CY » Topics » ARTICLE TWO: OBLIGATIONS AND DELIVERIES

This excerpt taken from the CY 10-Q filed Nov 13, 2006.

ARTICLE TWO: OBLIGATIONS AND DELIVERIES

2.1 Seller’s and Buyer’s Obligations. Subject to the terms and conditions of this Agreement, the Seller shall, during the term of this Agreement, sell and deliver, or cause to be delivered, whether (at the Seller’s sole discretion) sourced from the Facility or from other electricity generators, and the Buyer shall purchase and receive, or cause to be received, the Minimum Quantity of the Product at the Delivery Point, and the Buyer shall pay the Seller the Contract Price. The Buyer shall be responsible for any Governmental Charges imposed on or associated with the Product at, before or after the Delivery Point, including the fuel utilized to generate the Product.

2.2 Scheduled Outages and Unscheduled Outages. The Seller is allowed Scheduled Outages not to exceed seven hundred twenty (720) Equivalent Hours for each Contract Year during which times reduced or no deliveries will be available to the Buyer. The Seller is likewise allowed Unscheduled Outages of five hundred four (504) Equivalent Hours for each Contract Year during which times reduced or no deliveries will be available to the Buyer. If the Seller exceeds the Equivalent Hours allowed for Unscheduled Outages in any Contract Year, it shall be permitted to credit any unutilized Equivalent Hours to Scheduled Outages. Conversely, if the Seller exceeds the Equivalent Hours allowed for Scheduled Outages in any Contract Year, it shall be permitted to credit any unutilized Equivalent Hours to Unscheduled Outages. Unutilized Equivalent Hours for either Scheduled Outages or Unscheduled Outages in any Contract Year cannot be carried forward to subsequent Contract Years.

 

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During any Scheduled Outage or Unscheduled Outage the Seller, in consultation with the Buyer, shall use its best efforts to negotiate on behalf of the Buyer for the supply and delivery of the Product for a price as close as possible to the Contract Price with third parties (including the Wholesale Electricity Spot Market). If the Buyer agrees to the negotiated price, including WESM Charges, if any, and any applicable transaction and administrative charges for arranging this alternative supply, it shall take and pay for such quantity regardless of whether the price, including WESM Charges, if any, and any applicable transaction and administrative charges, is higher or lower than the Contract Price. The Buyer, however, has no obligation to agree to the price negotiated by the Seller and is permitted to procure its own supply of the Product during any Scheduled Outage or Unscheduled Outage. If the Seller, despite its best efforts, is unable to arrange for this alternative supply, it shall have no further liability to the Buyer for such quantity. Quantities of the Product purchased by the Buyer during any Scheduled Outage or Unscheduled Outage, regardless of whether such quantities were arranged by the Seller or the Buyer, shall not constitute part of the Minimum Quantity.

If during any Contract Year the total Equivalent Hours for both Scheduled Outages and Unscheduled Outages exceeds one thousand two hundred twenty-four (1,224) then, unless excused by Force Majeure, the Seller shall procure from third parties (including the Wholesale Electricity Spot Market) at its cost, and deliver the contracted quantities of the Product to the Buyer and the Buyer shall be obligated to pay only the Contract Price to the Seller for such quantities.

2.3 Transmission and Scheduling. The Seller shall arrange and be responsible for transmission service to the Delivery Point and shall Schedule or arrange for Scheduling services with the Transmission Utility and/or Distribution Utility, as the case may be, pursuant to a relevant Transmission Agreement and/or Distribution Agreement, as specified by the Parties, or in the absence thereof, in accordance with the practice of the Transmission Utility and/or Distribution Utility, as the case may be, to deliver the Product from the Delivery Point to the Receiving Point. The Buyer shall bear the cost of such transmission service from the Delivery Point up to the Receiving Point including the cost of any electric losses incurred in such transmission.

2.4 Force Majeure. To the extent either Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under this Agreement and such Party (the “Claiming Party”) gives notice and details of the Force Majeure to the other Party as soon as practicable, then the Claiming Party shall be excused from the performance of its obligations herein (other than the obligation to make payments then due or becoming due with respect to performance prior to the Force Majeure). During the Force Majeure event, the non-Claiming Party shall likewise be relieved of its obligations to the Claiming Party, but only those obligations corresponding to the performance of the Claiming Party excused by such Force Majeure event.

The Claiming Party shall always attempt to remedy the Force Majeure with all reasonable dispatch. However, if the duration of any Force Majeure event exceeds or is expected by the Claiming Party to exceed 180 days, then the Parties shall meet and discuss any appropriate action required with the objective of maintaining, to the extent feasible, the rights and obligations of the Parties under this Agreement. If any Force Majeure exceeds or is expected by the Claiming

 

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Party to exceed 360 days then this Agreement shall be terminated. For the avoidance of doubt, the Agreement Termination Date shall be extended, day for day, for the duration of any Force Majeure event.

2.5 Transmission/Distribution Failures. If the Buyer is not able to take the Product from the Delivery Point, or receive the Product at the Receiving Point, for causes attributable to any failure by the Transmission Utility and/or Distribution Utility, as the case may be, to transmit the Product (other than as a result of a system-wide or grid-wide blackout or service interruption), such event shall not excuse the Buyer from paying the Contract Price for the quantity of the Product otherwise made available to the Buyer by the Seller. However, in such instances the Seller will exert its best efforts to cause a quantity of the Product, equal to the quantity of the Product not so taken or received by the Buyer, to be delivered to the Buyer before the Agreement Termination Date in accordance with a schedule to be agreed upon between the Seller and the Buyer. If the Seller is able to cause such quantity of the Product to be delivered, the Buyer shall not be required to pay the Contract Price for such Product upon actual delivery; provided, however, that if the cost of fuel for generating the Product at the time the Product was originally scheduled to be delivered to, but was not taken, or received by, the Buyer is lower than when the Product is actually delivered in accordance with this Section 2.5, the Buyer shall pay to the Seller an amount equal to such difference in the cost of fuel. If the Seller is unable to cause such quantity to be delivered before the Agreement Termination Date, the Seller shall extend the term of the Agreement for as long as necessary to deliver such quantity.

Instead of redelivering the quantity, the Buyer may instruct the Seller, before the end of the Billing Period during which the delivery failure occurred, to credit the Contract Price for such quantity with any net proceeds from the Wholesale Electricity Spot Market actually received by the Seller for such quantity (“Net Proceeds”). If the Net Proceeds are less than the Contract Price for such quantity, the Buyer shall pay the Seller any deficiency as set forth in the invoice for the relevant Billing Period. If the Net Proceeds are greater than the Contract Price for such quantity, any excess shall be credited to the Buyer in the invoice for the relevant Billing Period.

2.6 Spot Market Sale Option. The Buyer may, upon proper notification to the Seller and in compliance with all Applicable Laws, instruct the Seller to sell into the Wholesale Electricity Spot Market in any Billing Period, on behalf of the Buyer, some or all of the Minimum Quantity in any Contract Year subject, at all times, to the Contracted Capacity and Minimum Capacity Factor as set forth in Schedule 1. The Buyer is obligated to pay to the Seller the Contract Price for such quantities, as set forth in Schedule 1, but any proceeds from such sales into the Wholesale Electricity Spot Market will be paid to the Buyer or, if retained by the Seller, netted against amounts owed by the Buyer to the Seller; provided, however, the Buyer shall be responsible for all WESM Charges related to such spot market sales. Any request by the Buyer to sell electricity into the Wholesale Electricity Spot Market will be combined with all similar requests from other buyers, as well as any market operations of the Seller, and, in the event that the total quantity offered to the market cannot be sold, all parties’ quantities shall be reduced pro rata. Before the commencement of any spot market sales, the Buyer and the Seller shall establish a mutually acceptable protocol for executing such sales and determine any charges by Seller for conducting such sales through the WESM on the Buyer’s behalf.

 

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2.7 Regulatory Approvals. The obligations of the Seller to sell and deliver the Product, or cause the Product to be delivered, to the Buyer hereunder are subject to the Seller having obtained all required governmental approvals and permits including, without limitation, any required approvals from the ERC or the Wholesale Electricity Spot Market. The Buyer and Seller acknowledge that, given the ongoing evolution of the Wholesale Electricity Spot Market and regulations governing the electricity market, there may be circumstances that require the Parties to amend this Agreement. Both Buyer and Seller hereby agree to fully cooperate to implement such amendments, especially as they relate to full compliance with Applicable Laws.

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