<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to
Commission File Registrant; State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
1-11459 PP&L Resources, Inc. 23-2758192
(Exact name of Registrant as
specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
1-905 PP&L, INC. 23-0959590
(Exact name of Registrant as
specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock of PP&L Resources, Inc. New York & Philadelphia
Stock Exchanges
Preferred Stock of PP&L, Inc.
4-1/2% New York & Philadelphia Stock Exchanges
3.35% Series Philadelphia Stock Exchange
4.40% Series New York & Philadelphia Stock Exchanges
4.60% Series Philadelphia Stock Exchange
Company-obligated Mandatorily Redeemable Securities of PP&L, Inc.
8.20% Series ($25 stated value)(a) New York Stock Exchange
8.10% Series ($25 stated value)(b) New York Stock Exchange
(a) Issued by PP&L Capital Trust and guaranteed by PP&L, Inc.
(b) Issued by PP&L Capital Trust II and guaranteed by PP&L, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrants' knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
PP&L Resources, Inc. [ X ]
PP&L, Inc. [ X ]
Indicate by check mark whether the Registrants (1) have 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 Registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
PP&L Resources, Inc. Yes X No
PP&L, Inc. Yes X No
The aggregate market value of the voting common stock held by non-
affiliates of PP&L Resources, Inc. at January 31, 1998 was
$3,670,816,160. PP&L Resources, Inc. held all 157,300,382 outstanding
common shares, no par value, of PP&L, Inc. The aggregate market value of
the voting preferred stock held by non-affiliates of PP&L, Inc. at
January 31, 1998 was $88,801,387.
The number of shares of PP&L Resources, Inc. Common Stock, $.01 par
value, outstanding on January 31, 1998 was 166,855,280.
Documents incorporated by reference:
Registrants have incorporated herein by reference certain sections
of their 1998 Notices of Annual Meetings and Proxy Statements which will
be filed with the Securities and Exchange Commission not later than 120
days after December 31, 1997. Such Proxy Statements will provide the
information required by Part III of this Report.
<PAGE>
PP&L RESOURCES, INC.
PP&L, INC.
FORM 10-K ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
This combined Form 10-K is separately filed by PP&L Resources, Inc.
and PP&L, Inc. Information contained herein relating to PP&L, Inc. is
filed by PP&L Resources, Inc. and separately by PP&L, Inc. on its own
behalf. PP&L, Inc. makes no representation as to information relating to
PP&L Resources, Inc. or its subsidiaries, except as it may relate to PP&L,
Inc.
Item Page
PART I
1. Business ............................................. 1
2. Properties ........................................... 14
3. Legal Proceedings .................................... 14
4. Submission of Matters to a Vote of Security Holders .. 18
Executive Officers of the Registrants ................ 19
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters .................................. 21
6. Selected Financial Data .............................. 22
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 24
8. Financial Statements and Supplementary Data
Report of Independent Accountants .................. 41
Management's Report on Responsibility for Financial
Statements ....................................... 42
Financial Statements:
PP&L Resources, Inc.
Consolidated Statement of Income for the Three Years
Ended December 31, 1997........................... 44
Consolidated Statement of Cash Flows for the Three
Years Ended December 31, 1997 .................... 45
Consolidated Balance Sheet at December 31, 1997 and
1996 ............................................. 46
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1997 ...... 48
Consolidated Statement of Preferred Stock at
December 31, 1997 and 1996 ....................... 49
Consolidated Statement of Company-Obligated
Mandatorily Redeemable Securities at
December 31, 1997 and 1996 ....................... 50
Consolidated Statement of Long-Term Debt at
December 31, 1997 and 1996 ....................... 51
PP&L, Inc.
Consolidated Statement of Income for the Three Years
Ended December 31, 1997 .......................... 52
Consolidated Statement of Cash Flows for the Three
Years Ended December 31, 1997 .................... 53
Consolidated Balance Sheet at December 31, 1997 and
1996 ............................................. 54
Consolidated Statement of Shareowner's Common Equity
for the Three Years Ended December 31, 1997 ...... 56
Consolidated Statement of Preferred Stock at
December 31, 1997 and 1996 ....................... 57
Consolidated Statement of Long-Term Debt at
December 31, 1997 and 1996 ....................... 58
Notes to Financial Statements ...................... 59
Supplemental Financial Statement Schedule:
II - Valuation and Qualifying Accounts and
Reserves for the Three Years Ended
December 31, 1997 ............................. 82
Quarterly Financial, Common Stock Price and
Dividend Data ...................................... 83
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .................. 84
PART III
10. Directors and Executive Officers of the Registrants .. 85
11. Executive Compensation ............................... 85
12. Security Ownership of Certain Beneficial
Owners and Management ................................ 85
13. Certain Relationships and Related Transactions ....... 86
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K .................................. 87
Shareowner and Investor Information .................. 89
Signatures ........................................... 92
Exhibit Index ........................................ 93
Computation of Ratio of Earnings to Fixed Charges .... 104
<PAGE>
Glossary of Terms and Abbreviations
AFUDC (Allowance for Funds Used During Construction) - the cost
of equity and debt funds used to finance construction projects
that is capitalized as part of construction cost.
Atlantic - Atlantic City Electric Company
BG&E - Baltimore Gas & Electric Company
CERCLA - Comprehensive Environmental Response, Compen-sation and
Liability Act
Clean Air Act (Federal Clean Air Act Amendments of 1990) -
legislation enacted to address environmental issues including
acid rain, ozone and toxic air emissions.
CTC - Competitive transition charge
Customer Choice Act - (Pennsylvania Electricity Generation
Customer Choice and Competition Act) - legislation enacted to
restructure the state's electric utility industry to create
retail access to a competitive market for generation of
electricity
DEP - Pennsylvania Department of Environmental Protection
District Court - United States District Court for the Eastern
District of Pennsylvania.
DOE - Department of Energy
DRIP (Dividend Reinvestment Plan) - program available to
shareowners of PP&L Resources' common stock and PP&L preferred
stock to reinvest dividends in PP&L Resources' common stock
instead of receiving dividend checks.
ECR (Energy Cost Rate) - a tariff applied to PUC-jurisdictional
customers to recover fuel and other energy costs. Effective
January 1997, energy costs were rolled into base rates.
EITF - Emerging Issues Task Force
Emel - Empresas Emel, S.A., a Chilean electric distribution
holding company
EMF - Electric and Magnetic Fields
Energy Act (Energy Policy Act of 1992) - legislation passed by
Congress to promote competition in the electric energy market for
bulk power.
Energy Marketing Center - organization within PP&L responsible
for marketing and trading wholesale energy
EPA - Environmental Protection Agency
ESOP - Employee Stock Ownership Plan
FASB (Financial Accounting Standards Board) - a rulemaking
organization that establishes financial accounting and reporting
standards.
FGD - Flue gas desulfurization equipment installed at coal-fired
power plants to reduce sulfur dioxide emissions.
FERC (Federal Energy Regulatory Commission) - federal agency that
regulates interstate transmission and sale of electricity and
related matters.
GRT - Gross Receipts Tax
H.T. Lyons - H.T. Lyons, Inc., a PP&L Resources' unregulated
subsidiary specializing in heating, ventilating and air-
conditioning.
IBEW - International Brotherhood of Electrical Workers
IEC (Interstate Energy Company) - a subsidiary of PP&L that
operates an oil and gas pipeline
ISO - Independent System Operator
JCP&L - Jersey Central Power & Light Company
Major utilities - Atlantic, BG&E and JCP&L
MSHA - Mine Safety and Health Administration
NOx - Nitrogen oxide
NPDES - National Pollutant Discharge Elimination System
NRC (Nuclear Regulatory Commission) - Federal agency that
regulates operation of nuclear power facilities
NUG (Non-Utility Generator) - generating plants not owned by
regulated utilities. If the NUG meets certain criteria, its
electrical output must be purchased by public utilities as
required by PURPA.
OCA - Pennsylvania Office of Consumer Advocate
OSM - United States Office of Surface Mining
OTS - PUC Office of Trial Staff
Pa. CNI - Pennsylvania Corporate Net Income Tax
PCB (Polychlorinated Biphenyl) - additive to oil used in certain
electrical equipment up to the late-1970s. Now classified as a
hazardous chemical.
PECO - PECO Energy Company
PFG - Penn Fuel Gas, Inc.
PJM (PJM Interconnection, L.L.C.) - operates the electric
transmission network and electric energy market in the mid-
Atlantic region of U.S.
Plan - PP&L's noncontributory defined benefit pension plan.
PP&L - PP&L, Inc. (formerly Pennsylvania Power & Light Company)
PP&L Capital Funding - PP&L Capital Funding, Inc., PP&L
Resources' financing subsidiary
PP&L Capital Trust - A Delaware statutory business trust created
to issue Preferred Securities
PP&L Capital Trust II -- A Delaware statutory business trust
created to issue Preferred Securities
PP&L Global - PP&L Global, Inc., a PP&L Resources' unregulated
subsidiary which invests in and develops world-wide power
projects (formerly Power Markets Development Company)
PP&L Resources - PP&L Resources, Inc., the parent holding company
of PP&L, PP&L Global, PP&L Spectrum and other subsidiaries
PP&L Spectrum - PP&L Spectrum, Inc., a PP&L Resources'
unregulated subsidiary which offers energy-related products and
services (formerly Spectrum Energy Services Corporation)
PP&L's Mortgage - PP&L's Mortgage and Deed of Trust, dated
October 1, 1945
Preferred Securities - Company-obligated mandatorily re-deemable
preferred securities of subsidiary trusts holding solely company
debentures (issued by two Delaware statutory business trusts)
PSE&G - Public Service Electric & Gas Company
PUC (Pennsylvania Public Utility Commission) - state agency that
regulates certain ratemaking, services, accounting, and
operations of Pennsylvania utilities
PUC Decision - final order issued by the PUC on September 27,
1995 pertaining to PP&L's base rate case filed in December 1994.
PUHCA - Public Utility Holding Company Act of 1935
PURPA (Public Utility Regulatory Policies Act of 1978) -
legislation passed by Congress to encourage energy conservation,
efficient use of resources, and equitable rates.
RCRA - 1976 Resource Conservation and Recovery Act
SBRCA - Special Base Rate Credit Adjustment
SEC - Securities and Exchange Commission
SER - Schuylkill Energy Resources, Inc.
SFAS (Statement of Financial Accounting Standards) - accounting
and financial reporting rules issued by the FASB.
SO2 - Sulfur dioxide
STAS (State Tax Adjustment Surcharge) - rate adjustment mechanism
to customer bills for changes in certain state taxes.
Superfund - Federal and state legislation that addresses
remediation of contaminated sites.
SWEB - South Western Electricity plc, a British regional electric
utility company.
UGI - UGI Utilities, Inc.
U.K. - United Kingdom
VEBA (Voluntary Employee Benefit Association Trust) - trust
accounts for health and welfare plans for future payments to
employees, retirees or their beneficiaries.
VERP - Voluntary Early Retirement Program
<PAGE>
PART I
ITEM 1. BUSINESS
Terms and abbreviations appearing in "BUSINESS" are explained in
the glossary.
BACKGROUND
PP&L Resources is a holding company with headquarters in
Allentown, PA. Its subsidiaries include PP&L, which provides
electricity delivery service in eastern and central Pennsylvania,
sells retail electricity throughout Pennsylvania and markets
wholesale electricity throughout the eastern United States; PP&L
Global, an international independent power company; PP&L Spectrum,
which markets energy-related services and products; PP&L Capital
Funding, which engages in financing for PP&L Resources and its
subsidiaries; and H. T. Lyons, a heating, ventilating and air-
conditioning firm which PP&L Resources acquired on January 22, 1998.
Other subsidiaries may be formed by PP&L Resources to take advantage
of new business opportunities.
PP&L is PP&L Resources' principal subsidiary (approximately 96%
of consolidated assets as of December 31, 1997), and the financial
condition and results of operation of PP&L are currently the
principal factors affecting the financial condition and results of
operations of PP&L Resources.
The electric utility industry, including PP&L, has experienced
and will continue to experience a significant increase in the level
of competition in the energy supply market. The Energy Act amended
the PUHCA to create a new class of independent power producers, and
amended the Federal Power Act to provide open access to electric
transmission systems for wholesale transactions. In addition, in
December 1996 the Customer Choice Act was enacted in Pennsylvania to
restructure the state's electric utility industry in order to create
retail access to a competitive market for the generation of
electricity. PP&L has announced its support for full customer choice
of their energy supplier for all customer classes. See "PUC
Restructuring Proceeding" on page 27 and "Increasing Competition" on
page 37 for a discussion of pending PUC and FERC proceedings on
industry competition and PP&L's involvement in those proceedings.
PP&L is subject to regulation as a public utility by the PUC and
is subject in certain of its activities to the jurisdiction of the
FERC under Parts I, II and III of the Federal Power Act. PP&L
Resources and PP&L have been exempted by the SEC from the provisions
of PUHCA applicable to them as holding companies.
PP&L is subject to the jurisdiction of the NRC in connection
with the operation of the two nuclear-fueled generating units at
PP&L's Susquehanna station. PP&L owns a 90% undivided interest in
each of the Susquehanna units and Allegheny Electric Cooperative,
Inc. owns a 10% undivided interest in each of those units. In
December 1997, Allegheny Electric Cooperative, Inc. issued a Request
for Proposals for the sale of its assets, including its 10% interest
in Susquehanna. This proposed sale is still pending.
PP&L also is subject to the jurisdiction of certain federal,
regional, state and local regulatory agencies with respect to air and
water quality, land use and other environmental matters. The
operations of PP&L are subject to the Occupational Safety and Health
Act of 1970, and the coal cleaning and loading operations of a PP&L
subsidiary are subject to the Federal Mine Safety and Health Act of
1977.
PP&L provides electricity delivery service to approximately 1.2
million customers in a 10,000 square mile territory in 29 counties of
eastern and central Pennsylvania (see Map on page 13), with a
population of approximately 2.6 million persons. This service area
has 129 communities with populations over 5,000, the largest cities
of which are Allentown, Bethlehem, Harrisburg, Hazleton, Lancaster,
Scranton, Wilkes-Barre and Williamsport.
During 1997, about 97% of total operating revenue was derived
from electric energy sales, with 33% coming from residential
customers, 27% from commercial customers, 19% from industrial
customers, 20% from wholesale sales and 1% from others.
See "Increasing Competition" in the Review of the Financial
Condition and Results of Operation on page 37 for a discussion of
PP&L's participation in Pennsylvania's retail access pilot program
under the Customer Choice Act.
PP&L operates its generation and transmission facilities as part
of the PJM. The PJM operates the electric transmission network and
electric energy market in the mid-Atlantic region of the United
States. Bulk electricity is transmitted to wholesale users
throughout a geographic area including all or part of Pennsylvania,
New Jersey, Maryland, Delaware, Virginia and the District of
Columbia.
In November 1997, the FERC ordered the restructuring of the PJM
into an ISO, in order to accommodate greater competition and broader
participation in the power pool. The purpose of the ISO is to
separate operation of, and access to, the transmission grid from the
PJM electric utilities' generation interests. The electric utilities
will continue to own the transmission assets, but the ISO will be
responsible for directing the control and operation of the
transmission facilities. See "Increasing Competition" for further
details on this FERC PJM order.
To take advantage of opportunities in the competitive energy
marketplace, PP&L created an Energy Marketing Center in 1995. The
group operates a 24-hour trading floor and a marketing effort with
responsibility for all PP&L wholesale power transactions. This
Center has allowed PP&L to buy and sell energy at the most
competitive prices and to expand these activities beyond PP&L's
traditional service territory. The group is presently marketing and
trading wholesale electricity in 22 states, including the east coast,
midwest, and mid-Atlantic region.
Wholly-owned subsidiary companies of PP&L principally are
engaged in oil and gas pipeline operations and passive financial
investing.
FINANCIAL CONDITION
See "Earnings", "Electric Energy Sales", and "Financial Indicators"
in the Review of the Financial Condition and Results of Operations
for this information.
CAPITAL EXPENDITURE REQUIREMENTS
See "Financial Condition - Capital Expenditure Requirements" on
page 32 for information concerning PP&L's estimated capital
expenditure requirements for the years 1998-2002. See "Environmental
Matters" on page 35 and Note 16 to Financial Statements for
information concerning PP&L's estimate of the cost to comply with the
federal clean air legislation enacted in 1990, to address groundwater
degradation and waste water control at PP&L facilities and to comply
with solid waste disposal regulations adopted by the DEP.
POWER SUPPLY
PP&L's system capacity (winter rating) at December 31, 1997 was
as follows:
Net
Kilowatt
Plant Capacity
Nuclear-fueled steam station
Susquehanna 1,995,000 (a)
Coal-fired steam stations
Montour 1,525,000
Brunner Island 1,469,000
Sunbury 389,000
Martins Creek 300,000
Keystone 210,000 (b)
Conemaugh 194,000 (c)
Holtwood 73,000
Total coal-fired 4,160,000
Oil-fired steam station
Martins Creek 1,592,000
Combustion turbines and diesels 364,000
Hydroelectric 146,000
Total generating capacity 8,257,000
Firm purchases
Hydroelectric 139,000 (d)
Qualifying facilities 338,000
Total firm purchases 477,000
Total system capacity 8,734,000
_____________________________
(a) PP&L's 90% undivided interest.
(b) PP&L's 12.34% undivided interest.
(c) PP&L's 11.39% undivided interest.
(d) From Safe Harbor Water Power Corporation.
The system capacity shown in the preceding tabulation does not
reflect: (i) sales of capacity and energy to Atlantic; (ii) sales
of capacity and energy to BG&E; (iii) sales of capacity and energy to
JCP&L; or (iv) sales of capacity credits to other load serving
entities for PJM installed capacity accounting purposes only, which
capacity credit sales aggregated 586,000 kilowatts at December 31,
1997. Giving effect to the sales to Atlantic (129,000 kilowatts),
BG&E (132,000 kilowatts), and JCP&L (567,000 kilowatts), PP&L's net
system capacity at December 31, 1997 was 7,906,000 kilowatts.
The capacity of generating units is based upon a number of
factors, including the operating experience and physical condition of
the units, and may be revised from time to time to reflect changed
circumstances.
During 1997, PP&L produced about 40.9 billion kWh in plants it
owned. PP&L purchased 13.4 billion kWh under purchase agreements and
received 1.4 billion kWh as power pool interchange. During the year,
PP&L delivered about 2.2 billion kWh as pool interchange and about
13.4 billion kWh under purchase agreements.
During 1997, 59.5% of the energy generated by PP&L's plants came
from coal-fired stations, 36.9% from nuclear operations at the
Susquehanna station, 2.1% from the Martins Creek oil-fired steam
station and 1.5% from hydroelectric stations.
The maximum one-hour demand recorded on PP&L's system is
6,506,000 kilowatts, which occurred on January 17, 1997. The maximum
recorded one-hour summer demand is 6,046,000 kilowatts, which
occurred on July 15, 1997. These peak demands do not include energy
sold to Atlantic, BG&E or JCP&L.
PP&L purchases and sells energy from other utilities and FERC-
certified power marketers when it is economically desirable to do so.
From time to time, PP&L enters into energy transactions with systems
outside the PJM on a daily, weekly or monthly basis. The amount of
energy purchased and sold in these transactions depends on a number
of factors, including cost and the import capability of the
transmission network.
Under a compliance tariff approved by FERC for implementation
starting April 1, 1997, PP&L has been providing open access of
available capability on its transmission system for use by wholesale
entities on a basis that is comparable with PP&L's own use of its
transmission facilities.
In June 1995, the FERC accepted a short-term capacity and/or
energy sales tariff enabling PP&L to sell to other utilities and
marketers. As of the end of 1997, 90 other parties have signed
service agreements under this tariff. Transactions under these
agreements allow PP&L to make more efficient use of its generating
resources and provide benefits to both PP&L and the other utilities.
At the end of 1996, PP&L filed with the FERC revisions to this cost-
based tariff to unbundle the generation and transmission components
of the existing rate schedules. PP&L also included in this filing a
request for FERC approval to sell power purchased from third parties,
which increases PP&L's capabilities for profitable wholesale trans-
actions.
In July 1997, the FERC accepted PP&L's application for
authorization to sell electric energy and capacity at market-based
rates to wholesale customers located both inside and outside the PJM
control area. Thirty-one parties have signed service and power sales
agreements for transactions under this market-based rates tariff.
In January 1998, the United States Department of Energy approved
PP&L's application for an export license to sell capacity and/or
energy to electric utilities in Canada. This export license will
allow PP&L to sell either its own capacity and energy not required to
serve domestic obligations or power purchased from other utilities.
See Note 5 to Financial Statements for additional information
concerning the sale of capacity and energy to Atlantic, BG&E and
JCP&L, the sale of capacity credits (but not energy) to other
electric utilities in the PJM and the sale of transmission
entitlements and the reservation of output from the Martins Creek
units.
In addition to 338,000 kilowatts of qualifying facility
generation included in the total system capacity, PP&L is purchasing
about 12,000 kilowatts of output from various other non-utility
generating companies. The payments made to non-utility generating
companies, all of whose facilities are located in PP&L's service
area, are recovered from customers through base rate charges
applicable to PUC- and FERC-jurisdictional customers.
The PJM companies had 57.2 million kilowatts of installed
generating capacity at December 31, 1997, and transmission line
connections with neighboring power pools have the capability of
transferring an additional 4 to 5 million kilowatts between the PJM
and neighboring power pools. Through December 31, 1997, the maximum
one-hour demand recorded on the PJM was approximately 49.4 million
kilowatts, which occurred on July 15, 1997. PP&L is also a party to
the Mid-Atlantic Area Coordination Agreement, which provides for the
coordinated planning of generation and transmission facilities by the
companies included in the PJM.
FUEL SUPPLY
Coal
During 1997, PP&L's generating stations burned about 10 million
tons of bituminous coal, anthracite and petroleum coke. About 63% of
the coal delivered to PP&L's generating stations in 1997 was
purchased under contracts and 37% was obtained through open market
purchases. Contracts with non-affiliated coal producers provided
PP&L with about 4.6 million tons of coal in 1997 and are expected to
provide PP&L with about 4.3 million tons in both 1998 and 1999.
PP&L's requirements for additional coal are expected to be obtained
by contracts and market purchases.
The amount of coal carried in inventory at PP&L's generating
stations varies from time to time depending on market conditions and
plant operations. As of December 31, 1997, PP&L's coal supply was
sufficient for at least 32 days of operations.
The coal burned in PP&L's generating stations contains both
organic and pyritic sulfur. Mechanical cleaning processes are
utilized to reduce the pyritic sulfur content of the coal. The
reduction of the pyritic sulfur content by either mechanical cleaning
or blending has lowered the total sulfur content of the coal burned
to levels which permit compliance with current sulfur dioxide
emission regulations established by the DEP. For information
concerning PP&L's plans to achieve compliance with the federal clean
air legislation enacted in 1990, see "Environmental Matters" on page
35 and Note 16 to Financial Statements.
PP&L owns a 12.34% undivided interest in the Keystone station
and an 11.39% undivided interest in the Conemaugh station, both of
which are generating stations located in western Pennsylvania. The
owners of the Keystone station have a long-term contract with a coal
supplier to provide at least two-thirds of that station's
requirements through 1999 and declining amounts thereafter until the
contract expires at the end of 2004. The balance of the Keystone
station requirements are purchased in the open market. The coal
supply requirements for the Conemaugh station are being met from
several sources through a blend of long-term and short-term contracts
and spot market purchases.
Oil and Natural Gas
PP&L's oil and natural gas purchasing and sales functions are
now performed by the Energy Marketing Center. The addition of oil
and gas to the Center's electricity trading enhances wholesale and
retail marketing efforts and provides a diversified energy portfolio
to offer customers. Additionally, the new trading activities create
opportunities to optimize electric generation efficiency and minimize
fuel costs.
During 1997, 100% of the oil requirements for the Martins Creek
units was purchased on the spot market. As of December 31, 1997,
PP&L had no long-term agreements for these requirements.
During 1997, PP&L's Martins Creek station consumed about
2,800,000 mcf of natural gas. All of this natural gas was purchased
and transported under short-term agreements that were one month or
less in duration. PP&L does not have any long-term agreements to
purchase gas or gas transportation.
Nuclear
The nuclear fuel cycle consists of the mining of uranium ore and
its milling to produce uranium concentrates; the conversion of
uranium concentrates to uranium hexafluoride; the enrichment of
uranium hexafluoride; the fabrication of fuel assemblies; the
utilization of the fuel assemblies in the reactor; the temporary
storage of spent fuel; and the permanent disposal of spent fuel.
PP&L has entered into uranium supply and conversion agreements
that satisfy 100% of the uranium hexafluoride requirements for the
Susquehanna units through 1998, approximately 45% of the requirements
for the period 1999-2001 and, including options, approximately 25% of
the requirements for the period 2002-2005. Deliveries under these
agreements are expected to provide sufficient quantities of uranium
hexafluoride to permit Unit 1 to operate into the first quarter of
2000 and Unit 2 to operate into the first quarter of 2001.
PP&L has entered into an agreement that satisfies 100% of its
enrichment requirements through 2004. Deliveries under this
agreement are expected to provide sufficient enrichment to permit
Unit 1 to operate into the first quarter of 2006 and Unit 2 to
operate into the first quarter of 2007.
PP&L has entered into an agreement that, including options,
satisfies 100% of its fabrication requirements through 2006.
Deliveries under this agreement are expected to provide sufficient
fabrication to permit Unit 1 to operate into the first quarter of
2008 and Unit 2 to operate into the first quarter of 2007.
PP&L estimates that there is sufficient storage capability in
the spent fuel pools at Susquehanna to accommodate the fuel that is
expected to be discharged through the end of 1999. Federal law
requires the federal government to provide for the permanent disposal
of commercial spent nuclear fuel. Pursuant to the requirements of
that law, the DOE has initiated an analysis of a site in Nevada for a
permanent nuclear waste repository. Progress on characterization of
a proposed disposal facility has been slow, and the repository is not
expected to be operational before 2010. Congress is considering new
legislation designed to re-establish a schedule for the spent fuel
disposal program. This legislation would authorize an above-ground
interim storage facility, along with the permanent disposal facility,
as part of an integrated disposal program. Even if this legislation
is enacted and the DOE is successful in building and operating the
interim storage facility, because of PP&L's position in the spent
fuel shipping queue, expansion of Susquehanna's on-site spent fuel
storage capability is necessary. To support this expansion, PP&L has
contracted for the design and construction of a spent fuel storage
facility employing dry fuel storage technology at the Susquehanna
plant. The facility will be modular so that additional storage
capacity can be added as needed. PP&L currently estimates that the
new facility should be available to start receiving spent fuel in
1999. See "Financial Condition - Capital Expenditure Requirements"
on page 32.
Federal law also provides that the costs of spent nuclear fuel
disposal are the responsibility of the generators of such wastes.
PP&L includes in customer rates the fees charged by the DOE to fund
the permanent disposal of spent nuclear fuel. In January 1997, PP&L
joined over 30 other utilities in a lawsuit in the U.S. Court of
Appeals for the District of Columbia Circuit seeking assurance of the
DOE's performance of its contractual obligation to accept the spent
nuclear fuel and suspension of the payment of fees to that agency
pending such performance. In November 1997, the Court denied the
utilities' requested relief and held that the contracts between the
utilities and the DOE provide a potentially adequate remedy (i.e.,
monetary damages) if the DOE fails to begin disposal of spent nuclear
fuel by January 31, 1998. However, the Court also precluded the DOE
from arguing that its delay in contract performance was
"unavoidable".
YEAR 2000 COMPUTER ISSUE
See "Year 2000 Computer Issue" in the Review of the Financial
Condition and Results of Operation on page 40 for information.
ENVIRONMENTAL MATTERS
PP&L is subject to certain present and developing federal,
regional, state and local laws and regulations with respect to air
and water quality, land use and other environmental matters. See
"Financial Condition - Capital Expenditure Requirements" on page 32
for information concerning environmental expenditures during 1997 and
PP&L's estimate of those expenditures during the years 1998-2002.
PP&L believes that it is presently in substantial compliance with
applicable environmental laws and regulations.
See "Environmental Matters" on page 35 and Note 16 to Financial
Statements for information concerning federal clean air legislation
enacted in 1990, groundwater degradation and waste water control at
PP&L facilities, the DEP's solid waste disposal regulations and
PP&L's agreement with the DEP concerning remediation at certain sites
of past operations. Other environmental laws, regulations and
developments that may have a substantial impact on PP&L are discussed
below.
Air
The Clean Air Act includes, among other things, provisions that:
(a) require the prevention of significant deterioration of existing
air quality in regions where air quality is better than applicable
ambient standards; (b) restrict the construction of and revise the
performance standards for new coal-fired and oil-fired generating
stations; and (c) authorize the EPA to impose substantial
noncompliance penalties of up to $25,000 per day of violation for
each facility found to be in violation of the requirements of an
applicable state implementation plan. The DEP administers the EPA's
air quality regulations through the Pennsylvania State Implementation
Plan and has concurrent authority to impose penalties for
noncompliance. At this time, PP&L is meeting all requirements of
Phase I of the Clean Air Act.
In December 1997, international negotiators reached agreement in
Kyoto, Japan to strengthen the 1992 United Nations Global Climate
Change Treaty by adding legally-binding greenhouse gas emission
limits. This Agreement -- formally called the Kyoto Protocol -- if
ratified by the U.S. Senate and implemented, would require the United
States to reduce its greenhouse gas emissions to 7% below 1990 levels
by the period 2008 to 2012. Compliance under the Agreement, if
implemented, could result in increased capital and operating expenses
for PP&L in amounts which are not now determinable but which could be
material.
Water
To implement the requirements established by the Federal Water
Pollution Control Act of 1972, as amended by the Clean Water Act of
1977 and the Water Quality Act of 1987, the EPA has adopted
regulations including effluent standards for steam electric stations.
The DEP administers the EPA's effluent standards through state laws
and regulations relating, among other things, to effluent discharges
and water quality. The standards adopted by the EPA pursuant to the
Clean Water Act may have a significant impact on PP&L's existing
facilities, depending on the DEP's interpretation and future
amendments to its regulations.
The EPA and DEP limitations, standards and guidelines for the
discharge of pollutants from point sources into surface waters are
implemented through the issuance of NPDES permits. PP&L has the NPDES
permits necessary for the operation of its facilities.
Pursuant to the Surface Mining and Reclamation Act of 1977, the
OSM has adopted effluent guidelines which are applicable to PP&L
subsidiaries as a result of their past coal mining and continued coal
processing activities. The EPA and the OSM limitations, guidelines
and standards also are enforced through the issuance of NPDES
permits. In accordance with the provisions of the Clean Water Act
and the Reclamation Act of 1977, the EPA and the OSM have authorized
the DEP to implement the NPDES program for Pennsylvania sources.
Compliance with applicable water quality standards is assured by DEP
review of NPDES permit conditions. PP&L's subsidiaries have received
NPDES permits for their mines and related facilities.
Solid and Hazardous Waste
The RCRA regulates the generation, transportation, treatment,
storage and disposal of hazardous wastes. RCRA also imposes joint
and several liability on generators of solid or hazardous waste for
clean-up costs. A revision of RCRA in late-1984 lowered the
threshold for the amount of on-site hazardous waste generation
requiring regulation and incorporated underground tanks used for the
storage of petroleum and petroleum products as regulated units.
Based upon the results of a survey of its solid waste practices, PP&L
in the past has filed notices with the EPA indicating that hazardous
waste is occasionally generated at all of its steam electric
generating stations and service centers. PP&L has established
specific operating procedures for handling this hazardous waste.
Therefore, at this time RCRA and related DEP regulations are not
expected to have a significant additional impact on PP&L.
The provisions of Superfund authorize the EPA to require past
and present owners of contaminated sites and generators of any
hazardous substance found at a site to clean up the site or pay the
EPA or the state for the costs of clean-up. The generators and past
owners can be liable even if the generator contributed only a minute
portion of the hazardous substances at the site. Present owners can
be liable even if they contributed no hazardous substances to the
site.
The Pennsylvania Superfund law also gives the DEP broad
authority to identify hazardous or contaminated sites in Pennsylvania
and to order owners or responsible parties to clean up the sites. If
responsible parties cannot or will not perform the clean-up, the DEP
can hire contractors to clean up the sites and then require
reimbursement from the responsible parties after the clean-up is
completed. To date, PP&L has principally been involved in federal,
rather than state, Superfund sites.
In 1996, PP&L completed removal of coal tar from one subsurface
accumulation at a former coal gasification plant site in Monroe
County, Pennsylvania and currently expects that significant
additional remedial action will not be required. PP&L has entered
into agreements with the adjacent property owner and DEP to share the
past and future costs of remediating this site. PP&L's share of
these costs, including future monitoring, is approximately $3
million, all of which has been spent or accrued.
PP&L has removed coal tar in two brick pits on the site of a
former gas plant and from river sediment adjacent to the site in
Columbia, Pennsylvania. The cost of investigation and remediation of
the areas of the site where such action has been required is
estimated at $3 million, all of which has been spent or accrued.
There also is coal tar contamination of the soil and groundwater at
the site. Further remediation of these other areas of the site may
be required, the costs of which are not now determinable but could be
material.
PP&L at one time also owned and operated several other gas
plants in its service area. None of these sites is presently on the
Superfund list. However, a few of them may be possible candidates
for listing at a future date. PP&L expects to continue to investigate
and, if necessary, remediate these sites. The cost of this work is
not now determinable but could be material.
See "LEGAL PROCEEDINGS" on page 14 for information concerning an
EPA order and a complaint filed by the EPA in federal district court
against PP&L and 35 unrelated parties for remediation of a Superfund
site in Berks County, Pennsylvania; a complaint filed by PP&L and 16
unrelated parties in federal district court against other parties for
contribution under Superfund relating to the Novak landfill Superfund
site in Lehigh County, Pennsylvania and a related action by the EPA
against PP&L and 29 unrelated parties to recover the agency's past
and future costs at the Novak landfill site; an action by the EPA for
reimbursement of the EPA's past response costs and remediation at the
site of a former metal salvaging operation in Montour County,
Pennsylvania; and PP&L's challenge to the DEP's right to collect fees
for emissions from PP&L's coal-fired units.
PP&L is involved in several other sites where it may be
required, along with other parties, to contribute to investigation
and remediation. Some of these sites have been listed by the EPA
under Superfund, and others may be candidates for listing at a future
date. Future investigation or remediation work at sites currently
under review, or at sites currently unknown, may result in material
additional operating costs which PP&L cannot estimate at this time.
In addition, certain federal and state statutes, including Superfund
and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek
compensation from the responsible parties for the lost value of
damaged natural resources. The EPA and the DEP may file such
compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
Low-Level Radioactive Waste
Under federal law, each state is responsible for the disposal of
low-level radioactive waste generated in that state. States may join
in regional compacts to jointly fulfill their responsibilities. The
states of Pennsylvania, Maryland, Delaware and West Virginia are
members of the Appalachian States Low-Level Radioactive Waste
Compact. Efforts to develop a regional disposal facility in
Pennsylvania are currently underway. Low-level radioactive wastes
resulting from the operation of Susquehanna are currently being sent
to Barnwell, South Carolina for disposal. In the event that this
disposal option becomes unavailable or no longer cost effective, the
low-level radioactive waste will be stored on-site at Susquehanna.
PP&L cannot predict the future availability of low-level waste
disposal facilities or the cost of such disposal.
General
Concerns have been expressed by some members of the scientific
community and others regarding the potential health effects of EMFs.
These fields are emitted by all devices carrying electricity,
including electric transmission and distribution lines and substation
equipment. Federal, state and local officials have focused attention
on this issue. PP&L supports the current efforts to determine
whether EMFs cause any human health problems and is taking low cost
or no cost steps to reduce EMFs, where practical, in the design of
new transmission and distribution facilities. PP&L is unable to
predict what effect, if any, the EMF issue might have on PP&L
operations and facilities and the associated cost.
In addition to the matters described above, PP&L and its
subsidiaries have been cited from time to time for temporary
violations of the DEP and EPA regulations with respect to air and
water quality and solid waste disposal in connection with the
operation of their facilities and may be cited for such violations in
the future. As a result, PP&L and its subsidiaries may be subject to
certain penalties which are not expected to be material in amount.
PP&L is unable to predict the ultimate effect of evolving
environmental laws and regulations upon its existing and proposed
facilities and operations. In complying with statutes, regulations
and actions by regulatory bodies involving environmental matters,
including the areas of water and air quality, hazardous and solid
waste handling and disposal and toxic substances, PP&L may be
required to modify, replace or cease operating certain of its
facilities. PP&L may also incur material capital expenditures and
operating expenses in amounts which are not now determinable.
FRANCHISES AND LICENSES
PP&L has authority to provide electric public utility service
throughout its entire service area as a result of grants by the
Commonwealth of Pennsylvania in corporate charters to PP&L and
companies to which it has succeeded and as a result of certification
thereof by the PUC. In addition, the PUC has granted PP&L a license
to act as an electric generation supplier throughout Pennsylvania in
the state's retail access pilot program. PP&L has been granted the
right to enter the streets and highways by the Commonwealth subject
to certain conditions. In general, such conditions have been met by
ordinance, resolution, permit, acquiescence or other action by an
appropriate local political subdivision or agency of the
Commonwealth.
In January 1998, the United States Department of Energy approved
PP&L's application for an export license to sell capacity and/or
energy to electric utilities in Canada.
PP&L operates Susquehanna Unit 1 and Unit 2 pursuant to NRC
operating licenses which expire in 2022 and 2024, respectively. PP&L
operates two hydroelectric projects pursuant to licenses which were
renewed by the FERC in 1980: Wallenpaupack (44,000 kilowatts
capacity) and Holtwood (102,000 kilowatts capacity). The
Wallenpaupack license expires in 2004 and the Holtwood license
expires in 2014.
PP&L also owns one-third of the capital stock of Safe Harbor
Water Power Corporation, which holds a project license which extends
until 2030 for the operation of its hydroelectric plant. The total
capability of the Safe Harbor plant is 417,500 kilowatts, and PP&L is
entitled by contract to one-third of the total capacity (139,000
kilowatts).
EMPLOYEE RELATIONS
As of December 31, 1997, 4,113 of PP&L's 6,343 full-time
employees were represented by the IBEW under a labor agreement which
expires in May 1998.
<PAGE>
Page 13 contains a map of PP&L's service territory which shows its
location, the location of each of PP&L's coal-fired, oil-fired, hydro and
nuclear-fueled generating stations and the location of major population
centers.
<PAGE>
ITEM 2. PROPERTIES
The accompanying Map shows the location of PP&L's service
area and generating stations.
Reference is made to the "Utility Plant" section of Note 1
for information concerning investments in property, plant and
equipment. Substantially all electric utility plant is subject
to the lien of PP&L's Mortgage.
For additional information concerning the properties of PP&L
see Item 1, "BUSINESS - Power Supply" and "BUSINESS - Fuel
Supply".
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Notes to Financial Statements for
information concerning rate matters and PP&L's restructuring
proceeding before the PUC under the Customer Choice Act.
Reference is made to "Increasing Competition" in the Review
of the Financial Condition and Results of Operation on page 37
for information concerning pending proceedings before the FERC
regarding wholesale customers and restructuring of the PJM.
Reference is made to Item 1 "BUSINESS-Fuel Supply" for
information concerning a lawsuit against the DOE for failure of
that agency to perform certain contractual obligations.
In August 1995, SER, one of the non-utility generating
companies from which PP&L purchases power under the PURPA,
brought suit against PP&L in the District Court. SER alleged
that, since July 1994, PP&L has improperly curtailed power
purchases from SER under the power purchase agreement between the
parties. SER claims that such activity breached the power
purchase agreement and violated the federal antitrust laws, among
other counts. SER alleged that PP&L's actions resulted in loss
of revenue from power sales of $1.6 million and an unquantified
increase in its costs of operation. SER requested compensatory
and punitive damages, as well as treble damages and attorneys'
fees for alleged antitrust violations. In May 1996, the District
Court granted PP&L's motion to dismiss the complaint. In May
1997, the U.S. Court of Appeals for the Third Circuit affirmed
the District Court's dismissal of this suit. In November 1997,
the United States Supreme Court denied SER's petition for a writ
of certiorari.
In December 1995, PP&L filed a petition with the PUC for a
declaratory order that it had acted properly in curtailing
purchases from SER and other NUGs during minimum generation
emergencies on the PJM system. The PUC has stayed a
determination in this case pending a FERC decision regarding
PP&L's request to decertify SER as a qualifying cogeneration
facility (see discussion below).
In November 1995, PP&L initiated a civil action against SER
in the Lehigh County Court of Common Pleas. The principal issue
is whether SER and an affiliate of SER properly used the steam
generated by the plant in accordance with the terms of the
contract. Under the contract, if the steam was used properly,
SER is entitled to a rate of 6.6 cents/kWh; if not, it is
entitled to a rate of only 5.0 cents/kWh. The total annual
difference in PP&L's payment under the two rates is about $9
million. In April 1996, the Court concluded that PP&L must seek
a determination by the FERC prior to reducing the rate paid to
SER.
Accordingly, in July 1996 PP&L filed a motion with the FERC
to revoke SER's status as a qualifying cogeneration facility.
PP&L's motion alleges that SER has engaged in a conscious and
continuing scheme to mislead PP&L and the FERC and that SER has
never complied with the FERC's requirements for a qualifying
cogeneration facility under PURPA. This motion is pending.
In a related matter, in June 1996 SER filed a lawsuit
against PP&L in the Court of Common Pleas of Lehigh County,
Pennsylvania. In this lawsuit, SER restates its allegations
concerning PP&L's procedures for curtailing power deliveries from
SER during periods of minimum generation emergencies declared by
the PJM. SER's claims include breach of contract, fraud,
negligent misrepresentation and breach of duty of good faith and
fair dealing. In addition, SER claims that public statements by
PP&L were libelous. In January 1997, the Court stayed SER's
state law claims against PP&L pending consideration by the PUC of
PP&L's minimum generation petition and dismissed SER's libel
claims.
PP&L cannot predict the outcome of these proceedings.
In April 1991, the U.S. Department of Labor through its MSHA
issued citations to one of PP&L's coal-mining subsidiaries for
alleged coal-dust sample tampering at one of the subsidiary's
mines. The MSHA at the same time issued similar citations to
more than 500 other coal-mine operators. Based on a review of
its dust sampling procedures, the subsidiary is contesting all of
the citations. It is believed at this time, based on the
information available, that the MSHA allegations are without
merit. Citations were also issued against the independent
operator of another subsidiary mine, who is also contesting the
citations issued with respect to that mine. The Administrative
Law Judge assigned to the proceedings ordered that one case be
tried against a single mine operator unrelated to PP&L to
determine whether the MSHA could prove its general allegations
regarding sample tampering. In April 1994, the Judge ruled in
favor of the mine operator and vacated the 75 citations against
it. The MSHA appealed the Judge's decision to the Mine Safety
and Health Review Commission. In November 1995, the Commission
affirmed the Judge's rulings in favor of the operator. The
Secretary of Labor has appealed the Commission's decision to the
U.S. Court of Appeals for the District of Columbia Circuit. PP&L
cannot predict the outcome of these proceedings.
In August 1994, PP&L filed a rate complaint with the federal
Interstate Commerce Commission, now the Surface Transportation
Board, challenging Consolidated Rail Corporation's (Conrail's)
coal transportation rates from interchange points with connecting
carriers to PP&L's power plants. In September 1995, PP&L amended
its complaint to add the connecting carriers, CSX Corporation and
Norfolk Southern Corporation, as additional defendants. As a
result of a Surface Transportation Board ruling in December 1996,
PP&L's complaint against Conrail alone was dismissed, but PP&L's
case against Conrail, CSX and Norfolk Southern jointly continued.
In September 1997, PP&L reached an agreement with the
carriers to settle this case. Under the terms of the settlement,
PP&L would pay lower coal transportation rates to the carriers.
However, the settlement is conditioned on the outcome of the
joint Norfolk Southern/CSX application to take control of
Conrail, which is pending before the Surface Transportation
Board. PP&L cannot predict the outcome of this proceeding or its
ultimate impact on PP&L's coal transportation rates.
In July 1997, UGI filed a lawsuit against PP&L requesting
that the Court of Common Pleas of Luzerne County, Pennsylvania
interpret the PP&L-UGI wholesale power supply agreement.
Specifically, UGI has asked the court to declare that it is
obligated to purchase from PP&L only that quantity of energy that
represents the difference between the amount of UGI's
requirements and the amount available to UGI from other sources.
UGI also is requesting the court to find that the "energy
requirements" of UGI under the power supply agreement do not
include energy and capacity purchased by UGI's retail customers
from sources other than UGI. PP&L has estimated the potential
impact of this claim at up to $14 million between now and the
termination of the agreement in 2001. PP&L is seeking recovery
of the amount of this claim in UGI's current PUC restructuring
proceeding.
In August 1991, PP&L and 35 other unrelated parties received
an EPA order under CERCLA requiring that certain remedial actions
be taken at a former oil recovery site in Berks County,
Pennsylvania, which has been included on the federal Superfund
list. PP&L had been identified by the EPA as a potentially
responsible party, along with over 100 other parties. The EPA
order required remediation by the 36 named parties of four
specific areas of the site. Remedial action under this order has
been completed at a cost of approximately $2 million, of which
PP&L's interim share was approximately $50,000.
The EPA at the same time filed a complaint under Section 107
of CERCLA in the District Court against PP&L and the same 35
unrelated parties. The complaint asks the District Court to hold
the parties jointly and severally liable for all EPA's past costs
at the site and future costs of remediating some of the remaining
areas of the site. The EPA claims it has spent approximately $21
million to date. PP&L and a group of the other named parties
have sued in District Court approximately 460 other parties that
have contributed waste to the site, demanding that these
companies contribute to the clean-up costs.
In July 1993, PP&L and 33 of the 35 unrelated parties
received an EPA order under Section 106 of CERCLA requiring
remediation of the remaining areas of the site identified by the
EPA. The current estimate of remediating the remainder of the
site is approximately $18 million. These costs would be shared
among the responsible parties. PP&L and other parties to the
lawsuit have reached a settlement among themselves and the
federal government regarding these claims. PP&L's share of the
settlement amount is not material.
In December 1991, PP&L and 16 unrelated parties filed
complaints against 64 other parties in District Court seeking
reimbursement under CERCLA for costs the plaintiffs have incurred
and will incur to investigate and remediate the Novak landfill
site in Lehigh County, Pennsylvania. The complaints allege that
the 64 defendants generated or transported substances disposed of
at the Superfund site. A Remedial Investigation and Draft
Feasibility Study for the site has been completed at a cost of
approximately $3 million, of which PP&L's share was approximately
$200,000. The EPA's selected remedy is currently estimated to
cost approximately $20 million. The EPA has issued a 106 Order
against PP&L and several other parties to implement this remedy.
In January 1997, the EPA filed an action against PP&L and 29
other parties under section 107 of CERCLA to recover its costs at
the site, which it alleges are in excess of $990,000. The
parties have reached a tentative settlement of these actions.
PP&L's allocated share is not material.
In April 1993, PP&L received an order under Section 106 of
CERCLA requiring that actions be taken at the site of a former
metal salvaging operation in Montour County, Pennsylvania. The
EPA has taken similar action with two other potentially
responsible parties at the site. The cost of compliance with the
order is currently estimated to be approximately $37 million.
The EPA currently estimates that additional remediation work not
covered by the order will cost an additional $36 million. In
addition, the EPA has already incurred clean-up costs of
approximately $5 million to date. The EPA had indicated that it
will seek to recover these additional costs at a later date.
PP&L's records indicate that scrap metal, wire and transformers
were sold to the salvage operator between 1969 and 1971. Current
information indicates that PP&L's contribution to the site, if
any, is de minimis.
PP&L has challenged the DEP's right to collect air emission
fees for hazardous air pollutants (HAPs) from PP&L's coal-fired
units and air emission fees for emissions from PP&L's Phase I
affected units from 1995 through 1999. (Phase I affected units
are those units designated by the Clean Air Act, or which
voluntarily opt into the requirement, to make certain reductions
in SO2 and NOx emissions by 1995; all others must make these
reductions by 2000.) The HAPs emissions fees are approximately
$200,000 per year. The emission fees for Phase I affected units
from 1995 through 1999 are estimated at $1.6 million. Depending
on the outcome of this litigation, PP&L may be subject to
penalties and interest for withholding portions of fees assessed
from 1994 to date. These penalties and interest are not likely
to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders, through the solicitation of proxies or otherwise, during
the fourth quarter of 1997.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS
Officers of PP&L Resources and PP&L are elected annually by
their Boards of Directors to serve at the pleasure of the
respective Boards. There are no family relationships among any
of the executive officers, or any arrangement or understanding
between any executive officer and any other person pursuant to
which the officer was selected.
There have been no events under any bankruptcy act, no
criminal proceedings and no judgments or injunctions material to
the evaluation of the ability and integrity of any executive
officer during the past five years.
Listed below are the executive officers as of December 31,
1997:
PP&L Resources, Inc.:
Effective Date of
Election to
Name Age Position Present Position
William F. Hecht 54 Chairman, President
and Chief Executive February 24, 1995
Officer
Frank A. Long 57 Executive Vice
President February 24, 1995
Robert G. Byram* 52 Senior Vice President-
Generation and Chief
Nuclear Officer - PP&L April 1, 1997
Ronald E. Hill** 55 Senior Vice President-
Financial August 1, 1996
Robert D. Fagan* 52 President - PP&L Global,
Inc. December 20, 1995
Robert J. Grey 47 Senior Vice President,
General Counsel and
Secretary March 1, 1996
Joseph J. McCabe 47 Vice President and
Controller August 1, 1995
PP&L, Inc.:
Effective Date of
Election to
Name Age Position Present Position
William F. Hecht 54 Chairman, President
and Chief Executive
Officer January 1, 1993
Frank A. Long 57 Executive Vice
President and Chief
Operating Officer January 1, 1993
Robert G. Byram 52 Senior Vice President-
Generation and Chief
Nuclear Officer April 1, 1997
Ronald E. Hill** 55 Senior Vice President-
Financial January 1, 1994
John R. Biggar** 53 Vice President-
Finance August 1, 1996
Robert J. Grey 47 Senior Vice President,
General Counsel and
Secretary March 1, 1996
Joseph J. McCabe 47 Vice President and
Controller August 1, 1995
* Mr. Byram and Mr. Fagan have been designated executive
officers of PP&L Resources by virtue of their respective
positions at PP&L Resources subsidiaries.
** Effective January 28, 1998, John R. Biggar, Vice President-
Finance of PP&L, was elected Senior Vice President-Financial
and designated as the acting principal financial officer of
PP&L Resources and PP&L pending the selection of a permanent
successor to Ronald E. Hill, who has retired.
Each of the above officers, with the exception of Mr. Fagan,
Mr. Grey and Mr. McCabe, has been employed by PP&L for more than
five years as of December 31, 1997. Mr. Fagan joined PP&L
Global, Inc. - then a PP&L subsidiary - in November 1994. Prior
to that time, he was Vice President and General Manager at
Mission Energy Company. Mr. McCabe joined PP&L in May 1994 and
was previously a partner of Deloitte & Touche LLP. Mr. Grey
joined PP&L in March 1995. He had been General Counsel of Long
Island Lighting Company since 1992.
Prior to their election to the positions shown above, the
following executive officers held other positions within PP&L
since January 1, 1993: Mr. Byram was Senior Vice President -
System Power & Engineering and Senior Vice President - Nuclear;
Mr. Hill was Vice President, Comptroller and Senior Vice
President - Financial and Treasurer of PP&L Resources; Mr. Biggar
was Vice President-Finance and Vice President - Finance and
Treasurer; Mr. Grey was Vice President, General Counsel and
Secretary, and Mr. McCabe was Controller.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Additional information for this item is set forth in the
sections entitled "Quarterly Financial, Common Stock Price and
Dividend Data" on page 83 and "Shareowner and Investor
Information" on pages 89 through 91 of this report. The number
of common shareowners is set forth in the section entitled
"Selected Financial and Operating Data" on page 22.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
<CAPTION>
1997 (a) 1996 1995 (a) 1994 (a) 1993
<S> <C> <C> <C> <C> <C> <C> <C>
PP&L RESOURCES, INC.
Income Items -- millions
Operating revenues ...................... $3,049 $2,910 $2,752 $2,725 $2,727
Operating income....................................... 545 556 574 501 563
Net Income ............................................ 296 329 323 216 (e) 314 (e)
Balance Sheet Items -- millions (b)
Property, plant and equipment, net....... 6,820 6,960 6,970 7,195 7,146
Total assets........................................... 9,485 9,670 9,492 9,372 9,454
Long-term debt......................................... 2,735 2,832 2,859 2,941 2,663
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely company debentures.................... 250
Preferred stock
With sinking fund requirements....................... 47 295 295 295 335
Without sinking fund requirements.................... 50 171 171 171 171
Common equity.......................................... 2,809 2,745 2,597 2,454 2,426
Short-term debt........................................ 135 144 89 74 202
Total capital provided by investors.................... 6,026 6,187 6,011 5,936 5,797
Capital lease obligations ............................. 171 247 220 225 249
Financial Ratios
Return on average common equity -- % .... 10.61 12.30 12.81 8.73 13.06
Embedded cost rates (b)
Long-term debt -- %.................................. 7.88 7.89 7.95 8.07 8.63
Preferred stock -- %................................. 7.71 6.09 6.09 6.07 6.30
Times interest earned before income taxes.............. 3.39 3.55 3.56 2.73 3.33
Ratio of earnings to fixed charges -- total
enterprise basis (c)................................. 3.23 3.45 3.47 2.70 3.31
Ratio of earnings to fixed charges and
dividends on preferred stock
--total enterprise basis (c)........................ 2.85 2.90 2.91 2.27 2.71
Common Stock Data
Number of shares outstanding -- thousands
Year-end............................................. 166,248 162,665 159,403 155,482 152,132
Average.............................................. 164,550 161,060 157,649 153,458 151,904
Number of shareowners (b).............................. 117,293 123,290 128,075 132,632 130,677
Earnings per share .................................... $1.80 $2.05 $2.05 $1.41 $2.07
Dividends declared per share........................... $1.67 $1.67 $1.67 $1.67 $1.65
Book value per share (b)............................... $16.90 $16.87 $16.29 $15.79 $15.95
Market price per share (b)............................. $23.938 $23 $25 $19 $27
Dividend payout rate -- %.............................. 93 82 82 119 80
Dividend yield -- % (d)................................ 6.98 7.26 6.68 8.79 6.11
Price earnings ratio (d)............................... 13.30 11.22 12.20 13.48 13.04
<FN>
(a) 1997, 1995 and 1994 earnings were affected by several
one-time adjustments. This affected net income and
certain items under Financial Ratios and Common Stock
Data. See Financial Notes 4, 11, 12 and 15.
(b) At year-end
(c) Computed using earnings and fixed charges of PP&L
Resources and its subsidiaries. Fixed charges consist
of interest on short- and long-term debt, other interest
charges, interest on capital lease obligations and the
estimated interest component of other rentals.
(d) Based on year-end market prices.
(e) Restated to reflect formation of the holding company.
</TABLE>
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
<CAPTION>
1997 (a) 1996 1995 (a) 1994 (a) 1993
<S> <C> <C> <C> <C> <C>
PP&L, Inc.
Income Items -- millions
Operating revenues ....................... $3,049 $2,910 $2,752 $2,725 $2,727
Operating income......................................... 545 556 574 501 563
Earnings available to PP&L Resources, Inc................ 308 329 324 215 (d) 314 (d)
Balance Sheet Items -- millions (b)
Property, plant and equipment, net........ 6,820 6,960 6,970 7,195 7,146
Total assets............................................. 9,472 9,405 9,424 9,321 9,454
Long-term debt........................................... 2,633 2,832 2,859 2,941 2,663
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely company debentures...................... 250
Preferred stock
With sinking fund requirements......................... 295 295 295 295 335
Without sinking fund requirements...................... 171 171 171 171 171
Common equity............................................ 2,612 2,617 2,528 2,404 2,426
Short-term debt.......................................... 45 10 89 74 202
Total capital provided by investors...................... 6,006 5,925 5,942 5,885 5,797
Capital lease obligations ............................... 171 247 220 225 249
Financial Ratios
Return on average common equity -- % ..... 11.75 12.95 13.10 8.83 13.06
Embedded cost rates (b)
Long-term debt -- %.................................... 7.91 7.89 7.95 8.07 8.63
Preferred stock -- %................................... 6.90 6.09 6.09 6.07 6.30
Times interest earned before income taxes................ 3.67 3.62 3.58 2.73 3.33
Ratio of earnings to fixed charges -- total
enterprise basis (c)................................... 3.47 3.50 3.48 2.70 3.31
Ratio of earnings to fixed charges and
dividends on preferred stock
--total enterprise basis (c).......................... 2.77 2.93 2.92 2.26 2.71
Revenue Data
Average price per kWh billed for service area
sales - cents........................................ 7.36 7.38 7.21 7.24 7.37
Sales Data
Customers (thousands)(b).................. 1,247 1,236 1,226 1,213 1,203
Electric energy sales billed -- millions of kWh
Residential ........................................... 11,434 11,849 11,300 11,444 11,043
Commercial ............................................ 10,309 10,288 9,948 9,715 9,373
Industrial ............................................ 10,078 10,016 9,845 9,536 9,100
Other ................................................. 143 154 188 236 219
Service area sales .................................. 31,964 32,307 31,281 30,931 29,735
Wholesale energy sales .............................. 21,454 14,341 11,424 10,848 12,599
Total electric energy sales billed .................. 53,418 46,648 42,705 41,779 42,334
Number of Full-Time Employees (b).......................... 6,343 6,428 6,661 7,431 7,677
<FN>
(a) 1997, 1995 and 1994 earnings were affected by several one-time adjustments. This affected
earnings available to PP&L Resources and certain items in Financial Ratios. See Financial
Notes 4, 12, and 15.
(b) At year-end
(c) Computed using earnings and fixed charges of PP&L and its subsidiaries. Fixed charges consist
of interest on short- and long-term debt, other interest charges, interest on capital lease
obligations and the estimated interest component of other rentals.
(d) Prior years restated to reflect formation of the holding company.
</TABLE>
<PAGE>
ITEM 7. REVIEW OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PP&L RESOURCES, INC. AND PP&L, INC.
PP&L Resources is a holding company with headquarters in Allentown,
PA. Its subsidiaries include PP&L, which provides electricity delivery
service in eastern and central Pennsylvania, sells retail electricity
throughout Pennsylvania and markets wholesale electricity throughout the
eastern United States; PP&L Global, an international independent power
company; PP&L Spectrum, which markets energy-related services and
products; PP&L Capital Funding, which engages in financing for PP&L
Resources and its subsidiaries; and H. T. Lyons, a heating, ventilating
and air-conditioning firm which PP&L Resources acquired on January 22,
1998. Other subsidiaries may be formed by PP&L Resources to take
advantage of new business opportunities.
The financial condition and results of operations of PP&L are
currently the principal factors affecting the financial condition and
results of operations of PP&L Resources. All fluctuations, unless
specifically noted, are primarily due to activities of PP&L. All
nonutility operating transactions are included in "Other Income and
(Deductions)" on the Consolidated Statement of Income.
Terms and abbreviations appearing in the Review of the Financial
Condition and Results of Operations are explained in the glossary.
Forward-looking Information
Certain statements contained in this Form 10-K concerning
expectations, beliefs, plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements
which are other than statements of historical facts, are "forward-looking
statements" within the meaning of the federal securities laws. Although
PP&L Resources and PP&L believe that the expectations reflected in these
statements are reasonable, there can be no assurance that these
expectations will prove to have been correct. These forward-looking
statements involve a number of risks and uncertainties, and actual
results may differ materially from the results discussed in the forward-
looking statements. The following are among the important factors that
could cause actual results to differ materially from the forward-looking
statements: state and federal regulatory developments, especially the
PUC's final order on PP&L's April 1, 1997 restructuring filing; new state
or federal legislation; national or regional economic conditions; weather
variations affecting customer usage; competition in retail and wholesale
power markets; the need for and effect of any business or industry
restructuring; PP&L Resources' and PP&L's profitability and liquidity;
new accounting requirements or new interpretations or applications of
existing requirements; system conditions and operating costs; performance
of new ventures; political, regulatory or economic conditions in foreign
countries; exchange rates; and PP&L Resources' and PP&L's commitments and
liabilities. Any such forward-looking statements should be considered in
light of such important factors and in conjunction with PP&L Resources'
and PP&L's other documents on file with the SEC.
Results of Operations
Earnings
Earnings per share of common stock were $1.80 in 1997 and $2.05 in
1996 and 1995. Excluding the effects of weather and one-time
adjustments, earnings were $2.03 per share in 1997, compared to $2.00 per
share in 1996. The effect of milder weather in 1997 adversely impacted
earnings in 1997 and colder than normal weather benefited earnings in
1996. The following table highlights the major items that impacted
earnings for each of these years:
1997 1996 1995
Earnings per share - excluding
weather and one-time adjustments $2.03 $2.00 $1.77
Weather variances on billed sales (0.03) 0.05 0.02
One-time adjustments:
Windfall Profits Tax (0.23)
U.K. Income Tax Rate Reduction 0.06
Penn Fuel Gas acquisition costs (0.03)
PUC Decision 0.21
Workforce reduction programs (0.11)
ECR purchased power costs 0.04
Gain on subsidiary coal reserves 0.12
Earnings per share - reported $1.80 $2.05 $2.05
Weather-normalized sales to service area customers remained
relatively unchanged from the prior year, increasing by 0.2 percent. A
major factor in this low growth was the shutdown of a large steel
producing facility. Excluding steel-related sales losses, weather
normalized service area energy sales would have increased by 1.1 percent
in 1997 when compared to 1996.
In 1997, higher revenues from bulk power sales and trading activity
of the Energy Marketing Center offset the impact of the phase-down of
contractual sales to JCP&L. Earnings also benefited from refinancing
activities and, excluding one-time adjustments, the on-going operations
of PP&L Global. A change in the regulatory treatment of energy costs
(see "Operating Revenues" on page 27) and higher depreciation in 1997
partially offset these earnings gains.
The earnings improvement in 1996 -- excluding weather and one-time
adjustments -- was primarily due to higher revenues resulting from the
base rate increase from the PUC Decision as well as higher sales to all
service area classes. Earnings also benefited from lower interest
expense due to refinancing efforts. These earnings gains were partially
offset by a reduction in contractual bulk power sales to JCP&L, as well
as higher wages and benefits and depreciation expense.
The costs of establishing the organization and programs to meet
retail competition in Pennsylvania are estimated to be approximately $35
million more in 1998 than in 1997. These expenses will adversely affect
1998 earnings. In addition, the settlement agreements with 16 small
utilities, if approved by FERC as filed, would require PP&L to write off
a portion of its stranded costs applicable to these customers. The
amount of this write-off is currently estimated at approximately $28
million after-tax, or 17 cents per share of common stock. See Financial
Note 3 for additional information. The reduction in contractual bulk
power sales to JCP&L and other major utilities will also continue to
adversely impact earnings over the next few years. However, the efforts
of the Energy Marketing Center to resell the returning electric energy
and capacity on the open market, along with its other energy trading
activities, should continue to offset the loss in revenues from declining
contractual sales. Finally, the Customer Choice Act and the regulatory
and business developments related thereto could have a major impact on
the future financial performance of PP&L. See "PUC Restructuring
Proceeding" on page 27 for additional information.
Electric Energy Sales
The change in PP&L's electric energy sales was attributable to the
following:
1997 1996
vs vs
1996 1995
(Millions of kWh)
Service Area sales
Residential (415) 548
Commercial 21 341
Industrial 62 171
Other (11) (34)
Total Service Area Sales (343) 1,026
Wholesale Energy Sales 7,113 2,917
Total 6,770 3,943
Service area sales were 32.0 billion kWh for 1997, a decrease of 343
million kWh, or 1.1%, from 1996. Part of this decrease was attributable
to milder weather in the first quarter of 1997 as compared to 1996. If
normal weather had been experienced in both 1997 and 1996, total service
area sales for 1997 would have increased by about 49 million kWh, or
0.2%, over 1996.
Actual sales to residential customers in 1997 decreased 415 million
kWh, or 3.5%, from 1996, compared with an increase in 1996 of 548 million
kWh, or 4.8%, from 1995. Under normal weather conditions, the 1997
decrease would have been 0.9%. Weather-adjusted commercial sales
increased 1.0% in 1997, and sales to industrial customers increased by
0.6% from 1996.
Wholesale energy sales, which include sales to other utilities and
energy marketers through contracts, spot market transactions or power
pool arrangements, were 21.5 billion kWh for the year ended December 31,
1997, an increase of 7.1 billion kWh, or 49.6%, from 1996, despite the
reduction in PP&L's contractual bulk power sales to JCP&L. This increase
was primarily the result of increased generation from PP&L units and the
increased activity of the Energy Marketing Center.
See "Operating Revenues" for more information.
Operating Revenues
The change in total operating revenues was attributable to the
following:
1997 1996
vs vs
1996 1995
(Millions of Dollars)
Base Rate Revenues - Service Area Sales:
Sales volume and sales mix effect $ (2) $ 57
Weather effect (31) 13
Unbilled revenues 17 (27)
Rate increase - PUC Decision 0 76
Energy Revenues (30) 5
Wholesale Revenues
Energy and capacity 139 27
Reservation charges and other 32 (7)
Other, net 14 14
$139 $158
Operating revenues increased by $139 million, or 4.8%, in 1997 over
1996. Revenues from service area sales in 1997 were slightly lower than
in 1996. This was the result of mild weather in the first quarter of
1997 compared to extremely cold weather during the first quarter of 1996.
However, 1997 saw higher revenues from bulk power sales and the trading
activities of PP&L's Energy Marketing Center. The efforts of the Energy
Marketing Center essentially offset the reduced revenues from the phase-
down of contractual sales to JCP&L. These increases were partially
offset by a change in the regulatory treatment of energy costs by the
PUC. Specifically, beginning January 1, 1997, underrecovered energy
costs up to a cap of $31.5 million annually are no longer recorded as
energy revenues but as regulatory credits, which are offsets to "Other
Operating Expenses." To the extent that underrecovered energy costs --
primarily fuel and purchased power -- exceed the cap, earnings are
adversely affected. Weather also had an unfavorable impact when
comparing 1997 to 1996.
Operating revenues increased by $158 million, or 5.8%, in 1996 over
1995. Base rate revenues were enhanced by the PUC Decision and strong
sales growth in all customer classes. In addition, weather had a
favorable impact when comparing 1996 to 1995. Also, 1996 revenues
reflected increased sales to other utilities, primarily due to the one-
year contract to supply energy to PSE&G. These increases were partially
offset by the loss of revenue due to the phase-down of the capacity and
energy agreement with JCP&L.
PUC Restructuring Proceeding
In December 1996, Pennsylvania enacted the Customer Choice Act to
restructure its electric utility industry in order to create retail
access to a competitive market for the generation of electricity. The
Act includes the following major provisions: (1) all electric utilities
in Pennsylvania are required to file a restructuring plan with the PUC to
implement direct access to a competitive market for electric generation;
(2) retail customer choice will be phased in over three years, beginning
as early as January 1, 1999; (3) electric distribution companies will be
the suppliers of last resort, and the PUC will ensure that adequate
generation reserves exist to maintain reliable electric service; (4)
retail rates generally will be capped for at least four-and-a-half years
for transmission and distribution charges and for as long as nine years
for generation charges; (5) utilities are permitted to recover PUC-
approved transition or stranded costs through a non-bypassable
Competitive Transition Charge (CTC); and (6) transition bonds may be
issued to refinance the stranded costs, with a transition charge on
customers bills to repay the bonds.
Under the Customer Choice Act, the PUC is authorized to determine
the amount of PP&L's stranded costs to be recovered through a CTC to be
paid by all PUC-jurisdictional customers who receive transmission and
distribution service from PP&L. Stranded costs are defined in the
Customer Choice Act as "generation-related costs... which would have been
recoverable under a regulated environment but which may not be
recoverable in a competitive generation market and which the PUC
determines will remain following mitigation by the electric utility."
In accordance with the Customer Choice Act, PP&L filed its
restructuring plan with the PUC on April 1, 1997. PP&L's restructuring
plan includes a claim of $4.5 billion (on a net present value basis as of
January 1, 1999) for stranded costs. Pursuant to the Customer Choice
Act, this claim is comprised of the following categories:
1. Net plant investments and costs attributable to existing
generation plants and facilities, costs of power purchases, disposal
costs of spent nuclear fuel, retirement costs attributable to
existing generating plants and employee-related transition costs;
2. Prudently incurred costs related to the cancellation,
buyout, buydown or renegotiation of NUG contracts; and
3. Regulatory assets and other deferred charges typically
recoverable under current regulatory practice and cost obligations
under PUC-approved contracts with NUGs.
The following are the components of PP&L's stranded cost claim as
presented in the evidentiary record of the proceeding:
Amount
Category of Stranded Cost (Millions of Dollars)
Nuclear Generation(a) $2,825
Fossil Generation(a) 670
NUG Contracts 651
Regulatory Assets 354
$4,500
(a) Includes deferred income taxes related to generation assets.
In determining the appropriate amount of stranded cost recovery, the
Customer Choice Act requires the PUC to consider the extent to which an
electric utility has taken steps to mitigate stranded costs by
appropriate means that are reasonable under the circumstances.
Mitigation efforts undertaken over time prior to the enactment of the
Customer Choice Act are to be considered of equal importance by the PUC
in determining an electric utility's stranded costs as actions taken
after the passage of the Customer Choice Act. In its restructuring plan,
PP&L described its extensive efforts to mitigate its stranded costs,
resulting in a reduction in its stranded cost claim of over $1 billion.
Numerous parties have intervened in PP&L's restructuring proceeding.
These parties are recommending stranded cost recovery by PP&L ranging
from $695 million to $3.2 billion. In this regard, the PUC's OTS
recommends that PP&L be permitted to recover $3.2 billion of its stranded
costs; the PP&L Industrial Customer Alliance recommends recovery of $695
million; and the OCA recommends recovery of $1.1 billion. Under
Pennsylvania law, the OCA and the OTS have advocacy roles in proceedings
before the PUC. Testimony filed by the OCA and OTS carries no more
weight than testimony filed by any other party in the proceeding.
Evidentiary hearings in this matter were held in late-August. The
PUC has revised the procedural schedule several times to permit continued
settlement discussions among the parties. In February 1998, the parties
filed their Main Briefs in the proceeding. Under the current schedule,
the PUC's final order is due by June 4, 1998. PP&L cannot predict the
ultimate outcome of this proceeding.
The ultimate impact of the Customer Choice Act on PP&L's financial
health will depend on numerous factors, including:
1. The PUC's final order in the restructuring proceeding,
including the amount of stranded cost recovery approved by the PUC and
the PUC's disposition of other issues raised;
2. The effect of the rate cap imposed under the provisions of the
Customer Choice Act;
3. The actual market price of electricity over the transition
period;
4. Future sales levels; and
5. The extent to which the regulatory framework established by the
Customer Choice Act will continue to be applied.
Under the Customer Choice Act, PP&L's rates to PUC-jurisdictional
customers are capped at the level in effect on January 1, 1997 through
mid-2001 for transmission and distribution services and through the year
2005 for generation services to customers who do not choose an
alternative supplier. Applying the CTC proposed in its restructuring
plan (which is restricted by the rate cap) through the year 2005, it is
estimated that PP&L would collect approximately $4 billion (on a net
present value basis as of January 1, 1999) of its stranded costs. The
remaining $500 million would be reflected as lower cash flow to PP&L
after the transition period than would have occurred with continued
regulated rates.
In this regard, it should be noted that PP&L's stranded cost claim
included in the restructuring plan is based on a projection of future
market prices and assumes a significant portion of PP&L's stranded costs
will be recovered by way of increased market prices for electricity.
This increase may or may not occur. To the extent that the market price
of electricity does not increase as projected, or other projections do
not actually occur, PP&L could experience a lower recovery of stranded
costs.
If the PUC's final order in the restructuring proceeding were to
permit full recovery of PP&L's stranded costs, including full recovery of
all regulatory assets and above-market NUG costs over the transition
period, PP&L estimates that its net income over the transition period
would be reduced by about 5% from amounts that were previously projected
under historic cost-based regulation.
However, the PUC's final order -- either as a result of a settlement
or a fully-litigated proceeding -- may result in changes to components or
assumptions in PP&L's restructuring plan that could have an adverse
effect on the amount of the CTC, the amount of stranded costs that are
recoverable through the CTC or the overall amount of revenues to be
collected from customers. As a result of these uncertainties, PP&L
cannot determine whether and to what extent it may be subject to a write-
off or a reduction in revenues and earnings with respect to the
restructuring proceeding. Based on the substantial amounts involved in
the restructuring proceeding, should PP&L incur such a write-off or
reduction in revenues and earnings, either one could be material in
amount. Accordingly, PP&L Resources is unable to predict the ultimate
effect of the Customer Choice Act or the PUC's final order in the
restructuring proceeding on its financial position, its results of
operation, future PP&L rate levels, the need or ability to issue
securities to meet future capital requirements or the ability to maintain
the common stock dividend at the current level.
The Customer Choice Act permits the issuance of "transition bonds"
securitized by customer revenues from an Intangible Transition Charge
(ITC) to finance the payment of stranded costs. PP&L is considering
whether to seek to securitize some portion of its stranded cost claim,
which would require the approval of the PUC in a qualified rate order.
Certain parties have brought actions in the Pennsylvania
Commonwealth Court challenging the constitutionality of the Customer
Choice Act. PP&L has intervened in these proceedings in support of the
Customer Choice Act.
Rate Matters
Refer to Financial Note 4 for information regarding rate matters.
Fuel Expense
Fuel expense for 1997 increased by $18 million from the comparable
period in 1996. This increase was primarily due to PP&L's coal-fired
units operating at higher output to support increased wholesale electric
market activity, resulting in an increase in total coal-fired generation
for the year. The increase was slightly offset by a decrease in the unit
fuel prices for coal-fired and gas-fired generation.
Power Purchases
Power purchases in 1997 increased $152 million over the comparable
period in 1996. This increase was primarily due to greater quantities of
power purchased from other utilities to meet increased trading activities
of the Energy Marketing Center. Higher overall market prices of power
during 1997 compared to 1996 contributed to the increase in purchased
power costs.
Power purchases in 1996 increased $61 million from 1995. The
increase was primarily due to greater quantities of power purchased from
PJM and other utilities, increased customer demand, planned and unplanned
outages of PP&L generation stations, and attractive market prices for
energy.
Income Taxes
Income tax expense for 1997 decreased $15 million, or 5.9%, from
1996. This was primarily due to a decrease in pre-tax book income of $52
million.
Income tax expense for 1996 decreased $33 million, or 11.3%, from
1995. This was primarily due to a decrease in pre-tax book income of $25
million, and the recording of the tax benefits of research and
experimental tax credits and deductions of $5 million.
Other Operation, Maintenance and Depreciation Expense
Other operation and maintenance expenses in 1997 decreased by $26
million from 1996. Excluding the effect of underrecovered energy costs,
operation and maintenance expenses increased by $6 million in 1997.
These increases were primarily due to costs associated with the pilot
program, the PUC restructuring filing and the FERC transmission access
filing.
Prior to 1997, underrecovered energy costs were accrued as energy
revenues. In 1997, these underrecovered costs were recorded as
regulatory credits, which are reflected in the income statement as a
reduction of "Other Operating Expense". This reflects a change in the
regulatory treatment of undercollected energy costs by the PUC.
Depreciation expenses in 1997 increased by $11 million from 1996.
These increases were primarily due to depreciation on plant additions and
amortization of newly implemented computer software.
Other Income and (Deductions)
Other income and deductions for 1997 decreased by $31 million from
1996. This decrease was primarily due to the windfall profits tax on
PP&L Global's investment in SWEB, which resulted in a $37 million charge.
Refer to "Windfall Profits Tax - PP&L Global" for further discussion.
Other income and deductions for 1997 also includes a $6 million pre-tax
charge for estimated costs associated with the acquisition of PFG.
Partially offsetting these charges was a $10 million one-time tax benefit
recorded by PP&L Global related to its investment in SWEB. This benefit
was based on the reduction of the U.K. corporate income tax rate from 33%
to 31%.
Other income and deductions improved in 1996 compared with 1995, due
to the equity earnings from PP&L Global's investment in SWEB and gains on
the sale of investment securities by PP&L. Other income and deductions
in 1995 reflected a gain on the sale of a PP&L subsidiary's undeveloped
coal reserves, offset by the write-off of Susquehanna Unit 1 deferred
operating expenses and carrying costs (net of energy savings) resulting
from the PUC Decision and by expenses associated with evaluating and
responding to PECO's unsolicited proposals to acquire PP&L Resources.
Windfall Profits Tax - PP&L Global
In July 1997, the U.K. assessed a windfall profits tax on privatized
utilities. The tax is payable in two equal installments; the first
installment was made on December 1, 1997 and the second one is due in
December 1998. SWEB's windfall profits tax was approximately 90 million
pounds sterling, or about $148 million. Based on PP&L Global's 25%
ownership interest in SWEB, PP&L Resources incurred a one-time charge
against earnings of $37 million, or 23 cents per share, in 1997.
Subsidiary Coal Reserves
In November 1995, PP&L sold the coal reserves of one of its
subsidiaries for $52 million, which resulted in a $42 million gain, or
$20 million after-tax. PP&L had acquired the reserves in 1974 with the
intention of supplying future coal-fired generating stations, but later
concluded that it would not develop these reserves for such purposes. In
1994, the reserves' carrying value was written down from $84 million to
$10 million.
Financing Costs
In 1997, PP&L Resources continued to take advantage of opportunities
to reduce its financing costs by retiring long-term debt with the
proceeds from the sale of securities at a lower cost and repurchasing
PP&L preferred stock. Interest on long-term debt and dividends on
preferred stock decreased from $242 million in 1994 to $220 million in
1997, for a total decrease of $22 million.
Financial Condition
Capital Expenditure Requirements
The schedule below shows PP&L's current capital expenditure
projections for the years 1998-2002 and actual spending for the year
1997.
PP&L's Capital Expenditure Requirements (a)
Actual -------------Projected----------------
1997 1998 1999 2000 2001 2002
(Millions of Dollars)
Construction expenditures
Generating facilities $ 64 $ 89 $ 66 $ 72 $ 84 $ 86
Transmission and
distribution facilities 116 124 121 139 138 145
Environmental 12 15 14 6 5 3
Other 58 74 46 22 20 20
Total Construction
Expenditures 250 302 247 239 247 254
Nuclear fuel owned and
leased 60 63 60 63 65 67
Other leased property 35 22 22 22 22 22
Total Capital Expen-
ditures $345 $387 $329 $324 $334 $343
(a) Construction expenditures include AFUDC which is expected to be less
than $10 million in each of the years 1998-2002.
PP&L's capital expenditure projections for the years 1998-2002 total
about $1.7 billion. Capital expenditure plans are revised from time to
time to reflect changes in conditions.
Unregulated Investments
PP&L Global continues to pursue opportunities to develop and acquire
electric generation, transmission and distribution facilities in the
United States and abroad.
As of December 31, 1997, PP&L Global had investments and commitments
in the amount of approximately $370 million in distribution, transmission
and generation facilities in the United Kingdom, Bolivia, Peru,
Argentina, Spain, Portugal and Chile. PP&L Global's principal
investments to date are in SWEB and Emel.
In July 1997, PP&L Global acquired a 25.05% interest in Emel at a
cost of approximately $118 million. Emel is a Chilean holding company
that has majority interests in six electric distribution companies
located in Chile and Bolivia. Emel's electric distribution company
holdings make it the third largest distributor of electricity in Chile
and the second largest in Bolivia, serving a total of 535,000 customers
in those countries. Under a shareholders' agreement, PP&L Global and
another major shareholder, Las Espigas Group, jointly control Emel's
board of directors. In January and February 1998, PP&L Global acquired
an additional 300,000 shares in Emel at a cost of approximately $5
million, increasing its ownership interest to 27%.
Also, in February 1998, PP&L Global and Emel acquired a 75% interest
in Distributidora de Electricidad del Sur (DelSur), an electric
distribution company serving 193,000 customers in El Salvador, for
approximately $180 million. Under the purchase agreement, PP&L Global
will directly acquire 37.5% of DelSur and Emel will acquire the other
37.5%. DelSur is one of five electricity distribution companies in El
Salvador that are being privatized by the government.
PP&L Resources' other unregulated subsidiary, PP&L Spectrum, offers
energy-related products and services. Other subsidiaries may be formed
by PP&L Resources to take advantage of new business opportunities.
Acquisitions of Penn Fuel Gas, Inc. and H.T. Lyons, Inc.
In June 1997, PP&L Resources entered into an agreement with Penn
Fuel Gas, Inc. (PFG), a Pennsylvania corporation, pursuant to which PP&L
Resources would acquire PFG. PFG, with nearly 100,000 customers in
Pennsylvania and a few hundred customers in Maryland, distributes and
stores natural gas and sells propane.
Under the terms of the agreement, PFG would become a wholly-owned
subsidiary of PP&L Resources. Upon consummation of the acquisition, each
outstanding PFG common share would be converted into the right to receive
between 6.968 and 8.516 shares of PP&L Resources' Common Stock, and each
outstanding PFG preferred share would be converted into the right to
receive between 0.682 and 0.833 shares of PP&L Resources' Common Stock.
PP&L Resources expects to issue shares of its Common Stock valued at
about $121 million to complete the transaction. The exact conversion
rate and number of PP&L Resources' shares to be issued will be based on
the market value of the Common Stock of PP&L Resources at the time of the
merger. The transaction is expected to be treated as a pooling-of-
interests for accounting and financial reporting purposes.
The acquisition of PFG is subject to several conditions, including
the receipt of required approvals by the PUC and the SEC. The Maryland
Public Service Commission has determined not to institute proceedings on
the matter. The U.S. Department of Justice and the Federal Trade
Commission have granted early termination of the required waiting period
for the acquisition under the Hart-Scott-Rodino Premerger Notification
Act. In October 1997, PFG's shareholders approved the acquisition at a
special shareholders meeting. The acquisition does not require the
approval of PP&L Resources' shareholders. The acquisition is expected to
be completed by mid-1998.
In the third quarter of 1997, PP&L Resources recorded one-time, non-
payroll related transaction costs associated with the acquisition of PFG
of $6 million, which reduced earnings by about three cents per share.
Additional charges may be incurred in connection with closing on this
transaction, which are not expected to be material in amount.
On January 22, 1998, PP&L Resources acquired H.T. Lyons, a heating,
ventilating and air-conditioning firm in a cash transaction for an amount
that is not material.
Financing and Liquidity
Net cash provided by operating activities decreased by $16 million
in 1997 compared with 1996. Net cash provided by operating activities
for 1996 increased $101 million over 1995. This increase was primarily
due to higher operating revenues, which reflects the 3.8% base rate
increase from the PUC Decision as well as higher sales to all customer
classes. Lower interest expense also contributed to the increase. These
increases were partially offset by higher fuel inventories.
Net cash used in investing activities was $141 million lower in 1997
than 1996. This decrease was due primarily to lower construction
expenditures by PP&L, liquidation of subsidiaries' long-term investments
to make funds available for other investing and financing activities, and
a reduction in the amount of equity funds invested by PP&L Global
compared to 1996. Net cash used in investing activities was $119 million
higher in 1996 than 1995. This increase was primarily due to PP&L
Global's investment in SWEB, partially offset by lower construction
expenditures by PP&L.
Net cash used in financing activities was $257 million higher in
1997 than 1996. The increase was primarily due to PP&L Resources'
purchase of PP&L preferred stock at a cost, including a premium and
associated cost of purchase, of $380 million. Also, PP&L retired $210
million of long-term debt in 1997, compared with $145 million in 1996.
These outflows were partially offset by PP&L's issuance of $250 million
of Preferred Securities through two Delaware statutory business trusts.
Net cash used in financing activities was $89 million lower in 1996
compared with 1995. This was largely due to higher proceeds from
issuance of long-term debt in 1996.
Additional financing activities in 1997 included PP&L's issuance of
$9 million of Pollution Control Revenue Bonds and PP&L Resources'
issuance of $102 million of Medium-term Notes. PP&L Resources also
issued $76 million of common stock of which $69 million was issued
through its DRIP and the remaining $7 million issued to PP&L's ESOP.
For the years 1995-1997, PP&L issued $282 million of long-term debt.
For the same period, PP&L and PP&L Resources issued a total of $234
million of common stock. Proceeds from security sales were used to
retire $495 million of long-term debt to lower PP&L's financing costs and
reduce short-term debt. During the years 1995-1997, PP&L also incurred
$252 million of obligations under capital leases (primarily nuclear
fuel).
PP&L Capital Funding, a wholly-owned subsidiary of PP&L Resources,
was formed in September 1997 to provide financing for PP&L Resources and
its subsidiaries. The payment of principal, interest and premium, if
any, with respect to debt securities issued by PP&L Capital Funding will
be guaranteed by PP&L Resources.
In November 1997, PP&L and PP&L Capital Funding established a new
joint revolving credit facility with a group of 14 banks comprised of two
separate revolving credit agreements -- a $150 million 364-day revolving
credit agreement and a $300 million five-year revolving credit agreement.
The new revolving credit facility replaced PP&L Resources' $300 million
revolving credit agreement, PP&L's $250 million revolving credit
agreement and three separate PP&L credit agreements totaling $45 million,
all of which were terminated.
At December 31, 1997, PP&L had no borrowings outstanding under the
new revolving credit agreements, and PP&L Capital Funding had $90 million
of borrowings outstanding under the five-year revolving credit agreement.
See Note 10 for additional information on this credit facility.
It is currently expected that the DRIP will continue in 1998 as
necessary to provide equity funding for PP&L Global investments, and that
PP&L's ESOP will provide proceeds of about $8 million in each of the
years 1998 through 2002.
Financial Indicators
PP&L Resources earned a 10.61% return on average common equity
during 1997, a decrease from the 12.30% earned in 1996. Excluding one-
time adjustments, as described in "Earnings", the return on average
common equity was 11.69% during 1997. The ratio of PP&L Resources' pre-
tax income to interest charges was 3.39 for 1997, a decrease from 3.55 in
1996. Excluding one-time adjustments, the ratio of PP&L Resources' pre-
tax income to interest charges was 3.53 in 1997, virtually unchanged from
1996. The annual per share dividend rate on common stock remained
unchanged at $1.67 per share. The book value per share of common stock
increased 0.2%, from $16.87 at the end of 1996 to $16.90 at the end of
1997. The ratio of the market price to book value of common stock was
142% at the end of 1997 compared with 136% at the end of 1996.
Environmental Matters
Air
The Clean Air Act deals, in part, with acid rain, attainment of
federal ambient ozone standards and toxic air emissions. PP&L has
complied with the Phase I acid rain provisions required to be implemented
by 1995 by installing continuous emission monitors on all units, burning
lower sulfur coal and installing low nitrogen oxide burners on certain
units. To comply with the year 2000 acid rain provisions, PP&L plans to
purchase lower sulfur coal and use banked or purchased emission
allowances instead of installing FGD on its wholly-owned units.
PP&L has met the initial ambient ozone requirements of the Clean Air
Act by reducing nitrogen oxide emissions by 40% through the use of low
nitrogen oxide burners. Further seasonal (i.e., 5 month) nitrogen oxide
reductions to 55% and 75% of 1990 levels for 1999 and 2003, respectively,
are specified under the Northeast Ozone Transport Region's Memorandum of
Understanding. The DEP has finalized regulations which require PP&L to
reduce its ozone seasonal NOx by 57% beginning in 1999.
The EPA has finalized new national standards for ambient levels of
ground-level ozone and fine particulates. Based in part on the new ozone
standard, the EPA has proposed NOx emission limits for 22 states,
including Pennsylvania, which in effect requires approximately an 80%
reduction from the 1990 level in Pennsylvania in the 2005-2012 timeframe.
The new particulates standard may require further reductions in both NOx
and SO2 and may extend the reductions from seasonal to year round.
The Clean Air Act requires the EPA to study the health effects of
hazardous air emissions from power plants and other sources. Depending
on the outcome of these studies, PP&L may be required to take additional
action.
Expenditures to meet the 2000 acid rain and 1999 NOx reduction
requirements are included in the table of projected construction
expenditures in the section "Financial Condition - Capital Expenditure
Requirements". PP&L currently estimates that additional capital
expenditures and operating costs for environmental compliance under the
Clean Air Act will be incurred beyond 2002 in amounts which are not now
determinable but which could be material.
Water and Residual Waste
DEP residual waste regulations set forth requirements for existing
ash basins at PP&L's coal-fired generating stations. Any new ash
disposal facility must meet the rigid siting and design standards set
forth in the regulations. To address these DEP regulations, PP&L has
installed dry fly ash handling systems at most of its power stations,
which eliminate the need for ash basins. In other cases, PP&L has
modified the existing facilities to allow continued operation of the ash
basins under a new DEP permit. Any groundwater contamination caused by
the basins must also be addressed.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Remedial
work is substantially completed at two generating stations. At this
time, the only other remedial work being planned is to abate a localized
groundwater degradation problem at Montour.
The recently issued final NPDES permit for the Montour station
contains stringent limits for iron and chlorine discharges. Depending on
the results of a toxic reduction study to be conducted, additional water
treatment facilities or operational changes may be needed at this
station.
Capital expenditures through the year 2002 to comply with the
residual waste regulations, correct groundwater degradation at fossil-
fueled generating stations, and address waste water control at PP&L
facilities are included in the table of construction expenditures in the
section "Financial Condition - Capital Expenditure Requirements". In
this regard, PP&L currently estimates that $6.5 million of additional
capital expenditures may be required in the next four years to close some
of the ash basins and address other ash basin issues at various
generating plants. Additional capital expenditures could be required
beyond the year 2002 in amounts which are not now determinable but which
could be material. Actions taken to correct groundwater degradation, to
comply with the DEP's regulations and to address waste water control are
also expected to result in increased operating costs in amounts which are
not now determinable but which could be material.
Superfund and Other Remediation
In 1995, PP&L entered into a consent order with the DEP to address a
number of sites where PP&L may be liable for remediation of
contamination. This may include potential PCB contamination at certain
PP&L substations and pole sites; potential contamination at a number of
coal gas manufacturing facilities formerly owned and operated by PP&L;
and oil or other contamination which may exist at some of PP&L's former
generating facilities. As of December 31, 1997, PP&L has completed work
on nearly half of the sites included in the agreement.
At December 31, 1997, PP&L had accrued $8.1 million, representing
the amount PP&L can reasonably estimate it will have to spend to
remediate sites involving the removal of hazardous or toxic substances
including those covered by the consent order mentioned above. Future
cleanup or remediation work at sites currently under review, or at sites
not currently identified, may result in material additional operating
costs which PP&L cannot estimate at this time. In addition, certain
federal and state statutes, including Superfund and the Pennsylvania
Hazardous Sites Cleanup Act, empower certain governmental agencies, such
as the EPA and the DEP, to seek compensation from the responsible parties
for the lost value of damaged natural resources. The EPA and the DEP may
file such compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
General
Due to the environmental issues discussed above or other
environmental matters, PP&L may be required to modify, replace or cease
operating certain facilities to comply with statutes, regulations and
actions by regulatory bodies or courts. In this regard, PP&L also may
incur capital expenditures, operating expenses and other costs in amounts
which are not now determinable but which could be material.
Increasing Competition
Background
The electric utility industry has experienced and will continue to
experience a significant increase in the level of competition in the
energy supply market. PP&L has publicly expressed its support for full
customer choice of electricity suppliers for all customer classes. PP&L
is actively involved in efforts at both the state and federal levels to
encourage a smooth transition to full competition. PP&L believes that
this transition to full competition should provide for the recovery of a
utility's stranded costs, which are generation-related costs that
traditionally would be recoverable in a regulated environment, but which
may not be recoverable in a competitive electric generation market.
Pennsylvania Activities
Reference is made to "PUC Restructuring Proceeding" for a discussion
of PP&L's April 1997 filing of its restructuring plan pursuant to the
Customer Choice Act.
In February 1997, PP&L filed a proposed retail access pilot program
with the PUC in accordance with the applicable provisions of the Customer
Choice Act and PUC guidelines. A number of the major parties, including
PP&L, entered into a joint settlement agreement resolving all of the
issues in the Pennsylvania utilities' pilot proceedings. In August 1997,
the PUC issued an order modifying this settlement and modifying and
approving PP&L's pilot program. In October 1997, PP&L submitted its
pilot program compliance filing to the PUC. Retail customers
participating in the PP&L and other pilot programs began to receive power
from their supplier of choice in November 1997. Under its pilot program,
approximately 60,000 PP&L residential, commercial and industrial
customers have chosen their electric supplier. PP&L will continue to
provide all transmission and distribution, customer service and back-up
energy supply services to participating customers in its service area.
Only those alternative suppliers licensed by the PUC and in
compliance with the state tax obligations set forth in the Customer
Choice Act may participate in the pilot programs. To date, approximately
50 suppliers have obtained such licenses to participate in the pilot
programs.
In June 1997, the PUC approved PP&L's application for a license to
act as an electric generation supplier. This license permits PP&L to
participate in the various retail access pilot programs of PP&L and of
the other Pennsylvania utilities, and PP&L currently is offering electric
supply to the participating customers of those utilities throughout the
state. PP&L has exceeded its goals in all classes for acquisition of
customers in the pilot program.
Federal Activities
Legislation has been introduced in the U.S. Congress that would give
all retail customers the right to choose among competitive suppliers of
electricity as early as 2000.
In addition, in April 1996 the FERC adopted rules on competition in
the wholesale electricity market primarily dealing with open access to
transmission lines, recovery of stranded costs, and information systems
for displaying available transmission capability (FERC Orders 888 and
889). These rules required all electric utilities to file open access
transmission tariffs by July 9, 1996. The rules also provided that
utilities are entitled to recover from certain wholesale requirements
customers all "legitimate, verifiable, prudently incurred stranded
costs." The FERC has provided recovery mechanisms for wholesale stranded
costs, including stranded costs resulting from municipalization.
Wholesale contracts signed after July 11, 1994 must contain explicit
provisions addressing recovery of stranded costs if the utility wishes to
seek such recovery. For requirements contracts signed before that date,
a utility may seek recovery if it can show that it had a reasonable
expectation of continuing to serve the customer after the contract term.
Finally, the rules required that power pools file pool-wide open access
transmission tariffs and modified bilateral coordination agreements
reflecting the removal of discriminatory provisions by December 31, 1996.
In March 1997, the FERC issued Orders 888-A and 889-A. Among other
things, these orders required utilities to make certain changes to the
non-rate terms and conditions of their open access transmission tariffs.
In compliance with Order 888-A, in July 1997 PP&L filed a revised open
access transmission tariff.
Under FERC Order 888, 16 small utilities which have power supply
agreements with PP&L signed before July 11, 1994, requested and were
provided with PP&L's current estimate of its stranded costs applicable to
these customers if they were to terminate their agreements in 1999. PP&L
has now executed settlement agreements with these customers, which will
be filed with the FERC for approval. These settlement agreements provide
for continued power supply by PP&L through January 2004. If FERC
approves the agreements as filed, PP&L would be required to write off a
portion of its stranded costs applicable to these customers. The amount
of this write-off is currently estimated at approximately $28 million
after-tax, or 17 cents per share of common stock. FERC action on this
matter is not expected until the second quarter of 1998.
In December 1996, the PJM companies submitted a compliance filing
with the FERC, which proposed a pool-wide pro forma transmission tariff
and a revised interconnection agreement and transmission owners agreement
designed to accommodate open, non-discriminatory participation in the
pool. The FERC accepted the PJM tariff and proposed rates, subject to
refund, and they went into effect on March 1, 1997. In June 1997, all of
the PJM companies except PECO (the PJM Supporting Companies) filed
proposals with the FERC to amend the PJM tariff and restructure the PJM
pool. PECO filed a separate request with the FERC to amend the PJM
tariff. Furthermore, PECO and certain electric marketers submitted
significantly different proposals to restructure the PJM pool.
In November 1997, the FERC approved, with certain modifications, the
PJM Supporting Companies' proposals for transforming the PJM into an ISO.
In summary, the FERC order: (i) approved the PJM's open access
transmission rates based on geographic zones, but required PJM to file a
single PJM system-wide rate proposal by 2002; (ii) accepted the PJM
Supporting Companies' methodology to price transmission when the system
is congested and to charge these congestion costs to system users in
addition to the open access transmission rates, but ordered PJM to file
an additional proposal to address concerns raised over price certainty
for buyers and sellers during periods of congestion; (iii) determined
that the ISO is to operate both the transmission system and the power
exchange which provides for the purchase and sale of spot energy within
the PJM market; and (iv) accepted the PJM Supporting Companies' proposal
regarding mandatory installed capacity obligations for all entities
serving firm retail and wholesale load within PJM, but rejected their
proposal for allocating the capacity benefits which result from PJM's
ability to import power from other regional power pools.
The PJM Supporting Companies and numerous other parties have filed
requests for amendment and/or rehearing of virtually every portion of the
FERC's PJM ISO order. PP&L also has filed its own request for amendment
and/or rehearing. PP&L's primary issue with the FERC's order relates to
a requirement that existing wholesale contracts for sales service and
transmission service be modified to have the new PJM transmission tariff
applied to service under these existing contracts. If PP&L were required
to modify these existing contracts and apply the PJM tariff to them, PP&L
could lose as much as $3-4 million in transmission revenues in 1998 --
but a lesser amount in the following years -- from several wholesale
sales and transmission service contracts that were negotiated prior to
industry deregulation.
In July 1997, the FERC accepted a new wholesale power tariff that
permits PP&L to sell capacity and energy at market-based rates, both
inside and outside the PJM area, subject to certain conditions. This
tariff allows PP&L to become more active in the wholesale market with
utilities and other entities, and removes pricing restrictions which in
the past had limited PP&L to charging at or below cost-based rates.
In September 1997, PP&L filed a request with the FERC to lower the
applicable PP&L revenue requirement currently set forth in the PJM open
access transmission tariff. The new revenue requirement results from
PP&L's use of the same test year and cost support data used in the PUC
restructuring proceeding. PP&L requested that the new revenue
requirement take effect on November 1, 1997. In February 1998, the FERC
accepted the proposed rates, subject to refund, and set the amount of
the decrease in the revenue requirement for hearing.
In September 1997, PP&L also filed a request with the FERC to
approve new revenue requirements and rates for the PP&L open access
transmission tariff under FERC Order 888. No customers currently take
service under that tariff. As with the PJM tariff filing, the new revenue
requirements and rates requested by PP&L are based on the same test year and
cost support data used by PP&L in its PUC restructuring proceeding.
In February 1998, the FERC rejected PP&L's tariff as unnecessary, in light of
the PJM open access transmission tariff.
In January 1998, the United States Department of Energy approved
PP&L's application for an export license to sell capacity and/or energy
to electric utilities in Canada. This export license allows PP&L to sell
either its own capacity and energy not required to serve domestic
obligations or power purchased from other utilities.
Year 2000 Computer Issue
PP&L Resources and its subsidiaries utilize software and related
technologies throughout their businesses. In the year 2000, computer
software systems will face a potentially serious problem with recognizing
calendar dates. Without corrective action, this problem could result in
computer shutdown or erroneous calculations. In 1996, PP&L Resources
began assessing the Year 2000 implications on its business systems.
During 1997, plans and procedures were developed for achieving
compliance, and remediation efforts began. As of the end of 1997,
approximately one-third of the software applications have been made Year
2000 compliant. The project is expected to be completed on a timely
basis, and the computer systems are expected to be fully Year 2000
compliant, with anticipated future costs of approximately $12 million.
<PAGE>
(Address and phone number appears here)
Thirty South Seventeenth Street
Philadelphia, PA 19103-4094
Telephone 215 575 5000
(Price Waterhouse LLP logo appears here)
Report of Independent Accountants
February 2, 1998
To the Shareowners and Board of Directors of
PP&L Resources, Inc. and to the Shareowners and
Board of Directors of PP&L, Inc.
In our opinion, the accompanying consolidated financial statements listed
in the index appearing under Item 14(a)(1) and (2) on page 87, present
fairly, in all material respects, the consolidated financial position of
PP&L Resources, Inc. and its subsidiaries (PP&L Resources) at December 31,
1997 and 1996, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31,
1997 and the consolidated financial position of PP&L, Inc. and its
subsidiaries (PP&L) at December 31, 1997 and 1996 and the consolidated
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of management of PP&L Resources and PP&L; our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
(Signed) Price Waterhouse LLP
PRICE WATERHOUSE LLP
<PAGE>
PP&L Resources, Inc.
Management's Report on Responsibility for Financial Statements
The management of PP&L Resources, Inc. is responsible for
the preparation, integrity and objectivity of the consolidated
financial statements and all other sections of this annual
report. The financial statements were prepared in accordance
with generally accepted accounting principles and the Uniform
System of Accounts prescribed by the Federal Energy Regulatory
Commission. In preparing the financial statements, management
makes informed estimates and judgments of the expected effects of
events and transactions based upon currently available facts and
circumstances. Management believes that the financial statements
are free of material misstatement and present fairly the
financial position, results of operations and cash flows of PP&L
Resources.
PP&L Resources' consolidated financial statements have been
audited by Price Waterhouse LLP (Price Waterhouse), independent
certified public accountants, whose report with respect to the
financial statements appears on page 41. Price Waterhouse's
appointment as auditors was previously ratified by the
shareowners. Management has made available to Price Waterhouse
all PP&L Resources' financial records and related data, as well
as the minutes of shareowners' and directors' meetings.
Management believes that all representations made to Price
Waterhouse during its audit were valid and appropriate.
PP&L Resources maintains a system of internal control
designed to provide reasonable, but not absolute, assurance as to
the integrity and reliability of the financial statements, the
protection of assets from unauthorized use or disposition and the
prevention and detection of fraudulent financial reporting. The
concept of reasonable assurance recognizes that the cost of a
system of internal control should not exceed the benefits derived
and that there are inherent limitations in the effectiveness of
any system of internal control.
Fundamental to the control system is the selection and
training of qualified personnel, an organizational structure that
provides appropriate segregation of duties, the utilization of
written policies and procedures and the continual monitoring of
the system for compliance. In addition, PP&L Resources maintains
an internal auditing program to evaluate PP&L Resources' system
of internal control for adequacy, application and compliance.
Management considers the internal auditors' and Price
Waterhouse's recommendations concerning its system of internal
control and has taken actions which are believed to be cost-
effective in the circumstances to respond appropriately to these
recommendations. Management believes that PP&L Resources' system
of internal control is adequate to accomplish the objectives
discussed in this report.
The Board of Directors, acting through its Audit and
Corporate Responsibility Committee, oversees management's
responsibilities in the preparation of the financial statements.
In performing this function, the Audit and Corporate
Responsibility Committee, which is composed of five independent
directors, meets periodically with management, the internal
auditors and the independent certified public accountants to
review the work of each. The independent certified public
accountants and the internal auditors have free access to the
Audit and Corporate Responsibility Committee and to the Board of
Directors, without management present, to discuss internal
accounting control, auditing and financial reporting matters.
Management also recognizes its responsibility for fostering a
strong ethical climate so that PP&L Resources' affairs are
conducted according to the highest standards of personal and
corporate conduct. This responsibility is characterized and
reflected in the business policies and guidelines of PP&L
Resources' operating subsidiaries. These policies and guidelines
address: the necessity of ensuring open communication within
PP&L Resources; potential conflicts of interest; proper
procurement activities; compliance with all applicable laws,
including those relating to financial disclosure; and the
confidentiality of proprietary information.
/s/William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
/s/John R. Biggar
John R. Biggar
Senior Vice President-Financial
<PAGE>
PP&L, Inc.
Management's Report on Responsibility for Financial Statements
The management of PP&L, Inc. is responsible for the
preparation, integrity and objectivity of the consolidated
financial statements and all other sections of this annual
report. The financial statements were prepared in accordance
with generally accepted accounting principles and the Uniform
System of Accounts prescribed by the Federal Energy Regulatory
Commission. In preparing the financial statements, management
makes informed estimates and judgments of the expected effects of
events and transactions based upon currently available facts and
circumstances. Management believes that the financial statements
are free of material misstatement and present fairly the
financial position, results of operations and cash flows of PP&L.
PP&L's consolidated financial statements have been audited
by Price Waterhouse LLP (Price Waterhouse), independent certified
public accountants, whose report with respect to the financial
statements appears on page 41. Price Waterhouse's appointment as
auditors was previously ratified by the shareowners. Management
has made available to Price Waterhouse all PP&L's financial
records and related data, as well as the minutes of shareowners'
and directors' meetings. Management believes that all
representations made to Price Waterhouse during its audit were
valid and appropriate.
PP&L maintains a system of internal control designed to
provide reasonable, but not absolute, assurance as to the
integrity and reliability of the financial statements, the
protection of assets from unauthorized use or disposition and the
prevention and detection of fraudulent financial reporting. The
concept of reasonable assurance recognizes that the cost of a
system of internal control should not exceed the benefits derived
and that there are inherent limitations in the effectiveness of
any system of internal control.
Fundamental to the control system is the selection and
training of qualified personnel, an organizational structure that
provides appropriate segregation of duties, the utilization of
written policies and procedures and the continual monitoring of
the system for compliance. In addition, PP&L maintains an
internal auditing program to evaluate PP&L's system of internal
control for adequacy, application and compliance. Management
considers the internal auditors' and Price Waterhouse's
recommendations concerning its system of internal control and has
taken actions which are believed to be cost-effective in the
circumstances to respond appropriately to these recommendations.
Management believes that PP&L's system of internal control is
adequate to accomplish the objectives discussed in this report.
The Board of Directors, acting through PP&L Resources' Audit
and Corporate Responsibility Committee, oversees management's
responsibilities in the preparation of the financial statements.
In performing this function, the Audit and Corporate
Responsibility Committee, which is composed of five independent
directors, meets periodically with management, the internal
auditors and the independent certified public accountants to
review the work of each. The independent certified public
accountants and the internal auditors have free access to PP&L
Resources' Audit and Corporate Responsibility Committee and to
the Board of Directors, without management present, to discuss
internal accounting control, auditing and financial reporting
matters.
Management also recognizes its responsibility for fostering a
strong ethical climate so that PP&L's affairs are conducted
according to the highest standards of personal and corporate
conduct. This responsibility is characterized and reflected in
PP&L's business policies and guidelines. These policies and
guidelines address: the necessity of ensuring open communication
within PP&L; potential conflicts of interest; proper procurement
activities; compliance with all applicable laws, including those
relating to financial disclosure; and the confidentiality of
proprietary information.
/s/William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
/s/John R. Biggar
John R. Biggar
Senior Vice President-Financial
<PAGE>
<TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENT OF INCOME
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars, except per share data)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Operating Revenues (Notes 1, 4 and 5)............................. $3,049 $2,910 $2,752
Operating Expenses
Operation
Fuel............................................................ 466 448 451
Power purchases................................................. 504 352 291
Other........................................................... 525 544 504
Maintenance....................................................... 184 191 186
Depreciation (including amortized depreciation)
(Notes 1 and 9) ................................................ 374 363 349
Income taxes (Note 6)............................................. 247 253 262
Taxes, other than income (Note 6)................................. 204 203 201
Voluntary early retirement program (Note 4) ......................... (66)
2,504 2,354 2,178
Operating Income................................. 545 556 574
Other Income and (Deductions)
Other - net ................................... 18 21 (16)
Income taxes (Note 6) ............................................ 9 (24)
Gain on sale of coal mining assets (Note 15)......................... 42
Windfall profits tax - PP&L Global (Note 11) ..................... (37)
(10) 21 2
Income Before Interest Charges and Dividends on
Preferred Stock .................................................. 535 577 576
Interest Charges
Long-term debt................................. 196 207 213
Short-term debt and other......................................... 19 13 12
215 220 225
Preferred Stock Dividend Requirements............................... 24 28 28
Net Income....................................... $296 $329 $323
Earnings Per Share of Common Stock (a)........... $1.80 $2.05 $2.05
Average Number of Shares Outstanding (thousands)............... 164,550 161,060 157,649
Dividends Declared Per Share of Common Stock..................... $1.67 $1.67 $1.67
(a) Based on average number of shares outstanding.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income.............................................. $296 $329 $323
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation................................................................ 377 366 352
Amortization of property under capital leases............................... 68 86 79
Regulatory debits and credits .............................................. (36) (10) (42)
Deferred income taxes and investment tax credits............................ 18 16
Voluntary early retirement program ........................................................ (66)
Change in current assets and current liabilities
Fuel inventories.......................................................... 11 (14) 43
Other..................................................................... (13) (35) (30)
Other operating activities -- net........................................... 56 71 17
Net cash provided by operating activities............................... 777 793 692
Cash Flows From Investing Activities
Property, plant and equipment expenditures.............. (310) (360) (403)
Proceeds from sale of nuclear fuel to trust................................... 60 93 44
Proceeds from sale of coal reserves......................................................... 52
Purchases of available-for-sale securities ................................... (72) (600) (303)
Sales and maturities of available-for-sale securities ........................ 111 631 301
Investment in electric energy projects........................................ (152) (201) (12)
Purchases and sales of other financial investments - net...................... 76
Other investing activities -- net....................... (4) 5 8
Net cash used in investing activities................................... (291) (432) (313)
Cash Flows From Financing Activities
Issuance of long-term debt.............................. 111 116 55
Issuance of common stock...................................................... 76 77 81
Issuance of Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely company debentures................................................... 250
Retirement of long-term debt............................ (210) (145) (140)
Purchase of subsidiary's preferred stock (net of
premium and associated costs) .............................................. (369)
Payments on capital lease obligations................... (68) (86) (79)
Common and preferred dividends paid........................................... (298) (296) (290)
Net increase (decrease) in short-term debt.................................... (9) 55 15
Other financing activities -- net............................................. (20) (1) (11)
Net cash used in financing activities................................... (537) (280) (369)
Net Increase(Decrease) in Cash and Cash Equivalents................ (51) 81 10
Cash and Cash Equivalents at Beginning of Period................................ 101 20 10
Cash and Cash Equivalents at End of Period...................................... $50 $101 $20
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized)........................................ $208 $213 $218
Income taxes................................................................ $244 $286 $257
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Assets 1997 1996
<S> <C> <C>
Property, Plant and Equipment
Electric utility plant in service - at original cost..... $9,984 $9,824
Accumulated depreciation (Notes 1 and 9).................................... (3,570) (3,337)
6,414 6,487
Construction work in progress - at cost ...................................... 185 172
Nuclear fuel owned and leased - net of amortization ......................... 167 170
Other leased property - net of amortization ........................................... 76
Electric utility plant - net ............................................... 6,766 6,905
Other property - (net of depreciation, amortization
and depletion: 1997, $57; 1996, $54)........................................ 54 55
6,820 6,960
Investments
Investment in and advances to electric energy
projects -- at equity (Note 1) ............................................. 360 224
Affiliated companies - at equity (Note 1)..................................... 17 17
Nuclear plant decommissioning trust fund (Notes 1 and 7)...................... 163 128
Financial investments (Notes 1 and 8) ........................................ 52 133
Other-at cost or less (Note 8) ............................................... 13 18
605 520
Current Assets
Cash and cash equivalents (Note 1) ...................... 50 101
Current financial investments (Notes 1 and 8)................................. 6 73
Accounts receivable (less reserve: 1997, $16; 1996, $25)
Customers .................................................................. 190 196
Other ...................................................................... 48 49
Unbilled revenues
Customers................................................................... 90 85
Other ...................................................................... 37 17
Fuel, materials and supplies - at average cost ............................... 200 201
Deferred income taxes (Note 6)................................................ 22 21
Other ........................................................................ 52 40
695 783
Regulatory Assets and Other Noncurrent Assets (Note 9)......................... 1,365 1,407
$9,485 $9,670
See accompanying Notes to Financial Statements.
<PAGE>
Liabilities 1997 1996
Capitalization
Common equity
Common stock ............................................................... $2 $2
Capital in excess of par value ............................................ 1,669 1,596
Earnings reinvested......................................................... 1,164 1,143
Capital stock expense and other ............................................ (26) 4
2,809 2,745
Preferred stock
With sinking fund requirements ............................................. 47 295
Without sinking fund requirements .......................................... 50 171
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
company debentures ......................................................... 250
Long-term debt .......................................... 2,585 2,802
5,741 6,013
Current Liabilities
Short-term debt (Note 10) ............................... 135 144
Long-term debt due within one year ........................................... 150 30
Capital lease obligations due within one year ................................ 58 81
Accounts payable ............................................................. 140 133
Taxes accrued ................................................................ 40 53
Interest accrued ............................................................. 62 61
Dividends payable ............................................................ 76 75
Other ........................................................................ 108 78
769 655
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits (Note 6) ................ 199 209
Deferred income taxes (Note 6) ............................................... 2,022 2,052
Capital lease obligations .................................................... 113 166
Other (Notes 1, 4 and 7)...................................................... 641 575
2,975 3,002
Commitments and Contingent Liabilities (Note 16) ..............................
$9,485 $9,670
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREOWNERS' COMMON EQUITY
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Capital
Common Stock Outstanding in Excess Earnings Capital Stock
Shares (a) Amount of Par Value Reinvested Expense & Other
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994. 155,481,962 $2 $1,433 $1,024 $(4)
Net income..................................... 323
Cash dividends declared on
common stock.............................. (264)
Common stock issued (b) ............ 3,921,304 80
Other............................................... 3
Balance at December 31, 1995. 159,403,266 $2 $1,513 $1,083 $(1)
Net income..................................... 329
Cash dividends declared on
common stock.............................. (269)
Common stock issued (b) ............ 3,262,150 77
Other............................................... 6 5
Balance at December 31, 1996. 162,665,416 $2 $1,596 $1,143 $4
Net income..................................... 296
Cash dividends declared on
common stock.............................. (275)
Common stock issued (b) ... 3,582,868 76
Other...................... (3) (30)
Balance at December 31, 1997........ 166,248,284 $2 $1,669 $1,164 $(26)
<FN>
(a) $.01 par value, 390,000,000 shares authorized.
Each share entitles the holder to one vote on any question
presented to any shareowners' meeting.
(b) Common Stock issued through the ESOP and the DRIP.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF PREFERRED STOCK AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries (a)
(Millions of Dollars)
<CAPTION>
Shares
Outstanding Outstanding Shares
1997(b) 1996 1997 (b) Authorized
<S> <C> <C> <C> <C> <C> <C>
PP&L
Preferred Stock - $100 par, cumulative
4-1/2%........................... $25 $53 530,189 629,936
Series........................... 72 413 4,133,556 10,000,000
$97 $466
Details of Preferred Stock (c)
Optional Sinking Fund
Redemption Provisions
Shares Price Per Shares to be
Outstanding Outstanding Share Redeemed Redemption
1997 (b) 1996 1997 (b) 1997 Annually (f) Period
With Sinking Fund Requirements
Series Preferred
5.95% ................... $1 $30 300,000 (d) 10,000 April 2001
6.05%............................ 25 250,000 (d)
6.125% .................. 31 115 1,150,000 (d) (e) 2003-2008
6.15%.................... 10 25 250,000 (d) 100,000 April 2003
6.33% ................... 5 100 1,000,000 (d) 50,000 July 2003
$47 $295
Without Sinking Fund Requirements
4-1/2% Preferred........... $25 $53 530,189 $110.00
Series Preferred
3.35%.................... 2 4 41,783 103.50
4.40%.................... 11 23 228,773 102.00
4.60%.................... 3 6 63,000 103.00
6.75%.................... 9 85 850,000 (d)
$50 $171
Increases(Decreases) in Preferred Stock
There were no issuances or redemptions of preferred stock in 1997, 1996 or 1995.
<FN>
(a) Each share of PP&L's preferred stock entitles the holder
to one vote on any question presented to PP&L's
shareowners' meetings. There were 10,000,000 shares
of Resources' preferred stock and 5,000,000
shares of PP&L's preference stock authorized; none were
outstanding at December 31, 1997 and 1996, respectively.
(b) In 1997, PP&L Resources acquired 79.10% ($369 million
par value) of the outstanding preferred stock of PP&L
in a tender offer. At December 31, 1997, these shares
have not been retired or redeemed. The par value
of PP&L preferred stock acquired by PP&L Resources has
been eliminated for purposes of providing consolidated
financial statements.
(c) The involuntary liquidation price of the preferred stock is
$100 per share. The optional voluntary liquidation
price is the optional redemption price per share in effect,
except for the 4-1/2% Preferred Stock for which
such price is $100 per share (plus in each case any unpaid
dividends).
(d) These series of preferred stock are not redeemable prior
to the following years: 5.95%, 2001; 6.05%, 2002;
6.125%, 6.15%, 6.33% and 6.75%, 2003.
(e) Shares to be redeemed annually on October 1 as follows:
2003-2007, 57,500; 2008, 22,500.
(f) After giving effect to the preferred stock tender offer.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF COMPANY-OBLIGATED MANDATORILY
REDEEMABLE SECURITIES AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries (a)
PP&L, Inc. and Subsidiaries (a)
(Millions of Dollars)
<CAPTION>
Outstanding
1997 1996 1997 Authorized Maturity (b)
<S> <C> <C> <C> <C> <C>
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trusts Holding
Solely Company Debentures - $25 per security
8.10%........ $150 $0 6,000,000 6,000,000 July 2002
8.20%..................... 100 0 4,000,000 4,000,000 April 2002
$250 $0
(a) PP&L arranged for the issuance of a total of $250
million of Company-obligated mandatorily redeemable
Preferred Securities of subsidiary trusts holding solely company
debentures by PP&L Capital Trust and PP&L Capital
Trust II, two Delaware statutory business trusts.
These Preferred Securities are supported by a
corresponding amount of junior subordinated deferrable
interest debentures issued by PP&L to the trusts.
PP&L owns all of the common securities, representing
the remaining undivided beneficial ownership
interest in the assets of the trusts. The proceeds
derived from the issuance of the Preferred Securities
and the common securities were used by PP&L Capital
Trust and PP&L Capital Trust II to acquire $103 million
and $155 million principal amount of Junior Subordinated
Deferrable Interest Debentures, respectively.
PP&L has guaranteed all of the trusts' obligations
under the Preferred Securities. The proceeds of the sale
of these Preferred Securities were loaned by PP&L to
PP&L Resources for the tender offer for PP&L preferred stock.
(b) The Preferred Securities are subject to mandatory
redemption, in whole or in part, upon the repayment of the
Subordinated Debentures at maturity or their earlier
redemption. At the option of the Company, the Subordinated
Debentures are redeemable on and after the dates shown
above in whole at any time or in part from time to
time. The amount of Preferred Securities subject to
such mandatory redemption will be equal to the amount of
related Subordinated Debentures maturing or being redeemed.
The redemption price is $25 per security plus
an amount equal to accumulated and unpaid distributions
to the date of redemption.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF LONG-TERM DEBT AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Outstanding
1997 1996 Maturity(b)
<S> <C> <C><C> <C> <C>
First Mortgage Bonds (a)
6 3/4% .................................. $30 November 1, 1997(c)
5 1/2%.................................................... $150 150 April 1, 1998
7%....................................................................... 40 January 1, 1999(c)
6%........................................................ 125 125 June 1, 2000
7 1/4% .................................................................. 60 February 1, 2001(c)
7 3/4%.................................................... 150 150 May 1, 2002
6 1/2% to 7 1/2%.......................................... 525 605 2003-2007 (c)
7.70%..................................................... 200 200 2008-2012 (d)
7 3/8%.................................................... 100 100 2013-2017
8 1/2% to 9 3/8% ......................................... 465 465 2018-2022
6 3/4% to 7 7/8% ......................................... 500 500 2023-2027
First Mortgage Pollution Control Bonds (a)
6.40% Series H........................... 90 90 November 1, 2021
5.50% Series I............................................ 53 53 February 15, 2027
6.40% Series J............................................ 116 116 September 1, 2029
6.15% Series K............................................ 55 55 August 1, 2029
2,529 2,739
Medium Term Notes (e)
6.79%.................................... 100 November 22, 2004
6.84%..................................................... 2 November 20, 2007
Unsecured promissory notes ................................. 116 116
Pollution Control Revenue Bonds............................. 9 (f)
2,756 2,855
Unamortized (discount) and premium -- net .................. (21) (23)
2,735 2,832
Less amount due within one year............................. 150 30
Total long-term debt ..................................... $2,585 $2,802
__________________________________________
<FN>
(a) Substantially all owned electric utility plant is
subject to the lien of PP&L's Mortgage.
(b) Aggregate long-term debt maturities through 2002
are (millions of dollars): 1998, $150;
2000, $125; 2002, $150. There are no bonds
outstanding that have sinking fund requirements.
(c) In 1997, PP&L redeemed the $30 million of 6 3/4%
mortgage bonds of the optional redemption
price of 100% of the principal amount. Three
series were redeemed under the maintenance
and replacement fund provisions: $40 million
of the 7% series due in 1999, $60 million of the
7 1/4% series due in 2001, and $80 million of
the 7 1/2% series due in 2003.
(d) Any registered owner of these bonds has the
right to require PP&L to redeem such owner's
bonds on October 1, 1999 at a price of 100%
of the principal amount.
(e) In 1997, PP&L Capital Funding issued two
tranches of Medium-Term Notes. The proceeds
derived from the issuance of these notes were
used to pay down loans made under PP&L
Resources' revolving credit agreement.
(f) In 1997, the Indiana County Industrial Development
Authority issued $62 million of Pollution
Control Revenue Bonds. Of this amount, $9 million
relates to PP&L's share of the financing
of scrubber costs at the Conemaugh Station.
The proceeds were used to retire the interim
financing previously arranged for the Conemaugh
project.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
PP&L, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Operating Revenues (Notes 1, 4 and 5)............................. $3,049 $2,910 $2,752
Operating Expenses
Operation
Fuel.......................................................... 466 448 451
Power purchases............................................... 504 352 291
Other......................................................... 525 544 504
Maintenance..................................................... 184 191 186
Depreciation (including amortized depreciation)
(Notes 1 and 9) .............................................. 374 363 349
Income taxes (Note 6)........................................... 247 253 262
Taxes, other than income (Note 6)............................... 204 203 201
Voluntary early retirement program (Note 4) ........................ (66)
2,504 2,354 2,178
Operating Income.................................................. 545 556 574
Other Income and (Deductions)
Other - net .................................. 11 17 (12)
Income taxes (Note 6) .......................................... (1) (2) (26)
Gain on sale of coal mining assets (Note 15) ....................... 42
10 15 4
Income Before Interest Charges.................................... 555 571 578
Interest Charges
Long-term debt................................ 195 207 213
Short-term debt and other....................................... 12 7 13
207 214 226
Net Income........................................................ 348 357 352
Dividends on Preferred Stock...................................... 40 28 28
Earnings Available to PP&L Resources, Inc. ..................... $308 $329 $324
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
PP&L, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income........................................ $348 $357 $352
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation....................................................... 377 366 352
Amortization of property under capital leases...................... 68 86 79
Regulatory debits and credits ..................................... (36) (10) (42)
Deferred income taxes and investment tax
credits.......................................................... 20 (1) 16
Voluntary early retirement program ............................................ (66)
Change in current assets and current liabilities
Fuel inventories................................................. 11 (14) 43
Other............................................................ (25) (38) (28)
Other operating activities -- net.................................. 23 53 (10)
Net cash provided by operating activities...................... 786 799 696
Cash Flows From Investing Activities
Property, plant and equipment expenditures........ (310) (360) (403)
Proceeds from sales of nuclear fuel to trust......................... 60 93 44
Proceeds from sale of coal reserves............................................. 52
Purchases of available-for-sale securities .......................... (72) (90) (81)
Sales and maturities of available-for-sale
securities......................................................... 88 93 80
Purchases and sales of other financial
investments - net.................................................. 76
Loan to parent ................................... (375)
Other investing activities -- net................. (4) 5 7
Net cash used in investing activities.......................... (537) (259) (301)
Cash Flows From Financing Activities
Issuance of long-term debt........................ 9 116 55
Issuance of Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely company debentures ......................................... 250
Issuance of common stock and capital
contribution from parent........................................... 7 32 60
Retirement of long-term debt......................................... (210) (145) (140)
Payments on capital lease obligations................................ (67) (86) (79)
Common and preferred dividends paid.................................. (344) (296) (290)
Net increase (decrease) in short-term debt........................... 35 (79) 15
Other financing activities -- net.................................... (9) (2) (10)
Net cash used in financing activities.......................... (329) (460) (389)
Net Increase(Decrease) in Cash and Cash Equivalents................... (80) 80 6
Cash and Cash Equivalents at Beginning of Period....................... 95 15 9
Cash and Cash Equivalents at End of Period............................. $15 $95 $15
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Interest (net of amount capitalized)............................... $201 $208 $218
Income taxes....................................................... $253 $289 $258
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET AT DECEMBER 31,
PP&L, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Assets 1997 1996
<S> <C> <C>
Property, Plant and Equipment
Electric utility plant in service - at original cost.... $9,984 $9,824
Accumulated depreciation (Notes 1 and 9)................................... (3,570) (3,337)
6,414 6,487
Construction work in progress - at cost ..................................... 185 172
Nuclear fuel owned and leased - net of amortization ......................... 167 170
Other leased property - net of amortization ............................................ 76
Electric utility plant - net ............................................... 6,766 6,905
Other property - (net of depreciation, amortization
and depletion: 1997, $57; 1996, $54)...................................... 54 55
6,820 6,960
Investments
Affiliated companies - at equity (Note 1) .............. 17 17
Nuclear plant decommissioning trust fund (Notes 1 and 7)..................... 163 128
Loan to parent .............................................................. 375
Financial investments (Notes 1 and 8) .................. 52 133
Other - at cost or less (Note 8) ............................................ 13 10
620 288
Current Assets
Cash and cash equivalents (Note 1) ..................... 15 95
Current financial investments (Notes 1 and 8)................................ 6 51
Accounts receivable (less reserve: 1997, $16; 1996, $25)
Customers ................................................................. 188 196
Other ..................................................................... 64 44
Unbilled revenues
Customers ................................................................. 90 85
Other ..................................................................... 36 17
Fuel, material and supplies - at average cost ............................... 200 201
Deferred income taxes (Note 6)............................................... 22 21
Other ....................................................................... 49 40
670 750
Regulatory Assets and Other Noncurrent Assets (Note 9)........................ 1,362 1,407
$9,472 $9,405
See accompanying Notes to Financial Statements.
<PAGE>
Liabilities 1997 1996
Capitalization
Common equity
Common stock .............................................................. $1,476 $1,476
Additional paid-in capital ................................................ 64 57
Earnings reinvested ....................................................... 1,092 1,094
Capital stock expense and other .......................................... (20) (10)
2,612 2,617
Preferred stock
With sinking fund requirements ............................................ 295 295
Without sinking fund requirements ......................................... 171 171
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
company debentures ........................................................ 250
Long-term debt ......................................... 2,483 2,802
5,811 5,885
Current Liabilities
Short-term debt (Note 10) .............................. 45 10
Long-term debt due within one year .......................................... 150 30
Capital lease obligations due within one year ............................... 58 81
Accounts payable ............................................................ 148 132
Taxes accrued ............................................................... 40 55
Interest accrued ............................................................ 59 60
Dividends payable ........................................................... 81 75
Other ....................................................................... 107 78
688 521
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits (Note 6) ............... 199 209
Deferred income taxes (Note 6) .............................................. 2,022 2,050
Capital lease obligations .................................................. 113 166
Other (Notes 1, 4 and 7) .................................................... 639 574
2,973 2,999
Commitments and Contingent Liabilities (Note 16) ...................................
$9,472 $9,405
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREOWNER'S COMMON EQUITY
PP&L, INC. AND SUBSIDIARIES
(Millions of Dollars)
<CAPTION>
Additional
Common Stock Outstanding Paid-in Earnings Capital Stock
Shares (a) Amount Capital Reinvested Expense & Other
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994............... 155,481,962 $1,441 $0 $973 $(10)
Net income.................................................................. 352
Cash dividends declared
Preferred stock.......................................................... (28)
Common stock........................................................... (263)
Common stock issued (b) ............................... 1,818,420 35
Capital contribution from PP&L Resources................. 25
Other............................................................................ 3
Balance at December 31, 1995............... 157,300,382 $1,476 $25 $1,034 $(7)
Net income.................................................................. 357
Cash dividends declared
Preferred stock.......................................................... (28)
Common stock........................................................... (269)
Capital contribution from PP&L Resources................. 32
Other............................................................................ (3)
Balance at December 31, 1996............... 157,300,382 $1,476 $57 $1,094 $(10)
Net income.................................................................. 348
Cash dividends declared
Preferred stock.......................................................... (40)
Common stock........................... (275)
Dividends to PP&L Resources ........... (35)
Capital contribution from PP&L Resources. 7
Other.................................... (10)
Balance at December 31, 1997............................. 157,300,382 $1,476 $64 $1,092 $(20)
<FN>
(a) No par value. 170,000,000 shares authorized. As of April 27, 1995, all holders of PP&L common
stock became holders of PP&L Resources common stock, all PP&L common stock was acquired by PP&L
Resources.
(b) Common Stock was issued through the ESOP and DRIP.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF PREFERRED STOCK AT DECEMBER 31,
PP&L, Inc. and Subsidiaries(a)
(Millions of Dollars)
<CAPTION>
Shares
Outstanding Outstanding Shares
1997 1996 1997 Authorized
<S> <C> <C> <C> <C>
Preferred Stock -- $100 par, cumulative
4-1/2%.......... $53 $53 530,189 629,936
Series.......................... 413 413 4,133,556 10,000,000
$466 $466
Details of Preferred Stock (b)
Optional Sinking Fund
Redemption Provisions
Shares Price Per Shares to be
Outstanding Outstanding Share Redeemed Redemption
1997 1996 1997 1997 Annually Period
With Sinking Fund Requirements
Series Preferred
5.95% ................... $30 $30 300,000 (c) 300,000 April 2001
6.05%.................... 25 25 250,000 (c) 250,000 April 2002
6.125% .................. 115 115 1,150,000 (c) (d) 2003-2008
6.15%.................... 25 25 250,000 (c) 250,000 April 2003
6.33% ................... 100 100 1,000,000 (c) (e) 2003-2008
$295 $295
Without Sinking Fund Requirements
4-1/2% Preferred........... $53 $53 530,189 $110.00
Series Preferred
3.35%.................... 4 4 41,783 103.50
4.40%.................... 23 23 228,773 102.00
4.60%.................... 6 6 63,000 103.00
6.75%.................... 85 85 850,000 (c)
$171 $171
Increases (Decreases) in Preferred Stock
There were no issuances or redemptions of preferred stock in 1997, 1996 or 1995.
<FN>
(a) Each share of PP&L's preferred stock entitles the holder to one vote on any question
presented to PP&L's shareowners' meetings. There were 5,000,000 shares of PP&L's
preference stock authorized; none were outstanding at December 31, 1997 and 1996,
respectively.
(b) The involuntary liquidation price of the preferred stock is $100 per share. The
optional voluntary liquidation price is the optional redemption price per share in
effect, except for the 4-1/2% Preferred Stock for which such price is $100 per share
(plus in each case any unpaid dividends).
(c) These series of preferred stock are not redeemable prior to the following years:
5.95%, 2001; 6.05%, 2002; 6.125%, 6.15%, 6.33% and 6.75%, 2003.
(d) Shares to be redeemed annually on October 1 as follows: 2003-2007, 57,500; 2008,
862500
(e) Shares to be redeemed annually on July 1 as follows: 2003-2007, 50,000; 2008, 750,000.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF LONG-TERM DEBT AT DECEMBER 31,
PP&L, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Outstanding
1997 1996 Maturity(b)
<S> <C> <C> <C>
First Mortgage Bonds (a)
6 3/4% ................................. $30 November 1, 1997(c)
5 1/2%.................................................. $150 150 April 1, 1998
7%.................................................................... 40 January 1, 1999(c)
6%...................................................... 125 125 June 1, 2000
7 1/4% ............................................................... 60 February 1, 2001(c)
7 3/4%.................................................. 150 150 May 1, 2002
6 1/2% to 7 1/2%........................................ 525 605 2003-2007 (c)
7.70%................................................... 200 200 2008-2012 (d)
7 3/8%.................................................. 100 100 2013-2017
8 1/2% to 9 3/8% ....................................... 465 465 2018-2022
6 3/4% to 7 7/8% ....................................... 500 500 2023-2027
First Mortgage Pollution Control Bonds (a)
6.40% Series H.......................... 90 90 November 1, 2021
5.50% Series I.......................................... 53 53 February 15, 2027
6.40% Series J.......................................... 116 116 September 1, 2029
6.15% Series K.......................................... 55 55 August 1, 2029
2,529 2,739
Unsecured promissory notes ............................... 116 116
Pollution Control Revenue Bonds........................... 9 (e)
2,654 2,855
Unamortized (discount) and premium -- net ................ (21) (23)
2,633 2,832
Less amount due within one year........................... 150 30
Total long-term debt ................................... $2,483 $2,802
__________________________________________
<FN>
(a) Substantially all owned electric utility plant is subject to the lien of PP&L's
Mortgage.
(b) Aggregate long-term debt maturities through 2002 are (millions of dollars): 1998,
$150; 2000, $125; 2002, $150. There are no bonds outstanding that have sinking fund
requirements.
(c) In 1997, PP&L redeemed the $30 million of 6 3/4% mortgage bonds at the optional
redemption price of 100% of the principal amount. Three series were redeemed under
the maintenance and replacement fund provisions: $40 million of the 7% series due
in 1999, $60 million of the 7 1/4% series due in 2001, and $80 million of the
7 1/2% series due in 2003.
(d) Any registered owner of these bonds has the right to require PP&L to redeem such
owner's bonds on October 1, 1999 at a price of 100% of the principal amount.
(e) In 1997, the Indiana County Industrial Development Authority issued $62 million of
Pollution Control Revenue Bonds. Of this amount, $9 million relates to PP&L's share
of the financing of scrubber costs at the Conemaugh Station. The proceeds were used
to retire the interim financing previously arranged for the Conemaugh project.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Terms and abbreviations appearing in Notes to Financial Statements
are explained in the glossary.
1. Summary of Significant Accounting Policies
Business and Consolidation
As of December 31, 1997, PP&L Resources was the parent holding
company of PP&L, PP&L Global, PP&L Spectrum and PP&L Capital Funding.
PP&L's financial condition and results of operations are currently
the principal factors affecting PP&L Resources' financial condition and
results of operations. PP&L is an operating electric utility serving
customers in central eastern Pennsylvania. All nonutility operating
transactions are included in "Other Income and (Deductions)" on the
Consolidated Statements of Income.
The consolidated financial statements include the accounts of PP&L
Resources and its direct and indirect subsidiaries. All significant
intercompany transactions have been eliminated.
Less than 50% owned affiliates are accounted for using the equity
method. These affiliates consist principally of Safe Harbor Water Power
Corporation and investments held by PP&L Global.
Reclassification
Certain amounts from prior years' financial statements have been
reclassified to conform to the current year presentation.
Management's Estimates
These financial statements have been prepared using information
available including certain information which represents management's
best estimates of existing conditions. Actual results could differ from
these estimates.
Accounting Records
The accounting records for PP&L, the principal subsidiary of PP&L
Resources, are maintained in accordance with the Uniform System of
Accounts prescribed by the FERC and adopted by the PUC.
Regulation
PP&L prepares its financial statements in accordance with the
provisions of SFAS 71, "Accounting for the Effects of Certain Types of
Regulation." SFAS 71 requires a rate-regulated entity to reflect the
effects of regulatory decisions in its financial statements. In
accordance with SFAS 71, PP&L has deferred certain costs pursuant to the
rate actions of the PUC and the FERC and is recovering or expects to
recover such costs in electric rates charged to customers. These
deferred costs or "regulatory assets" are enumerated and discussed in
Note 9.
To the extent that PP&L concludes that recovery of a regulatory
asset is no longer probable due to regulatory treatment, the effects of
competition or other factors, the amount would have to be written off
against income. PP&L will discontinue application of SFAS 71 for the
generation portion of its business upon the issuance of the PUC's
restructuring order. See Note 3 for additional information.
Utility Plant
Additions to utility plant and replacement of units of property are
capitalized at cost. The cost of funds used to finance construction
projects or AFUDC is capitalized as part of construction cost.
The cost of units of property retired or replaced is charged to
accumulated depreciation. Expenditures for maintenance and repairs of
property and the cost of replacing items determined to be less than an
entire unit of property are charged to operating expense.
Major classes of electric utility plant in service and their
respective balances are (millions of dollars):
1997 1996
Production $6,305 $6,303
Transmission 392 386
Distribution 2,891 2,774
General 328 303
Other 68 58
$9,984 $9,824
For financial statement purposes, depreciation is being provided
over the estimated useful lives of property using a straight-line method
for all property except for certain property at the Susquehanna steam
station. The other portion of the Susquehanna property is depreciated at
an annual rate of $173 million from October 1995 through December 1998,
after which depreciation is scheduled to decline by $71 million annually.
Provisions for depreciation, as a percent of average depreciable
property, approximated 3.8% in 1997 and 1996 and 3.7% in 1995.
Nuclear Decommissioning and Fuel Disposal
An annual provision for PP&L's share of the future cost to
decommission the Susquehanna station, equal to the amount allowed for
ratemaking purposes, is charged to operating expense. Such amounts are
invested in external trust funds which can be used only for future
decommissioning costs. See Notes 4 and 7.
The DOE is responsible for the permanent storage and disposal of
spent nuclear fuel removed from nuclear reactors. PP&L pays the DOE a
fee for future disposal services and recovers such costs in customer
rates. PP&L has joined other utilities in a federal lawsuit to suspend
payments to the DOE and to place the fees in escrow unless that
department begins accepting nuclear fuel as agreed to in its contract
with the utilities.
Financial Investments
Securities subject to the requirements of SFAS 115 "Accounting for
Certain Investments in Debt and Equity Securities" are carried at fair
value, determined at the balance sheet date. Net unrealized gains on
available-for-sale securities are included in common equity. Net
unrealized gains and losses on trading securities are included in income.
Net unrealized gains and losses on securities that are not available for
unrestricted use due to regulatory or legal reasons are reflected in the
related asset and liability accounts. Realized gains and losses on the
sale of securities are recognized utilizing the specific cost
identification method. Investments in financial limited partnerships are
accounted for under the equity method of accounting and venture capital
investments are recorded at cost. See Note 8.
Premium on Reacquired Long-Term Debt
Premiums paid and expenses incurred by PP&L to redeem long-term debt
are deferred and amortized over the life of the new debt issue or the
remaining life of the retired debt when the redemption is not financed by
a new issue.
Capital Leases
Leased property of PP&L capitalized on the Consolidated Balance
Sheet is recorded at the present value of future lease payments and is
amortized so that the total of interest on the lease obligation and
amortization of the leased property equals the rental expense allowed for
ratemaking purposes. Future lease payments for nuclear fuel are based on
the quantity of electricity produced at the Susquehanna Station. The
maximum amount of nuclear fuel available for lease under current
arrangements is $200 million.
In April 1997, capital leases for vehicles, personal computers, and
other property were reclassified as operating leases. This
reclassification resulted from a revised agreement between PP&L and its
leasing companies. The new leases did not meet any of the classification
criteria to be deemed capital leases according to FASB No. 13.
Revenues
Electric revenues are recorded based on the amounts of electricity
delivered to customers through the end of each calendar month. This
includes amounts customers will be billed for electricity delivered from
the time meters were last read to the end of the month. During 1997,
PP&L's ECR and STAS were zero. The SBRCA ended in June 1997.
Approximately 97% of operating revenues were derived from electric
energy sales, with 33% coming from residential customers, 27% from
commercial customers, 19% from industrial customers, 20% from wholesale
sales and 1% from others.
Income Taxes
PP&L Resources and its subsidiaries file a consolidated federal
income tax return. Income taxes are allocated to operating expenses and
other income and deductions on the Consolidated Statements of Income.
The provision for PP&L's deferred income taxes is based upon the
ratemaking principles reflected in rates established by the PUC and FERC.
The difference in the provision for deferred income taxes and the amount
that otherwise would be recorded under generally accepted accounting
principles is deferred and included in taxes recoverable through future
rates on the Consolidated Balance Sheet. See Note 6.
Investment tax credits were deferred when utilized and are amortized
over the average lives of the related property.
Pension Plan and Other Postretirement and Postemployment Benefits
PP&L has a noncontributory pension plan covering substantially all
employees. Subsidiary companies of PP&L formerly engaged in coal mining
have a noncontributory pension plan for substantially all non-bargaining,
full-time employees. Funding is based upon actuarially determined
computations that take into account the amount deductible for income tax
purposes and the minimum contribution required under the Employee
Retirement Income Security Act of 1974.
PP&L Global has a non-qualified retirement plan for its corporate
officers.
For information on other postretirement and postemployment benefits,
see Note 13.
Cash Equivalents
All highly liquid debt instruments purchased with original
maturities of three months or less are considered to be cash equivalents.
2. PUC Restructuring Proceeding
In December 1996, Pennsylvania enacted the Customer Choice Act to
restructure its electric utility industry in order to create retail
access to a competitive market for the generation of electricity. The
Act includes the following major provisions: (1) all electric utilities
in Pennsylvania are required to file a restructuring plan with the PUC to
implement direct access to a competitive market for electric generation;
(2) retail customer choice will be phased in over three years, beginning
as early as January 1, 1999; (3) electric distribution companies will be
the suppliers of last resort, and the PUC will ensure that adequate
generation reserves exist to maintain reliable electric service; (4)
retail rates generally will be capped for at least four-and-a-half years
for transmission and distribution charges and for as long as nine years
for generation charges; (5) utilities are permitted to recover PUC-
approved transition or stranded costs through a non-bypassable
Competitive Transition Charge (CTC); and (6) transition bonds may be
issued to refinance the stranded costs, with a transition charge on
customers bills to repay the bonds.
Under the Customer Choice Act, the PUC is authorized to determine
the amount of PP&L's stranded costs to be recovered through a CTC to be
paid by all PUC-jurisdictional customers who receive transmission and
distribution service from PP&L. Stranded costs are defined in the
Customer Choice Act as "generation-related costs... which would have been
recoverable under a regulated environment but which may not be
recoverable in a competitive generation market and which the PUC
determines will remain following mitigation by the electric utility."
In accordance with the Customer Choice Act, PP&L filed its
restructuring plan with the PUC on April 1, 1997. PP&L's restructuring
plan includes a claim of $4.5 billion (on a net present value basis as of
January 1, 1999) for stranded costs. Pursuant to the Customer Choice
Act, this claim is comprised of the following categories:
1. Net plant investments and costs attributable to existing
generation plants and facilities, costs of power purchases, disposal
costs of spent nuclear fuel, retirement costs attributable to
existing generating plants and employee-related transition costs;
2. Prudently incurred costs related to the cancellation,
buyout, buydown or renegotiation of NUG contracts; and
3. Regulatory assets and other deferred charges typically
recoverable under current regulatory practice and cost obligations
under PUC-approved contracts with NUGs.
The following are the components of PP&L's stranded cost claim as
presented in the evidentiary record of the proceeding:
Amount
Category of Stranded Cost (Millions of Dollars)
Nuclear Generation(a) $2,825
Fossil Generation(a) 670
NUG Contracts 651
Regulatory Assets 354
$4,500
(a) Includes deferred income taxes related to generation assets.
In determining the appropriate amount of stranded cost recovery, the
Customer Choice Act requires the PUC to consider the extent to which an
electric utility has taken steps to mitigate stranded costs by
appropriate means that are reasonable under the circumstances.
Mitigation efforts undertaken over time prior to the enactment of the
Customer Choice Act are to be considered of equal importance by the PUC
in determining an electric utility's stranded costs as actions taken
after the passage of the Customer Choice Act. In its restructuring plan,
PP&L described its extensive efforts to mitigate its stranded costs,
resulting in a reduction in its stranded cost claim of over $1 billion.
Numerous parties have intervened in PP&L's restructuring proceeding.
These parties are recommending stranded cost recovery by PP&L ranging
from $695 million to $3.2 billion. In this regard, the PUC's OTS
recommends that PP&L be permitted to recover $3.2 billion of its stranded
costs; the PP&L Industrial Customer Alliance recommends recovery of $695
million; and the OCA recommends recovery of $1.1 billion. Under
Pennsylvania law, the OCA and the OTS have advocacy roles in proceedings
before the PUC. Testimony filed by the OCA and OTS carries no more
weight than testimony filed by any other party in the proceeding.
Evidentiary hearings in this matter were held in late-August. The
PUC has revised the procedural schedule several times to permit continued
settlement discussions among the parties. In February 1998, the parties
filed their Main Briefs in the proceeding. Under the current schedule,
the PUC's final order is due by June 4, 1998. PP&L cannot predict the
ultimate outcome of this proceeding.
The ultimate impact of the Customer Choice Act on PP&L's financial
health will depend on numerous factors, including:
1. The PUC's final order in the restructuring proceeding,
including the amount of stranded cost recovery approved by the PUC and
the PUC's disposition of other issues raised;
2. The effect of the rate cap imposed under the provisions of the
Customer Choice Act;
3. The actual market price of electricity over the transition
period;
4. Future sales levels; and
5. The extent to which the regulatory framework established by the
Customer Choice Act will continue to be applied.
Under the Customer Choice Act, PP&L's rates to PUC-jurisdictional
customers are capped at the level in effect on January 1, 1997 through
mid-2001 for transmission and distribution services and through the year
2005 for generation services to customers who do not choose an
alternative supplier. Applying the CTC proposed in its restructuring
plan (which is restricted by the rate cap) through the year 2005, it is
estimated that PP&L would collect approximately $4 billion (on a net
present value basis as of January 1, 1999) of its stranded costs. The
remaining $500 million would be reflected as lower cash flow to PP&L
after the transition period than would have occurred with continued
regulated rates.
In this regard, it should be noted that PP&L's stranded cost claim
included in the restructuring plan is based on a projection of future
market prices and assumes a significant portion of PP&L's stranded costs
will be recovered by way of increased market prices for electricity.
This increase may or may not occur. To the extent that the market price
of electricity does not increase as projected, or other projections do
not actually occur, PP&L could experience a lower recovery of stranded
costs.
If the PUC's final order in the restructuring proceeding were to
permit full recovery of PP&L's stranded costs, including full recovery of
all regulatory assets and above-market NUG costs over the transition
period, PP&L estimates that its net income over the transition period
would be reduced by about 5% from amounts that were previously projected
under historic cost-based regulation.
However, the PUC's final order -- either as a result of a settlement
or a fully-litigated proceeding -- may result in changes to components or
assumptions in PP&L's restructuring plan that could have an adverse
effect on the amount of the CTC, the amount of stranded costs that are
recoverable through the CTC or the overall amount of revenues to be
collected from customers. As a result of these uncertainties, PP&L
cannot determine whether and to what extent it may be subject to a write-
off or a reduction in revenues and earnings with respect to the
restructuring proceeding. Based on the substantial amounts involved in
the restructuring proceeding, should PP&L incur such a write-off or
reduction in revenues and earnings, either one could be material in
amount. Accordingly, PP&L Resources is unable to predict the ultimate
effect of the Customer Choice Act or the PUC's final order in the
restructuring proceeding on its financial position, its results of
operation, future PP&L rate levels, the need or ability to issue
securities to meet future capital requirements or the ability to maintain
the common stock dividend at the current level.
The Customer Choice Act permits the issuance of "transition bonds"
securitized by customer revenues from an Intangible Transition Charge
(ITC) to finance the payment of stranded costs. PP&L is considering
whether to seek to securitize some portion of its stranded cost claim,
which would require the approval of the PUC in a qualified rate order.
Certain parties have brought actions in the Pennsylvania
Commonwealth Court challenging the constitutionality of the Customer
Choice Act. PP&L has intervened in these proceedings in support of the
Customer Choice Act.
3. Accounting for the Effects of Certain Types of Regulation
The FASB's Emerging Issues Task Force (EITF) has addressed the
appropriateness of the continued application of SFAS 71 by utilities in
states that have enacted restructuring legislation similar to the
Customer Choice Act. The EITF issued its statement 97-4 (Deregulation of
the Pricing of Electricity -- Issues Related to the Application of FASB
Statements 71 and 101), which concluded that utilities should discontinue
application of SFAS 71 for the generation portion of their business when
a deregulation plan is in place and its terms are known. For PP&L, this
will be upon the issuance of the PUC's restructuring order expected to be
no later than mid-1998. One of the EITF's key conclusions is that
utilities should continue to carry some or all of their regulatory assets
and liabilities that originated in the generation portion of the business
if the regulatory cash flows to realize and settle them will be derived
from the regulated portion of the business (e.g., transmission and
distribution). In addition, costs or obligations of the generation
portion of the business that are incurred after application of SFAS 71
ceases and that are covered by the regulated cash flows for the portion
of the business that remains regulated on a cost of service basis would
also meet the criteria to be considered regulatory assets or liabilities.
PUC Proceedings
The Customer Choice Act establishes a definitive process for
transition to market-based pricing for electric generation. This
transition effectively includes cost-of-service based ratemaking during
the transition period, subject to a rate cap. Rates will include a non-
bypassable CTC, which is designed to give utilities the opportunity to
recover their stranded costs during the transition period.
Given the current regulatory environment, PP&L's electric
transmission and distribution businesses are expected to remain regulated
on a cost-of-service basis and, as a result, the provisions of SFAS 71
should continue to apply to those businesses. The impact of the
discontinuance of application of SFAS 71 to the generation portion of
PP&L's business will depend to a large degree on the outcome of the
restructuring proceeding currently pending before the PUC. See Financial
Note 2 for a discussion of the potential financial impacts of that
proceeding.
FERC Proceedings
Under FERC Order 888, 16 small utilities which have power supply
agreements with PP&L signed before July 11, 1994, requested and were
provided with PP&L's current estimate of its stranded costs applicable to
these customers if they were to terminate their agreements in 1999. PP&L
has now executed settlement agreements with these customers, which will
be filed with the FERC for approval. These settlement agreements provide
for continued power supply by PP&L through January 2004. If FERC
approves the agreements as filed, PP&L would be required to write off a
portion of its stranded costs applicable to these customers. The amount
of this write-off is currently estimated at approximately $28 million
after-tax, or 17 cents per share of common stock. FERC action on this
matter is not expected until the second quarter of 1998.
4. Rate Matters
Base Rate Filing with the PUC
In 1995, the PUC issued a final order with respect to the base rate
case filed by PP&L in December 1994. The PUC Decision increased PUC
jurisdictional rates by about $85 million annually, or 3.8%. The PUC
Decision permitted the levelization of depreciation expense for the
Susquehanna station, recovery of retiree health care costs and costs of
the 1994 voluntary early retirement program and revised costs to
decommission Susquehanna SES. The order also permitted recovery of
deferred operating and capital costs, net of energy savings, for
Susquehanna Unit 2 but disallowed similar costs for Unit 1. The PUC also
rejected PP&L's request to include in the ECR the cost of capacity billed
to other utilities after the contractual arrangements with these
utilities expire.
The OCA appealed three issues from the PUC Decision to the
Pennsylvania Commonwealth Court. In May 1997, the Commonwealth Court
issued its decision on the OCA's appeal. Two of the issues, recovery of
SFAS 106 deferrals and the carrying charges and operating expenses for
Susquehanna Unit 2 from commercial operation until the plant was
recognized in rates, were decided in PP&L's favor. The third issue was
the recovery of Pennsylvania Gross Receipts Tax (GRT) on uncollectible
revenues. PP&L had requested an allowance for GRT on the full amount of
revenue approved by the PUC, while the OCA had proposed a $745,000
annualized adjustment to disallow GRT on revenues that PP&L will not be
able to collect. The PUC had rejected the OCA's proposed adjustment.
The Commonwealth Court reversed the PUC Decision and remanded that issue
to the PUC for adjustment of the allowance.
FERC - Major Utility Rates
In January 1996, PP&L filed a request with the FERC to incorporate a
change in the method of calculating depreciation under its contracts with
four major electric utility customers (Atlantic, BG&E, JCP&L, and UGI).
PP&L also sought to increase the charges to those customers for nuclear
decommissioning costs. A settlement of this case was approved by the
FERC in June 1997, under terms which have no material effect on PP&L.
5. Sales to Other Electric Utilities
PP&L provides Atlantic with 125,000 kilowatts of capacity (summer
rating) and related energy from its wholly owned coal-fired stations.
Sales to Atlantic will expire in March 1998.
PP&L provided JCP&L with 567,000 kilowatts of capacity and related
energy from all of its generating units during 1997. This amount will
decline by 189,000 kilowatts per year until the end of the agreement on
December 31, 1999. PP&L expects to be able to resell the capacity and
energy at market prices.
PP&L provides BG&E with 129,000 kilowatts or 6.6 percent of its
share of capacity and related energy from the Susquehanna station. Sales
to BG&E will continue through May 2001.
In June 1997, PP&L began a sale of capacity and energy to JCP&L
pursuant to an agreement which provides that JCP&L will purchase 150,000
kilowatts of capacity and energy for 12 months, increasing to 200,000
kilowatts in June 1998, and then to 300,000 kilowatts in June 1999
through the end of the agreement in May 2004. Prices for this energy and
capacity reflect market conditions.
In July 1997, FERC accepted a new wholesale power tariff that
permits PP&L to sell capacity and energy at market-based rates, both
inside and outside the PJM area, subject to certain conditions. This
tariff allows PP&L to become more active in the wholesale market with
utilities and other entities, and removes pricing restrictions which in
the past had limited PP&L to charging at or below cost-based rates.
Sales of capacity and energy have been made under this new tariff.
In January 1998, the United States Department of Energy approved
PP&L's application for an export license to sell capacity and/or energy
to electric utilities in Canada. This export license allows PP&L to sell
either its own capacity and energy not required to serve domestic
obligations or power purchased from other utilities.
6. Income Taxes
For 1997, 1996 and 1995, the corporate federal income tax rate was
35%, and the Pa. CNI rate was 9.99%.
The tax effects of significant temporary differences comprising PP&L
Resources' net deferred income tax liability were as follows (millions of
dollars):
1997 1996
Deferred tax assets
Deferred investment tax credits $ 82 $ 86
Accrued pension costs 77 67
Other 66 75
Valuation allowance (6) (6)
219 222
Deferred tax liabilities
Electric utility plant - net 1,755 1,788
Other property - net 9 9
Taxes recoverable through future rates 377 399
Reacquired debt costs 43 46
Other 35 11
2,219 2,253
Net deferred tax liability $2,000 $2,031
Details of the components of income tax expense, a reconciliation of
federal income taxes derived from statutory tax rates applied to income
from continuing operations for accounting purposes, and details of taxes,
other than income are as follows (millions of dollars):
Income Tax Expense 1997 1996 1995
Included in Operating Expenses
Provision - Federal $169 $189 $195
State 59 64 62
228 253 257
Deferred - Federal 20 4 9
State 9 6 6
29 10 15
Investment tax credit,
net - Federal (10) (10) (10)
247 253 262
Included in Other Income
and Deductions
Provision (credit) - Federal (6) (1) 8
State (2) 1 4
(8) 0 12
Deferred - Federal (1) 1 10
State 0 (1) 2
(1) 0 12
(9) 0 24
Total income tax
expense - Federal 172 183 212
State 66 70 74
$238 $253 $286
Reconciliation of Income
Tax Expense
Indicated federal income tax on
pre-tax income at statutory
tax rate - 35% $195 $213 $223
Increase (decrease) due to:
State income taxes 40 44 50
Flow through of depreciation
differences not previously
normalized 22 20 16
Amortization of investment
tax credit (10) (10) (10)
Research & experimentation
income tax credits (1) (5)
Other (8) (9) 7
43 40 63
Total income tax expense $238 $253 $286
Effective income tax rate 42.7% 41.5% 44.9%
Taxes, Other Than Income
State gross receipts $104 $105 $102
State utility realty 46 44 46
State capital stock 34 34 33
Social security and other 20 20 20
$204 $203 $201
7. Nuclear Decommissioning Costs
PP&L's most recent estimate of the cost to decommission the
Susquehanna station was completed in 1993 and was a site-specific study,
based on immediate dismantlement and decommissioning of each unit
following final shutdown. The study indicates that PP&L's 90% share of
the total estimated cost of decommissioning the Susquehanna station is
approximately $724 million in 1993 dollars. The estimated cost includes
decommissioning the radiological portions of the station and the cost of
removal of nonradiological structures and materials. The operating
licenses for Units 1 and 2 expire in 2022 and 2024, respectively.
Decommissioning costs charged to operating expense were $12 million
in both 1997 and 1996 and $8 million in 1995 and are based upon amounts
included in customer rates. The increase in 1996 is a result of the PUC
Decision, in which recovery of decommissioning costs was based on the
cost estimates in the 1993 site-specific study. Rates charged to small
utilities reflect the estimated cost of decommissioning in the 1993
study. In January 1996, PP&L filed with the FERC to increase its
decommissioning rate to reflect the projected cost of decommissioning the
Susquehanna station. A settlement of this case was approved by the FERC
in June 1997. See Note 4 for further information.
Amounts collected from customers for decommissioning, less
applicable taxes, are deposited in external trust funds for investment
and can be used only for future decommissioning costs. The market value
of securities held and accrued income in the trust funds at December 31,
1997 and 1996 aggregated approximately $163 million and $128 million,
respectively. The trust funds experienced, on a fair market value basis,
a $24 million net gain in 1997, which includes net unrealized
appreciation of $18 million, and a net gain in 1996 of $6 million, which
includes net unrealized appreciation of $2 million. The trust fund
activity is reflected in the nuclear plant decommissioning trust fund and
in other noncurrent liabilities on the Consolidated Balance Sheet.
Accrued nuclear decommissioning costs were $166 million and $130 million
at December 31, 1997 and 1996, respectively.
The FASB issued an exposure draft on the accounting for liabilities
related to closure and removal of long-lived assets, including
decommissioning of nuclear power plants. As a result, current industry
accounting practices for decommissioning may change, including the
possibility that the estimated cost for decommissioning could be recorded
as a liability at the present value of the estimated future cash outflows
that will be required to satisfy those obligations. Due to FASB's
recognition that these issues intertwine with other unresolved accounting
issues, FASB has not yet determined when it will issue another exposure
draft or a final statement.
8. Financial Instruments
The carrying amount shown on the Consolidated Balance Sheet and the
estimated fair value of PP&L Resources' financial instruments are as
follows (millions of dollars):
December 31, 1997 December 31, 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Nuclear plant decommis-
sioning trust fund (a) $163 $163 $128 $128
Financial investments (a) 58 62 206 206
Other investments 13 13 18 18
Cash and cash equivalents 50 50 101 101
Other financial instru-
ments included in
other current assets 3 3 2 2
Liabilities
Preferred stock with
sinking fund require-
ments (b) 47 49 295 294
Company-obligated manda-
torily redeemable
preferred securities of
subsidiary trusts
holding solely company
debentures (b) 250 256 - -
Long-term debt (b) 2,735 2,895 2,832 2,885
Commercial paper and
bank loans 135 135 144 144
(a) The carrying value of these financial instruments generally is
based on established market prices and approximates fair value.
(b) The fair value generally is based on quoted market prices for the
securities where available and estimates based on current rates offered
to PP&L Resources where quoted market prices are not available.
9. Regulatory Assets
The following regulatory assets were reflected in the PP&L
Consolidated Balance Sheet (millions of dollars):
1997 1996
Deferred depreciation $ 71 $ 140
Deferred operating and carrying
costs - Susquehanna 15 17
Utility plant carrying charges -
net of amortization 19 21
Reacquired debt costs 103 110
Taxes recoverable through future
rates 909 963
Assessment for decommissioning
uranium enrichment facilities 28 30
Postretirement benefits other
than pensions 25 28
Voluntary early retirement program 36 49
ECR undercollection 49 17
Buyout of NUG contracts 84
Other 20 24
$1,359 $1,399
As of December 31, 1997, substantially all of PP&L's regulatory
assets are being recovered through rates charged to customers over
periods ranging from 3 to 35 years. In December 1996, Pennsylvania
passed restructuring legislation which permits utilities to recover
approved regulatory assets as transition or stranded costs. See Note 2
"PUC Restructuring Proceeding".
For a discussion of taxes recoverable through future rates,
postretirement benefits other than pensions, assessment for
decommissioning uranium enrichment facilities, VERP, and additional
information on the PUC Decision, see Notes 4, 6, and 13.
10. Credit Arrangements & Financing Activities
PP&L issues commercial paper and, from time to time, borrows from
banks to provide short-term funds required for general corporate
purposes. In addition, certain subsidiaries also borrow from banks to
obtain short-term funds. Bank borrowings generally bear interest at
rates negotiated at the time of the borrowing. PP&L's weighted average
interest rate on short-term borrowings was 6.6% and 4.9% at December 31,
1997 and 1996, respectively. PP&L currently has authorization from the
FERC to issue up to $750 million of short-term debt.
In April 1997, PP&L redeemed $210 million principal amount of four
series of first mortgage bonds. Three of the series of first mortgage
bonds were redeemed under the maintenance and replacement fund provisions
of the mortgage. These series of bonds consisted of $40 million
principal amount of the 7% series due 1999; $60 million principal
amount of the 7-1/4% series due 2001; and $80 million principal amount
of the 7-1/2% series due 2003. The fourth series, $30 million principal
amount of the 6-3/4% series due 1997, was redeemed under the optional
redemption provisions of that series.
In April 1997, PP&L instituted a short-term bond program in order to
meet certain short-term working capital requirements and to accomplish
other corporate purposes. Under this program, a total of $800 million of
short-term bonds (having maturities not in excess of 30 days) were issued
from time to time, with no more than $150 million of such bonds
outstanding at any one time. No such bonds were outstanding at December
31, 1997.
In March and April 1997, PP&L Resources acquired 79.10% ($369
million par value) of the outstanding preferred stock of PP&L in a tender
offer. By obtaining a majority of the 4-1/2% Preferred Stock and a
majority of the combined amount of the 4-1/2% Preferred Stock and Series
Preferred Stock (collectively, the Preferred Stock), PP&L Resources will
be able to waive certain restrictive provisions contained in PP&L's
Articles of Incorporation, including limitations on PP&L's ability to
increase the authorized number of shares of Preferred Stock, merge or
consolidate with other corporations, and issue additional Preferred Stock
and unsecured debt.
To provide financing for a portion of this tender offer, PP&L
arranged for the issuance of a total of $250 million of "Company-
obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely company debentures" (Preferred Securities) by two
Delaware statutory business trusts. These securities consist of four
million shares of 8.20% Preferred Securities issued by PP&L Capital Trust
to the public in April 1997 at $25 per share, for proceeds of $100
million; and six million shares of 8.10% Preferred Securities issued by
PP&L Capital Trust II to the public in June 1997 at $25 per share, for
proceeds of $150 million. PP&L owns all of the common securities of both
trusts. The sole asset of PP&L Capital Trust is $103 million of PP&L's
8.20% junior subordinated deferrable interest debentures (Junior
Subordinated Debentures), due April 1, 2027, and the sole asset of PP&L
Capital Trust II is $155 million of PP&L's 8.10% Junior Subordinated
Debentures, due July 1, 2027. The obligations of PP&L under the Junior
Subordinated Debentures, the indenture under which the Junior
Subordinated Debentures were issued, the trust agreements of the trusts
and the guarantees by PP&L of payment of the Preferred Securities, in the
aggregate, constitute a full and unconditional guarantee by PP&L of each
trust's Preferred Securities.
PP&L Capital Funding, a wholly-owned subsidiary of PP&L Resources,
was formed in September 1997 to provide financing for PP&L Resources and
its subsidiaries. The payment of principal, interest and premium, if
any, with respect to debt securities issued by PP&L Capital Funding will
be guaranteed by PP&L Resources.
In November 1997, PP&L and PP&L Capital Funding established a new
joint revolving credit facility with a group of 14 banks comprised of two
separate revolving credit agreements -- a $150 million 364-day revolving
credit agreement and a $300 million five-year revolving credit agreement.
Under the terms of these credit agreements, either company can borrow at
interest rates based on Eurodollar deposit rates or the prime rate, and
the respective obligations of each company are several and not joint.
The new revolving credit facility replaced PP&L Resources' $300 million
revolving credit agreement, PP&L's $250 million revolving credit
agreement and three separate PP&L credit agreements totaling $45 million,
all of which were terminated. At December 31, 1997, PP&L had no
borrowings outstanding under the new revolving credit agreements, and
PP&L Capital Funding had $90 million of borrowings outstanding under the
five-year revolving credit agreement.
PP&L Capital Funding has registered $400 million of debt securities
with the SEC. It is expected that these debt securities will be issued
from time to time as medium-term notes to provide long-term debt
financing for PP&L Resources and its unregulated subsidiaries. In this
regard, in November 1997 PP&L Capital sold $100 million of medium-term
notes having a seven-year term and $2 million of medium-term notes having
a ten-year term. The proceeds from these sales of medium-term notes were
used to repay bank borrowings incurred by PP&L Resources under its prior
revolving credit agreement that had been used to provide interim
financing for the capital needs of PP&L Global.
PP&L leases its nuclear fuel from a trust. The maximum financing
capacity of the trust under existing credit arrangements is $200 million.
11. Windfall Profits Tax - PP&L Global
In July 1997, the U.K. assessed a windfall profits tax on privatized
utilities. The tax is payable in two equal installments; the first
installment was made on December 1, 1997 and the second one is due in
December 1998. SWEB's windfall profits tax was approximately 90 million
pounds sterling, or about $148 million. Based on PP&L Global's 25%
ownership interest in SWEB, PP&L Resources incurred a one-time charge
against earnings of $37 million, or 23 cents per share, in 1997.
12. Acquisitions of Penn Fuel Gas, Inc. and H.T. Lyons, Inc.
In June 1997, PP&L Resources entered into an agreement with Penn
Fuel Gas, Inc. (PFG), a Pennsylvania corporation, pursuant to which PP&L
Resources would acquire PFG. PFG, with nearly 100,000 customers in
Pennsylvania and a few hundred customers in Maryland, distributes and
stores natural gas and sells propane.
Under the terms of the agreement, PFG would become a wholly-owned
subsidiary of PP&L Resources. Upon consummation of the acquisition, each
outstanding PFG common share would be converted into the right to receive
between 6.968 and 8.516 shares of PP&L Resources' Common Stock, and each
outstanding PFG preferred share would be converted into the right to
receive between 0.682 and 0.833 shares of PP&L Resources' Common Stock.
PP&L Resources expects to issue shares of its Common Stock valued at
about $121 million to complete the transaction. The exact conversion
rate and number of PP&L Resources' shares to be issued will be based on
the market value of the Common Stock of PP&L Resources at the time of the
merger. The transaction is expected to be treated as a pooling-of-
interests for accounting and financial reporting purposes.
The acquisition of PFG is subject to several conditions, including
the receipt of required approvals by the PUC and the SEC. The Maryland
Public Service Commission has determined not to institute proceedings on
the matter. The U.S. Department of Justice and the Federal Trade
Commission have granted early termination of the required waiting period
for the acquisition under the Hart-Scott-Rodino Premerger Notification
Act. In October 1997, PFG's shareholders approved the acquisition at a
special shareholders meeting. The acquisition does not require the
approval of PP&L Resources' shareholders. The acquisition is expected to
be completed by mid-1998.
In the third quarter of 1997, PP&L Resources recorded one-time, non-
payroll related transaction costs associated with the acquisition of PFG
of $6 million, which reduced earnings by about three cents per share.
Additional charges may be incurred in connection with closing on this
transaction, which are not expected to be material in amount.
On January 22, 1998, PP&L Resources acquired H.T. Lyons, a heating,
ventilating and air-conditioning firm in a cash transaction for an amount
that is not material.
13. Pension Plan and Other Postretirement and
Postemployment Benefits
Pension Plan
PP&L has a funded noncontributory defined benefit pension plan
covering substantially all employees. Benefits are based upon a
participant's earnings and length of participation in the Plan, subject
to meeting certain minimum requirements.
PP&L has an unfunded supplemental retirement plan for certain
management employees. A similar plan for directors was terminated
December 31, 1996. Benefit payments pursuant to these supplemental plans
are made directly by PP&L. At December 31, 1997, the projected benefit
obligation of these supplemental plans was approximately $23 million.
PP&L Global has established, effective December 1, 1994, a non-qualified
retirement plan for its corporate officers. The cost of the plan was
immaterial in 1997.
The components of PP&L's net periodic pension cost for the three
plans were (millions of dollars):
1997 1996 1995
Service cost-benefits earned
during the period $ 32 $ 32 $ 27
Interest cost 64 61 58
Actual return on plan assets (254) (146) (241)
Net amortization and deferral 166 68 167
Net periodic pension cost $ 8 $ 15 $ 11
The net periodic pension cost charged to operating expenses was $5
million in 1997, $9 million in 1996 and $6 million in 1995. The balance
was charged to construction and other accounts. The funded status of
PP&L's Plan was (millions of dollars):
December 31
1997 1996
Fair value of plan assets $1,396 $1,187
Actuarial present value of benefit obligations:
Accumulated benefit obligation-vested 762 695
Effect of projected future compensation 200 191
Projected benefit obligation 962 886
Plan assets in excess of projected
benefit obligation 434 301
Unrecognized transition assets (being
amortized over 23 years) (54) (59)
Unrecognized prior service cost 52 55
Unrecognized net gain (636) (495)
Accrued expense $ (204) $(198)
The weighted average discount rate used in determining the actuarial
present value of projected benefit obligations was 6.75% and 7.0% on
December 31, 1997 and 1996, respectively. The rate of increase in future
compensation used in determining the actuarial present value of projected
benefit obligations was 5.0% on December 31, 1997 and 1996. The assumed
long-term rates of return on assets used in determining pension cost in
1997 and 1996 was 8.0%. Plan assets consist primarily of common stocks,
government and corporate bonds and temporary cash investments.
PP&L's subsidiaries formerly engaged in coal mining have a
noncontributory defined benefit pension plan covering substantially all
non-bargaining unit, full-time employees, which is fully funded,
primarily by group annuity contracts with insurance companies. This plan
was amended to freeze benefit increases effective June 1996. In
addition, the companies are liable under federal and state laws to pay
black lung benefits to claimants and dependents with respect to approved
claims, and are members of a trust which was established to facilitate
payment of such liabilities. Such costs were not material in 1997, 1996
and 1995.
Postretirement Benefits Other Than Pensions
Substantially all employees of PP&L and its subsidiaries will become
eligible for certain health care and life insurance benefits upon
retirement. PP&L sponsors four health and welfare benefit plans that
cover substantially all management and bargaining unit employees upon
retirement. One plan provides for retiree health care benefits to
certain management employees, another plan provides retiree health care
benefits to bargaining unit employees, a third plan provides retiree life
insurance benefits to certain management employees up to a specified
amount and a fourth plan provides retiree life insurance benefits to
bargaining unit employees.
Dollar limits have been established for the amount PP&L will
contribute annually toward the cost of retiree health care for employees
retiring after March 1993.
The PUC Decision in 1995 permitted recovery of the PUC-
jurisdictional amount of retiree health care costs resulting from the
adoption of SFAS 106. In addition, the PUC Decision permitted PP&L to
recover, over a period of about 17 years, the amount of SFAS 106 costs
that would have been deferred from January 1, 1993 through September 30,
1995, pursuant to a PUC order but for a Commonwealth Court decision that
PP&L could not recover these deferred costs. As a result of the PUC
Decision, which provided for recovery of $27 million of previously
expensed SFAS 106 costs, PP&L recorded a $16 million after-tax credit to
income in the third quarter of 1995.
In December 1993, PP&L established a separate VEBA for each of the
four health and welfare benefit plans for retirees. After making initial
contributions, additional funding of the trusts was deferred pending
resolution of PP&L's ability to recover the costs of the plans in rates.
Continued funding of these trusts was subject to the resolution of the
OCA appeal of the PUC Decision. In 1997, the Pennsylvania Supreme Court
ruled that the Commonwealth Court's decision to uphold the PUC Decision
is now final. In December 1997, PP&L contributed an additional $31
million to these VEBAs.
The following table sets forth the plans' combined funded status
reconciled with the amount shown on PP&L Resources' Consolidated Balance
Sheet as of December 31 (millions of dollars):
1997 1996
Accumulated postretirement benefit obligation:
Retirees $137 $123
Fully eligible active plan participants 21 19
Other active plan participants 79 85
237 227
Plan assets at fair value, primarily
temporary cash investments 64 31
Accumulated postretirement benefit obligation
in excess of plan assets 173 196
Unrecognized prior service costs (4) (5)
Unrecognized net loss (11) (12)
Unrecognized transition obligation (being
amortized over 20 years) (131) (139)
Accrued postretirement benefit cost $ 27 $ 40
The net periodic postretirement benefit cost included the following
components (millions of dollars):
1997 1996 1995
Service cost - benefits attributed
to service during the period $ 4 $ 4 $ 4
Interest cost on accumulated
postretirement benefit obligation 17 15 15
Actual return on plan assets (2) (1) (2)
Net amortization and deferral 10 9 9
Net periodic postretirement
benefit cost $29 $27 $26
Retiree health and benefits costs charged to operating expenses were
approximately $23 million in 1997, $20 million in 1996, and a net credit
of approximately $17 million in 1995 (reflecting both a $32 million
credit due to the PUC Decision and costs applicable to contractual
agreements with other major utilities). Costs in excess of the amount
charged to expense were charged to construction and other accounts.
For measurement purposes, an 8% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998; the
rate was assumed to decrease gradually to 6% by 2006 and remain at that
level thereafter. Increasing the assumed health care cost trend rates by
1% in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1997, by about $11 million and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by about $1 million.
In determining the accumulated postretirement benefit obligation,
the weighted average discount rate used was 6.75% and 7.0% on December
31, 1997 and 1996, respectively. The trusts that are holding the plan
assets, except for retiree health care benefits to certain management
employees, are tax-exempt. The expected long-term rate of return on plan
assets for the tax-exempt trusts was 6.5% on December 31, 1997 and 1996.
PP&L and its subsidiaries formerly engaged in coal mining accrued an
additional liability for the cost of health care of retired miners
previously employed by them. The liability, based on the present value
of future benefits, was estimated at $51 million and $54 million as of
December 1997 and 1996, respectively. In December 1997, PP&L contributed
$25 million to a VEBA to partially fund these health care costs.
Postemployment Benefits
PP&L provides health and life insurance benefits to disabled
employees and income benefits to eligible spouses of deceased employees.
Postemployment benefits charged to operating expenses were not material.
14. Jointly Owned Facilities
At December 31, 1997, PP&L or its subsidiary owned undivided
interests in the following facilities (millions of dollars):
Merrill
-----Generating Stations------ Creek
Susquehanna Keystone Conemaugh Reservoir
Ownership interest 90.00% 12.34% 11.39% 8.37%
Electric utility plant in
service $4,060 $68 $103
Other property $22
Accumulated depreciation 1,160 37 40 9
Construction work in progress 67 1
Each participant in these facilities provides its own financing.
PP&L receives a portion of the total output of the generating stations
equal to its percentage ownership. PP&L's share of fuel and other
operating costs associated with the stations is reflected on the PP&L
Consolidated Statement of Income. In December 1997, Allegheny Electric
Cooperative, Inc. issued a Request for Proposals for the sale of its
assets, including its 10% interest in Susquehanna. This proposed sale is
still pending. The Merrill Creek Reservoir provides water during periods
of low river flow to replace water from the Delaware River used by PP&L
and other utilities in the production of electricity.
15. Subsidiary Coal Reserves
In November 1995, PP&L sold the coal reserves of one of its
subsidiaries for $52 million, which resulted in a $42 million gain, or
$20 million after-tax. PP&L had acquired the reserves in 1974 with the
intention of supplying future coal-fired generating stations, but later
concluded that it would not develop these reserves for such purposes. In
1994, the reserves' carrying value was written down from $84 million to
$10 million.
16. Commitments and Contingent Liabilities
Construction Expenditures
PP&L's construction expenditures for the period 1998-2002 are
estimated to aggregate $1.3 billion, including AFUDC. For discussion
pertaining to construction expenditures, see Review of Financial
Condition and Results of Operations under the caption "Financial
Condition -- Capital Expenditure Requirements" on page 32.
Nuclear Insurance
PP&L is a member of certain insurance programs which provide
coverage for property damage to members' nuclear generating stations.
Facilities at the Susquehanna station are insured against property damage
losses up to $2.75 billion under these programs. PP&L is also a member
of an insurance program which provides insurance coverage for the cost of
replacement power during prolonged outages of nuclear units caused by
certain specified conditions. Under the property and replacement power
insurance programs, PP&L could be assessed retroactive premiums in the
event of the insurers' adverse loss experience. The maximum amount PP&L
could be assessed under these programs at December 31, 1997 was about $31
million.
PP&L's public liability for claims resulting from a nuclear incident
at the Susquehanna station is limited to about $8.9 billion under
provisions of The Price Anderson Amendments Act of 1988. PP&L is
protected against this liability by a combination of commercial insurance
and an industry assessment program. In the event of a nuclear incident
at any of the reactors covered by The Price Anderson Amendments Act of
1988, PP&L could be assessed up to $151 million per incident, payable at
a rate of $20 million per year, plus an additional 5% surcharge, if
applicable.
Environmental Matters
Air
The Clean Air Act deals, in part, with acid rain, attainment of
federal ambient ozone standards and toxic air emissions. PP&L has
complied with the Phase I acid rain provisions required to be implemented
by 1995 by installing continuous emission monitors on all units, burning
lower sulfur coal and installing low nitrogen oxide burners on certain
units. To comply with the year 2000 acid rain provisions, PP&L plans to
purchase lower sulfur coal and use banked or purchased emission
allowances instead of installing FGD on its wholly-owned units.
PP&L has met the initial ambient ozone requirements of the Clean Air
Act by reducing nitrogen oxide emissions by 40% through the use of low
nitrogen oxide burners. Further seasonal (i.e., 5 month) nitrogen oxide
reductions to 55% and 75% of 1990 levels for 1999 and 2003, respectively,
are specified under the Northeast Ozone Transport Region's Memorandum of
Understanding. The PA DEP has finalized regulations which require PP&L
to reduce its ozone seasonal NOx by 57% beginning in 1999.
The EPA has finalized new national standards for ambient levels of
ground-level ozone and fine particulates. Based in part on the new ozone
standard, the EPA has proposed NOx emission limits for 22 states,
including Pennsylvania, which in effect requires approximately an 80%
reduction from the 1990 level in Pennsylvania in the 2005-2012 timeframe.
The new particulates standard may require further reductions in both NOx
and SO2 and may extend the reductions from seasonal to year round.
The Clean Air Act requires the EPA to study the health effects of
hazardous air emissions from power plants and other sources. Depending
on the outcome of these studies, PP&L may be required to take additional
action.
Expenditures to meet the 2000 acid rain and 1999 NOx reduction
requirements are included in the table of projected construction
expenditures in the section "Financial Condition - Capital Expenditure
Requirements" in the Review of the Financial Condition and Results of
Operations. PP&L currently estimates that additional capital expen-
ditures and operating costs for environmental compliance under the Clean
Air Act will be incurred beyond 2002 in amounts which are not now
determinable but which could be material.
Water and Residual Waste
DEP residual waste regulations set forth requirements for existing
ash basins at PP&L's coal-fired generating stations. Any new ash
disposal facility must meet the rigid siting and design standards set
forth in the regulations. To address these DEP regulations, PP&L has
installed dry fly ash handling systems at most of its power stations,
which eliminate the need for ash basins. In other cases, PP&L has
modified the existing facilities to allow continued operation of the ash
basins under a new DEP permit. Any groundwater contamination caused by
the basins must also be addressed.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Remedial
work is substantially completed at two generating stations. At this
time, the only other remedial work being planned is to abate a localized
groundwater degradation problem at Montour.
The recently issued final NPDES permit for the Montour station
contains stringent limits for iron and chlorine discharges. Depending on
the results of a toxic reduction study to be conducted, additional water
treatment facilities or operational changes may be needed at this
station.
Capital expenditures through the year 2002 to comply with the
residual waste regulations, correct groundwater degradation at fossil-
fueled generating stations, and address waste water control at PP&L
facilities are included in the table of construction expenditures in the
section "Financial Condition - Capital Expenditure Requirements" in the
Review of the Financial Condition and Results of Operations. In this
regard, PP&L currently estimates that $6.5 million of additional capital
expenditures may be required in the next four years to close some of the
ash basins and address other ash basin issues at various generating
plants. Additional capital expenditures could be required beyond the
year 2002 in amounts which are not now determinable but which could be
material. Actions taken to correct groundwater degradation, to comply
with the DEP's regulations and to address waste water control are also
expected to result in increased operating costs in amounts which are not
now determinable but which could be material.
Superfund and Other Remediation
In 1995, PP&L entered into a consent order with the DEP to address a
number of sites where PP&L may be liable for remediation of
contamination. This may include potential PCB contamination at certain
PP&L substations and pole sites; potential contamination at a number of
coal gas manufacturing facilities formerly owned and operated by PP&L;
and oil or other contamination which may exist at some of PP&L's former
generating facilities. As of December 31, 1997, PP&L has completed work
on nearly half of the sites included in the agreement.
At December 31, 1997, PP&L had accrued $8.1 million, representing
the amount PP&L can reasonably estimate it will have to spend to
remediate sites involving the removal of hazardous or toxic substances
including those covered by the consent order mentioned above. Future
cleanup or remediation work at sites currently under review, or at sites
not currently identified, may result in material additional operating
costs which PP&L cannot estimate at this time. In addition, certain
federal and state statutes, including Superfund and the Pennsylvania
Hazardous Sites Cleanup Act, empower certain governmental agencies, such
as the EPA and the DEP, to seek compensation from the responsible parties
for the lost value of damaged natural resources. The EPA and the DEP may
file such compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
General
Due to the environmental issues discussed above or other
environmental matters, PP&L may be required to modify, replace or cease
operating certain facilities to comply with statutes, regulations and
actions by regulatory bodies or courts. In this regard, PP&L also may
incur capital expenditures, operating expenses and other costs in amounts
which are not now determinable but which could be material.
Loan Guarantees of Affiliated Companies
PP&L Global has guaranteed a subsidiary's pro rata share of the
outstanding portion of certain debt issuances of an affiliate. At
December 31, 1997, $13 million of such loans were guaranteed by PP&L
Global. PP&L Global's guarantee is expected to increase to $18 million
during 1998, as the affiliate draws down the balance of its debt
facility.
IEC has arrangements with banks under which the banks may lend funds
to IEC on an uncommitted basis. PP&L has been authorized by the PUC to
guarantee up to $45 million of these bank loans or to lend up to $45
million under a fixed rate loan agreement with PP&L. IEC has been
authorized by the PUC to have a maximum of $45 million outstanding at any
one time under both of these loan arrangements.
In addition, PP&L Spectrum has a $1 million line of credit, which is
guaranteed by PP&L Resources.
Source of Labor Supply
At December 31, 1997, PP&L had a total of 6,343 full-time employees.
Approximately 65 percent of these full-time employees are represented by
the IBEW. The labor agreement with the IBEW expires in May 1998.
17. New Accounting Standards
During 1997, the FASB issued SFAS 128, Earnings Per Share; SFAS 129,
Disclosure of Information about Capital Structure; SFAS 130, Reporting
Comprehensive Income; and SFAS 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS 128 and SFAS 129 are effective
for financial statements issued for periods ending after December 15,
1997, however these statements cause no additional disclosures. SFAS 130
and SFAS 131 are effective in 1998. The adoption of these statements is
not expected to have a material impact on PP&L Resources' or PP&L's
financial statements.
<PAGE>
<TABLE>
PP&L Resources, Inc.
PP&L, Inc.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Deductions
from
Balance Additions Reserves -
at Charges Losses or Balance at
Beginning Charged to Other Expenses End of
Description of Period to Income Accounts Applicable Period
(Millions of Dollars)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ $25 $17 $26 $16
Year Ended December 31, 1996
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ 35 20 30 25
Obsolete inventory - Materials and supplies........ 15 15 0
Year Ended December 31, 1995
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ 29 25 19 35
Obsolete inventory - Materials and supplies........ 0 15 15
</TABLE>
<PAGE>
<TABLE>
QUARTERLY FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars, except per share data)
<CAPTION>
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1997
Operating revenues..................... $786 $686 $778 $799
Operating income....................... 171 118 133 123
Net income............................. 117 65 42 72
Earnings per common share (b).......... 0.72 0.39 0.25 0.44
Dividends declared per common share (c) 0.4175 0.4175 0.4175 0.4175
Price per common share
High....................................... 24 20 7/8 23 1/16 24 1/4
Low.................................. 20 19 19 7/16 20
1996
Operating revenues..................... $789 $669 $715 $737
Operating income............................. 176 120 136 124
Net income................................... 116 61 79 73
Earnings per common share (b)................ 0.73 0.38 0.49 0.45
Dividends declared per common share (c)...... 0.4175 0.4175 0.4175 0.4175
Price per common share
High....................................... 26 24 1/2 24 24 1/2
Low........................................ 23 1/2 22 21 5/8 21 7/8
<FN>
(a) PP&L's electric utility business is seasonal in nature with
peak sales periods generally occurring in the winter months. In
addition earnings in several quarters were affected by several
one-time adjustments. Accordingly, comparisons
among quarters of a year may not be indicative of overall
trends and changes in operations.
(b) The sum of the quarterly amounts may not equal annual
earnings per share due to changes in the number of common
shares outstanding during the year or rounding.
(c) PP&L Resources has paid quarterly cash dividends on its
common stock in every year since 1946. The dividends paid
per share in 1997 and 1996 were $1.67. The most recent
regular quarterly dividend paid by PP&L Resources
was 41.75 cents per share (equivalent to $1.67 per annum) paid
January 1, 1998. Future dividends will be dependent
upon future earnings, financial requirements and other factors.
</TABLE>
<TABLE>
QUARTERLY FINANCIAL DATA (Unaudited)
PP&L, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1997
Operating revenues..................... $786 $686 $778 $799
Operating income....................... 171 118 133 123
Net income ............................ 120 70 81 77
Earnings available to PP&L Resources... 113 61 69 65
1996
Operating revenues..................... $789 $669 $715 $737
Operating income............................. 176 120 136 124
Net income .................................. 125 69 86 77
Earnings available to PP&L Resources......... 118 62 79 70
<FN>
(a) PP&L's electric utility business is seasonal in nature
with peak sales periods generally occurring in
the winter months. Accordingly, comparisons among quarters
of a year may not be indicative of overall trends
and changes in operations.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information for this item concerning directors of PP&L
Resources will be set forth in the sections entitled
"Nominees for Directors" and "Directors Continuing in
Office" in PP&L Resources' 1998 Notice of Annual Meeting and
Proxy Statement, which will be filed with the SEC not later
than 120 days after December 31, 1997, and which information
is incorporated herein by reference. Information required
by this item concerning the executive officers of PP&L
Resources is set forth on pages 19 through 20 of this
report.
Information for this item concerning directors of PP&L
will be set forth in the sections entitled "Nominees for
Directors" and "Directors Continuing in Office" in PP&L's
1998 Notice of Annual Meeting and Proxy Statement, which
will be filed with the SEC not later than 120 days after
December 31, 1997, and which information is incorporated
herein by reference. Information required by this item
concerning the executive officers of PP&L is set forth on
pages 19 through 20 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item for PP&L Resources will be
set forth in the sections entitled "Compensation of
Directors," "Summary Compensation Table" and "Retirement
Plans for Executive Officers" in PP&L Resources' 1998 Notice
of Annual Meeting and Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31,
1997, and which information is incorporated herein by
reference.
Information for this item for PP&L will be set forth in
the sections entitled "Compensation of Directors," "Summary
Compensation Table" and "Retirement Plans for Executive
Officers" in PP&L's 1998 Notice of Annual Meeting and Proxy
Statement, which will be filed with the SEC not later than
120 days after December 31, 1997, and which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information for this item for PP&L Resources will be
set forth in the section entitled "Stock Ownership" in PP&L
Resources' 1998 Notice of Annual Meeting and Proxy
Statement, which will be filed with the SEC not later than
120 days after December 31, 1997, and which information is
incorporated herein by reference.
Information for this item for PP&L will be set forth in
the section entitled "Stock Ownership" in PP&L's 1998 Notice
of Annual Meeting and Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31,
1997, and which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information for this item for PP&L Resources will be
set forth in the section entitled "Certain Transactions
Involving Directors or Executive Officers" in PP&L
Resources' 1998 Notice of Annual Meeting and Proxy
Statement, which will be filed with the SEC not later than
120 days after December 31, 1997, and which information is
incorporated herein by reference.
Information for this item for PP&L will be set forth in
the section entitled "Certain Transactions Involving
Directors or Executive Officers" in PP&L's 1998 Notice of
Annual Meeting and Proxy Statement, which will be filed with
the SEC not later than 120 days after December 31, 1997, and
which information is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements - included in response to Item 8.
PP&L Resources, Inc.
Report of Independent Accountants
Consolidated Statement of Income for the Three
Years Ended December 31, 1997
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1997
Consolidated Balance Sheet at December 31, 1997
and 1996
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1997
Consolidated Statement of Preferred Stock at
December 31, 1997 and 1996
Consolidated Statement of Company-Obligated
Mandatorily Redeemable Securities at
December 31, 1997 and 1996
Consolidated Statement of Long-Term Debt at
December 31, 1997 and 1996
Notes to Financial Statements
PP&L, Inc.
Report of Independent Accountants
Consolidated Statement of Income for the Three
Years Ended December 31, 1997
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1997
Consolidated Balance Sheet at December 31, 1997
and 1996
Consolidated Statement of Shareowner's Common Equity
for the Three Years Ended December 31, 1997
Consolidated Statement of Preferred Stock at
December 31, 1997 and 1996
Consolidated Statement of Company-Obligated
Mandatorily Redeemable Securities at
December 31, 1997 and 1996
Consolidated Statement of Long-Term Debt at
December 31, 1997 and 1996
Notes to Financial Statements
2. Supplementary Data and Supplemental Financial Statement
Schedule - included in response to Item 8.
Schedule II - Valuation and Qualifying Accounts and
Reserves for the Three Years Ended
December 31, 1997
All other schedules are omitted because of the absence
of the conditions under which they are required or
because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit Index on page 93.
(b) Reports on Form 8-K:
The following Reports on Form 8-K were filed during the
three months ended December 31, 1997:
Report dated October 24, 1997
Item 5. Other Events
Information regarding a schedule extension in PP&L's
restructuring case.
Report dated November 12, 1997
Item 5. Other Events
Information regarding the distribution, from time to time,
of up to $400 million aggregate principal amount of Medium-
Term Notes, Series A of PP&L Capital Funding.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
Exhibits relating to the $400 million aggregate principal
amount of Medium-Term Notes, Series A of PP&L Capital
Funding.
Report dated December 3, 1997
Item 5. Other Events
Information regarding a schedule extension in PP&L's
restructuring case.
Report dated December 24, 1997
Item 5. Other Events
Information regarding a schedule extension in PP&L's
restructuring case.
<PAGE>
SHAREOWNER AND INVESTOR INFORMATION
Annual Meetings: The annual meetings of shareowners of PP&L Resources and
PP&L are held each year on the fourth Friday of April. The 1998 annual
meetings will be held on Friday, April 24, 1998, at Lehigh University's
Stabler Arena, at the Goodman Campus Complex located in Lower Saucon
Township, outside Bethlehem, PA.
Proxy Material: A proxy statement and notice of PP&L Resources' and PP&L's
annual meetings are mailed to all shareowners of record as of February 27,
1998.
Dividends: The 1998 dates for consideration of the declaration of
dividends by the board of directors or its finance committee are February
27, May 22, August 28 and November 20. Subject to the declaration,
dividends are paid on the first day of April, July, October and January.
Dividend checks are mailed in advance of those dates with the intention
that they arrive as close as possible to the payment dates. The 1998
record dates for dividends are expected to be the 10th day of March, June,
September and December.
Direct Deposit of Dividends: Shareowners may choose to have their dividend
checks deposited directly into their checking or savings account.
Quarterly dividend payments are electronically credited on the dividend
date, or the first business day thereafter.
Dividend Reinvestment Plan: Shareowners may choose to have dividends on
their PP&L Resources common stock or PP&L preferred stock reinvested in
PP&L Resources common stock instead of receiving the dividend by check.
Certificate Safekeeping: Shareowners participating in the Dividend
Reinvestment Plan may choose to have their common stock certificates
forwarded to PP&L for safekeeping.
Lost Dividend or Interest Checks: Dividend or interest checks lost by
investors, or those that may be lost in the mail, will be replaced if the
check has not been located by the 10th business day following the payment
date.
Transfer of Stock or Bonds: Stock or bonds may be transferred from one
name to another or to a new account in the name of another person. Please
contact Investor Services regarding transfer instructions.
Bondholder Information: Much of the information and many of the procedures
detailed here for shareowners also apply to bondholders. Questions related
to bondholder accounts should be directed to Investor Services.
Lost Stock or Bond Certificates: Please contact Investor Services for an
explanation of the procedure to replace lost stock or bond certificates.
PP&L Resources Summary Annual Report: published and mailed in mid-March to
all shareowners of record.
Shareowners' Newsletter: an easy-to-read newsletter containing current
items of interest to shareowners -- published and mailed at the beginning
of each quarter.
Periodic Mailings: Letters regarding new investor programs, special items
of interest, or other pertinent information are mailed on a non-scheduled
basis as necessary.
Duplicate Mailings: The summary annual report and other investor
publications are mailed to each investor account. If you have more than
one account, or if there is more than one investor in your household, you
may contact Investor Services to request that only one publication be
delivered to your address. Please provide account numbers for all
duplicate mailings.
Shareowner Information Line: Shareowners can get detailed corporate and
financial information 24 hours a day using the Shareowner Information Line.
They can hear timely recorded messages about earnings, dividends and other
company news releases; request information by fax; and request printed
materials in the mail.
The toll-free Shareowner Information Line is 1-800-345-3085.
With the introduction of the Shareowner Information Line, PP&L
Resources will no longer publish the Quarterly Review. Replacing these
quarterly mailings with an enhanced information service is part of the
company's effort to improve the quality and timeliness of shareowner
communications. Other PP&L Resources publications, such as the annual and
quarterly reports to the Securities and Exchange Commission (Forms 10-K and
10-Q) will be mailed upon request. There will be no change in the mailing
of annual reports, proxy statements or dividend checks.
Another part of this new service is an enhanced Internet home page
(www.papl.com). Shareowners can access PP&L Resources' Securities and
Exchange Commission filings, stock quotes and historical performance.
Visitors to our website can provide their E-mail address and indicate their
desire to receive future earnings or news releases automatically at the
time of their release.
Investor Services: For any questions you have or additional information
you require about PP&L Resources and its subsidiaries, please call the
Shareowner Information Line, or write to:
George I. Kline
Manager-Investor Services
PP&L, Inc.
Two North Ninth Street
Allentown, PA 18101
Internet Access: For updated information throughout the year, check out
our home page at http://www.papl.com. You may also contact Investor
Services via E-mail at [email protected].
Security Analyst and Institutional
Investor Inquiries: Members of the financial community seeking additional
information may contact:
Timothy J. Paukovits
Investor Relations Manager
Phone: (610) 774-4124
Fax: (610) 774-5106
E-mail: [email protected]
Listed Securities: Fiscal Agents:
New York Stock Exchange Stock Transfer Agents and Registrars
PP&L Resources, Inc.: Norwest Bank Minnesota, N.A.
Common Stock (Code: PPL) Shareowner Services
161 North Concord Exchange
PP&L, Inc.: South St. Paul, MN 55075
4-1/2% Preferred Stock
(Code: PPLPRB) PP&L, Inc.
4.40% Series Preferred Stock Investor Services Department
(Code: PPLPRA)
Dividend Disbursing Office and
Dividend Reinvestment Plan Agent
PP&L Capital Trust: PP&L, Inc.
8.20% Preferred Securities Investor Services Department
(Code: PPLPRC)
Mortgage Bond Trusteee
PP&L Capital Trust II: Bankers Trust Co.
8.10% Preferred Securities Attn: Security Transfer Unit
(Code: PPLPRD) P.O. Box 291569
Nashville, TN 37229
Philadelphia Stock Exchange
PP&L Resources, Inc.: Bond Interest Paying Agent
Common Stock PP&L, Inc.
Investor Services Department
PP&L, Inc.
4-1/2% Preferred Stock
3.35% Series Preferred Stock
4.40% Series Preferred Stock
4.60% Series Preferred Stock
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PP&L Resources, Inc.
(Registrant)
PP&L, Inc.
(Registrant)
By /s/William F. Hecht
William F. Hecht - Chairman, President
and Chief Executive
Officer (PP&L Resources,
Inc. and PP&L, Inc.)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the date indicated.
TITLE
By /s/William F. Hecht Principal Executive
William F. Hecht - Chairman, President Officer and Director
and Chief Executive
Officer (PP&L Resources,
Inc. and PP&L, Inc.)
By /s/John R. Biggar Principal Financial
John R. Biggar - Senior Vice President - Officer
Financial(PP&L Resources,
Inc. and PP&L, Inc.)
By /s/Joseph J. McCabe Principal Accounting
Joseph J. McCabe - Vice President and Officer
Controller(PP&L Resources,
Inc. and PP&L, Inc.)
E. Allen Deaver Clifford L. Jones
Nance K. Dicciani Ruth Leventhal
William J. Flood Marilyn Ware Lewis Directors
Elmer D. Gates Frank A. Long
Stuart Heydt Norman Robertson
By /s/William F. Hecht
William F. Hecht, Attorney-in-fact Date: March 3, 1998
<PAGE>
EXHIBIT INDEX
The following Exhibits indicated by an asterisk preced-
ing the Exhibit number are filed herewith. The balance of
the Exhibits have heretofore been filed with the Commission
and pursuant to Rule 12(b)-32 are incorporated herein by
reference. Exhibits indicated by a # are filed or listed
pursuant to Item 601(b)(10)(iii) of Regulation S-K.
3(a)-1 - Articles of Incorporation of PP&L Resources,
Inc. (Exhibit B to Proxy Statement of PP&L and Prospectus of
Resources, dated March 9, 1995)
3(a)-2 - Restated Articles of Incorporation of PP&L,
Inc. (Exhibit A to Proxy Statement of PP&L and Prospectus of
Resources, dated March 9, 1995)
*3(a)-3 - Articles of Amendment of PP&L, Inc., dated
September 12, 1997
3(b)-1 - By-laws of PP&L Resources, Inc. (Exhibit 3.2
to Registration Statement No. 33-57949)
3(b)-2 - By-laws of PP&L, Inc. (Exhibit 3(ii) to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1993)
4(a)-1 - Amended and Restated Employee Stock
Ownership Plan, dated October 26, 1988 (Exhibit 4(b) to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1988)
4(a)-2 - Amendment No. 1 to said Employee Stock
Ownership Plan, effective January 1, 1989 (Exhibit 4(b)-2 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1989)
4(a)-3 - Amendment No. 2 to said Employee Stock
Ownership Plan, effective January 1, 1990 (Exhibit 4(b)-3 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1989)
4(a)-4 - Amendment No. 3 to said Employee Stock
Ownership Plan, effective January 1, 1991 (Exhibit 4(b)-4 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1990)
4(a)-5 - Amendment No. 4 to said Employee Stock
Ownership Plan, effective January 1, 1991 (Exhibit 4(a)-5 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1991)
4(a)-6 - Amendment No. 5 to said Employee Stock
Ownership Plan, effective October 23, 1991 (Exhibit 4(a)-6 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1991)
4(a)-7 - Amendment No. 6 to said Employee Stock
Ownership Plan, effective January 1, 1990 and January 1, 1992
(Exhibit 4(a)-7 to PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1991)
4(a)-8 - Amendment No. 7 to said Employee Stock
Ownership Plan, effective January 1, 1992 (Exhibit 4(a)-8 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1991)
4(a)-9 - Amendment No. 8 to said Employee Stock
Ownership Plan, effective July 1, 1992 (Exhibit 4(a)-9 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1992)
4(a)-10 - Amendment No. 9 to said Employee Stock
Ownership Plan, effective January 1, 1993 (Exhibit 4(a)-10 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1992)
4(a)-11 - Amendment No. 10 to said Employee Stock
Ownership Plan, effective January 1, 1993 (Exhibit 4(a)-11 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1993)
4(a)-12 - Amendment No. 11 to said Employee Stock
Ownership Plan, effective January 1, 1994 (Exhibit 4(a)-12 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1994)
4(a)-13 - Amendment No. 12 to said Employee Stock
Ownership Plan, effective January 1, 1994 (Exhibit 4(a)-13 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1994)
4(a)-14 - Amendment No. 13 to said Employee Stock
Ownership Plan, effective April 27, 1995 (Exhibit 4(a)-14 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1995)
4(a)-15 - Amendment No. 14 to said Employee Stock
Ownership Plan, effective January 1, 1989 and January 1, 1995
(Exhibit 4(a)-14 to PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1994)
4(a)-16 - Amendment No. 15 to said Employee Stock
Ownership Plan, effective October 25, 1995 (Exhibit 4(a)-16
to PP&L's Form 10-K Report (File No. 1-905) for the year
ended December 31, 1995)
4(a)-17 - Amendment No. 16 to said Employee Stock
Ownership Plan, effective January 1, 1989 (Exhibit 4(a)-17 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1996)
4(a)-18 - Amendment No. 17 to said Employee Stock
Ownership Plan, effective January 1, 1996 (Exhibit 4(a)-18 to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1996)
*4(a)-19 - Amendment No. 18 to said Employee Stock
Ownership Plan, effective December 12, 1994, January 1, 1997,
January 1, 1998, and January 1, 2000
*4(a)-20 - Amendment No. 19 to said Employee Stock
Ownership Plan, effective January 1, 1998
4(b)-1 - Mortgage and Deed of Trust, dated as of
October 1, 1945, between PP&L and Guaranty Trust Company of
New York, as Trustee (now Bankers Trust Company, as successor
Trustee) (Exhibit 2(a)-4 to Registration Statement No. 2-
60291)
4(b)-2 - Supplement, dated as of July 1, 1954, to
said Mortgage and Deed of Trust (Exhibit 2(b)-5 to
Registration Statement No. 219255)
4(b)-3 - Supplement, dated as of October 1, 1989, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated November 6, 1989)
4(b)-4 - Supplement, dated as of July 1, 1991, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated July 29, 1991)
4(b)-5 - Supplement, dated as of May 1, 1992, to said
Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form 8-K
Report (File No. 1-905) dated June 1, 1992)
4(b)-6 - Supplement, dated as of November 1, 1992, to
said Mortgage and Deed of Trust (Exhibit 4(b)-29 to PP&L's
Form 10-K Report (File 1-905) for the year ended December 31,
1992)
4(b)-7 - Supplement, dated as of February 1, 1993, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated February 16, 1993)
4(b)-8 - Supplement, dated as of April 1, 1993, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated April 30, 1993)
4(b)-9 - Supplement, dated as of June 1, 1993, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated July 7, 1993)
4(b)-10 - Supplement, dated as of October 1, 1993, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated October 29, 1993)
4(b)-11 - Supplement, dated as of February 15, 1994,
to said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's
Form 8-K Report (File No. 1-905) dated March 11, 1994)
4(b)-12 - Supplement, dated as of March 1, 1994, to
said Mortgage and Deed of Trust (Exhibit 4(b) to PP&L's Form
8-K Report (File No. 1-905) dated March 11, 1994)
4(b)-13 - Supplement, dated as of March 15, 1994, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated March 30, 1994)
4(b)-14 - Supplement, dated as of September 1, 1994,
to said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's
Form 8-K (File No. 1-905) dated October 3, 1994)
4(b)-15 - Supplement, dated as of October 1, 1994, to
said Mortgage and Deed of Trust (Exhibit 4(a) to PP&L's Form
8-K Report (File No. 1-905) dated October 3, 1994)
4(b)-16 - Supplement, dated as of August 1, 1995, to
said Mortgage and Deed of Trust (Exhibit 6(a) to PP&L's Form
10-Q Report (File No. 1-905) for the quarter ended September
30, 1995)
*4(b)-17 - Supplement, dated as of April 1, 1997 to
said Mortgage and Deed of Trust
4(c)-1 - Indenture, dated as of November 1, 1997,
among PP&L Resources, Inc., PP&L Capital Funding, Inc. and
The Chase Manhattan Bank as Trustee (Exhibit 4.1 to PP&L's 8-
K (File No. 1-905) dated November 12, 1997)
4(c)-2 - Supplement, dated as of November 1, 1997, to
said Indenture (Exhibit 4.2 to PP&L's 8-K (File No. 1-905)
dated November 12, 1997)
4(d)-1 - Junior Subordinated Indenture, dated as of
April 1, 1997, between PP&L, Inc. and The Chase Manhattan
Bank, as Trustee (Exhibit 4.1 to Registration Statement No.
333-20661)
4(d)-2 - Amended and Restated Trust Agreement, dated
as of April 8, 1997, among PP&L, Inc., The Chase Manhattan
Bank, as Property Trustee, Chase Manhattan Bank (Delaware),
as Delaware Trustee, and John R. Biggar and James E. Abel, as
Administrative Trustees (Exhibit 4.4 to Registration
Statement No. 333-20661)
4(d)-3 - Guarantee Agreement, dated as of April 8,
1997, between PP&L, Inc. and The Chase Manhattan Bank, as
Trustee (Exhibit 4.6 to Registration Statement No. 333-20661)
4(e)-1 - Amended and Restated Trust Agreement, dated
as of June 13, 1997, among PP&L, Inc., The Chase Manhattan
Bank, as Property Trustee, Chase Manhattan Bank (Delaware),
as Delaware Trustee, and John R. Biggar and James E. Abel, as
Administrative Trustees (Exhibit 4.4 to Registration
Statement No. 333-27773)
4(e)-2 - Guarantee Agreement, dated as of June 13,
1997, between PP&L, Inc. and The Chase Manhattan Bank, as
Trustee (Exhibit 4.6 to Registration Statement No. 333-27773)
*10(a) - 364-Day Revolving Credit Agreement, dated as
of November 20, 1997, between PP&L, Inc., PP&L Capital
Funding, Inc. and PP&L Resources, Inc. and the Banks named
therein
*10(b) - Five-Year Revolving Credit Agreement, dated
as of November 20, 1997, between PP&L, Inc., PP&L Capital
Funding, Inc. and PP&L Resources, Inc. and the banks named
therein
10(c) - Credit Agreement, dated as of March 14, 1996,
between PP&L, Inc. and The First National Bank of Chicago
(Exhibit 10(c) to PP&L, Inc.'s Form 10-K Report (File No. 1-
905) for the year ended December 31, 1996)
10(d) - Pollution Control Facilities Agreement, dated
as of May 1, 1973, between PP&L, Inc. and the Lehigh County
Industrial Development Authority (Exhibit 5(z) to
Registration Statement No. 2-60834)
*10(e) - Operating Agreement of the PJM
Interconnection, dated as of June 2, 1997 and revised as of
December 31, 1997
10(f) - Capacity and Energy Sales Agreement, dated
June 29, 1983, between PP&L, Inc. and Atlantic City Electric
Company (Exhibit 10(f)-2 to PP&L's Form 10-K Report (File No.
1-905) for the year ended December 31, 1983)
10(g)-1 - Capacity and Energy Sales Agreement, dated
March 9, 1984, between PP&L, Inc. and Jersey Central Power &
Light Company (Exhibit l0(f)-3 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended December 31, 1984)
10(g)-2 - First Supplement, effective February 28,
1986, to said Capacity and Energy Sales Agreement (Exhibit
10(e)-4 to PP&L's Form 10-K Report (File No. 1-905) for the
year ended December 31, 1986)
10(g)-3 - Second Supplement, effective January 1,
1987, to said Capacity and Energy Sales Agreement (Exhibit
10(g)-3 to PP&L's Form 10-K Report (File No. 1-905) for the
year ended December 31, 1989)
10(g)-4 - Amendments to Exhibit A, effective
October 1, 1987, to said Capacity and Energy Sales Agreement
(Exhibit 10(e)-6 to PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1987)
10(g)-5 - Third Supplement, effective December 1,
1988, to said Capacity and Energy Sales Agreement (Exhibit
10(g)-5 to PP&L's Form 10-K Report (File No. 1-905) for the
year ended December 31, 1989)
10(g)-6 - Fourth Supplement, effective December 1,
1988, to said Capacity and Energy Sales Agreement (Exhibit
10(g)-6 to PP&L's Form 10-K Report (File No. 1-905) for the
year ended December 31, 1989)
10(h)-1 - Capacity and Energy Sales Agreement, dated
January 28, 1988, between PP&L, Inc. and Baltimore Gas and
Electric Company (Exhibit 10(e)-7 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended December 31, 1987)
10(h)-2 - First Supplement, effective November 1,
1988, to said Capacity and Energy Sales Agreement (Exhibit
10(i)-2 to PP&L's Form 10-K Report (File No. 1-905) for the
year ended December 31, 1989)
10(h)-3 - Second Supplement, effective June 1, 1989,
to said Capacity and Energy Sales Agreement (Exhibit 10(i)-3
to PP&L's Form 10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(h)-4 - Third Supplement, effective June 1, 1991,
to said Capacity and Energy Sales Agreement (Exhibit 10(g)-4
to PP&L's Form 10-K Report (File No. 1-905) for the year
ended December 31, 1991)
*10(h)-5 - Fourth Supplement, effective June 1, 1992,
to said Capacity and Energy Sales Agreement
*10(h)-6 - Fifth Supplement, effective July 15, 1993,
to said Capacity and Energy Sales Agreement
*10(h)-7 - Sixth Supplement, effective June 1, 1993,
to said Capacity and Energy Sales Agreement
#10(i) - Amended and Restated Directors Deferred
Compensation Plan, effective July 1, 1995 (Exhibit C to Proxy
Statement of PP&L and Prospectus of Resources, dated March 9,
1995)
#10(i)-1 - Amendment No. 1 to said Amended and
Restated Directors Deferred Compensation Plan, effective
November 1, 1996 (Exhibit 10(j)-1 to PP&L, Inc.'s Form 10-K
Report (File No. 1-905) for the year ended December 31, 1996)
#10(i)-2 - Amendment No. 2 to said Amended and
Restated Directors Deferred Compensation Plan, effective
January 1, 1997 (Exhibit 10(j)-2 to PP&L, Inc.'s Form 10-K
Report (File No. 1-905) for the year ended December 31, 1996)
*#10(i)-3 - Amendment No. 3 to said Amended Directors
Deferred Compensation Plan, effective January 1, 1998
#10(j)-1 - Amended and Restated Deferred Compensation
Plan for Executive Officers, effective January 1, 1990
(Exhibit 10(s) to PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1990)
#10(j)-2 - Amendment No. 1 to said Officers Deferred
Compensation Plan, effective January 1, 1991 (Exhibit 10(j)-2
to PP&L's Form 10-K Report (File No. 1-905) for the year
ended December 31, 1991)
#10(j)-3 - Amendment No. 2 to said Officers Deferred
Compensation Plan, effective October 23, 1991 (Exhibit 10(j)-
3 to PP&L's Form 10-K Report (File No. 1-905) for the year
ended December 31, 1991)
#10(j)-4 - Amendment No. 3 to said Officers Deferred
Compensation Plan, effective January 1, 1992 and April 1,
1992 (Exhibit 10(j)-4 to PP&L's Form 10-K Report (File No. 1-
905) for the year ended December 31, 1991)
#10(j)-5 - Amendment No. 4 to said Officers Deferred
Compensation Plan, effective January 1, 1995 (Exhibit 10(j)-5
to PP&L's Form 10-K Report (File No. 1-905) for the year
ended December 31, 1994)
#10(j)-6 - Amendment No. 5 to said Officers Deferred
Compensation Plan, effective January 1, 1996 (Exhibit 10(l)-6
to PP&L, Inc.'s Form 10-K Report (File No. 1-905) for the
year ended December 31, 1996)
#10(k) - Amended and Restated Supplemental Executive
Retirement Plan, effective August 31, 1995 (Exhibit 10(k) to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1995)
#10(k)-1 - Amendment No. 1 to said Amended and
Restated Supplemental Executive Retirement Plan, effective
July 1, 1996 (Exhibit 10(m)-1 to PP&L, Inc.'s Form 10-K
Report (File No. 1-905) for the year ended December 31, 1996)
#10(l) - Amended and Restated Executive Retirement
Security Plan, effective August 31, 1995 (Exhibit 10(l) to
PP&L's Form 10-K Report (File No. 1-905) for the year ended
December 31, 1995)
#10(l)-1 - Amendment No. 1 to said Amended and
Restated Executive Retirement Security Plan, effective
January 1, 1996 (Exhibit 10(n)-1 to PP&L, Inc.'s Form 10-K
Report (File No. 1-905) for the year ended December 31, 1996)
#10(m)-1 - Amended and Restated Incentive Compensation
Plan, effective January 1, 1995 (Exhibit D to Proxy Statement
of PP&L and Prospectus of Resources, dated March 9, 1995)
#10(m)-2 - Amendment No. 1 to said Amended and
Restated Incentive Compensation Plan, effective April 27,
1995 (Exhibit 10(m)-2 to PP&L's Form 10-K Report (File No. 1-
905) for the year ended December 31, 1995)
#10(m)-3 - Amendment No. 2 to said Amended and
Restated Incentive Compensation Plan, effective January 1,
1996 (Exhibit 10(o)-3 to PP&L, Inc.'s Form 10-K Report (File
No. 1-905) for the year ended December 31, 1996)
#10(m)-4 - Amendment No. 3 to said Amended and
Restated Incentive Compensation Plan, effective January 1,
1997 (Exhibit 10(o)-4 to PP&L, Inc.'s Form 10-K Report (File
No. 1-905) for the year ended December 31, 1996)
#10(n) - Description of Executive Compensation
Incentive Award Program (Exhibit 10(p) to PP&L Form 10-K
Report (File No. 1-905) for the year ended December 31,
1996) 1/
1/This description is provided pursuant to 17 C.F.R.
Section 229.601(b)(10)(iii)(A).
10(o) - Nuclear Fuel Lease, dated as of February 1,
1982, between PP&L, as lessee, and Newton I. Waldman, not in
his individual capacity, but solely as Cotrustee of the
Pennsylvania Power & Light Energy Trust, as lessor (Exhibit
10(g) to PP&L's Form 10-K Report (File No. 1-905) for the
year ended December 31, 1981)
*12(a) - PP&L Resources, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
*12(b) - PP&L, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges
*23 - Consent of Price Waterhouse LLP
*24 - Power of Attorney
*27 - Financial Data Schedule
<PAGE>
Exhibit 3(a)-3
Articles of Amendment-Domestic Business Corporation
DSCB:15-1915 (Rev. 91)
In compliance with the requirements of 15 Pa.C.S.
Section 1915 (related to articles of amendment), the undersigned
business corporation, desiring to amend its Articles, hereby
states that:
1. The name of the corporation is: Pennsylvania Power & Light
Company.
2. The (a) address of this corporation's current registered
office in this Commonwealth or (b) name of its commercial
registered office provider and the county of venue is (the
Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) Two North Ninth Street, Allentown, PA 18101 Lehigh
Number and Street City State Zip County
(b) c/o: __________________________________________________
Name of Commercial Registered Office
Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which
the corporation is located for venue and official publication
purposes.
3. The statute by or under which it was incorporated is: PA
Business Corporation Law of 1988
4. The date of its Incorporation is: June 4, 1920
5. (Check, and if appropriate complete, one of the following):
_X_ The amendment shall be effective upon filing these Articles
of Amendment in the Department of State.
___ The amendment shall be effective on: _____________(date) at
________________(hour).
6. (Check one of the following):
___ The amendment was adopted by the shareholders (or members)
pursuant to 15 Pa.C.S. Section 1914(a) and (b).
_X_ The amendment was adopted by the board of directors pursuant
to 15 Pa. C.S. Section 1914 (c).
7. (Check, and if appropriate complete, one of the following):
_X_ The amendment adopted by the corporation, set forth in full,
is as follows:
"The name of the corporation is PP&L, Inc."
___ The amendment adopted by the corporation is set forth in
full in Exhibit A attached hereto and made a part hereof.
8. (Check if the amendment restates the Articles):
___ The restated Articles of Incorporation supersede the
original Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has
caused these Articles of Amendment to be signed by a duly
authorized officer thereof this 12th day of September, 1997.
Pennsylvania Power & Light Company
(Name of Corporation)
BY: /s/ Robert J. Grey
Robert J. Grey (Signature)
TITLE: Senior Vice President, General
Counsel and Secretary
Microfilm Number 9768-838 and 9768-839
Entity Number 273941
Filed with the Department of State on September 12, 1997
/s/ ________________________________
Secretary of the Commonwealth
<PAGE>
AMENDMENT NO. 18
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Employee Stock
Ownership Plan ("Plan") effective January 1, 1975; and
WHEREAS, the Plan was amended and restated effective Janu-
ary 1, 1987, and subsequently amended by Amendment Nos. 1, 2, 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective December 12, 1994, the following sections of
Articles II are amended to read:
2.31 "Qualified Military Service" means any service (either
voluntary or involuntary) by an individual in the Uniformed Ser-
vices if such individual is entitled to reemployment rights with
the Company with respect to such service.
2.34 "Returning Veteran" means a former Employee who on or
after December 12, 1994, returns from Qualified Military Service
to employment by the Company within the period of time during
which his reemployment rights are protected by law.
2.41 "Uniformed Services" means the Armed Forces, the Army
National Guard and Air National Guard (when engaged in active
duty for training, inactive duty training, or full-time National
Guard duty), the commissioned corps of the Public Health Service,
and any other category of persons designated by the President of
the United States in time of war or emergency.
II. Effective December 12, 1994, Article XIII is added to
read:
ARTICLE XIII
TREATMENT OF RETURNING VETERANS
13.1 Applicability and Effective Date. The rights of any
Returning Veteran who resumes employment with the Company on or
after December 12, 1994 shall be modified as set forth in this
Article.
13.2 Eligibility to Participate. For purposes of Section
3.1,
(a) A Returning Veteran who was an Eligible Employee imme-
diately prior to his Qualified Military Service shall be deemed
to have remained an Eligible Employee throughout his Qualified
Military Service.
(b) A Returning Veteran who would have become an Eligible
Employee during the period of his Qualified Military Service, but
for the resulting absence from employment, shall be deemed to
have become an Eligible Employee as of the date he would have
become an Eligible Employee if he had not entered into Qualified
Military Service.
13.3 Restoration of TRASOP, PAYSOP, and Dividend-based Con-
tributions. With respect to any Plan Year for which a Returning
Veteran would have been a Participant, but failed to share in
TRASOP, PAYSOP, or Dividend-based Contributions under Sections
4.1, 4.3 and 4.4 solely by reason of his Qualified Military Ser-
vice, the Company shall contribute to such Participant's Account
an amount equal to the TRASOP, PAYSOP, and Dividend-based Contri-
butions that would have been allocated to his Account, but for
his absence for Qualified Military Service. Such contribution
shall not include the earnings that would have accrued on such
amount.
13.4 Restoration of Matching Contributions.
(a) Each Returning Veteran who, during his period of Quali-
fied Military Service, would have been eligible to make Matching
Contributions shall be permitted to contribute an amount equal to
the Matching Contributions that he could have made during such
absence from employment. Such "make-up" contributions shall be
made during the period that begins with his reemployment by the
Company and ends with (1) the expiration of a period of five
years, or (2) if shorter, a period of three times the period of
Qualified Military Service.
(b) Any make-up contributions described in Subsection (a)
hereof shall be in addition to those Matching Contributions that
the Participant may elect to make pursuant to Section 4.2.
13.5 Determination of Compensation. For purposes of deter-
mining the amount of any make-up contributions under Section 13.3
or Section 13.4 and for applying the limits of Section 5.5, a
Participant's compensation during any period of Qualified Mili-
tary Service shall be deemed to equal either:
(a) the compensation he would have received but for such
Qualified Military Service, based on the rate of pay he would
have received from the Company; or
(b) if the amount described in (a) above is not reasonably
certain, his average compensation from the Company during the
12-month period immediately preceding the Qualified Military
Service (or, if shorter, the period of employment immediately
preceding the Qualified Military Service). Such amount shall be
adjusted as necessary to reflect the length of the Participant's
Qualified Military Service.
13.6 Application of Certain Limitations.
(a) For purposes of applying the limitations of Section
5.5, any TRASOP, PAYSOP, or Dividend-based Contributions
described in Section 13.3, and any make-up contributions
described in Section 13.4, shall be treated as contributions for
the Limitation Year to which they relate, rather than the Limita-
tion Year in which they are actually made.
(b) For purposes of applying the limitations of Section
4.6, any make-up contributions described in Section 13.4 shall be
disregarded, both for the Plan Year to which the contributions
relate, and for the Plan Year in which they are actually made.
13.7 Administrative Rules and Procedures. The Employee
Benefit Plan Board shall establish such rules and procedures as
it deems necessary or desirable to implement the provisions of
this Article, provided that they are not in violation of the
Uniformed Services Employment and Reemployment Rights Act of
1994, any regulations thereunder, or any other applicable law.
III. Effective January 1, 1997, Articles II and IV are
amended to read:
2.8 "Compensation" shall mean the annual compensation
received by an Employee from the Company as reported on Internal
Revenue Service Form W-2 or a successor form plus the Employee's
elective deferrals under the Employee Savings Plan or Deferred
Savings Plan; provided, however, that Compensation shall not
include fringe benefits not normally included in compensation,
such as tuition refunds, moving expenses, etc. and shall not, for
purposes of allocation under Section 5.2(a), include any amount
in excess of (i) for the 1975 and 1976 Plan Years, $16,000 and
(ii) commencing with the 1977 Plan Year, the median annual com-
pensation of all Participants during the Plan Year or $100,000,
whichever is less. Such median compensation shall be determined
as of the close of a Plan Year and shall be rounded to an even
thousand dollars. For an MCP Employee, Compensation shall also
include the full amount of any single-sum award paid to the Par-
ticipant from the fund credited annually with a percentage of
annualized base pay salaries in accordance with the Managers
Compensation Plan.
2.15 "Employee" shall mean any person employed by the
Company including officers, shareholders, or directors who are
employees, but excluding (a) persons covered by a collective
bargaining agreement unless such agreement specifically provides
for participation under the Retirement Plan, (b) leased employees
whether or not described in Section 414(n) of the Code, and (c)
persons classified by the Company as independent contractors,
regardless of whether they are subsequently determined to be
employees for employment tax or any other purpose.
2.20 "Highly Compensated Eligible Employee" shall mean an
Eligible Employee who:
(a) is a five-percent owner, as defined in section 416(i) of
the Code, either for the current Plan Year or the immediately
preceding Plan Year; or
(b)(1) received more than $80,000 (as indexed) in
Compensation from the Company or an Affiliated Company in the
immediately preceding Plan Year, and
(2) if so elected by the Company, was among the top 20%
of Employees of the Company and Affiliated Companies ranked by
Compensation (excluding Employees described in section 414(q)(5)
of the Code to the extent (A) permitted under the Code and
regulations thereunder and (B) elected by the Employee Benefit
Plan Board, for purposes of identifying the number of Employees
in the top 20%).
For purposes of this Section 2.20 "compensation" shall have
the meaning set forth in Section 415(c)(3) of the Code, but
including amounts that would be excluded from an Employee's gross
income under a plan described in Section 125, 401(k) or 403(b) of
the Code.
4.7 Prevention of Violation of Limitation on Matching
Contributions and TRASOP Contributions. The Employee Benefit
Plan Board shall monitor the level of Participants' Matching
Contributions and TRASOP Contributions under Section 4.1(b) and
elective deferrals, employee contributions, and employer matching
contributions under any other qualified retirement plan main-
tained by the Company or any Affiliated Company to ensure against
exceeding the limitations of Section 4.6 for any Plan Year. If
the Employee Benefit Plan Board determines that the limitations
of Section 4.6 may be or have been exceeded, it shall take the
appropriate following actions for such Plan Year:
(a) The Average Contribution Percentage for the Highly Com-
pensated Eligible Employees shall be reduced to the extent neces-
sary to satisfy at least one of the tests in Section 4.6(a) and
the test in Section 4.6(b).
(b) The reduction shall be accomplished by reducing the
maximum Contribution Percentage for any Highly Compensated Elig-
ible Employee to an adjusted maximum Contribution Percentage,
which shall be the highest Contribution Percentage that would
cause one of the tests in Section 4.6(a) and the test in Section
4.6(b) to be satisfied, if each Highly Compensated Eligible
Employee with a higher Contribution Percentage had instead the
adjusted maximum Contribution Percentage, reducing the Highly
Compensated Eligible Employees' Matching Contributions, TRASOP
Contributions under Section 4.1(b), and employee contributions
and employer matching contributions under any other qualified
retirement plan maintained by the Company or any Affiliated Com-
pany in order of priority based on the dollar amount of each
Eligible Highly Compensated Employee's Matching Contributions and
TRASOP Contributions, beginning with the Highly Compensated
Eligible Employee(s) with the highest dollar amount of Matching
Contributions and TRASOP Contributions.
IV. Effective January 1, 1998, Article V is amended to
read:
5.5 Maximum Allocation. The provisions of this Section
shall be construed to comply with Section 415 of the Code.
(m) For the purpose of this Section 5.5, "compensation"
shall be defined in accordance with Section 415(c)(3) of the Code
and regulations thereunder so that, for years beginning on or
after January 1, 1998, "compensation" shall also include amounts
excluded from gross income under Sections 125, 402(e)(3),
402(h)(1)(B) or 403(b).
V. Effective January 1, 2000, Article V is amended to read:
5.5 Maximum Allocation. The provisions of this Section
shall be construed to comply with Section 415 of the Code.
(j)(1) If in any Limitation Year beginning before January 1,
2000, a Participant in this Plan is also a participant in one or
more qualified defined benefit plans maintained by the Company or
any 50% Affiliated Company, the projected annual benefit under
such qualified defined benefit plan or plans shall be reduced if
necessary, so that the sum of the fractions described in (A) and
(B) does not exceed 1.0 for such Limitation Year:
(A) Defined Benefit Fraction -- a fraction, the
numerator of which is the Participant's projected
annual benefit under the defined benefit pension
plans in which he has participated, determined as
of the close of the limitation years of such
plans, and the denominator of which is the lesser
of: (i) 1.25 x $90,000 or (ii) 140% of the
Participant's highest average compensation over
any three consecutive calendar years. For
purposes of this Section, "projected annual
benefit" shall mean the annual benefit to which a
participant would be entitled under the terms of a
qualified defined benefit plan if he had continued
employment until his normal retirement date under
such plan and if his compensation for the purpose
of such plan continued at the same rate.
(B) Defined Contribution Fraction -- A fraction, the
numerator of which is the sum of the annual
additions to the Participant's accounts under all
defined contribution plans sponsored by the
Company or any 50% Affiliated Company for all
limitation years, and the denominator of which is
the sum of the lesser of the following amounts,
determined for each of such Limitation Years and
for each prior limitation year of service with the
Company or 50% Affiliated Company: (i) 1.25 x
$30,000 or (ii) 35% of the Participant's
compensation for such limitation year.
(2) If the Plan and the defined benefit plan referred to
in Subsection (j)(1)(A) satisfied Section 415 of the Code for the
Limitation Year ended December 31, 1986, an amount shall be
subtracted from the numerator of the fraction described in
Subsection (j)(1)(B) (not exceeding such numerator). The amount
to be subtracted shall be the product of:
(A) the sum of the defined contribution fraction under
Subsection (j)(1)(B) plus the defined benefit
fraction under Subsection (j)(1)(A) as of December
31, 1986, minus one, multiplied by
(B) the denominator of the defined contribution plan
fraction under Subsection (j)(1)(B) as of December
31, 1986.
VI. Except as provided for in this Amendment No. 18, all
other provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 18 is executed this
24th day of July, 1997.
PENNSYLVANIA POWER & LIGHT COMPANY
/s/ John M. Chappelear
By:_______________________________
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
AMENDMENT NO. 19
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Employee Stock
Ownership Plan ("Plan") effective January 1, 1975; and
WHEREAS, the Plan was amended and restated effective Janu-
ary 1, 1987, and subsequently amended by Amendment Nos. 1, 2, 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1998, the following sections of
Article VII are amended to read:
7.5 Termination of Employment. Upon a Participant's
retirement or other termination of employment with the Company
and all Affiliated Companies, he shall be entitled to receive his
interest in the Fund. Subject to Subsection 7.7(b), (a) if the
value of his interest in the Fund exceeds, or exceeded at the
time of any prior distribution, $5,000, his interest shall not be
paid to him or applied for his benefit until (1) he consents in
writing to such payment or application, or (2) he attains his
65th birthday or (3) he dies; whichever occurs first; (b)
otherwise, his interest shall be paid to him or applied for his
benefit in a single sum within 60 days after such termination
takes place.
7.7 Timing of Distribution.
(a) Subject to Subsection (b), a Participant entitled to
receive benefits under this Article shall commence to receive
benefits as soon as administratively practicable, but in no event
shall any Participant receive benefits later than the earliest of
the dates determined under (1), (2) or (3) below:
(1) the 60th day after the close of the Plan Year in
which occurs the later of (A) the Participant's attainment of age
65 or (B) the Participant's termination of employment with the
Company and all Affiliated Companies;
(2) the April 1st after the end of the calendar year in
which occurs the Participant's attainment of age 70-1/2; or
(3) in the event of the Participant's death, December 31
of the calendar year following the year of the Participant's
death.
(b) A Participant who terminates employment with the
Company on or after age 55, and whose Account exceeds, or
exceeded at the time of any prior distribution, $5,000, shall be
entitled to defer payment of his benefits until a date not later
than that specified in Section 7.7(a)(2).
(c) The Employee Benefit Plan Board shall supply to each
Participant who is entitled to distribution before his death or
attainment of age 65 and the value of whose Account exceeds, or
exceeded at the time of any prior distribution, $5,000, written
information relating to his right to defer distribution under
Section 7.4, 7.5 or 7.7(b). Such notice shall be furnished not
less than 30 days nor more than 90 days prior to the
Participant's benefit commencement date, except that such notice
may be furnished less than 30 days prior to the Participant's
benefit commencement date if (1) the Employee Benefit Plan Board
informs the Participant that the Participant has the right to a
period of at least 30 days after receiving such notice to
consider the decision whether to elect a distribution, and the
mode in which he desires such distribution to be made, and (2)
the Participant, after receiving such notice, affirmatively
elects a distribution.
II. Except as provided for in this Amendment No. 19, all
other provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 19 is executed this
26th day of November, 1997.
PP&L, INC.
/s/ John M. Chappelear
By:_______________________________
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
PENNSYLVANIA POWER & LIGHT COMPANY
TO
BANKERS TRUST COMPANY
(successor to Morgan Guaranty Trust Company of New York,
formerly Guaranty Trust Company of New York)
As Trustee under Pennsylvania Power & Light
Company's Mortgage and Deed of Trust,
Dated as of October 1, 1945
_________________________
Sixty-fifth Supplemental Indenture
Providing among other things for
First Mortgage Bonds, Short-Term Series A
_________________________
Dated as of April 1, 1997
<PAGE>
SIXTY-FIFTH SUPPLEMENTAL INDENTURE
SIXTY-FIFTH SUPPLEMENTAL INDENTURE, dated as of the 1st day of
April, 1997 made and entered into by and between PENNSYLVANIA POWER
& LIGHT COMPANY, a corporation of the Commonwealth of Pennsylvania,
whose address is Two North Ninth Street, Allentown, Pennsylvania
18101 (hereinafter sometimes called the Company), and BANKERS TRUST
COMPANY (successor to MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
formerly GUARANTY TRUST COMPANY OF NEW YORK), a corporation of the
State of New York, whose address is 4 Albany Street, New York, New
York 10006 (hereinafter sometimes called the Trustee), as Trustee
under the Mortgage and Deed of Trust, dated as of October 1, 1945
(hereinafter called the Mortgage and, together with any indentures
supplemental thereto, hereinafter called the Indenture), which
Mortgage was executed and delivered by Pennsylvania Power & Light
Company to secure the payment of bonds issued or to be issued under
and in accordance with the provisions of the Mortgage, reference to
which said Mortgage is hereby made, this instrument (hereinafter
called the Sixty-fifth Supplemental Indenture) being supplemental
thereto;
WHEREAS, said Mortgage was or is to be recorded in various
Counties in the Commonwealth of Pennsylvania, which Counties
include or will include all Counties in which this Sixty-fifth
Supplemental Indenture is to be recorded; and
WHEREAS, an instrument, dated August 5, 1994, was executed by
the Company appointing Bankers Trust Company as Trustee in
succession to said Morgan Guaranty Trust Company of New York
(resigned) under the Indenture, and by Bankers Trust Company
accepting said appointment, which instrument was or is to be
recorded in various Counties in the Commonwealth of Pennsylvania;
and
WHEREAS, by the Mortgage the Company covenanted that it would
execute and deliver such supplemental indenture or indentures and
such further instruments and do such further acts as might be
necessary or proper to carry out more effectually the purposes of
the Indenture and to make subject to the lien of the Indenture any
property thereafter acquired and intended to be subject to the lien
thereof; and
WHEREAS, the Company executed and delivered as supplements to
the Mortgage, the following supplemental indentures:
Designation Dated as of
First Supplemental Indenture.......... July 1, 1947
Second Supplemental Indenture......... December 1, 1948
Third Supplemental Indenture.......... February 1, 1950
Fourth Supplemental Indenture......... March 1, 1953
Fifth Supplemental Indenture.......... August 1, 1955
Sixth Supplemental Indenture.......... December 1, 1961
Seventh Supplemental Indenture........ March 1, 1964
Eighth Supplemental Indenture......... June 1, 1966
Ninth Supplemental Indenture.......... November 1, 1967
Tenth Supplemental Indenture.......... December 1, 1967
Eleventh Supplemental Indenture....... January 1, 1969
Twelfth Supplemental Indenture........ June 1, 1969
Thirteenth Supplemental Indenture..... March 1, 1970
Fourteenth Supplemental Indenture..... February 1, 1971
Fifteenth Supplemental Indenture...... February 1, 1972
Sixteenth Supplemental Indenture...... January 1, 1973
Seventeenth Supplemental Indenture.... May 1, 1973
Eighteenth Supplemental Indenture..... April 1, 1974
Nineteenth Supplemental Indenture..... October 1, 1974
Twentieth Supplemental Indenture...... May 1, 1975
Twenty-first Supplemental Indenture... November 1, 1975
Twenty-second Supplemental Indenture.. December 1, 1976
Twenty-third Supplemental Indenture... December 1, 1977
Twenty-fourth Supplemental Indenture.. April 1, 1979
Twenty-fifth Supplemental Indenture... April 1, 1980
Twenty-sixth Supplemental Indenture... June 1, 1980
Twenty-seventh Supplemental Indenture. June 1, 1980
Twenty-eighth Supplemental Indenture.. December 1, 1980
Twenty-ninth Supplemental Indenture... February 1, 1981
Thirtieth Supplemental Indenture...... February 1, 1981
Thirty-first Supplemental Indenture... September 1, 1981
Thirty-second Supplemental Indenture.. April 1, 1982
Thirty-third Supplemental Indenture... August 1, 1982
Thirty-fourth Supplemental Indenture.. October 1, 1982
Thirty-fifth Supplemental Indenture... November 1, 1982
Thirty-sixth Supplemental Indenture... February 1, 1983
Thirty-seventh Supplemental Indenture. November 1, 1983
Thirty-eighth Supplemental Indenture.. March 1, 1984
Thirty-ninth Supplemental Indenture... April 1, 1984
Fortieth Supplemental Indenture....... August 15, 1984
Forty-first Supplemental Indenture.... December 1, 1984
Forty-second Supplemental Indenture... June 15, 1985
Forty-third Supplemental Indenture.... October 1, 1985
Forty-fourth Supplemental Indenture... January 1, 1986
Forty-fifth Supplemental Indenture.... February 1, 1986
Forty-sixth Supplemental Indenture.... April 1, 1986
Forty-seventh Supplemental Indenture.. October 1, 1986
Forty-eighth Supplemental Indenture... March 1, 1988
Forty-ninth Supplemental Indenture.... June 1, 1988
Fiftieth Supplemental Indenture....... January 1, 1989
Fifty-first Supplemental Indenture.... October 1, 1989
Fifty-second Supplemental Indenture... July 1, 1991
Fifty-third Supplemental Indenture.... May 1, 1992
Fifty-fourth Supplemental Indenture... November 1, 1992
Fifty-fifth Supplemental Indenture.... February 1, 1993
Fifty-sixth Supplemental Indenture.... April 1, 1993
Fifty-seventh Supplemental Indenture.. June 1, 1993
Fifty-eighth Supplemental Indenture... October 1, 1993
Fifty-ninth Supplemental Indenture.... February 15, 1994
Sixtieth Supplemental Indenture....... March 1, 1994
Sixty-first Supplemental Indenture.... March 15, 1994
Sixty-second Supplemental Indenture... September 1, 1994
Sixty-third Supplemental Indenture.... October 1, 1994
Sixty-fourth Supplemental Indenture... August 1, 1995
which supplemental indentures were or are to be recorded in various
Counties in the Commonwealth of Pennsylvania; and
WHEREAS, the Company executed and delivered its Supplemental
Indenture, dated July 1, 1954, creating a security interest in
certain personal property of the Company, pursuant to the
provisions of the Pennsylvania Uniform Commercial Code, as a
supplement to the Mortgage, which Supplemental Indenture was filed
in the Office of the Secretary of the Commonwealth of Pennsylvania
on July 1, 1954, and all subsequent supplemental indentures were so
filed; and
WHEREAS, in addition to the property described in the
Mortgage, as heretofore supplemented, the Company has acquired
certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with
the provisions of the Mortgage, as supplemented, the following
series of First Mortgage Bonds:
Principal Principal
Amount Amount
Series Issued Outstanding
3% Series due 1975............ $93,000,000 None
2-3/4% Series due 1977........ 20,000,000 None
3-1/4% Series due 1978........ 10,000,000 None
2-3/4% Series due 1980........ 37,000,000 None
3-1/2% Series due 1983........ 25,000,000 None
3-3/8% Series due 1985........ 25,000,000 None
4-5/8% Series due 1991........ 30,000,000 None
4-5/8% Series due 1994........ 30,000,000 None
5-5/8% Series due 1996........ 30,000,000 None
6-3/4% Series due 1997........ 30,000,000 None
6-1/2% Series due 1972........ 15,000,000 None
7% Series due 1999............ 40,000,000 None
8-1/8% Series due June 1, 1999 40,000,000 None
9% Series due 2000............ 50,000,000 None
7-1/4% Series due 2001........ 60,000,000 None
7-5/8% Series due 2002........ 75,000,000 None
7-1/2% Series due 2003........ 80,000,000 None
Pollution Control Series A.... 28,000,000 None
9-1/4% Series due 2004........ 80,000,000 None
10-1/8% Series due 1982....... 100,000,000 None
9-3/4% Series due 2005........ 125,000,000 None
9-3/4% Series due Nov. 1, 2005 100,000,000 None
8-1/4% Series due 2006....... 150,000,000 None
8-1/2% Series due 2007....... 100,000,000 None
9-7/8% Series due 1983-1985. 100,000,000 None
15-5/8% Series due 2010..... 100,000,000 None
11-3/4% Series due 1984..... 30,000,000 None
Pollution Control Series B.... 70,000,000 None
Pollution Control Series C.... 20,000,000 None
14% Series due Dec. 1, 1990 125,000,000 None
15% Series due 1984-1986...... 50,000,000 None
14-3/4% Series A due 1986..... 30,000,000 None
14-3/4% Series B due 1986..... 20,000,000 None
16-1/2% Series due 1987-1991.. 52,000,000 None
16-1/8% Series due 1992....... 100,000,000 None
16-1/2% Series due 1986-1990.. 92,500,000 None
13-1/4% Series due 2012....... 100,000,000 None
Pollution Control Series D.... 70,000,000 None
12-1/8% Series due 1989-1993.. 50,000,000 None
13-1/8% Series due 2013....... 125,000,000 None
Pollution Control Series E.... 37,750,000 None
13-1/2% Series due 1994....... 125,000,000 None
Pollution Control Series F.... 115,500,000 None
12-3/4% Series due 2014....... 125,000,000 None
Pollution Control Series G.... 55,000,000 None
12% Series due 2015........... 125,000,000 None
10-7/8% Series due 2016....... 125,000,000 None
9-5/8% Series due 1996........ 125,000,000 None
9% Series due 2016............ 125,000,000 None
9-1/2% Series due 2016........ 125,000,000 None
9-1/4% Series due 1998........ 125,000,000 None
9-5/8% Series due 1998........ 125,000,000 None
10% Series due 2019........... 125,000,000 None
9-1/4% Series due 2019........ 250,000,000 $215,000,000
9-3/8% Series due 2021........ 150,000,000 99,750,000
7-3/4% Series due 2002........ 150,000,000 150,000,000
8-1/2% Series due 2022........ 150,000,000 150,000,000
Pollution Control Series H.... 90,000,000 90,000,000
6-7/8% Series due 2003........ 100,000,000 100,000,000
7-7/8% Series due 2023........ 200,000,000 200,000,000
5-1/2% Series due 1998........ 150,000,000 150,000,000
6-1/2% Series due 2005........ 125,000,000 125,000,000
6% Series due 2000............ 125,000,000 125,000,000
6-3/4% Series due 2023........ 150,000,000 150,000,000
Pollution Control Series I.... 53,250,000 53,250,000
6.55% Series due 2006......... 150,000,000 150,000,000
7.30% Series due 2024......... 150,000,000 150,000,000
6-7/8% Series due 2004........ 150,000,000 150,000,000
7-3/8% Series due 2014........ 100,000,000 100,000,000
Pollution Control Series J.... 115,500,000 115,500,000
7.70% Series due 2009......... 200,000,000 200,000,000
Pollution Control Series K.... 55,000,000 55,000,000
which bonds are also sometimes called bonds of the First through
Seventy-second Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of
each series of bonds (other than the First Series) issued
thereunder shall be established by Resolution of the Board of
Directors of the Company and that the form of such series, as
established by said Board of Directors, shall specify the
descriptive title of the bonds and various other terms thereof, and
may also contain such provisions not inconsistent with the
provisions of the Indenture as the Board of Directors may, in its
discretion, cause to be inserted therein expressing or referring to
the terms and conditions upon which such bonds are to be issued
and/or secured under the Indenture; and
WHEREAS, Section 120 of the Mortgage provides, among other
things, that any power, privilege or right expressly or impliedly
reserved to or in any way conferred upon the Company by any
provision of the Indenture, whether such power, privilege or right
is in any way restricted or is unrestricted, may be in whole or in
part waived or surrendered or subjected to any restriction if at
the time unrestricted or to additional restriction if already
restricted, and the Company may enter into any future covenants,
limitations or restrictions for the benefit of any one or more
series of bonds issued thereunder, or the Company may cure any
ambiguity contained therein or in any supplemental indenture or may
establish the terms and provisions of any series of bonds other
than said First Series, by an instrument in writing executed and
acknowledged by the Company in such manner as would be necessary to
entitle a conveyance of real estate to record in all of the States
in which any property at the time subject to the lien of the
Indenture shall be situated; and
WHEREAS, the Company now desires to create a new series of
bonds and to add to its covenants and agreements contained in the
Mortgage, as heretofore supplemented, certain other covenants and
agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage;
and
WHEREAS, the execution and delivery by the Company of this
Sixty-fifth Supplemental Indenture, and the terms of the bonds of
the Seventy-third Series, hereinafter referred to, have been duly
authorized by the Board of Directors of the Company by appropriate
Resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That Pennsylvania
Power & Light Company, in consideration of the premises and of One
Dollar to it duly paid by the Trustee at or before the ensealing
and delivery of these presents, the receipt whereof is hereby
acknowledged, and in further evidence of assurance of the estate,
title and rights of the Trustee and in order further to secure the
payment both of the principal of and interest and premium, if any,
on the bonds from time to time issued under the Indenture,
according to their tenor and effect and the performance of all the
provisions of the Indenture (including any modification made as in
the Mortgage provided) and of said bonds, hereby grants, bargains,
sells, releases, conveys, assigns, transfers, mortgages, pledges,
sets over and confirms (subject, however, to Excepted Encumbrances
as defined in Section 6 of the Mortgage) unto Bankers Trust
Company, as Trustee under the Indenture, and to its successor or
successors in said trust, and to said Trustee and its successors
and assigns forever, all property, real, personal and mixed, of the
kind or nature specifically mentioned in the Mortgage, as
heretofore supplemented, or of any other kind or nature, acquired
by the Company after the date of the execution and delivery of the
Sixty-fourth Supplemental Indenture (except any herein or in the
Mortgage, as heretofore supplemented, expressly excepted and except
any which may not lawfully be mortgaged or pledged under the
Indenture), now owned or, subject to the provisions of Section 87
of the Mortgage, hereafter acquired by the Company (by purchase,
consolidation, merger, donation, construction, erection or in any
other way) and wheresoever situated, including (without in anywise
limiting or impairing by the enumeration of the same the scope and
intent of the foregoing) all lands, power sites, flowage rights,
water rights, water locations, water appropriations, ditches,
flumes, reservoirs, reservoir sites, canals, raceways, dams, dam
sites, aqueducts, and all other rights or means for appropriating,
conveying, storing and supplying water; all rights of way and
roads; all plants for the generation of electricity by steam, water
and/or other power; all power houses, gas plants, street lighting
systems, standards and other equipment incidental thereto,
telephone, radio and television systems, air-conditioning systems
and equipment incidental thereto, water works, water systems, steam
heat and hot water plants, substations, lines, service and supply
systems, bridges, culverts, tracks, ice or refrigeration plants and
equipment, offices, buildings and other structures and the
equipment thereof; all machinery, engines, boilers, dynamos,
electric, gas and other machines, regulators, meters, transformers,
generators, motors, electrical, gas and mechanical appliances,
conduits, cables, water, steam heat, gas or other pipes, gas mains
and pipes, service pipes, fittings, valves and connections, pole
and transmission lines, wires, cables, tools, implements,
apparatus, furniture and chattels; all municipal and other
franchises, consents or permits; all lines for the transmission and
distribution of electric current, gas, steam heat or water for any
purpose including towers, poles, wires, cables, pipes, conduits,
ducts and all apparatus for use in connection therewith; all real
estate, lands, easements, servitudes, licenses, permits,
franchises, privileges, rights of way and other rights in or
relating to real estate or the occupancy of the same and (except as
herein or in the Mortgage, as heretofore supplemented, expressly
excepted) all the right, title and interest of the Company in and
to all other property of any kind or nature appertaining to and/or
used and/or occupied and/or enjoyed in connection with any property
hereinbefore or in the Mortgage, as heretofore supplemented,
described.
TOGETHER with all and singular the tenements, hereditaments,
prescriptions, servitudes, and appurtenances belonging or in
anywise appertaining to the aforesaid property or any part thereof,
with the reversion and reversions, remainder and remainders and
(subject to the provisions of Section 57 of the Mortgage) the
tolls, rents, revenues, issues, earnings, income, product and
profits thereof, and all the estate, right, title and interest and
claim whatsoever, at law as well as in equity, which the Company
now has or may hereafter acquire in and to the aforesaid property
and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the
provisions of Section 87 of the Mortgage and to the extent
permitted by law, all the property, rights, and franchises acquired
by the Company (by purchase, consolidation, merger, donation,
construction, erection or in any other way) after the date hereof,
except any herein or in the Mortgage, as heretofore supplemented,
expressly excepted, shall be and are as fully granted and conveyed
hereby and as fully embraced within the lien hereof and the lien of
the Indenture, as if such property, rights and franchises were now
owned by the Company and were specifically described herein and
conveyed hereby.
IT IS HEREBY DECLARED by the Company that all the property,
rights and franchises now owned or hereafter acquired by the
Company have been, or are, or will be owned or acquired with the
intention to use the same in carrying on the business or branches
of business of the Company, and it is hereby declared that it is
the intention of the Company that all thereof, except any herein or
in the Mortgage, as heretofore supplemented, expressly excepted,
shall (subject to the provisions of Section 87 of the Mortgage and
to the extent permitted by law) be embraced within the lien of this
Sixty-fifth Supplemental Indenture and the lien of the Indenture.
PROVIDED that the following are not and are not intended to be
now or hereafter granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, pledged, set over or confirmed
hereunder and are hereby expressly excepted from the lien and
operation of this Sixty-fifth Supplemental Indenture and from the
lien and operation of the Indenture, viz: (1) cash, shares of
stock, bonds, notes and other obligations and other securities not
hereafter specifically pledged, paid, deposited, delivered or held
under the Indenture or covenanted so to be; (2) goods, wares,
merchandise, equipment, apparatus, materials, or supplies held for
the purpose of sale or other disposition in the usual course of
business; fuel, oil and similar materials and supplies consumable
in the operation of any of the properties of the Company;
construction equipment acquired for temporary use; all aircraft,
rolling stock, trolley coaches, buses, motor coaches, automobiles
and other vehicles and materials and supplies held for the purposes
of repairing or replacing (in whole or part) any of the same; all
timber, minerals, mineral rights and royalties; (3) bills, notes
and accounts receivable, judgments, demands and choses in action,
and all contracts, leases and operating agreements not specifically
pledged under the Indenture or covenanted so to be; the Company's
contractual rights or other interest in or with respect to tires
not owned by the Company; (4) the last day of the term of any lease
or leasehold which may be or become subject to the lien of the
Indenture; and (5) electric energy, gas, steam, ice, and other
materials or products generated, manufactured, produced or
purchased by the Company for sale, distribution or use in the
ordinary course of its business; provided, however, that the
property and rights expressly excepted from the lien and operation
of the Indenture in the above subdivisions (2) and (3) shall (to
the extent permitted by law) cease to be so excepted in the event
and as of the date that the Trustee or a receiver or trustee shall
enter upon and take possession of the Mortgaged and Pledged
Property in the manner provided in Article XIII of the Mortgage by
reason of the occurrence of a Default as defined in Section 65
thereof, as supplemented by the provisions of this Sixty-fifth
Supplemental Indenture.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the
Company as aforesaid, or intended so to be, unto Bankers Trust
Company, as Trustee, and its successors and assigns forever.
IN TRUST NEVERTHELESS for the same purposes and upon the same
terms, trusts and conditions and subject to and with the same
provisos and covenants as are set forth in the Mortgage, as
heretofore supplemented, this Sixty-fifth Supplemental Indenture
being supplemental to the Mortgage.
AND IT IS HEREBY COVENANTED by the Company that all the terms,
conditions, provisos, covenants and provisions contained in the
Mortgage, as heretofore supplemented, shall affect and apply to the
property hereinbefore described and conveyed and to the estate,
rights, obligations and duties of the Company and the Trustee and
the beneficiaries of the trust with respect to said property, and
to the Trustee and its successors as Trustee of said property in
the same manner and with the same effect as if the said property
had been owned by the Company at the time of the execution of the
Mortgage, and had been specifically and at length described in and
conveyed to the Trustee by the Mortgage as a part of the property
therein stated to be conveyed.
The Company further covenants and agrees to and with the
Trustee and its successors in said trust under the Indenture, as
follows:
ARTICLE I
Seventy-third Series of Bonds
SECTION 1. There shall be a series of bonds designated
"Short-Term Series A" (herein sometimes referred to as the
"Seventy-third Series"), each of which shall also bear the
descriptive title First Mortgage Bonds, and the form thereof, which
shall be established by Resolution of the Board of Directors of the
Company, shall contain suitable provisions with respect to the
matters hereinafter in this Section specified. Bonds of the
Seventy-third Series shall be limited to $800 million in aggregate
principal amount (with no more than $150 million in aggregate
principal amount to be Outstanding at any one time), except as
provided in Section 16 of the Mortgage, and shall be issued as
fully registered bonds in denominations of One Thousand Dollars and
in any multiple or multiples of One Thousand Dollars; each bond of
the Seventy-third Series shall mature on a date not more than sixty
days from the date of issue, shall bear interest at such rate or
rates and have such other terms and provisions not inconsistent
with the Mortgage as the Board of Directors may determine in
accordance with one or more resolutions filed with the Trustee and
one or more written orders referring to this Sixty-fifth
Supplemental Indenture; the principal of and interest on each said
bond to be payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and interest on each
said bond to be also payable at the office of the Company in the
City of Allentown, Pennsylvania, in such coin or currency of the
United States of America as at the time of payment is legal tender
for public and private debts. Bonds of the Seventy-third Series
shall be dated as in Section 10 of the Mortgage provided.
Notwithstanding the foregoing, so long as there is no existing
default in the payment of interest on the bonds of the Seventy-
third Series, the person in whose name any bond of the Seventy-
third Series is registered at the close of business on any Record
Date with respect to any interest payment date shall be entitled to
receive the interest payable on such interest payment date;
provided that, interest payable on the maturity date will be
payable to the person to whom the principal thereof shall be
payable. "Record Date" for bonds of the Seventy-third Series,
shall mean the business day next preceding the corresponding
interest payment date. "Original Interest Accrual Date" with
respect to bonds of the Seventy-third Series of a designated
interest rate and maturity shall mean the date of first
authentication of Bonds of a designated interest rate and maturity
unless the written order filed for such bonds with the Trustee on
or before such date shall specify another date from which interest
shall accrue, in which case "Original Interest Accrual Date" shall
mean such other date specified in the written order for Bonds of
such designated interest rate and maturity.
(I) Each holder of a bond of the Seventy-third Series, except
as may be provided in the written order requesting authentication
and delivery of such bond, consents that the bonds of the Seventy-
third Series may be redeemable at the option of the Company or
pursuant to the requirements of the Indenture in whole at any time,
or in part from time to time, prior to maturity, without notice
provided in Section 52 of the Indenture, at the principal amount of
the bonds to be redeemed, in each case, together with accrued
interest to the date fixed for redemption by the Company in a
notice delivered on or before the date fixed for redemption by the
Company to the Trustee and to the holders of the bonds to be
redeemed.
(II) At the option of the registered owner, any bonds of the
Seventy-third Series, upon surrender thereof, for cancellation, at
the office or agency of the Company in the Borough of Manhattan,
The City of New York, shall be exchangeable for a like aggregate
principal amount of bonds of the same series, interest rate,
maturity and other terms of other authorized denominations.
Bonds of the Seventy-third Series shall be transferable, upon
the surrender thereof for cancellation, together with a written
instrument of transfer in form approved by the registrar duly
executed by the registered owner or by his duly authorized
attorney, at the office or agency of the Company in the Borough of
Manhattan, The City of New York; provided that such transfer shall
not result in any security being required to be registered under
the Securities Act of 1933, as amended, and an opinion of counsel
satisfactory to the Company to such effect shall have been provided
to the Company.
Upon any transfer or exchange of bonds of the Seventy-third
Series, the Company may make a charge therefor sufficient to
reimburse it for any tax or taxes or other governmental charge, as
provided in Section 12 of the Mortgage, but the Company hereby
waives any right to make a charge in addition thereto for any
exchange or transfer of bonds of the Seventy-third Series.
ARTICLE II
Maintenance and Replacement Fund Covenant - Dividend Covenant
- Other Related Provisions of the Mortgage
SECTION 2. Subject to the provisions of Section 3 hereof, the
Company covenants and agrees that the provisions of Section 39 of
the Mortgage, which were to remain in effect so long as any bonds
of the First Series remained Outstanding, shall remain in full
force and effect so long as any bonds of the Seventy-third Series
are Outstanding.
Clause (d) of subsection (II) of Section 4 of the Mortgage, as
heretofore amended, is hereby further amended by inserting the
words "and Seventy-third Series" after the words "and Seventy-
second Series" each time such words appear therein.
Clause (6) and clause (e) of Section 5 of the Mortgage and
Section 29 of the Mortgage, as heretofore amended, are hereby
further amended by inserting therein "Seventy-third," before
"Seventy-second," each time such words occur therein.
ARTICLE III
Miscellaneous Provisions
SECTION 3. The Company reserves the right to make such
amendments to the Mortgage, as supplemented, as shall be necessary
in order to delete subsection (I) of Section 39 of the Mortgage,
and each holder of bonds of the Seventy-third Series hereby
consents to such deletion without any other or further action by
any holder of bonds of the Seventy-third Series.
SECTION 4. The terms defined in the Mortgage, as heretofore
supplemented, shall, for all purposes of this Sixty-fifth
Supplemental Indenture, have the meanings specified in the
Mortgage, as heretofore supplemented.
SECTION 5. Whenever in this Sixty-fifth Supplemental
Indenture either of the parties hereto is named or referred to,
this shall, subject to the provisions of Articles XVI and XVII of
the Mortgage, be deemed to include the successors and assigns of
such party, and all the covenants and agreements in this Sixty-
third Supplemental Indenture contained by or on behalf of the
Company, or by or on behalf of the Trustee shall, subject as
aforesaid, bind and inure to the respective benefits of the
respective successors and assigns of such parties, whether so
expressed or not.
SECTION 6. So long as any bonds of the Seventy-third Series
remain Outstanding, unless this provision shall have been waived in
writing by the holders of seventy per centum (70%) in aggregate
principal amount of bonds of the Seventy-third Series Outstanding
at the time of such consent, subdivision (c) of Section 65 of the
Mortgage shall read as follows:
"(c) Failure to pay interest or premium, if any, upon or
principal (whether at maturity as therein expressed or by
declaration, or otherwise) of any Outstanding Qualified Lien Bonds
or of any outstanding indebtedness secured by any mortgage or other
lien (not included in the term Excepted Encumbrances) prior to the
lien of this Indenture, existing upon any property of the Company
which is subject to the lien and operation of this Indenture
continued beyond the period of grace, if any, specified in such
mortgage or Qualified Lien or other lien securing the same;"
SECTION 7. A breach of a specified covenant or agreement of
the Company contained in this Sixty-fifth Supplemental Indenture
shall become a Default under the Indenture upon the happening of
the events provided in Section 65(g) of the Mortgage with respect
to such a covenant or agreement.
SECTION 8. The Trustee hereby accepts the trusts herein
declared, provided, created or supplemented and agrees to perform
the same upon the terms and conditions herein and in the Mortgage,
as heretofore supplemented, set forth and upon the following terms
and conditions:
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Sixty-
fifth Supplemental Indenture or for or in respect of the recitals
contained herein, all of which recitals are made by the Company
solely. Each and every term and condition contained in Article
XVII of the Mortgage, as heretofore amended by said First through
Sixty-fourth Supplemental Indentures, shall apply to and form part
of this Sixty-fifth Supplemental Indenture with the same force and
effect as if the same were herein set forth in full with such
omissions, variations and insertions, if any, as may be appropriate
to make the same conform to the provisions of this Sixty-fifth
Supplemental Indenture.
SECTION 9. Nothing in this Sixty-fifth Supplemental
Indenture, expressed or implied, is intended, or shall be
construed, to confer upon, or to give to, any person, firm or
corporation, other than the parties hereto and the holders of the
bonds and coupons Outstanding under the Indenture, any right,
remedy or claim under or by reason of this Sixty-fifth Supplemental
Indenture or by any covenant, condition, stipulation, promise or
agreement hereof, and all the covenants, conditions, stipulations,
promises and agreements in this Sixty-fifth Supplemental Indenture
contained by or on behalf of the Company shall be for the sole and
exclusive benefit of the parties hereto, and of the holders of the
bonds and coupons Outstanding under the Indenture.
SECTION 10. This Sixty-fifth Supplemental Indenture shall be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
PENNSYLVANIA POWER & LIGHT COMPANY does hereby constitute and
appoint JOHN R. BIGGAR, Vice President - Finance of PENNSYLVANIA
POWER & LIGHT COMPANY, to be its attorney for it, and in its name
and as and for its corporate act and deed to acknowledge this
Sixty-fifth Supplemental Indenture before any person having
authority by the laws of the Commonwealth of Pennsylvania to take
such acknowledgment, to the intent that the same may be duly
recorded, and BANKERS TRUST COMPANY does hereby constitute and
appoint ROBERT CAPORALE, a Vice President of BANKERS TRUST COMPANY,
to be its attorney for it, and in its name and as and for its
corporate act and deed to acknowledge this Sixty-fifth Supplemental
Indenture before any person having authority by the laws of the
Commonwealth of Pennsylvania to take such acknowledgment, to the
intent that the same may be duly recorded.
IN WITNESS WHEREOF, PENNSYLVANIA POWER & LIGHT COMPANY has
caused its corporate name to be hereunto affixed, and this
instrument to be signed and sealed by its President or one of its
Vice Presidents, and its corporate seal to be attested by its
Secretary or one of its Assistant Secretaries for and in its
behalf, in the City of Allentown, Pennsylvania, and BANKERS TRUST
COMPANY has caused its corporate name to be hereunto affixed, and
this instrument to be signed and sealed by one of its Vice
Presidents or one of its Trust Officers, and its corporate seal to
be attested by one of its Assistant Vice Presidents, in The City of
New York, as of the day and year first above written.
PENNSYLVANIA POWER & LIGHT COMPANY
By: /s/John Biggar
Vice President
Attest:
/s/Diane M. Koch
Assistant Secretary
<PAGE>
BANKERS TRUST COMPANY, as Trustee
By /s/Robert Caporale
Vice President
Attest:
/s/Scott Thiel
Assistant Vice President
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF LEHIGH )
On this 9th day of April, 1997, before me, a notary public,
the undersigned officer, personally appeared JOHN R. BIGGAR, who
acknowledged himself to be a Vice President of PENNSYLVANIA POWER &
LIGHT COMPANY, a corporation and that he, as such Vice President,
being authorized to do so, executed the foregoing instrument for
the purposes therein contained, by signing the name of the
corporation by himself as Vice President.
In witness whereof, I hereunto set my hand and official seal.
/s/Francine Greenzweig
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 9th day of April, 1997, before me, a notary public,
the undersigned officer, personally appeared ROBERT CAPORALE, who
acknowledged himself to be a Vice President of BANKERS TRUST
COMPANY, a corporation and that he, as such Vice President, being
authorized to do so, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation
by himself as Vice President.
In witness whereof, I hereunto set my hand and official seal.
/s/Sharon V. Alston
SHARON V. ALSTON
Notary Public, State of New York
No. 31-4966275
Qualified in New York County
Commission Expires May 7, 1998
Bankers Trust Company hereby certifies that its precise name
and address as Trustee hereunder are:
Bankers Trust Company
4 Albany Street
New York, New York 10006
BANKERS TRUST COMPANY
By /s/Scott Thiel
Trust Officer
<PAGE>
EXECUTION COPY
PP&L, INC.
PP&L CAPITAL FUNDING, INC.,
as Borrowers
PP&L RESOURCES, INC.,
as Guarantor of the obligations of
PP&L Capital Funding, Inc.
$150,000,000
364-DAY REVOLVING CREDIT AGREEMENT
_________________
Dated as of November 20, 1997
[CS&M #6700-601]
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amounts and Terms of Loans ............. 1
1.1 Commitments ............................. 1
1.2 Notices of Borrowing .................... 2
1.3 Disbursement of Funds ................... 2
1.4 Repayment of Loans; Evidence of Debt..... 3
1.5 Special Payment Provisions............... 4
1.6 Fees .................................... 5
1.7 Reductions in Total Commitments ......... 6
1.8 Compensation ............................ 6
SECTION 1A. Letters of Credit. ...................... 6
SECTION 2. Interest ................................ 11
2.1 Rates of Interest ....................... 11
2.2 Determination of Rate of Borrowing....... 12
2.3 Interest Payment Dates .................. 12
2.4 Conversions; Interest Periods ........... 13
2.5 Increased Costs, Illegality, Etc. ....... 14
2.6 Extension of Expiry Date ................ 18
SECTION 3. Payments ................................ 20
3.1 Payments on Non-Business Days ........... 20
3.2 Voluntary Prepayments ................... 20
3.3 Method and Place of Payment, Etc. ....... 21
3.4 Net Payments ............................ 21
SECTION 4. Conditions Precedent .................... 22
4.1 Conditions to Effectiveness ............ 22
4.2A Conditions to Each Loan to PPL and
Each Issuance of Letter of Credit on
behalf of PPL .......................... 24
4.2B Conditions to Each Loan to Finance Co.
and Each Issuance of a Letter of
Credit on behalf of Finance Co. ........ 25
SECTION 5.A Covenants of PPL ....................... 26
5.1A Financial Statements ................... 26
5.2A Mergers ................................ 27
5.3A Ratings ................................ 27
5.4A Consolidated Indebtedness to
Consolidated Capitalization............. 27
SECTION 5.B Covenants of Finance Co. and Resources.. 28
5.1B Financial Statements ................... 28
5.2B Mergers ................................ 29
5.3B Ratings ................................ 30
5.4B Liens .................................. 30
5.5B Consolidated Indebtedness to
Consolidated Capitalization ............ 30
SECTION 6.A Events of Default for PPL .............. 30
6.1A Representations, Etc. .................. 30
6.2A Principal and Interest ................. 30
6.3A Defaults by PPL Under Other Agreements . 30
6.4A Judgments .............................. 31
6.5A Bankruptcy, Etc. ....................... 31
6.6A Other Covenants ........................ 32
SECTION 6.B Events of Default for Finance Co. ..... 32
6.1B Representations, Etc. ................. 32
6.2B Principal and Interest ................ 32
6.3B Defaults by PPL, Finance Co. or
Resources Under This Agreement or
Other Agreements ...................... 32
6.4B Judgments ............................. 33
6.5B Bankruptcy, Etc. ...................... 33
6.6B Other Covenants ....................... 34
6.7B Events of Default With Respect to PPL . 34
SECTION 7.A Representations and Warranties of PPL . 35
7.1A Corporate Status ...................... 35
7.2A Authority; No Conflict ................ 36
7.3A Legality, Etc. ........................ 36
7.4A Financial Statements .................. 36
7.5A Litigation ............................ 36
7.6A No Violation .......................... 36
7.7A ERISA ................................. 37
7.8A Consents .............................. 37
7.9A Subsidiaries .......................... 37
7.10A Investment Company Act ................ 37
7.11A Public Utility Holding Company Act .... 37
7.12A Tax Returns ........................... 37
7.13A Compliance with Laws .................. 38
SECTION 7.B Representations and Warranties of
Finance Co. and Resources ............. 38
7.1B Corporate Status ...................... 38
7.2B Authority; No Conflict ................ 38
7.3B..Legality, Etc. ........................ 38
7.4B Financial Statements .................. 39
7.5B Litigation ............................ 39
7.6B No Violation .......................... 39
7.7B ERISA ................................. 39
7.8B Consents .............................. 40
7.9B Investment Company Act ................ 40
7.10B Public Utility Holding Company Act .... 40
7.11B Tax Returns ........................... 40
7.12B Compliance with Laws .................. 40
SECTION 8. Agent ................................. 41
8.1 Appointment ........................... 41
8.2 Nature of Duties ...................... 41
8.3 Rights, Exculpation, Etc. ............. 42
8.4 Reliance .............................. 42
8.5 Indemnification ....................... 43
8.6 The Agent, Individually ............... 43
8.7 Resignation by the Agent .............. 43
SECTION 9. Resources' Guarantee .................. 44
SECTION 10. Miscellaneous ......................... 46
10.1 Definitions ........................... 46
10.2 Accounting Principles ................. 58
10.3 Exercise of Rights .................... 58
10.4 Amendment and Waiver .................. 59
10.5 Expenses; Indemnification ............. 59
10.6 Successors and Assigns ................ 60
10.7 Notices, Requests, Demands ............ 64
10.8 Survival of Representations and
Warranties ............................ 64
10.9 Governing Law ......................... 64
10.10 Counterparts .......................... 64
10.11 Effectiveness ......................... 65
10.12 Transfer of Office .................... 65
10.13 Proration of Payments ................. 65
10.14 Jurisdiction; Consent to Service
of Process ............................ 66
10.15 WAIVER OF JURY TRIAL .................. 67
10.16 Headings Descriptive .................. 67
EXHIBIT A - Form of Opinion of general counsel or senior
counsel of PPLC, Finance Co. and Resources
EXHIBIT B - Form of Opinion of Reid & Priest LLP
EXHIBIT C - Form of Extension Letter
EXHIBIT D1- Form of PPL Compliance Certificate
EXHIBIT D2- Form of Resources Compliance Certificate
<PAGE>
364-DAY REVOLVING CREDIT AGREEMENT, dated as of
November 20, 1997, among PP&L, INC., a Pennsylvania
corporation ("PPL"), and PP&L CAPITAL FUNDING, INC., a
Delaware corporation ("Finance Co."), as Borrowers; PP&L
RESOURCES, INC., a Pennsylvania corporation ("Resources"),
as guarantor of the obligations of Finance Co. hereunder;
the banks listed on Schedule I hereto (each a "Bank" and
collectively the "Banks"); and THE CHASE MANHATTAN BANK, as
fronting bank (in such capacity, the "Fronting Bank"), as
collateral agent (in such capacity, the "Collateral Agent")
and as Agent for the Banks to the extent and in the manner
provided in Section 8 below (in such capacity, the "Agent")
(all capitalized terms used herein shall have the meanings
specified therefor in Section 10.1 unless otherwise defined
herein).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions
set forth herein, the Banks are willing to make available to
PPL and Finance Co. the credit facility herein provided for
working capital and other general corporate purposes of the
Borrowers, including investments in, or loans to, affiliates
of the Borrowers;
NOW, THEREFORE, it is agreed:
SECTION 1. Amounts and Terms of Loans.
1.1 Commitments. Subject to and upon the terms and
conditions herein set forth, each Bank severally and not
jointly agrees, at any time and from time to time prior to
the Expiry Date, as such date may be extended pursuant to
Section 2.6, to make a loan or loans (each a "Loan" and
collectively for all Banks, the "Loans") to PPL or Finance
Co., as requested by such Borrower, which Loans (i) shall at
the option of PPL or Finance Co., as applicable, be
initially maintained as Base Rate Loans or Eurodollar Loans,
provided that all the Loans made by all the Banks at any one
Borrowing to a Borrower hereunder must be either all Base
Rate Loans or all Eurodollar Loans, (ii) may be repaid and
borrowed in accordance with the provisions hereof and
(iii) shall not exceed in aggregate principal amount at any
time outstanding the difference between such Bank's
Commitment and the L/C Exposure of such Bank at such time.
1.2 Notices of Borrowing. Whenever a Borrower
desires to make a Borrowing hereunder, it shall give the
Agent at the Payment Office (i) no later than 12:00 Noon
(New York time) at least three Business Days' prior written
notice or telephonic notice (confirmed in writing) of each
Eurodollar Loan to be made hereunder and (ii) no later than
10:00 A.M. (New York time) on the date of such Borrowing
written notice or telephonic notice (confirmed in writing)
of each Base Rate Loan to be made hereunder. Each such
notice (each a "Notice of Borrowing") shall state that the
Borrowing is being made hereunder and shall specify the
aggregate principal amount the applicable Borrower desires
to borrow hereunder, the date of Borrowing (which shall be a
Business Day), the Type of Loans to be made pursuant to such
Borrowing and the Interest Period to be applicable thereto.
The Agent shall promptly give each Bank telephonic notice
(confirmed in writing) of the proposed Borrowing, of such
Bank's proportionate share thereof and of the other matters
covered by the Notice of Borrowing. Each Borrowing shall be
in an integral multiple of $500,000 and not less than
$10,000,000 and shall be made from each Bank in the
proportion which its respective Commitment bears to the
Total Commitment except as otherwise specifically provided
in Section 2.5. The failure of any Bank to make any Loan
required hereby shall not release any other Bank from its
obligation to make Loans as provided herein.
1.3 Disbursement of Funds. (a) No later than 12:00
Noon (New York time) (or, in the case of Base Rate Loans,
2:00 P.M. (New York time)) on the date specified in each
Notice of Borrowing each Bank will make available the amount
of its pro rata portion of the Loans requested to be made on
such date in U.S. dollars and in immediately available
funds, to the Agent at the Payment Office. The Agent will
make available to the applicable Borrower not later than
1:00 P.M. (New York time) (or, in the case of Base Rate
Loans, 3:00 P.M. (New York time)) on such date at the
Payment Office the aggregate of the amounts in immediately
available funds made available by the Banks against delivery
to the Agent at the Payment Office, or at such other office
as the Agent may specify, of the documents and papers
provided for herein. The Agent shall deliver the documents
and papers received by it for the account of each Bank to
such Bank or upon its order.
(b) If the Fronting Bank shall not have received from a
Borrower the payment required to be made by such Borrower
pursuant to Section 1A(e) within the time specified in such
Section, the Fronting Bank will promptly notify the Agent of
the L/C Disbursement and the Agent will promptly notify each
Bank of such L/C Disbursement and its Applicable Percentage
thereof. Not later than 2:00 P.M. (New York time) on such
date (or, if such Bank shall have received such notice later
than 12:00 Noon (New York time) on any day, no later than
10:00 A.M. (New York time) on the immediately following
Business Day), each Bank will make available the amount of
its Applicable Percentage of such L/C Disbursement (it being
understood that such amount shall be deemed to constitute a
Base Rate Loan of such Bank and such payment shall be deemed
to have reduced the L/C Exposure) in immediately available
funds, to the Agent at the Payment Office, and the Agent
will promptly pay to the Fronting Bank amounts so received
by it from the Banks. The Agent will promptly pay to the
Fronting Bank any amounts received by it from such Borrower
pursuant to Section 1A(e) prior to the time that any Bank
makes any payment pursuant to this paragraph (b), and any
such amounts received by the Agent thereafter will be
promptly remitted by the Agent to the Banks that shall have
made such payments and to the Fronting Bank, as their
interests may appear. If any Bank shall not have made its
Applicable Percentage of such L/C Disbursement available to
the Agent as provided above, such Bank agrees to pay
interest on such amount, for each day from and including the
date such amount is required to be paid in accordance with
this paragraph to but excluding the date such amount is
paid, to the Agent for the account of the Fronting Bank at,
for the first such day, the Federal Funds Rate, and for each
day thereafter, the Base Rate.
1.4 Repayment of Loans; Evidence of Debt. (a) The
outstanding principal balance of each Loan shall be payable
by the Borrower to which such Loan was made on the Expiry
Date, subject to the provisions of Section 2.6. Each Loan
shall bear interest from the date thereof on the outstanding
principal balance thereof as set forth in Section 2.1. Each
Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness to such Bank
resulting from each Loan made by such Bank from time to time
to each Borrower, including the amounts of principal and
interest payable and paid to such Bank from time to time
under this Agreement. The Agent shall maintain the Register
pursuant to Section1.4(b), and a subaccount for each Bank
and each Borrower, in which Register and subaccounts (taken
together) shall be recorded (i) the amount of each Loan made
hereunder, the Type of each Loan made and the Interest
Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable
from the applicable Borrower to each Bank hereunder and
(iii) the amount of any sum received by the Agent hereunder
from each Borrower and each Bank's share thereof. The
entries made in the Register and accounts maintained
pursuant to this Section 1.4 shall be prima facie evidence
of the existence and amounts of the obligations therein
recorded; provided, however, that the failure of any Bank or
the Agent to maintain such account, such Register or such
subaccount, as applicable, or any error therein shall not in
any manner affect the obligations of each Borrower to repay
the Loans in accordance with their terms. The obligations
of the Borrowers with respect to their respective Loans
shall be several, not joint.
(b) The Agent shall maintain at the Payment Office a
register for the recordation of the names and addresses of
the Banks, the Commitments of the Banks from time to time,
and the principal amount of the Loans owing to each Bank
from each Borrower from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for
all purposes, absent manifest error. The Register shall be
available for inspection by each Borrower, the Agent or any
Bank at any reasonable time and from time to time upon
reasonable prior notice.
1.5 Special Payment Provisions. Unless the Agent
shall have been notified by any Bank prior to any date of a
Borrowing that such Bank does not intend to make available
to the Agent such Bank's portion of the Loans to be made on
such date, the Agent may assume that such Bank has made such
amount available to the Agent on such date of a Borrowing
and the Agent may, in reliance upon such assumption, make
available to the applicable Borrower a corresponding amount.
If such amount is not in fact made available to the Agent
by such Bank, the Agent shall be entitled to recover such
amount on demand from such Bank. If such Bank does not pay
such amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify the applicable Borrower and the
applicable Borrower shall pay such amount to the Agent. The
Agent shall also be entitled to recover from such Bank or
the applicable Borrower, as the case may be, interest on
such amount in respect of each day from the date such amount
was made available by the Agent to the applicable Borrower
to the date such amount is recovered by the Agent, at a rate
per annum equal to (i) in the case of such Bank, the Federal
Funds Rate and (ii) in the case of either Borrower, the
applicable rate provided in Section 2.1 for the applicable
Type of Loan. Nothing herein shall be deemed to relieve any
Bank from its obligation to fulfill its Commitment hereunder
or to prejudice any rights which the applicable Borrower may
have against any Bank as a result of the failure of such
Bank to perform its obligations hereunder.
1.6 Fees. (a) The Borrowers agree to pay to the Agent
for pro rata distribution to each Bank a Commitment Fee
(the "Commitment Fee"), for the period from the Closing Date
until the Expiry Date (or such earlier date as the Total
Commitment shall be terminated as to both Borrowers), on the
average daily unused amount of the Commitments, computed at
the Applicable Commitment Fee Percentage per annum computed
on the basis of the number of days actually elapsed over a
year of 365 or 366 days and payable quarterly in arrears on
the last day of each calendar quarter and on the Expiry Date
(or such earlier date as the Total Commitment shall be
terminated as to both Borrowers).
(b) Each Borrower agrees to pay to the Agent for pro
rata distribution to each Bank a fee (an "L/C Participation
Fee"), for the period from the Closing Date until the Expiry
Date (or such earlier date as all Letters of Credit shall be
canceled or expire and the Total Commitment shall be
terminated as to both Borrowers), on that portion of the
average daily L/C Exposure attributable to Letters of Credit
issued for the account of such Borrower (excluding the
portion thereof attributable to unreimbursed L/C
Disbursements), at the rate per annum equal to the
Applicable Eurodollar Margin from time to time in effect for
such Borrower and payable quarterly in arrears on the last
day of each calendar quarter and on the date on which the
Total Commitment shall be terminated as provided herein.
All L/C Participation Fees shall be computed on the basis of
the number of days actually elapsed over a year of 365 or
366 days.
1.7 Reductions in Total Commitments. The Borrowers
shall have the right, upon at least 3 Business Days' prior
written notice to the Agent at the Payment Office (which
notice the Agent shall promptly transmit to each of the
Banks), to reduce permanently the Total Commitment, in an
aggregate amount equal to an integral multiple of $1,000,000
and not less than $10,000,000, or to terminate the
unutilized portion of the Total Commitment, provided that
(i) any such reduction or termination shall apply
proportionately to the Commitments of the Banks and (ii) no
such termination or reduction shall be made that would
reduce the Total Commitments to an amount less than the sum
of the aggregate outstanding principal amount of Loans and
the aggregate L/C Exposure.
1.8 Compensation. The applicable Borrower shall
compensate each Bank, upon such Bank's written request given
promptly after learning of the same, for all losses,
expenses and liabilities (including, without limitation, any
interest paid by such Bank to lenders of funds borrowed by
it to make or carry its Eurodollar Loans and any loss
sustained by such Bank in connection with the re-employment
of such funds), which the Bank sustains: (i) if for any
reason (other than a failure of such Bank to perform its
obligations) a Borrowing of any Eurodollar Loan does not
occur on a date specified therefor in a Notice of Borrowing
or notice of conversion (whether or not withdrawn or
canceled pursuant to Section 2.5 or otherwise), (ii) if any
repayment or conversion (pursuant to Section 2.5 or
otherwise) of any of its Eurodollar Loans occurs on a date
which is not the last day of the Interest Period applicable
thereto, or (iii) without duplication of any amounts paid
pursuant to Section 2 hereof, as a consequence of any other
default by such Borrower to repay its Eurodollar Loans when
required by the terms of this Agreement. A certificate as
to any amounts payable to any Bank under this Section 1.8
submitted to the applicable Borrower by such Bank shall show
the amount payable and the calculations used to determine
such amount and shall, absent manifest error, be final,
conclusive and binding upon all parties hereto.
SECTION 1A. Letters of Credit. (a) General. A
Borrower may from time to time request the issuance of
Letters of Credit for its own account (for obligations of
such Borrower or any of its Subsidiaries, or in the case of
Finance Co., for any of Resources' Subsidiaries (other than
PPL and its Subsidiaries)), denominated in dollars, in form
reasonably acceptable to the Agent and the Fronting Bank, at
any time and from time to time while the Commitments remain
in effect. This Section shall not be construed to impose an
obligation upon the Fronting Bank to issue any Letter of
Credit that is inconsistent with the terms and conditions of
this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension;
Certain Conditions. In order to request the issuance of a
Letter of Credit (or to amend, renew or extend an existing
Letter of Credit), the applicable Borrower shall hand
deliver or telecopy to the Fronting Bank and the Agent
(reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the
issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which
such Letter of Credit is to expire (which shall comply with
paragraph (c) below), the amount of such Letter of Credit,
the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare such
Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if, and upon issuance,
amendment, renewal or extension of each Letter of Credit the
applicable Borrower shall be deemed to represent and warrant
that, after giving effect to such issuance, amendment,
renewal or extension (A) the L/C Exposure shall not exceed
$5,000,000 and (B) the Aggregate Credit Exposure shall not
exceed the Total Commitment.
(c) Expiration Date. Each Letter of Credit shall
expire at the close of business on the date that is five
Business Days prior to the Expiry Date, unless such Letter
of Credit expires by its terms on an earlier date.
(d) Participations. By the issuance of a Letter of
Credit and without any further action on the part of the
Fronting Bank or the Banks, the Fronting Bank hereby grants
to each Bank, and each such Bank hereby acquires from the
Fronting Bank, a participation in such Letter of Credit
equal to such Bank's Applicable Percentage from time to time
of the aggregate amount available to be drawn under such
Letter of Credit, effective upon the issuance of such Letter
of Credit. In consideration and in furtherance of the
foregoing, each Bank hereby absolutely and unconditionally
agrees to pay to the Agent, for the account of the Fronting
Bank, such Bank's proportionate share of each L/C
Disbursement made by the Fronting Bank and not reimbursed by
the applicable Borrower forthwith on the date due as
provided in Section 1.3(b). Each Bank acknowledges and
agrees that its obligation to acquire participations
pursuant to this paragraph in respect of Letters of Credit
is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and
continuance of a Default or an Event of Default or the
termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or
reduction whatsoever.
(e) Reimbursement. If the Fronting Bank shall make
any L/C Disbursement in respect of a Letter of Credit, the
applicable Borrower shall pay to the Agent an amount equal
to such L/C Disbursement not later than two hours after the
applicable Borrower shall have received notice from the
Fronting Bank that payment of such draft will be made, or,
if the applicable Borrower shall have received such notice
later than 10:00 A.M. (New York time) on any Business Day,
not later than 10:00 A.M. (New York time) on the immediately
following Business Day.
(f) Obligations Absolute. The applicable Borrower's
obligations to reimburse L/C Disbursements as provided in
paragraph (e) above shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all
circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any
Letter of Credit or any Loan Document, or any term or
provision therein;
(ii) any amendment or waiver of or any consent to
departure from all or any of the provisions of any Letter of
Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or
other right that the applicable Borrower, any other party
guaranteeing, or otherwise obligated with, either Borrower
or any subsidiary or other affiliate thereof or any other
person may at any time have against the beneficiary under
any Letter of Credit, the Fronting Bank, the Agent or any
Bank or any other person, whether in connection with this
Agreement, any other Loan Document or any other related or
unrelated agreement or transaction;
(iv) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(v) payment by the Fronting Bank under a Letter of
Credit against presentation of a draft or other document
that does not comply with the terms of such Letter of
Credit; and
(vi) any other act or omission to act or delay of any
kind of the Fronting Bank, the Banks, the Agent or any other
person or any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might,
but for the provisions of this Section, constitute a legal
or equitable discharge of the applicable Borrower's
obligations hereunder.
Without limiting the generality of the foregoing, it is
expressly understood and agreed that the absolute and
unconditional obligation of the Borrowers hereunder to
reimburse L/C Disbursements will not be excused by the gross
negligence or wilful misconduct of the Fronting Bank.
However, the foregoing shall not be construed to excuse the
Fronting Bank from liability to the applicable Borrower to
the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby
waived by the applicable Borrower to the extent permitted by
applicable law) suffered by the applicable Borrower that are
caused by the Fronting Bank's gross negligence or wilful
misconduct in determining whether drafts and other documents
presented under a Letter of Credit comply with the terms
thereof; it is understood that the Fronting Bank may accept
documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any
notice or information to the contrary and, in making any
payment under any Letter of Credit (i) the Fronting Bank's
exclusive reliance on the documents presented to it under
such Letter of Credit as to any and all matters set forth
therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the
amount due to the beneficiary thereunder equals the amount
of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be
in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein
proves to be inaccurate or untrue in any respect whatsoever
and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the
terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of the
Fronting Bank.
(g) Disbursement Procedures. The Fronting Bank shall,
promptly following its receipt thereof, examine all
documents purporting to represent a demand for payment under
a Letter of Credit. The Fronting Bank shall as promptly as
possible give telephonic notification, confirmed by
telecopy, to the Agent and the applicable Borrower (and, if
the applicable Borrower is Finance Co., Resources) of such
demand for payment and whether the Fronting Bank has made or
will make an L/C Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not
relieve the applicable Borrower of its obligation to
reimburse the Fronting Bank and the Banks with respect to
any such L/C Disbursement. The Agent shall promptly give
each Bank notice thereof.
(h) Interim Interest. If the Fronting Bank shall make
any L/C Disbursement in respect of a Letter of Credit, then,
unless the applicable Borrower shall reimburse such L/C
Disbursement in full on the date thereof, the unpaid amount
thereof shall bear interest for the account of the Fronting
Bank, for each day from and including the date of such L/C
Disbursement, to but excluding the earlier of the date of
payment by the applicable Borrower or the date on which
interest shall commence to accrue on the Base Rate Loans
resulting from such L/C Disbursement as provided in
Section 1.3(b), at the rate per annum that would apply to
such amount if such amount were a Base Rate Loan.
(i) Cash Collateralization. If any Event of Default
with respect to a Borrower shall occur and be continuing,
such Borrower shall, on the Business Day it receives notice
from the Agent or the Required Banks thereof and of the
amount to be deposited, deposit in an account with the
Collateral Agent, for the benefit of the Banks, an amount in
cash equal to the portion of the L/C Exposure attributable
to Letters of Credit issued for the account of such Borrower
and outstanding as of such date. Such deposit shall be held
by the Collateral Agent as collateral for the payment and
performance of the obligations under this Agreement. The
Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such
account. Such deposits shall not bear interest. Moneys in
such account shall automatically be applied by the Agent to
reimburse the Fronting Bank for L/C Disbursements
attributable to Letters of Credit issued for the account of
the Borrower depositing such moneys for which the Fronting
Bank has not been reimbursed, and any remaining amounts will
either (i) be held for the satisfaction of the reimbursement
obligations of such Borrower for the L/C Exposure at such
time or (ii) if the maturity of the Loans of such Borrower
has been accelerated, be applied to satisfy the obligations
of such Borrower under this Agreement. If a Borrower is
required to provide an amount of cash collateral hereunder
as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be
returned to such Borrower within three Business Days after
all Events of Default have been cured or waived.
SECTION 20 Interest.
2.1 Rates of Interest. (a) Each Borrower agrees to
pay interest in respect of the unpaid principal amount of
each Base Rate Loan made to it from the date the proceeds
thereof are made available to it until prepayment pursuant
to Section 3 or maturity (whether by acceleration or
otherwise) at a rate per annum which shall be the Base Rate
in effect from time to time.
(b) Each Borrower agrees to pay interest in respect of
the unpaid principal amount of each Eurodollar Loan made to
it from the date the proceeds thereof are made available to
it until prepayment pursuant to Section 3 or maturity
(whether by acceleration or otherwise) at a rate per annum
which shall be the relevant Quoted Rate plus the Applicable
Eurodollar Margin.
(c) Each Borrower agrees to pay interest in respect of
overdue principal of, and (to the extent permitted by law)
overdue interest in respect of, each Loan made to it, on
demand, at a rate per annum which shall be 2% in excess of
the Base Rate in effect from time to time.
(d) Interest shall be computed on the actual number of
days elapsed on the basis of a 360-day year; provided,
however, that for any rate of interest determined by
reference to the Prime Rate, interest shall be computed on
the actual number of days elapsed on the basis of a year of
365 or 366 days.
(e) In computing interest on the Loans, the date of
the making of a Loan shall be included and the date of
payment shall be excluded, provided, however, that if a Loan
is repaid on the same day on which it is made, such day
shall nevertheless be included in computing interest
thereon.
2.2 Determination of Rate of Borrowing. As soon as
practicable after 10:00 A.M. (New York time) on the second
Business Day prior to the commencement of any Interest
Period with respect to a Eurodollar Loan, the Agent shall
determine (which determination, absent manifest error, shall
be final, conclusive and binding upon all parties) the rate
of interest which shall be applicable to such Eurodollar
Loan for the Interest Period applicable thereto and shall
promptly give notice thereof (in writing or by telephone,
confirmed in writing) to the applicable Borrower and the
Banks. In the event that there is no applicable rate for
such Eurodollar Loan: (i) the Agent shall promptly give
notice thereof (in writing or by telephone, confirmed in
writing) to the applicable Borrower and the Banks and
(ii) such Loan shall be deemed to have been requested to be
made as a Base Rate Loan and (iii) the rate applicable to
such Loan shall be the Base Rate in effect from time to
time.
2.3 Interest Payment Dates. Accrued interest shall be
payable (i) in respect of each Eurodollar Loan, at the end
of the Interest Period relating thereto and in respect of
each Loan with an Interest Period of longer than 3 months,
on each 3-month anniversary of the first day of such
Interest Period, (ii) in respect of each Base Rate Loan, at
the end of each Interest Period relating thereto and
(iii) in respect of each Loan, on any prepayment (on the
amount prepaid), at maturity (whether by acceleration or
otherwise) and, after maturity, on demand.
2.4 Conversions; Interest Periods. (a) Each Borrower
shall have the option to convert on any Business Day, all or
a portion at least equal to $10,000,000 of the outstanding
principal amount of the Loans made to it pursuant to one or
more Borrowings of one Type of Loans into a Borrowing or
Borrowings of another Type of Loan, provided that (i) except
as provided in Section 2.5(b), Eurodollar Loans may be
converted into Base Rate Loans only on the last day of an
Interest Period applicable thereto and no partial conversion
of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Loans pursuant to such
Borrowing to less than $10,000,000 and (ii) Loans may only
be converted into Eurodollar Loans if no Default or Event of
Default with respect to such Borrower is in existence on the
date of the conversion. Each such conversion shall be
effected by such Borrower by giving the Agent at its Payment
Office, prior to 12:00 Noon (New York time), at least three
Business Days (or by 12:00 Noon on the same Business Day in
the case of a conversion into Base Rate Loans) prior written
notice (or telephonic notice promptly confirmed in writing)
(each a "Notice of Conversion") specifying the Loans to be
so converted, the Borrowing or Borrowings pursuant to which
such Loans were made, the Type of Loans to be converted into
and, if to be converted into a Borrowing of Eurodollar
Loans, the Interest Period to be initially applicable
thereto. The Agent shall give each Bank prompt notice of
any such proposed conversion affecting any of its Loans.
(b) At the time a Borrower gives a Notice of Borrowing
or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the
case of the initial Interest Period applicable thereto) or
prior to 12:00 Noon (New York time) on the third Business
Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans (in the case of any
subsequent Interest Period), such Borrower shall have the
right to elect, by giving the Agent written notice (or
telephonic notice promptly confirmed in writing), the
Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of such Borrower, be a one, two,
three or six month period or, subject to availability on the
part of each Bank, such shorter period as ends on the Expiry
Date. Notwithstanding anything to the contrary contained
above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such
Borrowing (including the date of any conversion from a
Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest
Period expires;
(ii) if any Interest Period applicable to a Borrowing
of Eurodollar Loans begins on a day for which there is no
numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iii) no Interest Period in respect of any Borrowing
of Loans shall extend beyond the Expiry Date; and
(iv) all Eurodollar Loans comprising a Borrowing shall
at all times have the same Interest Period.
If upon the expiration of any Interest Period, a
Borrower has failed to elect a new Interest Period to be
applicable to the respective Borrowing of Eurodollar Loans
as provided above or is unable to elect a new Interest
Period as a result of Section 2.4(a)(ii) above, such
Borrower shall be deemed to have elected to convert such
Borrowing into a Borrowing of Base Rate Loans effective as
of the expiration date of such current Interest Period.
2.5 Increased Costs, Illegality, Etc. (a) In the
event that any Bank (including the Agent and the Fronting
Bank) shall have reasonably determined (which determination
shall be final and conclusive and binding upon all parties
but, with respect to the following clauses (i), (ii) and
(iii), shall be made only after consultation with the
applicable Borrower and the Agent on the date of such
determination) that:
(i) on any date for determining the Quoted Rate for
any Interest Period, by reason of any change after the date
hereof affecting the interbank Eurodollar market or
affecting the position of such Bank (if a Reference Bank),
in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference to
the Quoted Rate; or
(ii) at any time, by reason of (y) any change after
the date hereof in any applicable law or governmental rule,
regulation or order (or any interpretation thereof by a
governmental authority or otherwise (provided that, in the
case of an interpretation not by a governmental authority,
such interpretation shall be made in good faith and shall
have a reasonable basis) and including the introduction of
any new law or governmental rule, regulation or order), to
the extent not provided for in clause (iii) below, or (z) in
the case of Eurodollar Loans, other circumstances affecting
such Bank or the interbank Eurodollar market or the position
of such Bank in such market, the Quoted Rate shall not
represent the effective pricing to such Bank for funding or
maintaining the affected Eurodollar Loan; or
(iii) at any time, by reason of the requirements of
Regulation D or other official reserve requirements, the
Quoted Rate shall not represent the effective pricing to
such Bank for funding or maintaining the affected
Eurodollar Loan; or
(iv) at any time, that the making or continuance of
any Eurodollar Loan or the issuance of any Letter of Credit
has become unlawful by compliance by such Bank or by the
Fronting Bank in good faith with any law, governmental rule,
regulation, guideline or order, or would cause severe
hardship to such Bank or to the Fronting Bank as a result of
a contingency occurring after the date hereof which
materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, the Bank so affected shall on
such date of determination give notice (by telephone
confirmed in writing) to each applicable Borrower and to the
Agent (who shall give similar notice to each Bank) of such
determination. Thereafter, (x) in the case of clause (i),
(ii) or (iii) above, each applicable Borrower shall pay to
such Bank, upon written demand therefor, such additional
amounts deemed in good faith by such Bank to be material (in
the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its
discretion shall determine) as shall be required to cause
such Bank to receive interest with respect to its affected
Eurodollar Loan at a rate per annum equal to the then
Applicable Eurodollar Margin in excess of the effective
pricing to such Bank to make or maintain such Eurodollar
Loan and (y) in the case of clause (iv), each applicable
Borrower shall take one of the actions specified in
Section 2.5(b) as promptly as possible and, in any event,
within the time period required by law. A certificate as to
additional amounts owed any such Bank, showing in reasonable
detail the basis for the calculation thereof, submitted to
each applicable Borrower and the Agent by such Bank shall,
absent manifest error, be final, conclusive and binding upon
all of the parties hereto.
(b) At any time that any of its Loans are affected by
the circumstances described in Section 2.5(a) each
applicable Borrower may (i) if the affected Eurodollar Loan
is then being made pursuant to a Borrowing, cancel said
Borrowing by giving the Agent notice thereof by telephone
(confirmed in writing) on the same date that such Borrower
was notified by the affected Bank pursuant to Section 2.5(a)
or (ii) if the affected Eurodollar Loan is then outstanding,
upon at least 3 Business Days' written notice to the Bank,
require the Bank to convert such Eurodollar Loan into a Base
Rate Loan; provided that if more than one Bank is affected
at any time, then all affected Banks must be treated in the
same manner pursuant to this Section 2.5(b).
(c) In the event that a Borrower shall be paying
additional amounts to a Bank pursuant to Section 2.5(a)(i),
(ii) or (iii) or Section 2.5(d) (and, in the case of
Section 2.5(d), such Bank has not eliminated the increased
costs by designating a new Applicable Lending Office) or is
unable to incur a Eurodollar Loan from such Bank because of
the existence of a condition described in Section 2.5(a)(iv)
(any such Bank, an "Affected Bank") covering a period of 90
consecutive days, the Borrowers, the Agent and the Affected
Bank shall consult with a view towards (but being under no
obligation to) amending this Agreement, with the consent of
the Banks other than the Affected Bank (the "Unaffected
Banks") which, at such time, have outstanding two-thirds of
the aggregate principal amount of the Loans outstanding
hereunder (exclusive of the aggregate principal amount of
the Loans outstanding of the Affected Bank), to provide for
(i) the termination of the Affected Bank's Commitment,
provided that such termination is accompanied by payment in
full of the outstanding amount of all Loans of the Affected
Bank, interest accrued on such amount to the date of payment
and all other liabilities and obligations of the Borrowers
hereunder (including, without limitation, amounts payable
pursuant to Section 1.8, Section 2.5(a) or Section 2.5(d))
with respect to the Affected Bank, and (ii) the substitution
of another bank for the Affected Bank and/or the increase,
pro rata or otherwise, of the Commitments of the Unaffected
Banks or otherwise, so that the Total Commitment remains the
amount which would be applicable in the absence of the
occurrence of clause (i) of this Section 2.5(c); provided
that no Commitment of any Unaffected Bank may be changed
without the consent of such Bank.
(d) If any Bank reasonably determines at any time that
any applicable law or governmental rule, regulation, order
or request (whether or not having the force of law)
concerning capital adequacy, or any change in interpretation
or administration thereof by any governmental authority,
central bank or comparable agency, will have the effect of
increasing the amount of capital required or expected to be
maintained by such Bank based on the existence of such
Bank's Commitment hereunder or its obligations hereunder or
under any Letter of Credit, then promptly upon receipt of a
written demand from such Bank meeting the requirements of
this Section 2.5(d), the applicable Borrowers agree to pay
such Bank such additional amounts as shall be required to
compensate such Bank for the increased cost to such Bank of
making Loans to (or issuing Letters of Credit for the
account of) the Borrowers, as a result of such increase in
capital for the first Compensation Period (as defined
below). After the initial written demand for payment in
respect of this Section 2.5(d) is delivered to the
applicable Borrowers by such Bank, written demand for
payment may be submitted for each Compensation Period
thereafter that this Agreement remains in effect as to such
Bank. Each such written demand shall (i) specify (a) the
event pursuant to which such Bank is entitled to claim the
additional amount, (b) the date on which the event occurred
and became applicable to the Bank and (c) the Compensation
Period for which the amount is due and (ii) set out in
reasonable detail the basis and computation of such
additional amount. Each period for which the additional
amounts may be claimed by such Bank (a "Compensation
Period") shall be the lesser of (x) the number of days
actually elapsed since the date the event occurred and
became applicable to such Bank or (y) 90 days. Payments
made by the applicable Borrowers to any Bank in respect of
this Section 2.5(d) shall be made on the last day of the
Compensation Period specified in each written demand with a
final payment to be made on the date of termination of this
Agreement as to such Bank. Provided that each Bank acts
reasonably and in good faith and uses averaging and
attribution methods which are reasonable in determining any
additional amounts due under this Section 2.5(d), such
Bank's determination of compensation owing under this
Section 2.5(d) shall, absent manifest error, be final and
conclusive and binding on all the parties hereto. No Bank
shall be entitled to compensation under this Section 2.5(d)
for any costs incurred with respect to any date unless it
shall have notified the applicable Borrowers that it will
demand compensation for such costs not more than 60 days
after the later of (i) such date and (ii) the date on which
it shall have become aware of such costs.
(e) Each Bank agrees that, upon the occurrence of any
event giving rise to the operation of Section 2.5(d) with
respect to such Bank, such Bank shall, if requested by the
Borrowers, designate another Applicable Lending Office for
any Loans affected by such event with the objective of
eliminating, avoiding or mitigating the consequence of the
event giving rise to the operation of such section; provided
that such Bank and its Applicable Lending Office shall not,
in the sole judgment of such Bank, suffer any economic,
legal or regulatory disadvantage. Nothing in this
Section 2.5(e) shall affect or postpone any of the
obligations of a Borrower or the right of any Bank provided
in Section 2.5(d).
2.6 Extension of Expiry Date. (i) The Borrowers may,
by sending an Extension Letter to the Agent (in which case
the Agent shall promptly deliver a copy to each of the
Banks), not less than 30 days and not more than 45 days
prior to the Expiry Date then in effect (the "Current Expiry
Date"), request that the Banks extend the Expiry Date so
that it will occur 364 days after the Current Expiry Date.
Each Bank, acting in its sole discretion, shall, by notice
to the Agent given not less than 20 days and not more than
30 days prior to the Current Expiry Date, advise the Agent
in writing whether or not such Bank agrees to such extension
(each Bank that so advises the Agent that it will not extend
the Expiry Date being referred to herein as a "Non-extending
Bank"); provided that any Bank that does not advise the
Agent by the 20th day prior to the Current Expiry Date shall
be deemed to be a Non-extending Bank. The election of any
Bank to agree to such extension shall not obligate any other
Bank to agree.
(ii) (A) If Banks holding Commitments that aggregate
at least 51% of the Total Commitment on that 20th day prior
to the Current Expiry Date shall not have agreed to extend
the Expiry Date, then the Current Expiry Date shall not be
so extended and the outstanding principal balance of all
loans and other amounts payable hereunder shall be payable
on the Current Expiry Date. (B) If (and only if) Banks
holding Commitments that aggregate at least 51% of the Total
Commitment on the 20th day prior to the Current Expiry Date
shall have agreed to extend the Expiry Date, then the Expiry
Date applicable to the Banks that are not Non-extending
Banks shall be the day that is 364 days after the Current
Expiry Date. In the event of such extension, the Commitment
of each Non-extending Bank shall terminate on the Current
Expiry Date, all Loans and other amounts payable hereunder
to such Non-extending Banks shall become due and payable on
the Current Expiry Date and the Total Commitment of the
Banks hereunder shall be reduced by the Commitments of Non-
extending Banks so terminated on and after such Current
Expiry Date.
(iii) In the event that the conditions of clause (B)
of paragraph (ii) above have been satisfied, the Borrowers
shall have the right on or before the Current Expiry Date,
at their own expense, to require any Non-extending Bank to
transfer and assign without recourse (except as to title and
the absence of Liens created by it) (in accordance with and
subject to the restrictions contained in Section 10.6) all
its interests, rights and obligations under this Agreement
(including with respect to any L/C Exposure) to one or more
other banks or other financial institutions (which may
include any Bank) (each, an "Additional Commitment Bank"),
provided that (x) such Additional Commitment Bank, if not
already a Bank hereunder, shall be subject to the approval
of the Agent (not to be unreasonably withheld), (y) such
assignment shall become effective as of the Current Expiry
Date and (z) the Additional Commitment Bank, shall pay to
such Non-extending Bank in immediately available funds on
the effective date of such assignment the principal of and
interest accrued to the date of payment on the Loans made by
such Non-extending Bank hereunder and all other amounts
accrued for such Non-extending Bank's account or owed to it
hereunder. Notwithstanding the foregoing, no extension of
the Expiry Date shall become effective unless, on the
Current Expiry Date the conditions set forth in paragraphs
(a), (b) and (d) of Sections 4.2A and 4.2B shall be
satisfied (with all references in such paragraphs to the
making of a Loan or issuance of a Letter of Credit being
deemed to be references to the extension of the Commitments
on the Current Expiry Date) and the Agent shall have
received a certificate to that effect dated the Current
Expiry Date and executed by a responsible officer of each of
the Borrowers and Resources.
SECTION 3. Payments.
3.1 Payments on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a
day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, if a
payment of principal has been so extended, interest shall be
payable on such principal at the applicable rate during such
extension.
3.2 Voluntary Prepayments. Each Borrower shall have
the right to prepay its Loans in whole or in part, without
premium or penalty, from time to time pursuant to this
Section 3.2 on the following terms and conditions: (i) the
applicable Borrower shall give the Agent at the Payment
Office at least 3 Business Days' prior written notice or
telephonic notice (confirmed in writing) of its intent to
prepay such Loans, which notice shall specify the amount of
such prepayment and the specific Borrowing to be prepaid,
which notice the Agent shall promptly transmit to each of
the Banks; (ii) each prepayment shall be in an integral
multiple of $1,000,000 and not less than $10,000,000 (or, if
less, the amount then remaining outstanding in respect of
the Borrowing being prepaid); (iii) each prepayment in
respect of Loans made pursuant to one Borrowing shall be
applied pro rata among the Banks on the basis of such Loans,
except as otherwise provided in Section 2.5; (iv) at the
time of any prepayment, the applicable Borrower shall pay
all interest accrued on the principal amount of said
prepayment and, if the applicable Borrower prepays any
Eurodollar Loan on any day other than the last day of an
Interest Period applicable thereto, the applicable Borrower
shall compensate the Banks for losses sustained as a result
of such prepayment to the extent and as provided in
Section 1.8.
3.3 Method and Place of Payment, Etc. Except as
expressly provided herein, all payments under this Agreement
shall be made to the Agent for the ratable account of the
Banks not later than Noon (New York time) on the date when
due and shall be made in freely transferable U.S. dollars
and in immediately available funds at the Payment Office
(or, if such payment is made in respect of principal of or
interest on any Eurodollar Loan, for the account of such
non-U.S. office of the Agent as the Agent may from time to
time direct). Unless the Agent shall have been notified by
the applicable Borrower prior to the date on which any
payment to be made by the applicable Borrower hereunder is
due that the applicable Borrower does not intend to remit
such payment, the Agent may, at its discretion, assume that
the applicable Borrower has remitted such payment when so
due and the Agent may, at its discretion and in reliance
upon such assumption, make available to each Bank (for the
account of its applicable lending office) on such payment
date an amount equal to such Bank's share of such assumed
payment. If the applicable Borrower has not in fact
remitted such payment to the Agent, each Bank shall
forthwith on demand repay to the Agent the amount of such
assumed payment made available to such Bank together with
interest thereon in respect of each day from and including
the date such amount was made available by the Agent to such
Bank to the date such amount is repaid to the Agent at a
rate per annum equal to the Federal Funds Rate. On the
commencement date of each Interest Period and on each date
occurring two Business Days prior to an Interest Payment
Date, the Agent shall notify the applicable Borrower of the
amount of interest and/or fees due at the end of such
Interest Period or on such Interest Payment Date (assuming,
in the case of Base Rate Loans, that there is no change in
the rate of interest applicable to the applicable Base Rate
Loan); provided, however, that failure to so notify the
applicable Borrower shall not affect such Borrower's
obligation to make any such payments.
3.4 Net Payments. All payments under this Agreement
shall be made without set-off or counterclaim and in such
amounts as may be necessary in order that all such payments
of principal and interest in connection with Loans (after
deduction or withholding for or on account of (i) any
present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or
any political subdivision or taxing authority thereof, other
than any tax (except such taxes referred to in clause (ii)
below) on or measured by the net income of a Bank pursuant
to the income tax laws of the jurisdiction where such Bank's
principal or lending office is located or in which such Bank
maintains a place of business (collectively the "Taxes") and
(ii) deduction of an amount equal to any taxes on or
measured by the net income payable by any such Bank with
respect to the amount by which the payments required to be
made by this Section 3.4 exceed the amount otherwise
specified to be paid under this Agreement) shall not be less
than the amounts otherwise specified to be paid under this
Agreement. A certificate as to any additional amounts
payable to any Bank under this Section 3.4 submitted to the
applicable Borrower by such Bank shall show in reasonable
detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be
final, conclusive and binding upon all parties hereto. With
respect to each deduction or withholding for or on account
of any Taxes, the applicable Borrower shall promptly furnish
to each Bank such certificates, receipts and other documents
as may be required (in the judgment of such Bank) to
establish any tax credit to which such Bank may be entitled.
SECTION 4. Conditions Precedent.
4.1 Conditions to Effectiveness. On the Closing Date:
(a) The Agent shall have received from the general
counsel or senior counsel of PPL a favorable opinion dated
the Closing Date substantially in the form of Exhibit A
hereto.
(b) The Agent shall have received an opinion of Reid &
Priest LLP, counsel for PPL, Finance Co. and Resources,
addressed to the Agent, the Fronting Bank and the Banks,
dated the Closing Date, with respect to the enforceability
of this Agreement against PPL and Finance Co., and with
respect to the enforceability of the guarantee hereunder by
Resources of the obligations of Finance Co. against
Resources, substantially in the form of Exhibit B hereto.
(c) All corporate and legal proceedings and all
instruments in connection with the transactions contemplated
by this Agreement (including resolutions of the Board of
Directors of PPL, Finance Co. and Resources and certificates
as to the incumbency of the officers signing this Agreement
or any certificate delivered in connection herewith) shall
be satisfactory in form and substance to the Agent, and the
Agent shall have received all information and copies of all
documents that it has requested, such documents where
appropriate to be certified by proper corporate or
governmental authorities.
(d) The Agent shall have received from each of the
Banks, the Fronting Bank, PPL, Finance Co. and Resources a
duly executed and delivered counterpart hereof.
(e) The conditions set forth in Sections 4.2A and 4.2B
(other than Section 4.2A(c) and Section 4.2B(c)) shall have
been satisfied.
(f) The Agent shall have received evidence
satisfactory to it of the termination of the Revolving
Credit Agreement dated as of August 30, 1994, among PPL, the
banks party thereto and The Chase Manhattan Bank (as
successor by merger to Chemical Bank), as agent for the
banks.
(g) The Agent shall have received evidence
satisfactory to it of the termination of the Revolving
Credit Agreement dated as of May 30, 1996, as amended as of
May 27, 1997, among Resources, the banks party thereto and
The Chase Manhattan Bank as fronting bank, collateral agent
and agent for the banks.
(h) The Agent shall have received a certificate signed
by appropriate officers of PPL stating that all regulatory
approvals necessary to permit PPL to enter into this
Agreement and to perform its obligations hereunder have been
obtained and are in full force and effect and attaching
evidence of all such regulatory approvals.
4.2A Conditions to Each Loan to PPL and Each Issuance
of a Letter of Credit for the account of PPL. The
obligation of each Bank to make each Loan to PPL (excluding
any conversions of one Type of Loan to another Type pursuant
to Section 2.5(b)) and of the Fronting Bank to issue each
Letter of Credit for the account of PPL hereunder is
subject, at the time of the making of each such Loan and the
issuance of each such Letter of Credit (except as
hereinafter indicated), to the satisfaction of the following
conditions, with the making of each such Loan and the
issuance of each such Letter of Credit constituting a
representation and warranty by PPL that the conditions
specified in Sections 4.2A(a), (b), (d) and (e) below are
then satisfied:
(a) No Default. At the time of the making each such
Loan to PPL, and the issuance of each Letter of Credit for
the account of PPL and after giving effect thereto, there
shall exist no Default or Event of Default with respect to
PPL.
(b) Representations and Warranties. At the time of
the making of each such Loan to PPL and the issuance of each
such Letter of Credit for the account of PPL and after
giving effect thereto, all representations and warranties
contained in Section 7A hereof shall be true and correct
with the same force and effect as though such
representations and warranties had been made as of such
time.
(c) Notice of Borrowing. The Agent shall have
received Notice of Borrowing from PPL as required by
Section 1.2 or, in the case of the issuance of a Letter of
Credit, the Fronting Bank and the Agent shall have received
a notice from PPL requesting the issuance of such Letter of
Credit as required by Section 1A(b).
(d) No Adverse Change. Since December 31, 1996, there
shall have been no change in the business, assets, financial
condition or operations of PPL and its Subsidiaries taken as
a whole which materially and adversely affects the ability
of PPL to perform any of its obligations hereunder.
(e) Regulatory Approval. The making of such Loan to
PPL or the issuance of such Letter of Credit for the account
of PPL shall not cause the aggregate dollar amount of Loans
and Letters of Credit outstanding for the account of PPL to
exceed the amount of such obligations for which PPL has
obtained the necessary regulatory approval.
4.2B Conditions to Each Loan to Finance Co. and Each
Issuance of a Letter of Credit for the account of Finance
Co. The obligation of each Bank to make each Loan to
Finance Co. (excluding any conversions of one Type of Loan
to another Type pursuant to Section 2.5(b)) and of the
Fronting Bank to issue each Letter of Credit for the account
of Finance Co. hereunder is subject, at the time of the
making of each such Loan and the issuance of each such
Letter of Credit (except as hereinafter indicated), to the
satisfaction of the following conditions, with the making of
each such Loan and the issuance of each such Letter of
Credit constituting a representation and warranty by Finance
Co. that the conditions specified in Sections 4.2B(a), (b)
and (d) below are then satisfied:
(a) No Default. At the time of the making of each
such Loan to Finance Co. and the issuance of each Letter of
Credit for the account of Finance Co. and after giving
effect thereto, there shall exist no Default or Event of
Default with respect to Finance Co.
(b) Representations and Warranties. At the time of
the making of each such Loan to Finance Co. and the issuance
of each such Letter of Credit for the account of Finance Co.
and after giving effect thereto, all representations and
warranties contained in Section 7B hereof shall be true and
correct with the same force and effect as though such
representations and warranties had been made as of such
time.
(c) Notice of Borrowing. The Agent shall have
received Notice of Borrowing from Finance Co. as required by
Section 1.2 or, in the case of the issuance of a Letter of
Credit, the Fronting Bank and the Agent shall have received
a notice from Finance Co. requesting the issuance of such
Letter of Credit as required by Section 1A(b).
(d) No Adverse Change. Since December 31, 1996, there
shall have been no change in the business, assets, financial
condition or operations of Resources and its Subsidiaries
taken as a whole which materially and adversely affects the
ability of Resources to perform any of its obligations
hereunder.
SECTION 5.A Covenants of PPL.
While this Agreement is in effect and until the Total
Commitment has been terminated with respect to PPL, all
obligations of PPL hereunder shall have been paid in full
and all Letters of Credit issued for the account of PPL
shall have been canceled or have expired and all amounts
drawn thereunder shall have been reimbursed in full, PPL
agrees that:
5.1A Financial Statements. PPL will furnish to each
Bank:
(a) within 120 days after the end of each fiscal year
an auditors' report, including a balance sheet as at the
close of such fiscal year and statements of income,
shareowners' common equity and cash flows for such year for
PPL and its consolidated Subsidiaries prepared in conformity
with GAAP, with an opinion expressed by Price Waterhouse LLP
or other independent auditors of recognized standing
selected by it;
(b) within 60 days after the end of each of the first
three quarters in each fiscal year, a balance sheet as at
the close of such quarterly period and statements of income,
shareowners' common equity and cash flows for such quarterly
period for itself and its consolidated Subsidiaries prepared
in conformity with GAAP;
(c) within 120 days after the end of each fiscal year,
a copy of its Form 10-K Report to the Securities and
Exchange Commission ("SEC") and within 60 days after the end
of each of the first three quarters in each fiscal year, a
copy of its Form 10-Q Report to the SEC;
(d) from time to time, with reasonable promptness,
such further information regarding its business, affairs and
financial condition as any Bank and the Fronting Bank may
reasonably request; and
(e) upon acquiring knowledge of the existence of a
Default or Event of Default with respect to it a certificate
of a financial officer specifying: (i) the nature of such
Default or Event of Default, (ii) the period of the
existence thereof, and (iii) the actions that PPL proposes
to take with respect thereto.
The financial statements required to be furnished
pursuant to clauses (a) and (b) above shall be accompanied
by a certificate of a principal financial officer of PPL to
the effect that no Default or Event of Default with respect
to it has occurred and is continuing. The financial
statements required to be furnished pursuant to clause (a)
above shall also be accompanied by a Compliance Certificate
in the form of Exhibit D-1 hereto ("PPL Compliance
Certificate") demonstrating compliance with Section 5.4A.
5.2A Mergers. PPL will not merge or consolidate with
any Person if PPL is not the survivor unless (a) the
survivor assumes the obligations of PPL hereunder, (b) the
survivor is a utility whose business is not substantially
different in character or composition from that of PPL and
(c) the senior secured debt ratings of the survivor by
Moody's and S&P as available (or if the ratings of Moody's
and S&P are not available, of such other rating agency as
shall be acceptable to the Agent), are at least equal to the
ratings of PPL's First Mortgage Bonds (or other senior
secured debt) immediately prior to such merger or
consolidation.
5.3A Ratings. PPL will use its best efforts to
promptly notify the Banks upon obtaining knowledge of any
change in, or cessation of, ratings of PPL's First Mortgage
Bonds (or other senior secured debt) by Moody's or S&P.
5.4A Consolidated Indebtedness to Consolidated
Capitalization. The ratio of Consolidated Indebtedness of
PPL to Consolidated Capitalization of PPL shall not exceed
70% at any time.
SECTION 5.B Covenants of Finance Co. and Resources.
While this Agreement is in effect and until the Total
Commitment has been terminated with respect to Finance Co.,
all obligations of Finance Co. and Resources hereunder shall
have been paid in full and all Letters of Credit issued for
the account of Finance Co. shall have been canceled or have
expired and all amounts drawn thereunder shall have been
reimbursed in full, each of Finance Co. and Resources agrees
that:
5.1B Financial Statements. Resources will furnish to
each Bank:
(a) within 120 days after the end of each fiscal year
(i) an auditors' report, including a balance sheet as at the
close of such fiscal year and statements of income,
shareowners' common equity and cash flows for such year for
Resources and its consolidated Subsidiaries prepared in
conformity with GAAP, with an opinion expressed by Price
Waterhouse LLP or other independent auditors of recognized
standing selected by it and (ii) Resources' unconsolidated
balance sheet as at the close of such fiscal year and
statements of income, shareholders common equity and cash
flows for such year;
(b) within 60 days after the end of each of the first
three quarters in each fiscal year, a balance sheet as at
the close of such quarterly period and statements of income,
shareowners' common equity and cash flows for such quarterly
period for (i) Resources and its consolidated Subsidiaries
prepared in conformity with GAAP, and (ii) Resources'
unconsolidated balance sheet as at the close of such
quarterly period and statements of income, shareowners'
common equity and cash flow for such quarterly period;
(c) within 120 days after the end of each fiscal year,
a copy of Resources' Form 10-K Report to the Securities and
Exchange Commission ("SEC") and within 60 days after the end
of each of the first three quarters in each fiscal year, a
copy of Resources' Form 10-Q Report to the SEC;
(d) from time to time, with reasonable promptness,
such further information regarding Resources' business,
affairs and financial condition as any Bank and the Fronting
Bank may reasonably request; and
(e) upon acquiring knowledge of the existence of a
Default or Event of Default with respect to Finance Co. a
certificate of a financial officer of Resources and an
officer of Finance Co. specifying: (i) the nature of such
Default or Event of Default, (ii) the period of the
existence thereof, and (iii) the actions that Resources and
Finance Co. propose to take with respect thereto.
The financial statements required to be furnished
pursuant to clauses (a) and (b) above shall be accompanied
by a certificate of a principal financial officer of
Resources to the effect that no Default or Event of Default
with respect to Finance Co. has occurred and is continuing.
The financial statements required to be furnished pursuant
to clause (a) above shall also be accompanied by a
Compliance Certificate in the form of Exhibit D-2 hereto
("Resources Compliance Certificate") demonstrating
compliance with Section 5.5B.
5.2B Mergers. (i) (1) Resources will not merge or
consolidate with any Person if Resources is not the survivor
unless (a) the survivor assumes Resources' obligations
hereunder, (b) substantially all of the consolidated assets
and consolidated revenues of the survivor are anticipated to
come from a utility business or utility businesses and
(c) the senior unsecured debt ratings of the survivor by
Moody's or S&P, as available (or if the ratings of Moody's
and S&P are not available, of such other rating agency as
shall be acceptable to the Required Banks), are at least
equal to the ratings of Resource's senior unsecured debt
immediately prior to such merger or consolidation; (2)
Resources will not dispose of any common stock of either
Borrower or any securities convertible into common stock of
either Borrower, except in connection with any merger or
consolidation permitted under this Section 5.2B or under
Section 5.2A, and except that Resources shall be allowed to
sell, transfer or otherwise dispose of PPL's common stock to
PPL.
(ii) Finance Co. will not merge into or consolidate
with any other Person except (a) Resources or a successor of
Resources permitted by this Section or (b) any other Person
which is a wholly owned subsidiary of Resources or a
successor of Resources permitted by this Section.
5.3B Ratings. Finance Co. and Resources will each use
their best efforts to promptly notify the Banks upon
obtaining knowledge of any change in, or cessation of,
ratings of Resources' senior unsecured debt by Moody's or
S&P.
5.4B Liens. Resources will not create, incur, or
suffer to exist any Lien in or on the common stock of PPL or
Finance Co. or on securities convertible into the common
stock of PPL or Finance Co. (in either case, now or
hereafter acquired) other than Permitted Liens.
5.5B Consolidated Indebtedness to Consolidated
Capitalization. The ratio of Consolidated Indebtedness of
Resources to Consolidated Capitalization of Resources shall
not exceed 70% at any time.
SECTION 6.A Events of Default with Respect to PPL.
Each of the following events shall constitute an "Event
of Default" with respect to PPL:
6.1A Representations, Etc. Any certificate furnished
by PPL to the Banks and the Fronting Bank pursuant hereto
shall prove to have been incorrect in any material respect
or any of the representations and warranties made by PPL
herein or in connection herewith shall prove to have been
incorrect in any material respect when made; or
6.2A Principal and Interest. PPL shall fail to make
any payment of principal on any of its Loans or any other
payment payable by PPL hereunder (including the
reimbursement of any L/C Disbursement) when due or, in the
case of interest or fees, within 10 days of the due date
thereof; or
6.3A Defaults by PPL Under Other Agreements. PPL
shall (i) fail to pay any principal or interest, regardless
of amount, due in respect of any Indebtedness in a principal
amount in excess of $50,000,000 beyond any period of grace
provided with respect thereto, or (ii) fail to observe or
perform any other term, covenant, condition or agreement
contained in any agreement or instrument evidencing or
governing any such Indebtedness in a principal amount in
excess of $50,000,000 beyond any period of grace provided
with respect thereto if the effect of any failure referred
to in this clause (ii) is to cause, or to permit the holder
or holders of such Indebtedness or a trustee on its or their
behalf to cause, such Indebtedness to become due prior to
its stated maturity; or
6.4A Judgments. PPL shall fail within 60 days to pay,
bond or otherwise discharge any judgment or order for the
payment of money in excess of $25,000,000 that is not stayed
on appeal or otherwise being appropriately contested in good
faith; or
6.5A Bankruptcy, Etc. PPL shall commence a voluntary
case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy" as now or hereafter in effect or
any successor thereto (the "Bankruptcy Code"); or an
involuntary case shall be commenced against PPL or such case
shall be controverted but shall not be dismissed within 60
days after the commencement of the case; or PPL shall not
generally be paying its debts as they become due; or a
custodian (as defined in the Bankruptcy Code) shall be
appointed for, or shall take charge of, all or substantially
all of the property of PPL or PPL shall commence any other
proceeding under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to PPL or there
shall be commenced against PPL any such proceeding which
remains undismissed for a period of 60 days or PPL shall be
adjudicated insolvent or bankrupt; or PPL shall fail to
controvert in a timely manner any such case under the
Bankruptcy Code or any such proceeding, or any order of
relief or other order approving any such case or proceeding
shall be entered; or PPL by any act or failure to act shall
indicate its consent to, approval of or acquiescence in any
such case or proceeding or in the appointment of any
custodian or the like for it or any substantial part of its
property or shall suffer any such appointment to continue
undischarged or unstayed for a period of 60 days; or PPL
shall make a general assignment for the benefit of
creditors; or any corporate action shall be taken by PPL for
the purpose of effecting any of the foregoing; or
6.6A Other Covenants. PPL shall fail to perform or
observe any other term, covenant or agreement contained in
this Agreement on its part to be performed or observed and
any such failure shall remain unremedied for a period of
30 days after written notice thereof shall have been
received by PPL from the Agent or the Required Banks.
SECTION 6.B Events of Default with Respect to Finance
Co.
Each of the following events shall constitute an "Event
of Default" with respect to Finance Co.:
6.1B Representations, Etc. Any certificate furnished
by Finance Co. or Resources to the Banks and the Fronting
Bank pursuant hereto shall prove to have been incorrect in
any material respect or any of the representations and
warranties made by Finance Co. or Resources herein or in
connection herewith shall prove to have been incorrect in
any material respect when made; or
6.2B Principal and Interest. Either Finance Co. or
Resources shall fail to make any payment of principal on any
Loan to Finance Co. or any other payment payable by Finance
Co. or Resources hereunder (including the reimbursement of
any L/C Disbursement) when due or, in the case of interest
or fees, within 10 days of the due date thereof; or
6.3B Defaults by Finance Co. or Resources Under Other
Agreements. Finance Co. or Resources shall (i) fail to pay
any principal or interest, regardless of amount, due in
respect of any Indebtedness in a principal amount in excess
of $40,000,000, in the case of Indebtedness of Resources or
Indebtedness of Finance Co. guaranteed by Resources or, in
the case of Indebtedness of Finance Co. not guaranteed by
Resources, $10,000,000, if such failure shall continue
beyond any period of grace provided with respect thereto, or
(ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or
instrument (including any term, covenant, condition or
agreement herein) evidencing or governing any such
Indebtedness in a principal amount in excess of, in the case
of Indebtedness of Resources or Indebtedness of Finance Co.
guaranteed by Resources, $40,000,000 or, in the case of
Indebtedness of Finance Co. not guaranteed by Resources,
$10,000,000, if such failure shall continue beyond any
period of grace provided with respect thereto if the effect
of any failure referred to in this clause (ii) is to cause,
or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf to cause, such Indebtedness
to become due prior to its stated maturity; or
6.4B Judgments. Finance Co. or Resources shall fail
within 60 days to pay, bond or otherwise discharge any
judgment or order for the payment of money in excess of
$25,000,000 that is not stayed on appeal or otherwise being
appropriately contested in good faith; or
6.5B Bankruptcy, Etc. Finance Co. or Resources shall
commence a voluntary case concerning itself under Title 11
of the United States Code entitled "Bankruptcy" as now or
hereafter in effect or any successor thereto (the
"Bankruptcy Code"); or an involuntary case shall be
commenced against Finance Co. or Resources or such case
shall be controverted but shall not be dismissed within 60
days after the commencement of the case; or Finance Co. or
Resources shall not generally be paying its debts as they
become due; or a custodian (as defined in the Bankruptcy
Code) shall be appointed for, or shall take charge of, all
or substantially all of the property of Finance Co. or
Resources or Finance Co. or Resources shall commence any
other proceeding under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Finance Co.
or Resources or there shall be commenced against Finance Co.
or Resources any such proceeding which remains undismissed
for a period of 60 days or Finance Co. or Resources shall be
adjudicated insolvent or bankrupt; or Finance Co. or
Resources shall fail to controvert in a timely manner any
such case under the Bankruptcy Code or any such proceeding,
or any order of relief or other order approving any such
case or proceeding shall be entered; or Finance Co. or
Resources by any act or failure to act shall indicate its
consent to, approval of or acquiescence in any such case or
proceeding or in the appointment of any custodian or the
like for it or any substantial part of its property or shall
suffer any such appointment to continue undischarged or
unstayed for a period of 60 days; Finance Co. or Resources
shall make a general assignment for the benefit of
creditors; or any corporate action shall be taken by Finance
Co. or Resources for the purpose of effecting any of the
foregoing; or
6.6B Other Covenants. Finance Co. or Resources shall
fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be
performed or observed and any such failure shall remain
unremedied for a period of 30 days after written notice
thereof shall have been received by Finance Co. or
Resources, as the case may be, from the Agent or the
Required Banks; or
6.7B Events of Default with Respect to PPL. An Event
of Default shall occur with respect to PPL.
If any Event of Default with respect to PPL as specified in
Section 6A shall then be continuing, then either or both of
the following actions may be taken: (i) the Agent, at the
direction of the Required Banks, shall by written notice to
PPL, declare the principal of and accrued interest in
respect of all of PPL's outstanding Loans to be, whereupon
the same and all other amounts due from PPL hereunder shall
become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which
are hereby expressly waived by PPL, anything contained
herein to the contrary notwithstanding, and (ii) the Agent,
at the direction of the Required Banks, shall by written
notice to PPL, declare the Total Commitment as to PPL
terminated, whereupon the Commitment of each Bank (insofar
as it is available to PPL) and the obligation of each Bank
to make its Loans hereunder to PPL and the obligation of the
Fronting Back to issue Letters of Credit for the account of
PPL hereunder shall terminate immediately and any accrued
Commitment Fee owed by PPL shall forthwith become due and
payable without any other notice of any kind; provided that
if an Event of Default described in Section 6.5A shall occur
with respect to PPL, the results which would otherwise occur
only upon the giving of written notice by the Agent to PPL
as specified in clauses (i) and (ii) above shall occur
automatically without the giving of any such notice and
without any instruction by the Required Banks to give such
notice.
If any Event of Default with respect to Finance Co. as
specified in Section 6B shall then be continuing, then
either or both of the following actions may be taken:
(i) the Agent, at the direction of the Required Banks, shall
by written notice to Resources and Finance Co., declare the
principal of and accrued interest in respect of all of
Finance Co.'s outstanding Loans to be, whereupon the same
and all other amounts due from Resources or Finance Co.
hereunder shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by Resources and
Finance Co., anything contained herein to the contrary
notwithstanding, and (ii) the Agent, at the direction of the
Required Banks, shall, by written notice to Resources and
Finance Co., declare the Total Commitment as to Finance Co.
terminated (insofar as it is available to Finance Co.),
whereupon the Commitment of each Bank and the obligation of
each Bank to make its Loans to Finance Co. hereunder and the
obligations of the Fronting Bank to issue Letters of Credit
for the account of Finance Co. shall terminate immediately
and any accrued Commitment Fee owed by Finance Co. shall
forthwith become due and payable without any other notice of
any kind; provided that if an Event of Default described in
Section 6.5B shall occur with respect to Finance Co., the
results which would otherwise occur only upon the giving of
written notice by the Agent to Finance Co. as specified in
clauses (i) and (ii) above shall occur automatically without
the giving of any such notice and without any instruction by
the Required Banks to give such notice.
SECTION 7.A Representations and Warranties of PPL.
In order to induce the Banks and the Fronting Bank to
enter into this Agreement and to make the Loans to PPL and
issue the Letters of Credit for the account of PPL, in each
case, as provided for herein, PPL makes the following
representations and warranties to the Banks and the Fronting
Bank:
7.1A Corporate Status. It is duly incorporated,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has the corporate power to
make and perform this Agreement and to borrow hereunder.
7.2A Authority; No Conflict. The making and
performance by it of this Agreement have been duly
authorized by all necessary corporate action and do not and
will not violate any provision of law or regulation, or any
decree, order, writ or judgment, or any provision of its
charter or by-laws, or result in the breach of or constitute
a default under any indenture or other agreement or
instrument to which it is a party.
7.3A Legality, Etc. This Agreement constitutes the
legal, valid and binding obligation of PPL, enforceable in
accordance with its terms except to the extent limited by
bankruptcy, insolvency or reorganization laws or by other
laws relating to or affecting the enforceability of credi-
tors' rights generally and by general equitable principles
which may limit the right to obtain equitable remedies.
7.4A Financial Statements. The consolidated financial
statements of PPL and its consolidated Subsidiaries for the
year ended as at December 31, 1996, furnished to the Banks,
fairly present its consolidated financial position at
December 31, 1996 and the results of its consolidated opera-
tions for the year then ended and were prepared in
accordance with GAAP. Since that date there has been no
adverse change in the business, assets, financial condition
or operations of PPL that would materially and adversely
affect the ability of PPL to perform any of its obligations
hereunder.
7.5A Litigation. Except as disclosed in or
contemplated by PPL's Form 10-K Report to the SEC for the
year ended December 31, 1996 or in any subsequent Form 10-Q
Report or otherwise furnished in writing to the Banks, no
litigation, arbitration or administrative proceeding is
pending or, to its knowledge, threatened, which, if
determined adversely to PPL, would materially and adversely
affect its ability to perform any of its obligations under
this Agreement. There is no litigation, arbitration or
administrative proceeding pending or, to the knowledge of
PPL, threatened which questions the validity of this
Agreement.
7.6 A No Violation. No part of the proceeds of the
borrowings by PPL under this Agreement or of any Letter of
Credit issued for its account will be used, directly or in-
directly by PPL for the purpose of purchasing or carrying
any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or for any
other purpose which violates, or which conflicts with, the
provisions of Regulations G, U or X of said Board of
Governors. PPL is not engaged principally, or as one of its
important activities, in the business of extending credit
for the purpose of purchasing or carrying any such "margin
stock."
7.7A ERISA. There have not been any "reportable
events," as that term is defined in Section 4043 of the
Employee Retirement Income Security Act of 1974, as amended,
which would result in a material liability to PPL.
7.8A Consents. No authorization, consent or approval
from governmental bodies or regulatory authorities is
required for the making and performance by PPL of this
Agreement, except such authorizations, consents and
approvals as have been obtained prior to the making of any
Loans or the issuance of any Letters of Credit and are in
full force and effect at the time of the making of each Loan
and the issuance of each Letter of Credit.
7.9A Subsidiaries. The assets of all Subsidiaries of
PPL do not comprise in the aggregate more than 20% of the
total consolidated assets of PPL.
7.10A Investment Company Act. PPL is not an
"investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, in order not
to be subject to the prohibitions of Section 7 of such Act.
7.11A Public Utility Holding Company Act. PPL is a
"holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, but is exempt from
such Act (except for the provisions of Section 9(a)(2)
thereof) by virtue of an order of the SEC pursuant to
Section 3(a)(2) thereof.
7.12A Tax Returns. PPL has filed or caused to be
filed all Federal, state, local and foreign tax returns or
materials required to have been filed by it and has paid or
caused to be paid all taxes due and payable by it and all
assessments received by it, except taxes that are being
contested in good faith by appropriate proceedings and for
which PPL shall have set aside on its books appropriate
reserves with respect thereto in accordance with GAAP.
7.13A Compliance with Laws. PPL is in compliance with
all laws, regulations and orders of any governmental
authority except to the extent (A) such compliance is being
contested in good faith by appropriate proceedings or
(B) non-compliance would not reasonably be expected to
materially and adversely affect its ability to perform any
of its obligations hereunder.
SECTION 7.B Representations and Warranties of Finance
Co. and Resources.
In order to induce the Banks and the Fronting Bank to
enter into this Agreement and to make the Loans to Finance
Co. and issue the Letters of Credit for the account of
Finance Co., in each case as provided for herein, each of
Finance Co. and Resources makes the following
representations and warranties to the Banks and the Fronting
Bank:
7.1B Corporate Status. Resources is duly
incorporated, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania, and has the
corporate power to make and perform this Agreement, and
Finance Co. is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and
has the corporate power to make and perform this Agreement
and to borrow hereunder.
7.2B Authority; No Conflict. The making and
performance by Resources and Finance Co. of this Agreement
have been duly authorized by all necessary corporate action
and do not and will not violate any provision of law or
regulation, or any decree, order, writ or judgment, or any
provision of its charter or by-laws, or result in the breach
of or constitute a default under any indenture or other
agreement or instrument to which Resources or Finance Co.,
as the case may be, is a party.
7.3B Legality, Etc. This Agreement constitutes the
legal, valid and binding obligation of each of Resources and
Finance Co., enforceable against Resources or Finance Co.,
as the case may be, in accordance with its terms except to
the extent limited by bankruptcy, insolvency or
reorganization laws or by other laws relating to or
affecting the enforceability of creditors' rights generally
and by general equitable principles which may limit the
right to obtain equitable remedies.
7.4B Financial Statements. The consolidated financial
statements of Resources for the year ended as at
December 31, 1996, furnished to the Banks, fairly present
Resources' consolidated financial position at December 31,
1996 and the results of its consolidated operations for the
year then ended and were prepared in accordance with GAAP.
Since that date there has been no adverse change in the
business, assets, financial condition or operations of
Resources that would materially and adversely affect its
ability to perform any of its obligations hereunder.
7.5B Litigation. Except as disclosed in or
contemplated by Resources's Form 10-K Report to the SEC for
the year ended December 31, 1996, or in any subsequent Form
10-Q Report or otherwise furnished in writing to the Banks,
no litigation, arbitration or administrative proceeding
against Resources or Finance Co. is pending or, to
Resources' knowledge, threatened, which, if determined
adversely, would materially and adversely affect the ability
of Resources to perform any of its obligations under this
Agreement. There is no litigation, arbitration or
administrative proceeding pending or, to the knowledge of
Resources, threatened which questions the validity of this
Agreement.
7.6B No Violation. No part of the proceeds of the
borrowings by Finance Co. under this Agreement or of any
Letter of Credit issued for its account will be used,
directly or indirectly by Finance Co. or any Subsidiary of
Resources for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or for any
other purpose which violates, or which conflicts with, the
provisions of Regulations G, U or X of said Board of
Governors. Neither Resources nor Finance Co. is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing
or carrying any such "margin stock."
7.7B ERISA. There have not been any "reportable
events," as that term is defined in Section 4043 of the
Employee Retirement Income Security Act of 1974, as amended,
which would result in a material liability to Resources.
7.8B Consents. No authorization, consent or approval
from governmental bodies or regulatory authorities is
required for the making and performance by Resource or
Finance Co. of this Agreement, except such authorizations,
consents and approvals as have been obtained prior to the
making of any Loans or the issuance of any Letters of Credit
and are in full force and effect at the time of the making
of each Loan and the issuance of each Letter of Credit.
7.9B Investment Company Act. Neither Resources nor
Finance Co. is an "investment company" that is required to
be registered under the Investment Company Act of 1940, as
amended, in order not to be subject to the prohibitions of
Section 7 of such Act.
7.10B Public Utility Holding Company Act. Resources
is a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, but is
exempt from such Act (except for the provisions of
Section 9(a)(2) thereof) by virtue of an order of the SEC
pursuant to Section 3(a)(1) thereof. Finance Co. is not a
"holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
7.11B Tax Returns. Resources and Finance Co. have
filed or caused to be filed all Federal, state, local and
foreign tax returns or materials required to have been filed
by it and has paid or caused to be paid all taxes due and
payable by it and all assessments received by it, except
taxes that are being contested in good faith by appropriate
proceedings and for which Resources shall have set aside on
its books appropriate reserves with respect thereto in
accordance with GAAP.
7.12B Compliance with Laws. Each of Resources and
Finance Co. is in compliance with all laws, regulations and
orders of any governmental authority except to the extent
(A) such compliance is being contested in good faith by
appropriate proceedings or (B) non-compliance would not
reasonably be expected to materially and adversely affect
its ability to perform any of its obligations hereunder.
SECTION 8. Agent.
8.1 Appointment. The Banks hereby appoint The Chase
Manhattan Bank as Agent (such term to include Agent acting
as Agent) to act as herein specified. Each Bank and the
Fronting Bank hereby irrevocably authorizes, and each
assignee of any Bank or the Fronting Bank shall be deemed
irrevocably to authorize, the Agent to take such action on
their behalf under the provisions of this Agreement and any
instruments, documents and agreements referred to herein
(such instruments, documents and agreements being herein
referred to as the "Loan Documents") and to exercise such
powers hereunder and thereunder as are specifically
delegated to the Agent by the terms hereof and thereof and
such other powers as are reasonably incidental thereto. The
Agent may perform any of its duties hereunder, or under the
Loan Documents, by or through its agents or employees.
8.2 Nature of Duties. The duties of the Agent shall
be mechanical and administrative in nature. The Agent shall
not have by reason of this Agreement a fiduciary
relationship in respect of any Bank or of the Fronting Bank.
Nothing in this Agreement or any of the Loan Documents,
expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in
respect of this Agreement or any of the Loan Documents
except as expressly set forth herein. Each Bank and the
Fronting Bank shall make its own independent investigation
of the financial condition and affairs of PPL, Finance Co.
and Resources and each of their Subsidiaries in connection
with the making and the continuance of the Loans and the
issuance of Letters of Credit hereunder and shall make its
own appraisal of the creditworthiness of PPL, Resources and
Finance Co.; and the Agent shall have no duty or
responsibility, either initially or on a continuing basis,
to provide any Bank or the Fronting Bank with any credit or
other information with respect thereto, whether coming into
its possession before the making of the Loans or the
issuance of Letters of Credit or at any time or times
thereafter. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through
agents or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible to any Bank or the
Fronting Bank for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care
except to the extent otherwise required by Section 8.3.
8.3 Rights, Exculpation, Etc. Neither the Agent nor
any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be liable to any Bank
or to the Fronting Bank for any action taken or omitted by
it hereunder or under any of the Loan Documents, or in
connection herewith or therewith, unless caused by its or
their gross negligence or willful misconduct. The Agent
shall not be responsible to any Bank or to the Fronting Bank
for any recitals, statements, representations or warranties
herein or for the execution, effectiveness, genuineness,
validity, enforceability, collectibility, or sufficiency of
this Agreement or any of the Loan Documents or the financial
condition of PPL, Finance Co. or Resources. The Agent shall
not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or
conditions of this Agreement or any of the Loan Documents or
the financial condition of PPL, Finance Co. or Resources, or
the existence or possible existence of any Default or Event
of Default. The Agent may at any time request instructions
from the Banks with respect to any actions or approvals
which by the terms of this Agreement or any of the Loan
Documents the Agent is permitted or required to take or to
grant, and if such instructions are requested, the Agent
shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under
any liability whatsoever to any Person for refraining from
any action or withholding any approval under this Agreement
or any of the Loan Documents until it shall have received
such instructions from the Required Banks or all Banks, as
required. Without limiting the foregoing, no Bank shall
have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting
hereunder or under any of the Loan Documents in accordance
with the instructions of the Required Banks or all Banks, as
required.
8.4 Reliance. The Agent shall be entitled to rely
upon any written notice, statement, certificate, order or
other document or any telephone message believed by it to be
genuine and correct and to have been signed, sent or made by
the proper Person, and, with respect to all legal matters
pertaining to this Agreement or any of the Loan Documents
and its duties hereunder or thereunder, upon advice of
counsel selected by it.
8.5 Indemnification. To the extent that the Agent is
not reimbursed and indemnified by PPL, Resources or Finance
Co., the Banks will reimburse and indemnify the Agent for
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against
the Agent, acting pursuant hereto, in any way relating to or
arising out of this Agreement or any of the Loan Documents
or any action taken or omitted by the Agent under this
Agreement or any of the Loan Documents, in proportion to
their respective Commitments hereunder; provided, however,
that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or wilful
misconduct. The obligations of the Banks under this
Section 8.5 shall survive the payment in full of outstanding
Loans, the expiration of any Letter of Credit and the
termination of this Agreement.
8.6 The Agent, Individually. With respect to its
Commitment hereunder and the Loans made by it, the Agent
shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any
other Bank. The terms "Banks," "Required Banks" or any
similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity as a
Bank or one of the Required Banks. The Agent may accept
deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with PPL, Finance
Co. or Resources as if it were not acting pursuant hereto.
8.7 Resignation by the Agent. The Agent may resign
from the performance of all its functions and duties
hereunder at any time by giving 30 Business Days' prior
written notice to each Borrower, Resources and the Banks.
Such resignation shall take effect upon the expiration of
such 30 Business Day period or upon the earlier appointment
of a successor. Upon any such resignation, the Required
Banks shall appoint a successor Agent who shall be
satisfactory to the Borrowers and Resources and shall be an
incorporated bank or trust company. In the event no such
successor shall have been so appointed, then any
notification, demand or other communication required or
permitted to be given by the Agent on behalf of the Banks to
the Borrowers hereunder shall be sufficiently given if given
by the Required Banks, and any notification, demand, other
communication, document, statement, other paper or payment
required to be made, given or furnished by PPL, Finance Co.
or Resources to the Agent for distribution to the Banks
shall be sufficiently made, given or furnished if made,
given or furnished by PPL, Finance Co. or Resources, as
applicable, directly to each Bank entitled thereto and, in
the case of payments, in the amount to which each such Bank
is entitled from the applicable Borrower. All powers
specifically delegated to the Agent by the terms hereof may
be exercised by the Required Banks.
SECTION 9. Resources Guarantee.
In order to induce the Banks to extend credit hereunder
to Finance Co., Resources hereby irrevocably and
unconditionally guarantees, as primary obligor and not
merely as a surety, the Finance Co. Obligations. Resources
further agrees that the due and punctual payment of the
Finance Co. Obligations may be extended or renewed, in whole
or in part, without notice to or further assent from it, and
that it will remain bound upon its Guarantee hereunder
notwithstanding any such extension or renewal of any Finance
Co. Obligation.
Resources waives presentment to, demand of payment from
and protest to Finance Co. of any of the Finance Co.
Obligations, and also waives notice of acceptance of its
obligations and notice of protest for nonpayment. The
obligations of Resources hereunder shall not be affected by
(a) the failure of any Bank or the Agent to assert any claim
or demand or to enforce any right or remedy against Finance
Co. under the provisions of this Agreement or otherwise,
(b) change or increase in the amount of any of the Finance
Co. Obligations, whether or not consented to by Resources,
or (c) any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement or any
other agreement.
Resources further agrees that its agreement hereunder
constitutes a promise of payment when due (whether or not
any bankruptcy or similar proceeding shall have stayed the
accrual or collection of any of the Finance Co. Obligations
or operated as a discharge thereof) and not merely of
collection, and waives any right to require that any resort
be had by any Bank to any balance of any deposit account or
credit on the books of any Bank in favor of any other
person.
The obligations of Resources hereunder shall not be
subject to any reduction, limitation, impairment or
termination for any reason, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination
whatsoever, by reason of the invalidity, illegality or
unenforceability of the Finance Co. Obligations, any
impossibility in the performance of the Finance Co.
Obligations or otherwise. Without limiting the generality
of the foregoing, the obligations of Resources hereunder
shall not be discharged or impaired or otherwise affected by
the failure of the Agent or any Bank to assert any claim or
demand or to enforce any remedy under this Agreement or any
other agreement, by any waiver or modification in respect of
any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Finance Co.
Obligations, or by any other act or omission which may or
might in any manner or to any extent vary the risk of
Resources or otherwise operate as a discharge of Resources
or Finance Co. as a matter of law or equity.
Resources further agrees that its obligations hereunder
shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of any
Finance Co. Obligation is rescinded or must otherwise be
restored by the Agent or any Bank upon the bankruptcy or
reorganization of Finance Co or otherwise.
In furtherance of the foregoing and not in limitation
of any other right which the Agent or any Bank may have at
law or in equity against Resources by virtue hereof, upon
the failure of Finance Co. to pay any Finance Co. Obligation
when and as the same shall become due, whether at maturity,
by acceleration, after notice of prepayment or otherwise,
Resources hereby promises to and will, upon receipt of
written demand by the Agent, forthwith pay, or cause to be
paid, in cash the amount of such unpaid Finance Co.
Obligation.
Upon payment by Resources of any Finance Co.
Obligation, each Bank shall, in a reasonable manner, assign
the amount of such Finance Co. Obligation owed to it and so
paid to Resources, such assignment to be pro tanto to the
extent to which the Finance Co. Obligation in question was
discharged by Resources, or make such disposition thereof as
Resources shall direct (all without recourse to any Bank and
without any representation or warranty by any Bank).
Upon payment by Resources of any sums as provided
above, all rights of Resources against Finance Co. arising
as a result thereof by way of right of subrogation or
otherwise shall in all respects be subordinate and junior in
right of payment to the prior indefeasible payment in full
of all the Finance Co. Obligations owed by Finance Co. to
the Banks.
SECTION 10. Miscellaneous.
10.1 Definitions. As used herein the following terms
shall have the meanings herein specified and shall include
in the singular number the plural and in the plural number
the singular:
"5-Year Agreement" shall mean the $300,000,000 5-Year
Revolving Credit Agreement among PPL, Finance Co.,
Resources, as guarantor of the obligations of Finance Co.,
the banks from time to time party thereto and The Chase
Manhattan Bank, as fronting bank, collateral agent and as
agent for the banks party thereto.
"Affected Bank" shall have the meaning assigned that
term in Section 2.5(c).
"Agent" shall mean The Chase Manhattan Bank and shall
include (i) any successor corporation thereto by merger,
consolidation or otherwise and (ii) any successor to the
Agent appointed pursuant to Section 8.7.
"Aggregate Credit Exposure" shall mean the aggregate
amount of the Banks' Credit Exposures.
"Agreement" shall mean this Revolving Credit Agreement,
as it may from time to time be amended, supplemented or
otherwise modified.
"Applicable Commitment Fee Percentage" shall mean for
the Borrowers, the percentage specified as such in the table
in the definition of "Applicable Rate" opposite the highest
rating category in which PPL's First Mortgage Bonds have
been assigned a rating by either of Moody's or S&P.
"Applicable Eurodollar Margin" shall mean (i) for PPL,
the margin specified as such in the table in the definition
of "Applicable Rate" opposite the highest rating category in
which PPL's First Mortgage Bonds have been assigned ratings
by either of Moody's or S&P or (ii) for Finance Co., the
margin specified as such in the table in the definition of
"Applicable Rate" opposite the highest rating category in
which Resources' senior unsecured debt has been assigned
ratings by either of Moody's or S&P.
"Applicable Lending Office" shall mean, with respect to
each Bank, (i) such Bank's Base Rate Lending Office in the
case of a Base Rate Loan and (ii) such Bank's Eurodollar
Lending Office in the case of a Eurodollar Rate Loan.
"Applicable Percentage" of any Bank at any time shall
mean the percentage of the Total Commitment represented by
such Bank's Commitment. In the event the Commitments shall
have expired or been terminated, the Applicable Percentages
shall be determined on the basis of the Commitments most
recently in effect, but giving effect to assignments
pursuant to Section 10.6.
"Applicable Rate" shall mean and include the Applicable
Commitment Fee Percentage for undrawn Commitments or
Applicable Eurodollar Margin for any Loans or issued Letters
of Credit and at any time will be determined based on the
highest applicable Category set forth below (the highest
category being Category A).
Applicable
Commitment Applicable
Fee Eurodollar
Criteria Percentage Margin
Category A:
A- or better/
A3 or better .080% .300%
Category B:
BBB+/Baa1 .100% .350%
Category C:
BBB/Baa2 .125% .400%
Category D:
BBB-/Baa3 .150% .450%
Category E:
BB+ or below/
Ba1 or below .200% .625%
"Bank" shall have the meaning assigned that term in the
first paragraph in this Agreement.
"Bankruptcy Code" shall have the meaning assigned that
term in Section 6.5.
"Base Rate" shall mean, for any day, a rate per annum
equal to the higher of (i) the Prime Rate and (ii) 1/2 of 1%
plus the Federal Funds Rate, each as in effect from time to
time.
"Base Rate Lending Office" means, with respect to each
Bank, the office of such Bank specified as its "Base Rate
Lending Office" on the signature pages to the Agreement or such
other office of such Bank as such Bank may from time to time
specify as such to the Borrowers and the Agent.
"Base Rate Loan" shall mean any Loan during any period
during which such Loan is bearing interest at the rates
provided for in Section 2.1(a).
"Borrower" shall mean either PPL or Finance Co. and
"Borrowers" shall mean PPL and Finance Co.
"Borrowing" shall mean the incurrence of one Type of Loan
to a Borrower from all the Banks on a given date, all of which
Eurodollar Loans shall have the same Interest Period, pursuant
to Section 1.2; provided, however, that Loans to a Borrower of
a different Type extended by one or more Banks pursuant to
Section 2.5(b) shall be considered a part of the related
Borrowing.
"Business Day" shall mean (i) for all purposes other than
as covered by clause (ii) below, any day excluding Saturday,
Sunday and any day on which banks in New York City are
authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in
clause (i) and which is also a day for trading by and between
banks in U.S. dollar deposits in the London interbank
Eurodollar market.
"Capital Lease Obligations" of any person shall mean
obligations of such person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as
capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with GAAP.
"Closing Date" shall mean November 20, 1997.
"Commitment", for each Bank, shall mean the amount
specified opposite its name on Schedule I hereto, such
Commitment to be reduced by the amount of any reduction thereto
effected pursuant to Section 1.7, Section 6 and/or
Section 10.6(b)(A).
"Commitment Fee" shall have the meaning assigned that term
in Section 1.6(a).
"Consolidated Capitalization of PPL" shall mean the sum of
(A) the Consolidated Indebtedness of PPL and (B)(i) the
consolidated shareowners' equity (determined in accordance with
GAAP) of the common, preference and preferred stockholders of
PPL and (ii) the aggregate amount of Hybrid Preferred
Securities of PPL, except that for purposes of calculating
Consolidated Capitalization of PPL, Consolidated Indebtedness
of PPL shall exclude Non-Recourse Indebtedness of PPL and
Consolidated Capitalization of PPL shall exclude that portion
of shareholder equity attributable to assets securing Non-
Recourse Indebtedness of PPL.
"Consolidated Capitalization of Resources" shall mean the
sum of (A) the Consolidated Indebtedness of Resources and
(B)(i) the consolidated shareowners' equity (determined in
accordance with GAAP) of the common, preference and preferred
stockholders of Resources and (ii) the aggregate amount of
Hybrid Preferred Securities of Resources, except that for
purposes of calculating Consolidated Capitalization of
Resources, Consolidated Indebtedness of Resources shall exclude
Non-Recourse Indebtedness of Resources and Consolidated
Capitalization of Resources shall exclude that portion of
shareholder equity attributable to assets securing Non-Recourse
Indebtedness of Resources.
"Consolidated Indebtedness of PPL" shall mean the
consolidated Indebtedness of PPL (determined in accordance with
GAAP), except that for purposes of this definition (1)
Consolidated Indebtedness of PPL shall exclude Non-Recourse
Indebtedness of PPL and (2) Consolidated Indebtedness of PPL
shall exclude any Hybrid Preferred Securities of PPL.
"Consolidated Indebtedness of Resources" shall mean the
consolidated Indebtedness of Resources (determined in
accordance with GAAP), except that for purposes of this
definition (1) Consolidated Indebtedness of Resources shall
exclude Non-Recourse Indebtedness of Resources and (2)
Consolidated Indebtedness of Resources shall exclude any Hybrid
Preferred Securities of Resources.
"Credit Exposure", for each Bank at any time, shall mean
the aggregate principal amount at such time of all outstanding
Loans of such Bank to the Borrowers plus the aggregate amount
at such time of such Bank's L/C Exposure.
"Default" with respect to a Borrower, shall mean any
event, act or condition which with notice or lapse of time or
both would constitute an Event of Default with respect to that
Borrower.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other "accredited investor" (as
defined in SEC Regulation D).
"Eurodollar Lending Office" shall mean, with respect to
each Bank, the office of such Bank specified as its "Eurodollar
Lending Office" on the signature pages to the Agreement or such
other office of such Bank as such Bank may from time to time
specify as such to the Borrowers and the Agent.
"Eurodollar Loan" shall mean any loan during any period
during which such Loan is bearing interest at the rates
provided for in Section 2.1(b).
"Event of Default" shall mean with respect to PPL each of
the Events of Default specified in Section 6A and with respect
to Finance Co., each of the Events of Default specified in
Section 6B.
"Expiry Date" shall mean the date 364 days from the date
hereof subject to extension pursuant to Section 2.6.
"Extension Letter" shall mean a letter from the Borrowers
requesting an extension of the Expiry Date substantially in the
form of Exhibit C hereto.
"Federal Funds Rate" shall mean for any day, a fluctuating
interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds
brokers of recognized standing selected by the Agent.
"Finance Co." shall have the meaning assigned that term in
the first paragraph of this Agreement.
"Finance Co. Obligations" shall mean all obligations of
Finance Co. under this Agreement to pay (i) the principal of
and interest on the Loans and LC Disbursements when and as due,
whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, and (ii) all other payment
obligations of Finance Co. hereunder.
"First Mortgagee Bonds" shall mean the first mortgage
bonds issued by PPL pursuant to its Mortgage and Deed of Trust
dated as of October 1, 1945, as supplemented.
"GAAP" shall mean United States generally accepted
accounting principles applied on a consistent basis.
"Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having
the economic effect of guaranteeing any Indebtedness of any
other person (the "primary obligor") in any manner, whether
directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for
the purchase of) any security for payment of such Indebtedness,
(b) to purchase or lease property, securities or services for
the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working
capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable
the primary obligor to pay such Indebtedness; provided,
however, that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business.
"Hybrid Preferred Securities of PPL" means (1) the
preferred securities and subordinated debt described in the
Prospectus dated as of April 3, 1997 of PP&L Capital Trust and
PPL and the preferred securities and subordinated debt
described in the Prospectus dated as of June 9, 1997 of PP&L
Capital Trust II and PPL (collectively, the "Existing TOPrS")
and (2) any additional preferred securities and subordinated
debt (with a maturity of at least twenty years) similar to the
Existing TOPrS and in an aggregate amount not to exceed
$100,000,000, issued by business trusts, limited liability
companies, limited partnerships (or similar entities) (i) all
of the common equity, general partner or similar interests of
which are owned (either directly or indirectly through one or
more wholly-owned Subsidiaries) at all times by PPL, (ii) that
have been formed for the purpose of issuing hybrid preferred
securities and (iii) substantially all the assets of which
consist of (A) subordinated debt of PPL or a Subsidiary of PPL,
as the case may be, and (B) payments made from time to time on
the subordinated debt.
"Hybrid Preferred Securities of Resources" means (1) the
preferred securities and subordinated debt described in the
Prospectus dated as of April 3, 1997 of PP&L Capital Trust and
PPL and the preferred securities and subordinated debt
described in the Prospectus dated as of June 9, 1997 of PP&L
Capital Trust II and PPL (collectively, the "Existing TOPrS")
and (2) any additional preferred securities and subordinated
debt (with a maturity of at least twenty years) similar to the
Existing TOPrS and in an aggregate amount not to exceed
$100,000,000, issued by business trusts, limited liability
companies, limited partnerships (or similar entities) (i) all
of the common equity, general partner or similar interests of
which are owned (either directly or indirectly through one or
more wholly-owned Subsidiaries) at all times by Resources or
PPL, (ii) that have been formed for the purpose of issuing
hybrid preferred securities and (iii) substantially all the
assets of which consist of (A) subordinated debt of Resources
or a Subsidiary of Resources, as the case may be, and (B)
payments made from time to time on the subordinated debt.
"Indebtedness" of any person shall mean, without
duplication, (a) all obligations of such person for borrowed
money, (b) all obligations of such person with respect to
deposits or advances of any kind, (c) all obligations of such
person evidenced by bonds, debentures, notes or similar
instruments, (d) all obligations of such person under
conditional sale or other title retention agreements relating
to property or assets purchased by such person, (e) all
obligations of such person issued or assumed as the deferred
purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any
Lien or property owned or acquired by such person, whether or
not the obligations secured thereby have been assumed but shall
not include any obligations that are without recourse to such
person, (g) all Guarantees by such person of Indebtedness of
others, (h) all Capital Lease Obligations of such person,
(i) all obligations of such person in respect of Interest Rate
Protection Agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements (the
amount of any such obligation to be the amount that would be
payable upon the acceleration, termination or liquidation
thereof) and (j) all obligations of such person as an account
party in respect of letters of credit and bankers' acceptances.
"Interest Period" shall mean (a) as to any Eurodollar
Loan, the period commencing on the date of such Loan and ending
on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar
month that is 1, 2, 3 or 6 months thereafter, as the applicable
Borrower may elect in a Notice of Borrowing or Notice of
Conversion and (b) as to any Base Rate Loan, the period
commencing on the date of such Loan and ending on the date 90
days thereafter or, if earlier, on the Expiry Date or the date
of prepayment of such Loan. If any Interest Period would
otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business
Day, provided that if any Interest Period applicable to a Bor-
rowing of Eurodollar Loans would otherwise expire on a day
which is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business
Day.
"Interest Rate Protection Agreement" shall mean any
agreement providing for an interest rate swap, cap or collar,
or for any other financial arrangement designed to protect
against fluctuations in interest rates.
"L/C Commitment" shall mean the commitment of the Fronting
Bank to issue Letters of Credit pursuant to Section 1A.
"L/C Disbursement" shall mean a payment or disbursement
made by the Fronting Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit
at such time plus (b) the aggregate principal amount of all L/C
Disbursements that have not yet been reimbursed at such time.
The L/C Exposure of any Bank at any time shall mean its
Applicable Percentage of the aggregate L/C Exposure at such
time.
"L/C Participation Fee" shall have the meaning assigned to
such term in Section 1.6(b).
"Letter of Credit" shall mean any letter of credit issued
pursuant to Section 1A.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or
security interest in or on such asset, (b) the interest of a
vender or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loan" shall have the meaning assigned that term in
Section 1.1.
"Loan Documents" shall have the meaning assigned that term
in Section 8.1.
"Moody's" shall mean Moody's Investors Service, Inc. or
any successor thereto.
"Non-Recourse Indebtedness of PPL" shall mean indebtedness
that is nonrecourse to PPL or any of its Subsidiaries.
"Non-Recourse Indebtedness of Resources" shall mean
indebtedness that is nonrecourse to Resources, either Borrower
or any of PPL's Subsidiaries.
"Notice of Borrowing" shall have the meaning assigned that
term in Section 1.2.
"Notice of Conversion" shall have the meaning assigned
that term in Section 2.4(a).
"Payment Office" shall mean the office of the Agent
located at 270 Park Avenue, New York, New York 10017, or such
other office as the Agent may hereafter designate in writing
as such to the other parties hereto.
"Permitted Liens" shall mean (a) Liens for taxes,
assessments or governmental charges or levies to the extent not
past due, or which are being contested in good faith in
appropriate proceedings for which Resources has provided
appropriate reserves for the payment thereof in accordance with
GAAP; (b) pledges or deposits in the ordinary course of
business to secure obligations under worker's compensation laws
or similar legislation; (c) other pledges or deposits in the
ordinary course of business (other than for borrowed monies)
that, in the aggregate, are not material to Resources;
(d) Liens imposed by law such as materialmen's, mechanics',
carriers', workers' and repairmen's Liens and other similar
Liens arising in the ordinary course of business for sums not
yet due or currently being contested in good faith by
appropriate proceedings; (e) attachment, judgment or other
similar Liens arising in connection with court proceedings,
provided that such Liens, in the aggregate, shall not exceed
$50,000,000 at any one time outstanding, and (f) other Liens
not otherwise referred to in the foregoing clauses (a) through
(e) above, provided that such other Liens do not secure at any
time obligations in an aggregate amount in excess of
$100,000,000 at any time outstanding.
"Persons" shall mean and include any individual, firm,
corporation, association, trust or other enterprise or any
governmental or political subdivision or agency, department or
instrument thereof.
"PPL" shall have the meaning assigned that term in the
first paragraph of this Agreement.
"Prime Rate" shall mean the rate which The Chase Manhattan
Bank announces from time to time as its prime lending rate,
such Prime Rate to change when and as such prime lending rate
changes. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged
to any customer. The Chase Manhattan Bank may make commercial
loans or other loans at rates of interest at, above or below
the Prime Rate.
"Quoted Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period, the average rate (rounded upwards
to the nearest 1/16 of 1%) at which dollar deposits
approximately equal in principal amount to the Agent's portion
of such Eurodollar Loan and for a maturity comparable to such
Interest Period are offered to the principal London office of
the Reference Banks in immediately available funds in the
London interbank market at approximately 11:00 A.M. (London
time) 2 Business Days prior to the commencement of such
Interest Period, without any addition to such offered quotation
to give effect to the reserve requirements established for
Eurodollar transactions by Regulation D. Each Reference Bank
shall use its best efforts to furnish rates to the Agent as
contemplated hereby. If any one of the Reference Banks shall
be unable or otherwise fail to supply such rates to the Agent
upon its request, the applicable rate shall be determined on
the basis of the rates submitted by the remaining two Reference
Banks. If more than one Reference Bank shall be unable or
otherwise fail to supply such rates, there shall be no
applicable rate.
"Reference Banks" shall mean The Chase Manhattan Bank,
Citibank, N.A. and Morgan Guaranty Trust Company.
"Register" shall have the meaning provided in 1.4(b).
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in
effect or any successor to all or a portion thereof
establishing reserve requirements.
"Required Banks" shall mean Banks having Loans the
outstanding principal amount of which aggregate (or, if no
Loans are outstanding, Banks with Commitments aggregating) at
least the majority of the aggregate outstanding principal
amount of all Loans (or of the Total Commitment).
"Resources" shall have the meaning assigned that term in
the first paragraph of this Agreement.
"SEC" shall have the meaning assigned that term in
Section 5.1(c).
"SEC Regulation D" shall mean Regulation D as promulgated
under the Securities Act of 1933, as amended, as the same may
be in effect from time to time."
"S&P" shall mean Standard & Poor's Ratings Group or any
successor thereto.
"Subsidiary" shall mean any company, partnership,
association or other business entity in which any Person and
its Subsidiaries now have or may hereafter acquire an aggregate
of at least 50% of the voting stock or ownership interests.
"Taxes" shall have the meaning assigned that term in
Section 3.4.
"Total Commitment" shall mean the aggregate of all the
Commitments of all the Banks.
"Type" shall mean any type of Loan, i.e., whether a Loan
is a Base Rate Loan or a Eurodollar Loan.
"Unaffected Bank" shall have the meaning assigned that
term in Section 2.5(c).
"written" or "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier
device, telegraph or cable.
10.2 Accounting Principles. All statements to be
prepared and determinations to be made under this Agreement,
including (without limitation) those pursuant to Section 5,
shall be prepared and made in accordance with generally
accepted accounting principles applied on a basis consistent
with the accounting principles reflected in the audited
financial statements of PPL and Resources for the fiscal year
ended December 31, 1996, referred to in Section 7.4, except for
changes in accounting principles consistent with GAAP.
10.3 Exercise of Rights. Neither the failure nor delay
on the part of any of the Banks or the Fronting Bank to
exercise any right, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative
and not exclusive of any rights or remedies which the Banks
would otherwise have. No notice to or demand on PPL, Finance
Co. or Resources in any case shall entitle PPL, Finance Co. or
Resources, as applicable, to any other or further notice or
demand in similar or other circumstances or constitute a waiver
of the right of the Banks or the Fronting Bank to any other or
further action in any circumstances without notice or demand.
10.4 Amendment and Waiver. Neither this Agreement nor
any other Loan Document nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by PPL,
Finance Co. and Resources, and the Required Banks, provided
that no such change, waiver, discharge or termination shall,
without the consent of each Bank directly affected thereby,
(i) extend the final scheduled maturity of any Loan (except as
provided for in Section 2.6), or reduce the rate or extend the
time of payment of interest or Commitment Fees thereon (except
in connection with a waiver of the applicability of any post-
default increase in interest rates), or reduce the principal
amount thereof (except to the extent repaid in cash),
(ii) amend, modify or waive any provision of this Section 10.4,
(iii) reduce the percentage specified in the definition of
Required Banks or (iv) consent to the assignment or transfer by
PPL, Finance Co. or Resources of any of its rights and
obligations under this Agreement or the release of Resources
from its guarantee hereunder; provided further, that no such
change, waiver, discharge or termination shall (x) increase the
Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that
waivers or modifications of conditions precedent, covenants,
Defaults or Events of Default shall not constitute an increase
of the Commitment of any Bank) or (y) without the consent of
the Agent, amend, modify or waive any provision of Section 8 as
such Section applies to such Agent or any other provision as
such Section relates to the rights or obligations of such
Agent.
10.5 Expenses; Indemnification. (a) The Borrowers agree
to pay all reasonable out-of-pocket expenses (i) of the Agent
and the Fronting Bank incurred in connection with the
preparation, execution, delivery, enforcement and
administration (exclusive of any internal overhead expenses) of
this Agreement and any and all agreements supplementary hereto
and the making and repayment of the Loans, the issuance of the
Letters of Credit and the payment of interest, including,
without limitation, the reasonable fees and expenses of
Cravath, Swaine & Moore, counsel for the Agent and (ii) of the
Agent, the Fronting Bank and each Bank incurred in connection
with the enforcement of this Agreement, including, without
limitation, the reasonable fees and expenses of any counsel for
any of the Banks with respect to such enforcement; provided
that none of the Borrowers or Resources shall be liable for any
fees, charges or disbursements of any counsel for the Banks or
the Agent other than Cravath, Swaine & Moore associated with
the preparation, execution and delivery of this Agreement and
the closing documentation contemplated hereby.
(b) The Borrowers further agree to pay, and to save the
Agent, the Fronting Bank and the Banks harmless from all
liability for, any stamp or other documentary taxes which may
be payable in connection with the Borrowers' execution or
delivery of this Agreement, their borrowings hereunder or
Letters of Credit, or the issuance of any notes or of any other
instruments or documents provided for herein or delivered or to
be delivered by each of them hereunder or in connection
herewith.
(c) The Borrowers agree to indemnify the Agent, the
Fronting Bank and each Bank and each of their respective
affiliates, directors, officers and employees (each such person
being called an "Indemnitee") against all losses, claims,
damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent, the Fronting
Bank or any Bank is a party thereto) which any of them may pay
or incur arising out of or relating to this Agreement, the
other Loan Documents, the transactions contemplated hereby, the
direct or indirect application or proposed application of the
proceeds of any Loan hereunder or the issuance of Letters of
Credit; provided that such indemnification shall not extend to
disputes solely among the Agent, the Fronting Bank and the
Banks; and provided further that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined
by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(d) All obligations provided for in this Section 10.5
shall survive any termination of this Agreement or the
resignation, withdrawal or removal of any Bank.
10.6 Successors and Assigns. (a) This Agreement shall
be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto,
provided that none of PPL, Finance Co. or Resources may assign
or transfer any of its interests hereunder, except to the
extent any such assignment results from the consummation of a
transaction permitted under Section 5.2, without the prior
written consent of the Banks and provided further that the
right of each Bank to transfer, assign or grant participations
in its rights and/or obligations hereunder shall be limited as
set forth below in this Section 10.6, provided that nothing in
this Section 10.6 shall prevent or prohibit any Bank from
pledging its rights under this Agreement and/or its Loans
hereunder to a Federal Reserve Bank in support of borrowings
made by such Bank from such Federal Reserve Bank. In order to
facilitate such an assignment to a Federal Reserve Bank, the
Borrowers shall, at the request of the assigning Bank, duly
execute and deliver to the assigning Bank a promissory note
evidencing its Commitment or Loans made by the assigning Bank
hereunder.
(b) Each Bank shall have the right to transfer, assign or
grant participations in all or any part of its remaining rights
and obligations hereunder on the basis set forth below in this
clause (b).
(A) Assignments. Each Bank may assign all or a portion
of its rights and obligations hereunder pursuant to this
clause (b)(A) to (x) one or more Banks or any affiliates of any
Bank or (y) one or more other Eligible Transferees, provided
that (i) any such assignment pursuant to clause (y) above shall
be in the aggregate amount of at least $5,000,000, (ii) after
giving effect to any such assignment pursuant to clause (x) or
(y) above, no Bank shall have a Commitment of less than
$5,000,000 unless such Bank's Commitment is reduced to zero
pursuant to such assignment, (iii) the assigning Bank shall not
assign any of its rights and obligations under this Agreement
without assigning the same percentage of its rights and
obligations under the 5-Year Agreement, provided that no Banks
shall be required to make an assignment under the 5-Year
Agreement with respect to assignments made pursuant to Section
2.6 hereunder, (iv) any assignment pursuant to clause (y) shall
require the consent of the Borrowers, which consent shall not
be unreasonably withheld, and provided further, that, so long
as no Loans or interest thereon shall be outstanding and no
Default or Event of Default shall have occurred with respect to
PPL, Finance Co. or Resources and then be continuing, the
Borrowers may at their option terminate the portion of such
assigning Bank's Commitment proposed to be assigned pursuant to
clause (y) above in lieu of consenting to such assignment, and
the Total Commitment shall be reduced in the amount of such
termination. Assignments or terminations of all or any portion
of any Bank's Commitment pursuant to this clause (b)(A) will
only be effective if the Agent shall have received a written
notice from the assigning Bank and the assignee, or, in the
case of a termination, the Borrowers, and, in the case of an
assignment, payment of a nonrefundable assignment fee of $2,500
to the Agent by either the assigning Bank or the assignee. No
later than five Business Days after its receipt of any written
notice of assignment or termination, the Agent will record such
assignment or termination, and the resultant effects thereof on
the Commitment of the assigning or terminating Bank and, in the
case of an assignment, the assignee, in the Register, at which
time such assignment or termination shall become effective,
provided that the Agent shall not be required to, and shall
not, so record any assignment or termination in the Register on
or after the date on which any proposed amendment, modification
or supplement in respect of this Agreement has been circulated
to the Banks for approval until the earlier of (x) the
effectiveness of such amendment, modification or supplement in
accordance with Section 10.4 or (y) 30 days following the date
on which such proposed amendment, modification or supplement
was circulated to the Banks. Upon the effectiveness of any
assignment or termination pursuant to this clause (b)(A), (x)
the assignee, in the case of an assignment, will become a
"Bank" for all purposes of this Agreement and the other Loan
Documents with a Commitment as so recorded by the Agent in the
Register, and to the extent of such assignment or termination,
the assigning or terminating Bank shall be relieved of its
obligations hereunder with respect to the portion of its
Commitment being assigned or terminated.
(B) Participations. Each Bank may transfer, grant or
assign participations in all or any part of such Bank's
interests and obligations hereunder pursuant to this clause
(b)(B) to any Eligible Transferee, provided that (i) such Bank
shall remain a "Bank" for all purposes of this Agreement and
the transferee of such participation shall not constitute a
Bank hereunder and (ii) no participant under any such
participation shall have any rights under the Agreement or
other Loan Document or any rights to approve any amendment to
or waiver of this Agreement or any other Loan Document except
to the extent such amendment or waiver would (x) extend the
final scheduled maturity of any of the Loans or the Commitment
in which such participant is participating, (y) reduce the
interest rate (other than as a result of waiving the
applicability of any post-default increases in interest rates)
or Commitment Fee or other fees applicable to any of the Loans
or Commitments in which such participant is participating or
postpone the payment of any thereof or reduce the principal
amount of any Loan (except to the extent repaid in cash) or
(z) release Resources from its obligations as a guarantor
hereunder. In the case of any such participation, the
participant shall not have any rights under this Agreement or
any of the other Loan Documents (the participant's rights
against the granting Bank in respect of such participation to
be those set forth in the agreement with such Bank creating
such participation) and all amounts payable by each of the
Borrowers hereunder shall be determined as if such Bank had not
sold such participation, provided that such participant shall
be entitled to receive additional amounts under Sections 1.8
and 2.5 on the same basis as if it were a Bank but in no case
shall be entitled to any amount greater than would have been
payable had the Bank not sold such participations.
(c) Each Bank hereby represents, and each Person that
becomes a Bank pursuant to an assignment permitted by the
preceding clause (b)(A) will upon its becoming party to this
Agreement represent, that it is an Eligible Transferee which
makes loans in the ordinary course of its business and that it
will make or acquire Loans for its own account in the ordinary
course of such business, provided that, subject to the
preceding clauses (a) and (b), the disposition of any
promissory notes or other evidences of or interests in Loans
held by such Bank shall at all times be within its exclusive
control.
10.7 Notices, Requests, Demands. All notices, requests,
demands or other communications to or upon the respective
parties hereto shall be deemed to have been given or made (i)
in the case of notice by mail, when actually received, and (ii)
in the case of telecopier notice sent over a telecopier machine
owned or operated by a party hereto, when sent, in each case
addressed to the party or parties to which such notice is given
at their respective addresses shown below their signatures
hereto or at such other address as such party may hereafter
specify in writing to the others. No other method of giving
notice is hereby precluded.
10.8 Survival of Representations and Warranties. All
representations and warranties contained herein or otherwise
made in writing by PPL, Finance Co. or Resources in connection
herewith shall survive the execution and delivery of this
Agreement.
10.9 Governing Law. This Agreement and the rights and
obligations of the parties under this Agreement (other than as
relates to Letters of Credit) shall be governed by and
construed and interpreted in accordance with the laws of the
State of New York. Each Letter of Credit shall be governed by,
and construed and interpreted in accordance with the laws or
rules designated in such Letter of Credit, or if no such laws
or rules are designated, the Uniform Customs and Practice for
Documentary Credits (1993 revision), International Chamber of
Commerce, publication no. 500 (the "Uniform Customs") and, as
to matters not governed by the Uniform Customs, the laws of the
State of New York.
10.10 Counterparts. This Agreement may be executed in
any number of copies, and by the different parties hereto on
the same or separate counterparts, each of which shall be
deemed to be an original instrument. Complete counterparts of
this Agreement shall be lodged with each Borrower, Resources
and the Agent.
10.11 Effectiveness. This Agreement shall become
effective on the Closing Date.
10.12 Transfer of Office. (a) Each Bank may transfer
and carry its Loans at, to or for the account of any branch
office, subsidiary or affiliate of such Bank; provided that
such Bank shall continue to bear all of its obligations under
this Agreement; and provided further that the Borrowers shall
not be responsible for costs arising under Sections 1.8, 2.5 or
3.4 resulting from any such transfer to the extent not
otherwise applicable to such Bank prior to such transfer.
(b) Upon a Bank becoming aware of any event which will
entitle it to any additional amount pursuant to Section 2.5(a)
or Section 3.4, such Bank shall take all reasonable steps
(including but not limited to making, maintaining or funding
the affected Loan through another office of such Bank) to avoid
or reduce the additional amount payable by the applicable
Borrower; provided that, such steps will not result in any
additional costs, liabilities or expenses (not reimbursable by
the applicable Borrower) to such Bank and are not otherwise
inconsistent with the interests of such Bank determined in good
faith.
10.13 Proration of Payments. The Banks agree among
themselves that, with respect to all amounts received by them
which are applicable to the payment of principal of or interest
on the Loans, equitable adjustment will be made so that, in
effect, all such amounts will be shared ratably among the Banks
on the basis of the amounts then owed each of them in respect
of such obligation, whether received by voluntary payment, by
realization upon security, by the exercise of any right of set-
off or bankers' lien, by counterclaim or cross action, under or
pursuant to this Agreement or otherwise. Each of the Banks
agrees that if it should receive any payment on its Loans of a
sum or sums in excess of its pro rata portion (other than as
expressly contemplated by Section 2.6(ii)), then the Bank
receiving such excess payment shall purchase for cash from the
other Banks an interest in the Loans of such Banks in such
amount as shall result in a ratable participation by each of
the Banks in the aggregate unpaid amount of all outstanding
Loans then held by all of the Banks. If all or any portion of
such excess payment is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
The Borrowers agree that any Bank so purchasing a
participation from another Bank pursuant to this Section 10.13
may exercise all its rights with respect to such participation
as fully as if such Bank were the direct creditor of the
Borrowers in the amount of such participation.
10.14 Jurisdiction; Consent to Service of Process. (a)
Each of PPL, Finance Co. and Resources hereby irrevocably and
unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any
right that the Agent, the Fronting Bank or any Bank may
otherwise have to bring any action or proceeding relating to
this Agreement against any of PPL, Finance Co., Resources or
its properties in the courts of any jurisdiction.
(b) Each of PPL, Finance Co. and Resources hereby
irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this
Agreement in any court referred to in paragraph (a) of this
Section. Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in
Section 10.7. Nothing in this Agreement will affect the right
of any party to this Agreement to serve process in any other
manner permitted by law.
10.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
10.16 Headings Descriptive. The headings of the various
provisions of this Agreement are inserted for convenience of
reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Agreement to be duly executed
and delivered as of the date first above written.
PP&L, INC.,
By /s/ John R. Biggar
Name:
Title: Vice President Finance
PP&L CAPITAL FUNDING, INC.,
By /s/ R.E. Hill
Name:
Title: President
PP&L RESOURCES, INC.,
By /s/ James E. Abel
Name:
Title: Treasurer
THE CHASE MANHATTAN BANK,
Individually and as Agent
and Fronting Bank
By /s/ Thomas Kozlark
Name:
Title: Vice President
CITIBANK, N.A.
By /s/ Robert J. Harrity, Jr.
Name:
Title: Managing Director
THE BANK OF NEW YORK
By /s/ John N. Watt
Name:
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ J. Alan Edwards
Name:
Title: Authorized Signatory
CORESTATES BANK, N.A.
By /s/ Anthony D. Braxton
Name:
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By /s/ J. Scott Karro
Name:
Title: Associate
By /s/ Eric J. Eckholdt
Name:
Title: Associate
DEUTSCHE BANK AG,
NEW YORK BRANCH and/or
CAYMAN ISLANDS BRANCH
By /s/ Gabrielle C. Upton
Name:
Title: Assistant Vice
President
By /s/ Steven A. Cohen
Name:
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Kenneth J. Bauer
Name:
Title: Authorized Agent
FIRST UNION NATIONAL BANK
By /s/ Michael J. Kolosowsky
Name:
Title: Vice President
FUJI BANK LIMITED
By /s/ Toshiaki Yakura
Name:
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
By /s/ Philip S. Detjens
Name:
Title: Vice President
MELLON BANK, N.A.
By /s/ A. Gary Chace
Name:
Title: Senior Vice President
NATIONSBANK, N.A.
By /s/ Gretchen P. Burud
Name:
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Darlene Riedel
Name:
Title: Vice President
<PAGE>
Bank Address Schedule
Name of Bank and Address Phone
Number(s) Fax Number(s)
The Chase Manhattan Bank
Attn: Jaimin Patel
270 Park Avenue
New York, NY 10017 (212) 270-1354 (212) 270-2101
The Bank of New York
Attn: John Watt
One Wall Street
New York, NY 10286 (212) 635-7533 (212) 635-7533
The Bank of Nova Scotia
Attn: Phil Adsetts
One Liberty Plaza
26th Floor
New York, NY 10006 (212) 225-5010 (212) 225-5090
Citibank, N.A.
Attn: Phil Kron
Jean Chastain
399 Park Avenue
9th Floor
New York, NY 10043 (212) 559-1500 (212) 793-6130
Corestates Bank, N.A.
Attn: Anthony Braxton
Jon Peterson
Widener Bldg. (215) 786-4353 (215) 786-7721
1339 Chestnut Street (215) 786-7799 (215) 786-7704
Philadelphia, PA 19101-7618
Credit Suisse First Boston
Attn: James Moran
11 Madison Avenue
20th Floor
New York, NY 10010 (212) 325-9176 (212) 325-8314
Deutsche Bank AG
Attn: Gabrielle Upton
Rosemary Kelley
31 West 52nd Street
24th Floor (212) 469-7368 (212) 469-4638
New York, NY 10019 (212) 469-8677
The First National Bank
of Chicago
Attn: Kenneth Bauer
Madeleine Pember
One First National Plaza
Suite 0360 (312) 732-6282 (312) 732-3055
Chicago, IL 60670 (312) 732-9727
First Union National Bank
Attn: Brian Tate
301 South College Street
5th Floor
Charlotte, NC 28288-0735 (704) 383-0510 (704) 383-6670
Fuji Bank Limited
Attn: Michael Gebauer
Mark Olson
Two World Trade Center (212) 898-2064 (212) 321-9407
New York, NY 10048 (212) 898-2066
Morgan Guaranty Trust Company
Attn: Philip Detjens
60 Wall Street
New York, NY 10005 (212) 648-8454 (212) 648-5014
Mellon Bank, N.A.
Attn: Mary Ellen Usher
A. Gary Chace
1 Mellon Bank Center
Suite 4425 (412) 236-1203 (412) 236-1840
Pittsburgh, PA 15258-0001 (412) 236-2786
NationsBank, N.A.
Attn: Brenda Tate
Andrew Hemsley
100 North Tyron Street
8th Floor (704) 386-1644 (704) 386-1270
Charlotte, NC 28255 (704) 386-0710
Toronto Dominion (Texas), Inc.
Attn: Katherine Lucey
31 West 52nd Street
New York, NY 10019-6101 (212) 468-0785 (212) 262-1929
<PAGE>
SCHEDULE I
BANK COMMITMENT
THE CHASE MANHATTAN BANK ...................... $15,000,000
CITIBANK, N.A. ................................ $15,000,000
THE BANK OF NEW YORK .......................... $10,000,000
THE BANK OF NOVA SCOTIA ....................... $10,000,000
CORESTATES BANK, N.A. ......................... $10,000,000
CREDIT SUISSE FIRST BOSTON .................... $10,000,000
DEUTSCHE BANK AG .............................. $10,000,000
THE FIRST NATIONAL BANK OF CHICAGO ............ $10,000,000
FIRST UNION NATIONAL BANK ..................... $10,000,000
FUJI BANK LIMITED. ............................ $10,000,000
MORGAN GUARANTY TRUST COMPANY ................. $10,000,000
MELLON BANK, N.A. ............................. $10,000,000
NATIONSBANK, N.A. ............................. $10,000,000
TORONTO DOMINION (TEXAS), INC. ................ $10,000,000
TOTAL COMMITMENT ...... $150,000,000
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL OR SENIOR COUNSEL FOR PPL,
FINANCE CO. AND RESOURCES
The opinion of Counsel for PPL, Finance Co. and Resources,
referred to in Section 4.1(b) of the 364-Day Revolving
Credit Agreement among PPL, Finance Co., Resources, as
guarantor of the obligations of Finance Co., the banks from
time to time party thereto and The Chase Manhattan Bank, as
fronting bank, collateral agent and as agent for the banks
thereto and the 5-Year Revolving Credit Agreement among PPL,
Finance Co., Resources, as guarantor of the obligations of
Finance Co., the banks from time to time party thereto and
The Chase Manhattan Bank, as fronting bank, collateral agent
and as agent for the banks thereto (each individually an
"Agreement" and together, the "Agreements") shall be to the
effect that (terms used herein shall have the meanings
specified therefor in the Agreements):
1. Each of PPL and Resources is duly incorporated,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and each of PPL and Finance Co.
has the corporate power to make and perform the Agreements
and to borrow under the Agreements and Resources has the
corporate power to guarantee the obligations of Finance Co.
under the Agreements.
2. The making and performance by each of PPL and
Finance Co. of the Agreements, and the guarantee by
Resources of the obligations of Finance Co. under the
Agreements have been duly authorized by all necessary
corporate action and do not and will not violate any
provision of law or regulation, or any decree, order, writ
or judgment, or any provision of its charter or by-laws, or
result in the breach of or constitute a default under any
indenture or other agreement or instrument known to such
counsel to which any of them is a party.
3. The Agreements constitute the legal, valid and
binding obligations of PPL, Finance Co. and Resources
enforceable in accordance with their respective terms except
to the extent limited by bankruptcy, insolvency or
reorganization laws or by other laws relating to or
affecting the enforceability of creditors' rights generally
and by general equitable principles.
4. Except as disclosed in or contemplated by PPL's or
Resources' Form 10-K Report to the Securities and Exchange
Commission for the year 1996, no litigation, arbitration or
administrative proceeding is pending or, to the knowledge of
such counsel, threatened, which, if determined adversely to
PPL or Resources, would materially and adversely affect the
ability of PPL or Resources to perform any of its
obligations under the Agreements. There is no litigation,
arbitration or administrative proceeding pending or, to the
knowledge of such counsel, threatened which questions the
validity of the Agreements.
5. Neither PPL nor Finance Co. is engaged principally,
or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying
any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System.
6. There have not been any "reportable events," as
that term is defined in Section 4043 of the Employee
Retirement Income Security Act of 1974, as amended, which
would result in a material liability of PPL or Resources.
7. No authorization, consent or approval from
governmental bodies or regulatory authorities is required
for the making and performance of the Agreement by PPL,
Finance Co. or Resources or by PPL or Finance Co. for the
borrowings thereunder, except such authorizations, consents
and approvals as have been obtained prior to the making of
any Loans and are in full force and effect, all of which are
listed on Annex I hereto.
<PAGE>
EXHIBIT B
To Each of the Banks party to the
Revolving Credit Agreements
referred to below, and The Chase
Manhattan Bank, as Fronting Bank,
as Collateral Agent and as Agent
for such Banks
Re: $150,000,000 364-Day Revolving Credit Agreement
$300,000,000 5-Year Revolving Credit Agreement
Dear Ladies and Gentlemen:
We have acted as Counsel to PP&L, Inc. ("PPL"), PP&L
Capital Funding, Inc. ("Finance Co.") and PP&L Resources,
Inc. (individually "Resources" and collectively with PPL and
Finance Co, the "Loan Parties") in connection with the 364-
Day Revolving Credit Agreement dated November [ ], 1997
among the Loan Parties, the Banks listed on Schedule I
thereto, and you as Fronting Bank, as Collateral Agent and
as Agent for such Banks and the 5-Year Revolving Credit
Agreement dated November [ ], 1997 among the Loan Parties,
the Banks listed on Schedule I thereto, and you as Fronting
Bank, as Collateral Agent and as Agent for such Banks
(individually each an "Agreement" and collectively, the
"Agreements").
We are familiar with the Agreements and the other
documents executed and delivered by the Loan Parties in
connection with the Agreements. We have also examined such
other documents and satisfied ourselves as to such other
matters as we have deemed necessary in order to render this
opinion.
Based on the foregoing, we are of the opinion that
Finance Co. is duly incorporated, validly existing and in
good standing under the laws of Delaware and Finance Co. has
the corporate power to make and perform the Agreements and
to borrower under the Agreements. We are also of the
opinion that the Agreements constitute the legal, valid and
binding obligations of the Loan Parties enforceable in
accordance with their terms except to the extent limited by
bankruptcy, insolvency or reorganization laws or by other
laws relating to or affective the enforceability of
creditors' rights generally and by general equitable
principles.
We are members of the New York Bar and do not hold
ourselves out as experts on the laws of the Commonwealth of
Pennsylvania. Insofar as the opinions set forth herein are
affected by the laws of the Commonwealth of Pennsylvania, we
have relied upon the opinion of even date herewith addressed
to you by [ ]. In rendering his opinion,
[ ] is hereby authorized to rely on this opinion as
to matters of New York law addressed herein as if it were
addressed to him. This opinion is not being delivered for
the benefit of, nor may it be relied upon by, any person to
which it is not specifically addressed or to which reliance
has not been expressly authorized in writing.
Very truly yours,
<PAGE>
EXHIBIT C
[Form of Extension Letter]
[Date]1)
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: The Chase Manhattan Bank, as Agent, as Fronting
Bank and as Collateral Agent, and the Banks party to the
Credit Agreement
Re: Extension of Expiry Date
Ladies and Gentlemen:
Reference is hereby made to that certain 364-Day
Revolving Credit Agreement (as amended, supplemented or
otherwise modified from time to time, the "Credit
Agreement") dated as of November [ ], 1997, among PP&L, Inc.
("PPL"), PP&L Capital Funding, Inc. ("Finance Co.") and PP&L
Resources, Inc. ("Resources"), the banks party thereto (the
"Banks"), The Chase Manhattan Bank, as fronting bank, as
collateral agent and as agent for the Banks. Terms used and
not defined herein shall have the meaning assigned to such
terms in the Credit Agreement.
1. Prior to giving effect to the extension referred to
below, the Expiry Date is __________ (the "Current Expiry
Date").
2. PPL and Finance Co. hereby request that the Expiry
Date be extended to _________.2)
____________________
1) This Letter shall be delivered to the Agent not less
than 30 and not more than 45 days prior to the Current
Expiry Date.
2) Such date shall be 364 days after the Current Expiry
Date.
3. Pursuant to Section 2.6 of the Credit Agreement,
such extension of the Current Expiry Date shall become
effective on the 20th day prior to the Current Expiry Date
if (and only if) Banks holding Commitments that aggregate at
least 51% of the Total Commitment on such date shall have
agreed to such extension as evidenced by their signatures
below.
This letter may be executed in two or more
counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one
instrument. The delivery by telecopy of an executed
counterpart hereof shall be effective as delivery of an
original manually executed counterpart.
Very truly yours,
PP&L, Inc. PP&L Capital Funding, Inc.
By: By:
______________________ ______________________
______________________ ______________________
Name: Name:
Title: Title:
Exhibit C
Page 3
PP&L Resources, Inc.
By:
______________________
______________________
Name:
Title:
Acknowledged and agreed to
as of the date noted above:
THE CHASE MANHATTAN BANK,
individually and as [BANK]
Agent, Collateral Agent
and Fronting Bank,
By: By:
______________________ ______________________
______________________ ______________________
Name: Name:
Title: Title:
<PAGE>
CONFORMED COPY
___________________________________________________________
PP&L, INC.
PP&L CAPITAL FUNDING, INC.,
as Borrowers
PP&L RESOURCES, INC.,
as Guarantor of the obligations of
PP&L Capital Funding, Inc.
$300,000,000
5-YEAR REVOLVING CREDIT AGREEMENT
_________________
Dated as of November 20, 1997
___________________________________________________________
[CS&M #6700-601]
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amounts and Terms of Loans ............ 1
1.1 Commitments ........................... 1
1.2 Notices of Borrowing .................. 2
1.3 Disbursement of Funds ................. 2
1.4 Repayment of Loans; Evidence of
Debt .................................. 3
1.5 Special Payment Provisions ............ 4
1.6 Fees .................................. 5
1.7 Reductions in Total Commitments ....... 5
1.8 Compensation .......................... 6
SECTION 1A. Letters of Credit ..................... 6
SECTION 2. Interest .............................. 11
2.1 Rates of Interest ..................... 11
2.2 Determination of Rate of Borrowing .... 12
2.3 Interest Payment Dates ................ 12
2.4 Conversions; Interest Periods ......... 12
2.5 Increased Costs, Illegality, Etc. ..... 14
SECTION 3. Payments .............................. 18
3.1 Payments on Non-Business Days ......... 18
3.2 Voluntary Prepayments ................. 18
3.3 Method and Place of Payment, Etc. ..... 19
3.4 Net Payments .......................... 20
SECTION 4. Conditions Precedent .................. 20
4.1 Conditions to Effectiveness ........... 20
4.2A Conditions to Each Loan to PPL and
Each Issuance of Letter of Credit on
behalf of PPL ......................... 22
4.2B Conditions to Each Loan to Finance Co.
and Each Issuance of a Letter of
Credit on behalf of Finance Co. ....... 23
SECTION 5.A Covenants of PPL ...................... 24
5.1A Financial Statements .................. 24
5.2A Mergers ............................... 25
5.3A Ratings ............................... 26
5.4A Consolidated Indebtedness to
Consolidated Capitalization ........... 26
SECTION 5.B Covenants of Finance Co. and
Resources ............................. 26
5.1B Financial Statements .................. 26
5.2B Mergers ............................... 27
5.3B Ratings ............................... 28
5.4B Liens ................................. 28
5.5B Consolidated Indebtedness to
Consolidated Capitalization ........... 28
SECTION 6.A Events of Default for PPL ............. 28
6.1A Representations, Etc. ................. 28
6.2A Principal and Interest ................ 29
6.3A Defaults by PPL Under Other Agreements. 29
6.4A Judgments ............................. 29
6.5A Bankruptcy, Etc. ...................... 29
6.6A Other Covenants ....................... 30
SECTION 6.B Events of Default for Finance Co. ..... 30
6.1B Representations, Etc. ................. 30
6.2B Principal and Interest ................ 30
6.3B Defaults by PPL, Finance Co. or
Resources Under This Agreement or
Other Agreements ...................... 30
6.4B Judgments ............................. 31
6.5B Bankruptcy, Etc. ...................... 31
6.6B Other Covenants ....................... 32
6.7B Events of Default With Respect
to PPL ................................ 32
SECTION 7.A Representations and Warranties of
PPL ................................... 33
7.1A Corporate Status ...................... 34
7.2A Authority; No Conflict ................ 34
7.3A Legality, Etc. ........................ 34
7.4A Financial Statements .................. 34
7.5A Litigation ............................ 34
7.6A No Violation .......................... 35
7.7A ERISA ................................. 35
7.8A Consents .............................. 35
7.9A Subsidiaries .......................... 35
7.10A Investment Company Act ............... 35
7.11A Public Utility Holding Company Act ... 35
7.12A Tax Returns .......................... 36
7.13A Compliance with Laws ................. 36
SECTION 7.B Representations and Warranties of
Finance Co. and Resources ............. 36
7.1B Corporate Status ...................... 36
7.2B Authority; No Conflict ................ 36
7.3B Legality, Etc. ........................ 37
7.4B Financial Statements .................. 37
7.5B Litigation ............................ 37
7.6B No Violation .......................... 37
7.7B ERISA ................................. 38
7.8B Consents .............................. 38
7.9B Investment Company Act ................ 38
7.10B Public Utility Holding Company Act ... 38
7.11B Tax Returns .......................... 38
7.12B Compliance with Laws ................. 38
SECTION 8. Agent .................................. 39
8.1 Appointment ............................ 39
8.2 Nature of Duties ....................... 39
8.3 Rights, Exculpation, Etc. .............. 40
8.4 Reliance ............................... 40
8.5 Indemnification ........................ 41
8.6 The Agent, Individually ................ 41
8.7 Resignation by the Agent ............... 41
SECTION 9. Resources' Guarantee ................... 42
SECTION 10. Miscellaneous ......................... 44
10.1 Definitions ........................... 44
10.2 Accounting Principles ................. 56
10.3 Exercise of Rights .................... 56
10.4 Amendment and Waiver .................. 56
10.5 Expenses; Indemnification ............. 57
10.6 Successors and Assigns ................ 58
10.7 Notices, Requests, Demands ............ 61
10.8 Survival of Representations and
Warranties ............................ 62
10.9 Governing Law ......................... 62
10.10 Counterparts ......................... 62
10.11 Effectiveness ........................ 62
10.12 Transfer of Office ................... 63
10.13 Proration of Payments ................ 63
10.14 Jurisdiction; Consent to Service of
Process .............................. 64
10.15 WAIVER OF JURY TRIAL ................. 64
10.16 Headings Descriptive ................. 65
EXHIBIT A -- Form of Opinion of general counsel or senior
counsel of PPLC, Finance Co. and Resources
EXHIBIT B -- Form of Opinion of Reid & Priest LLP
EXHIBIT D1 - Form of PPL Compliance Certificate
EXHIBIT D2 - Form of Resources Compliance Certificate
<PAGE>
5-YEAR REVOLVING CREDIT AGREEMENT, dated as of
November 20, 1997, among PP&L, INC., a Pennsylvania
corporation ("PPL"), and PP&L CAPITAL FUNDING, INC., a
Delaware corporation ("Finance Co."), as Borrowers; PP&L
RESOURCES, INC., a Pennsylvania corporation ("Resources"),
as guarantor of the obligations of Finance Co. hereunder;
the banks listed on Schedule I hereto (each a "Bank" and
collectively the "Banks"); and THE CHASE MANHATTAN BANK, as
fronting bank (in such capacity, the "Fronting Bank"), as
collateral agent (in such capacity, the "Collateral Agent")
and as Agent for the Banks to the extent and in the manner
provided in Section 8 below (in such capacity, the "Agent")
(all capitalized terms used herein shall have the meanings
specified therefor in Section 10.1 unless otherwise defined
herein).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and condi-
tions set forth herein, the Banks are willing to make
available to PPL and Finance Co. the credit facility herein
provided for working capital and other general corporate
purposes of the Borrowers, including investments in, or
loans to, affiliates of the Borrowers;
NOW, THEREFORE, it is agreed:
SECTION 1. Amounts and Terms of Loans.
1.1 Commitments. Subject to and upon the terms
and conditions herein set forth, each Bank severally and
not jointly agrees, at any time and from time to time prior
to the Expiry Date, to make a loan or loans (each a "Loan"
and collectively for all Banks, the "Loans") to PPL or
Finance Co., as requested by such Borrower, which Loans
(i) shall at the option of PPL or Finance Co., as
applicable, be initially maintained as Base Rate Loans or
Eurodollar Loans, provided that all the Loans made by all
the Banks at any one Borrowing to a Borrower hereunder must
be either all Base Rate Loans or all Eurodollar Loans,
(ii) may be repaid and borrowed in accordance with the
provisions hereof and (iii) shall not exceed in aggregate
principal amount at any time outstanding the difference
between such Bank's Commitment and the L/C Exposure of such
Bank at such time.
1.2 Notices of Borrowing. Whenever a Borrower
desires to make a Borrowing hereunder, it shall give the
Agent at the Payment Office (i) no later than 12:00 Noon
(New York time) at least three Business Days' prior written
notice or telephonic notice (confirmed in writing) of each
Eurodollar Loan to be made hereunder and (ii) no later than
10:00 A.M. (New York time) on the date of such Borrowing
written notice or telephonic notice (confirmed in writing)
of each Base Rate Loan to be made hereunder. Each such
notice (each a "Notice of Borrowing") shall state that the
Borrowing is being made hereunder and shall specify the
aggregate principal amount the applicable Borrower desires
to borrow hereunder, the date of Borrowing (which shall be
a Business Day), the Type of Loans to be made pursuant to
such Borrowing and the Interest Period to be applicable
thereto. The Agent shall promptly give each Bank tele-
phonic notice (confirmed in writing) of the proposed
Borrowing, of such Bank's proportionate share thereof and
of the other matters covered by the Notice of Borrowing.
Each Borrowing shall be in an integral multiple of $500,000
and not less than $10,000,000 and shall be made from each
Bank in the proportion which its respective Commitment
bears to the Total Commitment except as otherwise
specifically provided in Section 2.5. The failure of any
Bank to make any Loan required hereby shall not release any
other Bank from its obligation to make Loans as provided
herein.
1.3 Disbursement of Funds. (a) No later than
12:00 Noon (New York time) (or, in the case of Base Rate
Loans, 2:00 P.M. (New York time)) on the date specified in
each Notice of Borrowing each Bank will make available the
amount of its pro rata portion of the Loans requested to be
made on such date in U.S. dollars and in immediately
available funds, to the Agent at the Payment Office. The
Agent will make available to the applicable Borrower not
later than 1:00 P.M. (New York time) (or, in the case of
Base Rate Loans, 3:00 P.M. (New York time)) on such date at
the Payment Office the aggregate of the amounts in immedi-
ately available funds made available by the Banks against
delivery to the Agent at the Payment Office, or at such
other office as the Agent may specify, of the documents and
papers provided for herein. The Agent shall deliver the
documents and papers received by it for the account of each
Bank to such Bank or upon its order.
(b) If the Fronting Bank shall not have received
from a Borrower the payment required to be made by such
Borrower pursuant to Section 1A(e) within the time
specified in such Section, the Fronting Bank will promptly
notify the Agent of the L/C Disbursement and the Agent will
promptly notify each Bank of such L/C Disbursement and its
Applicable Percentage thereof. Not later than 2:00 P.M.
(New York time) on such date (or, if such Bank shall have
received such notice later than 12:00 Noon (New York time)
on any day, no later than 10:00 A.M. (New York time) on the
immediately following Business Day), each Bank will make
available the amount of its Applicable Percentage of such
L/C Disbursement (it being understood that such amount
shall be deemed to constitute a Base Rate Loan of such Bank
and such payment shall be deemed to have reduced the L/C
Exposure) in immediately available funds, to the Agent at
the Payment Office, and the Agent will promptly pay to the
Fronting Bank amounts so received by it from the Banks.
The Agent will promptly pay to the Fronting Bank any
amounts received by it from such Borrower pursuant to
Section 1A(e) prior to the time that any Bank makes any
payment pursuant to this paragraph (b), and any such
amounts received by the Agent thereafter will be promptly
remitted by the Agent to the Banks that shall have made
such payments and to the Fronting Bank, as their interests
may appear. If any Bank shall not have made its Applicable
Percentage of such L/C Disbursement available to the Agent
as provided above, such Bank agrees to pay interest on such
amount, for each day from and including the date such
amount is required to be paid in accordance with this
paragraph to but excluding the date such amount is paid, to
the Agent for the account of the Fronting Bank at, for the
first such day, the Federal Funds Rate, and for each day
thereafter, the Base Rate.
1.4 Repayment of Loans; Evidence of Debt.
(a) The outstanding principal balance of each Loan shall be
payable by the Borrower to which such Loan was made on the
Expiry Date. Each Loan shall bear interest from the date
thereof on the outstanding principal balance thereof as set
forth in Section 2.1. Each Bank shall maintain in
accordance with its usual practice an account or accounts
evidencing the indebtedness to such Bank resulting from
each Loan made by such Bank from time to time to each
Borrower, including the amounts of principal and interest
payable and paid to such Bank from time to time under this
Agreement. The Agent shall maintain the Register pursuant
to Section 1.4(b), and a subaccount for each Bank and each
Borrower, in which Register and subaccounts (taken
together) shall be recorded (i) the amount of each Loan
made hereunder, the Type of each Loan made and the Interest
Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable
from the applicable Borrower to each Bank hereunder and
(iii) the amount of any sum received by the Agent hereunder
from each Borrower and each Bank's share thereof. The
entries made in the Register and accounts maintained
pursuant to this Section 1.4 shall be prima facie evidence
of the existence and amounts of the obligations therein
recorded; provided, however, that the failure of any Bank
or the Agent to maintain such account, such Register or
such subaccount, as applicable, or any error therein shall
not in any manner affect the obligations of each Borrower
to repay the Loans in accordance with their terms. The
obligations of the Borrowers with respect to their
respective Loans shall be several, not joint.
(b) The Agent shall maintain at the Payment
Office a register for the recordation of the names and
addresses of the Banks, the Commitments of the Banks from
time to time, and the principal amount of the Loans owing
to each Bank from each Borrower from time to time (the
"Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest
error. The Register shall be available for inspection by
each Borrower, the Agent or any Bank at any reasonable time
and from time to time upon reasonable prior notice.
1.5 Special Payment Provisions. Unless the
Agent shall have been notified by any Bank prior to any
date of a Borrowing that such Bank does not intend to make
available to the Agent such Bank's portion of the Loans to
be made on such date, the Agent may assume that such Bank
has made such amount available to the Agent on such date of
a Borrowing and the Agent may, in reliance upon such
assumption, make available to the applicable Borrower a
corresponding amount. If such amount is not in fact made
available to the Agent by such Bank, the Agent shall be
entitled to recover such amount on demand from such Bank.
If such Bank does not pay such amount forthwith upon the
Agent's demand therefor, the Agent shall promptly notify
the applicable Borrower and the applicable Borrower shall
pay such amount to the Agent. The Agent shall also be
entitled to recover from such Bank or the applicable
Borrower, as the case may be, interest on such amount in
respect of each day from the date such amount was made
available by the Agent to the applicable Borrower to the
date such amount is recovered by the Agent, at a rate per
annum equal to (i) in the case of such Bank, the Federal
Funds Rate and (ii) in the case of either Borrower, the
applicable rate provided in Section 2.1 for the applicable
Type of Loan. Nothing herein shall be deemed to relieve
any Bank from its obligation to fulfill its Commitment
hereunder or to prejudice any rights which the applicable
Borrower may have against any Bank as a result of the
failure of such Bank to perform its obligations hereunder.
1.6 Fees. (a) The Borrowers agree to pay to the
Agent for pro rata distribution to each Bank a Commitment
Fee (the "Commitment Fee"), for the period from the Closing
Date until the Expiry Date (or such earlier date as the
Total Commitment shall be terminated as to both Borrowers),
on the average daily unused amount of the Commitments,
computed at the Applicable Commitment Fee Percentage per
annum computed on the basis of the number of days actually
elapsed over a year of 365 or 366 days and payable
quarterly in arrears on the last day of each calendar
quarter and on the Expiry Date (or such earlier date as the
Total Commitment shall be terminated as to both Borrowers).
(b) Each Borrower agrees to pay to the Agent for
pro rata distribution to each Bank a fee (an "L/C
Participation Fee"), for the period from the Closing Date
until the Expiry Date (or such earlier date as all Letters
of Credit shall be canceled or expire and the Total
Commitment shall be terminated as to both Borrowers), on
that portion of the average daily L/C Exposure attributable
to Letters of Credit issued for the account of such
Borrower (excluding the portion thereof attributable to
unreimbursed L/C Disbursements), at the rate per annum
equal to the Applicable Eurodollar Margin from time to time
in effect for such Borrower and payable quarterly in
arrears on the last day of each calendar quarter and on the
date on which the Total Commitment shall be terminated as
provided herein. All L/C Participation Fees shall be
computed on the basis of the number of days actually
elapsed over a year of 365 or 366 days.
1.7 Reductions in Total Commitments. The
Borrowers shall have the right, upon at least 3 Business
Days' prior written notice to the Agent at the Payment
Office (which notice the Agent shall promptly transmit to
each of the Banks), to reduce permanently the Total
Commitment, in an aggregate amount equal to an integral
multiple of $1,000,000 and not less than $10,000,000, or to
terminate the unutilized portion of the Total Commitment,
provided that (i) any such reduction or termination shall
apply proportionately to the Commitments of the Banks and
(ii) no such termination or reduction shall be made that
would reduce the Total Commitments to an amount less than
the sum of the aggregate outstanding principal amount of
Loans and the aggregate L/C Exposure.
1.8 Compensation. The applicable Borrower shall
compensate each Bank, upon such Bank's written request
given promptly after learning of the same, for all losses,
expenses and liabilities (including, without limitation,
any interest paid by such Bank to lenders of funds borrowed
by it to make or carry its Eurodollar Loans and any loss
sustained by such Bank in connection with the re-employment
of such funds), which the Bank sustains: (i) if for any
reason (other than a failure of such Bank to perform its
obligations) a Borrowing of any Eurodollar Loan does not
occur on a date specified therefor in a Notice of Borrowing
or notice of conversion (whether or not withdrawn or
canceled pursuant to Section 2.5 or otherwise), (ii) if any
repayment or conversion (pursuant to Section 2.5 or
otherwise) of any of its Eurodollar Loans occurs on a date
which is not the last day of the Interest Period applicable
thereto, or (iii) without duplication of any amounts paid
pursuant to Section 2 hereof, as a consequence of any other
default by such Borrower to repay its Eurodollar Loans when
required by the terms of this Agreement. A certificate as
to any amounts payable to any Bank under this Section 1.8
submitted to the applicable Borrower by such Bank shall
show the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be
final, conclusive and binding upon all parties hereto.
SECTION 1A. Letters of Credit. (a) General. A
Borrower may from time to time request the issuance of
Letters of Credit for its own account (for obligations of
such Borrower or any of its Subsidiaries, or in the case of
Finance Co., for any of Resources' Subsidiaries (other than
PPL and its Subsidiaries)), denominated in dollars, in form
reasonably acceptable to the Agent and the Fronting Bank,
at any time and from time to time while the Commitments
remain in effect. This Section shall not be construed to
impose an obligation upon the Fronting Bank to issue any
Letter of Credit that is inconsistent with the terms and
conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal,
Extension; Certain Conditions. In order to request the
issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the applicable
Borrower shall hand deliver or telecopy to the Fronting
Bank and the Agent (reasonably in advance of the requested
date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or
extended, the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to
expire (which shall comply with paragraph (c) below), the
amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall
be necessary to prepare such Letter of Credit. A Letter of
Credit shall be issued, amended, renewed or extended only
if, and upon issuance, amendment, renewal or extension of
each Letter of Credit the applicable Borrower shall be
deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension (A) the
L/C Exposure shall not exceed $5,000,000 and (B) the
Aggregate Credit Exposure shall not exceed the Total
Commitment.
(c) Expiration Date. Each Letter of Credit
shall expire at the close of business on the date that is
five Business Days prior to the Expiry Date, unless such
Letter of Credit expires by its terms on an earlier date.
(d) Participations. By the issuance of a Letter
of Credit and without any further action on the part of the
Fronting Bank or the Banks, the Fronting Bank hereby grants
to each Bank, and each such Bank hereby acquires from the
Fronting Bank, a participation in such Letter of Credit
equal to such Bank's Applicable Percentage from time to
time of the aggregate amount available to be drawn under
such Letter of Credit, effective upon the issuance of such
Letter of Credit. In consideration and in furtherance of
the foregoing, each Bank hereby absolutely and
unconditionally agrees to pay to the Agent, for the account
of the Fronting Bank, such Bank's proportionate share of
each L/C Disbursement made by the Fronting Bank and not
reimbursed by the applicable Borrower forthwith on the date
due as provided in Section 1.3(b). Each Bank acknowledges
and agrees that its obligation to acquire participations
pursuant to this paragraph in respect of Letters of Credit
is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and
continuance of a Default or an Event of Default or the
termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or
reduction whatsoever.
(e) Reimbursement. If the Fronting Bank shall
make any L/C Disbursement in respect of a Letter of Credit,
the applicable Borrower shall pay to the Agent an amount
equal to such L/C Disbursement not later than two hours
after the applicable Borrower shall have received notice
from the Fronting Bank that payment of such draft will be
made, or, if the applicable Borrower shall have received
such notice later than 10:00 A.M. (New York time) on any
Business Day, not later than 10:00 A.M. (New York time) on
the immediately following Business Day.
(f) Obligations Absolute. The applicable
Borrower's obligations to reimburse L/C Disbursements as
provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement,
under any and all circumstances whatsoever, and
irrespective of:
(i) any lack of validity or enforceability of any
Letter of Credit or any Loan Document, or any term or
provision therein;
(ii) any amendment or waiver of or any consent to
departure from all or any of the provisions of any Letter
of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or
other right that the applicable Borrower, any other party
guaranteeing, or otherwise obligated with, either Borrower
or any subsidiary or other affiliate thereof or any other
person may at any time have against the beneficiary under
any Letter of Credit, the Fronting Bank, the Agent or any
Bank or any other person, whether in connection with this
Agreement, any other Loan Document or any other related or
unrelated agreement or transaction;
(iv) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(v) payment by the Fronting Bank under a Letter of
Credit against presentation of a draft or other document
that does not comply with the terms of such Letter of
Credit; and
(vi) any other act or omission to act or delay of any
kind of the Fronting Bank, the Banks, the Agent or any
other person or any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might,
but for the provisions of this Section, constitute a legal
or equitable discharge of the applicable Borrower's
obligations hereunder.
Without limiting the generality of the foregoing,
it is expressly understood and agreed that the absolute and
unconditional obligation of the Borrowers hereunder to
reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of the Fronting Bank.
However, the foregoing shall not be construed to excuse
the Fronting Bank from liability to the applicable Borrower
to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are
hereby waived by the applicable Borrower to the extent
permitted by applicable law) suffered by the applicable
Borrower that are caused by the Fronting Bank's gross
negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of
Credit comply with the terms thereof; it is understood that
the Fronting Bank may accept documents that appear on their
face to be in order, without responsibility for further
investigation, regardless of any notice or information to
the contrary and, in making any payment under any Letter of
Credit (i) the Fronting Bank's exclusive reliance on the
documents presented to it under such Letter of Credit as to
any and all matters set forth therein, including reliance
on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary
thereunder equals the amount of such draft and whether or
not any document presented pursuant to such Letter of
Credit proves to be insufficient in any respect, if such
document on its face appears to be in order, and whether or
not any other statement or any other document presented
pursuant to such Letter of Credit proves to be forged or
invalid or any statement therein proves to be inaccurate or
untrue in any respect whatsoever and (ii) any noncompliance
in any immaterial respect of the documents presented under
such Letter of Credit with the terms thereof shall, in each
case, be deemed not to constitute wilful misconduct or
gross negligence of the Fronting Bank.
(g) Disbursement Procedures. The Fronting Bank
shall, promptly following its receipt thereof, examine all
documents purporting to represent a demand for payment
under a Letter of Credit. The Fronting Bank shall as
promptly as possible give telephonic notification,
confirmed by telecopy, to the Agent and the applicable
Borrower (and, if the applicable Borrower is Finance Co.,
Resources) of such demand for payment and whether the
Fronting Bank has made or will make an L/C Disbursement
thereunder; provided that any failure to give or delay in
giving such notice shall not relieve the applicable
Borrower of its obligation to reimburse the Fronting Bank
and the Banks with respect to any such L/C Disbursement.
The Agent shall promptly give each Bank notice thereof.
(h) Interim Interest. If the Fronting Bank
shall make any L/C Disbursement in respect of a Letter of
Credit, then, unless the applicable Borrower shall
reimburse such L/C Disbursement in full on the date
thereof, the unpaid amount thereof shall bear interest for
the account of the Fronting Bank, for each day from and
including the date of such L/C Disbursement, to but
excluding the earlier of the date of payment by the
applicable Borrower or the date on which interest shall
commence to accrue on the Base Rate Loans resulting from
such L/C Disbursement as provided in Section 1.3(b), at the
rate per annum that would apply to such amount if such
amount were a Base Rate Loan.
(i) Cash Collateralization. If any Event of
Default with respect to a Borrower shall occur and be
continuing, such Borrower shall, on the Business Day it
receives notice from the Agent or the Required Banks
thereof and of the amount to be deposited, deposit in an
account with the Collateral Agent, for the benefit of the
Banks, an amount in cash equal to the portion of the L/C
Exposure attributable to Letters of Credit issued for the
account of such Borrower and outstanding as of such date.
Such deposit shall be held by the Collateral Agent as
collateral for the payment and performance of the
obligations under this Agreement. The Collateral Agent
shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Such
deposits shall not bear interest. Moneys in such account
shall automatically be applied by the Agent to reimburse
the Fronting Bank for L/C Disbursements attributable to
Letters of Credit issued for the account of the Borrower
depositing such moneys for which the Fronting Bank has not
been reimbursed, and any remaining amounts will either
(i) be held for the satisfaction of the reimbursement
obligations of such Borrower for the L/C Exposure at such
time or (ii) if the maturity of the Loans of such Borrower
has been accelerated, be applied to satisfy the obligations
of such Borrower under this Agreement. If a Borrower is
required to provide an amount of cash collateral hereunder
as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be
returned to such Borrower within three Business Days after
all Events of Default have been cured or waived.
SECTION 20 Interest.
2.1 Rates of Interest. (a) Each Borrower
agrees to pay interest in respect of the unpaid principal
amount of each Base Rate Loan made to it from the date the
proceeds thereof are made available to it until prepayment
pursuant to Section 3 or maturity (whether by acceleration
or otherwise) at a rate per annum which shall be the Base
Rate in effect from time to time.
(b) Each Borrower agrees to pay interest in
respect of the unpaid principal amount of each Eurodollar
Loan made to it from the date the proceeds thereof are made
available to it until prepayment pursuant to Section 3 or
maturity (whether by acceleration or otherwise) at a rate
per annum which shall be the relevant Quoted Rate plus the
Applicable Eurodollar Margin.
(c) Each Borrower agrees to pay interest in
respect of overdue principal of, and (to the extent
permitted by law) overdue interest in respect of, each Loan
made to it, on demand, at a rate per annum which shall be
2% in excess of the Base Rate in effect from time to time.
(d) Interest shall be computed on the actual
number of days elapsed on the basis of a 360-day year;
provided, however, that for any rate of interest determined
by reference to the Prime Rate, interest shall be computed
on the actual number of days elapsed on the basis of a year
of 365 or 366 days.
(e) In computing interest on the Loans, the date
of the making of a Loan shall be included and the date of
payment shall be excluded, provided, however, that if a
Loan is repaid on the same day on which it is made, such
day shall nevertheless be included in computing interest
thereon.
2.2 Determination of Rate of Borrowing. As soon
as practicable after 10:00 A.M. (New York time) on the
second Business Day prior to the commencement of any
Interest Period with respect to a Eurodollar Loan, the
Agent shall determine (which determination, absent manifest
error, shall be final, conclusive and binding upon all
parties) the rate of interest which shall be applicable to
such Eurodollar Loan for the Interest Period applicable
thereto and shall promptly give notice thereof (in writing
or by telephone, confirmed in writing) to the applicable
Borrower and the Banks. In the event that there is no
applicable rate for such Eurodollar Loan: (i) the Agent
shall promptly give notice thereof (in writing or by
telephone, confirmed in writing) to the applicable Borrower
and the Banks and (ii) such Loan shall be deemed to have
been requested to be made as a Base Rate Loan and (iii) the
rate applicable to such Loan shall be the Base Rate in
effect from time to time.
2.3 Interest Payment Dates. Accrued interest
shall be payable (i) in respect of each Eurodollar Loan, at
the end of the Interest Period relating thereto and in
respect of each Loan with an Interest Period of longer than
3 months, on each 3-month anniversary of the first day of
such Interest Period, (ii) in respect of each Base Rate
Loan, at the end of each Interest Period relating thereto
and (iii) in respect of each Loan, on any prepayment (on
the amount prepaid), at maturity (whether by acceleration
or otherwise) and, after maturity, on demand.
2.4 Conversions; Interest Periods. (a) Each
Borrower shall have the option to convert on any Business
Day, all or a portion at least equal to $10,000,000 of the
outstanding principal amount of the Loans made to it
pursuant to one or more Borrowings of one Type of Loans
into a Borrowing or Borrowings of another Type of Loan,
provided that (i) except as provided in Section2.5(b),
Eurodollar Loans may be converted into Base Rate Loans only
on the last day of an Interest Period applicable thereto
and no partial conversion of a Borrowing of Eurodollar
Loans shall reduce the outstanding principal amount of the
Loans pursuant to such Borrowing to less than $10,000,000
and (ii) Loans may only be converted into Eurodollar Loans
if no Default or Event of Default with respect to such
Borrower is in existence on the date of the conversion.
Each such conversion shall be effected by such Borrower by
giving the Agent at its Payment Office, prior to 12:00 Noon
(New York time), at least three Business Days (or by 12:00
Noon on the same Business Day in the case of a conversion
into Base Rate Loans) prior written notice (or telephonic
notice promptly confirmed in writing) (each a "Notice of
Conversion") specifying the Loans to be so converted, the
Borrowing or Borrowings pursuant to which such Loans were
made, the Type of Loans to be converted into and, if to be
converted into a Borrowing of Eurodollar Loans, the
Interest Period to be initially applicable thereto. The
Agent shall give each Bank prompt notice of any such pro-
posed conversion affecting any of its Loans.
(b) At the time a Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making
of, or conversion into, a Borrowing of Eurodollar Loans (in
the case of the initial Interest Period applicable thereto)
or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period
applicable to a Borrowing of Eurodollar Loans (in the case
of any subsequent Interest Period), such Borrower shall
have the right to elect, by giving the Agent written notice
(or telephonic notice promptly confirmed in writing), the
Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of such Borrower, be a
one, two, three or six month period or, subject to
availability on the part of each Bank, such shorter period
as ends on the Expiry Date. Notwithstanding anything to
the contrary contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such
Borrowing (including the date of any conversion from a
Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest
Period expires;
(ii) if any Interest Period applicable to a Borrowing
of Eurodollar Loans begins on a day for which there is no
numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iii) no Interest Period in respect of any Borrowing of
Loans shall extend beyond the Expiry Date; and
(iv) all Eurodollar Loans comprising a Borrowing shall
at all times have the same Interest Period.
If upon the expiration of any Interest Period, a Borrower
has failed to elect a new Interest Period to be applicable
to the respective Borrowing of Eurodollar Loans as provided
above or is unable to elect a new Interest Period as a
result of Section 2.4(a)(ii) above, such Borrower shall be
deemed to have elected to convert such Borrowing into a Bor-
rowing of Base Rate Loans effective as of the expiration
date of such current Interest Period.
2.5 Increased Costs, Illegality, Etc. (a) In
the event that any Bank (including the Agent and the
Fronting Bank) shall have reasonably determined (which
determination shall be final and conclusive and binding upon
all parties but, with respect to the following clauses (i),
(ii) and (iii), shall be made only after consultation with
the applicable Borrower and the Agent on the date of such
determination) that:
(i) on any date for determining the Quoted Rate for
any Interest Period, by reason of any change after the date
hereof affecting the interbank Eurodollar market or
affecting the position of such Bank (if a Reference Bank),
in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference to
the Quoted Rate; or
(ii) at any time, by reason of (y) any change after the
date hereof in any applicable law or governmental rule,
regulation or order (or any interpretation thereof by a
governmental authority or otherwise (provided that, in the
case of an interpretation not by a governmental authority,
such interpretation shall be made in good faith and shall
have a reasonable basis) and including the introduction of
any new law or governmental rule, regulation or order), to
the extent not provided for in clause (iii) below, or (z) in
the case of Eurodollar Loans, other circumstances affecting
such Bank or the interbank Eurodollar market or the position
of such Bank in such market, the Quoted Rate shall not
represent the effective pricing to such Bank for funding or
maintaining the affected Eurodollar Loan; or
(iii) at any time, by reason of the requirements of
Regulation D or other official reserve requirements, the
Quoted Rate shall not represent the effective pricing to
such Bank for funding or maintaining the affected
Eurodollar Loan; or
(iv) at any time, that the making or continuance of any
Eurodollar Loan or the issuance of any Letter of Credit has
become unlawful by compliance by such Bank or by the
Fronting Bank in good faith with any law, governmental rule,
regulation, guideline or order, or would cause severe
hardship to such Bank or to the Fronting Bank as a result of
a contingency occurring after the date hereof which
materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, the Bank so affected shall on
such date of determination give notice (by telephone con-
firmed in writing) to each applicable Borrower and to the
Agent (who shall give similar notice to each Bank) of such
determination. Thereafter, (x) in the case of clause (i),
(ii) or (iii) above, each applicable Borrower shall pay to
such Bank, upon written demand therefor, such additional
amounts deemed in good faith by such Bank to be material (in
the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its
discretion shall determine) as shall be required to cause
such Bank to receive interest with respect to its affected
Eurodollar Loan at a rate per annum equal to the then
Applicable Eurodollar Margin in excess of the effective
pricing to such Bank to make or maintain such Eurodollar
Loan and (y) in the case of clause (iv), each applicable
Borrower shall take one of the actions specified in
Section 2.5(b) as promptly as possible and, in any event,
within the time period required by law. A certificate as to
additional amounts owed any such Bank, showing in reasonable
detail the basis for the calculation thereof, submitted to
each applicable Borrower and the Agent by such Bank shall,
absent manifest error, be final, conclusive and binding upon
all of the parties hereto.
(b) At any time that any of its Loans are
affected by the circumstances described in Section 2.5(a)
each applicable Borrower may (i) if the affected Eurodollar
Loan is then being made pursuant to a Borrowing, cancel said
Borrowing by giving the Agent notice thereof by telephone
(confirmed in writing) on the same date that such Borrower
was notified by the affected Bank pursuant to Section
2.5(a) or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least 3 Business Days' written notice
to the Bank, require the Bank to convert such Eurodollar
Loan into a Base Rate Loan; provided that if more than one
Bank is affected at any time, then all affected Banks must
be treated in the same manner pursuant to this
Section 2.5(b).
(c) In the event that a Borrower shall be paying
additional amounts to a Bank pursuant to Section 2.5(a)(i),
(ii) or (iii) or Section 2.5(d) (and, in the case of Section
2.5(d), such Bank has not eliminated the increased costs by
designating a new Applicable Lending Office) or is unable to
incur a Eurodollar Loan from such Bank because of the
existence of a condition described in Section 2.5(a)(iv)
(any such Bank, an "Affected Bank") covering a period of 90
consecutive days, the Borrowers, the Agent and the Affected
Bank shall consult with a view towards (but being under no
obligation to) amending this Agreement, with the consent of
the Banks other than the Affected Bank (the "Unaffected
Banks") which, at such time, have outstanding two-thirds of
the aggregate principal amount of the Loans outstanding
hereunder (exclusive of the aggregate principal amount of
the Loans outstanding of the Affected Bank), to provide for
(i) the termination of the Affected Bank's Commitment,
provided that such termination is accompanied by payment in
full of the outstanding amount of all Loans of the Affected
Bank, interest accrued on such amount to the date of payment
and all other liabilities and obligations of the Borrowers
hereunder (including, without limitation, amounts payable
pursuant to Section 1.8, Section 2.5(a) or Section 2.5(d))
with respect to the Affected Bank, and (ii) the substitution
of another bank for the Affected Bank and/or the increase,
pro rata or otherwise, of the Commitments of the Unaffected
Banks or otherwise, so that the Total Commitment remains the
amount which would be applicable in the absence of the
occurrence of clause (i) of this Section 2.5(c); provided
that no Commitment of any Unaffected Bank may be changed
without the consent of such Bank.
(d) If any Bank reasonably determines at any time
that any applicable law or governmental rule, regulation,
order or request (whether or not having the force of law)
concerning capital adequacy, or any change in interpretation
or administration thereof by any governmental authority,
central bank or comparable agency, will have the effect of
increasing the amount of capital required or expected to be
maintained by such Bank based on the existence of such
Bank's Commitment hereunder or its obligations hereunder or
under any Letter of Credit, then promptly upon receipt of a
written demand from such Bank meeting the requirements of
this Section 2.5(d), the applicable Borrowers agree to pay
such Bank such additional amounts as shall be required to
compensate such Bank for the increased cost to such Bank of
making Loans to (or issuing Letters of Credit for the
account of) the Borrowers, as a result of such increase in
capital for the first Compensation Period (as defined
below). After the initial written demand for payment in
respect of this Section 2.5(d) is delivered to the
applicable Borrowers by such Bank, written demand for
payment may be submitted for each Compensation Period
thereafter that this Agreement remains in effect as to such
Bank. Each such written demand shall (i) specify (a) the
event pursuant to which such Bank is entitled to claim the
additional amount, (b) the date on which the event occurred
and became applicable to the Bank and (c) the Compensation
Period for which the amount is due and (ii) set out in
reasonable detail the basis and computation of such
additional amount. Each period for which the additional
amounts may be claimed by such Bank (a "Compensation
Period") shall be the lesser of (x) the number of days
actually elapsed since the date the event occurred and
became applicable to such Bank or (y) 90 days. Payments
made by the applicable Borrowers to any Bank in respect of
this Section 2.5(d) shall be made on the last day of the
Compensation Period specified in each written demand with a
final payment to be made on the date of termination of this
Agreement as to such Bank. Provided that each Bank acts
reasonably and in good faith and uses averaging and
attribution methods which are reasonable in determining any
additional amounts due under this Section 2.5(d), such
Bank's determination of compensation owing under this
Section 2.5(d) shall, absent manifest error, be final and
conclusive and binding on all the parties hereto. No Bank
shall be entitled to compensation under this Section 2.5(d)
for any costs incurred with respect to any date unless it
shall have notified the applicable Borrowers that it will
demand compensation for such costs not more than 60 days
after the later of (i) such date and (ii) the date on which
it shall have become aware of such costs.
(e) Each Bank agrees that, upon the occurrence of
any event giving rise to the operation of Section 2.5(d)
with respect to such Bank, such Bank shall, if requested by
the Borrowers, designate another Applicable Lending Office
for any Loans affected by such event with the objective of
eliminating, avoiding or mitigating the consequence of the
event giving rise to the operation of such section; provided
that such Bank and its Applicable Lending Office shall not,
in the sole judgment of such Bank, suffer any economic,
legal or regulatory disadvantage. Nothing in this
Section 2.5(e) shall affect or postpone any of the
obligations of a Borrower or the right of any Bank provided
in Section 2.5(d).
SECTION 3. Payments.
3.1 Payments on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a
day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, if a
payment of principal has been so extended, interest shall be
payable on such principal at the applicable rate during such
extension.
3.2 Voluntary Prepayments. Each Borrower shall
have the right to prepay its Loans in whole or in part,
without premium or penalty, from time to time pursuant to
this Section 3.2 on the following terms and conditions:
(i) the applicable Borrower shall give the Agent at the
Payment Office at least 3 Business Days' prior written
notice or telephonic notice (confirmed in writing) of its
intent to prepay such Loans, which notice shall specify the
amount of such prepayment and the specific Borrowing to be
prepaid, which notice the Agent shall promptly transmit to
each of the Banks; (ii) each prepayment shall be in an
integral multiple of $1,000,000 and not less than
$10,000,000 (or, if less, the amount then remaining outs-
tanding in respect of the Borrowing being prepaid);
(iii) each prepayment in respect of Loans made pursuant to
one Borrowing shall be applied pro rata among the Banks on
the basis of such Loans, except as otherwise provided in
Section 2.5; (iv) at the time of any prepayment, the
applicable Borrower shall pay all interest accrued on the
principal amount of said prepayment and, if the applicable
Borrower prepays any Eurodollar Loan on any day other than
the last day of an Interest Period applicable thereto, the
applicable Borrower shall compensate the Banks for losses
sustained as a result of such prepayment to the extent and
as provided in Section 1.8.
3.3 Method and Place of Payment, Etc. Except as
expressly provided herein, all payments under this Agreement
shall be made to the Agent for the ratable account of the
Banks not later than Noon (New York time) on the date when
due and shall be made in freely transferable U.S. dollars
and in immediately available funds at the Payment Office
(or, if such payment is made in respect of principal of or
interest on any Eurodollar Loan, for the account of such
non-U.S. office of the Agent as the Agent may from time to
time direct). Unless the Agent shall have been notified by
the applicable Borrower prior to the date on which any
payment to be made by the applicable Borrower hereunder is
due that the applicable Borrower does not intend to remit
such payment, the Agent may, at its discretion, assume that
the applicable Borrower has remitted such payment when so
due and the Agent may, at its discretion and in reliance
upon such assumption, make available to each Bank (for the
account of its applicable lending office) on such payment
date an amount equal to such Bank's share of such assumed
payment. If the applicable Borrower has not in fact
remitted such payment to the Agent, each Bank shall
forthwith on demand repay to the Agent the amount of such
assumed payment made available to such Bank together with
interest thereon in respect of each day from and including
the date such amount was made available by the Agent to such
Bank to the date such amount is repaid to the Agent at a
rate per annum equal to the Federal Funds Rate. On the
commencement date of each Interest Period and on each date
occurring two Business Days prior to an Interest Payment
Date, the Agent shall notify the applicable Borrower of the
amount of interest and/or fees due at the end of such
Interest Period or on such Interest Payment Date (assuming,
in the case of Base Rate Loans, that there is no change in
the rate of interest applicable to the applicable Base Rate
Loan); provided, however, that failure to so notify the
applicable Borrower shall not affect such Borrower's
obligation to make any such payments.
3.4 Net Payments. All payments under this
Agreement shall be made without set-off or counterclaim and
in such amounts as may be necessary in order that all such
payments of principal and interest in connection with Loans
(after deduction or withholding for or on account of (i) any
present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any government or
any political subdivision or taxing authority thereof, other
than any tax (except such taxes referred to in clause (ii)
below) on or measured by the net income of a Bank pursuant
to the income tax laws of the jurisdiction where such Bank's
principal or lending office is located or in which such Bank
maintains a place of business (collectively the "Taxes") and
(ii) deduction of an amount equal to any taxes on or
measured by the net income payable by any such Bank with
respect to the amount by which the payments required to be
made by this Section 3.4 exceed the amount otherwise
specified to be paid under this Agreement) shall not be less
than the amounts otherwise specified to be paid under this
Agreement. A certificate as to any additional amounts
payable to any Bank under this Section 3.4 submitted to the
applicable Borrower by such Bank shall show in reasonable
detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be
final, conclusive and binding upon all parties hereto. With
respect to each deduction or withholding for or on account
of any Taxes, the applicable Borrower shall promptly furnish
to each Bank such certificates, receipts and other documents
as may be required (in the judgment of such Bank) to
establish any tax credit to which such Bank may be entitled.
SECTION 4. Conditions Precedent.
4.1 Conditions to Effectiveness. On the Closing
Date:
(a) The Agent shall have received from the general
counsel or senior counsel of PPL a favorable opinion dated
the Closing Date substantially in the form of Exhibit A
hereto.
(b) The Agent shall have received an opinion of Reid &
Priest LLP, counsel for PPL, Finance Co. and Resources,
addressed to the Agent, the Fronting Bank and the Banks,
dated the Closing Date, with respect to the enforceability
of this Agreement against PPL and Finance Co., and with
respect to the enforceability of the guarantee hereunder by
Resources of the obligations of Finance Co. against
Resources, substantially in the form of Exhibit B hereto.
(c) All corporate and legal proceedings and all
instruments in connection with the transactions contemplated
by this Agreement (including resolutions of the Board of
Directors of PPL, Finance Co. and Resources and certificates
as to the incumbency of the officers signing this Agreement
or any certificate delivered in connection herewith) shall
be satisfactory in form and substance to the Agent, and the
Agent shall have received all information and copies of all
documents that it has requested, such documents where
appropriate to be certified by proper corporate or
governmental authorities.
(d) The Agent shall have received from each of the
Banks, the Fronting Bank, PPL, Finance Co. and Resources a
duly executed and delivered counterpart hereof.
(e) The conditions set forth in Sections 4.2A and 4.2B
(other than Section 4.2A(c) and Section 4.2B(c)) shall have
been satisfied.
(f) The Agent shall have received evidence
satisfactory to it of the termination of the Revolving
Credit Agreement dated as of August 30, 1994, among PPL, the
banks party thereto and The Chase Manhattan Bank (as
successor by merger to Chemical Bank), as agent for the
banks.
(g) The Agent shall have received evidence
satisfactory to it of the termination of the Revolving
Credit Agreement dated as of May 30, 1996, as amended as of
May 27, 1997, among Resources, the banks party thereto and
The Chase Manhattan Bank as fronting bank, collateral agent
and agent for the banks.
(h) The Agent shall have received a certificate signed
by appropriate officers of PPL stating that all regulatory
approvals necessary to permit PPL to enter into this
Agreement and to perform its obligations hereunder have been
obtained and are in full force and effect and attaching
evidence of all such regulatory approvals.
4.2A Conditions to Each Loan to PPL and Each
Issuance of a Letter of Credit for the account of PPL. The
obligation of each Bank to make each Loan to PPL (excluding
any conversions of one Type of Loan to another Type pursuant
to Section 2.5(b)) and of the Fronting Bank to issue each
Letter of Credit for the account of PPL hereunder is
subject, at the time of the making of each such Loan and the
issuance of each such Letter of Credit (except as
hereinafter indicated), to the satisfaction of the following
conditions, with the making of each such Loan and the
issuance of each such Letter of Credit constituting a
representation and warranty by PPL that the conditions
specified in Sections 4.2A(a), (b), (d) and (e) below are
then satisfied:
(a) No Default. At the time of the making each such
Loan to PPL, and the issuance of each Letter of Credit for
the account of PPL and after giving effect thereto, there
shall exist no Default or Event of Default with respect to
PPL.
(b) Representations and Warranties. At the time of
the making of each such Loan to PPL and the issuance of each
such Letter of Credit for the account of PPL and after
giving effect thereto, all representations and warranties
contained in Section 7A hereof shall be true and correct
with the same force and effect as though such representa-
tions and warranties had been made as of such time.
(c) Notice of Borrowing. The Agent shall have
received Notice of Borrowing from PPL as required by
Section 1.2 or, in the case of the issuance of a Letter of
Credit, the Fronting Bank and the Agent shall have received
a notice from PPL requesting the issuance of such Letter of
Credit as required by Section 1A(b).
(d) No Adverse Change. Since December 31, 1996, there
shall have been no change in the business, assets, financial
condition or operations of PPL and its Subsidiaries taken as
a whole which materially and adversely affects the ability
of PPL to perform any of its obligations hereunder.
(e) Regulatory Approval. The making of such Loan to
PPL or the issuance of such Letter of Credit for the account
of PPL shall not cause the aggregate dollar amount of Loans
and Letters of Credit outstanding for the account of PPL to
exceed the amount of such obligations for which PPL has
obtained the necessary regulatory approval.
4.2B Conditions to Each Loan to Finance Co. and
Each Issuance of a Letter of Credit for the account of
Finance Co. The obligation of each Bank to make each Loan
to Finance Co. (excluding any conversions of one Type of
Loan to another Type pursuant to Section 2.5(b)) and of the
Fronting Bank to issue each Letter of Credit for the account
of Finance Co. hereunder is subject, at the time of the
making of each such Loan and the issuance of each such
Letter of Credit (except as hereinafter indicated), to the
satisfaction of the following conditions, with the making of
each such Loan and the issuance of each such Letter of
Credit constituting a representation and warranty by Finance
Co. that the conditions specified in Sections 4.2B(a), (b)
and (d) below are then satisfied:
(a) No Default. At the time of the making of each
such Loan to Finance Co. and the issuance of each Letter of
Credit for the account of Finance Co. and after giving
effect thereto, there shall exist no Default or Event of
Default with respect to Finance Co.
(b) Representations and Warranties. At the time of
the making of each such Loan to Finance Co. and the issuance
of each such Letter of Credit for the account of Finance Co.
and after giving effect thereto, all representations and
warranties contained in Section 7B hereof shall be true and
correct with the same force and effect as though such repre-
sentations and warranties had been made as of such time.
(c) Notice of Borrowing. The Agent shall have
received Notice of Borrowing from Finance Co. as required by
Section 1.2 or, in the case of the issuance of a Letter of
Credit, the Fronting Bank and the Agent shall have received
a notice from Finance Co. requesting the issuance of such
Letter of Credit as required by Section 1A(b).
(d) No Adverse Change. Since December 31, 1996, there
shall have been no change in the business, assets, financial
condition or operations of Resources and its Subsidiaries
taken as a whole which materially and adversely affects the
ability of Resources to perform any of its obligations
hereunder.
SECTION 5.A Covenants of PPL.
While this Agreement is in effect and until the
Total Commitment has been terminated with respect to PPL,
all obligations of PPL hereunder shall have been paid in
full and all Letters of Credit issued for the account of PPL
shall have been canceled or have expired and all amounts
drawn thereunder shall have been reimbursed in full, PPL
agrees that:
5.1A Financial Statements. PPL will furnish to
each Bank:
(a) within 120 days after the end of each fiscal year
an auditors' report, including a balance sheet as at the
close of such fiscal year and statements of income,
shareowners' common equity and cash flows for such year for
PPL and its consolidated Subsidiaries prepared in conformity
with GAAP, with an opinion expressed by Price Waterhouse LLP
or other independent auditors of recognized standing
selected by it;
(b) within 60 days after the end of each of the first
three quarters in each fiscal year, a balance sheet as at
the close of such quarterly period and statements of income,
shareowners' common equity and cash flows for such quarterly
period for itself and its consolidated Subsidiaries prepared
in conformity with GAAP;
(c) within 120 days after the end of each fiscal year,
a copy of its Form 10-K Report to the Securities and
Exchange Commission ("SEC") and within 60 days after the end
of each of the first three quarters in each fiscal year, a
copy of its Form 10-Q Report to the SEC;
(d) from time to time, with reasonable promptness,
such further information regarding its business, affairs and
financial condition as any Bank and the Fronting Bank may
reasonably request; and
(e) upon acquiring knowledge of the existence of a
Default or Event of Default with respect to it a certificate
of a financial officer specifying: (i) the nature of such
Default or Event of Default, (ii) the period of the
existence thereof, and (iii) the actions that PPL proposes
to take with respect thereto.
The financial statements required to be furnished
pursuant to clauses (a) and (b) above shall be accompanied
by a certificate of a principal financial officer of PPL to
the effect that no Default or Event of Default with respect
to it has occurred and is continuing. The financial
statements required to be furnished pursuant to clause (a)
above shall also be accompanied by a Compliance Certificate
in the form of Exhibit D-1 hereto ("PPL Compliance
Certificate") demonstrating compliance with Section 5.4A.
5.2A Mergers. PPL will not merge or consolidate
with any Person if PPL is not the survivor unless (a) the
survivor assumes the obligations of PPL hereunder, (b) the
survivor is a utility whose business is not substantially
different in character or composition from that of PPL and
(c) the senior secured debt ratings of the survivor by
Moody's and S&P as available (or if the ratings of Moody's
and S&P are not available, of such other rating agency as
shall be acceptable to the Agent), are at least equal to the
ratings of PPL's First Mortgage Bonds (or other senior
secured debt) immediately prior to such merger or
consolidation.
5.3A Ratings. PPL will use its best efforts to
promptly notify the Banks upon obtaining knowledge of any
change in, or cessation of, ratings of PPL's First Mortgage
Bonds (or other senior secured debt) by Moody's or S&P.
5.4A Consolidated Indebtedness to Consolidated
Capitalization. The ratio of Consolidated Indebtedness of
PPL to Consolidated Capitalization of PPL shall not exceed
70% at any time.
SECTION 5.B Covenants of Finance Co. and
Resources.
While this Agreement is in effect and until the
Total Commitment has been terminated with respect to Finance
Co., all obligations of Finance Co. and Resources hereunder
shall have been paid in full and all Letters of Credit
issued for the account of Finance Co. shall have been
canceled or have expired and all amounts drawn thereunder
shall have been reimbursed in full, each of Finance Co. and
Resources agrees that:
5.1B Financial Statements. Resources will
furnish to each Bank:
(a) within 120 days after the end of each fiscal
year (i) an auditors' report, including a balance sheet as
at the close of such fiscal year and statements of income,
shareowners' common equity and cash flows for such year for
Resources and its consolidated Subsidiaries prepared in
conformity with GAAP, with an opinion expressed by Price
Waterhouse LLP or other independent auditors of recognized
standing selected by it and (ii) Resources' unconsolidated
balance sheet as at the close of such fiscal year and
statements of income, shareholders common equity and cash
flows for such year;
(b) within 60 days after the end of each of the
first three quarters in each fiscal year, a balance sheet as
at the close of such quarterly period and statements of
income, shareowners' common equity and cash flows for such
quarterly period for (i) Resources and its consolidated
Subsidiaries prepared in conformity with GAAP, and (ii)
Resources' unconsolidated balance sheet as at the close of
such quarterly period and statements of income, shareowners'
common equity and cash flow for such quarterly period;
(c) within 120 days after the end of each fiscal
year, a copy of Resources' Form 10-K Report to the
Securities and Exchange Commission ("SEC") and within 60
days after the end of each of the first three quarters in
each fiscal year, a copy of Resources' Form 10-Q Report to
the SEC;
(d) from time to time, with reasonable
promptness, such further information regarding Resources'
business, affairs and financial condition as any Bank and
the Fronting Bank may reasonably request; and
(e) upon acquiring knowledge of the existence of
a Default or Event of Default with respect to Finance Co. a
certificate of a financial officer of Resources and an
officer of Finance Co. specifying: (i) the nature of such
Default or Event of Default, (ii) the period of the
existence thereof, and (iii) the actions that Resources and
Finance Co. propose to take with respect thereto.
The financial statements required to be furnished
pursuant to clauses (a) and (b) above shall be accompanied
by a certificate of a principal financial officer of
Resources to the effect that no Default or Event of Default
with respect to Finance Co. has occurred and is continuing.
The financial statements required to be furnished pursuant
to clause (a) above shall also be accompanied by a
Compliance Certificate in the form of Exhibit D-2 hereto
("Resources Compliance Certificate") demonstrating
compliance with Section 5.5B.
5.2B Mergers. (i) (1) Resources will not merge
or consolidate with any Person if Resources is not the
survivor unless (a) the survivor assumes Resources'
obligations hereunder, (b) substantially all of the
consolidated assets and consolidated revenues of the
survivor are anticipated to come from a utility business or
utility businesses and (c) the senior unsecured debt ratings
of the survivor by Moody's or S&P, as available (or if the
ratings of Moody's and S&P are not available, of such other
rating agency as shall be acceptable to the Required Banks),
are at least equal to the ratings of Resource's senior
unsecured debt immediately prior to such merger or
consolidation; (2) Resources will not dispose of any common
stock of either Borrower or any securities convertible into
common stock of either Borrower, except in connection with
any merger or consolidation permitted under this Section
5.2B or under Section 5.2A, and except that Resources shall
be allowed to sell, transfer or otherwise dispose of PPL's
common stock to PPL.
(ii) Finance Co. will not merge into or
consolidate with any other Person except (a) Resources or a
successor of Resources permitted by this Section or (b) any
other Person which is a wholly owned subsidiary of Resources
or a successor of Resources permitted by this Section.
5.3B Ratings. Finance Co. and Resources will
each use their best efforts to promptly notify the Banks
upon obtaining knowledge of any change in, or cessation of,
ratings of Resources' senior unsecured debt by Moody's or
S&P.
5.4B Liens. Resources will not create, incur,
or suffer to exist any Lien in or on the common stock of PPL
or Finance Co. or on securities convertible into the common
stock of PPL or Finance Co. (in either case, now or
hereafter acquired) other than Permitted Liens.
5.5B Consolidated Indebtedness to Consolidated
Capitalization. The ratio of Consolidated Indebtedness of
Resources to Consolidated Capitalization of Resources shall
not exceed 70% at any time.
SECTION 6.A Events of Default with Respect to PPL.
Each of the following events shall constitute an
"Event of Default" with respect to PPL:
6.1A Representations, Etc. Any certificate furn-
ished by PPL to the Banks and the Fronting Bank pursuant
hereto shall prove to have been incorrect in any material
respect or any of the representations and warranties made by
PPL herein or in connection herewith shall prove to have
been incorrect in any material respect when made; or
6.2A Principal and Interest. PPL shall fail to
make any payment of principal on any of its Loans or any
other payment payable by PPL hereunder (including the
reimbursement of any L/C Disbursement) when due or, in the
case of interest or fees, within 10 days of the due date
thereof; or
6.3A Defaults by PPL Under Other Agreements. PPL
shall (i) fail to pay any principal or interest, regardless
of amount, due in respect of any Indebtedness in a principal
amount in excess of $50,000,000 beyond any period of grace
provided with respect thereto, or (ii) fail to observe or
perform any other term, covenant, condition or agreement
contained in any agreement or instrument evidencing or
governing any such Indebtedness in a principal amount in
excess of $50,000,000 beyond any period of grace provided
with respect thereto if the effect of any failure referred
to in this clause (ii) is to cause, or to permit the holder
or holders of such Indebtedness or a trustee on its or their
behalf to cause, such Indebtedness to become due prior to
its stated maturity; or
6.4A Judgments. PPL shall fail within 60 days to
pay, bond or otherwise discharge any judgment or order for
the payment of money in excess of $25,000,000 that is not
stayed on appeal or otherwise being appropriately contested
in good faith; or
6.5A Bankruptcy, Etc. PPL shall commence a vol-
untary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy" as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code"); or
an involuntary case shall be commenced against PPL or such
case shall be controverted but shall not be dismissed within
60 days after the commencement of the case; or PPL shall not
generally be paying its debts as they become due; or a
custodian (as defined in the Bankruptcy Code) shall be
appointed for, or shall take charge of, all or substantially
all of the property of PPL or PPL shall commence any other
proceeding under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution, insol-
vency or liquidation or similar law of any jurisdiction whe-
ther now or hereafter in effect relating to PPL or there
shall be commenced against PPL any such proceeding which
remains undismissed for a period of 60 days or PPL shall be
adjudicated insolvent or bankrupt; or PPL shall fail to
controvert in a timely manner any such case under the
Bankruptcy Code or any such proceeding, or any order of
relief or other order approving any such case or proceeding
shall be entered; or PPL by any act or failure to act shall
indicate its consent to, approval of or acquiescence in any
such case or proceeding or in the appointment of any
custodian or the like for it or any substantial part of its
property or shall suffer any such appointment to continue
undischarged or unstayed for a period of 60 days; or PPL
shall make a general assignment for the benefit of credi-
tors; or any corporate action shall be taken by PPL for the
purpose of effecting any of the foregoing; or
6.6A Other Covenants. PPL shall fail to perform
or observe any other term, covenant or agreement contained
in this Agreement on its part to be performed or observed
and any such failure shall remain unremedied for a period of
30 days after written notice thereof shall have been
received by PPL from the Agent or the Required Banks.
SECTION 6.B Events of Default with Respect to
Finance Co.
Each of the following events shall constitute an
"Event of Default" with respect to Finance Co.:
6.1B Representations, Etc. Any certificate furn-
ished by Finance Co. or Resources to the Banks and the
Fronting Bank pursuant hereto shall prove to have been
incorrect in any material respect or any of the
representations and warranties made by Finance Co. or
Resources herein or in connection herewith shall prove to
have been incorrect in any material respect when made; or
6.2B Principal and Interest. Either Finance Co.
or Resources shall fail to make any payment of principal on
any Loan to Finance Co. or any other payment payable by
Finance Co. or Resources hereunder (including the
reimbursement of any L/C Disbursement) when due or, in the
case of interest or fees, within 10 days of the due date
thereof; or
6.3B Defaults by Finance Co. or Resources
Under Other Agreements. Finance Co. or Resources shall
(i) fail to pay any principal or interest, regardless of
amount, due in respect of any Indebtedness in a principal
amount in excess of $40,000,000, in the case of Indebtedness
of Resources or Indebtedness of Finance Co. guaranteed by
Resources or, in the case of Indebtedness of Finance Co. not
guaranteed by Resources, $10,000,000, if such failure shall
continue beyond any period of grace provided with respect
thereto, or (ii) fail to observe or perform any other term,
covenant, condition or agreement contained in any agreement
or instrument (including any term, covenant, condition or
agreement herein) evidencing or governing any such
Indebtedness in a principal amount in excess of, in the case
of Indebtedness of Resources or Indebtedness of Finance Co.
guaranteed by Resources, $40,000,000 or, in the case of
Indebtedness of Finance Co. not guaranteed by Resources,
$10,000,000, if such failure shall continue beyond any
period of grace provided with respect thereto if the effect
of any failure referred to in this clause (ii) is to cause,
or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf to cause, such Indebtedness
to become due prior to its stated maturity; or
6.4B Judgments. Finance Co. or Resources shall
fail within 60 days to pay, bond or otherwise discharge any
judgment or order for the payment of money in excess of
$25,000,000 that is not stayed on appeal or otherwise being
appropriately contested in good faith; or
6.5B Bankruptcy, Etc. Finance Co. or Resources
shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy" as
now or hereafter in effect or any successor thereto (the
"Bankruptcy Code"); or an involuntary case shall be
commenced against Finance Co. or Resources or such case
shall be controverted but shall not be dismissed within 60
days after the commencement of the case; or Finance Co. or
Resources shall not generally be paying its debts as they
become due; or a custodian (as defined in the Bankruptcy
Code) shall be appointed for, or shall take charge of, all
or substantially all of the property of Finance Co. or
Resources or Finance Co. or Resources shall commence any
other proceeding under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution, insol-
vency or liquidation or similar law of any jurisdiction whe-
ther now or hereafter in effect relating to Finance Co. or
Resources or there shall be commenced against Finance Co. or
Resources any such proceeding which remains undismissed for
a period of 60 days or Finance Co. or Resources shall be
adjudicated insolvent or bankrupt; or Finance Co. or
Resources shall fail to controvert in a timely manner any
such case under the Bankruptcy Code or any such proceeding,
or any order of relief or other order approving any such
case or proceeding shall be entered; or Finance Co. or
Resources by any act or failure to act shall indicate its
consent to, approval of or acquiescence in any such case or
proceeding or in the appointment of any custodian or the
like for it or any substantial part of its property or shall
suffer any such appointment to continue undischarged or
unstayed for a period of 60 days; Finance Co. or Resources
shall make a general assignment for the benefit of credi-
tors; or any corporate action shall be taken by Finance Co.
or Resources for the purpose of effecting any of the fore-
going; or
6.6B Other Covenants. Finance Co. or Resources
shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be
performed or observed and any such failure shall remain
unremedied for a period of 30 days after written notice
thereof shall have been received by Finance Co. or
Resources, as the case may be, from the Agent or the
Required Banks; or
6.7B Events of Default with Respect to PPL. An
Event of Default shall occur with respect to PPL.
If any Event of Default with respect to PPL as specified in
Section 6A shall then be continuing, then either or both of
the following actions may be taken: (i) the Agent, at the
direction of the Required Banks, shall by written notice to
PPL, declare the principal of and accrued interest in
respect of all of PPL's outstanding Loans to be, whereupon
the same and all other amounts due from PPL hereunder shall
become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which
are hereby expressly waived by PPL, anything contained
herein to the contrary notwithstanding, and (ii) the Agent,
at the direction of the Required Banks, shall by written
notice to PPL, declare the Total Commitment as to PPL
terminated, whereupon the Commitment of each Bank (insofar
as it is available to PPL) and the obligation of each Bank
to make its Loans hereunder to PPL and the obligation of the
Fronting Back to issue Letters of Credit for the account of
PPL hereunder shall terminate immediately and any accrued
Commitment Fee owed by PPL shall forthwith become due and
payable without any other notice of any kind; provided that
if an Event of Default described in Section 6.5A shall occur
with respect to PPL, the results which would otherwise occur
only upon the giving of written notice by the Agent to PPL
as specified in clauses (i) and (ii) above shall occur auto-
matically without the giving of any such notice and without
any instruction by the Required Banks to give such notice.
If any Event of Default with respect to Finance Co. as
specified in Section 6B shall then be continuing, then
either or both of the following actions may be taken:
(i) the Agent, at the direction of the Required Banks, shall
by written notice to Resources and Finance Co., declare the
principal of and accrued interest in respect of all of
Finance Co.'s outstanding Loans to be, whereupon the same
and all other amounts due from Resources or Finance Co.
hereunder shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by Resources and
Finance Co., anything contained herein to the contrary
notwithstanding, and (ii) the Agent, at the direction of the
Required Banks, shall, by written notice to Resources and
Finance Co., declare the Total Commitment as to Finance Co.
terminated (insofar as it is available to Finance Co.),
whereupon the Commitment of each Bank and the obligation of
each Bank to make its Loans to Finance Co. hereunder and the
obligations of the Fronting Bank to issue Letters of Credit
for the account of Finance Co. shall terminate immediately
and any accrued Commitment Fee owed by Finance Co. shall
forthwith become due and payable without any other notice of
any kind; provided that if an Event of Default described in
Section 6.5B shall occur with respect to Finance Co., the
results which would otherwise occur only upon the giving of
written notice by the Agent to Finance Co. as specified in
clauses (i) and (ii) above shall occur automatically without
the giving of any such notice and without any instruction by
the Required Banks to give such notice.
SECTION 7.A Representations and Warranties of PPL.
In order to induce the Banks and the Fronting Bank
to enter into this Agreement and to make the Loans to PPL
and issue the Letters of Credit for the account of PPL, in
each case, as provided for herein, PPL makes the following
representations and warranties to the Banks and the Fronting
Bank:
7.1A Corporate Status. It is duly incorporated,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has the corporate power to
make and perform this Agreement and to borrow hereunder.
7.2A Authority; No Conflict. The making and
performance by it of this Agreement have been duly
authorized by all necessary corporate action and do not and
will not violate any provision of law or regulation, or any
decree, order, writ or judgment, or any provision of its
charter or by-laws, or result in the breach of or constitute
a default under any indenture or other agreement or
instrument to which it is a party.
7.3A Legality, Etc. This Agreement constitutes
the legal, valid and binding obligation of PPL, enforceable
in accordance with its terms except to the extent limited by
bankruptcy, insolvency or reorganization laws or by other
laws relating to or affecting the enforceability of credi-
tors' rights generally and by general equitable principles
which may limit the right to obtain equitable remedies.
7.4A Financial Statements. The consolidated
financial statements of PPL and its consolidated
Subsidiaries for the year ended as at December 31, 1996,
furnished to the Banks, fairly present its consolidated
financial position at December 31, 1996 and the results of
its consolidated operations for the year then ended and were
prepared in accordance with GAAP. Since that date there has
been no adverse change in the business, assets, financial
condition or operations of PPL that would materially and
adversely affect the ability of PPL to perform any of its
obligations hereunder.
7.5A Litigation. Except as disclosed in or con-
templated by PPL's Form 10-K Report to the SEC for the year
ended December 31, 1996 or in any subsequent Form 10-Q
Report or otherwise furnished in writing to the Banks, no
litigation, arbitration or administrative proceeding is
pending or, to its knowledge, threatened, which, if
determined adversely to PPL, would materially and adversely
affect its ability to perform any of its obligations under
this Agreement. There is no litigation, arbitration or
administrative proceeding pending or, to the knowledge of
PPL, threatened which questions the validity of this
Agreement.
7.6A No Violation. No part of the proceeds of
the borrowings by PPL under this Agreement or of any Letter
of Credit issued for its account will be used, directly or
indirectly by PPL for the purpose of purchasing or carrying
any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or for any
other purpose which violates, or which conflicts with, the
provisions of Regulations G, U or X of said Board of
Governors. PPL is not engaged principally, or as one of its
important activities, in the business of extending credit
for the purpose of purchasing or carrying any such "margin
stock."
7.7A ERISA. There have not been any "reportable
events," as that term is defined in Section 4043 of the
Employee Retirement Income Security Act of 1974, as amended,
which would result in a material liability to PPL.
7.8A Consents. No authorization, consent or
approval from governmental bodies or regulatory authorities
is required for the making and performance by PPL of this
Agreement, except such authorizations, consents and
approvals as have been obtained prior to the making of any
Loans or the issuance of any Letters of Credit and are in
full force and effect at the time of the making of each Loan
and the issuance of each Letter of Credit.
7.9A Subsidiaries. The assets of all
Subsidiaries of PPL do not comprise in the aggregate more
than 20% of the total consolidated assets of PPL.
7.10A Investment Company Act. PPL is not an
"investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, in order not
to be subject to the prohibitions of Section 7 of such Act.
7.11A Public Utility Holding Company Act. PPL is
a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, but is exempt from
such Act (except for the provisions of Section 9(a)(2)
thereof) by virtue of an order of the SEC pursuant to
Section 3(a)(2) thereof.
7.12A Tax Returns. PPL has filed or caused to be
filed all Federal, state, local and foreign tax returns or
materials required to have been filed by it and has paid or
caused to be paid all taxes due and payable by it and all
assessments received by it, except taxes that are being
contested in good faith by appropriate proceedings and for
which PPL shall have set aside on its books appropriate
reserves with respect thereto in accordance with GAAP.
7.13A Compliance with Laws. PPL is in compliance
with all laws, regulations and orders of any governmental
authority except to the extent (A) such compliance is being
contested in good faith by appropriate proceedings or
(B) non-compliance would not reasonably be expected to
materially and adversely affect its ability to perform any
of its obligations hereunder.
SECTION 7.B Representations and Warranties of
Finance Co. and Resources.
In order to induce the Banks and the Fronting Bank
to enter into this Agreement and to make the Loans to
Finance Co. and issue the Letters of Credit for the account
of Finance Co., in each case as provided for herein, each of
Finance Co. and Resources makes the following
representations and warranties to the Banks and the Fronting
Bank:
7.1B Corporate Status. Resources is duly
incorporated, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania, and has the
corporate power to make and perform this Agreement, and
Finance Co. is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and
has the corporate power to make and perform this Agreement
and to borrow hereunder.
7.2B Authority; No Conflict. The making and
performance by Resources and Finance Co. of this Agreement
have been duly authorized by all necessary corporate action
and do not and will not violate any provision of law or
regulation, or any decree, order, writ or judgment, or any
provision of its charter or by-laws, or result in the breach
of or constitute a default under any indenture or other
agreement or instrument to which Resources or Finance Co.,
as the case may be, is a party.
7.3B Legality, Etc. This Agreement constitutes
the legal, valid and binding obligation of each of Resources
and Finance Co., enforceable against Resources or Finance
Co., as the case may be, in accordance with its terms except
to the extent limited by bankruptcy, insolvency or
reorganization laws or by other laws relating to or
affecting the enforceability of creditors' rights generally
and by general equitable principles which may limit the
right to obtain equitable remedies.
7.4B Financial Statements. The consolidated
financial statements of Resources for the year ended as at
December 31, 1996, furnished to the Banks, fairly present
Resources' consolidated financial position at December 31,
1996 and the results of its consolidated operations for the
year then ended and were prepared in accordance with GAAP.
Since that date there has been no adverse change in the
business, assets, financial condition or operations of
Resources that would materially and adversely affect its
ability to perform any of its obligations hereunder.
7.5B Litigation. Except as disclosed in or con-
templated by Resources's Form 10-K Report to the SEC for the
year ended December 31, 1996, or in any subsequent Form 10-Q
Report or otherwise furnished in writing to the Banks, no
litigation, arbitration or administrative proceeding against
Resources or Finance Co. is pending or, to Resources'
knowledge, threatened, which, if determined adversely, would
materially and adversely affect the ability of Resources to
perform any of its obligations under this Agreement. There
is no litigation, arbitration or administrative proceeding
pending or, to the knowledge of Resources, threatened which
questions the validity of this Agreement.
7.6B No Violation. No part of the proceeds of
the borrowings by Finance Co. under this Agreement or of any
Letter of Credit issued for its account will be used,
directly or indirectly by Finance Co. or any Subsidiary of
Resources for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or for any
other purpose which violates, or which conflicts with, the
provisions of Regulations G, U or X of said Board of
Governors. Neither Resources nor Finance Co. is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing
or carrying any such "margin stock."
7.7B ERISA. There have not been any "reportable
events," as that term is defined in Section 4043 of the
Employee Retirement Income Security Act of 1974, as amended,
which would result in a material liability to Resources.
7.8B Consents. No authorization, consent or
approval from governmental bodies or regulatory authorities
is required for the making and performance by Resource or
Finance Co. of this Agreement, except such authorizations,
consents and approvals as have been obtained prior to the
making of any Loans or the issuance of any Letters of Credit
and are in full force and effect at the time of the making
of each Loan and the issuance of each Letter of Credit.
7.9B Investment Company Act. Neither Resources
nor Finance Co. is an "investment company" that is required
to be registered under the Investment Company Act of 1940,
as amended, in order not to be subject to the prohibitions
of Section 7 of such Act.
7.10B Public Utility Holding Company Act.
Resources is a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, but
is exempt from such Act (except for the provisions of
Section 9(a)(2) thereof) by virtue of an order of the SEC
pursuant to Section 3(a)(1) thereof. Finance Co. is not a
"holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
7.11B Tax Returns. Resources and Finance Co.
have filed or caused to be filed all Federal, state, local
and foreign tax returns or materials required to have been
filed by it and has paid or caused to be paid all taxes due
and payable by it and all assessments received by it, except
taxes that are being contested in good faith by appropriate
proceedings and for which Resources shall have set aside on
its books appropriate reserves with respect thereto in
accordance with GAAP.
7.12B Compliance with Laws. Each of Resources
and Finance Co. is in compliance with all laws, regulations
and orders of any governmental authority except to the
extent (A) such compliance is being contested in good faith
by appropriate proceedings or (B) non-compliance would not
reasonably be expected to materially and adversely affect
its ability to perform any of its obligations hereunder.
SECTION 8. Agent.
8.1 Appointment. The Banks hereby appoint The
Chase Manhattan Bank as Agent (such term to include Agent
acting as Agent) to act as herein specified. Each Bank and
the Fronting Bank hereby irrevocably authorizes, and each
assignee of any Bank or the Fronting Bank shall be deemed
irrevocably to authorize, the Agent to take such action on
their behalf under the provisions of this Agreement and any
instruments, documents and agreements referred to herein
(such instruments, documents and agreements being herein
referred to as the "Loan Documents") and to exercise such
powers hereunder and thereunder as are specifically
delegated to the Agent by the terms hereof and thereof and
such other powers as are reasonably incidental thereto. The
Agent may perform any of its duties hereunder, or under the
Loan Documents, by or through its agents or employees.
8.2 Nature of Duties. The duties of the Agent
shall be mechanical and administrative in nature. The Agent
shall not have by reason of this Agreement a fiduciary
relationship in respect of any Bank or of the Fronting Bank.
Nothing in this Agreement or any of the Loan Documents,
expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in
respect of this Agreement or any of the Loan Documents
except as expressly set forth herein. Each Bank and the
Fronting Bank shall make its own independent investigation
of the financial condition and affairs of PPL, Finance Co.
and Resources and each of their Subsidiaries in connection
with the making and the continuance of the Loans and the
issuance of Letters of Credit hereunder and shall make its
own appraisal of the creditworthiness of PPL, Resources and
Finance Co.; and the Agent shall have no duty or
responsibility, either initially or on a continuing basis,
to provide any Bank or the Fronting Bank with any credit or
other information with respect thereto, whether coming into
its possession before the making of the Loans or the
issuance of Letters of Credit or at any time or times
thereafter. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through
agents or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible to any Bank or the
Fronting Bank for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care
except to the extent otherwise required by Section 8.3.
8.3 Rights, Exculpation, Etc. Neither the Agent
nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be liable to any Bank
or to the Fronting Bank for any action taken or omitted by
it hereunder or under any of the Loan Documents, or in
connection herewith or therewith, unless caused by its or
their gross negligence or willful misconduct. The Agent
shall not be responsible to any Bank or to the Fronting Bank
for any recitals, statements, representations or warranties
herein or for the execution, effectiveness, genuineness,
validity, enforceability, collectibility, or sufficiency of
this Agreement or any of the Loan Documents or the financial
condition of PPL, Finance Co. or Resources. The Agent shall
not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or
conditions of this Agreement or any of the Loan Documents or
the financial condition of PPL, Finance Co. or Resources, or
the existence or possible existence of any Default or Event
of Default. The Agent may at any time request instructions
from the Banks with respect to any actions or approvals
which by the terms of this Agreement or any of the Loan
Documents the Agent is permitted or required to take or to
grant, and if such instructions are requested, the Agent
shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under
any liability whatsoever to any Person for refraining from
any action or withholding any approval under this Agreement
or any of the Loan Documents until it shall have received
such instructions from the Required Banks or all Banks, as
required. Without limiting the foregoing, no Bank shall
have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting
hereunder or under any of the Loan Documents in accordance
with the instructions of the Required Banks or all Banks, as
required.
8.4 Reliance. The Agent shall be entitled to
rely upon any written notice, statement, certificate, order
or other document or any telephone message believed by it to
be genuine and correct and to have been signed, sent or made
by the proper Person, and, with respect to all legal matters
pertaining to this Agreement or any of the Loan Documents
and its duties hereunder or thereunder, upon advice of
counsel selected by it.
8.5 Indemnification. To the extent that the
Agent is not reimbursed and indemnified by PPL, Resources or
Finance Co., the Banks will reimburse and indemnify the
Agent for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against the Agent, acting pursuant hereto, in any way
relating to or arising out of this Agreement or any of the
Loan Documents or any action taken or omitted by the Agent
under this Agreement or any of the Loan Documents, in
proportion to their respective Commitments hereunder;
provided, however, that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
wilful misconduct. The obligations of the Banks under this
Section 8.5 shall survive the payment in full of outstanding
Loans, the expiration of any Letter of Credit and the
termination of this Agreement.
8.6 The Agent, Individually. With respect to its
Commitment hereunder and the Loans made by it, the Agent
shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any
other Bank. The terms "Banks," "Required Banks" or any
similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity as a
Bank or one of the Required Banks. The Agent may accept
deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with PPL, Finance
Co. or Resources as if it were not acting pursuant hereto.
8.7 Resignation by the Agent. The Agent may
resign from the performance of all its functions and duties
hereunder at any time by giving 30 Business Days' prior
written notice to each Borrower, Resources and the Banks.
Such resignation shall take effect upon the expiration of
such 30 Business Day period or upon the earlier appointment
of a successor. Upon any such resignation, the Required
Banks shall appoint a successor Agent who shall be
satisfactory to the Borrowers and Resources and shall be an
incorporated bank or trust company. In the event no such
successor shall have been so appointed, then any notifica-
tion, demand or other communication required or permitted to
be given by the Agent on behalf of the Banks to the
Borrowers hereunder shall be sufficiently given if given by
the Required Banks, and any notification, demand, other
communication, document, statement, other paper or payment
required to be made, given or furnished by PPL, Finance Co.
or Resources to the Agent for distribution to the Banks
shall be sufficiently made, given or furnished if made,
given or furnished by PPL, Finance Co. or Resources, as
applicable, directly to each Bank entitled thereto and, in
the case of payments, in the amount to which each such Bank
is entitled from the applicable Borrower. All powers spec-
ifically delegated to the Agent by the terms hereof may be
exercised by the Required Banks.
SECTION 9. Resources Guarantee.
In order to induce the Banks to extend credit
hereunder to Finance Co., Resources hereby irrevocably and
unconditionally guarantees, as primary obligor and not
merely as a surety, the Finance Co. Obligations. Resources
further agrees that the due and punctual payment of the
Finance Co. Obligations may be extended or renewed, in whole
or in part, without notice to or further assent from it, and
that it will remain bound upon its Guarantee hereunder
notwithstanding any such extension or renewal of any Finance
Co. Obligation.
Resources waives presentment to, demand of payment
from and protest to Finance Co. of any of the Finance Co.
Obligations, and also waives notice of acceptance of its
obligations and notice of protest for nonpayment. The
obligations of Resources hereunder shall not be affected by
(a) the failure of any Bank or the Agent to assert any claim
or demand or to enforce any right or remedy against Finance
Co. under the provisions of this Agreement or otherwise,
(b) change or increase in the amount of any of the Finance
Co. Obligations, whether or not consented to by Resources,
or (c) any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement or any
other agreement.
Resources further agrees that its agreement
hereunder constitutes a promise of payment when due (whether
or not any bankruptcy or similar proceeding shall have
stayed the accrual or collection of any of the Finance Co.
Obligations or operated as a discharge thereof) and not
merely of collection, and waives any right to require that
any resort be had by any Bank to any balance of any deposit
account or credit on the books of any Bank in favor of any
other person.
The obligations of Resources hereunder shall not
be subject to any reduction, limitation, impairment or
termination for any reason, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination
whatsoever, by reason of the invalidity, illegality or
unenforceability of the Finance Co. Obligations, any
impossibility in the performance of the Finance Co.
Obligations or otherwise. Without limiting the generality
of the foregoing, the obligations of Resources hereunder
shall not be discharged or impaired or otherwise affected by
the failure of the Agent or any Bank to assert any claim or
demand or to enforce any remedy under this Agreement or any
other agreement, by any waiver or modification in respect of
any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Finance Co.
Obligations, or by any other act or omission which may or
might in any manner or to any extent vary the risk of
Resources or otherwise operate as a discharge of Resources
or Finance Co. as a matter of law or equity.
Resources further agrees that its obligations
hereunder shall continue to be effective or be reinstated,
as the case may be, if at any time payment, or any part
thereof, of any Finance Co. Obligation is rescinded or must
otherwise be restored by the Agent or any Bank upon the
bankruptcy or reorganization of Finance Co or otherwise.
In furtherance of the foregoing and not in
limitation of any other right which the Agent or any Bank
may have at law or in equity against Resources by virtue
hereof, upon the failure of Finance Co. to pay any Finance
Co. Obligation when and as the same shall become due,
whether at maturity, by acceleration, after notice of
prepayment or otherwise, Resources hereby promises to and
will, upon receipt of written demand by the Agent, forthwith
pay, or cause to be paid, in cash the amount of such unpaid
Finance Co. Obligation.
Upon payment by Resources of any Finance Co.
Obligation, each Bank shall, in a reasonable manner, assign
the amount of such Finance Co. Obligation owed to it and so
paid to Resources, such assignment to be pro tanto to the
extent to which the Finance Co. Obligation in question was
discharged by Resources, or make such disposition thereof as
Resources shall direct (all without recourse to any Bank and
without any representation or warranty by any Bank).
Upon payment by Resources of any sums as provided
above, all rights of Resources against Finance Co. arising
as a result thereof by way of right of subrogation or
otherwise shall in all respects be subordinate and junior in
right of payment to the prior indefeasible payment in full
of all the Finance Co. Obligations owed by Finance Co. to
the Banks.
SECTION 10. Miscellaneous.
10.1 Definitions. As used herein the following
terms shall have the meanings herein specified and shall
include in the singular number the plural and in the plural
number the singular:
"364-Day Agreement" shall mean the $150,000,000 364-Day
Revolving Credit Agreement among PPL, Finance Co.,
Resources, as guarantor of the obligations of Finance Co.,
the banks from time to time party thereto and The Chase
Manhattan Bank, as fronting bank, collateral agent and as
agent for the banks party thereto.
"Affected Bank" shall have the meaning assigned that
term in Section 2.5(c).
"Agent" shall mean The Chase Manhattan Bank and shall
include (i) any successor corporation thereto by merger,
consolidation or otherwise and (ii) any successor to the
Agent appointed pursuant to Section 8.7.
"Aggregate Credit Exposure" shall mean the aggregate
amount of the Banks' Credit Exposures.
"Agreement" shall mean this Revolving Credit Agreement,
as it may from time to time be amended, supplemented or
otherwise modified.
"Applicable Commitment Fee Percentage" shall mean for
the Borrowers, the percentage specified as such in the table
in the definition of "Applicable Rate" opposite the highest
rating category in which PPL's First Mortgage Bonds have
been assigned a rating by either of Moody's or S&P.
"Applicable Eurodollar Margin" shall mean (i) for PPL,
the margin specified as such in the table in the definition
of "Applicable Rate" opposite the highest rating category in
which PPL's First Mortgage Bonds have been assigned ratings
by either of Moody's or S&P or (ii) for Finance Co., the
margin specified as such in the table in the definition of
"Applicable Rate" opposite the highest rating category in
which Resources' senior unsecured debt has been assigned
ratings by either of Moody's or S&P.
"Applicable Lending Office" shall mean, with respect to
each Bank, (i) such Bank's Base Rate Lending Office in the
case of a Base Rate Loan and (ii) such Bank's Eurodollar
Lending Office in the case of a Eurodollar Rate Loan.
"Applicable Percentage" of any Bank at any time shall
mean the percentage of the Total Commitment represented by
such Bank's Commitment. In the event the Commitments shall
have expired or been terminated, the Applicable Percentages
shall be determined on the basis of the Commitments most
recently in effect, but giving effect to assignments
pursuant to Section 10.6.
"Applicable Rate" shall mean and include the Applicable
Commitment Fee Percentage for undrawn Commitments or
Applicable Eurodollar Margin for any Loans or issued Letters
of Credit and at any time will be determined based on the
highest applicable Category set forth below (the highest
category being Category A).
Criteria Applicable Applicable
Commitment Eurodollar
Fee Margin
Percentage
Category A:
A- or better/ .110% .300%
A3 or better
Category B:
BBB+/Baa1 .130% .350%
Category C:
BBB/Baa2 .150% .400%
Category D:
BBB-/Baa3 .1875% .450%
Category E:
BB+ or below/ .250% .625%
Ba1 or below
"Bank" shall have the meaning assigned that term in the
first paragraph in this Agreement.
"Bankruptcy Code" shall have the meaning assigned that term
in Section 6.5.
"Base Rate" shall mean, for any day, a rate per annum equal
to the higher of (i) the Prime Rate and (ii) 1/2 of 1% plus the
Federal Funds Rate, each as in effect from time to time.
"Base Rate Lending Office" means, with respect to each Bank,
the office of such Bank specified as its "Base Rate Lending
Office" on the signature pages to the Agreement or such other
office of such Bank as such Bank may from time to time specify as
such to the Borrowers and the Agent.
"Base Rate Loan" shall mean any Loan during any period
during which such Loan is bearing interest at the rates provided
for in Section 2.1(a).
"Borrower" shall mean either PPL or Finance Co. and
"Borrowers" shall mean PPL and Finance Co.
"Borrowing" shall mean the incurrence of one Type of Loan to
a Borrower from all the Banks on a given date, all of which
Eurodollar Loans shall have the same Interest Period, pursuant to
Section 1.2; provided, however, that Loans to a Borrower of a
different Type extended by one or more Banks pursuant to
Section 2.5(b) shall be considered a part of the related
Borrowing.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday
and any day on which banks in New York City are authorized by law
or other governmental actions to close and (ii) with respect to
all notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Loans, any day which is
a Business Day described in clause (i) and which is also a day
for trading by and between banks in U.S. dollar deposits in the
London interbank Eurodollar market.
"Capital Lease Obligations" of any person shall mean
obligations of such person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real
or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases
on a balance sheet of such person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Closing Date" shall mean November 20, 1997.
"Commitment", for each Bank, shall mean the amount specified
opposite its name on Schedule I hereto, such Commitment to be
reduced by the amount of any reduction thereto effected pursuant
to Section 1.7, Section 6 and/or Section 10.6(b)(A).
"Commitment Fee" shall have the meaning assigned that term
in Section 1.6(a).
"Consolidated Capitalization of PPL" shall mean the sum of
(A) the Consolidated Indebtedness of PPL and (B)(i) the
consolidated shareowners' equity (determined in accordance with
GAAP) of the common, preference and preferred stockholders of PPL
and (ii) the aggregate amount of Hybrid Preferred Securities of
PPL, except that for purposes of calculating Consolidated
Capitalization of PPL, Consolidated Indebtedness of PPL shall
exclude Non-Recourse Indebtedness of PPL and Consolidated
Capitalization of PPL shall exclude that portion of shareholder
equity attributable to assets securing Non-Recourse Indebtedness
of PPL.
"Consolidated Capitalization of Resources" shall mean the
sum of (A) the Consolidated Indebtedness of Resources and (B)(i)
the consolidated shareowners' equity (determined in accordance
with GAAP) of the common, preference and preferred stockholders
of Resources and (ii) the aggregate amount of Hybrid Preferred
Securities of Resources, except that for purposes of calculating
Consolidated Capitalization of Resources, Consolidated
Indebtedness of Resources shall exclude Non-Recourse Indebtedness
of Resources and Consolidated Capitalization of Resources shall
exclude that portion of shareholder equity attributable to assets
securing Non-Recourse Indebtedness of Resources.
"Consolidated Indebtedness of PPL" shall mean the
consolidated Indebtedness of PPL (determined in accordance with
GAAP), except that for purposes of this definition (1)
Consolidated Indebtedness of PPL shall exclude Non-Recourse
Indebtedness of PPL and (2) Consolidated Indebtedness of PPL
shall exclude any Hybrid Preferred Securities of PPL.
"Consolidated Indebtedness of Resources" shall mean the
consolidated Indebtedness of Resources (determined in accordance
with GAAP), except that for purposes of this definition (1)
Consolidated Indebtedness of Resources shall exclude Non-Recourse
Indebtedness of Resources and (2) Consolidated Indebtedness of
Resources shall exclude any Hybrid Preferred Securities of
Resources.
"Credit Exposure", for each Bank at any time, shall mean the
aggregate principal amount at such time of all outstanding Loans
of such Bank to the Borrowers plus the aggregate amount at such
time of such Bank's L/C Exposure.
"Default" with respect to a Borrower, shall mean any event,
act or condition which with notice or lapse of time or both would
constitute an Event of Default with respect to that Borrower.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other "accredited investor" (as
defined in SEC Regulation D).
"Eurodollar Lending Office" shall mean, with respect to each
Bank, the office of such Bank specified as its "Eurodollar
Lending Office" on the signature pages to the Agreement or such
other office of such Bank as such Bank may from time to time
specify as such to the Borrowers and the Agent.
"Eurodollar Loan" shall mean any loan during any period
during which such Loan is bearing interest at the rates provided
for in Section 2.1(b).
"Event of Default" shall mean with respect to PPL each of
the Events of Default specified in Section 6A and with respect to
Finance Co., each of the Events of Default specified in Section
6B.
"Expiry Date" shall mean the date five years from the date
hereof.
"Federal Funds Rate" shall mean for any day, a fluctuating
interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System arranged
by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the
Agent from three Federal Funds brokers of recognized standing
selected by the Agent.
"Finance Co." shall have the meaning assigned that term in
the first paragraph of this Agreement.
"Finance Co. Obligations" shall mean all obligations of
Finance Co. under this Agreement to pay (i) the principal of and
interest on the Loans and LC Disbursements when and as due,
whether at maturity, by acceleration, upon one or more dates set
for prepayment or otherwise, and (ii) all other payment
obligations of Finance Co. hereunder.
"First Mortgagee Bonds" shall mean the first mortgage bonds
issued by PPL pursuant to its Mortgage and Deed of Trust dated as
of October 1, 1945, as supplemented.
"GAAP" shall mean United States generally accepted
accounting principles applied on a consistent basis.
"Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having
the economic effect of guaranteeing any Indebtedness of any other
person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of such person, direct
or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any security
for payment of such Indebtedness, (b) to purchase or lease
property, securities or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness or
(c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness;
provided, however, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of
business.
"Hybrid Preferred Securities of PPL" means (1) the preferred
securities and subordinated debt described in the Prospectus
dated as of April 3, 1997 of PP&L Capital Trust and PPL and the
preferred securities and subordinated debt described in the
Prospectus dated as of June 9, 1997 of PP&L Capital Trust II and
PPL (collectively, the "Existing TOPrS") and (2) any additional
preferred securities and subordinated debt (with a maturity of at
least twenty years) similar to the Existing TOPrS and in an
aggregate amount not to exceed $100,000,000, issued by business
trusts, limited liability companies, limited partnerships (or
similar entities) (i) all of the common equity, general partner
or similar interests of which are owned (either directly or
indirectly through one or more wholly-owned Subsidiaries) at all
times by PPL, (ii) that have been formed for the purpose of
issuing hybrid preferred securities and (iii) substantially all
the assets of which consist of (A) subordinated debt of PPL or a
Subsidiary of PPL, as the case may be, and (B) payments made from
time to time on the subordinated debt.
"Hybrid Preferred Securities of Resources" means (1) the
preferred securities and subordinated debt described in the
Prospectus dated as of April 3, 1997 of PP&L Capital Trust and
PPL and the preferred securities and subordinated debt described
in the Prospectus dated as of June 9, 1997 of PP&L Capital Trust
II and PPL (collectively, the "Existing TOPrS") and (2) any
additional preferred securities and subordinated debt (with a
maturity of at least twenty years) similar to the Existing TOPrS
and in an aggregate amount not to exceed $100,000,000, issued by
business trusts, limited liability companies, limited
partnerships (or similar entities) (i) all of the common equity,
general partner or similar interests of which are owned (either
directly or indirectly through one or more wholly-owned
Subsidiaries) at all times by Resources or PPL, (ii) that have
been formed for the purpose of issuing hybrid preferred
securities and (iii) substantially all the assets of which
consist of (A) subordinated debt of Resources or a Subsidiary of
Resources, as the case may be, and (B) payments made from time to
time on the subordinated debt.
"Indebtedness" of any person shall mean, without
duplication, (a) all obligations of such person for borrowed
money, (b) all obligations of such person with respect to
deposits or advances of any kind, (c) all obligations of such
person evidenced by bonds, debentures, notes or similar
instruments, (d) all obligations of such person under conditional
sale or other title retention agreements relating to property or
assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and
accrued obligations incurred in the ordinary course of business),
(f) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien or property owned or
acquired by such person, whether or not the obligations secured
thereby have been assumed but shall not include any obligations
that are without recourse to such person, (g) all Guarantees by
such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all obligations of such person in
respect of Interest Rate Protection Agreements, foreign currency
exchange agreements or other interest or exchange rate hedging
arrangements (the amount of any such obligation to be the amount
that would be payable upon the acceleration, termination or
liquidation thereof) and (j) all obligations of such person as an
account party in respect of letters of credit and bankers'
acceptances.
"Interest Period" shall mean (a) as to any Eurodollar Loan,
the period commencing on the date of such Loan and ending on the
numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is
1, 2, 3 or 6 months thereafter, as the applicable Borrower may
elect in a Notice of Borrowing or Notice of Conversion and (b) as
to any Base Rate Loan, the period commencing on the date of such
Loan and ending on the date 90 days thereafter or, if earlier, on
the Expiry Date or the date of prepayment of such Loan. If any
Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period
applicable to a Borrowing of Eurodollar Loans would otherwise
expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business
Day.
"Interest Rate Protection Agreement" shall mean any
agreement providing for an interest rate swap, cap or collar, or
for any other financial arrangement designed to protect against
fluctuations in interest rates.
"L/C Commitment" shall mean the commitment of the Fronting
Bank to issue Letters of Credit pursuant to Section 1A.
"L/C Disbursement" shall mean a payment or disbursement made
by the Fronting Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at
such time plus (b) the aggregate principal amount of all L/C
Disbursements that have not yet been reimbursed at such time.
The L/C Exposure of any Bank at any time shall mean its
Applicable Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to
such term in Section 1.6(b).
"Letter of Credit" shall mean any letter of credit issued
pursuant to Section 1A.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or
security interest in or on such asset, (b) the interest of a
vender or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with
respect to such securities.
"Loan" shall have the meaning assigned that term in
Section 1.1.
"Loan Documents" shall have the meaning assigned that term
in Section 8.1.
"Moody's" shall mean Moody's Investors Service, Inc. or any
successor thereto.
"Non-Recourse Indebtedness of PPL" shall mean indebtedness
that is nonrecourse to PPL or any of its Subsidiaries.
"Non-Recourse Indebtedness of Resources" shall mean
indebtedness that is nonrecourse to Resources, either Borrower or
any of PPL's Subsidiaries.
"Notice of Borrowing" shall have the meaning assigned that
term in Section 1.2.
"Notice of Conversion" shall have the meaning assigned that
term in Section 2.4(a).
"Payment Office" shall mean the office of the Agent located
at 270 Park Avenue, New York, New York 10017, or such other
office as the Agent may hereafter designate in writing as such to
the other parties hereto.
"Permitted Liens" shall mean (a) Liens for taxes,
assessments or governmental charges or levies to the extent not
past due, or which are being contested in good faith in
appropriate proceedings for which Resources has provided
appropriate reserves for the payment thereof in accordance with
GAAP; (b) pledges or deposits in the ordinary course of business
to secure obligations under worker's compensation laws or similar
legislation; (c) other pledges or deposits in the ordinary course
of business (other than for borrowed monies) that, in the
aggregate, are not material to Resources; (d) Liens imposed by
law such as materialmen's, mechanics', carriers', workers' and
repairmen's Liens and other similar Liens arising in the ordinary
course of business for sums not yet due or currently being
contested in good faith by appropriate proceedings;
(e) attachment, judgment or other similar Liens arising in
connection with court proceedings, provided that such Liens, in
the aggregate, shall not exceed $50,000,000 at any one time
outstanding, and (f) other Liens not otherwise referred to in the
foregoing clauses (a) through (e) above, provided that such other
Liens do not secure at any time obligations in an aggregate
amount in excess of $100,000,000 at any time outstanding.
"Persons" shall mean and include any individual, firm,
corporation, association, trust or other enterprise or any
governmental or political subdivision or agency, department or
instrument thereof.
"PPL" shall have the meaning assigned that term in the first
paragraph of this Agreement.
"Prime Rate" shall mean the rate which The Chase Manhattan
Bank announces from time to time as its prime lending rate, such
Prime Rate to change when and as such prime lending rate changes.
The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any
customer. The Chase Manhattan Bank may make commercial loans or
other loans at rates of interest at, above or below the Prime
Rate.
"Quoted Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period, the average rate (rounded upwards
to the nearest 1/16 of 1%) at which dollar deposits approximately
equal in principal amount to the Agent's portion of such
Eurodollar Loan and for a maturity comparable to such Interest
Period are offered to the principal London office of the
Reference Banks in immediately available funds in the London
interbank market at approximately 11:00 A.M. (London time) 2
Business Days prior to the commencement of such Interest Period,
without any addition to such offered quotation to give effect to
the reserve requirements established for Eurodollar transactions
by Regulation D. Each Reference Bank shall use its best efforts
to furnish rates to the Agent as contemplated hereby. If any one
of the Reference Banks shall be unable or otherwise fail to
supply such rates to the Agent upon its request, the applicable
rate shall be determined on the basis of the rates submitted by
the remaining two Reference Banks. If more than one Reference
Bank shall be unable or otherwise fail to supply such rates,
there shall be no applicable rate.
"Reference Banks" shall mean The Chase Manhattan Bank,
Citibank, N.A. and Morgan Guaranty Trust Company.
"Register" shall have the meaning provided in 1.4(b).
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in
effect or any successor to all or a portion thereof establishing
reserve requirements.
"Required Banks" shall mean Banks having Loans the
outstanding principal amount of which aggregate (or, if no Loans
are outstanding, Banks with Commitments aggregating) at least the
majority of the aggregate outstanding principal amount of all
Loans (or of the Total Commitment).
"Resources" shall have the meaning assigned that term in the
first paragraph of this Agreement.
"SEC" shall have the meaning assigned that term in Section
5.1(c).
"SEC Regulation D" shall mean Regulation D as promulgated
under the Securities Act of 1933, as amended, as the same may be
in effect from time to time."
"S&P" shall mean Standard & Poor's Ratings Group or any
successor thereto.
"Subsidiary" shall mean any company, partnership,
association or other business entity in which any Person and its
Subsidiaries now have or may hereafter acquire an aggregate of at
least 50% of the voting stock or ownership interests.
"Taxes" shall have the meaning assigned that term in
Section 3.4.
"Total Commitment" shall mean the aggregate of all the
Commitments of all the Banks.
"Type" shall mean any type of Loan, i.e., whether a Loan is
a Base Rate Loan or a Eurodollar Loan.
"Unaffected Bank" shall have the meaning assigned that term
in Section 2.5(c).
"written" or "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier
device, telegraph or cable.
10.2 Accounting Principles. All statements to be
prepared and determinations to be made under this Agreement,
including (without limitation) those pursuant to Section 5, shall
be prepared and made in accordance with generally accepted
accounting principles applied on a basis consistent with the
accounting principles reflected in the audited financial
statements of PPL and Resources for the fiscal year ended
December 31, 1996, referred to in Section 7.4, except for changes
in accounting principles consistent with GAAP.
10.3 Exercise of Rights. Neither the failure nor
delay on the part of any of the Banks or the Fronting Bank to
exercise any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof, or the exercise
of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Banks would otherwise have. No
notice to or demand on PPL, Finance Co. or Resources in any case
shall entitle PPL, Finance Co. or Resources, as applicable, to
any other or further notice or demand in similar or other circum-
stances or constitute a waiver of the right of the Banks or the
Fronting Bank to any other or further action in any circumstances
without notice or demand.
10.4 Amendment and Waiver. Neither this Agreement nor
any other Loan Document nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by PPL,
Finance Co. and Resources, and the Required Banks, provided that
no such change, waiver, discharge or termination shall, without
the consent of each Bank directly affected thereby, (i) extend
the final scheduled maturity of any Loan or reduce the rate or
extend the time of payment of interest or Commitment Fees thereon
(except in connection with a waiver of the applicability of any
post-default increase in interest rates), or reduce the principal
amount thereof (except to the extent repaid in cash), (ii) amend,
modify or waive any provision of this Section 10.4, (iii) reduce
the percentage specified in the definition of Required Banks or
(iv) consent to the assignment or transfer by PPL, Finance Co. or
Resources of any of its rights and obligations under this
Agreement or the release of Resources from its guarantee
hereunder; provided further, that no such change, waiver,
discharge or termination shall (x) increase the Commitments of
any Bank over the amount thereof then in effect without the
consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or
Events of Default shall not constitute an increase of the
Commitment of any Bank) or (y) without the consent of the Agent,
amend, modify or waive any provision of Section 8 as such Section
applies to such Agent or any other provision as such Section
relates to the rights or obligations of such Agent.
10.5 Expenses; Indemnification. (a) The Borrowers
agree to pay all reasonable out-of-pocket expenses (i) of the
Agent and the Fronting Bank incurred in connection with the
preparation, execution, delivery, enforcement and administration
(exclusive of any internal overhead expenses) of this Agreement
and any and all agreements supplementary hereto and the making
and repayment of the Loans, the issuance of the Letters of Credit
and the payment of interest, including, without limitation, the
reasonable fees and expenses of Cravath, Swaine & Moore, counsel
for the Agent and (ii) of the Agent, the Fronting Bank and each
Bank incurred in connection with the enforcement of this
Agreement, including, without limitation, the reasonable fees and
expenses of any counsel for any of the Banks with respect to such
enforcement; provided that none of the Borrowers or Resources
shall be liable for any fees, charges or disbursements of any
counsel for the Banks or the Agent other than Cravath, Swaine &
Moore associated with the preparation, execution and delivery of
this Agreement and the closing documentation contemplated hereby.
(b) The Borrowers further agree to pay, and to save
the Agent, the Fronting Bank and the Banks harmless from all
liability for, any stamp or other documentary taxes which may be
payable in connection with the Borrowers' execution or delivery
of this Agreement, their borrowings hereunder or Letters of
Credit, or the issuance of any notes or of any other instruments
or documents provided for herein or delivered or to be delivered
by each of them hereunder or in connection herewith.
(c) The Borrowers agree to indemnify the Agent, the
Fronting Bank and each Bank and each of their respective
affiliates, directors, officers and employees (each such person
being called an "Indemnitee") against all losses, claims,
damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent, the Fronting Bank
or any Bank is a party thereto) which any of them may pay or
incur arising out of or relating to this Agreement, the other
Loan Documents, the transactions contemplated hereby, the direct
or indirect application or proposed application of the proceeds
of any Loan hereunder or the issuance of Letters of Credit;
provided that such indemnification shall not extend to disputes
solely among the Agent, the Fronting Bank and the Banks; and
provided further that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(d) All obligations provided for in this Section 10.5
shall survive any termination of this Agreement or the
resignation, withdrawal or removal of any Bank.
10.6 Successors and Assigns. (a) This Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the
parties hereto, provided that none of PPL, Finance Co. or
Resources may assign or transfer any of its interests hereunder,
except to the extent any such assignment results from the
consummation of a transaction permitted under Section 5.2,
without the prior written consent of the Banks and provided
further that the right of each Bank to transfer, assign or grant
participations in its rights and/or obligations hereunder shall
be limited as set forth below in this Section 10.6, provided that
nothing in this Section 10.6 shall prevent or prohibit any Bank
from pledging its rights under this Agreement and/or its Loans
hereunder to a Federal Reserve Bank in support of borrowings made
by such Bank from such Federal Reserve Bank. In order to
facilitate such an assignment to a Federal Reserve Bank, the
Borrowers shall, at the request of the assigning Bank, duly
execute and deliver to the assigning Bank a promissory note
evidencing its Commitment or Loans made by the assigning Bank
hereunder.
(b) Each Bank shall have the right to transfer,
assign or grant participations in all or any part of its
remaining rights and obligations hereunder on the basis set forth
below in this clause (b).
(A) Assignments. Each Bank may assign all or a
portion of its rights and obligations hereunder pursuant to this
clause (b)(A) to (x) one or more Banks or any affiliates of any
Bank or (y) one or more other Eligible Transferees, provided that
(i) any such assignment pursuant to clause (y) above shall be in
the aggregate amount of at least $5,000,000, (ii) after giving
effect to any such assignment pursuant to clause (x) or (y)
above, no Bank shall have a Commitment of less than $5,000,000
unless such Bank's Commitment is reduced to zero pursuant to such
assignment, (iii) the assigning Bank shall not assign any of its
rights and obligations under this Agreement without assigning the
same percentage of its rights and obligations under the 364-Day
Agreement, (iv) any assignment pursuant to clause (y) shall
require the consent of the Borrowers, which consent shall not be
unreasonably withheld, and provided further, that, so long as no
Loans or interest thereon shall be outstanding and no Default or
Event of Default shall have occurred with respect to PPL, Finance
Co. or Resources and then be continuing, the Borrowers may at
their option terminate the portion of such assigning Bank's
Commitment proposed to be assigned pursuant to clause (y) above
in lieu of consenting to such assignment, and the Total
Commitment shall be reduced in the amount of such termination.
Assignments or terminations of all or any portion of any Bank's
Commitment pursuant to this clause (b)(A) will only be effective
if the Agent shall have received a written notice from the
assigning Bank and the assignee, or, in the case of a
termination, the Borrowers, and, in the case of an assignment,
payment of a nonrefundable assignment fee of $2,500 to the Agent
by either the assigning Bank or the assignee. No later than five
Business Days after its receipt of any written notice of
assignment or termination, the Agent will record such assignment
or termination, and the resultant effects thereof on the
Commitment of the assigning or terminating Bank and, in the case
of an assignment, the assignee, in the Register, at which time
such assignment or termination shall become effective, provided
that the Agent shall not be required to, and shall not, so record
any assignment or termination in the Register on or after the
date on which any proposed amendment, modification or supplement
in respect of this Agreement has been circulated to the Banks for
approval until the earlier of (x) the effectiveness of such
amendment, modification or supplement in accordance with
Section 10.4 or (y) 30 days following the date on which such
proposed amendment, modification or supplement was circulated to
the Banks. Upon the effectiveness of any assignment or
termination pursuant to this clause (b)(A), (x) the assignee, in
the case of an assignment, will become a "Bank" for all purposes
of this Agreement and the other Loan Documents with a Commitment
as so recorded by the Agent in the Register, and to the extent of
such assignment or termination, the assigning or terminating Bank
shall be relieved of its obligations hereunder with respect to
the portion of its Commitment being assigned or terminated.
(B) Participations. Each Bank may transfer, grant or
assign participations in all or any part of such Bank's interests
and obligations hereunder pursuant to this clause (b)(B) to any
Eligible Transferee, provided that (i) such Bank shall remain a
"Bank" for all purposes of this Agreement and the transferee of
such participation shall not constitute a Bank hereunder and (ii)
no participant under any such participation shall have any rights
under the Agreement or other Loan Document or any rights to
approve any amendment to or waiver of this Agreement or any other
Loan Document except to the extent such amendment or waiver would
(x) extend the final scheduled maturity of any of the Loans or
the Commitment in which such participant is participating,
(y) reduce the interest rate (other than as a result of waiving
the applicability of any post-default increases in interest
rates) or Commitment Fee or other fees applicable to any of the
Loans or Commitments in which such participant is participating
or postpone the payment of any thereof or reduce the principal
amount of any Loan (except to the extent repaid in cash) or
(z) release Resources from its obligations as a guarantor
hereunder. In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the
other Loan Documents (the participant's rights against the
granting Bank in respect of such participation to be those set
forth in the agreement with such Bank creating such
participation) and all amounts payable by each of the Borrowers
hereunder shall be determined as if such Bank had not sold such
participation, provided that such participant shall be entitled
to receive additional amounts under Section 1.8 and Section 2.5
on the same basis as if it were a Bank but in no case shall be
entitled to any amount greater than would have been payable had
the Bank not sold such participations.
(c) Each Bank hereby represents, and each Person that
becomes a Bank pursuant to an assignment permitted by the
preceding clause (b)(A) will upon its becoming party to this
Agreement represent, that it is an Eligible Transferee which
makes loans in the ordinary course of its business and that it
will make or acquire Loans for its own account in the ordinary
course of such business, provided that, subject to the preceding
clauses (a) and (b), the disposition of any promissory notes or
other evidences of or interests in Loans held by such Bank shall
at all times be within its exclusive control.
10.7 Notices, Requests, Demands. All notices,
requests, demands or other communications to or upon the
respective parties hereto shall be deemed to have been given or
made (i) in the case of notice by mail, when actually received,
and (ii) in the case of telecopier notice sent over a telecopier
machine owned or operated by a party hereto, when sent, in each
case addressed to the party or parties to which such notice is
given at their respective addresses shown below their signatures
hereto or at such other address as such party may hereafter
specify in writing to the others. No other method of giving
notice is hereby precluded.
10.8 Survival of Representations and Warranties. All
representations and warranties contained herein or otherwise made
in writing by PPL, Finance Co. or Resources in connection
herewith shall survive the execution and delivery of this
Agreement.
10.9 Governing Law. This Agreement and the rights
and obligations of the parties under this Agreement (other than
as relates to Letters of Credit) shall be governed by and
construed and interpreted in accordance with the laws of the
State of New York. Each Letter of Credit shall be governed by,
and construed and interpreted in accordance with the laws or
rules designated in such Letter of Credit, or if no such laws or
rules are designated, the Uniform Customs and Practice for
Documentary Credits (1993 revision), International Chamber of
Commerce, publication no. 500 (the "Uniform Customs") and, as to
matters not governed by the Uniform Customs, the laws of the
State of New York.
10.10 Counterparts. This Agreement may be executed in
any number of copies, and by the different parties hereto on the
same or separate counterparts, each of which shall be deemed to
be an original instrument. Complete counterparts of this
Agreement shall be lodged with each Borrower, Resources and the
Agent.
10.11 Effectiveness. This Agreement shall become
effective on the Closing Date.
10.12 Transfer of Office. (a) Each Bank may transfer
and carry its Loans at, to or for the account of any branch
office, subsidiary or affiliate of such Bank; provided that such
Bank shall continue to bear all of its obligations under this
Agreement; and provided further that the Borrowers shall not be
responsible for costs arising under Section 1.8, 2.5 or 3.4
resulting from any such transfer to the extent not otherwise
applicable to such Bank prior to such transfer.
(b) Upon a Bank becoming aware of any event which will
entitle it to any additional amount pursuant to Section 2.5(a) or
Section 3.4, such Bank shall take all reasonable steps (including
but not limited to making, maintaining or funding the affected
Loan through another office of such Bank) to avoid or reduce the
additional amount payable by the applicable Borrower; provided
that, such steps will not result in any additional costs,
liabilities or expenses (not reimbursable by the applicable
Borrower) to such Bank and are not otherwise inconsistent with
the interests of such Bank determined in good faith.
10.13 Proration of Payments. The Banks agree among
themselves that, with respect to all amounts received by them
which are applicable to the payment of principal of or interest
on the Loans, equitable adjustment will be made so that, in
effect, all such amounts will be shared ratably among the Banks
on the basis of the amounts then owed each of them in respect of
such obligation, whether received by voluntary payment, by
realization upon security, by the exercise of any right of set-
off or bankers' lien, by counterclaim or cross action, under or
pursuant to this Agreement or otherwise. Each of the Banks
agrees that if it should receive any payment on its Loans of a
sum or sums in excess of its pro rata portion, then the Bank
receiving such excess payment shall purchase for cash from the
other Banks an interest in the Loans of such Banks in such amount
as shall result in a ratable participation by each of the Banks
in the aggregate unpaid amount of all outstanding Loans then held
by all of the Banks. If all or any portion of such excess pay-
ment is thereafter recovered from such Bank, such purchase shall
be rescinded and the purchase price restored to the extent of
such recovery, but without interest. The Borrowers agree that
any Bank so purchasing a participation from another Bank pursuant
to this Section 10.13 may exercise all its rights with respect to
such participation as fully as if such Bank were the direct
creditor of the Borrowers in the amount of such participation.
10.14 Jurisdiction; Consent to Service of Process.
(a) Each of PPL, Finance Co. and Resources hereby irrevocably
and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition
or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by
law, in such Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. Nothing in
this Agreement shall affect any right that the Agent, the
Fronting Bank or any Bank may otherwise have to bring any action
or proceeding relating to this Agreement against any of PPL,
Finance Co., Resources or its properties in the courts of any
jurisdiction.
(b) Each of PPL, Finance Co. and Resources hereby
irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now
or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any
court referred to in paragraph (a) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in
Section 10.7. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner
permitted by law.
10.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREE-
MENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
10.16 Headings Descriptive. The headings of the
various provisions of this Agreement are inserted for convenience
of reference only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Agreement to be duly executed and
delivered as of the date first above written.
PP&L, INC.,
By /s/ John R. Biggar
Name:
Title: Vice President
Finance
PP&L CAPITAL FUNDING, INC.,
By /s/ R.E. Hill
Name:
Title: President
PP&L RESOURCES, INC.,
By /s/ James E. Abel
Name:
Title: Treasurer
THE CHASE MANHATTAN BANK,
Individually and as Agent
and Fronting Bank
By /s/ Thomas Kozlark
Name:
Title: Vice President
CITIBANK, N.A.
By/s/Robert J. Harrity, Jr.
Name:
Title: Managing Director
<PAGE>
THE BANK OF NEW YORK
By /s/ John N. Watt
Name:
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ J. Alan Edwards
Name:
Title: Authorized
Signatory
CORESTATES BANK, N.A.
By /s/ Anthony D. Braxton
Name:
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By /s/ J. Scott Karro
Name:
Title: Associate
By /s/ Eric J. Eckholdt
Name:
Title: Associate
<PAGE>
DEUTSCHE BANK AG,
NEW YORK BRANCH and/or
CAYMAN ISLANDS BRANCH
By /s/ Gabrielle C. Upton
Name:
Title: Assistant Vice
President
By /s/ Steven A. Cohen
Name:
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Kenneth J. Bauer
Name:
Title: Authorized Agent
FIRST UNION NATIONAL BANK
By /s/Michael J. Kolosowsky
Name:
Title: Vice President
FUJI BANK LIMITED
By /s/ Toshiaki Yakura
Name:
Title: Senior Vice
President
MORGAN GUARANTY TRUST
COMPANY
By /s/ Philip S. Detjens
Name:
Title: Vice President
<PAGE>
MELLON BANK, N.A.
By /s/ A. Gary Chace
Name:
Title: Senior Vice
President
NATIONSBANK, N.A.
By /s/ Gretchen P. Burud
Name:
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Darlene Riedel
Name:
Title: Vice President
<PAGE>
Bank Address Schedule
Name of Bank and Address Phone Number(s) Fax Number(s)
The Chase Manhattan Bank
Attn: Jaimin Patel
270 Park Avenue
New York, NY 10017
(212) 270-1354
(212) 270-2101
The Bank of New York
Attn: John Watt
One Wall Street
New York, NY 10286
(212) 635-7533
(212) 635-7533
The Bank of Nova Scotia
Attn: Phil Adsetts
One Liberty Plaza
26th Floor
New York, NY 10006
(212) 225-5010
(212) 225-5090
Citibank, N.A.
Attn: Phil Kron
Jean Chastain
399 Park Avenue
9th Floor
New York, NY 10043
(212) 559-1500
(212) 793-6130
<PAGE>
Corestates Bank, N.A.
Attn: Anthony Braxton
Jon Peterson
Widener Bldg.
1339 Chestnut Street
Philadelphia, PA 19101-7618
(215) 786-4353
(215) 786-7799
(215) 786-7721
(215) 786-7704
Credit Suisse First Boston
Attn: James Moran
11 Madison Avenue
20th Floor
New York, NY 10010
(212) 325-9176
(212) 325-8314
Deutsche Bank AG
Attn: Gabrielle Upton
Rosemary Kelley
31 West 52nd Street
24th Floor
New York, NY 10019
(212) 469-7368
(212) 469-8677
(212) 469-4638
The First National Bank
of Chicago
Attn: Kenneth Bauer
Madeleine Pember
One First National Plaza
Suite 0360
Chicago, IL 60670
(312) 732-6282
(312) 732-9727
(312) 732-3055
<PAGE>
First Union National Bank
Attn: Brian Tate
301 South College Street
5th Floor
Charlotte, NC 28288-0735
(704) 383-0510
(704) 383-6670
Fuji Bank Limited
Attn: Michael Gebauer
Mark Olson
Two World Trade Center
New York, NY 10048
(212) 898-2064
(212) 898-2066
(212) 321-9407
Morgan Guaranty Trust Company
Attn: Philip Detjens
60 Wall Street
New York, NY 10005
(212) 648-8454
(212) 648-5014
Mellon Bank, N.A.
Attn: Mary Ellen Usher
A. Gary Chace
1 Mellon Bank Center
Suite 4425
Pittsburgh, PA 15258-0001
(412) 236-1203
(412) 236-2786
(412) 236-1840
<PAGE>
NationsBank, N.A.
Attn: Brenda Tate
Andrew Hemsley
100 North Tyron Street
8th Floor
Charlotte, NC 28255
(704) 386-1644
(704) 386-0710
(704) 386-1270
Toronto Dominion (Texas), Inc.
Attn: Katherine Lucey
31 West 52nd Street
New York, NY 10019-6101
(212) 468-0785
(212) 262-1929
<PAGE>
SCHEDULE I
BANK COMMITMENT
THE CHASE MANHATTAN BANK $30,000,000
CITIBANK, N.A. $30,000,000
THE BANK OF NEW YORK $20,000,000
THE BANK OF NOVA SCOTIA $20,000,000
CORESTATES BANK, N.A. $20,000,000
CREDIT SUISSE FIRST BOSTON $20,000,000
DEUTSCHE BANK AG $20,000,000
THE FIRST NATIONAL BANK OF CHICAGO $20,000,000
FIRST UNION NATIONAL BANK $20,000,000
FUJI BANK LIMITED. $20,000,000
MORGAN GUARANTY TRUST COMPANY $20,000,000
MELLON BANK, N.A. $20,000,000
NATIONSBANK, N.A. $20,000,000
TORONTO DOMINION (TEXAS), INC. $20,000,000
TOTAL COMMITMENT $300,000,000
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL OR SENIOR COUNSEL FOR PPL,
FINANCE CO. AND RESOURCES
The opinion of Counsel for PPL, Finance Co. and Resources,
referred to in Section 4.1(b) of the 364-Day Revolving Credit
Agreement among PPL, Finance Co., Resources, as guarantor of the
obligations of Finance Co., the banks from time to time party
thereto and The Chase Manhattan Bank, as fronting bank,
collateral agent and as agent for the banks thereto and the 5-
Year Revolving Credit Agreement among PPL, Finance Co.,
Resources, as guarantor of the obligations of Finance Co., the
banks from time to time party thereto and The Chase Manhattan
Bank, as fronting bank, collateral agent and as agent for the
banks thereto (each individually an "Agreement" and together, the
"Agreements") shall be to the effect that (terms used herein
shall have the meanings specified therefor in the Agreements):
1. Each of PPL and Resources is duly incorporated, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania and each of PPL and Finance Co. has the corporate
power to make and perform the Agreements and to borrow under the
Agreements and Resources has the corporate power to guarantee the
obligations of Finance Co. under the Agreements.
2. The making and performance by each of PPL and Finance
Co. of the Agreements, and the guarantee by Resources of the
obligations of Finance Co. under the Agreements have been duly
authorized by all necessary corporate action and do not and will
not violate any provision of law or regulation, or any decree,
order, writ or judgment, or any provision of its charter or by-
laws, or result in the breach of or constitute a default under
any indenture or other agreement or instrument known to such
counsel to which any of them is a party.
3. The Agreements constitute the legal, valid and binding
obligations of PPL, Finance Co. and Resources enforceable in
accordance with their respective terms except to the extent
limited by bankruptcy, insolvency or reorganization laws or by
other laws relating to or affecting the enforceability of
creditors' rights generally and by general equitable principles.
4. Except as disclosed in or contemplated by PPL's or
Resources' Form 10-K Report to the Securities and Exchange
Commission for the year 1996, no litigation, arbitration or
administrative proceeding is pending or, to the knowledge of such
counsel, threatened, which, if determined adversely to PPL or
Resources, would materially and adversely affect the ability of
PPL or Resources to perform any of its obligations under the
Agreements. There is no litigation, arbitration or admin-
istrative proceeding pending or, to the knowledge of such
counsel, threatened which questions the validity of the
Agreements.
5. Neither PPL nor Finance Co. is engaged principally, or
as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System.
6. There have not been any "reportable events," as that
term is defined in Section 4043 of the Employee Retirement Income
Security Act of 1974, as amended, which would result in a
material liability of PPL or Resources.
7. No authorization, consent or approval from governmental
bodies or regulatory authorities is required for the making and
performance of the Agreement by PPL, Finance Co. or Resources or
by PPL or Finance Co. for the borrowings thereunder, except such
authorizations, consents and approvals as have been obtained
prior to the making of any Loans and are in full force and
effect, all of which are listed on Annex I hereto.
<PAGE>
EXHIBIT B
To Each of the Banks party to the
Revolving Credit Agreements
referred to below, and The Chase
Manhattan Bank, as Fronting Bank,
as Collateral Agent and as Agent
for such Banks
Re: $150,000,000 364-Day Revolving Credit Agreement
$300,000,000 5-Year Revolving Credit Agreement
Dear Ladies and Gentlemen:
We have acted as Counsel to PP&L, Inc. ("PPL"), PP&L
Capital Funding, Inc. ("Finance Co.") and PP&L Resources,
Inc. (individually "Resources" and collectively with PPL and
Finance Co, the "Loan Parties") in connection with the 364-
Day Revolving Credit Agreement dated November [ ], 1997
among the Loan Parties, the Banks listed on Schedule I
thereto, and you as Fronting Bank, as Collateral Agent and
as Agent for such Banks and the 5-Year Revolving Credit
Agreement dated November [ ], 1997 among the Loan Parties,
the Banks listed on Schedule I thereto, and you as Fronting
Bank, as Collateral Agent and as Agent for such Banks
(individually each an "Agreement" and collectively, the
"Agreements").
We are familiar with the Agreements and the other
documents executed and delivered by the Loan Parties in
connection with the Agreements. We have also examined such
other documents and satisfied ourselves as to such other
matters as we have deemed necessary in order to render this
opinion.
Based on the foregoing, we are of the opinion that
Finance Co. is duly incorporated, validly existing and in
good standing under the laws of Delaware and Finance Co. has
the corporate power to make and perform the Agreements and
to borrower under the Agreements. We are also of the
opinion that the Agreements constitute the legal, valid and
binding obligations of the Loan Parties enforceable in
accordance with their terms except to the extent limited by
bankruptcy, insolvency or reorganization laws or by other
laws relating to or affective the enforceability of
creditors' rights generally and by general equitable
principles.
We are members of the New York Bar and do not hold
ourselves out as experts on the laws of the Commonwealth of
Pennsylvania. Insofar as the opinions set forth herein are
affected by the laws of the Commonwealth of Pennsylvania, we
have relied upon the opinion of even date herewith addressed
to you by [ ]. In rendering his opinion,
[ ] is hereby authorized to rely on this opinion as
to matters of New York law addressed herein as if it were
addressed to him. This opinion is not being delivered for
the benefit of, nor may it be relied upon by, any person to
which it is not specifically addressed or to which reliance
has not been expressly authorized in writing.
Very truly yours,
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
PJM INTERCONNECTION, L.L.C.
Dated June 2, 1997
(Revised December 31, 1997)
DRAFT: 12/18/97
<PAGE>
OPERATING AGREEMENT
TABLE OF CONTENTS
1. DEFINITIONS
.......................................................... 2
1.1 Act................................................ 2
1.2 Affiliate.......................................... 2
1.3 Agreement.......................................... 2
1.4 Annual Meeting of the Members...................... 2
1.5 Board Member....................................... 2
1.6 Capacity Resource.................................. 2
1.7 Control Area....................................... 3
1.8 Electric Distributor............................... 3
1.9 Effective Date. ................................... 3
1.10 Emergency......................................... 3
1.11 End-Use Customer.................................. 3
1.12 FERC.............................................. 3
1.13 Finance Committee................................. 4
1.14 Generation Owner.................................. 4
1.15 Good Utility Practice............................. 4
1.16 Interconnection................................... 4
1.17 LLC............................................... 4
1.18 Load Serving Entity............................... 4
1.19 Locational Marginal Price......................... 4
1.20 MAAC.............................................. 4
1.21 Market Buyer...................................... 5
1.22 Market Participant................................ 5
1.23 Market Seller..................................... 5
1.24 Member............................................ 5
1.25 Members Committee................................. 5
1.26 NERC.............................................. 5
1.27 Office of the Interconnection..................... 5
1.28 Operating Reserve................................. 5
1.29 Original PJM Agreement............................ 5
1.30 Other Supplier.................................... 6
1.31 PJM Board......................................... 6
1.32 PJM Control Area.................................. 6
1.33 PJM Dispute Resolution Procedures................. 6
1.34 PJM Interchange Energy Market..................... 6
1.35 PJM Manuals....................................... 6
1.36 PJM Tariff........................................ 6
1.37 Planning Period................................... 6
1.38 President......................................... 6
1.39 Related Parties................................... 7
1.40 Reliability Assurance Agreement................... 7
1.41 Sector Votes...................................... 7
1.42 State............................................. 7
1.43 System............................................ 7
1.44 Transmission Facilities........................... 7
1.45 Transmission Owner................................ 7
1.46 Transmission Owners Agreement..................... 8
1.47 User Group........................................ 8
1.48 Voting Member..................................... 8
1.49 Weighted Interest................................. 8
2. FORMATION, NAME; PLACE OF BUSINESS..................... 8
2.1 Formation of LLC; Certificate of Formation. ....... 8
2.2 Name of LLC........................................ 9
2.3 Place of Business.................................. 9
2.4 Registered Office and Registered Agent............. 9
3. PURPOSES AND POWERS OF LLC............................. 9
3.1 Purposes........................................... 9
3.2 Powers............................................ 10
4. EFFECTIVE DATE AND TERMINATION........................ 10
4.1 Effective Date and Termination.....................10
4.2 Governing Law..................................... 10
5. WORKING CAPITAL AND CAPITAL CONTRIBUTIONS ............ 11
5.1 Funding of Working Capital and
Capital Contributions............................. 11
5.2 Contributions to Association...................... 11
6. TAX STATUS AND DISTRIBUTIONS.......................... 11
6.1 Tax Status........................................ 11
6.2 Return of Capital Contributions................... 12
6.3 Liquidating Distribution.......................... 12
7. PJM BOARD............................................. 12
7.1 Composition....................................... 12
7.2 Qualifications.................................... 13
7.3 Term of Office.................................... 13
7.4 Quorum............................................ 13
7.5 Operating and Capital Budgets..................... 14
7.5.1 Finance Committee............................... 14
7.5.2 Adoption of Budgets............................. 14
7.6 By-laws........................................... 14
7.7 Duties and Responsibilities of the PJM Board. .... 14
8. MEMBERS COMMITTEE..................................... 16
8.1 Sectors........................................... 16
8.1.1 Designation..................................... 16
8.1.2 Related Parties................................. 17
8.2 Representatives................................... 17
8.2.1 Appointment..................................... 17
8.2.2 Regulatory Authorities.......................... 17
8.2.3 Initial Representatives......................... 17
8.2.4 Change of or Substitution for a Representative.. 17
8.3 Meetings.......................................... 18
8.3.1 Regular and Special Meetings.................... 18
8.3.2 Attendance...................................... 18
8.3.3 Quorum.......................................... 18
8.4 Manner of Acting.................................. 18
8.5 Chair and Vice Chair of the Members Committee..... 19
8.5.1 Selection and Term.............................. 19
8.5.2 Duties.......................................... 19
8.6 Other Committees.................................. 19
8.7 User Groups....................................... 20
8.8 Powers of the Members Committee................... 20
9. OFFICERS.............................................. 21
9.1 Election and Term................................. 21
9.2 President......................................... 21
9.3 Secretary......................................... 21
9.4 Treasurer......................................... 22
9.5 Renewal of Officers; Vacancies.................... 22
9.6 Compensation...................................... 22
10. OFFICE OF THE INTERCONNECTION........................ 22
10.1 Establishment.................................... 22
10.2 Processes and Organization....................... 23
10.3 Confidential Information......................... 23
10.4 Duties and Responsibilities...................... 25
11. MEMBERS.............................................. 25
11.1 Management Rights................................ 25
11.2 Other Activities................................. 25
11.3 Member Responsibilities.......................... 25
11.3.1 General........................................ 25
11.3.2 Facilities Planning and Operation.............. 26
11.3.3 Electric Distributors.......................... 27
11.3.4 Reports to the Office of the Interconnection... 28
11.4 Regional Transmission Expansion Planning Protocol 28
11.5 Member Right to Petition......................... 28
11.6 Membership Requirements.......................... 29
12. TRANSFERS OF MEMBERSHIP INTEREST..................... 30
13. INTERCHANGE.......................................... 30
13.1 Interchange Arrangements with Non-Members. ...... 30
13.2 Energy Market.................................... 30
14. METERING............................................. 30
14.1 Installation, Maintenance and Reading of Meters.. 30
14.2 Metering Procedures.............................. 30
14.3 Integrated Megawatt-Hours........................ 31
14.4 Meter Locations.................................. 31
15. ENFORCEMENT OF OBLIGATIONS........................... 31
15.1 Failure to Meet Obligations...................... 31
15.1.1 Termination of Market Buyer Rights. ........... 31
15.1.2 Termination of Market Seller Rights. .......... 31
15.1.3 Payment of Bills............................... 32
15.2 Enforcement of Obligations....................... 33
15.3 Obligations to a Member in Default............... 33
15.4 Obligations of a Member in Default............... 33
15.5 No Implied Waiver................................ 33
16. LIABILITY AND INDEMNITY.............................. 34
16.1 Members.......................................... 34
16.2 LLC Indemnified Parties.......................... 35
16.3 Worker' Compensation Claims...................... 36
16.4 Limitation of Liability.......................... 36
16.5 Resolution of Disputes........................... 36
16.6 Gross Negligence or Willful Misconduct........... 36
16.7 Insurance........................................ 37
17. MEMBER REPRESENTATIONS, WARRANTIES AND COVENANT...... 37
17.1 Representations and Warranties................... 37
17.1.1 Organization and Existence..................... 37
17.1.2 Power and Authority............................ 37
17.1.3 Authorization and Enforceability............... 37
17.1.4 No Government Consents......................... 37
17.1.5 No Conflict or Breach.......................... 37
17.1.6 No Proceedings................................. 38
17.2 Municipal Electric Systems....................... 38
17.3 Survival......................................... 38
18. MISCELLANEOUS PROVISIONS............................. 38
18.1 Transmission Owners Rights....................... 38
18.2 Fiscal and Taxable Year.......................... 38
18.3 Reports.......................................... 38
18.4 Bank Accounts; Checks, Notes and Drafts.......... 39
18.5 Books and Records................................ 39
18.6 Amendment........................................ 40
18.7 Interpretation................................... 40
18.8 Severability..................................... 40
18.9 Force Majeure.................................... 41
18.10 Further Assurances.............................. 41
18.11 Seal............................................ 41
18.12 Counterparts.................................... 41
18.13 Costs of Meetings............................... 41
18.14 Notice.......................................... 42
18.15 Headings........................................ 42
18.16 No Third-Party Beneficiaries.................... 42
18.17 Confidentiality................................. 42
18.17.1 Party Access.................................. 42
18.17.2 Required Disclosure........................... 43
18.18 Termination and Withdrawal...................... 43
18.18.1 Termination................................... 43
18.18.2 Withdrawal.................................... 43
18.18.3 Winding Up.................................... 44
SCHEDULE 1 - PJM INTERCHANGE ENERGY MARKET ............... 1
1. MARKET OPERATIONS...................................... 1
1.1 Introduction....................................... 1
1.2 Cost-based Offers.................................. 1
1.3 Definitions........................................ 1
1.3.1 Dispatch Rate.................................... 1
1.3.2 Equivalent Load.................................. 1
1.3.3 External Market Buyer............................ 1
1.3.4 External Resource................................ 2
1.3.5 Fixed Transmission Right......................... 2
1.3.6 Generating Market Buyer.......................... 2
1.3.7 Generator Forced Outage.......................... 2
1.3.8 Generator Maintenance Outage..................... 2
1.3.9 Generator Planned Outage......................... 2
1.3.10 Internal Market Buyer........................... 2
1.3.11 Inadvertent Interchange......................... 2
1.3.12 Market Operations Center........................ 3
1.3.13 Maximum Generation Emergency.................... 3
1.3.14 Minimum Generation Emergency.................... 3
1.3.15 Network Resource................................ 3
1.3.16 Network Service User............................ 3
1.3.17 Network Transmission Service.................... 3
1.3.18 Normal Maximum Generation....................... 3
1.3.19 Normal Minimum Generation....................... 3
1.3.20 Offer Data...................................... 3
1.3.21 Office of the Interconnection Control Center.... 4
1.3.22 Operating Day.................................. 4
1.3.23 Operating Margin............................... 4
1.3.24 Operating Margin Customer...................... 4
1.3.25 PJM Interchange................................ 4
1.3.26 PJM Interchange Export......................... 4
1.3.27 PJM Interchange Import......................... 5
1.3.28 PJM Open Access Same-time Information System... 5
1.3.29 Point-to-Point Transmission Service. .......... 5
1.3.30 Ramping Capability............................. 5
1.3.31 Regulation..................................... 5
1.3.32 Regulation Class............................... 5
1.3.33 Spot Market Energy............................. 5
1.3.34 Transmission Congestion Charge................. 5
1.3.35 Transmission Congestion Credit................. 6
1.3.36 Transmission Customer.......................... 6
1.3.37 Transmission Forced Outage..................... 6
1.3.38 Transmission Planned Outage.................... 6
1.4 Market Buyers..................................... 6
1.4.1 Qualification................................... 6
1.4.2 Submission of Information....................... 7
1.4.3 Fees and Costs.................................. 7
1.4.4 Office of the Interconnection Determination..... 8
1.4.5 Existing Participants........................... 8
1.4.6 Withdrawal...................................... 8
1.5 Market Sellers.................................... 9
1.5.1 Qualification................................... 9
1.5.2 Withdrawal...................................... 9
1.6 Office of the Interconnection..................... 9
1.6.1 Operation of the PJM Interchange Energy Market...9
1.6.2 Scope of Services............................... 9
1.6.3 Records and Reports............................ 10
1.6.4 PJM Manuals.................................... 11
1.7 General.......................................... 11
1.7.1 Market Sellers................................. 11
1.7.2 Market Buyers.................................. 11
1.7.3 Agents......................................... 11
1.7.4 General Obligations of the Market Participants. 11
1.7.5 Market Operations Center....................... 13
1.7.6 Scheduling and Dispatching..................... 13
1.7.7 Pricing........................................ 13
1.7.8 Generating Market Buyer Resources.............. 13
1.7.9 Delivery to an External Market Buyer........... 13
1.7.10 Other Transactions............................ 14
1.7.11 Emergencies................................... 14
1.7.12 Fees and Charges.............................. 14
1.7.13 Relationship to PJM Control Area.............. 14
1.7.14 PJM Manuals................................... 15
1.7.15 Corrective Action............................. 15
1.7.16 Recording..................................... 15
1.7.17 Operating Reserves............................ 15
1.7.18 Regulation.................................... 15
1.7.19 Ramping....................................... 16
1.7.20 Communication and Operating Requirements...... 16
1.7.21 Multi-settlement System....................... 17
1.8 Selection, Scheduling and Dispatch
Procedure Adjustment Process..................... 17
1.8.1 PJM Dispute Resolution Agreement............... 17
1.8.2 Market or Control Area Hourly
Operational Disputes. ......................... 17
1.9 Prescheduling.................................... 18
1.9.1 Outage Scheduling.............................. 18
1.9.2 Planned Outages................................ 18
1.9.3 Generator Maintenance Outages.................. 19
1.9.4 Forced Outages................................. 19
1.9.5 Market Participant Responsibilities............ 20
1.9.6 Internal Market Buyer Responsibilities......... 20
1.9.7 Market Seller Responsibilities................. 20
1.9.8 Office of the Interconnection Responsibilities. 20
1.10 Scheduling...................................... 21
1.10.1 Day-Ahead Scheduling.......................... 21
1.10.2 Pool-Scheduled Resources...................... 23
1.10.3 Self-scheduled Resources...................... 24
1.10.4 Capacity Resources............................ 24
1.10.5 External Resources............................ 25
1.10.6 External Market Buyers........................ 26
1.10.7 Bilateral Transactions........................ 26
1.10.8 Office of the Interconnection Responsibilities.27
1.10.9 Hourly Scheduling............................. 27
1.11 Dispatch........................................ 28
1.11.1 Resource Output............................... 28
1.11.2 Operating Basis............................... 28
1.11.3 Pool-dispatched Resources..................... 29
1.11.4 Regulation.................................... 29
1.11.5 PJM Open Access Same-time Information System.. 29
2. CALCULATION OF LOCATIONAL MARGINAL PRICES............ 30
2.1 Introduction..................................... 30
2.2 General.......................................... 30
2.3 Determination of System Conditions Using
the State Estimator.............................. 31
2.4 Determination of Energy Offers Used in
Calculating Locational Marginal Prices........... 31
2.5 Calculation of Locational Marginal Prices........ 32
2.6 Performance Evaluation........................... 32
3. ACCOUNTING AND BILLING............................... 33
3.1 Introduction..................................... 33
3.2 Market Buyers.................................... 33
3.2.1 Spot Market Energy............................. 33
3.2.2 Regulation..................................... 34
3.2.3 Operating Reserves............................. 35
3.2.4 Transmission Congestion........................ 35
3.2.5 Transmission Losses............................ 35
3.2.6 Emergency Energy............................... 36
3.2.7 Billing........................................ 36
3.3 Market Sellers................................... 36
3.3.1 Spot Market Energy............................. 37
3.3.2 Regulation..................................... 37
3.3.3 Operating Reserves............................. 37
3.3.4 Emergency Energy............................... 37
3.3.5 Billing........................................ 38
3.4 Transmission Customers........................... 38
3.4.1 Transmission Congestion........................ 38
3.4.2 Transmission Losses............................ 38
3.4.3 Billing........................................ 38
3.5 Other Control Areas.............................. 39
3.5.1 Energy Sales................................... 39
3.5.2 Operating Margin Sales......................... 39
3.5.3 Transmission Congestion........................ 39
3.5.4 Billing........................................ 39
3.6 Metering Reconciliation.......................... 39
3.6.1 Meter Correction Billing....................... 39
3.6.2 Meter Corrections Between Market Participants.. 40
3.6.3 500 kV Meter Errors............................ 40
3.6.4 Meter Corrections Between Control Areas........ 40
3.6.5 Meter Correction Data.......................... 40
3.6.6 Correction Limits.............................. 40
4. RATE TABLE........................................... 41
4.1 Offered Price Rates.............................. 41
4.2 Transmission Losses.............................. 41
4.3 Emergency Energy Purchases....................... 41
5. CALCULATION OF TRANSMISSION CONGESTION CHARGES
AND CREDITS......................................... 42
5.1 Transmission Congestion Charge Calculation ...... 42
5.1.1 Calculation by Office of the Interconnection... 42
5.1.2 General........................................ 42
5.1.3 Network Service User Calculation. ............. 42
5.1.4 Transmission Customer Calculation.............. 42
5.1.5 Operating Margin Customer Calculation.......... 42
5.1.6 Total Transmission Congestion Charges.......... 43
5.2 Transmission Congestion Credit Calculation....... 43
5.2.1 Eligibility.................................... 43
5.2.2 Fixed Transmission Rights...................... 43
5.2.3 Target Allocation for Network Service Users.... 44
5.2.4 Target Allocation for other Holders............ 44
5.2.5 Calculation of Transmission Congestion Credits. 44
5.2.6 Distribution of Excess Congestion Charges...... 44
SCHEDULE 2 - COMPONENTS OF COST.......................... 1
SCHEDULE 3 - ALLOCATION OF OI COSTS...................... 1
SCHEDULE 4 - STANDARD MEMBERSHIP AGREEMENT............... 1
SCHEDULE 5 - DISPUTE RESOLUTION PROCEDURE................ 1
1. DEFINITIONS........................................... 1
1.1 Alternate Dispute Resolution Committee............ 1
1.2 MAAC Dispute Resolution Committee................. 1
1.3 Related PJM Agreements............................ 1
2. PURPOSES AND OBJECTIVES............................... 1
2.1 Common and Uniform Procedures..................... 1
2.2 Interpretation.................................... 1
3. NEGOTIATION AND MEDIATION............................. 2
3.1 When Required..................................... 2
3.2 Procedures........................................ 2
3.2.1 Initiation...................................... 2
3.2.2 Selection of Mediator........................... 2
3.2.3 Advisory Mediator............................... 2
3.2.4 Mediation Process............................... 3
3.2.5 Mediator's Assessment........................... 3
3.3 Costs............................................. 4
4. ARBITRATION........................................... 4
4.1 When Required..................................... 4
4.2 Binding Decision.................................. 4
4.3 Initiation........................................ 4
4.4 Selection of Arbitrator(s)........................ 4
4.5 Procedures........................................ 5
4.6 Summary Disposition and Interim Measures.......... 5
4.6.1 Lack of Good Faith Basis........................ 5
4.6.2 Discovery Limits................................ 5
4.6.3 Interim Decision................................ 5
4.7 Discovery of Facts................................ 6
4.7.1 Discovery Procedures............................ 6
4.7.2 Procedures Arbitrator........................... 6
4.8 Evidentiary Hearing............................... 6
4.9 Confidentiality................................... 7
4.9.1 Designation..................................... 7
4.9.2 Compulsory Disclosure........................... 7
4.9.3 Public Information.............................. 7
4.10 Timetable........................................ 8
4.11 Advisory Interpretations......................... 8
4.12 Decisions........................................ 8
4.13 Costs............................................ 8
4.14 Enforcement...................................... 9
5. ALTERNATE DISPUTE RESOLUTION COMMITTEE ............... 9
5.1 Membership........................................ 9
5.1.1 Representatives................................. 9
5.1.2 Term............................................ 9
5.2 Voting Requirements............................... 9
5.3 Officers.......................................... 9
5.4 Meetings......................................... 10
5.5 Responsibilities................................. 10
SCHEDULE 6 - REGIONAL TRANSMISSION EXPANSION
PLANNING PROTOCOL..................................... 1
1. REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL..... 1
1.1 Purpose and Objectives............................ 1
1.2 Conformity with NERC and MAAC Criteria............ 1
1.3 Establishment of Committees....................... 1
1.4 Contents of the Regional Transmission
Expansion Plan.................................... 2
1.5 Procedure for Development of the Regional
Transmission Expansion Plan....................... 2
1.5.1 Commencement of the Process..................... 2
1.5.2 Development of Scope, Assumptions and
Procedures...................................... 3
1.5.3 Scope of Studies................................ 3
1.5.4 Supply of Data.................................. 3
1.5.5 Coordination of the Regional Transmission
Expansion Plan.................................. 3
1.5.6 Development of the Recommended Regional
Transmission Expansion Plan..................... 3
1.6 Approval of the Final Regional
Transmission Expansion Plan ...................... 4
1.7 Obligation to Build .............................. 5
1.8 Relationship to the PJM Control Area
Open Access Transmission PJM Tariff............... 5
SCHEDULE 7 - UNDERFREQUENCY RELAY OBLICATIONS
AND CHARGES........................................... 1
1. UNDERFREQUENCY RELAY OBLIGATION....................... 1
1.1 Application....................................... 1
1.2 Obligations....................................... 1
2. UNDERFREQUENCY RELAY CHARGES.......................... 1
3. DISTRIBUTION OF UNDERFREQUENCY RELAY CHARGES.......... 2
3.1 Share of Charges.................................. 2
3.2 Allocation by the Office of the Interconnection... 2
SCHEDULE 8 -DELEGATION OF RELIABILITY RESPONSIBILITIES... 1
1. DELEGATION............................................ 1
2. NEW PARTIES........................................... 1
3. IMPLEMENTATION OF RELIABILITY ASSURANCE AGREEMENT. ... 1
SCHEDULE 9 - EMERGENCY PROCEDURE CHARGES ................ 1
1. EMERGENCY PROCEDURE CHARGE............................ 1
2. DISTRIBUTION OF EMERGENCY PROCEDURE CHARGES .......... 1
2.1 Complying Parties................................. 1
2.2 All Parties....................................... 1
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT
of
PJM INTERCONNECTION, L.L.C.
This Amended and Restated Operating Agreement of PJM
Interconnection, L.L.C., dated as of this 2 nd day of June, 1997,
amends and restates as of the Effective Date the Operating
Agreement of PJM Interconnection, L.L.C. filed with the FERC on
April 2, 1997, as amended.
WHEREAS, certain of the Members have previously entered into
an agreement, originally dated September 26, 1956, as amended and
supplemented up to and including December 31, 1996, stating
"their respective rights and obligations with respect to the
coordinated operation of their electric supply systems and the
interchange of electric capacity and energy among their systems"
(such agreement as amended and supplemented being referred to as
the "Original PJM Agreement"), and which coordinated operations
and interchange came to be known as the PJM Interconnection (the
"Interconnection"); and
WHEREAS, pursuant to a resolution of June 16, 1993, an
unincorporated association comprised of the parties to the
Original PJM Agreement was formed for the purpose of
implementation of the Original PJM Agreement as it then existed
and as it subsequently has been amended and supplemented, such
association being known as the "PJM Interconnection Association";
and
WHEREAS, because of changes in federal law and policy, the
Original PJM Agreement, together with other documents and
agreements, was amended, restated and submitted to FERC on
December 31, 1996 to restructure fundamental aspects of the
operation of the Interconnection; and
WHEREAS, so that the provisions of the Original PJM
Agreement could be placed into effect consistent with a February
28, 1997 order of FERC, including those provisions related to the
governance of the Interconnection, the parties to the Original
PJM Agreement, along with the other interested parties, approved
the conversion of the PJM Interconnection Association into the
LLC pursuant to the provisions of the Delaware Limited Liability
Company Act, as amended (the "Delaware LLC Act"), pursuant to a
Certificate of Formation (the "Certificate of Formation") and a
Certificate of Conversion (the "Certificate of Conversion"), each
filed with the Delaware Secretary of State (the "Recording
Office") on March 31, 1997; and
WHEREAS, the Members wish to amend and restate the Operating
Agreement of PJM Interconnection, L.L.C. adopted in connection
with the formation of the LLC and as in effect immediately prior
to the Effective Date in the form set forth below; and
WHEREAS, the Members intend to form an Independent System
Operator in accordance with the regulations of the Federal Energy
Regulatory Commission; and
Now, therefore, in consideration of the foregoing, and of
the covenants and agreements hereinafter set forth, the Members
hereby agree as follows:
<PAGE>
DEFINITIONS
Unless the context otherwise specifies or requires,
capitalized terms used in this Agreement shall have the
respective meanings assigned herein or in the Schedules hereto
for all purposes of this Agreement (such definitions to be
equally applicable to both the singular and the plural forms of
the terms defined). Unless otherwise specified, all references
herein to Sections, Schedules, Exhibits or Appendices are to
Sections, Schedules, Exhibits or Appendices of this Agreement.
As used in this Agreement:
1.1 Act.
"Act" shall mean the Delaware Limited Liability Company Act,
Title 6, Section 18-101 to 18-1109 of the Delaware Code.
1.2 Affiliate.
"Affiliate" shall mean any two or more entities, one of
which controls the other or that are under common control.
"Control" shall mean the possession, directly or indirectly, of
the power to direct the management or policies of an entity.
Ownership of publicly-traded equity securities of another entity
shall not result in control or affiliation for purposes of this
Agreement if the securities are held as an investment, the holder
owns (in its name or via intermediaries) less than 10 percent of
the outstanding securities of the entity, the holder does not
have representation on the entity's board of directors (or
equivalent managing entity) or vice versa, and the holder does
not in fact exercise influence over day-to-day management
decisions. Unless the contrary is demonstrated to the
satisfaction of the Members Committee, control shall be presumed
to arise from the ownership of or the power to vote, directly or
indirectly, ten percent or more of the voting securities of such
entity.
1.3 Agreement.
"Agreement" shall mean this Amended and Restated Operating
Agreement of PJM Interconnection, L.L.C., including all
Schedules, Exhibits, Appendices, addenda or supplements hereto,
as amended from time to time.
1.4 Annual Meeting of the Members.
"Annual Meeting of the Members" shall mean the meeting
specified in Section 8.3.1 of this Agreement.
1.5 Board Member.
"Board Member" shall mean a member of the PJM Board.
1.6 Capacity Resource.
"Capacity Resource" shall mean the net capacity from owned
or contracted for generating facilities all of which (i) are
accredited to a Load Serving Entity pursuant to the procedures
set forth in the Reliability Assurance Agreement and (ii) are
committed to satisfy that Load Serving Entity's obligations under
the Reliability Assurance Agreement and this Agreement.
1.7 Control Area.
"Control Area" shall mean an electric power system or
combination of electric power systems bounded by interconnection
metering and telemetry to which a common automatic generation
control scheme is applied in order to:
(a) match the power output of the generators within the
electric power system(s) and energy purchased from entities
outside the electric power system(s), with the load within the
electric power system(s);
(b) maintain scheduled interchange with other Control Areas,
within the limits of Good Utility Practice;
(c) maintain the frequency of the electric power system(s)
within reasonable limits in accordance with Good Utility Practice
and the criteria of NERC and the applicable regional reliability
council of NERC;
(d) maintain power flows on transmission facilities within
appropriate limits to preserve reliability; and
(e) provide sufficient generating capacity to maintain
operating reserves in accordance with Good Utility Practice.
1.8 Electric Distributor.
"Electric Distributor" shall mean a Member that owns or
leases with rights equivalent to ownership electric distribution
facilities that are used to provide electric distribution service
to electric load within the PJM Control Area.
1.9 Effective Date.
"Effective Date" shall mean August 1, 1997, or such later
date that FERC permits this Agreement to go into effect.
1.10 Emergency.
"Emergency" shall mean: (i) an abnormal system condition
requiring manual or automatic action to maintain system
frequency, or to prevent loss of firm load, equipment damage, or
tripping of system elements that could adversely affect the
reliability of an electric system or the safety of persons or
property; or (ii) a fuel shortage requiring departure from normal
operating procedures in order to minimize the use of such scarce
fuel; or (iii) a condition that requires implementation of
emergency procedures as defined in the PJM Manuals.
1.11 End-Use Customer.
"End-Use Customer" shall mean a Member that is a retail end-
user of electricity within the PJM Control Area.
1.12 FERC.
"FERC" shall mean the Federal Energy Regulatory Commission
or any successor federal agency, commission or department
exercising jurisdiction over this Agreement.
1.13 Finance Committee.
"Finance Committee" shall mean the body formed pursuant to
Section 0 of this Agreement.
1.14 Generation Owner.
"Generation Owner" shall mean a Member that owns or leases
with rights equivalent to ownership facilities for the generation
of electric energy that are located within the PJM Control Area.
Purchasing all or a portion of the output of a generation
facility shall not be sufficient to qualify a Member as a
Generation Owner.
1.15 Good Utility Practice.
"Good Utility Practice" shall mean 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 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. Good Utility
Practice is not intended to be limited to the optimum practice,
method, or act to the exclusion of all others, but rather is
intended to include acceptable practices, methods, or acts
generally accepted in the region.
1.16 Interconnection.
"Interconnection" shall mean the coordinated operations and
interchange resulting from the Original PJM Agreement as
continued in this Agreement.
1.17 LLC.
"LLC" shall mean PJM Interconnection, L.L.C., a Delaware
limited liability company.
1.18 Load Serving Entity.
"Load Serving Entity" shall mean an entity, including a load
aggregator or power marketer, (1) serving end-users within the
PJM Control Area, and (2) that has been granted the authority or
has an obligation pursuant to state or local law, regulation or
franchise to sell electric energy to end-users located within the
PJM Control Area, or the duly designated agent of such an entity.
1.19 Locational Marginal Price.
"Locational Marginal Price"' shall mean the hourly
integrated market clearing marginal price for energy at the
location the energy is delivered or received, calculated as
specified in Section 0 of Schedule 1 of this Agreement.
1.20 MAAC.
"MAAC" shall mean the Mid-Atlantic Area Council, a
reliability council under Section 202 of the Federal Power Act
established pursuant to the MAAC Agreement dated August 1, 1994,
or any successor thereto.
1.21 Market Buyer.
"Market Buyer" shall mean a Member that has met reasonable
creditworthiness standards established by the Office of the
Interconnection and that is otherwise able to make purchases in
the PJM Interchange Energy Market.
1.22 Market Participant.
"Market Participant"' shall mean a Market Buyer or a Market
Seller, or both.
1.23 Market Seller.
"Market Seller" shall mean a Member that has met reasonable
creditworthiness standards established by the Office of the
Interconnection and that is otherwise able to make sales in the
PJM Interchange Energy Market.
1.24 Member.
"Member" shall mean an entity that satisfies the
requirements of Section 11.6 of this Agreement and that (i) is a
member of the LLC immediately prior to the Effective Date, or
(ii) has executed an Additional Member Agreement in the form set
forth in Schedule 4 hereof.
1.25 Members Committee.
"Members Committee" shall mean the committee specified in
Section 8 of this Agreement composed of representatives of all
the Members.
1.26 NERC.
"NERC" shall mean the North American Electric Reliability
Council, or any successor thereto.
1.27 Office of the Interconnection.
"Office of the Interconnection" shall mean the employees and
agents of the LLC engaged in implementation of this Agreement and
administration of the PJM Tariff, subject to the supervision and
oversight of the PJM Board acting pursuant to this Agreement.
1.28 Operating Reserve.
"Operating Reserve" shall mean the amount of generating
capacity scheduled to be available for a specified period of an
Operating Day to ensure the reliable operation of the PJM
Control Area, as specified in the PJM Manuals.
1.29 Original PJM Agreement.
"Original PJM Agreement" shall mean that certain agreement
between certain of the Members, originally dated September 26,
1956, and as amended and supplemented up to and including
December 31, 1996, relating to the coordinated operation of their
electric supply systems and the interchange of electric capacity
and energy among their systems.
1.30 Other Supplier.
"Other Supplier" shall mean a Member that is (i) a seller,
buyer or transmitter of electric capacity or energy in, from or
through the PJM Control Area, and (ii) is not a Generation Owner,
Electric Distributor, Transmission Owner or End-Use Customer.
1.31 PJM Board.
"PJM Board" shall mean the Board of Managers of the LLC,
acting pursuant to this Agreement.
1.32 PJM Control Area.
"PJM Control Area" shall mean the Control Area recognized by
NERC as the PJM Control Area.
1.33 PJM Dispute Resolution Procedures
"PJM Dispute Resolution Procedures" shall mean the
procedures for the resolution of disputes set forth in Schedule 5
of this Agreement.
1.34 PJM Interchange Energy Market.
"PJM Interchange Energy Market" shall mean the regional
competitive market administered by the Office of the
Interconnection for the purchase and sale of spot electric energy
at wholesale in interstate commerce and related services
established pursuant to Schedule 1 to this Agreement.
1.35 PJM Manuals.
"PJM Manuals" shall mean the instructions, rules, procedures
and guidelines established by the Office of the Interconnection
for the operation, planning, and accounting requirements of the
PJM Control Area and the PJM Interchange Energy Market.
1.36 PJM Tariff.
"PJM Tariff" shall mean the PJM Open Access Transmission
Tariff providing transmission service within the PJM Control
Area, including any schedules, appendices, or exhibits attached
thereto, as in effect from time to time.
1.37 Planning Period.
"Planning Period" shall initially mean the 12 months
beginning June 1 and extending through May 31 of the following
year, or such other period established by the Reliability
Committee established under the Reliability Assurance Agreement.
1.38 President.
"President" shall have the meaning specified in Section 9.2.
1.39 Related Parties.
"Related Parties" shall mean, solely for purposes of the
governance provisions of this Agreement: (i) any generation and
transmission cooperative and one of its distribution cooperative
members; and (ii) any joint municipal agency and one of its
members. For purposes of this Agreement, representatives of state
or federal government agencies shall not be deemed Related
Parties with respect to each other, and a public body's
regulatory authority, if any, over a Member shall not be deemed
to make it a Related Party with respect to that Member.
1.40 Reliability Assurance Agreement.
"Reliability Assurance Agreement" shall mean that certain
agreement, dated June 2, 1997 and as amended from time to time,
establishing obligations, standards and procedures for
maintaining the reliable operation of the PJM Control Area.
1.41 Sector Votes.
"Sector Votes" shall mean the affirmative and negative votes
of each sector on the Members Committee, as specified in Section
8.4.
1.42 State.
"State" shall mean the District of Columbia and any State or
Commonwealth of the United States.
1.43 System.
"System" shall mean the interconnected electric supply
system of a Member and its interconnected subsidiaries exclusive
of facilities which it may own or control outside of the PJM
Control Area. Each Member may include in its system the electric
supply systems of any party or parties other than Members which
are within the PJM Control Area, provided its interconnection
agreements with such other party or parties do not conflict with
such inclusion.
1.44 Transmission Facilities.
"Transmission Facilities" shall mean facilities that: (i)
are within the PJM Control Area; (ii) meet the definition of
transmission facilities pursuant to FERC's Uniform System of
Accounts or have been classified as transmission facilities in a
ruling by FERC addressing such facilities; and (iii) have been
demonstrated to the satisfaction of the Office of the
Interconnection to be integrated with the PJM Control Area
transmission system and integrated into the planning and
operation of the PJM Control Area to serve all of the power and
transmission customers within the PJM Control Area.
1.45 Transmission Owner.
"Transmission Owner" shall mean a Member that owns or leases
with rights equivalent to ownership Transmission Facilities.
Taking transmission service shall not be sufficient to qualify a
Member as a Transmission Owner.
1.46 Transmission Owners Agreement.
"Transmission Owners Agreement" shall mean that certain
agreement, dated June 2, 1997 and as amended from time to time,
by and among Transmission Owners in the PJM Control Area
providing for an open-access transmission tariff in the PJM
Control Area, and for other purposes.
1.47 User Group.
"User Group" shall mean a group formed pursuant to Section 0
of this Agreement.
1.48 Voting Member
"Voting Member" shall mean (i) a Member as to which no other
Member is an Affiliate or Related Party, or (ii) a Member
together with any other Members as to which it is an Affiliate or
Related Party.
1.49 Weighted Interest.
"Weighted Interest" shall be equal to (0.1(1/N) + 0.5(B/C) +
0.2(D/E) + 0.2(F/G)), where:
N = the total number of Members
B = the Member's internal peak demand for the previous
calendar year
C = the sum of factor B for all Members
D = the Member's net installed generating capacity located
in the PJM Control Area as of January 1 of the current calendar
year
E = the sum of factor D for all Members
F = the sum of the Member's circuit miles of transmission
facilities multiplied by the respective operating voltage for
facilities 100 kV and above as of January 1 of the current
calendar year
G = the sum of factor F for all Members
2. FORMATION, NAME; PLACE OF BUSINESS
2.1 Formation of LLC; Certificate of Formation.
The Members of the LLC hereby:
(a) acknowledge the conversion of the PJM Interconnection
Association into the LLC, a limited liability company pursuant to
the Act, by virtue of the filing of both the Certificate of
Formation and the Certificate of Conversion with the Recording
Office, effective as of March 31, 1997;
(b) confirm and agree to their status as Members of the LLC;
(c) enter into this Agreement for the purpose of amending
and restating the rights, duties, and relationship of the
Members; and
(d) agree that if the laws of any jurisdiction in which the
LLC transacts business so require, the PJM Board also shall file,
with the appropriate office in that jurisdiction, any documents
necessary for the LLC to qualify to transact business under such
laws; and (ii) agree and obligate themselves to execute,
acknowledge, and cause to be filed for record, in the place or
places and manner prescribed by law, any amendments to the
Certificate of Formation as may be required, either by the Act,
by the laws of any jurisdiction in which the LLC transacts
business, or by this Agreement, to reflect changes in the
information contained therein or otherwise to comply with the
requirements of law for the continuation, preservation, and
operation of the LLC as a limited liability company under the
Act.
2.2 Name of LLC.
The name under which the LLC shall conduct its business is
"PJM Interconnection, L.L.C." 2.3 Place of Business. The
location of the principal place of business of the LLC shall be
955 Jefferson Avenue, Valley Forge Corporate Center, Norristown,
Pennsylvania 19403-2497. The LLC may also have offices at such
other places both within and without the State of Delaware as the
PJM Board may from time to time determine or the business of the
LLC may require.
2.4 Registered Office and Registered Agent.
The street address of the initial registered office of the
LLC shall be 1209 Orange Street, Wilmington, Delaware 19801, and
the LLC's registered agent at such address shall be The
Corporation Trust Company. The registered office and registered
agent may be changed by resolution of the PJM Board.
3. PURPOSES AND POWERS OF LLC
3.1 Purposes.
The purposes of the LLC shall be:
(a) to operate in accordance with FERC requirements as an
Independent System Operator, comprised of the PJM Board, the
Office of the Interconnection, and the Members Committee, with
the authorities and responsibilities set forth in this Agreement;
(b) as necessary for the operation of the Interconnection as
specified above: (i) to acquire and obtain licenses, permits and
approvals, (ii) to own or lease property, equipment and
facilities, and (iii) to contract with third parties to obtain
goods and services, provided that, the L.L.C. may procure goods
and services from a Member only after open and competitive
bidding; and
(c) to engage in any lawful business permitted by the Act or
the laws of any jurisdiction in which the LLC may do business and
to enter into any lawful transaction and engage in any lawful
activities in furtherance of the foregoing purposes and as may be
necessary, incidental or convenient to carry out the business of
the LLC as contemplated by this Agreement.
3.2 Powers.
The LLC shall have the power to do any and all acts and
things necessary, appropriate, advisable, or convenient for the
furtherance and accomplishment of the purposes of the LLC,
including, without limitation, to engage in any kind of activity
and to enter into and perform obligations of any kind necessary
to or in connection with, or incidental to, the accomplishment of
the purposes of the LLC, so long as said activities and
obligations may be lawfully engaged in or performed by a limited
liability company under the Act.
4. EFFECTIVE DATE AND TERMINATION
4.1 Effective Date and Termination.
(a) The existence of the LLC commenced on March 31, 1997, as
provided in the Certificate of Formation and Certificate of
Conversion which were filed with the Recording Office on March
31, 1997. This Agreement shall amend and restate the Operating
Agreement of PJM Interconnection, L.L.C. as of the Effective
Date.
(b) The LLC shall continue in existence until terminated in
accordance with the terms of this Agreement. The withdrawal or
termination of any Member is subject to the provisions of Section
0 of this Agreement.
(c) Any termination of this Agreement or withdrawal of any
Member from the Agreement shall be filed with the FERC and shall
become effective only upon the FERC's approval.
Governing Law.
This Agreement and all questions with respect to the rights
and obligations of the Members, the construction, enforcement and
interpretation hereof, and the formation, administration and
termination of the LLC shall be governed by the provisions of the
Act and other applicable laws of the State of Delaware, and the
Federal Power Act.
5. WORKING CAPITAL AND CAPITAL CONTRIBUTIONS
1 Funding of Working Capital and Capital Contributions.
(a) The Office of the Interconnection shall attempt to
obtain financing of up to five million two hundred thousand
dollars ($5,200,000) to meet the working capital needs of the
LLC, which shall be limited to such working capital needs that
arise from timing in cash flows from interchange accounting,
tariff administration and payment of the operating costs of the
Office of the Interconnection. Such financing, which shall be
non-recourse to the Members of the LLC and which shall be for a
stated term without penalty for prepayment, may be obtained by
borrowing the amount required at market-based interest rates,
negotiated on an arm's length basis, (i) from a Member or Members
or (ii) from a commercial lender, supported, if necessary, by
credit enhancements provided by a Member or Members; provided,
however, no Member shall be obligated to provide such financing
or credit enhancements. The LLC shall make such filings and seek
such approvals as necessary in order for the principal, interest
and fees related to any such borrowing to be repaid through
charges under the PJM Tariff as appropriate under Schedule 3 of
this Agreement.
(b) In the event financing of the working capital needs of
the Office of the Interconnection is unavailable on commercially
reasonable terms, the PJM Board may require the Members to
contribute capital in the aggregate up to five million two
hundred thousand dollars ($5,200,000) for the working capital
needs that could not be financed; provided that in such event
each Member's obligation to contribute additional capital shall
be in proportion to its Weighted Interest, multiplied by the
amount so requested by the PJM Board. Each Member that
contributes such capital shall be entitled to earn a return on
the contribution to the extent such contribution has not been
repaid, which return shall be at a fair market rate as determined
by the PJM Board but in no event less than the current interest
rate established pursuant to 18 C.F.R. Section 35.19a(a)(2)(iii);
provided further, that any Member not wanting to contribute the
requested capital contribution may withdraw from the LLC upon 90
days written notice as provided in Section 18.18.2 of this
Agreement.
5.2 Contributions to Association.
All contributions prior to the Effective Date of the
original Operating Agreement of PJM Interconnection, L.L.C. of
cash or other assets to the PJM Interconnection Association by
persons who are now or in the future may become Members of the
LLC shall be deemed contributions by such Members to the LLC.
6. TAX STATUS AND DISTRIBUTIONS
6.1 Tax Status.
The LLC shall make all necessary filings under the
applicable Treasury Regulations to have the LLC taxed as a
corporation.
6.2 Return of Capital Contributions.
(a) In the event Members are required to contribute capital
to the LLC in accordance with Section 5.1 herein, the LLC shall
request the Transmission Owners to recover such working capital
through charges under the PJM Tariff as provided in Schedule 3 of
this Agreement. In the event all or a portion of the working
capital is recovered pursuant to the PJM Tariff, such amount(s)
shall be returned to the Members in accordance with their actual
contributions.
(b) Except for return of capital contributions and
liquidating distributions as provided in the foregoing section
and Section 6.3 herein, respectively, the LLC does not intend to
make any distributions of cash or other assets to its Members.
6.3 Liquidating Distribution.
Upon termination or liquidation of the LLC, the cash or
other assets of the LLC shall be distributed as follows:
(a) first, in the event the LLC has any liabilities at the
time of its termination or dissolution, the LLC shall liquidate
such of its assets as is necessary to satisfy such liabilities;
(b) second, any capital contribution in cash or in kind by
any Member of the PJM Interconnection Association prior to the
Effective Date shall be distributed by the LLC back to such
Member in the form received by the PJM Interconnection
Association; and (c) third, any remaining assets of the LLC shall
be distributed to the Members in proportion to their Weighted
Interests.
7. PJM BOARD
7.1 Composition.
There shall be an LLC Board of Managers, referred to herein
as the "PJM Board," composed of seven voting members, with the
President as a non-voting member. The seven voting Board Members
shall be elected by the Members Committee from a slate of
candidates for the then-existing vacancies or expiring terms on
the PJM Board. An independent consultant, retained by the Office
of the Interconnection upon consideration of the advice and
recommendations of the Members Committee, shall be directed to
prepare a list of persons qualified and willing to serve on the
PJM Board. Not later than 30 days prior to each Annual Meeting
of the Members, the Office of the Interconnection shall
distribute to the representatives on the Members Committee a
slate from among the list proposed by the independent consultant,
along with information on the background and experience of the
persons on the slate appropriate to evaluating their fitness for
service on the PJM Board. Elections for the PJM Board shall be
held at each Annual Meeting of the Members, for the purpose of
selecting the initial PJM Board in accordance with the provisions
of Section 7.3(a), or selecting a person to fill the seat of a
Board Member whose term is expiring. Should the Members Committee
fail to elect a full PJM Board from the slate proposed by the
independent consultant, the Office of the Interconnection shall
direct the independent consultant, or a replacement consultant
selected by the Office of the Interconnection, to propose a list
for a slate of nominees for any vacancies on the PJM Board for
consideration by the Members at the next regular meeting of the
Members Committee.
7.2 Qualifications.
A Board Member shall not be, and shall not have been at any
time within five years of election to the PJM Board, a director,
officer or employee of a Member or of an Affiliate or Related
Party of a Member. Except as provided in the LLC's Standards of
Conduct filed with the FERC, at any time while serving on the PJM
Board, a Board Member shall have no direct business relationship
or other affiliation with any Member or its Affiliates or Related
Parties. Of the seven Board Members, four shall have expertise
and experience in the areas of corporate leadership at the senior
management or board of directors level, or in the professional
disciplines of finance or accounting, engineering, or utility
laws and regulation. Of the other three Board Members, one shall
have expertise and experience in the operation or concerns of
transmission dependent utilities, one shall have expertise and
experience in the operation or planning of transmission systems,
and one shall have expertise and experience in the area of
commercial markets and trading and associated risk management.
7.3 Term of Office.
(a) The persons serving as the Board of Managers of the LLC
immediately prior to the Effective Date shall continue in office
until the first Annual Meeting of the Members. At the first
Annual Meeting of the Members, the then current members of the
PJM Board who desire to continue in office shall be elected by
the Members to serve until the second Annual Meeting of the
Members or until their successors are elected, along with such
additional persons as necessary to meet the composition
requirements of Section 7.1 and the qualification requirements of
Section 7.2.
(b) A Board Member shall serve for a term of three years
commencing with the Annual Meeting of the Members at which the
Board Member was elected; provided, however, that two of the
Board Members elected at the first Annual Meeting of the Members
following the Effective Date shall be chosen by lot to serve a
term of one year, three of such Board Members shall be chosen by
lot to serve a term of two years and the final two such Board
Members shall serve a term of three years.
(c) Vacancies on the PJM Board occurring between Annual
Meetings of the Members shall be filled by vote of the then
remaining Board Members; a Board Member so selected shall serve
until the next Annual Meeting at which time a person shall be
elected to serve the balance of the term of the vacant Board
Seat. Removal of a Board Member shall require the approval of
the Members Committee.
7.4 Quorum.
The presence in person or by telephone or other authorized
electronic means of a majority of the voting Board Members shall
constitute a quorum at all meetings of the PJM Board for the
transaction of business except as otherwise provided by statute.
If a quorum shall not be present, the Board Members then present
shall have the power to adjourn the meeting from time to time,
until a quorum shall be present. Provided a quorum is present at
a meeting, the PJM Board shall act by majority vote of the Board
Members present.
7.5 Operating and Capital Budgets.
7.5.1 Finance Committee.
Not later than February 1 of each year, the entities
specified below shall select the members of a Finance Committee.
The Finance Committee shall be composed of one representative of
the parties to the Reliability Assurance Agreement chosen by the
parties to that agreement, one representative of the parties to
the Transmission Owners Agreement chosen by the parties to that
agreement, two representatives of the Members Committee chosen by
the Members Committee and that are not representatives of an
entity that is a party to the Transmission Owners Agreement or an
Affiliate or Related Party of such an entity, one representative
of the Office of the Interconnection selected by the President,
and two Board Members selected by the PJM Board. The Members
Committee shall endeavor to elect members of the Finance
Committee that are broadly representative of the diversity of
interests among the Members. The Office of the Interconnection
shall prepare annual budgets in accordance with processes and
procedures established by the PJM Board, and shall timely submit
its budgets to the Finance Committee for review. The Finance
Committee shall submit its analysis of and recommendations on the
budgets to the PJM Board, with copies to the Members Committee.
The Finance Committee shall also review and comment upon any
additional or amended budgets prepared by the Office of the
Interconnection at the request of the PJM Board or the Members
Committee.
7.5.2 Adoption of Budgets.
The PJM Board shall adopt, upon consideration of the advice
and recommendations of the Finance Committee, operating and
capital budgets for the LLC, and shall distribute to the Members
for their information final annual budgets for the following
fiscal year not later than 60 days prior to the beginning of each
fiscal year of the LLC.
7.6 By-laws.
To the extent not inconsistent with any provision of this
Agreement, the PJM Board shall adopt such by-laws establishing
procedures for the implementation of this Agreement as it may
deem appropriate, including but not limited to by-laws governing
the scheduling, noticing and conduct of meetings of the PJM
Board, selection of a Chair and Vice Chair of the PJM Board,
action by the PJM Board without a meeting, and the organization
and responsibilities of standing and special committees of the
PJM Board. Such by-laws shall not modify or be inconsistent with
any of the rights or obligations established by this Agreement.
7.7 Duties and Responsibilities of the PJM Board.
In accordance with this Agreement, the PJM Board shall
supervise and oversee all matters pertaining to the
Interconnection and the LLC, and carry out such other duties as
are herein specified, including but not limited to the following
duties and responsibilities:
i) As its primary responsibility, ensure that the President,
the other officers of the LLC, and Office of the Interconnection
perform the duties and responsibilities set forth in this
Agreement, including but not limited to those set forth in
Sections 9.2 through 9.4 and Section 10.4 in a manner consistent
with (A) the safe and reliable operation of the Interconnection,
(B) the creation and operation of a robust, competitive, and non-
discriminatory electric power market in the PJM Control Area, and
(C) the principle that a Member or group of Members shall not
have undue influence over the operation of the Interconnection;
ii) Select the Officers of the LLC;
iii) Adopt budgets for the LLC;
iv) Approve the Regional Transmission Expansion Plan in
accordance with the provisions of the Regional Transmission
Expansion Planning Protocol set forth in Schedule 6 of this
Agreement.
v) On its own initiative or at the request of a User Group
as specified herein, submit to the Members Committee such
proposed amendments to this Agreement or any Schedule hereto, or
a proposed new Schedule, as it may deem appropriate;
vi) Petition FERC to modify any provision of this Agreement
or any Schedule or practice hereunder that the PJM Board believes
to be unjust, unreasonable, or unduly discriminatory under
Section 206 of the Federal Power Act, subject to the right of any
Member or the Members to intervene in any resulting proceedings;
vii) Review for consistency with the creation and operation
of a robust, competitive and non-discriminatory electric power
market in the PJM Control Area any change to rate design or to
non-rate terms and conditions proposed by Transmission Owners for
filing under Section 205 of the Federal Power Act.
viii) If and to the extent it shall deem appropriate,
intervene in any proceeding at FERC initiated by the Members in
accordance with Section 11.5(b), and participate in other state
and federal regulatory proceedings relating to the interests of
the LLC;
ix) Review, in accordance with Section 15.1.3,
determinations of the Office of the Interconnection with respect
to events of default;
x) Assess against the other Members in proportion to their
Weighted Interest an amount equal to any payment to the Office of
the Interconnection, including interest thereon, as to which a
Member is in default;
xi) Establish reasonable sanctions for failure of a Member
to comply with its obligations under this Agreement;
xii) Direct the Office of the Interconnection on behalf of
the LLC to take appropriate legal or regulatory action against a
Member (A) to recover any unpaid amounts due from the Member to
the Office of the Interconnection under this Agreement and to
make whole any Members subject to an assessment as a result of
such unpaid amount, or (B) as may otherwise be necessary to
enforce the obligations of this Agreement;
xiii) Resolve claims by a Member that the Reliability
Committee established by the Reliability Assurance Agreement has
exercised its responsibilities in a manner inconsistent with the
creation and operation of a robust, competitive and non-
discriminatory electric power market in the PJM Control Area,
upon due consideration of the views of the Member and of the
Reliability Committee, and of the need to preserve the
reliability of electric service in the PJM Control Area.
xiv) Solicit the views of Members on, and commission from
time to time as it shall deem appropriate independent reviews of,
(A) the performance of the PJM Interchange Energy Market, (B)
compliance by Market Participants with the rules and requirements
of the PJM Interchange Energy Market, and (C) the performance of
the Office of the Interconnection under performance criteria
proposed by the Members Committee and approved by the PJM
Board; and
xv) Terminate a Member as may be appropriate under the terms
of this Agreement.
8. MEMBERS COMMITTEE
8.1 Sectors.
8.1.1 Designation.
Voting on the Members Committee shall be by sectors. The
Members Committee shall be composed of five sectors, one for
Generation Owners, one for Other Suppliers, one for Transmission
Owners, one for Electric Distributors, and one for End-Use
Customers, provided that there are at least five Members in each
Sector. Except as specified in Section 8.1.2, each Voting Member
shall have one vote. Each Voting Member shall, within thirty
(30) days after the Effective Date or, if later, thirty (30) days
after becoming a Member, and thereafter not later than 10 days
prior to the Annual Meeting of the Members for each annual period
beginning with the Annual Meeting of the Members, submit to the
President a sealed notice of the sector in which it is qualified
to vote or, if qualified to participate in more than one sector,
its rank order preference of the sectors in which it wishes to
vote, and shall be assigned to its highest-ranked sector that has
the minimum number of Members specified above. If a Member is
assigned to a sector other than its highest-ranked sector in
accordance with the preceding sentence, its higher sector
preference or preferences shall be honored as soon as a higher-
ranked sector has five or more Members. A Voting Member may
designate as its voting sector any sector for which it or its
Affiliate or Related Party Members is qualified. The sector
designations of the Voting Members shall be announced by the
President at the Annual Meeting.
8.1.2 Related Parties.
The Members in a group of Related Parties shall each be
entitled to a vote, provided that all the Members in a group of
Related Parties that chooses to exercise such rights shall be
assigned to the Electric Distributor sector.
8.2 Representatives.
8.2.1 Appointment.
Each Member may appoint a representative to serve on the
Members Committee, with authority to act for that Member with
respect to actions or decisions by the Members Committee. Each
Member may appoint an alternate representative to act for that
Member at meetings of the Members Committee in the absence of the
representative. A Member participating in the PJM Interchange
Energy Market through an agent may be represented on the Members
Committee by that agent. A Member shall appoint its
representative by giving written notice identifying its
representative and alternate representative to the Office of the
Interconnection. Members that are Affiliates or Related Parties
may each appoint a representative and alternate representative to
the Members Committee, but shall vote as specified in Section
8.1.
8.2.2 Regulatory Authorities.
FERC and any other federal agency with regulatory authority
over a Member, each State electric utility regulatory commission
with regulatory jurisdiction within the PJM Control Area, and
each office of consumer advocate from each State all or any part
of the territory of which is within the PJM Control Area, may
nominate one representative to serve as an ex officio non-voting
member of the Members Committee.
8.2.3 Initial Representatives.
Initial representatives to the Members Committee shall be
appointed no later than 30 days after the Effective Date;
provided, however, that each representative to the Management
Committee under the Operating Agreement of PJM Interconnection,
L.L.C. as in effect immediately prior to the Effective Date shall
automatically become a representative to the Members Committee on
the Effective Date unless replaced as specified in Section 8.2.4.
An entity becoming a Member shall appoint a representative to the
Members Committee no later than 30 days after becoming a Member.
8.2.4 Change of or Substitution for a Representative.
Any Member may change its representative or alternate on the
Members Committee at any time by providing written notice to the
Office of the Interconnection identifying its replacement
representative or alternate. Any representative to the Members
Committee may, by written notice to the Chair, designate a
substitute representative from that Member to act for him or her
with respect to any matter specified in such notice.
8.3 Meetings.
8.3.1 Regular and Special Meetings.
The Members Committee shall hold regular meetings, no less
frequently than once each calendar quarter at such time and at
such place as shall be fixed by the Chair. The Members Committee
shall hold an Annual Meeting of the Members each calendar year at
such time and place as shall be specified by the Chair. At the
Annual Meeting of the Members, Board Members as necessary,
officers of the Members Committee, and representatives to the
Finance Committee shall be elected. The Members Committee may
hold special meetings for one or more designated purposes within
the scope of the authority of the Members Committee when called
by the Chair on the Chair's own initiative, or at the request of
five or more representatives on the Members Committee. The
notice of a regular or special meeting shall be distributed to
the representatives as specified in Section 18.13 of this
Agreement not later than seven days prior to the meeting, shall
state the time and place of the meeting, and shall include an
agenda sufficient to notify the representatives of the substance
of matters to be considered at the meeting; provided, however,
that meetings may be called on shorter notice at the discretion
of the Chair as the Chair shall deem necessary to deal with an
emergency or to meet a deadline for action.
8.3.2 Attendance.
Regular and special meetings may be conducted in person or
by telephone, or other electronic means as authorized by the
Members Committee. The attendance in person or by telephone or
other electronic means of a representative or a duly designated
substitute shall be required in order to vote.
8.3.3 Quorum.
The attendance as specified in Section 8.3.2 of a majority
of the Voting Members from each of at least three sectors that
each have at least five Members shall constitute a quorum. No
action may be taken by the Members Committee at a meeting unless
a quorum is present; provided, however, that if a quorum is not
present, the Voting Members then present shall have the power to
adjourn the meeting from time to time until a quorum shall be
present.
8.4 Manner of Acting.
(a) All matters brought up for a vote or approval by the
Members Committee shall be stated in the form of a motion, which
must be seconded. Only one motion may be pending at one
time.
b) Each Sector shall be entitled to cast one and zero one-
hundredths (1.00) Sector Votes. Each Voting Member shall be
entitled to cast one (1) non-divisible vote in its sector. In the
case of a Voting Member comprised of Affiliates or Related
Parties, any representative, alternate or substitute of any of
the Affiliated or Related Parties may cast the vote of the Voting
Member. The Sector Vote of each sector shall be split into an
affirmative component based on votes for the pending motion, and
a negative component based on votes against the pending motion,
in direct proportion to the votes cast within the sector for and
against the pending motion, rounded to two decimal places.
(c) The sum of affirmative Sector Votes necessary to pass
the pending motion shall be greater than (but not merely equal
to) the product of .667 multiplied by the number of sectors that
have at least five Members and that participated in the vote.
d) Voting Members not in attendance at the meeting as
specified in Section 8.3.2 of this Agreement or abstaining shall
not be counted as affirmative or negative votes.
8.5 Chair and Vice Chair of the Members Committee.
8.5.1 Selection and Term.
The representatives or their alternates or substitutes on
the Members Committee shall elect from among the representatives
a Chair and a Vice Chair. The offices of Chair and Vice Chair
shall be held for a term of one year and until succession to the
office occurs as specified herein. Except as specified below, at
each Annual Meeting of the Members the Vice Chair shall succeed
to the office of Chair, and a new Vice Chair shall be elected.
If the office of Chair becomes vacant, or the Chair leaves the
employment of the Member for whom the Chair is the
representative, or the Chair is no longer the representative of
such Member, the Vice Chair shall succeed to the office of Chair,
and a new Vice Chair shall be elected at the next regular or
special meeting of the Members Committee, both such officers to
serve until the second Annual Meeting of the Members following
such succession or election to a vacant office. If the office of
Vice Chair becomes vacant, or the Vice Chair leaves the
employment of the Member for whom the Vice Chair is the
representative, or the Vice Chair is no longer the representative
of such Member, a new Vice Chair shall be elected at the next
regular or special meeting of the Members Committee.
8.5.2 Duties.
The Chair shall call and preside at meetings of the Members
Committee, and shall carry out such other responsibilities as the
Members Committee shall assign. The Chair shall cause minutes of
each meeting of the Members Committee to be taken and maintained,
and shall cause notices of meetings of the Members Committee to
be distributed. The Vice Chair shall preside at meetings of the
Members Committee in the absence of the Chair, and shall
otherwise act for the Chair at the Chair's request.
8.6 Other Committees.
(a) The Members Committee may form, select the membership,
and oversee the activities, of an Operating Committee, a Planning
Committee, and an Energy Market Committee as standing committees,
and such other committees, subcommittees, task forces, working
groups or other bodies as it shall deem appropriate, to provide
advice and recommendations to the Members Committee or to the
Office of the Interconnection as directed by the Members
Committee.
(b) The Members Committee shall elect representatives to the
Alternate Dispute Resolution Committee as specified in the PJM
Dispute Resolution Procedures.
8.7 User Groups.
(a) Any five or more Members sharing a common interest may
form a User Group, and may invite such other Members to join the
User Group as the User Group shall deem appropriate.
Notification of the formation of a User Group shall be provided
to all members of the Members Committee.
(b) The Members Committee shall create a User Group composed
of representatives of bona fide public interest and environmental
organizations that are interested in the activities of the LLC
and are willing and able to participate in such a User Group.
Meetings of User Groups shall be open to all Members and the
Office of the Interconnection. Notices and agendas of meetings
of a User Group shall be provided to all Members that ask to
receive them.
(d) Any recommendation or proposal for action adopted by
affirmative vote of three-fourths or more of the members of a
User Group shall be circulated by the Office of the
Interconnection to the representatives on the Members Committee
and shall be considered by the Members Committee at its next
regular meeting occurring not earlier than 30 days after the
circulation of such notice.
(e) If the Members Committee does not adopt a recommendation
or proposal submitted to it by a User Group, upon vote of nine-
tenths or more of the members of the User Group the
recommendation or proposal may be submitted to the PJM Board for
its consideration in accordance with Section 7.7(v).
8.8 Powers of the Members Committee.
The Members Committee, acting by adoption of a motion as
specified in Section 8.4, shall have the power to take the
actions specified in this Agreement, including:
i) Elect the members of the PJM Board;
ii) In accordance with the provisions of Section 18.6 of
this Agreement, amend any portion of this Agreement, including
the Schedules hereto, or create new Schedules, and file any such
amendments or new Schedules with FERC or other regulatory body of
competent jurisdiction;
iii) Terminate this Agreement; and
iv) Provide advice and recommendations to the PJM Board and
the Office of the Interconnection.
9. OFFICERS
9.1 Election and Term.
The officers of the LLC shall consist of a President, a
Secretary and a Treasurer. The PJM Board may elect such other
officers as it deems necessary to carry out the business of the
LLC. All officers shall be elected by the PJM Board and shall
hold office until the next annual meeting of the PJM Board and
until their successors are elected. Any number of offices may be
held by the same person, except that the offices of the President
and Treasurer may not be held by the same person.
9.2 President.
The PJM Board shall appoint a President and Chief Executive
Officer of the LLC (the "President"). The President shall direct
and supervise the day-to-day operation of the LLC, and shall
report to the PJM Board. The President shall be responsible for
directing and supervising the Office of the Interconnection in
the performance of the duties and responsibilities specified in
Section 10.4. The President shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the LLC,
except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof
shall be expressly delegated by the board to some other officer
or agent of the LLC. In the absence of the President or in the
event of his or her inability or refusal to act, and if a vice
president has been appointed by the PJM Board, the Vice President
(or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the PJM Board in its
Minutes) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice President shall
perform such other duties and have such other powers as the PJM
Board may from time to time prescribe.
9.3 Secretary.
The Secretary shall attend all meetings of the PJM Board and
record all the proceedings of the meetings of the PJM Board in a
minute book to be kept for that purpose and shall perform like
duties for the standing committees or special committees when
required. He or she shall give, or cause to be given, notice of
all special meetings of the PJM Board, and shall perform such
other duties as may be prescribed by the PJM Board or President,
under whose supervision he or she shall be. He or she shall have
custody of the corporate seal of the LLC, and he or she, or an
assistant secretary, shall have authority to affix the same to
any instrument requiring it and, when so affixed, it may be
attested by his or her signature or by the signature of such
assistant secretary. The PJM Board may give general authority to
any other officer to affix the seal of the LLC and to attest the
affixing by his or her signature.
9.4 Treasurer.
The Treasurer shall have or arrange for the custody of the
LLC's funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belongings to the
LLC and shall deposit all moneys and other valuable effects in
the name and to the credit of the LLC in such depositories as may
be designated by the PJM Board. The Treasurer shall disburse the
funds of the LLC as may be ordered by the PJM Board, taking
proper vouchers for such disbursements, and shall render to the
President and PJM Board at its regular meetings, or when the PJM
Board so requires, an account of his or her transactions as
Treasurer and of the financial condition of the LLC. If required
by the Board, the Treasurer shall give the LLC a bond (which
shall be renewed periodically) in such sum and with such surety
or sureties as shall be satisfactory to the PJM Board for the
faithful performance of the duties of his office and of the
restoration to the LLC, in case of his or her death, resignation,
retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the LLC.
9.5 Renewal of Officers; Vacancies.
Any officer elected or appointed by the PJM Board may be
removed at any time by the affirmative vote of a majority of the
PJM Board eligible to vote. Any vacancy occurring in any office
of the LLC shall be filled by the PJM Board.
9.6 Compensation.
The salaries of all officers and agents of the LLC, and the
reasonable compensation of the PJM Board, shall be fixed by the
PJM Board.
10. OFFICE OF THE INTERCONNECTION.
10.1 Establishment.
The Office of the Interconnection shall implement this
Agreement, administer the PJM Tariff, and undertake such other
responsibilities as set forth herein. All personnel of the
Office of the Interconnection shall be employees of the LLC or
under contract thereto. The cost of the Office of the
Interconnection and expenses associated therewith, including
salaries and expenses of said personnel, space and any necessary
facilities or other capital expenditures, shall be recovered in
accordance with Schedule 3. The Office of the Interconnection
shall adopt, publish and comply with standards of conduct that
satisfy the regulations of FERC.
10.2 Processes and Organization.
In order to carry out the responsibilities of the Office of
the Interconnection for the safe and reliable operation of the
Interconnection, the President may establish processes and
organization for operating personnel and facilities as the
President shall deem appropriate, and shall request such Members
as the President shall deem appropriate to participate in such
processes and organization. All such processes and organization
shall be carried out in accordance with all applicable code of
conduct or other functional separation requirements of FERC.
10.3 Confidential Information.
The Office of the Interconnection shall comply with the
requirements of Section 18.17 with respect to any proprietary or
confidential information received from or about any Member.
10.4 Duties and Responsibilities.
The Office of the Interconnection, under the direction of
the President as supervised and overseen by the PJM Board, shall
carry out the following duties and responsibilities, in
accordance with the provisions of this Agreement:
i) Administer and implement this Agreement;
ii) Perform such functions in furtherance of this Agreement
as the PJM Board, acting within the scope of its duties and
responsibilities under this Agreement, may direct;
iii) Prepare, maintain, update and disseminate the PJM
Manuals;
iv) Comply with MAAC and NERC operation and planning
standards, principles and guidelines;
v) Maintain an appropriately trained workforce, and such
equipment and facilities, including computer hardware and
software and backup power supplies, as necessary or appropriate
to implement or administer this Agreement;
vi) Direct the operation and coordinate the maintenance of
the facilities of the Interconnection used for both load and
reactive supply, so as to maintain reliability of service and
obtain the benefits of pooling and interchange consistent with
this Agreement and the Reliability Assurance Agreement;
vii) Direct the operation and coordinate the maintenance of
the bulk power supply facilities of the Interconnection with such
facilities and systems of others not party to this Agreement in
accordance with agreements between the LLC and such other systems
to secure reliability and continuity of service and other
advantages of pooling on a regional basis;
viii) Perform interchange accounting and maintain records
pertaining to the operation of the PJM Interchange Energy Market
and the Interconnection;
ix) Notify the Members of the receipt of any application to
become a Member, and of the action of the Office of the
Interconnection on such application, including but not limited to
the completion of integration of a new Member's system into the
PJM Control Area as specified in Section 11.6(f);
x) Calculate the Weighted Interest of each Member;
xi) Maintain accurate records of the sectors in which each
Voting Member is entitled to vote, and calculate the results of
any vote taken in the Members Committee;
xii) Furnish appropriate information and reports as are
required to keep the Members regularly informed of the outlook
for, the functioning of, and results achieved by the
Interconnection;
xiii) File with FERC on behalf of the Members any amendments
to this Agreement or the Schedules hereto, any new Schedules
hereto, and make any other regulatory filings on behalf of the
Members or the LLC necessary to implement this Agreement;
xiv) At the direction of the PJM Board, submit comments to
regulatory authorities on matters pertinent to the
Interconnection;
xv) Consult with the standing or other committees
established pursuant to Section 8.6(a) on matters within the
responsibility of the committee;
xvi) Perform operating studies of the bulk power supply
facilities of the Interconnection and make such recommendations
and initiate such actions as may be necessary to maintain
reliable operation of the Interconnection;
xvii) Accept, on behalf of the Members, notices served under
this Agreement;
xviii) Perform those functions and undertake those
responsibilities transferred to it under the Transmission Owners
Agreement, including (A) direct the operation of the transmission
facilities of the parties to the Transmission Owners Agreement,
(B) administer the PJM Tariff, and (C) administer the Regional
Transmission Expansion Planning Protocol set forth as Schedule 6
to this Agreement.
xix) Perform those functions and undertake those
responsibilities transferred to it under the Reliability
Assurance Agreement, as specified in Schedule 8 of this
Agreement.
xx) Monitor the operation of the PJM Control Area, ensure
that appropriate Emergency plans are in place and appropriate
Emergency drills are conducted, declare the existence of an
Emergency, and direct the operations of the Members as necessary
to manage, alleviate or end an Emergency;
xxi) Incorporate the grid reliability requirements
applicable to nuclear generating units in the PJM Control Area
planning and operating principles and practices; and
xxii) Initiate such legal or regulatory proceedings as
directed by the PJM Board to enforce the obligations of this
Agreement.
11. MEMBERS
11.1 Management Rights.
The Members or any of them shall not take part in the
management of the business of, and shall not transact any
business for, the LLC in their capacity as Members, nor shall
they have power to sign for or to bind the LLC.
11.2 Other Activities.
Except as otherwise expressly provided herein, any Member
may engage in or possess any interest in another business or
venture of any nature and description, independently or with
others, even if such activities compete directly with the
business of the LLC, and neither the LLC nor any Member hereof
shall have any rights in or to any such independent ventures or
the income or profits derived therefrom.
11.3 Member Responsibilities.
11.3.1 General.
To facilitate and provide for the work of the Office of the
Interconnection and of the several committees appointed by the
Members Committee, each Member shall, to the extent applicable;
(a) Maintain adequate records and, subject to the provisions
of this Agreement for the protection of the confidentiality of
proprietary or commercially sensitive information, provide data
required for (i) coordination of operations, (ii) accounting for
all interchange transactions, (iii) preparation of required
reports, (iv) coordination of planning, including those data
required for capacity accounting, (v) preparation of maintenance
schedules, (vi) analysis of system disturbances, and (vii) such
other purposes, including those set forth in Schedule 2, as will
contribute to the reliable and economic operation of the
Interconnection;
(b) Provide such recording, telemetering, communication and
control facilities as are required for the coordination of its
operations with the Office of the Interconnection and those of
the other Members and to enable the Office of the Interconnection
to operate the PJM Control Area and otherwise implement and
administer this Agreement, including equipment required in normal
and Emergency operations and for the recording and analysis of
system disturbances;
(c) Provide adequate and properly trained personnel to (i)
permit participation in the coordinated operation of the
Interconnection, (ii) meet its obligation on a timely basis for
supply of records and data, (iii) serve on committees and
participate in their investigations, and (iv) share in the
representation of the Interconnection in inter-regional and
national reliability activities;
(d) Share in the costs of committee activities and
investigations (including costs of consultants, computer time and
other appropriate items), communication facilities used by all
the Members (in addition to those provided in the Office of the
Interconnection), and such other expenses as are approved for
payment by the PJM Board, such costs to be recovered as provided
in Schedule 3;
(e) Comply with the requirements of the PJM Manuals and all
directives of the Office of the Interconnection to take any
action for the purpose of managing, alleviating or ending an
Emergency, and authorize the Office of the Interconnection to
direct the transfer or interruption of the delivery of energy on
their behalf to meet an Emergency and to implement agreements
with other Control Areas interconnected with the PJM Control Area
for the mutual provision of service to meet an Emergency, and be
subject to the emergency procedure charges specified in Schedule
9 of this Agreement for any failure to follow the Emergency
instructions of the Office of the Interconnection.
11.3.2 Facilities Planning and Operation.
Consistent with and subject to the requirements of this
Agreement, the PJM Tariff, the MAAC Agreement, the Reliability
Assurance Agreement, the Transmission Owners Agreement, and the
PJM Manuals, each Member shall cooperate with the other Members
in the coordinated planning and operation of the facilities of
its System within the PJM Control Area so as to obtain the
greatest practicable degree of reliability, compatible economy
and other advantages from such coordinated planning and
operation. In furtherance of such cooperation each Member shall,
as applicable:
(a) Consult with the other Members and the Office of the
Interconnection, and coordinate the installation of its electric
generation and Transmission Facilities with those of such other
Members so as to maintain reliable service in the PJM Control
Area;
(b) Coordinate with the other Members, the Office of the
Interconnection and with others in the planning and operation of
the regional facilities to secure a high level of reliability and
continuity of service and other advantages;
(c) Cooperate with the other Members and the Office of the
Interconnection in the implementation of all policies and
procedures established pursuant to this Agreement for dealing
with Emergencies, including but not limited to policies and
procedures for maintaining or arranging for a portion of a
Member's Capacity Resources at least equal to the level
established pursuant to the Reliability Assurance Agreement to
have the ability to go from a shutdown condition to an operating
condition and start delivering power without assistance from the
power system;
(d) Cooperate with the members of MAAC to augment the
reliability of the bulk power supply facilities of the region and
comply with MAAC and NERC operating and planning standards,
principles and guidelines and the PJM Manuals;
(e) Obtain or arrange for transmission service as
appropriate to carry out this Agreement;
(f) Cooperate with the Office of the Interconnection's
coordination of the operating and maintenance schedules of the
Member's generating and Transmission Facilities with the
facilities of other Members to maintain reliable service to its
own customers and those of the other Members and to obtain
economic efficiencies consistent therewith;
(g) Cooperate with the other Members and the Office of the
Interconnection in the analysis, formulation and implementation
of plans to prevent or eliminate conditions that impair the
reliability of the Interconnection; and
(h) Adopt and apply standards adopted pursuant to this
Agreement and conforming to MAAC and NERC standards, principles
and guidelines and the PJM Manuals, for system design, equipment
ratings, operating practices and maintenance practices.
11.3.3 Electric Distributors.
In addition to any of the foregoing responsibilities that
may be applicable, each Member that is an Electric Distributor,
whether or not that Member votes in the Members Committee in the
Electric Distributor sector or meets the eligibility requirements
for any other sector of the Members Committee, shall:
(a) Accept, comply with or be compatible with all standards
applicable within the PJM Control Area with respect to system
design, equipment ratings, operating practices and maintenance
practices as set forth in the PJM Manuals, or be subject to an
interconnected Member's requirements relating to the foregoing,
so that sufficient electrical equipment, control capability,
information and communication are available to the Office of the
Interconnection for planning and operation of the PJM Control
Area;
(b) Assure the continued compatibility of its local system
energy management system monitoring and telecommunications
systems to satisfy the technical requirements of interacting
automatically or manually with the Office of the Interconnection
as it directs the operation of the PJM Control Area;
(c) Maintain or arrange for a portion of its connected load
to be subject to control by automatic underfrequency, under-
voltage, or other load-shedding devices at least equal to the
levels established pursuant to the Reliability Assurance
Agreement, or be subject to another Member's control for these
purposes;
(d) Provide or arrange for sufficient reactive capability
and voltage control facilities to conform to Good Utility
Practice and (i) to meet the reactive requirements of its system
and customers and (ii) to maintain adequate voltage levels and
the stability required by the bulk power supply facilities of the
Interconnection;
(e) Shed connected load, share Capacity Resources, initiate
active load management programs, and take such other coordination
actions as may be necessary in accordance with the directions of
the Office of the Interconnection in Emergencies;
(f) Maintain or arrange for a portion of its Capacity
Resources at least equal to the level established pursuant to the
Reliability Assurance Agreement to have the ability to go from a
shutdown condition to an operating condition and start delivering
power without assistance from the power system;
(g) Provide or arrange through another Member for the
services of a 24-hour local control center to coordinate with the
Office of the Interconnection, each such control center to be
furnished with appropriate telemetry equipment as specified in
the PJM Manuals, and to be staffed by system operators trained
and delegated sufficient authority to take any action necessary
to assure that the system for which the operator is responsible
is operated in a stable and reliable manner;
(h) Provide to the Office of the Interconnection all System,
accounting, customer tracking, load forecasting and other data
necessary or appropriate to implement or administer this
Agreement or the Reliability Assurance Agreement; and
(i) Comply with the underfrequency relay obligations and
charges specified in Schedule 7 of this Agreement.
11.3.4 Reports to the Office of the Interconnection.
Each Member shall report as promptly as possible to the
Office of the Interconnection any changes in its operating
practices and procedures relating to the reliability of the bulk
power supply facilities of the Interconnection. The Office of the
Interconnection shall review such reports, and if any change in
an operating practice or procedure of the Member is not in accord
with the established operating principles, practices and
procedures for the Interconnection and such change adversely
affects the Interconnection and regional reliability, it shall so
inform such Member, and the other Members through their
representative on the Operating Committee, and shall direct that
such change be modified to conform to the established operating
principles, practices and procedures.
11.4 Regional Transmission Expansion Planning Protocol.
The Members shall participate in regional transmission
expansion planning in accordance with the Regional Transmission
Expansion Planning Protocol set forth in Schedule 6 to this
Agreement.
11.5 Member Right to Petition.
(a) Nothing herein shall deprive any Member of the right to
petition FERC to modify any provision of this Agreement or any
Schedule or practice hereunder that the petitioning Member
believes to be unjust, unreasonable, or unduly discriminatory
under Section 206 of the Federal Power Act, subject to the right
of any other Member (a) to oppose said proposal, or (b) to
withdraw from the LLC pursuant to Section 4.1.
(b) Nothing herein shall be construed as affecting in any
way the right of the Members, acting pursuant to a vote of the
Members Committee as specified in Section 8.4, unilaterally to
make an application to FERC for a change in any rate, charge,
classification, tariff or service, or any rule or regulation
related thereto, under section 205 of the Federal Power Act and
pursuant to the rules and regulations promulgated by FERC
thereunder, subject to the right of any Member that voted against
such change in any rate, charge, classification, tariff or
service, or any rule or regulation related thereto, in intervene
in opposition to any such application.
(c) Nothing in this Agreement shall preclude those Members
joining in the proposal to utilize Locational Marginal Prices to
deal with transmission congestion from (i) filing amendments to
the Agreement necessary to implement the use of Locational
Marginal Prices in the PJM Control Area in accordance with such
orders or other directives as may be issued by FERC relating
thereto, or (ii) implementing the provisions of Sections 1.7.21
and 5.2.2(d) of Schedule 1 to this Agreement, without further
authorization or approval by the Members Committee.
11.6 Membership Requirements.
(a) To qualify as a Member, an entity shall:
i) Be a Transmission Owner within the PJM Control Area
or an Eligible Customer under the PJM Tariff;
ii) If not a Transmission Owner, be a Generation Owner,
an Other Supplier, an Electric Distributor, or an End-Use
Consumer;
iii) Be engaged in buying, selling or transmitting
electric energy in or through the Interconnection or have a good
faith intent to do so; and
iv) Accept the obligations set forth in this Agreement.
(b) Certain Members that are Load Serving Entities are
parties to the Reliability Assurance Agreement. Upon becoming a
Member, any entity that is a Load Serving Entity and that wishes
to become a Market Buyer shall also simultaneously execute the
Reliability Assurance Agreement.
(c) An entity that wishes to become a party to this
Agreement shall apply, in writing, to the President setting forth
its request, its qualifications for membership, its agreement to
supply data as specified in this Agreement, its agreement to pay
all costs and expenses in accordance with Schedule 3, and
providing all information specified pursuant to the Schedules to
this Agreement for entities that wish to become Market
Participants. Any such application that meets all applicable
requirements shall be approved by the President within sixty (60)
days.
(d) Nothing in this Section 11 is intended to remove, in any
respect, the choice of participation by other utility companies
or organizations in the operation of the Interconnection through
inclusion in the System of a Member.
(e) An entity whose application is accepted by the President
pursuant to Section 11.6(c) shall execute a supplement to this
Agreement in substantially the form prescribed in Schedule 4,
which supplement shall be countersigned by the President and
tendered for filing with FERC by the President. The entity shall
become a Member effective on the date specified by FERC when
accepting the supplement for filing.
(f) Entities whose applications contemplate expansion or
rearrangement of the PJM Control Area may become Members promptly
as described in Sections 11.6(c) and 11.6(e) above, but the
integration of the applicant's system into all of the operation
and accounting provisions of this Agreement and the Reliability
Assurance Agreement shall occur only after completion of all
required installations and modifications of metering,
communications, computer programming, and other necessary and
appropriate facilities and procedures, as determined by the
Office of the Interconnection. The Office of the Interconnection
shall notify the other Members when such integration has
occurred.
12. TRANSFERS OF MEMBERSHIP INTEREST
The rights and obligations created by this Agreement shall
inure to and bind the successors and assigns of such Member;
provided, however, that the rights and obligations of any Member
hereunder shall not be assigned without the approval of the
Members Committee except as to a successor in operation of a
Member's electric operating properties by reason of a merger,
consolidation, reorganization, sale, spinoff, or foreclosure, as
a result of which substantially all such electric operating
properties are acquired by such a successor, and such successor
becomes a Member.
13. INTERCHANGE
13.1 Interchange Arrangements with Non-Members.
Any Member may enter into interchange arrangements with
others who are not Members with respect to the delivery or
receipt of capacity and energy to fulfill its obligations
hereunder or for any other purpose, subject to the standards and
requirements established in or pursuant to this Agreement.
13.2 Energy Market.
The Office of the Interconnection shall administer an
efficient energy market within the Interconnection, to be known
as the PJM Interchange Energy Market, in which Members may buy
and sell energy. The Office of the Interconnection will schedule
in advance and dispatch generation on the basis of least-cost,
security-constrained dispatch and the prices and operating
characteristics offered by sellers within and into the
Interconnection, continuing until sufficient generation is
dispatched to serve the energy purchase requirements of the
Interconnection and buyers out of the Interconnection, as well as
the requirements of the Interconnection for ancillary services
provided by such generation. Scheduling and dispatch shall be
conducted in accordance with applicable schedules to the PJM
Tariff and the Schedules to this Agreement.
14. METERING
14.1 Installation, Maintenance and Reading of Meters.
The quantities of electric energy involved in determination
of the amounts of the billing rendered hereunder shall be
ascertained by means of meters installed, maintained and read
either at the expense of the party on whose premises the meters
are located or as otherwise provided for by agreement between the
parties concerned.
14.2 Metering Procedures.
Procedures with respect to maintenance, testing,
calibrating, correction and registration records, and precision
tolerance of all metering equipment shall be in accordance with
Good Utility Practice. The expense of testing any meter shall be
borne by the party owning such meter, except that when a meter
tested upon request of another party is found to register within
the established tolerance the party making the request shall bear
the expense of such test.
14.3 Integrated Megawatt-Hours
All metering of energy required herein shall be the
integration of megawatt hours in the clock hour, and the
quantities thus obtained shall constitute the megawatt load for
such clock hour; provided, however, that adjustment shall be made
for other contractual obligations of any Member as may be
required to determine the quantity to be accounted for hereunder,
and for transmission losses.
14.4 Meter Locations.
The meter locations to be used by the Members in determining
their energy transactions on the Interconnection shall be as
reasonably determined from time to time by the Member or the
Office of the Interconnection.
15. ENFORCEMENT OF OBLIGATIONS
15.1 Failure to Meet Obligations.
15.1.1 Termination of Market Buyer Rights.
The Office of the Interconnection shall terminate a Market
Buyer's right to make purchases from the PJM Interchange Energy
Market if it determines that the Market Buyer does not continue
to meet the obligations set forth in this Agreement, provided
that the Office of the Interconnection has notified the Market
Buyer of any such deficiency and afforded the Market Buyer a
reasonable opportunity to cure it. The Office of the
Interconnection shall reinstate a Market Buyer's right to make
purchases from the PJM Interchange Energy Market upon
demonstration by the Market Buyer that it has come into
compliance with the obligations set forth in this Agreement.
15.1.2 Termination of Market Seller Rights.
The Office of the Interconnection shall not accept offers
from a Market Seller that has not complied with the prices,
terms, or operating characteristics of any of its prior scheduled
transactions in the PJM Interchange Energy Market, unless such
Market Seller has taken appropriate measures to the satisfaction
of the Office of the Interconnection to ensure future
compliance.
15.1.3 Payment of Bills.
(a) A Member shall make full and timely payment, in
accordance with the terms specified by the Office of the
Interconnection, of all bills rendered in connection with
transactions in the PJM Interchange Energy Market or other
services performed by the Office of the Interconnection,
notwithstanding any disputed amount, but any such payment shall
not be deemed a waiver of any right with respect to such dispute.
Any Member that fails to make such payment, or otherwise fails to
meet its financial or other obligations to a Member, the Office
of the Interconnection or the LLC under this Agreement, shall
upon expiration of the 30 day period specified below be in
default. If the Office of the Interconnection concludes, upon its
own initiative or the recommendation of or complaint by the
Members Committee or any Member, that a Member is in breach of
any obligation under this Agreement, the Office of the
Interconnection shall so notify such Member and inform all other
Members. The notified Member may remedy such asserted breach by:
(i) paying all amounts assertedly due, along with interest on
such amounts calculated in accordance with the methodology
specified for interest on refunds in FERC's regulations at 18
C.F.R. Section 35.19a(a)(2)(iii); and (ii) demonstration to the
satisfaction of the Office of the Interconnection that the Member
has taken appropriate measures to meet any other obligation of
which it was deemed to be in breach; provided, however, that any
such payment or demonstration may be subject to a reservation of
rights, if any, to subject such matter to the PJM Dispute
Resolution Procedures; and provided, further, that any such
determination by the Office of the Interconnection may be subject
to review by the PJM Board upon request of the Member involved or
the Office of the Interconnection. If a Member has not remedied
a breach by the 30th day following receipt of the Office of the
Interconnection's notice, or receipt of the PJM Board's decision
on review, if applicable, then the Member shall be in default
and, in addition to such other remedies as may be available to
the LLC:
i) A defaulting Market Participant shall be precluded from
buying or selling energy in the PJM Interchange Energy Market
until the default is remedied as set forth above.
ii) A defaulting Member shall not be entitled to participate
in the activities of any committee or other body established by
the Members Committee or the Office of the Interconnection.
iii) A defaulting Member shall not be entitled to vote on
the Members Committee or any other committee or other body
established pursuant to this Agreement.
15.2 Enforcement of Obligations.
If the Office of the Interconnection sends a notice to the
PJM Board that a Member has failed to perform an obligation under
this Agreement, the PJM Board shall initiate such action against
such Member to enforce such obligation as the PJM Board shall
deem appropriate. Subject to the procedures specified in Section
15.1, a Member's failure to perform such obligation shall be
deemed to be a default under this Agreement. In order to remedy
a default, but without limiting any rights the LLC may have
against the defaulting Member, the PJM Board may assess against,
and collect from, the Members not in default, in proportion to
their Weighted Interest, an amount equal to the amount that the
defaulting Member has failed to pay to the Office of the
Interconnection, along with appropriate interest, but such
assessment shall in no way relieve the defaulting Member of its
obligations, and shall confer upon the Members Committee the
right to recover the assessed amounts from the defaulting Member.
In addition to any amounts in default, the defaulting Member
shall be liable to the LCC for reasonable costs incurred in
enforcing the defaulting Member's obligations.
15.3 Obligations to a Member in Default.
The Members have no continuing obligation to provide the
benefits of interconnected operations to a Member in default.
15.4 Obligations of a Member in Default.
A Member found to be in default shall take all possible
measures to mitigate the continued impact of the default on the
Members not in default, including, but not limited to, loading
its own generation to supply its own load to the maximum extent
possible.
15.5 No Implied Waiver.
A failure of a Member, the PJM Board, or the LLC to insist
upon or enforce strict performance of any of the provisions of
this Agreement shall not be construed as a waiver or
relinquishment to any extent of such entity's right to assert or
rely upon any such provisions, rights and remedies in that or any
other instance; rather, the same shall be and remain in full
force and effect.
16. LIABILITY AND INDEMNITY
16.1 Members.
(a) As between the Members, except as may be otherwise
agreed upon between individual Members with respect to specified
interconnections, each Member will indemnify and hold harmless
each of the other Members, and its directors, officers,
employees, agents, or representatives, of and from any and all
damages, losses, claims, demands, suits, recoveries, costs and
expenses (including all court costs and reasonable attorneys'
fees), caused by reason of bodily injury, death or damage to
property of any third party, resulting from or attributable to
the fault, negligence or willful misconduct of such Member, its
directors, officers, employees, agents, or representatives, or
resulting from, arising out of, or in any way connected with the
performance of its obligations under this Agreement, excepting
only, and to the extent, such cost, expense, damage, liability or
loss may be caused by the fault, negligence or willful misconduct
of any other Member. The duty to indemnify under this Agreement
will continue in full force and effect notwithstanding the
expiration or termination of this Agreement or the withdrawal of
a Member from this Agreement, with respect to any loss,
liability, damage or other expense based on facts or conditions
which occurred prior to such termination or withdrawal.
(b) The amount of any indemnity payment arising hereunder
shall be reduced (including, without limitation, retroactively)
by any insurance proceeds or other amounts actually recovered by
the Member seeking indemnification in respect of the indemnified
action, claim, demand, costs, damage or liability. If any Member
shall have received an indemnity payment for an action, claim,
demand, cost, damage or liability and shall subsequently actually
receive insurance proceeds or other amounts for such action,
claim, demand, cost, damage or liability, then such Member shall
pay to the Member that made such indemnity payment the lesser of
the amount of such insurance proceeds or other amounts actually
received and retained or the net amount of the indemnity payments
actually received previously.
16.2 LLC Indemnified Parties.
(a) The LLC will indemnify and hold harmless the PJM Board,
the LLC's officers, employees and agents, and any representatives
of the Members serving on the Members Committee and any other
committee created under Section 8 of this Agreement (all such
Board Members, officers, employees, agents and representatives
for purposes of this Section 160 being referred to as "LLC
Indemnified Parties"), of and from any and all actions, claims,
demands, costs (including consequential or indirect damages,
economic losses and all court costs and reasonable attorneys'
fees) and liabilities to any third parties, arising from, or in
any way connected with, the performance of the LLC under this
Agreement, or the fact that such LLC Indemnified Party was
serving in such capacity, except to the extent that such action,
claim, demand, cost or liability results from the willful
misconduct of any LLC Indemnified Party with respect to
participation in the misconduct. To the extent any dispute
arises between any Member and the LLC arising from, or in any way
connected with, the performance of the LLC under this Agreement,
the Member and the LLC shall follow the PJM Dispute Resolution
Procedures. To the extent that any such action, claim, demand,
cost or liability arises from a Member's contractual or other
obligation to provide electric service directly or indirectly to
said third party, which obligation to provide service is limited
by the terms of any tariff, service agreement, franchise,
statute, regulatory requirement, court decision or other limiting
provision, the Member designates the LLC and each LLC Indemnified
Party a beneficiary of said limitation.
(b) An LLC Indemnified Party shall not be personally liable
for monetary damages for any breach of fiduciary duty by such LLC
Indemnified Party, except that an LLC Indemnified Party shall be
liable to the extent provided by applicable law (i) for acts or
omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, or (ii) for any
transaction from which the LLC Indemnified Party derived an
improper personal benefit. Notwithstanding (i) and (ii),
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the LLC if and to the extent that the court in which
such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such
court shall deem proper. If applicable law is hereafter
construed or amended to authorize the further elimination or
limitation of the liability of LLC Indemnified Parties, then the
liability of the LLC Indemnified Parties, in addition to the
limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by law. No amendment to
or repeal of this section shall apply to or have any effect on
the liability or alleged liability of any LLC Indemnified Party
or with respect to any acts or omissions occurring prior to such
amendment or repeal. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the LLC, and with respect to
any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
(c) The LLC may pay expenses incurred by an LLC Indemnified
Party in defending a civil, criminal, administrative or
investigative action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such LLC Indemnified Party to
repay such amount if it shall ultimately be determined that such
LLC Indemnified Party is not entitled to be indemnified by the
LLC as authorized in this Section.
(d) In the event the LLC incurs liability under this Section
16.2 that is not adequately covered by insurance, such amounts
shall be recovered pursuant to the PJM Tariff as provided in
Schedule 3 of this Agreement.
16.3 Worker' Compensation Claims.
Each Member shall be solely responsible for all claims of
its own employees, agents and servants growing out of any
Worker's Compensation Law.
16.4 Limitation of Liability.
No Member or its directors, officers, employees, agents, or
representatives shall be liable to any other Member or its
directors, officers, employees, agents, or representatives,
whether liability arises out of contract, tort (including
negligence), strict liability, or any other cause of or form of
action whatsoever, for any indirect, incidental, consequential,
special or punitive cost, expense, damage or loss, including but
not limited to loss of profits or revenues, cost of capital of
financing, loss of goodwill or cost of replacement power, arising
from such Member's performance or failure to perform any of its
obligations under this Agreement or the ownership, maintenance or
operation of its System; provided, however, that nothing herein
shall be deemed to reduce or limit the obligations of any Member
with respect to the claims of persons or entities that are not
parties to this Agreement.
16.5 Resolution of Disputes.
To the extent any dispute arises between one or more Members
regarding any issue covered by this Agreement, the Members shall
follow the dispute resolution procedures set forth in the PJM
Dispute Resolution Procedures.
16.6 Gross Negligence or Willful Misconduct.
Neither the LLC nor the LLC Indemnified Parties shall be
liable to the Members or any of them for any claims, demands or
costs arising from, or in any way connected with, the performance
of the LLC under this Agreement other than actions, claims or
demands based on gross negligence or willful misconduct;
provided, however, that nothing herein shall limit or reduce the
obligations of the LLC to the Members or any of them under the
express terms of this Agreement or the PJM Tariff, including, but
not limited to, those set forth in Sections 6.2 and 6.3 of this
Agreement.
16.7 Insurance.
The PJM Board shall be authorized to procure insurance
against the risks borne by the LLC and the LLC Indemnified
Parties, the cost of which shall be treated as a cost and expense
of the LLC.
17. MEMBER REPRESENTATIONS, WARRANTIES AND COVENANTS
17.1 Representations and Warranties.
Each Member makes the following representations and
warranties to the LLC and each other Member, as of the Effective
Date or such later date as such Member shall become admitted as a
Member of the LLC.
17.1.1 Organization and Existence.
Such Member is an entity duly organized, validly existing
and in good standing under the laws of the state of its
organization.
17.1.2 Power and Authority.
Such Member has the full power and authority to execute,
deliver and perform this Agreement and to carry out the
transactions contemplated hereby.
17.1.3 Authorization and Enforceability.
The execution and delivery of this Agreement by such Member
and the performance of its obligations hereunder have been duly
authorized by all requisite action on the part of the Member, and
do not conflict with any applicable law or with any other
agreement binding upon the Member. The Agreement has been duly
executed and delivered by such Member and constitutes the legal,
valid and binding obligation of such Member, enforceable against
it in accordance with the terms thereof, except insofar as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally, and to general principles of equity whether such
principles are considered in proceedings in law or in equity.
17.1.4 No Government Consents.
No authorization, consent, approval or order of, notice to
or registration, qualification, declaration or filing with, any
governmental authority is required for the execution, delivery
and performance by such Member of this Agreement or the carrying
out by such Member of the transactions contemplated hereby other
than such authorization, consent, approval or order of, notice to
or registration, qualification, declaration or filing that is
pending before such governmental authority.
17.1.5 No Conflict or Breach.
None of the execution, delivery and performance by such
Member of this Agreement, the compliance with the terms and
provisions hereof and the carrying out of the transactions
contemplated hereby, conflicts or will conflict with or will
result in a breach or violation of any of the terms, conditions
or provisions of any law, governmental rule or regulation or the
charter documents or bylaws of such Member or any applicable
order, writ, injunction, judgment or decree of any court or
governmental authority against such Member or by which it or any
of its properties, is bound, or any loan agreement, indenture,
mortgage, bond, note, resolution, contract or other agreement or
instrument to which such Member is a party or by which it or any
of its properties is bound, or constitutes or will constitute a
default thereunder or will result in the imposition of any lien
upon any of its properties.
17.1.6 No Proceedings.
There are no actions at law, suits in equity, proceedings or
claims pending or, to the knowledge of the Member, threatened
against the Member before any federal, state, foreign or local
court, tribunal or government agency or authority that might
materially delay, prevent or hinder the performance by the Member
of its obligations hereunder.
17.2 Municipal Electric Systems.
Any provisions of Section 17.1 notwithstanding, if any
Member that is a municipal electric system believes in good faith
that the provisions of Sections 5.1(b) and 16.1 of this Agreement
may not lawfully be applied to that Member under applicable state
law governing municipal activities, the Member may request a
waiver of the pertinent provisions of the Agreement. Any such
request for waiver shall be supported by an opinion of counsel
for the Member to the effect that the provision of the Agreement
as to which waiver is sought may not lawfully be applied to the
Member under applicable state law. The PJM Board shall have the
right to have the opinion of the Member's counsel reviewed by
counsel to the LLC. If the PJM Board concludes that either or
both of Sections 5.1(b) and 16.1 of this Agreement may not
lawfully be applied to a municipal electric system Member, it
shall waive the application of the affected provision or
provisions to such municipal Member. Any Member not permitted by
law to indemnify the other Members shall not be indemnified by
the other Members.
17.3 Survival.
All representations and warranties contained in this Section
17 shall survive the execution and delivery of this Agreement.
18. MISCELLANEOUS PROVISIONS
18.1 [Reserved.]
18.2 Fiscal and Taxable Year.
The fiscal year and taxable year of the LLC shall be the
calendar year.
18.3 Reports.
Each year prior to the Annual Meeting of the Members, the
PJM Board shall cause to be prepared and distributed to the
Members a report of the LLC's activities since the prior report.
18.4 Bank Accounts; Checks, Notes and Drafts.
(a) Funds of the LLC shall be deposited in an account or
accounts of a type, in form and name and in a bank(s) or other
financial institution(s) which are participants in federal
insurance programs as selected by the PJM Board. The PJM Board
shall arrange for the appropriate conduct of such accounts.
Funds may be withdrawn from such accounts only for bona fide and
legitimate LLC purposes and may from time to time be invested in
such short-term securities, money market funds, certificates of
deposit or other liquid assets as the PJM Board deems
appropriate. All checks or demands for money and notes of the
LLC shall be signed by any officer or by any other person
designated by the PJM Board.
(b) The Members acknowledge that the PJM Board may maintain
LLC funds in accounts, money market funds, certificates of
deposit, other liquid assets in excess of the insurance provided
by the Federal Deposit Insurance Corporation, or other depository
insurance institutions and that the PJM Board shall not be
accountable or liable for any loss of such funds resulting from
failure or insolvency of the depository institution.
(c) Checks, notes, drafts and other orders for the payment
of money shall be signed by such persons as the PJM Board from
time to time may authorize. When the PJM Board so authorizes, the
signature of any such person may be a facsimile.
18.5 Books and Records.
(a) At all times during the term of the LLC, the PJM Board
shall keep, or cause to be kept, full and accurate books of
account, records and supporting documents, which shall reflect,
completely, accurately and in reasonable detail, each transaction
of the LLC. The books of account shall be maintained and tax
returns prepared and filed on the method of accounting determined
by the PJM Board. The books of account, records and all
documents and other writings of the LLC shall be kept and
maintained at the principal office of the Interconnection.
(b) The PJM Board shall cause the Office of the
Interconnection to keep at its principal office the following:
i) A current list in alphabetical order of the full name and
last known business address of each Member, the Weighted Interest
of each Member, and the Members Committee sector of each Voting
Member;
ii) A copy of the Certificate of Formation and the
Certificate of Conversion, and all Certificates of Amendment
thereto;
iii) Copies of the LLC's federal, state, and local income
tax returns and reports, if any, for the three most recent years;
and
iv) Copies of the Operating Agreement, as amended, and of
any financial statements of the LLC for the three most recent
years.
18.6 Amendment.
(a) Except as provided by law or otherwise set forth herein,
this Agreement, including any Schedule hereto, may be amended, or
a new Schedule may be created, only upon: (i) submission of the
proposed amendment to the PJM Board for its review and comments;
(ii) approval of the amendment or new Schedule by the Members
Committee, after consideration of the comments of the PJM Board,
in accordance with Section 8.4, or written agreement to an
amendment of all Members not in default at the time the amendment
is agreed upon; and (iii) approval and/or acceptance for filing
of the amendment by FERC and any other regulatory body with
jurisdiction thereof as may be required by law. If and as
necessary, the Members Committee may file with FERC or other
regulatory body of competent jurisdiction any amendment to this
Agreement or to its Schedules or a new Schedule not filed by the
Office of the Interconnection.
(b) Notwithstanding the foregoing, an applicant eligible to
become a Member in accordance with the procedures specified in
this Agreement shall become a Member by executing a counterpart
of this Agreement without the need for amendment of this
Agreement or execution of such counterpart by any other Member.
(c) Each of the following fundamental changes to the LLC
shall require or be deemed to require an amendment to this
Agreement and shall require the prior approval of FERC:
i) Adoption of any plan of merger or consolidation;
ii) Adoption of any plan of sale, lease or exchange of
assets relating to all, or substantially all, of the property and
assets of the LLC;
iii) Adoption of any plan of division relating to the
division of the LLC into two or more corporations or other legal
entities;
iv) Adoption of any plan relating to the conversion of the
LLC into a stock corporation;
v) Adoption of any proposal of voluntary dissolution; or
vi) Taking any action which has the purpose or effect of the
adoption of any plan or proposal described in items (i), (ii),
(iii), (iv) or (v) above.
18.7 Interpretation.
Wherever the context may require, any noun or pronoun used
herein shall include the corresponding masculine, feminine or
neuter forms. The singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
18.8 Severability.
Each provision of this Agreement shall be considered
severable and if for any reason any provision is determined by a
court or regulatory authority of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions of this
Agreement shall continue in full force and effect and shall in no
way be affected, impaired or invalidated, and such invalid, void
or unenforceable provision shall be replaced with valid and
enforceable provision or provisions which otherwise give effect
to the original intent of the invalid, void or unenforceable
provision.
18.9 Force Majeure.
No Member shall be liable to any other Member for damages or
otherwise be in breach of this Agreement to the extent and during
the period such Member's performance is prevented by any cause or
causes beyond such Member's control and without such Member's
fault or negligence, including but not limited to any act,
omission, or circumstance occasioned by or in consequence of any
act of God, labor disturbance, act of the public enemy, war,
insurrection, riot, fire, storm or flood, explosion, breakage or
accident to machinery or equipment, or curtailment, order,
regulation or restriction imposed by governmental, military or
lawfully established civilian authorities; provided, however,
that any such foregoing event shall not excuse any payment
obligation. Upon the occurrence of an event considered by a
Member to constitute a force majeure event, such Member shall use
due diligence to endeavor to continue to perform its obligations
as far as reasonably practicable and to remedy the event,
provided that no Member shall be required by this provision to
settle any strike or labor dispute.
18.10 Further Assurances.
Each Member hereby agrees that it shall hereafter execute
and deliver such further instruments, provide all information and
take or forbear such further acts and things as may be reasonably
required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
18.11 Seal.
The seal of the LLC shall have inscribed thereon the name of
the LLC, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or
otherwise.
18.12 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which
together will constitute one instrument, binding upon all parties
hereto, notwithstanding that all of such parties may not have
executed the same counterpart.
18.13 Costs of Meetings.
Each Member shall be responsible for all costs of its
representative, alternate or substitute in attending any meeting.
The Office of the Interconnection shall pay the other reasonable
costs of meetings of the PJM Board and the Members Committee, and
such other committees, subcommittees, task forces, working
groups, User Groups or other bodies as determined to be
appropriate by the Office of the Interconnection, which costs
otherwise shall be paid by the Members attending. The Office of
the Interconnection shall reimburse all Board Members for their
reasonable costs of attending meetings.
18.14 Notice.
(a) Except as otherwise expressly provided herein, notices
required under this Agreement shall be in writing and shall be
sent to a Member by overnight courier, hand delivery, telecopier
or other reliable electronic means to the representative on the
Members Committee of such Member at the address for such Member
previously provided by such Member to the other Members or as
otherwise directed by the Members Committee. Any such notice so
sent shall be deemed to have been given (i) upon delivery if
given by overnight couriers or hand delivery, or (ii) upon
confirmation if given by telecopier or other reliable electronic
means.
(b) Notices, as well as copies of the agenda and minutes of
all meetings of committees, subcommittees, task forces, working
groups, User Groups, or other bodies formed under this Agreement,
shall be posted in a timely fashion on and made available for
downloading from the PJM website.
18.15 Headings.
The section headings used in this Agreement are for
convenience only and shall not affect the construction or
interpretation of any of the provisions of this Agreement.
18.16 No Third-Party Beneficiaries.
This Agreement is intended to be solely for the benefit of
the Members and their respective successors and permitted assigns
and, unless expressly stated herein, is not intended to and shall
not confer any rights or benefits on any third party (other than
successors and permitted assigns) not a signatory hereto.
18.17 Confidentiality.
18.17.1 Party Access.
No Member shall have a right hereunder to receive or review
any documents, data or other information of another Member,
including documents, data or other information provided to the
Office of the Interconnection, to the extent such documents, data
or information have been designated as confidential pursuant to
the procedures adopted by the Office of the Interconnection or to
the extent that they have been designated as confidential by such
other Member; provided, however, a Member may receive and review
any composite documents, data and other information that may be
developed based on such confidential documents, data or
information if the composite does not disclose any individual
Member's confidential data or information.
18.17.2 Required Disclosure.
(a) Notwithstanding anything in the foregoing Section to the
contrary, if a Member or the Office of the Interconnection is
required by applicable law, or in the course of administrative or
judicial proceedings, to disclose information that is otherwise
required to be maintained in confidence pursuant to this
Agreement, that Member or the Office of the Interconnection may
make disclosure of such information; provided, however, that as
soon as the Member or the Office of the Interconnection learns of
the disclosure requirement and prior to making disclosure, that
Member or the Office of the Interconnection shall notify the
affected Member or Members of the requirement and the terms
thereof and the affected Member or Members may direct, at their
sole discretion and cost, any challenge to or defense against the
disclosure requirement The disclosing Member and the Office of
the Interconnection shall cooperate with such affected Members to
the maximum extent practicable to minimize the disclosure of the
information consistent with applicable law. Each Member and the
Office of the Interconnection shall cooperate with the affected
Members to obtain proprietary or confidential treatment of such
information by the person to whom such information is disclosed
prior to any such disclosure.
(b) The Office of the Interconnection shall endeavor to
impose on any contractors retained to provide technical support
or otherwise to assist with the implementation or administration
of this Agreement a contractual duty of confidentiality
consistent with this Agreement. A Member shall not be obligated
to provide confidential or proprietary information to any
contractor that does not assume such a duty of confidentiality,
and the Office of the Interconnection shall not provide any such
information to any such contractor without the express written
permission of the Member providing the information.
18.18 Termination and Withdrawal.
18.18.1 Termination.
Upon termination of this Agreement, final settlement for
obligations under this Agreement shall include the accounting for
the period ending with the last day of the last month for which
the Agreement was effective.
18.18.2 Withdrawal.
Subject to the requirements of Section 4.1(c) of this
Agreement and Section 1.4.6 of the Schedule 1 to this Agreement,
any Member may withdraw from this Agreement upon 90 days
notice to the Office of the Interconnection.
18.18.3 Winding Up.
Any provision of this Agreement that expressly or by
implication comes into or remains in force following the
termination or expiration of this Agreement shall survive such
termination or expiration. The surviving provisions shall
include, but shall not be limited to: (i) those provisions
necessary to permit the orderly conclusion, or continuation
pursuant to another agreement, of transactions entered into prior
to the decision to terminate this Agreement, (ii) those
provisions necessary to conduct final billing, collection, and
accounting with respect to all matters arising hereunder, and
(iii) the indemnification provisions as applicable to periods
prior to such termination or expiration.
IN WITNESS whereof, the Members have caused this Agreement
to be executed by their duly authorized representatives.
<PAGE>
SCHEDULE 1
PJM INTERCHANGE ENERGY MARKET
(Revises and replaces former Schedules 7.01 and 7.03)
Issued: June 2, 1997
Effective: August 1, 1997
1. MARKET OPERATIONS
1.1 Introduction.
This Schedule sets forth the scheduling, other procedures,
and certain general provisions applicable to the operation of the
PJM Interchange Energy Market within the PJM Control Area. This
Schedule addresses each of the three time-frames pertinent to the
daily operation of the PJM Interchange Energy Market:
Prescheduling, Scheduling, and Dispatch.
1.2 Cost-based Offers.
Unless and until the FERC shall authorize the use of market-
based prices in the PJM Interchange Energy Market, all offers for
energy or other services to be sold on the PJM Interchange Energy
Market from generating resources located within the PJM Control
Area shall not exceed the variable cost of producing such energy
or other service, as determined in accordance with Schedule 2 to
this Agreement and applicable regulatory standards, requirements
and determinations; provided that, a Market Seller may offer to
the PJM Interchange Energy Market the right to call on energy
from a resource the output of which has been sold on a bilateral
basis, with the rate for such energy if called equal to the
curtailment rate specified in the bilateral contract.
1.3 Definitions.
1.3.1 Dispatch Rate.
"Dispatch Rate" shall mean the control signal, expressed in
dollars per megawatt-hour, calculated and transmitted
continuously and dynamically to direct the output level of all
generation resources dispatched by the Office of the
Interconnection in accordance with the Offer Data.
1.3.2 Equivalent Load.
"Equivalent Load" shall mean the sum of an Internal Market
Buyer's net system requirements to serve its customer load in the
PJM Control Area, plus its net bilateral transactions.
1.3.3 External Market Buyer.
"External Market Buyer" shall mean a Market Buyer making
purchases of energy from the PJM Interchange Energy Market for
consumption by end-users outside the PJM Control Area, or for
load in the Control Area that is not served by Network
Transmission Service.
1.3.4 External Resource.
"External Resource" shall mean a generation resource located
outside the metered boundaries of the PJM Control Area.
1.3.5 Fixed Transmission Right.
"Fixed Transmission Right" shall mean a number determined as
specified in Section 0 of this Schedule.
1.3.6 Generating Market Buyer.
"Generating Market Buyer" shall mean an Internal Market
Buyer that owns or has contractual rights to the output of
generation resources capable of serving the Market Buyer's load
in the PJM Control Area, or of selling energy or related services
in the PJM Interchange Energy Market or elsewhere.
1.3.7 Generator Forced Outage.
"Generator Forced Outage" shall mean an immediate reduction
in output or capacity or removal from service, in whole or in
part, of a generating unit by reason of an Emergency or
threatened Emergency, unanticipated failure, or other cause
beyond the control of the owner or operator of the facility, as
specified in the relevant portions of the PJM Manuals. A
reduction in output or removal from service of a generating unit
in response to changes in market conditions shall not constitute
a Generator Forced Outage.
1.3.8 Generator Maintenance Outage.
"Generator Maintenance Outage" shall mean the scheduled
removal from service, in whole or in part, of a generating unit
in order to perform necessary repairs on specific components of
the facility, if removal of the facility meets the guidelines
specified in the PJM Manuals.
1.3.9 Generator Planned Outage.
"Generator Planned Outage" shall mean the scheduled removal
from service, in whole or in part, of a generating unit for
inspection, maintenance or repair with the approval of the Office
of the Interconnection in accordance with the PJM Manuals.
1.3.10 Internal Market Buyer.
"Internal Market Buyer" shall mean a Market Buyer making
purchases of energy from the PJM Interchange Energy Market for
consumption by end-users inside the PJM Control Area.
1.3.11 Inadvertent Interchange.
"Inadvertent Interchange" shall mean the difference between
net actual energy flow and net scheduled energy flow into or out
of the PJM Control Area, as determined and allocated each hour by
the Office of the Interconnection in accordance with the
procedures set forth in the PJM Manuals.
1.3.12 Market Operations Center.
"Market Operations Center" shall mean the equipment,
facilities and personnel used by or on behalf of a Market
Participant to communicate and coordinate with the Office of the
Interconnection in connection with transactions in the PJM
Interchange Energy Market or the operation of the PJM Control
Area.
1.3.13 Maximum Generation Emergency.
"Maximum Generation Emergency" shall mean an Emergency
declared by the Office of the Interconnection in which the Office
of the Interconnection anticipates requesting one or more
Capacity Resources to operate at its maximum net or gross
electrical power output, subject to the equipment stress limits
for such Capacity Resource, in order to manage, alleviate, or end
the Emergency.
1.3.14 Minimum Generation Emergency.
"Minimum Generation Emergency" shall mean an Emergency
declared by the Office of the Interconnection in which the Office
of the Interconnection anticipates requesting one or more
generating resources to operate at or below Normal Minimum
Generation, in order to manage, alleviate, or end the Emergency.
1.3.15 Network Resource.
"Network Resource" shall have the meaning specified in the
PJM Tariff.
1.3.16 Network Service User.
"Network Service User" shall mean an entity using Network
Transmission Service.
1.3.17 Network Transmission Service.
"Network Transmission Service" shall mean transmission
service provided pursuant to the rates, terms and conditions set
forth in Part III of the PJM Tariff, or transmission service
comparable to such service that is provided to a Load Serving
Entity that is also a Regional Transmission Owner as that term is
defined in the PJM Tariff.
1.3.18 Normal Maximum Generation.
"Normal Maximum Generation" shall mean the highest output
level of a generating resource under normal operating conditions.
1.3.19 Normal Minimum Generation.
"Normal Minimum Generation" shall mean the lowest output
level of a generating resource under normal operating conditions.
1.3.20 Offer Data.
"Offer Data" shall mean the scheduling, operations planning,
dispatch, new resource, and other data and information necessary
to schedule and dispatch generation resources for the provision
of energy and other services and the maintenance of the
reliability and security of the transmission system in the PJM
Control Area, and specified for submission to the PJM Interchange
Energy Market for such purposes by the Office of the
Interconnection.
1.3.21 Office of the Interconnection Control Center.
"Office of the Interconnection Control Center" shall mean
the equipment, facilities and personnel used by the Office of the
Interconnection to coordinate and direct the operation of the PJM
Control Area and to administer the PJM Interchange Energy Market,
including facilities and equipment used to communicate and
coordinate with the Market Participants in connection with
transactions in the PJM Interchange Energy Market or the
operation of the PJM Control Area.
1.3.22 Operating Day.
"Operating Day" shall mean the daily 24 hour period
beginning at midnight for which transactions on the PJM
Interchange Energy Market are scheduled.
.3.23 Operating Margin.
"Operating Margin" shall mean the incremental adjustments,
measured in megawatts, required in PJM Control Area operations in
order to accommodate, on a first contingency basis, an operating
contingency in the PJM Control Area resulting from operations in
an interconnected Control Area. Such adjustments may result in
constraints causing Transmission Congestion Charges, or may
result in Ancillary Services charges pursuant to the PJM Tariff.
1.3.24 Operating Margin Customer.
"Operating Margin Customer' shall mean a Control Area
purchasing Operating Margin pursuant to an agreement between such
other Control Area and the LLC.
1.3.25 PJM Interchange.
"PJM Interchange" shall mean the following, as determined in
accordance with the Schedules to this Agreement: (a) the amount
by which an Internal Market Buyer's hourly Equivalent Load
exceeds, or is exceeded by, the sum of the hourly outputs of the
Internal Market Buyer's operating generating resources; or (b)
the hourly scheduled deliveries of Spot Market Energy by an
External Market Seller; or (c) the hourly net metered output of
any other Market Seller; or (d) the hourly scheduled deliveries
of Spot Market Energy to an External Market Buyer.
1.3.26 PJM Interchange Export.
"PJM Interchange Export" shall mean the following, as
determined in accordance with Schedules to this Agreement: (a)
the amount by which an Internal Market Buyer's hourly Equivalent
Load is exceeded by the sum of the hourly outputs of the Internal
Market Buyer's operating generating resources; or (b) the hourly
scheduled deliveries of Spot Market Energy by a Market Seller
from an External Resource; or (c) the hourly net metered output
of any other Market Seller.
1.3.27 PJM Interchange Import.
"PJM Interchange Import" shall mean the following, as
determined in accordance with the Schedules to this Agreement:
(a) the amount by which an Internal Market Buyer's hourly
Equivalent Load exceeds the sum of the hourly outputs of the
Internal Market Buyer's operating generating resources; or (b)
the hourly scheduled deliveries of Spot Market Energy to an
External Market Buyer.
1.3.28 PJM Open Access Same-time Information System.
"PJM Open Access Same-time Information System" shall mean
the electronic communication system for the collection and
dissemination of information about transmission services in the
PJM Control Area, established and operated by the Office of the
Interconnection in accordance with FERC standards and
requirements.
1.3.29 Point-to-Point Transmission Service.
"Point-to-Point Transmission Service" shall mean
transmission service provided pursuant to the rates, terms and
conditions set forth in Part II of the PJM Tariff.
1.3.30 Ramping Capability.
"Ramping Capability" shall mean the sustained rate of change
of generator output, in megawatts per minute.
1.3.31 Regulation.
"Regulation" shall mean the capability of a specific
generating unit with appropriate telecommunications, control and
response capability to increase or decrease its output in
response to a regulating control signal, in accordance with the
specifications in the PJM Manuals.
1.3.32 Regulation Class.
"Regulation Class" shall mean a subset of the generation
units capable of providing Regulation to the PJM Control Area
determined by a range of costs for providing Regulation as
specified by the Office of the Interconnection using procedures
specified in the PJM Manuals.
1.3.33 Spot Market Energy.
"Spot Market Energy" shall mean energy bought or sold by
Market Participants through the PJM Interchange Energy Market at
Locational Marginal Prices determined as specified in Section 2
of this Schedule.
1.3.34 Transmission Congestion Charge.
"Transmission Congestion Charge" shall mean a charge
attributable to the increased cost of energy delivered at a given
load bus when the transmission system serving that load bus is
operating under constrained conditions, which shall be calculated
and allocated as specified in Section 5.1 of this Schedule.
1.3.35 Transmission Congestion Credit.
"Transmission Congestion Credit" shall mean the allocated
share of total Transmission Congestion Charges credited to each
holder of Fixed Transmission Rights, calculated and allocated as
specified in Section 5.2 of this Schedule.
1.3.36 Transmission Customer.
"Transmission Customer" shall mean an entity using Point-to-
Point Transmission Service.
1.3.37 Transmission Forced Outage.
"Transmission Forced Outage" shall mean an immediate removal
from service of a transmission facility by reason of an Emergency
or threatened Emergency, unanticipated failure, or other cause
beyond the control of the owner or operator of the transmission
facility, as specified in the relevant portions of the PJM
Manuals. A removal from service of a transmission facility at
the request of the Office of the Interconnection to improve
transmission capability shall not constitute a Forced
Transmission Outage.
1.3.38 Transmission Planned Outage.
"Transmission Planned Outage" shall mean any transmission
outage scheduled in advance for a pre-determined duration and
which meets the notification requirements for such outages
specified in the PJM Manuals.
1.4 Market Buyers.
1.4.1 Qualification.
(a) To become a Market Buyer, an entity shall submit an
application to the Office of the Interconnection, in such form as
shall be established by the Office of the Interconnection.
(b) An applicant that is a Load Serving Entity or that will
purchase on behalf of a Load Serving Entity shall establish to
the satisfaction of the Office of the Interconnection that the
end-users as to which it or its principal is the Load Serving
Entity, and which will be served through energy and related
services purchased in the PJM Interchange Energy Market, are
located electrically within the PJM Control Area, or will be
brought within the PJM Control Area prior to any purchases from
the PJM Interchange Energy Market by the Load Serving Entity or
its agent. Such applicant shall further demonstrate that:
i) The foregoing Load Serving Entity (the applicant or its
principal) is obligated to meet the requirements of the
Reliability Assurance Agreement; and
ii) The foregoing Load Serving Entity has arrangements in
place for Network Transmission Service or Point-To-Point
Transmission Service for all PJM Interchange Energy Market
purchases.
(c) An applicant that is not a Load Serving Entity or
purchasing on behalf of a Load Serving Entity shall demonstrate
that:
i) The applicant has obtained or will obtain Network
Transmission Service or Point-to-Point Transmission Service for
all PJM Interchange Energy Market purchases; and
ii) The applicant's PJM Interchange Energy Market purchases
will ultimately be delivered to a load in another Control Area
that is recognized by NERC and that complies with NERC's
standards for operating and planning reliable bulk electric
systems.
(d) All applicants shall demonstrate that:
i) The applicant is capable of complying with all applicable
metering, data storage and transmission, and other reliability,
operation, planning and accounting standards and requirements for
the operation of the PJM Control Area and the PJM Interchange
Energy Market;
ii) The applicant meets the creditworthiness standards
established by the Office of the Interconnection, or has provided
a letter of credit or other form of security acceptable to the
Office of the Interconnection; and
iii) The applicant has paid all applicable fees and
reimbursed the Office of the Interconnection for all unusual or
extraordinary costs of processing and evaluating its application
to become a Market Buyer, and has agreed in its application to
subject any disputes arising from its application to the PJM
Dispute Resolution Procedures.
(e) The applicant shall become a Market Buyer upon a final
favorable determination on its application by the Office of the
Interconnection as specified below, and execution by the
applicant of counterparts of this Agreement.
1.4.2 Submission of Information.
The applicant shall furnish all information reasonably
requested by the Office of the Interconnection in order to
determine the applicant's qualification to be a Market Buyer.
The Office of the Interconnection may waive the submission of
information relating to any of the foregoing criteria, to the
extent the information in the Office of the Interconnection's
possession is sufficient to evaluate the application against such
criteria.
1.4.3 Fees and Costs.
The Office of the Interconnection shall require all
applicants to become a Market Buyer to pay a uniform application
fee, initially in the amount of $1,500, to defray the ordinary
costs of processing such applications. The application fee shall
be revised from time to time as the Office of the Interconnection
shall determine to be necessary to recover its ordinary costs of
processing applications. Any unusual or extraordinary costs
incurred by the Office of the Interconnection in processing an
application shall be reimbursed by the applicant.
1.4.4 Office of the Interconnection Determination.
Upon submission of the information specified above, and such
other information as shall reasonably be requested by the Office
of the Interconnection, the Office of the Interconnection shall
undertake an evaluation and investigation to determine whether
the applicant meets the criteria specified above. As soon as
practicable, but in any event not later than 60 days after
submission of the foregoing information, or such later date as
may be necessary to satisfy the requirements of the Reliability
Assurance Agreement, the Office of the Interconnection shall
notify the applicant and the members of the Members Committee of
its determination, along with a written summary of the basis for
the determination. The Office of the Interconnection shall
respond promptly to any reasonable and timely request by a Member
for additional information regarding the basis for the Office of
the Interconnection's determination, and shall take such action
as it shall deem appropriate in response to any request for
reconsideration or other action submitted to the Office of the
Interconnection not later than 30 days from the initial
notification to the Members Committee.
1.4.5 Existing Participants.
Any entity that was qualified to participate as a Market
Buyer in the PJM Interchange Energy Market under the Operating
Agreement of PJM Interconnection L.L.C. in effect immediately
prior to the Effective Date shall continue to be qualified to
participate as a Market Buyer in the PJM Interchange Energy
Market under this Agreement.
1.4.6 Withdrawal.
(a) An Internal Market Buyer may withdraw from this
Agreement by giving written notice to the Office of the
Interconnection specifying an effective date of withdrawal not
earlier than the effective date of (i) its withdrawal from the
Reliability Assurance Agreement, or (ii) the assumption of its
obligations under the Reliability Assurance Agreement by an agent
that is a Market Buyer.
(b) An External Market Buyer may withdraw from this
Agreement by giving written notice to the Office of the
Interconnection specifying an effective date of withdrawal at
least one day after the date of the notice.
(c) Withdrawal from this Agreement shall not relieve a
Market Buyer of any obligation to pay for electric energy or
related services purchased from the PJM Interchange Energy Market
prior to such withdrawal, to pay its share of any fees and
charges incurred or assessed by the Office of the Interconnection
prior to the date of such withdrawal, or to fulfill any
obligation to provide indemnification for the consequences of
acts, omissions or events occurring prior to such withdrawal; and
provided, further, that withdrawal from this Agreement shall not
relieve any Market Buyer of any obligations it may have under, or
constitute withdrawal from, any other Related PJM Agreement.
(d) A Market Buyer that has withdrawn from this Agreement
may reapply to become a Market Buyer in accordance with the
provisions of this Section 0, provided it is not in default of
any obligation incurred under this Agreement.
1.5 Market Sellers.
1.5.1 Qualification.
A Member that demonstrates to the Office of the
Interconnection that the Member meets the standards for the
issuance of an order mandating the provision of transmission
service under section 211 of the Federal Power Act, as amended by
the Energy Policy Act of 1992, may become a Market Seller upon
execution of this Agreement and submission to the Office of the
Interconnection of the applicable Offer Data in accordance with
the provisions of this Schedule. All Members that are Market
Buyers shall become Market Sellers upon execution of the PJM
Dispute Resolution Agreement and submission to the Office of the
Interconnection of the applicable Offer Data in accordance with
the provisions of this Schedule.
1.5.2 Withdrawal.
(a) A Market Seller may withdraw from this Agreement by
giving written notice to the Office of the Interconnection
specifying an effective date of withdrawal at least one day after
the date of the notice; provided, however, that withdrawal shall
not relieve a Market Seller of any obligation to deliver electric
energy or related services to the PJM Interchange Energy Market
pursuant to an offer made prior to such withdrawal, to pay its
share of any fees and charges incurred or assessed by the Office
of the Interconnection prior to the date of such withdrawal, or
to fulfill any obligation to provide indemnification for the
consequences of acts, omissions, or events occurring prior to
such withdrawal; and provided, further, that withdrawal shall not
relieve any entity that is a Market Seller and is also a Market
Buyer of any obligations it may have as a Market Buyer under, or
constitute withdrawal as a Market Buyer from, this Agreement or
any other Related PJM Agreement.
(b) A Market Seller that has withdrawn from this Agreement
may reapply to become a Market Seller at any time, provided it is
not in default with respect to any obligation incurred under this
Agreement.
1.6 Office of the Interconnection.
1.6.1 Operation of the PJM Interchange Energy Market
The Office of the Interconnection shall operate the PJM
Interchange Energy Market in accordance with this Agreement.
1.6.2 Scope of Services.
The Office of the Interconnection shall, on behalf of the
Market Participants, perform the services pertaining to the PJM
Interchange Energy Market specified in this Agreement, including
but not limited to the following:
i) Administer the PJM Interchange Energy Market as part of
the PJM Control Area, including scheduling and dispatching of
generation resources, accounting for transactions, rendering
bills to the Market Participants, receiving payments from and
disbursing payments to the Market Participants, maintaining
appropriate records, and monitoring the compliance of Market
Participants with the provisions of this Agreement, all in
accordance with applicable provisions of the Office of the
Interconnection Agreement, and the Schedules to this Agreement;
ii) Review and evaluate the qualification of entities to be
Market Buyers or Market Sellers under applicable provisions of
this Agreement;
iii) Coordinate, in accordance with applicable provisions of
this Agreement, the Reliability Assurance Agreement, and the
Transmission Owners Agreement, maintenance schedules for
generation and transmission resources operated as part of the PJM
Control Area;
iv) Provide or coordinate the provision of ancillary
services necessary for the operation of PJM Control Area or the
PJM Interchange Energy Market;
v) Determine and declare that an Emergency is expected to
exist, exists, or has ceased to exist, in all or any part of the
PJM Control Area, or in another Control Area interconnected
directly or indirectly with the PJM Control Area, and serve as a
primary point of contact for interested state or federal
agencies;
vi) Enter into agreements for the transfer of energy in
conditions constituting an Emergency in the PJM Control Area or
in a Control Area interconnected with it, and the mutual
provision of other support in such Emergency conditions with
other Control Areas interconnected with the PJM Control Area, in
accordance with the Schedules to this Agreement;
vii) Coordinate the curtailment or shedding of load, or
other measures appropriate to alleviate an Emergency, in order to
preserve reliability in accordance with NERC and MAAC principles,
guidelines and standards, and to ensure the operation of the PJM
Control Area in accordance with Good Utility Practice and the
this Agreement;
viii) Protect confidential information as specified in this
Agreement; and
ix) Send a representative to meetings of the Members
Committee or other Committees, subcommittees, or working groups
specified in this Agreement or formed by the Members Committee
when requested to do so by the chair or other head of such
committee or other group.
1.6.3 Records and Reports.
The Office of the Interconnection shall prepare and maintain
such records and prepare such reports, including, but not limited
to quarterly budget reports, as are required to document the
performance of its obligations to the Market Participants
hereunder in a form adopted by the Office of the Interconnection
upon consideration of the advice and recommendations of the
Members Committee. The Office of the Interconnection shall also
produce special reports reasonably requested by the Members
Committee and consistent with FERC's standards of conduct;
provided, however, the Market Participants shall reimburse the
Office of the Interconnection for the costs of producing any such
report. Notwithstanding the foregoing, the Office of the
Interconnection shall not be required to disclose confidential or
commercially sensitive information in any such report.
1.6.4 PJM Manuals.
The Office of the Interconnection shall prepare, maintain
and update the PJM Manuals consistent with this Agreement. The
PJM Manuals shall be available for inspection by the Market
Participants, regulatory authorities with jurisdiction over the
LLC or any Member, and the public.
1.7 General.
1.7.1 Market Sellers.
Only Market Sellers shall be eligible to submit offers to
the Office of the Interconnection for the sale of electric energy
or related services in the PJM Interchange Energy Market. Market
Sellers shall comply with the prices, terms, and operating
characteristics of all Offer Data submitted to and accepted by
the PJM Interchange Energy Market.
1.7.2 Market Buyers.
Only Market Buyers shall be eligible to purchase energy or
related services in the PJM Interchange Energy Market. Market
Buyers shall comply with all requirements for making purchases
from the PJM Interchange Energy Market.
1.7.3 Agents.
A Market Participant may participate in the PJM Interchange
Energy Market through an agent, provided that the Market
Participant informs the Office of the Interconnection in advance
in writing of the appointment of such agent. A Market
Participant participating in the PJM Interchange Energy Market
through an agent shall be bound by all of the acts or
representations of such agent with respect to transactions in the
PJM Interchange Energy Market, and shall ensure that any such
agent complies with the requirements of this Agreement.
1.7.4 General Obligations of the Market Participants.
(a) In performing its obligations to the Office of the
Interconnection hereunder, each Market Participant shall at all
times (i) follow Good Utility Practice, (ii) comply with all
applicable laws and regulations, (iii) comply with the applicable
principles, guidelines, standards and requirements of FERC, NERC
and MAAC, (iv) comply with the procedures established for
operation of the PJM Interchange Energy Market and PJM Control
Area and (v) cooperate with the Office of the Interconnection as
necessary for the operation of the PJM Control Area in a safe,
reliable manner consistent with Good Utility Practice.
(b) Market Participants shall undertake all operations in or
affecting the PJM Interchange Energy Market and the PJM Control
Area, including but not limited to compliance with all Emergency
procedures, in accordance with the power and authority of the
Office of the Interconnection with respect to the operation of
the PJM Interchange Energy Market and the PJM Control Area as
established in this Agreement, and as specified in the Schedules
to this Agreement and the PJM Manuals. Failure to comply with
the foregoing operational requirements shall subject a Market
Participant to such reasonable charges or other remedies or
sanctions for non-compliance as may be established by the PJM
Board, including legal or regulatory proceedings as authorized by
the PJM Board to enforce the obligations of this Agreement.
(c) The Office of the Interconnection may establish such
committees with a representative of each Market Participant, and
the Market Participants agree to provide appropriately qualified
personnel for such committees, as may be necessary for the Office
of the Interconnection to perform its obligations hereunder.
(d) All Market Participants shall provide to the Office of
the Interconnection the scheduling and other information
specified in the Schedules to this Agreement, and such other
information as the Office of the Interconnection may reasonably
require for the reliable and efficient operation of the PJM
Control Area and the PJM Interchange Energy Market, and for
compliance with applicable regulatory requirements for posting
market and related information. Such information shall be
provided as much in advance as possible, but in no event later
than the deadlines established by the Schedules to this
Agreement, or by the Office of the Interconnection in conformance
with such Schedules. Such information shall include, but not be
limited to, maintenance and other anticipated outages of
generation or transmission facilities, scheduling and related
information on bilateral transactions and self-scheduled
resources, and implementation of active load management,
interruption of load, and other load reduction measures. The
Office of the Interconnection shall abide by appropriate
requirements for the non-disclosure and protection of any
confidential or proprietary information given to the Office of
the Interconnection by a Market Participant. Each Market
Participant shall maintain or cause to be maintained compatible
information and communications systems, as specified by the
Office of the Interconnection, required to transmit scheduling,
dispatch, or other time-sensitive information to the Office of
the Interconnection in a timely manner.
(e) Each Market Participant shall install and operate, or
shall otherwise arrange for, metering and related equipment
capable of recording and transmitting all voice and data
communications reasonably necessary for the Office of the
Interconnection to perform the services specified in this
Agreement. A Market Participant that elects to be separately
billed for its PJM Interchange shall be individually metered in
accordance with Section 0 of this Agreement, or shall agree upon
an allocation of PJM Interchange between it and the Market
Participant through whose meters the unmetered Market
Participant's PJM Interchange is delivered. The Office of the
Interconnection shall be notified of the allocation by the
foregoing Market Participants.
(f) Each Market Participant shall operate, or shall cause to
be operated, any generating resources owned or controlled by such
Market Participant that are within the PJM Control Area or
otherwise supplying energy to or through the PJM Control Area in
a manner that is consistent with the standards, requirements or
directions of the Office of the Interconnection and that will
permit the Office of the Interconnection to perform its
obligations under this Agreement; provided, however, no Market
Participant shall be required to take any action that is
inconsistent with Good Utility Practice or applicable law.
(g) Each Market Participant shall follow the directions of
the Office of the Interconnection to take actions to prevent,
manage, alleviate or end an Emergency in a manner consistent with
this Agreement and the procedures of the PJM Control Area as
specified in the PJM Manuals.
(h) Each Market Participant shall obtain and maintain all
permits, licenses or approvals required for the Market
Participant to participate in the PJM Interchange Energy Market
in the manner contemplated by this Agreement.
1.7.5 Market Operations Center.
Each Market Participant shall maintain a Market Operations
Center, or shall make appropriate arrangements for the
performance of such services on its behalf. A Market Operations
Center shall meet the performance, equipment, communications,
staffing and training standards and requirements specified in
this Agreement for the scheduling and completion of transactions
in the PJM Interchange Energy Market and the maintenance of the
reliable operation of the PJM Control Area, and shall be
sufficient to enable (i) a Market Seller to perform all terms and
conditions of its offers to the PJM Interchange Energy Market,
and (ii) a Market Buyer to conform to the requirements for
purchasing from the PJM Interchange Energy Market.
1.7.6 Scheduling and Dispatching.
(a) The Office of the Interconnection shall schedule and
dispatch generation economically on the basis of least-cost,
security-constrained dispatch and the prices and operating
characteristics offered by Market Sellers, continuing until
sufficient generation is dispatched to serve the PJM Interchange
Energy Market energy purchase requirements under normal system
conditions of the Market Buyers, as well as the requirements of
the PJM Control Area for ancillary services provided by such
generation, in accordance with this Agreement. Scheduling and
dispatch shall be conducted in accordance with this Agreement.
(b) The Office of the Interconnection shall undertake to
identify any conflict or incompatibility between the scheduling
or other deadlines or specifications applicable to the PJM
Interchange Energy Market, and any relevant procedures of another
Control Area, or any tariff (including the PJM Tariff). Upon
determining that any such conflict or incompatibility exists, the
Office of the Interconnection shall propose tariff or procedural
changes, and undertake such other efforts as may be appropriate,
to resolve any such conflict or incompatibility.
1.7.7 Pricing.
The price paid for energy bought and sold in the PJM
Interchange Energy Market will reflect the hourly Locational
Marginal Price at each load and generation bus, determined by the
Office of the Interconnection in accordance with this Agreement.
Transmission Congestion Charges, which shall be determined by
differences in Locational Marginal Prices in an hour caused by
transmission constraints, shall be calculated and collected, and
the revenues therefrom shall be disbursed, by the Office of the
Interconnection in accordance with this Schedule.
1.7.8 Generating Market Buyer Resources.
A Generating Market Buyer may elect to self-schedule its
generation resources up to that Generating Market Buyer's
Equivalent Load, in accordance with and subject to the procedures
specified in this Schedule, and the accounting and billing
requirements specified in Section 0 to this Agreement.
1.7.9 Delivery to an External Market Buyer.
A purchase of Spot Market Energy by an External Market Buyer
shall be delivered to a bus or busses at the border of the PJM
Control Area specified by the Office of the Interconnection, or
to load in the Control Area that is not served by Network
Transmission Service, using Point-to-Point Transmission Service
paid for by the External Market Buyer. Further delivery of such
energy shall be the responsibility of the External Market Buyer.
1.7.10 Other Transactions.
Market Participants may enter into bilateral contracts for
the purchase or sale of electric energy to or from each other or
any other entity, subject to the obligations of Internal Market
Buyers to make Capacity Resources available for dispatch by the
Office of the Interconnection. Bilateral arrangements that
contemplate the physical transfer of energy to or from a Market
Participant shall be reported to and coordinated with the Office
of the Interconnection in accordance with this Schedule. To the
extent the Office of the Interconnection dispatches a Generating
Market Buyer's generation resources, such Generating Market Buyer
may elect to net the output of such resources against its hourly
Equivalent Load. Such a Generating Market Buyer shall be deemed
a buyer from the PJM Interchange Energy Market to the extent of
its PJM Interchange Imports, and shall be deemed a seller to the
PJM Interchange Energy Market to the extent of its PJM
Interchange Exports.
1.7.11 Emergencies.
he Office of the Interconnection, with the assistance of the
Member's dispatchers as it may request, shall be responsible for
monitoring the operation of the PJM Control Area, for declaring
the existence of an Emergency, and for directing the operations
of Market Participants as necessary to manage, alleviate or end
an Emergency. The standards, policies and procedures of the
Office of the Interconnection for declaring the existence of an
Emergency, including but not limited to a Minimum Generation
Emergency, and for managing, alleviating or ending an Emergency,
shall apply to all Members on a non-discriminatory basis.
Actions by the Office of the Interconnection and the Market
Participants shall be carried out in accordance with this
Agreement, the NERC Operating Policies, MAAC reliability
principles and standards, Good Utility Practice, and the PJM
Manuals. A declaration that an Emergency exists or is likely to
exist by the Office of the Interconnection shall be binding on
all Market Participants until the Office of the Interconnection
announces that the actual or threatened Emergency no longer
exists. Consistent with existing contracts, all Market
Participants shall comply with all directions from the Office of
the Interconnection for the purpose of managing, alleviating or
ending an Emergency. The Market Participants shall authorize the
Office of the Interconnection to purchase or sell energy on their
behalf to meet an Emergency, and otherwise to implement
agreements with other Control Areas interconnected with the PJM
Control Area for the mutual provision of service to meet an
Emergency, in accordance with this Agreement.
1.7.12 Fees and Charges.
Each Market Participant shall pay all fees and charges of
the Office of the Interconnection for operation of the PJM
Interchange Energy Market as determined by and allocated to the
Market Participant by the Office of the Interconnection in
accordance with Schedule 3.
1.7.13 Relationship to PJM Control Area.
The PJM Interchange Energy Market operates within and
subject to the requirements for the operation of the PJM Control
Area.
1.7.14 PJM Manuals.
The Office of the Interconnection shall be responsible for
maintaining, updating, and promulgating the PJM Manuals as they
relate to the operation of the PJM Interchange Energy Market.
The PJM Manuals, as they relate to the operation of the PJM
Interchange Energy Market, shall conform and comply with this
Agreement, NERC operating policies, and MAAC reliability
principles, guidelines and standards, and shall be designed to
facilitate administration of an efficient energy market within
industry reliability standards and the physical capabilities of
the PJM Control Area.
1.7.15 Corrective Action.
Consistent with Good Utility Practice, the Office of the
Interconnection shall be authorized to direct or coordinate
corrective action, whether or not specified in the PJM Manuals,
as necessary to alleviate unusual conditions that threaten the
integrity or reliability of the PJM Control Area or the regional
power system.
1.7.16 Recording.
Subject to the requirements of applicable State or federal
law, all voice communications with the Office of the
Interconnection Control Center may be recorded by the Office of
the Interconnection and any Market Participant communicating with
the Office of the Interconnection Control Center, and each Market
Participant hereby consents to such recording.
1.7.17 Operating Reserves.
The Office of the Interconnection shall schedule to the
Operating Reserve and load-following objectives of the PJM
Control Area in scheduling resources pursuant to this Schedule.
A table of Operating Reserve objectives is calculated seasonally
for various peak load levels and eight weekly periods and is
published in the PJM Manuals. Reserve levels are
probabilistically determined based on the season's historical
load forecasting error and expected generation mix (including
typical Planned and Forced/Unplanned Outages).
1.7.18 Regulation.
(a) Regulation shall be supplied from generators located
within the metered electrical boundaries of the PJM Control Area.
Generating Market Buyers, and Market Sellers offering Regulation,
shall comply with applicable standards and requirements for
Regulation capability and dispatch specified in the PJM Manuals.
(b) The Office of the Interconnection shall obtain and
maintain an amount of Regulation equal to the PJM Control Area
Regulation objective as specified in the PJM Manuals.
(c) The Regulation range of a unit shall be at least twice
the amount of Regulation assigned.
(d) A unit capable of automatic energy dispatch that is also
providing Regulation shall have its energy dispatch range reduced
by twice the amount of the Regulation provided. The amount of
Regulation provided by a unit shall serve to redefine the Normal
Minimum Generation and Normal Maximum Generation energy limits of
that unit, in that the amount of Regulation shall be added to the
unit's Normal Minimum Generation energy limit, and subtracted
from its Normal Maximum Generation energy limit.
(e) Qualified Regulation must satisfy the verification tests
described in the PJM Manuals.
1.7.19 Ramping.
A generator dispatched by the Office of the Interconnection
pursuant to a control signal appropriate to increase or decrease
the generator's megawatt output level shall be able to change
output at the ramping rate specified in the Offer Data submitted
to the Office of the Interconnection for that generator.
1.7.20 Communication and Operating Requirements.
(a) Market Participants. Each Market Participant shall have,
or shall arrange to have, its transactions in the PJM Interchange
Energy Market subject to control by a Market Operations Center,
with staffing and communications systems capable of real-time
communication with the Office of the Interconnection during
normal and Emergency conditions and of control of the Market
Participant's relevant load or facilities sufficient to meet the
requirements of the Market Participant's transactions with the
PJM Interchange Energy Market, including but not limited to the
following requirements as applicable.
(b) Market Sellers selling from resources within the PJM
Control Area shall: report to the Office of the Interconnection
sources of energy available for operation; supply to the Office
of the Interconnection all applicable Offer Data; report to the
Office of the Interconnection units that are self-scheduled;
report to the Office of the Interconnection bilateral sales
transactions to buyers not within the PJM Control Area; confirm
to the Office of the Interconnection bilateral sales to Market
Buyers within the PJM Control Area; respond to the Office of the
Interconnection's directives to start, shutdown or change output
levels of generation units, or change scheduled voltages or
reactive output levels; continuously maintain all Offer Data
concurrent with on-line operating information; and ensure that,
where so equipped, generating equipment is operated with control
equipment functioning as specified in the PJM Manuals.
(c) Market Sellers selling from resources outside the PJM
Control Area shall: provide to the Office of the Interconnection
all applicable Offer Data, including offers specifying amounts of
energy available, hours of availability and prices of energy and
other services; respond to Office of the Interconnection
directives to schedule delivery or change delivery schedules; and
communicate delivery schedules to the Market Seller's Control
Area.
(d) Internal Market Buyers shall: provide to the Office of
the Interconnection forecasts of load to be served as required by
the Office of the Interconnection; respond to Office of the
Interconnection directives for load management steps; report to
the Office of the Interconnection Capacity Resources to satisfy
capacity obligations that are available for pool operation;
report to the Office of the Interconnection all bilateral
purchase transactions; respond to other Office of the
Interconnection directives such as those required during
Emergency operation.
(e) External Market Buyers shall: provide to the Office of
the Interconnection requests to purchase specified amounts of
energy for each hour of the Operating Day during which it intends
to purchase from the PJM Interchange Energy Market, along with
Dispatch Rate levels above which it does not desire to purchase;
respond to other Office of the Interconnection directives such as
those required during Emergency operation.
1.7.21 Multi-settlement System.
The PJM Interchange Energy Market shall be enhanced by an
amendment to this Schedule, to be filed with FERC not later than
December 31, 1997, that will provide for the implementation of a
multi-settlement system as soon thereafter as shall be determined
by the Office of the Interconnection to be reasonably practical.
Such a system will provide an opportunity for Market Participants
to commit and obtain commitments to energy prices and
transmission congestion charges at certain specified deadlines in
advance of the Office of the Interconnection's real-time
dispatch. The Members specified in Section 11.5(c) of the
Agreement, working with the Office of the Interconnection, shall
develop the details of the implementation of such a multi-
settlement system.
1.8 Selection, Scheduling and Dispatch Procedure Adjustment
Process.
1.8.1 PJM Dispute Resolution Agreement.
Subject to the condition specified below, any Member
adversely affected by a decision of the Office of the
Interconnection with respect to the operation of the PJM
Interchange Energy Market, including the qualification of an
entity to participate in that market as a buyer or seller, make
seek such relief as may be appropriate under the PJM Dispute
Resolution Procedures on the grounds that such decision does not
have an adequate basis in fact or does not conform to the
requirements of this Agreement.
1.8.2 Market or Control Area Hourly Operational Disputes.
(a) Market Participants shall comply with all determinations
of the Office of the Interconnection on the selection, scheduling
or dispatch of resources in the PJM Interchange Energy Market, or
to meet the operational requirements of the PJM Control Area.
Complaints arising from or relating to such determinations shall
be brought to the attention of the Office of the Interconnection
not later than the end of the fifth business day after the end of
the Operating Day to which the selection or scheduling relates,
or in which the scheduling or dispatch took place, and shall
include, if practicable, a proposed resolution of the complaint.
Upon receiving notification of the dispute, the Office of the
Interconnection and the Market Participant raising the dispute
shall exert their best efforts to obtain and retain all data and
other information relating to the matter in dispute, and to
notify other Market Participants that are likely to be affected
by the proposed resolution. Subject to confidentiality or other
non-disclosure requirements, representatives of the Office of the
Interconnection, the Market Participant raising the dispute, and
other interested Market Participants, shall meet within three
business days of the foregoing notification, or at such other or
further times as the Office of the Interconnection and the Market
Participants may agree, to review the relevant facts, and to seek
agreement on a resolution of the dispute.
(b) If the Office of the Interconnection determines that the
matter in dispute discloses a defect in operating policies,
practices or procedures subject to the discretion of the Office
of the Interconnection, the Office of the Interconnection shall
implement such changes as it deems appropriate and shall so
notify the Members Committee. Alternatively, the Office of the
Interconnection may notify the Members Committee of a proposed
change and solicit the comments or other input of the Members.
(c) If either the Office of the Interconnection, the Market
Participant raising the dispute, or another affected Market
Participant believes that the matter in dispute has not been
adequately resolved, or discloses a need for changes in standards
or policies established in or pursuant to the Operating
Agreement, any of the foregoing parties may make a written
request for review of the matter by the Members Committee, and
shall include with the request the forwarding party's
recommendation and such data or information (subject to
confidentiality or other non-disclosure requirements) as would
enable the Members Committee to assess the matter and the
recommendation. The Members Committee shall take such action on
the recommendation as it shall deem appropriate.
(d) Subject to the right of a Market Participant to obtain
correction of accounting or billing errors, the LLC or a Market
Participant shall not be entitled to actual, compensatory,
consequential or punitive damages, opportunity costs, or other
form of reimbursement from the LLC or any other Market
Participant for any loss, liability or claim, including any claim
for lost profits, incurred as a result of a mistake, error or
other fault by the Office of the Interconnection in the
selection, scheduling or dispatch of resources.
1.9 Prescheduling.
The following procedures and principles shall govern the
prescheduling activities necessary to plan for the reliable
operation of the PJM Control Area and for the efficient operation
of the PJM Interchange Energy Market.
1.9.1 Outage Scheduling.
The Office of the Interconnection shall be responsible for
coordinating and approving requests for outages of generation and
transmission facilities as necessary for the reliable operation
of the PJM Control Area, in accordance with the PJM Manuals. The
Office of the Interconnection shall maintain records of outages
and outage requests of these facilities.
1.9.2 Planned Outages.
(a) A Generator Planned Outage shall be included in
Generator Planned Outage schedules established prior to the
scheduled start date for the outage, in accordance with standards
and procedures specified in the PJM Manuals.
(b) The Office of the Interconnection shall conduct
Generator Planned Outage scheduling for Capacity Resources in
accordance with the Reliability Assurance Agreement and the PJM
Manuals and in consultation with the Members owning or
controlling the output of Capacity Resources. A Market
Participant shall not be expected to submit offers for the sale
of energy or other services, or to satisfy delivery obligations,
from all or part of a generation resource undergoing an approved
Generator Planned Outage. If the Office of the Interconnection
determines that approval of a Generator Planned Outage would
significantly affect the reliable operation of the PJM Control
Area, the Office of the Interconnection may withhold approval or
withdraw a prior approval. Approval for a Generator Planned
Outage of a Capacity Resource shall be withheld or withdrawn only
as necessary to ensure the adequacy of reserves or the
reliability of the PJM Control Area in connection with
anticipated implementation or avoidance of Emergency procedures.
If the Office of the Interconnection withholds or withdraws
approval, it shall coordinate with the Market Participant owning
or controlling the resource to reschedule the Generator Planned
Outage of the Capacity Resource at the earliest practical time.
The Office of the Interconnection shall if possible propose
alternative schedules with the intent of minimizing the economic
impact on the Market Participant of a Generator Planned Outage.
(c) The Office of the Interconnection shall conduct Planned
Transmission Outage scheduling in accordance with procedures
specified in the Transmission Owners Agreement and the PJM
Manuals. If the Office of the Interconnection determines that
transmission maintenance schedules proposed by one or more
Members would significantly affect the efficient and reliable
operation of the PJM Control Area, the Office of the
Interconnection may propose alternative schedules, but such
alternative shall minimize the economic impact on the Member or
Members whose maintenance schedules the Office of the
Interconnection proposes to modify. The Office of the
Interconnection shall coordinate resolution of outage or other
planning conflicts that may give rise to unreliable system
conditions. The Members shall comply with all maintenance
schedules established by the Office of the Interconnection.
1.9.3 Generator Maintenance Outages
A Market Participant may request approval for a Generator
Maintenance Outage of any Capacity Resource from the Office of
the Interconnection in accordance with the timetable and other
procedures specified in the PJM Manuals. The Office of the
Interconnection shall approve requests for Generator Maintenance
Outages for a Capacity Resource unless the outage would threaten
the adequacy of reserves in, or the reliability of, the PJM
Control Area. A Market Participant shall not be expected to
submit offers for the sale of energy or other services, or to
satisfy delivery obligations, from a generation resource
undergoing an approved full or partial Generator Maintenance
Outage.
1.9.4 Forced Outages
(a) Each Market Seller that owns or controls a pool-
scheduled resource, or Capacity Resource whether or not pool-
scheduled, shall: (i) advise the Office of the Interconnection
of a Generator Forced Outage suffered or anticipated to be
suffered by any such resource as promptly as possible; (ii)
provide the Office of the Interconnection with the expected date
and time that the resource will be made available; and (iii) make
a record of the events and circumstances giving rise to the
Generator Forced Outage. A Market Seller shall not be expected
to submit offers for the sale of energy or other services, or
satisfy delivery obligations, from a generation resource
undergoing a Generator Forced Outage. A Capacity Resource that
does not deliver all or part of its scheduled energy shall be
deemed to have experienced a Generator Forced Outage with respect
to such undelivered energy, in accordance with standards and
procedures for full and partial Generator Forced Outages
specified in the Reliability Assurance Agreement and the PJM
Manuals.
(b) The Office of the Interconnection shall receive
notification of Forced Transmission Outages, and information on
the return to service, of Transmission Facilities in the PJM
Control Area in accordance with standards and procedures
specified in the Transmission Owners Agreement and the PJM
Manuals.
1.9.5 Market Participant Responsibilities.
Each Market Participant making a bilateral sale covering a
period greater than the following Operating Day from a generating
resource located within the PJM Control Area for delivery outside
the PJM Control Area shall furnish to the Office of the
Interconnection, in the form and manner specified in the PJM
Manuals, information regarding the source of the energy, the load
sink, the energy schedule, and the amount of energy being
delivered.
1.9.6 Internal Market Buyer Responsibilities.
Each Internal Market Buyer making a bilateral purchase
covering a period greater than the following Operating Day shall
furnish to the Office of the Interconnection, in the form an
manner specified in the PJM Manuals, information regarding the
source of the energy, the load sink, the energy schedule, and the
amount of energy being delivered. Each Internal Market Buyer
shall provide the Office of the Interconnection with details of
any load management agreements with customers that allow the
Office of the Interconnection to reduce load under specified
circumstances.
1.9.7 Market Seller Responsibilities
(a) Not less than 30 days before a Market Seller's initial
offer to sell energy from a given generation resource on the PJM
Interchange Energy Market, the Market Seller shall furnish to the
Office of the Interconnection the information specified in the
Offer Data for new generation resources.
(b) Market Sellers authorized and intending to request
market-based start-up and no-load fees in their Offer Data shall
submit a specification of such fees to the Office of the
Interconnection for each generating unit as to which the Market
Seller intends to request such fees. Any such specification
shall be submitted on or before March 31 for the period April 1
through September 30, and on or before September 30 for the
period October 1 through March 31, and shall remain in effect
without change throughout each such period for which a
specification was submitted. The Office of the Interconnection
shall reject any request for start-up and no-load fees in a
Market Seller's Offer Data that does not conform to the Market
Seller's specification on file with the Office of the
Interconnection.
1.9.8 Office of the Interconnection Responsibilities
(a) The Office of the Interconnection shall perform seasonal
operating studies to assess the forecasted adequacy of generating
reserves and of the transmission system, in accordance with the
procedures specified in the PJM Manuals.
(b) The Office of the Interconnection shall maintain and
update tables setting forth Operating Reserve and other reserve
objectives as specified in the PJM Manuals.
(c) The Office of the Interconnection shall receive and
process requests for firm and non-firm transmission service in
accordance with procedures specified in the PJM Tariff.
(d) The Office of the Interconnection shall maintain such
data and information relating to generation and transmission
facilities in the PJM Control Area as may be necessary or
appropriate to conduct the scheduling and dispatch of the PJM
Interchange Energy Market and PJM Control Area.
(e) The Office of the Interconnection shall coordinate with
other interconnected Control Area as necessary to manage,
alleviate or end an Emergency.
1.10 Scheduling.
The following scheduling procedures and principles shall
govern the commitment of resources to the PJM Interchange Energy
Market over a period extending from one week to one day prior to
the Operating Day that transactions are to take place.
Scheduling encompasses the day-ahead and hourly scheduling
process, through which the Office of the Interconnection
determines, based on changing forecasts of conditions and actions
by Market Participants and system constraints, a plan to serve
the hourly energy and reserve requirements of the Internal Market
Buyers and the purchase requests of the External Market Buyers in
the least costly manner, subject to maintaining the reliability
of the PJM Control Area. Scheduling shall be conducted as
specified below, subject to the following condition. If the
Office of the Interconnection's forecast for the next seven days
projects a likelihood of Emergency conditions, the Office of the
Interconnection may commit, for all or part of such seven day
period, to the use of generation resources with notification or
start-up times greater than one day as necessary in order to
alleviate or mitigate such Emergency, in accordance with the
Market Sellers' offers for such units for such periods and the
specifications in the PJM Manuals.
1.10.1 Day-Ahead Scheduling.
The following actions shall occur not later than 12:00 noon
on the day before the Operating Day for which transactions are
being scheduled.
(a) Each Internal Market Buyer shall submit to the Office of
the Interconnection forecasts of its customer loads for the next
Operating Day as required by the PJM Manuals. If an Internal
Market Buyer expects to curtail load at a specific Dispatch Rate,
it should specify the Dispatch Rate and estimated load
curtailment.
(b) An External Market Buyer shall submit to the Office of
the Interconnection requests to purchase specified amounts of
energy for each hour of the Operating Day during which it intends
to purchase from the PJM Interchange Energy Market, along with
Dispatch Rate levels above which it does not desire to purchase,
in accordance with the specifications set forth in the PJM
Manuals.
(c) Each Generating Market Buyer shall submit to the Office
of the Interconnection: (i) hourly schedules for resource
increments, including hydropower units, self-scheduled by the
Market Buyer to meet its Equivalent Load; and (ii) the Dispatch
Rate at which each such self-scheduled resource will disconnect
or reduce output, or confirmation of the Market Buyer's intent
not to reduce output.
(d) All Market Participants shall submit to the Office of
the Interconnection schedules for any bilateral transactions
involving use of generation or Transmission Facilities as
specified below, and shall inform the Office of the
Interconnection if the parties to the transaction are not willing
to incur Transmission Congestion Charges in order to complete any
such scheduled bilateral transaction. Scheduling of bilateral
transactions shall be conducted in accordance with the
specifications in the PJM Manuals and the following requirements:
i) Internal Market Buyers shall submit schedules for all
bilateral purchases for delivery within the PJM Control Area,
whether from generation resources inside or outside the PJM
Control Area;
ii) Market Sellers shall submit schedules for bilateral
sales to entities outside the PJM Control Area from generation
within the PJM Control Area; and
iii) In addition to the foregoing schedules for bilateral
transactions, Market Participants shall submit confirmations of
each scheduled bilateral transaction from each other party to the
transaction in addition to the party submitting the schedule, or
the adjacent Control Area.
(e) Market Sellers wishing to sell on the PJM Interchange
Energy Market shall submit offers for the supply of energy
(including energy from hydropower units), Regulation, Operating
Reserves or other services for the following Operating Day.
Offers shall be submitted to the Office of the Interconnection in
the form specified by the Office of the Interconnection and shall
contain the information specified in the Office of the
Interconnection's Offer Data specification, as applicable.
Market Sellers owning or controlling the output of a Capacity
Resource that has not been rendered unavailable by a Generation
Planned Outage, a Generator Maintenance Outage, or a Generation
Forced Outage shall submit offers for the available capacity of
such Capacity Resource, including any portion that is self-
scheduled by the Generating Market Buyer claiming the resource as
a Capacity Resource. The submission of offers for resource
increments that are not Capacity Resources shall be optional, but
any such offers must contain the information specified in the
Office of the Interconnection's Offer Data specification, as
applicable. Energy offered from generation resources that are
not Capacity Resources shall not be supplied from resources that
are included in or otherwise committed to supply the Operating
Reserves of another Control Area. The foregoing offers:
i) Shall specify the generation resource and energy for each
hour in the offer period;
ii) Shall specify the amounts and prices for the entire
Operating Day for each resource component offered by the Market
Seller to the Office of the Interconnection;
iii) If based on energy from a specific generating unit, may
specify start-up and no-load fees equal to the specification of
such fees for such unit on file with the Office of the
Interconnection;
iv) Shall set forth any special conditions upon which the
Market Seller proposes to supply a resource increment, including
any curtailment rate specified in a bilateral contract for the
output of the resource, or any cancellation fees;
v) May include a schedule of offers for prices and operating
data contingent on acceptance by the deadline specified in this
Schedule, with a second schedule applicable if accepted after the
foregoing deadline;
vi) Shall constitute an offer to submit the resource
increment to the Office of the Interconnection for scheduling and
dispatch in accordance with the terms of the offer, which offer
shall remain open through the Operating Day for which the offer
is submitted;
vii) Shall be final as to the price or prices at which the
Market Seller proposes to supply energy or other services to the
PJM Interchange Energy Market, such price or prices being
guaranteed by the Market Seller for the period extending through
the end of the following Operating Day; and
viii) Shall not exceed an energy offer price of
$1,000/megawatt-hour.
(f) A Market Seller that wishes to sell Regulation service
shall submit an offer for Regulation that shall specify the MW of
Regulation being offered and the Regulation Class from which such
Regulation is being offered. The range of costs defining
Regulation Classes, and the average cost for each Regulation
Class, shall be determined periodically by the Office of the
Interconnection on the basis of prior energy bid prices and
appropriate fuel indices, in accordance with procedures specified
in the PJM Manuals. Qualified Regulation capability must satisfy
the verification tests specified in the PJM Manuals.
(g) Each Market Seller owning or controlling the output of a
Capacity Resource shall submit a forecast of the availability of
each such Capacity Resource for the next seven days. A Market
Seller (i) may submit a non-binding forecast of the price at
which it expects to offer a generation resource increment to the
Office of the Interconnection over the next seven days, and (ii)
shall submit a binding offer for energy, along with start-up and
no-load fees, if any, for the next seven days or part thereof,
for any generation resource with minimum notification or start-up
requirement greater than 24 hours.
(h) Each offer by a Market Seller of a Capacity Resource
shall remain in effect for subsequent Operating Days until
superseded or canceled.
(i) The Office of the Interconnection shall post on the PJM
Open Access Same-time Information System its estimate of the
combined hourly load of the Market Buyers for the next four days,
and peak load forecasts for an additional three days.
1.10.2 Pool-Scheduled Resources.
Pool-scheduled resources shall be governed by the following
principles and procedures.
(a) Pool-scheduled resources shall be selected by the Office
of the Interconnection on the basis of the prices offered for
energy and related services, start-up, no-load and cancellation
fees, and the specified operating characteristics, offered by
Market Sellers to the Office of the Interconnection by the 12:00
noon offer deadline.
(b) A resource that is scheduled by a Market Participant to
support a bilateral sale, or that is self-scheduled by a
Generating Market Buyer, shall not be selected by the Office of
the Interconnection as a pool-scheduled resource except in an
Emergency.
(c) Market Sellers offering energy from hydropower or other
facilities with fuel or environmental limitations may submit data
to the Office of the Interconnection that is sufficient to enable
the Office of the Interconnection to determine the available
operating hours of such facilities.
(d) The Market Seller of a resource selected as a pool-
scheduled resource shall receive payments or credits for energy
or related services, or for start-up and no-load fees, from the
Office of the Interconnection on behalf of the Market Buyers in
accordance with Schedule 3 to this Agreement. Alternatively, the
Market Seller shall receive any cancellation fee reflected in the
Market Seller's offer in lieu of start-up and no-load fees, if
any, if the Office of the Interconnection cancels its selection
of the resource as a pool-scheduled resource and so notifies the
Market Seller before the resource is synchronized.
(e) Market Participants shall make available their pool-
scheduled resources to the Office of the Interconnection for
coordinated operation to supply the needs of the PJM Control Area
for Operating Reserves.
1.10.3 Self-scheduled Resources.
Self-scheduled resources shall be governed by the following
principles and procedures.
Each Generating Market Buyer shall use all reasonable
efforts, consistent with Good Utility Practice, not to self-
schedule resources in excess of its Equivalent Load.
(b) The offered prices of resources that are self-scheduled,
or otherwise not following the dispatch orders of the Office of
the Interconnection, shall not be considered by the Office of the
Interconnection in determining Locational Marginal Prices.
(c) Market Participants shall make available their self-
scheduled resources to the Office of the Interconnection for
coordinated operation to supply the needs of the PJM Control Area
for Operating Reserves.
1.10.4 Capacity Resources.
(a) A Capacity Resource selected as a pool-scheduled
resource shall be made available for scheduling and dispatch at
the direction of the Office of the Interconnection. A Capacity
Resource that does not deliver energy as scheduled shall be
deemed to have experienced a Generator Forced Outage to the
extent of such energy not delivered.
(b) Energy from a Capacity Resource that has not been
selected as a pool-scheduled resource may be sold on a bilateral
basis by the Market Seller, or may be self-scheduled. A Capacity
Resource that has not been selected as a pool-scheduled resource
and that has been sold on a bilateral basis must be made
available upon request to the Office of the Interconnection for
scheduling and dispatch if the Office of the Interconnection
declares a Maximum Generation Emergency. Any such resource so
scheduled and dispatched shall receive the applicable Locational
Marginal Price for energy delivered.
(c) A Capacity Resource that has been self-scheduled shall
not receive payments or credits for start-up or no-load fees.
1.10.5 External Resources.
(a) External Resources may submit offers to the PJM
Interchange Energy Market, in accordance with the day-ahead
scheduling process specified above. An External Resource
selected as a pool-scheduled resource shall be made available for
scheduling and dispatch at the direction of the Office of the
Interconnection, and except as specified below shall be
compensated on the same basis as other pool-scheduled resources.
External Resources that are not capable of dynamic dispatch
shall, if selected by the Office of the Interconnection on the
basis of the Market Seller's Offer Data, be block loaded on an
hourly scheduled basis. Market Sellers shall offer External
Resources to the PJM Interchange Energy Market on either a
resource-specific or an aggregated resource basis.
(b) Offers for External Resources from an aggregation of two
or more generating units shall so indicate, and shall specify, in
accordance with the Offer Data requirements specified by the
Office of the Interconnection: (i) energy prices; (ii) hours of
energy availability; (iii) a minimum dispatch level; (iv) a
maximum dispatch level; and (v) unless such information has
previously been made available to the Office of the
Interconnection, sufficient information, as specified in the PJM
Manuals, to enable the Office of the Interconnection to model the
flow into the PJM Control Area of any energy from the External
Resources scheduled in accordance with the Offer Data. If a
Market Seller submits more than one offer on an aggregated
resource basis, the withdrawal of any such offer shall be deemed
a withdrawal of all higher priced offers for the same period. A
Market Seller offering energy from External Resources on an
aggregated basis and that does not deliver energy as scheduled by
the Office of the Interconnection shall be assessed a non-
delivery charge as specified below.
(c) Offers for External Resources on a resource-specific
basis shall specify the resource being offered, along with the
information specified in the Offer Data as applicable. A Market
Seller offering an External Resource on a resource-specific basis
that does not deliver energy as scheduled by the Office of the
Interconnection shall be assessed a non-delivery charge as
specified below, unless the resource being offered has suffered a
Generator Forced Outage. The burden shall be on the Market
Seller to demonstrate to the reasonable satisfaction of the
Office of the Interconnection that the resource being offered has
experienced a Generator Forced Outage.
(d) Subject to the conditions specified in this paragraph,
the non-delivery charge for External Resources that do not
deliver energy as scheduled shall be calculated hourly as
follows: Pro-rated start-up plus hourly no-load fees specified
in the Offer Data + [offered minimum dispatch level x (Locational
Marginal Price - offered energy price) x 110%]. For purposes of
the foregoing calculation: (i) the Locational Marginal Price
shall be the Locational Marginal Price at the buses at which the
energy from the External Resource should have been delivered to
the PJM Control Area; (ii) if the Locational Marginal Price less
the offered energy price is less than zero, this difference shall
be set to zero; and (iii) start-up and no-load fees shall be
subject to the requirements of this Schedule. Payments or credits
for non-delivery charges shall be used by the Office of the
Interconnection to reduce or offset PJM Control Area costs for
Operating Reserves.
1.10.6 External Market Buyers.
(a) Deliveries to an External Market Buyer not subject to
dynamic dispatch by the Office of the Interconnection shall be
delivered on a block loaded basis to the load bus or busses at
the border of the PJM Control Area, or in the PJM Control Area
with respect to an External Market Buyer's load within the PJM
Control Area not served by Network Service, at which the energy
is delivered to or for the External Market Buyer. External
Market Buyers shall be charged the Locational Marginal Price for
energy at the foregoing load bus or busses.
(b) An External Market Buyer's hourly schedules for energy
purchased from the PJM Interchange Energy Market shall conform to
the ramping and other applicable requirements of the
interconnection agreement between the PJM Control Area and the
Control Area to which, whether as an intermediate or final point
of delivery, the purchased energy will initially be delivered.
(c) The Office of the Interconnection shall curtail
deliveries to an External Market Buyer if necessary to maintain
appropriate reserve levels for the PJM Control Area as defined in
the PJM Manuals, or to avoid shedding load in the PJM Control
Area.
(d) An External Market Buyer that does not take delivery of
the amounts of energy specified in its request to purchase shall
be assessed a non-delivery charge, or if using Point-to-Point
service within the PJM Control Area shall pay for imbalance
service as specified in the Tariff. The non-delivery charge
shall be calculated as the summation for all applicable busses of
the product of (i) the Locational Marginal Price at each load bus
at which delivery was not taken, times (ii) the amount of energy
not taken each hour at such bus. The non-delivery charge shall
not apply to deliveries curtailed by the Office of the
Interconnection in accordance with this Schedule, or for periods
when the Dispatch Rate exceeds the maximum value specified by the
External Market Buyer in accordance with this Schedule. Payments
or credits for non-delivery charges shall be used by the Office
of the Interconnection to reduce or offset PJM Control Area costs
for Operating Reserves.
1.10.7 Bilateral Transactions.
Bilateral transactions as to which the parties have notified
the Office of the Interconnection by 12:00 p.m. of the day before
the Operating Day that they are not willing to incur Transmission
Congestion Charges shall be curtailed by the Office of the
Interconnection as necessary to reduce or alleviate transmission
congestion. Bilateral transactions willing to incur congestion
charges shall continue to be implemented during periods of
congestion, except as may be necessary to respond to Emergencies.
1.10.8 Office of the Interconnection Responsibilities.
(a) The Office of the Interconnection shall use its best
efforts to determine the least-cost means of satisfying the
projected hourly requirements for energy, Operating Reserves, and
other ancillary services of the Market Buyers, including the
reliability requirements of the PJM Control Area. In making this
determination, the Office of the Interconnection shall take into
account: (i) the Office of the Interconnection's forecasts of
PJM Interchange Energy Market and PJM Control Area energy
requirements, giving due consideration to the energy requirement
forecasts and purchase requests submitted by Market Buyers; (ii)
the offers submitted by Market Sellers; (iii) the availability of
limited energy resources; (iv) the capacity, location, and other
relevant characteristics of self-scheduled resources; (v) the
objectives of the PJM Control Area for Operating Reserves, as
specified in the PJM Manuals; (vi) the requirements of the PJM
Control Area for Regulation and other ancillary services, as
specified in the PJM Manuals; (vii) the benefits of avoiding or
minimizing transmission constraint control operations, as
specified in the PJM Manuals; and (viii) such other factors as
the Office of the Interconnection reasonably concludes are
relevant to the foregoing determination. The Office of the
Interconnection shall develop a schedule of generation resources
based on the foregoing determination. The Office of the
Interconnection shall report the planned schedule for a
hydropower resource to the operator of that resource as necessary
for plant safety and security, and legal limitations on pond
elevations.
(b) Not later than 4:00 p.m. of the day before each
Operating Day, or such earlier deadline as may be specified by
the Office of the Interconnection in the PJM Manuals, the Office
of the Interconnection shall: (i) post on the PJM Open Access
Same-time Information System its forecast of the location and
duration of any expected transmission congestion, and of the
range of differences in Locational Marginal Prices between major
subareas of the PJM Control Area expected to result from such
transmission congestion; and (ii) inform each Market Seller
whether its offer or offers have been accepted.
(c) The Office of the Interconnection shall revise its
schedule of generation resources to reflect updated projections
of load, conditions affecting electric system operations in the
PJM Control Area, the availability of and constraints on limited
energy and other resources, transmission constraints, and other
relevant factors. The Office of the Interconnection shall post
on the PJM Open Access Same-time Information System at times
specified in the PJM Manuals a revised forecast of the location
and duration of any expected transmission congestion, and of the
range of differences in Locational Marginal Prices between major
subareas of the PJM Control Area expected to result from such
transmission congestion.
1.10.9 Hourly Scheduling
(a) Following the initial posting of the Office of the
Interconnection's transmission congestion forecast, and subject
to the right of the Office of the Interconnection to schedule and
dispatch pool-scheduled resources and to direct that schedules be
changed in an Emergency, a Market Participant may adjust the
schedule of a resource under its dispatch control on an hour-to-
hour basis beginning at 10:00 p.m. of the day before each
Operating Day, provided that the Office of the Interconnection is
notified not later than 60 minutes prior to the hour in which the
adjustment is to take effect, as follows:
i) A Generating Market Buyer may self-schedule any of its
resource increments, including hydropower resources, not
previously designated as self-scheduled and not selected as a
pool-scheduled resource;
ii) A Market Participant may request the scheduling of a
non-firm bilateral transaction; or
iii) A Generating Market Buyer may remove from service a
resource increment, including a hydropower resource, that it had
previously designated as self-scheduled, provided that the Office
of the Interconnection shall have the option to schedule energy
from any such resource increment that is a Capacity Resource at
the price offered in the scheduling process, with no obligation
to pay any start-up fee.
(b) An External Market Buyer may refuse delivery of some or
all of the energy it requested to purchase by notifying the
Office of the Interconnection of the adjustment in deliveries not
later than 60 minutes prior to the hour in which the adjustment
is to take effect. Any such refusal of delivery shall be subject
to non-delivery charges in accordance with this Schedule.
1.11 Dispatch.
The following procedures and principles shall govern the
dispatch of the resources available to the Office of the
Interconnection.
1.11.1 Resource Output.
The Office of the Interconnection shall have the authority
to direct any Market Seller to adjust the output of any pool-
scheduled resource increment within the operating characteristics
specified in the Market Seller's offer. The Office of the
Interconnection may cancel its selection of, or otherwise
release, pool-scheduled resources, subject to an obligation to
pay any applicable start-up, no-load or cancellation fees. The
Office of the Interconnection shall adjust the output of pool-
scheduled resource increments as necessary: (a) to maintain
reliability, and subject to that constraint, to minimize the cost
of supplying the energy, reserves, and other services required by
the Market Buyers and the operation of the PJM Control Area; (b)
to balance load and generation, maintain scheduled tie flows, and
provide frequency support within the PJM Control Area; and (c) to
minimize unscheduled interchange not frequency related between
the PJM Control Area and other Control Areas.
1.11.2 Operating Basis.
In carrying out the foregoing objectives, the Office of the
Interconnection shall conduct the operation of the PJM Control
Area in accordance with the PJM Manuals, and shall: (i) utilize
available generating reserves and obtain required replacements;
and (ii) monitor the availability of adequate reserves.
1.11.3 Pool-dispatched Resources
(a) The Office of the Interconnection shall implement the
dispatch of energy from pool-scheduled resources with limited
energy by direct request. In implementing mandatory or economic
use of limited energy resources, the Office of the
Interconnection shall use its best efforts to select the most
economic hours of operation for limited energy resources, in
order to make optimal use of such resources consistent with the
dynamic load-following requirements of the PJM Control Area and
the availability of other resources to the Office of the
Interconnection.
(b) The Office of the Interconnection shall implement the
dispatch of energy from other pool-dispatched resource
increments, including generation increments from Capacity
Resources the remaining increments of which are self-scheduled,
by sending appropriate signals and instructions to the entity
controlling such resources, in accordance with the PJM Manuals.
Each Market Seller shall ensure that the entity controlling a
pool-dispatched resource offered or made available by that Market
Seller complies with the energy dispatch signals and instructions
transmitted by the Office of the Interconnection.
1.11.4 Regulation
(a) A Market Buyer may satisfy its Regulation obligation
from its own resources capable of performing Regulation service,
by contractual arrangements with other Market Participants able
to provide Regulation service, or by purchases from the PJM
Interchange Energy Market.
(b) The Office of the Interconnection shall obtain
Regulation service from the least-cost alternatives available
from either pool-scheduled or self-scheduled resources as needed
to meet PJM Control Area requirements not otherwise satisfied by
the Market Buyers.
(c) The Office of the Interconnection shall dispatch
resources for Regulation by sending Regulation signals and
instructions to resources from which Regulation service has been
offered by Market Sellers, in accordance with the PJM Manuals.
Market Sellers shall comply with Regulation dispatch signals and
instructions transmitted by the Office of the Interconnection
and, in the event of conflict, Regulation dispatch signals and
instructions shall take precedence over energy dispatch signals
and instructions. Market Sellers shall exert all reasonable
efforts to operate, or ensure the operation of, their resources
supplying load in the PJM Control Area as close to desired output
levels as practical, consistent with Good Utility Practice.
1.11.5 PJM Open Access Same-time Information System.
The Office of the Interconnection shall update the
information posted on the PJM Open Access Same-time Information
System to reflect its dispatch of generation resources.
2. CALCULATION OF LOCATIONAL MARGINAL PRICES
2.1 Introduction.
The Office of the Interconnection shall calculate the price
of energy at the load busses and generation busses in the PJM
Control Area and at the interface busses between the PJM Control
Area and adjacent Control Areas on the basis of Locational
Marginal Prices. Locational Marginal Prices determined in
accordance with this Section shall be calculated every five
minutes and integrated hourly values of such calculations shall
be the basis of sales and purchases of energy in the PJM
Interchange Energy Market and of Transmission Congestion Charges
under the PJM Tariff.
2.2 General.
The Office of the Interconnection shall determine the least
cost security-constrained dispatch, which is the least costly
means of serving load at different locations in the PJM Control
Area based on actual operating conditions existing on the power
grid and on the prices at which Market Sellers have offered to
supply energy in the PJM Interchange Energy Market. Locational
Marginal Prices for the generation and load busses in the PJM
Control Area, including interconnections with other Control
Areas, will be calculated based on the actual economic dispatch
and the prices of energy offers. The process for the
determination of Locational Marginal Prices shall be as follows:
(a) To determine actual operating conditions on the power
grid in the PJM Control Area, the Office of the Interconnection
shall use a computer model of the interconnected grid that uses
available metered inputs regarding generator output, loads, and
power flows to model remaining flows and conditions, producing a
consistent representation of power flows on the network. The
computer model employed for this purpose, referred to as the
State Estimator program, is a standard industry tool and is
described in Section 2.3 below. It will be used to obtain
information regarding the output of generation supplying energy
to the PJM Control Area, loads at buses in the PJM Control Area,
transmission losses, and power flows on binding transmission
constraints for use in the calculation of Locational Marginal
Prices. Additional information used in the calculation,
including Dispatch Rates and real time schedules for external
transactions between PJM and other Control Areas, will be
obtained from the Office of the Interconnection's dispatchers.
(b) Using the prices at which energy is offered by Market
Sellers to the PJM Interchange Energy Market, the Office of the
Interconnection shall determine the offers of energy that will be
considered in the calculation of Locational Marginal Prices. As
described in Section 2.4 below, every offer of energy by a Market
Seller from a resource that is following economic dispatch
instructions of the Office of the Interconnection will be
utilized in the calculation of Locational Marginal Prices.
(c) Based on the system conditions on the PJM power grid,
determined as described in (a), and the eligible energy offers,
determined as described in (b), the Office of the Interconnection
shall determine the least costly means of obtaining energy to
serve the next increment of load at each bus in the PJM Control
Area, in the manner described in Section 2.5 below. The result
of that calculation shall be a set of Locational Marginal Prices
based on the system conditions at the time.
2.3 Determination of System Conditions Using the State
Estimator.
Power system operations, including, but not limited to, the
determination of the least costly means of serving load, depend
upon the availability of a complete and consistent representation
of generator outputs, loads, and power flows on the network. In
calculating Locational Marginal Prices, the Office of the
Interconnection shall obtain a complete and consistent
description of conditions on the electric network in the PJM
Control Area by using the most recent power flow solution
produced by the State Estimator, which is also used by the Office
of the Interconnection for other functions within power system
operations. The State Estimator is a standard industry tool that
produces a power flow model based on available real-time metering
information, information regarding the current status of lines,
generators, transformers, and other equipment, bus load
distribution factors, and a representation of the electric
network, to provide a complete description of system conditions,
including conditions at busses for which real-time information is
unavailable. The current version of the State Estimator includes
over 1600 busses in the PJM Control Area, as well as interface
busses with adjacent Control Areas. The Office of the
Interconnection shall obtain a State Estimator solution every
five minutes, which shall provide the megawatt output of
generators and the loads at busses in the PJM Control Area,
transmission line losses, and actual flows or loadings on
constrained transmission facilities. External transactions
between PJM and other Control Areas shall be included in the
Locational Marginal Price calculation on the basis of the real
time transaction schedules implemented by the Office of the
Interconnection's dispatcher.
2.4 Determination of Energy Offers Used in Calculating
Locational Marginal Prices.
(a) To determine the energy offers submitted to the PJM
Interchange Energy Market that shall be used to calculate the
Locational Marginal Prices, the Office of the Interconnection
shall determine which resources are following its economic
dispatch instructions. A resource will be considered to be
following economic dispatch instructions and shall be included in
the calculation of Locational Marginal Prices if:
i) the price bid by a Market Seller for energy from the
resource is less than or equal to the Dispatch Rate for the area
of the PJM Control Area in which the resource is located; or
ii) the resource is specifically requested to operate by the
Office of the Interconnection's dispatcher.
(b) In determining whether a resource satisfies the
condition described in (a), the Office of the Interconnection
will determine the bid price associated with an energy offer by
comparing the actual megawatt output of the resource with the
Market Seller's offer price curve. Because of practical generator
response limitations, a resource whose megawatt output is not ten
percent more than the megawatt level specified on the offer price
curve for the applicable Dispatch Rate shall be deemed to be
following economic dispatch instructions, but the energy price
offer used in the calculation of Locational Marginal Prices shall
not exceed the applicable Dispatch Rate. Units that must be run
for local area protection shall not be considered in the
calculation of Locational Marginal Prices.
2.5 Calculation of Locational Marginal Prices.
(a) The Office of the Interconnection shall determine the
least costly means of obtaining energy to serve the next
increment of load at each bus in the PJM Control Area represented
in the State Estimator and each interface bus between the PJM
Control Area and an adjacent Control Area, based on the system
conditions described by the most recent power flow solution
produced by the State Estimator program and the energy offers
determined to be eligible for consideration under Section 2.4.
This calculation shall be made by applying an incremental linear
optimization method to minimize energy costs, given actual system
conditions, a set of energy offers, and any binding transmission
constraints that may exist. In performing this calculation, the
Office of the Interconnection shall calculate the cost of serving
an increment of load at each bus from each resource associated
with an eligible energy offer as the sum of: (1) the price at
which the Market Seller has offered to supply an additional
increment of energy from the resource, and (2) the effect on
transmission congestion costs (whether positive or negative)
associated with increasing the output of the resource, based on
the effect of increased generation from that resource on
transmission line loadings. The energy offer or offers that can
serve an increment of load at a bus at the lowest cost,
calculated in this manner, shall determine the Locational
Marginal Price at that bus.
(b) The calculation set forth in (a) shall be performed
every five minutes, using the Office of the Interconnection's
Locational Marginal Price program, producing a set of Locational
Marginal Prices based on system conditions during the preceding
interval. The prices produced at five-minute intervals during an
hour will be integrated to determine the Locational Marginal
Prices for that hour, which will determine prices in the PJM
Interchange Energy Market and Transmission Congestion Costs under
the PJM Tariff.
2.6 Performance Evaluation.
The Office of the Interconnection shall undertake an
evaluation of the foregoing procedures for the determination of
Locational Marginal Prices, as well as the procedures for
determining and allocating Fixed Transmission Rights and
associated Transmission Congestion Charges and Credits, not less
often than every two years, in accordance with the PJM Manuals.
To the extent practical, the Office of the Interconnection shall
retain all data needed to perform comparisons and other analyses
of locational marginal pricing. The Office of the
Interconnection shall report the results of its evaluation to the
Market Participants, along with its recommendations, if any, for
changes in the procedures.
3. ACCOUNTING AND BILLING
3.1 Introduction.
This schedule sets forth the accounting and billing
principles and procedures for the purchase and sale of services
on the PJM Interchange Energy Market and for the operation of the
PJM Control Area.
3.2 Market Buyers.
3.2.1 Spot Market Energy.
(a) At the end of each hour during an Operating Day, the
Office of the Interconnection shall calculate the load payment
for each Market Buyer's load bus. The load payment at each bus
shall be the product of the Market Buyer's megawatts of load at
such load bus in the hour times the Locational Marginal Price at
the bus. The megawatts of load at each load bus shall be the sum
of the megawatts of load for that bus of that Market Buyer as
determined by the State Estimator, plus an allocated share of
transmission losses, plus any megawatts of that Market Buyer's
bilateral sales to purchasers outside the PJM Control Area
attributable to that bus. The total load payment for each Market
Buyer shall be the sum of the load payments for each of a Market
Buyer's load busses.
(b) At the end of each hour during an Operating Day, the
Office of the Interconnection shall calculate the generation
revenue for each Generating Market Buyer's generation bus. The
generation revenue at each generation bus shall be the product of
the Generating Market Buyer's megawatts of generation at such
generation bus in the hour times the Locational Marginal Price at
the bus. The megawatts of generation at each generation bus
shall be the sum of the megawatts of generation for that bus of
that Generating Market Buyer as determined by the State
Estimator, plus any megawatts of bilateral purchases of that
Generating Market Buyer from sellers outside the PJM Control Area
attributable to that bus. The total generation revenue for each
Generating Market Buyer shall be the sum of the generation
revenues for each of the Generating Market Buyer's generation
busses.
(c) At the end of each hour during an Operating Day, the
Office of the Interconnection shall calculate a net bill for each
Market Buyer, determined as the difference between its total load
payment and its total generation revenue. The portions of the
net bill attributable to net hourly PJM Interchange and to
Transmission Congestion Charges shall be determined as set forth
below.
(d) At the end of each hour during an Operating Day, the
Office of the Interconnection shall calculate the total amount of
net hourly PJM Interchange for each Market Buyer, including
Generating Market Buyers, in accordance with the PJM Manuals.
For Internal Market Buyers, this calculation shall include
determination of the net energy flows from: (i) tie lines; (ii)
any generation resource the output of which is controlled by the
Market Buyer but delivered to it over another entity's
Transmission Facilities; (iii) any generation resource the output
of which is controlled by another entity but which is directly
interconnected with the Market Buyer's transmission system; (iv)
500 kV transmission losses; (v) deliveries pursuant to bilateral
energy sales; (vi) receipts pursuant to bilateral energy
purchases; (vii) Inadvertent Interchange allocated to the Market
Buyer; and (viii) the Market Buyer's allocated share of energy
purchased from another Control Area in connection with a Minimum
Generation Emergency in such other Control Area as specified in
Section 0(0). For External Market Buyers, this calculation shall
determine the energy delivered pursuant to the External Market
Buyer's purchase request.
(e) The Office of the Interconnection shall calculate
Locational Marginal Prices for each load and generation bus in
the PJM Control Area, in accordance with Section 0 of this
Schedule.
(f) An Internal Market Buyer shall be charged for Spot
Market Energy purchases to the extent of its hourly net PJM
Interchange Imports, determined as specified above. An External
Market Buyer shall be charged for its Spot Market Energy
purchases based on the energy delivered to it, determined as
specified above. The Office of the Interconnection shall
calculate an hourly weighted average Locational Marginal Price
for each such Market Buyer, based on the Locational Marginal
Price at each load bus and the Market Buyer's load at that bus.
The total charge shall be the Market Buyer's total net PJM
Interchange Imports times the weighted average Locational
Marginal Price.
(g) A Generating Market Buyer shall be credited as a Market
Seller for sales of Spot Market Energy to the extent of its
hourly net PJM Interchange Exports, determined as specified
above. The total credit shall be the sum of the credits
determined by the product of (i) the hourly net amount of energy
of PJM Interchange Exports at the applicable generation bus from
each of the Generating Market Buyer's generation resources
determined to be making such deliveries, times (ii) the hourly
Locational Marginal Price at that generation bus. If the Office
of the Interconnection dispatches energy to serve load in the PJM
Control Area, the pool-dispatched generation resources determined
to be making deliveries into PJM Interchange of such Generating
Market Buyer shall be those that have the highest Locational
Marginal Prices of the Market Seller's generation resources.
(h) If energy in excess of a Generating Market Buyer's
Equivalent Load flows to the PJM Control Area from a self-
scheduled resource, the Generating Market Buyer shall receive a
payment or credit for such excess energy at a rate equal to the
lesser of (i) 95% of the Locational Marginal Price at the
delivery bus for such energy, or (ii) the Locational Marginal
Price at the delivery bus for such energy if the Locational
Marginal Price is negative. For purposes of the foregoing
calculation, such excess energy shall be deemed to have been
delivered from the Generating Market Buyer's self-scheduled
resource or resources with the lowest Locational Marginal Price
or Prices at the time of delivery. Revenues attributable to the
difference between the market clearing price in the PJM
Interchange Energy Market and payments or credits for excess
energy from self-scheduled resources shall be used by the Office
of the Interconnection to reduce or offset PJM Control Area costs
for Operating Reserves.
3.2.2 Regulation.
(a) Each Internal Market Buyer shall have an hourly
Regulation objective equal to its pro rata share of the PJM
Control Area Regulation requirements for the hour, based on the
Market Buyer's total load in the PJM Control Area for the hour.
A Generating Market Buyer supplying Regulation at the
direction of the Office of the Interconnection in excess of its
hourly Regulation obligation shall be credited for each increment
of such Regulation at the price in that hour for the Regulation
Class from which the Regulation was supplied, as determined by
the Office of the Interconnection in accordance with procedures
specified in the PJM Manuals. An Internal Market Buyer that does
not meet its hourly Regulation obligation shall be charged for
Regulation dispatched by the Office of the Interconnection to
meet such obligation at the average price paid by the Office of
the Interconnection for Regulation.
3.2.3 Operating Reserves.
(a) A Market Seller's pool-scheduled resources capable of
providing operating reserves shall be credited as specified below
based on the prices offered for the operation of such resource,
provided that the resource was available for the entire time
specified in the Offer Data for such resource.
(b) At the end of each Operating Day, the following
determination shall be made for each synchronized pool-scheduled
resource of each Market Seller: the total offered price for
start-up and no-load fees and Spot Market Energy, determined on
the basis of the resource's actual output or available and
requested time and type of operation, shall be compared to the
total value of that resource's Spot Market Energy. If the total
offered price exceeds the total value, the difference shall be
credited to the Market Seller. Market Sellers shall also be
credited on the basis of their offered prices for synchronized
condensing for any hydropower or combustion turbine units
operated as synchronous condensers at the request of Office of
the Interconnection but producing no energy.
(c) The sum of the foregoing credits, plus any cancellation
fees paid in accordance with Section 1.10.2(d), less any amounts
received in accordance with Sections 1.10.5(d), 1.10.6(d) and
3.2.1(h) of this Schedule and payments received from another
Control Area for Operating Reserves or from users of Point-to-
Point Transmission Service within the PJM Control Area for
imbalance service, shall be the cost of Operating Reserves for
the PJM Control Area for each Operating Day.
(d) The cost of Operating Reserves for each Operating Day
shall be allocated and charged to each Market Buyer in proportion
to its total load during that Operating Day in the PJM Control
Area.
3.2.4 Transmission Congestion.
Each Market Buyer shall be charged or credited for
Transmission Congestion Charges as specified in Section 5 of this
Schedule.
3.2.5 Transmission Losses.
(a) Whenever the Office of the Interconnection has in place
appropriate computer hardware, software, and other necessary
resources to account for marginal losses in the dispatch of
energy and the calculation of Locational Marginal Prices, loss
accounting shall be determined on that basis, and the provisions
of this Section shall be revised accordingly. Until such time,
the following accounting provisions for losses shall apply.
(b) Each Internal Market Buyer shall be credited in an
amount equal to its pro rata share of the hourly total amounts
collected from Transmission Customers either as charges for
transmission losses in the PJM Control Area as specified in
Section 3.4.2 or for transmission losses supplied in kind in
accordance with Section 3.4.2(c) based on the Locational Marginal
Price at the interface where such losses were delivered. This
credit shall be determined by the ratio of the Internal Market
Buyer's total hourly load, divided by the total hourly load in
the PJM Control Area.
(c) PJM Control Area 500 kV losses shall be allocated to
each Internal Market Buyer in proportion to its hourly load in
the PJM Control Area.
3.2.6 Emergency Energy.
(a) Internal Market Buyers shall be allocated a
proportionate share of the net cost of Emergency energy purchased
by the Office of the Interconnection. Such allocated share shall
be determined in proportion to the amount of net PJM Interchange
Imports by each Internal Market Buyer during the hour of each
such energy purchase.
(b) Net revenues in excess of Locational Marginal Prices
attributable to sales of energy in connection with Emergencies to
other Control Areas shall be credited to Internal Market Buyers
in proportion to the amount of net PJM Interchange Imports by
each Internal Market Buyer during each hour of such energy sales.
(c) The costs, revenues, and energy associated with hourly
energy purchased from another Control Area in connection with a
Minimum Generation Emergency in such other Control Area, shall be
allocated to each Internal Market Buyer in proportion to its load
in the PJM Control Area during the hour of such purchases.
3.2.7 Billing.
(a) The Office of the Interconnection shall prepare a
billing statement each billing cycle for each Market Buyer in
accordance with the charges and credits specified in Sections
3.2.1 through 3.2.6 of this Schedule, and showing the net amount
to be paid or received by the Market Buyer. Billing statements
shall provide sufficient detail, as specified in the PJM Manuals,
to allow verification of the billing amounts and completion of
the Market Buyer's internal accounting.
(b) If deliveries to a Market Buyer that has PJM Interchange
meters in accordance with Section 14 of the Operating Agreement
include amounts delivered for a Market Participant that does not
have PJM Interchange meters separate from those of the metered
Market Buyer, the Office of the Interconnection shall prepare a
separate billing statement for the unmetered Market Participant
based on the allocation of deliveries agreed upon between the
Market Buyer and the unmetered Market Participant specified by
them to the Office of the Interconnection.
3.3 Market Sellers.
Except as provided in the following sentence, the accounting
and billing principles and procedures applicable to Generating
Market Buyers functioning as Market Sellers shall be as set forth
in Section 3.2. This Section sets forth the accounting and
billing principles and procedures applicable to all other Market
Sellers, and to Generating Market Buyers functioning as Market
Sellers with respect to any matters not specified in Section 3.2.
3.3.1 Spot Market Energy.
(a) At the end of each hour during an Operating Day, the
Office of the Interconnection shall determine the total net
amount of hourly energy delivered to the PJM Control Area by each
pool-scheduled or pool-dispatched resource of each Market Seller,
in accordance with the PJM Manuals and the calculation described
in Section 3.2.1(d).
(b) The Office of the Interconnection shall calculate
Locational Marginal Prices for each generation and load bus in
the PJM Control Area, including the bus at each point of
interconnection between the PJM Control Area and each adjacent
Control Area, in accordance with Section 0 of this Schedule.
(c) A Market Seller shall be credited for sales of Spot
Market Energy to the extent of its hourly net deliveries of
energy to the PJM Control Area from the Market Seller's pool-
scheduled or pool-dispatched resources. For pool-scheduled
resources that are External Resources, the Office of the
Interconnection shall model, based on an appropriate flow
analysis, the hourly amounts delivered from each such resource to
the corresponding interface point between the PJM Control Area
and adjacent Control Areas. The total credit for each Market
Seller shall be the sum of its credits determined by the product
of (i) the hourly net amount of energy delivered to the PJM
Control Area at the applicable generation or interface bus from
each of the Market Seller's pool-scheduled or pool-dispatched
resources, times (ii) the hourly Locational Marginal Price at
that bus.
(d) Market Sellers, including Generating Market Buyers,
shall be charged for non-delivery of Spot Market Energy from
resources that are not Capacity Resources, as specified in
Section 1.10.5(d) of this Schedule.
3.3.2 Regulation.
Each Market Seller that is also an Internal Market Buyer
shall have an hourly Regulation objective as specified in Section
3.2.2(a), and shall be credited or charged in connection
therewith as specified in Section 3.2.2(b). All other Market
Sellers supplying Regulation at the direction of the Office of
the Interconnection shall be credited for each increment of such
Regulation at the price in that hour for the Regulation Class
from which the Regulation was supplied, as determined by the
Office of the Interconnection in accordance with procedures
specified in the PJM Manuals.
3.3.3 Operating Reserves.
A Market Seller shall be credited for its pool-scheduled
resources based on the prices offered for the operation of such
resource, provided that the resource was available for the entire
time specified in the Offer Data for such resource, in accordance
with the procedures set forth in Section 3.2.3(b).
3.3.4 Emergency Energy.
The costs and net revenues associated with hourly energy
sales to other Control Areas in connection with a Minimum
Generation Emergency in the PJM Control Area shall be allocated
to Market Sellers in proportion to their sales to the PJM
Interchange Energy Market from generation resources within the
metered boundaries of the PJM Control Area in each hour in which
such energy was sold to other Control Areas.
3.3.5 Billing.
The Office of the Interconnection shall prepare a billing
statement each billing cycle for each Market Seller in accordance
with the charges and credits specified in Sections 3.3.1 through
3.3.4 of this Schedule, and showing the net amount to be paid or
received by the Market Seller. Billing statements shall provide
sufficient detail, as specified in the PJM Manuals, to allow
verification of the billing amounts and completion of the Market
Seller's internal accounting.
3.4 Transmission Customers.
3.4.1 Transmission Congestion.
Each Transmission Customer shall be charged and credited for
Transmission Congestion Charges as specified in Section 5 of this
Schedule.
3.4.2 Transmission Losses
(a) Whenever the Office of the Interconnection has in place
appropriate computer hardware, software, and other necessary
resources to account for marginal losses in the dispatch of
energy and the calculation of Locational Marginal Prices, loss
accounting shall be determined on that basis, and the provisions
of this Section shall be revised accordingly. Until such time,
the following accounting provisions for losses shall apply.
(b) Transmission Customers other than entities that are also
Internal Market Buyers shall be charged for transmission losses
in an amount equal to the product of (i) the Transmission
Customer's megawatt-hours of deliveries using Point-to-Point
Transmission Service, times (ii) the appropriate loss factor for
deliveries using Point-to-Point Transmission Service, times (iii)
the weighted average Locational Marginal Price for all load
busses in the PJM Control Area. The foregoing average hourly
loss factor shall be: (i) determined by the Office of the
Interconnection from time to time as conditions affecting losses
shall warrant; and (ii) calculated separately for on-peak and
off-peak hours on the basis of the average ratio of losses to
load served in each such period.
(c) A Transmission Customer may elect to pay for losses in
kind, rounded off to the nearest whole megawatt, rather than as
specified above if its total deliveries in an hour using Point-
to-Point Transmission Service are greater than 200 megawatts. If
it so elects, the Transmission Customer's specified source for
the energy to be delivered using Point-to-Point Transmission
Service may be scheduled to supply to the PJM Control Area
boundary an amount of energy equal to the delivery schedule plus
the amount of losses determined by applying the appropriate
hourly loss factor as specified above to the delivered amount.
3.4.3 Billing.
The Office of the Interconnection shall prepare a billing
statement each billing cycle for each Transmission Customer in
accordance with the charges and credits specified in Sections 0
through 0 of this Schedule, and showing the net amount to be paid
or received by the Transmission Customer. Billing statements
shall provide sufficient detail, as specified in the PJM Manuals,
to allow verification of the billing amounts and completion of
the Transmission Customer's internal accounting.
3.5 Other Control Areas.
3.5.1 Energy Sales.
To the extent appropriate in accordance with Good Utility
Practice, the Office of the Interconnection may sell energy to an
interconnected Control Area as necessary to alleviate or end an
Emergency in that Control Area. Such sales shall be made (i)
only to Control Areas that have undertaken a commitment pursuant
to a written agreement with the LLC to sell energy on a
comparable basis to the PJM Control Area, and (ii) only to the
extent consistent with the maintenance of reliability in the PJM
Control Area. The Office of the Interconnection may decline to
make such sales to a Control Area that the Office of the
Interconnection determines does not have in place and implement
Emergency procedures that are comparable to those followed in the
PJM Control Area. If the Office of the Interconnection sells
energy to an interconnected Control Area as necessary to
alleviate or end an Emergency in that Control Area, such energy
shall be sold at 150% of the Locational Marginal Price at the bus
or busses at the border of the PJM Control Area at which such
energy is delivered.
3.5.2 Operating Margin Sales.
The extent appropriate in accordance with Good Utility
Practice, the Office of the Interconnection may sell Operating
Margin to an interconnected Control Area as requested to
alleviate an operating contingency resulting from the affect of
the purchasing Control Area's operations on the dispatch of
resources in the PJM Control Area. Such sales shall be made only
to Control Areas that have undertaken a commitment pursuant to a
written agreement with the Office of the Interconnection (i) to
purchase Operating Margin whenever the purchasing Control Area's
operations will affect the dispatch of resources in the PJM
Control Area, and (ii) to sell Operating Margin on a comparable
basis to the LLC.
3.5.3 Transmission Congestion.
Each Control Area purchasing Operating Margin shall be
assessed Transmission Congestion Charges as specified in Section
5.1.5 of this Schedule.
3.5.4 Billing.
The Office of the Interconnection shall prepare a billing
statement each billing cycle for each Control Area to which
Emergency energy or Operating Margin was sold, and showing the
net amount to be paid by such Control Area. Billing statements
shall provide sufficient detail, as specified in the PJM Manuals,
to allow verification of the billing amounts.
3.6 Metering Reconciliation.
3.6.1 Meter Correction Billing.
Metering errors and corrections will be reconciled at the
end of each month by a meter correction charge or credit. The
monthly meter correction charge or credit shall be determined by
the product of the positive or negative deviation in energy
amounts, times the weighted average Locational Marginal Price for
the affected Market Buyer.
3.6.2 Meter Corrections Between Market Participants.
If a Market Participant or the Office of the Interconnection
discovers a meter error affecting an interchange of energy with
another Market Participant and makes the error known to such
other Market Participant prior to the completion by the Office of
the Interconnection of the accounting for the interchange, and if
both Market Participants are willing to adjust hourly load
records to compensate for the error and such adjustment does not
affect other parties, an adjustment in load records may be made
by the Market Participants in order to correct for the meter
error, provided corrected information is furnished to the Office
of the Interconnection in accordance with the Office of the
Interconnection's accounting deadlines. No such adjustment may
be made if the accounting for the Operating Day in which the
interchange occurred has been completed by the Office of the
Interconnection.
3.6.3 500 kV Meter Errors.
Billing cycle accounting for 500 kV transmission losses
shall be adjusted to account for errors in meters on 500 kV
Transmission Facilities.
3.6.4 Meter Corrections Between Control Areas.
An error between accounted for and metered interchange
between a Party in the PJM Control Area and an entity in another
Control Area shall be corrected by adjusting the hourly meter
readings. If this is not practical, the error shall be accounted
for by a correction at the end of the billing cycle. The Market
Participant with ties to such other Control Area experiencing the
error shall account for the full amount of the discrepancy and an
appropriate debit or credit shall be applied equally among all
Market Buyers. The Office of the Interconnection will adjust the
actual interchange between the PJM Control Area and the other
Control Area to maintain a proper record of inadvertent energy
flow. Meter corrections on the 500 kV system between the PJM
Control Area and other Control Areas shall be accounted for
through the internal 500 kV system meter error allocation at the
end of the billing cycle.
3.6.5 Meter Correction Data.
Meter error data shall be submitted to the Office of the
Interconnection not later than noon on the second working day of
the Office of the Interconnection after the end of the billing
cycle applicable to the meter correction.
3.6.6 Correction Limits.
A Market Participant may not assert a claim for an
adjustment in billing as a result of a meter error for any error
discovered more than two years after the date on which the
metering occurred. Any claim for an adjustment in billing as a
result of a meter error shall be limited to bills for
transactions occurring in the most recent annual accounting
period of the billing Market Participant in which the meter error
occurred, and the prior annual accounting period.
4. RATE TABLE
4.1 Offered Price Rates.
Spot Market Energy, Regulation, Operating Reserve, and
Transmission Congestion are based on offers to the Office of the
Interconnection specified in this Agreement.
4.2 Transmission Losses.
Average loss factors shall be as specified in the PJM
Tariff.
4.3 Emergency Energy Purchases.
The pricing for Emergency energy purchases will be
determined by the Office of the Interconnection and the adjacent
Control Area, in accordance with an agreement between the Office
of the Interconnection and such adjacent Control Area that
complies with this Agreement.
5. CALCULATION OF TRANSMISSION CONGESTION CHARGES AND CREDITS
5.1 Transmission Congestion Charge Calculation
5.1.1 Calculation by Office of the Interconnection.
When the transmission system is operating under constrained
conditions, the Office of the Interconnection shall calculate
Transmission Congestion Charges for each Network Service User,
the PJM Interchange Energy Market, and each Transmission
Customer.
5.1.2 General.
The basis for the Transmission Congestion Charges shall be
the Locational Marginal Prices determined in accordance with
Section 2 of this Schedule.
5.1.3 Network Service User Calculation.
Each Network Service User shall be charged for the increased
cost of energy incurred by it during each constrained hour to
deliver the output of its firm Capacity Resources or other owned
or contracted for resources, its firm bilateral purchases, and
its non-firm bilateral purchases as to which it has elected to
pay Transmission Congestion Charges. The Transmission Congestion
Charge for deliveries from each such source shall be the Network
Service User's hourly net bill less its hourly net PJM
Interchange payments or sales as determined in accordance with
Section 3.2.1 or Sections 3.3 and 3.3.1 of this Schedule.
5.1.4 Transmission Customer Calculation.
Each Transmission Customer using Firm Point-to-Point
Transmission Service (as defined in the PJM Tariff), and each
Transmission Customer using Non-Firm Point-to-Point Transmission
Service (as defined in the PJM Tariff) that has elected to pay
Transmission Congestion Charges, shall be charged for the
increased cost of energy during constrained hours for the
delivery of energy using Point-to-Point Transmission Service.
The Transmission Congestion Charge for each such delivery shall
be the delivery amount multiplied by the difference between the
Locational Marginal Price at the delivery interface and the
Locational Marginal Price at the source interface, or for Market
Sellers using point-to-point transmission service for deliveries
out of the PJM Control Area from generating resources within the
PJM Control Area shall be the amount of its net bill less its net
hourly PJM Interchange payments or sales as determined in
accordance with Section 3.3 of this Schedule.
5.1.5 Operating Margin Customer Calculation.
Each Control Area purchasing Operating Margin shall be
assessed Transmission Congestion Charges for any the increase in
the cost of energy resulting from the provision of Operating
Margin. The Transmission Congestion Charge shall be the amount
of Operating Margin purchased in an hour multiplied by the
difference in the Locational Marginal Price at what would be the
delivery interface and the Locational Marginal Price at what
would be the source interface, if the operating contingency that
was the basis for the purchase of Operating Margin had occurred
in that hour. Operating Margin may be allocated among multiple
source and delivery interfaces in accordance with an applicable
load flow study.
5.1.6 Total Transmission Congestion Charges.
The total Transmission Congestion Charges collected by the
Office of the Interconnection each hour will be the sum of the
amounts determined as specified in this Schedule. The Office of
the Interconnection shall collect Transmission Congestion Charges
for each hour the transmission system operates under constrained
conditions.
5.2 Transmission Congestion Credit Calculation.
5.2.1 Eligibility.
Each Transmission Customer using firm Point-to-Point
Transmission Service and each Network Service User shall receive
as a Transmission Congestion Credit a proportional share of the
total Transmission Congestion Charges collected for each
constrained hour.
5.2.2 Fixed Transmission Rights
(a) Transmission Congestion Credits will be calculated based
upon the Fixed Transmission Rights of each Network Service User
and Transmission Customer, determined as specified below.
(b) Each Network Service User shall designate a subset of
its Network Resources for which Fixed Transmission Rights will be
assigned. The Fixed Transmission Right for each Network Resource
shall be a number of megawatts equal to or less than the
installed capacity summer megawatt rating of each designated
Network Resource, determined at the PJM Control Area transmission
bus at which the designated Network Resource is connected to the
aggregate load busses of the Network Service User. The sum of
each Network Service User's Fixed Transmission Rights must be
equal to or less than the Network Service User's projected annual
peak load.
(c) Each Transmission Customer receiving firm Point-to-Point
Transmission Service shall be assigned Fixed Transmission Rights.
The Fixed Transmission Right for each instance of Point-to-Point
Transmission Service shall be a number of megawatts equal to the
megawatts of firm service being provided between the receipt and
delivery points as to which the Transmission Customer has firm
Point-to-Point Transmission Service.
(d) The foregoing assignment of Fixed Transmission Rights
shall be enhanced by an amendment to this Schedule, to be filed
with FERC not later than December 31, 1997, that will provide for
an auction of Fixed Transmission Rights over and above those FTRs
obtained and retained by Network Service Users and Transmission
Customers then receiving firm Point-to-Point Transmission Service
(including firm Point-to-Point transmission service for existing
bilateral contracts), such auction to be implemented as soon
after December 31, 1997 as shall be determined by the Office of
the Interconnection to be reasonably practical. For so long as
Fixed Transmission Rights are assigned on the basis of Network
Transmission Service and firm Point-to-Point Transmission
Service, any Fixed Transmission Rights awarded pursuant to an
auction shall be simultaneously feasible with all Network
Transmission Service and firm Point-to-Point Transmission Service
obligations. The Members specified in Section 11.5(c) of the
Agreement, working with the Office of the Interconnection, shall
develop the details of the implementation of such an auction,
including but not limited to the nature of the bidding process,
the frequency of auctions, and the duration of the Fixed
Transmission Rights purchased at auction.
5.2.4 Target Allocation for Network Service Users.
A target allocation of Transmission Congestion Credits for
each Network Service User shall be determined for each of its
Fixed Transmission Rights. Each Fixed Transmission Right shall
be multiplied by the percent of the Network Service User's annual
peak load assigned to each load bus multiplied by the difference
calculated as the Network Service User's load bus Locational
Marginal Price minus the generation bus Locational Marginal Price
of the Network Resource associated with the Fixed Transmission
Right. The total target allocation for each Fixed Transmission
Right is the sum of the target allocations for each load bus.
The total target allocation for each Network Service User for
each hour is the sum of the total target allocations for each of
the Network Service User's Fixed Transmission Rights.
5.2.4 Target Allocation for other Holders.
A target allocation of Transmission Congestion Credits for
each Transmission Customer or entity holding an FTR acquired by
other means shall be determined for each Fixed Transmission
Right. Each Fixed Transmission Right shall be multiplied by the
hourly Locational Marginal Price differences for the receipt and
delivery points associated with the Fixed Transmission Right,
calculated as the Locational Marginal Price at the delivery
point(s) minus the Locational Marginal Price at the receipt
point(s). The total target allocation for the Transmission
Customer for each hour shall be the sum of the target allocations
associated with all of the Transmission Customer's Fixed
Transmission Rights.
5.2.5 Calculation of Transmission Congestion Credits
(a) The total of all the target allocations determined as
specified above shall be compared to the total Transmission
Congestion Charges in each hour. If the total of the target
allocations is less than the total of the Transmission Congestion
Charges, the Transmission Congestion Credit for each Network
Service User and Transmission Customer shall be equal to its
target allocation. All remaining Transmission Congestion Charges
shall be distributed as described below in Section 5.2.6
"Distribution of Excess Congestion Charges."
(b) If the total of the target allocations is greater than
the total Transmission Congestion Charges for the hour, each
holder of Fixed Transmission Rights shall receive a share of the
total Transmission Congestion Charges in proportion to its target
allocations.
5.2.6 Distribution of Excess Congestion Charges
(a) Excess Transmission Congestion Charges accumulated in a
month shall be distributed to each holder of Fixed Transmission
Rights in proportion to, but not more than, any deficiency in the
share of Transmission Congestion Charges received by the holder
during that month as compared to its total target allocations for
the month.
(b) Any excess Transmission Congestion Charges remaining at
the end of a month shall be distributed to Network Service Users
and Transmission Customers purchasing Firm Point-to-Point
Transmission Service in proportion to their Demand Charges for
Network Service and their charges for Reserved Capacity for Firm
Point-to-Point Transmission Service.
<PAGE>
SCHEDULE 2
Revision No. 2
COMPONENTS OF COST
Issued: June 2, 1997
Effective: August 1, 1997
(a) Each Market Participant obligated to sell operating
capacity on the PJM Interchange Energy Market at cost-based rates
shall include the following components or their equivalent in the
determination of costs for operating capacity supplied to or from
the Interconnection:
(1) Boilers
Firing-up cost;
No-load cost during period of operation;
Peak-prepared-for maintenance cost;
Incremental labor cost; and
Other incremental operating costs.
(2) Machines
Starting cost from cold to synchronized operation;
No-load cost during period of operation;
Incremental labor cost; and
Other incremental operating costs.
b) Each Member obligated to sell energy on the PJM
Interchange Energy Market at cost-based rates shall include the
following components or their equivalent in the determination of
costs for energy supplied to the Interconnection:
Incremental fuel cost;
Incremental maintenance cost;
Incremental labor cost; and
Other incremental operating costs.
(c) All fuel costs shall employ the marginal fuel price
experienced by the Member.
(d) The PJM Board, upon consideration of the advice and
recommendations of the Members Committee, shall from time to time
define in detail the method of determining the costs entering
into the said components, and the Members shall adhere to such
definitions in the preparation of incremental costs used on the
Interconnection.
<PAGE>
SCHEDULE 2 -- EXHIBIT A
EXPLANATION OF THE TREATMENT OF THE COSTS OF
EMISSION ALLOWANCES
Issued: June 2, 1997
Effective: August 1, 1997
The cost of emission allowances is included in "Other
Incremental Operating Costs" pursuant to Schedule 2. The
replacement cost of emission allowances will be used to recover
the cost of emission allowances consumed as a result of producing
energy for the Interconnection.
Index
Consistent with definitions promulgated by the PJM Board
upon consideration of the advice and recommendations of the
Members Committee under Schedule 2, each Member subject to
Schedule 2 will determine and provide to the Interconnection its
replacement cost of emission allowances, such cost to be an
amount not exceeding the market price index published by Cantor-
Fitzgerald Environmental Brokerage Services ("EBS"), or a PJM
Board approved index in the event that EBS should cease
publication of such index. As with all other components of cost
required for accounting under this Agreement, each Member subject
to Schedule 2 will use the same replacement cost of emissions
allowances, so determined, as it uses for coordinating operation
of its generating facilities hereunder. For each Member subject
to Schedule 2, the cost of emissions allowances is included in
the cost of energy supplied to or received from the
Interconnection.
Payment
The Members subject to Schedule 2 waive the right of
payment-in-kind for emission allowances for transactions wholly
between the parties. Cash payments for emission allowances
consumed in providing energy for the Interconnection shall be
incorporated into and conducted pursuant to the billing
procedures for energy prescribed by this Agreement.
Calculation of Emission Allowance Amount and Cost
Pursuant to the letter from the PJM Interconnection to FERC
dated June 26, 1995, the calculation of an annual average for the
cost of emission allowances, described below, is required due to
the profile of the PJM physical system and PJM Energy Management
software system. Approximately five hundred and forty generating
units comprise the PJM system, of which 9 units are Phase I
units. Current real-time operational software and hardware tools
used in the transaction of energy do not identify individual
units, and therefore do not identify Phase I units. (The pool
has contracted with a vendor to supply a new Energy Management
System to be installed over the next several years.) It is
currently not possible for system operators to provide actual
individual unit emission allowance costs in real time transaction
quotations. An average emission allowance cost based on a
standard production cost study case will be used to calculate the
average cost of emission allowances for each pool megawatt
produced. This cost for the current year is less than 0.2
dollars per megawatt-hour.
In summary, for the above-mentioned reasons, it is not
practical nor cost effective to provide actual individual
emission allowance costs in real-time transaction quotations.
Therefore, the annual average method is proposed.
The Emission Allowances (Tons of SO2)associated with a
transaction will be calculated by multiplying the magnitude of a
transaction (MWhr) by an Emissions per MWHr Factor (Tons of
SO2 per MWhr):
Emission Transaction Emissions
Allowances = Magnitude x per MWhr
Used Factor
(Tons of S0 2 ) (MWhr) (Tons of SO2 per MWhr)
The Emissions per MWHr Factor will be calculated by dividing
the forecast annual emissions from all Phase I units (Tons of
S02) by the Forecast Annual Total PJM Energy Production (MWhr):
Emissions
per MWhr = Forecast Annual Phase I Unit Emissions
(Tons of S0 2 )
Factor Forecast Annual Total PJM Energy Production
(MWhr)
(Tons of S02
per MWhr)
Likewise, the cost (Dollars) of the Emission Allowances for
a transaction will be calculated by multiplying the transaction
magnitude (MWhr) by a Charge per MWhr Factor (Dollars per MWHr).
Cost of Emission Transaction Charge
Allowances Used = Magnitude x per MWhr Factor
(Dollars) (MWhr) (Dollars per MWhr)
The Charge per MWhr Factor will be calculated by
multiplying, for each Member subject to Schedule 2, its Forecast
Annual Emissions (Tons of S02)by its respective Emissions
Allowance Replacement Cost (Dollars per Ton of S02) to yield each
the forecasted annual cost of emissions (Dollars). Then, the
total of forecasted annual cost of emissions for each Member
subject to Schedule 2 is divided by the Forecast Annual Total PJM
Energy Production (MWhr) to determine the Charge per MWHr Factor
(Dollars per MWHr).
Charge per
MWhr Factor = S (A x B) , where:
C
A = Member's Forecasted Annual Emissions, (Tons of SO2)
B = Emission Allowance Replacement Cost, (Dollars per Ton of
SO2 , per company)
C = Forecast Annual PJM Energy Production, (MWhr)
<PAGE>
SCHEDULE 3
Revision No. 6
ALLOCATION OF THE COST AND EXPENSES
OF THE OFFICE OF THE INTERCONNECTION
Issued: June 2, 1997
Effective: August 1, 1997
(a) Each group of Affiliates, each group of Related Parties,
and each Member that is not in such a group shall pay an annual
membership fee, the proceeds of which shall be used to defray the
costs and expenses of the LLC, including the Office of the
Interconnection. The amount of the annual fee as of the
Effective Date shall be $5,000. The amount of the annual
membership fee shall be adjusted from time to time by the PJM
Board to keep pace with inflation.
(b) All remaining costs of the operation of the LLC and the
Office of the Interconnection and the expenses, including,
without limitation, the costs of any insurance and any claims not
covered by insurance, associated therewith as provided in this
Agreement shall be costs of Scheduling, System Control and
Dispatching Service under the PJM Tariff and shall be recovered
pursuant to the PJM Tariff.
(c) An entity accepted for membership in the LLC shall pay
all costs and expenses associated with additions and
modifications to its own metering, communication, computer, and
other appropriate facilities and procedures needed to effect the
inclusion of the entity in the operation of the Interconnection.
<PAGE>
SCHEDULE 4
Revision No. 1
STANDARD FORM OF AGREEMENT TO BECOME A MEMBER OF THE LLC
Issued: June 2, 1997
Effective: August 1, 1997
Any entity which wishes to become a Member of the LLC shall,
pursuant to Section 0 of this Agreement, tender to the President
an application, upon the acceptance of which it shall execute a
supplement to this Agreement in the following form:
Additional Member Agreement
1. This Additional Member Agreement (the "Supplemental
Agreement"), dated as of
__________________, is entered into among _____________ and the
President of the LLC acting on behalf of its Members.
2. _____________ has demonstrated that it meets all of the
qualifications required of a Member to the Operating Agreement.
If expansion of the PJM Control Area is required to integrate
____________________'s facilities, a copy of Attachment J from
the PJM Tariff marked to show changes in Control Area boundaries
is attached hereto. ____________________ agrees to pay for all
required metering, telemetering and hardware and software
appropriate for it to become a member.
3. ______________________ agrees to be bound by and accepts all
the terms of the Operating Agreement as of the above date.
4. _________________________ hereby gives notice that the name
and address of its initial representative to the Members
Committee under the Operating Agreement shall be:
________________________________________________________________
5. The President of the LLC is authorized under the Operating
Agreement to execute this Supplemental Agreement on behalf of the
Members and to file it with regulatory authorities having
jurisdiction.
6. The Operating Agreement is hereby amended to include
___________ as a Member of the LLC thereto, effective as of
___________________, _____.
IN WITNESS WHEREOF, _______________________ and the Members
of the LLC have caused this Supplemental Agreement to be executed
by their duly authorized representatives.
Members of the LLC
By:
Name:
Title: President
By:
Name:
Title:
<PAGE>
SCHEDULE 5
Revision No. 1
PJM DISPUTE RESOLUTION PROCEDURES
Issued: June 2, 1997
Effective: August 1, 1997
1. DEFINITIONS
1.1 Alternate Dispute Resolution Committee.
"Alternate Dispute Resolution Committee" shall mean the
Committee established pursuant to Section 0 of this Schedule.
1.2 MAAC Dispute Resolution Committee.
"MAAC Dispute Resolution Committee" shall mean the committee
established by the Mid-Atlantic Area Council to administer its
industry-specific mechanism for resolving certain types of
wholesale electricity disputes.
1.3 Related PJM Agreements.
"Related PJM Agreements" shall mean this Agreement, the
Transmission Owners Agreement, and the Reliability Assurance
Agreement.
2. PURPOSES AND OBJECTIVES
2.1 Common and Uniform Procedures.
The PJM Dispute Resolution Procedures are intended to
establish common and uniform procedures for resolving disputes
arising under the Related PJM Agreements. To the extent any of
the foregoing agreements or the PJM Tariff contain dispute
resolution provisions expressly applicable to disputes arising
thereunder, however, this Agreement shall not supplant such
provisions, which shall apply according to their terms.
2.2 Interpretation.
To the extent permitted by applicable law, the PJM Dispute
Resolution Procedures are to be interpreted to effectuate the
objectives set forth in Section 2.1. To the extent permitted by
these PJM Dispute Resolution Procedures, the Alternate Dispute
Resolution Committee shall coordinate with the MAAC Dispute
Resolution Committee, where appropriate, in order to conserve
administrative resources and to avoid duplication of dispute
resolution staffing.
NEGOTIATION AND MEDIATION
3.1 When Required.
The parties to a dispute shall undertake good-faith
negotiations to resolve any dispute as to a matter governed by
one of the Related PJM Agreements. Each party to a dispute shall
designate an executive with authority to resolve the matter in
dispute to participate in such negotiations. Any dispute as to a
matter governed by one of the Related PJM Agreements that has not
been resolved through good-faith negotiation shall be subject to
non-binding mediation prior to the initiation of arbitral,
regulatory, judicial, or other dispute resolution proceedings as
may be appropriate as provided by these PJM Dispute Resolution
Procedures.
3.2 Procedures.
3.2.1 Initiation.
If a dispute that is subject to the mediation procedures
specified herein has not been resolved through good-faith
negotiation, a party to the dispute shall notify the Alternate
Dispute Resolution Committee in writing of the existence and
nature of the dispute prior to commencing any other form of
proceeding for resolution of the dispute. The Alternate Dispute
Resolution Committee shall have ten calendar days from the date
it first receives notification of the existence of a dispute from
any of the parties to the dispute in which to distribute to the
parties a list of mediators.
3.2.2 Selection of Mediator.
The Chair of the Alternate Dispute Resolution Committee
shall distribute to the parties by facsimile or other electronic
means a list containing the names of seven mediators with
mediation experience, or with technical or business experience in
the electric power industry, or both, as it shall deem
appropriate to the dispute. The Chair of the Alternate Dispute
Resolution Committee may draw from the lists of mediators
maintained by the MAAC Dispute Resolution Committee, as the Chair
shall deem appropriate. The persons on the proposed list of
mediators shall have no official, financial, or personal conflict
of interest with respect to the issues in controversy, unless the
interest is fully disclosed in writing to all participants in the
mediation process and all such participants waive in writing any
objection to the interest. The parties shall alternate in
striking names from the list with the last name on the list
becoming the mediator. The determination of which party shall
have the first strike off the list shall be determined by lot.
The parties shall have ten calendar days to complete the mediator
selection process, unless the time is extended by mutual
agreement.
3.2.3 Advisory Mediator.
If the Alternate Dispute Resolution Committee deems it
appropriate, it shall distribute two lists, one containing the
names of seven mediators with mediation experience, and one
containing the names of seven mediators with technical or
business experience in the electric power industry. In
connection with circulating the foregoing lists, the Alternate
Dispute Resolution Committee shall specify one of the lists as
containing the proposed mediators, and the other as a list of
proposed advisors to assist the mediator in resolving the
dispute. The parties shall then utilize the alternative strike
procedure set forth above until one name remains on each list,
with the last named persons serving as the mediator and advisor.
3.2.4 Mediation Process.
The disputing parties shall attempt in good faith to resolve
their dispute in accordance with procedures and a timetable
established by the mediator. In furtherance of the mediation
efforts, the mediator may:
(a) Require the parties to meet for face-to-face
discussions, with or without the mediator;
(b) Act as an intermediary between the disputing parties;
(c) Require the disputing parties to submit written
statements of issues and positions;
(d) If requested by the disputing parties at any time in the
mediation process, provide a written recommendation on resolution
of the dispute including, if requested, the assessment by the
mediator of the merits of the principal positions being advanced
by each of the disputing parties; and
(e) Adopt, when appropriate, the Center for Public Resources
Model ADR Procedures for the Meditation of Business Disputes (as
revised from time to time) to the extent such Procedures are not
inconsistent with any rule, standard, or procedure adopted by the
Alternate Dispute Resolution Committee or with any provision of
this Agreement.
3.2.5 Mediator's Assessment.
(a) If a resolution of the dispute is not reached by the
thirtieth day after the appointment of the mediator or such later
date as may be agreed to by the parties, if not previously
requested to do so the mediator shall promptly provide the
disputing parties with a written, confidential, non-binding
recommendation on resolution of the dispute, including the
assessment by the mediator of the merits of the principal
positions being advanced by each of the disputing parties. The
recommendation may incorporate or append, if and as the mediator
may deem appropriate, any recommendations or any assessment of
the positions of the parties by the advisor, if any. Upon
request, the mediator shall provide any additional
recommendations or assessments the mediator shall deem
appropriate.
(b) At a time and place specified by the mediator after
delivery of the foregoing recommendation, the disputing parties
shall meet in a good faith attempt to resolve the dispute in
light of the recommendation of the mediator. Each disputing party
shall be represented at the meeting by a person with authority to
settle the dispute, along with such other persons as each
disputing party shall deem appropriate. If the disputing parties
are unable to resolve the dispute at or in connection with this
meeting, then: (i) any disputing party may commence such
arbitral, judicial, regulatory or other proceedings as may be
appropriate as provided in the PJM Dispute Resolution Procedures;
and (ii) the recommendation of the mediator, and any statements
made by any party in the mediation process, shall have no further
force or effect, and shall not be admissible for any purpose, in
any subsequent arbitral, administrative, judicial, or other
proceeding.
3.3 Costs.
Except as specified in Section 0, the costs of the time,
expenses, and other charges of the mediator and any advisor, and
of the mediation process, shall be borne by the parties to the
dispute, with each side in a mediated matter bearing one-half of
such costs, and each party bearing its own costs and attorney's
fees incurred in connection with the mediation.
4. ARBITRATION
4.1 When Required.
Any dispute as to a matter: (i) governed by one of the
Related PJM Agreements that has not been resolved through the
mediation procedures specified herein, (ii) involving a claim
that one or more of the parties owes or is owed a sum of money,
and (iii) the amount in controversy is less than $1,000,000.00,
shall be subject to binding arbitration in accordance with the
procedures specified herein. If the parties so agree, any other
disputes as to a matter governed by a Related PJM Agreement may
be submitted to binding arbitration in accordance with the
procedures specified herein.
4.2 Binding Decision.
Except as specified in Section 0, the resolution by
arbitration of any dispute under this Agreement shall not be
binding.
4.3 Initiation.
A party or parties to a dispute which is subject to the
arbitration procedures specified herein shall send a written
demand for arbitration to the Chair of the Alternate Dispute
Resolution Committee with a copy to the other party or parties to
the dispute. The demand for arbitration shall state each claim
for which arbitration is being demanded, the relief being sought,
a brief summary of the grounds for such relief and the basis for
the claim, and shall identify all other parties to the dispute.
4.4 Selection of Arbitrator(s).
The parties to a dispute for which arbitration has been
demanded may agree on any person to serve as a single arbitrator,
or shall endeavor in good faith to agree on a single arbitrator
from a list of arbitrators prepared for the dispute by the
Alternate Dispute Resolution Committee and delivered to the
parties by facsimile or other electronic means promptly after
receipt by the Alternate Dispute Resolution Committee of a demand
for arbitration. The Alternate Dispute Resolution Committee may
draw from the lists of arbitrators maintained by the MAAC Dispute
Resolution Committee, as the Alternate Dispute Resolution
Committee deems appropriate. If the parties are unable to agree
on a single arbitrator by the fourteenth day following delivery
of the foregoing list of arbitrators or such other date as agreed
to by the parties, then not later than the end of the seventh
business day thereafter the party or parties demanding
arbitration on the one hand, and the party or parties responding
to the demand for arbitration on the other, shall each designate
an arbitrator from a list for the dispute prepared by the
Alternate Dispute Resolution Committee. The arbitrators so
chosen shall then choose a third arbitrator.
4.5 Procedures.
The Alternate Dispute Resolution Committee shall compile and
make available to the arbitrator(s) and the parties standard
procedures for the arbitration of disputes, which procedures (i)
shall include provision, upon good cause shown, for intervention
or other participation in the proceeding by any party whose
interests may be affected by its outcome, (ii) shall conform to
the requirements specified in these PJM Dispute Resolution
Procedures, and (iii) may be modified or adopted for use in a
particular proceeding as the arbitrator(s) deem appropriate. To
the extent deemed appropriate by the Alternate Dispute Resolution
Committee, the procedures adopted by the Alternate Dispute
Resolution Committee shall be based on the American Arbitration
Association Rules, to the extent such Rules are not inconsistent
with any rule, standard or procedure adopted by the Alternate
Dispute Resolution Committee, or with any provision of these PJM
Dispute Resolution Procedures. Upon selection of the
arbitrator(s), arbitration shall go forward in accordance with
applicable procedures.
4.6 Summary Disposition and Interim Measures.
4.6.1 Lack of Good Faith Basis.
The procedures for arbitration of a dispute shall provide a
means for summary disposition of a demand for arbitration, or a
response to a demand for arbitration, that in the reasoned
opinion of the arbitrator(s) does not have a good faith basis in
either law or fact. If the arbitrator(s) determine(s) that a
demand for arbitration or response to a demand for arbitration
does not have a good faith basis in either law or fact, the
arbitrator(s) shall have discretion to award the costs of the
time, expenses, and other charges of the arbitrator(s) to the
prevailing party.
4.6.2 Discovery Limits.
The procedures for the arbitration of a dispute shall
provide a means for summary disposition without discovery of
facts if there is no dispute as to any material fact, or with
such limited discovery as the arbitrator(s) shall determine is
reasonably likely to lead to the prompt resolution of any
disputed issue of material fact.
4.6.3 Interim Decision.
The procedures for the arbitration of a dispute shall permit
any party to a dispute to request the arbitrator(s) to render a
written interim decision requiring that any action or decision
that is the subject of a dispute not be put into effect, or
imposing such other interim measures as the arbitrator(s) deem
necessary or appropriate, to preserve the rights and obligations
secured by any of the Related PJM Agreements during the pendency
of the arbitration proceeding. The parties shall be bound by
such written decision pending the outcome of the arbitration
proceeding.
4.7 Discovery of Facts.
4.7.1 Discovery Procedures.
The procedures for the arbitration of a dispute shall
include adequate provision for the discovery of relevant facts,
including the taking of testimony under oath, production of
documents and other things, and inspection of land and tangible
items. The nature and extent of such discovery shall be
determined as provided herein and shall take into account (i) the
complexity of the dispute, (ii) the extent to which facts are
disputed, and (iii) the amount in controversy. The forms and
methods for taking such discovery shall be as described in the
Federal Rules of Civil Procedure, except as modified by the
procedures established by the Alternate Dispute Resolution
Committee, the arbitrator(s) or agreement of the parties.
4.7.2 Procedures Arbitrator.
The sole arbitrator, or the arbitrator selected by the
arbitrators chosen by the parties, as the case may be (such
arbitrator being hereafter referred to as the "Procedures
Arbitrator"), shall be responsible for establishing the timing,
amount, and means of discovery, and for resolving discovery and
other pre-hearing disagreement. If a dispute involves contested
issues of fact, promptly after the selection of the arbitrator(s)
the Procedures Arbitrator shall convene a meeting of the parties
for the purpose of establishing a schedule and plan of discovery
and other pre-hearing actions.
4.8 Evidentiary Hearing.
The procedures for the arbitration of a dispute shall
provide for an evidentiary hearing, with provision for the cross-
examination of witnesses, unless all parties consent to the
resolution of the matter on the basis of a written record. The
forms and methods for taking evidence shall be as described in
the Federal Rules of Evidence, except as modified by the
procedures established by the Alternate Dispute Resolution
Committee, the arbitrator(s) or agreement of the parties. The
arbitrator(s) may require such written or other submissions from
the parties as shall be deemed appropriate, including submission
of the direct testimony of witnesses in written form. The
arbitrator(s) may exclude any evidence that is irrelevant,
immaterial, unduly repetitious or prejudicial, or privileged.
Any party or parties may arrange for the preparation of a record
of the hearing, and shall pay the costs thereof. Such party or
parties shall have no obligation to provide or agree to the
provision of a copy of the record of the hearing to any party
that does not pay an equal share of the cost of the record. At
the request of any party, the arbitrator(s) shall determine a
fair and equitable allocation of the costs of the preparation of
a record between or among the parties to the proceeding willing
to share such costs.
4.9 Confidentiality.
4.9.1 Designation.
Any document or other information obtained in the course of
an arbitral proceeding and not otherwise available to the
receiving party, including any such information contained in
documents or other means of recording information created during
the course of the proceeding, may be designated "Confidential" by
the producing party. The party producing documents or other
information marked "Confidential" shall have twenty days from the
production of such material to submit a request to the Procedures
Arbitrator to establish such requirements for the protection of
such documents or other information designated as "Confidential"
as may be reasonable and necessary to protect the confidentiality
and commercial value of such information and the rights of the
parties, which requirements shall be binding on all parties to
the dispute. Prior to the decision of the Procedures Arbitrator
on a request for confidential treatment, documents or other
information designated as "Confidential" shall not be used by the
receiving party or parties, or the arbitrator(s), or anyone
working for or on behalf of any of the foregoing, for any purpose
other than the arbitration proceeding, and shall not be disclosed
in any form to any person not involved in the arbitration
proceeding without the prior written consent of the party
producing the information or as permitted by the Procedures
Arbitrator.
4.9.2 Compulsory Disclosure.
Any party receiving a request or demand for disclosure,
whether by compulsory process, discovery request, or otherwise,
of documents or information obtained in the course of an
arbitration proceeding that have been designated "Confidential"
and that are subject to a non-disclosure requirement under these
PJM Dispute Resolution Procedures or a decision of the Procedures
Arbitrator, shall immediately inform the party from which the
information was obtained, and shall take all reasonable steps,
short of incurring sanctions or other penalties, to afford the
person or entity from which the information was obtained an
opportunity to protect the information from disclosure. Any
party disclosing information in violation of these PJM Dispute
Resolution Procedures or requirements established by the
Procedures Arbitrator shall thereby waive any right to introduce
or otherwise use such information in any judicial, regulatory, or
other legal or dispute resolution proceeding, including the
proceeding in which the information was obtained.
4.9.3 Public Information.
Nothing in the Related PJM Agreements shall preclude the use
of documents or information properly obtained outside of an
arbitral proceeding, or otherwise public, for any legitimate
purpose, notwithstanding that the information was also obtained
in the course of the arbitral proceeding.
4.10 Timetable.
Promptly after the selection of the arbitrator(s), the
arbitrator(s) shall set a date for the issuance of the arbitral
decision, which shall be not later than eight months (or such
earlier date as may be agreed to by the parties to the dispute)
from the date of the selection of the arbitrator(s), with other
dates, including the dates for an evidentiary hearing or other
final submissions of evidence, set in light of this date. The
date for the evidentiary hearing or other final submission of
evidence shall not be changed absent extraordinary circumstances.
The arbitrator(s) shall have the power to impose sanctions,
including dismissal of the proceeding for dilatory tactics or
undue delay in completing the arbitral proceedings.
4.11 Advisory Interpretations.
Except as to matters subject to decision in the arbitration
proceeding, the arbitrator(s) may request as may be appropriate
from any committee or subcommittee established under a Related
PJM Agreement or by the Office of the Interconnection, an
interpretation of any Related PJM Agreements, or of any standard,
requirement, procedure, tariff, Schedule, principle, plan or
other criterion or policy established by any committee or
subcommittee. Except to the extent that the Office of the
Interconnection is itself a party to a dispute, the arbitrator(s)
may request the advice of the Office of the Interconnection with
respect to any matter relating to a responsibility of the Office
of the Interconnection under the Agreement or with respect to any
of the Related PJM Agreements, or to the PJM Manuals. Any such
interpretation or advice shall not relieve the arbitrator(s) of
responsibility for resolving the dispute or deciding the
arbitration proceeding in accordance with the standards specified
herein.
4.12 Decisions.
The arbitrator(s) shall issue a written decision, including
findings of fact and the legal basis for the decision. The
arbitral decision shall be based on (i) the evidence in the
record, (ii) the terms of the Related PJM Agreements, as
applicable, (iii) applicable United States federal and state law,
including the Federal Power Act and any applicable FERC
regulations and decisions, and international treaties or
agreements as applicable, and (iv) relevant decisions in previous
arbitration proceedings. The arbitrator(s) shall have no
authority to revise or alter any provision of the Related PJM
Agreements. Any arbitral decision issued pursuant to these PJM
Dispute Resolution Procedures that affects matters subject to the
jurisdiction of FERC under Section 205 of the Federal Power Act
shall be filed with FERC.
4.13 Costs.
Unless the arbitrator(s) shall decide otherwise, the costs
of the time, expenses, and other charges of the arbitrator(s)
shall be borne by the parties to the dispute, with each side on
an arbitrated issue bearing its pro-rata share of such costs, and
each party to an arbitral proceeding shall bear its own costs and
fees. The arbitrator(s) may award all or a portion of the costs
of the time, expenses, and other charges of the arbitrator(s),
the costs of arbitration, attorney's fees, and the costs of
mediation, if any, to any party that substantially prevails on an
issue determined by the arbitrator(s) to have been raised without
a substantial basis.
4.14 Enforcement.
If the decision of the arbitrator(s) is binding, the
judgment may be entered on such arbitral award by any court
having jurisdiction thereof; provided, however, that within one
year of the issuance of the arbitral decision any party affected
thereby may request FERC or any other federal, state, regulatory
or judicial authority having jurisdiction to vacate, modify, or
take such other action as may be appropriate with respect to any
arbitral decision that is based upon an error of law, or is
contrary to the statutes, rules, or regulations administered or
applied by such authority. Any party making or responding to, or
intervening in proceedings resulting from, any such request,
shall request the authority to adopt the resolution, if not
clearly erroneous, of any issue of fact expressly or necessarily
decided in the arbitral proceeding, whether or not the party
participated in the arbitral proceeding.
5. ALTERNATE DISPUTE RESOLUTION COMMITTEE
5.1 Membership.
5.1.1 Representatives.
The Alternate Dispute Resolution Committee shall be composed
of two representatives selected by each of the following: (i) the
Office of the Interconnection; (ii) the Members Committee; (iii)
the parties to the Reliability Assurance Agreement; and (iv) the
parties to the Transmission Owners Agreement.
5.1.2 Term.
Representatives on the Alternate Dispute Resolution
Committee shall serve for terms of three years and may serve
additional terms.
5.2 Voting Requirements.
Approval or adoption of measures by the Alternate Dispute
Resolution Committee shall require two-thirds of the votes of the
representatives present and voting. Two-thirds of the
representatives on the Alternate Dispute Resolution Committee
shall constitute a quorum for the conduct of business.
5.3 Officers.
At the first meeting of the Alternate Dispute Resolution
Committee, the representatives to the Alternate Dispute
Resolution Committee shall choose a Chair and Vice Chair from
among the representatives on the Committee. The Chair of the
Alternate Dispute Resolution Committee shall preside at meetings
of the Committee, and shall have the power to call meetings of
the Committee and to exercise such other powers as are specified
in this Agreement or are authorized by the Alternate Dispute
Resolution Committee. The Vice Chair shall preside at meetings
of the Alternate Dispute Resolution Committee in the absence of
the Chair, and shall exercise such other powers as are delegated
by the Chair.
5.4 Meetings.
The Alternate Dispute Resolution Committee shall meet at
such times and places as determined by the Committee, or at the
call of the Chair. The Chair shall call a meeting of the
Alternate Dispute Resolution Committee upon the request of two or
more representatives on the Alternate Dispute Resolution
Committee.
5.5 Responsibilities.
The duties of the Alternate Dispute Resolution Committee
include but are not limited to the following:
i) Maintain a list of persons qualified by temperament and
experience, and with technical or legal expertise in matters
likely to be the subject of disputes, to serve as mediators or
arbitrators under these PJM Dispute Resolution Procedures;
ii) Determine the rates and other costs and charges that
shall be paid to mediators, advisors and arbitrators for or in
connection with their services;
iii) Determine whether mediation is not warranted in a
particular dispute;
iv) Provide to disputing parties lists of mediators,
advisors or arbitrators to resolve particular disputes;
v) Compile and make available to parties to disputes,
arbitrators, and other interested persons suggested procedures
for the arbitration of disputes in accordance with Section 4.5;
vi) Maintain and make available to parties to disputes,
mediators, advisors, arbitrators, and other interested persons
the written decisions required by Section 4.12;
vii) Establish such procedures and schedules, in addition to
those specified herein, as it shall deem appropriate to further
the prompt, efficient, fair and equitable resolution of disputes;
and
viii) Provide such oversight and supervision of the dispute
resolution processes and procedures instituted pursuant to the
Related PJM Agreements as may be appropriate to facilitate the
prompt, efficient, fair and equitable resolution of disputes.
<PAGE>
SCHEDULE 6
Revision No. 1
REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL
Issued: June 2, 1997
Effective: August 1, 1997
1. REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL
Purpose and Objectives
This Regional Transmission Expansion Planning Protocol shall
govern the process by which the Members shall rely upon the
Office of the Interconnection to prepare a plan for the
enhancement and expansion of the Transmission Facilities in order
to meet the demands for firm transmission service in the PJM
Control Area. The Regional Transmission Expansion Plan to be
developed shall enable the transmission needs in the PJM Control
Area to be met on a reliable, economic and environmentally
acceptable basis.
1.2 Conformity with NERC and MAAC Criteria
(a) NERC establishes Planning Principles and Guides to
promote the reliability and adequacy of the North American bulk
power supply as related to the operation and planning of electric
systems.
(b) MAAC is responsible for ensuring the adequacy,
reliability and security of the bulk electric supply systems in
the MAAC region through coordinated operations and planning of
generation and transmission facilities. Toward that end, it has
adopted the NERC Planning Principles and Guides and has
established detailed Reliability Principles and Standards for
Planning the Bulk Electric Supply System of the MAAC Group.
(c) The Regional Transmission Expansion Plan shall conform
with the applicable reliability principles, guidelines and
standards of NERC and MAAC in accordance with the procedures
detailed in the PJM Manuals.
1.3 Establishment of Committees
(a) The Regional Transmission Owners shall supply
representatives to the Planning Committee to provide the data,
information, and analysis support necessary to perform studies as
required. As used herein, "Regional Transmission Owner" shall be
defined as it is in the PJM Open Access Transmission PJM Tariff
("PJM Tariff").
(b) The Transmission Expansion Advisory Committee
established by the Office of the Interconnection will provide
input to the development of the Regional Transmission Expansion
Plan. The Transmission Expansion Advisory Committee will invite
participation by: (i) all Transmission Customers, as that term
is defined in the PJM Tariff, and applicants for transmission
service; (ii) any other entity proposing to provide Transmission
Facilities to be integrated into the PJM Control Area; (iii) all
Members; (iv) the agencies and offices of consumer advocates of
the States in the PJM Control Area exercising regulatory
authority over the rates, terms or conditions of electric service
or the planning, siting, construction or operation of electric
facilities and (v) any other interested entities or persons.
1.4 Contents of the Regional Transmission Expansion Plan
(a) The Office of the Interconnection shall prepare the
Regional Transmission Expansion Plan, which shall consolidate the
transmission needs of the region into a single plan which is
assessed on the basis of maintaining the PJM Control Area's
reliability in an economic and environmentally acceptable manner.
(b) The Regional Transmission Expansion Plan shall reflect
transmission enhancements and expansions, load and capacity
forecasts and generation additions and retirements for the
ensuing ten years.
(c) The Regional Transmission Expansion Plan shall, as a
minimum, include a designation of the Regional Transmission Owner
or Owners or other entity that will own a transmission facility
and how all reasonably incurred costs are to be recovered.
(d) The Regional Transmission Expansion Plan shall (i) avoid
unnecessary duplication of facilities; (ii) avoid the imposition
of unreasonable costs on any Regional Transmission Owner or any
user of Transmission Facilities; (iii) take into account the
legal and contractual rights and obligations of the Regional
Transmission Owners; (iv) provide, if appropriate, alternative
means for meeting transmission needs in the PJM Control Area; and
(v) provide for coordination with existing transmission systems
and with appropriate interregional and local expansion plans.
1.5 Procedure for Development of the Regional Transmission
Expansion Plan
1.5.1 Commencement of the Process
(a) The Office of the Interconnection shall initiate the
enhancement and expansion study process if (i) required as a
result of a need for transfer capability identified by the Office
of the Interconnection in its evaluation of requests for firm
transmission service with a term of one year or more or as a
result of the Office of the Interconnection's on-going evaluation
of transmission system adequacy and performance; (ii) identified
as a result of the MAAC reliability assessment or more stringent
local reliability criteria, if any; (iii) constraints or
available transfer capability shortage are identified by the
Office of the Interconnection as a result of generation additions
or retirements, evaluation of load forecasts or proposals for the
addition of Transmission Facilities in the PJM Control Area; or
(iv) expansion of the transmission system is proposed by the
Regional Transmission Owners or others.
(b) The Office of the Interconnection shall notify the
Transmission Expansion Advisory Committee of the commencement of
an enhancement and expansion study. The Transmission Expansion
Advisory Committee shall notify the Office of the Interconnection
in writing of any additional transmission considerations to be
included.
1.5.2 Development of Scope, Assumptions and Procedures
Once the need for an enhancement and expansion study has
been established, the Office of the Interconnection shall consult
with the Transmission Expansion Advisory Committee to prepare the
study's scope, assumptions and procedures.
1.5.3 Scope of Studies
In general, enhancement and expansion studies shall include:
(a) An identification of existing and projected electric
system limitations, with accompanying simulations to identify the
costs of controlling those limitations. Potential enhancements
and expansions will be proposed to mitigate limitations
controlled by non-economic means.
(b) Evaluation and analysis of potential enhancements and
expansions, including alternatives thereto, needed to mitigate
such limitations.
(c) Engineering studies needed to determine the
effectiveness and compliance (with reliability criteria) of
recommended enhancements and expansions.
1.5.4 Supply of Data
The Regional Transmission Owners, those entities requesting
transmission service and any other entities proposing to provide
Transmission Facilities to be integrated into the PJM Control
Area shall supply such information and data reasonably required
by the Office of the Interconnection to perform the enhancement
and expansion study.
1.5.5 Coordination of the Regional Transmission Expansion
Plan
(a) The Regional Transmission Expansion Plan shall be
developed in coordination with the transmission systems of the
surrounding regional reliability councils and with the local
transmission providers.
(b) The Regional Transmission Expansion Plan shall be
developed by the Office of the Interconnection in consultation
with the Transmission Expansion Advisory Committee during the
enhancement and expansion study process.
1.5.6 Development of the Recommended Regional Transmission
Expansion Plan
(a) Upon completion of its studies and analysis, the Office
of the Interconnection shall prepare a recommended enhancement
and expansion plan for review by the Transmission Expansion
Advisory Committee. The recommended plan shall include
recommendations for cost responsibility, except for directly
assigned costs, for any enhancement or expansion, based on the
planning analysis and other input from participants, including
any indications of a willingness to bear cost responsibility for
an enhancement or expansion.
(b) For the purposes of Section 1.5.6(a), any allocation of
costs to all of the Regional Transmission Owners shall be
proportional to the load within the Zones. Load shall be measured
consistent with the loads utilized to develop the rates included
in Attachment H to the PJM Tariff.
(c) Any Regional Transmission Owner and other participants
on the Transmission Expansion Advisory Committee may offer an
alternative.
(d) If the Office of the Interconnection adopts the
alternative, based upon its review of the relative costs and
benefits, the ability of the alternative to supply the required
level of transmission service, and its impact on the reliability
of the Transmission Facilities, the Office of the Interconnection
shall make any necessary changes to the recommended plan.
(e) If, based upon its review of the relative costs and
benefits, the ability of the alternative to supply the required
level of transmission service, and the alternative's impact on
the reliability of the Transmission Facilities, the Office of the
Interconnection does not adopt such alternative, the Regional
Transmission Owner or Owners whose alternative or alternatives
have not been accepted or to whom cost responsibility has been
assigned and other participants on the Transmission Expansion
Advisory Committee may require that its or their alternative(s)
be submitted to Alternative Dispute Resolution.
1.6 Approval of the Final Regional Transmission Expansion
Plan
(a) The PJM Board shall approve the final Regional
Transmission Expansion Plan, including any alternatives therein,
in accordance with the requirements of this Section 1.6.
(b) If the facilities to be provided in the Regional
Transmission Expansion Plan are acceptable, but the Regional
Transmission Owners and other entities who have indicated a
willingness to bear some or all of the cost responsibility cannot
unanimously agree on the allocation of the costs of enhancements
or expansions, the cost responsibility shall be allocated (a) to
those entities who have indicated a willingness to bear some or
all of the cost of responsibility, and (b) among the Regional
Transmission Owners in accordance with the following guidelines:
i) All of the costs of Transmission Facilities (other than
transformers) with a nominal operating voltage of 500 kV or
higher shall be allocated to all of the Regional Transmission
Owners;
ii) One-half of the costs of Transmission Facilities (other
than transformers) with a nominal operating voltage of 230 kV or
345 kV shall be allocated to all Regional Transmission Owners and
one-half of the costs of such facilities shall be allocated to
the Regional Transmission Owners in whose Zone, as that term is
defined in the PJM Tariff, the enhancement or expansion is to be
located;
iii) All of the costs of Transmission Facilities (other than
transformers) with a nominal operating voltage below 230 kV shall
be allocated to the Regional Transmission Owner or Owners in
whose Zone the enhancement or expansion is located;
iv) One-half of the costs of transformers shall be allocated
in accordance with the methodology specified in (a), (b), or (c)
above, based upon the voltage at the high side of the transformer
and one-half of the costs shall be allocated in accordance with
the methodology specified in (a), (b), and (c) above based upon
the voltage at the low side of the transformer, unless the low
side of the transformer is less than 100 kV, in which case all of
the costs of the transformer shall be allocated to the Regional
Transmission Owner or Owners in whose Zone the transformer is
located. If a Regional Transmission Expansion Plan is not
approved, or if the transmission service requested by any entity
is not included in an approved Regional Transmission Expansion
Plan, nothing herein shall limit in any way the right of any
entity to seek relief pursuant to the provisions of Section 211
of the Federal Power Act.
(d) Following PJM Board approval, the final Regional
Transmission Expansion Plan shall be submitted to MAAC for
verification that all enhancements or expansions conform to all
MAAC Reliability Principles and Standards.
1.7 Obligation to Build
(a) Subject to the requirements of applicable law,
government regulations and approvals, including, without
limitation, requirements to obtain any necessary state or local
siting, construction and operating permits, to the availability
of required financing, to the ability to acquire necessary right-
of-way, and to the right to recover, pursuant to appropriate
financial arrangements and tariffs or contracts, all reasonably
incurred costs, plus a reasonable return on investment, Regional
Transmission Owners designated as the appropriate entities to
construct and own or finance enhancements or expansions specified
in the Regional Transmission Expansion Plan shall construct and
own or finance such facilities or enter into appropriate
contracts to fulfill such obligations.
(b) Nothing herein shall prohibit any Regional Transmission
Owner from seeking to recover the cost of enhancements or
expansions on an incremental cost basis or from seeking approval
of such rate treatment from any regulatory agency with
jurisdiction over such rates.
1.8 Relationship to the PJM Control Area Open Access
Transmission PJM Tariff
Nothing herein shall modify the rights and obligations of an
Eligible Customer or a Transmission Customer, as those terms are
defined in the PJM Tariff, with respect to required studies and
completion of necessary enhancements or expansions. An Eligible
Customer or Transmission Customer electing to follow the
procedures in the PJM Tariff instead of the procedures provided
herein, shall also be responsible for the related costs. The
enhancement and expansion study process under this Protocol shall
be funded as a part of the operating budget of the Office of the
Interconnection.
<PAGE>
SCHEDULE 7
Revision No. 1
UNDERFREQUENCY RELAY OBLICATIONS AND CHARGES
Issued: June 2, 1997
Effective: August 1, 1997
1. UNDERFREQUENCY RELAY OBLIGATION
1.1 Application.
The obligations of this Schedule apply to each Member that
is an Electric Distributor, whether or not that Member
participates in the Electric Distributor sector on the Members
Committee or meets the eligibility requirements for any other
sector of the Members Committee.
1.2 Obligations.
Each Electric Distributor shall install or contractually
arrange for underfrequency relays to interrupt at least 30
percent of its peak load with 10 percent of the load interrupted
at each of three frequency levels: 59.3 Hz, 58.9 Hz and 58.5 Hz.
Upon the request of the Reliability Committee, each Electric
Distributor shall document that it has complied with the
requirement for underfrequency load shedding relays.
2. UNDERFREQUENCY RELAY CHARGES
If an Electric Distributor is determined to not have the
required underfrequency relays, it shall pay an underfrequency
relay charge of:
Charge = D x R x 365
where
D = the amount, in megawatts, the Electric Distributor is
deficient; and
R = the daily rate per megawatt, which shall be based on the
annual carrying charges for a new combustion turbine generator,
installed and connected to the transmission system, which daily
deficiency rate as of the Effective Date shall be $58.400/per
kilowatt-year or $160 per megawatt-day.
3. DISTRIBUTION OF UNDERFREQUENCY RELAY CHARGES
3.1 Share of Charges.
Each Electric Distributor that has complied with the requirements
for underfrequency relays imposed by this Agreement during a
Planning Period, without incurring an underfrequency relay
charge, shall share in any underfrequency relay charges paid by
any other Electric Distributor that has failed to satisfy said
obligation during such Planning Period. Such shares shall be in
proportion to the number of megawatts of a Electric Distributor's
load in the most recently completed month at the time of the peak
for the PJM Control Area during that month rounded to the next
higher whole megawatt, as established initially on the Effective
Date and as updated at the beginning of each month thereafter.
3.2 Allocation by the Office of the Interconnection.
In the event all of the Electric Distributors have incurred
underfrequency relay charges during a Planning Period, the
underfrequency relay charges shall be distributed among the
Electric Distributors on an equitable basis as determined by the
Office of the Interconnection.
<PAGE>
SCHEDULE 8
Revision No. 1
DELEGATION OF RELIABILITY RESPONSIBILTIES
Issued: June 2, 1997
Effective: August 1, 1997
1. DELEGATION
The following responsibilities shall be delegated to the
Office of the Interconnection by the parties to the Reliability
Assurance Agreement.
2. NEW PARTIES
With regard to the addition, withdrawal or removal of a
party to the Reliability Assurance Agreement, the Office of the
Interconnection shall:
(a) Receive and evaluate the information submitted by
entities that plan to serve loads within the PJM Control Area,
including entities whose participation in the Agreement will
expand the boundaries of the PJM Control Area, such evaluation to
be conducted in accordance with the requirements of the
Reliability Assurance Agreement; and
(b) Evaluate the effects of the withdrawal or removal of a
party from the Reliability Assurance Agreement.
3. IMPLEMENTATION OF RELIABILITY ASSURANCE AGREEMENT.
With regard to the implementation of the provisions of the
Reliability Assurance Agreement, the Office of the
Interconnection shall:
(a) Receive all required data and forecasts from the parties
to the Reliability Assurance Agreement;
(b) Perform all calculations and analyses necessary to
determine the Forecast Pool Requirement, the Forecast Zone
Requirement and the Forecast LSE Obligation, including periodic
reviews of the capacity benefit margin for consistency with the
Reliability Principles and Standards, as the foregoing terms are
defined in the Reliability Assurance Agreement;
(c) Monitor the compliance of each party to the Reliability
Assurance Agreement with its obligations under the Reliability
Assurance Agreement;
(d) Keep cost records, and bill and collect any costs or
charges due from the parties to the Reliability Assurance
Agreement and distribute those charges in accordance with the
terms of the Reliability Assurance Agreement;
(e) Assist with the development of rules and procedures for
determining and demonstrating the capability of Capacity
Resources;
(f) Establish the capability and deliverability of Capacity
Resources consistent with the requirements of the Reliability
Assurance Agreement;
(g) Collect and maintain generator availability data;
(h) Perform any other studies or analyses required to
administer the Reliability Assurance Agreement;
(i) Coordinate maintenance schedules for generation
resources operated as part of the PJM Control Area;
(j) Determine and declare that an Emergency exists or has
ceased to exist in all or any part of the PJM Control Area or in
a Control Area interconnected with the PJM Control Area;
(k) Enter into agreements for (i) the transfer of energy in
Emergencies in the PJM Control Area or in a Control Area
interconnected with the PJM Control Area and (ii) mutual support
in such Emergencies with other Control Areas interconnected with
the PJM Control Area; and
(l) Coordinate the curtailment or shedding of load, or other
measures appropriate to alleviate an Emergency, to preserve
reliability in accordance with FERC, NERC or MAAC principles,
guidelines, standards and requirements and the PJM Manuals, and
to ensure the operation of the PJM Control Area in accordance
with Good Utility Practice.
<PAGE>
SCHEDULE 9
Revision No. 1
EMERGENCY PROCEDURE CHARGES
Issued: June 2, 1997
Effective: August 1, 1997
EMERGENCY PROCEDURE CHARGE
Following an Emergency, the compliance of each Member with
the instructions of the Office of the Interconnection shall be
evaluated by the Office of the Interconnection. If, based on
such evaluation, it is determined that a Member failed to comply
with the instructions of the Office of the Interconnection to
implement voltage reductions or to drop load, that Member shall
demonstrate that it employed its best efforts to comply with such
instructions. In the event a Member failed to employ its best
efforts to comply with the instructions of the Office of the
Interconnection, that Member shall pay an emergency procedure
charge as follows:
(a) For each megawatt of voltage reduction that was not
implemented as directed, the Member shall pay 365 times the daily
deficiency rate per megawatt based on the annual carrying charges
for a new combustion turbine generator, installed and connected
to the transmission system, which daily deficiency rate as of the
Effective Date shall be $58.400/per kilowatt-year or $160 per
megawatt-day; and
(b) For each megawatt of load that was not dropped as
directed, the Member shall pay 730 times the daily deficiency
rate per megawatt based on the annual carrying charges for a new
combustion turbine generator, installed and connected to the
transmission system, which daily deficiency rate as of the
Effective Date shall be $58.400/per kilowatt-year or $160 per
megawatt-day.
2. DISTRIBUTION OF EMERGENCY PROCEDURE CHARGES
2.1 Complying Parties.
Each Member that has complied with the emergency procedures
imposed by this Agreement during an Emergency, without incurring
an emergency procedure charge, shall share in any emergency
procedure charges paid by any other Member that has failed to
satisfy said obligation during such Emergency in an equitable
manner to be determined by the PJM Board.
2.2 All Parties.
In the event all of the Members have incurred emergency
procedure charges with respect to an Emergency, the emergency
procedure charges related to that Emergency shall be distributed
in an equitable manner as directed by the PJM Board.
<PAGE>
Exhibit 10(h)-5
FOURTH SUPPLEMENT TO THE
CAPACITY AND ENERGY SALES AGREEMENT
FROM PENNSYLVANIA POWER & LIGHT COMPANY (PP&L)
TO BALTIMORE GAS & ELECTRIC COMPANY (BG&E)
Fourth Supplement (Fourth Supplemental Agreement) dated July
2, 1992 to the Capacity and Energy Sales Agreement (Basic
Agreement), dated January 28, 1988, as supplemented by a First
Supplemental Agreement dated August 10, 1988, and by a Third
Supplemental Agreement dated May 24, 1991 between Pennsylvania
Power & Light Company and Baltimore Gas & Electric Company.
1. This supplemental agreement shall become effective on
June 1, 1992, unless otherwise ordered by the Federal Energy
Regulatory Commission. The terms and conditions of the Basic
Agreement, as supplemented by the First Supplemental Agreement
and the Second Supplemental Agreement, and the Third Supplemental
Agreement, shall remain in full force and effect, except as
amended herein.
2. Exhibit C Revision No. 2 shall be amended to read:
"The Installed Capacity Rate shall be $193 per
megawatt per day."
Such amended Exhibit C Revision No. 2 is reflected on
Exhibit C Revision No. 3, attached hereto and made a part hereof,
which supersedes Exhibit C Revision No. 2.
PENNSYLVANIA POWER & LIGHT COMPANY
By: ___/s/_______________________
WITNESS: Name: __F. A. Long________________
Sr. Vice President-
System Power &
_________________________ Title:__Engineering_______________
Cheryl D. Cincilla
BALTIMORE GAS AND ELECTRIC COMPANY
By: __/s/________________________
WITNESS: Name: __Herbert D. Coss, Jr.______
Vice President-Electric
Interconnection &
_________________________ Title: _Transmission______________
<PAGE>
EXHIBIT C
REVISION NO. 3
INSTALLED CAPACITY RATE
The Installed Capacity Rate shall be $193 per megawatt per
day.
<PAGE>
EXHIBIT 10(h)-6
FIFTH SUPPLEMENT TO THE
CAPACITY AND ENERGY SALES AGREEMENT
FROM PENNSYLVANIA POWER & LIGHT COMPANY (PP&L)
TO BALTIMORE GAS & ELECTRIC COMPANY (BG&E)
Fifth Supplement (Fifth Supplemented Agreement) dated as of
the 13th day of July, 1993 to the Capacity and Energy Sales
Agreement (Basic Agreement) dated January 28, 1988, as
supplemented.
WHEREAS, the Parties intend to amend the Basic Agreement, as
supplemented, to change the rate of return on common equity
thereunder to 11%.
NOW, THEREFORE, the Parties hereby agree and covenant to
amend the Basic Agreement, as supplemented, as follows:
1. This Fifth Supplemental Agreement shall become effective
on July 15, 1993, unless otherwise ordered by the Federal Energy
Regulatory Commission. All terms and conditions of the Basic
Agreement, as supplemented shall remain in full force and effect,
unless specifically revised by this Fifth Supplemental Agreement.
2. The only revision to the Basic Agreement, as
supplemented, made by this Fifth Supplemental Agreement is that
in Exhibit A subpart (B)(2) 12.75% shall be replace by 11%.
BALTIMORE GAS & ELECTRIC COMPANY
/s/
WITNESS: By: ____________________________
Name: _Herbert D. Coss, Jr._____
_________________________ Title: Vice President
Margaret W. Krubbel
PENNSYLVANIA POWER & LIGHT COMPANY
/s/
WITNESS: By: ______________________________
Name: _Raymond F. Suhocki_________
_________________________ Title: Vice President-System Power
Cheryl D. Cincilla
<PAGE>
Exhibit 10(h)-7
SIXTH SUPPLEMENT TO THE
CAPACITY AND ENERGY SALES AGREEMENT
FROM PENNSYLVANIA POWER & LIGHT COMPANY (PP&L)
TO BALTIMORE GAS AND ELECTRIC COMPANY (BG&E)
Supplement dated as of the 2nd day of August 1993, to the
Capacity and Energy Sales Agreement (Basic Agreement), dated
January 28, 1988 between Pennsylvania Power & Light Company and
Baltimore Gas & Electric Company.
1. This supplemental agreement shall become effective on
June 1, 1993, unless otherwise ordered by the Federal Energy
Regulatory Commission. The terms and conditions of the Basic
Agreement as heretofore supplemented and amended shall remain in
full force and effect, except as amended herein.
2. Exhibit C shall be amended to read:
"The Installed Capacity Rate shall be $201 per megawatt per
day."
Such amended Exhibit C is reflected on Exhibit C Revision
No. 4, attached hereto and made a part hereof, which supersedes
Exhibit C Revision No. 3.
PENNSYLVANIA POWER & LIGHT COMPANY
/s/
WITNESS: By: ______________________________
Name: _Raymond F. Suhocki_________
_________________________ Title: Vice President-System Power
Cheryl D. Cincilla
BALTIMORE GAS & ELECTRIC COMPANY
/s/
WITNESS: By: ____________________________
Name: _Herbert D. Coss, Jr._____
_________________________ Title: Vice President
Margaret W. Krubbel
<PAGE>
EXHIBIT C
REVISION NO. 4
INSTALLED CAPACITY RATE
The Installed Capacity Rate shall be $201 per megawatt day.
<PAGE>
AMENDMENT NO. 3
TO
PP&L RESOURCES, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
WHEREAS, PP&L, Inc. ("PP&L") adopted the Pennsylvania Power
& Light Company Directors Deferred Compensation Plan ("Plan")
effective January 26, 1972; and
WHEREAS, PP&L Resources, Inc. ("Company") adopted the Plan
as amended and restated effective April 26, 1995, and the Plan
was subsequently amended by Amendment No. 1 and 2; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1998, Articles 2 and 6 are amended to
read:
2. Definitions.
(n) "Mandatory Deferral Amount" means a portion of the
retainer fee payable to the Participant equal to an amount
established by resolution of the Committee from time to time, but
in no event later than December 31 of the calendar year preceding
the calendar year in which the retainer fee is payable to the
Participant.
6. Deferred Cash Compensation.
(c) Any election to defer or change the amount of Cash
Compensation to be deferred for any subsequent calendar year
after the first calendar year of eligibility may be made by
Participant not later than December 31 of the year preceding such
calendar year by filing with the EBPB an election form; provided,
however, that an election once made will be presumed to continue
with respect to subsequent years unless changed or revoked by
Participant. Participant, may, prior to December 31, 1994, elect
to defer some or all of his Cash Compensation otherwise payable
after July 1, 1995 to this Stock Account.
II. Except as provided for in this Amendment No. 3, all other
provisions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment No. 3 is executed this
23rd day of February, 1998.
PP&L RESOURCES, INC.
By: /s/John M. Chappelear
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
<TABLE>
Exhibit 12(a)
PP&L RESOURCES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt ............ $196 $207 $213 $214 $226
Interest on short-term debt
and other interest ................. 25 17 18 18 13
Amortization of debt discount, expense
and premium - net.................... 2 2 2 2 2
Interest on capital lease
obligations
Charged to expense ................ 9 13 15 12 9
Capitalized ....................... 2 2 2 1 1
Estimated interest component of
operating rentals ................... 15 8 8 6 5
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons ............................. 1 1 1 1 1
Total fixed charges ........... $250 $250 $259 $254 $257
Earnings, as defined:
Net income ............................ $296 $329 $323 $216 $314
Preferred and Preference Stock Dividend
Requirements......................... 24 28 28 28 34
Less undistributed income of less
than 50-percent-owned persons ....... - - - - -
320 357 351 244 348
Add (Deduct):
Federal income taxes .................. 169 189 195 198 163
State income taxes .................... 59 64 62 77 64
Deferred income taxes ................. 29 10 15 (45) 22
Investment tax credit - net ........... (10) (10) (10) (12) (14)
Income taxes on other income and
deductions - net .................... (9) 0 24 (38) (1)
Amortization of capitalized
interest on capital leases .......... 2 4 5 9 12
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) ....... 248 248 257 253 256
Total earnings ................ $808 $862 $899 $686 $850
Ratio of earnings to fixed
charges ............................... 3.23 3.45 3.47 2.70 3.31
</TABLE>
<PAGE>
<TABLE>
Exhibit 12(b)
PP&L, INC. AND SUBSIDIARIES, CONSOLIDATED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt ............ $195 $207 $213 $214 $226
Interest on short-term debt
and other interest ................. 17 11 18 18 13
Amortization of debt discount, expense
and premium - net.................... 2 2 2 2 2
Interest on capital lease
obligations
Charged to expense ................ 9 13 15 12 9
Capitalized ....................... 2 2 2 1 1
Estimated interest component of
operating rentals ................... 15 8 8 6 5
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons ............................. 1 1 1 1 1
Total fixed charges ........... $241 $244 $259 $254 $257
Earnings, as defined:
Net income ............................ $348 $357 $352 $243 $348
Less undistributed income of less
than 50-percent-owned persons ...... -
348 357 352 243 348
Add (Deduct):
Federal income taxes .................. 169 189 195 199 163
State income taxes .................... 59 64 62 77 64
Deferred income taxes ................. 29 10 15 (45) 22
Investment tax credit - net ........... (10) (10) (11) (12) (14)
Income taxes on other income and
deductions - net .................... 1 (2) 26 (38) (1)
Amortization of capitalized
interest on capital leases .......... 2 4 6 9 12
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) ....... 239 243 257 253 256
Total earnings ................ $837 $855 $902 $686 $850
Ratio of earnings to fixed
charges ............................... 3.47 3.50 3.48 2.70 3.31
</TABLE>
<PAGE>
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in
the Prospectus constituting part of the Registration
Statement on Form S-3 (No. 33-59405) of PP&L Resources, Inc.
and of the Registration Statements on Form S-3 (No. 333-
20661 and No. 333-27773) of PP&L, Inc., in the Registration
Statement on Form S-4 (No. 333-33565) of PP&L Resources,
Inc. and in the Registration Statements on Form S-8 (No. 33-
50031, No. 333-02003, No. 333-38003 and No. 333-38003-01) of
PP&L Resources, Inc. of our report dated February 2, 1998
appearing on Page 41 of this Form 10-K.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
March 3, 1998
<PAGE>
Exhibit 24
PP&L RESOURCES, INC.
PP&L, INC.
1997 ANNUAL REPORT
TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-K
POWER OF ATTORNEY
The undersigned directors of PP&L Resources, Inc. and
PP&L, Inc., both Pennsylvania corporations, which are to file
with the Securities and Exchange Commission, Washington, D.C.,
under the provisions of the Securities Exchange Act of 1934, as
amended, their 1997 Annual Report on Form 10-K, do hereby appoint
William F. Hecht, John R. Biggar and Robert J. Grey their true
and lawful attorney, and each of them their true and lawful
attorney, with power to act without the other and with full power
of substitution and resubstitution, to execute for them and in
their names said Form 10-K Report and any and all amendments
thereto, whether said amendments add to, delete from or otherwise
alter said Form 10-K Report, or add or withdraw any exhibits or
schedules to be filed therewith and any and all instruments in
connection therewith. The undersigned hereby grant to said
attorneys and each of them full power and authority to do and
perform in the name of and on behalf of the undersigned, and in
any and all capacities, any act and thing whatsoever required or
necessary to be done in and about the premises, as fully and to
all intents and purposes as the undersigned might do, hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned have hereunto set
their hands and seals this 27th day of February, 1998.
/s/ E. Allen Deaver L.S. /s/ Clifford L. Jones L.S.
E. Allen Deaver Clifford L. Jones
/s/ Nance K. Dicciani L.S. /s/ Ruth Leventhal L.S.
Nance K. Dicciani Ruth Leventhal
/s/ William J. Flood L.S. /s/ Marilyn Ware Lewis L.S.
William J. Flood Marilyn Ware Lewis
/s/ Elmer D. Gates L.S. /s/ Frank A. Long L.S.
Elmer D. Gates Frank A. Long
/s/ William F. Hecht L.S. /s/ Norman Robertson L.S.
William F. Hecht Norman Robertson
/s/ Stuart Heydt L.S.
Stuart Heydt
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of income, consolidated balance sheet, and consolidated
statement of cash flows for the form 10-K dated December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000922224
<NAME> PP&L RESOURCES, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,766
<OTHER-PROPERTY-AND-INVEST> 659
<TOTAL-CURRENT-ASSETS> 695
<TOTAL-DEFERRED-CHARGES> 1,365
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,485
<COMMON> 2
<CAPITAL-SURPLUS-PAID-IN> 1,643
<RETAINED-EARNINGS> 1,164
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,809
297
50
<LONG-TERM-DEBT-NET> 2,585
<SHORT-TERM-NOTES> 90
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 45
<LONG-TERM-DEBT-CURRENT-PORT> 150
0
<CAPITAL-LEASE-OBLIGATIONS> 113
<LEASES-CURRENT> 58
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,288
<TOT-CAPITALIZATION-AND-LIAB> 9,485
<GROSS-OPERATING-REVENUE> 3,049
<INCOME-TAX-EXPENSE> 247
<OTHER-OPERATING-EXPENSES> 2,257
<TOTAL-OPERATING-EXPENSES> 2,504
<OPERATING-INCOME-LOSS> 545
<OTHER-INCOME-NET> (10)
<INCOME-BEFORE-INTEREST-EXPEN> 535
<TOTAL-INTEREST-EXPENSE> 215
<NET-INCOME> 320
24
<EARNINGS-AVAILABLE-FOR-COMM> 296
<COMMON-STOCK-DIVIDENDS> 275
<TOTAL-INTEREST-ON-BONDS> 196
<CASH-FLOW-OPERATIONS> 777
<EPS-PRIMARY> 1.80
<EPS-DILUTED> 1.80
</TABLE>
