation
costs which RECs passed through to Franchise Supply Customers in Fiscal Years
1995 and 1996 under the Supply Price Control Formula. The Regulator has
reviewed the supply price controls applicable to PES License holders and
published in October 1997 proposals for new controls to take effect on April
1, 1998. He issued a consultation paper on this matter on September 5, 1996
entitled "The Competitive Electricity Market from 1998: Price Restraints". He
subsequently issued four further consultation papers in January, May, July and
August, 1997. The October 1997 proposals were for maximum price restraints in
respect of supply to residential and small business customers for a period of
at least two years beginning April 1, 1998, which would eliminate the pass-
through of costs to such customers, consisting primarily of purchased power
costs. Yorkshire accepted these proposals. See "--Supply of Electricity--Price
Regulation".
In England and Wales, each PES License limits the extent of the generation
capacity in which the relevant REC may hold an interest without the prior
consent of the Regulator ("own-generation limits"). These own-generation
limits, expressed in megawatts, currently restrict the participation of a REC
in generation to a level of approximately 15% of the simultaneous maximum
electricity consumption in that REC's franchise area at the time of
privatization. In the case of Yorkshire, the own-generation limit is fixed at
800 MW.
The Regulator has stated that it would be reasonable to consider a REC's
request to increase its own- generation limit on the condition that it
accepted explicit restrictions on the contracts it signed with its supply
business, and that at a minimum the REC would be prohibited from entering into
additional own-generation contracts in its franchise market. The Regulator
considers that an increase in own-generation limits subject to such
restrictions could allow a REC to contribute more fully to the development of
competition in generation without the allegation that it was exploiting its
captive market and local monopoly position. In June 1996, the Regulator stated
that he had indicated to Energy Group, in the context of its acquisition of
6,000 MW of generating capacity from National Power and PowerGen, that he
would be favorably inclined to relax the own-generation limits of Energy Group
subject to the Regulator and Energy Group agreeing to license modifications as
set out in a consultation paper which he had published in August 1995.
The Regulator has made modifications to 14 PES Licenses in connection with
the introduction of competition for Franchise Supply Customers currently
scheduled to begin in September 1998. These modifications comprise a number of
new obligations to offer services to all competing suppliers. These services
are generally known as data management services, including registration, data
collection and aggregation, meter operation and provision of prepayment meter
infrastructure. The Regulator has issued full modifications to the first-tier
and second-tier licenses to encompass the changes. In response to respective
individual requirements, the PESs are providing collectively a data transfer
service. Preparations are being made to provide these services as part of a
program of work and in October 1997 the Regulator made final proposals for the
recovery of the costs of this program which were accepted by Yorkshire in
November 1997.
The RECs are also contributing to a program of work by the Pool to adopt
settlement arrangements for the competitive market in 1998. It has been agreed
that these costs, subject to a cap above which recovery would be partial, will
be recovered from charges to be made to suppliers by the Pool over a five year
period.
Second-Tier Supply Licenses
Other than a PES in its Franchise Area and subject to certain other
exceptions, a supplier of electricity to premises in Great Britain must
possess a second-tier supply license. Subject to the restrictions described in
"--Supply of Electricity" above, second-tier licensees may compete for the
supply of electricity with one another and with the PES for the relevant area.
There are currently 40 second-tier supply license holders for England and
Wales, including Yorkshire, and 27 for Scotland.
Transmission Licenses
In England and Wales, NGC is the only transmission license holder. The
transmission license imposes on NGC the obligation to operate the merit order
system for the central dispatch of generating units and gives NGC
responsibility for the economic purchasing of ancillary services from
generators and suppliers. The transmission
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license requires NGC to offer terms on a nondiscriminatory basis for the
carrying out of works for connection to, and use of, the transmission system.
Modifications to Licenses
Subject to a power of veto by the Secretary of State, the Regulator may
modify license conditions with the agreement of the license holder. He must
first publish the proposed modifications and consider representations or
objections made. If the Regulator fails to agree to modifications with a
license holder, he may refer a matter relating to generation, transmission or
supply of electricity under a license to the MMC. If the MMC finds that the
matter referred to it has, or may be expected to have, specified effects
adverse to the public interest which could be remedied or prevented by a
license modification, the Regulator is required to make modifications that
appear to him requisite for the purpose of remedying or preventing the adverse
effects identified by the MMC. Modifications to License conditions may also be
made by the Secretary of State as a consequence of monopoly, merger or other
competition references under general UK competition law.
Following the acquisition of Yorkshire by Yorkshire Group, the Regulator
proposed that Yorkshire's PES License be modified, by agreement, to take into
account the fact that the PES License is now held by a subsidiary company. In
particular, the Regulator proposed that the license be modified to provide
that, with few exceptions, the only business activities which Yorkshire is
permitted to undertake directly are its franchise and second-tier supply
businesses and its distribution business. The license modifications also
require Yorkshire to ensure that it has sufficient management resources and
financial resources and facilities to conduct its supply and distribution
businesses and to comply with its statutory and license obligations. Yorkshire
is required to provide an annual certificate to the Regulator approved by the
Yorkshire Board of Directors and signed by a Director to that effect and in
the interim to notify the Regulator immediately of any changes threatening the
validity of such certificates. Additionally, the license modifications require
Yorkshire to obtain from AEP and NCE legally enforceable undertakings in favor
of Yorkshire that they and their subsidiaries will refrain from any action
which would be likely to cause Yorkshire to breach any of its obligations
under the Electricity Act or the PES License. Further, the consent of the
Regulator is required for Yorkshire to create security over its assets, to
incur indebtedness or to give guarantees, unless the transaction is on normal
commercial and arm's length terms and for a "permitted purpose" (which refers
to the supply, distribution or generation business, or any business conducted
by Yorkshire or its affiliates or subsidiaries on March 31, 1997) or the
transaction involves any businesses whose aggregate revenues in any financial
year do not exceed 5% of the aggregate turnover of the supply, second-tier
supply and distribution businesses in the previous financial year. The consent
of the Regulator also is required before Yorkshire may transfer assets or make
loans to affiliates or subsidiaries except for certain specified purposes,
including payment of dividends out of distributable reserves, repayments of
capital, and payments on normal commercial and arm's length terms for goods,
services or assets supplied. These provisions are subject to an overriding
provision in the PES License which prevents any REC from disposing of (which
would include creating a security interest in) distribution assets without the
Regulator's express prior consent. Additionally, the license modifications
require Yorkshire to use reasonable efforts to maintain the investment grade
credit ratings of its debt. Finally, because Yorkshire is now owned by
Yorkshire Group, the Regulator required Yorkshire to obtain from AEP and NCE
legally enforceable undertakings to provide information to Yorkshire, as
licensee, in order to comply with requirements of the Regulator. These
modifications to the PES License have been agreed to by Yorkshire and took
effect on December 15, 1997 and the required undertakings were also provided
on December 15, 1997. In February 1998, the Regulator issued, for public
consultation, proposals for further modifications to the licenses of PESs that
have been subject to takeovers. Further proposals are expected to be made by
the Regulator in light of this consultation paper that may result in further
modifications to PES licenses. See "Risk Factors--Factors Relating to
Yorkshire's Business--Regulatory Policies Affecting Yorkshire Group".
TERM AND REVOCATION OF LICENSES
Yorkshire's PES License will continue in effect until at least 2025 unless
revoked. Under ordinary circumstances, the license may not be revoked except
on 25 years' prior notice, which notice may not be given until 2000.
Otherwise, the Secretary of State may revoke a PES License by not less than 30
days' notice in writing to the licensee in certain specified circumstances
including any failure to comply with a final order of the Regulator requiring
the license holder to comply with its license conditions or requirements, or
the insolvency of the licensee.
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MANAGEMENT
MANAGEMENT OF YORKSHIRE GROUP
The following table sets forth certain information with respect to the
officers and directors of Yorkshire Group as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ------------------------------------
<S> <C> <C>
Dr. E. Linn Draper, Jr............ 55 Chairman and Director
Donald M. Clements, Jr............ 48 Director
Armando A. Pena................... 52 Chief Financial Officer and Director
Wayne H. Brunetti................. 55 Director
Richard C. Kelly.................. 51 Director
Teresa S. Madden.................. 41 Director
</TABLE>
Dr. E. Linn Draper, Jr. Has been a Director and Chairman of Yorkshire Group
since February 1997. Since April 1993 has been Chairman of the Board of
Directors of AEP and all of its major subsidiaries. In March 1992, appointed
President of AEP and President and Chief Operating Officer of American
Electric Power Service Corporation. Serves as a Director of BCP Management,
Inc. and Cell Net Data Systems.
Donald M. Clements, Jr. Has been a Director of Yorkshire Group since
February 1997. Since October 1995, has been President of AEP Resources, Inc.
Joined AEP in September 1994 as Senior Vice President. From 1978 to 1994, was
employed with Gulf States Utility Company.
Armando A. Pena. Since February 1997, has been a Director, and, since July
1997, has been Chief Financial Officer of Yorkshire Group. Since January 1998,
has been Chief Financial Officer, and, since March 1996, Senior Vice President
and Treasurer of American Electric Power Service Corporation. Since November
1995, has been Treasurer of all of AEP's major subsidiaries. From 1989 to
March 1996, was Vice President-Finance of American Electric Power Service
Corporation.
Wayne H. Brunetti. Has been a Director of Yorkshire Group since February
1997. Since August 1997, has been President and Chief Executive Officer of
NCE. Since January 1996, has been the President and Chief Executive Officer of
Public Service Company of Colorado. Joined Public Service Company of Colorado
in July 1994 as President and Chief Operating Officer. From 1991 to July 1994,
was President and Chief Executive Officer of Management Systems International,
a management consulting firm. Serves as a Director of e prime and YGSC Natural
Fuels.
Richard C. Kelly. Has been a Director of Yorkshire Group since February
1997. Since August 1997, has been Executive Vice President, Finance and
Support Services and Chief Financial Officer of NCE. From 1990 to August 1997,
was Chief Financial Officer of Public Service Company of Colorado.
Teresa S. Madden. Has been a Director of Yorkshire Group since February
1997. Since September 1997, has been Controller and Secretary of NCE. From
1990 to August 1997, was Director of Corporate Accounting and Assistant
Secretary of Public Service Company of Colorado.
MANAGEMENT COMPENSATION OF YORKSHIRE GROUP
The officers and directors of Yorkshire Group listed above (each an "AEP/NCE
Officer or Director", as applicable) receive no cash or non-cash compensation
as a result of their services performed for Yorkshire Group. The salaries of
all AEP/NCE Officers and Directors are paid by either AEP or NCE, as
applicable, solely for the services performed by them for either AEP or NCE,
as applicable.
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MANAGEMENT OF YORKSHIRE FINANCE
The following table sets forth certain information with respect to the Board
of Directors of Yorkshire Finance as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Graham J. Hall................................................ 54 Director
Roger Dickinson............................................... 51 Director
Andrew G. Donnelly............................................ 42 Director
</TABLE>
Graham J. Hall. Has been a Director of Yorkshire Finance since August 1997.
Since January 1998, has been the Chief Executive of Yorkshire. From April 1997
to December 1997, was the Group Operations Director of Yorkshire. From 1990
through 1997, was the Group Executive Director, Distribution of Yorkshire.
Roger Dickinson. Has been a Director of Yorkshire Finance since August 1997.
Since 1989, has been Group Company Secretary and Solicitor of Yorkshire.
Andrew G. Donnelly. Has been a Director of Yorkshire Finance since December
1997. Since January 1998, has been Finance Director of Yorkshire. From January
1996 through December 1997, was Group Financial Controller of Yorkshire. From
1993 to 1996, was Financial Controller, System Division of Yorkshire.
MANAGEMENT COMPENSATION OF YORKSHIRE FINANCE
The directors of Yorkshire Finance listed immediately above receive no cash
or non-cash compensation as a result of their services performed for Yorkshire
Finance. The salaries of all directors listed immediately above are paid by
Yorkshire solely for their services performed for Yorkshire.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described under "Business--Business Restructuring", an alternative
ownership structure is being pursued for the generation business. Yorkshire
currently contemplates that such assets may be transferred to a new entity or
to new entities that will be an indirect subsidiary or will be indirect
subsidiaries of the US Parents. It is expected that proceeds from the transfer
of these assets will be used to reduce debt of the Guarantor.
Total assets less current liabilities employed by the generation business at
December 31, 1997 were (Pounds)168 million. Operating income attributable to
the generation business in the nine months ended December 31, 1997 was
(Pounds)12 million. See "Business--Business Restructuring".
SECURITY OWNERSHIP
Yorkshire Group is wholly owned indirectly by AEP and NCE. Yorkshire Finance
is wholly owned by Yorkshire Group. The following table shows the number of
shares of common stock of AEP and NCE, respectively, owned by the directors
and executive officers of Yorkshire Group and Yorkshire Finance as of December
31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TITLE OF SECURITY BENEFICIALLY OWNED(1)
- ---- ----------------- ---------------------
<S> <C> <C>
Dr. E. Linn Draper, Jr................. AEP Common Stock 7,373(2)(3)(4)
Donald M. Clements, Jr................. AEP Common Stock 907(2)
Armando A. Pena........................ AEP Common Stock 7,761(2)
Wayne H. Brunetti...................... NCE Common Stock 370,802(5)(6)
Richard C. Kelly....................... NCE Common Stock 143,515(5)
Teresa S. Madden....................... NCE Common Stock 28,938(5)
Directors of Yorkshire Finance and
Yorkshire Group as a group
(6 persons)........................... AEP Common Stock 16,041
NCE Common Stock 543,255
</TABLE>
- --------
(1) "Beneficial ownership" means the sole or shared power to vote, or to
direct the voting of, a security and/or investment power with respect to a
security.
(2) Includes shares of AEP common stock held in the AEP Savings Plan as
follows: Dr. Draper 2,717 shares, Mr. Clements 907 shares and Mr. Pena
3,222 shares.
(3) Includes 2,200 shares of AEP common stock held in joint tenancy with Dr.
Draper's wife.
(4) Includes 2,050 shares of AEP common stock held in the AEP Performance
Share Incentive Plan.
(5) Includes shares of NCE common stock in the form of unexercised stock
options awarded pursuant to the Omnibus Incentive Plan as follows: Mr.
Brunetti 352,334, Mr. Kelly 141,050 and Ms. Madden 28,550 shares.
(6) Includes 18,468 shares of NCE common stock held in joint tenancy.
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DESCRIPTION OF THE TRUST SECURITIES
The Trust Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the
1939 Act. The Property Trustee will act as the indenture trustee with respect
to the Trust, as well as the Trust Securities Guarantee, for purposes of
compliance with the provisions of the 1939 Act. The terms of the Trust
Securities will include those stated in the Trust Agreement, the Delaware
Business Trust Act, and those made part of the Trust Agreement by the 1939
Act. The following summary of the material terms and provisions of the Trust
Securities is subject to, and qualified in its entirety by reference to, the
Trust Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, as well as the 1939 Act.
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of the
Trust, to issue the Trust Securities, which represent undivided beneficial
interests in the assets of the Trust. The Trust Agreement does not permit the
issuance by the Trust of any securities other than the Trust Securities and
the Control Certificate or the incurrence of any indebtedness by the Trust.
Pursuant to the Trust Agreement and the Deposit Agreement, the Property
Trustee will own Book-Entry Interests representing a 100% beneficial interest
in the Junior Subordinated Debentures for the benefit of the Trust and the
holders of the Trust Securities.
Pursuant to the Trust Securities Guarantee, Yorkshire Group will guarantee
the payment of Distributions and payments upon redemption of the Trust
Securities or liquidation of the Trust, but only in each case to the extent of
sufficient funds held by the Trust and available therefor. See "Description of
the Trust Securities Guarantee". The Trust Securities Guarantee does not cover
payment of Distributions on the Trust Securities or amounts payable on
redemption or otherwise when the Trust does not have sufficient funds
available to make such payments. In such event, a remedy of a holder of Trust
Securities is to direct the Property Trustee to enforce its rights under the
Junior Subordinated Debentures and the Debentures Guarantee. In addition, if
Interest Payments or any other payments are due but have not been made on the
Junior Subordinated Debentures, pursuant to the terms of the Debentures
Guarantee, a holder of Trust Securities may institute a legal proceeding
directly against Yorkshire Group without first instituting a legal proceeding
against or requesting or directing that action be taken by the Property
Trustee or any other person or entity for enforcement of payment to such
holder under the Debentures Guarantee in respect of Interest Payments or any
other payments due on the Junior Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Trust Securities of
such holder on or after the due dates specified in the Junior Subordinated
Debentures. See "Description of the Trust Securities Guarantee", "Description
of the Debentures Guarantee" and "Relationship Among the Trust Securities, the
Junior Subordinated Debentures, the Trust Securities Guarantee and the
Debentures Guarantee". The above mechanisms and obligations, together with the
US Affiliates' obligations under the Agreement as to Expenses and Liabilities,
constitute a full and unconditional guarantee of the Trust's obligations under
the Trust Securities.
DISTRIBUTIONS
Distributions on each Trust Security shall be fixed at the rate of % per
annum of the stated Liquidation Amount of $25, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year. Distributions
that are in arrears for more than one quarter will accumulate additional
Distributions thereon at the rate of % per annum thereof, compounded
quarterly ("Additional Distributions"). The term "Distributions" as used
herein includes any Additional Distributions, Additional Amounts or Additional
Interest (as defined herein). Distributions will accumulate from the date of
original issuance of the Trust Securities. The first Distribution Date for the
Trust Securities will be , 1998. The amount of Distributions payable for
any full period will be computed on the basis of a 360-day year of twelve 30-
day months and for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months.
So long as no Event of Default under the Indenture has occurred and is
continuing, Yorkshire Finance has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures, at any time and
from time to time, for up to 20 consecutive quarters; provided, however,
Yorkshire Finance cannot defer
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Interest Payments beyond the Stated Maturity of the Junior Subordinated
Debentures. During such an Extension Period, quarterly Distributions on the
Trust Securities would also be deferred (but would continue to accumulate
Additional Distributions thereon at the rate of % per annum, compounded
quarterly) by the Trust. Until all deferred Interest Payments, together with
interest thereon, have been paid in full, neither Yorkshire Finance nor
Yorkshire Group may, directly or indirectly, (i) declare or pay any cash
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock, (ii) make any
payments on or repay, repurchase or redeem, any of its debt securities
(including other Indenture Securities or other junior subordinated securities
issued by Yorkshire Finance) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior to the Junior Subordinated Debentures or the
Debentures Guarantee, respectively, or (iv) make any payments on, or repay,
repurchase or redeem, any of its debt securities held by, make any loans or
advances to, or make any payments with respect to any guarantee of the debt
of, any affiliate, in each case other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, the common stock of Yorkshire Finance or Yorkshire Group and exchanges or
conversions of common stock of one class for common stock of another class,
(b) payments by Yorkshire Group under the Trust Securities Guarantee (or any
other guarantee by Yorkshire Group with respect to any securities issued by
its direct or indirect subsidiaries, provided that the proceeds from the
issuance of such securities were used to purchase other Indenture Securities
or other junior subordinated securities issued by Yorkshire Finance), (c)
payments by Yorkshire Group under the Debentures Guarantee, (d) any dividend
or payment by Yorkshire Group which is applied, directly or indirectly, to any
Tax Payments (as defined below), (e) payments by Yorkshire Group, directly or
indirectly, on the Intercompany Notes or any other promissory notes held by
Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary of
Yorkshire Group) evidencing loans made with the proceeds from the issuance by
Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary of
Yorkshire Group) of securities guaranteed by Yorkshire Group or (f) the
reinvestment of any proceeds received under clause (e) above by Yorkshire
Finance (or any other direct or indirect wholly-owned subsidiary of Yorkshire
Group) in additional debt securities of Yorkshire Group or any of its other
direct or indirect wholly-owned subsidiaries. "Tax Payments" shall mean any
direct or indirect payment by Yorkshire Group to governmental authorities in
respect of UK, US or Cayman Islands taxes arising from the operations of
Yorkshire Group, Yorkshire Finance, the Trust or Yorkshire as and when such
taxes become due and payable. Prior to the termination of any such Extension
Period, Yorkshire Finance may further extend the interest payment period;
provided that, such Extension Period, together with all such previous and
further extensions within such Extension Period, may not exceed 20 consecutive
quarters or the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any Extension Period and the payment of all amounts then
due, Yorkshire Finance may commence a new Extension Period, subject to the
above requirements. As a result, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--Option to Defer Payment of
Interest".
Yorkshire Finance currently has no intention of exercising its right to
defer Interest Payments on the Junior Subordinated Debentures. Moreover,
because of the consequences of exercising such right, including a prohibition
on the payment of cash distributions by Yorkshire Finance and Yorkshire Group
with respect to their capital stock, Yorkshire Finance believes that the
likelihood of such exercise is remote.
In the event that a Distribution Date is not a Business Day (as defined
below), payment of the Distributions payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distributions shall be made
on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are
payable in accordance with the foregoing, a "Distribution Date"). A "Business
Day" shall mean any day other than a Saturday or a Sunday, or a day on which
banking institutions in The City of New York are authorized or required by law
or executive order to remain closed, or a day on which the corporate trust
office of the Property Trustee or the Indenture Trustee is closed for
business.
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Distributions on the Trust Securities must be paid and shall be deemed
payable on the Distribution Date only to the extent that the Trust has
sufficient funds available therefor. The payment of Distributions (if and to
the extent the Trust has sufficient funds available for the payment of such
Distributions) is guaranteed by Yorkshire Group as set forth herein under
"Description of the Trust Securities Guarantee". It is anticipated that the
revenue of the Trust available for Distributions on the Trust Securities will
be limited to payments under the Junior Subordinated Debentures or the
Debentures Guarantee. See "Description of the Junior Subordinated Debentures"
and "Description of the Debentures Guarantee". If Yorkshire Finance does not
make payments of principal of or interest on the Junior Subordinated Debentures
or if Yorkshire Group does not make payments with respect to the Debentures
Guarantee, the Trust will not have sufficient funds available to pay
Distributions on the Trust Securities or amounts payable on redemption thereof
or otherwise.
Distributions on the Trust Securities will be payable to the holders of
record as they appear on the register of the Trust on the relevant record
dates, which, as long as the Trust Securities remain in book-entry form, will
be one Business Day prior to the relevant Distribution Date. In the event that
any Trust Securities are not in book-entry form, the relevant record date for
such Trust Securities shall be the date 15 calendar days prior to the relevant
Distribution Date.
REDEMPTIONS
Mandatory Redemption. Upon the repayment of the Junior Subordinated
Debentures at Stated Maturity or upon the redemption, in whole or in part, of
the Junior Subordinated Debentures (as described below and in "Description of
the Junior Subordinated Debentures--Redemption"), the proceeds from such
repayment or redemption will be applied to redeem a Like Amount of Trust
Securities, upon not less than 30 nor more than 60 days' notice to each holder
of Trust Securities at its registered address, at the Redemption Price.
Optional Redemption of Junior Subordinated Debentures. Yorkshire Finance will
have the right to redeem the Junior Subordinated Debentures on or after ,
2003, in whole at any time or in part from time to time, at the Debenture
Redemption Price and thereby cause a mandatory redemption of a Like Amount of
Trust Securities at the Redemption Price. See "Description of the Junior
Subordinated Debentures--Redemption".
Yorkshire Finance will also have the right to redeem the Junior Subordinated
Debentures in whole (but not in part), at the Debenture Redemption Price, if
Yorkshire Finance or Yorkshire Group has or will become obligated to pay
Additional Amounts as provided under "Description of the Junior Subordinated
Debentures--Optional Tax Redemption", and thereby cause a mandatory redemption
of the Trust Securities in whole (but not in part) at the Redemption Price.
Special Event Redemption of Junior Subordinated Debentures. Upon the
occurrence and continuation of a Special Event, Yorkshire Finance shall have
the right, at any time, to redeem the Junior Subordinated Debentures in whole
(but not in part) at the Debenture Redemption Price and thereby cause a
mandatory redemption of the Trust Securities in whole (but not in part) at the
Redemption Price within 90 days following the occurrence of such Special Event.
If a Special Event occurs and Yorkshire Finance does not elect to redeem the
Junior Subordinated Debentures or to dissolve the Trust, the Trust Securities
will remain outstanding and, if such Special Event is a Tax Event, Additional
Interest (as described under "Description of the Junior Subordinated
Debentures--Certain Covenants") may be payable on the Junior Subordinated
Debentures.
"Tax Event" means the receipt by Yorkshire Finance or Yorkshire Group of an
opinion of independent counsel (which may be counsel to Yorkshire Group or its
affiliates) experienced in such matters to the effect that there has been (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of any supranational federation to
which the UK belongs or the jurisdiction (or any political subdivision or
taxing authority thereof or therein) in which Yorkshire Finance or Yorkshire
Group is incorporated or created, as applicable, or in which Yorkshire Finance
or Yorkshire Group is managed and controlled or has a place of business (each,
a "Taxing Jurisdiction"), (b) any official administrative pronouncement or
judicial decision interpreting, clarifying or applying such laws or regulations
or (c) a
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threatened challenge asserted by a government or taxing authority with respect
to Yorkshire Group or any of its subsidiaries, or a threatened challenge
asserted in writing by a government or taxing authority against any other
taxpayer that has raised capital through the issuance of securities that are
substantially similar to the Junior Subordinated Debentures or the Trust
Securities, which amendment or change is effective or which pronouncement,
clarification, challenge or decision is announced on or after the date of this
Prospectus, and that results in there being more than an insubstantial risk
that (i) Yorkshire Finance is, or will be within 90 days of the date thereof,
subject to income tax within a Taxing Jurisdiction (other than the UK
corporation income tax) with respect to interest accrued or received on the
Intercompany Notes, (ii) Yorkshire Finance is, or will be within 90 days of
the date thereof, subject to more than a de minimis amount of other tax,
duties or other governmental charges, (iii) Interest Payments on the Junior
Subordinated Debentures are not, or within 90 days of the date thereof will
not be, deductible, in whole or in part for (as appropriate) US Federal or UK
corporation income tax purposes, as they accrue by Yorkshire Finance or by a
member of any tax group to which Yorkshire Group belongs or (iv) interest
payable with respect to the Intercompany Notes by Yorkshire Group or its
affiliates is not, or within 90 days of the date thereof will not be,
deductible, in whole or in part, for (as appropriate) US Federal or UK
corporation income tax purposes, as it accrues by one of (as appropriate)
Yorkshire Group, its shareholders or a member of any tax group to which
Yorkshire Group belongs.
"Investment Company Act Event" means that Yorkshire Group or Yorkshire
Finance shall have received an opinion of independent counsel (which may be
counsel to Yorkshire Group or its affiliates) experienced in such matters to
the effect that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority
(an "Investment Company Act Change"), there is more than an insubstantial risk
that Yorkshire Finance or Yorkshire Group is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which
Investment Company Act Change becomes effective on or after the date of this
Prospectus.
"Special Event" means the occurrence of a Tax Event or an Investment Company
Act Event.
"Like Amount" means (i) with respect to a repayment or redemption of any
Trust Securities, Trust Securities having a Liquidation Amount equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously repaid or redeemed and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of the Trust
Securities in connection with a dissolution and liquidation of the Trust or a
payment of any Additional Amounts or Additional Interest on the Trust
Securities, Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Trust Securities of the holder to whom such
Junior Subordinated Debentures are distributed or such payment is being made.
"Liquidation Amount" means the stated liquidation amount of $25 per Trust
Security.
REDEMPTION PROCEDURES
Trust Securities redeemed on each Redemption Date shall be redeemed at the
Redemption Price with the applicable proceeds from the contemporaneous
repayment or redemption of the Junior Subordinated Debentures. Redemptions of
the Trust Securities shall be made, and the Redemption Price shall be deemed
payable, on each Redemption Date only to the extent that the Trust has
sufficient funds available for the payment of such Redemption Price.
If the Property Trustee gives a notice of redemption in respect of any Trust
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
subject to the immediately preceding paragraph, the Property Trustee will
deposit irrevocably with DTC, so long as the Trust Securities are in book-
entry only form, funds sufficient to pay the applicable Redemption Price and
will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of such Trust Securities. See "--Book-Entry Issuance". If
the Trust Securities are no longer in book-entry form, the Property Trustee,
subject to the immediately preceding paragraph, will irrevocably deposit with
the paying agent for the Trust Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the
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Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Trust Securities. Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date for any Trust Securities called for
redemption shall be payable to the holders of such Trust Securities as of the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon
the date of such deposit, all rights of the holders of such Trust Securities
so called for redemption will cease, except the right of the holders of such
Trust Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Trust Securities will cease to be outstanding. In
the event that any date fixed for redemption of Trust Securities is not a
Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next succeeding calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. In the event that payment of the
Redemption Price in respect of Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by
Yorkshire Group pursuant to the Trust Securities Guarantee or the Debentures
Guarantee, Distributions on such Trust Securities will continue to accumulate
at the then applicable rate from the Redemption Date originally established by
the Trust for such Trust Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, Rule 14e-1 under
the Exchange Act and any other applicable US Federal securities law),
Yorkshire Group, Yorkshire Finance, the US Affiliates or their affiliates may
at any time and from time to time purchase outstanding Trust Securities by
tender, in the open market or by private agreement.
Payment of the Redemption Price on the Trust Securities and any distribution
of Junior Subordinated Debentures to holders of Trust Securities shall be made
to the holders of record as they appear on the register of the Property
Trustee as of the relevant record date, which, as long as the Trust Securities
remain in book-entry form, will be one Business Day prior to the relevant
Redemption Date or liquidation date, as applicable; provided, however, that in
the event that the Trust Securities are not in book-entry form, the relevant
record date for the Trust Securities shall be the date 15 calendar days prior
to the Redemption Date or liquidation date, as applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, the particular Trust Securities to be redeemed shall be selected on a
pro rata basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Trust Securities not previously called
for redemption, by such method as the Property Trustee shall deem fair and
appropriate, which shall provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
Liquidation Amount of Trust Securities of a denomination larger than $25. The
Property Trustee shall promptly notify the transfer agent and registrar in
writing of the Trust Securities selected for redemption and, in the case of
any Trust Securities selected for partial redemption, the aggregate
Liquidation Amount thereof to be redeemed.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Control Party has the right, at any time, to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust, if any, as
provided by applicable law, to cause a Like Amount of Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust. Under current US Federal income tax law, provided
the Trust is treated as a grantor trust at the time of such distribution, such
distribution would not be a taxable event to holders of the Trust Securities.
See "Description of the Junior Subordinated Debentures--Distribution of the
Junior Subordinated Debentures" and "Material Income Tax Considerations--US
Federal Income Tax Considerations--Receipt of Junior Subordinated Debentures
or Cash in Certain Circumstances".
After the date fixed for any distribution of Junior Subordinated Debentures
upon liquidation of the Trust (i) the Trust Securities will no longer be
deemed to be outstanding and the Trust Securities Guarantee will be
discharged, (ii) DTC or its nominee, as the record holder of the Trust
Securities, will receive Global Book-Entry
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Interests (as defined herein) representing a 100% beneficial interest in the
Junior Subordinated Debentures to be delivered upon such distribution, or, if
any Trust Securities are not held by DTC or its nominee, the certificates
representing the Trust Securities will be deemed to represent Book-Entry
Interests representing the Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on the Trust Securities until such certificates are presented to
Yorkshire Finance or its agent for transfer or reissuance and (iii) Yorkshire
Finance will use its reasonable efforts to list the Junior Subordinated
Debentures on the NYSE or such other exchanges or other organizations, if any,
on which the Trust Securities are then listed or traded.
There can be no assurance as to the market price for the Junior Subordinated
Debentures that may be distributed if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Junior Subordinated Debentures that an
investor may receive upon a dissolution and liquidation of the Trust may trade
at a discount to the price that such investor paid to purchase its Trust
Securities offered hereby.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall dissolve upon the first to
occur of: (i) , 2043, (ii) the delivery of written direction to the
Property Trustee by the Control Party at any time to dissolve the Trust (which
direction is optional and wholly within the discretion of Yorkshire Group) and
to distribute the Junior Subordinated Debentures to the holders of the Trust
Securities in liquidation of the Trust (see "--Distribution of Junior
Subordinated Debentures"), (iii) the occurrence of a Bankruptcy Event (as
defined in the Trust Agreement) in respect of Yorkshire Finance, dissolution
or liquidation of Yorkshire Finance, or the dissolution of the Trust pursuant
to a judicial decree or (iv) the payment at Stated Maturity or redemption of
all of the Junior Subordinated Debentures and the consequent redemption of all
of the Trust Securities.
If an early dissolution occurs as described in clause (ii) or (iii) above,
the Trust shall be liquidated, and the Property Trustee shall distribute to
each holder of Trust Securities a Like Amount of Junior Subordinated
Debentures, unless, in the case of an event described in clause (iii), such
distribution is determined by the Administrative Trustees not to be practical,
in which event such holders will be entitled to receive, out of the assets of
the Trust available for distribution to holders after satisfaction of
liabilities to creditors, an amount equal to the aggregate of the Liquidation
Amount plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Trust on the Trust
Securities shall be paid on a pro rata basis in proportion to the full
Liquidation Distribution for which the Trust Securities would be entitled.
MERGERS, CONVERSIONS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
The Trust may not merge with or into, convert into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise described in the Trust Agreement. The Trust
may, at the request of the Control Party, with the consent of the
Administrative Trustees and without the consent of the holders of the Trust
Securities, merge with or into, convert into, consolidate, amalgamate, be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of
any jurisdiction; provided that (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the Trust
Securities or (b) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) such successor entity transfers to
the Control Party, directly or indirectly, a control certificate (or similar
instrument) or common securities relating to such successor entity, (iii) the
Control Party expressly appoints a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder, directly or
indirectly, of the Junior Subordinated Debentures, (iv) the Trust Securities
or the Successor Securities are listed or traded, or any Successor Securities
will be listed or traded upon notification of issuance, on any national
securities exchange or other organization on which the Trust Securities are
then listed, if any, (v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not
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cause the Trust Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (vi)
such merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect, (vii) such successor entity has a purpose
substantially identical to that of the Trust, (viii) prior to such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Control Party has received an opinion from independent counsel
experienced in such matters to the effect that (a) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect, and (b) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust,
the Control Party, Yorkshire Finance nor such successor entity will be
required to register as an "investment company" under the Investment Company
Act and (ix) Yorkshire Group or any permitted successor or assignee guarantees
the obligations of such successor entity under the Successor Securities at
least to the extent provided by the Trust Securities Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% of the Liquidation Amount of the Trust Securities,
consolidate, amalgamate, merge with or into, convert into, or be replaced by
or convey, transfer or lease its properties and assets substantially as an
entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, convert into or replace it, if such
consolidation, amalgamation, merger, conversion or replacement would cause (i)
the Trust or the successor entity to be classified as other than a grantor
trust for US Federal income tax purposes, (ii) the Trust or the successor
entity to be classified as a company or other than as a trust whose
beneficiaries are fully entitled to the underlying income of the Trust (a
"Transparent Trust"), in either case, for purposes of UK tax law, (iii) the
Control Party, Yorkshire Finance, the Trust or the successor entity to be
required to register as an "investment company" under the Investment Company
Act or (iv) Yorkshire Finance to be classified as an association or a publicly
traded partnership taxable as a corporation for US Federal income tax
purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below, under "--Events of Default" and under "Description
of the Trust Securities Guarantee--Amendments and Assignment" and as otherwise
required by law and the Trust Agreement, the holders of the Trust Securities
will have no voting rights.
The Trust Agreement may be amended from time to time by the Securities
Trustees, the Control Party and AEP Resources, as depositor, without the
consent of the holders of the Trust Securities: (i) to cure any ambiguity, to
correct or supplement any provisions in the Trust Agreement that may be
inconsistent with any other provision therein, or to make any other provisions
with respect to matters or questions arising under the Trust Agreement that
shall not be inconsistent with the other provisions of the Trust Agreement;
(ii) to modify, eliminate or add to any provisions of the Trust Agreement to
such extent as shall be necessary to ensure that (a) the Trust will be
classified for US Federal income tax purposes as a grantor trust at all times
that any of the Trust Securities are outstanding, (b) the Trust will be a
Transparent Trust and will not be classified as a company, in either case, for
purposes of UK tax law, (c) neither the Trust, Yorkshire Finance nor Yorkshire
Group will be required to register as an "investment company" under the
Investment Company Act or (d) Yorkshire Finance will not be classified as an
association or a publicly traded partnership taxable as a corporation for US
Federal income tax purposes; or (iii) to effect the acceptance of appointment
by a successor Property Trustee, provided, however, that, except in the case
of clause (ii), such action shall not adversely affect in any material respect
the interests of any holder of Trust Securities, and, in the case of clause
(i), any such amendment of the Trust Agreement shall become effective when
notice thereof is given to the holders of Trust Securities. Except as provided
in the next succeeding paragraph, other amendments to the Trust Agreement may
be made (i) with the consent of the holders of not less than 66 2/3% in
aggregate Liquidation Amount of the Trust Securities then outstanding and (ii)
upon receipt by the Securities Trustees of an opinion of independent counsel
experienced in such matters to the effect that such amendment or the exercise
of any power granted by the Securities Trustees in accordance with such
amendment will not (A) affect the Trust's status as a grantor trust for US
Federal income tax purposes, (B) affect
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the Trust's or Yorkshire Finance's exemption from the Investment Company Act,
(C) cause the Trust to be treated as a company for purposes of UK tax law or
as a trust which is not a Transparent Trust, in either case, for purposes of
UK tax law or (D) affect Yorkshire Finance's status as a partnership for US
Federal income tax purposes.
Notwithstanding the foregoing, no amendment or modification may be made to
the Trust Agreement if such amendment or modification would cause (i) the
Trust to be classified as other than a grantor trust for US Federal income tax
purposes, (ii) the Trust to be classified as a company or as a trust which is
not a Transparent Trust, in either case, for purposes of UK tax law, (iii) the
Trust, Yorkshire Finance or Yorkshire Group to be required to register as an
"investment company" under the Investment Company Act or (iv) Yorkshire
Finance to be classified as an association or a publicly traded partnership
taxable as a corporation for US Federal income tax purposes.
Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date, (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date or (iii) change the consent required to amend
the Trust Agreement.
So long as any Junior Subordinated Debentures are held by or for the benefit
of the Property Trustee, the Securities Trustees shall not (i) direct the
time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee, or executing any trust or power conferred on the
Indenture Trustee with respect to such Junior Subordinated Debentures or the
Debentures Guarantee, (ii) waive any past default that is waivable under the
applicable provisions of the Indenture, (iii) exercise any right to rescind or
annul a declaration that any Interest Payment or other payment with respect to
the Junior Subordinated Debentures or the Debentures Guarantee shall be due
and payable or (iv) consent to any amendment, modification or termination of
the Indenture or the Junior Subordinated Debentures, where such consent shall
be required, or take any other action under the Indenture without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Trust Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debentures affected thereby, no such consent
shall be given by the Securities Trustees without the prior written consent of
each holder of the Trust Securities. The Securities Trustees shall not revoke
any action previously authorized or approved by a vote of the Trust Securities
except by subsequent vote of the holders of the Trust Securities. The Property
Trustee shall notify all holders of Trust Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining
the foregoing approvals of the holders of the Trust Securities, prior to
taking any of the foregoing actions, the Securities Trustees shall obtain an
opinion of independent counsel experienced in such matters to the effect that
(i) the Trust will not be classified as other than a grantor trust for US
Federal income tax purposes on account of such action, (ii) the Trust will be
a Transparent Trust and will not be classified as a company for purposes of UK
tax law on account of such action, (iii) neither the Trust, Yorkshire Finance
nor Yorkshire Group will be required to register as an "investment company"
under the Investment Company Act on account of such action and (iv) Yorkshire
Finance will not be classified as an association or a publicly traded
partnership taxable as a corporation for US Federal income tax purposes.
Any required approval of holders of Trust Securities may be given at a
meeting of holders of Trust Securities convened for such purpose or pursuant
to written consent. The Administrative Trustees will cause a notice of any
meeting at which holders of Trust Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Trust Securities in the manner set forth
in the Trust Agreement.
No vote or consent of the holders of Trust Securities will be required for
the Trust to redeem and cancel the Trust Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of Trust Securities are entitled to vote or
consent under any of the circumstances described above, any of the Trust
Securities that are owned by Yorkshire Group, or any of its affiliates, shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
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EVENTS OF DEFAULT
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (a "Trust Agreement Event of Default") with respect to the
Trust Securities issued thereunder (whatever the reason for such Trust
Agreement Event of Default, and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of an Event of Default under the Indenture (see
"Description of the Junior Subordinated Debentures--Indenture Events of
Default"); or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable (subject to an Extension Period) and the
continuation of such default for a period of 60 days; or
(iii) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, of any covenant or warranty
of the Securities Trustees in the Trust Agreement (other than a covenant or
warranty a default in the performance of which is covered by clause (ii) or
(iii) above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to such
Securities Trustees by the holders of at least 33% in aggregate Liquidation
Amount of the outstanding Trust Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after the occurrence of any Trust Agreement Event of Default,
the Property Trustee shall transmit notice of any default known to the
Property Trustee to the holders of Trust Securities, the Control Party and
Yorkshire Finance, unless such Trust Agreement Event of Default shall have
been cured or waived.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate
Liquidation Amount of Trust Securities have the right to direct the time,
method and place of conducting any proceeding for remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Trust Agreement, including the right to
direct the Property Trustee under the Trust Agreement to exercise the remedies
available to it as indirect holder of the Junior Subordinated Debentures and
as direct beneficiary of the Debentures Guarantee. Furthermore, if the
Property Trustee fails to enforce its rights under the Debentures Guarantee, a
holder of Trust Securities may, to the fullest extent permitted by applicable
law, institute a legal proceeding directly against Yorkshire Group to enforce
the Property Trustee's rights with respect to the Debentures Guarantee without
first instituting any legal proceeding against or requesting or directing that
action be taken by the Property Trustee or the Trust. Notwithstanding the
foregoing, a holder of Trust Securities may institute a legal proceeding
directly against Yorkshire Group without first instituting a legal proceeding
against the Property Trustee or any other person or entity for enforcement of
payment to such holder under the Debentures Guarantee in respect of Interest
Payments or any other payments due on the Junior Subordinated Debentures
having an aggregate principal amount equal to the aggregate Liquidation Amount
of the Trust Securities of such holder on or after the due dates specified in
the Junior Subordinated Debentures. See "Relationship Among the Trust
Securities, the Junior Subordinated Debentures, the Trust Securities Guarantee
and the Debentures Guarantee".
Unless an Event of Default under the Indenture shall have occurred and be
continuing, any Securities Trustee may be removed at any time by act of the
holder of the Control Certificate. If an Event of Default under the Indenture
has occurred and is continuing, the Property Trustee and the Delaware Trustee
may be removed at such time by act of the holders of a majority in aggregate
Liquidation Amount of the Trust Securities. In no event will the holders of
the Trust Securities have the right to vote, appoint, remove or replace the
Administrative Trustees, which rights are vested exclusively with the Control
Party. No resignation or removal of any Securities Trustee and no appointment
of a successor shall be effective until the acceptance of appointment by the
successor trustee in accordance with the requirements of the Trust Agreement.
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PAYMENT AND PAYING AGENCY
Payments in respect of Trust Securities held by DTC or its nominee shall be
made as described under "--Book-Entry Issuance". If any Trust Securities are
not held by DTC or its nominee, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
register of the Trust. The paying agent shall initially be The Bank of New
York in New York, New York.
BOOK-ENTRY ISSUANCE
DTC will act as initial securities depositary for the Trust Securities. The
Trust Securities will be issued as fully-registered global securities in book-
entry form registered in the name of Cede & Co. (DTC's partnership nominee).
One or more fully-registered global certificates in book-entry form will be
issued for the Trust Securities representing the aggregate total number of the
Trust Securities and will be deposited with DTC or its custodian.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the NYSE, the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with Direct Participants, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Trust Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Trust
Securities on DTC's records. The ownership interest of each actual purchaser
of each Trust Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Trust Securities. Transfers of ownership interests in the Trust Securities are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Trust Securities, except in the
event that use of the book-entry system for the Trust Securities is
discontinued.
To facilitate subsequent transfers, all of the Trust Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Trust Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Trust Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Trust
Securities are being redeemed, DTC will determine the amount of the interest
of each Direct Participant to be redeemed in accordance with its current
procedures.
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Neither DTC nor Cede & Co. will consent or vote with respect to Trust
Securities. Under its usual procedures, DTC mails an omnibus proxy (the
"Omnibus Proxy") to the Property Trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts such Trust Securities are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Securities will be made to DTC in
immediately available funds. DTC's current practice, upon receipt of any
payment in respect of securities such as the Trust Securities, is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices and will be the responsibility of such Participant and
not of DTC, the Trust, Yorkshire Group or Yorkshire Finance, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to DTC is the responsibility of the Property Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
If (i) DTC discontinues providing its services as securities depositary with
respect to the Trust Securities at any time by giving reasonable notice to the
Trust or Yorkshire Finance, (ii) the Trust or Yorkshire Finance decides to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) and a successor securities depositary is not obtained or
(iii) the Trust fails to pay any amounts due and payable in respect of the
Trust Securities or Yorkshire Group fails to pay any amounts payable in
respect of the Trust Securities Guarantee, as required by their respective
terms, definitive Trust Securities certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and Yorkshire Finance believe to
be accurate, but the Trust and Yorkshire Finance assume no responsibility for
the accuracy thereof. Neither the Trust nor Yorkshire Finance has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
REGISTRAR AND TRANSFER AGENT
The Bank of New York will act as registrar and transfer agent for the Trust
Securities.
Registration of transfers of Trust Securities will be effected without
charge by or on behalf of the Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of Trust Securities after the date such Trust Securities have
been called for redemption.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that (i) neither the Control
Party, Yorkshire Finance nor the Trust will be deemed to be an "investment
company" required to be registered under the Investment Company Act, (ii) the
Trust will not be classified other than as a grantor trust for US Federal
income tax purposes, (iii) the Trust will be classified as a Transparent Trust
and not as a company for purposes of UK tax law, (iv) Yorkshire Finance will
not be classified as an association or a publicly traded partnership taxable
as a corporation for US Federal income tax purposes and (v) the Junior
Subordinated Debentures will be treated as indebtedness for US Federal income
tax purposes. In this connection, the Control Party and the Administrative
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust or the Trust Agreement, that the Administrative
Trustees determine in their discretion consider to be necessary or desirable
for such purposes, as long as such action does not materially and adversely
affect the interests of the holders of the Trust Securities.
The Trust and the holders of Trust Securities (by acceptance of a beneficial
interest in a Trust Security) will agree to treat the Junior Subordinated
Debentures as indebtedness of Yorkshire Finance for all US Federal income tax
purposes.
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DESCRIPTION OF THE TRUST SECURITIES GUARANTEE
The Trust Securities Guarantee will be executed and delivered by Yorkshire
Group (concurrently with the issuance by the Trust of the Trust Securities)
for the benefit of the holders from time to time of the Trust Securities. The
Bank of New York will act as indenture trustee (the "Guarantee Trustee") under
the Trust Securities Guarantee for the purposes of compliance with the 1939
Act. The Trust Securities Guarantee will be qualified as an indenture under
the 1939 Act. This summary of material provisions of the Trust Securities
Guarantee is subject to, and qualified in its entirety by reference to, all of
the provisions of the Trust Securities Guarantee and the 1939 Act. The form of
the Trust Securities Guarantee has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The Guarantee
Trustee will hold the Trust Securities Guarantee for the benefit of the
holders of the Trust Securities.
GENERAL
Yorkshire Group will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below), to the extent not paid by, or on behalf of, the Trust to the holders
of the Trust Securities, as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert other than the
defense of payment. The following payments with respect to the Trust
Securities, to the extent not paid by or on behalf of the Trust, will be
subject to the Trust Securities Guarantee (without duplication): (i) any
accumulated and unpaid Distributions required to be paid on the Trust
Securities, to the extent that the Trust has sufficient funds available
therefor, (ii) the Redemption Price with respect to any Trust Securities
called for redemption to the extent that the Trust has sufficient funds
available therefor or (iii) upon a voluntary or involuntary dissolution,
winding-up or liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Trust Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions on the Trust Securities to the date of payment, to the extent
sufficient funds held are available therefor, and (b) the amount of assets of
the Trust remaining available for distribution to holders of the Trust
Securities (the "Guarantee Payments"). Yorkshire Group's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by Yorkshire Group to the holders of the Trust Securities or by causing the
Trust to pay such amounts to such holders.
The Trust Securities Guarantee will be an irrevocable guarantee on a
subordinated basis of the Trust's obligations under the Trust Securities, but
will apply only to the extent that the Trust has sufficient funds available to
make such payments.
If Yorkshire Finance does not make payments of principal of or interest on
the Junior Subordinated Debentures or Yorkshire Group does not make payments
pursuant to the Debentures Guarantee, it is expected that the Trust will not
pay Distributions on the Trust Securities and will not have sufficient funds
available therefor.
The Trust Securities Guarantee, the Debentures Guarantee, the Indenture, the
Junior Subordinated Debentures, the Trust Agreement and the Agreement as to
Expenses and Liabilities, when taken together, will effectively provide a full
and unconditional guarantee, on a subordinated basis, of the Trust's
obligations under the Trust Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents
constitutes such a guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Securities.
See "Relationship Among the Trust Securities, the Junior Subordinated
Debentures, the Trust Securities Guarantee and the Debentures Guarantee".
During an Extension Period, Yorkshire Group's obligations to make payments
under the Trust Securities Guarantee will be suspended. See "Description of
the Junior Subordinated Debentures--Option to Defer Payment of Interest".
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STATUS OF THE TRUST SECURITIES GUARANTEE
Yorkshire Group's obligations under the Trust Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of Yorkshire
Group and will rank (i) subordinate and junior in right of payment to all
Senior Debt of Yorkshire Group (which excludes those obligations or
liabilities made pari passu or subordinate by their terms), (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
Yorkshire Group and with any guarantee now or hereafter entered into by
Yorkshire Group in respect of any preferred or preference securities of any
affiliate of Yorkshire Group, and (iii) senior to all common stock of
Yorkshire Group. The terms of the Trust Securities will provide that each
holder of Trust Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Trust Securities Guarantee.
The Trust Securities Guarantee will constitute a guarantee of payment and
not of collection (that is, the guaranteed party may institute a legal
proceeding directly against Yorkshire Group to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity).
The Trust Securities Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by or on behalf of the
Trust or upon distribution to the holders of the Trust Securities of the
Junior Subordinated Debentures. The Trust Securities Guarantee does not place
a limitation on the amount of additional Senior Debt that may be incurred by
Yorkshire Group. Yorkshire Group expects from time to time to incur additional
indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Trust Securities (in which case no vote will be
required), the Trust Securities Guarantee may not be amended without the prior
approval of the holders of a majority of the aggregate Liquidation Amount of
the outstanding Trust Securities. The manner of obtaining any such approval is
set forth under "Description of the Trust Securities--Voting Rights; Amendment
of Trust Agreement". All guarantees and agreements contained in the Trust
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Yorkshire Group and shall inure to the benefit of
the holders of the Trust Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Trust Securities Guarantee will occur upon the
failure of Yorkshire Group to perform any of its payment obligations
thereunder. The holders of a majority in aggregate Liquidation Amount of the
Trust Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Trust Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Trust Securities
Guarantee.
Any holder of the Trust Securities may institute a legal proceeding directly
against Yorkshire Group to enforce its rights under the Trust Securities
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than prior to the occurrence and after the
curing of a default by the Yorkshire Group in performance of the Trust
Securities Guarantee, undertakes to perform only such duties as are
specifically set forth in the Trust Securities Guarantee and, after default
with respect to the Trust Securities Guarantee, must exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Notwithstanding this provision, the Guarantee Trustee
is under no obligation to exercise any of the powers vested in it by the Trust
Securities Guarantee at the request of any holder of the Trust Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
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The Bank of New York, the Guarantee Trustee, also serves as the Property
Trustee and the Indenture Trustee. Yorkshire Group and certain of its
affiliates maintain banking relationships with The Bank of New York.
TERMINATION OF THE TRUST SECURITIES GUARANTEE
The Trust Securities Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of the Trust Securities, upon
full payment of the amounts payable upon liquidation of the Trust or upon
distribution of the Junior Subordinated Debentures to the holders of the Trust
Securities. The Trust Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the Trust
Securities must restore payment of any sums paid under the Trust Securities or
the Trust Securities Guarantee.
GOVERNING LAW
The Trust Securities Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
THE AGREEMENT AS TO EXPENSES AND LIABILITIES
Pursuant to an expense agreement ( the "Agreement as to Expenses and
Liabilities"), the US Affiliates will irrevocably and unconditionally
guarantee to each person or entity to whom the Trust becomes indebted or
liable the full payment of any indebtedness, expenses or liabilities of the
Trust, other than obligations of the Trust to pay to the holders of the Trust
Securities or other similar interests in the Trust, the amounts due such
holders pursuant to the terms of the Trust Securities or such other similar
interests, as the case may be.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under the Indenture with
terms corresponding to the terms of the Trust Securities. This summary of
material terms and provisions of the Junior Subordinated Debentures and the
Indenture is subject to, and is qualified in its entirety by reference to, the
Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the 1939 Act.
GENERAL
Concurrently with the issuance of the Trust Securities, the Trust will
invest the proceeds thereof in the Junior Subordinated Debentures issued by
Yorkshire Finance. The Junior Subordinated Debentures will be unsecured and
will rank junior and be subordinate in right of payment to all Senior Debt of
Yorkshire Finance and will rank pari passu with any other series of Indenture
Securities (as defined below) issued by Yorkshire Finance. Additional series
of securities (together with the Junior Subordinated Debentures, the
"Indenture Securities") may be issued, without limitation as to amount, under
the Indenture and the Indenture does not limit the incurrence or issuance of
other secured or unsecured securities of Yorkshire Finance, whether under the
Indenture, any other indenture that Yorkshire Finance may enter into in the
future or otherwise. See "--Subordination". Application will be made to list
the Junior Subordinated Debentures on the Luxembourg Stock Exchange.
The entire principal amount of the Junior Subordinated Debentures will
mature and become due and payable, together with any accrued and unpaid
interest thereon, on , 2038.
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of % per
annum of the principal amount thereof, payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date"), commencing , 1998, initially, through a Paying Agent to
the Book-Entry Depositary (as defined under "--Form, Book-Entry Procedures and
Transfer"), as the holder of the Global Debentures (as defined under "--Form,
Book-Entry Procedures and Transfer"), and, otherwise, as described under "--
Form, Book-Entry Procedures and Transfer--Payments on the Junior Subordinated
Debentures". The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any
date on which an Interest Payment is payable on the Junior Subordinated
Debentures is not a Business Day, then the Interest Payment payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date such payment was
originally payable. Interest Payments that are in arrears for more than one
quarter will accrue additional interest (to the extent permitted by law) at
the rate of % per annum thereof, compounded quarterly. The term "interest" as
used herein shall include quarterly Interest Payments, interest on quarterly
Interest Payments in arrears, Additional Amounts and Additional Interest, as
applicable.
OPTION TO DEFER PAYMENT OF INTEREST
So long as no Event of Default under the Indenture has occurred and is
continuing, Yorkshire Finance has the right under the Indenture during the
term of the Junior Subordinated Debentures to defer Interest Payments, at any
time or from time to time, for up to 20 consecutive quarters; provided,
however, that Yorkshire Finance cannot defer Interest Payments beyond the
Stated Maturity of the Junior Subordinated Debentures. Until all deferred
Interest Payments together with interest thereon have been paid in full,
interest will continue to accrue, together with interest thereon at the stated
rate of interest on the Junior Subordinated Debentures, to the extent
permitted by law.
In the event that Yorkshire Finance exercises this right, until all deferred
Interest Payments together with interest thereon have been paid in full,
neither Yorkshire Finance nor Yorkshire Group may, directly or indirectly, (i)
declare or pay any cash dividends or distributions on, or redeem, purchase,
acquire, or make a
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liquidation payment with respect to, any of its capital stock, (ii) make any
payments on, or repay, repurchase or redeem, any of its debt securities
(including other Indenture Securities or other junior subordinated securities
issued by Yorkshire Finance) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior in interest to the Junior Subordinated Debentures or
the Debentures Guarantee, respectively, or (iv) make any payments on, or
repay, repurchase or redeem, any of its debt securities held by, make any
loans or advances to, or make any payments with respect to any guarantee of
the debt of, any affiliate, in each case other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of Yorkshire Finance or Yorkshire Group and
exchanges or conversions of common stock of one class for common stock of
another class, (b) payments by Yorkshire Group under the Trust Securities
Guarantee (or any other guarantee by Yorkshire Group with respect to any
securities of any issued by its direct or indirect subsidiaries, provided that
the proceeds from the issuance of such securities were used to purchase other
Indenture Securities or other junior subordinated securities issued by
Yorkshire Finance), (c) payments by Yorkshire Group under the Debentures
Guarantee, (d) any dividend or payment by Yorkshire Group which is applied,
directly or indirectly, to any Tax Payments, (e) payments by Yorkshire Group,
directly or indirectly, on the Intercompany Notes or any other promissory
notes held by Yorkshire Finance (or any other direct or indirect wholly-owned
subsidiary of Yorkshire Group) evidencing loans made with the proceeds from
the issuance by Yorkshire Finance (or any other direct or indirect wholly-
owned subsidiary of Yorkshire Group) of securities guaranteed by Yorkshire
Group or (f) the reinvestment of any proceeds received under clause (e) above
by Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary
of Yorkshire Group) in additional debt securities of Yorkshire Group or any of
its other direct or indirect wholly-owned subsidiaries.
Prior to the termination of any such Extension Period, Yorkshire Finance may
further extend the interest payment period; provided that, such Extension
Period, together with all such previous and further extensions within such
Extension Period, may not exceed 20 consecutive quarters or the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, Yorkshire Finance
may commence a new Extension Period, subject to the above requirements. As a
result, there could be multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated Debentures.
Yorkshire Finance must give the Property Trustee and the Indenture Trustee
notice of its intention to defer Interest Payments at least one Business Day
prior to the earlier of (i) the next succeeding Interest Payment Date and (ii)
the date Yorkshire Finance is required to give notice to the NYSE or other
applicable self-regulatory organization or to holders of the Junior
Subordinated Debentures of the record date or Interest Payment Date, but in
any event not less than one Business Day prior to such record date. The
Property Trustee shall give notice of Yorkshire Finance's intention to defer
Interest Payments to the holders of the Trust Securities within five Business
Days of the receipt of notice thereof.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of Yorkshire Finance (i) on or after , 2003, in whole at any time or
in part from time to time, (ii) at any time, in whole (but not in part) within
90 days following the occurrence of a Special Event or (iii) at any time, in
whole (but not in part), if Yorkshire Finance or Yorkshire Group has or will
become obligated to pay Additional Amounts, as provided under "--Optional Tax
Redemption", in each case, at the Debenture Redemption Price.
The proceeds of any such redemption will be used by the Trust to redeem the
Trust Securities in accordance with their terms. Yorkshire Finance may not
redeem less than all of the Junior Subordinated Debentures unless all accrued
and unpaid interest, if any, has been paid in full on all outstanding Junior
Subordinated Debentures for all interest periods terminating on or prior to
the Redemption Date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless
Yorkshire Finance defaults in payment of the Debenture Redemption Price, on
and after the Redemption Date interest shall cease to accrue on the Junior
Subordinated Debentures or portions thereof called for redemption.
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ADDITIONAL AMOUNTS
All payments in respect of the Junior Subordinated Debentures and all
payments made pursuant to the Debentures Guarantee shall be made free and
clear of, and without withholding or deduction for or on account of, any
present or future taxes, duties, assessments or governmental charges of
whatever nature imposed, levied, collected, withheld or assessed by or within
a Taxing Jurisdiction or by or within any political subdivision thereof or any
authority therein or thereof having power to tax ("Gross-Up Taxes"), unless
such withholding or deduction is required by law. In the event of any such
withholding or deduction, Yorkshire Finance or Yorkshire Group, as the case
may be, shall pay to the relevant holder of Junior Subordinated Debentures the
amount that would otherwise have been due to such holder in the absence of
such withholding or deduction, except that no Additional Amounts shall be
payable:
(a) to, or to a person on behalf of, a holder who is liable for such
Gross-Up Taxes in respect of the Junior Subordinated Debentures or the
Debentures Guarantee by reason of such holder having some connection with
the relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, such Taxing Jurisdiction)
other than the mere holding of a Junior Subordinated Debenture or the
receipt of any payment in respect thereof or in respect of the Debentures
Guarantee;
(b) to, or to a person on behalf of, a holder who presents a Junior
Subordinated Debenture (whenever presentation is required) for payment more
than 30 days after the Relevant Date (as defined below) except to the
extent that such holder would have been entitled to such Additional Amounts
on presenting such Junior Subordinated Debenture for payment on the last
day of such period of 30 days;
(c) to, or to a person on behalf of, a holder who presents a Junior
Subordinated Debenture (where presentation is required) in the UK or Cayman
Islands;
(d) to, or to a person on behalf of, a holder who would not be liable or
subject to the withholding or deduction by making a declaration of non-
residence or similar claim for exemption to the relevant tax authority; or
(e) to, or to a person on behalf of, a holder of a Definitive Registered
Debenture (as defined under "--Form, Book-Entry Procedures and Transfer")
issued pursuant to an Optional Definitive Security Request (as defined
under "--Form, Book-Entry Procedures and Transfer").
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Junior Subordinated Debentures (or any interest therein) been the
holder of the Junior Subordinated Debentures, he would not have been entitled
to payment of Additional Amounts by reason of any one or more of the clauses
(a) through (e) above. If Yorkshire Group or Yorkshire Finance, as applicable,
shall determine that Additional Amounts will not be payable because of the
immediately preceding sentence, Yorkshire Group or Yorkshire Finance, as
applicable, will inform such holder promptly after making such determination
setting forth the reason(s) therefor.
"Relevant Date" means whichever is the later of (i) the date on which such
payment first becomes due and (ii) if the full amount payable has not been
received in The City of New York by the Book-Entry Depositary (as defined
herein) or the Indenture Trustee on or prior to such due date, the date on
which, the full amount having been so received, notice to that effect shall
have been given to the holders in accordance with the Indenture.
Any reference in this Prospectus to any payments with respect to the Junior
Subordinated Debentures or pursuant to the Debentures Guarantee shall be
deemed to include any such Additional Amounts payable in connection therewith.
OPTIONAL TAX REDEMPTION
If (a) Yorkshire Group or Yorkshire Finance satisfies the Indenture Trustee
prior to the giving of a notice as provided below that it has or will become
obligated to pay Additional Amounts with respect to the Junior Subordinated
Debentures or the Debentures Guarantee as a result of either (x) any change
in, or amendment to, the laws or regulations of a Taxing Jurisdiction or any
political subdivision or any authority or agency thereof or therein having
power to tax or levy duties, or any change in the application or
interpretation of such laws or regulations, which change or amendment becomes
effective on or after the date of this Prospectus or (y) the issuance of
Definitive Registered Debentures pursuant to an Optional Definitive Security
Request or clause (i) or
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(ii) of the second sentence of "--Form, Book-Entry Procedures and Transfer--
Definitive Registered Debentures" and (b) such obligation cannot be avoided by
Yorkshire Group or Yorkshire Finance taking reasonable measures available to
it, Yorkshire Finance may, at its option, on giving not more than 60 nor less
than 30 days' notice to the holders, redeem, as a whole but not in part, the
Junior Subordinated Debentures at the Debenture Redemption Price provided that
no such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which Yorkshire Group or Yorkshire Finance would be obligated
to pay such Additional Amounts were a payment in respect of the Junior
Subordinated Debentures then due. Prior to the publication of any notice of
redemption pursuant to this paragraph, Yorkshire Finance shall deliver to the
Indenture Trustee a certificate signed by a director of Yorkshire Finance
stating that the obligation referred to in clause (a) above cannot be avoided
by Yorkshire Group or Yorkshire Finance taking reasonable measures available
to it, and the Indenture Trustee shall accept such certificate as sufficient
evidence of the condition precedent set forth in clause (b) above, in which
event it shall be conclusive and binding on the holders.
In the event that the Global Debentures are redeemed in whole or in part
pursuant to this provision or "--Redemption" above, the Book-Entry Depositary
will redeem, from the amount received by it in respect of the redemption of
the Global Debentures an equal amount of the related Book-Entry Interests
initially held by the Property Trustee. The redemption price payable in
connection with the redemption of such Book-Entry Interests will be equal to
the amount received by the Book-Entry Depositary in connection with the
redemption of the Global Debentures.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
At any time, the Control Party has the right at any time to dissolve the
Trust, and, in such event, cause a Like Amount of Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust after satisfaction of liabilities to creditors of the
Trust, if any, as provided by applicable law. See "Description of the Trust
Securities--Distribution of Junior Subordinated Debentures". If distributed to
holders of the Trust Securities in liquidation of the Trust, the Junior
Subordinated Debentures will initially be issued as described under "--Form,
Book-Entry Procedures and Transfer". If the Junior Subordinated Debentures are
distributed to the holders of the Trust Securities upon the dissolution and
liquidation of the Trust, Yorkshire Finance will use its best efforts to list
the Junior Subordinated Debentures on the NYSE or such other stock exchanges
or other organizations, if any, on which the Trust Securities are then listed.
There can be no assurance as to the market price of the Junior Subordinated
Debentures that may be distributed to the holders of the Trust Securities.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Indenture Securities that has occurred and
is continuing constitutes an "Event of Default" with respect to such series of
Indenture Securities:
(i) failure for 60 days to pay any interest or similar payment on such
series of Indenture Securities when due and payable (subject to Yorkshire
Finance's right to defer such payment); or
(ii) failure to pay principal of or premium, if any, on such series of
Indenture Securities when due and payable; or
(iii) failure to perform, or breach of, any covenant or warranty of
Yorkshire Finance or Yorkshire Group contained in the Indenture for 60 days
after written notice to Yorkshire Finance or Yorkshire Group from the
Indenture Trustee or to Yorkshire Finance or Yorkshire Group and the
Indenture Trustee by the holders of at least 33% in aggregate principal
amount of such series of outstanding Indenture Securities as provided in
the Indenture; or
(iv) certain events in bankruptcy, insolvency or reorganization of
Yorkshire Finance or Yorkshire Group; or
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(v) the Debentures Guarantee shall be held in a judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect; or
(vi) any other Event of Default specified with respect to such series of
Indenture Securities.
If an Event of Default due to the default in payment of principal of, or
interest or similar payment on, any series of Indenture Securities or due to
the default in the performance or breach of any other covenant or warranty of
Yorkshire Finance or Yorkshire Group applicable to the Indenture Securities of
such series but not applicable to all series occurs and is continuing, then
either the Indenture Trustee or the holders of not less than 33% in aggregate
principal amount of the outstanding Indenture Securities of such series may
declare the principal of all of the Indenture Securities of such series and
interest or other amounts accrued or accumulated thereon to be due and payable
immediately (subject to the subordination provisions of the Indenture) and, in
the case of the Junior Subordinated Debentures, should the Indenture Trustee
or such holders of such Junior Subordinated Debentures fail to make such
declaration, the holders of at least 33% in aggregate Liquidation Amount of
the Trust Securities shall have such right. If an Event of Default due to the
default in the performance of any covenants or agreements in the Indenture
applicable to all outstanding Indenture Securities or due to certain events of
bankruptcy, insolvency or reorganization of Yorkshire Finance has occurred and
is continuing, either the Indenture Trustee or the holders of not less than
33% in aggregate principal amount of all outstanding Indenture Securities (or
Trust Securities, as described above), considered as one class, and not the
holders of the Indenture Securities (or Trust Securities) of any one of such
series, may make such declaration of acceleration (subject to the
subordination provisions of the Indenture).
At any time after such a declaration of acceleration with respect to the
Indenture Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event or Events of
Default giving rise to such declaration of acceleration will, without further
act, be deemed to have been waived, and such declaration and its consequences
will, without further act, be deemed to have been rescinded and annulled, if
(a) Yorkshire Finance or Yorkshire Group has paid or deposited with the
Indenture Trustee a sum sufficient to pay
(1) all overdue interest and similar payments on all Indenture
Securities of such series;
(2) the principal of and premium, if any, on any Indenture Securities
of such series which have become due otherwise than by such declaration
of acceleration and interest or other amounts thereon at the rate or
rates prescribed therefor in such Indenture Securities;
(3) interest upon overdue interest or other amounts at the rate or
rates prescribed therefor in such Indenture Securities, to the extent
that payment of such interest or other amounts is lawful; and
(4) all amounts due to the Indenture Trustee under the Indenture; and
(b) any other Event or Events of Default with respect to Indenture
Securities of such series, other than the nonpayment of the principal of
the Indenture Securities of such series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture.
The holders of a majority in aggregate principal amount of the Indenture
Securities of all series then outstanding may waive compliance by Yorkshire
Finance or Yorkshire Group with certain restrictive provisions of the
Indenture. The holders of a majority in principal amount of the outstanding
Indenture Securities of any series may, on behalf of the holders of all the
Indenture Securities of such series, waive any past default under the
Indenture with respect to such series, except a default in the payment of
principal of or premium, if any, or interest or other amounts (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest, principal and such other amounts due otherwise than by declaration
of acceleration has been deposited with the Indenture Trustee) or a default in
respect to a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Indenture Security of such series affected. With respect to the Junior
Subordinated Debentures, the Trust may not waive compliance by Yorkshire
Finance or Yorkshire Group with certain restrictive provisions of the
Indenture or waive any past defaults
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thereunder without the consent of a majority in aggregate Liquidation Amount
of the outstanding Trust Securities.
In case an Event of Default shall occur and be continuing as to the Junior
Subordinated Debentures, the Property Trustee will have the right to declare
the principal of and the interest on the Junior Subordinated Debentures and
any other amounts payable under the Indenture to be immediately due and
payable and to enforce its other rights as a creditor with respect to the
Junior Subordinated Debentures. Furthermore, a holder of Trust Securities may
institute a proceeding directly against Yorkshire Group for enforcement of
payment to such holder under the Debentures Guarantee in respect of Interest
Payments or any other payments due on the Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Trust Securities of such holder on or after the due dates specified in the
Junior Subordinated Debentures. See "Description of the Trust Securities--
Voting Rights; Amendment of Trust Agreement" and "Description of the Trust
Securities Guarantee".
MODIFICATION OF INDENTURE
Without the consent of any holder of Indenture Securities, Yorkshire Group,
Yorkshire Finance and the Indenture Trustee may enter into one or more
supplemental indentures for any of the following purposes: (a) to evidence the
assumption by any permitted successor to Yorkshire Finance or Yorkshire Group
of the covenants of Yorkshire Finance or Yorkshire Group, respectively, in the
Indenture and in the Indenture Securities; (b) to add one or more covenants of
Yorkshire Finance or Yorkshire Group or other provisions for the benefit of
the holders of outstanding Indenture Securities or to surrender any right or
power conferred upon Yorkshire Finance or Yorkshire Group by the Indenture;
(c) to add any additional Events of Default under the Indenture with respect
to outstanding Indenture Securities; (d) to modify, eliminate or add
provisions to the Indenture to such extent as shall be necessary to ensure
that (1) Yorkshire Finance will not be classified as an association or a
publicly traded partnership taxable as a corporation for U.S. Federal income
tax purposes or (2) Yorkshire Finance or Yorkshire Group will not be required
to register as an "investment company" under the Investment Company Act; (e)
to change or eliminate any provision of the Indenture or to add any new
provision to the Indenture, provided that if such change, elimination or
addition will adversely affect the interests of the holders of any series of
Indenture Securities in any material respect, such change, elimination or
addition will become effective with respect to such series only (1) when the
consent of the holders of Indenture Securities of such series has been
obtained in accordance with the Indenture, or (2) when no Indenture Securities
of such series remain outstanding under the Indenture; (f) to provide
collateral security for the Indenture Securities; (g) to establish the form or
terms of Indenture Securities of any other series as permitted by the
Indenture; (h) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the solicitation of the vote or
consent of, the holders thereof, and for any and all other matters incidental
thereto; (i) to evidence and provide for the acceptance of appointment of a
separate or successor Indenture Trustee under the Indenture with respect to
the Indenture Securities of one or more series and to add to or change any of
the provisions of the Indenture as shall be necessary to provide for or to
facilitate the administration of the trusts under the Indenture by more than
one trustee; (j) to provide for the procedures required to permit the
utilization of a noncertificated system of registration for the Indenture
Securities of all or any series; (k) to change any place where (1) the
principal of and premium, if any, and interest or other payments, if any, on
all or any series of Indenture Securities shall be payable, (2) all or any
series of Indenture Securities may be surrendered for registration of transfer
or exchange and (3) notices and demands to or upon Yorkshire Finance or
Yorkshire Group in respect to Indenture Securities and the Indenture may be
served; or (l) to cure any ambiguity or inconsistency or to add or change any
other provisions with respect to matters and questions arising under the
Indenture, provided that, except in the case of clause (d) above, such changes
or additions shall not adversely affect the interests of the holders of
Indenture Securities of any series in any material respect.
The Indenture contains provisions permitting Yorkshire Finance and Yorkshire
Group, with the consent of the holders of a majority in principal amount of
each outstanding series of Indenture Securities affected, to modify the
Indenture in a manner affecting the rights of the holders of such series of
the Indenture Securities;
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provided, that no such modification may (i) change the maturity, if any, of
any series of Indenture Securities, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon (except such
extension as is contemplated thereby), (ii) reduce the percentage of principal
amount of Indenture Securities of any series, the holders of which are
required to consent to any such modification of the Indenture, (iii) reduce
any amount payable under, delay or defer the required time of payment under,
or impair the right to institute suit to enforce any payment under the
Debentures Guarantee, (iv) modify the provisions of the Indenture with respect
to the subordination of the Indenture Securities or the Debentures Guarantee
or (v) modify certain of the provisions of the Indenture relating to
supplemental indentures, waivers of certain covenants and waivers of past
defaults with respect to the Indenture Securities of any series, without the
consent of the holder of each outstanding Indenture Security affected thereby,
provided, that in the case of the Junior Subordinated Debentures, so long as
any of the Trust Securities remain outstanding, no such modification may be
made that adversely affects the holders of the Trust Securities, and no
termination of the Indenture may occur, and no waiver of any Event of Default
under the Indenture or compliance with any covenant under the Indenture may be
effective, without the prior consent of the holders of a majority of the
aggregate Liquidation Amount of such Trust Securities unless and until the
principal of the Junior Subordinated Debentures and all accrued and unpaid
interest or other amounts thereon have been paid in full and certain other
conditions are satisfied.
Notwithstanding the foregoing, no amendment or modification may be made to
the Indenture if such amendment or modification would cause (i) Yorkshire
Finance to be classified as an association or publicly traded partnership
taxable as a corporation for US Federal income tax purposes or (ii) Yorkshire
Finance or Yorkshire Group to be required to register as an "investment
company" under the Investment Company Act.
DEBENTURES GUARANTEE
Pursuant to the Indenture, Yorkshire Group will irrevocably and
unconditionally guarantee the Junior Subordinated Debentures as described
under "Description of the Debentures Guarantee".
CERTAIN COVENANTS
Each of Yorkshire Finance and Yorkshire Group will covenant in the Indenture
that it will not, directly or indirectly, (i) declare or pay any cash
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock, (ii) make any
payments on, or repay, repurchase or redeem, any of its debt securities
(including other Indenture Securities or other junior subordinated securities
issued by Yorkshire Finance) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior in interest to the Junior Subordinated Debentures or
the Debentures Guarantee, respectively, or (iv) make any payments on, or
repay, repurchase or redeem, any of its debt securities held by, make any
loans or advances to, or make any payments with respect to any guarantee of
the debt of, any affiliate, in each case other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, the common stock of Yorkshire Finance or Yorkshire Group
and exchanges or conversions of common stock of one class for common stock of
another class, (b) payments by Yorkshire Group under the Trust Securities
Guarantee (or any other guarantee by Yorkshire Group with respect to any
securities of any of its direct or indirect subsidiaries, provided that the
proceeds from the issuance of such securities were used to purchase other
Indenture Securities or other junior subordinated securities issued by
Yorkshire Finance), (c) payments by Yorkshire Group under the Debentures
Guarantee, (d) any dividend or payment by Yorkshire Group which is applied,
directly or indirectly, to any Tax Payments, (e) payments by Yorkshire Group,
directly or indirectly, on the Intercompany Notes or any other promissory
notes held by Yorkshire Finance (or any other direct or indirect wholly-owned
subsidiary of Yorkshire Group) evidencing loans made with the proceeds from
the issuance by Yorkshire Finance (or any other direct or indirect wholly-
owned subsidiary of Yorkshire Group) of securities guaranteed by Yorkshire
Group or (f) the reinvestment of any proceeds received under clause (e) above
by Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary
of Yorkshire Group) in additional debt securities of Yorkshire Group or any of
its other direct or indirect wholly-owned subsidiaries, if at such time (i)
there shall have occurred and be continuing a payment default (whether before
or after expiration
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of any period of grace) or an Event of Default with respect to any series of
Indenture Securities, (ii) Yorkshire Group shall be in default with respect to
its payment of any obligations under the Trust Securities Guarantee or the
Debentures Guarantee or any other such guarantee as described above or (iii)
Yorkshire Finance shall have given notice of its intention to defer payment of
interest or other amounts as provided in the Indenture with respect to any
series of Indenture Securities, shall not have rescinded such notice and such
deferral shall be continuing until all deferred interest or similar payments
together with interest thereon have been paid in full.
Yorkshire Finance and Yorkshire Group also will covenant that so long as any
Trust Securities remain outstanding, if the Trust shall be required to pay,
with respect to its income derived from payments of principal of or interest
on the Junior Subordinated Debentures or pursuant to the Debentures Guarantee,
any amounts for or on account of any taxes, duties, assessments or
governmental charges of whatever nature imposed by a Taxing Jurisdiction or
any other taxing authority, then, in any such case, Yorkshire Finance or
Yorkshire Group will pay as interest on the Junior Subordinated Debentures
such amounts as may be necessary in order that the net amounts received and
retained by the Trust after the payment of such taxes, duties, assessments or
governmental charges shall result in the Trust having such funds as it would
have had in the absence of the payment of such taxes, duties, assessments or
governmental charges ("Additional Interest"). Furthermore, Yorkshire Finance
and Yorkshire Group will covenant, so long as the Trust Securities remain
outstanding, to keep effective and comply with the terms and conditions of the
Demand Share Issue and Purchase Agreement, dated February 24, 1998, between
Yorkshire Finance and Yorkshire Group.
Yorkshire Group will also covenant to (i) ensure that an affiliate of
Yorkshire Group will retain the Control Certificate, provided that certain
successors which are permitted pursuant to the Trust Agreement may succeed to
the ownership of the Control Certificate and (ii) use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause (a)
the Trust not to be classified as anything other than a grantor trust for US
Federal income tax purposes, (b) the Trust to remain a Transparent Trust and
not to be treated as a company for purposes of UK tax law, (c) each of
Yorkshire Group, Yorkshire Finance and the Trust not to be required to
register as an "investment company" under the Investment Company Act, (d)
Yorkshire Finance to not be classified as an association or a publicly traded
partnership taxable as a corporation for US Federal income tax purposes and
(e) Yorkshire Finance not, at any time, to be engaged in a US trade or
business for US Federal income tax purposes. Furthermore, Yorkshire Group and
Yorkshire Finance will covenant to treat the Junior Subordinated Debentures as
indebtedness of Yorkshire Finance for all US Federal income tax purposes.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that Yorkshire Group shall not consolidate with or
merge into any other corporation or convey, transfer or lease its properties
and assets substantially as an entirety to any person, unless (i) in case
Yorkshire Group consolidates with or merges into another corporation or
conveys or transfers its properties and assets substantially as an entirety to
any person, the successor corporation expressly assumes the obligations of
Yorkshire Group under the Debentures Guarantee; (ii) immediately after giving
effect thereto, no Event of Default under the Indenture, and no event which,
after notice or lapse of time or both, would become an Event of Default under
the Indenture, shall have occurred and be continuing; and (iii) certain other
conditions as prescribed in the Indenture are met.
Yorkshire Finance may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. Yorkshire Finance may, without the consent of the holders of
the Junior Subordinated Debentures, consolidate, amalgamate, merge with or
into, or be replaced by a limited partnership, limited liability company or
trust organized under the laws of any state of the US; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of
Yorkshire Finance under the Junior Subordinated Debentures or (b) substitutes
for the Junior Subordinated Debentures other securities having substantially
the same terms as the Junior Subordinated Debentures (the "Successor
Debentures"), so long as the Successor Debentures are not junior to any other
equity securities of the successor entity with respect to participation in the
profits and distributions, and in the assets, of the successor entity, (ii) if
the Junior Subordinated Debentures are then so
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listed, the Junior Subordinated Debentures continue to be listed, or any
Successor Debentures are or will be listed upon notification of issuance, on
any national securities exchange or with another organization on which the
Junior Subordinated Debentures are then listed or quoted, (iii) such merger,
consolidation, amalgamation or replacement does not cause the Trust Securities
(or, in the event that the Trust is liquidated, the Junior Subordinated
Debentures (including any Successor Debentures)) to be downgraded by any
nationally recognized statistical securities rating organization, (iv) such
merger, consolidation, amalgamation or replacement does not adversely affect
the powers, preferences and other special rights of the holders of the Trust
Securities or Junior Subordinated Debentures (including any Successor
Debentures) in any material respect (other than, in the case of Junior
Subordinated Debentures or Successor Debentures, with respect to any dilution
of the holders' interest in the new resulting entity), (v) such successor
entity has a purpose substantially identical to that of Yorkshire Finance,
(vi) Yorkshire Group guarantees the obligations of such successor entity under
the Successor Debentures to the same extent as provided by the Debentures
Guarantee and (vii) prior to such merger, consolidation, amalgamation or
replacement, Yorkshire Group and Yorkshire Finance have received an Opinion of
Counsel experienced in such matters to the effect that: (A) such successor
entity will be treated as a partnership and not as an association or publicly
traded partnership taxable as a corporation for US Federal income tax
purposes, (B) such merger, consolidation, amalgamation or replacement will not
adversely affect the limited liability of the holders of the Junior
Subordinated Debentures (or the Successor Debentures), (C) following such
merger, consolidation, amalgamation or replacement, neither Yorkshire Group,
Yorkshire Finance nor such successor entity will be required to register as an
"investment company" under the Investment Company Act and (D) such merger,
consolidation, amalgamation or replacement would not cause the Trust to be
classified as (x) other than as a grantor trust for US Federal income tax
purposes and (y) other than as a Transparent Trust for purposes of UK tax law.
In the event that any such successor entity is organized under the laws of a
country located outside of the Taxing Jurisdiction and withholding or
deduction is required by law for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed,
levied, collected, withheld or assessed by or within such country in which the
successor entity is organized or by or within any political subdivision
thereof or any authority therein or thereof having power to tax, the successor
entity shall pay to the relevant holder of the Global Debentures or to the
relevant holders of the Definitive Registered Debentures or to the relevant
holder or holders of the Successor Debentures, as the case may be, such
additional amounts, under the same circumstances and subject to the same
limitations as are specified for "Gross-Up Taxes", as is set forth under "--
Additional Amounts" above, but substituting for the applicable Taxing
Jurisdiction in each place the name of the country under the laws of which
such successor entity is organized. In addition, such successor entity shall
be entitled to effect an optional tax redemption of the Junior Subordinated
Debentures under the same circumstances and subject to the same limitations as
are set forth under "--Optional Tax Redemption" above, but substituting for
the applicable Taxing Jurisdiction in each place the name of the country under
the laws of which such successor entity is organized.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction, a change in control or other transaction involving Yorkshire
Finance or Yorkshire Group that may adversely affect holders of the Junior
Subordinated Debentures.
SATISFACTION AND DISCHARGE
The principal amount of Junior Subordinated Debentures will be deemed to
have been paid for purposes of the Indenture and the entire indebtedness of
Yorkshire Finance in respect thereof will be deemed to have been satisfied and
discharged, if there shall have been irrevocably deposited with the Indenture
Trustee or any Paying Agent, in trust: (a) money in an amount which will be
sufficient, or (b) Government Obligations (as defined herein), which do not
contain provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on which
when due, without any regard to reinvestment thereof, will provide moneys
which, together with the money, if any, deposited with or held by the
Indenture Trustee, will be sufficient, or (c) a combination of (a) and (b)
which will be sufficient, to pay when due the principal of and premium, if
any, or interest or other amounts, if any, due and to become due on the Junior
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Subordinated Debentures (including any Additional Amounts then known) that are
outstanding. For this purpose, Government Obligations include direct
obligations of, or obligations unconditionally guaranteed by, the US entitled
to the benefit of the full faith and credit thereof and certificates,
depository receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or principal payments
due in respect thereof.
SUBORDINATION
In the Indenture, Yorkshire Finance has covenanted and agreed that any
Indenture Securities issued thereunder will be subordinate and junior in right
of payment to all Senior Debt of Yorkshire Finance to the extent provided in
the Indenture. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of Yorkshire Finance, the holders of Senior Debt of
Yorkshire Finance will first be entitled to receive payment in full of
principal of, premium, if any, and interest, if any, on such Senior Debt of
Yorkshire Finance before the holders of Indenture Securities will be entitled
to receive or retain any payment in respect of the principal of, premium, if
any, or interest or other amounts, if any, on the Indenture Securities.
In the event of the declaration of acceleration of any Indenture Securities,
the holders of all Senior Debt of Yorkshire Finance outstanding at the time of
such declaration will be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon such declaration) before the
holders of Indenture Securities will be entitled to receive any payment upon
the principal of, premium, if any, or interest, if any, on the Indenture
Securities.
No payments on account of principal, premium, if any, or interest or other
amounts, if any, in respect of any Indenture Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt of Yorkshire Finance or an event of default remaining uncured with
respect to any Senior Debt resulting in the acceleration of the maturity
thereof.
The term "Senior Debt" means, with respect to any person, (i) any payment
due in respect of indebtedness of such person, whether outstanding at the date
of execution of the Indenture or thereafter incurred, created or assumed, (a)
in respect of money borrowed (including any financial derivative, hedging or
futures contract or similar instrument) and (b) evidenced by securities,
debentures, bonds, notes or other similar instruments issued by such person
that, by their terms, are senior or senior subordinated debt securities; (ii)
all capital lease obligations; (iii) all obligations issued or assumed as the
deferred purchase price of property, all conditional sale obligations and all
obligations of such person under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business and long-
term purchase obligations); (iv) all obligations for the reimbursement of any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction; (v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons the payment of which such person is
responsible or liable as obligor, guarantor or otherwise; and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such person (whether
or not such obligation is assumed by such person); provided, however, that
Senior Debt shall not include (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Indenture Securities and (2) any
unsecured indebtedness between or among such person and its affiliates. Such
Senior Debt shall continue to be Senior Debt and be entitled to the benefits
of the subordination provisions contained in the Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Debt.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by Yorkshire Finance or Yorkshire Group. Yorkshire
Finance and Yorkshire Group expect from time to time to incur additional
indebtedness constituting Senior Debt.
FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
General
The Junior Subordinated Debentures will be issued initially only as a Global
Debenture in bearer form (the "Global Debenture") and will be payable only in
US dollars. Title to such Global Debentures will pass by
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delivery. The Global Debentures will be deposited on issue with The Bank of
New York in New York, New York, as book-entry depositary (the "Book-Entry
Depositary"), which will hold the Global Debentures for the benefit of the
Trust pursuant to the terms of the deposit agreement (the "Deposit Agreement")
dated as of May , 1998 among Yorkshire Finance, the Book-Entry Depositary and
the holders and beneficial owners from time to time of interests in the Book-
Entry Interests. Pursuant to the Deposit Agreement, the Book-Entry Depositary
will issue one or more certificateless depository interests (the "Book-Entry
Interests"), which together will represent a 100% beneficial interest in the
Global Debentures. Such Book-Entry Interests will initially be issued to the
Property Trustee.
If Book-Entry Interests are distributed to holders of Trust Securities in
liquidation of such holders' interests in the Trust, the Global Debentures
held by the Book-Entry Depositary and representing all of the Junior
Subordinated Debentures will cease to be held for the benefit of the Trust and
will, for all purposes under the Indenture and the Deposit Agreement, be held
by the Book-Entry Depositary for the benefit of DTC and its Participants, and
all of the Book-Entry Interests in the Global Debentures will be transferred
by the Property Trustee to DTC, which will operate a book-entry system for
interests in the Book-Entry Interests in global form (the "Global Book-Entry
Interests"). DTC will initially credit Direct Participants holding Trust
Securities with interests in the Global Book-Entry Interests (pro rata to
their holding of Trust Securities) registered in the name of DTC or its
nominee. Unless and until the Global Debentures are exchanged in whole for
Definitive Registered Debentures, Global Book-Entry Interests held by DTC may
not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee
to a successor of DTC or a nominee of such successor. For a description of DTC
and its book-entry system, see "Description of the Trust Securities--Book
Entry Issuance". As of the date of this Prospectus, the description herein of
DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Trust Securities will
apply in all material respects to any Global Book-Entry Interests registered
in the name of and held by DTC or its nominee. Yorkshire Finance may appoint a
successor to DTC or any successor depositary in the event DTC or such
successor depositary is unable or unwilling to continue as depositary for the
Global Book-Entry Interests.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such Global Book Entry
Interests.
So long as the Book-Entry Depositary, or its nominee, is the holder of the
Global Debentures, the Book-Entry Depositary or such nominee, as the case may
be, will be considered the sole holder of the Global Debentures (and the
Junior Subordinated Debentures) for all purposes under the Indenture. Except
as set forth below with respect to the issuance of Definitive Registered
Perpetual Securities, if the Junior Subordinated Debentures (represented by
Global Book-Entry Interests) are held through the facilities of DTC, Direct
Participants or Indirect Participants will not be entitled to have Junior
Subordinated Debentures registered in their names, will not receive or be
entitled to receive physical delivery of Junior Subordinated Debentures in
definitive bearer or registered form and will not be considered the owners or
holders thereof under the Indenture or the Deposit Agreement. Accordingly, if
the Junior Subordinated Debentures (represented by Global Book-Entry
Interests) are held through the facilities of DTC, each person owning an
interest in the Global Book-Entry Interests must rely on the procedures of the
Book-Entry Depositary and DTC and, if such person is not a Direct Participant
in DTC, on the procedures of the Direct Participant through which such person
owns its interest, to exercise any rights and obligations of a holder under
the Indenture or the Deposit Agreement.
In addition to a Paying Agent in the Borough of Manhattan, The City of New
York, Yorkshire Finance will, so long as Junior Subordinated Debentures are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
so require, maintain a Paying Agent in Luxembourg.
Neither Yorkshire Finance, Yorkshire Group nor any agent of Yorkshire
Finance or Yorkshire Group will have any responsibility or liability for any
aspect relating to payments made or to be made by the Book-Entry Depositary to
the persons entitled thereto in respect of the Junior Subordinated Debentures
or the Book-Entry Interests. None of Yorkshire Finance, Yorkshire Group, the
Indenture Trustee, the Book-Entry Depositary or any
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agent of any of the foregoing will have any responsibility or liability for
any aspect relating to payments made or to be made by DTC on account of a
Direct Participant's or Indirect Participant's ownership of an interest in the
Global Book-Entry Interests or for maintaining, supervising or reviewing any
records relating to a Direct Participant's or Indirect Participant's interests
in the Global Book-Entry Interests.
Payments on the Junior Subordinated Debentures
Payments of any amounts in respect of the Global Debenture will be made
through a Paying Agent to the Book-Entry Depositary, as the holder thereof.
Such payments shall be considered paid on the date they are due if the Paying
Agent holds at 11:00 a.m. New York City time on that date money deposited by
or on behalf of Yorkshire Group or Yorkshire Finance in immediately available
funds, designated for and sufficient to pay the amount due in full. The Book-
Entry Depositary will pay an amount equal to each such payment to the Property
Trustee as the initial holder of the Book-Entry Interests, which will
distribute such payments to DTC. If the Global Book-Entry Interests
representing the Junior Subordinated Debentures are held through the
facilities of DTC, such payments will be made by the Book-Entry Depository to
DTC, as holder of the Global Book-Entry Interests, which will distribute such
payments to its Direct Participants.
If any Definitive Registered Debentures have been issued, the interest
payable on such Definitive Registered Debenture other than at maturity will be
paid to the holder in whose name such Definitive Registered Debenture is
registered at the close of business on the fifteenth day (whether or not a
Business Day) immediately preceding the relevant Interest Payment Date (each a
"Record Date"). The principal amount of a Definitive Registered Debenture will
be payable to the person in whose name such Definitive Registered Debenture is
registered at the close of business on the immediately preceding Record Date
upon surrendering such Definitive Registered Debenture at the Indenture
Trustee's office in New York City. Interest payable at maturity will be
payable to the person to whom principal is payable.
If any Definitive Registered Debentures have been issued, Interest Payments
on such Definitive Registered Debentures to be paid other than at maturity
will be made by check to the person entitled thereto at such person's address
appearing on the Security Register. Interest Payments on the Definitive
Registered Debentures may also be made, in the case of a holder of at least US
$1,000,000 aggregate principal amount of Junior Subordinated Debentures by
wire transfer to a US Dollar account maintained by the payee with a bank in
the US; provided that such holder elects payment by wire transfer by giving
written notice to the Indenture Trustee or a Paying Agent to such effect
designating such account no later than 15 days immediately preceding the
relevant due date for payment (or such other date as the Indenture Trustee may
accept in its discretion).
Any monies paid by Yorkshire Finance or Yorkshire Group to the Indenture
Trustee or any Paying Agent, or held by Yorkshire Finance or Yorkshire Group
in trust, or the payments of the principal of or any interest or Additional
Amounts on any Junior Subordinated Debentures and remaining unclaimed at the
end of two years after such principal, interest or Additional Amounts become
due and payable will be paid to the US Affiliates, or released from the trust,
upon its written request, and upon such payment or release all liability of
Yorkshire Finance, Yorkshire Group, the Indenture Trustee and such Paying
Agent with respect thereto will cease.
All payments to the Book-Entry Depositary in respect of the Global
Debenture, and all payments to the holders of the Definitive Registered
Debentures, if issued, will be made without deduction or withholding for any
Gross-Up Taxes or other governmental charges, or if any such deduction or
withholding is required to be made under the provisions of any applicable law
or regulation, except as described under "--Additional Amounts", such
Additional Amounts will be paid as may be necessary in order that the net
amounts received by any holder of the Global Debenture or of any Definitive
Registered Debenture, after such deduction or withholding, will equal the
amounts that such holder would have otherwise received in respect of the
Global Debentures or of such Definitive Registered Debentures absent such
deduction or withholding. If Definitive Registered Debentures are issued
pursuant to an Optional Definitive Security Request, neither Yorkshire Finance
nor Yorkshire Group will be obligated to pay Additional Amounts in respect of
such Definitive Registered Debentures.
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If the due date for any interest in respect of the Junior Subordinated
Debentures is not a Business Day, the holder thereof will not be entitled to
payment of the amount due until the next succeeding Business Day and will not
be entitled to any further interest or other payment in respect of any such
delay.
Redemption
In the event the Global Debenture (or a portion thereof) is redeemed, the
Book-Entry Depositary will deliver all amounts received by it in respect to
the redemption of the Global Debenture to the persons entitled thereto and (in
the case of redemption in full) surrender the Global Debenture to the
Indenture Trustee for cancellation. The redemption price payable in connection
with the redemption of interests in a Book-Entry Interest will be equal to the
amount received by the Book-Entry Depositary in connection with the redemption
of the Global Debentures (or a portion thereof). For any redemption of the
Global Debenture in part, if the Junior Subordinated Debentures are held
through the facilities of DTC, selection of interests in the related Global
Book-Entry Interest to be redeemed will be made in accordance with the
procedures of DTC. Once redeemed in part, a new Global Debenture in the
principal amount equal to the unredeemed portion thereof will be issued and
delivered to the Book-Entry Depositary.
Action by Holders of Junior Subordinated Debentures
As soon as practicable after receipt by the Book-Entry Depositary of notice
of any solicitation of consents or request for a waiver or other action by the
holders of Junior Subordinated Debentures, the Book-Entry Depositary will mail
to the Property Trustee (or, if the Global Book-Entry Interests representing
the Junior Subordinated Debentures are then held through the facilities of
DTC, to DTC) a notice containing (a) such information as is contained in such
notice, (b) a statement that at the close of business on a specified record
date the Property Trustee (or DTC, as applicable) will be entitled, subject to
the provisions of the Indenture, to instruct the Book-Entry Depositary as to
the consent, waiver or other action, if any, pertaining to the Junior
Subordinated Debentures and (c) a statement as to the manner in which such
instructions may be given. Upon the written request of the Property Trustee
(or DTC, as applicable), the Book-Entry Depositary shall endeavor insofar as
practicable to take such action regarding the requested consent, waiver or
other action in respect of the Junior Subordinated Debentures in accordance
with any instructions set forth in such request. DTC is expected to follow
procedures described under "Description of the Trust Securities--Book-Entry
Issuance" with respect to soliciting instructions from Participants. The Book-
Entry Depositary will not exercise any discretion in the granting of consents
or waivers or the taking of any other action relating to the Deposit Agreement
or the Indenture.
Meetings of Holders of Junior Subordinated Debentures
A meeting of the holders of Junior Subordinated Debentures may be called at
any time from time to time pursuant to the Indenture to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by the Indenture to be made given or taken by holders of the
Junior Subordinated Debentures.
To be entitled to vote at any meeting of holders of Junior Subordinated
Debentures, a person shall be (a) a holder of Junior Subordinated Debentures
or (b) a person appointed by an instrument in writing as proxy for a holder or
holders of Junior Subordinated Debentures by such holder or holders. The only
persons who shall be entitled to attend any meeting of holders of Junior
Subordinated Debentures shall be the persons so entitled to vote at such
meeting and their counsel, any representatives of the Indenture Trustee and
its counsel, and any representatives of Yorkshire Finance and its counsel.
At any meeting of holders of Junior Subordinated Debentures, the persons
holding or representing Junior Subordinated Debentures in an aggregate
principal amount sufficient under the appropriate provision of the Indenture
to take action upon the business for the transaction of which such meeting was
called shall constitute a quorum. No action at a meeting of holders shall be
effective unless approved by persons holding or representing Junior
Subordinated Debentures in the aggregate principal amount required by the
provision of the Indenture pursuant to which such action is being taken. At
any meeting of holders, each holder or proxy shall be entitled to one vote for
each $1 principal amount of outstanding Junior Subordinated Debentures held or
represented.
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Until such time as written instruments shall have been delivered to the
Indenture Trustee evidencing the taking of any action at a meeting of holders
by the holders of the percentage in aggregate principal amount of the Junior
Subordinated Debentures specified in the Indenture in connection with such
action, any holder of a Junior Subordinated Debenture the serial number of
which is included in the Junior Subordinated Debentures the holders of which
have consented to such action may, by filing written notice with the Indenture
Trustee at its principal corporate trust office and upon proof of holding as
provided in the Indenture, revoke such consent so far as concerns such Junior
Subordinated Debentures. Except as aforesaid any such consent given by the
holder of any Junior Subordinated Debentures shall be conclusive and binding
upon such holder and upon all future holders and owners of such Junior
Subordinated Debentures and of any securities issued in exchange therefor, in
lieu thereof or upon transfer thereof, irrespective of whether or not any
notation in regard thereto is made upon such securities. Any action taken by
the holders of the percentage in aggregate principal amount of the holders
specified in the Indenture in connection with such action shall be
conclusively binding upon Yorkshire Finance, the Indenture Trustee and the
holders of all the Junior Subordinated Debentures.
Reports and Notices
So long as the Junior Subordinated Debentures are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange so require, notice to
holders of the Junior Subordinated Debentures will be published in a leading
newspaper having general circulation in Luxembourg (which is expected to be
the Luxemburger Wort) in addition to notifying the Book-Entry Depositary. If
any Junior Subordinated Debentures have been distributed to holders of Trust
Securities, the Book-Entry Depositary will immediately send to DTC a copy of
any notices, reports and other communications received by it relating to
Yorkshire Finance, Yorkshire Group or the Junior Subordinated Debentures. In
the case of Definitive Registered Debentures, all notices regarding the Junior
Subordinated Debentures will, in addition to publication as referred to above,
be mailed to holders by first-class mail at their respective addresses as they
appear on the registration books of the registrar.
Amendment and Termination of the Deposit Agreement
The Deposit Agreement may be amended by agreement between Yorkshire Finance
and the Book-Entry Depositary, and the consent of DTC shall not be required in
connection with any amendment to the Deposit Agreement (i) to cure any formal
defect, omission, inconsistency or ambiguity in the Deposit Agreement, (ii) to
add to the covenants and agreements of Yorkshire Finance or the Book-Entry
Depositary, (iii) to effect the assignment of the Book-Entry Depositary's
rights and duties to a qualified successor, (iv) to comply with the Securities
Act, the Exchange Act, the 1939 Act or the Investment Company Act, or any
other applicable securities laws, (v) to modify the Deposit Agreement in
connection with an amendment of the Indenture that does not require the
consent of the holders of Junior Subordinated Debentures or (vi) to modify,
alter, amend or supplement the Deposit Agreement in any other respect not
inconsistent with such agreement which, in the opinion of counsel acceptable
to Yorkshire Finance, is not materially adverse to the Property Trustee or DTC
(if any Junior Subordinated Debentures (represented by Global Book-Entry
Interests) are then held through the facilities of DTC) or the beneficial
owners of the interests in the Book-Entry Interests. Except as provided in the
preceding sentence, no amendment that materially adversely affects any holder
or beneficial owner of an interest in the Book-Entry Interests may be made to
the Deposit Agreement without the consent of such holder or beneficial owner.
If Definitive Registered Debentures are issued by Yorkshire Finance in
exchange for the entire Global Debenture, the Book-Entry Depositary, as holder
of the Global Debenture, will surrender the Global Debenture against receipt
of the Definitive Registered Debentures and distribute the Definitive
Registered Debentures to the holders of Book-Entry Interests (or such other
persons as the Book-Entry Depositary becomes aware are entitled thereto),
whereupon the Deposit Agreement will terminate. The Deposit Agreement may also
be terminated upon the resignation of the Book-Entry Depositary if no
successor has been appointed within 120 days.
Resignation of Book-Entry Depositary
The Book-Entry Depositary may at any time resign as Book-Entry Depositary
with respect to the Global Debenture. If a successor depository meeting the
requirements specified in the Deposit Agreement has agreed to
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enter into arrangements with the same effect as the Deposit Agreement, the
Book-Entry Depositary shall deliver the Global Debenture to that successor. If
no such successor has so agreed within 120 days, the terms of the Deposit
Agreement provide that the Property Trustee or DTC (if any Junior Subordinated
Debentures (represented by Global Book-Entry Interests) are held through the
facilities of DTC) may request Yorkshire Finance to issue Definitive
Registered Debentures with respect to the Global Debenture. On receipt of such
Definitive Registered Debentures, the Book-Entry Depositary will surrender the
Global Debenture and distribute such Definitive Registered Debentures to the
persons entitled thereto. The Deposit Agreement will then terminate.
Obligation of Book-Entry Depositary
The Book-Entry Depositary will assume no obligation or liability under the
Deposit Agreement other than to act in good faith without negligence or
willful misconduct in the performance of its duties thereunder.
Definitive Registered Debentures
Beneficial owners of the Book-Entry Interests shall be entitled to receive
definitive Junior Subordinated Debentures in registered form ("Definitive
Registered Debentures") only in the limited circumstances set forth in this
paragraph. The Book-Entry Depositary will promptly notify the Indenture
Trustee and request in writing that Yorkshire Finance issue and the Indenture
Trustee authenticate and deliver Definitive Registered Debentures in exchange
for the Global Debenture, as a whole but not in part, in such names and
authorized denominations as DTC shall specify, if: (i) DTC notifies Yorkshire
Finance and the Book-Entry Depositary that it is unwilling or unable to
continue to hold the Global Book-Entry Interests related to the Global
Debenture or DTC at any time ceases to be a "clearing agency" registered as
such under the Exchange Act and, in either case, a successor is not appointed
by Yorkshire Finance within 120 days; (ii) the Book-Entry Depositary notifies
Yorkshire Finance that it is unwilling or unable to continue as Book-Entry
Depositary with respect to the Global Debenture and no successor Book-Entry
Depositary is appointed within 120 days; or (iii) Yorkshire Finance, in its
sole discretion, executes and delivers to the Indenture Trustee an officers'
certificate providing that the Global Debentures of such series shall be so
exchangeable. In addition, if an Event of Default shall have occurred and be
continuing with respect to the Junior Subordinated Debentures, any beneficial
owner of interests in Book-Entry Interests in the Global Debenture shall, upon
written request, be entitled to receive Definitive Registered Debentures in
exchange for such interests (an "Optional Definitive Security Request"). In no
event will an owner of beneficial interests in the Book-Entry Interests be
entitled to receive definitive Junior Subordinated Debentures in bearer form
on account of such ownership.
Definitive Registered Debentures so issued will be issued only in minimum
denominations of $25 and integral multiples thereof and will be issued in
registered form only, without coupons, and shall have the same interest rate,
terms and the same aggregate principal amount as the Global Debenture for
which they are exchanged. Such Definitive Registered Debentures shall be
registered in the name or names of such persons as the Book-Entry Depositary
shall notify the Trustee based on the instructions of DTC. It is expected that
such instructions may be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in the Book-
Entry Interests.
PARTICIPANTS AND INDIRECT PARTICIPANTS SHOULD BE AWARE THAT, UNDER CURRENT
UK TAX LAW, UPON THE ISSUANCE TO SUCH PARTICIPANTS AND INDIRECT PARTICIPANTS
OF DEFINITIVE REGISTERED DEBENTURES, SUCH PARTICIPANTS AND INDIRECT
PARTICIPANTS, AS HOLDERS OF DEFINITIVE REGISTERED DEBENTURES, WILL BECOME
SUBJECT TO UK INCOME TAX (CURRENTLY AT THE RATE OF 20%) THAT MUST BE WITHHELD
ON ANY PAYMENTS OF INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES AS SET FORTH
UNDER "MATERIAL INCOME TAX CONSIDERATIONS--UK INCOME TAX CONSIDERATIONS". IF
SUCH DEFINITIVE REGISTERED DEBENTURES ARE ISSUED FOLLOWING AN EVENT OF DEFAULT
WITH RESPECT TO JUNIOR SUBORDINATED DEBENTURES PURSUANT TO THE REQUEST OF
BENEFICIAL OWNERS OF INTERESTS IN THE
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BOOK-ENTRY INTERESTS IN ALL OF THE GLOBAL DEBENTURES, NEITHER YORKSHIRE
FINANCE NOR YORKSHIRE GROUP WILL BE OBLIGATED TO PAY ANY ADDITIONAL AMOUNTS IN
RESPECT OF SUCH DEFINITIVE REGISTERED DEBENTURES.
However, holders of Definitive Registered Debentures may be entitled to
receive a refund of withheld amounts from the UK Inland Revenue in certain
circumstances. See "Material Income Tax Considerations--UK Tax
Considerations". In addition, if an owner of a beneficial interest in a Book-
Entry Interest receives Definitive Registered Debentures other than pursuant
to its request, such owner will be entitled to receive Additional Amounts with
respect to such Definitive Registered Debentures. See "--Additional Amounts".
Transfer and Exchange of Definitive Registered Debentures
In the event that Definitive Registered Debentures are issued, a holder may
transfer or exchange the Definitive Registered Debentures in accordance with
the Indenture. Yorkshire Finance and the transfer agent and registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents, and may require a holder to pay a sum sufficient to cover
any taxes, other governmental charges and fees required by law or permitted by
the Indenture. Yorkshire Finance is not required to issue, register the
transfer of or exchange Definitive Registered Debentures of any series during
a period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption as required by the Indenture and ending at
the close of business on the day of such mailing, or to register the transfer
of or exchange any Definitive Registered Debentures so selected for redemption
in whole or in part, except that Yorkshire Finance shall be required to
register the transfer of or exchange the unredeemed portion of any Definitive
Registered Debentures being redeemed in part. Upon the issuance of Definitive
Registered Debentures, holders will be able to transfer and exchange
Definitive Registered Debentures at the offices of the transfer agent and
registrar; provided that all transfers and exchanges must be effected in
accordance with the terms of the Indenture and, among other things, be
recorded in the Security Register maintained by the transfer agent and
registrar.
GOVERNING LAW; SUBMISSION TO JURISDICTION
The Indenture, the Junior Subordinated Debentures and the Debentures
Guarantee will be governed by and construed in accordance with the laws of the
State of New York. Any legal suit, action or proceeding against Yorkshire
Finance or Yorkshire Group or the properties, assets or revenues with respect
to their respective obligations, liabilities or any other matter relating to
Yorkshire Finance or Yorkshire Group arising out of or in connection with the
Indenture, a Junior Subordinated Debenture or the Debentures Guarantee may be
brought in the Supreme Court of New York, New York County or in the United
States District Court for the Southern District of New York and any appellate
court from either thereof. Yorkshire Finance and Yorkshire Group have
submitted to the non-exclusive jurisdiction of such courts for the purposes of
any such proceeding and have irrevocably waived, to the fullest extent that
they may effectively do so, any objection to the laying of venue of any such
proceeding in any such court and the defense of an inconvenient forum.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have, and shall be subject to, all the duties
and responsibilities specified with respect to an indenture trustee under the
1939 Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
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DESCRIPTION OF THE DEBENTURES GUARANTEE
Pursuant to the Indenture, Yorkshire Group will irrevocably and
unconditionally guarantee all payments on the Junior Subordinated Debentures
when and as the same shall become due and payable, whether at maturity, upon
redemption or otherwise. The Debentures Guarantee will be a direct and
unsecured obligation of Yorkshire Group and will rank subordinate and junior
to all Senior Debt that may be issued by Yorkshire Group. As of December 31,
1997, Senior Debt of Yorkshire Group aggregated approximately (Pounds)1,034
million ($1,699 million), a portion of which will be repaid with proceeds of
this offering. Yorkshire Group is a non-operating holding company, conducting
substantially all of its business through Yorkshire and its subsidiaries.
Except to the extent that Yorkshire Group receives funds from the US Parents
in the future, Yorkshire Group will rely on dividends, indirectly, from
Yorkshire to meet its obligations for payment of its outstanding obligations,
including any payments necessary pursuant to the Debentures Guarantee, and
corporate expenses. Furthermore, Yorkshire Group's obligations under the
Debentures Guarantee will effectively be subordinated to all existing and
future indebtedness and liabilities of the subsidiaries of Yorkshire Group,
including Yorkshire. As a result, the rights of holders of the Trust
Securities in respect of claims on the assets of each of the Yorkshire Group's
subsidiaries upon any liquidation or administration are structurally
subordinated to, and therefore will be subject to the prior claims of, the
creditors of Yorkshire and its subsidiaries (including trade creditors),
except to the extent that Yorkshire Group may itself be a creditor with
recognized claims against Yorkshire and its subsidiaries. At December 31,
1997, the direct and indirect subsidiaries of Yorkshire Group had total
indebtedness (excluding indebtedness owed to Yorkshire Group) of approximately
(Pounds)476 million ($782 million) and such subsidiaries may incur additional
indebtedness in the future.
During an Extension Period, Yorkshire Group's obligations to make payments
under the Debentures Guarantee will be suspended. See "Description of the
Junior Subordinated Debentures--Option to Defer Payment of Interest".
Under the terms of the Indenture and the Debentures Guarantee, if the
Property Trustee fails to enforce the Trust's rights with respect to the
Debentures Guarantee, a holder of Trust Securities may institute a legal
proceeding directly against Yorkshire Group to enforce the Trust's rights with
respect to the Debentures Guarantee to the fullest extent permitted by law,
without first instituting any legal proceeding against the Property Trustee or
the Trust. Notwithstanding the foregoing, a holder of Trust Securities may
institute a legal proceeding directly against Yorkshire Group for enforcement
of payment to such holder under the Debentures Guarantee in respect of
principal of or interest on the Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Securities of such holder on or after the due dates specified in the Junior
Subordinated Debentures, without first instituting any legal proceeding
against the Property Trustee or any other person.
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RELATIONSHIP AMONG THE TRUST SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES,
THE TRUST SECURITIES GUARANTEE AND
THE DEBENTURES GUARANTEE
As long as Interest Payments and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Trust Securities, (ii) the interest rate and Interest Payment Dates on the
Junior Subordinated Debentures will match the Distribution rate and
Distribution Dates and other payment dates for the Trust Securities; (iii) the
Agreement as to Expenses and Liabilities provides that the US Affiliates shall
pay for all and any costs, expenses and liabilities of the Trust (except the
obligations of the Trust to pay holders of the Trust Securities the amounts
due such holders pursuant to the terms of the Trust Securities); and (iv) the
Trust Agreement further provides that the Trust will not engage in any
activity that is not consistent with the limited purposes of the Trust.
Payments of Distributions and other amounts due on the Trust Securities (to
the extent the Trust has sufficient funds available for the payment of such
Distributions) are irrevocably guaranteed by Yorkshire Group as and to the
extent set forth under "Description of the Trust Securities Guarantee". If and
to the extent that Yorkshire Finance does not make payments on the Junior
Subordinated Debentures or Yorkshire Group does not make payments pursuant to
the Debentures Guarantee, the Trust will not pay Distributions or other
amounts due on the Trust Securities. The Trust Securities Guarantee does not
cover payment of Distributions when the Trust does not have sufficient funds
available to pay such Distributions.
If the Trust has sufficient funds available to make Distribution payments,
but does not make such payments and Yorkshire Group fails to make payments
under the Trust Securities Guarantee, the Trust Securities Guarantee provides
a mechanism whereby the holders of the Trust Securities may direct the
Guarantee Trustee to enforce its rights thereunder. In addition, any holder of
Trust Securities may institute a legal proceeding directly against Yorkshire
Group to enforce the Guarantee Trustee's rights under the Trust Securities
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity.
Furthermore, if Yorkshire Finance fails to make Interest Payments or other
payments which are due on the Junior Subordinated Debentures or Yorkshire
Group does not make payments which are due pursuant to the Debentures
Guarantee, the Trust Agreement provides a mechanism whereby the holders of the
Trust Securities may direct the Property Trustee to enforce its rights under
the Junior Subordinated Debentures and the Debentures Guarantee, including
proceeding directly against Yorkshire Finance to enforce the Junior
Subordinated Debentures and proceeding directly against Yorkshire Group to
enforce the Debentures Guarantee. If the Property Trustee fails to enforce its
rights under the Debentures Guarantee, to the fullest extent permitted by
applicable law, any holder of Trust Securities may institute a legal
proceeding directly against Yorkshire Group to enforce the Property Trustee's
rights under the Debentures Guarantee without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Trust Securities may institute a
legal proceeding directly against Yorkshire Group, without first instituting a
legal proceeding against the Property Trustee or any other person or entity,
for enforcement of payment to such holder under the Debentures Guarantee in
respect of Interest Payments or any other payments due on the Junior
Subordinated Debentures having an aggregate principal amount equal to the
aggregate Liquidation Amount of the Trust Securities of such holder on or
after the due dates specified in the Junior Subordinated Debentures.
The Debentures Guarantee, the Trust Securities Guarantee, the Indenture, the
Junior Subordinated Debentures, the Trust Agreement and the Agreement as to
Expenses and Liabilities, when taken together, effectively provide a full and
unconditional guarantee, on a subordinated basis, of the Trust's obligations
under the Trust Securities. No single document standing alone or operating in
conjunction with fewer than all of the
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other documents constitutes such guarantee. It is only the combined operation
of these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Securities.
Notwithstanding anything to the contrary in the Indenture and the Debentures
Guarantee, Yorkshire Group has the right to set-off any payment it is
otherwise required to make under the Debentures Guarantee with and to the
extent Yorkshire Finance has theretofore made, or is concurrently on the date
of such payment making, a payment under the Indenture.
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Trust not involving the distribution of the Junior Subordinated
Debentures, after satisfaction of creditors of the Trust, if any, as provided
by the Delaware Act, the holders of Trust Securities will be entitled to
receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of the Trust Securities--Liquidation Distribution upon
Dissolution". Upon any voluntary or involuntary liquidation or bankruptcy of
Yorkshire Finance, the Property Trustee, as beneficial owner of the Junior
Subordinated Debentures, would be a subordinated creditor of Yorkshire
Finance, subordinated in right of payment to all Senior Debt, but entitled to
receive all payments in full due on the Junior Subordinated Debentures, before
any stockholders of Yorkshire Finance receive payments or distributions.
Because Yorkshire Group is the guarantor under the Debentures Guarantee and
the Trust Securities Guarantee, the positions of a holder of Trust Securities
and a holder of Junior Subordinated Debentures relative to other creditors and
to stockholders of Yorkshire Group in the event of liquidation or bankruptcy
of Yorkshire Group would be substantially the same.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default with respect to the Junior Subordinated
Debentures. However, in the event of payment defaults under, or acceleration
of, Senior Debt, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Junior Subordinated Debentures until
such Senior Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on any Junior
Subordinated Debentures would constitute an Event of Default under the
Indenture.
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MATERIAL INCOME TAX CONSIDERATIONS
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THEIR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF STATE, LOCAL OR FOREIGN LAWS,
INCLUDING UK TAX LAWS, TO WHICH THEY MAY BE SUBJECT.
UK TAX CONSIDERATIONS
The comments below are based on UK law and UK Inland Revenue practice as of
the date of this Prospectus and represent the opinion of Allen & Overy, UK
counsel to Yorkshire Group, Yorkshire Finance and the Trust, so far as such
comments relate to matters of law or legal conclusions. They relate only to
holders of Junior Subordinated Debentures who are the absolute beneficial
owners thereof and related interest and may not apply to certain classes of
persons, including persons who do not hold such securities as capital assets
and special classes of investors such as dealers in securities. The UK
inheritance tax is not discussed. The UK tax position of a holder of the Trust
Securities is not addressed because the Trust is not a UK entity and is not
intended to be resident in the UK for UK tax purposes and the Trust Securities
will not be offered to UK-resident persons. Moreover, these comments do not
address the tax position of UK-resident holders of Junior Subordinated
Debentures (or of holders of such Junior Subordinated Debentures who carry on
a trade profession or vocation in the UK through a branch or agency to which
the holding of such Junior Subordinated Debentures is attributable). Any
prospective holders of Junior Subordinated Debentures or Trust Securities who
are in any doubt as to their tax position should consult their professional
advisers.
Payments on the Junior Subordinated Debentures
For UK tax purposes, provided that the Junior Subordinated Debentures (i)
remain represented by the Global Debenture, (ii) are in bearer form and (iii)
continue to be listed on the Luxembourg Stock Exchange or some other stock
exchange recognized under Section 841 UK Income and Corporation Taxes Act 1988
by the UK Inland Revenue, Interest Payments by Yorkshire Finance to the Trust
or any other holder of the Junior Subordinated Debentures may be made without
withholding or deduction for or on account of UK income tax for so long as the
paying agent of Yorkshire Finance, the Book-Entry Depositary, and the Trust is
not in the UK. In the event that Yorkshire Finance becomes liable to make any
withholding or deduction in respect of Interest Payments on the Junior
Subordinated Debentures, Additional Amounts will become payable to the extent
set out above under "Description of the Junior Subordinated Debentures--
Additional Amounts".
In other cases (subject to any direction to the contrary by the UK Inland
Revenue under an applicable double-taxation treaty), and in particular if
Definitive Registered Debentures are issued, Interest Payments will be made
after deduction of UK income tax (currently at the rate of 20%). A US-resident
holder of Junior Subordinated Debentures may be eligible to recover in full
any UK tax withheld from Interest Payments to which such holder is
beneficially entitled by making a claim under the US/UK- Double Tax Treaty on
the appropriate form. Alternatively, a claim may be made by such a US holder
in advance of an Interest Payment. If the claim is accepted by the UK Inland
Revenue, they will usually authorize subsequent payments to that US holder to
be made without withholding of UK income tax. Claims for repayment of UK tax
withheld must be made within six years of the end of the UK year of assessment
(generally April 5 in each year) to which the Interest Payments relate and
must be accompanied by the original statement provided by Yorkshire Finance
when the Interest Payment was made showing the amount of UK income tax
deducted. Because a claim is not considered made until the UK tax authorities
receive the appropriate form from the Internal Revenue Service (the "IRS"),
forms should be sent to the IRS, in the case of an advance claim, well before
the relevant Interest Payment Date or, in the case of a claim for the
repayment of the tax, well before the end of the appropriate limitation
period.
Where a person in the UK acts as a collecting agent, i.e. either:
(i) acts as custodian of the Junior Subordinated Debentures and receives
Interest Payments on the Junior Subordinated Debentures or directs that
Interest Payments on the Junior Subordinated Debentures be paid to another
person, or consents to such payment; or
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(ii) collects or secures payment of, arranges to secure or collect
payment of or receives Interest Payments on, the Junior Subordinated
Debentures for a holder (except by means of clearing a cheque or arranging
for the clearing of a cheque),
the collecting agent will be required to withhold on account of UK income tax
at the lower rate (currently 20%) unless the person who is the beneficial
owner of the Junior Subordinated Debentures and beneficially entitled to the
interest is not resident in the UK, and a declaration to that effect in the
required form has been given to the collecting agent, or the Inland Revenue
has issued a notice to the collecting agent, or one of the other exceptions to
the withholding obligation applies and, in each case, the conditions imposed
by regulations which need to be satisfed for the exemption from withholding to
apply have been complied with.
The above collecting agent rules apply to the Trust Securities as they apply
to the Junior Subordinated Debentures. The Trust does not intend to appoint a
UK collecting agent in respect of Interest Payments on the Junior Subordinated
Debentures. The above section may become relevant in relation to the Junior
Subordinated Debentures if they are distributed to the holders of the Trust
Securities in a liquidation of the Trust.
In the event that the Junior Subordinated Debentures are distributed to the
holders of the Trust Securities in a liquidation of the Trust, holders of
Junior Subordinated Debentures in other jurisdictions may be entitled to a
refund of all or part of any UK income tax deducted or withheld or to make a
claim for interest on the Junior Subordinated Debentures to be paid without,
or subject to a reduced rate of, deduction or withholding under the provisions
of an applicable double tax treaty.
A credit in respect of all or part of any UK income tax deducted or withheld
may, depending on individual circumstances, be available to a holder of Junior
Subordinated Debentures who is resident in the UK or who carries on a trade,
profession or vocation in the UK through a branch or agency to which the
Junior Subordinated Debentures are attributable.
Holders of Trust Securities should be aware that under current UK tax law
upon the issuance of Definitive Registered Debentures, the Interest Payments
on such Definitive Registered Debentures will (subject to any entitlement to
make a claim under the provisions of an applicable double tax treaty as
described above) become subject to UK withholding tax, currently at the rate
of 20%. Holders of Definitive Registered Debentures (including the Trust) will
be entitled to the payment of Additional Amounts in respect of the tax
withheld, except as set forth under "Description of the Junior Subordinated
Debentures--Additional Amounts" and under "Description of the Junior
Subordinated Debentures--Form, Book-Entry Procedures and Transfer--Definitive
Registered Debentures", and then subject to the right of Yorkshire Finance in
certain circumstances to redeem the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--Optional Tax Redemption".
Interest Payments on the Junior Subordinated Debentures constitute UK-source
income and, as such, may be subject to UK income tax by direct assessment even
where paid without deduction or withholding. However, UK tax chargeable on
such income from a UK source beneficially owned by persons not regarded as
resident in the UK for tax purposes will normally be limited to the tax, if
any, deducted at source on payment of such income. This limitation on the UK
tax charge will not apply if such income is beneficially owned by a person who
is not resident for tax purposes in the UK if that person carries on a trade,
profession or vocation in the UK through a UK branch or agency in connection
with which the income is received or to which the Junior Subordinated
Debentures are attributable. There are in any case exemptions for certain
types of income received by certain categories of UK agent (such as some
brokers and investment managers) on behalf of non-UK resident persons.
Where the Junior Subordinated Debentures are held by the Trust and any
holder of Trust Securities is a UK resident, special considerations apply.
Section 128(5) Finance Act 1995 provides "This section [i.e. the section
providing the limitation on the UK tax charge referred to in the second
sentence of the previous paragraph above] shall NOT apply to the income tax
chargeable for any year of assessment on the income of trustees NOT resident
in the United Kingdom if there is a relevant beneficiary of the trust who is
either: (a) an individual ordinarily resident in the United Kingdom; or (b) a
company resident in the United Kingdom". It is not entirely clear, as a
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matter of law, whether Section 128(5) applies where the trust in question is
one under the terms of which the beneficiaries are entitled to the underlying
income of the trust as and when it arises. However, as a matter of practice,
it is understood that the UK Inland Revenue does not currently seek to apply
Section 128(5) to such trusts. Consequently, if the holders of Trust
Securities are entitled to the underlying income of the Trust as and when it
arises, it is not anticipated that the UK Inland Revenue will seek to assess
the Trust directly even if any holder of Trust Securities is UK-resident.
No stamp duty or stamp duty reserve tax ("SDRT") will be payable on the
issue or transfer by delivery of the Junior Subordinated Debentures.
US FEDERAL INCOME TAX CONSIDERATIONS
The following opinion of Dewey Ballantine LLP, counsel to Yorkshire Group,
Yorkshire Finance and the Trust ("Tax Counsel"), describes the material US
Federal income tax consequences of the acquisition, ownership and disposition
of the Trust Securities by purchasers upon original issuance that are US
citizens or residents, corporations, partnerships or other entities created or
organized in or under the laws of the US or any state thereof, an estate, the
income of which is subject to US Federal income taxation regardless of its
source or a trust, the administration of which is subject to the primary
supervision of a US court and for which one or more US persons have the
authority to control all substantial decisions, in each case that are resident
in the US and not resident in the UK for purposes of the current double
taxation convention between the US and the UK ("US Holders") and that hold
their beneficial interest in the Trust Securities as capital assets. This
opinion so far as it relates to matters of law or legal conclusions is based
upon the provisions of the US Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated thereunder and administrative
and judicial interpretations thereof now in effect, all of which are subject
to change, possibly with retroactive effect. This opinion does not discuss all
aspects of US Federal income taxation (for example, alternative minimum tax
consequences) that may be relevant to particular investors in light of their
particular investment circumstances, nor does it discuss any aspects of state,
local or foreign tax laws or any estate or gift tax considerations. This
opinion does not deal with certain classes of US persons subject to special
treatment under the US Federal income tax laws (for example, dealers in
securities, banks, regulated investment companies, life insurance companies,
tax exempt organizations or persons whose functional currency is not the US
dollar).
The Trust Securities are not being marketed to persons that would not
constitute US Holders ("non-United States Persons") and, consequently, the
following discussion does not discuss the tax consequences that might be
relevant to non-United States Persons. NON-UNITED STATES PERSONS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC US FEDERAL INCOME TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF TRUST SECURITIES.
Tax Counsel has advised that there is no authority directly on point dealing
with securities such as the Trust Securities or transactions of the type
described herein and that the opinions expressed herein are not binding on the
Internal Revenue Service ("IRS") or the courts, either of which could take a
contrary position. No rulings have been or will be sought from the IRS.
Accordingly, there can be no assurance that the IRS will not challenge the
opinions expressed herein or that a court would not sustain such a challenge.
PROSPECTIVE PURCHASERS OF TRUST SECURITIES SHOULD CONSULT, AND SHOULD RELY
UPON, THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN US FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE
POSSIBLE REDEMPTION OF THE TRUST SECURITIES OR REDEMPTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE
"DESCRIPTION OF THE TRUST SECURITIES--REDEMPTIONS" AND "DESCRIPTION OF THE
JUNIOR SUBORDINATED DEBENTURES--OPTIONAL TAX REDEMPTION", RESPECTIVELY.
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Classification of the Trust
Tax Counsel is of the opinion that, under current law, and assuming full
compliance with the terms of the Indenture and the Trust Agreement, the Trust
will be classified as a grantor trust for US Federal income tax purposes and
not as an association or a publicly traded partnership taxable as a
corporation. Accordingly, for US Federal income tax purposes, each US Holder
will be considered the beneficial owner of a pro rata undivided interest in
the Junior Subordinated Debentures held by the Trust, and each US Holder will
be required to include in its gross income its allocable share of the entire
income attributable to the Junior Subordinated Debentures. Each US Holder
generally will determine its net income or loss with respect to the Trust in
accordance with its own method of accounting, although income arising from
OID, if any, must be taken into account under the accrual method of accounting
even if the US Holder otherwise would use the cash receipts and disbursements
method.
Classification of the Junior Subordinated Debentures
Yorkshire Group, Yorkshire Finance, the Trust and the holders of Trust
Securities (by acceptance of a beneficial interest in a Trust Security) will
agree to treat the Junior Subordinated Debentures as indebtedness of Yorkshire
Finance for all US Federal income tax purposes. Tax Counsel is of the opinion
that, under current law, and assuming full compliance with the terms of the
Indenture, the Junior Subordinated Debentures will be classified as
indebtedness of Yorkshire Finance for US Federal income tax purposes.
Original Issue Discount
Under Treasury regulations applicable to debt instruments issued on or after
August 13, 1996 (the "Regulations"), it is the opinion of Tax Counsel that,
for the reasons described in the immediately following paragraph, the Junior
Subordinated Debentures will not be treated as issued with OID.
The terms of the Junior Subordinated Debentures permit Yorkshire Finance to
defer the payment of interest on the Junior Subordinated Debentures at any
time and from time to time for up to 20 consecutive quarters with respect to
each Extension Period; provided, however, that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Under the
Regulations, a "remote" contingency that stated interest will not be timely
paid will be ignored in determining whether a debt instrument is issued with
OID. Yorkshire Finance believes that the likelihood of its exercising its
option to defer Interest Payments is "remote" since exercising that option
would prevent Yorkshire Finance and Yorkshire Group from declaring dividends
on any class of its equity securities. Accordingly, it is the opinion of Tax
Counsel, and Yorkshire Finance intends to take the position, that interest on
the Junior Subordinated Debentures generally will be taxable to a US Holder as
ordinary income at the time it is paid or accrued in accordance with such
holder's method of accounting. It should be noted that the Regulations have
not yet been addressed in any rulings or other interpretations by the IRS.
Accordingly, it is possible that the IRS could take a position contrary to the
interpretations described herein.
Under the Regulations, if Yorkshire Finance were to exercise its option to
defer Interest Payments, the Junior Subordinated Debentures would at that time
be treated as reissued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a US
Holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a US
Holder would be required to include in gross income OID even though Yorkshire
Finance would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer Interest Payments was
determined not to be "remote," the Junior Subordinated Debentures would be
treated as having been originally issued with OID. In such event, all of a US
Holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for on
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an economic accrual basis regardless of such holder's method of tax
accounting, and actual distributions of stated interest would not be reported
as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Trust Securities will constitute interest or OID,
corporate holders of the Trust Securities will not be entitled to a dividends-
received deduction with respect to any income recognized with respect to the
Trust Securities. In the case of a US Holder other than a corporation, such
income in general will also constitute "investment income" for purposes of
determining the deduction allowable for investment interest expense.
A US Holder, subject to certain limitations, may be eligible to claim as a
credit or deduction for purposes of computing its US Federal income tax
liability UK taxes withheld (if any). For that purpose, interest income and
Additional Amounts will generally be treated as foreign source passive income
or, if income were subject to a foreign withholding tax of five percent or
more, high withholding tax interest (or, in the case of certain US Holders,
financial services income). The rules relating to foreign tax credits are
extremely complex, and US Holders should consult with their own tax advisors
with regard to the availability of a foreign tax credit and the application of
the foreign tax credit rules to their particular situation.
Market Discount
A US Holder of a Trust Security at a discount from face (or the adjusted
issue price if the Trust Security bears OID) of such purchaser's pro rata
share of the Junior Subordinated Debentures acquires such Trust Security with
"market discount." However, market discount with respect to a Trust Security
will be considered to be zero if it is de minimis. Market discount will be de
minimis with respect to a Trust Security if it is less than the product of (i)
0.25% of the adjusted issue price of the purchaser's pro rata share of the
Junior Subordinated Debentures multiplied by (ii) the number of complete years
to maturity of such Junior Subordinated Debentures after the date of purchase.
The purchaser of a Trust Security with more than a de minimis amount of market
discount generally will be required to treat any gain on the sale, exchange,
redemption or other disposition of all or part of the Trust Securities (or
related Junior Subordinated Debentures) as ordinary income to the extent of
accrued (but not previously taxed) market discount. Market discount generally
will accrue ratably during the period from the date of purchase of such Trust
Security to the maturity date of the Junior Subordinated Debentures, unless
the US Holder irrevocably elects to accrue such market discount on the basis
of a constant interest rate.
A US Holder who has acquired a Trust Security at a market discount generally
will be required to defer any deductions of interest expense attributable to
any indebtedness incurred or continued to purchase or carry the Trust
Security, to the extent such interest expense exceeds the related interest
income. Any such deferred interest expense generally will be allowable as a
deduction not later than the year in which the related market discount income
is recognized. As an alternative to the inclusion of market discount in income
upon disposition of all or a portion of a Trust Security or the related Junior
Subordinated Debentures (including redemptions thereof), a US Holder may make
an election (which may not be revoked without the IRS's consent) to include
market discount income as it accrues on all market discount instruments
acquired by the US Holder during or after the taxable year for which the
election is made. In that case, the preceding deferral rule for interest
expense will not apply.
Disposition of Trust Securities
A US Holder will recognize capital gain or loss on a sale, exchange or other
disposition of Trust Securities, including a redemption for cash, equal to the
difference between the amount realized and the US Holder's adjusted tax basis
in the Trust Securities. Gain or loss recognized by a US Holder on the sale,
exchange or other disposition of Trust Securities held for more than one year
will generally be taxable as long-term capital gain or loss, except to the
extent of any accrued market discount. See "--Market Discount". The maximum
effective
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US Federal income tax rate applicable to gains resulting from the sale of
capital assets held by individuals for more than one year but not more than 18
months is 28%. The maximum effective tax rate on long-term capital gain will
decrease to 20% if the Trust Securities are held for more than 18 months.
A US Holder that sells, exchanges or otherwise disposes of Trust Securities
during a period of deferral of Interest Payments on the Junior Subordinated
Debentures, and prior to the record date for the date on which Distributions
of such amounts are made, will increase its adjusted tax basis in its Trust
Securities by the amount of OID included in income in respect of such deferral
and, to the extent that the adjusted tax basis exceeds the amount realized on
the sale or other disposition of such holder's Trust Securities, recognize a
capital loss. If the US Holder disposes of a Trust Security prior to the
occurrence of an Extension Period, any portion of the amount received from the
purchaser that is attributable to accrued interest will be treated as interest
income to the US Holder (that will only be includible as income to the extent
it previously has not been included in the US Holder's taxable income) and
will not be treated as part of the amount realized for purposes of determining
gain or loss on the disposition of the Trust Security. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for US Federal income tax purposes.
For foreign tax credit limitation purposes, gain realized on the sale,
exchange or other disposition of a Trust Security generally will be US source
income. At this time, the source of loss is uncertain because the US Treasury
Department has not yet issued final regulations with respect to the allocation
between foreign and US source income of losses from the sale, exchange or
other disposition of securities such as the Trust Securities.
A US Holder's tax basis in its Trust Securities generally will be equal to
(i) the amount paid by such holder for its Trust Securities, increased by (ii)
the amount includible in income by such holder with respect to its Trust
Securities, including any related accrued OID and market discount included in
taxable income by the US Holder, and reduced by (iii) the amount of cash or
other property distributed to such holder with respect to amounts included in
the holder's tax basis pursuant to clause (ii) hereof. A US Holder that
acquires Trust Securities at different prices may be required to maintain a
single aggregate adjusted tax basis in all of its Trust Securities and, upon
sale or other disposition of some of such Trust Securities, to allocate a pro
rata portion of such aggregate tax basis to the Trust Securities sold or
disposed of (rather than maintaining a separate tax basis in each Trust
Security for purposes of computing gain or loss upon a sale or other
disposition of that Trust Security).
Receipt of Junior Subordinated Debentures or Cash In Certain Circumstances
Yorkshire Finance has the right, at any time, to dissolve the Trust and to
cause Junior Subordinated Debentures to be distributed to the US Holders in
liquidation of the Trust. Such liquidating distribution will generally be tax-
free to each US Holder and will result in each US Holder receiving an
aggregate tax basis in its Junior Subordinated Debentures equal to such
holder's aggregate tax basis in its Trust Securities. A US Holder's holding
period in the Junior Subordinated Debentures will include the holding period
for which the US Holder held the related Trust Securities. If a liquidation of
the Trust occurs following a determination that the Trust is subject to US
Federal income tax with respect to the amounts received on the Junior
Subordinated Debentures, then such liquidation will be taxable to the US
Holders. In that event, gain or loss would be recognized in the amount
measured by the difference between the fair market value of the Junior
Subordinated Debentures received in the liquidation and the US Holder's
aggregate tax basis in its Trust Securities. In such a case, the holding
period for the Junior Subordinated Debentures received in the liquidation
would not include the period during which the Trust Securities were held.
The Junior Subordinated Debentures may be redeemed for cash and the proceeds
of such redemption distributed to US Holders in redemption of their Trust
Securities. Such redemption of the Trust Securities would, for US Federal
income tax purposes, constitute a taxable disposition of the redeemed Trust
Securities, and a US Holder would recognize gain or loss as if it had sold
such redeemed Trust Securities for an amount of cash equal to the proceeds
received upon the redemption. See "--Disposition of Trust Securities".
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The redemption of only part of a Trust Security will require an allocation
of the US Holder's tax basis in the related Junior Subordinated Debentures
between the portion of the Junior Subordinated Debentures redeemed and the
portion retained by the US Holder in order to determine gain or loss.
Information Reporting and Backup Withholding
Income on the Trust Securities will be reported to US Holders on IRS Form
1099, which should be mailed to US Holders by January 31 following each
calendar year. Payments made on and proceeds from the sale of Trust Securities
may be subject to a "backup withholding" tax of 31% unless the US Holder
complies with certain identification requirements. Any withheld amount
generally will be allowed as a credit against the US Holder's US Federal
income tax, provided the required information is timely filed with the IRS. In
addition, recently adopted US Treasury regulations, which generally are
effective for payments made after December 31, 1998, subject to certain
transition rules, modify in certain respects the backup withholding and
information reporting rules. In general, the new regulations do not
significantly alter the substantive requirements of these rules, but unify
current procedures and forms and clarify reliance standards. Prospective
purchasers are urged to consult their own tax advisors regarding the new
regulations.
CAYMAN ISLANDS TAXATION
It is the opinion of Maples and Calder, Cayman Islands counsel for Yorkshire
Finance, that, under existing Cayman Islands laws:
(i) payments in respect of the Junior Subordinated Debentures will not be
subject to taxation in the Cayman Islands and no withholding will be
required on such payments to any holder of the Junior Subordinated
Debentures and gains derived from the sale of the Junior Subordinated
Debentures, if distributed, will not be subject to Cayman Islands income or
corporation tax. The Cayman Islands currently has no income tax or taxation
in the nature of a withholding tax, corporate or capital tax and no estate
duty, inheritance tax or gift tax; and
(ii) the holder of a Junior Subordinated Debenture in bearer form (or the
legal personal representative of such holder) whose Junior Subordinated
Debenture in bearer form is brought into the Cayman Islands in original
form may be liable to pay stamp duty imposed under the laws of the Cayman
Islands in respect of such Junior Subordinated Debenture in bearer form
(currently up to CI $250 (U.S. $305) per Junior Subordinated Debenture in
bearer form (unless duty of CI$500 is paid in respect of the series of such
Junior Subordinated Debentures)). Definitive Registered Debentures and any
Global Debentures which are evidence of entitlement only and title to which
passes by entry in the relevant register, will not be subject to Cayman
Islands stamp duty. Any instrument transferring title to any Junior
Subordinated Debenture in registered form may be subject to Cayman Islands
stamp duty of CI$100 if brought to or executed in the Cayman Islands.
Yorkshire Finance has been incorporated under the laws of the Cayman Islands
as an exempted company and, as such, has obtained an undertaking dated
September 9, 1997 from the Governor-in-Council of the Cayman Islands that, for
a period of twenty years from the date of the undertaking, no law enacted in
the Cayman Island imposing any tax to be levied on profits, income, gains or
appreciations shall apply to Yorkshire Finance or its operations and, in
addition, that no tax to be levied on profits, income, gains, or appreciations
or which is in the nature of estate duty or inheritance tax shall be payable
by Yorkshire Finance on or in respect of the shares, debentures or other
obligations of Yorkshire Finance or by way of the withholding in whole or in
part of any relevant payments (as defined in Section 6(3) of the Tax
Concessions Law (1995 Revisions)).
113
<PAGE>
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to ERISA (an "ERISA Plan") should consider the fiduciary standards of
ERISA in the context of the ERISA Plan's particular circumstances before
authorizing an investment in the Trust Securities. Among other factors, the
fiduciary should consider whether such an investment is in accordance with the
documents governing the ERISA Plan and whether the investment is appropriate
for the ERISA Plan in view of its overall investment policy and
diversification of its portfolio.
Certain provisions of ERISA and the Code prohibit ERISA Plans, as well as
individual retirement accounts and Keogh plans subject to section 4975 of the
Code (collectively, "Plans"), from engaging in certain transactions involving
"plan assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the Plan. The U.S.
Department of Labor has issued a final regulation (the "Regulation") with
regard to whether the underlying assets of an entity in which employee benefit
plans acquire equity interests are deemed to be plan assets.
Under such Regulation, for purposes of ERISA and section 4975 of the Code,
the assets of the Trust would be deemed to be "plan assets" of a Plan whose
assets were used to purchase Trust Securities if the Trust Securities were
considered to be equity interests in the Trust and no exception to plan asset
status were applicable under the Regulation.
If the assets of the Trust were deemed to be plan assets of Plans that are
holders of the Trust Securities, a Plan's investment in the Trust Securities
might be deemed to constitute a delegation under ERISA of the duty to manage
plan assets by a fiduciary investing in Trust Securities. In addition,
Yorkshire Group might be considered a "party in interest" or "disqualified
person" with respect to Plans whose assets were used to purchase Trust
Securities. If this were the case, an investment in Trust Securities by a Plan
might constitute or, in the course of the operation of the Trust, give rise to
a prohibited transaction under ERISA or the Code. In particular, it is likely
that, under such circumstances, a prohibited "extension of credit" to
Yorkshire Group would be considered to occur under ERISA and the Code.
Because of the possibility that the assets of the Trust would be considered
plan assets of Plans whose assets were invested in the Trust Securities, and
the likelihood that under such circumstances a prohibited extension of credit
would occur, the Trust Securities may be not purchased or held by any Plan or
any person investing "plan assets" of any Plan, unless such purchaser or
holder is eligible for the exemptive relief available under PTCE 96-23 (for
certain transactions determined by in-house asset managers), PTCE 95-60 (for
certain transactions involving insurance company general accounts), PTCE 91-38
(for certain transactions involving bank collective investment funds), PTCE
90-1 (for certain transactions involving insurance company separate accounts),
or PTCE 84-14 (for certain transactions determined by independent qualified
asset managers). Any purchaser or holder of the Trust Securities or any
interest therein will be deemed to have represented by its purchase and
holding thereof that it either (a) is not a Plan and is not purchasing such
securities on behalf of or with "plan assets" of any Plan or (b) is eligible
for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-
14.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person
considering the purchase of Trust Securities with Plan assets consult with its
counsel regarding the consequences under ERISA and the Code of the acquisition
and ownership of Trust Securities and the availability of exemptive relief
under the class exemptions listed above. In John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 114 S. Ct. 517 (1993), the Supreme Court
ruled that assets held in an insurance company's general account may be deemed
to be "plan assets" for ERISA purposes under certain circumstances. Employee
benefit plans which are governmental plans (as defined in Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
generally are not subject to ERISA requirements.
114
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement (the
"Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as
representative (the "Representative"), has severally agreed to purchase from
the Trust, the number of Trust Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
TRUST
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................
----------
Total.................................................... 11,000,000
==========
</TABLE>
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters are committed to take and pay for all such Trust Securities
offered hereby, if any are taken. Default by one Underwriter would not relieve
any non-defaulting Underwriter from its several obligation, and in the event
of such a default, the non-defaulting Underwriters may be required by the
Trust to purchase the Trust Securities that they have severally agreed to
purchase and, in addition, to purchase the Trust Securities that the
defaulting Underwriter or Underwriters shall have failed to purchase up to an
amount equal to one-ninth of the Trust Securities that such non-defaulting
Underwriter or Underwriters have otherwise agreed to purchase.
The Trust has been advised by the Representative that the Underwriters
propose to offer the Trust Securities in part directly to the public at the
initial public offering price set forth on the cover page of this Prospectus,
and in part to certain securities dealers at such price less a concession of
not to exceed $ per Trust Security. The Underwriters may allow, and such
dealers may reallow, a concession of not to exceed $ per Trust Security to
certain brokers and dealers. After the Trust Securities are released for sale
to the public, the offering price and other selling terms may from time to
time be varied by the Underwriters.
In view of the fact that the proceeds from the sale of the Trust Securities
will be used to purchase the Junior Subordinated Debentures, the Underwriting
Agreement provides that Yorkshire Finance will pay as Underwriters'
Compensation for the Underwriters arranging the investment therein of such
proceeds an amount of $ per Trust Security (or $ in the aggregate);
provided that such compensation for sales of 10,000 or more Trust Securities
to a single purchaser will be $ per Trust Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will be
less than the aggregate amount specified in the preceding sentence.
Prior to this offering, there has been no public market for the Trust
Securities. Application has been made to list the Trust Securities on the
NYSE. In order to meet one of the requirements for listing the Trust
Securities on the NYSE, the Underwriters will undertake to sell lots to a
minimum of 400 beneficial holders. If accepted, trading of the Trust
Securities on the NYSE would commence within the 30-day period after the
initial delivery of the Trust Securities. The Underwriters have advised
Yorkshire Group that they intend to make a market in the Trust Securities
prior to commencement of trading on the NYSE, but are not obligated to do so
and may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Trust Securities.
In connection with the sale of the Trust Securities, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Trust Securities. Specifically, the Underwriters may bid
115
<PAGE>
for, and purchase, the Trust Securities in the open market to cover syndicate
short positions or to stabilize the price of the Trust Securities, and in
connection therewith impose a penalty bid on certain Underwriters and selling
group members. This means that if the Underwriters purchase Trust Securities in
the open market to reduce any short position or to stabilize the price of the
Trust Securities, they may reclaim the amount of the selling concession from
the Underwriter or Underwriters and selling group members who sold those Trust
Securities as part of this offering. Any of these activities may stabilize or
maintain the market price of the Trust Securities above independent market
levels. The Underwriters will not be required to engage in these activities and
may end any of these activities at any time.
Yorkshire Group, Yorkshire Finance and the Trust have agreed, during the
period of 30 days from the date of the Underwriting Agreement, not to sell,
offer to sell, grant any option for the sale of, or otherwise dispose of any
Trust Securities, any security convertible into or exchangeable into or
exercisable for Trust Securities or the Junior Subordinated Debentures or debt
securities substantially similar to the Junior Subordinated Debentures or
equity securities substantially similar to the Trust Securities (except for the
Junior Subordinated Debentures and the Trust Securities issued pursuant to the
Underwriting Agreement), without the prior written consent of the
Representative.
Each Underwriter has also agreed that (a) it has not offered or sold and,
prior to the date six months after the date of issuance of the Trust
Securities, will not offer or sell any Trust Securities to persons in the UK
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes
of their businesses or otherwise in circumstances which have not resulted and
will not result in an offer to the public in the UK within the meaning of the
Public Offers of Securities Regulations 1995, (b) it has complied, and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Trust
Securities in, from or otherwise involving the UK, and (c) it has only issued
or passed on, and will only issue or pass on, in the UK any document received
by it in connection with the issuance of the Trust Securities to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person
to whom such document may otherwise lawfully be issued or passed on.
Each of the Underwriters has severally represented and agreed that it has not
and will not make any invitation to the public in the Cayman Islands to
purchase any Junior Subordinated Debentures or any Trust Securities, whether
directly or indirectly.
Yorkshire Group and Yorkshire Finance have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to Yorkshire Group and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
116
<PAGE>
LEGAL OPINIONS
Certain matters of Delaware law will be passed upon by Richards, Layton &
Finger, P.A., special Delaware counsel to Yorkshire Group, Yorkshire Finance
and the Trust. Certain matters of English law will be passed upon by Allen &
Overy, London, England, special UK counsel to Yorkshire Group, Yorkshire
Finance and the Trust. Certain matters of New York and US Federal law
including US Federal income tax considerations, will be passed upon by Dewey
Ballantine LLP, New York, New York, special US counsel to Yorkshire Group,
Yorkshire Finance and the Trust. Certain matters of Cayman Islands law will be
passed upon by Maples and Calder, special Cayman Islands counsel for Yorkshire
Finance. Certain matters of New York and US Federal law will be passed upon by
Winthrop, Stimson, Putnam & Roberts, New York, New York, counsel for the
Underwriters.
Dewey Ballantine LLP and Winthrop, Stimson, Putnam & Roberts may rely,
without independent investigation, upon Allen & Overy with respect to matters
relating to English law and upon Maples and Calder with respect to matters
relating to Cayman Islands law.
EXPERTS
The consolidated balance sheets of Yorkshire Electricity Group plc as of
March 31, 1996 and 1997, consolidated statements of income, cash flows and
changes in shareholders' equity for the three years ended March 31, 1995, 1996
and 1997 and the consolidated balance sheet or Yorkshire Power Group Limited
as of April, 1 1997 included in this Prospectus have been audited by Deloitte
& Touche, independent chartered accountants, as stated in their reports
appearing herein.
NATURE OF FINANCIAL INFORMATION
The financial information in respect of the Successor Company and the
Predecessor Company set forth in "Summary--Summary Financial Information",
"Capitalization", "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
herein does not constitute statutory accounts under Section 240 of the
Companies Act 1985. Statutory accounts for the Fiscal Year 1997 to which such
financial information relates have been delivered to the Registrar of
Companies in England and Wales. The auditors of the Successor Company and the
Predecessor Company have made a report under Section 236 of the Companies Act
1985 on the statutory accounts for such Fiscal Year which was not qualified
within the meaning of Section 262 of the Companies Act 1985 and did not
contain a statement made under Section 237(2) or 237(3) of that Act.
117
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
Independent Auditors' Report............................................. F-2
Consolidated Statements of Income........................................ F-3
Consolidated Balance Sheets.............................................. F-4
Consolidated Statements of Changes in Shareholders' Equity............... F-6
Consolidated Statements of Cash Flows.................................... F-7
Notes to the Consolidated Financial Statements........................... F-8
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Income..................... F-20
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
Independent Auditors' Report............................................. F-21
Consolidated Balance Sheet............................................... F-22
Notes to the Consolidated Balance Sheet.................................. F-24
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
Independent Accountants' Review Report................................... F-33
Condensed Consolidated Statements of Income.............................. F-34
Condensed Consolidated Balance Sheets.................................... F-35
Condensed Consolidated Statement of Changes in Shareholders' Equity...... F-36
Condensed Consolidated Statements of Cash Flows.......................... F-37
Notes to the Condensed Consolidated Financial Statements................. F-38
</TABLE>
F-1
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To the Shareholder and Board of Directors
of Yorkshire Electricity Group plc
We have audited the accompanying consolidated balance sheets of Yorkshire
Electricity Group plc and its subsidiaries (the "Company") as of March 31,
1997 and 1996, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1997 (all expressed in pounds sterling). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Yorkshire Electricity Group
plc and its subsidiaries as of March 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the
period ended March 31, 1997 in conformity with generally accepted accounting
principles in the United States of America.
Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
(December 31, 1997 as to Note 14)
F-2
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
OPERATING REVENUES................................. 1,331 1,431 1,464
COST OF SALES...................................... 932 1,013 1,025
GROSS MARGIN....................................... 399 418 439
OPERATING EXPENSES
Maintenance........................................ 76 77 64
Depreciation....................................... 50 42 41
Provision for uneconomic gas and electricity
contracts......................................... 78 -- --
Selling, general and administrative................ 93 85 111
Systems development costs (Note 9)................. 50 -- --
Restructuring charges.............................. -- -- 8
----- ----- -----
Income from operations............................. 52 214 215
----- ----- -----
OTHER INCOME (EXPENSE)
National Grid transaction (Note 12):
Realized gain on sale of National Grid Group
plc............................................. 1 215 --
Realized gain on sale of PSB Holdings Limited.... 6 56 --
Special dividend................................. -- 118 --
Customer discounts awarded....................... -- (85) --
Administrative costs............................. -- (4) --
Dividend income.................................... 2 21 18
Equity in loss of associates....................... (4) (6) (19)
Gain on sale of associate.......................... 15 -- --
Loss on sale of subsidiary......................... -- (2) --
Compensation payment-Stockholm Stadhus AB.......... -- -- 17
----- ----- -----
Total other income, net............................ 20 313 16
----- ----- -----
Interest expense................................... (55) (46) (23)
Interest income.................................... 22 26 11
----- ----- -----
Net interest expense............................... (33) (20) (12)
----- ----- -----
INCOME BEFORE INCOME TAXES......................... 39 507 219
PROVISION FOR INCOME TAXES......................... 13 114 78
----- ----- -----
NET INCOME......................................... 26 393 141
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
ASSETS -------- --------
(Pounds) (Pounds)
<S> <C> <C>
FIXED ASSETS
Property, plant and equipment, net of accumulated
depreciation of (Pounds)500 and (Pounds)458................ 765 735
Construction work in progress............................... 31 34
----- -----
Total fixed assets........................................ 796 769
----- -----
OTHER ASSETS
Investments, long-term...................................... 109 103
Long-term receivables....................................... -- 15
Prepaid pension asset....................................... 6 4
----- -----
Total other assets........................................ 115 122
----- -----
CURRENT ASSETS
Cash and cash equivalents................................... 221 252
Investments................................................. 29 37
Customer receivables, less provision for uncollectible
accounts of (Pounds)6 and (Pounds)7........................ 90 89
Unbilled revenue............................................ 84 99
Other receivables........................................... 21 26
Other....................................................... 19 14
----- -----
Total current assets...................................... 464 517
----- -----
Total assets.............................................. 1,375 1,408
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital, 68 2/11 pence par value common shares,
220,000,000 shares, authorized, 159,131,326 in 1997 and
158,555,100 in 1996 issued and outstanding.................. 108 108
Additional paid-in capital................................... 92 89
Unrealized gain on available-for-sale investments............ 13 14
Retained earnings............................................ 146 188
----- -----
Total shareholders' equity................................. 359 399
----- -----
LONG-TERM DEBT............................................... 419 424
OTHER NON-CURRENT LIABILITIES
Deferred income taxes........................................ 136 158
Provision for uneconomic gas and electricity contracts....... 78 --
Other........................................................ 15 23
----- -----
Total other non-current liabilities........................ 229 181
----- -----
CURRENT LIABILITIES
Current portion of long-term debt............................ 5 5
Short-term debt.............................................. 82 85
Accounts payable............................................. 15 17
Electricity purchases payable................................ 64 75
Payments received in advance................................. 14 55
Accrued liabilities and deferred income...................... 69 52
Income taxes payable......................................... 51 45
Other current liabilities.................................... 68 70
----- -----
Total current liabilities.................................. 368 404
----- -----
Total liabilities.......................................... 1,016 1,009
----- -----
COMMITMENTS AND CONTINGENCIES (NOTE 4)
Total shareholders' equity and liabilities................. 1,375 1,408
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN MILLIONS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
SHARE CAPITAL ADDITIONAL AVAILABLE
--------------------- PAID-IN RETAINED FOR SALE
SHARES AMOUNT CAPITAL EARNINGS INVESTMENTS TOTAL
----------- -------- ---------- -------- ----------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1994.. 207,865,920 104 74 434 -- 612
Common shares issued.... 1,141,446 -- 3 -- -- 3
Reduction in shares from
reverse shares
split(1)............... (25,109,191) -- -- -- -- --
Net income.............. -- -- -- 141 -- 141
Dividends declared...... -- -- -- (239) -- (239)
----------- --- --- ---- ---- ----
Balance, March 31,
1995................... 183,898,175 104 77 336 -- 517
Common shares issued.... 5,537,644 4 12 -- -- 16
Reduction in shares from
reverse shares
split(2)............... (30,880,719) -- -- -- -- --
Revaluation of NGG
shares to fair market
value.................. -- -- -- -- 233 233
Realization of gain on
distribution of NGG
shares................. -- -- -- -- (215) (215)
Deferred tax on
revaluation of NGG
shares................. -- -- -- -- (4) (4)
Revaluation of PSB
shares to fair market
value.................. -- -- -- -- 56 56
Realization of gain on
sale of PSB............ -- -- -- -- (56) (56)
Net income.............. -- -- -- 393 -- 393
NGG special dividend.... -- -- -- (298) -- (298)
Dividends declared...... -- -- -- (243) -- (243)
----------- --- --- ---- ---- ----
Balance, March 31,
1996................... 158,555,100 108 89 188 14 399
Common shares issued.... 576,226 -- 3 -- -- 3
Gain on sale of NGG
shares................. -- -- -- -- (1) (1)
Revaluation of PSB
shares to fair market
value.................. -- -- -- -- 6 6
Realization of gain on
sale of PSB............ -- -- -- -- (6) (6)
Net income.............. -- -- -- 26 -- 26
Dividends declared...... -- -- -- (68) -- (68)
----------- --- --- ---- ---- ----
Balance, March 31,
1997................... 159,131,326 108 92 146 13 359
=========== === === ==== ==== ====
</TABLE>
(1) In January 1995 the share capital was consolidated on the basis of 22 new
56 9/11 pence ordinary shares for every 25 existing 50 pence ordinary
shares.
(2) In January 1996 the share capital was consolidated on the basis of 5 new 68
2/11 pence ordinary shares for every 6 existing 56 9/11 pence shares.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... 26 393 141
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation....................................... 50 42 41
Write off of capitalized system costs.............. 22 -- --
Deferred income taxes.............................. (24) 23 23
Gain on disposal of investments.................... (7) (271) --
Equity in loss of associates....................... 4 6 19
Gain on sale of associate.......................... (15) -- --
Changes in assets and liabilities:
Receivables........................................ 14 21 (44)
Provision for uneconomic gas and electricity
contracts......................................... 78 -- --
Electricity purchases.............................. (11) 15 6
Payments received in advance....................... (41) 25 (26)
Other.............................................. -- (32) 41
---- ---- ----
Net cash provided by operating activities.......... 96 222 201
---- ---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................... (103) (101) (89)
Proceeds from sale of fixed assets................. 29 33 3
Proceeds from sale of subsidiary................... -- 33 --
Purchases of associates............................ -- -- (11)
Proceeds from sale of associate.................... 26 -- --
Loans (advanced to) repaid by associate............ (3) 2 (24)
Purchases of long-term investments................. (18) (25) (30)
Proceeds from sale of PSB.......................... 10 53 --
Sales (purchases) of short-term investments........ 8 (3) 50
---- ---- ----
Net cash used in investing activities.............. (51) (8) (101)
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........... -- 163 196
Proceeds from issuance of common stock............. 3 11 3
Repayments of long-term debt....................... (5) (47) (17)
Net change in short-term debt...................... (3) 2 (10)
Dividends paid..................................... (71) (243) (239)
---- ---- ----
Net cash used in financing activities.............. (76) (114) (67)
---- ---- ----
(Decrease) increase in cash and cash equivalents... (31) 100 33
Beginning of period cash and cash equivalents...... 252 152 119
---- ---- ----
End of period cash and cash equivalents............ 221 252 152
==== ==== ====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................. 42 46 19
==== ==== ====
Cash paid for income taxes......................... 30 98 23
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Yorkshire Electricity Group plc ("YEG" or the "Company") is one of the
twelve regional electricity companies ("RECs") in England and Wales licensed
to supply, distribute, and to a limited extent, generate electricity. The RECs
were created as a result of the privatization of the UK electricity industry
in 1990 after the state owned low voltage distribution networks were allocated
to the then existing twelve regional boards. The Company's main business, the
distribution and supply of electricity to customers in its franchise area (the
"Franchise Area") in the North of England, is regulated under the terms of a
Public Electricity Supply License ("PES License") by the Office of Electricity
Regulation ("OFFER").
The Company operates primarily in its Franchise Area in Northern England.
The Franchise Area covers approximately 10,000 square kilometers, encompassing
parts of the counties of West Yorkshire, Humberside, South Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The Franchise Area
has a resident population of approximately 4.4 million.
The Company purchases power primarily from the wholesale trading market for
electricity in England and Wales (the "Pool"). The Pool monitors supply and
demand between generators and suppliers, sets prices for generation and
provides for centralized settlement of accounts due between generators and
suppliers.
BASIS OF PRESENTATION
The consolidated financial statements of the Company are presented in pounds
sterling ((Pounds)) and in conformity with accounting principles generally
accepted in the United States of America. The Company is not subject to rate
regulation but rather, is subject to price cap regulation and, therefore, the
provisions of Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation" do not apply.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries and have been prepared
from records maintained by the Company in the UK. Significant intercompany
items are eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
UNBILLED REVENUE
The Company records revenue net of value added tax ("VAT") and accrues
revenues for service provided but unbilled at the end of each reporting
period.
RECOVERY OF REGULATED INCOME
Charges for distribution of electricity and for supply to customers with a
maximum demand under 100 kW are subject to a price control formula set out in
the Company's PES License which allows a maximum charge per unit of
electricity. Differences in the charges, or in the purchase cost of
electricity, can result in the under or overrecovery of revenues in a
particular period.
F-8
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Where there is an overrecovery of supply or distribution business revenues
against the regulated maximum allowable amount, revenues are deferred in an
amount equivalent to the overrecorded amount. The deferred amount is deducted
from operating revenues and included in other current liabilities.
FINANCIAL INSTRUMENTS
The Company enters into contracts for differences ("CFDs") primarily to
hedge its supply business against the price risk of electricity purchases from
the Pool. Use of these CFDs is carried out within the framework of the
Company's purchasing strategy and hedging guidelines. CFDs are accounted for
as hedges and, consequently, gains and losses are deferred and recognized over
the same period as the item hedged. The Company recognizes gains (losses) on
CFDs when settlement is made, which is generally monthly. Gains (losses) on
CFDs are recognized as a decrease (increase) to cost of sales based upon the
difference between fixed prices in the CFD compared to variable prices paid to
the Pool for the period. Gains (losses) based upon the difference between
fixed prices in the CFD compared to variable prices paid to the Pool for
future electricity purchases are not recognized until the period of such
settlements.
The Company enters into interest rate swaps as a part of its overall risk
management strategy and does not hold or issue material amounts of derivative
financial instruments for trading purposes. The Company accounts for its
interest rate swaps in accordance with Statement of Financial Accounting
Standards No. 80, "Accounting for Futures Contracts" and various Emerging
Issues Task Force pronouncements. If the interest rate swaps were to be sold
or terminated, any gain or loss would be deferred and amortized over the
remaining life of the debt instrument being hedged by the interest rate swap.
If the debt instrument being hedged by the interest rate swap were to be
extinguished, any gain or loss attributable to the swap would be recognized in
the period of the transaction.
The Company considers the carrying amounts of financial instruments
classified as current assets and current liabilities to be a reasonable
estimate of their fair value because of the short maturity of these
instruments.
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at original cost, which includes
materials, labor and appropriate overhead costs, and the estimated cost of
borrowed funds used during construction. The cost of maintenance, repairs and
replacement of minor items of property is charged to maintenance expense.
The Company records book depreciation expense on a straight-line basis,
except for distribution network assets which are charged at 3% for 20 years
and 2% for the remaining 20 years. Assets are depreciated using the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Distribution network................................................ 40
Generation.......................................................... 20
Buildings........................................................... Up to 60
Fixtures and equipment.............................................. Up to 10
Vehicles and mobile plant........................................... Up to 10
</TABLE>
F-9
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVESTMENTS
The Company accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115,
"Investments in Certain Debt and Equity Securities" ("SFAS 115"). The
Company's investments are classified as available-for-sale under SFAS 115.
Securities whose fair market values are readily determinable are reported at
fair value. Securities whose fair market values are not readily determinable
are recorded at the lower of cost or net realizable value.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
standard requires that deferred income taxes be recorded for temporary
differences between the financial statement basis and the tax basis of assets
and liabilities and loss carryforwards and that deferred tax balances be based
on enacted tax laws at rates that are expected to be in effect when the
temporary differences reverse.
2. RETIREMENT BENEFITS
PENSION PLANS
The Company operates two schemes, one based on defined contributions and a
second based on defined benefits.
DEFINED CONTRIBUTION
The defined contribution plan was established on December 1, 1991. From
April 1, 1995 new employees are only eligible to join this plan. The assets of
the defined contribution plan are held and administered by an independent
trustee. The cost recognized for this plan was less than (Pounds)1 million for
each of the three fiscal years ended March 31, 1997.
DEFINED BENEFITS
The Company participates in the Electricity Supply Pension Scheme, which
provides pension and other related defined benefits, based on final
pensionable pay, to substantially all employees throughout the electricity
supply industry in the UK.
The Company uses the projected unit credit actuarial method for accounting
purposes. Amounts funded to the pension are primarily invested in equity and
fixed income securities.
Statement of Financial Accounting Standards No. 87 "Employers' Accounting
For Pensions" ("SFAS 87") was effective for fiscal years beginning after
December 15, 1988. The provisions of SFAS No. 87 were initially adopted by the
Company on April 1, 1992. The amount of the unrecognized net transition
obligation on April 1, 1992 was (Pounds)51 million.
F-10
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Accumulated benefit obligation:
Vested benefits.......................................... 590 570
Nonvested benefits....................................... 35 40
---- ----
625 610
---- ----
Fair value of plan assets.................................. 725 666
Projected benefit obligation............................... (664) (648)
---- ----
Assets in excess of projected benefit obligation........... 61 18
Unrecognized net transition obligation..................... 37 40
Unrecognized prior service cost............................ 10 10
Other unrecognized net gain................................ (102) (64)
---- ----
Prepaid pension asset...................................... 6 4
==== ====
</TABLE>
The weighted average rates assumed in the actuarial calculations as of the
following dates were:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
% % %
<S> <C> <C> <C>
Discount rate................................... 8.0 8.5 7.5
Annual salary rate increase..................... 6.0 6.5 5.5
Long-term rate of return on plan assets......... 9.0 9.0 9.0
The components of the plan's net periodic pension cost during the periods
are shown below (in millions):
<CAPTION>
MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Service cost (benefits earned during the
period)........................................ 10 9 11
Interest cost on projected benefit obligation... 52 49 45
Actual return on plan assets.................... (89) (113) 1
Net amortization and deferral................... 33 65 (52)
--- ---- ---
Net periodic pension cost....................... 6 10 5
=== ==== ===
</TABLE>
3. REGULATORY MATTERS
The distribution business of the Company is regulated under its PES License,
pursuant to which revenue of the distribution business is controlled by the
Distribution Price Control Formula (the "DPCF"). The DPCF determines the
maximum average price per unit of electricity (expressed in kilowatt hours)
that the Company can charge. The DPCF is usually set for a five-year period,
subject to more frequent adjustments as determined necessary by the Director
General of Electricity Supply (the "Regulator"). At each review, the Regulator
can adjust the value of certain elements in the DPCF. The Company's allowed
distribution revenues were reduced by a 14% below inflation reduction and a
13% below inflation reduction on April 1, 1995 and 1996, respectively,
following a review by the Regulator. On April 1, 1997 and April 1, 1998, the
Company's allowed distribution revenues were decreased by an additional 3%
below inflation reduction and there will be a further annual 3% below
inflation reduction on April 1, 1999.
F-11
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's supply business is also regulated by the Regulator, and prices
are established based upon the Supply Price Control Formula which is similar
to the DPCF; however, it currently allows full pass through for all properly
incurred costs.
The non-franchise supply market, which typically includes larger commercial
and industrial customers was opened to competition for all customers with
usage above 1MW upon privatization of the industry in 1990. The non-franchise
supply markets of 100 kW or more were opened to full competition in April
1994.
Currently, the Company, under its PES License, has the exclusive right to
supply residential and small commercial and industrial customers within its
Franchise Area. However, it is anticipated that the supply market will become
fully competitive over a several month period beginning September 1998.
4. COMMITMENTS AND CONTINGENCIES
ELECTRICITY AND GAS PURCHASE AGREEMENTS
The Company and its subsidiaries have entered into contracts for purchases
of electricity and gas for a period of up to 2009. A provision of (Pounds)78
million has been made for the net present value of expected future payments in
excess of anticipated recoverable amounts, reflecting management's current
expectations of market prices for electricity following the opening of the
competitive market for franchise supply customers and future gas prices. The
actual net costs are highly sensitive to movements in future prices. The
Company's provision includes amounts in respect of contracts with a non
wholly-owned subsidiary.
The Company has additional contracts with unaffiliated parties relating to
the purchase of gas which expire by October 2005, the terms of which are
immaterial with respect to quantity and price, both annually and in the
aggregate.
LEGAL PROCEEDINGS
The Company is a party to legal proceedings arising in the ordinary course
of business which are not material, either individually or in the aggregate,
nor is it currently aware of any threatened material legal proceedings.
OPERATING LEASES
The Company has commitments under operating leases with various terms and
expiration dates. At March 31, 1997 estimated minimum rental commitments for
noncancelable operating leases were (Pounds)2 million and (Pounds)1 million
for the fiscal years ending March 31, 1998 and 1999, respectively. Rental
expenses incurred for operating leases were (Pounds)4 million, (Pounds)5
million, and (Pounds)8 million during fiscal years 1997, 1996 and 1995,
respectively.
LABOR SUBJECT TO COLLECTIVE BARGAINING AGREEMENTS
The majority of the Company's employees are subject to one of three
collective bargaining agreements. Such agreements are ongoing in nature, and
the Company's employees' participation level is consistent with that of the
electric utility industry in the UK.
5. SEGMENT REPORTING
The Company is primarily engaged in two electric industry segments;
distribution, which involves the transmission of electricity across its
network to its customers, and supply, which involves bulk purchase of
electricity from the Pool for delivery to the distribution networks. Included
in "Other" are insignificant operating
F-12
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
subsidiaries of the Company as well as various corporate activities, and non-
allocated corporate assets. Intersegment sales primarily represent sales from
distribution to supply for use of the distribution networks. A summary of
information about the Company's operations by segments follows (in millions):
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 308 1,178 172 (327) 1,331
Operating income
(loss)................. 127 (132) 10 47 52
Depreciation............ 30 1 19 -- 50
Total assets employed at
period end............. 643 178 554 -- 1,375
Capital expenditures.... 87 8 31 -- 126
<CAPTION>
MARCH 31, 1996
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 334 1,309 163 (375) 1,431
Operating income........ 164 30 20 -- 214
Depreciation............ 28 1 13 -- 42
Total assets employed at
period end............. 589 212 607 -- 1,408
Capital expenditures.... 70 8 13 -- 91
<CAPTION>
MARCH 31, 1995
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 362 1,343 162 (403) 1,464
Operating income........ 176 23 16 -- 215
Depreciation............ 25 1 15 -- 41
Total assets employed at
period end............. 556 198 613 -- 1,367
Capital expenditures.... 55 11 25 -- 91
</TABLE>
6. INCOME TAXES
The Company's income tax expense consists of the following (in millions):
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Current........................................... 37 91 55
Deferred.......................................... (24) 23 23
--- --- ---
Total............................................. 13 114 78
=== === ===
</TABLE>
F-13
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of the difference between the amount of
income taxes computed by multiplying book income before income taxes by the
statutory rate, and the amount of income taxes reported (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Pre-tax income....................................... 39 507 219
--- --- ---
Income taxes computed at statutory rate.............. 13 167 72
National Grid transactions:
Gain on sale of PSB excluded from taxable income... (2) (19) --
Effect of difference between statutory rate (33%)
and rate on dividends received (20%).............. -- (21) (3)
Permanent differences................................ 6 (11) 8
Other................................................ (4) (2) 1
--- --- ---
Total income tax expense............................. 13 114 78
=== === ===
</TABLE>
The tax effect of temporary differences between the carrying amounts of
assets and liabilities in the consolidated balance sheets and their respective
tax bases, which give rise to deferred tax assets and liabilities are as
follows (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Deferred tax liabilities:
Property related
temporary differences.. 172 164
Provision for uneconomic
gas and electricity
contracts.............. (26) --
Other................... (6) --
--- ---
Net deferred tax
liability................ 140 164
Portion included in
current liabilities...... (4) (6)
--- ---
Long-term deferred tax
liability................ 136 158
=== ===
</TABLE>
The tax years since fiscal year 1993 are currently under review by the
Inland Revenue in the UK. In the opinion of management, the final settlement
of open years will not have a material effect on the financial position or
results of operations.
7. FINANCIAL INSTRUMENTS
The Company utilizes contracts for differences ("CFDs") to mitigate its
exposure to volatility in the prices of electricity purchased through the
Pool. Such contracts allow the Company to effectively convert the majority of
its anticipated Pool purchases from market prices to fixed prices. CFDs are in
place to hedge a portion of electricity purchases on approximately 30,662 GWh
through the year 2009. Accordingly, the gains and losses on such contracts are
deferred and recognized as electricity is purchased. Management's estimate of
the fair value of CFDs outstanding at March 31, 1997 is a net liability of
(Pounds)22 million. This estimate is based on management's projections of
future prices of electricity. The net liability will be recovered through
electricity costs passed through to franchise customers during the fiscal year
ended March 31, 1998.
F-14
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is exposed to losses in the event of non-performance by
counterparties to its CFDs. To manage this credit risk, the Company selects
counterparties based on their credit ratings, limits its exposure to any one
counterparty under defined guidelines, and monitors the market position of the
programs and its relative market position with each counterparty.
As part of its risk management policy, the Company enters into interest rate
swap agreements under which counterparties have agreed to pay amounts to the
Company equal to variable interest obligations in consideration of amounts
payable by the Company equivalent to fixed rates of interest. If the
counterparty to the interest rate swap was to default on contractual payments,
the Company could be exposed to increased costs related to replacing the
original agreement. At March 31, 1996, the Company was party to interest rate
swap agreements with a notional value of (Pounds)89 million which were at
fixed interest rates varying between 6.64% and 10.98%. During the fiscal year
ended March 31, 1997, the Company terminated these agreements at a cost of
(Pounds)7 million.
The estimated fair value of the Company's financial instruments are as
follows (in millions):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Long-term debt........................... 424 438 429 421
Interest rate swap agreements............ -- -- -- (9)
</TABLE>
The fair value of long-term debt is estimated based on quoted market prices
for the same or similar issues or the current rates offered to the Company for
debt of the same maturities. The fair values of interest rate swap agreements
are estimated by obtaining quotes from brokers.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following (in
millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Distribution network....................................... 1,163 1,073
Generation................................................. 132 128
Non-network land and buildings............................. 72 93
Other...................................................... 154 128
Consumer contributions..................................... (256) (229)
----- -----
1,265 1,193
Accumulated depreciation................................... (500) (458)
----- -----
Property, plant and equipment, net......................... 765 735
===== =====
</TABLE>
Arrangements have been put in place to entitle the British Government to a
proportion of any property gain (above certain thresholds) accruing as a
result of disposals, or events treated as disposals for these purposes,
occurring after March 31, 1990 in relation to land in which the Company had an
interest at that date (and, in certain circumstances, land in which the
Company acquires an interest thereafter from other members of the electricity
industry) and any buildings on that land. These arrangements will last until
March 31, 2000.
F-15
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A provision in respect of these property disposals is made only to the extent
that it is probable that a liability will be incurred.
9. SYSTEMS DEVELOPMENT COSTS
During the year ended March 31, 1997, a (Pounds)50 million charge to earnings
was recorded for costs incurred related to information systems development
costs pertaining to the opening up of the competitive electricity market in
1998. It is management's opinion that, at this stage in the development of the
future commercial and regulatory environment, it would not be prudent to
capitalize these costs.
10. LONG-TERM DEBT
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
8.625% Eurobonds, due 2005................................. 149 149
9.25% Eurobonds, due 2020.................................. 197 197
European Investment Bank:
7.52% credit facility, due 1999-2002..................... 15 15
6.55% credit facility, due 1997-2000..................... 15 15
8.05% amortizing term loan, due 2009..................... 48 50
Unsecured loan stock, LIBOR minus .5%, due 2007............ -- 3
--- ---
Total...................................................... 424 429
Less current maturities.................................... (5) (5)
--- ---
Long-term debt, net of current maturities.................. 419 424
=== ===
</TABLE>
Long-term debt outstanding at March 31, 1997 is payable as follows (in
millions):
<TABLE>
<CAPTION>
(Pounds)
--------
<S> <C>
For the fiscal years ended March 31
1998.............................................................. 5
1999.............................................................. 6
2000.............................................................. 11
2001.............................................................. 12
2002.............................................................. 7
Thereafter........................................................ 383
---
Total........................................................... 424
===
</TABLE>
11. SHORT-TERM DEBT
Short-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Commercial paper........................................... 81 77
Bank loans and overdrafts.................................. 1 8
--- ---
Total...................................................... 82 85
=== ===
Year-end weighted average interest rate.................... 6.2% 6.1%
</TABLE>
F-16
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1997 and 1996 unused committed bank facilities were available
to the Company in the amount of (Pounds)250 million. Commitment fees of
approximately 1/10 of 1% of the unused committed bank facilities are required
to maintain the facilities which have expiration dates between 2000 and 2002.
In addition, the Company has commercial paper programs (denominated in US
dollars) which provide for the issuance of up to $550 million in commercial
paper with short-term maturities (up to 364 days) issued at a discount to face
value.
12. DISTRIBUTION OF NATIONAL GRID INVESTMENT
At April 1, 1995, the Company's investment in the issued share capital of
National Grid Group plc ("NGG"), formerly National Grid Holdings plc, was
recorded at (Pounds)72 million, the estimated fair value at privatization.
During December 1995 the following transactions relating to the Company's NGG
investment occurred:
a) Special dividends of (Pounds)118 million (pre-tax) were paid by NGG to
the Company and recognized in other income. The Company reinvested
(Pounds)16 million of this dividend in additional NGG shares.
b) NGG became listed on the London Stock Exchange and therefore, the
Company revalued its investment in NGG to its fair market value of
(Pounds)321 million.
c) The Company distributed, in kind, approximately 90% of its NGG shares
to its shareholders and recognized a gain of (Pounds)210 million within
other income.
d) A (Pounds)50 discount to each of the Company's residential customers
was provided. The net effect of the customer discount in the amount of
(Pounds)85 million has been recorded as other expense during the year ended
March 31, 1996.
In November 1995, NGG also distributed to the RECs its ownership shares in
PSB Holdings Limited ("PSB") based on their respective ownership percentages
of NGG. The PSB shares were revalued at their estimated market value of
(Pounds)56 million. In December 1995 this investment was sold and a gain on
sale of (Pounds)56 million was recognized. In the year to March 31, 1997
further consideration of (Pounds)6 million was received.
In order that holders of options in the Company's shares were not
disadvantaged by the NGG transactions, the Company's Directors established a
new employee share trust. The Company contributed (Pounds)9 million to the
trust which was used to purchase NGG shares from the Company. This
contribution was recorded as a dividend. A corresponding gain of (Pounds)5
million was recognized upon distribution of NGG shares from the trust to
option holders during the year ended March 31, 1996.
13. EMPLOYEE OPTION AND SHARE PLANS
The Company operates various employee option and share plans. During the
fiscal year 1995, an Executive Long Term Share Incentive Scheme for certain
eligible Executive Directors was introduced. Under the scheme amounts (as
determined by the earnings per share and market value growth of YEG) were paid
to a trust to be utilized to purchase Company shares. After the final
determination of the amounts in the first cycle of 1998, the shares were to
have been released to participants. Amounts transferred were expensed. 54,025
shares and 23,951 shares were held in trust at March 31, 1997 and 1996,
respectively.
On July 1, 1996 a trust related to the Company's Profit Sharing Scheme
purchased 243,356 ordinary shares of the Company for (Pounds)1,769,198 or
(Pounds)7.27 per share. 64 shares were allocated to each eligible employee.
The net cost of acquiring the shares and maintaining the trust was borne by
the Company.
F-17
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the acquisition (note 14), all shares held in the above
trusts were transferred to employees in accordance with the provisions of the
schemes.
The Company had two option plans, the Executive Share Option Scheme and the
Savings-Related Share Option Scheme. The Executive Share Option Scheme
provides for the granting of stock options to purchase ordinary shares to
certain key executives of the Company at the discretion of the Renumeration
Committee of the Company. The options vest three years from the date of grant
and expire ten years after the date of grant. Options to purchase ordinary
shares of the Company have been granted to employees under the Savings-Related
Share Option Schemes adopted in 1996 and 1997. The options vest five years
from date of grant and expire five and a half years after the date of grant.
The following table summarizes the transactions of the share option scheme
for the three year period ended March 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
--------- --------
(Pounds)
<S> <C> <C>
Unexercised options outstanding-March 31, 1994............ 7,853,647 2.26
Granted................................................... 45,636 7.82
Exercised................................................. 1,141,446 2.58
Forfeited................................................. 313,686 1.75
--------- ----
Unexercised options outstanding-March 31, 1995............ 6,444,151 2.26
Granted................................................... 1,650,259 5.58
Exercised................................................. 5,536,659 1.99
Forfeited................................................. 105,934 1.75
--------- ----
Unexercised options outstanding-March 31, 1996............ 2,451,817 5.13
Granted................................................... 1,059,218 5.97
Exercised................................................. 576,226 4.05
Forfeited................................................. 118,865 4.01
Expired................................................... 642 1.75
--------- ----
Unexercised options outstanding-March 31, 1997............ 2,815,302 5.72
========= ====
Exercisable options-March 31, 1997........................ 129,781 4.78
========= ====
Exercisable options-March 31, 1996........................ 590,379 4.64
========= ====
</TABLE>
In connection with the acquisition, holders of any outstanding options were
given the opportunity to exercise their options and sell their shares to
Yorkshire Holdings plc at a price of (Pounds)9.27 per share. If the holders of
the options did not exercise their options, such options were cash cancelled
and the holders were paid (Pounds)9.27 per share less the option's exercise
price.
The Company accounts for its share-based compensation schemes in accordance
with Accounting Principles Board Opinion No. 25, " Accounting for Stock Issued
to Employees". Compensation expense of (Pounds)1 million was recognized in
1997, 1996 and 1995. Because of the change in control of the Company and the
immaterial impact on net income of applying the fair value method, the
disclosures required by Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation", have not been presented.
F-18
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS
On February 24, 1997 the Boards of American Electric Power Company, Inc.
("AEP") and Public Service Company of Colorado ("PS Colorado") announced the
terms of a cash offer for Yorkshire Electricity Group plc to be made by
Yorkshire Holdings plc, a subsidiary of Yorkshire Power Group Limited. The
offer was declared wholly unconditional on April 1, 1997. On April 16, 1997
notices were issued by Yorkshire Holdings plc in accordance with section 429
of the Companies Act 1985 to acquire all those Yorkshire Electricity Group plc
shares outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares of YEG during
April and May 1997 through payment of cash consideration of (Pounds)1.457
billion and the issuance of loan notes to former YEG shareholders in the
amount of (Pounds)22 million.
WINDFALL TAX
On July 2, 1997 the British Government announced a "windfall tax" to be
applied at that date to companies privatized by flotation and regulated by
relevant privatization statutes. A decrease in the UK statutory income tax
rate from 33% to 31% was also included in the legislation. The Company will
record a charge to income of (Pounds)134 million for the windfall tax and an
income tax benefit as a result of the change in the UK statutory income tax
rate of approximately (Pounds)12 million during the quarter ending September
30, 1997. The windfall tax is not deductible for UK income tax purposes and is
payable in two equal installments on or before December 1, 1997 and 1998.
BUSINESS RESTRUCTURING
On December 4, 1997 a planned business restructuring was announced. The
restructuring will result in the Company's main divisions (electricity
distribution and energy supply) becoming self sufficient businesses within the
group structure. A separate ownership structure will be pursued for the
generation business. As a result of the restructuring approximately 160
positions will no longer be required. The estimated cost of this restructuring
is (Pounds)10 million.
IONICA
Following a profits warning issued by Ionica Group plc ("Ionica") in
November 1997, the fair value of the Company's investment in Ionica decreased
from (Pounds)54 million at April 1, 1997 to (Pounds)30 million at December 31,
1997. The reduction is not regarded by management as a permanent diminution in
value.
F-19
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED MARCH
31, 1997
The following unaudited pro forma consolidated statement of income is based
upon the consolidated statement of income for the year ended March 31, 1997 of
Yorkshire Electricity Group plc (the "Predecessor Company") adjusted to
reflect the items described in notes (1) through (4) below as if the indirect
acquisition of the Predecessor Company (the "Acquisition") by Yorkshire Power
Group Limited (the "Successor Company") had occurred at April 1, 1996.
<TABLE>
<CAPTION>
(IN MILLIONS)
-----------------------------------------------------
PREDECESSOR PERIOD PRO FORMA FOR
APRIL 1, 1996 TO THE YEAR ENDED
MARCH 31, 1997 ADJUSTMENTS MARCH 31, 1997
------------------ ------------------ --------------
(Pounds) (1) (2) (3) (4) (Pounds) $(5)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues...... 1,331 -- -- -- -- 1,331 2,183
----- --- --- --- --- ----- -----
Income from operations.. 52 -- (24) (6) 84 106 174
----- --- --- --- --- ----- -----
Other income
Gain on sale of
associate............. 15 -- -- -- -- 15 25
Other.................. 5 -- -- -- -- 5 8
----- --- --- --- --- ----- -----
Total other income..... 20 -- -- -- -- 20 33
----- --- --- --- --- ----- -----
Interest expense........ (55) (74) -- -- 7 (122) (200)
Interest income......... 22 -- -- -- -- 22 36
----- --- --- --- --- ----- -----
Net interest expense.... (33) (74) -- -- 7 (100) (164)
----- --- --- --- --- ----- -----
Income before income
taxes.................. 39 (74) (24) (6) 91 26 43
Provision for income
taxes.................. (13) 24 -- 2 (30) (17) (28)
----- --- --- --- --- ----- -----
Net income.............. 26 (50) (24) (4) 61 9 15
===== === === === === ===== =====
</TABLE>
- --------
(1) To reflect the interest expense recorded in connection with the
Acquisition financed by (Pounds)22 million loan notes issued by Yorkshire
Holdings plc ("Yorkshire Holdings") and (Pounds)1,034 million in short-
term debt incurred by the Successor Company and share capitalization of
(Pounds)440 million. The loan notes issued by Yorkshire Holdings are
redeemable at the option of the bond holder until 2000. An interest rate
of 7% has been assumed for both types of debt. The impact of a 1/8% change
in the assumed interest rate would affect net income by (Pounds)1 million.
(2) Amortization of goodwill recorded in connection with the Acquisition.
(3) Additional depreciation expense that would have been recorded in
connection with the Acquisition.
(4) To remove the effect of recording the provision for uneconomic gas and
electricity contracts ((Pounds)78 million), loss on interest rate swap
agreements ((Pounds)7 million) and write-down of non-operational
properties ((Pounds)6 million). If the Acquisition had occurred on April
1, 1996, these items would have been accounted for as fair value
adjustments at that date.
(5) Solely for convenience of the reader, UK pound sterling amounts have been
translated into US dollars at the Noon Buying Rate on December 31, 1997 of
$1.64=(Pounds)1. See "Presentation of Certain Information and Exchange
Rates" in this Offering Memorandum.
During the pro forma fiscal year ended March 31, 1997, the Predecessor
Company incurred expenses of (Pounds)8.0 million relating to the Acquisition.
F-20
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Yorkshire Power Group Limited
We have audited the accompanying consolidated balance sheet of Yorkshire
Power Group Limited and its subsidiaries (the "Company") as of April 1, 1997
(expressed in pounds sterling). This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated balance sheet presentation. We
believe that our audit of the consolidated balance sheet provides a reasonable
basis for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all
material respects, the consolidated financial position of Yorkshire Power
Group Limited and its subsidiaries as of April 1, 1997 in conformity with
generally accepted accounting principles in the United States of America.
Our audit also comprehended the translation of the pounds sterling amounts
into US dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 1. The translation of the financial
statement amounts into US dollars has been made solely for the convenience of
readers in the United States of America.
Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
(December 31, 1997 as to Note 13)
F-21
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Pounds) $
-------- ------------
(SEE NOTE 1)
<S> <C> <C>
ASSETS
FIXED ASSETS
Property, plant and equipment........................... 908 1,489
Construction work in progress........................... 31 51
----- -----
Total fixed assets.................................... 939 1,540
----- -----
OTHER ASSETS
Goodwill (Note 11)...................................... 994 1,630
Investments, long-term.................................. 133 218
Other non-current assets................................ 61 100
----- -----
Total other assets.................................... 1,188 1,948
----- -----
CURRENT ASSETS
Cash and cash equivalents............................... 221 362
Investments............................................. 29 47
Customer receivables, less provision for uncollectibles
of (Pounds)6........................................... 90 148
Unbilled revenue........................................ 84 138
Other................................................... 40 66
----- -----
Total current assets.................................. 464 761
----- -----
Total assets.......................................... 2,591 4,249
===== =====
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-22
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Pounds) $
-------- ------------
(SEE NOTE 1)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY (NOTE 11)
Share capital, (Pounds)1 par value common shares,
436,000,100 shares authorized, 2 issued and
outstanding............................................. -- --
Share capital subscribed but not yet issued.............. -- --
Retained earnings........................................ -- --
----- -----
Total shareholders' equity............................. -- --
----- -----
LONG-TERM DEBT........................................... 433 710
OTHER NON-CURRENT LIABILITIES
Deferred income taxes.................................... 204 335
Provision for electricity and gas contracts.............. 78 128
Other.................................................... 13 21
----- -----
Total other non-current liabilities.................... 295 484
----- -----
CURRENT LIABILITIES
Current portion of long-term debt........................ 5 8
Short-term debt.......................................... 82 134
Accounts payable......................................... 15 25
Electricity purchases payable............................ 64 105
Payments received in advance............................. 14 23
Accrued liabilities and deferred income.................. 69 113
Income taxes payable..................................... 51 84
Accrued liability to purchase Yorkshire Electricity Group
plc (Note 11)........................................... 1,496 2,453
Other current liabilities................................ 67 110
----- -----
Total current liabilities.............................. 1,863 3,055
----- -----
Total liabilities...................................... 2,591 4,249
----- -----
COMMITMENTS AND CONTINGENCIES (NOTE 4)
Total shareholders' equity and liabilities............. 2,591 4,249
===== =====
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-23
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Yorkshire Power Group Limited ("YPG" or the "Company") is a joint venture
formed by subsidiaries of American Electric Power Company, Inc. and Public
Service Company of Colorado for the purpose of acquiring the entire issued
share capital of Yorkshire Electricity Group plc ("YEG"). The acquisition of
YEG was made effective as of April 1, 1997 by Yorkshire Holdings plc, a
wholly-owned subsidiary of YPG.
YEG is one of the twelve regional electricity companies ("RECs") in England
and Wales licensed to supply, distribute, and to a limited extent, generate
electricity. The RECs were created as a result of the privatization of the UK
electricity industry in 1990 after the state owned low voltage distribution
networks were allocated to the then existing twelve regional boards. YEG's
main business, the distribution and supply of electricity to customers in its
franchise area (the "Franchise Area"), is regulated under the terms of YEG's
Public Electricity Supply License ("PES License") by the Office of Electricity
Regulation ("OFFER").
YEG operates primarily in its Franchise Area in Northern England. YEG's
Franchise Area covers approximately 10,000 square kilometers, encompassing
parts of the counties of West Yorkshire, Humberside, South Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The Franchise Area
has a resident population of approximately 4.4 million.
The Company purchases power primarily from the wholesale trading market for
electricity in England and Wales (the "Pool"). The Pool monitors supply and
demand between generators and suppliers, sets prices for generation and
provides for centralized settlement of accounts due between generators and
suppliers.
BASIS OF PRESENTATION
On February 24, 1997, the joint venture partners of the Company announced
the terms of a cash tender offer for Yorkshire Electricity Group plc to be
made by Yorkshire Holdings plc, a subsidiary of the Company. The offer was
declared wholly unconditional on April 1, 1997. On April 16, 1997 notices were
issued by Yorkshire Holdings plc in accordance with section 429 of the
Companies Act 1985 to acquire all YEG shares outstanding at the end of the
requisite notice period.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Accounting for
Business Combinations" ("APB 16"). The purchase price of YEG has been
allocated to the underlying assets and liabilities based on preliminary
estimated fair values at the acquisition date (April 1, 1997). The final
purchase price allocation report has not yet been completed; however, the
Company does not anticipate any material changes based on currently available
information.
The consolidated balance sheet of the Company is presented in pounds
sterling ((Pounds)) and in conformity with accounting principles generally
accepted in the United States of America. The Company is not subject to rate
regulation but rather, is subject to price cap regulation and, therefore, the
provisions of Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation" ("SFAS 71") do not apply.
The consolidated balance sheet and certain information in the notes to the
consolidated balance sheet are presented in pounds sterling ((Pounds)) and in
US dollars ($) solely for the convenience of the reader, at the exchange rate
of (Pounds)1= $1.6427, the noon buying rate in New York City for cable
transfers in pounds sterling as certified for customs purposes by the Federal
Reserve Bank of New York on December 31, 1997. This presentation has not been
translated in accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation". No representation is made that the pounds
sterling amounts have been, could have been, or could be converted into US
dollars at that or any other rate of exchange.
F-24
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet includes the accounts of the Company and its
wholly-owned and majority-owned subsidiaries and has been prepared from
records maintained by the Company in the UK. Significant intercompany items
are eliminated in consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
UNBILLED REVENUE
The Company records revenue net of value added tax ("VAT") and accrues
revenues for service provided but unbilled at the end of each reporting
period.
RECOVERY OF REGULATED INCOME
Charges for distribution of electricity and for supply to customers with a
maximum demand under 100kW are subject to a price control formula set out in
YEG's PES license which allows a maximum charge per unit of electricity.
Differences in the charges, or in the purchase cost of electricity, can result
in the under or over recovery of revenues in a particular period.
Where there is an overrecovery of supply or distribution business revenues
against the regulated maximum allowable amount, revenues are deferred in an
amount equivalent to the overrecorded amount and included in other current
liabilities.
FINANCIAL INSTRUMENTS
YEG enters into contracts for differences ("CFDs") primarily to hedge its
supply business against the price risk of electricity purchases from the Pool.
Use of these CFDs is carried out within the framework of YEG's purchasing
strategy and hedging guidelines. CFDs are accounted for as hedges and,
consequently, gains and losses are deferred and recognized over the same
period as the item hedged. The Company recognizes gains (losses) on CFDs when
settlement is made, which is generally monthly. Gains (losses) on CFDs are
recognized as a decrease (increase) to cost of sales based upon the difference
between fixed prices in the CFD compared to variable prices paid to the Pool
for the period. Gains (losses) based upon the difference between fixed prices
in the CFD compared to variable prices paid to the Pool for future electricity
purchases are not recognized until the period of such settlements.
The Company enters into interest rate swaps as a part of its overall risk
management strategy and does not hold or issue material amounts of derivative
financial instruments for trading purposes. The Company accounts for its
interest rate swaps in accordance with Statement of Financial Accounting
Standards No. 80, "Accounting for Futures Contracts" and various Emerging
Issues Task Force pronouncements. If the interest rate swaps were to be sold
or terminated, any gain or loss would be deferred and amortized over the
remaining life of the debt instrument being hedged by the interest rate swap.
If the debt instrument being hedged by the interest rate swaps were to be
extinguished, any gain or loss attributable to the swap would be recognized in
the period of the transaction.
The Company considers the carrying amounts of financial instruments
classified as current assets and liabilities to be a reasonable estimate of
their fair value because of the short maturity of these instruments.
F-25
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at fair market value as adjusted
at the acquisition date in accordance with APB 16. Items capitalized
subsequent to the acquisition will be recorded at original cost, which
includes materials, labor and appropriate overhead costs, and the estimated
cost of borrowed funds used during construction.
The Company's policy is to record depreciation on a straight-line basis,
except for distribution network assets which are charged at 3% for 20 years
and 2% for the remaining 20 years. Assets are depreciated using the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Distribution network................................................ 40
Generation.......................................................... 20
Buildings........................................................... Up to 60
Fixtures and equipment.............................................. Up to 10
Vehicles and mobile plant........................................... Up to 10
</TABLE>
GOODWILL
The Company's policy is to amortize costs in excess of fair value of net
assets of the business acquired using the straight-line method over a period
of 40 years. Recoverability (evaluated on the basis of undiscounted operating
cash flow analysis) is reviewed annually or sooner if events or changes in
circumstances indicate that the carrying amount may exceed fair value, in
accordance with the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of". Goodwill shown in the accompanying
consolidated balance sheet relates to the acquisition of YEG (Note 11).
INVESTMENTS
The Company accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115,
"Investments in Certain Debt and Equity Securities" ("SFAS 115"). The
Company's investments are classified as available-for-sale under SFAS 115.
Securities whose fair market values are readily determinable are reported at
fair value. Securities whose fair market values are not readily determinable
are recorded at the lower of cost or net realizable value.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
standard requires that deferred income taxes be recorded for temporary
differences between the financial statement basis and the tax basis of assets
and liabilities and loss carryforwards and that deferred tax balances be based
on enacted tax laws at rates that are expected to be in effect when the
temporary differences reverse.
2. RETIREMENT BENEFITS
PENSION PLANS
The Company operates two schemes, one based on defined contributions and a
second based on defined benefits.
F-26
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
DEFINED CONTRIBUTION
The defined contribution plan was established on December 1, 1991. From
April 1, 1995 new employees are only eligible to join this plan. The assets of
the defined contribution plan are held and administered by an independent
trustee.
DEFINED BENEFITS
The Company participates in the Electricity Supply Pension Scheme, which
provides pension and other related defined benefits, based on final
pensionable pay, to substantially all employees throughout the electricity
supply industry in the UK.
The Company uses the projected unit credit actuarial method for accounting
purposes. Amounts funded to the pension are primarily invested in equity and
fixed income securities.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at April 1, 1997 (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION:
Accumulated benefit obligation, including vested benefits of
(Pounds)590 ($968)......................................... 625 1,025
==== ======
Fair value of plan assets................................... 725 1,189
Projected benefit obligation for service rendered to date... (664) (1,089)
---- ------
Prepaid pension asset....................................... 61 100
==== ======
</TABLE>
The weighted average discount rate, expected rate of increase in future
compensation, and the expected long-term rate of return on plan assets used to
determine the plan's funded status were, 8.0%, 6.0% and 9.0%, respectively.
3. REGULATORY MATTERS
The distribution business of YEG is regulated under its PES License,
pursuant to which revenue of the distribution business is controlled by the
Distribution Price Control Formula ("DPCF"). The DPCF determines the maximum
average price per unit of electricity (expressed in kilowatt hours) that YEG
can charge. The DPCF is usually set for a five-year period, subject to more
frequent adjustments as determined necessary by the Director General of
Electricity Supply (the "Regulator"). At each review, the Regulator can adjust
the value of certain elements in the DPCF. YEG's allowed distribution revenues
were reduced by a 14% below inflation reduction and a 13% below inflation
reduction on April 1, 1995 and 1996, respectively, following a review by the
Regulator. On April 1, 1997 and April 1, 1998, YEG's allowed distribution
revenues were decreased by an additional 3% below inflation reduction, and
there will be a further annual 3% below inflation reduction on April 1, 1999.
The supply business of YEG is also regulated by the Regulator, and prices
are established based upon the Supply Price Control Formula which is similar
to the DPCF; however, it currently allows full pass through for all properly
incurred costs.
The non-franchise supply market, which typically includes larger commercial
and industrial customers was opened to competition for all customers with
usage above 1 MW upon privatization of the industry in 1990. The non-franchise
supply markets of 100 kW or more were opened to full competition in April
1994.
F-27
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
Currently, YEG, under its PES License has the exclusive right to supply
residential and small commercial and industrial customers within its Franchise
Area. However, it is anticipated that the supply market will become fully
competitive over a several month period beginning September 1998.
4. COMMITMENTS AND CONTINGENCIES
ELECTRICITY AND GAS PURCHASE AGREEMENTS
The Company and its subsidiaries have entered into contracts for purchases
of electricity and gas for a period of up to 2009. A provision of (Pounds)78
million ($128 million) has been made for the net present value of expected
future payments in excess of anticipated recoverable amounts, reflecting
management's current expectations of market prices for electricity following
the opening of the competitive market to franchise supply customers and future
gas prices. The actual net costs are highly sensitive to movements in future
prices. The Company's provision includes amounts in respect of contracts with
a non wholly-owned subsidiary.
The Company has additional contracts with unaffiliated parties relating to
the purchase of gas which expire by October 2005, the terms of which are
immaterial with respect to quantity and price, both annually and in the
aggregate.
LEGAL PROCEEDINGS
The Company is a party to legal proceedings arising in the ordinary course
of business which are not material, either individually or in the aggregate,
nor is it currently aware of any threatened material legal proceedings.
OPERATING LEASES
The Company has commitments under operating leases with various terms and
expiration dates. At April 1, 1997 estimated minimum rental commitments for
noncancelable operating leases were (Pounds)2 million ($3 million) and
(Pounds)1 million ($2 million) for the fiscal years ending March 31, 1998 and
1999, respectively.
LABOR SUBJECT TO COLLECTIVE BARGAINING AGREEMENTS
A majority of the Company's employees are subject to one of three collective
bargaining agreements. Such agreements are ongoing in nature, and the
Company's employees participation level is consistent with that of the
electric utility industry in the UK.
5. SEGMENT REPORTING
The Company is primarily engaged in two electric industry segments;
distribution, which involves the transmission of electricity across its
network to its customers, and supply, which involves bulk purchase of
electricity from the Pool for delivery to the distribution networks. Included
in "Other" are insignificant operating subsidiaries of the Company as well as
various corporate activities, and non-allocated corporate assets. The
Company's assets in these individual segments as of April 1, 1997 are as
follows (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- -----
<S> <C> <C>
Distribution.................................................. 1,802 2,955
Supply........................................................ 187 307
Other......................................................... 602 987
----- -----
Total......................................................... 2,591 4,249
===== =====
</TABLE>
F-28
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
6. INCOME TAXES
The tax effect of temporary differences between the carrying amounts of
assets and liabilities in the consolidated balance sheet and their respective
tax bases, which give rise to deferred tax assets and liabilities, at April 1,
1997 are as follows (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
Deferred tax liabilities:
Property related temporary differences....................... 217 356
Pension...................................................... 20 33
Provision for electricity and gas contracts.................. (26) (43)
Other........................................................ (3) (5)
--- ---
Net deferred tax liability..................................... 208 341
Portion included in current liabilities........................ (4) (6)
--- ---
Long-term deferred tax liability............................... 204 335
=== ===
</TABLE>
The tax years since 1993 are currently under review by the Inland Revenue in
the UK. In the opinion of management, the final settlement of open years will
not have a material effect on financial position.
7. FINANCIAL INSTRUMENTS
YEG utilizes contracts for differences ("CFDs") to mitigate its exposure to
volatility in the prices of electricity purchased through the Pool. Such
contracts allow YEG to effectively convert the majority of its anticipated
Pool purchases from market prices to fixed prices. CFDs are in place to hedge
a portion of electricity purchases on approximately 30,662 GWh through the
year 2009. Accordingly, the gains and losses on such contracts are deferred
and recognized as electricity is purchased. Management's estimate of the fair
value of CFDs outstanding at March 31, 1997 is a net liability of (Pounds)22
million. This estimate is based on management's projections of future prices
of electricity. The net liability will be recovered through electricity costs
passed through to franchise customers during the fiscal year ended March 31,
1998.
YEG is exposed to losses in the event of non-performance by counterparties
to its CFDs. To manage this credit risk, YEG selects counterparties based on
their credit ratings, limits its exposure to any one counterparty under
defined guidelines, and monitors the market position of the programs and its
relative market position with each counterparty.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at April 1, 1997 consisted of the following
(in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- -----
<S> <C> <C>
Distribution network......................................... 882 1,446
Generation................................................... 112 184
Non-network land and buildings............................... 57 93
Other........................................................ 57 93
Consumer contributions....................................... (200) (327)
---- -----
Total........................................................ 908 1,489
==== =====
</TABLE>
Arrangements have been put in place to entitle the British Government to a
proportion of any property gain (above certain thresholds) accruing as a
result of disposals, or events treated as disposals for clawback purposes,
F-29
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
occurring after March 31, 1990 in relation to land in which YEG had an
interest at that date (and, in certain circumstances, land in which YEG
acquires an interest thereafter from other members of the electricity
industry) and any buildings on that land. These arrangements will last until
March 31, 2000.
A provision for clawback in respect of property disposals is made only to
the extent that it is probable that a liability will be incurred.
9. LONG-TERM DEBT
Long-term debt at April 1, 1997 consisted of the following (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
8.625% Eurobonds, due 2005..................................... 152 249
9.25% Eurobonds, due 2020...................................... 208 340
European Investment Bank:
7.52% credit facility, due 1999-2002......................... 15 25
6.55% credit facility, due 1997-2000......................... 15 25
8.05% amortizing term loan, due 2009......................... 48 79
--- ---
Total.......................................................... 438 718
Less current maturities........................................ (5) (8)
--- ---
Long-term debt, net of current maturities...................... 433 710
=== ===
</TABLE>
Long-term debt outstanding at April 1, 1997 is payable as follows (in
millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
For the fiscal years ending March 31
1998.......................................................... 5 8
1999.......................................................... 6 10
2000.......................................................... 11 18
2001.......................................................... 12 20
2002.......................................................... 7 11
Thereafter.................................................... 397 651
--- ---
Total........................................................... 438 718
=== ===
</TABLE>
10. SHORT-TERM DEBT
Short-term debt at April 1, 1997 consisted of the following (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
Commercial paper................................................ 81 132
Bank loans and overdrafts....................................... 1 2
--- ---
Total........................................................... 82 134
=== ===
</TABLE>
The weighted average interest rate on short-term debt instruments was 6.2%
at April 1, 1997.
At April 1, 1997 unused committed bank facilities were available to YEG in
the amount of (Pounds)250 million ($410 million). Commitment fees of
approximately 1/10 of 1% of the unused committed bank facilities are
F-30
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
required to maintain the facilities which have expiration dates between 2000
and 2002. In addition, YEG has commercial paper programs (denominated in US
dollars) which provide for the issuance of up to $550 million in commercial
paper with short-term maturities (up to 364 days) issued at a discount to face
value.
11. ACQUISITION
On February 24, 1997 the joint venture partners of the Company announced the
terms of a cash offer for YEG to be made by Yorkshire Holdings plc, a
subsidiary of the Company. The offer was declared wholly unconditional on
April 1, 1997. On April 16, 1997 notices were issued by Yorkshire Holdings plc
in accordance with section 429 of the Companies Act 1985 to acquire all those
YEG shares outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares of YEG during
April and May 1997 through payment of cash consideration of (Pounds)1.457
billion ($2.393 billion) and the issuance of loan notes to former YEG
shareholders in the amount of (Pounds)22 million ($36 million).
The acquisition was financed by cash contributions of (Pounds)220 million
($361 million) from each of the joint venture partners, against which shares
in the Company were subsequently allotted, and borrowings under a
(Pounds)1.140 billion ($1.873 billion) term loan and revolving facility
agreement. The term loan and revolving facility agreement provided for a
revolving credit facility of (Pounds)50 million ($82 million) and a term loan
facility in the aggregate amount of (Pounds)1.090 billion ($1.790 billion).
Effective July 31, 1997 the term loan and revolving credit facility
agreement was replaced with a (Pounds)1.085 billion ($1.782 billion) credit
facility. This credit facility consists of two parts which are Facility A
(term loan facility) for (Pounds)1.034 billion ($1.699 billion) and Facility B
(revolving credit facility) for (Pounds)50 million ($82 million). Facility A
is repayable on July 30, 1998. The interest rates on the facilities are based
on LIBOR plus a margin which ranges from 0.125% to 0.5% dependent on the time
elapsed since the Facility became available, plus a defined margin which is
based on a bank cost of funds. The Facilities contain certain restrictive
covenants which include a maximum consolidated net debt to capitalization
ratio and minimum earnings to interest ratio. The Company intends to partly
repay Facility A, in 1998, through issue, by subsidiaries of the Company, of
bonds and preferred securities, the proceeds of which will be loaned to the
Company.
The acquisition was accounted for using the purchase method of accounting in
accordance with APB 16. The purchase price of YEG has been allocated to the
underlying assets and liabilities based on preliminary estimated fair values
at the acquisition date. The final purchase price allocation report has not
yet been completed; however, the Company does not anticipate any material
changes based on currently available information. The acquisition cost
exceeded the fair market value of net assets acquired, including (Pounds)17
million ($28 million) of acquisition related costs, by (Pounds)994 million
($1.630 billion) and is considered goodwill.
The net purchase price of (Pounds)1.496 billion ($2.453 billion) was
allocated as follows at April 1, 1997 (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
Property, plant and equipment............................... 939 1,540
Prepaid pension asset....................................... 61 100
Current assets.............................................. 464 761
Investments................................................. 133 218
Goodwill.................................................... 994 1,630
Current liabilities......................................... (367) (602)
Other liabilities........................................... (728) (1,194)
----- ------
Purchase price.............................................. 1,496 2,453
===== ======
</TABLE>
F-31
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
12. EMPLOYEE OPTION AND SHARE PLANS
Prior to the acquisition of YEG by the Company, employees of YEG were
eligible to participate in the 1997 and 1996 Savings-Related Share Option
Schemes, Executive Share Option Scheme, Profit Sharing Scheme, and/or the Long
Term Incentive Scheme. In connection with the acquisition, employees were
given the opportunity to exercise their options granted under the Savings-
Related Share Option Schemes and the Executive Share Option Scheme and sell
their shares to Yorkshire Holdings plc at a price of (Pounds)9.27 ($15.20) per
share. If the holders of the options did not exercise their options, such
options were cash cancelled and the holders were paid (Pounds)9.27 ($15.20)
per share less the option's exercise price. There were 2,815,302 options
outstanding, which were all exercised or cash cancelled subsequent to April 1,
1997.
Prior to April 1, 1997, the following shares of stock were held in trust on
behalf of employees:
<TABLE>
<CAPTION>
SHARES
-------
<S> <C>
Profit Sharing Scheme................................................ 236,525
Long-Term Incentive Scheme........................................... 54,025
</TABLE>
In connection with the acquisition, all shares of YEG issued under the
Profit Sharing Scheme, Long-Term Incentive Scheme, as well as the NGG shares
held in trust for the benefit of certain option holders, were transferred to
employees in accordance with vesting rights as previously established and the
related schemes and trusts were terminated.
13. SUBSEQUENT EVENTS
On July 2, 1997 the British Government announced a "windfall tax" to be
applied at that date to companies privatized by flotation and regulated by
relevant privatization statutes. A decrease in the UK statutory income tax
rate, from 33% to 31% was also included in the legislation. The Company will
record a charge to income of (Pounds)134 million ($220 million) for the
windfall tax and an income tax benefit as a result of the change in the UK
statutory income tax rate of approximately (Pounds)12 million ($20 million)
during the quarter ending September 30, 1997. The windfall tax is not
deductible for UK income tax purposes and is payable in two equal installments
on or before December 1, 1997 and 1998.
On December 4, 1997 a planned business restructuring was announced. The
restructuring will result in the Company's main divisions (electricity
distribution and energy supply) becoming self-sufficient businesses within the
group structure. A separate ownership structure will be pursued for the
generation business. As a result of the restructuring approximately 160
positions will no longer be required. The estimated cost of this restructuring
is (Pounds)10 million ($16 million).
Following a profits warning issued by Ionica Group plc ("Ionica") in
November 1997, the fair value of the Company's investment in Ionica decreased
from (Pounds)54 million ($89 million) at April 1, 1997 to (Pounds)30 million
($49 million) at December 31, 1997. The reduction is not regarded by
management as a permanent diminution in value.
F-32
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and Board of Directors
of Yorkshire Power Group Limited
We have reviewed the accompanying condensed consolidated balance sheet of
Yorkshire Power Group Limited and subsidiaries (the "Company") as of December
31, 1997 and the related condensed consolidated statements of income, changes
in shareholders' equity and cash flows (all expressed in pounds sterling) for
the nine-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles in the United
States of America.
Deloitte & Touche
Leeds, United Kingdom
April 30, 1998
F-33
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
(SEE NOTE 1)
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996
------------ ------------ ------------
(Pounds) $ (Pounds)
------------ ------------ ------------
(SEE NOTE 2) (SEE NOTE 2)
<S> <C> <C> <C>
Operating revenues..................................................................... 909 1,493 974
Cost of sales.......................................................................... 618 1,015 681
Operating expenses..................................................................... 168 276 173
--- ----- ---
Income from operations................................................................. 123 202 120
Other income .......................................................................... 2 3 17
Net interest expense................................................................... 78 128 20
--- ----- ---
Income before income taxes............................................................. 47 77 117
Provision for income taxes............................................................. 5 8 40
--- ----- ---
Income before extraordinary item....................................................... 42 69 77
Extraordinary loss-UK windfall tax..................................................... 134 220 --
--- ----- ---
Net (loss) income...................................................................... (92) (151) 77
- --------------------------------------------------
=== ===== ===
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-34
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER DECEMBER APRIL
31, 1997 31, 1997 1, 1997
-------- -------- --------
(Pounds) $ (Pounds)
-------- -------- --------
(SEE NOTE 2)
<S> <C> <C> <C>
ASSETS
Fixed Assets, net.................................. 1,001 1,644 939
Goodwill, net of accumulated amortization of
(Pounds)18, $30 and (Pounds)0..................... 976 1,603 994
Investments........................................ 90 148 133
Other non-current assets........................... 88 145 61
Current assets:
Cash and cash equivalents........................ 118 194 221
Customer receivables and unbilled revenue........ 168 276 174
Other current assets............................. 81 133 69
----- ----- -----
Total assets................................... 2,522 4,143 2,591
===== ===== =====
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' Equity:
Share capital.................................... 440 723 --
Retained earnings................................ (92) (151) --
Unrealized loss on available-for-sale
investments..................................... (18) (30) --
----- ----- -----
Total shareholders' equity..................... 330 542 --
----- ----- -----
Liabilities:
Current liabilities:
Liability to purchase Yorkshire Electricity
Group plc...................................... -- -- 1,496
Other........................................... 385 632 280
Short-term debt and current portion of long-term
debt............................................ 1,081 1,776 87
Long-term debt................................... 429 705 433
Long-term deferred income taxes.................. 203 334 204
Other non-current liabilities.................... 94 154 91
----- ----- -----
Total liabilities.............................. 2,192 3,601 2,591
----- ----- -----
Total shareholders' equity and liabilities..... 2,522 4,143 2,591
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-35
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
AVAILABLE-
RETAINED FOR-SALE
SHARE CAPITAL EARNINGS INVESTMENTS TOTAL
-------------------- -------- ----------- --------
SHARES (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1997..... 2 -- -- -- --
Net income................. -- -- (92) -- (92)
Issuance of ordinary
shares.................... 440,000,000 440 -- -- 440
Market value adjustments on
investments............... -- -- -- (18) (18)
----------- --- --- --- ---
BALANCE, DECEMBER 31,
1997...................... 440,000,002 440 (92) (18) 330
=========== === === === ===
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-36
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
(SEE NOTE 1)
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996
------------ ------------ ------------
(Pounds) $ (Pounds)
------------ ------------ ------------
(SEE NOTE 2) (SEE NOTE 2)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES...
Net (loss) income.................... (92) (151) 77
Depreciation......................... 40 65 31
Deferred income taxes................ (7) (11) 8
Equity in (profit) loss of
associates.......................... (1) (2) 1
Gain on sale of associate............ -- -- (15)
Goodwill amortization................ 18 30 --
Change in assets and liabilities:
Receivables.......................... 6 10 21
Electricity Purchases................ 33 54 6
Income tax payable................... 64 105 31
Other................................ 2 3 (11)
------ ------ ---
Net cash provided by operating
activities............................ 63 103 149
------ ------ ---
INVESTING ACTIVITIES:
Capital expenditures................. (129) (212) (72)
Loans repaid by (advanced to)
associates.......................... 1 2 (4)
Proceeds from property, plant and
equipment sales..................... 20 33 28
Proceeds from sale of associate...... -- -- 26
Purchases of long-term investments... (8) (13) (7)
Proceeds from sale of long-term
investments......................... 25 41 6
Purchase of Yorkshire Electricity
Group plc........................... (1,474) (2,421) --
Purchase of short-term investments... (10) (16) (76)
------ ------ ---
Net cash used in investing activities.. (1,575) (2,586) (99)
------ ------ ---
FINANCING ACTIVITIES:
Issuance of common stock............. 440 723 2
Repayment of long-term debt.......... (4) (7) (4)
Change in short-term debt............ 973 1,598 (1)
Dividends paid....................... -- -- (46)
------ ------ ---
Net cash provided by (used in)
financing activities.................. 1,409 2,314 (49)
------ ------ ---
Net (decrease) increase in cash and
cash equivalents...................... (103) (169) 1
Cash and cash equivalents, beginning of
period................................ 221 363 252
Cash and cash equivalents, end of
period................................ 118 194 253
====== ====== ===
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............... 66 108 12
Cash paid for income taxes........... 71 117 --
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company issued (Pounds)22 million ($36 million) of loan notes, during
the nine months ended December 31, 1997, to former YEG shareholders (see Note
3).
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-37
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Yorkshire Power Group Limited and Subsidiaries ("YPG" or "the Company") is a
joint venture formed by subsidiaries of American Electric Power Company, Inc.
and New Century Energies, Inc. for the purpose of acquiring Yorkshire
Electricity Group plc ("YEG" or the "Predecessor"). The acquisition of YEG was
made effective as of April 1, 1997 by Yorkshire Holdings plc, a wholly-owned
subsidiary of YPG.
YEG is one of the twelve regional electricity companies ("RECs") in England
and Wales licensed to supply, distribute, and to a limited extent, generate
electricity. The RECs were created as a result of the privatization of the UK
electricity industry in 1990 after the state owned low voltage distribution
networks were allocated to the then existing twelve regional boards. YEG's
main business, the distribution and supply of electricity to customers in its
Franchise Area, is regulated under the terms of YEG's Public Electricity
Supply License by the Office of Electricity Regulation ("OFFER").
YEG operates primarily in its Franchise Area in Northern England. YEG's
Franchise Area covers approximately 10,000 square kilometers, encompassing
parts of the counties of West Yorkshire, Humberside, South Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The Franchise Area
has a resident population of approximately 4.4 million.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The condensed consolidated balance sheet of the Company is presented in
pounds sterling ((Pounds)) and in conformity with accounting principles
generally accepted in the United States of America.
The condensed consolidated financial statements and certain information in
the notes to the condensed consolidated financial statements are presented in
pounds sterling ((Pounds)) and in US dollars ($), solely for the convenience
of the reader, at the exchange rate of (Pounds)1=$1.6427, the noon buying rate
in New York City for cable transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New York on December 31, 1997.
This presentation has not been translated in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation". No
representation is made that the pounds sterling amounts have been, could have
been, or could be converted into US dollars at that or any other rate of
exchange.
PRINCIPLES OF CONSOLIDATION
The unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned and majority-owned subsidiaries
and has been prepared from records maintained by the Company in the UK. All
significant intercompany accounts and transactions have been eliminated in
consolidation. In the opinion of the management of the Company, the condensed
consolidated financial statements reflect all adjustments (consisting of
normal recurring adjustments) considered necessary for the fair presentation
of the financial position and results of operations for the periods presented.
Such unaudited interim financial statements should be read in conjunction with
the audited balance sheet of the Company and financial statements of YEG
contained elsewhere in this Offering Memorandum.
PREDECESSOR COMPANY FINANCIAL STATEMENTS
The Predecessor company unaudited condensed financial statements for the
nine month period ended December 31, 1996 are presented for comparison
purposes only. Those financial statements do not reflect any of the effects of
the purchase accounting adjustments and financing transactions described in
Note 3. Those effects
F-38
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
consist primarily of the amortization of goodwill, depreciation of fixed
assets valued at a historical cost which is less than the fair value recorded
by the Successor company and interest expense on the borrowings incurred to
finance the acquisition.
3. ACQUISITION
On February 24, 1997 the joint venture partners of the Company announced the
terms of a cash offer for YEG to be made by Yorkshire Holdings plc, a
subsidiary of the Company. The offer was declared wholly unconditional on
April 1, 1997. On April 16, 1997 notices were issued by Yorkshire Holdings plc
in accordance with section 429 of the Companies Act 1985 to acquire all YEG
shares outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares of YEG during
April and May 1997 through payment of cash consideration of (Pounds)1.457
billion ($2.393 billion) and the issuance of loan notes to former YEG
shareholders in the amount of (Pounds)22 million ($36 million).
The acquisition was financed by cash contributions of (Pounds)220 million
($361 million) from each of the joint venture partners, against which shares
in the Company were subsequently allotted, and borrowings under a
(Pounds)1.140 billion ($1.873 billion) term loan and revolving facility
agreement. The term loan and revolving facility agreement provided for a
revolving credit facility of (Pounds)50 million ($82 million) and a term loan
facility in the aggregate amount of (Pounds)1.090 billion ($1.790 billion).
Effective July 31, 1997 the term loan and revolving credit facility
agreement was replaced with a (Pounds)1.085 billion ($1.782 billion) credit
facility. This credit facility consists of two parts which are Facility A
(term loan facility) for (Pounds)1.034 billion ($1.699 billion) and Facility B
(revolving credit facility) for (Pounds)50 million ($82 million). Facility A
is repayable on July 30, 1998. The interest rates on the facilities are based
on LIBOR plus a margin which ranges from 0.125% to 0.5% dependent on the time
elapsed since the facility became available, plus a defined margin which is
based on a bank cost of funds. The facilities contain certain restrictive
covenants which include a maximum consolidated net debt to capitalization
ratio and minimum earnings to interest ratio. The Company intends to partly
repay Facility A, in 1998, through issue, by subsidiaries of the Company, of
bonds and preferred securities, the proceeds of which will be loaned to the
Company.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Accounting for
Business Combinations". The purchase price of YEG has been allocated to the
underlying assets and liabilities based on estimated fair values at the
acquisition date. The acquisition cost exceeded the fair market value of net
assets acquired by (Pounds)994 million ($1.630 billion), including (Pounds)17
million ($28 million) of acquisition related costs, and is considered
goodwill.
The net purchase price of (Pounds)1.496 billion ($2.453 billion) was
allocated as follows at April 1, 1997 (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
Property, plant and equipment............................... 939 1,540
Prepaid pension asset....................................... 61 100
Current assets.............................................. 464 761
Investments................................................. 133 218
Goodwill.................................................... 994 1,630
Current liabilities......................................... (367) (602)
Other liabilities........................................... (728) (1,194)
----- ------
Purchase price.............................................. 1,496 2,453
===== ======
</TABLE>
F-39
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. BUSINESS RESTRUCTURING CHARGES
On December 4, 1997, a planned business restructuring was announced. The
restructuring will result in the Company's main divisions (electricity
distribution and energy supply) becoming self-sufficient businesses. A
separate ownership structure will be pursued for the generation business. As a
result of the restructuring, approximately 160 positions within the head
office and corporate services division will no longer be required. The
estimated cost of this restructuring charged to operating expenses is
(Pounds)10 million ($16 million). As at December 31, 1997, the actual amount
of termination benefits paid was (Pounds)1 million ($2 million) relating to 4
employees.
5. SYSTEM DEVELOPMENT COSTS
During the nine month period ended December 31, 1996, a (Pounds)24 million
($39 million) charge to earnings was recorded for costs incurred related to
information systems development costs pertaining to the opening up of the
competitive electricity market in 1998. It is management's opinion that, at
this stage in the development of the future commercial and regulatory
environment, it would not be prudent to capitalize these costs.
6. INTEREST RATE SWAPS
As part of its risk management policy, the Company enters into interest rate
swap agreements under which counterparties have agreed to pay amounts to the
Company equal to variable interest obligations in consideration of amounts
payable by the Company equivalent to fixed rates of interest. If the
counterparty to the interest rate swap was to default on contractual payments,
the Company could be exposed to increased costs related to replacing the
original agreement. At December 31, 1997, the Company was party to interest
rate swap agreements with a notional value of (Pounds)650 million ($1.068
billion) which were at fixed interest rates varying between 7.13% and 7.50%.
Had the Company terminated its interest rate swap agreements on December 31,
1997, it would have incurred a loss of (Pounds)31 million ($51 million).
In January 1998, the Company issued (Pounds)200 million ($329 million) of
7.25% Eurobonds which are due in 2028 and paid (Pounds)14 million ($23
million) to terminate interest rate swaps with a notional value of (Pounds)200
million ($329 million). The termination payments will be deferred and
amortized over the remaining life of the debt instruments being hedged.
In February 1998, the Company issued $350 million aggregate principal amount
of 6.154% Senior Notes due 2003 and $300 million aggregate principal amount of
6.496% Senior Notes due 2008. Upon issuance of these notes, (Pounds)300
million of the above mentioned swaps and (Pounds)100 million new swap
agreements were consolidated with cross currency swaps to hedge the currency
exposure related to having sterling cash flows and dollar interest payments.
7. EXTRAORDINARY LOSS--WINDFALL TAX
In July 1997, the British Government announced a "windfall tax" to be
applied at that date to companies privatized by floatation and regulated by
relevant privatization statutes. A decrease in the UK statutory income tax
rate from 33% to 31% was also included in the legislation. The Company
recorded an extraordinary loss of (Pounds)134 million ($220 million) for the
windfall tax and an income tax benefit as a result of the change in the UK
statutory income tax rate of approximately (Pounds)12 million ($20 million)
during the quarter ended September 1997. The windfall tax is not deductible
for UK corporation tax purposes and is payable in two equal instalments on or
before December 1, 1997 and 1998.
F-40
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
8. SUBSEQUENT EVENTS
Following a profits warning issued by Ionica Group plc ("Ionica") in
November 1997, the fair value of the Company's investment in Ionica decreased
from (Pounds)54 million ($89 million) at April 1, 1997 to (Pounds)30 million
($49 million) at December 31, 1997 and an unrealized loss of (Pounds)18
million ($30 million), net of tax has been recorded. At April 30, 1998, the
fair value of the Company's investment in Ionica is valued at (Pounds)19
million ($31 million). This reduction of the fair value has not been included
as a charge against earnings as it is not considered that the diminution in
value is permanent.
F-41
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST, YORKSHIRE FINANCE, YORKSHIRE GROUP OR THE UNDER-
WRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE TRUST, YORKSHIRE FINANCE OR YORKSHIRE GROUP SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUAL-
IFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SO-
LICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 4
Enforceability of Civil Liabilities....................................... 4
Presentation of Certain Information and Exchange Rates.................... 5
UK Selling Restrictions................................................... 5
Forward Looking Statements................................................ 6
Summary................................................................... 7
Risk Factors.............................................................. 20
Yorkshire Group and the US Parents........................................ 28
Yorkshire Capital Trust I................................................. 31
US Accounting Treatment................................................... 31
Use of Proceeds........................................................... 32
Capitalization............................................................ 32
Selected Consolidated Financial Data...................................... 33
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 39
Business.................................................................. 51
The Electric Utility Industry in Great Britain............................ 60
Management................................................................ 71
Certain Relationships and Related Transactions............................ 73
Security Ownership........................................................ 73
Description of the Trust Securities....................................... 74
Description of the Trust Securities Guarantee............................. 85
Description of the Junior Subordinated Debentures......................... 88
Description of the Debentures Guarantee................................... 104
Relationship Among the Trust Securities, the Junior Subordinated
Debentures, the Trust Securities Guarantee and the Debentures Guarantee.. 105
Material Income Tax Considerations........................................ 107
ERISA Considerations...................................................... 114
Underwriting.............................................................. 115
Legal Opinions............................................................ 117
Experts................................................................... 117
Nature of Financial Information........................................... 117
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11,000,000
% TRUST SECURITIES
YORKSHIRE CAPITAL TRUST I
LIQUIDATION AMOUNT $25 PER
TRUST SECURITY
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
YORKSHIRE POWER
GROUP LIMITED
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
Filing Fees--Securities and Exchange Commission............... $ 81,130.00
*Rating Agencies' fees........................................ 105,000.00
*Trustee's fees............................................... 25,000.00
*Fees of Company Counsel...................................... 800,000.00
*Fees of NYSE................................................. 75,300.00
*Accounting fees.............................................. 50,000.00
*Printing and engraving costs................................. 100,000.00
*Miscellaneous expenses (including Blue-Sky expenses)......... 13,570.00
-------------
*Total Expenses............................................. $1,250,000.00
=============
</TABLE>
- --------
*Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under English law there is a general rule that any provision (whether
contained in a company's articles or in any other arrangement with the
company) exempting an officer of the company from, or indemnifying him
against, any liability for negligence, default, breach of duty or breach of
trust in relation to the company is void (this would include liability for
fraud or dishonesty). As an exception to this rule, a company may indemnify an
officer against a liability incurred by him in defending any proceedings
(whether civil or criminal), in which judgment is given in his favor or in
which he is acquitted. A company may also give an indemnity where, in any
proceedings against a director, the court relieves him from liability for
negligence, default, or breach of duty or breach of trust where he has acted
honestly and reasonably and having regard to all the circumstances, ought
fairly to be excused from liability. An indemnity is permitted where a
director acts within his powers and is not guilty of negligence or other
breach of duty. A company is also permitted to purchase insurance against any
such liability.
Subject to the general rule set out above, the Articles of Association of
Yorkshire Group provide that every director, other officer or auditor of
Yorkshire Group shall be indemnified out of the assets of Yorkshire Group
against any liability incurred by him in the actual or purported execution or
discharge of his duties or the exercise or purported exercise of his powers or
otherwise in relation to or in connection with his duties, powers or office.
This indemnity (i) shall not apply to any liability to the extent that it is
recovered from any other person and (ii) is subject to such officer or auditor
taking all reasonable steps to effect such recovery, so that the indemnity
shall not apply to the extent that an alternative right of recovery is capable
of being enforced.
Pursuant to the Memorandum and Articles of Association of Yorkshire Finance,
the directors and officers for the time being of Yorkshire Finance and any
trustee for the time being acting in relation to any of the affairs of
Yorkshire Finance and their heirs, executors, administrators and personal
representatives respectively shall be indemnified out of the assets of
Yorkshire Finance from and against all actions, proceedings, costs, charges,
losses, damages and expenses which they or any of them shall or may incur or
sustain by reason of any act done or omitted in or about the execution of
their duty in their respective offices or trusts, except such (if any) as they
shall incur or sustain by or through their own wilful neglect or default
respectively and no such director, officer or trustee shall be answerable for
the acts, receipts, neglects or defaults of any other director, officer or
trustee or for joining in any receipt for the sake of conformity or for the
solvency or honesty of any banker or other persons with whom any monies or
effects belonging to Yorkshire Finance may be lodged or deposited for safe
custody or for any insufficiency of any security upon which any monies of
Yorkshire Finance may be invested or for any other loss or damage due to any
such cause as aforesaid or which may happen in or about the execution of his
II-1
<PAGE>
office or trust unless the same shall happen through the wilful neglect or
default of such director, officer or trustee.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Yorkshire Finance issued:
(i) (Pounds)200 million ($338 million) aggregate principal amount of its
7.25% Guaranteed Bonds due 2028 (the "Guaranteed Eurobonds") which were
subscribed by Merrill Lynch International and UBS Limited (the "Managers").
The Managers agreed to subscribe for the Guaranteed Eurobonds at 7.25% of
their principal amount. Yorkshire Finance has agreed to pay the Managers a
selling commission of 0.25% of the principal amount of the Guaranteed
Eurobonds and a combined management and underwriting fee of 0.375% of such
principal amount. The Guaranteed Eurobonds are not to be offered or sold
within the US or to, or for the account or benefit of, US persons except in
accordance with Regulation S or in certain transactions exempt from the
registration requirements of the Securities Act.
(ii) $350,000,000 aggregate principal amount of its 6.154% Senior Notes
due 2003 and $300,000,000 aggregate principal amount of its 6.496% Senior
Notes due 2008 to a group of initial purchasers led by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, J.P. Morgan
Securities Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC
(the "Initial Purchasers"). The net proceeds of such sale were $645,950,000
, after deduction of the Initial Purchasers' discount (which was
$4,050,000). The sale by Yorkshire Finance of such Notes to the Initial
Purchasers was exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
(A) EXHIBITS
------------
<C> <S> <C>
1.1** Form of Underwriting Agreement
3.1** Memorandum and Articles of Association of Yorkshire Power
Group Limited
3.2** Certificate of Incorporation of Yorkshire Power Group
Limited
3.3** Memorandum and Articles of Incorporation of Yorkshire Power
Finance Limited
3.4** Certificate of Incorporation of Yorkshire Power Finance
Limited
4.1** Form of Subordinated Debenture Indenture of Yorkshire Power
Group Limited, Yorkshire Power Finance Limited, Banque
Generale du Luxembourg, as paying agent and transfer
agent, and the Indenture Trustee relating to the Junior
Subordinated Debentures
4.2** Form of First Supplemental Indenture to Subordinated
Debenture Indenture of Yorkshire Power Group Limited,
Yorkshire Power Finance Limited, Banque Generale du
Luxembourg, as paying agent and transfer agent, and the
Indenture Trustee relating to the Junior Subordinated
Debentures
4.3** Forms of Certificate of Junior Subordinated Debentures
(included as Exhibits A and B to Exhibit 4.2)
4.4** Certificate of Trust of Yorkshire Capital Trust I
4.5** Trust Agreement of Yorkshire Capital Trust I
4.6** Form of Amended and Restated Trust Agreement of Yorkshire
Capital Trust I
4.7** Form of Trust Security Certificate for Yorkshire Capital
Trust I (included as Exhibit E to Exhibit 4.6)
4.8** Form of Trust Securities Guarantee Agreement between
Yorkshire Power Group Limited and the Guarantee Trustee
relating to the Trust Securities
4.9** Form of Agreement as to Expenses and Liabilities (included
as Exhibit D to Exhibit 4.6)
4.10** Control Certificate of Yorkshire Capital Trust I
4.11** Form of Deposit Agreement between Yorkshire Power Finance
Limited and the Book-Entry Depositary
5.1** Opinion of Richards, Layton & Finger, P.A., special
Delaware counsel, as to the validity of the Trust
Securities to be issued by Yorkshire Capital Trust I
5.2 Opinion of Dewey Ballantine LLP, US counsel to Yorkshire
Power Group Limited, as to enforceability of the Trust
Securities Guarantee and the Debentures Guarantee to be
issued by Yorkshire Power Group Limited
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
(A) EXHIBITS
------------
<C> <S> <C>
5.3 Opinion of Maples and Calder, Cayman Islands counsel to
Yorkshire Power Finance Limited, as to the validity of the
Junior Subordinated Debentures to be issued by Yorkshire
Power Finance Limited
8.1 Opinion of Dewey Ballantine LLP, special tax counsel, as to
certain United States federal income tax matters
8.2 Opinion of Allen & Overy, special tax counsel, as to
certain United Kingdom tax matters
8.3 Opinion of Maples and Calder, special tax counsel, as to
certain Cayman Islands tax matters
10.1 Yorkshire Electricity Group plc Public Electricity Supply
License dated March 26, 1990 as modified by modifications
dated March 30, 1994, March 31, 1995, September 25, 1995,
December 11, 1997, December 30, 1997 and March 31, 1998.
10.2 Second Tier License to Supply Electricity for England and
Wales for Yorkshire Electricity Group plc dated June 8,
1990.
10.3 Modifications to Yorkshire Electricity Group plc Second
Tier License to Supply Electricity for England and Wales
dated October 24, 1990, April 22, 1992, March 11, 1994,
April 29, 1994 and January 19, 1998.
10.4 Second Tier License to Supply Electricity for Scotland for
Yorkshire Electricity Group plc dated March 25, 1991.
10.5 Modifications to Yorkshire Electricity Group plc Second
Tier License to Supply Electricity for Scotland dated June
15, 1992, June 30, 1993, March 11, 1994 and January 20,
1998.
10.6 Pooling and Settlement Agreement dated March 30, 1990 among
Yorkshire Electricity Group plc, National Grid Company plc
and other parties.
10.7 Master Connection and Use of System Agreement dated as of
March 30, 1990 among The National Grid Company plc, and
its users (including Yorkshire Electricity Group plc).
10.8 Master Agreement dated as of October 25, 1995 among The
National Grid Holding plc, The
National Grid Company plc, Yorkshire Electricity Group plc
and the other REC's.
10.9 Memorandum of Understanding among The National Grid Group
plc, Yorkshire Electricity Group plc and the other REC's,
dated November 17, 1995.
10.10 Agreement for (Pounds)1,085,000,000 Credit Facility for
Yorkshire Power Group Limited between Yorkshire Power
Group Limited and Union Bank of Switzerland.
12.1** Computation of ratios of earnings to fixed charges
15.1** Letter from Deloitte & Touche relating to unaudited interim
financial information
21.1** List of Subsidiaries of Yorkshire Power Group Limited
23.1** Consent of Deloitte & Touche
23.2** Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.1)
23.3** Consent of Dewey Ballantine LLP (included in Exhibit 5.2)
23.4** Consent of Maples & Calder (included in Exhibit 5.3)
23.5** Consent of Allen & Overy (included in Exhibit 8.2)
24.1** Power of Attorney of certain officers and directors of
Yorkshire Power Group Limited
24.2** Power of Attorney of certain officers and directors of
Yorkshire Power Finance Limited
25.1** Statement of Eligibility under the 1939 Act of The Bank of
New York, as Indenture Trustee under the Subordinated
Indenture
25.2** Statement of Eligibility under the 1939 Act of The Bank of
New York, as Guarantee Trustee under the Trust Securities
Guarantee Agreement of Yorkshire Power Group Limited
25.3** Statement of Eligibility under the 1939 Act of The Bank of
New York, as Property Trustee under the Amended and
Restated Trust Agreement of Yorkshire Capital Trust I
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
</TABLE>
- --------
**Previously filed
II-3
<PAGE>
(b) Financial Statement Schedules
The following financial statement schedule is filed as part of this
Registration Statement:
Schedule II--Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b) (1) or (4) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
(4) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933, may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing
provisions, or otherwise, the registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of
expenses incurred or paid by a director, officer or controlling person of
the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT, YORKSHIRE POWER GROUP LIMITED, CERTIFIES THAT IT HAS DULY CAUSED
THIS AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE
OF OHIO, ON THE 12TH DAY OF MAY, 1998.
Yorkshire Power Group Limited
/s/ Armando A. Pena
By: _________________________________
DIRECTOR AND CHIEF FINANCIAL
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Dr. E. Linn Draper, Jr. Chairman and
- ------------------------------------- Director (Principal May 12, 1998
DR. E. LINN DRAPER, JR. Executive Officer)
/s/ Donald M. Clements, Jr. Director
- ------------------------------------- May 12, 1998
DONALD M. CLEMENTS, JR.
/s/ Armando A. Pena Director, Chief
- ------------------------------------- Financial Officer May 12, 1998
ARMANDO A. PENA (Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Wayne H. Brunetti Director
- ------------------------------------- May 12, 1998
WAYNE H. BRUNETTI
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Richard C. Kelly Director
- ------------------------------------- May 12, 1998
RICHARD C. KELLY
/s/ Teresa S. Madden Director
- ------------------------------------- May 12, 1998
TERESA S. MADDEN
/s/ Armando A. Pena Authorized
- ------------------------------------- Representative in May 12, 1998
ARMANDO A. PENA the United States
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT, YORKSHIRE POWER FINANCE LIMITED, CERTIFIES THAT IT HAS DULY CAUSED
THIS AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, HEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE
OF OHIO, ON THE 12TH DAY OF MAY, 1998.
Yorkshire Power Finance Limited
/s/ Armando A. Pena
By: _________________________________
Name: Armando A. Pena
Title: Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING DIRECTORS AND OFFICERS OF YORKSHIRE POWER FINANCE LIMITED IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ Graham J. Hall Director (Principal
By: _________________________________ Executive Officer) May 12, 1998
GRAHAM J. HALL
/s/ Roger Dickinson Director
By: _________________________________ May 12, 1998
ROGER DICKINSON
/s/ Andrew G. Donnelly Director (Principal
By: _________________________________ Financial Officer, May 12, 1998
ANDREW G. DONNELLY Principal
Accounting Officer)
/s/ Armando A. Pena Authorized
By: _________________________________ Representative in May 12, 1998
ARMANDO A. PENA the United States
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT, YORKSHIRE CAPITAL TRUST I, CERTIFIES THAT IT HAS DULY CAUSED THIS
AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, HEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF
OHIO, ON THE 12TH DAY OF MAY, 1998.
Yorkshire Capital Trust I
AEP Resources, Inc., as Depositor
By: _________________________________
/s/ Jeffrey D. Cross
By: _________________________________
Name: Jeffrey D. Cross
Title: Vice President and General
Counsel
II-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Shareholders and Board of Directors
of Yorkshire Electricity Group plc and Subsidiaries
We have audited the consolidated financial statements of Yorkshire
Electricity Group plc and its subsidiaries (the "Company") as of March 31,
1997 and 1996, for each of the three years in the period ended March 31, 1997,
and have issued our report thereon dated July 15, 1997. Our audits also
included the financial statement schedule of the Company, listed in Item 16.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respect the information set forth therein.
Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
II-8
<PAGE>
YORKSHIRE ELECTRICITY GROUP LIMITED
YORKSHIRE ELECTRICITY GROUP PLC
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ --------------------- ---------- --------------
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ------------ ---------- ---------- ---------- --------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
DEDUCTED FROM ASSETS:
Accumulated Provision
for Uncollectible
Accounts............. 7 5 6(c) 6
Investment Provision.. 2 2
--- --- --- --- ---
YEAR ENDED MARCH 31,
1997................... 7 7 6 8
=== === === === ===
Accumulated Provision
for Uncollectible
Accounts............. 10 4 7(c) 7
Investment Provision.. 9 (8)(b) 1(d)
--- --- --- --- ---
YEAR ENDED MARCH 31,
1996................... 19 4 (8) 8 7
=== === === === ===
Accumulated Provision
for Uncollectible
Accounts............. 9 9 8(c) 10
Investment Provision.. 17 7 (2)(a) 13(d) 9
--- --- --- --- ---
YEAR ENDED MARCH 31,
1995................... 26 16 (2) 21 19
=== === === === ===
</TABLE>
- --------
(a) Provision reclassified due to repayment of loan by associate
(b) Provision transferred to a liability account for liabilities assumed in
connection with the sale of retailing joint venture
(c) Uncollectible accounts written-off
(d) Write-off investment
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1.1** Form of Underwriting Agreement
3.1** Memorandum and Articles of Association of Yorkshire Power Group
Limited
3.2** Certificate of Incorporation of Yorkshire Power Group Limited
3.3** Memorandum and Articles of Incorporation of Yorkshire Power
Finance Limited
3.4** Certificate of Incorporation of Yorkshire Power Finance Limited
4.1** Form of Subordinated Indenture of Yorkshire Power Group Limited,
Yorkshire Power Finance Limited, Banque Generale du Luxembourg,
as paying agent and transfer agent, and the Indenture Trustee
relating to the Junior Subordinated Debentures
4.2** Form of First Supplemental Indenture to Subordinated Indenture
of Yorkshire Power Group Limited, Yorkshire Power Finance
Limited, Banque Generale du Luxembourg, as paying agent and
transfer agent, and the Indenture Trustee relating to the
Junior Subordinated Debentures
4.3** Forms of Certificate of Junior Subordinated Debentures (included
as Exhibits A and B to Exhibit 4.2)
4.4** Certificate of Trust of Yorkshire Capital Trust I
4.5** Trust Agreement of Yorkshire Capital Trust I
4.6** Form of Amended and Restated Trust Agreement of Yorkshire
Capital Trust I
4.7** Form of Trust Security Certificate for Yorkshire Capital Trust I
(included as Exhibit E to Exhibit 4.6)
4.8** Form of Trust Securities Guarantee Agreement between Yorkshire
Power Group Limited and the Guarantee Trustee relating to the
Trust Securities
4.9** Form of Agreement as to Expenses and Liabilities (included as
Exhibit D to Exhibit 4.6)
4.10** Control Certificate of Yorkshire Capital Trust I
4.11** Form of Deposit Agreement between Yorkshire Power Finance
Limited and the Book-Entry Depositary
5.1** Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the Trust Securities to be
issued by Yorkshire Capital Trust I
5.2 Opinion of Dewey Ballantine LLP, US counsel to Yorkshire Power
Group Limited, as to enforceability of the Trust Securities
Guarantee and the Debentures Guarantee to be issued by
Yorkshire Power Group Limited
5.3 Opinion of Maples and Calder, Cayman Islands counsel to
Yorkshire Power Finance Limited, as to the validity of the
Junior Subordinated Debentures to be issued by Yorkshire Power
Finance Limited
8.1 Opinion of Dewey Ballantine LLP, special tax counsel, as to
certain United States federal income tax matters
8.2 Opinion of Allen & Overy, special tax counsel, as to certain
United Kingdom tax matters
8.3 Opinion of Maples and Calder, special tax counsel, as to certain
Cayman Island tax matters
10.1 Yorkshire Electricity Group plc Public Electricity Supply
License dated March 26, 1990, as modified by modifications
dated March 30, 1994, March 31, 1995, September 25, 1995,
December 11, 1997, December 30, 1997 and March 31, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.2 Second Tier License to Supply Electricity for England and Wales for
Yorkshire Electricity Group plc dated June 8, 1990.
10.3 Modifications to Yorkshire Electricity Group plc Second Tier License
to Supply Electricity for England and Wales dated October 24, 1990,
April 22, 1992, March 11, 1994, April 29, 1994 and January 19, 1998.
10.4 Second Tier License to Supply Electricity for Scotland for Yorkshire
Electricity Group plc dated March 25, 1991.
10.5 Modifications to Yorkshire Electricity Group plc Second Tier License
to Supply Electricity for Scotland dated June 15, 1992, June 30,1993,
March 11, 1994 and January 20, 1998.
10.6 Pooling and Settlement Agreement dated March 30, 1990 among Yorkshire
Electricity Group plc, National Grid Company plc and other parties.
10.7 Master Connection and Use of System Agreement dated as of March 30,
1990 among The National Grid Company plc, and its users (including
Yorkshire Electricity Group plc).
10.8 Master Agreement dated as of October 25, 1995 among The National Grid
Holding plc, The
National Grid Company plc, Yorkshire Electricity Group plc and the
other REC's.
10.9 Memorandum of Understanding among The National Grid Group plc,
Yorkshire Electricity Group plc and the other REC's, dated November
17, 1995.
10.10 Agreement for (Pounds)1,085,000,000 Credit Facility for Yorkshire
Power Group Limited between Yorkshire Power Group Limited and Union
Bank of Switzerland.
12.1** Computation of ratios of earnings to fixed charges
15.1** Letter from Deloitte & Touche relating to unaudited interim financial
information
21.1** List of Subsidiaries of Yorkshire Power Group Limited
23.1** Consent of Deloitte & Touche
23.2** Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.1)
23.3** Consent of Dewey Ballantine LLP (included in Exhibit 5.2)
23.4** Consent of Maples & Calder (included in Exhibit 5.3)
23.5** Consent of Allen & Overy (included in Exhibit 8.2)
24.1** Power of Attorney of certain officers and directors of Yorkshire Power
Group Limited
24.2** Power of Attorney of certain officers and directors of Yorkshire Power
Finance Limited
25.1** Statement of Eligibility under the 1939 Act of The Bank of New York,
as Indenture Trustee under the Subordinated Indenture
25.2** Statement of Eligibility under the 1939 Act of The Bank of New York,
as Guarantee Trustee under the Trust Securities Guarantee Agreement
of Yorkshire Power Group Limited
25.3** Statement of Eligibility under the 1939 Act of The Bank of New York,
as Property Trustee under the Amended and Restated Trust Agreement of
Yorkshire Capital Trust I
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
</TABLE>
- --------
** Previously filed
<PAGE>
Exhibit 5.2
May 1, 1998
Yorkshire Power Group Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Yorkshire Power Finance Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We are acting as United States counsel to Yorkshire Power Group Limited
("Yorkshire") and Yorkshire Power Finance Limited ("Yorkshire Finance") in
connection with the preparation of a Registration Statement on Form S-1,
including a preliminary prospectus, filed with the Securities and Exchange
Commission (the "Commission") on March 13, 1998 (the "Registration Statement"),
contemplating the registration under the Securities Act of 1933, as amended (the
"Act"), of (1) Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures") to be issued by Yorkshire Finance to Yorkshire Capital
Trust I (the "Trust"), (2) Trust Securities (liquidation amount $25 per Trust
Security) to be issued by the Trust, (3) Yorkshire's Trust Securities Guarantee
(as defined in the Registration Statement) with respect to such Trust Securities
and (4) Yorkshire's Debentures Guarantee (as defined in the Registration
Statement) with respect to the Junior Subordinated Debentures. The Junior
Subordinated Debentures and the Debentures Guarantee will be issued pursuant to
a subordinated indenture, as supplemented, among Yorkshire, Yorkshire Finance,
and the trustee named therein (the "Subordinated Indenture") and the Trust
Securities Guarantee will be issued pursuant to a guarantee agreement between
Yorkshire and the trustee named therein (the "Trust Securities Guarantee
Agreement"), in each case in the respective forms filed as exhibits to the
Registration Statement.
We are of the opinion that, upon compliance with the pertinent provisions
of the Act, the Trust Indenture Act of 1939, as amended, and the Public Utility
Holding Company Act of 1935, as amended, upon compliance with applicable
securities or blue sky laws of various jurisdictions, upon the adoption of
appropriate resolutions by each of the Directors of Yorkshire Finance or a duly
authorized committee thereof and the
<PAGE>
Directors of Yorkshire or a duly authorized committee thereof, when the
Subordinated Indenture has been duly executed and delivered by the proper
officers of Yorkshire, Yorkshire Finance and the trustee named therein, when the
Trust Securities Guarantee Agreement has been duly executed and delivered by the
proper officers of Yorkshire and the trustee named therein, and when the Junior
Subordinated Debentures, the Debentures Guarantee and the Trust Securities
Guarantee have been executed, authenticated and delivered in accordance with the
terms of the Subordinated Indenture and the Trust Securities Guarantee
Agreement, as the case may be, (i) the Debentures Guarantee and the Trust
Securities Guarantee will be valid, binding and legal obligations of Yorkshire
(subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and to
general principles of equity, whether considered in a proceeding at law or in
equity) and (ii) the Junior Subordinated Debentures will be valid, binding and
legal obligations of Yorkshire Finance (subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and to general principles of equity,
whether considered in a proceeding at law or in equity).
We are members of the State Bar of New York and we do not express any
opinion herein concerning any law other than the law of the State of New York,
the federal law of the United States. In rendering the opinion expressed in
clause (ii) immediately above with respect to the validity of the Junior
Subordinated Debentures, we have relied upon the opinion address to you and
dated the date hereof of Maples and Calder as to matters of Cayman Islands law.
We hereby consent to the reliance by Maples and Calder on the opinions
expressed herein insofar as such opinions relate to matters of New York
law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statements with respect to our firm under the
caption "Legal Opinions" in the Registration Statement. In giving the foregoing
consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission thereunder.
Very truly yours,
DEWEY BALLANTINE LLP
2
<PAGE>
EXHIBIT 5.3
[letterhead of Maples and Calder]
Effective as of 1st May, 1998
Issued on 12th May, 1998
To: Yorkshire Power Finance Limited
PO Box 309
George Town
Grand Cayman
Cayman Islands
British West Indies
Yorkshire Capital Trust I
1 Riverside Plaza
Columbus, Ohio
USA 43215
Dear Sirs:
RE: REGISTRATION STATEMENT ON FORM S-1
- --- ----------------------------------
We are Cayman Islands Counsel to Yorkshire Power Finance Limited ("Yorkshire
Finance") in connection with the preparation of a registration statement on Form
S-1, including a preliminary prospectus, filed with the United States Securities
and Exchange Commission (the "Commission") on 13th March, 1998 (the
"Registration Statement"), contemplating the registration under the United
States Securities Act of 1933, as amended (the "Securities Act"), of Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") to be issued by Yorkshire Finance and guaranteed by Yorkshire Power
Group Limited ("Yorkshire") and subscribed by Yorkshire Capital I. The Junior
Subordinated Debentures will be issued pursuant to a subordinated indenture, as
supplemented, to be entered into between Yorkshire Finance, Yorkshire and the
trustee named therein (the "Subordinated Indenture") in substantially the form
filed as an exhibit to the Registration Statement.
For the purposes of this opinion, we have reviewed the Companies Law (1995
Revision) of the Cayman Islands (the "Companies Law") and have examined and
relied upon:
1. the prospectus relating to the Junior Subordinated Debentures in the form
included in the Registration Statement;
2. the Memorandum and Articles of Association of Yorkshire Finance;
3. Certificate of Incorporation and Certificate of Incorporation on Change of
Name of Yorkshire Finance;
4. the form of the Subordinated Indenture;
5. the Minutes of a Meeting of the Board of Directors of Yorkshire Finance held
on 11th February, 1998 (the "Minutes"), the Power of Attorney granted by the
Company on 11th February, 1998 and the corporate records of Yorkshire
Finance; and
<PAGE>
2
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
6. a Certificate from a Director of Yorkshire Finance in the form annexed
hereto (the "Director's Certificate") and
7. the opinion dated the date hereof and given by Dewey Ballantine LLP, United
States counsel to Yorkshire Finance and Yorkshire (the "Dewey Ballantine
Opinion")
The following opinion is given only as to circumstances existing on the date
hereof and known to us and as to the laws of the Cayman Islands as the same are
in force at the date hereof. In giving this opinion, we have relied upon the
accuracy of the Director's Certificate and the Dewey Ballantine Opinion on the
date of issue hereof without further verification and have relied upon the
following assumptions, which we have not independently verified:-
(a) The Junior Subordinated Debentures and the Subordinated Indenture will be
duly authorised, executed and delivered by or on behalf of all relevant
parties (other than Yorkshire Finance);
(b) The choice of the laws of the State of New York as the governing law of the
Junior Subordinated Debentures and the Subordinated Indenture will be made
in good faith and would be regarded as a valid and binding selection which
will be upheld by the courts of the State of New York as a matter of New
York law and all other relevant courts (other than the courts of the
Cayman Islands);
(c) Copy documents or the forms of documents provided to us are true copies of,
or in the final forms of, the originals;
(d) The genuineness of all signatures;
(e) The power, authority and legal right of all parties under all relevant laws
and regulations (other than Yorkshire Finance under the laws of the Cayman
Islands) to execute and perform their respective obligations under the
Junior Subordinated Debentures and the Subordinated Indenture;
(f) The Junior Subordinated Debentures will be duly completed, executed and
authenticated and delivered in accordance with, and as contemplated by, the
provisions of the Subordinated Indenture;
(g) That all preconditions to the obligations of the parties to the Junior
Subordinated Debentures and the Subordinated Indenture have been or will be
satisfied or duly waived and there has been no breach of the terms of the
Junior Subordinated Debentures or the Subordinated Indenture; and
<PAGE>
3
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
(h) There is nothing under any law (other than the laws of the Cayman Islands)
which would or might affect the opinions hereinafter appearing.
Specifically, we have made no independent investigation of the laws of the
State of New York.
We render no opinion as to the negotiability or transferability by delivery of
any Junior Subordinated Debentures in any jurisdiction which does not recognise
such negotiability or transferability.
Based upon and subject to the foregoing and having regard to such legal
considerations as we deem relevant, we are of the opinion that:-
1. Yorkshire Finance has been duly incorporated and is validly existing under
the laws of the Cayman Islands;
2. Assuming that the precise terms of issue of the Junior Subordinated
Debentures are duly determined by an Attorney of the Company in accordance
with the resolutions set forth in the Minutes, the Subordinated Debentures
have been duly authorised by Yorkshire Finance and, when executed on behalf
of Yorkshire Finance, authenticated in the manner set forth in the Junior
Subordinated Indenture and delivered against due payment therefor, will
constitute the legal, valid and binding obligations of Yorkshire Finance
enforceable in accordance with their terms, except and insofar as such
enforcement may be limited as hereinafter set forth. The term "enforceable"
as used above means the obligations assumed by Yorkshire Finance under the
Junior Subordinated Debentures are of a type which the Courts of the Cayman
Islands enforce. It does not mean those obligations will necessarily be
enforced in all circumstances in accordance with their terms and we would
draw to your attention:
(i) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization and other laws of general application relating to or
affecting the rights of creditors;
(ii) enforcement may be limited by general principles of equity - for
example, equitable remedies such as specific performance may not be
available, inter alia, where damages are considered to be an adequate
remedy;
(iii) claims may become barred under the statutes of limitation or may be or
become subject to defences of set-off or counterclaim;
(iv) where obligations are to be performed in a jurisdiction outside the
Cayman Islands, they may not be enforceable in the Cayman Islands to the
extent that performance would be illegal under the laws of that
jurisdiction;
(v) in the event of any proceedings being brought in the Cayman Islands
courts in respect of a monetary obligation expressed to be payable in a
currency other than Cayman
<PAGE>
4
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
Islands dollars, a Cayman Islands court will give judgement expressed as
an order to pay such other currency on enforcement of the judgement.
With respect to winding up proceedings, Cayman Islands law will require
that all claims or debts are converted into Yorkshire Finance's
functional currency of account;
(vi) Cayman Islands stamp duty will be payable if any of the Junior
Subordinated Debentures or the Subordinated Indenture is brought to or
executed in the Cayman Islands, which duty would be up to CI$250 on each
of the Junior Subordinated Debentures (unless Yorkshire Finance has paid
a duty of CI$500 in respect of the issue of the Junior Subordinated
Debentures) and would be CI$40 on the Subordinated Indenture;
(vii) a certificate, determination, calculation or designation of any party to
the foregoing documents as to any matter provided therein might be held
by a Cayman Islands court not to be conclusive, final and binding if,
for example, it could be shown to have an unreasonable or arbitrary
basis or in the event of manifest error;
(viii) although there is no statutory enforcement in the Cayman Islands of
judgments obtained in New York, the courts of the Cayman Islands will
recognise and enforce a foreign judgment of a court of competent
jurisdiction without reexamination or relitigation of the matter
adjudicated upon, based on the principle that a judgment of a competent
foreign court imposes upon the judgment debtor an obligation to pay the
sum for which judgment has been given, and provided such judgment is
final, for a liquidated sum not in respect of taxes or a fine or
penalty, and which was not obtained in a manner, and is not of a kind
the enforcement of which is, contrary to the public policy of the Cayman
Islands; a Cayman Islands court may stay proceedings if concurrent
proceedings are being brought elsewhere;
(ix) obligations to make payments that may be regarded as penalties will not
be enforceable to the extent that they are penal;
(x) in principle a Cayman Islands court will award costs and disbursements
in litigation in accordance with contractual provisions in this regard
but the applicable rule of court (GCR Order 62, rule 2) has been in
force only since 1st June, 1995 and there remains some uncertainty as to
the way in which it will be applicable in practice. Whilst it is clear
that costs incurred prior to judgement can be recovered in accordance
with the contract, it is likely that post-judgment costs will be
recoverable, if at all, in accordance with the scales laid down in the
Grand Court (Taxation of Costs) Rules 1995;
(xi) we reserve our opinion as to the extent to which a Cayman Islands court
would, in the event of any relevant illegality, sever the offending
provisions and enforce the remainder of the transaction of which such
provisions form a part, notwithstanding any express provisions in this
regard;
<PAGE>
5
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
(xii) to maintain Yorkshire Finance in good standing under the laws of the
Cayman Islands, annual filing fees must be paid and Returns made to the
Registrar of Companies;
(xiii) the obligations of Yorkshire Finance under the Junior Subordinated
Debentures or the Subordinated Indenture which involve the government of
any country which is currently the subject of United Nations sanctions as
extended to the Cayman Islands by an Order in Council (namely Iraq and
Libya and each an "Affected Country"), any person or body resident in,
incorporated in or constituted under the laws of any Affected Country or
exercising public functions in any Affected Country or any person or body
controlled by any of the foregoing or by any person acting on behalf of
any of the foregoing may be subject to restrictions pursuant to such
sanctions as implemented under the laws of the Cayman Islands;
(xiv) if Yorkshire Finance obtains a beneficial interest in any of the Junior
Subordinated Debentures then its rights and obligations in respect
thereof may merge thus extinguishing its rights and obligations in
respect thereof, so that any attempted resale of those Junior
Subordinated Debentures might constitute a separate issue of debt
obligations;
(xvi) we make no comment with regard to the references to foreign statutes in
the Junior Subordinated Debentures or the Subordinated Indenture.
This opinion is for the benefit of the addressees but may be relied upon
by the addressees' legal advisors (in that capacity only). We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the reference to us under the heading "Legal Opinions" in the prospectus
included in the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules or regulations of the
Commission thereunder.
Yours faithfully
/s/ Maples and Calder
<PAGE>
Exhibit 8.1
May 12, 1998
Yorkshire Power Group Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Yorkshire Power Finance Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We are acting as United States counsel to Yorkshire Power Group Limited and
Yorkshire Power Finance Limited in connection with the preparation of a
Registration Statement on Form S-1, including a preliminary prospectus, filed
with the Securities and Exchange Commission (the "Commission") on March 13, 1998
(the "Registration Statement").
We hereby confirm that the statements as to matters of law and legal
conclusions set forth under the caption "Certain Income Tax Considerations- US
Federal Income Tax Considerations" in the preliminary prospectus included in the
Registration Statement are the opinions of Dewey Ballantine LLP and are correct
in all material respects.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name under the
heading "Material Income Tax Considerations - US Federal Income Tax
Considerations" in the preliminary prospectus forming part of the Registration
Statement. In giving the foregoing consent, we do not hereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Commission thereunder.
Very truly yours,
DEWEY BALLANTINE LLP
<PAGE>
EXHIBIT 8.2
May 12, 1998
Yorkshire Power Group Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS
Yorkshire Power Finance Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS
Yorkshire Capital Trust I
1 Riverside Plaza
Columbus, Ohio 43215
Dear Ladies and Gentlemen,
Registration Statement on Form S-1
We are legal advisers as to English law to Yorkshire Capital Trust I, Yorkshire
Power Group Limited and Yorkshire Power Finance Limited in connection with the
preparation of a Registration Statement on Form S-1, including a preliminary
prospectus, filed with the Securities and Exchange Commission (the "Commission")
on 13th March, 1998 (the "Registration Statement").
We confirm that the information relating to United Kingdom taxation
in the section of the preliminary Prospectus headed "Material Income Tax
Considerations" and specifically the paragraphs headed "UK Tax Considerations"
is the opinion of Allen & Overy and is correct in all material respects.
We consent to the filing of this opinion with the Commission as an exhibit to
the Registration Statement and to the use of our name under the heading "Tax
Considerations - UK Tax Considerations" in the preliminary prospectus forming
part of the Registration Statement. In giving the foregoing consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Commission thereunder.
Yours faithfully,
ALLEN & OVERY
<PAGE>
EXHIBIT 8.3
[Letterhead of Maples and Calder]
Effective as of 1st May, 1998
Issued on 12th May, 1998
To: Yorkshire Power Finance Limited
PO Box 309
George Town
Grand Cayman
Cayman Islands
British West Indies
Dear Sirs:
RE: REGISTRATION STATEMENT ON FORM S-1
- --- ----------------------------------
We are Cayman Islands Counsel to Yorkshire Power Finance Limited in connection
with the registration statement on Form S-1, including a preliminary prospectus,
filed with the Securities and Exchange Commission (the "Commission") on 13th
March, 1998 (the "Registration Statement").
We confirm that the statements as to matters of law and legal conclusions set
forth under the caption "Cayman Islands Taxation" in the preliminary prospectus
included in the Registration Statement are the opinion of Maples and Calder and
are correct in all material respects.
We here by consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name under the
heading "Cayman Islands Taxation" in the preliminary prospectus forming part of
the Registration Statement. In giving the foregoing consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the United States Securities Act of 1933, as amended, or the
rules or regulations of the Commission thereunder.
Yours faithfully
/s/ Maples and Calder
<PAGE>
TABLE OF CONTENTS
-----------------
Yorshire Power
Exhibit 10.1
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I: TERMS OF THE LICENCE 1
PART II: THE CONDITIONS 2
1. Interpretation 2
2. Separate accounts for separate businesses 19
2A. Restriction on activity and financial ring-fencing 24
2B. Availability of resources 26
2C. [Not applicable] 29
2D. Credit rating of Licensee 30
3. Charge restriction conditions: definitions 31
3A. Restriction of distribution charges 38
Annex A to Condition 3A 45
Annex B to Condition 3A 46
3B. Restriction of supply charges 47
Annex A to Condition 3B 55
Annex B to Condition 3B 56
Annex C to Condition 3B 57
Annex D to Condition 3B 58
3C. [No longer used] 59
3D. Restriction of distribution charges and of supply charges: adjustments 60
3E. Information to be provided to the Director in connection with the
charge restriction conditions 62
3F. Allowances in respect of security costs 67
3G. Duration of charge restriction conditions 71
4. Prohibition of cross-subsidies and of discrimination in electricity sale
contracts 73
4A. Prohibition of discrimination in supply 74
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4B. Duration of discrimination conditions 79
5. Obligation on economic purchasing 81
6. Restriction on own-generation capacity 84
7. Tariffs 89
7A. Arrangements for informing customers on revocation of Licence 90
7B. The Programme Implementation Agreement 92
8. Basis of charges for top-up and standby supplies or sales of electricity,
exempt supply services, use of system and connection to the system:
requirements for transparency 96
8A. Non-discrimination in the provision of top-up or standby supplies or
sales of electricity, exempt supply services, use of system and
connection to the system 102
8B. Requirement to offer terms 104
8C. Requirement to offer Standard Terms of Connection 111
8D. Functions of the Director 113
9. Distribution system planning standard and quality of service 115
9A. Security and safety of supplies 116
9B. Procedures for the detection and prevention of theft, damage and
meter interference 119
9C. Provisions relating to the connection of metering equipment 120
9D. Agreements for the provision of meters 122
10. Generation security standard 123
11. Distribution Code 126
11A. The Metering Point Administration Service and the Master
Registration Agreement 129
11B. Establishment of a Data Transfer Service 132
11C. Requirement to offer terms for the provision of Metering and Data
Services 135
11D. Non-discrimination in the provision of Metering and Data Services 138
11E. Basis of charges for Metering and Data Services: requirements for
transparency 139
11F. Functions of the Director 141
12. Restriction on use of certain information 142
13. Compliance with the Grid Code 147
14. Security arrangements 148
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
15. Pooling and Settlement Agreement 149
16. Conditions of supply affecting customers' statutory rights 150
17. Licensee's apparatus on customers' side of meter 152
18. Code of practice on payment of bills and guidance for dealing with
customers in difficulty 153
19. Record of and report on performance 155
20. Provision of services for persons who are of pensionable age or disabled or 157
chronically sick
20A. Code of practice on procedures with respect to site access 159
21. Standards of performance 160
22. Efficient use of electricity 161
23. Complaint handling procedure 163
23A. Preparation, review of and compliance with customer service codes 164
23B. Information given to Designated Customers 166
23C. Publication of information to customers 167
24. Relations with the Relevant Consumers' Committee 168
25. Health and safety of employees 169
26. [No longer used] 170
27. Disposal of relevant assets 171
28. Provision of information to the Director 175
29. Payment of fees 177
30. Designated Premises 179
31. Terms for supply of electricity incompatible with Licence Conditions 181
32. Limitation on requirements for termination fees 182
33. Revision of Contract Terms Conditions 183
PART III: THE CONTRACT TERMS CONDITIONS
34. Designated Supply Contracts 186
35. Contractual terms 187
36. Notification of terms 189
37. Security Deposits 191
38. Termination of contracts on notice 193
39. Termination of contracts in specified circumstances 195
40. Assignment of outstanding charges 197
41. Modification of provisions under Conditions 38 and 40 199
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
SCHEDULE 1: Description of authorised area 201
SCHEDULE 2: Terms as to revocation 203
SCHEDULE 3: Supplementary provisions of the charge restriction conditions 206
PART A Principles for attribution of the fossil fuel levy and of
payments in lieu thereof, transmission connection point charges,
remote transmission asset rentals and distribution losses 206
PART B EHV premises 209
PART C Excluded services 210
PART D Regulated distribution unit categories 214
PART E Calculation of factor in respect of distribution losses 216
</TABLE>
4
<PAGE>
PART I: TERMS OF THE LICENCE
-----------------------------
1. The Secretary of State, in exercise of the powers conferred by Section 6 (1)
(c), Section 6 (6) and Section 7 of the Electricity Act 1989 (hereinafter
referred to as the "Act") hereby licenses Yorkshire Electricity Group plc
(registered in England and Wales under number 2366995) as public electricity
supplier to supply electricity to any premises in the authorised area
designated in Schedule 1 below during the period specified in paragraph 3
below, subject to the Conditions set out in Part II and Schedule 3 below
(hereinafter referred to as the "Conditions").
2. The Conditions are subject to modification or amendment in accordance with
their terms or with Sections 11, 14 or 15 of the Act. This licence is
further subject to the terms as to revocation specified in Schedule 2.
3. This licence shall come into force on the transfer date appointed under
section 65 of the Act and unless revoked in accordance with the provisions
of Schedule 2 shall continue until determined by not less than 25 years'
notice in writing given by the Secretary of State to the licensee, such
notice not to be served earlier than a date being 10 years after the licence
comes into force.
JOHN WAKEHAM
26 March, 1990 Secretary of State for Energy
<PAGE>
PART II: THE CONDITIONS
-----------------------
CONDITION 1: INTERPRETATION
- ----------------------------
1. Unless the contrary intention appears, words and expressions used in the
Conditions shall be construed as if they were in an Act of Parliament and
the Interpretation Act 1978 applied to them and references to an enactment
shall include any statutory modification or re-enactment thereof after the
date when this Licence comes into force.
2. Any word or expression defined for the purposes of any provision of Part 1
of the Act shall, unless the contrary intention appears, have the same
meaning when used in the Conditions.
3. In the Conditions unless the context otherwise requires:
"Act" means the Electricity Act 1989.
"affiliate" in relation to the Licensee means any holding
company of the Licensee, any subsidiary of
the Licensee or any subsidiary of a holding
company of the Licensee.
"Auditors" means the Licensee's auditors for the time
being holding office in accordance with the
requirements of the Companies Act 1985.
"authorised" in relation to any business or activity means
authorised by licence granted under Section 6
or by exemption granted under Section 5 of
the Act.
"authorised area" means the area from time to time comprised in
Schedule 1 to this Licence.
2
<PAGE>
"Authorised Electricity Operator" means any person (other than the
Licensee) who is authorised to generate,
transmit or supply electricity and for
the purposes of Conditions 8A to 8C
inclusive shall include any person who
has made an application to be so
authorised which has not been refused
and any person transferring electricity
to or from England and Wales across an
interconnector or who has made an
application for use of interconnector
which has not been refused.
"Condition" means a condition set out in this Part
of this Licence.
"connection charges" means charges made or levied or to be
made or levied for the carrying out
(whether before or after the date on
which the Licence comes into force) of
works and provision and installation of
electrical plant, electric lines and
ancillary meters in constructing or
modifying entry and exit points on the
Licensee's Distribution System together
with charges in respect of maintenance
and repair of such items in so far as
not otherwise recoverable as use of
system charges and in respect of
disconnection and the removal of
electrical plant, electric lines and
ancillary meters following
disconnection, all as more fully
described in paragraphs 5 and 9 of
Condition 8, whether or not such charges
are annualised.
"contract" in relation to the supply of electricity
by the Licensee to a customer at
premises, means a special agreement in
accordance with section 22 of the Act.
"Contract Terms Conditions" means, as the context requires, either
the Conditions contained in Section C of
this Licence or those Conditions
together with the equivalent Conditions
contained in the licences of all other
Electricity Suppliers.
3
<PAGE>
"customer" means any person supplied or requiring
to be supplied with electricity at
premises within the authorised area
whether by the Licensee (including any
affiliate or related undertaking of the
Licensee) or, where the context
requires, by another Electricity
Supplier, but shall not include any
Authorised Electricity Operator in its
capacity as such.
"data aggregation services" has the meaning given at sub-paragraph
1(e) of Condition 11C.
"data processing services" has the meaning given at sub-paragraph
1(d) of Condition 11C.
"data retrieval services" has the meaning given at sub-paragraph
1(c) of Condition 11C.
"Data Transfer Catalogue" has the meaning given at sub-paragraph
6(c) of Condition 11A.
"Data Transfer Service" means the service to be established,
operated and maintained by the Licensee,
in conjunction and co-operation with all
other public electricity suppliers, in
accordance with Condition 11B.
"data transfer services" means the services of the Data Transfer
Service established in accordance with
Condition 11B.
"date of the contract" means, in respect of any contract, the
date on which that contract is entered
into.
4
<PAGE>
"Declared Net Capacity" means, in relation to generation plant,
the highest generation of electricity at
the main alternator terminals which can
be maintained for an indefinite period
of time without causing damage to the
plant, less so much of that capacity as
is consumed by the plant.
"deposit" means a deposit of money by way of
security for the payment of charges for
the supply of electricity.
"Designated Customer" means a customer supplied or requiring
to be supplied with electricity at
Designated Premises (but excluding such
customer in so far as he is supplied or
requires to be supplied at premises
other than Designated Premises).
"Designated Premises" has the meaning determined in accordance
with Condition 30.
"Designated Supply Contract" has the meaning given in Condition 34.
"Distribution Business" means the business of the Licensee or
any affiliate or related undertaking
comprising or ancillary to:
(a) the distribution (whether for its
own account or that of third
parties) of electricity through the
Licensee's Distribution System,
including any business in providing
connections to such system; and
(b) the provision of Metering and Data
Services (other than prepayment
meter services).
5
<PAGE>
"Distribution Code" means the Distribution Code required to
be prepared pursuant to Condition 11 and
approved by the Director, as from time
to time revised with the approval of the
Director.
"Domestic Customer" means a customer supplied or requiring
to be supplied with electricity at
Domestic Premises (but excluding such
customer in so far as he is supplied or
requires to be supplied at premises
other than Domestic Premises).
"Domestic Premises" means premises at which a supply is
taken wholly or mainly for domestic
purposes.
"electricity purchase contract" includes any contract or arrangement,
other than for the supply of electricity
to a customer at premises, under which
provision is made for the making or
receipt of payments by reference to the
difference between
(a) an amount specified or
ascertainable under the terms of
such contract or arrangement; and
(b) the price at which electricity is
sold or purchased under the
Pooling and Settlement Agreement
or any component of either of such
prices;
and
"electricity sale contract" shall be construed accordingly.
"Electricity Supplier" means either a Second Tier Supplier or a
public electricity supplier.
6
<PAGE>
"equivalent megawatt" in circumstances where demand is
measured only in megavolt amperes means
megavolt amperes converted into
megawatts using for this purpose a power
factor of 0.9 megawatts per megavolt
ampere or such other factor as may with
the approval of the Director be taken as
being appropriate having regard to
electrical characteristics of the
supply, and cognate expressions shall be
construed accordingly.
"established connection" means, in relation to any premises, an
existing connection to the Licensee's
Distribution System which does not
require modification, or a new or
modified connection to such system in
respect of which all works have been
completed, such that in either case
electricity is able to be supplied to
the premises in accordance with the
terms of the relevant supply agreement.
"Exempt Supplier" means a person who is authorised to
supply electricity by virtue of an
exemption granted under Section 5 of the
Act.
"exempt supply services" means the services detailed at paragraph
4 of Condition 8B, as provided by the
Licensee to Exempt Suppliers in respect
of premises within the authorised area.
"financial year" bears the meaning given to it at
paragraph 1 of Condition 2.
"fixed term period" means, in relation to any Designated
Supply Contract, a specified period of
more than 12 months during which the
Principal Terms of that contract may not
be varied by the Licensee other than by
agreement with the customer.
"Fuel Security Code" means the document of that title
designated as such by the Secretary of
State as from time to time amended.
7
<PAGE>
"Generation Business" means the business (if any) in the
generation of electricity, being a
business involving own-generation sets
or in which there is an accountable
interest in generation sets, as defined
for the purposes of Condition 6.
"generation set" means any plant or apparatus for the
production of electricity and shall
where appropriate include a generating
station comprising more than one
generation set.
"goods or services" includes electric lines and electric
plant, and goods or services designed or
calculated to promote the efficient use
of electricity, but excludes meters,
meter operation and prepayment systems,
and data retrieval and related services.
"Grid Code" means the Grid Code required to be
prepared by the Transmission Company and
approved by the Director as from time to
time revised with the approval of the
Director.
"Grid Supply Point" means any point at which electricity is
delivered to the Licensee's Distribution
System from the Transmission System.
"half-hourly metering equipment" means metering equipment which is
configured to record the quantity of
electricity (to be calculated in kWh)
supplied to premises during each half
hour period of supply and "non-half-
hourly metering equipment" shall be
construed accordingly.
"holding company" means a holding company within the
meaning of Sections 736, 736A and 736B
of the Companies Act 1985.
8
<PAGE>
"interconnectors" means the electric lines and electrical
plant and meters owned or operated by
the Transmission Company solely for the
transfer of electricity to or from the
Transmission System into or out of
England and Wales.
"Licensee" means Yorkshire Electricity Group plc
(registered in England and Wales under
number 2366995) and (where the context
so requires) shall include any Area
Board in respect of which the Licensee
is the successor company.
"Licensee's Distribution System" means the system of electric lines
situated wholly or partly within the
authorised area owned or operated by the
Licensee for the distribution of
electricity between the Grid Supply
Points or generation sets or other entry
points and the points where it is
delivered to customers or Authorised
Electricity Operators, and includes any
Remote Transmission Assets owned by the
Transmission Company operated by the
Licensee and any electrical plant and
meters owned or operated by the Licensee
in connection with the distribution of
electricity, and references to the
distribution system of any Authorised
Electricity Operator shall be construed
accordingly.
"Master Registration Agreement" means the agreement of that title to be
prepared by the Licensee, in conjunction
and co-operation with all other public
electricity suppliers, in accordance
with and comprising such matters as are
set out in Condition 11A.
"megawatt" or "MW" includes an equivalent megawatt.
"meter operation services" has the meaning given at sub-paragraph
1(b) of Condition 11C.
9
<PAGE>
"meter provision services" has the meaning given at sub-paragraph
1(a) of Condition 11C.
"Metering and Data Services" has the meaning given in Condition 11C.
"metering equipment" includes any meter and any associated
equipment which materially affects the
operation of that meter.
"Metering Point Administration means the service to be established,
Service" operated and maintained by the Licensee
in accordance with Condition 11A.
"metering point administration means the services of the Metering Point
services" Administration Service established in
accordance with Condition 11A or, where
the context requires, means the
equivalent services provided by any
other public electricity supplier in
accordance with the provisions of its
public electricity supply licence.
"notice" means (unless otherwise specified)
notice given in writing or by any other
reasonable means.
"participating interest" bears the meaning ascribed to that
expression by Section 260 of the
Companies Act 1985.
10
<PAGE>
"Permitted Purpose" means the purpose of all or any of the
following:
(a) the Supply Business, the Second
Tier Supply Business, the
Distribution Business or any
business or activity within the
limits of paragraph 4(e) of
Condition 2A;
(b) the Generation Business;
(c) any business conducted or activity
carried on by the Licensee or by an
affiliate or related undertaking of
the Licensee on 31 March 1997; and
(d) without prejudice to the generality
of paragraphs (a) to (c), any
payment or transaction lawfully
made or undertaken by the Licensee
for a purpose within sub-paragraphs
(i) to (ix) of paragraph 5(b) of
Condition 27.
"Pooling and Settlement means the agreement of that title
Agreement" approved by the Secretary of State as
from time to time amended with the
approval of the Director (where so
required pursuant to its terms).
"prepayment meter services" has the meaning given at sub-paragraph
1(f) of Condition 11C.
11
<PAGE>
"Principal Terms" means, in respect of any form of
Designated Supply Contract, those terms
which relate to:
(a) charges for the supply of electricity;
(b) any requirement to pay charges for the
supply by prepayment through a
prepayment meter;
(c) any requirement for a security
deposit;
(d) the duration of the contract;
(e) the rights to terminate the contract
(including any obligation to pay a
termination fee); and
(f) the obligation to enter into an
agreement on the Standard Terms of
Connection,
and such other terms as may reasonably be
considered significantly to affect the
evaluation of the contract.
"related undertaking" in relation to the Licensee means any
undertaking in which the Licensee has a
participating interest.
"Relevant Consumers' Committee" means the committee appointed by the
Director under Section 2 of the Act for
the area in respect of which the Licensee
is the public electricity supplier.
"relevant premises" in relation to a Designated Supply
Contract, means any premises supplied with
electricity under the terms of the
contract.
12
<PAGE>
"Remote Transmission Assets" means any electric lines, electrical
plant or meters owned by the
Transmission Company which:
(a) are embedded in the distribution
system of the Licensee or any
Authorised Electricity Operator
other than the Transmission Company
and are not directly connected by
lines or plant owned by the
Transmission Company to a sub-
station owned by the Transmission
Company; and
(b) are by agreement between the
Transmission Company and the
Licensee or such Authorised
Electricity Operator operated under
the direction and control of the
Licensee or such Authorised
Electricity Operator.
"representation" includes any objection or any other
proposal made in writing.
"Retail Price Index" means the general index of retail prices
published by the Office for National
Statistics each month in respect of all
items or:
(a) if the index for any month in any
year shall not have been published
on or before the last day of the
third month after such month, such
index for such month or months as
the Director may after consultation
with the Licensee determine to be
appropriate in the circumstances; or
(b) if there is a material change in the
basis of the index, such other index
as the Director may after
consultation with the Licensee
determine to be appropriate in the
circumstances.
13
<PAGE>
"Second Tier Supplier" means a person authorised to supply
electricity pursuant to Section 6(2) of
the Act.
"Second Tier Supply Business" means the authorised business (if any)
of the Licensee or any affiliate or
related undertaking as a private
electricity supplier.
"Settlement Agreement for means the agreement of that title to be
Scotland" prepared in accordance with, and
comprise such matters as are set out in,
Condition 24 of Part V of the Scottish
Generation, Transmission and Public
Electricity Supply Licences.
"settlement purposes" means for the purposes of settlement as
set out in the Pooling and Settlement
Agreement or the Settlement Agreement
for Scotland.
"Separate Business" means each of the Distribution, Supply,
Second Tier Supply and Generation
Businesses taken separately from one
another and from any other business of
the Licensee, but so that where all or
any part of such business is carried on
by an affiliate or related undertaking
of the Licensee such part of the
business as is carried on by that
affiliate or related undertaking shall
be consolidated with any other such
business of the Licensee (and of any
other affiliate or related undertaking)
so as to form a single Separate
Business.
"Standard Terms of Connection" means the terms approved by the
Director, in accordance with Condition
8C, for the retention of an established
connection to the Licensee's
Distribution System.
14
<PAGE>
"standby" means the periodic or intermittent
supply or sale of electricity:
(a) to an Authorised Electricity
Operator to make good any
shortfall in the availability of
electricity to that operator for
the purposes of its supply of
electricity to persons seeking
such supply; or
(b) to a customer of the Licensee to
make good any shortfall between
the customer's total supply
requirements and that met either
by its own generation or by
electricity supplied by an
Authorised Electricity Operator
other than the Licensee
such standby supply or sale being
provided at such entry or exit point on
the Licensee's Distribution System as
the operator or customer may request.
"subsidiary" means a subsidiary within the meanings
of Sections 736, 736A and 736B of the
Companies Act 1985.
"Supply Business" means the authorised business of the
Licensee as public electricity supplier
in the authorised area, but shall not
include any activities forming part of
the Distribution Business.
"termination fee" means any sum of money or other penalty
(whether financial or otherwise) which
may be demanded of a customer solely in
consequence of the termination of a
contract to supply electricity to
premises.
15
<PAGE>
"top-up" means the supply or sale of electricity
on a continuing or regular basis:
(a) to an Authorised Electricity
Operator to make good any
shortfall in the availability of
electricity (including, where that
operator is using the Licensee's
Distribution System, to make good
any distribution losses on that
system) to that operator for the
purposes of its supply of
electricity to persons seeking
such supply; or
(b) to a customer of the Licensee to
make good any shortfall between
the customer's total supply
requirements and that met either
by its own generation or by
electricity supplied by an
Authorised Electricity Operator
other than the Licensee
such top-up supply or sale being
provided at such entry or exit point on
the Licensee's Distribution System as
the operator or customer may request.
"Transfer Date" means such date as may be appointed by
the Secretary of State by order under
Section 65 of the Act.
"Transmission Company" means The National Grid Company plc or
any other holder for the time being of a
Licence to transmit electricity in
England and Wales under Section 6(1)(b)
of the Act.
16
<PAGE>
"Transmission System" means the system consisting (wholly or
mainly) of high voltage electric lines
owned or operated by the Transmission
Company and used for the transmission of
electricity from one generating station
to a sub-station or to another
generating station, or between sub-
stations or to any interconnector, and
includes any electrical plant and meters
owned or operated by the Transmission
Company in connection with the
transmission of electricity but shall
not include any Remote Transmission
Assets.
"undertaking" bears the meaning ascribed to that
expression by Section 259 of the
Companies Act 1985.
"unmetered supply" means a supply of electricity to
premises which is not, for the purpose
of calculating the charges for
electricity supplied to the customer at
such premises, measured by metering
equipment.
"use of system" means use of the Licensee's Distribution
System for the distribution of
electricity by the Licensee for the
Supply Business or for any other
Authorised Electricity Operator.
"use of system charges" means charges made or levied or to be
made or levied by the Licensee for the
provision of services as part of the
Distribution Business to any Authorised
Electricity Operator or to the Licensee
for the purposes of its Supply Business
or Second Tier Supply Business as more
fully described at paragraph 4 of
Condition 8 and at paragraph C2 of Part
C of Schedule 3 to this Licence; but
shall not include connection charges.
"valid notice of termination" has the meaning given in Condition 38.
17
<PAGE>
4. Unless otherwise specified, any reference to a numbered Condition (with
or without a suffix letter) or Schedule is a reference to the Condition
or Schedule bearing that number in this Licence, and any reference to a
numbered paragraph (with or without a suffix letter) is a reference to
the paragraph bearing that number in the Condition or Schedule in which
the reference occurs.
5. In construing the provisions of this Licence, the heading or title of
any Part, Section, Condition, Schedule or paragraph shall be
disregarded.
6. Where any obligation of the Licensee is required to be performed by a
specified date or within a specified period, and where the Licensee has
failed so to perform, such obligation shall continue to be binding and
enforceable after the specified date or after the expiry of the
specified period (but without prejudice to all rights and remedies
available against the Licensee by reason of the Licensee's failure to
perform by that date or within that period).
7. The provisions of Section 109 of the Act shall apply for the purposes
of the delivery or service of any documents, directions or notices to
be delivered or served pursuant to any Condition or Schedule, and
directions issued by the Director pursuant to any Condition or Schedule
shall be delivered or served as aforesaid.
18
<PAGE>
CONDITION 2: SEPARATE ACCOUNTS FOR SEPARATE BUSINESSES
- -------------------------------------------------------
1. The first financial year of the Licensee shall run from 1st April 1990
to 31st March 1991, and thereafter each financial year of the Licensee
shall run from 1st April to the following 31st March.
2. The remaining paragraphs of this Condition apply for the purpose of
ensuring that the Licensee (and any affiliate or related undertaking)
maintains accounting and reporting arrangements which enable separate
accounts to be prepared for each Separate Business and showing the
financial affairs of each such Separate Business.
3. The Licensee shall in respect of each Separate Business:
(a) keep or cause to be kept for the period referred to in Section
222 (5) (b) of the Companies Act 1985 and in the manner
referred to in that section such accounting records in respect
of each Separate Business as would by Section 221 of the
Companies Act 1985 be required to be kept in respect of each
such business if it were carried on by a separate company, so
that the revenues, costs, assets, liabilities, reserves and
provisions of, or reasonably attributable to, each Separate
Business are separately identifiable in the books of the
Licensee (and any affiliate or related undertaking) from those
of any other business; and
(b) prepare on a consistent basis from such accounting records in
respect of:
(i) the financial year commencing on 1st April 1990 and
each subsequent financial year, accounting statements
comprising a profit and loss account, a balance sheet
and a statement of source and application of funds,
together with notes thereto, and showing separately
in respect of each Separate Business and in
appropriate detail the amounts of any revenue, cost,
asset, liability, reserve or provision which has been
either:
(aa) charged from or to any other business
(whether or not a Separate Business)
together with a description of the basis of
that charge; or
19
<PAGE>
(bb) determined by apportionment or allocation
between any Separate Business and any other
business (whether or not a Separate
Business) together with a description of the
basis of the apportionment or allocation;
and
(ii) the first six months of the financial year commencing
on 1st April 1990 and of each subsequent financial
year, an interim profit and loss account; and
(c) procure, in respect of the accounting statements prepared in
accordance with this Condition in respect of a financial year,
a report by the Auditors and addressed to the Director stating
whether in their opinion those statements have been properly
prepared in accordance with this Condition and give a true and
fair view of the revenues, costs, assets, liabilities,
reserves and provisions of, or reasonably attributable to, the
Separate Business to which the statements relate; and
(d) deliver to the Director a copy of the account referred to in
sub-paragraph (b) (ii) above, the Auditors' report referred to
in sub-paragraph (c) above and the accounting statements
referred to in sub-paragraph (b) (i) above as soon as
reasonably practicable, and in any event not later than three
months after the end of the period to which it relates in the
case of the account referred to in sub-paragraph (b) (ii) and
six months after the end of the financial year to which they
relate in the case of the accounting statements and Auditors'
report referred to in sub-paragraphs (b) (i) and (c) above.
4. Unless the Director so specifies in directions issued for the purposes
of this Condition or with his prior written approval the Licensee shall
not in relation to the accounting statements in respect of a financial
year change the bases of charge or apportionment or allocation referred
to in sub-paragraph (b) (i) of paragraph 3 from those applied in
respect of the previous financial year.
5. Where, in relation to the accounting statements in respect of a
financial year, the
20
<PAGE>
Licensee has changed such bases of charge or apportionment or
allocation from those adopted for the immediately preceding financial
year, the Licensee shall, if so directed in directions issued by the
Director, in addition to preparing accounting statements on those bases
which it has adopted, prepare such accounting statements on the bases
which applied in respect of the immediately preceding financial year.
21
<PAGE>
6. Accounting statements in respect of a financial year prepared under
sub-paragraph (b) (i) of paragraph 3 shall, so far as reasonably
practicable and unless otherwise approved by the Director having regard
to the purposes of this Condition:
(a) have the same content and format (in relation to each Separate
Business) as the annual accounts of the Licensee prepared
under Section 226 and, where appropriate, Section 227 of the
Companies Act 1985 and conform to the best commercial
accounting practices including Statements of Accounting
Practice issued by the member bodies of the Consultative
Committee of Accountancy Bodies currently in force; and
(b) state the accounting policies adopted; and
(c) (with the exception of the part of such statement which shows
separately the amounts charged, apportioned or allocated and
describes the bases of charge or apportionment or allocation
respectively and with the exception of the accounting
statements relating to the Second-Tier Supply Business), be
published with the annual accounts of the Licensee.
7. Unless the accounting statements prepared under sub-paragraph (b) (i)
of paragraph 3 are prepared on the current cost basis as provided by
the alternative accounting rules, the Licensee shall, unless otherwise
agreed by the Director, in addition to preparing those accounting
statements under that paragraph, prepare accounting statements for each
Separate Business covering the same period, which shall comprise and
show separately:
(a) a profit and loss account, a balance sheet and a statement of
source and application of funds, together with notes thereto,
which shall:
(i) include in respect of current cost assets amounts
determined on the current cost basis as provided by
the alternative accounting rules; and
22
<PAGE>
(ii) show or disclose the information and other matters
required by the alternative accounting rules to be
shown or disclosed in accounts where the amounts
included in respect of assets covered by any items
shown in those accounts have been determined on any
basis mentioned in paragraph 31 of Section C of Part
II of Schedule 4 to the Companies Act 1985;
(b) in respect of each Separate Business the adjusted amount of
any such provision for depreciation as is referred to in
paragraph 32 (2) of Section C of Part II of Schedule 4 to the
Companies Act 1985 and the items shown in the profit and loss
account of the Separate Business for the relevant period which
are affected by the determination of amounts on the current
cost basis as provided by the alternative accounting rules,
including the profit (or loss) before taxation; and
(c) such other current cost information as is referred to in the
Handbook as the Director may reasonably require
and shall deliver the same, together with the Auditors' report prepared
in relation to the current cost basis accounting statements in the form
referred to in sub-paragraph (c) of paragraph 3, to the Director within
the time limit referred to in sub-paragraph (d) of paragraph 3, and
shall (with the exception of the part of such statement which shows
separately the amounts charged, apportioned or allocated and describes
the bases of charge or apportionment or allocation respectively and
with the exception of the accounting statements relating to the Second-
Tier Supply Business) publish the same with the annual accounts of the
Licensee.
8. References in this Condition to costs or liabilities of, or reasonably
attributable to, any Separate Business shall be construed as excluding
taxation, capital liabilities which do not relate principally to a
particular Separate Business, and interest thereon; and references to
any profit and loss account shall be construed accordingly.
23
<PAGE>
9. Without prejudice to paragraph 1 of Condition 1, references in this
Condition to sections of the Companies Act 1985 are references to those
provisions as amended, substituted or inserted by the relevant
provisions of the Companies Act 1989 and if such provisions of the
Companies Act 1989 are not in force at the date of grant of this
Licence shall be construed as if such provisions were in force at such
date.
10. For the purposes of paragraph 7:
"alternative means the rules set out in Section C of Part
accounting rules" II of Schedule 4 to the Companies Act 1985.
"current cost assets" means assets of any description mentioned
in paragraph 31 of Section C of Part II of
Schedule 4 to the Companies Act 1985.
"the Handbook" means the handbook issued by the Accounting
Standards Committee of the Consultative
Committee of Accounting Bodies (CCAB
Limited) or any successor body entitled
"Accounting for the effects of changing
prices: a Handbook" in its current edition
for the time being or in the event that no
such handbook shall be in issue such
guidance or publication as may be issued in
replacement or substitution therefor.
24
<PAGE>
CONDITION 2A: RESTRICTION ON ACTIVITY AND FINANCIAL RING-FENCING
- -----------------------------------------------------------------
1. Save as provided by paragraphs 3 and 4, the Licensee shall not conduct
any business or carry on any activity other than the Supply Business,
the Second-Tier Supply Business and the Distribution Business.
2. The Licensee shall not without the written consent of the Director
acquire shares in any affiliate or related undertaking after 31 March
1997 except
(a) shares in any body corporate which was a subsidiary of the
Licensee on 31 March 1997;
(b) shares acquired in a body corporate to satisfy the obligation
imposed by paragraph 3;
(c) shares in a body corporate which conducts business only for a
Permitted Purpose; or
(d) shares acquired in order to avoid dilution of a shareholding
in a body corporate in which the Licensee holds shares in
conformity with this licence.
3. Notwithstanding paragraph 1, the licensee may continue to conduct any
business or carry on any activity otherwise prohibited by paragraph 1
which it was conducting or carrying on as at 31 March 1997, but by 31
March 1998 or such later date as the Director shall specify to the
Licensee in writing, shall transfer to an affiliate or otherwise cease
to conduct or carry on any such other business or activity.
4. Nothing in this Condition shall prevent:
(a) any affiliate or related undertaking from conducting any
business or carrying on any activity;
(b) the Licensee from holding shares as, or performing the
supervisory or management functions of, an investor in respect
of any body corporate in which it holds an interest
consistently with the provisions of this licence;
25
<PAGE>
(c) the Licensee from performing the supervisory or management
functions of a holding company in respect of any subsidiary;
(d) the Licensee from carrying on any business or conducting any
activity to which the Director has given his consent in
writing; or
(e) the Licensee from carrying on any business or conducting any
activity other than the Supply Business, the Second-Tier
Supply Business and the Distribution Business provided that
the aggregate turnover of all such other businesses or
activities does not in any financial year exceed 5% of the
aggregate turnover of the Supply Business, the Second-Tier
Supply Business and the Distribution Business (excluding the
turnover on transactions which the Supply Business the Second-
Tier Supply Business and the Distribution Business make with
each other) in the immediately preceding financial year.
26
<PAGE>
CONDITION 2B: AVAILABILITY OF RESOURCES
- ----------------------------------------
1. The Licensee shall at all times act in a manner calculated to secure
that it has sufficient management resources and financial resources and
financial facilities to enable it:
(a) to carry on the Supply Business and the Distribution Business, and
(b) to comply with its obligations under the Act and this Licence.
2. The Licensee shall submit a certificate addressed to the Director,
approved by a resolution of the board of directors of the Licensee and
signed by a director of the Licensee pursuant to that resolution. Such
certificate shall be submitted on 30 June 1997 and 30 June of each
subsequent year. Each certificate shall be in one of the following
forms:
(a) "After making enquiries, the directors of the Licensee have a
reasonable expectation that the Licensee will have available to
it, after taking into account in particular (but without
limitation) any dividend or other distribution which might
reasonably be expected to be declared or paid, sufficient
financial resources and financial facilities to enable the
Licensee to carry on the Supply Business and Distribution Business
for a period of 12 months from the date of this certificate."
(b) "After making enquiries, the directors of the Licensee have a
reasonable expectation, subject to what is said below, that the
Licensee will have available to it, after taking into account in
particular (but without limitation) any dividend or other
distribution which might reasonably be expected to be declared or
paid, sufficient financial resources and financial facilities to
enable the Licensee to carry on the Supply Business and
Distribution Business for a period of 12 months from the date of
this certificate. However, they would like to draw attention to
the following factors which may cast doubt on the ability of the
Licensee to carry on the Supply Business and Distribution
Business..."
27
<PAGE>
(c) "In the opinion of the directors of the Licensee, the Licensee
will not have available to it sufficient financial resources and
financial facilities to enable the Licensee to carry on the Supply
Business and Distribution Business for a period of 12 months from
the date of this certificate."
3. The Licensee shall submit to the Director with that certificate a
statement of the main factors which the directors of the Licensee have
taken into account in giving that certificate.
4. The Licensee shall inform the Director in writing immediately if the
directors of the Licensee become aware of any circumstance which causes
them no longer to have the reasonable expectation expressed in the then
most recent certificate given under paragraph 2.
5. The Licensee shall use its best endeavours to obtain and submit to the
Director with each certificate provided for in paragraph 2 a report
prepared by its auditors and addressed to the Director stating whether
or not the auditors are aware of any inconsistencies between, on the
one hand, that certificate and the statement submitted with it and, on
the other hand, any information which they obtained during their audit
work.
6. The Licensee shall procure from the holding company of the Licensee a
legally enforceable undertaking in favour of the Licensee in a form
already specified by the Director that the holding company will refrain
from any action, and will procure that every subsidiary of the holding
company (other than the Licensee and its subsidiaries) will refrain
from any action, which would then be likely to cause the licensee to
breach any of its obligations under the Act or this Licence. Such
undertaking shall be obtained by 22 December 1997 and shall remain in
force for as long as the Licensee remains the holder of this Licence
and the giver of the undertaking remains the holding company of the
Licensee.
28
<PAGE>
7. The Licensee shall:
(a) deliver to the Director evidence (including a copy of such
undertaking) that the Licensee has complied with the
obligation to procure an undertaking pursuant to paragraph 6;
and
(b) inform the Director immediately in writing if the directors of
the Licensee become aware that the undertaking has ceased to
be legally enforceable or that its terms have been breached.
29
<PAGE>
CONDITION 2C: CHANGE OF FINANCIAL YEAR
- ---------------------------------------
[Not applicable]
30
<PAGE>
CONDITION 2D CREDIT RATING OF LICENSEE
- ---------------------------------------
1. The Licensee shall use all reasonable endeavours to ensure that:
(a) any corporate debt of the Licensee in issue at 31 March 1997 which had
an investment grade credit rating at that date maintains an investment
grade credit rating throughout the period during which such debt
remains outstanding, and
(b) any corporate debt, other than corporate debt issued by way of
negotiated private placement, issued by the Licensee on or after the 1
April 1997 has and maintains an investment grade credit rating
throughout the period during which such debt remains outstanding.
2. For the purpose of paragraph 1:
(a) "corporate debt" means any unsecured and unsubordinated borrowing of
money having an initial maturity of five years or more, and
(b) "investment grade credit rating" means a rating of not less than BBB-
by Standard & Poor's Ratings Group or any of its subsidiaries or not
less than Baa3 by Moody's Investors Service, Inc. or any of its
subsidiaries or an equivalent rating from any other reputable credit
rating agency which has comparable standing in the UK and the USA.
31
<PAGE>
CONDITION 3: CHARGE RESTRICTION CONDITIONS: DEFINITIONS
- --------------------------------------------------------
1. In this Condition and in Conditions 3A to 3G and Schedule 3:
"attributed" means when used in relation to the fossil fuel levy or
payments in lieu thereof or transmission connection
point charges or Remote Transmission Asset rentals or
distribution losses or transmission costs or allowed
distribution costs, or in relation to attributing
electricity purchase or sale contracts and electricity
purchase costs to regulated customers and other
customers, attributed in accordance with the principles
set out in Part A of Schedule 3 and attribute,
attributed, attributable and attribution shall be
construed accordingly.
"average charge per means the distribution revenue in the relevant year
unit distributed" divided by the regulated quantity distributed in that
year.
"average charge per means the supply revenue in the year divided by the
unit supplied" quantity supplied in that year.
"average charge per means the regulated supply revenue in the relevant
regulated year divided by the regulated quantity supplied in
supplied" that year.
"average specified means the average of the daily base rates of Barclays
rate" Bank plc current from time to time during the
period in respect of which the calculation falls to
be made.
"charge restriction means Conditions 3 to 3G inclusive together with
conditions" Schedule 3 to this Licence, as from time to time
modified or replaced in accordance therewith or
pursuant to Sections 11, 14 or 15 of the Act.
32
<PAGE>
"distribution means units unaccounted for on the Licensee's
losses" distribution system, measured as being the difference
between the units metered on entry into the system
and the units metered on leaving the system.
"distribution means the revenue (measured on an accruals basis)
revenue" derived by the Licensee from the provision of
distribution services in the relevant year, after
deduction of:
(i) an amount equal to such part of the total
amount payable in that relevant year to the
Transmission Company (measured on an accruals
basis) in respect of transmission connection
point charges and Remote Transmission Asset
rentals and which would otherwise be included
in distribution revenue by reason of being
recovered in that relevant year by the
Licensee in its use of system charges, as
falls to be attributed to the regulated
quantity distributed in that relevant year;
and
(ii) value added tax (if any) and any other taxes
based directly on the amount so derived.
"distribution services" means all services provided by the Licensee as part
of its Distribution Business other than excluded
services.
"EHV premises" means those premises to which units are delivered by
the Licensee which fall to be treated as EHV premises
in accordance with Part B of Schedule 3.
"EHV units" means units distributed by the Licensee which are
delivered or deemed to be delivered to EHV premises.
33
<PAGE>
"electricity purchase means the licensee's purchase costs of electricity
calculated costs" in accordance with the principles
in Part F of Schedule 3.
"excluded services" means those services provided by the licensee which
in accordance with the principles set out in Part C
of Schedule 3 fall to be treated as excluded
services.
"fifth relevant year" means the relevant year commencing 1st April 1994.
"HV units" means units (other than EHV units) distributed by the
Licensee which are delivered to premises connected to
the Licensee's distribution system at a voltage at or
higher than 1000 volts.
"interconnector means charges levied by the Interconnectors Business
charges" of the Transmission Company and payable by the Supply
or Second-Tier Supply Business of the Licensee in
respect of use of interconnector for the transfer of
electricity into England and Wales.
"LV units" means units distributed by the Licensee which are
delivered to premises connected to the Licensee's
distribution system at a voltage less than 1000
volts.
"LV1 units" means LV units which are distributed by the Licensee
outside nighttime periods to Domestic Premises or
small premises (other than Domestic Premises) where
the appropriate use of system charges apply different
rates in night-time periods as opposed to other times
of day, for the avoidance of doubt including the use
of system charges under the tariffs specified in
paragraph D2 of Part D of Schedule 3.
34
<PAGE>
"LV2 units" means LV units which are distributed by the Licensee
to Domestic Premises or small premises (other than
Domestic Premises):
(a) during night-time periods, where the
appropriate use of system charges apply
different rates in night-time periods as
opposed to other times of the day; or
(b) where the appropriate use of system charges
are incorporated into tariffs which restrict
availability of supply to specified off-peak
periods,
for the avoidance of doubt including the use of
system charges under the tariffs specified in
paragraph D3 of Part D of Schedule 3.
"LV3 units" means LV units other than LV1 and LV2 units, for the
avoidance of doubt including units distributed under
the tariffs specified in paragraph D4 of Part D of
Schedule 3.
"maximum average means the charge calculated in accordance with the
charge per unit formula in paragraph 1 of Condition 3A.
distributed"
"maximum average means the charge calculated in accordance with the
charge per regulated formula in paragraph 1 of Condition 3B.
unit supplied"
"metered" means, in relation to any quantity distributed or
supplied, as measured by a meter installed for such
purpose or (where no such meter is installed or it is
not reasonably practicable to measure the quantity by
such meter) as otherwise reasonably calculated.
"0.1MW customer" means any customer other than an over 0.1MW customer
in its capacity as such.
35
<PAGE>
"0.1MW premises" means any premises other than over 0.1MW premises.
"over 0.1MW means a customer supplied at over 0.1MW premises but
customer" shall not include such customer insofar as supplied
at 0.1MW premises.
"over 0.1MW means premises supplied by the Licensee at which the
premises" average of the maximum monthly demands in the three
months of highest demand in any period of twelve
consecutive months commencing on or after January
1993 exceeds one tenth of a megawatt.
"quantity supplied" means the aggregate quantity of units supplied by the
Licensee in the relevant year metered at the points
of supply (whether or not in the authorised area of
the Licensee).
"regulated customer" means a person other than the Licensee who in the
calendar year ending in the relevant year t-1 was
supplied at 0.1 MW premises.
"regulated distribution means as the case may be HV units or LV1 units
unit category" or LV2 units or LV3 units.
"regulated quantity means the aggregate quantity of units distributed
distributed" (both for the Supply Business of the Licensee and on
behalf of third parties under use of system) by the
Licensee through the Licensee's distribution system
in relevant year t metered at exit points on leaving
the Licensee's distribution system but excluding for
this purpose:
(a) units distributed for the purpose of supply
to premises outside the Licensee's authorised
area; and
(b) EHV units.
36
<PAGE>
"relevant year" means a financial year commencing on or after
1st April 1990.
"relevant year t" means that relevant year for the purposes of
which any calculation falls to be made;
"relevant year t-1" means the relevant year
preceding relevant year t or, in respect of
the period prior to 1st April 1990, the
period of 12 calendar months commencing on
1st April 1989; and similar expressions shall
be construed accordingly.
"remote transmission means any rent or other periodic payment
asset rental" payable by the Distribution Business of the
Licensee to the Transmission Company in
respect of Remote Transmission Assets forming
part of the Licensee's distribution system.
"sixth relevant year" means the relevant year commencing 1st April
1995.
"supply" includes supply outside the authorised area,
standby and top-up supply and sale and any
other sales of electricity by the Licensee to
persons other than customers; and "supplied"
and similar expressions shall be construed
accordingly.
"supply charges" means all charges (including charges for the
provision of distribution services and
standing charges) made by the Licensee in
respect of electricity supplied by the
Licensee other than charges for the provision
of excluded services by the Licensee.
"supply revenue" means the revenue (measured on an accruals
basis) derived by the Licensee from supply
charges after deduction of value added tax
(if any) and any other taxes based directly
on the amounts so derived.
37
<PAGE>
"transmission charges" means charges levied by the Transmission
Company payable by the Supply or the Second-
Tier Supply Business of the Licensee in
respect of the transmission of electricity,
but for the avoidance of doubt shall exclude
transmission connection point charges and
remote transmission asset rentals.
"transmission means charges levied by the Transmission
connection point Company as connection charges by direct
charges" reference to the number or nature of the
connections between the Licensee's
distribution system and the Transmission
System and payable by the Distribution
Business of the Licensee.
"unit" means a kilowatt hour.
38
<PAGE>
CONDITION 3A: RESTRICTION OF DISTRIBUTION CHARGES
- --------------------------------------------------
BASIC FORMULA
- -------------
1. Without prejudice to Condition 3F the Licensee shall in setting its charges
for the provision of distribution services use its best endeavours to
ensure that in any relevant year the average charge per unit distributed
shall not exceed the maximum average charge per unit distributed calculated
in accordance with the following formula:
M/dt/ = P/dt/ + PN/dt/ - K/dt/
2. For the purposes of paragraph 1, M/dt/ means the maximum average charge per
unit distributed in relevant year t.
Formula for P/dt/ as used in paragraph 1
----------------------------------------
3. For the purposes of paragraph 1, P/dt/ is derived from the following
formula:
P/dt/ = ( (PU+PM) . GR/t/..PID /t/) + (PL. (Al/t/ - L/t/) . PIL/t/)
-----------------------------------------------
D/t/
where:
PU means the amount set against that term in the part of Annex
A to this Condition that applies to the Licensee.
PM means the amount set against that term in the part of Annex
A to this Condition that applies to the Licensee.
GR/t/ is derived from the following formula:
GR/t/ = 0.5 (SIGMA)P/oi/.D/it/ + Cd/t/ ) GR/t/ -1
------------- ---
(SIGMA)Poi.D/it/-1 C/dt/-1 )
39
<PAGE>
where, for the relevant year beginning 1st April 1995,
GR/t/-1 equals 1.
(SIGMA) means the summation across all regulated distribution unit
categories i.
P/oi/ means in respect of each regulated distribution unit
category i set out in column 1 under that term in the part
of Annex A to this Condition that applies to the Licensee
the value opposite that category in column 2.
D/it/ means that number of units in each regulated distribution
unit category i distributed in relevant year t.
D/it/-1 means that number of units in each regulated distribution
unit category i distributed in relevant year t-1.
C/dt/ means a notional figure, representing the number of
customers in the authorised area defined (for the purpose of
this term Cdt only) for each relevant year, given in the
table appearing under that term in the part of Annex A to
this Condition that applies to the Licensee.
C/dt/-1 means the number equal to C/dt/ in relevant year t-1.
PID/t/ is derived from the following formula:
PID/t/ = ( 1 + RPI/t/ - Xd/t/ ) PID/t/-1
-------------
100
where, for the relevant year beginning 1 April 1995,
PID/t/-1 equals 1.
RPI/t/ means the percentage change (whether of a positive or a
negative value) in the arithmetic average of the Retail
Price
40
<PAGE>
Index numbers published or determined with respect to each
of the six months July to December (inclusive) in relevant
year t-1 and the arithmetic average of the Retail Price
Index numbers published or determined with respect to the
same months in relevant year t-2.
X/dt/ for any relevant year beginning on or after 1 April 1997,
shall equal 3.
PL means an amount equal to 3.0656p
AL/t/ means an amount (in units) representing allowed distribution
losses in relevant year t, being the allowed percentage of
the adjusted units distributed (calculated as provided in
paragraph E5 of Part E of Schedule 3) where in respect of
each relevant year t, the allowed percentage shall equal
that percentage which the aggregate of adjusted distribution
losses (calculated as provided in paragraphs E2 to E5 of
Part E of Schedule 3) over the preceding relevant years
(commencing with the twelve-month period from 1 April 1989,
or, if the number of preceding relevant years exceeds nine,
relevant year t-10) bears to the aggregate of adjusted units
distributed (calculated as aforesaid) over the corresponding
relevant years: save that for this purpose adjusted
distribution losses in respect of the twelve-month period
from 1 April 1989 shall be derived by applying the initial
relevant loss percentage (calculated as provided in
paragraphs E6 to E8 of Part E of Schedule 3) to the adjusted
units distributed in that period.
L/t/ means in respect of relevant year t, adjusted grid supply
point purchases less adjusted units distributed (calculated
as provided in paragraphs E2 to E5 of Part E of Schedule 3).
PIL/t/ is derived from the following formula:
41
<PAGE>
PIL/t/ = (1 + RPI/t/ ) PIL/t/-1
----
100
where, for the relevant year beginning 1 April 1995,
PIL/t/-1 equals 1.
D/t/ means the regulated quantity distributed in relevant year t.
FORMULA FOR PN/dt/ AS USED IN PARAGRAPH 1
-----------------------------------------
4. For the purposes of paragraph 1, in the ninth and subsequent relevant years
the term PN/dt/ shall be calculated in accordance with the following formula:
PNdt = (PS + PR) PIR/t/ - TA/dt/-1 - GA/dt/-1
--------------------------------------
D/t/
and for each relevant year t prior to the ninth relevant year PNdt shall be
0.
where:
PS means an amount equal to (pound)4.87 million for each of the
ninth to the thirteenth relevant years, and thereafter shall be
0.
PR means, in the ninth and all subsequent relevant years, the amount
given under that heading in Annex B to this Condition.
PIR/t/ is derived from the following formula:
PIR/t/ = (1+ RPI/t/ ) PIR/t/-1
-----
100
where for the ninth relevant year PIR/t/-1 equals 1
TA/dt/ in respect of any relevant year t, is derived from the
following formula:
My
TA/dt/ = Sigma P/sd/.Cmn
Mx
42
<PAGE>
save that TA shall be a figure not less than 0, and shall for
each relevant year t prior to the ninth relevant year be 0.
where:
My
Sigma means a summation across all the months M/x/ to M/y/ in each
relevant M/x/ year.
M/x/ means, in the ninth relevant year, the month commencing 1/st/
July 1998, and means in each subsequent relevant year the month
commencing 1/st/ April in such relevant year.
M/y/ means, in each relevant year, the month commencing 1st March
in such relevant year.
P/sd/ means the amount given under that heading in Annex B to this
Condition.
C/mn/ means, in respect of each month M/x/ to M/y/ in the ninth and
each subsequent relevant year, a proportion of the total number
of 0.1MW customers within the authorised area (expressed as a
figure greater than or equal to - 1 and less than or equal to 1)
to be calculated by reference to the first day of such month in
accordance with the following formula:
C/mn/ = N - SC
where:
N means a figure equal to:
(a) in respect of the months commencing 1/st/ July 1998, 1/st/
August 1998 and 1/st/ September 1998, the amount given under
that heading in Annex B to this Condition;
(b) in respect of the months commencing 1/st/ October 1998,
1/st/ November 1998 and 1/st/ December 1998, 0.5; and
43
<PAGE>
(c) in respect of the month commencing 1/st/ January 1999 and
all subsequent months, 1.
SC in respect of the first day of each relevant month, means a
proportion of the total number of 0.1MW customers within the
authorised area (expressed as a figure greater than or equal to 0
and less than or equal to 1), being customers who may be supplied
by a Second Tier Supplier on such date in accordance with any
direction or variation of a direction issued by the Director (and
not subsequently withdrawn or varied) pursuant to Condition 3 of
that Supplier's licence to supply electricity.
GA/dt/ shall in the ninth relevant year, where the earliest date
specified (and not subsequently withdrawn or varied to a later
date) in any direction or variation of a direction issued by the
Director, pursuant to Condition 3 of the licence held by any
Second Tier Supplier, in relation to the supply of electricity to
any premises:
(a) is in April 1998, be 0:
(b) is in May 1998, be the amount given for that month under the
heading GA/dt/ in Annex B to this Condition;
(c) is in June 1998, be the amount given for that month under
that heading; or
(d) is in July 1998 or any subsequent month, be the amount given
for July under that heading.
and shall in each relevant year t other than the ninth relevant
year be 0.
FORMULA FOR K/dt/ AS USED IN PARAGRAPH 1
----------------------------------------
5. For the purposes of paragraph 1, K/dt/ means the correction factor per unit
(whether of a positive or a negative value) to be applied to the average
charge per unit distributed in
44
<PAGE>
relevant year t (subject to paragraph 4 of Condition 3D) and is derived from the
following formula:
45
<PAGE>
K/dt/ = R/dt/-1 - (D/t/-1.M/dt/-1) (1 + I/dt/)
------------------------- -----
D/t/ 100
provided that: notwithstanding the above, the value of K/dt/ for the
sixth relevant year shall be that value required by
Condition 3A in the Licence in the form in force on
31st March 1995.
where:
R/dt/-1 means the distribution revenue in relevant year t-1.
D/t/-1 means the regulated quantity distributed in relevant
year t-1.
M/dt/-1 means maximum average charge per unit distributed in
relevant year t - 1.
I/dt/ means that interest rate in relevant year t which is
equal to, where K/dt/ (taking no account of I/d/ for
this purpose) has a positive value, the average
specified rate plus 4, or where Kdt (taking no account
of I/d/ for this purpose) has a negative value, the
average specified rate.
6. In this Condition, any term defined for the purposes of paragraph 1 shall
have the same meaning in all paragraphs of this Condition.
46
<PAGE>
ANNEX A TO CONDITION 3A
- -----------------------
YORKSHIRE ELECTRICITY GROUP PLC:
- --------------------------------
(pound)m
PU 249.7
PM 27.9
C/dt/
'000s
-----
relevant year beginning on
--------------------------
1 April 1994 2036
1 April 1995 2051
1 April 1996 2065
1 April 1997 2080
1 April 1998 2094
1 April 1999 2109
every subsequent relevant year 2109
P/0i/
1 2
unit category i value (p)
--------------- ---------
LV1 1.9497
LV2 0.3271
LV3 1.6654
HV 0.5750
47
<PAGE>
ANNEX B TO CONDITION 3A
- -----------------------
VALUES FOR PARAGRAPH 4 OF THIS CONDITION FOR YORKSHIRE ELECTRICITY GROUP PLC:
PR (pound)3.28m
P/sd/ (pound)0.57m
N (1.7.98 - 1.9.98) 0.105
GA/dt/ (May) (pound)0.14m
GA/dt/ (June) (pound)0.51m
GA/dt/ (July) (pound)1.16m
48
<PAGE>
CONDITION 3B: RESTRICTION OF SUPPLY CHARGES
- --------------------------------------------
CONTINUATION OF TARIFFS
- -----------------------
1.1 Save where the Director consents in writing to a tariff being discontinued,
the Licensee shall continue to make available to customers at Designated
Premises the tariffs listed under the Licensee's name in Annex A to this
Condition.
1.2 Where a customer at Designated Premises was supplied at the end of the
eighth relevant year on a tariff listed under the Licensee's name in Annex
B to this Condition, the Licensee shall continue to offer that tariff to
that customer at those premises unless the Director consents in writing to
the Licensee's not doing so.
1.3 The Licensee shall not, without the consent in writing of the Director,
change the terms (other than price, which shall be regulated in accordance
with this Condition) of any tariff described in the second column of the
Table; and the terms to which this prohibition applies include, for
example, the hours between which particular prices apply and the level of
consumption at which prices change.
NEW TARIFFS
- -----------
2. The Licensee shall not offer to supply any customer at Designated Premises
on a tariff not shown in the Table unless the terms of that tariff have
been approved by the Director.
THE PRICE RESTRAINT
- -------------------
3. Without prejudice to Condition 3F, the prices in the tariffs which apply at
the beginning of the ninth relevant year to supplies to Designated
Customers shall be set at or below the limit imposed by paragraph 4 and in
addition at or below each of the limits imposed by paragraph 5 and (where
those paragraphs apply) by paragraphs 6 and 7.
49
<PAGE>
4. The prices referred to in paragraph 3 shall be so set that they do not
cause the value of composite term
/n/ /n/
Sigma PSi/t/.QSi0 + <C083> PUi/t/.QUi0
1 1
/n/ /n/
Sigma PSi0.QSi0 + <C083> PUi0.QUi0
1 1
to exceed the value of the formula
100 + RPI/t/ - X/a/
-------------------
100
where,
/n/ means the summation across all tariffs; and
Sigma
1
X/a/ has the value given against the Licensee's name in Annex C to
this Condition.
5.1 Without prejudice to Condition 3F, at the beginning of the ninth relevant
year the Licensee shall so set its prices to Designated Customers supplied
on the tariff numbered 1 in the Table that the total charge for that year
for a Designated Customer supplied on such a tariff who consumes 3300 units
in that year shall not exceed
100 + RPI/t/ - X/a/
-------------------
(Psi0 + 3300 PUi0) 100
where
X/a/ has the value given against the Licensee's name in Annex C to
this Condition.
50
<PAGE>
5.2 Without prejudice to Condition 3F, at the beginning of the ninth relevant
year, the prices to Designated Customers on each of the domestic tariffs in
the Table other than the tariff numbered 1 shall be so set that, when used
to determine the value of the terms Pui/t/ and Psi/t/, they do not cause
the value of the composite term
/u/
<C083> PUi/t/.QUi0 s
1 + <C083> PSi/t/
---------------------
NC 1
to exceed the value of the formula
/u/
<C083> PUi0.QUi0 s 100 + RPI/t/ - X/b/
-------------------
1 + <C083> Psi0 100
------------------------
NC 1
where X/b/ has the value of 3.
5.3 Without prejudice to Condition 3F, at the beginning of the ninth relevant
year, the prices to Designated Customers on each of the non-domestic
tariffs in the Table shall be so set that, when used to determine the value
of the terms Puit and Psit, they do not cause the value of the composite
term
/u/
<C083> PUi/t/.QUi0 s
1 + <C083> Psi/t/,
-----------------
NC 1
when applied to that tariff, to exceed the value of the formula
/u/
<C083> PUi0.QUi0 s 100 + RPI/t/
------------
1 + <C083> PSi0 100
---------------
NC 1
6. Without prejudice to Condition 3F, in the case of any tariff described as
domestic in column 3 of the Table, the standing charge to a Designated
Customer at the beginning of the ninth relevant year shall not exceed the
standing charge given for that tariff in column 5 of the Table multiplied
by
100 + RPI/t/
------------
-
100
7.1 Without prejudice to Condition 3F, in the case of any tariff described in
column 2 of the
51
<PAGE>
Table which is a domestic prepayment tariff,
(a) the standing charge and the unit charge at the beginning of the ninth
relevant year shall each be lower than the standing charge and unit
charge respectively set against that tariff in column 5 of the Table
by the same proportion as the standing charge and the unit charge at
the beginning of the ninth relevant year of the nearest equivalent
domestic tariff (not being a prepayment tariff) are lower than the
standing charge and unit charge respectively of that nearest
equivalent domestic charge shown against them in column 5 of the Table
(and in this sub-paragraph the standing charge shall be exclusive of
any prepayment surcharge); and
(b) there shall at no time be any increase in the amount by which the
standing charge (including any prepayment meter surcharge) for any
domestic prepayment tariff exceeds the standing charge for the nearest
comparable domestic tariff (not being a prepayment tariff).
7.2 The Director may direct which tariff is the nearest equivalent domestic
tariff for the purpose of this paragraph.
8.1 Without prejudice to paragraph 9 and Condition 3F, no price (whether a
standing charge or a unit charge) in any tariff shall be increased during
the ninth relevant year above the price which applies at the beginning of
the ninth relevant year, unless the Director has consented in writing.
8.2 In giving consent the Director shall have regard in particular but not
exclusively to the impact of significant movements in costs outside the
Licensee's control, and shall consider whether such movements in costs
justify an increase in all tariffs, a differential increase in tariffs or
an increase in some tariffs only.
9. If any change is made to the rate of the Fossil Fuel Levy between 1 August
1997 and 2 April 1998, and whenever any change is made to that rate
thereafter, every price limit set pursuant to paragraphs 4, 5, 6 and 7.1(a)
shall be multiplied by the following factor:
100 + F/t/
----------
100 + F/d/
52
<PAGE>
10.1 Where, after the end of the eighth relevant year, the Director is
satisfied that in the eighth relevant year the average charge per unit
supplied differed from the maximum average charge per unit supplied
assumed for the purpose of setting the prices in column 5 of the Table,
the Director may give a direction to the Licensee stipulating the prices
to be charged for any (or all) of the tariffs described in column 2 of the
Table.
10.2 Before giving any such direction, the Director shall consult the Licensee.
10.3 In considering whether to give any such direction, and in considering the
content of any such direction, the Director shall have regard
(a) to the extent to which the regulated supply revenue for the eighth
relevant year assumed for the purpose of setting the prices in column
5 of the Table differs from the actual regulated supply revenue for
that year adjusted
(i) to reflect what the regulated supply revenue would have been if
the tariffs in force on 1 August 1997 had remained unchanged until
the end of the eighth relevant year; and
(ii) by adding any rebates or discounts to Regulated Customers in
respect of the period from 1 August 1997 to the end of the eighth
relevant year, being rebates or discounts not included in the tariffs
in force on 1 August 1997;
(b) to any representations made by the Licensee; and
(c) to the cost to the Licensee of changing any tariff.
11.1 Where, for relevant year t, the terms TAdt or GAdt (or both of them) in
paragraph 4 of Condition 3A have a value greater than 0, the Director may
give a direction to the Licensee stipulating the prices to be charged, in
that or any subsequent relevant year, for any (or all) of the tariffs
described in column 2 of the Table.
11.2 Before giving any such direction, the Director shall consult the Licensee.
53
<PAGE>
11.3 In considering whether to give any such direction, and in considering the
content of any such direction, the Director shall have regard
(a) to the extent by which the charges made by the Distribution
Business to the Supply Business have been reduced on account of the
terms TA/dt/ or GA/dt/ (or both of them) having a greater value
than 0;
(b) to any representation made by the Licensee; and
(c) to the cost to the Licensee of changing any tariff.
12.1 Without prejudice to paragraph 9 and Condition 3F, for the tenth and
every subsequent relevant year, unless the Director has consented in
writing, each component of each tariff described in column 2 of the Table
or approved for the purpose of paragraph 2 shall have a price no greater
than the price at the end of the immediately preceding relevant year, in
each case multiplied by the formula
100 + RPIt - Xc
-----------------
100
where X/c/ has the value of 3 for the tenth relevant year and the value
of 0 for every subsequent relevant year.
12.2 In giving consent the Director shall have regard in particular but not
exclusively to the impact of significant movements in costs outside the
Licensee's control, and shall consider whether such movements in costs
justify an increase in all tariffs, a differential increase in tariffs or
an increase in some tariffs only.
INTERPRETATION
- --------------
13. In this Condition:
(a) all prices and revenue shall exclude value added tax (if any); and
54
<PAGE>
(b) any reference to the first relevant year shall be a reference to
the relevant year commencing on 1 April 1990, and any reference to
the second financial year and so on shall be construed accordingly;
(c) in respect of any tariff described in column 2 of the Table the
following terms have the following meanings:
PSi/t/ is the standing charge (or each of them) for that tariff for
the ninth relevant year t:
PSi0 is the standing charge (or each of them) for that tariff
given in column 5 of the Table;
QSi0 is the number in column 6 of the Table set against that
standing charge;
PUi/t/ is the unit charge (or each of them) for that tariff for the
ninth relevant year t;
PUi0 is the unit charge (or each of them) for that tariff given
in column 5 of the Table;
QUi0 is the number in column 6 of the Table set against that unit
charge (or each of them);
u
Sigma means the summation across all unit charges for that tariff;
1
s
Sigma means the summation across all standing charges for that
1
tariff;
NC means the number given against tariff in column 7 of the
Table; and
(d) the following terms shall have the following meanings:
F/t/ means the rate of the Fossil Fuel Levy applicable from time
to time during relevant year t;
F/d/ has the value of 2.2;
RPI/t/ means the percentage change (whether of a positive or a
negative value) in the arithmetic average of the Retail
Price Index numbers published or determined with respect to
each of the six months July to December (inclusive) in
relevant year t-1 and the arithmetic average of the Retail
Price Index numbers published or determined with respect to
the same months in relevant year t-2; and
55
<PAGE>
the Table means the table given under the Licensee's name in
Annex D to this Condition.
56
<PAGE>
ANNEX A TO CONDITION 3B
- -----------------------
TARIFFS GENERALLY AVAILABLE - YORKSHIRE ELECTRICITY GROUP PLC
- -------------------------------------------------------------
TARIFF NO. TARIFF
1 Domestic Unrestricted
2 Economy 7
3 Domestic Off-Peak
4 Prepayment
5 Prompt Payment
6 Automated Payment
7 General Quarterly
8 Economy 7 Quarterly
9 Evening/Weekend Quarterly
10 Evening/Weekend E7 Quarterly
11 Farm Off-Peak
12 Commercial 2 Rate Tariff
13 Commercial Off Peak
14 Industrial Off Peak Tariff
15 Prompt Payment
16 Automated Payment
57
<PAGE>
ANNEX B TO CONDITION 3B
- -----------------------
PRESERVED TARIFFS - YORKSHIRE ELECTRICITY GROUP PLC
- ---------------------------------------------------
TARIFF NO. TARIFF
---------- ------
3 Domestic Off-Peak
11 Farm Off-Peak
12 Commercial 2 Rate Tariff
13 Commercial Off-Peak
14 Industrial Off-Peak Tariff
58
<PAGE>
ANNEX C TO CONDITION 3B
- -----------------------
VALUE OF X/A/
- -------------
Yorkshire Electricity Group plc: X/a/ = 3.7
59
<PAGE>
ANNEX D TO CONDITION 3B
- -----------------------
THE TABLE - YORKSHIRE ELECTRICITY GROUP PLC
- -------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NO. DESCRIPTION OF TARIFF CATEGORY COMPONENT PRICE PO QUANTITY Q0 NC
(UNIT RATE IN (UNIT RATE IN
PENCE PER KWH) GWH)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Domestic UR Domestic Standing Charge 4000 1702844 1702844
Unit Charge 6.19 5774.61
2 Economy 7 Domestic Standing Charge 5200 162799 162799
Day Units 6.56 516.67
Night Units 2.49 798.21
3 Domestic Off Peak Domestic Standing Charge 1200 34147 34147
Units 3.82 146.53
4 Prepayment Domestic Standing Charge 2360 248125 248125
5 Prompt Payment Standing Charge Discount 0 361700 361700
6 Automated Payment Domestic Standing Charge Discount -1200 533512 533512
7 General Quarterly Non Domestic Standing Charge 5200 60745 60745
1st 1000 Units 6.96 157.60
Excess Units 6.37 89.77
8 Economy 7 Quarterly Non Domestic Standing Charge 6400 6076 6076
Night Units 2.49 16.71
First 1000 Day Units 7.33 15.34
Excess Day Units 6.74 5.10
9 Weekend/Evening Non Domestic Standing Charge 6400 1224 1224
Quarterly WE units 3.60 3.20
First 1000 Units 9.31 1.94
Excess Units 8.72 0.16
10 Weekend/Evening E7 Non Domestic Standing Charge 7200 939 939
Quarterly Night Units 2.49 1.40
WE7 Units 3.60 2.17
First 1000 Units 9.31 1.93
Excess Units 8.72 0.10
11 Farm Off Peak Non Domestic Standing Charge 1200 509 509
Units 4.32 4.57
12 Commercial '2 rate Tar' Non Domestic Units 3.48 0.78
13 Commercial Off Peak Non Domestic Standing Charge 1200 1428 1428
Units 3.64 7.01
14 Industrial Off Peak Non Domestic Standing Charge 1200 89 89
Units 4.05 0.50
15 Prompt Payment Standing Charge Discount 0.00 32132 32132
16 Automated Payment Automated Payment Standing Charge Discount -1296.2 15430 15430
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
CONDITION 3C: [NO LONGER USED]
- ----------------------------------
61
<PAGE>
CONDITION 3D: RESTRICTION OF DISTRIBUTION CHARGES AND OF SUPPLY CHARGES:
- -------------------------------------------------------------------------
ADJUSTMENTS
- -----------
1. If, in respect of any relevant year, the average charge per unit
distributed exceeds the maximum average charge per unit distributed by more
than 3 per cent, the Licensee shall furnish an explanation to the Director
and in the next following relevant year the Licensee shall not effect any
increase in charges unless it has demonstrated to the reasonable
satisfaction of the Director that the average charge per unit distributed
would not be likely to exceed the maximum charge per unit distributed in
that next following relevant year.
2. If, in respect of any two successive relevant years, the sum of the amounts
by which the average charge per unit distributed has exceeded the maximum
average charge per unit distributed is more than 4 per cent, then in the
next following relevant year the Licensee shall, if required by the
Director, adjust its charges such that the average charge per unit
distributed would not be likely, in the judgment of the Director, to exceed
the maximum average charge per unit in that next following relevant year.
3. If, in respect of two successive relevant years, the average charge per
unit distributed is less than 90 per cent of the maximum average charge per
unit distributed, the Director, after consultation with the Licensee, may
direct that in calculating K/dt/ for the purposes of paragraph 1 of
Condition 3A in respect of the next following relevant year, there shall be
substituted for R/dt-1/ in the formula at paragraph 1 of Condition 3A such
figure as the Director may specify being not less than R/dt-1/, and not
more than 0.90 (Dt-1.M/dt-1/).
4.1 If, in respect of the eighth relevant year, the average charge per
regulated unit supplied exceeds the maximum average charge per regulated
unit supplied, but by not more than 1 1/2 per cent, the Licensee shall
ensure that the excess above the maximum average charge per regulated unit
supplied, with interest thereon at a rate 2 per cent above the average
specified rate, shall be paid to all 0.1 MW customers who continue to be
supplied by the Licensee in the ninth relevant year.
4.2 If, in respect of the eighth relevant year, the average charge per
regulated unit supplied exceeds the maximum average charge per regulated
unit supplied by more than 1 1/2 per cent, the Licensee shall use all
reasonable endeavours to return the excess above the maximum average charge
per unit supplied, with interest thereon at a rate 4 per cent above the
average specified rate, during the ninth relevant year to all 0.1MW
customers supplied by the
62
<PAGE>
Licensee in the eighth relevant year.
4.3 For the purpose of Condition 3B, no sum payable under paragraphs 4.1 or 4.2
shall be regarded as paid or payable under a tariff applicable to the ninth
relevant year or any subsequent relevant year.
5. No later than three months after the end of the eighth relevant year, the
Licensee shall send to the Director a statement accompanied by such
forecasts, estimates and calculations as may be necessary, showing the
basis by which the Licensee intends to comply with paragraph 4.
6. The powers exercisable under paragraphs F6 and F8 of Part F of Schedule 3
in the form of licence in force on 31 March 1998 shall continue to be
exercisable after that date, but only in respect of a relevant year ending
before 1 April 1998.
63
<PAGE>
CONDITION 3E: INFORMATION TO BE PROVIDED TO THE DIRECTOR IN CONNECTION WITH THE
- --------------------------------------------------------------------------------
CHARGE RESTRICTION CONDITIONS
- -----------------------------
1. Where the Licensee is intending to make any change in charges for the
provision of distribution services regulated under Condition 3A the
Licensee shall (unless otherwise agreed by the Director) not later than the
date of publication of such charges provide the Director with:
(a) written forecast of the maximum average charge per unit distributed,
together with its components, in respect of the relevant year t in
which such a change is to take effect and in respect of the next
following relevant year t+1; and
(b) a written estimate of the maximum average charge per unit distributed,
together with its components, in respect of the relevant year t-1
immediately preceding the relevant year in which the change is to take
effect unless a statement complying with paragraph 7 in respect of
relevant year t-1 has been furnished to the Director before the
publication of the proposed change.
2. Where, at any time during the eighth relevant year, the Licensee intends to
change the principles of attribution or any provisional attribution
specified in a statement already made to the Director or to purchase or
sell an electricity sale contract, the change or the provisional
attribution in relation to the purchase or sale shall be specified in a
written statement signed by a person authorised to sign the statement by
the directors of the Licensee which statement shall not provide for a
retrospective change of principles or for any re-attribution of payments
already made or any payment where the event giving rise to that payment has
already occurred.
3. If within three months of the commencement of any relevant year t the
Licensee has not made any such change in charges as is referred to in
paragraph 1, the Licensee shall provide the Director with a written
forecast of the maximum average charge per unit distributed, together with
its components, in respect of the relevant year t.
64
<PAGE>
4. The Director may issue directions providing that any forecast or estimate
provided in accordance with paragraphs 1, 2 or 3 shall be accompanied by
such information as regards the assumptions underlying the forecast or
estimate as may be necessary to enable the Director to be satisfied that
the forecast or estimate has been properly prepared on a consistent basis.
5. Subject as provided in sub-paragraph (b) below, not later than six weeks
after the commencement of each relevant year t, the Licensee shall send to
the Director a statement as to:
(a) whether or not the provisions of Condition 3D are likely to be
applicable in consequence of the average charge per unit distributed
in the preceding relevant year t-1 or the two preceding relevant years
t-1 and t-2; and
(b) its best estimate as to the relevant correction factor K/dt/ to be
applied in calculating the maximum average charge per unit distributed
in respect of the relevant year t.
6. Not later than 15 January in the ninth and tenth relevant years the
Licensee shall send to the Director a written estimate of the value of the
term TA for that year (TA/dt/), together with an estimate of the value of
each of its component parts, as detailed in paragraph 4 of Condition 3A.
7. Not later than three months after the end of a relevant year the Licensee
shall send the Director a statement, in respect of that relevant year,
showing the specified terms referred to in paragraph 9.
8. The statement referred to in the preceding paragraph shall be:
(a) accompanied by a report from the Auditors that in their opinion (i)
such statement fairly presents each of the specified items referred to
in paragraph 9 in accordance with the requirements of the charge
restriction conditions and (ii) the amounts shown in respect of each
of those specified items are in accordance with the Licensee's
accounting records which have been maintained in respect of each of
the relevant Separate Businesses in accordance with Condition 2; and
65
<PAGE>
(b) certified by a director of the Licensee on behalf of the Licensee that
to the best of his knowledge, information and belief having made all
reasonable enquiries:
(i) there is no amount included in its calculations under Condition
3A and Schedule 3 which represents other than:
(aa) bona fide consideration for the provision of distribution
services in the course of its Distribution Business; or
(bb) an amount permitted under the charge restriction
conditions to be so included;
(ii) (in respect of the eighth relevant year only) there is no
amount included in its calculations under Condition 3B and
Schedule 3 (in each case in the form of licence in force on 31
March 1998) which represents other than:
(aa) bona fide consideration for electricity supplied to
regulated customers (as defined in the form of licence in
force on 31 March 1998); or
(bb) an amount permitted under the charge restriction
conditions to be so included;
(iii) there is no amount included in its calculations of allowed
security costs under Condition 3F which represents other than
an amount permitted under the charge restriction conditions to
be so included;
(iv) no service has been treated as an excluded service which was
not properly so treated and no amount included in the revenues
in respect thereof represents other than bona fide
consideration for the provision of the excluded service to
which it relates;
(v) all amounts which should properly be taken into account for the
purposes of the charge restriction conditions have been taken
into account; and
(vi) (in respect of the eighth relevant year only) there is no
amount included in its calculations under Condition 3B and
Schedule 3 in respect of electricity
66
<PAGE>
purchase or sale costs which does not result from an
attribution or method of attribution contained in the statement
under either paragraph 2(a) or paragraph 2(b) in the form of
licence in force on 31 March 1998.
9. The specified items to be contained in the statement referred to in
paragraph 7 shall be the following:
(a) the regulated quantity distributed;
(b) the quantity distributed in each regulated distribution unit category;
(c) the average charge per unit distributed;
(d) the amount in respect of the Terms AL/t/ and L/t/ in paragraph 3 of
Condition 3A calculated as therein provided;
(e) the value of the term TAdt, together with the value of each of its
component parts, as detailed in paragraph 4 of Condition 3A;
(f) the information referred to at paragraph 8 of Condition 3F;
(g) the statements and information referred to in paragraph A6, B2, C8, D1
and E10 of Schedule 3; and
(h) in respect of the eighth relevant year only, the statements and
information referred to in paragraph F7 or Schedule 3 of the Licence
in the form in force on 31 March 1997;
Provided that the statement to be provided in the ninth relevant year in
respect of the immediately preceding relevant year shall contain the
information required by paragraph 10 of Condition 3E of the Licence in the
form in force on 31 March 1998.
67
<PAGE>
10. Where the Director issues directions in accordance with paragraph 9 of
Condition 3F or paragraphs A7, B3, C9, D5 or E11 of Schedule 3, then such
directions shall not have effect from a date earlier than the commencement
of the relevant year to which the statement last furnished to the Director
pursuant to paragraph 7 prior to the issue of the directions related,
unless such statement (or the accompanying report or certificate under
paragraph 8) or any statement, report or certificate in respect of an
earlier relevant year was incorrect or was misleading in any material
respect.
11. Where the Director issues such directions as are referred to in the
preceding paragraph the Director may require the Licensee to provide a
revised statement in respect of such of the specified items as may be
affected by the directions, and the Licensee shall comply with such
request.
68
<PAGE>
CONDITION 3F: ALLOWANCES IN RESPECT OF SECURITY COSTS
- ------------------------------------------------------
1. At any time during a security period, the Licensee may give notice in
writing to the Director suspending, with effect from the date of receipt of
the notice by the Director, application of such of the charge restriction
conditions as may be specified in the notice for the unexpired term of the
security period.
2. At any time during a security period, the Director may (having regard to
his duties under the Act) by means of directions:
(a) suspend or modify for the unexpired term of the security period the
charge restriction conditions or any part or parts thereof; or
(b) introduce for the unexpired term of the security period new charge
restriction conditions
in either case, so as to make such provision as in the opinion or
estimation of the Director is requisite or appropriate:
(i) to enable the Licensee to recover by means of increased charges an
amount estimated as being equal to the Licensee's allowed security
costs during such period;
(ii) to ensure that such part of the amount referred to in sub-paragraph
(i) above as is estimated as being equal to the allowed security
costs incurred by the Licensee as costs in its Distribution Business
are recovered by means of appropriate equitable increases on the
charges made by the Licensee in its Distribution Business; and
(iii) to ensure that such part of the amount referred to in sub-paragraph
(i) above as is estimated as being equal to the allowed security
costs incurred by the Licensee as costs in its Supply Business and
its Second-Tier Supply Business respectively are recovered by
appropriate equitable increases in the charges made by the Licensee
in those Businesses and the Licensee shall comply with the terms of
any directions so issued.
69
<PAGE>
3. At any time following a security period, the Director may (following such
consultation with the Licensee and others as the Director may consider
appropriate) issue directions suspending or modifying the charge
restriction conditions or any part or parts thereof or replacing such
directions as may have been made during the security period and introducing
such new charge restriction conditions as in the opinion of the Director
are appropriate in all the circumstances (including at the Director's
discretion an appropriate adjustment having regard to any profit gained or
forgone by the Licensee during the security period), and the Licensee shall
comply with any directions so issued.
4. At any time within three months after the issue of directions by the
Director under paragraph 3, the Licensee may serve on the Director a
disapplication request in respect of such of the charge restriction
conditions or any part or parts thereof as are specified in the request.
5. If within three months of the receipt by the Director of the disapplication
request referred to in paragraph 4, the Director has either not agreed in
writing to such disapplication request or has not made a reference to the
Monopolies Commission under Section 12 of the Act relating to the
modification of the charge restriction conditions, the Licensee may deliver
one month's written notice to the Director terminating the application of
the charge restriction conditions (or any part or parts thereof) as were
specified in the disapplication request.
6. Subject to paragraphs 7 and 9, the Licensee shall in any relevant year be
entitled to recover an aggregate amount equal to its allowed security costs
in that year or (insofar as not previously recovered) any previous year, by
means of appropriate equitable increases on the charges made by the
Licensee in each of its Distribution, Supply and Second-Tier Supply
Businesses.
7. Paragraph 6 shall not apply insofar as such allowed security costs:
(a) were otherwise recovered by the Licensee; or
(b) were taken into account by the Director in setting charge restriction
conditions by means of directions issued under paragraph 3 above.
70
<PAGE>
8. The Licensee shall following the end of each relevant year provide to the
Director, as being one of the specified items to be contained in the
statement referred to at paragraph 8 of Condition 3E, details in respect of
that relevant year of:
(a) the amount of the Licensee's allowed security costs; and
(b) the aggregate amounts charged under paragraph 6 on account of the
Licensee's allowed security costs; and
(c) the bases and calculations underlying the increases in charges made
by the Licensee in its Distribution, Supply and Second-Tier Supply
Businesses under paragraph 6.
9. Where the Director is satisfied that the Licensee has recovered amounts in
excess of the allowed security costs, the Director may issue directions
requiring the Licensee to take such steps as may be specified to reimburse
customers of or purchasers from the Distribution, Supply and Second-Tier
Supply Business (as the case may be) for the excess amounts charged to
them, and the Licensee shall comply with any directions so issued provided
that if the excess amounts relate to allowed security costs paid to any
authorised electricity operator, the Licensee shall not be obliged to make
any such reimbursement unless and until it has recovered such costs from
the relevant authorised electricity operator.
10. No amounts charged by the Licensee under this Condition (whether or not
subsequently required to be reimbursed) shall be taken into account for the
purpose of applying the charge restriction provisions of Conditions 3A and
3B.
11. In this Condition:
"allowed security shall have the meaning ascribed to that term in the
cost" Fuel Security Code;
71
<PAGE>
"security period" means a period commencing on the date on which any
direction issued by the Secretary of State under
Section 34 (4) (b) of the Act enters into effect and
terminating on the date (being not earlier than the
date such direction, as varied, is revoked or
expires) as the Director, after consultation with
such persons (including without limitation, Licence
holders liable to be principally affected) as he
shall consider appropriate, may with the consent of
the Secretary of State by notice to all Licence
holders determine after having regard to the views
of such persons.
72
<PAGE>
CONDITION 3G: DURATION OF CHARGE RESTRICTION CONDITIONS
- --------------------------------------------------------
1. The charge restriction conditions shall apply so long as this Licence
continues in force but shall cease to have effect (in whole or in part, as
the case may be) if the Licensee delivers to the Director a disapplication
request made in accordance with paragraph 2 and:
(a) the Director agrees in writing to the disapplication request; or
(b) their application (in whole or in part) is terminated by notice given
by the Licensee in accordance with either paragraph 4 or paragraph 5.
2. A disapplication request pursuant to this Condition 3G shall (a) be in
writing addressed to the Director, (b) specify the charge restriction
conditions (or any part or parts thereof) to which the request relates and
(c) state the date from which the Licensee wishes the Director to agree
that the specified charge restriction conditions shall cease to have
effect.
3. Save where the Director otherwise agrees, no disapplication following
delivery of a disapplication request pursuant to this Condition 3G shall
have effect earlier than that date which is the later of:
(a) a date being not less than 18 months after delivery of the
disapplication request; and either
(b) in the case of distribution charges regulated under Condition 3A, 31st
March 2000; or
(c) in the case of supply charges regulated under Condition 3B, 31st March
2000.
73
<PAGE>
4. If the Director has not made a reference to the Monopolies Commission under
Section 12 of the Act relating to the modification of the charge
restriction conditions before the beginning of the period of 12 months
which will end with the disapplication date, the Licensee may deliver
written notice to the Director terminating the application of such of the
charge restriction conditions (or any part or parts thereof) as are
specified in the disapplication request with effect from the disapplication
date or a later date.
5. If the Monopolies Commission makes a report on a reference made by the
Director relating to the modification of the charge restriction conditions
(or any part or parts thereof) specified in the disapplication request and
such report does not include a conclusion that the cessation of such charge
restriction conditions, in whole or in part, operates or may be expected to
operate against the public interest, the Licensee may within 30 days after
the publication of the report by the Director in accordance with Section 13
of the Act deliver to him written notice terminating the application of
such charge restriction conditions with effect from the disapplication date
or later.
6. A disapplication request or notice served under this Condition may be
served in respect of a specified geographic area.
74
<PAGE>
CONDITION 4: PROHIBITION OF CROSS-SUBSIDIES AND OF DISCRIMINATION IN
- ----------------------------------------------------------------------
ELECTRICITY SALE CONTRACTS
- --------------------------
1. The Licensee shall procure that no Separate Business gives any cross-
subsidy to, or receives any cross-subsidy from, any other business of the
Licensee or an affiliate or related undertaking of the Licensee (whether or
not a Separate Business).
2. The Licensee shall not, and shall procure that any affiliate or related
undertaking of the Licensee shall not, sell or offer to sell electricity
under any electricity sale contract to any one relevant purchaser or person
seeking to become a relevant purchaser on terms as to price which are
materially more or less favourable than those on which it sells or offers
to sell electricity under any electricity sale contract to comparable
relevant purchasers. For these purposes, due regard shall be had to the
circumstances of sale to such purchasers including (without limitation)
volumes, load factors, conditions of interruptibility and the dates and
duration of the relevant agreements.
3. For the purposes of paragraph 2:
"relevant purchaser" means any purchaser of electricity from
the Licensee or any affiliate or related
undertaking of the Licensee under an
electricity purchase contract.
75
<PAGE>
CONDITION 4A: PROHIBITION OF DISCRIMINATION IN SUPPLY
- ------------------------------------------------------
1. This Condition applies where the Licensee is in a dominant position in a
market for the supply of electricity to customers at premises.
2. Where this Condition applies the Licensee shall not supply or offer to
supply electricity to customers in any market in which it is dominant on
terms which are predatory.
3. Where this Condition applies, but subject to paragraph 4, the Licensee
(taken together with its affiliates and related undertakings) shall not, in
supplying or offering terms for the supply of electricity to customers in
any market in which it is dominant:
(a) show undue preference to any person (or class of persons) within such
market;
(b) exercise undue discrimination between any persons (or classes of
person) within such market; or
(c) set terms which are unduly onerous.
4. Nothing in paragraph 3 shall prohibit the Licensee, within any area or
class of customers (the "relevant area or class") in respect of which there
is established competition in the supply of electricity, from supplying or
offering to supply electricity on terms which are reasonably necessary to
meet that competition, save that the Licensee (taken together with its
affiliates and related undertakings) shall not, in supplying or offering
terms for the supply of electricity:
(a) show undue preference to any person (or class of persons) or exercise
undue discrimination between any persons (or classes of person) within
the relevant area or class of customers; or
(b) set terms in respect of any person (or class of persons) in a market
in which the Licensee is dominant, save such persons who are within
the relevant area or class of customers, which are unduly onerous.
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<PAGE>
5. For the purposes of this Condition, terms are unduly onerous if the revenue
from the supply of electricity to customers on those terms:
(a) significantly exceeds the costs of that supply; and
(b) exceeds such costs to a significantly greater degree than the revenue
from supply to all other customers of the Licensee (and of its
affiliates and related undertakings) within the same market exceeds
the costs of supply to those customers.
6. For the purposes of this Condition, a market may be defined by reference to
a geographical area, or to a class of customer or both, save that no market
defined by reference to Designated Customers shall comprise fewer than
50,000 such customers.
7. In determining, for the purposes of this Condition, whether any persons
constitute a class of person, due regard shall be had to the circumstances
of supply to such persons including (without limitation) volumes, load
factors, conditions of interruptibility, location of premises being
supplied and date and duration of the supply contract.
8. For the purposes of this Condition, the Director shall determine any
question as to:
(a) whether any area or class of customers constitutes a market for the
supply of electricity;
(b) whether the Licensee is dominant in any market for the supply of
electricity;
(c) whether there is established competition in respect of the supply of
electricity in any area or to any class of customers; and
(d) whether any terms are predatory, having due regard to whether such
terms:
(i) incorporate charges which do not reasonably cover the avoidable
costs incurred in consequence of supplying the customers in
question; and
(ii) are intended or are likely to restrict, distort or prevent
competition in the supply of electricity.
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<PAGE>
9. The Director may determine that the Licensee is dominant in a specified
market:
(a) at any time prior to this Condition coming into force; or
(b) having first consulted with the Licensee and such other persons as he
considers appropriate (and having taken into account any
representations made to him), at any time after this Condition has
come into force, and where the Director does make such a determination
he shall immediately notify the Licensee.
10. Where the Director has notified the Licensee of his determination in
accordance with paragraph 9 that it is dominant in a specified market, the
provisions of paragraphs 11 to 16 shall apply in respect of that market.
11. Where this paragraph applies the Licensee shall, prior to supplying or
offering to supply electricity under a tariff or Designated Supply Contract
on any new terms, give to the Director at least 28 days' notice in writing
of its intention to supply on such terms.
12. For the purposes of this Condition, a tariff or Designated Supply Contract
is on "new terms" if:
(a) it is a form of tariff or Designated Supply Contract under which the
Licensee has not previously supplied or offered to supply electricity;
(b) it is a tariff or Designated Supply Contract in respect of which the
Licensee is varying the terms as to price; or
(c) it is a tariff or Designated Supply Contract in respect of which the
Licensee is varying any other terms in such a manner as to
significantly affect the evaluation of that tariff or contract.
13. Where the Licensee has given notice to the Director of its intention to
supply on new terms it shall not supply or offer to supply electricity on
such terms until either the period of notice given to the Director has
expired and:
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<PAGE>
(a) the Director has not given or sent to the Licensee a counter-notice
(the "counter-notice") in accordance with paragraph 14; or
(b) prior to the expiry of such period, the Director has informed the
Licensee that he will not issue a counter-notice in respect of such
terms.
14. The Director may issue a counter-notice where, having considered the new
terms and having had regard to the likely effects of issuing such counter-
notice (including, but not limited to, the likely effect upon the business
of the Licensee), he determines that further consideration is required to
assess whether such terms are in breach of the provisions of this
Condition.
15. Where the Director issues a counter-notice in respect of any new terms the
Licensee shall not supply or offer to supply electricity on such terms
until either:
(a) a period of 3 months from the date of the counter-notice has expired;
or
(b) prior to the expiry of such period, the Director indicates to the
Licensee that he has no present intention of taking enforcement action
under Section 25 of the Act in respect of such terms.
16. Where the Director issues a counter-notice he may:
(a) give or send a copy of that counter-notice to any Interested Person;
(b) invite representations from Interested Persons as to the matters to
which the counter-notice relates; and
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(c) require the Licensee, within a reasonable period determined by the
Director, to provide him with such further information relating to the
new terms as he may specify (save that he may not by virtue of this
paragraph require the Licensee to furnish him with information for the
purpose of exercising his functions under Section 48 of the Act),
and the Director shall take into account any representations made to him by the
Licensee in respect of such terms.
17. The Director may, at any time after notifying the Licensee of his
determination in accordance with paragraph 9 that it is dominant in a
specified market, determine that the Licensee is no longer dominant in that
market, and where he does make such a determination:
(a) the Director shall immediately notify the Licensee; and
(b) the provisions of paragraphs 11 to 16 shall cease to apply in respect
of the specified market.
18. For the purposes of this Condition, any reference to the Licensee being
dominant in a market for the supply of electricity shall be treated as a
reference to the Licensee, taken together with its affiliates and related
undertakings, being so dominant.
19. In this Condition:
"Interested Persons" means all Electricity Suppliers which supply
electricity within the market or area or to
the class of customers in question, the
Relevant Consumers' Committee and such other
persons or bodies as in the opinion of the
Director have a legitimate interest in the
terms on which the Licensee supplies
electricity.
"terms" means all the terms on which a supply of
electricity is offered or provided which
significantly affect the evaluation of that
supply, and shall include all terms as to
price.
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CONDITION 4B: DURATION OF DISCRIMINATION CONDITIONS
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1. Condition 4A shall cease to have effect (in whole or in part, as the case
may be) if the Licensee makes a disapplication request in accordance with
this Condition and:
(a) the Director agrees in writing to that request; or
(b) the application of Condition 4A (in whole or in part) is terminated by
notice given by the Licensee in accordance with paragraph 4 or 5 of
this Condition.
2. A disapplication request pursuant to this Condition may be made by the
Licensee only where the Director has notified it, in accordance with
paragraph 9 of Condition 4A, of his determination that the Licensee is
dominant in a specified market, and any such request shall:
(a) be made in writing to the Director;
(b) specify whether the request relates to the whole of Condition 4A or
any part or parts thereof; and
(c) state the date (the "disapplication date") from which the Licensee
wishes the specified provisions of Condition 4A to cease to have
effect, which date shall be in accordance with paragraph 3 and not
earlier than 12 months after the date on which the request is made.
3. Where the Licensee was notified by the Director prior to this Condition
coming into force of his determination that the Licensee is dominant in a
specified market, no disapplication request made by the Licensee shall be
effective to disapply any of the provisions of Condition 4A prior to 31
March 2000.
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4. If the Director has not by the date which is 6 months prior to the
disapplication date made a reference to the Monopolies Commission (under
Section 12 of the Act) relating to the modification of Condition 4A, the
Licensee may give to the Director a notice in writing terminating the
application of such of the provisions of Condition 4A as are specified in
the disapplication request with effect from the disapplication date or from
any later date specified in the notice.
5. If the Monopolies Commission reports on a reference made by the Director
relating to the modification of Condition 4A and does not conclude that the
disapplication of any of the provisions of that Condition (being provisions
specified in the disapplication request) would or may be expected to
operate against the public interest, the Licensee may within 30 days of the
publication of the report under Section 13 of the Act give to the Director
notice in writing terminating the application of such provisions with
effect from the disapplication date or any later date specified in the
notice.
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CONDITION 5: OBLIGATION ON ECONOMIC PURCHASING
- ------------------------------------------------
1. Subject to paragraph 6, the provisions of paragraph 2 shall apply
separately in relation to purchases of electricity from the following
sources:
(a) qualifying renewable generation;
(b) qualifying non-fossil generation; and
(c) generation from any source other than as referred to in sub-paragraphs
(a) and (b) above.
2. In respect of each category referred to in paragraph 1 above, and subject
to paragraph 4 below, the Licensee shall:
(a) itself purchase;
(b) procure any affiliate of the Licensee to purchase; and
(c) insofar as it is able through the exercise of voting rights or
otherwise to do so, procure any related undertaking of the Licensee or
any defined undertaking to purchase
electricity at the best effective price reasonably obtainable having regard
to the sources available.
3. In determining the effective price at which electricity is purchased by the
Licensee or any affiliate or related undertaking of the Licensee or any
defined undertaking, regard shall be had to any payments made or received
or to be made or received for the grant of or pursuant to any electricity
purchase contract.
4. In the discharge of it obligations under paragraph 2 above, the Licensee
may additionally have regard to any considerations liable to affect its
ability and that of any affiliate of the Licensee to discharge its
obligations under this Condition in the future, including the future
security, reliability and diversity of sources of electricity available for
purchase.
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5. In this Condition (and subject to paragraph 6) references to qualifying
renewable generation and to qualifying non-fossil generation shall refer to
generation from capacity of that description which:
(a) has been contracted by the Licensee or any defined undertaking under
an arrangement certified by the Secretary of State under Section 32
(7) of the Act which was entered into prior to the date this Licence
enters force; or
(b) is available to be contracted under arrangements to be produced to the
Director in satisfaction of an obligation imposed on the Licensee by
Order made under Section 32 of the Act after this Licence enters
force.
6. Notwithstanding that generation may previously have been contracted as
being qualifying renewable generation or qualifying non-fossil generation
(as the case may be), it shall cease to be so treated to the extent that:
(a) the Licensee (or any affiliate or related undertaking of the Licensee
or any defined undertaking) enjoys contractual freedom to vary or
discontinue its obligation to purchase such generation; and
(b) capacity from which qualifying renewable or non-fossil generation (as
the case may be) is otherwise contracted by the Licensee or any
affiliate or related undertaking of the Licensee or any defined
undertaking is equal to or exceeds the aggregate capacity specified in
any Orders previously made under Section 32 of the Act and continuing
in force, as being required to be available to the Licensee at that
time or in respect of any future period covered by such Orders.
7. Paragraphs 2, 3 and 4 of this Condition shall apply mutatis mutandis where
----------------
the Licensee exercises a discretion or (by agreement or otherwise) varies
the terms of an existing contract (whether or not entered into prior to the
date of entry into force of this Licence) in such a manner as to alter the
effective price under such contract.
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8. In this Condition:
"defined undertaking" means Non-Fossil Purchasing Agency Limited or
other entity through which the Licensee enters
into qualifying arrangements within the meaning of
Section 33 of the Act.
"purchase" includes the acquisition of electricity from
sources falling to be treated as own-generation
for the purpose of Condition 6, and the purchase
of electricity under electricity purchases
contracts.
"qualifying non-fossil shall include generation from renewable sources
generation" which for the time being has not been contracted
as being qualifying renewable generation.
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CONDITION 6: RESTRICTION ON OWN-GENERATION CAPACITY
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1. The Licensee shall procure that, with effect from the transfer date, the
Generation Business of the Licensee is held as a Separate Business by or
through a wholly-owned subsidiary of the Licensee.
2. Save with the prior written consent of the Director or in the circumstances
described in paragraph 3 below, the Licensee shall at all times ensure that
the sum of the amount in megawatts (calculated as provided under paragraphs
4 and 5 below) represented by the declared net capacity of the Licensee's
own-generation sets and the appropriate share of the declared net capacity
of generation sets in which the Licensee has an accountable interest shall
not exceed 800 megawatts.
3. Where the Licensee is in breach of paragraph 2 by reason of the acquisition
of own- generation sets or an accountable interest in other generation sets
in consequence of the occurrence of a specified event affecting the
operator or any third party, the Licensee shall forthwith notify the
Director for the purpose of obtaining such consent as is specified in
paragraph 2.
4. For the purposes of calculating the limit under paragraph 2 and subject to
paragraph 5, there shall be attributed to the Licensee:
(a) the whole of the declared net capacity represented by own-generation
sets; and
(b) the appropriate share (namely the share representing the Licensee's
economic interest therein) of the declared net capacity of generation
sets in which it has an accountable interest, ascertained in such
manner as the Licensee with the approval of the Director may
determine.
5. Where the Director is satisfied that by virtue of the Licensee's economic
interest (ascertained in such manner as the Director may determine)
therein:
(a) generation sets in which the Licensee has only an accountable interest
should more properly be treated as own-generation sets; or
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(b) own-generation sets should more properly be treated as sets in which
the Licensee only has an accountable interest; or
(c) own-generation sets, or generation sets in which the Licensee has an
accountable interest, should not be treated as falling in either
category; or
(d) generation sets not declared as sets in which the Licensee has an
accountable interest, should be treated as generation sets in which
the Licensee has an accountable interest;
the Director may issue directions to that effect.
6. For the purposes of this Condition and subject to paragraphs 5 and 9, the
Licensee shall have an accountable interest in a generation set in
circumstances where (such generation set not being an own-generation set of
the Licensee):
(a) the operator is a related undertaking of the Licensee or any affiliate
of the Licensee; or
(b) the Licensee or any affiliate of the Licensee is in partnership with
or is party to any arrangement for sharing profits or cost-savings or
any joint venture with the operator or with any third party with
regard to the operator; or
(c) the Licensee or any affiliate of the Licensee has (directly or
indirectly):
(i) any beneficial shareholding interest in the operator; or
(ii) any beneficial underlying interest in the generation set; or
(iii) provided or agreed to provide finance to the operator otherwise
than on arm's length terms; or
(iv) provided or agreed to provide, or has determined or is
responsible for determining the price (or other terms affecting
the financial value) of, the fuel used in the generation sets;
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and is entitled under a contract of not less than 5 years'
duration:
(aa) to a share of the declared net capacity of the generation
set; or
(bb) to a share of the declared net capacity of a generation
set being the own-generation set of another Authorised
Electricity Operator or in which such Authorised
Electricity Operator has an accountable interest, under
arrangements for the exchange of capacity entitlement or
supplies of electricity representing such entitlement
between the licensee or its affiliate and such Authorised
Electricity Operator.
7. Paragraph 6 shall be applied in relation to the calculation of an
accountable interest in generation sets of any other Authorised Electricity
Operator as if the references therein to the Licensee were replaced by
references to such Authorised Electricity Operator.
8. References in paragraph 6 to contracts giving entitlements to a share of
declared net capacity shall include electricity sale or purchase contracts
where rights under such contract are exercisable by reference to an
identified generation set or to amounts generated at such set.
9. The Licensee shall not be deemed to have an accountable interest in a
generation set where:
(a) such generation set is owned and operated by the National Grid Company
plc or a wholly-owned subsidiary thereof under a Licence granted
pursuant to Section 6 of the Act; or
(b) the Licensee's interest arises wholly under the terms of the Pooling
and Settlement Agreement or (other than as provided in paragraph 8)
under any electricity purchase or sale contract; or
(c) the Licensee's interest arises solely by virtue of arrangements for
the sharing with the operator of any generation set of the risks
associated with changes in the price of fuel used by the generation
set during the term of any such contract as is referred to in
paragraph 6 or 8 above.
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10. The Licensee shall, on each such occasion as it provides to the Director
separate accounts for the Generation Business pursuant to paragraph 3(b)
(i) of Condition 2 and at any other time upon request of the Director,
provide to the Director a statement:
(a) confirming compliance with paragraphs 1, 2 and 3 above as at the date
of the statement and throughout the period since the last such
statement; and
(b) identifying (in such detail and with such supporting documents or
information as the Director may require) the amount of capacity in
megawatts represented by the declared net capacity of own-generation
sets attributable to the licensee and the appropriate share of the
Licensee in the declared net capacity of generation sets in which the
Licensee has an accountable interest, as at the date of the statement.
11. Where the Director is satisfied that the basis of calculation used by the
Licensee is not in conformity with paragraphs 4 and 5 above, the Director
may issue directions specifying an alternative basis of calculation, and
the basis of calculation by the Licensee shall be adjusted accordingly with
effect from the date of issue of the directions or such other date as may
be specified in the directions.
12. In this Condition:
"operator" means, in relation to any generation set, the
Authorised Electricity Operator or any person
for the time being responsible (under contract
or otherwise) for the generation or sale of
electricity from such plant.
"own-generation set" means any generation set the majority beneficial
ownership of which is vested in the Licensee or
an affiliate of the Licensee or in respect of
which the Licensee or an affiliate of the
Licensee is the operator and references to own-
generation sets of another Authorised
Electricity Operator shall be construed as if
the reference herein to the Licensee were
replaced by reference to that Authorised
Electricity Operator.
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"specified event" means any such event as is described in
paragraph (1) (f) of Schedule 2 to this Licence
but for this purpose as if references to the
Licensee were replaced by references to the
operator or third party in question.
"underlying interest" in relation to any generation set means any
interest arising by reason of the Licensee or
affiliate or any related undertaking of the
Licensee or affiliate (whether alone or with
others):
(a) holding or being entitled to acquire an
interest in the land on which the
generation set, or any part thereof, is
built;
(b) being in partnership with or party to any
arrangement for sharing of profits or
cost-savings or any joint venture with any
person holding or entitled to acquire an
interest in the land on which the
generation set, or any part thereof, is
built;
(c) owning any electrical plant situated on or
operated as a unit with the generation set
(and for such purpose, any electrical
plant or equipment to the possession of
which the Licensee, affiliate or related
undertaking is entitled under any
agreement for hire, hire purchase,
conditional sale or loan shall be deemed
to be owned by such person) provided
always that such electrical plant shall
not be deemed to be operated as a unit
with any generation set by reason only of
connections with any other system for the
transmission or distribution of
electricity; or
(d) having obtained any consent under Section
36 of the Act required for the
construction or extension of the
generation set or any part thereof.
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CONDITION 7: TARIFFS
- ----------------------
1. The Licensee shall ensure that any tariffs fixed under Section 18 of the
Act shall be so framed as separately to identify:
(a) the use of system element in the Licensee's charges; and
(b) the charges in respect of the supply of electricity to tariff
customers.
2. Where the Director considers that by reason of the complexity of any such
tariffs fixed by the Licensee, simplified explanatory statements are
required or expedient for the understanding of tariff customers, the
Director may direct the Licensee to draw up such explanatory statements and
thereafter to publish them with the tariffs to which they relate.
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CONDITION 7A: ARRANGEMENTS FOR INFORMING CUSTOMERS ON REVOCATION OF LICENCE
- ----------------------------------------------------------------------------
1. The Licensee shall comply with a direction from the Director in the
following terms where the Director:
(a) is, or is aware that the Secretary of State is, about to revoke a
Licence granted to another Electricity Supplier to supply electricity
(in this Condition known as the "First Supplier"); and
(b) considers that the Licensee is able to supply electricity to the
customers of the First Supplier without significantly prejudicing the
supplies of electricity which the Licensee makes or is contracted to
make.
2. The Director shall only issue a direction in accordance with paragraph 1
when the Secretary of State or, as the case may be, the Director has served
the First Supplier with a notice that he is revoking the First Supplier's
Licence to supply electricity in accordance with the terms of the First
Supplier's Licence, or such earlier date as the Director may agree with the
First Supplier.
3. A direction issued in accordance with paragraph 1 shall require that the
Licensee shall, within the period specified by the Director, send a written
notice in a form approved by the Director to each of the persons or
premises specified or described in the direction:
(a) informing the customer in question that, notwithstanding any contract
he may have with the First Supplier, the First Supplier is no longer
supplying him with electricity and has not done so since the
revocation took effect or, where the notice has been sent before the
revocation has taken effect, will be no longer supplying him with
electricity when it takes effect;
(b) informing the customer that the customer must from the moment the
revocation takes effect enter into a new contract for supply with
another Electricity Supplier of the customer's choice, and that he is
free to request a supply from the Licensee; and
(c) setting out the terms upon which the Licensee is prepared to supply
electricity if requested.
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CONDITION 7B: THE PROGRAMME IMPLEMENTATION AGREEMENT
- -----------------------------------------------------
1. The Licensee shall, where the Director has given it a written direction to
do so, enter into and comply with the Programme Implementation Agreement
established in accordance with paragraph 4.
2. The Programme Implementation Agreement shall be concerned with matters
relating to the effective implementation of trading and other arrangements
between the Licensee and other Relevant Parties which, in the reasonable
opinion of the Director following consultation with all Relevant Parties,
are or are likely to be necessary and appropriate to provide for the
effective and timely facilitation of competition in the supply of
electricity.
3. The Programme Implementation Agreement may include provisions relating to:
(a) the operation and management of procedures for the testing, trialing
and integration of those systems, processes and procedures required to
facilitate competition in the supply of electricity;
(b) the obligations of each of the Relevant Parties in respect of the
procedures defined under sub-paragraph (a);
(c) limitations of the liability of the Licensee and of such other persons
as are specified in the Agreement in respect of actions taken in
connection with the Agreement;
(d) the provision of information as between Relevant Parties and to other
persons specified in the Agreement;
(e) the determination of the specification of systems, processes and
procedures to be tested, trialed and integrated in accordance with the
Agreement, except in those circumstances where the Director considers
that any of the Relevant Parties has entered into another agreement
which adequately provides for such specification to be otherwise
determined;
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(f) the settling by the Director of disputes between Relevant Parties in
relation to matters covered by the Agreement; and
(g) the establishment of a board (the "Implementation Board"), comprising
appropriate persons appointed by the Director following consultation
with the Relevant Parties, which shall:
i) oversee the conduct of the Agreement;
ii) advise the Director and the Relevant Parties of any matters upon
which they may reasonably seek advice in relation to matters
covered by the Agreement, including the operation and management
of procedures established under the Agreement; and
iii) undertake such other functions as in the reasonable opinion of
the Director are necessary to provide for the effective and
timely facilitation of competition in electricity supply.
4. The Programme Implementation Agreement shall be that established by
agreement between the Relevant Parties with the approval of the Director
or, where the Relevant Parties cannot agree (or where in the opinion of the
Director such agreement is unlikely to be reached within a reasonable
period) and where:
(a) the Director has sent to each of the Relevant Parties a notice (the
"proposals notice") setting out his own proposals in relation to the
content of the Programme Implementation Agreement; and
(b) following consideration of any comments received from any of the
Relevant Parties within 21 days of the issue of the proposals notice,
and having made such changes to his proposals as the Director
considers appropriate, the Director has given to each of the Relevant
Parties a notice setting out his final proposals (the "confirmation
notice"),
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the Programme Implementation Agreement shall, unless within 7 days of the
issue of the confirmation notice the parties have reached agreement with
the approval of the Director as to an alternative, be established in
accordance with the terms of the Director's confirmation notice.
5. With regard to the provisions of paragraphs 1 to 4, and following
consultation with the Relevant Parties and with such other persons or
bodies as appear to the Director to represent the interests of those likely
to be affected, the Director may issue a direction that specified parts of
the Relevant Conditions shall take effect at such time and in such cases or
circumstances as he shall direct.
6. In issuing a direction in accordance with paragraph 5 the Director shall
have regard to the need to provide for effective arrangements to facilitate
competition in the supply of electricity to customers and for the effective
maintenance of existing trading arrangements in respect of the supply of
electricity.
7. This Condition shall cease to be in force on whichever is the latest of the
following dates:
(a) 30 September 1998;
(b) the date which is 6 months after the latest date upon which any
provision in accordance with paragraph 3 (but excluding sub-paragraph
3(c)) ceases to have effect; or
(c) such other date as may be agreed between the Director and the
Licensee.
8. In this Condition:
"Relevant Conditions" means Conditions 7A, 7B, 8B, 11A to 11F,
18 to 23C, 30 to 33 and the Contract Terms
Conditions of this Licence.
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"Relevant Parties" means the Licensee, other Authorised
Electricity Operators, the Electricity Pool of
England and Wales and Scottish Electricity
Settlements Ltd.
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CONDITION 8: BASIS OF CHARGES FOR TOP-UP AND STANDBY SUPPLIES OR SALES OF
- -------------------------------------------------------------------------
ELECTRICITY, EXEMPT SUPPLY SERVICES, USE OF SYSTEM AND CONNECTION TO THE SYSTEM:
- -------------------------------------------------------------------------------
REQUIREMENTS FOR TRANSPARENCY
- -----------------------------
1. The Licensee shall as soon as practicable and in any event within 28 days
after this Licence has come into force prepare statements in a form
approved by the Director setting out the basis upon which the charges for
the provision of top-up and standby supplies or sales of electricity and
for exempt supply services (in each case, as part of the Supply or Second
Tier Supply Business), for use of system and for connection to the
Licensee's Distribution System (in each case, as part of the Distribution
Business) will be made, in all cases in such form and with such detail as
shall be necessary to enable any person to make a reasonable estimate of
the charges to which he would become liable for the provision of such
services, and (without prejudice to the foregoing) including the
information set out in paragraphs 2 to 5.
2. The statement referred to in paragraph 1 shall, in respect of the provision
of top-up and standby supplies or sales of electricity, set out the methods
by which and the principles on which the charges for the provision of each
of top-up supplies or sales and standby supplies or sales will be made.
3. The statement referred to in paragraph 1 shall, in respect of the provision
of exempt supply services, set out the methods by which and the principles
on which charges for the provision of such services will be made.
4. The statement referred to in paragraph 1 shall in respect of use of system
include:
(a) a schedule of charges for the distribution of electricity under use of
system;
(b) a schedule of adjustment factors to be made in respect of distribution
losses, in the form of additional supplies required to cover those
distribution losses;
(c) the methods by which and the principles on which the charges (if any)
for availability of distribution capacity on the Licensee's
Distribution System will be made; and
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(d) save to the extent that such matters are included in any statement
prepared in accordance with Condition 11E:
i) a schedule of charges in respect of meter reading, accounting and
administrative services; and
ii) a schedule of the charges (if any) which may be made for the
provision and installation of any meters or electrical plant at
entry or exit points, the provision and installation of which is
ancillary to the grant of use of system, and for the maintenance
of such meters or electrical plant.
5. The statement referred to in paragraph 1 shall in respect of connections to
the Licensee's Distribution System include (save to the extent that such
matters are included in any statement prepared in accordance with Condition
11E):
(a) a schedule listing those items (including the carrying out of works
and the provision and installation of electric lines or electrical
plant or meters) of significant cost liable to be required for the
purpose of connection (at entry or exit points) to the Licensee's
Distribution System for which connection charges may be made or levied
and including (where practicable) indicative charges for each such
item and (in other cases) an explanation of the methods by which and
the principles on which such charges will be calculated;
(b) the methods by which and the principles on which any charges will be
made in respect of extension or reinforcement of the Licensee's
Distribution System rendered (in the Licensee's discretion) necessary
or appropriate by virtue of providing connection to or use of system
to any person seeking connection;
(c) the methods by which and the principles on which connection charges
will be made in circumstances where the electric lines or electrical
plant to be installed are (at the Licensee's discretion) of greater
size or capacity than that required for use of system by the person
seeking connection;
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(d) the methods by which ad the principles on which any charges (including
any capitalised charge) will be made for maintenance, repair, and
replacement required o electric lines, electrical plant or meters
provided and installed for making a connection to the Licensee's
Distribution System;
(e) the methods by which and principles on which any charges will be made
for the provision of special metering or telemetry or data processing
equipment by the Licensee for the purposes of enabling any person
which is party to the Pooling and Settlement Agreement to comply with
its obligations in respect of metering thereunder, or for the
performance by the Licensee of any service in relation thereto; and
(f) the methods by which and principles on which any charges will be made
for disconnection from the Licensee's Distribution System and the
removal of electrical plant, electric lines and ancillary meters
following disconnection.
6. The basis on which charges for the provision of top-up and standby supplies
or sales of electricity shall be set shall reflect the costs directly
incurred in the provision thereof, together with a reasonable rate of
return on the capital represented by such costs.
7. The basis on which charges for the provision of exempt supply services
shall be set shall reflect the costs directly incurred in the provision
thereof, together with a reasonable rate of return on the capital
represented by such costs.
8. Use of system charges for those items referred to in paragraph 4 shall be
determined on the same basis as is applied by the Licensee when determining
the use of system element of tariffs fixed pursuant to Section 18 of the
Act and Condition 7.
9. Connection charges for those items referred to in paragraph 5 shall be set
at a level which will enable the Licensee to recover:
(a) the appropriate proportion of the costs directly or indirectly
incurred in carrying out any works, the extension or reinforcement of
the Licensee's Distribution System or the provision and installation,
maintenance, repair, and replacement or (as the case may be) removal
following disconnection of any electric lines, electrical plant or
meters; and
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(b) a reasonable rate of return on the capital represented by such costs.
10. If so requested and subject to paragraphs 11 and 16, the Licensee shall, as
soon as practicable and in any event within 28 days (or where the Director
so approves such longer period as the Licensee may reasonably require
having regard to the nature and complexity of the request) after the date
referred to in paragraph 17 give or send to any person making such request
a statement showing present and future circuit capacity, forecast power
flows and loading on the part or parts of the Licensee's Distribution
System specified in the request and fault levels for each distribution node
covered by the request and containing:
(a) such further information as shall be reasonably necessary to enable
such person to identify and evaluate the opportunities available when
connecting to and making use of the part or parts of the Licensee's
Distribution System specified in the request; and
(b) if so requested, a commentary prepared by the Licensee indicating the
Licensee's views as to the suitability of the part or parts of the
Licensee's Distribution System specified in the request for new
connections and the distribution of further quantities of electricity.
11. The Licensee shall include in every statement given or sent under paragraph
10 the information required by that paragraph except that the Licensee may:
(a) with the prior consent of the Director omit from any such statement
any details as to circuit capacity, power flows, loading or other
information, disclosure of which would, in the view of the Director,
seriously and prejudicially affect the commercial interests of the
Licensee or any third party; and
(b) omit information the disclosure of which would place the Licensee in
breach of Condition 12.
12. The Licensee may periodically revise the information set out in and, with
the approval of the Director, alter the form of the statements prepared in
accordance with paragraph 1 and shall, at least once in every year this
Licence is in force, make any necessary revisions to such statements in
order that the information set out in the statements shall continue to be
accurate in all material respects.
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13. The Licensee shall send a copy of the statements prepared in accordance
with paragraph 1, and of each revision of such statements in accordance
with paragraph 12, to the Director.
14. The Licensee shall give or send a copy of the statements prepared in
accordance with paragraph 1, or (as the case may be) of the latest revision
of such statements in accordance with paragraph 12, to any person who
requests a copy of such statement or statements.
15. The Licensee may make a charge for any statement given or sent pursuant to
paragraph 14 of an amount which shall not exceed the amount specified in
directions issued by the Director for the purposes of this Condition based
on the Director's estimate of the Licensee's reasonable costs of providing
such a statement.
16. The Licensee may within 10 days after receipt of the request provide an
estimate of its reasonable costs in the preparation of any statement
referred to in paragraph 10, and its obligation to provide such statement
shall be conditional on the person requesting such statement agreeing to
pay the amount estimated or such other amount as the Director may, upon
application of the Licensee or the person requesting such statement,
direct.
17. For the purposes of paragraph 10, the date referred to shall be the latest
of:
(a) the date of receipt of the request referred to in paragraph 10; or
(b) the date on which the Licensee receives agreement from the person
making the request to pay the amount estimated or such other amount as
is determined by the Director (as the case may be) under paragraph 16.
18. The Licensee shall, not less than 5 months prior to the date on which it
proposes to amend its use of system charges in respect of any agreement for
use of system, send to the Director a notice setting out the Licensee's
proposals in relation to such amendment together with an explanation of the
proposed amendment (including a statement of any assumptions on which such
proposals are based), and the Licensee shall send a copy of such notice to
any person who has entered into an agreement for use of system under
Condition 8B.
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19. Except with the prior consent of the Director, the Licensee shall not amend
its use of system charges in respect of any agreement for use of system
save to the extent that it has given prior notice of the amendment in
accordance with paragraph 18 and such amendment reflects the proposals made
in the notice (subject only to revisions consequent upon material changes
in the matters which were expressed, in the statement which accompanied the
notice, to be assumptions on which the proposals were based).
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CONDITION 8A: NON-DISCRIMINATION IN THE PROVISION OF TOP-UP OR STANDBY SUPPLIES
- -------------------------------------------------------------------------------
OR SALES OF ELECTRICITY, EXEMPT SUPPLY SERVICES, USE OF SYSTEM AND CONNECTION TO
- -------------------------------------------------------------------------------
THE SYSTEM
- ----------
1. It the provision of top-up or standby supplies or sales of electricity, in
the carrying out of works for the purpose of connection to the Licensee's
Distribution System or in providing for the retention of a connection to
its Distribution System, the Licensee shall not discriminate:
(a) between any persons or class or classes of persons; or
(b) as between the Licensee (in the provision of connections by the
Licensee as part of its Distribution Business to itself for the
purpose of its Supply or Second Tier Supply Business) and any person
or class or classes of persons.
2. In the provision of use of system the Licensee shall not discriminate:
(a) between any Authorised Electricity Operators or class or classes
thereof; or
(b) as between the Licensee (in the provision of use of system by the
Licensee as part of its Distribution Business to itself for the
purpose of its Supply or Second Tier Supply Business) and any
Authorised Electricity Operator or class or classes thereof.
3. In the provision of exempt supply services the Licensee shall not
discriminate between any Exempt Suppliers or class or classes thereof.
4. Without prejudice to paragraphs 1 to 3, the Licensee shall not:
(a) make charges for the provision of top-up or standby supplies or sales
of electricity to any person or class or classes of persons;
(b) make charges for use of system to any Authorised Electricity Operator
or class or classes thereof, or
(c) make charges for exempt supply services to any Exempt Supplier or
class or classes thereof which differ from the charges for such
provision:
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i) (in the case of top-up or standby supplies or sales of
electricity) to any other person or class or classes of person;
ii) (in the case of use of system):
(aa) to any other Authorised Electricity Operator or to any class
or classes thereof; or
(bb) to the Licensee (in the provision of use of system by the
Licensee as part of its Distribution Business to itself for
the purposes of the Supply Business or the Second Tier
Supply Business); or
iii) (in the case of exempt supply services) to any other Exempt
Supplier or class or classes thereof
except in so far as such differences reasonably reflect differences in the
costs associated with such provision.
5. The Licensee shall not in setting its charges for provision of top-up or
standby supplies or sales of electricity, for exempt supply services or for
use of system restrict, distort or prevent competition in the generation,
distribution or supply of electricity.
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CONDITION 8B: REQUIREMENT TO OFFER TERMS
- -------------------------------------------
1. On application made by any Authorised Electricity Operator the Licensee
shall (subject to paragraph 7) offer to enter into an agreement for use of
system:
(a) to accept into the Licensee's Distribution System at such entry point
or points and in such quantities as may be specified in the
application, electricity to be provided by or on behalf of such
Authorised Electricity Operator; and/or
(b) to distribute such quantities of electricity as are referred to in
sub-paragraph (a) (less any distribution losses) at such exit point or
points on the Licensee's Distribution System and to such person or
persons as the Authorised Electricity Operator may specify; and
(c) specifying the use of system charges to be paid by the Authorised
Electricity Operator, such charges (unless manifestly inappropriate)
to be referable to the statement referred to at paragraphs 1 and 4 of
Condition 8 or any revision thereof, and to be in conformity with the
requirements of paragraph 8 of Condition 8;
(d) containing (where appropriate) the provisions referred to in paragraph
2 of Condition 21;
(e) including terms requiring and entitling the Authorised Electricity
Operator to act (where appropriate) as agent of the Licensee in order
to procure an agreement on the Standard Terms of Connection between
the Licensee and each customer of the Authorised Electricity Operator
at premises which are to be supplied with electricity through an
established connection;
(f) where the applicant is an Exempt Supplier, requiring such Exempt
Supplier either to enter into an agreement with the Licensee for
exempt supply services or to enter into an equivalent agreement with
another Electricity Supplier; and
(g) containing such further terms as are or may be appropriate for the
purposes of the agreement.
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2. On application made by any person, the Licensee shall (subject to paragraph
7) offer to enter into an agreement for the provision of a connection or
for the modification of an existing connection to the Licensee's
Distribution System and such offer shall make detailed provision regarding:
(a) the carrying out of works (if any) required to connect the Licensee's
Distribution System to any other system for the transmission or
distribution of electricity, and for the obtaining of any consents
necessary for such purpose;
(b) the carrying out of works (if any) in connection with the extension or
reinforcement of the Licensee's Distribution System rendered (in the
Licensee's discretion) appropriate or necessary by reason of making
the connection or modification to an existing connection and for the
obtaining of any consents necessary for such purpose;
(c) (save to the extent that such matters are included in any agreement
offered in accordance with Condition 11C) the installation of
appropriate meters (if any) required to enable the Licensee to measure
electricity being accepted into the Licensee's Distribution System at
the specified entry point or points or leaving such system at the
specified exit point or points;
(d) the installation of such switchgear or other apparatus (if any) as may
be required for the interruption of supply where the person seeking
connection or modification of an existing connection does not require
the provision by the Licensee of top-up or standby supplies or sales
of electricity;
(e) (save to the extent that such matters are included in any agreement
offered in accordance with Condition 11C) the installation of special
metering, telemetry or data processing (if any) for the purpose of
enabling any person which is party to the Pooling and Settlement
Agreement to comply with its obligations in respect to metering or the
performance by the Licensee of any service in relation to such
metering thereunder;
(f) the date by which any works required to permit access to the
Licensee's
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Distribution System (including for this purpose any works to reinforce
or extend the Licensee's Distribution System) shall be completed (time
being of the essence unless otherwise agreed by the person seeking
connection);
(g) the connection charges to be paid to the Licensee, such charges
(unless manifestly inappropriate):
i) to be presented in such a way as to be referable to the statement
referred to in paragraphs 1 and 5 of Condition 8 or any revision
thereof; and
ii) to be set in conformity with the requirements of paragraph 9 of
Condition 8 and (where relevant) of paragraph 5 of this
Condition; and
(h) containing such further terms as are or may be appropriate for the
purpose of the agreement.
3. On application made by any person the Licensee shall (subject to paragraph
7) offer to enter into an agreement to provide top-up or standby supplies
or sales of electricity, such offer to make provision for the charges to be
made in respect of top-up or standby supplies or sales of electricity,
which shall:
(a) be presented in such a way as to be referable to the statement
referred to at paragraphs 1 and 2 of Condition 8 or any revision
thereof; and
(b) be set in conformity with the requirements of paragraph 6 of Condition
8.
4. On application made by any Exempt Supplier the Licensee shall (subject to
paragraph 7) offer to enter into an agreement for exempt supply services
within its authorised area and such offer shall make detailed provision
regarding:
(a) the making, maintenance and termination by the Licensee of
registrations under and in accordance with the Master Registration
Agreement in relation to premises to which the Exempt Supplier
supplies or is required to supply electricity;
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(b) the exchange between the Licensee and Exempt Supplier of such
information as is required for the performance of the Licensee's
obligations in accordance with sub-paragraph (a);
(c) the appointment by the Exempt Supplier of an appropriate provider of
meter operation, data retrieval, data processing and data aggregation
services in relation to premises to which it supplies electricity;
(d) the apportionment and settlement by the Licensee of charges incurred
by it by virtue of registrations under the Master Registration
Agreement which are made, maintained and terminated in accordance with
sub-paragraph (a);
(e) the payment by the Exempt Supplier of charges for exempt supply
services, such charges (unless manifestly inappropriate) to be
referable to the statement referred to at paragraphs 1 and 3 of
Condition 8 or any revision thereof and to be in conformity with the
requirements of paragraph 7 of Condition 8;
(f) the reimbursement by the Exempt Supplier (by way of indemnity) of all
charges incurred by the Licensee by virtue of registrations made and
maintained in accordance with sub-paragraph (a);
(g) the provision by the Exempt Supplier to the Licensee of reasonable
security or collateral for the performance of its obligations under
the agreement;
(h) the varying of the agreement, including the making of amendments
necessary to give effect to any determination made by the Director in
respect of the agreement; and
(i) such further matters as are or may be appropriate for the purposes of
the agreement.
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5. For the purpose of determining an appropriate proportion of the costs
directly or indirectly incurred in carrying out works under an agreement
for making a connection or modification to an existing connection, the
Licensee shall have regard to:
(a) the benefit (if any) to be obtained or likely in the future to be
obtained by the Licensee or any other person as a result of the
carrying out of such works whether by reason of the reinforcement or
extension of the Licensee's Distribution System or the provision of
additional entry or exit points on such system or otherwise;
(b) the ability or likely future ability of the Licensee to recoup a
proportion of such costs from third parties; and
(c) the principles that:
(i) no charge will normally be made for reinforcement of the existing
Distribution System if the new or increased load requirement does
not exceed 25 per cent of the existing effective capacity at the
relevant points on the system; and
(ii) charges will not generally take into account system reinforcement
carried out at more than one voltage level above the voltage of
connection.
6. The Licensee shall offer terms for agreements in accordance with paragraphs
1 to 4 as soon as practicable and (save where the Director consents to a
longer period) in any event not more than the period specified in paragraph
8 after receipt by the Licensee (or its agent) from:
(a) in the case of paragraph 1, an Authorised Electricity Operator;
(b) in the case of paragraphs 2 and 3, any person; and
(c) in the case of paragraph 4, an Exempt Supplier
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of all such information as the Licensee may reasonably require for the
purpose of formulating the terms of the offer.
7. The Licensee shall not be obliged pursuant to this Condition to offer to
enter or to enter into any agreement if:
(a) to do so would be likely to involve the Licensee being:
i) in breach of its duties under section 9 of the Act;
ii) in breach of the Electricity Supply Regulations 1988 or of any
regulations made under section 29 of the Act or of any other
enactment relating to safety or standards applicable in respect
to the Distribution Business;
iii) in breach of the Grid Code or the Distribution Code; or
iv) in breach of the Conditions;
(b) the person making the application does not undertake to be bound,
in so far as applicable, by the terms of the Distribution Code or
the Grid Code from time to time in force;
(c) in the case of a person making application for use of system
under paragraph 1, such person ceases to be an Authorised
Electricity Operator; or
(d) in the case of a person making application for exempt supply
services under paragraph 4, such person ceases to be an Exempt
Supplier.
8. For the purpose of paragraph 6, the period specified shall be:
(a) in the case of persons seeking use of system, exempt supply services
or top-up or standby supplies or sales of electricity only, 28 days;
(b) in the case of persons seeking connection or a modification to an
existing connection, 3 months; and
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(c) in the case of persons seeking use of system or top-up or standby
supplies or sales of electricity in conjunction with connection, 3
months.
9. The Licensee shall within 28 days following receipt of a request from any
person, give or send to such person such information in the possession of
the Licensee as may be reasonably required by such person for the purpose
of completing paragraph 8 of Part 1 and paragraphs 2(v) and (vi) of Part 2
of Schedule 2 to The Electricity (Application for Licences and Extensions
of Licences) Regulations 1990 or such provisions to like effect contained
in any further regulations then in force made pursuant to sections 6(3), 60
and 64(1) of the Act.
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CONDITION 8C: REQUIREMENT TO OFFER STANDARD TERMS OF CONNECTION
- -----------------------------------------------------------------
1. The Licensee shall, within 28 days after this Condition has come into
force, prepare and submit to the Director for his approval the standard
terms of an agreement (the "Standard Terms of Connection") to provide, as
between the Licensee and any customer, for the retention of an established
connection at premises which are to be supplied with electricity through
such a connection.
2. The Licensee may, subject to the approval of the Director, prepare
different Standard Terms of Connection for different cases or classes of
customer or premises, clearly identifying the criteria used to distinguish
between such cases or classes.
3. The Licensee shall from time or time, and whenever requested to do so by
the Director, review the Standard Terms of Connection with a view to
determining whether any revision should be made to such terms, and in the
course of the review the Licensee shall consult with the Relevant
Consumers' Committee, all other public electricity suppliers and all Second
Tier Suppliers which supply electricity within the authorised area.
4. At the conclusion of any review in accordance with paragraph 3 the Licensee
shall submit to the Director:
(a) a proposal for the revision of the Standard Terms of Connection (or,
where the Licensee considers it appropriate in all the circumstances,
a proposal that no revision should be made to the Standard Terms of
Connection); and
(b) the reasons for its proposal, together with a summary of responses
received from such parties as were consulted by the Licensee.
5. A proposal made by the Licensee in accordance with paragraph 4 shall
require to be approved by the Director and, following such approval in
writing, the Licensee shall accordingly revise (or, as the case may be,
shall make no revision to) the Standard Terms of Connection.
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6. The Licensee shall, in such manner as will in the opinion of the Licensee
secure adequate publicity therefor:
(a) publish, no later than 31 December 1997, the Standard Terms of
Connection approved by the Director in accordance with paragraph 1;
and
(b) publish, within 21 days after receiving the approval of the Director,
any revision to the Standard Terms of Connection in accordance with
paragraph 5.
7. The Licensee shall not:
(a) subject to paragraph 8, enter into a contract with a customer for the
supply of electricity to premises which are to be supplied through an
established connection without at the same time (in respect of such
premises) entering into an agreement with the customer on the Standard
Terms of Connection; or
(b) do anything to prevent the conclusion of an agreement on the Standard
Terms of Connection between itself and a customer of any Authorised
Electricity Operator which is acting as agent for the Licensee in
accordance with an agreement for use of system.
8. The Licensee may at any time agree with any person (by way of variation to
the Standard Terms of Connection) terms for the retention of a particular
established connection which differ from the Standard Terms of Connection
where such different terms are appropriate in all the circumstances.
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CONDITION 8D: FUNCTIONS OF THE DIRECTOR
- -----------------------------------------
1. If, after a period which appears to the Director to be reasonable for the
purpose, the Licensee has failed to enter into an agreement with any person
entitled or claiming to be entitled thereto pursuant to a request under
Condition 8B or 8C, the Director may, on the application of such person or
the Licensee, settle any terms of the agreement in dispute between the
Licensee and that person in such manner as appears to the Director to be
reasonable having (in so far as relevant) regard in particular to the
following considerations:
(a) that such person should pay to the Licensee:
i) in the case of the provision of top-up or standby supplies or
sales of electricity, such sum as is determined in accordance
with paragraph 6 of Condition 8;
ii) in the case of exempt supply services, such sum as is determined
in accordance with paragraph 7 of Condition 8;
iii) in the case of provision of use of system, the use of system
charges determined in accordance with paragraph 8 of Condition 8;
and
iv) in the case of provision of a connection or a modification to an
existing connection to the system, the whole or an appropriate
proportion (as determined in accordance with paragraph 5 of
Condition 8B) of the costs referred to in sub-paragraph 9(a) of
Condition 8, together with a reasonable rate of return on the
capital represented by such costs;
(b) that the performance by the Licensee of its obligations under the
agreement should not cause it to be in breach of those provisions
referred to at sub-paragraph 7(a) of Condition 8B;
(c) that any methods by which the Licensee's Distribution System is
connected to any other system for the transmission or distribution of
electricity accord (in so far as applicable to the Licensee) with the
Distribution Code and with the Grid Code;
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(d) that the terms and conditions of the agreement so settled by
the Director and of any other agreements entered into by the
Licensee pursuant to an application under Condition 8B or 8C
should be, so far as circumstances allow, in as similar a form
as is practicable; and
(e) in the case of exempt supply services, that the agreement for
the provision of exempt supply services should make provision
for all the matters set out at paragraph 5 of Condition 8B.
2. In so far as any person entitled or claiming to be entitled to an offer
under Condition 8B or 8C wishes to proceed on the basis of the
agreement as settled by the Director, the Licensee shall forthwith
enter into and implement such agreement in accordance with its terms.
3. If either party to such agreement proposes to vary the contractual
terms of any agreement for exempt supply services, for the provision of
a connection or for the modification of an existing connection to the
Licensee's Distribution System, for the retention of an established
connection to such Distribution System or for use of system entered
into pursuant to Condition 8B or 8C or under this Condition in any
manner provided for under such agreement, the Director may, at the
request of that party, settle any dispute relating to such variation in
such manner as appears to the Director to be reasonable.
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CONDITION 9: DISTRIBUTION SYSTEM PLANNING STANDARD AND QUALITY OF SERVICE
- -----------------------------------------------------------------------------
1. The Licensee shall plan and develop the Licensee's Distribution System
in accordance with a standard not less than that set out in Engineering
Recommendation P.2/5 (October 1978 revision) of the Electricity Council
Chief Engineers' Conference in so far as applicable to it or such other
standard of planning as the Licensee may, following consultation (where
appropriate) with the Transmission Company and any other Authorised
Electricity Operator liable to be materially affected thereby and with
the approval of the Director, adopt from time to time.
2. The Licensee shall within 3 months after this Licence enters into force
draw up and submit to the Director for his approval a statement setting
out criteria by which the quality of performance of the Licensee in
maintaining distribution system security and availability and quality
of service may be measured.
3. The Licensee shall within 2 months after the end of each financial year
submit to the Director a report providing details of the performance of
the Licensee during the previous financial year against the criteria
referred to in paragraph 2.
4. The Director may (following consultation with the Licensee and, where
appropriate, with the Transmission Company and any other Authorised
Electricity Operator liable to be materially affected thereby) issue
directions relieving the Licensee of its obligation under paragraph 1
in respect of such parts of the Licensee's Distribution System and to
such extent as may be specified in the directions.
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CONDITION 9A: SECURITY AND SAFETY OF SUPPLIES
- -------------------------------------------------
1. The Licensee shall establish and operate an enquiry service for use by
any person for the purposes of receiving reports and offering
information, guidance or advice about any matter or incident that:
(a) causes danger or requires urgent attention, or is likely to
cause danger or require urgent attention, in relation to the
supply or distribution of electricity in the Licensee's
authorised area; or
(b) affects or is likely to affect the maintenance of the
security, availability and quality of service of the
Licensee's Distribution System.
2. The service established by the Licensee in accordance with paragraph 1
shall:
(a) be provided without charge by the Licensee to the user at the
point of use;
(b) ensure that all reports and enquiries are processed in a
prompt and efficient manner whether made by telephone, in
writing or in person;
(c) be available to receive and process telephone reports and
enquiries at all times on every day of each year; and
(d) be operational no later than 31 March 1998.
3. In the establishment and operation of the enquiry service in accordance
with paragraph 1 the Licensee shall not discriminate:
(a) between any persons or class or classes thereof; or
(b) between the Licensee (in the provision of such services by the
Licensee as part of its Distribution Business to itself for
the purpose of its Supply Business) and any private
electricity supplier or any customer thereof.
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4. In the establishment and operation of the enquiry service in accordance
with paragraph 1 the Licensee shall not restrict, distort or prevent
competition in the supply of electricity.
5. The Licensee shall by 1 January 1998 prepare and submit to the Director
for his approval a statement setting out details of the service to be
provided in accordance with paragraph 1, and the Licensee shall,
following the Director's approval, give or send a copy of such
statement to any person requesting it.
6. The Licensee shall give to the Director notice of any amendments it
proposes to make to the statement prepared under paragraph 5, and shall
not make such amendments until either:
(a) a period of one month from the date of the notice has expired;
or
(b) prior to the expiry of such period, the Licensee has obtained
the written approval of the Director to the amendments.
7. The Licensee shall make arrangements to keep each of its customers
informed of a postal address and telephone number at which the service
established in accordance with paragraph 1 may be contacted.
8. The Licensee may discharge the duty imposed by paragraph 7 by providing
the requisite information to each of its customers:
(a) on the occasion of the customer first commencing to take a
supply from the Licensee; and
(b) either:
(i) where bills or statements in respect of charges for the
supply of electricity are rendered to the customer, on
a quarterly basis (it being sufficient that the
information is included on or with any bill or
statement); or
(ii) where no bills or statements in respect of charges for
the supply of electricity are rendered to the customer,
on an annual basis
and by publishing such information in such manner as will in the
opinion of the Licensee secure adequate publicity for it.
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9. The Licensee shall take steps to inform each of its customers, and each
Authorised Electricity Operator which uses the service, of any change
to the address or telephone number of the service established in
accordance with paragraph 1 as soon as is practicable prior to such
change becoming effective.
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CONDITION 9B: PROCEDURES FOR THE DETECTION AND PREVENTION OF THEFT, DAMAGE
- ------------------------------------------------------------------------------
AND METER INTERFERENCE
- ----------------------
1. The Licensee shall (and shall ensure that its agents) take all
reasonable steps to detect and prevent:
(a) the theft of electricity at premises which are supplied by it;
(b) damage to any electrical plant, electric line or electricity
meter through which such premises are supplied; and
(c) interference with any electricity meter through which such
premises are supplied.
2. Where a person other than the Licensee is the owner of any electrical
plant, electric lines or meter the Licensee shall, as soon as is
reasonably practicable, inform that person of any incident where it has
reason to believe:
(a) there has been damage to such electrical plant, electric line
or meter; or
(b) there has been interference with the meter to alter its
register or prevent it from duly registering the quantity of
electricity supplied.
3. Where a person other than the Licensee is the supplier of electricity
to premises within the authorised area the Licensee shall, as soon as
is reasonably practicable, inform that person of any incident where it
has reason to believe:
(a) there has been damage to any electrical plant, electric line
or meter through which such premises are supplied with
electricity; or
(b) there has been interference with the meter through which such
premises are supplied to alter its register or prevent it from
duly registering the quantity of electricity supplied.
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CONDITION 9C: PROVISIONS RELATING TO THE CONNECTION OF METERING EQUIPMENT
- -----------------------------------------------------------------------------
1. On application made by any person the Licensee shall, subject to
paragraph 5, offer to enter into an agreement authorising that person
to connect metering equipment to the Licensee's Distribution System.
2. In making an offer to enter into an agreement specified in paragraph 1,
the Licensee shall set out:
(a) the date from which the applicant is authorised to undertake
connections;
(b) the procedures to be adopted by the applicant when making
connections, with particular regard to those relating to
safety; and
(c) such other detailed terms as are or may be appropriate for the
purposes of the agreement.
3. The Licensee shall offer terms for agreements in accordance with
paragraph 1 as soon as practicable and (save where the Director
consents to a longer period) in any event not more than 28 days after
receipt by the Licensee from any person of an application containing
all such information as the Licensee may reasonably require for the
purpose of formulating the terms of the offer
4. In the offering of the terms in accordance with paragraph 1, the
Licensee shall not show undue preference to or exercise undue
discrimination against any person or class of persons.
5. The Licensee shall not be obliged pursuant to this Condition to offer
to enter or to enter into any agreement:
(a) (in respect of non-half hourly metering equipment) which comes
into effect prior to 1 April 2000; or
(b) where to do so would be likely to cause the Licensee to be in
breach of those provisions referred to at sub-paragraph 7(a)
of Condition 8B.
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6. If, after a period which appears to the Director to be reasonable for
the purpose, the Licensee has failed to enter into an agreement with
any person entitled or claiming to be entitled thereto pursuant to a
request under this Condition, the Director may, on the application of
such person or the Licensee, settle any terms of the agreement in
dispute between the Licensee and that person in such manner as appears
to the Director to be reasonable.
7. In so far as any person entitled or claiming to be entitled to an offer
under this Condition wishes to proceed on the basis of the agreement as
settled by the Director, the Licensee shall forthwith enter into and
implement such agreement in accordance with its terms.
8. If the Licensee or other party to such agreement proposes to vary the
terms of any agreement entered into pursuant to this Condition in any
manner provided for under such agreement, the Director may, at the
request of the Licensee or other party to such agreement, settle any
dispute relating to such variation in such manner as appears to the
Director to be reasonable.
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CONDITION 9D: AGREEMENTS FOR THE PROVISION OF METERS
- --------------------------------------------------------
1. The Licensee shall not, in the course of its Supply Business, enter
into an agreement with any person for the provision of an electricity
meter at any premises (whatever the nature of that agreement) which is
intended or is likely to restrict, distort or prevent competition in
the supply of electricity.
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CONDITION 10: GENERATION SECURITY STANDARD
- ----------------------------------------------
1. The Licensee shall make arrangements sufficient to meet the generation
security standard.
2. The duty imposed by paragraph 1 shall be discharged either by the
Licensee's complying with the provisions of paragraph 3 below or by the
making by the Licensee of such other arrangements as may have been
previously approved in writing for the purpose by the Director.
3. The Licensee may discharge the duty imposed by paragraph 1 by:
(a) for so long as the relevant condition is met, purchasing as a
pool member under the terms of the Pooling and Settlement
Agreement quantities of electricity which are at all times
sufficient to meet the demands of all qualifying customers of
the Licensee; and
(b) for so long as the relevant condition is met, and save by
reason of planned maintenance undertaken on the Licensee's
Distribution System or in circumstances of force majeure
affecting either the Licensee's Distribution System or the
quantities of electricity delivered into that system, not:
(i) making voltage reductions outside statutory limits;
or
(ii) interrupting or reducing supplies to any qualifying
customer
otherwise than as instructed pursuant to the Grid Code by the
Transmission Company or in accordance with the Distribution Code.
4. The relevant condition referred to in paragraph 3 is that there should
at any relevant time be electricity available to be purchased under the
terms of the Pooling and Settlement Agreement at a price less than the
ceiling price.
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5. The Licensee shall upon request by the Director provide to the Director
such information as the Director may require for the purpose of
monitoring compliance with this Condition and to enable the Director
(having regard to his statutory duties) to review the operation of the
generation security standard.
6. The provisions of this Condition are without prejudice to the duties of
the Licensee under the Electricity Supply Regulations 1988.
7. In this Condition:
"ceiling price" means such price as would be equal to the
Pool Selling Price in circumstances where
the corresponding Pool Purchase Price was an
amount equal to the Value of Lost Load.
"generation security means such standard of generation security
standard" as will ensure that:
(a) the supply of electricity to
qualifying customers will not be
discontinued in more than 9 years in
any 100 years; and
(b) the voltage or frequency of
electricity supplied to qualifying
customers will not be reduced below
usual operational limits in more
than 30 years in any 100 years by
reason of insufficiency of
electricity generation available for
the purposes of supply by the
Licensee to its qualifying customers
at times of annual system peak
demand.
"Pool Purchase Price" shall each have the meaning from time to
and "Pool Selling time ascribed to them in Schedule 9 to the
Price" Pooling and Settlement Agreement.
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"qualifying customer" means any purchaser from the Licensee
entitled and requiring at any time to be
supplied by the Licensee at premises within
the authorised area of the Licensee but
shall exclude:
(a) a contract purchaser under an
interruptible contract or a contract
containing load management terms to
the extent that supplies to that
purchaser may be interrupted or
reduced in accordance with the terms
of that contract; and
(b) a tariff customer on special tariffs
which restrict supplies to
particular time periods to the
extent that supplies to that
customer may be interrupted or
reduced in accordance with such
tariff.
"Value of Lost Load" means in respect of the first financial
year, the sum of (pound)2 per kWh and, in
respect of each succeeding financial year,
the sum which corresponds to (pound)2 per
kWh as adjusted to reflect the percentage
change in the Retail Price Index between the
index published or determined in respect to
the December prior to the start of that
financial year and the index published or
determined for December 1989.
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CONDITION 11: DISTRIBUTION CODE
- -----------------------------------
1. The Licensee shall in consultation with Authorised Electricity
Operators liable to be materially affected thereby prepare and at all
times have in force and shall implement and (subject to paragraph 10 of
this Condition) comply with a Distribution Code:
(a) covering all material technical aspects relating to
connections to and the operation and use of the Licensee's
Distribution System or (insofar as relevant to the operation
and use of the Licensee's Distribution System) the operation
of electric lines and electrical plant connected to the
Licensee's Distribution System or the distribution system of
any Authorised Electricity Operator and (without prejudice to
the foregoing) making express provision as to the matters
referred to in paragraph 5 below; and
(b) which is designed so as:
(i) to permit the development, maintenance and operation
of an efficient, co-ordinated and economical system
for the distribution of electricity; and
(ii) to facilitate competition in the generation and
supply of electricity.
2. The Distribution Code in force at the date this Licence enters force
shall be sent to the Director for his approval. Thereafter the Licensee
shall (in consultation with Authorised Electricity Operators liable to
be materially affected thereby) periodically review (including upon the
request of the Director) the Distribution Code and its implementation.
Following any such review, the Licensee shall send to the Director:
(a) a report on the outcome of such review; and
(b) any proposed revisions to the Distribution Code from time to
time as the Licensee (having regard to the outcome of such
review) reasonably thinks fit for the achievement of the
objectives referred to in sub-paragraph (b) of paragraph 1;
and
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(c) any written representations or objections from Authorised
Electricity Operators (including any proposals by such
operators for revisions to the Distribution Code not accepted
by the Licensee in the course of the review) arising during
the consultation process and subsequently maintained.
3. Revisions to the Distribution Code proposed by the Licensee and sent to
the Director pursuant to paragraph 2 shall require to be approved by
the Director.
4. Having regard to any written representations or objections referred to
in sub-paragraph (c) of paragraph 2, and following such further
consultation (if any) as the Director may consider appropriate, the
Director may issue directions requiring the Licensee to revise the
Distribution Code in such manner as may be specified in the directions
and the Licensee shall forthwith comply with any such directions.
5. The Distribution Code shall include:
(a) a distribution planning and connection code containing:
(i) connection conditions specifying the technical,
design and operational criteria to be complied with
by any person connected or seeking connection with
the Licensee's Distribution System; and
(ii) planning conditions specifying the technical and
design criteria and procedures to be applied by the
Licensee in the planning and development of the
Licensee's Distribution System and to be taken into
account by persons connected or seeking connection
with the Licensee's Distribution System in the
planning and development of their own plant and
systems; and
(b) a distribution operating code specifying the conditions under
which the Licensee shall operate the Licensee's Distribution
System and under which persons shall operate their plant
and/or distribution systems in relation to the Licensee's
Distribution System, insofar as necessary to protect the
security and quality of supply and safe operation of the
Licensee's Distribution System under both normal and abnormal
operating conditions.
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6. The Licensee shall give or send a copy of the Distribution Code (as
from time to time revised) to the Director.
7. The Licensee shall (subject to paragraph 8) give or send a copy of the
Distribution Code (as from time to time revised) to any person
requesting the same.
8. The Licensee may make a charge for any copy of the Distribution Code
(as from time to time revised) given or sent pursuant to paragraph 7 of
an amount which will not exceed any amount specified for the time being
for the purposes of this Condition in directions issued by the
Director.
9. In preparing, implementing and complying with the Distribution Code
(including in respect of the scheduling of maintenance of the
Licensee's Distribution System), the Licensee shall not unduly
discriminate against or unduly prefer:
(a) any one or any group of persons; or
(b) the Licensee in the conduct of any business other than the
Distribution Business
in favour of or as against any one other or any other group of persons.
10. The Director may (following consultation with the Licensee) issue
directions relieving the Licensee of its obligations under the
Distribution Code in respect of such parts of the Licensee's
Distribution System and to such extent as may be specified in the
directions.
11. Compliance with this Condition shall not require the Licensee to impose
any contractual obligation on tariff customers to comply with the
Distribution Code (as from time to time revised).
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CONDITION 11A: THE METERING POINT ADMINISTRATION SERVICE AND THE MASTER
- ---------------------------------------------------------------------------
REGISTRATION AGREEMENT
- ----------------------
1. The Licensee shall establish, and shall subsequently operate and
maintain, a service to be known as the Metering Point Administration
Service.
2. The Metering Point Administration Service shall, within the authorised
area, fulfil the following functions:
(a) the maintenance of such a register of technical and other data
as is necessary to facilitate supply by any Electricity
Supplier or Exempt Supplier to all premises within the
authorised area and to meet the reasonable requirements of
Electricity Suppliers in respect of such premises for
information for settlement purposes, including (where so
required):
i) the identity of the Electricity Supplier responsible
under the Pooling & Settlement Agreement for the
supply to each such premises;
ii) the type of metering equipment installed at each such
premises; and
iii) the address of each such premises;
(b) the amendment of the register maintained in accordance with
sub-paragraph (a) to reflect changes of supplier in respect of
any premises;
(c) the provision, in a timely and efficient manner, of such data
contained in the register as is reasonably required and
requested to:
i) any Electricity Supplier or agent thereof;
ii) any person identified in the Pooling and Settlement
Agreement as an appropriate person for the receipt of
data for settlement purposes; and
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iii) any person identified in the Master Registration
Agreement as entitled to such data for the purpose of
facilitating changes of supplier in respect of any
premises; and
(d) the maintenance of an enquiry service for the provision to any
customer of an Electricity Supplier, on request and free of
charge to that customer, of such data contained in the
register as is relevant to the supply of electricity to
premises which are (or are to be) owned or occupied by the
customer, and the taking of such steps as will in the opinion
of the Licensee secure adequate publicity for the operation of
the enquiry service.
3. In fulfilling its obligation in accordance with paragraph 1 the
Licensee shall not restrict, distort or prevent competition in the
provision of meter operation, data retrieval, data processing, data
aggregation or prepayment meter services.
4. The Licensee shall use its best endeavours, in conjunction and co-
operation with all other public electricity suppliers, to prepare a
form of agreement to be known as the Master Registration Agreement.
5. The Master Registration Agreement shall be an agreement made between:
(a) on the one part, the Licensee and all other public electricity
suppliers in their capacity as providers of metering point
administration services; and
(b) on the other part, all Electricity Suppliers who require the
provision of metering point administration services from at
least one public electricity supplier, together with such
other persons as are, for settlement purposes, appropriate
parties to the agreement
and shall comprise all the matters set out at paragraph 6.
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6. The Master Registration Agreement shall comprise:
(a) terms for the provision of metering point administration
services in accordance with the requirements of paragraph 2
and the equivalent requirements in the licences of all other
public electricity suppliers;
(b) provisions to facilitate, and procedures and practices to be
followed by Electricity Suppliers in relation to changes of
Electricity Supplier in respect of any premises;
(c) a catalogue of definitions, flows and forms of such data as
may require to be transferred by or to parties to the Master
Registration Agreement, or as between any persons for
settlement purposes or for any related purposes (the "Data
Transfer Catalogue");
(d) arrangements for the variation of the Master Registration
Agreement following consultation with the parties, or
representatives of the parties, to that agreement;
(e) provisions (which shall require to be approved in advance by
the Director) by virtue of which the whole or specified parts
of the Master Registration Agreement shall not be capable of
variation without the prior approval of the Director; and
(f) such other matters as are or may be appropriate for the
development, maintenance and operation of an efficient, co-
ordinated and economical system for the supply of electricity
and for the purpose of facilitating competition in electricity
supply.
7. The Licensee shall be a party to and shall comply with the provisions
of the Master Registration Agreement.
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CONDITION 11B: ESTABLISHMENT OF A DATA TRANSFER SERVICE
- ----------------------------------------------------------
1. The Licensee shall use its best endeavours, in conjunction and co-
operation with all other public electricity suppliers:
(a) to establish, or to procure the establishment by a third party
of, a service to be known as the Data Transfer Service; and
(b) subsequently to operate and maintain, or to procure the
subsequent operation and maintenance by a third party of such
Data Transfer Service in accordance with the provisions of
this Condition.
2. The Data Transfer Service shall:
(a) provide a network over which may be made all of the electronic
data transfers specified at paragraph 3;
(b) operate and maintain that network; and
(c) provide a connection to that network, on request, to any
person who is or will be a party to any of the electronic data
transfers specified at paragraph 3.
3. The electronic data transfers specified at this paragraph are those
which are reasonably required for any of the purposes set out at
paragraph 4 and which are made between:
(a) a Metering Point Administration Service (MPAS) Operator and an
Electricity Supplier (including the Licensee acting in the
course of its Supply Business) or any agent thereof;
(b) an MPAS Operator and any person identified in the Pooling and
Settlement Agreement or the Settlement Agreement for Scotland
as an appropriate person for the receipt of data from the MPAS
Operator for settlement purposes;
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(c) the Electricity Pool of England and Wales or Scottish
Electricity Settlements Limited (or any agent thereof) and an
Electricity Supplier (or any agent thereof);
(d) an Electricity Supplier (or any agent thereof) and another
Electricity Supplier (or any agent thereof);
(e) an Electricity Supplier and any of its agents;
(f) different agents of the same Electricity Supplier;
(g) public electricity suppliers (or their agents) and generators
(or their agents) which are parties to the Settlement
Agreement for Scotland; and
(h) Scottish Electricity Settlements Limited (or any agent
thereof) and generators which are parties to the Settlement
Agreement for Scotland.
4. The purposes of this paragraph are:
(a) meeting obligations with respect to the transfer of data for
settlement purposes;
(b) communicating meter reading and meter standing data;
(c) facilitating the provision of metering point administration
services;
(d) communicating distribution use of system information; and
(e) fulfilling such other requirements relating to the transfer of
data as may be requisite for the supply of electricity to
customers and compliance by Electricity Suppliers with the
Master Registration Agreement.
5. The Data Transfer Service shall, where relevant, transmit data in a
form which complies with the provisions of the Data Transfer Catalogue.
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6. In fulfilling its obligation under paragraph 1 the Licensee shall not,
or (if appropriate) shall ensure that the third party shall not,
restrict, distort or prevent competition in the provision of meter
operation, data retrieval, data processing, data aggregation or
prepayment meter services.
7. Any obligation placed on the Licensee under Conditions 11C to 11F in
respect of the provision of data transfer services shall (for the
purposes of those Conditions) be treated as a requirement on the
Licensee to use its best endeavours, in conjunction and co-operation
with all other public electricity suppliers, to fulfil that obligation
or to procure the fulfilment of that obligation by a third party, and
Conditions 11C to 11F shall apply mutatis mutandis to the provision of
data transfer services.
8. Further, in relation to the provision of data transfer services the
reference at paragraph 1 of Condition 11F to the Licensee failing to
enter into an agreement shall be a reference to the Licensee, in
conjunction with all other public electricity suppliers, failing to
enter into or failing to procure that a third party enters into an
agreement.
9. In this Condition:
"Metering Point Administration means the Licensee or any other
Service (MPAS) Operator" public electricity supplier in
its capacity as a provider of
metering point administration
services.
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CONDITION 11C: REQUIREMENT TO OFFER TERMS FOR THE PROVISION OF METERING AND
- ----------------------------------------------------------------------------
DATA SERVICES
- -------------
1. On application made by any private electricity supplier, or in the case of
sub-paragraphs 1(a) and (b) by any person, the Licensee shall (subject to
paragraph 6) offer to enter into an agreement for the provision within its
authorised area of such of the following services as may be required:
(a) the provision of metering equipment whether, at the discretion of the
Licensee, by way of sale, hire or loan ("meter provision services");
(b) the installation, commissioning, testing, repair and maintenance of
metering equipment ("meter operation services");
(c) the retrieval and verification of meter reading data from electricity
meters and the delivery of such data to any relevant person for the
purpose of data processing ("data retrieval services");
(d) the:
i) processing, validation and (where necessary) estimation of meter
reading data; and
ii) creation, processing and validation of data in respect of the
consumption of electricity at premises which receive an unmetered
supply,
and in each case the delivery of such data to any relevant person for the
purpose of data aggregation ("data processing services");
(e) the collation and summation of meter reading data (whether actual or
estimated) and of data in respect of the consumption of electricity at
premises which receive an unmetered supply, and the delivery of such
data to any relevant person for settlement purposes ("data aggregation
services"); and
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(f) the access to a system which supports the supply of electricity to
Designated Customers with prepayment meters ("prepayment meter
services"), such system providing as may be reasonably appropriate for
prepayment meters which require tokens, cards or keys for their
operation and comprising facilities for:
i) (where requested) the purchase by private electricity suppliers
and/or encoding with data of tokens, cards or keys;
ii) the use by customers of local outlets for the purchase of tokens
and the crediting with value of cards or keys;
iii) the making of payments to suppliers in respect of sums received
by the Licensee on behalf of customers; and
iv) where relevant, the transfer of customer data to private
electricity suppliers.
2. On application made by any Electricity Supplier the Licensee shall (subject
to paragraph 6) offer to provide metering point administration services
within its authorised area pursuant to and in accordance with the Master
Registration Agreement.
3. On application made by any person the Licensee shall (subject to paragraph
6) offer to enter into an agreement for the provision of data transfer
services.
4. In making an offer to enter into any agreement specified in paragraphs 1 to
3, the Licensee shall set out:
(a) the date by which the services required shall be provided (time being
of the essence unless otherwise agreed between parties);
(b) the charges to be paid in respect of the services required, such
charges (unless manifestly inappropriate):
i) to be presented in such a way as to be referable to the
statements prepared in accordance with paragraph 1 of Condition
11E or any revision thereof; and
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ii) to be set in conformity with the requirements of Condition 11E;
and
(c) such other detailed terms in respect of each of the services required
as are or may be appropriate for the purpose of the agreement.
5. The Licensee shall offer terms for agreements in accordance with paragraphs
1 to 3 as soon as practicable and (save where the Director consents to a
longer period) in any event not more than 28 days after receipt by the
Licensee from any person of an application containing all such information
as may reasonably be required for the purpose of formulating the terms of
the offer.
6. The Licensee shall not be obliged pursuant to this Condition to offer to
enter or to enter into any agreement if to do so would be likely to cause
the Licensee to be in breach of any of the provisions referred to at sub-
paragraph 7(a) of Condition 8B.
7. The Licensee shall undertake each of the services referred to in paragraphs
1 to 3 in the most efficient and economic manner practicable having regard
to the alternatives available and the other requirements of this Licence
and of the Act in so far as they relate to the provision of those services.
8. In the provision of any of the services referred to in paragraphs 1 to 3
(excepting prepayment meter services) the Licensee shall not restrict,
distort or prevent competition in the supply of electricity.
9. The services referred to in paragraphs 1 to 3 shall collectively be
described as Metering and Data Services.
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CONDITION 11D: NON-DISCRIMINATION IN THE PROVISION OF METERING AND DATA
- ------------------------------------------------------------------------
SERVICES
- --------
1. In the provision of any of the Metering and Data Services the Licensee
shall not discriminate:
(a) between any persons or class or classes thereof; or
(b) as between the Licensee (in the provision of such services by the
Licensee as part of its Distribution Business to itself for the
purpose of its Supply or Second Tier Supply Business) and any persons
or class or classes thereof.
2. Without prejudice to paragraph 1, and subject to the provisions of
Condition 11E, the Licensee shall not make charges for the provision of any
of the Metering and Data Services to any person or class or classes thereof
which differ from the charges for such provision:
(a) to any other person or class or classes of person; or
(b) to the Licensee in the provision of such services by the Licensee (as
part of its Distribution Business to itself for the purposes of its
Supply or Second Tier Supply Business)
except in so far as such differences reasonably reflect differences in the costs
associated with such provision.
3. In relation to the provision of prepayment meter services paragraphs 1 and
2 shall have effect as if after "Distribution Business" were inserted
therein "or any other business."
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CONDITION 11E: BASIS OF CHARGES FOR METERING AND DATA SERVICES: REQUIREMENTS
- -----------------------------------------------------------------------------
FOR TRANSPARENCY
- ----------------
1. The Licensee shall as soon as reasonably practicable prepare statements in
a form approved by the Director setting out:
(a) the basis upon which charges for the provision of each of the Metering
and Data Services will be made; and
(b) information relating to the other terms that will apply to the
provision of each service,
in each case in such form and with such detail as shall be necessary to enable
any person to make a reasonable estimate of the charges to which he would
become liable for the provision of such services and of the other terms,
likely to have a material impact on the conduct of his business, upon which
the service would be provided and (without prejudice to the foregoing)
including the information set out in paragraph 2.
2. The statements referred to in paragraph 1 shall include:
(a) a schedule of charges for such services; and
(b) an explanation of the methods by which and the principles on which
such charges will be calculated.
3. The Director may, upon the written request of the Licensee, issue a
direction relieving the Licensee of its obligations under paragraphs 1 and
2 to such extent and subject to such terms and conditions as he may specify
in that direction.
4. The Licensee shall not in setting its charges for or in setting the other
terms that will apply to the provision of any of the Metering and Data
Services restrict, distort or prevent competition in the generation,
distribution or supply of electricity or in the provision of meter
operation, data retrieval, data processing or data aggregation services.
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5. The Licensee may periodically review the information set out in and, with
the approval of the Director, alter the form of the statements prepared in
accordance with paragraph 1 and shall, at least once in every year that
this Licence is in force, make any necessary revisions to such statements
in order that the information set out in the statements shall continue to
be accurate in all material respects.
6. The Licensee shall send a copy of the statements prepared in accordance
with paragraph 1, and of each revision of such statements in accordance
with paragraph 5, to the Director.
7. The Licensee shall give or send a copy of the statements prepared in
accordance with paragraph 1, or (as the case may be) of the latest revision
of such statements in accordance with paragraph 5, to any person who
requests a copy of such statement or statements.
8. The Licensee may make a charge for any statement given or sent pursuant to
paragraph 7 of an amount which shall not exceed the amount specified in
directions issued by the Director for the purposes of this Condition based
on the Director's estimate of the Licensee's reasonable costs of providing
such a statement.
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CONDITION 11F: FUNCTIONS OF THE DIRECTOR
- ------------------------------------------
1. If, after a period which appears to the Director to be reasonable for the
purpose, the Licensee has failed to enter into an agreement with any person
entitled or claiming to be entitled thereto pursuant to a request under
Condition 11C, the Director may, on the application of such person or the
Licensee, settle any terms of the agreement in dispute between the Licensee
and that person in such manner as appears to the Director to be reasonable
having (in so far as relevant) regard in particular to the following
considerations:
(a) that such person should pay in respect of the services required the
whole or the appropriate proportion of such sum as is determined in
accordance with paragraph 4 of Condition 11E;
(b) that the performance by the Licensee of its obligations under the
agreement should not cause it to be in breach of those provisions
referred to at sub-paragraph 7(a) of Condition 8B; and
(c) that the terms and conditions of the agreement so settled by the
Director and of any other agreements entered into pursuant to a
request under Condition 11C should be, so far as circumstances allow,
in as similar a form as is practicable.
2. In so far as any person entitled or claiming to be entitled to an offer
under Condition 11C wishes to proceed on the basis of the agreement as
settled by the Director, the Licensee shall forthwith enter into and
implement such agreement in accordance with its terms.
3. If any party to such agreement proposes to vary the contractual terms of
any agreement for any Metering and Data Services entered into pursuant to
Condition 11C or this Condition in any manner provided for under such
agreement, the Director may, at the request of that party, settle any
dispute relating to such variation in such manner as appears to the
Director to be reasonable.
4. The Director may (following consultation with the Licensee) issue
directions relieving the Licensee of its obligations under Condition 11C in
respect of such parts of that Condition and to such extent as may be
specified in the directions.
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CONDITION 12: RESTRICTION ON USE OF CERTAIN INFORMATION
- --------------------------------------------------------
1. Where the Licensee or any affiliate or related undertaking of the Licensee
receives, in the course of the operation of the Distribution Business,
information from any person:
(a) pursuant to the provisions of the Distribution Code;
(b) pursuant to the provisions of the Master Registration Agreement;
(c) in accordance with any agreement to provide a Metering or Data Service
pursuant to Condition 11C (but excluding prepayment meter services);
or
(d) in accordance with any agreement for Standard Terms of Connection,
such information shall be treated as confidential information for the purposes
of this Condition and, subject to paragraph 7, the provisions of this
Condition shall apply to that information, save where the person providing
the information notifies (or otherwise agrees with) the Licensee that the
information need not be treated as confidential.
2. The Licensee shall not (and shall procure that its affiliates and related
undertakings shall not) use confidential information in a manner which may
obtain for the Licensee or any affiliate or related undertaking of the
Licensee any commercial advantage in the operation of the Supply Business
or of the Second Tier Supply Business.
3. The Licensee shall not (and shall procure that its affiliates or related
undertakings shall not) authorise access to confidential information to any
of its (or its affiliates' and related undertakings') employees, agents,
consultants or contractors save insofar as sucrequire access to the
information for the effective operation of the Distribution Business.
4. The Licensee shall use all reasonable endeavours to ensure that any person
with authorised access to confidential information in accordance with
paragraph 3 shall use such information only for the purposes for which it
was provided.
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5. The Licensee shall not (and shall procure that its affiliates and related
undertakings shall not) disclose confidential information other than:
(a) subject to paragraph 6, to any professional or other advisers who
require such information for the purpose of providing advice which is
necessary for the effective operation of the Distribution Business.
(b) to the Director; and
(c) where the Licensee (or any affiliate or related undertaking of the
Licensee) is required or permitted to disclose such information:
(i) in compliance with its duties under the Act or any other
requirement of a Competent Authority;
(ii) in compliance with the conditions of any licence granted under
the Act or any document referred to in such a licence with which
it is by virtue of the Act or that licence to comply;
(iii) in compliance with any other requirement of law;
(iv) in response to a requirement of any Stock Exchange, the Panel on
Take-overs and Mergers or any other regulatory authority; or
(v) pursuant to the arbitration rules for the Electricity
Arbitration Association or pursuant to any judicial or other
arbitral process or tribunal of competent jurisdiction.
6. Where confidential information is disclosed in accordance with sub-
paragraph 5(a), the Licensee shall ensure that any persons to whom that
information is disclosed are aware of its confidential nature, and shall
take reasonable steps to ensure that such persons do not disclose that
confidential information save in accordance with the provisions of this
Condition.
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7. The Director may, upon the written request of the Licensee, issue a
direction relieving the Licensee of its obligations under paragraphs 1 to 6
to such extent and subject to such terms and conditions as he may specify
in that direction. 8. The Licensee shall no later than 1 January 1998
prepare a statement in a form approved by the Director setting out the
practices, procedures and systems the Licensee has adopted (or intends to
adopt) to ensure its compliance:
(a) with paragraphs 2 to 6 of this Condition; and
(b) in the provision of services in accordance with Conditions 9A,
11A, 11B and 11C (excluding prepayment meter services), with its
obligations not to restrict, distort or prevent competition.
9. The Licensee may periodically revise the information set out in and, with
the approval of the Director, alter the form of the statement prepared in
accordance with paragraph 8 and shall, at least once every year during
which this Licence is in force, review such statement in order that the
information set out therein shall continue to be accurate in all material
respects.
10. The Licensee shall take all reasonable steps to ensure that it complies
with the practices and procedures set out in the statement prepared in
accordance with paragraph 8 (as from time to time revised).
11. The Licensee shall send a copy of the statement prepared in accordance with
paragraph 8, and of each revision of such statement in accordance with
paragraph 9, to the Director.
12. The Licensee shall give or send a copy of the statement prepared in
accordance with paragraph 8, or (as the case may be) of the latest revision
of such statement in accordance with paragraph 9, to any person who
requests a copy of such statement.
13. As soon as is reasonably practicable after the end of each calendar year
the Licensee shall produce a report as to its compliance during that year
with the practices and procedures set out in the statement prepared in
accordance with paragraph 8, and such report shall:
(a) detail the procedures followed by the Licensee during that year for
monitoring its compliance with paragraph 10;
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(b) refer to such other matters as are or may be appropriate in relation
to the operation of the practices, procedures and systems adopted by
the Licensee during that year;
(c) outline the content of any representations received by the Licensee in
respect of the practices and procedures set out in the statement
prepared in accordance with paragraph 8, and detail such steps as were
taken by the Licensee in response to those representations; and
(d) specify any remedial action taken by the Licensee to ensure its
conformity with the statement prepared in accordance with paragraph 8.
14. The Licensee shall submit to the Director a copy of the report produced in
accordance with paragraph 13, and shall give or send a copy of the report
to any person who requests such a copy.
15. In this Condition:
"Competent Authority" means the Secretary of State, the Director and
any local or national agency, authority,
department, inspectorate, minister, ministry,
official or public or statutory person (whether
autonomous or not) of, or of the government of,
the United Kingdom or the European Community.
"confidential information" means all information required to be treated as
confidential under paragraph 1, but shall
exclude all information that is in or enters
into the public domain otherwise than as a
consequence of unauthorised disclosure by the
Licensee or any affiliate or related
undertaking of the Licensee (or by any person
to whom the same is disclosed or suffered to be
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disclosed by the Licensee or such affiliate or
related undertaking).
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"Electricity Arbitration means the unincorporated members' club of
Association" that name formed inter alia to promote the
efficient and economic operation of the
procedure for the resolution of disputes within
the electricity supply industry by means of
arbitration or otherwise in accordance with its
arbitration rules.
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CONDITION 13: COMPLIANCE WITH THE GRID CODE
- --------------------------------------------
1. The Licensee shall comply with the provisions of the Grid Code insofar as
applicable to it.
2. The Director may (following consultation with the Transmission Company)
issue directions relieving the Licensee of its obligation under paragraph 1
in respect of such parts of the Grid Code and to such extent as may be
specified in those directions.
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CONDITION 14: SECURITY ARRANGEMENTS
- ------------------------------------
1. The Licensee shall comply with the provisions of the Fuel Security Code and
such provisions shall have effect as if they were set out in this Licence.
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CONDITION 15: POOLING AND SETTLEMENT AGREEMENT
- -----------------------------------------------
1. The Licensee shall be a pool member under, and comply with the provisions
of, the Pooling and Settlement Agreement.
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CONDITION 16: CONDITIONS OF SUPPLY AFFECTING CUSTOMERS' STATUTORY RIGHTS
- -------------------------------------------------------------------------
1. The Licensee shall not include in or send with any notice given under
Section 16(3) of the Act, or any form provided to customers for use in
giving notice under Section 16(2) of the Act, or any notice sent to
customers prior to their entering into a tariff or special agreement, an
invitation to agree to anything which, by virtue of the Act, may only be
done or (as the case may be) not done:
(a) with the agreement of that customer; or
(b) in any case where that customer withholds his agreement or makes that
agreement subject to terms and conditions to which the Licensee objects,
with the approval or consent or by order of the Secretary of State
unless the form and terms of such invitation have first been submitted to
and approved by the Director.
2. Nothing in paragraph 1 shall prevent the Licensee from:
(a) inviting or requiring a customer to take a supply of electricity under
a special agreement in accordance with Section 22 of the Act;
(b) including in any such notice any provision or condition which the
Licensee is required or permitted to include in such notice by virtue
of Section 16(4) of the Act; or
(c) including in any such notice concerning the provision of a supply to
premises:
(i) not previously supplied by the Licensee; or
(ii) where any modification is required to any electric line,
electrical plant or electric meter through which such premises
are supplied, or where any change is required to the location
thereof
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an invitation to any customer to agree to any provision or condition
concerning the installation or location of any or all of an electric
line, electrical plant or an electric meter
in any such case without having submitted the form and terms of such agreement
or notice to the Director.
3. The Licensee shall include in any form provided to a customer for use in
giving notice under Section 16(2) of the Act a prominent statement of the right
of such customer to apply to the Director for the determination of any dispute
arising out of the proposed terms of supply.
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CONDITION 17: LICENSEE'S APPARATUS ON CUSTOMERS' SIDE OF METER
- ---------------------------------------------------------------
1. This Condition applies where the Licensee, whether on its own behalf or as
a provider of meter operation services to another Electricity Supplier,
installs a second meter or other apparatus for the purpose of ascertaining
or regulating the amount of electricity supplied, the period of supply, or
any other quantity or time connected with the supply on the customer's side
of non half-hourly metering equipment registering the quantity of the
supply to that customer.
2. Any second meter or other apparatus installed by the Licensee in the
position and for a purpose described in paragraph 1 shall be such that the
power consumed by it, when aggregated with the power consumed by any other
meter or apparatus installed by the Licensee in the like position and for a
like purpose in relation to the customer, does not exceed 10 watts except
where otherwise agreed with the customer.
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CONDITION 18: CODE OF PRACTICE ON PAYMENT OF BILLS AND GUIDANCE FOR DEALING
- ----------------------------------------------------------------------------
WITH CUSTOMERS IN DIFFICULTY
- ----------------------------
1. The Licensee shall, no later than 1 January 1998, prepare and submit to the
Director for his approval a code of practice concerning the payment of
electricity bills by its Domestic Customers, including appropriate guidance
for the assistance of such customers who, through misfortune or inability
to cope with electricity supplied on credit terms, may have difficulty in
paying such bills.
2. The code of practice shall include procedures by which the Licensee can
distinguish customers in difficulty (the "relevant customers") from others
in default and can:
(a) provide general information as to how relevant customers might reduce
their bills in the future by the more efficient use of electricity;
(b) where such a facility is available, accept in payment for electricity
supplied sums which are deducted at source from social security
benefits payable to relevant customers;
(c) detect failures by relevant customers to comply with arrangements
entered into for paying by instalments charges for electricity
supplied;
(d) make such arrangements so as to take into account the customers'
ability to comply with them;
(e) ascertain, with the assistance of other persons or organisations, the
ability of customers to comply with such arrangements;
(f) provide for customers who have failed to comply with such
arrangements, or procure for them the provision of, a prepayment meter
(where safe and practicable to do so); and
(g) arrange for the calibration of any prepayment meter so provided so as
to take into account `the customers' ability to pay any of the charges
due from them under such arrangements in addition to the other charges
lawfully being recovered through the prepayment meter.
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3. In formulating the procedures referred to at paragraph 2 the Licensee shall
have particular regard:
(a) to the purpose of avoiding, in so far as is practicable, the
disconnection of premises occupied by relevant customers otherwise
than following compliance by the Licensee with such procedures; and
(b) to the interests of relevant customers who are of pensionable age or
disabled or chronically sick and to the purpose of avoiding, in so far
as is practicable, the disconnection of premises occupied by such
customers during the winter months of each year,
and the procedures shall be designed for the achievement of such
purposes.
4. This Condition is subject to the provisions of Condition 23A.
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CONDITION 19: RECORD OF AND REPORT ON PERFORMANCE
- ---------------------------------------------------
1. The Licensee shall keep a record of its general operation of the
arrangements mentioned in Conditions 18, 20, 20A, 21, 22 and 23 and if the
Director so directs in writing, of its operation of any particular cases
specified, or of a description specified, by him.
2. The Licensee shall keep a statistical record of its performance in relation
to the provision of electricity supply to its Designated Customers under
the terms of contracts or in accordance with tariffs fixed under Section 18
of the Act, including services relating to:
(a) the amounts of electricity supplied and the recovery of electricity
charges for each of the principal payment methods and for each set of
the contract or tariff terms offered;
(b) the disconnection of customers for non-payment of bills and breach
of payment arrangements agreed following such non- payment;
(c) the holding of security deposits;
(d) the installation of pre-payment meters calibrated to recover customer
debts;
(e) the offering of appointments and the making of visits to customers'
premises;
(f) the response made to enquiries concerning electricity supply matters;
(g) the nature of guidance as to the efficient use of electricity given and
the measures to improve the efficient use of electricity introduced by
the Licensee; and
(h) payments made to customers and to suppliers pursuant to the standards
of performance prescribed by the Director in accordance with
regulations made under Section 39 of the Act or in accordance with
paragraphs 2 and 3 of Condition 21.
3. The Licensee shall, from time to time as required by the Director, provide
to the Director and to the Relevant Consumers' Committee such of the
information contained in the records prepared in accordance with paragraphs
1 and 2 as the Director may request in writing.
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4. As soon as is reasonably practicable after the end of each calendar year,
the Licensee shall submit to the Director and the Relevant Consumers'
Committee a report dealing with the matters mentioned in paragraphs 1 and 2
in relation to that year and shall:
(a) publish the report so submitted in such manner as will in the
reasonable opinion of the Licensee secure adequate publicity for it;
and
(b) send a copy of it free of charge to any person requesting one,
except that, in performing its obligations under sub-paragraphs 4(a) and
(b), the Licensee shall exclude from the report such information as appears
to it to be necessary or expedient to ensure that, save where they consent,
individual Designated Customers referred to therein cannot readily be
identified.
5. The report shall be presented, so far as is reasonably practicable, in a
standard form designated by the Director for the purposes of this
Condition.
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CONDITION 20: PROVISION OF SERVICES FOR PERSONS WHO ARE OF PENSIONABLE AGE OR
- -----------------------------------------------------------------------------
DISABLED OR CHRONICALLY SICK
- ----------------------------
1. The Licensee shall, no later than 1 January 1998, prepare and submit to the
Director for his approval a code of practice detailing the special services
the Licensee will make available for Domestic Customers who are of
pensionable age or disabled or chronically sick.
2. The code of practice shall include arrangements by which the Licensee will
where appropriate, in respect of its customers:
(a) provide where practicable special controls and adaptors for electrical
appliances and meters (including prepayment meters) and reposition
meters (and shall set out any charges to be made for the provision of
such services);
(b) provide special means of identifying persons acting on behalf of the
Licensee;
(c) give advice on the use of electricity;
(d) send bills in respect of the supply of electricity to a customer to
any person who is willing to be sent such bills and is nominated by
that customer (without prejudice, however, to the right of the
Licensee to send such bills both to the customer and to the nominated
person where that appears appropriate to the Licensee);
(e) make available (free of charge) to blind and partially sighted
customers, by telephone or other appropriate means, information
concerning the details of any bill relating to the supply of
electricity to them and a facility for enquiring or complaining in
respect of any such bill or any service provided by the Licensee; and
(f) make available (free of charge) to deaf and hearing impaired
customers, being in possession of appropriate equipment, facilities to
assist them in enquiring or complaining about any bill relating to the
supply of electricity to them or any service provided by the Licensee.
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3. The code of practice shall further include arrangements whereby the
Licensee will:
(a) take reasonable steps to draw the attention of its customers to the
existence of a register of customers who may be expected, by virtue of
being of pensionable age or disabled or chronically sick, to require:
(i) information and advice in respect of the matters set out at
paragraph 2; or
(ii) advance notice of interruptions to the supply of electricity;
(b) maintain such a register, comprising the relevant details of each
customer who requests (or, in the case of a customer supplied by a
private electricity supplier, whose supplier requests) his inclusion
on it and:
(i) give to those of its own customers so registered, in respect of
the matters set out at paragraph 2; and
(ii) give to all customers so registered, in respect of interruptions
to the supply of electricity,
such information and advice as may be appropriate and is of such
nature as shall be set out in the code of practice.
4. This Condition is subject to the provisions of Condition 23A.
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CONDITION 20A: CODE OF PRACTICE ON PROCEDURES WITH RESPECT TO SITE ACCESS
- --------------------------------------------------------------------------
1. The Licensee shall, no later than 1 January 1998, prepare and submit to the
Director for his approval a code of practice setting out the principles and
procedures the Licensee will follow in respect of any person acting on its
behalf who requires access to customers' premises.
2. The code of practice shall include procedures calculated to ensure that
persons visiting customers' premises on behalf of the Licensee:
(a) possess the skills necessary to perform the required duties;
(b) are readily identifiable to members of the public;
(c) use passwords provided for vulnerable customers;
(d) are appropriate persons to visit and enter customers' premises; and
(e) are able to inform customers, on request, of a contact point for help
and advice they may require in relation to the supply of electricity.
3. This Condition is subject to the provisions of Condition 23A.
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CONDITION 21: STANDARDS OF PERFORMANCE
- ---------------------------------------
1. The Licensee shall conduct its Supply and Distribution Businesses in the
manner which it reasonably considers to be best calculated to achieve any
standards of overall performance or standards of performance in connection
with the promotion of the efficient use of electricity by customers, as may
be determined by the Director pursuant to Sections 40 and 41 respectively
of the Act.
2. The Licensee shall not enter into a use of system agreement with any
Electricity Supplier that does not provide for the Licensee to make
payments in respect of the performance of the Distribution Business to the
Electricity Supplier for the benefit of any customer of that Electricity
Supplier equivalent to such sums as would have been paid pursuant to the
standards of performance prescribed by the Director in accordance with
regulations made under Section 39 of the Act had that customer been a
tariff customer of the Licensee in those situations where the Licensee
would have been obliged to make such a payment.
3. In making payments in accordance with any standards of performance or in
accordance with paragraph 2, the Licensee shall not discriminate:
(a) between any persons or class or classes thereof; or
(b) as between the Licensee and any persons or class or classes thereof.
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CONDITION 22: EFFICIENT USE OF ELECTRICITY
- --------------------------------------------
1. The Licensee shall, no later than 1 January 1998, prepare and submit to the
Director for his approval a code of practice setting out the ways in which
the Licensee will make available to customers such guidance on the
efficient use of electricity as will, in the opinion of the Licensee,
enable them to make informed judgments on measures to improve the
efficiency with which they use the electricity supplied to them. Such code
of practice shall include, but shall not be limited to:
(a) the preparation and making available free of charge to any customer
who requests it of a statement, in a form approved by the Director,
setting out information and advice for the guidance of customers in
the efficient use of electricity supplied to them;
(b) the making of arrangements for maintaining sources from which
customers may obtain further information about the efficient use of
electricity supplied to them, including the maintenance of a telephone
information service; and
(c) the preparation and making available free of charge to any customer
who requests it of a statement or statements of sources (to the extent
that the Licensee is aware of the same) outside the Licensee's
organisation from which customers may obtain additional information or
assistance about measures to improve the efficiency with which they
use the electricity supplied to them, such statement or statements to
include basic information which is publicly available on financial
assistance towards the costs of such measures available from Central
or Local Government or through bodies in receipt of financial support
from Government in connection with measures to promote the efficiency
of energy use.
2. Where the Director (who may have regard to the need for economy, efficiency
and effectiveness before giving directions under this paragraph) gives
directions to do so, the Licensee shall:
(a) review and prepare a revision of the code of practice;
(b) take steps to bring to the attention of customers information on the
efficient use of electricity supplied to them; and
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(c) send to each customer a copy of any information published by the
Director pursuant to Section 48 of the Act
in such manner and at such times as will comply with those directions.
3. This Condition is subject to the provisions of Condition 23A.
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CONDITION 23: COMPLAINT HANDLING PROCEDURE
- --------------------------------------------
1. The Licensee shall, no later than 1 January 1998, prepare and submit to the
Director for his approval a code of practice detailing the procedure for
handling complaints from customers about the manner in which the Licensee
conducts its Supply and Distribution Businesses.
2. Any procedure established in accordance with this Condition shall specify
the periods within which it is intended that different descriptions of
complaint should be processed and resolved.
3. This Condition is subject to the provisions of Condition 23A.
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CONDITION 23A: PREPARATION, REVIEW OF AND COMPLIANCE WITH CUSTOMER SERVICE CODES
- --------------------------------------------------------------------------------
1. This Condition applies to any code of practice required to be prepared by
the Licensee pursuant to Conditions 18, 20, 20A, 22 and 23 of this Licence.
2. In first preparing such a code the Licensee shall, prior to submitting that
code to the Director, consult the Relevant Consumers' Committee and shall
have regard to any representations made by the committee about such code or
the manner in which it is likely to be operated.
3. Where before the expiry of 30 days of the Licensee first submitting such
code to the Director for his approval the Director notifies the Licensee
that the Director considers the code is not sufficient for the purposes of
meeting the requirements of this Licence the Licensee shall forthwith make
such changes as the Director may require.
4. The Licensee shall, whenever requested to do so by the Director, review
such code and the manner in which it has been operated, with a view to
determining whether any modification should be made to it or to the manner
of its operation.
5. In carrying out any such review the Licensee shall consult the Relevant
Consumers' Committee and shall have regard to any representations made by
it about such code or the manner in which it is likely to be or (as the
case may be) has been operated.
6. The Licensee shall submit any revision of such code which, after consulting
the Relevant Consumers' Committee in accordance with paragraph 5, it wishes
to make, to the Director for his approval and following his approval in
writing shall then revise the code.
7. The Licensee shall:
(a) as soon as practicable following the preparation of any code or any
revision made to it send to the Director and the Relevant Consumers'
Committee a copy of such code or such revision (in each case in the
form approved by the Director);
(b) draw the attention of those of its customers to whom such code applies
to the existence of the code and of each substantive revision of it
and to the means by which they may inspect a copy of such code in its
latest form; and
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(c) give or send free of charge a copy of such code (as from time to time
revised) to any person who requests it.
8. No changes may be made to any code otherwise than in accordance with the
foregoing procedures.
9. The Licensee shall ensure, so far as reasonably practicable, that it
complies with such arrangements or procedures (as the case may be) as are
contained in or described by any code to which this condition applies and
approved by the Director or any revision to such code approved by the
Director.
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CONDITION 23B: INFORMATION GIVEN TO DESIGNATED CUSTOMERS
- ----------------------------------------------------------
1. The Licensee shall keep each of its Designated Customers (save insofar as
he receives an unmetered supply) informed of the amount of electricity
which, since he was last informed, its records show as having been consumed
by that customer:
(a) according to the meter through which he is supplied; or
(b) where no meter reading is available, according to the estimate of the
Licensee.
2. The Licensee shall keep each of its Designated Customers informed:
(a) that the Relevant Consumers' Committee or the Director can assist in
resolving complaints which the Licensee has not resolved to the
customer's satisfaction; and
(b) of how the appropriate office of the Committee or the Director can be
contacted.
3. The Licensee may discharge its duties under paragraphs 1 and 2 by providing
the relevant information on or with each bill or statement given to a
customer in respect of charges for the supply of electricity, and annually
to each customer to whom no such bills or statements are rendered.
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CONDITION 23C: PUBLICATION OF INFORMATION TO CUSTOMERS
- --------------------------------------------------------
1. Subject to paragraph 5, the Licensee shall by 31 December 1997 inform each
customer of a number or numbers ("the Supply Number(s)") relevant to the
registration, under the Master Registration Agreement, of a supplier of
electricity to the premises owned or occupied by such customer.
2. The Licensee shall, at the same time as it informs a customer of the
relevant Supply Number in accordance with paragraph 1, send to that
customer a statement in writing which provides a clear and sufficient
explanation of the nature and function of the Supply Number, such statement
having received the prior approval of the Director.
3. The Supply Number shall consist of a number of data items, each of which
shall be represented by a numerical identifier which shall:
(a) have the number of digits specified in a direction issued by the Director;
(b) be approved by the Director; and
(c) be used by the Licensee in common with all Electricity Suppliers.
4. Subject to paragraph 5, the Licensee shall inform each of its customers of
the Supply Number relevant to such customer:
(a) in a form in accordance with the terms of a direction issued by the
Director, on each bill or statement given to the customer in relation to
the supply of electricity; and
(b) annually where the customer does not receive such a bill or statement.
5. The Director may issue a direction relieving the Licensee of its obligation
under paragraphs 1 and 4 to such extent and subject to such terms and
conditions as he may specify in that direction.
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CONDITION 24: RELATIONS WITH THE RELEVANT CONSUMERS' COMMITTEE
- ----------------------------------------------------------------
1. The Licensee shall meet with the Relevant Consumers' Committee whenever
requested to do so by that committee, up to a maximum of six times in every
year during the period of this Licence.
2. Without prejudice to paragraph 1, the Licensee shall meet the Relevant
Consumers' Committee at least once in every year during the period of this
Licence.
3. In at least one meeting with the Relevant Consumers' Committee in every
year during the period of this Licence, the Licensee shall be represented
by one or more directors of the Licensee.
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CONDITION 25: HEALTH AND SAFETY OF EMPLOYEES
- ----------------------------------------------
1. The Licensee shall, together with all other licensees, consult with
appropriate representatives of persons employed by itself and by those
licensees in order to establish and maintain an appropriate machinery or
forum for the joint consideration of matters of mutual concern in respect
of the health and safety of such persons.
2. In this Condition:
"licensees" means all holders of licences granted under
Section 6(1)(a), 6(1)(b), 6(1)(c) and 6(2) of
the Act.
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CONDITION 26: [NO LONGER USED]
- -------------------------------
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CONDITION 27: DISPOSAL OF RELEVANT ASSETS
- ---------------------------------------------
1. The Licensee shall not dispose of or relinquish operational control over
any relevant asset otherwise than in accordance with the following
paragraphs of this Condition.
2. Save as provided in paragraph 3, the Licensee shall give to the Director
not less than two months' prior written notice of its intention to dispose
of or relinquish operational control over any relevant asset, together with
such further information as the Director may request relating to such asset
or the circumstances of such intended disposal or relinquishment of control
or to the intentions in regard thereto of the person proposing to acquire
such asset or operational control over such asset.
3. Notwithstanding paragraphs 1 and 2, the Licensee may dispose of or
relinquish operational control over any relevant asset:
(a) where:
(i) the Director has issued directions for the purposes of this
Condition containing a general consent (whether or not subject to
conditions) to:
(aa) transactions of a specified description; and/or
(bb) the disposal of or relinquishment of operational control
over relevant assets of a specified description; and
(ii) the transaction or the relevant assets are of a description to
which such directions apply and the disposal or relinquishment is
in accordance with any conditions to which the consent is
subject;
(b) where the disposal or relinquishment of operational control in
question is required by or under any enactment or subordinate
legislation.
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4. Notwithstanding paragraph 1, the Licensee may dispose of or relinquish
operational control over any relevant asset as is specified in any notice
given under paragraph 2 in circumstances where:
(a) the Director confirms in writing that he consents to such disposal or
relinquishment (which consent may be made subject to the acceptance by
the Licensee or any third party in favour of whom the relevant asset
is proposed to be disposed or operational control is proposed to be
relinquished of such conditions as the Director may specify); or
(b) the Director does not inform the Licensee in writing of any objection
to such disposal or relinquishment of control within the notice period
referred to in paragraph 2.
5. Without prejudice to paragraphs 1 to 4, the Licensee shall not after 15
December 1997 without the written consent of the Director after disclosure
of all material facts:
(a) create any mortgage, charge, pledge, lien or other form of security or
encumbrance whatsoever, undertake any indebtedness to any other person
or enter into any guarantee of any obligation otherwise than:
(i) on an arm's length basis;
(ii) on normal commercial terms;
(iii) for a Permitted Purpose; and
(iv) (if the transaction is within the ambit of paragraph 1) in
accordance with paragraphs 3 and 4;
provided that nothing in this Condition shall prevent the Licensee
guaranteeing any obligation owed by an affiliate or related
undertaking of the Licensee which has been or is to be incurred for a
Permitted Purpose;
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(b) transfer, lease, license or lend any sum or sums, asset, right or
benefit to any affiliate or related undertaking of the Licensee
otherwise than by way of:
(i) a dividend or other distribution out of distributable reserves;
(ii) repayment of capital;
(iii) payment properly due for any goods, services or assets provided
on an arm's length basis and on normal commercial terms;
(iv) a transfer, lease, licence or loan of any asset, right or
benefit on an arm's length basis and on normal commercial
terms;
(v) repayment of any loan or payment of any interest on such a
loan on an arm's length basis and on normal commercial terms;
(vi) payments for group corporation tax relief or for the
surrender of Advance Corporation Tax;
(vii) a transfer for the purpose of satisfying paragraph 3 of
Condition 2A;
(viii) an acquisition of shares in conformity with paragraph 2
of Condition 2A; or
(ix) a loan not prohibited by sub-paragraph (c);
(c) make loans to any affiliate or related undertaking of the Licensee,
other than loans for a Permitted Purpose.
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6. In this Condition:
"disposal" includes any sale, gift, lease, licence, loan,
mortgage, charge or the grant of any other
encumbrance or the permitting of any encumbrance
to subsist or any other disposition to a third
party, and "dispose" shall be construed
accordingly.
"indebtedness" means all liabilities now or hereafter due, owing
or incurred, whether actual or contingent, whether
solely or jointly with any other person and
whether as principal or surety, together with any
interest accruing thereon and all costs, charges,
penalties and expenses incurred in connection
therewith.
"relevant asset" means any asset for the time being forming part of
the Licensee's distribution system, any control
centre for use in conjunction therewith and any
legal or beneficial interest in land upon which
any of the foregoing is situate.
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Condition 28: Provision of information to the Director
- -------------------------------------------------------
1. Subject to paragraphs 6 and 7, the Licensee shall furnish to the Director,
in such manner and at such times as the Director may require, such
information and shall procure and furnish to him such reports, as the
Director may consider necessary in the light of the Conditions or as he may
require for the purpose of performing:
(a) the functions assigned to him by or under the Act; and
(b) any functions transferred to him under the Act.
2. The Licensee shall by 22 December 1997 procure from the holding company of
the Licensee a legally enforceable undertaking in favour of the Licensee in
a form already specified by the Director; such undertaking shall provide
that the holding company will give to the Licensee, and will procure that
each subsidiary of that holding company (other than the Licensee and its
subsidiaries) will give to the Licensee, all such information as may be
necessary to enable the Licensee to comply fully with paragraph 1. Such
undertaking shall remain in force for as long as the Licensee remains the
holder of this Licence and the giver of the undertaking remains the holding
company of the Licensee.
3. The Licensee shall deliver to the Director evidence (including a copy of
such undertaking) that the Licensee has complied with the obligation to
procure an undertaking pursuant to paragraph 2.
4. The Licensee shall not, save with the consent in writing of the Director,
enter (directly or indirectly) into any agreement or arrangement with the
holding company of the Licensee or any of the subsidiaries of the holding
company (other than the subsidiaries of the Licensee) at a time when:
(a) an undertaking complying with paragraph 2 is not in place; or
(b) there is an unremedied breach of such undertaking.
5. Without prejudice to the generality of paragraph 1, the Director may call
for the furnishing of accounting information which is more extensive than
or differs from that required to be prepared and supplied to the Director
under Condition 2.
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6. The Licensee may not be required by the Director to furnish him under this
Condition with information for the purpose of the exercise of his functions
under Section 48 of the Act.
7. The Licensee may not be required by the Director to furnish him under this
Condition with any information in relation to an enforcement matter which
the Licensee could not be compelled to produce or give under Section 28(3)
of the Act.
8. The power of the Director to call for information under paragraph 1 is in
addition to the power of the Director to call for information under or
pursuant to any other Condition.
9. The Licensee shall, if so requested by the Director, give reasoned comments
on the accuracy and text of any information and advice (so far as relating
to the Supply and Distribution Businesses) which the Director proposes to
publish pursuant to Section 48 of the Act.
10. In this Condition "information" shall include any documents, accounts,
estimates, returns or reports (whether or not prepared specifically at the
request of the Director) of any description specified by the Director.
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Condition 29: Payment of fees
- ------------------------------
1. The Licensee shall, at the times stated hereunder, pay to the Secretary of
State fees of the amount specified in, or determined under, this Condition.
2. In respect of the year beginning on 1 April 1991 and in each subsequent
year, the Licensee shall pay to the Secretary of State a fee which is the
aggregate of the following amounts:
(a) an amount which is a proportion as determined by the Director of the
amount estimated by the Director, according to a method which has
previously been disclosed in writing to the Licensee, as likely to be
his total costs during the coming year;
(b) the amount (or, where the Relevant Consumers' Committee in question is
the consumers' committee for more than one public electricity
supplier, the amount which is a proportion as determined by the
Director, according to a method which has previously been disclosed in
writing to the Licensee, of such amount) estimated by the Director
(having regard to any statement under paragraph 8(2) of Schedule 2 to
the Act) as being likely to be the costs during the coming year of the
Relevant Consumers' Committee in the exercise of the functions
assigned to it by or under the Act and any other such functions as it
has been or may be required to exercise by the Director;
(c) an amount which is a proportion as determined by the Director of the
amount estimated by the Director (in consultation with the Monopolies
Commission) as having been incurred in the calendar year immediately
preceding the 1st April in question by the Monopolies Commission in
connection with references made to it under Section 12 of the Act with
respect to this Licence or any other licence issued under Section
6(1)(c) of the Act; and
(d) the difference (being a positive or a negative amount), if any,
between:
(i) the amount of the fee paid by the Licensee in respect of the year
immediately preceding the 1st April in question; and
(ii) the amount which that fee would have been in respect of that year
had the amounts comprised therein been calculated by reference
to:
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(aa) in the case of sub-paragraph 2(a), the actual total
costs of the Director during that year and the
proportion thereof attributable to the Licensee; and
(bb) in the case of sub-paragraph 2(b), the actual total
costs of the Relevant Consumers' Committee during that
year and where appropriate, the proportion thereof
attributable to the Licensee,
(such costs being apportioned in each case as determined by
the Director according to a method previously disclosed in
writing to the Licensee),
and the fee shall be paid by the Licensee to the Secretary of State within
one month of the Director giving notice to the Licensee of its amount if that
notice is given within 6 months of the beginning of the year in respect of which
the fee is payable.
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Condition 30: Designated Premises
- ----------------------------------
1. For the purposes of this Licence, the question whether any premises are
"Designated Premises" shall be determined in accordance with the provisions
of this Condition.
2. Premises are Designated Premises if they are either:
(a) Domestic Premises; or
(b) premises at which, in the reasonable expectation of the Licensee at
the time of entering into a contract for the supply of electricity to
such premises, the normal annual consumption of electricity will
amount to no more than 12,000 kWh,
but excluding premises referred to at sub-paragraph (b) which receive an
unmetered supply, or which are supplied through half-hourly or maximum
demand metering equipment or under the terms of a multi-site contract.
3. For the purposes of this Condition, a "multi-site contract" is a contract
for the supply of electricity both to any premises which do not fall within
the terms of sub-paragraphs 2(a) or (b) and to one or more other premises
(not being Domestic Premises), all of which premises are owned or occupied
by:
(a) the same person or body of persons whether corporate or unincorporate;
or
(b) an undertaking (the "principal undertaking") and any holding company,
subsidiary, or subsidiary of the holding company of that principal
undertaking, or any other undertaking in which the principal
undertaking has a participating interest.
4. Any premises supplied by the Licensee which (in accordance with paragraphs
1 to 3) were not Designated Premises at the time at which the Licensee
entered into a contract for their supply shall, notwithstanding subsequent
changes to the nature or level of the consumption of electricity at those
premises, not become Designated Premises for the purposes of this Licence
prior to the time at which they cease to be supplied by the Licensee.
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5. Any premises supplied by the Licensee which (in accordance with paragraphs
1 to 3) were Designated Premises at the time at which the Licensee entered
into a contract for their supply shall cease to be Designated Premises for
the purposes of this Licence where:
(a) they have been continuously supplied by the Licensee for a period of
at least 12 months and:
(i) they are not, or are no longer, Domestic Premises; and
(ii) it is reasonably to be expected that the normal annual
consumption of electricity at the premises will amount to more
than 12,000 kWh; or
(b) (not being, or being no longer, Domestic Premises) the premises
commence receipt of an unmetered supply or a supply through half-
hourly or maximum demand metering equipment or under the terms of a
multi-site contract.
6. In this Condition:
"maximum demand metering means metering equipment which is
equipment" capable of recording the demand for
electricity supplied to premises during
the half hour of maximum demand in any
period of supply.
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CONDITION 31: TERMS FOR SUPPLY OF ELECTRICITY INCOMPATIBLE WITH LICENCE
- ------------------------------------------------------------------------
CONDITIONS
- ----------
1. Without prejudice to its rights and obligations under the Act, the Licensee
shall not enter into, offer to enter into or enter into a variation of any
contract for the supply of electricity to a customer at Designated Premises
otherwise than on terms which comply with the Licensee's obligations under
this Licence.
2. The Licensee shall not enforce or take advantage of any term of a contract
for the supply of electricity to a customer at Designated Premises if the
inclusion of that term was in breach of the provisions of this Licence.
3. The Licensee shall not take advantage of the omission of any term from a
contract for the supply of electricity to a customer at Designated Premises
if the omission of that term was in breach of the provisions of this
Licence.
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<PAGE>
CONDITION 32: LIMITATION ON REQUIREMENTS FOR TERMINATION FEES
- --------------------------------------------------------------
1. Where the Licensee enters into any Designated Supply Contract in the
circumstances set out at paragraph 2 it may not in such contract provide
for the payment of any termination fee by the Designated Customer.
2. Paragraph 1 applies in respect of any Designated Supply Contract entered
into prior to the date which is 90 days following the earliest date
specified (and not subsequently withdrawn or varied to a later date) in any
direction or variation of a direction issued by the Director, pursuant to
condition 3 of the licence held by any Second Tier Supplier, in relation to
the supply of electricity to all premises within the authorised area.
186
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CONDITION 33: REVISION OF THE CONTRACT TERMS CONDITIONS
- --------------------------------------------------------
1. The Director, in accordance with the provisions of this Condition, may from
time to time review (in whole or in part) the provisions and operation of
the Contract Terms Conditions in the licences of all Electricity Suppliers
with a view to establishing whether any revision should be made to the
Contract Terms Conditions in all such licences.
2. At the commencement of any review by the Director, the Director shall:
(a) give to all Relevant Parties a notice in writing which sets out the
terms of the review and of any proposals in connection therewith and
which invites the submission of any representations by a specified
date (being not less than 28 days after the date of the notice); and
(b) publish such notice or an accurate summary of it in a manner which
will, in the opinion of the Director, secure adequate publicity for
it.
3. On receiving from the Director notice of such a review the Licensee may
submit any representations on matters within the terms of the review by the
date specified in the notice.
4. As soon as practicable following the completion of any such review, the
Director shall send to each Relevant Party, and to any person who has made
representations to him by virtue of the notice published under sub-
paragraph 2(b), a copy of:
(a) a report on the outcome of such review;
(b) any revisions which he proposes to make, having regard to any
representations received during such review, to the Contract Terms
Conditions in the licences of all Electricity Suppliers;
(c) a statement of his reasons for proposing those revisions; and
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(d) a notice specifying the time (being not less than 28 days from the
date the Director issues the notice) within which Electricity
Suppliers which are entitled to supply electricity to Designated
Premises shall state whether or not they consent to the proposed
revisions to the Contract Terms Conditions in their licences.
5. A revision proposed to be made by the Director to the Contract Terms
Conditions of all Electricity Suppliers may be made only where the Director
is satisfied that the figures determined in accordance with paragraphs 6
and 7 (expressed as a percentage) are each not less than 90 per cent.
6. The figure determined in accordance with this paragraph shall be calculated
under the following formula:
C x 100
---
C+N
where:
C = the number of Designated Premises supplied on contract by
consenting Electricity Suppliers; and
N = the number of Designated Premises supplied on contract by
non-consenting Electricity Suppliers
as estimated (in each case) by the Director on the basis of the information
most recently available to him.
7. The figure determined in accordance with this paragraph shall be calculated
under the following formula:
C x 100
---
C+N
where:
C = the number of consenting Electricity Suppliers; and
N = the number of non-consenting Electricity Suppliers.
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<PAGE>
8. In paragraphs 6 and 7 the expressions "consenting" and "non-consenting"
refer (as the case may be) to the consent or otherwise of Electricity
Suppliers which are entitled to supply electricity to Designated Premises
to the proposed revision to the Contract Terms Conditions in their
licences.
9. Where the Director is satisfied that the figures determined in accordance
with paragraphs 6 and 7 (expressed as a percentage) are each not less than
90 per cent the Director may amend the Contract Terms Conditions of the
Licensee in accordance with the proposed revision.
10. No revision made to the Contract Terms Conditions by virtue of this
Condition may introduce an obligation in respect of any matter other than
one which:
(a) is provided for, or is reasonably ancillary to a matter provided for,
under the Contract Terms Conditions on the date on which such
Conditions come into force;
(b) concerns the terms of contracts offered or entered into by the
Licensee for the supply of electricity to Designated Premises; or
(c) concerns any dealings with customers by or on behalf of the Licensee
prior to and for the purpose of offering or entering into contracts
for the supply of electricity to Designated Premises.
11. In this Condition:
"Relevant Parties" means the Licensee, all other
Electricity Suppliers, the Electricity
Consumers' Committees and such other
persons or bodies as in the opinion of
the Director are representative of those
likely to be affected by a revision to
the Contract Terms Conditions.
189
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PART III - THE CONTRACT TERMS CONDITIONS
----------------------------------------
CONDITION 34: DESIGNATED SUPPLY CONTRACTS
- ---------------------------------------------
1. A Designated Supply Contract is a contract for the supply of electricity to
Designated Premises, as varied from time to time, which complies with the
provisions of this Condition.
2. Without prejudice to its rights and obligations under the Act, the Licensee
shall not supply electricity to Designated Premises on contract except
under a Designated Supply Contract.
3. A Designated Supply Contract shall:
(a) be in a standard form, save that there may be different forms for
different areas, cases and circumstances;
(b) set out all the terms and conditions, including terms as to price, on
which the Licensee will supply electricity in the relevant case; and
(c) contain terms reflecting the termination provisions of Conditions 38
and 39.
4. Any Designated Supply Contract for both the supply of electricity and the
provision of goods or services shall identify separately the charge for
that supply from the charge for the goods or services.
5. Where a Designated Supply Contract may be terminated by a customer by
virtue of any provision included in that contract in compliance with
Conditions 38 and 39, the Licensee may at its discretion accept a lesser
period of notice than is specified in that provision.
6. Nothing in this Licence shall prevent the Licensee from entering into a
Designated Supply Contract which contains provisions for its termination
that are additional to and do not derogate from those set out at Conditions
38 and 39.
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<PAGE>
CONDITION 35: CONTRACTUAL TERMS
- --------------------------------
1. Where the Licensee offers to supply electricity to Domestic Premises under
Designated Supply Contracts, it shall have available forms of Designated
Supply Contract which provide for the payment of charges for electricity
supplied to Domestic Premises:
(a) by prepayment through a prepayment meter;
(b) by different methods, including:
(i) by cash, at such places and to such persons as are reasonable in
all the circumstances; and
(ii) by cheque, and
(c) at a reasonable range of different intervals, including:
(i) paying monthly a predetermined sum; and
(ii) paying quarterly in arrears.
2. Before entering into any contract to supply electricity to Domestic
Premises (other than through a prepayment meter) the Licensee shall inform
the customer of and offer to enter into Designated Supply Contracts which
comply with sub-paragraphs 1(b) and (c).
3. The Licensee shall process all requests for a supply of electricity to
Designated Premises without undue preference or undue discrimination.
4. The Licensee shall send copies of each of the forms of Designated Supply
Contract (as revised from time to time) under which it supplies or offers
to supply electricity:
(a) on receipt of a request, to any person; and
(b) not later than the date on which it first offers to supply electricity
under each such form of Designated Supply Contract (or revision
thereof), to the Director.
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<PAGE>
5. The Licensee shall prepare, in respect of each form of Designated Supply
Contract:
(a) a document which sets out an accurate summary of the Principal Terms
of that form of Designated Supply Contract; and
(b) particulars of inducements offered to any person entering into such a
contract which might reasonably be expected materially to influence
the decision whether or not to enter into it.
6. The Licensee shall publish the documents and particulars referred to at
paragraph 5 in a manner that will in the opinion of the Licensee secure
adequate publicity for them, and shall send copies of them to the Director
no later than the date on which they are published.
192
<PAGE>
CONDITION 36: NOTIFICATION OF TERMS
- ------------------------------------
1. Before entering into any Designated Supply Contract the Licensee shall take
all reasonable steps to draw the attention of the customer to the Principal
Terms of the contract.
2. Where the Licensee has entered into a Designated Supply Contract it shall
(except where it has already done so) provide the customer within 2 working
days of the date of the contract with a copy of its full terms and
conditions.
3. Subject to paragraph 4 the Licensee shall, at least 30 days before any
Designated Supply Contract to supply electricity for a specified period is
due to expire, send to the customer:
(a) a written offer to enter into a new contract for supply from the date
of expiry of the existing contract, drawing the attention of the
customer to the Principal Terms relevant to that offer;
(b) an accurate summary of the Principal Terms of other contracts which
the Licensee will make available to the customer; and
(c) details of how the customer can obtain continuity of supply from the
Licensee.
4. Paragraph 3 shall not apply where:
(a) the customer has informed the Licensee that he does not wish to
continue to be supplied by it after the expiry of the existing
contract; or
(b) it is not reasonable in all the circumstances for the Licensee to be
required to continue to supply that customer and the Licensee has (at
least 30 days before the contract was due to expire) both notified the
customer to that effect and informed him that he must make
arrangements to obtain a supply from another Electricity Supplier.
193
<PAGE>
5. Where a Designated Supply Contract allows for its unilateral variation (in
any respect) by the Licensee and is so varied to the significant
disadvantage of the customer, the Licensee shall within 10 days of the
variation give to the customer written notice:
(a) of the variation;
(b) of the customer's right to terminate the contract; and
(c) of the effect of paragraph 6.
6. Where a customer gives to the Licensee a valid notice of termination within
14 days of receiving notice under paragraph 5, the Licensee shall treat the
variation as ineffective and shall neither enforce nor take advantage of
it.
7. Where the Licensee believes that any of its customers no longer occupies or
is about to vacate Designated Premises to which it supplies electricity, it
shall as soon as reasonably practicable provide any new occupier of those
premises with an accurate summary of the Principal Terms of contracts it
will make available to him.
194
<PAGE>
CONDITION 37: SECURITY DEPOSITS
- --------------------------------
1. The Licensee shall not, in respect of the supply of electricity under any
Designated Supply Contract, require a deposit:
(a) where the customer is prepared to be supplied through a prepayment
meter and it is reasonably practicable in all the circumstances
(including in particular the risk of loss or damage) for the Licensee
to provide such a meter; or
(b) where it is otherwise unreasonable in all the circumstances to do so.
2. Any deposit required of a Designated Customer may be 1 1/2 times the value
of the average quarterly consumption of electricity reasonably expected at
the relevant premises, or more if that is reasonable in all the
circumstances.
3. Where the Licensee requires a deposit of a Designated Customer it shall at
the same time inform that customer of the effect of paragraphs 5 and 7.
4. Where the Licensee holds any deposit it shall pay interest, at a rate it
shall fix from time to time with the approval of the Director, on every sum
of 50p deposited for every 3 months during which that sum is held.
5. Subject to paragraph 6, any deposit given by a Designated Customer shall be
repaid (with interest) by the Licensee:
(a) within 14 days where, in the previous 12 months, the customer has paid
all charges for electricity supplied within 28 days of each written
demand made; or
(b) as soon as reasonably practicable, and in any event within 1 month,
where the Licensee has ceased to supply the customer and the customer
has paid all charges for electricity supplied.
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<PAGE>
6. Sub-paragraph 5(a) shall not apply where it is reasonable in all the
circumstances for the Licensee to retain the deposit.
7. Any dispute arising under this Condition between the Licensee and a
Designated Customer may be referred by either party to the Director. The
Director shall determine any such dispute, following such practice and
procedure as he considers appropriate.
196
<PAGE>
CONDITION 38: TERMINATION OF CONTRACTS ON NOTICE
- -------------------------------------------------
1. Each Designated Supply Contract shall contain a term allowing the customer
to terminate such contract at any time by:
(a) giving to the Licensee a valid notice of termination; and
(b) subject to paragraph 6, paying to the Licensee on demand a termination
fee.
2. A notice of termination is valid where it is given at least 28 days in
advance of the date on which it is to take effect and where, not later than
that date, the requirements of paragraphs 3 and (unless the Licensee
expressly agrees to waive it) 4 are satisfied.
3. The requirement of this paragraph is that either:
(a) another Electricity Supplier commences a supply of electricity to the
relevant premises; or
(b) the relevant premises are cut off because the customer at those
premises has ceased to require a supply.
4. The requirement of this paragraph is that no charges for electricity
supplied to the customer (whether at the relevant premises or at any
premises previously occupied by him), having been demanded in writing prior
to the notice of termination being given, remain owing to the Licensee more
than 28 days after that demand was made.
5. Each Designated Supply Contract shall provide that a notice of termination
which is not valid shall not be effective to terminate such contract.
6. A termination fee shall not be demanded of a customer where:
(a) the contract was terminated under any provision of Condition 39;
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<PAGE>
(b) the contract was a contract of indefinite length, and was terminated
other than during a fixed term period;
(c) the Licensee notified the customer, under paragraph 5 of Condition 36,
of a unilateral variation of the contract and the customer gave notice
of termination in accordance with paragraph 6 of that Condition; or
(d) the contract was a contract to which paragraph 4 of Condition 39
applied and the Licensee did not, before entering into it, take all
reasonable steps to draw the attention of the customer to the effect
of the term set out at that paragraph.
7. Where a termination fee is payable, it shall be of an amount not greater
than that which the Licensee may in all the circumstances reasonably
require.
198
<PAGE>
CONDITION 39: TERMINATION OF CONTRACTS IN SPECIFIED CIRCUMSTANCES
- ------------------------------------------------------------------
1. Each Designated Supply Contract shall provide that the contract will
terminate:
(a) on the date on which the customer ceases to own or occupy the relevant
premises, having given the Licensee at least 2 working days' notice of
that date; or
(b) where the customer has ceased to own or occupy the premises without
giving the Licensee at least 2 working days' notice, on the first in
time of:
(i) the second working day after he has given notice to the
Licensee;
(ii) the next day on which the meter is due to be read; and
(iii) the date on which any subsequent owner or occupier enters into a
contract or tariff agreement for the supply of electricity to
the premises.
2. Each Designated Supply Contract shall provide that where it is terminated
by virtue of a term included in the contract in compliance with paragraph
1, the customer shall remain liable for any charges for the supply of
electricity until the date of termination.
3. Each Designated Supply Contract shall provide that it may be terminated
immediately by either party at any time after the Director or the Secretary
of State has revoked this Licence.
4. Any Designated Supply Contract which:
(a) provides for the Licensee to supply electricity for a specified period
of more than 12 months; or
(b) contains an initial fixed term period, shall provide that it may be
terminated immediately by the customer at any time within 5 working
days of the date of the contract.
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<PAGE>
Where a Designated Supply Contract is for both the supply of electricity
and the provision of goods or services:
(a) any reference in the Contract Terms Conditions to its termination is a
reference to its termination in respect of the supply of electricity
alone; and
(b) on its termination by virtue of any provision of the Contract Terms
Conditions, the Licensee may require the customer to give any
reasonable security for his future compliance with the contract for
the provision of goods or services.
200
<PAGE>
CONDITION 40: ASSIGNMENT OF OUTSTANDING CHARGES
- ------------------------------------------------
1. This Condition shall apply where:
(a) the Licensee has commenced the supply of electricity to Domestic
Premises at which a supply was previously given to its customer by the
Previous Supplier;
(b) the customer has failed to pay, within 28 days of receiving a demand
in writing, any charges due from him to the Previous Supplier for the
supply of electricity at those premises;
(c) that failure occurred after either the Previous Supplier was informed
of the change of supplier or the Licensee commenced supply to the
premises (whichever is the earlier);
(d) the Previous Supplier has given written notice to the customer that it
proposes to assign the debt to the Licensee, which may be entitled to
reclaim from him its costs in recovering the debt; and
(e) the Licensee has received from the Previous Supplier a notice in
accordance with paragraph 2.
2. A notice in accordance with this paragraph is one which:
(a) is given at least 14 days after the notice referred to at sub-
paragraph 1(d) and is received by the Licensee within 90 days of it
commencing a supply to the premises;
(b) specifies the amount of the debt which remains unpaid;
(c) states that the Previous Supplier has used all reasonable endeavours
to recover the debt, which remains unpaid at least 42 days after being
demanded in writing; and
(d) states that the Previous Supplier intends to assign to the Licensee
the debt, up to a maximum sum of one-third of the value (calculated in
accordance with the charges
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of the Previous Supplier to the customer immediately before it ceased
to supply him) of the average annual consumption reasonably expected
of the customer.
3. Where this Condition applies the Licensee shall, within 60 days of
receiving a notice under paragraph 2 and in consideration of the assignment
of the debt, pay to the Previous Supplier the sum specified under sub-
paragraph 2(d) (less, where they cannot be reclaimed from the customer, its
reasonable costs of recovering that debt).
4. For the purposes of this Condition, a customer shall not be regarded as
being in debt to the Previous Supplier to the extent to which that debt is
genuinely in dispute.
5. In this Condition:
"Previous Supplier" means, in relation to any premises,
the Electricity Supplier which supplied
electricity to those premises immediately
prior to the commencement of supply by the
Licensee.
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<PAGE>
CONDITION 41: MODIFICATION OF PROVISIONS UNDER CONDITIONS 38 AND 40
- --------------------------------------------------------------------
1. In this Condition, the "relevant provisions" are the provisions of
paragraph 4 of Condition 38 and Condition 40 of this Licence (or any of
them).
2. Where the Director considers (having regard to any representations made to
him) that in any specified class of cases the relevant provisions do not
fulfil the requirements of paragraph 4, he may direct that they shall cease
to have effect in that class of cases.
3. Where a direction under paragraph 2 has been made and the Director
considers (having regard to any representations made to him) that in the
specified class of cases the relevant provisions would fulfil the
requirements of paragraph 4, he may direct that they shall again have
effect in those cases.
4. The requirements of this paragraph are that, in the specified class of
cases, the operation of the relevant provisions:
(a) significantly reduces the number of unrecovered debts otherwise to be
expected; or
(b) involves expenditure in debt recovery which is less than the reduction
in the value of unrecovered debts which it achieves.
5. Any direction under paragraphs 2 or 3 shall be made by a notice given to
the Relevant Parties which shall specify:
(a) the relevant provisions to which it applies;
(b) the class of cases to which it applies; and
(c) the date on which it shall have effect (being, in a direction under
paragraph 3, at least 3 months after the notice is given).
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<PAGE>
6. In this Condition:
"Relevant Parties" means the Licensee, all other
Electricity Suppliers, the Electricity
Consumers' Committees and such other
persons or bodies as in the opinion of
the Director are representative of those
likely to be affected by a revision to
the relevant provisions.
204
<PAGE>
SCHEDULE 1
----------
DESCRIPTION OF AUTHORISED AREA
------------------------------
The authorised area shall comprise that area which is outlined on the attached
map and shall additionally include those premises listed in List A (the
"Additional Premises") but shall not include those premises listed in List B
(the "Excluded Premises").
A: ADDITIONAL PREMISES
-------------------
ADDRESS GRID REFERENCE
------- --------------
Mine SE 6040 4045
Stillingfleet Moor
Stillingfleet
Nr York
YO4 6HX
Mine SE 6475 4431
North Selby
New Road
Escrick
YO4 6EY
B: EXCLUDED PREMISES
-----------------
ADDRESS GRID REFERENCE
------- --------------
None
205
<PAGE>
SCHEDULE 2
----------
TERMS AS TO REVOCATION
----------------------
1. The Secretary of State may at any time revoke this Licence by not less than
30 days' notice in writing to the Licensee:
(a) if the Licensee agrees in writing with the Secretary of State that
this Licence should be revoked;
(b) if any amount payable under Condition 29 is unpaid 30 days after it
has become due and remains unpaid for a period of 14 days after the
Secretary of State has given the Licensee notice that the payment is
overdue. Provided that no such notice shall be given earlier than the
sixteenth day after the day on which the amount payable became due;
(c) if the Licensee fails to comply with a final order (within the meaning
of Section 25 of the Act) or with a provisional order (within the
meaning of that Section) which has been confirmed under that Section
and (in either case) such failure is not rectified to the satisfaction
of the Secretary of State within 3 months after the Secretary of State
has given notice of such failure to the Licensee. Provided that no
such notice shall be given by the Secretary of State before the
expiration of the period within which an application under Section 27
of the Act could be made questioning the validity of the final or
provisional order or before the proceedings relating to any such
application are finally determined;
(d) if the Licensee fails to comply with any order made by the Secretary
of State under Section 56, 73, 74 or 89 of the Fair Trading Act 1973
or under Section 10 (2) (a) of the Competition Act 1980;
(e) if the Licensee ceases to carry on its business as a public
electricity supplier;
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(f) if the Licensee:
(i) is unable to pay its debts (within the meaning of Section 123
(1) or (2) of the Insolvency Act 1986, but subject to paragraph
2 of this Schedule) or has any voluntary arrangement proposed
in relation to it under Section 1 of that Act or enters into
any scheme of arrangement (other than for the purpose of
reconstruction or amalgamation upon terms and within such
period as may previously have been approved in writing by the
Secretary of State);
(ii) has a receiver (which expression shall include an
administrative receiver within the meaning of Section 29 of the
Insolvency Act 1986) of the whole or any material part of its
assets or undertaking appointed;
(iii) has an administration order under Section 8 of the Insolvency
Act 1986 made in relation to it;
(iv) passes any resolution for winding-up other than a resolution
previously approved in writing by the Secretary of State; or
(v) becomes subject to an order by the High Court for winding-up;
or
(g) if the Licensee is convicted of having committed an offence under
Section 59 of the Act in making its application for this Licence.
2. (a) For the purposes of paragraph 1 (f) (i) of this Schedule Section 123
(1) (a) of the Insolvency Act 1986 shall have effect as if for
"(pound)750" there was substituted "(pound)250,000" or such higher
figure as the Director may from time to time determine by notice in
writing to the Secretary of State and the Licensee.
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(b) The Licensee shall not be deemed to be unable to pay its debts for the
purposes of paragraph 1 (f) (i) of this Schedule if any such demand as
is mentioned in Section 123 (1) (a) of the Insolvency Act 1986 is
being contested in good faith by the Licensee with recourse to all
appropriate measures and procedures or if any such demand is satisfied
before the expiration of such period as may be stated in any notice
given by the Secretary of State under paragraph 1 of this Schedule.
3. The provisions of Section 109 of the Act shall apply for the purposes of
the service of any notice under this Schedule.
208
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SCHEDULE 3
----------
SUPPLEMENTARY PROVISIONS OF THE CHARGE RESTRICTION CONDITIONS
-------------------------------------------------------------
PART A
------
PRINCIPLES FOR ATTRIBUTION
--------------------------
General Principles
------------------
A1. Where, for the purposes of the charge restriction conditions, a share of
costs borne by the Licensee requires to be attributed to any part of the
market, the Licensee shall make that attribution on a basis which ensures
that no more than a fair proportion of those costs, reflecting the costs
incurred by the Licensee in supplying that part of the market, are so
attributed.
A2. The following paragraphs of this Part of Schedule 3 are without prejudice
to paragraph A1.
Fossil Fuel Levy and payments in lieu thereof
---------------------------------------------
A3. The fossil fuel levy requiring to be attributed to supplies to Designated
Customers shall be attributed on the basis of the amount of the levy
incorporated in the prices actually charged or to be charged by the
Licensee on supplies to such customers in the relevant year in respect of
which the attribution falls to be made. Amounts in lieu of the fossil fuel
levy in respect of purchases of electricity other than leviable electricity
requiring to be calculated and then attributed to supplies to Designated
Customers in any relevant year for the purposes of Condition 3B shall:
(a) be calculated as being such amounts as correspond to the lesser of:
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(i) the premium actually payable (measured on an accruals basis) by
the Licensee during the relevant year on purchases of
electricity other than leviable electricity as representing the
benefit to the Licensee of being able to treat such electricity
as being other than leviable electricity for the purposes of
Section 33 of the Act and Regulations thereunder; and
(ii) the additional amount that would have been payable (measured on
an accruals basis) by the Licensee in respect of the fossil
fuel levy pursuant to Regulations made under Section 33 of the
Act had such electricity been leviable electricity; and
(b) be attributed to supplies to Designated Customers pro rata to the
amount which the quantity supplied to Designated Customers bears to
the total quantity supplied (in each case in the relevant year in
respect of which the attribution falls to be made) or on the basis of
the amount referred to in paragraph (a) incorporated in the prices
actually charged or to be charged by the Licensee on supplies to such
customers in the relevant year in respect of which the attribution
falls to be made or on such other basis of attribution as the Licensee
shall previously have agreed with the Director.
Transmission connection point charges and Remote Transmission Asset rentals
---------------------------------------------------------------------------
A4. The transmission connection point charges and Remote Transmission Asset
rentals requiring to be attributed between the regulated quantity
distributed and other quantities distributed shall be attributed in
proportion to the transmission connection point and Remote Transmission
Asset capacity required for the purpose of distributing those quantities.
Distribution losses
-------------------
A5. Where an amount (in units) in respect of distribution losses requires to be
calculated and attributed in respect of EHV units and units distributed by
the Licensee for the purpose of supply to premises outside the Licensee's
authorised area, such calculation and attribution shall be made
consistently with the principles underlying the schedule of adjustment
factors referred to at sub-paragraph (b) of paragraph 3 of Condition 8.
210
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Information to be provided by Licensee
--------------------------------------
A6. The Licensee shall following the end of each relevant year furnish to the
Director, as being one of the specified items to be included in the
statement referred to at paragraph 7 of Condition 3E, a statement of the
actual attribution of electricity purchase costs between regulated and
other customers and reconciling the attribution with any statements made in
respect of the relevant year under paragraph 2 of Condition 3E, and a
statement confirming that the calculation of amounts in lieu of the fossil
fuel levy and the attribution of the fossil fuel levy, amounts in lieu
thereof, the transmission connection point charges, the Remote Transmission
Asset rentals and of distribution losses was made in accordance with the
provisions of this Part of Schedule 3, accompanied (where appropriate) by
(i) a statement of the total amounts attributed to regulated
Designated Customers and other customers; and
(ii) copies of statements prepared under paragraph 2 of Condition 3E
and an explanation of the basis therefor.
A7. Where the Director is satisfied that the basis of calculation or
attribution (as the case may be) used by the Licensee is not in conformity
with paragraph A1, the Director may issue directions specifying an
alternative basis of calculation or attribution, and the basis of
calculation or attribution by the Licensee (as the case may be) shall be
adjusted accordingly with effect from the date of issue of the directions
or (subject to paragraph 10 of Condition 3E) such other date as may be
specified in those directions.
211
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PART B
------
EHV PREMISES
------------
B1. EHV premises shall comprise:
(a) in relation to premises connected to the Licensee's distribution
system as at the date this Licence enters into force, those premises
specified in the list of EHV premises notified in writing to the
Director by the Licensee within twenty-eight days after this Licence
enters into force; and
(b) in relation to premises connected to the Licensee's distribution
system which are either first connected or (having been previously
connected) have had their connections materially altered following the
date this Licence enters into force, means premises connected to the
Licensee's distribution system at a voltage at or higher than 22
kilovolts or at a sub-station with a primary voltage of 66 kilovolts
or above.
B2. The Licensee shall following the end of each relevant year furnish to the
Director, as being one of the specified items to be included in the
statement referred to at paragraph 7 of Condition 3E, a statement listing
any changes in the premises falling to be treated as EHV premises.
B3. Where the Director is satisfied that any premises treated by the Licensee
as EHV premises should not in conformity with sub-paragraph B1 (b) above be
so treated, the Director may issue directions to that effect, and such
premises shall cease to be treated as EHV premises from the date of issue
of the directions or (subject to paragraph 10 of Condition 3E) such other
date as may be specified in those directions.
212
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PART C
------
EXCLUDED SERVICES
-----------------
Distribution Business
---------------------
C1. There may be treated as excluded services provided by the Licensee in its
Distribution Business such services in respect of which charges are made
which:
(a) do not fall within paragraph C2 of this Part; and
(b) may (subject to paragraph C9) be determined by the Licensee as falling
under one of the principles set out in paragraphs C3 to C6 of this
Part.
C2. No service provided by the Licensee as part of its Distribution Business
shall be treated as an excluded service insofar as it consists of the
provision of services remunerated under the use of system charges in
accordance with paragraph 3 of Condition 8 including (without prejudice to
the foregoing):
(i) (subject to paragraph C3 of this Part) the transport of
electricity;
(ii) the carrying out of works for the installation of electric
lines or electrical plant (not otherwise payable in the form of
connection charges);
(iii) the carrying out of works or the provision of maintenance or
repair or other services for the purpose of enabling the
Licensee to comply with Conditions 9, 11 and 13, the
Electricity Supply Regulations 1988 or any regulations made
under Section 29 of the Act or any other enactment relating to
safety or standards applicable in respect of the Distribution
Business; and
(iv) (subject to paragraph C5 of this Part) the provision,
installation and maintenance of any meters, switchgear or other
electrical plant (not being part of connection charges).
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C3. The Licensee may treat as being an excluded service for the purposes of its
Distribution Business the transport of:
(a) units of electricity not consumed in the Licensee's authorised area;
or
(b) EHV units.
C4. Charges of the type described in paragraph 4 of Condition 8 and borne in
accordance with the principles set out in paragraph 7 of Condition 8 by any
person as connection charges, and charges in respect of the statements
referred to in paragraph 8 of Condition 8, may each be treated as excluded
services for the purposes of the Distribution Business.
C5. A service provided by the Licensee as part of its Distribution Business may
be treated as an excluded service insofar as it consists in the provision
of services (including metering, electric lines or electrical plant) for
the specific benefit of any third party requesting the same and not made
available by the Licensee as a normal part of its Distribution Business
remunerated by use of system charges including (without prejudice to the
foregoing):
(i) special metering (including "time of day" metering) to
facilitate energy saving programmes for the benefit of
customers requesting the same;
(ii) charges for moving mains, services or meters forming part of
the Licensee's distribution system to accommodate extension,
re-design or re-development of any premises on which the same
are located or to which they are connected;
(iii) the provision of electric lines and electrical plant (a)
insofar as the same are required for the specific purpose of
enabling the provision of top-up or standby supplies or sales
of electricity or (b) to provide a higher degree of security
than is required for the purposes of complying with Condition
9;
214
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(iv) the amount by which charges for the provision of prepayment
meters to customers exceed charges for the provision of
standard meters for such customers; and
(v) special metering or telemetry or data processing equipment for
the purpose of enabling any person who is a party to the
Pooling and Settlement Agreement to comply with its obligations
in respect of metering thereunder, or for the performance by
the Licensee of any service in relation thereto.
C6. There may be treated as an excluded service for the purposes of the
Distribution Business, charges for the relocation of electric lines or
electrical plant and the carrying out of works associated therewith
pursuant to a statutory obligation (other than under Section 9 (1) or
Section 16 of the Act) imposed on the Licensee.
Supply Business
---------------
C7. Subject to paragraph C9, a service provided by the Licensee as part of its
Supply Business may be treated as an excluded service insofar as it
consists of the provision of services for the specific benefit of customers
requesting the same and not made available by the Licensee as a normal part
of such Business. For the avoidance of doubt, the provision of facilities
for prepayment may not be treated as an excluded service except the
provision of prepayment meters as an excluded service by the Distribution
Business.
Information to be provided to the Director
------------------------------------------
C8. The Licensee shall following the end of each relevant year furnish to the
Director, as being one of the specified items to be included in the
statement referred to at paragraph 7 of Condition 3E, details specifying
separately the nature of all services provided as part of its Distribution
Business or Supply Business by the Licensee and treated as excluded
services by the Licensee during the course of such year and stating the
revenues derived by the Licensee in respect of each such service so
treated.
215
<PAGE>
Directions
----------
C9. Where the Director is satisfied that in light of the principles set out in
paragraphs C2 to C7 inclusive any service treated by the Licensee as an
excluded service should not be so treated, the Director shall issue
directions to that effect, and the service or services specified in the
directions shall cease to be treated as excluded services from the date of
issue of the directions or (subject to paragraph 10 of Condition 3E) such
other date as may be specified in the directions.
216
<PAGE>
PART D
------
REGULATED DISTRIBUTION UNIT CATEGORIES
--------------------------------------
D1. The Licensee shall following the end of each relevant year furnish to the
Director, as being one of the specified items to be included in the
statement referred to at paragraph 7 of Condition 3E, details specifying
separately those use of system charges in respect of which the Licensee has
during the course of such year treated the units distributed as falling
within the definition of each of LV1 units and LV2 units and LV3 units
respectively.
D2. The definition of LV1 units includes units distributed under the following
tariffs:
Domestic E7 day rate
Quarterly non domestic E7 day rate
Quarterly non domestic 3-rate evening, weekend and night tariff: day,
evening and weekend units only.
D3. The definition of LV2 units includes units distributed under the following
tariffs:
Domestic E7 night rate
Quarterly non domestic E7 night rate
Quarterly non domestic 3-rate evening, weekend and night tariff: night
units only
Off peak tariffs.
D4. The definition of LV3 units includes units distributed under the following
tariffs:
General domestic
Quarterly unrestricted non domestic
Quarterly non domestic two-rate evening and weekend tariffs
Monthly billed maximum demand tariffs
STOD tariffs
Public lighting.
217
<PAGE>
D5. Notwithstanding the provisions of paragraphs D2 to D4 above, where the
Director is satisfied that a tariff or tariffs in respect of which the
Licensee has treated the units distributed as falling within one of the
categories in paragraphs D2 to D4 above should not be so treated, the
Director shall issue directions to that effect and the tariff or tariffs
specified in the directions shall cease to be so treated from the date of
issue of the directions or (subject to paragraph 10 of Condition 3E) such
other date as may be specified in the directions and shall with effect from
such date be treated in such manner as may be specified in the directions.
218
<PAGE>
PART E
------
CALCULATION OF FACTOR IN RESPECT OF DISTRIBUTION LOSSES
-------------------------------------------------------
E1. For the purposes of calculation of the terms ALt and Lt as used in
paragraph 1 of Condition 3A shall each be determined for relevant years
commencing on or after 1st April 1995 using the consistent methodological
basis set out in paragraphs E2 to E5 below.
Consistent methodological basis for determination of ALt and L
---------------------------------------------------------------
E2. Adjusted distribution losses shall be determined as being the difference
between adjusted grid supply point purchases and adjusted units
distributed.
E3. Units metered on entry to the Licensee's distribution system shall be
adjusted to obtain adjusted grid supply point purchases by:
(a) excluding that number of units which is equal to the sum of:
(i) EHV units; and
(ii) units distributed by the Licensee for the purpose of supply to
premises outside the Licensee's authorised area; and
(iii) an amount in respect of distribution losses between the grid
supply point and the exit point attributable to the units
referred to in (i) and (ii) above, as determined in accordance
with paragraph A5 in Part A of Schedule 3; and
219
<PAGE>
(b) including an amount (in units) to represent the effect of units
entering the Licensee's distribution system otherwise than at grid
supply points, being the difference between the number of units so
entering and the number of units that would have been required to
have entered at grid supply points in their absence (such latter
number of units being calculated consistently with the principles
underlying the schedule of adjustment factors in respect of
distribution losses referred to at sub-paragraph (b) of paragraph 3
of Condition 8).
E4. For so long as units are metered on entry to the Licensee's distribution
system at bulk supply points instead of at grid supply points, such units
shall be calculated by:
(i) applying the procedures in paragraph E3 as if all references to units
metered at grid supply points were to units metered at bulk supply
points; and
(ii) grossing-up units metered at the bulk supply points by the relevant
grid supply point conversion factor being either:
(a) 0.5 per cent of the units metered at the bulk supply points; or
(b) such other factor to take account of losses occurring between
the grid supply points and the bulk supply points as the
Licensee may with the prior approval of the Director determine
to be appropriate.
E5. Adjusted units distributed shall be obtained by:
(a) calculating all units distributed by the Licensee metered at exit
points on leaving the Licensee's distribution system; and
(b) deducting therefrom EHV units and units distributed for the purpose
of supply to premises outside the Licensee's authorised area; and
(c) adding thereto an amount equal to the units consumed on the
Licensee's premises in the authorised area (insofar as not otherwise
taken into account in determining units distributed under sub-
paragraph (a) above).
220
<PAGE>
Initial relevant loss percentage in the term ALt
------------------------------------------------
E6. In the first relevant year, the initial relevant loss percentage in the
term ALt shall (consistently with the methodology set out in paragraphs E2
to E5 above) be determined as being:
adjusted GSP purchase units less adjusted units distributed
-----------------------------------------------------------
adjusted units distributed
where adjusted GSP purchase units are calculated as provided in paragraph
E7 and adjusted units distributed are calculated as provided in paragraph
E8.
E7. Adjusted GSP purchase units shall be calculated in accordance with the
procedures successively described in the following sub-paragraphs:
(a) the actual losses in each of relevant years t-1, t-2 and t-3 (the
"historic losses") shall be calculated as the difference in each of
those years between units purchased at entry points to the Licensee's
distribution system and units sold;
(b) the historic loss percentage shall be calculated as the proportion
(expressed as a percentage) which the aggregate historic losses were
of the aggregate units purchased at entry points to the Licensee's
distribution system, in each case over the three relevant years t-1 to
t-3;
(c) the total number of units sold in relevant year t-1 shall be grossed
up by the historic loss percentage ("BSP purchase units"); and
(d) the figure for BSP purchase units resulting from sub-paragraph (c)
shall be adjusted to obtain adjusted GSP purchase units in accordance
with the provisions of paragraphs E3 and E4 above.
E8. Adjusted units distributed shall be calculated by applying the methodology
of paragraph E5 in respect of those units referred to in sub-paragraphs (a)
to (c) of paragraph E5 in relevant year t-1.
221
<PAGE>
Information to be provided to the Director
------------------------------------------
E9. The Licensee shall within three months after the entry into force of this
Licence furnish to the Director a statement showing the initial relevant
loss percentage and the underlying calculations.
E10. The Licensee shall, following the end of each relevant year, furnish to
the Director, as being one of the specified items to be included in the
statement referred to at paragraph 7 of Condition 3E, a statement showing
adjusted distribution losses for that relevant year, accompanied by the
underlying calculations and (where appropriate) an explanation of any
changes in the basis of calculation or estimation thereof.
E11. Where the Director is satisfied that any statement or underlying
calculation provided has not been drawn up in conformity with paragraphs
E2 to E8 above, the Director may issue directions, and the statement or
underlying calculation shall be adjusted with effect from the date of
issue of the directions or (subject to paragraph 10 of Condition 3E) such
other date as may be specified in the directions.
222
<PAGE>
EXHIBIT 10.2
SECOND-TIER LICENCE TO SUPPLY ELECTRICITY
- for -
Yorkshire Electricity Group plc
1
<PAGE>
NOTE
The licenceholder is subject to the
environmental obligations set out in
Schedule 9 (Preservation of Amenity and
Fisheries) of the Electricity Act 1989
2
<PAGE>
TABLE OF CONTENTS
Page
PART I: TERMS OF THE LICENCE
PART II: THE CONDITIONS
1. Interpretation. 2
2. Restriction on supply to certain premises. 16
3. Connection and use of system - requirement
to offer terms. 21
3A. Connection and use of system - functions
of the Director. 27
4. Compliance with the Grid Code. 29
5. Compliance with Distribution Codes. 30
6. Pooling and Settlement Agreement. 31
7. Licensee's system planning. 32
8. Generation security standard. 33
9. Security arrangements. 38
10. Health and safety of employees. 39
11. Provision of information to the Director. 40
12. Payment of fees. 42
SCHEDULE 1: Specified premises 44
SCHEDULE 2: Terms as to revocation 45
3
<PAGE>
SECOND-TIER LICENCE TO SUPPLY ELECTRICITY
PART I: TERMS OF THE LICENCE
1. The Director General of Electricity Supply in accordance with a general
authority given by the Secretary of State under Sections 6(1) and (2) of
the Electricity Act 1989 (hereinafter referred to as "the Act") and in
exercise of the powers conferred by Section 6(2)(a), Section 6(6), and
Section 7 of the Act hereby licenses Yorkshire Electricity Group plc
(registered in England under number 2366995) to supply electricity to the
premises specified in Schedule 1 below during the period specified in
paragraph 3 below, subject to the Conditions set out in Part II below
(hereinafter referred to as the "Conditions") .
2. The Conditions are subject to modification or amendment in accordance with
their terms or with Sections 11, 14 or 15 of the Act. The licence is
further subject to the terms as o revocation specified in Schedule 2.
3. This licence shall come into force on 8th June 1990 and unless revoked in
accordance with the provisions of Schedule 2 shall continue until
determined by not less than 25 years' notice in writing given by the
Director General of Electricity Supply to the licensee, such notice not to
be served earlier than a date being 10 years after the licence comes into
force .
8th June 1990 Director General of Electricity Supply
4
<PAGE>
PART II: THE CONDITIONS
Condition 1: Interpretation
1. Unless the contrary intention appears, words and expressions used in the
Conditions shall be construed as if they were in an Act of Parliament and
the Interpretation Act 1978 applied to them and references to an enactment
shall include any statutory modification or re-enactment thereof after the
date when this licence comes into force.
2. Any word or expression defined for the purposes of any provision of Part I
of the Act shall, unless the contrary intention appears, have the same
meaning when used in the Conditions.
3. In the Conditions unless the context otherwise requires:
"affiliate" in relation to the licensee or any
person means any holding company or
subsidiary of the licensee or such
person or any subsidiary of a
holding company of the licensee or
such person, in each case within
the meaning of Sections 736, 736A
and 736B of the Companies Act 1985
as substituted by Section 144 of
the Companies Act 1989 and if that
section is not in force at the date
of grant of this licence as if such
section were in force at such date.
5
<PAGE>
"authorised" in relation to any business or
activity means authorised by
licence granted under Section 6 or
exemption granted under Section 5
of the Act.
"authorised electricity operator" means any person(other than the
licensee) who is authorised to
generate, transmit or supply
electricity and for the purposes of
Conditions 3 and 3A shall include
any person who has made application
to be so authorised which
application has not been refused
and any person transferring
electricity to or from England and
Wales across an interconnector or
who has made application for use of
interconnector which has not been
refused .
" connection and use means an agreement under which the
of system agreement" licensee agrees to provide to any
person a connection or connections
or a modification to an existing
connection to the licensee's system
and/or to any authorised
electricity operator, use of system
to transport
6
<PAGE>
electricity on such system, as more
fully described in Condition 3.
"designated" in relation to any agreement or
arrangement or code or proposal
therefor means designated by the
Secretary of State or on his behalf
by such means as he may consider
appropriate whether for the
purposes of any Condition of this
licence or otherwise, but so that
an agreement or arrangement or code
or proposal therefor so designated
may at the discretion of the
Secretary of State cease to be
designated if amended or modified
in any material respect.
"Distribution Code" means in relation to any public
electricity supplier the
Distribution Code required to be
drawn up by such supplier and
approved by the Director as from
time to time revised with the
approval of the Director.
"distribution system " means the system consisting (wholly
or mainly) of electric lines owned
or operated by any
7
<PAGE>
authorised electricity operator and
used for the distribution of
electricity from grid supply points
or generation sets or other entry
points to the point of delivery to
customers, and includes any remote
transmission assets operated by
such authorised electricity
operator and any electrical plant
and meters owned or operated by the
authorised electricity operator in
connection with the distribution of
electricity, but shall not include
any part of the transmission
system.
"equivalent megawatt" in circumstances where demand is
only measured in megavolt amperes
means megavolt amperes converted
into megawatts using for this
purpose a power factor of 0.9
megawatts per megavolt ampere or
such other factor as may with the
approval of the Director be taken
as being appropriate having regard
to electrical characteristics of
the supply, and cognate expressions
shall be construed accordingly.
"Fuel Security Code" means the document of that title
designated as such by the Secretary
of State as from time to time
amended.
8
<PAGE>
"generation set" means any plant or apparatus for
the production of electricity and
shall where appropriate include a
generating station comprising more
than one generation set.
"Grid Code" means the Grid Code required to be
drawn up by the Transmission
Company and approved by the
Director as from time to time
revised with the approval of the
Director.
"grid supply point" means any point where electricity
is delivered to the licensee's
system or to the distribution
system of any authorised
electricity operator from the
transmission system.
"interconnectors" means the electric lines and
electrical plant and meters owned
or operated by the Transmission
Company solely for the transfer of
electricity to or from the
transmission system into or out of
England and Wales.
"licensee" means Yorkshire Electricity Group
plc and (where the context so
requires) shall include any
9
<PAGE>
business in respect of which the
licensee is the successor company.
"licensee's system" means the electric lines owned or
operated by the licensee for the
transport of electricity from
generation sets or grid or bulk
supply points to the point of
delivery to customers, and includes
any electrical plant and meters
associated therewith.
" megawatt" or "MW" inc1udes an equivalent megawatt.
"Pooling and Settlement means the agreement of that title
Agreement" approved (or to be approved) by the
Secretary of State or by the
Director as from time to time
amended with the approval of the
Director (where so required
pursuant to its terms) and shall
where the context permits include
the Initial Settlement Agreement
approved (or to be approved) by the
Secretary of State (as from time to
time amended with the consent of
the Secretary of State).
10
<PAGE>
"related undertaking" in relation to the licensee or any
person means any undertaking in
which the licensee or such person
has a participating interest as
defined by Section 260 of the
Companies Act 1985 as substituted
by Section 22 of the Companies Act
1989 and if that section is not in
force at the date of grant of this
licence as if such section were in
force at such date.
"remote transmission assets" means any electric lines,
electrical plant or meters owned by
the Transmission Company which (a)
are embedded in the licensee's
system or in the distribution
system of any authorised
electricity operator other than the
Transmission Company and are not
directly connected by lines or
plant owned by the Transmission
Company to a substation owned by
the Transmission Company and (b)
are by agreement between the
Transmission Company and the
licensee or such authorised
electricity operator operated under
the direction and control of the
licensee or such authorised
electricity operator.
11
<PAGE>
"Retail Price Index" means the general index of retail
prices published by the Department
of Employment each month in respect
of all items or:
(a) if the index for any month in
any year shall not have been
published on or before the last day
of the third month after such
month, such index for such month or
months as the Director may after
consultation with the licensee
determine to be appropriate in the
circumstances; or
(b) if there is a material change
in the basis of the index, such
other index as the Director may
after consultation with the
licensee determine to be
appropriate in the circumstances.
"Transmission Company" means The National Grid Company plc
or any other holder for the time
being of a licence to transmit
electricity in England and Wales
under Section 6(1)(b) of the Act.
"transmission system" means the system consisting (wholly
or mainly) of high voltage electric
lines owned or
12
<PAGE>
operated by the Transmission
Company and used for the
transmission of electricity from
one generating station to a
sub-station or to another
generating station or between
substations or to any
interconnector, and includes any
electrical plant and meters owned
or operated by the Transmission
Company in connection with the
transmission of electricity but
shall not include any remote
transmission assets .
"undertaking" bears the meaning ascribed to that
expression by Section 259 of the
Companies Act 1985 as substituted
by Section 22 of the Companies Act
1989 and if that section is not in
force at the date of grant of this
licence as if such section were in
force at such date.
4. Any reference to a numbered Condition (with or without a suffix letter) or
Schedule is a reference to the Condition (with or without a suffix letter)
or Schedule bearing that number in this licence, and any reference to a
numbered paragraph (with or without a suffix letter) is a reference to the
paragraph (with or without a suffix letter) bearing that number in the
Condition or Schedule in
13
<PAGE>
which the reference occurs.
5. In construing the Conditions, the heading or title of any Condition or
paragraph shall be disregarded.
6. Where, in the Conditions, any obligation of the licensee is required to be
performed within a specified time limit that obligation shall be deemed to
continue after that time limit if the licensee fails to comply with that
obligation within that time limit
7. The provisions of Section 109 of the Act shall apply for the purposes of
the delivery or service of any documents, directions or notices to be
delivered or served pursuant to any Condition, and directions issued by the
Director pursuant to any Condition shall be delivered or served as
aforesaid.
14
<PAGE>
Condition 2: Restriction on supply to certain premises
1. Save as provided in paragraphs 3 and 5 below the licensee shall not during
the franchise period supply electricity to any single premises at which the
relevant demand in megawatts is below the franchise limit.
2. In determining for the purposes of this Condition whether any single
premises falls within the franchise limit the licensee shall have regard to
the following bases of assessment:
(a) in respect of premises occupied by existing customers the relevant
demand in megawatts shall be calculated as an average of the maximum
monthly demands under normal operating conditions at such single
premises supplied by one or more authorised electricity operators
and/or the licensee in the three months of highest maximum demand as
recorded over the most recent twelve-month period in respect of which
figures are available; and
(b) in respect of premises occupied by a new customer seeking a supply
from the licensee the relevant demand in megawatts shall be calculated
by reference to the average maximum monthly demand which might
reasonably be expected in the three months of highest maximum demand
over a twelve-month period at premises having similar demand
characteristics to the premises occupied by such new customer.
3. Subject to paragraph 4 below, if at any time during the franchise period
the relevant demand in megawatts (calculated in accordance with paragraph 2
above) at any single premises to which a supply is given by the licensee in
accordance with the provisions of this Condition should fall below the
franchise limit the licensee may, notwithstanding such fact, continue to
supply such premises without being in breach of this Condition until such
time as:
(a) any contract existing between the licensee and the customer occupying
such premises is determined by effluxion of time or otherwise; or
15
<PAGE>
(b) the supply arrangements between the licensee and the customer
occupying such premises shall for any other reason be terminated.
4. Save where the Director otherwise agrees, if (having regard to the basis of
assessment referred to in paragraph 2(b) above) the relevant demand in
megawatts of a customer who was a new customer at the time of commencement
of supply by the licensee should, in the first twelve-month period for
which figures are available, prove to be less than was reasonably expected
of such customer and to fall below the franchise limit, the licensee shall
cease to supply such customer.
5. Not withstanding paragraph 1, the licensee may supply electricity to single
premises at which the relevant demand in megawatts is below the franchise
limit where such single premises are specified for the purposes of this
licence by the Director with the prior approval of the Secretary of State.
6. For the purposes of paragraph 2(a), where the average calculated as there
provided, but ignoring for this purpose the reference to normal operating
conditions, was no more than 10 per cent. higher than the average
(calculated in the same manner) over the twelve-month period preceding the
twelve-month period referred to in paragraph 2(a), the maximum monthly
demands from which the average was derived shall be presumed to have
occurred under normal operating conditions.
7. Any dispute arising under the provisions of this Condition between the
licensee and any authorised electricity operator or any person requiring a
supply of electricity from the licensee may be referred to the Director and
the Director shall determine whether the premises in respect of which the
customer requires a supply to be given fall within the franchise limit.
8. In this Condition:
"existing customer" means any person occupying premises
to which a supply is being given by
the licensee or any other
authorised electricity operator,
which
16
<PAGE>
person (or any affiliate or related
undertaking of such person) and
premises have been supplied for a
clear period of at least 12 months
prior to the date on which
application for supply by the
licensee is made.
"franchise limit" means:
(a) during the four year period
from 31st March, 1990 to 30th
March, 1994 a relevant demand in
megawatts taken at any single
premises which does not exceed one
megawatt; and
(b) during the succeeding four year
period from 31st March,1994 to 30th
March, 1998 a relevant demand in
megawatts taken at any single
premises which does not exceed 0.1
megawatt in each case, having
regard to the bases of assessment
referred to in paragraph 2.
"franchise period" means the period of eight years
commencing on the date this licence
enters into force.
17
<PAGE>
"new customer" means any person supplied or
applying for a supply to premises
other than an existing customer.
"single premises" includes in the case of sites or
buildings in multi-occupation, each
area in respect of which the supply
of electricity was as at 31st
December, 1989 or is or is to be
separately metered and the occupier
individually invoiced by the
licensee or any authorised
electricity operator .
18
<PAGE>
Condition 3: Connection and use of system requirement to offer terms.
1. The licensee shall, subject to paragraphs 6 and 7 below, offer to enter
into an agreement with any authorised electricity operator who has made
application for use of system:
(a) to accept into the licensee's system at such entry point and in such
quantities as may be specified in the application, electricity to be
provided by or for the authorised electricity operator;
(b) to deliver electricity equal in quantity to that accepted into the
licensee's system (less only any distribution losses) from such exit
points on that system and in such quantities as may be specified in
the application to such person as the authorised electricity operator
may specify; and
(c) containing terms in accordance with paragraphs 3 and 4 below and such
other terms and conditions as may be appropriate for the purposes of
the agreement in the circumstances in which it is likely to be made.
2. The licensee shall, subject to paragraphs 6 and 7 below, offer terms for a
connection and use of system agreement in accordance with paragraph 1 above
as soon as practicable and in any event not more than the period specified
in paragraph 8 below after receipt by the licensee of an application from
the authorised electricity operator containing all such information as the
licensee may reasonably require for the purpose of formulating the terms of
his offer.
3. The licensee's offer made in accordance with paragraph 1 shall make
detailed provision regarding:
(a) the carrying out of works (if any) required for the construction or
modification of the entry point to connect the licensee s system to
the transmission system or to any distribution system or in connection
with the construction or modification of any exit points for the
delivery of the electricity to be distributed as specified in
19
<PAGE>
the agreement, and for the obtaining of any consents necessary for
such purpose;
(b) the carrying out of works (if any) for the provision of electrical
plant or for the extension or reinforcement of the licensee s system
which are required, in the opinion of the licensee, to be undertaken
for the provision of use of system to the authorised electricity
operator and for the obtaining of any consents necessary for such
purpose;
(c) the installation of appropriate meters or other apparatus (if any)
required to enable the licensee to measure electricity being accepted
into the licensee's system at the specified entry point and leaving
such system at the specified exit points;
(d) the installation of such switchgear or other apparatus (if any) as may
be required for interrupting the use of system should there be a
failure by or for an authorised electricity operator to provide
electricity at its entry point on the licensee's system for delivery
to the person specified by the authorised electricity operator from
the exit points on such system;
(e) the date by which any works required so as to permit access to the
licensee's system (including for this purpose any works to extend or
reinforce them) shall be completed (time being of the essence unless
otherwise agreed by the authorised electricity operator); and
(f) the charges to be paid by the authorised electricity operator for the
provision of electrical plant, for connections to or modification of
connections to, or the extension or reinforcement of, the licensee's
system and for use of system shall, unless manifestly inappropriate,
be set in conformity with paragraph 4 below.
4. The charges referred to in paragraph 3 to be contained in every agreement
the subject of an offer by the licensee shall be such that:
(a) charges for the provision of electrical plant, connection charges,
charges for modification of connections or any charges for extension
or reinforcement of the licensee's system or for use of
20
<PAGE>
system are set at a level which will enable the licensee to recover no
more than:
(i) the appropriate proportion (taking account of the factors
referred to in paragraph 5) of the costs directly or indirectly
incurred by the licensee; and
(ii) a reasonable rate of return on the capital represented by such
costs;
(b) charges for the installation of meters, switchgear or other apparatus
and for their maintenance shall not exceed the costs thereof and a
reasonable rate of return on the capital represented by such cost.
5. For the purpose of determining an appropriate proportion of the costs
directly or indirectly incurred in carrying out works, the licensee shall
have regard to:
(a) the benefit (if any) to be obtained or likely in the future to be
obtained by the licensee or any other authorised electricity operator
as a result of the carrying out of such works whether by virtue of the
provision of electrical plant, the reinforcement or extension of the
licensee's system, or the provision of additional entry or exit points
on such system or otherwise; and
(b) the ability or likely future ability of the licensee to recoup a
proportion of such costs from other authorised electricity operators
or other persons.
6. The licensee shall not be obliged pursuant to this Condition to offer to
enter into any agreement with an authorised electricity operator to make
connections or to provide use of system where, by reason of the capacity of
the licensee s system and the use made or reasonably expected to be made of
it, the licensee would be required to expand or reinforce the capacity of
the licensee's system.
7; The licensee shall not be obliged pursuant to this Condition to offer to
enter into any agreement with an authorised electricity operator if:
(a) to do so would be likely to involve the licensee:
21
<PAGE>
(i) in breach of the Grid Code;
(ii) in breach of the Distribution Code;
(iii) in breach of the Electricity Supply Regulations 1988 or any
regulations made under Section 29 of the Act; or
(iv) in breach of any other enactment relating to safety or standards
applicable to the licensee's system; or
(b) the person making the application does not undertake to be bound,
insofar as applicable, by the terms of the Distribution Code or the
Grid Code from time to time in force; or
(c) the person making the application ceases to be an authorised
electricity operator.
8. For the purpose of paragraph 2, the period specified shall be:
(a) in the case of persons seeking use of system only, 28 days; and
(b) in the case of persons seeking connection, modification of an existing
connection or use of system in conjunction with connection, three
months.
9. The preceding paragraphs of this Condition shall apply mutatis mutandis in
the case of any person (not being an authorised electricity operator) who
wishes to be connected at an exit point on the licensee s system.
10. The licensee shall within 28 days following receipt of a request from any
person, give or send to such person such information in the possession of
the licensee as may be reasonably required by such person for the purpose
of completing paragraph 8 of Part 1 and paragraphs 2(v) and (vi) of Part 2
of Schedule 2 of The Electricity (Application for Licences and Extensions
of Licences) Regulations 1990 or such provisions to like effect contained
in any further regulations then in force made pursuant to Section 6(3), 60
and 64(1) of the Act.
22
<PAGE>
Condition 3A: Connection and use of system - functions of the Director
1. If, after a period which appears to the Director to be reasonable for the
purpose, the licensee has failed to enter into an agreement with an
authorised electricity operator (or in the case of connection at any exit
point, any person) entitled or claiming to be entitled thereto pursuant to
an application in accordance with Condition 3, the Director may pursuant to
Section 7(3)(c) of the Act, on the application of such authorised
electricity operator or person or the licensee, settle any terms of the
agreement in dispute between the licensee and the authorised electricity
operator or person in such manner as appears to the Director to be
reasonable having (in so far as relevant) regard, in particular, to the
following considerations:
(a) that the authorised electricity operator or person should pay to the
licensee the whole or an appropriate proportion (as determined in
accordance with paragraph 5 of Condition 3) of the costs directly or
indirectly incurred by the licensee in the carrying out of any works
or in providing or doing any other thing under the agreement in
question together with a reasonable rate of return on the capital
represented by such costs calculated in accordance with the principles
set out in paragraph 4 of Condition 3;
(b) that the performance by the licensee of its obligations under the
agreement should not cause it to be in breach of any other Condition
of this licence;
(c) that any methods by which the licensee's system is connected to the
transmission system or to any distribution system accords with good
engineering principles and practices; and
(d) that the terms and conditions of agreements entered into by the
licensee pursuant to an application in accordance with Condition 3
should be, so far as circumstances allow, as similar in substance and
form as is practicable.
2. If the authorised electricity operator or person (as the case may be)
wishes to proceed on the basis of the agreement as settled by the Director,
the licensee shall forthwith enter into and implement such agreement in
accordance with its terms.
23
<PAGE>
Condition 4: Compliance with the Grid Code
1. The licensee shall comply with the provisions of the Grid Code in so far as
applicable to it.
2. The Director may (following consultation with the Transmission Company)
issue directions relieving the licensee of its obligation under paragraph 1
in respect of such parts of the Grid Code and to such extent as may be
specified in those directions.
24
<PAGE>
Condition 5: Compliance with Distribution Codes
1. The licensee shall comply with the provisions of the Distribution Code of
any public electricity supplier in so far as applicable to it.
2. The Director may (following consultation with any public electricity
supplier directly affected thereby) issue directions relieving the licensee
of its obligation under paragraph 1 in respect of such parts of the
Distribution Code of any public electricity supplier and to such extent as
may be specified in those directions.
25
<PAGE>
Condition 6: Pooling and Settlement Agreement
1. The licensee shall be party to and, within 3 months after the date on which
this licence comes into force (or such longer period as may be specified by
the Director in directions issued for the purposes of this Condition),
shall become a pool member under and shall in either case comply with the
provisions of, the Pooling and Settlement Agreement insofar as the same
shall apply to it in its capacity as a private electricity supplier.
2. Paragraph 1 shall not apply for so long as the aggregate amounts to be
supplied by the licensee and any affiliate or related undertaking of the
licensee in its or their capacity as a public or private electricity
supplier do not exceed 500 kW.
26
<PAGE>
Condition 7: Licensee's system planning
1. The licensee shall plan and develop the licensee's system in accordance
with a standard not less than that set out in Engineering Recommendation
P.2/5 (October 1978 revision) of the Electricity Council Chief Engineers'
Conference in so far as applicable to it or such other standard of planning
as the licensee may, following consultation with the Transmission Company
and any authorised electricity operator liable to be materially affected
thereby and with the approval of the Director, adopt from time to time .
2. The Director may (following consultation with the licensee and, where
appropriate, with the Transmission Company and any authorised electricity
operator liable to be materially affected thereby) issue directions
relieving the licensee of its obligation under paragraph 1 in respect of
such parts of the licensee's system and to such extent as may be specified
in the directions.
27
<PAGE>
Condition 8: Generation security standard
1. The licensee shall make arrangements sufficient to meet the generation
security standard.
2. The duty imposed by paragraph 1 shall be discharged either by the
licensee's complying with the provisions of paragraph 3 below or by the
making by the licensee of such other arrangements as may have been
previously approved in writing for the purpose by the Director.
3. The licensee may discharge the duty imposed by paragraph 1 by:
(a) for so long as the relevant condition is met, purchasing as a pool
member under the terms of the Pooling and Settlement Agreement
quantities of electricity which are at all times sufficient to meet
the demands of all qualifying customers of the licensee; and
(b) for so long as the relevant condition is met, and save by reason of
planned maintenance undertaken on the licensee s system or in
circumstances of force majeure affecting either the licensee s system
or the quantities of electricity delivered into that system, not:
(i) making voltage reductions outside statutory limits; or
(ii) interrupting or reducing supplies to any qualifying customer
otherwise than as instructed pursuant to the Grid Code by the
Transmission Company or in accordance with any applicable
Distribution Code.
4. The relevant condition referred to in paragraph 3 is that there should at
any relevant time be electricity available to be purchased under the terms
of the Pooling and Settlement Agreement at a price less than the ceiling
price.
5. The licensee shall upon request by the Director provide to the Director
such information as the Director may require for the purpose of monitoring
compliance with this Condition and to enable the Director (having regard to
his statutory duties) to review the operation of the generation security
standard.
28
<PAGE>
6. The provisions of this Condition are without prejudice to the duties of the
licensee under the Electricity Supply Regulations 1988.
7. In this Condition:
"ceiling price" means such price as would be equal
to the Pool Selling Price in
circumstances where the
corresponding Pool Purchase Price
was an amount equal to the Value of
Lost Load.
"generation security means such standard of generation
standard" security as will ensure that:
(a) the supply of electricity to
qualifying customers will not be
discontinued in more than 9 years
in any 100 years; and
(b) the voltage or frequency of
electricity supplied to qualifying
customers will not be reduced below
usual operational limits in more
than 30 years in any 100 years by
reason of insufficiency of
electricity generation available
for the purposes of supply by the
licensee to its qualifying
customers at times of annual system
peak demand.
29
<PAGE>
"Pool Purchase Price" shall each have the meaning from
and "Pool time to Selling to time ascribed to
Price" them in Schedule 9 to the Pooling
and Settlement Agreement.
"qualifying customer" means any purchaser from the
licensee but shall exclude
(a) a contract purchaser under an
interruptible contract or a
contract containing load management
terms to the extent that supplies
to that purchaser may be
interrupted or reduced in
accordance with the terms of that
contract; and
(b) a customer on special tariff
terms which restrict supplies to
particular time periods to the
extent that supplies to that
customer may be interrupted or
reduced in accordance with such
tariff .
"Value of Lost Load" means in respect of the first
financial year, the sum of(pound)2
per kWh and, in respect of each
succeeding financial year, the sum
which corresponds to(pound)2 per
kWh as adjusted to reflect
30
<PAGE>
the percentage change in the Retail
Price Index between the index
published or determined in respect
to the December prior to the start
of that financial year and the
index published or determined for
December 1989.
31
<PAGE>
Condition 9: Security arrangements
1. The licensee shall comply with the provisions of the Fuel Security Code and
such provisions shall have effect as if they were set out in this licence.
32
<PAGE>
Condition 10: Health and safety of employees
1. It shall be the duty of the licensee to act together with other licensees
to consult with appropriate representatives of the employees for the
purpose of establishing and maintaining an appropriate machinery or forum
for the joint consideration of matters of mutual concern in respect of the
health and safety of persons employed by those licensees.
33
<PAGE>
Condition 11: Provision of information to the Director
1. Subject to paragraphs 2 and 3, the licensee shall furnish to the Director,
in such manner and at such times as the Director may require, such
information and shall procure and furnish to him such reports, as the
Director may consider necessary in the light of the Conditions or as he may
require for the purpose of performing:
(a) the functions assigned to him by or under the Act; and
(b) any functions transferred to him under the Act.
2. The licensee may not be required by the Director to furnish him under this
Condition with information for the purpose of the exercise of his functions
under Section 48 of the Act.
3. The licensee may not be required by the Director to furnish him under this
Condition with any information required in relation to an enforcement
matter which the licensee could not be compelled to produce or give under
Section 28(3) of the Act.
4. The power of the Director to call for information under paragraph 1 is in
addition to the power of the Director to call for information under or
pursuant to any other Conditions.
5. In paragraphs 1 to 4, "information" shall include any documents, accounts,
estimates, returns or reports (whether or not prepared specifically at the
request of the Director) of any description specified by the Director.
6. The licensee shall, if so requested by the Director, give reasoned comments
on the accuracy and text of any information and advice (so far as relating
to the supply of electricity authorised by this licence) which the Director
proposes to publish pursuant to Section 48 of the Act.
34
<PAGE>
Condition 12: Payment of fees
1. The licensee shall, at the times stated hereunder, pay to the Secretary of
State fees of the amount specified in, or determined under, the following
paragraphs of this Condition.
2. Within 30 days after the grant of this licence but, in any event, before
8th July, 1990, the licensee shall pay to the Director an initial fee of
(pound)250.
3. In respect of the year beginning on 1st April in 1991 and in each
subsequent year, the licensee shall pay to the Director a fee which is the
aggregate of the following amounts:
(a) an amount which is a proportion as determined by the Director of the
amount estimated by the Director, according to a method which has
previously been disclosed in writing to the licensee, as likely to be
his costs during the coming year in the exercise of his general
functions under the Act in relation to the holders of licences granted
by the Secretary of State or the Director under Section 6(1) and 6(2)
of the Act;
(b) an amount which is a proportion as determined by the Director of the
amount estimated by the Director (in consultation with the Monopolies
Commission) as having been incurred in the calendar year immediately
preceding the 1st April in question by the Monopolies Commission in
connection with references made to it under Section 12 of the Act with
respect to this licence or any other licence issued under Section 6(2)
of the Act; and
(c) the difference (being a positive or a negative amount), if any,
between:
(i) the amount of the fee paid by the licensee in respect of the year
immediately preceding the 1st April in question; and
(ii) the amount which that fee would have been in respect of that year
had the amount comprised therein under sub-paragraph (a) above
(or, where that period commenced on 8th June, 1990 the amount
attributable to the matters referred to in that sub-paragraph)
been
35
<PAGE>
calculated by reference to the total costs of the Director and
the proportion thereof actually attributable to the licensee
(such total costs being apportioned as determined by the Director
according to a method previously disclosed in writing to the
licensee)
and the fee shall be paid by the licensee to the Director within one month of
the Director giving notice to the licensee of its amount if that notice is given
within six months of the beginning of the year in respect of which the fee is
payable.
36
<PAGE>
SCHEDULE 1
Specified premises
All non-domestic premises having a maximum demand over 1MW in the authorised
areas as at 31 March 1990 of the following public electricity suppliers:
East Midlands Electricity plc
Eastern Electricity plc
London Electricity plc
MANWEB plc
Midlands Electricity plc
Northern Electricity plc
NORWEB plc
SEEBOARD plc
Southern Electric plc
South Wales Electricity plc
South Western Electricity plc
proceedings relating to any such application are finally determined;
(d) if the licensee fails to comply with any order made by the Secretary
of State under Section 56, 73, 74 or 89 of the Fair Trading Act 1973
or under Section 10(2)(a) of the Competition Act 1980;
37
<PAGE>
(e) if the licensee:
(i) has not within 5 years after the date of this licence commenced
the supply of electricity to any of the premises specified in
Schedule 1 above; or
(ii) has ceased to supply electricity to all those premises for a
period of 5 years;
(f) if the licensee:
(i) is unable to pay its debts (within the meaning of Section 123(1)
or (2) of the Insolvency Act 1986, but subject to paragraph 2 of
this Schedule) or has any voluntary arrangement proposed in
relation to it under Section 1 of that Act or enters into any
scheme of arrangement (other than for the purpose of
reconstruction or amalgamation upon terms and within such period
as may previously have been approved in writing by the Director);
(ii) has a receiver (which expression shall include an administrative
receiver within the meaning of Section 251 of the Insolvency Act
1986) of the whole or any
3. The provisions of Section 109 of the Act shall apply for the purposes of
the service of any notice under this Schedule.
38
<PAGE>
EXHIBIT 10.3
L/OF/103/2TS
E&W
SECOND-TIER LICENCE TO SUPPLY ELECTRICITY
for
Yorkshire Electricity Group plc
(pound)4.80
<PAGE>
L/OF/103/2TS
Uncertified copies of this licence are available
price (pound)4.80 payment with order from:
Library
Office of Electricity Regulation
Hagley House
Hagley Road
Birmingham
B16 8QG
Cheques and postal orders should be made payable to:
Office of Electricity Regulation.
(C) Crown Copyright
2
<PAGE>
EXTENSION OF
A SECOND TIER LICENCE TO SUPPLY ELECTRICITY
Whereas on 8 June 1990 the Director General of Electricity Supply, in accordance
with a general authority ("the authority') given by the Secretary of State under
section 6(1) and (2) of the Electricity Act 1989 ("the Act") and in exercise of
the powers conferred by section (6)(2)(a), section 6(6), section 7 and section
10 of the Act granted a licence ("the licence") to Yorkshire Electricity Group
plc ("the licensee") (registered in England under number 2366995) to supply
electricity to the premises specified in Schedule 1 to the licence, subject to
the conditions set out in Part II of the licence and to the terms as to
revocation specified in Schedule 2 to the licence for the period determinable in
accordance with paragraph 3 of Part 1 of the licence.
The Director General of Electricity Supply, in exercise of the powers conferred
by the authority and by section 6(2)(b) of the Act hereby extends the premises
authorised to be supplied by the licensee under the licence by the addition to
the premises specified in the Schedule 1 to the licence of the premises
specified in the Schedule hereto with effect from 14 March 1994.
Dr Eileen Marshall
authorised on behalf of the
Director General of Electricity Supply
11 March 1994
3
<PAGE>
SCHEDULE
Specified Premises
All premises other than those which, during the franchise period, have a maximum
demand at or below the franchise limit in the authorised areas of the following
public electricity supply companies together with such premises as may, from
time to time, be specified by the Director (with the approval of the Secretary
of State) for the purposes of paragraph 5 of condition 2 of this licence:
East Midlands Electricity plc
Eastern Electricity plc
London Electricity plc
MANWEB plc
Midlands Electricity plc
Northern Electric plc
NORWEB plc
SEEBOARD plc
Southern Electric plc
South Wales Electricity plc
South Western Electricity plc
(Words and phrases used or defined in Condition 2 shall have the same meaning as
when used in this schedule)
4
<PAGE>
REGULATION & BUSINESS AFFAIRS Offer
OFFICE OF
ELECTRICITY
REGULATION
The Company Secretary
Yorkshire Electricity Group plc
Scarcroft
LEEDS
LS14 3HS
MODIFICATION OF LICENCE
Whereas --
(1) Yorkshire Electricity Group plc ("the licensee") has been granted a licence
("the licence") under Section 6 (2) of the Electricity Act 1989 ("the Act")
to supply electricity to premises in England and Wales specified or of a
description specified in the licence subject to the Conditions contained in
the licence;
(2) In accordance with Section 11 (2) of the Act the Director General of
Electricity Supply ("Director") gave notice of his intention to make
modifications to the licence through the insertion of two additional
conditions (13 and 14) by advertising the modifications in the London
Gazette and the Financial Times, requiring any objections or
representations to the modifications to be made to him on or before 25
April 1994;
(3) The Director has considered the representations or objections which were
duly made and not withdrawn;
(4) In accordance with Section 11 (4) of the Act the Director gave notice of
his intention to make the modifications to the Secretary of State and has
not received a direction not to make the modification;
(5) The licensee has given his consent to the modifications, set out in the
Schedule attached which the Director proposed to the licence.
Now in accordance with the powers contained in Section 11 (1) of the Act and
with the consent of the licensee the Director hereby modifies the licence in the
manner specified in the Schedule attached with effect from 2 May 1994.
A J BOORMAN
Authorised on behalf of
The Director General of Electricity Supply 29 April 1994
Hagley House . Hagley Road . Edgbaston . Birmingham B16 8OG .
Telephone: (021)456 2100 Fax: (021)454 9115
5
<PAGE>
SCHEDULE
After Condition 12 insert
"Condition 13: Compulsory acquisition of land etc
1. All the powers and rights conferred by or under the provisions of Schedule
3 of the Act (compulsory acquisition of land etc.) shall have effect in
relation to the licensee to the extent that they are required for the
installation, maintenance, removal or replacement of the licensee s system
or any part thereof which are necessary to enable the licensee to supply
electricity to the premises specified in Schedule 1 to this licence.
2. Paragraph 1 shall cease to have effect on 2 May 1997 or such later date as
the Director may from time to time direct.
6
<PAGE>
Condition 14: Powers to carry out street works etc.
1. The powers and rights conferred by or under the provisions of Schedule 4 to
the Act (powers to carry out street works etc.) shall have effect and may,
subject to paragraph 2 below, be exercised by carrying out works in
relation to, or in pursuance of, the installation, inspection, maintenance,
adjustment, repair, alteration, replacement and removal of:
(a) electric lines which are necessary to enable the licensee to supply
electricity to premises specified in Schedule 1 below;
(b) electrical plant associated with such lines; and
(c) any structures for housing or covering such lines or plant.
2. Works which are under, over, in, on, along or across any street, which for
the purposes of the Highways Act 1980, constitutes a highway or part of a
highway maintainable at the public expense, may be undertaken in pursuance
of paragraph 1 above subject to the following conditions:
(a) that such works shall not be carried out except with the consent,
which shall not unreasonably be withheld, of the highway authority and
in accordance with such reasonable conditions as may be attached to
such consent;
(b) that any question as to whether or not a consent of highway authority
is unreasonably withheld, or as to the reasonableness of conditions
attached to such consent, shall be determined by a single arbitrator
to be appointed:-
(i) by agreement between the licensee and the highway authority; or
(ii) in default of such agreement, by the Director on the application
of either party.
3. Paragraph 1 shall cease to have effect on 2 May 1997 or such later date as
the Director may from time to time direct."
7
<PAGE>
REGULATION & BUSINESS AFFAIRS Offer
OFFICE OF
ELECTRICITY
REGULATION
Mr. P B Morgan
Executive Director of Supplies
Yorkshire Electricity Group plc
Wetherby Road
Scarcroft
Leeds
LS14 3HS
Dear Mr Morgan
MODIFICATION OF LICENCE CONDITION
Whereas --
(1) Yorkshire Electricity Group plc ("the licensee") has been granted a licence
("the licence") under Section 6(2) of the Electricity Act 1989 ("the Act")
to supply electricity to premises in England and Wales specified or of a
description specified in the licence subject to the Conditions contained in
the licence;
(2) In accordance with Section 11 (2) of the Act the Director gave notice of
his intention to make modifications to Condition 2 of the licence by
advertising the modifications in the London Gazette the Edinburgh Gazette
the Financial Times and the Scotsman requiring any objections or
representations to the modifications to be made to him on or before 27
March 1992,
(3) The Director has considered the representations or objections which were
duly made and not withdrawn;
(4) The licensee has given his consent to the modifications, set out in the
Schedule attached which the Director General of Electricity Supply ("the
Director") proposed to Condition 2 of the licence.
Now in accordance with the powers contained in Section 11(1) of the Act and with
the consent of the licensee the Director hereby modifies Condition 2 of the
licence in the manner specified in the Schedule attached with effect from 23rd
April 1992.
Dr Eileen Marshall
Authorised on behalf of
The Director General of Electricity Supply 22 April 1992
Hagley House . Hagley Road . Edgbaston Birmingham B16 8OG .
Telephone (021)4562100 Fax. (02114549115
8
<PAGE>
Schedule
Condition 2 of each licence which has been granted under section 6(2)(a) of the
Act (other than the licence granted to London Electricity plc) shall be modified
by the addition of the following two paragraphs after paragraph 7 -
7A. For the purpose of this Condition occupation of any premises by an
affiliate of a person shall be deemed to be occupation by that person.
7B. (1) In this paragraph -
"customer B" means the customer for the time being of the licensee in
respect of premises A;
"permitted quantity" means 10 per cent of the quantity of electricity
supplied by the licensee to customer B in respect of premises A in the
relevant year;
"premises A" means a site or building which, if in the occupation of a
single customer, would be capable of being single premises; and
"relevant year " means the period of 12 months commencing on the date
upon which the licensee starts to supply premises A and (if such
supply is provided for a continuous period exceeding 12 months) each
anniversary of that date until such supply shall cease .
(2) Where during a relevant year -
(i) premises A are occupied by more than one person;
(ii) customer B supplies the other person or persons who are in
occupation of premises A or supplies one or more of such persons
who supply the other occupiers;
(iii) each of the persons referred to in subparagraph (ii) who
provides a supply is exempt by or under an Order under section 5
of the Act from the requirement to hold a licence to supply; and
(iv) customer B does not supply an aggregate quantity of electricity
to such other occupiers in any relevant year which may
reasonably be expected to exceed or actually exceeds the
permitted quantity,
the occupation of premises A by the persons other than customer B shall be
deemed to be occupation by customer B.
(3) The licensee shall, at: the request of the public electricity supplier
in whose authorised area premises A are situated, provide not more
than once in any period of 3 months in a relevant year, evidence to
the supplier that the licensee reasonably believes that the aggregate
quantity of electricity
9
<PAGE>
expected to be supplied by customer B during the relevant year will
not exceed the permitted quantity including, where at the date of such
request any such supply has been provided during the relevant year,
evidence as to the quantity so supplied.
(4) Where customer B has supplied a quantity of electricity to such other
occupiers which in aggregate exceeds the permitted quantity, the
licensee shall pay to the public electricity supplier in whose
authorised area premises A are situated a sum calculated by
multiplying the number of units by which the actual supply to such
other occupiers exceeds the permitted quantity by 5 per cent of the
standard tariff price per unit charged by that public electricity
supplier for customers of the type or types of such other occupiers
(but excluding any standing charge or other charge not fixed solely by
reference to the number of units consumed) or in the absence of
agreement as to the appropriate tariff such rate as may be determined
by the Director at the request of the licensee or the public
electricity supplier.
(5) For the purposes of this paragraph there shall be disregarded -
(i) the quantity of electricity supplied by customer B to an
occupier of premises A who has a relevant demand above the
franchise limit;
(ii) the quantity of electricity supplied to customer B equal to the
quantity supplied by customer B in accordance with subparagraph
(i); and
(iii) the occupation by the occupier (other than customer B) referred
to in subparagraph (i).
(6) To the extent that, disregarding sub-paragraph (2), the licensee would
have been permitted to provide a supply to customer B's premises under
this Condition, the provisions of this paragraph shall not apply.
10
<PAGE>
offer
OFFICE OF
ELECTRICITY
REGULATION
Company Secretary
Yorkshire Electricity Group plc
Wetherby Road
Scarcroft
Leeds LS14 3HS
24 October 1990
MODIFICATION OF LICENCE CONDITION
Whereas --
(1) On 8 June 1990, Yorkshire Electricity Group plc ("the licensee") was
granted a licence ("the licence") under Section 6(2)(a) of the Electricity
Act 1989 ("the Act") to supply electricity to premises specified or of a
description specified in the licence subject to the Conditions contained in
the licence;
(2) On 10 September 1990 the licensee gave his consent to modifications, ("the
modifications") set out in the .Schedule below which the Director General
of Electricity Supply ("the Director") proposed to Condition 2 of the
licence;
(3) In accordance with Section 11(2) of the Act the Director gave notice of his
intention to make the modifications by advertising the modifications in the
London Gazette the Financial Times and the Scotsman requiring any
objections or representations to the modifications to be made to him on or
before 18 October 1990;
(4) The Director has considered the representations or objections which were
duly made and not withdrawn.
Now in accordance with the powers contained in Section 11(1) of the Act and with
the consent of the licensee the Director hereby modifies Condition 2 of the
licence in the manner specified in the Schedule below with effect on 24 October
1990.
Authorised on behalf of
The Director General of Electricity Supply
Hagley House . Hagley Road . Edgbaston . Birmingham B16 8OG .
Telephone: (021)456 2100 Fax: (021)454 9115
11
<PAGE>
Offer
OFFICE OF
ELECTRICITY
REGULATION
The Schedule
Condition 2 of the licence is modified as follows:-
A(l) In the definition of "franchise limit" contained in paragraph 8 of the
Condition -
(a) in sub-paragraphs (a) and (b) the words "a relevant demand in
megawatts taken at any single premises which does not exceed"; and
(b) the words "in each case, having regard to the bases of assessment
referred to in paragraph 2", shall be deleted.
(2) There shall be inserted before the phrase "below the franchise limit" -
(a) in paragraphs 1 and 5 of the Condition the words "at or" ; and
(b) in paragraphs 3 and 4 of the Condition the words "to or".
B(l) By inserting after paragraph 2 of that condition the following paragraph -
(2A) For the purposes of paragraph 2, if any electricity which has been or is to
be supplied by the licensee to any single premises ("premises- A") is or
will be on-supplied by another person from premises A to one or more other
single premises ("premises B") then -.
(a) If the on-supply to premises B from premises A was made on 31 March
1990 by that other person pursuant to an agreement for that other
person to supply premises B which was subsisting on that date that
demand at premises B which is met by such on-supply from premises A
may be regarded as part of the relevant demand in megawatts at
premises A; and
(b) save as provided in sub-paragraph (a) above, that demand at premises B
which is met by such on-supply from premises A shall not be regarded
as part of the relevant demand in megawatts at premises A.
(2) In paragraph 3 of Condition 2 for the words "paragraph 2" there shall be
substituted the words "paragraphs 2 and 2A".
12
<PAGE>
Company Secretary
Yorkshire Electricity Group plc
Wetherby Road
Scarcroft
Leeds
LS14 3HS
19 January 1998 OUR REF: LE2394\2562\013
MODIFICATION OF LICENCE
Whereas -
I. Yorkshire Electricity Group plc ('the Licensee') has been granted a licence
('the Licence') under section 6(2) of the Electricity Act 1989 ('the Act')
to supply electricity to premises specified or of a description specified
in Schedule 1 to the Licence subject to the conditions contained in the
Licence.
II. In accordance with section 11(2) of the Act, the Director General of
Electricity Supply ('the Director') gave notice that he proposed to make
modifications to the Conditions of the Licence - to the effect and for the
purposes specified in that notice - by advertising the modifications in the
London Gazette and the Financial Times on 30 September 1997 and requiring
any representations or objections to the modifications to be made to him on
or before 28 October 1997.
III. The Director has considered the representations or objections which were
duly made to him and not withdrawn.
IV. In accordance with section 11(4) of the Act the Director gave notice to
the Secretary of State of his intention to make the modifications and has
not received a direction not to make the modifications.
V. The Licensee has given its consent to the modifications as set out in the
attached Schedule.
<PAGE>
Now, in accordance with the powers contained in section 11 (1) of the Act and
with the consent of the Licensee, the Director hereby modifies the Licence in
the manner specified in the attached Schedule with effect on and after 20
January 1998.
AJ BOORMAN 19 January 1998
AUTHORISED ON BEHALF OF THE
- ---------------------------
DIRECTOR GENERAL OF ELECTRICITY SUPPLY
- --------------------------------------
<PAGE>
Minor typographical amendments were necessary to Condition 3, 6 and 31 - please
insert as appropriate in Annexes B and F.
<PAGE>
MODIFICATIONS TO THE SECOND TIER SUPPLY LICENCE
ISSUED TO YORKSHIRE ELECTRICITY GROUP PLC
SCHEDULE
--------
The following modifications shall apply on and after 20 January 1998.
1. Condition 1 shall be deleted, and new Condition 1 (the terms of which are
set out at Annex A hereto) shall be inserted in its place.
2. Conditions 2, 3 and 3A shall be deleted and new Conditions 2, 3, 4, 5 and 6
(the terms of which are set out in Annex B hereto) shall be inserted in
their place.
3. Conditions 4 and 5 shall be renumbered as Conditions 7 and 8 respectively,
and in those Conditions each occurrence of the word "licensee" shall be
amended to read, in initial upper case, "Licensee".
4. Immediately after the renumbered Condition 8, new Conditions 9 and 10 (the
terms of which are set out at Annex C hereto) shall be inserted.
5. Conditions 6 and 7 shall be renumbered as Conditions 11 and 12, and in
those Conditions any and each occurrence of the words "authorised
electricity operator", "licence" "licensee" and "licensee's system" shall
be amended to read, in initial upper case, "Authorised Electricity
Operator", "Licence", "Licensee" and "Licensee's System", respectively.
6. Condition 8 shall be renumbered as Condition 13, and in that Condition:
(a) any and each occurrence of the words "ceiling price", "generation
security standard", "licensee", "qualifying customer" and "relevant
condition" shall be amended to read, in initial upper case, "Ceiling
Price", "Generation Security Standard", "Licensee", "Qualifying
Customer" and "Relevant Condition", respectively; and
(b) the following definition shall be inserted immediately after the
definition of "Qualifying Customer"
<PAGE>
"Retail Price Index" means the general index of retail prices
published by the Office for National Statistics
each month in respect of all items or:
(a) if the index for any month in any year shall
not have been published on or before the
last day of the third month after such
month, such index for such month or months
as the Director may after consultation with
the Licensee determine to be appropriate in
the circumstances; or
(b) if there is a material change in the basis
of the index, such other index as the
Director may after consultation with the
Licensee determine to be appropriate in the
circumstances.
7. Condition 9 shall be renumbered as Condition 14, and in that Condition the
words "licensee" and "licence" shall be amended to read, in initial upper
case, "Licensee" and "Licence", respectively.
8. Condition 10 shall be deleted, and new Conditions 15, 16, 17 and 18 (the
terms of which are set out at Annex D hereto) shall be inserted in its
place.
9. Condition 11 shall be renumbered as Condition 19, and in that Condition:
(a) paragraph 5 shall be renumbered as paragraph 6, and in that paragraph
the words "In paragraphs I to 4" shall be amended to read "In this
Condition";
(b) paragraph 6 shall be renumbered as paragraph 5; and
<PAGE>
(c) each occurrence of the word "licensee" shall be amended to read, in
initial upper case, "Licensee".
10. Conditions 12, 13 and 14 shall be deleted and new Conditions 20 to 50 (the
terms of which are set out at Annex E hereto) shall be inserted in their
place.
<PAGE>
CONDITION 3. CONTROLLED MARKET START-UP
- ---------------------------------------
1. This Condition applies to those premises which the Licensee would during
the franchise period be prohibited from supplying under the terms of
Condition 2.
2. The Licensee shall not, after the expiry of the franchise period, supply
electricity to any premises to which this Condition applies prior to such
date as is specified in respect of such premises in a direction issued by
the Director under this Condition.
3. A direction under this Condition may specify that different premises may be
supplied from different dates, and for the purposes of this Condition
premises may be specified by reference to:
(a) their location;
(b) whether or not they are Domestic Premises; or
(c) the type of metering equipment installed at the premises,
or any combination of these factors.
4. Prior to making any direction under this Condition, the Director shall:
(a) set out the proposed contents of the direction in a notice (the
"proposals notice");
(b) send the proposals notice to the Licensee, each Relevant Public
Electricity Supplier in respect of premises specified in the notice,
each consumers' committee appointed for an area within which the
premises specified in the notice are situated and any other persons or
bodies appearing to the Director to be representative of those likely
to have an interest; and
(c) consider any representations concerning the proposed contents of the
direction which are made within a reasonable period, being not less
than 7 days from the date of issue of the proposals notice.
5. Any direction issued by the Director under this Condition shall be in
writing and shall be made not less than 28 days prior to the first date
specified in the direction.
<PAGE>
6. Where, by virtue of this Condition, the Licensee is prohibited from
supplying any premises, the provisions of Condition 29 shall not apply in
relation to the supply of electricity to those premises.
7. When the Director has issued a direction under this Condition and it
appears to him, having regard to the considerations set out in paragraph 8,
that it would be unreasonable in all the circumstances for the direction to
have effect on the dates specified therein in respect of any or all of
those premises at which it has not yet had effect, then the Director may,
subject to paragraph 9, withdraw or vary the direction in respect of the
premises to be supplied or of the dates from which they may be supplied, or
both.
8. The considerations set out in this paragraph are:
(a) whether the interests of customers in general, and in particular the
interests those occupying the premises specified in the direction,
would be served by the withdrawal or variation of the direction;
(b) whether the interests of any Electricity Supplier, including the
Licensee, would be or would be likely to be unfairly prejudiced by the
withdrawal or variation of the direction, or by a failure to do so;
(c) the content of any representation made to the Director on the issue;
and
(d) such information as is available to the Director concerning:
(i) the manner in which arrangements for the supply of electricity to
any premises to which this Condition applies have operated and
are expected to operate;
(ii) the likely ability of the Licensee to fulfil its obligations
under its Licence with respect to the supply of electricity to
any of the premises concerned; and
(iii) the likely ability of each Relevant Public Electricity Supplier
to comply with the requirements of its public electricity supply
licence in respect of the supply of electricity by the Licensee
to the premises concerned.
<PAGE>
9. The Director shall not withdraw or vary a direction in respect of any
premises when the date specified from which supply may commence is less
than 14 days from the date of the withdrawal or variation, unless the
Director has the agreement of the Licensee, or failing that agreement the
agreement of no fewer than two-thirds of the Second Tier Suppliers to whom
a direction applies in respect of the same premises and dates.
10. When the Director withdraws or varies a direction in accordance with
paragraph 7, he shall issue a notice of withdrawal or variation (as the
case may be) and that notice shall have effect.
11. The Director shall publish any direction, or any notice of withdrawal or
variation in such manner as in the opinion of the Director will secure
adequate publicity for it.
12. A direction or a variation or withdrawal of a direction made under this
Condition shall not distinguish between the Licensee and other Second Tier
Suppliers except to the extent that the distinction is appropriate in all
the circumstances given:
(a) the information available to the Director in accordance with sub-
paragraph 8(d)(ii); or
(b) where the Licensee is also a public electricity supplier, any failure
by the Licensee to comply with the requirements of its public
electricity supply licence, or with any agreement entered into in
accordance with any such requirements, which adversely affects the
ability of private electricity suppliers to supply electricity to
customers within its authorised area.
<PAGE>
CONDITION 6. CONNECTION AND USE OF SYSTEM - REQUIREMENT TO OFFER TERMS AND
- --------------------------------------------------------------------------
FUNCTIONS OF THE DIRECTOR
- -------------------------
1. Subject to paragraphs 7 and 8, the Licensee shall, on the application of
any person, offer to enter into an agreement with such person for the
provision or modification of a connection to the Licensee's System.
2. Subject to paragraphs 7 and 8, the Licensee shall, on the application of
any Authorised Electricity Operator, offer to enter into an agreement with
such Authorised Electricity Operator for use of system:
(a) to accept into the Licensee's System at such entry point and in such
quantities as may be specified in the application, electricity to be
provided by or for the Authorised Electricity Operator;
(b) to deliver electricity equal in quantity to that accepted into the
Licensee's System (less only any distribution losses) from such exit
points on that system and in such quantities as may be specified in
the application to such person as the Authorised Electricity Operator
may specify; and
(c) containing terms in accordance with paragraphs 4 and 5 and such
further terms as may be appropriate for the purposes of the agreement.
3. The Licensee shall, subject to paragraphs 7 and 8, offer terms for an
agreement in accordance with paragraphs 1 and 2 as soon as practicable and
in any event not more than the period specified in paragraph 9 after
receipt by the Licensee of an application containing all such information
as the Licensee may reasonably require for the purpose of formulating the
terms of its offer.
4. Any offer to enter into an agreement made by the Licensee in accordance
with paragraph 1 or 2 shall make detailed provision regarding:
(a) the carrying out of works (if any) required for the construction or
modification of the entry point to connect the Licensee's System to
the Transmission System or to any Distribution System or in connection
with the construction or modification of any exit points for the
delivery of the
<PAGE>
electricity to be distributed in accordance with the agreement, and
for the obtaining of any consents necessary for such purpose;
(b) the carrying out of works (if any) for the provision of electrical
plant or for the extension or reinforcement of the Licensee's System
which are required to be undertaken for the provision or modification
of a connection to the Licensee's System or for use of system and the
obtaining of any consents necessary for such purpose;
(c) the installation of appropriate meters or other apparatus (if any)
required to enable the Licensee to measure electricity being accepted
into the Licensee's system at the specified entry point and leaving
such system at the specified exit points;
(d) the installation of such switchgear or other apparatus (if any) as
may be required for interrupting the use of system should there be a
failure by or for an Authorised Electricity Operator to provide
electricity at its entry point on the Licensee's System for delivery
to the person specified by the Authorised Electricity Operator from
the exit points on such system;
(e) the date by which any works required so as to permit access to the
Licensee's System (including for this purpose any works for its
extension or reinforcement) shall be completed (time being of the
essence unless otherwise agreed by the Authorised Electricity
Operator); and
(f) the charges to be paid by the applicant for the provision of
electrical plant, for connections or modification of connections to,
or the extension or reinforcement of, the Licensee's System, for the
installation of meters, switchgear or other apparatus and the removal
of electrical plant, electric lines and meters following disconnection
and for use of system which shall, unless manifestly inappropriate, be
set in conformity with paragraph 5.
5. The charges referred to in paragraph 4 to be contained in every agreement
which is the subject of an offer by the Licensee shall be such that:
<PAGE>
(a) charges for the provision of electrical plant, connection charges,
charges for modification of connections, charges for disconnection
from the Licensee's System and the removal of electrical plant,
electric lines and meters following disconnection or any charges for
extension or reinforcement of the Licensee's System or for use of
system are set at a level which will enable the Licensee to recover no
more than:
(i) the appropriate proportion (taking account of the factors
referred to in paragraph 6) of the costs directly or indirectly
incurred by the Licensee; and
(ii) a reasonable rate of return on the capital represented by such
costs; and
(b) charges for the installation of meters, switchgear or other apparatus
and for their maintenance shall not exceed the costs thereof and a
reasonable rate of return on the capital represented by such costs.
6. For the purpose of determining an appropriate proportion of the costs
directly or indirectly incurred in carrying out works, the Licensee shall
have regard to:
(a) the benefit (if any) to be obtained or likely in the future to be
obtained by the Licensee or any other person as a result of the
carrying out of such works whether by virtue of the provision of
electrical plant, the reinforcement or extension of the Licensee's
System, the provision of additional entry or exit points on such
system or otherwise; and
(b) the ability or likely future ability of the Licensee to recoup a
proportion of such costs from other persons.
7. The Licensee shall not be obliged pursuant to this Condition to offer to
enter into any agreement where, by reason of the capacity of the Licensee's
System and the use made or reasonably expected to be made of it, the
Licensee would be required to expand or reinforce the capacity of the
Licensee's System.
<PAGE>
8. The Licensee shall not be obliged pursuant to this Condition to offer to
enter into any agreement if:.
(a) to do so would be likely to involve the Licensee being:
(i) in breach of the Grid Code;
(ii) in breach of any Distribution Code;
(iii) in breach of the Electricity Supply Regulations 1988 or any
regulations made under Section 29 of the Act; or
(iv) in breach of any other enactment relating to safety or standards
applicable to the Licensee's System; or
(b) the person making the application does not undertake to be bound,
insofar as applicable, by the terms of the Distribution Codes or the
Grid Code from time to time in force; or
(c) in the case of an agreement for use of system, the person making the
application ceases to be an Authorised Electricity Operator.
9. For the purpose of paragraph 3, the period specified shall be:
(a) in the case of persons seeking use of system only, 28 days; and
(b) in the case of persons seeking the provision or modification of a
connection or use of system in conjunction with connection, 3 months.
10. The Licensee shall within 28 days following receipt of a request from any
person, give or send to such person such information in the possession of
the Licensee as may be reasonably required by such person for the purpose
of completing paragraph 8 of Part I and paragraphs 2(v) and (vi) of Part 2
of Schedule 2 to The Electricity (Application for Licences and Extensions
of Licences) Regulations 1990 or such provisions to like effect contained
in any further regulations then in force made pursuant to section 6(3) of
the Act.
11. If, after a period which appears to the Director to be reasonable for the
purpose, the Licensee has failed to enter into an agreement with any person
entitled or claiming to be entitled thereto pursuant to an application in
accordance with this Condition, the Director may pursuant to section
7(3)(c) of the Act, on the
<PAGE>
application of such person or the Licensee, settle any terms of the
agreement in dispute between the Licensee and that person in such manner as
appears to the Director to be reasonable having (in so far as relevant)
regard, in particular, to the following considerations
(a) that the person should pay to the Licensee the whole or an
appropriate proportion (as determined in accordance with paragraph 6)
of the costs directly or indirectly incurred by the Licensee in the
carrying out of any works or in providing or doing any other thing
under the agreement in question together with a reasonable rate of
return on the capital represented by such costs, to be calculated in
accordance with the principles set out in paragraph 5;
(b) that the performance by the Licensee of its obligations under the
agreement should not cause it to be in breach of any Condition of this
Licence;
(c) that any methods by which the Licensee's System is connected to the
Transmission System or to any Distribution System accords with good
engineering principles and practices; and
(d) that the terms of agreements entered into by the Licensee pursuant to
an application in accordance with this Condition should be, so far as
circumstances allow, as similar in substance and form as is
practicable.
12. If any person wishes to proceed on the basis of an agreement as settled by
the Director, the Licensee shall forthwith enter into and implement such
agreement.
13. If either party to such agreement proposes to vary the contractual terms
of any agreement for the provision or modification of a connection to the
Licensee's System or for use of system entered into pursuant to this
Condition in any manner provided for under such agreement, the Director
may, at the request of that party, settle any dispute relating to such
variation in such manner as appears to the Director to be reasonable.
<PAGE>
Condition 31. Provision of services for persons who are of pensionableable or
- -----------------------------------------------------------------------------
disabled or chronically sick
- ----------------------------
1. The Licensee shall within two months of serving a Designated Supply Notice
on the Director prepare and submit to the Director for his approval a code
of practice detailing the special services the Licensee will make available
for its Domestic Customers who are of pensionable age or disabled or
chronically sick.
2. The code of practice shall include arrangements by which the Licensee will,
where appropriate:
(a) provide where practicable special controls and adaptors for electrical
appliances and meters (including prepayment meters) and reposition
meters (and shall set out any charges to be made for the provision of
such services);
(b) provide special means of identifying persons acting on behalf of the
Licensee or the Relevant Public Electricity Supplier;
(c) give advice on the use of electricity;
(d) send bills in respect of the supply of electricity to a customer to
any person who is willing to be sent such bills and is nominated by
that customer (without prejudice, however, to the right of the
Licensee to send such bills both to the customer and to the nominated
person where that appears appropriate to the Licensee);
(e) make available (free of charge) to blind and partially sighted
customers, by telephone or other appropriate means, information
concerning the details of any bill relating to the supply of
electricity to them and a facility for enquiring or complaining in
respect of any such bill or any service provided by the Licensee; and
(f) make available (free of charge) to deaf and hearing impaired
customers, being in possession of appropriate equipment, facilities to
assist them in enquiring or complaining about any bill relating to the
supply of electricity to them or any service provided by the Licensee.
<PAGE>
3. The code of practice shall further include arrangements whereby the
Licensee will:
(a) take reasonable steps to draw the attention of customers to the
existence of a register of customers who may be expected, by virtue of
being of pensionable age or disabled or chronically sick, to require:
(i) information and advice in respect of the matters set out at
paragraph 2;
or
(ii) advance notice of interruptions to the supply of electricity,
(b) maintain such a register, comprising the relevant details of each
customer who requests his inclusion on it; and
(c) give to those customers so registered:
(i) such information and advice in respect of the matters set
paragraph 2 or in respect of interruptions to the supply of
electricity as may be appropriate and is of such nature as shall
be set out in the code of practice; and
(ii) notice of the existence of another register maintained by the
Relevant Public Electricity Supplier, in relation to such
customers who may be expected to require advance notice of
interruptions to the supply of electricity, on which such
customers may be included.
4. The Licensee shall, with the consent or at the request of any customer
included on the register maintained in accordance with sub-paragraph 3(b),
provide the Relevant Public Electricity Supplier with appropriate details
concerning such customer and his requirements for the purpose of his
inclusion on the equivalent register maintained by the Relevant Public
Electricity Supplier in accordance with the provisions of its public
electricity supply licence.
5. This Condition is subject to the provisions of Condition 36.
<PAGE>
EXHIBIT 10.4
SECOND TIER LICENCE TO SUPPLY ELECTRICITY
-for-
Yorkshire Electricity Group plc
<PAGE>
L/OF/127/2TS
Uncertified copies of this licence are available price (pound)4.20 payment with
order from:
Library
Office of Electricity Regulation
Hagley House
Hagley Road
Birmingham
B16 8QG
Cheques and postal orders should be made payable to:
Office of Electricity Regulation.
(C) Crown Copyright
2
<PAGE>
SECOND TIER LICENCE TO SUPPLY ELECTRICITY
- for -
Yorkshire Electricity Group plc
3
<PAGE>
NOTE
The licenceholder is subject to the
environmental obligations set out in
Schedule 9 (Preservation of Amenity and
Fisheries) to the Electricity Act 1989
4
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
PART I: TERMS OF THE LICENCE 1
PART II: THE CONDITIONS
1. Interpretation and construction 2
2. Restriction on supply to certain premises 8
3. Connection and use of system - requirement to 12
offer terms
3A. Connection and use of system - functions of the 18
Director
4. Compliance with Scottish Grid Codes 20
5. Compliance with Scottish Distribution Codes 21
6. Compliance with Trading Code 22
7. Licensee 's system planning 23
8. Generation security standard 25
9. Security arrangements 30
10. Health and safety of employees 31
11. Provision of information to the Director 32
12. Payment of fees 33
SCHEDULE 1: Specified premises 35
SCHEDULE 2: Terms as to revocation 36
</TABLE>
5
<PAGE>
SECOND-TIER LICENCE TO SUPPLY ELECTRICITY
PART I: TERMS OF THE LICENCE
1. The Director General of Electricity Supply in accordance with a general
authority given by the Secretary of State under Sections 6(1) and (2) of
the Electricity Act 1989 (hereinafter referred to as "the Act") and in
exercise of the powers conferred by Section 6(2)(a), Section 6(6), and
Section 7 of the Act hereby licenses Yorkshire Electricity Group plc
(registered in England under number 2366995) to supply electricity to the
premises specified in Schedule 1 below during the period specified in
paragraph 3 below, subject to the Conditions set out in Part II below
(hereinafter referred to as the "Conditions") .
2. The Conditions are subject to modification or amendment in accordance with
their terms or with Sections 11, 14 or 15 of the Act. The licence is
further subject to the terms as to revocation specified in Schedule 2.
3. This licence shall come into force on 1 April 1991 and unless revoked in
accordance with the provisions of Schedule 2 shall continue until
determined by not less than 25 years' notice in writing given by the
Director General of Electricity Supply to the licensee, such notice not to
be served earlier than a date being 10 years after the licence comes into
force .
Dr. Eileen Marshall
authorised on behalf of the
25 March 1991 Director General of Electricity Supply
6
<PAGE>
PART II: THE CONDITIONS
Condition 1: Interpretation and construction
1. Unless the contrary intention appears, words and expressions used in the
Conditions or in the Schedules below shall be construed as if they were in an
Act of Parliament and the Interpretation Act 1978 applied to them and references
to an enactment shall include any statutory modification or reenactment thereof
after the date when this licence comes into force .
2. Any word or expression defined for the purposes of any provision of Part I of
the Act shall, unless the contrary intention appears, have the same meaning when
used in the Conditions or in the Schedules below.
3. In the Conditions and in the Schedules below unless otherwise specified or
the context otherwise requires:-
"affiliate" in relation to any person means any
holding company or subsidiary of such
person or any subsidiary of a holding
company of such person, in each case
within the meaning of Sections 736, 736A
and 736B of the Companies Act 1989 and
if that Section is not in force at the
date of grant of this licence as if such
Section were in force at such date.
"authorised" in relation to any business or activity
means authorised by licence granted
under Section 6 or exemption granted
under Section 5 of the Act.
7
<PAGE>
"authorised electricity means any person (other than the
operator" licensee) who is authorised to generate,
transmit or supply electricity.
"designated" in relation to any agreement means
designated by the Secretary of State or
on his behalf by means of initialling or
descriptive reference whether for the
purposes of any Condition of this
licence or otherwise, but so that an
agreement so designated may at the
discretion of the Secretary of State
cease to be designated if amended or
modified in any material respect.
"Distribution Code" means, in relation to any public
electricity supplier, the Distribution
Code required to be prepared by such
supplier and approved by the Director as
from time to time revised with the
approval of the Director.
"distribution system" in relation to any public electricity
supplier, shall have the same meaning as
it has for the purposes of the licence
held by such supplier under Section
6(l)(c) of the Act or, in the event that
such supplier holds more than one such
licence at any time, it shall mean at
that time each system which is defined
as the distribution system of that
supplier in such licences (taken
together with each other system which is
so defined) .
"equivalent megawatt" in circumstances where demand is only
measured in megavolt amperes. means
megavolt amperes converted into
megawatts using for this purpose a power
factor of 0.9 megawatts per megavolt
ampere or such other factor
8
<PAGE>
as may with the approval of the Director
be taken as being appropriate having
regard to electrical characteristics of
the supply, and cognate expressions
shall be construed accordingly.
"Grid Code" means, in relation to any transmission
licensee, the Grid Code required to be
prepared by such transmission licensee
and approved by the Director as from
time to time revised with the approval
of the Director.
"licensee" means Yorkshire Electricity Group plc
(registered number 2366995) and (where
the context so requires) shall include
any business in respect of which the
licensee is the successor company .
"licensee's system" means the electric lines of the licensee
through which the licensee supplies
electricity to premises pursuant to this
licence and includes any electrical
plant and meters of the licensee which
are used in connection with the
transport of electricity through such
lines.
"megawatt" or "MW" includes an equivalent megawatt.
"related undertaking" in relation to any person means any
undertaking in which such a person has a
participating interest as defined by
Section 260 of the Companies Act 1985 as
substituted by Section 22 of the
Companies Act 1989 and if that Section
is not in force at the date of grant of
this licence as if such Section were in
force at such date.
9
<PAGE>
"Scottish transmission means a person who holds a licence under
licensee" Section 6(1)(b) of the Act for an
authorised area in Scotland.
"successor company" has the meaning ascribed to it for the
purposes of Part II of the Act.
"Trading Code" means the Trading Code required to
be adopted by the Scottish transmission
licensees, as from time to time revised
with the approval of the Director.
"transmission licensee" means a person who holds a licence under
Section 6(1)(b) of the Act.
"transmission system" in relation to any transmission
licensee, shall have the same meaning as
it has for the purposes of the licence
held by such licensee under Section
6(1)(b) of the Act or, in the event that
such licensee holds more than one such
licence at any time, it shall mean at
that time each system which is defined
as the transmission system of that
licensee in such licences (taken
together with each other system which is
so defined).
"undertaking" bears the meaning ascribed to that
expression by Section 259 of the
Companies Act 1985 as substituted by
Section 22 of the Companies Act 1989 and
if that Section is not in force at the
date of grant of this licence as if such
Section were in force at such date.
4. Unless otherwise specified, any reference to a numbered Condition or to a
numbered Condition with a suffix letter or to a numbered Schedule is
respectively a
10
<PAGE>
reference to the Condition, or to the Condition with a suffix letter or to the
Schedule bearing that number in this licence, and any reference to a numbered
paragraph or to a numbered paragraph with a suffix letter is respectively a
reference to the paragraph or to the paragraph with a suffix letter bearing that
number in the Condition or Schedule in which the reference occurs.
5. The heading or title of any Part, Condition, Schedule or paragraph shall not
affect the construction hereof.
6. Where any obligation of the licensee is expressed to require performance
within a specified time limit that obligation shall continue to be binding and
enforceable after that time limit if the licensee fails to perform that
obligation within that time limit (but without prejudice to all rights and
remedies available against the licensee by reason of the licensee's failure to
perform within the time limit).
7. The provisions of Section 109 of the Act shall apply for the purposes of the
delivery or service of any documents, directions or notices to be delivered or
served pursuant to any Condition or Schedule and directions issued by the
Director pursuant to any Condition or Schedule shall be delivered or served as
aforesaid.
11
<PAGE>
Condition 2: Restriction on supply to certain premises
1. Save as provided in paragraphs 3 and 5 below the licensee shall not during
the franchise period supply electricity to any single premises at which the
relevant demand in megawatts is at or below the franchise limit.
2. In determining for the purposes of this Condition whether any single premises
falls within the franchise limit the licensee shall have regard to the following
bases of assessment:
(a) in respect of premises occupied by existing customers the relevant
demand in megawatts shall be calculated as an average of the maximum
monthly demands under normal operating conditions at such single premises
supplied by one or more authorised electricity operators and/or the
licensee in the 3 months of highest maximum demand as recorded over the
most recent 12 month period in respect of which figures are available; and
(b) in respect of premises occupied by a new customer seeking a supply
from the licensee the relevant demand in megawatts shall be calculated by
reference to the average maximum monthly demand which might reasonably be
expected in the 3 months of highest maximum demand over a 12 month period
at premises having similar demand characteristics to the premises occupied
by such new customer.
2A. For the purposes of paragraph 2, if any electricity which has been or is to
be supplied by the licensee to any single premises ("premises A") is or will be
on-supplied by another person from premises A to one or more single premises
("premises B") then:
(a) If the on-supply to premises B from premises A was made on 31st
March 1990 by that other person pursuant to an agreement for that other
person to supply premises B which was subsisting on that date that demand
at premises B which is met by such on-supply from premises A may be
regarded as part of the relevant demand in megawatts at premises A; and
(b) save as provided in sub-paragraph (a) above, that demand at
premises
12
<PAGE>
B which is met by such on-supply from premises A shall not be regarded as
part of the relevant demand in megawatts at premises A.
3. Subject to paragraph 4, if at any time during the franchise period the
relevant demand in megawatts (calculated in accordance with paragraph 2 and 2A)
at any single premises to which a supply is given by the licensee in accordance
with the provisions of this Condition should fall to or below the franchise
limit the licensee may, notwithstanding such fact, continue to supply such
premises without being in breach of this Condition until such time as:
(a) any contract existing between the licensee and the customer
occupying such premises is determined by effluxion of time or otherwise; or
(b) the supply arrangements between the licensee and the customer
occupying such premises shall for any other reason be terminated.
4. Save where the Director otherwise agrees, if (having regard to the basis of
assessment referred to in paragraph 2(b)) the relevant demand in megawatts of a
customer who was a new customer at the time of commencement of supply by the
licensee should, in the first 12 month period for which figures are available,
prove to be less than was reasonably expected of such customer and to fall to or
below the franchise limit, the licensee shall cease to supply such customer.
5. Notwithstanding paragraph 1, the licensee may supply electricity to single
premises at which the relevant demand in megawatts is at or below the franchise
limit where such single premises are specified for the purposes of this licence
by the Director with the prior approval of the Secretary of State.
6. For the purposes of paragraph 2(a), where the average calculated as there
provided, but ignoring for this purpose the reference to normal operating
conditions, was no more than 10 per cent higher than the average (calculated in
the same manner) over the twelve-month period preceding the twelve-month period
referred to in paragraph 2(a), the maximum monthly demands from which the
average was derived shall be presumed to have occurred under normal operating
conditions.
7. Any dispute arising under the provisions of this Condition between the
licensee and any authorised electricity operator or any person requiring a
supply of electricity from the licensee may be referred to the Director and the
Director shall
13
<PAGE>
determine whether the premises in respect of which the customer requires a
supply to be given fall within the franchise limit.
8. In this Condition:
"existing customer" means any person occupying premises to which
a supply is being given by the licensee or
any other authorised electricity operator,
which person (or any affiliate or related
undertaking of such person) and premises have
been supplied for a clear period of at least
12 months prior to the date on which
application for supply by the licensee is
made.
"franchise limit" means:
(a) during the 4 year period from 31st March
1990 to 30th March 1994 one megawatt; and
(b) during the succeeding 4 year period from
31st March 1994 to 30th March 1998 0.1
megawatt
"franchise period" means the period of 8 years commencing on
31st March 1990.
"new customer" means any person supplied or applying for a
supply to premises other than an existing
customer.
"single premises" includes in the case of sites or buildings in
multi-occupation, each area in respect of
which the supply of electricity was as at
31st December 1989 or is or is to be
separately metered and the occupier
individually invoiced by the licensee or any
authorised electricity operator.
14
<PAGE>
Condition 3: Connection and use of system - requirement to offer terms
1. The licensee shall, subject to paragraphs 6, 7 and 10:-
(a) offer to enter into an agreement to provide a connection to the
licensee's system with any person who has made application for connection
to the licensee's system; and
(b) offer to enter into an agreement for the modification of a connection
to the licensee's system with any person who has made application for
modification of a connection to the licensee's system; and
(c) offer to enter into an agreement with any person who has made
application for use of system:-
(i) to accept into the licensee's system at such entry point and in
such quantities as may be specified in application, electricity to be
provided by or for the person; and
(ii) to deliver electricity equal in quantity to that accepted into
the licensee's system (less only any losses incurred in the course of
transporting such electricity through the licensee's system) from such
exit points on the licensee's system and in such quantities as may be
specified in the application to such person as the person making the
application may specify.
2. The licensee shall, subject to paragraphs 6 and 7, offer terms for an
agreement in accordance with paragraph 1 as soon as practicable and in any event
not more than the period specified in paragraph 8 after receipt by the licensee
of an application from the person containing all such information as the
licensee may reasonably require for the purpose of formulating the terms of its
offer.
3. Each offer made in accordance with paragraph I shall:
(a) make detailed provision regarding such of the following matters as are
relevant for the purposes of the agreement:
(i) the carrying out of works (if any) required for the construction
or modification of the entry point to connect, the licensee's system
15
<PAGE>
to the transmission system of any transmission licensee or the
distribution system of any public electricity supplier or the system
for the distribution of electricity of any other person authorised to
supply electricity or in connection with the construction or
modification of any exit points for the delivery of electricity as
specified in the application and for the obtaining of any consents
necessary for such purpose;
(ii) the carrying out of works (if any) for the provision of
electrical plant or for the extension or reinforcement of the
licensee's system which are required to be undertaken for the
provision of connection to, or the making of a modification to a
connection to, the licensee's system or for provision of use of the
licensee's system to the person and for the obtaining of any consents
necessary for such purpose;
(iii) the installation of appropriate meters or other apparatus
(if any) required to enable the licensee to measure electricity being
accepted into the licensee's system at the specified entry point and
leaving such system at the specified exit points;
(iv) the installation of such switchgear or other apparatus (if
any) as may be required for interrupting the use of system should
there be a failure by or for a person to provide electricity at its
entry point on the licensee's system for delivery to the person
specified by the person in its application from the exit points on the
licensee's system;
(v) the date by which any works required so as to permit access
to the licensee's system (including for this purpose any works for its
extension or reinforcement) shall be completed (and so that, unless
otherwise agreed by the person making the application, a failure to
complete such works by such date shall be a material breach of the
agreement entitling the person to rescind such agreement);
16
<PAGE>
(vi) the charges to be paid by the person making the application
for the provision of electrical plant, for connections to or
modification of connections to, or the extension or reinforcement of,
the licensee s system, for the installation of meters, switchgear or
other apparatus and for their maintenance, for disconnection from the
licensee's system and the removal of electrical plant, electric lines
and meters following disconnection and for use of system which shall,
unless manifestly inappropriate, be set in conformity with paragraph
4; and
(b) contain such other provisions as may be appropriate for the purposes of
the agreement in the circumstances in which it is likely to be entered
into.
4. The charges referred to in paragraph 3 to be contained in every agreement
subject of an offer by the licensee shall be such that:
(a) charges for the provision of electrical plant, connection charges,
charges for modification or connections, charges for disconnection from the
licensee's system and the removal of electrical plant, electric lines and
meters following disconnection or any charges for extension or
reinforcement of the licensee s system or for use of system are set at a
level which will enable the licensee to recover no more than:
(i) the appropriate proportion (taking account of the factors referred
to in paragraph 5) of the costs directly or indirectly incurred by the
licensee; and
(ii) a reasonable rate of return on the capital represented by such
costs; and
(b) charges for the installation of meters, switchgear or other apparatus
and for their maintenance shall not exceed the costs thereof and a
reasonable rate of return on the capital represented by such costs.
5. For the purpose of determining an appropriate proportion of the costs
directly or indirectly incurred in carrying out works, the licensee shall have
regard to:-
17
<PAGE>
(a) the benefit (if any) to be obtained or likely in the future to be
obtained by the licensee or any other person as a result of the carrying
out of such works whether by virtue of the provision of electrical plant,
the reinforcement or extension of the licensee s system or the provision of
additional entry or exit points on the licensee's system or otherwise; and
(b) the ability or likely future ability of the licensee to recoup a
proportion of such costs from other persons.
6. The licensee shall not be obliged pursuant to this Condition 3 to offer to
enter into any agreement where, by reason of the capacity of the licensee's
system and the use made or reasonably expected to be made of it, the licensee
would be required to expand or reinforce the capacity of the licensee s system.
7. The licensee shall not be obliged pursuant to this Condition 3 to offer to
enter into any agreement with any person if:
(a) to do so would be likely to involve the licensee:
(i) in breach of the Grid Code of any transmission licensee; or
(ii) in breach of the Distribution Code of any public electricity
supplier; or
(iii) in breach of the Electricity Supply Regulations 1988 or any
regulations made under Section 29 of the Act; or
(iv) in breach of any other enactment relating to safety or standards
applicable to the licensee's system; or
(b) the person does not undertake to be bound, insofar as applicable, by
the terms of the Codes referred to in sub-paragraphs (a)(i) and (a)(ii)
above, as from time to time in force.
8. For the purpose of paragraph 2, the period specified shall be:
(a) in the case of persons seeking use of system only, 28 days; and
18
<PAGE>
(b) in the case of persons seeking connection or modification of an
existing connection or seeking use of system in conjunction with
connection, 3 months.
9. The licensee shall within 28 days following receipt of a request from any
person, give or send to such person such information in the possession of the
licensee as may be reasonably required by such person for the purpose of
completing paragraph 8 of Part 1 and paragraphs 2(v) and (vi) of Part 2 of
Schedule 2 to the Electricity (Application for Licences and Extensions of
Licences) Regulations 1990 or such provisions to like effect contained in any
further regulations then in force made pursuant to Sections 6(3),to the extent
that, the Director so directs and the licensee shall comply with any such
direction.
10. Paragraphs 1 to 9 inclusive above shall apply only if, and to the extent
that, the Director so directs and the licensee shall comply with any such
direction.
19
<PAGE>
Condition 3A: Connection and use of system - functions of the Director
1. If, after a period which appears to the Director to be reasonable for the
purpose, the licensee has failed to enter into an agreement with any person
entitled or claiming to be entitled thereto pursuant to an application in
accordance with Condition 3, the Director may, pursuant to Section 7(3) of the
Act, on the application of such person or the licensee, settle any terms of the
agreement in dispute between the licensee and the person in such manner as
appears to the Director to be reasonable having (insofar as relevant) regard, in
particular, to the following considerations:
(a) that the person should pay to the licensee the whole or an appropriate
proportion (as determined in accordance with paragraph 5 of Condition 3] of
the costs directly or indirectly incurred by the licensee in the carrying
out of any works or in providing or doing any other thing under the
agreement in question calculated in accordance with the principles set out
in paragraph 4 of Condition 3 together with a reasonable rate of return on
the capital represented by such costs;
(b) that the performance by the licensee of its obligations under the
agreement should not cause it to be in breach of any of the Conditions;
(c) that any methods by which the licensee's system is connected to the
transmission system of any transmission licensee or the distribution system
of any public electricity supplier or the system for the distribution of
electricity of any other person authorised to supply electricity accord
with good engineering principles and practices;
(d) that the terms and conditions of agreements entered into by the
licensee pursuant to an application in accordance with Condition 3 should
be, so far as circumstances allow, as similar in substance and form as is
practicable
2. If the person wishes to proceed on the basis of the agreement as settled by
the Director, the licensee shall forthwith enter into and implement such
agreement in accordance with its terms.
3. If the licensee proposes to vary the contractual terms of any agreement for
connection to, or modification of a connection to, the licensee's system or for
use of
20
<PAGE>
system entered into pursuant to Condition 3 or this Condition in any
manner provided for under such agreement, the Director may, at the request of
the licensee or other party to such agreement, settle any dispute relating to
such variation in such manner as appears to the Director to be reasonable.
21
<PAGE>
Condition 4: Compliance with Scottish Grid Codes
1. The licensee shall comply with the provisions of the Grid Code of each
Scottish transmission licensee insofar as applicable to it.
2. The Director may (following consultation with such Scottish transmission
licensees as the Director shall consider appropriate) issue directions relieving
the licensee of its obligation under paragraph 1 in respect of such parts of the
Grid Code of any Scottish transmission licensee and to such extent as may be
specified in those directions.
3. In this Condition -
"authorised activities" means the activities which the licensee
is authorised by this Licence to carry
on.
22
<PAGE>
Condition 5: Compliance with Scottish Distribution Codes
1. The licensee shall comply with the provisions of the Distribution Code of
each Scottish public electricity supplier insofar as applicable to it.
2. The Director may (following consultation with such Scottish public
electricity suppliers as the Director shall consider appropriate) issue
directions relieving the licensee of its obligation under paragraph 1 in respect
of such parts of the Distribution Code of any Scottish public electricity
supplier and to such extent as may be specified in those directions.
23
<PAGE>
Condition 6: Compliance with Trading Code
1. The licensee shall comply with the provisions of the Trading Code insofar as
applicable to it during any period that the licensee is a member of the trading
system established by the Trading Code, including any requirements thereunder
for the Director's approval or consent, for compliance with directions issued by
the Director or relating to determinations made by the Director.
2. The Director may (following consultation with such members of the trading
system established by the Trading Code as the Director shall consider
appropriate) issue directions relieving the licensee of its obligation under
paragraph 1 in respect of such parts of the Trading Code and to such extent as
may be specified in those directions.
24
<PAGE>
Condition 7: Licensee's system Planning
1. The licensee shall plan and develop each part of the licensee's system in
accordance with a standard not less than the relevant standard insofar as
applicable to it, or such standard of planning as the licensee may, following
consultation with such (if any) authorised electricity operators as the Director
shall consider appropriate and with the approval of the Director, adopt from
time to time.
2. The Director may (following consultation with the licensee and such other (if
any) authorised electricity operators as the Director shall consider
appropriate) issue directions relieving the licensee of its obligation under
paragraph 1 in respect of such parts of the licensee's system and to such extent
as may be specified in the directions.
3. In this Condition:-
"relevant standard" means, in relation to each part of the
licensee's system, whichever of the
following standards is applicable to
that part namely:-
(i) the standard in accordance with
which the transmission licensee within
whose authorised area that part is
situated is required under the licence
held by it under Section 6(1)(b) of the
Act to plan and develop its transmission
system; or
(ii) the standard in accordance with
which the public electricity supplier
within whose authorised area that part
is situated is required under the
licence held by it under Section 6(l)(c)
of the Act to plan and develop its
distribution system.
25
<PAGE>
Condition 8: Generation security standard
1. The licensee shall make arrangements sufficient to meet the generation
security standard.
2. Not later than 3 months before the end of each financial year, commencing
with the financial year ending on 31 March 1992, the licensee shall provide to
the Director a statement complying with the provisions of paragraphs 3 and 4.
3. The statement to be provided to the Director under paragraph 2 shall:
(a) be signed by 2 Directors of the licensee;
(b) describe the arrangements made or to be made by the licensee to meet
the generation security standard in each of the 7 succeeding financial
years;
(c) state the planning margin or margins adopted by the licensee for the
purpose of the above arrangements and set out the methodology and
calculations used in arriving at such margin or margins;
(d) refer to data, assumptions and demand forecasts (including insofar as
relevant those relating to diversity of demand, own generation,
arrangements for trading energy and capacity with other persons,
arrangements with relevant purchasers, including those permitting
interruption and reduction of supply, forecast maximum demand from relevant
purchasers, the maximum demand which the licensee could meet without
failing to meet the generation security standard, contracted availability
of generation, and load management (if any) of relevant purchasers); and
(e) include such other matters as the Director shall specify in directions
issued by the Director to the licensee for the purpose of this Condition
not later than 6 months before the end of the financial year in which the
statement is provided.
4. The licensee shall upon request by the Director provide to the Director
such information as the Director may require for the purpose of monitoring
compliance with this Condition and to enable the Director (having regard to
his statutory duties)
26
<PAGE>
to review the operation of the generation security standard.
5. The licensee shall not make or agree any alteration other than an alteration
to which paragraph 7 applies, to the arrangements described in any statement
provided to the Director under paragraph 2 as having been made by the licensee
to meet the generation security standard for the first financial year covered by
such statement.
6. The licensee shall:-
(a) procure that, except to the extent that the Director shall otherwise
approve, arrangements described in any statement provided to the Director
under paragraph 2 as failing to be made by the licensee, to meet the
generation security standard for the first financial year covered by such
statement shall be made; and
(b) not make or agree any alteration, other than an alteration to which
paragraph 7 applies, to the arrangements so made.
7. This paragraph applies to an alteration which the Director considers is
unlikely to result in the licensee failing to meet the generation security
standard.
8. The licensee shall not enter into any contract for the supply of electricity
if the entering into of the contract would cause demand from relevant purchasers
in the first year covered by the statement most recently provided to the
Director under paragraph 2 to exceed the maximum demand which the licensee can
meet in that year without failing to meet the generation security standard, as
referred to in such statement, unless the Director shall consider that the
entering into of the contract is unlikely to result in the licensee failing to
meet the generation security standard.
9. In the event that the Director, after consultation with the licensee, shall
at any time or from time to time issue a direction to the licensee for the
purpose of this Condition to the effect that, in the opinion of the Director, it
is desirable that the licensee make arrangements such as are specified in the
direction to meet the generation security standard, then the duty imposed by
paragraph 1 shall not be capable of being discharged by the licensee after such
date as shall be specified for the purpose in the direction except by the
licensee making the arrangements so specified.
27
<PAGE>
10. The duty of the licensee under paragraph 1 may, in relation to relevant
purchasers whose premises are located in isolated areas, be discharged by the
making of arrangements sufficient to meet a standard of generation security
(other than the generation security standard) agreed between the licensee and
the Director.
11. The provisions of this Condition are without prejudice to the duties of the
licensee under the Electricity Supply Regulations 1988.
12. In this Condition:-
"generation security standard" means:-
(a) such standard of generation security
as will ensure:
(i) that the supply of electricity to
relevant purchasers will not be
discontinued in more than 9 years in any
period of 100 years; and
(ii) that the voltage or frequency of
electricity supplied to relevant
purchasers will not be reduced below
usual operational limits in more than 30
years in any period of 100 years by
reason of insufficiency of electricity
generation available for the purposes of
supply by the licensee to its relevant
purchasers at times of annual system
peak demand; and
(b) sufficient electricity generation
being available for the purposes of
supply by the licensee to its relevant
purchasers at times other than times of
annual system peak demand to ensure that
the standard of generation security at
each such time will be not less than
that referred to in sub-paragraph (a)
above for times of annual system peak
demand.
28
<PAGE>
"relevant purchaser" means any purchaser from the licensee
entitled and requiring at any time to be
supplied by the licensee at any premises
but shall exclude:
(a) a purchaser under an interruptible
contract or a contract containing load
management terms to the extent that
supplies to that purchaser may be
interrupted or reduced in accordance
with the terms of that contract; and
(b) a purchaser whose premises are
within an authorised area for which the
licensee is the public electricity
supplier.
"contract" includes an agreement or arrangement
(whether or not constituted or evidenced
by any written document)
"contract for the supply
of electricity" includes any contract which amends
another contract so as to provide for
the licensee, to supply quantities of
electricity in excess of that supplied
under the last mentioned contract .
29
<PAGE>
Condition 9: Security arrangements
1. If so directed in directions issued by the Director for the purposes of this
Condition the licensee shall, not later than such date as it shall be directed
so to do in the directions, enter into an agreement designated by the Secretary
of State for the purposes of this Condition relating to compliance with
directions issued by the Secretary of State under Section 34 and/or Section 35
of the Act.
2. The licensee shall comply with and perform its obligations under any
agreement which it enters into pursuant to paragraph 1.
30
<PAGE>
Condition 10: Health and safety of employees
It shall be the duty of the licensee to act together with other licensees to
consult with appropriate representatives of the employees for the purpose of
establishing and maintaining an appropriate machinery or forum for the joint
consideration of matters of mutual concern in respect of the health and safety
of persons employed by those licensees.
31
<PAGE>
Condition 11: Provision of information to the Director
1. Subject to paragraphs 2 and 3, the licensee shall furnish to the Director, in
such manner and at such times as the Director may require, such information and
shall procure and furnish to him such reports, as the Director may consider
necessary in the light of the Conditions or as he may require for the purpose of
performing:-
(a) the functions assigned to him by or under the Act; and
(b) any functions transferred to him under the Act.
2. The licensee may not be required by the Director to furnish him under this
Condition with information for the purpose of the exercise of his functions
under Section 48 of the Act.
3. The licensee may not be required by the Director to furnish him under this
Condition with any information required in relation to an enforcement matter
which the licensee could not be compelled to produce or give under Section 28(3)
of the Act.
4. The powers of the Director to call for information under paragraph 1 are in
addition to the power of the Director to call for information under or pursuant,
to any other Condition.
5. In paragraphs 1 to 4, "information" shall include any documents, accounts,
estimates, returns or reports (whether or not prepared specifically at the
request of the Director) of any description specified by the Director.
6. The licensee shall, if so requested by the Director, give reasoned comments
on the accuracy and text of any information and advice (so far as relating to
the supply of electricity authorised by this licence) which the Director
proposes to publish pursuant to Section 48 of the Act.
32
<PAGE>
Condition 12: Payment of fees
1. The licensee shall at the times stated hereunder pay to the Director fees of
the amount specified in, or determined under, the following paragraphs of this
Condition.
2. Within 30 days after the grant of this licence but, in any event before 2 May
1991 the licensee shall pay to the Director an initial fee of(pound)250.00.
3. In respect of the year beginning on 1 April in 1992 and in each subsequent
year, the licensee shall pay to the Director a fee which is aggregate of the
following amounts:
(a) an amount which is a proportion, as determined by the Director of the
amount estimated by the Director, according to a method which has
previously been disclosed in writing to the licensee. as likely to be his
costs during the coming year in the exercise of his general functions under
the Act in relation to the holders of licences granted under Section 6(1)
and 6(2) of the Act;
(b) an amount which is a proportion as determined by the Director of the
amount estimated by the Director (in consultation with the Monopolies
Commission) as having been incurred in the calendar year immediately
preceding the 1st April in question by the Monopolies Commission in
connection with references made to it under Section 12 of the Act with
respect to this licence or any other licence issued under Section 6(2) of
the Act; and
(c) the difference (being a positive or a negative amount), if any,
between:
(i) the amount of the fee paid by the licensee in respect of the year
immediately preceding the 1st April in question: and
(ii) the amount which that fee would have been in respect of that year
had the amount comprised therein under sub-paragraph (a) above (or, where
that year commenced on 1 April 1991 the amount comprised therein which was
attributable to the matters referred to in that sub-paragraph) been
calculated by reference to the total costs of the Director and the
proportion thereof actually attributable to the licensee (such total costs
being apportioned as determined by the
33
<PAGE>
Director according to a method previously disclosed in writing to the
licensee)
and the fee shall be paid by the licensee to the Director within one month of
the Director giving notice to the licensee of its amount if that notice is given
within 6 months of the beginning of the year in respect of which the fee is
payable.
34
<PAGE>
Condition 13: Compulsory acquisition of land etc
1. All the powers and rights conferred by or under the provisions of Schedule
3 of the Act (compulsory acquisition of land etc.) shall have effect in
relation to the licensee to the extent that they are required for the
installation, maintenance, removal or replacement of the licensee's system
or any part thereof which are necessary to enable the licensee to supply
electricity to the premises specified in Schedule 1 of this licence.
2 Paragraph 1. shall cease to have effect on 31 March 1994.
35
<PAGE>
Condition 14: Powers to carry out road works etc
1. For the purposes of enabling the licensee to carry on the authorised
activities, The powers and rights conferred by or under the provisions of
Schedule 4 to the Act (powers to carry out street works etc.) shall have
effect and may, subject to paragraph 2 below, be exercised by carrying out
works in relation to, or in pursuance of, the installation, inspection,
maintenance, adjustment, repair, alteration, replacement and removal of:
(a) electric lines which are necessary to enable the licensee to supply
electricity to premises specified in Schedule 1 below;
(b) electrical plant associated with such lines; and
(c) any structures for housing or covering such lines or plant.
2. Works which are under, over, in, on, along or across any road, which for
the purposes of the Roads (Scotland) Act 1984 constitutes a public road,
may be undertaken in pursuance of paragraph 1 above subject to the
following conditions:
(a) that such works shall not be carried out except with the consent,
which shall not unreasonably be withheld, of the roads authority and
in accordance with such reasonable conditions as may be attached to
such consent;
(b) that any question as to whether or not a consent of roads authority is
unreasonably withheld, or as to the reasonableness of conditions
attached to such consent, shall be determined by a single arbiter to
be appointed:
(i) by agreement between the licensee and the roads authority; or
(ii) in default of such agreement, by the Director on the application
of either party.
3. In this condition:-
"authorised activities" has the meaning given in
paragraph 3 of condition 4.
4. Paragraph 1. shall cease to have effect on 31 March 1994.
36
<PAGE>
SCHEDULE 1
Specified Premises
All non-domestic premises having a maximum demand over 1 MW in the authorised
areas as at 31 March 1990 of the following public electricity suppliers:
Scottish Power plc
Scottish Hydro-Electric plc
37
<PAGE>
SCHEDULE 2
Terms as to revocation
1. The Director General may at any time revoke this licence by not Less than 30
days' notice in writing to the licensee:-
(a) if the licensee agrees in writing with the Director that this licence
should be revoked;
(b) if any amount payable under Condition 14 is unpaid 30 days after it has
become due and remains unpaid for a period of 14 days after the Director
has given the licensee notice that the payment is overdue. Provided that no
such notice shall be given earlier than the sixteenth day after the day on
which the amount payable became due;
(c) if the licensee fails to comply with a final order (within the meaning
of Section 25 of the Act) or with a provisional order (within the meaning
of that Section) which has been confirmed under that Section and which (in
either case) has been made in respect of a contravention or apprehended
Contravention of any of the Conditions or of any relevant requirement
(within the meaning of that Section) imposed on the licensee in its
capacity as holder of this licence and (in either case) such failure is not
rectified to the satisfaction of the Director within 3 months after the
Director has given notice of such failure to the licensee. Provided that no
such notice shall be given by the Director before the expiration of the
period within which an application under Section 27 of the Act could be
made questioning the validity of the final or provisional order or before
the proceedings relating to any such application are finally determined;
(d) if the licensee fails to comply with any order made by the Secretary of
State under Section 56 73, 74 or 89 of the Fair Trading Act 1973 or under
Section l0(2)(a) of the Competition Act 1980;
(e) if:-
(i) none of the premises specified, or of the description
specified, in Schedule 1 shall have been supplied with electricity by
the licensee at any time during the period of 5 years commencing on
the date on which this licence comes into force; or
38
<PAGE>
(ii) none of the premises specified, or of the description
specified, in Schedule l shall have been supplied with electricity by
the licensee at any time during any period of 5 years;
(f) if the licensee:
(i) is unable to pay its debts (within the meaning of Section
123(1) or (2) of the Insolvency Act 1986, but subject to paragraph 2
of this Schedule) or if any voluntary arrangement is proposed in
relation to it under Section 1 of that Act or if it enters into any
scheme of arrangement (other than for the purpose of reconstruction or
amalgamation upon terms and within such period as may previously have
been approved in writing by the Director);
(ii) has a receiver (which expression shall include an
administrative receiver within the meaning of Section 251 of the
Insolvency Act 1986) of the whole or any material part of its assets
or undertaking appointed;
(iii) has an administration order under Section 8 of the
Insolvency Act 1986 made in relation to it;
(iv) passes any resolution for winding-up other than a resolution
previously approved in writing by the Director; or
(v) becomes subject to an order for winding-up by a court of
competent jurisdiction; or
(g) if the licensee is convicted of having committed an offence under
Section 59 of the Act.
2. (a) For the purposes of paragraph 1(f)(i) of this Schedule Section
123(1)(a) of the Insolvency Act 1986 shall have effect as if for
"(pound)750" there was substituted "(pound)250,000" or such higher figure
as the Director may from time to time determine by notice in writing to the
licensee .
(b) The licensee shall not be deemed to be unable to pay its debts for the
purposes of paragraph 1(f)(i) of this Schedule if any such demand as is
mentioned in Section 123(1)(a) of the Insolvency Act 1986 is being
contested in good faith by the licensee with recourse to all appropriate
measures and procedures or if any such demand is satisfied before the
39
<PAGE>
expiration of such period as may be stated in any notice given by the
Director under paragraph l of the Schedule.
40
<PAGE>
EXHIBIT 10.5
The Regulation Manager
Yorkshire Electricity
Wetherby Road
Scarcroft
LEEDS
LS143 HS
MODIFICATION OF LICENCE CONDITION
Whereas:
(1) Yorkshire Electricity ("the licencee") has been granted a licence ("the
licence") under Section 6(2) of the Electricity Act 1989 ("the Act") to
supply electricity to premises in Scotland specified or of a description
specified in the licence subject to the Conditions contained in the
licence;
(2) In accordance with Section 11(2) of the Act the Director gave notice of his
intention to make modifications to Condition 2 of the licence by
advertising the modifications in the London Gazette, the Edinburgh Gazette,
the Financial Times and the Scotsman requiring any objections or
representations to the modifications to be made to him on or before 27
March 1992;
(3) The Director has considered the representations or objections which were
duly made and not withdrawn;
(4) The licencee has given his consent to the modifications, set out in the
Schedule attached which the Director General of Electricity Supply ("the
Director") proposed to Condition 2 of the licence.
Now in accordance with the powers contained in Section 11(1) of the Act and with
the consent of the licencee the Director hereby modifies Condition 2 of the
licence in the manner specified in the Schedule attached with effect from 16
June 1992.
ROBERT IRVINE
- -------------
Authorised on behalf of
The Director General of Electricity Supply
- ------------------------------------------
<PAGE>
Schedule
Condition 2 of each licence which has been granted under Section 6(2)(a) of the
Act (other than the licence granted to London Electricity plc) shall be modified
by the addition of the following 2 paragraphs after paragraph 7-
7A. For the purpose of this Condition occupation of any premises by an
affiliate of a person shall be deemed to be occupation by that person.
7B. (1) In this paragraph -
"customer B" means that the customer for the time being of the
licencee in respect of premises A;
"permitted quantity" means 10 per cent of the quantity of electricity
supplied by the licencee to customer B in respest of premises A in the
relevant year;
"premises A" means a site or building which, if in the occupation of a
single customer, would be capable of being a single premises; and
"relevant year" means the period of 12 months commencing on the date
upon which the licencee starts to supply premises A and (if such
supply is provided for a continuous period exceeding 12 months) each
anniversary of that date until such supply shall cease.
(2) Where during a relevant year -
(i) premises A are occupied by more than one person;
(ii) customer B supplies the other person or persons who are in
occupation of premises A or supplies one or more of such
persons who supply the other occupiers;
(iii) each of the persons referred to in subparagraph (ii) who
provides a supply is exempt by or under an Order under Section 5
of the Act from the requirement to hold a licence to supply; and
(iv) customer B does not supply an aggregate quantity of
electricity to such other occupiers in any relevant year which
may reasonably be expected to exceed or actually exceeds the
permitted quantity,
the occupation of premises A by the persons other than customer B
shall be deemed to be occupation by customer B.
<PAGE>
(3) The licencee shall, at the request of the public electricity supplier
in whose authorised area premises A are situated, provide not more
that once in any period of 3 months in a relevant year, evidence to
the supplier that the licencee reasonably believes that the aggregate
quantity of electricity expected to be supplied by customer B during
the relevant year will not exceed the permitted quantity including,
where at the date of such request any such supply has been provided
during the relevant year, evidence as to the quantity so supplied.
(4) Where customer B has supplied a quantity of electricity to such other
occupiers which in aggregate exceeds the permitted quantity, the
licencee shall pay to the public electricity supplier in whose
authorised area premises A are situated a sum calculated by
multiplying the number of units by which the actual supply to such
other occupiers exceeds the permitted quantity by 5 per cent of the
standard tariff price per unit charged by that public electricity
supplier for customers of the type or types of such other occupiers
(but excluding any standing charge or other charge not fixed solely by
reference to the number of units consumed) or in the absence of
agreement as to the appropriate tariff such rate as may be determined
by the Director at the request of the licencee or the public
electricity supplier.
(5) For the purposes of this paragraph there shall be disregarded -
(i) the quantity of electricity supplied by customer B to an
occupier of premises A who has a relevant demand above the
franchise limit;
(ii) the quantity of electricity supplied to customer B equal to
the quantity supplied by customer B in accordance with
subparagraph (i); and
(iii) the occupation by the occupier (other than customer B)
referred to in subparagraph (i).
(6) To the extent that, disregarding subparagraph (2), the licencee would
have been permitted to provide a supply to customer B's premises under
this Condition, the provisions of this paragraph shall not apply.
<PAGE>
30 June 1993
Ms. Lynne Burkey
Regulation Coordinator
Yorkshire Electricity Group plc
Wetherby Road
Scarcroft
LEEDS LS14 3HS
Dear Ms. Burkey,
MODIFICATION OF LICENCE
Whereas:
(1) Yorkshire Electricity ("the licencee") has been granted a licence ("the
licence") under Section 6(2) of the Electricity Act 1989 ("the Act") to
supply electricity to premises in Scotland specified or of a description
specified in the licence subject to the conditions contained in the
licence;
(2) In accordance with Section 11(2) of the Act the Director General of
Electricity Supply ("the Director") gave notice of his intention to make
modifications to the conditions in the licence relating to the compulsory
acquisition of land, etc., and powers to carry out street works, etc., by
advertising the modifications in the Edinburgh Gazette and The Scotsman,
requiring any objections or representation to the modifications to be made
to him on or before 23 June 1993;
(3) The Director has considered the representations or objections which were
duly made and not withdrawn;
(4) In accordance with Section 11(4) of the Act the Director gave notice of his
intention to make the modifications to the Secretary of State and has not
received a direction not to make the modifications; and
(5) The licencee has given his consent to the modifications, set out in the
Schedule attached which the Director proposed to the licence.
<PAGE>
Now in accordance with the powers contained in Section 11(1) of the Act and with
the consent of the licencee the Director hereby modifies the licence in the
manner specified in the Schedule attached with effect from 30 June 1993.
Yours sincerely,
C PETER CARTER
Authorised on behalf of
The Director General of Electricity Supply
<PAGE>
SCHEDULE
1. The following shall be inserted in Substitution for the existing Paragraph 2
of Condition 13:
"Paragraph 1 shall cease to have effect on 31 March 1997 or such later date as
the Director may from time to time direct."
2. The following shall be inserted in Substitution for the existing Paragraph 4
of Condition 14:
"Paragraph 1 shall cease to have effect on 31 March 1997 or such later date as
the Director may from time to time direct."
<PAGE>
11 March 1994
P B Morgan Esq.
Group Executive Director - Supply
Yorkshire Electricity Group plc
Scarcroft
Leeds
LS14 3HS
Dear Mr. Morgan
EXTENSION OF SECOND TIER SUPPLY LICENCES FOR ENGLAND, WALES AND SCOTLAND:
YORKSHIRE ELECTRICITY GROUP PLC
I am pleased to be able to enclose the extensions to the existing second tier
supply licences for the above company.
Yours sincerely,
Gwyn Nation
Regulation and Business Affairs
<PAGE>
EXTENSION OF
A SECOND TIER LICENCE TO SUPPLY ELECTRICITY
Whereas on 8 June 1990 the Director General of Electricity Supply, in accordance
with a general authority ("the authority") given by the Secretary of State under
Section 6(1) and (2) of the Electricity Act of 1989 ("the Act") and in exercise
of the powers conferred by section (6)(2)(a), section 6(6), section 7 and
section 10 of the Act granted a licence ("the licence") to Yorkshire Electricity
Group plc ("the licencee") (registered in England under number 2366995) to
supply electricity to the premises specified in Schedule 1 to the licence,
subject to the conditions set out in Part II of the licence and to the terms as
to revocation specified in Schedule 2 to the licence for the period determinable
in accordance with paragraph 3 of Part 1 of the licence.
The Director General of Electricity Supply, in exercise of the powers conferred
by the authority and by section 6(2)(b) of the Act hereby extends the premises
authorised to be supplied by the licencee under the licence by the addition to
the premises specified in the Schedule 1 to the licence of the premises
specified in the Schedule hereto with effect from 14 March 1994.
DR. EILEEN MARSHALL
AUTHORISED ON BEHALF OF THE
DIRECTOR GENERAL OF ELECTRICITY SUPPLY
11 MARCH 1994
<PAGE>
SCHEDULE
Specified Premises
All premises other than those which, during the franchise period, have a maximum
demand at or below the franchise limit in the authorised areas of the following
public electricity supply companies together with such premises as may, from
time to time, be specified by the Director (with the approval of the Secretary
of State) for the purposes of paragraph 5 of condition 2 of this licence:
East Midlands Electricity plc
Eastern Electricity plc
London Electricity plc
MANWEB plc
Millan#s Electricity plc
Northern Electric plc
NORWEB plc
SEEBOARD plc
Southern Electric plc
South Wales Electricity plc
South Western Electricity plc
(Words and phrases used or defined in Condition 2 shall have the same meaning as
when used in this schedule)
<PAGE>
EXTENSION OF
A SECOND TIER LICENCE TO SUPPLY ELECTRICITY
Whereas on 25 March 1991 the Director General of Electricity Supply, in
accordance with a general authority ("the authority") given by the Secretary of
State under section 6(1) and (2) of the Electricity Act 1989 ("the Act") and in
exercise of the powers conferred by section (6)(2)(a), section 6(6), section 7
and section 10 of the Act granted a licence ("the licence") to Yorkshire
Electricity Group plc ("the licensee") (registered in England under number
2366995) to supply electricity to the premises specified in Schedule 1 to the
licence, subject to the conditions set out in Part II of the licence and to the
terms as to revocation specified in Schedule 2 to the licence for the period
determinable in accordance with paragraph 3 of Part 1 of the licence.
The Director General of Electricity Supply, in exercise of the powers conferred
by the authority and by section 6(2)(b) of the Act hereby extends the premises
authorised to be supplied by the licensee under the licence by the addition to
the premises specified in the Schedule 1 to the licence of the premises
specified in the Schedule hereto with effect from 14 March 1994.
Dr Eileen Marshall
authorised on behalf of the
Director General of Electricity Supply
11 March 1994
<PAGE>
SCHEDULE
Specified Premises
All premises other than those which, during the franchise period, have a maximum
demand at or below the franchise limit in the authorised areas of the following
public electricity supply companies together with such premises as may, from
time to time, be specified by the Director (with the approval of the Secretary
of State) for the purposes of paragraph 5 of condition 2 of this licence:
Scottish Power plc
Scottish Hydro-Electric plc
(Words and phrases used or defined in Condition 2 shall have the same meaning as
when used in this schedule)
<PAGE>
Company Secretary
Yorkshire Electricity Group plc
Wetherby Road
Scarcroft
Leeds
LS14 3HS
20 January 1998 Our Ref. LE2394\2562\013
MODIFICATION OF LICENCE
Whereas -
1. Yorkshire Electricity Group plc ('the Licensee') has been granted a licence
('the Licence') under section 6(2) of the Electricity Act 1989 ('the Act') to
supply electricity to premises in Scotland specified or of a description
specified in Schedule I to the Licence subject to the conditions contained in
the Licence.
2. In accordance with section 11(2) of the Act, the Director General of
Electricity Supply ('the Director') gave notice that he proposed to make
modifications to the Conditions of the Licence - to the effect and for the
purposes specified in that notice - by advertising the modifications in the
Edinburgh Gazette and the Scotsman on 10 October 1997 and requiring any
representations or objections to the modifications to be made to him on or
before 7 November 1997.
3. The Director has considered the representations or objections which were duly
made to him and not withdrawn.
4. In accordance with section 11(4) of the Act the Director gave notice to the
Secretary of State of his intention to make the modifications and has not
received a direction not to make the modifications.
5. The Licensee has given its consent to the modifications as set out in the
attached Schedule.
<PAGE>
Now, in accordance with the powers contained in section 11(1) of the Act and
with the consent of the Licensee, the Director hereby modifies the Licence in
the manner specified in the attached Schedule with effect on and after 21
January 1998.
A J BOORMAN 20 January 1998
AUTHORISED ON BEHALF OF THE
- ----------------------------
DIRECTOR GENERAL OF ELECTRICITY SUPPLY
- --------------------------------------
<PAGE>
MINOR TYPOGRAPHICAL AMENDMENTS WERE NECESSARY TO CONDITIONS 3 AND 32 - PLEASE
INSERT AS APPROPRIATE IN ANNEXES B AND E.
<PAGE>
MODIFICATIONS TO THE SECOND TIER SUPPLY LICENCE FOR SCOTLAND
ISSUED TO YORKSHIRE ELECTRICITY GROUP PLC
SCHEDULE
--------
The following modifications shall apply on and after 21 January 1998.
1. Conditon 1 shall be deleted, and new Condition 1 (the terms of which are set
out at Annex A hereto) shall be inserted in its place.
2. Conditions 2, 3 and 3A shall be deleted and new Conditions 2, 3, 4, 5 and 6
(the terms of which are set out in Annex B hereto) shall be inserted in
their place.
3. Condition 4 shall be renumbered as Condition 7, and in that Condition:
(a) paragraph 3 shall be deleted; and
(b) each occurrence of the words "licensee" and "Scottish transmission
licensee" shall be amended to read, in initial upper case, "Licensee"
and "Scottish Transmission Licensee" respectively.
4. Condition 5 shall be renumbered as Condition 8, and in that Condition:
(a) the following paragraph shall be inserted as paragraph 3:
In this Condition:
"Scottish Public Electricity means a person who holds a licence
Supplier" under Section 6(l)(c) of the Act for
an authorised supply area in
Scotland.
(b) each occurrence of the words "licensee" and "Scottish public electricity
supplier" shall be amended to read, in initial upper case, "Licensee" and
"Scottish Public Electricity Supplier".
5. Immediately after the renumbered Condition 8, new Conditions 9 and 10 (the
terms of which are set out at Annex C hereto) shall be inserted.
6. Conditions 6 and 7 shall be renumbered as Conditions 11 and 13, and in those
Conditions any and each occurrence of the words "authorised electricity
operator", "distribution system", "licence", "licensee", "licensee's
system", "transmission licensee" and "transmission system" shall be amended
to read, in initial upper case, "Authorised Electricity Operator",
"Distribution System", "Licence", "Licensee",
<PAGE>
"Licensee's System", "Transmission Licensee" and "Transmission System"
respectively.
7. Condition 8 shall be renumbered as Condition 14, and in that Condition:
(a) in sub-paragraph 3(a) the word "Directors" shall be amended to read, in
initial lower case, "directors"; and
(b) each occurrence of the word "licensee", shall be amended to read, in
initial upper case, "Licensee".
8. Condition 9 shall be renumbered as Condition 15, and in that Condition each
occurrence of the word "licensee" shall be amended to read, in initial upper
case, "Licensee".
9. Condition 10 shall be deleted, and new Conditions 16, 17, 18 and 19 (the
terms which are set out at Annex D hereto) shall be inserted in its place.
10. Condition 11 shall be renumbered as Condition 20, and in that Condition:
(a) paragraph 5 shall be renumbered as paragraph 6, and in that paragraph
the words "In paragraphs 1 to 4" shall be amended to read "In this
Condition";
(b) paragraph 6 shall be renumbered as paragraph 5, and in that paragraph
the word "proposed" shall be amended to read "proposes"; and
(c) each occurrence of the words "licensee" and "licence" shall be amended
to read, in initial upper case, "Licensee" and "Licence" respectively.
11. Conditions 12, 13 and 14 shall be deleted and new Conditions 21 to 51 (the
terms of which are set out at Annex E hereto) shall be inserted in their
place.
<PAGE>
CONDITION 3. CONTROLLED MARKET START-UP
- ---------------------------------------
1. This Condition applies to those premises which the Licensee would during the
franchise period be prohibited from supplying under the terms of Condition 2.
2. The Licensee shall not, after the expiry of the franchise period, supply
electricity to any premises to which this Condition applies prior to such
date as is specified in respect of such premises in a direction issued by the
Director under this Condition.
3. A direction under this Condition may specify that different premises may be
supplied from different dates, and for the purposes of this Condition
premises may be specified by reference to:
(a) their location;
(b) whether or not they are Domestic Premises; or
(c) the type of metering equipment installed at the premises,
or any combination of these factors.
4. Prior to making any direction under this Condition, the Director shall:
(a) set out the proposed contents of the direction in a notice (the
"proposals notice");
(b) send the proposals notice to the Licensee, each Relevant Public
Electricity Supplier in respect of premises specified in the notice, each
consumers' committee appointed for an area within which the premises
specified in the notice are situated and any other persons or bodies
appearing to the Director to be representative of those likely to have an
interest; and
(c) consider any representations concerning the proposed contents of the
direction which are made within a reasonable period, being not less than
7 days from the date of issue of the proposals notice.
5. Any direction issued by the Director under this Condition shall be in
writing and shall be made not less than 28 days prior to the first date
specified in the direction.
6. Where, by virtue of this Condition, thc Licensee is prohibited from
supplying any premises, the provisions of Condition 29 shall not apply in
relation to the supply of electricity to those premises.
7. When the Director has issued a direction under this Condition and it appears
to him, having regard to the considerations set out in paragraph 8, that it
would be unreasonable in all the circumstances for the direction to have
effect on the dates specified therein in respect of any or all of those
premises at which it has not yet had effect, then the Director may, subject
to paragraph 9, withdraw or vary the direction
<PAGE>
in respect of the premises to be supplied or of the dates from which they may
be supplied, or both.
8. The considerations set out in this paragraph are:
(a) whether the interests of customers in general, and in particular the
interests of those occupying the premises specified in the direction,
would be served by the withdrawal or variation of the direction;
(b) whether the interests of any Electricity Supplier, including the
Licensee, would be or would be likely to be unfairly prejudiced by the
withdrawal or variation of the direction, or by a failure to do so;
(c) the content of any representation made to the Director on the issue; and
(d) such information as is available to the Director concerning:
(i) the manner in which arrangements for the supply of electricity to
any premises to which this Condition applies have operated and are
expected to operate;
(ii) the likely ability of the Licensee to fulfil its obligations under
its Licence with respect to the supply of electricity to any of
the premises concerned; and
(iii) the likely ability of each Relevant Public Electricity Supplier to
comply with the requirements of its public electricity supply
licence in respect of the supply of electricity by the Licensee to
the premises concerned.
9. The Director shall not withdraw or vary a direction in respect of any
premises when the date specified from which supply may commence is less than
14 days from the date of the withdrawal or variation, unless the Director
has the agreement of the Licensee, or failing that agreement the agreement
of no fewer than two-thirds of the Second Tier Suppliers to whom a direction
applies in respect of the same premises and dates.
10. When the Director withdraws or varies a direction in accordance with
paragraph 7, he shall issue a notice of withdrawal or variation (as the case
may be) and that notice shall have effect.
11. The Director shall publish any direction, or any notice of withdrawal or
variation in such manner as in the opinion of the Director will secure
adequate publicity for it.
12. A direction or a variation or withdrawal of a direction made under this
Condition shall not distinguish between the Licensee and other Second Tier
Suppliers except to the extent that the distinction is appropriate in all
the circumstances given:
(a) the information available to the Director in accordance with sub-
paragraph 8(d)(ii); or
<PAGE>
(b) where the Licensee is also a public electricity supplier, any failure by
the Licensee to comply with the requirements of its public electricity
supply licence, or with any agreement entered into in accordance with any
such requirements, which adversely affects the ability of private
electricity suppliers to supply electricity to any customers within its
authorised area.
CONDITION 32. PROVISION OF SERVICES FOR PERSONS WHO ARE OF PENSIONABLE AGE OR
- -----------------------------------------------------------------------------
DISABLED OR CHRONICALLY SICK
- ----------------------------
1. The Licensee shall within two months of serving a Designated Supply Notice on
the Director prepare and submit to the Director for his approval a code of
practice detailing the special services the Licensee will make available for
its Domestic Customers who are of pensionable age or disabled or chronically
sick.
2. The code of practice shall include arrangements by which the Licensee will,
where appropriate:
(a) provide where practicable special controls and adaptors for electrical
appliances and meters (including prepayment meters) and reposition meters
(and shall set out any charges to be made for the provision of such
services);
(b) provide special means of identifying persons acting on behalf of the
Licensee or the Relevant Public Electricity Supplier;
(c) give advice on the use of electricity;
(d) send bills in respect of the supply of electricity to a customer to any
person who is willing to be sent such bills and is nominated by that
customer (without prejudice, however, to the right of the Licensee to send
such bills both to the customer and to the nominated person where that
appears appropriate to the Licensee);
(e) make available (free of charge) to blind and partially sighted customers,
by telephone or other appropriate means, information concerning the
details of any bill relating to the supply of electricity to them and a
facility for enquiring or complaining in respect of any such bill or any
service provided by the Licensee; and
(f) make available (free of charge) to deaf and hearing impaired customers,
being in possession of appropriate equipment, facilities to assist them in
enquiring or complaining about any bill relating to the supply of
electricity to them or any service provided by the Licensee.
(3) The code of practice shall further include arrangements whereby the
Licensee will:
(a) take reasonable steps to draw the attention of customers to the existence
of a register of customers who may be expected, by virtue of being of
pensionable age or disabled or chronically sick, to require:
<PAGE>
(i) information and advice in respect of the matters set out at paragraph
2; or
(ii) advance notice of interruptions to the supply of electricity;
(b) maintain such a register, comprising the relevant details of each
customer who requests his inclusion on it; and
(c) give to those customers so registered:
(i) such information and advice in respect of the matters set out at
paragraph 2 or in respect of interruptions to the supply of
electricity as may be appropriate and is of such nature as shall be
set out in the code of practice; and
(ii) notice of the existence of another register maintained by the
Relevant Public Electricity Supplier, in relation to such customers
who may be expected to require advance notice of interruptions to the
supply of electricity, on which such customers may be included.
4. The Licensee shall, with the consent or at the request of any customer
included on the register maintained in accordance with sub-paragraph 3(b),
provide the Relevant Public Electricity Supplier with appropriate details
concerning such customer and his requirements for the purpose of his
inclusion on the equivalent register maintained by the Relevant Public
Electricity Supplier in accordance with the provisions of its public
electricity supply licence.
5. This Condition is subject to the provisions of Condition 37.
<PAGE>
EXHIBIT EX-10.6
Dated 30th March, 1990
THE GENERATORS
named herein
- and -
THE SUPPLIERS
named herein
- and -
ENERGY SETTLEMENTS AND INFORMATION SERVICES
as Settlement System Administrator
- and -
ENERGY POOL FUNDS
ADMINISTRATION LIMITED
as Pool Funds Administrator
- and -
THE NATIONAL GRID COMPANY plc
as Grid Operator and Ancillary Services Provider
- and -
SCOTTISH POWER plc
and
ELECTRICITE DE FRANCE, SERVICE NATIONAL
as Externally
Interconnected Parties
- and -
THE OTHER PARTIES
named herein
--------------------------------------------
POOLING AND SETTLEMENT
AGREEMENT
for the Electricity Industry in
England and Wales
(as amended and restated at 2 December 1994)
--------------------------------------------
Main Text Schedules 1 - 8 and 10 - 21
<PAGE>
Page
----
CONTENTS
PART I: PRELIMINARY 3
1. Definitions and Interpretation 3
2. The Effective Date 30
3. Additional Parties 30
PART II: OBJECTS, REVIEW AND PRIORITY 35
4. Objects and Purpose of the Agreement 35
5. Transitional Arrangements and Reviews 35
6. Entrenched Provisions, Inconsistencies and Conflicts 45
PART III: POOL MEMBERSHIP AND GENERAL MEETINGS 51
7. Introduction 51
8. Pool Membership 52
9. General Meetings 59
10. Proceedings at General Meetings 63
11. Voting 65
12. Proxies 71
13. Matters reserved to the General Meeting: Class Rights 73
PART IV: THE EXECUTIVE COMMITTEE 78
14. Establishment of the Executive Committee 78
15. Membership of the Executive Committee 79
16. Pool Chairman 84
17. Chief Executive, Secretarial and Secretary 86
18. Proceedings of the Executive Committee 89
19. Conduct of Executive Committee Meetings 91
20. Delegation 92
21. Vacation of Office by Committee Members 94
22. Voting 95
23. Committee Members' Responsibilities and Protections 98
24. Powers of the Executive Committee 101
PART V: LIMITATION OF LIABILITY 106
25. Limitation of Liability 106
i
<PAGE>
Page
----
PART VI: THE SETTLEMENT SYSTEM ADMINISTRATOR 108
26. Appointment 108
27. Resignation and Removal 108
28. Transfer of Responsibilities and Assets 111
PART VII: THE SETTLEMENT SYSTEM ADMINISTRATOR'S
RESPONSIBILITIES 115
29. Responsibilities 115
30. Insurance Responsibilities 119
31. Performance of Duties 121
[SUBSTITUTE PAGE TO COME]
PART XV: METERING 173
60. Metering 173
PART XVI: POOL CIVIL EMERGENCIES 197
61. Pool Civil Emergencies 197
PART XVII: TRADING SITE 208
62. Trading Site 208
PART XVIII: THE POOL FUNDS ADMINISTRATOR, BILLING
AND SETTLEMENT 209
63. The Pool Funds Administrator 209
64. Procedures Manual 213
65. Billing and Settlement 214
PART XIX: DEFAULT, TERM AND TERMINATION 215
66. Default 215
67. Term and Termination 220
ii
<PAGE>
Page
----
PART XX: CONFIDENTIALITY 222
68. Definitions and Interpretation 222
69. Confidentiality for NGC and its Subsidiaries 223
70. Confidentiality other than for NGC and its Subsidiaries 228
71. Release of Information 229
PART XXI: THE PARTICIPATION OF NGC 232
72. The Participation of NGC 232
73. Intra-Company Contracts 232
PART XXII: MISCELLANEOUS 234
74. Force Majeure 234
75. Notices 235
76. Assignment 236
77. Counterparts 236
78. Waivers; Remedies Not Cumulative 236
79. Severance of Terms 237
80. Entire Agreement 237
81. Language 237
82. Restrictive Trade Practices Act 1976 238
83. Arbitration 238
84. Jurisdiction 239
85. Governing Law 240
86. The Settlement System Administrator's Contract 240
Page
----
SCHEDULES 242
1. Part I The Generators 242
Part II The Suppliers 244
Part A: Public Electricity Suppliers 244
Part B: Second Tier Suppliers 245
Part C: Others 247
2. The Other Parties 248
3. Form of Accession Agreement 250
iii
<PAGE>
Page
----
4. The Accounting Procedure 252
Part A: Preliminary 254
Part B: The Provision of Financial Information 261
Part C: The Settlement System Administrator's 267
Charges
Part D: Allocation of Charges 275
Part E: [Not Used] 279
Part F: Pro-forma Budget 280
Part G: Pro-forma Statement of Costs 286
Part H: Pro-forma Statement of Charges 288
5. Form of Admission Application 289
6. Form of Pool Membership Application 292
7. Form of Escrow Agreement 295
8. The Hardware and Software 302
Part A: The Hardware 302
Part B: Developed Software 303
Part C: Licensed Software 303
9. The Pool Rules 304
Preamble 308
Part I: Definitions and Interpretation 312
Part II: Data Input to Settlement 322
Part III: Computation of Payments in Settlement 359
Part IV: Interconnectors 472
Part V: Special Provisions 484
Part VI: Settlement Runs 501
Appendix 1: Part I: Definitions 516
Part II: List of Acronyms 626
Appendix 2: Procedures for running GOAL 635
Appendix 3: Forms and Terms to be used when 673
entering Despatch Instructions into PORTHOLE
Appendix 4: Reporting Requirements 674
Appendix 5: Variables established by reference to PORTHOLE 691
Appendix 6: Procedures for the Aggregation of Metered Data 693
Appendix 7: Short-Term Modifications 715
10. Form of Resignation Notice 810
11. Billing and Settlement 812
Part 1: Preliminary 813
Part 2: Establishment of Systems 819
Part 3: Security Cover and Credit Monitoring 831
Part 4: Billing and Paying Procedures 836
iv
<PAGE>
Page
----
Annex 1: Form of Advice Note 859
Annex 2: Form of Confirmation Notice 860
Annex 3: Part 1: Form of Settlement Account
Designation 861
Part 2: Form of Change of Settlement
Account 862
Annex 4: Form of Letter of Credit 863
12. Transitional Arrangements 864
13. Contributory Shares 872
14. Membership of the Executive Committee: Public 874
Electricity Suppliers and Independent Suppliers
15. The Pool Funds Administrator's Contract 880
Annex 1: PFA Budget for the 1992 PFA Accounting
Period 910
Annex 2: Pro-Forma Statement of Charges 911
Annex 3: Pro-Forma Statement of Costs and Fees 912
Annex 4: Existing Funds Transfer Software 913
Part A: Beneficially Owned 913
Part B: Licensed 914
Annex 5: Escrow Arrangements 915
16. Matters requiring consent of the Settlement System Administrator 917
17. Trading Sites 919
Part A: General 919
Part B: Procedures 919
Part C: Trading Site Applications 922
Part D: Additional Provisions 923
18. The Ancillary Services Accounting Procedure 924
Annex: Part 1: ASP Budget for the First Accounting Period 931
Part 2: Pro-Forma Statement of Costs 932
Part 3: Pro-Forma Statement of Charges 933
19. Objective and Scope of the Scheduling and Despatch Review 934
20. Accountable Interest 936
21. Meter Operator Schedule 939
ANNEX: Issue C Pool Rules
v
<PAGE>
THIS AGREEMENT is made on 30th March, 1990 (as amended and restated pursuant to
a Supplemental Deed dated 22nd April, 1994)
BETWEEN:
(1) THE PERSONS whose names, registered numbers and registered or principal
offices are set out in Part I of Schedule 1;
(2) THE PERSONS whose names, registered numbers and registered or principal
offices are set out in Part II of Schedule 1;
(3) NGC SETTLEMENTS LIMITED (registered number 2444282) whose registered
office is situated at Fairham House, Green Lane, Clifton, Nottingham
NG11 9LN as Settlement System Administrator;
(4) ENERGY POOL FUNDS ADMINISTRATION LIMITED (registered number 2444187)
whose registered office is situate at 185 Park Street, London SE1 9DY as
Pool Funds Administrator;
(5) THE NATIONAL GRID COMPANY plc (registered number 2366977) whose
registered office is situate at National Grid House, Kirby Corner Road,
Coventry CV4 8JY as Grid Operator and Ancillary Services Provider;
(6) SCOTTISH POWER plc (registered number 117120) whose principal office is
situate at 1 Atlantic Quay, Glasgow G2 8SP, Scotland as an Externally
interconnected Party;
(7) ELECTRICITE DE FRANCE, SERVICE NATIONAL whose principal office is
situate at 3 Rue de Messine, 75008 Paris, France as an Externally
Interconnected Party; and
(8) THE OTHER PARTIES whose names, registered numbers and registered or
principal offices are set out in Schedule 2.
WHEREAS:
(A) it is a Condition of the NGC Transmission License that, subject to its
removal or resignation as Settlement System Administrator hereunder, NGC
shall implement, maintain and operate a settlement system which will
provide (inter alia) for the calculation of any payments which become
due to or owing by Authorized Electricity Operators in respect of sales
and purchases of electricity under the terms of this Agreement and such
License further provides that NGC may comply with its said obligations
by participating in this Agreement in the manner provided in such
License
1
<PAGE>
(B) it is a Condition of the Generation License granted to each of the
Founder Generators in England and Wales requiring such a License that
the licensee shall be a party to and a pool member under, and shall
comply with the provisions of, this Agreement insofar as the same shall
apply to it in its capacity as a party to this Agreement and/or as a
pool member being a generator of electricity as the case may be;
(C) it is a Condition of the PES License granted to each of the Founder
Suppliers whose names are set out in Part A of Part II of Schedule 1
that the licensee shall be a pool member under, and comply with the
provisions of, this Agreement;
(D) it is a Condition of the Second Tier Supply License granted to each of
the Founder Suppliers whose names are set out in Part B of Part II of
Schedule 1 that the licensee shall be a pool member under, and comply
with the provisions of, this Agreement insofar as the same shall apply
to it in its capacity as a private electricity supplier (as that
expression is defined in section 17(1) of the Act);
(E) this Agreement sets out, inter alia, the rules and procedures for the
operation of an electricity trading pool and for the operation of a
settlement system (including the calculation of payments due) and in
compliance with the conditions of their respective Licenses those
parties subject to such conditions have agreed to become parties hereto
with the intent that this Agreement shall be and shall remain approved
by the Director; and
(F) in relation to this Agreement each of the Secretary of State and the
Director enjoys the rights, powers and authorities conferred upon him
inter alia by the Act and the Licenses.
NOW IT IS HEREBY AGREED as set out on the following pages of this Agreement.
2
<PAGE>
PART I
PRELIMINARY
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions: in this Agreement (including the Recitals and the
Schedules), except where the context otherwise requires:
"Accession Agreement" means an accession agreement in or substantially
in the form set out in Schedule 3 or in such other form (to which the
Settlement System Administrator has no reasonable objection) as the
Executive Committee may for the time being and from time to time
approve;
"Accountable Interest" has the meaning given that expression in Schedule
20;
"Accounting Date" means, in relation to any Accounting Period, the last
day of such Accounting Period;
"Accounting Period" means each successive period of 12 months beginning
on 1st April in each year or of such other length and/or beginning on
such other date as may be determined in accordance with the terms
hereof, provided that the first such period shall begin on and include
31st March, 1990 and shall end on and include 31st March, 1991;
"Accounting Procedure" means the accounting procedure set out in
Schedule 4, as amended, varied or substituted from time to time in
accordance with the terms hereof;
"Act" means the Electricity Act 1989;
"Active Energy" means the electrical energy produced, flowing or
supplied by an electric circuit during a time interval, and being the
integral with respect to time o the instantaneous power, measured in
units of watt-hours or standard multiples thereof, that is:
1000Wh = 1kWh
1000kWh = 1MWh
1000MWh = 1GWh
1000GWh = 1TWh;
"Active Power" means the product of voltage and the in-phase component
of alternating current measured in units of watts and standard multiples
thereof, that is:
1000 Watts = 1kW
3
<PAGE>
1000kW = 1MW
1000MW = 1GW
1000GW = 1TW;
"Admission Application" means an application in or substantially in the
form set out in Schedule 5 or in such other form as the Executive
Committee may for the time being and from time to time approve;
"Agreed Procedure" means each of the agreed procedures specified in the
Agreed Procedures Index and which is agreed to be treated as an Agreed
procedure for the purposes of this Agreement either:
(a) by the Executive Committee and the Settlement System
Administrator and (where the agreed procedure imposes
obligations on the Grid Operator) the Grid Operator; or
(b) where such agreed procedure concerns the duties and
responsibilities of the Pool Funds Administrator, by the
Executive Committee and the Pool Funds Administrator
as the same
(i) may be amended or substituted from time to time by the Executive
Committee with the prior written consent of the Settlement
System Administrator and (where such Agreed Procedure imposes
obligations on the Grid Operator) the Grid Operator (in each
case, such consent not to be unreasonably withheld or delayed);
or
(ii) shall be amended or substituted from time to time by the
Executive Committee at the request of the Settlement System
Administrator and with the prior written consent of the
Executive Committee and (where such Agreed Procedure imposes
obligations on the Grid Operator) the Grid Operator (in each
case, such consent not to be unreasonably withheld or delayed);
or
Provided that the reference to the Grid Operator in this definition
shall be construed as if it were a reference to such term prior to the
creation of Meter Operator Parties and the associated amendments to this
Agreement, but this shall be without limitation to any right to agree
any adoption, amendment or substitution under this definition;
"Agreed Procedures Index" means an index of agreed procedures agreed to
be treated as Agreed Procedures in accordance with and for the purposes
of this Agreement;
"Agreement" means this Agreement (including the Schedules), as amended,
varied, supplemented, modified or suspended from time to time in
accordance with the terms hereof;
4
<PAGE>
"Ancillary Service" means a System Ancillary Service and/or a Commercial
Ancillary Service, as the case may be;
"Ancillary Services Agreement" means an agreement between a User and the
Ancillary Services Provider for the payment by the Ancillary Services
Provider to that User in respect of the provision by such User of
Ancillary Services;
"Ancillary Services Business" means the business relating to Ancillary
Services carried on by the Ancillary Services Provider;
"Ancillary Services Provider" mans the person who for the time being and
from time to time is required by the terms of a Transmission License to
contract for Ancillary Services;
"Apparatus" means all equipment in which electrical conductors are used
or supported or of which they may form a part;
"Approved Recommendation" has the meaning given that expression in
Clause 5.8;
"ASP Accounting Procedure" means the accounting procedure set out in
Schedule 18, as amended, varied or substituted from time to time in
accordance with the terms hereof;
"Authorized Electricity Operator" means any person who is authorized
under the Act to generate, transmit or supply electricity and shall
include any person transferring electricity to or from England and Wales
across an interconnector (as such term is used in the NGC Transmission
License), other than the Grid Operator in its capacity as operator of
the NGC Transmission System;
"Banking System" has the meaning given that expression in Section 1.1 of
Schedule 11;
"Billing System" has the meaning given that expression in Section 1.1 of
Schedule 11;
"BPS Goal" has the meaning given that expression in Appendix 2 of
Schedule 9;
"British Grid Systems Agreement" means the agreement of that name made
or to be made between NGC, Scottish Hydro-Electric PLC and Scottish
Power plc inter alia regulated the relationship between their respective
grid systems;
"Budget" has the meaning given that expression in Part A of Schedule 4;
"Bulk Supply Point" means any or (as the context may require) a
particular point of supply where Metering Equipment for the purposes of
the Bulk Supply Tariff is or
5
<PAGE>
would have been located and, in the event of any dispute as to location,
as determined in accordance with Clause 83;
"Bulk Supply Tariff" means the basis of payment for Active Energy as
levied by the Generating Board prior to the Effective Date;
"Central Despatch" means the process of Scheduling and issuing direct
instructions by the Grid Operator referred to in paragraph 1 of
Condition 7 of the NGC Transmission License and "Centrally Despatched"
shall be construed accordingly;
"Change Management Policies" means the policies, procedures and
guidelines for the co-ordination by the Settlement System Administrator
of the implementation of changes to the Settlement System entitled
respectively "Change Management Policy", "Settlement Change Co-ordinator
Operating Procedures" and "Change Management Implementation Guidelines"
in the form initialled for the purposes of identification as at 29th
November, 1991 by or on behalf of the Executive Committee and the
Settlement System Administrator, as the same have been or may be amended
from time to time in accordance with the terms of the Initial Settlement
Agreement or this Agreement;
"Chief Executive" has the meaning given that expression in Clause
17.1.1;
"Code of Practice" means each of the codes of practice in relation to
any Metering Equipment or any part or class thereof which are specified
in the Synopsis of Metering Codes, as the same may be amended or
substituted from time to time by the Executive Committee with the
agreement or approval of:
(i) in the case of any Code of Practice in respect of Metering
Equipment in respect of which it is the Operator, the Grid
Operator;
(ii) in the case of any Code of Practice in respect of Metering
Equipment relating to Reactive Energy, the Ancillary Services
Provider;
(iii) in the case of any change to any Code of Practice prior to lst
April, 1994 in respect of standards of accuracy of Metering
Equipment required for Second Tier Customers up to (and
including) 1MW, the Suppliers in separate general meeting; and
(iv) in the case of any change to any Code of Practice prior to lst
April, 1998 in respect of standards of accuracy of Metering
Equipment required for Second Tier Customers up to (and
including) 100kW, the Suppliers in separate general meeting,
6
<PAGE>
(provided that, prior to the date on which the transitional arrangements
regarding metering of Reactive Power at Grid Supply Points are brought
into effect (the "RP Date") in the case of a Code of Practice or part
thereof which relates to Reactive Power metering at Grid Entry Points,
such Code or part thereof may only be amended or substituted by
agreement between the Ancillary Services Provider and all Committee
Members), and any other code of practice which is agreed from time to
time to be treated as a Code of Practice for the purposes of this
Agreement by the Executive Committee (or, where appropriate, prior to
the RP Date all Committee Members) and, where appropriate, the Grid
Operator and/or the Ancillary Services Provider and/or the Suppliers;
"Commercial Ancillary Services" means Ancillary Services, other than
System Ancillary Services, utilized by the Grid Operator in operating
the Total System if a User has agreed to provide them under a
Supplemental Agreement with payment being dealt with under an Ancillary
Services Agreement or, in the case of Externally Interconnected Parties
or External Pool Members, under any other agreement;
"Commissioned" means, in relation to any Plant or Apparatus connected to
the NGC Transmission System or to any External Interconnection or any
Distribution System, commissioned for the purposes of the Connection
Agreement relating to such Plant or Apparatus;
"Committee Member" means a member of the Executive Committee;
"Communications Equipment" means, in respect of any Metering Equipment,
the terminating equipment (which may include a modem) necessary to
convert data from such Metering Equipment into a state for transmission
to the Settlement System Administrator across the communications link
provided pursuant to Clause 60.6.3(a), but it shall not include an
Outstation;
"Competent Authority" means the Secretary of State, the Director and any
local or national agency, authority, department, inspectorate, minister,
ministry, official or public or statutory person (whether autonomous or
not) of, or of the government of, the United Kingdom or the European
Community;
"Computer Systems" means all and any computer systems used by the
Settlement System Administrator and required in connection with the
operation of the Settlement System;
"Connection Agreements" means the Master Connection and Use of System
Agreement, the Supplemental Agreements, the Supplier's Connection
Agreements, the Supplier's Use of System Agreements and the
Interconnection Agreements, and "Connection Agreement" means any or (as
the context may require) a particular one of them;
7
<PAGE>
"Connection Point" means a Grid Supply Point or Grid Entry Point, as the
case may be;
"Consumer Metered Demand" has the meaning given that expression in Part
I of Appendix 1 to Schedule 9;
"Contributory Share" means, in relation to any Pool Member, the
Contributory Share for the time being and from time to time of such Pool
Member calculated in accordance with Schedule 13;
"Control" has the meaning set out in section 840 of the Income and
Corporation Taxes Act 1988 and "Controlled" shall be construed
accordingly;
"Custodian" has the meaning given that expression in Clause 45.1;
"Customer" means a person to whom electrical power is provided (whether
or not he is the provider of such electrical power);
"De-energization" means the movement of any isolator, breaker or switch
or the removal of any fuse whereby no electricity can flow to or from
the relevant User System through the User's Plant or Apparatus connected
to such User System and, in relations to any External Pool Member, the
termination of such External Pool Member's rights to use any relevant
External Interconnection;
"Default Calling Creditor" means any Pool Creditor, the Settlement
System Administrator and the Pool Funds Administrator;
"Default Interest Rate" has the meaning given the expression in Section
1.1 of Schedule 11;
"Defaulting Pool Member" has the meaning given that expression in Clause
66.3.1;
"Despatch" means the issue by the Grid Operator of instructions for
Generating Plant and/or Generation Trading Blocks to achieve specific
Active Power (and, in relation to Generating Plant, Reactive Power or
target voltage) levels within their Generation Scheduling and Despatch
Parameters or Generation Trading Block Scheduling and Despatch
Parameters, as the case may be, and by stated times;
"Development Policies" means the policies, procedures and practices for
the development of the Computer Systems in the forms initialled for the
purpose of identification as at 29th November, 1991 by or on behalf of
the Executive Committee and the Settlement System Administrator, as the
same have been or may be amended from time to time in accordance with
the terms of the Initial Settlement Agreement or this Agreement;
8
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"Directive" includes any present or future directive, requirement,
instruction, direction or rule of any Competent Authority (but only, if
not having the force of law, if compliance with the Directive is in
accordance with the general practice of persons to whom the Directive is
addressed) and includes any modification, extension or replacement
thereof then in force;
"Director" means the Director General of Electricity Supply appointed
for the time being pursuant to section 1 of the Act;
"Distribution Code" means the Distribution Code required to be drawn up
by each Public Electricity Supplier and approved by the Director, as
from time to time revised with the approval of the Director;
"Distribution System" means the system consisting (wholly or mainly) of
electric lines owned or operated by a Public Electricity Supplier and
used for the distribution of electricity from Grid Supply Points or
Generating Units or other entry points to the point of delivery to
Customers or other Users and includes any Remote Transmission Assets (as
defined in the Grid Code) operated by such Public Electricity Supplier
and any Plant and Apparatus and meters owned or operated by such Public
Electricity Supplier in connection with the distribution of electricity,
but does not include any part of the NGC Transmission System;
"EdF Documents" means any agreement for the time being and from time to
time made between NGC and Electricite de France, Service National
relating to the use or operation of relevant External Interconnection;
"Effective Date" means 2400 hours on 30th March, 1990;
"Effective Date of Termination" shall mean 2400 hours on 31st March,
1993;
"Electricity" means Active Energy and Reactive Energy;
"Electricity Arbitration Association" means the unincorporated members'
club of that name formed inter alia to promote the efficient and
economic operation of the procedure for the resolution of disputes
within the electricity supply industry by means of arbitration or
otherwise in accordance with its arbitration rules;
"Embedded" means having a direct connection to a Distribution System or
the System of any other User to which Customers and/or Power Stations
are connected, such connection being either a direct connection or a
connection via a busbar of another User or of NGC (but with no other
connection to the NGC Transmission System);
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"Embedded Non-Franchise Site" means:
(i) a Site which is Embedded and which is at the point of
connection to a Second Tier Customer; or
(ii) a Site which is Embedded in respect of which there is a
Potential Operator where the customer to which that Site
is at a point of connection is eligible to receive
supplies from a Second Tier Supplier in the period
between 1st April, 1994 and 31st March, 1998;
"Equipment Owner" means, in relation to a Metering System, the person
which is the owner of that Metering System;
"Escrow Agreement" has the meaning given that expression in Clause 45.1;
"Event of Default" means any event declared as such pursuant to Clause
66.1.1 or 66.2.1, as the case may be;
"Executive Committee" means the committee established pursuant to Clause
14.1;
"Export" means, in respect of any Party, a flow of electricity from the
Plant or Apparatus of such Party to the Plant or Apparatus of another
Party and, in relation to any Party which is an External Pool Member,
the External Interconnection in respect of which that Party has the
right to deliver or take electricity to or from the NGC Transmission
System shall be treated as the Plant or Apparatus of such Party and the
verb "Export" and its respective tenses shall be construed accordingly;
"External Interconnection" means Apparatus for the transmission of
electricity to or from the NGC Transmission System into or out of an
External System;
"Externally Interconnected Party" means a person operating an External
System which is connected to the NGC Transmission System by an External
Interconnection (which person may or may not also be an External Pool
Member);
"External Pool Member" means a Party supplying electricity to or taking
electricity from the NGC Transmission System through an External
Interconnection and which has been or (where appropriate) is to be
admitted as a Pool Member in the capacity of a Generator and/or a
Supplier;
"External System" means, in relation to an Externally Interconnected
Party, the transmission or distribution system which it owns or operates
and any Apparatus or Plant which connects that system to the External
Interconnection and which is owned or operated by such Externally
Interconnected Party;
10
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"Final Metering Scheme" means a national metering scheme to be installed
in accordance with the relevant Codes of Practice and to come into
effect on the FMS Date;
"First Quarter" means, in respect of any year, the months of January,
February and March;
"FMS Codes of Practice" means the Codes of Practice B, C, E, J, K1 and
K2 and, to the extent that they relate to Metering Equipment the date
derived from which was not used as Settlement Metering Data immediately
prior to the FMS Date, F and G, and Codes of Practice 1, 2, 3, 4 and 5;
"FMS Date" means 1st April, 1993;
"FMS Metering Equipment" means Metering Equipment comprising a Metering
System at or in relation to the commercial boundary in accordance with
paragraph 7.1.2 of Schedule 21 in relation to the requirements to be met
from the FMS Date;
"FMS Trading Date" means 10th January, 1994;
"Following Quarter" means, in respect of any Quarter Day or Quarter, the
period of three months immediately following such Quarter Day or
Quarter;
"Force Majeure" means, in relation to any Party, any event or
circumstance which is beyond the reasonable control of such Party and
which results in or causes the failure of that Party to perform any of
its obligations under this Agreement including act of God, strike,
lockout or other industrial disturbance, act of the public enemy, war
declared or undeclared, threat of war, terrorist act, blockade,
revolution, riot, insurrection, civil commotion, public demonstration,
sabotage, act of vandalism, lightning, fire, storm, flood, earthquake,
accumulation of snow or ice, lack of water arising from weather or
environmental problems, explosion, fault or failure of Plant and
Apparatus (which could not have been prevented by Good Industry
Practice), governmental restraint, Act of Parliament, other legislation,
bye-law and Directive (not being any order, regulation or direction
under section 32, 33, 34 or 35 of the Act) provided that lack of funds
shall not be interpreted as a cause beyond the reasonable control of
that Party. For the avoidance of doubt, Force Majeure shall not apply in
respect of the Settlement System Administrator where and to the extent
that the Settlement System Administrator can perform its obligations
under this Agreement by using the back-up arrangements referred to in
Clause 29.2 or by acting in accordance with Clause 52 or Section 31 of
Schedule 9;
"Founder Generators" means the parties to this Agreement of the first
part at 30th March, 1990;
11
<PAGE>
"Founder Suppliers" means the parties to this Agreement of the second
part at 30th March, 1990;
"Fourth Quarter" means, in respect of any year, the months of October,
November and December;
"Fuel Security Code" means the document of that title designated as such
by the Secretary of State, as from time to time amended;
"Funds Transfer Agreement" has the meaning given that expression in
Section 1.1 of Schedule 11;
"Funds Transfer Business" has the meaning given that expression in
Section 1.1 of Schedule 11;
"Funds Transfer Hardware" has the meaning given that expression in
Section 1.1 of Schedule 15;
"Funds Transfer Software" has the meaning given that expression in
Section 1.1 of Schedule 15;
"Funds Transfer System" has the meaning given that expression in Section
1.1 of Schedule 11;
"The Generating Board" has the meaning given that expression in the Act;
"Generating Plant" means a Power Station subject to Central Despatch;
"Generating Unit" means any Apparatus which produces electricity and, in
respect of an External Pool Member, means a Generation Trading Block;
"Generation License" means a license granted or to be granted under
section 6(1)(a) of the Act;
"Generation Scheduling and Despatch Parameters" means those parameters
listed in Appendix A1 to SDC1;
"Generation Trading Block" means a notional Centrally Despatched
Generating Unit of an External Pool Member treated as such for the
purposes of the Grid Code;
"Generation Trading Block Scheduling and Despatch Parameters" means
those parameters listed in Appendix A1 to SDC1 relating to Generation
Trading Blocks;
12
<PAGE>
"Generator" means:
(i) a person who generates electricity under license or exemption
under the Act; or
(ii) a person who is an External Pool Member who delivers electricity
or on whose behalf electricity is delivered to the NGC
Transmission System; or
(iii) a person who is acting as the agent for any such person who is
referred to in paragraph (i) or (ii) above,
and, in any such case, for the time being party to this Agreement, and:
(a) who is a Founder Generator; or
(b) who was admitted as a Party in the capacity of a Generator; or
(c) who, in accordance with Clause 3.10, has changed capacity(ies)
such that it participates as a Party in the capacity of a
Generator,
and, where the expression is used in Part III or Part IV, who is also or
(where appropriate) is to become a Pool Member;
"Generic Dispensation" shall have the meaning ascribed thereto in
paragraph 14.1(b) of Schedule 21;
"Genset Metered Generation" has the meaning given that expression in
Part I of Appendix 1 to Schedule 9;
"Gigawatt" means 10000MW;
"GOALPOST" has the meaning given that expression in the Pool Rules;
"Good Industry Practice" means, in relation to any undertaking and any
circumstances, the exercise of that degree of skill, diligence, prudence
and foresight which would reasonably and ordinarily be expected from a
skilled and experienced operator engaged in the same type of undertaking
under the same or similar circumstances;
"Grid Code" means the Grid Code drawn up pursuant to the Transmission
License, as from time to time revised in accordance with the
Transmission License;
"Grid Code Review Panel" has the meaning given that expression in the
Grid Code;
13
<PAGE>
"Grid Entry Point" means the point at which a Power Station which is not
Embedded connects to the NGC Transmission System;
"Grid Operator" means the person who for the time being and from time to
time is required by the terms of a License, inter alia, to implement the
Grid Code;
"Grid Supply Point" means the point of supply from the NGC Transmission
System to Public Electricity Suppliers or to other Users with User
Systems with Customers connected to them or Non-Embedded Customers;
"GW" means Gigawatt;
"GWh" means Gigawatt-hour;
"Hardware" means at any time the computer equipment and accessories
specified in Schedule 8 or such other computer equipment and accessories
used by the Settlement System Administrator on or in connection with
which the Software Functions or is intended to function at such time
(other than the Second Tier Hardware);
"Host PES" means, in respect of a Metering System, either:
(i) the Public Electricity Supplier to whose Distribution System
such Metering System is connected; or
(ii) where such Metering System is connected directly to the NGC
Transmission System, the Public Electricity Supplier whose
Consumer Metered Demand determined in accordance with the Pool
Rules is calculated by the Settlement System Administrator using
data from such Metering System;
"Import" means, in respect of any Party, a flow of electricity to the
Plant or Apparatus of such Party from the Plant or Apparatus of another
Party and, in relations to any Party which is an External Pool Member,
the External Interconnection in respect of which it has the right to
deliver or take electricity to or from the NGC Transmission System shall
be treated as the Plant or Apparatus of such Party and the verb "Import"
and its respective tenses shall be construed accordingly;
"Independent Generators" means Generators other than:
(i) the Founder Generators;
(ii) any Generator which is an External Pool Member; and
(iii) any Generator which is an affiliate or related undertaking of
(a) any person referred to in paragraph (i) or (ii) above, (b)
any person referred to in
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<PAGE>
paragraph (i) of the definition of Independent Suppliers, or (c) any
Public Electricity Supplier;
"Independent Suppliers" means Suppliers other than:
(i) Eastern Electricity plc, East Midlands Electricity plc, London
Electricity plc, Manweb plc, Midlands Electricity plc, Northern
Electric plc, NORWEB plc, SEEBOARD plc, Southern Electric plc,
South Wales Electricity plc, South Western Electricity plc,
Yorkshire Electricity Group plc, National Power plc, PowerGen
plc, Nuclear Electric plc, British Nuclear Fuels plc, The
National Grid Company plc (Pumped Storage Business Division),
Electricite de France, Service National, Scottish Power plc and
Scottish Hydro-Electric plc;
(ii) Public Electricity Suppliers;
(iii) any Supplier which is an External Pool Member; and
(iv) any Supplier which is an affiliate or related undertaking of any
person referred to in paragraph (i), (ii) or (iii) above;
"Information Systems" has the meaning given that expression in Section
1.1 of Schedule 11;
"Initial Period" means the period from the date of this Agreement until
the end of the Accounting Period in which the Executive Committee
reaches the conclusion set out in Clause 5.4.2 or, if earlier, the date
of termination thereof determined in accordance with the provisions of
Clause 5.4.5;
"Initial Settlement Agreement" means the agreement of even date herewith
made between the Parties as at such date modifying and suspending the
provisions of this Agreement for an initial period and setting out inter
alia the rules and procedures for the operation of the electricity
trading pool referred to in Recital (E) and for the operation of a
settlement system and the procedures for the development of the phases
and pool rules during such initial period, as amended, varied,
supplemented, modified or suspended from time to time;
"Interconnection Agreement" means an agreement between NGC and an
Externally Interconnected Party and/or an External Pool Member relating
to an External Interconnection and/or an agreement under which an
External Pool Member can use an External Interconnection;
"kVAr" means kilovoltamperes reactive;
"Kw" means kilowatt;
15
<PAGE>
"Kwh" means kilowatt-hour;
"Licenses" means all Generation Licenses, PES Licenses, Second Tier
Supply Licenses and Transmission Licenses and "License" means any or (as
the context may require) a particular one of them;
"Localized Implementation Errors" means errors the correction of which:
(i) requires no amendment to or variation of the Specification or
the design or functionality of the Software; and
(ii) does not alter the numerical outputs from the Software;
"LOLP" means the computer program developed by Energy Management
Associates Inc. for the National Grid Division of the Generating Board
pursuant to agreements with reference PCC/GB/J6638 and PCC/GB/J6881, as
such program is amended from time to time in accordance with this
Agreement;
"Lost Opportunity Costs" means, in relation to any Generator, the profit
foregone by such Generator in respect of a Generating Unit during a
period when it is out of service for the purposes of maintenance,
repair, modification, renewal or replacement needed to comply with a
proposal made by such Generator to restore the Generating Unit's
Reactive Power capability to that required by the Grid Code or, where
relevant, the applicable Supplemental Agreement, whichever capability is
lower provided that:
(i) the period when it is taken out of service is:
(a) outside the period identified for the Generating Unit
concerned pursuant to Section OC2 of the Grid Code as at
the time when the failure to have Reactive Power
capability was notified or determined; and
(b) approved by the Grid Operator; and
(ii) the Generator gives credit for any savings in loss of profit by
carrying out other repair work at the same time as that required
for the purposes of Reactive Power;
"Main Site" means those sites specified in paragraphs (i), (ii) and (v)
of the definition of Site;
16
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"Majority Default Calling Creditors" means:
(i) in respect of each calendar quarter other than the first, any
single or group of Default Calling Creditors to whom, in respect
of the aggregate of (a) all Notified Payments payable on the
last five Business Days of the immediately preceding calendar
quarter and (b) all sums due to the Settlement System
Administrator, the Pool Funds Administrator and the Ancillary
Services Provider and outstanding under this Agreement on the
last Business Day of such immediately preceding calendar
quarter, more than 50 percent of the total amount of all such
Notified Payments and such other sums were due; and
(ii) in respect of the first calendar quarter, all Pool Members other
than the Defaulting Pool Member;
"Master Connection and Use of System Agreement" means the agreement
envisaged in Condition 10B of the NGC Transmission License;
"Meter" means a device for measuring Active Energy and/or Reactive
Energy;
"Meter Operator Party" means each person admitted in the capacity as
such and for the time being and from time to time party to Schedule 21
in accordance with the provisions thereof, and shall include any
successor(s) in title to, or permitted assign(s) of, such person;
"Meter Operator Party Accession Agreement" means an accession agreement
in or substantially in the form set out in Annex 3 to Schedule 21 or in
such other form (to which the Settlement System Administrator has no
reasonable objection) as the Executive Committee may for the time being
and from time to time approve;
"Meter Operator Party Admission Application" means an application in or
substantially in the form set out in Annex 1 to Schedule 21 or in such
other form as the Executive Committee may for the time being and from
time to time approve;
"Meter Operator Party Resignation Notice" means an application in or
substantially in the form set out in Annex 2 to Schedule 21 or in such
other form as the Executive Committee may for the time being and from
time to time approve;
"Metering Equipment" means Meters, measurement transformers (voltage,
current or combination units), metering protection equipment including
alarms, circuitry, their associated Communications Equipment and
Outstations, and wiring which are part of the Active Energy and/or
Reactive Energy measuring and transmitting equipment at or relating to a
Site;
17
<PAGE>
"Metering System" means all or that part of the Metering Equipment at or
relating to a site linked to a single Outstation at or relating to a
Site linked to a single Outstation at or relating to that Site and
includes, for the avoidance of doubt, such Outstation. Without prejudice
to the generality of the foregoing, a set of non-exhaustive diagrammatic
representations of Metering Systems is contained in Annex 5 to Schedule
21;
"MVAr" means megavar;
"MVArh" means megavar-hours;
"MW" means megawatt;
"MWh" means megawatt-hours;
"New Software" means the Software, the development of which is initiated
after the Effective Date of Termination;
"NGC" means the National Grid Company plc (registered number 2366977)
whose registered office is situate at National Grid House, Kirby Corner
Road, Coventry CV4 8JY;
"NGC Pumped Storage" means the pumped storage business division of NGC
or any permitted successor to which such business may be transferred in
accordance with its Generation License;
"NGC Site" means a site owned (or occupied pursuant to a lease, license
or other agreement) by NGC at which there is a Connection Point and, for
the avoidance of doubt, a site owned by a User but occupied by NGC as
aforesaid is an NGC Site;
"NGC Transmission License" means the Transmission License granted or to
be granted to NGC;
"NGC Transmission System" means the system consisting (wholly or mainly)
of high voltage electric lines owned or operated by NGC and used for the
transmission of electricity from one Power Station to a sub-station or
to another Power Station or between sub-stations or to or from any
External Interconnection and includes any Plant and Apparatus and meters
owned or operated by NGC in connection with the transmission of
electricity but does not include any Remote Transmission Assets (as
defined in the Grid Code);
"Non-Embedded Customer" means any Customer, other than a PES, receiving
electricity direct from the NGC Transmission System irrespective of from
whom it is supplied;
18
<PAGE>
"Notified Payment" has the meaning given that expression in Section 1.1
of Schedule 11;
"Operator" means, in relation to any Metering System:
(i) used to measure the supply to a Second Tier Customer, the Meter
Operator Party who is appointed as such by the Second Tier
Customer or by the Registrant (with the consent of that Second
Tier Customer) and who agrees to act as Operator in relation to
such Metering System; or
(ii) not within (i) above or (iii) to (v) below, the Meter Operator
Party who is appointed as such by the Registrant of such
Metering System and who agrees to act as Operator in relation to
such Metering System; or
(iii) where new Metering Equipment is to be added to an existing
Metering System, the Operator of such existing Metering System;
or
(iv) the Meter Operator Party which continues as the Operator in
accordance with the transitional arrangements set out in
paragraph 23 of Schedule 21; or
(v) the Party who is deemed to be the Operator and Meter Operator
Party in respect thereof in accordance with the terms of Clause
60.4.4;
"Outstation" means equipment which receives and stores data from a
Meter(s) for the purpose, inter alia, of transfer of that metering data
to the Settlement System Administrator and which may perform some
processing before such transfer. This equipment may be in one or more
separate units or may be integral with the Meter;
"Party" means each person for the time being and from time to time party
to this Agreement acting in a capacity, or deemed to be acting in a
capacity, other than that of Operator or Meter Operator Party, and shall
include any successor(s) in title to, or permitted assign(s) of, such
person;
"Period Metered Demand" has the meaning given that expression in Part I
of Appendix 1 to Schedule 9;
"PES License" means a license granted or to be granted under section
6(1)(c) of the Act;
"PFA Accounting Procedure" means the procedure for the recovery of
certain moneys set out in Section 20 of Schedule 15;
"Plant" means fixed and moveable items used in the generation and/or
supply and/or transmission of electricity, other than Apparatus;
19
<PAGE>
"Pool Auditor" means the firm of accountants appointed for the time
being and from time to time pursuant to Clause 47.1;
"Pool Banker" has the meaning given that expression in Section 1.1 of
Schedule 11;
"Pool Chairman" has the meaning given that expression in Clause 16.1;
"Pool Creditor" has the meaning given that expression in Section 1.1 of
Schedule 11;
"Pool Funds Administrator" means the person for the time being and from
time to time appointed pursuant to Schedule 15 to act as Pool Funds
Administrator;
"Pool Member" means each of the Founder Generators and Founder Suppliers
and any other person who is admitted to pool membership in accordance
with Clause 8.2, in each case until it shall have resigned from pool
membership or otherwise ceased to be a member in accordance with this
Agreement be a member in accordance with this Agreement, and "Pool
Membership" shall be construed accordingly;
"Pool Membership Application" means an application in or substantially
in the form set out in Schedule 6 or in such other form as the Executive
Committee may for the time being and from time to time approve;
"Pool Rules" means the rules referred to in Clause 7.4 and set out in
Schedule 9, as amended, varied or substituted from time to time in
accordance with the terms hereof;
"PORTHOLE" means the database which allows the transfer of operational
information from the Grid Operator to the Settlement System
Administrator;
"Potential Operator" means a Meter Operator Party which is appointed as
the operator pursuant to an agreement or arrangement:
(i) in respect of a Metering System or Metering Equipment at a Site
or Sites but which is not yet registered as Operator in respect
of that Metering System; or
(ii) in respect of Metering Equipment where such Metering Equipment
has not been registered as comprising a Metering System;
"RP Date" has the meaning given to that expression in the definition of
Code of Practice;
"Power Station" means an installation comprising one or more Generating
Units (even where sited separately), other than an External
Interconnection, owned and/or controlled by the same Generator, which
may reasonably be considered as being managed as one Power Station;
20
<PAGE>
"Project Manager" has the meaning given that expression in Clause 5.13;
"Public Electricity Supplier" or "PES" means a person for the time being
party to this Agreement who is a public electricity supplier (as that
expression is defined in the Act) and, in relation to Clauses 15.4 and
15.5 and Schedule 14, means a person for the time being party to this
Agreement who is a public electricity supplier in England and Wales;
"Quarter" means the period of three calendar months ending on a Quarter
Day;
"Quarter Day" means 31st March, 30th June, 30th September and 31st
December;
"Reactive Energy" means the integral with respect to time of the
Reactive Power;
"Reactive Power" means the product of voltage and current and the sine
of the phase angle between them measured in units of voltamperes
reactive and standard multiples thereof, that is:
1000VAr = 1kVAr
1000kVAr = 1MVAr;
"Register" means the register to be maintained by the Settlement System
Administrator pursuant to Clause 60.5;
"Registered Capacity" has the meaning given that expression in the Grid
Code;
"Registrant" means, in relation to a Metering System at or in relation
to any site which is:
(i) a Grid Entry Point,
the Pool Member which operates Generating Plant at such Site; or
(ii) a Grid Supply Point or Bulk Supply Point,
the Pool Member whose System is directly connected to the NGC
Transmission System at or in Relation to such Grid Supply Point or Bulk
Supply Point; or
(iii) the point of connection of a Customer of a Supplier and the NGC
Transmission System,
the Supplier which is the supplier to that Customer; or
21
<PAGE>
(iv) the point of connection of a Generator which is Embedded or of a
Second Tier Supplier or of a Second Tier Customer to a
Distribution System,
the Party which is such Generator which is Embedded or such Second Tier
Supplier or the Second Tier Supplier in respect of such Second Tier
Customer, as the case may be; or
(v) the point of connection of two or more Distribution Systems,
the Authorized Electricity Operator of one of such Distribution Systems
which is nominated in accordance with the provisions of this Agreement;
or
(vi) the point of connection of an External Interconnection to the
NGC Transmission System or a Distribution System,
The Externally Interconnected Party;
"Resignation Notice" means a resignation notice in or substantially in
the form set out in Schedule 10;
"Schedule Day" has the meaning given that expression in Part I of
Appendix 1 to Schedule 9;
"Scheduling" means the process of compiling and issuing a Generation
Schedule (as that expression is defined in the Grid Code), as set out in
SDCI;
"Scheduling and Despatch Code" or "SDC" means that portion of the Grid
Code which is identified as such in the Grid Code;
"Scheme" means the scheme set out in Clause 53 and, separately, each
further scheme implemented pursuant to Clause 56.2;
"Scheme Admission Application" means an application form setting out the
Scheme Admission Conditions and requiring such information as the
Executive Committee may consider necessary to enable it to consider the
application, in such form as the Executive Committee may from time to
time determine;
"Scheme Admission Conditions" means the conditions set out in Clause 54;
"Scheme Genset" means a Centrally Despatched Generating Unit which is
admitted to a Scheme under Clause 53.3;
"Scheme Planned Availability" or "SPA" has the meaning given that
expression Clause 55;
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<PAGE>
"Scheme Year" means, in respect of each Scheme Genset, each successive
period of twelve months, the first such period commencing on 1st April,
1990;
"Second Quarter" means, in respect of any year, the months of April, May
and June;
"Second Tier Agent" means an agent appointed pursuant to Clause 60.16.1
acting where the provisions of Clause 60.16 are applicable or, as the
case may be, appointed pursuant to Clause 60.27.1 acting where the
provisions of Clause 60.17 are applicable;
"Second Tier Computer Systems" means all and any computer systems used
by any Second Tier Agent in connection with the operation of the Second
Tier Data Collection System operated by such Second Tier Agent;
"Second Tier Customer" means a person who is supplied with or sold
electricity by a Second Tier Supplier;
"Second Tier Data Collection System" means those parts of the Settlement
System which relate to the obligations of the Settlement System
Administrator under this Agreement in relation to collecting, estimating
and aggregating data as may be required for the proper functioning of
Settlement from Metering Systems at the point of connection between the
Distribution System of a Public Electricity Supplier and:
(i) a Second Tier Customer;
(ii) the System of an Authorized Electricity Operator other than the
Public Electricity Supplier;
(iii) an Embedded Generator not subject to Central Despatch; and
(iv) the Distribution System of another Public Electricity Supplier,
and providing such data to the Settlement System Administrator;
"Second Tier Hardware" means at any time the computer equipment and
accessories used by any Second Tier Agent on or in connection with which
the Second Tier Software functions or is intended to function at such
time;
"Second Tier Software" means at any time the computer programs and codes
and associated documents and materials which are used by any Second Tier
Agent in connection with the operation of the Second Tier Data
Collection System operated by such Second Tier Agent;
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<PAGE>
"Second Tier Specification" means at any time the computer
specifications developed to give effect to the collection, estimation
and aggregation of data for the purposes set out in Clause 60.16.3 and
such other matters as may be agreed between the Settlement System
Administrator and the relevant Second Tier Agent;
"Second Tier Supplier" means a person for the time being party to this
Agreement who is the holder of a Second Tier Supply License;
"Second Tier Supply License" means a license granted or to be granted
under section 6(2)(a) of the Act;
"Secretary" means the person for the time being and from time to time
holding office as secretary of the Executive Committee;
"Secretary of State" has the meaning given that expression in the Act;
"Security Cover" has the meaning given that expression in Section 1.1 of
Schedule 11;
"Security Period" has the meaning given that expression in the Fuel
Security Code;
"Settlement" means the operation of the Settlement System under this
Agreement;
"Settlement Account" has the meaning given that expression in Section
1.1 of Schedule 11;
"Settlement Day" has the meaning given that expression in Part I of
Appendix 1 to Schedule 9;
"Settlement GOAL" has the meaning given that expression in Appendix 2 to
Schedule 9;
"Settlement Metering Data" shall mean Metered Data as defined in, and
used in accordance with Section 3 of Schedule 9 and relevant metered
data in accordance with Appendix 6 to Schedule 9 of this Agreement,
which is used for the purposes of Settlement;
"Settlement Period" has the meaning given that expression in Part I of
Appendix 1 to Schedule 9;
"Settlement System" means those assets, systems and procedures for the
calculation in accordance with the Pool Rules of payments which become
due thereunder, as modified from time to time;
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"Settlement System Administrator" means the person appointed for the
time being pursuant to Clause 26 or any replacement thereof from time to
time appointed pursuant to Part VI;
"Settlements Business" means the business of the Settlement System
Administrator in operating the Settlement System under this Agreement;
"Site" means:
(i) a Grid Entry Point;
(ii) a Grid Supply Point or Bulk Supply Point;
(iii) the point of connection of a Generator which is Embedded or of a
Second Tier Supplier or of a Second Tier Customer to a
Distribution System or the NGC Transmission System;
(iv) the point of connection of two Distribution Systems; or
(v) the point of connection of an External Interconnection to the
NGC Transmission System;
"Small Generator" means any Independent Generator with Generating Units
the aggregate Registered Capacity of which does not exceed 100MW;
"Software" means at any time the computer programs codes and associated
documents and materials which are at such time used by or on behalf of
the Settlement System Administrator and required in the operation of the
Settlement System;
"Specification" means at any time the computer specification(s) giving
effect to the Pool Rules and such other matters as may be agreed between
the Executive Committee and the Settlement System Administrator at the
time;
"Statement of Costs" has the meaning given that expression in Section
1.1 of Part A of Schedule 4;
"Supplemental Agreement" means any agreement entered or to be entered
into between NGC and any User party to the Master Connection and Use of
System Agreement and expressed to be supplemental thereto;
"Supplier" means a person for the time being party to this Agreement:
(i) who is a Founder Supplier; or
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(ii) who was admitted as a Party in the capacity of a Supplier; or
(iii) who, in accordance with Clause 3.10, has changed capacity(ies)
such that it participates as a Party in the capacity of a
Supplier,
and, where the expression is used in Part III, Part IV or Part XI or
Schedule 14 or 18, who is also or (where appropriate) is to become a
Pool Member;
"Supplier's Connection Agreement" means the agreement for connection to
any User System envisaged in Condition 8B of a PES License and Condition
3 of a Second Tier Supply License;
"Supplier's Use of System Agreement" means the agreement for use of
system envisaged in Condition 8B of a PES License and Condition 3 of a
Second Tier Supply License;
"Synopsis of Metering Codes" means a synopsis maintained and updated as
necessary by the Executive Committee listing each Code of Practice
approved as such from time to time in accordance with this Agreement;
"System" means any User System or the NGC Transmission System, as the
case may be;
"System Ancillary Services" means Ancillary Services which are required
for System reasons and which must be provided by Users (but in some
cases only if a User has agreed to provide the same under a Supplemental
Agreement);
"Tariff" means the tariff approved by the Director and published by the
Executive Committee on or before 31st March in each year (beginning with
31st March, 1994) and providing for amounts payable to Operators or
Potential Operators of certain Sites in respect of the provision and
maintenance of Communications Equipment;
"Third Quarter" means, in respect of any year, the months of July,
August and September;
"Total System" means the NGC Transmission System and all User Systems in
England and Wales;
"Total Votes" means, in relation to a Pool Member, the number of votes
to which such Pool Member is entitled pursuant to Clause 11.7;
"Trading Site" shall be determined in accordance with Schedule 17;
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"Transmission License" means a license granted or to be granted under
section 6(1)(b) of the Act, the authorized area of which is England and
Wales or any part of either thereof;
"TW" means terrawatt;
"TWh" means terrawatt-hours;
"Undertaking" has the meaning given that expression by section 259 of
the Companies Act 1985 as substituted by section 22 of the Companies Act
1989 and, if that latter section is not in force at the date of this
Agreement, as if such latter section were in force at such date;
"User" means a term utilized in various sections of the Grid Code to
refer to a person using the NGC Transmission System and includes an
Externally Interconnected Party, all as more particularly identified in
each section of the Grid Code concerned;
"User Site" means a site owned (or occupied pursuant to a lease, license
or other agreement) by a User in which there is a Connection Point;
"User System" means:
(i) other than in relation to an External Pool Member or an
Externally Interconnected Party, any system owned or operated by
a User comprising Generating Units and/or Distribution Systems
(and/or other systems consisting, wholly or mainly, of electric
lines which are owned or operated by a person other than a PES)
and Plant and/or Apparatus connecting Generation Units,
Distribution Systems (and/or other systems consisting, wholly or
mainly, of electric lines which are owned or operated by a
person other than a PES) or Non-Embedded Customers to the NGC
Transmission System or (except in the case of Non-Embedded
Customers) to the relevant other User System, as the case may
be, including any Remote Transmission Assets (as defined in the
Grid Code) operated by such User or other person and any Plant
and/or Apparatus and meters owned or operated by the User or
other person in connection with the distribution of electricity,
but does not include any part of the NGC Transmission Systems;
and
(ii) in relation to an External Pool Member or an Externally
Interconnected Party, the External System connected to the
relevant External Interconnection;
"Value For Money Audit" has the meaning given that expression in Part A
of Schedule 4;
"VAr" means voltamperes reactive;
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"Votes Calculation Period" means:
(i) in relation to the First Quarter in any year, the Third Quarter
in the immediately preceding year;
(ii) in relation to the Second Quarter in any year, the Fourth
Quarter in the immediately preceding year;
(iii) in relation to the Third Quarter in any year, the First Quarter
of the same year; and
(iv) in relation to the Fourth Quarter in any year, the Second
Quarter in the same year;
"Weighted Votes" means, in relation to a Pool Member, the number of
votes to which such Pool Member is entitled pursuant to Clause 11.2;
"Wh" means watt-hours; and
"Working Day" has the meaning given that expression in the Act.
1.2 Construction of Certain References: in this Agreement, except where the
context otherwise requires, any reference to:
1.2.1 an Act of parliament of any Part or section or other provision
of, or Schedule to, an Act of Parliament shall be construed, at
the particular time, as including a reference to any
modification extension or reenactment thereof then in force and
to all instruments, orders or regulations then in force and made
under or deriving validity from the relevant Act of Parliament;
1.2.2 another agreement or any deed or other instrument shall be
construed as a reference to that other agreement, deed or other
instrument as the same may have been, or may from time to time
be, amended, varied, supplemented or novated;
1.2.3 an "affiliate" means, in relation to any person, any holding
company or subsidiary of such person or any subsidiary of a
holding company of such person, in each case within the meaning
of sections 736, 736A and 736B of the Companies Act 1985 as
substituted by section 144 of the Companies Act 1989 and, if
that latter section is not in force at the date of this
Agreement, as if such latter section were in force at such date;
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1.2.4 a "Business Day" means any week day (other than a Saturday) on
which banks are open for domestic business in the City of
London;
1.2.5 a "day" means a period of 24 hours (or such other number of
hours as may be relevant in the case of changes for daylight
saving) ending at 12:00 midnight;
1.2.6 a "holding company" means, in relation to any person, a holding
company of such person within the meaning given that expression
in Clause 1.2.3;
1.2.7 a "month" means a calendar month;
1.2.8 a "person" includes any individual, partnership, firm, company,
corporation, joint venture, trust, association, organization or
other entity, in each case whether or not having separate legal
personality;
1.2.9 a "related undertaking" means, in relation to any person, any
undertaking in which such person has a participating interest as
defined by section 260(1) of the Companies Act 1985 as
substituted by section 22 of the Companies Act 1989 and, if that
latter section is not in force at the date of this Agreement, as
if such latter section were in force at such date;
1.2.10 a "subsidiary" means, in relation to any person, a subsidiary of
such person within the meaning given that expression in Clause
1.2.3; and
1.2.11 a "year" means a calendar year.
For all purposes of this Agreement no Party shall be an associate or a
related undertaking of any other Party only by reason of all or any of
the share capital of any Party being owned directly or indirectly by the
Secretary of State.
1.3 Interpretation:
1.3.1 in this Agreement:
(a) references to the masculine shall include the feminine
and references in the singular shall include references
in the plural and vice versa;
(b) references to the word "include" or "including" are to
be construed without limitation;
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(c) references to time are to London time;
(d) except where the context otherwise requires, references
to a particular Part, Clause, sub-clause, paragraph,
sub-paragraph or Schedule shall be a reference to that
Part, Clause, sub-clause, paragraph, sub-paragraph or
Schedule in or to this Agreement;
(e) except where the context otherwise requires, references
in a Schedule to a particular Section, sub-section,
Annex or Appendix shall be a reference to that Section,
sub-section, Annex or Appendix in or to that Schedule;
and
(f) the table of contents, the headings to each of the
Parts, Clauses, sub-clauses, paragraphs, sub-paragraphs,
Schedules, Sections, sub-sections, Annexes and
Appendices are inserted for convenience only and shall
be ignored in construing this Agreement.
1.3.2 With respect to Part XV of and Schedule 21 to this Agreement
(but not elsewhere or otherwise):
(a) in the event that any person is required to give or is
entitled to withhold its consent or approval to terms
and conditions of this Agreement or an Agreed Procedure
or Code of Practice or to any other act, matter or thing
under or referred to in this Agreement or has agreed to
revise such terms and conditions or an Agreed Procedure
or Code of Practice or any dispensation therefrom, such
person shall act in good faith and be reasonable in
giving or withholding of such consent or approval or in
imposing conditions to such consent or approval or in
agreeing revised terms and conditions of Part XV of or
Schedule 21 to this Agreement or any Agreed Procedure or
Code of Practice; and
(b) where any person is required to perform any act or give
any consent or notification or do any other thing, it
shall, in the absence of any specified time limit,
perform, give or do or (as the case may be) notify its
withholding of its consent or approval to the same as
soon as is reasonably practicable in all the
circumstances.
1.4 Agreed Procedures and Codes of Practice: each of the Parties undertakes
to comply with the Agreed Procedures and the Codes of Practice insofar
as applicable to such
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Party. The Executive Committee shall provide copies of the Agreed
Procedures and Codes of Practice to a Party upon request.
1.5 Obligation on Generators with respect to Availability Declarations: in
respect of each of its Centrally Despatched Generating Units a Generator
shall submit an Availability Declaration or a re-declared Availability
Declaration to ensure that its Genset Offered Availability and Genset
Re-Offered Availability do not exceed at any time the maximum Gross/Net
generation which it, acting as a prudent operator using Good Industry
Practice, would reasonably expect to achieve if such Centrally
Despatched Generating Unit were to be despatched at that level. In this
Clause 1.5 capitalized terms not defined in Clause 1.1 shall have the
respective meanings given to them in the Pool Rules.
2. THE EFFECTIVE DATE
Commencement: the rights and obligations of each of the Parties under
this Agreement shall commence on the Effective Date.
3. ADDITIONAL PARTIES
3.1 General: subject to the following provisions of this Clause 3, the
Parties shall admit as an additional party to this Agreement any person
(the "New Party") (not, for the avoidance of doubt, being a successor
Settlement System Administrator, Pool Funds Administrator, Grid Operator
or Ancillary Services Provider, to which the provisions of Clause 3.11,
3.12, 3.13 or, as the case may be, 3.14 apply) who applies to be
admitted, in the capacity or, as the case may be, capacities requested
by the New Party.
3.2 Admission Application: a New Party wishing to be admitted as an
additional party to this Agreement shall complete an Admission
Application and shall deliver it to the Executive Committee together
with the fee (which shall be non-refundable) and other documents (if
any) therein specified.
3.3 Executive Committee response:
3.3.1 upon receipt of any Admission Application duly completed the
Executive Committee shall notify (for information only) all
Parties and the Director of such receipt and of the name of the
New Party.
3.3.2 Within 60 days after receipt of a duly completed Admission
Application from a New Party the Executive Committee shall
notify the New Party and the Director either:
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(a) that the New Party shall be admitted as a Party, in
which event the provisions of Clause 3.6 shall apply; or
(b) that the Executive Committee requires the New Party to
produce evidence satisfactory to the Executive Committee
("Additional Evidence") demonstrating the New Party's
fulfillment of the admission conditions relevant to it
set out in its Admission Application, in which event the
provisions of Clause 3.4 shall apply.
If the Executive Committee shall fail so to notify the New Party
and the Director, the New Party may within 28 days after the
expiry of the said 60 day period refer the matter to the
Director pursuant to Clause 3.5, in which event the provisions
of that Clause shall apply.
3.4 Additional Evidence: within 28 days (or such longer period as the
Executive Committee in its absolute discretion may allow) after the
Executive Committee has given notice pursuant to Clause 3.3.2(b) the New
Party shall:
3.4.1 provide the Executive Committee with the Additional Evidence, in
which event the Provisions of Clause 3.6 shall apply; or
3.4.2 refer the matter to the Director pursuant to Clause 3.5, in
which event the provisions of that Clause shall apply,
failing which the New Party's application for admission shall lapse and
be of no effect and the New Party shall not be, and shall not be
entitled to be, admitted as a Party consequent upon such application
(but without prejudice to any new application for admission it may make
thereafter).
3.5 Reference to the Director:
3.5.1 if:
(a) any dispute shall arise between the Executive Committee
and a New Party over whether the New Party has fulfilled
the admission conditions relevant to it; or
(b) the Executive Committee shall have failed to notify the
New Party as provided in Clause 3.3 within the 60 day
period therein specified,
the issue of whether the New Party has fulfilled the admission
conditions relevant to it may be referred by way of written
application
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of the New Party, copies to the Executive Committee, to the
Director for determination. The determination of the Director,
which shall be made within 28 days after receipt of the said
written application and shall be to the effect set out in
paragraph (a) or (b) of Clause 3.5.2, shall be final and binding
for all purposes. The Director shall publish reasons supporting
his determination.
3.5.2 (a) If the determination is to the effect that the New Party
has fulfilled the said admission conditions, the New
Party shall be admitted and the provisions of Clause 3.6
shall apply.
(b) If the determination is to the effect that the New Party
has not fulfilled the said admission conditions, the New
Party's application for admission shall lapse and be of
no effect and the New Party shall not be, and shall not
be entitled to be, admitted as a Party consequent upon
such application (but without prejudice to any new
application it may make thereafter).
3.6 Admission: if:
3.6.1 the Executive Committee shall notify the New Party and the
Director as provided in Clause 3.3.2(a); or
3.6.2 following a request for Additional Information pursuant to
Clause 3.3.2(b), the New Party provides the same within the
period specified in Clause 3.4; or
3.6.3 the New Party is to be admitted as a Party pursuant to Clause
3.5,
the Executive Committee shall forthwith prepare or cause to be prepared
an Accession Agreement. Subject to the Executive Committee making all
notifications and filings (if any) required of it for regulatory
purposes and obtaining all regulatory consents and approvals (if any)
required to be obtained by it, the Executive Committee shall instruct
the Chief Executive or another person authorized by the Executive
Committee for the purpose to prepare an Accession Agreement and to sign
and deliver the Accession Agreement on behalf of all Parties other than
the New Party and the New Party shall also execute and deliver the
Accession Agreement and, on and subject to the terms and conditions of
the Accession Agreement, the New Party shall become a Party for all
purposes of this Agreement with effect from the date specified in such
Accession Agreement (and, if no such date is so specified, the date of
such Accession Agreement). The New Party shall pay all costs and
expenses associated with the preparation, execution and delivery of its
Accession Agreement. Each Party hereby authorizes and instructs the
Chief Executive and each person authorized for the purpose by the
Executive Committee to sign on its behalf Accession Agreements and
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undertakes not to withdraw, qualify or revoke such authority and
instruction at any time. The Executive Committee shall promptly notify
all Parties and the Director of the execution and delivery of each
Accession Agreement.
3.7 Additional Agreements: upon and as a condition of admission as a Party,a
New Party shall execute and deliver such further agreements and
documents and shall do all such other acts, matters and things as the
Executive Committee may reasonably require.
3.8 Application fees: all fees received by the Executive Committee in
respect of any application by a New Party to become a Party shall be
used to defray the costs and expenses of the Executive Committee and
shall be paid to such account as the Executive Committee may direct. The
application fee shall be (pound)250 or such other amount as the
Executive Committee may, with the prior approval of the Director, from
time to time prescribe.
3.9 Compliance: each Party shall procure that for so long as it is a Party
it shall at all times satisfy or otherwise comply with the admission
conditions set out in its Admission Application applicable to it (and/or
such further or other conditions as the Executive Committee may from
time to time reasonably specify) and upon request from time to time
shall promptly provide the Executive Committee with evidence reasonably
satisfactory to the Executive Committee of such satisfaction and
compliance.
3.10 Change of capacities:
3.10.1 any Founder Generator, any Founder Supplier, any Externally
Interconnected Party and any Party admitted as an additional
party to this Agreement pursuant to this Clause 3 may, upon
application to the Executive Committee and satisfaction of such
conditions (if any) as the Executive Committee may reasonably
require, change the capacity(ies) in which it participates as a
Party.
3.10.2 If upon receipt of any Admission Application the Executive
Committee shall consider that the New Party should either:
(a) not be admitted as a Party in the capacity in which it
has applied so to be admitted but should be admitted in
another capacity; or
(b) be admitted both in the capacity in which it has applied
so to be admitted and in another capacity,
then the Executive Committee shall within the period specified
in Clause 3.3.2 notify the New Party and the Director
accordingly and shall specify what, if any, additional evidence
the Executive Committee
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requires the New Party to produce to demonstrate its fulfillment
of the admission conditions relevant to its admission in such
other capacity(ies). The provisions of Clauses 3.4, 3.5 and 3.6
shall apply mutatis mutandis but as if the references therein to
Additional Evidence were read and construed as references to the
said additional evidence.
3.11 Successor Settlement System Administrator: any successor Settlement
System Administrator requiring to be admitted as a Party in that
capacity shall, upon application to the Executive Committee, be so
admitted by any of Accession Agreement modified insofar as is necessary
to take account of the capacity in which such successor is to be
admitted. The provisions of Clause 3.6 shall apply mutatis mutandis to
any such admission.
3.12 Successor Pool Funds Administrator: any successor Pool Funds
Administrator appointed in accordance with the provisions of Schedule 15
shall be admitted as a Party in that capacity at such time and on such
terms and conditions as the Executive Committee may reasonably require.
3.13 Successor Grid Operator: any successor Grid Operator requiring to be
admitted as a Party in that capacity shall, upon application to the
Executive Committee, be so admitted by way of Accession Agreement
modified insofar as is necessary to take account of the capacity in
which such successor is to be admitted. The provisions of Clause 3.6
shall apply mutatis mutandis to any such admission.
3.14 Successor Ancillary Services Provider: any successor Ancillary Services
Provider requiring to be admitted as a Party in that capacity shall,
upon application to the Executive Committee, be so admitted by way of
Accession Agreement modified insofar as is necessary to take account of
the capacity in which such successor is to be admitted. The provisions
of Clause 3.6 shall apply mutatis mutandis to any such admission.
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PART II
OBJECTS, REVIEW AND PRIORITY
4. OBJECTS AND PURPOSE OF THE AGREEMENT
4.1 Principal objects and purpose: the principal objects and purpose of this
Agreement are:
4.1.1 to provide a set of rules which, when implemented, will
quantify:
(a) the financial obligations owed by certain Pool members
to other Pool Members in respect of the former Pool
Members' purchases of electricity produced or delivered
by such other Pool Members; and
(b) the financial obligations owed by certain Pool Members
to the Ancillary Services Provider in respect of the
purchase of Ancillary Services;
4.1.2 to establish, maintain and operate efficiently computer and
other systems (whether or not computer related) which will
implement the rules referred to in Clause 4.1.1; and
4.1.3 by following the procedures for amending this Agreement set out
or referred to herein, to keep under review and promote the
implementation, administration and development of the systems
referred to in Clause 4.1.2 in a way which takes into account,
and balances, the respective interests of actual and potential
generators and suppliers of electricity and of consumers of
electricity and providers of Ancillary Services.
4.2 Interpretation: in the construction and interpretation of this Agreement
due regard shall be had to the principal objects and purpose set out in
Clause 4.1.
4.3 Exercise of rights: in exercising its rights under this Agreement, each
Party shall exercise and enforce such rights and perform its obligations
in good faith having due regard both to its own legitimate commercial
interests and the principal objects and purpose set out in Clause 4.1.
5. TRANSITIONAL ARRANGEMENTS AND REVIEWS
5.1 [Not used]
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Transitional Arrangements
5.2 Transitional Arrangements: the Parties acknowledge and agree that the
arrangements described or referred to in the first column of Schedule 12
("Transitional ------------ Arrangements") have been designed as
transitional arrangements only. The Parties ------------ undertake with
each other to use all reasonable endeavors (including, where
appropriate, through their representation on the Executive Committee) to
give effect to the principle (the "New Principle") set opposite the
relevant Transitional ------------- Arrangement in the second column of
Schedule 12 by the date set opposite such Transitional Arrangement in
the third column of that Schedule. Clauses 5.9 to 5.14 (inclusive) shall
have effect in relation to all Transitional Arrangements.
Regular Reviews
5.3 Conduct of reviews: within a period (the "Review Period") of six months
beginning on each of the dates referred to in Clause 5.5 (the "Review
Dates") the Executive Committee shall review in consultation with the
Settlement System Administrator and the Pool Auditor the operation in
practice of this Agreement and the Settlement System to assess whether
the principal objects and purpose set out in Clause 4.1 are being or
could be better achieved. In carrying out each such review the Executive
Committee shall give due consideration to any matter referred to it by
any Party, the Pool Auditor, the Director or the Secretary of State.
Clauses 5.4 to 5.15 (inclusive) shall have effect in relation to the
reviews described in this Clause 5.3, and such reviews shall be in
addition to the reviews associated with the Transitional Arrangements.
5.4 Initial Period reviews:
5.4.1 in addition to the matters set out in Clause 5.3, as part of its
review beginning on the date falling 24 months after the
Effective Date the Effective Committee shall consider whether or
not the Initial Period shall terminate with effect from the end
of the then current Accounting Period in which the relevant
Review Period ends taking into account the following:
(a) whether material changes to the nature or level of
service which the Settlement System Administrator is
required to provide under this Agreement in the
operation of the Settlement System have been proposed by
the Executive Committee or the Pool Members in general
meeting which have been accepted or are in the process
of being implemented or are under discussion and likely
to be accepted and implemented;
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(b) whether anticipated costs to be incurred by the
Settlement System Administrator in running the
Settlement System are materially in excess of actual
costs for the immediately preceding Accounting Period
due, directly or indirectly, to circumstances beyond the
control of the Settlement System Administrator; and
(c) any other relevant considerations.
5.4.2 The Executive Committee shall notify the Settlement System
Administrator of the result of such considerations as are
referred to the in Clause 5.4.1. In the absence of written
representations to the contrary from the Settlement System
Administrator to the Executive Committee to the effect that it
is inequitable to conclude that the Initial Period should
terminate (having regard to the consequences of such termination
as set out in Schedule 4), such representations to be made
within three months after the date of such notification, the
Executive Committee may conclude that the Initial Period shall
terminate, but may not otherwise come to such conclusion unless
it has complied with Clause 5.4.3.
5.4.3 Where written representations have been made by the Settlement
System Administrator pursuant to Clause 5.4.2, the Executive
Committee and the Settlement System Administrator shall
negotiate in good faith with a view to agreeing whether the
Initial Period should terminate. If the matter is not resolved
by agreement between the Settlement System Administrator and the
Executive Committee within one month (or such other period as
the Settlement System Administrator and the Executive Committee
may agree) after the Settlement System Administrator has made
such written representations, the same shall be referred to
arbitration in accordance with Clause 83. The costs of any such
reference shall be borne in accordance with the Accounting
Procedure.
5.4.4 If for any reason the Executive Committee does not in the course
of any review referred in Clause 5.3 reach the conclusion that
the Initial Period should terminate or it is resolved pursuant
to Clause 5.4.3 that the Initial Period should not terminate,
the Executive Committee shall be obliged to have regard to the
same considerations in each subsequent review to be carried out
pursuant to Clause 5.3 and the provisions of Clauses 5.4.2 and
5.4.3 shall apply in relation thereto.
5.4.5 The Settlement System Administrator may, upon not less than two
months' notice to the Executive Committee prior to any Review
Date,
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determine that the Initial Period should terminate at the end of
the then current Accounting Period whereupon the Initial Period
shall so terminate.
5.5 Review Dates: the Review Dates are:
5.5.1 those dates falling 12 and 24 months after the Effective Date;
5.5.2 those dates falling on the last day of each successive period of
two years, the first such period beginning on 30th March, 1992;
and
5.5.3 such other date(s) as the Pool Members in general meeting may
from time to time determine.
5.6 Reports: promptly (and in any event within one month) after the end of
each Review Period the Executive Committee shall prepare or cause to be
prepared a written report of its review containing such matters as are
referred to in Clause 5.7 and a copy of such report shall be sent to
each Party, the Pool Auditor, the Director and the Secretary of State.
If at the time of issue of such report no such conclusion or resolution
as is referred to in Clause 5.4.2 or (as the case may be) 5.4.3 has been
reached, the Executive Committee shall notify each Party, the Pool
Auditor, the Director and the Secretary of State accordingly.
5.7 Content of reports: each report referred to in Clause 5.6 shall set out:
5.7.1 the scope of the review conducted;
5.7.2 the matters reviewed and the investigations and enquiries made;
5.7.3 the findings of such review;
5.7.4 the recommendations (if any) as to the changes to be made to
this Agreement and the Settlement System so as to achieve or
better to achieve the principal objects and purpose set out in
Clause 4.1;
5.7.5 the effect which any such recommendation referred to in Clause
5.7.4 would, if implemented, have on the role of the Pool
Auditor under this Agreement and any comments of the Pool
Auditor thereon;
5.7.6 the financial effects (if any) which any such recommendation
referred to in Clause 5.7.4 would, if implemented, have on Pool
Members;
5.7.7 in the case of the report for the review beginning on the second
Review Date and (if appropriate) each subsequent Review Date,
whether the
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Executive Committee has concluded as set out in Clause 5.4.2,
whether it has been resolved pursuant to Clause 5.4.3 that the
Initial Period should terminate or (as the case may be) whether
the Executive Committee has received notice under Clause 5.4.5;
and
5.7.8 such other matters as the Executive Committee shall consider
appropriate.
If any Committee Member shall disagree with any of the recommendations
made in any such report, such report shall set out the reasons for such
disagreement and any alternative proposals of such Committee Member.
5.8 General Meeting approval: within two months after the end of each Review
Period the Executive Committee shall convene an extraordinary general
meeting of Pool Members to consider and, if thought fit, approve (in
whole or in part) the recommendations (the "Recommendations") made in
the report referred to in Clause 5.6. If any Recommendation is so
approved (an "Approved Recommendation") then, subject to Clause 13.5,
the provisions of Clauses 5.9 to 5.14 (inclusive) shall have effect in
relation thereto. If any Recommendation is not so approved, no further
action shall be taken in respect thereof arising from such report.
Works Programme
5.9 Works Programme: in respect of each Transitional Arrangement and each
Approved Recommendation the Executive Committee shall:
5.9.1 in the case of a Transitional Arrangement, b the date set
opposite such Transitional Arrangement in the fourth column of
Schedule 12; and
5.9.2 in the case of an Approved Recommendation,by the date stipulated
by the Pool Members in general meeting or (if no date is
stipulated) within a reasonable time,
prepare (or cause to be prepared) in consultation with the Pool Auditor
a programme (the "Works Programme", which expression shall include any
associated documentation hereinafter referred to in this Clause 5.9)
which programme shall (unless otherwise resolved b the Executive
Committee after consultation with those Parties not being Pool Members
who might reasonably be expected to be affected by the Works Programme)
include:
(a) a detailed timetable for the implementation of the New Principle
or (as the case may be) the Approved Recommendation, including
(where appropriate) a series of milestone and/or target dates
for the achievement of specified parts of such programme;
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(b) a full explanation of how such New Principle or approved
Recommendation is to be implemented, including a detailed
analysis of such New Principle or Approved Recommendation and
the objectives which it is intended to achieve, the work
involved, the resources required and the amendments likely to be
required to this Agreement, the Specification and to any other
relevant agreement or document and of any changes required to be
made to the Software or the Hardware; and
(c) an estimate of the cost of such implementation supported by a
breakdown of such costs and a detailed commentary on each
element thereof together with proposals for the recovery of such
cost,
and (unless otherwise resolved by the Executive Committee after
consultation with those Parties not being Pool Members who might
reasonably be expected to be affected by the Works Programme) shall be
supported by:
(i) any draft legal documentation required to give effect to the
amendments referred to in paragraph (b) above; and
(ii) the outline form of agreement appointing the Project Manager as
project manager for the implementation of the Works Programme
(which form shall, where the Settlement System Administrator is
or, in the Executive Committee's opinion, is likely to be the
Project Manager or here the Works Programme involves changes to
the Specification or the Software, be prepared in consultation
with the Settlement System Administrator).
5.10 Review: the Executive Committee shall arrange for a copy of each Works
Programme to be sent to each Party, the Pool Auditor and the Director
for review under cover of a letter setting a deadline for receipt of
comments on such Works Programme (being no earlier than one month and no
later than two months after the date of despatch of copies of the Works
Programme for comment) and indicating to whom such comments should be
addressed. Within such time as is reasonable after the deadline set for
receipt of comments, but, in any event, within two months thereafter,
the Executive Committee shall revise (or cause to be revised) the Works
Programme to take into account (so far as it considers desirable) the
comments received from the Parties, the Pool Auditor and the Director.
5.11 General Meeting referral: as soon as a Works Programme has been revised
as provided in Clause 5.10 (or, if the Executive Committee considers no
such revision desirable, within one month after the deadline set under
Clause 5.10 for receipt of comments on such Works Programme), the
Executive Committee shall convene an extraordinary general meeting of
Pool Members to consider and, if thought fit, approve such Work
Programme (with or without amendment).
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5.12 Approval of the Works Programme:
5.12.1 a Works Programme shall not be given effect to unless and until
approved by the Pool Members in general meeting. Additionally,
if a Works Programme or any part thereof shall involve a matter
requiring the approval of Generators or Suppliers in separate
general meeting under Clause 13.2 (a "Class Issue"), then such
Works Programme shall not be given effect to unless and until
approved by the relevant class of Pool Members. If a Works
Programme shall not be duly approved (with or without
amendment), then the Executive Committee shall revise (or cause
to be revised) the same to take account of the wishes of the
Pool Members in general meeting and/or (as the case may be) in
separate general meeting and thereafter such revised Works
Programme shall be re-submitted to the Pool Members in general
meeting and, if such revised Works Programme or any part thereof
shall involve a Class Issue, to the relevant Pool Members in
separate general meeting, in each case for approval (with or
without amendment). This revision and re-submission procedure
shall be repeated as often as may be required until such time as
the Pool Members in general meeting and, as necessary, in
separate general meetings approve the Works Programme.
5.12.2 Notwithstanding the provisions of Clause 5.12.1, the Executive
Committee and each Party shall be entitled at any time prior to
the approval of a Works Programme by the Pool Members in general
meeting and (where required under Clause 5.12.1) by the relevant
class of Pool Members in separate general meeting to apply to
the Director requesting that the implementation of the New
Principle or (as the case may be) the Approved Recommendation
should not proceed or should not proceed in the manner set out
by such Works Programme and, in such event, effect shall not be
given to the Works Programme pending the determination of the
Director and then (subject as provided in Clause 5.14) only to
the extent (if at all) that the Director in his absolute
discretion shall approve.
5.13 Implementation: the implementation of all Works Programmes shall be
project managed by the Settlement System Administrator or (if the
Settlement System Administrator is unable or unwilling so to project
manage) such other person as the Executive Committee shall nominate (the
"Project Manager") upon and subject to such terms and conditions as are
agreed by the Executive Committee with the Project Manager and the cost
thereof recovered in accordance with the terms of the relevant Works
Programme. Cost overruns, liquidated damages and all other financing
costs, incentives and penalties shall be financed, levied and/or paid at
the times and in the manner provided for in such Works Programme. The
Executive Committee shall
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require the Project Manager to prepare and submit to the Executive
Committee no less frequently than quarterly a written report giving a
detailed commentary on the progress of implementing each Work Programme,
including a comparison of actual progress made against the timetable set
by such Works Programme and of actual costs incurred against budgeted
costs.
5.14 Pool Auditor's approval: at the completion of the work required by each
Works Programme but prior to effect being given to the New Principle or
(as the case may be) the Approved Recommendation the Executive Committee
shall request the Pool Auditor to issue an opinion in form and content
satisfactory to the Executive Committee confirming to all Parties and
the Director that the Pool Auditor has inspected and tested the
arrangements giving effect to the new Principle or (as the case may be)
the Approved Recommendation and is satisfied (without qualification or
reservation) that such arrangements do give effect to the New Principle
or Approved Recommendation in the manner required by the Works
Programme. The Executive Committee shall use all reasonable endeavors to
make (or procure to be made) such modifications to such arrangements as
are necessary to enable the Pool Auditor to give its opinion without
qualification or reservation, and the costs of any such modification
shall be recovered in accordance with the relevant Works Programme. If
the Pool Auditor's opinion can be given only with qualification or
reservation, the Executive Committee shall convene an extraordinary
general meeting of Pool Members and, where required under Clause 5.12.1,
a separate general meeting of Generators and/or (as the case may be)
Suppliers to consider and, if thought fit, approve such arrangements in
the knowledge that the Pool Auditor's opinion can be given only with
qualification or reservation. Subject to the provisions of Clause 6,
each of the Parties undertakes with each of the other Parties promptly
following the issue of the Pool Auditor's opinion (but, where such
opinion has a qualification or reservation, only after approval as
aforesaid by the Pool Members in general meeting and, where required
under Clause 5.12.1, by the relevant class of Pool Members in separate
general meeting) to execute and deliver any amending agreement or other
documents and to take such other action as may reasonably be required of
it to give effect to such arrangements, in any such case at its own cost
and expense.
5.15 Secretary of State's approval: in respect of the Secretary of State's
decision as set out in his letter of 11th December, 1991 to the Chief
Executive concerning the selling of the output of plant by Generators
with on-site demand under this Agreement:
5.15.1 each of the Parties undertakes with each of the other Parties
forthwith to take all such steps (including as to the execution
of any document) as may be required to give full force and
effect to the decision of the Secretary of State. Each of the
Parties shall take all such steps at its own costs and expense
except that the Settlement System Administrator, the Pool Funds
Administrator and the Ancillary Services Provider shall
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be entitled to recover any such costs and expenses in accordance
with the terms of this Agreement; and
5.15.2 each of the Parties acknowledges and agrees that damages would
not be an adequate remedy for any failure by it to give in
accordance with Clause 5.15.1 full force and effect to the
decision of the Secretary of State pursuant to this Clause 5.15
and that, accordingly, each of the other Parties and the
Director shall be entitled to the remedies of injunction,
specific performance and other equitable relief for any
threatened or actual such failure and that no proof of special
damages shall be necessary for enforcement.
5.16 Director's modifications:
5.16.1 Where the Monopolies and Mergers Commission has issued a report
on a reference under section 12 of the Act which:
(a) includes conclusions to the effect that any of the
matters specified in the reference operate, or may be
expected to operate, against the public interest;
(b) specifies effects adverse to the public interest which
those matters have or may be expected to have;
(c) includes conclusions to the effect that those effects
could be remedied or prevented by modifications of the
conditions of any License and such modifications would
require a change to the Pooling and Settlement
Agreement; and
(d) specifies modifications by which those effects could be
remedied or prevented,
the Director may, subject to the following provisions of this
Clause, require such modifications to this Agreement as are
requisite for the purpose of remedying or preventing the adverse
effect specified in the report.
5.16.2 Before requiring modifications to be made pursuant to this
Clause, the Director shall have regard to the modifications
specified in the report. Further, the Director shall not, and
shall not be entitled to, require a modification to be made to
this Agreement which modification could not have been achieved
lawfully through a modification of one or more Licenses
consequent upon the report (but as if, for this purpose, only
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those Parties who are holders of Licenses were parties to this
Agreement).
5.16.3 Before requiring modifications to be made pursuant to this
Clause, the Director shall give notice:
(a) stating that he proposes to make the modifications and
setting out their effect;
(b) stating the reasons why he proposes to make the
modifications; and
(c) specifying the period (not being less than 28 days from
the date of publication of the notice) within which
representations or objections with respect to the
proposed modifications may be made,
and shall consider any representations or objections from any
person which are duly made and not withdrawn.
5.16.4 A notice under Clause 5.16.3 shall be given:
(a) by publishing the notice in such manner as the Director
considers appropriate for the purpose of bringing the
matters to which the notice relates to the attention of
persons likely to be affected by the making o the
modifications; and
(b) by serving a copy of the notice on each Party, the
Executive Committee and the Pool Auditor.
5.16.5 After considering any representations or objections which are
duly made and not withdrawn pursuant to Clause 5.16.3, the
Director may by notice published as provided in Clause 5.16.4(a)
and served on those referred to in Clause 5.16.4(b) specify the
modifications to this Agreement which he requires to be made and
the date upon which such modifications are to take effect and
each of the Parties undertakes with each other of the Parties
promptly to take all such steps as may be necessary to give full
force and effect to the modifications so required.
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6. ENTRENCHED PROVISIONS, INCONSISTENCIES AND CONFLICTS
Entrenched Provisions
6.1 Secretary of State's consent: the Parties acknowledge and agree that,
notwithstanding any other provision of this Agreement, no amendment to
or variation of any of the matters dealt with in any of the following
provisions of this Agreement shall take effect without the prior written
consent of the Secretary of State:
6.1.1 Clause 5.15, Part XIV and Section 28 of Schedule 9; and
6.1.2 this Clause 6.1.
6.2 Director's consent: the Parties acknowledge and agree that,
notwithstanding any other provision of this Agreement, no amendment to
or variation of any of the matters dealt with in any of the following
provisions of this Agreement shall take effect without the prior written
consent of the Director:
6.2.1 (a) Clauses 3.5, 4, 5.12.2, 5.15, 5.16, 6.11, 11, 13, 15.6,
27.5, 27.7, 53.6, 67.3, 67.4, 83, 84 and 85 and Section
8 of Schedule 14 and Section 7 of Schedule 20;
(b) paragraphs 1.4, 2.2.3, 3.3, 3.4, 3.7, 4.4.1, 6.4, 6.5,
17.3 and 22.5 of Schedule 21;
6.2.2 without prejudice to Clause 6.2.3, the Pool Rules or any of
them, other than an amendment or variation which:
(a) involves only a change of a technical nature in the
systems, rules and procedures contemplated by this
Agreement; and
(b) will not increase the liability or decrease the rights
of any Party under this Agreement beyond what may
reasonably be regarded as de minimis in relation to such
Party,
but in any event including Section 22 thereof;
6.2.3 any provision of this Agreement which requires or permits any
matter to be referred to the Director for approval, consent,
direction or decision or confers any rights or benefits upon the
Director; and
6.2.4 the Clause 6.2.
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6.3 Settlement System Administrator's consent: the Parties acknowledge and
agree that, notwithstanding any other provision of this Agreement,
insofar as directly affects in any material respect the rights, benefits
duties responsibilities, liabilities and/or obligations of the
Settlement System Administration no amendment to or variation of any of
the matters dealt with in any of the following provisions of this
Agreement shall take effect:
6.3.1 without the prior written consent of the Settlement System
Administrator:
(a) the definitions in Clause 1.1 of "Agreed Procedure",
"Code of Practice", "Force Majeure" and "Good Industry
Practice";
(b) Clauses 6.9, 7.3, 7.6, 9.5, 10.9, 10.10, 19.4, 27, 28,
32, 33, 34.1, 34.2, 35.3, 35.4, 35.6, 36.2, 37, 39,
42.4, 42.5, 66, 68, 69, 72, 74 and 78.2;
(c) Sections 1.6 (and its application to any other Section
of Schedule 9), 1.7 and 3 of Schedule 9: and
(d) this Clause 6.3;
6.3.2 without the prior written consent of the Settlement System
Administrator (such consent not to be unreasonably withheld or
delay):
(a) Clauses 18.1.2, 18.1.4, 19.5, 29, 30, 31, 40 to 48
(inclusive), 60, 70, 71.1, 71.2 (but only insofar as
directly concerns the fees and charges referred to
therein), 71.5 and 71.6;
(b) Part XXII (other than Clauses 74 and 78.2);
(c) paragraphs 4 to 16 (inclusive), 18, 19, 21 and 22 of
Schedule 21;
(d) Section 30 of, and Appendix 4 to, Schedule 9; and
(e) Section 2(b) of Part C to Schedule 17.
6.4 Pool Funds Administrator's consent: the prior written consent of the
Pool Funds Administrator may be needed to certain amendments to or
variations of this Agreement, as provided in Schedule 15.
6.5 Grid Operator's consent: the Parties acknowledge and agree that,
notwithstanding any other provision of this Agreement, insofar as
directly affects in any material
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respect the rights, benefits, duties, responsibilities, liabilities
and/or obligations of the Grid Operator, no amendment to or variation of
any of the matters dealt with in any of the following provisions shall
take effect:
6.5.1 without the prior written consent of the Grid Operator:
(a) Clauses 6.9, 7.3, 7.6, 9.5, 10.9, 10.10, 19.4, 25, 37.3,
47 to 50 (inclusive), 66, 68, 69, 72, 74 and 78.2;
(b) sub-section 3.1 of Appendix 2 to Schedule 9; and
(c) this Clause 6.5; and
6.5.2 without the prior written consent o the Grid Operator (such
consent not to be unreasonable withheld or delayed), any other
provision of this Agreement,
Provided that the references to Parties and to the Grid Operator in this
Clause 6.5 shall be construed as if they were references to such terms
prior to the creation of Meter Operator Parties and the associated
amendments to this Agreement, but this shall be without limitation to
any right of the Grid Operator to consent to any amendment or variation
to this Agreement under this Clause 6.5.
6.6 Ancillary Services Provider's consent: the Parties acknowledge and agree
that, notwithstanding any other provision of this Agreement, insofar as
directly affects in any material respect the rights, benefits, duties,
responsibilities, liabilities and/or obligations of the Ancillary
Services Provider, no amendment to or variation of any of the following
provisions shall take effect:
6.6.1 without the prior written consent of the Ancillary Services
Provider:
(a) Clauses 6.9, 7.3, 7.6, 9.5, 10.9, 10.10, 19.4, 25, 52.3,
66, 68, 69, 72, 74 and 78.2;
(b) Part XI and the provisions expressly incorporated
therein by reference;
(c) Sections 1.8, 23, 24.8 and 28 of Schedule 9; and
(d) this Clause 6.6; and
6.6.2 without the prior written consent of the Ancillary Services
Provider (such consent not to be unreasonably withheld or
delayed), any other provision of this Agreement.
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6.7 Amendments generally: without prejudice to the rights, powers and
privileges of the Secretary of State and the Director under the Act or
any License or otherwise howsoever:
6.7.1 subject to:
(a) any consent of a particular person(s) required to be
obtained under the foregoing provisions of this Clause 6
being obtained; and
(b) the requirements of Clauses 6.7.2 and 13.2; and
save where otherwise expressly provided in this Agreement, any
amendment to or variation of this Agreement shall be effective
if approved by the Pool Members in general meeting pursuant to
Clause 13.1 or 13.2 and all Parties agree promptly to execute
and deliver all agreements and other documentation and to do all
such other acts, matters and things as may be necessary to give
effect to such amendment or variation; and
6.7.2 where any change is proposed to this Agreement which, if made:
(a) would introduce provisions dealing with matters not then
dealt with in or expressly contemplated by this
Agreement; and
(b) would in any material respect directly affect the
rights, benefits, duties, responsibilities, liabilities
and/or obligations under this Agreement of the
Settlement System Administrator, the Grid Operator, the
ancillary Services Provider and/or any Externally
Interconnected Party,
such change shall not be made without the prior written consent
of the relevant one(s) of them (in each case such consent not to
be unreasonably withheld or delayed) Provided that the reference
to the Grid Operator in this Clause 6.7.2 shall be construed as
if it was a reference to such term prior to the creation of
Meter Operator Parties and the associated amendments to this
Agreement, but this shall be without limitation to any right to
consent to any amendment or variation of this Agreement under
this Clause 6.7.2.
Inconsistencies and Conflicts
6.8 Internal inconsistencies and conflicts: in the event of any
inconsistency or conflict:
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6.8.1 the Pool Rules shall prevail over the other provisions of this
Agreement (except Clause 4);
6.8.2 the provisions of this Agreement shall prevail over the
Specification; and
6.8.3 the Specification shall prevail over the Software,
and the Parties shall use all reasonable endeavors promptly to secure
the elimination of such inconsistency or conflict.
6.9 External inconsistencies and conflicts:
6.9.1 each of the Parties hereby acknowledges and agrees the
desirability of achieving and maintaining consistency and
absence of conflict between the provisions o this Agreement and
the Grid Code but recognizes that, due principally to the
different functions and objectives of this Agreement and the
Grid Code, the fact that there may be Parties who are not bound
by the Grid Code and the difference procedures in this Agreement
and the Grid Code for review of their respective terms, it will
not in all circumstances be possible to avoid inconsistency or
conflict.
6.9.2 Where at the Effective Date there is an inconsistency or
conflict between the provisions of this Agreement and the Grid
Code the Executive Committee shall first consider the matter and
make recommendations and thereafter the Parties shall negotiate
in good faith to eliminate such inconsistency and/or conflict
having regard to the different functions and objectives o the
Grid Code and this Agreement.
6.9.3 Each of the Parties shall use its reasonable endeavors to ensure
that where any change to this Agreement is proposed to be made
which may reasonably be expected to require a change to the Grid
Code (or vice versa) such change is brought by the Executive
Committee to the attention of the Grid Code Review Panel in good
time to enable it to consider what corresponding change, if any,
should be made to the Grid Code or (as the case may be) this
Agreement. In any such consideration, the Parties acknowledge
and agree that it would be desirable in the event of any
inconsistency or conflict between the provisions of this
Agreement and the Grid Code if regard were had by the Grid Code
Review Panel to the principles set out in Clause 6.9.4.
6.9.4 The principles referred to in Clause 6.9.3 are that:
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(a) where by reason of any inconsistency or conflict the
security, quality of supply and/or safe operation of the
NGC Transmission System under both normal and/or
abnormal operating conditions would necessarily be
compromised and/or the Grid Operator would necessarily
be in breach of its obligations under the Act or its
Transmission License, the provisions of this Agreement
should be made to conform (to the extent of such
inconsistency or conflict) to those of the Gird Code;
and
(b) in any other case, where by reason of such inconsistency
or conflict there is or is likely to be a material
financial effect on any class of Pool Members or on all
or a significant number of Pool Members, the provisions
of the Grid Code should be made to conform (to the
extent of such inconsistency or conflict) to those of
this Agreement.
6.9.5 The Parties acknowledge that changes to the Grid Code are
required to be approved by the Director.
6.9.6 Where there is any conflict or inconsistency between the Grid
Code and the Pool Rules, no Party shall be liable hereunder or
under the Grid Code as a result of complying with its
obligations under this Agreement or under the Grid Code.
6.10 Breaches of the Pool Rules: if at any time any Party believes that there
has been a breach of the Pool Rules, such Party shall promptly report
the same in writing to the Executive Committee.
6.11 Director's requests: the Executive Committee shall:
(i) give due and prompt consideration to any matter referred to it
in writing by the Director;
(ii) advise the Director in writing of any decision or action of the
Executive Committee in relation to such matter;
(iii) provide the Director in writing with an explanation in
reasonable detail of the reasons for such decision or action;
and
(iv) if reasonably requested by the Director (having regard, in
particular, to the resources available to the Executive
Committee), in relation to any proposal by the Director for a
change to any provision of this Agreement provide or procure the
provision of advice and assistance to the Director as soon as
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reasonably practicable as to the implications of the change and
the actions necessary to implement it (including any relevant
feasibility study).
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PART III
POOL MEMBERSHIP AND GENERAL MEETINGS
7. INTRODUCTION
7.1 Obligations contractually binding: each Pool Member acknowledges and
agrees that it is bound to each other Pool Member as a matter of
contract and will comply with its obligations under this Agreement.
7.2 Externally Interconnected Parties: each Externally Interconnected Party
acknowledges and agrees that it is bound to each Pool Member as a mater
of contract and undertakes to comply with the Pool Rules so far as they
may be applicable to it and each Pool Member acknowledges and agrees
that it is bound to each Externally Interconnected Party as a matter of
contract and will comply with its obligations under this Agreement.
7.3 Parties not Pool Members: the Settlement System Administrator, the Pool
Funds Administrator, the Grid Operator and the Ancillary Services
Provider shall not be Pool Members and not be bound as against other
Pool Members or the Executive Committee except as expressly provided for
in this Agreement, the Escrow Agreement and the Funds Transfer Agreement
in their respective roles as Settlement System Administrator, Pool Funds
Administrator, Grid Operator and Ancillary Services Provider.
7.4 Pool Rules:
7.4.1 the Pool Rules as at lst April, 1993 are set out in Schedule 9.
The Settlement System calculations shall be carried out on the
basis of the Settlement System and the Pool Rules. The Annex to
this Agreement contains modified Pool Rules to which the
Executive Committee shall have regard when considering changes
to the Pool Rules pursuant to Clause 38.
7.4.2 The Pool Rules shall be developed under the control of the
Executive Committee. The Executive Committee shall approve all
changes to the Pool Rules and no change shall be made to the
Pool Rules without the prior approval of the Executive
Committee.
7.5 Pool Members obligations:
7.5.1 save as otherwise expressly provided in this Agreement, the
obligations of each Pool Member under this Agreement are several
and a Pool Member shall not be responsible for the obligations
or liabilities of any
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other Pool Member. The failure of any Pool Member to carry out
all or any of its obligations under this Agreement shall not
relieve any other Pool Member of all or any o its obligations
hereunder.
7.5.2 In respect of those obligations of a Pool Member (the
"Indemnifying Pool member") under this Agreement which are
expressed to be several, the Indemnifying Pool Member shall
indemnify and keep indemnified each other Pool member from and
against all losses, costs (including legal costs) and expenses
which such other Pool Member may suffer or incur as a result of
being held liable by operation of law (or contesting any such
liability) for the performance or non- performance of all or any
of such obligations o the Indemnifying Pool Member.
7.6 Information: in respect of all data and other information which a Pool
Member or an Externally Interconnected Party (not being a Pool Member)
is required to notify to the Settlement System Administrator under or
pursuant to this Agreement (other than (i) Metered Data (as defined in
paragraph 3.1.2 of Schedule 9) and (ii) pursuant to paragraph 2.3.2 of
Schedule 9, the relevant Pool member or (as the case may be) Externally
Interconnected Party shall use all reasonable endeavors to ensure that
all such data and other information is complete and accurate in all
material respects.
8. POOL MEMBERSHIP
8.1 Initial Pool Members: the initial Pool Members shall be the Founder
Generators and the Founder Suppliers.
8.2 Additional Pool Members:
8.2.1 subject to the following provisions of this Clause 8.2 and to
the fulfillment by the Party concerned of the conditions set out
or referred to in Clause 8.3 (the "Pool Membership Conditions"),
any Party shall, upon application to the Executive Committee, be
admitted as a Pool Member.
8.2.2 For the purposes of this Clause 8, "Party" shall include any
person who is applying to be admitted as a Party pursuant to
Clause 3 contemporaneously with being admitted as a Pool Member
but shall exclude the Settlement System Administrator, the Pool
Funds Administrator, the Grid Operator and the ancillary
Services Provider.
8.2.3 Subject to Clause 8.2.4, the admission of a Party as a Pool
Member shall take effect on the date (the "Admission Date")
specified by the Executive Committee (with the prior agreement
of the Settlement
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System Administrator) in a notice given by the Executive
Committee to the relevant Party no later than 28 days after the
Satisfaction Date, provided that the Admission Date shall be a
date falling no earlier than the Satisfaction Date and (unless
otherwise agreed by the Executive Committee, the Settlement
System Administrator and such party) no later than 90 days after
the Satisfaction Date. In default of such notification being
given by the Executive Committee within the said 28 days, the
admission shall take effect on the day falling 35 days after the
Satisfaction Date. For the purposes of this Clause, the
"Satisfaction Date" shall be the day on which the last of the
Pool Membership Conditions required to be fulfilled by such
party shall have been fulfilled by it.
8.2.4 No person shall be admitted as a Pool Member unless prior to or
contemporaneously with such admission it shall have been or (as
the case may be) shall be admitted as a Party.
8.2.5 Prior to a Party's admission as a Pool member the Executive
Committee shall, where appropriate, determine and notify the
relevant party of the amount of Security Cover (if any) to be
provided by such Party.
8.3 Pool Membership Conditions:
8.3.1 where a person has been admitted as a Party pursuant to Clause 3
otherwise than contemporaneously with being admitted as a Pool
Member pursuant to Clause 8, the Pool Membership Conditions
applicable to it shall (unless otherwise determined by the
Director upon the application of such person or the Executive
Committee) be those that would have been applicable to it if it
had applied to be admitted as a Pool Member at the date of its
admission as a Party and, subject as aforesaid, such person
shall not be required to fulfill any further or other Pool
Membership Conditions introduced after such date unless the
applicant notifies the Executive Committee in writing prior to
or contemporaneously with its application for admission as a
Pool Member that it wishes such further or other conditions to
apply, in which case the Pool Membership Conditions applicable
to it shall (subject as aforesaid) be those applicable on the
date of its application for admission as a Pool Member.
8.3.2 The Pool Membership Conditions required to be fulfilled by a
Party prior to its admission as a Pool member are:
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(a) the due completion by the Party and the delivery to the
Executive Committee of a Pool Membership Application;
(b) in respect of any Metering System required to be taken
into account for the purposes of Settlement and which
relates to the Party, the provision of evidence
reasonably satisfactory to the Executive Committee that:
(i) there is a Registrant and an Operator for such
Metering System;
(ii) such Registrant has provided to the Settlement
System Administrator the information required
for standing data purposes as required by this
Agreement or the relevant Agreed Procedure; and
(iii) such Metering System conforms with the
requirements of Part XV, all relevant Agreed
Procedures and all Codes of Practice and is
compatible with the Settlement System;
(c) the Party has entered into and has in full force and
effect all appropriate Connection Agreements or, if the
Party is applying to be admitted as an External Pool
Member, that all appropriate Connection Agreements with
the relevant Externally Interconnected Party in relation
to the relevant Interconnection are in full force and
effect;
(d) the provision of such information as the Executive
Committee may reasonably require to enable the Executive
Committee to ascertain whether any of the provisions of
Clause 11.4 are applicable to that Party, to determine
whether that Party is an Independent Generator, Small
Generator and/or Independent Supplier and to calculate
the initial Weighted Votes and Points of that Party as a
Pool Member under Clause 11.3 and Schedule 13
respectively;
(e) the provision of such information as the Executive
Committee may reasonably require:
(i) to enable the Executive Committee to ascertain
whether (and, if so, on what basis) that Party
is entitled to take the benefit of any exception
in Clause 8.5 claimed by it; and
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(ii) to assist the Executive Committee in making any
determination under Clause 8.5 relevant to that
Party;
(f) if the Party is a Generator (other than an External Pool
Member), the provision of evidence reasonably
satisfactory to the Executive Committee that the Party
operates or has under its control one or more Generating
Units, which Generating Unit(s) has (have) provided
electricity to the Total system or will be capable of so
providing electricity within such period as the
Executive Committee may specify; and
(g) if the Party is an External Pool Member, the provision
of evidence reasonably satisfactory to the Executive
Committee that the Party has the right to use one or
more Generation Trading Blocks and/or the right to take
electricity across an External Interconnection under an
Interconnection Agreement then in full force and effect.
8.4 Compliance: each Pool Member shall procure that for so long as it is a
Pool Member it shall at all times satisfy or otherwise comply with those
Pool Membership Conditions (whether set out in this Agreement or in its
Pool Membership Application) applicable to it (and/or such further or
other conditions as the Executive Committee may from time to time
reasonably specify). Each Pool Member shall upon request from time to
time promptly provide the Executive Committee with such information as
the Executive Committee may reasonably require (i) to enable the
Executive Committee to ascertain whether (and, if so, on what basis)
that Pool Member is entitled to take the benefit of any exception in
Clause 8.5 claimed by it, and (ii) to assist the Executive Committee in
making any determination under Clause 8.5 relevant to that Party, and
further with evidence reasonably satisfactory to the Executive Committee
of such satisfaction and compliance.
8.5 Restrictions applicable to Pool Members:
8.5.1 at each of its Sites, or where any such Site forms part of a
Trading Site, such Trading Site, each Generator shall sell its
entire Exports of electricity to Pool Members pursuant to this
Agreement except:-
(a) for its Exports of electricity from any generating
station in respect of which (but for other generating
stations owned or operated by it) it would not be
required to hold a Generation Licence, being Exports at
any Site, or as the case may be, Trading Site for which
the Generator is not required to complete a Supplemental
Agreement to the Master Connection and Use of System
Agreement.
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Provided that the Generator has given the Executive Committee
either on the Effective Date or not less than 10 Business Days
before that Site, or as the case may be, Trading Site is
withdrawn from the requirements of this provision written notice
that the circumstances described in sub-paragraph (a) apply: or
(b) for the output of electricity from any of its Generating
Units in circumstances which the Executive Committee
resolves by a vote passed by 80 per cent. or more of the
votes of all Committee Members (after consultation with
the Director) are exceptional.
8.5.2 In respect of all its requirements for electricity which a
Supplier wishes to purchase from Pool Members, the Supplier
shall purchase the same pursuant to this Agreement, provided
that nothing in this Agreement shall prevent or restrict the
purchase by a Supplier otherwise than pursuant to this
Agreement:-
(a) in circumstances where the Supplier is acting otherwise
than in its capacity as a consumer, of all or part of
that output of electricity from any Generating Unit
which is not required to be sold to Pool members
pursuant to Clause 8.5.1 or of electricity which has
been purchased by an External Pool Member at its
associated External Interconnection as an export from
the NGC Transmission System pursuant to this Agreement;
(b) in circumstances where the Supplier is acting in its
capacity as a consumer:-
(i) of electricity from any Supplier which has
purchased that electricity pursuant to this
Agreement; or
(ii) of such output of electricity as is referred to
in paragraph (a) above; or
(c) in circumstances where the Supplier is a Supplier
holding a PES Licence and is acting in its capacity as a
PES, of electricity from any Supplier which is a
Supplier holding a PES Licence, which operates a
Distribution System directly connected to the
Distribution System operated by the Supplier first
mentioned in this paragraph (c) and which has purchased
that electricity pursuant to this Agreement; or
(d) in circumstances which the Executive Committee resolves
by a vote passed by 80 per cent. or more of the votes of
all Committee Members (after consultation with the
Director) are exceptional, from any person.
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For the purposes of this Clause 8.5.2 a "consumer" means a
person who purchases electricity from a Supplier for its own
consumption at premises owned or occupied by that person.
8.6 Restrictions applicable to non-Pool Members: save as otherwise expressly
provided, a Party which is not a Pool Member shall not be entitled to
any of the rights and benefits accorded to Pool Members under this
Agreement.
8.7 Resignation: subject as provided in Clause 8.8:-
8.7.1 a Party (other than the Settlement System Administrator, the
Pool Funds Administrator, the Grid Operator, the Ancillary
Services Provider and each Externally Interconnected Party)
shall be entitled at any time to resign as a Party by delivering
a Resignation Notice to the Secretary; and
8.7.2 such resignation shall take effect 28 days after receipt of the
Resignation Notice by the Secretary.
Promptly after receipt of a duly completed Resignation Notice from a
Party, the Secretary shall notify (for information only) all of the
other Parties, the Executive Committee and the Director of such receipt
and of the name of the Party wishing to resign.
8.8 Restrictions on resignation: a Party may not resign as a Party (and any
Resignation Notice delivered pursuant to Clause 8.7.1 shall lapse and be
of no effect) unless:-
8.8.1 as at the date its resignation would otherwise become effective
all sums due from such Party to the Executive committee or any
other Party under (a) this Agreement, (b) the Funds Transfer
Agreement or (c) any agreement entered into pursuant to this
Agreement (whether by or on behalf of such Party) and notified
for the purposes of this Clause 8.8 by the Executive Committee
to such Party prior to the date of its resignation, have been
paid in full; and
8.8.2 it would not be a breach of any Licence condition applicable to
such Party so to resign.
8.9 Release as a Party: without prejudice to Clause 66.7 and its accrued
rights and liabilities and its rights and liabilities which may accrue
in relation to the period during which it was a Party under this
Agreement, the funds Transfer Agreement or any agreement referred to in
Clause 8.8.1(c), upon a Party's resignation becoming effective in
accordance with Clause 8.7:-
8.9.1 such Party (if it is a Pool Member) shall cease automatically to
be a Pool Member;
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8.9.2 such Party shall be automatically released and discharged from
all its obligations and liabilities under this Agreement, the
Funds Transfer Agreement and any agreement referred to in Clause
8.8.1(c); and
8.9.3 each of the other Parties shall be automatically released and
discharged from its obligations and liabilities to such Party
under this Agreement, the Funds Transfer Agreement and any
agreement referred to in Clause 8.8.1(c).
Each Party shall promptly at its own cost and expense execute and
deliver all agreements and other documentation and do all such other
acts, matters and things as may be necessary to confirm such cessation,
release and discharge.
8.10 Withdrawal as a Party: if a Party (the "Withdrawing Party") shall apply
on three occasions to be admitted as a Pool Member pursuant to this
Clause 8 and on each such occasion it is not so admitted by reason of
its failure to fulfil the relevant Pool Membership conditions then with
effect from the date the Withdrawing Party is deemed to receive
notification from the Executive Committee pursuant to Clause 75 that it
has failed for the third time to fulfil such conditions, without
prejudice to Clause 66.7 and its accrued rights and liabilities, and its
rights and liabilities which may accrue in relation to the period during
which it was a Party, under any agreement entered into pursuant to this
Agreement (whether by or on behalf of the Withdrawing Party) and
notified to it for the purposes of this Clause 8.10 by the Executive
Committee prior to the date of its cessation as a Party:-
8.10.1 the Withdrawing Party shall automatically cease to be a Party
and shall be automatically released and discharged from all its
obligations and liabilities under this Agreement and any such
agreement;
8.10.2 each of the other Parties shall be automatically released and
discharged from its obligations and liabilities to the
Withdrawing Party under this Agreement and any such agreement;
and
8.10.3 each Party shall promptly, at the cost and expense of the
Withdrawing Party, execute and deliver all agreements and other
documentation and do all such other acts, matters and things as
may be necessary to confirm such cessation, release and
discharge.
8.11 External Pool Members: a person who has been admitted as an External
Pool Member shall immediately cease to be a Pool Member (such cessation
to be without prejudice to Clause 66.7) upon either:-
8.11.1 all of its rights under an Interconnection Agreement to use the
relevant External Interconnection(s) for taking or delivering
electricity from or to the NGC Transmission System having
permanently ceased; or
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8.11.2 the relevant External Interconnection(s) permanently ceasing to
be connected to the NGC Transmission System.
8.12 Change of capacities: any Pool Member may, upon application to the
Executive Committee and satisfaction of those of the Pool Membership
conditions relevant to its new capacity and such other conditions (if
any) as the Executive Committee may reasonably require, change the
capacity(ies) in which it participates as a Pool Member.
9. GENERAL MEETINGS
9.1 Annual general meeting: once in, and no later than 31st March of, each
year Pool Members shall hold a general meeting as their annual general
meeting in addition to any other meetings of Pool Members in that year,
and notices calling such general meeting shall specify it as the annual
general meeting. At each annual general meeting the Pool Members shall
be required to consider and, where appropriate, resolve upon the
following, namely:-
9.1.1 a report prepared by the Executive Committee on the Settlement
System and its operation during the immediately preceding year,
which report shall include:-
(a) a review of the operation of the Settlement System, the
Accounting Procedure, the accounting procedure set out
in Schedule 15 and the Funds Transfer System during the
immediately preceding year;
(b) a report on the progress of all Works Programmes then
current and of all changes to the operation of the
Settlement System, the Accounting Procedure, the
accounting procedure set out in Schedule 15, the Funds
Transfer System, all revisions to this Agreement and all
enhancements, improvements and modifications of or to
the Specification, the Hardware or the Software, in each
case which have been undertaken pursuant to this
Agreement;
(c) a review of performance over the immediately preceding
year against the business plan referred to in Clause
9.1.6; and
(d) such other information or matters as the Executive
Committee shall consider appropriate (including any
proposed revision to this Agreement);
9.1.2 a report prepared by the Pool Auditor on the Settlement System
and its operation during the immediately preceding year, which
report shall include:-
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(a) a summary of the audits, reviews, tests and/or checks
referred to in Part IX carried out by the Pool Auditor
during such immediately preceding year;
(b) any recommendation which the Pool Auditor wishes to make
regarding the operation of the Settlement System, the
Accounting Procedure, the accounting procedure set out
in Schedule 15, the ASP Accounting Procedure and the
Funds Transfer System; and
(c) such other information or matters which the Executive
Committee may reasonably require or the Pool Auditor
shall consider appropriate;
9.1.3 all Budgets and reports prepared by the Settlement System
Administrator under Schedule 4 since the date of the immediately
preceding annual general meeting;
9.1.4 the appointment of Committee Members pursuant to Clause 15
(where appropriate, in separate class meetings of Pool
Members);
9.1.5 such matters as any Pool Member present in person may wish to
raise at such meeting, notice of which has been given to the
Secretary no later than seven days before the date of such
meeting, it being acknowledged and agreed that failure by a Pool
Member so to notify shall not prejudice the right of any Pool
Member to ask questions at such meeting on any matter then
before such meeting;
9.1.6 a business plan prepared by the Executive Committee for the then
current year and the next following four years (or such shorter
period as the Pool Members in general meeting shall from time to
time determine) on the Settlement System and the Funds Transfer
System and their operation and in relation to all other matters
which are the subject of this Agreement;
9.1.7 the election of the Pool Chairman pursuant to Clause 16; and
9.1.8 such other matters as the Executive Committee sees fit to
propose and of which notice has been given in accordance with
Clause 9.4.1.
9.2 General meetings: all general meetings of Pool Members other than annual
general meetings shall be extraordinary general meetings.
9.3 Calling meetings: all general meetings of Pool Members shall be called
by 14 days' notice in writing at the least, provided that a general
meeting of Pool Members shall, notwithstanding that it is called by
shorter notice, be deemed to have been duly called if it is so agreed by
a majority in number of the Pool Members having a right to
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attend and vote at such meeting, being a majority in number together
holding not less than 95 per cent. of the Total Votes.
9.4 Convening meetings:
9.4.1 an annual general meeting shall be convened by the Secretary on
the instructions of the Executive Committee and any notice
convening such a meeting shall set out or append details of any
such matters as are referred to in Clause 9.1.8 and shall be
accompanied by a copy of the reports referred to in Clauses
9.1.1 to 9.1.3 (inclusive) and of the business plan referred to
in Clause 9.1.6. The Secretary shall use its reasonable
endeavours to notify the Pool Chairman and Pool Members in
advance of the relevant annual general meeting of any such
matters referred to in Clause 9.1.8 of which the Secretary has
received notice in accordance with that Clause.
9.4.2 Extraordinary general meetings shall be convened:-
(a) by the Secretary on the instructions of the Executive
Committee or of any one or more Committee Members
pursuant to Clause 13.4; or
(b) by the Executive Committee, forthwith upon receipt of a
Pool Members' requisition being a requisition of Pool
Members holding together at the date of the deposit of
the requisition not less than two per cent. of the Total
Votes of all Pool Members; or
(c) by the Secretary on the instructions of the Pool
Chairman.
9.4.3 A Pool Members' requisition shall state the objects of the
meeting and must be signed by or on behalf of the
requisitionists and deposited at the office of the Secretary,
and may consist of several documents in like form each signed by
one or more requisitionists. If the Executive Committee does not
within 21 days from the date of the deposit of the requisition
proceed duly to convene an extraordinary general meeting for a
date not later than two months after the said date of deposit,
the requisitionists may themselves convene a meeting, but any
meeting so convened shall not be held after the expiration of
three months from such date. A meeting convened under this
Clause 9.4 by requisitionists shall be convened in the same
manner, as nearly as possible, as that in which meetings are to
be convened by the Executive Committee.
9.5 Notice of general meetings: any notice convening any general meeting of
Pool Member shall be exclusive of the day on which it is served or
deemed to be served and of the day for which it is given, and shall
specify the place, the day and the hour of the meeting and the general
nature of the business of such meeting and shall be given to all
Parties, all Committee Members, the Pool Chairman, the Chief Executive
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(if any), the Pool Auditor and the Director. The accidental omission to
give notice of a meeting to, or the non-receipt of notice of a meeting
by, any person entitled to receive notice shall not invalidate the
proceedings at that meeting. In every such notice there shall appear
with reasonable prominence a statement that a Pool Member entitled to
attend and vote is entitled to appoint a proxy to attend, speak and
(subject to Clause 12.1) vote in its place and that a proxy need not
also be a Pool Member.
9.6 Quarterly meetings:
9.6.1 The Secretary shall, on the instructions of the Executive
Committee, convene meetings of Pool Members not less frequently
than once in each Quarter to discuss reports prepared by the
Executive Committee pursuant to Clause 24.2.16 and any other
matter of interest which is the subject of this Agreement.
Unless the Executive Committee otherwise determines, no such
meeting shall be convened for the Quarter in which any annual
general meeting is to take place.
9.6.2 The provisions of Clauses 9.3 and 9.5 shall apply, mutatis
mutandis, for the purposes of the notice and the calling of
quarterly meetings pursuant to Clause 9.6.1 as if such meetings
were general meetings of Pool Members and the provisions of
Clause 10.9 shall also apply mutatis mutandis. Nothing in this
Agreement shall prevent a quarterly meeting being convened also
as an extraordinary general meeting.
10. PROCEEDINGS AT GENERAL MEETINGS
10.1 General: save as provided in Clause 12.8 and Part IV, all business of
Pool Members shall be transacted at general meetings of Pool Members,
the proceedings for the conduct of which are set out in this Clause 10.
10.2 Quorum: no business shall be transacted at any general meeting of Pool
Members unless a quorum of Pool Members is present at the time when the
meeting proceeds to business. Save as herein otherwise provided, a
quorum shall be Pool Members present in person representing:-
10.2.1 50 per cent. or more of the aggregate number of Weighted Votes
to which all Generators are entitled under Clause 11.2.1; and
10.2.2 50 per cent. or more of the aggregate number of Weighted Votes
to which all Suppliers are entitled under Clause 11.2.2
10.3 Lack of quorum: if within half an hour from the time appointed for the
general meeting a quorum is not present, the meeting shall stand
adjourned to the same day in the next week, at the same time and place
or to such other day and at such other time
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and place as the Executive Committee may determine and, if at the
adjourned meeting a quorum is not present within half an hour from the
time appointed for the meeting, the Pool member(s) present shall be a
quorum.
10.4 Chairman: the Pool Chairman shall preside as chairman at every general
meeting and separate general meeting of Pool Members (other than one
convened to consider his removal) or, if there is no Pool Chairman or if
he shall not be present within 15 minutes after the time appointed for
the holding of the meeting or is unwilling to act or if the relevant
meeting has been convened to consider the removal of the Pool Chairman,
the Chief Executive (if any) shall preside as chairman or, if the Chief
Executive shall not be present or is unwilling to act or if the relevant
meeting has been convened to consider the removal of the Chief
Executive, the Pool Members present shall choose one of their number to
be chairman of the meeting.
10.5 Adjournments: the chairman of the meeting may, with the consent of any
general meeting of Pool Members at which a quorum is present (and shall
if so directed by the meeting) adjourn the meeting from time to time and
from place to place, but no business shall be transacted at any
adjourned meeting other than the business left unfinished at the meeting
from which the adjournment took place. When a meeting is adjourned for
30 days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
10.6 Demand for a pool: at any general meeting of Pool Members a resolution
put to the vote of the meeting shall be decided on a show of hands
unless a poll is (before or on the declaration of the result of the show
of hands) demanded:-
10.6.1 by the chairman of the meeting; or
10.6.2 by at least two Pool Members present in person or by proxy; or
10.6.3 by any Pool Member present in person or by proxy and holding not
less than two per cent. of the Total Votes of all Pool Members.
Unless a poll be so demanded a declaration by the chairman of the
meeting that a resolution has on a show of hands between carried or
carried unanimously, or by a particular majority, or lost and an entry
to that effect in the book containing minutes of the proceedings of
general meetings shall be conclusive evidence of the fact without proof
of the number or proportion of the votes recorded in favour of or
against such resolution. The demand for a poll may be withdrawn.
10.7 Timing of poll: except as hereinafter provided in this Clause 10.7, if a
poll is duly demanded it shall be taken in such manner as the chairman
of the meeting directs, and
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the result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded. A poll demanded on the election
of the chairman of the meeting or on a question of adjournment shall be
taken forthwith. A poll demanded on any other question shall be taken at
such time as the chairman of the meeting directs, and any business other
than that upon which a poll has been demanded may be proceeded with
pending the taking of the poll.
10.8 No casting vote: in the case of an equality of votes, whether on a show
of hands or on a poll, the chairman of the meeting at which the show of
hands takes place or at which the poll is demanded, shall not be
entitled to a second or casting vote.
10.9 Representation of non-Pool Members: each of the Chief Executive (if any)
or his duly appointed representative, the Settlement System
Administrator, the Pool Funds Administrator, the Grid Operator and the
Ancillary Services Provider shall be obliged to attend, and each other
Party, each Committee Member, the Pool Auditor and the Director (or its
or his duly appointed representative) shall have the right to attend, at
each general meeting of Pool Members, and each of them shall have the
right to speak (but not to vote) thereat.
10.10 Minutes: the Secretary shall prepare minutes of all general meetings of
Pool Members and shall circulate copies thereof to all Parties, each
Committee Member, the Pool Chairman, the Chief Executive (if any), the
Pool Auditor and the Director as soon as practicable (and in any event
within ten working days) after the relevant meeting has been held.
11. VOTING
11.1 Membership Votes: each Pool Member shall be entitled to one vote by
reason of its Pool Membership (its "Membership Vote"),,
11.2 Weighted Votes: subject as provided in Clauses 11.3 and 11.4, in respect
of any Quarter:-
11.2.1 each Pool Member which is a Generator shall be entitled in that
capacity to one vote for each GWh of Genset Metered Generation
of all Generating Units of such Pool Member for all Settlement
Periods falling in the Votes Calculation Period relative to such
Quarter, as determined from the final run of Settlement (as
referred to in paragraph D(3) of the Preamble to Schedule 9) for
each such Settlement Period; and
11.2.2 each Pool Member which is a Supplier shall be entitled in that
capacity to such number of votes as is equal to the total GWh of
Consumer Metered Demand taken by that Pool Member in all
Settlement Periods
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falling in the Votes Calculation Period relative to such
Quarter, as determined from the final run of Settlement (as
referred to in paragraph D(3) of the Preamble to Schedule 9) for
each such Settlement Period,
11.3 Calculation of Weighted Votes: subject as provided in Clause 11.4:-
11.3.1 New Pool Members:
(a) until the third Quarter Day next falling after the date
of its admission as a Pool Member, any Party who is
admitted as a Pool Member pursuant to Clause 8.2 shall
have that number of Weighted Votes as fall to be
determined in accordance with the following provisions
of this Clause 11.3.1. Thereafter, such Pool Member's
Weighted Votes shall be calculated in accordance with
Clause 11.2;
(b) until the third Quarter Day next falling after the date
of admission of the relevant Pool member as a Pool
Member such Pool Member shall have that number of
Weighted Votes as are accorded to it upon its admission
as a Pool Member by the Executive Committee (which the
Executive Committee shall do prior to the date of such
admission) who shall have regard to the factors listed
in paragraph (c), (d) and/or (as the case may be) (e)
below or as are determined by the Director in accordance
with Clause 11.5;
(c) the factors referred to in paragraph (b) shall i the
case of such Generator:-
(i) the Registered Capacity of all Generating Units
of such Generator;
(ii) the Executive Committee's assessment of the
likely availability of all such Generating Units
for the period from the date of admission of
such Pool Member as a Pool Member to the third
Quarter Day next falling after such date, having
regard to the registered Generation Scheduling
and Despatch Parameters or (as the case may be)
Generation Trading Block Scheduling and Despatch
Parameters for such Generating Units;
(iii) the Executive Committee's assessment of the
likely output of all such Generating Units
during such period having regard to the output
of Generating Units which in
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the Executive Committee's opinion most nearly
correspond to such Generating Units; and
(iv) the Executive Committee's assessment of the
likely daily station load associated with the
Power Stations of which such Generating Units
form part during such period.
(d) the factors referred to in paragraph (b) above shall in
the case of a Supplier be the total GWh which would be
supplied by the relevant Supplier in the period from the
date of admission of such Pool Member as a Pool Member
to the third Quarter Day next falling after such date on
the basis of its Customers' metered demand or, where
such metered information is not available, the load
profiles of its Customers used for the purposes of
estimating the consumption of Second Tier Customers; and
(e) the factors referred to in paragraph (b) above shall in
the case of an External Pool Member be whichever one or
more of those factors referred to in paragraph (c) above
and those referred to in paragraph (d) above as the
Executive Committee considers to be most readily
applicable to the Generating Units (if any) of such Pool
Member and to the level of demand for Active Energy of
that Pool Member across the relevant External
Interconnection but as if the references to Customers in
paragraph (d) were references to that Pool Member's own
requirements:
11.3.2 Calculation: on or prior to each Quarter Day the Executive
Committee shall, on the basis of information to be supplied by
the Settlement System Administrator, calculate the number of
Weighted Votes to which each Pool Member whose Weighted Votes
are to be calculated in accordance with Clause 11.2 is entitled
in its capacity as a Generator or a Supplier for the Following
Quarter, and shall notify each Pool Member and the Director in
writing of the number of Weighted Votes of all Pool Members in
their respective capacities (whether calculated in accordance
with Clause 11.2 or 11.3.1). Subject to Clause 11.5, the
determination of the Executive Committee as to the number of
Weighted votes of each Pool Member shall (in the absence of
manifest error) be final and binding for all purposes of this
Agreement;
11.3.3 Attribution: if a Pool Member shall receive one Weighted Vote or
no Weighted Votes by reason of the calculations under Clause
11.2 or the foregoing provisions of this Clause 11.2 or the
foregoing provisions of
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this Clause 11.3, such Pool Member shall nevertheless be
accorded two Weighted Votes;
11.3.4 Rounding: in calculating Weighted Votes in accordance with the
provisions of Clause 11.2 and this clause 11.3, the total GWh
for each Generator or (as the case may be) Supplier shall be
rounded up or down (0.5 being rounded upwards) to the nearest
whole number; and
11.3.5 Information: the information to be supplied by the Settlement
system Administrator referred to in Clause 11.3.2 is:-
(a) in respect of each Generator, the number of GWh of the
Genset Metered Generation for that Generator for each of
the Settlement periods referred to in Clause 11.2.1; and
(b) in respect of each Supplier, the number of GWh of the
Consumer Metered Demand for that Supplier for each of
the Settlement Periods referred to in Clause 11.2.2.
11.4 Restrictions on Weighted Votes:
11.4.1 Generators: at no time shall the aggregate number of Weighted
Votes to which Central Power Limited (together with its
affiliates and related undertakings) shall be entitled in its
capacity as a Generator under the foregoing provisions of this
Clause 11 exceed 10 per cent. of the aggregate number of
Weighted Votes to which all Generators are entitled under the
foregoing provisions of this Clause 11 and the number of
Weighted Votes of Central Power Limited in such capacity shall,
if necessary, be limited accordingly;
11.4.2 Suppliers: at no time shall the aggregate number of Weighted
Votes to which both National Power PLC and PowerGen plc
(together with their respective affiliates and related
undertakings) are entitled in their capacity as Suppliers under
the foregoing provisions of this Clause 11 exceed 10 per cent.
of the aggregate number of Weighted Votes to which all Suppliers
are entitled under the foregoing provisions of this Clause 11
and the aggregate number of Weighted votes to which both such
companies ar entitled in that capacity shall be limited
accordingly and the number of weighted votes of each such
company in its capacity as a Supplier shall, if necessary, be
pro rata reduced; and
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11.4.3 Cap on Weighted Votes:
(a) at no time shall the aggregate number of Weighted Votes
to which a Generator and its affiliates and related
undertakings which are also Generators are entitled in
their capacity as Generators under the foregoing
provisions of this Clause 11 exceed 44 per cent. of the
aggregate number of Weighted Votes to which all
Generators are entitled under the foregoing provisions
of this Clause 11 (after taking account of any
limitation required under Clause 11.4.1) and the
aggregate number of Weighted Votes to which such
Generator and all such affiliates and related
undertakings are entitled in that capacity shall be
limited accordingly and the number of Weighted Votes of
such Generator and all such affiliates and related
undertakings in their capacity as Generators shall, if
necessary, be pro rata reduced.
(b) At no time shall the aggregate number of Weighted Votes
to which a Supplier and its affiliates and related
undertakings which are also Suppliers are entitled in
their capacity as Suppliers under the foregoing
provisions of this Clause 11 exceed 44 percent of the
aggregate number of Weighted Votes to which all
Suppliers are entitled under the foregoing provisions of
this Clause 11 (after taking account of any limitation
required under clause 11.4.2) and the aggregate number
of Weighted Votes to which such undertakings are
entitled in that capacity shall be limited accordingly
and the number of Weighted Votes of each Supplier and
all such affiliates and related undertakings in their
capacity as Suppliers shall, if necessary, be pro rata
reduced.
(c) If any limitation or reduction pursuant to paragraph (a)
or (b) above would otherwise result in a Generator or
(as the case may be) a Supplier being accorded other
than a whole number of Weighted Votes, the Weighted
Votes actually accorded to such person shall be rounded
down to the nearest whole number.
11.4.4 Interim arrangement: the Parties acknowledge that the
application of Clauses 11.4.1 and 11.4.2 has been limited to
named companies pending resolution of how (if at all)
restrictions on Weighted Votes should apply to Generators with
second tier supply businesses and to Suppliers with an interest
in a generation business. The Parties agree to use all
reasonable endeavours to reach an agreed resolution to this
issue and to amend this Agreement to give effect thereto no
later
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than 31st March, 1994 (or such later date as the Executive
Committee may decide).
11.5 Reference to the Director: if any person as is referred to in clause
11.3.1(a) shall dispute the calculation of or the number of Weighted
Votes accorded to it in accordance with Clause 11.3.1, such person may
refer such dispute to the Director for determination, whose
determination as to the calculation of or the number of Weighted Votes
to which such person shall be entitled shall be final and binding for
all purposes of this Agreement.
11.6 Alteration of Weighted Votes: the Director may at any time by notice to
the Executive Committee alter the calculation of Weighted Votes set out
in clauses 11.2.1 and 11.2.2 and/or the restrictions on Weighted Votes
set out in Clause 11.4 if in his opinion such alteration is required to
achieve fair representation for all Pool Members.
11.7 Total Votes: each Pool Member shall be entitled to that number of votes
("Total Votes") calculated in accordance with the following formulae:
TV = X + Y
where:
X = A x B
-----
2 x C
Y = A x D
-----
2 x E
and where:
TV = the number of Total Votes (rounded up or down, 0.5 being
rounded up) to which such Pool Member
A = the greater of C and E and, where C is equal to E, 0
B = the number of Weighted Votes for the time being of all Pool
Members which are Generators, in their capacity as such
(ignoring those Generators whose voting rights have been
suspended pursuant to this Agreement)
C = the number of Weighted Votes for the time being of all Pool
Members which are Generators, in their capacity as such
(ignoring those
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Generators whose voting rights have been suspended pursuant to
this Agreement)
D = the number of Weighted Votes for the time being of such Pool
Member in its capacity as a Supplier
E = the number of Weighted Votes for the time being of all Pool
Members which are Suppliers, in their capacity as such (ignoring
those Suppliers whose voting rights have been suspended pursuant
to this Agreement).
11.8 Calculation of Total Votes: on or prior to:
11.8.1 each Quarter Day;
11.8.2 each date upon which a New Party is admitted as a Pool Member;
11.8.3 each date upon which a Pool Member's voting rights have been
suspended or reinstated pursuant to this Agreement; and
11.8.4 each date upon which a Pool Member ceases to be a Party,
the Executive Committee shall calculate for the Following Quarter or (as
the case may be) the remainder of the then current Quarter the number of
Total Votes to which each Pool Member is for the time being entitled,
and shall notify each Pool Member and the Director in writing if the
number of Total Votes of each of the Pool Members. The determination of
the Executive Committee as to the number of Total Votes of each Pool
Member shall (in the absence of manifest error) be final and binding for
all purposes of this Agreement.
11.9 Records: the Executive Committee shall maintain, and retain for a period
of not less than eight years, a register recording the Weighted Votes
(as a Generator and as a Supplier) and Total Votes of each Pool Member,
which register shall be open for inspection by any Party at the office
of the Secretary during normal business hours.
11.10 Voting on a show of hands: on a show of hands every Pool Member present
in person shall have only its Membership Vote.
11.11 Voting on a poll: on a poll every Pool Member shall have only its Total
Votes. On a poll votes may be given either personally or by proxy.
11.12 Objections: no objection shall be raised to the qualification of any
voter except at the meeting or adjourned meeting at which the vote
objected to is given or tendered, and every vote not disallowed at such
meeting shall be valid for all purposes. Any such
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objection made in due time shall be referred to the chairman of the
meeting whose decision shall be final and conclusive.
12. PROXIES
12.1 Authority: any Pool Member entitled to attend and vote at any general
meeting of Pool Members shall be entitled to appoint another person
(whether a Pool Member or not) as its proxy to attend, speak and vote in
its place, save that a proxy shall not be entitled to vote except on a
poll.
12.2 Authentication of proxy: the instrument appointing a proxy shall be in
writing either under seal or under the had of an officer or attorney
duly authorised. A proxy need not be a Pool Member.
12.3 Deposit of proxy: the instrument appointing a proxy and the power of
attorney or other authority, if any, under which it is signed or
certified copy of that power or authority shall be deposited at the
office of the Secretary or at such other place within the United Kingdom
as is specified for that purpose in the notice convening the relevant
general meeting of Pool Members, not less than 48 hours before the time
for holding the meeting or adjourned meeting, at which the person named
in the insturment proposes to vote, or, in the case of a poll, not less
than 24 hours before the time appointed for the taking of the poll, and
in default the instrument of proxy shall not be treated as valid.
12.4 Form of proxy (1): an instrument appointing a proxy shall be in the
following form or a form as near thereto as circumstances admit:
"POOLING AND SETTLEMENT AGREEMENT FOR THE ELECTRICITY INDUSTRY IN
ENGLAND AND WALES dated 30th March, 1990
We, ________________ of ________________, being a Pool Member (as
defined in the above-mentioned Agreement), hereby appoint ______________
of _____________, or failing him, ___________________ of
________________, as our proxy to vote for us on our behalf at the
[annual or extraordinary, as the case may be] general meeting of Pool
Members, to be held on the __________ day of __________ 19__, and at any
adjournment thereof.
Signed this __________ day of ___________ 19__."
12.5 Form of proxy (2): where it is desired to afford Pool Members an
opportunity of voting for or against a resolution the instrument
appointing a proxy shall be in the following form or a form as near
thereto as circumstances admit:
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"POOLING AND SETTLEMENT AGREEMENT FOR THE ELECTRICITY INDUSTRY IN
ENGLAND AND WALES dated 30th March, 1990
We, ________________ of ________________, being a Pool Member (as
defined in the above-mentioned Agreement), hereby appoint ______________
of _____________, or failing him, ___________________ of
________________, as our proxy to vote for us on our behalf at the
[annual or extraordinary, as the case may be] general meeting of Pool
Members, to be held on the __________ day of __________ 19__, and at any
adjournment thereof.
Signed this __________ day of ___________ 19__."
this form is to be used *in favour of the resolution.
------------
against
Unless otherwise instructed, the proxy will vote as he thinks fit.
*Strike out whichever is not desired."
12.6 Authority to demand a poll: the instrument appointing a proxy shall be
deemed to confer authority to demand or join in demanding a poll.
12.7 Proxy valid: a vote given in accordance with the terms of an instrument
of proxy shall be valid notwithstanding the previous revocation of the
proxy or of the authority under which the proxy was executed, provided
that no intimation in writing of such revocation shall have been
received by the Secretary at his office before the commencement of the
meeting of adjourned meeting at which the proxy is used.
12.8 Resolution in writing: a resolution in writing signed by all the Pool
Members for the time being entitled to receive notice of and to attend
and vote at general meetings of Pool Members (or by their duly
authorised representatives) shall be as valid and effective as if the
same had been passed at a general meeting of Pool Members duly convened
and held and may consist of several instruments in like form and
executed by or on behalf of one or more Pool Members.
12.9 Corporations acting be representives at meetings: any company,
corporation, partnership, firm joint venture, trust, association or
other organisation which is a Pool Member may be resolution of its
directors or other governing body authorise such person as it thinks fit
to act as its representative at any general meeting of Pool Members, and
references in this Agreement to a Pool Member acting in person
(howsoever expressed) shall be deemed to include Pool Members acting by
their duly authorised representatives.
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13. MATTERS RESERVED TO THE GENERAL MEETING: CLASS RIGHTS
13.1 Matters reserved generally:
13.1.1 as between the Pool Members each of the matters referred to in
Clause 13.1.2 shall require the prior approval of Pool Members
in general meeting before effect is given to same, such approval
to be (subject as provided in Clause 27.3) by resolution of Pool
Members passed by not less than 65 percent of the Membership
Votes of such Pool Members as (being entitled to do so) vote in
person or by proxy at a general meeting of Pool Members of which
notice specifying the intention to propose the resolution has
been duly given.
13.1.2 The matters referred to in Clause 13.1.1 are:
(a) the removal of the Settlement System Adminstrator;
(b) the appointment and removal of the Pool Auditor;
(c) any amendment to or variation of this Agreement (other
than any amendment or variation referred to in Clause
13.2.1, 13.2.2 or 13.2.3 or any amendment of or
variation to Schedule 9 (including any amendment thereto
made pursuant to Clause 56.2) or to Schedule 15);
(d) the approval pursuant to Clause 5.8 of any
Recommendation and pursuant to Clause 5.11 of any Works
Programme and any approval pursuant to clause 5.14;
(e) the appointment and removal of the Pool Chairman; and
(f) such other matters (not being matters referred to in
clause 9.1.8) which are otherwise designated under this
Agreement for reference to the Pool Members in general
meeting.
13.2 Matters reserved to particular classes of Pool Members:
13.2.1 as between the Pool Members any amendment to or variation of
this clause 13.2 shall require the prior approval of the
Generators in separate general meeting.
13.2.2 As between the Pool Members each of the following matters shall
require the prior approval of the Suppliers in separate general
meeting:
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(a) any change prior to 1st April, 1994 to the standards of
accuracy of Metering Equipment required for Second Tier
Customers up to (and including) 1MW;
(b) any change prior to 1st April, 1998 to the standards of
accuracy of Metering Equipment required for Second Tier
Customers up to (and including) 100kW;
(c) any amendment to or variation of Part XI and/or Schedule
18; and
(d) any amendment to or variation of this Clause 13.2.
13.2.3 As between the Pool Members any amendment to or variation of
Clause 10.2, 10.6, 13.4, 13.5, 15.2, 15.3, 15.4, 15.5, 15.8,
16.2, 19.2, 22 or 83, Schedule 14 or this Clause 13.2 shall
require the approval both of the Generators in separate general
meeting and of the Suppliers in separate general meeting.
13.2.4 To every separate general meeting referred to in this Clause
13.2 the provisions of this Part III relating to general
meetings of Pool Members (other than Clause 10.9, save in
respect of the attendance by the Pool auditor or the Director or
its or his duly appointed representative) shall apply mutatis
mutandis but so that:
(a) in the case of the Generators, the necessary quorum
shall be two Pool Members of that class;
(b) in the case of the Suppliers, the necessary quorum shall
be eight Pool Members of that class;
(c) the reference in clause 10.6.3 to Total Votes shall be
substituted by a reference to Weighted Votes; and
(d) notice of any such separate general meeting need be
given only to those entitled to attend the same,
and any resolution put to any such separate general meeting
shall, to be passed, require (in the case of the Generators) 75
percent and (in the case of the Suppliers) a simple majority of
the total Membership Votes or (as the case may be) Weighted
Votes of such Pool Members as (being entitled to do so) vote in
person or by proxy at such separate general meeting of which
notice specifying the intention to propose the resolution has
been duly given.
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13.3 Provisions cumulative: the provisions of Clauses 13.1 and 13.2 are
cumulative and not exclusive one of the other.
13.4 Executive Committee's referral: in the event of receipt by the Secretary
from one or move of the Committee Members of a request that any matter
resolved upon a poll by the Executive Committee (or upon which it has
been unable or has refused to resolve other than where the taking of a
vote has ben deferred pursuant to Clause 22.1) be remitted to the Pool
Members in general meeting, such request having been received no later
than five working days after the date on which the results of such poll
were notified to Committee Members (exclusive of the date on which
notice was given) (or, as the case may be, the date of its failure or
refusal so to resolve), the matter the subject of the relevant
resolution shall be remitted to the Pool Members in general meeting and,
pending the decision of Pool Members in general meeting, such resolution
shall not have effect. The provisions of this Clause 13.4 are subject to
the provisions of Clause 61.9.
13.5 Dissentient Pool Member's right of appeal:
13.51. any Pool Member who:
(a) voted against a resolution passed or in favour of a
resolution not passed by Pool Members in general
meeting; or
(b) voted against a resolution passed or in favour of a
resolution not passed by Generators or (as the case may
be) Suppliers in separate general meeting; or
(c) is directly affected by Pool Creditors passing or
failing to pass a resolution of Pool Creditors (but only
where such resolution does not concern the enforcement
or non-enforcement of any payment obligation),
and each Externally Interconnected Party (not being a Pool
Member) (each such Pool Member a "Dissentient Pool Member",
which expression shall include each such Externally
Interconnected Party) shall be entitled within ten working days
after the date of such resolution to apply in writing to the
Director seeking a ruling that the relevant resolution shall or
shall not have effect on the grounds that either:
(i) the interests of a group of Pool Members (including the
Dissentient Pool Member) or of the Dissentient Pool
Member under this Agreement have been, are or will be
unfairly
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prejudiced by the passing of or the failure to pass such
resolution; or
(ii) such resolution will breach, or will cause the
dissentient Pool Member to be in breach of, one or more
provisions of this Agreement or of its License or of the
Act.
Any such application shall give detailed reasons and evidence in
support and shall be copied to the Executive Committee. The
Dissentient Pool Member shall be entitled to mark all or any
part of such application as confidential and the Executive
Committee shall give such weight as its sees fit to such marking
in the copying of such application to those persons to whom it
is obliged to copy such application. The Executive Committee
shall promptly notify all other Pool Members, each Externally
Interconnected Party (not being a Pool Member), the Pool
Chairman, the Settlement System Administrator and the Pool Funds
Administrator of receipt of such application. At the same time
as the Executive Committee shall notify all such other Pool
Members, each Externally Interconnected Party (not being a Pool
Member), the Pool Chairman, the Settlement System Administrator
and the Pool Funds Administrator of such receipt, the Executive
Committee shall send each of them a copy of the relevant
application (amended, if appropriate, to take account of any
such marking where the Executive Committee shall have seen fit
so to do). The Executive Committee, each Pool Member, each
Externally Interconnected Party (not being a Pool Member), the
Pool Chairman, the Settlement System Administrator and (if
invited by the Director) the Pool Auditor shall each be entitled
to make representations to the Director. If the Pool Auditor
shall be so invited to make any such representations, the
Executive Committee will provide it with a copy of the relevant
application (amended, if appropriate, as aforesaid).
13.5.2 Any determination of the Director in respect of any such
application as is referred to in Clause 13.5.1 shall be final
and binding. Pending any determination of the Director in
respect of any such application, the relevant resolution (if
passed) shall not have effect provided that, if the Director
shall decline to accept a reference or to make a determination
(in either case, for whatsoever reason), such resolution shall
take effect from the date that the Director notifies the
Executive Committee that he declines to accept the reference or
to make the determination.
13.5.3 The Parties acknowledge and agree that the satisfaction of
either of the grounds referred to in Clause 13.5.1(i) or (ii)
shall not of itself entitle
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the Dissentient Pool Member to a determination by the Director
in its favour.
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PART IV
THE EXECUTIVE COMMITTEE
14. ESTABLISHMENT OF THE EXECUTIVE COMMITTEE
14.1 Establishment: the Pool Members hereby establish the Executive Committee
upon the terms and subject to the conditions of this Agreement.
14.2 1993/4 Committee Members:
14.2.1 at 1st December, 1993 the Committee Members for the Generators
are:
(a) Roger Witcomg, deemed appointed by National Power PLC
pursuant to Clause 15.2.4(a);
(b) Graham Thomas, deemed appointed by PowerGen plc pursuant
to Clause 15.2.4(a);
(c) Andrew Clements, deemed appropriate by Nuclear electric
plc pursuant to Clause 15.2.4(a);
(d) Roger Booth, deemed appointed pursuant to Clause
15.2.4(b) by those Generators who were Pool Members as
at 1st april, 1993 (other than National Power PLC,
PowerGen plc, Nuclear Electric plc and Small Generators
but including Central Power Limited); and
(e) David Porter, deemed appointed by Small Generators who
were Pool members as at 1st April, 1993 (other than
Central Power Limited) pursuant to Clause 15.2.4(c).
14.2.2 at 1st December, 1993 the Committee Members for the Suppliers
are:
(a) Graham Fowler, appointed for Group A;
(b) Michael Mackey, appointed for Group B;
(c) Malcolm Chandler, appointed for Group C;
(d) Jim Keohane, appointed for Group D; and
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(e) Edwyn Cumberland, deemed appointed by those Independent
Suppliers who were Pool Members as at 1st April, 1993
pursuant to Section 6 of Schedule 14.
14.3 Deemed appointments: those Committee Members who according to Clause
14.2 were deemed appointed shall be treated for allpurposes of this
Agreement as having been duly appointed in accordance with the
provisions of this Part IV by the persons who are stated in that Clause
to have made the relevant appointment. In the case of any deemed
appointment by Generators of a Committee Member the provisions of
Clauses 15.3.1(c) and 15.3.2(b) shall not apply to any removal of such
Committee Member or (as the case may be) appointment of a substitute
Committee Member.
15. MEMBERSHIP OF THE EXECUTIVE COMMITTEE
15.1 Membership: Committee Members shall be appointed and removed in
accordance with the following provisions of this Clause 15.
15.2 Right to appoint (Generators):
15.2.1 subject to Clauses 15.6, 15.7 and 15.8, Generators shall
together have the right to appoint not more than five Committee
Members, such appointments to be made in accordance with the
following provisions of this Clause 15.2.
15.2.2 No later than seven days before each annual general meeting of
Pool Members or, failing election at such meeting, seven days
before an extraordinary general meeting convened for such
purpose each Generator shall be entitled, by notice to the
Executive Committee, to propose one person (a "Nominee") to be a
Committee Member. Any such proposal to be valid shall be
accompanied by a written statement from the Nominee stating that
he is aware of the proposal and would be prepared to serve as a
Committee Member is elected. As soon as practicable after such
seventh day (and in any event before the date of the annual
general meeting or, as the case may be, extraordinary general
meeting) the Executive Committee shall circulate (or cause to be
circulated) to all Generators a list of all the names of the
Nominees and of the Generators who proposed them. Such list
shall also be circulated at the annual general meeting or, as
the case may be, extraordinary general meeting to all Generators
present in person or by proxy.
15.2.3 The term of office of Committee members appointed by Generators
shall be from 1st April in the year of appointment to 31st March
in the next following year provided that, if the meeting at
which any such
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Committee Member is appointed is held after 1st April, his term
of office shall commence from the time of his appointment. A
Committee Member whose term of office has expired or is to
expire shall be eligible for re-election.
15.2.4 At each annual general meeting or extraordinary general meeting
of Pool Members resolutions shall be put to the Generators for
the election by them of Committee Members from the list of
Nominees referred to in Clause 15.2.2. The election shall be
conducted in such manner as shall give effect to the following:
(a) on the first round of voting:
(i) each Generator (other than Central Power
Limited) shall be entitled to vote;
(ii) each Generator shall have its Weighted Votes
(disregarding for this purpose the restrictions
imposed by Clause 11.4.3(a)); and
(iii) the votes of a Generator and of all its
affiliates and related undertakings which are
also Generators may only be cast in favor of one
Nominee.
and at the conclusion of the first round the three
Nominees with the highest number of Weighted Votes cast
in their favor shall be elected Committee Members;
(b) on the second round of voting:
(i) each Generator (not being (A) Central Power
Limited, (B) a Generator which voted in favour
of one of the three Nominees referred to in
paragraph (a) above or (C) an affiliate or
related undertaking of such Generator) shall be
entitled to vote; and
(ii) each Generator shall have its Weighted Votes
(disregarding for this purpose the restrictions
imposed by Clause 11.4.3(a)),
and at the conclusion of the second round the Nominee
with the highest number of Weighted Votes cast in its
favour shall be elected a Committee Member;
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(c) on the third round of voting, each Small Generator which
did not vote in the first or the second round of voting
shall be entitled to vote and at the conclusion of the
third round the Nominee with the highest number of votes
cast in its favour shall be elected a Committee member;
and
(d) if in any round of voting there is a tie between two or
more Nominees as to who should be elected a Committee
Member, that round of voting shall be reheld and, in the
event of another tie, the matter shall be resolved:
(i) in the case of a tie at any reheld first or
second round of voting, by lot held in such
manner as the chairman of the meeting shall
decide; and
(ii) in the case of a tie at any reheld third round
of voting, by the casting vote of the Small
Generator holding the largest number of Weighted
Votes (disregarding for this purpose the
restrictions imposed by Clause 11.4.3(a)) and
entitled to vote in such third round.
15.3 Right to remove (Generators):
15.3.1 a Committee Member appointed by Generators or any class of
Generators may be removed at any time by written notice of
removal given to that Committee Member (copied to the Executive
Committee) by or on behalf of that number of those Generators
who:
(a) voted in favour of his appointment;
(b) are Pool Members at such time; and
(c) (disregarding for this purpose the restrictions imposed
by Clause 11.4.3(a)) hold more Weighted Votes than the
difference between:
(i) the number of Weighted Votes cast in favour of
that Committee Member; and
(ii) the number of Weighted Votes cast in favour of
the candidate, in that round of voting, who
received the next highest number of Weighted
Votes after the Committee Member being removed
(or, if there was no such candidate, zero).
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15.3.2 If a Committee Member appointed by Generators is removed or his
office is vacated pursuant to Clause 21, a separate general
meeting of Generators shall be convened for the purpose of
appointing a substitute Committee Member. To such separate
general meeting the provisions of Clause 15.2 shall apply
mutatis mutandis but so that only those Generators which:
(a) are within the class of Generators entitled to vote in
respect of the appointment of the first-mentioned
Committee Member; and
(b) did not (when that first-amended Committee Member was
appointed) by reason of exercising their rights under
Clause 15.2 to vote for another candidate disenfranchise
themselves from voting in respect of the appointment of
the first-mentioned Committee Member (unless the
candidate in whose favour those votes were cast was not
appointed),
shall be entitled to vote on the appointment of his successor
(and then in accordance with the relevant paragraph of Clause
15.2.4). Until such successor is appointed the remaining
Committee Members appointed (or deemed appointed) by Generators
shall be entitled to nominate a successor.
15.4 Right to appoint (Suppliers): subject to Clause 15.6, 15.7 and 15.8,
Suppliers shall together have the right to appoint not more than five
Committee Members, such appointments to be made in accordance with the
provisions of Schedule 14.
15.5 Right to remove (Suppliers): a Committee Member appointed (or deemed
appointed) by Suppliers or any class of Suppliers may be removed in
accordance with the provisions of Schedule 14.
15.6 Director's right to appoint: if at any time there shall be no Small
Generators, the Parties acknowledge and agree that the Director shall
have the right to appoint one person to be a Committee Member to
represent the interests of all Small Generators and to remove from
office any person so appointed by him. The foregoing provisions of this
Clause 15.6 shall apply mutatis mutandis if at any time there shall be
no Independent Suppliers.
15.7 Qualifications on right to appoint:
15.7.1 no person appointed a Committee Member by the Generators (or any
of them) may for the duration of his appointment be appointed a
Committee Member by the Suppliers (or any of them) and vice
versa.
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15.7.2 No person other than an individual shall be appointed a
Committee Member or his alternate.
15.7.3 No person for the time being appointed as Pool Chairman shall be
appointed a Committee Member or his alternate and no person for
the time being appointed a Committee Member or his alternate
shall be appointed as Pool Chairman.
15.7.4 No person for the time being appointed as Chief Executive shall
be appointed a Committee Member or his alternate and no person
for the time being appointed a Committee Member or his alternate
shall be appointed as Chief Executive.
15.8 Number: the maximum number of Committee Members shall not at any time
exceed ten.
15.9 Alternates:
15.9.1 each Committee Members shall have the power to appoint any
person (who may be an existing Committee Member) to be his
alternate and may at his discretion remove an alternate
Committee Member so appointed. Any appointment or removal of an
alternate Committee Member shall be effected by notice in
writing executed by the appointor and delivered to the Secretary
who shall forthwith notify all other Committee Members of such
appointment. If his appointor so requests, an alternate
Committee Member shall be entitled to receive notice of all
meetings of the Executive Committee or of sub-committees or
sub-groups of which his appointor is a member and to receive a
voting paper on a poll instead of the appointor. He shall also
be entitled to attend, speak and vote as a Committee Member at
any such meeting at which the Committee Member appointing him is
not personally present and at the meeting to exercise and
discharge all the functions, powers and duties of his appointor
as a Committee Member and for the purposes of the proceedings at
the meeting the provisions of this Part IV shall apply as if he
were a Committee Member. He shall also be entitled to demand a
poll (whether at or after the meeting) pursuant to Clause 22.3,
to carry out consultations with Pool Members contemplated by
Clause 22.9 insofar as his appointor shall be unable to do so,
to act on the instructions of Pool Members duly given to his
appointor and to complete his appointor's voting paper on a poll
on to behalf of his appointor.
15.9.2 Except on a poll, every person acting as an alternate Committee
Member shall have one vote for each Committee Member for whom he
acts as alternate, in addition to his own vote if he is also a
Committee
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Member. On a poll, an alternate Committee Member shall be
entitled (if his appointor and by completion of the appointor's
separate voting paper) all of the votes which his appointor is
entitled to cast, in addition to any votes which the alternate
is entitled to cast in his own capacity if he is also a
Committee Member. Execution by an alternate Committee Member of
any resolution in writing of the Executive Committee shall,
unless the notice of his appointment provides to the contrary,
be as effective as execution by his appointor.
15.9.3 An alternate Committee Member shall ipso facto cease to be an
alternate Committee Member if his appointor ceases for any
reason to be a Committee Member.
15.9.4 References in this Agreement to a Committee Member shall, unless
the context otherwise requires, include his duly appointed
alternate.
16. POOL CHAIRMAN
16.1 Pool Chairman: there shall at all times be a Chairman of the pooling and
settlement arrangements for the electricity industry in England and
Wales established by this Agreement (the "Pool Chairman").
16.2 Appointments, removal and resignation:
16.2.1 (a) The election of the Pool Chairman shall take place at
each annual general meeting of Pool Members or, failing
election at such meeting, at an extraordinary general
meeting of Pool Members convened for such purpose.
(b) The right to nominate a person to stand for election as
Pool Chairman shall alternate from year to year between
the Committee Members appointed by Suppliers and the
Committee Members appointed (or deemed appointed) by
Generators.
(c) The procedures for selecting a nominee for the purposes
of paragraph (b) shall be as agreed between the relevant
Committee Members (having regard to their
responsibilities under Clause 23.2) or, failing
agreement, by simple majority vote of such Committee
Members.
(d) Nominations made pursuant to paragraph (a) shall be
delivered in writing to the Secretary no later than 21
days prior to the relevant annual general meeting or (as
the case may be) extraordinary general meeting. Any such
nomination to be valid
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shall be accompanied by a written statement from the
nominee stating that he is aware of the proposal and
would be prepared to serve as Pool Chairman if elected.
(e) The term of office of the Pool Chairman shall be from
1st April in the year of his election to 31st March in
the next following year provided that:
(i) if the meeting at which he is elected is held
after 1st April, his term of office shall
commence from such date as the Pool Members in
general meeting shall resolve (being no later
than the date of such meeting); and
(ii) his term of office shall expire before 31st
March is he resigns or is unable for whatever
reason to continue to act or if a successor Pool
Chairman is elected with a term of office which
Pool Members in general meeting resolve is to
commence before that date.
(f) If at any time the Pool Chairman shall resign or be
unable for whatever reason to continue or act, those
Committee Members who were entitled to nominate a
candidate for election at the immediately preceding
annual general meeting shall forthwith do so and the
Executive Committee shall procure that a general meeting
is convened to consider the election of such candidate
as Pool Chairman.
16.3 Functions:
16.3.1 the Pool Chairman shall have and carry out only such duties and
responsibilities and exercise such powers as are expressly
provided in this Agreement. The Pool Chairman shall exercise all
duties, responsibilities and powers impartially.
16.3.2 the Pool Chairman shall liaise with the Chief Executive (if any)
on a frequent and regular basis and on behalf of Pool Members
shall generally monitor the performance by the Executive
Committee of its powers, duties and responsibilities under this
Agreement. The Pool Chairman in his capacity as Pool Chairman
shall have no voting rights under this Agreement.
16.4 Expenses: the Pool Chairman shall be paid his reasonable travelling,
hotel and incidental expenses of attending and returning from meetings
of the Executive Committee or any sub-committee thereof and any general
meetings and separate
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general meetings of Pool Members and all costs and expenses properly and
reasonably incurred by him in the performance of his duties and
responsibilities under this Agreement. All such costs and expenses shall
be recovered in accordance with the PFA Accounting Procedure.
16.5 Indemnity: the Pool Chairman shall be indemnified and kept indemnified
jointly and severally by those Pool Members for the time being entitled
to appoint and remove the Pool Chairman pursuant to Clause 16.2 (and, as
between the relevant Pool Members, rateably in the proportion which
their respective Contributory Shares bear one to the other at the time
of receipt of the request for indemnification) from and against any and
all costs (including legal costs), charges, expenses, damages or other
liabilities property incurred or suffered by him in relation to his
office as Pool Chairman or the due exercise by him of his powers, duties
and responsibilities as Pool Chairman and all claims, demands or
proceedings arising out of or in connection with the same except any
such costs, charges, expenses, damages or other liabilities which are
suffered or incurred or occasioned by the wilful default or bad faith
of, or breach of duty or trust by, the Pool Chairman. Such Pool Members
shall, upon request, provide the Pool Chairman with a written deed of
indemnity to that effect.
17. CHIEF EXECUTIVE, SECRETARIAT AND SECRETARY
17.1 Chief Executive:
17.1.1 Subject to Clause 15.7.4, a chief executive of the Executive
Committee (the "Chief Executive") shall be appointed and be
subject to removal and replacement by resolution of the
Executive Committee passed by 70 percent or more of the votes of
all Committee Members (after consultation with the Pool
Chairman). The Chief Executive shall be appointed on such terms
and conditions as they see fit.
17.1.2 The Chief Executive shall undertake such duties and
responsibilities and exercise such powers in relation to the
Executive Committee and its activities as the Executive
Committee may from time to time assign to or vest in him.
17.1.3 The Chief Executive shall have the right and shall be obliged to
attend all meetings of the Executive Committee and all meetings
of the Pool Members in general meeting. The Chief Executive in
his capacity as Chief Executive shall have no voting rights
under this Agreement. If for any reason the Chief Executive is
unable to attend any such meeting, he shall nominate a
representative to attend in his place.
17.1.4 The Executive Committee shall make arrangements for the
remuneration of the Chief Executive and the payment of his costs
and
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expenses and the same shall be recovered in accordance with the
PFA Accounting Procedure or as otherwise directed by the
Executive Committee from time to time.
17.2 Secretariat:
17.2.1 the Executive Committee may from time to time appoint and
remove, or make arrangements for the appointment and removal of,
such personnel as the Executive Committee requires to assist the
Executive Committee, any sub-committee of the Executive
Committee, the chairman of the Executive Committee or any such
sub-committee, the Pool Chairman, the Chief Executive or the
Secretary in the proper performance of its or his duties and
responsibilities, in each such case upon such terms and
conditions as the Executive Committee sees fit.
17.2.2 Any personnel referred to in Clause 17.2.1 shall undertake such
duties and responsibilities and exercise such powers as the
Executive Committee may from time to time assign to or vest in
him, it or them
17.2.3 The Executive Committee shall make arrangements for the
remuneration of such personnel as are referred to in clause
17.2.1 and the payment of their costs and expenses and the same
shall be recovered in accordance with the PFA Accounting
Procedure or as otherwise directed by the Executive Committee
from time to time.
17.3 Secretary:
17.3.1 the Executive Committee may from time to time appoint and
remove, or make arrangements for the appointment and removal of,
the Secretary on such terms and conditions as it sees fit.
17.3.2 The Secretary in his capacity as Secretary shall have no voting
rights under this Agreement.
17.3.3 The Secretary shall have and carry out only such duties and
responsibilities as are expressly provided in this Agreement and
such other reasonable secretarial and administrative duties and
responsibilities as may from time to time be delegated to it by
the Executive Committee. If at any time there is no Secretary,
the responsibilities and duties of the Secretary under this
Agreement shall become those of the Chief Executive or, if there
shall be no Chief Executive, the Executive Committee until such
time as a Secretary is appointed pursuant to Clause 17.3.1 or a
Chief Executive is appointed
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pursuant to Clause 17.1.1 (and notices to the Secretary under
this Agreement shall be re-addressed accordingly).
17.3.4 The Secretary shall be entitled to receive such remuneration (if
any) as the Executive Committee may from time to time approve,
such remuneration to be paid to it at such times and in such
manner as the Executive Committee shall from time to time direct
and to be recovered in accordance with the PFA Accounting
Procedure or as otherwise directed by the Executive Committee
from time to time. Further, the Secretary shall be paid its
reasonable travelling, hotel and incidental expenses of
attending and returning from meetings of the Executive Committee
or any sub-committee thereof and any general meetings and
separate general meetings of Pool Members and all costs and
expenses properly and reasonably incurred by it in the
performance of its duties and responsibilities under this
Agreement. All such costs and expenses shall be recovered in
accordance with the PFA Accounting Procedure or as otherwise
directed by the Executive Committee from time to time.
17.4 Indemnity:
17.4.1 all Pool Members shall jointly and severally indemnify and keep
indemnified the Chief Executive, the personnel referred to in
Clause 17.2.1, the Executive Committee or any sub-group
established by any such sub-committee (other than a Committee
Member, without prejudice to Clause 23.3.4) (and, as between the
Pool Members, according to their respective Contributory Shares
at the time of receipt of the request for indemnification) from
and against any and all costs (including legal costs), charges,
expenses, damages or other liabilities properly incurred or
suffered by the Chief Executive in relation to his office as
Chief Executive or (as the case may be) the Secretary in
relation to its office as Secretary or the due exercise by the
Chief Executive, the said personnel, the Secretary or (as the
case may be) any such member of his, their or its powers, duties
and responsibilities under this Agreement and all claims,
demands or proceedings arising out of or in connection with the
same except any such costs, charges, expenses, damages or other
liabilities which are suffered or incurred or occasioned by the
wilful default or bad faith of, or breach of obligation by, the
Chief Executive, such personnel, the Secretary or (as the case
may be) any such member.
17.4.2 The Pool Members undertake to enter into an indemnity in favour
of any employer of the Chief Executive, any personnel referred
to in Clause 17.2.1, the Secretary or (as the case may be) any
such member of any sub-committee of the Executive Committee or
of any sub-group
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established by any such sub-committee as is referred to in
Clause 17.4.1 under which they shall jointly and severally
indemnify and keep indemnified any such employer in respect of
all acts and omissions of the Chief Executive, such personnel,
the Secretary or (as the case may be) any such member in the
performance of his, their or its rights, powers, duties and
responsibilities under this Agreement (and, as between the Pool
Members, according to their respective Contributory Shares at
the time of receipt of the request for indemnification under the
relevant indemnity).
18. PROCEEDINGS OF THE EXECUTIVE COMMITTEE
18.1 Meetings:
18.1.1 until the second anniversary of the Effective Date meetings of
the Executive Committee (other than special meetings referred to
in Clause 18.1.3) shall be held at least once every month and
thereafter at least quarterly (or, in either case at such
shorter regular intervals as may be agreed from time to time by
the Executive Committee) at such time and place in any
jurisdiction in which any Pool Member is incorporated or has its
principal place of business as may be agreed from time to time
by the Executive Committee (or, in default of agreement, as
stipulated by the Pool Chairman).
18.1.2 Meetings of the Executive Secretary shall be convened by the
Secretary upon giving to the Committee Members, the Pool
Chairman, the Chief Executive (if any), the Settlement System
Administrator, the Director and the Pool Auditor and (where
matters the subject of the agenda referred to in Clause 18.1.4
concern directly the functions, duties or responsibilities of
any Externally Interconnected Party(not being a Pool Member),
the Pool Funds Administrator, the Grid Operator and/or the
Ancillary Services Provider) the relevant one(s) of them at
least five working days' notice of the place, the day and the
hour of the relevant meeting.
18.1.3 Special meetings of the Executive Committee shall be convened
upon the request of any Committee Member, the Pool Chairman or
the Chief Executive. Such request shall be made in writing to
the Secretary and shall state the matters to be considered at
that special meeting. Upon receipt of such request the Secretary
shall convene in accordance with Clause 18.1.2 without delay
such special meeting for a date occurring as soon as practicable
thereafter but not less than five nor more than ten working days
after receipt of such request. If the Secretary shall fail so to
convene a special meeting the Committee member which
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made such request, the Pool Chairman or (as the case may be) the
Chief Executive may himself convent a special meeting, but any
meeting so convened shall not be held after the expiration of
two months from the date of such request. A special meeting
convened under this Clause 18.1.3 by a Committee Member, the
Pool Chairman or the Chief Executive shall be convened in the
same manner, as nearly as possible, as that in which meetings of
the Executive Committee are to be convened by the Secretary
pursuant to Clause 18.1.2.
18.1.4 Any notice given under Clause 18.1.2 shall be exclusive of the
day on which it is served or deemed to be served and of the day
for which it is given and shall be accompanied by an agenda of
the matters to be considered at the relevant meeting together
with any supporting documents or papers then available to the
Secretary, Any Committee Member may advise additional matters
which he wishes to be considered at such meeting by notice to
all other Committee Members, the Pool Chairman, the Chief
Executive (if any), the Secretary, the Settlement System
Administrator, the Director and the Pool Auditor and (where such
additional matters concern directly the functions, duties or
responsibilities of any Externally Interconnected Party (not
being a Pool Member), the Pool Funds Administrator, the Grid
Operator and/or the Ancillary Services Provider) the relevant
one(s) of them given no later than three working days before the
date of such meeting. Only matters identified in such agenda or
so advised shall be discussed or resolved upon at such meeting.
The accidental omission to give notice of a meeting or
accompanying agenda or supporting documents or papers to, or the
non-receipt of notice of a meeting or accompanying agenda or
supporting documents or papers by, any person entitled to
receive notice shall not invalidate the proceedings at that
meeting.
18.1.5 For any meeting of the Executive Committee, the periods and
methods of notice referred to in the foregoing provisions of
this Clause 18 may be waived prospectively or retrospectively
with the consent in writing of all such persons as are entitled
to attend the relevant meeting.
18.1.6 The Secretary shall prepare minutes of all meetings of the
Executive Committee and shall provide copies thereof to all such
persons as were entitled to attend the relevant meeting as soon
as practicable (and in any event within ten working days) after
the relevant meeting has been held. Each person who attended
such meeting shall notify his approval or disapproval of the
minutes thereof to the Secretary no later than ten working days
after receipt thereof and, if he fails to do so, he or it shall
be deemed to have approved the same. The Secretary shall record
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any such disapproval in the minutes unless the same shall have
been withdrawn or the minutes amended with the agreement of the
Executive Committee. The Secretary shall provide copies of
minutes of meetings of the Executive Committee to any other
Party within a reasonable time after request therefor provided
that the said time for approving or disapproving the same has
expired. Further, the Secretary shall provide copies of such
minutes to such persons as the Executive Committee may from time
to time direct within a reasonable time after receipt of such
direction.
19. CONDUCT OF EXECUTIVE COMMITTEE MEETINGS
19.1 General: Chairman:
19.1.1 subject as provided in Clauses 13, 18, and 22 and this Clause
19, the Executive Committee may meet for the transaction of
business, and adjourn and otherwise regulate its meetings, as it
shall see fit.
19.1.2 The Pool Chairman shall preside as chairman at every meeting of
the Executive Committee provided that:
(a) if the Pool Chairman is unable to attend any meeting, he
shall nominate another individual to preside as chairman
at that meeting in his place. Such individual shall be a
director or senior executive of one of the Pool Members
entitled under Clause 16.2.1 to appoint the next
successor Pool Chairman, but shall not be a Committee
member or an alternate for any Committee Member; and
(b) if there is no Pool Chairman or the Pool Chairman or his
duly appointed nominee shall not be present within 15
minutes after the time appointed for the holding of the
meeting or the Pool Chairman is unwilling to act, the
Committee Members present may appoint one of their
number to be chairman of the meeting.
19.1.3 The chairman of the meeting in his capacity as chairman shall
not have any vote at meetings of the Executive Committee.
19.2 Quorum:no business shall be transacted at a meeting of the Executive
Committee unless a quorum is present at the time the meeting proceeds to
business. Three Committee Members appointed pursuant to Clause 15.2 and
three Committee Members appointed pursuant to Clause 15.4 present in
person or by their respective alternates shall constitute a quorum.
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19.3 Lack of quorum: if within half an hour from the time appointed for
holding any meeting of the Executive Committee, a quorum is not present,
the meeting shall be adjourned to the same day in the next week at the
same time and place and if at the adjourned meeting a quorum is not
present within half an hour from the time appointed for holding the
meeting, those present shall constitute a quorum.
19.4 Representation of non-Committee Members: each of the Settlement System
Administrator, the Pool Chairman, the Director and the Pool Auditor (or
its or his duly appointed representative) shall have the right to attend
and speak (but not to vote) at meetings of the Executive Committee. Each
Externally Interconnected Party (not being a Pool Member) and each of
the Pool Funds Administrator, the Grid Operator and the Ancillary
Services Provider (or its duly appointed representative) shall be
entitled to attend and speak (but not vote) at meetings of the Executive
Committee only where matters directly concerning its functions, duties
or responsibilities have been identified or advised as provided in
Clause 18.1.4 or if so requested by the Executive Committee. The Chief
Executive (or his duly appointed representative) shall have the right to
attend and speak (but not vote) at meetings of the Executive Committee
and shall be obliged so to attend.
19.5 Written resolutions: a resolution in writing, executed by or on behalf
of each Committee Member, shall be as valid and effectual as if it had
been passed at a meeting of the Executive Committee duly convened and
held and may consist of several instruments in like form and executed by
or on behalf of one or more of such Committee Members. Any proposed
resolution in writing shall be circulated to all those persons who would
have been entitled to attend a meeting of the Executive Committee at
which such resolution could properly have been passed.
19.6 Default in appointment: all acts done by any meeting of the Committee
Members or of a sub-committee of the Executive Committee shall,
notwithstanding that it be afterwards discovered that there was some
defect in the appointment of such Committee Member, be as valid as if
such person had been duly appointed.
20. DELEGATION
20.1 Sub-Committees: the Executive Committee may establish sub-committees.
Each sub-committee:
20.1.1 shall be composed of such persons (whether or not Committee
Members) and shall discharge such rights, powers, duties and
responsibilities as from time to time the Executive Committee
considers desirable to delegate to it; and
20.1.2 in the exercise of its rights and powers and the performance of
its duties and responsibilities delegated to it by the Executive
Committee
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shall at all times conduct itself and its affairs in a manner
which it considers best designed to give effect to the principal
objects and purpose set out in Clause 4.1.2 and to promote, and
not obstruct, the fair and efficient operation of the procedures
referred to in Clause 4.1.3 so that the objectives set out in
Clause 4.1.3 are thereby achieved; and
20.1.3 shall be given written terms of reference and, unless otherwise
varied by the Executive Committee, the provisions of Clauses 18
and 19 shall apply mutatis mutandis to meetings of such
sub-committee and the provisions of Clauses 19.4, 23.3.1,
23.2.2, and 23.3.3 shall apply mutatis mutandis in relation to
any such sub-committee and the members thereof; and
20.1.4 may establish sub-groups to assist in the discharge of the
rights, powers, duties and responsibilities of such
sub-committee, each of which sub-groups shall be given written
terms of reference and, unless otherwise varied by the Executive
Committee or any sub-committee acting on the authority of the
Executive Committee, the provisions of Clauses 18 and 19 shall
apply mutatis mutandis to meetings of such sub-groups and the
provisions of Clauses 23.3.1, 23.3.2, and 23.3.3 shall apply
mutatis mutandis in relation to each such sub-group and the
members thereof.
20.2 Nominees: upon written request of the Executive Committee each Pool
Member and the Settlement System Administrator shall:
20.2.1 nominate one or more persons knowledgeable in the matters
referred to, or the subject of consideration by, the relevant
sub-committee to attend at meetings of, and otherwise
participate as a member of, any sub-committee established by the
Executive Committee; and
20.2.2 procure that such nominee(s) shall so attend and participate at
such time or times as the Executive Committee os such
sub-committee may require,
provided that a Pool Member shall not be required in any period of 12
months to make available nominees for more than 60 days in aggregate.
Save as provided by Clause 25.3 no payment shall be made in respect of
any such attendance or participation.
20.3 Member's responsibilities: to the extent not inconsistent with the
provisions of Clauses 20.1.1, 20.1.2 and 20.1.3 a member of any
sub-committee established by the Executive Committee shall be free to
represent the interests of the person or persons
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which nominated him to that sub-committee but each such person
acknowledges and agrees the subordination of those interests to the
responsibilities of such sub-committee under Clause 20.1.2.
20.4 Chief Executive: the Executive Committee may from time to time delegate
all or any of its rights, powers, duties and responsibilities under this
Agreement to the Chief Executive upon such terms and conditions as the
Executive Committee thinks fit.
20.5 Effect of decisions: resolutions of sub-committees shall not have
binding effect (a) unless and then only to the extent that the Executive
Committee shall have delegated the relevant decision-making powers to
the sub-committee, or (b) unless approved by resolution of the Executive
Committee (and then subject to Clause 13). Meetings of such
sub-committee shall, so far as possible, be arranged so that minutes of
such meetings can be circulated to each Committee Member in sufficient
time for consideration before the next following regular meeting of the
Executive Committee. Resolutions of sub-groups shall not have binding
effect. The Executive Committee shall remain at all times responsible
for the actions of all its sub-committees and sub- groups.
20.6 Other delegation: subject to any direction to the contrary by Pool
Members in general meeting but without prejudice to the Executive
Committee's rights under Clauses 20.1 and 20.4, the Executive Committee
may from time to time delegate in any particular case all or any of its
rights, powers, duties and responsibilities under this Agreement,
including any decision-making powers and the conduct of any review or
consultation and the preparation and submission of any report required
of it under this Agreement, to such person or persons as it thinks fit
and on such terms and conditions as it thinks fit and shall require
that, in the performance of the delegated duties, such person or persons
shall conform to any regulations that may be imposed on it or them by
the Executive Committee.
21. VACATION OF OFFICE BY COMMITTEE MEMBERS
The office of a Committee Member shall be vacated if:
21.1 he resigns his office by notice delivered to the Secretary; or
21.2 he becomes bankrupt or compounds with his creditors generally;
or
21.3 he becomes of unsound mind or a patient for any purpose of any
statute relating to mental health; or
21.4 he and his alternate fail to attend more than three consecutive
meetings of the Executive Committee; or
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21.5 he is removed from office pursuant to Clause 15.3, 15.5 or (as
the case may be) 15.6.
22. VOTING
22.1 Voting: the chairman of the relevant meeting of the Executive Committee
and any Committee Member may demand that any question or matter arising
at a meeting of the Executive Committee be put to a vote of Committee
Members. Any vote so demanded shall be taken forthwith or at such other
time as such chairman directs not being later than the date of the next
meeting of the Executive Committee. Any demand for a vote may, before
the vote is taken, be withdrawn.
22.2 Simple majority: subject as provided in Clauses 22.3 to 22.11, any
question or matter arising at a meeting of the Executive Committee shall
be decided by a simple majority of the votes cast at the meeting by
Committee Members. On any such question or matter each Committee Member
shall be entitled to one vote. In the event of an equality of votes on
any resolution put to the Executive Committee, the matter the subject of
the relevant resolution shall be remitted to the Committee Members for
decision on a poll.
22.3 Demand for a poll: in respect of any matter or question which is put to
a vote of Committee Members a poll may be demanded (before or after the
simple majority vote) either:
22.3.1 at the meeting at which the simple majority vote takes place, by
the chairman of the meeting or by any Committee Member; or
22.3.2 by no later than five working days after such meeting, by notice
in writing to the Secretary by any Committee Member (whether or
not present at the relevant meeting).
22.4 Effect of decision: a decision duly made at a meeting of the Executive
Committee shall (unless otherwise determined by the Executive Committee
or otherwise provided by the terms of the decision) have immediate
effect, unless a poll be duly demanded in accordance with Clause 22.3,
in which case, pending the outcome of the vote on a poll, the decision
shall cease to or shall not have effect.
22.5 Conduct of a poll: the Secretary shall without delay following the
demand for, or the remittance of a matter for decision on, a poll
dispatch to each Committee Member a voting paper in such form as shall
be agreed by the chairman of the Executive Committee meeting at which
the matter in question was considered or (failing him) the Chief
Executive but which shall in any event set out the full text of the
resolution in respect of which the poll is required (which shall be the
same as the resolution which was put to a simple majority vote), shall
provide for each Committee Member
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to cast votes for or against the resolution and shall specify the date
by which votes must be lodged by Committee Members. The Secretary shall
at the same time give notice to all Parties that a poll has been
demanded and shall specify in such notice the resolution on which the
poll has been called (if applicable), the identity of the person (or
persons) who has demanded the poll and the date by which votes must be
lodged by the Committee Members. The accidental omission to issue a
voting paper or to give notice of a poll, or the non-receipt of a voting
paper or such a notice by, any person entitled to receive the voting
paper or (as the case may be) the notice shall not invalidate the
conduct of the poll or the result thereof.
22.6 Votes on a poll: on a vote on a poll:
22.6.1 the Committee Members shall in aggregate be entitled to a number
of votes equal to the number of votes which the Pool Members
would have been entitled to cast on a poll at a general meeting
if such meeting had taken place on the day of the Executive
Committee meeting at which the matter in question was
considered;
22.6.2 the Committee Members appointed (or deemed appointed) by
Generators shall be entitled to cast votes on the following
basis:
(a) each Committee Member nominated by a single Generator
(which for this purpose shall include affiliates and
related undertakings of a Generator which are also
Generators) and elected on the first round of voting
shall cast the number of votes respectively attributable
to that Generator and to its affiliates and related
undertakings (in each case, whether as Generators of
Suppliers) in accordance with the written instructions
of that Generator and of each relevant affiliate and
undertaking;
(b) the Committee Members not falling within (a) above shall
have the votes attributable to all other Generators (not
being those referred to in paragraph (a) above or their
affiliates and related undertakings) and shall cast such
votes in accordance with the individual written
instructions of each such Generator, but so that no
Generator shall be entitled to instruct that the votes
attributable to it be cast more than once;
22.6.3 the Committee Members appointed by the Suppliers shall be
entitled to cast votes on the following basis:
(a) the Committee Members appointed (or deemed
appointed) by Groups A, B, C and D shall each
cast the votes attributable to
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the members of the relevant Group in accordance
with the written instructions of the individual
Suppliers which are members of that Group;
(b) the Committee Member appointed on behalf of the
Independent Suppliers shall cast the votes
attributable to the Independent Suppliers in
accordance with the individual written
instructions of each such Supplier;
22.6.4 in the absence of any written instructions from any Generator or
Supplier, a Committee Member shall not be entitled to cast any
votes on behalf of that Generator or Supplier;
22.6.5 a Generator or Supplier may instruct the relevant Committee
Member to abstain from casting any or a specified number of
votes on its behalf;
22.6.6 the votes cast by a Committee Member shall not be valid unless:
(a) the relevant voting paper shall have been received by
the Secretary on or before the date falling 14 working
days after the date on which the voting papers were
despatched to Committee Members and the votes cast in
such voting paper accord with the written instructions
referred to in paragraph (b) below;
(b) accompanied by a copy of the written instructions given
by or on behalf of the Generator(s) or Supplier(s) whose
votes the Committee Member is entitled to cast;
(c) the Committee Member in other respects shall have
complied with the procedures for votes on a poll (if
any) from time to time established by the Executive
Committee;
22.6.7 any Generator or Supplier on whose instructions a Committee
Member is required to act in accordance with the foregoing
provisions shall be entitled to make arrangements with any other
Generator or Supplier on whose instructions that same Committee
Member is required to act for the requisite written instructions
to be given on its behalf by that other Generator or Supplier.
Details of any such arrangement shall promptly be given to the
Secretary.
22.7 65 per cent. majority: a resolution on a poll shall be decided by a
majority of not less than 65 per cent. of the votes duly cast. The
Secretary shall as soon as reasonably practicable after the expiry of
the 14 working day period for return of
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voting papers referred to in Clause 22.6.6(a) ascertain the results of
the poll in consultation with the Pool Chairman or (failing him) the
Chief Executive and the Chief Executive or (failing him) the Secretary
shall as soon as practicable thereafter notify all Parties and all other
persons entitled or required to attend general meetings of Pool Members
of the outcome of the poll. The result of the poll shall be deemed to be
the resolution of the meeting at which or after which the poll was
demanded.
22.8 Withdrawal of demand: any demand for a poll may be withdrawn by the
person who made it at any time provided that notice of withdrawal is
received by the Secretary by no later than the seventh day following the
date of the Executive Committee meeting at which the simple majority
vote took place. The Secretary shall as soon as reasonably practicable
notify all Parties and other persons entitled or required to attend
general meetings of Pool Members of receipt of any such notice of
withdrawal.
22.9 Responsibilities of Committee Members: the Committee Members shall
consult the Pool Members whose votes they are entitled to cast as soon
as reasonably practicable following the demand for a poll and shall be
required to cast, or to refrain from casting, the votes of such Pool
Members in accordance with their individual instructions. The provisions
of Clauses 23.1 and 23.2 shall not apply in respect of any vote
conducted on a poll.
22.10 Referral to general meetings: the provisions of this Clause 22 are
subject to the requirements of referral to the Pool Members in general
meeting described in Clause 13.4.
22.11 Civil emergencies: the provisions of this Clause 22 are subject to the
provisions of Clause 61.9.
23. COMMITTEE MEMBERS' RESPONSIBILITIES AND PROTECTIONS
23.1 Executive Committee's responsibilities: in the exercise of its powers
and the performance of its duties and responsibilities under this
Agreement the Executive Committee shall at all times conduct itself and
its affairs in a manner which it considers best designed to give effect
to the principal objects and purpose set out in Clause 4.1.2 and to
promote, and not obstruct, the fair and efficient operation of the
procedures referred to in Clause 4.1.3 so that the objectives set out in
Clause 4.1.3 are thereby achieved. To the extent not inconsistent with
the responsibilities of the Executive Committee under this Clause 23.1 a
Committee Member shall be free to give effect to his responsibilities
under Clause 23.2 but each of the Pool Members whom such Committee
Member represents acknowledges and agrees the subordination of such
Committee Member's responsibilities under Clause 23.2 to the
responsibilities of the Executive Committee under this Clause 23.1
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23.2 Committee Members' responsibilities: in the exercise of his powers and
the performance of his duties and responsibilities as a Committee Member
under this Agreement a Committee Member shall represent:
23.2.1 where he is appointed on the first round of voting under Clause
15.2.4, the interests of the Pool Member who cst the most number
of votes in favour of his appointment;
23.2.2 where he is appointed on the second or third round of voting
under Clause 15.2.4 or where he is appointed pursuant to Section
6 of Schedule 14, the interests of all Pool Members who were
entitled to vote on his appointment, (and, for the purposes of
this Clause, until the annual general meeting of Pool Members in
1995 Central Power shall be deemed to be a Pool Member who was
entitled to vote on the appointment of the Committee Member
appointed on the second round of voting), but so that he shall
not incur personal liability as against one or more such Pool
Members if, acting bona fide, he acts in a way which gives
effect to the interests of one or more other such Pool Members;
and
23.2.3 where he is appointed by Groups A, B, C or D pursuant to
Schedule 14, the interests of all PES Members (as defined in
Schedule 14).
23.3 Protections:
23.3.1 the Executive Committee, each Committee Member, the Pool
Chairman, the Chief Executive (if any) and the Secretary shall
be entitled to rely upon any communication or document
reasonably believed by it or him to be genuine and correct and
to have been communicated or signed by the person by whom it
purports to be communicated or signed and shall not be liable to
any of the Parties for any of the consequences of such reliance.
23.3.2 The Executive Committee, each Committee Member, the Pool
Chairman, the Chief Executive (if any) and the Secretary may in
relation to any act, matter or thing contemplated by this
Agreement act on the opinion or advice of, or any information
from, any lawyer, banker, valuer, broker, accountant or any
other specialist or professional adviser given within the field
of expertise usually ascribed to persons of such description or
the specialist field of expertise for which he has been retained
and duly instructed so to act by the Executive Committee, and
shall not be liable for the consequences of so acting. The
appointment of any such adviser to the Executive
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Committee shall be approved by the Executive Committee before
any such cost is charged to the PFA Accounting Procedure.
23.3.3 In the event of any conflict or inconsistency, any directions
and instructions of the Director (which the Director's entitled
under his statutory or regulatory powers to issue or give) shall
prevail over the duties and responsibilities of the Executive
Committee or the Secretary under this Agreement and no liability
whatsoever shall attach to the Executive Committee or any
Committee Member or the Pool Chairman or the Chief Executive (if
any) or the Secretary (as the case may be) as a result of due
compliance by it or him with any such directions and
instructions.
23.3.4 Each Committee Member shall be indemnified and kept indemnified
by that Pool Member or jointly and severally by those Pool
Members whom he represents as provided in Clause 23.2 (and, if
more than one, as between the relevant Pool Members rateably in
the proportion which their respective Contributory Shares bear
one to the other at the time of receipt of the request for
indemnification) from and against any and all costs (including
legal costs), charges, expenses, damages or other liabilities
properly incurred or suffered by him in relation to the
Executive Committee or his office as Committee Member or the due
exercise by him or his powers, duties and responsibilities as a
Committee Member and all claims, demands or proceedings arising
out of or in connection with the same except any such costs and
expenses referred to in Clause 23.4 which have been recovered in
accordance with the PFA Accounting Procedure and any such costs,
charges, expenses, damages or other liabilities which are
suffered or incurred or occasioned by the wilful default or bad
faith of, or breach of duty or trust by, such Committee Member.
The Pool Member or (as the case may be) Pool Members whom he
represents as aforesaid shall, upon request, provide the
relevant Committee Member with a written deed of indemnity to
that effect.
23.4 Committee Members' costs and expenses: each committee Member and each
member of any sub-committee or sub-group of the Executive Committee may
be paid his reasonable travelling, hotel and incidental expenses of
attending and returning from meetings of the Executive Committee or any
such sub-committee or sub-group and shall be paid all expenses properly
and reasonably incurred by him in the conduct of the business of the
Executive Committee or the relevant sub-committee or sub-group or in the
discharge of his duties as a Committee Member or (as the case may be) a
member of the relevant sub-committee or sub-group. All such expenses
shall be recovered in accordance with the PFA Accounting procedure.
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23.5 Committee's costs and expenses: the Executive Committee and each of its
sub- committees and sub-groups shall be entitled to recover all its
costs and expenses reasonably incurred in accordance with the PFA
Accounting Procedure. For this purpose, the costs and expenses of the
Executive Committee shall include the reasonably incurred costs of any
business accommodation and services required by the Executive Committee,
the Chief Executive, the Secretary or the personnel referred to in
Clause 17.2.1 and the reasonably incurred costs and expenses of any
consultant or adviser retained by the Executive Committee or any such
person in the proper performance of its or his duties and
responsibilities.
24. POWERS OF THE EXECUTIVE COMMITTEE
24.1 General power: subject as otherwise provided in this Agreement, the
Executive Committee shall, as between itself and the Pool Members in
general meeting, exercise overall supervision of the Settlement System
and its operations.
24.2 Specific powers: subject as otherwise provided in this Agreement, the
powers, duties and responsibilities of the Executive Committee shall, as
between itself and the Pool Members in general meeting, include:-
24.2.1 the specific powers, duties and responsibilities set out in the
Pool Rules;
24.2.2 monitoring on a regular basis the Settlement System
Administrator in its operation of the Settlement System
(including deciding whether to propose to the Pool Members in
general meeting for their approval the removal of the Settlement
System Administrator);
24.2.3 the power to appoint and remove the Pool Funds Administrator and
to carry out the other functions ascribed to it in Schedules 11
and 15 and to enter into on behalf of Pool Members any agreement
or arrangement with the Pool funds Administrator (or successor
Pool Funds Administrator) in substitution for that set out in
Schedule 15;
24.2.4 monitoring on a regular basis each of the Grid Operator and the
Ancillary Services Provider in the performance of its
obligations under this Agreement;
24.2.5 considering applications by New Parties to be admitted as
parties to this Agreement under Clause 3 and of Parties to be
admitted as Pool Members under Clause 8;
24.2.6 considering, amending, substituting, approving and disapproving
all Agreed Procedures and Codes of Practice (including
commissioning
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reviews thereof by the Pool Auditor in accordance with Clause
47.1.5 or by other technical experts);
24.2.7 where provided in Schedule 4, considering, revising, approving
or disapproving all budgets and authorities for capital
expenditure prepared and submitted to it by the Settlement
System Administrator in accordance with the Accounting
Procedure;
24.2.8 commissioning and review Value For Money Audits in accordance
with the Accounting Procedure;
24.2.9 the specific powers, duties and responsibilities set out in
Schedule 15;
24.2.10 appointing and removing the Pool Auditor, and instructing the
Pool Auditor to conduct audits, reviews, tests and checks and
the monitoring and review thereof, all in accordance with Part
IX;
24.2.11 opening, maintaining and closing bank accounts for its own
purposes and crediting and debiting sums thereto;
24.2.12 controlling the development of the Software and/or the
Specification, considering, revising and approving or
disapproving changes to the Software and/or the Specification,
and considering, revising and approving or disapproving all
proposals to change the Hardware;
24.2.13 controlling the development of the Pool Rules and considering
and approving or disapproving amendments to the Pool Rules;
24.2.14 commissioning independent reviews of the Scheme and its
operation in accordance with Part XIII;
24.2.15 conducting reviews, preparing Works Programmes and implementing
Transitional Arrangements, all in accordance with Clause 5;
24.2.16 preparing the reports referred to in Clause 9.1.1 and the
business plan referred to in Clause 9.1.6 and preparing and
despatching regular quarterly reports to the Parties (with a
copy to the Director) in relation to all matters which are the
subject of this Agreement and in such reports reviewing
performance over the immediately preceding Quarter against the
business plan referred to in Clause 9.1.6;p
24.2.17 considering any representation from any Pool Member in relation
to any regular quarterly report prepared pursuant to Clause
24.2.16 above
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or otherwise relating to any matter which is the subject of this
Agreement;
24.2.18 overseeing the standards of Metering Equipment and the Codes of
Practice, agreeing in accordance with paragraph 14 of Schedule
21 dispensations therefrom and reviewing the need for new
standards for Metering Equipment and, where it considers such
new standards are required, adopting such standards in
accordance with the requirements for adoption of Codes of
Practice (as contained in the definition of Code of Practice)
and in accordance with the provisions of Schedule 21;
24.2.19 dealing promptly and efficiently with any dispute referred to it
concerning Settlement or its operation (including with respect
to data);
24.2.20 convening in accordance with Clause 9.4 general meetings of Pool
Members or classes of Pool Members and convening in accordance
with Clause 9.6 quarterly meetings of Pool Members;
24.2.21 appointing, remunerating and removing the Chief Executive in
accordance with Clause 17.1 and, where permitted by the terms of
this Agreement, giving directions and instructions to the Chief
Executive (if any), the Settlement System Administrator, the
Pool Funds Administrator, the Grid Operator, the Ancillary
Services Provider, Externally Interconnected Parties (not being
Pool Members) and other persons to carry into effect the
decisions of the Executive Committee or Pool Members in general
meeting or separate general meeting;
24.2.22 if requested by the Director, conveying any direction or request
of the Director to the Settlement System Administrator, the Pool
Funds Administrator, the Grid Operator, the Ancillary Services
Provider or any other Party or the Pool Auditor;
24.2.23 appointing, remunerating and removing in accordance with the
Grid Code one or more persons to represent the Executive
Committee on the Grid Code Review Panel;
24.2.24 appointing, remunerating and removing lawyers, bankers, valuers,
brokers, accountants and other professional and specialist
advisers to assist the Executive Committee or any of its
sub-committees in the performance of its duties and
responsibilities under this Agreement;
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24.2.25 subject to any applicable confidentiality provisions, monitoring
any litigation, arbitration or other proceedings affecting or
which may affect the Settlement System;
24.2.26 subject to any applicable confidentiality provisions, advising
Pool Members, Externally Interconnected Parties (not being Pool
Members), the Settlement System Administrator, the Pool Funds
Administrator, the Grid Operator and the Ancillary Services
Provider of decisions of the Executive Committee applicable to
them or the relevant one(s) of them and liaising with all such
persons on an ongoing and regular basis;
24.2.27 advising each of the Pool Auditor and the Director of decisions
of the Executive Committee and of Pool Members in general
meeting or separate general meeting and liaising with each of
the Pool Auditor and the Director on an ongoing and regular
basis;
24.2.28 investigating any complaints made by any Pool Member concerning
the Settlement System, the Funds Transfer System (or any part or
aspect of any thereof), the Settlement System Administrator, the
Pool Funds Administrator, the Grid Operator, the Ancillary
Services Provider, the Pool Auditor, the Pool Banker or the
Custodian;
24.2.29 approving the Pool Banker and giving instructions for, or
consenting to, the removal of the same;
24.2.30 reviewing and approving or disapproving the Procedures Manual in
accordance with Clause 64;
24.2.31 considering and dealing with any other matter relating to the
Settlement System, the Funds Transfer System (or any part or
aspect of any thereof) or its or their operation referred to the
Executive Committee by the Pool Members in general meeting or
separate general meeting, any Pool Member, the Pool Chairman,
the Pool Auditor or the Director and any other matter which is
otherwise designated under this Agreement for reference to it;
and
24.2.32 determining the amount of the Second Tier Suppliers' System
Charge for the purpose of Section 6.3 of Part C of Schedule 4.
24.3 Exclusion of general meeting powers: Pool Members in general meeting
shall have no powers in relation to the matters expressly reserved under
this Agreement to the Executive Committee except to the extent that such
matters are remitted to the Pool Members in general meeting under Clause
13.4.
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PART V
LIMITATION OF LIABILITY
25. LIMITATION OF LIABILITY
25.1 Limitation of liability: subject to Clause 25.2 and save where any
provision of this Agreement provides for an indemnity, each Party agrees
and acknowledges that no Party (excluding for this purpose the
Settlement System Administrator) (the "Party Liable") or any of its
officers, employees or agents shall be liable to any of the other
Parties for loss arising from any breach of this Agreement other than
for loss directly resulting from such breach and which at the date of
this Agreement was reasonably foreseeable as not unlikely to occur in
the ordinary course of events from such breach in respect of:-
25.1.1 physical damage to the property of any of the other Parties or
its or their respective officers, employees or agents; and/or
25.1.2 the liability of any such other Party to any other person for
loss in respect of physical damage to the property of any other
person.
25.2 Death and personal injury: nothing in this Agreement shall exclude or
limit the liability of the Party Liable for death or personal injury
resulting from the negligence of the Party Liable or any of its
officers, employees or agents and the Party Liable shall indemnify and
keep indemnified each of the other Parties, its officers, employees or
agents from and against all such and any loss or liability which any
such other Party may suffer or incur by reason of any claim on account
of death or personal injury resulting from the negligence of the Party
Liable or any of its officers, employees or agents.
25.3 Exclusion of certain types of loss: subject to Clause 25.2 and save
where any provision of this Agreement provides for an indemnity, neither
the Party Liable nor any of its officers, employees or agents shall in
any circumstances whatsoever be liable to any of the other Parties for:-
25.3.1 any loss of profit, loss of revenue, loss of use, loss of
contract or loss of goodwill; or
25.3.2 any indirect or consequential loss; or
25.3.3 loss resulting from the liability of any other Party to any
other person howsoever and whensoever arising save as provided
in Clauses 25.1.2 and 25.2.
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25.4 Trust: each Party acknowledges and agrees that each of the other Parties
holds the benefit of Clauses 25.1, 25.2 and 25.3 for itself and as
trustee and agent for its officers, employees and agents.
25.2 Survival: each of Clauses 25.1, 25.2, 25.3 and 25.4 shall:-
25.5.1 be construed as a separate and severable contract term, and if
one or more of such Clauses is held to be invalid, unlawful or
otherwise unenforceable the other or others of such Clauses
shall remain in full force and effect and shall continue to bind
the Parties; and
25.5.2 survive termination of this Agreement.
25.6 Saving: for the avoidance of doubt, nothing in this Part V shall prevent
or restrict any Party enforcing any obligation (including suing for a
debt) owed to it under or pursuant to this Agreement.
25.7 Full negotiation: each Party acknowledges and agrees that the foregoing
provisions of this Part V have been the subject of discussion and
negotiation and are fair and reasonable having regard to the
circumstances as at the date of this Agreement.
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PART VI
THE SETTLEMENT SYSTEM ADMINISTRATOR
26. APPOINTMENT
NGC Settlements Limited is hereby appointed by each Pool Member and
agrees to act as the initial Settlement System Administrator on and
subject to the terms and conditions of this Agreement.
27. RESIGNATION AND REMOVAL
27.1 Resignation: subject:-
27.1.1 to the Settlement System Administrator having demonstrated to
the satisfaction of the Director good cause for its resignation;
and
27.1.2 as provided in Clauses 27.5 and 27.6,
the Settlement System Administrator may at any time on or after the
third anniversary of the Effective Date resign as Settlement System
Administrator having given to the Secretary (who shall forthwith notify
all Pool Members) and the Director not less than 12 months' notice in
writing of its intention so to do.
27.2 Good cause for resignation: examples of good cause for the purposes of
Clause 27.1.1 may include the following:-
27.2.1 a failure on the part of the Settlement System Administrator
(all relevant circumstances being taken into account) to achieve
a reasonable rate of return from the Settlements Business (not
being a failure occasioned by the Settlement System
Administrator's own default, negligence or inefficient
management); and
27.2.2 a failure on the part of the Settlement System Administrator to
receive all or a not insignificant part of its budgeted income
in any Accounting Period, not being:-
(a) a failure which could have been avoided by proper and
efficient debt collection or could adequately be cured
by a provision for bad debts in the then current or next
succeeding Budget; or
(b) a failure which is remedied within a reasonable time
(and in any event within 120 days) after the Settlement
System Administrator has given the defaulting Pool
Member(s) and the
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Executive Committee notice of such failure and requiring
the same to be remedied.
For the avoidance of doubt, the Parties hereby acknowledge and
agree that an application by the Settlement System Administrator
to the Director to resign shall not, of itself, constitute good
cause.
27.3 Removal: subject:-
27.3.1 to good cause for the removal of the Settlement System
Administrator having been demonstrated to the satisfaction of
the Director; and
27.3.2 as provided in Clauses 27.5 and 27.6.
the Settlement System Administrator may at any time on or after the
third anniversary of the Effective Date be removed as Settlement System
Administrator by:-
(a) resolution of the Pool Members in general meeting passed
by Pool Members holding not less than 80 per cent. of
the Total Votes of Pool Members who are entitled to vote
in person or by proxy at a general meeting of Pool
Members or deemed effective pursuant to Clause 13.5; and
(b) the giving by the Executive Committee to the Settlement
System Administrator after such resolution has been
passed or deemed effective (which the Executive
Committee shall promptly do) of not less than 6 months'
notice in writing of such removal (or such other period
as the Director may determine in response to the
application made to him for the purposes of Clause
27.3.1).
27.4 Good cause for removal: examples of good cause for the purposes of
Clause 27.3.1 may include the following:-
27.4.1 the failure by the Settlement System Administrator in any
persistent, material respect or in any single, major respect to
perform or comply with any of the obligations expressed to be
assumed by it under this Agreement and such default (if capable
of remedy) is not remedied within a reasonable period of time
after the Executive Committee has given notice to the Settlement
System Administrator of the occurrence thereof and requiring the
same to be remedied;
27.4.2 the revocation or determination or cessation in force for any
reason whatsoever of the Condition of the Transmission Licence
applicable to the Settlement System Administrator requiring the
Settlement System
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Administrator to implement, maintain and operate a settlement
system; and
27.4.3 the Settlement System Administrator:-
(a) is unable to pay its debts (within the meaning of
section 123(1) or (2) of the Insolvency Act 1986, but
subject as hereinafter provided in this Clause 27.4.3)
or if any voluntary agreement is proposed in relation to
it under section 1 of that Act or enters into any scheme
of arrangement (other than for the purpose of
reconstruction or amalgamation upon terms and within
such period as may previously have been approved in
writing by the Executive Committee);
(b) has a receiver (which expression shall include an
administrative receiver within the meaning of section 29
of the Insolvency Act of 1986) of the whole or any
material part of its assets or undertaking appointed;
(c) has an administration order under section 8 of the
Insolvency Act of 1986 made in relation to it;
(d) passes any resolution for winding-up other than a
resolution previously approved in writing by the
Executive Committee; or
(e) becomes subject to an order by the High Court for
winding-up.
For the purposes of paragraph (a) above section 123(1)(a) of the
Insolvency Act of 1986 shall have effect as if for
"(pound)250,000" and, further, the Settlement System
Administrator shall not be deemed to be unable to pay its debts
for the purposes of paragraph (a) above if any such demand as is
mentioned in the said section is being contested in good faith
by the Settlement System Administrator with recourse to all
appropriate measures and procedures.
For the avoidance of doubt, the Parties hereby acknowledge and agree
that a resolution of Pool Members in general meeting to remove the
Settlement Administrator shall not, of itself, constitute good cause.
27.5 Referral to the Director: the Parties agree that the Settlement System
Administrator shall not be entitled to resign under Clause 27.1 and
shall not be removed under Clause 27.3 unless the Director shall have
notified the Settlement System Administrator and the Executive Committee
(which shall promptly notify all the other
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Parties) that he is satisfied that good cause has been demonstrated for
such resignation or removal.
27.6 Appointment of successor: any resignation by or removal of the
Settlement System Administrator pursuant to Clause 27.1 or 27.3 shall
not take effect until a successor Settlement System Administrator shall
have been appointed and shall have accepted such appointment and the
Settlement System Administrator shall continue to perform and discharge
its duties and responsibilities under this Agreement until such
appointment and acceptance. Subject as provided in Clause 27.7:-
27.6.1 during the period of notice of resignation provided in Clause
27.1 the Executive Committee shall have the right to appoint a
successor but, if none is so appointed, the Settlement System
Administrator shall have the right to appoint a successor; and
27.6.2 upon removal of the Settlement System Administrator under Clause
27.3 the Executive Committee shall have the right to appoint a
successor.
27.7 Approval of the Director: the Parties undertake with each other that no
successor Settlement System Administrator shall be appointed without the
written approval of the Director first having been obtained.
27.8 Discharge: if a successor to the Settlement System Administrator is
appointed under the provisions of Clause 27.6 and accepts such
appointment, the retiring or removed Settlement System Administrator
shall (save as provided in Clause 28 and save as regards any rights and
liabilities accrued as at the date of retirement or removal) be
discharged from any further obligation and shall have no further rights
under this Agreement but shall remain entitled to the benefit of the
provisions of Clauses 32 and 33 and any other provision of this
Agreement providing for an indemnity in favour of the Settlement System
Administrator, and its successor and (save as provided in this Clause
27.8) each of the other Parties shall have the same rights and
obligations amongst themselves as they would have had if such successor
had been a party to this Agreement in place of the retiring or removed
Settlement System Administrator.
28. TRANSFER OF RESPONSIBILITIES AND ASSETS
28.1 Transfer of responsibilities and assets: upon a successor Settlement
System Administrator being appointed under Clause 27.6 and accepting
such appointment the retiring or removed Settlement System Administrator
shall:-
28.1.1 transfer to such successor all copies of all Software belonging
to the Settlement System Administrator together with all rights
therein vested in the Settlement System Administrators;
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28.1.2 use all reasonable endeavours to novate, or procure the novation
of, any licence or other agreement to use and/or maintain the
Software to such successor;
28.1.3 when no longer reasonably required by the Settlement System
Administrator to perform its duties and responsibilities under
this Agreement, transfer to such successor all Hardware
belonging to the Settlement System Administrator and required by
such successor to carry out such successor's duties and
responsibilities under this Agreement and necessary for the
proper functioning of the Settlement System;
28.1.4 make over to such successor all such records, manuals and data
and other information in the ownership or under the control of
the settlement System Administrator and relating to the
operation, and necessary for the proper functioning, of the
Settlement System, provided that, until such time as no longer
reasonably required by the Settlement System Administrator for
its operation hereunder of the Settlement System, the Settlement
System Administrator may retain copies of all such records,
manuals, data or other information solely for that purpose;
28.1.5 provide such training and systems support as such successor may
reasonably require and for such period as such successor may
reasonably require to enable such successor to carry out its
duties and responsibilities under this Agreement; and
28.1.6 without prejudice to the foregoing provisions of this Clause 28,
transfer or otherwise make available to such successor all
assets (excluding freehold and leasehold property), equipment,
facilities, rights, know-how and transitional assistance which
it possesses and which is necessary for such successor to have
to operate the Settlement System in accordance with this
Agreement and which is not otherwise readily obtainable by such
successor,
in each case on such reasonable terms (other than as to consideration)
as may be agreed between the Settlement System Administrator, such
successor and the Executive Committee (and, in default of agreement, the
dispute shall be referred to arbitration in accordance with Clause 83)
and in consideration of the payment of such sums as are referred to in
Clause 28.2. The Settlement System Administrator further agrees, in
consideration of the payment of such sums as are referred too in Clause
28.2, to co-operate with any such successor and the Executive Committee
so that the transfer of duties, responsibilities, assets and know-how to
such successor is carried
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out causing as little disruption to the operation of the Settlement
System and inconvenience to the Parties as is practicable in all the
circumstances.
28.2 Costs of transfer:
28.2.1 the consideration referred to in Clause 28.1 is:
(a) in respect of all Software, Hardware, records, manuals,
data and other information referred to in Clauses
28.1.1, 28.1.3 and 28.1.4, the net book value of the
same at the date of transfer (which net book value shall
not be written up without the prior written consent of
the Executive Committee, such consent not to be
unreasonably withheld or delayed); and
(b) in respect of the training and systems support referred
to in Clause 28.1.5, the co-operation referred to in the
last sentence of Clause 28.1 and such other matters as
are within Clause 28.1.6 but not paragraph (a) above,
such reasonable amount as may be agreed between the
Settlement System Administrator, the successor and the
Executive Committee (and, in default of agreement, the
dispute shall be referred to arbitration in accordance
with Clause 83).
28.2.2 Where, during its appointment under this Agreement as Settlement
System Administrator, the Settlement System Administrator has at
the request of the Executive Committee purchased assets for use
solely for the purposes of the Settlements Business (not being
assets transferred or to be transferred pursuant to Clause 28.1)
the Pool Members shall use all reasonable endeavours to procure
that the successor to the Settlement System Administrator shall
acquire from the Settlement System Administrator at the
Settlement System Administrator's request all or any of such
assets on such reasonable terms (other than as to consideration)
as may be agreed between the Settlement System Administrator,
such successor and the Executive Committee (and, in default of
agreement, the dispute shall be referred to arbitration in
accordance with Clause 83) and at their respective net book
values at the date of acquisition by such successor (which net
book values shall not be written up without the prior written
consent of the Executive Committee, such consent not to be
unreasonably withheld or delayed).
28.2.3 (a) With respect to the removal of the Settlement System
Administrator, if in giving notice pursuant to Clause
27.5 the Director shall state that in his opinion the
removal of the Settlement System Administrator is not
occasioned in any
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material respect by fault, negligence or inefficient
management on the part of the Settlement System
Administrator, the Settlement System administrator's
costs and expenses of, or directly associated with, its
removal (including any redundancy or relocation costs or
expenses and any costs and expenses arising from the
vacation or surrender of any premises or disposal or its
own redeployment of any plant or equipment used in the
Settlements Business) (the "Unwinding Costs") shall be
borne as to 50 per cent. by the Settlement System
Administrator and as to 50 per cent. by the Pool Members
(and as between the Pool Members according to their
respective Contributory Shares at the date of removal).
(b) With respect to the resignation of the Settlement System
Administrator, if in giving notice pursuant to Clause
27.5 the Director shall state that in his opinion good
cause has been demonstrated on the basis of the grounds
set out in Clause 27.2.1 or 27.2.2, the Unwinding Costs
of the Settlement System Administrator shall be borne
exclusively by the Pool Members (and as between the Pool
Members according to their respective Contributory
Shares at the date of resignation).
(c) In any other case, the Settlement System Administrator
shall bear all its Unwinding Costs.
28.2.4 Any payment made by all or any of the Pool Members to the
Settlement System Administrator under this Clause 28 shall be
without prejudice to any rights and remedies which the Pool
Members (or any of them) may have against the Settlement System
Administrator arising under this Agreement.
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PART VII
THE SETTLEMENT SYSTEM ADMINISTRATOR'S RESPONSIBILITIES
29. RESPONSIBILITIES
Responsibilities: the Settlement System Administrator shall have the
following general duties, responsibilities and obligations under this
Agreement:-
29.1 The Settlement System: on and subject to the terms and conditions of
this Agreement, compliance with its obligations under this Agreement in
respect of the day-to-day operation of the Settlement System;
29.2 Back-up arrangements: In accordance with such requirements as the
Executive Committee may from time to time notify to it, the maintenance
at one or more sites separate from the site(s) (the "Primary Site")
where the day-to-day operation of the Settlement system is carried out
of up-to-date copies of the software, appropriate computer hardware,
other facilities, records and data such that, upon any breakdown in the
operation of the settlement System at the Primary Site, the day-to-day
operation thereof can be transferred and run from the separate site or
sites at such levels and to such standards of performance as the
Executive committee may from time to time so notify, provided that the
Settlement System Administrator shall not be obliged to take any action
in this regard until the date falling six months after the Effective
date;
29.3 Budgets: compliance with its obligations under Schedule 4;
29.4 Metering: compliance with its obligations under Part XV and Schedule 21;
29.5 Works Programmes: subject to the availability of resources, co-operation
in the preparation, finalisation and implementation of all Works
Programmes in respect of which the Settlement System Administrator is
not appointed Project Manager;
29.6 Recommendations: at the request of the Executive Committee or of its own
initiative, the recommendation to the Executive Committee of changes to
this Agreement, the Settlement System, the Pool Rules, the
Specification, the Hardware, the Software, the Agreed Procedures and the
Codes of Practice (or any part or aspect of any thereof);
29.7 Instructions: subject as provided in Clause 31.3, the implementation of
all directions and instructions advised to it under this Agreement by
the Executive Committee;
29.8 Records:
29.8.1 the maintenance of such records, data and other information as
the Pool Auditor may from time to time (after consultation with
the Executive
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Committee) by notice in reasonable detail to the Settlement
System Administrator require for the purposes of Part IX or as
may otherwise be reasonably necessary to enable the Settlement
System Administrator to comply promptly and fully with all its
obligations under this Agreement and to facilitate the operation
of the Fuel Security Code; and
29.8.2 the retention in machine readable form for a period of not less
than eight years (or such longer period as the Executive
Committee may from time to time reasonably require) and in
electronic or hard copy form (which for these purposes shall
include microfiche) for a period of not less than one year of
the records, data and other information referred to in Clause
29.8.1 (such records, data and other information to include, to
the extent not already included, that specified in Appendix 4 to
Schedule 9);
provided that this obligation shall cease to apply to the Settlement
System Administrator which has resigned or been removed to the extent
that it has complied with its obligations under Clause 28.1;
29.9 Provision of information (1): subject to any statutory or Licence
obligations, the provision to the Executive Committee upon request of
reports, data and other information concerning the Settlement System
(other than information which is exclusively confidential to and the
property of the Settlement System Administrator) required by the
Executive Committee and which the Settlement System Administrator is
required to retain under Clause 29.8. Each of the Parties agrees to the
release of all such reports, data and other information in the
circumstances described in this Clause 29.9;
29.10 Provisions of information (s): the provision to the Pool Auditor upon
request of reports, data and other information concerning the Settlement
System required by the Pool Auditor and which the Settlement System
Administrator is required to retain under Clause 29.8. Each of the
Parties agrees to the release of all such reports, data and other
information in the circumstances described in this Clause 29.10;
29.11 Provision of information (3): the provision to each Pool Member and the
Ancillary Services Provider upon request of a certified copy of such
records, data and other information concerning amounts payable by or to
such Pool Member and the Ancillary Services Provider as such Pool Member
may reasonably request for the purpose of establishing the amounts which
are owed to or by such Pool Member in accordance with this Agreement,
and in any event such information as any Pool Member may request from
the Settlement System Administrator in order to establish or prove a
claim to any amounts due or claimed to be due. The Settlement System
Administrator shall provide such information forthwith upon request or
(if so
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required by the Settlement System Administrator) upon delivery of a
certificate from the Pool Member's counsel certifying that such
information is required for such purpose. Each of the Parties agrees to
the release of all such records, data and other information in the
circumstances described in this Clause 29.11;
29.12 Pool Rules: those specific duties and responsibilities ascribed to it in
the Pool Rules:
29.13 Operation of the Settlement System: the operation of the software in
accordance with the Pool rules and the proper employment of the Hardware
in the carrying out of its duties and responsibilities and the
performance of its obligations in respect of its operation of the
Settlement System;
29.14 Arrangements with the Grid Operator and Ancillary Services Provider:
each of the Settlement System Administrator, the Grid Operator and the
Ancillary Services Provider shall make and maintain arrangements with
each other whereby such data and other information as may be collected
or received by any of them or necessary for the purposes of the
Settlement System, the Ancillary Services Business or (as the case may
be and subject to Clause 69) the operation of the NGC Transmission
System or the performance by the Grid Operator of its obligations under
the NGC Transmission Licence shall be provided to such other(s) to the
extent necessary to enable such other(s) to perform its or their
respective obligations under this agreement, the Grid Code, any
Ancillary Services Agreement and/or the NGC Transmission Licence. Each
of the Parties agrees to the release of all such data and other
information in the circumstances described in this Clause 29.14;
29.15 Arrangements with the Pool Funds Administrator: the Settlement System
Administrator and the Pool Funds Administrator shall make and maintain
arrangements with each other whereby:-
(a) sufficient data and other information is provided by the
Settlement System Administrator to the Pool Funds Administrator
as to enable the Pool Funds Administrator to perform its
obligations under this Agreement and the Funds Transfer
Agreement; and
(b) sufficient data and other information is provided by the Pool
Funds Administrator to the Settlement System Administrator as to
enable the Settlement System Administrator to perform its
obligations under this Agreement.
Each of the Parties agrees to the release of all such data and other
information in the circumstances described in this Clause 29.15;
29.16 Notification of arrangements: the provision, upon request, to the
Executive Committee of full details of its arrangements for the time
being in effect with each
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of the Grid Operator, the Pool Funds Administrator and the Ancillary
Services Provider Preferred to in Clause 29.15 or (as the case may be)
29.15;
29.17 Provision of information (4): the provision to each Pool Member of a
report of the running of the Settlement System for each Settlement Day.
Such report may be provided to each Pool Member by electronic means via
data communication links or in such other manner as is agreed between
the Settlement System Administrator and the relevant Pool Member.
29.18 Estimates: without prejudice to its obligations under Section 17.8 of
Schedule 11, where the Settlement System Administrator is unable for
whatever reason to provide the Pool Funds Administrator with the actual
information required in respect of each Settlement Day for each Pool
Member and the Ancillary Services Provider, the provision to the Pool
Funds Administrator of its best estimates of that information by the
same time as it was required to provide the actual information. The
Settlement System Administrator shall promptly notify the Pool Funds
Administrator, the Ancillary Services Provider, each Pool Member, each
Externally Interconnected Party (not being a Pool Member), the Executive
Committee, the Pool Auditor and the Director that the information so
provided has been provided on an estimated, and not actual, basis;
29.19 Provisional determinations: where a provisional determination of any
dispute is required for the purposes of any run of Settlement (as
referred to in paragraph D of the Preamble to Section 9) the same shall
be made by the Settlement System Administrator in accordance with the
relevant Agreed Procedure or, if there is no such Agreed Procedure, on
such basis as the Settlement System Administrator shall reasonably
consider to be appropriate in all the circumstances. If the Settlement
System Administrator shall make any such provisional determination, it
shall promptly notify the Executive Committee in writing of the same and
shall give such details thereof as the Executive Committee may from time
to time request;
29.20 Other: subject to Clause 31.3, generally the carrying out of all such
technical, operative, executive, administrative and advisory services in
connection with the operation of the Settlement System as from time to
time may reasonably be required by the Executive Committee;
29.21 Availability testing: the giving of instructions to the Grid Operator to
conduct Availability Tests (as defined in paragraph 19.1.1 of Schedule
9), which the Grid Operator undertakes to conduct, all in accordance
with Section 19 of that Schedule.
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30. INSURANCE RESPONSIBILITIES
30.1 Insurance requirements: subject to the availability in the insurance
market of such insurances, the Settlement System Administrator shall
effect and maintain in full force and effect with first class insurers
the following insurances:-
30.1.1 insurance with respect to (a) physical loss or damage to each of
the Hardware (including Second Tier Hardware) and Software
(including Second Tier Software) and (b) corruption of the
Software (including Second Tier Software) and related computer
data, in each case in an amount equivalent to its replacement
cost, except, with effect from 1st April, 1994, insofar as
concerns any Second Tier Hardware and Second Tier Software owned
and/or operated by any particular Second Tier Agent where such
Second Tier Agent has agreed with the Settlement System
Administrator substantially to the effect, inter alia, that:
(i) the Second Tier Agent will effect and maintain in full
force and effect with first class insurers insurance
with respect to (a) physical loss or damage to each of
such Second Tier Hardware and Second Tier Software and
(b) corruption of such Second Tier Software and related
computer data, in each case in an amount equivalent to
its correction cost;
(ii) the Second Tier Agent shall promptly on request provide
to the Settlement System Administrator an insurance
broker's certificate having a form and content as
specified in Clause 30.4 and evidence that the Second
Tier Agent has paid the relevant premiums; and
(iii) if the Second Tier Agent has not so insured and paid the
relevant premiums the Settlement System Administrator
shall, on behalf of the Second Tier Agent, take out such
insurance and pay such premiums and recover the cost of
the same from the Second Tier Agent; and
provided that, in the case of (iii) above, where:
(a) the Settlement System Administrator is aware
that the Second Tier Agent has not so insured in
accordance with (i) above; and
(b) a period of fourteen days since the Settlement
System Administrator first became aware that the
Second Tier Agent had not insured in accordance
with (i) above, has
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elapsed, during which period the Second Tier
Agent has not so insured in accordance with (i)
above.
the Settlement System Administrator shall so take out
such insurances in the name of such Second Tier Agent
unless, after having sought, to the extent that it is
able, such information from the Second Tier Agent as is
necessary for the purposes of obtaining such insurances,
it has failed to obtain such information; and
30.1.2 professional indemnity insurance as Settlement System
Administrator in an amount of not less than "(pound)20,000,000"
any one claim and "(pound)20,000,000" all claims in any one year
(or such other amount as may from time to time be reasonably
required by the Executive Committee after consultation with the
Settlement System Administrator).
30.2 Costs: all premiums and other sums of money payable in respect of all
insurances effected or to be effected pursuant to Clause 30.1 where
borne by the Settlement System Administrator shall be recovered in
accordance with the Accounting Procedure.
30.3 Application of proceeds: the Settlement System Administrator shall use
all reasonable endeavors:
(i) in the case of insurance where its Second Tier Agent is the
insured, to procure that such Second Tier Agent makes and
collects claims promptly; and
(ii) in the case of insurances where its Second Tier Agent is the
insured, to procure that such Second Tier Agent makes and
collects claims promptly,
and shall apply and, as appropriate, shall procure that its Second Tier
Agent applies, all moneys so received by it in respect of the insurances
referred to in Clause 30.1 in or towards making good the loss and fully
repairing the damage or (as the case may be) satisfying the relevant
liability in respect of which such moneys were receivable or reimbursing
the cost of the same.
30.4 Information requirements: the Settlement System Administrator shall
promptly supply the Executive Committee upon request from time to time
with an insurance broker's certificate in form and content reasonably
satisfactory to the Executive Committee confirming that cover has been
effected, whether by it or its Second Tier Agent, in respect of the
insurances referred to in Clause 30.1 and giving reasonable details of
the terms and conditions of such insurance.
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31. PERFORMANCE OF DUTIES
31.1 Independent contractor: in carrying out its duties and responsibilities
under this Agreement and otherwise in acting as Settlement System
Administrator hereunder, the Settlement System Administrator shall act
as an independent contractor and (unless expressly authorised to the
contrary) shall neither act nor hold itself out nor be held out as
acting as agent for any of the other Parties.
31.2 Delegation:
31.2.1 subject as provided in Clauses 31.2.2 and 31.2.3 the Settlement
System Administrator may delegate the performance of all or any
of its duties and responsibilities under this Agreement to
agents or contractors.
31.2.2 The Settlement system Administrator shall be entitled to
delegate the performance of all or any of its duties and
responsibilities under this Agreement (not being duties or
responsibilities which are in respect of any significant matter,
unless the prior written approval of the Executive Committee
under Clause 31.2.3 has been given).
31.2.3 In giving any such approval as is referred to in Clause 31.2.2
the Executive Committee shall specify the particular duties and
responsibilities which may be delegated and to whom and for what
period. On receipt of such approval the Settlement System
Administrator may delegate its duties and responsibilities only
to the extent of the terms of such approval.
31.2.4 As between the Settlement System Administrator and the other
parties, no delegation pursuant to this Clause 31.2 or pursuant
to Clause 60.15 nor the terms or conditions of any contract
pursuant to which any such delegation is effected shall relieve
the Settlement System Administrator of any of its duties or
responsibilities under this Agreement. The Settlement System
Administrator shall at all times properly supervise the
performance of all such delegates.
31.3 Compliance with Executive Committee's instructions:
31.3.1 subject to the other provisions of this Clause 31, the
Settlement System Administrator shall at all times observe and
comply with all directions and instructions of the Executive
Committee or the Chief Executive which fulfil the criteria set
out in Clause 31.3.2.
31.3.2 A direction or instruction of the Executive Committee or the
Chief Executive shall:-
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(a) be clear and unequivocal (and a direction or instruction
shall be deemed such until such time as the Settlement
System Administrator requests any necessary
clarification);
(b) have due regard to the resources of the Settlement
System Administrator available to give effect to such
direction or instruction (and the Settlement System
Administrator shall promptly provide the Executive
Committee or the Chief Executive upon request from time
to time with full details of such available resources);
(c) not increase the duties, responsibilities or liabilities
of the Settlement System Administrator beyond those
contemplated under this Agreement without proper
compensation: for this purpose, without limitation, (a)
compensation for increased duties and responsibilities
shall be proper if the costs are included in the Budget
or, as appropriate, the Statement of Costs with a margin
in accordance with the Accounting Procedure or such
higher margin as may be appropriate to the level of such
increased duties or responsibilities, and (b)
compensation for increased liabilities shall be proper
if an indemnity is given to the Settlement System
Administrator which is reasonably satisfactory to it or
other compensation reasonably satisfactory to the
Settlement System Administrator is provided to it; and
(d) not conflict with the terms of this Agreement.
31.3.3 The Settlement System Administrator shall be entitled to rely
upon any direction or instruction of the Executive Committee or
the Chief Executive (if any) if the same is signed by way of
authority in accordance with Clause 31.6 on behalf of two or
more Committee Members or on behalf of the Chief Executive and
shall not be obliged to comply with any direction or instruction
of any sub-committee of the Executive Committee or any delegate
of the Executive Committee other than the Chief Executive
(unless such direction or instruction is shown as having been
ratified by the Executive Committee).
31.3.4 The Settlement System Administrator shall be entitled to rely
upon any communication or document reasonably believed by it to
be genuine and correct and to have been communicated or signed
by the person by whom it purports to be communicated or signed
and shall not be liable to any of the Parties for any of the
consequences of such reliance.
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31.4 Compliance with the Director's directions: no liability whatsoever shall
attach to the Settlement System Administrator as a result of due
compliance by it with any directions and instructions of the Director,
provided that in complying with such directions and instructions the
Settlement System Administrator is at all times acting in good faith.
31.5 Prior approval: where by the terms of this Agreement the Settlement
System Administrator is required to obtain the prior directions,
instructions, approval or consent of the Executive Committee or the
Chief Executive, the Settlement System Administrator shall have no
authority to, and shall not, act unless the requisite directions,
instructions, approval or consent have first been obtained.
Notwithstanding the foregoing sentence, nothing in this Agreement shall
prevent the Executive Committee from ratifying any act of the Settlement
System Administrator.
31.6 Express authority: all directions and instructions of the Executive
Committee or the Chief Executive to the Settlement System Administrator
shall, as between the Settlement System Administrator and the Pool
Members, be deemed to have the express authority of, and shall be
binding without reservation upon, all Pool Members.
31.7 Authority of Pool Members: the Settlement System Administrator shall not
be bound to act in accordance with the directions or instructions of the
Pool Members unless the Pool Members act through the Executive
Committee.
31.8 General Meetings: the Settlement System Administrator shall not be
obliged to take any steps to ascertain whether any resolution of Pool
Members in general meeting or of any class of Pool Members in separate
general meeting which it is advised by the Executive Committee or the
Chief Executive as having been passed was in fact passed or passed by
the requisite majority and until the Settlement System Administrator
shall have express written notice to the contrary from the Executive
Committee or the Chief Executive it shall be entitled to assume that the
relevant resolution was passed or (as the case may be) the relevant
requisite majority was obtained.
31.9 Exceptions: notwithstanding the foregoing provisions of this Clause 31,
in the performance of its duties and responsibilities under this
Agreement the Settlement System Administrator shall not be bound to act
in accordance with the directions or instructions of the Executive
Committee or the Chief Executive if:-
31.9.1 to do so would cause the Settlement System Administrator to
breach any of its obligations under the Act or its Transmission
Licence; or
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31.9.2 the Settlement System Administrator has reasonable grounds for
believing that it would so breach any of such obligations and
has consulted the Director and:-
(a) the Director has indicated that, notwithstanding any
such actual or potential breach, the Director would not
be minded to enforce compliance with those obligations
and the Settlement System Administrator has received an
indemnity reasonably satisfactory to it in respect of
its acting in accordance with such directions and
instructions.
In any such event the Settlement System Administrator shall promptly
notify the Executive Committee.
31.10 Reference to the Director: if at any time the Settlement System
Administrator has a concern which is properly and reasonably found that,
in acting in accordance with any direction or instruction of the
Executive Committee or the Chief Executive, it will breach one or more
of its obligations under the Act or its Transmission Licence, then, if
having discussed the matter with the Executive Committee the matter
remains unresolved, the Settlement System Administrator shall either
comply with such direction or instruction or by notice in writing refer
the same to the Director, such notice to set out in full the directions
or instructions given to the Settlement System Administrator and the
grounds for such concern and to be copied to the Executive Committee.
Pending any guidance from the Director in response to any such reference
and, provided that the Director shall not express any view that such
reference is misconceived, vexatious or in respect of an improperly or
unreasonably founded concern, the Settlement System Administrator shall
not be liable to any of the other Parties for refusing to act in
accordance with the relevant direction or instruction. If the Director
shall express such a view, the Settlement system Administrator shall be
so liable.
32. STANDARD OF CARE AND LIMITATION OF LIABILITY
32.1 Standard of care: in the exercise of its duties and responsibilities
under this Agreement the Settlement System Administrator shall exercise
that degree of care, diligence, skill and judgement which would
ordinarily be expected of a reasonably prudent operator of the
Settlement System taking into account the circumstances actually known
to the Settlement System Administrator, its officers and employees at
the relevant time or which ought to have been known to it or them had it
or they made such enquiries as were reasonable in the circumstances. In
particular, but without prejudice to the generality of the foregoing, in
the absence of directions and instructions given to it by the Executive
Committee under this Agreement and having due regard to the constraints
imposed on the Settlement System Administrator by the Accounting
Procedure and the resources available to it, the Settlement System
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Administrator shall at all times conduct itself in a manner calculated
to achieve the principal objects and purpose of this Agreement set out
in Clauses 4.1.2 and 4.1.3.
32.2 Limitation of liability: subject to Clauses 32.3 and 39.7 and save where
any provision of this Agreement provides for an indemnity, each Party
agrees and acknowledges that neither the Settlement System Administrator
nor any of its officers, employees or agents shall be liable to any of
the other Parties for loss arising from any breach of this Agreement
other than for loss directly resulting from such breach and which at the
date of this Agreement was reasonably forseeable as not unlikely to
occur in the ordinary course of events from such breach in respect of:-
32.2.1 physical damage to the property of any of the other Parties or
its or their respective officers, employees or agents; and/or
32.2.2 the liability of any such other Party to any other person for
loss in respect of physical damage to the property of any other
person.
32.3 Death and personal injury: nothing in this Agreement shall exclude or
limit the liability of the Settlement System Administrator for death or
personal injury resulting from the negligence of the Settlement System
Administrator or any of its officers, employees or agents and the
Settlement System Administrator shall indemnify and keep indemnified
each of the other Parties, its officers, employees or agents from and
against all such and any loss or liability which any such other Party
may suffer or incur by reason of any claim on account of death or
personal injury resulting from the negligence of the Settlement System
Administrator or any of its officers, employees or agents.
32.4 Exclusion of certain types of loss: subject to Clauses 32.3 and 39.7 and
save where any provision of this Agreement provides for an indemnity,
neither the Settlement System Administrator nor any of its officers,
employees or agents shall in any circumstances whatsoever be liable to
any of the other Parties for:-
32.4.1 any loss of profit, loss of revenue, loss of use, loss of
contract or loss of goodwill; or
32.4.2 any indirect or consequential loss; or
32.4.3 loss resulting from the liability of any other Party to any
other person howsoever and whensoever arising save as provided
in Clauses 32.2.2 and 32.3
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32.5 Trust: each Party acknowledges and agrees that each of the other Parties
holds the benefit of Clauses 32.2, 32.3 and 32.4 for itself and as
trustee and agent for its officers, employees and agents.
32.6 Survival: each of Clauses 32.2, 32.3, 32.4 and 32.5 shall:-
32.6.1 be construed as a separate and severable contract term, and if
one or more of such Clauses is held to be invalid, unlawful or
otherwise unenforceable the other or others of such Clauses
shall remain in full force and effect and shall continue to bind
the Parties; and
32.6.2 survive termination of this Agreement.
32.7 Saving: for the avoidance of doubt, nothing in this Clause 32 shall
prevent or restrict any Party enforcing any obligation (including suing
for a debt) owed to it under or pursuant to this Agreement.
32.8 Full negotiation: each party acknowledges and agrees that the foregoing
provisions of this Clause 32 have been the subject of discussion and
negotiation and are fair and reasonable having regard to the
circumstances as at the date of this Agreement.
33. INDEMNITY
33.1 Definition: in this Clause 33 "Losses" means all losses, costs,
damages, expenses, liabilities and claims suffered or incurred
by the Settlement System Administrator, its officers, employees
or agents, including the costs of management time incurred.
33.2 Indemnity (1); each Pool Member (or, in the case of any
agreement entered into for or on behalf of any class of Pool
Members, each Pool Member of that class) shall (but only in
respect of its Contributory Share at the time of receipt of the
request for indemnification) severally indemnify and keep
indemnified the Settlement System Administrator, its officers,
employees and agents against all Losses arising directly or
indirectly as a result of the Settlement System Administrator,
with the approval of Pool Members in general meeting or (as
appropriate) of any class of Pool Members in separate General
Meeting, entering into any agreement as agent for, or otherwise
on behalf of, the Pool Members and/or any class of Pool Members
and/or the Executive Committee (other than any Losses
recoverable under the Accounting Procedure or arising from the
wilful default, bad faith or negligence of, or breach of its
obligations under this Agreement by, the Settlement System
Administrator, its officers, employees or agents). For the
purposes of this Clause 33.2 the Pool Members in general meeting
shall be deemed to have approved the Escrow Agreement and each
Accession
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Agreement executed prior to 1st October, 1991 and the relevant
class of Pool Members which are parties thereto shall be deemed
to have approved each deed of indemnity entered into in favour
of a Pool Chairman where his period of appointment began on or
before 1st April, 1993.
33.3 [Not used].
33.4 Litigation: the Settlement System Administrator shall not be obliged to
engage in any litigation or arbitration proceedings on behalf of the
Pool members or any of them or the Executive Committee but, if it does
agree to become engaged in any such proceedings, it shall be entitled,
inter alia, to an indemnity in its favour in form and content
satisfactory to it.
34. COSTS, FEES AND EXPENSES
34.1 Schedule 4: the provisions of Schedule 4 shall have effect.
34.2 Fees:
34.2.1 each Party which is not a Pool Member (other than the Settlement
System Administrator, the Pool Funds Administrator, the Grid
Operator and the Ancillary Services provider) shall pay the
Settlement System Administrator a fee in respect of the
provision to such Party of all data and other information which
is required by the terms and conditions of this Agreement to be
made available to it by the Settlement System Administrator save
where there is a specific provision in this Agreement for
payment in respect of such data or other information. Such fee
shall be an amount (exclusive of Untied Kingdom Value Added Tax)
determined by the Executive Committee in consultation with the
Settlement System Administrator to be the aggregate of (a) the
cost to the Settlement System Administrator of providing all
such data and other information or (as the case may be) such of
it as is requested by such Party, (b) the Permitted margin and
(c) such additional amount (if any) as the Executive Committee
shall from time to time determine. Such fee shall be payable
quarterly in arrears within 15 days after the issue by the
Settlement System Administrator of an invoice therefor or within
such other period as may be agreed from time to time by the
relevant Party and the Settlement System Administrator. All such
payments shall be made in sterling in cleared funds in full
without set- off or counter-claim, withholding or deduction of
any kind whatsoever but without prejudice to any other remedy.
In the event of any dispute regarding payment of such fees, no
Party may withhold payment of any invoiced amount but may refer
such dispute regarding payment of such fees, no Party may
withhold payment of any invoiced amount but may
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refer such dispute to arbitration in accordance with Clause 83
following payment. The provisions of Section 2.3 of Part C of
Schedule 4 shall apply mutatis mutandis to any amount due to the
Settlement System Administrator pursuant to this Clause 34.2.1
which is not received on the due date.
34.2.2 For the purposes of this Clause 34.2 "Permitted Margin" means in
respect of any amount (the "Base Amount"), such amount as, when
added to the Base Amount, is equal to x per cent. of the sum of
such amount and the Base Amount, where x is equal to the
mid-range figure for the Net Martin of the Settlements Business
referred to in Section 8.1 of Part C of Schedule 4.
34.2.3 A Party may at any time by notice in writing to the Settlement
System Administrator elect not to be provided with all or some
of the data and other information to which it is entitled from
the Settlement System Administrator under this Agreement and amy
change such election at any time upon further written notice to
the Settlement System Administrator.
34.3 Charges: the Executive Committee shall be entitled to require that a fee
or other charge (not exceeding(pound)500 per dispute or such other sum
as the Pool Members in general meeting may from time to time approve) be
levied on and paid by a Party in respect of any dispute concerning
Settlement or its operation (including with respect to data) referred by
such Party for determination to the Executive Committee or any
sub-committee thereof. Such fee or other charge shall be levied, paid
and collected in such manner and at such time as the Executive Committee
shall direct and the relevant Party hereby undertakes to pay any such
fee or other charge so levied. Any such fee or other charge shall at the
option of the Executive Committee (i) be refunded in whole or in part to
the Party which paid the same, or (ii) be applied against the
administration costs of whatsoever nature of the Executive Committee or
the relevant sub-committee and the surplus, if any, after payment in
full of all such costs shall be applied against the charges of the
Settlement System Administrator recoverable from all Pool Members under
Part C of Schedule 4.
34.4 Externally Interconnected Parties' costs:
34.4.1 an Externally Interconnected Party shall be entitled to recover
in accordance with this Clause 34.4 its costs and expenses
reasonably incurred in acting in accordance with this Agreement
as the Externally Interconnected Party for its Corresponding
External Pool Members (as defined in the Pool Rules).
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34.4.2 Not later than 30 days after the beginning of each Accounting
Period (commencing with the Accounting Period beginning in 1992)
each Externally Interconnected Party shall submit in writing to
the Executive Committee for approval (such approval not to be
unreasonably withheld) reasonable details of the costs and
expenses anticipated as likely to be incurred by it in its
capacity as an Externally Interconnected Party in that
Accounting period and (commencing with the Accounting period
beginning in 1993) of the actual costs and expenses so incurred
by it in the immediately preceding Accounting Period. If
approved by the Executive Committee, all such costs and expenses
shall be recovered by an Externally Interconnected Party from
its Corresponding External Pool Members in accordance with
Clause 34.4.3. If not so approved, the Externally Interconnected
Party shall revise and resubmit to the Executive Committee the
said details as often as may be required in order to obtain such
approval.
10.4.3 Each Corresponding External Pool Member shall reimburse its
Externally Interconnected Party its due proportion of all its
Externally Interconnected Party's approved costs and expenses
within 28 days after receipt of an invoice from its Externally
Interconnected Party. The Externally Interconnected Party shall
issue invoices in respect of each Quarter on or after the
Quarter Day relating thereto. Invoices shall be based on
approved anticipated costs and expenses for the relevant
Accounting Period and the first invoice for each Accounting
Period (commencing with the Accounting Period beginning in 1993)
shall include any correction that may be necessary on account on
the approved actual costs and expenses being different from the
approved anticipated costs and expenses for the immediately
preceding Accounting Period.
34.4.4 For the purposes of this Clause 34.4 a Corresponding External
Pool Member's due proportion of its Externally Interconnected
Party's approved costs and expenses for each Quarter shall be
calculated as follows:-
(a) the aggregate of the Externally Interconnected Party's
approved costs and expenses shall be divided by two;
(b) as to one half of such approved costs and expenses, the
Corresponding External Pool Member's due proportion
shall be the proportion which the sum of (i) the number
of its Generation Trading Blocks and (ii) one
(representing the notional Consumer referred to in
paragraph 26.5.2(d) of the Pool Rules) bears to the sum
of (a) the total number of the
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Generation Trading Blocks of all Corresponding External
Pool Members the Externally Interconnected Party of
which is the same as that for the Corresponding External
Pool Member in question and (b) the number of all such
Corresponding External Pool Member shall for this
purpose be allocated at least one Generation Trading
Block; and
(c) as to the other half of such approved costs and
expenses, the Corresponding External Pool Member's due
proportion shall be the proportion which its Gross
Traded Energy for the Quarter in question bears to the
aggregate of the Gross Traded Energy for that Quarter of
all Corresponding External Pool Members the Externally
Interconnected Party of which is the same as that for
the Corresponding External Pool Member in question, and
for this purpose "Gross Traded Energy" in respect of any
Quarter and any Corresponding External Pool member shall
be the aggregate amount of Active Energy (measured in
kWh) bought and sold pursuant to this Agreement by such
Corresponding External Pool member in its capacity as
such in that Quarter.
34.4.5 The foregoing provisions of this Clause may be amended or varied
in respect of an Externally Interconnected Party and its
Corresponding External Pool Members (or any of them) by prior
written agreement of that Externally Interconnected Party, all
its Corresponding External Pool Members and the Executive
Committee.
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PART VIII
THE SETTLEMENT SYSTEM AND COMPUTER OPERATIONS
35. DEVELOPMENT OF THE SETTLEMENT SYSTEM
35.1 Development: the Settlement System shall be developed under the overall
control of the Executive Committee. All developments of and changes to
the Computer Systems shall be made in accordance with the terms of the
Development Policies.
35.2 Delegation: save as provided by the Development Policies, the Executive
Committee shall be entitled to delegate all or any of its rights, powers
and duties under Clause 35.1 and the Development Policies to such
person(s) and on such terms and conditions as from time to time it may
see fit.
33.3 Development Policies:
35.3.1 (a) The matters addressed by the Development Policies are
set out in the list of contents in the Development
Policies. These general headings define the scope of the
Development Policies.
(b) The scope of the Development Policies may be amended at
any time and from time to time by written agreement of
the Executive Committee and the Settlement System
Administrator.
(c) Any amendment to any of the matters addressed by the
Development Policies or any addition or substitution to
the Development Policies which does not extend or
restrict (other than in a way or to an extent which can
reasonably be regarded as de minimis) the scope of the
Development Policies may be made at any time and from
time to time, and shall be effective if so made, by the
Executive Committee after consultation with the
Settlement System Administrator unless such matter is
one covered by the headings in Schedule 16 in which
event such amendment, addition or substitution may be
made and shall be effective only by written agreement of
the Executive Committee and the Settlement System
Administrator.
35.3.2 Without prejudice to Clause 35.3.1(c), Schedule 16 may be
changed at any time and from time to time by written agreement
of the Executive Committee and the Settlement System
Administrator.
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35.3.3 Each of the Parties undertakes to comply with (and the Pool
members undertake to ensure that the Executive Committee
complies with) the Development Policies.
35.3.4 In carrying out any development of the Settlement System the
omission of any step generally comprising the life cycle of any
project under the Development Policies or the omission,
substitution or modification of any standard, method or
procedure specified in the Development Policies shall be taken
into account in determining the liability of the Settlement
System Administrator under Clause 39, save where such step,
standard, method or procedure is omitted, substituted or
modified by the Settlement System Administrator, its employees,
officers or agents without the consent of the Executive
Committee or any authorised delegate of the Executive Committee.
35.4 Project Management:
35.4.1 in accordance with the following provisions of this Clause 35.4,
the Settlement System Administrator shall have the right and, at
the request of the Executive Committee, the obligation:-
(i) to procure the project management; and
(ii) to contract for all developments,
of the Settlement system or any stage or module thereof. In
connection with any such project management or contracting for
any such development the Settlement system Administrator shall
enter into agreements with persons (other than the Settlement
System Administrator or any of its employees) on such terms as
the Executive Committee may reasonably require.
35.4.2 The project manager of any development of the Settlement System
or any stage or module thereof shall be as agreed between the
Executive Committee and the Settlement System Administrator
taking into account inter alia such matters as
cost-effectiveness, quality and the competitive terms of such
project manager.
35.4.3 The functional and technical direction of any project manager of
a development of the Settlement System or any stage or module
thereof shall be given by the Executive Committee or any
sub-committee or sub-group thereof established to monitor the
particular development of the Settlement System or any stage or
module thereof for which such person is appointed as a project
manager, provided that the
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management of the use of the Settlement System Administrator's
computing and human resources by any project manager so
appointed shall remain with the Settlement System Administrator.
The Settlement System Administrator shall be obliged and have
the right to attend any meeting of such sub-committee or
sub-group.
35.4.4 The Executive Committee or the particular sub-committee or
sub-group in respect of any development of the Settlement System
shall take into account all reasonable comments of the
Settlement System Administrator in relation to the
specification, design, testing and implementation requirements
of any development of the Settlement System where such comments
relate to the operational compatibility or consistency with the
Settlement System or the ability of the Settlement System
Administrator to comply with this Agreement, the Act or NGC's
Transmission Licence.
35.4.5 Where a person (other than the Settlement System Administrator
or any of its employees) is chosen to project manage a
development of the Settlement System or any stage or module
thereof, the Settlement System Administrator shall co-operate
with such project manager to the extent necessary to enable such
project manager properly to manage such development.
35.5 Provision of data and information: each Party shall ensure that all data
and information necessary to enable any testing of the Settlement System
or any development thereof or change thereto required under the
Development Policies and which is permitted to be released by the
Settlement System Administrator under the Pool Rules or as otherwise
expressly provided herein is supplied to the Executive Committee or as
it may direct and to the Settlement System Administrator, and each party
shall use all reasonable endeavours to co-operate with and support any
such testing.
35.6 Provision of data and information to authorised persons: the Parties
shall provide or ensure that the Settlement System Administrator
provides all data and information required under Clause 35.5 to such
persons as may from time to time be authorised by the Executive
Committee to receive the same provided that such persons shall have
executed a confidentiality undertaking in such form as the Executive
Committee may from time to time determine. If the Settlement System
Administrator is not permitted or required to release any data and
information by reason only of the confidential nature of such data and
information it shall and may provide representative data to the extent
required for such testing.
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35.7 Inconsistencies and conflicts: in the event of any inconsistency or
conflict between the provisions of this Agreement and the provisions of
the Development Policies, the provisions of this Agreement shall
prevail.
36. CHANGE MANAGEMENT
36.1 Change Management Policies: in order to ensure that developments of and
changes to the Settlement System are brought into effect in an ordered
and controlled manner, each of the Parties undertakes to comply with the
Change Management Policies.
36.2 Amendments: the Change Management Policies may be amended at any time
and from time to time by the Executive Committee after consultation with
the Settlement System Administrator.
37. SOFTWARE
37.1 Acceptance of Software: the Settlement System Administrator shall not
after the Effective Date accept any software unless and until instructed
to do so by the Executive Committee and, to the extent that any lack of
any such instruction causes the Settlement System Administrator to
suffer or incur a loss under any contract relating thereto (not being a
loss occasioned by its own fault), it shall be entitled to recover the
same in accordance with the Accounting procedure, provided always that
the Settlement System Administrator has notified the Executive Committee
in writing of the nature and amount of any such potential loss in good
time prior to the loss arising.
37.2 Warranties: without prejudice to Clauses 39 and 44, nothing in this
Agreement shall imply or impose any requirement on the Settlement System
Administrator to give any warranty with respect to any Software.
38.3 No liability: each Party acknowledges that neither NGC nor NGC
Settlements Limited shall have any liability in respect of any software
developed before the Effective Date.
38. CHANGES TO THE POOL RULES
39.1 The Settlement System Administrator's obligations: the Settlement System
Administrator shall have the obligations and responsibilities set out in
this Clause 39 in respect of the New Software and its related
Specifications and the written procedures used by the Settlement System
Administrator in connection with the operation of the Settlement System
(the "Operation Procedures").
39.2 Future developments (1): in respect of:
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39.2.1 each Works Programme involving a change to the Specification or
the Software for which the Settlement System Administrator is
appointed Project Manager or which is developed by or on behalf
of the Settlement System Administrator; or
39.2.2 all changes to the Software or the Specification (other than
those referred to in Clause 39.2.1 or 39.3).
the Settlement System Administrator shall ensure that, subject to Clause
39.4, upon the implementation of such change the New Software which is
the result of such change (excluding Settlement GOAL, GOALPOST, LOLP and
Second Tier Software and any Software the development of which has been
project managed by a person other than the Settlement System
Administrator) is consistent in all material respects with, and will in
its operation give effect in all material respects to, and the
Operational Procedures are appropriate to give effect in all material
respects to, the Specification relating to such New Software (other than
those parts relating to Settlement GOAL, GOALPOST, LOLP and Second Tier
Software and any Software the development of which has been project
managed by a person other than the Settlement System Administrator.)
39.3 Future developments (2); in respect of each Works Programme or
development specified in accordance with the Development Policies
involving a change to the Specification or the Software for which the
Settlement System Administrator is not appointed Project Manager and
which is not developed by or on behalf of the Settlement System
Administrator, the Settlement System Administrator shall ensure that,
subject to Clause 39.5, upon the implementation of such change the New
Software which is the result of such change (excluding Settlement GOAL,
GOALPOST, LOLP and Second Tier Software and any Software the development
of which has been project managed by a person other than the Settlement
System Administrator) is consistent in all material respects with, and
will in its operation give effect in all material respects to, and the
Operational Procedures are appropriate to give effect in all material
respects to, the Specification relating to such new Software (other than
those parts relating to Settlement GOAL, GOALPOST, LOLP and Second Tier
Software and any Software the development of which has been project
managed by a person other than the Settlement System Administrator).
39.4 Relief from liability (1): the Settlement System Administrator shall be
relieved from liability under Clause 39.2 if (but only to the extent
that):-
39.4.1 in good time (having regard to the time elapsed from the date
upon which work on the relevant change is initiated by the
Executive Committee to the date such change is implemented and
taking into account, where appropriate, that testing of the New
Software by or on behalf of the Settlement System Administrator
may have taken place
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only after delivery thereof to the Settlement System
Administrator) before such implementation the Settlement System
Administrator has notified the Executive Committee in writing on
Specified Grounds of inconsistencies between the New Software
and/or its Operational Procedures and the Specification or
operational failures in the Settlement System which will arise
by reason of such implementation, which inconsistencies or
operational failures remain unresolved at the time of such
implementation; and
39.4.2 any other such inconsistency could not reasonably have been
expected to have been discovered by a project manager engaged to
give effect to such change and acting in accordance with Good
Industry Practice (taking into account the actual time given for
such development and the testing of any relevant software).
39.5 Relieve from liability (2): the Settlement System Administrator shall be
relived from liability under Clause 39.3 if (but only to the extent
that):-
39.5.1 in good time (having regard to the time elapsed from the date
upon which work on the relevant change is initiated by the
Executive Committee to the date such change is implemented and
taking into account, where appropriate, that testing of the New
Software by or on behalf of the Settlement System Administrator
may have taken place only after delivery thereof to the
Settlement System Administrator) before such change the
Settlement system Administrator has notified the Executive
Committee in writing on Specified Grounds of inconsistencies
between the New Software and/or its Operational procedures and
its Specification or operational failures in the Settlement
System which will arise by reason of such implementation, which
inconsistencies or operational failures remain unresolved at the
time of such implementation; and
39.5.2 any other such inconsistency could not reasonably have been
expected to have been discovered by the Settlement System
Administrator having regard to its actual knowledge of the
detail of such change and the development works in relation
thereto, its involvement generally in the development of the
related Specification and the New Software and its actual
knowledge of the Settlement System and the effect of such change
thereon.
39.6 Specified Grounds: in this Clause 39 "Specified Grounds" means grounds
reasonably held by the Settlement System Administrator for believing
that at the time of the implementation of any such change as is referred
to in Clause 39.2 or 39.3, there will be an inconsistency between the
New Software (excluding Settlement GOAL,
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GOALPOST, LOLP and Second Tier Software and any Software the development
of which has been project managed by a person other than the Settlement
System Administrator) and/or its Operational procedures and its
Specification (other than those parts relating to Settlement GOAL,
GOALPOST, and Second Tier Software and any Software the development of
which has been project managed by a person other than the Settlement
System Administrator) or operational failures in the Settlement System
which will arise by reason of such introduction or implementation, which
grounds (and the reasons therefor) are fairly disclosed to the Executive
Committee (taking into account the actual time given for the relevant
development and the testing of any relevant software). In the event of
any dispute between the Executive Committee and the Settlement System
Administrator as to whether a matter has been fairly disclosed the same
shall be referred promptly (and in any event within one month after the
dispute has arisen) to arbitration in accordance with Clause 83. if the
decision of the arbitrator(s) is that the matter has not been fairly
disclosed, the relevant disclosure shall be ignored for the purpose of
establishing a Specified Ground.
39.7 Liability for breach: the Settlement System Administrator's liability
for breach of any of its obligations under the foregoing provisions of
this Clause 39 shall be subject to the limitations set out in Clause 32
save that the Settlement System Administrator shall also be liable to
the extent (if any) agreed in writing with the Executive Committee in
relation to each development relating to New Software (and shall not
charge or recharge that liability to Pool Members).
39.8 Claims limitation: the Settlement System Administrator shall not be
liable in respect of any breach of this Clause 39 unless:-
(i) a breach in respect of the New Software is notified to the
Executive Committee or the Executive Committee becomes aware of
such breach within 12 months after the date upon which such New
Software is accepted by or on behalf of the Executive Committee;
and
(ii) details of any claim to be made in respect of such breach are
given to the Settlement System Administrator within 3 months
after the Executive Committee is notified or otherwise becomes
aware of such breach.
40. OPERATION OF THE COMPUTER SYSTEM
40.1 Data input and validation:
40.1.1 the Settlement System Administrator undertakes to the other
Parties promptly and properly to input such data and other
information as it may receive pursuant to the terms of this
Agreement.
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40.1.2 The Settlement System Administrator shall review and validate
data and other information in accordance with the Agreed
Procedures to establish the completeness thereof and to identify
any inconsistencies therein.
40.2 Procedures: the Settlement System Administrator shall:-
40.2.1 promptly report internally in accordance with its management
procedures and to the Executive Committee any deviation from
pre- specified norms in the Computer Systems (which
pre-specified norms shall be those for the time being and from
time to time agreed between the Settlement System Administrator
and the Executive Committee and, in default of agreement, as
reasonably specified by the Executive Committee), shall promptly
investigate any such deviation to determine whether the Hardware
and/or the Software is (are) functioning correctly and in
accordance with the Specification and shall promptly report the
findings of any such investigation to the Executive Committee.
Any such deviation shall be corrected in accordance with Clause
40.2.5 or (as the case may be) 35.1;
40.2.2 ensure that prompt attention and response is given by the
Settlement System Administrator to all reasonable enquiries of
Pool Members concerning unexpected results arising from the
operation of the Computer Systems and to all notifications by
Pool Members to it of suspected defects in the Software or the
Hardware or its operation;
40.2.3 in addition to its obligations under Clause 39, ensure that any
defects in the Software or inconsistencies between it and the
Specification of which the Settlement System Administrator is or
is made aware (including in the course of development work) are
reported promptly to the Executive Committee;
40.2.4 conduct such programmes of tests as may be agreed for the time
being and from time to time by it with the Executive Committee
(and, in default of agreement, as reasonably specified by the
Executive Committee) in order to verify the conformity of the
Software with the Specification;
40.2.5 review on a regular basis (and not less frequently than once in
every six months) the Computer Systems for the purposes of
identifying and isolating, and in the course of operating,
testing and maintaining the Computer Systems shall maintain for
a period of not less than eight years (or such longer period as
the Executive Committee may from
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time to time reasonably require) records of, Localised
Implementation Errors and shall following:-
(a) notification of such Localised Implementation Errors to
the Executive Committee;
(b) a release of a suitable correction, which the Settlement
System Administrator shall prepare; and
(c) a report from the Pool Auditor confirming that, in its
opinion, by implementing such release, a suitable
correction will be made in accordance with the
Specification,
correct them; and
40.2.6 on a regular basis (and not less frequently than once in every
six months, beginning at the Effective Date of Termination or at
such longer regular intervals as the Executive Committee may
from time to time notify the Settlement System Administrator)
review the Computer Systems and report to the Executive
Committee any deviations from the pre-specified norms referred
to in Clause 40.2.1 (not being Localised Implementation Errors).
Any such deviation shall be corrected in accordance with Clause
35.1.
41. NOTIFICATION OF DEFECTS BY POOL MEMBERS
Each Pool Member undertakes to the Settlement System Administrator and
each other Pool Member promptly to notify the Settlement System
Administrator and the Executive Committee in writing of any defects of
which it is or becomes aware in the Software or its operation and to
provide such further information as may reasonably be required by the
Settlement System Administrator to identify, isolate and correct such
defect.
42. TESTING AND ACCESS
42.1 Tests requested by the Executive Committee:
42.1.1 the Settlement System Administrator shall, upon receipt of not
less than ten working days' notice from the Executive Committee
and subject to availability of computer time and other necessary
resources, arrange for such tests of the Hardware and Software
to be performed by the Settlement System Administrator as are
from time to time reasonably required by the Executive
Committee.
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42.1.2 The Executive Committee shall be entitled to nominate the Pool
Auditor or any other person to whom the Settlement System
Administrator has no reasonable objection to attend at and
monitor any test under Clause 42.1.1 and the Settlement System
Administrator shall give the Pool Auditor or (as the case may
be) such other person reasonable access to the Hardware and the
Software for the purpose of attending at and monitoring any such
test.
42.1.3 The costs of any test under Clause 42.1.1 shall be borne in
accordance with the Accounting Procedure.
42.2 Tests requested by Pool Members:
42.2.1 the Settlement System Administrator shall upon being given
reasonable notice by a Pool Member conduct tests on information
or data sets provided by such Pool member by running the
Software subject to the availability of computer time and other
resources and at such cost and on such terms as the Settlement
System Administrator may reasonably determine.
42.2.2 The costs of any test under Clause 42.2.1 shall be borne by the
Pool member which requested the same.
42.3 Tests requested by the Pool Auditor:
42.3.1 the Settlement System Administrator shall, upon receipt of not
less than ten working days' notice from the Pool Auditor and
subject to availability of computer time, arrange for such tests
of the Hardware and Software to be performed as are from time to
time reasonably required by the Pool Auditor for the performance
of its functions under Part IX. The Settlement System
Administrator shall, if so required by the Pool Auditor, permit
the Pool Auditor to carry out such tests provided that the
person or persons allocated to carry out such tests by the Pool
Auditor is or are suitably qualified in the operation of
computers and computer systems to carry out such tests and, in
any other case, the Settlement System Administrator shall carry
out such tests.
42.3.2 The Settlement System Administrator shall give the Pool Auditor
reasonable access to the Hardware and the Software for the
purpose of monitoring any test under Clause 42.3.1.
42.4 Access to Listings: the Settlement System Administrator shall afford
each Pool Member reasonable access in a secure environment to enable it
visually to examine
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either in hard copy form or by electronic display all of the then
current operation versions of source code listings relevant to the
running of Settlement and of Settlement GOAL and GOALPOST software
provided that no Pool Member shall be entitled to make any notes
relating to such examination which may be taken outside of such secure
environment. The Settlement System Administrator shall report all such
examinations to the Executive Committee.
42.5 Load Modules: subject to any licence restrictions imposed on the
Settlement System Administrator by any relevant software supplies (and
the Settlement System Administrator shall use all reasonable endeavours
to ensure that there are no such restrictions), the Settlement System
Administrator shall against payment of a reasonable charge therefor:-
42.5.1 make available to any Pool Member upon request run time copies
(modified, where appropriate, to meet the requirements of the
Pool Auditor) of the then current operational load modules and
associated operating documentation of any Software in the forms
run by or on behalf of the Settlement System Administrator or in
such other form as may be reasonably requested by the Pool
member; and
42.5.2 provide reasonable assistance to any Pool Member upon request in
the understanding and use of such load modules and associated
operating documentation. If the Settlement System Administrator
does not have adequate resources to provide such assistance, it
will promptly notify the Executive Committee of such fact
specifying what duties and responsibilities under this Agreement
it could not perform if it were to provide the assistance
requested. The Executive Committee will then notify the
Settlement System Administrator whether it wishes it to provide
such assistance or to perform such duties and responsibilities
instead and the Settlement System Administrator shall comply
with the notification received.
In operating such load modules, a Pool Member shall not make copies of
such load modules available to any other person and shall use its best
endeavours to keep any information about the operation of such load
modules restricted on a "need-too-know" basis amongst its staff.
43. CHANGES TO THE HARDWARE
43.1 Changes to the Hardware: changes in Hardware (not being changes
occasioned by the use of the Settlement System Administrator's back-up
facilities or changes which do not affect the functioning of the
Settlement System) shall be made by the Settlement System Administrator
only with the prior approval of the Executive
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Committee (which may take the form of a general approval of specified
categories of changes).
43.2 Implementation: the Settlement System Administrator shall be responsible
for giving effect to any changes approved as provided in Clause 43.1.
For this purpose the Settlement System Administrator shall consult the
Executive Committee as to the manner in which any such change shall be
implemented and shall provide the Executive Committee with such
documents, information and other data as it may reasonably request in
connection with such implementation.
43.3 Costs: the costs of and associated with implementing any such change
approved as provided in Clause 43.1 shall be borne in accordance with
the Accounting Procedure.
44. PROPRIETARY RIGHTS
44.1 Definitions: in this Clause 44:-
"Developed Software" means those computer programs and codes described
in Part B of Schedule 8 and all copyright and other intellectual
property rights therein and all documents and materials forming part
thereof or relating thereto;
"Future Developed Software" means those computer programs and codes
comprising software and all copyright and other intellectual property
rights therein which after the date of this Agreement are specifically
developed at the request of the Settlement System Administrator for the
purposes of the running of the Settlement System;
"Future Licensed Software" means those computer programs and codes which
after the date of this Agreement are to be licensed to the Settlement
System Administrator for the purposes of the running of the Settlement
System; and
"Licensed Software" means those computer programs and codes described in
Part C of Schedule 8, Settlement GOAL and GOALPOST.
44.2 As at the Effective Date: the Settlement System Administrator
represents, warrants and undertakes to the other Parties as a continuing
obligation that:-
44.2.1 the Settlement System Administrator has, and for so long as it
remains the Settlement System Administrator will have,
unencumbered and freely transferable title to Developed
Software;
44.2.2 the Licensed Software is, and for so long as the Settlement
System Administrator remains as such will remain, the subject
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of a non-exclusive licence in favour of the Settlement System
Administrator transferable to its successor Settlement System
Administrator; and
44.2.3 where any such Licensed Software is transferable with the
consent of the licensor, the Settlement System Administrator
shall use all reasonable endeavors to obtain consent to assign
such Licensed Software to its successor Settlement System
Administrator, as son as is reasonably practicable.
44.3 Following the Effective Date: the Settlement System Administrator
represents, warrants and undertakes to the other Parties as a continuing
obligation that:-
44.3.1 save and to the extent notified to the Executive Committee prior
to the Settlement System Administrator entering into any
agreement for the production of Future Developed Software, the
Settlement System Administrator, for so long as it remains as
such, will have unencumbered and freely transferable title to
all Future Developed Software;
44.3.2 Future Licensed Software will be, and for so long as the
Settlement System Administrator remains as such will remain, the
subject of a non-exclusive licence in favour of the Settlement
System Administrator transferable to its successor Settlement
System Administrator;
44.3.3 where any Future Licensed Software is transferable with the
consent of the licensor, the Settlement System Administrator
shall use all reasonable endeavours to obtain consent to assign
such Future Licensed Software to its successor Settlement System
Administrator and will notify the Executive Committee if it
cannot obtain such consent prior to entering into any agreement
for such Future Licensed Software; and
44.3.4 the Settlement System Administrator shall use all reasonable
endeavours to obtain unencumbered and freely transferable title
to any Future Developed Software and, having notified the
Executive Committee pursuant to Clause 44.3.1, shall not enter
into any such agreement without the consent of the Executive
Committee, such consent not to be unreasonably withheld or
delayed.
44.4 Listing and Updating: the Settlement System Administrator undertakes to
establish and maintain a list of all Software and a list of all
Specifications of Developed
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Software and Future Developed Software and to make copies of such lists
available to Pool Members on reasonable request.
44.5 Restrictions on use: subject to Clauses 42.4, 42.5 and 45 and the
requirements of the Pool Auditor, the Settlement System Administrator
may not, without the prior written consent of the Executive Committee
(such consent not to be unreasonably withheld or delayed) grant to any
person (other than a successor Settlement System Administrator) any
right or title to, or give that person a copy of or permit that person
to use, Developed Software or Future Developed Software or otherwise
derive any benefit or profit therefrom (other than by itself using such
Software for the purposes of the Settlement System or in the actual
production or development of the same).
45. ESCROW ARRANGEMENTS
45.1 Escrow Agreement: no later than eight months after the Effective Date
(or such longer period as the Executive Committee may from time to time
approve) the Settlement System Administrator (for itself and on behalf
of the Pool Members acting though the executive Committee) shall enter
into and deliver an escrow agreement (the "Escrow Agreement") in or
substantially in the form set out in Schedule 7 or in such other
reasonable form as the Executive Committee after consultation with the
Settlement System Administrator may direct with a reputable software
escrow agent (the "Custodian") shall use all reasonable endeavours to
procure the Custodian to enter into and deliver the Escrow Agreement.
Forthwith upon entering into the Escrow Agreement the Settlement System
Administrator shall deposit with the Custodian to the extent then in
existence (and, if not in existence, as soon after it becomes such):-
45.1.1 a copy of the source code and load (machine executable) modules
relating to all Developed Software and Future Developed Software
together with all job control language and licensed software
system tables, each in a machine readable form and the source
code and job control language in a hard copy form; and
45.1.2 a copy of all related manuals and other associated
documentation, including:-
(a) any user requirement documents, together with all
associated authorised change requests;
(b) any functional specification documents associated with
those documents described in paragraph (a) above,
together with all authorised change requests associated
with the relevant functional specification;
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(c) to the extent available to the Settlement System
Administrator, any design specification documents
associated with those documents described in paragraphs
(a) and (b) above, together with the relevant design
specification;
(d) any program and/or user guides prepared to assist in the
day-t-day operation and future development of the
computer programs (including records of test cases
together with the associated test input and output data
used for validation purposes);
(e) any relevant test strategy schedules and acceptance
schedules as specified for functional and operational
end to end testing;
(f) any relevant test acceptance certificates and reports
for all tests recording comments and observations made
on the appropriate tests where such tests are
commissioned by the Settlement System Administrator;
(g) any relevant client acceptance certificates and reports
for all tests recording comments and observations made
on the appropriate tests where such tests are
commissioned by the Settlement System Administrator;
(h) any relevant compilation or detailed operating
procedures required in connection with any of the
relevant paragraphs in this Clause 45.1.2;
(i) all Software licenses for Licensed Software and Future
Licensed Software; and
(j) a list detailing all versions of Licensed Software and
Future Licensed Software (including operating systems
and compilers) used in creating each version of the
object code detailing the version numbers used and any
program temporary fixes or equivalent mode,
(together the "Material").
If, after consultation with the Settlement System Administrator, the
Executive committee shall so request:-
(A) the Settlement System Administrator shall use its reasonable
endeavours (which may include the payment of a fee or further
fee recoverable
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through the Accounting Procedure) to procure that any licence
for any Licensed Software or Future Licensed software is on
terms or amended terms that permit the deposit of such Licensed
Software or Future Licensed Software with a reputable software
escrow agent approved by the Executive Committee on the terms of
an escrow agreement approved by the Executive Committee and NGC
(in the case of NGC such approval not to be unreasonably
withheld).
45.2 Updating: the Settlement System Administrator shall ensure that the
Material deposited with the Custodian is kept fully up-to-date and
reflects all Modifications (as defined in the Escrow Agreement) and
shall deposit a copy of all Modifications with the Custodian as soon as
the same are available, all in accordance with the terms and subject to
the conditions of the Escrow Agreement.
45.3 Notification to Executive Committee: the Settlement System Administrator
shall notify the Executive Committee promptly of the delivery of each
Modification to the Custodian.
45.4 Amendments: any amendment to or variation of the Escrow Agreement shall
be made in accordance with its terms provided that the Settlement System
Administrator shall not make or agree to any such amendment or variation
without the prior written consent of the Executive Committee.
46. MAINTENANCE ARRANGEMENTS
The Settlement System Administrator shall ensure that at all times it
has in full force and effect proper arrangements for the maintenance of
(and the prompt rectification of defects in) the Hardware and Software
and, upon reasonable request of the Executive Committee, shall supply
evidence reasonably satisfactory to the Executive Committee of the
existence and nature of such arrangements. The costs of all such
maintenance arrangements (not being costs relating to the rectification
of defects under the terms of any warranty cover in relation to the
Computer Systems) shall be borne in accordance with the Accounting
Procedure.
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PART IX
THE POOL AUDITOR AND SCHEDULING AND DESPATCH REVIEWS
47. THE POOL AUDITOR AND SCHEDULING AND DESPATCH REVIEWS
47.1 Appointment and removal: the Executive Committee shall (after
consultation with the Settlement System Administrator) from time to time
appoint a firm of accountants of internationally recognised standing to
carry out:-
47.1.1 audits of the calculations and allocations performed by the
Settlement System, such audits to be carried out annually;
47.1.2 audits of the Funds Transfer System, such audits to be carried
out annually;
47.1.3 tests and/or checks on new items or versions of Software;
47.1.4 reviews of Agreed Procedures and Codes of Practice, as required
from time to time by the Executive Committee; and
47.1.5 audits, reviews, tests and/or checks of such other matters as
are otherwise designated under this Agreement for reference to
it and, where not so designated, such other audits, reviews,
tests and/or checks as the Executive Committee may from time to
time reasonably require (having regard, in particular, to the
disruptive effect of the same on the business and operations of
the Parties),
and to assist, upon request of the Executive Committee, in the
preparation of Works Programmes pursuant to Clause 5.9.
The Executive Committee shall have the right at any time and from time
to time (after consultation with the Settlement System Administrator) to
remove from office as Pool Auditor any firm of accountants so appointed
by it, but the Executive Committee shall ensure that there shall at all
times be a Pool Auditor.
47.2 Scheduling and Despatch Review:
47.2.1 the Grid Operator shall (after consultation with the Executive
Committee) decide upon the appointment from time to time of such
firm of accounts of internationally recognised standing as the
Executive Committee shall approve (such approval not to be
unreasonably withheld or delayed) to carry out reviews
("Scheduling and Despatch Reviews" of the Scheduling and
Despatch processes under the Grid
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Code, such reviews to be carried out, until the first
anniversary of the effective date, at such time or times as
shall be agreed between the Grid Operator and the Executive
Committee and, thereafter, annually. The objective and scope of
each such review is set out in Schedule 19.
47.2.2 The Grid Operator shall have the right at any time and from time
to time (after consultation with the Executive Committee) to
decide upon the removal from office of the firm of accountants
so appointed by it with the consent of the Executive Committee
(such consent not to be unreasonably withheld or delayed).
47.2.3 The auditor carrying out the Scheduling and Despatch Review
shall report to the Grid Operator.
47.3 Scope of work:
47.3.1 the terms of engagement and scope of the work to be carried out
by the Pool Auditor shall be in accordance with the terms of
this Agreement and as determined from time to time by the
Executive Committee (after consultation with the Pool Auditor
and, where appropriate, the Settlement System Administrator or
the Pool Funds Administrator) and the Pool Auditor shall report
to the Executive Committee. the Executive Committee shall, upon
request, provide each Pool Member, the Director, any Party which
has applied pursuant to Clause 8.2 to become a Pool Member and
(as appropriate) the Settlement System Administrator of the Pool
Funds Administrator with a copy of such terms of engagement.
47.3.2 Any opinion or report of the auditor carrying out the Scheduling
and Despatch Review shall be addressed to the Grid Operator (for
its own benefit) and a copy thereof shall be sent to the
Executive Committee and to each Pool Member, the Director, the
Settlement System Administrator and the Pool Funds Administrator
(each of whom shall be entitled to rely on it).
47.3 Notification of disputes: upon written request of the Pool Auditor or,
where the dispute relates to Scheduling and Despatch, the auditor
carrying out the Scheduling and Despatch Review, a Party shall promptly
provide the Pool Auditor or (as the case may be) the auditor carrying
out the Scheduling and Despatch Review with a written statement of all
disputes under or in connection with this Agreement or any Ancillary
Services agreement which are then outstanding and which involve such
Party or which the relevant Party believes may arise and are likely to
involve such Party, and (subject to any supervening obligations of
confidentiality binding on such Party) such statement shall include
reasonable details of each such dispute.
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48. AUDIT INSTRUCTIONS
48.1 Frequency:
48.1.1 audits, tests, reviews and checks pursuant to Clause 47.1 shall
be carried out at such time or times as the Executive Committee
shall determine (after consultation with the Pool Auditor and,
where appropriate, the Settlement System Administrator or the
Pool Funds Administrator) and any such audit, test, review or
check shall relate to such period(s) as the Executive Committee
and the Pool Auditor shall agree.
48.1.2 The review pursuant to Clause 47.2 shall be carried out at such
time or times as the Grid Operator shall determine and the
Executive Committee shall approve (such approval not to be
unreasonably withheld or delayed).
48.1.3 In good time before each annual general meeting of Pool
Members:-
(a) the Executive Committee shall instruct the Pool Auditor
to prepare the report referred to in clause 9.1.2; and
(b) the Grid Operator shall instruct the auditor carrying
out the Scheduling and Despatch Review to prepare the
report referred to in Clause 47.2.3.
48.2 Opinions and reports: any opinion or report of the Pool Auditor required
by the Executive Committee for the benefit of all Pool Members and to
such other person(s) as the Executive Committee may direct and a copy
thereof shall be sent by the Executive Committee to each Pool Member and
the Director and, if requested and the Executive Committee approves, the
Settlement System Administrator and the Pool Funds Administrator (and
the Settlement System Administrator and the Pool Funds Administrator
shall be entitled to rely upon the same in any legal proceedings
(including arbitration)).
48.3 Concerns and recommendations:
48.3.1 in instructing the Pool Auditor in respect of any of the matters
referred to in Clause 47.1 the Executive Committee shall require
the Pool Auditor:-
(a) forthwith to report any material concerns with respect
to matters the subject of the relevant audit, test,
review and/or check; and
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(b) to make such recommendations as to changes in the
procedures, controls and/or audit coverage as the Pool
Auditor considers appropriate.
Upon receipt of any such report or recommendation the Executive
Committee shall, after consultation with the Settlement System
Administrator or (in the case of the review referred to in
Clause 47.1.2) the Pool Funds Administrator, prepare and sand or
cause to be prepared and sent a report to Pool Members, the Pool
Auditor and the Director and the Settlement System Administrator
or (as the case may be) the Pool Funds Administrator enclosing a
copy of the Pool Auditor's report of recommendation. The
Executive Committee shall instruct the Settlement System
Administrator to carry out such corrective action as the Pool
Members in general meeting may approve or (where such approval
is not required by the terms of this Agreement) as the Executive
Committee may resolve consequent upon receipt of the Executive
Committee's report (which the Settlement System Administrator
and the Pool Funds Administrator undertake promptly to do).
48.3.2 In instructing the auditor in respect of the scheduling and
Despatch review the Grid Operator shall require the auditor to
make the reports and recommendations referred to in Clauses
48.3.1(a) and (b). Upon receipt of a copy of any such report or
recommendation the Executive committee shall, after consultation
with the Settlement System Administrator and the Grid Operator,
prepare or send or cause to be prepared and sent a report to
Pool Members, the auditor carrying out the Scheduling and
Despatch review and the Settlement System Administrator
enclosing a copy of the report or recommendation. The Executive
Committee may instruction the Grid Operator to carry out such
corrective action as may be reasonable and practicable in all
the circumstances and which is consistent with the grid Code
which Pool Members in general meeting shall approve.
48.4 Access:
48.4.1 the Settlement System Administrator shall permit the Pool
Auditor unrestricted access to the Settlement System, the
Hardware and Software and all data used, information held and
records kept by the Settlement System Administrator or its
agents in operating the Settlement System and shall make
available members of its staff to explain the operation of the
Settlement System and such other issues as the Pool Auditor
considers relevant.
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48.4.2 To the extent that the Pool Auditor reasonably requires in order
to be satisfied that the Pool Funds Administrator is complying
with its obligations under this Agreement and the Agreed
Procedures, the Pool Funds Administrator shall permit the Pool
Auditor unrestricted access to its operation of the Funds
Transfer System, the Funds Transfer Hardware and the Funds
Transfer Software and all data used, information held and
records kept by the Pool Funds Administrator or its agents in
the conduct of that operation and shall make available members
of its staff to explain such operation and such other issues as
the Pool Auditor considers relevant.
48.4.3 The Grid Operator shall permit the auditor carrying out the
Scheduling and Despatch Review unrestricted access to that part
of its business as relates to Scheduling and Despatch and the
operation of BPS GOAL and all data used, information held and
records kept by the Grid Operator in the conduct of such
business and shall make available members of its staff to
explain such operations and such other issues as the auditor
considers relevant.
48.5 Costs:
48.5.1 the costs of any audit, test, review or check pursuant to Clause
47.1.1, 47.1.3, 47.1.4 or 47.1.5 and any corrective action on
the part of the Settlement System Administrator pursuant to
Clause 48.3.1 shall be as agreed between the Pool Auditor and
the Executive committee (after consultation with the Settlement
System Administrator) and shall be borne in accordance with the
Accounting procedure.
48.5.2 The costs of any review pursuant to Clause 47.1.2 and any
corrective action on the part of the Pool Funds Administrator
pursuant to Clause 48.3.1 shall be as agreed between the Pool
Auditor and the Executive Committee (after consultation with the
Pool Funds Administrator) and shall be borne by the Pool Funds
Administrator and recovered by it in accordance with the
accounting procedure set out in Schedule 15.
48.5.3 The costs of any review pursuant to Clause 47.2 and any
corrective action on the part of the Grid Operator pursuant to
Clause 48.3.2 shall be borne by the Grid Operator.
48.6 Conflict: the Executive Committee shall require the Pool Auditor and the
auditor carrying out the Scheduling and Despatch Review to disclose to
the Executive Committee the existence and nature of all audit
assignments with any Party.
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48.7 Own auditors' review: each Pool Member may request of the Executive
Committee that its own external auditors be permitted to liaise with the
Pool Auditor and the auditor carrying out the Scheduling and Despatch
Review in accordance with normal professional standards, including
provision of access to working papers. The Executive Committee shall
take such steps as may reasonably be required of it to ensure that each
of the Pool Auditor and the auditor carrying out the Scheduling and
Despatch Review co-operates accordingly (subject to Clause 48.9).
48.8 Pool Auditor's rights: the Pool Auditor shall be entitled to attend and
speak at meetings of the Executive Committee and at general meetings and
separate general meetings of Pool Members. The Pool Auditor shall be
entitled to resign upon giving prior notice to the Executive Committee
(the period of such notice (if any) to be as set out in the terms of its
appointment). Should the Pool Auditor resign, be removed from office or
not be reappointed the Pool Auditor shall have the right to communicate
directly with Pool Members if it believes there are matters which should
be brought to their attention.
48.9 Confidentiality:
48.9.1 the Pool Auditor shall as a condition precedent to its
appointment execute a confidentiality undertaking in favour of
each of the Settlement System Administrator, the Pool Funds
Administrator, the Grid Operator and the Ancillary Services
Provider and the Executive Committee on behalf of all Pool
members in such form as may be reasonably required from time to
time by the Executive Committee.
48.9.2 The auditor carrying out the Scheduling and Despatch Review
shall as a condition precedent to its appointment execute a
confidentiality undertaking in such form as may be reasonably
required from time to time by the Grid Operator and which shall
be approved by the Executive Committee (such approval not to be
unreasonably withheld or delayed).
48.9.3 If requested by the Settlement System Administrator, the Pool
funds Administrator, the Grid Operator or the Ancillary Services
provider, the auditor carrying out the Scheduling and Despatch
Review shall execute a confidentiality undertaking in favour of
the relevant one of them in such form as the Executive Committee
may from time to time approve (such approval not to be
unreasonably withheld or delayed).
48.10 Scheduling and Despatch Auditor: the auditor appointed to carry out the
Scheduling and Despatch Review shall be entitled to attend and speak at
meetings of the Executive Committee and at general meetings and separate
general meetings of Pool Members where matters relating to Scheduling
and
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Despatch are to be discussed or considered. The auditor shall be
entitled to resign upon giving prior notice to the Grid Operator (who
shall send a copy forthwith to the Executive Committee) (the period of
such notice, if any, to be as set out in the terms of its appointment).
Should the auditor resign, be removed from office or not be reappointed
it shall have the right to communicate directly with Pool members if it
believes that there are matters which should be brought to their
attention.
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PART X
THE GRID OPERATOR'S RESPONSIBILITIES
49. RESPONSIBILITIES
The Grid Operator shall have the following duties, responsibilities and
obligations under this Agreement:-
49.1 PORTHOLE: ensuring that, insofar as relevant to the operation of
the Settlement System and the Pool Rules, PORTHOLE will in its
operation comply with its user and functional specifications;
49.2 Services: making available to any successor Settlement System
Administrator those services necessary for the proper
functioning of the Settlement System which the Grid Operator
made available to the incumbent Settlement System Administrator
at any time in the twelve month period prior to the resignation
or removal of such incumbent Settlement System Administrator, in
any such case upon such terms as may be agreed between the Grid
Operator, such successor Settlement system Administrator and the
Executive Committee; and
49.3 Generally: such other duties, responsibilities and obligations
as are set out in this Agreement.
50. STANDARD OF CARE
50.1 Standard of Care: the standard of care applicable to the Grid Operator
in the exercise of its duties and responsibilities pursuant to this
Agreement shall be as set out in Clause 32.1 in respect of the
Settlement System Administrator mutatis mutandis except that the final
sentence in Clause 32.1 shall not apply.
50.2 Miscellaneous: the provisions of Clauses 31.3.3, 31.3.4, 31.4, 31.5 and
31.6 to 31.10 (inclusive) shall apply in respect of the Grid Operator
mutatis mutandis.
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PART XI
ANCILLARY SERVICES AND THE
ANCILLARY SERVICES PROVIDER
51. ANCILLARY SERVICES
51.1 Obligations: the obligations of the Ancillary Services Provider and the
Grid Operator pursuant to this Clause 51 shall be owed to each and every
Supplier.
51.2 Obligations of Ancillary Services Provider: the Ancillary Services
Provider shall:-
51.2.1 implement, maintain and operate all such systems as are
necessary to enable it properly to carry on the Ancillary
Services Business in accordance with the Transmission Licence;
51.2.2 operate the Ancillary Services Business in an efficient and
economic manner;
51.2.3 maintain such records, data and other information as the Pool
Auditor may from time to time by notice in reasonable detail to
the Ancillary Services Provider reasonably require for the
purposes of this Part XI or as may otherwise be reasonably
necessary to enable the Ancillary Services Provider to comply
promptly and fully with its obligations under this Agreement;
51.2.4 retain in electronic or machine readable form for a period of
not less than eight years (or such longer period as the Pool
Auditor may from time to time reasonably require), copies of all
records, data and information referred to in Clause 51.2.3 in
respect of the Ancillary Services;
51.2.5 provide to the Settlement System Administrator who shall
promptly provide the same to each Supplier monthly and annual
statements giving aggregate payment details separately in
respect of each of the following items:-
(a) Reactive Energy;
(b) frequency control;
(c) Black Start Capability (as defined in the Grid Code);
(d) lost opportunity costs;
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(e) supplies of Ancillary Services to Externally
Interconnected Parties;
(f) adjustments for disputes which have been settled or
otherwise determined; and
(g) the Ancillary Services Provider's business charges,
together with a statement of the sum of all such items, and each
of the Parties agrees to such information being so provided;
51.2.6 not transfer or seek to transfer any of its duties or
responsibilities as Ancillary Services Provider save to NGC's
successor as Grid Operator where NGC is removed as Grid Operator
(but not further or otherwise);
51.2.7 upon a successor Grid Operator being appointed (so far as it is
able), transfer to such successor all data, records, other
information, assets, equipment, facilities, rights and know-how
which it has (excluding freehold and leasehold real property)
and which are necessary to carry out the duties and
responsibilities of the Ancillary Services Provider and which
are not otherwise readily obtainable by such successor including
all original and copy material relating to the same and, in
consideration for such transfer, the Suppliers shall jointly and
severally pay to the Ancillary Services Provider a reasonable
sum to reflect the costs of, and the costs of transferring, such
material, such sum to be determined pursuant to Clause 83 in
default of agreement between the Suppliers and Ancillary
Services Provider; and
51.2.8 ensure that all agreements or arrangements for the provision of
Ancillary Services to Externally Interconnected Parties are on
the best commercial terms reasonably available.
51.3 Obligations of Suppliers: each Supplier shall pay the Ancillary Services
Provider the amount allocated to such Supplier for Ancillary Services in
any Settlement Period for Ancillary Services in accordance with this
Agreement.
51.4 Obligation of Grid Operator: the Grid Operator shall enforce the Master
Connection and Use of System Agreement and each Supplemental Agreement
(insofar as it concerns the provision of Ancillary Services) in
accordance with their respective terms in all circumstances in which it
is reasonable to do so having regard to its obligations under the Act,
the Transmission Licence and the Grid Code.
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51.5 Audit of Ancillary Services:
51.5.1 the Suppliers may require the Pool Auditor to carry out audits,
tests, checks or reviews in relation to the operation by the
Ancillary Services Provider of the Ancillary Services Business
as Suppliers may from time to time reasonably require (having
regard, in particular, to the disruptive effect of the same on
the business and operations of the Ancillary Services Provider).
The terms of engagement for any such audit, test, check or
review shall be made available to the Ancillary Services
Provider.
51.5.2 The Suppliers shall not require more than two audits, tests,
checks and reviews pursuant to Clause 51.5.1 in any Accounting
Period.
51.5.3 On instructing the Pool Auditor pursuant to Clause 51.5.1, the
Supplier(s) concerned may require the Pool Auditor:-
(a) forthwith to report any material concerns with respect
to matters the subject of the relevant audit, test,
check or review; and
(b) to make such recommendation as to changes in the
procedures, controls and/or audit coverage of the
Ancillary Services Business as the Pool Auditor
considers appropriate.
51.5.4 The Ancillary Services Provider shall permit the Pool Auditor
such access to its Ancillary Services' operations and all
records, documents, data and other information (other than
Excluded Information) held by the Ancillary Services Provider in
the conduct of such operations in each case as the Pool Auditor
may reasonably require and shall make available members of its
staff to explain such operations and such other issues as the
Pool Auditor considers relevant. The Pool Auditor shall not
disclose and shall not be obliged to disclose to any Supplier
details of prices paid to each Generator by the Ancillary
Services Provider.
51.5.2 The Suppliers shall not require more than two audits, tests,
checks and reviews pursuant to Clause 51.5.1 in any Accounting
period.
51.5.3 On instructing the Pool Auditor pursuant to Clause 51.5.1, the
Supplier(s) concerned may require the Pool Auditor:-
(a) forthwith to report any material concerns with respect
to matters the subject of the relevant audit, test,
check or review; and
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(b) to make such recommendation as to changes in the
procedures, controls and/or audit coverage of the
Ancillary Services Business as the Pool Auditor
considers appropriate.
51.5.4 The Ancillary Services Provider shall permit the Pool Auditor
such access to its Ancillary Services' operations and all
records, documents, data and other information (other than
Excluded Information) held by the Ancillary Services Provider in
the conduct of such operations in each case as the Pool Auditor
may reasonably require and shall make available members of its
staff to explain such operations and such other issues as the
Pool Auditor considers relevant. The Pool Auditor shall not
disclose and shall not be obliged to disclose to any Supplier
details of prices paid to each Generator by the Ancillary
Services Provider.
In this Clause 51.5 "Excluded Information" means all records,
documents, data and other information provided in the course of
the discussions or negotiations with any person with whom the
Ancillary Services Provider contracts or considers contracting
for the provision of Ancillary Services other than as stated in
any Ancillary Services Agreement whether such discussions or
negotiations take place before contracting or as part of any
price review during the term of any Ancillary Services
Agreement.
51.5.5 The Pool Auditor shall report to the Suppliers and a copy of any
report by the Pool Auditor relating to an audit, test, check or
review pursuant to Clause 51.5.1 shall be provided to the
Ancillary Services Provider. The Pool Auditor shall owe a duty
of confidentiality to the Ancillary Services Provider save to
the extent necessary to carryout the particular audit, test,
check or review provided that any matter or thing set out in any
report to the Suppliers shall not be subject to any such
obligation and provided always that nothing in this Clause
51.5.5 shall prevent the disclosure of any information pursuant
to Clause 69. The Ancillary Services Provider shall be entitled
to rely on any such report in any legal proceedings (including
arbitration).
51.5.6 if the Suppliers so resolve, the Ancillary Services provider
shall promptly implement any recommendations made by the Pool
Auditor in a report relating to an audit, test, check or review
pursuant to Clause 51.5.1 and, in the event of any dispute, such
dispute shall be referred to arbitration in accordance with
Clause 83.
51.5.7 The cost of any audit, test, check or review pursuant to Clause
51.5.1 shall be borne by the requisitioning Supplier(s). The
costs of implementing any recommendations pursuant to Clause
51.5.6 may be
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recovered by the Ancillary Services Provider in accordance with
the ASP Accounting Procedure.
51.6 Basis of Payment: the Ancillary Services Provider shall calculate the
total amount payable under Ancillary Services Agreements in respect of
each Settlement Day together with any amendments to calculations made
for previous Settlement Days based upon information derived from the
Grid Operator and the Settlement System Administrator. The charges to
Suppliers for Ancillary Services shall comprise the costs so calculated
together with the charges of the Ancillary Services provider calculated
in accordance with Schedule 18. The Ancillary Services Provider shall
notify a provisional sum to the Settlement System Administrator within
three working days after receipt of such information from the Grid
Operator and the Settlement System Administrator so as to be despatched
by the Settlement System Administrator to Suppliers in accordance with
the relevant Agreed Procedure to enable the Settlement System
Administrator to apportion this sum to the sale of Active Energy
according to the Pool Rules. The Ancillary Services Provider shall
notify a final sum to the Settlement System Administrator by such time
as will enable the Settlement System Administrator to take into account
the final Settlement Run for each Settlement Day. Any unresolved amount
shall be included in the final Settlement Run on an interim basis
pending resolution. Thereafter it may be included (together with any
errors or omissions subsequently arising) in any appropriate Settlement
run.
51.7 Lost opportunity costs:
51.7.1 subject to Clause 51.6, where the Ancillary Services Provider
pays any Generator an amount in respect of lost opportunity
costs the Ancillary Services Provider shall use reasonable
endeavours to include any such amounts in its Ancillary Service
charge to Suppliers in the Settlement Day on which it arises or
as soon as possible thereafter.
51.7.2 As soon as the Ancillary Services Provider is notified by any
Generator that any obligation to pay lost opportunity costs may
arise it shall consult the Suppliers and, without prejudice to
the Ancillary Services Provider's right to recover such lost
opportunity costs from Suppliers, if requested by the Suppliers
shall recover such lost opportunity costs over such a period as
may be agreed between the Ancillary Services Provider and the
Suppliers and, in default of agreement, over such period as the
Ancillary Services Provider considers to be reasonable.
51.8 Standard of Care: the standard of care applicable to the Ancillary
Services Provider in the exercise of its duties and responsibilities
pursuant to this Agreement shall be as set out in Clause 32.1 in respect
of the Settlement System Administrator mutatis mutandis except that the
final sentence in Clause 32.1 shall not apply.
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51.9 Independent Contractor: the Ancillary Services Provider shall act as an
independent contractor in carrying out its duties pursuant to this
Agreement and Clause 31.1 in respect of the Settlement System
Administrator shall apply mutatis mutandis.
51.10 Miscellaneous: the provisions of Clauses 31.3.3, 31.3.4, 31.4, 31.5 and
31.6 to 31.10 (inclusive) shall apply in respect of the Ancillary
Services Provider mutatis mutandis.
51.11 Suppliers' Resolutions: where any matter is reserved under this Part XI
or Schedule 18 for the Suppliers to resolve, that matter shall be
decided upon by the majority vote of the Suppliers' representatives on
the Executive Committee.
51A. UPLIFT MANAGEMENT INCENTIVE SCHEME
51A.1 Notwithstanding any other provision of this Agreement, the provisions of
this Clause shall govern the right and obligations of the Parties in
relation to UMIS.
51A.2 Nothing in this Clause shall prejudice or affect in any way the rights
of the parties and the Executive Committee to establish arrangements for
the management of the difference between Pool Selling Price and Pool
Purchase Price subject to Clauses 51A.5 and 51A.3. The parties and the
Executive Committee acknowledge that in the period until 24.00 hours on
the 31st March, 1995 the relevant arrangements shall be UMIS.
51A.3 Neither this Clause 51A (other than Clauses 51A.5 or 51A.7) or UMIS nor
any amendment, variation or replacement of either of them may become
effective except with the prior written agreement of the suppliers and
the Grid Operator (acting through its agent the Ancillary Services
Provider).
51A.4 The Parties agree:
(a) to be bound by the terms, conditions and other provisions of
UMIS;
(b) that the Grid Operator and each Consumer (as defined in the Pool
Rules) shall make such payments as are required and determined
by the provisions of UMIS; and
(c) that from the date UMIS takes effect the following changes to
this Agreement shall take effect.
(i) in Clause 51.6 the words "in respect of Ancillary
Services and UMIS" shall be inserted after the words
"provisional sum";
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(ii) in paragraphs 1, 5.4, 5.14 and 17.6 of Schedule 11
references to the Ancillary Services Provider shall be
deemed to be references to itself and as agent for the
Grid Operator;
(iii) in line 7 of paragraph 2.1 of Schedule 11 the words "and
UMIS" shall be inserted after the words "Ancillary
Services";
(iv) in paragraph 5.14 of Schedule 11 the words "or in
respect of UMIS" shall be inserted after the words
"Ancillary Services" in line 5 and the words "or in
respect of UMIS for the relevant Payment Date" shall be
inserted after the words "that same day" in line 9; and
(v) in Part 4 of Schedule 11 references to information in
respect of Ancillary Services shall be deemed to include
information in respect of UMIS for the relevant Payment
Date.
51A.5 The Suppliers and the Grid Operator may request the Parties and the
Executive Committee promptly (and in any event before the date UMIS is
to take effect) to execute and do all such acts, matters and things
(including effecting amendments to the Pool Rules) as may be necessary
to give effect to UMIS. The Parties and the Executive Committee shall
not refuse any such request on the grounds of any objections to any
values specified in Annex 1 or the provisions of Annex 2 of Appendix 8
to the Pool Rules as agreed from time to time between the suppliers and
the Grid Operator.
51A.6 In this Part XI, in Schedule 9 and in Schedule 11:
(i) "UMIS" means the amendment and/or additions to the Pool Rules to
implement an uplift management incentive scheme to provide an
incentive for the Grid Operator to minimise certain elements of
the difference between the Pool Selling Price and Pool Purchase
Price (other than payments in respect of the Daily Pool Payment
and/or the Genset Availability Payment) and to provide for
payments and repayments associated therewith between the Grid
Operator (acting through its agent the Ancillary Services
Provider) and Consumers (as defined in the Pool Rules) i the
form agreed pursuant to Clause 51A.3 as the same may be amended
from time to time in accordance with the terms of that Clause.
(ii) whenever the agreement of the Suppliers is required it shall be
given by a resolution of the Suppliers in a separate class
meeting.
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51A.7 The provisions of this Clause, UMIS and any addition to or amendment of
any other provisions of this Agreement effected pursuant to this Clause
shall terminate at 24.00 hours on 31st March, 1995 except for any
provision, addition or amendment which is required to continue beyond
that date to give effect to the operation of UMIS in respect of any
period before that date. Nothing in this Clause shall prejudice or
affect in any way whether and if so by what means all or any of the
elements comprising the difference between Pool Selling Price and Pool
Purchase Price are managed or otherwise dealt with after 24.00 hours on
31st March, 1995. This Clause 51A.7 may not be amended without the prior
written consent of all Parties.
51A.8 Termination or expiry of the provisions of this Clause, UMIS and/or any
addition to or amendment of any other provision of this Agreement
effected pursuant to this Clause shall not prejudice any Consumer's (as
defined in the Pool Rules) or the Grid Operator's (acting through its
agent the Ancillary Services Provider) accrued rights and liabilities
under UMIS at the date of such termination or expiry, which accrued
rights shall include, for the avoidance of doubt, the ability to adjust
sums calculated under UMIS in respect of disputes arising after such
termination or expiry.
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PART XII
STATEMENT RE-RUNS
52. SETTLEMENT RERUNS
52.1 Re-runs: the Parties acknowledge and agree that there may be occasions
following any final run of Settlement (as referred to in paragraph D(3)
of the Preamble to Schedule 9) when it is necessary in respect of a
Settlement Day (or part thereof) to re-determine the trades of
electricity pursuant to this Agreement and the provision of Ancillary
Services (whether to take account of oversight or error, malfunction of
the Settlement System operation in accordance with Grid Operator
Despatch instructions issued under emergency circumstances, award of an
arbitrator(s) pursuant to Clause 83, court order or otherwise
howsoever). The Executive Committee, in consultation with the Settlement
System Administrator, the Pool Funds Administrator and the Pool Auditor
and, where appropriate, the Ancillary Services Provider, shall decide
how such re-determination is to be effected, the re-allocation of moneys
and the period of time over which any such reallocation is to take
place, any such decision to take account and give effect, as nearly as
practicable, to the principles and procedures set out in this Agreement
(and, where relevant, the award of the said arbitrator(s) or court
order). In particular, but without prejudice to the generality of the
foregoing, the Executive Committee may require following any relevant
final run of Settlement (and, shall take due notice of any request from
the Ancillary Services Provider to this effect) the Settlement System
Administrator to re-run, and the Settlement System Administrator shall
re-run, Settlement in respect of any Settlement Day (or relevant part
thereof) using the software and data originally used in respect of such
Settlement Day (or relevant part thereof) but subject to such changes,
amendments or additional inputs as may be required by the Executive
Committee, the Ancillary Services Provider, such arbitrator(s) or court
or (as the case may be) any other relevant Party. Any such re-run shall
hereafter in this Clause 52 be referred to as a "Re-run".
52.2 Timing: the Settlement System Administrator shall arrange for any Re-run
to be carried out as soon as is reasonably practicxable following
request by the Executive Committee subject to the availability of
computer time, compatible software, appropriate data and other
resources.
52.3 Ancillary Services Provider: the Ancillary Services Provider shall have
the right to incorporate any delayed or disputed amount in respect of
the provision of Ancillary Services into Settlement without requiring a
Re-run.
52.4 Notification: the Executive Committee shall promptly notify each Party,
the Pool Auditor and the Director of each occasion on which it requries
the Settlement System Administrator to carry out any Re-run, the reasons
for such requirement, the
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timing thereof and the period to be covered thereby and shall provide
each Party with such information about any Re-run as is relevant to such
Party and shall provide the Pool Auditor and the Director with full
details of any Re-run.
52.5 Proviso: the foregoing provisions of this Clause 52 are subject to the
proviso that no Re-run shall be carried out, and neither the Executive
Committee nor any Party shall be entitled to requrie that a Re-run be
carried out, in respect of a Settlement Day or any part thereof after
the first anniversary of such Settlement Day, but so that this proviso
shall not restrict the right of any Party to claim or recover any moneys
properly due and owing to it under this Agreement.
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PART XIII
RISK MANAGEMENT SCHEME
53. APPLICATION
53.1 Request: the Executive Committee shall send any Pool Member a Scheme
Admission Application within 28 days after receipt of a request for the
same from that Pool Member.
53.2 Scheme Admission Application: any Pool Member may apply to the Executive
Committee to have any Centrally Despatched Generating Unit admitted to
the Scheme by completing and submitting to the Executive Committee a
duly completed Scheme Admission Application not less than 40 days before
the proposed date of admission to the Scheme of that Centrally
Despatched generating Unit.
53.3 Admission: the Executive committee shall admit any Centrally Despatched
Generating Unit to the Scheme in respect of which all Scheme Admission
Condition are met.
53.4 Notification (1): if the executive committee determines that, in respect
of any Centrally Despatched Generating Unit, the Scheme Admission
Conditions have been met it shall forthwith and in any event within 40
days after receipt of the Scheme Admission Application notify the
relevant Pool Member and the Settlement system Administrator
accordingly.
53.5 Notification (2): if the Executive Committee determines that, in respect
of any Centrally Despatched Generating Unit, the Scheme Admission
Conditions have not been met it shall forthwith and in any event within
40 days after receipt of the Scheme Admission Application notify the
relevant Pool Member of the reasons why the Scheme Admission conditions
have not been met.
53.6 Reference to the Director: in the event of any dispute between the
Executive Committee and the relevant Pool Member over whether such Pool
Member has fulfilled the Scheme Admission conditions the same may be
referred by the Executive committee or the relevant Pool Member to the
Director for determination, whose determination shall be final and
binding for all purposes.
54. SCHEME ADMISSION CONDITIONS
The Scheme Admission Conditions are that:-
54.1 no person has an Accountable Interest in the Centrally
Despatched Generating Unit which is the subject of the Scheme
Admission Application which, when
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added to the Accountable Interests of that person in other
Generating Units (whether situate with England and Wales or
elsewhere), exceeds in aggregate 1500MW;
54.2 the Pool Member does not have an Accountable Interest (excluding
any Accountable Interest of less than 10MW) in more than four
Generating Units (whether situate within england and Wales or
elsewhere). For the avoidance of doubt a combined cycle module
shall be deemed for these purposes a single Generating Unit;
54.3 the Centrally Despatched Generating Unit which is the subject of
the Scheme Admission Application has not at the date of the
Scheme Admission Application been Commissioned;
54.4 the Centrally Despatched Generating Unit shall be admitted for
seven calendar years from the date of its admission to the
Scheme specified in the Scheme Admission Application; and
54.5 the Pool Member shall specify in the Scheme Admission
Application the proposed Scheme Planned Availability for each
Settlement Period in the proposed first Scheme Year for the
Centrally Despatched Generating Unit.
55. RIGHTS AND OBLIGATIONS OF POOL MEMBERS
55.1 Notification of unavailability: in respect of each Scheme Year for each
Scheme Genset (other than the first) the Pool Member shall not later
than 28 days before the start of that Scheme Year for each Scheme Genset
notify the Executive Committee of all Settlement periods in that Scheme
Year during which the Scheme Genset is intended to be unavailable.
55.2 Scheme Planned availability: all settlement Periods in that Scheme Year
other than those notified under clause 55.1 shall together constitute
the Scheme Planned Availability in respect of that Scheme Genset for
that Scheme Year.
55.3 Failure to notify: if the Pool Member fails to notify the Executive
Committee in accordance with Clause 55.1 of the Scheme Planned
Availability in respect of that Scheme Genset for the following Scheme
Year, the Scheme Planned Availability shall be deemed to be the same as
the Scheme Planned Availability for the current Scheme Year.
55.4 No amendment: the Scheme Planned Availability for any Scheme Year
notified in accordance with Clause 55.1 or deemed in accordance with
Clause 55.3 may not be amended.
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55.5 Payment rights: the Pool Member shall make or be entitled to receive
payments in respect of each Scheme Genset as determined in accordance
with Section 27 of Schedule 9 notwithstanding the expiry of the period
referred to in Clause 50.4.
55.6 No withdrawal: the Pool Member may not withdraw any Scheme Genset from
the Scheme during any period referred to in Clause 50.4 applicable to
that Scheme Genset.
55.7 Actual planned availability: in respect of each Scheme Genset, the Pool
member shall use all reasonable endeavours to ensure that the Scheme
Planned Availability for each Scheme Year is the actual planned
availability of such Scheme Genset.
56. REVIEW
56.1 Review: within two months after the end of the third Scheme Year in
respect of which the first Scheme Genset has been admitted to the Scheme
and each subsequent anniversary of that date the Executive Committee
shall (with the consent of the Director) appoint an independent firm of
accountants of internationally recognised standing to review the Scheme
to establish whether or not any element of the Scheme (or the Scheme
taken as a whole) gives rise to a systematic imbalance which is likely
to prevent the payments to the Scheme balancing payments from the Scheme
and to submit to the Executive committee and the director a report
setting out details of any such imbalance and his findings and
recommendations for amending the Scheme designed to correct any such
imbalance.
56.2 Amendments: the Executive Committee may make such amendments to the
provisions of Section 27 of Schedule 9 as are required to implement the
recommendations referred to in Clause 56.1. Any such amendments shall
apply in respect of any Scheme Admission Application received after the
date such amendments become effective and shall constitute a new Scheme.
56.3 Existing rights and obligations continue: any Pool Member shall remain
entitled to the benefits and subject to the obligations of the Scheme
with respect to any Scheme Genset in effect at the time of admission of
that Scheme Genset to the Scheme.
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PART XIV
FUEL SECURITY
57. DEFINITIONS
Definitions: in this Part XIV:-
"Fuel Security Interest" in relation to a particular Payment
Instruction, means the interest (if any) accruing on the Fuel Security
Payment or Fuel Security Reimbursement specified in that Payment
Instruction pursuant to Sub-clause 2.08 of Part 5 of the Fuel Security
code:
"Fuel Security Ledger" means any ledger required to be maintained by the
Pool Funds Administrator in accordance with Clause 59;
"Fuel Security Payment" means the amount specified in a Payment
Instruction which a Generator is entitled to recover from those persons
specified in that Payment Instruction (excluding Fuel Security Interest,
if any, in relation thereto);
"Payment Instruction" means an instruction which has been duly
authorised and delivered by a Generator to whom the Fuel Security Code
applies to the Pool Funds Administrator in the form, and in the manner,
specified in the Fuel Security Code.
58. PAYMENT INSTRUCTIONS
58.1 Effect of a Payment Instruction: following delivery of a Payment
Instruction to the Pool Funds Administrator:-
58.1.1 any Fuel Security Payment specified in that Payment Instruction
(together with any Fuel Security Interest in relation thereto)
shall be treated as an amount which is due to that Generator
from those persons specified in that Payment Instruction and
which is payable on the basis provided in that Payment
Instruction; and
58.1.2 any Fuel Security Reimbursement specified in that Payment
Instruction (together with any Fuel Security Interest in
relation thereto) shall be treated as an amount which is due
from that Generator to those persons specified in that Payment
Instruction and which is payable on the basis provided in that
Payment Instruction; and
58.1.3 subject to Clauses 58.2 and 58.3, the Pool funds Administrator
shall arrange for such Fuel Security Payment or such Fuel
Security Reimbursement (together with any Fuel Security Interest
in relation
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thereto) to be paid to or, as the case may be, paid by that
Generator by or, as the case may be, to those persons specified
in that Payment Instruction in accordance with the provisions of
such Payment Instruction; and
58.1.4 such Payment Instruction (including any calculation,
determination or other matter stated or specified therein)
shall, save in the case of fraud, be conclusive and binding upon
all Parties.
58.2 Clarification: if the Pool Funds Administrator considers either that the
basis of payment of a Fuel Security Payment or a Fuel Security
Reimbursement provided for in a Payment Instruction is unclear,
contradictory or incomplete or that it is impossible to implement in
full the basis of payment provided for in a Payment Instruction, then
the Pool Funds Administrator must, promptly on becoming aware of the
same, notify the Director in reasonable detail of the same and, until
that matter is clarified, the Pool Funds Administrator shall only be
obliged to implement the payment specified in that Payment Instruction
to the extent that without clarification such implementation is
possible.
58.3 Failure to specify or clarify: if a Payment Instruction fails to specify
the basis upon which the Fuel Security Payment or a Fuel Security
Reimbursement specified in that Payment Instruction must be paid or if
the Director fails to clarify any matter notified to it in accordance
with Clause 58.2 within ten Business Days of such notification then the
Pool Funds Administrator shall arrange for the relevant payment to be
made on such basis as the Executive Committee shall, with the written
approval of the director, determine to be appropriate.
59. RECORD KEEPING AND PAYMENTS
59.1 Fuel Security Ledgers:
59.2.1 following delivery of a Payment Instruction to the Pool Funds
Administrator, the Pools Funds Administrator shall, if he has
not already done so, open and thereafter maintain a Fuel
Security Ledger in the name of that Generator and shall record
therein all amounts (together with any Fuel Security Interest in
relation thereto) due to and from that Generator that are
specified in Payment Instructions and shall also record therein
all transactions arranged by the Pool Funds Administrator for
payments to be made to and from that Generator in accordance
with the provisions of Payment Instructions.
59.2.2 The Pool Funds Administrator shall from the time that a Fuel
Security Ledger is opened until it records a nil balance provide
to each Generator and to each Supplier on the last Business Day
of each
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calendar month a statement reflecting all entries recorded in
the Fuel Security Ledger of that Generator over the course of
the previous month.
59.2.3 The Fuel Security Ledger of a Generator shall, except as
required by Clause 59.2.2 or Part IX, be kept confidential in
accordance with Part XX.
59.2.4 Each monthly statement provided under Clause 59.2.2 shall, save
in the case of manifest error, be deemed prima facie evidence of
the contents of that part of the Fuel Security Ledger to which
it relates.
59.2.5 Each Party shall promptly review each monthly statement provided
to it under Clause 59.2.2 and shall (without prejudice to any of
its rights under this Agreement) where practicable within ten
Business Days after receiving each such statement notify the
Pool Funds Administrator of any inaccuracies in such statement
of which it is aware.
59.2.6 If the Pool Funds Administrator at any time receives from a
Generator or any Supplier a notice disputing the accuracy of the
Fuel Security Ledger of that Generator, the Pool funds
Administrator shall consult with the Party giving the notice and
use all reasonable endeavours to rectify any inaccuracy. In the
event that any inaccuracy in a Fuel Security Ledger of a
Generator is rectified, the Pool funds Administrator shall
advise that Generator and the Suppliers of the inaccuracy that
was rectified.
59.2 Fuel Security Payments: following delivery to the Pool Funds
Administrator of a Payment Instruction specifying a Fuel Security
Payment, the Pool funds Administrator shall enter in the fuel Security
Ledger of that Generator as a credit (a) the amount of the Fuel Security
Payment, and (b) thereafter, any Fuel Security Interest in relation
thereto.
59.3 Fuel Security Reimbursements: following delivery to the Pool Funds
Administrator of a Payment Instruction specifying a Fuel Security
Reimbursement, the Pool funds Administrator shall enter in the Fuel
Security Ledger of that Generator as a debit (a) the amount of the Fuel
Security Reimbursement, and (b) thereafter, any Fuel Security Interest
in relation thereto.
59.4 Other Entries: any amount paid to or, as the case may be, paid by a
Generator in accordance with the provisions of a Payment Instruction
shall be entered as a debit or, as the case may be, a credit in the Fuel
Security Ledger of that Generator.
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59.5 Set off: the Pool Funds Administrator shall, unless it reasonably
believes that it would be unlawful to do so, from time to time where
possible set off any amounts shown as credits in the Fuel Security
Ledger of a Generator against any amounts shown as debits in the Fuel
Security Ledger of that Generator in the order in which they were
entered. Any balance shown in the Fuel Security Ledger of a Generator
shall, if it is a credit, be paid to or, if it is a debit, be paid by
that Generator to the extent that it relates to a Payment Instruction on
the basis provided for in that Payment Instruction. The entitlements and
liabilities of a Generator (and the corresponding liabilities and
entitlements of the respective debtors and creditors of that Generator)
shall, to the extent that they have been set off as aforesaid, be deemed
satisfied and extinguished.
59.6 Schedule 11: all payments made to or by any Generator in accordance with
the provisions of a Payment Instruction shall, subject to any contrary
instruction contained i the provisions of a Payment Instruction, be
effected by the Pool funds Administrator through the Banking System and
the Billing System established in accordance with Schedule 11.
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PART XV
METERING
60.1 METERING
60.1 Introduction: the rights and obligations of each Party to this Agreement
which enable the accurate measurement of Energy traded for the purposes
of this Agreement by appropriate metering installations are as set out
in this Part XV and also in Schedule 21, and the provisions of Schedule
21 shall have effect and apply in the same manner as the remaining
provisions of this Agreement apply with respect to each such Party.
60.2 General
60.2.1 for the purposes of this Agreement the quantities of Active
Energy and Reactive Energy Exported or Imported by Parties shall
be measured and recorded through Metering Equipment installed,
operated and maintained and otherwise provided for as set out in
this Part XV and in Schedule 21. Each Generating Unit (excluding
for this purpose Generation Trading Blocks) which is subject to
Central Despatch shall have separate Metering Equipment.
60.2.2 Each Party is required to register or procure that there is
registered with the Settlement system Administrator the Metering
System at each site where such Party Exports or Imports
electricity except where such electricity is not sold or
purchased in accordance with the Pool Rules.
60.3 Registrants:
60.3.1 a Metering System shall have a Registrant and Operator before
the Settlement System Administrator is required to take such
Metering system into account for the purposes of Settlement.
60.3.2 Each Metering System (and the identifies of its respective
Registrant and Operator) which the Settlement System
Administrator shall take into account for the purposes of
Settlement shall be as set out, for the time being and from time
to time, in the Register.
60.3.3 A Registrant's role in relation to a Metering System under this
Agreement shall continue until:-
(i) such Registrant ceases to be a party or another Party
complying with the definition of Registrant accepts such
role
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as Registrant in accordance with the provisions of this
Agreement by service of a duly completed notice in the
form prescribed by the relevant Agreed Procedure (but
without prejudice to any accrued liabilities of the
previous Registrant); or
(ii) the Plant or Apparatus of the Registrant, in respect of
such Metering System, ceases to be connected at the
relevant site (as indicated in the notification to the
Settlement system Administrator in the form prescribed
by the relevant Agreed Procedure); or
(iii) in the case of a Registrant of a Metering System which
is at the point of connection between a Public
Electricity Supplier's Distribution System and a Second
Tier Customer, the Registrant ceases to act as Second
Tier Supplier in relation to the same at such point of
connection.
60.3.4 The Settlement System Administrator shall inform the relevant
Host PES of:-
(i) the identity of any new Registrant; and
(ii) any change in the identity of any existing Registrant.
of a Metering System in respect of which that Public Electricity
is Host PES, after such change is notified to the Settlement
system Administrator in accordance with the terms of this
Agreement.
60.3.5 there must always be one and, at any point in time, no more than
one Registrant for each Metering System which is registered with
the Settlement System Administration.
60.3.6 Any notice of a new, or of a change in an existing, Registrant,
Equipment Owner Operator, Second Tier customer or Host PES or
any Form of Acknowledgement required under this Part XV or
Schedule 21 shall be in such form and given to such person at
such time(s) and accompanied by payment of such fees (if any) as
is prescribed by the relevant Agreed Procedures.
60.3.7 If a Metering System ceases to have a Registrant who is not
replaced as Registrant in relation to the relevant Metering
Equipment, the Settlement System Administrator shall not be
obliged to take the relevant Metering System into account for
the purposes of Settlement.
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60.3.8 A Registrant may not resign or retire as Registrant except in
accordance with Clause 60.3.3.
60.3.9 The Registrant in respect of any Metering System shall provide
to the Settlement System Administrator such information as may
be required by the relevant Agreed Procedures.
60.3.10 The Settlement System Administrator shall not enter on the
Register a Registrant in respect of which evidence of consent of
the Equipment Owner has not been provided in accordance with the
relevant Agreed Procedure.
60.3.11 Where a Metering System at the point of connection of two or
more Distribution Systems is to be registered with the
Settlement System Administrator, all interested Parties shall
agree upon and nominate the Registrant by means of a duly
completed nomination to the Settlement System Administrator in
the form prescribed by the relevant Agreed Procedure.
60.4 Operators:
60.4.1 there must always be one and, at any point in time, no more than
one Operator for each Metering System which is registered with
the Settlement System Administrator. A replacement Operator of
such Metering System may be appointed from time to time in
accordance with the provisions of this Part XV, Schedule 21 and
the relevant Agreed Procedure.
60.4.2 Any notice of a new Operator or of a change in Operator
(including upon resignation, removal or cessation in accordance
with the provisions of Schedule 21) or any form of
Acknowledgement required under this Part XV or Schedule 21 shall
be in such form and given to such person at such time(s) and
accompanied by payment of such fees (if any) as is prescribed by
the relevant Agreed Procedures. Where any Meter Operator Party
has not acknowledged its appointment as Operator the Settlement
system Administrator shall notify the Registrant in accordance
with the relevant Agreed Procedure.
60.4.3 The Registrant in respect of a Metering System shall ensure that
there is appointed from time to time an Operator, which is a
Meter Operator Party, in accordance with, and for the purposes
of, Schedule 21 as Operator in respect of that Metering System.
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60.4.4 If a person which is an Operator in respect of any Metering
System ceases to be an Operator in respect thereof for whatever
reason (including upon removal or resignation) or ceases to be a
meter Operator Party (including upon removal or resignation) and
there has not been appointed, at that time, a replacement
Operator in respect of the relevant Metering System(s) in
accordance with the provisions of this Part XV and Schedule 21,
such person's responsibilities as Operator of such Metering
Equipment shall upon such cessation be assumed by the Registrant
in respect of such Metering Equipment who shall be deemed to be
the Operator therefor (notwithstanding that it shall not be
registered as such by the Settlement System Administrator) in
accordance with the provisions of this Clause (the "deemed
Operator").
60.4.5 As soon as any Registrant has reasonable grounds to believe that
an Operator of any Metering system in respect of which it is the
Registrant has ceased to act as Operator therefor in accordance
with substantially all of its responsibilities as set out in
Schedule 21 it shall remove such Operator in respect of such
Metering System in accordance with paragraph 6.1 of Schedule 21.
60.4.6 If the Settlement System Administrator has reasonable grounds to
believe that an Operator of any Metering System has ceased to
act as Operator therefor in accordance with substantially all of
its responsibilities as set out in Schedule 21 the Settlement
System Administrator shall notify the Registrant in accordance
with the relevant Agreed Procedure.
60.4.7 Any Registrant which is deemed to be the Operator of a Metering
System pursuant to the provisions of Clause 60.4.4 shall,
subject to Clauses 60.4.8 and 60.4.9, continue to act as the
Operator in respect of any Metering System to which that Clause
applies, or shall appoint an agent or contractor which shall
continue to act as the Operator in respect of such Metering
System, for a period of 10 Business Days (which shall commence
at the time of the cessation referred to in Clause 60.4.4) or,
if a new Operator is registered in respect of that Metering
System prior to the expiry of that period, for a period ending
on the date of such registration.
60.4.8 If a Registrant to which Clause 60.4.7 applies does not act as
Operator in accordance with the provisions thereof or does not
appoint an agent or contractor who shall act as Operator, or if
the 10 Business Day period referred to in Clause 60.4.7 shall
expire without a replacement Operator being registered with the
Settlement System Administrator in
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respect of that Metering System in accordance with paragraph 4
of Schedule 21, that Registrant shall:
(i) undertake to cease forthwith to supply or to generate
electricity for the purposes of the sale or acquisition
of electricity pursuant to this Agreement at the site
where such supply or generation is measured, recorded
and communicated to the Settlement System Administrator
by that Metering System; and
(ii) notify the Settlement System Administrator in accordance
with the relevant Agreed Procedure of that fact.
60.4.9 During the period in which a Registrant is the deemed Operator
in accordance with this Clause it shall be required (save only
as expressly provided to the contrary in this Agreement) to
comply with the requirements of this Part XV and Schedule 21 as
Operator provided that, but without prejudice to any liability
to pay for Active or Reactive Energy traded by it, such
Registrant as deemed Operator:
(i) shall not be required to be registered as Operator with
the Settlement System Administrator nor to comply with
the prescribed conditions for registration as Operator
from time to time in accordance with the provisions of
Schedule 21; and
(ii) shall not at any time when it is the deemed Operator be
required to incur significant capital expenditure in the
fulfillment of obligations contained in this Part XV or
Schedule 21 where:
(a) the Metering Equipment shall have become
defective, inaccurate or in want of repair (the
"defective Metering Equipment") as a direct
consequence of the act or omission of any
previous Operator;
(b) the Registrant shall upon becoming aware of the
same have taken all steps to cease forthwith to
supply or to generate electricity for the
purposes of the sale or acquisition of
electricity pursuant to this Agreement at or in
relation to the site where such supply or
generation is measured, recorded and
communicated to the Settlement System
Administrator by the defective Metering
Equipment; and
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(c) the Registrant shall have notified the
Settlement System Administrator in accordance
with the relevant Agreed Procedure of the fact
that the supply or generation has ceased.
Where (x) the Settlement System Administrator proposes
to exercise its right under paragraph 18 of Schedule 21
to replace, renew or repair the defective Metering
Equipment (the "remedial work"); (y) the exercise of
such right would result in the incurring of significant
capital expenditure; and (z) the Register indicates that
such Registrant is acting as deemed Operator, the
Settlement System Administrator shall notify the
Registrant before undertaking such remedial work and
shall give such Registrant the opportunity to comply
with (ii) (b) and (c) above before commencing such
remedial work.
60.5 Maintenance of Register and documents:
60.5.1 the Settlement System Administrator shall keep a register
recording:
(i) each Metering System which is accepted for the purposes
of the Settlement System;
(ii) the respective identities in respect of each such
Metering System of:
(a) the Registrant;
(b) the Operator;
(c) the Equipment Owner;
(d) the Host PES (where applicable);
(e) any Second Tier Customer in respect of a supply
to which that Metering System is being used; and
(f) any agent which may be appointed from time to
time by the Settlement System Administrator for
the purpose of data collection or, where
appropriate, of any Second Tier Agent in respect
of such Metering System or, where the Settlement
System Administrator does not appoint or have
currently appointed such agent or Second Tier
Agent in respect of a Metering System, a note to
this effect;
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(iii) loss adjustment details whether by meter biasing or by
software;
(iv) whether the Metering Equipment comprising a Metering
System is the subject of a dispensation agreed in
accordance with paragraph 14 of Schedule 21; and
(v) the relevant Code(s) of Practice in respect of such
Metering System.
60.5.2 For the purposes of this Agreement, the Settlement System
Administrator shall refer only to the Register to identify the
Registrant, Operator, Equipment Owner, Host PES, Second Tier
Customer, agent or Second Tier Agent referred to in Clause
60.5.1 relating to each Metering System and shall not be obliged
to acknowledge or be bound by any other agreement or arrangement
entered into by any Registrant, Operator, Equipment Owner, Host
PES or Second Tier Customer.
60.5.3 The Settlement System Administrator shall keep the Register up
to date, noting changes to Registrants, Operators, Equipment
Owners, Host PESs, Second Tier Customers, Metering Equipment,
dispensations and any Site disconnections as notified to it
pursuant to this Agreement and any changes to any agent or
Second Tier Agent. The Settlement System Administrator shall
also record in the Register any other information regarding each
Metering System as may be reasonably required by the Executive
Committee.
60.6 Communication lines and central collector stations:
60.6.1 the Settlement System Administrator shall collect (or procure
the collection of) and estimate data relating to quantities of
Active and Reactive Power Imported or Exported by any Party as
may be required for the proper functioning of Settlement in
accordance with the provisions of this Clause 60.6.
60.6.2 The Settlement System Administrator shall collect or procure the
collection of all such data referred to in Clause 60.6.1 as is
available from Outstations either by means of remote
interrogation or by means of manual on-site interrogation.
60.6.3 (a) For the purposes of remote interrogation the Settlement
System Administrator shall enter into, manage and
monitor contracts or other arrangements to provide for
the maintenance of all communication links by which
information is passed from
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Outstations to the Settlement System Administrator or
its agent.
(b) In the event of any fault or failure of any
communication link or any error or omission in such data
or all necessary data not being available from
Outstations the Settlement System Administrator shall
collect or procure the collection of such data by manual
on-site interrogation in accordance with the relevant
Agreed Procedures.
60.6.4 The Settlement System Administrator shall be responsible for the
installation and maintenance of central collector stations.
60.6.5 The Settlement System Administrator shall collect or procure the
collection of data for the purposes of the Settlement System
from Embedded Generators, Second Tier Suppliers, Second Tier
Customers and inter-Distribution System connections in
accordance with the relevant Agreed Procedures.
60.6.6 The obligation to maintain communications links in respect of
Metering Equipment shall not apply where and with effect from
the date on which a person receiving a supply of or generating
electricity recorded by such Metering Equipment ceases to be a
Second Tier Customer, a Generator or a PES.
60.7 Class rights:
60.7.1 the levels of accuracy for Metering Equipment at points of
connection of Second Tier Customers taking up to (and including)
100kW of demand and at new points of connection between two or
more Distribution Systems were not set as at 1st April, 1993 and
shall be specified by the Executive Committee subject to the
consent of any relevant class of Pool Members.
60.7.2 Any change to the standards of accuracy of Metering Equipment
required for Second Tier Customers up to (and including) 1MW
before 31st March, 1994 or up to (and including) 100kW before
31st March, 1998 shall be a change to the class rights of
Suppliers.
60.8 Sealing: Metering Equipment shall be as secure as is practicable in all
the circumstances and for this purpose:
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(a) all Metering Equipment shall comply with the relevant Agreed
Procedure; and
(b) the Executive Committee and the Settlement System Administrator
shall regularly review Agreed Procedures for security
arrangements in relation to Metering Equipment.
60.9 Discrepancies between meter advance and half hourly value totals: the
Parties acknowledge that, in transmitting metered data, impulses
representing quantities of electricity may be lost between the relevant
Meter and the Outstations giving rise to inaccuracies in half hourly
values notwithstanding that the Metering Equipment is complying with the
standards required by this Agreement. In such circumstances any
differences between electricity flows recorded on meters and the total
of the half hourly values recorded in the Settlement System will be
noted at the time that the Meter is inspected and read by the Settlement
System Administrator pursuant to paragraph 10 of Schedule 21 and will be
dealt with as provided in the relevant Agreed Procedure. In any other
circumstances where the Metering Equipment is not complying with the
standards required by this Agreement such difference will be dealt with
in accordance with paragraph 11 of Schedule 21.
60.10 Meter Failure:
60.10.1 if at any time any Metering Equipment ceases to function or is
found to be outside the prescribed limits of accuracy referred
to in paragraph 7.3.1 of Schedule 21 for whatever reason then,
except in those circumstances referred to in Clause 60.10.2:
(a) in the case of Metering Equipment ceasing to function,
during the period from the date of such cessation; or
(b) in any other case, during the period from the time when
such inaccuracy first occurred or, if such time is
unknown, from the midnight preceding the day during
which the disputed reading occurred.
until, in either such case, the date of adjustment,
replacement, repair or renewal of such Metering
Equipment under paragraph 8.4 of Schedule 21, the meter
readings shall be deemed to be those calculated pursuant
to the relevant Agreed Procedure.
60.10.2 If at any time a voltage transformer fuse on a circuit supplying
a Meter fails with the result that the Metering Equipment is
outside the prescribed limits of accuracy referred to in
paragraph 7.3.1 of Schedule 21, the meter readings from the time
the failure is deemed to have
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occurred until the voltage transformer circuit is again restored
to the Meter shall be deemed to be those calculated pursuant to
the relevant Agreed Procedure. A failure shall be deemed to have
occurred at the point in time provided for in the relevant
Agreed Procedure.
60.11 Disputes:
60.11.1 any dispute regarding the accuracy of data recorded or
transmitted by Metering Equipment in respect of any Settlement
Day which is to be used for the purposes of Settlement and where
the purpose of the resolution of such dispute is solely to
affect payments arising from a Settlement Run shall, if there is
a relevant Agreed Procedure, be dealt with in accordance with
such Agreed Procedure. If, having exhausted such Agreed
Procedure any Party is not satisfied with the outcome, such
Party may refer the matter to the Executive Committee. If there
shall be no relevant Agreed Procedure, such dispute shall be
referred to the Executive Committee. If, in either case, any
Party is not satisfied with the decision of the Executive
Committee, the matter may be referred by such Party to
arbitration in accordance with Clause 83.
60.11.2 Any dispute regarding Metering Equipment (other than a dispute
referred to in Clause 60.11.1) shall be referred to the
Executive Committee. If any Party is not satisfied with the
decision of the Executive Committee, the matter may be referred
by such Party to arbitration in accordance with Clause 83.
60.11.3 It is hereby expressly acknowledged and agreed by the Parties
that the resolution of any dispute referred to in Clause 60.11.1
or 60.11.2 shall in all cases be without prejudice to the
bringing or pursuing of any claim, by or against, or the
resolving of any issue between any one or more of such Parties
or any other Party arising out of the same facts or
circumstances, or facts or circumstances incidental to the facts
and circumstances giving rise to such dispute, or upon the basis
of which such dispute has been resolved, in favor of, or
against, a Meter Operator Party or Meter Operator Parties.
60.11.4 Upon the request of any Party which is a party to a dispute
referred to in Clause 60.11.1 or 60.11.2 any relevant data
derived from Metering Equipment may be submitted by the
Settlement System Administrator to the body then having
jurisdiction in respect of the relevant dispute for the purposes
of resoling such dispute.
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60.12 Information:
60.12.1 if a Pool Member or Party intends to make or provide or make a
significant alteration to a connection to the NGC Transmission
System or to a Distribution System which connection is of 100MW
or more in capacity and which may require a new Metering System
to be registered into the Settlement System or a significant
change to a Metering System to be registered into the Settlement
System, the Pool Member or Party shall inform the Settlement
System Administrator as soon as possible and, in any event, not
later than three months prior to the date on which the Pool
Member or Party expects to make or provide the connection or
change. Such information will be regarded as confidential to the
Pool Member or Party providing it, and will be used by the
Settlement System Administrator only for the purpose of
preparing the Settlement System to take account of the Metering
System when it is registered.
60.12.2 Any information regarding or data acquired by the Settlement
System Administrator or its agent from Metering Equipment at any
Site which is a point of connection to a Distribution System
shall, and may, be passed by the Settlement System Administrator
or its agent to the operator of the relevant Distribution
System. The said operator of the relevant Distribution System
may only use the same for the purposes of the operation of the
Distribution System and the calculation of charges for use of
and connection to the Distribution System.
60.13 Ownership of Metering Data, access, use and use of Communications
Equipment:
60.13.1 the Registrant of any Metering System shall own the data
acquired therefrom provided that (and each Registrant hereby
expressly agrees and acknowledges that) a Second Tier Customer
of that Registrant in respect of which such data is generated
shall be entitled at all times without charge by the Registrant
to access, obtain and use such data and provided further that:
(i) such access, obtaining or use, or the method of such
access, obtaining or use, does not interfere with the
operation of Settlement;
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(ii) nothing in this Clause 60.13.1 shall require the
Registrant actively to provide such data to such Second
Tier Customer or so to provide such data free of charge;
and
(iii) such access shall not be by using any communications
link used by the Settlement System Administrator for the
purposes of Clause 60.6 without the prior written
consent of the Settlement System Administrator.
60.13.2 The Settlement System Administrator is hereby authorized to use
all data which is owned by the Registrant pursuant to Clause
60.13.1 as may be permitted pursuant to this Agreement, and the
Settlement System Administrator may only release such data to
others to the extent set out in this Agreement. It is hereby
expressly agreed that the Settlement System Administrator is
permitted to and shall against request and payment of a
reasonable charge therefor release to a Second Tier Customer
such data relating to it as is referred to in Claque 60.13.1.
60.13.3 Communications Equipment need not be dedicated exclusively to
the provision of data to the Settlement System Administrator for
the purposes of Settlement provided that any other use shall not
interfere at any time with the operation of Settlement and
subject also to the relevant provisions (if any) in the Tariff.
60.14 Ancillary Services: until the RP Date, the Ancillary Services Provider
shall be entitled at its own cost and expense (which shall not be
charged or recharged to Pool Members) to prepare and submit to the
Suppliers in separate class meeting a works program relating to the
method of recovery from Pool Members for the supply of Reactive Energy
by reference to the actual amount of Reactive Energy consumed by Pool
Members as measured by MVAr Metering Equipment at each relevant Site,
and, if approved by the Suppliers in separate class meeting, such works
program shall be deemed to be an approved Works Program for all purposes
of this Agreement and the provisions of Clauses 5.13 and 5.14 shall
apply mutatis mutandis.
60.15 Appointment by Agents by Settlement System Administrator:
notwithstanding the provisions of Clause 31.2.2 the Settlement System
Administrator may appoint one or more agents to perform any or all of
its obligations under this Part XV and Schedule 21.
60.16 Appointment of Second Tier Agents by Settlement System Administrator
from the Effective Date:
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60.16.1 from the Effective Date, each of the Public Electricity
Suppliers who are Founder Suppliers shall be appointed a non-
exclusive agent by the Settlement System Administrator for the
purpose of carrying out the obligations of the Settlement System
Administrator under or in connection with this Part XV and
Schedule 21 in relation to such Metering Systems at the point of
connection between such Public Electricity Supplier's
Distribution System and:
(i) a Second Tier Customer;
(ii) the System of an Authorized Electricity Operator other
than the Public Electricity Supplier;
(iii) an Embedded Generator not subject to Central Dispatch;
and
(iv) the Distribution System of another Public Electricity
Supplier,
as the Settlement System Administrator may direct. The
appointment of each such Second Tier Agent shall
continue unless and until terminated by either such
Second Tier Agent or the Settlement System Administrator
giving to the other no less than 12 months' notice in
writing to expire on or after the fourth anniversary of
the date of this Agreement. The provisions of Clauses
60.16.1 to 60.16.20 and Clause 60.18 shall apply in
respect of such Second Tier Agents for so long as they
continue to be appointed as Second Tier Agents pursuant
to the provisions of Clause 60.16.1. For the avoidance
of doubt the provisions of Clause 60.16.15 shall
continue to apply to such Second Tier Agents after 31st
March 1994.
60.16.2 Notwithstanding the provisions of Clause 60.16.1 the Settlement
System Administrator may remove a Second Tier Agent at any time
without notice if it fails in any persistent and material
respect to perform its obligations hereunder, provided that the
Settlement System Administrator shall have given written notice
to the Second Tier Agent specifying in reasonable detail the
nature of the breach and requiring the Second Tier Agent within
28 days after notice of such breach (or within any longer period
agreed between the Settlement System Administrator and the
Second Tier Agent) and that at the expiry of such period the
breach remains unremedied.
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60.16.3 A Second Tier Agent shall collect, aggregate, adjust and
transmit metering data in accordance with the provisions of the
relevant Agreed Procedure and the Pool Rules. The costs of any
agency appointment made pursuant to this Part XV or Schedule 21
shall be treated as Bought-In Supplies (as defined in Schedule
4) and accordingly a cost beyond the control of the Settlement
System Administrator.
60.16.4 Each Second Tier Agent shall operate such agency business in an
efficient and economic manner. It shall maintain such records,
data and other information as the Pool Auditor may from time to
time by notice and in reasonable detail to the Second Tier Agent
reasonably require for the purposes of this Clause 60.16 or as
may otherwise be reasonably necessary to enable the Settlement
System Administrator to comply with its obligations under this
Agreement which are referred to in Clause 60.16.1.
60.16.5 The Settlement System Administrator may require the Pool Auditor
to carry out audits, reviews, tests or checks in relation to
each Second Tier Agent as the Settlement System Administrator
may from time to time reasonably require (having regard, in
particular, to the disruptive effect of the same on the business
and operations of the Second Tier Agent). The terms of
engagement of any such audit, reviews, tests or checks shall be
made available to the Second Tier Agent. No more than two
audits, reviews, tests or checks may be made in any one
Accounting Period.
60.16.6 In instructing the Pool Auditor pursuant to Clause 60.16.5 the
Settlement System Administrator may require the Pool Auditor:
(a) forthwith to report any material concerns with respect
to matters the subject of the relevant audit, review,
tests or check; or
(b) make such recommendations as to changes in the
procedures, controls and/or audit coverage of the agency
business as the Pool Auditor considers appropriate.
60.16.7 Any Second Tier Agent shall permit the Pool Auditor such access
to its agency operations and all records, data and information
held by the Second Tier Agent in the conduct of
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such agency operations as the Pool Auditor may reasonably
require and shall make available members of its staff to
explain such operations and such other issues as the Pool
Auditor considers relevant.
60.16.8 The Pool Auditor shall report to the Settlement System
Administrator and a copy of any report by the Pool Auditor
relating to any audit, review, tests or check made pursuant to
Clause 60.16.5 shall be provided to the Settlement System
Administrator. The Pool Auditor shall owe a duty of
confidentiality to the Second Tier Agent provided that nothing
in this Clause 60.16.8 shall prevent the disclosure of such
report to the Settlement System Administrator.
60.16.9 If the Settlement System Administrator so requires, the Second
Tier Agent shall promptly implement any recommendation made by
the Pool Auditor in a report relating to any audit, review,
test or check pursuant to Clause 60.16.5 subject to a right of
appeal.
60.16.10 The costs of any audit, test, review or check pursuant to
Clause 60.16.5 shall be borne by the Settlement System
Administrator which may recover the same through the
Accounting Procedure. The cost of implementing any
recommendations pursuant to Clause 60.16.9 may be recovered by
the Second Tier Agent through its agency charges.
60.16.11 In the performance of its duties and obligations under this
Clause 60.16 a Second Tier Agent shall at all times be acting
as the agent of the Settlement System Administrator and the
Settlement System Administrator shall indemnify each Second
Tier Agent and its officers, employees and agents against all
Losses (as defined in Clause 33.1) arising whether directly or
indirectly as a result of the Second Tier Agent entering into
any agreement as agent for, or otherwise on behalf of, the
Settlement System Administrator other than any Losses
recoverable through its charges as agent or arising from the
willful default, bad faith or negligence of, or breach of its
obligations under this Agreement by, the Second Tier Agent,
its officers, employees and agents.
60.16.12 Each Second Tier Agent acknowledges the responsibilities of
the Settlement System Administrator under this Agreement and
the standard of care set out therein and under the NGC
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Transmission License and the Act. In the collection,
aggregation and adjustment of data and information required
pursuant to this Clause 60.16 to each Second Tier Agent shall
act in accordance with such directions and instructions of the
Settlement System Administrator as are required to fulfill its
obligations under this Agreement in accordance with the
standard of care set out in Clause 32.1, and in any event,
without prejudice to the generality of the foregoing, in the
absence of directions and instructions given to it by the
Settlement System Administrator each Second Tier Agent shall,
in its role as agent under this Clause 60.16, at all times
conduct itself in a manner best calculated to achieve the
principal objects and purpose of this Agreement set out in
Clauses 4.1.2 and 4.1.3.
60.16.13 Each Second Tier Agent shall:
(a) maintain such back-up arrangements in relation to its
Second Tier Data Collection System as the Settlement
System Administrator may reasonably require in order
for it to comply with its obligations under Clause
29.2;
(b) implement all directions and instructions in relation
to its Second Tier Data Collection System as shall be
advised to the Settlement System Administrator under
this Agreement by the Executive Committee and with
which the Settlement System Administrator is obliged
to comply;
(c) provide upon request such reports, data and other
information concerning the Second Tier Data
Collection System as the Settlement System
Administrator may reasonably require to comply with
its obligations under this Agreement;
(d) operate the Second Tier Software in accordance with
the Pool Rules and properly employ the Second Tier
Hardware in carrying out its duties and
responsibilities and performing its obligations in
respect of the operation of its Second Tier
Collection System;
(e) provide the Settlement System Administrator with its
best estimates of information within the timescales
provided by this Agreement for the purposes of Clause
29.18;
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(f) generally carry out all such technical operative,
executive, administrative and advisory services in
connection with the operation of its Second Tier Data
Collection System as from time to time may reasonably
be required by the Settlement System Administrator;
(g) subject to the availability in the insurance market
of such insurances, effect and maintain in full force
and effect with first class insurers insurance in
relation to the Second Tier Hardware, the Second Tier
Software, its Second Tier Data Collection System and
its duties as agent hereunder so as to permit the
Settlement System Administrator to comply with the
requirements of Clause 30;
(h) take such other action as may reasonably be required
by the Settlement System Administrator in relation to
its Second Tier Data Collection System in order to
permit the Settlement System Administrator to comply
with its obligations under this Agreement;
(i) not delegate the performance of all or any of its
duties and responsibilities hereunder to agents or
other contractors without the prior written consent
of the Settlement System Administrator; and
(j) reimburse the Settlement System Administrator any
costs, losses or expenses suffered by the Settlement
System Administrator (which are not recoverable under
the Accounting Procedure) due to claims made against
the Settlement System Administrator to the extent the
same are due to any breach by such Second Tier Agent
of its obligations under this Clause 60.
60.16.14 (i) Where at any time there is any material inconsistency
between the Second Tier Software, the written
procedures used by the relevant Second Tier Agent in
connection with the operation of the Second Tier Data
Collection System (the "Second Tier Operational
Procedures") and the Second Tier Specification such
Second Tier Agent shall promptly correct the same (so
as to ensure that the Second Tier Software and the
Second Tier Operational Procedures are consistent in
all material respects with the Second Tier
Specification) and may
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charge or recharge the reasonable costs of correction
to the Settlement System Administrator.
(ii) Each Second Tier Agent undertakes to the Settlement
System Administrator promptly and properly to input
data and other information as it may receive pursuant
to the terms of this appointment into its Second Tier
Computer Systems. Each Second Tier Agent shall review
and validate data and other information in accordance
with the relevant Agreed Procedures to establish the
completeness thereof and to identify any
inconsistencies therein.
60.16.15 Each Second Tier Agent hereby acknowledges and agrees that the
Settlement System Administrator is required pursuant to
Clauses 68 and 69 to keep certain information confidential and
hereby undertakes to the Settlement System Administrator not
to disclose information obtained by the Second Tier Agent in
such capacity so as to cause a breach by the Settlement System
Administrator of its obligations pursuant to Clauses 68 or 69.
Each Second Tier Agent shall reimburse the Settlement System
Administrator the costs of any breach of such confidentiality
obligations by the Settlement System Administrator caused by
such Second Tier Agent.
60.16.16 Upon the removal or resignation of any Second Tier Agent, the
retiring or removed Second Tier Agent shall make over to the
Settlement System Administrator or its nominee all such
records, manuals and data and other information in the
ownership or under the control of the Second Tier Agent and
relating to the operation, and necessary for the proper
functioning, of the Second Tier Data Collection System.
60.16.17 Upon the removal or resignation of any Second Tier Agent, all
Second Tier Agents as at the Effective Date shall, if
requested by the Settlement System Administrator, grant a
license of the Second Tier Software to the Settlement System
Administrator or to such of its agents as the Settlement
System Administrator may direct upon terms which are
reasonable in all the circumstances and shall use all
reasonable endeavors to make available to the Settlement
System Administrator or any such agent any license or other
agreement to use or maintain the Second Tier Software where
necessary for the proper functioning of the Second Tier Data
Collection System. Any
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failure to agree such terms shall be referred to arbitration
pursuant to the provisions of Clause 83.
60.16.18 Following the FMS Date, the Settlement System Administrator
may direct that some or all of the Metering Systems referred
to in Clause 60.16.1 which, as at the Effective Date, provide
data and information directly to the Settlement System
Administrator shall thenceforth provide data to a specified
Second Tier Agent or Second Tier Agents (if any).
60.16.19 Each Second Tier Agent shall be entitled to recover from the
Settlement System Administrator all costs properly incurred in
acting as Second Tier Agent in accordance with this Clause
60.16. In addition, each Second Tier Agent may recover a
reasonable annual management agency fee as may be agreed
between it and the Settlement System Administrator (and, in
default of agreement, the dispute shall be referred to
arbitration in accordance with Clause 83). During the first
four years of its appointment each Second Tier Agent shall
recover its capital expenditure properly incurred for the
purposes of its Second Tier Data Collection System spread
equally over such four year period at a real discount rate of
8 percent. Each Second Tier Agent shall recover the costs to
which it is entitled under this Clause 60.16.19 from the
Settlement System Administrator on a monthly basis.
60.16.20 Upon the resignation or removal of any Second Tier Agent, the
relevant Second Tier Agent shall be entitled to recover from
the Settlement System Administrator such costs as are detailed
in Clause 60.16.19 and which that Second Tier Agent has not
recovered prior to the date of such resignation or removal.
The costs which such Second Tier Agent is entitled to recover
shall be any accrued management agency fee referred to in
Clause 60.16.19 together with the net book value of the
capital assets or parts of assets the subject of the capital
expenditure referred to in Clause 60.16.19 (which net book
value shall not be written up without the consent of the
Executive Committee, such consent not be to unreasonably
withheld or delayed). Such Second Tier Agent shall make a
balancing payment to the Settlement System Administrator in an
amount equal to the net realizable market value of such
capital assets or parts of assets at the date of the
resignation or the removal of the Second Tier Agent. The costs
to or receipts by the Settlement System Administrator as a
result of
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such resignation or removal shall be charged or credited to
Pool Members which are Registrants of Metering Systems at
Second Tier Sites as appropriate. Any dispute relating to the
amount of any payment to be made pursuant to this Clause
60.16.20 shall be referred to arbitration pursuant to the
provisions of Clause 83.
60.17 Appointment of Second Tier Agents by Settlement System Administrator
with effect from 31st March 1994:
60.17.1 if, for the purposes of Clause 60.15, the Settlement System
Administrator appoints whether in addition to or substitution
for those agents appointed pursuant to Clause 60.16 one or
more agents for the purpose of carrying out the obligations of
the Settlement System Administrator under or in connection
with this Part XV or Schedule 21 in relation to Metering
Systems at or referable to points of connection relating to
Second Tier Customers as the Settlement System Administrator
may direct, then the provisions of Clauses 60.17.1 to 60.17.10
and Clause 60.18 shall, inter alia, apply to such
arrangements.
60.17.2 The Settlement System Administrator shall, prior to appointing
any Second Tier Agent pursuant to Clause 60.17.1, consult with
the Executive Committee as to the appropriateness of the
appointment of such Second Tier Agent and the terms upon
which, if appropriate, such agent is to be appointed and shall
have due regard to the wishes expressed pursuant to this
Clause 60.17.2 by the Executive Committee.
60.17.3 The Settlement System Administrator may require the Pool
Auditor to carry out audits, reviews, tests or checks in
relation to each or any Second Tier Agent as the Settlement
System Administrator may from time to time reasonably require.
No more than two audits, reviews, tests or checks may be made
by the Pool Auditor in any one Accounting Period.
60.17.4 In instructing the Pool Auditor pursuant to Clause 60.17.3 the
Settlement System Administrator may require the Pool Auditor:
(a) forthwith to report any material concerns with
respect to matters the subject of the relevant audit,
review, test or check; or
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(b) make such recommendations as to changes in the
procedures, controls and/or audit coverage of the
agency business as the Pool Auditor considers
appropriate.
60.17.5 The Settlement System Administrator shall use reasonable
endeavors to procure that each Second Tier Agent shall permit
the Pool Auditor such access to its agency operations and all
records, data and information held by the Second Tier Agent in
the conduct of such agency operations as the Pool Auditor may
reasonably require and shall make available members of its
staff to explain such operations and such other issues as the
Pool Auditor considers relevant.
60.17.6 The Pool Auditor shall report to the Settlement System
Administrator and a copy of any report by the Pool Auditor
relating to any audit, review, test or check made pursuant to
Clause 60.17.3 shall be provided to the Settlement System
Administrator and to the Executive Committee.
60.17.7 The costs of any audit, test, review or check pursuant to
Clause 60.17.3 shall be borne by the Settlement System
Administrator which may recover the same through the
Accounting Procedure.
60.17.8 The Settlement System Administrator shall use reasonable
endeavors to procure that each Second Tier Agent shall
promptly and properly input data and other information as it
may receive pursuant to the terms of its appointment into its
Second Tier Computer Systems and shall review and validate
data and other information in accordance with the relevant
Agreed Procedures to establish the completeness thereof and to
identify any inconsistencies therein.
60.17.9 The Settlement System Administrator shall use reasonable
endeavors to procure that each Second Tier Agent shall keep
secure and confidential and not disclose, during the period of
its appointment or following its resignation or removal,
information, data and documentation obtained by the Second
Tier Agent in such capacity as to cause a breach by the
Settlement System Administrator of its obligations pursuant to
Clauses 68 or 69 of this Agreement.
60.17.10 The Settlement System Administrator shall use reasonable
endeavors to procure that upon the reasonable request of the
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Settlement System Administrator and in any event upon the
removal or resignation of any Second Tier Agent, such Second
Tier Agent shall make over to the Settlement System
Administrator or its nominee all such records, manuals and
data and other information in the ownership or under the
control of the Second Tier Agent and relating to the
operation, and necessary for the proper functioning, of the
Second Tier Data Collection System.
60.18 Review:
(a) as soon as practicable after the third anniversary of the date
of this Agreement the Executive Committee, in consultation
with the Settlement System Administrator and the Director,
shall carry out a full review of the Second Tier Data
Collection System and, in consultation with the Director,
shall seek to agree with the Settlement System Administrator
(the agreement of the Settlement System Administrator not to
be unreasonably withheld or delayed) the manner by which the
costs of the Second Tier Data Collection System should be
recovered, in the Accounting Periods commencing on or after
1st April, 1994.
(b) if, and to the extent, deemed necessary by the Executive
Committee in consultation with the Settlement System
Administrator and the Director, the Executive Committee shall
conduct a further review of the Second Tier Data Collection
System and, in consultation with the Director, shall seek to
agree with the Settlement System Administrator (the agreement
of the Settlement System Administrator not to be unreasonably
withheld or delayed), the manner by which the Second Tier Data
Collection System should operate, and by which the costs of
the same should be recovered, in the Accounting Periods
commencing on or after 1st April, 1996 such review to commence
in due time to enable implementation of any changes to the
Second Tier Data Collection System on that date.
(c) The Executive Committee, in consultation with the Settlement
System Administrator and the Director, shall carry out a
further full review of the Second Tier Data Collection System
and, in consultation with the Director, shall seek to agree
with the Settlement system Administrator (the agreement of the
Settlement System Administrator not to be unreasonably
withheld or delayed), the manner by which the Second Tier Data
Collection System should operate, and by which the costs of
the same should be recovered, in the Accounting Periods
commencing on or after 1st April, 1998 such review to commence
in due time to
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enable implementation of any changes to the Second Tier Data
Collection System on that date.
(d) In the event of an agreement within (a), () or, as the case
may be, (c) above, the provisions of this Agreement relating
to the Second Tier Data Collection System shall be amended
accordingly and, in the event of any failure to agree, the
matter shall be referred to arbitration pursuant to the
provisions of Clause 83. If such agreement has not been
reached or a determination has not been made or a settlement
not been reached under any such arbitration prior to:
(i) in the case of (a) above, the fourth anniversary of
the date of this Agreement;
(ii) in the case of (b) above (where applicable) by 1st
April, 1996; and
(iii) in the case of (c) above by 1st April, 1998,
the Settlement System Administrator shall, between
such date and the date on which agreement is reached
or (if applicable) a determination or settlement
under such arbitration is made or reached, recover
the costs, expenses and charges of the Second Tier
Data Collection System in accordance with the
provisions of Section 1.3.4 of Part D of Schedule 4.
60.19 Software for FMS:
The Settlement System Administrator shall develop and implement
appropriate computer software for the purposes of collecting and
aggregating data following the FMS Date.
60.20 Second Tier Unmetered Supplies:
60.20.1 Notwithstanding any of the other provisions of this Agreement,
including Clause 60 (other than the provisions of this Clause
60.20) and Schedule 21, the provisions of this Clause 60.20
and any Second Tier Unmetered Supplies Procedures shall, to
the extent they are supplemental to or conflict with any other
provisions of this Agreement, govern the rights and
obligations of the Parties (including each Operator and each
Meter Operator Party) in relation to Second Tier Unmetered
Supplies.
60.20.2 Neither this Clause 60.20 (save for the requirements set out
in this Clause 60.20.2 for the bringing into effect of this
Clause
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60.20) nor the Second Tier Unmetered Supplies Procedures nor
any amendment, variation or replacement of either of them may
become effective:
(i) unless and until the Chief Executive shall have given
each Public Electricity Supplier, each Second Tier
Supplier, the Director (who may consult with such
persons as he considers appropriate) and the
Settlement System Administrator not less than 14
days' notice that this Clause 60.20 (or any
amendment, variation or replacement thereof) and/or
the Second Tier Unmetered Supplies Procedures are to
become effective, stating the date on which the same
are proposed to become effective and having attached
thereto a coy of any proposed Second Tier Unmetered
Supplies Procedures; and
(ii) so long as none of the recipients of the notice
referred to in Clause 60.20.2(i) shall have given a
counternotice to the Chief Executive before the date
on which this Clause 60.20 and/or the Second Tier
Unmetered Supplies Procedures are to become effective
stating, on reasonable grounds, an objection to this
Clause 60.20 or the Second Tier Unmetered Supplies
Procedures becoming effective on the proposed date or
at all,
in the event that a counternotice shall have been
given in accordance with Clause 60.20.2(ii) the Chief
Executive shall, as soon as is reasonably
practicable, notify the persons referred to in Clause
60.20.2(i) of that fact.
60.20.3 Nothing in this Clause 60.20 shall permit the adoption, in the
Second Tier Unmetered Supplies Procedures or otherwise, of
standards of accuracy of data for Second Tier Unmetered
Supplies different from those which apply generally under this
Agreement other than during the transitional period expiring
on 31st March, 1995.
60.20.4 Except where the context otherwise requires, in this Clause
60.20:
"Second Tier Unmetered Supplies" means unmetered street
lighting and related supplies of a type which as at the date
this Clause 60.20 becomes effective are permitted to be made
by a Second Tier Supplier;
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"Second Tier Unmetered Supplies Procedures" means the
procedures in respect of Second Tier Unmetered Supplies in the
form agreed between all Public Electricity Suppliers and the
Director (who may consult with such persons as he considers
appropriate) as the same may be amended, varied or replaced
from time to time with the agreement of such persons.
60.20.5 The Executive Committee may determine that Agreed Procedures
are necessary to implement this Clause 60.20 or the Second
Tier Unmetered Supplies Procedures and in such case nothing in
this Clause 60.20 or the Second Tier Unmetered Supplies
Procedures shall prejudice such determination or the adoption
or implementation of such Agreed Procedures, provided that any
such Agreed Procedure shall not include matters which would
occur on the Second Tier Customer's side of the outstation.
60.20.6 The Parties accept that modifications to the Settlement System
Administrator's rights and obligations under this Agreement
may be required under the Second Tier Unmetered Supplies
Procedures or otherwise before this Clause 60.20 can become
effective.
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PART XVI
POOL CIVIL EMERGENCIES
61.1 DEFINITIONS
Definitions: in this Part XVI:
"Civil Emergency Pool Credit Facility" shall mean a credit facility to
be arranged by and for the use of Supplies upon terms and conditions to
be set out in Schedule 11 to this Agreement:
"Pool Civil Emergency" shall have the meaning ascribed to it in Clause
61.2.1;
"Pool Civil Emergency Period" shall mean a period initiated by the
Executive Committee after the occurrence of a Pool Civil Emergency
Event which shall commence, and terminate, in accordance with this
Part;
"Pool Rules Civil Emergency Condition" shall mean, in respect of any
Schedule Day, that both:
(i) UMT 0.1 (as determined in accordance with paragraph 32.1(a) of
Schedule 9); and
(ii) RAPT 3 * CAPT (as determined in accordance with paragraph
32.1(b) of Schedule 9);
"Pool Rules Civil Emergency Period" shall mean a period which
commences, and terminates, and in which Section 32.2 of Schedule 9 is
in force, in accordance with this Part; and
"Relevant Time" in relation to any event, means the time which falls
two hours prior to the first time at which an Availability Declaration
must be submitted pursuant to Section 6.1 of Schedule 9 on the first
Settlement Day which commences at least 24 hours after the occurrence
of such event.
61.2 APPLICATION AND STATEMENT OF INTENT
61.2.1 General Statement of Intended Application: it is intended that
this Part shall apply where there is in existence an event, or
series of events which does or do not generally occur as part
of normal market operating conditions and which affect(s) the
operation of the market for the generation, transmission
and/or supply of electricity in England and
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Wales and which, as a result, cause(s) or is or are likely to
cause materially changed pool prices to arise and continue (a
"Pool Civil Emergency"). The following conditions set out in
this Part are intended to reflect the circumstances in which
it is envisaged that it would likely be the case that such
event or events shall have so occurred.
61.2.2 Interrelationship with Act: the Act and the Energy Act 1976
contain legislation conferring wide powers upon the Secretary
of State to regulate the generation, transmission and/or
supply of electricity in an emergency. It is intended that the
provisions of this Part shall coexist in application with such
legislation.
61.3 CONDITIONS FOR EXISTENCE OF A POOL CIVIL EMERGENCY
61.3.1 Determination of a Pool Civil Emergency: a Pool Civil
Emergency shall exist upon any resolution to that effect
passed by the Executive Committee in accordance with the
provisions of this Part whereafter, subject to the following
provisions of this Part, a Pool Civil Emergency Period shall
commence.
61.3.2 Conditions: the Executive Committee shall resolve that a Pool
Civil Emergency exists only if it has formed the opinion that
a Pool Civil Emergency Event has occurred. A Pool Civil
Emergency Event shall occur whenever:
(a) materially changed pool prices exist or are likely to
exist and, in either case, are likely to continue;
and
(b) such materially changed pool prices are the direct
result of any one or more of the following:
(i) a major failure affecting the operation of
the NGC Transmission System;
(ii) a major operational failure of one or more
Distribution Systems; or
(iii) an inability of any Generator to generate or
the loss of generating plant availability of
any Generator; and
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(c) the event within (i), (ii), or as the case may be,
(iii) of (b) above has itself resulted from any one
or more of the following:
(i) any action taken by or on behalf of Her
Majesty's Government pursuant to and in
accordance with the emergency provisions set
out in Sections 1 to 4 of the Energy Act
1976 or Section 96 of the Act;
(ii) any act, order, regulation, direction or
directive, legislation or restraint of
Parliament or any governmental authority, or
agent or instrument of the foregoing;
(iii) any act of public enemy or terrorist, act of
war or hostilities (whether declared or
undeclared), threat of war or hostilities,
blockade, revolution, riot, insurrection,
civil commotion or unrest or demonstration;
(iv) any strike, lock-out or other industrial
action;
(v) any act of sabotage or vandalism;
(vi) lightning, earthquake, hurricane, storm,
fire, flood, drought, accumulation of snow
or ice, or any other extreme weather or
environmental condition; or
(vii) any other event provided that in such a case
any resolution of the Executive Committee
determining that a Pool Civil Emergency
exists must be carried by a majority of not
less than 75 percent of the total votes of
all Committee Members entitled to vote at a
meeting of the Executive Committee whether
or not present.
61.4 CONDITIONS FOR EXISTENCE OF A POOL RULES CIVIL EMERGENCY PERIOD
Pool Rules Civil Emergency Period: a Pool Rules Civil Emergency Period
shall, subject to the following provisions of this Part, commence as
part of a Pool Civil Emergency Period whenever (i) a Pool Civil
Emergency Period is
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current and (ii) the Pool Rules Civil Emergency Condition is satisfied
and (iii) Section 28 of Schedule 9 hereof is not in effect.
61.5 PROCEDURE FOR INITIATION OF A POOL CIVIL EMERGENCY PERIOD AND
COMMENCEMENT OF A POOL RULES CIVIL EMERGENCY PERIOD
61.5.1 Right to requisition:
(a) Each Pool Member, the Settlement System
Administrator, the Grid Operator, the Director and
the Secretary of State shall have the several right
to have convened a special meeting of the Executive
Committee for it to consider whether a Pool Civil
Emergency exists (and accordingly whether a Pool
Civil Emergency Period is to commence).
(b) To requisition a meeting of the Executive Committee
the relevant Party, the Director or, as the case may
be, the Secretary of State shall notify in writing:
(i) in the case of a Pool Member, its appointed
Committee Member, the Pool Chairman or the
Chief Executive; and
(ii) in the case of the Settlement System
Administrator, the Grid Operator, the
Director or the Secretary of State, the Pool
Chairman or the Chief Executive,
that it wishes such a meeting to be convened giving
as full an explanation as it is able of the event or
events which it believes constitute(s) the relevant
Pool Civil Emergency Event.
(c) Upon receipt of a written requisition in accordance
with (b), the relevant Committee Member, the Pool
Chairman or, as the case may be, the Chief Executive
shall convene a special meeting of the Executive
Committee in accordance with Clause 18 to take place
within 48 hours after receipt of such requisition,
and the provisions relating to notice periods in
Clause 18 shall be varied for the purposes of this
Part accordingly.
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61.5.2 Initiation by the Executive Committee:
Pool Civil Emergency Period: if the Executive Committee shall
resolve that a Pool Civil Emergency exists then, subject to
the right of veto in Clause 61.5.7 being exercised, a Pool
Civil Emergency Period shall commence upon the expiry of the
time limit for the exercise of such veto and shall continue
until terminated in accordance with Clause 61.7.
61.5.3 Pool Rules Civil Emergency Period:
(a) Commencement: a Pool Rules Civil Emergency Period
shall, subject to the right of veto in (b) below and
in Clause 61.5.7 being exercised, commence in
accordance with Clause 61.4 at the expiry of the
period for the exercise of the Executive Committee's
veto in (b) below and shall continue until terminated
in accordance with the provisions of Clause 61.7.
(b) Executive Committee's Right of Veto: the Executive
Committee shall have the right to veto the
commencement of a Pool Rules Civil Emergency Period
by the passing of a resolution to that effect carried
by a majority of not less than 65 percent of the
total votes of all Committee Members entitled to vote
at such meeting whether or not present, provided that
the Executive Committee shall only be able to
exercise such right of veto prior to the Relevant
Time relative to the time at which the Secretary
receives a notification given by the Settlement
System Administrator pursuant to Clause 61.5.4.
(c) Effect of Veto: where the Executive Committee
exercises its right of veto in accordance with (b)
above, the relevant Pool Rules Civil Emergency Period
shall not commence.
61.5.4 Settlement System Administrator's Notification: the Settlement
System Administrator shall notify forthwith by telephone (and
confirm in writing as soon as is practicable thereafter to)
the Chief Executive, Pool Chairman, Secretary, Director and
Secretary of State whenever it becomes aware that the Pool
Rules Civil Emergency Condition is satisfied.
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61.5.5 Reasons: the Executive Committee shall give reasons for the
passing of any resolution pursuant to this Clause or the
exercising of any right of veto conferred on it by this
Clause, to be notified to the relevant parties by the
Secretary in accordance with Clause 61.5.6.
61.5.6 Notification (1): the Secretary shall notify in accordance
with Clause 75 all Parties, the Director and the Secretary of
State:
(a) of the result of any vote taken on a resolution of
the Executive Committee pursuant to this Part, giving
reasons in outline explaining such result,
immediately following the conclusion of the meeting
at which the vote was taken; such notification may be
given by telephone or by facsimile transmission. An
outline statement of reasons shall be circulated by
the Secretary to the same persons as soon as is
reasonably practicable thereafter; and
(b) where there has been no exercise within the time
limit provided therefor of a right of veto pursuant
to either Clause 61.5.3 by the Executive Committee or
Clause 61.5.7 by the Director or the Secretary of
State, notify all Parties, the Director and the
Secretary of State immediately of the commencement of
a Pool Rules Civil Emergency Period.
61.5.7 Right of Veto:
(a) Right of Veto: the Director and the Secretary of
State shall each have a several right to veto the
commencement of any Pool Civil Emergency Period or,
as the case may be, Pool Rules Civil Emergency Period
by giving written notice of an exercise of such right
of veto addressed to the Executive Committee, the
Pool Chairman and the Chief Executive within the time
periods specified below. To be validly given, such
notice shall specify in sufficient detail (in the
case of a Pool Civil Emergency Period) the relevant
resolution of the Executive Committee or (in the case
of a Pool Rules Civil Emergency Period) the relevant
notification of the Settlement System Administrator,
in respect of which the right of veto is being
exercised.
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(b) Effect of veto: where the Director or the Secretary
of State exercises his veto in accordance with this
Clause 61.5.7, the relevant Pool Civil Emergency
Period or, as the case may be, Pool Rules Civil
Emergency Period shall not commence.
(c) Time Limits: any veto given by, or on behalf of,
either of the Director or Secretary of State must be
received by or on behalf of the Executive Committee:
(i) in respect of a resolution initiating a Pool
Civil Emergency Period, before the expiry of
a period of 48 hours commencing upon the
receipt by the Director or, as appropriate,
the Secretary of State, of the notification
of the result of the vote upon the relevant
resolution; or
(ii) in the case of a veto in respect of the
commencement of a Pool Rules Civil Emergency
Period, before the expiry of the time for
the exercise of the Executive Committee's
right of veto pursuant to 61.5.3.
For the avoidance of doubt, such veto may be given at any time
before the commencement of such period.
(d) Reasons: the Director shall upon exercising a right
of veto conferred by this Clause give reasons to the
Executive Committee supporting the exercise of that
right and the Parties would expect the Secretary of
State also to give reasons upon any exercise of his
right of veto conferred by this Clause.
(e) Notification (2): upon receipt by or on behalf of the
Executive Committee of a notice of exercise of veto
pursuant to this Clause, the Secretary, on behalf of
the Executive Committee, shall as soon as is possible
thereafter give notice in accordance with Clause 75
of the exercise of such veto.
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61.6 EFFECT OF POOL AND POOL RULES CIVIL EMERGENCY PERIODS
61.6.1 Effect of a Pool Civil Emergency Period:
(a) Upon a determination that a Pool Civil Emergency
exists in accordance with 61.2.1 above:
(i) Suppliers shall be entitled during the Pool
Civil Emergency Period, for the purposes of
payments to be made by them pursuant to this
Agreement during such period, to utilize the
Civil Emergency Pool Credit Facility; and
(ii) Section 32.1 and 32.2 of the Pool Rules
shall enter into force and effect.
(b) The Pool Members expressly acknowledge the fact that
during the currency of any Pool Civil Emergency
Period Suppliers shall be entitled to operate credit
facilities in accordance with and subject to any
conditions of their respective Licenses (where
relevant).
61.6.2 Effect of a Pool Rules Civil Emergency Period: upon the
commencement of a Pool Rules Civil Emergency Period in
accordance with Clause 61.5.3(a), the provisions of Section
32.2 of Schedule 9 shall enter into full force and effect and
shall continue in full force and effect until such time as
that Pool Rules Civil Emergency Period is terminated in
accordance with Clause 61.7.
61.7 TERMINATION OF A POOL CIVIL EMERGENCY PERIOD
61.7.1 Director's determination of end of Pool Civil Emergency
Period: a Pool Civil Emergency Period and, where applicable,
any concurrent Pool Rules Civil Emergency Period, shall
terminate upon any determination of the Director to that
effect.
61.7.2 Consultation: the Director shall only determine that a Pool
Civil Emergency Period and, where applicable, any concurrent
Pool Rules Civil Emergency Period shall terminate after having
fully consulted and taken into consideration the views of all
relevant Parties and after having obtained the approval of the
Secretary of State.
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61.7.3 Notification (3): the Director shall notify in writing the
Secretary, the Pool Chairman and the Chief Executive as soon
as is possible of any determination made pursuant to this
Clause 61.7 giving reasons for any determination so made and
the Secretary shall immediately notify all Parties of such
determination upon receipt.
61.7.4 Confirmation: the Director shall confirm to the Executive
Committee upon any determination pursuant to this Clause 61.7
that a Pool Civil Emergency Period shall terminate, that he
has taken full account of all relevant matters, the views of
such relevant Parties and has obtained the approval of the
Secretary of State.
61.7.5 Termination of a Pool Rules Civil Emergency Period within a
continuing Pool Civil Emergency Period:
(a) The Executive Committee may, by resolution carried by
a majority of not less than 65 percent of the total
votes of all Committee Members whether or not
present, terminate any current Pool Rules Civil
Emergency Period whenever it considers, in its
absolute discretion, that the continued application
of the modified Pool Rules as set out in Section 32.3
of Schedule 9 to be, in the circumstances, no longer
appropriate.
(b) The relevant Pool Rules Civil Emergency Period shall
terminate following the passing of that resolution at
the Relevant Time relative to the time at which that
resolution is passed.
(c) The Secretary, on behalf of the Executive Committee,
shall as soon as is possible after the passing of
such resolution give notice to all Parties, the
Director and the Secretary of State in accordance
with Clause 75 that the relevant Pool Rules Civil
Emergency Period is to so terminate.
(d) Whenever Section 28 of Schedule 9 enters into force
and effect, in accordance with this Agreement, any
Pool Rules Civil Emergency Period then current shall
terminate at the time that such Section so enters
into force and effect.
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61.7.6 Effect of Termination:
(a) Pool Civil Emergency Period: upon the termination of
any Pool Civil Emergency Period the Civil Emergency
Pool Credit Facility shall forthwith cease to be
utilized and, where there is a concurrent Pool Rules
Civil Emergency Period, the provisions of Section 32
of Schedule 9, shall forthwith cease to be effective.
(b) Pool Rules Civil Emergency Period within a current
and continuing Pool Civil Emergency Period: upon the
termination of any Pool Rules Civil Emergency Period
within a current and continuing Pool Civil Emergency
Period the provisions of Section 32.3 of Schedule 9
shall forthwith cease to be effective.
61.8 REFERENCE TO DIRECTOR
61.8.1 Reference to the Director: if any dispute shall arise between
the Executive Committee and any Pool Member:
(a) as to whether the Executive Committee ought to have
concluded that the conditions for the initiation of a
Pool Civil Emergency Period in accordance with Clause
61.3.2 were satisfied either as a matter of fact or
such that there was a Pool Civil Emergency within the
spirit of the statement of intent set out at Clause
61.2.1; or
(b) as to whether the Executive Committee ought or ought
not to have exercised its right of veto pursuant to
Clause 61.5.3(b) in respect of the commencement of a
Pool Rules Civil Emergency Period; or
(c) as to whether a Pool Rules Civil Emergency Period
within a current and continuing Pool Civil Emergency
Period ought or ought not to have been terminated by
the Executive Committee in accordance with Clause
61.7.5 above,
the dispute may be referred by notice of the dispute given in
writing by the relevant Pool Member to the Director and as if
such Pool Member were exercising a Dissentient Pool Member's
right of appeal pursuant to Clause 13.5. The Director shall
determine the matter within 60 days of receipt of
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such referral. Notice of any such referral shall be given to
the Executive Committee at the same time that the dispute is
so referred.
61.8.2 Content and Effect of Determination:
(a) If the Director shall determine in accordance with
61.8.1 that a Pool Civil Emergency Period or Pool
Rules Civil Emergency Period should commence, or a s
the case may be, resume, then:-
(i) in the case of a Pool Civil Emergency
Period, upon such determination having been
notified to the Secretary in accordance with
61.8.3, a Pool Civil Emergency Period shall
commence or, as the case may be, resume; and
(ii) in the case of a Pool Civil Emergency
Period, such period shall commence at the
Relevant Time relative to the time at which
such determination has been notified to the
Secretary in accordance with 61.8.3; or
(b) If the Director shall determine in accordance with
61.8.1 that a continuing Pool Civil Emergency Period
or Pool Rules Civil Emergency Period should
terminate, then:-
(i) in the case of a Pool Civil Emergency
Period, upon such determination having been
notified to the Secretary in accordance with
61.8.3, the then current Pool Civil
Emergency Period shall terminate; and
(ii) in the case of a Pool Rules Civil Emergency
Period, the then current such period shall
terminate at the Relevant Time relative to
the time at which such determination has
been notified to the Secretary in accordance
with 61.8.3.
61.8.3 Notification (4): the Director shall notify in writing the
Secretary, the Pool Chairman and the Chief Executive as soon
as is possible of any determination made pursuant to this
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Clause 61.8 giving reasons for any determination so made and
the Secretary shall immediately notify all Parties of such
determination upon receipt.
61.9 MODIFICATION OF PROCEDURES
Modification of Procedures: neither the procedures for a poll set out
in Clause 22 nor the provisions of Clause 13.4 shall apply to any
resolution of the Executive Committee referred to in this Part XVI, and
there shall be no right of referral of the matter the subject of such
resolution to the Pool Members in general meeting.
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PART XVII
TRADING SITE
62. TRADING SITE
Trading Site: the provisions of Schedule 17 shall have effect.
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PART XVII
THE POOL FUNDS ADMINISTRATOR, BILLING AND SETTLEMENT
63. THE POOL FUNDS ADMINISTRATOR
63.1 Responsibilities: the Pool Funds Administrator shall have the following
duties, responsibilities and obligations, namely:-
63.1.1 to comply with all the obligations set out in this Agreement
and the Agreed Procedures in respect of the establishment,
maintenance and operation of the Funds Transfer System and to
carry out its obligations under the Funds Transfer Agreement;
63.1.2 to keep under review and to make recommendations to the
Executive Committee on its own initiative or whenever
requested by the Executive Committee concerning:-
(a) any change to the Funds Transfer System (or any part
or aspect thereof);
(b) the appointment of a new Pool Banker;
(c) any change to Schedule 11 or 15; and
(d) any change to the Funds Transfer Agreement,
which the Pool Funds Administrator may consider desirable. In
making such recommendations, the Pool Funds Administrator
shall have regard to, and shall provide details of, the cost
of implementing such changes (which cost would be charged or
recharged to Pool Members) and shall recommend whether, in
light of those costs, certain parties or categories of party
to the Agreement should be exempted from such changes or
whether special provisions for such parties or categories of
party should be adopted;
63.1.3 (a) to maintain such records, data and other information
as the Pool Auditor may, after consultation with the
Executive Committee, from time to time by notice in
writing and in reasonable detail to the Pool Funds
Administrator, require for the purposes of Part IX,or
as may otherwise be reasonably necessary to enable
the Pool Funds Administrator to comply promptly and
fully with all its obligations under this Agreement,
the Agreed Procedures or the Funds Transfer
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Agreement, in either such case in such form as the
Pool Auditor may from time to time by notice to the
Pool Funds Administrator require or (in the absence
of such notification) in such form as a reasonably
prudent operator of the Funds Transfer System would
adopt; and
(b) to maintain such records, data and other information
as H.M. Customs and Excise may from time to time
require of the Pool Funds Administrator;
63.1.4 to retain in machine readable form or hard copy form for a
period of not less than eight years (or such longer period as
any applicable law may require) and in any event in hard copy
form (which for these purposes shall include microfiche) for a
period of not less than one year copies of the records, data
and other information received and processed by the Pool Funds
Administrator in connection with its performance of the
Services including:-
(a) (to the extent relevant for the performance of the
Services) Settlement Runs and Settlement Re-runs;
(b) Advice Notes and Confirmation Notices;
(c) bank statements in respect of the Pool Accounts;
(d) Pool Ledger Accounts;
(e) Payments Calendars;
(f) a record of all Default Interest Rates and Reserve
Interest Rates calculated from time to time
(including the period to which each interest rate
relates);
(g) details of Security Cover supplied and to be supplied
by each Supplier; and
(h) correspondence between the Pool Funds Administrator,
on the one hand, and the Executive Committee, the
Pool Chairman, the Chief Executive, any Pool Member,
the Pool Banker, any Collection Bank, the Settlement
System Administrator, the Ancillary Services
Provider, the Director, the Pool Auditor, the Grid
Operator and any other relevant bank of institution,
on the other hand;
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63.1.5 to provide to the Executive Committee and the Chief Executive
upon request records, data and other information concerning
the Funds Transfer System (and any part thereof) (unless
disclosure would breach any duty of confidentiality imposed on
the Pool Funds Administrator) and which the Pool Funds
Administrator is required to retain under paragraph 63.1.3 or
63.1.4 (and each of the Parties agrees to the release of all
such records, data and other information in the circumstances
and manner described in this paragraph 63.1.5);
63.1.6 to provide to the Pool Auditor upon request records, data and
other information concerning the Funds Transfer System (and
any part thereof) and which the Pool Funds Administrator is
required to maintain and retain under paragraph 63.1.3 or
63.1.4 (and each of the Parties agrees to the release of all
such records, data and other information in the circumstances
and manner described in this paragraph 63.1.6);
63.1.7 subject to the provisions of Part XX, to provide a certified
copy of such records, data and other information concerning
the Funds Transfer System (and any part thereof) and amounts
payable by or to any Pool Member or the Ancillary Services
Provider as the relevant Pool Member or (as the case may be)
the Ancillary Services Provider may reasonably request for the
purpose of establishing the amounts which are owed to or by
such Pool Member or the Ancillary Services Provider in
accordance with this Agreement, and in any event such
information as any Pool Member or the Ancillary Services
Provider may request from the Pool Funds Administrator in
order to establish or prove a claim to any amounts due or
claimed to be due. The Pool Funds Administrator shall
forthwith upon such request provide such information upon
delivery (if so required by the Pool Funds Administrator) of a
certificate from the counsel of such Pool Member or the
Ancillary Services Provider certifying that, in such counsel's
opinion, such information is required for such purpose;
63.1.8 to issue Advice Notes and Confirmation Notices within the
times and containing the details required by Schedule 11;
63.1.9 upon request, promptly to supply on its own behalf and on
behalf of Pool Members and the Ancillary Services Provider
(with a copy to the Pool Member concerned and the Ancillary
Services Provider) any information (including copies of
documents) to H.M. Customs and Excise, and to co-operate in
any investigation by H.M. Customs and Excise or H.M. Inspector
of Taxes relating to the Funds Transfer System (or any part or
aspect thereof);
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63.1.10 in respect of each calendar quarter, to issue to all Pool
Members, the Executive Committee, the Chief Executive, the
Settlement System Administrator and the Ancillary Services
Provider no later than the fifth Business Day after each
calendar quarter a statement enabling the identification of
who may constitute Majority Default Calling Creditors during
that calendar quarter (and the Parties hereby agree to such
disclosure being made);
63.1.11 except in respect of moneys received on account of the PFA
Operating Costs, the PFA Handling Charge, the Annual Fee or
Bank Charges in accordance with the accounting procedure set
out in Schedule 15 or the consideration received pursuant to
sub-section 5.1 or 5.2 of that Schedule, to pay all moneys
received by it from a Pool Member or the Ancillary Services
Provider in accordance with Schedule 11 into a pool Account to
be held in trust in accordance with the provisions of Schedule
11; and
63.1.12 to comply with all its other obligations under this Agreement
(including Schedules 11 and 15) and the Agreed Procedures,
and expression defined in Schedules 11 and 15 shall have the same
respective meanings when used in this Clause 63.1.
63.2 Standard of care: in the exercise of its duties and responsibilities
under this Agreement and the agreed Procedures the Pool Funds
Administrator shall exercise that degree of care, diligence, skill and
judgment which would ordinarily be expected of a reasonably prudent
operator of the Funds Transfer System taking into account the
circumstances actually known to the Pool Funds Administrator, its
officers and employees at the relevant time or which ought to have been
known to it or them had it or they made such inquiries as were
reasonable in the circumstances. In particular, but without prejudice
to the generality of the foregoing, in the absence of directions and
instructions given to it by the Executive Committee under this
Agreement and having due regard to the resources available to it, the
Pool Funds Administrator shall at all times conduct itself in a manner
calculated to achieve the principal objects and purpose of this
Agreement set out in Clauses 4.1.2 and 4.1.3.
63.3 UK value added tax indemnity:
63.3.1 Indemnity (1): without prejudice to paragraph 63.3.2 all Pool
Members shall jointly and severally indemnify and keep
indemnified the Pool Funds Administrator, its officers,
employees and agents (and, as between the Pool Members,
according to their respective Contributory Shares at the time
of receipt of the request for indemnification, calculated on
the basis that the points allocated to the Pool Member in
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default are disregarded) against any liability which the Pool
Funds Administrator may incur as a result of the failure of
any Pool Member or the Ancillary Services Provider (as the
case may be) properly to account to H.M. Customs and Excise
for all amounts of United Kingdom Value Added Tax payable or
receivable by it in respect of any supplies of electricity or
Ancillary Services.
63.3.2 Indemnity (2): if any Pool Member or the Ancillary Services
Provider shall fail properly to account for any amount of
United Kingdom Value Added Tax payable or receivable by it,
that person shall indemnify and keep indemnified each Pool
Member (on an after tax basis, but taking account of any tax
relief available to the relevant Pool Member) against any
liability which such Pool Member shall incur pursuant to
paragraph 63.2.1.
63.4 Schedule 15:
63.4.1 subject to the rights of each of the Parties under this
Agreement, all Parties hereby agree promptly to execute and
deliver all agreements and other documentation necessary to
give effect to any act, matter or thing done by the Executive
Committee in accordance with Schedule 15 (including the
removal of the incumbent Pool Funds Administrator and the
appointment of a successor in accordance with the terms
thereof).
63.4.2. Schedule 15 provides that certain matters may be referred by
the Executive Committee to arbitration pursuant to Clause 83.
In making any such reference or in alleging that any such
reference is being made pursuant to Clause 83 the Executive
Committee shall act (and is hereby irrevocably authorized by
each of the Pool Members to act) as the sole and exclusive
representative of all the Pool Members and the Pool Funds
Administrator hereby agrees that the Executive Committee shall
have the authority so to act.
63.4 Schedule 15:
63.4.1 subject to the rights of each of the Parties under this
Agreement, all Parties hereby agree promptly to documentation
necessary to give effect to any act, accordance with Schedule
15 (including the removal of the incumbent Pool Funds
Administrator and the appointment of a successor in accordance
with the terms thereof).
63.4.2 Schedule 15 provides that certain matters may be referred by
the Executive Committee to arbitration pursuant to Clause 83.
In making any such reference or in alleging that any such
reference is being made
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pursuant to Clause 83 the Executive Committee shall act (and
is hereby irrevocably authorized by each of the Pool Member to
act) as the sole and exclusive representative of all the Pool
Members and the Pool Funds Administrator hereby agrees that
the Executive Committee shall have the authority so to act.
64. PROCEDURES MANUAL
64.1 Preparation: within 28 days after the Effective Date (or such longer
period as the Executive Committee may approve) the Pool Funds
Administrator shall prepare, or cause to be prepared, a Procedures
Manual which is shall submit to the Executive Committee for its review.
The Executive Committee shall give its comments on the Procedures
Manual to the Pool Funds Administrator within 28 days after receipt
thereof and the Pool Funds Administrator shall revise, or cause to be
revised, the Procedures Manual to the satisfaction of the Executive
Committee within 21 days after receipt of such comments (or such longer
period as the Executive Committee may approve). Promptly thereafter the
Pool Funds Administrator shall provide the Executive Committee with
sufficient copies of the revised Procedures Manual for distribution by
the Executive Committee to all Parties, the Pool Auditor, the Pool
Banker and the Director.
64.2 Amendments: where from time to time any amendments to the Procedures
Manual are necessary to reflect changes in the systems and/or
procedures associated with the Funds Transfer System, the procedure set
out in Clause 64.1 shall apply mutatis mutandis.
64.3 Costs: the costs of producing, revising and amending the Procedures
Manual shall be borne by the Pool Funds Administrator and recovered by
it in accordance with the provisions of Schedule 11 as part of its
charges.
65. BILLING AND SETTLEMENT
The provisions of Schedule 11 shall have effect.
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PART XIX
DEFAULT, TERM AND TERMINATION
66. DEFAULT
66.1 Default (1): at any time after the occurrence of any of the events
referred to in Clause 66.3.1, 66.3.2 or 66.3.3 and so long as such
event continues unremedies or unwaived by Majority Default Calling
Creditors:-
66.1.1 Majority Default Calling Creditors may, upon reaching a bona
fide conclusion that the reason for the failure by the
Defaulting Pool Member under Clause 66.3.1, 66.3.2 or 66.3.3
is other than administrative or banking error (having taken
into account the representations, if any, of the Defaulting
Pool Member made within 24 hours after request therefor is
made to the Defaulting Pool Member on behalf of the Majority
Default Calling Creditors, which request Majority Default
Calling Creditors shall be obliged to make), by notice to the
Defaulting Pool Member (copied to the Executive Committee and
the Director) declare such even an Event of Default;
66.1.2 at the same time as Majority Default Calling Creditors declare
such an Event of Default or at any time thereafter, Majority
Default Calling Creditors may by notice to the Executive
Committee (copied to the Defaulting Pool Member and the
Director) require the Executive Committee to suspend (which
the Executive Committee shall forthwith do) all voting rights
of the Defaulting Pool Member under this Agreement for a
specified period (being not more than 90 days) and, upon the
Executive Committee giving notice to such effect to the
Defaulting Pool Member (copied to the Director), such voting
rights (but not any other rights or any liabilities or
obligations of the Defaulting Pool Member) shall be suspended
for such period; and
66.1.3 where:-
(a) the Defaulting Pool Member is a Public Electricity
Supplier, no earlier than 28 days after the date of
the notice referred to in Clause 66.1.1.; and
(b) in any other case, at the same time as Majority
Default Calling Creditors declare such an Event of
Default or at any time thereafter,
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Majority Default Calling Creditors may by notice to
Defaulting Pool Member (copied to the Executive
Committee, the Settlement System Administrator, the
Grid Operator, the Pool Funds Administrator the
Ancillary Services Provider and the Director) require
the Defaulting Pool Member to cease to be a Party
with effect from the date of its De-energisation and
until such date all voting rights of the Defaulting
Pool Member under this Agreement (but not any other
rights or any liabilities or obligations of the
Defaulting Pool Member) shall be automatically
suspended.
For the avoidance of doubt, Majority Default Calling Creditors
shall be at liberty to give notice under Clause 66.1.2 and,
upon expiry of the specified period referred to therein and
subject as provided in the foregoing provisions of this Clause
66.1, to give notice under Clause 66.1.3.
66.2 Default (2): at any time after the occurrence of any of the events
referred to in Clause 66.3 (other than (a) any of the events referred
to in Clause 66.3.1, 66.3.2 and 66.3.3 and (b) in the case where the
Defaulting Pool Member is unable to pay its debts as referred to in
Clause 66.3.6(a), unless any of the other events referred to in Clause
66.3 has occurred and is continuing) and so long as such event
continues unremedied or unwaived by the Pool Members in general meeting
the Executive Committee may (and shall if so directed by the Pool
Members in general meeting):-
66.2.1 by notice to the Defaulting Pool Member (copied to the
Director) declare such event and Event of Default and suspend
all voting rights of the Defaulting Pool Member under this
Agreement for a specified period (being not more than 90 days)
whereupon such voting rights (but not any other rights or any
liabilities or obligations of the Defaulting Pool Member)
shall be suspended for such period; and
66.2.2 upon the expiry of such period by notice to the Defaulting
Pool Member (copied to the Settlement System Administrator,
the Grid Operator, the Pool Funds Administrator, the Ancillary
Services Provider and the Director) require the Defaulting
Pool Member to cease to be a party to this Agreement with
effect from the date of its De-energisation and until such
date all voting rights of the Defaulting Pool Member under
this Agreement (but not any other rights or any liabilities or
obligations of the Defaulting Pool Member) shall be
automatically suspended.
66.3 Events of Default: the event referred to in the foregoing provisions of
this Clause 66 are:-
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66.3.1 the Pool Member in question (the "Defaulting Pool Member")
shall fail to provide or maintain or renew in accordance with
Schedule 11 the requisite amount of Security Cover determined
pursuant to that Schedule; or
66.3.2 the Defaulting Pool Member shall fail to pay in the manner
provided in this Agreement any sum payable by it to any Pool
Creditor within three Business Days after its due date; or
66.3.3 the Defaulting Pool Member shall fail to pay in the manner
provided in this Agreement any sum payable by it hereunder to
the Settlement System Administrator or the Pool Funds
Administrator within 28 days after the Settlement System
Administrator or (as the case may be) the Pool Funds
Administrator has given notice to it (copied to the Executive
Committee and the Director) that payment has not been received
and requiring such default to be remedied; or
66.3.4 the Defaulting Pool Member shall fail to pay in the manner
provided in this Agreement any sum payable by it hereunder to
the Executive Committee within 28 days after the Executive
Committee has given notice to it (copied to the Director) that
payment has not been received and requiring such default to be
remedied; or
66.3.5 the Defaulting Pool Member shall fail in any material respect
to perform or comply with any of its other obligations under
this Agreement and such default (if it is capable of remedy)
is not remedied within a reasonable period of time (not
exceeding 90 days) after the Executive Committee has given
notice to the Defaulting Pool Member (copied to the Director)
of the occurrence thereof and requiring the same to be
remedied; or
66.3.6 the Defaulting Pool Member:-
(a) is unable to pay its debts (within the meaning of
section 123(1) or (2) of the Insolvency Act 1986, but
subject as hereinafter provided in this Clause
66.3.5) or if any voluntary agreement is proposed in
relation to it under section 1 of that Act or enters
into any scheme of arrangement (other than for the
purpose of reconstruction or amalgamation upon terms
and within such period as may previously have been
approved in writing by the Executive Committee);
(b) has a receiver (which expression shall include an
administrative receiver within the meaning of section
29 of the
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Insolvency Act 1986) of the whole or any material
part of its assets or undertaking appointed;
(c) has an administration order under section 8 of the
Insolvency Act 1986 made in relation to it;
(d) passes any resolution for winding-up other than a
resolution previously approved in writing by the
Executive Committee; or
(e) becomes subject to an order by the High Court for
winding-up.
For the purposes of paragraph (a) above section 123(1)(a) of
the Insolvency Act 1986 shall have effect as if the
"(pound)750" there was substituted (pound)10,000 and, further,
the Defaulting Pool Member shall not be deemed to be unable to
pay its debts for the purposes of paragraph (a) above it any
such demand as is mentioned in the said section is being
contested in good faith by the Defaulting Pool Member with
recourse to all appropriate measures and procedures; or
66.3.7 the License (if any) granted to the Defaulting Pool Member is
determined or revoked or otherwise ceases to be in force for
any reason whatsoever,
in any such case for whatever reason and whether reason and whether or
not within the control of the Defaulting Pool Member.
66.4 De-energisation:
66.4.1 if the Majority Default Calling Creditors shall give notice to
a Defaulting Pool Member under Clause 66.1.3 or the Executive
Committee shall give notice to a Defaulting Pool Member under
Clause 66.2.2 the Defaulting Pool Member shall forthwith, and
in compliance with the instructions of the Grid Operator or
(in the case of any connection to a User whose System it is
(the "Relevant User"), take all such action as may be
necessary to give effect to the relevant De-energisation.
66.4.2 If the Defaulting Pool Member shall fail to take such action
as is referred to in Clause 66.4.1 within 48 hours after the
date of any such notice referred to therein, the Grid Operator
and/or, as the case may be, the Relevant User undertakes to
each of the other Parties and the Executive Committee to use
reasonable endeavors to effect or (as the case may be) give
instructions to effect such De-energisation as quickly
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as practicable having regard to all the circumstances
affecting such De-energisation (including any operational
difficulties and relevant License duties).
66.4.3 Each Pool Member hereby irrevocably and unconditionally
consents to its De-energisation by the Grid Operator and/or,
as the case may be, the Relevant User in the circumstances set
out in Clause 66.4.2.
66.5 Sharing of risk: where an Event of Default is declared under Clause
66.1.1 or 66.2.1 in respect of a Defaulting Pool Member which is a
Public Electricity Supplier, then for the period beginning on the date
of the notice declaring such Event of Default until the earlier of:-
66.5.1 the date falling 28 days thereafter; and
66.5.2 the date on which the Event of Default has been remedied or
waived by Majority Default Calling Creditors or (as the case
may be) the Pool Members in general meeting,
(but not further or otherwise) each Pool Member (other than the
Defaulting Pool Member) shall be severally liable for its Contributory
Share (calculated on the basis that the Points allocated to the
Defaulting Pool Member and Ancillary Services during each complete
Settlement Day falling within such period and which are not paid on the
due date therefor by the Defaulting Pool Member. The Defaulting Pool
Member shall indemnify and keep indemnified each Pool Member on demand
against all sums properly paid by such Pool Member pursuant to this
Clause 66.5 together with interest thereon from the date of payment by
such Pool Member to the date of its reimbursement (as well after as
before judgment) at the Default Interest Rate.
66.6 Indemnity on De-energisation: where under Clause 66.4 the Grid Operator
and/or the Relevant User is required to effect or (as the case may be)
give instructions to effect a De-energisation the Defaulting Pool
Member, failing which, each Pool Member (but, in the case of each Pool
Member, only in respect of its Contributory Share at the time of
receipt of the request for indemnification, calculated on the basis
that the Points allocated to the Defaulting Pool Member are
disregarded) shall indemnify and keep indemnified the Grid Operator
and/or the Relevant User (as the case may be) on demand against any and
all liability, loss or damage which it may suffer or incur by reason of
effecting or giving instructions to effect such De-energisation.
66.7 Accrued rights and liabilities:
66.7.1 the suspension of a person as a Pool Member and the cessation
of a person as a Pool Member and/or a Party for whatever
reason shall not prejudice its accrued rights and liabilities
under this Agreement as at
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the date of its suspension or (as the case may be) cessation
or its rights and liabilities under this Agreement which may
accrue in relation to the period during which it was not so
suspended or (as the case may be) it was a Party or any of its
obligations under this Agreement which are expressed to
continue notwithstanding such suspension or cessation.
66.7.2 Without prejudice to the generality of Clause 66.7.1, a
Defaulting Pool Member shall be liable for all sums (including
United Kingdom Value Added Tax) which it is required under
this Agreement to pay in respect of electricity taken by it
and Ancillary Services pending its De-energisation pursuant to
Clause 66.4.
67. TERM AND TERMINATION
67.1 Term: this Agreement shall have no fixed duration.
67.2 Suspension of Pool Member's voting rights: a Pool Member's voting
rights shall be suspended only in the circumstances and to the extent
specified in Clauses 66.1.2 and 66.2.1.
67.3 Termination as a Party: a Pool Member shall cease to be a Party only:-
67.3.1 in the circumstances and to the extent specified in Clauses
8.7 to 8.10 (inclusive);
67.3.2 in the circumstances and to the extent specified in Clauses
66.1.3 and 66.2.2; or
67.3.3 if, by unanimous resolution of all Committee Members, the
Executive Committee shall so reasonably determine and the
prior written consent of the Director shall have been
obtained.
67.4 Termination of the Agreement:
67.4.1 this Agreement may be terminated if a resolution of Pool
Members in general meeting is unanimously carried by those
Pool Members present in person or by proxy at the relevant
general meeting and the prior written consent of the Director
has been obtained.
67.4.2 The termination shall take effect from whichever is the later
in time of the date of the resolution referred to in Clause
67.4.1 and the consent in writing of the Director referred to
in that Clause.
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67.5 Clause exhaustive: the Pool Members agree that the foregoing
provisions of this Clause 67, when read with the Clauses
referred to herein and Clause 8.11, are exhaustive of the
rights of suspension of a Pool Member's voting rights, of
termination of Pool Membership, of cessation as a Party and of
termination of this Agreement.
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PART XX
CONFIDENTIALITY
66. DEFINITIONS AND INTERPRETATION
66.1 Definitions: in this Part XX, except where the context otherwise
requires:-
"Authorised Recipient" means, in relation to any Protected Information,
any Business Person who, before the Protected Information had been
divulged to him by NGC or any subsidiary of NGC, had been informed of
the nature and effect of Clause 69 and who requires access to such
Protected Information for the proper performance of his duties as a
Business Person in the course of Permitted Activities;
"Business Person" means any person who is a Main Business Person or a
Corporate Functions Person, and "Business Personnel" shall be construed
accordingly;
"Confidential Information" means all data and other information
supplied to the Obligor or any nominee of the Obligor appointed
pursuant to paragraph 10 of Appendix 4 of Schedule 9 by another Party
under the provisions of this Agreement, and shall include copies of the
load modules referred to in Clause 42.5;
"Corporate Functions Person" means any person who:-
(a) is a director of NGC; or
(b) is an employee of NGC or any of its subsidiaries carrying out
any administrative, finance or other corporate services of any
kind which in part relate to the Main Business; or
(c) is engaged as an agent of or an adviser to or performs work in
relation to or services for the Main Business;
"Generation Business" has the same meaning as in the NGC Transmission
License;
"Main Business" means any business of NGC or any of its subsidiaries as
at the Effective Date or which it is required to carry on under the NGC
Transmission License, other than the Generation Business;
"Main Business Person" means any employee of NGC or any director or
employee of its subsidiaries who is engaged solely in the Main
Business, and "Main Business Personnel" shall be construed accordingly;
"Obligor" has the meaning given that expression in Clause 70.1;
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"Permitted Activities" means activities carried on for the purposes of
the Main Business; and
"Protected Information" means any information relating to the affairs
of a Party which is furnished to Business Personnel pursuant to this
Agreement unless, prior to such information being furnished, such Party
has informed the recipient thereof by notice in writing or by
endorsement on such information that the said information is not to be
regarded as Protected Information.
68.2 Interpretation: for the avoidance of doubt, data and other information
which any Party is permitted or obliged to divulge or publish to any
other Party pursuant to this Agreement shall not necessarily be
regarded as being in the public domain by reason of being so divulged
or published.
69. CONFIDENTIALITY FOR NGC AND ITS SUBSIDIARIES
69.1 Protection of Protected Information: NGC and its subsidiaries in each
of their capacities in this Agreement shall secure that Protected
Information is not:-
69.1.1 divulged by Business Personnel to any person unless that
person is an Authorised Recipient;
69.1.2 used by Business Personnel for the purposes of obtaining for
NGC or any of its subsidiaries or for any other person:-
(a) any electricity license; or
(b) any right to purchase or otherwise acquire, or to
distribute, electricity (including rights under any
electricity purchase contract, as defined in the NGC
Transmission License); or
(c) any contract or arrangement for the supply of
electricity to Customers or Suppliers; or
(d) any contract for the use of any electrical lines or
electrical plant belonging to or under the control of
a Supplier; or
(e) control of any body corporate which, whether directly
or indirectly, has the benefit of any such license,
contract or arrangement; and
69.1.3 used by Business Personnel for the purpose of carrying on any
activities other than Permitted Activities
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except with the prior consent in writing of the Party to whose
affairs such Protected Information relates.
69.2 Exceptions: nothing in this Clause 69 shall apply:-
69.2.1 to any Protected Information which, before it is furnished to
Business Personnel, is in the public domain; or
69.2.2 to any Protected Information which, after it is furnished to
Business Personnel:-
(a) is acquired by NGC or any subsidiary of NGC in
circumstances in which this Clause 69 does not apply;
or
(b) is acquired by NGC or any subsidiary of NGC in
circumstances in which this Clause 69 does apply and
thereafter ceases to be subject to the restrictions
imposed by this Clause 69; or
(c) enters the public domain,
and in any such case otherwise than as a result of (i) a
breach by NGC or any subsidiary of NGC of its obligations in
this Clause 69 or (ii) a breach by the person who disclosed
that Protected Information of that person's confidentiality
obligation and NGC or any of its subsidiaries is aware of such
breach; or
69.2.3 to the disclosure of any Protected Information to any person
if NGC or any subsidiary of NGC is required or expressly
permitted to make such disclosure to such person:-
(a) in compliance with the duties of NGC or any
subsidiary of NGC under the Act or any other
requirement of a Competent Authority; or
(b) in compliance with the conditions of the NGC
Transmission License or any document referred to in
the NGC Transmission License with which NGC or any
subsidiary of NGC is required by virtue of the Act or
the NGC Transmission License to comply; or
(c) in compliance with any other requirement of law; or
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(d) in response to a requirement of any stock exchange or
regulatory authority or the Panel on Take-overs and
Mergers; or
(e) pursuant to the arbitration rules for the Electricity
Arbitration Association or pursuant to any judicial
or other arbitral process or tribunal having
jurisdiction in relation to NGC or its subsidiaries;
or
69.2.4 to any Protected Information to the extent that NGC or any of
its subsidiaries is expressly permitted or required to
disclose that information under the terms of any agreement or
arrangement (including this Agreement, the Grid Code, the
Distribution Codes and the Fuel Security Code) with the Party
to whose affairs such Protected Information relates; or
69.2.5 to any Protected Information but only to the extent that it
has been properly provided to NGC or any subsidiary of NGC by
the Settlement System Administrator pursuant to any provision
of the Pool Rules.
69.3 Use of information by NGC: NGC and each of its subsidiaries may use al
and any information or data supplied to or acquired by it from or in
relation to the Parties in performing Permitted Activities including,
for the following purposes:-
69.3.1 the operation and planning of the NGC Transmission System;
69.3.2 the calculation of charges and preparation of offers of terms
for connection to or use of the NGC Transmission Systems;
69.3.3 the operation and planning of the Ancillary Services Business
and the calculation of charges therefor;
69.3.4 the operation of the Settlements Business;
69.3.5 the provision of information under the British Grid Systems
Agreement and the EdF Documents,
and may pass the same to subsidiaries of NGC which carry out such
activities and the Parties agree to provide all information to NGC and
its subsidiaries for such purposes.
69.4 Restrictions on Business Personnel: NGC undertakes to each of the other
Parties that, having regard to the activities in which any business
person is engaged and the nature
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and effective life of the Protected Information divulged to him by
virtue of such activities, neither NGC nor any of its subsidiaries
shall unreasonably continue (taking into account any industrial
relations concerns reasonably held by it) to divulge Protected
Information or permit Protected Information to be divulged by any
subsidiary of NGC to any Business Person:-
69.4.1 who has notified NGC or the relevant subsidiary of his
intention to become engaged as an employee or agent of any
other person (either than of NGC or any subsidiary thereof)
who is:-
(a) authorised by license or exemption to generate,
transmit or supply electricity; or
(b) an electricity broker or who is known to be engaged
in the writing of electricity purchase contracts (as
hereinbefore defined); or
(c) known to be retained as a consultant to any such
person who is referred to in paragraph (a) or (b)
above; or
69.4.2 who is to be transferred to the Generation Business,
save where NGC or such subsidiary could not, in all the circumstances,
reasonably be expected to refrain from divulging to such Business
Person Protected Information which is required for the proper
performance of his duties.
69.5 Identification of Protected Information: without prejudice to the other
provisions of this Clause 69, NGC shall procure that any additional
copies made of the Protected Information, whether in hard copy or
computerised form, will clearly identify the Protected Information as
protected.
69.5 Identification of Protected Information: without prejudice to the other
provisions of this Clause 69, NGC shall procure that any additional
copies made of the Protected Information, whether in hard copy or
computerised form, will clearly identify the Protected Information as
protected.
69.6 Corporate Functions Person: NGC undertakes to use all reasonable
endeavours to procure that no employee is a Corporate Functions Person
unless the same is necessary for the proper performance of his duties.
69.7 Charge restriction condition variable: without prejudice to Clause
69.3, NGC and each of its subsidiaries may use and pass to each other
all and any Period Metered Demand data supplied to or acquired by it
and all and any information and data supplied to it pursuant to Section
OC6 of the Grid Code for the purposes of Demand
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Control (as defined in the Grid Code), but in each case only for the
purposes of its estimation and calculation from time to time of the
variable "system maximum ACS demand" (as defined in Condition 4 of the
NGC Transmission License).
69.8 Ancillary Services: NGC shall secure that Protected Information which
is subject to the provisions of Clause 69.1 and which relates to the
cost of Reactive Power provided by each individual Generator is not
divulged to any Business Person engaged in the provision of static
compensation for use by the Grid Operator.
69.9 Metering data - Distribution System: any information regarding, or data
acquired by the Settlement Administrator or its agent from, Metering
Equipment at Sites which are a point of connection to a Distribution
System shall and may be passed by the Settlement System Administrator
or his agent to the operator of the relevant Distribution System. The
said operator of the relevant Distribution System may use the same only
for the purposes of the operation of such Distribution System and the
calculation of charges for use of and connection to such Distribution
System.
69.10 Metering data - Qualifying Arrangements: the Settlement System
Administrator and the Grid Operator shall and may pass any relevant
information and data relating to the Genset Metered Generation
(including, for the avoidance of doubt, all relevant Metered Data, as
defined in paragraph 3.1.2 of Schedule 9) of any of the Generating
Units which are the subject of qualifying arrangements (as defined in
section 33 of the Act) to such persons as may be specified from time to
time pursuant to such qualifying arrangements.
70. CONFIDENTIALITY OTHER THAN FOR NGC AND ITS SUBSIDIARIES
70.1 General obligation: each party (other than NGC and its subsidiaries)
(the "Obligor") hereby undertakes with each other Party (including NGC
and its subsidiaries that it shall preserve the confidentiality of, and
not directly or indirectly reveal, report, publish, disclose or
transfer or use for its own purposes Confidential Information except:-
70.1.1 in the circumstances set out in Clause 70.2; or
70.1.2 to the extent otherwise expressly permitted by this Agreement;
or
70.1.3 with the prior consent in writing of the Party to whose
affairs such Confidential Information relates; or
70.1.4 to the extent that it has been properly provided to the
Obligor by the Settlement System Administrator pursuant to any
provision of the Pool Rules.
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70.2 Exceptions: the circumstances referred to in Clause 70.1.1 are:-
70.2.1 where the Confidential Information, before it is furnished to
the Obligor, is in the public domain; or
70.2.2 where the Confidential Information, after it is furnished to
the Obligor:-
(a) is acquired by the Obligor in circumstances in which
this Clause 70 does not apply; or
(b) is acquired by the Obligor in circumstances in which
this Clause 70 does apply and thereafter ceases to be
subject to the restrictions imposed by this Clause
70; or
(c) enters the public domain,
and in any such case otherwise than as a result of (i) a
breach by the Obligor of its obligations in this Clause 70 or
(ii) a breach by the person who disclosed that Confidential
Information of that person's confidentiality obligation and
the Obligor is aware of such breach; or
70.2.3 if the Obligor is required or permitted to make disclosure of
the Confidential Information to any person:-
(a) in compliance with the duties of the Obligor under
the Act or any other requirement of a Competent
Authority; or
(b) in compliance with the conditions of any Licence or
any document referred to in any Licence with which
the Obligor is required to comply; or
(c) in compliance with any other requirement of law; or
(d) in response to a requirement of any stock exchange or
regulatory authority or the Panel on Take-overs and
Mergers; or
(e) pursuant to the arbitration rules for the Electricity
Arbitration Association or pursuant to any judicial
or other arbitral process or tribunal having
jurisdiction in relation to the Obligor; or
70.2.4 to the employees, directors, agents, consultants and
professional advisers of the Obligor, in each case on the
basis set out in Clause 70.3.
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70.3 Internal procedures: with effect from the date of this Agreement the
Obligor shall adopt procedures within its organisation for ensuring the
confidentiality of all Confidential Information which it is obliged to
preserved as confidential under Clause 70.1. These procedures are:-
70.3.1 the Confidential Information will be disseminated within the
Obligor only on a "need to know" basis;
70.3.2 employees, directors, agents, consultants and professional
advisers of the Obligor in receipt of Confidentiality
Information will be made fully aware of the Obligor's
obligations of confidence in relation thereto; and
70.3.3 any copies of the Confidential Information, whether in hard
copy or computerised form, will clearly identify the
Confidential Information as confidential.
71. RELEASE OF INFORMATION
71.1 Notwithstanding any foregoing provisions of this Part XX, the Parties
agree that each of them shall be at liberty to provide copies of this
Agreement and the Initial Settlement Agreement and any supplemental
agreement to both or either thereof to any third party, and each of the
Parties consents to disclosure by any other Party of the fact that it
is a party to this Agreement and the Initial Settlement Agreement and,
where such is the case, a Pool Member.
71.1.1 The following provisions of this Clause are designed to
facilitate the release of certain data and other information
to persons who are not Parties. Such provisions are without
prejudice to any Party's rights to disclose or use data or
information pursuant to the other provisions of this Agreement
or otherwise.
71.1.2 At the request of the Executive Committee or any person who is
not a Party and against payment by or on behalf of the person
to whom the data or other information is to be released of a
fee or charge therefor calculated mutatis mutandis on the
basis set out in Clause 34.2, the Settlement System
Administrator shall provide to such person(s) as the Executive
Committee may nominate or (as the case may be) to the person
requesting the same, data and other information received by
the Settlement System Administrator in or derived from the
operation of the Settlement System provided that:-
(a) the Pool Rules specify that such data or other
information may be so released; or
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(b) the Party to whose affairs such data or other
information relates has given its prior consent in
writing to such disclosure.
71.1.3 Upon request by the Executive Committee, the Settlement System
Administrator shall notify the Executive Committee in writing
of any request received by it from any person under Clause
71.1.2 and of the name of such person and shall give details
of the data and other information provided.
71.1.4 Each of the parties agrees to the release of data and other
information in the circumstances described in Clause 71.1.2.
71.2 The Parties acknowledge that, for the Executive Committee and each of
its sub- committees properly to carry out its duties and
responsibilities under this Agreement, the Executive Committee may
decide or be obliged to keep confidential to it (and may instruct its
sub-committees to keep confidential) matters, reports, data and other
information produced by or for, made available to or held by, the
Executive Committee or the relevant sub-committee and, in any such
case, Committee Members shall neither disclose the same to the Pool
Member(s) which they represent nor be required by such Pool Member(s)
so to disclose. Each of the Parties agrees to respect the position of
the Executive Committee, its sub-committees and the Committee Members
accordingly.
71.3 Each of the Parties other than the Settlement System Administrator, the
Grid Operator, the Ancillary Services Provider and the Pool Funds
Administrator agrees, subject to any relevant confidentiality
restriction binding on it, to provide the Executive committee, the
Chief Executive and the personnel referred to in Clause 17.2.1 with all
data and other information reasonably requested by the Executive
Committee and necessary for the Executive Committee, the Chief
Executive or (as the case may be) such personnel properly to carry out
its or his duties and responsibilities under this Agreement. The Grid
Operator and the Ancillary Services Provider each agree, subject to any
relevant confidentiality restriction binding on it, to provide the
Executive Committee, the Chief Executive and the personnel referred to
in Clause 17.2.1 with such data and other information relating to its
duties, responsibilities or obligations under this Agreement which the
Executive Committee shall reasonably request and which is necessary for
the Executive Committee, the Chief Executive or (as the case may be)
such personnel to carry out its or his duties and responsibilities
under this Agreement.
71.4 Each party acknowledges and agrees that no Party shall be in breach of
any obligation of confidentiality owed by it pursuant to this Agreement
in reporting under Clause 6.10 any breach of the Pool Rules or its
belief that any such breach has occurred.
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71.5 Notwithstanding any other provision of this Agreement, the provisions
of this Part XX shall continue to bind a person after its cessation as
a Party for whatever reason.
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PART XXI
THE PARTICIPATION OF NGC
72. THE PARTICIPATION OF NGC
72.1 As Grid Operator: for so long as NGC is the Grid Operator, references
in this Agreement to the Grid Operator shall be read and construed as
references to NGC acting in its capacity as Grid Operator, and all
rights, benefits, duties, responsibilities, liabilities and obligations
under this Agreement with regard to the Grid Operator shall be those of
NGC acting in that capacity.
72.2 As Ancillary Services Provider: for so long as NGC is the Ancillary
Services Provider, references in this Agreement to the Ancillary
Services Provider shall be read and construed as references to NGC
acting in its capacity as Ancillary Services Provider, and all rights,
benefits, duties, responsibilities, liabilities and obligations under
this Agreement with regard to the ancillary services Provider shall be
shoe of NGC acting in that capacity. The Ancillary Services Provider
shall have the benefit of the obligations and undertakings entered into
by the Settlement System Administrator and Pool Funds Administrator in
this Agreement.
72.3 As Pumped Storage Business: references in this Agreement to NGC Pumped
Storage shall be read and construed as references to the pumped storage
business division of NGC, and all rights, benefits, responsibilities,
liabilities and obligations of NGC Pumped Storage under this Agreement
shall be those of NGC acting in that capacity.
72.4 As Pool Member: the Parties acknowledge that, save in its capacity as
NGC Pumped Storage, NGC is not in any of its capacities under this
Agreement a Pool Member.
72.5 Wholly-owned subsidiary: NGC shall procure that so long as NGC
Settlements Limited is appointed Settlement System Administrator it
shall at all times remain a wholly-owned subsidiary of, and wholly
controlled by, NGC.
73. INTRA-COMPANY CONTRACTS
73.1 Intra-company contracts (1): NGC acknowledges and agrees that where, as
Ancillary Services Provider, it enters into an Ancillary Services
Agreement with NGC Pumped Storage for the purchase of Ancillary
Services NGC shall, in each of those capacities, comply with the terms
and conditions as if for the purpose the Ancillary Services Provider
and NGC Pumped Storage were separate legal entities.
73.2 Intra-company contracts (2): NGC acknowledges and agrees that where, as
Grid Operator, it enters into the Master Connection and Use of System
Agreement and/or any Supplemental Agreement with NGC Pumped Storage NGC
shall, in each of those
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capacities, comply with the terms and conditions as if for the purpose
the Grid Operator and NGC Pumped Storage were separate legal entities.
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PART XXII
MISCELLANEOUS
74. FORCE MAJEURE
74.1 Force Majeure: where the Settlement System Administrator, the Grid
operator, the Pool Funds Administrator or the Ancillary Services
Provider (the "Non-Performing Party") is unable to carry out all or any
of its obligations under this Agreement by reason of Force Majeure:-
74.1.15 this Agreement shall remain in effect; but
74.1.2 (a) the Non-Preforming Party's relevant obligations;
(b) the obligations of each of the other parties owed to
the Non- Performing Party under this Agreement; and
(c) any other obligations (not being payment obligations)
of such other Parties under this Agreement owed inter
se which the relevant Party is unable to carry out
directly as a result of the suspension of the
Non-Performing Party's obligations.
shall be suspended for a period qual to the Force Majeure
provided that:-
(i) the suspension of performance is of no greater scope
and of no longer duration than is required by the
Force Majeure;
(ii) no obligations of any Party are excused as a result
of the Force Majeure; and
(iii) in respect of the suspension of the Non-Performing
Party's obligations:-
(A) the Non-Performing Party gives the Executive
Committee (which shall promptly inform the
other Parties, the Pool Auditor and the
Director) prompt notice describing the
circumstance of Force Majeure, including the
nature of the occurrence and its expected
duration, and continues to furnish daily
reports with respect thereto during the
period of Force Majeure; and
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(B) the Non-Performing Party uses all reasonable
efforts to remedy its inability to perform.
74.2 Discussions: as soon as is practicable after the occurrence of the
Force Majeure the Non-Performing Party shall discuss with the Executive
Committee how best to continue its operations and give effect to its
obligations so far as possible in accordance with this Agreement.
75. NOTICES
75.1 Addresses: save as otherwise expressly provided in this Agreement, any
notice or other communication to be given by one Party to another
under, or in connection with the matters contemplated by, this
Agreement shall be addressed to the recipient and sent to the address,
telex number or facsimile number of such other Party given in this
Agreement for the purpose and marked for the attention of the person so
given or to such other address, telex number and/or facsimile number
and/or marked for such other attention as such other Party may from
time to time specify by notice given in accordance with this Clause 75
to the Party giving the relevant notice or other communication to it.
75.2 Executive Committee: any notice or other communication to be given to
the Executive Committee under, or in connection with the matters
contemplated by, this Agreement shall be sent to the Secretary at the
address, telex number or facsimile number given in this Agreement for
the purpose or to such other address, telex number or facsimile number
as the Secretary may from time to time specify by notice given in
accordance with this Clause 75 to the Parties.
75.2 Deemed receipt: save as otherwise expressly provided in this Agreement,
any notice or other communication to be given by any Party to any other
Party under, or in connection with the matters contemplated by, this
Agreement shall be in writing and shall be given by letter delivered by
hand or sent by first class prepaid post (airmail if overseas) or telex
or facsimile, and shall be deemed to have been received:-
75.3.1 in the case of delivery by hand, when delivered; or
75.3.2 in the case of first class prepaid post, on the second day
following the day of posting or (if sent airmail overseas or
from overseas) on the fifth day following the day of posting;
or
75.3.3 in the case of telex, on the transmission of the automatic
answer-back of the addressee (where such transmission occurs
before 1700 hours on the day of transmission) and in any other
case on the day following the day of transmission; or
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75,3,4 in the case of facsimile, on acknowledgement by the
addressee's facsimile receiving equipment (where such
acknowledgement occurs before 1700 hours on the day of
acknowledgement) and in any other case on the day following
the day of acknowledgement.
76. ASSIGNMENT
A Party shall not assign and/or transfer and shall not purport to
assign and/or transfer any of its rights and/or obligations under this
Agreement provided that any Party may assign by way of security only
all or any of its rights over receivables arising under this Agreement.
77. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
different Parties on separate counterparts, each of which when executed
and delivered shall together constitute but one and the same
instrument.
78. WAIVERS; REMEDIES NOT CUMULATIVE
Waivers: no delay by or omission of any Party in exercising any right,
power, privilege or remedy under this Agreement shall operate to impair
such right, power, privilege or remedy or be construed as a waiver
thereof. Any single or partial exercise of any such right, power,
privilege or remedy shall not preclude any other or further exercise
thereof or the exercise of any other right, power, privilege or remedy.
78.2 Remedies not cumulative: the rights and remedies provided by this
Agreement to the Parties are exclusive and not cumulative and exclude
and are in place of all substantive (but not procedural) rights or
remedies express or implied and provided by common law or stature in
respect of the subject matter of this Agreement (other than any such
rights or remedies provided under section 58 of the Act or any
directions (if any) issued thereunder), including without limitation
any rights any Party may possess in tort which shall include actions
brought in negligence and/or nuisance. Accordingly, each of the Parties
hereby waivers to the fullest extent possible all such rights and
remedies provided by common law or statute, and releases a Party which
is liable to another (or others), its officer, employees and agents to
the same extent from all duties, liabilities, responsibilities or
obligations provided by common law or statute in respect of the mattes
dealt with in this Agreement and undertakes not to enforce any of the
same except as expressly provided herein.
78.3 Director's and Secretary of State's rights: for the avoidance of doubt,
the Parties acknowledge and agree that nothing in this Agreement shall
exclude or restrict or otherwise prejudice or affect any of the rights,
powers, privileges, remedies, duties
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and obligations of the Secretary of State or the Director under the Act
or any Licence or otherwise howsoever.
79. SEVERANCE OF TERMS
If for any reason whatever any provision of this Agreement is or
becomes invalid, illegal or unenforceable, or is declared by any court
of competent jurisdiction or any other Competent Authority to be
invalid, illegal or unenforceable or if such Competent Authority:-
79.1 refuses, of formally indicates an intention to refuse, authorisation
of, or exemption to, any of the provisions of or refusal either way of
outright refusal or by way of requiring the amendment or deletion of
any provision of this Agreement and/or the giving of undertakings or
the acceptance of conditions as to future conduct before such
authorisation or exemption can be granted); or
79.2 formally indicates that to continue to operate any provision of this
Agreement may expose the Parties to sanctions under any law, order,
enactment or regulation, or requests any Party to give undertakings or
to accept conditions as to future conduct in order that such Party may
not be subject to such sanctions
80. ENTIRE AGREEMENT
This Agreement contains or expressly refers to the entire agreement
between the Parties with respect to the subject matter hereof and
expressly excludes any warranty, condition or other taking implied at
law or by custom and supersedes all previous agreements and
understandings between the Parties with respect thereto and each of the
Parties acknowledges and confirms that it does not enter into this
Agreement in reliance on any representation, warranty or other
undertaking not fully reflected in the terms of this Agreement,
81. LANGUAGE
Each notice, instrument, certificate or other document to be given by
one Party to another hereunder shall be in the English language.
82. RESTRICTIVE TRADE PRACTICES ACT 1976
If after the commencement of section 100 of the Act (the "RTP Section")
this Agreement is subject to registration under the Restrictive Trade
Practices Act 1976 then NGC undertakes, no earlier than five months but
no later than six months after the commencement of the RTP Section, to
furnish to the Director General of Fair Trading particulars of this
Agreement and of any agreement of which it forms part. Before
furnishing such particulars NGC will consult with the Founder
Generators and
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the Founder Suppliers as to the nature of the particulars to be so
furnished and will consult with the Founder Generators and Founder
Suppliers regularly regarding the progress of discussions with the
Director General of Fair Trading in regard to the agreement(s) so
furnished.
83. ARBITRATION
83.1 Referral to arbitration: save where expressly stated in this Agreement
to the contract and subject to any contrary provision of the Act or any
Licence or the rights, powers, duties and obligations of the Director
or the Secretary of State under the Act, any Licence or otherwise
howsoever, any dispute or difference of whatever nature howsoever
arising under, out of or in connection with this Agreement between any
one or more parties shall be and is hereby referred to arbitration
pursuant to the arbitration rules of the Electricity Arbitration
Association in force from time to time.
83.2 Proper law: whatever the nationality, residence or domicile of any
Party and wherever the dispute or difference or any part thereof arose
the law of England shall be the proper law of any reference to
arbitration hereunder and in particular (but not so as to derogate from
the generality of the foregoing) the provisions of the Arbitration Acts
1950 (notwithstanding anything in section 34 thereof) to 1979 shall
apply to any such arbitration wherever the same or any part of it shall
be conducted.
83.3 Third Party Claims (1): subject always to Clause 83.6, if any tariff
customer (as defined in section 22(4) of the Act) brings any legal
proceedings in any court (as defined in the Rules of the Supreme Court
1965 and in the County Courts Act 1984) against one or more persons,
any of which is a Party (the "Defendant Contracting Party"), and the
Defendant Contracting Party wishes to made a Third Party Claim (as
defined in Clause 83.5) against any other Party (a "Contracting Party")
which would but for this Clause 83.3 have been a dispute or difference
referred to arbitration by virtue of Clause 83.1 then, notwithstanding
the provisions of Clause 83.1 which shall not apply and in lieu of
arbitration, the court in which the legal proceedings have been
commenced shall hear and completely determine and adjudicate upon the
legal proceedings and the Third Party Claim not only between the tariff
customer and the Defendant Contracting Party but also between either or
both of them and any other Contracting Party whether by way of third
party proceedings (pursuant to the Rules of the Supreme Court 1965 or
the County Court Rules 1981) or otherwise as may be ordered by the
court
83.4 Third Party Claims (2): where a Defendant Contracting Party makes a
Third Party Claim against any Contracting Party and such Contracting
Party wishes to make a Third Party Claim against a further Contracting
Party the provisions of Clause 83.3 shall apply mutatis mutandis as if
such Contracting Party had been the Defendant Contracting Party and
similarly in relation to any such further Contracting Party.
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83.5 Third Party Claims (3): for the purposes of this Clause 83 "Third Party
Claim" shall mean:-
83.5.1 any claim by a Defendant Contracting Party against a
Contracting Party (whether or not already a party to the legal
proceedings) for any contribution or indemnity; or
83.5.2 any claim by a Defendant Contracting Party against such a
Contracting Party for any relief or remedy relating to or
connected with the subject matter of the legal proceedings and
substantially the same as some relief or remedy claimed by the
tariff customer; or
83.5.3 any requirement by a Defendant Contracting Party that any
question or issue relating to or connected with the subject
matter of the legal proceedings should be determined not only
as between the tariff customer and the defendant Contracting
Party but also as between either or both of them and a
Contracting Party (whether or not already a party to the legal
proceedings).
83.6 Limitation: Clause 83.3 shall apply only if at the time the legal
proceedings are commenced no arbitration has been commenced between the
Defendant Contracting Party and another Contracting Party raising or
involving the same or substantially the same issues as would be raised
by or involved in the Third Party Claim. The tribunal in any
arbitration which has been commenced prior to the commencement of legal
proceedings shall determine the question, in the event of dispute,
whether the issues raised or involved are the same or substantially the
same.
84. JURISDICTION
84.1 Submission to jurisdiction: subject and without prejudice to Clauses 83
and 84.4, all the Parties irrevocably agree that the courts of England
are to have exclusive jurisdiction to settle any disputes which may
arise out of or in connection with this Agreement and that accordingly
any suit, action or proceeding (together in this Clause 84 referred to
as "Proceedings") arising out of or in connection with this Agreement
may be brought in such courts.
84.2 Waiver: each Party irrevocably waives any objection which it may have
now or hereafter to the laying of the venue of any Proceedings in any
such court as if referred to in this Clause and any claim that any such
Proceedings have been brought in an inconvenient forum and further
irrevocably agrees that a judgment in any Proceedings brought in the
English courts shall be conclusive and binding upon such Party and may
be enforced in the courts of any other jurisdiction.
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84.3 Agent for service of process: each Party which is not incorporated in
any part of England or Wales agrees that if it does not have, or shall
cease to have, a place of business in England or Wales it will promptly
and hereby does appoint the Settlement System Administrator (or such
other person as shall be acceptable to the Executive Committee)
irrevocably to accept service of process on its behalf in any
Proceedings in England.
84.4 Arbitration: for the avoidance of doubt nothing contained in the
foregoing provisions of this Clause 84 shall be taken as permitting a
Party to commence Proceeding to be referred to arbitration.
85. GOVERNING LAW
This Agreement shall be governed by, and construed in all respects in
accordance with, English law.
86. THE SETTLEMENT SYSTEM ADMINISTRATOR'S CONTRACT
86.1 The Parties anticipate that this Agreement will be amended by a
Supplemental Agreement to provide for revised terms and conditions upon
and subject to which the Settlement System Administrator will
administer and render services connected with the administration of the
Settlement System (the "Revised Terms") and it is expected that these
revised terms and conditions will be contained in a separate Schedule
to (but nevertheless will form part of) this Agreement. At the date at
which this Clause 86 takes effect negotiations are continuing on the
Revised Terms.
86.2 Notwithstanding the fact that the Revised Terms do not exist at the
date at which this Clause 86 takes effect, the Parties are keen to
establish as soon as possible the terms of understanding reached
between the Parties as to the revised terms and conditions to be
contained in the Revised Terms. Accordingly, a letter of intent (the
"Letter of Intent") is in the course of preparation which, and subject
to the Executive Committee by unanimous resolution approving the Letter
of Intent and the Settlement System Administrator acknowledging the
same will revise in part the billing and financial reporting
arrangements associated with the provision of services by the
Settlement System Administrator described in Clause 86.1 from 1st
April, 1994.
86.3 With a view to finalisation of the Revised Terms an agreement is also
in the course of preparation which will give detailed effect to those
revised terms and conditions (the "Framework Agreement") and subject to
the Executive Committee first approving (with or without amendment) the
Framework Agreement by unanimous resolution and the Settlement System
Administrator executing and delivering the same, each of the Parties
agrees that, it shall be bound by the Framework Agreement until the
Framework End Date as if it were part of this Agreement provided that:-
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(i) if the Framework Agreement shall expressly suspend provisions
of this Agreement which relate to the performance of services
by the Settlement System Administrator or other rights,
obligations, responsibilities and/or duties of the Settlement
System Administrator under this Agreement, those provisions
shall be suspended for the period ending no later than the
Framework End Date specified in the Framework Agreement;
(ii) subject as provided in (i) above, in the event of any
inconsistency or conflict between the provisions of the
Framework Agreement and this Agreement, the provisions of this
Agreement shall prevail; and
(iii) the expiry or termination of the Framework Agreement shall be
without prejudice to the accrued rights and liabilities of
each Party thereunder.
86.4 The Framework End Date shall be 31st March, 1995 or such other date,
being no later than 31st March, 1996, as the Executive Committee and
the Settlement System Administrator may agree,
IN WITNESS whereof this Agreement has been duly executed the day and year first
above written
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SCHEDULE 1
PART I
The Generators
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
National Power PLC 2366963 Windmill Hill Business Park
Whitehill Way
Swindon
Wiltshire SN5 6PB
PowerGen plc 2366970
53 New Broad Street
London EC2M 1JJ
Nuclear Electric plc 2264251 Barnett Way
Barnwood
Gloucester GL4 7RS
The National Grid 2366977 National Grid House
Company plc Kirby Corner Road
(Pumped Storage Coventry CV4 8JY
Business Division)
Electricite de France, - Department Relations avec
Service National L'Etranger
Echanges d'Energie
2 Rue Louis Murat
5 eme etage
75384 Paris
Cedex 08
Scottish Power plc 117120 1 Atlantic Quay
Glasgow G2 8SP
Scotland
Scottish Hydro-Electric PLC 117119 16 Rothsay Terrace
Edinburgh EH3 7SE
Scotland
</TABLE>
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<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
British Nuclear Fuels plc 1002607 Risley
Warrington
Lancashire WA3 6AS
Central Power Limited 2251099 Mucklow Hill Halesowen
West Midlands B62 8BP
Lakeland Power Limited 2355290 Roosecote Power Station
Roosecote Marsh
Barrow-in-Furness
Cumbria LA13 OPR
</TABLE>
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PART II
The Suppliers
Part A
Public Electricity Suppliers
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
Fibropower Limited 2234141 38 Clarendon Road
London W11 3AD
Teesside Power 246040 34 Park Street
London W1Y 3LE
CeltPower 2656561 13 Charles II Street
Limited Phoenix Parkway
Corby
Nothampshire
NN17 1QT
Peterborough Power 2353599 Storeys Bar Road
Limited Peterborough
PE1 5NT
Regional Power Generators 2352390 Whetherby Road
Limited Scarcroft
Leeds
LS14 3HS
Fibrogen Limited 2547498 38 Clarendon Road
London W11 3AD
Elm Energy & Recycling (UK) 2516685 Sparklemore House
Limited Biddings Lane
Bilston
Wolverhampton
West Midlands
WV14 9NN
South East London 2489384 8 Headfort Place
</TABLE>
246
<PAGE>
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
Combined Heat London SW1X 7DH
and Power Limited
Keadby Generation 2729513 P.O. Box 3
Limited Lowgate House
Lowgate
Hull
HU1 1JJ
Eukan Energy 7716139 3rd Floor
33 Queen Street
Maidenhead
Berkshire
SL6 1NB
</TABLE>
247
<PAGE>
PART II
The Suppliers
Part A
Public Electricity Suppliers
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
Eastern Electricity plc 2366906 Wherstead Park
Wherstead
Ipswich
Suffolk
1P9 2AQ
East Midlands 2366923 398 Coppice Road
Electricity plc P.O. Box 4
Arnold
Nottingham
NG5 7HX
London Electricity plc 2366852 Templar House
81 - 87 High Holborn
London WC1V 6NU
Manweb plc 2366937 Sealand Road
Chester
CH1 4LR
Midlands Electricity 2366928 Mucklow Hill
Halesowen
West Midlands
B62 8BP
Northern Electric plc 2366942 Carliol House
Market Street
Newcastle upon Tyne
NE1 6NE
NORWEB plc 2366949 Talbot Road
Manchester
</TABLE>
248
<PAGE>
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
M16 0HQ
SEEBOARD plc 2366867 Grand Avenue
Hove
East Sussex
BN3 2LS
Southern Electric plc 2366879 Littlewick Green
Maidenhead
Berkshire
SL6 3QB
South Wales Electricity plc 2366985 Newport Road
St. Mellons
Cardiff
CF34 9XW
South Western Electricity 2366894 800 Park Avenue
plc Aztec West
Almondsbury
Bristol
BS12 4SE
Yorkshire Electricity 2366995 Wetherby Road
Group plc Scarcroft
Leeds
LS14 3HS
Part B
Second Tier Suppliers
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
National Power PLC 2366963 Windmill Hill Business Park
Whitehill Way
Swindon
Wiltshire SN5 6PB
</TABLE>
249
<PAGE>
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
PowerGen plc 2366970 53 New Broad Street
London EC2M 1JJ
Nuclear Electric plc 2264251 Barnett Way
Barnwood
Gloucester GL4 7RS
SEEBOARD plc 2366867
Grand Avenue
Hove
East Sussex
BN3 2LS
British Nuclear Fuels plc 1002607 Risley
Warrington
Lancashire WA3 6AS
Joseph Crosfield & Sons 48745 Bank Quay
Limited P.O. Box 26
Warrington
Cheshire
WA4 1AB
UML Limited 661900 P.O, Box 115
Port Sunlight
Wirral
Merseyside
L62 4ZG
Slough Electricity Supplies 2474514 234 Bath Road
Ltd Slough
SL1 4EE
Shell Power Limited 2559630 Shell-Mex House
Strand
London
WC2R 0DX
Energy Supply Contracts 172268 P.O. Box 178
One Melford Court
The Havens
</TABLE>
250
<PAGE>
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
Ransomes Europark
Ipswich
Suffolk IP3 9SZ
IMPKEMIX Energy Limited 2076043 The Heath
Runcorn
Cheshire WA7 4QT
CITIGEN Limited 2427823 22 St. Andrew Street
London EC4A 3AN
Marc Rich & Co. AG 3-12738 Baarerstrasse 37
CH6304 Zug
Switzerland
Accord Energy 2869629 152 Grovesnor Road
Limited London SW1V 3LJ
Eukan Energy
7716139 3rd Floor
Limited 33 Queen Street
Maidenhead
Berkshire
SL6 1NB
Elswick Petroleum 2749711 3rd Floor
33 Queen Street
Maidenhead
Berkshire
SL6 1NB
Altwood Petroleum 2728156 Chenier House
Limited Altwood Close
Maidenhead
Berkshire
SL6 4PP
</TABLE>
251
<PAGE>
Part C
Others
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
Electricite de France, - 3 Rue de Messine
Service National 75008 Paris
France
Scottish Power plc 117120
1 Atlantic Quay
Glasgow G2 8SP
Scotland
Scottish Hydro-Electric PLC 117119 16 Rothsay Terrace
Edinburgh EH3 7SE
Scotland
</TABLE>
252
<PAGE>
SCHEDULE 2
The Other Parties
<TABLE>
<CAPTION>
Registered Registered or
Name Number Principal Office
- ---- ------ ----------------
<S> <C> <C>
Barking Power Limited 2354681 Devonshire House
Mayfair Place
London W1X 5FH
Keadby Power 2548042 P.O. Box 3
Limited Lowgate House
Lowgate
Hull
HU1 1JJ
Hydro Electric 2487475 Royex House
Energy Limited Aldermanbury Square
London EC2V 7LD
Medway Power 2537903 Boston House
Limited The Little Green
Richmond Twp 1QE
Derwent Cogeneration 2650621 66 Buckingham Gate
Limited London SW1E 6AU
South East London 2489384 8 Headfort Place
Combined Heat and London SW1X 7DH
Power Limited
Cabah Energy 2759706 109 Strand
Limited London WC2E 1JN
Keadby Generation 2729513 P.O. Box 3
Limited Lowgate House
Lowgate
Hull
HU1 1JJ
Kingsnorth Power 2656343 190 Strand
Limited London Wc2R 1JN
</TABLE>
253
<PAGE>
<TABLE>
<S> <C> <C>
Fellside Heat and 2614535 Risley
Power Limited Warrington
Cheshire
Schlumberger 534821 1 Kingsway
Industries Limited london WC2B 6XH
Humber Power Limited 2571241 18 Savile Row
Limited London W1X 1AE
Eastern Generation 2529347 Wherstead Park
Services Limited Wherstead
Ipswich
Suffolk
IP9 2AQ
</TABLE>
254
<PAGE>
SCHEDULE 3
Form of Accession Agreement
THIS SUPPLEMENTAL AGREEMENT is made on [__________] BETWEEN:-
(1) [__________], a company incorporated [with limited liability] under the
laws of [___________] [(registered number [____________])] and having
its [registered] [principal] office at [___________] (the "New Party");
and
(2) [___________] (the "Nominee") on behalf of all the parties to the
Pooling and Settlement Agreement referred to below.
WHEREAS:-
(a) by an agreement dated 30th march, 1990 made between the Founder
Generators named therein (1), the Founder Suppliers named therein (2),
NGC Settlements Limited as Settlement System Administrator (3), Energy
Pool Funds Administration Limited as Pool Funds Administrator (45), The
National Grid Company plc as Grid Operator and Ancillary Services
Provider (5), and Scottish Power plc and Electricite de France, Service
national as Externally Interconnected Parties (6) (as amended, varied,
supplemented, modified or suspended, the "Pooling and Settlement
Agreement") the parties thereto agreed to give effect to and be bound
by certain rules and procedures for the operation of an electricity
trading pool and the operation of a settlement system; and
(b) the New Party has requested that it be admitted as a Party pursuant to
Clause 3 of the Pooling and Settlement Agreement and each of the
Parties hereby agrees to such admission.
NOW IT IS HEREBY AGREED as follows:-
1. Unless the context otherwise requires, word and expressions defined in
the Pooling and Settlement Agreement shall bear the same meanings
respectively when used herein.
2. The Nominee (acting on behalf of each of the Parties) hereby admits the
New Party as an additional Party under the Pooling and Settlement
Agreement on the terms and conditions hereof and with effect from
[insert effective date of admission].
3. The New Party hereby accepts its admission as a Party and undertakes
with the Nominee (acting on behalf of each of the Parties) to perform
and to be bound by the terms and conditions of the Pooling and
Settlement Agreement as a Party as from the [insert effective date of
admission].
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<PAGE>
4. For all purposes in connection with the Pooling and Settlement
Agreement the New Party shall as from the [insert effective date of
admission] be treated as if it had been a signatory of the Pooling and
Settlement Agreement as a [[Generator]/[Supplier]/[Externally
Interconnected Party]]*, and as if this Agreement were part of the
Pooling and Settlement Agreement, and the rights and obligations of the
Parties shall be construed accordingly.
5. This Agreement and the Pooling Agreement and Settlement Agreement shall
be read and construed as one document and references in the Pooling and
Settlement Agreement to the Pooling and Settlement Agreement (howsoever
expressed) shall be read and construed as references to the Pooling and
Settlement Agreement and this Agreement.
6. This Agreement shall be governed by and construed in all respects in
accordance with English law and the provisions of Clauses 83 and 84 of
the Pooling and Settlement Agreement shall apply hereto mutatis
mutandis.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first above written
[New Party]
By:
Notice details (Clause 75 of the Pooling and Settlement Agreement)
Address:
Telex number:
Facsimile number:
Attention:
[Nominee]
(for and on behalf of each of the parties to the Pooling and Settlement
Agreement)
By:
___________________________________________
* Delete/complete as appropriate
256
<PAGE>
Note: this form will require adaptation in the circumstances described in
Clauses 3.11 to 31.14 inclusive.
257
<PAGE>
SCHEDULE 4
The Accounting Procedure
PART A
PRELIMINARY
1. Definitions and Interpretation
PART B
THE PROVISION OF FINANCIAL INFORMATION
1. Budgets, Statements of Costs and Statements of Charges
2. Review and Audits
3. Auditors' opinion
4. Accounting Period
PART C
THE SETTLEMENT SYSTEM ADMINISTRATOR'S CHARGES
1. General
2. The Initial Period
3. Post-Initial Period
4. Corporate Overhead Charges and Purchases
5. Miscellaneous Charges and Fuel Security Costs
6. Second Tier System Changes
7. Allocation of Charges
8. Adjustment to Margin
9. Capital Expenditure
258
<PAGE>
PART D
ALLOCATION OF CHARGES
1. The settlement System Administrator's Charges
PART E
[NOT USED]
PART F
PRO-FORMA BUDGET
PART G
PRO-FORMA STATEMENT OF COSTS
PART H
PRO-FORMA STATEMENT OF CHARGES
259
<PAGE>
PART A
Preliminary
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions: in this Schedule, unless the context otherwise requires,
the words and expressions set out in this Section 1.1 shall bear the
meanings respectively set out herein:-
"1993/1994 Accounting Period" has the meaning given to that expression
i Section 6,1 of part C;
"Bought-in Supplies" means goods or services supplied to or acquired by
the Settlement System Administrator for the running of the Settlements
Business including, for the avoidance of doubt, goods or services
supplied by or acquired from any affiliate of the Settlement System
Administrator;
"Budget" means any budget prepared by the Settlement System
Administrator pursuant to Section 1.1 of Part B;
"Capital Charge" means, in respect of any Accounting Period or part
thereof, a sum equal to interest on the Capital Employed during such
period calculated at a rate of 2.5 per cent. per annum below the Base
Rate from time to time of National Westminster bank PLC during such
period;
"Capital Employed" means, in respect of any Accounting Period, the
Fixed Assets plus the Current Assets less the Current Liabilities;
"Capital Expenditure" means, in respect of any Accounting Period,
expenditure by the Settlement System Administrator on fixed assets
required for the purposes of the Settlements Business including assets
acquired on lease which are required by generally accepted accounting
principles to be capitalised;
"Cost base" means, in respect of any Accounting Period, the average
value of the current assets of the Settlement System Administrator
employed in the Settlements Business during such period determined by
the following formula:-
a+b
---
2
where "a"= the closing balance for current assets of the
Settlement System Administrator employed in the
Settlements Business for the Accounting Period
immediately prior to such period; and
260
<PAGE>
"b"= the closing balance for current assets of the
Settlement System Administrator employed in the
Settlements Business for such period as set out in
the audited accounts of the Settlements Business
provided that in the case of the first Accounting Period "a" shall
equal the balance for current assets of the Settlement System
Administrator employed in the Settlements business as at 1st June, 1990
a reported upon by the auditors of the Settlement System Administrator
in its opining to Pool Members issued pursuant to Section 3 of Part B;
"Current Liabilities" means, in respect of any Accounting Period, the
average value of the current liabilities of the Settlement System
Administrator incurred in the Settlements Business during such period
determined by the following formula:-
a+b
---
2
where "a"= the closing balance for current liabilities of the
Settlement System Administrator incurred in the
Settlements Business for the Accounting Period
immediately prior to such period; and
"b"= the closing balance for current liabilities of the
Settlement System Administrator incurred in the
Settlements Business for such period as set out in
the audited accounts of the Settlements Business
provided that in the case of the first Accounting Period "a: shall
equal the balance for current liabilities of the Settlement System
Administrator employed in the Settlements Business as at 1st June, 1990
as reported upon by the auditors of the Settlement System Administrator
in its opinion to Pool Members issued pursuant to Section 3 of Part B;
"Depreciation" means, in respect of any Accounting Period, the
aggregate value of all depreciation on assets owned or employed by the
Settlement System Administrator in the Settlements Business, such
assets being depreciated in accordance with the accounting policies of
the Settlement System Administrator for such period as stated in the
audited accounts of the Settlement System Administrator for such period
and treated as depreciation in accordance with the terms of this
Agreement;
"Efficiencies" means, in respect of any Accounting Period in the Post
Initial Period, the amount (if any) by which the Cost Base in such
Accounting Period is less than the Cost Base in the immediately
preceding Accounting Period (the "First Period") after adjustments on a
pound for pound basis to any difference between such two Cost Bases to
offset movements from the Cost Base in the First Period due to the Rate
of
261
<PAGE>
Inflation, Value For Money Audit Adjustments, Required Adjustments and
any other matters beyond the control of the Settlement System
Administrator and changes in the accounting principles or practices of
the Settlement System Administrator made during the Accounting Period
in question;
"Fixed Assets" means, in respect of any Accounting Period, the average
value of the fixed assets of the Settlement System Administrator
employed in the Settlements Business during such period determined by
the following formula:_
a+b
---
2
where "a"= the closing balance for fixed assets of the
Settlement System Administrator employed in the
Settlements Business for the Accounting Period
immediately prior to such period; and
"b"= the closing balance for fixed assets of the
Settlement System Administrator employed in the
Settlements Business for such period as set out in
the audited accounts of the Settlements Business
provided that in the case of the first Accounting Period "a: shall
equal the balance for fixed assets of the Settlement System
Administrator employed in the Settlements Business as at 1st June, 1990
as reported upon by the auditors of the Settlement System Administrator
in its opinion to Pool Members issued pursuant to Section 3 of Part B;
"Handling Charge" means, in respect of any amount, 2 per cent. of such
amount;
"individual Limit means, in respect of any Accounting Period during the
Initial Period, such amount as, when added to the Total Operating Costs
in such Accounting Period, is equal to 6 per cent. of the sum of such
amount and such Total Operating Costs and, in respect of any Accounting
Period during the Post-Initial Period, such amount as when added to the
Revenue Base in such accounting Period is equal to 6 per cent. of the
sum of such amount and such Revenue Base;
"Non-Second Tier System" means a metering system at premises eligible
for supply under a Second Tier Supply Licence in the authorized area of
a Supplier holding a PES Licence but not being a Metering System in
respect of which a Second Tier Supplier is the Registrant;
"Overall Limit" means, in respect of Capital Expenditure in any
Accounting Period, (pound)250,000, as the same may b increased from the
Effective Date by the Rate of Inflation;
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<PAGE>
"Post-Initial Period" means the period commencing on the day following
the last day of the Accounting Period at the end of which the Initial
Period ends;
"Rate of Inflation" means, in respect of any Accounting Period, the
average percentage increase in earnings for service industries during
such period determined by reference to the service industries indicator
in the Average Earnings Index for All Employees In Main Industrial
Sectors currently published by HMSO in the Employment Gazette or in the
event such index is no longer published in such form or by HMSO, any
replacement or alternative index therefor which is appropriate in the
circumstances;
"Required Adjustment" means the aggregate cost of all adjustments taken
into account by the Settlement System Administrator during any
Accounting Period in order to give effect to any increase in revenue
expenditure required to be made by the Settlement System Administrator
arising from changes to be made to the Settlement System, the Hardware
or Software or in any other respect, in any such case as agreed from
time to time by the Executive Committee with the Settlement System
Administrator (and, in default of agreement, the dispute shall be
referred to arbitration in accordance with Clause 83);
"Revenue Base" means, in respect of any Accounting Period:-
(i) the Cost Base for the immediately preceding Accounting Period
as identified by the Statement of Costs for the immediately
preceding Accounting Period submitted pursuant to Section 1.4
of Part B; plus
(ii) Value For Money Audit Adjustments made during such Accounting
Period; plus
(iii) Required Adjustments made during such Accounting Period; plus
(iv) Depreciation in such Accounting Period; Plus
(v) Efficiencies which are permitted to be included in any
Statement of Costs pursuant to Section 3.6 of Part C; plus
(vi) a sum equal to that percentage which is the Rate of Inflation
for such Accounting Period of the aggregate of the amounts
referred to in (i) to (iii) (inclusive) of this definition;
plus
(vii) any other costs or expenses which are beyond the control of
the Settlement System Administrator, in any such case as
agreed from time to time by the Executive Committee with the
Settlement System Administrator (and, in
263
<PAGE>
default of agreement, the dispute shall be referred to
arbitration in accordance with Clause 83);
"Second Tier System" means any Metering System from which the
Settlement System Administrator or any Second Tier Agent is required to
collect, aggregate, adjust or transmit date for the purposes of a
supply pursuant to a Second Tier Supply Licence;
"Second Tier Suppliers' System Charge" means the amount determined by
the Executive Committee for the purposes of Section 6.3 of Part C;
"Specified Area" means an area of the Settlements Business in respect
of which a Value For Money Audit may be performed, being any one of the
following:-
(i) data acquisition - Generators,
(ii) data acquisition - Suppliers,
(iii) production computer facilities,
(iv) standby computer facilities,
(v) Settlement System development,
(vi) client interface - electronic mail/reporting,
(vii) support activities, that is, any other activities not referred
to above,
and any category of expenditure included in the most recent Budget or
Statement of Costs;
"Statement of Charges" means the statement of charges required to be
submitted by the Settlement System Administrator pursuant to Section
1.11 of Part B in the form or substantially in the form set out in Part
H or such other form as the Executive Committee and the Settlement
System Administrator may agree showing the total charges to be made by
the Settlement System Administrator on all Pool Members in accordance
with Part C;
"Statement of Costs" means the statement of costs required to be
submitted by the Settlement System Administrator pursuant to Section 1
of Part B setting out the actual and accrued expenditure incurred by
the Settlement System Administrator in any period which shall be
substantially in the form set out Part G or such other form as the
Executive Committee and the Settlement System Administrator may agree;
264
<PAGE>
"Supplier's System Charge" means the amount determined by the Executive
Committee in accordance with the provisions of Section 6.4 of Part C;
"Total Operating Costs" means, in respect of any Accounting Period or
part thereof:-
(i) the total expenditure properly incurred or accrued by or on
behalf of the Settlement System Administrator in operating the
Settlements Business in such period or part thereof (other
than those referred to in (ii) and (iii) below); plus
(ii) all Depreciation in such period on all assets owned or
employed by the Settlement System Administrator in the
Settlements Business; plus
(iii) all other expenditure properly incurred or accrued during such
period which, under this Schedule, is permitted to be included
in any Statement of Costs or required to be dealt with in
accordance with the Accounting Procedure;
"Total Second Tier System Charges" means, in respect of any Specified
Accounting Period (as defined in Section 6.1 of Part C), the aggregate
of the costs, expenses and charges incurred by all Second Tier Agents
in respect of the relevant Specified Accounting Period and relating to
the collection, aggregation. adjustment and transmission of data from
Second Tier Systems of when the collection, aggregation, adjustment and
the transmission of data from Second Tier Systems is performed by the
Settlement System Administrator the costs, expenses and charges
directly incurred by the Settlement System Administrator (including,
for the avoidance of doubt, the costs described in Clause 60.16.10 and
Clause 60.17.7) plus the deficit (if any) or (as the case may be) less
the surplus (if any) in the amount of Total Second Tier System Charges
recovered for the immediately preceding Specified Accounting Period
carried forward in accordance with the provisions of Section 6.6 of
Part C;
"Total Sum Due" means, in respect of any Accounting Period, the total
aggregate amount chargeable by the Settlement System Administrator in
accordance with Section 2.1 or 3.2 of Part C;
"Value For Money Audit" means an independent appraisal of the
performance of management in seeking to secure economy, efficiency and
effectiveness in the use of resources at its disposal (but not any
appraisal of policy objectives) carried out in accordance with the most
recently published auditing guideline on value for money audits
published by the Institute of Chartered Accountants in England and
Wales; and
"Value For Money Audit Adjustments" means the aggregate value of all
changes in the Cost Base required to be taken into account by the
Settlement System Administrator during any Accounting Period in order
to give effect to the conclusions resulting from a Value For Money
Audit commissioned pursuant to Section 2.2.2 of Part B, if necessary,
as resolved pursuant to Section 2.2.7 of Part B.
265
<PAGE>
1.2 Interpretation: in this Schedule, except where the context otherwise
requires, references to a particular Appendix, Part, Section,
sub-section, paragraph or sub-paragraph shall be a reference to that
Appendix or Part of this Schedule or, as the case may be, that Section,
sub-section, paragraph or sub-paragraph of the relevant Part.
PART B
The Provision of Financial Information
1. BUDGETS, STATEMENTS OF COSTS AND STATEMENTS OF CHARGES
Budgets
1.1 Budgets: not earlier than six nor later than three months prior to the
first day of each Accounting Period (other than the first) the
Settlement System Administrator shall prepare and submit to the
Executive Committee a Budget for such Accounting Period. Such Budget
shall be indicative only but prepared on a best estimate basis.
1.2 Contents of Budgets: each Budget (other than the first) shall compare
each item or category of budgeted expenditure shown therein with the
forecast expenditure in respect of such item or category for the
remainder of the then current Accounting Period and report any salient
differences between any such item or category for the remainder of the
then current Accounting Period and report any salient differences
between and such forecast expenditures and the budgeted expenditure in
respect of each such item or category and the budgeted expenditure in
respect of each such item or category in the immediately preceding
Budget.
1.3 Form of Budgets: each Budget shall be substantially in the form of that
set out in Part F (or in such other form as the Settlement System
Administrator and the Executive Committee may from time to time agree.
Statement of Costs
1.4 Statements of Costs: no later than one month following the date in any
Accounting Period of the publication of the audited accounts for the
Settlements Business for the previous Accounting Period, the Settlement
System Administrator shall prepare and submit to the Executive
Committee and all Pool Members a Statement of Costs for such previous
Accounting Period. The audited accounts of the Settlement System
Administrator and the auditors' management letter, to the extent it
related to the economy, efficiency and effectiveness of the Settlement
System Administrator in carrying out its duties, shall accompany each
Statement of Costs for each entire Accounting Period.
266
<PAGE>
1.5 Form of Statement of Costs: the Statement of Costs for any Accounting
Period shall attribute actual and accrued expenditure for such period
against, inter alia, each of the categories and sub-categories set out
in the corresponding Budget for such Accounting Period.
1.6 Accompanying Report: each Budget and Statement of Costs for an entire
Accounting Period submitted to the Executive Committee and, in the case
of the Statement of Costs, Pool Members pursuant to Section 1.1 or 1.4
shall be supported by a written report of the Settlement System
Administrator commenting in reasonable detail upon the matters
comprised in the categories of expenditure included in such Budget or
Statement of Costs drawing attention to and giving reasons for any
unusual commitment or item of expenditure proposed to be incurred or
which had been incurred and, in the case of a Statement of Costs,
explaining the difference (if material) between:-
1.6.1 the amount set against each item or category therein; and
1.6.2 the amount set against each corresponding item or category in
the immediately preceding Budget.
1.7 Quarterly Statement of Costs: the Settlement System Administrator
shall, during the Initial Period, issue Statements of Costs on a
quarterly basis to Pool Members and the Executive Committee. Each such
quarterly Statement of Costs shall include a forecast of commitments
and expenditure in respect of each item or category for the entire
current Accounting Period based (where appropriate) on actual and
accrued commitments and expenditure already incurred in such Accounting
Period.
1.8 Basis of preparation: all Statements of Costs other than a Statement of
Costs in respect of an entire Accounting Period shall be unaudited but
prepared on a best estimates basis.
1.9 Six-monthly Statement of Costs: the Settlement System Administrator may
and shall, if so requested by the Executive Committee, during the
Post-Initial Period, issue to Pool Members a Statement of Costs every
six months. A Statement of Costs for six months of any Accounting
Period shall attach a forecast of commitments and expenditure in
respect of each item or category for the entire current Accounting
Period based (where appropriate) on actual and accrued commitments and
expenditure already incurred in such Accounting Period.
1.10 Accounting Practices: each Budget and Statement of Costs shall be
prepared on the basis of the accounting principles and practices used
to draw up the most recent audited accounts of the Settlement System
Administrator and consistently applied. If any Statement of Costs for
an entire Accounting Period is not prepared on such basis, the
Settlement System Administrator shall prepare and submit to the
Executive
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<PAGE>
Committee and all Pool Members a pro-forma set of audited accounts of
the Settlement System Administrator for such entire Accounting Period
which is prepared on the basis of the accounting principles and
practices used to prepare the relevant Statement of Costs. Any changes
in the accounting principles and practices or their method of
application used to prepare audited accounts of the Settlement System
Administrator shall be noted in the next following Budget or Statement
of Costs, as the case may be.
1.11 Statement of Charges: a Statement of Charges shall accompany each
Statement of Costs.
1.12 Bad debts: the total cost of any bad debts of the Settlement System
Administrator arising in any Accounting Period may be taken into
account by the Settlement System Administrator in its Statement of
Costs for such Accounting Period or any subsequent Accounting Period
and accordingly recovered as part of Total Operating Costs or Revenue
Base for any such Accounting Period.
2. REVIEWS AND AUDITS
2.1 Review: at the written request of the Executive Committee, the
Settlement System Administrator shall review with the Executive
Committee the Budget for the forthcoming Accounting Period or any
Statement of Costs. The Settlement System Administrator will, if
requested by the Executive Committee, submit a revised Budget,
following any such review taking into account changes requested by the
Executive Committee.
2.2 Audits:
2.2.1 the Settlement System Administrator shall, upon written
request of the Executive Committee, review with the Executive
Committee, any Specified Area with a view to agreeing whether
the Specified Area represents value for money to Pool Members
in terms of economy, efficiency and effectiveness in the use
of the resources available to the operation of the Settlement
System by the Settlement System Administrator.
2.2.2 If, in respect of any Specified Area which is the subject of
review pursuant to Section 2.2.1, agreement on any of the
matters referred to in Section 2.2.1 cannot be reached between
the Settlement System Administrator and the Executive
Committee within three months after the Executive Committee
having first made a request in respect of such Specified Area
pursuant to Section 2.2.1 (or such longer period as the
Settlement System Administrator and the Executive Committee
may agree), the Executive Committee may require an independent
firm of Chartered Accountants of international repute (which
may be the Pool Auditor - but not the same person or persons
within
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such firm) to conduct a Value For Money Audit in respect of
the Specified Area and to report in writing to the Executive
Committee and the Settlement System Administrator. The terms
of engagement (including the objectives and scope of the work
to be performed and the form of report to be issued) for any
such Value For Money Audit shall be set by the Executive
Committee in accordance with this Schedule and in consultation
with the Settlement System Administrator. The firm conducting
any Value For Money Audit shall be required to owe a duty of
confidentiality to the Settlement System Administrator except
to the extent necessary to conduct such Value For Money Audit
provided that nothing in this Section 2.2.2 shall prevent,
restrict or qualify the disclosure to Pool Members or the
Executive Committee in such report of such information as
ought reasonably to be disclosed.
2.2.3 The Executive Committee shall not be entitled to require a
Value for Money Audit unless and until:-
(a) the Executive Committee shall have given the
Settlement System Administrator at least one month's
notice of its intention to commission such Value For
Money Audit and the scope thereof; and
(b) the Settlement System Administrator shall within that
period either:-
(i) have failed to prepare and submit to the
Executive Committee detailed proposals for
the implementation of a cost-efficiency
programme in respect of the Specified Area
proposed to be the subject of such Value For
Money Audit; or
(ii) have submitted such detailed proposals or
notified the Executive Committee that no
such cost-efficiency programme is
appropriate, and the Executive Committee
shall have notified the Settlement System
Administrator that it rejects such detailed
proposals or (as the case may be) the
Settlement System Administrator's
notification that a cost-efficiency
programme is not appropriate.
2.2.4 No more than two Value For Money Audits shall be performed in
any Accounting Period. No more than one Value For Money Audit
shall be performed in respect of the same Specified Are in any
period of three consecutive Accounting Periods. A Value For
Money Audit may only be performed in respect of a Specified
Area and may not be performed on the Settlements Business on a
general basis or in respect of Bought-in Supplies.
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2.2.5 The Settlement System Administrator shall be given the
opportunity to examine and comment on the report in respect of
any Value For Money Audit before it is submitted in final
form. Such final form shall, if the auditor commission to
carry out the Value For Money Audit shall think fit, take into
consideration the comments of the Settlement System
Administrator and otherwise include an indication of the
response and proposed action of the Settlement System
Administrator.
2.2.6 Upon agreement being reach as described in Section 2.2.1 or
upon receipt of a report pursuant to Section 2.2.2, the
Settlement System Administrator shall (if so required by and
in consultation with the Executive Committee) give effect to
such agreement or (as the case may be) the conclusions, if
any, set out in such report as soon as is reasonably
practicable following the date of such agreement or report.
2.2.7 If the Settlement System Administrator shall in good faith
consider the conclusions in any report referred to in Section
2.2.2 to be incorrect or inaccurate or any recommended
remedial action impractical or inappropriate the same shall be
referred for resolution to arbitration in accordance with
Clause 83.
2.3 Access: for the purposes of any such report as if referred to in
Section 2.2.2 the Settlement System Administrator shall permit the
relevant auditor access to its company books, accounts and vouchers and
the relevant auditor shall be entitled to require from the Settlement
System Administrator's officers such information and explanations as
are necessary for the performance of the Value For Money Audit (but,
for the avoidance of doubt, the auditor shall not have access to any
data used, information held or records kept in relation to any Pool
Member without such Pool Member's prior written consent).
3. AUDITORS' OPINION
The Statement of Costs in respect of an entire Accounting Period to be
sent to the Executive Committee pursuant to Section 1.4 shall be
accompanied by a report from the auditors of the Settlement System
Administrator, considering whether, in such auditors' opinion:-
(a) the Statement of Costs is in agreement with the underlying
books and records of the Settlement System Administrator; and
(b) Total Operating Costs and Depreciation have been properly
extracted from the audited financial statements.
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Such auditors' report shall also contain such other matters as the
Executive Committee may agree with the auditors of the Settlement
System Administrator.
4. ACCOUNTING PERIOD
The first Accounting Period shall run from (and including) 31st March,
1990 to (and including) 31st March, 1991. Thereafter, unless agreed by
the Settlement System Administrator and the Executive Committee each
Accounting Period shall be for a period of 12 months. In the event that
the Settlement System Administrator wishes to change its accounting
reference date it shall give due notice thereof to the Executive
Committee which shall agree to enter into an amending agreement to this
Agreement in order to give effect to the same at the cost and expenses
of the Settlement System Administrator.
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PART C
The Settlement System Administrator's Charges
1. GENERAL
The Settlement System Administrator shall be entitled to recover from
all Pool Members the charges set out in this Part C in respect of its
operation of the Settlement System.
2. THE INITIAL PERIOD
2.1 Initial Period - Annual Charges: in respect of each Accounting Period
which begins during the Initial Period, the Settlement System
Administrator shall be entitled to recover from Pool Members annual
charges equal to the aggregate of the following amounts:-
2.1.1 Total Operating Costs as identified by the Statement of Costs
of such period submitted pursuant to Section 1.4 of Part B;
2.1.2 the Margin; and
2.1.3 the Capital Charge.
2.2 Recovery of Charges: the due proportion (determined in accordance with
Section 2.4) of the annual changes of the Settlement System
Administrator referred to in Section 2.1 payable by each Pool Member
for each Accounting Period in the Initial Period shall be recovered by
monthly payments in advance from each Pool Member or, where the
Settlement System Administrator and the Pool Member otherwise agree,
semi-annually in advance (calculated on a best estimate and reasonable
basis to be one twelfth or, as the case may be, one half of the annual
charges payable by such Pool Member by reference to the most recent
Statement of Costs). Except for the first month or, as the case may be,
other period the Settlement System Administrator shall advise each Pool
Member of such amount by invoice despatched to each Pool Member
approximately 15 days prior to the first day of each month or other
period. Such invoice shall be paid no later than the first day of such
month or such other period. In the case of the first month or, as the
case may be, other period, each Pool Member shall pay the amount
advised in the relevant invoice within 15 days after the invoice date.
Each Pool Member shall pay all amounts due hereunder in sterling in
cleared funds in full without set off or counterclaim, withholding or
deduction of any kind whatsoever but without prejudice to any other
remedy. All charges are exclusive of United Kingdom Value Added Tax
which shall be added to such charges, if applicable. In the event of
any dispute regarding charges in any month, no Pool Member may withhold
payment of any invoiced amount but may refer such dispute to
arbitration in accordance with Clause 83 following payment.
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2.3 Interest on non-payment: if any amount due to the Settlement System
Administrator is not received on the due date the Pool Member required
to pay such amount shall pay interest on the Settlement System
Administrator on such amount from and including the date of default to
the date of actual payment (as well after as before judgment) at the
rate which is 4 per cent. per annum above the Base Rate from time to
time during each period of default of National Westminster Bank PLC.
2.4 Payment of Charges: during the Initial Period each Pool Member shall
pay its due proportion of the Settlement System Administrator's charges
for each Accounting Period determined in accordance with Part D.
2.5 Amount of Charges: the amount of each such payment during the Initial
Period shall be estimated initially by reference to the Budget and
thereafter adjusted as required by this Part C. The Settlement System
Administrator shall adjust the amount of each such payment by reference
to the most recent Statement of Costs (whether quarterly or otherwise)
and so as to take into account Total Operating Costs, the Margin
thereon and the Capital Charge during the previous quarter and
anticipated costs in respect of the same during the current quarter and
shall recover from, or as appropriate, credit to each Pool Member its
due proportion of the difference between actual and anticipated Total
Operating Costs, the Margin thereon and the Capital Charge and payments
received in respect of such costs, margin and charges in each case for
the previous and the current quarter. Such recovery or credit shall
take place by reference to an adjustment to each Pool Member's charges
for the current quarter.
3. POST-INITIAL PERIOD
3.1 Post-Initial Period - Annual Charges: in respect of each Accounting
Period which begins after the Initial Period, the Settlement System
Administrator shall be entitled to recover the charges set out in
Section 3.2.
3.2 Amount of Charges: the charges referred to in Section 3.1 shall be the
aggregate of:-
3.2.1 the Revenue Base and the Margin for the relevant Accounting
Period (as identified by the Statement of Costs for such
Accounting Period to be submitted pursuant to Section 1.4 of
Part B); and
3.2.2 the Capital Charge for such Accounting Period.
3.3 Recovery of Charges: annual charges for the Post-Initial Period shall
be recovered mutatis mutandis for Pool Members, in accordance with
Section 2.2 with the substitution of the reference to "Section 2.1" by
"Section 3.2".
3.4 Interest on non-payment: the provisions of Section 2.3 shall apply to
any amount due to the Settlement System Administrator which is not
received on the due date.
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3.5 Adjustment of Charges: the Settlement System Administrator may adjust
(either up or down) its charges in any Accounting Period during the
Post-Initial Period within one month following the publication of a
Statement of Costs. Such adjustment may only take into account:-
3.5.1 the Revenue Base, the Margin and Capital Employed for the
immediately preceding Accounting Period; and
3.5.2 the Settlement System Administrator's best estimate of its
charges for the current Accounting Period taking into account
the Cost Base for the immediately preceding Accounting Period.
That part of the adjustment referred to in Section 3.5.1 shall be made
only in respect of the charges applicable to persons who were Pool
Members during the immediately preceding Accounting Period and shall
take into account changes in Pool Membership during such preceding
Accounting Period.
3.6 Sharing of Efficiency: the Settlement System Administrator shall be
entitled to the benefit of all Efficiencies and, accordingly, to charge
Pool Members the amount of all Efficiencies by including them in
Budgets and Statements of Costs during the Post- Initial Period in the
following manner. The amount of any Efficiency arising in any
Accounting Period shall be identified in the Statement of Costs for
such Accounting Period submitted pursuant to Section 1.4 of Part B and
shall be taken into account in the Statement of Costs for the two
successive Accounting Periods thereafter. Accordingly, the amount of
any Efficiency may be included in any Statement of Costs for the two
Accounting Periods following that in which the Efficiency is
identified. In the Statement of Costs for the third consecutive
Accounting Period and all following Accounting Periods thereafter the
amount of such Efficiency shall be eliminated.
4. CORPORATE OVERHEAD CHARGES AND PURCHASES
4.1 Corporate Overhead Charges: the Settlement System Administrator may
take into account in any Budget or Statement of Costs (and consequently
its charges to Pool Members) all corporate overhead charges payable by
the Settlement System Administrator to its immediate holding company of
any other affiliate which is solely a property holding company provided
such corporate overhead charges are reasonable and in due proportion to
the corporate overhead charges payable by other affiliates of the
Settlement System Administrator or divisions of such affiliates as
reported upon by the auditors of the Settlement System Administrator.
4.2 Goods of Services: purchases of goods or services from affiliates of
the Settlement System Administrator shall be on arm's length terms and
included in Total Operating Costs or Revenue Base. If requested by the
Executive Committee, the Settlement
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<PAGE>
System Administrator shall procure its auditors to confirm that such
purchases have been contracted and paid for on an open market value
basis.
5. MISCELLANEOUS CHARGES AND FUEL SECURITY COSTS
5.1 Accounting Procedure: for the purposes of this Agreement, all costs,
expenses and other amounts required by this Agreement (or any other
agreement or document executed or prepared pursuant to this Agreement
and for this purpose approved by the Executive Committee) to be dealt
with "in accordance with the Accounting Period" shall be deemed to be a
cost and expense of the operation of the Settlement System and shall be
recovered by the Settlement System Administrator as part of Total
Operating Costs or Revenue Base save that, where the same are treated
as Revenue Base, they shall be regarded as costs beyond the control of
the Settlement System Administrator which may recover the same in full
from Pool Members who shall be obliged to pay the actual amount of such
costs and expenses.
5.2 Fuel Security: except to the extent recoverable under any other
provision of this Schedule, any additional costs necessarily incurred
by the Settlement System Administrator in running the Settlements
Business during a Security Period shall be regarded as beyond the
control of the Settlement System Administrator, which may recover the
same in full from Pool Members provided such costs have been verified
as additional costs by the auditors of the Settlement System
Administrator. Pool Members shall be obliged to pay the actual amount
of such costs and expenses.
5.3 No Liability to finance: the Settlement System Administrator shall not
be required to finance the Electricity Arbitration Association or the
Executive Committee.
6. SECOND TIER SYSTEM CHARGES
6.1 The provisions set out in this Section 6 of Part C and Section 1.3.3 of
Part D of this Schedule (prior to their amendment and restatement with
effect from midnight on 31st March, 1994) and the definitions of
"Second Tier Site" (now "Second Tier System") and "Total Second Tier
System Charges" (prior to their amendment and restatement with effect
from midnight on 31st March, 1994) shall continue to apply but only in
respect of the Accounting Period beginning on 1st April, 1993. The
following provisions of this Section 6 (as amended and restated with
effect from midnight on 31st March, 1994) shall apply in respect of
each of the Accounting Periods beginning on 1st April, 1994, 1st April,
1995, 1st April, 1996 and 1st April, 1997 (each a "Specified Accounting
Period").
6.2 In respect of each of the Specified Accounting Periods the Settlement
System Administrator shall be entitled to recover as part of Total
Operating Costs or Revenue Base the Total Second Tier System Charges
for the Specified Accounting Period.
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<PAGE>
6.3 Subject to Section 6.6, the Second Tier Suppliers' System Charge for a
Specified Accounting Period shall be determined by the Executive
Committee as the amount per annum to be charged to each Second Tier
Supplier in respect of each Second Tier System supplied by such
Supplier.
6.4 Subject to Section 6.6, the Suppliers' System Charge for a Specified
Accounting Period shall be determined by the Executive Committee as the
amount per annum to be charged to each Supplier (other than a Second
Tier Supplier) in respect of each Non-Second Tier System in that
Supplier's authorized area.
6.5 The second tier system charge payable by a Supplier in respect of each
calendar month in a Specified Accounting Period (the "Supplier's Second
Tier Charge") shall be calculated as follows:-
6.5.1 in respect of each Second Tier Supplier, in accordance with
the following formula:-
Second Tier Suppliers' System Charge x NOSP
------------------------------------
12
where NOSP is the total number of Second Tier Systems supplied
by such Supplier at the beginning of the relevant calendar
month;
6.5.2 in respect of each Supplier (other than a Second Tier
Supplier), in accordance with the following formula:-
Suppliers' System Charge x NMS
------------------------
12
where NMS is the total number of Non-Second Tier Systems in
that Supplier's authorized area as at the beginning of that
month;
6.5.3 for these purposes, the numbers of Second Tier Systems and of
Non-Second Tier Systems as at the beginning of each calendar
month shall be as notified to the Settlement System
Administrator (who shall then notify the Director) by the
relevant Suppliers (the first such notifications to be made no
later than 1st May, 1994 and the Settlement System
Administrator being entitled, in the absence of any
notification to the contrary, to rely on the last such
notification and other information in its possession) and, in
the event of any dispute between the Parties, shall be as
determined by the Director (whose determination shall be final
and binding); and
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<PAGE>
6.5.4 only those Second Tier Systems in respect of which data
collection costs are incurred by Second Tier Agents or the
Settlement System Administrator shall be used in determining
the number of Second Tier Systems.
6.6 If in respect of any Specified Accounting Period (other than the one
beginning on 1st April, 1997) the aggregate of all second tier system
charges payable pursuant to Sections 6.5.1 and 6.5.2 and received by
the Settlement System Administrator is less than or (as the case may
be) more than the Total Second Tier System Charges for such Specified
Accounting Period the deficit or (as the case may be) the surplus shall
be carried forward to the immediately succeeding Specified Accounting
Period and shall be included in the calculation of the Total Second
Tier System Charges therefor, and in making any determination pursuant
to Section 6.3 or 6.4 the Executive Committee shall use its reasonable
endeavors to ensure that the aggregate of all second tier system
charges payable pursuant to Sections 6.5.1 and 6.5.2 in respect of that
immediately succeeding Specified Accounting Period will equal the
anticipated Total Second Tier System Charges therefor. There shall be
no carry forward of any such deficit or surplus arising in respect of
the Specified Accounting Period beginning on 1st April, 1997.
7. ALLOCATION OF CHARGES
7.1 Allocation: the Settlement System Administrator shall allocate its
charges amongst Pool Member in accordance with Part D.
7.2 New and Former Pool Members: any Pool Member which is a Pool Member for
part only of any Accounting Period shall pay charges on an interim
basis of such amount as the Executive Committee estimates to be
reasonable for such Accounting Period on the basis of the allocation of
charges set out in Part D. Adjustments to charges on all Pool Members
as a result of existing Pool Members leaving or new Pool Members
joining will be made following, and shall be set out in, the Statement
of Charges published for the relevant Accounting Period pursuant to
Section 1.11 of Part B whereupon the Pool Members and/or former Pool
Members shall be required to pay such additional amount or be entitled
to such reimbursement as may be determined in accordance with this
Agreement by an adjustment to charges in the then current Accounting
Period.
8. ADJUSTMENT TO MARGIN
The Parties acknowledge and agree that the Margin has been determined
by the Parties based upon:-
8.1 the Net Margin of the Settlement Business falling within the
range 15 to 20 per cent.; and
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8.2 the Return on Capital Employed of the Settlements Business
falling within the range 15 to 20 per cent.; and
8.3 the accounts of the Settlement System Administrator being
prepared on the basis of the Historic Cost Convention.
For these purposes "Net Margin" means profit before interest and tax
divided by turnover and "Return on Capital Employed" means profit
before interest and tax divided by capital employed.
In the event that either of the factors in Section 8.1 and 8.2 should
fall outside its respective range or the factor in Section 8.3 should
change, the Executive Committee and the Settlement System Administrator
agree to meet to discuss the basis of the Margin and, if necessary, to
agree in good faith a revised Margin based upon the requirements of the
Settlements Business at such time. The Director shall be invited to
attend any such meeting.
During the Initial Period the Net Margin should not be taken into
account in determining whether the Margin should be adjusted.
9. CAPITAL EXPENDITURE
9.1 Capital Expenditure (1): the following provisions apply to Capital
Expenditure by the Settlement System Administrator in respect of the
Settlements Business:-
9.1.1 save as provided below, Capital Expenditure by the Settlement
System Administrator which may be recovered by Depreciation
charged to Pool Members shall require the prior approval of
the Executive Committee, such approval to take into account an
appropriate sharing of the Efficiencies arising from such
Capital Expenditure;
9.1.2 Capital Expenditure which may be recovered by Depreciation
charged to Pool Members specified in any Budget shall be
regarded as approved by the Executive Committee unless the
Executive Committee notifies the Settlement System
Administrator to the contrary within one month after receipt
of such Budget;
9.1.3 in any Accounting Period the Settlement System Administrator
may incur Capital Expenditure which may be recovered by
Depreciation charged to Pool Members without the need to
consult or obtain the approval of the Executive Committee up
to a maximum of the Individual Limit for each item of Capital
Expenditure and a maximum of the Overall Limit for all items
of Capital Expenditure and in the event of the Settlement
System Administrator incurring
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<PAGE>
such Capital Expenditure, it shall notify the Executive
Committee as soon as practicable thereafter;
9.1.4 the Settlement System Administrator shall be entitled to incur
Capital Expenditure which may be recovered by Depreciation
changed to Pool Members of the any amount without the need to
obtain the approval of the Executive Committee, in
circumstances where:-
(a) the Settlement System Administrator would be in
breach of its duty under the NGC Transmission License
to implement, maintain and operate a Settlement
System unless such Capital Expenditure were incurred;
and
(b) it has not reached agreement with the Executive
Committee on such Capital Expenditure within a
reasonable period of time.
9.2 Capital Expenditure (2): Capital Expenditure not falling within Section
9.1.1 to 9.1.4 may not be charged as Depreciation to Pool Members.
279
<PAGE>
PART D
Allocation of Charges
1. THE SETTLEMENT SYSTEM ADMINISTRATOR'S CHARGES
1.1 Total Sum Due: in respect of each Accounting Period, the Total Sum Due
shall be allocated amongst Pool Members in accordance with the
following provisions of this Part D.
1.2 Payment of Total Sum Due: each Pool Member shall be obliged to pay the
amount allocated to it in accordance with this Part D. The total
aggregate amount allocated to all Pool Members in respect of any
Accounting Period shall equal the Total Sum Due in respect of such
Accounting Period.
1.3 Allocation of Total Sum Due: the Total Sum Due in respect of each
Accounting Period shall be allocated amongst Pool Members in the
following manner:-
1.3.1 first, in order to recover discrete costs referable to each
Pool Member during such Accounting Period:-
(a) the costs, as reasonably determined by the Settlement
System Administrator, associated with any change to
the Software necessitated by such Pool Member's
request for data from Settlement additional to that
which is generally provided to other Pool Members of
the same class or for reporting of data in a format
different from that in which data is generally
provided to other Pool Members of the same class
(which costs shall, in the first Accounting Period
that they are charged to such Pool Member, have added
to them a single lump sum payment for maintenance
equal to 40 per cent. of the costs of such change, as
reasonably determined by the Settlement System
Administrator) shall be allocated to such Pool
Member; and
(b) the costs for the use by such Pool Member of
electronic mail, the provision and maintenance of
communication links from Outstations and any other
services procured or provided by the Settlement
System Administrator which are directly referable to
such Pool Member shall, as far as practicable, be
allocated to such Pool Member;
1.32. secondly:-
(a) each Generator shall pay ___500 (or such other amount
as the Executive Committee and the Settlement System
Administrator may agree) for
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each of its Generating Units in respect of which
standing data has been submitted;
(b) each Pool Member shall pay 750 (or such other amount
as the Executive Committee and the Settlement System
Administrator may agree) for each metering System in
respect of which it is the Registrant;
(c) subject as provided in paragraphs (d) to (h)
inclusive below, each Pool Member shall pay an annual
membership fee as follows:-
Category Fee
-------- ---
(A) A Supplier with a maximum demand
at any time during such
Accounting Period (as reasonably
determined by the Executive
Committee) of less than 200MW or
a Generator with aggregate
Registered Capacity of less than
50MW (other than a Supplier or
Generator referred to in (B)
below)
(pound)9,000
(B) A Supplier with a maximum demand
at any time during such
Accounting Period (as reasonably
determined by the Executive
Committee) of less than 200MW or
a Generator with aggregate
Registered Capacity of less than
50MW, in either case which
requires to have delivered to it
only its own trading information (pound)2,500
(ii) A Supplier with a maximum demand
at any time during such
Accounting Period (as reasonably
determined by the Executive
Committee) of 200MW or more up to
(but excluding) 2000MW or a
Generator with aggregate
Registered Capacity of 50MW or
more up to (but excluding) 1000MW (pound)20,000
(iii) Large
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A Supplier with a maximum demand
at any time during such
Accounting Period (as reasonably
determined by the Executive
Committee) of 2000MW or more or a
Generator with aggregate
Registered Capacity of 1000MW or
more (pound)45,000
(d) any Pool Member which is both a Generator and a
Supplier shall pay only one annual membership fee,
being that fee which is the greater of its annual
membership fee as a Generator and its annual
membership fee as a Supplier (and, if both are the
same amount, such Pool Member shall pay only its
annual membership fee as a Generator): such fee shall
continue to be payable regardless of any change
during the relevant Accounting Period in the
capacity(ies) in which such Pool Member participates
as a Pool Member;
(e) unless otherwise resolved by the Executive Committee
with respect to the relevant Pool Member, a Pool
Member with no demand or generation shall not pay any
membership fee and, if the Executive Committee shall
so resolve, shall pay only that annual membership fee
referable to a Pool Member falling within the
relevant sub-category of paragraph (c)(i) above;
(f) if, in its reasonable opinion, the Executive
Committee considers:-
(i) any Pool Member (not being a Pool Member
referred to in paragraph (e) above) to be
insignificant in terms of generation or
demand, it may waive the membership fee for
such Pool Member until further notice; and
(ii) it inequitable or otherwise inappropriate to
levy the full amount of the annual
membership fee that would otherwise be
payable by any Pool Member, it may waive all
or part of such fee on such terms and for
such period(s) as it reasonably sees fit;
(g) (i) any Pool Member falling within sub-category
(B) of paragraph (c)(i) above which wishes
to receive data by electronic mail shall be
required to pay an additional membership fee
of (pound)800;
(ii) any Pool Member which wishes to receive data
by courier shall be required to pay an
additional membership fee of (pound)1,000;
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(h) the Executive Committee may from time to time amend
the categories of membership and the fees (with the
consent of the Settlement System Administrator, such
consent not to be unreasonably withheld or delayed);
(i) the annual charges referred to in this Section 1.3.2
shall be adjusted in relation to each Pool Member,
Generator or Supplier, as the case may be, by
reference to the number of days during each
Accounting Period for which such Party was a Pool
Member and (where appropriate) the number of
Generating Units or Metering Systems allocated to it
during such period;
1.3.3 thirdly, in respect of a Specified Accounting Period (as
defined in Section 6.1 of Part C), each Pool Member which is a
Supplier shall pay its Supplier's Second Tier Charge in
respect of each calendar month in such Accounting Period; and
1.3.4 fourthly, 100 per cent. of the balance of the Total Sum Due
during any Accounting Period not recovered pursuant to
Sections 1.3.1 or 1.3.2 shall be allocated amongst all Pool
Members during each Quarter of such Accounting Period by
reference to the Total Sum Due attributed to such Quarter by
the Settlement System Administrator and Contributory Shares of
each Pool Member during such Quarter.
1.4 Prima facie evidence: the Settlement System Administrator's
determination of the allocation of all costs during any Accounting
Period shall, in the absence of manifest error, be prima facie evidence
thereof.
1.5 Contributory Shares: the Settlement System Administrator shall advise
each Pool Member of its Contributory Share and how such Contributory
Share is calculated in the Statement of Charges sent to such Pool
Member.
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<PAGE>
PART E
[Not Used]
284
<PAGE>
PART E
Pro-forma Budget
<TABLE>
<CAPTION>
Estimated Proposed
Out-turn Budget Variance Schedule
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Production
Development
Capitalized
Second Tier
Chief Executive
Arbitration Association
Administration Costs
Depreciation & Asset
Write Off
-------- ------ --------
Total Cost
-------- ------ --------
Capital
======== ====== ========
</TABLE>
285
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Reference in
Forecast Supporting
Out-turn Budget Variance Commentary
-------- ------ -------- ----------
<S> <C> <C> <C> <C>
Staff Costs
Software Maintenance
Hardware Maintenance
NGC Recharges
Computer Consumables
Communication Links
Professional Indemnity
Consultancy
External Auditor
Other
Sundry Income
---------- ---------- ----------
Total Production Costs
Capital
========== ========== ==========
</TABLE>
286
<PAGE>
SCHEDULE 2
<TABLE>
<CAPTION>
Reference in
Supporting
Forecast Budget Variance Commentary
-------- ------ -------- ----------
<S> <C> <C> <C> <C>
Staff Costs
Hardware Maintenance
Computer Consumables
Property Costs
Consultancy
Other Costs
Capitalized Costs
---------- ---------- ----------
Total Development Costs
========== ========== ========== TOTAL RULES
</TABLE>
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<PAGE>
SCHEDULE 3
<TABLE>
<CAPTION>
Reference in
Supporting
Forecast Budget Variance Commentary
-------- ------ -------- ----------
<S> <C> <C> <C> <C>
Eastern Electricity Board plc
East Midland plc
London Electricity plc
MANWEB plc
Midlands Electricity plc
Northern Electricity
NORWEB plc
SEEBOARD plc
South Wales Electricity plc
South Western Electricity plc
Yorkshire Electricity
---------- ---------- ----------
Total Second Tier Costs
---------- ---------- ---------- TOTAL RULES
</TABLE>
288
<PAGE>
SCHEDULE 4
<TABLE>
<CAPTION>
Forecast Budget Variance
-------- ------ --------
<S> <C> <C> <C>
Staff Costs
Accommodation
Office Services
Professional Services
Consultancy
Income ( ) ( )
Total Chief Executive's
Executive Committee
Expenses
Consultancy
Sub-Committees
Expenses
Consultancy
Total Committee Costs
Total Pool Executive Costs
</TABLE>
289
<PAGE>
SCHEDULE 5
<TABLE>
<CAPTION>
Reference in
Supporting
Forecast Budget Variance Commentary
-------- ------ -------- ----------
<S> <C> <C> <C> <C>
Staff Costs
Property Costs
Building Maintenance
Other Services
Consultancy Costs
Insurance & Legal Costs
Corporate Overheads
---------- ---------- ----------
Total Administration Costs
========== ========== ========== TOTAL RULES
</TABLE>
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<PAGE>
PART G
Pro-forma Statement of Costs
<TABLE>
<CAPTION>
Actual Out-turn
Budget for previous for previous
Accounting Period Accounting Period
----------------- -----------------
<S> <C> <C>
1. Revenue
(a) Process Costs Internal
Computer Maintenance
Software Maintenance
Process Consumables
Communication Links
Other
(b) Process Costs External (NGC recharges)
CDCS
Porthole
Metering Collection etc.
SMP & LOLP Broadcast
SID Operation
Consultancy
(c) Process Costs External
Insurance
SMP & LOLP Broadcast
SID Operation
Consultancy
(d) Business Costs Internal
Salaries Process
Salaries Development
Property
Insurance
Consultancy
Other
</TABLE>
291
<PAGE>
<TABLE>
<CAPTION>
Actual Out-turn
Budget for previous for previous
Accounting Period Accounting Period
----------------- -----------------
<S> <C> <C>
(e) Business Costs External
Corporate Overhead
Other
(f) Other Payments
Depreciation
Interest
(g) Other Revenue Costs
External Auditor
Contingency Provision
Other
2. Capital
(a) Schemes
as approved
(b) Global
(as approved in excess of (pound)250,000 and other)
3. Executive Committee Costs
Disputes Procedure
Executive Expenses
4. Revenue Base
5. Capital Employed
6. Capital Charge
7. Handling Charge
8. Efficiencies
</TABLE>
292
<PAGE>
<TABLE>
<CAPTION>
Actual Out-turn
Budget for previous for previous
Accounting Period Accounting Period
----------------- -----------------
<S> <C> <C>
9. Margin
</TABLE>
293
<PAGE>
PART H
Pro-forma Statement of Costs
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Contributory Period to which Amount
Share charges relate
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
</TABLE>
294
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SCHEDULE 5
Form of Admission Application
The Executive Committee for the
Pooling and Settlement System in England and Wales
[Date]
Dear Sir,
1. We [insert full legal name and address of registered/principal office of
applicant] refer to the Pooling and Settlement Agreement for the electricity
industry in England and Wales dated 30th March, 1990 (as amended, varied,
supplemented, modified or suspended, the "Pooling and Settlement Agreement").
2. Unless the context otherwise requires, words and expressions defined in the
Pooling and Settlement Agreement shall bear the same meanings respectively when
used herein.
3. We hereby apply to be admitted as an additional party to the Pooling and
Settlement Agreement pursuant to Clause 3 thereof. We wish to participate as a
[[Generator]/[Supplier]/[Externally Interconnected Party]]*.
4. We confirm that:-
(A)** (i) we have been granted and have in full force and
effect a Generation License or we have made and have
current an application for such a license; or
(ii) we are exempted from the obligation to hold a
Generation License by reason of an exemption under
section 5 of the Act; or
(iii) we have entered into an Interconnection Agreement
under which we will, subject to becoming a Pool
Member, have the right (whether alone or together
with others) then or at any time in the future to use
all or any part of an External Interconnection for
the delivery of electricity to the NGC Transmission
System; or
(iv) we are acting as the agent for a person generating or
proposing to generate electricity on terms whereby we
have the exclusive right to all the output of those
Generating Unit(s) of such person and in respect of
which we have been appointed agent;
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<PAGE>
(B) (i) we have been granted and have in full force and effect a
PES License or a Second Tier Supply License or we have made
and have current an application for such a license; or
(ii) we are exempted from the obligation to hold a PES
License or (as the case may be) a Second Tier Supply
License by reason of an exemption under section 5 of
the Act; or
(iii) we have entered into an Interconnection Agreement
under which we will, subject to alone or together
with others) then or at any time in the future to use
all or any part of an External Interconnection for
the taking of electricity from the NGC Transmission
System;
(C) (i) we are [or [________] (being our agent and a person which
the Executive Committee has confirmed in writing to us is
acceptable to the Executive Committee, a copy of which
confirmation is acceptable to the Executive Committee, a copy
of which confirmation is enclosed) is]* registered for United
Kingdom Value Added Tax purposes;
(ii) we have [or our agent has]* so arranged matters that
any payment receivable by us under or pursuant to the
Pooling and Settlement Agreement will constitute for
United Kingdom Value Added Tax purposes the
consideration for a taxable supply made in the United
Kingdom by us [or our agent]* as a taxable person in
the United Kingdom in the course of furtherance of a
business;
(iii) we have [or our agent has]* so arranged matters that
any payment required to be made by us under or
pursuant to the Pooling and Settlement Agreement will
constitute for United Kingdom Value Added Tax
purposes the consideration for a taxable supply made
in the United Kingdom to us [or our agent]*; and
(iv) in any case where any electricity has been or will be
generated or produced by us outside the United
Kingdom, we have [or our agent has]* so arranged
matters that any import thereof for the purposes of
or otherwise in connection with the Pooling and
Settlement Agreement will constitute for United
Kingdom Value Added Tax purposes an importation or
acquisition of goods solely by us [or our agent]* and
so not by any other Party.
(D) as a Party we shall accede to the Initial Settlement Agreement
in accordance with its terms.
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<PAGE>
5. We hereby represent and warrant to the Executive Committee (for itself and on
behalf of all the Parties) that:-
(A) we are duly organized and validly existing under the laws of
the jurisdiction of our organization or incorporation;
(B) We have the power to execute and deliver our Accession
Agreement and any other documentation relating to that other
agreements as are required thereby and to perform our
obligations hereunder or thereunder and we have taken all
necessary action to authorize such execution, delivery and
performance; and
(C) such execution, delivery and performance do not violate or
conflict with any law applicable to us, any provision of our
constitutional documents, any order or judgment of any court
or other agency of government applicable to us or any of our
assets or any contractual restriction on or affecting us or
any of our assets.
We confirm that these representations and warranties will also be true and
correct in all material respects at the date of our admission as a New Party.
6. We enclose the application fee of (pound)[________________].****
7. We accept and agree to be bound by the terms of Clause 3 of the Pooling and
Settlement Agreement.
Yours faithfully,
___________________________________________
duly authorized for and on behalf of
[insert full legal name of the New Party]
________________________________________________________________________________
* Complete/delete as appropriate.
** Include paragraph (A) if applying to be admitted as a Generator.
*** Include paragraph (B) if applying to be admitted as a Supplier.
**** Insert current application fee prescribed by the Executive Committee.
297
<PAGE>
SCHEDULE 6
Form of Pool Membership Application
The Executive Committee for the
Pooling and Settlement System in England and Wales.
[Date]
Dear Sir,
1. We [insert full legal name and address of registered/principal office of
applicant] refer to the Pooling and Settlement Agreement for the electricity
industry in England and Wales dated 30th March, 1990 (as amended, varied,
supplemented, modified or suspended, the "Pooling and Settlement Agreement").
2. Unless the context otherwise requires, words and expressions defined in the
Pooling and Settlement Agreement shall bear the same meanings respectively when
used herein.
3. We hereby apply to be admitted as a Pool Member pursuant to Clause 8.2 of the
Pooling and Settlement Agreement. We wish to participate as a
[[Generator]/[Supplier]/[and an External Pool Member]]*.
4. We confirm that:-
(A)**
(i) we have been granted and have in full force and
effect a Generation License; or
(ii) we are exempted from the obligation to hold a PES
License (as the case may be) a Second Tier Supply
License by reason of an exemption under section 5 of
the Act; or
(iii) we have entered into an Interconnection Agreement
under which we will, subject to becoming a Pool
Member, have the right (whether alone or together
with others) then or at any time in the future to use
all or any part of an External Interconnection for
the taking of electricity from the NGC Transmission
System;
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<PAGE>
(iv) we are acting as the agent for a person generating or
proposing to generate electricity on terms whereby we
have the exclusive right to all the output of those
Generating Unit(s) of such person and in respect of
which we have been appointed agent;
(B)*** (i) we have been granted and have in full force and
effect a PES License or a Second Tire Supply License;
or
(ii) we are exempted from the obligation to hold a PES
license or (as the case may be) a Second Tier Supply
License by reason of an exemption under section 5 of
the Act; or
(iii) we have entered into an Interconnection Agreement
under which we will, subject to become a Pool Member,
have the right (whether alone or together with
others) then or at any External Interconnection for
the taking of electricity from the NCG Transmission
System;
(C) with effect form the date of our admission as a Pool Member,
we will accede as a party to the Funds Transfer Agreement and
to the Deed to Indemnity in favor (inter alia) of the Chief
Executive in accordance with their respective terms;
(D) on or before our admission as a Pool Member, we will open a
Settlement Account and comply with all other applicable
requirements of Schedule 11 to the Pooling and Settlement
Account;
(E) (i) we are [or [___________] (being our agent and a
person which the Executive Committee has confirmed in
writing to us is acceptable to the Executive
Committee, a copy of which confirmation is enclosed)
is]* registered for United Kingdom Value Added Tax
purposes;
(ii) we have [or our agent has]* so arranged matters that
any payment receivable by us under or pursuant to the
Pooling and Settlement Agreement will constitute for
a taxable supply made in the United Kingdom by us [or
our agent]* as a taxable person in the United Kingdom
in the course of furtherance of a business;
(iii) we have [or our agent has]* so arranged matters that
any payment required to be made by us under or
pursuant to the Pooling and Settlement Agreement will
constitute for United Kingdom Value Added Tax
purposes for consideration for a taxable supply made
in the United Kingdom to us [or our agent]*; and
(iv) in any case where any electricity has been or will be
generated or produced by us outside the United
Kingdom, we have [or our agent has]* so arranged
matters that any import thereof for the purposes of
or otherwise in connection
299
<PAGE>
with the Pooling and Settlement Agreement will
constitute for United Kingdom Value Added Tax
purposes an importation or acquisition of goods
solely by us [or our agent]* and so not by any other
Party;
(F)****
Option 1
We have entered into and have in full force and effect (or,
prior to our admission as a Pool Member, will enter into and
have in full force and effect) all appropriate Connection
Agreement;
-or-
Option 2
all appropriate Connection Agreement with [______________],
being the relevant Externally Interconnected Party, in
relation to [______________], being the relevant External
Interconnection, are in full force and effect.
5. We enclose:-
[insert details of evidence in support of fulfillment of the
other Pool Membership Conditions set out in Clause 8.3 of the
Pooling and Settlement Agreement].
Yours faithfully,
_______________________________________________
duly authorized for and on behalf of
[insert full legal name of the applicant]
________________________________________________________________________________
* Complete/delete as appropriate.
** Include paragraph (A) if applying to be admitted as a Generator.
*** Include paragraph (B) if applying to be admitted as a Supplier.
**** Include Option 2 if applying to be admitted as an External Pool
Member. Otherwise include Option 1.
300
<PAGE>
SCHEDULE 7
Form of Escrow Agreement
THIS AGREEMENT is made on [_______________________], 1990
BETWEEN:-
(1) NGC SETTLEMENTS LIMITED (registered number 2444282) whose registered
office is situate at National Grid House, Sumner Street, London SEI 9JU
for itself and on behalf of the Pool Member (as defined in the Pooling
and Settlement Agreement hereinafter referred to) acting through the
Executive Committee (as hereinafter defined) (the "Settlement System
Administrator" which expression shall include the Settlement System
Administrator's successors in title); and
(2) [___________________________]LIMITED (registered number
[________________]) whose registered office is situated at
[___________________________] (the "Custodian").
WHEREAS:-
(A) by a Pooling and Settlement Agreement (the "Pooling and Settlement
Agreement") details of which are set out in Schedule A the Settlement
System Administrator has agreed to act as Settlement System
Administrator and operate a settlements system requiring the use of
certain computer package(s) comprising computer programs and related
systems;
(B) certain technical information and documentation describing or otherwise
relating to the said computer programs and related systems is required
for the understanding, maintaining, modifying and correcting of the
said computer programs and related systems; and
(C) the Settlement System Administrator acknowledges that in certain
circumstances the Executive Committee may require possession of the
said technical information and documentation, up-to-date and in good
order
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:-
"Director" means the Director General of Electricity Supply;
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<PAGE>
"Executive Committee" means the Executive Committee established under
the Pooling and Settlement Agreement and "Committee Member" means a
member of the Executive Committee;
"Material" means the source code and load (machine executable) modules
and the technical information manuals and other documentation described
in Schedule B;
"Modification" means the technical information and documents relating
to all modifications, updates and changes to the Material; and
"Receptacle" means the receptacle to contain a copy of the Material
pursuant to Clause 3.1
1.2 Unless the context otherwise requires, words and expression defined in
the Pooling and Settlement Agreement shall bear the same meanings
respectively when used herein.
2. DEPOSIT
2.1 Forthwith upon execution and delivery of this Agreement, the Settlement
System Administrator will deposit and the Custodian will accept as
custodian for the Pool Members (acting through the Executive Committee)
a copy of the Material.
2.2 The Custodian will place the copy of the Material in the Receptacle.
2.3 The Custodian shall bear no obligation or responsibility to any person
to determine the existence, relevance, completeness, accuracy or any
other or any other aspect of the Material and/or Modifications. The
Custodian shall have no responsibility to determine that whatever is
deposited or accepted by it for deposit is or is not Material and/or
Modifications.
3. MODIFICATIONS
3.1 The Settlement System Administrator will ensure that the Material is
kept fully up-to-date and reflects all Modifications and will deposit a
copy of all Modifications with the Custodian as soon as the same is
available.
34.2 The Settlement System Administrator will advise the Executive Committee
of all Modifications and will confirm in writing that a copy of all
Modifications has been delivered to the Custodian and the Custodian
shall as soon as possible confirm receipt thereof in writing to the
Executive Committee.
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<PAGE>
4. RELEASE TO THE EXECUTIVE COMMITTEE
4.1 The Custodian shall forthwith release to the Executive Committee (or a
person nominated by the Executive Committee) the copy(ies) of the
Material and/or all the Modifications:-
4.1.1 upon the written request of the Executive Committee if the
Settlement System Administrator has resigned or has been
removed as Settlement System Administrator under the Pooling
and Settlement Agreement; or
4.1.2 at any time, upon the written request of the Director.
4.2 Any written request of the Executive Committee referred to in Clause
4.1.1 shall be in the form of a statutory declaration by one or more
Committee Members setting out the grounds on which release is sought
and exhibiting such documentation in support thereof as the Custodian
shall reasonably require.
4.3 When any dispute shall arise as to the occurrence of the event set out
in Clause 4.1.1, such dispute will be referred at the instance of
either the Settlement System Administrator, the Custodian or the
Executive Committee to the Director whose decision shall be final and
binding.
5. CONFIDENTIALITY
The Settlement System Administrator will pay the Custodian's fees as
detailed in Schedule C as amended from time to time by written
agreement between the parties.
7. TERMINATION
7.1 This Agreement shall terminate upon the release of the copy of the
Material and copies of all Modification in accordance with Clause 4.1.
7.2 This Agreement may be terminated by the Custodian by giving not less
than 90 days' written notice to both the Executive Committee and the
Settlement System Administrator.
7.3 The Settlement System Administrator may not terminate this Agreement
without the consent of the Executive Committee first being given in
writing. In the event of such consent being given, this Agreement may
be terminated by the Settlement System Administrator giving not less
than 90 days' written notice to the Custodian.
7.4 Upon termination under the provisions of Clause 7.2 or 7.3 the
Custodian will deliver the copy(ies) of the Material and all the
Modifications to the Settlement System
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<PAGE>
Administrator (unless jointly instructed to the contrary by the
Settlement System Administrator and the Executive Committee).
7.5 Termination of the Agreement for whatever reason will not relieve the
Custodian from the obligations of confidentiality contained in Clause
5.
8. TESTS
The Executive Committee shall be entitled to require the Custodian to
carry out such tests which in the opinion of the Custodian would
reasonably establish that the Material and Modification contain true
and accurate versions of the source codes. Any reasonable charges and
expenses incurred by the Custodian will be paid by the Settlement
System Administrator.
9. NOTICES
9.1 Any notice or other communication to be given by one party to the other
party under, or in connection with the matters contemplated by, this
Agreement shall be addressed to the recipient and sent to the address,
telex number of facsimile number of such other party given in this
Agreement for the purpose and marked for the attention of the person so
given or to such other address, telex number and/or facsimile number
and/or marked for such other attention as such other party may from
time to time specify by notice given in accordance with this Clause to
the party giving the relevant notice or other communication to it.
9.2 Any notice or other communication to be given to the Executive
Committee under, or in connection with the matters contemplated by,
this Agreement shall be sent to the Secretary at such address, telex
number or facsimile number as the Secretary may from time to time
specify by notify given in accordance with this Clause to the parties.
9.3 Any notice or other communications to be given by one party to the
other party under, or in connection with the matters contemplated by,
this Agreement shall be in writing and shall be given letter delivered
by hand or sent by first class prepaid post (airmail if overseas) or
telex or facsimile, and shall be deemed to have been received:-
9.3.1 in the case of delivery by hand, when delivered; or
9.3.2 in the case of first class prepaid post, on the second day
following the day of posting or (if sent airmail overseas or
from overseas) on the first day following the day of posting;
or
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<PAGE>
9.3.3 in the case of telex, on the transmission of the automatic
answer-back of the addressee (where such transmission occurs
before 1700 hours on the day of transmission) and in any other
case on the day following the day of transmission; or
9.3.4 in the case of facsimile, on acknowledgement by the address's
facsimile receiving equipment (where such acknowledgement
occurs before 1700 hours on the day of acknowledgement) and in
any other case on the day following the day of
acknowledgement.
10. GOVERNING LAW
This Agreement shall be governed by, and construed in all respects in
accordance with, English law.
305
<PAGE>
SCHEDULE A
Details of the Pooling and Settlement Agreement
Pooling and Settlement Agreement dated 30th March, 1990 made between the Founder
Generators named therein (1), the Founder Suppliers named therein (2), NGC
Settlements Limited as Settlement Systems Administrator (3), Energy Pool Funds
Administration Limited as Pooling Funds Administrator (4), The National Grid
Company plc as Grid Operator and Ancillary Services Provider (5) and Scottish
Power plc and Electricite de France, Service
National as Externally Interconnected Parties (6).
SCHEDULE B
The Material
SCHEDULE C
The Custodian's Fees
1. Initial fee
2. Receptacle fee
3. Annual fee
4. Release fee
306
<PAGE>
IN WITNESS whereof this Agreement has been duly executed the day and year fist
above written
As Settlement System Administrator
(for itself and on behalf of the Pool Members
acting through the Executive Committee)
THE COMMON SEAL OF )
NCG SETTLEMENTS )
LIMITED was hereunto )
affixed in the )
presence of:- )
Director
Director/Secretary
Address:
Telex No:
Facsimile No:
Attention:
As Custodian
[ ]
Address:
Telex No:
Facsimile No:
Attention:
By:
307
<PAGE>
SCHEDULE 8
The Hardware and Software
Part A
The Hardware
AT NATIONAL GRID HOUSE
3 X 8830 VAX Processors
2 x HSC20 Disk Controllers
3 X LPS40 Printers
11 X RA90 Disk Drives
1 x TA79 Magnetic Tape Drives
1 X TB79 Magnetic Tape Drives
2 X RU20 Optical Disk Drives
7 X DEMSA Routers
1 X Decnet Monitor
16 X VT340 Terminals
5 X DEC Terminal Servers
6 X PS2 IBM PCs
12 X Quatro Modems
1 X IBM Comms Gear
1 X 3100 Processors
AT FAIRHAM HOUSE
3 X 6000-420 VAX Processors
2 X HSC70 Disk Controllers
3 X LPS40 Printers
11 X RA90 Disk Drives
1 X TA79 Magnetic Tape Drives
1 X TB79 Magnetic Tape Drives
2 X RU20 Optical Disk Drives
7 X DEMSA Routers
1 X Decnet Monitor
24 X VT340 Terminals
5 X DEC200 Terminal Servers
6 X PS2 IBM PCs
8 X Quatro Modems
1 X IBM Comms Gear
1 X 3100 Processors
308
<PAGE>
Part B
Developed Software
SD-Scicon Settlement Application Software
Landis and Gyr Software
Central Data Collection Systems
LOLP Software
Part C
Limited Software
ORACLE
Digital VMS Operating System
Landis and Gyr Software
LOLP Software
LOLP Software
309
<PAGE>
SCHEDULE 9
THE POOL RULES
SEE SEPARATELY
PRINTED VOLUME
310
<PAGE>
SCHEDULE 10
THE POOL RULES
The Secretary of the Executive Committee for the Pooling and Settlement System
in England and Wales
(copied to:
(A) Settlement System Administrator; and
(B) the Pool Funds Administrator).
[Date]
Dear Sir,
We [insert full legal name and address of registered/principal office of
applicant] refer to the Pooling and Settlement Agreement for the electricity
industry in England and Wales dated 30th March, 1990 as amended, varied,
supplemented, modified or suspended, (the "Pooling and Settlement Agreement").
Unless the context otherwise requires, words and expressions defined in the
Pooling and Settlement Agreement shall bear the same meanings respectively when
used herein.
We hereby give notice pursuant to Clause 8.7 of the Pooling and Settlement
Agreement that we are resigning as a Party with effect form the date falling 28
days after receipt by you of this Resignation Notice.
We confirm that, in giving this notice of resignation, we are not and will not
be in breach of any of the restrictions on resignation set our in Clause 8.8 of
the Pooling and Settlement Agreement.
We [enclose]/[confirm that we have already provided]* such notices if any) as
are required to be given by us pursuant to the provisions of Part XV of the
Pooling and Settlement Agreement.
810
<PAGE>
We acknowledge that our resignation as a Party is without prejudice to our
accrued rights and liabilities and any rights and liabilities which may accrue
to us in relation to the period during which we were a Party under the Pooling
and Settlement Agreement, the Funds Transfer Agreement or any agreement referred
to in Clause 8.8.1(c) of the Pooling and Settlement Agreement.
Yours faithfully,
__________________________________
duly authorized for and on behalf of
[insert full legal name of Party]
_______________________________________________
*Complete/delete as appropriate
811
<PAGE>
SCHEDULE 11
Billing and Settlement
PART 1
PRELIMINARY
1. Definitions and Interpretation
PART 2
ESTABLISHMENT OF SYSTEMS
2. Payments Calendar
3. Information Systems
4. Banking System
5. Establishment of Trusts
6. Pool Ledger Accounts
[Sections 7 to 14 (inclusive) not used]
PART 3
SECURITY COVER AND CREDIT MONITORING
15. Security Cover
16. Credit Monitoring
PART 4
BILLING AND PAYMENT PROCEDURES
17. Receipt and Verification of Information
18. Advice Notes
19. Payment Procedure
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<PAGE>
20. Alternative Payment Procedure
21. Payment Default
22. Confirmation Notices
23. Payment Errors
24. Enforcement of Claims
25. Credit Facility: Payment Defaults
26. Credit Facility: General
Annex 1 - Form of Advice Note
Annex 2 - Form of Confirmation Notice
Annex 3 Part 1 - Form of Settlement Account Designation
Part 2 - Form of Change of Settlement Account
Annex 4 - Form of Letter of Credit
813
<PAGE>
SCHEDULE 11
Billing and Settlement
PART 1
PRELIMINARY
1. DEFINITION AND INTERPRETATION
1.1 Definitions: in this Schedule, except where the context otherwise
requires:-
"Advice Note" means a statement substantially in the form and
containing the information set out in Annex 1 (or in such other form or
containing such further information as may from time to time be
specified by the Executive Committee) issued in the name of the Pool
Funds Administrator to a Pool Member or the Ancillary Services
Provider;
"Approved Credit Rating" means, in relation to a Pool Member, a
short-term debt rating of not less than Al by Standard and Poor's
Corporation or a rating of not less than P1 by Moody's Investors
Service or an equivalent rating from any other reputable credit rating
agency approved by the Executive Committee;
"Banking System" means the banking system described in Section 4, for
the transfer of funds from Pool Debtors to Pool Creditors in accordance
with this Schedule, as amended or replaced from time to time in
accordance with the provisions of the Agreement;
"Billing System" means the systems and procedures described in Sections
18 and 22 for the issuing of Advice Notes and Confirmation Notices by
the Pool Funds Administrator to Pool Members and the Ancillary Services
Provider, as amended or replaced from time to time in accordance with
the provisions of the Agreement;
"CHAPS" means the Clearing House Automated Payments System;
"Collection Account" means an account denominated in sterling
maintained by the Pool Funds Administrator at a Town Clearing branch of
a Settlement Bank, and designated from time to time as a Collection
Account in accordance with Section 4;
"Collection Account" means an account denominated in sterling
maintained by the Pool Funds Administrator at a Town Clearing branch of
a Settlement Bank, and designated from time to time as a Collection
Account in accordance with Section 4;
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<PAGE>
"Confirmation Notice" means a statement substantially in the form and
containing the information set out in Annex 2 (or in such other form or
containing such further information as may from time to time be
specified by the Executive Committee) issued in the name of the Pool
Funds Administrator to a Pool Member of the Ancillary Services
Provider;
"Credit Facility" means the credit facility in a principal amount of up
to (pound)20,000,000 provided to the Pool Funds Administrator by
Barclays Bank PLC (acting through its branch at 54 Lombard Street,
London EC3 9EX) with effect from 1st January, 1993 as from time to time
extended, renewed or modified and any other facility provided to the
Pool Funds Administrator by Barclays Bank PLC or any other bank
(approved by the Executive Committee) whether in substitution for or in
addition to the same in any such case or terms approved by the
Executive Committee;
"Default Interest Rate" means:-
(i) a rate per annum determined by the Pool Funds Administrator to
be equal to the aggregate of:-
(a) 4 per cent, per annum; and
(b) the Pool Banker's base lending rate from time to
time;
(ii) such other rate as the Executive Committee may from time to
time determine;
"Facility Bank" means Barclays Bank PLC (acting through its branch at
54 Lombard Street, London EC3 PEX) or such other bank as may from time
to time provided a Credit Facility;
"Funds Transfer Agreement" means the agreement of that name dated 30th
March, 1990 and made between Energy Pool Funds Administration Limited,
Barclays Bank PLC, the Pool Members named therein and The National Grid
Company plc as Ancillary Services Provider, as amended, varied,
supplemented, modified or suspended from time to time in accordance
with the terms hereof and thereof;
"Funds Transfer Business" means the business of the Pool Funds
Administrator in operating the Funds Transfer System and providing the
Services;
"Funds Transfer Hardware" has the meaning ascribed to it in Schedule
15;
"Funds Transfer Software" has the meaning ascribed to it in Schedule
15;
"Funds Transfer System" means the Banking System, the Billing System
and the Information Systems;
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"Information Systems" means the information systems described in
Section 3 for the transfer of information to be given by or to the Pool
Funds Administrator in connection with the Funds Transfer Administrator
in connection with the Funds Transfer Business, as amended or replaced
from time to time in accordance with the provisions of the Agreement;
"Letter of credit" means an unconditional irrevocable standby letter of
credit substantially in the form set out in Annex 4 (or such other form
as the Executive Committee may approve) issued for the account of a
Supplier in sterling in favor of the Pool Funds Administrator as
trustee on the trusts set out in Section 5 by any United Kingdom
clearing bank or any other bank which has a long term debt rating of
not less than single A by Standard and Poor's Corporation or by Moody's
Investors Service, or such other bank as the Executive Committee may
approve, and which shall be available for payment at a Town Clearing
branch of the issuing bank;
"Notification Date" means, in respect of any Settlement Day, the day
specified in the Payments Calendar as the day on which the Settlement
Run shall be required to be delivered by the Settlement System
Administrator to the Pool Funds Administrator for that Settlement Day;
"Notified Payment" means a payment notified in accordance with Section
18 by the Pool Funds Administrator to a Pool Member or the Ancillary
Services Provider as being a payment required to be cleared through the
Pool Clearing Account;
"Notified Payments System" means the system to be established by
Section 19 for the settling of Notified Payments, as amended or
replaced from time to time in accordance with the provisions of the
Agreement;
"Payment Date" means, in relation to any Settlement Day, the date fixed
in accordance with Section 2 upon which Notified Payments in respect of
supplies of electricity and the provision of Ancillary Services must be
settled in accordance with this Schedule;
"Payment Calendar" means the calendar prepared and issued in accordance
with Section 2 showing a Notification Date and a Payment Date in
respect of each Settlement Day;
"Pool Accounts" means the Pool Clearing Account, the Pool Borrowing
Account, the Pool Reserve Account and the Collection Accounts and such
other accounts as may be established in accordance with sub-section
4.2;
"Pool Banker" means Barclays Bank PLC or such other person nominated
form time to time by the Executive Committee as Pool Banker and
appointed as Pool Banker;
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"Pool Borrowing Account" means the account of that title in the name of
the Pool Funds Administrator with the Facility Bank which may from time
to time be opened in respect of the Credit Facility;
"Pool Clearing Account" means the account in the name of the Pool Funds
Administrator (holding as trustee on the trusts set out in Section 5)
with the Pool Banker to which Notified Payments are required to be
transferred for allocation to Pool Creditors in accordance with their
respective entitlements;
"Pool Creditor" means each Pool Member and the Ancillary Services
Provider to whom moneys are payable pursuant to the terms of this
Schedule other than a Supplier in respect of (i) amounts owning to it
by another Supplier pursuant to the operation of sub-section 21.1;
"Pool Debt" means, in respect of a Pool Member or the Ancillary
Services Provider, the aggregate amount payable by such Pool Member or
the Ancillary Services Provider pursuant to the terms of this Schedule;
"Pool Debtor" means each Pool Member the Ancillary Services Provider,
but in either case only where it is required to make payment under this
Schedule;
"Pool Ledger Accounts" means the accounting records required to be
maintained by the Pool Funds Administrator in accordance with Section 6
for the recording of transactions settled in accordance with this
Schedule;
"Pool Reserve Account" means the account established pursuant to
sub-section 4.2 for the purpose of holding a cash deposit which may be
used in or towards clearing the Pool Clearing Account in accordance
with Section 21;
"Pool Reserve Assets" has the meaning given that expression in
sub-section 5.12;
"Reserve Interest Rate" means the rate of interest payable from time to
time by the Pool Banker on amounts standing to the credit of the Pool
Reserve Account;
"Security Amount" means, in respect of a Supplier, the aggregate of
available amounts of each outstanding Letter of Credit plus the
principal amount (if any) of cash that such Supplier has paid to the
credit of the Pool Reserve Account (and which has not been repaid to
such Supplier) and less the amount of all outstanding loans deemed to
be made under paragraphs 21.1.3 or 21.1.5 of this Schedule to such
Supplier; for the purposes of this definition, in relation to a Letter
of Credit, "available amount" means the face amount thereof less (i)
payment already made thereunder and (ii) claims made thereunder but not
yet paid;
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"Security Cover" means, in respect of each Supplier, the aggregate
amount for the time being which it shall be required by the Executive
Committee to provide and maintain by way of security in accordance with
Part 3;
"Services" means the services and responsibilities to be supplied or
discharged by the Pool Funds Administrator pursuant to the Agreement;
"Settlement Account" means, in relation to a Pool Member or the
Ancillary Services Provider, an account maintained at a Settlement Bank
and designated in accordance with sub-section 4.4;
"Settlement Account Designation" means a notice substantially in the
form set our in Part 1 of Annex 3 or in such other forms as may be
specified by the Executive Committee, completed and signed by a Pool
Member of the Ancillary Services Provider designating a Settlement
Account for the purposes of this Schedule;
"Settlement Bank" means a bank which:-
(a) has its head office or a branch situated in the United Kingdom
and which holds sterling denominated accounts such office or
branch;
(b) is a settlement member of the Clearing House Automated Payment
Systems ("CHAPS") or is a CHAPS participant by virtue of an
agency agreement with a settlement member; and
(c) is either:-
(i) a European institution under the Banking Coordination
(Second Council Directive) Regulations 1992; or
(ii) an authorized institution under the Banking Act 1987;
"Settlement Bank Mandate" means any mandate referred to in sub-section
4.7 to be given by the Pool Funds Administrator in favor of a
Settlement Bank or, as the context may require, a particular one of
them in such form(s) as the Executive Committee may approve, such
approval not to be unreasonably withheld, such mandate being given for
the purpose of establishing and maintaining a Collection Account;
"Settlement Re-run" means any re-run of Settlement in accordance with
Part XII of the Agreement;
"Settlement Bank Mandate" means any mandate referred to in sub-section
4.7 to be given by the Pool Funds Administrator in favor of a
Settlement Bank or, as the
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context may require, a particular one of them in such form(s) as the
Executive Committee may approve, such approval not to be unreasonably
withheld, such mandate being given for the purpose of establishing and
maintaining a Collection Account;
"Settlement Re-run" means any re-run of Settlement in accordance with
Part XII of the Agreement;
"Settlement Run" means, in respect of transactions occurring on the
relevant Settlement Day for which payments are to be settled pursuant
to this Schedule, the data which the Settlement System Administrator is
required to deliver from time to time to the Pool Funds Administrator
pursuant to Section 17 in respect of such transactions; and
"Shortfall" has the meaning given that expression in sub-section 5.7
1.2 Interpretation: in this Schedule, except where the context otherwise
requires, references to a particular Annex, Part, Section, sub-section,
paragraph or sub- paragraph shall be a reference to that Annex to or
part of this Schedule or, as the case may be, that Section,
sub-section, paragraph or sub-paragraph in this Schedule and references
to any amount being exclusive or inclusive of United Kingdom Value
Added Tax shall mean that that amount is exclusive or inclusive (as the
case may be) of a sum equal to such amount, if any, of United Kingdom
Value Added Tax as is properly chargeable on the supply to which the
first-mentioned amount is attributable as being all or part of the
consideration for that supply.
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PART 2
ESTABLISHMENT OF SYSTEMS
2. PAYMENTS CALENDAR
2.1 Preparation: no later than 31st January in each year the Pool Funds
Administrator and the Settlement System Administrator shall agree on a
Payments Calendar showing for the period from 1st April in that year to
31st March in the next succeeding year (both dates inclusive) the
Payment Dates on which payments pursuant to the Agreement in respect of
supplies of electricity and the provision of Ancillary Services on each
Settlement Day are required to be settled and showing the Notification
Dates on which the Settlement Run in respect of such supplies shall be
delivered by the Settlement System Administrator to the Pool Funds
Administrator.
2.2 Principles: each Payments Calendar shall give effect to the following
principles:
2.2.1 the Settlement Run shall be required to be delivered by the
Settlement System Administrator to the Pool Funds
Administrator no later than the 24th day after the Settlement
Day to which the Settlement Run relates (or, if such day is
not a Business Day, the next succeeding day which is a
Business Day);
2.2.2 the Payment Date shall not fall earlier than two clear
Business Days after the day on which the Settlement Run is
required to be delivered by the Settlement System
Administrator to the Pool Funds Administrator;
2.2.3 expressed as an average over the entire period covered by the
Payments Calendar, the Payment Date shall fall, as near as
practicable, 28.0 days after the Settlement Day to which it
relates; and
2.2.4 each Payment Date shall fall as close as is reasonably
practicable to the 28th day after the Settlement Day to which
it relates,
2.3 Form: the Payments Calendar shall be in such form as the Executive
Committee shall from time to time prescribe.
2.4 Default: if the Pool Funds Administrator and the Settlement System
Administrator shall fail to agree a Payments Calendar for any period by
the date stated in subsection 2.1 or the Payments Calendar prepared by
them does not give effect to the principles set out in sub-section 2.2,
the Executive Committee shall prepare or cause to be prepared a
Payments Calendar for that period giving effect to the said principles
and that shall be the Payments Calendar for use for that period.
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2.5 Distribution: any Payments Calendar prepared pursuant to this Section 2
shall e distributed promptly to each Pool Member, the Ancillary
Services Provider, the Pool Banker, the Pool Auditor and the Director
and (if prepared by the Pool Funds Administrator and the Settlement
System Administrator) the Executive Committee and (if prepared by or
for the Executive Committee) the Pool Funds Administrator and the
Settlement System Administrator.
3. INFORMATION SYSTEMS
3.1 Provision of information: unless otherwise required by the Executive
Committee, all written information to be given by or to the Pool Funds
Administrator in connection with the Banking System and the Billing
System shall be provided in the following manner:
3.1.1 for information flowing between the Pool Funds Administrator,
the Settlement System Administrator and the Ancillary Services
Provider by electronic mail as designated from time to time by
the recipient in a written notice to the sender of the
information or if such electronic mail systems are not
operational by the Effective Date, then until such systems are
operational, by such means as such parties shall agree;
3.1.2 for information flowing between the Pool Funds Administrator
and the Pool Banker, in the manner prescribed in the Funds
Transfer Agreement or in such other manner as may be agreed
between the Pool Funds Administrator and the Pool Banker;
3.1.3 for information flowing between the Pool Funds Administrator
and a Settlement Bank, in the manner prescribed in the
relevant Settlement Bank Mandate or in such manner as may be
agreed between the Pool funds Administrator and the Settlement
Bank;
3.1.4 for information flowing between the Pool Funds Administrator
and any Pool Member who has installed an electronic mail
transfer system compatible with the Pool Funds Administrator's
electronic mail transfer system, by electronic mail as
designated from time to time by the recipient in a written
notice to the sender of the information;
3.1.5 for information flowing between the Pool Funds Administrator
and any other Pool Member, by facsimile transmission and
addressed for the attention of the Authorized Person (as
defined in sub-section 3.3) for such Pool Member and sent to
them latest facsimile number of such Authorized Person
notified to the Pool Funds Administrator pursuant to
sub-section 3.3 provided that, if at the relevant time there
is no Authorized Person for such Pool Member, such information
shall be sent by facsimile transmission and addressed for the
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attention of the company secretary of such Pool Member and
sent to the facsimile number of its registered or principal
office.
3.2 Communications Equipment: each Party undertakes to exercise reasonable
skill and care to ensure that its communications equipment at all times
adequate to transmit and receive information in connection with the
Banking System and the Billing System. In the case of any breakdown,
failure or non-availability of the communications or other equipment,
each Party affected shall use all reasonable efforts to agree promptly
on the use and implementation of alternative, effective and secure
means of communication (and, in default of agreement, notices or other
communication shall be by letter delivered or sent in accordance with
Clause 75).
3.3 Authorized persons: upon written request of the Pool Funds
Administrative each Pool Member shall (and may of the its own accord)
provide the Pool Funds Administrator in writing with the name of, and
communication details for, one or more individuals ("Authorized
Persons") who are authorized (and, until it receives written notice to
the contrary, the Pool Funds Administrator shall be entitled to assume
that they are authorized) to take action on behalf of such Pool Member
in respect of all communications and other dealings under this Schedule
between the Pool Funds Administrator and such Pool Member. Each Pool
Member shall promptly advise the Pool Funds Administrator in writing of
any change of any such individual or his communication details. The
Pool Funds Administrator shall notify all Pool Members and the
Executive Committee of the names and communication details of all
Authorized Persons and of any change in any such individual or his
communication details.
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4. BANKING SYSTEM
4.1 Funds Transfer Agreement: on the Effective Date the Pool Funds
Administrator, the Pool Banker, each Pool Member and the Ancillary
Services Provider (in each case as at such date) entered into the Funds
Transfer Agreement.
4.2 Establishment of Accounts: the Pool Funds Administrator shall establish
and operate in accordance with the Agreement and Funds Transfer
Agreement a Pool Clearing Account to and from which all payments
calculated in accordance with this Schedule are to be made, a Pool
Reserve Account from which any debit balances on the Pool Clearing
Account at the close of banking business on each Business Day shall be
settled or reduced in accordance with this Schedule, a Collection
Account at each bank at which, from time to time, any Pool Member or
the Ancillary.
4.3 Rights and obligations under Funds Transfer Agreement: the Pool Funds
Administrator is authorized by the Pool Members and the Ancillary
Services Provider to exercise the rights granted to it under, and shall
perform its obligations pursuant to, the Funds Transfer Agreement
except that it shall not remove the Pool Banker without the prior
written consent of the Executive Committee; and that at the request of
the Executive Committee it Transfer Agreement. Subject to the agreement
of the Pool Banker, the Parties agree promptly to give effect to any
amendment to the Funds Transfer Agreement as may be required by the
Executive Committee.
4.4 Settlement Account: each Pool Member and the Ancillary Services
Provider shall deliver to the Pool funds Administrator, in the case of
a Pool Member, not later than the later of the Effective Date and 10
Business Days (or such lesser number of Business Member, by notice to
such Pool Member and the Pool Funds Administrator specify) before it is
admitted as a Pool Member and, in the case of the Ancillary Services
Provider, not later than the later of the Effective Date and the date
of its admission as a Party a duly completed and signed Settlement
Account Designation providing details of the Settlement Account to
which the Pool Funds Administrator is instructed to make payments to
such person and, if such person wishes to designate a second account as
its Settlement Account from which payments due from such person are to
be transferred in accordance with this Schedule, providing details of
such other account.
4.5 Further information: each Pool Member and the Ancillary Services
Provider shall also supply to the Pool Funds Administrator and the
Executive Committee such information or (as the case may be) further
information concerning its Settlement Account as shall be reasonably
requested by the Executive Committee or the Pool Funds Administrator.
4.6 Change of Settlement Account: each Pool Member and the Ancillary
Services Provider may, in consultation with the Pool Funds
Administrator and the Pool
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Banker, change its Settlement Account at any time by delivering to the
Pool Funds Administrator and the Pool Banker a duly completed and
signed notice substantially in the form set out in Part 2 of Annex 3
(or in such other form as may from time to time be specified by the
Executive Committee) specifying the effective date of the change (which
shall be no less than 10 Business Days after the notice is received by
the Pool Funds Administrator and the Pool Banker a duly completed and
signed notice substantially in the form set out in Part 2 of Annex 3
(or in such other form as may from time to time be specified by the
Executive Committee) specifying the effective date of the change (which
shall be no less than 10 Business Days after the notice is received by
the Pool Funds Administrator).
4.7 Maintenance of Settlement Account and Settlement Bank Mandate: each
Pool Member and the Ancillary Services Provider shall, unless otherwise
agreed by the Executive Committee, at all times maintain a Settlement
Account and the Pool Funds Administrator shall enter into and maintain
a Settlement Bank Mandate with each of the relevant Settlement Banks.
4.8 Details of Accounts: the Pool Funds Administrator shall supply full
details to each Pool Member and the Ancillary Services Provider of the
Pool Clearing Account, the Pool Reserve Account and any relevant
Collection Account and, for so long as it is maintained, the Pool
Borrowing Account and shall supply the Executive Committee with full
details of all Pool Accounts and Settlement Accounts.
5. ESTABLISHMENT OF TRUSTS
5.1 Trusts: the Pool Funds Administrator shall hold all moneys deposited
with or paid to it (other than Pool Reserve Assets) and such rights as
may from time to time be vested in it with regard to payment by Pool
Members (apart from fees owed or paid to it for its services in
accordance with Schedule 15 and any amounts payable to it pursuant to
that Schedule upon its removal as Pool Funds Administrator or the
expiry or termination of its appointment as such) by and from each Pool
Debtor or with regard to the provision of Security Cover by each Pool
Member, including:-
5.1.1 subject as provided in sub-section 5.2, all moneys from time
to time standing to the credit of each Pool Account other than
the Pool Reserve Account and the Pool Borrowing Account;
5.1.2 all rights of the Pool Funds Administrator to call for payment
or Security Cover;
5.1.3 the Letters of Credit and all rights to, and (subject to
sub-section 15.5) moneys representing, any proceeds therefrom
other than proceeds repayable by loan in accordance with
paragraphs 5.12.5 and 5.16; and
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<PAGE>
5.1.4 any interest received or receivable in respect of a Pool Debt
or a Pool Account (other than interest on the Pool Reserve
Account),
on trust for Pool Creditors in accordance with their respective individual
entitlement as they arise in accordance with the Agreement. Upon termination of
the said trust any residual balance after satisfaction of the entitlement of all
Pool Creditors shall be held for Suppliers in accordance with their respective
individual entitlement as they arise in accordance with the Agreement.
5.2 Trusts in respect of the Credit Facility: the Pool Funds Administrator
shall hold all moneys from time to time standing to the credit of the
Pool Clearing Account on trust first for the Facility Bank to the
extent that there is an aggregate amount outstanding under the Credit
Facility but on terms that no funds shall be withdrawn in favor of the
Facility Bank under the terms of the Credit Facility or in accordance
with this Schedule and on terms that the Pool Funds Administrator
Members and other Parties in accordance with the other provisions of
this Schedule.
5.3 Rights of Pool Creditors other than the Ancillary Services Provide: the
respective rights of Pool Creditors other than the Ancillary Services
Provider to the assets held by the Pool Funds Administrator on the
trusts set out in sub-section 5.1 shall be determined in accordance
with the Agreement and in accordance with the following principles:
5.3.1 the extent of each Pool Creditor's individual rights shall be
deemed to consist of the aggregate of the claims (to the
extent not paid or otherwise satisfied of such Pool Creditor
in respect of each Settlement Period; and
5.3.2 the assets referred to in sub-section 5.1 shall be deemed to
consist of a series of funds, each fund representing the
rights or moneys owed, paid, held or otherwise attributable to
each Settlement Period. The Pool Funds Administrator shall not
be obliged to segregate moneys into separate funds.
5.4 Rights of Ancillary Services Provider: the rights of the Ancillary
Services Provider to assets held on trust shall be determined in
accordance with Section 23 of Schedule 9.
5.5 Trusts in respect of Pool Reserve Assets: the Pool Funds Administrator
shall stand possessed of the Pool Reserve Assets on the following
trusts, that is to say:-
5.5.1 at any time when no amounts owed by Pool Debtors are overdue,
on trust to repay (subject to and in accordance with the
provision of sub-section 5.8 and 5.9) to each Supplier such
Supplier's respective share (determined in accordance with
sub-section 5.13) of the Pool Reserve Assets; and
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5.5.2 with automatic effect as soon as any amount owed by a Pool
Debtor becomes overdue, to hold an amount of the moneys
credited from time to time to the Pool Reserve Account equal
to the Shortfall or the amount held in the Pool Reserve
Account attribute to such Pool Debtor (whichever is less) on
the trusts set out in sub-section 5.1 and the balance (if any)
shall be held on the trusts set out in paragraph 5.5.1.
5.6 Overdue amounts: in respect of a Pool Debtor and for the purposes of
sub-section 5.5, an amount shall be deemed to become overdue at the
time at which the Pool Funds Administrator becomes aware that such Pool
Debtor has not made or will not make by 12.30 hours payment in full to
the credit of the Collection Account of such Pool Debtor of such an
amount as it is required on such day to make and, for as long as the
Credit Facility remains unconditionally available, the Pool Funds
Administrator considers in good faith that the amount in default is not
likely to be remedied on the next Business Day and the amount overdue
shall be the amount of the Shortfall.
5.7 Shortfall: the term "Shortfall", as used in this Section 5 means the
amount from time to time of Notified Payments which have become overdue
by application of the rule set out in sub-section 5.6 and which have
not subsequently been paid (whether by remittance from a Pool Debtor,
payment out of the extent that the Pool Reserve Account or a call under
a Letter of Credit). To the extent that the Pool Funds Administrator is
unable to determine the precise amount a Shortfall, it shall be deemed
to be such amount as the Pool Funds Administrator and the Pool Banker
shall agree, or failing agreement, the entire amount of the Notified
Payment.
5.8 Supplier's rights to funds: each Supplier remitting funds for credit to
the Pool Reserve Account agrees that the following terms shall apply.
None of the remittances shall be repayable full amounts actually or
contingently owed by it to any Pool Creditor, the Settlement System
Administrator or the Pool Funds Administrator. Furthermore, if and to
the extent that, at any time when an amount would be repayable to a
Supplier pursuant to this sub-section 5.8, all or any part of the
Supplier's interest in the Pool Reserve Assets is represented by a loan
to a Pool Member deemed to be made in accordance with paragraph 21.1.3
or 21.1.5 the Supplier's rights as against the Pool Funds Administrator
to receive a payment of its share in the Pool Reserve Assets (or the
relevant portion of such share) shall be conditional on repayment in
full of the relevant loan.
5.9 Funds not to be withdrawn: each Supplier undertakes not to seek
withdrawal of any funds of which it may be entitled except in the
circumstances permitted by sub-section 5.10 or 16.7. The Pool Funds
Administrator shall be entitled to disregard any purported notice of
withdrawal not complying with this sub-section 5.9.
5.10 Suppliers' rights to withdraw funds: notwithstanding sub-sections 5.8
and 5.9, if a Supplier is not in default in respect of any amount owed
to a Pool Creditor:-
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5.10.1 the Pool Funds Administrator shall transfer to the relevant
Supplier quarterly its share of interest credited to the Pool
Reserve Account; and
5.10.2 the Pool Funds Administrator shall transfer to such Supplier
with a reasonable time after such Supplier's written request
therefor an amount of cash which exceeds the amount which such
Supplier is required to maintain in the Pool Reserve Account
from time to time in accordance with Section 16.
5.11 Waiver of Supplier's rights: each Supplier waives any right it might
otherwise have to set off against any obligation owed to the Pool Funds
Administrator, the Pool Banker, any Pool Member or the Ancillary
Services Provider any claims Supplier may have to or in respect of the
Pool Reserve Assets.
5.12 Pool Reserve Assets: "Pool Reserve Assets" means the aggregate of:-
5.12.1 amounts form time to time credited to the Pool Reserve
Account;
5.12.2 amounts which any Supplier is from time to time obliged to pay
to the Pool Funds Administrator for credit to the Pool Reserve
Account and claims in respect of such amounts;
5.12.3 interest accrued and accruing on the Pool Reserve Account;
5.12.4 any amounts credited to the Pool Reserve Account pursuant to
paragraph 15.4.3; and
5.12.5 any loans deemed to be made from any amounts credited to the
Pool Reserve Account pursuant to paragraph 21.1.3 or 21.1.5.
5.13 Suppliers' rights and interests in the Pool Reserve Account: at any
time when it is necessary to determine the respective rights and
interests of Suppliers in and to funds standing to the credit of the
Pool Reserve Account, such rights shall be determined in accordance
with the following rules:-
5.13.1 any amount withdrawn from the Pool Reserve Account following
the occurrence of a Shortfall which the Pool Funds
Administrator has determined to be attributable to a
particular Supplier (the "Relevant Supplier") (irrespective of
the existence or otherwise of actual fault on the part of the
Relevant Supplier) shall in the first instance reduce pro
tanto the Relevant Supplier's interest in the Pool Reserve
Assets;
5.13.2 if, in any circumstances described in paragraph 5.13.1, the
Shortfall exceeds the Relevant Supplier's interest in the Pool
Reserve Account,
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then any excess required to be withdrawn from the Pool Reserve
Account shall reduce the respective interests of Suppliers
other than the Relevant Supplier in proportion to their
respective interests in the Pool Reserve Account prior to the
withdrawal;
5.13.3 any proceeds of a Letter of Credit which are to be credited to
the Pool Reserve Account pursuant to sub-section 5.16, and any
amounts paid by a Relevant Supplier to make up a payment out
of the Pool Reserve Account, shall be applied in priority in
or towards reinstating (rateably among themselves) the
respective interests of Suppliers other than the Relevant
Supplier in the Pool Reserve Account;
5.13.4 subject to the rules set out in paragraphs 5.13.1 to 5.13.3
(inclusive), the respective rights of each Supplier in and to
funds standing to the credit of the Pool Reserve Account shall
be to receive (subject to subsections 5.8 and 5.9) an amount
equal to the aggregate amounts remitted by the Supplier to the
Pool Reserve Account and not subsequently withdrawn together
with a proportionate share of any interest from time to time
credited to the Pool Reserve Account;
5.13.5 in the absence of a Shortfall, any amounts credited to the
Pool Reserve Account following a call under a Letter of Credit
pursuant to subsection 15.5 shall be considered as an interest
in the Pool Reserve Assets of the relevant Supplier in respect
of the relevant Letter of Credit.
5.14 Overpayments to be held on trust: if and to the extent that payments
under this Schedule actually made on any day by the Pool Funds
Administrator to Pool Members or the Ancillary Services Provider in
respect of supplies of electricity under the Agreement or the provision
of Ancillary Services do not correspond exactly with their respective
payment entitlement established in accordance with the Agreement in
relation to supplies of electricity or the provision of Ancillary
Services in respect of that same day, then the person receiving any
overpayment shall receive and be deemed to hold the amount of such
overpayment on trust for the Pool Member or rateably for the Pool
Members or, as the case may be, for the Ancillary Services Provider
which, in respect of that same day was (were) underpaid and, on the
written instruction of the Pool Funds Administrator, shall account in
accordance with sub- section 23.2 to the Pool Funds Administrator
accordingly for redistribution of the moneys.
5.15 Reimbursement of overpayments: subject to sub-section 5.8 and 5.14, all
payments under this Schedule shall be made on the basis that a Pool
Member shall only be entitled to claim reimbursement of an overpayment
made by it (whether to the Pool
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Funds Administrator or (through the Pool Funds Administrator) to
another Pool Member or the Ancillary Services Provider) if, any then
only to the extent that:-
(a) the aggregate amounts paid by the Pool Member in respect of
the relevant Payment Date
exceed
(b) the total amounts payable to that Pool Member to Pool
Creditors in respect of that Payment Date together with all
amounts (if any) overdue by that Pool Member in respect of
periods prior to the relevant Payment Date.
5.16 Repayment of loans: notwithstanding their rights pursuant to
sub-section 5.1 in and to Letters of Credit and the proceeds thereof,
Pool Creditors agree that if:-
5.16.1 a payment is received under a Letter of Credit after a sum has
been withdrawn from the Pool Reserve Account to make good (in
whole or in part) a discrepancy between amounts owed and
amounts received by the due time on a particular Payment Date;
and
5.16.2 the aggregate of the amounts paid out of the Pool Reserve
Account and paid under the Letter of Credit exceeds the
amounts owed in respect of the relevant Payment Date.
then any excess paid under the Letter of Credit over the amount then
remaining unpaid in respect of the relevant Payment Date appropriate,
any such credit shall pro tanto constitute repayment of any loans
deemed to be made pursuant to paragraphs 21.1.3 or 21.1.5.
5.17 No claim for breach of trust: provided that the Pool Funds
Administrative carries out its duties under the Agreement, no Pool
Member shall have any claim against the Pool Funds Administrator for
breach of trust or fiduciary duty arising solely out of any discrepancy
between payments actually made in respect of any day and the
entitlement of Pool Members to receive payments in respect of that same
day.
6. POOL LEDGER ACCOUNTS
6.1 Maintenance of Pool Ledger Accounts: the Pool Funds Administrator shall
maintain ledger accounts showing all amounts payable and receivable by
each Pool Member and the Ancillary Services Provider according to
calculations made and notifications issued by the Pool Funds
Administration pursuant to this Schedule.
6.2 Ledger extracts: each Pool Member and the Ancillary Services Provider
shall be entitled to receive a quarterly extract of the ledger account
which is relevant to it
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showing all amounts debited and credited to its account provided that,
if a Pool Member or the Ancillary Services Provider so requests of the
Pool Funds Administrator, it shall be entitled to receive a monthly
extract of such ledger account.
6.3 Certified copy extracts: without prejudice to the generality of the
general duties and responsibilities of the Pool Funds Administrator set
out in Schedule 15, in the event of any enforcement proceedings being
brought by a Pool Creditor against a non- paying Pool Member, the Pool
Funds Administrator shall forthwith upon request being made to it a the
cost of the requesting Pool Creditor provide a certified copy of an
extract of the ledger accounts sufficient to establish the details of
each transaction in respect of which the Pool Creditor has a claim
against the non-paying Pool Member.
6.4 Confidentiality: the ledger accounts maintained by the Pool Funds
Administrator shall be kept confidential in accordance with Part XVIII
of the Agreement from Committee Members and from all Pool Members
(except as required pursuant to Clause 63.1.5 or 63.1.6 or sub-section
6.2 or 6.3) but the Pool Funds Administrator shall disclose such ledger
accounts to the Pool Auditor for the purpose of any audit requested to
be conducted pursuant to Part IX of the Agreement.
6.5 Information: any extract of a ledger account of any other records, data
or information provided pursuant to Clause 63.1.5 or 63.1.6 or
sub-section 6.2 (collectively referred to in this Section 6 as the
"information") shall, save in the case of manifest error, be deemed
prima facie evidence of its contents.
6.6 Review of extracts: each Pool Member and the Ancillary Services
Provider shall promptly review all extracts of ledger accounts sent to
it and shall without prejudice to any of its rights under the
Agreement) where practicable within 10 Business Days after receiving
such information notify the Pool Funds Administrator of any errors in
such account of which it is aware.
6.7 Dispute of accuracy: if the Pool Funds Administrator at any time
receives a notice disputing the accuracy of any ledger account,
records, data or information, it shall consult with the Pool Member who
gave the notice or (as the case may be) the Ancillary Services Provider
and both shall use all reasonable endeavors to agree the information.
Promptly after agreement is reached, the Pool Funds Administrator
shall, if necessary, issue corrected information and notifications
under the provisions of sub-section 17.8.
[Sections 7 to 14 (inclusive) not used]
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PART 3
SECURITY COVER AND CREDIT MONITORING
15. SECURITY COVER
15.1 Provision of Security Cover: each Supplier shall provide Security Cover
from time to time in accordance with the following provisions: -
15.1.1 each Supplier (with the exception of any entity of or
wholly-owned or Controlled by the United Kingdom Government)
shall:-
(a) deliver to the Pool Funds Administrator evidence
reasonably satisfactory to the Executive Committee
that:-
(i) it presently holds an Approved Credit
Rating; or
(ii) it has provided and is not in default under
alternative or additional security as may be
approved from time to time by unanimous
decision of all Committee Members (Committee
Members being under no obligation to approve
any such security), or
(b) comply with the provisions of paragraph 15.1.3;
15.1.2 in addition to the provisions of paragraph 15.1.1 but subject
as provided in Sections 21.12 and 25, each Supplier (including
any entity of or wholly-owned or Controlled by the United
Kingdom Government shall:-
(a) not later than the date of its admission as a Pool
Member, deliver to the Pool Funds Administrator a
Letter of Credit (available for an initial period of
not less than 12 months) in such amount as shall be
notified by the Executive Committee in accordance
with Section 16; and
(b) not later than the date of its admission as a Pool
Member, deliver to the Pool Funds Administrator cash
for credit to the Pool Reserve Account in such amount
as shall be notified by the Executive Committee in
accordance with Section 16;
15.1.3 each Supplier mentioned in paragraph 15.1.1 to which paragraph
(b) of paragraph 15.1.1 applies shall immediately be required
(in addition to its obligation, if any, under paragraph
15.1.2) to deliver to the Pool Funds Administrator a Letter of
Credit (available for an initial period
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of not less than 12 months) or cash for credit to the Pool
Reserve Account in such amount and in such proportions as
shall be notified by the Executive Committee in accordance
with Section 16.
15.2 Letters of Credit: for the avoidance of doubt nothing in sub-section
15.1 or 15.6 shall prevent any Supplier from delivering a single Letter
of Credit in respect of its obligations under paragraphs 15.1.2 and
15.1.3.
15.3 Cash deposit: any cash amount delivered to the Pool Funds Administrator
for credit to the Pool Reserve Account shall be held on the terms set
out in Section 5. Amounts standing to the credit of the Pool Reserve
Account shall bear interest at the Reserve Interest Rate.
15.4 Maintenance of Security Cover: each Supplier shall be required to
provide and at all times thereafter maintain a Security Amount equal to
or more than the Security Cover applicable to it in such aggregate
amount as shall be set from time to time in accordance with this Part
3. Immediately upon any reduction occurring in the Security Amount
provided by any Supplier or any Letter of Credit being for any reason
drawn down (and including the deemed making of any loan to that
Supplier under the provisions of paragraph 21.1.3 or 21.1.5) the
Supplier will procure that new Letters of Credit are issued or existing
Letters of Credit are reinstated (to the satisfaction of the Pool Funds
Administrator) to their full value or cash is placed to the credit of
the Pool Reserve Account in an amount required to restore the Security
Amount to an amount at least equal to the Security Cover applicable to
the Supplier, and in such proportions of Letters of Credit and cash as
this Part 3 requires. Not later than 10 Business Days before any
outstanding Letter of Credit is due to expire, the Supplier providing
such Letter of Credit shall procure to the satisfaction of the Pool
Funds Administrator that is required Security Amount will be available
for a further period not less than 12 months which may be done in one
of the following ways:
15.4.1 (subject to the issuing bank continuing to have the credit
rating referred to in sub-section 15.6) provide the Pool Funds
Administrator with confirmation from the issuing bank that the
validity of the Letter of Credit has been extended for a
period of not less than 12 months on the same terms and
otherwise for such amount as is required by this Part 3; or
15.4.2 provide the Pool Funds Administrator with a new Letter of
Credit issued by an issuing bank with the credit rating
required by this Schedule for an amount at least equal to the
required Security Amount applicable to it (less its balance on
the Pool Reserve Account) which Letter of Credit shall be
available for a period of not less than 12 months; or
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15.4. procure such transfer to the Pool Funds Administration for
credit to the Pool Reserve Account as shall ensure that the
credit balance applicable to it standing to the credit of the
Pool Reserve Account shall be at lest equal to the required
Security Amount.
15.5 Failure to supply Security Cover: if a Supplier fails at any time to
provide Security Cover to the satisfaction of the Pool Funds
Administrator in accordance with the provisions of this Section 15, the
Pool Funds Administrator may at any time while such default continues,
and if at such time any Letter of Credit forming part of the Security
Cover is due to expire within nine Business Days it shall immediately,
and without notice to such Supplier, demand payment of the entire
amount of any outstanding Letter of Credit and shall credit the
proceeds of the Letter of Credit to the Pool Reserve Account to be held
on the terms and on the trusts set out in Section 5.
15.6 Substitute Letter of Credit: if the bank issuing any Suppler's Letter
of Credit ceases to have the credit rating as is set out in sub-section
1.1 under "Letter of Credit", such Supplier shall forthwith procure the
issue of a substitute Letter of Credit by a bank that has such credit
rating.
16. CREDIT MONITORING
16.1 Determination of Security Cover: the amount of Security Cover which
each Supplier shall be required to maintain and, in respect of the
amounts of Security Cover to be provided under paragraph 15.1.2 (so
long as applicable and paragraph 15.1.3 the proportions as between cash
and Letter of Credit that may be permitted, shall be determined from
time to time by the Executive Committee in consultation with the Pool
funds Administrator in accordance with this Section 16 and on the basis
of the criteria set out in sub-section 16.2, and shall be notified to
such Supplier and to the Pool Funds Administrator.
16.2 Criteria for provision of Security Cover:
16.2.1 in respect of each Supplier to which paragraph (b) of
paragraph 15.1.1 applies, the amount of Security Cover
required to be provided by such Supplier in addition to the
amounts referred to in paragraph 15.1.2 (so long as
applicable) shall be provided by Letter of Credit in an amount
to be assessed by the Executive Committee in consultation with
the Pool Funds Administrator as the aggregate amounts payable
pursuant to the Agreement by the relevant Supplier in respect
of purchases of, or as the case may be, prospective purchase
of electricity (including Ancillary Services) made by the
relevant Supplier over a 28 day period, as determined by the
Executive Committee provided that with the approval of the
Executive Committee, all or part of the required
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Security Cover may be provided in cash credited to the Pool
Reserve Account; and
16.2.2 in respect of all Suppliers, the amounts required to be
provided by each Supplier which are referred to in paragraph
15.1.2 (so long as applicable) shall (subject as provided in
sub-section 21.12 and Section 25) be initially as to a minimum
of 20 per cent in cash and the remainder by way of Letter of
Credit; and thereafter as revised by the Executive Committee.
Such amounts shall be assessed by the Executive Committee in
consultation with the Pool Funds Administrator to cover
banking error and to minimize reductions of payments to Pool
Creditors.
16.3 Six monthly variation: in respect of paragraph 16.2.1 and 16.2.2, the
Executive Committee shall calculate two amounts for the two six-month
periods commencing 1st april and 1st October in each year and shall
advise the Pool Funds Administrator and the relevant Suppliers
accordingly. Such six monthly variation shall not apply to paragraph
16.2.2 where Section 25 is applicable.
16.4 Review of Security Cover: the Pool Funds Administrator shall keep under
review the Security Amounts relating to each Supplier and shall
promptly advise the Executive Committee and the relevant Supplier
whenever the Security Cover maintained by such Supplier is
significantly more or less than the amount required to be maintained
pursuant to this Part 3.
16.5 Increase or Decrease of Security Cover: if, after considering the
recommendations of the Pool Funds Administrator and any representations
which may be made by the relevant Supplier, the Executive Committee
determines that a Supplier's Security cover should be increased or
decreased, it shall so notify the Supplier, the Pool Funds
Administrator and the Director. If the Executive Committee determines
that such Security cover should be decreased, the Supplier consents and
the Director so approve, that reduction shall take place. The Pool
Funds Administrator shall consent to an appropriate reduction in the
available amount of outstanding Letter of Credit and/or shall repay to
the Supplier such part of the deposit held in the Pool Reserve Account
for the account of such Supplier (together with all accrued interest on
the part to be repaid) sufficient to reduce the Supplier's Security
Amount to the level of Security Cover applicable to it. If the
Executive Committee determines that the Supplier's Security Cover
should be increased, the relevant Supplier shall, within five Business
Days of notice as aforesaid, procure an additional or replacement
Letter of Credit or transfer to the Pool Funds Administrator a cash
deposit for credit to the Pool Reserve Account in an amount sufficient
to increase its Security Amount so as to be at least equal to the level
of Security Cover applicable to it.
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16.6 Notification in respect of Security Cover: the Pool Funds Administrator
shall notify the Executive Committee, the Settlement System
Administrator and the Director promptly if:
16.6.1 a Supplier fails to provide, extend or renew a Letter of
Credit which it is required to maintain pursuant to Section
15; or
16.6.2 the Pool Funds Administrator shall make a call under any such
Letter of Credit; or
16.6.3 the Pool Funds Administrator becomes aware that a Supplier (a)
shall cease to retain an Approved Credit Rating, or (b) shall
be placed on credit watch by the relevant credit rating agency
(or becomes subject to an equivalent procedure) which in any
case casts doubt on the Supplier retaining an Approved Credit
Rating, or (c) shall be in default under the additional or
alternative security referred to in paragraph 15.1.1; or
16.6.4 the Security Amount in relation to any Supplier is at any time
less than the level of its required Security Cover for the
time being; or
16.6.5 the Pool Funds Administrator becomes aware that any bank that
has issued a Letter of Credit which has not expired ceases to
have the credit rating required by this Schedule.
16.7 Release from Security Cover Obligations: upon a Supplier ceasing to be
a Pool Member and provided that all amounts owed by the Supplier have
been duly and finally paid and that it is not otherwise in default in
any respect under the Agreement, the Supplier shall be released form
the obligation to maintain Security Cover and the Pool Funds
Administrator shall consent to the revocation of any outstanding Letter
of Credit.
16.8 No liability for amount of Security Cover: any recommendations made by
the Pool Funds Administrator pursuant to this Section 16 shall be given
in good faith. Any instructions given by the Executive Committee in
respect of the amount of Security Cover to be maintained by a Supplier,
if given in good faith, shall insofar as applicable in terms of this
Services Provider and neither the Pool Funds Administrator nor any
Committee Member shall incur any liability by reason of a Supplier's
Security Cover proving to be inadequate or excessive.
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PART 4
BILLING AND PAYMENT PROCEDURES
17. RECEIPT AND VERIFICATION OF INFORMATION
17.1 Receipt of Information from Settlement System Administrator: not later
than 12.00 hours on the Notification Date the Pool Funds Administrator
shall require of, and take all steps available to it to procure from,
the Settlement System Administrator, and the Settlement System
Administrator shall use its best endeavours to provide to the Pool
Funds Administrator, the information referred to in sub-sections 17.2
to 17.5 (inclusive) concerning supplies of electricity and the
provision of Ancillary Services in respect of each Settlement Day.
17.2 Information for each Settlement Day: the information required in
respect of each Settlement Day is as follows:-
17.2.1 the Settlement Day:
17.2.2 the corresponding Payment Date;
17.2.3 the Settlement Run identification number;
17.2.4 the total amount owing in accordance with the Agreement
(exclusive of United Kingdom Value Added Tax) in respect of
electricity supplied and Ancillary Services provided during
each Settlement Day; and
17.2.5 the total amount owing (exclusive of United Kingdom Value
Added Tax) in respect of Ancillary Services provided during
each Settlement Day.
17.3 Information - taking of electricity: the information required
in respect of each Pool Member taking electricity in each
Settlement Day is as follows:-
17.3.1 the Pool Member's identification number;
17.3.2 the Pool Member's name; and
17.3.3 the total amount owing in accordance with the Agreement
(exclusive of United Kingdom Value Added Tax) in respect of
electricity taken by such Pool Member during each Settlement
Day including the amount owing in respect of Ancillary
Services attributable to the amount of electricity purchased
by such Pool Member.
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17.4 Information - provision of electricity: the information required in
respect of each Pool Member providing electricity during each
Settlement Day is as follows:-
17.4.1 the Pool Member's identification number;
17.4.2 the Pool Member's name; and
17.4.3 the total amount owing in accordance with this Agreement
(exclusive of United Kingdom Value Added Tax) in respect of
electricity provided by such Pool Member during each
Settlement Day.
17.5 Information - Ancillary Services Provider: the information required in
relation to the Ancillary Services Provider in respect of each
Settlement Day is the total amount receivable in accordance with the
Agreement by the Ancillary Services Provider (exclusive of United
Kingdom Value Added Tax) for the provision of Ancillary Services during
each Settlement Day.
17.6 Verification of Information: upon receipt of the information supplied
by the Settlement System Administrator, the Pool Funds Administrator
shall verify whether, on the basis of such information, the sum of the
amounts shown to be receivable by each Pool Member in respect of its
sales of electricity plus the amount shown to be payable to the
Ancillary Services on the relevant Settlement Day is equal to the sum
of the amounts shown to be payable by each Pool Member in respect of
its purchase of electricity on the same Settlement Day.
17.7 Deemed Verification: unless the Pool Funds Administrator shall, by
close of business on the Notification Date, otherwise inform the
Settlement System Administrator, each Pool Member and the Ancillary
Services Provider to the contrary before the Payment Date, the
information provided by the Settlement System Administrator shall be
deemed to be verified.
17.8 Rectification of Errors: if the Pool Funds Administrator determines
that the information provided by the Settlement System Administrator
cannot be verified in accordance with sub-section 17.6, it shall as
soon as possible notify the Settlement System Administrator, each Pool
Member and the Ancillary Services Provider accordingly and require the
Settlement System Administrator to correct any errors and obtain the
Pool Funds Administrator's verification of the corrected information as
quickly as possible. As soon as the Pool Funds Administrator verifies
that the information provided by the Settlement System Administrator
can be verified in accordance with sub-section 17.6, the Pool Funds
Administrator shall notify the Settlement System Administrator, each
Pool Member and the Ancillary Services Provider of the verified
information required to be given pursuant to sub-section 17.6. The
settlement System Administrator shall use its best endeavours to
provide
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such corrected information as may be necessary for the Pool Funds
Administrator to issue verification.
17.9 Amounts in Advice Notes; Adjustments:
17.9.1 the amounts to be incorporated in the Advice Notes in
accordance with sub-section 18.1 (and in all cases together
with United Kingdom Value Added Tax thereon) shall be:-
(a) if verification has been made in accordance with
sub-section 17.6, the full amounts so verified;
(b) to the extent verification can reasonably be made in
circumstances where all the information cannot be
fully verified as described in sub-section 17.6,
those amounts which are shown against the name of
each Pool Debtor in such information as is received
under the provisions of sub-section 17.1 (whether or
not such information is an estimate only) and such
amounts will be shared amongst the relevant Pool
Creditors in the proportion which the amount shown as
due to each of them in such information as aforesaid
bears to the amounts which are so shown as due to all
of them; and
(c) to the extent that for any reason whatever the
amounts to be paid cannot be verified at all
(including, but not limited to, application of Force
Majeure and failure to provide information on the
part of the Settlement System Administrator) of the
appropriate calculations to permit payment in
accordance with sub-paragraph (b) above cannot
properly be made, the same as the amounts calculated
as being payable by and to Pool Members and to the
Ancillary Services Provided in respect of the last
same day of the week in respect of which payments
were verified under sub-section 17.6 (provided that
any Pool Member who was not at that earlier time a
Pool Member, or vice versa, shall be ignored and such
adjustment made as the Pool Funds Administrator
considers appropriate).
17.9.2 in the event that payments are made in the circumstances set
out in paragraph 17.9.1(b) or (c), the Settlement System
Administrator in conjunction with the Pool Funds Administrator
shall, as soon as actual verification an thereafter be made,
make such adjustments as may be necessary (and, where
relevant, apply interest at the Reserve Interest Rate or at
such rate as shall be set from time to time by the Executive
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Committee) to account for any differences between payments
made and actual verified payment information.
17.10 Postponed Payment Date: if for any reason beyond the reasonable control
of the Pool Funds Administrator it is not possible, after application
of sub-section 17.9, for the Pool Funds Administrator to determine by
the close of business on the Notification Date the amounts to be
incorporated in the Advice Notes, the Pool Funds Administrator shall
inform the Settlement System Administrator, each Pool Member and the
Ancillary Services Provider that the Payment Date shall be postponed so
the Pool Funds Administrator verifies the information provided by the
Settlement System Administrator pursuant to sub-section 17.6 (any such
Payment Date being the "Postponed Payment Date" and a reference to a
Payment Date in this Schedules shall where applicable include a
reference to a Postponed Payment Date). On the Postponed Payment Date,
each Pool Member who took electricity on the Settlement Day to which
the Postponed Payment Date applies shall pay interest on all such
amounts for each day from and including the originally scheduled
Payment Date to (but excluding) the Postponed Payment Date at such rate
as shall be set from time to time by the Executive Committee or, in the
absence of such rate, at the Reserve Interest Rate and all Pool Members
who supplied electricity and the Ancillary Services Provider on such
Settlement Day shall be entitled to receive in addition to the amounts
that they are entitled to receive in respect of such supplies, interest
on such amounts for each day during the same period and at the same
rate. Interest shall accrue from day to day and shall be calculated by
the Pool Funds Administrator on a 365 day year basis.
17.11 Further notification: where instructed by the Executive Committee, or
where there is an award by a Court of competent jurisdiction or an
arbitrator, or a decision of the Pool Auditor or where rendered
appropriate by Clause 52, the Pool Funds Administrator shall issue
further or other notification to the Pool Members and the Ancillary
Services Provided in accordance with the provisions of this Section 17;
and the Business Day which falls five Business Days after the date of
such notification or earlier if practicable shall be a Payment Date.
17.12 Payment by Pool Debtor: without prejudice to its obligations in respect
of supplies of electricity in accordance with the provisions of the
Agreement, each Pool Debtor shall without defense, set-off or
counterclaim (but without prejudice to any other rights or remedies
available to such Pool Debtor) make payment on the relevant Payment
Date of the full amount (including United Kingdom Value Added Tax) so
notified as being payable by it for the account of those pool members
and, as the case may be, the Ancillary Services Provider so notified as
being entitled to receive payments. Payment shall be made in accordance
with the terms of this Schedule. For the avoidance of doubt no payment
made shall be treated as being paid on account or subject to any
condition or reservation, notwithstanding the provisions for the making
of subsequent adjusting payments provided in this Schedule. The
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provisions of sub-section 5.14 shall apply to any payment insofar as it
is or may constitute an overpayment.
17.13 Liability several: save as otherwise expressly provided, the liability
of each Pool Member for amounts payable by it pursuant to this Schedule
is several and no Pool Member shall be liable for the default of any
other Pool Member.
18. ADVICE NOTES
18.1 Despatch of Advice Notes: not later than 17.00 hours on the relevant
Notification Date (and, if this is not practicable, in good time (as
that expression is explained in more detail in the relevant Agreed
Procedure) to enable Pool Members and the Ancillary Services Provider
to give all necessary instructions for payments to be effected on the
relevant Payment Date) the Pool Funds Administrator shall:-
18.1.1 despatch to Pool Members and the Ancillary Services Provider
Advice Notes showing amounts (inclusive of United Kingdom
Value Added Tax) which, according to its calculations, are to
be paid by or to each Pool Member and the Ancillary Services
Provider on each Payment Date in respect of supplies of
electricity and the provision of Ancillary Services during
each Settlement Day to which that Notification Date relates;
18.1.2 notify each Settlement Bank of amounts payable by the Pool
Members or the Ancillary Services Provider maintaining a
Settlement Account at the relevant Settlement Bank; and
18.1.3 notify the Pool Banker of the amount to be remitted to the
Pool Clearing Account by each Settlement Bank.
18.2 Method of despatch: all Advice Notes shall be despatched by the means
established in accordance with paragraphs 3.1.1 and 3.1.5, or by such
other means as the Executive Committee may reasonably direct.
18.3 Content of Advice Notes: all Advice Notes will include an appropriate
indication if payment is being made under the provisions of paragraph
17.9.1(b), 17.9.1(c) or 17.9.2.
18.4 Interest: where interest is payable by or to any Pool Member or the
Ancillary Services Provider pursuant to this Schedule, the Pool Funds
Administrator shall, at the same time as it despatches the Advice
Notes, despatch to each Pool Member and the Ancillary Services Provider
who is required to pay interest and to each Pool Member and the
Ancillary Services Provider who is entitled to receive interest a
statement showing the amount of interest payable or receivable by it,
the rate of interest applicable thereto and the amount (if any) of tax
to be withheld.
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19. PAYMENT PROCEDURE
19.1 Instructions for payment: each Pool Member and the Ancillary Services
Provider shall, in respect of each Payment Date on which it is under an
obligation to make a payment under this Schedule, make such
arrangements as will ensure that such payment is credited to the
relevant Collection Account in sufficient time to allow such Settlement
Bank to make irrevocable arrangements to remit to the Pool Clearing
Account by 12.30 hours the amount payable by that Pool Member or (as
the case may be) the Ancillary Services Provider in respect of that
Payment Date. Each Pool Member and the Ancillary Services Provider
shall ensure all remittances by its bank to the relevant Collection
Account shall be remittances for value on the relevant Payment Date.
19.2 Pool Funds Administrator's responsibilities:
19.2.1 As soon as practicable and in any event not later than 13.00
hours on each Payment Date the Pool Funds Administrator shall
take such action as is required to ensure that all amounts
required to be credited to each Collection Account on such
Payment Date have been so credited (or if not so credited, the
reason therefor established).
19.2.2 As soon as practicable and in any event not later than 13.30
hours on each Payment Date the Pool Funds Administrator shall
take such action as is required to ensure that all amounts
credited to each Collection Account on such Payment Date in
accordance with sub-section 19.1 have been remitted to the
Pool Clearing Account.
19.3 Non-payment by Pool Member: if a Pool Member becomes aware that a
payment for which it is responsible will not be credited to the
relevant Collection Account by 12.30 hours on the relevant Payment
Date, it will immediately notify the Pool Funds Administrator, giving
all details available to the Pool Member. The Pool Funds Administrator
shall, as soon as it becomes aware that payment will not be remitted,
use its best endeavours to establish the cause of non-payment.
19.4 Excess payments: if by 12.30 hours on any Payment Date the Pool Funds
Administrator is advised by a Settlement Bank that the Settlement Bank
will be making a payment in excess of the amount notified to the Pool
Member pursuant to sub-section 18.1 in respect of that Payment Date, or
if the Pool Banker notifies the Pool Funds Administrator by 13.30 hours
that amounts greater than the amounts notified to the Pool Banker
pursuant to paragraph 18.1.3 have been credited to the Pool Clearing
Account, the Pool Funds Administrator shall use its best endeavours to
ascertain the nature of the excess payment, to calculate the
entitlement to such payment and to instruct the Pool Banker by 13.30
hours that day to credit the appropriate Settlement Account(s) with the
amount determined by the Pool Funds
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Administrator as falling due to each Pool Creditor in accordance with
this Schedule provided that, where an External Pool Member makes a
payment in excess of the amount owing by it on any Payment Date and the
reason for such overpayment is the difficulty in remitting funds on a
future Payment Date because of the mismatch of bank and public holidays
between countries, the Pool Funds Administrator shall instruct the Pool
Banker to credit the Pool Reserve Account with the amount of the
excess. Any Pool Member who instructs its bank to make a payment in
excess of the amount owing by that Pool Member on any Payment Date
shall simultaneously with giving such instructions advise the Pool
Funds Administrator in writing of the amount of the excess payment
providing a description of what the Pool Member considers the excess
payment relates to.
19.5 Payment to Pool Creditors: the Pool Funds Administrator shall, prior to
14.30 hours on each day, calculate the amounts available for
distribution to Pool Creditors on that day. As soon as practicable and
not later than 14.30 hours on that day the Pool Funds Administrator
shall give irrevocable instructions to the Pool Banker to remit from
the Pool Clearing Account to the relevant Settlement Accounts
maintained by the Pool Creditors the aggregate of amounts determined by
the Pool Funds Administrator to be available for payment to Pool
Creditors and, if required, to transfer amounts from the Pool Reserve
Account or the Pool Borrowing Account to the Pool Clearing Account or
vice versa.
19.6 Making good the Pool Reserve Account: if the Pool Reserve Account is
debited or credited in or towards clearing the Pool Clearing Account,
the Pool Funds Administrator shall as soon as possible thereafter take
the necessary steps, including making any calculations or taking any
action in accordance with Section 21, to reverse the debit or credit to
the Pool Reverse Account and/or to make a call under a Letter of
Credit.
19.7 Prohibition on transfers: the Pool Funds Administrator shall not at any
time instruct the Pool Banker to transfer any sum from a Pool Account
to another account (not being a Pool Account) unless that account is a
Settlement Account.
19.8 Application of payments: where payments in respect of more than one
Settlement Day are required to be settled on a Payment Date, payments
in respect of the longest outstanding Settlement Day shall be, and be
deemed to be, settled first.
19.9 Bank contacts: upon written request of the Pool Funds Administrator each
Pool Member and the Ancillary Services Provider shall provide the Pool Funds
Administrator in writing with the name of, and communication details for, one or
more individuals at the branch of its Settlement Bank from which payments or
payment instructions required to be made or given by it pursuant to this
Schedule originate (the "Local Branch") who is (are) familiar with the payment
procedures set out in this Section 19 applicable to such Pool Member or (as the
case may be) the Ancillary Services Provider, and shall promptly advise
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the Pool Funds Administrator in writing of any change of any such individual or
his communication details. Each Pool Member and the Ancillary Services Provider
hereby authorizes the Pool Funds Administrator to contact any such individual to
enquire in respect of any Payment Date whether and in respect of what amount
instructions have been given for the remittance of any payment required to be
made by such Pool Member or (as the case may be) the Ancillary Services Provider
under this Schedule and/or whether such payment has been remitted or otherwise
made as provided for in this Schedule, and undertakes not to withdraw, qualify
or revoke such authority at any time. Each Pool Member and the Ancillary
Services Provider shall instruct its Local Branch to co-operate with the Pool
Funds Administrator accordingly and to provide the Pool Funds Administrator with
all such information as is necessary to answer such enquiries. The Pool Funds
Administrator shall comply with all reasonable security arrangements imposed by
the relevant Pool Member or the Ancillary Services Provider or any Local Branch.
20. ALTERNATIVE PAYMENT PROCEDURE
20.1 Alternative Payment procedure: without prejudice to other obligations
in the Agreement not substituted by the provisions of this Section 20,
the provisions set out in this Section 20 shall apply:-
20.1.1 if, on the Effective Date, it has not been possible to
establish the Notified Payments System (in which case they
shall continue to apply until the Notified Payments System is
established, or until such other time as the Executive
Committee may determine); or
20.1.2 if, for any reason, it is not possible to apply the procedures
contemplated by the Notified Payments System and for so long
as it is not possible to apply such procedures.
20.2 Pool Debtor to effect remittance: each Pool Debtor shall, in respect of
each Payment Date on which it is under an obligation to make a payment
under the Agreement, give instructions to its bank, which it undertakes
not to qualify, withdraw or revoke, to effect remittance to the Pool
Clearing Account of the amount payable by that Pool Member to be
received on that Payment Date.
20.3 Receipt of remittance: any remittance must be received by the Pool
Banker in the Pool Clearing Account no later than 12.30 hours on the
Payment Date unless arrangements have been made between the Pool Banker
and the relevant Pool Member which shall be notified to the Pool Funds
Administrator and which are satisfactory to the Pool Banker such that
funds will be received for value on that Payment Date. The Pool Members
shall ensure that instructions are given to their banks in sufficient
time to ensure that their respective banks comply with this time limit.
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20.4 Method of remittance: the Parties acknowledge and agree that when
practicable to give effect to sub-section 20.3 a Pool Debtor shall
cause remittances to be effected through CHAPS but, where not
practicable or where the amount payable is less than the minimum
individual amount then processed through CHAPS, the Pool Member shall
ensure by whatever means at its disposal that remittance for value on
the relevant Payment Date is made for credit to the Pool Clearing
Account not later than 12.30 hours.
20.5 Notification of non-payment: the Parties acknowledge and agree that if
a Pool Debtor becomes aware that a payment for which it is responsible
will not be remitted to the Pool Banker by 12.30 hours on the relevant
day, and where satisfactory arrangements, as referred to in sub-section
20.3 have not been made, it shall immediately notify the Pool Funds
Administrator, giving all details available to that Pool Debtor.
20.6 Payment default: if the Pool Funds Administrator determines at any time
after 12.30 hours on any day that a remittance which should have been
credited on that day to the Pool Clearing Account has not been made (or
that the credit has not been received) (in whole or in part) and where
satisfactory arrangements, as referred to in sub-section 20.3, have not
been made, the provisions of Section 21 shall apply mutatis mutandis.
20.7 Late payment: if, after the Pool Funds Administrator shall, prior to
14.30 hours on each day, calculate the amounts available for
distribution to Pool Creditors on that day (including amounts resulting
from the application of sub-section 20.6). Not later than 14.30 hours
on that day the Pool Funds Administrator shall give instructions to the
Pool Banker, which it undertakes not to qualify, withdraw or revoke, to
make same day value remittances to the Pool Creditors.
20.9 Construction: where the provisions of this Section 20 apply references
in Sections 5 and 18 and sub-section 21.1 to "Settlement Bank" and
"Collection Account" shall be construed as references to "bank" and
"Pool Clearing Account" respectively.
21. PAYMENT DEFAULT
21.1 Payment default: subject as provided by sub-section 21.12, if, by 12.30
hours on a Payment Date, the Pool Funds Administrator has been notified
by a Settlement Bank or it otherwise has reason to believe that a
Settlement Bank will not remit to the Pool Clearing Account all or any
part (the "amount in default") of any amount which has been notified by
the Pool Funds Administrator as being payable by a Pool Debtor (the
"non-paying Pool Debtor") on the relevant Payment Date in sufficient
time to ensure that such amount can be cleared through the Pool
Clearing Account not later than the close of banking business on such
Payment Date, the Pool Funds Administrator shall act in accordance with
the following provisions (or whichever of
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them shall apply) in the order in which they appear until the Pool
Funds Administrator is satisfied that the Pool Clearing Account will
clear not later than the close of business on the relevant Payment
Date:-
21.1.1 if the Pool Funds Administrator has been able to identify the
non-paying Pool Debtor in sufficient time to apply this
paragraph 21.1.1 and to the extent that the non-payment Pool
Debtor is entitled to receive payment from any Pool Debtor
pursuant to this Schedule on the relevant Payment Date, then
the Pool Funds Administrator shall (unless it reasonably
believes that such set-off shall be unlawful) set off the
amount of such entitlement against the amount in default;
21.1.2 if the Pool Funds Administrator has been able to identify the
non-paying Pool Debtor in sufficient time to apply this
paragraph 21.1.2, the Pool Funds Administrator shall debit the
Pool Reserve Account and credit the Pool Clearing Account with
a sum not exceeding the amount of funds standing to the credit
of the non-paying Pool Debtor in the Pool Reserve Account;
21.1.3 subject to sub-section 21.2, the Pool Funds Administrator
shall debit the Pool Reserve Account and credit the Pool
Clearing Account with a sum not exceeding the amount of funds
then standing to the credit of the Poll Reserve Account to the
extent that they represent Security Cover provided in
accordance with paragraph 15.1.2, the transfer of such amount
as is not attributable to the funds standing to the credit of
the non-paying Pool Debtor by each Supplier rateably according
to its share of the funds standing to the credit of the Pool
Reserve Account to the extent that they represent Security
Cover provided in accordance with paragraph 15.1.2, at the
time immediately prior to the transfer, such loans to be
repayable on demand and to carry interest at the Reserve
Interest Rate and in any case repayable not later than two
Business Days after they arise after which, to the extent that
any such loans remain outstanding, such loans shall carry
interest at the Default Interest Rate (which interest shall be
credited to the relevant Supplier's Pool Ledger Account). Each
Supplier hereby irrevocably authorizes the Pool Funds
Administrator to advance, collect in and enforce payment of
such loans for its account and on its behalf and each Pool
Member hereby irrevocably consents to the making of such loans
to the extent that such Pool Member has a share in the Pool
Reserve Account;
21.1.4 if the Pool Funds Administrator has been able to identify the
non-paying Pool Debtor in sufficient time to apply this
paragraph 21.1.4 and provided that the Pool Funds
Administrator is satisfied that the proceeds of a call under
the Letter of Credit will be paid into the Pool Clearing
Account in
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sufficient time to ensure that it will clear not later than
the close of business on the relevant Payment Date, the Pool
Funds Administrator shall make a call under the Letter of
Credit supplied by the non-paying Pool Debtor in a sum not
exceeding the available amount of all such Letter of Credit,
and the Pool Funds Administrator shall cause the proceeds of
such call or calls to be paid into the Pool Clearing Account;
21.1.5 subject to sub-section 21.2 and provided that the Pool Funds
Administrator is satisfied that the proceeds of a call under a
Letter of Credit will be paid into the Pool Clearing Account
in sufficient time to ensure that it will clear not later than
the close of business on the relevant Payment Date, the Pool
Funds Administrator shall make a call under one or more
Letters of Credit supplied by Pool Members (other than the
non-paying Pool Debtor) in a total sum not exceeding the total
available amount of all such Letters of Credit to the extent
that such amount represents Security Cover provided in
accordance with paragraph 15.1.2, and the Pool Funds
Administrator shall cause the proceeds of such call or calls
to be paid into the Pool Clearing Account. The transfer of
such proceeds into the Pool Clearing Account shall be deemed
to give rise to a series of loans to the non-paying Pool
Debtor by each Supplier whose Letter of Credit was called
rateably according to the amounts called udder their
respective Letter of Credit, such loans to be repayable on
demand and to carry interest at the Reserve Interest Rate and
in any case repayable not later than two Business Days after
they arise after which, to the extent that any such loans
remain outstanding, such loans shall carry interest at the
Default Interest Rate (which interest shall be credited to the
relevant Supplier's Pool Ledger Account). Each Supplier hereby
irrevocably authorizes the Pool Funds Administrator to
advance, collect in and enforce payment of such loans for its
account and on its behalf and each Pool Member hereby
irrevocably consents to the making of such loans to the extent
that such Pool Member has a share in the Pool Reserve Account;
21.1.6 if and to the extent that, notwithstanding application of the
foregoing measures, it is not possible to clear the Pool
Clearing Account by any of the foregoing means, the Pool Funds
Administrator shall reduce payments to all Pool Creditors in
proportion to the amounts payable to them on the relevant
Payment Date by an aggregate amount equal to the amount
necessary to clear the Pool Clearing Account and shall account
for such reduction in the Pool Ledger Accounts as amounts due
and owing by the non-paying Pool Debtor to each Pool Creditor
whose payments were reduced.
21.2 Amounts in default likely to be remedied: the Pool Funds Administrator
shall not apply paragraph 21.1.3 or 21.1.5 unless it considers in good
faith that the amount in
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default is likely to be remedied by the non-paying Pool Debtor no later
than the next Business Day and in such a case the Pool Funds
Administrator shall only apply paragraphs 21.1.2 and 21.1.4 to the
extent of any amounts provided by way of Security Cover pursuant to
paragraph 15.1.2.
21.3 Loans part of Pool Reserve Assets: any loans arising pursuant to
paragraph 21.1.3 or 21.1.5 shall be deemed to constitute part of the
Pool Reserve Assets and all repayments of such loans, together with
interest thereon, shall be paid into the Pool Reserve Account for the
account of each Supplier who is deemed to have made such loan.
21.4 Repayment of loans: if any loans to a non-paying Pool Debtor arising
pursuant to paragraph 21.1.3 or 21.1.5 shall not have been repaid in
full (together with interest at the rate or rates specified therein) by
12.00 hours on the next Business Day after such loan is deemed to have
arisen, the Pool Funds Administrator shall make a call under the Letter
of Credit (if any) which shall been supplied by the non-paying Pool
Debtor and which remains outstanding in an amount not exceeding the
amount necessary to repay such loans and all accrued interest in full
and, if the proceeds of any Letter of Credit are insufficient to repay
all outstanding loans to the relevant non-paying Pool Debtor, such
proceeds shall be applied towards repayment of each such outstanding
loan rateably.
21.5 Reduction of payments to Pool Creditors: if, after the date that any
loans to a non- paying Pool Debtor arise pursuant to paragraph 21.1.3
or 21.1.5, the Pool Funds Administrator shall reasonably be of the
opinion that the non-paying Pool Debtor will not repay forthwith all of
such loans and all accrued interest in full or the loans have not been
repaid with all interest within two Business Days after they arose
(whichever occurs first), the Pool Funds Administrator shall reduce
payments to all Pool Creditors in proportion to the amounts payable to
them on the Payment Date to which the default relates and any
succeeding Payment Dates as may be required by an aggregate amount
necessary to restore the balance in the Pool Reserve Account to the sum
for the time being required under this Schedule to be deposited by the
Pool Members other than the non-paying Pool Debtor, to the intent that
all loans arising under paragraphs 21.1.3 and 21.1.5 and remaining
undischarged after application of the non-paying Pool Debtor's Letter
of Credit are discharged in full together with interest thereon at the
Reserve Interest Rate.
21.6 Obligation to make calls: if and whenever the Pool Funds Administrator
has not applied the provisions of paragraph 21.1.4, and has reduced
payments to Pool Creditors in accordance with paragraph 21.1.6, it
shall, on the relevant Payment Date or so soon thereafter as the
non-paying Pool Debtor has been identified (but, in any event, not
later than the close of business on the Business Day following such
Payment Date) make a call under the Letter of Credit supplied by the
non-paying Pool Debtor in a sum sufficient to cover the reduction made
under paragraph 21.1.6
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(but not exceeding the available amount of all such Letters of Credit)
and the Pool Funds Administrator shall cause the proceeds of such call
to be paid forthwith into the Pool Reserve Account. On the next
Business Day following receipt of such proceeds, the Pool Funds
Administrator shall pay such amounts as have been credited to the Pool
Reserve Account to the Pool Creditors whose payments were reduced in
full or (as the case may be) in proportion to their respective
entitlement including interest on such amounts at the Reserve Interest
Rate.
21.7 Indemnification by non-paying Pool Debtor: the non-paying Pool Debtor
shall indemnify and keep indemnified each Pool Member whose Letter of
Credit is called under paragraph 21.1.5 and/or who is deemed to have
made loans under paragraph 21.1.3 or 21.1.5 on demand against all
costs, expenses and losses (including the costs of management time)
suffered or incurred by such Pool Member arising from its Letter of
Credit being so called (including the costs of reinstating the same) or
such loans being deemed to have been made to the extent that such Pool
Member is not compensated under this Section 21. This indemnity shall
be in addition to or without prejudice to the liability of the
non-paying Pool Debtor to repay the loan, together with accrued
interest, which arises pursuant to paragraph 21.1.5. The Pool
Creditors, in proportion to the amounts payable to them on the Payment
Date to which a default relates in respect of which the Pool Funds
Administrator has operated sub-section 21.5, and any succeeding Payment
Dates as may be required, shall indemnify and keep indemnified each
Pool Member as is referred to in the earlier provisions of this
sub-section 21.7 to the extent of any failure by the non- paying Pool
Debtor to fulfill its obligations under this sub-section 21.7.
21.8 Notification of Pool Creditors: the Pool Funds Administrator shall use
all reasonable endeavours promptly to notify the relevant Pool
Creditors whenever it makes any such reduction as is referred to in
paragraph 21.1.6.
21.9 Default Interest: save as otherwise provided in the Agreement
(including where an express rate of interest is provided), if any
amount payable by any Pool Debtor pursuant to this Schedule is not
given value for the due date by close of banking business on the due
date the Pool Debtor shall on written demand by the Pool Funds
Administrator pay to the Pool Funds Administrator, for the account of
the person or persons entitled to receive the amount in default,
interest on such amount from the due date up to the day of actual
receipt by the Pool Funds Administrator (as well after as before
judgment) at the Default Interest Rate.
21.10 Application of payments: any amount received by the Pool Funds
Administrator from a non-paying Pool Debtor for the credit of any Pool
Account shall be applied by the Pool Funds Administrator in or towards
payment of amounts payable by the non-paying Pool Debtor to Pool
Creditors on each successive Payment Date in respect of which there is
an outstanding default (with the longest outstanding default being
settled first).
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21.11 Clearing of Pool Clearing Account: all amounts standing to the credit
of the Pool Clearing Account at the close of business on any Payment
Date shall be transferred to the Pool Reserve Account so that the
balance in the Pool Clearing Account shall at the end of such day be
nil.
21.12 Credit Facility: if and for so long as the Credit Facility remains
unconditionally available, the provision of this Section 21 shall apply
with the modifications provided by Section 25.
22. CONFIRMATION NOTICES
22.1 Despatch of Confirmation Notices: within two Business Days after each
Payment Date the Pool Funds Administrator shall issue a Confirmation
Notice to each Pool Member and the Ancillary Services Provider in
respect of the corresponding Payment Date setting out the information
required in sub-sections 22.2, 22.3, and 22.4.
22.2 Information - taking of electricity: the information required on a
Confirmation Notice in respect of each Pool Member taking electricity
on each Settlement Day is as follows:-
22.2.1 the Pool Member's identification number;
22.2.2 the Pool Member's name;
22.2.3 the total amount (inclusive of United Kingdom Value Added Tax)
received in the Pool Clearing Account on the relevant Payment
Date by the Pool Funds Administrator in respect of electricity
taken by such Pool Member during the Settlement Day and
Ancillary Services attributable thereto;
22.2.4 the amount received in the Pool Clearing Account on the
relevant Payment Date by the Pool Funds Administrator in
respect of electricity taken by such Pool Member during the
Settlement Day and Ancillary Services attributable thereto,
exclusive of United Kingdom Value Added Tax; and
22.2.5 the amount of United Kingdom Value Added Tax received in the
Pool Clearing Account on the Payment Day by the Pool Funds
Administrator in respect of electricity taken by such Pool
Member during the Settlement Day and Ancillary Services
attributable thereto.
22.3 Information - supplies of electricity: the information required on a
Confirmation Notice in respect of each Pool Member supplying
electricity on each Settlement Day shall include:-
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22.3.1 the Pool Member's identification number;
22.3.2 the Pool Member's name;
22.3.3 the Settlement Run identification number;
22.3.4 the total amount (inclusive of United Kingdom Value Added Tax)
paid out of the Pool Clearing Account on the relevant Payment
Date by the Pool Funds Administrator in respect of electricity
supplied by such Pool Member during the Settlement Day;
22.3.5 the amount paid out and the date on which such amount is paid
out of the Pool Clearing Account on the relevant Payment Date
by the Pool Funds Administrator in respect of electricity
supplied by such Pool Member during the Settlement Day
exclusive of United Kingdom Value Added Tax and the Settlement
Run identification number; and
22.3.6 the amount of United Kingdom Value Added Tax paid out of the
Pool Clearing Account on the relevant Payment Date by the Pool
Funds Administrator in respect of electricity supplied by such
Pool Member during the Settlement Day.
22.4 Information - Ancillary Services Provider: the information required on
a Confirmation Notice in respect of the Ancillary Services Provider is
as follows:-
22.4.1 the total amount receivable by the Ancillary Services Provider
(exclusive of United Kingdom Value Added Tax) for the
provision of Ancillary Services during the Settlement Day;
22.4.2 the total amount receivable by the Ancillary Services Provider
(inclusive of United Kingdom Value Added Tax) for the
provision of Ancillary Services during the Settlement Day; and
22.4.3 the total amount of United Kingdom Value Added Tax receivable
by the Ancillary Services Provider for the provision of
Ancillary Services during the Settlement Day.
22.5 Interest: where interest has been paid to any Pool Member or the
Ancillary Services Provider, the Pool Funds Administrator shall
promptly after such payment provide to each Pool Member and the
Ancillary Services Provider a statement showing the amount of interest
paid or received, the rate of interest applicable thereto and the
amount (if any) of tax withheld. If applicable, the Pool Funds
Administrator shall provide to the relevant Pool Member or the
Ancillary Services Provider an appropriate tax deduction certificate in
respect of any withholding tax.
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23. PAYMENT ERRORS
23.1 Overpayments: if for any reason whatsoever (including the negligence of
the Pool Banker or the Pool Funds Administrator) a Pool Creditor
receives on any Payment Date a payment in excess of the amount
disclosed in the Pool Ledger Account as calculated as being payable to
it (an "overpayment" (including but not limited to the proceeds of any
loan made or deemed to be made in accordance with Section 21 or Section
25 to any non-paying Pool Debtor which becomes insolvent before such
advance is repaid) the provisions of sub-section 5.15 apply, and the
Pool Creditor shall forthwith notify the Pool Funds Administrator of
the amount of the overpayment and shall forthwith pay the overpayment
into a Pool Account specified by the Pool Funds Administrator.
23.2 Repayment of overpayment (1): if prior to a Pool Creditor notifying the
Pool Funds Administrator of the overpayment, the Pool Funds
Administrator receives notice (from the Pool Banker or otherwise) of
the overpayment, the Pool Funds Administrator shall forthwith require
(by written notice) that the recipient of the overpayment pay the
overpayment to a Pool Account specified by the Pool Funds Administrator
and any Pool Creditor who receives such notice shall forthwith pay the
amount to an account specified by the Pool Funds Administrator. If the
overpayment is repaid within two Business Days of receiving the notice,
the overpayment (or any part not paid) shall bear interest at the
Reserve Interest Rate of at such rate as shall be set from time to time
by the Executive Committee from the date the overpayment was received
up to the date that value is given in a Pool Account by the Pool Funds
Administrator (as well after as before judgment). Any overpayment (or
part thereof) not repaid within two Business Days after demand therefor
in accordance with this Section 23 shall bear interest at the Default
Interest Rate from the expiry of that period and shall be recoverable
in accordance with Section 24. The Pool Funds Administrator shall
account to those entitled to payment by reason of an overpayment.
23.3 Repayment of overpayment (2): upon receipt of the overpayment
(including any interest) the Pool Funds Administrator shall (forthwith
upon entitlement to it being ascertained) pay the amount received to
the Pool Member or the Ancillary Services Provider who should have
received the payment on the Payment Date.
23.4 Underpayments: if for any reason whatsoever (including the negligence
of the Pool Banker or the Pool Funds Administrator) a Pool Creditor
does not receive on the relevant Payment Date the full amount disclosed
as owing to it pursuant to the Pool Ledger Account (an "underpayment")
that Pool Creditor shall forthwith notify the Pool Funds Administrator
of the amount of the underpayment, and the Pool Funds Administrator
after consultation with the Pool Banker shall use all reasonable
endeavours to identify such person as shall have received any
corresponding overpayment and promptly to correct the underpayment. If,
by reason of
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negligence, the Pool Funds Administrator holds or has under its control
amounts which it ought properly to have paid to Pool Members, such Pool
Members shall be entitled to interest on such amounts at the Default
Interest Rate and for such period as the Pool Funds Administrator
improperly holds or has such amounts under its control.
24. ENFORCEMENT OF CLAIMS
24.1 Notification of amount in default: without prejudice to the provisions
of Section 21, if a Pool Member shall fail to pay any amount payable
pursuant to this Schedule on the due date, the Pool Funds Administrator
shall notify the Director, the Executive Committee and each Pool
Creditor to whom the amount in default is owed pursuant to this
Agreement of the name of the non-paying Pool Debtor, the aggregate
amount in default and the amount owed to each Pool Creditor.
24.2 Duties of Pool Funds Administrator: except as otherwise expressly
provided in this Schedule, the Pool Funds Administrator shall not be
required to ascertain or enquire as to the performance or observance by
any Pool Member or the Ancillary Services Provider of its obligations
under the Agreement and shall have no duty to inform the Executive
Committee or any Pool Member or the Ancillary Services Provider of any
default, other than a failure to pay as may come to its attention.
24.3 Notice before action: each Pool Creditor shall give notice to the Pool
Funds Administrator before instituting any action or proceedings in any
court to enforce payments due to it pursuant to this Schedule. Upon
receipt of any notice under this sub-section 24.3, the Pool Funds
Administrator will as soon as practicable notify the Executive
Committee, all Pool Members, the Settlement System Administrator, the
Ancillary Services Provider and the Director.
24.4 Proceedings to Recover Overdue Amounts: without prejudice to the right
of any Pool Member to bring such proceedings as it sees fit in
connection with matters related to the Agreement, the Pool Funds
Administrator shall, if instructed to do so by the Executive Committee,
bring proceedings against a Pool Member (on behalf of those Pool
Members who have indicated their willingness to the Executive Committee
for the Pool Funds Administrator first so to act) for the recovery of
any amounts due by that Pool Member pursuant to this Schedule so long
as the Pool Funds Administrator has first reached agreement with the
Executive Committee and the Pool Members as to appropriate
remuneration, is indemnified to its reasonable satisfaction or, if it
so requires, provided that it shall have received such security as it
may reasonably request against all costs, claims, expenses (including
legal fees) and liabilities which it will or may sustain or incur in
complying with such instructions. Save as provided in the foregoing
provisions of this sub-section 24.4, the Pool Funds Administrator shall
not be obliged to bring any such proceedings.
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25. CREDIT FACILITY: PAYMENT DEFAULTS
25.1 Purpose of Credit Facility: It is acknowledged that the Credit Facility
provides an alternative to the Security Cover referred to in paragraph
15.1.2 and the Pool Funds Administrator will use the Credit Facility to
cover banking error and payment error and to minimize reductions of
payments to Pool Creditors unless it consider in good faith that an
amount in default is not likely to be remedied by the non-paying Pool
Debtor no later than the next Business Day.
25.2 Modification of other provisions of this Schedule: if and so long as
the Credit Facility is unconditionally available to the Pool Funds
Administrator (whether or not there remains any amount undrawn),
paragraphs 15.1.2, 21.1.3 and 21.1.5 shall be of no effect and the
remaining provisions of this Schedule shall be implemented on the basis
that the following sub-sections apply.
25.3 Payment default: the Pool Funds Administrator shall operate the Credit
Facility on the following basis:-
25.3.1 the Credit Facility may be drawn down by the Pool Funds
Administrator if, by 12.30 hours on any Payment Date, there is
an amount in default unless the Pool funds Administrator
considers in good faith that the amount in default is not
likely to be remedied by the non-paying Pool Debtor no later
than the next Business Day;
25.3.2 if paragraph 25.3.1 applies such that the Credit Facility may
be drawn down, the Pool Funds Administrator will first act in
accordance with paragraph 21.1.1, will then draw on the Credit
Facility for an amount not exceeding the available amount
under the Credit Facility (after allowing for any repayment to
be made to the Facility Bank under sub-section 25.6) and, if
it is not possible to clear the Pool Clearing Account by
either or both of those means, it will then act in accordance
with paragraph 21.1.6;
25.3.3 if paragraph 25.3.1 does not apply, then the Pool funds
Administrator will act in accordance first with paragraph
21.1.1, then with paragraph 21.1.2, then with paragraph 21.1.4
and only then with paragraph 21.1.6.
25.4 Amounts in default: each non-paying Pool Debtor will be responsible in
relation to any amount in default in accordance with the following
paragraphs:-
25.4.1 each non-paying Pool Debtor will be responsible for the
repayment of all amounts of principal drawn down under the
Credit Facility in respect of any amount in default relating
to that Pool Debtor as if the Pool Funds Administrator had
made a loan to such Pool Debtor of the relevant amount and the
amounts so payable are to be paid to, or otherwise made
available
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for credit to, the Pool Clearing Account as soon as possible,
but in any event no later than two Business Days after the
relevant Payment Date;
25.4.2 each non-paying Pool Debtor will be responsible also for
interest (determined in accordance with paragraph 25.4.4) on
all amounts of principal drawn down under the Credit Facility
in respect of any amount in default relating to that Pool
Debtor as if the Pool Funds Administrator had made a loan to
such Pool Debtor of the relevant amount and the amount so
payable by way of interest is to be paid to, or otherwise made
available for credit to, the Pool Clearing Account by no later
than the day notified by the Pool Funds Administrator to such
Pool Debtor for payment thereof (being the date which is 2
Business Days prior to the date on which interest is payable
under the Credit Facility by the Pool Funds Administrator to
the Facility Bank for the month in which the principal amount
in question was outstanding);
25.4.3 each non-paying Pool Debtor will further be responsible for
its proportionate share (determined in accordance with
paragraph 25.4.5) of any additional sum payable to the
Facility Bank pursuant to the terms of the Credit Facility as
if the Pool Funds Administrator had made a loan to such Pool
Debtor of the relevant amount and the amount so payable is to
be paid to, or otherwise made available for credit to, the
Pool Clearing Account forthwith on notification thereof by the
Pool Funds Administrator to the Pool Debtor in question;
25.4.4 for the purposes of paragraph 25.4.2, interest is to be
calculated using the effective daily rate of interest
reasonably determined by the Pool Funds Administrator on the
basis of the aggregate interest (including any compound
interest) payable under the Credit Facility in relation to any
particular day;
25.4.5 for the purposes of paragraph 25.4.3, the proportionate share
for a particular non-paying Pool Debtor is the amount (if any)
which the Pool Funds Administrator reasonably determines
(after consultation with the Facility Bank) as being the
amount of any additional sum payable in accordance with the
terms of the Credit Facility attributable to drawings under
the Credit Facility made in respect of that Pool Debtor.
25.5 Application of payments: on the Relevant Date the Pool Funds
Administrator shall, if the amount in question has not been received in
full from the non-paying Pool Debtor:-
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25.5.1 first debit the Pool Reserve Account and credit the Pool
Clearing Account with a sum not exceeding the amount of funds
(if any) standing to the credit of the non-paying Pool Debtor
in the Pool Reserve Account;
25.5.2 if that sum is insufficient to repay in full the amount in
question, the Pool Funds Administrator shall call the Letter
of Credit (if any) provided by the non-paying Pool Debtor (for
an amount not exceeding the available amount) and pay or cause
the proceeds thereof to be paid into the Pool Clearing
Account; and
25.5.3 if the amount credited to the Pool Clearing Account after
following the foregoing procedure is insufficient, reduce
payments to all Pool Creditors in proportion to the amounts
payable to them on the Payment Date to which the default
relates,
so that, in any case, the Pool Funds Administrator has available to it
on the Pool Clearing Account sufficient funds to comply with paragraph
25.6. For the purposes of this paragraph, the "Relevant Date" is
whichever of the following is applicable:-
(a) in relation to any principal amount for which a non-paying
Pool Debtor is responsible under paragraph 25.4.1, the last
date specified for payment under paragraph 25.4.1;
(b) in relation to any principal amount as referred to in
sub-paragraph (a), the first date (if earlier than the date
referred to in sub-paragraph (a)) on which the Pool Funds
Administrator is reasonably of the opinion that the non-paying
Pool Debtor will not repay forthwith all of the amounts of
principal in question;
(c) in relation to payment of interest under paragraph 25.4.2, the
last date for payment thereof; and
(d) in relation to an additional amount under paragraph 25.4.3 the
last date for payment of this amount.
25.6 Payments to Facility Bank: to the extent of any payment by the
non-paying Pool Debtor and/or if any of the circumstances described in
sub-section 25.5 occur, the Pool Funds Administrator will forthwith
repay to the Facility Bank by credit to the Pool Borrowing Account, if
applicable, an amount equal, in the former case, to the amount so paid
and, in the latter case, to the amount which should have been paid by
the non-paying Pool Debtor.
25.7 Reduction in payments to Pool Creditors: a reduction in payments as
contemplated by paragraphs 25.5.3 will also apply in the event of any
amounts drawn down under
855
<PAGE>
the Credit Facility being required to be repaid in accordance with the
terms of the Credit Facility and the Pool Funds Administrator shall
account for such reduction in the Pool Ledger Accounts as amounts due
and owing by the non-paying Pool Debtor to each Pool Creditor whose
payments were reduced.
25.8 Enforcement of Claims and other provisions: Sub-sections 21.7, 21.8,
21.9, 21.10 and Section 24 shall have effect in relation to amounts due
from a non-paying Pool Debtor which arise under the foregoing
sub-sections.
25.9 Unavailability of Credit Facility: if at any time the Credit Facility
ceases to be unconditionally available and paragraph 15.1.2 shall
thereupon have been effective, the whole or any part of the Security
Cover thereby required to be provided by each Supplier may be provided
by a credit to the Pool Reserve Account, unless otherwise determined by
the Executive Committee. The Executive Committee shall from time to
time assess (in consultation with the Pool Funds Administrator) and
determine the amount of Security Cover which would be required pursuant
to paragraph 15.1.2 as if that paragraph were in effect and such
assessment and determination shall apply for the purposes of paragraph
16.2.2 if paragraph 15.1.2 becomes applicable, pending any revised
assessment by the Executive Committee.
25.10 Interpretation: terms and expressions used in this Section 25 shall,
unless the context otherwise requires, have the same meanings as are
given to them for the purposes of Clause 21.
26. CREDIT FACILITY: GENERAL
26.1 Notifications to the Executive Committee: the Pool Funds Administrator
shall notify the Executive Committee forthwith:-
26.1.1 on it becoming aware of any circumstances which might lead to
an event under the Credit Facility as a result of which the
Credit Facility might cease to be available; and
26.1.2 upon receipt of a written demand from the Facility Bank
pursuant to the terms of the Credit Facility as a result of
which the Facility ceases to be available; and
26.1.3 in the event that the Facility Bank requires any additional
amount to be paid under the Credit Facility by reason of any
increased costs to the Facility Bank or any changes in
circumstances.
26.2 Notifications to Suppliers: the Pool Funds Administrator shall notify
the Suppliers as soon as reasonably practicable after receipt by it of
a notice from the Facility
856
<PAGE>
Bank that an additional amount will or may be payable by the Pool Funds
Administrator to the Facility Bank under the terms of the Credit
Facility.
26.3 Amendment and Cancellation:
26.3.1 the Pool Funds Administrator shall not:-
(a) amend or supplement, or agree to any amendment or
supplement to, the terms of the Credit Facility
without the approval of the Executive Committee; or
(b) cancel the Credit Facility unless either the approval
of the Executive Committee has been obtained of
paragraph 26.3.2 applies.
26.3.2 The Pool Funds Administrator shall cancel the Credit Facility
in full at any time if a resolution to that effect is passed
(on a simple majority vote) by the Suppliers in separate
general meeting or if all Suppliers have requested such
cancellation.
26.4 Extension and Renewal: the Pool Funds Administrator shall negotiate
with the Facility Bank an extension or renewal of the Credit Facility
on the instructions of the Executive Committee and, in the absence or
such instructions, shall begin negotiations with the Facility Bank no
later than ten weeks before the Credit Facility is due to terminate in
accordance with its terms, with a view to the extension or renewal of
the Credit Facility on substantially the same terms for a further year
and, in any event, to keep the Executive Committee in agreeing any
extension or renewal of the Credit Facility and the Executive Committee
shall be responsible for deciding whether or not to renew or extend the
Credit Facility and, if so, on what terms and for what period.
26.5 Fees not attributable to a particular Supplier: any fees (and any
additional amounts payable under the terms of the Credit Facility to
the Pool Funds Administrator shall be recharged to the Suppliers, in
accordance with their respective Supplier Contributory Shares (to be
calculated on the basis of those current on the date on which the
relevant fee (or the relevant portion thereof) or additional amount is
payable by the Pool Funds Administrator under the Credit Facility).
26.6 No additional charge: the Pool Funds Administrator shall not make any
additional charge for arranging, participating in or administering the
Credit Facility.
857
<PAGE>
ANNEX 1
Form of Advice Note
ADVICE NOTE
DATE: Energy Pool Funds Administration Ltd.
Room 157.2
185 Park Street
London SE1 9DY
TELEPHONE: (071) 620 9456
FAX NO: (071) 401 2799
NAME:
ADDRESS:
ADVICE NOTE:
PAYMENT DATE:
FAX NO.:
THIS IS NOT A TAX INVOICE
Advice Note issued in accordance with the Pooling and Settlement Agreement for
the Electricity Industry in England and Wales dated 30th March 1990 as amended,
varied or supplemented from time to time.
<TABLE>
<CAPTION>
====================================================================================================================================
SETTLEMENT RUN/ DESCRIPTION Amount payable Amount payable
DATE TYPE exc VAT inc VAT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
DO NOT NET YOUR PAYABLES TO YOUR RECEIVABLES
A wholly owned subsidiary of the National Grid Company plc. Regd. in England No.
2444187 VAT No 547 8630 11
858
<PAGE>
ANNEX 2
Form of Confirmation Notice
CONFIRMATION NOTICE
DATE: Energy Pool Funds Administration Ltd.
TELEPHONE: Room 157.2
FAX NO: 185 Park Street
TELEX: London SE1 9DY
NAME:
ADDRESS:
CONFIRMATION NO:
PAYMENT DATE:
FAX NO:
Confirmation notice issued in accordance with the Pooling and Settlement
Agreement for the Electricity Industry in England and Wales dated 30th March
1990 as amended, varied or supplemented from time to time.
THIS IS A TAX INVOICE
<TABLE>
<CAPTION>
====================================================================================================================================
PAYMENT SETTLEMENT DESCRIPTION AMOUNT PAID VAT VAT AMOUNT PAID
DATE DATE EXC VAT RATE PAID INC VAT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
A wholly owned subsidiary of The National Grid Company plc. Regd. in England No
2444187 VAT No 547 8630 11
859
<PAGE>
ANNEX 3
Part 1
Form of Settlement Account Designation
To: Energy Pool Funds Administration Limited
as Pool Funds Administrator
and
Barclays Bank PLC
54 Lombard Street Branch
as Pool Banker
Date:
Settlement Account Designation
1. [Insert name of Pool Member/Ancillary Service Provider] hereby
designates the following account as its Settlement Account to which you
are instructed to remit all amounts which are payable to us through the
Pool Clearing Account in accordance with Schedule 11 to the Pooling and
Settlement Agreement for the Electricity Industry in England and Wales
dated 30th March, 1990, as amended, varied or supplemented from time to
time (the "Agreement").
Name of Bank Branch Address Sorting Code Name of Account Account No.
2. We hereby designate the following account as our Settlement Account
from which all payments due from us in accordance with Schedule 11 to
the Agreement will be remitted.
Name of Bank Branch Address Sorting Code Name of Account Account No.
Signed by .........................
Position ..........................
For and on behalf of
[Name of Pool Member/Ancillary Services Provider]
860
<PAGE>
ANNEX 3
Part 2
Form of Change of Settlement Account
To: Energy Pool Funds Administration Limited as
Pool Funds Administrator
and
Barclays Bank PLC
54 Lombard Street Branch
as Pool Banker
In accordance with sub-section 4.6 of Schedule 11 to the Pooling and Settlement
Agreement [insert name] hereby gives you notice that, with effect from [insert
date] (or 10 Business Days after you receive this notice, whichever is later),
our new Settlement Account [from which payments due from the undersigned/to
which payments due to the undersigned]* will be paid shall be
Name of Bank Branch Address Sorting Code Name of Account Account No.
Yours sincerely,
[_________________]
for and on behalf of
[Name of Pool Member/Ancillary Services Provider]
_________________________________________________________
*Please complete as appropriate
861
<PAGE>
ANNEX 4
Form of Letter of Credit
To: Energy Pool Funds Administration Limited
as Pool Funds Administrator
At the request of [Supplier] we have opened in your favour our irrevocable
Letter of Credit Number (_______) for (pound)[______________] (amount in words).
This Letter of Credit is available against your sight drafts accompanied by a
signed statement either that the applicant has failed to pay to you the amount
you are claiming under the terms of the Pooling and Settlement Agreement for the
electricity industry in England and Wales dated 30th March, 1990 (the
"Agreement") or that the claim is being made under sub-section 15.5 or Section
21 of Schedule 11 to the Agreement. Payments under this Letter of Credit shall
be effected immediately to [insert relevant account details].
Partial drawings are allowed hereunder.
Claims under this Letter of Credit shall be made at the counters of [insert
details of the Town Clearing branch of the issuing bank].
This Letter of Credit expires on [______________].
We waive any right to set off against any amount payable hereunder any claims we
may have against you.
Any demand hereunder must comply with all the above requirements [and signatures
thereon must be confirmed by yours Bankers].
This Letter of Credit is subject to Uniform customs and practice for Documentary
Credits (1983 Revision) International Chamber of Commerce.
We undertake that drafts and documents drawn under and in strict conformity with
the terms of this credit will be honoured upon presentation.
This Letter of Credit shall be governed by and construed in accordance with
English law.
For and on behalf of [______________] Bank [Plc]
862
<PAGE>
SCHEDULE 12
Transitional Arrangements
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
GOAL
(1) Use of GOAL programme (i) An auditable April 1997 April 1993
for Scheduling and calculation route for (GOAL Replacement Phase 1)
Settlement purposes scheduling
(ii) Assessment for April 1997 April 1993
development or (GOAL Replacement Phase 1)
replacement of GOAL
(2) [Not used]
(3) [Not used]
</TABLE>
863
<PAGE>
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
(4) Ancillary Service costs (i) Review the Reactive Power Reactive Power:
charged by NGC as a arrangements for the April 1994 December 1993
lump sum per day payment to generators
for ancillary services. Other services: Other services:
Where appropriate, April 1996 December 1995
recommend and, if
agreed, implement
changes to the level of
aggregation by payment
type and by time
period, and the method
of calculating payment.
Review the requirement
for the Ancillary
Services Provider to
contract for particular
ancillary services.
(ii) Review the Reactive Power: Reactive Power
arrangements for April 1995 December 1994
charging consumers for
ancillary services and, Other services: Other services:
in particular, whether April 1996 December 1995
individual consumers
can be charged for the
impact of their demands
on reactive power
requirements.
(5) Scheduling, Despatch and Review arrangements to
Settlement cater :or:
</TABLE>
864
<PAGE>
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
No special treatment (i) energy constrained January 1998 April 1996
plant; (GOAL Replacement Phase 2)
(ii) plant with cost January 1998 April 1996
structures that cannot (GOAL Replacement Phase 2)
adequately be expressed
as a Willans line
(6) [Not used]
(7) Dynamic Parameters Treatment of changes in April 1998 April 1996
generator dynamic
parameters during the
day
(8) Offer Prices submitted Review frequency at
daily which revised offer
prices can be used in
Scheduling, Despatch
and Settlement e.g.:
(i) submitted for each April 1997 August 1995
scheduling period
(control phase);
(ii) submitted at any April 1997 April 1995
time for opportunity
trading on despatch
timescales
</TABLE>
865
<PAGE>
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
(9) Out-of-merit costs shared Review demand
forecasts entered by
NGC into Settlement,
based on information
supplied by customers,
against actual demand
figures. Review and, if
agreed, implement
changes in the:
(i) [Not used];
(ii) allocation of July 1995 July 1994
out-of-merit costs
associated with
deviations from
forecast; and
(iii) incentives and July 1995 July 1994
penalties associated
with demand forecast
accuracy
</TABLE>
866
<PAGE>
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
(10) Three stage settlement Introduction of October 1995 October 1994
process (unconstrained additional stage(s), in
schedule, despatch and particular, the
out-turn) transmission
constrained schedule, to
allow further
disaggregation of
difference between
unconstrained schedule
costs and out-turn costs.
(Could be a phased
implementation)
(11) Sharing cost across all
demand for:
(A) Transmission constraints Cost of out-of-merit April 1995 October 1994
generation required
only to support stability
of a local network to be
charged to the owner of
such network
(B) Transmission losses Review and, if agreed, July 1996 October 1994
implement changes in
the arrangements for
allocating the costs of
transmission losses on
the supergrid, e.g. to
reflect:
</TABLE>
867
<PAGE>
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
(i) electrical location
of generation and
demand; and/or
(ii) contractual
arrangements between
Generators, Suppliers
and NGC; and/or
(iii) incentives for
investment in supergrid
facilities
(12) Metering data collection by (i) [Not used]
Settlement Day (0000
hours to 2400 hours)
(ii) Review change to December 1999 December 1997
collecting metering data
by variable scheduling
day (see (13)(A)) and
implement if agreed
(13) Schedule Day parameters
(A) Schedule Day start and Review the introduction December 1999 December 1997
finish (0500 hours to 0500 of varying length
hours) Schedule Days based
upon the shape of the
demand curve or other
factors and implement
if and as agreed
</TABLE>
868
<PAGE>
<TABLE>
<CAPTION>
Date for Submission
Transitional Arrangement New Principle date for Implementation of Works Programme
- ------------------------ ------------- ----------------------- ------------------
<S> <C> <C> <C>
(B) Settlement Period duration Review the use of December 1999 December 1997
set at 0.5 hours shorter scheduling
periods and implement
if agreed
</TABLE>
869
<PAGE>
SCHEDULE 13
Contributory Shares
1. Contributory Share: the Contributory Share of a Pool Member shall be
calculated in accordance with the following provisions of this
Schedule.
2. Points: subject as provided in Section 3, in respect of each Quarter:-
2.1 each Pool Member which is a Generator shall receive in that
capacity one point (a "Point") for each MWh of Genset Metered
Generation of all Generating Units of such Pool Member for all
Settlement Periods falling in the Votes Calculation Period
relative to such Quarter, as determined from the final run of
Settlement (as referred to in paragraph D(3) of the Preamble
to Schedule 9) for each such Settlement Period; and
2.2 each Pool Member which is a Supplier shall receive in that
capacity such number of points (each a "Point") as is equal to
the total MWh of Consumer Metered Demand taken by that Pool
Member in all Settlement Periods falling in the Votes
Calculation Period relative to such Quarter, as determined
from the final run of Settlement (as referred to in paragraph
D(3) of the Preamble to Schedule 9) for each such Settlement
Period.
3. New Pool Members: until the third Quarter Day next falling after the
date of its admission as a Pool Member, any Party which is admitted as
a Pool Member pursuant to Clause 8.2 shall receive that number of
Points as is equal to one thousand times the number of Weighted Votes
to which such Pool Member would have been entitled under Clause
11.3.1(b) had:-
3.1 the provisions of Clause 11.3.3 been ignored; and
3.2 any applicable restrictions under Clause 11.4 been ignored;
as determined by the Executive Committee. Thereafter, such Pool
Member's Points shall be calculated in accordance with paragraph 2.
4. Calculation of Points: on or prior to each Quarter Day the Executive
Committee shall, on the basis of information to be supplied by the
Settlement System Administrator as referred to in Clause 11.3.5,
calculate for the Following Quarter the number of Points which each
Pool Member whose Points are to be calculated in accordance with
paragraph 2 shall receive, and shall notify each Pool Member and the
Director in writing of the number of Points received by all Pool
Members (whether calculated in accordance with paragraph 2 or 3). The
determination of the Executive Committee as to the number of Points of
each Pool Member shall (in the absence of manifest error) be final and
binding for all purposes of this Agreement.
5. Contributor Shares: the Contributory Share of a Pool Member shall be
calculated in accordance with the following formula:-
870
<PAGE>
CS = X + Y
Where:-
X = A
-----
2 x B
Y = C
-----
2 x D
and where:-
CS = the Contributory Share of such Pool Member, expressed as a
percentage
A = the number of Points for the time being of such Pool Member
in its capacity as a Generator
B = the number of Points for the time being of such Pool Members
which are Generators, in their capacity as such
C = the number of Points for the time being of such Pool Member
in its capacity as a Supplier
D = the number of Points for the time being of all Pool Members
which are Suppliers, in their capacity as such.
6. Calculation of Contributory Shares: on or prior to:-
6.1 each Quarter Day;
6.2 each date upon which a New Party is admitted as a Pool Member;
and
6.3 each date upon which a Pool Member ceases to be a Party,
the Executive Committee shall calculate for the Following Quarter or
(as the case may be) the remainder of the then current Quarter the
Contributory Share for the time being of each Pool Member, and shall
notify each Pool Member and the Director in writing of the Contributory
Share of each of the Pool Members. The determination of the Executive
Committee as to the Contributory Share of each Pool Member shall (in
the absence of manifest error) be final and binding for all purposes of
this Agreement.
7. Records: the provisions of Clause 11.9 shall apply mutatis mutandis in
respect of each Pool Member's Points and Contributory Share.
871
<PAGE>
SCHEDULE 14
Membership of the Executive Committee:
Public Electricity Suppliers and Independent Suppliers
1. Definitions: in this Schedule the following expressions have the
following meanings:-
"Appointment Date" means the first day in any Appointment Period;
"Appointment Period" means either a Preliminary Period or a period of
four years, as the case may require;
"Appointor" means a PES having for the time being a right to appoint a
PES Committee Member;
"Group" means Group A, B, C, or D, as the case may be;
"PES Member" means any Pool Member which is a Public Electricity
Supplier; and
"Preliminary Period" means the period commencing on the Effective Date
and ending on the following dates:-
(a) in the case of the Appointor is Group A, 31st March, 1991;
(b) in the case of the Appointor in Group B, 31st March, 1992;
(c) in the case of the Appointor in Group C, 31st March, 1993; and
(d) in the case of the Appointor in Group D, 31st March, 1994.
2. Appointment - Public Electricity Suppliers:
2.1 subject to Sections 2 to 5 and Section 8, the PES Members shall
together have the right to appoint not more than four members of the
Executive Committee (the "PES Committee Members").
2.2 The PES Members shall for the purposes of Sections 2 to 5 and Section 8
be arranged into Groups as follows:-
Group A: 1 SEEBOARD plc
2 Southern Electric plc
3 London Electricity plc
Group B: 1 Midlands Electricity plc
2 South Wales plc
3 Eastern Electricity plc
Group C: 1 Yorkshire Electricity Group plc
872
<PAGE>
2 Northern Electric plc
3 NORWEB plc
Group D: 1 South Western Electricity plc
2 East Midlands Electricity plc
3 Manweb plc
2.3 In respect of the Preliminary Period appropriate to each Group, the
first-named PES Member shall be entitled to appoint a PES Committee
Member and in respect of each subsequent Appointment Period the
entitlement to appoint shall pass to the second-named PES Member and so
on through each Group, in constant rotation.
2.4 No later than seven days before the end of an Appointment Period, the
Appointor of each Group next entitled to appoint a PES Committee Member
shall give notice in accordance with Section 2.7 of its intention to
appoint a PES Committee Member for the next Appointment Period.
2.5 If a notice if given pursuant to Section 2.4, the person specified in
the notice shall hold office as a PES Committee member commencing on
the Appointment Date in place of the person previously appointed.
2.6 If no notice is given pursuant to Section 2.4, the PES Member next
following in the relevant Group shall be entitled to make an
appointment for the relevant Appointment Period.
2.7 Any notice required to be given pursuant to Sections 2 to 5 shall
specify the name of the person to be appointed and shall be given to
the Secretary of the Executive Committee and to all PES Members.
3. Removal and Replacement - Public Electricity Suppliers:
3.1 a PES Committee Member shall cease to hold office if:-
(a) the office is vacated pursuant to Clause 21; or
(b) he is removed from office by his Appointor at any time during
the Appointment Period; or
(c) his Appointor ceases to be a Pool Member or Party for whatever
reason; or
(d) another person is appointed as the PES Committee Member
pursuant to Section 2.4; or
(e) if the office is required to be vacated pursuant to Section
5.2.
3.2 If at any time there are less than four PES Committee Members then the
following persons shall have the right to appoint a PES Committee
Member by giving notice in accordance with Section 2.7:-
(a) the Appointor in the appropriate Group which is not for the
time being represented;
873
<PAGE>
(b) if an appointment is not made within three days of the right
becoming exercisable, the PES Member next following in the
relevant Group shall be entitled to appoint a PES Committee
Member, and so on; and
(c) if by the end of nine days after the right to appoint under
paragraph (a) above has become exercisable no such appointment
has been made, then any PES Member shall have the right to
call a meeting of PES Members for the purpose of making the
appointment.
To any meeting of PES Members called pursuant to Section 3.2(c) the
provisions of Clauses 10.3 to 10.5, 10.8, 11.12 and 12 shall apply
mutatis mutandis but so that:-
(i) the required notice period shall be seven days and shall be
given to all PES Members;
(ii) a meeting called by shorter notice shall be deemed to have
been duly called if it is agreed by at least two-thirds in
number of the PES Members having a right to attend and vote at
such meeting;
(iii) the necessary quorum shall be two;
(iv) each PES Member shall have one vote;
(v) any PES Member shall be entitled at the meeting to nominate
any person to be appointed;
(vi) an appointment shall be duly made by resolution of a simple
majority of PES Members present and voting at such meeting;
(vii) any such resolution shall be decided on a show of hands and
proxies shall be entitled to vote on a show of hands; and
(viii) in the event of a tie, the matter shall be decided by the PES
Member present (in person or by proxy) with the highest number
of Weighted Votes.
Any person appointed pursuant to Section 3.2(c) shall be subject to
removal and replacement by a meeting of PES Members called for that
purpose, and the provisions of Section 3.2(c) shall apply mutatis
mutandi to any such meeting.
3.3 If at any time there are less than four PES Committee Members, then
until such time as the appropriate appointment has been made in
accordance with Section 3.2, any PES Member shall be entitled to make
an emergency appointment by notice given in accordance with Section
2.7, and the person so appointed shall hold office as a PES Committee
Member until such time as an appointment is made pursuant to Section
3.2 or until the next Appointment Date (whichever is the earlier). In
the event that more than one PES Member exercises its right to make an
emergency appointment pursuant to this Section 3.3, the person duly
appointed as the PES Committee Member pursuant to this Section 3.3
shall be the person named in the first notice received by the Secretary
and for this purpose the decision of the Secretary as to which notice
was received first shall be conclusive and binding on the PES Members.
874
<PAGE>
3.4 Subject to Section 3.1 any person appointed as a PES Committee Member
pursuant to Section 3.2 shall hold office until the next Appointment
Date.
3.5 Any notice duly given pursuant to Sections 3.2(a) or (b) or 3.3 shall
be effective to appoint the PES Committee Member with effect at the
beginning of the relevant Appointment Period.
4. New PES Members:
4.1 any New Party who is or becomes a PES Member (the "New PES Member")
shall, subject to Section 4.2 below, on such admission be allotted to a
Group as follows:-
(a) if one Group has less PES Members that any other Group, to
that Group; or
(b) if all Groups have the same number of PES Members, to Group A;
or
(c) (in any other case), as the New PES Member shall be notice to
all PES Members elect.
4.2 A New PES Member shall be entitled to appoint a PES Committee Member on
the Appointment Date falling 10 years after the date of admission as a
PES Member or such other Appointment Date as the PES Members in the
appropriate Group may agree, in either case in preference to any other
PES Member entitled as at that date to appoint the PES Committee
Member, in which case the rights of other PES Members in that Group to
appoint shall accordingly be delayed by one Appointment Period.
5. Limitations on the Right to Appoint - Public Electricity Suppliers:
5.1 the right to appoint a PES Committee Member shall at all times be
limited to the appointment of one PES Committee Member in each
Appointment Period.
5.2 If, at any time, two or more Appointors are affiliated with each other
then such Appointors shall procure that the aggregate member of PES
Committee Members appointed by them shall be reduced accordingly, by
removing such PES Member or Members from Groups A to D in descending
order starting with Group A, until only one such PES Member remains out
of all those which are affiliated to each other.
6. Right to Appoint - Independent Suppliers:
6.1 Independent Suppliers shall together have the right to appoint one
Committee Member.
6.2 No later than seven days before each annual general meeting of Pool
Members or, failing election at such meeting, seven days before an
extraordinary general meeting convened for such purpose each
Independent Supplier shall be entitled, by notice to the Executive
Committee, to propose one person (a "Nominee") to be a Committee
Member. Any such proposal to be valid shall be accompanied by a written
statement from the Nominee stating that he is aware of the proposal and
would be prepared to serve as a Committee Member if elected. As soon as
practicable after such seventh day (and in any event before the date of
the annual general meeting or, as the case may be, extraordinary
general meeting) the Executive Committee shall circulate (or cause to
be circulated) to all
875
<PAGE>
Independent Suppliers a list of all the names of the Nominees and of
the Independent Suppliers who proposed them Such list shall also be
circulated at the annual genera meeting or, as the case may be,
extraordinary general meeting to all Independent Suppliers present in
person or by proxy.
6.3 The term of office of Committee Members appointed by Independent
Suppliers shall be from 1st April in the year of appointment to 31st
March in the next following year provided that, if the meeting at which
such Committee Member is appointed is held after 1st April, his term of
office shall commence from the time of his appointment. A Committee
Member whose term of office has expired or is to expire shall be
eligible for re-election.
6.4 In the event that there is more than one Nominee, at each annual
general meeting of Pool Members or (as the case may be) extraordinary
general meeting convened for the purpose a resolution shall be put to
the Independent Suppliers for the election by them of one Committee
Member form the list of Nominees referred to in Section 6.2. The
Nominee with the highest number of Weighted Votes cast in his favour
shall be elected as a Committee Member.
7. Right to Remove - Independent Suppliers:
7.1 a Committee Member appointed by the Independent Suppliers may be
removed at any time by resolution of the Independent Suppliers who are
Pool Members at such time.
7.2 If a Committee Member appointed by the Independent Suppliers is removed
or his office is vacated pursuant to Clause 21, a separate general
meeting of Independent Suppliers shall be convened for the purpose of
appointing a substitute Committee Member. To such separate general
meeting the provisions of Section 6.2 shall apply mutatis mutandis.
7.3 To any meeting of Independent Suppliers called pursuant to this Section
7, the provisions of Clauses 9.3, 9.5, 10.2 to 10.5, 10.8, 11.12 and 12
shall apply mutatis mutandis but so that:-
(a) the necessary quorum shall be fifty per cent in number of all
independent Suppliers;
(b) a meeting called by shorter notice shall be deemed to have
been duly called if it is agreed by at least two-thirds in
number of Independent Suppliers having a right to attend and
vote at such meeting;
(c) appointments and removals shall be decided by the highest
number of Weighted Votes cast in favour; and
(d) each Independent Supplier shall be entitled at the meeting to
nominate any person to be appointed.
7.4 In the event that there is only one Independent Supplier, that
Independent Supplier shall have the right to appoint and remove the
Committee Member.
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8. Disputes - Public Electricity Suppliers and Independent Suppliers: any
dispute as to whether a person has been duly appointed or removed as a
Committee Member under this Schedule and any dispute as to entitlement
to appoint a Committee Member hereunder shall be decided upon by the
Director, whose decision shall be final, conclusive and binding upon
all Public Electricity Suppliers and Independent Supplier who have the
right to appoint Committee Members under this Schedule.
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SCHEDULE 15
The Pool Funds Administrator's Contract
Contents
Page
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1. Definitions and Interpretation
2. Appointment
3. Expiry of Term and Removal
4. Appointment of a Successor
5. Transfer of Responsibilities and Assets
6. Specific Duties and Responsibilities
7. Funds Transfer Software
8. Annual Fee
9. PFA Budgets and Notices of Annual Fee
10. Statement of costs and Fees
11. Auditor's Opinion
12. PFA Accounting Period
14. The Pool Funds Administrator's Charges
15. Amount
16. Bank Charges
17. Allocation of Charges
18. Adjustment
19. Additional Compensation
Annex 1 PFA Budget for the 1992 PFA Accounting Period
Annex 2 Pro-forma Statement of Charges
Annex 3 Pro-forma Statement of Costs and Fees
Annex 4 Existing Funds Transfer Software
Annex 5 Escrow Agreements
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1. DEFINITIONS AND INTERPRETATION
1.1 Definitions: in this Schedule, except where the context otherwise
requires:
"Active Trading Pool Member" means a Pool Member which buys and/or
sells electricity pursuant to this Agreement on a regular basis or
which is an Externally Interconnected Party:
"Active Trading Pool Member Identities" means at any time the sum of:
(i) one; and
(ii) the aggregate number of Pool Member identities which at that
time have been accorded to all Active Trading Pool Members by
the Settlement System Administrator for the purposes of its
operation of the Settlement System provided that (unless EPFAL
and the Executive Committee shall otherwise agree in writing)
for the purposes of this definition a Pool Member shall have
no more that one Pool Member identity in each of the following
categories applicable to it, namely:-
(a) category 1: a Pool Member which generates
electricity;
(b) category 2: a Pool Member which generates electricity
and which is also a Consumer (as defined in the Pool
Rules);
(c) category 3: a Pool Member which supplies electricIty
within the meaning of section 4 of the Act; and
(d) category 4: an Externally Interconnected Party;
and accordingly may not have more than four Pool Member
identities:
"Annual Fee" has the meaning ascribed to it in Section 8;
"Bank Charges" has the meaning ascribed to it in Section 16;
"Base Sum" has the meaning ascribed to in paragraph 8.2.1:
"Consultants" means an independent firm of chartered accountants or
management consultants of international repute selected by the
Executive Committee in consultation with EPFAL;
"EPFAL" means Energy Pool Funds Administration Limited (registered)
number 2444187) whose registered office is situate at 185 Park Street,
London SEI 9DY;
"Funds Transfer Hardware" means all the computer equipment and
accessories whether existing or coming into existence in the future
which are used at any time by EPFAL in connection with the Funds
Transfer Business;
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"Funds Transfer Software" means all the computer programs and codes
(both source code and object code) and all documents and materials
relating thereto or developed therefrom (including those documents and
materials on which the programs and codes are embodied and all user
documentation) and whether existing or coming into existence in the
future which are used at any time by EPFAL in connection with the Funds
Transfer Business, including (as at the date hereof) the software
listed in Annex 4;
"Notice of Annual Fee" means any notice of the Annual Fee prepared by
EPFAL pursuant to Section 9:
"PFA Accounting Period" means each successive period of 12 months
beginning on 1st April in each year or of such other length and/or
beginning on such other date as may be agreed in writing between EPFAL
and the Executive Committee;
"PFA Budget" means any budget prepared by EPFAL pursuant to Section 9
and, in the case of the PFA Accounting Period beginning in 1992, the
budget set out in Annex 1;
"PFA Commencement Date" means 1st April, 1992;
"PFA Handling Charge" means, in respect of any amount, five per cent of
such amount;
"PFA Operating Costs" means, in respect of any PFA Accounting Period or
part thereof, the total expenditure properly incurred or accrued by
EPFAL in such PFA Accounting Period or (as the case may be) the
relevant part thereof in respect of:
(i) the costs of effecting and maintaining insurance in accordance
with the requirements of sub-section 6.2:
(ii) the costs of any tests of Funds Transfer Hardware and Funds
Transfer Software under sub-section 6.1;
(iii) audit fees for the Funds Transfer Business and the costs and
expenses of the Pool Auditor under sub-section 6.1;
(iv) bank administration charges levied by the Pool Banker on EPFAL
in respect of the operation of the Pool Banker Accounts (as
defined in the Funds Transfer Agreement) (and excluding, for
the avoidance of doubt, Bank Charges and any interest
charges);
(v) the fees and expenses of the PFA Custodian (as defined in
Annex 5) incurred in respect of the updating of all historical
data referred to in paragraph 1.1.3 of Annex 5; and
(vi) the costs of the maintenance arrangements referred to in
sub-section 7.7;
together with the total amount of EPFAL'S bad debts recognised in such
PFA Accounting Period and arising from a Pool Member's failure to pay
its due proportion of EPFAL's charges determined in accordance with
Section 17; as conclusively certified in the event of any dispute by
the auditors for the time being of EPFAL, at the cost and expense of
EPFAL;
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"Quality of Service Review" means a review of the manner and standard
of performance (both overall and on a day-to-day basis) by EPFAL of
those of its obligations under the Agreement (including this Schedule)
and the Agreed Procedures, the performance of which is called into
question by reason of the notification received by the Executive
Committee under sub-section 11.1;
"Retail Price Index" means the general index of retail prices published
by the Central Statistical Office each month in respect of all items
provided that if:
(i) the index for any month in any year shall not have been
published on or before the last day of the third month after
such month; or
(ii) there is a material change in the basis of the index,
the Executive Committee and EPFAL shall agree a substitute index for
such month or (as the case may be) a substitute index (and, in default
of agreement, the matter shall be referred to arbitration pursuant to
Clause 83);
"Statement of Charges" means the statement of charges required to be
submitted by EPFAL pursuant to sub-section 10.7 substantially in the
form set out in Annex 2 (or in such other form as EPFAL and the
Executive Committee may from time to time agree in writing) showing the
total charges to be made by EPFAL on all Pool Members in accordance
with Section 15 and 16;
"Statement of Costs and Fees" means any statement of costs and fees
required to be submitted by EPFAL pursuant to Section 10 which shall be
substantially in the form set out in Annex 3 or in such other form as
EPFAL and the Executive Committee may from time to time agree in
writing; and
"Total Sum Due" means, in respect of any PFA Accounting Period, the
total aggregate amount chargeable by EPFAL for that PFA Accounting
Period in accordance with Sections 15 and 16.
1.2 Incorporation by reference: in this Schedule, the following definition,
namely:
"Funds Transfer Agreement";
"Funds Transfer Business";
"Letter of Credit";
"Pool Account"; and
"Pool Banker"
shall have the meanings respectively ascribed to them in Schedule II.
1.3 Interpretation: in this Schedule, except where the context otherwise
requires, references to a particular Annes, section, sub-section,
paragraphs or sub-paragraph shall be a reference to that Annex to this
Schedule or, as the case may be, that Section, sub-section, paragraph
or sub-paragraph in this Schedule.
1.4 Pool Funds Administrator's consent: the Parties acknowledge and agree
that, notwithstanding any other provision of the Agreement, insofar as
directly affects in any material respect the rights, benefits, duties,
responsibilities, liabilities and/or obligations of the Pool Funds
Administrator, no
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amendment to or variation of any of the matters dealt with in any of
the following provisions of the Agreement shall take effect:
1.4.1 without the prior written consent of EPFAL (but only for so
long as it is the Pool Funds Administrator):
(a) Clauses 7.3, 9.5, 10.9, 19.4, 25, 66, 68, 69, 74 and
78.2 of the Agreement; and
(b) this sub-section 1.4; and
1.4.2 without the prior written consent of EPFAL (but only for so
long as it is the Pool Funds Administrator), such consent not
to be unreasonably withheld or delayed:
(a) Clauses 18.1.2, 70, 71.5 and 71.6 of the Agreement;
and
(b) Part XVI (other than Clause 63.1), Part XX (other
than Clauses 74 and 78.2) of and Schedule 11 to the
Agreement; and
(c) this Schedule.
2. APPOINTMENT
2.1 Continuation of Appointment: on 30th March, 1990 EPFAL was appointed by
each Pool Member and the Ancillary Services Provider and agreed to act
as the Pool Funds Administrator. This Schedule sets out the terms and
conditions on and subject to which EPFAL shall continue and agrees to
continue to act as the Pool Funds Administrator for the period referred
to in sub-section 2.2 (as such period may be extended or further
extended in accordance with the terms of this Schedule).
2.2 Term: EFPAL's appointment as the Pool Funds Administrator on and
subject to the terms and conditions set out in this Schedule shall be
deemed to have commenced on the PFA Commencement Date and, subject as
hereinafter provided in this Schedule, shall end on 31st March, 1995
(the period from the PFA Commencement Date to 31st March, 1995 being
the "Current Term").
2.3 Extension of term: EPFAL's appointment as the Pool Funds Administrator
may be extended beyond the expiry of the Current Term or (as the case
may be) any extended or further extended term either:
2.3.1 if it successfully tenders pursuant to sub-section 4.3 for
continuation of its appointment and then on and subjected to
the terms and conditions of the tender; or
2.3.2 if at any time prior to that expiry EFPAL and the Executive
Committee so agree in writing and then on and subject to such
terms and conditions as are so agreed.
2.4 Wholly-owned subsidiary: NGC shall procure that, so long as EPFAL acts
or is obliged to act as the Pool Funds Administrator, EPFAL at all
times remains a wholly-owned subsidiary of NGC.
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2.5 Independent Contractor: in carrying out its duties and responsibilities
and otherwise in acting as the Pool Funds Administrator under the
Agreement, EPFAL shall act as an independent contractor and (unless
expressly authorised to the contrary) shall neither act nor hold itself
out nor be held out as acting as agent for any of the other Parties.
2.6 Restrictions on business: for so long as EPFAL is the Pool Funds
Administrator EPFAL undertakes to each Party and the Executive
Committee that it shall not render to any other Party any billing
service or any other service of any nature whatsoever which is likely
to give rise to a conflict of interest in the performance by EPFAL of
its duties and responsibilities as the Pool Funds Administrator under
the Agreement. EPFAL further undertakes that if it carries on any
business other than that of Pool Funds Administrator it shall maintain
separate accounts and records in respect of any other business. EPFAL
acknowledges and agrees that this undertaking has been the subject of
discussion and negotiation and is fair and reasonable having regard to
the revision of the terms and conditions of EPFAL's appointment as the
Pool Administrator with effect from the PFA Commencement Date.
3. EXPIRY OF TERM AND REMOVAL
3.1 Expiry of term: if on expiry of the Current Term (or, if EPFAL'S term
of appointment has been extended or further extended in accordance with
paragraphs 2.3.1 or 2.3.2, expiry of that extended or further extended
term) the term of EPFAL'S appointment as the Pool Funds Administrator
has not been or will not be extended or (as the case may be) further
extended in accordance with paragraph 2.3.1 or 2.3.2, EPFAL shall, at
the request of the Executive Committee, continue to serve as the Pool
Funds Administrator for such additional period not exceeding in
accordance with paragraph 2.3.1 or 2.3.2, expiry of that extended or
further extended term) as the Executive Committee may request in order
to provide an opportunity for a successor to be appointed. The
Executive Committee shall make such a request as soon as possible after
becoming aware of the above circumstances but in any event no later
than three months (or such other period as EPFAL and the Executive
Committee may form time to time agree in writing) before the date of
expiry of the Current Term or (as the case may be) the extended or
further extended term.
3.2 Removal by Executive Committee: the Executive Committee may at any time
remove EPFAL as the Pool Funds Administrator forthwith or after such
period of notice as it thinks fit if:
3.2.1 EPFAL shall have committed a material breach of any of its
obligations as the Pool Funds Administrator under the
Agreement or the Agreed Procedures (other than a technical
breach of trust covered by the provisions contained in Section
5.16 of Schedule 11) and, if such breach is capable of remedy,
shall have failed to remedy such breach within:
(a) three Business Days (in the case of a failure to make
payment (other than where any Pool Member or the
Ancillary Services Provider is in default which
results in EPFAL'S inability to make such payment) or
a failure to call a Letter of Credit when required);
(b) 14 days (in the case of any breach of its undertaking
in sub-section 2.6:) or
(c) 15 Business Days (in the case of any other default),
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in any such case after it shall have received written
notice from the Executive Committee specifying the
breach and requiring it to be remedied; or
3.2.2 EPFAL;
(i) is unable to pay its debts (within the meaning of
section 123(1) or (2) of the insolvency Act 1986, but
subject as hereinafter provided n this paragraph
3.2.2) or if any voluntary agreement is proposed in
relation to it under section 1 of the Act enters into
any scheme of arrangement other than for the purpose
of reconstruction or amalgamation upon terms and
within such period as may previously have been
approved in writing by the Executive Committee); or
(ii) has an administration order under section 8 of the
Insolvency Act 1986 made in relation to it; or
(iv) passes any resolution for winding-up other than a
resolution previously approved in writing by the
Executive Committee; or
(v) becomes subject to an order by the High court for
winding-up.
For the purposes of sub-paragraphs (i) above section 123(1) of
the Insolvency Act 1986 shall have effect as if for
"(pound)750" there was substituted "(pound)150,000" and,
further, EPFAL shall not be deemed to be unable to pay its
debts for the purposes of sub-paragraph (i) above if any such
demand as is mentioned in the said section is being contested
in good faith by EPFAL with recourse to all appropriate
measures and procedures.
3.3 Acknowledgement: EPFAL acknowledges and agrees that, for the purposes
of paragraph 3.2.1, any breach by it of its undertaking in sub-section
2.6 shall be deemed to be a material breach of its obligations under
the Agreement.
3.4 Removal as a Party:
3.4.1 upon the expiry or termination for whatever reason of EPFAL as
the Pool Funds Administrator each of the Parties shall
promptly at its own cost and expense execute and deliver all
agreements and other documentation and do all such other acts,
matters and things as may be necessary to effect (without
prejudice to paragraph 3.4.2) EPFAL's release as the Pool
Funds Administrator and (if appropriate) as a Party.
3.4.2 The expiry or termination for whatever reason of EPFAL's
appointment as the Pool Funds Administrator shall be without
prejudice to any accrued rights and liabilities of the Parties
(including EPFAL as the Pool Funds Administrator) under the
Agreement.
4. APPOINTMENT OF A SUCCESSOR
4.1 Right to appoint: the Executive Committee shall have the right to
appoint any successor Pool Funds Administrator. In making any such
appointment the Executive Committee shall take account of the views (if
any) expressed by any Pool Member or Ancillary Services Provider. The
appointment of a
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successor Pool Funds Administrator shall take effect upon the removal
of, as the case may be, expiry of the term of appointment EPFAL as the
Pool Funds Administrator.
4.2 Appointment following removal: if EPFAL, is removed pursuant to
sub-section 3.2 the Executive Committee may appoint a successor without
being obliged to carry out or complete the process set out in
sub-section 4.3, such appointment to be on and subject to such terms
and conditions as the Executive Committee sees fit.
4.3 Tender process:
4.3.1 the Executive Committee shall invite tenders for appointment
as successor Pool Funds Administrator:
(a) not later than one year before the expiry of the
Current Term (or, if EPFAL's term of appointment has
been extended or further extended in accordance with
paragraph 2.3.2, not later than a date agreed between
EPFAL and the Executive Committee and falling before
the expiry of that extended or further extended
term); and
(b) if EPFAL's term of appointment has been extended or
further in accordance with paragraph 2.3.1 or EPFAL
has been requested to continue to serve as the Pool
Funds Administrator pursuant to sub-section 3.1, not
later than six months (or such other period as EPFAL
and the Executive Committee may agree in writing)
before the expiry of that extended or further
extended term.
4.3.2 The persons invited to tender and the terms and conditions of
that invitation, of the tender procedure and of the
appointment shall be determined by the Executive Committee
provided that the tender process shall be completed and the
Executive Committee shall have made its decision as to the
successor (or shall have decided not to appoint a successor
from those persons who submitted tenders) no later than the
date falling three months before the expiry of the Current
Term or (as the case may be) the extended or further extended
term. The Executive Committee shall not be bound to appoint
the successor Pool Funds Administrator from any of those
persons who have submitted tenders. The Executive Committee
shall use its reasonable endeavors to ensure that in the
tender process the Executive committee shall use its
reasonable endeavors to ensure that in the tender process the
Executive Committee does not discriminate unfairly between
those eligible to tender or the tenders received.
5. TRANSFER OF RESPONSIBILITIES AND ASSETS
5.1 Transfer of responsibilities and assets: upon a successor Pool Funds
Administrator being appointed under Section 4 and accepting such
appointment, EPFAL shall, at the request of such successor:
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5.1.1 (a) at EPFAL'S option:
(i) fully and effectively assign, transfer and
deliver to such successor all Funds Transfer
Software (and copies thereof) beneficially
owned by EPFAL together with all rights,
title and interest therein or thereunder
vested in EPFAL; or
(ii) irrevocably license such successor to use
all Funds Transfer Software beneficially
owned by EPFAL, which licence shall be on
terms enabling such successor to grant
sub-licences and permitting the benefit of
such licence to be assigned to any further
successor Pool Funds Administrator and shall
include an undertaking by EPFAL promptly to
provide such access to source and object
code and other documents and materials
thereto relating to the operation of the
Funds Transfer System as each such successor
may reasonably require for the purpose of
maintaining and enhancing all Funds Transfer
Software; and
(b) use its best endeavors to assign or novate or procure
that assignment or novation of any licence on other
agreement to use any Funds Transfer Software which is
not beneficially owned by EPFAL or to such successor
and/or to maintain any Funds Transfer Software;
(c) deliver to the successor Pool Funds Administrator two
copies of the Funds Transfer Software and any
associated documentation at the request of the
Executive Committee for use by the successor Pool
Fund Administrator;
5.1.2 make over to such successor all such records, manuals, data
and other information which EPFAL is required to retain
pursuant to Clause 63.1.3 of the Agreement provided that EPFAL
shall be entitled to retain copies of such of those manuals as
have been prepared by EPFAL at its own cost and expenses (and
not recharged to Pool Members pursuant to the Agreement);
5.1.3 use all reasonable endeavors to novate or procure the novation
of the Funds Transfer Agreement and any banking facility or
financial accommodation made available to EPFAL as Pool Funds
Administrator by the Pool Banker and to transfer all Letters
of Credit to such successor and cause to be transferred to
such successor to hold in its capacity as Pool Funds
Administrator all balances standing to the credit of any Pool
Account;
5.1.4 provide such training, assistance and systems support as such
successor may reasonably require and for such period as such
successor may reasonably require (not exceeding three months
from the date of its removal or expiry of its term as the Pool
Funds Administrator) to enable such successor to carry out its
duties and responsibilities as successor Pool Funds
Administrator;
5.1.5 use all reasonable endeavors to transfer or otherwise make
available to such successor such of the freehold and leasehold
property as is owned or occupied by EPFAL and is used by it in
its capacity as the Pool Funds Administrator; and
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5.1.6 transfer or otherwise make available to such successor all
other assets, equipment (excluding computer hardware),
facilities, rights, know-how and transitional assistance which
it possesses and which is necessary or desirable for such
successor to have in order to enable such successor
efficiently to operate the in accordance with the Agreement
and the Agreed Procedures with effect on and from the time of
the removal of EPFAL or expiry of EPFAL's term as the Pool
Funds Administrator (unless such removal is without notice in
which case so soon thereafter as is reasonably practicable),
and in any such case on such reasonable terms as may be agreed between
EPFAL and its successor as Pool Funds Administrator (but only, in the
case of such successor, after it has itself obtained the written
consent of the Executive Committee to such terms) within one month
after the commencement of negotiations (or such longer period as EPFAL,
such successor and the Executive Committee may agree in writing) and,
in default of agreement of terms, the dispute shall be referred to
arbitration in accordance with Clause 83.
5.2 Co-operation: EPFAL further agrees, in consideration of the payment of
such amount as may be agreed between EPFAL and its successors as Pool
Funds Administrator (but only, in the case of such successor, after it
has itself obtained the written consent of the Executive Committee to
such terms) within the period referred to in the final paragraph of
sub-section 5.1 (and, in default of agreement of terms, the dispute
shall be referred to arbitration in accordance with Clause 83), to
co-operate with any such successor and the Executive Committee so that
the transfer of duties, responsibilities, assets and know-how to the
operation of the Funds Transfer System and as little inconvenience to
the Parties as is practicable in all the circumstances.
5.3 PFA Unwinding Costs: without prejudice to Section 18, EPFAL's costs and
expenses of, or directly associated with, its removal or the expiry or
termination for whatever reason of its appointment as the Pool Funds
Administrator (including any redundancy or relocation costs and
expenses and any costs and expenses arising from the vacation or
surrender of any premises or disposal or its own redeployment of any
plant or equipment used in the Funds Transfer Business) shall be borne
exclusively by EPFAL (and shall not be recharged to Pool Members).
5.4 Without prejudice to rights: any payment made by all or any of the Pool
Members to EPFAL under this Section 5 shall be without prejudice to any
rights and remedies which the Pool Members (or any of them) may have
against EPFAL in its capacity as the Pool Funds Administrator arising
under the Agreement.
5.5 Reference to Arbitration: if any matter is referred to arbitration
pursuant to this Section 5, EPFAL shall not by virtue of the reference
to such arbitration be entitled to delay in the handing over of the
Funds Transfer Software and any records, manuals, data or other
information referred to in sub- section 5.1 and EPFAL shall not be
entitled to withhold any training, assistance and system support but
shall continue to co-operate with the Executive Committee and the
successor Pool Funds Administrator including carrying out its
obligations set out in sub-sections 5.1 and 5.2 and accordingly EPFAL
shall not be entitled to withhold or delay the carrying out of its
obligations.
6. SPECIFIC DUTIES AND RESPONSIBILITIES
6.1 Test of the Funds Transfer Hardware and Software:
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6.1.1 EPFAL shall, upon receipt of not less than ten working days'
notice from the Pool Auditor and subject to availability of
computer time, arrange for such tests of the Funds Transfer
Hardware and the Funds Transfer Software as are from time to
time reasonably required by the Pool Auditor (either on its
own initiative or on the instructions of the Executive
Committee) for the performance of its functions under Part IX
of the Agreement. EPFAL shall, if so required by the Pool
Auditor, permit the Pool Auditor to carry out such tests
provided that the person or persons allocated to carry out
such tests by the Pool Auditor is or are suitably qualified in
the operation of computers and computer systems to carry out
such test and, in any other case, EPFAL shall carry out such
test.
6.1.2 EPFAL shall give the Pool Auditor reasonable access to the
Funds Transfer Hardware and the Funds Transfer Software for
the purpose of carrying out and monitoring any test under
paragraph 6.1.1.
6.1.3 The costs of any test under paragraph 6.1.1 shall be borne by
EPFAL and recovered by it as part of the DPA Operating Costs
in accordance with this Schedule.
6.2 Insurance:
6.2.1 subject to the availability in the insurance market of such
insurances, EPFAL shall effect and maintain in full force and
effect with first class insurers the following insurance:-
(a) professional indemnity insurance as Pool Funds
Administrator in an amount of not less than
(pound)60,000,000 any one claims and
(pound)60,000,000 all claims in any one year (or such
other amount as may from time to time be reasonably
required by the Executive Committee after
consultation with EPFAL); and
(b) employee fidelity insurance in an amount of
(pound)60,000,000.
6.2.2 All premia and other sums of money payable in respect of all
insurances effected or to be effected pursuant to paragraph
6.2.1 shall be borne by EPFAL and recovered by it as part of
the PFA Operating Costs in accordance with this Schedule.
6.2.3 EPFAL shall use all reasonable endeavors to make and collect
claims promptly and shall apply all moneys received by it in
respect of the insurance referred to in paragraph 6.2.1 in or
towards making good the loss and fully repairing the damage or
(as the case may be) satisfying the relevant liability in
respect of which such moneys were receivable or reimbursing
the cost of the same.
6.2.4 EPFAL shall promptly supply the Executive Committee upon
request from time to time with an insurance broker's
certificate in form and content reasonably satisfactory to the
Executive Committee confirming that cover has been effected in
respect of the insurances referred to in paragraph 6.2.1 and
giving reasonable details of the terms and conditions of such
insurances.
6.3 Instructions: without prejudice to Section 19, EPFAL shall comply with
all instructions and directions issued by the Executive Committee to
EPFAL in its capacity as the Pool Funds Administrator unless
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such compliance would cause EPFAL to be in breach of any of its other
obligations as the Pool Funds Administrator under the Agreement or the
Agreed Procedures.
6.4 Changes: EPFAL in its capacity as the Pool Funds Administrator shall
not make any change in its operation of the Funds Transfer System (or
any party or aspect thereof) which in its reasonable opinion is or may
(either alone or together with any other change(s) be material without
the prior written consent of the Executive Committee. If EPFAL wishes
to make any such change, it shall promptly notify the Executive
Committee. If EPFAL wishes to make any such change, it shall promptly
notify the Executive Committee in writing giving reasonable details of
the proposed change.
6.5 General: EPFAL shall have such other duties, responsibilities,
obligations and liabilities as are attributed to it in the Agreement
and the Agreed Procedures.
7. FUNDS TRANSFER SOFTWARE
7.1 Representations and warranties: EPFAL hereby represent and warrants to
each of the Pool Members and the Executive Committee that:-
7.1.1 the Funds Transfer Software referred to in Annex 4 (in this
Section, "Existing Funds Transfer Software") is all the Funds
Transfer Software used by EPFAL in connections with the Funds
Transfer Business as at 31st March, 1992;
7.1.2 it is the sole beneficial owner of the Existing Funds Transfer
Software referred to in Part A of Annex 4;
7.1.3 it is the license of the Existing Funds Transfer Software
referred to in Part B of Annex 4 and that the details of the
licenses set out in Part B of Annex 4 are correct;
7.1.4 the Existing Funds Transfer Software is freely transferable to
any successor Pool Funds Administrator pursuant to Section 5;
7.1.5 the use of the Existing Funds Transfer Software in connection
with the Funds Transfer Business does not infringe the rights
of any other person and EPFAL is not in breach of any of the
terms of the licenses referred to in Part B of Annex t; and
7.1.6 it has not received any claim or notice challenging its title
to, or its right to use, the Existing Funds Transfer Software.
7.2 Future Funds Transfer Software: as from the PFA Commencement Date EPFAL
shall use its best endeavors to ensure it shall be the sole beneficial
owner of all Funds Transfer Software used or to be used in the Funds
Transfer Business after 31st March, 1992 (in this Section, "Future
Funds Transfer Software"). In the event that EPFAL is unable to ensure
that it will be sole beneficial owner of such Future Funds Transfer
Software it shall use its best endeavors to ensure that it shall be the
exclusive license thereof in relation to the Funds Transfer Business or
any similar or related businesses on terms which enable it to grant
sub-licenses and the benefit of such license to be assigned to any
successors Pool Funds Administrator.
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7.3 Notification: EPFAL undertakes to notify the Executive Committee
forthwith in writing in the event that:-
7.3.1 it is unable to ensure that it is the owner of, or license on
the terms set out in sub-section 7.2 under, Future Funds
Transfer Software; or
7.3.2 it receives any claim or notice of any alleged infringement of
the rights of any other person by its use of any Funds
Transfer Software or challenging its title to, or its right to
use, any Funds Transfer Software; or
7.3.3 it is or becomes aware of any infringement by any third party
of its rights in any Funds Transfer Software,
and to consult with the Executive Committee as to any steps to be taken
in respect of any such situation.
7.4 Infringement: EPFAL hereby further represents and warrants to and
undertakes with each of the Pool Members and the Executive Committee
that the use of any Future Funds Transfer Software in connection with
the Funds Transfer Business will not infringe the rights of any other
person and that it shall not breach any of the terms of any licenses
under Future Funds Transfer Software.
7.5 Restrictions: EPFAL shall not, without the prior written consent of the
Executive Committee (not be to unreasonably withheld or delayed), grant
to any person (other than a successor Pool Funds Administrator) any
right, title or interest to, in or under any Funds Transfer Software or
give to such person a copy of, or permit such person to use, Funds
Transfer Software or otherwise derive any benefit or profit therefrom
(other than by itself using such Funds Transfer Software for the
purpose of the Funds Transfer Business).
7.6 Indemnity: EPFAL hereby agrees fully and effectively to indemnify and
keep indemnified each of the Pool Members and the Executive Committee
from and against any and all loss, liability, damages, costs and
expenses which it may suffer or incur arising out of or resulting from
any breach by the Pool Funds Administrator of any of the terms,
representations, warranties and undertakings contained in this Section
7 and Annex 5.
7.7 Maintenance: EPFAL shall ensure that at all times it has in full force
and effect proper arrangements for the maintenance of (and the prompt
rectification of defects in) the Funds Transfer Hardware and the Funds
Transfer Software and, upon the reasonable request of the Executive
Committee, shall supply evidence reasonably satisfactory to the
Executive Committee of the existence and nature of such arrangements.
The costs of all such maintenance arrangements shall be borne by EPFAL
and recovered by it as part of the PFA Operating Costs in accordance
with this Schedule.
7.8 Escrow arrangements: EPFAL shall comply with the provisions of Annex 5
which relate to escrow arrangements for the Funds Transfer Software and
gives the warranties therein stated.
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8. ANNUAL FEE
8.1 General: in consideration of the carrying out by EPFAL of its duties
and responsibilities as the Pool Funds Administrator as set out in the
Agreement and the Agreed Procedures (other than in respect of those
matters for which EPFAL is or will e compensated through the recovery
of the PFA Operating Costs in accordance with this Schedule) EPFAL
shall be paid an annual fee as the Pool Funds Administrator (the
"Annual Fee") calculated in accordance with the following provisions of
this Section 8.
8.2 Calculation of fee:
8.2.1 in respect of the PFA Accounting Period beginning on the PFA
Commencement Date the Annual Fee for that PFA Accounting
Period shall be (pound)1,250,000 (the "Base Sum").
8.2.2 In respect of each PFA Accounting Period beginning on an
anniversary of the PFA Commencement Date the Annual Fee
(expressed in pounds sterling) for that PFA Accounting Period
shall be calculated in accordance with the following formula:-
(a) ABS = Base Sum * (1+(RPIP/100))
where RPIP = the percentage change (whether of a
positive or negative value) in the Retail
Price Index between that published in, or
(as the case may be) the substitute index
for, the third month before the PFA
Commencement Date and that published in, or
the substitute index for, the third month
before the anniversary from which the
adjusted Annual Fee is to take effect:
(b) ATPB = Base Sum * (I/100)
where I = the value set out in column 2 below
opposite the number of Active Trading Pool
Member Identities set out in column 1 below
as at the beginning of the third month
before the anniversary from which the
adjusted Annual Fee is to take effect:-
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<TABLE>
<CAPTION>
Column 1 Column 2
-------- --------
Number of Active Trading
Pool Member Identities Value
---------------------- -----
<S> <C>
0 to 60 0
61 to 70 5
71 to 80 10
81 to 90 20
91 to 100 25
101 to 110 30
111 to 120 35
121 to 130 45
131 to 140 50
141 to 150 55
</TABLE>
(c) Annual Fee = ABS + ATPM.
8.2.3 If during any PFA Accounting Period beginning on an
anniversary of the PFA Commencement Date the number of Active
Trading Pool Member Identities shall change such that, were
the Annual Fee for that PFA Accounting Period to be
recalculated, it would yield a different result from that
originally calculated for that PFA Accounting Period (or, as
the case may be, from that most recently recalculated for that
PFA Accounting Period pursuant to this paragraph 8.2.3) EPFAL
shall promptly recalculate the Annual Fee and notify the
Executive Committee in writing of the amount thereof. Such
notification shall be accompanied by a statement showing in
reasonable detail the calculation of such amount. Subject to
paragraph 8.3.2(b), such recalculated Annual Fee shall take
effect for the period from the date falling one month after
the receipt by the Executive Committee of such notification
until the end of the then current PFA Accounting Period (or
until further recalculated under this paragraph 8.2.3).
8.3 Review of fee:
8.3.1 if at any time the total number of Active Trading Pool Member
Identities shall exceed 150 EPFAL may request the Executive
Committee to review the basis of calculation and/or the amount
of the Annual Fee. Upon receipt of such request the Executive
Committee and EPFAL shall negotiate in good faith for a period
not exceeding three months (or such longer period as EPFAL and
the Executive Committee may agree in writing) with a view to
agreeing a revised basis of calculation and/or amount of the
Annual Fee.
8.3.2 (a) If EPFAL and the Executive Committee shall agree a revised
basis of calculation and/or amount of the Annual Fee, such
revisions shall take effect in accordance with the terms of
that agreement.
(b) If at the end of the negotiation period referred to
in paragraph 8.3.1 EPFAL and the Executive Committee
shall not have agreed a revised basis of
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calculation and/or amount of the Annual Fee or if the
Executive Committee shall dispute any calculation of
the Annual Fee made by EPFAL and notified to the
Executive Committee may refer the dispute to
arbitration pursuant to Clause 83. Pending the award
of the arbitrator(s) the Annual Fee current as at the
date of EPFAL's calculation or recalculation shall
continue in force.
9. PFA BUDGETS AND NOTICES OF ANNUAL FEE
9.1 PFA Budgets: not earlier than three nor later than two months prior to
the first day of each PFA Accounting Period EPFAL shall prepare and
submit to the Executive Committee a PFA Budget for such PFA Accounting
Period. Such PFA Budget shall be indicative only but shall be prepared
on a best estimates basis. The PFA Budget for the PFA Accounting Period
beginning in 1992 is set out in Annex 1.
9.2 Content of PFA Budgets: each PFA Budget (other than the PFA Budget for
the PFA Accounting Period beginning in 1992) shall compare each item or
category of budgeted expenditure shown therein with the forecast
expenditure in respect of such item or category for the remainder of
the then current PFA Accounting Period and report any salient
differences between any such forecast expenditure and the budgeted
expenditure in respect of each such item or category in the immediately
preceding PFA Budget.
9.3 Form of PFA Budgets: each PFA Budget shall be substantially in the form
of that set out in Annex 1 (or in such other form as EPFAL and the
Executive Committee may from time to time agree in writing).
9.4 Notice of Annual Fee: each PFA Budget (other than the PFA Budget for
the PFA Accounting Period beginning in 1992) shall be accompanied by a
Notice of Annual Fee prepared by EPFAL stating the Annual Fee for the
PFA Accounting Period to which such PFA Budget relates and setting out
in reasonable detail the calculation of the Annual Fee. Subject to
paragraphs 8.2.3 and 8.3.2, the Annual Fee so stated shall take effect
for such PFA Accounting Period.
10. STATEMENT OF COSTS AND FEES
10.1 Statement of Costs and Fees: no later than one month following the date
in any PFA Accounting Period of the publication of the audited accounts
for the Funds Transfer Business for the previous PFA Accounting Period,
EPFAL shall prepare and submit to the Executive Committee and all Pool
Members a Statement of Costs and Fees for such previous PFA Accounting
Period. The audited accounts of EPFAL, the instruction letter from
EPFAL to its auditors giving instructions for the auditing of those
accounts and the auditors' management letter (to the extent that it
relates to the economy, efficiency, effectiveness and quality of
service of EPFAL in carrying out its duties and responsibilities as the
Pool Funds Administrator) shall accompany each Statement of Costs and
Fees for each entire PFA Accounting Period.
10.2 Form of Statement of Costs and Fees: the Statement of Costs and Fees
for any PFA Accounting Period:-
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10.2.1 in relation to the PFA Operating Costs, shall attribute actual
and accrued expenditure for such period against, inter alia,
each of the categories and sub-categories set out in the
corresponding PFA Budget for such PFA Accounting Period; and
10.2.2 in relation to the Annual Fee, shall state the Annual Fee and
any revisions thereto for such PFA Accounting Period and shall
set out in reasonable detail the calculation thereof.
10.3 Accompanying Report: each PFA Budget and Statement of costs and Fees
for an entire PFA Accounting Period submitted to the Executive
Committee and, in the case of the Statement of Costs and Fees Pool
Members pursuant to sub-section 9.1 or 10.1 shall be supported by a
written report of EPFAL commenting in reasonable detail upon the
matters comprised in the categories of expenditures included in such
PFA Budget or Statement of Costs and Fees.
10.4 Tender Costs:
10.4.1 if, during any PFA Accounting Period, the Pool Funds
Administrator reasonably believes that any of the category of
services within the definition of PFA Operating Costs are
likely to exceed the amount of that expenditure for that
category or sub- category or other items of cost provided for
in the PFA Budget by more than 5%, the Pool Funds
Administrator shall notify the Executive Committee accordingly
and explain the reasons for the increase. The Executive
Committee may required the Pool Fund Administrator to invite
tenders for any of the categories or sub-categories or items
of cost which are so exceeded, in accordance with sub-section
10.4.3.
10.4.2 If the Executive Committee consider that the amount budgeted
for any category or sub-category or other item of cost in the
PFA Budget in unreasonable then the Executive Committee may
require the Pool Funds Administrator to invite tenders for any
of the categories or sub-categories or other items of cost in
the PFA Budget in accordance with sub-section 10.4.3.
10.4.3 Within seven Business Day after receipt of a notice given
pursuant to paragraph 10.4.1 the Executive Committee shall
notify the Pool Funds Administrator in writing whether it
wishes the Pool Funds Administrator to seek a further tender
for the service in question. If the Executive Committee so
notifies the Pool Funds Administrator that it requires a
further tender to be sought, the Pool Funds Administrator
shall obtain a further tender and shall give the Executive
Committee reasonable details of that further tender and at the
same time shall notify the Executive Committee of which tender
it has chosen to accept together (if applicable) with reasons
as to why it has not chosen the lowest price tender.
10.4.4 If the Executive Committee fails to notify the Pool Funds
Administrator within the time period referred to in paragraph
10.4.2 or notifies the Pool Funds Administrator that it does
not wish it to seek a further tender, the Pools Funds
Administrator may accept the original tender.
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<PAGE>
10.5 Basis of preparation: all Statement of Costs and Fees other than a
Statement of Costs and Fees in respect of an entire PFA Accounting
Period shall be unaudited but prepared on a best estimates basis. The
Statement of Costs and Fees in respect of an entire PFA Accounting
Period shall be audited by EPFAL's auditors.
10.6 Accounting Practices: each PFA Budget and Statement of Costs and Fees
shall be prepared on the basis of the accounting principles and
practices used to draw up the most recent audited accounts of EPFAL and
consistently applied. If any Statement of Costs and Fees for an entire
PFA Accounting Period is not prepared on such basis, EPFAL shall
prepare and submit to the Executive Committee and all Pool Members a
pro-forma set of its audited accounts for such entire PFA Accounting
Period which is prepared on the basis of the accounting principles and
practices or their method of application used to prepare EPFAL's
audited accounts shall be noted in the next following PFA Budget or
Statement of Costs and Fees, as the case may be.
10.7 Statement of Charges: a Statement of Charges shall accompany each
Statement of Costs and Fees.
11. QUALITY OF SERVICE REVIEW
11.1 Complaints: if the Executive Committee shall receive from any Pool
Member written notification of a breach or an alleged breach of the
Agreement or an Agreed Procedure involving EPFAL in its capacity as the
Pool Funds Administrator it shall promptly notify EPFAL of receipt and
shall send a copy of such notification to EPFAL.
11.2 Report: within one month after receipt from the Executive Committee of
any such notification as is referred to in sub-section 11.1 EPFAL shall
prepare and submit to the Executive Committee a written report
explaining in reasonable detail the circumstances which gave rise to,
and the causes of, the breach (or, if it asserts that there has not
been a breach, the reasons in support of that assertion), any remedial
action taken by it and the consequences of such action.
11.3 Quality of Service Review: promptly after receipt of EPFAL'S written
report referred to in sub- section 11.2 (or, if EPFAL shall fail to
submit a report within the period referred to in that sub- section,
promptly after expiry of that period) the Executive Committee shall
determine whether it wishes to commission a Quality of Service Review.
In making such determination the Executive Committee shall take into
account the nature and seriousness of the notified breach (or alleged
breach) and the said written report (if any). The Executive Committee
shall notify EPFAL in writing of any such determination.
11.4 Consultants: if the Executive Committee shall determine to commission a
Quality of Service Review, it shall instruct the Consultants to conduct
such review and to report in writing (a "Review Report") to the
Executive Committee and EPFAL.
11.5 Terms of engagement: the terms of engagement of the Consultants
(including the objectives and scope of the work to be performed and the
form of report to be issued) in respect of any Quality of Service
Review shall (subject to sub-section 11.10) be determined by the
Executive Committee in consultation with EPFAL.
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11.6 Review Report: EPFAL shall be given the opportunity to examine and
comment on any factual details contained in any Review Report before it
is submitted in final form. Such final form shall, if the Consultants
commissioned to carry out the Quality of Service Review shall think
fit, take into consideration the comments of EPFAL on any factual
details contained in the Review Report and include an indication of the
response and proposed action of EPFAL. A copy of the final form of the
Review Report shall be sent to EPFAL and may be distributed by the
Executive Committee to Pool Members and the Director.
11.7 Implementation: upon receipt of a Review Report, EPFAL shall (if so
required by and in consultation with the Executive Committee) give
effect to such recommendations, if any, as are set out in such report
as soon as is reasonably practicable following the date of receipt by
EPFAL of such report.
11.8 Arbitration: if EPFAL shall in good faith consider the recommendations
in any Review Report to be impractical or inappropriate, the same shall
be referred for resolution to arbitration in accordance with Clause 83.
11.9 Access: for the purposes of any Review Report, EPFAL shall permit the
Consultants access to the Funds Transfer Hardware, the Funds Transfer
Software and all data used by EPFAL in the operation of the Funds
Transfer System and to such of its company books, accounts and vouchers
as related to any of the items or categories of expenditure which make
up the PFA Operating Costs and as are necessary for the performance of
the Quality of Service Review. The Consultants shall also be entitled
to require from EPFAL's officers, employees or agents such information
and explanations as are necessary to the performance of the Quality of
Service Review (but, for the avoidance of doubt, the Consultants shall
not have access to any data used, information held or records kept in
relation to any Pool Member without such Pool Member's prior written
consent).
11.10 Confidentiality: the terms of engagement of the Consultants
commissioned to carry out the Quality of Service Review shall include a
written obligation of the Consultants and signed on their behalf in
favour of EPFAL to keep confidential information made available by
EPFAL to the Consultants or tow which the Consultants have access for
the purposes of the Quality of Service Review save that the Consultants
shall be entitled to disclose any such information:-
11.10.1 in the Review Report to the extent that the Consultants
reasonably consider appropriate (after consultation with
EPFAL) for the purposes of that report; or
11.10.2 with the prior written consent of EPFAL; or
11.10.3 in compliance with any requirement of law or pursuant to the
arbitration rules of the Electricity Arbitration Association
or pursuant to any judicial or other arbitral process or
tribunal having jurisdiction.
11.11 Additional rights : the provisions of this section 11 are in addition
to (and not in substitution for) and shall not prejudice any other
rights which the Executive Committee or any Pool Member may have in
respect of any such breach as is referred to in sub-section 11.1.
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<PAGE>
12. AUDITORS' OPINION
The Statement of Costs and Fees in respect of an entire PFA Accounting
Period to be sent to the Executive Committee and all Pool Members
pursuant to sub-section 10.1 shall be accompanied by a report from
EPFAL's auditors considering whether in such auditors' opinion:-
(a) the Statement of Costs and Fees is in agreement with EPFAL's
underlying books and records;
(b) PFA Operating Costs have been properly extracted from EPFAL's
audited financial statements; and
(c) the calculations in respect of the Annual Fee are in
accordance with the formula set out in sub-section 8.2, and
are correct and in agreement with EPFAL's underlying books and
records.
13. PFA ACCOUNTING PERIOD
Each PFA Accounting Period shall be for a period of twelve months
unless otherwise agreed in writing by EPFAL and the Executive
Committee. If EPFAL wishes to change its accounting reference date it
shall give due notice thereof to the Executive Committee which shall
agree to enter into an amending agreement to the Agreement in order to
give effect to the same at EPFAL's cost and expense.
14. THE POOL FUNDS ADMINISTRATOR'S CHARGES
EPFAL shall be entitled to recover from all Pool Members the charges
set out in Sections 15 and 16 in respect of its operation of the Funds
Transfer Business but, subject to Section 19, shall not be entitled to
recover any other charges.
15. AMOUNT
15.1 Annual Charges: in respect of each PFA Accounting Period, EPFAL shall
be entitled to recover from Pool Members annual charges equal to the
aggregate of the following amounts:-
15.1.1 PFA Operating Costs for the relevant PFA Accounting Period (as
identified by the Statement of Costs and Fees for such period
submitted pursuant to Section 10);
15.1.2 the PFA Handling Charge, calculated on the total amount of the
PFA Operating Costs;
15.1.3 the Annual Fee for such PFA Accounting Periods; and
15.1.4 the Bank Charges.
15.2 Recovery of Charges:
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15.2.1 the due proportion (determined in accordance with sub-section
15.4) of EPFAL's annual charges referred to in sub-section
15.1 payable by each Pool Member for each PFA Accounting
Period shall be recovered by monthly payments in advance from
each Pool Member or, where EPFAL and the Pool Member otherwise
agree, semi- annually in advance (calculated on a best
estimates and reasonable basis to be one twelfth or, as the
case may be, one half of the annual charges payable by such
Pool Member by reference to the most recent PFA Budget).
15.2.2 EPFAL shall advise each Pool Member of such amount by invoice
despatched to each Pool Member approximately 15 days prior to
the first day of each month or, as the case may be, other
period. Such invoice shall be paid no later than the first day
of such month or such other period. Each Pool Member shall pay
the amount advised in the relevant invoice within 15 days
after the invoice date.
15.2.3 Each Pool Member shall pay all amounts due hereunder in
sterling in cleared funds in full without set off or
counterclaim, withholding or deduction of any kind whatsoever
but without prejudice to any other remedy. All charges are
exclusive of United Kingdom Value Added Tax which shall be
added to such charges, if applicable.
15.2.4 In the event of any dispute regarding charges in any month or
period, no Pool Member may withhold payment of any invoiced
amount but may refer such dispute to arbitration in accordance
with Clause 83.
15.3 Interest on non-payment: if any amount due to EPFAL, in its capacity as
the Pool Funds Administrator is not received on the due date the Pool
Member required to pay such amount shall pay interest to EPFAL on such
amount from and including the date of default to the date of actual
payment (as well after as before judgment) at the rate which is 4 per
cent. per annum above the Base Rate from time to time of National
Westminster Bank PLC during each period of default.
15.4 Payment of Charges: each Pool Member shall pay its due proportion of
EPFAL'S charges for each PFA Accounting Period determined in accordance
with Section 17.
15.5 Amount of Charges: the amount of each such payment shall be estimated
initially by reference to the PFA Budget. EPFAL shall adjust the amount
of each such payment by reference to the most recent Statement of Costs
and Fees and so as to take into account PFA Operating Costs, the PFA
Handling Charge, the Annual Fee and the Bank Charges during the
previous PFA Accounting Period and anticipated costs in respect of the
same during the current PFA Accounting Period and shall recover from
or, as appropriate, credit to each Pool Member its due proportion of
the difference between actual and anticipated PFA Operating Costs, the
PFA Handling Charge, the Annual Fee and the Bank Charges and payments
received in respect of such costs, fees and charges in each case for
the previous and the current PFA Accounting Period. Such recovery or
credit shall take place by reference to an adjustment to each Pool
Member's charges for the current PFA Accounting Period.
15.6 New and Former Pool Members: any Pool Member which is a Pool Member for
part only of any PFA Accounting Period shall pay charges on an interim
basis of such amount as the Executive Committee estimates to be
reasonable for such PFA Accounting Period on the basis of the
allocation of charges set out in Section 17. Adjustments to charges on
all Pool Members as a result of existing
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Pool Members leaving or new Pool Members joining will be made
following, and shall be set out in, the Statement of charges submitted
for the relevant PFA Accounting Period pursuant to subsection 10.7
whereupon the Pool Members and/or former Pool Members shall be required
to pay such additional amount or be entitled to such reimbursement as
may be determined in accordance with the Agreement by and adjustment to
charges in the then current PFA Accounting Period.
16. BANK CHARGES
Bank Charges: EPFAL in its capacity as the Pool Funds Administrator
shall collect from Pool Members the amounts they are obliged to pay by
way of bank transaction charges towards the costs of the Pool Banker
and all Settlement Banks ("Bank Charges") and shall account for the
same to the Pool Banker and such Settlement Banks.
17. ALLOCATION OF CHARGES
17.1 Total Sum Due: in respect of each PFA Accounting Period, the Total Sum
Due shall be allocated amongst Pool Members in accordance with the
following provisions of this Section 17.
17.2 Payment of Total Sum Due: each Pool Member shall be obliged to pay the
amount allocated to it in accordance with this sub-section. The total
aggregate amount allocated to all Pool Members in respect of any PFA
Accounting Period shall equal the Total Sum Due in respect of such PFA
Accounting Period.
17.3 Allocation of Total Sum Due: the Total Sum Due in respect of each PFA
Accounting Period shall be allocated amongst Pool Members in the
following manner:-
17.3.1 first, in order to recover the discrete costs referable to
each Pool Member during any PFA Accounting Period, the costs
incurred by EPFAL, in its capacity as the Pool Funds
Administrator in complying with a request of such Pool Member
made pursuant to Clause 63.1.7 or sub-section 6.3 of Schedule
which are directly referable to such Pool Member shall, as far
as possible, be allocated to such Pool Member; and
17.3.2 secondly, 100 per cent. of the balance of the Total Sum Due
during any PFA Accounting Period not recovered pursuant to
paragraph 17.3.1 shall be allocated amongst all Pool Members
during such PFA Accounting Period according to their
respective Contributory Shares for such PFA Accounting Period.
17.4 Prima facie evidence: EPFAL's determination of the allocation of all
costs during any PFA Accounting period shall, in the absence of
manifest error, be prima facie evidence thereof.
18. ADJUSTMENT
If the Executive Committee requests EPFAL to continue to serve as the
Pool Funds Administrator pursuant to sub-section 3.1 to allow a
successor to be appointed, EPFAL and the Executive Committee shall
negotiate in good faith for a period not exceeding six weeks (or such
longer period as EPFAL and the Executive Committee) may agree in
writing) with a view to agreeing a revision in the amount of the Base
Sum to be used in the calculation of the Annual Fee for the duration of
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the additional period referred to in sub-section 3.1. If EPFAL and the
Executive Committee shall agree to revise the amount of the Base Sum,
such revision (and any consequential revision in the Annual Fee) shall
take effect in accordance with the terms of that agreement. If no
agreement is reached within the said negotiation period the Executive
Committee or EPFAL may refer the dispute to arbitration pursuant to
Clause 83. Pending any such agreement being reached or any such dispute
being resolved by arbitration, EPFAL shall continue to serve as the
Pool Funds Administrator for the additional period referred to in
sub-section 3.1.
19. ADDITIONAL COMPENSATION
19.1 General: a direction or instruction of the Executive Committee to EPFAL
in its capacity as the Pool Funds Administrator shall not materially
increase the duties, responsibilities or liabilities of EPFAL as the
Pool Funds Administrator beyond those detailed in the Agreement as at
the PFA Commencement Date and as detailed in the Agreed Procedures
without proper compensation.
19.2 Compensation: if the Executive Committee gives a direction or
instruction to EPFAL in its capacity as the Pool Funds Administrator
which materially increases the duties, responsibilities or liabilities
of EPFAL as the Pool Funds Administrator beyond those detailed in the
Agreement as at the PFA Commencement Date and a detailed in the Agreed
Procedures, then (subject to sub-section 19.3):-
19.2.1 EPFAL shall carry out that direction or instruction unless it
has reasonable grounds for refusing so to do in which event it
shall forthwith notify the Executive Committee in writing of
its refusal and its reasons therefor (and, for this purpose,
an increase in the duties, responsibilities or liabilities of
EPFAL in its capacity as the Pool Funds Administrator shall
not of itself constitute reasonable grounds);
19.2.2 EPFAL and the Executive Committee shall negotiate in good
faith for a period not exceeding one month (or such longer
period as EPFAL and the Executive Committee may agree in
writing) with a view to agreeing an appropriate increase in
the Base Sum to reflect such increase in EPFAL's duties,
responsibilities and liabilities as the Pool Funds
Administrator;
19.2.3 if EPFAL and the Executive Committee shall agree an increase
in the Base Sum, such increase shall take effect in accordance
with the terms of that agreement; and
19.2.4 if there shall be any dispute as to whether that direction or
instruction does or did materially increase the duties,
responsibilities or liabilities of EPFAL, as the Pool Funds
Administrator or whether EPFAL has reasonable grounds for
refusing to carry out that direction or instruction or if no
agreement is reached under paragraph 19.2.9, EPFAL or the
Executive Committee may refer to the dispute to arbitration in
accordance with Clause 83.
19.3 Reservation: the performance by EPFAL of any direction or instruction
of the Executive Committee shall not prevent EPFAL from later claiming
that such direction or instruction materially increased its duties,
responsibilities or liabilities as the Pool Funds Administrator
provided always that EPFAL shall not be entitled so to claim unless it
gave written notice to the Executive Committee promptly (and in any
event within seven days) after first becoming aware that such direction
or instruction
900
<PAGE>
materially increased or was likely materially to increase such duties,
responsibilities or liabilities, such notice to contain detailed
reasons in support of why there has been or is likely to be such an
increase.
20. RECOVERY OF POOL ADMINISTRATION COSTS
20.1 Applicability: the provisions of this Section 20 shall apply to:-
20.1.1 the costs and expenses (within the extended meaning of that
expression in Clause 23.5 of the Agreement) of the Executive
Committee, its sub-committees and sub-groups;
20.1.2 the costs and expenses of Committee Members and members of the
sub-committees and sub-groups of the Executive Committee;
20.1.3 the costs and expenses of the Pool Chairman;
20.1.4 the remuneration, costs and expenses of the personnel referred
to in Clause 17.2.1 of the Agreement;
20.1.5 the remuneration, costs and expenses of the Secretary;
20.1.6 the costs and expenses of the Pool Auditor;
20.1.7 the overhead costs of the Electricity Arbitration Association;
20.1.8 all such other costs, expenses and other amounts which are
required by the Agreement (or any other agreement or document
executed or prepared pursuant to the Agreement and for this
purpose approved by the Executive Committee) to be dealt with
"in accordance with Section 20 of Schedule 15"; and
20.1.9 any bad debts which are to be treated as Pool Administration
Costs pursuant to sub- section 20.7,
(together "Pool Administration Costs").
20.2 Approval: the Executive Committee (or its delegate) shall approve all
Pool Administration Costs in advance of submitting the same to EPFAL
for payment.
20.3 Payment: upon receipt of an invoice or other statement relating to Pool
Administration Costs which as been approved by or on behalf of the
Executive Committee in accordance with sub-section 20.2, EPFAL shall
pay the amount stated in such invoice or other statement (together with
Value Added Tax thereon, if applicable) to such person or persons as
the Executive Committee (or its delegate) shall direct.
20.4 Recovery:
901
<PAGE>
20.4.1 EPFAL shall collect from Pool Members the amounts which they
are obliged to pay towards the Pool Administration Costs and
Pool Members shall be obliged to pay in accordance with
sub-section 20.6 their respective proportionate share of the
Pool Administration Costs (together with Value Added Tax
thereon, if applicable) against receipt of an invoice or other
statement therefor issued by EPFAL and otherwise in accordance
with paragraph 20.5.1;
20.4.2 EPFAL shall collect from the Grid Operator, and the Grid
Operator shall be obliged to pay against receipt of an invoice
or other statement therefor issued by EPFAL and otherwise in
accordance with paragraph 20.5.2 10 per cent. of the annual
overhead costs of the Electricity Arbitration Association
(together with Value Added Tax thereon, if applicable).
20.5 Collection procedure:
20.5.1 EPFAL shall arrange for collection from Pool Members of their
respective proportionate share of the Pool Administration
Costs in such manner as may be agreed by EPFAL with the
Executive Committee from time to time (which may include
collection in advance) and Pool Members shall comply with such
collection procedures and, in particular, shall make payment
within the time period prescribed by such procedures. The
provisions of paragraphs 15.2.3, 15.2.4 and sub-section 15.3
shall in any event apply mutatis mutandis in respect of all
payments required to be made by Pool Members pursuant to this
Section 20.
20.5.2 The Grid Operator shall may payment of the amount referred to
in paragraph 20.4.2 within 15 days after receipt of the
invoice or other statement therefor.
20.6 Proportionate Share: Pool Members shall contribute towards the Pool
Administration Costs referable to a Quarter in the proportions which
their respective Contributory Shares bear to each other during such
Quarter.
20.7 Bad Debts: If in any PFA Accounting Period the Executive Committee
recognises bad debts arising from a Pool Member's failure to pay its
due proportion of Pool Administration Costs, the aggregate amount of
those bad debts shall be carried forward to the immediately succeeding
PFA Accounting Period and shall form part of the Pool Administration
Costs for that PFA Accounting Period (spread evenly so far as
practicable over the four Quarters thereof).
902
<PAGE>
ANNEX 1
PFA Budget for the 1992 PFA Accounting Period
<TABLE>
<CAPTION>
Budgeted Cost
Category/Item (pound)000
- ------------- ----------
<S> <C>
Insurance costs 200
Funds Transfer Hardware and Funds Transfer 75
Software testing and maintenance costs
Audit fees 75
Bank administration charges 100
Bad debt allowance 0
---------
Total Sum Due 450
=========
</TABLE>
903
<PAGE>
ANNEX 2
Pro-forma Statement of Charges
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name Contributory Share Period to which charges Amount
relate
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
904
<PAGE>
ANNEX 3
Pro-forma Statement of Costs and Fees
<TABLE>
<CAPTION>
(A)
PFA Operating Costs
-------------------
Budgeted Cost for Actual Out-Turn
previous PFA for previous PFA
Accounting Period Accounting Period
----------------- -----------------
<S> <C> <C>
Insurance costs
Funds Transfer Hardware and
Funds Transfer Software
testing and maintenance costs
Audit fees
Bank administration
charges
Bad debt allowance
-------------- ---------------
Total Sum Due
============== ================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(B)
Annual Fee
<S> <C>
Annual
Fee (initial): the Annual Fee for the [19 ] PFA Account Period was (pound)[_______________].
Annual
Fee (revisions): the Annual Fee for the [19 ] PFA Accounting Period was revised as from
[______________] to (pound)[_____________] [and as from [_______________] to
(pound)[_________]].
Calculation of
Annual Fee
(initial and
revisions) :
</TABLE>
905
<PAGE>
ANNEX 4
Existing Funds Transfer Software
Part A
Beneficially Owned
Pool Funds Transfer System (PFTS) PHASE 1
System Administration - User Guide (2/5/90)
Clerical Procedures (3/5/90)
Self Study Training Module (4/7/90)
Billing Sub-Project - Test Specification v.1.0 (29/3/90), v.1.1 (3/4/90)
Test Plan - Issue 1.1 (3/4/90)
System Testing Log (4/4/90)
Quality Assurance Plan (16/5/90)
Test Data (2/4/90)
Test Schedules (3/4/90)
Implementation Paper - Security Controls (22/3/90)
Pool Funds Transfer System (PFTS) PHASE 1.1
Test Plan Issue 1.0 (18/6/90)
Summary Test Report (13/7/90)
Pool Funds Transfer System (PFTS) PHASE 2.0
Documentation EPFAL PFTS Phase II User Manual Version 1
" " " DBA Guide "
Physical Design Documentation (volumes 1-4) (22/6/90)
Functional Specification - Appendices (April 1990)
Addendum to the Detailed Physical Design (May 1991)
906
<PAGE>
Part B
Licensed
VMS, unless otherwise stated)
VAX System
VMS Sun Account 3.5.14 purchased 1/7/90. Licence No. 002505
Documentation - Standard Reference/Installation/Getting started and Tutorial
manuals.
VMS v.5.4 issued 1/5/90. Licence pack LP594621 s/no. 01440169.
PCSA/Decnet v.4 End User Node issued 1/5/90. Licence pack LP594624 s/no.
0440172.
Lotus 123 v.2.2 Server Version purchased 1/91. - upgraded to v.3.1 + 18/9/91.
Note a VMS version.
Oracle RDBMS v.6 purchased 16/5/91 with full set of delivered documentation.
PC based Novell Network
Novell Advanced Network 286 v.2.15 Rec C purchased 3/90 via 3rd party. Full set
Netware documentation - Reference Installation/Guides etc.
Sun Account v.3.5.3 purchased via 3rd party 3/90. Full set documentation -
Reference/Installation/getting started and Tutorials.
Lotus 123 v.3.1 Server purchased 18/9/91. Upgrade from v.2.2 purchased 1/91.
907
<PAGE>
ANNEX 5
Escrow Arrangements
1.1 EPFAL Escrow Agreement
No later than 1st February, 1993 (or such later date as EPFAL and the
Executive Committee may agree in writing) EPFAL in its capacity as the
Pool Fund Administrator (for itself and on behalf of the Pool Members
acting through the Executive Committee) shall enter into and deliver an
escrow agreement (the "PF Escrow Agreement") in the form to be agreed
between EPFAL and the Executive Committee with a reputable escrow agent
to be agreed between EPFAL and the Executive Committee with a reputable
escrow agent to be agreed between EPFAL and the Executive Committee
(the "PFA Custodian"). Forthwith upon entering into the PFA Escrow
Agreement EPFAL shall deposit with the PFA Custodian to the extent then
in existence (and, if not in existence, as soon as possible after it
comes into existence):-
1.1.1 a copy of the source code and load (machine executable)
modules relating to all Funds Transfer Software beneficially
owned by it together with all job control language and
licensed software system tables, each in a machine readable
form and the source code and job control language in a hard
copy form;
1.1.2 a copy of all related manuals and other associated
documentation, including:-
(a) any user requirement documents, together with all
associated authorised change requests;
(b) any functional specification documents associated
with those documents described in sub-paragraph (a)
above, together with all authorised change requests
associated with the relevant functional
specification;
(c) to the extent available to EPFAL, any design
specification documents associated with those
documents described in sub-paragraphs (a) and (b)
above, together with all authorised change requests
associated with the relevant design specification;
(d) any program and/or user guides prepared to assist in
the day-to-day operation and future development of
the computer programs (including records of test
cases together with the associated test input and
output data used for validation purposes);;
(e) any relevant test strategy schedules and acceptance
test schedules as specified for functional and
operational end to end testing;
(f) any relevant test acceptance certificates and reports
for all tests recording comments and observations
made on the appropriate tests where such tests
commissioned by EPFAL;
908
<PAGE>
(g) any relevant client acceptance certificates and Pool
Auditor's reports, together with any reports
recording such clients' and the Pool Auditor's
observations and comments on the tests;
(h) any relevant compilation or detailed operating
procedures required in connection with any of the
relevant paragraphs in this paragraph 1.1.2;
(i) all software licences for Funds Transfer Software
licensed to EPFAL; and
(j) a list detailing all versions of Funds Transfer
Software licenced to EPFAL (including operating
systems and compilers) used in creating such versions
of the object code detailing the version numbers used
and any program temporary fixes or equivalent modes;
1.1.3 a copy of all historical data (including all transaction,
reference and audit data and changes to standing data)
relating to the operations of EPFAL in its capacity as Pool
Funds Administrator;
1.1.4 all the material referred to in sub-clauses 1.1.1 to 1.1.3
above is hereafter together referred to in this Annex 5 as the
"PFA Material".
1.2 Licensed Funds Transfer Software
If, after consultation with EPFAL, the Executive Committee shall so
request, EPFAL shall use its reasonable endeavors to procure that the
owner of any Funds Transfer Software shall permit the deposit of such
Funds Transfer Software licensed to EPFAL with the PFA Custodian or
other reputable escrow agent on the terms of the Escrow Agreement or
similar agreement approved by the Executive Committee.
1.3 Updating
EPFAL shall ensure that the PFA Material deposited with the PFA
Custodian is kept fully up-to-date and reflects all Modifications (as
defined int he PFA Escrow Agreement) and shall deposit a copy of all
Modifications with the PFA Custodian as soon as the same are available,
all in accordance with the terms of and subject to the conditions of
the PFA Escrow Agreement. EPFAL shall notify the Executive Committee
promptly of the delivery of each Modification to the PFA Custodian.
909
<PAGE>
SCHEDULE 16
Matters requiring consent of
the Settlement System Administrator
The Settlement System Administrator's membership of, and the procedures and
powers of, the Project Board
Terms of reference of Project Managers
Approval of project documents
Quality standards (including design, coding, testing, implementation and
documentation)
Role of Pool Auditor in systems development
Components of project life cycle
Ownership and warranties on development
Housekeeping
The Settlement System Administrator's responsibilities and rights
Use of the Settlement System Administrator's resources
Implementability of systems - technical compatibility with existing system
- use of the Settlement System
Administrator's facilities
for testing
- parallel operation
- migration into production
- configuration control
- implementation planning
Operability of systems - operational feasibility
- operational support
requirements
- operational testing
- interface design
- performance
- security
- auditability
- reliability
Maintainability of systems - design integrity
- design documentation
- adherence to design and
coding standards
- reliability
910
<PAGE>
- configuration control
SCHEDULE 17
Trading Sites
Part A
General
1. Introduction: a site shall be identified as a Trading Site for the
purposes of this Agreement in accordance with the following provisions
of this Schedule.
2. Application: a Party may apply to the Executive Committee for a site to
be treated as a Trading Site by sending to the Executive Committee a
written application in the form prescribed by the relevant Agreed
Procedure (in this Schedule, a "Trading Site Application") stating the
class of application and containing the other information and supported
by the documents and other matters referred to in Part C and signed by
or on behalf of the Generator concerned and the Supplier concerned
where there exists a Supplier in respect of that site (together in this
Schedule, the "Applicants").
3. Decision: the Executive Committee shall consider any Trading Site
application within 45 days after receipt in accordance with the
procedures set out in Part B and (subject to paragraph 5 of Part B)
shall within that period make a determination as to whether the site
the subject of such application (in this Schedule, the "Nominated
Site") shall be treated as a Trading Site and shall promptly notify the
Applicants and the Settlement System Administrator of its
determination.
Part B
Procedures
1. Classes: every Trading Site Application shall state whether it is a
Class 1, Class 2, Class 3 or Class 4 application and the Executive
Committee shall consider a Trading Site Application by reference to the
provisions set out in this Part B for the stated class (or, in the case
of paragraph 5, as provided therein).
2. Class 1: if the Trading Site Application shall state that it is a Class
1 application then the Executive Committee shall determine from the
Trading Site Application and supporting documentation and other matters
(and any further evidence provided in accordance with paragraph 6) if
the Nominated Site is a Power Station which is or is to be electrically
configured in the same manner as is prescribed in one of the line
diagrams contained in the relevant Agreed Procedure and fulfills all
the conditions specified in such Agreed Procedure applicable to a Class
1 application, in which event the Nominated Site shall be treated as a
Trading Site.
3. Class 2: if the Trading Site Application shall state that it is a Class
2 application then the Executive Committee shall determine from the
Trading Site Application and supporting documentation and other
911
<PAGE>
matters (and any further evidence provided in accordance with paragraph
6) if the generation and demand at the Nominated Site are electrically
connected solely by Dedicated Assets, in which event the Nominated Site
shall be treated as a Trading Site.
In this paragraph, "Dedicated Assets" means assets and equipment which
are used solely to connect electrically (a) the location at which the
generation originates with (b) the location at which the demand is
taken (and no other), and additionally satisfy one of the diagrammatic
representations of Dedicated Assets contained in the relevant Agreed
Procedure.
4. Class 3: if the Trading Site Application shall state that it is a Class
3 application then the Executive committee shall determine from the
Trading Site Application and supporting documentation and other matters
(and any further evidence provided in accordance with paragraph 6) if
the generation and demand at the Nominated Site are electrically
connected by Contiguous Assets, in which event the Nominated Site shall
be treated as a Trading Site.
In this paragraph:-
(a) "Contiguous Assets" means those Specified Assets and Equipment
at a location which connect by one continuous electrical
connection the location at which the generation originates
with the location at which the demand is taken, which
Specified Assets and Equipment are all owned by the Applicants
and/or are Specified Assets and Equipment in respect of which
a contribution is or will be made by the Applicants to the
provision and installation or maintenance and repair costs
thereof or where such Specified Assets and Equipment are
already provided and installed, the maintenance and repair
costs thereof; and
(b) "Specified Assets and Equipment" means assets and equipment
identified and quoted in the Connection Agreement of either
Applicant where such assets and equipment include assets and
equipment identified and quoted in the Connection Agreements
relating to both Applicants which form part of the continuous
electrical connection for the purposes of (a) above.
5. Class 4:
5.1 if the Trading Site Application shall state that it is a Class
4 application or if the Executive Committee shall determine
that the Nominated Site the subject of a Class 1, Class 2 or
Class 3 Trading Site Application does not satisfy the
conditions specified in paragraph 2, 3 or (as the case may be)
4, the Executive Committee shall determine from the Trading
Site Application and supporting documentation and other
matters (and any further evidence provided in accordance with
paragraph 6) if the Nominated Site shall be treated as a
Trading Site having regard to the criteria set out in
paragraph 5.2.
5.2 The criteria referred to in paragraph 5.1 are:-
(a) whether special circumstances existed before 30th
March, 1990 which demonstrate to the reasonable
satisfaction of the Executive Committee that the
generation and demand were treated as being on a
Trading site;
912
<PAGE>
(b) whether special circumstances existed before 11th
December, 1991 which demonstrate to the reasonable
satisfaction of the Executive Committee that the
generation and demand should have been treated as on
a Trading Site;
(c) whether, although not satisfying the conditions
applicable to a Class 1, Class 2 or Class 3 Trading
Site Application, if, to the reasonable satisfaction
of the Executive Committee, the Trading Site
Application demonstrates sufficient similarities with
sites which would satisfy those conditions such that
it would be unreasonable not to treat the Nominated
Site as a Trading Site;
(d) whether there are any other facts or evidence in
support of the Trading Site Application which in the
reasonable opinion of the Executive Committee
demonstrate that the Nominated Site ought to be
treated as a Trading Site.
6. Further evidence: the Executive Committee may request an Applicant to
produce such further evidence as the Executive committee may reasonably
require in support of its Trading Site Application before the Executive
Committee makes any determination as to whether the Nominated Site is
to be treated as a Trading Site, and the Executive Committee shall not
be bound to make any determination on the issue of whether the
Nominated Site is a Trading site pending receipt of such further
evidence.
7. Majorities: any determination of the Executive Committee in favour of
treating a Nominated Site as a Trading site shall require a simple
majority of the votes cast by Committee Members at the relevant meeting
provided that in the case of a Trading Site Application which falls to
be considered under paragraph 5 the necessary majority shall be 75 per
cent of all the votes cast by Committee Members.
8. Effect of determination: if the Executive Committee shall determine
pursuant to paragraph 2, 3, 4 or (as the case may be) 5 that a
Nominated Site is a Trading Site all metered values of all meters
associated with the Nominated Site and identified in the Trading Site
Application shall be aggregated in accordance with the provisions of
sub-section 3.3 of, and paragraph 2F of Appendix 6 to, Schedule 9.
Part C
Trading Site Applications
1. Every Trading site Application shall contain the following
information:-
(a) the name and address of the Applicants;
(b) full description of the Nominated Site;
(c) a full description of the Metering Systems (if any) located or
to be located at the Nominated Site and of their location
together with a full description of the points at which all
electricity flows relative to the Nominated Site are to be
measured;
913
<PAGE>
(d) such other information as may be specified in the relevant
Agreed Procedure; and
(e) such other information as the Applicants shall consider
relevant to their application.
2. Every Trading Site Application shall be accompanied by the following
documents and other matters:-
(a) line diagrams showing the electrical connections and energy
flows at the Nominated Site and the location of Metering
Systems (if any) and evidence demonstrating that the assets
and equipment electrically connecting the generation and
demand are capable of transmitting or distributing the
quantity of electricity to be transmitted or distributed to
the Nominated Site;
(b) confirmation from the Settlement System Administrator, having
duly notified the Grid Operator, that it is satisfied that the
metering arrangements at the Nominated Site are compatible
with the operation of Settlement;
(c) in the case of a Class 2 or Class 3 Trading Site Application,
other evidence demonstrating the existence of Dedicated Assets
or (as the case may be) Contiguous Assets (including any
connection Agreements or relevant parts thereof).
Part D
Additional Provisions
1. (a) the Settlement System Administrator, the Grid Operator and
each Public Electricity Supplier shall co-operate with the
Applicants (insofar as is reasonable) to enable them to
prepare and deliver a Trading Site Application by making
available (upon reasonable notice) line diagrams relevant to
the Nominated Site.
(b) the Settlement System Administrator and the Grid Operator
shall review the Metering systems relative to the Nominated
site for the purposes of issuing confirmations required by the
Executive Committee and where such confirmations are
considered appropriate by the Settlement System Administrator
and the Grid Operator, shall issue the requisite confirmation.
(c) In relation to (a) and (b), the reasonable costs and expenses
of the Settlement System Administrator, the Grid Operator and
each relevant Public Electricity Supplier shall be borne by
the Applicants.
2. A Nominated Site which the Executive committee resolves should be
treated as a Trading site (or is otherwise to be so treated) shall
cease to be treated as a Trading Site if the Executive Committee
reasonably determines that the site no longer fulfils the conditions
upon which the approval for it being so treated was based. The
Generator Applicant shall forthwith notify the Executive Committee if
the site no longer fulfils such conditions.
914
<PAGE>
SCHEDULE 18
The Ancillary Services Accounting Procedure
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions: in this Schedule, unless the context otherwise required,
the words and expressions set out in this Section 1.1 shall bear the
meanings respectively set out herein:-
"ASP Budget" means any budget prepared by the Ancillary Services
Provider pursuant to Section 2.1;
"Audit Adjustments" means the aggregate value of all changes in the
Cost Base required to be taken into account by the Ancillary Services
Provider during any Accounting Period in order to give effect to the
conclusions resulting from an audit commissioned pursuant to Clause
5.15;
"Capital Expenditure" means, in respect to any Accounting Period,
expenditure by the Ancillary Services Provider on fixed assets required
for the purposes acquired on lease which are required by generally
accepted accounting principles to be capitalised;
"Cost Base" means, in respect of any Accounting Period, Total Operating
Costs for such period less Depreciation during such period;
"Depreciation System", in respect of any Accounting Period, the
aggregate value of all depreciation on assets owned or employed by the
Ancillary Services Provider in the Ancillary Services Business, such
assets being depreciated in accordance with the accounting policies of
the Ancillary Services Provider for such period as stated in the
audited accounts of the Ancillary Services Provider for such period and
treated as depreciation in accordance with the terms of the Agreement.
"Efficiencies" means, in respect to any Accounting Period, the amount
(if any) by which the Cost Base in such Accounting Period is less than
the Cost Base in the immediately preceding Accounting Period (the
"First Period") after adjustments on a pound for pound basis to any
difference between such two Cost Bases to offset movements from the
Cost Base in the First Period due to the Rate of Inflation, Audit
Adjustments and any other matters beyond the control of the Ancillary
Services Provider and changes in the accounting principles or practices
of the Ancillary Services Provider made during the Accounting Period in
question;
"Executive" means those members of the Executive Committee representing
Suppliers;
"Individual Limit" means, in respect to Capital Expenditure in any
Accounting Period, (pound)25,000, as the same may be increased from the
Effective Date by the Rate of Inflation.
"Martin" means:-
(i) in respect of each of the first three Accounting Periods, such
amount as when added to the Total Operating Costs (excluding
for this purpose any payments made by the Ancillary Services
Provider for Ancillary Services, and the price of any goods
and services referred to
915
<PAGE>
in Section 6.2 if the price exceeds the aggregate cost of
supplying such goods and services actually incurred by the
relevant affiliate of, or other division of, the company of
which the Ancillary Services Provider is a division)9 in the
relevant Accounting Period is equal to 10 per cent. of the sum
of such amount and such Total Operating Costs; and
(ii) thereafter, such margin as may be agreed upon between the
Executive and the Ancillary Services Provider (or, in default
of agreement, such margin as is reasonable in all the
circumstances as determined pursuant to Clause 83);
"Overall Limit" means, in respect of Capital Expenditure in any
Accounting Period, (pound)100,000, as the same may be increased from
the Effective Date by the Rate of Inflation;
"Statement of Charges" means the statement of charges required to be
submitted by the Ancillary Services Provider pursuant to Section 2.8 in
the form or substantially in the form set out in Part 3 of the Annex or
such other form as the Executive and the Ancillary Services Provider
may agree showing the total charges to be made by the Ancillary
Services Provider on all Suppliers in accordance with this Schedule;
"Statement of Costs" means the statement of costs required to be
submitted by the Ancillary Services Provider pursuant to Section 2.4
setting out the actual and accrued expenditure incurred by the
Ancillary Services provider in any period which shall be substantially
in the form set out in Part 2 of the Annex or such other form as the
Executive and the Ancillary Services Provider may agree; and
"Total Operating Costs" means, in respect of any Accounting Period or
part thereof:-
(i) the total expenditure properly incurred or accrued by or on
behalf of the Ancillary Services Provider in operating the
Ancillary Services Business in such period or part thereof
(other than that referred to in (ii) and (iii) below; plus
(ii) all Depreciation in such period on all assets owned and
employed by the Ancillary Services Provider in the Ancillary
Services Business; plus
916
<PAGE>
(iii) all other expenditure properly incurred or accrued during such
period which, under this Schedule, is permitted to be included
in any Statement or Costs; plus.
(iv) Efficiencies which are permitted to be included in any
Statement of Costs pursuant to Section 5.4.
1.2 Interpretation:
1.2.1 in this Schedule, except where the context otherwise requires,
references to a particular Section, sub-section or paragraph
or to the Annex shall be a reference to that Section
sub-section or paragraph of, or the Annex to, this Schedule.
1.2.2 In this Schedule the expression "Rate of Inflation" shall have
the meaning assigned to it in Schedule 4.
2. ASP BUDGETS, STATEMENTS OF COSTS AND STATEMENTS OF CHARGES
Budget
2.1 ASP Budgets: not earlier than six nor later than three months prior to
the first day of each Accounting Period (other than the first) the
Ancillary Services Provider shall prepare and submit to the Suppliers
an ASP Budget for such Accounting Period. Such ASP Budget shall be
indicative only but prepared on a best estimates basis. The ASP Budget
for the first Accounting Period shall be that set out in Part 1 of the
Annex.
2.2 Contents of ASP Budgets: each ASP Budget (other than the first) shall
compare each item or category of budgeted expenditure shown therein
with the forecast expenditure in respect of such item or category for
the remainder of the then current Accounting Period and report any
salient differences between any such forecast expenditure and the
budgeted expenditure in respect of each such item or category in the
immediately preceding ASP Budget.
2.3 Form of ASP Budgets: each ASP Budget shall be substantially in the form
of that set out in Part 1 of the Annex ( or in such other form as the
Ancillary Services Provider and the Executive may from time to time
agree).
2.4 Statement of Costs: no later than one month following the date in any
Accounting Period of the publication of the audited accounts of the
Ancillary Services Business for the previous Accounting Period, the
Ancillary Services Provider shall prepare and submit to each Supplier a
Statement of Costs for such pervious Accounting Period. The audited
accounts of the Ancillary Services Provider and the auditors'
management letter, to the extent it relates to the economy, efficiency
and effectiveness of the Ancillary Services Provider in carrying out
its duties, shall accompany each Statement of Costs for each entire
Accounting Period.
2.5 Form of Statement of Costs: the Statement of Costs for any Accounting
Period shall attribute actual expenditure for such period against,
inter alia, each of the categories and sub-categories set out in the
corresponding ASP Budget for such Accounting Period.
917
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2.6 Accompanying Report: each ASP Budget And Statement of Costs for an
entire Accounting Period submitted to the Suppliers pursuant to Section
2.1 or 2.4 shall be supported by a written report of the Ancillary
Services Provider commenting in reasonable detail upon the matters
comprised in the categories of expenditure included in such ASP Budget
or Statement of Costs drawing attention to and giving reasons for any
unusual commitment or item of expenditure proposed to be incurred or
which has been incurred and, in the case of a Statement of Costs,
explaining the difference (if material) between:-
2.6.1 the amount set against each item or category therein; and
2.6.2 the amount set against each corresponding item or category in
the immediately preceding ASP Budget.
2.7 Accounting Practices: each ASP Budget and Statement of Costs shall be
prepared on the basis of the accounting principles and practices used
to draw up the most recent audited accounts of the Ancillary Services
Provider and consistently applied. If any Statement of Costs for an
entire Accounting Period which is not prepared on such basis, the
Ancillary Accounting Period which is prepared on the basis of the
accounting principles and practices used to prepare the relevant
Statement of Costs. Any changes in the accounting principles and
practices or their method of application used ton prepare applied
accounts of the Ancillary Services Provider shall be noted in the next
following ASP Budget or Statement of Costs, as the case may be.
2.9 Statement of Charges: a Statement of Charges shall accompany each
Statement of Costs.
2.9 Bad debts: the total cost of any bad debts of the Ancillary Services
Provider arising in any Accounting Period may be taken into account by
the Ancillary Services Provider in its Statement of Costs for such
Accounting Period or any subsequent Accounting Period and accordingly
recovered as part of Total Operating Costs for any such Accounting
Period.
3. AUDITORS' OPINION
The statement of Costs to be sent to the Suppliers pursuant to Section
2.4 shall be accompanied by a report from the auditors of the Ancillary
Services Provider considering whether in such auditors' opinion:
3.1 the Statement of Costs is in agreement with the underlying
books and records of the Ancillary Services Provider
considering whether in such auditors' opinion: -
3.2 Total Operating Costs and Depreciation have been properly
extracted from the audited financial statements.
Such auditors' report shall also contain such other matters as the
Executive may agree with the auditors of the Ancillary Services
Provider.
918
<PAGE>
4. ACCOUNTING PERIOD
The first Accounting Period shall run from (and including) 31st March,
1990 to (and including) 31st March, 1991. Thereafter unless agreed by
their Ancillary Services Provider and the Executive each Accounting
Period shall be for a period of twelve months. In the event that the
Ancillary Services Provider wishes to change its accounting reference
date it shall give due notice thereof to the Executive which shall
agree to enter into an amending agreement to give effect tot he same at
the cost and expense of the Ancillary Services Provider.
5. ANCILLARY SERVICES PROVIDER'S CHARGES
5.1 Ancillary Services Provider's charges: in respect of each Accounting
Period, the Ancillary Services Provider shall be entitled to recover
from Suppliers in addition to the cost of Ancillary Services the
aggregate of:
5.1.1 Total Operating Costs for the relevant Accounting Period (as
identified by the Statement of Costs for such Accounting
Period to be submitted pursuant to Section 2.4); and
5.1.2 the Margin
5.2 Recovery of Charges: the Ancillary Services Provider's charges in
respect of any Accounting Period shall be recovered from the Suppliers
on a daily basis in accordance with the Pool Rules and by reference to
the allocation provided therein by:
5.2.1 estimating a daily amount necessary to recover the charge by
reference to the ASP Budget and, where appropriate and under-
or over-recovery in respect of any previous Accounting Period;
and Ancillary
5.2.2 adjusting that amount by reference to any subsequent Statement
of Costs
5.3 Revision of Estimates: if the Ancillary Services Provider reasonably
believes that the amount which will be recovered under Section 5.2 is
likely to be 10 per cent more or less than the amount to which it is
entitled under Section 5.1 it shall, with the consent of the Executive
(such consent not to be unreasonably withheld or delayed), revise as
appropriate the estimate made in accordance with Section 5.2
5.4 Sharing of Efficiency: the Ancillary Services Provider shall be
entitled to the benefit of all Efficiencies and, accordingly, to charge
Suppliers the amount of all Efficiencies by including them in ASP
Budgets and Statements of Cost in the following manner. The amount of
any Efficiency arising in any Accounting Period shall be identified in
the Statement of costs of such Accounting Period submitted pursuant to
Section 2.4 and shall be taken into account in the Statement of Costs
for the two successive Accounting Periods thereafter. Accordingly, the
amount of any Efficiency may be included in any Statement of Costs for
the two Accounting Periods following that in which the Efficiency is
identified. In the Statement of Costs for the third consecutive
Accounting Period and all following Accounting Periods thereafter the
amount of such Efficiency shall be eliminated.
919
<PAGE>
6. CORPORATE OVERHEAD CHARGES AND PURCHASES
6.1 Corporate Overhead Charges: the Ancillary Services Business any take
into account in any ASP Budget or Statement of Costs (and consequently
its charges to Suppliers) all corporate overhead charges payable by the
Ancillary Services Provider to its immediate holding company or any
other division of the company of which it is a division provided such
corporate overhead charges payable to by other affiliates of the
Ancillary Services Provider is a division as reported upon by the
auditors of the Ancillary Services Provider.
6.2 Goods or services: purchases of goods or services from affiliates of
the Ancillary Services Provider shall be on arm's length terms.
7. FUEL SECURITY
Except to the extent recoverable under any other provision of this
Schedule, andy additional costs necessarily incurred by the Ancillary
Services Provider in running the ancillary Services Business during a
Security Period shall be regarded as beyond the control of the
Ancillary Services Provider which may recover the same in full from
Suppliers provided such costs have been verified as additional costs by
the auditors of the Ancillary Services Provider. Suppliers shall be
obliged to pay the actual amount of such cost and expenses.
8. CAPITAL EXPENDITURE
8.1 Capital Expenditure (1): the following provisions apply to Capital
Expenditure by the Ancillary Services Provider in respect of the
Ancillary Services Business:-
8.1.1 save as provided below, Capital Expenditure by the Ancillary
Services Provider which may be recovered by Depreciation
charged to Suppliers shall require the prior approval of the
Executive in writing, such approval to take into account an
appropriate sharing of the deficiencies arising from such
Capital Expenditure;
8.1.2 Capital Expenditure which may be recovered by Depreciation
charged to Suppliers specified in any ASP Budget shall be
regarded as approved by the Executive unless the Executive
notifies the Ancillary Services Provider to the contrary
within one month after receipt of such ASP Budget:
8.1.3 in any Accounting Period the Ancillary Services Provider may
incur Capital Expenditure which may be recovered by
Depreciation charged to Suppliers without the need to consult
or obtain the approval of the Suppliers up to a maximum of the
Individual Limit for each item of Capital Expenditure and a
maximum of the Overall Limit for all items of Capital
Expenditure and, in the event of the Ancillary Services
Provider incurring such Capital Expenditure, it shall notify
the Executive as soon as practicable thereafter; and
8.1.4 the Ancillary Services Provider shall be entitled to incur
Capital Expenditure which may be recovered by Depreciation
charged to Suppliers of any amount without the need to obtain
the approval of the Executive in circumstances whereas
920
<PAGE>
(a) the Ancillary Services Provider would be in breach of
its duties under NGC Transmission License unless such
Capital Expenditure were incurred; and
(b) it has not reached agreement with the Executive on
such Capital Expenditure within a reasonable period
of time.
8.2 Capital Expenditure (2): Capital Expenditure not failing within Section
8.1 may not be charged as Depreciation to Suppliers.
921
<PAGE>
ANNEX
Part 1
ASP Budget for the First Accounting Period
<TABLE>
<S> <C>
Purchases of Ancillary Services 85.00
Local Overheads 0.81
NGC Corporate Management Charge 0.48
NGC System Operations Charge 0.25
NGC Settlement Systems Charge 0.25
-----
86.79
-----
</TABLE>
922
<PAGE>
Part 2
Pro-forma Statement of Costs
Purchases of Ancillary Services
LocAl Overheads
NGC Corporate Management Charge
NGC System Operations Charge
NGC Settlement Systems Charge
923
<PAGE>
Part 3
Pro-forma Statement of Charges
<TABLE>
<CAPTION>
====================================================================================================================================
Name Contributory Period to which Amount
Share charges relate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
====================================================================================================================================
</TABLE>
924
<PAGE>
Part 2
Pro-forma Statement of Costs
Purchases of Ancillary Services
Local Overheads
NGC Corporate Management Charge
NGC System Operations Charge
NGC Settlement Systems Charge
925
<PAGE>
SCHEDULE 19
Objective and Scope of
the Scheduling and Despatch Review
1. Objective: the objective of the Scheduling and Despatch Review will be
to establish that:
1.1 scheduling and despatch is carried out in accordance with the
Scheduling and Despatch Code; and
1.2 information is entered into PORTHOLE in accordance with the
Pool Rules.
2. Scope: the scope of the review will be to:-
2.1 review internal scheduling and despatch operating procedures
for consistency with Scheduling and Despatch Code;
2.2 review the internal checks that the Grid Operator has
established to ensure that the operation of scheduling and
despatch has been carried out in accordance with the
procedures referred to in Section 2.1;
2.3 perform compliance testing of the operation of the internal
checks referred to in Section 2.2;
2.4 review the operation procedures in relation to the use of the
BPS GOAL, program, including: -
(a) controls over the input of data and the output of data to
establish that they are appropriate to ensure and adequate
level of control; and
(b) procedures for the retention of records of the nature and
extent of And reasons for any manual adjustments to BPS GOAL,
output or where BPS GOAL, is run using non-standard
parameters, for consistency with the Scheduling and Despatch
Code;
2.5 perform compliance testing of the operating procedures
referred to in Section 2.4;
2.6 review the operating procedures referred to in Sections 2.1,
2.2 and 2,.4 to establish that there is no bias in favor of or
against any particular Pool Member on the part of the Grid
operator;
926
<PAGE>
2.7 review the operating procedures relating to the recording of
despatch instructions, availability declarations, generation
offer prices and the application of reason codes and the entry
of data into PORTHOLE for consistency with the Pool Rules;
2.8 perform compliance testing of the operating procedures
referred to in Section 2.7;
2.9 review the operation procedures referred to in Section 2.1 to
establish that in the call for the delivery of Ancillary
Services by the Grid Operator there is no bias favor of or
against any particular Pool Member on the part of the Grid
Operator.
2.10 review the call for the delivery or Ancillary Services;
2.11 compare the generation schedule forecast demand with actual
demand and
2.12 review the generation schedule forecast demand for consistency
with Section OC1 of the Grid Code.
927
<PAGE>
SCHEDULE 20
Accountable Interest
1. Definitions: in this schedule
"Generating Unit" means any Generating Unit whether or not situate in
England or Wales;
"Operator" means, in relation to any Generating Unit, the Authorized
Electricity Operator or any other person for the time being responsible
(under contract or otherwise) for the generation or sale of electricity
form such unit;
"Underlying Interest" means, relation to any Generating Unit, any
interest arising by reason of the person or affiliate or any related
undertaking of the person or affiliate (where alone or with others):-
(a) holding or being entitled to acquire an interest in the land
on which the Generating Unit, or any part thereof is built;
(b) being in partnership with or party to any arrangement for
sharing or profits or cost-savings or any joint venture with
any person holding or entitled to acquire an interest in the
land of which the Generating Unit, or any part thereof, is
built:
(c) owning any electrical plant situated on or operated as a unit
with the Generating Unit (and for such purpose andy electrical
plant or equipment to the possession of which the person,
affiliate or related undertaking is entitled under any
agreement for hire, hire purchase, conditional sale or loan
shall be deemed to be owned by such person) provided always
that such electrical plant shall not be deemed to be operated
as a unit with any Generating Unit by reason only of
connections with any other system for the transmission or
distribution of electricity; or
(d) having obtained any consent under section 36 of the Act
required for the construction or extension of the Generating
Unit or any part thereof.
2. Accountable Interests: the rules for determining whether or not any
person has an Accountable Interest in any Generating Unit and, if so,
the MW in respect of which that person shall be treated as having such
an Accountable Interest shall, subject to the following sections of
this Schedule, be ascertained in such manner as the Executive Committee
with the approval of the Director may determine the appropriate share
(namely the share representing that person's economic interest
therein)in the declared net capacity of any Generating Unit.
3. Net capacity: there shall be attributed to the person the whole of the
declared net capacity represented by any Own Generating Unit.
928
<PAGE>
4. Determination of Accountable Interest: for the purposes of this
Schedule and subject to Section 5, the person shall have an Accountable
Interest in a Generating Unit (not being an Own Generating Unit)in
circumstances where; -
4.1 the Operator is a related undertaking of the person or any affiliate of
the person; or
4.2 the person or any affiliate of the person is in partnership with or is
party to any arrangement for sharing profits or cost-savings or any
joint venture with the Operator or with any third party with regard to
the Operator; or
4.3 the person or any affiliate of the person has (directly or indirectly):
(a) any beneficial shareholding interest in the Operator; or
(b) any beneficial Underlying Interest in the Generating Unit; or
(c) provided or agreed to provide finance to the Operator
otherwise than on arm's length terms; or
(d) provided or agreed to provide, or has determined or is
responsible for determining the price ( or other terms
affecting the financial value) of, the fuel used in the
Generating Unit.
5. No Accountable Interest: the person shall not be deemed to have an
Accountable Interest in a Generating Unit where; -
5.1 such Generating Unit is owned and operated by NGC under a license
granted pursuant to section 6 of the Act; or
5.2 the persons's interest arises wholly under the terms of the Agreement
or under any electricity purchase or sale contract; or
5.3 the person's interest arises solely by virtue of arrangements for the
sharing with the Operator or any Generating Unit of the risks
associated with changes in the price of fuel used by the Generating
Unit during the term of any contract for the provision of electricity
from the Generating Unit to the person.
6. Amount of Capacity: the Pool Member submitting an Admission Application
shall provide to the Executive Committee and the Director a statement
identifying (in such detail and with such supporting documents or
information as the Executive Committee or the Director may require) the
amount of capacity in MW represented by the Registered Capacity of
Generating Units in which any person who has an Accountable Interest in
the Generating Unit which is the subject of the Admission Application,
including the Pool Member, has an Accountable Interest, as at the date
of the statement.
929
<PAGE>
7. Alternative Basis of Calculations: where the Executive Committee or the
Director is satisfied that the basis of calculation used by the Pool
Member is not in conformity with this Schedule, the Executive Committee
or the Director may issue directions specifying an alternative basis of
calculation, and the basis of calculation provided by the Pool Member
shall be adjusted accordingly with effect from the date of issue of the
directions or such other date as may be specified in the directions.
930
<PAGE>
SCHEDULE 21
METER OPERATOR SCHEDULE
PART 1
PRELIMINARY
1. INTRODUCTION
1.1 Definitions and constructions: the Parties and Meter Operator Parties
expressly Agree and acknowledge that the words and expressions listed
below, and which are used for the purposes of this Schedule, shall not
be capable of amendment without the consent of Meter Operator Parties,
but that any word or expression which is not so listed in this Schedule
but is a definition for the purposes of this Agreement and is used
primarily for parts of this Agreement other than this Schedule shall,
subject to paragraph 2.2.3 and without prejudice to paragraph 2.5, be
capable of being amended without such consent notwithstanding that it
may also be used in this Schedule: -
Active Surgery;
Active Power;
Agreed Procedure;
Agreed Procedures Index;
Code of Practice;
Communications Equipment;
Embedded Non-Franchise Site;
Equipment Owner;
Exports;
FMS Codes of Practice;
FMS Date;
FMS Trading Date;
Force Majeure;
Generic Dispensations;
Good Industry Practice;
Host PES;
Imports;
Invitee;
License Restricted Party;
Meter;
Metering Equipment;
Metering System;
Meter Operator Party Accession Agreement;
Meter Operator Party Resignation Notice;
MNA Metering Equipment;
New Meter Operator Party;
Operator;
931
<PAGE>
Outstation;
Potential Operator;
Reactive Energy;
Reactive Power;
Register;
Registrant;
Second Tier Customer;
Substantial Part;
Synopsis of Metering Codes;
Tariff; and
Third Parties.
1.2 Interpretation: wherever a reference is made in this Schedule to a
Meter Operator Party or to an Operator, such reference shall be to a
Meter Operator Party in its capacity as such Meter Operator Party or,
where the context so requires, to an Operator in its capacity as
Operator, but shall not refer to the person which is that Meter
Operator Party or Operator in, and shall be in all cases without
prejudice to, any other capacity in which such person may be party to
this Agreement.
1.3 Agreed Procedures and Codes of Practice:
1.3.1 each of the Parties and each of the Meter Operator Parties
undertakes to comply with the Agreed Procedures and the Codes
of Practice insofar as applicable to it.
1.3.2 The Settlement System Administrator shall retain copies of all
Agreed Procedures and Codes of Practice and of any other
documentation referred to in such Agreed Procedures or Codes
of Practice and shall provide a copy of all or any thereof to
any Party or Meter Operator Party on request and may make a
reasonable charge for such provision.
1.4 Agreed Procedures and Codes of Practice: Referral to the Director:
1.4.1 without prejudice to paragraph 1.3.3, where any Meter Operator
Party considers that any change proposed to be made to any
Agreed Procedure or to any Code of Practice would have a
material adverse effect on its rights ad liabilities as a
registered Operator or as a Potential Operator as set out in
this Schedule ( the "proposed change"), it shall have the
right in the prescribed time limits to refer the matter in
writing to the Director (such referral to be copied to the
Executive Committee) who shall determine, taking into account
the views expressed by the Executive Committee and any Parties
referred to below in this paragraph, whether such proposed
change has such a material adverse effect. The Director's
determination shall be final and binding for all purposes.
1.4.2 For the purposes of enabling any Meter Operator Party to
appeal to the Director against a proposed change to any Agreed
Procedure or Code of Practice in accordance with paragraph
1.4.1, the Executive Committee shall give all Parties, Meter
Operator Parties and the Director
932
<PAGE>
notice of the proposed changes at least fourteen clear days
prior to the implementation of such proposed change in
accordance with the provisions of this Agreement.
1.4.3 If an appeal to the Director against a proposed change to any
Agreed Procedure or Code of Practice is made within 14 days
after notification by the Executive Committee pursuant to
paragraph 1.4.4,. If no appeal is made within the said 14
days, the change shall come into effect on the expiry of that
period (or such later date as the Executive Committee may
determine).
1.4.4 The Director shall within 28 days of receipt or a referral (
or within such extended period as the Director shall have
notified to the Executive Committee within that 28 day period
as being necessary to enable him to reach a considered
determination) pursuant to paragraph 1.4.1 make the
determination referred to therein giving supporting reasons
and: -
(i) if the determination of the Director is that the
proposed change does not have a material adverse
effect upon the rights and liabilities as et out in
Schedule 21 of the appellant Meter Operator Party as
registered Operator or as Potential Operator then the
proposed change shall come into effect in accordance
with the provisions of this Agreement; and
(ii) if the determination of the Director is that the
proposed change does have a material adverse effect
upon the rights and liabilities as set out in
Schedule 21 of the Appellant Meter Operator Party as
registered Operator or as Potential Operator, the
Director may require that the proposed change not
come into effect (in which case such proposed change
shall not come into effect) or require that
modifications be made to the proposed change to
obviate or mitigate such material adverse effect. In
the latter case the Executive Committee and each
Party whose consent is required to the relevant
amendment to that Agreed Procedure or as the case may
be, Code of Practice, shall take all reasonable steps
to implement any decision of the Director (for which
reasons shall be given) requiring changes to be made
to such Agreed Procedure or Code of Practice with the
purposes of obviAting or, where the Director
considers appropriate, mitigating such material
adverse effect on such Meter Operator Party.
2. AMENDMENTS AND MODIFICATIONS
2.1 Obligations: the Parties and Meter Operator Parties expressly
acknowledge and agree that each Meter Operator Party is bound only to
the extent of the obligations which are expressly set out or referred
to in this Schedule (including those provisions incorporated herein by
reference in paragraph 24) and not by any other provision of this
Agreement. Each Meter Operator Party agrees to comply with the
provisions of this Agreement incorporated herein by reference in
paragraph 24) or are definitions listed in paragraph 1.1.
2.2. Consent:
2.2.1 the consent or agreement of any Meter Operator Party shall not
be required to any modification, abrogation, amendment or
suspension of any provision of this Agreement incorporated
herein by reference in paragraph 24 shall be deemed to be not
set out in this
933
<PAGE>
Schedule) or which is not a definition listed in paragraph
1.1. Each Meter Operator Party hereby irrevocably waives any
rights which it might be considered or held to have to consent
or agree to any such modification, abrogation, amendment or
suspension.
2.2.2 Where under paragraph 2.2.1 a Meter Operator Party would
otherwise have a right to consent or agree to a modification,
abrogation, amendment or suspension of a provision of this
Agreement then consent or agreement shall not be required in
circumstances where the consent or agreement of any Party (not
being the Settlement System Administrator, the Grid Operator,
the Ancillary Services Provider or the Pool Funds
Administrator) is also not required under this Agreement to
such modification, abrogation, amendment or suspension
2.2.3 A meter Operator Party whose consent or approval need not by
virtue of this paragraph 2 be sought or obtained to any
modification, abrogation, amendment or suspension of any
provision of this Agreement may refer the matter to the
Director as if it were a referral under and in accordance with
paragraph 1.4 (and such that the provisions of that paragraph
shall apply mutatis mutandis to such referral) provided that
in reaching any determination as to whether the proposed
change shall come into effect the Director shall consider the
nature of the changes upon Meter Operators Parties as a class
and shall not have locus standi to consider any perceived or
actual prejudice as an individual Meter Operator Party.
2.3 Authorisation to amend: without prejudice to paragraphs 2.1 and 2.2,
each Meter Operator Party hereby unconditionally and irrevocably
authorises and instructs the Chief Executive and each person authorised
for the purpose by the Executive Committee to sign on its behalf
amending agreements to this Agreement, to execute any agreement which
modifies, abrogates, amends or suspends any provision of this Agreement
in circumstances where such Meter Operator Party's consent or approval
is not required, and undertakes not to withdraw, qualify or revoke such
authority and instruction at any time.
2.4 Notification: the Executive Committee shall notify each Meter Operator
Party of all amendments, modifications, abrogations and suspensions
which are made to this Agreement for which the consent or agreement of
such Meter Operator Party is not required.
2.5 Further rights: the Executive Committee shall from time to time
consider any representations which Meter Operator Parties may make to
the effect that there are provisions set out in the Agreement but not
in this Schedule 21 and, accordingly, in respect of which Meter
Operator Parties are not conferred with rights by virtue of this
paragraph 2, which are operating in a manner which is having a material
effect on the rights and liabilities of such Meter Operator Parties as
set out herein. The Executive Committee shall consider whether, and the
extent to which (if at all), such provisions should be recommended for
incorporation into this Schedule 21.
934
<PAGE>
PART 2
ADMISSION, RESIGNATION AND REMOVAL
3. ADMISSION
3.1 General: subject to the following provisions of this paragraph 3, the
Parties and the Meter Operator Parties shall admit as an additional
party for the purposes of this Schedule only, on the terms set out in
paragraph 2, any person (the "New Meter Operator Party") who applies to
be admitted in the capacity of Meter Operator Party.
3.2 Procedure for admission: Admission Application: a New Meter Operator
Party wishing to be admitted as an additional party for the purposes
only of this Schedule, on the terms set out in paragraph 2 hereof,
shall complete a Meter Operator Party Admission Application and shall
deliver it to the Executive Committee together with the fee (which
shall be non-refundable).
3.3 Procedure for admission as Meter Operator Party: Executive Committee
response:
3.3.1 upon receipt of any Meter Operator Party Admission Application
duly completed the Executive Committee shall notify all
Parties, Meter Operator Parties and the Director of such
receipt and of the name of the New Meter Operator Party.
3.3.2 Any Pool Member may be written notice to the Executive
Committee, stating the grounds for the objection, object to
the admission of any person in respect of which a Meter
Operator Party Admission Application has been received by the
Executive Committee and where any such notice of objections is
received the Executive Committee:
(i) in the case of an application which the Executive
Committee considers, taking into account any
objections made pursuant to this paragraph, to be
frivolous or vexatious, may reject such application
and such rejection shall on that application be final
and binding and there shall not be conferred upon the
relevant New Meter Operator Party, by virtue of such
rejection, any further right of appeal to the
Director in respect thereof; or
(ii) in the case of an application which the Executive
Committee does not consider, taking into account any
objections made pursuant to this paragraph, to be
frivolous or vexatious, shall refer the matter to the
Director for determination and the provision of
paragraph 3.4 shall apply to such determination.
Any objection to be effective must be received by the
Executive Committee within 7 days of notification by
the Executive Committee of the relevant Meter
Operator Party Admission Application in accordance
with paragraph 3.3.1 (the "objection period"), and
the Executive Committee shall disregard any notice of
objection which is received outside the prescribed
period. Any notice of objection shall be copied by
the Executive Committee upon its receipt to all
Parties, Meter Operator Parties and the Director.
935
<PAGE>
3.3.3 Within 7 days of the expiry of the objection period (the
"consideration period") the Executive Committee shall notify
the New Meter Operator Party and the Director either:
(a) that the New Meter Operator Party shall be admitted
as a Meter Operator Party, in which even the
provisions of paragraph 3.5 shall apply; or
(b) that the Executive Committee has received an
objection, or objections, to the admission of that
New Meter Operator Party and, on the basis thereof,
considers the application to be frivolous or
vexatious and for that reason is rejecting the
application without further right of appeal; or
(c) that the Executive Committee has received an
objection, or objections, to the admission of that
New Meter Operator Party in accordance with paragraph
3.3.2 and has referred the matter to the Director in
accordance with paragraph 3.4.
If the Executive Committee shall fail so to notify the New
Meter Operator Party and the Director, the New Meter Operator
Party may within 7 days after the expiry of the consideration
period refer the matter to the Director pursuant to paragraph
3.4, in which event the provisions of that paragraph shall
apply.
3.4 Procedure for application: Reference to the Director:
3.4.1 if:
(a) a notice of objection or notices of objection to the
admission of the New Meter Operator Party as a Meter
Operator Party within the objection period has (or
have) been received and the Executive Committee has
not notified the New Meter Operator Party that it is
rejecting its application on the basis that those
objections demonstrate that the relevant application
is frivolous or vexatious; or
(b) the Executive Committee shall have failed to notify
the New Meter Operator Party as provided in paragraph
3.3.3 within the consideration period,
the matter may be referred by way of written application of
the New Meter Operator Party, copied to the Executive
Committee, to the Director for determination. The
determination of the Director, which shall be made within 28
days after receipt of the said written application and shall
be to the effect that the New Meter Operator Party should or
should not be admitted as a Meter Operator Party for the
purposes of this Schedule, shall be final and binding for all
purposes. The Director shall publish reasons supporting his
determination.
3.4.2 (a) If the determination is to the effect that the New Meter Operator
Party should be admitted as a Meter Operator Party, the New Meter
Operator Party shall be admitted and the provisions of paragraph 3.5
shall apply.
936
<PAGE>
(b) If the determination is to the effect that the New Meter
Operator Party should not be admitted as a Meter Operator
Party, the New Meter Operator Party's application for
admission shall lapse and be of no effect and the New Meter
Operator Party shall not be, and shall not be entitled to be,
admitted as a Meter Operator Party consequent upon such
application (but without prejudice to any new application it
may make thereafter).
3.5 Admission: if:
3.5.1 the Executive Committee shall notify the New Meter Operator
Party and the Director as provided in paragraph 3.3.3(a); or
3.5.2 the New Meter Operator Party is to be admitted as a Meter
Operator Party pursuant to paragraph 3.4,
the Executive Committee shall forthwith prepare or cause to be prepared
a Meter Operator Party Accession Agreement. Subject to the Executive
Committee making all notifications and filings (if any) required of it
for regulatory purposes and obtaining all regulatory consents and
approvals (if any) required to be obtained by it, the Executive
Committee shall instruct the Chief Executive or another person
authorised by the Executive Committee for the purpose to prepare a
Meter Operator Party Accession Agreement and to sign and deliver the
Meter Operator Party Accession Agreement and to sign and deliver the
Meter Operator Party Accession Agreement on behalf of all Parties and
Meter Operator Parties other than the New Meter Operator Party and the
New Meter Operator Party shall also execute and deliver the Meter
Operator Party Accession Agreement and, on and subject to the Terms and
conditions of the Meter Operator Party Accession Agreement, the New
Meter Operator Party shall become a Meter Operator Party on the terms
set out in paragraph 2, for the purposes of this Schedule, with effect
from the date specified in such Meter Operator Party Accession
Agreement (and, if no such date is so specified, the date of such Meter
Operator Party Accession Agreement). The New Meter Operator Party shall
pay all costs and expenses associated with the preparation, execution
and delivery of its Meter Operator Party Accession Agreement. Each
Party and Meter Operator Party hereby authorises and instructs the
Chief Executive and each person authorised for the purpose by the Chief
Executive to sign on its behalf Meter Operator Party Accession
Agreements and undertakes not to withdraw, qualify or revoke such
authority and instruction at any time. The Executive Committee shall
promptly notify all Parties and Meter Operator Parties and the Director
of the execution and delivery of each Meter Operator Party Accession
Agreement.
3.6 Additional Agreements: upon and as a condition of admission as a Meter
Operator Party, a New Meter Operator Party shall execute and deliver
such further agreements and documents and shall do all such other acts,
matters and things as the Executive Committee may reasonably require.
3.7 Application fees: all fees received by the Executive Committee in
respect of any application by a New Meter Operator Party to become a
Meter Operator Party shall be sued to defray the costs and expenses of
the Executive Committee and shall be paid to such account as the
Executive Committee may direct. The application fee shall be (pound)250
or such other amount as the Executive Committee may, with the prior
approval of the Director, from time to time prescribe.
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3.8 Acknowledgement that provisions not exhaustive of being Operator: the
compliance by any person with the provisions of this paragraph 3 with
regard to its admission as a Meter Operator Party shall not of itself
mean that all things have been done and agreements or arrangements have
been entered into with other Parties and persons such that the duly
admitted Meter Operator Party is entitled or enabled to comply as an
operational, physical or legal matter with its obligations, or to enjoy
its rights, as an Operator under this Schedule and the provisions of
this Schedule shall always be without prejudice to the rights or
obligations of such Meter Operator Party under any other agreement or
arrangement with such other Parties or persons.
3.9 Compliance: each Meter Operator Party shall procure that for so long as
it is a Meter Operator Party it shall at all times satisfy or otherwise
comply with the admission conditions set out in its Meter Operator
Party Admission Application applicable to it (and/or such further or
other conditions as the Executive Committee may from time to time
reasonably specify) and upon request from time to time shall promptly
provide the Executive Committee with evidence reasonably satisfactory
to the Executive Committee of such satisfaction and compliance.
3.10 Change of capacities:
3.10.1 any Meter Operator Party admitted as an additional party
pursuant to this paragraph 3 may apply, whether in
substitution for or in addition to being a Meter Operator
Party, to become a Party to this Agreement in accordance with
Clause 3 of this Agreement and, if appropriate, a Pool Member
in accordance with Clause 8 of this Agreement. Such Meter
Operator Party shall only be entitled to become a Party and,
as the case may be, Pool Member in accordance with those
provisions of this Agreement.
3.10.2 Subject to the transitional arrangements set out in paragraph
23, any Party to this Agreement may, upon application to the
Executive Committee and satisfaction of such conditions (if
any) as the Executive Committee may reasonably require,
whether in substitution for or in addition to being a Party,
become a Meter Operator Party for the purposes of and on the
terms set out in this Schedule.
4. REGISTRATION OF OPERATORS
4.1 Registration: subject to Clause 60.4, the identity of the Operator for
each Metering System which the Settlement System Settlement and which
shall be the Operator for all purposes of this Schedule shall be as
notified to the Settlement System Administration in accordance with
this Schedule and as recorded b it, for the time being and from time to
time, in the Register.
4.2 Who can be Operator: the operator of any Metering System proposed to be
registered with the Settlement System Administrator or the new operator
of any Metering System already so registered shall be either:-
4.2.1 the Meter operator Party specified as such in a notice served
by it upon the Settlement System Administrator in accordance
with the relevant Agreed Procedure and which has acknowledged
its appointment therein; or
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4.2.2 where no Meter Operator Party is specified pursuant to
paragraph 4.2.1 or such Meter Operator Party has not
acknowledged its appointment, the Registrant deemed to be
Operator pursuant to Clause 60.4.4 in accordance with the
provisions thereof.
4.3 Consents: subject to Clause 60.4.9, no person shall be the Operator of
a Metering System without the prior written consent of:-
(i) the person (if not the Operator or Registrant in respect
thereof) which is at that time the Equipment Owner; and
(ii) in the case of a Metering system to be operated in respect of
supplies to a Second Tier Customer, and if different from the
Equipment Owner, that Second Tier Customer.
The Registrant in respect of that Metering System shall provide
evidence of such consent to the Executive Committee and to the
Settlement System Administrator at the time of the registration of that
Meter Operator Party as Operator in respect of such Metering System.
The Settlement System Administrator shall not register as an Operator
in respect of such Metering System any person in respect of which
evidence of consent of the Equipment Owner., and where applicable and
where different, the relevant Second Tier Customer, is required but has
not been so provided. Where no such evidence or insufficient evidence
is provided the Settlement System Administrator shall notify the
relevant Meter Operator Party accordingly.
4.4 Power to prescribe new registration conditions:
4.4.1 the Executive Committee shall have the power to prescribe,
from time to time, such further conditions to be imposed upon
the registration of any Meter Operator Party as an Operator
under this Schedule as it shall consider appropriate with the
consent of the Meter Operator Parties. In the case of a Meter
Operator Party, such consent shall not be unreasonably
withheld or delayed and notification of such consent or
refusal to consent shall be made to the Executive Committee
within 7 days of its consent being requested. If any Meter
Operator Party refuses to consent or does not consent within
the prescribed 7 day period, the Director shall determine
whether such consent was unreasonably withheld.
4.4.2 The conditions to be imposed pursuant to paragraph 4.4.1 shall
be as specified from time time in an Agreed Procedure and each
Operator shall be required, upon the bringing into effect of
new or revised conditions, to demonstrate to the satisfaction
of the Executive Committee in accordance with the provisions
of such Agreed Procedure, the ability to comply with the
standards laid down therein.
4.4.3 Any Operator which is not able to demonstrate compliance with
such revised standards in accordance with paragraph 4.4.2
shall at the time specified in that Agreed Procedure ceases to
be a Meter Operator Party for the purposes hereof, but such
cessation shall be without prejudice to any right to make a
future application to become a Meter Operator Party or
Operator in accordance with the provisions of this Schedule.
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5. RESIGNATION
5.1 Resignation as Meter Operator Party: subject as provided in paragraph
5.2.:-
5.1.1 a Meter Operator Party shall be entitled at any time to resign
as a Meter Operator Party by delivering a Meter Operator Party
Resignation Notice to the Secretary; and
5.1.2 such resignation shall take effect 28 days after receipt of
the Meter Operator Party Resignation Notice by the Secretary.
Promptly after receipt of a duly completed Meter Operator Party
Resignation Notice from a Meter Operator Party, the Secretary shall
notify (for information only) all of the other Parties, of such receipt
and of the name of the Meter Operator Party wishing to resign.
5.2 Restrictions on resignation: a Meter Operator Party may not resign as a
Meter Operator Party (and any Meter Operator Party Resignation Notice
delivered pursuant to paragraph 5.1.1 shall lapse and be of no effect)
unless:-
(i) as at the date its resignation would otherwise become
effective all sums due from such Meter Operator Party to the
Executive Committee or any other Party or Meter Operator Party
under this Agreement or any agreement entered into pursuant to
and in accordance with this Agreement (whether by or on behalf
of such Meter Operator Party) and notified for the purposes of
this paragraph 5.2 by the Executive Committee to such Meter
Operator Party prior to the date of its resignation have been
paid in full; and
(ii) the Meter Operator Party is not registered as the Operator in
respect of any Metering System.
5.3 Resignation as an Operator:
5.3.1 an Operator shall be entitled at any time to resign as
Operator of a Metering System by service of a duly completed
notice in the form prescribed by the relevant Agreed Procedure
upon the Settlement System Administrator.
5.3.2 Such resignation shall take effect (unless otherwise agreed
with the Settlement System Administrator) on the date
specified therein which shall be no earlier than the date
specified in the relevant Agreed Procedure.
5.3.3 The Settlement System Administrator shall notify the relevant
Registrant and, where applicable, host PES of receipt by it of
a notice pursuant to this paragraph 5.3 within one working day
following such receipt.
5.4 Release as a Meter Operator Party: without prejudice to Clause 66.7 as
incorporated into this Schedule by paragraph 24 hereof and its accrued
rights and liabilities and its rights and liabilities which may accrue
in relation to the period during which it was a Meter Operator Party
under this Schedule pursuant to paragraph 2 hereof or to any agreement
referred to in paragraph 5.2, upon a Meter Operator Party's resignation
becoming effective in accordance with paragraph 5.1:-
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5.4.1 such Meter Operator Party shall be automatically released and
discharged from all its obligations and liabilities in its
capacity as Meter Operator Party under this Schedule and any
agreement referred to in paragraph 5.2; and
5.4.2 each of the other Parties and Meter Operator Parties shall be
automatically released and discharged from its obligations and
liabilities to such Meter Operator Party in its capacity as
Meter Operator Party under this Schedule and any agreement
referred to in paragraph 5.2.
Each Meter Operator Party shall promptly at its own cost and expense
execute and deliver all agreements and other documentation and do all
such other acts, matters and things as may be necessary to confirm such
cessation, release and discharge.
6. REMOVAL AND CESSATION
6.1 Removal as Operator by Registrant: without prejudice to any rights
under any other agreement between any Operator and any other person
(which the Settlement System Administrator shall not be obliged to take
into account or acknowledge for the purposes of this Agreement) and
without prejudice to its accrued rights and liabilities and its rights
and liabilities which may accrue in relation to the period during which
it was Operator pursuant to this Schedule, the Registrant of any
Metering System may remove the Operator of such Metering System upon
service of a duly completed notice in the form prescribed by the
relevant Agreed Procedure to be served upon the Settlement System
Administrator (with a copy to be served upon the relevant Second Tier
Customer (if any) and such notice to take effect (unless otherwise
agreed with the Settlement System Administrator) on the date specified
in the relevant Agreed Procedure. The Settlement System Administrator
shall notify the relevant Operator and, where applicable, Host PES of
the receipt by it of a notice pursuant to this paragraph 6.1 following
such receipt.
6.2 Removal as Operator or Meter Operator Party for cause: subject.-
6.2.1 to good cause for the removal of a Meter Operator Party as (i)
Operator in respect of one or more, but not all, Metering
Systems in respect of which it is the Operator, or (i) as
Meter Operator Party in respect of which it is the Operator,
having been demonstrated to the satisfaction of the Executive
Committee; and
6.2.2 as provided in paragraphs 6.3 and 6.4,
an Operator (where removal is in respect of one or more, but not all,
such Metering Systems) or, as the case may be, a Meter Operator Party
(where removal is in respect of all such Metering Systems), may at any
time be removed by:-
(a) resolution of the Executive Committee passed by a
majority of not less than 75% of the total votes of
all Committee Members which may be exercised whether
or not any such Committee Member is present in
accordance with the provisions of this Agreement; and
(b) the giving by the Executive Committee to the Operator
or, as the case may be, Meter Operator Party after
such resolution has been passed or deemed effective
(which the
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Executive Committee shall promptly do) of not less
than 28 days' notice in writing of such removal.
6.3 Good cause for removal: good cause for the purposes of paragraph 6.2.1
may include the following:-
6.3.1 the failure by the Operator or Meter Operator Party as
Operator in any persistent, material respect o in any single,
major respect to perform or comply with any of the obligations
expressed to be assumed by it under this Schedule and such
default (if capable of remedy) is not remedied within a
reasonable period of time after the Executive Committee has
given notice to that Operator or, as the case may be, Meter
Operator Party of the occurrence thereof and requiring the
same to be remedied; and
6.3.2 in the case of removal as a Meter Operator Party, where a
Meter Operator Party:-
(a) is unable to pay its debts (within the meaning of
section 123(1) or (2) of the Insolvency Act 1986) or
has any voluntary agreement proposed in relation to
it under section 1 of that Act or enters into any
scheme arrangement (other than for the purpose of
reconstruction or amalgamation upon terms and within
such period as may previously have been approved in
writing by the Executive Committee);
(b) has a receiver (which expression shall include an
administrative receiver within the meaning of section
29 of the Insolvency Act 1986) of the whole or any
material part of its assets or undertaking appointed;
(c) has an administration order under section 8 of the
Insolvency Act 1986 made in relation to it;
(d) passes any resolution for winding-up other than a
resolution previously approved in writing by the
Executive Committee; or
(e) becomes subject to an order by the High Court for
winding-up.
For the purposes of paragraph (a) above the Meter Operator
Party shall not be deemed to be unable to pay its debts if any
such demand as is mentioned in the said section is being
contested in good faith by the Meter Operator Party with
recourse to all appropriate measures and procedures.
For the avoidance of doubt, the Parties and Meter Operator Parties
hereby acknowledge and agree that a resolution o the Executive
Committee to remove the Operator as Operator or a Meter Operator Party
as Meter Operator Party shall not, of itself, constitute good cause.
6.4 Referral to the Director: an Operator or, as the case may be, a Meter
Operator Party may in writing the 28 day period referral to in
paragraph 6.2(b) refer a decision of the Executive Committee to remove
it for cause pursuant to paragraph 6.2 to the Director. Where such
referral is made in accordance with this paragraph 6.4, the removal of
such meter Operator Party as Operator or, as the
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case may be, Meter Operator Party for cause shall not become effective
until such time as the Director determines, in accordance with
paragraph 6.5, that good cause exists for such removal.
6.5 Determination by Director: the Director, upon any referral being made
pursuant to paragraph 6.4, shall determine whether there is good cause
within the meaning of this paragraph 6 of the removal of such Meter
Operator Party as Operator or, as the case may be, as Meter Operator
Party, within 28 days of the receipt of the written referral of the
decision of the Executive Committee. Any decision of the Director that
there is, or is not, good cause for removal shall be final and binding
on the Parties and Meter Operator Parties. Where the Director
determined that there is not good cause for the removal of a Meter
Operator Party, the relevant decision of the Executive Committee shall
lapse and cease to be effective and such Meter Operator Party shall not
be removed as Operator or, as the case may be, Meter Operator Party by
virtue o the passing of that resolution.
6.6 Notification of removal: within 7 days of any Operator or Meter
Operator Party being removed for cause in accordance with the
provisions of this paragraph 6, the Secretary shall notify all Parties,
Meter Operator Parties, relevant Second Tier Customers and the Director
in accordance with the provisions of this Agreement of the identify of
the relevant Operator or, as the case may be, Meter Operator Party and
of the fact of its removal.
6.7 Right to representation: any Party or Meter Operator Party against whom
the Executive Committee is considering exercising powers pursuant to
this paragraph 6 shall have the right to representation at any meeting
of the Executive Committee which considers the exercise of such powers.
6.8 Cessation as Operator: an Operator of any Metering System shall cease
to be the Operator therefor when the Plant or Apparatus in respect of
such Metering Equipment ceases to be connected at the relevant Site.
6.9 Cessation as Meter Operator Party: without prejudice to any rights
under any other agreement between an Operator and any other person
(which the Settlement System Administrator shall not be obliged to take
into account or acknowledge for the purposes of this Agreement) and
without prejudice to its accrued rights and liabilities and its rights
and liabilities which may accrue in relation to the period during which
it was a Meter Operator Party under this Schedule, an Operator shall
cease to be a Meter Operator Party where it has not been registered by
the Settlement System Administrator (save in the case of manifest error
or bad faith on the part of the Settlement System Administrator) as an
Operator in respect of any Metering System registered with the
Settlement System Administrator for any consecutive period of fifteen
months.
6.10 Termination of Rights and Obligations under this Agreement: a Meter
Operator Party shall only cease to be party to this Agreement in the
capacity as a Meter Operator Party in the circumstances and to the
extent specified in either paragraph 4, 5 or 6.
6.11 Rights and liabilities as Party: where any Party which is also a Meter
Operator Party resigns as, is removed as, or ceases to be, a Meter
Operator Party for the purposes of, and in accordance with, this
Schedule, such resignations, removal or cessation shall be without
prejudice to all past, present and future accrued and accruing rights
and liabilities of the Party as Party in any capacity whatsoever other
than as Meter Operator Party.
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6.12 Paragraph exhaustive: the Parties and Meter Operator Parties agree that
the foregoing provisions of this paragraph 6, when read with the
provisions referred to in this paragraph, are exhaustive of cessation
as a Meter Operator Party and of cessation of rights and liabilities as
a Meter Operator Party.
PART 3
METER OPERATOR'S RESPONSIBILITIES
7. OBLIGATION TO ENSURE COMPLIANT METERING EQUIPMENT
7.1 General Obligation and Commercial Boundary:
7.1.1 there must always be one and, at any point in time, no more
than one Operator for each Metering System which is registered
with the Settlement System Administrator.
7.1.2 Each Operator shall ensure there is installed a Metering
System complying with the provisions of this Schedule and Part
XV of this Agreement which meets the required levels of
accuracy at the commercial boundary at each Site for which it
is the Operator and which is as close as reasonably
practicable to that commercial boundary taking into account
relevant financial considerations. The Parties and Meter
Operator Parties acknowledge and agree that Metering Equipment
at Power Stations either existing or under construction at the
Effective Date might not be situated at the commercial
boundary. In such cases, loss adjustment factors may be
applied after the Effective Date subject to the it being
demonstrated o the reasonable satisfaction of the Settlement
System Administrator that such loss adjustment factors have
been correctly derived.
7.1.3 To the extent that the required levels of accuracy referred to
in paragraph 7.1.2 depend upon associated current and voltage
transforms which are not in the ownership or control of the
relevant Operator, the relevant Equipment Owner agrees to take
reasonable steps to assist the Operator in complying with its
obligations under paragraph 7.1.2 by the maintenance and
repair of such current and voltage transformers in accordance
with the provisions of this Schedule provided that this
paragraph 7.1.3 shall be without prejudice to any right to
charge for the same and provided further that an Equipment
Owner shall not be required by this paragraph 7.1.3 to take
steps which would cause it to be in breach of its obligations
under its License, its Nuclear Site License (as defined in
paragraph 21.9(a), the Grid Code or any Distribution Code.
7.2 Description of Metering Equipment:
7.2.1 Metering Equipment and its component parts shall comply, as a
minimum, with the requirements referred to or set out in any
relevant Code of Practice or shall be the subject of, and
comply with, a dispensation agreed in accordance with
paragraph 14.
7.2.2 Metering Equipment comprising a Metering System shall use such
communication protocols selected, with the approval of the
Settlement System Administrator, as appropriate for that
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Metering Equipment from a list of communication protocols
approved and maintained from time to time by the Settlement
System Administrator.
7.3 Accuracy of Metering Equipment:
7.3.1 the Metering Equipment comprising any Metering System shall be
accurate within prescribed limits for such Metering Equipment
referred to or set out in the relevant Code of Practice except
only in the case where such Metering Equipment is the subject
of, and complies with, a dispensation relevant to those
prescribed limits agreed in accordance with paragraph 14.
7.3.2 The accuracy limits referred to in the relevant Code of
Practice shall be applied after adjustments have been made to
Metering Equipment to compensate for any errors due to
measuring transformers and connections thereto. Beyond the
ranges specified in the relevant Code of Practice and power
factors other than unity or zero (as the case may be) limits
of accuracy will depend on the characteristics of the
individual meters and measuring transformers specified for the
Metering Equipment. Such levels of accuracy will, in the event
of any uncertainty or dispute, be specified by the Executive
Committee.
7.4 Calibration of Metering Equipment: each Operator shall ensure that all
Metering Equipment which is registered with the Settlement System
Administrator pursuant to this Agreement and for which it is Operator
pursuant to this Schedule shall be calibrated in order to meet the
accuracy requirements referred to in paragraph 7.3.1 and otherwise in
accordance with the relevant Code of Practice or, where appropriate,
any relevant dispensation agreed in accordance with paragraph 14.
Subject to paragraph 21, the Settlement System Administrator and the
Pool Auditor shall be granted access to all such Metering Equipment and
any other Plant or Apparatus on any Site in order to inspect the basis
of any adjustments made to Metering Equipment.
8. MAINTENANCE OF METERING EQUIPMENT
8.1 Proper order: each Operator shall at its own cost and expense (but
without prejudice to its right to charge any other person for such
service pursuant to another agreement or arrangement) keep in good
working order, repair and condition all Metering Equipment in respect
of which it is the Operator to the extent necessary to allow the
correct registration, recording and transmission of the requisite
details of the quantity of Active Energy and/or Reactive Energy
measured by the relevant Meter.
8.2 Inspection and Testing:
8.2.1 no less frequently than such period as may be specified in the
relevant Code of Practice each Operator shall carry out a
routine test of the accuracy of all Metering Equipment in
respect of which it is the Operator. The Operator shall also
carry out a test of the accuracy of all Metering Equipment in
respect of which it is the Operator and which replaces
defective or inaccurate Metering Equipment as soon as is
reasonably practicable after its installation. Such Operator
will give the Settlement System Administrator and the
Registrant at least 15 days' prior written notice of the date,
time, place and nature of every such test and the Settlement
System Administrator and Host PES and the Registrant shall
have the right to attend such test should it so require. Any
such test as envisaged in this paragraph 8.2.1 shall comply
with the relevant Code of Practice.
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8.2.2 If either:-
(a) the Settlement System Administrator has reason to
believe that the Metering Equipment which an Operator
is required to maintain for the purposes of this
Schedule is not performing within the prescribed
limits of accuracy referred to in paragraph 7.3.1; or
(b) such Operator or any other Party or Meter Operator
Party has reason to believe there is any such failure
to so perform, then, in the case of (b), such
Operator, such other Party or such Meter Operator
Party shall notify the Settlement System
Administrator, the Registrant of the relevant
Metering System and the Host PES (if any) and, in any
case, the Settlement System Administrator:-
(i) shall (if so requested by any Party or Meter
Operator Party) and (in any other case) may,
without giving notice to the relevant
Operator or Registrant, inspect such
Metering Equipment and make such tests as
the Settlement System Administrator shall
deem necessary to determine its accuracy; or
(ii) in any other circumstances require the
relevant Operator promptly to test the
accuracy of the same but in any event within
24 hours of receiving notification of such
requirement pursuant to this paragraph
8.2.2, whereupon the relevant Operator shall
carry out such test. Such test shall comply
with the relevant Code of Practice and shall
take place in the presence of the Settlement
System Administrator, if it so requires.
Further, if an Operator has reason to believe that
the Metering Equipment in respect of which it is the
Operator is incorrectly recording data for any
reason, it shall notify the Settlement System
Administrator, the Registrant in respect of the
relevant Metering System and the Host PES (if any.
8.2.3 Recovery of costs for non-routine testing (1): subject to
paragraph 8.3.4, the costs of any such test referred to in
this paragraph 8.2 shall be borne by the Operator responsible
for the maintenance of the relevant Metering Equipment (but
without prejudice to its right to charge any other person for
such service pursuant to another agreement or arrangement),
save that the Settlement System Administrator shall bear the
costs of its nominee's attendance thereat (subject to its
right to recover the same through its charges).
8.2.4 Recovery of costs for non-routine testing (2): where any
Metering Equipment passes all inspections and tests required
pursuant to paragraph 8.2.2 or the test is in respect of
Metering Equipment where the Operator is the deemed Operator
pursuant to Clause 60.4.4, the costs of such inspections and
test shall, in the case of paragraph (a) of that paragraph, be
borne by the Settlement System Administrator (subject to its
right to recover the same through its charges) and, in the
case of paragraph 8.2.2(i) where a test is required by another
Party or Meter
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Operator Party, be borne by such other Party or Meter Operator
Party which shall reimburse the relevant Operator its costs on
demand.
8.3 Sealing: Metering Equipment shall be as secure as is practicable in all
the circumstances and for this purpose:-
(a) all Metering Equipment shall comply with the relevant Agreed
Procedure; and
(b) the Executive Committee and the Settlement System
Administrator shall regularly review Agreed Procedures for
security arrangements in relation to Metering Equipment.
8.4 Defective Metering Equipment: it at any time any Metering Equipment or
any party thereof is destroyed or damaged or otherwise ceases to
function, or is found to be outside the prescribed limits of accuracy
referred to in paragraph 7.3.1, the Operator therefor shall, subject to
compliance with its obligations under paragraph 8.3, promptly adjust,
renew or repair the same or replace any defective component so as to
ensure that the relevant Metering Equipment is back in service and
operating within the prescribed limits of accuracy as quickly as is
reasonably practicable in all the circumstances.
9. MAINTENANCE OF RECORDS AND PROVISION OF INFORMATION
9.1 Information:
9.1.1 an Operator shall inform the Settlement System Administrator
of all relevant information relating to the Metering Equipment
in respect of which it is the Operator, including any new or
substituted Metering Equipment, and as may be require the
relevant Agreed Procedure.
9.1.2 All Meter Operator Parties shall give to the Settlement System
Administrator all such information regarding Metering
Equipment as the Settlement Systems Administrator shall
reasonably require for the proper functioning of the
Settlement System including information regarding the dates
and time periods for installation of new Metering Equipment
and the dates and periods when Metering Equipment is out of
service.
9.2 Records: each Operator shall maintain a record in relation to each
Metering System for which it is the Operator detailing all relevant
matters as may be required by the relevant Code of Practice relating to
the calibration of the Metering Equipment comprising each such Metering
System including the dates and results of any tests, readings,
adjustment or inspections carried out and the dates on which any seal
was applied or broken, the reason for any seal being broken and the
persons attending any such tests, readings, inspections or sealings.
Such records shall also include any other details as may be reasonably
required by the Settlement System Administrator. Each Operator shall
pass such records or copies of the same to its successor as Operator in
relation to any Metering Equipment. Any such records shall be complete
and accurate and retained for the life of the relevant item of Metering
Equipment. The Registrant in respect of any Metering Equipment shall be
entitled to receive copies of all such records free of charge.
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PART 4
RIGHTS AND RESPONSIBILITIES RELATING TO
THE SETTLEMENT SYSTEM ADMINISTRATOR
10. INSPECTIONS AND READINGS
10.1 Inspections: the Settlement System Administrator shall procure that all
Metering Equipment comprising any Metering System which is registered
with it for the purpose of the Settlement System is inspected and read
by it or on its behalf not less than once in every three months for
general and reconciliation purposes and shall give the Registrant and
Operator notice thereof in accordance with the relevant Agreed
Procedure.
10.2 Written reports: the Settlement System Administrator and the Operator
shall keep written reports of all such inspections and readings as are
referred to in paragraph 10.1 in accordance with Clause 29.8 and the
Settlement System Administrator shall provide copies in accordance with
the relevant Agreed Procedure of such written reports to each
Registrant whose Consumer Metered Demand determined in accordance with
the Pool Rules is calculated by the Settlement System Administrator
using data from such Metering System.
11. DATA COLLECTION
11.1 Collection, Retrieval, Validation and Estimation of Data: the
Settlement System Administrator will notify the relevant Registrant,
Operator and Host PES where, as determined by the relevant Agreed
Procedure, it has reasonable grounds to believe or has established that
data required from any Metering Equipment for the functioning of the
Settlement System in accordance with this Agreement is incomplete,
inaccurate or has relevant Metering Equipment and data which the
Settlement System Administrator believes or has established is
incomplete, inaccurate or has not been received. The Settlement System
Administrator shall investigate and remedy the defect in accordance
with the relevant Agreed Procedure taking into account the following
priorities in the following order:-
(a) the need to obtain accurate data;
(b) the need to apply verification procedures;
(c) the need to produce edited or substitute date where it is
incorrect or unavailable.
subject always to the obligations set out in Clause 40.1.2.
11.2 Corrected, completed or received data: once the Settlement System
Administrator has remedied the defect identified in accordance with
paragraph 11.1, it will notify the relevant Registrant, Operator and
Host PES:-
(a) in the case of data which it has established was inaccurate,
of the validated data; and
(b) in the case of date which it has established is incomplete or
which has not been received, of the edited or substitute data,
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in each case established according to the relevant Agreed
Procedure.
12. POLICING BY THE SETTLEMENT SYSTEM ADMINISTRATOR
Policing: the Settlement System Administrator shall make or shall
procure arrangements for spot visits to metering sites by suitably
qualified inspectors in order to monitor compliance by Registrants and
Operators of their obligations under Part XV of this Agreement and this
Schedule, the appropriate Code of Practice and the Agreed Procedures.
the sites chosen for, and the conduct of, such policing shall be
determined by the Settlement System Administrator. The extent of
policing shall be in accordance with instructions given to the
Settlement System Administrator from time to time by the Executive
Committee subject to the provisions of Clause 31.3.2.
PART 5
CODES OF PRACTICE AND DISPENSATIONS
13. CODES OF PRACTICE
13.1 Relevant Code of Practice: subject to paragraph 13.2 and subject to the
transitional arrangements described in paragraph 13.4, the relevant
Code of Practice in respect of Metering Equipment shall be determined
by reference to the version of the Code of Practice which is expressed
to be applicable to that Metering Equipment at the time that the
Metering System comprised therein is registered with the Settlement
System Administrator for the first time, and such Metering Equipment
shall only be required, save as provided in paragraph 13.2, to comply
with such Code of Practice, and not with any Code of Practice which in
any respect later amends, modifies or supersedes such Code of Practice,
and references to the relevant Code of Practice in Part XV of this
Agreement and this Schedule shall be construed accordingly.
13.2 Saving: notwithstanding the provisions of paragraph 13.1:
(a) without prejudice to sub-paragraphs (b) and (c) below, FMS
Metering Equipment which is installed, or in the course of
being installed, on the FMS Date, shall only be required to
comply with the applicable FMS Code of Practice with which it
would have been required to comply were this paragraph 13 not
in effect;
(b) where any material change is made to the Metering Equipment
comprising a Metering System, details of the changes made
shall be given immediately by the Operator in respect of that
Metering System to the Settlement System Administrator (with a
copy to the Registrant of that Metering System) who shall note
the same on the Register pursuant to Clause 60.5. The noting
of that change on the Register shall be deemed (but no other
entry made on the Register shall be deemed) to constitute a
registration of that Metering System comprised in that
Metering Equipment for the purposes of paragraph 13.1, and the
Code of Practice current at the time of that deemed new
registration shall, from that time, be the relevant Code of
Practice in respect of that Metering Equipment;
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(c) in sub-paragraph (b) above, the term "material change" shall
mean a change to the Metering Equipment other than:-
(i) a change by way of repair, modification or
replacement of any component which is not in the
judgment of the Operator, acting as a reasonable
Operator in all the circumstances, a substantial part
of the Metering Equipment (a "Substantial Part"); and
(ii) a change to another part or other parts of the
Metering Equipment, each of which is not of itself
(and where taken together with other such changes,
these changes together are not) a Substantial Part
(determined as in (i) above) of the Metering
Equipment, necessitated in the judgment of the
Operator, acting as a reasonable Operator in all the
circumstances, by any change under (i) above,
in each case even where an enhanced or equivalent component is
used for the repair, modification or replacement rather than
an identical component; and
(d) Metering Equipment shall at all times comply with the latest
version of the Code(s) of Practice which contains the
requirements for the calibration, testing and commissioning of
Metering Equipment.
13.3 Record of Codes of Practice: the Executive Committee shall records in
the Synopsis of Metering Codes each Code of Practice and the date at
which that Code becomes effective as the relevant Code of Practice in
respect of Metering Equipment comprising a Metering System registered
or, in accordance with paragraph 13.2(b), re-registered at that date or
thereafter.
13.4 FMS Codes of Practice: on or after the FMS Trading Date and in relation
to any period on or after this date any relevant Code of Practice for
the purposes of this Agreement shall be an FMS Code of Practice.
14. DISPENSATIONS
14.1 Dispensations:
(a) if for financial reasons of practicality a Metering System or
Metering Equipment does not comply with some or all of the
requirements of the relevant Code of Practice or the
requirements in relation to the commercial boundary of
paragraph 7.1.2, the Registrant or potential Registrant of
such Metering System or, as the case may be, Operator or
Potential Operator of such Metering Equipment with the consent
of such Registrant or, in the case of Potential Operators
only, such potential Registrant, may make an application to
the Executive Committee for a dispensation from such
requirements. The Executive Committee shall consider and
agree, on such conditions (if any) as it shall deem fit, or
dismiss such application in accordance with the relevant
Agreed Procedure and this paragraph 14.
(b) The Executive Committee shall have the right to agree from
time to time, in accordance with the relevant Agreed
Procedure, dispensations from the requirements referred to in
sub-paragraph (a), on such conditions (if any) as it shall
deem fit, attaching generally to any item
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of Metering Equipment ("Generic Dispensations"). Generic
Dispensations may be agreed upon the application of a Party or
Meter Operator Party or be initiated by the Executive
Committee at its discretion.
(c) Before agreeing any dispensation (including any Generic
Dispensation), the Executive Committee shall be obliged to
seek and to obtain:-
(i) in the case of a dispensation from a Code of
Practice, the approval and agreement of those Parties
whose approval and agreement is required in
accordance with the definition of Code of Practice in
respect of an amendment to or substitution of the
Code(s) of Practice from which a dispensation is
sought;
(ii) the prior written consent (not to be unreasonably
withheld or delayed) of the Settlement System
Administrator where applicable in accordance with
Clause 6.3;
(iii) in the case of a dispensation from the requirements
of paragraph 7.1.2 relating to the commercial
boundary, the prior written consent (not to be
unreasonably withheld or delayed) of the Grid
Operator where applicable in accordance with Clause
6.5; and
(iv) in the case of a dispensation from the requirements
of paragraph 7.1.2 relating to the commercial
boundary, the prior written consent (not to be
unreasonably withheld or delayed) of the Ancillary
Services Provider where applicable in accordance with
Clause 6.6.
Where, in accordance with (i) above, the amendment of the
relevant Code of Practice would require the approval of the
Suppliers in separate general meeting such approval shall be
deemed to be given by a resolution of the Executive Committee
to agree the relevant dispensation, save where any
representative of any Supplier elects, upon that resolution,
to refer the matter to a separate general meeting of Suppliers
in which case, such meeting shall be convened and held in
accordance with the provisions of Clause 13.2, and shall
determine by resolution whether or not the approval and
agreement of Suppliers to that dispensation be given in
accordance with this paragraph 14.1.
14.2 Records of dispensations: the Executive Committee shall maintain, in
accordance with the relevant Agreed Procedure, an up-to-date record of
all dispensations agreed pursuant to this paragraph 14. The Executive
Committee shall provide a duplicate copy of any such record to the
Settlement System Administrator and shall provide the Settlement System
Administrator with details of all amendments made to such records as
soon as reasonably possible after the making of such amendment.
14.3 Existing dispensations: the Parties acknowledge that, prior to 1st
April 1993, dispensations (within the meaning of this paragraph 14)
were agreed by the Executive Committee as if this paragraph 14 were at
such time in full force and effect and agree that the record identified
as such as at 1st April, 1993 further agree that such dispensation
shall be deemed, with effect from the date at which they were agreed,
to have been effectively agreed in accordance with the provisions of
this paragraph 14 (as formerly incorporated into this Agreement as
Clause 60.10) as in force as at 1st April, 1993. This paragraph 14
shall be without prejudice to any claim an Operator or person acting as
Operator:-
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(i) may have as at 31st March, 1993 against a Supplier arising out
of any Agreement between such Operator (or such person acting
as Operator) and such Supplier or out of any representation;
or
(ii) may have against a Supplier arising out of facts an
circumstances in existence prior to or as at 31st March, 1993,
which relates to the installation by such Operator or such person
acting as Operator of any Metering System installed or being installed
as at the FMS Date or the installation of which was commenced prior to
the FMS Date, and which relates to a Metering System which, by virtue
of a dispensation granted pursuant to this paragraph 14, is not
required by that Supplier.
14.4 Appeals: any dispensation from the requirements of a Code of Practice
or from the requirements relating to the commercial boundary of
paragraph 7.1.2 agreed in accordance with this paragraph 14 shall be
capable of being appealed in accordance with the provisions of
paragraph 19.1, provided that no dispensation shall be considered to be
agreed in accordance with this paragraph upon any appeal being granted
where the approval and agreement of the relevant Parties as referred to
in paragraph 14.1(c) has not been obtained.
PART 6
FURTHER RIGHTS OF OPERATORS
15. OWNERSHIP AND USE OF DATA
15.1 Ownership of data: the Registrant of any Metering System shall own the
data acquired therefrom provided that (and each Registrant hereby
expressly agrees and acknowledges that) a Second Tier Customer of that
Registrant in respect of which such data is generated shall be entitled
at all times without charge by the Registrant to access, obtain and use
such data and provided further that:-
(i) such access, obtaining or use, or the method of such access,
obtaining or use, does not interfere with the operation of
Settlement;
(ii) nothing in this paragraph 15.1 shall require the Registrant
actively to provide such data to such Second Tier Customer or
so to provide such data free of charge; or
(iii) such access shall not be by using any communications link used
by the Settlement System Administrator for the purposes of
Clause 60.6 without the prior written consent of the
Settlement System Administrator.
15.2 Use of data: the Settlement System Administrator is hereby authorised
to use all data which is owned by the Registrant pursuant to paragraph
15.1 as may be permitted pursuant to this Agreement, and the Settlement
System Administrator may only release such data to others to the extent
set out in this Agreement. It is hereby expressly agreed that the
Settlement System Administrator is permitted to and shall against
request and payment of a reasonably charge therefor release to a Second
Tier Customer such data relating to it as is referred to in paragraph
15.1.
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15.3 Communications Equipment use: Communications Equipment need not be
dedicated exclusively to the provisions of data to the Settlement
System Administrator for the purposes of Settlement provided that any
other use shall not interfere at any time with the operation of
Settlement and subject also to the relevant provisions (if any) in the
Tariff.
16. CHANGES OF SUPPLIERS
16.1 Change of Supplier: where notice is served on the Settlement System
Administrator in the form prescribed by the relevant Agreed Procedure
by a proposed Registrant of an existing Site which is the point of
supply of a Second Tier Supplier or Second Tier Customer, the proposed
Registrant and the Operator or proposed Operator (where the existing
Operator is to be replaced shall confirm that the Metering System
required for the purposes of this Schedule and Part XV of this
Agreement will be installed and operational at the Site by the date
specified in the notice as that on which the notice will take effect.
If the necessary Metering System will not be so installed and
operational by such date and a Second Tier Agent has been directed to
collect, aggregate, adjust and transmit the ate from such Metering
System, the Registrant and the Operator shall, unless otherwise agreed
between them and the relevant Host PES in respect of the relevant
Metering System or, where there is no such Host PES, the Executive
Committee, comply with the provisions of paragraph 16.2.
16.2 Procedure: where this paragraph 16.2 has effect pursuant to the
provisions of paragraph 16.1:-
(i) the Registrant and the relevant Host PES in respect of the
relevant Metering System, or where there is no such relevant
Host PES, the Executive Committee, shall agree forty eight
half-hourly values for each day from the expiry of the notice
until the relevant Metering System is installed and
operational and the Operator in respect of that Metering
System shall give all reasonable assistance to the Registrant
and Host PES to enable them to reach such an agreement;
(ii) the Registrant shall inform the Settlement System
Administrator of the forty eight half-hourly values for each
such day within 7 days of the day to which they relate. The
Settlement System Administrator shall take such values into
account for the purpose of Settlement and the Registrant and
the relevant Host PES in respect of such Metering System shall
be bound to accept such values for the purposes of the Pool
Rules until the relevant Metering System is installed,
operational an registered; and
(iii) as soon as practicable after the Operator has installed the
Metering System at the relevant Site, the Operator shall
notify the Settlement System Administrator, the Registrant
therefor and the relevant Host PES in respect of such Metering
System or, where there is not such relevant Host PES, the
Executive Committee, in writing. As soon as reasonably
practicable thereafter, the Settlement System Administrator
shall commence using the data collected from that Metering
System for the purposes of Settlement and shall inform the
Registrant, the Operator and the relevant Host PES in respect
of such Metering System and, where there is no such relevant
Host PES, the Executive Committee, of the date on which it
commenced doing so.
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17. ATTENDANCE AT MEETINGS AND RIGHTS OF REPRESENTATION
17.1 Attendance at Pool Members meetings:
17.1.1 any notice convening any general meeting of Pool Members
including any adjournment thereof in accordance with Clause
9.5 shall be additionally given to all Meter Operator Parties
and be given in accordance with the provisions of that Clause.
The accidental omission to give notice of a meeting to any
Meter Operator Party entitled to receive notice shall not
invalidate the proceedings at that meeting.
17.1.2 Each Meter Operator Party (or its duly appointed
representative) shall have the right to attend at each general
meeting of Pool Members and shall have the right to speak (but
not to vote) thereat.
17.1.3 The Secretary shall circulate any minutes circulated in
accordance with Clause 10.10 additionally to Meter Operator
Parties in accordance with the provisions thereof.
17.2 Attendance at meetings of the Executive Committee, and sub-committees
and sub-groups of the Executive Committee:
17.2.1 one representative for all Meter Operator Parties selected in
accordance with paragraph 17.3 (a "Meter Operator Party
Representative") shall be entitled to attend and speak (but
not to vote) at meetings of the Executive Committee or at
meetings of any sub-committee or sub- group of the Executive
Committee on behalf of all Meter Operator Parties and shall be
entitled to appoint from time to time alternates and delegates
to assist him in those functions, where matters directly
concerning the functions, duties or responsibilities of
Operators, individually or collectively, have been identified
or advised in the agenda for that meeting to be circulated
pursuant to Clause 18.1.4 or, as the case may be, Clause 20.1.
17.2.2 Notice of meetings of the Executive Committee or meetings of
any sub-committees or sub-group at which the relevant Meter
Operator Party Representative is entitled to attend shall be
given to him, together with all prescribed accompanying
documentation and agendas, in accordance with Clause 18.1, as
the case may be, Clause 20.1. The Meter Operator Party
Representative shall as soon as is reasonably practicable copy
such notice together with such accompanying documentation to
all Meter Operator Parties.
17.2.3 The relevant Meter Operator Party Representative shall be
entitled to receive copies of all minutes of meetings which he
was entitled to attend and which the Secretary is required to
circulate in accordance with Clause 18.1.6 or, as the case may
be, Clause 20.1 in accordance with the provisions thereof.
Such Meter Operator Party Representative, if he attended the
relevant meeting, shall notify his approval or disapproval of
the minutes to the Secretary no later than ten working days
after receipt thereof and, if he fails to do so, he shall be
deemed to have approved the same.
17.3 Appointment of representative for Meter Operators Parties: the Director
shall nominate from time to time a representative who shall represent
the collective and individual interests of Meter Operator parties under
this Agreement. Such representative shall be drawn from those Meter
Operator Parties
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which are not represented at the Executive Committee in any other
capacity pursuant to the provisions of this Agreement.
17.4 Class representation: the Executive Committee or any sub-committee or
sub-group thereof shall be entitled to assume that any Meter Operator
Party Representative represents the interests of Meter Operator Parties
as a class and, where appropriate, represents any affected specific
individual interests and, in considering matters or exercising its
powers or discretion under this Agreement, the Executive Committee or
any sub-committee or sub-group thereof shall not be obliged to seek,
nor to take account of, the views, comments or consent or otherwise of
any other Meter Operator Party.
PART 7
FAILURE TO COMPLY AND DISPUTES
18. FAILURE TO COMPLY WITH OBLIGATIONS
Defective Metering Equipment: subject to the provisions of Clause
60.4.9, in the event that an Operator cannot or does not comply with
its obligations to repair, adjust or replace or renew any defective
component pursuant to paragraph 8.4, the Settlement System
Administrator shall have the right to carry out or procure there is
carried out such repair, adjustment, replacement or renewal and to
recover its own costs, expenses and profit thereon from such Operator
forthwith on demand or, where the Settlement System Administrator,
having taken reasonable steps to recover such costs, expenses and
profit from the relevant Operator is unable so to recover within a
reasonable period of time, from the Registrant in respect of that
Operator subject thereto forthwith on demand (such profit to be mutatis
mutandis, based on the principles set out in the Accounting Procedure).
19. DISPUTES
19.1 Disputes which may involve a Meter Operator Party: any dispute
regarding Metering Equipment (other than a dispute referred to in
Clause 60.11.1 or one arising out of any decision made pursuant to
paragraph 6.2, which in the latter case shall be determined in
accordance with the provisions of that paragraph) shall be referred to
the Executive Committee. If any Party or Meter Operator Party is not
satisfied with the decision of the Executive Committee, the matter may
be referred by such Party or Meter Operator Party to arbitration in
accordance with Clause 83 of this Agreement as incorporated into this
Schedule by paragraph 24.
19.2 Tests to determine disputes: any testing of Metering Equipment required
to settle any dispute (including a dispute under Clause 60.11.1) will,
prima facie, be carried out by the relevant Operator on the relevant
Metering Equipment mounted in its operational position in the presence
of the Settlement System Administrator acting on behalf of the
Executive Committee and in the presence of the Host PES. All testing
will be carried out in accordance with the relevant dispensation agreed
in accordance with this Schedule. The test performance of any Metering
Equipment shall be compared with calibrated test equipment by one of
the following methods:-
(a) injecting into the measuring circuits (i.e., excluding the
primary current and voltage transformers) and comparing the
readings or records over such period as may be required by
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the relevant dispensation agreed in accordance with the
Schedule to ensure a reliable comparison; or
(b) where practicable, operating the calibrated test equipment
from the same primary current and voltage transformers as the
Metering Equipment under operating conditions. The readings or
recordings of the Metering Equipment and the calibrated test
equipment shall be compared over such period as may be
required by the relevant Code of Practice or, where
applicable, any relevant dispensation agreed in accordance
with this Schedule; or
(c) in exceptional circumstances, such other method as may be
specified by the Settlement System Administrator.
19.3 Laboratory tests: Metering Equipment which fails any test whilst in its
operational position shall be tested under laboratory conditions in
accordance with the relevant Code of Practice.
19.4 Witnesses: No more than two persons representing all interested Parties
or Meter Operator Parties nominated by the Executive Committee
(including the Host PES) in addition to the Settlement Systems
Administrator will be entitled to witness tests taken as a result of a
dispute, including tests confirming the calibration of test equipment,
or inspect evidence of valid calibration, or valid calibration
certificates, as appropriate.
19.5 Saving: It is hereby expressly acknowledged and agreed by the Parties
that the resolution of any dispute referred to in Clause 60.11.1 shall
in all cases be without prejudice to the bringing or pursuing of any
claim, by or against, or the resolving of any issue between any one or
more of such Parties or any other Party arising out of the same facts
or circumstances, or facts or circumstances incidental to the facts and
circumstances giving rise to such dispute or upon the basis of which
such dispute has been resolved, in favor of, or against, a Meter
Operator Party or Meter Operator Parties.
19.6 Release of data: Upon the request of any Party or Meter Operator Party
which is a party to a dispute referred to in paragraph 19.1 any
relevant data derived from any Metering System may be submitted by the
Settlement System Administrator to the body then having jurisdiction in
respect of the relevant dispute for the purposes of resolving such
dispute.
PART 8
LIMITATION OF LIABILITY
20. LIMITATION OF LIABILITY
20.1 Limitation of liability: Subject to paragraph 20.2 and save where any
provision of this Agreement provides for an indemnity, each Party and
each Meter Operator Party agrees and acknowledges that no Party nor
Meter Operator Party (excluding for this purpose the Settlement System
Administrator) (in this paragraph 20, the "Party Liable") or any of its
officers, employees or agents shall be liable to any of the other
Parties or Meter Operator Parties for loss arising from any breach of
this Schedule or of this Agreement other than for loss directly
resulting from such breach and which at the date of this
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Agreement was reasonably foreseeable as not unlikely to occur in the
ordinary course of events from such breach in respect of:
20.1.1 physical damage to the property of any of the other Parties or
Meter Operator Parties or its or their respective officers,
employees or agents; and/or
20.1.2 the liability of any such other Party or Meter Operator Party
to any other person for loss in respect of physical damage to
the property or any other person.
20.2 Death and personal injury: Nothing in this Schedule or this Agreement
shall exclude or limit the liability of the Party Liable for death or
personal injury resulting from the negligence of the Party Liable or
any of its officers, employees or agents and the Party Liable shall
indemnify and keep indemnified each of the other Parties or Meter
Operator Parties, its officers, employees or agents from and against
all such and any loss or liability which any such other Party or Meter
Operator Party may suffer or incur by reason of any claim on account of
death or personal injury resulting from the negligence of the Party
Liable or any of its officers, employees or agents.
20.3 Exclusion of certain types of loss: Subject to paragraph 20.2 and save
where any provision of this Agreement provides for an indemnity,
neither the Party Liable nor any of its officers, employees or agents
shall in any circumstances whatsoever be liable to any of the other
Parties or Meter Operator Parties for:
20.3.1 any loss of profit, loss of revenue, loss of use, loss of
contract or loss of goodwill; or
20.3.2 any indirect or consequential loss; or
20.3.3 loss resulting from the liability of any other Party or Meter
Operator Party to any other person howsoever and whensoever
arising save as provided in paragraphs 20.1.2 and 20.2.
20.4 Trust: Each Party and each Meter Operator Party acknowledges and agrees
that each of the other Parties and Meter Operator Parties holds the
benefit of Clauses 20.1, 20.2 and 20.3 of this Schedule for itself and
as trustee and agent for its officers, employees and agents.
20.5 Survival: Each of paragraphs 20.1, 20.2, 20.3 and 20.4 shall:
20.5.1 be constructed as a separate and severable contract term, and
if one or more of such paragraphs is held to be invalid,
unlawful or otherwise unenforceable the other or others of
such paragraphs shall remain in full force and effect and
shall continue to bind the Parties and the Meter Operator
Parties; and
20.5.2 survive the termination of this Agreement.
20.6 Saving: For the avoidance of doubt, nothing in this Part 8 shall
prevent or restrict any Party or Meter Operator Party enforcing any
obligations (including suing for a debt) owed to it under or pursuant
to this Schedule or this Agreement.
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20.7 Full negotiation: Each Party and each Meter Operator Party acknowledges
and agrees that the foregoing provisions of this Part 8 have been the
subject of discussion and negotiation and are fair and reasonable
having regard to the circumstances as at the date this Schedule came
into effect.
PART 9
ACCESS
21. ACCESS
21.1 Access to Party's and Meter Operator Party's property: Each Party and
Meter Operator Party hereby agrees to grant to any Invitee and, in the
case of a Meter Operator Party, the Registrant of the Metering System
in respect of the Metering System of which it is Operator, and, in the
case of a Registrant of a Metering System, the Meter Operator Party
which is the Operator in respect of that Metering System:
(a) full right during the currency of this Agreement to enter upon
and through and remain upon, or do any other act contemplated
by this Schedule 21 which would otherwise constitute a
trespass upon, any part of such Party's or, as the case may
be, Meter Operator Party's, property; and
(b) in the case of the Operator or the Settlement System
Administrator, full right to remove any part of Metering
Equipment forming part of such property to a laboratory or
test house in accordance with the provisions of this Schedule,
provided always that such access rights conferred by or pursuant to
this paragraph shall be granted only to the extent necessary for the
purposes of this Schedule and shall be subject to the other provisions
of this paragraph 21.
21.2 Invitees: An Invitee for the purposes of this paragraph 21 shall
comprise any one or more of the following:
(i) the Settlement System Administrator acting through any
reasonably nominated employees, agent or contractors;
(ii) the Executive Committee acting through any reasonably
nominated persons;
(iii) the Equipment Owner for the purposes only of fulfilling its
obligations under paragraph 7.1.3;
(iv) the Pool Auditor acting through any partner or employee;
(v) the auditor carrying out the Scheduling and Despatch Review
acting through any partner or employee; and
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(vi) the Ancillary Service Provider acting through any reasonably
nominated employees, agents or contractors.
21.3 Access to property of Second Tier Customers and Third Parties: The
registrant of a Metering System and the Meter Operator Party which is
the Operator or Potential Operator of that Metering System hereby
jointly and severally agree to use all reasonable endeavors to, and to
cooperate with each other for the purpose of procuring for the benefit
of each Invitee and for each other:
(a) full right to enter upon and through and remain upon, or do
any other act contemplated by this Schedule which would
otherwise constitute a trespass upon, any part of the
property:
(i) of the Second Tier Customer in respect of which that
Registrant is the Supplier; and
(ii) of any other person which is not a party to this
Agreement (the "Third Party") but the exercise of
whose rights would prevent, in relation to such
Second Tier Customer, the Registrant, the Meter
Operator Party or any Invitee from performing its
obligations under this Schedule or this Agreement and
the existence of whose rights is known to, or ought
reasonably be know to, the Registrant, or as the case
may be the Meter Operator Party; and
(b) in the case of the Operator or the Settlement System
Administrator, full right to remove all or any part of
Metering Equipment forming part of such property to a
laboratory or test house in accordance with the provisions of
this Schedule,
provided always that such access rights conferred by or pursuant to
this paragraph shall be granted only to the extent necessary for the
purposes of this Schedule and shall be subject to the other provisions
of this paragraph 21.
21.4 Failure to procure access: If, after having used all such reasonable
endeavors to procure access rights in accordance with this paragraph 21
in respect of a Second Tier Customer or Third Party referred to in
paragraph 21.3, a Registrant and/or Meter Operator Party have been
unable to procure any such rights the Registrant:
(i) hereby undertakes not to make any future supplies to such
Second Tier Customer at the Site in respect of which such
access rights are required until such access rights have been
obtained and if supplying such Second Tier Customer at such
Site to cease forthwith to supply such Second Tier Customer at
that Site; and
(ii) shall notify the Settlement System Administrator in accordance
with the relevant Agreed Procedure of that fact.
The Settlement System Administrator shall be entitled to assume that
the consents of any Third Parties shall have been obtained in
accordance with the provisions of this paragraph until such time as it
is fixed with notice to the contrary.
21.5 Right of access: The right of access provided for in paragraphs 21.1
and 21.3 shall include the right to bring on to such Meter Operator
Party's, Party's, Second Tier Customer's or Third Party's
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property such vehicles, plant, machinery and maintenance or other
materials as shall be reasonably necessary for the purposes of this
Schedule.
21.6 Authorisation: Each Meter Operator Party or, as the case may be, Party
shall ensure that any particular authorisation or clearance which is
required to be given to ensure access to any Invitee, Registrant or
Meter Operator Party in accordance with this paragraph is available on
arrival.
21.7 Safety: Subject to the right of the Settlement System Administrator to
inspect without notice pursuant to paragraph 8.2.2, each Meter Operator
Party or, as the case may be, Party shall procure that all reasonable
arrangements and provisions are made and/or revised from time to time
as and when necessary or desirable to facilitate the safe exercise of
any necessary or desirable to facilitate the safe exercise of any right
of access granted pursuant to paragraph 16.1 or 16.3 with the minimum
of disruption, disturbance and inconvenience. Such arrangements and
provisions may, to the extent that the same are reasonable, limit or
restrict the exercise of such right of access and/or provide for any
Meter Operator Party or Party to make directions or regulations from
time to time in relation to a specified matter. Matters to be covered
by such arrangements and/or provisions include:
(i) the identification of any relevant Metering Equipment;
(ii) the particular access routes applicable to the land in
question having particular regard for the weight and size
limits on those routes;
(iii) any limitations on times of exercise of the right of access;
(iv) any requirements as to prior notification and as to
authorsation or security clearance of individuals exercising
such right of access and procedures for obtaining the same;
(v) the means of communication to the Meter Operator Party or, as
the case may be, Party (and all employees and/or contractors
who may be authorised from time to time to exercise such right
of access) of any relevant directions or regulations made by
the Meter Operator Party or, as the case may be, Party; and
(vi) the identification of and arrangements applicable to personnel
exercising the right of access granted by paragraphs 21.1 or
21.3.
Each Party or Meter Operator Party shall (and shall procure that all
persons exercising any right of access on behalf of such Party or Meter
Operator Party) observe and perform any such arrangements and all
provisions (or directions or regulations issued pursuant thereto) made
from time to time.
21.8 Damage: Each Party or Meter Operator Party shall procure that all
reasonable steps are taken in the exercise of any right of access by or
on behalf of such Party or Meter Operator Party to:
(a) avoid or minimise damage in relation to any Meter Operator
Party's, Party's, Second Tier Customer's or other Third
Party's property; and
960
<PAGE>
(b) cause as little disturbance and inconvenience as possible to
any Meter Operator Party, Party, Second Tier Customer or other
Third Party or other occupier of such Meter Operator Party's,
Party's, Second Tier Customer's or other Third Party's
property,
and shall make good any damage caused to such property in the course of
exercise of such rights as soon as may be practicable. Subject to this,
all such rights of access shall be exercisable free of any charge or
payment of any kind.
21.9 License Restricted Parties:
(a) this paragraph 21.9 shall apply to any area owned or occupied
by any Party, Meter Operator Party or any subsidiary of such
Party or Meter Operator Party, Second Tier Customer or Third
Party (each a "Licence Restricted Party") which is the holder
of or subject to a licence granted under the Nuclear
Installations Act 1965 (a "Nuclear Site Licence") or subject
to restrictions in relation to a Nuclear Site Licence, where
such area is subject to that Nuclear Site Licence but, in
respect of Energy Settlements and Information Services
Limited, this paragraph 21.9 shall apply subject to the
provisions of any other agreement between the Licence
Restricted Party and NGC (or any of its subsidiaries) imposing
restrictions on NGC's (or any of its subsidiaries') right of
access to any areas owned by the Licence Restricted Party
subject to (or subject to restrictions in relation to) a
Nuclear Site Licence.
(b) This paragraph 21.9 shall take precedence over any contrary
provisions of this Schedule.
(c) No Party or Meter Operator Party shall enter or attempt to
enter or permit or suffer any person to enter or attempt to
enter any area owned or occupied by the Licence Restricted
Party to which a Nuclear Site Licence applies except strictly
in accordance with the provisions, restrictions and conditions
of the Nuclear Site Licence.
(d) The Licence Restricted Party shall be entitled to take
reasonable action of any kind whatsoever relating to or
affecting access to its property as it considers on reasonable
grounds to be necessary in order to enable the Licence
Restricted Party to comply with the provisions, restrictions
and conditions of a Nuclear Site Licence or avert or minimise
any reasonably anticipated breaches thereof.
21.10 Denial of access: The Settlement System Administrator shall not incur
any liability under this Schedule or this Agreement in the event it
cannot perform any of its duties hereunder due to access to Metering
Equipment being denied to it save that the Settlement System
Administrator shall inform the Executive Committee thereafter.
961
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PART 10
COMMUNICATIONS EQUIPMENT
22. COMMUNICATIONS EQUIPMENT
22.1 Compatibility: Communications Equipment at any City (which whenever
used in this paragraph 22 shall include all Qualifying Sites determined
in accordance with the first Tariff published at or after the date the
ninth supplemental deed to this Agreement comes into effect) must be
compatible with the communications link to such Site provided by the
Settlement System Administrator pursuant to Clause 60.6.3(a). Prior to
the installation of Communications Equipment at any Site the Operator
or Potential Operator shall consult with the Settlement System
Administrator to ensure that such Communications Equipment will be
compatible with such communication link. The Operator or Potential
Operator shall notify the Settlement System Administrator of any use to
which the Communications Equipment is put other than in connection with
Settlement.
22.2 General principle: Subject to the requirement of the Settlement System
Administrator to collect data in accordance with Clause 60.6.1 and
subject to the provisions of paragraph 22.1, the Settlement System
Administrator shall use all reasonable endeavors to ensure that the
communications link provided by it to any Embedded Non-Franchise Site
pursuant to Clause 60.6.3(a) is of the type requested by the Operator
or Potential Operator.
22.3 Tariff payments: The Settlement System Administrator shall pay from
time to time to each Operator or Potential Operator of a Metering
System at a Site an amount (if any) determined in accordance with the
Tariff and payable in respect of Communications Equipment installed and
maintained at such Site by such Operator or Potential Operator for the
purposes of this Agreement.
22.4 Refunds: Where an Operator is removed, resigns or otherwise ceases to
be Operator at any Site it shall pay to the Settlement System
Administrator such amount (if any) as is set out in the Tariff by way
of reimbursement of amounts paid to it pursuant to paragraph 22.3.
22.5 Additional payments: If an Operator or Potential Operator can
demonstrate to the reasonable satisfaction of the Settlement System
Administrator that any relevant payment to be made pursuant to this
paragraph 22 and in accordance with the Tariff in respect of any
particular Site as is described in the Tariff does not reflect the cost
to such Operator or Potential Operator of installing and maintaining
Communications Equipment at such Site in an efficient and economic
manner then the Settlement System Administrator may negotiate an
additional payment to such Operator or Potential Operator in respect of
Communications Equipment at such Site provided that the Operator or
Potential Operator shall be entitled to receive such additional payment
only if and to the extent that the economic and efficient installation
and maintenance of the Communications Equipment at that Site is in fact
effected. If the Operator or Potential Operator and the Settlement
System Administrator fail to agree on the amount of an additional
payment, the Operator or Potential Operator may refer the matter to the
Executive Committee which shall determine the same. The relevant Meter
Operator Party may refer an such decision of the Executive Committee to
the Director and for the purposes thereof shall be deemed to be
exercising a Dissentient Pool Member's right of appeal pursuant to and
in accordance with Clause 13.5. The Settlement System Administrator
shall sen the Executive
962
<PAGE>
Committee on request a written report giving reasonable details of any
such additional payments made or proposed to be made.
22.6 Bought-in supplies: Payments which are made to Operators or Potential
Operators in respect of the installation and maintenance of
Communications Equipment (whether or not pursuant to or in addition to
the Tariff) and payments for communications links shall be treated as
"Bought-in Supplies" (as defined in Schedule 4) and accordingly a cost
beyond the control of the Settlement System Administrator.
22.7 Recovery of costs: All costs and expenses relating to the payment
arrangements referred to in this Schedule for the installation and
maintenance of Communications Equipment, the Tariff or otherwise,
including payments which are made to Operators or Potential Operators
for the installation and maintenance of Communications Equipment,
payments for communications links, management time and expenses of the
Settlement System Administrator and the cost of funds borrowed to
finance such costs, expenses and payments, may be recovered in full by
the Settlement System Administrator in accordance with the Accounting
Procedure.
22.8 No agency: No agency relationship (whether express or implied) shall
be, or be deemed to be, created between any Operator or Potential
Operator and the Settlement System Administrator or any other person as
a result of the payments to be made pursuant to this paragraph 22.
22.9 Potential Operators: There shall at any point in time be no more than
one Potential Operator in respect of each Metering System or Metering
Equipment.
PART 11
TRANSITIONAL ARRANGEMENTS
23. TRANSITIONAL ARRANGEMENTS
23.1 Transitional Arrangements: With effect from the date this Schedule came
into effect (the"NSD date") each Party which is an Operator or a
Potential Operator shall be deemed to be a Meter Operator Party (in
addition to continuing as a Party in any other capacity) and to have
complied with all the requirements of or referred to in this Schedule
21 relating to admission as a Meter Operator Party and as an Operator.
Such Parties are more particularly described in Annex 4 hereto. The
Parties acknowledge and confirm that the deemed admission of an
existing Party as a Meter Operator Party shall not affect that Party's
rights and obligations under any agreement or arrangement relating to
being an Operator entered into or existing between the Parties or any
of them prior to such deemed admission, and that accordingly such
agreement or arrangement shall continue notwithstanding the change and
any reference to that Party being an Operator under this Agreement
shall be construed as being an Operator as a Meter Operator Party.
23.2 Saving: Notwithstanding paragraph 23.1, each Party to which this Part
11 applies, expressly acknowledges and agrees that, notwithstanding any
deemed satisfaction of the conditions which are required to be
fulfilled as at the NSD Date in accordance with this Schedule for the
purposes of admission as a Meter Operator Party and as Operator it
shall be subject (but only with prospective
963
<PAGE>
effect; that is to say to the effect that any conditions which apply as
at the NSD Date are deemed to be fulfilled and need not then be
fulfilled as a continuing obligation) to the continuing and further
conditions for registration as an Operator from time to time and to the
provisions of paragraph 4.4, and that it shall be subject to the
provisions for the resignation, removal and cessation as Operator in
respect of any Metering System, or as Meter Operator Party, as the case
may be, in accordance with the provisions of this Schedule as at the
date hereof and from time to time, and after any such resignation,
removal or cessation as a Meter Operator Party it shall be subject in
full to the procedures for admission as a Meter Operator Party and
Operator as may be set out from time to time in this Schedule.
PART 12
INCORPORATION OF OTHER PROVISIONS OF THIS AGREEMENT
24. INCORPORATION BY REFERENCE
Incorporation by reference: The provisions of Clauses 1.2, 1.3, 8.6,
31, 32, 33.4, 34.1, 34.2, 34.3, 37.3, 48.4.4, 66.7, 68, 69, 70, 71, 74,
75, 76, 77, 78, 79, 80, 81, 82, 83, 84 and 85 of the Pooling and
Settlement Agreement shall be deemed to be incorporated into this
Schedule 21 mutatis mutandis as if each reference therein to the word
"Party" were a reference to the words "Party and Meter Operating Party"
and to the word "Parties" were to the words "Parties and Meter Operator
Parties."
PART 13
SECOND TIER UNMETERED SUPPLIES
25. SECOND TIER UNMETERED SUPPLIES
Notwithstanding any of the other provisions of this Schedule, the
provisions of Clause 60.20 and any Second Tier Unmetered Supplies
Procedures shall, to the extent they are supplemental to or conflict
with any other provisions of this Schedule, govern the rights and
obligations of the Parties (including each Operator and each Meter
Operator Party) in relation to Second Tier Unmetered Supplies.
964
<PAGE>
ANNEX 1
Form of Meter Operator Party Admission Application
The Executive Committee for the
Pooling and Settlement System in England and Wales
[copy to: the Settlement System Administrator]
[Date]
Dear Sir,
1. We [insert full legal name and address of registered/principal office of
applicant] refer to Schedule 21 to the Pooling and Settlement Agreement for the
electricity industry in England and Wales dated 30th March, 1990 (as amended,
varied, supplemented, modified or suspended, the "Pooling and Settlement
Agreement").
2. Unless the context otherwise requires, words and expressions defined in the
Pooling and Settlement Agreement for the purposes of Schedule 21 to the Pooling
and Settlement Agreement shall bear the same meanings respectively when used
herein.
3. We hereby apply to be admitted as an additional party in accordance with, and
for the purposes only of, Schedule 21 to the Pooling and Settlement Agreement
pursuant to paragraph 3 and subject to the terms set out in paragraph 2 thereof.
We wish to participate thereunder in the capacity of a Meter Operator Party.
4. We hereby represent and warrant to the Executive Committee (for itself and on
behalf of all the Parties and Meter Operator Parties) that:
(A) we are duly organised and validly existing under the laws of
the jurisdiction of our organisation or incorporation;
(B) we have the power to execute and deliver our Meter Operator
Party Accession Agreement and any other documentation relating
to that Agreement and any other documentation relating to that
Agreement or the Pooling and Settlement Agreement and such
other agreements as are required thereby and to perform our
obligations hereunder or thereunder and we have taken all
necessary action to authorise such execution, delivery and
performance; and
(C) such execution, delivery and performance do not violate or
conflict with any law applicable to us, any provision of our
constitutional documents, any order or judgment of any court
or other agency of government applicable to us or any of our
assets or any contractual restriction on or affecting us or
any of our assets.
We confirm that these representations and warranties will also be true
and correct in all material respects at the date of our admission as a New Meter
Operator Party.
5. We enclose the application fee of (pound)[ ].
965
<PAGE>
6. We accept and agree to be bound by the terms of paragraph 3 of Schedule 21 to
the Pooling and Settlement Agreement.
Yours faithfully,
------------------------------------
duly authorised for and on behalf of [insert full
legal name of the New Meter Operator Party]
*Insert current application fee prescribed by the Executive Committee.
966
<PAGE>
ANNEX 2
Form of Meter Operator Party Resignation Notice
The Secretary of the Executive Committee for the
Pooling and Settlement System in England and Wales
(copied to: the Settlement System Administrator).
[Date]
Dear Sir,
We [insert full legal name and address of registered/principal office of
applicant] refer to Schedule 21 to the Pooling and Settlement Agreement for the
electricity industry in England and Wales dated 30th March, 1990 (as amended,
varied, supplemented, modified or suspended, the "Pooling and Settlement
Agreement").
Unless the context otherwise requires, words and expressions defined in the
Pooling and Settlement Agreement for the purposes of Schedule 21 to the Pooling
and Settlement Agreement shall bear the same meanings respectively when used
herein.
We hereby give notice pursuant to paragraph 5.1 of Schedule 21 to the Pooling
and Settlement Agreement that we are resigning as a Meter Operator Party with
effect from the date falling 28 days after receipt by you of this Meter Operator
Party Resignation Notice.
We confirm that in giving this notice of resignation, we are not and will not be
in breach of the restriction on resignation set out in paragraph 5.2 of Schedule
21 to the Pooling and Settlement Agreement.
We acknowledge that our resignation as a Meter Operator Party is without
prejudice to our accrued rights and liabilities and any rights and liabilities
which may accrue to us in relation to the period during which we were a Meter
Operator Party under Schedule 21 to the Pooling and Settlement Agreement or any
agreement referred to in paragraph 5.2 of Schedule 21 to the Pooling and
Settlement Agreement.
We further expressly acknowledge and confirm that our resignation as a Meter
Operator Party pursuant to Schedule 21 to the Pooling and Settlement Agreement
is without prejudice to our past, present and future accrued or accruing rights
and liabilities as a Party to the Pooling and Settlement Agreement in any
capacity whatsoever other than that of Meter Operator Party.
Yours faithfully,
------------------------------------
duly authorised for and on behalf of [insert full
legal name of Meter Operator Party]
967
<PAGE>
ANNEX 3
Form of Meter Operator Party Accession Agreement
THIS SUPPLEMENTAL AGREEMENT is made on [ ] BETWEEN:
(1) [ ], a company incorporated [with limited liability] under the laws of [ ]
[(registered number [ ])] and having its [registered] [principal] office at [ ]
(the "New Meter Operator Party"); and
(2) [ ] (the "Nominee") on behalf of all the parties to the Pooling and
Settlement Agreement referred to below.
WHEREAS:
(A) by Agreement dated 30th March, 1990 made between the Founder Generators
named therein (1), the Founder Suppliers named therein (2), Energy
Settlements and Information Services Limited (formerly NGC Settlements
Limited) as Settlement System Administrator (3), Energy Pool Funds
Administration Limited as Pool Funds Administrator (4), The National
Grid Company plc as Grid Operator and Ancillary Services Provider (5),
and Scottish Power plc and Electricite' de France, Service National as
Externally Interconnected Parties (6) (as amended, varied,
supplemented, modified or suspended, the "Pooling and Settlement
Agreement") the parties thereto agreed to give effect to and be bound
by certain rules and procedures for the operation of an electricity
trading pool and the operation of a settlement system;
(B) by paragraph 2 of Schedule 21 to the Pooling Settlement Agreement
additional parties may be admitted to that Agreement for the purposes
of, and only to be bound by and conferred rights in accordance with,
Schedule 21 thereto in the capacity of Meter Operator Party; and
(C) the New Meter Operator Party has requested that it be admitted as a
Meter Operator Party pursuant to paragraph 3 of Schedule 21 to the
Pooling and Settlement Agreement and each of the Parties and Meter
Operator Parties hereby agrees to such admission.
NOW IT IS HEREBY AGREES as follows:
1. Unless the context otherwise requires, words and expressions defined in
the Pooling and Settlement Agreement used for the purposes of Schedule
21 to the Pooling and Settlement Agreement shall bear the same meanings
respectively when used herein.
2. The Nominee (acting on behalf of each of the Parties and Meter Operator
Parties) hereby admits the New Meter Operator Party as an additional
Meter Operator Party under Schedule 21 to the Pooling and Settlement
Agreement on the terms and conditions hereof and with effect from
[insert effective date of admission].
3. The New Meter Operator Party hereby accepts its admission as a Meter
Operator Party and undertakes with the Nominee (acting on behalf of
each of the Parties and Meter Operator Parties) to
968
<PAGE>
perform and to be bound by the terms and conditions of Schedule 21 to
the Pooling and Settlement Agreement as a Meter Operator Party as from
the [insert effective date of admission].
4. For all purposes in connection with the Pooling and Settlement
Agreement the New Meter Operator Party shall as from the [insert
effective date of admission] be treated including for the purposes of
paragraph 2 of Schedule 21 to the Pooling and Settlement Agreement as
if it had been a signatory of the Pooling and Settlement Agreement as a
Meter Operator Party and as if this Agreement were part of the Pooling
and Settlement Agreement, and the rights and obligations of the Parties
and Meter Operator Parties shall be construed accordingly.
5. The New Meter Operator Party, the Parties and the Meter Operator
Parties expressly acknowledge and confirm that, pursuant to paragraph
2.1 of Schedule 21 to the Pooling and Settlement Agreement with effect
from [insert effective date of admission] the New Meter Operator Party
shall only be bound by, and conferred rights in accordance with,
Schedule 21 to the Pooling and Settlement Agreement in the sole
capacity of Meter Operator Party.
6. The New Meter Operator Party expressly consents to be bound by the
provisions of paragraphs 2.2 and 2.3 of Schedule 21 to the Pooling and
Settlement Agreement.
7. This Agreement and the Pooling and Settlement Agreement shall be read
and construed as one document and references in the Pooling and
Settlement Agreement to the Pooling and Settlement Agreement (howsoever
expressed) shall be read and construed as references to the Pooling and
Settlement Agreement and this Agreement.
8. This Agreement shall be governed by and construed in all respects in
accordance with English law and the provisions of Clauses 83 and 84 of
the Pooling and Settlement Agreement as incorporated into Schedule 21
thereto by paragraph 24 thereof shall apply hereto mutatis mutandis.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the date and year first above written.
[New Meter Operator Party]
By:
Notice details (Clause 75 of the Pooling and Settlement Agreement as
incorporated into Schedule 21 thereto by paragraph 24 thereof)
969
<PAGE>
Address:
Telex number:
Facsimile number:
Attention:
[Nominee]
(for and on behalf of each of the parties (including Meter Operator Parties) to
the Pooling and Settlement Agreement)
By:
970
<PAGE>
ANNEX 4
List of Existing Meter Operator Parties
Qualifying under the Transitional Arrangements
Derwent Cogeneration Limited
Eastern Electricity plc
Elm Energy & Recycling (UK) Limited
Humber Power Limited
Joseph Crosfield & Sons, Limited
London Electricity plc
Manweb plc
Marc Rich & Co. AG
Medway Power Limited
Meter Operators Limited
Midlands Electricity plc
The National Grid Company plc
National Power PLC
Northern Electric plc
NORWEB plc
Nuclear Electric plc
PowerGen plc
Schlumberger Industries Limited
Scottish Hydro-electric PLC
SEEBOARD plc
Southern Electric plc
South Wales Electricity plc
South Western Electricity plc
Teesside Power Limited
Yorkshire Electricity Group plc
<PAGE>
ANNEX 5
Non-Exhaustive Diagrammatic Representations of
Metering Systems
Examples of the configuration of Metering Systems for the purposes of this
Agreement are set out as to 7(b) below.
<PAGE>
METERING SYSTEM CONFIGURATION
Example 1 Code of Practice Three installation
Single customer
Single premises
Single feeder
[Diagram of the configuration described above]
1 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 2 (a) Code of Practice Three installation
Single customer
Single premises
Multiple feeders (no physical separation)
[Diagram of the configuration described above]
1 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 2(b) Code of Practice Three installation
Single customer
Single premises
Multiple feeders (at different physical locations on the site)
[Diagram of the configuration described above]
2 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 3 Code of Practice Three installation with two
Code of Practice Five meters
Single customer
Single premises
Single feeder
[Diagram of the configuration described above]
1 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 4 Code of Practice Three installation with two
Code of Practice Five meters per feeder
Single customer
Single premises
Multiple feeders (no physical separation)
[Diagram of the configuration described above]
1 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 5 Code of Practice Five installation
Single customer
Single premises
Single feeder
[Diagram of the configuration described above]
1 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 6(a) Code of Practice Five installation
Single customer
Single premises
Multiple feeders (no physical separation)
[Diagram of the configuration described above]
1 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 6(b) Code of Practice Five installation
Single customer
Single premises
Multiple feeders (at different physical locations on the site)
[Diagram of the configuration described above]
2 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 7(a) Code of Practice Five installation
Two customer
Single or adjacent premises
[Diagram of the configuration described above]
2 x Metering System
<PAGE>
METERING SYSTEM CONFIGURATION
Example 7(b) Code of Practice Five installation
Two customer
Single or adjacent premises
Multiple feeders (at different physical locations on the site)
[Diagram of the configuration described above]
2 x Metering System
<PAGE>
ANNEX 6
List of Existing Meter Operator Parties
Derwent Cogeneration Limited
Eastern Electricity plc
East Midlands Electricity plc
Elm Energy & Recycling (UK) Limited
Humber Power Limited
Joseph Crosfield & Sons, Limited
London Electricity plc
Manweb plc
Marc Rich & Co. AG
Medway Power Limited
Meter Operators Limited
Midlands Electricity plc
The National Grid Company plc
National Power PLC
Northern Electric plc
NORWEB plc
Nuclear Electric plc
PowerGen plc
Schlumberger Industries Limited
Scottish Hydro-Electric PLC
SEEBOARD plc
Southern Electric plc
South Wales Electricity plc
South Western Electricity plc
Teesside Power Limited
Yorkshire Electricity Group plc
Control Devices and Services Limited
E Squared Limited
Northern Energy Services Limited
Slough Electricity Supplies Limited
Scottish Power Limited
Powermet Limited
Keadby Generation Limited
Mission Energy Services Limited
<PAGE>
EXHIBIT 10.7
THE NATIONAL GRID COMPANY PLC
- --------------------------------------------------------------------------------
CONNECTION AND USE OF SYSTEM DOCUMENTATION
- --------------------------------------------------------------------------------
<PAGE>
DATED 30TH MARCH 1990
THE NATIONAL GRID COMPANY PLC (1)
and
OTHERS (2)
-----------------------------------------------
MASTER
CONNECTION AND USE OF SYSTEM AGREEMENT
-----------------------------------------------
<PAGE>
CONTENTS
Page
----
Master Agreement 1-48
Schedule 1 - NGC/Users' Details 49-51
Schedule 2 - Definitions 52-87
Schedule 3 - Accession Agreement 88-89
Exhibit 1 - Supplemental Agreement Type 1 1-40
Exhibit 2 - Supplemental Agreement Type 2 1-61
Exhibit 3 - Supplemental Agreement Type 3 1-34
Exhibit 4 - Supplemental Agreement Type 4 1-36
Exhibit 5 - Supplemental Agreement Type 5 1-28
Exhibit 6 - Supplemental Agreement Type 6 1-28
Exhibit 7 - Connection Application 1-6
Exhibit 8 - Connection Offer 1-8
Exhibit 9 - Use of System Application (Generators) 1-7
Exhibit 10 - Use of System Application (Suppliers) 1-10
Exhibit 11 - Modification Application 1-5
Exhibit 12 - Modification Offer
Exhibit 13 - Modification Notification
Exhibit 14 - Ancillary Services Agreement
Exhibit 15 - Interface Agreement Type 1
Exhibit 16 - Interface Agreement Type 2
Exhibit 17 - Interface Agreement Type 3
<PAGE>
MASTER AGREEMENT
CONTENTS
Clause Title Page
- ------ ----- ----
1. Interpretation and Construction 2
2. Supplemental Agreements 3
3. Ancillary Services 7
4. Interface Agreement 7
5. Nuclear Installations 8
6. Principles of Ownership 10
7. Metering 11
8. Ngc Obligations 12
9. Compliance with the Grid Code/Distribution Code 12
10. Modifications 14
11. New Connection Sites 16
12. General Provisions Concerning Modifications and
New Connection Sites 16
13. Additional Parties 18
14. Payment 19
15. Limitation of Liability 21
16. Duration and Termination 24
17. Events of Default/Deenergisation 24
18. Transfer and Subcontracting 26
19. Confidentiality 28
20. Intellectual Property 35
21. Force Majeure 35
22. Waiver 37
23. Notices 37
24. Counterparts 38
25. Variations 38
26. Dispute Resolution 39
27. Jurisdiction 42
28. Governing Law 42
29. Severance of Terms 43
30. Language 43
<PAGE>
THIS MASTER AGREEMENT is made the 30th day of March 1990 and becomes effective
on the 31st day of March 1990 BETWEEN:
(1) THE NATIONAL GRID COMPANY PLC a company registered in England with number
2366977 whose registered office is at National Grid House, Sumner Street,
London SEI 9JU ("NGC", which expression shall include its successors
and/or permitted assigns) and whose address, telex and facsimile numbers
for notices are set out in Schedule 1; and
(2) THE PERSONS whose names, registered numbers, registered offices, and
addresses, telex and facsimile numbers for notices are set out in Schedule
1 (each a "User", which expression shall include its successors and/or
permitted assigns)
WHEREAS:
This Master Agreement has the following principal purposes:
(i) to establish contractual framework between NGC and all Users
pursuant to which Supplemental Agreements will from time to time be
made which will provide for, amongst other things:
(a) connection of a User's Equipment at a Connection Site to the
NGC Transmission System;
(b) the use by a User of the NGC Transmission System in connection
with the generation and/or transmission of electricity;
(c) the payment to NGC of Connection Charges and/or Use of System
Charges; and
(ii) to provide for the enforcement of the Grid Code.
<PAGE>
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. INTERPRETATION AND CONSTRUCTION
1.1 In this Agreement and in each Supplemental Agreement the words and
expressions defined in Schedule 2 shall, unless the subject matter or
context otherwise requires or is inconsistent therewith, apply.
1.2 In the event of any inconsistency between the provisions of any
Supplemental Agreement and this Agreement, the provisions of the
Supplemental Agreement shall prevail in relation to the Connection Site
which is the subject thereof to the extent that the rights and obligations
of Users not party to that Supplemental Agreement are not affected.
1.3 If in order to comply with any obligation in this Agreement or any
Supplemental Agreement any Party is under a duty to obtain the consent or
approval (including any statutory licence or permission) ("the Consent")
of a third party (or the consent of another Party to this Agreement) such
obligation shall be deemed to be subject to the obtaining of such Consent
which the Party requiring the consent shall use its reasonable endeavors
to obtain including (if there are reasonable grounds therefor) pursuing
any appeal in order to obtain such Consent.
1.3.1. If such Consent is required from any Party to this Agreement then
such Party shall grant such Consent unless it is unable to do so or
it would be unlawful for it to do so provided that such grant by
such Party may be made subject to such reasonable conditions as
such Party shall reasonably determine.
1.3.2. For the avoidance of doubt if the Party who is under a duty to
obtain such Consent fails to obtain such Consent having complied
with this Clause 1.3 the obligation on that Party (in relation to
which such Consent is required) shall cease.
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1.4 In this Agreement:
(i) unless the context otherwise requires all references to a particular
Clause, Sub-Clause, paragraph, Schedule or Exhibit shall be a
reference to that Clause, Sub-Clause, paragraph, Schedule or Exhibit
in or to this Agreement and all references to a particular Appendix
shall be a reference to that Appendix to a Supplemental Agreement;
(ii) a table of Contents and headings are inserted for convenience only
and shall be ignored in construing this Agreement or a Supplemental
Agreement, as the case may be;
(iii) references to the words "include" or "including" are to be construed
without limitation to the generality of the preceding words;
(iv) unless the context otherwise requires any reference to an Act of
Parliament or any Part or Section or other provision of or Schedule
to an Act of Parliament shall be construed, at the particular time,
as including a reference to any modification, extension or
re-enactment thereof then in force and to all instruments, orders or
regulations then in force and made under or deriving validity from
the relevant Act of Parliament; and
(v) references to the masculine shall include the feminine and
references in the singular shall include the plural and vice versa
and words denoting persons shall include any individual,
partnership, firm, company, corporation, joint venture, trust,
association, organisation or other entity, in each case whether or
not having separate legal personality.
2. SUPPLEMENTAL AGREEMENTS
2.1 Exhibits 1 to 6 to this Master Agreement contain the forms of agreements
contemplated to be entered into pursuant to this Clause, being:
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Exhibit 1
Supplemental Agreement "Type 1", in respect of Connection Sites of Users
which are in existence and Commissioned at the Transfer Date;
Exhibit 2
Supplemental Agreement "Type 2", in respect of New Connection Sites of
Users which have not been Commissioned at the Transfer Date;
Exhibit 3
Supplemental Agreement "Type 3", for Generators with Embedded Generating
Plant or with Embedded Small dependent Generating Plant and who are acting
in that capacity and who are passing power onto a Distribution System
through a connection with a Distribution System Commissioned at the
Transfer Date;
Exhibit 4
Supplemental Agreement "Type 4", for Generators with Embedded Generating
Plant or with Embedded Small Independent Generating Plant and who are
acting in that capacity and who are passing power on to a Distribution
System through a connection with a distribution System which has not been
Commissioned at the Transfer Date;
Exhibit 5
Supplemental Agreement "Type 5", for Second Tier Suppliers acting in that
capacity taking Energy through any Grid supply Point and through a
Distribution system owned or operated by any other persons; and
Exhibit 6
Supplemental Agreement "Type 6", for Generators with Minor Independent
Generating Plant which is Embedded and who are acting in that capacity and
who are Pool members.
2.2 The Supplemental Agreements which are to be entered into between NGC and
Users who are parties to this Master Agreement as at the Transfer Date,
and
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which are in respect of Connection Sites existing as at the Transfer Date,
shall be in or substantially in the relevant exhibited form of
Supplemental Agreement.
2.3 Any Supplemental Agreements which are entered into between NGC and Users
who are parties to this Master Agreement as at the Transfer Date, but in
respect of New Connection Sites, shall be in or substantially in the
relevant exhibited form of Supplemental Agreement unless the parties
thereto agree otherwise.
2.4 All other Supplemental Agreements shall be in such form as may be agreed
between NGC and each User.
2.5 Obligations of Users who own or operate Distribution Systems
2.5.1. Any User who owns or operates a Distribution System shall not
Energise the connection between any Generating Plant or Small
Independent Generating Plant or Minor Independent Generating Plant
and its Distribution System nor permit the use of its Distribution
System by the same until the person owning or operating the plant
has where required completed the Use of System Application
(Generators) and has entered into a Supplemental Agreement in the
appropriate form (if any) with NGC and (if such person is not
already a party to this Master Agreement) has where required
entered into an Accession Agreement with NGC pursuant to Clause 13.
2.5.2. Any User who owns or operates a Distribution System shall not
Energise the connection between any Customer of another Authorised
Electricity Operator connected to such Distribution System if the
Demand (Active Power) being supplied to such Customer is being
purchased by such Authorised Electricity Operator pursuant to the
Pooling and Settlement Agreement unless such Authorised Electricity
Operator has first completed the Use of System Application
(Suppliers) and has entered into a Supplemental Agreement in the
appropriate form with NGC and
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has notified NGC of the details relevant to such Customer to be
notified to NGC pursuant to such Supplemental Agreement and (if the
Authorised Electricity Operator is not already a party to this
Agreement) has entered into an Accession Agreement with NGC pursuant
to Clause 13.
2.5.3. NGC shall notify the relevant owner or operator of the Distribution
System in writing as soon as the conditions set out in Sub-Clause
2.5.1 and Sub-Clause 2.5.2 have been satisfied in any particular
case together with, if appropriate, a copy of Appendix A of
Supplemental Agreement Type 5. NGC undertakes to each Party that,
for so long as it is the case, NGC shall from time to time forthwith
upon receipt of any written request from that Party to do so,
confirm in writing to any person specified in such request that that
Party is a party to this Agreement and any Supplemental Agreement
specified in such request.
2.5.4. Each owner or operator of a Distribution System shall Deenergise
the connection equipment of any such User the subject of Sub-Clause
2.5.1 or Customer the subject of Sub-Clause 2.5.2 as soon as
reasonably practicable following the instruction of NGC in
accordance with the terms of this Agreement. NGC shall reimburse
such owner or operator any expense incurred in relation to such act
of Deenergisation, if any, and shall indemnify such owner or
operator against any liability, loss or damage suffered by it as a
result of such Deenergisation. Details of any circumstances likely
to lead to such a Deenergisation shall be notified promptly by NGC
to the said owner or operator. The owner or operator of a
Distribution System shall promptly notify NGC when the connection
equipment of any User or Customer the subject of Sub-Clauses 2.5.1
or 2.5.2 is Deenergised or Disconnected from its
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Distribution System or ceases to use its Distribution System as the
case may be following the instruction of NGC in accordance with the
terms of this Agreement.
2.6 Each and every Supplemental Agreement entered into by a User and in force
from time to time will constitute separate agreement governed by the terms
of this Master Agreement and will be read and construed accordingly. For
the avoidance of doubt no User shall enjoy any rights nor incur any
obligations against any other User pursuant to the terms of any
Supplemental Agreement.
2.7 Each and every User connected to or using the NGC Transmission System
shall be a Pool Member except for Non-Embedded Customers being supplied by
a Pool Member.
3. ANCILLARY SERVICES
3.1 NGC and each User agree that any Ancillary Services agreement in respect
of any Ancillary Services to be provided by the User at or from a
Connection Site or New Connection Site or a Site where an Embedded User is
connected to a Distribution System shall be in a form to be agreed between
them but based substantially on the form set out in Exhibit 14.
4. INTERFACE AGREEMENT
4.1 NGC and each User undertake to enter into an Interface Agreement with each
other in a form to be agreed between them but based substantially on the
forms set out in Exhibits 15, 16 and 17 as appropriate in relation to
Connection Site(s) and New Connection Site(s) where Interface Agreements)
is/are required pursuant to the applicable Supplemental Agreement or
otherwise.
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5. NUCLEAR INSTALLATIONS
5.1 Save as provided in Sub-Clause 5.2 below notwithstanding anything to the
contrary contained in this Agreement (but subject to the following
provision), in circumstances affecting a generator or nuclear electricity
(a "Nuclear Generator") in which:
(a) a breach of any of the matters specified in Sub-Clause 5.4 below may
be reasonably anticipated; and
(b) there is no defense (other than that provided for under this
Sub-Clause) available to the Nuclear Generator in respect of the
breach referred to in Sub-Clause 5.1(a);
the Nuclear Generator shall be entitled to take any acting or refrain from
taking any action which is reasonably necessary in order to avert the
breach referred to in Sub-Clause 5.1(a) and each and every provision of
this Agreement shall be read and construed subject to this Clause,
Provided that the Nuclear Generator shall:
(i) make reasonable efforts to verify the factors that it takes into
account in its assessment of the circumstances and anticipated
breach referred to above; and
(ii) use its best endeavors to comply with the relevant provision in a
manner which will not cause the Nuclear Generator to breach any of
the matters specified in Sub-Clause 5.4 below.
5.2 Sub-Clauses 5.1 and 5.3 shall not apply in relation to the provisions of
SDC1, SDC2 and SDC3 of the Grid Code which will apply with full force and
effect notwithstanding the occurrence of the circumstances referred to in
Sub-Clause 5.1(a) (including those provisions specified in Sub-Clause 5.4
which relate to Safety of Personnel and Plant).
5.3 Save as provided in Sub-Clause 5.2 above notwithstanding anything this
Agreement, the Nuclear Generator shall be entitled upon giving reasonable
notice
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to all affected Parties to require any Party to take any reasonable and
proper action whatsoever to the extent necessary in order to comply with
(or avert an anticipated breach of) any of the matters specified in
Sub-Clause 5.4 below.
5.4 The matters referred to in Sub-Clauses 5.1 and 5.3 above are any covenant,
agreement, restriction, stipulation, instruction, provision, condition or
notice contained, or referred to, in a licence for the time being in
force, granted in accordance with the Notice Installation Act 1965 (or
legislation amending, replacing or modifying the same) or any consent, or
approval issued, or to take effect from time to time under such licence,
any emergency arrangements, operating rules or other matters from time to
time, under such licence, any emergency arrangements, operating rules or
other matters from time to time approved by the relevant authority under,
or pursuant to, any such agreements, restrictions, stipulations,
instructions, provisions, conditions or notices.
5.5 The Nuclear Generator shall indemnify and keep indemnified any Party for
any loss, damage, costs and expenses incurred by that Party as a
consequence of any action of that Party pursuant to Sub-Clause 5.3 (to the
extent that the action was not required by any licence or agreement
binding on that Party).
5.6 Notwithstanding the fact that any action or inaction allowed by Clause 5.1
above does not constitute a breach of this Agreement or an Event of
Default under Clause 17 below, the Nuclear Generator shall be liable to
the other Parties to this Agreement for any loss, claims, costs,
liabilities and expenses arising from such action or inaction to the
extent only that such loss, claims, costs, liabilities and expenses (had
it arisen as a result of a breach of this Agreement) would not have been
limited or excluded under the provisions of Clause 15 below.
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6. PRINCIPLES OF OWNERSHIP
6.1 Ownership - electrical boundaries
Subject to the Transfer Scheme or any contrary agreement in this
Agreement, any Supplemental Agreement or elsewhere the division of
ownership of Plant and Apparatus shall be at the electrical boundary, such
boundary to be determined in accordance with the following principles:
(i) In relation to Plant and Apparatus located between the NGC
Transmission System and a Power Station, the electrical boundary is
at the busbar clamp on the busbar side of the busbar isolators on
Generators and Power Station transformer circuits;
(ii) save as specified in Clause 6.1(iii) below, in relation to Plant and
Apparatus located between the NGC Transmission System and a
Distribution System, the electrical boundary is at the busbar clamp
in the busbar side of the Distribution System voltage busbar
selector isolator(s) of the NGC Transmission System circuit or, if a
conventional busbar does not exist, an equivalent isolator. If no
isolator exists an agreed bolted connection at or adjacent to the
tee point shall be deemed to be an isolator for these purposes;
(iii) in relation to Plant and Apparatus located between the NGC
Transmission System and a Distribution System and owned by NGC but
designed for a voltage of 132KV or below, the electrical boundary is
at the busbar clamp on the busbar side of the busbar selector
isolator on the Distribution System circuit or, if a conventional
busbar does not exist, an equivalent isolator. If no isolator
exists, an agreed bolted connection at or adjacent to the tee point
shall be deemed to be an isolator for these purposes; and
(iv) in the case of a metal clad switchgear bay the electrical boundary
will be the equivalent of those specified in this Clause 6.1 save
that:
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(a) for rack out switchgear, the electrical boundary will be at
the busbar shutters;
(b) for SF6 switchgear, the electrical boundary will be at the gas
zone separators on the busbar side of the busbar selection
devices.
6.2 If a User wants to use transformers of specialised design for unusual load
characteristics at the electrical boundary, NGC shall own such
transformers but the User shall pay NGC for the proper and reasonable
additional cost thereof as identified by NGC in the Offer covering such
transformers. In this Sub-Clause 6.2 "unusual load characteristics" means
loads which have characteristics which are significantly different from
those of the normal range of domestic, commercial and industrial loads
(including loads which vary considerably in duration or magnitude).
6.3 For the avoidance of doubt nothing in this Clause 6 shall effect any
transfer of ownership in any Plant or Apparatus.
7. METERING
7.1 Each User consents to NGC having access to and copies of all meter
readings taken from Energy Metering Equipment pursuant to the Pooling and
Settlement Agreement in any Financial Year for the purposes of calculating
Connection Charges and Use of System Charges due from Users or for the
purpose of operating the NGC Transmission System. Such access and copies
shall be obtained from the Settlement System Administrator appointed under
the Pooling and Settlement Agreement from time to time provided always
that if the Settlement System Administrator fails to provide such access
and copies at NGC's request the User shall supply any such meter readings
in the possession of the User direct to NGC.
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7.2 The relationship between the Parties hereto with respect to Energy
Metering Equipment shall be regulated by Part XV of the Pooling and
Settlement Agreement.
7.3 In respect of Operational Metering Equipment owned by the Party and in
respect of which access and rights to deal with such Operational Metering
Equipment are not set down in any other document the Parties shall grant
each other such access and the rights as are reasonably necessary to
enable them to perform their obligations under this Agreement and the Grid
Code upon presentation of a suitable indemnity and the Parties shall take
such action as may be necessary to regularise the position forthwith
thereafter.
8. NGC OBLIGATIONS
8.1 NGC agrees with each User to make available, plan, develop, operate and
maintain the NGC Transmission System in accordance with the NGC
Transmission Licence and with the Grid Code subject to any Derogations
from time to time.
9. COMPLIANCE WITH THE GRID CODE/DISTRIBUTION CODE
9.1 Subject to Sub-Clause 9.3 each Party agrees with each other Party to be
bound by and to comply in all respects with the provisions of the Grid
Code in so far as applicable to that Party.
9.2 Subject to Sub-Clause 9.3 each Party agrees with each other Party to be
bound by and to comply in all respects with the provisions of the relevant
Distribution Code(s) in so far as applicable to that Party except as may
be otherwise provided in any agreement for connection to a Distribution
System.
9.3 Neither NGC nor a User need comply with the Grid Code or any relevant
Distribution Code(s) to the extent (if any) that:
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(i) either the Director has issued directions relieving NGC or that User
from the obligation under its respective licence to comply with the
Licence Standards, the Grid code or any relevant Distribution
Code(s) in respect of such parts of the Grid Code or any relevant
Distribution Code(s) respectively as may be specified in those
directions or to the extent that NGC and a User which does not have
a Licence under the Act can and have so agreed in any Supplemental
Agreement in relation to any Connection Site or New Connection Site
and/or Derogated Plant; or
(ii) (in the case of a User) the Grid Code relates to the provision by
that User of any Ancillary Services unless there is an Ancillary
Services Agreement in force between that User and NGC for the
payment by NGC for such Ancillary Services; or
(iii) (in the case of NGC) the Grid Code imposes any obligation on NGC to
make available Additional Scheduling Data (as defined in the Grid
code) before 31st December 1990.
9.4 In this Sub-Clause 9.4 the following expressions shall bear the following
meanings:
"Required Standard" In relation to an item of Derogated Plant, the
respective standard required of that item (which
shall not exceed that required by the Grid code
or the Licence Standards, as the case may be) as
specified in or pursuant to the relevant
Derogation;
"Back Stop Date" in relation to an item of Derogated
Plant, the date by which it is to attain its
Required Standard, as specified in or pursuant
to the relevant Derogation.
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Each User undertakes to NGC and NGC undertakes to each User to use all
reasonable endeavours to carry out such works as are necessary to ensure
that each item of Derogated Plant owned or operated by that User or NGC
(as appropriate) is brought up to the Required Standard applicable to it
no later than the Back stop Date applicable to it.
9.5 The terms and provisions of the Fuel Security Code shall prevail to the
extent that they are inconsistent with the Grid code or any Distribution
code and the Parties' obligations under this Agreement shall be construed
accordingly.
10. MODIFICATIONS
10.1 No modification may be made by or on behalf of a User or NGC otherwise
than in accordance with the provisions of this Clause 10.
10.2 Modifications Proposed by Users
10.2.1. If a User wishes to make a Modification it shall complete and
submit to NGC a Modification Application and comply with the
terms thereof.
10.2.2. NGC shall make the Modification Offer to that User as soon as
practicable and (save where the Director consents to a longer
period) any event not more than 3 months after receipt by NGC of
the Modification Application. The Modification Offer shall
include details of any variation NGC proposes to make to the
Supplemental Agreement which applies to the Connection Site in
question. During such period NGC and the User concerned shall
discuss in good faith the implications of the proposed
Modifications.
10.2.3. The Modification Offer shall remain open for acceptance for 3
months from the date of its receipt by that User unless either
that User or NGC makes an application to the Director under
Condition 10C of the NGC Transmission Licence, in which event the
Modification Offer shall
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remain open for acceptance by that User until the date 14 days
after any determination by the Director pursuant to such
application.
10.2.4. If the Modification Offer is accepted by that User the
Supplemental Agreement relating to the Connection Site in
question shall be varied to reflect the terms of the Modification
Offer and the Modification shall proceed according to the terms
of the Supplemental Agreement as so varied.
10.3 Modifications proposed by NGC
10.3.1. If NGC wishes to make a Modification to the NGC Transmission
System, NGC shall complete and submit to each User a Modification
Notification and shall complete and submit to each User a
Modification Notification and shall advise each User of any works
which NGC reasonably believes that User may have to carry out as
a result.
10.3.2. Any User which considers that it shall be required to make a
Modification (an "Affected User Modification") as a result of the
Modification proposed by NGC (an "Affected User") may as soon as
practicable after receipt of the Modification Notification and
(save where the Director consents to a longer period) within the
period stated therein (which shall be sufficient to enable the
User to assess the implications of the proposed Modification and
in any event shall not be less than 3 months) may make an
application to the Director under Condition 10C of the
Transmission Licence.
10.3.3. As soon as practicable after the receipt of the Modification
Notification or, if an application to the Director has been made,
the determination by the Director, and in any event within two
months thereof, each Affected User shall complete and submit a
Modification Application to NGC and
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comply with the terms thereof. No fee shall be payable by any
User to NGC in respect of any such Modification Application.
10.3.4. Once a Modification Application has been made by a User pursuant
to Sub-Clause 10.3.2 the provisions of Sub-Clauses 10.2.2, 10,2.3
and 10.2.4 shall thereafter apply.
11. NEW CONNECTION SITES
11.1 If a User wishes to connect a New Connection Site it shall complete and
submit to NGC a Connection Application and comply with the terms thereof.
11.2 Without prejudice to Condition 10B4 of the NGC Transmission Licence NGC
shall make a Connection Offer to that User as soon as practicable after
receipt of the Connection Application and (save where the Director
consents to a longer period) in any event not more than 3 months after
receipt by NGC of the Connection Application.
11.3 The Connection Offer shall remain open for acceptance for 3 months from
its receipt by that User unless either that User or NGC makes an
application to the Director under Condition 10C of the NGC Transmission
Licence, in which event the Connection Offer shall remain open for
acceptance until the date 14 days after any determination by the Director
pursuant to such application.
11.4 If the Connection Offer is accepted by that User the connection shall
proceed according to the terms of the Supplemental Agreement entered into
consequent upon acceptance of the Offer.
12. GENERAL PROVISIONS CONCERNING MODIFICATIONS AND NEW CONNECTION SITES
12.1 subject to the payment of its Reasonable Charges, if any, as provided for
in this Sub-Clause NGC undertakes to each User to provide all advice and
assistance reasonably requested by that User to enable that User
adequately to assess the
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implications (including the feasibility) of making a Modification to the
User's Equipment or the Users System (whether such Modification is to be
made at the request of NGC or of the User) or of constructing a New
Connection Site (including adequately assessing the feasibility of making
any Connection Application or considering the terms of any Connection
Offer). If the proposed Modification by the User is or may be required as
a result of a Modification proposed by NGC then NGC shall provide such
advice and assistance free of charge. If the proposed Modification is or
may be proposed by the User or if the advice and assistance is in respect
of a New connection Site NGC may charge the User Reasonable charges for
such advice and assistance. The provisions of such advice and assistance
shall be subject to any confidentiality obligations binding on NGC and
that User.
12.2 When giving such advice and assistance NGC shall comply with Good Industry
Practice.
12.3 NGC shall have no obligation to compensate any User (the "First User") for
the cost or expense of any Modification required to be made by any User as
a result of any NGC Modification under Sub-Clause 10.3.1. Where such NGC
Modification is made as a result of the construction of a New Connection
Site or a Modification for another User (the "Other User"), the Other User
shall compensate the First User for the reasonable and proper cost and
expense of any Modifications required to be made by the First User as a
result of that NGC Modification. Such compensation shall be paid to the
First User by the Other User within thirty days of production to the Other
User of a receipted invoice (together with a detailed breakdown of such
reasonable costs and expenses) for the expenditure which has been incurred
by the First User.
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12.4 Modification Offers and Connection Offers conditional Upon other
Modification Offers and Connection Offers
If at the time of making any Offer or Modification Offer or Connection
Offer to a User ("the Second Offer") there is an outstanding Modification
Offer(s) or Connection Offer(s) to another User(s) ("the First Offer")
which if accepted would affect the terms of the Second Offer NGC shall at
the time of making the Second Offer.
(i) inform the recipient(s) of both the First Offer(s) and Second
Offer(s) in writing that there is another Offer outstanding which
might affect them; and
(ii) be entitled to make the First Offer(s) and Second Offer(s)
conditional upon other outstanding Offers not having been or being
accepted; and
(iii) be entitled to vary the terms of either Offer if the other Offer is
accepted first on the same procedures as those set out in Clauses
10.2.2 to 10.2.4 or 11.2 to 11.4 inclusive as the case may be.
13. ADDITIONAL PARTIES
13.1 The Parties shall admit as an additional party to this Master Agreement
any person who accepts a Connection Offer from NGC or any new Embedded
User (the "New Party") and who is not at the time already a Party. Such
admission shall take effect by way of Accession Agreement prepared by NGC
at the expense and cost of the New Party and to be executed by NGC for
itself and on behalf of all other Parties. Upon execution of the Accession
Agreement by NGC and the New Party and subject to the terms and conditions
of that Accession Agreement, the New Party shall become a Party for all
purposes of this Agreement.
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13.2 Each Party hereby authorises and instructs NGC to sign any such Accession
Agreement on its behalf and undertakes not to withdraw, qualify or revoke
any such authority or instruction at any time.
13.3 NGC shall promptly notify all Parties in writing that the New Party has
become a Party.
14. PAYMENT
14.1 NGC will invoice Users for Connection Charges and/or Use of System Charges
due under each Supplemental Agreement in the following manner:
(i) in the case of recurrent monthly charges other than the Energy
related charges identified in Appendix D to the relevant
Supplemental Agreement NGC shall despatch an invoice on or before
the 15th day of the month for the charges due in relation to that
month;
(ii) in the case of the Energy related recurrent monthly charges
identified in Appendix D to the relaxant Supplemental Agreement NGC
shall despatch an invoice on or before the 1st day of a month
covering the charge due in relation to the period expiring on the
15th day of the preceding month and commencing on the 16th day of
the month before that;
(iii) unless otherwise specified in this Agreement where charges are
payable other than monthly NGC shall despatch an invoice not less
than 30 days prior to the due date for payment specified in the
relevant Appendix to the Supplemental Agreement.
14.2 Payment
Users shall pay NGC Connection Charges and/or Use of System Charges due
under each Supplemental Agreement in the following manner:
(i) in the case of recurrent monthly charges on the 15th day of the
month in which NGC's invoice therefor was despatched (if despatched
on the first
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day of that month) or, in all other cases, on the 15th day of the
month following the month in which NGC's invoice therefor was
despatched unless, in any such case, the said date is not a Business
Day in which case payment shall be made on the next business Day;
(ii) unless otherwise specified in this Agreement where charges are
payable other than monthly within 30 days of the date of NGC's
invoice therefor.
14.3 All payments hereunder shall be made by the variable direct debit method
or such other form of bankers automated payment as shall be approved by
NGC to the account number, bank and branch specified by NGC in Schedule 1
or in the case of sums payable to a User the account number, bank and
branch of the User set out in Schedule 1 (or such other account and/or
bank as NGC or a User may from time to time notify in writing to the
other).
14.4 If any Party fails to pay on the due date any amount properly due under
this Agreement such Party shall pay to the Party to whom such amount is
due interest on such overdue amount from and including the date of such
failure to (but excluding) the date of actual payment (as well after as
before judgement) at the rate of 4% over Barclays Bank PLC base rate for
the time being and from time to time interest shall accrue from day to
day.
14.5 All sums payable by one Party to the other pursuant to this Agreement
whether of charges, interest or otherwise shall (except to the extent
otherwise required by law) be paid in full, free and clear of and without
deduction set off or deferment in respect of such sums the subject of any
disputes or claims whatsoever save for sums the subject of a final award
or judgement (after exhaustion of all appeals if this opportunity is
taken) or which by agreement between NGC and those Parties may be so
deducted or set-off.
14.6 All amounts specified hereunder or under any Supplemental Agreement shall
be exclusive of any Value Added Tax or other similar tax.
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14.7 If upon the request of any User the Director determines that the NGC
Connection Charges and/or Use of System Charges payable by that User
(including any variations thereof) have not been calculated strictly in
accordance with the terms of the statements prepared for the purposes of
Condition 10 of the NGC Transmission Licence (setting out the basis upon
which the charges for use of system and for connection to the NGC
Transmission System will be made) NGC shall pay to such User an amount in
respect of each charging period equal to the amount (if any) by which the
User has been overcharged as a result, together with interest thereon from
the date upon which such charges were paid until the date of payment of
such interest. Such interest shall accrue from day to day at the rate
specified in Sub-Clause 14.4.
15. LIMITATION OF LIABILITY
15.1 Subject to Sub-Clauses 15.5, 2.5.4 and 5.5 and any liquidated damages
provisions of any supplemental Agreement and the payment adjustment
provisions of the relevant Ancillary Services Agreement and save where any
provision of this Agreement provides for an indemnity each Party agrees
and acknowledges that no Party (the "Party Liable") nor any of its
officers, employees or agents shall be liable to any of the other Parties
for loss arising from any breach of this Agreement other than for loss
directly resulting from such breach and which at the date hereof was
reasonably foreseeable as not unlikely to occur in the ordinary course of
events from such breach in respect of:
15.1.1. physical damage to the property of any of the other Parties, or
its or their respective officers, employees or agents; and/or
15.1.2. the liability of any such other Party to any other person for
loss in respect of physical damage to the property of any other
person.
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15.2 Nothing in this Agreement shall exclude or limit the liability of the
Party Liable for death or personal injury resulting from the negligence of
the Party Liable or any of its officers, employees or agents and the Party
Liable shall indemnify and keep indemnified each of the other Parties, its
officers, employees or agents, from and against all such and any loss or
liability which any such other Party may suffer or incur by reason of any
claim on account of death or personal injury resulting from the negligence
of the Party Liable or any of its officers employees or agents.
15.3 Subject to Sub-Clauses 15.5, 2.5.4 and 5.5 and any liquidated damages
provision of any Supplemental Agreement and save where any provision of
this Agreement provides for an indemnity, neither the Party Liable nor any
of its officers, employees or agents shall in any circumstances whatsoever
be liable to any of the other Parties for:
15.3.1. any loss of profit, loss of revenue, loss of use, loss of
contract or loss of goodwill; or
15.3.2. any indirect or consequential loss; or
15.3.3. loss resulting from the liability of any other Party to any other
person howsoever and whensoever arising save as provided in
Sub-Clauses 15.1.2 and 15.2.
15.4 The rights and remedies provided by this Agreement to the Parties are
exclusive and not cumulative and exclude and are in place of all
substantive (but not procedural) rights or remedies express or implied and
provided by common law or statute in respect of the subject matter of this
Agreement, including without limitation any rights any Party may possess
in tort which shall include actions brought in negligence and/or nuisance.
Accordingly, each of the Parties hereby waives to the fullest extent
possible all such rights and remedies provided by common law or statute,
and releases a Party which is liable to another (or others),
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its officers, employees and agents to the same extent from all duties,
liabilities, responsibilities or obligations provided by common law or
statute in respect of the matters dealt with in this Agreement and
undertakes not to enforce any of the same except as expressly provided
herein.
15.5 Save as otherwise expressly provided in this Agreement, this Clause 15
insofar as it excludes or limits liability shall override any other
provision in this Agreement provided that nothing in this Clause 15 shall
exclude or restrict or otherwise prejudice or affect any of:
15.5.1. the rights, powers, duties and obligations of any Party which are
conferred or created by the Act, the Licence or the Regulations;
or
15.5.2. the rights, powers, duties and obligations of the Director or the
Secretary of State under the Act, any Licence or otherwise
howsoever.
15.6 Each of the Sub-Clauses of this Clause 15 shall:
15.6.1. be construed as a separate and severable contract term, and if
one or more of such Sub-Clauses is held to be invalid, unlawful
or otherwise unenforceable the other or others of such
Sub-Clauses shall remain in full force and effect and shall
continue to bind the Parties; and
15.6.2. survive termination of this Agreement.
15.7 Each Party acknowledges and agrees that each of the other Parties holds
the benefit of Sub-Clauses 15.1 and 15.2 and 15.3 above for itself and as
trustee and agent for its officers, employees and agents.
15.8 Each Party acknowledges and agrees that the provisions of this Clause 15
have been the subject of discussion and negotiation and are fair and
reasonable having regard to the circumstances as at the date hereof.
15.9 For the avoidance of doubt, nothing in this Clause 15 shall prevent or
restrict any Party enforcing any obligation (including suing for a debt)
owned to it under or pursuant to this Agreement.
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16. DURATION AND TERMINATION
16.1 This Agreement shall continue in relation to each User until terminated in
accordance with this Clause 16 or pursuant to Clause 17.
16.2 A User shall automatically cease to be a Party to this Agreement upon
termination of all Supplemental Agreements entered into by that User.
16.3 Termination or expiry of a particular Supplemental Agreement shall not of
itself, cause the relevant User to cease to be a Party to this Agreement.
16.4 Termination or a person ceasing to be a Party to this Agreement shall not
affect any rights or obligations of any Party which may have accrued to
the date of termination or expiry and shall not affect any continuing
obligations of any Party under this Agreement.
16.5 Following termination of this Agreement Clause 19 shall remain in full
force and effect.
17. EVENTS OF DEFAULT/DEENERGISATION
17.1 It shall be an event of default if:
(i) a User shall fail to pay (other than by inadvertent error in funds
transmission which is discovered by NGC, notified to that User and
corrected within 2 business Days thereafter) any amount properly due
or owing from that User to NGC pursuant to this Agreement and such
failure continues unremedied for 7 business Days after the due date
for payment; or
(ii) in respect of a User:
(a) an order of the High Court is made or in effective resolution
passed for its insolvent winding up or dissolution; or
(b) a receiver (which expression shall include an administrative
receiver within the meaning of Section 29 Insolvency Act 1986)
of
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the whole or any material part of its assets or undertaking is
appointed; or
(c) an administration order under Section 8 of the Insolvency Act
1986 is made or if a voluntary arrangement is proposed under
Section 1 of that Act; or
(d) a User enters into any scheme of arrangement (other than for
the purpose of reconstruction or amalgamation upon terms and
within such period as may previously have been approved in
writing by the Director); or
(e) any of the events referred to in (a) to (d) above has occurred
and is continuing and a User is unable to pay its debts within
the meaning of Section 123(1) or (2) of the Insolvency Act
1986 save that such sections shall have effect as if
for(pound)750 there was inserted(pound)250,000 and a User
shall not be deemed to be unable to pay its debts if any
demand for payment is being contested in good faith by that
User with recourse to all appropriate measures and procedures)
and in any such case within 28 days of this appointment the
liquidator, receiver, administrative receiver, administrator,
nominee or other similar officer has not provided to NGC a guarantee
of future performance by the User of this Agreement and all
Supplemental Agreements to which the User is a party in such form
and amount as NGC may reasonably require.
17.2 Provided that at the time the failure specified in Sub-Clause 17.1(i) is
still continuing or the circumstances referred to in Sub-Clause 17.1(ii)
still exist NGC may having given 48 hours notice of an event of default
Deenergise all of the User's Equipment which is the subject of a
Supplemental Agreement with that User or may as appropriate instruct the
operator of a Distribution System to
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Deenergise such User's Equipment provided that prior to Deenergisation the
User may refer the matter to the Disputes Resolution Procedure.
17.3 If notice is given to a User in accordance with Clause 60.1.3 or 60.2.3 of
Part XVII of the Pooling and Settlement Agreement and that User shall fail
to take such action as is referred to in Clause 60.4.1 of Part XVII of the
Pooling and Settlement Agreement within 48 hours after the date of any
such notice referred to therein, NGC may Deenergise the User's Equipment.
17.4 If the event of default under Sub-clause 17.2 or 17.3 is still continuing
six months after the later of Deenergisation and the conclusion of the
Disputes Resolution Procedure in favour of NGC, NGC may Disconnect all
that User's Equipment at each Connection Site where the User's Equipment
is connected and:
(i) NGC and that User shall remove any of the User's Equipment and NGC
Assets on the other Party's land within 6 months or such longer
period as may be agreed between the Parties concerned;
(ii) that the User shall pay to NGC forthwith all Termination Amounts;
and
(iii) that the User shall cease to be a Party to this Agreement.
18. TRANSFER AND SUBCONTRACTING
18.1 the rights, powers, duties and obligations of a User under this Agreement
or any supplemental Agreement are personal to that User and that User may
not assign or transfer the benefit or burden of this Agreement save in the
following circumstances:
(i) upon the disposal by that User of the whole of its business or
undertaking it shall have the right to transfer its rights and
obligations under this Agreement and all relevant Supplemental
Agreements to the purchaser thereof on condition that the purchaser
if not already a User enters into an Accession Agreement with NGC
under Clause 13 and confirms to NGC in
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writing either that all of the technical or related conditions,
data, information, operational issues or other matters specified in
or pursuant to the relevant Supplemental Agreement(s) or Grid code
by the User seeking the transfer will remain unchanged or, if any
such matters are to be changed, the purchaser first notifies NGC in
writing of such changes which NGC will consider promptly and in any
event within 28 days of receiving notice of such change and until
such consideration is complete the transfer shall not be effective.
If having considered such changes NGC in its reasonable opinion does
not consider the proposed changes reasonably satisfactory to NGC it
shall consult with the User seeking to undertake such transfer and
pending the outcome thereof to NGC's reasonable satisfaction the
transfer shall not be effective provided always that the User may
refer any dispute to the Disputes Resolution Procedure. such
transfer shall become effective once the changes are reasonably
satisfactory to NGC or have been determined to be so under the
Disputes Resolution Procedure;
(ii) upon the disposal by a User of part of its business undertaking
comprising User's Equipment at one or more Connection Sites that
User shall have the right to transfer its rights and obligations
under all relevant Supplemental Agreements to the purchaser thereof
on condition that the purchaser (if not already a User) enters into
an Accession Agreement with NGC under Clause 13 and confirms to NGC
in writing either that all of the technical or related conditions,
data, information, operational issues or other matters specified in
or pursuant to the relevant Supplemental Agreement(s) or Grid Code
by the User seeking the transfer will remain unchanged or, if any
such matters are to be changed, the purchaser first notifies NGC in
writing of such changes which NGC will consider promptly and in any
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event within 28 days of receiving notice of such change and until
such consideration is complete the assignment shall not be
effective. If having considered such changes NGC in its reasonable
opinion does not consider the proposed changes reasonably
satisfactory to NGC it shall consult with the User seeking to
undertake such transfer and pending the outcome thereof to NGC's
reasonable satisfaction the transfer shall not be effective provided
always that the User may refer any dispute to the Disputes
Resolution Procedure. Such transfer shall become effective once the
changes are reasonably satisfactory to NGC or have been determined
to be so under the Disputes Resolution Procedure;
(iii) a User may assign or charge its benefit under this Agreement and any
Supplemental agreements in whole or in part by way of security.
18.2 Each Party shall have the right to sub-contract or delegate the
performance of any of its obligations or duties arising under this
Agreement or any Supplemental Agreement including activities envisaged by
the Grid Code without the prior consent of any other Party. The
sub-contracting by a Party of the performance of any obligations or duties
under this Agreement or any supplemental Agreement or of any activities
envisaged by the Grid Code shall not relieve that party from liability for
performance of such obligation or duty.
19. CONFIDENTIALITY
Confidentiality for NGC and its subsidiaries
19.1 NGC and its subsidiaries in each of their capacities in this Agreement
shall secure that Protected Information is not:
19.1.1. divulged by Business Personnel to any person unless that person
is an Authorised Recipient;
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19.1.2. used by business Personnel for the purposes of obtaining for NGC
or any of its subsidiaries or for any other person:
(a) any electricity licence; or
(b) any right to purchase or otherwise acquire, or to
distribute electricity (including rights under any
electricity purchase contract, as defined in the NGC
Transmission Licence); or
(c) any contract or arrangement for the supply of electricity
to Customers or Suppliers; or
(d) any contract for the use of any electrical lines or
electrical plant belonging to or under the control of a
Supplier; or
(e) control of any body corporate which, whether directly or
indirectly, has the benefit of any such licence, contract
or arrangement; and
19.1.3. used by Business Personnel for the purchase of carrying any
activities other than Permitted Activities
except with the prior consent in writing of the Party to whose affairs
such Protected Information relates.
19.2 Nothing in Sub-Clause 19.1 shall apply:
19.2.1. to any Protected Information which, before it is furnished to
business Personnel is in the public domain; or
19.2.2. to any Protected Information which, after it is furnished to
Business Personnel:
(a) is acquired by NGC or any subsidiary of NGC in
circumstances in which Sub-Clause 19.1 does not apply; or
(b) is acquired by NGC or any subsidiary of NGC in
circumstances in which Sub-clause 10.1 does apply and
thereafter ceases to be subject to the restrictions imposed
by such Sub-Clause; or
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(c) enters the public domain,
and in any such case otherwise than as a result of a breach by
NGC or any subsidiary of NGC of its obligations in Sub-Clause
19.1, or a breach by the person's confidentiality obligation and
NGC or any of its subsidiaries is aware of such breach; or
19.2.3. to the disclosure of any Protected Information to any person if
NGC or any subsidiary of NGC is required or expressly permitted
to make such disclosure to such person:
(a) in compliance with the duties of NGC or any subsidiary
under the Act or any other requirement of a Competent
Authority; or
(b) in compliance with the conditions of the Transmission
License or any document referred to in the Transmission
License with which NGC or any subsidiary of NGC is required
by virtue of the Act or the NGC Transmission License to
comply; or
(c) in compliance with any other requirement of law; or
(d) in response to a requirement of any stock exchange or
regulatory authority or the Panel on Take-overs and
Mergers; or
(e) pursuant to the Arbitration rules for the Electricity
Supply Industry Arbitration Association or pursuant to any
judicial or other arbitral process or tribunal having
jurisdiction in relation to NGC or any of its Subsidiaries;
or
(f) in compliance with the requirements of Section 35 of the
Act and with the provisions of the Fuel Security Code; or
19.2.4. to any Protected Information to the extent that NGC or any of its
subsidiaries is expressly permitted or required to disclose that
information under the terms of any agreement or arrangement
(including this Agreement, the Grid Code, the Distribution codes
and the Fuel
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Security Code) with the Party to whose affairs such Protected
Information relates.
19.3 NGC and each of its subsidiaries may use all and any information or data
supplied to or acquired by it, from or in relation to the other Parties in
performing Permitted Activities including for the following purposes:
19.3.1. the operation and planning of the NGC Transmission system;
19.3.2. the calculation of charges and preparation of offers of terms for
connection to or use of the NGC Transmission System;
19.3.3. the operation and planning of the Ancillary Services Business and
the calculation of charges therefor;
19.3.4. the operation of the Settlements Business;
19.3.5. the provision of information under the British Grid systems
Agreement and the EdF Documents;
and may pass the same to subsidiaries of NGC which carry out such
activities and the Parties hereto agree to provide all information to NGC
and its subsidiaries for such purposes.
19.4 NGC undertakes to each of the other Parties that, having regard to the
activities in which any Business Person is engaged and the nature and
effective life of the Protected Information divulged to him by virtue of
such activities, neither NGC nor any of its subsidiaries shall
unreasonably continue (taking into account any industrial relations
concerns reasonably held by it) to divulge Protected Information or permit
Protected Information to be divulged by any subsidiary of NGC to any
business Person:
19.4.1. who has notified NGC or the relevant subsidiary of his intention
to become engaged as an employee or agent of any other person
(other than of NGC or any subsidiary thereof) who is:
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(a) authorized by license or exemption to generate, transmit or
supply electricity; or
(b) an electricity broker or is known to be engaged in the
writing of electricity purchase contracts (as defined in
the NGC Transmission License); or
(c) know to be retained as a consultant to any such person who
is referred to in (a) or (b) above; or
19.4.2. who is to be transferred to the Generation Business, save where
NGC or such subsidiary could not, in all the circumstances,
reasonably be expected to refrain from divulging to such Business
Person Protected Information which is required for the proper
performance of his duties.
19.5 Without prejudice to the other provisions of this Clause 19 NGC shall
procure that any additional copies made of the Protected Information
whether in hard copy or computerized form, will clearly identify the
Protected Information as protected.
19.6 NGC undertakes to use all reasonable endeavors to procure that no employee
is a Corporate Functions Person unless the same is necessary for the
proper performance of his duties.
19.7 Without prejudice to Clause 19.3, NGC and each of its subsidiaries may use
and pass to each other all and any Period Metered Demand data supplied to
or acquired by it and all and any information and data supplied to it
pursuant to Section OC6 of the Grid Code for the purposes of Demand
Control (as defined in the Grid Code), but in each case only for the
purposes of its estimation and calculation from time to time of the
variable "system maximum ACS demand" (as defined in Condition 4 of the NGC
Transmission License).
19.8 NGC shall secure that Protected Information which is subject to the
provisions of Clause 19.1 and which relates to the cost of Reactive Power
provided by each individual Generator is not divulged to any Business
Person engaged in the
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provision of static compensation for use by the Grid Operator (as defined
in the Pooling and Settlement Agreement).
19.9 Any information regarding, or data acquired by the Settlement System
Administrator or its agent from the Energy Metering Equipment at Sites
which are a point of connection to a Distribution System shall and may be
passed by the Settlement System Administrator or his agent to operator of
the relevant Distribution System. The said operator of the relevant
Distribution System and the calculation of charges for use of and
connection to the Distribution System.
Confidentiality other than for NGC and its subsidiaries
19.10 Each User hereby undertakes with each other User and with NGC and its
subsidiaries that it shall preserve the confidentiality of, and not
directly or indirectly reveal, report, publish, disclose or transfer or
use for its own purposes Confidential Information except in the
circumstances set out in Sub-Clause 19.11 or to the extent otherwise
expressly permitted by this Agreement or with the prior consent in writing
of the Party to whose affairs such Confidential Information relates.
19.11 The circumstances referred to in Sub-clause 19.10 are:
19.11.1. where the Confidential Information, before it is furnished to the
User, is in the public domain; or
19.11.2. where the Confidential Information, after it is furnished to the
User:
(a) is acquired by the User in circumstances in which
Sub-Clause 19.10 does not apply; or
(b) is acquired by the User in circumstances in which
Sub-Clause 19.10 does apply and thereafter ceases to be
subject to the restrictions imposed by Sub-Clause 19.10; or
(c) enters the public domain,
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and in any such case otherwise than as a result of a breach by
the User of its obligations in Sub-clause 19.10 or a breach by
the person who is disclosed that Confidential Information of that
person's confidentiality obligation and the User is aware of such
breach; or
19.11.3. if the User is required or permitted to make disclosure of the
Confidential Information to any person:
(a) in compliance with the duties of the User under the Act or
any other requirement of a Competent Authority; or
(b) in compliance with the conditions of any License or any
document referred to in any License with which the User is
required to comply; or
(c) in compliance with any other requirement of law; or
(d) in response to a requirement of any stock exchange or
regulatory authority or the Panel on Take-overs and
Mergers; or
(e) pursuant to the Arbitration Rules for the Electricity
Supply Industry Arbitration Association or pursuant to any
judicial or other arbitral process or tribunal having
jurisdiction in relation to the Users; or
19.11.4. where Confidential Information is furnished by the User to the
employees, directors, agents, consultants and professional
advisors of the User, in each case on the basis set out in
Sub-clause 19.12.
19.12 With effect from the date of this Agreement the User shall adopt
procedures within its organization for ensuring the confidentiality of all
Confidential Information which it is obliged to preserve as confidential
under Clause 19.10. These procedures are:
19.12.1. the Confidential Information will be disseminated within the User
only on a "need to know" basis;
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19.12.2. employees, directors, agents, consultants and professional
advisers of the User in receipt of Confidential Information will
be made fully aware of the User's obligations of confidence in
relation thereto; and
19.12.3. any copies of the Confidential Information, whether in hard copy
or computerized form, will clearly identify the Confidential
Information as confidential.
19.13 For the avoidance of doubt, data and other information which any Party is
permitted or obliged to divulge or publish to any other Party pursuant to
this Agreement shall not necessarily be regarded as being in the public
domain by reason of being so divulged or published.
19.14 Notwithstanding any other provision of this Agreement, the provisions of
this Clause 19 shall continue to bind a person after its cessation as a
Party for whatever reason.
20. INTELLECTUAL PROPERTY
All Intellectual Property relating to the subject matter of this Agreement
conceived, originated, devised, developed or created by a Party, its
officers, employees, agents or consultants during the currency of this
Agreement or any Supplemental Agreement shall vest in such Party as sole
beneficial owner thereof save where the Parties agree in writing
otherwise.
21. FORCE MAJEURE
If any Party (the "Non-Performing Party") shall be unable to carry out any
of its obligations under this Agreement due to a circumstance of Force
Majeure this Master Agreement and the relevant Supplemental Agreement
shall remain in effect but:
(a) the Non-Performing Party's relevant obligations;
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(b) the obligations of each of the other Parties owed to the
Non-Performing Party under this Agreement and/or the relevant
Supplemental Agreement as the case may be; and
(c) any other obligations of such other Parties under this Agreement
owed between themselves which the relevant Party is unable to carry
out directly as a result of the suspension of the Non-Performing
Party's obligations
shall be suspended for a period equal to the circumstance of Force Majeure
provided that:
(i) the suspension of performance is of no greater scope and of no
longer duration than is required by the Force Majeure;
(ii) no obligations of any Party that arose before the Force Majeure
causing the suspension of performance are excused as a result of the
Force Majeure;
(iii) the Non-Performing Party gives the other Parties prompt notice
describing the circumstance of Force Majeure, including the nature
of the occurrence and its expected duration, and continues to
furnish regular reports with respect thereto during the period of
Force Majeure;
(iv) the Non-Performing Party uses all reasonable efforts to remedy its
inability to perform; and
(v) as soon as practicable after the event which constitutes Force
Majeure the Parties shall discuss how best to continue their
operations so far as possible in accordance with this Agreement, any
Supplemental Agreement and the Grid Code.
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22. WAIVER
No delay by or omission of any Party in exercising any right, power,
privilege or remedy under this Master Agreement or any Supplemental
Agreement or the Grid Code shall operate to impair such right, power,
privilege or remedy or be construed as a waiver thereof. Any single or
partial exercise of any such right, power, privilege or remedy shall not
preclude any other or future exercise thereof or the exercise of any other
right, power, privilege or remedy.
23. NOTICES
23.1 Save as otherwise expressly provided in this Agreement, any notice or
other communication to be given by one Party to another under, or in
connection with the matters contemplated by, this Agreement shall be
addressed to the recipient and sent to the address, telex number or
facsimile number of such other Party set out in schedule 1 to this
Agreement for the purpose and marked for the attention of the company
secretary or to such other address, telex number and/or facsimile number
and/or marked for such other attention as such other Party may from time
to time specify by notice given in accordance with this Clause 23 to the
Party giving the relevant notice or other communication to it.
23.2 Save as otherwise expressly provided in this Agreement, any notice or
other communication to be given by any Party to any other Party under, or
in connection with the matters contemplated by, this Agreement shall be in
writing and shall be given by letter delivered by hand or sent by first
class prepaid post (airmail if overseas) or telex or facsimile, and shall
be deemed to have been received:
23.2.1. in the case of delivery by hand, when delivered; or
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23.2.2. in the case of first class prepaid post, on the second day
following the day of posting or (if sent airmail from overseas)
on the fifth day following the day of posting; or
23.2.3. in the case of telex, on the transmission of the automatic
answering-back of the address (where such transmission occurs
before 1700 hours on the day of transmission) and in any other
case on the day following the day of transmission; or
23.2.4. in the case of facsimile, on acknowledgement by the addressee's
facsimile receiving equipment (where such acknowledgement occurs
before 1700 hours on the day of acknowledgement) and in any other
case on the day following the day of acknowledgement.
24. COUNTERPARTS
This Agreement and any Supplemental Agreement may be executed in any
number of counterparts and by the different Parties on separate
counterparts, each of which when executed and delivered shall constitute
an original, but all the counterparts shall together constitute but one
and the same instrument.
25. VARIATIONS
25.1 No variations to this Master Agreement shall be effective unless made in
writing and signed by or on behalf of all the Parties. The Parties shall
effect any amendment required to be made to this Master Agreement by the
Director as a result of a change in the Transmission License or an order
or direction made pursuant to the Act or a License or as a result of
settling the terms of any Supplemental Agreement and each Party hereby
authorises and instructs NGC to make any such amendment on its behalf and
undertakes not to withdraw, qualify or revoke such authority or
instruction at any time.
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25.2 NGC and each User acknowledges that, because there has been insufficient
time to discuss and agree the details of the Appendices to each
Supplemental Agreement, those details may be inaccurate. Accordingly,
(a) each User and NGC undertake to discuss in good faith the correct
identification of the details of each part of Appendix F of each
Supplemental Agreement entered into between NGC and the User with a
view to amending the same as necessary to reflect the correct
position. To the extent that agreement on the correct position
cannot be reached within 12 months after the date of that
Supplemental Agreement the matter shall be referred to arbitration
for determination in accordance with Clause 26 of this Agreement and
such details shall be amended accordingly following such agreement
or determination (as the case may be); and
(b) in relation to Appendix A of each Supplemental Agreement, NGC
undertakes to establish a new asset register, specifying all Plant
and Apparatus owned by NGC which is necessary to connect each User's
Equipment to the NGC Transmission System at each Connection Site,
during the course of the Financial Year ending 31st March 1991 in
accordance with paragraph 2.2 of Appendix E to such Supplemental
Agreement. Such new asset register shall, provided that NGC has
complied with such paragraph 2.2, take effect from 1st April 1991.
Following the establishment of such new asset register, each such
Appendix A and any provisions of the relevant Supplemental Agreement
which refer to it shall, to the extent appropriate, be amended
accordingly.
26. DISPUTE RESOLUTION
26.1 Save where expressly stated in this Agreement to the contrary and subject
to any contrary provision of the Act, any License, or the Regulations, or
the rights,
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powers, duties and obligations of the Director or the Secretary of State
under the Act, any License or otherwise howsoever, any dispute or
difference of whatever nature howsoever arising under out of or in
connection with this Agreement between any one or more Parties hereto
shall be and is hereby referred to arbitration pursuant to the arbitration
rules of the Electricity Supply Industry Arbitration Association in force
from time to time.
26.2 Whatever the nationality, residence or domicile of any Party to this
Agreement and wherever the dispute or difference or any part thereof arose
the law of England shall be the proper law of any reference to arbitration
hereunder and in particular (but not so a to derogate from the generality
of the foregoing) the provisions of the Arbitration Acts 1950
(notwithstanding anything in section 34 thereof) to 1979 shall apply to
any such arbitration wherever the same or any part of it shall be
conducted.
26.3 Subject always to Sub-Clause 26.6 below, if any tariff customer (as
defined in Section 22(4) of the Electricity Act 1989) brings any legal
proceedings in any court (as defined in the Rules of the Supreme Court
1965 and in the County Courts Act 1984) against one or more persons, any
of which is a Party to this Agreement (the "Defendant Party"), and the
Defendant Party, and the Defendant Party wishes to make a Third Party
Claim (as defined in Sub-Clause 26.5 below) against any other Party to
this Agreement ("the Other Party") which would but for this Sub-Clause
have been a dispute or difference referred to arbitration by virtue of
Sub-Clause 26.1 above which shall not apply and in lieu of arbitration,
the court in which the legal proceedings have been commenced shall hear
and completely determine and adjudicate upon the legal proceedings and the
Third Party Claim not only between the tariff customer and the Defendant
Party but also between either or both of them and any Other Party whether
by way of third party
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proceedings (pursuant to the Rules of the Supreme Court 1965 or the County
Court Rules 1881) or otherwise as may be ordered by the court.
26.4 Where a Defendant Party makes a Third Party Claim against any Other Party
and such Other Party wishes to make a Third Party Claim against a further
Party the provisions of Sub-Clause 26.3 above shall apply mutatis mutandis
as if such Party had been the Defendant Party and similarly in relation to
any such further Party.
26.5 For the purposes of this Clause 26 "Third Party Claim" shall mean:-
(a) any claim by a Defendant Party against any other Party (whether or
not already a party to the legal proceedings) for any contribution
or indemnity, or
(b) any claim by a Defendant Party against such an Other Party for any
relief or remedy relating to or connected with the subject matter of
the legal proceedings and substantially the same as some relief or
remedy claimed by the tariff customer, or
(c) any requirement by a Defendant Party that any question or issue
relating to or connected with the subject matter of the legal
proceedings should be determined not only as between the tariff
customer and the Defendant Party but also as between either or both
of them and an Other Party (whether or not already a party to the
legal proceedings).
26.6 Sub-Clause 26.3 above shall apply only if at the time the legal
proceedings are commenced no arbitration has been commenced between the
Defendant Party and an Other Party raising or involving the same or
substantially the same issues as would be raised by or involved in the
Third Party Claim. The tribunal in any arbitration which has been
commenced prior to the commencement of legal proceedings shall determine
the question in the event of dispute, whether the issues raised or
involved are the same or substantially the same.
41
<PAGE>
27. JURISDICTION
27.1 Subject and without prejudice to Clause 26 and to Sub-Clause 27.4 below,
all the Parties irrevocably agree that the courts of England are to have
exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement including the Grid Code and any
Supplemental Agreement and that accordingly any suit, action or proceeding
(together in this Clause 27 referred to as "Proceedings") arising out of
or in connection with this Agreement and any Supplemental Agreement may be
brought in such courts.
27.2 Each Party irrevocably waives any objection which it may have now or
hereafter to the laying of the venue of any Proceedings in any such court
as is referred to in this Clause 27 and any claim that any such
Proceedings have been brought in an inconvenient forum and further
irrevocably agrees that judgment in any Proceedings brought in the English
courts shall be conclusive and binding upon such Party and may enforced in
the courts of any other jurisdiction.
27.3 Each Party which is not incorporated in any part of England and Wales
agrees that if it does not have, or shall cease to have, a place of
business in England and Wales it will promptly appoint, and shall at all
times maintain, a person in England and Wales irrevocably to accept
service of process on its behalf in any Proceedings in England.
27.4 For the avoidance of doubt nothing contained in Sub-Clause 27.1 to 27.3
above shall be taken as permitting a Party to commence Proceedings in the
courts where this Agreement otherwise provides for Proceedings to be
referred to arbitration.
28. GOVERNING LAW
This Agreement and each Supplemental Agreement shall be governed by and
construed in all respects in accordance with English law.
42
<PAGE>
29. SEVERANCE OF TERMS
If any provision of this Agreement or any Supplemental Agreement is or
becomes or is declared invalid, unenforceable or illegal by the courts of
any competent jurisdiction to which it is subject or by order of any other
Competent Authority such invalidity, unenforceability or illegality shall
not prejudice or affect the remaining provisions of this Agreement or any
Supplemental Agreement which shall continue in full force and effect
notwithstanding such invalidity, unenforceability or illegality.
30. LANGUAGE
Each notice, instrument, certificate or other document to be given by one
Party to another under this Agreement shall be in the English language.
IN WITNESS WHEREOF the hands of the duly authorized representatives of the
Parties the date first above written.
THE NATURAL GRID COMPANY PLC
By /s/ E. Clefueux
- -------------------------------
NATIONAL POWER PLC
By /s/
- -------------------------------
POWERGEN PLC
By /s/ R. Melville
- -------------------------------
NUCLEAR ELECTRIC PLC
By /s/ E. Clefueux
- -------------------------------
43
<PAGE>
THE NATIONAL GRID COMPANY PLC
(PUMPED STORAGE DIVISION)
By /s/
- -------------------------------
BRITISH NUCLEAR FUELS PLC
By /s/
- -------------------------------
UNITED KINGDOM ATOMIC ENERGY AUTHORITY
By /s/ Richard Pechover
- -------------------------------
CENTRAL POWER LTD
By /s/
- -------------------------------
EASTERN ELECTRICITY PLC
By /s/ W E Watson
- -------------------------------
EAST MIDLANDS ELECTRICITY PLC
By /s/ P J Champ
- -------------------------------
LONDON ELECTRICITY PLC
By /s/
- -------------------------------
MANWEB PLC
By /s/
- -------------------------------
MIDLANDS ELECTRICITY PLC
By /s/
- -------------------------------
44
<PAGE>
NORTHERN ELECTRIC PLC
By /s/
- -------------------------------
NORWEB PLC
By /s/
- -------------------------------
SEEBOARD PLC
By /s/ E M Wide
- -------------------------------
SOUTHERN ELECTRIC PLC
By /s/
- -------------------------------
SOUTH WALES ELECTRICITY PLC
By /s/
- -------------------------------
SOUTH WESTERN ELECTRICITY PLC
By /s/ M J Carson
- -------------------------------
YORKSHIRE ELECTRICITY GROUP PLC
By /s/
- -------------------------------
45
<PAGE>
SCHEDULE 1
NGC/USERS
NAME NOTICES BANK DETAILS
(and registered number) (address as registered
(and registered office) office unless otherwise
stated)
(telex number)
(fax number)
THE NATIONAL GRID COMPANY PLC TELEX: 25815
2366977 FAX: 01-620 8547
National Grid House
Summer Street
London SEI 9JU
NATIONAL POWER PLC TELEX: 883141
2366963 FAX: 01-634 5811
Sudbury House
15 Newgate Street
London EC1A 7AU
POWERGEN PLC TELEX: 881 1400
2366970 FAX: 01-826 2890
53 New Broad Street
London EC2M 1JJ
NUCLEAR ELECTRIC PLC TELEX: 883141
2264251 FAX: 01-634 7282
Barnett Way Sudbury House
Barnwood 15 Newgate Street
Gloucester GL4 7Registrable Securities London EC1A 7AU
THE NATIONAL GRID COMPANY PLC
(PUMPED STORAGE DIVISION)
(details as above)
BRITISH NUCLEAR FUELS PLC TELEX: 627581
1002607 FAX: 0925 822711
Warrington Road
Risley
Warrington
Cheshire WA3 6AS
<PAGE>
UNITED KINGDOM ATOMIC ENERGY TELEX: 22565
AUTHORITY FAX: 01 930 8403
11 Charles II Street, AEA Technology
London SW1Y 4QP Winfrith
Dorchester
Dorset DT2 8DH
CENTRAL POWER LIMITED TELEX: 338 092
2251099 FAX: 021 423 1907
Mucklow Hill
Halesowen
West Midlands B62 8BP
EASTERN ELECTRICITY PLC TELEX: 98123
2366906 FAX: 0473 601036
P O Box 40
Wherstead
Ipswich IP9 2AQ
EAST MIDLANDS ELECTRICITY PLC TELEX: 37424
2366923 FAX: 0602 209789
P O Box 4
North P D O
398 Coppice Road
Arnold
Nottingham NG5 7HX
LONDON ELECTRICITY PLC TELEX: 885342
2366852 FAX: 01-242 2815
Templar House
81-87 High Holborn
London WC1V 6NU
MANWEB PLC TELEX: 61277
2366937 FAX: 0244 377269
Sealand Road
Chester CH1 4LR
MIDLANDS ELECTRICITY PLC TELEX: 338092
2366928 FAX: 021 422331
Mucklow Hill
Halesowen
West Midlands B62 8BP
2
<PAGE>
NORTHERN ELECTRIC PLC TELEX: 53324
2366942 FAX: 091 235 2109
Carliol House
Newcastle-Upon-
Tyne NE99 1SE
NORWEB PLC TELEX: 6695971
2366949 FAX: 061 875 7360
Talbot Road
Manchester M16 0HQ
SEEBOARD PLC TELEX: 87230
2366867 FAX: 0273 21705
Grand Avenue
Hove
East Sussex BN3 2LS
SOUTHERN ELECTRIC PLC TELEX: 848282
2366879 FAX: 0628 87124
South Electricity House
Littlewick Green
Maidenhead
Berks. SL6 3QB
SOUTH WALES ELECTRICITY PLC TELEX: 498331
2366985 FAX: 0222 777759
St Mellons
Cardiff CF3 9XW
SOUTH WESTERN ELECTRICITY PLC TELEX:
2366894 FAX: 0454 616369
800 Park Avenue
Aztec West
Almondsbury
Avon BS12 4SE
YORKSHIRE ELECTRICITY TELEX: 55128
GROUP PLC FAX: 0532 892123
2366996
Scarcroft
Leeds LS14 3HS
3
<PAGE>
SCHEDULE 2
DEFINITIONS
"Accession Agreement" an agreement in or substantially in the form set
out in Schedule 3.
"the Act" the Electricity Act 1989.
"Active Power" the product of voltage and the in-phase component
of alternating current measured in units of watts
and standard multiples thereof i.e.
1000 watts = 1kW
1000 kW = 1MW
1000 MW = 1GW
1000 GW = 1TW.
"Affiliate" in relation to NGC means any holding company or
subsidiary of NGC or any subsidiary of a holding
company of NGC, in each case within the meaning of
Section 736, 736A and 736B of the Companies Act
1985 as substituted by Section 144 of the
Companies Act 1989 and if that section is not in
force at the date of this Agreement as if such
latter section were in force at such date.
"Agency Business" any business of NGC or any Affiliate or Related
Undertaking in the purchase or other acquisition
or sale or other disposal of electricity as agent
for any other Authorised Electricity Operator.
<PAGE>
"this Agreement" this Agreement including the Schedules and any
Supplemental Agreements and the Appendices thereto
as the same may be amended, extended,
supplemented, novated or modified in accordance
with the terms hereof from time to time provided
that each Supplemental Agreement shall constitute
an agreement separate from each other Supplemental
Agreement.
"Agreed Ancillary Services" Commercial Ancillary Services and Part 2 System
Ancillary Services.
"Ancillary Service" a System Ancillary Service and/or a Commercial
Ancillary Service as the case may be.
"Ancillary Services Business" the business of NGC or any Affiliate or Related
Undertaking as operator of NGC's Transmission
System in the acquisition and/or sale (other than
as part of the Generation Business) of Ancillary
Services.
"Annual Average Cold Spell a particular combination of weather elements which
(ACS) Conditions" gives rise to a level of peak Demand within an NGC
Financial Year which has a 50% chance of being
exceeded as a result of weather variation alone.
"Apparatus" all equipment in which electrical conductors are
used, supported or of which they may form a part.
2
<PAGE>
"Authorized Electricity any person (other than NGC in its capacity as
Operator" operator of the NGC Transmission System) who is
authorised to generate, transmit or supply
electricity and for the purposes of Condition 10A
to 10C inclusive of the Transmission Licence shall
include any person who has made application to be
so authorised which application has not been
refused and any person transferring electricity to
or from England and Wales across an interconnector
or who has made application for use of
interconnector which has not been refused.
"Authorised Recipient" in relation to any Protected Information, means
any Business Person who, before the Protected
Information had been divulged to him by NGC or any
Subsidiary of HGC, had been informed of the nature
and effect of Sub-Clause 19.1 of the Master
Agreement and who requires access to such
Protected Information for the proper performance
of his duties as a Business Person in the course
of Permitted Activities.
"Black Start Capability" as defined in the Grid Code.
"Business Day" any week-day other than a Saturday on which
banks are open for domestic business in the City
of London.
"Business Person" any person who is a Main Business Person or a
Corporate Functions Person and "Business
Personnel" shall be construed accordingly.
"Central Despatch" the process of Scheduling and issuing direct
instructions by NGC referred to in paragraph 1 of
Condition 7 of the Transmission Licence.
"Charging Rules" the provisions of Appendix E to the Supplemental
Agreements.
3
<PAGE>
"Commercial Ancillary Ancillary Services, other than System Ancillary
Services" Services, utilised by NGC in operating the Total
System if a User has agreed to provide them under
a Supplemental Agreement with payment being dealt
with under an Ancillary Services Agreement or in
the case of Externally Interconnected Parties or
External Pool Members (as defined in the Grid
Code) under any other agreement. A non-exhaustive
list of commercial Ancillary Services is set out
below:-
- Frequency Control by means of a Pumped
Storage Unit Spinning in Air
- Frequency Control by means of adjustment to a
Pumped Storage Unit Pumping Programme
- Frequency Control by means of Demand
reduction
- Reactive Power supplied by means of
synchronous or static compensators
- Hot Standby
In addition, there is also the Ancillary Service
of cancelled start which arises as part of the
ordinary operational instruction of Generating
Units and therefore needs to separate capability
description. Defined terms used in this definition
are defined in the Grid Code.
4
<PAGE>
"Commissioned" in respect of Plant and Apparatus commissioned
before the Transfer Date means Plant and Apparatus
recognised as having been commissioned according
to the commissioning procedures current at the
time of commissioning and in respect of Plant and
Apparatus commissioned after the Transfer Date
means Plant and/or Apparatus certified by the
Independent Engineer as having been commissioned
in accordance with the relevant Commissioning
Programme.
"Competent Authority" the Secretary of State, the Director and any local
or national agency, authority, department,
inspectorate, minister, ministry, official or
public or statutory person (whether autonomous or
not) of, or of the government of, the United
Kingdom or the European Community.
"Confidential Information" all data and other information supplied to a User
by another Party under the provisions of this
Agreement.
"Connection Application" an application for a New Connection Site in the
form or substantially in the form set out in
Exhibit 7.
5
<PAGE>
"Connection Charges" charges made or levied or to be made or levied for
the carrying out (whether before or after the date
on which the NGC Transmission Licence comes into
force) of works and provision and installation of
electrical plant, electric lines and ancillary
meters in constructing entry and exit points on
NGC's Transmission System, together with charges
in respect of maintenance and repair of such items
in so far as not otherwise recoverable as Use of
System Charges, all as more fully described in the
Transmission Licence, whether or not such charges
are annualised.
"Connection Conditions" that portion of the Grid Code which is identified
or "CC" as the Connection Conditions.
"Connection Offer" an offer for a New Connection Site in the form or
substantially in the form set out in Exhibit 8
including any revision or extension of such offer.
"Connection Site" each location more particularly described in the
relevant Supplemental Agreement at which a User's
Equipment and the NGC Assets required to connect
that User to the NGC Transmission System are
situated. If two or more Users own or operate
Plant and Apparatus which is connected at any
particular location that location shall constitute
two (or the appropriate number of) Connection
Sites.
6
<PAGE>
"Connection Site Demand the capability of a Connection Site to take power
Capability" to the maximum level forecast by the User from
time to time and forming part of the Forecast Data
supplied to NGC pursuant to the Grid Code together
with such margin as NGC shall in its reasonable
opinion consider necessary having regard to NGC's
duties under its Transmission Licence.
"Control Telephony" as defined in the Grid Code.
"Corporate Functions Person" any person who is:-
(a) a director of NGC; or
(b) an employee of NGC or any of its Subsidiaries
carrying out any administrative, finance or other
corporate services of any kind which in part
relate to the Main Business; or
(c) engaged as an agent of or adviser to or
performs work in relation to or services for the
Main Business.
"Customer" A person to whom electrical power is provided
(whether or not he is the provider of such
electrical power) other than power to meet Station
Demand of that person.
"Data Registration Code" the portion of the Grid Code which is identified
or "DRC" as the Data Registration Code.
"Decommission" cessation of use by a User of that User's
Equipment at any given Connection Site for a
continuous period exceeding 12 months pursuant to
the relevant Supplemental Agreement.
"Deenergisation" or the movement of any isolator, breaker or switch or
the removal
"Deenergise(d)" of any fuse whereby no Electricity can flow to or
from the relevant System through the User's
Equipment.
7
<PAGE>
"Demand" the demand of MW and MVA of electricity (i.e. both
Active Power and Reactive Power), unless otherwise
stated.
"Derogation" a direction issued by the Director relieving a
Party from the obligation under its Licence to
comply with such parts of the Grid Code or any
Distribution Code or in the case of NGC the
Transmission Licence as may be specified in such
direction and "Derogated" shall be construed
accordingly.
"Derogated Plant" shall mean Plant or Apparatus which is the subject
of a Derogation.
"Despatch" the issue by NGC of instructions for Generating
Plant to achieve specific Active Power and
Reactive Power Levels or target voltage levels
within Generation Scheduling and Despatch
Parameters and by stated times.
"Detailed Planning Data" detailed additional data which NGC requires under
the PC in support of Standard Planning Data.
"Directive" includes any present or future directive,
requirement, instruction, direction or rule of any
Competent Authority, (but only, if not having the
force of law, if compliance with the Directive is
in accordance with the general practice of persons
to whom the Directive is addressed) and includes
any modification, extension or replacement thereof
then in force.
"Director" the Director General of Electricity Supply
appointed for the time being pursuant to Section 1
of the Act.
8
<PAGE>
"Disconnection" permanent physical disconnection of a User's
Equipment at any given Connection Site which
permits removal thereof from the Connection Site
or removal of all NGC's Assets therefrom (as the
case may be).
"Disputes Resolution arbitration pursuant to the arbitration rules of
Procedure" the Electricity Supply Industry Arbitration
Association in force from time to time.
"Distribution Code(s)" the Distribution Code(s) drawn up by
Public Electricity Suppliers pursuant to the terms
of their respective Licence(s) as from time to
time revised in accordance with those Licences.
"Distribution System" the system consisting (wholly or mainly) of
electric lines owned or operated by any Authorised
Electricity Operator and used for the distribution
of electricity from Grid Supply Points or
generation sets or other entry points to the point
of delivery to Customers or Authorised Electricity
Operators, and includes any Remote Transmission
Assets operated by such Authorised Electricity
Operator and any electrical plant and meters owned
or operated by the Authorised Electricity Operator
in connection with the distribution of
electricity, but shall not include any part of
NGC's Transmission System.
"Earthing" as defined in the Grid Code.
"the EdF Documents" as defined in the Pooling and Settlement
Agreement.
"Electricity" Active Energy and Reactive Energy (in each case as
defined in the Pooling and Settlement Agreement)
"Embedded" a direct connection to a Distribution System or
the System of any other User to which Customers
and/or Power Stations are connected.
9
<PAGE>
"Energisation" or the movement of any isolator, breaker or switch or
"Energise(d)" the insertion of any fuse so as to enable Energy
to flow from and to the relevant System through
the User's Equipment.
"Energy" the electrical energy produced, flowing or
supplied by an electric circuit during a time
interval, being the integral with respect to time
of the power, measured in units of watt-hours or
standard multiples thereof i.e.
1000 Wh = 1kWh
1000 kWh = 1MWh
1000 MWh = 1GWh
1000 GWh = 1TWh
"Energy Metering Equipment" has the meaning given to the phrase "Metering
Equipment" in the Pooling and Settlement
Agreement.
"Energy Metering System" has the meaning given to the phrase "Metering
System" in the Pooling and Settlement Agreement.
"Estimated Demand" the forecast Demand (Active Power) data
filed with NGC pursuant to paragraph 12 of the
Charging Rules.
"Executive Committee" the committee established pursuant to Clause 14.1
of the Pooling and Settlement Agreement.
"Financial Year" the period of 12 months ending on 31st March in
each calendar year.
"FMS Date" has the meaning given in the Pooling and
Settlement Agreement.
10
<PAGE>
"Force Majeure" in relation to any Party any evnt or circumstance
which is beyond the reasonable control of such
Party and which results in or causes the failure
of that Party to perform any of its obligations
under this Agreement including act of God, strike,
lckout or other industrial disturbance, act of the
public eemy, war declared or undeclared, threat of
war, terroist act, blockade, revolution, riot,
insurrection, civil commotion, public
demonstration, sabotage, act of vandalism,
lightning, fire, storm, flood, earthquake,
accumulation of snow or ice, lack of water arising
from weather or environmental problems, explosion,
falut or failure of Plant and Apparatus (which
could not have been prevnted by Good Industry
Practice), governmental restraing, Act of
Parliament, other legislation, bye law and
Directive (not being any order, regulation or
direction unde Section 32, 33, 34 and 35 of the
Act) provided that lack of funds shall not be
interpreted as a cause beyond the reasonable
control of that Party.
"Fuel Security Code" the document of that title designated as such by
the Secretary of State as from time to time
amended.
"Generation Business" the authorized business of NGC or any Affiliate or
Related Undertaking in the generation of
electricity or the provision of Ancillary
Services, in each case from pumped storage and
from the Kielder hydro-electric generating
station.
"Generation License" the license granted to a Geneator pursuant to
Section 6(1)(a) of the Act.
"Generating Plant" a Power Station subject to Central Dispatch.
11
<PAGE>
"Generating Unit" unless otherwise provided in the Grid Code any
Apparatus which produces electricity.
"Generator" a person who generates electricity under license
or exemption under the Act.
"Good Industry Practice" in relation to any undertaking and any
circumstances, the exercise of that degree of
skill, diligence, prudence and foresight which
would reasonably and ordinarily be exected from a
skilled and experienced operator engaged in the
same type of undertaking under the same or similar
circumstances.
"Grid Code" the Grid Code drawn up pursuant to the
Transmission Licensee, as from time to time
revised in accordance with the Transmission
License.
"Grid Supply Point" a point of delivery from the NGC Transmission
System to a Distribution System or a Non-Embedded
Customer.
"Gross Asset Value" the value calculated by NGC in accordance with
recognised accounting principles and procedures as
published by NGC from time to time.
"High Voltage" a voltage exceeding 650 volts.
"Independent Generating a Power Station not subject to Central Dispatch.
Plant"
"Intellectual Property" patents, trade marks, service marks, rights in
designs, trade names, copyrights and topography
rights (whether or not any of the same are
registered and including applications for
registration of any of the same) and rights under
licenses and consents in relation to any of the
same and all rights or forms of protection of a
similar nature or having equivalent or similar
effect to any of the same which may subsist
anywhere in the world.
12
<PAGE>
"Interconnectors" the electric lines and electrical plant and meters
owned or operated by NGC solely for the transfer
of electricity to or from the NGC Transmission
System into or out of England and Wales.
"Interconnectors Business" the business of NGC or any Affiliate or Related
Undertaking in the operation of any
interconnector.
"Isolation" as defined in the Grid Code.
"License" any license granted pursuant to Section 6 of the
Act.
"License Standards" the standards to be met by NGC under Condition 12
of the Transmission License.
"Local Safety Instructions" as defined in the Grid Code.
"Main Business" any business of NGC or any of its Subsidiaries as
at the Transfer Date or which it is required to
carry on under the Transmission License, other
than the Generating Business.
"Main Business Person" any employee of NGC or any directo or employee of
its Subsidiaries who is engaged solely in the Main
Business and "Main Business Personnel" shall be
construed accordingly.
"Master Agreement" the Agreement to which this is Schedule 2,
excluding any Supplemental Agreements.
"Material Effect" an effect causing a Party to effect any works or
to alter the manner of operation of its Plant
and/or Apparatus at the Conetion Site or the site
of connection which in either case involves that
Party in expenditure of more than (pound)10,000.
"Maximum Export Capacity" the maximum amount of power to be passed into the
NGC Transmission System at the Connection Site as
notified by the User to NGC as part of the
Registered Data from time to time.
13
<PAGE>
"Minor Independent Any Independent Generating Plant with a Registered
Generating Plant" Capacity of less than 50 mW.
"Modification" any actual or proposed replacement, renovation,
modification, alteration, or construction by or on
behalf of a User or NGC to either that Party's
Plant or Apparatus or the manner of its operation
which has or may have a Material Effect on another
Party at a particular Connection Site.
"Modification Application" an application in the form or substantially in the
form set out in Exhibit 11.
"Modification Notification" a notification in theform or substantially in the
form set out in Exhibit 13.
"Modification Offer" an offer in the fom or substantially in the form
set out in Exhibit 12, including any revision or
extension of such offer.
"Natural Demand" the Demand (Active Power) which is necessary to
meet the needs of Customers excluding that Demand
(Active Power) met by Embedded Generating Units
which is to be paid for otherwise than pursuant to
the Pooling and Settlement Agreement.
"Net Asset Value" the Gross Asset Value of the NGC Asset in question
less depreciation over the Replacement Period
calculated in accordance with recognised
accounting principles and procedures.
"New Connection Site" a proposed Connection Site in relation to which
there is no Supplement Agreement in force between
the Parties.
14
<PAGE>
"NGC Assets" the Plant and Apparatus owned by NGC necessary to
connect the User's Equipment to the NGC
Transmission System at any particular Connection
Site in respect of which NGC charges Connection
Charges (if any) as listed or identified in
Appendix A to the Supplemental Agreement relating
to each such Connection Site.
"NGC Engineering Charges" Reasonable Charges for time spent by NGC engineers
and other staff in relation to NGC Transmission
System development and related services as
published from time to time by NGC.
"NGC Transmission System" the sysem consisting (wholly or mainly) of high
voltage electric lines owned or opeated by NGC and
used for the transmission of electricity from one
Power Station to a sub-station or to another Power
Station or between sub-stations or to or from any
External Interconnection and includes any Pant and
Apparatus and meters owned or operated by NGC in
connection with the transmission of electricity
but does not include any Remote Transmission
Assets.
"Non-embedded Customer" a Customer except for a PES receiving electricity
direct from the NGC Transmission System
irrespective of from whom it is supplied.
"Operating Code" or "OC" the portion of the Grid Code which is identified
as the Operating Code.
"Operation Diagrams" as defined in the Grid Code.
15
<PAGE>
"Operational" in relation to a Connection Site means that the
same has been Commissioned (which for the
avoidance of doubt does not necessarily include
commissioning of Generating Units connected at the
Connection Site) and that the User can use such
User's Equipment to undertake those acts and
things capable of being undertaken by Pool
Members.
"Operational Effect" any effect on the operation of any System which
causes that System to operate (or be at a
materially increased risk of operating)
differently to the way in which it would have
normally operated in the absence of that effect.
"Operational Intertripping" the automatic tripping of circuit-breakers to
prevent abnormal system conditions occurring, such
as over voltage, overload, system instability etc.
after the tripping of other circuit breakers
following power system faul(s) which includes
System to Generating Plan and Sysem to Demand
intertripping schemes.
"Operational Metering meters, instrument transformers (both voltage and
Equipment" current), transducers, metering protection
equipment incuding alarms circuitry and their
associated outstations as may be necessary for the
purpose of CC.6.5.5 of the Grid Code and the
corresponding provision of the relevant
Distribution Code.
"Operator" has the meaning defined in the Pooling and
Settlement Agreement.
16
<PAGE>
"Part 1 System Ancillary Ancillary Services which are required for System
Services" reasons and which must be provided by Users in
accordance with the Connection Conditions. An
exhaustive list of Part 1 System Ancillary
Services is included in the Grid Code (in that
part of CC8.1 headed Part 1) namely:
- Reactive Power supplied otherwise than by
means of synchronous or statis compensators
- Frequency Control by means of Frequency
Sensitive Generation.
"Part 2 System Ancillary Ancillary Services which are requied for System
Services" reasons and which must be provided by a Unser if
the User has agreed to provide them under a
Supplemental Agreement. A non-exhaustive list of
Part 2 System Ancillary Services is included in
the Grid Code (in that part of CC8.1 headed Part
2) namely:-
- Black Start Capability.
"Party" each person for the time being and from time to
time party to the Master Agreement and any
successor(s) in title to, or permitted assign(s)
of, such person;
"Payment Date" a date for payment of NGC Connection Charges
and/or Use of System Charges, determined in
accordance with Sub-Clause 14.2 of the Master
Agreement.
"Permitted Activities" activities carried on for the purposes of the Main
Business.
"PES Supply Business Demand" the Demand (Active Power) of any PES which is
attributable to each Grid Supply Point.
"Planning Code" or PC that portion of the Grod Code which is identified
as the Planning Code.
17
<PAGE>
"Plant" fixed and moveable items used in the generation
and/or supply and/or transmission of electricity
other than Apparatus.
"Pool Member" any person who is admitted to membership in
accordance with the Pooling and Settlement
Agreement.
"Pooling and Settlement the agreement of that title for the time being
Agreement" approved (or to be approved) by the Secretary of
State or by the Director as from time to time
amended and, where the context so permits,
includes the agreement known as the Initial
Settlement Agreement of even date with the above
agreement, and made between the parties to the
above agreement as at such date.
"Power Station" An installation comprising one or more Generating
Units (even where sited separately) owned and/or
controlled by the same Generator, which may
reasonably be considered as being managed as one
Power Station.
"Protected Information" any information relating to the affairs of a Party
which is furnished to Business Personnel pursuant
to this Agreement or pursuant to a direction under
section 34 of the Act or pursuant to the
provisions of the Fuel Security Code unless, prior
to such information being furnished, such Party
has informed the recipient thereof by notice in
writing or by endorsement on such information,
that the said information is not to be regarded as
Protected Information.
"Public Electricity a holder of a Public Electricity Supply License.
Supplier" or "PES"
"Public Electricy Supply a license issued under Section 6(a)(c) of the Act.
License"
18
<PAGE>
"Reasonable Charges" reasonable cost reflective charges comparable to
charges for similar services obtainable in the
open market.
"Registered Capacity" the normal full load capacity of a Generating Unit
as declared by the Generator, less the MW cosumed
by the Generating Unit through the Generating
Unit's unit transformer when producing the same.
"Registered Data" those items of Standard Planning Data and Detailed
Planning Data which upon connection become fixed
(subject to any subsequent changes).
"Registrant" has the meaning define in the Pooling and
Settlement Agreement.
"Regulations" the Electricity Supply Regulations 1988 or any
amendment or reenactment thereof.
"Related Undertaking" in relation to NGC means any undertaking in which
NGC has a participating interest as defined by
Section 260(1) of the Companies Act 1985 as
substituted by Section 22 of the Companies Act
1989 and if that latter section is in force at the
date of this Agreement as if such latter section
were in force at such date.
"Remote Transmission Assets" any Plant and Apparatus or meters owned by NGC
which (a) are embedded in a Distribution System or
a User System and which are not directly connected
by Plant and/or Apparatus owned by NGC to a
sub-station owned by NGC and (b) are by agreement
between NGC and (b) are by agreement between NGC
and such PES or User under the direction and
control of such PES or User.
19
<PAGE>
"Replacement Period" in relation to an NGC Asset, the period commencing
on the date on which such NGC Asset is or was
originally Commissioned, after which it is assumed
for accounting purposes such NGC Asset will need
to be replaced, which shall be 40 years unless
otherwise agreed between the Parties to a
Supplemental Agreement and recorded in the
relevant Supplemental Agreement.
"Safety Coordinator(s)" a person or persons nominated by NGC and each User
to be responsible for the co-ordination of Safety
Precautions (as defined in the Grid Code) at each
Connection Point when work and/or testing is to be
carried out on a system which necessitates the
provision of Safety Precautions on HV Apparatus,
pursuant to OC8.
"Safety Rules" the rules of NGC or a User that seek to ensure
that persons working on Plant and/or Apparatus to
which the rules apply are safeguarged from hazards
arising from the System.
"Scheduling" the process of compiling and issuing a Generation
Schedule (as that expression is defined in the
Grid Code) as set out in SDC1.
"SDC or Scheduling and that portion of the Grid Code which specifies the
Despatch Code" Scheduling and Despatch process.
"Second Tier Supplier" a holder of a Second Tier Supply License.
or "STS"
"Second Tier Supply License" a licence granted under Section 6(2)(a) of the
Act.
20
<PAGE>
"Separate Business" each of the Transmission, Settlements, Generation,
Interconnectors and Ancillary Services Businesses
taken separately from one another and from any
other business of NGC, but so that where all or
any part of such business is carried out by an
Affiliate or Related Undertaking of NGC such part
of the business as is carried out by that
Affiliate or Related Undertaking shall be
consolidated with any other such business of NGC
(and of any other Affiliate or Ralted Underaking)
so as to form a single Separate Business.
"Settlements Business" means the business of NGC or any Affiliate or
Related Undertaking as settlement system
administrator under the Pooling and Settlement
Agreement.
"Site Common Drawings" as defined in the Grid Code
"Site Responsibility a schedule containing the information and prepared
Schedule" on the basis of the provisions set out in Appendix
1 of the CC.
"Small Independent any Independent Generating Plant with a Registered
Generating Plant" Capacity of 50 MW or more.
"Station Demand" in respect of any generating station and
Generator, means that consumption of electricity
(excluding any supply to any Customer of the
relevant Generator who is neither such Generator
nor a member of a qualifying group of which such
Generator is a part) from the NGC Transmission
System or a Distribution System at premises on the
same site as such generating station, with
premises being treated as on the same site as each
other if they are:
(i) the same premises;
(ii) immediately adjoining each other; or
21
<PAGE>
(iii) separated from each other only by
road, railway or watercourse or by
other premises (other than a
pipe-line, electric line or similar
structure) occupied by the consumer
in question or by any other person
who together with that consumer
forms a qualifying group; and for
the purpose of this definition
"generating station" and
"qualifying group" shall have the
meanings given those expressions
when used in the Electricy (Class
Exemptions from the Requirement for
a License) Order 1990.
"STS Demand" the Demand (Active Power) of any STS which is
atributable to each Grid Supply Point.
"Supplemental Agreement" has the meaning set out in Clause 2 of the Master
Agreement.
"Supplier" a Public Electricity Supplier or Second Tier
Supplier.
"System" any User System or the NGC Transmission System as
the case may be.
"Termination Amount" in relation to a Connection Site, the amount
calculated in accordance with paragrah 4 of the
Charging Rules.
"Total System" the NGC Transmission System and all User Systems
in England and Wales.
"Transfer Date" 2400 hours on 30th March 1990.
"Transfer Scheme" the transfer scheme made by Central Electricity
Generating Board established under Section 66 of
the Act or by the Secretary of State under Section
69 of the act.
22
<PAGE>
"Transmission Business" the authorised business of NGC or any Affiliate or
Related Undertaking in the planning, development,
construction and maintenance of the NGC
Transmission System (whether or not pursuant to
directions of the Secretary of State made under
Section 34 or 35 of the Act) and the opeation of
such system for the transmission of electricity,
including any business in providing connections to
the NGC Transmission System but shall not include
(i) any other Separate Business or (ii) any other
business (not being a Separate Business) of NGC or
any Affiliate or Related Undertaking in the
provision of services to or on ehalf of any one or
more persons.
"Transmission License" the license granted to NGC under Section 6(1)(b)
of the Act.
"Undertaking" bears the meaning ascribed to that expression by
Section 259 of the Companies Act 1985 as
substituted by Section 22 of the Companies Act
1989 and if that latter section is not in force at
that date of this Agreement as if such latter
section were in force at such date.
"Use of System" use of NGC's Transmission System for the transport
of electricity by any Authorised Electricity
Operator.
"Use of System Application" an application for a Supplemental Agreement Type 5
or Type 6 in the form or substantially in the form
set out in Exhibit 9 or 10 as appropriate.
23
<PAGE>
"Use of System Charges" charges made or levied or to be made or levied by
NGC for the provision of services as part of the
Transmission Business to any Authorised
Electricity Operator as more fully described at
paragraph 2 of Condition 10 and paragraph 2 of
Schedule 3 to the Transmission License and in the
Supplemental Agreements but shall not include
Connection Charges.
"User's License" a User's license to carry on its business granted
pursuant to Section 6 of the Act.
"User's Equipment" the Plant and Apparatus owned by a User
(ascertained in the absence of agreement to the
contrary byreference to the rules set out in
Clause 6 of the Master Agreement) which either is
connected to the NGC Assets forming part of the
NGC Transmission System at any particular
Connection Site or which that User wishes so to
connect.
24
<PAGE>
"User System" any system owned or operated by a User comprising
Generating Units and/or Distribution Systems
(and/or other systems consisting (wholly or
mainly) of electric lines which are owned or
operated by a person other tha a PES) and Plant
and/or Apparatus connecting Generating Units,
Distribution Systems (and/or other systems
consisting (wholly or mainly) of electric lines
which are owned or operated by a person other than
a PES) or Non-Embedded Customers to the NGC
Transmission System or (except in the case of
Non-Embedded Customers) to the relevant other User
System, as the case may be, including any Remote
Transmission Assets operated by such User or other
person and any Plant and/or Apparatus and meters
owned or operated by such User or other person in
connection with the distribution of electricity
but does not include any part of the NGC
Transmission System.
25
<PAGE>
SCHEDULE 3
THIS ACCESSION AGREEMENT is made on [_______________] between:-
1. [_________], a company incorporated [with limited liability] under the laws
of [___________] [(registered number)] and having its [registered office]
at [ ] (the "New Party"); and
2. The National Grid Company PLC ("NGC") on its own behalf and on behalf of
all the other parties to the Master Agreement referred to below.
WHEREAS:-
By an agreement (the "Master Connection and Use of System Agreement") dated
[___________], 1990 made between the Parties named therein and NGC the
parties thereto agreed to give effect to and be bound by certain rules and
procedures for etablishing a contractual framework between the Parties
pursuant to which Supplemental Agreements will from time to time be made
for the connection of Plant and Apparatus to the NGC Transmission System,
the use by Parties of the MGC Transmission System and the payment of
charges to NGC.
IT IS HEREBY AGREED AS FOLLOWS:-
1. Unless the context otherwise requires, words and expressions defined in the
Master Agreement shall bear the same meanings respectively when used
herein.
2. NGC (acting on its own behalf and on behalf of each of the other Parties)
hereby admits the New Party as an additional Party under the Master
Agreement on the terms and conditions hereof.
3. The New Party hereby accepts its admission as a Party and undertakes with
NGC (acting on its own behalf and on behalf of each of the other Parties)
to perform and to be bound by the terms and conditions of the Master
Agreement as a Party as from the date hereof.
4. For all purposes in connection with the Master Agreement the New Party
shall as from the date hereof be treated as if it has been a signatory of
the Master Agreement, and as if this Agreement were part of the Master
Agreement, and the rights and obligations of the Party shall be contrued
accordingly.
5. This Agreement and the Master Agreement shall be read and construed as one
document and references in the Master Agreement to the Master Agreement
(howsoever expressed) whould be read and construed as references to the
Master Agreement and this Agreement.
<PAGE>
6. This Agreement shall be governed by and contrued in all respects in
accordance with English law and the provisions of Clause 27 of the Master
Agreement shall apply hereto mutatuis mutandis.
2
<PAGE>
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first above written.
[New Party]
By:
Registered Number:
Registered Office:
Address for Notices (if different from Registered Office):
Telex No:
Attention:
Bank Details:
The National Grid Company PLC (for itself and on behalf of each of the Parties
to the Master Agreement).
By:
<PAGE>
EXHIBIT 10.8
25 OCTOBER 1995
EASTERN GROUP plc
EASTERN MIDLANDS ELECTRICITY plc
LONDON ELECTRICITY plc
MANWEB plc
MIDLANDS ELECTRICITY plc
NORTHERN ELECTRIC plc
NORWEB plc
SEEBOARD plc
SOUTHERN ELECTRIC plc
SOUTH WALES ELECTRICITY plc
SOUTH WESTERN ELECTRICITY plc
YORKSHIRE ELECTRICITY GROUP plc
THE NATIONAL GRID HOLDING plc
THE NATIONAL GRID COMPANY plc
- --------------------------------------------------------------------------------
MASTER AGREEMENT
- --------------------------------------------------------------------------------
Herbert Smith
Exchange House
Primrose Street
London
EC2A 2HS
Ref:223/C267/30438764
<PAGE>
CONTENTS
CLAUSE PAGE
1. Definitions and Interpretation 2
2. Conditions 5
3. NGH EGM 5
4. NGC Written Resolutions 5
5. The Memorandum of Understanding 6
6. PSB Demerger 6
7. The Special Dividends 7
8. The Rights Issue 8
9. Application for Listing 9
10. The REC Review Committee 10
11. Publication of REC Circulars 10
12. The Specie Dividends 11
13. Flotation not effective 12
14. Customer Discount 12
15. Other Undertakings by the RECs 12
16. Cost Sharing 13
17. Waiver 13
18. Announcements 14
19. NGC Option Schemes 14
20. Variations 15
21. Good Faith 15
22. Force Majeure 15
23. Notices 17
24. RTPA 18
25. Governing Law and Jurisdiction 19
SCHEDULES
I. The Memorandum of Understanding
II. The Timetable
III. The NGG Memorandum and Articles
IV. The NGH EGM Circular and The NGH EGM Notice
V. The NGC Written Resolutions
VI. The Listing Particulars
VII. The Summary Particulars
VIII. The Eights Issue Circular
IX. The NGH announcement and the pro forma REC announcement
X. The Customer Discount
XI. Pro forma notice of extraordinary general meeting for REC circulars
XII. Procedure and formula for option adjustments
XIII. Distributing RECs
XIV. NGC contribution to advisers' fees
XV. Pumped storage asset acquisition agreement
i
<PAGE>
THIS MASTER AGREEMENT is made on 25 October 1995
BETWEEN
A. Each of:
EASTERN GROUP plc whose registered office is Wherstead Park, PO Box 40,
Wherstead, Ipswich, Suffolk IP9 2AQ
EAST MIDLANDS ELECTRICITY plc whose registered office is 398 Coppice Road,
Arnold, Nottingham NG5 7HX
LONDON ELECTRICITY plc whose registered office is Templar House, 81-87 High
Holborn, London WC1V 6NU
MANWEB plc whose registered office is Sealand Road, Chester CH1 4LR
MIDLANDS ELECTRICITY plc whose registered office is Mucklow Hill,
Halesowen, West Midlands, B62 8BP
NORTHERN ELECTRIC plc whose registered office is Carliol House, Market
Street, Newcastle Upon Tyne NE1 6NE
NORWEB plc whose registered office is Talbot Road, Manchester, M16 OHQ
SEEBOARD plc whose registered office is Forest Gate, Brighton Road,
Crawley, West Sussex, RH11 9BH
SOUTHERN ELECTRIC plc whose registered office is Southern Electric House,
Westacott Way, Littlewick Green, Maidenhead, Berkshire SL6 3QB
SOUTH WALES ELECTRICITY plc whose registered office is Newport Road, St.
Mellons, Cardiff CF3 9XW
SOUTH WESTERN ELECTRICITY plc whose registered office is 800 Park Avenue,
Aztec West, Almondsbury, Bristol BS12 4SE
YORKSHIRE ELECTRICITY GROUP plc whose registered office is Wetherby Road,
Scarcroft, Leeds LS14 3HS
(collectively the "RECS" and each a "REC")
AND
B. THE NATIONAL GRID HOLDING plc whose registered office is 185 Park Street,
London SE1 9DU ("NGH")
AND
1
<PAGE>
C. THE NATIONAL GRIB COMPANY plc whose registered office is Kirby Corner Road,
Coventry CV4 8JY ("NGC")
WHEREAS
A. The parties have agreed the terms on which a listing of NGH on the London
Stock Exchange will be sought.
B. Prior to such listing, certain changes to the capital structure of NGH will
be effected.
C. Prior to such listing the PSB Demerger (as defined below) will be effected.
THE PARTIES HEREBY AGREE as follows:
1. Definitions and Interpretation
1.1 In this Agreement, unless the context otherwise requires, the following
words and expressions bear the meanings respectively set out below:
the "Act" the Companies Act 1985 (as amended prior to
the date hereof).
the "Announcement" means the public announcement to be made by
NGH and NGC in the form set out in Schedule
IX.
the "Customer Discount" means the reduction in future electricity
charges by the RECs to Eligible Customers (as
defined in Schedule X) on the basis set out
in Schedule X.
"Distributing RECs" means the RECs listed in Schedule XIII.
the "Flotation" means the admission of the ordinary shares of
NGH (issued and to be issued) to the official
list of the London Stock Exchange and, where
the context so allows, shall mean such
admission becoming effective in accordance
with the Listing Rules of the London Stock
Exchange.
"Kleinwort Benson" means Kleinwort Benson Limited, sponsor to
the Flotation.
the "Listing Particulars" means the document of record to be issued in
connection with the Flotation pursuant to the
Listing Rules of the London Stock Exchange,
proof 15: 17.10.95 of which is set out in
Schedule VI.
2
<PAGE>
"The London Stock Exchange" means the International Stock Exchange of the
United Kingdom and the Republic of Ireland
Limited
the "Long Stop Date" means 31 January 1996.
"Memorandum of Understanding" means the document to be entered into
following the NGH EGM, in the form set out in
Schedule I (or such other form as shall be
agreed between the parties).
"NGC Board" means the board of directors of NGC from time
to time.
"NGC Interim Dividend" means an interim dividend of(pound)70 million
to be paid by NGC to NGH on 4 December 1995.
"NGC Special Dividend" means an interim dividend of (pound)1,111
million to be paid by NGC to NGH on 4
December 1995.
"NGC Written Resolutions means the resolutions in writing of NGC, in
the form set out in Schedule V.
the "NGG Memorandum means the Memorandum of Association
and NGG Articles" and Articles of Association of NGH
respectively, which will be adopted upon
Flotation, in the form set out in Schedule
III>
"NGH Board" means the board of directors of NGH from time
to time or, where the context so permits, a
duly authorized committee thereof.
"NGH EGM" means the extraordinary general meeting of
NGH to be convened by the NGH EGM Notice.
"NGH EGM Circular" means the document to be circulated to NGH
shareholders in the form set out in Schedule
IV.
"NGH EGM Notice" means the notice to convene the NGH EGM which
is to form part of the NGH EGM Circular.
"NGH Interim Dividend" means an interim dividend of (pound)70
million to be paid by NGH to its ordinary
shareholders on the register on 21 November
1995.
"NGH Rights Dividend" means an interim dividend of (pound)66
million (assuming that the rights offer of
the NGH Rights Shares is
3
<PAGE>
fully taken-up) to be paid by NGH to the
persons who are issued the NGH Rights Shares.
"NGH Rights Shares" means new ordinary shares of 10p each in NGH
carrying the exclusive right to receive the
NGH Rights Dividend to be offered by way of
rights on the basis set out in the Rights
Issue Circular.
"NGH Second Dividend" means a second interim dividend of
(pound)172.5 million to be paid by NGH to the
persons who are issued the Special Bonus
Shares immediately following payment of the
NGH Special Dividend.
"NGH Special Dividend" means an interim dividend of (pound)872.5
million to be paid by NGH to the persons who
are issued the Special Bonus Shares.
"PSB Demerger" has the meaning ascribed to it in the proof
of the NGH EGM Circular set out in Schedule
IV.
"REC Circular" means the circular which will be posted by
each of the Distributing RECs to its own
shareholders on 22 November 1995 containing a
notice of extraordinary general meeting
the "REC Oversight Committee" means the committee to be established
pursuant to Clause 3 of the Memorandum of
Understanding.
the "REC Review Committee" means the committee described in Clause 10.
the "Rights Issue Circular" means the document (including an application
form) which, together with the Listing
Particulars, will be posted to NGH
shareholders on 22 November 1995, proof 2 of
which is set out in Schedule VIII.
the "Special Bonus Issue" has the meaning ascribed to it in the proof
of the NGH EGM Circular set out in Schedule
IV.
the "Special Bonus Shares" have the meaning ascribed to them in the
proof of the NGH EGM Circular set out in
Schedule IV.
the "Special Shareholder" means the holder of the special rights
redeemable preference share of (pound)1 in
each of NGH and NGC.
the "Summary Particulars" means the document to be published by NGH,
proof 10 of which is set out in Schedule VII.
the "Timetable" means the timetable set out in Schedule II.
4
<PAGE>
1.2 Unless the context otherwise requires:
(A) any reference in this Agreement to a Clause, Sub-clause or Schedule is
to a clause, sub-clause or schedule, as the case may be, of or to this
agreement;
(B) this Agreement includes the Schedules; and
(C) the singular shall be deemed to include the plural and vice versa.
1.3 The headings in this Agreement are for ease of reference only and shall not
affect the construction of this Agreement.
2. Conditions
This Agreement is conditional upon, and shall not be effective until
(a) the Special Shareholder gives (or, subject to each of the parties to
this Agreement being satisfied with the form thereof, indicates that
he will give) his unconditional prior written consent to the passing
of the NGC Written Resolutions and the resolutions set out in the NGH
EGM Notice;
(b) the Special Shareholder issues, (or subject to each of the parties to
this Agreement being satisfied with the form thereof, indicates that
he will issue) a notice to NGC requiring NGC to redeem the special
rights redeemable preference share of (pound)1 in NGC conditionally
upon Flotation.
3. NGH EGM
3.1 NGH shall convene the NGH EGM for 11 a.m. on 17 November 1995 by means of
dispatching the NGH EGM Circular.
3.2 Each REC undertakes to each of the other RECs and to NGC and NGH to vote in
favor of each of the resolutions to be set out in the NGH EGM Notice. The
NGG Memorandum and NGG Articles referred to in resolution 9 thereof shall
be in the form set out in Schedule III.
3.3 Each REC and NGH agrees that it will not seek to amend any of the
resolutions to be set out in the NGH EGM Notice without the prior written
consent of NGC and of the Special Shareholder.
4. NGC Written Resolutions
Each of NGH and Midlands Electricity plc undertake to the other RECs and to
NGC to sign the NGC Written Resolutions prior to the NGH EGM.
5
<PAGE>
5. The Memorandum of Understanding
5.1 NGH will, conditionally upon the resolutions set out in the NGH EGM Notice
and the NGC Written Resolutions having been passed (without amendment),
execute the Memorandum of Understanding as soon as practicable following
the NGH EGM and prior to the publication of the Listing Particulars.
5.2 Each of the RECs will execute the Memorandum of Understanding as soon as
practicable following the NGH EGM and prior to the publication of the
Listing Particulars.
5.3 On or prior to the execution of the Memorandum of Understanding, NGC will
procure that each member of the NGC Board who is to join the NGH Board will
confirm in writing that, if the Flotation does not become effective before
the Long Stop Date, he will resign without compensation from the NGH Board
on request by the REC Oversight Committee.
6. PSB Demerger
6.1 Each of the parties undertakes to each of the other parties, conditionally
upon the resolutions set out in the NGH EGM Notice and the NGC Written
Resolutions having been passed (without amendment) and subject to
Sub-clauses 6.4 and 22.3, to take all steps within its power to ensure that
the PSB Demerger is effected prior to Flotation in accordance with the
procedure set out in Appendix I of the NGH EGM Circular.
6.2 The RECs' share of the NGH dividend forming part of the PSB Demerger shall
be paid inside the existing consortium elections made by NGH and each of
the RECs.
6.3 Without limitation to the generality of its obligations under Sub-clause
6.1 and conditionally as set out in that Sub-clause, NGC undertakes to NGH
and to the RECs to enter into an agreement for the sale of its pumped
storage business to First Hydro Limited in the form set out in Schedule XV,
subject only to such amendments as are made pursuant to Sub-clause 6.4 and
to such other final amendments as may be agreed between NGC and each of the
RECs.
6.4 It is acknowledged and agreed by all the parties that the PSB Demerger is
to be effected so as to ensure that NGC shall continue to be able to fulfil
its duties under the North Wales Hydro-Electric Power Acts of 1955 and 1973
and that First Hydro will contract to perform these on NGC's behalf and
that NGC and NGH will agree the necessary documentation and/or amendments
to the agreement referred to in Subclause 6.3 by 7 November 1995 to give
effect to the above acknowledgement and agreement.
6
<PAGE>
7. The Special Dividends
7.1 NGC undertakes to each of the RECs and to NGH, conditionally upon the
resolutions set out in the NGH EGM Notice and the NGC Written Resolutions
having been passed (without amendment) and subject to Sub-clause 22.3:
(a) to file interim accounts complying with section 272 of the Act which
interim accounts shall show profits available for distribution of not
less than (pound)1759 million (including special reserves) or, if such
accounts provide for payment of one or more of the dividend forming
part of the PSB Demerger, the NGC Interim Dividend and the NGC Special
Dividend, shall show profits available for distribution of not less
than (pound)1759 million (including special reserves) less the amounts
provided in respect of such dividends; and
(b) to pay the NGC Interim Dividend and the NGC Special Dividend.
7.2 NGH undertakes to each of the RECs, conditionally upon the passing (without
amendment) at the NGH EGM of all of the resolutions set out in the NGH EGM
Notice and subject to Sub-clause 22.3:
(a) to effect the Special Bonus Issue;
(b) to file interim accounts complying with section 272 of the Act which
interim accounts shall provide for one or more of the dividend forming
part of the PSB Demerger, the NGH Interim Dividend, the NGH Special
Dividend, the NGH Second Dividend and the NGH Rights Dividend or, to
the extent not so provided, show that NGH has profits available for
distribution at lease equal to the amount of the dividends to be paid
prior to payment thereof;
(c) to give notice to the Inland Revenue (pursuant to section 247(3) of
the Income and Corporation Taxes Act 1988), following payment of the
relevant dividends, that all but the RECs' share of the dividend
forming part of the PSB Demerger, the NGH Rights Dividend and of the
NGH Second Dividend will be paid outside the existing consortium
elections made by NGH and each of the RECs;
(d) to pay the NGH Interim Dividend on 4 December 1995;
(e) to pay the NGH Special Dividend on 4 December 1995;
(f) to pay the NGH Second Dividend immediately following payment of the
NGH Special Dividend on 4 December 1995; and
(g) to pay the NGH Rights Dividend on 7 December 1995.
7
<PAGE>
7.3 On request by a REC, NGH will pay that REC's share of the NGH Interim
Dividend, the NGH Special Dividend, the NGH Second Dividend and the NGH
Rights Dividend by CHAPS automated transfer to such REC bank account as may
be notified by the REC in such request.
8. The Rights Issue
8.1 NGH undertakes to each of the RECs conditionally upon all of the
resolutions set out in the NGH EGM Notice having been passed (without
amendment) at the NGH EGM and subject to Sub-clause 22.3:
(a) to effect a rights issue on the basis of one new ordinary share of NGH
for every 19 existing ordinary shares held on 21 November 1995 at
(pound)2.04 per new share and that of such new ordinary shares to be
offered to any shareholder, 44.6 per cent. will be NGH Rights Shares
and 55.4 per cent. will be new ordinary shares which do not carry an
entitlement to the NGH Rights Dividend ("Ordinary Shares")(save that
the allocation of Ordinary Shares and NGH Rights Shares amongst the
RECs shall be as set out in the NGH EGM Notice), in the manner set out
in the Rights Issue Circular;
(b) to post the Rights Issue Circular and the Listing Particulars to each
of the shareholders of NGH on 22 November 1995;
(c) to procure that each REC which complies with its obligations under
clause 8.3 shall have the interest for which it shall have subscribed
pursuant to the Rights Issue entered on the register of members of NGH
on or before 7 December 1995.
8.2 Any changes to the proof of the Rights Issue Circular set out in Schedule
VIII which are material to the RECs (or any thereof) shall require the
prior approval of each of the RECs. Any other changes shall require the
prior approval (not to be unreasonably withheld or delayed) of each of the
RECs or of Herbert Smith acting on behalf of all the RECs. Subject thereto,
the final version of the Rights Issue Circular shall be in the form
approved by the NGH Board.
8.3 Each REC undertakes to NGH and to NGC, conditionally upon receipt by it of
its entitlement under the NGH Interim Dividend, the NGH Special Dividend
and the NGH Second Dividend, that it will take up its full entitlement to
the rights for which it may subscribe under the terms of the Rights Issue
Circular and will make payment, in cleared funds, to NGH in accordance with
the procedure set out in the application form attached to the Rights Issue
Circular on or before 5 December 1995.
8.4 NGH undertakes to NGC to subscribe for new ordinary shares in NGC for a
subscription price equal to the proceeds of the rights issue contemplated
in this Clause 8 as soon as practicable following receipt by NGH of the
proceeds of the rights issue.
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8.5 Each REC shall accept for its own tax purposes that Section 29 of the
Taxation of Chargeable Gains Act 1992 shall apply on a basis consistent
with that assumed for the calculation of the NGH Rights Dividend payable to
each REC.
9. Application for Listing
9.1 NGH undertakes to each of the RECs, conditionally upon all of the
resolutions set out in the NGH EGM Notice having been passed (without
amendment) at the NGH EGM and subject to Sub-clause 22.3:
(a) to use all reasonable endeavors to effect the Flotation in accordance
with the Timetable;
(b) to use all reasonable endeavors to publish the Listing Particulars and
the Summary Particulars on 22 November 1995;
(c) that the Listing Particulars will contain a declaration that the
directors of NGH accept responsibility for the information contained
in the Listing Particulars and that to the best of their knowledge and
belief (having taken all reasonable care to ensure that such is the
case) the information contained in the Listing Particulars is in
accordance with the facts and does not omit anything likely to effect
the import of such information.
(d) that the Summary Particulars will contain a statement that the
directors of NGH are satisfied that the Summary Particulars contain a
fair summary of the key information set out in the Listing
Particulars; and
(e) not, without the prior approval of each of the RECs (which, in the
case of the description referred to in (ii) below, shall not be
unreasonably withheld or delayed) to make any material alteration or
addition to (i) those sections of the Listing Particulars or Summary
Particulars which repeat or restate information relating to the RECs
or to the dividend policy or dividend forecasts of NGH which is
contained in the Announcement or (ii) the description of the prospects
of NGH and its subsidiaries set out in the proof of the Listing
Particulars forming Schedule VI.
9.2 NGH additionally undertakes to each of the RECs that it will:
(a) notify the REC Review Committee of any other proposed alteration to
the Listing Particulars or the Summary Particulars which may
materially affect the content or import of any part of either document
(other than any such alteration which has been approved under
Sub-clause 9.1(d));
(b) consider any comments made by the REC Review Committee or any REC
relating to any such proposed alteration; and
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<PAGE>
(c) in the event that NGH is required to publish supplementary listing
particulars, so far as practicable consult with the REC Review
Committee regarding their contents and consider any comments made by
it.
9.3 NGC undertakes to provide all reasonable cooperation and assistance to NGH
in relation to its obligations under Sub-clauses 9.1 and 9.2.
10. The REC Review Committee.
10.1 The REC Review Committee shall consist of not less than three members, each
appointed by the unanimous agreement of the RECs. The first members of the
REC Review Committee shall be B. Townsend (Midlands), E. Anstee (Eastern),
A. Coleman (Yorkshire) and J. Tebbs (East Midlands).
10.2 A member of the REC Review Committee may be removed from the REC Review
Committee only upon his resignation, by notice from the REC by which he is
(or was) employed in the event of such employment terminating or notice of
termination having been given or by the unanimous agreement of the RECs. In
such event a new member of the REC Review Committee shall be appointed by
the unanimous agreement of the RECs. Any changes to the members of the REC
Review Committee shall be notified to NGH and NGC as soon as practicable
following such change.
10.3 Comments to be submitted by the REC Review Committee pursuant to Sub-clause
9.2(b) on any proposed alteration to the Listing Particulars or Summary
Particulars or pursuant to Sub-clause 9.2(c) on any supplementary listing
particulars shall be signed by or on behalf of a majority of the members of
the REC Review Committee and shall be returned to NGH within 2 business
days of notification to Kleinwort Benson of the relevant proposals or, if
earlier, prior to the deadline for printing the relevant document. If no
comments have been given within the applicable time limit, NGH can proceed
as though the relevant document was approved by the REC Review Committee
without comment.
11. Publication of REC Circulars
11.1 Each Distributing REC undertakes to each of the other RECs and to NGH and
NGC conditionally upon:
(i) the passing of all the resolutions set out in the NGH EGM Notice
at the NGH EGM;
(ii) the publication by NGH of the Listing Particulars and the Summary
Particulars as contemplated in Clause 9; and
(iii) not having been subject to a public takeover which has
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<PAGE>
(iv) become or been declared wholly unconditional prior to the date on
which it would otherwise have posted its REC Circular in
accordance with this Agreement;
(a) to post its REC Circular to its shareholders on 22 November 1995; and
(b) to convene an extraordinary general meeting for 10 a.m. on 8 December
1995.
11.2 Each Distributing REC undertakes to NGH and NGC that the resolution shall
be in substantially the form set out in Schedule XI provided that the
proportion of 25 per cent. in paragraph (i) thereof shall be reduced to
such lower percentage as may be agreed by NGH with the London Stock
Exchange as permissible in the context of the Flotation. The final form of
each such resolution shall be approved by the Board of the relevant
Distributing REC.
11.3 Each Distributing REC confirms that its board of directors has resolved or
will resolve (conditionally upon there having been no relevant material
change of circumstances between the date hereof and the date of publication
of the REC Circular) to recommend its shareholders to vote in favour of the
resolution to be proposed at such extraordinary general meeting and that
the REC Circular will contain a statement to this effect.
11.4 Each Distributing REC shall give NGC the opportunity to review prior to
dispatch those sections of its Circular which contain information relating
to NGH, NGC or the Flotation and will consider any comments made thereon by
NGC.
11.5 If a REC which is not a Distributing REC (and which does not fall within
Sub-clause 11.1(iii) above) determines to declare and pay a specie dividend
of some or all of its holding of shares in NGH to be effective on
Flotation, the provisions of Sub-clauses 11.2 and 11.4 shall apply as it
were named in this Agreement as a Distributing REC. For the avoidance of
doubt the foregoing provisions of this Sub-Clause 11.5 shall not apply to a
REC which has been subject to a public takeover which has become or been
declared wholly unconditional prior to the date of this Agreement.
12. The Specie Dividends
Each Distributing REC undertakes to the other parties, conditionally upon
the resolution to be proposed at its extraordinary general meeting having
been passed and having become unconditional in accordance with its terms,
that it will declare and pay a specie dividend with the effect that not
less than the proportion of its holding of shares in NGH on Flotation set
opposite its name in Schedule XIV is distributed to its shareholders.
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13. Flotation not effective
In the event that the Flotation does not become effective before the Long
Stop Date:
(a) NGH undertakes to the RECs to convene an extraordinary general meeting
to take place within 25 days of the Long Stop Date at which an
ordinary resolution will be proposed which will provide that the
directors of NGH shall cease to be its directors and a new NGH Board
shall be appointed, consisting of 12 persons, each of whom shall have
been nominated by a different REC; and
(b) each of the RECs undertakes to notify NGH within 5 days of the Long
Stop Date of the identity of the person nominated by it to be a
director of NGH and to vote in favour of the resolutions referred to
in Sub-clause 13(a).
14. Customer Discount
Subject to Flotation becoming effective and to receipt of its share of the
NGH Interim Dividend, the NGH Special Dividend, the NGH Second Dividend and
the NGH Rights Dividend, each of the RECs undertakes to each of the other
RECs that it will grant the Customer Discount in the manner set out in
Schedule X; provided that nothing in this Clause 14 shall prevent a REC
from granting the Customer Discount to customers who are not Eligible
Customers (as defined in Schedule X) as well as to Eligible Customers. If
Flotation has not become effective by 31st December 1995, the Record Date
for the purposes of Schedule X shall be 4 February 1996.
15. Other undertakings by the RECs
15.1 Each of the RECs undertakes to NGH that, save for any permitted disposal,
it has not made any decision to sell all or any part of its holding of
shares in NGH (where the context so allows, as increased by the matters
provided for in the NGH EGM Circular and the Rights Issue Circular) on or
prior to Flotation and that it will not make any such decision prior to
Flotation (or until the date on which it becomes clear that Flotation
cannot occur by the Long Stop Date). For the avoidance of doubt, there
shall be no breach of this undertaking solely by reason of the provisions
in the NGG Articles to be adopted on Flotation.
15.2 For the purposes of Sub-clause 15.1, a permitted disposal shall be:
(a) a dividend in specie of shares in NGH by a REC to its shareholders
becoming effective on or after Flotation;
(b) disposals forming part of arrangements to compensate holders of
options in the REC for the loss of value consequent upon any such
dividend in specie as is contemplated in Clause 12;
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<PAGE>
(c) the disposal of any aggregated fractional entitlements following any
such dividend in specie as is contemplated in Clause 12;
(d) intra-group transfers or sales (including, without limitation, a
dividend in specie) on or after Flotation;
(e) a disposal by Manweb plc (or any transferee thereof under (d) above)
pursuant to the undertaking to dispose of such shares given by
Scottish Power plc to the Secretary of State.
15.3 Each of the RECs confirms to NGH, NGC and to the other RECs that the
section headed "Intentions of the RECs" in the Announcement contains a
correct statement of its intentions as at the date of this Agreement with
regard to its shareholding in NGH.
Each of the RECs undertakes to inform Kleinwort Benson (on behalf of NGH
and NGC) as soon as is reasonably practicable of any change in this
intention prior to the date on which the Flotation becomes effective.
15.4 Each of the RECs and NGH undertake to each other and to NGC that they will
not withdraw or revoke the existing consortium elections so long as the
same remain relevant to the payment of dividends by NGH contemplated in
this Agreement.
16. Cost Sharing
16.1 Save as otherwise set out in this Agreement
16.2 NGC undertakes to the RECs to pay to Eastern Group plc (on behalf of the
RECs) or to the adviser concerned the proportion (as set out in column 2 of
Schedule XIV opposite the name of the relevant adviser set out in column 1
of that Schedule) of the fees (including disbursements and value added tax)
of each of the advisers to the RECs whose names are set out in column 1 of
Schedule XIV arising in relation to, or in preparation for, or in
contemplation of or incidental to, the Flotation and the matters
contemplated by this Agreement.
16.3 Eastern Group plc shall provide to NGC copies of the relevant invoices in
relation to the fees to be shared pursuant to Sub-clause 16.2. NGC's
obligation to make payments in respect of Ernst & Young's fees is subject
to having first received evidence reasonably satisfactory to it that such
costs have been properly incurred.
17. Waiver
Each REC hereby releases and discharges each other REC and the directors
and employees of such RECs from any and all actions, proceedings, claims,
demands or other liabilities whatsoever in relation to liabilities arising
in connection with or out of the preparation and approval of the Listing
Particulars and Summary Particulars.
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<PAGE>
18. Announcements
18.1 NGH undertakes to issue an announcement in the form set out in Schedule IX
as soon as practicable following the signature by all parties of this
Agreement. NGC shall be entitled to issue an announcement in substantially
similar terms to comply with its obligations under the rules of the London
Stock Exchange.
18.2 Each of the Distributing RECs undertakes to NGH and to the other
Distributing RECs that any announcement it makes following the signature of
this Agreement shall, insofar as it relates to the Flotation or to the
other matters provided for in this Agreement, be based on the pro forma REC
announcement set out in Schedule IX.
18.3 If any Distributing REC intends to make an announcement following the
signature of this Agreement which, insofar as it relates to NGH, NGC, the
Flotation or to the other matters provided for in this Agreement, differs
in any significant respect from such pro forma, or if any REC which is not
a Distributing REC intends to make such an announcement, it shall consult
with Kleinwort Benson prior to the making of such announcement.
18.4 Each party will use all reasonable endeavors not to issue any further
public announcements or other public statement or advertisement prior to
Flotation which contains information relating to NGH or NGC which is
material to the Flotation or which may be relevant to effecting Flotation
within the Timetable without first having consulted Kleinwort Benson.
18.5 In relation to any consultation with Kleinwort Benson pursuant to
Sub-clauses 18.3 and 18.4, the party obliged to so consult shall, unless it
shall consider that to do so would put it in breach of any statutory or
regulatory requirement binding upon it or a member of its parent company's
group, or in breach of the requirements of the London Stock Exchange or of
the City Code on Takeovers and Mergers, comply with all reasonable requests
from Kleinwort Benson in relation to the contents, timing or distribution
of such announcement, statement or advertisement.
19. NGC Option Schemes
NGH undertakes to the RECs that it will seek to agree with the Inland
Revenue that the Adjustments to be made to subsisting options granted under
the NGC savings related share option scheme and the NGC executive share
option scheme will be calculated on the basis set out in Schedule XII. No
adjustments will be made on terms that would be materially more
advantageous to the optionholders than the terms contemplated in Schedule
XII without the prior approval of the NGH Board (if approved prior to the
NGH EGM) or of the REC Oversight Committee (if approved after the NGH EGM).
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<PAGE>
20. Variations
20.1 Save as set out in Sub-clauses 20.2, 20.3 and 20.4, variations to this
Agreement shall not be effected save by means of an instrument executed on
behalf of all the parties.
20.2 Alterations to the Timetable may be effected by notice from Kleinwort
Benson provided that no such alteration has the effect of altering the
process described in Appendix II of the NGH EGM Circular or of causing the
Flotation to take place after the Long Stop Date. In the event of any such
alteration to the Timetable dates specified elsewhere in this Agreement
shall be deemed to be amended to conform to such alteration.
20.3 Each of the RECs and NGH authorizes Herbert Smith to consent on their
behalf to minor changes or corrections to any of the documents of which
drafts or proofs are set out in the Schedules.
20.4 The parties recognize that all cash dividends referred to in this Agreement
will be declared as an amount per share which will be calculated, so far as
is practicable, so as to result in the total dividend paid being equal to
the total amount for such dividend specified in this Agreement. Any minor
variation between the actual total dividend paid and the total specified in
this Agreement as a result of rounding or as a result of calculating such
amount per share shall not constitute a variation of this Agreement for the
purposes of Sub-clause 20.1.
21. Good Faith
Each of the parties undertakes to each of the other parties to act in good
faith and to take all reasonable steps to ensure a successful Flotation in
accordance with the Timetable.
22. Force Majeure
22.1 If at any time prior to the publication of the Listing Particulars, NGC
becomes aware of any event or change in circumstances (which was not known
to the NGC Board at the date hereof) which is so significant that it would,
notwithstanding compliance by NGC with its obligations pursuant to Clause
21, prevent it from fulfilling or make it unlawful to fulfil any of its
obligations under this Agreement, it shall forthwith notify the other
parties of such circumstance. If no variation to this Agreement (having
regard to Clause 21) is agreed pursuant to Sub-clause 20.1 within 5
business days of such notification NGC may terminate this Agreement
(subject to Sub-clause 22.5 by notice to the other parties without further
liability whatsoever to those parties.
22.2 If at any time prior to the date on which the extraordinary general
meetings of the Distributing RECs are to be held (as contemplated in
Sub-clause 11.1(b)) there shall be announced by the Government, Inland
Revenue, Office of Electricity Regulation or some other competent authority
an actual or proposed change in the
15
<PAGE>
legislative, regulatory or taxation treatment of the RECs generally (an
"Adverse Announcement"), which change may result in a significant adverse
financial consequence for the RECs, RECs together holding a majority in
number of the NGH shares may terminate this Agreement (subject to
Sub-clause 22.5) by notice to the other parties within 10 business days of
the Adverse Announcement without further liability whatsoever to those
parties. Upon an Adverse Announcement NGC and NGH shall be entitled to
defer performance of any of their respective obligations under this
Agreement until they are satisfied that this Agreement will not be
terminated as a result of such Adverse Announcement.
22.3 The obligations of NGC under Sub-clauses 6 and 7.1 and the obligations of
NGH under Sub-clauses 6, 7.2, 8.1 and 9.1(a) and (b) (each such obligation
being "Relevant Obligation") shall be conditional upon each of the RECs
having complied in all respects material to the Flotation with the
obligations undertaken by it under this Agreement (insofar as the same fall
to be performed under the terms of this Agreement prior to the time of
performance of the Relevant Obligation). If such condition is not fulfilled
at the time otherwise provided for performance by NGC or NGH of a Relevant
Obligation, NGC or NGH (as the case may be) shall be entitled without
prejudice to any other rights it may have whether under this Agreement or
otherwise to waive the condition or (if such default is capable of
rectification without having a material adverse effect on the Flotation) to
require the REC in default to rectify such default and, pending such
rectification, to defer performance of the Relevant Obligation. If such
default is not rectified within 3 business days of notification or, if
earlier, by 21st January, 1996, or if the default is incapable of
rectification without a material adverse effect on Flotation, NGC or NGH
(as the case may be) may forthwith terminate this Agreement (subject to
Sub-clause 22.5) by notice to the other parties without further liability
whatsoever to those parties.
22.4 In the event that the Agreement is terminated pursuant to Sub-clauses 22.1,
22.2 or 22.3 the Flotation shall not proceed and the parties shall use all
reasonable endeavors to agree the form of each announcement to be issued in
respect of such termination. If the Agreement is terminated pursuant to
Sub-clause 22.2, NGH undertakes to the RECs to withdraw forthwith any
application for listing which may have been made.
22.5 The termination of this Agreement under Sub-clauses 22.1, 22.2 or 22.3
shall be without prejudice to the provisions of Clause 13 (Flotation not
effective), Clause 16 (Cost Sharing) and Sub-clause 22.4, which shall
continue to have effect and to any liability for antecedent breaches.
22.6 In Sub-clause 22.1, references to NGC shall include references to NGH with
effect from the date on which the appointment of the NGC Board to the NGH
Board becomes effective.
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23. Notices
23.1 Any notice required to be given under this Agreement may be served
personally or by prepaid registered or recorded delivery letter or by telex
or facsimile addressed to the relevant party at its address stated on the
first page of this Agreement and marked for the attention of the person
described alongside that party below or at the relevant number set out
below or at such other address or number as it may have notified to the
other for this purpose:
Facsimile No.
-------------
EASTERN GROUP plc
For the attention of
The Company Secretary 01473 553002
EAST MIDLANDS ELECTRICITY plc
For the attention of
The Company Secretary 0115 967 0459
LONDON ELECTRICITY plc
For the attention of
The Company Secretary 0171 331 3424
MANWEB plc
For the attention of
Ian Russell 0141 6364578
MIDLANDS ELECTRICITY plc
For the attention of
The Company Secretary 0121 423 1907
NORTHERN ELECTRIC plc
For the attention of
Valerie Giles 0191 210 2409
NORWEB plc
For the attention of
Peter Rothwell 0161 875 7211
SEEBOARD plc
For the attention of
The Company Secretary 01293 657 325
SOUTHERN ELECTRIC plc
For the attention of
The Company Secretary 01628 584 408
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SOUTH WALES ELECTRICITY plc
For the attention of
The Company Secretary 01222 773 880
SOUTH WESTERN ELECTRICITY plc
For the attention of
The Company Secretary 01454 617 702
YORKSHIRE ELECTRICITY GROUP plc
For the attention of
Roger Dickinson 0113 289 5926
THE NATIONAL GRID HOLDING plc
For the attention of )Notices given before
Hugh Hamilton )Memorandum of Understanding 0121 423 1907
For the attention of )Notices given after
David Jones )Memorandum of Understanding 01203 423026
)takes effect
THE NATIONAL GRID COMPANY plc
For the attention of
David Jones 01203 423026
23.2 Any notice so given by letter shall be deemed to have been served 48 hours
after the same shall have been posted and any notice given by facsimile
shall be deemed to have been served upon receipt of a facsimile receipt
form indicating satisfactory receipt by the receiving machine, and in
proving such service it shall be sufficient to prove, in the case of a
letter, it was properly addressed, and in the case of a facsimile by
producing the relevant facsimile receipt form.
23.3 Any notification to the REC Review Committee under Clause 9 shall be sent
to Kleinwort Benson Limited, P O Box 560, 20 Fenchurch Street, London EC3P
3DB (fax no. 0171 929 2676) for the attention of Andrew Smith-Maxell/Rita
Theil.
24. RTPA
To the extent that any provision of this Agreement, or of any other
arrangement of which it forms part, is a restriction or information
provision for the purposes of the Restrictive Trade Practices Act 1976
("RTPA") by virtue of which this Agreement or any such agreement is
registrable under the RTPA, no such restriction or provision shall take
effect until the day after particulars of this Agreement or, as the case
may be, that arrangement, have been furnished to the Director General of
Fair Trading in accordance with the RTPA.
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25. Governing Law and Jurisdiction
This Agreement shall be governed by, and construed in accordance with,
English law and the High Court of Justice in England shall have exclusive
jurisdiction in relation to any claim, dispute or difference concerning
this Agreement.
THIS AGREEMENT has been signed by the duly authorized representatives of the
parties the day and year first before written.
Signed by JOHN DEVANEY )
for and on behalf of ) /s/ John Devaney
EASTERN GROUP plc )
Signed by ROBERT DAVIES )
for and on behalf of ) /s/ Robert Davies
EAST MIDLANDS ELECTRICITY plc )
Signed by ALAN TOWERS )
for and on behalf of ) /s/ Alan Towers
LONDON ELECTRICITY plc )
Signed by IAN RUSSELL )
for and on behalf of ) /s/ Ian Russell
MANWEB plc )
Signed by PETER CHAPMAN )
for and on behalf of ) /s/ Peter Chapman
MIDLANDS ELECTRICITY plc )
Signed by JOHN EDWARDS )
for and on behalf of ) /s/ John Edwards
NORTHERN ELECTRIC plc )
Signed by KENNETH HARVEY )
for and on behalf of ) /s/ Kenneth Harvey
NORWEB plc )
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Signed by MICHAEL PAVIA )
for and on behalf of ) /s/ Michael Pavia
SEEBOARD plc )
Signed by HENRY CASLEY )
for and on behalf of ) /s/ Henry Casley
SOUTHERN ELECTRIC plc )
Signed by WYNFORD EVANS )
for and on behalf of ) /s/ Wynford Evans
SOUTH WALES ELECTRICITY plc )
Signed by JOHN SEED )
for and on behalf of ) /s/ John Seed
SOUTH WESTERN ELECTRICITY plc )
Signed by ROGER DICKINSON )
for and on behalf of ) /s/ Roger Dickinson
YORKSHIRE ELECTRICITY GROUP plc )
Signed by K. G. HARVEY )
for and on behalf of ) /s/ K.G. Harvey
THE NATIONAL GRID HOLDING plc )
Signed by D. H. JONES )
or and on behalf of ) /s/ D.H. Jones
THE NATIONAL GRID COMPANY plc )
20
<PAGE>
EXHIBIT 10.9
17TH NOVEMBER 1995
THE NATIONAL GRID COMPANY plc
EASTERN GROUP plc
EASTERN MIDLANDS ELECTRICITY plc
LONDON ELECTRICITY plc
MANWEB plc
MIDLANDS ELECTRICITY plc
NORTHERN ELECTRIC plc
NORWEB plc
SEEBOARD plc
SOUTHERN ELECTRIC plc
SOUTH WALES ELECTRICITY plc
SOUTH WESTERN ELECTRICITY plc
YORKSHIRE ELECTRICITY GROUP plc
-------------------------------------------------------
MEMORANDUM OF UNDERSTANDING
-------------------------------------------------------
Herbert Smith
Exchange House
Primrose Street
London C2A 2HS
Ref:223/C267/30438764
<PAGE>
THIS MEMORANDUM OF UNDERSTANDING is made the 17th day of ________________, 1995
BETWEEN
A The National Grid Group plc (formerly The National Grid Holding plc)
("NGG") whose registered office is at Kirby Corner Road, Coventry CV4 8JY
AND
B Each of:
Eastern Group plc whose registered office is Wherstead Park, PO Box 40,
Wherstead, Ipswich, Suffolk IP9 2AQ
East Midlands Electricity plc whose registered office is 398 Coppice Road,
Arnold, Nottingham NG5 7HX
London Electricity plc whose registered office is Templar House, 81-87 High
Holborn, London WC1V 6NU
Manweb plc whose registered office is Sealand Road, Chester CH1 4LR
Midlands Electricity plc whose registered office is Mucklow Hill,
Halesowen, West Midlands, B62 8BP
Northern Electric plc whose registered office is Carliol House, Market
Street, Newcastle Upon Tyne NE1 6NE
NORWEB plc whose registered office is Talbot Road, Manchester, M16 OHQ
SEEBOARD plc whose registered office is Forest Gate, Brighton Road,
Crawley, West Sussex, RH11 9BH
Southern Electric plc whose registered office is Southern Electric House,
Westacott Way, Littlewick Green, Maidenhead, Berkshire SL6 3QB
South Wales Electricity plc whose registered office is Newport Road, St.
Mellons, Cardiff CF3 9XW
South Western Electricity plc whose registered office is 800 Park Avenue,
Aztec West, Almondsbury, Bristol BS12 4SE
Yorkshire Electricity Group plc whose registered office is Wetherby Road,
Scarcroft, Leeds LS14 3HS
(collectively the "RECS" and each a "REC")
2
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WHEREAS
Following certain changes made at the NGH EGM to the Articles of
Association of NGG and, effective upon execution of this Agreement, to the
board of directors of NGG, the parties have agreed that the relationship
between RECs (being the principal shareholders of NGG) and NGG should be
regulated in the period prior to Flotation.
NOW IT IS AGREED as follows:
1. Definitions and Interpretation
1.1. In this Agreement, unless the context otherwise requires, the following
words and expressions bear the meanings respectively set out below:
the "EGMs" means the NGH EGM and the passing of the
NGC Written Resolutions
"NGC" means The National Grid Company plc.
the "Master Agreement" means the agreement of that name dated
25th October 1995 between each of the
RECs, NGG and NGC.
the "REC Oversight Committee" means the committee established pursuant
to Clause 3.
the "Relevant Period" means the period commencing with the
execution of this Agreement and
terminating upon the earlier of the
Flotation or the Termination Date.
"Termination Date" means the date on which directors of NGC
cease to be directors of NGG and
representatives of the RECs are
appointed in their place.
1.2. Unless the context otherwise requires:
(a) any reference in this Agreement to a Clause, Sub-clause or Schedule is
to a clause, sub-clause or schedule, as the case may be, of or to this
Agreement;
(b) Capitalized terms which are not defined in Clause 1.1 shall have the
meanings ascribed to them in the Master Agreement; and
(c) the singular shall be deemed to include the plural and vice versa.
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1.3. The headings in this Agreement are for ease of reference only and shall not
affect the construction of this Agreement.
2. The Relevant Period
2.1. Save as set out in Clause 2.2 below, during the Relevant Period:
(a) NGG will not engage in any activity outside the ordinary course of its
business;
(b) no material contracts or commitments will be entered into by NGG
unless such contracts or commitments are conditional on Flotation;
(c) NGG shall procure that no matters relating to NGC (or its
subsidiaries) which prior to the EGMs would have required either
consultation with or the approval of the NGG Board pursuant to the
Articles of Association of either NGG pr NGC which were in force prior
to the EGMs, will be carries out by NGC (or such subsidiaries);
without the prior approval of the REC Oversight Committee or, in the case
of matters falling within paragraph (c) above which would have required
consultation only with the NGG Board, consultation with the REC Oversight
Committee.
(i) The REC Oversight Committee shall not unreasonably delay in giving or
withholding its approval in any case.
(ii) In relation to any proposal or matter concerning the carrying on of
the National Grid Business (as defined in the articles of association
of NGC in the form in force prior to the EGMs) which requires the
approval of the REC Oversight Committee, such committee shall not be
entitled to withhold approval unless it has reasonable grounds for
believing that implementation is likely adversely to affect the
financial viability of NGC and/or NGG and if the REC Oversight
Committee does withhold approval it shall provide NGC and NGG with a
written statement giving details of the grounds for such belief; and
(iii) In relation to any business or proposed business of NGC or NGG or any
subsidiary undertakings, other than National Grid Business, the RED
Oversight Committee shall be entitled to give or withhold approval to
such plans in whole or in part on any grounds it shall think fit.
(iv) No consent of the REC Oversight Committee shall be required to the
planning and implementation of any Business Plan (as defined in the
articles of association of NGC in the form in force prior to the EGMs)
except as provided in this Agreement.
4
<PAGE>
2.2. The following matters may be carried out by NGG or NGC during the Relevant
Period without prior consultation with or the prior approval of the REC
Oversight Committee:
(a) matters expressly referred to in the Master Agreement or otherwise
necessary to effect Flotation;
(b) matters expressed to be, or whose effect is, conditional on Flotation;
(c) arrangements for a low cost dealing facility for shareholders of NGG
after Flotation provided that such arrangements will be conditional
upon Flotation becoming effective and shall release NGG from all
obligations in respect thereof in the event that the Flotation does
not become effective; and
(d) arrangements for the establishment of an ADR programme in respect of
NGG shares provided that such arrangements will be conditional upon
Flotation becoming effective and shall release NGG from all
obligations in respect thereof in the event that the Flotation does
not become effective.
3. The REC Oversight Committee
3.1. The REC Oversight Committee shall consist of up to 12 persons, each
appointed by a different REC and at the date hereof shall consist of the
members of the NGH Board at the date of the NGH EGM.
3.2. The Chairman of the REC Oversight Committee shall be Mr. K. Harvey or,
failing him, that person appointed to the Committee by NORWEB plc.
3.3. Any consultation with or request for the approval of the REC Oversight
Committee pursuant to Clause 2.1 or pursuant to any provisions of the
Master Agreement which expressly contemplate approval by the REC Oversight
Committee shall be made by notice in writing to all members of the REC
Oversight Committee in accordance with Clause 6.
3.4. On receipt of such consultation or request the Chairman of the REC
Oversight Committee shall call a meeting of the committee by notice to all
its members and to the Chairman of NGG in accordance with Clause 6
specifying the date, time and place of such meeting which shall be within 7
days of receipt of the consultation or request for approval provided that
if Kleinwort Benson informs the Chairman that it is necessary for a shorter
notice period to apply such meeting shall be called as soon as s
practicable thereafter.
3.5. A meeting of the REC Oversight Committee will be quorate if 2 members are
present in person, on the telephone or by other telecommunication facility
or by duly authorized representative. The Chairman of NGG or his
representative shall be entitled to be present and to speak at the meeting,
but not to vote.
5
<PAGE>
3.6. Such meeting shall, by the votes of a majority of the committee members so
present, decide whether the approval is granted and shall give notice to
NGG in accordance with Clause 6 of its decision within one business day of
the close of the meeting. The Chairman shall not have a second or casting
vote. In the event of an equality of votes approval shall not be given.
3.7. If no meeting of the REC Oversight Committee is held following a valid
request for approval within the time limit in Clause 3.4, or notice to NGG
of its decision pursuant to Clause 3.6 is served pursuant to Clause 6.2 NGC
shall be entitled to proceed as though such approval had been given.
4. Termination
This Agreement shall terminate (without prejudice to any liability for any
liability for antecedent breach) on the earlier of the Flotation or the
Termination Date.
5. Variations
Variations to this Agreement shall not be effected save by means of an
instrument executed on behalf of all the parties save that alteration to
the Timetable made pursuant to Clause 20.2 of the Master Agreement shall
have the effect of altering any relevant date specified herein to conform
to the Timetable as so altered.
6. Notices
6.1. Any notice required to be given under this Agreement may be served
personally or by prepaid registered or recorded delivery letter or by
facsimile addressed to the relevant party at its address stated on the
first page of this Agreement and marked for the attention of the person
described alongside that party below or at the relevant number set out
below or at such other address or number as it may have notified to the
other for this purpose:
<TABLE>
<CAPTION>
Party Facsimile No.
----- -------------
<S> <C>
THE NATIONAL GRID GROUP plc
for the attention of The Company Secretary
EASTERN GROUP plc 01473 553002
for the attention of The Company Secretary
EAST MIDLANDS ELECTRICITY plc 0115 967 0459
for the attention of The Company Secretary
LONDON ELECTRICITY plc 0171 331 3424
for the attention of The Company Secretary
MANWEB plc 0141 6364578
for the attention of Ian Russell
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Party Facsimile No.
----- -------------
<S> <C>
MIDLANDS ELECTRICITY plc 0121 423 1907
for the attention of The Company Secretary
NORTHERN ELECTRIC plc 0191 210 2409
for the attention of Valerie Giles
NORWEB plc 0161 875 7211
for the attention of Peter Rothwell
SEEBOARD plc 01293 657 325
for the attention of The Company Secretary
SOUTHERN ELECTRIC plc 01628 584 408
for the attention of The Company Secretary
SOUTH WALES ELECTRICITY plc 01222 723 880
for the attention of The Company Secretary
SOUTH WESTERN ELECTRICITY plc 01454 617702
for the attention of The Company Secretary
YORKSHIRE ELECTRICITY GROUP plc 0113 289 5926
for the attention of Roger Dickinson
</TABLE>
6.2. Save in respect of a notice calling a meeting of the REC Oversight
Committee which shall, in addition to the following provisions of this
clause, only to be deemed to have been duly served upon production of
evidence that such notice was acknowledged by its recipient any notice so
given by letter shall be deemed to have been served 48 hours after the same
shall have been posted and any notice given by facsimile shall be deemed to
have been served upon receipt of a facsimile receipt form indicating
satisfactory receipt by the receiving machine, and in proving such service
it shall be sufficient to prove, in the case of a letter, it was properly
addressed, and in the case of a facsimile, by producing the relevant
facsimile receipt form.
7. Governing Law and Jurisdiction
This Agreement shall be governed by, and construed in accordance with,
English law and the High Court of Justice in England shall have exclusive
jurisdiction in relation to any claim, dispute or difference concerning
this Agreement.
7
<PAGE>
THIS AGREEMENT has been signed by or on behalf of each of the parties the day
and year first before written.
Signed by for and on behalf of )
THE NATIONAL GRID GROUP plc )
Signed by for and on behalf of )
EASTERN GROUP plc )
Signed by for and on behalf of )
EAST MIDLANDS ELECTRICITY plc )
Signed by for and on behalf of )
LONDON ELECTRICITY plc )
Signed by for and on behalf of )
MANWEB plc )
Signed by for and on behalf of )
MIDLANDS ELECTRICITY plc )
Signed by for and on behalf of )
NORTHERN ELECTRIC plc )
Signed by for and on behalf of )
NORWEB plc )
Signed by for and on behalf of )
SEEBOARD plc )
Signed by for and on behalf of )
SOUTHERN ELECTRIC plc )
Signed by for and on behalf of )
SOUTH WALES ELECTRICITY plc )
Signed by for and on behalf of ) /s/ John Junior Seed
SOUTH WESTERN ELECTRICITY plc )
Signed by for and on behalf of )
YORKSHIRE ELECTRICITY GROUP plc )
8
<PAGE>
EXHIBIT 10.10
CONFORMED COPY
AGREEMENT
DATED 31st July, 1997
(pound)1,085,000,000
CREDIT FACILITY
FOR
YORKSHIRE POWER GROUP LIMITED
PROVIDED BY
UNION BANK OF SWITZERLAND
ALLEN & OVERY
London
B1:99092.5
<PAGE>
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1. Interpretation.......................................................1
2. The Facility........................................................14
3. Purpose.............................................................14
4. Conditions precedent................................................15
5. Drawdown............................................................15
6. Repayment...........................................................16
7. Prepayment and cancellation.........................................16
8. Interest Periods....................................................17
9. Interest............................................................19
10. Payments............................................................20
11. Taxes...............................................................20
12. Market disruption...................................................22
13. Increased costs.....................................................22
14. Illegality and mitigation...........................................24
15. Representations and warranties......................................24
16. Undertakings........................................................27
17. Default.............................................................33
18. Fees................................................................36
19. Expenses............................................................36
20. Stamp duties........................................................36
21. Indemnities.........................................................37
22. Evidence and calculations...........................................38
23. Waivers and remedies cumulative.....................................38
24. Changes to the Parties..............................................38
25. Disclosure of information...........................................39
26. Set-off.............................................................39
27. Severability........................................................39
28. Counterparts........................................................39
29. Notices.............................................................39
30. Governing law.......................................................40
Schedules
1. Conditions precedent documents......................................42
2. Calculation of the MLA Cost.........................................43
3. Form of Request.....................................................45
Signatories....................................................................
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
THIS AGREEMENT is dated 31st July, 1997 between:-
(1) YORKSHIRE POWER GROUP LIMITED (the "Borrower"); and
(2) UNION BANK OF SWITZERLAND as lender (the "Bank").
IT IS AGREED as follows:-
1. INTERPRETATION
1.1 Definitions
In this Agreement:-
"Adjusted Share Capital and Reserves"
means the aggregate of:
(a) the amount paid up or credited as paid up on the issued share capital
of the Borrower; and
(b) the amounts standing to the credit of the consolidated capital and
revenue reserves of the Group after adding back an amount equal to all
windfall tax paid or provided for by the Group
adjusted, to the extent that the following items have not already been
added, deducted or excluded in arriving at the figures referred to in
paragraph (a) or (b) above:
(i) by adding Subordinated Debt;
(ii) by deducting the amounts standing to the debit of the consolidated
reserves of the Group;
(iii) by deducting any amounts attributable to interests of non-Group
members in Group subsidiaries;
(iv) by deducting any reserves set aside for deferred taxation;
(v) by deducting the amount by which the net book value of any fixed asset
has been written up after the date of this Agreement (or, in the case
of a person becoming a member of the Group after that date, the date
on which it becomes a member of the Group) by way of revaluation or on
its transfer from one member of the Group to another (but no such
deduction shall be made in respect of any amount if supported by, and
not exceeding the amount shown by, an independent written valuation),
but so that no amount to be added, deducted or excluded as a result of any
of the above shall be added, deducted or excluded more than once in the
same calculation.
- --------------------------------------------------------------------------------
<PAGE>
2
- --------------------------------------------------------------------------------
"Affiliate"
means a Subsidiary or a holding company (as defined in Section 736 of the
Companies Act 1985) of the Bank or any other Subsidiary of that Holding
Company.
"Anticipated Refinancing"
means each of:
(a) each sterling bond issue to be arranged for the Borrower by the Bank
pursuant to a mandate letter dated on or about the date of this
Agreement;
(b) any syndicated loan agreement to be arranged for the Borrower by the
Bank referred to in the Fee Letter;
(c) any securitisation or "yankee" bond arranged for the Borrower;
(d) any tax deductible preference share issue; or
(e) any other appropriate funding outside the banking markets,
in each case for the purposes of reducing or repaying the obligations of
the Borrower under this Agreement.
"Applicable Rate"
means the rate quoted by the Bank to the Borrower to be that at which money
can be deposited in the London interbank market on the earliest available
day, provided that the applicable rate shall not be less than LIBID nor
more than LIBOR.
"Balance Sheet"
means, at any time, the then most recent audited consolidated annual or
unaudited consolidated half yearly balance sheet of the Group delivered to
the Bank by the Borrower under Clause 16.2 (Financial information).
"Borrowings"
means indebtedness in respect of:
(a) moneys borrowed or raised including (except for the purposes of Clause
17.5 (Cross default)) the recourse element of any asset securitisation
or other factoring excluding any amounts owing for assets purchased or
services obtained on trade credit terms in the ordinary course of
business;
(b) amounts raised by means of acceptances under any acceptance credit
facility or otherwise (not being acceptances in relation to the
purchase of assets or services in the ordinary course of business);
- --------------------------------------------------------------------------------
<PAGE>
3
- --------------------------------------------------------------------------------
(c) the deferred purchase price of assets or services the payment of which
is deferred for a period in excess of ninety days (other than assets
or services obtained on trade credit terms normal in the business
concerned);
(d) the principal amount and any premium payable by the relevant company
from time to time owing in respect of any loan notes, debentures,
bonds or other similar instruments;
(e) the capital value of any financial lease, hire purchase arrangements
or any arrangement treated as a financial lease required to be
capitalised and treated as a borrowing in the consolidated balance
sheet of the Group;
(f) for the purposes of Clause 17.5 (Cross default) (only) net
indebtedness under any currency or interest cap, swap or collar; and
(g) any guarantee or assurance against financial loss or indemnity in
respect of the borrowings of any other person not being a member of
the Group of a type referred to in paragraphs (a) to (f) (inclusive)
above (but excluding any such guarantee or assurance in respect of the
performance of any contract or service not involving financial loss or
indemnity in respect of borrowings),
but shall exclude:
(A) liabilities in respect of the Pooling and Settlement Agreement; and
(B) Project Finance Borrowings.
"Business Day"
means a day (other than a Saturday or a Sunday) on which banks are open for
business in London.
"Capitalisation"
means, at any time, the aggregate of Adjusted Share Capital and Reserves
and Debt.
"Commitment"
means each of the Facility A Commitment and the Facility B Commitment.
"Commitment Period"
means each of the Facility A Commitment Period and the Facility B
Commitment Period.
"Company"
means Yorkshire Electricity Group plc.
"Debt"
means Borrowings (excluding Subordinated Debt) less Investments.
- --------------------------------------------------------------------------------
<PAGE>
4
- --------------------------------------------------------------------------------
"Default"
means an Event of Default or an event which, with the giving of notice or
lapse of time provided for in Clause 17 (Default) (or any combination of
the foregoing), would constitute an Event of Default.
"Director General"
means the person from time to time appointed by the Secretary of State to
hold office as Director General of Electricity Supply for the purposes of
the Electricity Act 1989.
"Drawdown Date"
means the date of the advance of a Loan.
"EBITDA"
means, in respect of any Relevant Period, the total operating profit for
continuing operations, acquisitions (as a component of continuing
operations) and discontinued operations of the Group before taking into
account:
(a) Interest Payable and Interest Receivable;
(b) all amounts provided for depreciation and amortisation (including,
without limitation, amortisation of any goodwill);
(c) all exceptional and extraordinary items; and
(d) all taxes including (without limitation, the windfall tax),
in each case for that Relevant Period but after:
(A) deducting any gain over book value arising in favour of the Group on
the sale, lease or other disposal of any asset (other than on the sale
of trading stock) during the Relevant Period and any gain arising on
revaluation of any asset during that Relevant Period, in each case to
the extent that it would otherwise be taken into account, whether as
an exceptional item or otherwise; and
(B) excluding the earnings or profit before interest, tax depreciation and
amortisation (as determined in accordance with the preceding
paragraphs of this definition) and excluding all exceptional and
extraordinary items of any company referred to in paragraph (a) of the
definition of Project Finance Borrowings,
(all calculated on a consolidated basis disregarding any portion of any
item taken into account in that calculation which is attributable to any
minority interests in Subsidiaries).
"Environmental Law"
means any applicable law (including, without limitation, common law),
regulation, directing code of practice, circular, guidance notice or the
like concerning pollution or the protection
- --------------------------------------------------------------------------------
<PAGE>
5
- --------------------------------------------------------------------------------
of human health, the environment, the conditions of the work place or the
manufacture, processing, generation, transportation, storage, treatment or
disposal of dangerous substances, pollutants, contaminants, chemicals or
toxic or hazardous substances or waste.
"Environmental Licence"
means any consent required by any Environmental Law.
"Event of Default"
means an event specified as such in Clause 17.1 (Events of Default).
"Existing Facility"
means the (pound)1,140,000,000 term loan and revolving facility agreement
dated 24th February, 1997 between the Borrower as borrower, Yorkshire
Holdings PLC as Guarantor and Merill Lynch & Co. as Arranger and
Syndication Agent.
"Facility A"
means the sterling term loan facility so designated, the terms of which are
set out in this Agreement.
"Facility A Commitment"
means (pound)1,035,000,000 to the extent not cancelled or reduced under
this Agreement.
"Facility A Commitment Period"
means the period from the date of this Agreement to the Term Date (both
dates inclusive).
"Facility A Loan"
means a Loan drawn down or to be drawn down under Facility A.
"Facility B"
means the sterling revolving credit facility so designated, the terms of
which are set out in this Agreement.
"Facility B Commitment"
means (pound)50,000,000 to the extent not cancelled or reduced under this
Agreement.
"Facility B Commitment Period"
means the period from the date of this Agreement to the Repayment Date
(both dates inclusive).
- --------------------------------------------------------------------------------
<PAGE>
6
- --------------------------------------------------------------------------------
"Facility B Loan"
means a Loan drawn down or to be drawn down under Facility B.
"Fee Letter"
means a letter dated the date of this Agreement between the Bank and the
Borrower setting out, amongst other things, the amount of the fee referred
to in Clause 18 (Fees).
"Finance Document"
means this Agreement or any other document designated as such by the Bank
and the Borrower.
"Group"
means the Borrower and its Subsidiaries.
"Holdings"
means Yorkshire Holdings PLC.
"Interest Payable"
means, in respect of any Relevant Period, all interest payable and similar
charges as shown in (or in the notes to) the financial statements of the
Group (calculated on a consolidated basis) for the Relevant Period but
excluding interest payable on Project Finance Borrowings by companies
referred to in paragraph (a) of that definition.
"Interest Period"
means each period determined in accordance with Clause 8 (Interest
Periods).
"Interest Receivable"
means, in respect of any Relevant Period, all interest receivable and
similar income as shown in (or in the notes to) the financial statements of
the Group (calculated on a consolidated basis) for that Relevant Period but
excluding interest receivable by a company of the type referred to in
paragraph (a) of the definition of Project Finance Borrowings.
"Investments"
means, as at any date, the aggregate (calculated on a consolidated basis)
of:
(a) cash in hand in a jurisdiction where such amounts are freely
transferable out of that jurisdiction and convertible into currencies
dealt in on the London foreign exchange market;
(b) money at call in a jurisdiction, and freely convertible into
currencies, referred to in (a) above;
- --------------------------------------------------------------------------------
<PAGE>
7
- --------------------------------------------------------------------------------
(c) deposits and certificates of deposit the term of which has twelve
months or less remaining to maturity in a jurisdiction, and freely
convertible into currencies, referred to in (a) above;
(d) United Kingdom gilts;
(e) deposits made with the Commissioners of Inland Revenue in respect of
which certificates of tax deposit have been issued by Her Majesty's
Treasury;
(f) sterling bills of exchange eligible for rediscount at the Bank of
England;
(g) bonds rated AA- (or the equivalent) or above by Standard & Poor's
Ratings Group, IBCA Limited or Moody's Investors Service Limited; and
(h) any other negotiable money market instrument issued by an issuer in a
jurisdiction, and convertible into currencies, referred to in (a)
above with a maximum maturity of twelve months or less, excluding
commercial paper (unless it is rated at least A1 by Standard & Poor's
Ratings Group or IBCA Limited or P1 by Moody's Investors Service
Limited),
provided that, when the aggregate amount of Investments required to be
taken into account for the purposes of this definition on any particular
day is being ascertained, any such Investments denominated or repayable or
in respect of which monies are payable in a currency other than sterling
shall be taken into account at their sterling equivalent at the rate of
exchange prevailing on that day in London using the Bank's spot rate as of
11.00 a.m. on such date for the purchase of such currency with sterling.
"LIBID"
means, in relation to an amount received by the Bank referred to in Clause
21.2(b) (Other indemnities), the rate quoted by the Bank to leading banks
in the London interbank market at or about 11.00 a.m. on the relevant day
for the taking of deposits in sterling and in an amount approximately equal
to the amount so received from the Borrower for the period from and
including the date that payment is received by the Bank to but excluding
the last day of the Interest Period of the relevant Loan or amount.
"LIBOR"
means, in relation to an Interest Period:
(a) the rate appearing on the Telerate Screen page 3750 or any equivalent
successor to such page or other page as appropriate on the Telerate
Service or such other service as may, from time to time, display the
British Bankers' Association Interest Settlement Rates for deposits in
the relevant currency (as agreed between the relevant Borrower and the
Bank (acting reasonably)) (the "Telerate Screen"); or
(b) (in the absence of manifest error, if no such offered rate for
quotation appears on the Telerate Screen) the rate quoted by the Bank
to leading banks in the London interbank market,
- --------------------------------------------------------------------------------
<PAGE>
8
- --------------------------------------------------------------------------------
(in each case) at 11.00 a.m. on the first day of that Interest Period, as
being the interest rate(s) quoted in the London interbank market for the
offering of deposits in sterling for a period equal to that Interest Period
of that Loan.
"Licence"
means the public electricity supply licence granted by the Secretary of
State to the Company under Section 6(I)(c) of the Electricity Act 1989.
"Loan"
means, subject to Clause 8 (Interest Periods), the principal amount of each
borrowing by the Borrower under this Agreement or the principal amount
outstanding of that borrowing.
"Margin"
means:
(a) for the period from the date of this Agreement to the date falling 3
months after the date of this Agreement (both dates inclusive) 0.125
per cent. per annum;
(b) thereafter to and including the date falling six months after the date
of this Agreement, 0.20 per cent. per annum;
(c) thereafter to and including the date falling nine months after the
date of this Agreement, 0.30 per cent. per annum; and
(d) thereafter 0.50 per cent. per annum.
"MLA Cost"
means the cost imputed to the Bank of compliance with the Mandatory Liquid
Assets requirements of the Bank of England during an Interest Period,
expressed as a rate per annum and determined in accordance with Schedule 2.
"Net Interest Payable"
means, in respect of any Relevant Period, Interest Payable less Interest
Receivable for that Relevant Period.
"Party"
means a party to this Agreement.
"Permitted Security Interest"
means any Security Interest:
(a) arising pursuant to an order of attachment or injunction restraining
disposal of assets or similar legal process which is contested by the
Borrower or any of its Subsidiaries in good faith or created in favour
of a plaintiff or defendant in any action of the court
- --------------------------------------------------------------------------------
<PAGE>
9
- --------------------------------------------------------------------------------
or tribunal before whom such action is brought as security for costs
or expenses where the Borrower or one of its Subsidiaries is
prosecuting or defending such action in the bona fide interests of the
Group;
(b) arising by operation of law or contained in a contract for the sale of
goods or supply of services entered into in the ordinary course of
business of the company creating the same or which is a pledge over or
assignment of documents of title, insurance policies and sale
contracts in relation to commercial goods created or made in the
ordinary course of business to secure the purchase price of goods or
indebtedness to finance such purchase price;
(c) over or affecting any asset acquired by a member of the Group after
the date hereof and subject to which such asset is acquired provided
that the principal amount secured by such Security Interest is not
increased either as a result of such acquisition or thereafter;
(d) over or affecting any asset of any company which becomes a member of
the Group after the date hereof, where such Security Interest is
created prior to the date on which such company becomes a member of
the Group and provided that the principal amount secured by such
Security Interest is not increased either as a result of such company
becoming a member of the Group or thereafter;
(e) created or granted in favour of the European Investment Bank or any
successor institution or in respect of any financial indebtedness
originally specified to mature no earlier than the [tenth] anniversary
of the date of the agreement originally evidencing such financial
indebtedness;
(f) which is a Security Interest (a "Substitute Security Interest") which
replaces any Permitted Security Interest and which secures an amount
not exceeding the principal amount secured by such Permitted Security
Interest together with any interest accruing on such amounts from the
date such Substitute Security Interest is created or arises and any
fees or expenses incurred in relation thereto and in such
circumstances when such Permitted Security Interest will be released
as a consequence of such Substitute Security Interest being granted;
(g) over or affecting an asset where such Security Interest was granted in
connection with the acquisition or development for the sole purpose of
financing or refinancing that acquisition or development;
(h) arising in connection with any cash management or netting arrangements
made between any banks or financial institutions and any member or
members of the Group;
(i) created prior to the date of this Agreement provided the principal
amount secured by such Security Interest shall not be increased after
the date of this Agreement;
(j) arising out of title retention provisions in a supplier's standard
conditions of supply of goods acquired by any member of the Group in
the ordinary course of business;
- --------------------------------------------------------------------------------
<PAGE>
10
- --------------------------------------------------------------------------------
(k) over assets and/or (where such assets comprise substantially the whole
of the assets of the owner thereof) shares or the like in the owner of
such assets securing borrowings incurred to finance the cost of
developing (or acquiring and developing) such assets (and/or securing
any indebtedness in respect of hedging actual or projected exposure in
respect of these borrowings) where such borrowings are Project Finance
Borrowings;
(l) created under or pursuant to, or in accordance or connection with, the
terms of any pooling and settlement agreement (including, without
limitation, the Pooling and Settlement Agreement) or pooling and
settling arrangements of the electricity supply industry or any
transactions or arrangements entered into in connection with the
management of risks relating thereto;
(m) securing indebtedness not otherwise permitted to be secured by
Security Interests provided that the aggregate principal amount of the
indebtedness so secured under this paragraph (m) shall not at any time
exceed (pound)10,000,000 or (if higher) 2 per cent. of Adjusted Share
Capital and Reserves; or
(n) to the creation or subsistence of which the Bank at any time consents
in writing.
"Pooling and Settlement Agreement"
means an agreement dated 30 March 1990 (as amended and restated at 22 April
1994), made by the Company with The National Grid Company plc and others
setting out the rules and procedures for the operation of an electricity
trading pool and of a settlement system and, while the same has effect, the
Initial Settlement Agreement dated 30 March 1990;
"Principal Subsidiary"
means Holdings, the Company or a Subsidiary of the Borrower (not being a
Subsidiary falling within category (a) of the definition of Project Finance
Borrowings or any other Subsidiary of the Borrower whose only Borrowings
are Project Finance Borrowings):
(a) whose (i) net assets or (ii) turnover represent 10 per cent. or more
of the net assets of the Group or consolidated turnover of the Group
respectively, in each case as calculated by reference to the then
latest audited financial statements of such Subsidiary (consolidated
in the case of a company which itself has Subsidiaries and which, in
the normal course, prepares consolidated accounts) and the then latest
audited consolidated financial statements of the Group; or
(b) to which is transferred all or substantially all of the business,
undertaking and assets of a Subsidiary of the Borrower which
immediately prior to such transfer is a Principal Subsidiary,
whereupon the transferor Subsidiary shall immediately cease to be a
Principal Subsidiary and the transferee Subsidiary shall cease to be a
Principal Subsidiary under the provisions of this sub-paragraph (b)
(but without prejudice to the provisions of sub-paragraph (a) above),
upon publication of its next audited financial statements; or
(c) which is a holder of any public electricity supply licence granted by
the Secretary of State.
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"Project Finance Borrowings"
means any Borrowings to finance the ownership, acquisition, construction,
development and/or operation of an asset:
(a) made by a single purpose company (whether or not a member of the
Group) whose principal assets and business are constituted by the
ownership, acquisition, construction, development and/or operation of
an asset and whose liabilities in respect of the relevant financing
are not directly or indirectly the subject of a guarantee, indemnity
or any other form of assurance, undertaking or support from any member
of the Group except as expressly referred to in paragraph (b)(iii)
below; or
(b) in respect of which the person or persons to whom such Borrowings are
or may be owed by the relevant borrower (whether or not a member of
the Group) has or have no recourse whatsoever to any member of the
Group for the repayment of or payment of any sum relating to such
Borrowings other than:
(i) recourse to the relevant borrower for amounts limited to the
aggregate cash flow or net cash flow (other than historic cash
flow or historic net cash flow) from such asset; and/or
(ii) recourse to such borrower for the purpose only of enabling
amounts to be claimed in respect of those Borrowings in an
enforcement of any Security Interest given by such borrower over
such asset or the income, cash flow or other proceeds arising
therefrom (or given by any shareholder or the like in the
borrower over its shares or the like in the capital of the
relevant borrower) to secure those Borrowings or any recourse
referred to in (iii) below, provided that (A) the extent of such
recourse to such borrower is limited solely to the amount of any
recoveries made on any such enforcement, and (B) such person or
persons are not entitled, by virtue of any right or claim arising
out of or in connection with such Borrowings, to commence
proceedings for the winding up or dissolution of the borrower or
to appoint or procure the appointment of any receiver, trustee or
similar person or officer in respect of the borrower or any of
its assets (save for the assets the subject of such Security
Interest); and/or
(iii) recourse to such borrower generally, or directly or indirectly
to a member of the Group under any form of assurance, undertaking
or support, which recourse is limited to a claim for damages
(other than liquidated damages and damages required to be
calculated in a specified way) for breach of an obligation (not
being a payment obligation or any obligation to procure payment
by another or an obligation to comply or to procure compliance by
another with any financial ratios or other tests of financial
condition) by the person against whom such recourse is available;
or
(c) which the Bank shall have agreed (acting reasonably) in writing to
treat as a Project Finance Borrowing for the purposes of this
Agreement.
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"Qualifying Bank"
means a bank which:
(a) is a bank within the meaning of Section 840A of the Income and
Corporation Taxes Act 1988;
(b) will be beneficially entitled to any interest to be paid to it (as the
Bank) under this Agreement; and
(c) is within the charge to United Kingdom corporation tax as respects
such interest.
"Relevant Period"
means each period of 12 months ending on the date of the audited
consolidated accounts for each of the Borrower's financial years and on the
date of the Borrower's unaudited consolidated accounts for the first half
of each of the Borrower's financial years.
"Repayment Date"
means the date falling 364 days after the date of this Agreement.
"Request"
means a request made by the Borrower for a Loan, substantially in the form
of Schedule 3.
"Rollover Loan"
means, in relation to a particular date, one or more Facility B Loans:
(a) whose proposed Drawdown Date is the same as the last day of the
Interest Period of one or more existing Facility B Loans; and
(b) whose aggregate principal amount does not exceed the aggregate
outstanding principal amount of all existing Facility B Loans whose
Interest Period ends on that Drawdown Date.
"Secretary of State"
means the person from time to time holding office as the Secretary of State
for Trade and Industry or any successor office thereto;
"Security Interest"
means any mortgage, pledge, lien (other than a lien arising by operation of
law), charge or other security interest.
"Subordinated Debt"
means, at any time, the outstanding amount (including capitalised interest)
of Borrowings which is:
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(a) owing by the Borrower to any of its shareholders or a wholly-owned
subsidiary (other than a member of the Group) of any of them; and
(b) fully subordinated to the indebtedness of the Borrower under this
Agreement by a subordination agreement in an agreed form.
"Subsidiary"
means:-
(a) a subsidiary within the meaning of Section 736 of the Companies Act
1985 as amended by Section 144 of the Companies Act 1989; and
(b) unless the context otherwise requires, a subsidiary undertaking within
the meaning of Section 21 of the Companies Act 1989.
"Term Date"
means the date falling 10 Business Days after the date of this Agreement.
1.2 Construction
(a) In this Agreement, unless the contrary intention appears, a reference to:-
(i) an "agreed form" means, in the case of a document, the form of that
document agreed between the Borrower and the Bank as evidenced by the
initialling of that document (or other written confirmation of the
same) by the Borrower and the Bank or their respective legal advisers;
"assets" includes properties, revenues and rights of every
description;
an "authorisation" includes an authorisation, consent, approval,
resolution, licence, exemption, filing and registration;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
calendar month, except that, if there is no numerically corresponding
day in the month in which that period ends, that period shall end on
the last day in that calendar month;
a "regulation" includes any regulation, rule, official directive,
request or guideline (whether or not having the force of law) of any
governmental body, agency, department or regulatory, self-regulatory
or other authority or organisation;
"tax" includes any present or future tax, levy, impost, duty, charge,
fee deduction or withholding of any nature and whatever called by
whomsoever and wherever imposed, levied, collected, withheld or
assessed;
the "windfall tax" is a reference to any tax substantially similar to
the windfall tax provided for by Part I and Schedules 1 and 2 of the
Finance Bill ordered to be printed by the House of Commons on 7th
July, 1997.
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(ii) a provision of law is a reference to that provision as amended or
re-enacted;
(iii) a Clause or a Schedule is a reference to a clause of or a schedule to
this Agreement;
(iv) a person includes its successors and assigns;
(v) a Finance Document or another document is a reference to that Finance
Document or other document as amended, novated or supplemented; and
(vi) a time of day is a reference to London time.
(b) Unless the contrary intention appears, a term used in any other Finance
Document or in any notice given under or in connection with any Finance
Document has the same meaning in that Finance Document or notice as in this
Agreement.
(c) The index to and the headings in this Agreement are for convenience only
and are to be ignored in construing this Agreement.
1.3 Financial definitions
In this Agreement Adjusted Share Capital and Reserves as at the end of a
Relevant Period, and EBITDA, Interest Payable and Interest Receivable for
any Relevant Period shall be determined or calculated by reference to the
financial statements of the Borrower for that Relevant Period delivered to
the Bank under Clause 16.2 (Financial information).
2. THE FACILITY
(a) Subject to the terms of this Agreement, the Bank agrees:
(i) to make Facility A Loans available during the Facility A Commitment
Period up to an aggregate principal amount not exceeding the Facility
A Commitment; and
(ii) to make Facility B Loans available during the Facility B Commitment
Period up to an aggregate principal amount not exceeding at any time
the Facility B Commitment.
(b) No more than 10 Loans shall be outstanding at any time.
3. PURPOSE
The Borrower shall apply each Loan towards its general corporate purposes
including (without limitation) prepayment of the Existing Facility. Without
affecting the obligations of the Borrower in any way, the Bank is not bound
to monitor or verify the application of any Loan.
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4. CONDITIONS PRECEDENT
4.1 Documentary conditions precedent
The obligations of the Bank to the Borrower under this Agreement are
subject to the condition precedent that it has received all of the
documents set out in Schedule 1 in the agreed form.
4.2 Further conditions precedent
The obligation of the Bank to make any Loan is subject to the further
conditions precedent that on both the date of the Request and the Drawdown
Date:-
(a) the representations and warranties in Clause 15 (Representations and
warranties) to be repeated on those dates are correct in all material
respects and will be correct in all material respects immediately
after the Loan is made; and
(b) (i) (in the case of a Loan other than a Rollover Loan) no Default
(ii) in the case of a Rollover Loan, no Event of Default
is outstanding or would result from the making of the Loan.
5. DRAWDOWN
5.1 Commitment Period
(a) The Borrower may borrow a Loan during the relevant Commitment Period if the
Bank receives, not later than:
(i) 4.00 p.m. on the Business Day before the proposed Drawdown Date (in
the case of Facility A); or;
(ii) 10.00 a.m. on the proposed Drawdown Date (in the case of Facility B),
a duly completed Request.
(b) The undrawn amount (if any) of the Facility A Commitment shall
automatically be cancelled at close of business on the Term Date and the
Facility B Commitment shall automatically be cancelled in full on the
Repayment Date.
5.2 Completion of Requests
A Request will not be regarded as having been duly completed unless:-
(a) the Drawdown Date is a Business Day (which, in the case of Facility A,
must fall on or before the Term Date);
(b) the Facility under which the Loan is to be made is specified;
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(c) the principal amount of the Loan is a minimum of (pound)25,000,000 (in
the case of Facility A) or (pound)1,000,000 (in the case of Facility
B) and (in each case) an integral multiple of (pound)1,000,000 or the
balance of the relevant undrawn Commitment;
(d) the first Interest Period selected complies with Clause 8 (Interest
Periods); and
(e) the payment instructions comply with Clause 10 (Payments).
Each Request must specify one Loan only, but the Borrower may, subject to
the other terms of this Agreement, deliver more than one Request on any one
day.
5.3 Advance of Loan
Subject to the terms of this Agreement, the Bank shall make the Loan
available to the Borrower on the relevant Drawdown Date.
6. REPAYMENT
6.1 Facility A
The Borrower shall repay each Facility A Loan in full on the Repayment
Date.
6.2 Facility B
The Borrower shall repay each Facility B Loan in full on the last day of
the Interest Period for that Facility B Loan.
6.3 Reborrowing
(a) Amounts repaid under Facility B may be re-borrowed, in accordance with the
terms of this Agreement, prior to the Repayment Date.
(b) Subject to paragraph (a) above, no amount repaid under this Agreement may
be re-borrowed.
7. PREPAYMENT AND CANCELLATION
7.1 Voluntary prepayment
The Borrower may at any time, by giving not less than 7 days' prior notice
to the Bank, prepay any Loan in whole or in part (but, if in part, in a
minimum amount of (pound)10,000,000 and an integral multiple of
(pound)1,000,000).
7.2 Voluntary cancellation
The Borrower may, by giving not less than 7 days' prior notice to the Bank,
cancel the undrawn amount of either Commitment in whole or in part (but, if
in part, in a minimum amount of (pound)10,000,000 and an integral multiple
of (pound)1,000,000).
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7.3 Additional right of prepayment and cancellation
If:-
(a) the Borrower is required to pay to the Bank any additional amounts
under Clause 11 (Taxes); or
(b) the Borrower is required to pay to the Bank any amount under Clause 13
(Increased costs); or
(c) interest on a Loan is being calculated in accordance with Clause 12.2
(Alternative basis),
then, without prejudice to the obligations of the Borrower under those
Clauses, the Borrower may, whilst the circumstances continue, serve a
notice of prepayment and cancellation on the Bank. On the date falling 5
Business Days after the date of service of the notice:-
(i) the Borrower shall prepay all the Loans; and
(ii) the undrawn Commitment shall be cancelled.
7.4 Miscellaneous provisions
(a) Any notice of prepayment and/or cancellation under this Agreement is
irrevocable.
(b) All prepayments under this Agreement shall be made together with accrued
interest on the amount prepaid.
(c) No prepayment or cancellation is permitted except in accordance with the
express terms of this Agreement.
(d) No amount prepaid under Facility A may subsequently be re-borrowed. Subject
to the terms of this Agreement amounts prepaid under Facility B may be
reborrowed. No amount of a Commitment cancelled under this Agreement may
subsequently be reinstated.
8. INTEREST PERIODS
8.1 General
(a) Each Facility A Loan shall have successive Interest Periods.
(b) Each Facility B Loan shall have one Interest Period only.
(c) Any Interest period which would otherwise end during the week preceding, or
extend beyond the Repayment Date shall be of such duration that it shall
end on the Repayment Date.
8.2 Selection
(a) The Borrower may select an Interest Period for a Loan in either the
relevant Request or, if (in the case of a Facility A Loan) the Loan has
been borrowed, a notice received by the Bank not later than 4.00 p.m. on
the Business Day before the commencement of that Interest Period.
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Each Interest Period for a Loan will commence on its Drawdown Date or (in
the case of a Facility A Loan) the expiry of its preceding Interest Period.
(b) Subject to the following provisions of this Clause 8, each Interest Period
will be either an approved duration or an optional duration as so selected
under paragraph (a) above.
In this Clause 8:-
"approved duration" means 1 or 2 weeks or 1, 2, 3 or 6 months; and
"optional duration" means any other period agreed by the Bank.
(c) If the Borrower fails to select an Interest Period for an outstanding
Facility A Loan in accordance with paragraph (a) above, that Interest
Period will, subject to the other provisions of this Clause 8, be one
month.
(d) No Interest Period for a Facility B Loan may extend beyond the Repayment
Date.
8.3 Selection of an optional duration
(a) If the Borrower selects an Interest Period of an optional duration, it may
also select an Interest Period of an approved duration to apply if the
selection of an optional duration becomes ineffective in accordance with
paragraph (b) below.
(b) If:-
(i) the Borrower requests an Interest Period of an optional duration; and
(ii) the Bank notifies the Borrower not later than 10.30 a.m. on the first
Business Day of that Interest Period that matching deposits are not
available to it in the London interbank market to fund the Loan for
that Interest Period,
the Interest Period for that Loan shall be the alternative period so
specified or, in the absence of any alternative selection, one month.
8.4 Non-Business Days
If an Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period shall instead end on the next Business Day in
that calendar month (if there is one) or the preceding Business Day (if
there is not).
8.5 Consolidation and splitting
(a) Notwithstanding Clause 8.2 (Selection), the first Interest Period for each
Facility A Loan shall end on the same day as the current Interest Period
for any other Facility A Loan. On the last day of those Interest Periods,
those Loans shall be consolidated and treated as one Loan.
(b) The Borrower may, subject to Clause 2(b), in any notice selecting an
Interest Period for an outstanding Facility A Loan under Clause 8.2
(Selection), direct that the Facility A Loan in question shall, at the
beginning of that Interest Period be divided into (and thereafter be
treated for all purposes under this Agreement as) two Facility A Loans in
such amount each
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being a minimum of (pound)25,000,000 and an integral multiple of
(pound)1,000,000 as the Borrower shall specify and on the first day of the
Interest Period to which that notice relates those Facility A Loans shall
be so divided.
8.6 Other adjustments
The Bank and the Borrower may enter into such other arrangements as they
may agree for the adjustment of Interest Periods and the consolidation
and/or splitting of Loans.
9. INTEREST
9.1 Interest rate
The rate of interest on each Loan for each of its Interest Periods is the
rate per annum determined by the Bank to be the aggregate of the
applicable:-
(a) Margin;
(b) LIBOR; and
(c) MLA Cost.
9.2 Due dates
Except as otherwise provided in this Agreement, accrued interest on each
Loan is payable by the Borrower on the last day of each Interest Period for
that Loan and also, if the Interest Period is longer than 6 months, on the
date falling 6 months after the first day of that Interest Period.
9.3 Default interest
(a) If the Borrower fails to pay any amount payable by it under this Agreement,
it shall forthwith on demand by the Bank pay interest on the overdue amount
from the due date up to the date of actual payment, as well after as before
judgment, at a rate (the "default rate") determined by the Bank to be 1 per
cent. per annum above the rate which would have been payable if the overdue
amount had, during the period of non-payment, constituted a Loan in the
currency of the overdue amount for such successive Interest Periods of such
duration as the Bank may determine (each a "Designated Interest Period").
(b) The default rate will be determined by the Bank on each Business Day or the
first day of, or two Business Days before the first day of, the relevant
Designated Interest Period, as appropriate.
(c) If deposits in the currency of the overdue amount are not at the relevant
time being made available by the Bank to leading banks in the London
interbank market, the default rate will be determined by reference to the
cost of funds to the Bank from whatever sources it may select.
(d) Default interest will be compounded at the end of each Designated Interest
Period.
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10. PAYMENTS
10.1 Place
All payments under this Agreement shall be made to the relevant Party to
its account at such office or bank in the U.K. as it may notify to the
other Party for this purpose.
10.2 Funds
Payments under this Agreement shall be made for value on the due date at
such times and in such funds as the Bank may specify as being customary at
the time for the settlement of transactions in sterling.
10.3 Currency
(a) Amounts payable in respect of costs, expenses and taxes and the like are
payable in the currency in which they are incurred.
(b) Any other amount payable under this Agreement is, except as otherwise
provided in this Agreement, payable in sterling.
10.4 Set-off and counterclaim
All payments made by the Borrower under this Agreement shall be made
without set-off or counterclaim.
10.5 Non-Business Days
(a) If a payment under this Agreement is due on a day which is not a Business
Day, the due date for that payment shall instead be the next Business Day
in the same calendar month (if there is one) or the preceding Business Day
(if there is not).
(b) During any extension of the due date for payment of any principal under
this Agreement interest is payable on that principal at the rate payable on
the original due date.
11. TAXES
11.1 Gross-up
Subject to Clause 11.4 (Exceptions from gross-up), each payment to be made
by the Borrower under this Agreement shall be made free and clear of and
without deduction or withholding (whether for or on account of tax or
otherwise) unless the Borrower is required by law to make such a payment
subject to such deduction or withholding in respect of any taxes imposed by
laws of the United Kingdom or any federation or association of sovereign
states of which the United Kingdom is a member, in which case the sum
payable by the Borrower in respect of which such deduction or withholding
is required to be made shall (subject as provided in this Clause) be
increased to the extent necessary to ensure that, after the making of such
deduction or withholding, the Bank receives and retains (free from any
liability in respect of any such deduction or withholding) a net sum equal
to the sum which it would have received and so retained had no such
deduction or withholding been made or required to be made.
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11.2 Tax receipts
Within 30 days after paying any sum from which it is required by law to
make any deduction or withholding, the Borrower shall deliver to the Bank
evidence satisfactory to the Bank of that deduction, withholding or payment
and (where remittance is required) of the remittance thereof to the
relevant taxing or other authority (a receipt by the relevant taxing or
other authority being deemed to be such evidence).
11.3 Tax credits
If the Borrower makes a payment under Clause 11.1 (Gross-up) for the
account of the Bank and the Bank determines that it has received or been
granted a credit against or relief or remission for, or repayment of, any
tax paid or payable by it in respect of or calculated with reference to the
deduction or withholding under Clause 11.1 (Gross-up) the Bank shall, to
the extent that it can do so without prejudice to the retention of the
amount of such credit, relief, remission or repayment, pay to the Borrower
such amount as the Bank determines is attributable to such deduction or
withholding under Clause 11.1 (Gross-up) and which will leave the Bank
(after such payment) in no better or worse position than it would have been
in if the Borrower had not been required to make such deduction or
withholding under Clause 11.1 (Gross-up). Nothing in this Clause 11.3 shall
interfere with the right of the Bank to arrange its tax affairs in whatever
manner it thinks fit nor oblige the Bank to disclose any information
relating to its tax affairs or any computations in respect thereof.
11.4 Exceptions from gross-up
(a) If:
(i) the Bank is not or ceases to be a Qualifying Bank; and
(ii) as a result the Borrower is required to deduct or withhold United
Kingdom income tax in respect of payments of interest to be made by
the Borrower to the Bank under this Agreement,
then the Borrower shall not be liable to pay under Clause 11.1 (Gross-up)
in respect of any such payment of interest any amount in excess of the
amount it would have been obliged to pay if the Bank were a Qualifying Bank
provided that this Clause 11.4 shall not apply if, after the date of this
Agreement any change occurs in, or in the official interpretation or
application of, any relevant law or the practice of the United Kingdom
Inland Revenue and as a result thereof the Bank is not or ceases to be a
Qualifying Bank.
(b) The obligation of the Borrower to pay an additional amount under Clause
11.1 (Gross-up) shall not apply to the extent that the tax deducted is tax
on the overall net income of the Bank save to the extent that such tax is
in respect of the relevant payment from which the deduction must be made.
11.5 Notification
If at any time after the date of this Agreement the Bank is aware that it
is not or will cease to be a Qualifying Bank (for whatever reason), it
shall promptly notify the Borrower.
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12. MARKET DISRUPTION
12.1 Market disruption
If, by reason of circumstances affecting the London interbank market
generally, the Bank is unable to make any determination of LIBOR, the Bank
shall promptly notify the Borrower of the fact and that this Clause 12
(Market disruption) is in operation.
12.2 Alternative basis
(a) If a notification under Clause 12.1 (Market disruption) applies to a Loan
which has not been made:
(i) that Loan shall still be made;
(ii) the first Interest Period of that Loan shall be one month; and
(iii) interest in respect of that Loan shall be calculated in accordance
with paragraph (b) below.
(b) If a notification under Clause 12.1 (Market disruption) applies to a Loan
then, notwithstanding any other provision of this Agreement:
(i) within 5 Business Days of receipt of the notification, the Borrower
and the Bank shall enter into negotiations for a period of not more
than 30 days with a view to agreeing an alternative basis for
determining the rate of interest and/or funding applicable to that
Loan and/or any other Loans;
(ii) if no alternative basis is agreed, the Bank shall certify on or before
the last day of the Interest Period to which the notification relates
an alternative basis for maintaining that Loan, which shall be binding
on the Borrower; and
(iii) any such alternative basis may include an alternative method of
fixing the interest rate, alternative Interest Periods or alternative
currencies but it must reflect the cost to the Bank of funding the
Loan from whatever sources it may select plus the Margin plus any MLA
Cost.
(c) The Bank shall consult with the Borrower at least once every 14 days after
the occurrence and during the continuance of the circumstances specified in
the foregoing provisions of this Clause 12 with a view to reverting to the
normal provisions for the determination of the rates of interest applicable
to any Loan under this Agreement.
13. INCREASED COSTS
13.1 Increased costs
(a) Subject to Clause 13.2 (Exceptions), the Borrower shall within 5 Business
Days of a demand by the Bank pay to the Bank the amount of any increased
cost incurred by it as a result of any change in or change in the
interpretation or application of any law or regulation (including any law
or regulation relating to taxation, or reserve asset, special deposit, cash
ratio, liquidity or capital adequacy requirements or any other form of
banking or monetary
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control). Any such demand shall set out in reasonable detail the
calculation and the cause of the amounts claimed and contain confirmation
that the Bank is taking the same approach in relation to the majority of
its other facilities of a similar nature.
(b) In this Agreement "increased cost" means:
(i) an additional cost incurred by the Bank as a result of it having
entered into, or performing, maintaining or funding its obligations
under, this Agreement; or
(ii) that portion of an additional cost incurred by the Bank in making,
funding or maintaining all or any advances comprised in a class of
advances formed by or including the Loans made or to be made under
this Agreement as is attributable to it making, funding or maintaining
the Loans; or
(iii) a reduction in any amount payable to the Bank or the effective return
to the Bank under this Agreement or on its capital; or
(iv) the amount of any payment made by the Bank, or the amount of any
interest or other return foregone by the Bank, calculated by reference
to any amount received or receivable by the Bank under this Agreement.
13.2 Exceptions
Clause 13.1 (Increased costs) does not apply to any increased cost:-
(a) compensated for by the payment of the MLA Cost;
(b) compensated for by the operation of Clause 11 (Taxes) or which would
have been compensated under that Clause but for the operation of
Clause 11.4 (Exceptions from gross-up);
(c) attributable to any change in the rate of tax on the overall net
income of the Bank;
(d) occurring as a result of any negligence or default of the Bank,
including, without limitation, a breach by the Bank of any fiscal,
monetary or capital adequacy limit imposed on it by any law or
regulation; or
(e) any increased cost attributable to any implementation of the proposals
contained in any of:-
(i) the statement of the Basle Committee on Banking Regulations and
Supervisory Practices dated July 1988 and entitled "International
Convergence of Capital Measurement and Capital Standards"; or
(ii) the EC Solvency Ratio Directive, EC Own Funds Directive, or EC
Capital Adequacy Directive or any law, regulation, rule, official
directive, request or guideline (whether or not having the force
of law) of any governmental body, central bank, agency,
department, regulatory, self-regulatory or other authority in any
jurisdiction, implementing, applying or supplementing any of them
with which the Bank complies or is required to comply,
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in each case as published before the date of this Agreement unless it
results from any change in, or change in the interpretation of or
application of, that statement, Directive, law, regulation, rule,
official directive, request or guideline after the date of this
Agreement.
14. ILLEGALITY AND MITIGATION
14.1 Illegality
If it is or becomes unlawful in any jurisdiction for the Bank to give
effect to any of its obligations as contemplated by this Agreement or to
fund or maintain any Loan, then:-
(a) the Bank may notify the Borrower accordingly; and
(b) (i) the Borrower shall forthwith prepay all or part of the Loans to
the extent necessary to avoid the relevant illegality together
with accrued interest on that portion of the Loan; and
(ii) the undrawn Commitments shall be reduced to such amount as would
be lawful or (if no such amount would be lawful) to zero,
in each case, on the last day before the relevant unlawfulness takes
effect.
14.2 Mitigation
If circumstances arise which would, or would on the giving of notice,
result in:-
(a) any additional amounts becoming payable under Clause 11 (Taxes); or
(b) any amount becoming payable under Clause 13 (Increased costs); or
(c) any prepayment, early payment or cancellation under Clause 14.1
(Illegality),
then, without limiting the obligations of the Borrower under this Agreement
and without prejudice to the terms of Clauses 11 (Taxes), 13 (Increased
costs) and 14.1 (Illegality), the Bank shall, in consultation with the
Borrower, take such steps as may be open to it to mitigate or remove such
circumstance, including (without limitation) the transfer of its rights and
obligations under this Agreement to another branch or another bank or
financial institution acceptable to the Borrower, unless to do so would (in
the opinion of the Bank) be prejudicial to it.
15. REPRESENTATIONS AND WARRANTIES
15.1 Representations and warranties
The Borrower makes the representations and warranties set out in this
Clause 15 (Representations and warranties) to the Bank.
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15.2 Status
(a) It is a limited liability company, duly incorporated and validly existing
under the laws of England;
(b) each member of the Group has the power to own its assets and carry on its
business as it is being conducted;
(c) (i) Holdings is the direct, wholly owned, Subsidiary of the Borrower; and
(ii) the Company is the direct, wholly owned, Subsidiary of Holdings; and
(d) the Company has been duly licensed by the Secretary of State under Section
6(I)(c) of the Electricity Act 1989.
15.3 Powers and authority
It has the power to enter into and perform, and has taken all necessary
action to authorise the entry into, performance and delivery of, the
Finance Documents to which it is or will be a party and the transactions
contemplated by those Finance Documents.
15.4 Legal validity
Each Finance Document to which it is or will be a party constitutes, or
when executed in accordance with its terms will constitute, its legal,
valid and binding obligation.
15.5 Non-conflict
The entry into and performance by it of, and the transactions contemplated
by, the Finance Documents do not and will not:-
(a) conflict with the Company's Licence or any law or regulation or
judicial or official order; or
(b) conflict with the constitutional documents of any member of the Group;
or
(c) conflict with any document which is binding upon any member of the
Group or any asset of any member of the Group,
in any such case to an extent or in a manner which would have a material
adverse effect on the ability of the Borrower to perform its payment
obligations under this Agreement or its ability to comply with Clause 16.17
(Financial covenants).
15.6 No default
No Event of Default or Default is outstanding which has not been remedied
or waived or would result from the making of any Loan.
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15.7 Authorisations
All authorisations required in connection with the entry into, performance
and validity of, and the transactions contemplated by, the Finance
Documents have been obtained or effected (as appropriate) and are in full
force and effect.
15.8 Accounts
(a) On and from the date that audited consolidated accounts of the Group are
first delivered to the Bank under Clause 16.2 (Financial information), the
audited consolidated accounts of the Group most recently delivered to the
Bank:-
(i) have been prepared in accordance with accounting principles and
practices generally accepted in the United Kingdom; and
(ii) (in conjunction with the notes thereto) give a true and fair view of
the consolidated financial condition of the Group as at the date to
which they were drawn up; and
(b) except as disclosed to the Bank, there has been no material adverse change
in the Borrower's ability to make payments as they fall due since the date
of the financial projections referred to in Clause 2.1.11 of the Existing
Facility.
15.9 Litigation
Save as disclosed in writing to the Bank prior to the date of this
Agreement no litigation or arbitration is current or, to its knowledge,
pending or has been threatened in writing, which are likely to be
determined adversely to it and, if so determined, might reasonably be
likely to have a material adverse effect on the ability of the Borrower to
perform its payment obligations under this Agreement or on its ability to
comply with Clause 16.17 (Financial covenants).
15.10 Licence
The Licence is in full force and effect, there exist no material breaches
of the terms of the Licence and there are no circumstances in existence
which would be likely to lead the Director General or the Secretary of
State to seek to revoke the Licence except in each case where the relevant
event or circumstances would not have a material adverse effect on the
ability of the Borrower to comply with its payment obligations under this
Agreement or on its ability to comply with Clause 16.17 (Financial
covenants).
15.11 Times for making representations and warranties
The representations and warranties set out in this Clause 15
(Representations and warranties):-
(a) are made on the date of this Agreement; and
(b) (other than the representations in Clauses 15.2(d) (Status), 15.8(b)
(Accounts) and 15.9 (Litigation)) are deemed to be repeated by the
Borrower on the date of each Request and the first day of each
Interest Period with reference to the facts and
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circumstances then existing but as if the words in Clause 15.6 (No
default) "or Default" had been deleted.
16. UNDERTAKINGS
16.1 Duration
The undertakings in this Clause 16 (Undertakings) remain in force from the
date of this Agreement for so long as any amount is or may be outstanding
under this Agreement or any Commitment is in force.
16.2 Financial information
The Borrower shall supply to the Bank:-
(a) as soon as the same are available (and in any event within 180 days of
the end of each of its financial years), the audited consolidated
accounts of the Group for that financial year;
(b) as soon as the same are available (and in any event within 90 days of
the end of the first half-year of each of its financial years), the
unaudited consolidated accounts of the Group for that half-year; and
(c) together with the accounts specified in paragraphs (a) and (b) above,
a certificate signed by two of its directors on its behalf setting out
in reasonable detail computations establishing compliance with Clause
16.17 (Financial covenants),
and all such accounts supplied under paragraphs (a) or (b) above shall be
prepared in accordance with accounting principles generally accepted in
England.
16.3 Information - Miscellaneous
The Borrower shall supply to the Bank:-
(a) all documents despatched by it to its creditors generally or (if it is
not a close company within the meaning of Section 414 of the Income
and Corporation Taxes Act, 1988) to its shareholders generally (or any
class of its shareholders generally) at the same time as they are
despatched; and
(b) promptly upon becoming aware of them, details of any litigation,
arbitration or administrative proceedings which are current,
threatened in writing or pending, and which if they had been current
or threatened in writing on the date of this Agreement would have
resulted in the representation in Clause 15.9 (Litigation) being
incorrect in any material respect.
16.4 Notification of Default
The Borrower shall notify the Bank of any Event of Default (and the steps,
if any, being taken to remedy it) promptly upon its occurrence.
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16.5 Compliance certificates
The Borrower shall supply to the Bank:-
(a) together with the accounts specified in Clause 16.2(a) (Financial
information); and
(b) promptly if the Bank so requests (but no more often than twice in a
calendar year (excluding the certificate under paragraph (a) above)),
a certificate signed by two of its directors on its behalf certifying that
no Default is outstanding or, if a Default is outstanding, specifying the
Default and the steps, if any, being taken to remedy it.
16.6 Authorisations
The Borrower shall:-
(a) use all reasonable endeavours to obtain, maintain and comply in all
material respects with the terms of; and
(b) (if requested) supply certified copies to the Bank of,
any authorisation required under any law or regulation to enable it to
perform its obligations under, or for the validity or admissibility in
evidence of, any Finance Document.
16.7 Pari passu ranking
The Borrower shall procure that its obligations under the Finance Documents
do and will rank at least pari passu with all its other present and future
unsecured obligations, except for taxes, national insurance contributions,
local or water authority rates and employee remuneration and benefits which
are mandatorily preferred by law applying to companies generally or by the
Electricity Act 1989.
16.8 Negative pledge
(a) The Borrower shall not, and shall procure that neither Holdings, the
Company nor any other Principal Subsidiary will, create or permit to
subsist any Security Interest on any of its assets.
(b) (i) The Borrower shall not create or permit to subsist any Security
Interest on any of its shares in or loans to Holdings; and
(ii) the Borrower shall procure that Holdings will not create or permit to
subsist any Security Interest in any of its shares in or loans to the
Company.
(c) Paragraph (a) does not apply to Permitted Security Interests or to Security
Interests arising under the Electricity Act 1989.
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16.9 Transactions similar to security
The Borrower shall not, and shall procure that Holdings will not:-
(a) sell, transfer or otherwise dispose of any of its assets on terms
whereby it is or may be leased to or re-acquired or acquired by a
member of the Group or any of its related entities; or
(b) (except as permitted under Clause 16.10 (Disposals)) sell, transfer or
otherwise dispose of any of its receivables on recourse terms, except
for the discounting of bills or notes in the ordinary course of
trading,
in circumstances where the transaction is entered into primarily as a
method of raising finance or of financing the acquisition of an asset.
16.10 Disposals
(a) The Borrower will not sell, transfer or otherwise dispose of or cease to
exercise direct control over any of its shares in Holdings.
(b) The Borrower will procure that Holdings does not sell, transfer or
otherwise dispose of or cease to exercise direct control over any of the
shares in the Company owned by Holdings.
(c) The Borrower will not, and will procure that Holdings does not dispose of
all or any material part of its assets other than those referred to in
paragraphs (a) and (b) above.
(d) The Borrower shall procure that neither the Company nor any other Principal
Subsidiary (other than Holdings) shall either in a single transaction or in
a series of transactions, whether related or not and whether voluntarily or
involuntarily sell, transfer, grant or lease or otherwise dispose of all or
any substantial part of its assets if the relevant disposal would have a
material adverse effect on the ability of the Borrower to perform its
payment obligations under this Agreement or its ability to comply with
Clause 16.17 (Financial covenants).
Paragraphs (c) and (d) above do not apply to:
(i) sales, conveyances, transfers or other disposals in the ordinary
course of business on arm's length terms or otherwise at market value;
or
(ii) sales, conveyances, transfers or other disposals the aggregate book
value of which is at the time of the final such disposal in any
financial year 7.5% or less of Adjusted Share Capital and Reserves; or
(iii) disposals to another member of the Group; or
(iv) disposals of assets in exchange for other assets similar as to type
and value or where all or a substantial part of the net proceeds of
such disposal are used within 60 days of the disposal (or such longer
period as the Bank may agree) in the acquisition of such assets; or
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(v) disposals of cash raised or borrowed or temporary investments
representing surplus funds; or
(vi) the expenditure of cash in the ordinary course of business including,
without limitation, for the repayment of any debt or the acquisition
of any asset; or
(vii) the payment of any dividend or distribution whatsoever and whether
extraordinary or special in nature or otherwise, in each case, in cash
or in specie; or
(viii) disposals on normal commercial terms of old and/or obsolete plant or
equipment; or
(ix) any distribution of the surplus assets of a Subsidiary (not being a
Principal Subsidiary) in a liquidation or winding up not involving
insolvency; or
(x) any disposal, transfer or distribution arising out of or in connection
with a scheme of arrangement or other reorganisation of the Borrower
and/or any of its Subsidiaries; or
(xi) disposals (with or without recourse) of receivables at arm's length
and on normal commercial terms (or by way of securitisation or
monetisation); or
(xii) the sale at arm's length of any of the shares in Ionica PLC owned by
the Company; or
(xiii) with the prior written consent of the Bank.
16.11 Change of business
Unless the Bank otherwise agrees or the change arises by operation of law,
the Borrower shall not permit the Group as a whole to make any substantial
change in the nature of its business as a distributor and/or supplier of
electricity within its authorised area which would adversely affect the
Borrower's ability to comply with its payment obligations under this
Agreement or its ability to comply with Clause 16.17 (Financial covenants).
16.12 Restriction on Borrowings
None of the Borrower, Holdings and the Company will incur or have
outstanding any Borrowings other than:
(a) under the Finance Documents;
(b) for the purpose of refinancing the Facility in full on the date on
which such Borrowings are first utilised;
(c) for the purpose of refinancing part of the Facility so long as all
utilisations of such Borrowings shall be applied first to repay
outstanding Facility A Loans (and if any portion of the Borrowings
referred to above remains unused after the Facility A Loans have been
repaid or prepaid in full, an amount of the Facility B Commitments
equal to the amount of that portion shall be cancelled);
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(d) in the case of the Company, Borrowings not exceeding, in aggregate
(pound)250,000,000 provided that the documents evidencing such
Borrowings do not contain any prohibition or restriction on the
ability of the Company to pay dividends or make distributions or make
other payments to Holdings;
(e) Borrowings owing to another member of the Group;
(f) Subordinated Debt;
(g) in the case of the Company and its Subsidiaries, Borrowings existing
at the time the Company became a subsidiary of Holdings and any
replacement of such Borrowings in the same or a lower amount;
(h) in the case of the Borrower and its Subsidiaries, Borrowings secured
by Permitted Security Interests;
(i) in the case of the Borrower and its Subsidiaries, Borrowings under any
recourse disposal of receivables;
(j) Project Finance Borrowings;
(k) with the prior written consent of the Bank; or
(l) any other Borrowings in an amount not exceeding (pound)15,000,000.
16.13 Environmental Matters
The Borrower will ensure that each member of the Group will:
(a) obtain all necessary Environmental Licences and comply in all material
respects with (i) the terms and conditions of all Environmental
Licences applicable to it and (ii) all other applicable Environmental
Laws in each case where failure to do so would have a material adverse
effect on the ability of the Borrower to comply with its payment
obligations under this Agreement or its ability to comply with Clause
16.17 (Financial covenants);
(b) promptly upon receipt of the same, notify the Bank of any claim,
notice or other communication served on it in respect of any alleged
breach of or corrective or remedial obligation or liability under any
Environmental Law which would or would be likely to or (in the case of
an alleged breach), if substantiated, would have a material adverse
effect on the ability of the Borrower to comply with its payment
obligations under this Agreement or its ability to comply with Clause
16.17 (Financial covenants).
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16.14 Company distributions etc.
Subject to:
(a) compliance with all applicable laws, directives and consents
(including, without limitation, the Electricity Act, 1989 and the
conditions of the Licence) by the Company or, as the case may be, the
relevant Subsidiary; and
(b) retention of cash by the Company or, as the case may be, the relevant
Subsidiary to meet its projected cash requirements,
the Borrower will procure that the Company does not enter into any
agreement prohibiting it from, and will use all reasonable endeavours to
procure that the Company and/or each other member of the Group does
distribute, lend or otherwise transfer so as to be received directly or
indirectly by the Borrower, such cash from time to time as may be required
from time to time to meet and provide for the Borrower's payment
obligations under the Finance Documents, save to the extent to which funds
for that purpose are provided from another source.
16.15 Clear Market
There will not (without the prior written consent of the Bank (not to be
unreasonably withheld)) be any public or private financing in the domestic
(whether in the United Kingdom or the United States) or international bank
or capital markets for the Borrower or Holdings other than:
(a) an Anticipated Refinancing; or
(b) short term financings entered into in the ordinary course of business
of the Group.
16.16 Licence
(a) To the extent that the Borrower's ability to perform its payment
obligations under this Agreement or its ability to comply with Clause 16.17
(Financial covenants) would otherwise be materially adversely affected, the
Borrower will procure that the Company complies with all terms and
conditions of the Licence and with the requirements of all laws, rules,
regulations, orders and other requirements for the time being of the
Secretary of State and the Director General applicable to the Company with
which it is obliged to comply; and
(b) the Borrower will promptly notify the Bank of any significant amendments to
the Licence occurring after the date of this Agreement.
16.17 Financial covenants
The Borrower shall procure that:
(a) the ratio of Debt to Capitalisation does not at any time exceed 79%;
and
(b) EBITDA of the Group for any Relevant Period shall not be less than
2.00 times Net Interest Payable for that Relevant Period.
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17. DEFAULT
17.1 Events of Default
Each of the events set out in Clauses 17.2 (Non-payment) to 17.14
(Ownership of the Company) (inclusive) is an Event of Default (whether or
not caused by any reason whatsoever outside the control of the Borrower or
any other person).
17.2 Non-payment
The Borrower does not pay any amount payable by it under the Finance
Documents on the due date at the place at and in the currency in which it
is expressed to be payable and, but only if such failure is due solely to
administrative error or technical difficulties, such non payment is not
remedied within 5 Business Days.
17.3 Breach of other obligations
(a) The Borrower does not comply with the provisions of Clause 16.17 (Financial
covenants).
(b) The Borrower does not comply with any provision of the Finance Documents
(other than those referred to in paragraph (a) above or Clause 17.2
(Non-Payment)) and such default, if capable of remedy, is not remedied
within 25 days after the earlier of the date upon which the Borrower became
aware of the same and the date on which the Borrower receives notice from
the Bank requiring remedy.
17.4 Misrepresentation
A representation, warranty or statement made or repeated in or in
connection with any Finance Document or in any document delivered by or on
behalf of the Borrower under or in connection with any Finance Document is
incorrect in any material respect when made or deemed to be made or
repeated.
17.5 Cross-default
(a) Any Borrowings of a member of the Group are not paid when due; or
(b) an event of default howsoever described occurs under any document relating
to Borrowings of a member of the Group and any financier to which those
Borrowings are owed takes any step to improve its commercial position,
whether by charging a fee not provided for in the original document
evidencing those Borrowings, or seeking more onerous provisions in that
document; or
(c) Any Borrowings of a member of the Group become prematurely due and payable
or are placed on demand as a result of an event of default under the
document relating to those Borrowings,
and the aggregate principal amount of Borrowings or amounts referred to in
paragraphs (a) to (c) (inclusive) above exceeds (pound)10,000,000 or its
equivalent in any other currency.
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17.6 Administration
(a) The Borrower or any Principal Subsidiary passes an effective resolution to
present an application for an administration order; or
(b) an application for an administration order in relation to the Borrower or a
Principal Subsidiary is presented to the court unless the application is
being contested in good faith on reasonable grounds by appropriate
proceedings; or
(c) an administration order is made in relation to the Borrower or any
Principal Subsidiary.
17.7 Insolvency
The Borrower or any Principal Subsidiary has any voluntary arrangement
proposed in relation to it under Section 1 of the Insolvency Act 1986, or
enters into any other composition, scheme of arrangement, compromise or
arrangement involving such company and its respective creditors generally
(other than for the purposes of reconstruction or amalgamation or other
similar arrangement).
17.8 Insolvency proceedings
(a) The Borrower or any Principal Subsidiary passes an effective resolution for
its winding up other than a resolution previously approved in writing by
the Bank, such approval not to be unreasonably withheld or delayed; or
(b) a petition for the winding up of the Borrower or any Principal Subsidiary
is presented to the court and either:
(i) such company does not apply to the court within 30 days after the
presentation of such petition requesting the court to refuse such
petition; or
(ii) it does so apply but such petition is not refused by such court within
60 days after such application for the refusal of such petition or any
such company becomes subject to a winding up order,
provided that nothing in this Clause 17.8 shall apply to a solvent
reconstruction, amalgamation or reorganisation of a Principal Subsidiary
or, subject to the prior approval of the Bank (not to be unreasonably
withheld or delayed), the Borrower.
17.9 Appointment of receivers and managers
Any liquidator, trustee in bankruptcy, compulsory manager, receiver,
administrative receiver, administrator or the like is appointed in respect
of the Borrower or any Principal Subsidiary or any material part of its
assets or undertaking or the directors of the Borrower or a Principal
Subsidiary request the appointment of a liquidator, trustee in bankruptcy,
compulsory manager, receiver, administrative receiver, administrator or the
like (other than an appointment to which the Bank has approved pursuant to
Clause 17.8 (Insolvency proceedings)).
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17.10 Unlawfulness
It is or becomes unlawful for the Borrower to perform any of its
obligations under the Finance Documents.
17.11 Licence
(a) Any modification (other than a modification which is of a formal, minor or
technical nature) is made to the terms and conditions of the Company's
Licence and such modification would be expected to have a material adverse
effect on the Borrower's ability to perform its payment obligations under
this Agreement or its ability to comply with Clause 16.17 (Financial
covenants); or
(b) the Company's Licence (excluding any second tier supply licence) is
surrendered by the Company or revoked by the Secretary of State (and not
replaced on substantially similar terms) in accordance with the terms of
the Licence except where such revocation has been agreed between the
Company and the Secretary of State and consented to by the Bank and
provided that the giving of notice pursuant to paragraph 3 of Part 1 of the
Licence shall not be deemed to constitute the revocation of the Licence.
17.12 Pooling and Settlement Agreement
Any notice requiring the Company to cease to be a party to the Pooling and
Settlement Agreement is given to the Company under clause 66.1.3 or 66.2.2
of the Pooling and Settlement Agreement, or the Company otherwise ceases to
be a party to that agreement and the same has a material adverse effect on
the Borrower's ability to comply with its payment obligations under this
Agreement or its ability to comply with Clause 16.17 (Financial covenants).
17.13 Ownership of the Borrower
At least 50% of the ordinary voting shares in the capital of the Borrower
cease to be owned, directly or indirectly, by American Electric Power
Company Inc. or Public Supply Company of Colorado (or their respective
wholly owned Subsidiaries) taken together.
17.14 Ownership of the Company
The Company is not or ceases to be a direct or indirect wholly owned
Subsidiary of the Borrower.
17.15 Acceleration
On and at any time after the occurrence of an Event of Default while the
same is continuing, unremedied or unwaived the Bank may, by notice to the
Borrower:
(a) cancel the Commitment; and/or
(b) demand that all or part of the Loans, together with accrued interest
and all other amounts accrued under this Agreement be immediately due
and payable, whereupon they shall become immediately due and payable;
and/or
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(c) demand that all or part of the Loans be payable on demand, whereupon
they shall immediately become payable on demand.
18. FEES
18.1 Front-end fee
The Borrower shall pay to the Bank a front-end fee in the amount agreed in
the Fee Letter. The front end fee is payable on the Term Date or (if
earlier) the First Drawdown Date under this Agreement.
18.2 Commitment fee
(a) From close of business on the Term Date to and including the Repayment
Date, the Borrower shall pay to the Bank a commitment fee on the undrawn,
uncancelled amount of the Commitments during the Commitment Period computed
at the rates set out below:
(i) for the period from the Term Date to and including the date falling
three months after the date of this Agreement, 0.0625 per cent. per
annum;
(ii) thereafter, to and including the date falling six months after the
date of this Agreement, 0.10 per cent. per annum; and
(iii) thereafter 0.15 per cent. per annum.
(b) Accrued commitment fee is payable quarterly in arrear from the date of this
Agreement and on the earlier of the Repayment Date and the date of
cancellation of the Commitments in full. Accrued commitment fee is also
payable to the Bank on the cancelled amount of the Commitment at the time
the cancellation takes effect.
18.3 VAT
Any fee referred to in this Clause 18 (Fees) is exclusive of any value
added tax or any other tax which might be chargeable in connection with
that fee. If any value added tax or other tax is so chargeable, it shall be
paid by the Borrower at the same time as it pays the relevant fee.
19. EXPENSES
Each Party shall within 30 Business Days of a demand pay to the other (the
"claiming party") the amount of all costs and expenses (including legal
fees) properly incurred by the claiming party in connection with the
enforcement of, or the preservation of any rights under, any Finance
Document.
20. STAMP DUTIES
The Borrower shall within 10 Business Days of a demand pay to the Bank the
amount of any liability it incurs in respect of any United Kingdom stamp,
registration and similar tax which is or becomes payable in connection with
the entry into, performance or enforcement of any Finance Document.
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21. INDEMNITIES
21.1 Currency indemnity
(a) If the Bank receives an amount in respect of the Borrower's liability under
the Finance Documents or if that liability is converted into a claim,
proof, judgment or order in a currency other than the currency (the
"contractual currency") in which the amount is expressed to be payable
under the relevant Finance Document:
(i) the Borrower shall indemnify the Bank as an independent obligation
against any loss or liability arising out of or as a result of the
conversion;
(ii) if the amount received by the Bank, when converted into the
contractual currency at a market rate in the usual course of its
business is less than the amount owed in the contractual currency, the
Borrower shall forthwith on demand pay to the Bank an amount in the
contractual currency equal to the deficit; and
(iii) the Borrower shall pay to the Bank forthwith on demand any exchange
costs and taxes payable in connection with any such conversion.
(b) The Borrower waives any right it may have in any jurisdiction to pay any
amount under the Finance Documents in a currency other than that in which
it is expressed to be payable.
21.2 Other indemnities
(a) The Borrower shall within 10 Business Days of a demand pay to the Bank the
amount of any loss or liability which the Bank incurs as a consequence of:
(i) the occurrence of any Default;
(ii) the operation of Clause 17.15 (Acceleration); or
(iii) (other than by reason of negligence or default by the Bank) a Loan
not being made after the Borrower has delivered a Request or a Loan
(or part of a Loan) not being prepaid in accordance with a notice of
prepayment.
The Borrower's liability in each case includes any loss or expense on
account of funds borrowed, contracted for or utilised to fund any amount
payable under any Finance Document, any amount repaid or prepaid or any
Loan but excludes any loss of margin.
(b) If the Bank receives or recovers any payment of principal of a Loan or of
an overdue amount other than on the last day of the Interest Period
relative to that Loan or amount so received or recovered, the Bank shall
calculate the difference between:
(i) the additional interest (excluding the Margin and MLA Costs) which
would have been payable on the principal so received or recovered had
it been received or recovered on the last day of the relevant Interest
Period; and
(ii) the amount of interest which would have been payable to the Bank on
the last day of that Interest Period in respect of the principal so
received or recovered if the principal so received or recovered had
been placed on deposit by the Bank earning
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interest at the Applicable Rate from (and including) the Business Day
of receipt of that amount up to (but excluding) the last day of
applicable Interest Period.
If (i) is greater than (ii) then the Borrower shall, within five Business
Days of a demand from the Bank, pay to the Bank an amount equal to the
difference.
22. EVIDENCE AND CALCULATIONS
22.1 Accounts
Accounts maintained by the Bank in connection with this Agreement are prima
facie evidence of the matters to which they relate.
22.2 Certificates and determinations
Any certification or determination by the Bank of a rate or amount under
this Agreement is prima facie evidence of the matters to which it relates.
22.3 Calculations
Interest (including any applicable MLA Cost) and the fee payable under
Clause 18.2 (Commitment fee) accrue from day to day and are calculated on
the basis of the actual number of days elapsed and a year of 365 days.
23. WAIVERS AND REMEDIES CUMULATIVE
The rights of the Bank under the Finance Documents:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under the general law;
and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver of
that right.
24. CHANGES TO THE PARTIES
24.1 Transfers by the Borrower
The Borrower may not assign, transfer, novate or dispose of any of, or any
interest in, its rights and/or obligations under this Agreement.
24.2 Transfers by the Bank
(a) The Bank may at any time assign or transfer any of its rights and/or
obligations under this Agreement to another bank or financial institution
(the "New Bank"). The prior consent of the Borrower is required for any
such assignment or transfer and for any sub-participation of the Borrower's
obligations under this Agreement.
- --------------------------------------------------------------------------------
<PAGE>
39
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(b) A transfer of obligations will be effective only if the New Bank confirms
to the Borrower that it undertakes to be bound by the terms of this
Agreement as the Bank in form and substance satisfactory to the Borrower.
On the transfer becoming effective in this manner the Bank shall be
relieved of its obligations under this Agreement to the extent that they
are transferred to the New Bank.
(c) Subject to paragraph (a), nothing in this Agreement restricts the ability
of the Bank to sub-contract an obligation if it remains liable under this
Agreement for that obligation.
25. DISCLOSURE OF INFORMATION
Any information supplied to the Bank pursuant to or in connection with this
Agreement shall be held in confidence and shall not be disclosed by it to
any person without the prior written consent of the Borrower except to its
legal or other professional advisers to the extent required for the
purposes of protecting its rights hereunder or by law or regulation or
pursuant to applicable reporting requirements or any order of any court or
to bank supervisory authorities or examining authorities unless it is or
becomes a matter of public knowledge otherwise than as a result of a breach
by it of its obligations hereunder.
26. SET-OFF
The Bank may set off any matured obligation owed by the Borrower under this
Agreement (to the extent beneficially owned by the Bank) against any
matured obligation owed by the Bank to the Borrower, regardless of the
place of payment, booking branch or currency of either obligation. If the
obligations are in different currencies, the Bank may convert either
obligation at a market rate of exchange in its usual course of business for
the purpose of the set-off.
27. SEVERABILITY
If a provision of any Finance Document is or becomes illegal, invalid or
unenforceable in any jurisdiction, that shall not affect:
(a) the validity or enforceability in that jurisdiction of any other
provision of the Finance Documents; or
(b) the validity or enforceability in other jurisdictions of that or any
other provision of the Finance Documents.
28. COUNTERPARTS
This Agreement may be executed in any number of counterparts, and this has
the same effect as if the signatures on the counterparts were on a single
copy of this Agreement.
29. NOTICES
29.1 Giving of notices
All notices or other communications under or in connection with this
Agreement shall be given in writing or by telex or facsimile. Any such
notice will be deemed to be given as follows:
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<PAGE>
40
- --------------------------------------------------------------------------------
(a) if in writing, when delivered;
(b) if by telex, when despatched, but only if, at the time of
transmission, the correct answerback appears at the start and at the
end of the sender's copy of the notice; and
(c) if by facsimile, when received,
provided that any notice or communication to be made hereunder shall only
be effective when received and then only if the same is expressly marked
for the attention of the department or office identified in Clause 29.2
(Addresses for notices) below.
However, a notice given in accordance with the above but received on a
non-working day or after business hours in the place of receipt will only
be deemed to be given on the next working day in that place.
29.2 Addresses for notices
(a) The address, telex number and facsimile number of the Borrower are:
Yorkshire Power Group Limited
Wetherby Road
Scarcroft
Leeds LS14 3HS
Telex: 55128
Facsimile: 0113 289 5682
Telephone: 0113 289 5602
Attention: Nick Dahlgreen
(b) The address, telex number and facsimile number of the Bank are:
Union Bank of Switzerland
PO Box 428
100 Liverpool Street
London EC2M 2RH,
Telex: 941 3848/941 3944 UBSCORG
Facsimile: 0171 901 3703
Telephone: 0171 901 3773/0171 901 1774
Attention: Peter Davis/Paul Saunders
or such other as the Bank may notify to the Borrower by not less than 5
Business Days' notice.
30. GOVERNING LAW
This Agreement is governed by English law.
- --------------------------------------------------------------------------------
<PAGE>
41
- --------------------------------------------------------------------------------
This Agreement has been entered into on the date stated at the beginning of this
Agreement.
- --------------------------------------------------------------------------------
<PAGE>
42
- --------------------------------------------------------------------------------
SCHEDULE 1
CONDITIONS PRECEDENT DOCUMENTS
1. A copy of the memorandum and articles of association and certificate of
incorporation of the Borrower.
2. A copy of a resolution of the board of directors of the Borrower:
(i) approving the terms of, and the transactions contemplated by, this
Agreement and resolving that it execute this Agreement;
(ii) authorising a specified person or persons to execute this Agreement on
its behalf; and
(iii) authorising a specified person or persons, on its behalf, to sign
and/or despatch all documents and notices to be signed and/or
despatched by it under or in connection with this Agreement.
3. A specimen of the signature of each person authorised by the resolution
referred to in paragraph 2 above.
4. A certificate of a director of the Borrower confirming that the borrowing
of the Commitment in full would not cause any borrowing limit binding on
the Borrower to be exceeded.
5. A certificate of an Authorised Signatory of the Borrower certifying that
each copy document specified in this Schedule 1 is correct, complete and in
full force and effect as at a date no earlier than the date of this
Agreement.
6. A copy of a notice of prepayment in respect of the Existing Facility
addressed to National Westminster Bank Plc as agent under the Existing
Facility.
7. Confirmation from National Westminster Bank Plc that all of the security
constituted by the Debenture executed by the Borrower and Holdings in
favour of the banks party to the Existing Facility will be released
immediately on receipt by National Westminster Bank Plc of repayment of the
outstandings under the Existing Facility in full.
8. A legal opinion of Clifford Chance, legal advisers to the Bank.
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<PAGE>
43
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SCHEDULE 2
CALCULATION OF THE MLA COST
(a) The MLA Cost for a Loan for each of its Interest Periods is calculated in
accordance with the following formula:
BY+L(Y-X)+S(Y-Z)
---------------- % per annum = MLA Cost
100-(B+S)
where on the day of application of the formula:
B is the percentage of the Bank's eligible liabilities which the Bank of
England requires the Bank to hold on a non-interest-bearing deposit
account in accordance with its cash ratio requirements;
Y is the rate at which sterling deposits are offered by the Bank to
leading banks in the London interbank market at or about 11.00 a.m. on
that day for the relevant period;
L is the percentage of eligible liabilities which the Bank of England
requires the Bank to maintain as secured money with members of the
London Discount Market Association and/or as secured call money with
certain money brokers and gilt-edged primary market makers;
X is the rate at which secured sterling deposits may be placed by the
Bank with members of the London Discount Market Association and/or as
secured call money with certain money brokers and gilt-edged primary
market makers at or about 11.00 a.m. on that day for the relevant
period;
S is the percentage of the Bank's eligible liabilities which the Bank of
England requires the Bank to place as a special deposit; and
Z is the interest rate per annum allowed by the Bank of England on
special deposits.
(b) For the purposes of this Schedule 3:
(i) "eligible liabilities" and "special deposits" have the meanings given
to them at the time of application of the formula by the Bank of
England; and
(ii) "relevant period" in relation to each Interest Period, means:
(A) if it is 3 months or less, that Interest Period; or
(B) if it is more than 3 months, each successive period of 3 months
and any necessary shorter period comprised in that Interest
Period.
(c) In the application of the formula, B, Y, L, X, S and Z are included in the
formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY
is calculated as 0.5 x 15.
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<PAGE>
44
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(d) (i) The formula is applied on the first day of each relevant period
comprised in the relevant Interest Period.
(ii) Each rate calculated in accordance with the formula is, if necessary,
rounded upward to four decimal places.
(e) If the Bank determines that a change in circumstances has rendered, or will
render, the formula inappropriate, the Bank shall notify the Borrower of
the manner in which the MLA Cost will subsequently be calculated which
shall (so far as practicable) leave the Bank and the Borrower in no better
or worse position than they would have been in if the relevant change in
circumstances had not occurred. The manner of calculation so notified by
the Bank shall, in the absence of manifest error, be binding on the
Borrower.
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<PAGE>
45
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SCHEDULE 3
FORM OF REQUEST
To: UNION BANK OF SWITZERLAND
From: YORKSHIRE POWER GROUP LIMITED
Date: [_______________]
YORKSHIRE POWER GROUP LIMITED - (pound)1,085,000,000
Credit Agreement dated [___________________________], 1997
1. We wish to borrow a Loan as follows:
(a) Drawdown Date: [_______________]
(b) Facility: [A/B]*
(c) Amount: (pound)[_______________]
(d) First Interest Period: [_______________]/
alternative Interest Period: [_______________]**
(e) Payment Instructions: [_______________].
2. We confirm that each condition specified in Clause 4.2 (Further conditions
precedent) is satisfied on the date of this Request.
By:
YORKSHIRE POWER GROUP LIMITED
Authorised Signatory
- --------
* Delete as appropriate.
** Complete only if the requested Interest Period is of an optional duration.
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<PAGE>
46
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SIGNATORIES
Borrower
YORKSHIRE POWER GROUP LIMITED
By: ARMANDO A. PENA RICHARD C. KELLY
Bank
UNION BANK OF SWITZERLAND
By: MICHAEL J. ROWLINSON SEAN MALONE
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM YORKSHIRE
ELECTRICITY GROUP PLC CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0001056090
<NAME> crisp#98
<MULTIPLIER> 1,000,000
<CURRENCY> BRITISH POUNDS STERLING
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1.65
<CASH> 221
<SECURITIES> 0
<RECEIVABLES> 180
<ALLOWANCES> 6
<INVENTORY> 0
<CURRENT-ASSETS> 464
<PP&E> 1,265
<DEPRECIATION> 500
<TOTAL-ASSETS> 1,375
<CURRENT-LIABILITIES> 368
<BONDS> 419
0
0
<COMMON> 108
<OTHER-SE> 251
<TOTAL-LIABILITY-AND-EQUITY> 1,375
<SALES> 0
<TOTAL-REVENUES> 1,331
<CGS> 932
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 269
<LOSS-PROVISION> 78
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> 39
<INCOME-TAX> 13
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF YORKSHIRE POWER GROUP LIMITED AS OF AND FOR
THE NINE MONTHS ENDED DECEMBER 31, 1997.
</LEGEND>
<RESTATED>
<CIK> 0001056090
<NAME> crisp#98
<MULTIPLIER> 1,000,000
<CURRENCY> BRITISH POUNDS STERLING
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.64
<CASH> 118
<SECURITIES> 30
<RECEIVABLES> 168
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 367
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,522
<CURRENT-LIABILITIES> 1,466
<BONDS> 429
0
0
<COMMON> 440
<OTHER-SE> (110)
<TOTAL-LIABILITY-AND-EQUITY> 2,522
<SALES> 0
<TOTAL-REVENUES> 909
<CGS> 618
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 47
<INCOME-TAX> 5
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 134
<CHANGES> 0
<NET-INCOME> (92)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
