UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITES EXCHANGE ACT OF 1934
For the period ended September 30, 1999
------------------
- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number 1-6986
------
PUBLIC SERVICE COMPANY OF NEW MEXICO
------------------------------------
(Exact name of registrant as specified in its charter)
New Mexico 85-00019030
---------- -----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation of organization) Identification No.)
Alvarado Square, Albuquerque, New Mexico 87158
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(505) 241-2700
--------------
(Registrant's telephone number, including area code)
------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock-$5.00 par value 40,774,083 shares
---------------------------- -----------------
Class Outstanding at November 1, 1999
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Report of Independent Public Accountants............................... 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings -
Three Months and Nine Months Ended September 30, 1999 and 1998......... 4
Consolidated Statements of Comprehensive Income -
Three Months and Nine Months Ended September 30, 1999 and 1998......... 5
Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998............................... 6
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998.......................... 7
Notes to Consolidated Financial Statements............................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................... 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK..................................................... 24
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS............................................... 25
ITEM 5. OTHER INFORMATION............................................... 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................ 31
Signature ................................................................ 33
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Public Service Company of New Mexico:
We have reviewed the accompanying consolidated balance sheet of Public Service
Company of New Mexico (a New Mexico corporation) and subsidiaries as of
September 30, 1999 and the related consolidated statements of earnings and
comprehensive income for the three-month and nine-month periods ended September
30, 1999 and 1998, and the consolidated statements of cash flows for the
nine-month periods ended September 30, 1999 and 1998. 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 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 the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of New
Mexico and subsidiaries as of December 31, 1998 (not presented herein), and, in
our report dated March 2, 1999, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1998, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
November 5, 1999
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues:
Electric 299,767 $280,662 $697,073 $636,817
Gas 38,249 39,321 171,432 195,826
Unregulated businesses 2,588 455 6,288 833
-------- -------- -------- --------
Total operating revenues 340,604 320,438 874,793 833,476
-------- -------- -------- --------
Operating expenses:
Cost of energy sold 180,730 139,628 399,093 347,754
Administrative and other costs 42,079 37,111 112,708 99,282
Energy production costs 32,980 33,208 104,018 104,260
Depreciation and amortization 23,313 20,516 69,739 62,532
Transmission and distribution costs 14,357 14,712 43,870 43,345
Taxes, other than income taxes 9,652 9,208 27,821 27,553
Income taxes 7,218 18,609 22,954 38,636
-------- -------- -------- --------
Total operating expenses 310,329 272,992 780,203 723,362
-------- -------- -------- --------
Operating income 30,275 47,446 94,590 110,114
-------- -------- -------- --------
Other income and deductions, net of taxes: 8,455 4,406 20,867 12,159
-------- -------- -------- --------
Income before interest charges 38,730 51,852 115,457 122,273
-------- -------- -------- --------
Interest charges:
Interest on long-term debt 16,208 13,659 49,610 34,215
Other interest charges 1,121 3,537 3,144 11,344
-------- -------- -------- --------
Net interest charges 17,329 17,196 52,754 45,559
-------- -------- -------- --------
Net earnings from continuing operations 21,401 34,656 62,703 76,714
Discontinued operations, net of tax:
Loss from operations of gas marketing - (1,320) - (7,386)
Estimated loss on disposal of gas marketing,
including provision for operating losses
during phase-out period - (1,347) - (1,347)
Cumulative effect of a change in accounting
principle, net of tax (Note 2) - - 3,541 -
-------- -------- -------- --------
Net earnings (Notes 2 and 5) 21,401 31,989 66,244 67,981
Preferred stock dividend requirements 147 147 440 440
-------- -------- -------- --------
Net earnings applicable to common stock $ 21,254 $ 31,842 $ 65,804 $ 67,541
======== ======== ======== ========
Net earnings (loss) per share of common stock (Note 3):
Earnings from continuing operations $ 0.52 $ 0.83 $ 1.51 $ 1.83
Loss from discontinued operations - (0.03) - (0.18)
Estimated loss on disposal of gas marketing - (0.04) - (0.03)
Cumulative effect of a change in accounting principle - - 0.09 -
-------- -------- -------- --------
Net earnings per common share (Basic) $ 0.52 $ 0.76 $ 1.60 $ 1.62
======== ======== ======== ========
Net earnings per common share (Diluted) $ 0.52 $ 0.76 $ 1.60 $ 1.60
======== ======== ======== ========
Dividends paid per share of common stock $ 0.20 $ 0.20 $ 0.60 $ 0.57
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1999 1998 1999 1998
--------- -------- -------- --------
(In thousands)
Net Earnings $ 21,401 $ 31,989 $ 66,244 $ 67,981
-------- -------- -------- --------
Other Comprehensive Income, net of tax:
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during the period, net of
reclassification adjustment 154 (393) 1,826 (80)
Minimum pension liability adjustment (1,065) (355) (3,226) (526)
-------- -------- -------- --------
Total other comprehensive losses (911) (748) (1,400) (606)
-------- -------- -------- --------
Total Comprehensive Income $ 20,490 $ 31,241 $ 64,844 $ 67,375
======== ======== ======== ========
Note: Tax expense (benefit) for Total Other Comprehensive Income for the
three months ended September 30, 1999 and 1998 was $(597) and $(490),
respectively. Tax expense (benefit) for Total Other Comprehensive
Income for the nine months ended September 30, 1999 and 1998 was
$(918) and $(397), respectively.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
1999 1998
------------ -----------
(Unaudited)
ASSETS
Utility plant $2,640,879 $2,591,934
Accumulated depreciation and amortization (1,062,896) (998,175)
---------- ----------
Net utility plant 1,577,983 1,593,759
---------- ----------
Other property and investments 481,797 523,834
---------- ----------
Current assets:
Cash and temporary investments 88,620 61,280
Receivables 216,607 197,906
Income tax receivable - 8,266
Inventory 42,767 35,674
Other current assets 5,678 4,666
---------- ----------
Total current assets 353,672 307,792
---------- ----------
Deferred charges 145,645 151,403
---------- ----------
Total Assets $2,559,097 $2,576,788
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 203,870 $ 208,870
Additional paid-in capital 452,734 465,386
Accumulated other comprehensive income
(loss), net of tax (274) 1,127
Retained earnings 219,205 186,220
---------- ----------
Total common stock equity 875,535 861,603
Minority interest 12,771 13,405
Cumulative preferred stock without mandatory
redemption requirements 12,800 12,800
Long-term debt, less current maturities 977,115 1,008,614
---------- ----------
Total capitalization 1,878,221 1,896,422
---------- ----------
Current liabilities:
Short-term debt - 26,620
Accounts payable 116,347 113,975
Dividends payable 8,301 147
Accrued interest and taxes 39,640 34,289
Other current liabilities 34,259 28,308
---------- ----------
Total current liabilities 198,547 203,339
---------- ----------
Deferred credits 482,329 477,027
---------- ----------
Commitments and Contingencies (Note 7) - -
---------- ----------
Total Capitalization and Liabilities $2,559,097 $2,576,788
========== ==========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
------------------
1999 1998
-------- --------
(In thousands)
Cash Flows From Operating Activities:
Net earnings $ 66,244 $ 67,981
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Depreciation and amortization 78,447 71,676
Gain on cumulative effect of a change in
accounting principle (Note 2) (5,862) -
Changes in certain assets and liabilities:
Receivables (10,670) 13,905
Inventory 1,114 10,591
Deferred charges 4,474 499
Accounts payable 2,310 (26,714)
Accrued interest and taxes 5,352 26,962
Deferred credits 7,899 (2,534)
Other 3,845 637
Other, net (3,751) (6,394)
-------- --------
Net cash flows from operating activities 149,402 156,609
-------- --------
Cash Flows From Investing Activities:
Utility plant additions (60,881) (89,828)
Purchase of PVNGS LOBs - (215,701)
(Increase) decrease in nuclear decommissioning trust 26,620 (2,675)
Other, net 13,584 5,637
-------- --------
Net cash flows from investing activities (20,677) (302,567)
-------- --------
Cash Flows From Financing Activities:
Dividends paid (24,895) (24,238)
Common stock repurchase (17,655) -
(Repayments) borrowings for nuclear decommissioning (26,620) 2,675
Debt repaid (31,580) (357,431)
Financing - 582,994
Other, net (635) (3,340)
-------- --------
Net cash flows from financing activities (101,385) 200,660
-------- --------
Increase in cash and temporary investments 27,340 54,702
Beginning of period 61,280 18,195
-------- --------
End of period $ 88,620 $ 72,897
======== ========
Supplemental Cash Flow Disclosures:
Interest paid $ 60,392 $ 35,239
Income taxes paid, net 27,525 35,118
Acquired DOE pipeline in exchange for
transportation services 3,100 -
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies and Responsibilities for Financial Statements
The significant accounting policies followed by Public Service Company of New
Mexico (the "Company") are set forth in note (1) of notes to the Company's
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (the "1998 Form 10-K") filed with the
Securities and Exchange Commission ("SEC"). The consolidated financial
statements are unaudited and reflect all adjustments (consisting only of normal
and recurring adjustments) that are, in the opinion of management, necessary for
a fair presentation of the financial position and results of operations for the
interim periods presented. The consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
contained in the 1998 Form 10-K. The results of operations for the three and
nine months ended September 30, 1999 are not necessarily indicative of the
results for the entire year ending December 31, 1999. Certain 1998 amounts have
been reclassified to conform to the 1999 financial statement presentation.
(2) Accounting Changes
Effective January 1, 1999, the Company adopted Emerging Issues Task Force
("EITF") Issue No. 98-10, Accounting for Contracts Involved in Energy Trading
and Risk Management Activities. EITF Issue No. 98-10 requires gains or losses
resulting from the market value changes on energy trading contracts to be
recorded in earnings. The effect of the initial application of EITF Issue No.
98-10 is reported as a cumulative effect of a change in accounting principle
which increased the Company's consolidated net income by approximately $3.5
million (after related income tax expense of approximately $2.3 million), or
$.09 per common share.
(3) Earnings Per Share
The following table provides a reconciliation between basic and diluted earnings
per share for the periods ended:
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------- ------- ------- -------
(In thousands, except per
share amounts)
Net income applicable to common stock $21,254 $31,842 $65,804 $67,541
------- ------- ------- -------
Weighted-average shares of common stock
outstanding
Basic 40,774 41,774 41,127 41,774
Dilutive effect of common stock
equivalents (a) 159 231 127 327
------- ------- ------- -------
Diluted 40,933 42,005 41,254 42,101
------- ------- ------- -------
Earnings per share
Basic - net income $0.52 $0.76 $1.60 $1.62
Diluted - net income $0.52 $0.76 $1.60 $1.60
(a) Excludes the effect of anti-dilutive common stock equivalents related
to out-of-the-money options of 62,635 and 30,250 for the three months ended
September 30, 1999 and September 30, 1998, respectively, and 260,448 and
53,965 for the nine months ended September 30, 1999 and September 30, 1998,
respectively.
8
<PAGE>
(4) Segments Information
The Company's principal business segments are electric ("Electric") and gas
("Gas") operations. Electric consists of three major business lines that include
the Electric Service Business Unit ("Distribution"), Transmission Service
Business Unit ("Transmission") and Bulk Power Business Unit ("Generation"). The
unregulated segments include the operation of Avistar, Inc. and corporate
administrative functions. Intersegment revenues are determined based on a
formula mutually agreed upon between affected segments and are not based on
market rates. Intersegment revenues are eliminated for consolidation purposes.
Summarized financial information by business segment for the three months and
nine months ended September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Electric
--------------------------------------------
Distri. Trans. Gen. Total Gas Unregulated Consolidated
-------- ------- -------- --------- ------- ----------- ------------
(In thousands)
Three Months Ended:
- -------------------
1999:
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues:
External customers $143,442 $ 4,120 $152,205 $ 299,767 $38,249 $ 2,588 $ 340,604
Intersegment revenues - 7,450 88,752 96,202 - - 96,202
Operating income (loss) 13,954 2,014 15,740 31,708 (724) (709) 30,275
Segment net income (loss) 11,177 1,034 13,114 25,325 (2,789) (1,135) 21,401
1998 (a):
Operating revenues:
External customers $153,520 $ 4,228 $122,914 $ 280,662 $39,321 $ 455 $ 320,438
Intersegment revenues - 7,273 96,044 103,317 - - 103,317
Operating income (loss) 16,077 3,310 28,462 47,849 2,573 (2,976) 47,446
Segment net income (loss) 13,039 1,992 23,506 38,537 (15) (6,533) 31,989
Nine Months Ended:
- ------------------
1999:
Operating revenues:
External customers $405,816 $ 11,632 $279,625 $ 697,073 $171,432 $ 6,288 $ 874,793
Intersegment revenues - 22,351 245,919 268,270 - - 268,270
Operating income 40,605 6,561 37,797 84,963 9,134 493 94,590
Segment net income (loss) 32,121 3,513 33,602 69,236 1,859 (4,851) 66,244
1998 (a):
Operating revenues:
External customers $409,941 $ 11,953 $214,923 $ 636,817 $195,826 $ 833 $ 833,476
Intersegment revenues - 21,818 273,485 295,303 - - 295,303
Operating income (loss) 27,124 9,064 63,254 99,442 15,959 (5,287) 110,114
Segment net income (loss) 19,783 5,444 50,751 75,978 8,440 (16,437) 67,981
</TABLE>
(a) On August 4, 1998, the Company adopted a plan to discontinue the natural
gas trading operations of its Energy Services Business Unit and completely
discontinued these operations on December 31, 1998. Included in the line
item Segment net income (loss) under Unregulated are losses of $2,667 and
$8,733 for the discontinued operations for the three months and nine months
ended September 30, 1998, respectively.
9
(5) Financial Instruments
The Company uses derivative financial instruments in limited instances to manage
risk as it relates to changes in natural gas and electric prices and adverse
market changes for investments held by the Company's various trusts. The Company
is exposed to credit losses in the event of non-performance or non-payment by
counterparties. The Company uses a credit management process to assess and
monitor the financial conditions of counterparties. The Company also uses, on a
limited basis, certain derivative instruments for bulk power electricity trading
purposes in order to take advantage of favorable price movements and market
timing activities in the wholesale power markets.
Natural Gas Contracts
Pursuant to an order issued by the New Mexico Public Utility Commission
("NMPUC"), predecessor to New Mexico Public Regulation Commission ("PRC"), the
Company has previously entered into swaps to hedge certain portions of natural
gas supply contracts in order to protect the Company's natural gas customers
from the risk of adverse price fluctuations in the natural gas market. The
financial impact of all hedge gains and losses from swaps flowed through the
Company's purchased gas adjustment clause. As a result, earnings were not
affected by gains or losses generated by these instruments. The Company hedged
40% of its natural gas deliveries during the 1998-1999 heating season. Less than
15.5% of the 1998-1999 heating season portfolio was hedged using financial
hedging contracts. The Company has hedged a portion of its 1999-2000 heating
season gas supply portfolio through the use of both physical and financial
hedging tools. Less than 9.1% of the Company's 1999-2000 heating season
portfolio is hedged using financial hedging contracts. As of September 30, 1999,
the Company had unrecognized mark-to-market gains of $0.5 million associated
with its gas-related financial hedging activities.
Electricity Trading Contracts
To take advantage of market opportunities associated with the purchase and sale
of electricity, the Company's wholesale power operation periodically enters into
derivative financial instrument contracts. The Company accounts for these
financial instruments as trading activities under the accounting guidelines set
forth under EITF Issue No. 98-10. As a result, all open contracts are marked to
market at the end of each period. These contracts may be in the form of futures
and are required to be reflected on the balance sheet at fair market value with
resulting gains and losses recognized in earnings. In addition, the Company
enters into forward physical contracts and physical options. Those contracts
that meet the criteria for trading activities under EITF Issue No. 98-10 are
marked to market and reflected on the balance sheet. The physical contracts are
subsequently recognized as revenues or purchased power when the actual physical
delivery occurs.
10
<PAGE>
Through September 30, 1999, the Company's wholesale electric trading operations
settled trading contracts for the sale of electricity that generated $34 million
of electric revenues by delivering 820 million KWh. The Company purchased $36
million or 1,046 million KWh of electricity to support these contractual sale
and other open market sales opportunities. Energy purchases for trading purposes
are included in the cost of energy sold.
As of September 30, 1999, the Company had open trading contract positions to buy
$21.5 million and to sell $20.8 million of electricity. At September 30, 1999,
the Company had a gross mark-to-market gain (asset position) on these trading
contracts of $8.2 million and gross mark-to-market loss (liability position) of
$3.8 million, with net mark-to-market gain (asset position) of $4.4 million. The
mark-to-market valuation is recognized in earnings each period.
Corporate Hedge
The Company has about $62 million invested in domestic stocks in various trusts
for nuclear decommissioning, executive retirement and retiree medical benefits.
At the end of March 1999, the Company began using financial derivatives based on
the Standard & Poor's ("S&P") 500 Index to limit potential loss on these
investments due to adverse market fluctuations. The options are structured as a
collar, protecting the portfolio against losses beyond a certain amount and
balancing the cost of that downside protection by foregoing gains above a
certain level. If the S&P 500 Index is within the specified range when the
option contract expires, the Company will not be obligated to pay, nor will the
Company have the right to receive cash. The Company accounts for the market
value changes of these options under mark-to-market accounting on a quarterly
basis. At September 30, 1999, the Company recorded an unrealized year-to-date
gain of $0.7 million (pre-tax) on the market value of these options, although
the S&P 500 Index is still within the specified range of the collar.
(6) Accounting Pronouncements
EITF Issue No. 99-14, Recognition of Impairment Losses on Firmly Committed
Executory Contracts: The EITF has added an issue to its agenda to address
impairment of leased assets. A significant portion of the Company's nuclear
generating assets is held under operating leases. Based on the alternative
accounting methods being explored by the EITF, the related financial impact of
the future adoption of EITF No. 99-14 could potentially be significant. However,
a complete evaluation of the financial impact from the future adoption of EITF
Issue No. 99-14 will be undeterminable until EITF deliberations are completed
and stranded cost recovery issues are resolved.
11
<PAGE>
Statement of Financial Accounting Standards ("SFAS") No. 137 -- Accounting for
Derivative Instruments and Hedging Activities-- Deferral of the Effective Date
of SFAS No. 133: SFAS No. 133 establishes accounting and reporting standards
requiring every derivative instrument to be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement also
requires that changes in the derivatives' fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. The Company is in
the process of reviewing and identifying financial instruments currently
existing in the Company for compliance with the provisions SFAS No. 133. It is
likely that the adoption of SFAS No. 133 will add volatility to the Company's
operating results and/or asset and liability valuations. In June 1999, the
Financial Accounting Standards Board issued SFAS No. 137 to amend the effective
date for compliance with SFAS No. 133 to January 1, 2001.
(7) Commitments and Contingencies
There are various claims and lawsuits pending against the Company and certain of
its subsidiaries. The Company is also subject to Federal, state and local
environmental laws and regulations, and is currently participating in the
investigation and remediation of numerous sites. In addition, the Company
periodically entered into financial commitments in connection with business
operations. It is not possible at this time for the Company to determine fully
the effect of all litigation on its consolidated financial statements. However,
the Company has recorded a liability where such litigation can be estimated and
where an outcome is considered probable. The Company does not expect that any
known lawsuits, environmental costs and commitments will have a material adverse
effect on its financial condition or results of operations.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's 1998 Form 10-K PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed
management's assessment of the Company's financial condition, results of
operations and other issues facing the Company. The following discussion and
analysis by management focuses on those factors that had a material effect on
the Company's financial condition and results of operations during the three
months and nine months ended September 30, 1999 and 1998. It should be read in
conjunction with the Company's consolidated financial statements and PART II,
ITEM 1 -- LEGAL PROCEEDINGS. Trends and contingencies of a material nature are
discussed to the extent known and considered relevant.
RESULTS OF OPERATIONS
For the Three Months Ended September 30, 1999
Consolidated Results - Net earnings of $21.4 million or $0.52 per common share
decreased $10.6 million ($0.24 per common share including the effect of the
stock purchase) for the quarter. The decline reflects the negative effects that
mild weather and the rate reduction that began in late July had on operations.
The following discussion highlights significant items that affected the results
of operations for the quarter ended September 30, 1999 versus 1998.
Operating revenues grew $20.2 million (6.3%) for the quarter to $340.6 million
reflecting strong wholesale electric sales. See the electric and gas operations
sections below for further discussions.
Total operating expenses grew $37.7 million (13.7%) to $310.3 million for the
quarter. The cost of energy sold (which includes coal, nuclear fuel, gas and
electricity purchased for resale) increased $41.1 million (29.4%) to $180.7
million, reflecting an 18.6% growth in wholesale electric volumes, a 5.1%
increase in gas sales volumes, higher prices for elecricity purchased for resale
and open market energy purchases used to supplement the Company's own energy
production capability due to scheduled and unscheduled electric generation plant
outages. Administrative costs increased $5.0 million (13.4%) to $42.1 million
due to costs associated with the implementation of a new customer billing system
and costs incurred to support the formation of a new holding company. In
addition, depreciation expense grew $2.8 million period-over-period caused by
continuing capital investments and a first quarter 1999 depreciation rate
change. These cost increases were partially offset by lower taxes due to lower
pre-tax income levels and lower energy production costs.
13
<PAGE>
Operating income decreased $17.2 million (36.2%) to $30.3 million as margins for
both the gas and electric businesses were hurt by weak market pricing, the
electric rate reduction, mild weather conditions and excess electricity supply
in the Company's key markets.
Other income and deductions, net of taxes, increased $4.0 million for the
quarter to $8.5 million due to the recording of interest income from the Palo
Verde Nuclear Generating Station ("PVNGS") Capital Trust and a mark-to-market
gain on the corporate investment collar (see note 5 to Notes to Consolidated
Financial Statements).
Electric Operations - Net earnings from electric operations of $25.3 million
decreased $13.2 million (34.3%) for the quarter, reflecting weather conditions
and the rate reduction. The following discussion highlights significant items
that affected the results of operations of the electric business for the quarter
ended September 30, 1999 versus 1998.
Operating revenues grew $19.1 million (6.8%) for the quarter to $299.8 million
as a 18.6% improvement in wholesale electricity sales volume was only partially
offset by the implementation of a new rate order in late July 1999 (which will
lower rates by $37 million annually based on current customer base) and a 1.3%
decline in retail megawatt hour ("MWh") sales for the quarter due to mild local
weather conditions. The Company delivered wholesale (bulk) power of 3.61 million
MWh of electricity this year compared to 3.04 million MWh delivered last year.
Total electricity delivery was 5.51 million MWh compared to 4.97 MWh delivered
last year, a 10.9% improvement.
Total operating expenses grew $35.2 million (15.1%) caused primarily by an
increases in the cost of energy sold of $41.5 million as a result of
volume-related increases in power purchased for resale at higher prices and
higher administrative costs of $4.0 million due to Y2K compliance costs, holding
company formation costs and new customer billing system installation costs.
Depreciation and amortization expense increased $1.3 million for the quarter to
$18.3 million due to additions to the plant base and the 1999 rate change.
Operating income taxes decreased $9.0 million (41.1%) to $12.9 million
reflecting decreased electric gross margin (electric operating revenues less
fuel and purchased power expense) of $22.4 million for the quarter. The margin
decrease was attributable to increased purchased power expense (higher purchase
costs and volume growth) and decreased retail sales due to mild weather
conditions.
Gas Operations - Gas operations had a net loss of $2.8 million for the quarter
compared with a net loss of $0.02 million a year ago. The following discussion
highlights significant items that affected the results of operations of gas
operations for the quarter ended September 30, 1999 versus 1998.
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Operating revenues declined $1.1 million (2.7%) for the quarter to $38.2
million. This decline was driven by a 15.7% decline in the average rate charges
per decatherm (due to weak gas prices). Price declines were partially offset by
a 5.1% volume improvement, as residential and commercial business posted double
digit growth and transportation volume growth of 21.1%.
Total operating expenses increased $2.2 million (6.1%) caused by increased gas
costs of $0.9 million, higher administrative costs of $1.6 million largely due
to the new customer billing system installation costs) and increased
depreciation and amortization expense of $1.6 million.
Operating income decreased $3.3 million to a loss of $0.7 million due to
depressed gas gross margin (gas operating revenues less gas purchased for
resale) of $2.0 million and increased operating expenses discussed above.
Discontinued Operations - In August 1998, the Company adopted a plan to
discontinue the natural gas trading operations of its Energy Services Business
Unit and completely discontinue these operations on December 31, 1998. Losses
from discontinued operations, net of taxes, for the three months ended September
30, 1998, were $2.7 million, or $0.07 per common share. These losses did not
recur in 1999.
For the Nine Months Ended September 30, 1999
Consolidated Results - Net earnings of $66.2 million or $1.60 per common share
decreased $1.7 million ($0.02 per common share including the effect of the
second quarter stock purchase) for the period. The decline was driven by mild
weather conditions that weakened market prices and the electric rate reduction
implemented in late July. The following discussion highlights significant items
that affected the results of operations for the nine months ended September 30,
1999 versus 1998.
Operating revenues grew $41.3 million (5.0%) for the nine months to $874.8
million. The growth in revenues was led by a 27.4% improvement in wholesale
electric power sales volumes (8.25 million MWh in 1999 versus 6.47 million MWh
in 1998) as the Company continued to expand its power trading operations. Retail
sales volumes also improved slightly year-over-year. These volume improvements
were partially offset by residential (down 1.4%) and commercial (down 0.9%)
price decreases due to the rate reduction implemented in late July.
Total operating expenses grew $56.8 million (7.9%) to $780.2 million for the
period. The cost of energy sold increased $51.3 million (14.8%) reflecting a
27.4% rise in wholesale electricity sales, a 1.5% increase in gas throughput and
higher unit costs associated with electricity purchased for resale.
Administrative expenses grew $13.4 million (13.5%) to $112.7 million due to the
non-recurring effect of Year 2000 ("Y2K") costs, new billing system
implementation costs and holding company formation costs. In addition,
depreciation expense grew $7.2 million as a result of continued capital
investment and higher 1999 depreciation rates. These increases were partially
offset by lower taxes reflecting lower pre-tax income.
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Operating income for the current period decreased $15.5 million (14.25%) to
$94.6 million from a year ago, reflecting a 4.3% margin decline caused by weak
market prices in the Company's wholesale power market, weak first quarter gas
demand due to mild weather and higher administrative costs.
Other income and deductions, net of taxes, increased $8.7 million for the period
to $20.9 million due to the recording of interest income from the PVNGS Capital
Trust and a gain resulting from closing down of the coal mine reclamation
activities.
Net interest charges increased $7.2 million for the period to $52.8 million as a
result of the issuance of $435 million in senior unsecured notes in August 1998,
partially offset by a decrease in short-term debt interest charges.
Discontinued Operations - In August 1998, the Company adopted a plan to
discontinue the natural gas trading operations of its Energy Services Business
Unit and completely discontinue these operations on December 31, 1998. Losses
from discontinued operations, net of taxes, for the nine months ended September
30, 1998, were $8.7 million, or $0.21 per common share. These losses did not
recur in 1999.
Cumulative Effect of a Change in Accounting Principle - Effective January 1,
1999, the Company adopted EITF Issue No. 98-10. The effect of the initial
application of the new standard is reported as a cumulative effect of a change
in accounting principle. As a result, the Company recorded additional earnings,
net of taxes, of approximately $3.5 million, or $0.09 per common share, to
recognize the gain on net open physical electricity purchase and sales
commitments considered to be trading activities.
LIQUIDITY AND CAPITAL RESOURCES
Cash Activity - Cash generated from operating activities of $149.4 million
decreased $7.2 million (4.6%) from last year. The reduction in cash generation
reflects an $18.7 million increase in customer accounts receivable caused by
collection delays generated by implementation of a new customer billing system
and higher overall sales volumes. In addition, 1999 earnings include a $3.5
million non-cash gain from implementation of new accounting methods. These cash
uses were partially offset by cash generation from lower inventory levels and
higher non-cash depreciation charges.
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Cash used for investing activities was $20.7 million in 1999 compared to $302.6
million in 1998. This decreased spending reflects the absence of the 1998
purchases of $215.7 million in PVNGS lease obligation bonds, lower construction
expenditures in 1999 of $28.9 million and the liquidation of insurance-based
investments in the nuclear decommissioning trust of $26.6 million (see financing
activities below for the payment of decommissioning debt of $26.6 million).
Cash used for financing activities was a use of $101.4 million in 1999 because
of the repurchase of $31.6 million of senior unsecured notes, $26.6 million of
loan repayments associated with nuclear decommissioning trust activities and
$17.7 million stock repurchase by the Company. Cash from financing activities in
1998 included proceeds from the issuance of senior unsecured notes of $429.4
million and repayment of short-term borrowings of $211.8 million.
Capital Requirements - The projection for total capital requirements for 1999 is
$176 million, which includes $145 million of utility construction expenditures.
During the nine month period, the Company spent approximately $98.3 million for
capital requirements and anticipates spending approximately $50.2 million over
the remainder of 1999. The Company expects that these cash requirements will be
met primarily through internally generated cash. However, to cover the
difference in the amounts and timing of cash generation and cash requirements,
the Company intends to utilize short-term borrowings under its liquidity
arrangements. These estimates are under continuing review and subject to
on-going adjustment based upon business needs and market conditions.
Stock Repurchase - In March 1999, the Company's board of directors approved a
plan to repurchase up to 1,587,000 shares of the Company's outstanding common
stock with maximum purchase price of $19.00 per share. The repurchase program
was created to facilitate the Company's stock option program. As of September
30, 1999, the Company repurchased one million shares of its previously
outstanding common stock at a cost of $17.7 million. The Company may from
time-to-time repurchase additional common stock for various corporate purposes.
Financing and Liquidity - In 1999, the Company retired $31.6 million of its 7.1%
senior unsecured notes through open market purchases, utilizing the funds from
operations and the funds from temporary investments. On October 28, 1999,
tax-exempt pollution control revenue bonds of $11.5 million with an interest
rate of 6.60% were issued to partially reimburse the Company for expenditures
associated with its share of a recently completed upgrade of the emission
control system at San Juan Generating Station ("SJGS").
The Company does not have any additional long-term financing plans for the
remainder of 1999.
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As of September 30, 1999, the Company had $405.0 million of available liquidity
arrangements, consisting of $300.0 million from an unsecured revolving credit
facility, $80.0 million from an accounts receivable securitization and $25.0
million in local bank lines of credit. At September 30, 1999, the Company did
not have any short-term borrowings and had $90.4 million in cash and temporary
investments.
The Company's ability to finance its construction program at a reasonable cost
is dependent largely upon its earnings, credit ratings, regulatory approvals and
financial market conditions. In August 1999, two major credit rating agencies
upgraded the Company's securities to investment grade following the electric
rate order by the PRC, approving the rate case settlement. (See Item 5. Other
Events - "Upgrades of the Company's Securities Ratings to Investment Grade" in
the Current Report on Form 8-K dated September 2, 1999.)
OTHER ISSUES FACING THE COMPANY
Formation of Holding Company
The Electric Utility Industry Restructuring Act of 1999 (the "Restructuring
Act") opens the state's electric power market to customer choice in 2001. The
Restructuring Act requires that assets and activities subject to the PRC
jurisdiction, primarily electric and gas distribution, and transmission assets
and activities (collectively, the "regulated business"), be separated from other
competitive business, primarily electric generation and service and certain
other energy services (collectively, "the competitive businesses"). Such
separation is required to be accomplished through the creation of at least two
separate corporations. The Company has decided to accomplish the mandated
separation by the formation of a holding company and the transfer of the
regulated businesses to a newly-created, wholly owned subsidiary of such holding
company, subject to various regulatory approvals. Corporate separation of the
regulated business from the competitive businesses must be completed by January
1, 2001, although such date may be extended by up to one year by the PRC.
Completion of corporate separation will require a number of regulatory approvals
by, among others, the PRC and the Nuclear Regulatory Commission. Completion will
also require shareholder approval and a number of other consents from creditors
and lessors. Completion may also entail significant restructuring activities
with respect to the Company's existing liquidity arrangements and the Company's
publicly-held senior unsecured notes of which $403.4 million were outstanding as
of September 30, 1999. Holders of the Company's senior unsecured notes, $135
million at 7.5% and $268.4 million at 7.1%, may be offered the opportunity to
exchange their securities for similar senior unsecured notes of the newly
created regulated business.
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On September 30, 1999, the Board of Directors of the Company authorized
management to commence the process of obtaining necessary regulatory and other
approvals so that corporate separation could occur in advance of the statutory
deadline of January 1, 2001 and in advance of approval of the balance of the
Company's transition plan under the Restructuring Act. The Company anticipates
filing its application with the PRC for necessary authorizations in the near
future.
Regulated Business
The regulated business comprised approximately 47% of the Company's total assets
and contributed approximately 41% of the Company's operating revenues and
approximately 49% of the Company's income before interest charges in 1998.
Stranded Costs
The Restructuring Act recognizes that electric utilities should be permitted a
reasonable opportunity to recover an appropriate amount of the costs incurred
previously in providing electric service ("stranded costs"). Stranded costs
include plant decommissioning costs, regulatory assets, lease and lease-related
costs recognized under cost-of-service regulation. Utilities will be allowed to
recover no less than 50% of such costs through a non-bypassable charge on all
customer bills for five years after implementation of customer choice. The PRC
could authorize a utility to recover up to 100% of its stranded costs if the PRC
finds that recovery of more than 50%: (i) is in the public interest; (ii) is
necessary to maintain the financial integrity of the public utility; (iii) is
necessary to continue adequate and reliable service; and (iv) will not cause an
increase in rates to residential or small business customers during the
transition period. Utilities will also be allowed to recover in full any costs
incurred in implementing full open access ("transition costs"). The transition
costs will be recovered through 2007 by means of a separate wire charge. While
recoverable stranded costs and transition costs will be collected as part of the
regulated business, it is anticipated that such collections would be paid to the
Company and be part of the revenues available to the competitive businesses
subsequent to restructuring.
Competitive Businesses
The competitive businesses which would be retained by the Company include the
Company's interests in generation facilities, including PVNGS, the Four Corners
Power Plant ("Four Corners"), and SJGS, together with the pollution control
facilities which have been financed with pollution control revenue bonds.
Approximately $586 million in pollution control revenue bonds would remain as
obligations of the generation subsidiary, as would certain other of the
Company's long-term obligations. The competitive businesses would not be subject
to regulation by the PRC. Under the Company's restructuring plan, the Company's
bondholders will continue to hold obligations of the Company following
restructuring. Since the Restructuring Act requires significant changes in the
assets and businesses of the Company, the bondholders will be accepting the
risks involved in those changes.
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The Company will continue its competitive business following the restructuring,
which will be subject to market conditions. Following the separation as required
by the Restructuring Act, in support of its wholesale trading operations, the
Company is targeting to double its generating capacity and triple its sales
volume. Recently, the Company formed a non-regulated subsidiary, Avistar, Inc.
("Avistar") in August 1999, to achieve competitive business strategies. Avistar
provides services in the areas of utility management for municipalities and
other communities, remote metering and development of energy conservation and
supply projects for federal government facilities. The Company does not
anticipate an earnings contribution from Avistar over the next few years.
Financial Options
Funds generated from capitalizing the new regulated and competitive businesses
and/or from potential stranded cost recovery may be used by the Company to
retire or restructure currently outstanding debt obligations, to repurchase the
Company's outstanding equity securities or to fund business expansion. In this
regard, the Company announced a five-year strategy to invest up to $600 million
to expand its power generation portfolio to support its asset-backed wholesale
electricity sales operations and expand the geographic range of its generation
operations into new markets. A significant portion of the Company's recent
revenue and earnings growth has been generated from the Company's wholesale
electricity trading operations. The expansion strategy is focused on developing
opportunities to expand these operations.
Risk of Deregulation
Deregulation in the electric utility is likely to have a significant impact on
the price for electric generation and recovery of the investment in electric
generation assets. Such price pressures will likely put a strain on electric
generation margins. In response to competition and the need to gain economies of
scale, electricity producers will need to control costs to maintain margins,
profitability and cash flow that will be adequate to support investments in new
technology and infrastructure. As a result, the uncertainties surrounding
deregulation and the Company's ability to be competitive in a deregulated
environment could be significant business risks for the Company as deregulation
and possible industry consolidation continue to evolve.
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New Customer Billing System
As previously reported, the Company installed a new customer billing system in
November 1998, for which the Company has had a significant number of
implementation issues. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- NEW
CUSTOMER BILLING SYSTEM" in the quarterly report on Form 10-Q for the quarter
ended June 30, 1999.)
On October 1, 1999, the Company and the PRC Staff entered into a stipulation
that would allow the Company to bill an additional service charge to customers
who were not billed the appropriate electric service charges and/or gas access
fees. The one-time charge will be equal to or less than the amount that
customers would have otherwise been billed had their bills not been delayed. On
October 14, 1999, at the conclusion of a hearing, the hearing examiner announced
that he would certify the stipulation to the PRC for approval and on October 20,
1999, the hearing examiner issued a certification of the stipulation. On
November 2, 1999, the PRC approved the stipulation, concluding the investigation
without imposing any civil penalty on the Company. Under the stipulated
agreement, the Company is allowed to collect approximately $0.7 million in
unbilled electric service charges and gas access fees in the November and
December billing cycles.
Because of the implementation issues associated with the new billing system, the
Company was estimating retail gas and electric revenues through July 1999.
Beginning with the August financial reports, the Company was able to generate
reports produced by the new billing system that reflect the actual revenues
billed for all subsequent months. The Company now is in the process of fully
reconciling previously estimated revenues to those actually billed to customers.
The Company's financial, tax and regulatory reports have reflected these
estimates. Management does not believe that the estimation on the subsequent
reconciliation process will have a material adverse effect on the Company's
results of operations or financial condition.
The Year 2000 ("Y2K") Issues
As previously reported, the Y2K issue is a consequence of computer programs ("IT
Systems") written using two digits rather than four digits to define the
applicable year. The Company adopted a plan to address the Y2K issue for
internal systems and external dependencies. In June 1999, the Company reported,
as required, to the North American Electric Reliability Council ("NERC") that it
believes its mission critical systems used to produce and deliver electricity
are Y2K ready, without any exceptions. On July 2, 1999, the Company announced
that it believes its mission critical systems used to produce electricity and to
deliver gas and electricity are Y2K ready. The Company's remaining non-mission
critical systems had been scheduled to be Y2K ready by October 1, 1999, but not
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all of those systems met that deadline. Several systems have been delayed due to
vendor delivery problems or remediation delays. The Company expects these
non-mission critical systems to be Y2K ready by December 31, 1999. None of these
systems have any direct impact on the production of electricity or the delivery
of gas or electricity to customers. (See ITEM 2. -- "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING
THE COMPANY -- THE YEAR 2000 ISSUE" in the Company's quarterly report on Form
10-Q for the quarter ended June 30, 1999.)
The estimated status of each phase as of October 31, 1999, is set out below:
Estimated Status of
Y2K Project Phases Completion*
------------------ -------------------
Awareness Phase 100%
Inventory Phase 100%
Assessment Phase 100%
Planning and Scheduling Phase 100%
Repair Phase 99%
Testing Phase 98%
Re-Integration/Deployment Phase 98%
Company-Wide Testing Phase 91%
* The stated percentages represent the status of completion as of
October 31, 1999, of all of the Company's IT Systems and
Embedded Systems, including mission critical systems. For
purposes of this presentation, "mission critical systems"
include systems whose failures could cause an interruption in
the supply of electricity or gas to the Company's customers,
could interfere with the Company's ability to communicate with
customers, or could interfere with the Company's cash flow.
The Company has a 10.2% undivided interest in PVNGS, with portions of its
interest held under leases. Arizona Public Service Company ("APS"), the
operating agent of PVNGS, notified the U. S. Nuclear Regulatory Commission
("NRC") on June 26, 1999 that PVNGS is Y2K ready.
Although the mission critical systems are Y2K ready, work will continue on the
development and testing of the Company's contingency plans. Contingency plans
for mission critical systems were completed on July 30, 1999. The Company
participated in the successful September drills organized by the NERC and the
Western Systems Coordinating Council, with valuable lessons being learned and
changes to be implemented for future drills. Testing of the Company's
contingency plans will continue into November and December 1999. The Company has
completed the remediation and testing of its prior energy management system
("EMS") and it is now Y2K ready. In addition, the Company has completed the
testing and installation of an upgraded EMS that is also Y2K ready. The Company
has also developed and is testing a process to switch from the upgraded system
to the prior system in case of a system failure.
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The Company has spent approximately $12.2 million on non-PVNGS Y2K related
activities during the first nine months of 1999, and approximately $17.5 million
since project commencement. The Company's share of the PVNGS costs associated
with the Y2K project is deemed to be immaterial.
The statements in this section are Y2K readiness disclosures pursuant to the
Year 2000 Information and Readiness Disclosure Act.
Labor Union Negotiations
The Company and International Brotherhood of Electrical Workers ("IBEW") Local
Union 611 will enter into negotiations for a successor agreement during the
later part of the first quarter of 2000. The current collective bargaining
agreement, which covers the 654 bargaining unit employees in the Company's
regulated operations, expires on May 1, 2000. The Company's negotiating team is
currently preparing for the upcoming negotiations. The outcome of future
negotiations cannot be determined at this time.
Accounting Standards
EITF Issue 99-14, Recognition of Impairment Losses on Firmly Committed Executory
Contracts: The Emerging Issues Task Force ("EITF") has added an issue to its
agenda to address impairment of leased assets. A significant portion of the
Company's nuclear generating assets are held under operating leases. Based on
the alternative accounting methods being explored by the EITF, the related
financial impact of the future adoption of EITF Issue No. 99-14 could
potentially be significant. However, a complete evaluation of the financial
impact from the future adoption of EITF Issue No. 99-14 will be undeterminable
until EITF deliberations are completed and stranded cost recovery issues are
resolved.
Statement of Financial Accounting Standards ("SFAS") No. 137 -- Accounting for
Derivative Instruments and Hedging Activities-- Deferral of the Effective Date
of SFAS No. 133: SFAS No. 133 establishes accounting and reporting standards
requiring every derivative instrument be recorded in the balance sheet as either
an asset or liability measured at its fair value. The Statement also requires
that changes in the derivatives' fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Company is in the process
of reviewing and identifying all financial instruments currently existing in the
Company in compliance with the provisions of SFAS No. 133. It is likely that the
adoption of SFAS No. 133 will add volatility to the Company's operating results
and/or asset and liability valuations. In June 1999, Financial Accounting
Standards Board issued SFAS No. 137 to amend the effective date for the
compliance of SFAS No. 133 to January 1, 2001.
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Disclosure Regarding Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies without fear of litigation so long
as those statements are identified as forward-looking and are accompanied by
meaningful, cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the statement. Words
such as "estimates," "expects," "anticipates," "plans," "believes," "projects,"
and similar expressions identify forward-looking statements. Accordingly, the
Company hereby identifies the following important factors which could cause the
Company's actual financial results to differ materially from any such results
which might be projected, forecasted, estimated or budgeted by the Company in
forward-looking statements: (i) adverse actions of utility regulatory
commissions; (ii) utility industry restructuring; (iii) failure to recover
stranded costs; (iv) the inability of the Company to successfully compete
outside its traditional regulated market; (v) the success of the Company's
expansion strategies; (vi) regional economic conditions, which could affect
customer growth; (vii) adverse impacts resulting from environmental regulations;
(viii) loss of favorable fuel supply contracts; (ix) failure to obtain water
rights and rights-of-way; (x) operational and environmental problems at
generating stations; (xi) the cost of debt and equity capital; (xii) weather
conditions; and (xiii) technical developments in the utility industry.
The costs of the Company's Y2K Project and the dates on which the Company
believes it will complete the phases of the Project are based upon management's
best estimates, which were derived using numerous assumptions regarding future
events, including the continued availability of certain resources, third-party
remediation plans, and other factors. There can be no assurance that these
estimates will prove to be accurate and actual results could differ materially
from those currently anticipated. Specific factors that could cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in Y2K issues, the ability to identify, assess, remediate
and test all relevant computer codes and embedded technology, and similar
uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses derivative financial instruments in limited instances to manage
risk as it relates to changes in natural gas and electric prices and adverse
market changes for investments held by the Company's various trusts. The Company
is exposed to credit losses in the event of non-performance or non-payment by
counterparties. The Company uses a credit management process to assess and
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monitor the financial conditions of counterparties. The Company also uses, on a
limited basis, certain derivative instruments for bulk power electricity trading
purposes in order to take advantage of favorable price movements and market
timing activities in the wholesale power markets. See Note 5 to Notes to
Consolidated Financial Statements for the Company's market risk information.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
San Diego Gas Electric Company ("SDG&E") Complaints
As previously reported, SDG&E has filed four separate and similar complaints
with the FERC, alleging that certain charges under the Company's 100 MW power
sales agreement with SDG&E were unjust, unreasonable and unduly discriminatory.
The Company filed responses to such complaints denying the allegations made by
SDG&E, requesting they be dismissed. (See PART II, ITEM 7. -- "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
OTHER ISSUES FACING THE COMPANY -- NMPUC REGULATORY ISSUES -- SAN DIEGO GAS AND
ELECTRIC COMPANY ("SDG&E") COMPLAINTS" in the Company's 1998 annual report on
Form 10-K.)
On March 11, 1999, the FERC issued two separate orders regarding these
complaints. One order, among other things, dismissed the first two complaints
filed by SDG&E. In dismissing the first two complaints, the FERC stated that
SDG&E had not presented sufficient evidence to warrant a hearing regarding the
reasonableness of the contract rate. The order also ruled that an appropriate
time frame for evaluating the reasonableness of the contract rate is over the
life of the contract rather than a snapshot of the rate on a year-to-year basis
as SDG&E alleged in the first two complaints. The second order established the
refund period for the latest complaint, the fourth complaint, and consolidated
it with the other remaining complaint and set a hearing.
Commencing July 19, 1999, a hearing was held on Phase I of the SDG&E complaint
issues regarding whether SDG&E has the right to challenge the rates charged
under the power sales agreement under the Federal Power Act ("FPA") Section 206
"just and reasonable standard", or whether SDG&E has waived this right and is
limited to challenging the rates under the tougher Section 206 "public interest
standard". On September 14, 1999, the Administrative Law Judge issued his
initial decision (subject to review by FERC on exceptions or on its own motion),
holding that the standard of review to be applied in Phase II of the proceeding
is the "public interest" standard. The Phase II hearing regarding whether, and
to what extent, the Company's power sale agreement rates are unlawful, excessive
and/or contrary to the public interest is scheduled for June 2000.
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The Company estimates that the potential refund amount, if the relief sought in
the third and fourth complaints is granted, could be up to as much as $20.3
million plus accrued interest through the refund date. However, the precise
nature of the claim has not yet been presented by SDG&E, and the final amount of
the claim, based on the evidence, could turn out different from the claims
presented in the complaints. The Company continues to firmly believe that the
remaining two complaints are without merit and intends to vigorously defend its
position. The Company cannot predict the ultimate outcome of this matter.
In addition, the Company currently estimates that the net revenue reduction
resulting from the loss of SDG&E contract that expires in April 2001 will be
approximately $20 million annually.
Kirtland Air Force Base ("KAFB") Contract
As previously reported, the Company was informed that the Department of Energy
("DOE") had entered into an intra-agency agreement with the Western Area Power
Administration ("Western") on behalf of KAFB, one of the Company's largest
retail electric customers, under the terms of which Western will competitively
procure power for KAFB. In May 1999, the Company received a request for network
transmission service from Western to facilitate the delivery of wholesale power
to KAFB over the Company's transmission system. (See PART I, ITEM 2. --
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- Kirtland Air Force Base
("KAFB") Contract" in the quarterly report on Form 10-Q for the quarter ended
March 31, 1999.)
The Company denied Western's request, by letter dated June 30, 1999, citing the
fact that KAFB is and will continue to be a retail customer until the effective
date KAFB can elect customer choice service under the provisions of the
Restructuring Act of 1999 (the effective date for customer choice for KAFB is
January 1, 2002, unless extended by the PRC). The Company also cited several
provisions of Federal law that prohibit the provision of such service to
Western. On October 4, 1999, Western filed a petition at the Federal Energy
Regulatory Commission ("FERC") requesting the FERC to consider, on an expedited
basis, ordering the Company to provide network transmission service to Western
under the Company's Open Access Transmission Tariff on behalf of DOE and several
other entities located on KAFB. The Company responded to the Western petition on
October 25, 1999, and intends to litigate this matter vigorously. The net
revenue reduction to the Company if DOE replaces the Company as the power
supplier to KAFB is estimated to be approximately $7.0 million annually.
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In a separate but related proceeding, the Company and the United States
Executive Agencies on behalf of KAFB are involved in a PRC case regarding a
dispute over the terms under which KAFB has taken retail service from the
Company. Among the disputed issues in this case are the interpretation of
language in a retail rate schedule pertaining to the continuation of service
after expiration of the Company's electric service agreement for service to KAFB
and an issue related to the proper scope of the case under the New Mexico Public
Utility Act.
The Company is currently unable to predict the ultimate outcome of these
matters.
New Royalty Claim
On September 23, 1999, a class action lawsuit, on behalf of natural gas
producers, royalty owners and others, was filed in state district court in
Stevens County, Kansas against the Company and its subsidiaries, Sunterra Gas
Gathering Company and Sunterra Gas Processing Company (collectively called
"Company"), as well as numerous other unrelated parties in the natural gas
industry, alleging that gas producers have been underpaid royalties due to
mismeasurement of gas on privately owned lands. The suit also purports to be
brought on behalf of state taxing authorities, although no representative of
that class is designated. The complaint alleges that the mismeasurement
practices alleged breached contracts between plaintiffs and defendants,
constituted negligent or intentional misrepresentation, conversion, negligence,
breach of fiduciary duty and violations of Kansas statutory laws. The complaint
also alleges a civil conspiracy among defendants to misrepresent and mislead
plaintiffs. The complaint also alleges that the defendants fraudulently
concealed the mismeasurement practices alleged in the complaint from plaintiffs
and seeks to suspend the applicable statute of limitations in order to recover
damages for the period from 1974 to the present.
The Company will vigorously defend against this lawsuit and, at this very
preliminary stage, is unable to predict the ultimate outcome or the potential
liability, if any.
City of Gallup ("Gallup") Complaint
As previously reported, in 1998, Gallup, Gallup Joint Utilities and the
Pittsburg & Midway Coal Mining Co. ("Pitt-Midway") filed a joint complaint and
petition ("Complaint") with the NMPUC (predecessor of the PRC). The Complaint
sought an interim declaratory order stating, among other things, that
Pitt-Midway is no longer an obligated customer of the Company, Gallup is
entitled to serve Pitt-Midway and the Company must wheel power purchased by
Gallup from other suppliers over the Company's transmission system. In September
1998, the NMPUC issued an order without conducting a hearing, granting the
requests sought in the Complaint. The Company strongly disagreed with the
NMPUC's decision and filed a motion with the New Mexico Supreme Court ("Supreme
Court") in September 1998, requesting an emergency stay of the NMPUC order
pending its appeal of the order. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY
- -- NMPUC REGULATORY ISSUES -- City of Gallup ("Gallup") Complaint" in the 1998
Form 10-K.)
27
<PAGE>
On August 16, 1999, oral arguments on the Company's appeal were heard, and on
October 13, 1999, the Supreme Court issued an order, annulling and vacating the
NMPUC final order on remand regarding the Gallup Complaint, stating that the
NMPUC lacked the statutory authority to issue that order, because the New Mexico
Public Utility Act did not authorize Gallup to seek a wheeling order from the
NMPUC. The Company has filed testimony regarding certain aspects of its petition
for declaratory order at the FERC, requesting a determination as to whether the
Company's agreement with Gallup requires (i) the Company to deliver energy to
Gallup at the Company's Yah-Ta-Hey station and (ii) the Company to wheel energy
for Gallup. Hearings are scheduled in February 2000.
Nuclear Decommissioning Trust
As previously reported, in 1998, the Company and the trustee of the Company's
master decommissioning trust filed a civil complaint and an amended complaint,
respectively, against several companies and individuals for the
under-performance of a corporate owned life insurance program. The program,
which was approved by the NMPUC and set up in a trust in 1987, was used to fund
a portion of the Company's nuclear decommissioning obligations for its 10.2%
interest in PVNGS. In January 1999, the life insurance program was terminated,
and the life insurance policies were surrendered by the trust in exchange for
the cash surrender value of the policies. In the lawsuit, the Company asserted
various tort, contract and equity theories against the defendants, seeking,
among other things, an amount sufficient to compensate for the harm to the
Company caused by the defendants' conduct. A defendant counterclaimed for
indemnity based on its engagement contract with the Company, claiming that if it
had injured the trustee, then the Company must pay the damages. The Company
denied liability under the counterclaim and set forth numerous defenses. The
case is proceeding in State District Court in Santa Fe County. The defendants'
motions to dismiss were denied and the Company's motions to further amend the
complaint to assert claims against two additional defendants, a law firm and an
accounting firm, were granted. (See PART II, ITEM 1. -- "LEGAL PROCEEDINGS --
Nuclear Decommissioning Trust" in the Company's quarterly report on Form 10-Q
for the quarter ended June 30, 1999.)
On August 13, 1999, the Company appealed one of the trial court's decisions
regarding pretrial discovery to the New Mexico Court of Appeals. While this
decision is on appeal, all pretrial discovery is being stayed. The Company is
currently unable to predict the ultimate outcome or amount of recovery, if any.
28
<PAGE>
ITEM 5. OTHER INFORMATION
Clean Air Act
As previously reported, the Clean Air Act Amendments of 1990 (the "Act") impose
stringent limits on emissions of sulfur dioxide and nitrogen from fossil-fueled
electric generating plants. The Act is intended to reduce air contamination from
every sizable source of air pollution in the nation. The Act established the
Grand Canyon Visibility Transport Commission ("Commission") and charged it with
assessing adverse impacts on visibility at the Grand Canyon. The Commission
broadened its scope to assess visibility impairment in mandatory Class I areas
(parks and wilderness areas) located in the Colorado Plateau. The Commission
submitted its findings and recommendations to the Environmental Protection
Agency ("EPA") in June 1996. See PART I, ITEM 1. -- "BUSINESS -- ENVIRONMENTAL
FACTORS" in the 1998 Form 10-K.
On July 1, 1999, the final regional haze regulations were published. The purpose
of the regional haze regulations is to address regional haze visibility
impairment in the 156 Class I areas in the nation. The final rule calls for all
states to establish goals and emission reduction strategies for improving
visibility in all of the Class I areas. The rule contains specific provisions to
allow the western states to implement the Commission's recommendations within
the framework of Section 309 of the rule.
Arizona Public Service Company ("APS"), as the operating agent of the Four
Corners Power Plant ("Four Corners"), previously filed a petition for review
alleging EPA improperly classified Four Corners Unit 4 with respect to nitrogen
oxides emission limitations. In October 1999, EPA issued a direct final rule,
which classified Four Corners Unit 4 as APS proposed. Depending on the comments
filed by other parties, if any, the rules may be become final as soon as
December 1999. APS does not currently expect this rule to have a material impact
on the Four Corners operations.
In a related matter, in September 1999, the EPA proposed a Federal
Implementation Plan ("FIP") to set air quality standards at certain power
plants, including Four Corners. The comment period on this proposal ends in
November 1999. The FIP is similar to current New Mexico regulation of Four
Corners with minor modifications. APS does not currently expect the FIP to have
a material impact on the Four Corners operations.
Certain Assets of Plains Electric Generation and Transmission Cooperative, Inc.
("Plains")
As previously reported, the Company and Tri-State Generation and Transmission
Association, Inc. ("Tri-State") submitted a binding joint offer in 1998 for the
acquisition of the assets of Plains, and Plains subsequently announced that it
would be entering into exclusive negotiations with the Company and Tri-State
regarding the joint proposal. Plains entered into a merger agreement with
Tri-State, with Tri-State being the surviving entity. Tri-State would then,
under the terms of an asset sale agreement with the Company, sell certain assets
to the Company consisting primarily of transmission assets and the Plains
29
<PAGE>
headquarters building in Albuquerque. In addition, the Company agreed to become
the power supplier of approximately 50 MW to one of Plains' member cooperatives.
Plains, Tri-State and the Company have filed for regulatory approvals from the
PRC and the Federal Energy Regulatory Commission. (See ITEM 2. --"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
ASSETS ACQUISTIONS" in the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1999.)
In the pending PRC case, a settlement stipulation was entered into among the
Company, Tri-State, Plains and the PRC Staff to resolve the issues in the case,
to permit the merger to take place and to allow Tri-State to sell the
above-referenced assets to the Company. None of the other intervenors in the
case objected to the settlement stipulation. The principal disputed issue had
been the scope of the PRC's jurisdiction over Tri-State after the completion of
the merger; Tri-State argued that the PRC should have very limited jurisdiction
while the PRC Staff argued for substantially broader jurisdiction. The
settlement stipulation effected a compromise in which there would be limited PRC
rate regulation of Tri-State after the merger. A hearing on the stipulation was
held commencing on November 2, 1999 before a PRC hearing examiner. The Company
cannot predict the outcome of the case or when a decision will be issued by the
PRC.
The Company and Tri-State entered into an asset sale agreement, dated September
9, 1999, pursuant to which Tri-State has agreed to sell the above-referenced
assets to the Company. The purchase price to be paid by the Company is $13.2
million, subject to adjustment at the time of the closing of the purchase. The
asset sale agreement contains standard covenants and conditions for this type of
agreement.
30
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
3.1* Restated Articles of Incorporation of the Company, as amended
through May 10, 1985
3.2* By-laws of Public Service Company of New Mexico With All
Amendments to and including June 8, 1999
10.44.2** Second Restated and Amended Non-Union Severance Pay Plan of
Public Service Company of New Mexico dated August 1, 1999
10.77 San Juan Project Participation Agreement dated as of
October 27, 1999, among Public Service Company of New Mexico,
Tucson Electric Power Company, The City of Farmington, New
Mexico, M-S-R Public Power Agency, The Incorporated County of
Los Alamos, New Mexico, Southern California Public Power
Authority, City of Anaheim, Utah Associated Municipal Power
Systems and Tri-State Generation and Transmission
Association, Inc.
10.78 Stipulation in the matter of the Commission's
investigation of the rates for electric service of Public
Service Company of New Mexico, Rate Case No. 2761, dated May
21, 1999
10.78.1 Supplemental Stipulation in the matter of the Commission's
investigation of the rates for electric service of Public
Service Company of New Mexico, Rate Case No. 2761, dated May
27, 1999
10.79 Asset Sale Agreement between Tri-State Generation and
Transmission Association, Inc., a Colorado Cooperative
Association and Public Service Company of New Mexico, a New
Mexico Corporation, dated September 9, 1999
15.0 Letter Re: Unaudited Interim Financial Information
27 Financial Data Schedule
* The Company hereby incorporates the exhibits by reference pursuant to
Exchange Act Rule 12b-32 and Regulation S-K, Section 10, paragraph (d).
** Designates each management contract or compensation plan or arrangement
required to be identified pursuant to paragraph 3 of Item 14 (a) of Form
10-K.
31
<PAGE>
b. Reports on Form 8-K:
Report dated September 2, 1999 and filed September 2, 1999 relating to
the electric rate case, upgrades of the Company's securities ratings to
investment grade and disclosure regarding forward looking statements.
Report dated September 16, 1999 and filed September 16, 1999 relating to
the Company's third quarter earnings projection.
Report dated October 7, 1999 and filed October 7, 1999 related to the
Company's board of directors approve filing holding company plan.
Report dated October 22, 1999 and filed October 22, 1999 relating to the
Company's third quarter earnings.
32
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
-------------------------------------
(Registrant)
Date: November 12, 1999 /s/ John R. Loyack
-------------------------------------
John R. Loyack
Vice President, Corporate Controller
and Chief Accounting Officer
(Officer duly authorized to
sign this report)
33
BYLAWS
OF
PUBLIC SERVICE COMPANY OF NEW MEXICO
With All Amendments to and Including June 8, 1999
- -------------------------------------------------
<PAGE>
BYLAWS
OF
PUBLIC SERVICE COMPANY OF NEW MEXICO
ARTICLE I.
Meetings of Stockholders
------------------------
Section 1. Meetings. The Annual Meeting of Stockholders shall be held on such
date and at such time and place as may be fixed from time to time by the Board
of Directors of the Company pursuant to a resolution adopted by a majority of
the members of the Board then in office, for the election of directors and the
transaction of such other business as may properly come before the meeting.
Special meetings may be called by a majority of the Board of Directors, the
Executive Committee, the Chairman of the Board or the President.
Section 2. Place of Meetings. The annual or any special meeting of
stockholders shall be held at the principal office of the Company in the City of
Albuquerque, Bernalillo County, State of New Mexico, or at such other places
within or without the State of New Mexico as shall be specified in the notice of
such meeting.
Section 3. Notice. Written notice of any meeting stating the time and place,
and if a special meeting, the purpose or purposes of such meeting, shall be
mailed to each stockholder of record entitled to vote at such meeting at the
address of such stockholders as the same appears on the stock transfer books of
the Company, except as otherwise provided by law. In the event of the transfer
of a stockholder's stock after mailing of such notice and prior to the holding
of the meeting, it shall not be necessary to mail notice of the meeting to any
transferee. All notices of any special stockholder meeting shall be mailed not
less than forty (40) days before the date of the meeting; however, notice of any
such special meeting called by a majority of the Board of Directors, the
Executive Committee, the Chairman of the Board or the President, and notice of
any annual meeting, shall be mailed not less than ten (10) days before such
meeting of stockholders.
<PAGE>
Section 4. Quorum. At any meeting of the stockholders, except as otherwise
provided by law, it shall be necessary that the holders of a majority of the
issued and outstanding shares of the capital stock entitled to vote at such
meeting shall be represented in person or by proxy to constitute a quorum for
the transaction of business.
Section 5. Adjournment. Whenever at any meeting of the stockholders, notice of
which shall have been duly given, a quorum shall not be present, or whenever for
any reason it may be deemed desirable, a majority in interest of the
stockholders present in person or by proxy may adjourn the meeting from time to
time to any future day, without notice other than by announcement at the meeting
or adjournment thereof. At any such adjourned meeting at which quorum shall be
present, any business may be transacted which might have been transacted at the
meeting on the date originally fixed.
Section 6. Organization. The Chairman, or in the absence of the Chairman, the
President, or in the absence of both, a Vice President shall call meetings of
the stockholders to order and shall act as Chairman of such meetings. The
stockholders may appoint any stockholder or the proxy of any stockholder to act
as Chairman of any meeting of the stockholders in the absence of the Chairman,
President and Vice Presidents. The Secretary, or in the absence of the
Secretary, an Assistant Secretary, shall act as Secretary at all meetings of the
stockholders, but in the absence of the Secretary and Assistant Secretaries at
any meeting of the stockholders the presiding officer may appoint any person to
act as Secretary of such meeting.
Section 7. Inspectors. At each meeting of the stockholders at which a vote by
ballot is taken, the polls shall be opened and closed, the proxies and ballots
shall be received and be taken in charge, and the validity of proxies and the
acceptance or rejection of votes shall be decided by two inspectors. No person
who is a candidate for the office of director shall act as Inspector of any
election for directors. Such inspectors shall be appointed by the Board of
Directors before the meeting, or, if no such appointment shall have been made,
then by the presiding officer of the meeting. If for any reason any of the
inspectors previously appointed shall fail to attend or refuse or be unable to
serve, inspectors in place of any so failing to attend or refusing or unable to
serve shall be appointed in like manner.
2
<PAGE>
Section 8. Voting. At each meeting of stockholders every stockholder, whether
resident or nonresident, shall be entitled to one vote for each share of stock
standing in the name of the stockholder on the books of the Company on the date
on which stockholders entitled to vote are determined. Such stockholder may be
represented and vote by a proxy or proxies appointed by an instrument in
writing; in the event that such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated, unless the instrument shall otherwise provide. No proxy
shall be voted at any meeting or adjournment thereof other than that for which
the proxy is given.
In all elections for directors, voting shall be by written ballot.
The Board of Directors may fix a date in advance not exceeding fifty (50) days
preceding the date of any meeting of stockholders as a record date for the
determination of stockholders entitled to notice of and to vote at any such
meeting, and in such case only stockholders of record on the date so fixed shall
be entitled to notice of and to vote at such meeting.
3
<PAGE>
ARTICLE II.
Directors
Section 1. Number, Election and Terms. The business and property of the
corporation shall be managed and controlled by a Board of Directors who, if and
while so required by law, shall be stockholders in the Company, and none of whom
need be a resident of the State of New Mexico. The directors shall be nine in
number and shall be elected in classes in the manner provided in Article Fifth
of the Articles of Incorporation as amended.
Section 2. Chairman of the Board of Directors. The Chairman shall be elected
annually by the Board of Directors at the annual meeting thereof and shall hold
that office until the next annual meeting or until a successor shall be elected
and shall qualify. In the event of the incapacity of the Chairman of the Board,
the Board of Directors shall, by a majority vote of the Board of Directors,
designate an Acting Chairman who shall, during the incapacity of the Chairman,
assume and perform all functions and duties which the Chairman is authorized or
required by law to do. The Chairman of the Board shall have the power to call
special meetings of the stockholders and of the Directors for any purpose or
purposes. The Chairman shall preside at all meetings of the stockholders and of
the Board of Directors unless the Chairman shall be absent or incapacitated. The
Chairman of the Board, subject to the authority of the Board, shall generally do
and perform all acts incident to the office of the Chairman of the Board and
which are authorized or required by law.
Section 3. Vacancies. Any vacancies occurring on the Board of Directors by
death, resignation, or otherwise shall be filled by a majority of Directors then
remaining in office.
Section 4. Meetings. The meetings of the Board of Directors shall be held at
the times and places designated by the Board of Directors. There shall be no
fewer than four regular meetings of the Board during any calendar year.
4
<PAGE>
The Annual Meeting of the Board of Directors for the election of officers and
of the Executive Committee, and such other business as may properly come before
the meeting, shall be held immediately following the annual meeting of
stockholders.
Special meetings of the Board of Directors shall be held whenever called at the
direction of the Chairman of the Board of Directors, the President, any two
directors, or the Executive Committee.
Section 5. Notice. No notice shall be required of any annual or regular
meeting of the Board of Directors unless the place thereof shall be other than
that last designated by the Board. Notice of any annual or regular meeting, when
required, or of any special meeting of the Board of Directors shall be given to
each director by mailing or delivering the same at least forty-eight hours, or
by telephoning the same at least twenty-four hours before the time fixed for the
meeting. Such notice may be waived by any director. Unless otherwise indicated
in the notice thereof any and all business may be transacted at a special
meeting. At any meeting at which every director shall be present, even without
notice, any business may be transacted.
Section 6. Quorum. A majority of the Board of Directors shall constitute a
quorum for the transaction of business, and any action receiving the affirmative
vote of a majority of the directors present at any meeting shall be effective.
Section 7. Adjournments. Any annual, regular or special meeting of the Board
of Directors may be adjourned from time to time by the members present whether
or not a quorum shall be present, and no notice shall be required of any
adjourned meeting beyond the announcement of such adjournment at the meeting.
Section 8. Indemnification. Each person who shall have served as a director or
an officer of the Company, or, at the request of the Company, as a director or
an officer of any other corporation, partnership or joint venture, whether
profit or nonprofit, in which the Company (a) owns shares of capital stock, (b)
has an ownership interest, (c) is a member, or (d) is a creditor, and regardless
of whether or not such person is then in office, and the heirs, executors,
administrators and personal representatives of any such person shall be
indemnified by the Company to the full extent of the authority of the Company to
so indemnify as authorized by the law of New Mexico.
5
<PAGE>
Section 9. Committees. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members
one or more committees, in addition to the Executive Committee provided for in
Article III hereof, each of which, to the extent provided in the resolution
establishing such committee and designating the member or members thereof, shall
have and may exercise all the authority of the Board of Directors, except as may
be limited by law.
ARTICLE III.
Executive Committee
-------------------
Section 1. The Board of Directors may from time to time appoint by resolution
adopted by a majority of the full Board of Directors from among its members an
Executive Committee which may exercise the powers of the Board of Directors in
the management of the business, affairs and property of the Company during
intervals between the meetings of the Board of Directors unless and until the
Board of Directors shall otherwise direct. The Board shall appoint the Chair of
the Executive Committee, who will be a Director other than the Chairman of the
Board.
Section 2. A majority of the Executive Committee shall constitute a quorum for
the transaction of business and any action receiving the affirmative vote of a
majority of the members of the Executive Committee present at any meeting shall
be effective; provided, however, that the affirmative vote of not less than
three members of the Executive Committee shall be required for any such action.
Section 3. Meetings of the Executive Committee shall be held whenever called
by the direction of the Chairman of the Executive Committee, the Chairman of the
Board of Directors, or any two members of the Executive Committee. Notice of any
meeting of the Executive Committee shall be given each member of the Executive
Committee in writing or by telephone at least 24 hours before the time fixed for
the meeting. Such notice may be waived by any member of the Executive Committee.
6
<PAGE>
ARTICLE IV.
Officers
--------
Section 1. Number, Election and Term. The officers of the Company shall be a
President, one or more Vice Presidents, a Secretary, a Treasurer, and a
Controller who shall be elected annually by the Board of Directors at the annual
meeting thereof and who shall hold their respective offices until the next
annual meeting or until their successor shall be elected and shall qualify. The
Board of Directors may designate one or more Vice Presidents as "Executive" Vice
Presidents and one or more Vice Presidents as "Senior" Vice Presidents. The
title of any Vice President may include words indicative of the area of
responsibility of such Vice President. The Board of Directors shall designate
one of the Vice Presidents as the chief financial officer of the Company. The
Board of Directors may from time to time appoint such additional officers as the
interest of the Company may require and fix their terms and duties of office. A
vacancy occurring in any office may be filled by the Board of Directors. All
officers shall hold office subject to the Board of Directors and shall be
subject to removal at any time by the affirmative vote of a majority of the
whole Board of Directors. Election of any person as an officer of the Company
shall not of itself create contract rights.
Section 2. President. The President shall be the Chief Executive Officer of
the Company and shall provide active executive management over all operations of
the Company; subject, however, to control of the Board of Directors. The
President shall have the power to appoint and discharge, subject to the general
approval or review by the Board of Directors, employees and agents of the
7
<PAGE>
Company and to fix their compensation to make and sign contracts and agreements
in the name of and on behalf of the Company and direct the general management
and control of the business and affairs of the Company. The President may
delegate from among the powers enumerated in the preceding sentence to officers
of the Company, such responsibilities and authority as the President may
determine. The President shall have the power to segregate the operations of the
Company into areas of responsibility. The President shall see that the books,
reports, statements and certificates required by the statute under which the
Company is organized or any other laws applicable thereto are properly kept,
made, and filed according to law; and the President shall generally do and
perform all acts which are authorized or required by law. The President shall
designate a Vice President who shall, during the absence or incapacity of the
President, assume and perform all functions and duties which the President might
lawfully do if present in person and not under any incapacity.
Section 3. Vice Presidents.
Section 3(a). Executive and Senior Vice Presidents. Each Vice President
designated as "Executive" or "Senior Vice President" shall be responsible for
such areas and activities as assigned by the President, shall be subject to the
authority of the President and shall assist in the general control and
management of the business and affairs of the Company.
Section 3(b). Other Vice Presidents. The Vice Presidents shall be responsible
for such areas and activities as are assigned by the President and shall perform
such duties as may be required.
Section 3(c). Assumption of Duties by a Vice President. A Vice President,
consistent with the title or duty of such Vice President, shall assume and
perform all functions and duties assigned to a superior executive during the
absence or incapacity of such superior.
8
<PAGE>
Section 4. Secretary. The Secretary shall be sworn to the faithful discharge
of the duties of the Secretary. The Secretary shall keep a record in the proper
books provided for that purpose of meetings and proceedings of the Board of
Directors, Executive Committee and other Committees as may be designated by the
Board and stockholders, and shall record all votes of the directors and
stockholders in a book to be kept for that purpose. The Secretary shall notify
the directors and stockholders of the respective meetings as required by law or
by the bylaws of the Company and shall perform such other duties as may be
required by law or the bylaws of the Company, or which may be assigned from time
to time by the Board of Directors or Executive Committee. The Secretary is
authorized to appoint one or more assistants from time to time as the Secretary
deems advisable, the assistant or assistants to serve at the pleasure of the
Secretary, and to perform the duties that are delegated by the Secretary. The
assistant or assistants so appointed shall not be officers of the Company.
Section 5. Treasurer. The Treasurer shall have the custody of all the funds
and securities of the Company, and shall have the power on behalf of the Company
to sign checks, notes, drafts and other evidences of indebtedness, to borrow
money for the current needs of the business of the Company and to make
short-term investments of surplus funds of the Company. The Treasurer shall
render to the President or directors, whenever required by them, an account of
all transactions performed as Treasurer and of the financial conditions of the
Company. The Treasurer shall perform such other duties as may be assigned from
time to time by the Board of Directors, by the Executive Committee or by the
President. The Treasurer is authorized to appoint one or more assistants from
time to time as the Treasurer deems advisable, the assistant or assistants to
serve at the pleasure of the Treasurer, and to perform the duties that are
delegated by the Treasurer. The assistant or assistants so appointed shall not
be officers of the Company.
Section 6. Controller. The Controller shall be the chief accounting officer of
the Company and have full responsibility and control of the accounting
department, which department shall include all accounting functions carried on
throughout the Company and its subsidiaries. As such, the Controller shall,
subject to the approval of the Board of Directors, the Executive Committee or
the President, establish accounting policies. The Controller shall standardize
and coordinate accounting practices, supervise all accounting records and the
9
<PAGE>
presentation of all financial statements and tax returns. The Controller shall
have such other powers and duties as, from time to time, may be conferred by the
Board of Directors, by the Executive Committee or by the President. The
Controller is authorized to appoint one or more assistants from time to time as
the Controller deems advisable, the assistant or assistants to serve at the
pleasure of the Controller, and to perform the duties that are delegated by the
Controller. The assistant or assistants so appointed shall not be officers of
the Company.
Section 7. Form of Appointment. In making any appointments of assistants the
Secretary, Treasurer, and Controller shall use the following form:
I, (Name), the duly elected (Title) of Public Service Company of New
Mexico, do hereby appoint (Name) to serve as Assistant (Title) for the
period of (date) to (date), unless this appointment is terminated
earlier in writing, to assume or perform all functions and duties
which I might require and, in my absence or incapacity, which I might
lawfully do if present and not under any incapacity.
Any appointments of assistants by the Secretary, Treasurer or Controller and any
terminations of appointments shall be maintained in the records of the
Secretary's office.
ARTICLE V.
Contracts
---------
Section 1. Unless the Board of Directors shall otherwise specifically direct,
all contracts, instruments, documents or agreements of the Company shall be
executed in the name of the Company by the President, or any Vice President, or
any other employee, if approved by the President by either administrative policy
letter or specific written designation. It shall not be necessary that the
corporate seal be affixed to any contract.
10
<PAGE>
Section 2. No contract or other transaction between the Company and any other
corporation owning or holding stock in this Company shall be affected by the
fact that the directors or officers of this Company are interested in, or are
directors or officers of, such other corporation. No contract or transaction of
this Company with any person or persons or firm or association or corporation
(other than one owning or holding stock in this Company) shall be affected by
the fact that any director or officer of this Company is a party thereto or
interested therein, or in any way connected with such person or persons, firm or
association, or corporation, provided that at the meeting of the Board of
Directors of this Company, making, authorizing or confirming such contract or
transaction, there shall be present a quorum of directors not so interested, and
that such contract or transaction shall be approved or be ratified by the
affirmative vote of at least three directors not so interested.
The Board of Directors in its discretion may submit any contract, or act, for
approval or ratification at any annual meeting of the stockholders, or at any
meeting of the stockholders called for the purpose of considering any such act
or contract; and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the capital stock of the Company which
is represented in person or by proxy at such meeting (provided that lawful
quorum of stockholders be there represented in person or by proxy) shall be as
valid and as binding upon the Company and upon all the stockholders as though it
had been approved or ratified by every stockholder of the Company.
ARTICLE VI.
Negotiable Instruments
----------------------
Except as otherwise provided by the Board of Directors, all checks, drafts,
bills of exchange, promissory notes and other negotiable instruments shall be
signed by the Chairman of the Board, the President, any Vice President,
Secretary or Treasurer.
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ARTICLE VII.
Capital Stock
-------------
Section 1. Certificates of Stock. All certificates of stock shall be in such
form as the Board of Directors may approve and shall be signed by the President
or a Vice President and by the Secretary and may be sealed with the seal of the
Company or a facsimile thereof. The signatures of the President or Vice
President and the Secretary of the Company upon a certificate may be facsimiles.
In case any officer of the Company whose signature, whether facsimile or
otherwise, shall have been placed upon any certificate shall cease to be such
officer before any certificate so signed shall have been actually issued and
delivered, such certificate may nevertheless be issued and delivered by the
Company as though the person who had signed such certificate had not ceased to
be an officer. All certificates shall be numbered for identification. The name
of the person owning the shares represented thereby with the number of shares
and the date of issue shall be entered on the Company's books. All certificates
surrendered to the Company shall be cancelled, and no new certificates shall be
issued until a certificate or certificates aggregating the same number of shares
of the same class shall have been surrendered or cancelled; but the Board of
Directors or Executive Committee may make proper provision, from time to time,
for the issue of new certificates in place of lost or destroyed certificates.
Section 2. Transfer Agents and Registrars. The Company shall, if and whenever
the Board of Directors shall so determine maintain one or more transfer offices
or agencies, each in charge of a transfer agent designated by the Board of
Directors, where the shares of the capital stock of the Company shall be
directly transferable, and also one or more registry offices, each in charge of
a registrar designated by the Board of Directors, where such shares of stock
shall be registered and no certificates for shares of the capital stock of the
Company, in respect of which one or more transfer agents and registrars shall
have been designated, shall be valid unless countersigned by one of such
transfer agents and registered by one of such registrars. The Board of Directors
may also make such additional rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
the capital stock of the Company.
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Section 3. Transfer of Stock. Transfers of stock shall be made only upon the
books of the Company by the holder in person or by the holder's attorney upon
surrender of certificates for a like number of shares.
Section 4. Closing of Transfer Books. The Board of Directors shall have power
to close the transfer books of the Company for a period not exceeding fifty (50)
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the transfer books as aforesaid, the
Board of Directors may fix in advance a date, not exceeding fifty (50) days
preceding the date of any meeting of stockholders or the date for the payment of
any dividend or the date for the allotment of rights or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of stockholders entitled to notice of and to vote at
any such meeting, or entitled to receive payment of any such dividend or to any
such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such cases only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at such meeting, or to receive the
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Company after any such record date fixed as aforesaid.
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ARTICLE VIII.
Dividends
---------
Dividends upon the stock of the Company may be declared from time to time by
the Board of Directors in its discretion and paid to stockholders from the
surplus or net profits arising from the business of the Company.
ARTICLE IX.
Books
-----
The books of the Company, except as otherwise provided by law, may be kept
outside of the State of New Mexico, at such place or places as may be from to
time designated by the Board of Directors.
The Directors shall, from time to time determine whether and to what extent,
and at what time and places, and under what conditions and regulations the
accounts and the books of the Company, or any of them, shall be open to the
inspection of stockholders; and no stockholder shall have any right to inspect
any book or account or document of the Company except as conferred by the
statutes of New Mexico, or authorized by the Directors.
ARTICLE X.
Corporate Seal
--------------
The common corporate seal is, and until otherwise ordered by the Board of
Directors shall be, an impression circular in form upon paper or wax bearing the
words "Public Service Company of New Mexico, Incorporated, 1917."
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The seal shall be in the charge of the Secretary. If and when so directed by
the Board of Directors or by the Executive Committee a duplicate of the seal may
be kept and used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
ARTICLE XI.
Amendments
----------
The power to alter, amend or repeal the Bylaws of the Company or adopt new
Bylaws for this Company shall be vested in the Board of Directors.
PUBLIC SERVICE COMPANY OF NEW MEXICO
SECOND RESTATED AND AMENDED
NON-UNION SEVERANCE PAY PLAN
The Public Service Company of New Mexico ("PNM" or the "Company")
hereby adopts the following Second Restated and Amended Non-Union Severance Pay
Plan (the "Plan"), effective August 1, 1999.
WHEREAS, the Plan was originally adopted by the Company on September 1,
1990;
WHEREAS, pursuant to Article X of the Plan as originally adopted, the
Company reserved the right to amend the Plan;
WHEREAS, pursuant to such right, the Company adopted the First
Amendment to the Plan, dated April 15, 1992, in part to implement the Non-Union
Employment Option Program ("EOP");
WHEREAS, the Company adopted effective August 1, 1992, the First
Restated and Amended Non-Union Severance Pay Plan, and the First Restated and
Amended Non-Union Employment Option Program, as a part of the Plan;
WHEREAS, the Board of Directors ("Board") or Compensation and Human
Resources Committee ("Committee") on October 6, 1992, March 8, 1993 and April 5,
1993 again considered and approved extensions of the Plan, adoption of senior
management severance benefits in lieu of the EOP benefit option, and senior
management severance benefits for the employees identified as Primary Asset Team
("PAT") members through the Asset Sales Incentive Plan ("ASIP");
WHEREAS, the Company adopted the First Amendment to the First Restated
and Amended Non-Union Severance Pay Plan, effective April 6, 1993;
WHEREAS, the EOP of the Plan was subsequently amended on April 6, 1993,
October 4, 1993, and August 1, 1994;
WHEREAS, the Company now wishes to amend and restate the Plan and to
integrate referenced and inter-related severance programs and plans into the
body of this Plan, and to delete the EOP, and the Impaction Leave of Absence
("ILAP");
WHEREAS, the Company wishes to adopt this Second Restated and Amended
Non-Union Severance Pay Plan as of the date above written, in order to also
delete outdated references to PAT members, the Gas Assets Retention Plan
("GARP"), delete reference to the seldom used severance option ILAP, clarify the
status of employee transfers to an affiliate subsidiary, and to provide for
other administrative updates and revisions;
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NOW, THEREFORE, the Plan shall be, and the same hereby is, amended and
restated as follows:
I. PURPOSE
----------
The Company establishes this Plan for the purpose of providing
severance benefits to an eligible Participant whose employment is terminated by
the Company generally due to the elimination of his or her position, and who is
ineligible for retention benefits under the Public Service Company of New Mexico
Executive Retention Plan ("Executive Retention Plan"), the Public Service
Company of New Mexico Employee Retention Plan ("Employee Retention Plan"), or
any other similar severance, retention or change in control plan or agreement.
This Plan shall hereafter include three forms of severance benefits: (a) Regular
Severance; (b) Enhanced Severance; and (c) Senior Management Severance. Any
benefits previously provided under the EOP and ILAP severance options are hereby
terminated, effective as of the date and year first above written.
II. DEFINITIONS
---------------
2.1. Affiliate shall mean any person who directly controls, or is
controlled by, or is under common control with, the Company.
2.2. Base Salary shall mean the annual rate of base earnings of a
Participant immediately preceding his or her Termination Date, (a) exclusive of
overtime pay, bonuses, commission, payments for accrued vacations or other
special payments, and (b) before any deductions, including, but not limited to,
any federal, state, or other taxes, and salary reduction amounts contributed to
benefit plans. A Participant's monthly Base Salary shall be computed by dividing
his or her annualized Base Salary, as defined above, by twelve (12) and his or
her weekly Base Salary shall be computed by dividing his or her annualized Base
Salary, as defined above, by fifty-two (52). For part-time and job-share
Participants, adjustments will be made to their annualized Base Salary by the
Company as necessary to reflect their less than full-time status.
2.3. Cause for purposes of termination of a Participant's employment,
shall mean:
2.3.1. The willful and continued failure of a Participant to
substantially perform his or her duties with the Company after a written demand
for substantial performance is delivered to the Participant which specifically
identifies the manner in which the Participant has not substantially performed
his or her duties, or willful failure to report to work for more than thirty
(30) days. Provided, however, that this Section shall not apply if the failure
results from such Participant's incapacity due to verifiable physical or mental
illness substantiated by appropriate medical evidence. For purposes of this
definition, an act or failure to act, by a Participant shall not be deemed
"willful" if done, or omitted to be done, by the Participant in good faith and
with a reasonable belief that his or her action was in the best interest of the
Company; or
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2.3.2. The willful engaging by the Participant in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, including acts of fraud, misappropriation, violence or embezzlement
for personal gain at the expense of the Company, conviction of a felony, or
conviction of a misdemeanor involving immoral acts.
2.4. Code shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.5. Committee shall mean an employee committee consisting of at least
three (3) members, appointed by the President of the Company to administer the
Plan.
2.6. Company shall mean the Public Service Company of New Mexico, a New
Mexico corporation.
2.7. Enhanced Severance Benefits shall mean the benefits described in
Section 5.3.
2.8. Health Care Benefits shall mean the medical and dental benefits
provided to Participants under existing policies and plans maintained by the
Company, although the Company reserves the right from time to time, in its
absolute and sole discretion, to amend such plans, in any and all respects,
including the right to terminate, reduce or change the level of benefits
provided thereunder, or to provide alternative forms of benefits.
2.9. Impacted or Impaction shall mean the elimination of a
Participant's position by the Company as approved by the President of the
Company or his authorized designee, followed by the Company giving a Notice of
Position Impaction to the Participant and the Participant's subsequent
termination of employment.
2.10. Management Group shall mean those Participants designated as
being eligible for Management Group severance benefits, as described in Section
5.3.4.2. To be an eligible member, a Participant must be included in the
Management Group list, established and updated from time-to-time by the Company.
2.11. Notice of Position Impaction shall mean the written notice issued
by the Company to the Participant stating that his or her position with the
Company has been selected for Impaction.
2.12. Participant shall mean any employee of the Company or of an
authorized participating Affiliate employer who satisfies the eligibility
requirements pursuant to Articles III and IV hereof.
2.13. Plan shall mean the Public Service Company of New Mexico
Non-Union Severance Pay Plan as described herein.
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2.14. Plan Administrator shall be the Company, who further delegates
responsibility to administer the Plan to the Human Resources Department and the
Committee, or their respective successors.
2.15. Qualified Retirement Plans shall mean all tax qualified
retirement plans currently in existence or hereafter adopted by the Company,
including, but not limited to, the Public Service Company of New Mexico
Employees' Retirement Plan, the Public Service Company of New Mexico Master
Employee Savings Plan and Trust, and any other qualified retirement plan adopted
by the Company.
2.16. Regular Severance Benefits shall mean those benefits described in
Section 5.2.
2.17. Release Form shall mean the waiver and release agreement(s) to be
executed by Participants in order to be eligible for and receive any severance
pay or benefit other than Regular Severance Benefits, prepared by the Company or
a participating Affiliate and containing such terms and conditions as are
necessary to protect the interests of the Company or Affiliate.
2.18. Senior Management Group shall mean those Participants designated
by the President of the Company as being terminated from employment, and
eligible for Senior Management Severance Benefits, without a Notice of
Impaction. To be an eligible member, a Participant must be included in the
Senior Management Group list, established and updated from time-to-time by the
President of the Company.
2.19. Severance Pay shall mean the severance pay provided to a
Participant pursuant to Article V hereof.
2.20. Termination Date shall mean the effective date of a Participant's
termination of employment.
2.21. Transfer of Employment as described in Section 4.2.3 shall not be
deemed an Impaction or termination of employment or an eligibility event
qualifying a Participant or employee for any severance benefits herein.
2.22. Year of Service shall mean a year of service including fractional
portions of the year, counting each month as one-twelfth (1/12) of a year if the
Participant was employed on any day of that calendar month. If the Participant's
employment with the Company includes a break in service, then only the years of
service in the last period of employment will be considered Years of Service
under this Plan.
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<PAGE>
III. ELIGIBILITY FOR PARTICIPATION
----------------------------------
All active employees of the Company are Participants in the Plan, other
than (a) introductory status employees; (b) part-time or job-share employees
scheduled to work less than twenty (20) hours per week during the calendar month
immediately preceding the date Notice of Position Impaction is given; (c)
temporary, contract, summer or other contingent workers; (d) contract personnel
who are designated as independent consultants pursuant to a written agreement
with the Company; (e) employees covered by the terms of a collective bargaining
agreement between the Company and a union representing such employees; and (f)
employees subject to termination of their employment for cause. Employees of an
Affiliate of the Company are not eligible to participate hereunder, unless the
Affiliate adopts the Plan for some or all of its non-union employees, with the
prior approval of the Company Board of Directors for the adoption of the Plan.
Any Company or Affiliate water services unit employee whose employment is
terminated upon expiration of the contract for maintenance and operation of the
City of Santa Fe water supply system shall not be eligible to participate
hereunder in the event such employee receives an offer of employment from the
City of Santa Fe as a successor employer, at ninety percent (90%) or greater of
the employee's pre-termination Base Salary, independent of the employee's
decision to accept or decline such offer, or in the event the offer is less than
ninety percent (90%) of the pre-termination base salary and the employee accepts
the offer.
IV. ELIGIBILITY FOR BENEFITS
----------------------------
4.1. Eligibility. To be eligible for benefits hereunder, a Participant
must satisfy the General and specific requirements as set forth below, dependent
on the type of severance benefit to be received.
4.2. General.
4.2.1. The Participant must generally receive a Notice of
Position Impaction, thereby being notified of his or her pending termination of
employment with the Company.
4.2.2. The termination must be under circumstances that do not
entitle the Participant to benefits pursuant to (a) the Executive Retention
Plan; (b) the Employee Retention Plan; or (c) any other similar severance,
retention or change in control plan or agreement adopted by the Company or any
Affiliate thereof.
4.2.3. Notwithstanding other provisions in this Article, the
Company does not intend to create or offer these severance benefits to
Participants or employees transferred to or employed by an Affiliate, nor to
employees not receiving a Notice of Position Impaction.
4.2.4. Notwithstanding other provisions in this Article, any
water services unit employee of the Company or a participating Affiliate whose
employment is terminated upon expiration of the contract for maintenance and
operation of the City of Santa Fe water supply system shall be eligible to
participate hereunder in the event the employee receives an offer of employment
from the City of Santa Fe as a successor employer, at less than ninety percent
(90%) of the employee's pre-termination Base Salary and the employee declines
the offer.
4.3. Regular Severance Benefits. In order to be eligible for Regular
Severance Benefits as described in Section 5.2 below, the Participant must have
his or her employment terminated with the Company.
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<PAGE>
4.4. Enhanced Severance Benefits. In order to be eligible for the
Enhanced Severance Benefits as described in Section 5.3 below, a Participant
must:
4.4.1. Have his or her employment terminated with the Company;
and
4.4.2. Sign and deliver a Release Form pursuant to Sections
4.7 and 4.8 below, without revoking such release.
4.5. Management Group. A Participant who meets the definition of a
member of the Management Group as set forth in Section 2.10 is eligible for
certain additional Placement Assistance benefits under Section 5.3.4.2., if he
or she elects and is eligible for Enhanced Severance Benefits.
4.6. Senior Management Group. A Participant who meets the definition of
a member of the Senior Management Group as set forth in Section 2.18 is eligible
for certain severance benefits under Section 5.4.
4.7. Release Form. The Participant must agree to sign a Release Form in
exchange for all benefits options other than Regular Severance Benefits in
Section 5.2., containing such terms and conditions as are satisfactory to the
Company, including, but not limited to, the release of any and all claims that
the Participant may then (as of the signing of such release) have against the
Company, its employees, officers and directors. The Participant shall generally
have up to forty-five (45) calendar days following the date the Release Form is
given to the Participant to sign the release and return it to the Company.
4.8. Revocation.
4.8.1. Revocation - Release Form. Notwithstanding the
foregoing, within seven (7) calendar days after delivering a signed Release
Form, the Participant shall be entitled to revoke the release by returning the
signed copy or counterpart original of the Release Form to the Company, which
includes the Participant's written signature in a space provided thereon,
indicating his or her decision to revoke the release.
4.8.2. Impact of Revocation. The revocation of a previously
signed and delivered Release Form pursuant to this Article shall be deemed to
constitute an irrevocable election by the Participant to have declined the
election of severance benefits other than Regular Severance Benefits in Section
5.2.
V. BENEFITS
-----------
5.1. General. Participants satisfying the eligibility requirements set
forth in Articles III and IV above, as may be applicable, shall be entitled to
the following benefits, as set forth below.
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5.2. Regular Severance Benefits.
5.2.1. Severance Pay. Severance Pay in the amount of two (2)
months of Base Salary, plus one additional week of Base Salary for each Year of
Service.
5.2.2. Health Care Coverage. Health Care Benefits for the next
three (3) calendar months immediately following the Participant's Termination
Date, with the Company paying for only such general Health Care Benefits for the
Participant and his or her enrolled eligible dependents as was provided by the
Company immediately prior to the Termination Date. If the Participant was
receiving a monthly refund immediately prior to his or her Termination Date due
to the elected level of Health Care Benefits, he or she will continue to receive
the refund during the three (3) month period. If the Participant was required to
contribute to the monthly cost of the Health Care Benefits (i.e., by payroll
withholding), he or she will be required to continue making any applicable
monthly premium payments to retain the level of coverage being provided
immediately prior to the Termination Date.
5.2.3. Life Insurance. Term life insurance coverage in the
face amount of $10,000 for the next three (3) calendar months following the
Participant's Termination Date.
5.2.4. Placement Assistance. At its option the Company will:
(a) provide the Participant with placement assistance for two (2) months, either
internally or through an outside consultant; or (b) pay the Participant a lump
sum amount equal to five percent (5%) of Participant's Base Salary for placement
assistance.
5.3. Enhanced Severance Benefits.
5.3.1. Severance Pay. Severance Pay in the amount of four (4)
months of Base Salary, plus one additional week of Base Salary for each Year of
Service.
5.3.2. Health Care Coverage. Health Care Benefits for the next
six (6) calendar months immediately following the Participant's Termination
Date, with the Company paying for only such general Health Care Benefits for the
Participant and his or her enrolled eligible dependents as was provided by the
Company immediately prior to the Termination Date. If the Participant was
receiving a monthly refund immediately prior to his or her Termination Date due
to the elected level of Health Care Benefits, he or she will continue to receive
the refund during the six (6) month period. If the Participant was required to
contribute to the monthly cost of the Health Care Benefits (i.e., by payroll
withholding), he or she will be required to continue making any applicable
monthly premium payments to retain the level of coverage being provided
immediately prior to the Termination Date.
5.3.3. Life Insurance. Term life insurance coverage in the
face amount of $10,000 for the next six (6) calendar months following the
Participant's Termination Date.
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5.3.4. Placement Assistance.
5.3.4.1. Participants Who Are Not Members of the Management
Group. For a Participant who is not a member of the Management Group, at its
option the Company will: (a) provide the Participant with placement assistance
for four (4) months, either internally or through an outside consultant; or (b)
pay the Participant a lump sum amount equal to ten percent (10%) of
Participant's Base Salary for placement assistance.
5.3.4.2. Participants Who Are Members of the Management Group.
For a Participant who is a member of the Management Group, at its option the
Company will: (a) provide the Participant with placement assistance for four (4)
months, either internally or through an outside consultant; or (b) pay the
Participant a lump sum amount equal to ten percent (10%) of Participant's Base
Salary for placement assistance. If the Company elects placement assistance
pursuant to Section 5.3.4.2(b), the Participant shall also be entitled to
additional compensation for such placement assistance in an amount equal to one
(1) month's Base Salary.
5.4. Senior Management Severance Benefits. A Participant who is a
member of the Senior Management Group is not eligible for Enhanced Severance
Benefits. Instead, an eligible Participant, pursuant to Article IV, who is a
member of the Senior Management Group, and is selected for Senior Management
Severance Benefits by the President of the Company shall receive:
5.4.1. Severance Pay. One cash lump sum payment equal to
twelve (12) months of the Participant's Base Salary, with no additional cost of
living, promotion, merit or other increases; plus severance pay the equivalent
of Regular Severance Pay in the amount of two (2) months' of Participant's Base
Salary, and one additional week of Base Salary for each Year of Service.
5.4.2. Health Care and Life Insurance. Term life insurance,
accidental death and dismemberment coverage in the amount of one (1) times the
Participant's annual Base Salary and Health Care Benefits, all such benefits
being provided from the Participant's Termination Date until twelve (12) months
after the Termination Date. The Company shall pay for such general Health Care
Benefits for the Participant and his or her enrolled eligible dependents as was
provided by the Company immediately prior to his or her Termination Date. If the
Participant was receiving a monthly refund immediately prior to his or her
Termination Date due to the elected level of Health Care Benefits, he or she
will continue to receive the refund during the twelve (12) month period. If the
Participant was required to contribute to the monthly cost of the Health Care
Benefits (i.e., by payroll withholding ), he or she will be required to continue
making any applicable monthly premium payments to retain the level of coverage
being provided immediately prior to the Termination Date.
5.4.3. Placement Assistance. Placement Assistance benefits by
reimbursement of his or her placement assistance expenses during the twelve (12)
month period following the Termination Date. The maximum amount of such
reimbursement of expenses is five percent (5%) of the Participant's Base Salary.
For purposes of this Section, the term "placement assistance" shall include, but
not be limited to, any of the following types of expenses: (a) out of town
travel (i.e., airfare, mileage, rental cars, lodging and meals); (b) services
for outplacement; (c) resume preparation and mailing; and (d) recruitment or
employment agencies' fees.
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5.4.4. Release Form. A Participant is eligible for these
benefits only upon executing and delivering an unrevoked Release Form. If the
Participant revokes the Release Form, he or she shall receive Regular Severance
Benefits, pursuant to Sections 4.2., 4.3., and 5.2. hereof, if all other
Participant requirements are fulfilled.
5.5. Payment Date. Severance Pay due a Participant shall be paid not
later than the fifth (5th) business day following his or her Termination Date,
or delivery by the Participant of an executed and unrevoked Release Form,
whichever last occurs. Provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall pay to the
Participant on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payment and shall pay the remainder of such
payments (together with interest at the rate provided in Code ss. 1274(b)(2)(B))
as soon as the amount thereof can be determined but in no event later than one
(1) month after the Participant's Termination Date, as applicable. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Participant, payable on the tenth (10th) day after demand by the Company
(together with interest at the rate provided in Code ss. 1274(b)(2)(B)).
5.6. Suspension of Benefits. Health Care Benefits and life insurance
benefits being received by a Participant pursuant to the terms and conditions of
Article V of this Plan shall terminate in the event, and at the time that, the
Participant is subsequently hired as an employee of the Company or an Affiliate.
5.7. No Duplication of Benefits. Notwithstanding anything herein to the
contrary, the right to receive any benefits under this Plan by any Participant
is specifically conditioned upon the Participant either waiving or being
ineligible for any and all benefits under the: (i) Executive Retention Plan,
including any amendments thereto; (ii) Employee Retention Plan, including any
amendments thereto; or (iii) any successor Change in Control or severance
benefit plans otherwise available to the Participant. The Company does not
intend to provide any Participant with benefits under both this Plan and
benefits under any other severance, retention or change in control plans or
agreements sponsored by the Company or an affiliate.
5.8. Severance Pay Plan. Notwithstanding anything herein to the
contrary, the Plan shall be interpreted as, and is intended to qualify as, a
severance pay plan, pursuant to 29 CFR ss.2510.3-2(b), and therefore does not
constitute an Employee Pension Benefit Plan pursuant to Section 3(2) of the
Employee Retirement Income Security Act of 1974. In this regard, the following
additional provisions shall apply with respect to all benefits hereunder:
9
<PAGE>
5.8.1. The benefits hereunder shall not be contingent,
directly or indirectly, upon a Participant's retirement;
5.8.2. The total amount of benefits hereunder shall not exceed
the equivalent of twice the Participant's annual compensation during the year
immediately preceding the termination of service. For purposes of this Section,
"annual compensation" shall mean the total of all compensation, including wages,
salary and any other benefit of monetary value, whether paid in the form of cash
or otherwise, which was paid as consideration for the Participant's service
during the year, or which would have been so paid at the Participant's usual
rate of compensation if the Participant had worked a full year; and
5.8.3. All benefits due hereunder shall be fully paid or
provided within twenty-four (24) months after the Participant's Termination
Date.
VI. ADMINISTRATION
------------------
The Plan shall be administered by the Committee, and the Committee
shall be the "Named Fiduciary" for purposes of the Employee Retirement Income
Security Act of 1974, and shall have the authority to control, interpret and
construe the Plan and manage the operations thereof. Any such interpretation and
construction of any provisions of this Plan by the Committee shall be final. The
Committee shall, in addition to the foregoing, exercise such other powers and
perform such other duties as it may deem advisable in the administration of the
Plan. The Committee may engage agents and assistance from the Company, including
Company counsel. However, the Committee shall not be responsible for any action
taken or omitted to be taken on the advice of legal counsel. The Committee is
given specific authority to allocate and revoke responsibilities among its
members or designees. When the Committee has allocated authority pursuant to the
foregoing, the Committee shall not be liable for the acts or omissions of the
party to whom such responsibility has been allocated, except to the extent
provided by law.
VII. BINDING AGREEMENT
----------------------
Subject to the right of the Company to amend or terminate this Plan, as
provided in Article IX hereof, and of the Committee's right to interpret the
Plan pursuant to Article VI hereof, this Plan shall be for the benefit of and be
enforceable by, a Participant's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If a
Participant should die after satisfying the requirements for the receipt of
benefits hereunder, pursuant to Articles IV and V, any amount remaining unpaid
to him or her, unless otherwise provided herein, shall be paid in accordance
with the terms of this Plan to the Participant's designee or, if there is no
such designee, to the Participant's estate.
VIII. NOTICE
------------
For the purpose of this Plan, and except as specifically set forth
herein, notices and all other communications provided for in the Plan shall be
in writing and shall be deemed to have been duly given when hand-delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the Participant at his or her last known address, and to
the Company at Alvarado Square, Albuquerque, New Mexico 87158, provided that all
notices to the Company shall be directed to the attention of the Secretary of
the Company; or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
10
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IX. AMENDMENT AND TERMINATION
-----------------------------
The Company hereby reserves the right to amend, modify or terminate the
Plan, in whole or in part, at any time or from time to time, including, but not
limited to, the right to increase, decrease or discontinue any or all of the
benefits due herein. Notwithstanding the foregoing, no amendment, modification
or termination shall affect a Participant's right hereunder whose Notice of
Position Impaction is given before the effective date of such amendment,
modification or termination and who subsequently satisfied the eligibility
provisions pursuant to Articles III and IV above.
X. MISCELLANEOUS
----------------
10.1. Governing Law. The validity, interpretation, construction and
performance of this Plan shall be governed by the laws of the State of New
Mexico.
10.2. Not An Employment Contract. Notwithstanding anything to the
contrary contained in the Plan, (a) the execution of the Plan shall not create
an express or implied contract of employment for a specified term between the
Participant and the Company; and (b) unless otherwise expressly provided in
writing by an authorized officer, the employment relationship between the
Participant and the Company shall be defined as "employment at will," where
either party, without notice, may terminate the relationship with or without
cause.
10.3. Mitigation of Benefits. The Participant shall not be required to
mitigate the amount of payment provided for in Article V by seeking other
employment or otherwise, and except as set forth in Section 5.6, the amount of
any payment or benefit provided for in Article V shall not be reduced by any
compensation earned by the Participant as the result of employment by another
employer, or by retirement benefits received.
10.4. No Right of Assignment. Neither a Participant nor any person
taking on behalf of a Participant may anticipate, assign or alienate (either at
law or in equity) any benefit provided under the Plan and the Company shall not
recognize any such anticipation, assignment or alienation. Furthermore, to the
extent permitted by law, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
10.5. Service of Process. The Secretary of the Company shall be the
agent for service of process in matters relating to this Plan.
10.6. Headings. The headings and subheadings in this Plan are inserted
for convenience and reference only and are not to be used in construing this
instrument or any provision hereof.
11
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10.7. Gender and Number. Where the context so requires, words in the
masculine gender shall include the feminine and neuter genders, the plural shall
include the singular, and the singular shall include the plural.
10.8. Validity. The invalidity or unenforceability of any provision of
this Plan shall not affect the validity or enforceability of any other provision
of this Plan, which shall remain in full force and effect.
10.9. Continuation Requirements. The foregoing Health Care Benefits
shall not affect the rights of the Participant or any beneficiary thereof, to
elect to receive continuation benefits pursuant to Code ss. 4980B, Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"), and the full period of
continuation coverage required by COBRA shall commence following the termination
of the Health Care Benefits provided hereunder.
XI. CLAIMS PROCEDURES
---------------------
11.1. The Committee shall make any determinations as to a Participant's
right to a benefit, pursuant to the provisions of the Plan. The Committee,
within ninety (90) days after receipt of written notice of objection to benefits
payable or claim for benefits, shall render a written decision on the objection
to the benefits payable or the claim for benefits. If the objection to benefits
payable or the claim for benefits is denied, either in whole or in part, the
decision shall include the following:
11.1.1. The specific reason or reasons for the denial;
11.1.2. An indication of the specific Plan provisions on which
the denial is based;
11.1.3. A description of any additional material or
information necessary for the claimant to perfect the claim and any explanation
of why such material or information is necessary; and
11.1.4. An explanation of the Plan's appeal procedure,
indicating that (a) the appeal of the adverse determination must be in writing
addressed to the Committee; (b) received within sixty (60) days after the
receipt by the claimant of the Committee's initial written denial of benefits;
and (c) failure to perfect an appeal within the sixty (60) day period shall make
the decision conclusive.
11.2. If the claimant should appeal to the Committee, he or she, or his
or her duly authorized representative, must do so in writing and may submit, in
writing, whatever issues and comments he or she, or his or her duly authorized
representative, feels are pertinent. The claimant, or his or her duly authorized
representative, may review pertinent Plan documents. The Committee shall render
a written decision on the question of the benefits payable or the claim for
benefit, setting forth the specific reasons for its decision, including a
reference to the Plan's provisions, within sixty (60) days after receipt of the
request for reconsideration, unless special circumstances (such as a hearing)
would make the rendering of a decision within the sixty (60) day limit
infeasible, but in no event shall the Committee render a decision respecting a
denial for a claim for benefits later than one hundred twenty (120) days after
its receipt of a request for a review.
12
<PAGE>
11.3. Any denial by the Committee of a Participant's claim for benefits
under the Plan shall be stated in writing and such notice shall be written in a
manner that may be understood without legal or actuarial counsel.
IN WITNESS WHEREOF, the Company has caused this Second Restated and
Amended Public Service Company of New Mexico Non-Union Severance Pay Plan to be
executed, and to be effective, as of date and year first above written.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
---------------------------------
BENJAMIN F. MONTOYA
Chairman, President and
Chief Executive Officer
13
SAN JUAN PROJECT PARTICIPATION AGREEMENT
AMONG
PUBLIC SERVICE COMPANY OF NEW MEXICO
TUCSON ELECTRIC POWER COMPANY
THE CITY OF FARMINGTON, NEW MEXICO
M-S-R PUBLIC POWER AGENCY
THE INCORPORATED COUNTY OF LOS ALAMOS, NEW MEXICO
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY
CITY OF ANAHEIM
UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS
TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
I. PARTIES AND INTRODUCTORY MATTERS
1 PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4 EFFECTIVE DATE AND TERMINATION . . . . . . . . . . . . . . . . . 8
5 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
II. OWNERSHIP OF SAN JUAN PROJECT
6 OWNERSHIPS AND TITLES . . . . . . . . . . . . . . . . . . . . . 19
7 CAPITAL IMPROVEMENTS AND RETIREMENTS OF SAN JUAN PROJECT
AND PARTICIPANTS' SOLELY OWNED FACILITIES . . . 23
8 WAIVER OF RIGHT TO PARTITION . . . . . . . . . . . . . . . . . . 27
9 BINDING COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 28
10 MORTGAGE AND TRANSFER OF PARTICIPANTS' INTERESTS . . . 30
11 RIGHTS OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . 33
12 RIGHTS OF PNM AND TEP IN WATER AND COAL . . . . . . . . . . . . 38
13 SEVERANCE OF IMPROVEMENTS . . . . . . . . . . . . . . . . . . . 39
III. ENTITLEMENTS TO OUTPUT OF SAN JUAN PROJECT
14 ENTITLEMENT TO CAPACITY AND ENERGY . . . . . . . . . . . . . . . 40
15 CAPACITY ALLOCATION OF SWITCHYARD FACILITIES . . . . . . . 42
16 USE OF FACILITIES DURING CURTAILMENTS . . . . . . . . . . . . . 44
i
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17 START-UP AND AUXILIARY POWER AND ENERGY REQUIREMENTS . . . . . 46
IV. ADMINISTRATION
18 COORDINATION COMMITTEE . . . . . . . . . . . . . . . . . . . . . 47
19 ENGINEERING AND OPERATING COMMITTEE . . . . . . . . . . . . . . 51
20 FUELS COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . 55
21 AUDITING COMMITTEE . . . . . . . . . . . . . . . . . . . . . . 61
V. BUDGETS AND OPERATING EXPENSES
22 OPERATION AND MAINTENANCE EXPENSES . . . . . . . . . . . . . . . 64
23 FUEL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 72
24 ANNUAL BUDGETS . . . . . . . . . . . . . . . . . . . . . . . . 78
25 PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . 79
26 MATERIALS AND SUPPLIES . . . . . . . . . . . . . . . . . . . . 80
27 EMERGENCY SPARE PARTS . . . . . . . . . . . . . . . . . . . . . 82
VI. OPERATING AGENT
28 OPERATION AND MAINTENANCE . . . . . . . . . . . . . . . . . . . 83
29 OPERATING EMERGENCY . . . . . . . . . . . . . . . . . . . . . . 89
30 PAYMENT OF EXPENSES BY PARTICIPANTS . . . . . . . . . . . . . . 92
31 OPERATING INSURANCE . . . . . . . . . . . . . . . . . . . . . . 94
32 SURPLUS OR RETIRED PROPERTY . . . . . . . . . . . . . . . . . . 98
33 REMOVAL OF OPERATING AGENT . . . . . . . . . . . . . . . . . . . 99
34 DEFAULTS BY OPERATING AGENT . . . . . . . . . . . . . . . . . . 101
ii
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VII. DEFAULTS, LIABILITY AND ARBITRATION
35 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
36 LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
37 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 115
VIII. RETIREMENT AND RECONSTRUCTION
38 DESTRUCTION, DAMAGE OR CONDEMNATION OF A UNIT . . . . . . . . . 118
39 RIGHTS OF PARTICIPANTS UPON TERMINATION . . . . . . . . . . . . 120
40 DECOMMISSIONING OF THE PROJECT . . . . . . . . . . . . . . . . . 121
IX. MISCELLANEOUS PROVISIONS
41 RELATIONSHIP OF PARTICIPANTS . . . . . . . . . . . . . . . . . . 122
42 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
43 OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 125
44 EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . 128
45 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 129
EXHIBIT I Real Property
EXHIBIT II Annual Minimum Coal
EXHIBIT III Switchyard Facilities
EXHIBIT IV Ownership of Equipment
EXHIBIT V O&M of Equipment
EXHIBIT VI A&G Expenses
EXHIBIT VII Coal Allocation and Billing
EXHIBIT VIII Adjustment of Voting Requirements
EXHIBIT IX Fixed Fuel Expense
iii
<PAGE>
30
PART I
PARTIES AND INTRODUCTORY MATTERS
1.0 PARTIES:
The parties to this San Juan Project Participation Agreement
("Agreement") are: PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation ("PNM"); TUCSON ELECTRIC POWER COMPANY, an Arizona corporation
("TEP"); THE CITY OF FARMINGTON, NEW MEXICO, an incorporated municipality and a
body politic and corporate, existing as a political subdivision under the
constitution and laws of the State of New Mexico ("Farmington"); M-S-R PUBLIC
POWER AGENCY, a joint exercise of powers agency organized under the laws of the
State of California ("M-S-R"); THE INCORPORATED COUNTY OF LOS ALAMOS, NEW
MEXICO, a body politic and corporate, existing as a political subdivision under
the constitution and laws of the State of New Mexico ("LAC"); SOUTHERN
CALIFORNIA PUBLIC POWER AUTHORITY, a joint exercise of powers agency organized
under the laws of the State of California ("SCPPA"); THE CITY OF ANAHEIM, a
municipal corporation organized under the laws of the State of California
("Anaheim"); UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS, a political subdivision of
the State of Utah ("UAMPS"); and TRI-STATE GENERATION AND TRANSMISSION
ASSOCIATION, INC., a Colorado cooperative corporation ("Tri-State"). These
parties are the participants in the San Juan Project, and are hereinafter
sometimes referred to individually as a "Participant" and collectively as
"Participants."
1
<PAGE>
2.0 RECITALS: This Agreement is made with reference to the following
facts, among others:
2.1 PNM is an electric utility engaged in the generation,
transmission and distribution of electric power and energy in a part of
the State of New Mexico.
2.2 TEP is an electric utility engaged in the generation,
transmission and distribution of electric power and energy in a part of
the State of Arizona.
2.3 Farmington operates a municipal electric utility engaged
in the generation, transmission and distribution of electric power and
energy in a part of the State of New Mexico.
2.4 M-S-R is a public entity engaged in the generation,
transmission, purchase and sale of electric power and energy in the
western United States for the benefit of its member public agencies.
2.5 LAC operates a municipal electric utility engaged in the
generation, transmission and distribution of electric power and energy
in a part of the State of New Mexico.
2.6 SCPPA is a public entity created to acquire, construct,
finance, operate and maintain generation and transmission projects on
behalf of its members.
2.7 Anaheim operates a municipal utility in the State of
California engaged in the generation, transmission and distribution of
electric power.
2.8 UAMPS is a public entity created to plan, finance,
develop, acquire, construct, improve, better, operate and maintain
projects, or ownership interests or capacity rights therein, for the
generation, transmission and distribution of electric energy for the
benefit of its members.
2
<PAGE>
2.9 Tri-State is a cooperative corporation created pursuant to
the laws of the State of Colorado. Tri-State's primary functions
involve the generation, transmission, transformation and sale of
electricity to its member distribution cooperatives.
2.10 PNM and TEP each has an undivided one-half (1/2)
ownership interest in the real property associated with the San Juan
Project, which real property is described in Exhibit I, attached hereto
and incorporated herein, and is identified therein as Parcels A through
F.
2.11 PNM and TEP have entered into the Coal Sales Agreement
with San Juan Coal Company ("SJCC"), pursuant to which SJCC agreed to
supply the San Juan Project with coal.
2.12 PNM contracted with the United States Department of the
Interior, Bureau of Reclamation, under the Colorado River Storage
Project Act to purchase 20,200 acre feet of water per year from Navajo
Reservoir under Contract 14-06-400-4821 dated April 11, 1968. Said
contract was amended by an amendatory contract dated September 29,
1977, wherein the United States Department of the Interior, Bureau of
Reclamation (i) acknowledged PNM's assignment to TEP of an undivided
one-half (1/2) interest in PNM's rights and obligations imposed under
the April 11, 1968, contract; and (ii) revised the amount of water
available for consumptive use by the San Juan Project from the Navajo
Reservoir from 20,200 acre feet per year to 16,200 acre feet per year.
2.13 The San Juan Project Co-Tenancy Agreement was executed as
of February 15, 1972, effective as of July 1, 1969. The original
Co-Tenancy Agreement was modified by joint action of PNM and TEP, as
follows: Modification No. 1 on May 16, 1979, Modification No. 2 on
December 31, 1983, Modification No. 3 on July 17, 1984, Modification
No. 4 on October 25, 1984, Modification No. 5 on July 1, 1985,
Modification No. 6 on April 1, 1993, Modification No. 7 on April 1,
1993, Modification No. 8 on September 15, 1993, Modification No. 9 on
January 12, 1994 and Modification No. 10 on November 30, 1995 (the
original of such Co-Tenancy Agreement, as amended by Modifications 1
through 10, is referred to herein as the "Co-Tenancy Agreement").
3
<PAGE>
2.14 The San Juan Project Operating Agreement was executed as
of December 21, 1973, effective as of July 1, 1969. The original
Operating Agreement was modified by joint action of PNM and TEP, as
follows: Modification No. 1 on May 16, 1979, Modification No. 2 on
December 31, 1983, Modification No. 3, on July 17, 1984, Modification
No. 4 on October 25, 1984, Modification No. 5 on July 1, 1985,
Modification No. 6 on April 1, 1993, Modification No. 7 on April 1,
1993, Modification No. 8 on September 15, 1993, Modification No. 9 on
January 12, 1994 and Modification No. 10 on November 30, 1995 (the
original of such Operating Agreement, as amended by Modifications 1
through 10, is referred to herein as the "Operating Agreement").
2.15 A San Juan Project Construction Agreement was executed as
of December 21, 1973, effective as of July 1, 1969, to govern the
construction of the San Juan Project; this agreement was thereafter
modified from time to time and was terminated in 1995 by action of PNM
and TEP.
2.16 On May 16, 1979, TEP and PNM entered into an agreement
whereby on that date TEP conveyed to PNM TEP's 50 percent undivided
ownership interest in Unit 4.
2.17 On November 17, 1981, PNM transferred an 8.475 percent
undivided ownership interest in Unit 4 to Farmington.
4
<PAGE>
2.18 On December 31, 1983, PNM transferred a 28.8 percent
undivided ownership interest in Unit 4 to M-S-R.
2.19 On October 31, 1984, TEP transferred its 50 percent
undivided ownership interest in Unit 3 to Alamito Company, which later
changed its name to Century Power Company ("Century").
2.20 On July 1, 1985, PNM transferred a 7.2 percent undivided
ownership interest in Unit 4 to LAC.
2.21 On July 1, 1993, Century transferred a 41.8 percent
undivided ownership interest in Unit 3 to SCPPA.
2.22 On August 12, 1993, PNM transferred a 10.04 percent
undivided ownership interest in Unit 4 to Anaheim.
2.23 On June 2, 1994, PNM transferred a 7.028 percent
undivided ownership interest in Unit 4 to UAMPS.
2.24 On January 2, 1996, Century transferred an 8.2 percent
undivided ownership interest in Unit 3 to Tri-State.
2.25 Farmington, M-S-R, LAC, SCPPA, Anaheim, UAMPS and
Tri-State were classified as "Unit Participants" in the San Juan
Project, pursuant to the Co-Tenancy Agreement.
2.26 As of April 29, 1994, PNM, TEP, Century, SCPPA,
Farmington, M-S-R, LAC and Anaheim executed the San Juan Project
Designated Representative Agreement (the "DR Agreement") to implement
the requirements of the federal Clean Air Act Amendments of 1990; the
DR Agreement was thereafter accepted by UAMPS and Tri-State at the time
of their respective purchases of ownership interests in the San Juan
Project.
5
<PAGE>
2.27 The Participants desire, in this Agreement, to amend and
restate, and to replace in their entirety, the Co-Tenancy Agreement and
the Operating Agreement and to set out in one instrument all of the
matters previously included in the Co-Tenancy Agreement and the
Operating Agreement.
6
<PAGE>
3.0 AGREEMENT: The Participants, for and in consideration of the mutual
covenants to be by them kept and performed, agree as follows.
7
<PAGE>
4.0 EFFECTIVE DATE AND TERMINATION:
4.1 Except as otherwise provided in Section 4.3, this
Agreement shall become effective upon the later of the following dates:
(a) the date upon which the FERC accepts for filing this Agreement;
provided that, if the FERC orders a hearing to determine whether this
Agreement is just and reasonable, this Agreement shall not become
effective until the date when an order, no longer subject to judicial
review, has been issued by the FERC determining this Agreement to be
just and reasonable without changes or modifications unacceptable to
the Participants; or (b) the date upon which the Rural Utilities
Service ("RUS") approves this Agreement on behalf of Tri-State.
4.2 Following execution by all Participants, PNM shall file a
copy of this Agreement with the FERC in a timely manner. In such
filing, PNM shall request waiver of applicable FERC notice requirements
in order to allow this Agreement to become effective as of the earliest
feasible date. All other Participants shall support PNM's filing by the
prompt filing of a certificate or letter of concurrence or intervention
in support of the filing.
4.3 Following (a) an order by the FERC or any other regulatory
agency having jurisdiction, or (b) a letter or other communication from
the RUS, the Participants shall each review such order, letter or
communication to determine if the FERC, RUS or any agency having
jurisdiction has changed or modified a condition or conditions, deleted
a condition or conditions, or imposed a new condition or conditions
with regard to this Agreement; or has conditioned its approval of this
Agreement upon changes or modifications to a condition or conditions,
deletion of a condition or conditions or imposition of a new condition
or conditions. The Participant receiving such order, letter or
communication shall promptly provide a copy of such order, letter or
communication to the other Participants. Within fifteen (15) business
days after receipt by the other Participants of the copy of the order,
letter or communication, the Participants shall indicate to each other
in writing their acceptance or rejection of this Agreement based upon
any changes, modifications, deletions or new conditions required by the
FERC, RUS or any agency having jurisdiction. A failure to notify within
said fifteen (15) day period shall be the equivalent to a notification
of acceptance. If any Participant rejects this Agreement because the
8
<PAGE>
FERC, RUS or any agency having jurisdiction has modified a condition,
deleted a condition or imposed a new condition in this Agreement, or
has conditioned its approval on such a change, modification, deletion
or new condition, the Participants will be deemed to have rejected this
Agreement and they shall attempt, in good faith, to renegotiate the
terms and conditions of this Agreement to resolve such changed,
modified, deleted or new condition to the satisfaction of the
Participants within one hundred twenty (120) days after the date of
such order, letter or communication and thereafter to obtain requisite
regulatory approval of such renegotiated agreement.
4.4 This Agreement shall continue in force and effect until
July 1, 2022, unless otherwise agreed in writing by the Participants.
9
<PAGE>
5.0 DEFINITIONS: The following terms, when used herein with initial
capitalization, and whether in the singular or the plural, shall have the
meaning specified:
5.1 ACCOUNTING PRACTICE: Generally accepted accounting
principles in accordance with FERC Accounts applicable to electric
utility operations.
5.2 AGREEMENT: This San Juan Project Participation Agreement,
including all exhibits and attachments hereto, and as may be modified
or amended from time to time.
5.3 ANNUAL MINIMUM COAL DELIVERY: The quantities of coal set
forth on Exhibit H to the Coal Sales Agreement, which amounts are shown
on Exhibit II, attached hereto and incorporated herein.
5.4 AUDITING COMMITTEE: A committee which is described in
Section 21.
5.5 AVAILABLE OPERATING CAPACITY: The maximum net electrical
capacity of each installed and operating Unit which is available at any
given time to the Participants at the 345 kV buses.
5.6 CAPACITY: Electrical rating expressed in megawatts ("MW").
5.7 CAPITAL IMPROVEMENTS: Any property, land or land rights
added to the San Juan Project or the substitution, replacement,
enlargement or improvement of any Units of Property, structures,
facilities, equipment, property, land or land rights constituting a
part of the San Juan Project, which in accordance with Accounting
Practice would be capitalized, and also including the costs of removal,
salvage or disposal of any Units of Property being replaced or
substituted.
5.8 CARRY-OVER TONS: Coal deliveries made annually to the San
Juan Project by SJCC in excess of the Annual Minimum Coal Delivery, as
more fully described in the Coal Sales Agreement.
10
<PAGE>
5.9 CARRY-OVER TONS ACCOUNT: A record system established and
maintained by the Operating Agent to allocate to each Participant
Carry-over Tons earned by the San Juan Project.
5.10 COAL SALES AGREEMENT: Agreement between PNM, TEP and SJCC
executed on August 18, 1980, as amended or modified and as may be
amended and modified from time to time.
5.11 CONTROL AREA: An area comprised of an electric system or
systems, bounded by interconnection metering and telemetry, and capable
of controlling generation to maintain its interchange schedule with
other control areas and contributing to frequency regulation of the
interconnection.
5.12 COORDINATION COMMITTEE: A committee which is described in
Section 18.
5.13 CO-TENANCY AGREEMENT: The agreement described in Section
2.13.
5.14 DR AGREEMENT: The agreement described in Section 2.26, as
amended from time to time.
5.15 EMERGENCY COAL STORAGE PILE: The coal storage pile for
the San Juan Project, sometimes referred to as the "minimum coal
storage pile," which is to be drawn upon when fuel deliveries are
interrupted.
5.16 EMERGENCY SPARE PARTS: Spare parts or auxiliary
equipment, the cost of which is capitalized, which are stocked for
emergency use for the San Juan Project and which are not scheduled for
periodic replacement.
5.17 ENERGY: The accumulated amount of power produced over a
stated time interval, expressed in kilowatt hours ("kWh") or megawatt
hours ("MWh").
11
<PAGE>
5.18 ENGINEERING AND OPERATING COMMITTEE: A committee which is
described in Section 19.
5.19 EXCESS FIXED FUEL EXPENSE: Annual Fixed Fuel Expenses in
excess of Minimum Fixed Fuel Expense.
5.20 FC LINE: That 345 kV transmission line between the San
Juan generating station and the Four Corners generating plant.
5.21 FIXED FUEL EXPENSE: Those expenses itemized on Exhibit
IX, attached hereto and incorporated herein.
5.22 FERC: The Federal Energy Regulatory Commission or any
successor thereto.
5.23 FERC ACCOUNTS: The FERC Uniform System of Accounts
prescribed for Public Utilities and Licensees (Class A and Class B).
References in this Agreement to a specific FERC account number shall
mean the number in effect as of the date of this Agreement and any
successor account number.
5.24 FUELS COMMITTEE: A committee which is described in
Section 20.
5.25 MATERIALS AND SUPPLIES: Those materials and supplies, the
cost of which is charged to FERC Account 154, which are stocked for use
in the operation and maintenance of the San Juan Project.
5.26 MINIMUM FIXED FUEL EXPENSE: Fixed Fuel Expense associated
with the Annual Minimum Coal Delivery.
5.27 MINIMUM NET GENERATION: The lowest net load at which each
Unit can be reliably maintained in service on a continuous basis on
coal fuel.
12
<PAGE>
5.28 NET EFFECTIVE GENERATING CAPACITY: The maximum continuous
ability of each Unit to produce power, less auxiliary power
requirements.
5.29 NET ENERGY GENERATION: The Energy generated by each Unit
which is available to the respective Participants at the 345 kV bus.
5.30 OPERATING ACCOUNT: The bank account(s) in the names of
the Participants established by the Operating Agent pursuant to Section
28.
5.31 OPERATING AGENT: The Participant or other entity which
has been selected by the Participants as the entity responsible for the
operation and maintenance of the San Juan Project pursuant to this
Agreement.
5.32 OPERATING AGREEMENT: The agreement described in Section
2.14.
5.33 OPERATING EMERGENCY: An unplanned event or circumstance
at the San Juan Project which reduces or may reduce the availability of
Capacity or Energy from a Unit.
5.34 OPERATING FUNDS: Monies advanced to, and disbursed by,
the Operating Agent on behalf of the Participants in accordance with
this Agreement.
5.35 OPERATING INSURANCE: Policies of insurance secured or to
be secured and maintained in accordance with Section 31.
5.36 OPERATING WORK: Engineering, contract preparation and
administration, purchasing, repair, supervision, training, expediting,
inspection, testing, protection, operation, use, management,
replacement, retirement, reconstruction and maintenance of and for the
benefit of the San Juan Project pursuant to this Agreement, including
the administration of this Agreement and of any other Project
Agreements and the procurement of fuel and water and other necessary
materials and supplies.
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5.37 PARTICIPANT: PNM, TEP, Farmington, M-S-R, LAC, SCPPA,
Anaheim, UAMPS or Tri-State.
5.38 PARTICIPANT MINIMUM FIXED FUEL EXPENSE: For each
Participant, the Minimum Fixed Fuel Expense, as provided in Section 23,
multiplied by that Participant's Participation Share as provided in
Section 6.2.6.
5.39 PARTICIPATION SHARE: Each Participant's percentage
ownership interest in the various elements of the San Juan Project as
set forth in Section 6.
5.40 PROJECT AGREEMENTS: This Agreement and such other
agreements as are determined by the Coordination Committee to be
necessary to define the rights and duties of the Participants with
respect to the San Juan Project.
5.41 PRUDENT UTILITY PRACTICE: Any of the practices, methods
and acts engaged in or approved by a significant portion of the
electric utility industry during the relevant time period, or any of
the practices, methods and acts which, in the exercise of reasonable
judgment in the light of the facts known at the time the decision was
made, could have been expected to accomplish the desired result at a
reasonable cost consistent with good business practices, reliability,
safety and expedition. Prudent Utility Practice is intended to be
acceptable practices, methods or acts generally accepted in the
industry, as such practices may be affected by special operational
design characteristics of the San Juan Project, the quality and
quantity of fuel delivered in accordance with the Coal Sales Agreement
or successor agreement, the rights and obligations of the Participants
in accordance with this Agreement and any other special circumstances
affecting the Operating Work.
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5.42 SAN JUAN PROJECT: The four unit, coal-fired electric
generation plant located in San Juan County, New Mexico, near
Farmington, New Mexico. The San Juan Project includes all facilities,
structures, transmission and distribution lines incident to the
four-unit electric generating plant. The San Juan Project does not
include distribution lines, transmission lines, equipment in the
Switchyard Facilities or other facilities owned exclusively by a
Participant.
5.43 SWITCHYARD FACILITIES: The switchyard facilities required
for the San Juan Project as shown by materials listed in Exhibit III,
attached hereto and incorporated herein.
5.44 TOTAL MONTHLY COAL COST: The amount charged the Operating
Agent by SJCC in accordance with the Coal Sales Agreement.
5.45 UNIT: Unit 1, Unit 2, Unit 3 or Unit 4.
5.46 UNIT 1: The second operating unit of the San Juan
Project, which was placed in commercial service on December 31, 1976
and which presently has a net capacity rating of 327 MW.
5.47 UNIT 2: The first operating unit of the San Juan Project,
which was placed in commercial service on November 30, 1973 and which
presently has a net capacity rating of 316 MW.
5.48 UNIT 3: The third operating unit of the San Juan Project,
which was placed in commercial service on December 31, 1979 and which
presently has a net capacity rating of 497 MW.
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5.49 UNIT 4: The fourth operating unit of the San Juan
Project, which was placed in commercial service on April 27, 1982 and
which presently has a net capacity rating of 507 MW.
5.50 UNITS OF PROPERTY: Property as described in the FERC's
list of units of property for use in connection with the Uniform System
of Accounts Prescribed for Public Utilities and Licensees Subject to
the Provisions of the Federal Power Act, contained in 18 CFR Part 116,
in effect on the effective date of this Agreement, as thereafter
modified or amended.
5.51 VARIABLE FUEL EXPENSES: All fuel expenses not
specifically identified as Fixed Fuel Expenses.
5.52 WATER CONTRACT: The contract with the United States
Department of the Interior, Bureau of Reclamation, under the Colorado
River Storage Project Act, as more fully described in Section 2.12.
5.53 WILLFUL ACTION:
5.53.1 Action taken or not taken by a Participant (or
the Operating Agent), at the direction of its directors,
members of its governing body, officers or employees having
management or administrative responsibility affecting its
performance under a Project Agreement, which action is
knowingly or intentionally taken or not taken with conscious
indifference to the consequences thereof or with intent that
injury or damage would probably result therefrom; or
5.53.2 Action taken or not taken by a Participant (or
the Operating Agent) at the direction of its directors,
members of its governing body, officers or employees having
management or administrative responsibility affecting its
performance under a Project Agreement, which action has been
determined by final arbitration award or final judgment or
judicial decree to be a material default under a Project
Agreement and which action occurs or continues beyond the time
specified in such arbitration award or judgment or judicial
decree for curing such default, or if no time to cure is
specified therein, occurs or continues beyond a reasonable
time to cure such default; or
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5.53.3 Action taken or not taken by a Participant (or
the Operating Agent), at the direction of its directors,
members of its governing body, officers or employees having
management or administrative responsibility affecting its
performance under a Project Agreement, which action is
knowingly or intentionally taken or not taken with the
knowledge that such action taken or not taken is a material
default under a Project Agreement.
5.53.4 The phrase "employees having management or
administrative responsibility," as used in this Section 5.53,
means employees of a Participant who are responsible for one
or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such
Participant's performance under a Project Agreement; provided
however, that, with respect to employees of the Operating
Agent acting in its capacity as such and not in its capacity
as a Participant, such phrase shall refer only to (i) the
senior employee of the Operating Agent on duty at the San Juan
Project who is responsible for the operation of the Units, and
(ii) anyone in the organizational structure of the Operating
Agent between such senior employee and an officer.
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5.53.5 Willful Action does not include any act or
failure to act which is merely involuntary, accidental or
negligent.
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PART II
OWNERSHIP OF SAN JUAN PROJECT
6.0 OWNERSHIPS AND TITLES:
6.1 PNM and TEP, respectively, each has an undivided one-half
(1/2) ownership interest in the real property interests described in
Exhibit I as Parcels A through F.
6.2 Unless otherwise provided in Exhibit IV, the Units and
other facilities of the San Juan Project and Capital Improvements shall
be owned and title held by the Participants, in the following
percentages:
6.2.1 For Units 1 and 2 and for all equipment and
facilities directly related to Units 1 and 2 only, in
accordance with the following percentages:
6.2.1.1 PNM: 50 percent
6.2.1.2 TEP: 50 percent
6.2.1.3 M-S-R: 0 percent
6.2.1.4 Farmington: 0 percent
6.2.1.5 Tri-State: 0 percent
6.2.1.6 LAC: 0 percent
6.2.1.7 SCPPA: 0 percent
6.2.1.8 Anaheim: 0 percent
6.2.1.9 UAMPS: 0 percent
6.2.2 For Unit 3 and for all equipment and facilities
directly related to Unit 3 only, in accordance with the
following percentages:
6.2.2.1 PNM: 50 percent
6.2.2.2 TEP: 0 percent
6.2.2.3 M-S-R: 0 percent
6.2.2.4 Farmington: 0 percent
6.2.2.5 Tri-State: 8.2 percent
6.2.2.6 LAC: 0 percent
6.2.2.7 SCPPA: 41.8 percent
6.2.2.8 Anaheim: 0 percent
6.2.2.9 UAMPS: 0 percent
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6.2.3 For Unit 4 and for all equipment and facilities
directly related to Unit 4 only, in accordance with the
following percentages:
6.2.3.1 PNM: 38.457 percent
6.2.3.2 TEP: 0 percent
6.2.3.3 M-S-R: 28.8 percent
6.2.3.4 Farmington: 8.475 percent
6.2.3.5 Tri-State: 0 percent
6.2.3.6 LAC: 7.20 percent
6.2.3.7 SCPPA: 0 percent
6.2.3.8 Anaheim: 10.04 percent
6.2.3.9 UAMPS: 7.028 percent
6.2.4 For equipment and facilities common to Units 1
and 2 only, in accordance with the following percentages:
6.2.4.1 PNM: 50 percent
6.2.4.2 TEP: 50 percent
6.2.4.3 M-S-R: 0 percent
6.2.4.4 Farmington: 0 percent
6.2.4.5 Tri-State: 0 percent
6.2.4.6 LAC: 0 percent
6.2.4.7 SCPPA: 0 percent
6.2.4.8 Anaheim: 0 percent
6.2.4.9 UAMPS: 0 percent
6.2.5 For equipment and facilities common to Units 3
and 4 only, in accordance with the following percentages:
6.2.5.1 PNM: 44.119 percent
6.2.5.2 TEP: 0 percent
6.2.5.3 M-S-R: 14.4 percent
6.2.5.4 Farmington: 4.249 percent
6.2.5.5 Tri-State: 4.1 percent
6.2.5.6 LAC: 3.612 percent
6.2.5.7 SCPPA: 20.9 percent
6.2.5.8 Anaheim: 5.07 percent
6.2.5.9 UAMPS: 3.55 percent
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6.2.6 For equipment and facilities common to all of
the Units in accordance with the following percentages:
6.2.6.1 PNM: 46.297 percent
6.2.6.2 TEP: 19.8 percent
6.2.6.3 M-S-R: 8.7 percent
6.2.6.4 Farmington: 2.559 percent
6.2.6.5 Tri-State: 2.49 percent
6.2.6.6 LAC: 2.175 percent
6.2.6.7 SCPPA: 12.71 percent
6.2.6.8 Anaheim: 3.10 percent
6.2.6.9 UAMPS: 2.169 percent
6.2.7 San Juan Project equipment and facilities not
included in Sections 6.2.1 through 6.2.6 which were in service
as of May 16, 1979 remain in individual one-half (1/2)
ownership, with each of PNM and TEP retaining title to an
equal undivided one-half (1/2) interest therein; provided,
however, that subsequent to the in-service date of Unit 4,
PNM, on behalf of itself and the Participants to which PNM
conveyed ownership interests and generation entitlements in
the San Juan Project, shall have the right to use sixty-five
percent (65%), and TEP, on behalf of itself and the
Participants which succeeded to TEP-conveyed ownership
interests and generation entitlements in the San Juan Project,
shall have the right to use thirty-five percent (35%) of the
real property associated with the San Juan Project, the water,
the coal inventory, the then existing oil for ignition and
flame stabilization, and the use of the 345 kV switchyard
capacity up to the combined installed capacity of Units 1, 2,
3 and 4, except as otherwise provided in Section 7, and except
that, subject to Section 15.2.3, PNM and TEP shall each be
entitled to use 50 percent (50%) of switchyard capacity in
excess of combined installed capacity of Units 1, 2, 3 and 4
for the San Juan Project.
6.2.8 Exhibit IV (a through h), attached hereto and
incorporated herein, is a partial list of equipment and
facilities of the San Juan Project and reflects the
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Participants' ownership interests therein. This exhibit is to
provide the Engineering and Operating Committee, the Auditing
Committee, the Fuels Committee and the Coordination Committee
with guidelines for carrying out their duties under this
Agreement.
6.2.9 In areas where ownership of equipment and
facilities is not clearly defined by Sections 6.2.1 to 6.2.7,
the Engineering and Operating Committee shall make a
determination of such ownership in accordance with Section 19.
Disputes arising from such determination shall be resolved by
the Coordination Committee in accordance with Section 18.
6.2.10 Materials and Supplies shall be owned by the
Participants in proportion to their respective current
investments in the Materials and Supplies.
6.3 The Emergency Coal Storage Pile shall be owned by the
Participants in proportion to their respective investments in the
Emergency Coal Storage Pile.
6.4 In the event that a Participant transfers or assigns any
of its rights, titles or interests in and to the San Juan Project in
accordance with the terms and conditions of this Agreement, the
Participants (including the transferee or assignee of a Participant)
shall jointly make, execute and deliver a supplement to this Agreement
in recordable form which shall describe with particularity and in
detail the rights, titles and interests of each Participant following
such transfer or assignment.
6.5 PNM and TEP own as tenants in common the Switchyard
Facilities described in Exhibit III in equal, undivided one-half (1/2)
interests.
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7.0 CAPITAL IMPROVEMENTS AND RETIREMENTS OF SAN JUAN PROJECT AND
PARTICIPANTS' SOLELY OWNED FACILITIES:
7.1 The Participants recognize that from time to time it may
be necessary or desirable to make Capital Improvements to and
retirements of facilities comprising the San Juan Project.
7.2 Any such Capital Improvements and retirements shall be
noted by an appropriate revision in or supplement to the appropriate
exhibits hereto attached.
7.3 The rights, titles and interests, including Participation
Shares, of a Participant in and to any Capital Improvements shall be as
provided for the respective classes of property described in Section 6.
The Participants shall be obligated for the costs of such Capital
Improvements in the same percentages as their Participation Shares.
7.4 All Capital Improvements, and a contingency allowance for
capital expenditures necessitated by an Operating Emergency or
otherwise deemed justifiable by the Operating Agent, shall be included
in the annual capital expenditures budget. The Engineering and
Operating Committee may authorize Capital Improvements not included in
the annual capital expenditures budget; provided, that such Capital
Improvements shall not exceed the sum of five hundred thousand dollars
($500,000) for each such Capital Improvement, unless also authorized by
the Coordination Committee.
7.5 The Operating Agent shall submit to the Participants a
forecast of cash requirements by months for Capital Improvements. Said
forecast will be submitted on a yearly basis after final budget
approvals have been made. A revised forecast shall be submitted when
the capital expenditures budget is revised, or when significant changes
in monthly expenditures from those previously forecast are anticipated.
The Operating Agent shall be authorized to make additional expenditures
related to Capital Improvements; provided, however, that such
additional expenditures for Capital Improvements shall not exceed the
sum of one hundred thousand dollars ($100,000) or cause the total
expenditure limit contained in the capital expenditures budget to be
exceeded, unless also authorized by the Engineering and Operating
Committee, or by the Coordination Committee if the total expenditure
for such Capital Improvement exceeds five hundred thousand dollars
($500,000).
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7.6 In the event of the removal or retirement of any
facilities comprising part of the San Juan Project, any proceeds
realized from the salvage of such facilities shall be distributed to
the Participants in accordance with their Participation Shares therein,
or shall be applied on account of the Participant's obligations to pay
for Capital Improvements replacing facilities removed or retired. Units
of Property retired from service shall be disposed of by the Operating
Agent on the best available terms as soon as practicable.
7.7 Each Participant shall have the right, at its own expense,
to add facilities to the Switchyard Facilities, provided the
Engineering and Operating Committee approves the design of such
additional facilities and determines that space is available therefor,
and that such committee also determines that such additional facilities
will not (i) infringe upon the rights of another Participant in the
Switchyard Facilities, (ii) unreasonably interfere with future
expansion plans at the San Juan Project, (iii) impair or interfere with
the contractual rights of another Participant, or (iv) jeopardize the
reliability of another Participant's system. The Engineering and
Operating Committee shall have authority to impose conditions on a
Participant allowed to make such additions in order to protect the
other Participants. Such facilities shall be and remain the sole and
exclusive property of the Participant installing same until and unless
the Coordination Committee determines that such facilities are
necessary and beneficial for operation of the San Juan Project as a
whole. In the event of such determination, the facilities shall be
acquired as a part of the San Juan Project by the Participants and
compensation shall be paid to the selling Participant by the
Participants acquiring such interest based on the net book value of
such facilities.
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7.8 Each Participant shall have the right, at its own expense,
to add protective relay or communication equipment to facilities solely
owned by it, if the Participant determines the protective relay or
communication equipment is needed for the protection of its electric
system, provided the Engineering and Operating Committee approves the
design of such additional equipment and determines that space is
available therefor, and that such committee also determines that such
additional facilities will not (i) infringe upon the rights of another
Participant in the facilities, (ii) unreasonably interfere with future
expansion plans at the San Juan Project, (iii) impair or interfere with
the contractual rights of another Participant, or (iv) jeopardize the
reliability of another Participant's system.
7.9 Transportation and motorized equipment which is to be
utilized by the Operating Agent for Operating Work may be purchased or
leased by the Operating Agent upon receipt of the approval referred to
in Section 19.3.4. Ownership of such purchased equipment and the
purchase price thereof shall be allocated between and paid by the
Participants in proportion to the percentages established in Section 6.
Lease payments made by the Operating Agent for such leased equipment
shall be apportioned between and paid by the Participants in accordance
with Section 22.1. No allowance to the Operating Agent for
administrative and general expense shall be included in or added to
such lease payments for transportation and motorized equipment which,
in lieu of acquiring such equipment by purchase, has been leased on a
long-term basis.
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7.10 Upon retirement of leased transportation and motorized
equipment utilized for Operating Work, an amount, which shall be
treated as a charge (or credit), shall be determined by multiplying the
difference between the salvage value and the unamortized balance owing
to the leasing company for each piece of such equipment by a fraction,
the numerator of which is the sum of the monthly lease payments for
such equipment charged to Operating Work and the denominator of which
is the sum of all monthly lease payments made by the Operating Agent
for such equipment. Such charge or credit shall be allocated among the
Participants in accordance with the applicable percentages set forth in
Section 22.
7.11 Administrative and general expenses which have been
incurred by the Operating Agent which are applicable to authorized
Capital Improvements, shall be applied monthly to construction costs
incurred during the preceding month. A rate will be developed by the
Operating Agent every three (3) years in conjunction with the
administrative and general ("A&G") expenses study referenced in
Attachment A to Exhibit VI. The current methodology for calculating the
A&G Ratio for Capital Improvements is set forth in Exhibit VI,
Attachment E. If any Participant believes that the method used in
determining the A&G Ratio for Capital Improvements results in an
unreasonable burden on such Participant(s), such Participant(s) may
request that said method used in determining said ratio be submitted to
the Auditing Committee for review in accordance with the procedures set
out in Sections 22.6.1 through 22.6.4.
7.12 Excluded from the charges in Section 7.11 are expenses
incurred under Section 36.2.
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8.0 WAIVER OF RIGHT TO PARTITION:
8.1 The Participants accept title to their respective
interests in the San Juan Project, water rights, lands, land rights and
improvements thereon as tenants in common, and agree that their
interests therein shall be held in such tenancy in common for the
duration of the term of this Agreement, including any extensions
thereof. While this Agreement, including any extensions thereof,
remains in force and effect, each Participant agrees as follows:
8.1.1 That it hereby waives the right to partition
the San Juan Project, water rights, lands, land rights or the
improvements built thereon (whether by partitionment in kind
or by sale and division of the proceeds thereof), and
8.1.2 That it will not resort to any action at law or
in equity to partition (in either such manner) the San Juan
Project, water rights, lands, land rights or the improvements
built thereon and waives the benefits of all laws that may now
or hereafter authorize such partition.
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9.0 BINDING COVENANTS:
9.1 Except as otherwise provided in Section 9.3, all of the
respective covenants and obligations of each of the Participants set
forth and contained in the Project Agreements shall bind and shall be
and become the respective obligations of:
9.1.1 Each Participant;
9.1.2 All mortgagees, trustees and secured parties
under all present and future mortgages, indentures and deeds
of trust, and security agreements which are or may become a
lien upon any of the properties of each Participant;
9.1.3 All receivers, assignees for the benefit of
creditors, bankruptcy trustees and referees of a Participant;
9.1.4 All other persons, firms, partnerships or
corporations claiming through or under any of the foregoing;
and
9.1.5 Any successors or assigns of any of those
mentioned in Sections 9.1.1 to 9.1.4, inclusive,
and shall be obligations running with the Participants' rights, titles
and interests in the San Juan Project, with all of the rights, titles
and interests (if any) of each Participant in, to and under this
Agreement and with their rights, titles and interests in the water
rights, lands, land rights and the improvements thereon. It is the
specific intention of this provision that all of such covenants and
obligations shall be binding upon any party which acquires any of the
rights, titles and interests of any of the Participants in the San Juan
Project, in, to and under this Agreement, and/or in the water rights,
lands, land rights or the improvements thereon, and that all of the
above-described persons and groups shall be obligated to use such
Participant's rights, titles and interests in the San Juan Project, in,
to and under this Agreement, and in the water rights, lands, land
rights and the improvements thereon, for the purpose of discharging its
covenants and obligations under this Agreement.
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9.2 The rights, titles and interests of each Participant in
the San Juan Project, its rights, titles and interests in, to and under
this Agreement and its rights, titles and interests in and to the water
rights, lands, land rights and improvements thereon, shall inure to the
benefit of its successors and assigns.
9.3 Any mortgagee, trustee or secured party, or any receiver
or trustee appointed pursuant to the provisions of any present or
future mortgage, deed of trust, indenture or security agreement
creating a lien upon or encumbering the rights, titles or interests of
any Participant in the San Juan Project, in, to and under this
Agreement and/or in the water rights, lands, land rights or the
improvements thereon, and any successor thereof by action of law or
otherwise, and any purchaser, transferee or assignee of any thereof,
shall not be obligated to pay any monies accruing on account of any of
the obligations or duties of such Participant under this Agreement
incurred prior to the taking of possession or the initiation of
foreclosure or other remedial proceedings by such mortgagee, trustee or
secured party.
9.4 In the event that any or all of the provisions of this
Section 9 shall not be legally effective as to any Participant, or its
mortgagees, trustees, secured parties, receivers, successors or
assigns, then such Participant shall not be deemed in violation of this
Section 9 by reason thereof.
9.5 Nothing in this Section 9 or in this Agreement shall be
deemed to change any rights, titles or interests to water rights,
lands, land rights and the improvements thereon.
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10.0 MORTGAGE AND TRANSFER OF PARTICIPANTS' INTERESTS:
10.1 The Participants shall have the right at any time and
from time to time to mortgage, create or provide for a security
interest in or convey in trust their respective rights, titles and
interests in the San Juan Project, their respective rights, titles and
interests in, to and under a Project Agreement and/or their rights,
titles and interests in the water rights, lands, land rights or the
improvements to be built thereon to a trustee or trustees under deeds
of trust, mortgages or indentures, or to secured parties under a
security agreement, as security for their present or future bonds or
other obligations or securities, and to any successors or assigns
thereof without need for the prior consent of the other Participants,
and without such mortgagee, trustee or secured party assuming or
becoming in any respect obligated to perform any of the obligations of
the Participants.
10.2 Any mortgagee, trustee or secured party under present or
future deeds of trust, mortgages, indentures or security agreements of
any of the Participants and any successor or assign thereof, and any
receiver, referee, or trustee in bankruptcy or reorganization of any of
the Participants, and any successor by action of law or otherwise, and
any purchaser, transferee or assignee of any thereof may, without need
for the prior consent of the other Participants, succeed to and acquire
all the rights, titles and interests of such Participant in the San
Juan Project, in, to and under the Project Agreements and/or the
rights, titles and interests of such Participant in the water rights,
lands, land rights and improvements thereon, and may take over
possession of or foreclose upon said property, rights, titles and
interests of such Participant.
10.3 Except as otherwise provided in Sections 10.1, 10.2 or
10.4 or, with respect to a transfer or assignment by a Participant to
another Participant as provided in Section 11, no Participant shall
transfer or assign its respective rights, titles and interests in the
San Juan Project, in, to and under this Agreement and/or in the water
rights, land, land rights and the improvements thereon, without the
prior written consent of the other Participants, which consent shall
not be unreasonably withheld.
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10.4 Each Participant shall have the right to transfer or
assign its respective rights, titles and interests in the San Juan
Project, in, to and under this Agreement and/or in the water rights,
land, land rights and the improvements thereon, without the need for
prior consent of the other Participants, at any time to any of the
following:
10.4.1 To any corporation or other entity acquiring
all or substantially all of the property of such Participant;
or
10.4.2 To any corporation or entity into which or
with which such Participant may be merged or consolidated; or
10.4.3 To any corporation or entity the stock or
ownership of which is wholly owned by a Participant; or
10.4.4 To any corporation or other entity which owns
all of the outstanding common stock or other ownership
interest of a Participant (its "Parent"); or
10.4.5 To any corporation or other entity the common
stock or other ownership interest of which is wholly owned by
the Parent of a Participant.
10.5 Except as otherwise provided in Sections 10.1, 10.2 and
9.3, any successor to the rights, titles and interests of a Participant
in the San Juan Project, to the rights, titles and interests of a
Participant in, to and under the Project Agreements and/or in the water
rights, lands, land rights or improvements thereon shall assume and
agree to fully perform and discharge all of the obligations hereunder
of such Participant, and such successor shall notify the other
Participants in writing of such transfer, assignment or merger, and
shall furnish to the other Participants evidence of such transfer,
assignment or merger. Any such successor shall specifically agree in
writing with the remaining Participants at the time of such transfer,
assignment or merger that it will not transfer or assign any rights,
titles and interests acquired from the assigning Participant without
complying with the terms and conditions of Section 11.
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10.6 No Participant shall be relieved of any of its
obligations and duties to the other Participants by a transfer,
assignment or merger under this Section 10 without the express prior
written consent of the remaining Participants, which consent shall not
be unreasonably withheld.
10.7 Except as otherwise provided in Section 10.5, any
transfer, assignment or merger made pursuant to the provisions of this
Section 10 shall not be subject to the terms and conditions set forth
and contained in Section 11.
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11.0 RIGHTS OF FIRST REFUSAL:
11.1 The purpose of this Section 11 is to set forth the manner
in which all existing or future rights of first refusal, pertaining to
the transfer of interests in the San Juan Project, shall be exercised.
Except as provided in Section 10, PNM has a right of first refusal with
respect to the proposed transfer of any ownership interest in the San
Juan Project by any Participant and TEP has a right of first refusal
with respect to PNM's proposed transfer of an interest in Unit 1 or
Unit 2 and associated common property. The existence of other rights of
first refusal shall be as provided in other instruments to which
Participants are parties. Nothing in this Section 11 shall be construed
to limit or expand the rights of first refusal of any Participant.
11.2 Except as provided in Section 10, should a Participant
desire to assign, transfer, convey or otherwise dispose of (hereinafter
collectively referred to as "Assign") its rights, titles and interests
in the San Juan Project, or its rights, titles and interests in, to and
under the Project Agreements, or its rights, titles and interests in
the water rights, lands, land rights or the improvements thereon or any
part thereof or interest therein (hereinafter referred to as "Transfer
Interest"), to any person, company, corporation or governmental agency
(hereinafter referred to as "Outside Party"), the Participant desiring
to Assign shall first make an offer to sell the Transfer Interest to a
Participant(s) having a right of first refusal, on the basis of the
applicable amount as set out in either Section 11.2.1 or Section
11.2.2:
11.2.1 Where the Outside Party proposes to purchase
for a specified monetary amount, from the Participant desiring
to Assign, an interest only in the San Juan Project and/or in
contract rights, water rights, lands, land rights and
improvements associated therewith, the amount of (i) a bona
fide written offer from an Outside Party ready, willing and
able (subject to obtaining any required regulatory approvals)
to purchase the Transfer Interest; or, in the absence of a
bona fide written offer, (ii) a purchase price set out in a
bona fide purchase and sale agreement between the Participant
desiring to Assign and an Outside Party ready, willing and
able (subject to obtaining any required regulatory approvals)
to purchase the Transfer Interest; or
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11.2.2 Where the Outside Party proposes to purchase
from the Participant desiring to Assign, (i) as part of a
non-monetary offer (such as in the case of an asset swap) or
(ii) when a segregated value for the Transfer Interest is not
available (such as in the case of a bundled or packaged sale
of assets), or (iii) where the Outside Party proposes to
purchase an interest not only in the San Juan Project and/or
in contract rights, water rights, lands, land rights and
improvements associated therewith, but also in other property
of the Participant desiring to Assign, the fair market value
of the Transfer Interest. As used herein, the term "fair
market value" means the amount of money which a purchaser,
willing but not obligated to buy the property, will pay to an
owner, willing but not obligated to sell it, taking into
consideration all of the uses to which the Transfer Interest
is adapted and might in reason be applied.
11.3 At least three (3) months prior to its intended date to
Assign, and after its receipt of a bona fide written offer, or
execution of a bona fide purchase and sale agreement, of the type
described in Section 11.2, the Participant desiring to Assign its
Transfer Interest shall serve written notice of its intention to do so
upon the Participant(s) having a right of first refusal, in accordance
with Section 42. Such notice shall: (i) have attached as an exhibit a
copy of the bona fide offer of an Outside Party or of the bona fide
purchase and sale agreement between the Outside Party and the
Participant desiring to Assign (an "Outside Offer"); and (ii) shall
contain a statement of the approximate proposed date to Assign.
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11.4 The Participant(s) having the right of first refusal
shall signify its (their) desire to purchase the entire Transfer
Interest, or not purchase the entire Transfer Interest, by serving
written notice of its (their) intention upon the Participant desiring
to Assign pursuant to Section 42 within sixty (60) days after such
service pursuant to Section 11.3 of the written notice of intention to
Assign. Failure by a Participant to serve notice as provided hereunder
within the time period specified shall be conclusively deemed to be
notice of its intention not to purchase the Transfer Interest.
11.5 When intention to purchase the entire Transfer Interest
has been indicated by notices duly given hereunder by the
Participant(s) desiring to purchase the Transfer Interest, the affected
Participants shall thereby incur the following obligations:
11.5.1 The Participant desiring to Assign and a
Participant desiring to purchase the Transfer Interest shall
be obligated to proceed in good faith and with diligence to
obtain all required authorizations and approvals to Assign;
11.5.2 The Participant desiring to Assign shall be
obligated to obtain the release of any liens imposed by or
through it upon any part of the Transfer Interest and to
Assign the Transfer Interest at the earliest practicable date
thereafter; and
11.5.3 A Participant desiring to purchase the
Transfer Interest shall be obligated to perform all terms and
conditions required of it to complete the purchase of the
Transfer Interest.
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The purchase of the Transfer Interest shall be fully consummated within
six (6) months following the date upon which all notices required to be
given under this Section 11 have been duly served, unless the
Participant is then diligently pursuing applications to appropriate
regulatory bodies (if any) for required authorizations to effect such
assignment or is then diligently prosecuting or defending appeals from
orders entered or authorizations issued in connection with such
applications.
11.6 If the intention to purchase the entire Transfer Interest
has not been indicated by notices given within the time periods
specified in this Section 11 by a Participant desiring to purchase the
Transfer Interest, the Participant desiring to Assign shall be free to
Assign all, but not less than all, of its Transfer Interest to the
Outside Party that made the Outside Offer, upon the terms and
conditions set forth in the Outside Offer. If such assignment of the
entire Transfer Interest to the Outside Party is not completed within
three (3) years after the approximate proposed date to Assign specified
in the notice given pursuant to Section 11.3, the Participant desiring
to Assign its Transfer Interest must, unless it is then diligently
pursuing its applications to appropriate regulatory bodies (if any) for
required authorizations to effect such assignment, or is then
diligently prosecuting or defending appeals from orders entered or
authorizations issued in connection with such applications, give
another complete new right of first refusal to the Participant(s)
desiring to purchase pursuant to the provisions of this Section 11,
before such Participant shall be free to Assign a Transfer Interest to
said Outside Party.
11.7 No assignment of a Transfer Interest, whether to another
Participant or to an Outside Party, shall relieve the assigning
Participant from full liability and financial responsibility for
performance after any such assignment: (i) of all obligations and
duties incurred by such Participant prior to such assignment under the
terms and conditions of the Project Agreements; and/or (ii) of all
obligations and duties provided and imposed after such assignment upon
such assigning Participant under the terms and conditions of the
Project Agreements, unless and until the assignee shall agree in
writing with the remaining Participants to assume the obligations and
duties of a Participant hereunder; provided further, however, that such
assignor shall not be relieved of any of its obligations and duties by
an assignment under this Section 11, without the express prior written
consent of the remaining Participants, which consent shall not be
unreasonably withheld.
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11.8 Any transferee, successor or assignee, or any party who
may succeed to the Transfer Interest pursuant to this Section 11, shall
specifically agree in writing with the remaining Participants at the
time of such transfer or assignment that it will not transfer or assign
all or any portion of the Transfer Interest so acquired without
complying with the terms and conditions of this Section 11.
11.9 The provisions of Section 11.8 shall not be applicable to
any assignment of a Transfer Interest by one Participant to another
Participant, provided that payment in full of such Transfer Interest,
as defined in Section 11, has been made by the Participant who is the
assignee thereof.
11.10 A Participant may, for the purpose of financing its
interest in pollution control systems and facilities at the San Juan
Project, sell, transfer or convey such interests pursuant to the New
Mexico Pollution Control Revenue Bond Act, and any such sale, transfer
or conveyance shall not be deemed as an assignment, transfer,
conveyance or other disposal within the meaning of this Section 11.
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12.0 RIGHTS OF PNM AND TEP IN WATER AND COAL:
12.1 If, pursuant to the terms and conditions of the Coal
Sales Agreement, or the sublease dated August 18, 1980 (as amended to
date and as such sublease may be amended from time to time), between
Western Coal Company and Utah International, Inc. or their successors
("Sublease"), PNM and TEP succeed to any interest in coal lands, coal
leases, water rights, or other property, the rights, titles and
interests of PNM and TEP therein shall be held as tenants in common,
with each of PNM and TEP having an equal undivided one-half (1/2)
interest therein, and such rights, titles and interests shall be
subject to all the terms and conditions set forth and contained in this
Agreement.
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13.0 SEVERANCE OF IMPROVEMENTS:
13.1 All facilities, structures, improvements, equipment and
property of whatever kind and nature constructed, placed or affixed on
the rights-of-way, easements, patented lands, fee lands and leased
lands as part of, or as Capital Improvements, to the San Juan Project,
as against all parties and persons whomsoever (including, without
limitation, any party acquiring any interest in the rights-of-way,
easements, patented, fee or leased lands or any interest in or lien,
claim or encumbrance against any of such facilities, structures,
improvements, equipment and property of whatever kind and nature) shall
be deemed to be and remain personal property of the Participants, not
affixed to the realty.
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PART III
ENTITLEMENTS TO OUTPUT OF SAN JUAN PROJECT
14.0 ENTITLEMENT TO CAPACITY AND ENERGY:
14.1 Subject to the provisions of Section 16, the Participants
shall be entitled to the Net Effective Generating Capacity of each of
Unit 1, Unit 2, Unit 3 and Unit 4 in proportion to their respective
Participation Shares. Each Participant shall be entitled to schedule
its Energy up to the Available Operating Capacity.
14.2 The Operating Agent shall keep the system dispatcher of
each Participant advised of the Available Operating Capacity.
14.3 When a Participant's request for its share of the
Available Operating Capacity necessitates the operation of a Unit, each
Participant shall schedule for its account not less than its share of
Minimum Net Generation. If, however, a Participant has scheduled an
amount of Energy in excess of its share of the Minimum Net Generation,
the other Participants shall be allowed to reduce their scheduled
Energy to an amount that will maintain the Unit at the Minimum Net
Generation level.
14.4 The delivery of Energy from the San Juan Project shall be
scheduled by each Participant in advance with the Operating Agent and
accounted for on the basis of integrated hourly actual generation, all
in accordance with any operating procedures which may be established or
approved by the Engineering and Operating Committee. Such operating
procedures shall provide for modifying such schedules to meet the needs
of day-to-day and hour-by-hour operation, including emergencies on a
Participant's system.
14.5 The Operating Agent shall, to the extent possible,
generate Energy at the San Juan Project in accordance with schedules
submitted by each Participant, as such schedules may be revised from
time to time, as long as such schedules do not jeopardize the operation
of the San Juan Project.
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14.6 The Participants shall revise their schedules in the
event of an Operating Emergency or other incident beyond the control of
the Operating Agent to reflect the actual Energy available from the San
Juan Project during the period of the Operating Emergency or incident.
14.7 The Energy generated at the San Juan Project shall be
controlled within PNM's Control Area; provided, that such control shall
not diminish the rights of any Participant to receive its entitlement
of Energy from the San Juan Project.
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15.0 CAPACITY ALLOCATION OF SWITCHYARD FACILITIES:
15.1 The electrical capacity in the Switchyard Facilities
shall be made available to PNM and TEP in the manner and in the amounts
as set forth in Section 6.2.7. For the purposes of this Agreement, the
FC Line shall be considered a part of the Switchyard Facilities.
15.1.1 The transmission capacity of the FC Line shall
be as measured at the Four Corners terminal. PNM and TEP each
shall be entitled to fifty percent (50%) of the designated FC
Line Capacity.
15.1.2 The transmission capacity of the FC Line
termination and other contract matters concerning the Four
Corners Project shall be handled individually by PNM and TEP.
15.2 The points of attachment to the San Juan 345 kV
Switchyard Facilities for the purposes of this Section 15 are:
No. 1: TEP/PNM No. 1 345 kV transmission line;
No. 2: TEP/PNM No. 2 345 kV transmission line;
No. 3: PNM/TEP Four Corners Generating Plant 345
kV switchyard (through the FC Line);
No. 4: PNM's WW 345 kV transmission line;
No. 5: PNM's OJ 345 kV transmission line;
No. 6: Colorado Public Service Company/Western
Area Power Administration/Tri-State Rifle
345 kV transmission line
No. 7: Western Area Power Administration-Shiprock
345 kV transmission line
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15.2.1 The Participants collectively shall not
schedule more Power and Energy through any of the foregoing
individual points of attachment than the established rating of
that facility.
15.2.2 The Participants' individual transmission
capacity rights into or out of the Switchyard Facilities
attachment points shall be the same as the ownership or
contract rights of the Participant(s) in the attached facility
up to the limits specified in this Section 15.
15.2.3 Any transmission capacity in the Switchyard
Facilities specified to be available in Section 15.2.1 or
otherwise determined to be available by the Engineering and
Operating Committee, but not allocated to the individual
Participants under Section 15.2.2, shall be declared "excess
capacity" by the Engineering and Operating Committee. The
Engineering and Operating Committee shall allocate such excess
transmission capacity to PNM or TEP or such Participants
having an ownership interest in the Switchyard Facilities,
upon request in the amount requested for specified periods of
time to the extent and for such time as the Engineering and
Operating Committee finds such excess capacity to be
available.
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16.0 USE OF FACILITIES DURING CURTAILMENTS:
16.1 If the Net Effective Generating Capacity of all Units is
reduced because of factors (including, but not limited to, equipment
failures, scheduled or unscheduled outages, fuel or fuel deliveries,
water supply, air quality limitations) which commonly influence the
total output of all Units, each Participant's entitlement to Capacity
during such period shall be reduced in proportion to the percentages
specified in Section 6.2.6 during each hour of such curtailment unless
otherwise specified in a separate agreement.
16.2 If factors which influence the operation of a Unit cause
a curtailment of that Unit, then the capacity entitlement from that
Unit for each Participant in that Unit shall be in proportion to the
Participant's Participation Share of that Unit.
16.3 If, because of factors which influence the operation
solely of Units 1 and 2, or solely of Units 3 and 4, there shall be a
curtailment of Units 1 and 2, or of Units 3 and 4, as the case may be,
the curtailment for each Participant in Units 1 and 2, or Units 3 and
4, shall be allocated in proportion to the percentages specified in
Sections 6.2.4 and 6.2.5, respectively.
16.4 To the extent that a curtailment results from scarcity of
resources and not from mechanical or legal limitations, Participants
may agree in writing to modify their schedules to allocate the use of
such resources to such Unit(s) or to such times as to make the most
efficient use thereof, consistent with Prudent Utility Practice, during
the pendency of such curtailment. Notwithstanding the provisions of
Section 23.2, the Operating Agent shall, during such curtailments,
account for coal inventory on a Participant by Participant basis. Upon
the conclusion of such curtailment, the provisions of Section 23.2
shall apply to any remaining coal inventory.
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16.5 Curtailment of the transmission capacity in the
Switchyard Facilities shall be allocated to the Participants in the
manner and in the amounts as set forth in Section 6.2.7.
16.6 No Participant shall exercise its rights relating to the
San Juan Project so as to endanger or unreasonably interfere with the
operation of the San Juan Project or the right of any other Participant
to use its share of Capacity and Energy from the San Juan Project.
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17.0 START-UP AND AUXILIARY POWER AND ENERGY REQUIREMENTS:
17.1 Each Participant shall be obligated to provide its
Participation Share of the Energy requirements to start up and operate
each Unit, and such requirements shall be provided by the Participants
based upon the Participant's percentage of operating costs in
accordance with Section 22.1. Appropriate metering facilities shall be
installed to assure measurement of such Energy. Such requirements for
Energy shall be scheduled in advance by the Operating Agent in
accordance with operating procedures approved by the Engineering and
Operating Committee.
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PART IV
ADMINISTRATION
18.0 COORDINATION COMMITTEE:
18.1 As a means of securing effective cooperation and
interchange of information and of providing consultation on a prompt
and orderly basis among the Participants in connection with various
administrative and technical problems which may arise from time to time
under this Agreement, the Coordination Committee shall remain in
existence during the term of this Agreement. Except as otherwise
expressly provided in this Agreement, the Coordination Committee shall
have no authority to modify any of the provisions of this Agreement.
18.2 The Coordination Committee shall consist of one
representative from each Participant who shall be an officer or other
duly authorized representative of a Participant. Any of the
Participants may designate an alternate or substitute to act as its
representative on the Coordination Committee in the absence of the
regular representative on the Coordination Committee or to act on
specified occasions or with respect to specified matters. Each
Participant shall notify the other Participants promptly, in writing,
of the designation of its representative and alternate representative
on the Coordination Committee and of any subsequent changes in such
designations.
18.3 The Coordination Committee shall have the following
functions and responsibilities:
18.3.1 Provide liaison between and among the
Participants.
18.3.2 Exercise general supervision over the
Engineering and Operating Committee, the Fuels Committee and
the Auditing Committee.
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18.3.3 Consider and act upon all matters referred to
the Coordination Committee by the Engineering and Operating
Committee, the Fuels Committee and the Auditing Committee.
18.4 Any action or determination of the Coordination Committee
shall require a vote of the Participants in accordance with Sections
18.4.1, 18.4.2 or 18.4.3. A Participant's Coordination Committee
representative shall be entitled to vote on all matters except those
actions or determinations which relate solely to a Unit or to common
property in which such Participant does not have a Participation Share
or as provided in Section 35.4.1. If a Participant's right to vote has
been suspended pursuant to Section 35.4.1, the requisite majorities for
actions or determinations specified in Sections 18.4.1, 18.4.2 and
18.4.3 shall be adjusted in proportion to the number of Participants
whose right to vote has not been suspended. An example of such an
adjustment is provided in Exhibit VIII, attached hereto and
incorporated herein. Maintenance scheduling and operation during
periods of curtailment of the total San Juan Project are not matters
which relate solely to a Unit, but are deemed to be matters affecting
all Units.
18.4.1 Except as provided in Sections 18.4.2 and
18.4.3, any actions or determinations brought before the
Coordination Committee shall require the following vote:
(a) More than a sixty-six and two thirds
percent (66 2/3%) majority of the Participation
Shares of the Participants in a Unit or common
property as defined in Section 6.2; and
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(b) More than a sixty-six and two thirds
percent (66 2/3%) majority of the number of
individual Participants having a Participation Share
in a Unit or common property as defined in Section
6.2.
18.4.2 Any action or determination of the
Coordination Committee related to common property as set forth
in Section 6.2.6 and involving an expenditure greater than
five million dollars ($5,000,000) shall require the following
vote:
(a) More than an eighty-two percent (82%)
majority of the Participation Shares of the
Participants as defined in Section 6.2.6; and
(b) A minimum of sixty-six and two thirds
percent (66 2/3%) majority of the number of the
individual Participants.
18.4.3 Any action or determination of the
Coordination Committee regarding any amendment of the Coal
Sales Agreement, replacement of the Coal Sales Agreement with
a new agreement or any interim coal pricing agreement related
to the Coal Sales Agreement (or its successor) shall require
the following vote:
(a) More than an eighty-two percent (82%)
majority of the Participation Shares of the
Participants as defined in Section 6.2.6; and
(b) A minimum of sixty-six and two thirds
percent (66 2/3%) majority of the number of
individual Participants.
18.5 The Coordination Committee shall keep written minutes and
records of all meetings. Any action or determination made by the
Coordination Committee shall be reduced to writing and shall become
effective when signed by the representatives of the Participants
entitled to vote thereon, representing a voting majority of the members
of the Coordination Committee, as defined in Section 18.4; provided,
however, in the event of an Operating Emergency, actions or
determinations may be made on the basis of oral agreements among duly
authorized representatives of the respective Participants entitled to
vote thereon, and such action or determination subsequently shall be
reduced to writing.
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18.6 Except for matters subject to the voting requirements of
Section 18.4.3, in the event the Coordination Committee fails to reach
agreement on any matter, which such committee is authorized to
determine, approve or otherwise act upon after a reasonable opportunity
to do so, then the Operating Agent shall be authorized and obligated to
take such reasonable and prudent action, consistent with Prudent
Utility Practice, as is necessary to the successful and proper
operation and maintenance of the San Juan Project, pending the
resolution, by arbitration or otherwise, of any such inability or
failure to agree.
18.7 In the event the Coordination Committee fails to reach
agreement on a matter subject to the voting requirements of Section
18.4.3, then an impasse shall be deemed to exist and the Participants
which are signatories to the Coal Sales Agreement then in effect shall
have the obligation and the responsibility, consistent with Prudent
Utility Practice, to maintain a supply of coal to the San Juan Project.
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19.0 ENGINEERING AND OPERATING COMMITTEE:
19.1 The Engineering and Operating Committee shall remain in
existence during the term of this Agreement. Except as expressly
provided in this Agreement, the Engineering and Operating Committee
shall have no authority to modify any of the provisions of this
Agreement.
19.2 The Engineering and Operating Committee shall consist of
up to two representatives from each Participant who shall collectively
have one vote. Any of the Participants may designate an alternate or
substitute to act as its representative on the Engineering and
Operating Committee in the absence of a regular representative on the
Engineering and Operating Committee or to act on specified occasions or
with respect to specified matters. Each Participant shall notify the
other Participants promptly, in writing, of the designation of its
representatives and alternate representative on the Engineering and
Operating Committee and of any subsequent change in the designation.
19.3 The Engineering and Operating Committee shall have the
following functions and responsibilities:
19.3.1 Review and approve the following items related
to the performance of Operating Work.
19.3.1.1 Capital Improvements and the annual
Capital Improvements budget.
19.3.1.2 The annual staffing table.
19.3.1.3 The annual operation and
maintenance budget.
19.3.1.4 Such written statements of
operating procedures as may be submitted to the
Engineering and Operating Committee.
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19.3.1.5 The planned annual maintenance
schedule.
19.3.1.6 The policies for establishing the
Emergency Spare Parts inventory.
19.3.1.7 The policies for establishing the
inventory for Materials and Supplies.
19.3.1.8 The statistical and administrative
reports, budgets and information and other similar
records, and the form thereof, to be kept and
furnished by the Operating Agent, in accordance with
Section 28.3.15 (excluding accounting records used
internally by the Operating Agent for the purpose of
accumulating financial and statistical data, such as
books of original entry, ledgers, work papers and
source documents).
19.3.1.9 The determination of Net Effective
Generating Capacity, Minimum Net Generation and Net
Energy Generation of the San Juan Project, based upon
recommendations of the Operating Agent.
19.3.1.10 The principles and procedures for
establishing communication channels among
Participants.
19.3.1.11 The operating procedures for
performance and efficiency testing.
19.3.1.12 The operating procedures for
maintaining complete and accurate Capacity and Energy
accounting.
19.3.1.13 The Operating Agent's estimate and
analysis of the total expenditures resulting from an
Operating Emergency, as provided in Section 29.7.
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19.3.1.14 The results and expenditures of
programs and contracts on environmental control and
data collection for which the Operating Agent has
contracted.
19.3.2 Establish procedures for the operation of the
San Juan Project during any period of curtailed operations
which reduces or may reduce the Net Effective Generating
Capacity.
19.3.3 Except for an Operating Emergency, as provided
in Section 29, designate a construction agent responsible for
the design, construction and acquisition of Capital
Improvements.
19.3.4 Approve the list of transportation and
motorized equipment to be purchased or leased by the Operating
Agent for use in the performance of Operating Work.
19.3.5 Perform such other functions and
responsibilities as may be assigned to it from time to time by
the Coordination Committee.
19.4 Any action or determination of the Engineering and
Operating Committee shall require a vote of the Participants, in the
manner provided for in Sections 18.4.1 and 18.4.2. A Participant's
Engineering and Operating Committee voting representative shall be
entitled to vote on all matters except those actions or determinations
which relate solely to a Unit or to common property in which such
Participant does not have a Participation Share or as provided in
Section 35.4.1. If a Participant's right to vote has been suspended
pursuant to Section 35.4.1, the requisite majorities for actions or
determinations specified in Sections 18.4.1 and 18.4.2 shall be
adjusted in proportion to the number of Participants whose right to
vote has not been suspended. An example of such an adjustment is
provided in Exhibit VIII. Maintenance scheduling and operation during
periods of curtailment of the total San Juan Project are not matters
which relate solely to a Unit, but are deemed to be matters affecting
all Units.
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19.5 The Engineering and Operating Committee shall keep
written minutes and records of all meetings. Any action or
determination made by the Engineering and Operating Committee shall be
reduced to writing and shall become effective when signed by the
representatives of the Participants entitled to vote thereon,
representing a voting majority of the members of the Engineering and
Operating Committee, as defined in Section 19.4; provided, however, in
the event of an Operating Emergency, actions or determinations may be
made on the basis of oral agreements among duly authorized
representatives of the respective Participants entitled to vote
thereon, and such action or determination subsequently shall be reduced
to writing.
19.6 In the event that less than a requisite majority of the
Engineering and Operating Committee is obtained, the matter shall be
referred to the Coordination Committee for decision upon the request of
any Participant's Engineering and Operating Committee representative.
19.7 In the event the Engineering and Operating Committee
fails to reach agreement on any matter which such committee is
authorized to determine, approve or otherwise act upon after a
reasonable opportunity to do so, then the Operating Agent shall be
authorized and obligated to take such reasonable and prudent action,
consistent with Prudent Utility Practice, as is necessary to the
successful and proper operation and maintenance of the San Juan
Project, pending the resolution, by arbitration or otherwise, of any
such inability or failure to agree.
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20.0 FUELS COMMITTEE:
20.1 As a means of establishing a centralized forum to
facilitate the timely and candid consideration and discussion between
all Participants of policies and issues associated with the procurement
of coal for the San Juan Project, there is hereby established a Fuels
Committee, which shall remain in existence during the term of this
Agreement. The Participants do not intend that the operation of the
Fuels Committee shall affect the day-to-day operational
responsibilities of the fuels management department of the Operating
Agent, except as otherwise specifically provided in this Section 20.
The Fuels Committee shall have no authority to modify any of the
provisions of this Agreement.
20.2 The Fuels Committee shall consist of one representative
from each Participant. Any of the Participants may, by written notice
to the other Participants, designate an alternate or substitute to act
as its representative on the Fuels Committee in the absence of the
regular representative on the Fuels Committee or to act on specified
occasions or with respect to specified matters. Each Participant shall
notify the other Participants promptly in writing of the designation of
its representative on the Fuels Committee and of any subsequent change
in such designation. The chairperson of the Fuels Committee shall be a
representative employed by a Participant that is a signatory to the
Coal Sales Agreement. The Fuels Committee shall meet regularly, but in
no event less than semiannually. Special meetings shall be called by
the chairperson if requested in writing by any three (3) Participants.
20.3 The Fuels Committee shall have the following functions
and responsibilities:
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20.3.1 To conduct studies, or cause studies to be
conducted, regarding criteria pertaining to the acquisition of
coal supplies and the negotiation and approval of coal
agreements. Such studies and recommendations may include, but
are not limited to:
20.3.1.1 Annual fuel supply budgets
20.3.1.2 Coal cost
20.3.1.3 Coal delivery rates and minimum
take obligations
20.3.1.4 Coal quality
20.3.1.5 Contract terms
20.3.1.6 Economic requirements
20.3.1.7 Negotiation strategies
20.3.1.8 Potential coal suppliers
provided, however, that prior to any such study being
conducted, the Participant(s) desiring that the study be
performed shall have made suitable arrangements therefor,
including payment arrangements with the provider of the study.
Nothing in this Section 20.3 shall be construed to require the
Operating Agent or any Participant which is a signatory to the
Coal Sales Agreement to undertake any uncompensated or
unfunded study which it would not otherwise perform.
20.3.2 To obtain input from all Participants
regarding individual criteria and economic requirements
necessary to vote on matters entrusted to the Fuels Committee
or to make collective recommendations to the Coordination
Committee.
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20.3.3 To receive progress reports from and provide
recommendations to negotiators acting on behalf of
Participants in the negotiation of coal supply agreements.
20.3.4 To provide regular progress reports to the
Engineering and Operating and to the Coordination Committees,
as requested by such committees.
20.3.5 To establish the amount of coal to be
maintained in the Emergency Coal Storage Pile.
20.3.6 To establish operating procedures for delivery
of coal to the Emergency Coal Storage Pile.
20.3.7 To perform such other functions and
responsibilities as may be assigned to it from time to time by
the Coordination Committee.
20.4 The following special procedures shall apply to all
negotiations or discussions with SJCC regarding amendment, interim
pricing agreements, termination or succession of the Coal Sales
Agreement, or with any other coal supplier or potential supplier.
20.4.1 Each Participant which is a signatory to the
Coal Sales Agreement shall be entitled to have at least two
(2) representatives present at any such negotiations or
discussions. Participants not signatories to the Coal Sales
Agreement or its successors (for purposes of this Section
20.4.1, the "Remaining Participants") shall have the
collective right to have two (2) representatives present at
any such negotiations or discussions. The Remaining
Participants may jointly or separately designate
representatives, but in no case may the total number of
representatives so designated by all of the Remaining
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Participants exceed two (2). Any dispute among the Remaining
Participants regarding the naming of representatives shall be
subject to resolution pursuant to Section 37 and shall not
restrict the rights of any other representatives to engage in
any ongoing negotiations or discussions. Representatives shall
be designated in writing by the Participants which are
signatories to the Coal Sales Agreement and Remaining
Participants. If such representatives are not employees of a
Participant or a Remaining Participant, such fact shall be
disclosed in writing to all Participants and Remaining
Participants. Representatives shall agree in writing to: (i)
avoid any conflict of interest that would be detrimental to
the operation of the San Juan Project; and (ii) maintain all
proprietary information obtained through such negotiations and
discussions in confidence. The form of such confidentiality
agreements shall be prepared by the Fuels Committee, and shall
be subject to the approval of the Participants which are
signatories to the Coal Sales Agreement, such approval not to
be unreasonably withheld. Such confidentiality agreements
shall be executed by a Participant's Coordination Committee
representative or, as appropriate, the person authorized by
such Participant or Representative to execute such documents.
Representatives may be changed by Participants or Remaining
Participants by the giving of written notice to all other
Participants and Remaining Participants.
20.4.2 Representatives shall make regular reports to,
coordinate with, and obtain the recommendations of the Fuels
Committee regarding the progress of and issues involved in
such coal negotiations or discussions. No representative or
Participant shall engage in bilateral negotiations or
discussions concerning coal supply to the San Juan Project
with SJCC or any other coal supplier or potential supplier;
provided, however, that nothing herein shall be construed to
prevent the Operating Agent or the Participants which are
signatories to the Coal Sales Agreement, in the regular
conduct of its or their fuel-related activities, from
maintaining routine business contacts and communications with
SJCC or other coal suppliers or potential suppliers to the San
Juan Project.
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20.5 Any proposed action or determination regarding any
amendment of the Coal Sales Agreement, replacement of the Coal Sales
Agreement with a new agreement or any interim coal pricing agreement
related to the Coal Sales Agreement (or its successor) shall be
submitted to the vote of the representatives of the Participants on the
Fuels Committee. Any such action or determination shall require the
affirmative vote as established in Section 18.4.3, except that if a
Participant's right to vote has been suspended pursuant to Section
35.4.1, the requisite majority for actions or determinations specified
in Section 18.4.3 shall be adjusted in proportion to the number of
Participants whose right to vote has not been suspended. An example of
such an adjustment is provided in Exhibit VIII.
20.5.1 If, upon such vote, the requisite votes are
obtained, the Participants which are signatories to the Coal
Sales Agreement then in effect shall proceed in accordance
with the affirmative vote of the Fuels Committee without
further action of any other San Juan Project committee.
20.5.2 If, upon such vote, the requisite votes are
not obtained, the matter giving rise to the vote shall, not
later than thirty (30) days after the negative vote of the
Fuels Committee, be submitted to the Coordination Committee
for its vote in accordance with Section 18. If the requisite
majorities are obtained in the Coordination Committee vote,
the Participants which are signatories to the Coal Sales
Agreement then in effect shall proceed in accordance with the
affirmative vote of the Coordination Committee.
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20.5.3 If the requisite votes are not obtained in the
Coordination Committee vote, then consistent with Section
18.7, the Participants which are signatories to the Coal Sales
Agreement then in effect shall have the obligation and the
responsibility, consistent with Prudent Utility Practice, to
maintain a supply of coal to the San Juan Project.
20.6 The Fuels Committee shall keep written minutes and
records of all meetings. Any action or determination made by the Fuels
Committee shall be reduced to writing and shall become effective when
signed by the representatives of the Participants representing a voting
majority.
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21.0 AUDITING COMMITTEE:
21.1 The Auditing Committee shall remain in existence during
the term of this Agreement. The Auditing Committee shall have no
authority to modify any of the provisions of this Agreement.
21.2 The Auditing Committee shall consist of one
representative from each Participant. Any of the Participants may
designate an alternate or substitute to act as its representative on
the Auditing Committee in the absence of the regular representative on
the Auditing Committee or to act on specified occasions or with respect
to specified matters. Each Participant shall notify the other
Participants promptly, in writing, of the designation of its
representative and alternate representative on the Auditing Committee
and of any subsequent changes in such designation.
21.3 The Auditing Committee shall have the following
functions and responsibilities under this Agreement:
21.3.1 Review accounting, financial and internal
control aspects of Operating Work and Capital Improvements
and, not less than every two years, audit the records
maintained by the Operating Agent in its performance of
Operating Work, Capital Improvements and any other records
maintained by the Operating Agent in support of its billings
to the Participants.
21.3.2 Review and approve the format and content of
the Operating Agent's accounting records and reports for
Operating Work and Capital Improvements.
21.3.3 Certify to the Participants, for management
purposes and for the use of the Participants only, that the
Operating Agent's results of operations and accounting methods
and records, including any allocations for Operating Work and
Capital Improvements, are in accordance with the Project
Agreements and Accounting Practice.
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21.3.4 Review and make recommendations to the
Coordination Committee regarding a Participant's
administrative and general expense allowance and other normal
loadings when such Participant acts as construction agent for
Capital Improvements.
21.3.5 Review and approve the Operating Agent's cost
and expense allocations between (i) electric generation and
related functions and (ii) unrelated functions.
21.3.6 Advise and make recommendations to the
Coordination Committee and Operating Agent on matters
involving auditing and financial transactions.
21.3.7 Develop procedures for proper accounting and
financial liaison between Participants in connection with the
Operating Work and Capital Improvements.
21.3.8 Perform such functions and responsibilities as
may be assigned to it from time to time by the Coordination
Committee or as otherwise provided in this Agreement.
21.4 Any action or determination of the Auditing Committee
shall require a vote of the voting Participants in accordance with
Section 18.4.1. A Participant's Auditing Committee representative shall
be entitled to vote on all matters except those actions or
determinations which relate solely to a Unit or common property in
which such Participant does not have a Participation Share except that
if a Participant's right to vote has been suspended pursuant to Section
35.4.1, the requisite majority for actions or determinations specified
in Section 18.4.1 shall be adjusted in proportion to the number of
Participants whose right to vote has not been suspended. An example of
such an adjustment is provided in Exhibit VIII.
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21.5 The Auditing Committee shall keep written minutes and
records of all meetings, and any action or determination by the
Auditing Committee shall be reduced to writing and shall become
effective when signed by the representatives of the Participants
entitled to vote thereon, representing a voting majority of the members
of the Auditing Committee.
21.6 In the event less than a requisite majority of the
Auditing Committee is obtained, the matter shall be referred to the
Coordination Committee for decision upon the request of any
Participant's Auditing Committee representative.
21.7 In the event the Auditing Committee fails to reach
agreement on a matter which such committee is authorized to determine,
approve or otherwise act upon after a reasonable opportunity to do so,
then the Operating Agent shall be authorized and obligated to take such
reasonable and prudent action, consistent with Prudent Utility
Practice, as is necessary to the successful and proper operation and
maintenance of the San Juan Project, pending the resolution, by
arbitration or otherwise, of any such inability or failure to agree.
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PART V
BUDGETS AND OPERATING EXPENSES
22.0 OPERATION AND MAINTENANCE EXPENSES:
22.1 The expenses for the operation and maintenance of the San
Juan Project in the performance of Operating Work (which, for purposes
of this Section 22, and as defined more particularly herein, are
referred to as the "O&M Expenses") shall be apportioned among the
Participants, in accordance with the following percentages:
22.1.1 For Units 1 and 2 and for all equipment and
facilities directly related to Units 1 and 2 only, in
accordance with the following percentages:
22.1.1.1 PNM - 50 percent
22.1.1.2 TEP - 50 percent
22.1.1.3 M-S-R - 0 percent
22.1.1.4 Farmington - 0 percent
22.1.1.5 Tri-State - 0 percent
22.1.1.6 LAC - 0 percent
22.1.1.7 SCPPA - 0 percent
22.1.1.8 Anaheim - 0 percent
22.1.1.9 UAMPS - 0 percent
22.1.2 For Unit 3 and all equipment and facilities
directly related to Unit 3 only, in accordance with the
following percentages:
22.1.2.1 PNM - 50 percent
22.1.2.2 TEP - 0 percent
22.1.2.3 M-S-R - 0 percent
22.1.2.4 Farmington - 0 percent
22.1.2.5 Tri-State - 8.2 percent
22.1.2.6 LAC - 0 percent
22.1.2.7 SCPPA - 41.8 percent
22.1.2.8 Anaheim - 0 percent
22.1.2.9UAMPS - 0 percent
22.1.3 For Unit 4 and for all equipment and
facilities directly related to Unit 4 only, in accordance with
the following percentages:
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22.1.3.1 PNM - 38.457 percent
22.1.3.2 TEP - 0 percent
22.1.3.3 M-S-R - 28.8 percent
22.1.3.4 Farmington - 8.475 percent
22.1.3.5 Tri-State - 0 percent
22.1.3.6 LAC - 7.20 percent
22.1.3.7 SCPPA - 0 percent
22.1.3.8 Anaheim - 10.04 percent
22.1.3.9 UAMPS - 7.028 percent
22.1.4 For equipment and facilities common to Units 1
and 2 only, in accordance with the following percentages:
22.1.4.1 PNM - 50 percent
22.1.4.2 TEP - 50 percent
22.1.4.3 M-S-R - 0 percent
22.1.4.4 Farmington - 0 percent
22.1.4.5 Tri-State - 0 percent
22.1.4.6 LAC - 0 percent
22.1.4.7 SCPPA - 0 percent
22.1.4.8 Anaheim - 0 percent
22.1.4.9 UAMPS - 0 percent
22.1.5 For equipment and facilities common to Units 3
and 4 only, in accordance with the following percentages:
22.1.5.1 PNM - 44.119 percent
22.1.5.2 TEP - 0 percent
22.1.5.3 M-S-R - 14.4 percent
22.1.5.4 Farmington - 4.249 percent
22.1.5.5 Tri-State - 4.1 percent
22.1.5.6 LAC - 3.612 percent
22.1.5.7 SCPPA - 20.9 percent
22.1.5.8 Anaheim - 5.07 percent
22.1.5.9 UAMPS - 3.55 percent
22.1.6 For the Switchyard Facilities except as
otherwise provided in Section 15, in accordance with the
following percentages:
22.1.6.1 PNM - 65 percent
22.1.6.2 TEP - 35 percent
22.1.6.3 M-S-R - 0 percent
22.1.6.4 Farmington - 0 percent
22.1.6.5 Tri-State - 0 percent
22.1.6.6 LAC - 0 percent
22.1.6.7 SCPPA - 0 percent
22.1.6.8 Anaheim - 0 percent
22.1.6.9 UAMPS - 0 percent
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22.1.7 Except as provided in Exhibit V(g), attached
hereto and incorporated herein, for equipment and facilities
common to all of the Units, and all San Juan Project expenses
not identifiable by Unit and not otherwise listed above, in
accordance with the following percentages:
22.1.7.1 PNM - 46.297 percent
22.1.7.2 TEP - 19.8 percent
22.1.7.3 M-S-R - 8.7 percent
22.1.7.4 Farmington - 2.559 percent
22.1.7.5 Tri-State - 2.49 percent
22.1.7.6 LAC - 2.175 percent
22.1.7.7 SCPPA - 12.71 percent
22.1.7.8 Anaheim - 3.10 percent
22.1.7.9 UAMPS - 2.169 percent
22.1.8 In the event of a permanent shutdown of either
of Unit 1 or Unit 2, the expenses incurred in connection with
the shutdown (which may include removal, salvage, cleanup and
protection service) shall be allocated as set forth in Section
22.1.1. In the event of a permanent shutdown of Unit 3, said
expenses shall be allocated as set forth in Section 22.1.2. In
the event of a permanent shutdown of Unit 4, said expenses
shall be allocated as set forth in Section 22.1.3. Expenses
which are attributable to equipment and facilities common to
more than one Unit shall be apportioned in accordance with
Section 22.1, as applicable.
22.1.9 Exhibit V, attached hereto and incorporated
herein, is a partial list of equipment and facilities of the
San Juan Project for use by the Engineering and Operating
Committee as a guideline in determining the allocation of
operation and maintenance costs among the Participants.
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22.1.10 In areas where the allocation of costs of
operation and maintenance of equipment and facilities among
the Participants is not clearly defined by Sections 22.1.1 to
22.1.8, the Engineering and Operating Committee shall make a
determination of such allocation of costs.
22.1.11 The following shall apply in the event of a
declaration of default against a Participant and a suspension
of that Participant's right to receive all or any part of its
proportionate share of the Net Effective Generating Capacity,
as provided for in Section 35.4.1: those non-defaulting
Participant(s) having a Participation Share in each affected
Unit, who are entitled to schedule and receive for their
accounts proportionate shares of the Net Effective Generating
Capacity of the defaulting Participant, shall bear
proportionate shares of the defaulting Participant's
responsibility for expenses of the operation and maintenance
of the San Juan Project, as provided in Section 35.5.
22.2 O&M Expenses chargeable to the following FERC Accounts
shall be apportioned among the Participants in accordance with Sections
22.1.1, 22.1.2, 22.1.3, 22.1.4, 22.1.5 and 22.1.7, as applicable:
22.2.1 Power Production/Steam Power Generation: FERC
Accounts 500, 502, 505, 506, 507, 509 and 510 through 514 (charged by
on-site San Juan Project employees and operations-related departments
located off-site); provided, however, that limestone costs (chemicals)
chargeable to FERC Account 502 shall be apportioned among the
Participants in accordance with Section 23.3.2.1.
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22.2.2 Administrative and General Expenses directly
chargeable to FERC Accounts 920, 921, 923, 926, 930.2, 931 and 935, by
on-site San Juan Project employees and by A&G related departments
located off-site as set forth in Exhibit VI, Attachment A, which have
not been included as a part of the A&G Ratio or charged to FERC Account
935, in accordance with Section 22.4. Such direct A&G charges must be
supported by the Operating Agent and are subject to audit and approval
by the Auditing Committee. If the Auditing Committee is unable to agree
on the appropriateness of direct A&G charges, the Auditing Committee
shall submit the entire matter to the Coordination Committee.
22.2.3 O&M Expenses chargeable to FERC Account 501
shall be apportioned among the Participants in accordance with Section
23.
22.2.4 The cost of the property insurance for the San
Juan Project chargeable to FERC Account 924 and any uninsured loss or
expense thereunder and the cost of general liability or workers'
compensation insurance for the San Juan Project chargeable to FERC
Account 925 shall be apportioned among the Participants according to
Section 22.1.
22.2.5 Costs or revenues chargeable to the following
FERC Operating and Non-Operating Accounts: 411.8, 411.9, 412, 421 and
426.
22.3 Power Production Expense chargeable to FERC Account 500
(for employees of PNM's fuels management department), Non San Juan
Project Specific, shall be allocated among all of PNM's fossil-fueled
power plants, including the San Juan Project, based on the percentage
of labor charged to each fossil-fueled power plant as a percentage of
labor charged to all of PNM's fossil-fueled power plants.
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22.4 The O&M Expenses for the Switchyard Facilities chargeable
to FERC Accounts 560 through 573 and FERC Account 935 shall be
apportioned among the Participants in accordance with Section 22.1.6.
22.5 The O&M Expenses for the portion of system control and
load dispatching expenses (allocated between PNM and the San Juan
Project based on the number of megawatts of San Juan Project capacity
as a percentage of PNM's total generating capacity) chargeable to FERC
Accounts 556, 560 and 561 shall be apportioned among the Participants
in accordance with Section 22.1.7.
22.6 Payroll loads for administrative and general expenses,
payroll taxes, injuries and damages and pension and benefits, shall be
added to the monthly billings in proportion to the dollars of direct
labor billed and apportioned among the Participants in accordance with
Sections 22 and 23. The current methodologies for calculating the A&G
Ratio, Payroll Tax Ratio, Injuries and Damages Ratio and Pension and
Benefits Ratio are set forth in Exhibit VI (Attachments A, B, C and D
thereto), attached hereto and incorporated herein.
22.6.1 If any Participant believes that the method
used in determining A&G Ratio, Payroll Tax Ratio, Injuries and
Damages Ratio and Pension and Benefits Ratio, in accordance
with Exhibit VI (Attachments A, B, C and D thereto), results
in an unreasonable burden on such Participant(s), such
Participant(s) may request that said method used in
determining said ratios be submitted to the Auditing Committee
for review. After any such request, the Auditing Committee
shall review said method and shall endeavor to agree upon
whether or not said unreasonable burden does actually exist.
If, after such review, the Auditing Committee determines that
the application of said method does result in an unreasonable
burden on the Participant, the Auditing Committee shall
determine and recommend a modified method to the Coordination
Committee to eliminate such unreasonable burden. If, after
such review, the Auditing Committee is unable to agree upon
whether or not such unreasonable burden does exist or is
unable to agree on a modified method for eliminating said
unreasonable burden, the Auditing Committee shall submit the
entire matter to the Coordination Committee.
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22.6.2 The Coordination Committee shall review the
recommendation of the Auditing Committee pursuant to Section
22.6.1. If, as a result of such review, the Coordination
Committee agrees that such unreasonable burden does exist and
that a modified method eliminates such unreasonable burden,
the Coordination Committee shall adopt said modified method.
22.6.3 If the Auditing Committee has not submitted a
recommended modified method and the Coordination Committee
agrees that such unreasonable burden does exist, the
Coordination Committee shall endeavor to agree on a modified
method. If, after such review, the Coordination Committee is
unable to agree that such unreasonable burden does exist or on
a modified method which will eliminate such unreasonable
burden, upon request of a Participant, either matter may be
submitted to arbitration pursuant to Section 37.
22.6.4 Any modified method adopted by the
Coordination Committee or determined through arbitration shall
be retroactive for the length of the period of inequity up to
a maximum period of three (3) years and shall become effective
on the first day following such date of adoption.
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22.7 As soon as possible after the end of each calendar year,
the Operating Agent shall calculate the actual ratios for: A&G, payroll
tax, injuries and damages, and pension and benefits for such year in
accordance with the methodologies described in Exhibit VI (Attachments
A, B, C and D thereto). To the extent such expenses are more or less
than those already paid by the Participants during said year, the
Operating Agent shall bill or credit the Participants for the amount of
such difference.
22.8 At the start of each calendar year, the Operating Agent
shall calculate new ratios for: A&G, payroll tax, injuries and damages
and pension and benefits. Such ratios shall be calculated in accordance
with the methodologies described in Exhibit VI (Attachments A, B, C and
D thereto). Such ratios may be adjusted to more nearly reflect the
anticipated expenses of the current year because of tax legislation,
labor contract negotiations or other factors not reflected in the prior
year's costs.
22.9 The Operating Agent shall bill to the requesting
Participant(s) the costs and expenses, including A&G expenses, incurred
by the Operating Agent (including, but not limited to, fees of outside
legal counsel or consultants, time of in-house legal counsel and other
employees and agents of the Operating Agent) in performing tasks
requested by a Participant in relation to (i) the offering or sale of
bonds or other type of security by a Participant in connection with the
acquisition or ownership of an interest in the San Juan Project; and
(ii) the attempted or contemplated sale by a Participant of any portion
of its ownership interest in the San Juan Project. The Operating Agent
shall establish and maintain appropriate accounting procedures to
identify such costs and expenses incurred by the Operating Agent.
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23.0 FUEL COSTS:
23.1 The quantity of coal delivered to the San Juan Project
shall be determined by the belt scales, in accordance with the Coal
Sales Agreement.
23.2 The Operating Agent shall maintain a coal inventory
including an Emergency Coal Storage Pile for all Units, wherein the
Participants shall have Participation Shares as provided in Section
6.2.6. The Fuels Committee shall establish an optimum coal inventory
tonnage for all Units in total. Coal inventory shall be accounted for
in FERC Account 151.
23.3 Costs of the coal inventory and fuel expense shall be
apportioned among and paid for by the Participants on the following
basis:
23.3.1 Costs that are classified as Fixed Fuel
Expenses shall be charged to FERC Account 151. Such Fixed Fuel
Expenses shall then be charged monthly to FERC Account 501 and
shall be apportioned among and paid for by the Participants on
the basis of the percentage that each Participant's monthly
Net Energy Generation and auxiliary generation bears to the
total monthly Net Energy Generation and auxiliary generation.
The Fixed Fuel Expense balance in FERC Account 151 shall be
reduced to zero monthly by charging Fixed Fuel Expense to FERC
Account 501. Such Fixed Fuel Expense shall be adjusted to an
annual reconciliation among the Participants based on the
Participation Shares as provided in Section 6.2.6.
23.3.2 Costs that are classified as Variable Fuel
Expenses shall be charged to the fuel inventory or credited
(as withdrawn) to FERC Account 151 and such costs shall be
apportioned among and paid for by the Participants on the
basis of the Participation Shares as provided in Section
6.2.6. Variable Fuel Expenses related to coal requirements
shall be charged to FERC Account 501 as determined by dividing
the total number of tons of coal at the beginning of the
month, plus the coal delivered during the month, into the
total recorded variable cost and multiplying the cost per ton
so derived by the number of tons withdrawn. The Variable Fuel
Expenses shall be apportioned among and paid for by the
Participants on the basis of the percentage that each
Participant's monthly Net Energy Generation bears to the total
monthly Net Energy Generation of the Unit(s).
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23.3.2.1 Limestone costs (chemicals)
chargeable to FERC Account 502 shall be apportioned among and
paid for by the Participants on the basis of the percentage
that each Participant's monthly Net Energy Generation bears to
the total monthly Net Energy Generation of the Unit(s).
23.3.3 All other Variable Fuel Expenses (including,
but not limited to, fuel oil, fuel handling and ash and gypsum
disposal) incurred which are chargeable to FERC Account 501
shall be apportioned among the Participants in accordance with
Section 23.3.2.
23.3.4 All Participants acknowledge and recognize the
terms and conditions of the Coal Sales Agreement, wherein,
among other terms and conditions, an annual Fixed Fuel Expense
must be paid by the San Juan Project each year to SJCC. Each
Participant shall pay its Participant's Minimum Fixed Fuel
Expense plus a proportional share of Excess Fixed Fuel
Expense. Such Excess Fixed Fuel Expense shall be allocated to
the Participants based on each Participant's percentage share
of Carry-over Tons created during that calendar year.
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23.3.5 All Participants acknowledge and recognize
that the monthly allocation of Fixed Fuel Expenses based on
the monthly Net Energy Generation, as described in Section
23.3.1, may result in an individual Participant having been
allocated Minimum Fixed Fuel Expense and Excess Fixed Fuel
Expense equal to, less than, or greater than its proportional
share of such expenses. Any overpayment or underpayment of a
Participant's Minimum Fixed Fuel Expense and Excess Fixed Fuel
Expense shall be included as an adjustment to the final
Participant fuel invoices in a given year. Payments received
from Participants which have underpaid during the year shall
be used by the Operating Agent to pay SJCC for any Minimum
Fixed Fuel Expense not paid and to compensate other
Participants which have overpaid.
23.3.6 All Participants acknowledge and recognize the
provisions of the Coal Sales Agreement that create Carry-over
Tons. To the extent that Carry-over Tons are created and paid
for by individual Participants, the Carry-over Tons will be
allocated to each Participant's Carry-over Tons Account in
proportion to each Participant's allocation of Excess Fixed
Fuel Expense for the calendar year. At the direction of a
Participant, the Operating Agent shall transfer Carry-over
Tons from an individual Participant's Carry-over Tons Account
to another Participant's Carry-over Tons Account. Carry-over
Tons shall be accounted for on the basis of tonnage only, with
no financial value attached thereto. Participants shall apply
any existing Carry-over Tons from their account to the payment
of a minimum tonnage deficiency invoice. When Carry-over Tons
are used by the San Juan Project, Participants whose
Carry-over Tons Accounts are reduced shall be compensated by
Participants whose Carry-over Tons Accounts have no balance or
an inadequate balance to meet their obligation for the Annual
Minimum Coal Delivery. The value of this compensation shall be
based on the actual cost billed by SJCC.
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23.3.7 All Participants acknowledge and recognize the
provisions of Exhibit VII, attached hereto and incorporated
herein, as representative of the allocation and billing
methodology agreed upon. Exhibit VII reflects the allocation
of expenses among the Participants based on actual expenses
incurred for fuel expense for the month of January 1993.
23.4 The Operating Agent shall provide the Participants a
monthly written report on the following items related to coal
deliveries at the San Juan Project:
23.4.1 Annual Minimum Coal Delivery for the year.
23.4.2 Annual Minimum Coal Delivery allocated among
the Participants.
23.4.3 Total actual coal deliveries by SJCC to the
San Juan Project for each month and for the year to date.
23.4.4 Total actual coal deliveries to the San Juan
Project for each month and for the year to date, allocated to
the Participants.
23.4.5 Total cost and tonnage of inventory allocated
to the Participants.
23.4.6 Fixed Fuel Expense and Variable Fuel Expense
allocated to the Participants for each month and for the year
to date.
23.4.7 Status of Carry-over Tons for the San Juan
Project, allocated to the Participants.
23.5 The Operating Agent shall replace the tons of coal
withdrawn from inventory on a ton for ton basis according to the coal
withdrawn from inventory for the month, except where modified to
reflect anticipated generation usage in the following month. The cost
of this replacement shall be apportioned among the Participants in
accordance with Sections 23.2 and 23.3.
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23.6 In the event that SJCC defaults in its obligations under
the Coal Sales Agreement, the Operating Agent may assume or make such
arrangements for the assumption of such of SJCC's operation as
permitted by the Coal Sales Agreement. Costs associated with the coal
operations shall become a part of the Total Monthly Coal Cost as
applicable and, with the costs and expenses of fuel and emission
residuals and ash disposal, shall be apportioned between and paid for
by the Participants in accordance with this Section 23.
23.7 The monthly costs of coal allocated between the
Participants in accordance with this Section 23 shall be estimated by
the Operating Agent as soon as practicable after the end of each month
and a preliminary bill shall be presented and paid in the manner set
forth in Section 30.3.3. Adjustments in the estimated preliminary bill
due to quality and quantity of coal delivered, and estimates of
escalation, shall be made in the next succeeding month or on the
earliest possible billing thereafter.
23.8 In the event of a catastrophic occurrence which results
in a sustained outage of a Unit and a declaration that an
uncontrollable force exists under the Coal Sales Agreement, then in
such event, FERC Account 151 will be allocated to the commercial and
non-commercial Units. The portion of FERC Account 151 allocated to the
non-commercial Unit(s) shall remain frozen until such time as such
Unit(s) is restored to commercial operation. New costs of coal
chargeable to FERC Account 151 will be apportioned among the
Participants on the basis of the Participants' Participation Share in
the generating capacity of the commercial Units. At such time as a
damaged Unit is restored to commercial operation, the frozen portion of
Account 151 will be merged into the operating unit(s) portion of
Account 151 and to the extent that a Participant is adversely impacted
by an incremental increase in the average unit cost of coal an
allocation of such incremental cost will be made and the net difference
paid to the Participant having a credit balance.
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23.9 The accounting practice as stated in this Section 23 is
applicable at the present time. If, however, at a later time the
practice is proven to be inadequate or another practice later proves to
be more equitable in the opinion of the Auditing Committee, the
Coordination Committee, upon the recommendation of the Auditing
Committee, may authorize changes and revisions to the accounting
practices.
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24.0 ANNUAL BUDGETS:
24.1 Not less than ninety (90) days prior to the beginning of
each calendar year, the Operating Agent shall prepare and submit to the
Engineering and Operating Committee for its review and approval the
proposed capital budget, manpower budget and a budget for the
performance of Operating Work for such calendar year.
24.2 The Engineering and Operating Committee shall approve the
budgets described in Section 24.1 in final form not less than thirty
(30) days prior to their effective date. In the event that any such
budget is not so approved, the Operating Agent will nevertheless
continue to perform Operating Work in a manner consistent with Prudent
Utility Practice until such time as a budget has been approved.
24.3 Any information required from the Participants by the
Operating Agent in preparing such proposed budgets will be supplied by
the Participants, if possible, within thirty (30) days following a
request by the Operating Agent.
24.4 The Engineering and Operating Committee may at any time
during the year approve revisions to the approved capital expenditures
budget, manpower budget and a budget for the performance of Operating
Work.
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25.0 PAYMENT OF TAXES:
25.1 The Participants shall use their best efforts to have any
taxing authority imposing any taxes or assessments on the San Juan
Project, assess and levy such taxes or assessments directly against
each Participant in accordance with its respective Participation Share
in the property taxed.
25.2 All taxes or assessments levied against each
Participant's ownership interest in the San Juan Project, excepting
those taxes or assessments levied against an individual Participant on
behalf of other Participants, shall be the sole responsibility of the
Participant upon whom said taxes and assessments are levied.
25.3 If any property taxes and other taxes and assessments are
levied and assessed in a manner other than specified in Section 25.1,
it shall be the responsibility of the Coordination Committee to
establish equitable standard practices and procedures for the
apportionment among the Participants of such taxes and assessments and
the payment thereof.
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26.0 MATERIALS AND SUPPLIES:
26.1 The Operating Agent from time to time may increase or
reduce the inventory of Materials and Supplies by changing the maximum
or the minimum quantities to be maintained in inventory in accordance
with the procedures established by the Engineering and Operating
Committee.
26.2 The Operating Agent shall prepare a list of the items for
inclusion in Materials and Supplies for the operation and maintenance
of each Unit. The list shall include the estimated cost of each
individual item of such Materials and Supplies and specify the maximum
and minimum quantity of each such individual item to be maintained in
inventory. The list shall be submitted to the Engineering and Operating
Committee by the Operating Agent for review and approval.
26.3 The Operating Agent shall purchase and take control of
Materials and Supplies for inventory, so that the total inventory of
Materials and Supplies on hand remains in accordance with the policies
established by the Engineering and Operating Committee.
26.4 Materials and Supplies withdrawn from inventory and used
in the operation and maintenance of the San Juan Project shall be
accounted for as a component of operation and maintenance expense and
allocated among the Participants in accordance with Section 22.
26.5 Materials and Supplies withdrawn from inventory and used
in connection with Capital Improvements shall be accounted for as a
capital expenditure and allocated among the Participants in accordance
with Section 7.
26.6 Materials and Supplies removed from service shall be
returned to inventory if reusable, or if junk or obsolete, shall be
disposed of by the Operating Agent under the best available terms. The
proceeds, if any, received shall be credited or distributed to the
Participants in the same proportion as their Participation Shares
therein.
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26.7 A separate Materials and Supplies account and
undistributed stores expense account will be established by the
Operating Agent in accordance with FERC Accounts. Such charges and
credits so allocated to Materials and Supplies shall be allocated to
the Participants as a component of operation and maintenance expense in
accordance with Section 22, or as a Capital Improvement in accordance
with Section 7, as the case may be.
26.8 The inventory value of any item withdrawn from or
returned to Materials and Supplies shall be the average cost of like
items in inventory.
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27.0 EMERGENCY SPARE PARTS:
27.1 The Operating Agent shall prepare a list of the Emergency
Spare Parts for each Unit and common facilities. Such list shall
include the estimated costs for each individual item of such Emergency
Spare Parts and shall specify the quantity of each such individual item
to be maintained in inventory. Such list shall be submitted to the
Engineering and Operating Committee by the Operating Agent for review
and approval.
27.2 The Operating Agent shall purchase Emergency Spare Parts
from time to time as replacements for those withdrawn from inventory in
accordance with the policies established by the Engineering and
Operating Committee.
27.3 Emergency Spare Parts shall be owned by and the costs
thereof shall be allocated between the Participants in accordance with
their Participation Shares.
27.4 The Operating Agent shall notify the Participants
promptly after Emergency Spare Parts are withdrawn from inventory and
shall also notify the Participants of the value of such parts so
withdrawn and of the accounting treatment with respect thereto.
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PART VI
OPERATING AGENT
28.0 OPERATION AND MAINTENANCE:
28.1 PNM is the Operating Agent, unless replaced in accordance
with Section 33.
28.2 All Participants hereby appoint PNM as their agent, and
PNM agrees to undertake, as the agent of the Participants and as
principal on its own behalf, the responsibility for the performance of
Operating Work in accordance with this Agreement.
28.3 Subject to the provisions, conditions, limitations and
restrictions of this Agreement, the Operating Agent shall:
28.3.1 Perform the Operating Work in accordance with
the Project Agreements and Prudent Utility Practice.
28.3.2 Contract for, furnish or obtain the services
and studies necessary for performance of Operating Work.
28.3.3 Arrange for the placement and maintenance of
Operating Insurance.
28.3.4 Execute all contracts in the name of the
Operating Agent, acting as principal on its own behalf and as
agent for the Participants, in connection with the performance
of Operating Work.
28.3.5 Furnish and train the necessary personnel for
performance of Operating Work.
28.3.6 Have the coal replaced which has been removed
from the Emergency Coal Storage Pile at the earliest practical
time following resumption of normal coal deliveries.
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28.3.7 Enforce and comply with all contracts entered
into for the performance of Operating Work.
28.3.8 Comply with any and all laws and regulations
applicable to the performance of Operating Work.
28.3.9 Maintain the Operating Account and expend the
Operating Funds only in accordance with this Agreement.
28.3.10 Keep and maintain records of monies expended
and received, obligations incurred, credits accrued and
contracts entered into in the performance of this Agreement,
and make such records available for inspection by the
Participants at reasonable times and places.
28.3.11 Not suffer any liens to remain in effect
unsatisfied against the San Juan Project (other than the liens
permitted under Section 10.1, for taxes or assessments not yet
delinquent, for labor and material not yet delinquent or
undetermined charges or liens incidental to the performance of
Operating Work); provided, that the Operating Agent shall not
be required to pay or discharge any such lien as long as a
proceeding shall be pending in which the lawfulness or
validity of such lien shall be contested in good faith and
which shall operate during the pendency thereof to prevent the
collection or enforcement of such lien so contested.
28.3.12 Recommend minimum notification times and lead
times for changing scheduled Energy required for the
Participants to the Engineering and Operating Committee for
its approval.
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28.3.13 Act as operating representative or agent in
connection with the administration and enforcement of the Coal
Sales Agreement.
28.3.14 Recommend programs to the Engineering and
Operating Committee to make environmental studies and, upon
approval of the Engineering and Operating Committee, supervise
the performance of such programs.
28.3.15 Provide the Engineering and Operating
Committee with all written statistical and administrative
reports, written budgets, information and other records
relating to Operating Work which may be necessary to permit
such committee to perform its responsibilities under this
Agreement.
28.3.16 Provide the Fuels Committee with all written
reports, written budgets, information and other records
relating to Operating Work which may be necessary to permit
such committee to perform its responsibilities under this
Agreement.
28.3.17 Provide the Auditing Committee with all
accounting records, information, reports and other records
relating to Operating Work, which may be necessary to permit
such committee to perform its responsibilities under this
Agreement.
28.3.18 Perform Operating Work so as to comply with
the Water Contract and make such tests and measurements and
keep such records as are required by the United States Bureau
of Reclamation.
28.3.19 Keep the Participants fully and promptly
advised of material changes in conditions or other material
developments affecting the performance of Operating Work and
furnish the Participants with copies of any notices given or
received pursuant to the Project Agreements.
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28.3.20 Present claims to any insurer for losses and
damages covered by valid and collectible Operating Insurance
procured by the Operating Agent directly from the insurer.
Investigate, adjust, settle, decline and defend claims against
the Participants arising out of the performance of Operating
Work when said claims or portions thereof are not covered by
valid and collectible Operating Insurance; provided that the
Operating Agent shall obtain the agreement of the
Participants, acting through the Coordination Committee, prior
to disposing of any claims or combination of claims arising
out of the same occurrence which exceeds one hundred thousand
dollars ($100,000).
28.3.21 Assist, as requested, other Participants and
their insurers in the investigation, adjustment and settlement
of any loss or claim arising out of Operating Work for which
payment may be made on account of valid and collectible
additional insurance applicable thereto procured by any such
Participant; provided, that the Operating Agent may agree (by
separate agreement) that a Participant procuring any policy or
policies of additional insurance shall have the authority and
the responsibility to (i) present, investigate, adjust,
settle, decline and defend claims or potential claims covered
by said policies in favor of the Participants and against any
one or more of said insurers; and (ii) present, investigate,
adjust, settle, decline and defend claims against the
Participants arising out of the performance of Operating Work
when said claims or portions thereof are not covered by said
policies; and provided further, that such Participant shall
obtain the agreement of the Participants, acting through the
Coordination Committee, prior to the settlement of any claim
or combination of claims arising out of the same occurrence
which exceeds one hundred thousand dollars ($100,000).
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28.3.22 Notwithstanding anything in Section 28.3.20
and 28.3.21 to the contrary, any Participant may at any time,
at its own expense, employ its own counsel to assist in
investigating, adjusting, settling, declining and defending
claims of the types referred to in Sections 28.3.20 and
28.3.21 and the Operating Agent and its employees and counsel
shall cooperate fully with such counsel and permit such
counsel to participate fully in all of the foregoing
activities.
28.3.23 Keep the Participants fully and promptly
informed of any known default under the Project Agreements.
28.3.24 Determine switching and clearance procedures
to be followed by the Participants at the San Juan Project.
28.3.25 Determine Available Operating Capacity from
time to time and make recommendations to the Engineering and
Operating Committee regarding items referenced in Section
19.3.1.9.
28.3.26 Upon the request of a Participant, provide
such Participant, in reasonable quantity without direct charge
therefor, a copy or copies of any report, record, list,
budget, manual, accounting or billing summary, classification
of accounts, or other documents or revisions of any of the
foregoing items, all as prepared in accordance with this
Agreement.
28.3.27 In the event of the failure of the
Participants which are signatories to the Coal Sales Agreement
then in effect to reach agreement on a matter described in
Sections 18.7 and 20.5.3, maintain a supply of coal to the San
Juan Project, consistent with Prudent Utility Practice.
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28.3.28 Manage the activities of the "designated
representative" pursuant to the DR Agreement.
28.3.29 Perform all of the duties and obligations set
out in this Agreement as duties and obligations of the
Operating Agent.
28.4 The Participants shall lend and be properly reimbursed
for all necessary and available assistance as may be requested by the
Operating Agent in the performance of Operating Work.
28.5 The Operating Agent shall be the agent of the
Participants and shall exercise only such authority as is conferred
upon it by this Agreement. The Operating Agent shall not receive any
fee or profit hereunder, unless otherwise agreed unanimously by the
Participants.
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29.0 OPERATING EMERGENCY:
29.1 In the event of an Operating Emergency, the Operating
Agent shall take any and all steps reasonably necessary and required to
terminate the Operating Emergency, subject to the provisions of this
Section 29.
29.2 As soon as practicable after the commencement of an
Operating Emergency, the Operating Agent shall advise the Participants
of the occurrence of the Operating Emergency, its nature and the steps
taken or to be taken to terminate the Operating Emergency, including a
preliminary estimate of the expenditures required to terminate the
Operating Emergency.
29.3 In the event that the estimated cost to cure an Operating
Emergency with respect to any Unit or to any equipment and facilities
common to any of the Units does not exceed two hundred and fifty
thousand dollars ($250,000), the Operating Agent shall have the
authority to expend, in its discretion, no more than two hundred and
fifty thousand dollars ($250,000) to terminate such Operating
Emergency.
29.4 In the event the Operating Agent determines that the
estimated amount required to terminate the Operating Emergency exceeds
the amount which it is authorized to expend, the Operating Agent shall
so notify the Participants and shall call a meeting of the Engineering
and Operating Committee to be held not later than five (5) days
following such determination. At such meeting, the Operating Agent
shall submit the following information:
29.4.1 The estimated date when the Operating
Emergency can be terminated.
29.4.2 The person or persons who would perform the
work and furnish the materials required to terminate the
Operating Emergency.
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29.4.3 The estimated amount of overtime, if any,
which would be necessary in order to expedite the termination
of the Operating Emergency.
29.4.4 The costs that are proposed to be capitalized,
and salvage realized.
29.4.5 The costs that are proposed to be charged as
maintenance expense.
29.4.6 The proposed administrative and general
expense allowance applicable to such repair or reconstruction.
29.4.7 Such other information as may be necessary and
required by the Engineering and Operating Committee to
determine the manner in which the Operating Emergency is to be
terminated.
29.5 The Engineering and Operating Committee shall review and
approve the proposed repair or reconstruction, including the estimated
cost thereof or shall agree upon an alternative.
29.6 Costs incurred in terminating an Operating Emergency may
be billed to the Participants by the Operating Agent on the basis of
its estimate of such costs with adjustment to be made in accordance
with Section 29.8 when final cost determination has been made.
29.7 Following the termination of the Operating Emergency, the
Operating Agent shall submit to the Participants a report containing a
summary of the costs incurred and expenditures made in connection with
the repair or reconstruction and such other information as may be
required by the Engineering and Operating Committee.
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29.8 The Operating Agent shall allocate to the Participants
the costs incurred or expenditures made in such repair or
reconstruction, as follows: (i) costs charged as maintenance expense,
in accordance with Section 22; and (ii) any other such repair or
reconstruction costs, in accordance with Section 7.
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30.0 PAYMENT OF EXPENSES BY PARTICIPANTS:
30.1 All amounts required to be advanced by the Participants
in accordance with this Agreement shall be made payable to the
Operating Account established by the Operating Agent. The Operating
Funds shall be owned by the Participants in proportion to their
respective balances therein at any given time, and the Operating Agent
in its capacity as such shall not have any right or title therein
except to maintain custody of and to disburse the Operating Funds as a
conduit between the Participants and those to whom such disbursements
shall be made.
30.2 The Engineering and Operating Committee shall establish a
minimum amount for the Operating Funds which will be available to pay
for expenditures or obligations incurred by or on behalf of the
Participants in accordance with this Agreement. Such minimum amount of
Operating Funds may be revised by the Engineering and Operating
Committee at any time. The minimum amount of the Operating Funds and
any increases therein shall be advanced by the Participants in
accordance with the percentages set forth in Section 22, and shall be
due and payable within fifteen (15) business days following
notification of the establishment of the minimum amount to be kept in
Operating Funds or the date on which any increase in such amount
authorized by the Engineering and Operating Committee shall become
effective. In the event the Engineering and Operating Committee
decreases such minimum amount, then each Participant shall receive a
credit which shall be equal to the product of its percentage, as set
forth in Section 22, and the amount of any such decrease.
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30.3 Each Participant shall advance Operating Funds on the
basis of notices (hereinafter called bills) submitted by the Operating
Agent reflecting such Participant's share of costs and expenses in
accordance with this Agreement, as follows:
30.3.1 Expenses described in Sections 30 and 22 shall
be billed in writing as follows:
30.3.1.1 The payroll costs to be paid to the
Operating Agent's employees for each pay period.
30.3.1.2 On the 20th day of each month, the
total expenses incurred the previous month and
described in Section 22 less those expenses billed
under Section 30.3.1.1.
30.3.2 Bills submitted under Section 30.3.1 shall be
due and payable within seven (7) business days following
receipt of the bill.
30.3.3 Expenses described in Sections 31 and 23 shall
be billed in writing at least ten (10) business days prior to
their due date, and funds therefor shall be deposited with the
Operating Agent not less than three (3) business days prior to
their due date. If such bills do not have a specific due date,
they shall be billed within a reasonable time following their
incurrence.
30.3.4 Expenses described in Sections 7, 26, 27 and
29 shall be billed monthly, except when such expenses exceed
the minimum amount in the Operating Funds in which case
billing will be made immediately and payable within seven (7)
business days following receipt of the bill.
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31.0 OPERATING INSURANCE:
31.1 Unless otherwise specified by the Coordination Committee,
during the performance of Operating Work, the Operating Agent shall
procure and maintain in force, or cause to be procured and maintained
in force, policies of Operating Insurance providing coverage against
the following risks, hazards and perils:
31.1.1 Risks covered by the standard form of
commercial liability insurance, including bodily injury,
personal injury and property damage risk, hazards of
automobiles liability, contractual liability, contractor's
protective liability and liability for products and completed
operations, in an amount not less than twenty-five million
dollars ($25,000,000).
31.1.2 Risks covered by the standard form of "all
risk" property insurance providing coverage against all risk
of loss, except those risks excluded in the standard form of
"all risk" property insurance. Such insurance shall provide
boiler and pressure vessel coverage, including reasonable
expediting expense.
31.1.3 Risks covered by the standard form of workers'
compensation and employers liability insurance, covering
employees of the Operating Agent engaged in the performance of
Operating Work, or other compliance by the Operating Agent
with requirements of the laws of the State of New Mexico as to
such coverage.
31.1.4 Risks covered by the standard form of employee
dishonesty bond covering loss of property or funds due to
dishonest or fraudulent acts committed by an officer or
employee of the Operating Agent.
31.2 Except for Operating Insurance described in Sections
31.1.3 and 31.1.4, each Participant shall be a named insured
individually and jointly and in accordance with its Participation Share
as established in Section 6. Operating Insurance referred to in Section
31.1.1 shall carry cross-liability coverage.
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31.3 In the event that another Participant's insurance program
affords equal or better coverage on a more favorable cost basis than
that available to the Operating Agent, the Participants may agree (by
separate agreement) that such insurance program may be utilized to
afford all or part of the insurance coverage required by Section 31.1.
31.4 The insurance company used, the insurable values, limits,
deductibles, retentions and other special terms, covenants and
conditions of the Operating Insurance shall be agreed upon by the
Coordination Committee.
31.4.1 Any deductibles shall be shared by the
Participants in accordance with the percentages established in
Section 22.1.
31.5 The Operating Agent shall furnish each of the
Participants with either a certified copy of each of the policies of
Operating Insurance or a certified copy of each of the policy forms of
Operating Insurance, together with a line sheet therefor (and any
subsequent amendments) naming the insurers and underwriters and the
extent of their participation. When the policies or policy forms of
Operating Insurance have been approved in writing by all of the
Participants, said policies or policy forms shall not be modified or
changed by any Participant without the prior written consent of all of
the Participants, except for minor and insubstantial changes or
modifications, as to which notification shall be given by the Operating
Agent to the Participants.
31.6 Each of the Operating Insurance policies shall be
endorsed so as to provide that all named insureds shall be given thirty
(30) days notice of cancellation or material change.
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31.7 Operating Insurance policies shall be primary insurance
for all purposes and shall be so endorsed. Any insurance carried by a
Participant individually shall not participate with the Operating
Insurance as respects any loss or claim for which valid and collectible
Operating Insurance shall apply. Such other insurance shall apply
solely as respects the individual interest of the Participant carrying
such other insurance.
31.8 Nothing herein shall prohibit the Operating Agent or any
Participant from furnishing a policy of Operating Insurance which
combines the coverage required by this Agreement with coverage outside
the scope of that required by this Agreement. If the Operating Agent or
any Participant furnishes a policy of Operating Insurance which
combines the coverage required by this Agreement with coverage outside
the scope of that required by this Agreement, the Coordination
Committee shall agree on the portion of the total premium cost which is
allocable to Operating Insurance. If the Participants are unable to
agree on such allocation, the Operating Agent may make an estimated
allocation and bill the Participants on the basis thereof, with
adjustment to be made when the dispute is resolved.
31.9 If a Participant desires changes in any Operating
Insurance policy, such Participant shall notify the Operating Agent and
the other Participants in writing of the desired changes. Upon
agreement of the Coordination Committee to such change, the Operating
Agent shall obtain the insurance within sixty (60) days from the date
of agreement. If the Operating Agent is unable to obtain the type of
policy or coverage required herein or believed by the Operating Agent
to be adequate, then the Operating Agent shall immediately notify the
Participants.
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31.10 In the event the Coordination Committee is unable to
agree upon any matters relating to the Operating Insurance, the
Operating Agent, pending the resolution of such disagreement, shall
procure or cause to be procured such policies of insurance, consistent
with Prudent Utility Practice, as are necessary to protect the
Participants against the insurable risks for which Operating Insurance
is required. During any period of negotiations with an insurer, or
other negotiations which are pending at the expiration of the period of
coverage of an Operating Insurance policy, or in the event an Operating
Insurance policy is canceled, the Operating Agent shall renew or bind
policies as an emergency measure, or may procure policies of insurance
which are identical to those which were canceled, or may to the extent
possible secure replacement policies which will provide substantially
the same coverage as the policy expiring or canceled.
31.11 Each Participant shall have the right to request that
any mortgagee, trustee or secured party be named on all or any of the
Operating Insurance policies as loss payees or additional assureds as
their interests may appear. Such request shall be submitted to the
Operating Agent specifying the name or names of such mortgagee, trustee
or secured party and such additional information as may be necessary or
required to permit it to be included on the policies of Operating
Insurance.
31.12 On an annual basis, the Operating Agent shall advise the
Participants on the status of insurance coverage for the San Juan
Project and shall make appropriate recommendations concerning insurance
issues to the Coordination Committee.
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32.0 SURPLUS OR RETIRED PROPERTY:
The Operating Agent shall dispose of surplus property or property no
longer used or useful in the operation of the San Juan Project and report such
disposal to the Participants, both in accordance with practices and procedures
established by the Engineering and Operating Committee. The proceeds from such
disposition shall be credited to the Participants in accordance with their
Participation Shares.
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33.0 REMOVAL OF OPERATING AGENT:
33.1 The Operating Agent shall serve as such during the term
of this Agreement unless it resigns as Operating Agent by giving notice
to the Participants at least one (1) year in advance of the date of
resignation or until receipt by the Operating Agent of notice of its
removal as provided in Section 33.2.
33.2 The Operating Agent may be removed as Operating Agent for
any one of the following reasons:
33.2.1 The Operating Agent may be removed by action
of the Coordination Committee if, in the judgment of the
Coordination Committee (voting as provided for in Section
18.4), the best interests of the San Juan Project require that
a new Operating Agent be selected. Any Participant seeking a
Coordination Committee determination to remove the Operating
Agent shall provide to the Operating Agent and to all of the
Participants a written statement, detailing the reasons why,
in the judgment of the initiating Participant, the Operating
Agent should be removed. Within thirty (30) days after receipt
by the Operating Agent of this written statement, the
Operating Agent shall prepare and serve upon all of the
Participants its response which shall contain a detailed
rebuttal of the allegations made in the initiating statement.
Within the same thirty (30) day period, any other Participant
may also prepare and serve upon the Operating Agent and the
Participants a statement responding to the allegations in the
initiating statement. Within twenty (20) days after service of
all such response statements, the Coordination Committee shall
meet to consider what action, if any, to take with regard to
the removal of the Operating Agent. If, pursuant to this
Section 33.2.1, the Coordination Committee removes the
Operating Agent, such removal shall be effective upon the date
established by the Coordination Committee. If the Operating
Agent or any Participant is dissatisfied with the action of
the Coordination Committee, it shall have the right to seek
arbitration under Section 37, but no demand for arbitration
shall stay the decision of the Coordination Committee to
remove the Operating Agent.
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33.2.2 If, pursuant to the provisions of Section 34,
it is determined that the Operating Agent is in default of its
obligations under this Agreement, the Operating Agent may be
removed by written notice given by any Participant under
Section 34.1.2, which notice shall state the effective date of
the removal of the Operating Agent.
33.2.3 Notwithstanding the pendency of any actions to
remove the Operating Agent, the Operating Agent shall continue
in good faith to exercise its obligations as Operating Agent.
33.3 Prior to the effective date of a resignation of the
Operating Agent, or prior to the date of removal of the Operating Agent
in accordance with Section 33.2, the Coordination Committee shall by
written agreement designate a new Operating Agent, which may, but need
not, be a Participant. The Coordination Committee may designate an
interim Operating Agent pending selection of a permanent Operating
Agent. Acceptance by the new Operating Agent of its appointment as such
shall constitute its agreement to perform the obligations of the
Operating Agent under this Agreement.
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34.0 DEFAULTS BY OPERATING AGENT:
34.1 The following provisions shall apply solely in regard to
violations or allegations of violations of this Agreement by the
Operating Agent on the basis of which removal of the Operating Agent is
sought:
34.1.1 In the event any Participant shall be of the
opinion that an action taken or failed to be taken by the
Operating Agent constitutes a violation of this Agreement, it
may give written notice thereof to the Operating Agent and the
other Participants, together with a statement of the basis for
its opinion. Thereupon, the Operating Agent may prepare a
statement of the reasons justifying its action or failure to
take action. If agreement in settling the dispute is not
reached between the Operating Agent and such Participant which
gave such notice, then the matter shall be submitted to
arbitration in the manner provided in Section 37. During the
continuance of the arbitration proceedings, the Operating
Agent may continue such action taken or failed to be taken in
the manner it deems most advisable and consistent with this
Agreement.
34.1.2 If it is determined that the Operating Agent
is violating this Agreement, then the Operating Agent shall
act with due diligence to end such violation and shall, within
thirty (30) days or within such lesser time following the
determination as may be prescribed in the determination, take
action or commence action in good faith to terminate such
violation. In the event that the complaining Participant is of
the opinion that the Operating Agent has not taken such action
to correct, or to commence action to correct, the violation
within such allowed period, the complaining Participant shall
be entitled to submit the question of the Operating Agent's
good faith action to terminate such violation to arbitration
as provided in Section 37. If it is determined that the
Operating Agent has not acted with due diligence or good faith
to terminate such violation, it shall be deemed to be in
default and shall be subject to removal, after the arbitration
determination, within fifteen (15) days after receipt of
notice executed by the complaining Participant in accordance
with Section 42.
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34.1.3 The provisions of Section 35, excepting
Sections 35.8 and 35.9, shall not apply to disputes as to
whether or not an action or non-action of the Operating Agent,
in its capacity as Operating Agent, is a violation or default
under this Agreement.
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PART VII
DEFAULTS, LIABILITY AND ARBITRATION
35. DEFAULTS:
35.1 Each Participant shall pay all monies and carry out all
other performances, duties and obligations agreed to be paid or
performed by it pursuant to all of the terms and conditions set forth
and contained in the Project Agreements, and a default by any
Participant in the covenants and obligations to be by it kept and
performed pursuant to the terms and conditions set forth and contained
in any of the Project Agreements shall be an act of default under this
Agreement.
35.2 In the event of a default by a Participant in any of the
terms and conditions of this Agreement to be performed by that
Participant, the following shall apply:
35.2.1 The Operating Agent shall give a written
notice of the default to the defaulting Participant and the
other Participants in accordance with Section 35.2.2.
35.2.2 The notice of default shall specify the
existence, nature and extent of the default. Upon receipt of
the notice of default, the defaulting Participant shall
immediately take all steps necessary to cure the default as
promptly and completely as possible.
35.3 In the event that any Participant shall dispute an
asserted default by it, then such Participant shall pay the disputed
payment or perform the disputed obligation, but may do so under
protest. The protest shall be in writing, shall accompany the disputed
payment or precede the performance of the disputed obligation(s), and
shall specify the reason upon which the protest is based. Copies of
such protest shall be mailed by such Participant to all other
Participants and to the Operating Agent. Payments not made under
protest shall be deemed correct, except to the extent that periodic or
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annual audits may reveal over or under payment by a Participant or may
necessitate adjustments. In the event it is determined by arbitration,
pursuant to the provisions of this Agreement or otherwise, that the
protesting Participant is entitled to a refund of all or any portion of
a disputed payment or payments, or is entitled to the reasonable
equivalent in money of non-monetary performance of a disputed
obligation theretofore made, then, upon such determination, the
non-protesting Participant(s) shall reimburse such amount to the
protesting Participant, together with interest thereon at the rate of
ten percent (10%) per annum, or the maximum legal rate of interest,
whichever is lesser, from the date of payment or of the performance of
a disputed obligation to the date of reimbursement.
35.4 In the event a default shall continue for a period of ten
(10) days or more after the notice given by the Operating Agent in
accordance with Section 35.2 without having been cured by the
defaulting Participant, or without such defaulting Participant having
commenced or continued action in good faith to cure such default, the
following shall apply:
35.4.1 If the defaulting Participant has failed to
cure such default or to commence such good faith action during
said ten (10) day period, the Operating Agent shall make a
written report to the Engineering and Operating Committee
concerning the status of the default and shall, on the next
working day after such ten (10) day period, notify the
defaulting Participant in writing that the Operating Agent
intends to declare the defaulting Participant in default under
the Project Agreements unless there is a prompt cure of the
default. Seven (7) days after the giving of such notice to the
defaulting Participant, the Operating Agent shall make a
second written report to the Engineering and Operating
Committee concerning the status of the default and the
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efforts, if any, of the defaulting Participant to cure the
default. If, within seven (7) additional days, the defaulting
Participant has neither cured nor reasonably commenced to cure
the default, the Operating Agent shall declare the defaulting
Participant in default under the Project Agreements and shall
provide written notification of the declaration of default to
the defaulting Participant and to the Engineering and
Operating Committee. Thereafter, and for so long as the
default is not remedied and the declaration of default is not
revoked by the Operating Agent, all rights of the defaulting
Participant under the Project Agreements shall be suspended,
including the right to vote on all committees and to receive
all or any part of its proportionate share of the Net
Effective Generating Capacity.
35.4.2 Within seventeen (17) days after the notice by
the Operating Agent, as provided for in Section 35.2, the
Operating Agent shall prepare special operating procedures for
approval by the Engineering and Operating Committee that will
apply during the period of suspension under Section 35.4.1.
Upon approval by the Engineering and Operating Committee, the
Operating Agent shall provide notice to each Participant of
such special procedures. These special procedures shall
include:
35.4.2.1 A tabulation in form similar to
Section 6.2 of the percentages of costs to be borne by the
non-defaulting Participants pursuant to Section 35.5;
35.4.2.2 Billing and accounting of such
costs;
35.4.2.3 Dispatch and scheduling of the
defaulting Participant's proportionate share of Net Effective
Generating Capacity; and
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35.4.2.4 Any other items required for the
optimal use of the San Juan Project and the mitigation of
damages by the non-defaulting Participants.
35.4.2.5 If the Operating Agent proposes to
broker all or a portion of the defaulting Participant's
proportionate share of Net Effective Generating Capacity on
behalf of one or more non-defaulting Participants, the form of
such an agreement shall be incorporated in such procedures.
35.4.3 Within twenty (20) days after the declaration
of a default, as provided for in Section 35.4.1, the
defaulting Participant and the non-defaulting Participants
shall convene a meeting to address the defaulting
Participant's situation and its intentions with regard to
curing its default. The defaulting Participant shall promptly
prepare a cure plan for approval by the members of the
Coordination Committee entitled to vote thereon. The cure plan
shall address the defaulting Participant's plan to cure the
default and restore itself to full participation as an owner
of the San Juan Project. The Coordination Committee, by vote
of the members of the Coordination Committee entitled to vote
thereon, will monitor the defaulting Participant's compliance
with the terms and conditions of the cure plan and if it
appears to the Coordination Committee that the defaulting
Participant is or will be unable to comply with the terms of
an approved cure plan, the Coordination Committee shall
consider what actions may be required to address such
inability, including, but not limited to, directing the
Operating Agent to take such actions as may be appropriate. It
is the intent of the Participants that any defaults shall be
cured on as expeditious a basis as reasonably possible.
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35.4.4 A demand for arbitration of an asserted
default pursuant to Section 37 shall not stay the suspension
of the rights of the defaulting Participant, but in the event
that the board of arbitrators shall determine that the
asserted default did not in fact exist or occur, the
arbitrators shall specify a method of fully and fairly
compensating the Participant which, under Section 35.4.1, was
denied the right to vote on committee actions and to receive
all or any part of its proportionate share of the Net
Effective Generating Capacity.
35.5 During any period when the suspension provided for in
Section 35.4.1 is in effect, the non-defaulting Participant(s) having a
Participation Share in the affected Unit or Units: (i) shall bear a
proportionate share of all expenses, including but not limited to, the
operation and maintenance costs, insurance costs, fuel costs, capital
expenditures and other expenses otherwise payable by the defaulting
Participant under the Project Agreements, including any obligations
related to common equipment and facilities, based upon the relation of
the Participation Share of each such non-defaulting Participant(s) to
the Participation Shares of all non-defaulting Participants in the
specific Unit or Units; and (ii) shall be entitled to schedule and
receive for their accounts their proportionate share of the Net
Effective Generating Capacity of the defaulting Participant.
35.6 In connection with its cure of the default, the
defaulting Participant shall pay promptly upon demand to the
non-defaulting Participant(s) the total amount of money (and/or the
reasonable equivalent in money of non-monetary performance) paid and/or
made by such non-defaulting Participant(s) pursuant to Section 35.5 in
order to cure any default by the defaulting Participant, together with
interest thereon at the rate of ten percent (10%) per annum, or the
maximum legal rate of interest, whichever is the lesser, from the date
of the expenditure of such money (or the making of such other
performance) by the non-defaulting Participant(s), to the date of such
reimbursement by the defaulting Participant, or such greater amount as
may be otherwise provided in the Project Agreements. Any payment
obligation of the defaulting Participant shall be reduced by mitigation
measures undertaken by the non-defaulting Participants; provided,
however, that the payment obligations of the defaulting Participant
shall not be reduced by any profits or gains achieved by the
non-defaulting Participants as the result of taking a proportionate
share of the Net Effective Generating Capacity due to the default of
the defaulting Participant.
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35.7 The suspension of a defaulting Participant shall be
terminated and its full rights under the Project Agreements restored
when the default(s) have been cured and all compensable costs incurred
by the non-defaulting Participant(s) hereunder have been paid by the
defaulting Participant or other arrangements acceptable to the
non-defaulting Participant(s) have been made.
35.8 No waiver by a non-defaulting Participant of its rights
with respect to a default under this Agreement, or with respect to any
other matter arising in connection with this Agreement, shall be
effective unless the non-defaulting Participant(s) waive in writing
their respective rights and any such waiver shall not be deemed to be a
waiver with respect to any subsequent default or matter. No delay short
of the statutory period of limitations in asserting or enforcing any
right hereunder shall be deemed a waiver of such right.
35.9 The rights and remedies provided in this Agreement shall
be in addition to the rights and remedies of the Participants as set
forth and contained in any other Project Agreement or any rights and
remedies the Participants have in law or equity.
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36.0 LIABILITY:
36.1 Except for any judgment debt for damage resulting from
Willful Action and except to the extent any judgment debt is
collectible from valid insurance, and subject to the provisions of
Sections 36.1.1, 36.4, 36.5, 36.6 and Section 37, each Participant
hereby extends to all other Participants, their directors, members of
their governing bodies, officers and employees, its covenant not to
execute, levy or otherwise enforce a judgment obtained against any of
them, including recording or effecting a judgment lien, for any direct,
indirect, or consequential loss, damage, claim, cost, charge or
expense, whether or not resulting from the negligence of such
Participant, its directors, members of its governing body, officers,
employees or any person or entity whose negligence would be imputed to
such Participant from (i) Operating Work, the design and construction
of Capital Improvements or the use or ownership of the San Juan Project
or (ii) the performance or nonperformance of the obligations of any
Participant under any of the Project Agreements, other than the
obligation to pay any monies becoming due.
36.1.1 In the event any insurer providing insurance
refuses to pay any judgment obtained by a Participant against
any other Participant, its directors, members of its governing
body, officers or employees on account of liability referred
to in Section 36.1, the Participant, its directors, members of
its governing body, officers or employees against whom the
judgment is obtained shall, at the request of the prevailing
Participant and in consideration for the covenant granted in
Section 36.1, execute such documents as may be necessary to
effect an assignment of its contractual rights against the
nonpaying insurer and thereby give the prevailing Participant
the opportunity to enforce its judgment directly against such
insurer. In no event when a judgment debt is collectible from
valid insurance shall the Participant obtaining the judgment
execute, levy or otherwise enforce the judgment (including
recording or effecting a judgment lien) against the
Participant, its directors, members of its governing body,
officers or employees against whom the judgment was obtained.
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36.1.2 To the extent that Section 41-3-5, New Mexico
Statutes Annotated, 1978 compilation (as such section may be
amended), shall be applicable and for the purpose of relieving
each Participant, its directors, members of its governing
body, officers and employees of any liability to make
contribution to other non-Participant tortfeasors, the
foregoing covenant not to execute hereby effects a reduction
of all injured Participants' damages recoverable against all
other non-Participant tortfeasors to the extent of the pro
rata share (as referred to in Section 41-3-5, New Mexico
Statutes Annotated, 1978 compilation, as such section may be
amended) of the other Participants, their directors, members
of their governing bodies, officers and employees.
36.1.3 Each Participant agrees, upon request by any
other Participant, to make, execute and deliver any and all
documents or take such other action as may reasonably be
required to effectuate the intent of this Section 36.1.
36.2 Except as provided in Sections 36.4, 36.5 and 36.6, the
costs and expenses of discharging all work liability imposed upon one
or more of the Participants, for which payment is not made by
insurance, shall be allocated among the Participants in proportion to
their respective Participation Shares in the property giving rise to
the work liability. Work liability is defined as liability of one or
more Participants for any loss, damage, claim, cost, charge or expense
of any kind or nature (including direct, indirect or consequential)
suffered or incurred by any party other than a Participant, whether or
not resulting or to result in the future from the negligence of any
Participant, its directors, members of its governing body, officers,
employees or any other person or entity whose negligence would be
imputed to such Participant, that has resulted or may result in the
future from (i) performance or nonperformance of the work herein
described, (ii) operation, maintenance, use or ownership of the San
Juan Project, and (iii) past or future performance or nonperformance of
the obligations of any Participant under any of the Project Agreements.
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36.3 If it cannot be determined which property gave rise to
work liability, the allocation for discharging costs and expenses
associated therewith shall be as specified in Section 22.1.7.
36.4 Except for liability resulting from Willful Action (which
subject to the provisions of Section 36.6 shall be the responsibility
of the willfully acting Participant), any Participant whose electric
customer shall have a claim or bring an action against any other
Participant for any death, injury, loss or damage arising out of or in
connection with electric service to such customer caused by the
operation or failure of operation of the San Juan Project or any
portion thereof shall indemnify and hold harmless such other
Participant, its directors, members of its governing body, officers and
employees from and against any liability for such death, injury, loss
or damage.
36.5 Each Participant shall be responsible for any damage,
loss, claim, cost, charge or expense that is not covered by insurance
and results from its own Willful Action as defined in Section 5.53.2
and shall indemnify and hold harmless the other Participants, their
directors, members of their governing bodies, officers and employees,
from any such damage, loss, claim, cost, charge or expense.
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36.6 Except as provided in Section 36.5, the aggregate
liability of any Participant to all other Participants for Willful
Action not covered by insurance shall be determined as follows:
36.6.1 All such liability for damages, losses,
claims, costs, charges or expenses of such Participant shall
not exceed ten million dollars ($10,000,000) per occurrence.
Each Participant extends to each other Participant, its
directors, members of its governing body, officers and
employees its covenant not to execute, levy or otherwise
enforce a judgment against any of them for any such aggregate
liability in excess of ten million dollars ($10,000,000) per
occurrence.
36.6.2 A claim based on Willful Action must be
perfected by filing suit in a court of competent jurisdiction
within three (3) years after the Willful Action occurs. All
claims made thereafter relating to the same Willful Action
shall be barred by this Section 36.6.2. The award to each
nonwillfully acting Participant from each Participant
determined to have committed Willful Action shall be
determined as follows: (i) Each Participant who successfully
files suit for remuneration shall receive the lesser of (a)
its final judgment awarded (or settlement made) or (b) its pro
rata Participation Share of the ten million dollar
($10,000,000) maximum recovery established in Section 36.6.1;
(ii) When all pending suits are resolved, those Participants
who were awarded judgments or reached settlements but whose
claims were not fully satisfied pursuant to Section 36.6.2(i)
shall be entitled to participate in any remaining portion of
the ten million dollar ($10,000,000) maximum recovery limit,
based upon the ratio of the unsatisfied portion of such
Participant's judgment or settlement to the total unsatisfied
portion of all such judgments and settlements. Such
participation shall be limited to the Participants'
unsatisfied judgments or settlements.
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36.7 The provisions of this Section 36 shall not be construed
so as to relieve any insurer of its obligation to pay any insurance
proceeds in accordance with the terms and conditions of valid and
collectible insurance policies.
36.8 If a court of competent jurisdiction determines upon a
challenge by a Participant or third party that the provisions of
Section 56-7-1, New Mexico Statutes Annotated, 1978 compilation, are
applicable to this Agreement, the Participants agree that any agreement
to indemnify contained in this Agreement shall not extend to liability,
claims, damages, losses or expenses, including attorney's fees, arising
out of:
(i) the preparation or approval of maps, drawings,
opinions, reports, surveys, change orders, designs or
specifications by the indemnitee, or the agents or employees
of the indemnitee; or
(ii) the giving of or the failure to give directions
or instructions by the indemnitee, or the agents or employees
of the indemnitee, where such giving or failure to give
directions or instructions is the primary cause of bodily
injury to persons or damage to property.
The word "indemnify" as used in this Section 36.8 includes,
without limitation, an agreement to remedy damage or loss caused in
whole or in part by the negligence, act or omission of the indemnitee,
the agents or employees of the indemnitee, or any legal entity for
whose negligence, acts or omissions any of the foregoing may be liable.
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36.9 The Participants agree that the aggregate liability limit
of ten million dollars ($10,000,000) referenced in Sections 36.6.1 and
36.6.2 may be determined in the future to be inappropriate and shall,
at the request of any Participant, make a good faith effort to evaluate
and, if appropriate, revise said limit.
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37.0 ARBITRATION:
37.1 If a dispute between or among any of the Participants
(which term, for purposes of this Section 37, shall be deemed to
include the Operating Agent) should arise in relation to any aspect of
the San Juan Project, any Participant(s) may call for submission of the
dispute to arbitration, which call shall be binding upon all of the
other affected Participant(s).
37.2 The Participant(s) calling for arbitration shall give
written notice to all other Participants, setting forth in such notice
in adequate detail the entity(ies) against whom relief is sought, the
nature of the dispute, the amount or amounts, if any, involved in such
dispute, and the remedy sought by such arbitration proceedings. Within
twenty (20) days after receipt of such notice, any other Participant(s)
involved may, by written response to the first Participant(s), as well
as the other Participant(s), submit its or their own statement of the
matter at issue and set forth in adequate detail additional related
matters or issues to be arbitrated. Thereafter, the Participant(s)
first submitting its or their notice of the matter at issue shall have
ten (10) days in which to submit a written rebuttal statement, copies
of which shall be provided to all other Participants.
37.3 Within ten (10) days following delivery of the last
written submittal pursuant to Section 37.2, the affected
Participant(s), acting through their respective representatives, shall
meet for the purpose of selecting arbitrators. Each affected
Participant, or group of Participants, representing one side of the
dispute, shall designate an arbitrator. The arbitrators so selected
shall meet within twenty (20) days following their selection and shall
select additional arbitrator(s), the number of which additional
arbitrators shall be one (1) less than the total number of arbitrators
selected by the affected Participants. If the arbitrators selected by
the affected Participants, as herein provided, shall fail to select
such additional arbitrator(s) within said twenty (20) day period, then
the arbitrators shall request from the American Arbitration Association
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(or similar organization if the American Arbitration Association should
not exist at the time) a list of arbitrators who are qualified and
eligible to serve as hereinafter provided. The arbitrators selected by
the affected Participants shall take turns striking names from the list
of arbitrators furnished by the American Arbitration Association, and
the last name(s) remaining on said list shall be the additional
arbitrator(s). All arbitrators shall be persons skilled and experienced
in the field which gives rise to the dispute, and no person shall be
eligible for appointment as an arbitrator who is an officer or employee
of any of the Participants to the dispute or is otherwise interested in
the matter to be arbitrated.
37.4 Except as otherwise provided in this Section 37 or
otherwise agreed by the Participants to the dispute, the arbitration
shall be governed by the rules and practices of the American
Arbitration Association (or rules and practices of a similar
organization if the American Arbitration Association should not exist
at that time) from time to time in force, except that if such rules and
practices, as modified herein, shall conflict with New Mexico Rules of
Civil Procedure or any other provisions of New Mexico law then in force
which are specifically applicable to arbitration proceedings, such New
Mexico laws shall govern.
37.5 Included in the issues which may be submitted to
arbitration pursuant to this Section 37 is the issue of whether the
right to arbitrate a particular dispute is permitted under the Project
Agreements.
37.6 The arbitrators shall hear evidence submitted by the
respective Participants or group or groups of Participants and may call
for additional information, which additional information shall be
furnished by the party having such information. The decision of a
majority of the arbitrators shall be binding upon all the Participants
and shall be based on the provisions of the Project Agreements and New
Mexico law.
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37.7 This agreement to arbitrate shall be specifically
enforceable and the award of the arbitrators shall be final and binding
upon the Participants to the extent provided by the laws of the State
of New Mexico. Any award may be filed with the clerk of any court
having jurisdiction over the Participants or any of them against whom
the award is rendered, and, upon such filing, such award, to the extent
permitted by the laws of the jurisdiction in which said award is filed,
shall be specifically enforceable or shall form the basis of a
declaratory judgment or other similar relief.
37.8 Each Participant or group of Participants shall be
responsible for the fees and expenses of the arbitrator selected by
that Participant or group of Participants, unless the decision of the
arbitrators shall specify some other apportionment of such fees and
expenses. The fees and expenses of the neutral arbitrators shall be
shared among the affected Participants equally, unless the decision of
the arbitrators shall specify some other apportionment of such fees and
expenses. All other expenses and costs of the arbitration, including
attorney fees, shall be borne by the Participant incurring the same.
37.9 In the event that any Participant(s) shall attempt to
institute or to carry out the provisions herein set forth in regard to
arbitration, and such Participant(s) shall not be able to obtain a
valid and enforceable arbitration decree, such Participant(s) shall be
entitled to seek legal remedies in a court having jurisdiction in the
premises, and the provisions in this Section 37 referring to
arbitration decisions shall then be deemed applicable to final
decisions of such court.
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PART VIII
RETIREMENT AND RECONSTRUCTION
38.0 DESTRUCTION, DAMAGE OR CONDEMNATION OF A UNIT:
38.1 If all, or substantially all, of a Unit is destroyed,
damaged or condemned, then the Participants with Participation Shares
in that Unit by unanimous agreement may elect to repair or reconstruct
the damaged, destroyed or condemned Unit in such a manner as to restore
the Unit to substantially the same general character or use as the
original, or to such other character or use as the Participants may
then mutually agree. In the event of such election, it shall be the
obligation of the Participants to pay for the costs of such repair or
reconstruction in accordance with the Participation Shares of the
respective Participants in such Unit, and, upon completion thereof, the
Participants' rights, titles and interests therein shall be as provided
in this Agreement.
38.2 Failure to reach unanimous agreement as provided in
Section 38.1 shall be deemed to be an election not to repair or
reconstruct the damaged, destroyed or condemned Unit, in which event
the proceeds from any insurance or from any award shall be distributed
to the Participants in accordance with their respective Participation
Shares in such Unit. The facilities not destroyed, damaged or condemned
shall be disposed of by the Participants in a manner to be mutually
agreed upon, and the proceeds from such disposition shall be
distributed in accordance with the Participation Shares of the
respective Participants in such Unit. Nothing in this section shall be
deemed to preclude any Participant or group of Participants in the Unit
from agreeing to repair, reconstruct or replace the damaged, destroyed
or condemned Unit.
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38.3 In the event that less than substantially all of a Unit
is destroyed, damaged or condemned, then it shall be the obligation of
the Participants having a Participation Share in such Unit to repair or
reconstruct such Unit. Each Participant shall be obligated to pay its
proportionate share of the costs of such repair or reconstruction in
accordance with Section 6.2.
38.4 In the event that any common equipment and/or facility is
destroyed, damaged or condemned, then it shall be the obligation of the
Participants having a Participation Share in such common equipment
and/or facilities to repair or reconstruct such damaged, destroyed or
condemned equipment and/or facilities. Each Participant shall be
obligated to pay its proportionate share of the costs of such repair or
reconstruction in accordance with Section 6.2.
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39.0 RIGHTS OF PARTICIPANTS UPON TERMINATION:
39.1 In the event the Participants by unanimous agreement
abandon, retire or otherwise terminate or suspend operation of the San
Juan Project prior to the termination of this Agreement, the facilities
forming the San Juan Project shall be disposed of by the Participants
in a manner to be unanimously agreed upon and the proceeds from such
disposition shall be distributed to the Participants in accordance with
their respective Participation Shares.
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40.0 DECOMMISSIONING OF THE PROJECT:
40.1 The Participants acknowledge the appropriateness of
incorporating in a future amendment to this Agreement, or in another
appropriate contractual instrument, provisions which address the
decommissioning of the San Juan Project and/or of one or more Units. It
is recognized, however, that the resolution of issues associated with
San Juan Project decommissioning will require protracted study. The
Participants therefore agree to establish a task force or other forum
for the careful and deliberate consideration of decommissioning issues
so that these issues may be addressed and resolved in a timely manner.
The Operating Agent shall propose to the Participants a methodology and
a schedule for addressing decommissioning issues.
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PART IX
MISCELLANEOUS PROVISIONS
41.0 RELATIONSHIP OF PARTICIPANTS:
41.1 The covenants, obligations and liabilities of the
Participants are intended to be several and not joint or collective,
and nothing herein contained shall ever be construed to create an
association, joint venture, trust or partnership, or to impose a trust
or partnership covenant, obligation or liability on or with regard to
any one or more of the Participants. Each Participant shall be
individually responsible for its own covenants, obligations and
liabilities as herein provided. No Participant or group of Participants
shall be under the control of or shall be deemed to control any other
Participant or the Participants as a group. No Participant shall be the
agent of or have a right or power to bind any other Participant without
its express written consent, except as expressly provided herein.
41.2 The Participants hereby elect to be excluded from the
application of Subchapter "K" of Chapter 1 of Subtitle "A" of the
Internal Revenue Code of 1986, or such portion or portions thereof as
may be permitted or authorized by the Secretary of the Treasury or its
delegate insofar as such subchapter, or any portion or portions
thereof, may be applicable to the Participants hereunder.
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42.0 NOTICES:
42.1 Any notice, demand or request provided for in this
Agreement, or served, given or made in connection with it, shall be
deemed properly served, given or made if delivered in person or sent by
registered or certified mail, postage prepaid, return receipt
requested, to the persons specified below:
42.1.1 Public Service Company of New Mexico
c/o Secretary
Alvarado Square
Albuquerque, New Mexico 87158
42.1.2 Tucson Electric Power Company
c/o Secretary
Post Office Box 711
Tucson, Arizona 85702
42.1.3 City of Farmington
c/o City Clerk
800 Municipal Drive
Farmington, NM 87401
42.1.4 M-S-R Public Power Agency
c/o General Manager
P. O. Box 4060
Modesto, CA 95352
42.1.5 Southern California Public Power Authority
c/o Executive Director
225 South Lake Ave, Suite 1410
Pasadena, CA 91101
42.1.6 City of Anaheim
c/o City Clerk
200 South Anaheim Boulevard
Anaheim, CA 92805
with a copy to:
Public Utilities General Manager
201 South Anaheim Boulevard
Suite 1101
Anaheim, CA 92805
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42.1.7 Incorporated County of
Los Alamos, New Mexico
c/o Utilities Manager
P.O. Drawer 1030
901 Trinity Drive
Los Alamos, NM 87544
42.1.8 Utah Associated Municipal Power Systems
c/o General Manager
2825 E. Cottonwood Parkway
Suite 200
Salt Lake City, UT 84121
42.1.9 Tri-State Generation and Transmission
Association, Inc.
c/o General Manager
P. O. Box 33695
Denver, CO 80233
42.2 A Participant may, at any time or from time to time, by
written notice to the other Participants, change the designation or
address of the person so specified as the one to receive notices
pursuant to this Agreement.
42.3 The Operating Agent shall provide to each Participant a
copy of any material notice, demand or request given or received by it
in connection with the San Juan Project.
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43.0 OTHER PROVISIONS:
43.1 Each Participant agrees, upon request by another
Participant, to make, execute and deliver any and all documents
reasonably required to implement the terms of this Agreement.
43.2 No Participant shall be considered to be in default in
the performance of any of the obligations hereunder (other than
obligations of a Participant to pay costs and expenses) if failure of
performance shall be due to uncontrollable forces. The term
"uncontrollable forces" shall mean any cause beyond the control of the
Participant affected, including but not limited to failure of
facilities, flood, earthquake, storm, fire, lightning, epidemic, war,
riot, civil disturbance, labor dispute, sabotage, restraint by court
order or public authority, or failure to obtain approval from a
necessary governmental authority which by exercise of due diligence and
foresight such Participant could not reasonably have been expected to
avoid and which by exercise of due diligence it shall be unable to
overcome. Nothing contained herein shall be construed so as to require
a Participant to settle any strike or labor dispute in which it may be
involved. Any Participant rendered unable to fulfill any obligation by
reason of uncontrollable forces shall exercise due diligence to remove
such inability with all reasonable dispatch.
43.3 The captions and headings appearing in this Agreement are
inserted merely to facilitate reference and shall have no bearing upon
the interpretation of the provisions hereof.
43.4 This Agreement is made under and shall be governed by the
laws of the State of New Mexico.
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43.5 The covenants and obligations set forth and contained in
this Agreement are to be deemed to be independent covenants, not
dependent covenants, and the obligation of a Participant to perform all
of the obligations and covenants to be by it kept and performed is not
conditioned on the performance by another Participant of all of the
covenants and obligations to be kept and performed by it.
43.6 In the event that any of the terms or conditions of this
Agreement, or the application of any such term or condition to any
person or circumstance, shall be held invalid by any court having
jurisdiction in the premises, the remainder of this Agreement, and the
application of such terms or conditions to persons or circumstances
other than those as to which it is held invalid, shall not be affected
thereby.
43.7 All costs or expenses, including all taxes that the
Operating Agent is required to pay (but not specifically referred to in
other sections of this Agreement), which are incurred by the Operating
Agent in connection with the performance of its obligations under this
Agreement and which are not specifically allocated to the Participants
in accordance with this Agreement shall be equitably allocated among
the Participants in a manner to be established by the Coordination
Committee.
43.8 Should a change in circumstances, economic factors, or
basic technology occur which results or may result in a substantial
increase or decrease in the benefits to or expenses incurred by a
Participant, including the Operating Agent, which such change was not
within the reasonable contemplation of the Participants at the time of
the execution of this Agreement, the Participants, including the
Operating Agent, shall negotiate in good faith in order that an
appropriate and equitable adjustment shall be made in the reimbursement
of the Operating Agent and in the allocation of expenses among the
Participants. Such adjustment shall be fair and equitable as to both
the Operating Agent and the other Participants.
126
<PAGE>
43.9 This Agreement shall be subject to filing with, and to
such changes or modifications as may from time to time be directed by,
competent regulatory authority, if any, in the exercise of its
jurisdiction.
43.10 It is the intent of the Participants in executing this
Agreement to set out in one instrument the entire agreement of the
Participants with respect to the subject matter hereof, and on the
effective date hereof to explicitly amend and restate, and to replace
in their entirely, the Co-Tenancy Agreement and the Operating Agreement
and all modifications thereto. Accordingly, on the effective date
hereof, the Co-Tenancy Agreement and the Operating Agreement are no
longer in force and effect except as incorporated herein; provided,
however, that the interim coal billing arrangements reflected in side
agreements shall continue in effect through their stated term.
43.11 The execution of this Agreement shall not affect any
rights or obligations of the Participants which shall have accrued
prior to the effective date of this Agreement, including any obligation
to pay money or take other actions in accordance with the Co-Tenancy
Agreement and the Operating Agreement or any other agreement.
127
<PAGE>
44.0 EXECUTION IN COUNTERPARTS:
44.1 This Agreement may be executed in any number of counterparts, and
each executed counterpart shall have the same force and effect as an original
instrument as if all the Participants to the aggregated counterparts had signed
the same instrument. Any signature page of this Agreement may be detached from
any counterpart thereof without impairing the legal effect of any signatures
thereon and may be attached to any other counterpart of this Agreement identical
in form thereto but having attached to it one or more additional pages.
128
<PAGE>
45.0 AMENDMENTS:
45.1 Except as provided in Section 45.2, this Agreement may be amended
only by written instrument executed by all of the Participants with the same
formality as this Agreement.
45.2 The Coordination Committee, by unanimous vote, may amend any one
or more of the exhibits attached to this Agreement. In the event of any such
action by the Coordination Committee, a copy of the new exhibit shall be
attached to this Agreement to replace the old or superseded exhibit, without the
necessity of formally amending this Agreement. Any such action shall not affect
other provisions of this Agreement, including other exhibits thereto.
129
<PAGE>
IN WITNESS WHEREOF, the Participants, by their duly authorized
representatives, have caused this Agreement to be made as of this 27th day of
October, 1999.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By /s/ Patrick J. Goodman
-------------------------
Its Vice President
-------------------------
TUCSON ELECTRIC POWER COMPANY
By /s/ T. A. Delawder
-------------------------
Its Vice President
-------------------------
THE CITY OF FARMINGTON, NEW MEXICO
By /s/ William E. Standley
-------------------------
Its Mayor
-------------------------
M-S-R PUBLIC POWER AGENCY
By /s/ William C. Walbridge
-------------------------
Its General Manager
-------------------------
THE INCORPORATED COUNTY OF LOS ALAMOS,
NEW MEXICO
By /s/ Christine Chandler
-------------------------
Its Council Chair
-------------------------
130
<PAGE>
SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY
By /s/ Joseph F. Hsu
-------------------------
Its President
-------------------------
CITY OF ANAHEIM
By /s/ Brian G. Thomas
---------------------------
Its Accounting General Manager
---------------------------
UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS
By /s/ Wayne McArthur
-------------------------
Its Chairman
-------------------------
TRI-STATE GENERATION AND TRANSMISSION
ASSOCIATION, INC.
By /s/ Frank R. Knutson
-------------------------
Its General Manager
-------------------------
131
<PAGE>
STATE OF NEW MEXICO )
)ss.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me on this 27th day of
October, 1999, by Patrick J. Goodman, Vice President of Public Service Company
of New Mexico, a New Mexico corporation, on behalf of the corporation.
/s/ Bridgett S. Alvarez
-----------------------
Notary Public
My commission expires:
November 14, 2000
- ---------------------
STATE OF ARIZONA )
)ss.
COUNTY OF PIMA )
The foregoing instrument was acknowledged before me on this 13th day of
September, 1999, by T. Delawder, Vice President of Tucson Electric Power
Company, an Arizona corporation, on behalf of the corporation.
/s/ Bertha A. Kissinger
-----------------------
Notary Public
My commission expires:
January 21, 2003
- ---------------------
132
<PAGE>
STATE OF NEW MEXICO )
)ss.
COUNTY OF SAN JUAN )
The foregoing instrument was acknowledged before me on this 11th day of
August, 1999, by William E. Standley, Mayor of The City of Farmington, New
Mexico, a New Mexico municipal corporation, on behalf of the municipal
corporation.
/s/ Debra L. Jackson
-----------------------
Notary Public
My commission expires:
August 14, 2000
- ---------------------
STATE OF CALIFORNIA )
)ss.
COUNTY OF PLACER )
The foregoing instrument was acknowledged before me on this 21st day of
July, 1999, by William Walbridge, who personally appeared before me and
acknowledged to me that he is the General Manager of M-S-R Public Power Agency,
a California joint powers agency, and that he executed the instrument on behalf
of said joint powers agency.
/s/ Alicia A. Phillips
-----------------------
Notary Public
My commission expires:
October 22, 2000
- ---------------------
133
<PAGE>
STATE OF NEW MEXICO )
)ss.
COUNTY OF LOS ALAMOS )
The foregoing instrument was acknowledged before me on this 7th day of
October, 1999, by Christine Chandler, Council Chair of The Incorporated County
of Los Alamos, New Mexico, a New Mexico Class H County, on behalf of said
county.
/s/ Sandra Cordova
-------------------------
Notary Public
My commission expires:
March 30, 2000
- ---------------------
STATE OF CALIFORNIA )
)ss.
COUNTY OF LOS ANGELES )
The foregoing instrument was acknowledged before me on this 15th day of
July, 1999, by Joseph F. Hsu, who personally appeared before me and acknowledged
to me that he is the President of Southern California Public Power Authority, a
California joint powers agency, and that he executed the instrument on behalf of
said joint powers agency.
/s/ Candace Toscano
-----------------------
Notary Public
My commission expires:
May 12, 2003
- ----------------------
134
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF ORANGE )
The foregoing instrument was acknowledged before me on this 25th day of
August, 1999, by Brian G. Thomas, who personally appeared before me and
acknowledged to me that he is the Accounting General Manager of the City of
Anaheim, a California municipal corporation, and that he executed the instrument
on behalf of the said municipal corporation.
/s/ Lenorah Ertel
--------------------------
Notary Public
My commission expires:
November 29, 1999
- ----------------------
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me on this 18th day of
August, 1999, by Wayne McArthur, Chairman of Utah Associated Municipal Power
Systems, a political subdivision of the State of Utah, on behalf of said entity.
/s/ Jacqueline Makin
--------------------------
Notary Public
My commission expires:
April 23, 2001
- ----------------------
135
<PAGE>
STATE OF COLORADO )
)ss.
COUNTY OF ADAMS )
The foregoing instrument was acknowledged before me on this 1st day of
September, 1999, by Frank R. Knutson, General Manager of Tri-State Generation
and Transmission Association, Inc., a Colorado cooperative corporation, on
behalf of the said cooperative corporation.
/s/ Robin S. Wilkins
------------------------
Notary Public
My commission expires:
September 13, 2000
- ----------------------
136
<PAGE>
REFERENCES TO EXHIBITS IN
PARTICIPATION AGREEMENT
Exhibit No. References in Agreement Subject Matter
- ---------- ----------------------- --------------
I ss.ss.2.10, 6.1 Real Property
II ss. 5.3 Annual Minimum Coal
III ss.ss.5.43, 6.5 Switchyard Facilities
IV ss.ss.6.2, 6.2.8 Ownership of Equipment
V ss.ss.22.1.7, 22.1.9 O&M of Equipment
VI ss.ss.7.11, 22.2.2, 22.6, 22.7, 22.8 A&G Expenses
VII ss.ss.5.21, 23.3.7 Coal Allocation and Billing
VIII ss.ss.18.4, 19.4, 20.5, 21.4 Adjustment of Voting
IX ss. 5.21 Fixed Fuel Expense
<PAGE>
EXHIBIT I TO PARTICIPATION AGREEMENT
This Exhibit I to the San Juan Project Participation Agreement contains
a map of the San Juan Project Generating Station site and the River Weir site,
showing Parcels A, B, C, C-1 D, E and F, the parcels of real property underlying
the San Juan Project and River Weir sites. Also included in the Exhibit are
property descriptions and separate maps showing Parcels A through F. PNM and TEP
each has a one-half undivided ownership interest in the parcels described as
Parcels A, B, C, D, E and F; and PNM and TEP each has a one-half leasehold
interest in Parcel C-1.
Exh. I - 1
<PAGE>
PARCEL A
--------
The following portions of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:
Section 16: SW 1/4
Section 20: NE 1/4, N 1/2 SE 1/4, SW 1/4 SE 1/4
Section 21: NW 1/4 NW 1/4
Section 29: NE 1/4
PARCEL B
--------
The following portions of Township 30 North, Range 15 West, N.M.P.M, San
Juan County, New Mexico:
Section 19: SE 1/4 SW 1/4, SW 1/4 SE 1/4 Section
20: E 1/2 NW 1/4, NE 1/4 SW 1/4 Section 29: NW
1/4, N 1/2 SW 1/4 Section 30: NE 1/4, E 1/2 NW
1/4, N 1/2 SE 1/4
PARCEL C
--------
That part of Lot 6 in Section 4 and of Lot 5 in Section 3, Township 29
North, Range 15 West, N.M.P.M., San Juan County, New Mexico, described as
follows:
Beginning at a point which is 772.69 feet, South 88(degree)12' 03" East
from Northwest Corner of Lot 6:
Thence, S. 55(degree)50'29" E., 205.55 feet; thence, N.
78(degree)21'34" E., 457.06 feet; thence N. 88(degree)29'07"E., 746.61
feet; thence, S. 25(degree)38'00" W., 1,177.50 feet; thence, N.
54(degree)32'00" W., 1,291.70 feet; thence, N. 32(degree)1'00" E.,
372.20 feet to the point of beginning. Containing 21.039 acres, more
or less.
Exh. I - 2
<PAGE>
PARCEL C-1
----------
A tract of land situated adjacent to the southerly side of the San Juan
River in Sections 3, 4, 9 and 10, Township 29 North, Range 15 West, N.M.P.M.,
San Juan County, New Mexico, and more particularly described as follows:
Beginning at point A, from which the comer common to Sections 33 and
34, T.30 N., R. 15 W., and Sections 4 and 3, T. 29 N., R. 15 W., bears
N. 06(degree)09'45" E., 4,966.7 feet; thence N. 49(degree)00'00" E.,
351.95 feet to point B located on the approximate centerline of the
San Juan River; thence along the centerline of the River S.
50(degree)44'26" E., 268.63 feet to point C; thence continuing along
the centerline of the River, S. 41(degree)18'31" E., 263.59 feet to
point D; thence S. 21(degree)12'40" E., 678 feet to point E; thence S.
51(degree)00'00" W., 209 feet to point F; thence N. 39(degree)00'00"
W., 1,160.00 feet to the point of beginning; containing 9.3 76 acres,
more or less.
PARCEL D
--------
The following portions of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:
Section 17: SE 1/4 SW 1/4, S 1/2 SE 1/4
PARCEL E
--------
The following portions of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:
Section 19: SE 1/4 SE 1/4 NE 1/4 SE 1/4 E 1/2 NW 1/4 SE
1/4 S 1/2 S 1/2 SE 1/4 NE 1/4
Section 20: SE 1/4 SW 1/4
SW 1/4 SW 1/4
NW 1/4 SW 1/4
S 1/2 SW 1/4 SW 1/4 NW 1/4
Containing 235 acres, more or less.
PARCEL F
--------
The following portion of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:
Section 20: SE 1/4 SE 1/4
Exh. I - 3
<PAGE>
EXHIBIT II
<PAGE>
EXHIBIT H TO COAL SALES AGREEMENT
SAN JUAN GENERATING STATION
FUEL SOURCE MINIMUM DELIVERIES
1981-2017
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
San Juan Surface Mine Total Annual La Plata Surface Mine
Fruitland Leases Minimum Deliveries La Plata Leases
Year Annual Tons Tons Annual Tons
1980 280,834 289,296
1981 4,058,000 4,307,120
1982 4,900,000 5,283,120
1983 4,725,000 5,988,370
1984 4,425,000 5,967,174
1985 4,425,000 5,989,620
1986 4,000,000 5,909,565 600,000
1987 3,900,000 5,877,554 1,500,000
1988 3,871,000 5,587,667 1,500,000
1989 3,939,000 5,649,750 1,500,000
1990 3,942,000 5,873,500 1,500,000
1991 4,100,000 5,873,500 1,500,000
1992 4,100,000 5,873,500 1,500,000
1993 4,100,000 5,873,500 1,500,000
1994 4,100,000 5,857,500 1,500,000
1995 4,100,000 5,857,500 1,500,000
1996 4,100,000 5,857,500 1,500,000
1997 4,100,000 5,857,500 1,500,000
1998 4,100,000 5,857,500 1,500,000
1999 4,100,000 5,857,500 1,500,000
2000 4,100,000 5,817,500 1,500,000
2001 4,100,000 5,692,500 1,500,000
2002 4,100,000 5,512,500 1,500,000
2003 4,100,000 5,480,500 1,500,000
2004 4,100,000 5,480,500 1,500,000
2005 3,667,000 5,126,000 1,500,000
2006 1,000,000 5,126,000 1,500,000
2007 1,000,000 5,126,000 1,500,000
2008 1,000,000 5,118,000 1,500,000
2009 1,000,000 4,810,000 1,500,000
2010 1,000,000 4,810,000 1,500,000
2011 1,000,000 4,810,000 1,500,000
2012 1,000,000 4,810,000 1,500,000
2013 1,000,000 4,500,000 1,500,000
2014 1,000,000 4,500,000 1,500,000
Exh. II - 1
<PAGE>
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
San Juan Surface Mine Total Annual La Plata Surface Mine
Fruitland Leases Minimum Deliveries La Plata Leases
Year Annual Tons Tons Annual Tons
2015 1,000,000 3,860,000 1,500,000
2016 1,000,000 3,860,000 1,500,000
2017 1,000,000 1,086,000 1,500,000
----------- ----------- ----------
115,798,834 195,014,866 47,100,000
Exh. II - 2
<PAGE>
EXHIBIT III
<PAGE>
EXHIBIT III
SAN JUAN PROJECT SWITCHYARD FACILITIES
Material List
-------------
Phase I - Project (DWG, ED-54, ED-55)
QUANTITY DESCRIPTION
-------- -----------
5 345 kV Circuit Breakers - (G.E. A.T.B.'s)
16 345 kV Motor Operated Disconnect Switches with Stands
2 345 kV S&C Circuit Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
4 Line Deadend Towers
5 Intermediate Bus Towers
1 Start-Up Transformers 345/12.47/4.16 kV, 24/32/40 MVA
1 Set of 4.16 kV Switchgear
1 4.16 kV Start-Up Cable Run into Plant
2 4.16 kV Station Service Transformers
1 Set of 12.45 kV Switchgear
3 12.47 kV Zig-Zag Grounding Transformer
6 345 kV PCM Potential Transformers with Stands (Bus #1, Bus #2)
6 345 kV Bus Lightning Arresters with Stands
1 Control House 40' x 72'
2 Sets of Batteries & Chargers, 125 v and 48 v
1 Microwave Tower
Lot Cable Troughs, Equipment Controls, Breaker Failure Relaying,
Fault Recorder
Lot Metering - Indication, Billing and Telemetry Transducers
Lot Switchyard Foundations, Fencing, Grading, Grounding
1 Line Trap (FC Line)
1 345 kV PCM Potential Transformer/Coupling Capacitor with Stand
3 345 kV Line Lightning Arresters with Stands
Lot Line Relaying, Carrier, Microwave
1 345-69-12470 Transformer
1 345/230-12470 Transformer, 230 yard
1 Reactor - 12.47 kV, 345 yard
Exh. III - 1
<PAGE>
Phase 2 - Project (DWG. SK-135)
- ----------------- -------------
QUANTITY DESCRIPTION
-------- -----------
4 345 kV Circuit Breakers
3 345 kV Motor Operated Disconnect Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
1 Intermediate Bus Tower
Lot Cable Troughs, Equipment Controls, Breaker Failure Relaying
Lot Metering - Indication, Billing and Telemetry Transducers
Lot Switchyard Foundations, Grounding
Phase 3 - Project (DWG. SK-316)
- -------------------------------
3 345 kV Circuit Breakers
6 345 kV Motor Operated Disconnect Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
1 Line Deadend Tower
2 Intermediate Bus Towers
Lot Cable Troughs, Equipment Controls, Breaker Failure Relaying
Lot Metering - Indication, Billing and Telemetry Transducers
Lot Switchyard Foundations and Grounding
Phase 3 - Project (DWG. SK-317)
- -------------------------------
2 345 kV Circuit Breakers
4 345 kV Motor Operated Disconnect Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
1 Intermediate Bus Tower
Lot Switchyard Foundations, Grounding
Exh. III - 2
<PAGE>
EXHIBIT IV
<PAGE>
EXHIBIT IV(a)
FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 1
Ownership
PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC- 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers
11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water Pump
building and equipment.)
12. Fly Ash System
Exh. IV - 1
<PAGE>
EXHIBIT IV(a)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas
Reheat System including the 650-pound Reheat Steam Line and
Desuperheater from the Plant Main Steam Line but not including the
165-pound Control Valve and Branch Line to the Chemical Plant
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. SSR Protection System
18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
Exh. IV - 2
<PAGE>
EXHIBIT IV(b)
FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 2
Ownership
PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers
11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water Pump
building and equipment.)
12. Fly Ash System
Exh. IV - 3
<PAGE>
EXHIBIT IV(b)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas
Reheat System including the 650-pound Reheat Steam Line and
Desuperheater from the Plant Main Steam Line but not including the
165-pound Control Valve and Branch Line to the Chemical Plant
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
Exh. IV - 4
<PAGE>
EXHIBIT IV(c)
FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 3
Ownership
PNM - 50% TEP - 0%
M-S-R - 0% Farmington - 0%
Tri-State - 8.2% LAC - 0%
SCPPA - 41.8% Anaheim - 0%
UAMPS - 0%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Unit Auxiliary 3A and 3B Transformers*
11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, Storage Tank, and Pump House
12. Fly Ash System
Exh. IV - 5
<PAGE>
EXHIBIT IV(c)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. Fuel Oil Ignitor Heaters and Unit Specific Piping
18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
19. Coal Reclaim Hoppers, Feeders, Feeder Belts, Belt Scales, Fire Protection
System, and 3C Conveyor to the Secondary Crusher Building
20. SSR Protection System
21. Auxiliary Steam Header Piping System:
a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant
* PNM and TEP each owns a 50% interest in the main unit transformer
Exh. IV - 6
<PAGE>
EXHIBIT IV(d)
FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 4
Ownership
PNM - 38.457% TEP - 0%
M-S-R - 28.8% Farmington - 8.475%
Tri-State - 0% LAC - 7.2%
SCPPA - 0% Anaheim - 10.04%
UAMPS - 7.028%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Unit Auxiliary 4A and 4B Transformers
11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, Storage Tank, and Pump House
12. Fly Ash System
Exh. IV - 7
<PAGE>
EXHIBIT IV(d)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. Fuel Oil Ignitor Heaters and Unit Specific Piping
18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
19. Coal Reclaim Hoppers, Feeders, Feeder Belts, Belt Scales, Fire Protection
System, and 3D Conveyor to the Secondary Crusher Building
20. Auxiliary Steam Header Piping System:
a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant
Exh. IV - 8
<PAGE>
EXHIBIT IV(e)
FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNITS NO. 1 AND 2
Ownership
PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%
1. Bearing Cooling Water System
2. Bottom Ash Dewatering Facility including: Dewatering Tank, Settling Tank,
Surge Tank, Storage Tank, and Pump House
3. Demineralizer System including: Clarifier, Storage Tanks, and Sump Pump
4. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization)
5. Premix Tank Facility (This was the wastewater neutralizer facility and
is now operated as part of the Water Management System.)
6. Instrument Air system, except Unit Piping
7. Chemical Feed System, except Unit Piping
a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System
8. Plant Air System, except Unit Piping
9. Sootblowing Air System, except Unit Piping
10. Hydrogen Storage System, except Unit Piping
Exh. IV - 9
<PAGE>
EXHIBIT IV(e)
(continued)
11. Coal Handling Reclaim Systems A and B including: Hoppers, Feeders, Reclaim
Conveyors, Belt Scales, and Sprinkler System
12. Coal Tripper System south of column, Line 12 including Dust Collection
System
13. Turbine Lube Oil Storage and Transfer System
14. Control Room, Equipment Rooms, and Associated HVAC System
15. Turbine Crane south of column, Line 12
16. Fuel Oil, Ash, and Water Pipe Racks
17. Boiler Fill System for Units 1 and 2
18. All spare parts common to either unit
19. SO2 Backup Scrubber-Absorber Transformer
20. SAR Multiplexer Control System
Exh. IV - 10
<PAGE>
EXHIBIT IV(f)
FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNITS NO. 3 AND 4
Ownership
PNM - 44.119% TEP - 0%
M-S-R - 14.4% Farmington - 4.249%
Tri-State - 4.1% LAC - 3.612%
SCPPA - 20.9% Anaheim - 5.07%
UAMPS - 3.55%
1. Bearing Cooling Water System
2. Demineralizer System: including Sump Pumps, Filter Beds, and Storage Tanks
3. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization except
Ignitor Heaters and Unit Specific Piping)
4. Wastewater Neutralizer Facility (This facility is operated as part of Water
Management System.)
5. Instrument Air System except Unit Piping
6. Chemical Feed System except Unit Piping
a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System
7. Plant Air System except Unit Piping
8. Sootblowing Air System except Unit Piping
9. Start-Up Transformers and Nonseg Bus to Units 3 and 4 Switchgear
10. Hydrogen Storage System except Unit Piping
11. Coal Tripper System Serving Units 3 and 4 including Dust Collection Systems
Exh. IV - 11
<PAGE>
EXHIBIT IV(f)
(continued)
12. Turbine Lube Oil Storage and Transfer System
13. Control Room, Equipment Rooms, and Associated HVAC System
14. Boiler Fill System for Units 3 and 4
15. Auxiliary Cooling Systems including Auxiliary Cooling Tower No. 1 and
Pumps, but excepting No. 4 Tower Pumps and Piping which is Unit Specific
16. CO2 Storage System
17. Start-Up Boiler Feed Pump
18. Turbine Bay Crane north of column, Line 12
19. Fuel Oil, Ash, and Water Pipe Racks
20. Fire Water Booster and Jockey Pumps
21. Halon Fire Protection System
22. Cooling Tower Multiplex Control System
23. All spare parts common to either unit
Exh. IV - 12
<PAGE>
EXHIBIT IV(g)
FACILITIES AND EQUIPMENT
COMMON TO ALL FOUR SAN JUAN UNITS
Ownership
PNM - 46.29% TEP - 19.8%
M-S-R - 8.7% Farmington - 2.559%
Tri-State - 2.49% LAC - 2.175%
SCPPA - 12.71% Anaheim - 3.10%
UAMPS - 2.169%
1. River and Raw Water System including:
a. Diversion and intake structures, including all equipment and pump
building.
b. Raw Water line to reservoir.
c. Reservoir, pump buildings, and all equipment.
d. Raw water lines to plant yard.
e. All above and underground fire protection system to each vendor
supplied or unit specific fire protection system.
2. Auxiliary Boiler
3. SO2 Removal System except Absorbers
NOTE: The new SO2 Absorber Feed System is being placed in-service to
replace the SO2 Chemical Plant previously used by the Project. The SO2 Chemical
Plant facilities will be retired in place and will be salvaged or decommissioned
at a later date. Section 3.1 describes the new SO2 Absorber Feed System while
Section 3.2 describes the old SO2 Chemical Plant.
3.1 SO2 Absorber Feed System
a. Limestone Handling System
b. Limestone Preparation System
c. Dewatering System
d. Gypsum Stack Out System
Exh. IV - 13
<PAGE>
EXHIBIT IV(g)
(continued)
3.2 SO2 Chemical Plant
a. Double effect evaporator train systems.
b. Fly ash filter system.
c. Absorber product and feed tanks.
d. Condensate collection, storage, and transfer systems.
e. Soda ash storage, mixing, and distribution systems.
f. Sulfate purge system including: crystallizers, centrifuges,
evaporators, and salt cake system.
g. Sulfuric acid plant system including storage tanks and load out
system.
h. Auxiliary. No. 2 cooling tower, pumps, and systems.
4. Spare-Main Transformer 345/24 kV for all units.
5. Maintenance, Office, and Warehousing Facilities
6. Chemical Laboratory
7. Coal and Ash Handling Control Facilities
8. Roads and grounds such as fencing, yard lighting, guard facilities,
drainage, and dikes.
9. Potable Water System
10. Environmental Monitoring systems including Air, Water, and Ground.
Excludes Stack Monitoring Systems which are unit specific.
11. Transportation such as trucks, cars, and dozers (not otherwise charged).
12. Water Management System
a. Wastewater Recovery System -- Northside
1. Reverse osmosis system including lime/soda softening clarifier
system.
2. Brine concentrator Nos. 4 and 5.
3. Process pond No. 3 and pump system
4. North evaporation ponds 1, 2, and 3.
Exh. IV - 14
<PAGE>
EXHIBIT IV(g)
(continued)
b. SO2 Waste Treatment System -- Southside
1. Process ponds 1A, 1 B, 2 and pumping system.
2. Premix tank and clarifier system.
3. Oxidation towers.
4. Brine concentrator Nos. 2 and 3.
5. South evaporation ponds Nos. 1, 2, 3, 4, and 5.
c. Data Acquisition System
d. Solid Waste Disposal Pit
e. Coal pile runoff pond
13. Coal Transfer Facilities from the Reclaim Conveyors to the Head-End of Plat
Belts 4A and 4B and Dust Suppression Systems
14. Maintenance Bay Facilities including: Bay Bridge Crane, all Offices, and
Support Facilities
15. Sewage Treatment Facilities
16. On each of Units 1 and 2, the Chemical Plant 165-pound Control Valve,
and Branch Line from the Unit Specific 650-pound Rehear Steam Line
17. On each of Units 3 and 4, the Chemical Plant Branch Steam Line from the Unit
Specific Auxiliary Steam Header System
Exh. IV - 15
<PAGE>
EXHIBIT IV(h)
SAN JUAN PROJECT
SWITCHYARD FACILITIES
Cost Allocation (%)
Replacements/Improvements
-------------------------
Installed Cost Betterments
-------------- -----------
PNM TEP PNM TEP
--- --- --- ---
345 kV Bus 1 & 3 (East Bus) 50 50 50 50
Bus 2 (West Bus) 50 50 50 50
Circuit Breakers
- ----------------
06582 (345/230) 50 50 50 50
05482 50 50 50 50
04382 (OJO) 50 50 50 50
12982 (McKinley) 50 50 50 50
11882 50 50 50 50
10782 (Unit 4) 50 50 50 50
09882 (McKinley) 58.33 41.67 62.5 37.5
08782 54.16 45.84 56.25 43.75
07682 (Unit 3) 50 50 50 50
15282 (Four Comers) 50 50 50 50
14182 50 50 50 50
13082 (Unit 2) 50 50 50 50
18582 (West Mesa) 50 50 50 50
17482 50 50 50 50
16382 (Unit 1) 50 50 50 50
20782 50 50 50 50
Shunt Reactors
- --------------
Ojo 100 0 100 0
McKinley 1 5.36 94.64 5.36 94.64
McKinley 2 16.67 83.33 25 75
WW (BA) 100 0 100 0
Exh. IV - 16
<PAGE>
EXHIBIT IV(h)
(continued)
Replacements/Improvements
-------------------------
Installed Cost Betterments
-------------- -----------
PNM TEP PNM TEP
--- --- --- ---
Transformers
- ------------
Station Aux. No. 2 100 0 100 0
400 MVA, 345/230-12.5
Station Aux. No. 1 50 50 50 50
345/4.16-12.5
Station Aux. No. 3 50 50 50 50
90 MVA, 345/69-12.5
Future Facilities
- -----------------
345/69/12 kV 66.67 33.33 66.67 33.33
2-345 kV Bkrs (Durango) 50 50 50 50
Lower Voltage
- -------------
230 kV Control Hse 83.33 16.67 83.33 16.67
230/69 kV Trf 66.67 33.33 66.67 33.33
Shiprock 230 kV line 100 0 100 0
Exh. IV - 17
<PAGE>
EXHIBIT V
<PAGE>
EXHIBIT V(a)
FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 1
Operation and Maintenance Costs
PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers
11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water Pump
building and equipment)
12. Fly Ash System
Exh. V - 1
<PAGE>
EXHIBIT V(a)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas
Reheat System including the 650-pound Reheat Steam Line and
Desuperheater from the Plant Main Steam Line but not including the
165-pound Control Valve and Branch Line to the Chemical Plant
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. SSR Protection System
18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
Exh. V - 2
<PAGE>
EXHIBIT V(b)
FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 2
Operation and Maintenance Costs
PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers
11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water
Pump building and equipment)
12. Fly Ash System
Exh. V - 3
<PAGE>
EXHIBIT V(b)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas
Reheat System including the 650-pound Reheat Steam Line and
Desuperheater from the Plant Main Steam Line but not including the
165-pound Control Valve and Branch Line to the Chemical Plant
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
Exh. V - 4
<PAGE>
EXHIBIT V(c)
FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 3
Operation and Maintenance Costs
PNM - 50% TEP - 0%
M-S-R - 0% Farmington - 0%
Tri-State - 8.2% LAC - 0%
SCPPA - 41.8% Anaheim - 0%
UAMPS - 0%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Unit Auxiliary 3A and 3B Transformers
11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, and Pump House
12. Fly Ash System
Exh. V - 5
<PAGE>
EXHIBIT V(c)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System including the Reheat Steam Line from the Auxiliary Steam Header
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. Fuel Oil Ignitor Heaters and Unit Specific Piping
18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
19. SSR Protection System
20. Auxiliary Steam Header Piping System:
a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant
Exh. V - 6
<PAGE>
EXHIBIT V(d)
FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 4
Operation and Maintenance Costs
PNM - 38.457% TEP - 0%
M-S-R - 28.8% Farmington - 8.475%
Tri-State - 0% LAC - 7.2%
SCPPA - 0% Anaheim - 10.04%
UAMPS - 7.028%
1. Turbine Generator
2. Condenser
3. Condensate and Feedwater System
a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks
4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks
5. Forced Draft Fans and Primary Air Fans
6. Precipitator
7. Stack and Stack Monitoring System
8. Cooling Tower
9. Circulating Water Pumps
10. Main, Unit Auxiliary 4A and 4B Transformers
11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, and Pump House
12. Fly Ash System
Exh. V - 7
<PAGE>
EXHIBIT V(d)
(continued)
13. Building HVAC System
14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System including the Reheat Steam Line from the Auxiliary Steam Header
15. Emergency Diesel Generator
16. Electrical and Control Systems
17. Fuel Oil Ignitor Heaters and Unit Specific Piping
18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen
19. Auxiliary Steam Header Piping System:
a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant
Exh. V - 8
<PAGE>
EXHIBIT V(e)
FACILITIES AND EQUIPMENT
COMMON TO SAN JUAN UNITS NO. 1 AND 2
Operation and Maintenance Costs
PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%
1. Bearing Cooling Water System except Unit Piping
2. Bottom Ash Dewatering Facility including: Dewatering Tank, Settling Tank,
Surge Tank, Storage Tank, and Pump House
3. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization)
4. Instrument Air System, except Unit Piping
5. Chemical Feed System, except Unit Piping
a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System
6. Plant Air System, except Unit Piping
7. Sootblowing Air System, except Unit Piping
8. Hydrogen Storage System, except Unit Piping
9. Coal Tripper System including Dust Collection System
10. Turbine Lube Oil Storage and Transfer System
11. Control Room, Equipment Rooms, and Associated HVAC System
Exh. V - 9
<PAGE>
EXHIBIT V(e)
(continued)
12. SO2 Backup Scrubber-Absorber Transformer
13. Turbine Crane south of column, Line 12
14. Fuel Oil, Ash, and Water Pipe Racks
15. Boiler Fill System
16. SAR Multiplexer Control System
Exh. V - 10
<PAGE>
EXHIBIT V(f)
FACILITIES AND EQUIPMENT
COMMON TO SAN JUAN UNITS NO. 3 AND 4
Operation and Maintenance Costs
PNM - 44.119% TEP - 0%
M-S-R - 14.4% Farmington - 4.249%
Tri-State - 4.1% LAC- 3.612%
SCPPA - 20.9% Anaheim - 5.07%
UAMPS - 3.55%
1. Bearing Cooling Water System except Unit Piping
2. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization except
Ignitor Heaters and Unit Specific Piping)
3. Instrument Air System except Unit Piping
4. Chemical Feed System except Unit Piping
a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System
5. Plant Air System except Unit Piping
6. Sootblowing Air System except Unit Piping
7. Start-Up Transformers and Nonseg Bus to Units 3 and 4 Switchgear
8. Hydrogen Storage System except Unit Piping
9. Coal Tripper System including Dust Collection Systems
10. Turbine Lube Oil Storage and Transfer System
11. Control Room, Equipment Rooms, and Associated HVAC System
Exh. V - 11
<PAGE>
EXHIBIT V(f)
(continued)
12. Boiler Fill System
13. Auxiliary Cooling Systems including Auxiliary Cooling Tower No. 1 and
Pumps, but excepting No. 4 Tower Pumps and Piping which is Unit Specific
14. CO2 Storage System except Unit Piping
15. Start-Up Boiler Feed Pump except Unit Piping
16. Turbine Bay Crane north of column, Line 12
17. Fuel Oil, Ash, and Water Pipe Racks
18. Fire Water Booster and Jockey Pumps
19. Halon Fire Protection System
20. Cooling Tower Multiplex Control System
Exh. V - 12
<PAGE>
EXHIBIT V(g)
FACILITIES AND EQUIPMENT
COMMON TO ALL FOUR SAN JUAN UNITS
Operation and Maintenance Costs
PNM - 46.297% TEP - 19.8%
M-S-R - 8.7% Farmington - 2.559%
Tri-State - 2.49% LAC - 2.175%
SCPPA - 12.71% Anaheim - 3.10%
UAMPS - 2.169%
1. River and Raw Water System including:
a. Diversion and intake structures, including all equipment and pump
building.
b. Raw Water line to reservoir.
c. Reservoir, pump buildings, and all equipment.
d. Raw water lines to plant yard.
e. All above and underground fire protection system to each vendor
supplied or unit specific fire protection system.
2. Auxiliary Boiler
3. SO2 Removal System except Absorbers
NOTE: In April 1998 the new SO2 Absorber Feed System went in-service and
replaced the SO2 Chemical Plant previously used by the Project. The SO2 Chemical
Plant facilities are retired in place and will be salvaged or decommissioned at
a later date. Section 3.1 describes the new SO2 Absorber Feed System while
Section 3.2 describes the old SO2 Chemical Plant.
3.1 SO2 Absorber Feed System
a. Limestone Handling System
b. Limestone Preparation System
c. Dewatering System
d. Gypsum Stack Out System
Exh. V - 13
<PAGE>
EXHIBIT V(g)
(continued)
3.2 SO2 Chemical Plant
a. Double effect evaporator train systems.
b. Fly ash filter system.
c. Absorber product and feed tanks.
d. Condensate collection, storage, and transfer systems.
e. Soda ash storage, mixing, and distribution systems.
f. Sulfate purge system including: crystallizers, centrifuges,
evaporators, and salt cake system.
g. Sulfuric acid plant system including storage tanks and load out
system.
h. Auxiliary No. 2 cooling tower, pumps, and systems.
4. Spare-Main Transformer 345/24 kV for all units.
5. Maintenance, Office, and Warehousing Facilities
6. Chemical Laboratory
7.* Coal and Ash Handling Control Facilities
8. Roads and grounds such as fencing, yard lighting, guard facilities,
drainage, and dikes.
9. Potable Water System
10. Environmental Monitoring systems including Air, Water, and Ground.
Excludes Stack Monitoring Systems which are unit specific.
11. Transportation such as trucks, cars, and dozers (not otherwise charged).
12. Water Management System
a. Wastewater Recovery System -- Northside
1. Neutralization system including premix tank, neutralization
tank, clarifier/thickener, and pumps. 2. Reverse osmosis
system including lime/soda softening clarifier system.
3. Brine concentrator Nos. 4 and 5.
4. Process pond No. 3 and pump system.
5. North evaporation ponds 1, 2, and 3.
Exh. V - 14
<PAGE>
EXHIBIT V(g)
(continued)
b. SO2 Waste Treatment System -- Southside
1. Process ponds 1A, 1B, 2 and pumping system.
2. Premix tank and clarifier system.
3. Oxidation towers.
4. Brine concentrator Nos. 2 and 3.
5. South evaporation ponds Nos. 1, 2, 3, 4, and 5.
c. Data Acquisition System
d. Solid Waste Disposal Pit
e. Coal pile runoff pond
13.* Coal Handling Equipment -- all equipment from all reclaim hoppers
ending at the chutes to the tripper conveyors. This includes: hoppers.
feeders. feeder belts, reclaim conveyors, plant conveyors, belt scales,
fire protection systems, dust suppression systems, magnetic separators,
all electrical and controls, and heating and ventilation systems.
14. Maintenance Bay Facilities including: Bay Bridge Crane, all Offices, and
Support Facilities
15. Sewage Treatment Facilities
16. All Demineralizer Systems including: Clarifier, Storage Tanks, Sump Pumps,
Filter Beds, and Control Systems.
17. The Chemical Plant 165-pound Control Valve and Branch Line from each of
Units 1 and 2 Unit Specific 650-pound Reheat Steam Line.
18. The Chemical Plant Branch Steam Line from (but not including) the Unit
Specific Auxiliary, Steam Header System on each of Units 3 and 4.
*Maintenance Only
Exh. V - 15
<PAGE>
EXHIBIT V(h)
FACILITIES AND EQUIPMENT
COMMON TO ALL FOUR SAN JUAN UNITS
Operation Costs Only
PNM)
M-S-R)
TEP)
Farmington)
Tri-State) Variable split based on generation by unit
LAC)
SCPPA)
Anaheim)
UAMPS)
1. Coal and Ash Handling Control Facilities
2. Coal Handling Equipment
All equipment from all reclaim hoppers ending at the chutes to the
tripper conveyors. This includes: hoppers, feeders, feeder belts,
reclaim conveyors, plant conveyors, belt scales, fire protection
systems, dust suppression systems, magnetic separators, all electrical
and control, and heating and ventilation systems.
Exh. V - 16
<PAGE>
EXHIBIT V(i)
SWITCHYARD FACILITIES AND EQUIPMENT
OPERATION AND MAINTENANCE COSTS
PNM - 65% TEP - 35%
Exh. V - 17
<PAGE>
EXHIBIT VI
<PAGE>
San Juan Project Participation Agreement
Exhibit VI-Attachment A
A&G RATIO APPLICABLE TO OPERATION AND MAINTENANCE FOR THE SAN JUAN
------------------------------------------------------------------
GENERATING STATION ("SJGS")
---------------------------
The Operating Agent determines, in accordance with Accounting Practice,
the appropriate A&G expense incurred for the benefit of the SJGS and to
be billed to the SJGS as follows:
1. A&G expenses directly chargeable by on-site San Juan Project
employees as set forth in Section 22.2.2;
2. A&G expenses directly chargeable by A&G related departments located
off-site as set forth in Section 22.2.2; and
3. Indirect A&G expenses included in the development of the A&G ratio.
Except as set forth in Section 22.0, individuals located off-site must
either charge their time and expenses direct to the SJGS or be included
in the A&G pool in the development of the A&G Ratio. Costs incurred for
the same purpose must be either all charged direct to the SJGS or all
be included in the A&G pool, e.g., all staff persons within the same
department must either charge direct to the SJGS or to the A&G pool.
A. The Operating Agent conducts an A&G study every three years. However,
periodic reviews will be performed to determine if significant
organizational changes have occurred that may require the Operating
Agent to conduct an A&G study on a basis more frequently than three
years. This study determines the appropriate amount of indirect A&G
expense to utilize in the development of the A&G Ratio described below.
The FERC A&G accounts included in the A&G study are: 920, 921, 923,
930.2, 931 and 935.
Background
----------
The responsibility for the SJGS resides in the Operating Agent's Bulk
Power Business Unit. The A&G expenses charged to this Business Unit are
derived from two areas. The first component is an allocation of A&G
expenses from the Operating Agent's Corporate Office to the Bulk Power
Business Unit. These allocations are based on pre-determined
methodologies. The second component of costs are A&G expenses that are
directly charged to the Bulk Power Business Unit. Note: Any A&G
expenses charged directly to the SJGS are excluded from the
determination of the A&G Ratio and are not subject to the A&G Ratio.
Exh. VI - 1
<PAGE>
A questionnaire is sent to all managers that have A&G charges to the
Bulk Power Business Unit to determine what percentage of their A&G
expenses should be included in the development of the A&G Ratio.
The percentages derived from the questionnaires are then applied to the
actual A&G amounts charged to the Bulk Power Business Unit for the
study year. Amounts are split between labor and other.
B. Labor Ratios for Payroll Taxes (FERC Account 408), Injuries and Damages
(FERC Account 925) and Pension and Benefits (FERC Account 926) (See
Exhibit VI Attachments B, C and D) are applied to the labor portion of
the A&G determined above.
C. Other costs included in the development of the A&G Ratio are
Depreciation of General Plant (FERC Account 403), Property Insurance
(FERC Account 924) and Property Taxes (FERC Account 408) for the
Operating Agent's headquarters buildings and energy management facility
and Amortization of Computer Software (FERC Account 404) for certain
software applications that provide benefit to the SJGS.
The portion of the costs related to the Operating Agent's headquarters
buildings included in the development of the A&G Ratio are derived by
applying certain ratios obtained from the A&G study questionnaires. The
costs included in the A&G Ratio for the Operating Agent's energy
management facility are based on the number of MW of SJGS capacity as a
percentage of the Operating Agent's total generating capacity. In
addition, ratios for determining the amount of software costs to
include in the A&G Ratio are based on the specific software
application. For example, if the Operating Agent installed a new
payroll system, the amount of costs for this system that would be
included in the A&G Ratio calculation would be based on the number of
employees at the SJGS as a percent of the Operating Agent's total
employees. The Operating Agent reviews each specific software
application to determine the method for assigning the appropriate
amount of costs to be included in the A&G Ratio calculation.
The A&G ratio shall be applied to the following SJGS costs:
1) Labor charged to the operation and maintenance expenses included in
Sections 22.2.1, 22.3, 22.4, 22.5 and 23.3.3 of the San Juan Project
Participation Agreement. Such labor dollars are utilized as the
denominator in the calculation of the A&G Ratio described below.
The A&G Ratio shall be derived annually based on the preceding year's
experience, as set forth herein unless otherwise agreed to by the participants.
The A&G Ratio will be adjusted to actuals at year-end and the adjustment will be
used in the computation of the A&G Ratio for the following year.
A&G Ratio = A/B
Exh. VI - 2
<PAGE>
Where A = Administrative and general expense chargeable to FERC Accounts
920, 921, 923, 930.2, 931 and 935, including Labor Ratios for
Payroll Taxes (FERC Account 408), Injuries and Damages (FERC
Account 925) and Pension and Benefits (FERC Account 926) plus
other related costs for the Operating Agent's headquarters
buildings and energy management facility for Property Taxes FERC
Account (408), Depreciation of General Plant FERC Account (403),
and Property Insurance FERC Account (924) plus amortization of
certain Computer Software costs charged to FERC Account (404).
B = Total SJGS operation and maintenance labor paid and accrued
excluding labor expenses chargeable to FERC accounts 920 through
935 inclusive.
Note: Any modifications to the methodology utilized for calculating the A&G
Ratio described above shall be developed by the San Juan Auditing
Committee and approved by the San Juan Coordination Committee.
Exh. VI - 3
<PAGE>
San Juan Project Participation Agreement
Exhibit VI-Attachment B
-----------------------
PAYROLL TAX RATIO FOR THE SAN JUAN GENERATING STATION ("SJGS")
--------------------------------------------------------------
The Payroll Tax Ratio shall be applied to the following SJGS costs:
1) Labor charged to operation and maintenance expenses included in
Sections 22.2.1, 22.2.2, 22.2.4, 22.2.5 22.3, 22.4, 22.5 and 23.3.3
of the San Juan Project Participation Agreement.
2) Labor charged to other primary accounts including, but not limited
to, FERC Accounts 107, 108, 163, 183, 186 and 188.
The Payroll Tax Ratio shall be determined annually on the basis of the Operating
Agent's preceding years experience adjusted for known changes to comply with
regulations applicable to Social Security and Unemployment Compensation as set
forth herein unless otherwise agreed to by the participants. The Payroll Tax
Ratio will be adjusted to actuals at year-end and the adjustment will be used in
the computation of the ratio for the following year.
Payroll Tax Ratio = T/P
Where T = The Operating Agent's total payroll tax expense chargeable to FERC
Account 408.
P = The Operating Agent's total base labor paid and accrued, less
wages paid for time-off allowances plus accruals for time-off
allowances.
Notes: (1 Base labor is defined as an employee's hourly rate times the
number of hours worked plus an accrual for time-off allowances.
In addition, base labor also includes overtime pay and special
pay.
(2) Time-off allowances are defined as vacation, illness and holiday
time.
(3) Special pay is defined as any other compensation an employee
receives that is not part of his/her regular base pay. Examples
include employee recognition awards as well as results based
pay, the Operating Agent's bonus pay plan.
(4) Any modifications to the methodology utilized for calculating
the Payroll Tax Ratio described above shall be developed by the
San Juan Auditing Committee and approved by the San Juan
Coordinating Committee.
Exh. VI - 4
<PAGE>
San Juan Project Participation Agreement
Exhibit VI-Attachment C
-----------------------
INJURIES AND DAMAGES RATIO FOR THE
----------------------------------
SAN JUAN GENERATING STATION ("SJGS")
------------------------------------
The Injuries and Damages Ratio shall be applied to the following SJGS costs:
1) Labor charged to operation and maintenance expenses included in
Sections 22.2.1, 22.2.2, 22.2.4, 22.2.5 22.3, 22.4, 22.5 and 23.3.3
of the San Juan Project Participation Agreement.
2) Labor charged to other primary accounts including, but not limited
to, FERC Accounts 107, 108, 163, 183, 186 and 188.
The Injuries and Damages Ratio shall be determined annually on the basis of the
Operating Agent's preceding year's experience as set forth herein unless
otherwise agreed to by the participants. The Injuries and Damages Ratio will be
adjusted to actuals at year-end and the adjustment will be used in the
computation of the ratio for the following year.
Injuries and Damages Ratio = I/P
Where I = The Operating Agent's total injuries and damages expense
chargeable to FERC Account 925, including payroll taxes, and
pension and benefits on labor chargeable to FERC Account 925.
The amount of payroll taxes and pension and benefits to be added
are based on the ratios included in Exhibit VI, Attachments B
and D, respectively. Note: Any injuries and damages expense
charged direct to the SJGS are excluded from the determination
of the Injuries and Damages Ratio.
P = The Operating Agent's total base labor paid and accrued, less
wages paid for time-off allowances plus accruals for time-off
allowances less special pay and wages charged direct to FERC
Account 925.
Notes: (1) Special pay is defined as any other compensation an employee
receives that is not part of his/her regular base pay. Examples
include employee recognition awards as well as results based
pay, the Operating Agent's bonus pay plan.
(2) Any modifications to the methodology utilized for calculating
the Injuries and Damages Ratio described above shall be
developed by the San Juan Auditing Committee and approved by the
San Juan Coordination Committee.
Exh. VI - 5
<PAGE>
San Juan Project Participation Agreement
Exhibit VI-Attachment D
-----------------------
PENSION AND BENEFITS RATIO FOR THE
----------------------------------
SAN JUAN GENERATING STATION ("SJGS")
------------------------------------
The Pension and Benefits Ratio shall be applied to the following SJGS costs:
1) Labor charged to operation and maintenance expenses included in
Sections 22.2.1, 22.2.2, 22.2.4, 22.2.5 22.3, 22.4, 22.5 and 23.3.3
of the San Juan Project Participation Agreement.
2) Labor charged to other primary accounts including, but not limited
to, FERC Accounts 107, 108, 163, 183, 186 and 188.
The Pension and Benefits Ratio shall be determined annually on the basis of the
Operating Agent's preceding year's experience as set forth herein unless
otherwise agreed to by the participants. The Pension and Benefits Ratio will be
adjusted to actuals at year-end and the adjustment will be used in the
computation of the ratio for the following year.
Pension and Benefits Ratio = B/P
Where B = The Operating Agent's total pension and benefits expense
chargeable to FERC Account 926, including payroll taxes, and
injuries and damages on labor chargeable to FERC Account 926.
The amount of payroll taxes and injuries and damages to be added
are based on the ratios included in Exhibit VI, Attachments B
and C, respectively.
P = The Operating Agent's total base labor paid and accrued, less
wages paid for time-off allowances plus accruals for time-off
allowances, less overtime, part-time, special pay not eligible
for pension and benefits and wages charged direct to FERC
Account 926.
Notes: (1) Special pay is defined as any other compensation an employee
receives that is not part of his/her regular base pay. Examples
include employee recognition awards as well as results based
pay, the Operating Agent's bonus pay plan. Employee recognition
awards are not eligible for pension and benefit loadings.
(2) Any modifications to the methodology utilized for calculating
the Pension and Benefits Ratio described above shall be
developed by the San Juan Auditing Committee and approved by the
San Juan Coordination Committee.
Exh. VI - 6
<PAGE>
San Juan Project Participation Agreement
Exhibit VI-Attachment E
-----------------------
CAPITALIZED A&G RATIO APPLICABLE TO CAPITAL PROJECTS FOR THE SAN
----------------------------------------------------------------
JUAN GENERATING STATION ("SJGS")
--------------------------------
The Operating Agent determines the appropriate A&G expense incurred for
the benefit of the SJGS and to be billed to the SJGS as follows:
A. The Operating Agent conducts an A&G study every three years. However,
periodic reviews will be performed to determine if significant
organizational changes have occurred that may require the Operating
Agent to conduct an A&G study on a basis more frequently than three
years. This study determines the appropriate amount of indirect A&G
expense to utilize in the development of the Capitalized A&G Ratio
described below.
The FERC A&G accounts included in the A&G study are: 920, 921, 923,
930.2, 931 and 935.
Background
----------
The responsibility for the SJGS resides in the Operating Agent's Bulk
Power Business Unit. The A&G expenses charged to this Business Unit are
derived from two areas. The first component is an allocation of A&G
expenses from the Operating Agent's Corporate Office to the Bulk Power
Business Unit. These allocations are based on pre-determined
methodologies. The second component of costs are A&G expenses that are
directly charged to the Bulk Power Business Unit. Note: Any A&G
expenses charged directly to the SJGS are excluded from the
determination of the Capitalized A&G Ratio. Two Capitalized A&G Ratios
are calculated, one for major construction projects (Projects greater
than $10,000,000) and one for minor construction projects (Projects
less than $10,000,000).
A questionnaire is sent to all managers that have A&G charges to the
Bulk Power Business Unit to determine what percentage of their A&G
expenses are capital-related and should be included in the development
of the Capitalized A&G Ratios. Amounts are split between labor and
other.
B. Labor Ratios for Payroll Taxes (FERC Account 408), Injuries and Damages
(FERC Account 925) and Pension and Benefits (FERC Account 926) (see
Exhibit VI Attachments B, C and D) are applied to the labor portion of
the A&G determined above.
The Capitalized A&G Ratios, shall be applied to all SJGS construction costs
except for long-term leased transportation and motorized equipment. The total
amount of these construction dollars are utilized as the denominator in the
calculation of the A&G Ratio described below.
Exh. VI - 7
<PAGE>
Capitalized A&G Ratio = A/B
Where A = Administrative and general expense chargeable to FERC
Accounts 920, 921, 923, 930.2, 931 and 935, including Labor
Ratios for Payroll Taxes (FERC Account 408), Injuries and Damages
(FERC Account 925) and Pension and Benefits (FERC Account 926) as
categorized separately in the A&G questionnaire for major and
minor construction expenditures for the study period.
B = Total SJGS capital project amounts for the Bulk Power Business
Unit as categorized between major and minor construction projects
for the study period chargeable to FERC Accounts 107 and 108.
Note: Any modifications to the methodology utilized for calculating the A&G
Ratio described above shall be developed by the San Juan Auditing
Committee and approved by the San Juan Coordination Committee.
Exh. VI - 8
<PAGE>
EXHIBIT VII
<PAGE>
Attachment C
Page 1
BHP MINERALS INC.
SAN JUAN COAL COMPANY
P. O. BOX 155
FRUITLAND, NEW MEXICO 87416
February 9, 1993 cc: Tani Cambra - BHP
Chris Seymour - SJM
Public Service Company of New Mexico Rick Franklin - TEP
414 Silver Avenue, S.W. Rick Sarracino - PNM
Albuquerque, New Mexico 87102 Harry Schanning - PNM
Jay Clatworthy - LPM
Attention: Suzy Braun, Fuel Accounting
Dear Ms. Braun:
Enclosed is the current billing for coal sales for the month of January 1993.
The following invoices are included:
INVOICE SAN JUAN LA PLATA SJ TRANSPORTATION
- -------------------- ------------- ------------- --------------------
ASH DISPOSAL $ 273,244.00
93-01 $9,324,192.00* $3,384,804.00** $ 1,259,928.00***
------------- ------------- --------------
$9,597,436.00 $3,384,804.00 $ 1,259,928.00
============= ============= ==============
TOTAL PAYMENT DUE $14,242,168.00
==============
If you have any questions, please call me at (505) 598-4235.
Sincerely,
Ed A. Becenti
San Juan Coal Company
Enclosures
* Detail on Attachment C, Page 1
** Detail on Attachment C, Page 4
*** Detail on Attachment C, Page 6
<PAGE>
Attachment C
Page 2
SAN JUAN COAL COMPANY INVOICE NO.: 593-01
P. O. BOX 15 DATE: JAN. 31, 1993
FRUITLAND, NM 87416
SAN JUAN COAL SALES AGREEMENT
TO: PUBLIC SERVICE COMPANY OF NEW MEXICO
P. O. BOX 2267
ALBUQUERQUE, NM 87103
- --------------------------------------------------------------------------------
JAN. 1993 COAL DELIVERIES
- --------- ---------------
TONS OF COAL DELIVERED CURRENT MONTH (SCHEDULE P) 369,845
TONS OF COAL DELIVERED PREVIOUSLY DURING THE YEAR 0
--------------
TOTAL COAL DELIVERED YEAR TO DATE 369,845
==============
PARAGRAPH INVOICE AMOUNT
--------- --------------
9.2(A), 9.3(A),9.4, 9.5(A) OPERATING COSTS (SCHEDULE A) $5,759,716.00
9.2(B), 9.3(B), 9.5(B) CAPITAL INVEST. ELEMENT (SCH. B) 2,833,025.00
9.2(D), 9.3(D), 9.5(D) ADMINISTRATIVE COMPONENT (SCH. D) 161,231.00
9.6 EFFICIENCY ELEMENT (SCHEDULE E) 0.00
-------------
TOTAL SALES VALUE 8,753,972.00
LESS: INVOICE NUMBER N/A 0.00
-------------
ADJUSTED SALES VALUE $8,753,972.00
PLUS: TAX (SCHEDULE T) 570,220.00
-------------
SUBTOTAL INVOICE $9,324,192.00
LESS: INCREMENTAL TONS 0.00
-------------
TOTAL INVOICE $9,324,192.00
=============
REMIT TO: SAN JUAN COAL COMPANY
C/O BHP MINERALS INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
ATTENTION: TREASURY DEPARTMENT
COPIES TO: PUBLIC SERVICE COMPANY OF NEW MEXICO (3)
TUCSON ELECTRIC POWER COMPANY (1)
BHP MINERALS INC - SAN FRANCISCO OFFICE (2)
SAN JUAN COAL COMPANY (2)
* Details on Attachment C, Page 3
<PAGE>
Attachment C
Page 3
SAN JUAN COAL COMPANY SCHEDULE B
INVOICE NO.: S93-01
DATE: JAN. 31, 1993
MONTH: JAN. 1993
I. FRUITLAND CAPITAL INVESTMENT ELEMENT
- ---------------------------------------
FRUITLAND TONS MINED & DELIVERED (SCHEDULE P)
TIMES: C1 (SCHEDULE S-2)
= 256,849 X $6.131 = $1,574,741.00
LESS: DISCOUNT TONS
= 0 X $0.000 = $ 0.00
-------------
SUBTOTAL 1,574,741.00
II. PROCESSING CAPITAL INVESTMENT ELEMENT
- ------------------------------------------
TONS APPLICABLE (SCHEDULE P)
TIMES: PC1 (SCHEDULE S-3)
= 564,760 X $2.228 = 1,258,284.00
-------------
TOTAL CAPITAL INVESTMENT ELEMENT $2,833,025.00*
=============
* Forward to Attachment C, Page 2
<PAGE>
Attachment C
Page 4
SAN JUAN COAL COMPANY
C/O LA PLATA MINE L93-01
P.O. BOX 155 JAN. 31, 1993
FRUITLAND, NM 87416
SAN JUAN COAL SALES AGREEMENT
- -----------------------------
TO: PUBLIC SERVICE COMPANY OF NEW MEXICO
P.O. BOX 2267
ALBUQUERQUE, NM 87103
JAN. 1993 COAL DELIVERIES
- --------- ---------------
TONS OF COAL DELIVERED CURRENT MONTH (SCHEDULE P) 112,996
TONS OF COAL DELIVERED PREVIOUSLY DURING THE YEAR 0
-------------
TOTAL COAL DELIVERED YEAR TO DATE 112,996
=============
PARAGRAPH INVOICE AMOUNT
9.3 (A) OPERATING COSTS (SCHEDULE A) $2,064,762.00
9.3 (B) CAPITAL INVEST. ELEMENT (SCH. B) 1,071,767.00*
9.3 (C) MIN. AGGREGATE CAPITAL INVEST. ELEMENT (SCH. C) 0.00
9.3 (D) ADMINISTRATIVE COMPONENT (SCH. D) 43,199.00
-------------
TOTAL SALES VALUE $3,179,728.00
LESS: INVOICE NUMBER N/A 0.00
-------------
ADJUSTED SALES VALUE $3,179,728.00
PLUS: TAX (SCHEDULE T) 205,076.00
-------------
SUBTOTAL INVOICE $3,384,804.00
LESS: INCREMENTAL TONS 0.00
-------------
TOTAL INVOICE $3,384,804.00
=============
REMIT TO: SAN JUAN COAL COMPANY
C/O BHP MINERALS INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
ATTENTION: TREASURY DEPARTMENT
COPIES TO: PUBLIC SERVICE COMPANY OF NEW MEXICO (3)
TUCSON ELECTRIC POWER COMPANY (1)
SAN JUAN COAL COMPANY (1)
* Details on Attachment C, Page 5
<PAGE>
Attachment C
Page 5
SAN JUAN COAL COMPANY SCHEDULE B
LA PLATA MINE
INVOICE NO.: L93-01
DATE: JAN. 31, 1993
MONTH: JAN. 1993
I. LA PLATA MINING CAPITAL INVESTMENT ELEMENT
- ---------------------------------------------
LA PLATA TONS MINED & DELIVERED (SCHEDULE P)
TIMES: NC1 (SCHEDULE S-2)
= 112,996 X $9.485 = $1,071,767.00
LESS: DISCOUNT TONS
= 0 X $2.250 = $ 0.00
-------------
TOTAL CAPITAL INVESTMENT ELEMENT $1,071,767.00*
=============
* Forward to Attachment C, Page 4
<PAGE>
Attachment C
Page 6
SAN JUAN TRANSPORTATION COMPANY INVOICE NO: T93-01
P.O. BOX 155 JAN. 31, 1993
FRUITLAND, NM 87416
SAN JUAN TRANSPORTATION AGREEMENT
- ---------------------------------
TO: PUBLIC SERVICE COMPANY OF NEW MEXICO
P.O. BOX 2267
ALBUQUERQUE, NM 87103
JAN. 1993 COAL DELIVERIES
- --------- ---------------
TONS OF COAL DELIVERED CURRENT MONTH (SCHEDULE P) 112,996
TONS OF COAL DELIVERED PREVIOUSLY DURING THE YEAR 0
-------------
TOTAL COAL DELIVERED YEAR TO DATE 112,996
=============
PARAGRAPH INVOICE AMOUNT
7.2 (A) OPERATING COSTS (SCHEDULE A) $ 525,827.00
7.2 (B) CAPITAL INVEST. ELEMENT (SCH. B) 658,993.00*
7.3 (C) MIN. AGGREGATE CAPITAL INVEST. ELEMENT (SCH. C) 0.00
7.3 (D) ADMINISTRATIVE COMPONENT (SCH. D) 8,011.00
-------------
TOTAL SALES VALUE $1,192,831.00
LESS: INVOICE NUMBER N/A 0.00
-------------
ADJUSTED SALES VALUE $1,192,831.00
PLUS: GROSS RECEIPTS TAX @ 5.625% 67,097.00
-------------
TOTAL INVOICE $1,259,928.00
=============
REMIT TO: SAN JUAN COAL COMPANY
C/O BHP MINERALS INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
ATTENTION: TREASURY DEPARTMENT
COPIES TO: PUBLIC SERVICE COMPANY OF NEW MEXICO (3)
TUCSON ELECTRIC POWER COMPANY (1)
SAN JUAN COAL COMPANY (1)
* Details on Attachment C, Page 7
<PAGE>
Attachment C
Page 7
SAN JUAN COAL COMPANY SCHEDULE B
INVOICE NO.: T93-01
DATE: JAN. 31, 1993
MONTH: JAN. 1993
I. CAPITAL INVESTMENT ELEMENT
- ------------------------------
TONS DELIVERED
TIMES: C1 (SCHEDULE S-2)
= 112,996 X $5.832 = $658,993.00
-----------
TOTAL CAPITAL INVESTMENT ELEMENT $658,993.00*
===========
* Forward to Attachment C, Page 6
<PAGE>
Attachment C
Page 8
MONTHLY FIXED COST CALCULATION
January 1993
A) San Juan CIE (Schedule B) (Attachment C, Page 3) 1,574,741.00
B) Processing (Schedule B) (Attachment C, Page 3) 1,258,284.00
C) Royalty @12.5% 434,954.00 J X .125
------------
D) Sub-Total 3,267.979.00 A + B + C
E) Sub-Total--Royalty Subject to RET and CT 2,833,025.00 D - C
F) Resource Excise Tax @ .75% 21,247.69 E X .0075
G) Conservation Tax @ .18% 5,099.45 E X .0018
------------
H) Amount Subject to GRT 3,294,326.14 D + F + G
I) Gross Receipts Tax @ 5.625% 185,305.85 H X .05625
------------
J) TOTAL SAN JUAN CIE & PROCESSING 3,479,631.99 H + I
A) La Plata CIE (Schedule B) (Attachment C, Page 5) 1,071,767.00
B) Royalty @ 12.5% 164,548.26 I X .125
------------
C) Sub-Total 1,236,315.26 A + B
D) Sub-Total--Royalty Subject to RET and CT 1,071,767.00 C - B
E) Resource Excise Tax @ .75% 8,038.25 D X .0075
F) Conservation Tax @ .18% 1,929.18 D X .0018
------------
G) Amount Subject to GRT 1,246,282.69 C + E + F
H) Gross Receipts Tax @ 5.625% 70,103.40 G X .05625
------------
I) TOTAL LA PLATA CIE 1,316,386.09 G + H
Transportation CIE (Schedule B)
(Attachment C, Page 7) 658,993.00
------------
658,993.00
Gross Receipts Tax @ 5.625% 37,068.36
------------
TOTAL TRANSPORTATION CIE 696,061.36
------------
TOTAL FIXED COSTS INVOICED 1/93: 5,492,079.44
------------
<PAGE>
Attachment C
Page 9
Removal of Fixed Expenses from Coal Inventory
Total Coal Invoice $14,242,168.00
(Attachment C, p. 1)
Less Ash Expense $273,244.00
(Attachment C, p. 1)
Less Fixed Fuel Expenses
San Juan & Processing CIE $3,479,631.99
(Attachment C, p. 8)
La Plata CIE $1,316,386.09
(Attachment C, p. 8)
Transportation CIE $696,061.36
(Attachment C, p. 8)
Net Variable Fuel Expense
To Inventory $8,476,844.56
<PAGE>
<TABLE>
<CAPTION>
Attachment C
Page 10
TONS COST
SAN JUAN COAL INVENTORY DELIVERED TOTAL DELIVERED AVERAGE
- ----------------------- BURNED TONS BURNED TOTAL COST PRICE
DATE DESCRIPTION AND SOLD TO DATE AND SOLD TO DATE PER TON
---- ----------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Beg. Bal. 744,453 $21,422,710.42
January 1993
Deliveries 369,845 1,114,298 8,476,844.56** 29,899,554.98
Stockpile deliveries 0 1,114,298 0.00 29,899,554.98
Adjustment to deliveries 0 1,114,298 0.00 29,899,554.98
Employee sales 0 1,114,298 0.00 29,899,554.98
Adjustments to prior burns 0 1,114,298 0.00 29,899,554.98 26.832638
Unit 1 burn gen. (92,339.05) 1,021,959 (2,477,700.30) 27,421,854.68
Unit 2 burn gen. (92,202.40) 929,757 (2,474,033.62) 24,947,821.06
Unit 3 burn gen. (143,098.82) 786,658 (3,839,718.84) 21,108,102.22
Unit 4 burn gen. (162,852.47) 623,805 (4,369,761.37) 16,738,340.85
Unit 1 burn chem. 0.00 623,805 0.00 16,738,340.85
Unit 2 burn chem. 0.00 623,805 0.00 16,738,340.85
Unit 3 burn chem. (5,240.98) 618,564 (140,629.32) 16,597,711.53
Unit 4 burn chem. (6,032.98) 612,531 (161,880.77) 16,435,830.76
Adjustments to burn 0.00 612,531 0.00 16,435,830.76
----------- ---------- -------------- --------------
Total Tons/Dollars (501,766.70) 612,531 (13,463,724.22) 16,435,830.76
----------- ---------- -------------- --------------
**Attachment C, Page 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Attachment C
Page 11
MONTHS--January 1993 CIE Revision
GENERATION DATA UNIT 1 UNIT 2 UNIT 3 UNIT 4 TOTALS
- --------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1) METERED GROSS GEN. 179,880.00 172,030.00 271,300.00 316,450.00 939,660.00
A. START-UP POWER 685.00 698.00 200.00 0.00 1,583.00
B. UNIT AUXILIARY 20,440.00 20,941.30 28,230.00 23,840.00 93,451.30
C. COMMON AUXILIARY 2,431.80 2,304.50 3,707.40 4,463.00 12,906.70
D. 1 & 2 COMMON AUX. 0.00 0.00 0.00 0.00 0.00
E. 3 & 4 COMMON AUX. 0.00 0.00 0.00 0.00 0.00
2) TOTAL METERED AUX. 23,556.80 23,943.80 32,137.40 28,303.00 107,941.00
3) METERED NET GEN. 156,323.20 148,086.20 239,162.60 288,147.00 831,719.00
4) PNM'S SHARE-----* 80,603.30 74,833.80 127,017.10 179,725.50 462,179.70
5) TEP'S SHARE-----* 75,719.90 73,252.40 91,928.20 0.00 240,900.50
6) COF'S SHARE-----* 0.00 0.00 11,934.50 11,972.70 23,907.20
7) MSR'S SHARE-----* 0.00 0.00 0.00 83,843.30 83,843.30
8) LAC SHARE-------* 0.00 0.00 8,282.80 12,605.50 20,888.30
9) # OF DAYS IN MONTH 31.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 12
For the month ended January 1993 CIE Revision
Unit 1 Breakdown
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
--- --- ---- --- --- --- -----
Start-up 342.50 342.50 685.00 (Attachment C, Page 11)
Unit auxiliary 10,220.00 10,220.00 20,440.00 (Attachment C, Page 11)
Common auxiliary 1,253.98 481.50 62.23 211.57 369.83 52.69 2,431.80 (Attachment C, Page 11)
Units 1 and 2 common auxiliary 0.00 0.00 0.00 (Attachment C, Page 11)
----------- ---------- ------ ------ ------ ------ ----------
Total start-up and auxiliary 11,816.48 11,044.00 62.23 211.57 369.83 52.69 23,556.60
Net generation (metered shares) 80,603.30 75,719.90 156,323.20 (Attachment C, Page 11)
----------- ---------- ------ ------ ------ ------ ----------
Total 92,419.78 86,763.90 62.23 211.57 369.83 52.69 179,880.00
Gross generation--Unit 1 179,860.00
</TABLE>
FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 0.00
Coal cost for the month $2,477,700.30
Oil cost for the month $ 55,628.38
-------------
Total fuel cost for the month $2,533,328.68
-------------
UNIT 1 ALLOCATION PERCENTAGE (From Total Line-Unit 1 Breakdown above)
- ----------------------------
PNM 0.5138
TEP 0.4823
CITY 0.0003
MSR 0.0012
CPC 0.0021
LAC 0.0003 1.0000
<TABLE>
<CAPTION>
ALLOCATION OF UNIT 1 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
PNM $1,273,042.42 $28,560.83 $0.00 1-501001-770-722-1656-5850 $0.00 $1,273,042.42 $1,273,042.42
TEP $1,194,994.85 $28,628.60 $0.00 1-501001-789-722-1656-5850 $0.00 $1,194,994.85 $1,194,994.85
CITY $743.31 $16.89 $0.00 1-501001-774-722-1656-5850 $0.00 $743.31 $743.31
MSR $2,973.24 $68.75 $0.00 1-501001-773-752-1656-5850 $0.00 $2,973.24 $2,973.24
CPC $5,203.17 $118.82 $0.00 1-501001-772-722-1656-5850 $0.00 $5,203.17 $5,203.17
LAC $743.31 $16.89 $0.00 1-501001-771-722-1656-5850 $0.00 $743.31 $743.31
------------- ---------- -----
Total $2,477,700.30 $55,628.38 $0.00 1-151000-768-800-1998-0000-1998 $0.00 $55,628.38
</TABLE>
ACCOUNTING ENTRY
----------------
1-501401-770-722-1658-5850 $28,580.83
1-501401-769-722-1656-5850 $28,528.80
1-501401-774-722-1656-5850 $16.89
1-501401-773-722-1656-5850 $68.75
1-501401-772-722-1656-5850 $116.82
1-501401-771-722-1656-5850 $16.89
$2,477.700.30 1-501001-765-800-1998-0000-1998
<PAGE>
<TABLE>
<CAPTION>
SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 13
For the month ended January 1993 CIE Revision
Unit 2 Breakdown
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
--- --- ---- --- --- --- -----
Start-up 349.00 349.00 698.00 (Attachment C, Page 11)
Unit auxiliary 10,470.65 10,470.65 20,941.30 (Attachment C, Page 11)
Common auxiliary 1,188.34 456.29 59.07 200.40 350.28 50.12 2,304.50 (Attachment C, Page 11)
Units 1 and 2 common auxiliary 0.00 0.00 0.00 (Attachment C, Page 11)
---------- --------- ------ ------ ------ ------ ----------
Total start-up and auxiliary 12,007.99 11,275.94 59.07 200.40 350.28 50.12 23,943.60
Net generation (metered shares) 74,833.80 73,252.40 148,086.20 (Attachment C, Page 11)
---------- --------- ------ ------ ------ ------ ----------
Total 86,841.79 84,528.34 59.07 200.40 350.28 50.12 172,030.00
Gross generation--Unit 2 172,030.00
</TABLE>
FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 0.00
Coal cost for the month $2,474,033.62
Oil cost for the month $ 57,921.54
-------------
Total fuel cost for the month $2,531,955.16
-------------
UNIT 2 ALLOCATION PERCENTAGE (From Total Line-Unit 2 Breakdown above)
- ----------------------------
PNM 0.5048
TEP 0.4814
CITY 0.0003
MSR 0.0012
CPC 0.0020
LAC 0.0003 1.0000
<TABLE>
<CAPTION>
ALLOCATION OF UNIT 2 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
PNM $1,248,892.17 $29,236.79 $0.00 1-501002-770-722-1656-5850 $0.00 $1,248,892.17 $1,248,892.17
TEP $1,215,740.12 $28,483.64 $0.00 1-501002-789-722-1656-5850 $0.00 $1,215,740.12 $1,215,740.12
CITY $742.21 $17.38 $0.00 1-501002-774-722-1656-5850 $0.00 $742.21 $742.21
MSR $2,968.04 $50.31 $0.00 1-501002-773-752-1656-5850 $0.00 $2,968.84 $2,968.84
CPC $4,949.07 $115.84 $0.00 1-501002-772-722-1656-5850 $0.00 $4,949.07 $4,949.07
LAC $742.21 $17.38 $0.00 1-501002-771-722-1656-5850 $0.00 $742.21 $742.21
------------- ---------- ------
Total $2,474,033.82 $57,921.34 $0.00 1-151000-768-800-1998-0000-1998 $0.00
</TABLE>
ACCOUNTING ENTRY
----------------
1-501402-770-722-1656-5850 $29,236.78
1-501402-769-722-1656-5850 $28,483.64
1-501402-774-722-1656-5850 $17.38
1-501402-773-722-1656-5850 $50.31
1-501402-772-722-1656-5850 $115.84
1-501402-771-722-1656-5850 $17.38
$2,474.033.62 1-501001-765-800-1998-0000-1998 $57,921.34
<PAGE>
<TABLE>
<CAPTION>
SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 14
For the month ended January 1993 CIE Revision
Unit 3 Breakdown
- ----------------
PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
--- --- ---- --- --- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Start-up 100.00 0.00 100.00 200.00 (Attachment C, Page 11)
Unit auxiliary 11,857.14 0.00 1,220.76 14,115.00 1,037.10 28,230.00 (Attachment C, Page 11)
Common auxiliary 1,911.75 734.07 94.87 322.54 563.52 80.64 3,707.40 (Attachment C, Page 11)
Units 3 and 4 common auxiliary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Attachment C, Page 11)
---------- ------ --------- ------ ---------- -------- ----------
Total start-up and auxiliary 13,868.89 734.07 1,315.63 322.54 14,778.52 1,117.74 32,137.40
Net generation (metered shares) 127,017.10 0.00 11,934.50 91,928.20 8,282.80 239,162.60 (Attachment C, Page 11)
---------- ------ --------- ------ ---------- -------- ----------
Total 140,885.99 734.07 13,250.13 322.54 106,706.72 9,400.54 271,300.00
Gross generation--Unit 3 271,300.00
</TABLE>
FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 140,829.32
Coal cost for the month $3,838,718.84
Oil cost for the month $ 25,465.56
-------------
Total fuel cost for the month $4,005,013.72
-------------
UNIT 3 ALLOCATION PERCENTAGE (From Total Line-Unit 3 Breakdown above)
- ----------------------------
PNM 0.5194
TEP 0.0027
CITY 0.0488
MSR 0.0012
CPC 0.3933
LAC 0.0346 1.0000
<TABLE>
<CAPTION>
ALLOCATION OF UNIT 3 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
PNM $1,994,349.97 $13,226.81 $72,516.91 1-501003-770-722-1656-5850 $72,516.91 $1,994,349.97 $2,066,866.88
TEP $10,367.24 $68.78 $27,844.61 1-501003-789-722-1656-5850 $27,844.61 $10,367.24 $38,211.85
CITY $187,378.28 $1,242.72 $3,598.70 1-501003-774-722-1656-5850 $3,598.70 $187,378.28 $190,976.98
MSR $4,607.66 $30.56 $12,234.75 1-501003-773-752-1656-5850 $12,234.75 $4,607.66 $16,842.41
CPC $1,510,161.42 $10,015.60 $21,375.66 1-501003-772-722-1656-5850 $21,375.66 $1,510,161.42 $1,531,537.08
LAC $132,854.27 $881.11 $3,058.69 1-501003-771-722-1656-5850 $3,058.69 $132,854.27 $135,912.96
------------- ---------- -----------
Total $3,838,718.84 $25,465.58 $140,629.32 1-151000-768-800-1998-0000-1998
</TABLE>
ACCOUNTING ENTRY
----------------
1-501403-770-722-1656-5850 $13,226.81
1-501403-769-722-1656-5850 $68.76
1-501403-774-722-1656-5850 $1,242.72
1-501403-773-722-1656-5850 $30.58
1-501403-772-722-1656-5850 $10,015.60
1-501403-771-722-1656-5850 $881.11
$3,980.348.16 1-501001-765-800-1998-0000-1998 $25,465.58
<PAGE>
<TABLE>
<CAPTION>
SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 15
For the month ended January 1993 CIE Revision
Unit 4 Breakdown
- ----------------
PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Start-up 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Attachment C, Page 11)
Unit auxiliary 15,105.62 0.00 1,010.22 6,865.92 0.00 858.24 23,840.00 (Attachment C, Page 11)
Common auxiliary 2,301.39 583.37 114.21 388.28 678.38 97.07 4,463.00 (Attachment C, Page 11)
Units 3 and 4 common auxiliary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Attachment C, Page 11)
---------- ------ --------- --------- ------ --------- ----------
Total start-up and auxiliary 17,407.01 583.37 1,124.43 7,254.20 678.38 955.31 28,303.00
Net generation (metered shares) 179,725.80 0.00 11,972.70 83,843.30 0.00 12,905.50 288,147.00 (Attachment C, Page 11)
---------- ------ --------- --------- ------ --------- ----------
Total 197,132.81 583.37 13,097.13 91,097.50 678.38 13,860.81 316,450.00
Gross generation--Unit 4 318,450.00
</TABLE>
FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 161,880.77
Coal cost for the month $4,369,761.37
Oil cost for the month $ 24,896.56
-------------
Total fuel cost for the month $4,556,538.70
-------------
UNIT 4 ALLOCATION PERCENTAGE (From Total Line-Unit 4 Breakdown above)
- ----------------------------
PNM 0.6229
TEP 0.0028
CITY 0.0414
MSR 0.2879
CPC 0.0021
LAC 0.0429 1.0000
<TABLE>
<CAPTION>
ALLOCATION OF UNIT 4 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
PNM $2,721,924.36 $15,508.07 $83,475.43 1-501004-770-722-1656-5850 $83,475.43 $2,721,924.38 $2,805,399.79
TEP $12,235.33 $69.71 $32,052.39 1-501004-789-722-1656-5850 $32,052.39 $12,235.33 $44,287.72
CITY $180,908.12 $1,030.72 $4,142.43 1-501004-774-722-1656-5850 $4,142.43 $180,908.12 $185,050.65
MSR $1,258,054.30 $7,167.72 $14,083.83 1-501004-773-752-1656-5850 $14,083.83 $1,258,054.30 $1,272,137.93
CPC $9,176.50 $52.28 $24,805.88 1-501004-772-722-1656-5850 $24,605.88 $9,176.50 $33,782.38
LAC $187,462.76 $1,068.06 $3,320.81 1-501004-771-722-1656-5850 $3,320.91 $187,462.76 $190,983.67
------------- ---------- ------------
Total $4,369,761.37 $24,896.56 $161,880.77 1-151000-768-800-1998-0000-1998
</TABLE>
ACCOUNTING ENTRY
1-501404-770-722-1656-5850 $15,508.07
1-501404-769-722-1656-5850 $69.71
1-501404-774-722-1656-5850 $1,030.72
1-501404-773-722-1656-5850 $7,167.72
1-501404-772-722-1656-5850 $52.28
1-501404-771-722-1656-5850 $1,068.06
$4,531.642.14 1-501001-767-800-1998-0000-1998 $24,896.56
<PAGE>
Attachment C
Page 16
JAN JAN AS PROPOSED
BURN UNDER MODIFICATION 8
TONS BASE BURN EXPENSE
Unit 1 92,339.05 Unit 1 2,477,700.30 (Attachment C, Page 12)
Stm 0.00 Stm 0.00
Unit 2 92,202.40 Unit 2 2,474,033.62 (Attachment C, Page 13)
Stm 0.00 Stm 0.00
Unit 3 143,098.82 Unit 3 3,839,718.84 (Attachment C, Page 14)
Stm 5,240.98 Stm 140,629.32
Unit 4 162,852.47 Unit 4 4,369,761.37
Stm 6,032.98 Stm 161,880.77 (Attachment C, Page 15)
Total 501,766.70 Total 13,463,724.22
Participation Allocation (%) Participation Allocation (%)
Unit 1 (Attachment C, Page 12) Unit 1
PNM 0.5138 PNM 0.5138
TEP 0.4823 TEP 0.4823
COF 0.0003 COF 0.0003
MSR 0.0012 MSR 0.0012
CPC 0.0021 CPC 0.0021
LAC 0.0003 LAC 0.0003
1.0000 1.0000
Unit 2 (Attachment C, Page 13) Unit 2
PNM 0.5048 PNM 0.5048
TEP 0.4914 TEP 0.4914
COF 0.0003 COF 0.0003
MSR 0.0012 MSR 0.0012
CPC 0.0020 CPC 0.0020
LAC 0.0003 LAC 0.0003
1.0000 1.0000
Unit 3 (Attachment C, Page 14) Unit 3
PNM 0.5194 PNM 0.5194
TEP 0.0027 TEP 0.0027
COF 0.0488 COF 0.0488
MSR 0.0012 MSR 0.0012
CPC 0.3933 CPC 0.3933
LAC 0.0346 LAC 0.0346
1.0000 1.0000
Unit 4 (Attachment C, Page 15) Unit 4
PNM 0.6229 PNM 0.6229
TEP 0.0028 TEP 0.0028
COF 0.0414 COF 0.0414
MSR 0.2879 MSR 0.2879
CPC 0.0021 CPC 0.0021
LAC 0.0429 LAC 0.0429
1.0000 1.0000
CIE: 5,492,079.44
TONS BASE BURN CIE* TOTAL 501
BURNED EXPENSE EXPENSE EXPENSE
PNM 275,567.44 PNM 7,394,201.26 3,016,219.03 10,410,420.29
TEP 92,917.98 TEP 2,493,234.54 1,017,032.27 3,510,266.81
COF 14,069.18 COF 377,513.15 153,993.99 531,507.14
MSR 48,259.23 MSR 1,294,922.42 528,220.63 1,823,143.05
CPC 58,714.71 CPC 1,575,470.70 642,660.93 2,218,131.63
LAC 12,238.16 LAC 328,382.15 133,952.59 462,334.74
501,766.70 13,463,724.22 5,492,079.44 18,955,803.66
*Attachment C, page 8
<PAGE>
EXHIBIT VIII
<PAGE>
EXHIBIT VIII
Proportional Adjustment of Voting Requirements
----------------------------------------------
in Case of a Default and Suspension of the Rights of a Participant
------------------------------------------------------------------
to Vote Pursuant to Section 35.4.1.
-----------------------------------
Example Calculation Based on Hypothetical Ownership Percentages:
In the following table, Participant D with Participation Shares in Units 3 and 4
is assumed to be the defaulting Participant. Participation Shares for Voting and
Number of Participants for Voting are shown under original or pre-default
conditions and are then adjusted as provided in Sections 18.4, 19.4, 20.5, and
21.4 after the right of Participant D to vote is suspended pursuant to Section
35.4.1.
Participation Shares for voting pursuant to Sections 18.4.1(a), 18.4.2(a), and
18.4.3(a) are adjusted as follows:
For Units:
The Adjusted Participation Share for a Participant =
(That Participant's Participation Share)/(The sum of
the Participation Shares of all non-defaulting
Participants in the affected Unit)
For Common Facilities:
Adjustments related to common facilities shall be proportional
to any differing Participation Shares between Units.
The above formula would be applied to each Unit and
then summed and normalized over the applicable common
facilities. Because San Juan Units are of unequal
ratings, the normalization will be in proportion to
each Unit's rating rather than the even fractions in
the example below where equally sized units were used
for simplicity.
The numbers of Participants used for voting purposes pursuant to the
requirements of Sections 18.4.1(b), 18.4.2(b), and 18.4.3(b) are adjusted by
subtracting the number of defaulting Participants from the total number of
Participants voting under those Sections.
Exh. VIII - 1
<PAGE>
Original Adjusted
Original Number of Adjusted Number of
Participation Participants Participation Participants
Shares for For Voting Shares for for Voting
Voting: Purposes: for Voting- Purposes -
ss.18.4.1(a), ss.18.4.1, ss.18.4.1(a), ss.18.4.1(b),
ss.18.4.2(a),& ss.18.4.1(b),& ss.18.4.2(a),& ss.18.4.2(b),&
Unit or Facility ss.18.4.3(a) ss.18.4.3(b) ss.18.4.3(a) ss.18.4.3(b)
- ---------------- -------------- -------------- -------------- --------------
Unit 1 2 2
Participant A 50.00% 50.00%
Participant B 50.00% 50.00%
Unit 2 2 2
Participant A 50.00% 50.00%
Participant B 50.00% 50.00%
Unit 3 4 3
Participant A 20.00% 28.57% 1
Participant B 20.00% 28.57%
Participant C 30.00% 42.86%
Participant D 30.00% 0.00%
Unit 4 5 4
Participant A 10.00% 12.50% 2
Participant B 10.00% 12.50%
Participant C 20.00% 25.00%
Participant D 20.00% 0.00%
Participant E 40.00% 50.00%
Unit 1 & 2 Common 2 2
Participant A 50.00% 50.00%
Participant B 50.00% 50.00%
- --------
1 Computed on Unit 3 Participation Shares as follows: (Participant A)/
(Participant A + Participant B + Participant C) = 20%/(20%+20%+30%) = 28.57%
2 Computed on Unit 4 Participation Shares as follows: (Participant A)/
(Participant A + Participant B + Participant C + Participant E) =
10%/(10%+10%+20%+40%) = 12.50%
Exh. VIII - 2
<PAGE>
Original Adjusted
Original Number of Adjusted Number of
Participation Participants Participation Participants
Shares for For Voting Shares for for Voting
Voting: Purposes: for Voting- Purposes -
ss.18.4.1(a), ss.18.4.1, ss.18.4.1(a), ss.18.4.1(b),
ss.18.4.2(a),& ss.18.4.1(b),& ss.18.4.2(a),& ss.18.4.2(b),&
Unit or Facility ss.18.4.3(a) ss.18.4.3(b) ss.18.4.3(a) ss.18.4.3(b)
- ---------------- -------------- -------------- -------------- --------------
Unit 3 & 4 Common 5 4
Participant A 15.00% 20.536% 3
Participant B 15.00% 20.536%
Participant C 25.00% 33.928%
Participant D 25.00% 0.00%
Participant E 20.00% 25.000%
Plant Common 5 4
Participant A 32.50% 35.268% 4
Participant B 32.50% 35.268%
Participant C 12.50% 16.964%
Participant D 12.50% 0.00%
Participant E 10.00% 12.500%
3 Computed on Unit 3 and 4 Common Participation Shares as follows: Unit 3
Contribution = (Participant A) / (Participant A + Participant B + Participant
C) = 20%/(20%+20%+30%) = 28.571%; Unit 4 Contribution = (Participant A) /
(Participant A + Participant B + Participant C + Participant E) =
10%/(10%+10%+20%+40%) = 12.500%. Unit 3 & 4 Common = (Unit 3 Rating)/(Sum of
Unit 3 and 4 Ratings) * (Unit 3 Contribution) + (Unit 4 Rating)/(Sum of Unit 3
and 4 Ratings) * (Unit 4 Contribution) = 1/2 (28.571%) + 1/2 (12.500%) =
20.536%
4 Computed on Plant Common Participation Shares as follows: Unit 1 Contribution
= (Participant A) / (Participant A + Participant B) = 50%/(50%+50%) = 50.000%;
Unit 2 Contribution = (Participant A) / (Participant A + Participant B) =
50%/(50%+50%) = 50.000%. Unit 3 Contribution = (Participant A) / (Participant
A + Participant B + Participant C) = 20%/(20%+20%+30%) = 28.571%; Unit 4
Contribution = (Participant A) / (Participant A + Participant B + Participant
C + Participant E) = 10%/(10%+10%+20%+40%) = 12.500%. Plant Common = (Unit 1
Rating)/(Plant Rating) * (Unit 1 Contribution) + (Unit 2 Rating)/(Plant
Rating) * (Unit 2 Contribution) + (Unit 3 Rating)/(Plant Rating) * (Unit 3
Contribution) + (Unit 4 Rating)/(Plant Rating) * (Unit 4 Contribution) = 1/4
(50.000%) + 1/4 (50.000%) + 1/4 (28.571%) + 1/4 (12.500%) = 35.268%
Exh. VIII - 3
<PAGE>
EXHIBIT IX
<PAGE>
EXHIBIT IX
FIXED FUEL EXPENSE
SAN JUAN COAL SALES AGREEMENT (As Amended)
- ------------------------------------------
SECTION 9.2(B):
San Juan (Fruitland) Mine Capital Investment Element
SECTION 9.3(b):
La Plata Mine Capital Investment Element
SECTION 9.5(b):
Processing Capital Investment Element
TRANSPORTATION AGREEMENT (As Amended)
- -------------------------------------
SECTION 7.2(b):
Transportation Capital Investment Element
Exh. IX - 1
BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
IN THE MATTER OF THE COMMISSION'S )
INVESTIGATION OF THE RATES FOR )
ELECTRIC SERVICE OF PUBLIC SERVICE )
COMPANY OF NEW MEXICO, )
)
PUBLIC SERVICE COMPANY OF NEW ) Case No. 2761
MEXICO, )
)
Respondent. )
)
)
)
- -------------------------------------------------------------------
STIPULATION
-----------
The signatories to this Stipulation, as indicated on the signature
page, are collectively referred to herein as the "signatories." The signatories
have jointly prepared and submit this Stipulation to the New Mexico Public
Regulation Commission ("Commission" or "PRC") for approval in this case:
BACKGROUND
----------
1. In its Final Order in NMPUC Case No. 2752 issued on February 13,
1997, the New Mexico Public Utility Commission ("PUC") ordered Public Service
Company of New Mexico ("PNM") to file an electric general rate case using a test
period of the 12 months ending December 31, 1996.
2. In accordance with subsequent PUC orders, on November 3, 1997, PNM
filed its Advice Notice No. 258 and its petition for all approvals,
authorizations and variances necessary for PNM to implement 13 proposed revised
rates and 14 proposed new rates and to cancel 3 current rates. PNM also filed
its Experimental Incremental Interruptible Power Rate ("EIIPR") Final Report.
<PAGE>
3. Subsequently, the Commission suspended PNM's proposed rates and
appointed Peter E. Springer as Hearing Examiner to preside over hearings in this
case.
4. After an evidentiary hearing and submission of post-hearing briefs,
the PUC issued its Final Order on November 30, 1998, from which PNM took an
appeal to the New Mexico Supreme Court in Docket No. 25,513. On March 15, 1999,
the Court issued its Decision, vacating and annulling the PUC's Final Order and,
thereafter, the Court remanded Case No. 2761 to the PRC "for further proceedings
consistent and in conformity with the decision of this Court and with the
opinion issued in Cause No. 25,523, State ex rel. Sandel v. PUC."
5. The PRC entered its Order Establishing Procedures on Remand on April
20, 1999, finding that this matter should be brought to final resolution as
expeditiously as possible and that the signatories should be allowed the
opportunity to reach a negotiated settlement in order to expedite final
resolution.
6. By entering into this Stipulation the signatories intend to serve
the public interest by bringing this case to final resolution as expeditiously
as possible, providing immediate implementation of lower rates and tariffs for
all PNM customer classes, rate stability for PNM's customers and revenue
stability for PNM.
NOW THEREFORE, in consideration of their mutual promises and of the
benefits they and their respective constituencies will receive, the signatories,
through their undersigned authorized representatives, stipulate and agree as
follows:
2
<PAGE>
RATE REDUCTION
--------------
7. PNM shall file new tariffs which shall reduce its New Mexico
jurisdictional 1996 test period annualized revenues of $504,903,847 filed in
Case No. 2761 by $34,000,000, based on 1996 billing determinants. These tariffs
shall be effective for all bills rendered on and after July 30, 1999. If a final
order approving this Stipulation is entered after June 30, 1999 and as a result
PNM is unable to implement the rate reduction agreed to herein by July 30, 1999,
the rate reduction will nevertheless be effective for all bills rendered on and
after July 30, 1999. PNM will implement the rate reduction with the first full
monthly billing cycle which begins 30 days after entry of a final order
approving this Stipulation and shall refund or credit to customers any excess
revenues collected as a result of the delay in implementation past July 30,
1999.
8. To comply with ss. 18 of the Electric Utility Industry Restructuring
Act of 1999, Laws of 1999, ch. 294 ("the Act"), PNM shall also file a second set
of new tariffs which shall reduce New Mexico jurisdictional 1996 test period
annualized revenues by an additional $7,409,457 to reflect that local government
franchise fees ("franchise fees") currently charged by government authorities
shall be collected from and stated as a separate line item on the bills of
customers located within the jurisdiction of the government authority imposing
the fee. This second set of tariffs will replace the tariffs described in P. 7
once PNM's customer billing system (Banner) has been modified to reflect
franchise fees as a separate line item on customers' bills. PNM will use best
efforts in good faith to implement this second set of tariffs as soon as
possible, with franchise fees as a separate line item charged only to customers
located within the jurisdiction of the government authority imposing the fee.
But in any event, PNM will comply with all Commission orders applicable to
franchise fees. Notwithstanding the foregoing language, the signatories to this
Stipulation expressly reserve all rights and remedies they may have under
Section 18A of the Act.
3
<PAGE>
9. The annual base rate revenue reductions set forth in paragraphs 7
and 8 will be allocated among current rate classes pro rata on a revenue basis
as shown in Attachments A and B, respectively to this Stipulation. Specific
tariffs reflected in Attachments C and D, respectively, to this Stipulation show
how the resulting $470,903,847 or $463,494,390 of revenues will be collected.
10. The Experimental Incremental Interruptible Power Rate ("EIIPR")
will be continued on a non-experimental basis for customers on that rate as of
the date of the execution of this Stipulation, will not be offered to new
customers, and will be called the Incremental Interruptible Power Rate ("IIPR").
The rates on the IIPR and on the economic development rate riders will not be
reduced.
11. The signatories agree that Tariff 16, PNM's Special Changes tariff,
should be approved as part of this Stipulation. Tariff 16 is included in
Attachments C and D to the Stipulation.
RATE STABILITY
--------------
12. Except as otherwise provided in this Stipulation, the rates
stipulated to herein and PNM's Street and Private Area Lighting rates shall
continue in effect, regardless of any changed circumstances, until customer
choice service is implemented in accordance with ss. 4 of the Act or January 1,
2003, whichever occurs first.
13. Under Section 4(A)(1) of the Act customer choice service is to be
implemented for public post-secondary educational institutions and public
schools, residential and small business customers before all other customers.
Therefore, the rates for each customer class stipulated to herein will remain in
effect until customer choice service is implemented for that class even though
customer choice service may have been previously implemented for another class.
4
<PAGE>
14. The signatories will not institute on their own motion or encourage
or support another person to seek or initiate any proceeding requesting a change
in PNM's rates which would take effect prior to implementation of customer
choice service under the Act. If at any time after approval of this Stipulation
any person petitions or otherwise seeks from the Commission a rate case or other
proceeding or the Commission initiates a rate case or other proceeding to review
the reasonableness of PNM's revenue requirements and to seek a change in rates
that would become effective prior to implementation of customer choice service
under the Act, the signatories will state their support for the provisions of
this Stipulation and the continuation of the rates stipulated herein. The
signatories will support, and work in good faith and to the best of their
abilities to meet, the timeframes established in Section 4(A) of the Act for
implementation of customer choice service and will not institute or support any
delay in these timeframes unless necessary to maintain adequate and reliable
service to customers. This does not preclude the signatories from requesting
extensions of time, continuances or other appropriate relief from hearing
schedules or other deadlines in PRC proceedings initiated pursuant to the Act.
15. Except as otherwise provided in this Stipulation, before the
effective date of customer choice service, the signatories may make filings,
subject to Commission approval, that modify tariffs, riders and terms and
conditions of rate schedules or which propose new tariffs, riders or terms and
conditions, so long as such changes or additions do not increase or decrease
base rates reflected in the rate schedules implemented pursuant to this
Stipulation or increase or decrease revenues to PNM based on 1996 billing
determinants. However, this Stipulation shall not preclude PNM from proposing
decreases in rates or revenues.
5
<PAGE>
16. Notwithstanding any provision herein to the contrary, before the
effective date of customer choice service, the signatories may make filings,
subject to Commission approval, that modify or propose new tariffs, riders and
terms and conditions of rate schedules if any governmental authority imposes (a)
a new franchise fee or a change in an existing franchise fee or (b) the Case No.
2787 renewable energy surcharge. In addition, PNM may seek approval of tariffs
to recover from governmental authorities increased costs of a siting, permitting
or construction requirement that mandates the extraordinary undergrounding of
distribution facilities not recovered under PNM's line extension policy or the
undergrounding of transmission facilities; provided however, a requirement
mandating undergrounding necessary to comply with state or federal rules,
regulations or laws shall not be included in such request to recover increased
costs from governmental authorities. The signatories will not oppose a request
by PNM for a Commission hearing or rulemaking on the recovery from governmental
authorities of increased costs of the extraordinary undergrounding of
distribution facilities not recovered under PNM's line extension policy or the
undergrounding of transmission facilities required by such authorities.
17. Nothing herein shall affect the operation of NMPUC Rule 330 or
PNM's Tax Adjustment Clause or PNM's Palo Verde Refinancing Credit approved in
Case No. 2837 which is stated as a separate line item on customers' bills.
18. The signatories acknowledge that this agreement to reduce rates
constitutes valuable consideration which the signatories have given based on
their expectation that base rates will not be changed until customer choice
service is implemented or January 1, 2003, whichever occurs first. The
signatories further acknowledge that they have agreed to the rate reduction in
reliance on and in exchange for the other signatories' promise that they will
not support docketing any proceeding to review the reasonableness of PNM's
rates, to seek a change in rates prior to implementation of customer choice
service, or support a delay in the implementation of customer choice service
beyond the dates set forth in Section 4(A) of the Act, except as otherwise
provided in this Stipulation.
6
<PAGE>
GENERAL PROVISIONS
------------------
19. The signatories will use their best efforts to obtain expeditious
implementation of this Stipulation by the entry of an appropriate final
Commission order. This Stipulation assumes the legality and enforceability of
the rates and agreements set forth in this Stipulation. Should any rate or
agreement set forth in this Stipulation be rejected, modified or directly or
indirectly rendered inoperable by Commission or Court decision, any party shall
have the right, by filing a notice of withdrawal with the PRC within five
working days, to withdraw from this Stipulation and render this Stipulation of
no further force and effect, in which case the signatories shall attempt in good
faith to negotiate an appropriate substitute rate or agreement.
20. Under Commission Rule 531 adopted by the PUC in Case No. 2816, PNM
is required, for informational purposes, to functionalize the rates which
implement the revenue reduction agreed to herein. The signatories agree that
neither the methodology used to functionalize PNM's rates nor the resulting
functionalized rates after the rate reduction to comply with Commission Rule
531, shall in any way bind the signatories, constitute an admission or have any
precedential effect in any proceeding, including, specifically, any proceedings
and determinations required under the Act.
7
<PAGE>
21. The rate design, rate design method, the allocation of revenue
requirements and the allocation method for setting revenue requirements agreed
to in this Stipulation reflect various compromises of the positions of the
signatories in this case for settlement purposes only and shall not constitute
an admission of any kind or otherwise bind any signatory or establish any
precedent or presumption in any other proceeding, including any proceedings
required by the Act.
22. This Stipulation shall not prejudice, bind, or affect any party, or
be viewed as an admission, except to the extent necessary to give effect to or
enforce the terms of this Stipulation or unless otherwise specifically stated
herein. In the event this Stipulation is not approved by the Commission, nothing
in this Stipulation or negotiations leading up to its execution shall be
construed as an admission of a signatory's position on any issue nor be used or
offered into evidence by any signatory in this or any other proceeding.
23. Neither this Stipulation nor changes or deletions in the proposed
4000B tariff to the section entitled, "Service With A Contract Demand of 10,000
KW Or More:" shall prejudice, bind, or serve as an admission by any signatory
regarding the historic application/availability of PNM's current tariffs to
specific customers or regarding the provision of electric
generation/transmission to the United States Executive Agencies facilities by
the Western Area Power Administration.
24. In its transition plan filed pursuant to the Act, PNM agrees to
propose methods to address the situation of customers which, after open access
pursuant to the Act, may not have genuine access to markets and suppliers beyond
PNM's system, and as such could be exposed to excessive market power of a
competitive power supplier.
8
<PAGE>
25. This Stipulation shall remain in effect until terminated or
modified by unanimous consent of the signatories, except as otherwise provided
in this Stipulation.
26. This Stipulation expresses the full intent, understanding and
entire agreement of the signatories concerning the subject matter hereof.
27. This Stipulation shall be binding upon and inure to the benefit of
the heirs, successors and assigns of the signatories.
28. Approval of this Stipulation shall be entered as the Final Order in
Case No. 2761.
29. Other signatories may agree to the terms of this Stipulation
through the execution of a separate signature page. Duly authorized
representatives of the signatories have signed or telephonically
approved this Stipulation as of the 21st day of May, 1999.
/s/ Sarah D. Smith
- -----------------------------
Sarah D. Smith, Esq. for
Public Service Company of New Mexico
Alvarado Square, MS - 0806
Albuquerque, NM 87158
/s/ Karen L. Fisher
- -----------------------------
Karen L. Fisher, Esq. for
Attorney General of the State of New Mexico
Post Office Box 1508
Santa Fe, NM 87504
/s/ Steven S. Michel
- -----------------------------
Steven S. Michel, Esq. for
NMIEC
320 Galisteo Street, Suite 301
Santa Fe, NM 87501
9
<PAGE>
/s/ Steve Hattenbach
- -----------------------------
Steve Hattenbach, Esq. for
NMPRC Staff, Utility Division
Marian Hall, 224 East Palace Avenue
Santa Fe, NM 87501
/s/ Nann Houliston
- -----------------------------
Nann Houliston, Esq. for
City of Albuquerque
Post Office Box 2248
Albuquerque, NM 87103
/s/ Bruce C. Throne
- -----------------------------
Bruce C. Throne, Esq. for
The Regents of the University of New Mexico
Post Office Box 9270
Santa Fe, NM 87504-9270
/s/ Leslie J. Lawner
- -----------------------------
Leslie J. Lawner, Esq. for
Enron Capital & Trade Resources Corp.
712 North Lea
Roswell, NM 88201
10
BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
--------------------------------------------------
IN THE MATTER OF THE COMMISSION'S )
INVESTIGATION OF THE RATES FOR )
ELECTRIC SERVICE OF PUBLIC SERVICE )
COMPANY OF NEW MEXICO, )
)
PUBLIC SERVICE COMPANY OF NEW ) Case No. 2761
MEXICO, )
)
Respondent. )
)
)
)
- --------------------------------------------
SUPPLEMENTAL STIPULATION
------------------------
COME NOW the signatories to the Stipulation filed herein on May 21,
1999 and United States Executive Agencies ("USEA") and stipulate as follows:
1. USEA withdraws its Statement Opposing Stipulation filed May 24, 1999 and
joins in the Stipulation filed on May 21, 1999 as amended herein.
2. Paragraph 23 of the Stipulation is amended to read:
This Stipulation shall not prejudice, bind or serve as an admission by
any signatory regarding the historic application/availability of PNM's
current tariffs to specific customers.
3. USEA and PNM dispute the terms which should be included in Rate 4000B
relating to the sections dealing with "Applicability," "Type of Service," and
"Service With a Contract Demand of 10,000 kW or More" submitted with the
Stipulation in Attachments C and D. USEA and PNM will propose a procedural
schedule for resolution by the Commission of the dispute about these terms of
Rate 4000B.
<PAGE>
4. Pending determination by the Commission of the appropriate terms of Rate
4000B, the rate included in Advice Notice No. 272 shall be amended to contain
the existing tariff language, proposed by USEA and disputed by PNM, and the
alternative tariff language, proposed by PNM and disputed by USEA, as shown in
Attachment E hereto which replaces the Rate 4000B originally included in Advice
Notice No. 272. USEA will take service under Rate 4000B as shown in Attachment E
pending resolution by the Commission of this dispute.
5. Nothing in this Supplemental Stipulation shall affect the Stipulation
filed on May 21, 1999, including the implementation provisions of Paragraph 7 of
that Stipulation, except as otherwise expressly provided herein.
/s/ Sarah D. Smith
- -------------------------------------------
Sarah D. Smith, Esq. for
Public Service Company of New Mexico
Alvarado Square, MS - 0806
Albuquerque, NM 87158
/s/ David Dusseau
- -------------------------------------------
Maj. David Dusseau
Utility Litigation Team
AFLSA
139 Barnes Drive, Suite 1
Tyndall AFB, FL 32403-5319
/s/ Karen K. Fisher
- -------------------------------------------
Karen L. Fisher, Esq. for
Attorney General of the State of New Mexico
Post Office Box 1508
Santa Fe, NM 87504
2
<PAGE>
/s/ Steven S. Michel
- -----------------------------
Steven S. Michel, Esq. for
NMIEC
320 Galisteo Street, Suite 301
Santa Fe, NM 87501
/s/ Steven Hattenbach
- -----------------------------
Steve Hattenbach, Esq. for
NMPRC Staff, Utility Division
Marian Hall, 224 East Palace Avenue
Santa Fe, NM 87501
/s/ I. David Rosenstein
- -----------------------------
I. David Rosenstein for
United States Executive Agency
Lundberg, Marshall & Associates
Post Office Box 429349
Cincinnati, OH 45242-9349
/s/ Nann Houliston
- -----------------------------
Nann Houliston, Esq. for
City of Albuquerque
Post Office Box 2248
Albuquerque, NM 87103
/s/ Bruce C. Throne
- -----------------------------
Bruce C. Throne, Esq. for
Regents of the University of New Mexico
Post Office Box 9270
Santa Fe, NM 87504-9270
/s/ Leslie J. Lawner
- -----------------------------
Leslie J. Lawner, Esq. for
Enron Capital & Trade Resources Corp.
712 North Lea
Roswell, NM 88201
3
ASSET SALE AGREEMENT
BETWEEN
TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.,
A COLORADO COOPERATIVE ASSOCIATION
AND
PUBLIC SERVICE COMPANY OF NEW MEXICO,
A NEW MEXICO CORPORATION
DATED _____________
SEPTEMBER 9, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I. SALE AND PURCHASE OF ASSETS.................................... 1
1.1 Sale and Purchase of Assets............................... 1
1.2 Liability for Taxes, etc.................................. 3
1.3 Revisions to Exhibits..................................... 3
ARTICLE II. CONSIDERATION.................................................. 3
2.1 Purchase Price............................................ 3
2.2 Allocation of Purchase Price.............................. 3
ARTICLE III. ASSUMPTION OF LIABILITIES...................................... 4
3.1 Contracts................................................. 4
3.2 Post-Closing Liabilities.................................. 4
3.3 Other Liabilities......................................... 4
ARTICLE IV. PRORATION OF TAXES; OPERATIONS AGREEMENTS...................... 4
4.1 Proration of Taxes........................................ 4
4.2 Operations Agreements..................................... 4
ARTICLE V. GENERAL REPRESENTATIONS AND WARRANTIES......................... 4
5.1 Representatives and Warranties of Seller.................. 4
5.2 Representations and Warranties of Buyer................... 9
5.3 Disclosure Schedules......................................10
5.4 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES........11
ARTICLE VI. PRE-CLOSING COVENANTS OF SELLER AND BUYER......................11
6.1 Hart-Scott-Rodino Act.....................................11
6.2 Good Faith Efforts........................................11
6.3 Notice of Developments....................................11
6.4 Environmental Site Assessments............................11
ARCTICLE VII. COVENANTS OF SELLER...........................................11
7.1 Consents..................................................12
7.2 NMPRC Approvals...........................................12
7.3 Operation of the Property.................................12
7.4 Access....................................................12
7.5 Additional Covenants of Seller............................13
ARTICLE VIII. COVENANTS OF BUYER............................................13
8.1 Consents..................................................13
8.2 NMPRC and FERC Approvals..................................13
<PAGE>
ARTICLE IX. CONDITIONS PRECEDENT..........................................14
9.1 Conditions to Obligations of Buyer........................14
9.2 Conditions to Obligations of Seller.......................15
ARTICLE X. CLOSING AND POST-CLOSING OBLIGATIONS..........................16
10.1 Closing...................................................16
10.2 Post-Closing..............................................17
ARTICLE XI. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS...............................................17
ARTICLE XII. TERMINATION....................................................18
12.1 Termination...............................................18
12.2 Effect of Agreement Upon Termination......................18
ARTICLE XIII. OTHER AGREEMENTS..............................................19
13.1 Discharge of Liabilities..................................19
13.2 Delivery and Maintenance of Records.......................19
13.3 Arbitration...............................................20
13.4 Consents Not Obtained.....................................23
13.5 Navopache Arrangement.....................................23
13.6 Headquarters Building.....................................23
13.7 Rights-of-Way Renewals....................................24
ARTICLE XIV. MISCELLANEOUS..................................................24
14.1 Notices...................................................24
14.2 Governing Law.............................................24
14.3 Modification/Waiver.......................................24
14.4 Assignment................................................25
14.5 No Brokers................................................25
14.6 Public Announcements......................................25
14.7 Severability..............................................25
14.8 Paragraph Headings........................................25
14.9 Counterparts..............................................25
14.10 Entire Agreement..........................................25
<PAGE>
ASSET SALE AGREEMENT
THIS ASSET SALE AGREEMENT (this "Agreement") is made and entered into
as of the ______ day of _______________, 1999 (the "Signing Date"), by and
between TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC., a Colorado
cooperative association ("Seller"), and PUBLIC SERVICE COMPANY OF NEW MEXICO, a
New Mexico corporation ("Buyer").
WHEREAS, as of March 18, 1999, Seller and Plains Electric Generation
and Transmission Cooperative, Inc. ("Plains") entered into a Transaction
Agreement (the "Transaction Agreement") providing for the merger of Plains with
and into Seller (the "Merger"); and
WHEREAS, Seller is required to enter into this Agreement with Buyer by
Section 5.3(c) of the Transaction Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I.
SALE AND PURCHASE OF ASSETS
---------------------------
1.1 Sale and Purchase of Assets. Subject to all the terms and
conditions set forth in this Agreement, on the Closing Date and at the Closing
(as such terms are defined in Article X of this Agreement), Seller hereby agrees
to sell, transfer, assign and convey to Buyer all of the following described
assets (collectively, the "Assets") which will be owned by Seller following the
Merger, and Buyer hereby agrees to purchase, assume and accept the Assets from
Seller:
(i) Generating Assets. An ownership interest, as specified on
Exhibit 1.1(i) attached hereto, in and to the electric
generating facility and related common facilities described on
Exhibit 1.1(i), together with the same ownership interest in
and to the real property interests (including, without
limitation, any easements, rights-of-way, permits or other
equivalent real property usage rights) related thereto
(collectively, the "Generating Assets").
(ii) Transmission Assets. An ownership interest, as specified on
Exhibit 1.1(ii) attached hereto, in and to those transmission
and distribution lines, interconnections and other components
of the system identified on Exhibit 1.1(ii), together with the
same ownership interest in and to the real property interests
(including, without limitation, any easements, rights-of-way,
permits or other equivalent real property usage rights)
related thereto (collectively, the "Transmission Assets").
1
<PAGE>
(iii) Substations. An ownership interest, as specified on Exhibit
1.1(iii) attached hereto, in and to those substations,
interconnections and related components which are identified
on Exhibit 1.1(iii), together with the same ownership interest
in all of the real property interests (including, without
limitation, any easements, rights-of-way, permits or other
equivalent real property usage rights) related thereto
(collectively the "Substations").
(iv) Telecommunications Assets. An ownership interest, as specified
on Exhibit 1.1(iv) attached hereto, in and to those
telecommunications facilities and related equipment described
on Exhibit 1.1(iv), together (where indicated on Exhibit
1.1(iv)) with the same ownership interest in all of the real
property interests (including, without limitation, any
easements, rights-of-way, permits or other equivalent real
property usage rights) related thereto (the
"Telecommunications Assets").
(v) Headquarters Facility. The headquarters facility and related
common facilities described on Exhibit 1.1(v) attached hereto,
together with all of the real property interests (including,
without limitation, any easements, rights-of-way, permits or
other equivalent real property usage rights) related thereto
(collectively, the "Headquarters Facility").
(vi) Personal Property. The office furniture, equipment and other
personal property described on Exhibit 1.1(vi) attached hereto
(the "Personal Property").
(vii) Contracts. The rights of Plains (and, following consummation
of the Merger, of Seller) under the contracts, leases and
other agreements listed on Exhibit 1.1(vii) attached hereto,
to the extent described on Exhibit 1.1(vii) (to the extent so
described, the "Contracts").
(viii) Business Records. Subject to Section 13.2 hereof, all business
records associated with the Assets as of the time of the
Closing, including but not limited to financial, operating,
accounting, tax, business, marketing and other files,
documents, instruments, papers, customer list(s), books,
ledgers, records, insurance policies, and any and all records
of annual testing and certification (the "Business Records").
(ix) Licenses and Permits. To the extent assignable, and to the
extent held by Seller as of the Closing Date, permits or
licenses to the extent that the parties agree are necessary
for Buyer to operate the Assets (the "Licenses and Permits").
(x) Navopache Assets. Subject to Section 13.5 hereof, the
assets described on Exhibit 1.1 (ix) attached hereto (the
"Navopache Assets").
2
<PAGE>
1.2 Liability for Taxes, etc. Liability for any real estate transfer
fees and taxes shall be borne by Buyer. The parties expect that no liability for
sales, use or gross receipts tax will result from this transaction, but, in the
event that such liability does arise, it shall be borne by Buyer.
1.3 Revisions to Exhibits. Seller and Buyer recognize and agree that
the foregoing Exhibits may not completely and/or accurately identify all Assets,
and further agree to cooperate with each other to prepare, supplement or amend
any such Exhibit in order to have a complete and accurate description of the
Assets before the Closing.
ARTICLE II.
CONSIDERATION
-------------
2.1 Purchase Price. The purchase price to be paid for the Assets (the
"Purchase Price") shall be an amount provisionally estimated by the parties (on
the basis of Plains' financial information as of December 31, 1997) to be
Thirteen Million Two Hundred Forty Eight Thousand One Hundred Thirty Four and
03/100 Dollars ($13,248,134.03), to be paid in full at the Closing, together
with the assumption of the liabilities described in Article III, to be assumed
at the Closing. Within fifteen (15) business days after the Signing Date, Seller
shall provide to Buyer financial information as of December 31, 1998, with
reasonable supporting documentation, that will update the December 31, 1997
financial information previously provided to Buyer. Notwithstanding the
foregoing, Seller will provide to Buyer a revised estimated Purchase Price at
least fifteen (15) days prior to the Closing Date, calculated in the manner
described on Exhibit 2.1 attached hereto and on the basis of financial
information that is current as of the date on which such revised estimated
Purchase Price is established, and such revised estimate will be the basis for
the payment of the Purchase Price on the Closing Date. As soon as possible (but
no more than forty-five days) after the Closing Date, the parties will negotiate
in good faith to agree to and establish a final Purchase Price, and within five
(5) business days after such final Purchase Price is established, one party will
make to the other a payment to reconcile the difference between the provisional
Purchase Price (revised as hereinbefore described) and the final Purchase Price.
In the event the parties are unable to agree on a final Purchase Price, such
dispute will be submitted to arbitration pursuant to Section 13.3 hereof.
2.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in such manner as may be agreed upon by the parties prior to
the Closing in accordance with Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that if the parties cannot
mutually agree upon such allocation, such allocation shall be conclusively
determined by an independent appraiser selected by the parties, who shall
prepare such appraisal in accordance with Section 1060 of the Code. The parties
agree that any tax filings that they may make in relation to the Assets shall be
consistent with such allocations.
3
<PAGE>
ARTICLE III.
ASSUMPTION OF LIABILITIES
-------------------------
3.1 Contracts. Subject to all the terms and conditions set forth in
this Agreement and in the Operations Agreements described in Section 4.2 hereof,
effective from and after the Closing Date, Buyer hereby agrees to assume and be
bound by and to perform, observe and comply with all of the terms, covenants,
conditions, undertakings and other provisions of the Contracts, in the same
manner and with the same force and effect as if Buyer had originally executed
such Contracts in the place and stead of Seller (or Plains, as the case may be),
and agrees faithfully to perform each of the Contracts from and after the
Closing Date.
3.2 Post-Closing Liabilities. Subject to all the terms and conditions
set forth in this Agreement and in the Operations Agreements described in
Section 4.2 hereof, effective from and after the Closing Date, Buyer hereby
agrees to assume and be bound by and to pay and discharge all liabilities that
arise on or subsequent to the Closing Date out of the ownership or operation of
any of the Assets.
3.3 Other Liabilities. Except as expressly provided in this Article
III, Buyer is not assuming and shall have no responsibility for any obligations
or liabilities of Seller.
ARTICLE IV.
PRORATION OF TAXES; OPERATIONS AGREEMENTS
-----------------------------------------
4.1 Proration of Taxes. Real property taxes and personal property taxes
attributable to the Assets for the year in which the Closing occurs, together
with utility charges and rents, shall be prorated between Buyer and Seller as of
the Closing Date.
4.2 Operations Agreements. On or prior to the Closing Date (or as
otherwise specified on Exhibit 4.2 attached hereto), Seller and Buyer shall
enter into the operations, transmission, power marketing and other agreements
(collectively, the "Operations Agreements") listed on Exhibit 4.2 hereto.
ARTICLE V.
GENERAL REPRESENTATIONS AND WARRANTIES
--------------------------------------
5.1 Representatives and Warranties of Seller. Except to the extent set
forth on the Seller's Disclosure Schedule described in Section 5.3 hereof,
Seller hereby represents and warrants to Buyer for and on behalf of itself and,
where indicated, for and on behalf of Plains, that the following statements
contained in this Section 5.1 will be correct and complete as of the date of
delivery of such Disclosure Schedule and as of the Closing Date (as though made
on the Closing Date):
(i) Due Incorporation, etc. Seller is duly incorporated, existing
and in good standing under the laws of the State of Colorado,
and has all requisite corporate power and authority to own its
properties and conduct its business as presently owned and
conducted.
4
<PAGE>
(ii) Due Authorization, etc. Seller has the corporate power and
authority to enter into and perform its obligations under this
Agreement, this Agreement has been duly and validly authorized
by the Board of Directors of Seller, and no other corporate
action on the part of Seller is required in connection with
this Agreement. When completed, this Agreement and any related
agreements of Seller hereunder shall constitute valid and
binding obligations of Seller that shall be enforceable
against Seller in accordance with the terms hereof and
thereof.
(iii) No Violation. This Agreement and the execution and delivery
hereof by Seller do not, and the fulfillment of and compliance
with the terms and conditions hereof and the consummation of
the transactions contemplated hereby will not:
(a) Violate or conflict with any provision of the
articles of incorporation or bylaws, each as amended
to date, of Seller;
(b) Violate or conflict with or require any consent,
authorization or approval under any provision of any
law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment,
writ, injunction or decree applicable to or binding
upon Seller (except the approval of the Rural
Utilities Service ("RUS"), the New Mexico Public
Regulation Commission ("NMPRC"), the Federal
Communications Commission ("FCC") and the expiration
or early termination of the required waiting period,
if applicable, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act"));
(c) Result in a breach of, constitute a default or
violation under (whether with notice or lapse of time
or both) or require any consent, authorization or
approval under any mortgage, indenture, loan or
credit agreement or any other agreement or instrument
evidencing indebtedness for money borrowed to which
Seller is a party or by which any of its properties
or assets is bound; or
(d) Result in the creation or imposition of any lien,
charge, security interest or other encumbrance upon
the Assets.
(iv) Compliance with Laws and Regulations. Seller's and Plains'
ownership and operation of the Assets is in compliance with
all applicable laws, regulations, orders, judgments or decrees
of any Governmental Authority (as herein defined) having
jurisdiction over the Assets, except such violations as would
not have a Material Adverse Effect (as herein defined) with
respect to the Assets. For the purposes of this Agreement,
"Governmental Authority" shall mean the United States of
America, any state, commonwealth, territory or possession
thereof and any tribe or pueblo, and any political subdivision
of any of the foregoing, including, but not limited to,
courts, departments, commissions, boards, bureaus, agencies or
other instrumentalities; and "Material Adverse Effect" with
respect to the Assets shall mean a change or occurrence which,
in the reasonable judgment of the Buyer, is or is likely to be
materially adverse to the value or condition of the Assets.
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(v) Taxes. All taxes, assessments and charges by Governmental
Authorities which are due and payable by Seller and Plains
with respect to the Assets, as applicable, have been paid,
other than those taxes, assessments and charges by
Governmental Authorities being contested in good faith for
which adequate provisions have been made.
(vi) Litigation. There is no action, suit, or proceeding pending
or, to the knowledge of Seller or Plains, threatened against
Seller or Plains (i) which could reasonably be expected to
materially hinder Seller's ability to consummate the
transactions contemplated by this Agreement, or (ii) which
specifically concerns the Assets.
(vii) Environmental. Seller and Plains:
(a) Have operated the Assets in compliance in all
respects with all applicable Environmental Laws (as
herein defined), except such violations as would not
have a Material Adverse Effect with respect to the
Assets; for the purposes of this Agreement,
"Environmental Laws" shall mean federal, state,
tribal, pueblo or municipal laws, rules and
regulations governing, regulating or relating to
pollution or the protection of the environment,
including, but not limited to, the Resource
Conservation and Recovery Act of 1976, as amended,
the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended,
the Superfund Amendments and Reauthorization Act of
1986, as amended, and all similar state, tribal,
pueblo, municipal and local laws, ordinances, rules,
regulations, orders, directives, determinations and
requirements each as in effect on the Signing Date
for purposes of the representations given on the
Signing Date and as in effect on the Closing Date for
all other purposes of this Agreement;
(b) Have obtained all Governmental Licenses (as herein
defined) which are required under any Environmental
Law applicable to the Assets except to the extent
that the failure to obtain any such Governmental
License would not have a Material Adverse Effect with
respect to the Assets; for the purposes of this
Agreement, "Governmental Licenses" shall mean
licenses, permits, certificates of public convenience
and necessity, consents and other similar licenses
issued by any Governmental Authority;
(c) Have not received written notice from any
Governmental Authority of any unresolved violation of
or pending or threatened action, suit, inquiry,
proceeding or investigation relating to any
Environmental Law applicable to the Assets which
unresolved violation or investigation would have a
Material Adverse Effect with respect to the Assets;
and
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(d) Have not received written notice from any
Governmental Authority of any legally required
environmental removal, remediation or clean-up
obligation with respect to the Assets that would have
a Material Adverse Effect on the Assets.
(viii) Maintenance of the Assets. Seller and Plains have maintained
the Assets in reasonable operating condition and repair and
the Assets are adequate to perform normal operations
consistent with Plains' recent practices, except where the
failure to maintain would not have a Material Adverse Effect
with respect to the Assets.
(ix) Contracts. Seller and Plains have provided Buyer with complete
copies of the Contracts and all amendments thereto. The
Contracts are in full force and effect. No third party to any
Contract has prepaid more than 30 days in advance any amounts
due thereunder. Seller has not waived its remedies for default
by, or expressly waived any other rights against, a third
party under any Contract. Seller and Plains have made all
payments due thereunder, if any, except those being contested
in good faith, and have performed all of their material
obligations under such Contracts, except for such failures to
make payments or perform obligations which would not have a
Material Adverse Effect with respect to the Assets. To the
knowledge of Seller and Plains, there are no written proposals
or threats by third parties to cancel, revise or fail to renew
any Contract or fail to renew, cancel or revise any
right-of-way or easement.
(x) Title to Property. Plains has, and on the Closing Date Seller
will have, good and marketable title to the Assets, in each
case free and clear of all mortgages, liens, charges, security
interests, or other encumbrances except Permitted Encumbrances
(as herein defined). To the knowledge of Seller, no adverse
title claims are pending or threatened with respect to any
portion of the Assets and Seller owns its rights in the same
free and clear of all mortgages, liens, charges, security
interests or other encumbrances except Permitted Encumbrances.
For the purposes of this Agreement, "Encumbrances" shall mean
all liens, mortgages, pledges, claims, charges, security
interests or other encumbrances, including, without
limitation, any leases, subleases, rights-of-way, licenses,
easements, options to purchase, encumbrances, covenants,
building use restrictions, exceptions, variances, restrictions
or limitations, and "Permitted Encumbrances" shall mean (a)
Encumbrances for current real property, personal property or
ad valorem taxes which are not yet due and payable, (b)
mineral rights and claims to minerals which do not materially
adversely affect the value, condition or usefulness of the
property affected thereby, (c) water rights and claims to
water which do not materially adversely affect the value,
condition or usefulness of the property affected thereby, and
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(d) easements, covenants, restrictions and reservations (not
arising out of or created in connection with the borrowing of
money, including the obtaining of advances, or the payment of
the deferred purchase price of property) which do not
materially adversely affect the value, condition or usefulness
of the property affected thereby. As of the date of delivery
of Seller's Disclosure Schedule, but not on the Closing Date,
Permitted Encumbrances shall include (i) "Permitted
Encumbrances" as such term is defined in that certain
Consolidated Mortgage and Security Agreement, dated as of
April 15, 1992, as amended, between Plains and the United
States of America acting through the Administrator of the RUS,
the National Rural Utilities Cooperative Finance Corporation,
CoBank ACB and The Bank of New York, as successor in trust to
Sunwest Bank of Albuquerque, National Association (the "Plains
Mortgage"), and (ii) any encumbrances created by the Plains
Mortgage.
(xi) Historical Operating Data and Financial Statements. All
historical operating data and financial information delivered
in writing to Buyer was accurate in all material respects as
of the date provided.
(xii) No Third Party Options. There are no existing agreements,
options, commitments, or rights with or to any person to
acquire any of the Assets, properties or rights included in
the Assets.
(xiii) FERC Regulation. None of the Assets is subject to rate
regulation or a filed tariff under the Federal Power Act.
(xiv) RUS Regulation. Seller and Plains are subject to regulation by
the RUS and the Closing is contingent upon Seller obtaining
all required approvals and authorizations from the RUS with
respect to the execution and performance of this Agreement.
(xv) Environmental Assessments. No written environmental assessment
of the Assets has been prepared by a third party on behalf of
Seller or Plains within the 5-year period preceding the
Signing Date.
(xvi) Deeds. Seller or Plains has provided Buyer full and complete
copies of all deeds under which such Seller or Plains holds
fee title to any real property that is a part of the Assets.
Neither Plains nor Seller has transferred any right, title or
interest in any such fee property.
(xvii) Existing Arrangements. Exhibit 5.1(xvii) attached hereto lists
the existing contractual arrangements (the "Existing
Arrangements") between Plains and Buyer and describes the
proposed disposition of the Existing Arrangements through
assignment, termination or modification. Seller and Buyer
agree to use their best efforts to promptly achieve the
assignment, termination or modification of the Existing
Arrangements as shown in Exhibit 5.1(xvii).
(xviii) Rights-of-Way. The Assets include all easements,
rights-of-way, permits or other equivalent real property usage
rights in respect of any real property comprising the Assets,
as may be reasonably necessary to operate the Assets, and none
of such easements, rights-of-way, permits or other equivalent
real property usage rights have expired.
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5.2 Representations and Warranties of Buyer. Except to the extent set
forth on the Buyer's Disclosure Schedule described in Section 5.3 hereof, Buyer
hereby represents and warrants to Seller that the following statements contained
in this Section 5.2 will be correct and complete as of the date of delivery of
such Disclosure Schedule and as of the Closing Date (as though made on the
Closing Date):
(i) Due Incorporation, etc. Buyer is duly incorporated, existing
and in good standing under the laws of the State of New
Mexico, and has all requisite corporate power and authority to
own its properties and conduct its business as presently owned
and conducted.
(ii) Due Authorization, etc. Buyer has the corporate power and
authority to enter into and perform its obligations under this
Agreement, this Agreement has been duly and validly authorized
by the Board of Directors of Buyer, and no other corporate
action on the part of Buyer is required in connection with
this Agreement. When completed, this Agreement and any related
agreements of Buyer hereunder shall constitute valid and
binding obligations of Buyer that shall be enforceable against
Buyer in accordance with the terms hereof and thereof.
(iii) No Violation. This Agreement and the execution and delivery
hereof by Buyer do not, and the fulfillment and compliance
with the terms and conditions hereof and the consummation of
the transactions contemplated hereby will not:
(a) Violate or conflict with any provision of the
certificate of incorporation or bylaws, each as
amended to date, of Buyer;
(b) Violate or conflict with or require any consent,
authorization or approval under any provision of any
law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment,
writ, injunction or decree applicable to or binding
upon Buyer (except the approvals of the NMPRC, the
Federal Energy Regulatory Commission ("FERC") and the
FCC and the expiration or early termination of the
required waiting period, if applicable, under the
Hart-Scott-Rodino Act); or
(c) Result in a breach of, constitute a default or
violation under (whether with notice or lapse of time
or both) or require any consent, authorization or
approval under any mortgage, contract, indenture,
loan or credit agreement or any other agreement or
instrument evidencing indebtedness for money borrowed
to which Buyer is a party or by which any of its
properties or assets is bound.
(iv) Litigation. There is no action, suit or proceeding, pending
or, to the knowledge of Buyer, threatened against Buyer which
would have a material adverse effect with respect to Buyer or
would materially hinder Buyer's ability to consummate the
transactions contemplated by this Agreement.
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(v) Funds Available. Buyer has, or will have on and after the
Closing Date, sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to
pay the Purchase Price.
(vi) Qualification. Buyer has, or as of the Closing Date will have,
all Governmental Licenses necessary or required to own and
operate the Assets, and to perform the obligations of Seller
under the Contracts.
5.3 Disclosure Schedules. No later than forty five (45) days after the
Signing Date, each party shall prepare and deliver to the other party a
Disclosure Schedule relating to its respective representations and warranties
contained in this Article V. Nothing in any Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself).
5.4 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY, WHETHER
WRITTEN, ORAL, STATUTORY, COMMON LAW, EXPRESS OR IMPLIED, CONCERNING THE ASSETS,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE.
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ARTICLE VI.
PRE-CLOSING COVENANTS OF SELLER AND BUYER
-----------------------------------------
The parties agree as follows with respect to the period between the
Signing Date and the Closing Date:
6.1 Hart-Scott-Rodino Act. The parties agree to make as promptly as
practicable all filings, if any, required in connection with the
Hart-Scott-Rodino Act.
6.2 Good Faith Efforts. Each party will use good faith efforts (i) to
take all action necessary to render accurate, as of the Closing Date, its
representations and warranties contained herein, and to refrain from taking any
action which would render any such representation or warranty inaccurate as of
the Closing Date, (ii) to perform or cause to be satisfied each covenant or
condition to be performed or satisfied by it pursuant to this Agreement, and to
cause the Closing to occur, and (iii) to obtain all licenses or other approvals
required to be obtained by it from any appropriate governmental or regulatory
body or other person in connection with its obligations hereunder.
6.3 Notice of Developments. Each party will give prompt written notice
to the other of any material adverse development causing a breach of any of its
own representations and warranties contained herein. Except as specified in such
written notice, no disclosure by a party pursuant to this Section 6.3 shall be
deemed to amend or supplement such party's Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty or breach of covenant.
6.4 Environmental Site Assessments. Buyer and Seller agree to conduct
Phase I Environmental Site Assessments of the Assets prior to the Closing Date,
as mutually determined by them, and shall share the costs of such agreed upon
assessments based on their respective agreed ownership percentage of the
specific Asset in question.
ARTICLE VII.
COVENANTS OF SELLER
-------------------
Seller covenants and agrees with Buyer that, except as may be approved
by Buyer in writing, which approval shall not be unreasonably withheld or
delayed:
7.1 Consents. Seller agrees to use, and to cause Plains to use, all
reasonable efforts to obtain and make and to assist Buyer, as applicable, in
obtaining and making, as appropriate, (a) all necessary consents, authorizations
and approvals, (b) all findings necessary for the consummation of the
transactions contemplated by this Agreement, and (c) all Governmental Licenses
necessary for Buyer's operation of the Assets after Closing.
7.2 NMPRC Approvals. Seller has filed for necessary NMPRC approvals and
agrees to submit as promptly as possible any additional filings necessary in
connection with proceedings before the NMPRC for necessary approvals with
respect to the transactions contemplated by this Agreement and shall use its
reasonable efforts to obtain such approvals. Seller shall provide Buyer with
copies of any NMPRC filings (or portions thereof) prior to submitting the
filings to the NMPRC.
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7.3 Operation of the Property. From the Signing Date to the
Closing Date:
(i) The Assets shall be operated and maintained in reasonable
operating condition and repair adequate to perform normal
operations consistent with Plains' past practices; and
(ii) Seller shall, except with respect to commitments already made
prior to the Signing Date, as set forth in the Seller
Disclosure Schedule, obtain Buyer's prior written approval
(which approval may not be unreasonably withheld) before (a)
Seller or Plains enters into any material contract binding on
any of the Assets, or Buyer in its capacity as owner of the
Assets, after the Closing Date, except for any month-to-month
renewals of any existing contracts that terminate not more
than one month after the Closing Date; (b) Seller or Plains
voluntarily abandons any easement that constitutes part of the
Assets; (c) Seller or Plains sells, transfers or otherwise
disposes of any Assets except in the ordinary course of
business; or (d) Seller or Plains encumbers any of the Assets
except in the ordinary course of business and other than any
Encumbrances that do not materially detract from the value of
the Assets.
7.4 Access. From the Signing Date to the closing date of the Merger
under the Transaction Agreement, Seller shall, upon reasonable advance notice
and during normal business hours, use reasonable efforts to cause Plains to
allow Buyer and its Representatives (as herein defined), and thereafter until
the Closing Date shall allow Buyer and its Representatives, in either event at
Buyer's sole risk and expense and for the purpose of investigating the Assets in
connection with the transactions contemplated by this Agreement, to:
(i) Inspect and become familiar with the Assets;
(ii) Subject to the right of Seller to have its own Representatives
present, consult with Seller's attorneys, accountants,
engineers and other Representatives concerning the ownership,
use or operation of the Assets; and
(iii) Examine the Business Records.
For the purpose of this Agreement, "Representatives" shall mean the affiliates
of a person and its and their directors, officers, employees, agents and
advisors.
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7.5 Additional Covenants of Seller. From the Signing Date to the
Closing Date:
(i) Seller shall use reasonable efforts to, and shall use
reasonable efforts to cause Plains to, preserve and maintain
in force all of its licenses, permits, registrations,
franchises, and bonds applicable to the Assets.
(ii) Seller shall use reasonable efforts to, and shall use
reasonable efforts to cause Plains to, comply with all laws,
ordinances, rules, regulations, and orders applicable to the
Assets, the noncompliance with which would result in a
Material Adverse Effect on the Assets.
(iii) Seller shall either cause Plains to maintain in effect its
excess liability insurance policies with respect to the Assets
that are in effect on the Signing Date or obtain and maintain
in effect equivalent "tail coverage" for such periods, if any,
as Seller may have an obligation to indemnify Buyer hereunder
for third-party claims covered by such insurance. With respect
to the periods set forth above, Seller shall not (other than
through contract terminations in the ordinary course of
business) cancel any third party indemnity rights regarding
the Assets to which such Seller is entitled as of the Signing
Date.
ARTICLE VIII.
COVENANTS OF BUYER
------------------
Buyer covenants and agrees with Seller that, except as may be approved
by Seller in writing, which approval shall not be unreasonably withheld or
delayed:
8.1 Consents. Buyer agrees to use all reasonable efforts to obtain and
make and to assist Seller, as applicable, in obtaining and making, as
appropriate, (a) all necessary consents, authorizations and approvals and (b)
all filings necessary for the consummation of the transactions contemplated by
this Agreement.
8.2 NMPRC and FERC Approvals. Buyer has filed for necessary NMPRC
approvals and agrees to submit as promptly as possible all additional filings
necessary in connection with proceedings before the NMPRC and the FERC for
necessary approvals and shall use its reasonable efforts to obtain such
approvals. Buyer shall provide Seller with copies of any NMPRC or FERC filings
(or portions thereof) prior to submitting the filings to the NMPRC or the FERC,
respectively.
ARTICLE IX.
CONDITIONS PRECEDENT
--------------------
9.1 Conditions to Obligations of Buyer. All of the obligations of Buyer
under the terms of this Agreement are subject to fulfillment prior to or on the
Closing Date of each of the following conditions or the waiver thereof by Buyer:
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(i) Material Discrepancies or Breaches. Buyer shall not have
discovered any material error, misstatement or omission in the
representations and warranties made by Seller (for itself and
on behalf of Plains) or any material breach in the
undertakings and agreements by Seller (for itself and on
behalf of Plains) as set forth in this Agreement.
(ii) Continuing Representations and Warranties. All representations
and warranties by Seller which are contained in this Agreement
shall (subject to any disclosures contained on Seller's
Disclosure Schedule) be correct and complete in all material
respects on and as of the Closing Date as though made on such
date. None of the disclosures contained on Seller's Disclosure
Schedule shall disclose any matter that would have (i) a
material adverse effect on the ability of Seller to consummate
the sale of the Assets hereunder, or (ii) a Material Adverse
Effect with respect to the Assets. If Seller's Disclosure
Schedule discloses a matter that would have a Material Adverse
Effect with respect to one or more individual Assets, Buyer
and Seller shall use their best efforts to negotiate such
adjustments as may be necessary to carry out the original
intent of the parties with respect to the remaining Assets not
affected by the disclosure.
(iii) Performance of Conditions. Seller (and, where applicable,
Plains) shall have performed and complied with all other
agreements and conditions required by this Agreement to be
performed by and complied with by Seller (and, where
applicable, Plains) on or before the Closing Date.
(iv) Consents, etc. Buyer and Seller shall have obtained all
regulatory approvals, authorizations, consents, licenses,
permits and acceptances from relevant federal, state and local
authorities, in form and substance acceptable to the receiving
party, which are necessary or required to be obtained by such
party in order to consummate the transaction, except where the
failure to obtain such approval, authorization, consent,
license, permit or acceptance will not interfere materially
with the consummation of the transaction.
(v) Merger. The closing of the Merger under the Transaction
Agreement shall have occurred.
(vi) Operations Agreements. The parties shall have entered into the
Operations Agreements.
(vii) No Orders. The Closing shall not violate any order or decree
with respect to the transactions contemplated by this
Agreement issued by any court or governmental body having
competent jurisdiction over such transactions.
(viii) Adverse Change. Since the Signing Date, there shall have been
no changes in or losses to the Assets, not cured by Seller at
its option, which have had, individually or in the aggregate,
a Material Adverse Effect on the Assets.
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9.2 Conditions to Obligations of Seller. All of the obligations of
Seller under the terms of this Agreement are subject to fulfillment prior to or
on the Closing Date of each of the following conditions or the waiver thereof by
Seller:
(i) Material Discrepancies or Breaches. Seller shall not have
discovered any material error, misstatement or omission in the
representations and warranties made by Buyer or any material
breach in the undertakings and agreements by Buyer as set
forth in this Agreement.
(ii) Continuing Representations and Warranties. All representations
and warranties by Buyer which are contained in this Agreement
shall (subject to any disclosures contained on Buyer's
Disclosure Schedule) be correct and complete in all material
respects on and as of the Closing Date as though made on such
date. None of the disclosures contained on Buyer's Disclosure
Schedule shall disclose any matter that would have a material
adverse effect on the ability of Buyer to consummate the
purchase of the Assets hereunder.
(iii) Performance of Conditions. Buyer shall have performed and
complied with all other agreements and conditions required by
this Agreement to be performed by and complied with by Buyer
on or before the Closing Date, including payment of the
Purchase Price.
(iv) Consents, etc. Buyer and Seller shall have obtained all
regulatory approvals, authorizations, consents, licenses,
permits and acceptances from relevant federal, state and local
authorities, in form and substance acceptable to the receiving
party, which are necessary or required to be obtained by such
party in order to consummate the transaction, except where the
failure to obtain such approval, authorization, consent,
license, permit or acceptance will not interfere materially
with the consummation of the transaction.
(v) Merger. The closing of the Merger under the Transaction
Agreement shall have occurred.
(vi) Operations Agreements. The parties shall have entered into the
Operations Agreements.
(vii) No Orders. The Closing shall not violate any order or decree
with respect to the transactions contemplated by this
Agreement issued by any court or governmental body having
competent jurisdiction over such transactions.
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ARTICLE X.
CLOSING AND POST-CLOSING OBLIGATIONS
------------------------------------
10.1 Closing. Subject to the other terms of this Agreement, the
consummation of the transfer of the Assets (the "Closing") shall be held as soon
as practicable after the receipt of all necessary regulatory approvals and
consents, but not later than six (6) months after the closing of the Merger
under the Transaction Agreement, or such other date as may be agreed upon by the
parties (the "Closing Date"). At the Closing and on the Closing Date, the
following documents and considerations shall be exchanged between the parties:
(i) Deliveries by Seller at the Closing. At the Closing, Seller
shall deliver to Buyer the following documents and
considerations against the simultaneous delivery by Buyer to
Seller of the documents and considerations described in
paragraph 10.1(ii) below:
(a) One or more General Assignments and Bills of Sale in
a form reasonably satisfactory to Buyer,
transferring, assigning and conveying such of the
Assets as are transferable thereby to Buyer, and such
other documents of transfer as are necessary to
transfer the Licenses and Permits that are not
transferred by the foregoing General Assignment and
Bills of Sale.
(b) One or more Special Warranty Deeds in a form
reasonably satisfactory to Buyer, transferring any
real estate comprising the Assets to Buyer free and
clear of all liens and encumbrances (except as
expressly provided therein and consistent with the
representations as to title contained in Section
5.1(x) hereof).
(c) Certificates of officers of Seller in the forms of
Exhibit 10.1(i)(c)-1 and Exhibit 10.1(i)(c)-2
attached hereto.
(d) Opinion of counsel of Seller confirming the
representations made by Seller in Sections 5.1(i),
(ii) and (iii) hereof, in customary form and with
customary qualifications.
(e) Such other instruments and documents as Buyer may
reasonably request.
(ii) Deliveries by Buyer at Closing. At the Closing, Buyer shall
deliver to Seller the following documents and considerations
against simultaneous delivery of documents and considerations
by Seller as set forth in paragraph 10.1(i) above:
(a) One or more Assumption Agreements in a form
reasonably satisfactory to Seller, relating to the
Contracts.
(b) The Purchase Price of the Assets, as described in
Section 2.1 hereof.
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(c) Certificates of officers of Buyer in the form of
Exhibit 10.1(i)(c)-1 and Exhibit 10.1(i)(c)-2
attached hereto.
(d) Opinion of Counsel of Buyer confirming the
representations made by Buyer in Sections 5.2(i),
(ii) and (iii) hereof, in customary form and with
customary qualifications.
(e) Such other instruments and documents as Seller may
reasonably request.
10.2 Post-Closing. Seller agrees that it will, upon the request of
Buyer, execute and deliver to Buyer from time to time after the Closing Date,
such other instruments of sale, transfer, assignment and conveyance and take
such other action as Buyer may reasonably request to more effectively vest
ownership of the Assets in Buyer and to put Buyer in possession of all the
Assets. Buyer agrees that it will from time to time execute and deliver to
Seller such additional instruments and take such additional action as Seller may
reasonably request to evidence the agreements of Buyer under this Agreement.
ARTICLE XI.
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES,
--------------------------------------------
COVENANTS AND AGREEMENTS
------------------------
The representations and warranties made by Seller and Buyer in Article
V of this Agreement and in the certificates contemplated hereby shall form the
basis for conditions to Closing only and shall not survive the Closing Date. No
provision of this Agreement shall form the basis for any action by or on behalf
of either party or any third party for breach, misrepresentation or indemnity at
any time after the Closing Date. Notwithstanding the foregoing, any rights and
obligations of the parties that are expressed to survive the Closing Date shall
so survive the Closing Date, including (without limitation) those described in
Section 2.1; Section 2.2; Section 3.1; Section 3.2; Section 10.2; Section 13.1;
Section 13.2; Section 13.3 (to the extent provided therein); Section 13.4;
Section 13.5; and Section 13.6.
ARTICLE XII.
TERMINATION
-----------
12. 1 Termination. This Agreement may be terminated, at any time at or
prior to the Closing Date, as follows, except as otherwise provided in Section
12.2 below:
(i) By mutual agreement of Buyer and Seller;
(ii) By Buyer or Seller if the Closing shall not have occurred on
or before the date that is six (6) months after the closing of
the Merger under the Transaction Agreement or such later date
as shall be mutually agreed upon by the parties; provided,
however, that no party can so terminate this Agreement if the
Closing has failed to occur because such party failed to
perform or observe its material agreements and covenants
hereunder;
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(iii) By Buyer or Seller if any Governmental Authority shall have
issued a final order, judgment or decree materially
restraining, enjoining, prohibiting or invalidating the
consummation of the transaction;
(iv) By Buyer or Seller if the NMPRC or the FERC affirmatively
rejects the transaction; provided that the party seeking to
make use of this paragraph 12.1(iv) shall have exhausted all
rights to reargue or appeal such rejection on meritorious
grounds;
(v) By Buyer or Seller if any regulatory agency or Governmental
Authority requires material changes in this Agreement or in
the transaction hereunder as a condition of approval, or
imposes material conditions on this Agreement or the
transaction as a condition of approval, which changes or
conditions are unacceptable to the terminating party; provided
that the terminating party shall have promptly filed and used
reasonable efforts to seek rehearing or modification of such
order; and provided that the terminating party shall provide
the other party with ten days prior notice to allow time for
discussion and consultation between the parties.
12.2 Effect of Agreement Upon Termination. If any party exercises its
rights to terminate this Agreement pursuant to this Article XII, then (a) except
as expressly provided in this Section, no party shall have any rights or
obligations under this Agreement, and such termination shall be without
liability to any party to this Agreement; (b) if this Agreement is terminated as
a result of the negligent or willful failure of Buyer to perform its obligations
hereunder, Buyer shall be fully liable for any and all damages actually
sustained by Seller, provided that Buyer shall not be liable for any
consequential damages sustained or incurred by Seller, nor for any punitive
damages; (c) if this Agreement is terminated as a result of the negligent or
willful failure of Seller to perform its obligations hereunder, Seller shall be
fully liable for any and all damages actually sustained or incurred by Buyer,
provided that Seller shall not be liable for any consequential damages sustained
or incurred by Buyer, nor for any punitive damages; (d) the existing
Confidentiality Agreement between Buyer and Seller shall remain in full force
and effect in accordance with its terms with respect to this transaction and the
materials furnished to Buyer until the later of (i) the expiration of the term
of the Confidentiality Agreement or (ii) two years from the date of termination
of this Agreement.
ARTICLE XIII
OTHER AGREEMENTS
----------------
13.1 Discharge of Liabilities. From and after the Closing Date, Buyer
shall, in accordance with its usual timely practices, fulfill, pay and discharge
all obligations, responsibilities and liabilities in respect of the Contracts.
13.2 Delivery and Maintenance of Records.
(i) As promptly as practicable, but in any case within 90 days
after the Closing Date, Seller will deliver or cause to be
delivered to Buyer to a location designated by Buyer in
Albuquerque, New Mexico all Business Records; provided,
however, that Seller may retain:
18
<PAGE>
(a) Originals of all accounting, financial and tax
Business Records for the Assets attributable to all
periods prior to the Closing Date; provided, however,
that Seller shall provide Buyer with copies of all
such accounting, financial and tax Business Records
that Buyer may reasonably request; and
(b) Copies of any other Business Records that Seller
elects to retain.
(ii) Until December 31, 2000, Buyer shall:
(a) (A) Retain the Business Records obtained by Buyer,
(B) furnish copies of such Business Records to Seller
upon Seller's written request and at Seller's sole
expense and (C) make such Business Records available
to Seller and its Representatives upon reasonable
notice and during normal business hours; and
(b) Grant Seller or Seller's Representatives reasonable
access to Buyer's Representatives on a mutually
convenient basis to obtain information, in addition
to the Business Records, with respect to the
continuing obligations or rights, if any, of Seller
under this Agreement or with respect to the Assets
and use its reasonable efforts to cause any such
Representatives to cooperate with Seller by
testifying or furnishing evidence, as applicable, at
Seller's request and expense in any proceedings
relating to the Assets or Seller's continuing
obligations under this Agreement, if any.
13.3 Arbitration.
(i) Any dispute, controversy or claim arising out of or related to
this Agreement, or the breach thereof, shall be exclusively
and finally settled by arbitration pursuant to this Section
13.3. The arbitration proceedings shall be conducted in
accordance with the terms of this Section 13.3 and the
Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), as modified by the AAA's Supplementary
Procedures for Large, Complex Disputes, as in effect on the
date hereof (the "Rules"). Any procedural issues not
determined under this Section or such Rules shall be
determined by the laws of New Mexico, including without
limitation the New Mexico Uniform Arbitration Act, N.M. Stat.
Ann. ss. 44-7-1 et seq.
(ii) Either Buyer or Seller may invoke arbitration under this
Section 13.3 at any time on or before one (1) year after the
Closing Date (or, with respect to any right or obligation that
survives the Closing Date, on or before one (1) year after
such right or obligation expires), by serving on the other
19
<PAGE>
party a written notice of arbitration, which shall specify
with reasonable detail (1) the matter in dispute, (2) the
relief requested and (3) the grounds therefor. The arbitration
shall be heard and determined by a board of three (3)
arbitrators (the "Board"), each of whom shall be impartial and
independent of the parties to the dispute. The party giving
notice of the arbitration shall appoint its party arbitrator
in such notice of arbitration. The other party shall appoint
an arbitrator of its choice within twenty (20) days after its
receipt of the notice of arbitration. The parties shall
jointly select and appoint the third arbitrator, who shall be
Chairman of the Board (the "Chairman"), and shall jointly
determine the fee that each arbitrator shall receive, within
thirty (30) days after the notified party's receipt of the
notice of arbitration. If the parties cannot reach agreement
on a Chairman and/or fee, or if any party fails to appoint its
party-appointed arbitrator within the prescribed period, the
missing arbitrator(s) and/or fee shall be selected by the
Phoenix, Arizona office of the AAA pursuant to the selection
process set forth in the Rules as in effect on the date
hereof, provided that all potential arbitrators submitted to
the parties must be chosen from AAA's Large Complex Case Panel
or from a panel of the Center for Public Resources and further
provided that any fee established by AAA must conform to
Section 13.3(vii) below. If an arbitrator should die, withdraw
or otherwise become incapable of serving, a replacement shall
be selected and appointed in a like manner as the original
arbitrator. Any arbitrator appointed hereunder shall certify
in writing that he or she is immediately available to conduct
such arbitration. Upon consultation with the other arbitrators
and the parties, the Chairman shall, within ten (10) days
after appointment, set dates for the hearing. The Chairman
shall preside at all hearings and executive sessions of the
Board. All decisions of the Board shall be by a majority of
the arbitrators, unless the parties agree otherwise.
(iii) (a) The arbitration proceedings shall be held in
Albuquerque, Bernalillo County, New Mexico, at a
place to be agreed upon by the parties.
(b) A stenographic record of the proceedings shall be
made and supplied to the Board.
(c) Unless the parties agree otherwise, the Board shall
require witnesses to testify under oath or
affirmation.
(d) The parties may offer such evidence as is relevant
and material to the dispute and shall produce such
additional evidence as the Board may deem necessary
to the determination of the dispute.
(e) All evidence to be considered by the Board shall be
offered at the hearing and subject to
cross-examination unless the parties agree otherwise.
Exhibits shall be admitted into evidence by the Board
only upon the establishment of a proper foundation
concerning authenticity, unless the parties agree
otherwise.
20
<PAGE>
(f) There shall be no direct communication between any
party and any arbitrator after the third arbitrator
has been appointed and the arbitrators' fee has been
established except at the hearing and at joint
consultations between both parties and the
arbitrators on the schedule as provided for in
Section 13.3(ii).
(g) Unless the parties agree otherwise, the arbitration
hearing (including any filing of briefs and
submission of documents) shall be closed within 60
days of the appointment of the third arbitrator.
(iv) The Board shall render its award in writing within thirty (30)
days following the close of the hearing. The Board shall
render its award only with respect to the specific issues
submitted by either party, and shall base its decision solely
upon the evidence before it, applicable law and this
Agreement.
(v) Judgment upon the award may be entered and execution had or
application may be made for a judicial acceptance of the award
and an order of enforcement, as the case may be, in any court
located in Bernalillo County, New Mexico.
(vi) The arbitration may proceed in the absence of a party that,
after due notice, fails to be present. An award shall not be
made solely on the default of a party, but the Board shall
require the party that is present to submit such available
evidence as may be reasonably required for the making of an
award.
(vii) The parties shall share equally the cost of the arbitration
proceedings, including the fees and expenses of the
arbitrators and the cost of the stenographic record. Each
arbitrator shall be paid an identical flat fee, which shall
not vary, irrespective of the length of service or number of
hearings, and neither the AAA nor the Board shall have any
authority to authorize the payment of a fee on any other
basis.
(viii) All aspects of the arbitration shall be confidential, and the
parties and arbitrators shall maintain the confidentiality of
all information related to the proceedings, including but not
limited to documents exchanged by the parties, testimony and
other evidence, briefs and the award, and shall not disclose
the same to any third party. Upon the motion of either party,
and for good cause shown, the Board may make any order which
justice requires to protect a party from the disclosure of
proprietary, privileged or confidential business information,
including (1) that hearings be conducted with no one present
except persons designated by the Board, and (2) that exhibits,
other documents filed with the Board or transcripts of the
hearing be sealed and not be disclosed except as specified by
the Board. Notwithstanding the foregoing, each party shall be
entitled to disclose such information (i) to its affiliates,
21
<PAGE>
attorneys, financial or lending institutions, outside
auditors, insurers, and entities involved in negotiation or
bidding for the acquisition of a party, its stock or assets,
provided that the person or entity to which such information
is disclosed is obligated to hold it confidential, (ii) as may
be required by law or by regulation or order of Governmental
Authority or by the rules of any stock exchange applicable to
such party or its affiliates, or as part of any party's good
faith attempt to comply with disclosure obligations under any
of the same, (iii) as Seller or Buyer may deem necessary or
desirable to disclose to the NMPRC, the FERC or other
regulatory body, and (iv) as may be necessary or desirable to
enforce such party's rights hereunder.
(ix) The Board shall not distribute the stenographic record of the
proceedings to the parties unless an action as may be
permitted under the Rules and the New Mexico Uniform
Arbitration Act challenging the arbitration proceedings is
filed no later than sixty (60) days following the issuance of
the award. If no such action is timely filed, all copies of
the stenographic record shall be destroyed.
(x) ANY CHALLENGE TO ANY REQUEST FOR ARBITRATION OR ARBITRATION
PROCEEDING HEREUNDER SHALL BE LITIGATED, IF AT ALL, IN AND
BEFORE A STATE OR FEDERAL COURT LOCATED IN BERNALILLO COUNTY,
NEW MEXICO, TO THE EXCLUSION OF THE COURTS OF ANY OTHER STATE
OR COUNTY.
(xi) Any obligation to arbitrate which is established by this
Section shall survive any termination of this Agreement for
the notice period stipulated in Section 13.3(ii) hereof, it
being understood and agreed between the parties that any
dispute, controversy or claim arising out of or related to
this Agreement, or the breach thereof, that is not notified
within such time-frame shall be deemed conclusively waived.
13.4 Consents Not Obtained. To the extent that Seller is unable to
obtain a third party consent to transfer any lease, Contract or other interest
constituting a part of the Assets and consequently does not assign, transfer or
sublease such Assets to Buyer, Seller shall, at Buyer's written request
delivered within a reasonable time after Closing, use its reasonable efforts to
make all benefits of such non-assigned interests available to Buyer without any
administrative cost to Buyer, but shall not be obligated to incur any cost or
expense after the Closing Date with respect to such Assets, all of which shall
be for the account of Buyer.
13.5 Navopache Arrangement. The parties recognize that the Navopache
Assets are to be transferred to Buyer as a result of the selection by Navopache
Electric Cooperative, Inc. ("Navopache") of Buyer as its power supplier. The
parties also recognize that it will be necessary for the RUS to release Plains
from its All-Requirements Contract with Navopache, and that Navopache likewise
will need to be released by all necessary parties from such All-Requirements
Contract. The parties also recognize that it will be necessary for transmission
agreements identified on Exhibit 1.1 (vii) to be assigned to Buyer and that
other transmission arrangements will need to be made between Buyer and
Navopache. Finally, the parties recognize that it will also be necessary for the
FERC to approve the new power supply contract between Buyer and Navopache. In
order to make provision for the supply of power to Navopache following the
effective date of the Merger in the event that all conditions to the
effectiveness of the new power supply contract between Buyer and Navopache have
not been satisfied on or prior to the effective date of the Merger, and to make
other transition arrangements, the parties agree to enter into the Navopache
Transition Agreement identified on Exhibit 4.2 attached hereto.
22
<PAGE>
13.6 Headquarters Building. Buyer shall, if required by Seller, lease
the Headquarters Facility to Seller for a period not exceeding sixty (60) days
after the Closing Date, at a nominal fee of Thirty Dollars ($30.00) per day. In
addition, Seller shall have the right to occupy mutually-agreed upon space
within the Headquarters Facility for as long as reasonably required to operate
the electrical power system and relocate the computers and Supervisory Control
and Data Acquisition system in a safe and orderly manner. Moreover, Seller shall
have the right to use the outlying buildings and facilities at the Headquarters
Facility for a period of 150 days after the Closing Date until the operations
and maintenance functions can be relocated. Buyer's wholesale marketing
department will occupy the control center facilities no later than thirty (30)
days after the Closing Date.
13.7 Rights-of-Way Renewals. Notwithstanding Section 13.4 hereof,
Seller will promptly reimburse Buyer for fifty percent (50%) of the costs
incurred by Buyer to obtain the renewal (for a period not to extend beyond 2020)
of any rights-of-way on the West Mesa-Belen transmission line and the
Ojo-Hernandez-Norton-Algodones-West Mesa 115-kV transmission path. Buyer shall
at all times keep Seller fully apprised of the status of the renewal
negotiations and shall consult with Seller with respect to such negotiations. In
return for its reimbursement with respect to the Ojo-West Mesa transmission
path, Seller and Buyer agree to use good faith efforts to negotiate an equitable
credit for Seller against Seller's network service charges from Buyer, with such
credit to be agreed before any request for reimbursement with respect to such
path is made. Notwithstanding the foregoing: (i) with respect to the West
Mesa-Belen rights-of-way, any reimbursements by Seller shall be returned to
Seller to the extent Buyer places these costs in its filed transmission tariff;
and (ii) with respect to the Ojo-West Mesa rights-of-way, Buyer shall have the
right, at its sole discretion, to fund more than its fifty percent (50%) share
of the costs of the right-of-way renewals, thereby reducing or eliminating
Seller's credit.
23
<PAGE>
ARTICLE XIV.
MISCELLANEOUS
-------------
14.1 Notices. Any notice or approval required or permitted under this
Agreement shall be in writing and shall be sent by registered or certified mail,
postage prepaid, or by facsimile, to the following address or to any other
address designated by prior written notice:
If to Buyer:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, NM 87158
Facsimile: (505) 241-4311
Attention: Secretary
If to Seller:
Tri-State Generation and Transmission Association, Inc.
P.O. Box 33695
Denver, CO 80233
Facsimile: (303) 254-6007
Attention: General Manager
14.2 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New Mexico, excluding its conflict of laws rules.
14.3 Modification/Waiver. This Agreement may not be amended, modified
or waived except by a writing signed by an authorized representative of each
party and may not be amended except as approved by the RUS. No waiver of or any
failure or omission to enforce any provision of this Agreement or any claim or
right arising hereunder shall be deemed to be a waiver of any other provision of
this Agreement or any other claim or right arising hereunder.
14.4 Assignment. Neither party may assign, delegate or otherwise
transfer its rights, obligations or other interest in this Agreement without the
prior written consent of both the other party (which consent may be withheld at
such other party's sole discretion) and the RUS.
14.5 No Brokers. Seller represents and warrants to Buyer that Seller
has not directly or indirectly employed any broker or finder to whom Buyer shall
have any liability in connection with this Agreement or the transactions
contemplated by this Agreement; and Buyer represents and warrants to Seller that
Buyer has not directly or indirectly employed any broker or finder to whom
Seller shall have any liability in connection with this Agreement or the
transactions contemplated by this Agreement.
14.6 Public Announcements. Prior to the Closing Date, neither Seller
nor Buyer shall make written announcements or other written public disclosures
or issue press releases relating to the content of this Agreement or the
transactions contemplated hereby without the prior written approval of the other
party to this Agreement to the form and content of the release or disclosure,
24
<PAGE>
which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, each party shall be entitled to disclose such information without
limitation (i) to its affiliates, members, attorneys, financial or lending
institutions, outside auditors and insurers, (ii) as may be required by law or
by regulation or order of Governmental Authority or by the rules of any stock
exchange applicable to such party or its affiliates, or as part of such party's
good faith attempt to comply with disclosure obligations under any of the same,
(iii) as each party may deem necessary or desirable to disclose in connection
with obtaining regulatory approvals, (iv) to the extent necessary for such party
to obtain third-party consents, and (v) as may be necessary or desirable to
enforce such party's rights hereunder.
14.7 Severability. If any provision of this Agreement is declared
illegal, invalid or otherwise unenforceable, such provision shall be deemed
severed, with the remaining provisions of this Agreement being deemed to remain
in full force and effect.
14.8 Paragraph Headings. Article and paragraph headings herein are
intended for convenience of reference only, and shall not in any way limit,
define, amplify or otherwise affect the interpretation of any term of this
Agreement.
14.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on each of the parties.
14.10 Entire Agreement. Except for the Confidentiality Agreement
referred to in Section 12.2, this Agreement (including the Exhibits and
Schedules attached hereto and referred to herein) constitutes the complete
agreement between the parties relating to the subject matter of this Agreement
and supersedes all prior understandings or arrangements between them relating to
the subject matter hereof.
25
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By: ________________________
Its: ________________________
TRI-STATE GENERATION AND
TRANSMISSION ASSOCIATION, INC.
By: ________________________
Its: ________________________
26
<PAGE>
STATE OF NEW MEXICO ) ss
) ss
COUNTY OF BERNALILLO ) ss
This instrument was acknowledged before me on _____________________,
1999 by ________________, as ____________________ of PUBLIC SERVICE COMPANY OF
NEW MEXICO, a New Mexico corporation, on behalf of the corporation.
Notary Public in and for the State of New Mexico
My Commission expires: ___________________
STATE OF COLORADO ) ss
) ss
COUNTY OF ) ss
This instrument was acknowledged before me on ______________, 1999 by
_______________, as _____________________ of TRI-STATE GENERATION AND
TRANSMISSION ASSOCIATION, INC., a Colorado cooperative association, on behalf of
the cooperative association.
Notary Public in and for the State of Colorado
My Commission expires: ___________________
27
<PAGE>
Exhibits
Exhibit 1.1(i) - Generating Assets
Exhibit 1.1(ii) - Transmission Assets
Exhibit 1.1(iii) - Substations
Exhibit 1.1(iv) - Telecommunications Assets
Exhibit 1.1(v) - Headquarters Facility
Exhibit 1.1(vi) - Personal Property
Exhibit 1.1(vii) - Contracts
Exhibit 1.1(ix) - Navopache Assets
Exhibit 2.1 - Methodology to Adjust Purchase Price
Exhibit 4.2 - Operations Agreements
Exhibit 5.1(xvii) - Existing Arrangements
Exhibit 10.1(i)(c)-1 - Certificate of Officer (Incumbency)
Exhibit 10.1(i)(c)-2 - Certificate of Officer (Bring-Down)
<PAGE>
EXHIBIT 1.1(i)
--------------
GENERATING ASSETS
A fifty percent (50%) undivided interest in the Algodones Generating
Station (the "Station") and all related common facilities (FASA 310.010,
311.000, 312.100, 312.200, 312.300, 312.400, 314.100, 314.200, 314.300, 314.400,
315.200, 315.300, 315.400, 315.500, 316.00), subject to an option agreement as
hereinafter described.
Seller will have the right to acquire a 5 acre tract of unimproved real
property at the Station, the specific boundaries of which will be mutually
agreed by the parties. Seller's acquisition of such tract would be for the
purposes of constructing operations and maintenance facilities and for other
purposes ancillary thereto. Surveying of such 5 acre tract shall be at the
expense of Seller. Consideration to Buyer for the exercise of the option will be
$60,000, escalated from the Closing Date in accordance with the GDP Implicit
Price Deflator. The option will expire at the time either party, or both
parties, elect to develop the Station for its intended original purposes, or if
the parties agree to sell the site. The initial determination of the site
location will be shown in the Algodones Generating Station Participation
Agreement. The parties will enter into an option agreement embodying the
foregoing and other customary terms and conditions.
<PAGE>
EXHIBIT 1.1(ii)
---------------
TRANSMISSION ASSETS
Undivided
Interest
Transmission Asset To Buyer
- ------------------ ---------
Poles and Fixtures
- ------------------
1. Albuquerque (West Mesa) - Algodones (FASA 355.030) 100%
2. Algodones - Espanola (Hernandez) (FASA 355.040) 100%
3. Ojo - Espanola (Hernandez) (FASA 355.150) 100%
4. Albuquerque (West Mesa) - Grants (FASA 355.010) 100%
5. Grants - Bluewater portion of Grants - Gallup (15.54% of
FASA 355.020) 100%
6. Bluewater - Ambrosia (FASA 355.100) 100%
7. Algodones - Moriarty (FASA 355.110) 100%
8. Moriarty - Willard (FASA 355.120) 100%
9. Belen - Willard (FASA 355.240) 100%
10. Albuquerque (West Mesa) - Belen portion of Albuquerque
(West Mesa) - Socorro (46.71% of FASA 355.190) 100%
Overhead Conductor and Devices
1. Albuquerque (West Mesa) - Algodones (FASA 356.030) 100%
2. Algodones - Espanola (Hernandez) (FASA 356.040) 100%
3. Ojo - Espanola (Hernandez) (FASA 356.150) 100%
4. Albuquerque (West Mesa) - Grants (FASA 356.010) 100%
5. Grants - Bluewater portion of Grants - Gallup (15.54% of
FASA 356.020) 100%
6. Bluewater - Ambrosia (FASA 356.100) 100%
7. Algodones - Moriarty (FASA 356.110) 100%
8. Moriarty - Willard (FASA 356.120) 100%
9. Belen - Willard (FASA 356.240) 100%
10. Albuquerque (West Mesa) - Belen portion of Albuquerque (West Mesa) 100%
- Socorro (46.71% of FASA 356.190)
<PAGE>
EXHIBIT 1.1(iii)
SUBSTATIONS
Undivided
Interest
Substation Assets To Buyer
- ----------------- --------
Station Equipment
- -----------------
1. Albuquerque (West Mesa) - A&B Bays (FASA 353.010) 100%
2. Albuquerque (West Mesa) - C Bay (FASA 353.030) 100%
3. Albuquerque (West Mesa) - D Bay (FASA 353.040) 100%
4. Algodones Switching Station (FASA 353.080) 100%
5. Belen Switching Station (FASA 353.100) 100%
6. Ojo Switching Station (345-kV, 115-kV, and Autotransformer) 100%
(FASA 353.130)
7. Rio Rancho Switching Station (Palm Station) (FASA 353.120) 100%
8. Rio Rancho Tap (FASA 353.160) 100%
<PAGE>
EXHIBIT 1.1(iv)
TELECOMMUNICATION ASSETS
Undivided
Interest
Telecommunications Assets with Real Property Interests To Buyer
------------------------------------------------------ ---------
1. Sandia Crest Communications Site (FASA 397.030) 50% of building
33% of the tower
2. Albuquerque (West Mesa) Communications Site (FASA 397.020) 100%
3. Belen Communications Site (FASA - To Be Determined) 100%
Telecommunications Equipment Without Real Property Interests
------------------------------------------------------------
1. The Belen Switch radio terminal and associated antenna, transmission
line and ancillary equipment located at the Socorro Mountain
Communications Site (10% of FASA 397.150) (real property not included).
2. The Crockett radio terminal and associated antenna, transmission line
and ancillary equipment located at the La Mosca Communications Site (9%
of FASA 397.050) (real property not included).
<PAGE>
EXHIBIT 1.1(v)
--------------
HEADQUARTERS FACILITY
All of Seller's right, title and interest in and to the real property on which
the headquarters facility (at 2401 Aztec Road N.E., Albuquerque, NM 87107) is
located, together with the Headquarters Facility and all other buildings and
improvements located thereon (FASA 390.000 and 389.010).
<PAGE>
EXHIBIT 1.1(vi)
---------------
PERSONAL PROPERTY
1. Office Furniture, Equipment and other Personal Property - FASA 391.010,
391.020, 391.030, 393.000.
2. Spare parts, materials and supplies located at the substations and critical
spare parts, materials and supplies associated with the purchased
transmission assets. An inventory of these items will be mutually conducted
by Buyer and Seller and mutual price agreed upon.
<PAGE>
EXHIBIT 1.1(vii)
----------------
CONTRACTS
1. Power Coordination Agreement dated April 23, 1980, between Plains and
Arizona Public Service Company, as amended, including service schedules.
2. Interconnection and Wheeling Agreement dated April 23, 1980, between Plains
and Salt River Project Agricultural Improvement and Power District, as
amended.
3. Service and supply contracts supporting the operations of the Headquarters
Facility, to the extent Buyer chooses to assume the same. (Seller will
supply a list of such contracts promptly after the Signing Date).
<PAGE>
EXHIBIT 1.1(ix)
NAVOPACHE ASSETS
Undivided Interest
Asset to Buyer
----- ------------------
Substation Equipment
- --------------------
1. Coronado (FASA 362.380 and 25% of FASA 303.100) 100%
2. Showlow (FASA 362.400 and FASA 303.200) 100%
3. Linden 100%
4. Zeniff 100%
Telecommunications Facilities
- -----------------------------
1. Crockett Communications Site (FASA 397.310) 100%
2. Greens Peak Communications Equipment (FASA 397.300) 100%
3. Coronado Communications Equipment (included in Substation 100%
Account 362.380.0011)
4. Linden Communications Site (FASA 397.440) 100%
5. Showlow Communications Site (FASA 397.290) 100%
6. Zeniff Communications Site (FASA 397.450) 100%
<PAGE>
EXHIBIT 2.1
METHODOLOGY TO ADJUST PURCHASE PRICE
The following methodology will be used to adjust the Purchase Price from that
stated in Section 2.1, which is based on December 31, 1997 financial
information. Reasonable supporting documentation will be provided by Seller to
allow substantiation of such adjustments by Buyer.
1. Transmission and Telecommunication Assets other than
Ojo-Hernadez-Norton-Algodones-West Mesa 115kv line facilities, Algodones
and West Mesa Station facilities. (Relates to the following FASA or share
of FASA as appropriate: 355.010, 355.020, 355.100, 355.110, 355,120,
355.240, 355.190, 356.010, 356.020, 356.100, 356.110, 356.120, 356.240,
356.190, 353.100, 353.130, 353.120, 353.160, 397.030, 397.020, 397.150,
397.050.):
12/31/97 Value per Plains account and records ..........
Additions (Itemized) ...................................
Reductions (itemized) ..................................
Value as of the Closing Date ...........................
2. Other Assets other than Algodones (Relates to the following FASA or
share of FASA as appropriate: 390.000, 389.010, 391.010, 391.020, 391.030,
393.000.):
12/31/97 Value per Plains account and records ..........
Additions (Itemized) ...................................
Reductions (itemized) ..................................
Value as of the Closing Date ...........................
3. Ojo-Hernandez-Norton-Algodones-West Mesa 115kv line facilities,
Algodones and West Mesa Switching Facilities.
Ojo-Hernandez-Norton-Algodones-West Mesa 115kv line,
poles and conductors-12/31/97 value (FASA 355.030,
355.040, 355.150, 356.030, 356.040, 356.150)............
Algodones Switching Station
---------------------------
1/2 of Algodones Switching Station- (FASA 353.080)
12/31/97 value .......................................
1/2 of Algodones Switching Station- (FASA 353.080)
12/31/97 Value per Plains account and records ..........
1/2 Additions (Itemized) ...............................
1/2 Reductions (itemized) ..............................
Value as of the Closing Date ...........................
Total Algodones Switching Station.......................
<PAGE>
West Mesa Switching Station
---------------------------
West Mesa ( A and B ) Facility (FASA 353.010)-
12/31/97 value .....................................
West Mesa C and D Station Facilities- (FASA
353.030, 353.040)
12/31/97 Value per Plains account and records .........
Additions (Itemized) ..................................
Reductions (itemized) .................................
Value as of the Closing Date ..........................
Total West Mesa Switching Station.....................
4. Algodones Generation Facilities
(FASA 310.010, 311.000, 312.100, 312.200,
312.300, 314.100, 315.200, 315.300, 315.400,315.500,
316.000) 12/31/97 value)...............................
5. Premium
Algodones:..................................... $860,000.00
Transmission:.................................$4,337,653.00
6. Navopache Assets other than FASA 303.100
12/31/97 Value per Plains account and records .........
Additions (Itemized) ..................................
Reductions (Itemized) .................................
Value as of the Closing Date ..........................
7. Navopache Assets FASA 303.100
12/31/97 Value per Plains account and records .........
Additions (Itemized) ..................................
Reductions (Itemized) .................................
Value as of the Closing Date ..........................
PNM payment = 25% Value as of Closing Date.............
<PAGE>
EXHIBIT 4.2
-----------
OPERATIONS AGREEMENTS
1. Algodones Participation Agreement
---------------------------------
Under the provisions of this contract, Buyer will operate and maintain the
Algodones Generating Station that is jointly owned by Seller and Buyer and is
currently an idle plant. This contract will cover the power plant only.
2. Marketing Agreement (and Related Transmission Arrangements)
-----------------------------------------------------------
This contract will describe the arrangements for Buyer's marketing of power from
Seller's PEGS and San Juan Generating Station entitlement which is surplus to
the needs of Seller's member cooperatives. Seller will make a request to PNM for
point-to-point transmission service between PEGS and Four Corners within 30 days
of Signing Date.
3. Seller Power Sales Agreement
----------------------------
This contract will define the terms and conditions of a 50-MW firm power sale
from Seller to Buyer that is part of the modified joint offer between Seller and
Buyer. This contract will be effective by the time Buyer commences power sales
to Navopache.
4. Telecommunications Sharing Agreement
------------------------------------
Seller and Buyer will share communications facilities and channels under this
agreement. The agreement will assign maintenance and replacement responsibility
for shared facilities.
5. Network Integration Transmission Service (Network Service) Agreement
----------------------------------------------------------------------
and associated specification sheets (Buyer Service for Seller)
------------------------------------
Network service will be provided by Buyer to Seller under Buyer's Open Access
Transmission Tariff that will provide transmission service for Seller loads that
are served on or through Buyer's transmission system.
6. Navopache Transition Agreement
------------------------------
This contract among Seller, Buyer, Navopache and Plains will provide transition
arrangements, including the arrangements and conditions for service to Navopache
in the event FERC approval or acceptance for filing for Buyer's service to
Navopache has not been obtained, or other conditions have not been satisfied, by
the time of the Merger closing. This contract will be effective upon the Merger
closing.
<PAGE>
7. Joint Transmission Planning and Development Agreement
-----------------------------------------------------
This agreement will provide for joint planning and development activities
between Seller and Buyer in the former Plains service area. The agreement will
include provisions for first right of refusal in facility improvements and
rights to interconnect.
8. Transmission Service Agreement (Seller Service for Buyer)
------------------------------
This contract will be a bilateral transmission service contract that provides
for the use of Seller's system to serve isolated Buyer load that is connected to
the Seller system.
9. Network Operating Agreement
---------------------------
This agreement will set forth terms and conditions to be employed by Seller and
Buyer to coordinate the Buyer and Seller system operations.
10. Bus License Agreement
---------------------
This license agreement will provide Buyer with rights through Seller's
substations where transmission lines acquired by Buyer are attached to Seller's
substations. Additionally, Buyer will provide Seller with rights through Buyer's
Mimbres Substation.
11. Algodones Five Acre Option Agreement
------------------------------------
This agreement will include the terms for Seller's option to purchase a 5 acre
tract at the Algodones Generating Station as described on Exhibit 1.1(i).
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 5.1(xvii)
-----------------
EXISTING ARRANGEMENTS
Description Disposition
----------- -----------
<S> <C>
1. Plains/PNM Interconnection Agreement Tri-State will assume this agreement as the successor to Plains.
2. Memorandum (Coordination Agreement) Terminate. Incorporate planning coordination provisions into new
Tri-State/PNM Network Operating Agreement
3. Service Schedule A (Wheeling Service for Smith Lake Terminate. Tri-State to provide PNM service under a bilateral
and Wingate) agreement. PNM to provide Wingate) service to Tri-State under
the PNM OATT.
4. Service Schedule C. (Wheeling Service for Rio Rancho, Terminate. Each party has agreed in principle that no credit or
Gulf, and Mimbres) compensation is due.
5. Letter Agreement - 8/7/91 (NNMI/SNMI Operating Terminate. Agreement is no longer effective.
Relationship)
6. Service Schedule E (Reciprocal Use Facilities and Terminate. Each party has agreed that no credit or compensation
Balance of Benefits) is due.
7. Ambrosia Switchyard Expansion - 7/8/82 Terminate.
8. Service Schedule F (Economy Energy Interchange and WSPP) Terminate. Incorporate provisions in new Tri-State/PNM
Marketing Agreement.
9. Service Schedule G (Master Transmission Agreement) Terminate. Tri-State to receive network service from PNM.
10. Letter Agreement - 7/19/1994 (Temporary Scheduling Termination occurs when network service begins.
Arrangements)
11. Service Schedule H (Reciprocal Wheeling Service) Terminate. Tri-State to develop bi-lateral transmission agreement
for PNM and Tri-State to receive service from PNM under Tariff.
12. Service Schedule J (Hazard Sharing) Tri-State to assume as the successor to Plains.
13. Mutual Emergency Transmission Assistance Tri-State to assume as the successor to Plains.
Agreement (1971)
14. Service Schedule K (Clayton Transmission Service) Terminate. Tri-State to develop bi-lateral transmission
agreement for PNM.
15. Letter of Understanding, Clapham Substation Terminate.
16. Transmission Service Agreement to Rowe Terminate. Include Rowe as a Point of Delivery.
17. Agreement to Wheel Power (San Juan to Ojo) Terminate. Include Ojo as a Point of Delivery.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Description Disposition
----------- -----------
<S> <C>
18. Ojo 345/115-kV Transformer Losses Terminate.
19. Assistance in PNM Rebuild Alternative Terminate. No longer in force or effect.
20. Northern Transmission Project - 3/23/1990 Terminate. No longer in force or effect.
21. Norton Switching Station Agreement - 12/13/1972 Terminate. PNM will own the former Plains transmission lines.
22. Letter Agreement - West Mesa Transformer Operations Terminate. Operating limits of West Mesa Transformer to be
handled through Network Operating Agreement.
23. Miscellaneous Operating Procedures, E&O Letter Incorporate into the PNM/Tri-State Network Operating Agreement.
Agreements, and System Operating Limits Terminate only those no longer applicable.
24. Natural Gas Sales Agreement - Escalante Plant Tri-State to assume as the successor to Plains.
(Contract No. GS 20257)
25. Contract of Sale - 4/4/79 Terminate.
</TABLE>
<PAGE>
EXHIBIT 10.1(i)(c)-1
--------------------
CERTIFICATE OF OFFICER
(INCUMBENCY)
I, _________________________________, hereby certify to, as follows:
1. I am the Secretary of _____________________ organized and existing
under the laws of the State of _____________________ (this "Corporation").
2. The [Articles] [Certificate] of Incorporation attached hereto as
Attachment 1 and the Bylaws attached hereto as Attachment 2 are, respectively,
true, complete and correct copies of the [Articles] [Certificate] of
Incorporation and Bylaws of this Corporation which [Articles] [Certificate] and
Bylaws this Corporation has duly adopted and are presently in full force and
effect.
3. Attached hereto as Attachment 3 is a true, complete and correct copy
of Resolutions which the Board of Directors of this Corporation has duly
adopted, and said Resolutions are now in full force and effect.
4. The Board of Directors of this Corporation has, and at the time it
adopted the Resolutions described in Paragraph 3 above had full power and lawful
authority to adopt such Resolutions and to confer the powers therein granted to
the persons named therein or referred to therein by title, and such persons have
full power and authority to exercise the same. The signatures appearing below
are the true, authentic and official signatures of the persons referred to in
such Resolutions:
Name Title Sample Signature
---- ----- ----------------
_______________________ ________________________ _________________________
_______________________ ________________________ _________________________
5. The Resolutions referred to in Paragraph 3 are effective and binding
on this Corporation without approval of its [members] [shareholders].
Dated as of ________________, 1999.
By: ____________________________
____________________________, Secretary
<PAGE>
EXHIBIT 10.1(i)(c)-2
--------------------
CERTIFICATE OF OFFICER
(BRING-DOWN)
I, _______________________, hereby certify to ____________________, as
follows:
1. I am the Secretary of _______________________, a ___________________
organized and existing under the laws of the State of _______________ (this
"Corporation").
2. Except as set forth on the attached Disclosure Schedule (updated,
subject to the limitations in Section 9.1 or 9.2 (as applicable) relating to the
Disclosure Schedules, through the date hereof), all of the representations and
warranties of this Corporation set forth in Section of the Asset Sale Agreement
between this Corporation and _________________________________ dated as of
________________, 1999 (the "Asset Sale Agreement"), are correct and complete in
all material respects on and as of the date hereof as though made on the date
hereof.
3. This Corporation [and Plains Electric Generation and Transmission
Cooperative, Inc. ("Plains")] [has] [have] performed and complied with all other
agreements and conditions required by the Asset Sale Agreement to be performed
by and complied with by this Corporation [and Plains] on or before the date
hereof.
Dated as of _________________, 1999.
______________________________________________
By: ____________________________
____________________________, Secretary
ARTHUR ANDERSEN LLP
November 5, 1999
Public Service Company of New Mexico:
We are aware that Public Service Company of New Mexico has incorporated by
reference in its Registration Statement Nos. 33-65418, 333-03289, 333-03303, and
333-53367 its Form 10-Q for the quarter ended September 30, 1999, which includes
our report dated November 5, 1999, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1933, that report is not considered a part of the registration statement
prepared or certified by our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Statement of Earnings, Consolidated Balance Sheets and
Consolidated Statement of Cash Flows for the period ended September 30, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000081023
<NAME> Public Service Company of New Mexico
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,577,983
<OTHER-PROPERTY-AND-INVEST> 481,797
<TOTAL-CURRENT-ASSETS> 353,672
<TOTAL-DEFERRED-CHARGES> 145,645
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,559,097
<COMMON> 203,870
<CAPITAL-SURPLUS-PAID-IN> 452,460
<RETAINED-EARNINGS> 219,205
<TOTAL-COMMON-STOCKHOLDERS-EQ> 875,535
0
12,800
<LONG-TERM-DEBT-NET> 111,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 866,115
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 693,647
<TOT-CAPITALIZATION-AND-LIAB> 2,559,097
<GROSS-OPERATING-REVENUE> 874,793
<INCOME-TAX-EXPENSE> 38,948
<OTHER-OPERATING-EXPENSES> 757,249
<TOTAL-OPERATING-EXPENSES> 780,203
<OPERATING-INCOME-LOSS> 94,590
<OTHER-INCOME-NET> 24,408
<INCOME-BEFORE-INTEREST-EXPEN> 115,457
<TOTAL-INTEREST-EXPENSE> 52,754
<NET-INCOME> 66,244
440
<EARNINGS-AVAILABLE-FOR-COMM> 65,804
<COMMON-STOCK-DIVIDENDS> 24,464
<TOTAL-INTEREST-ON-BONDS> 4,978
<CASH-FLOW-OPERATIONS> 149,402
<EPS-BASIC> 1.60
<EPS-DILUTED> 1.60
</TABLE>
