Exhibit B-1
PRO FORMA OPERATING AGREEMENT
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This Operating Agreement (this "Agreement"), dated as of , 2000, is
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entered into by and between the undersigned Transmission Owner (the
"Transmission Owner"), and [ ], a Limited Liability Company
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existing under and by virtue of the laws of the State of Delaware ("Transco").
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The Transmission Owner and Transco are each referred to herein as a "Party", and
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collectively as the "Parties."
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WITNESSETH
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WHEREAS, Transco has been formed as a Limited Liability Corporation under
Delaware law to operate electric transmission facilities owned by itself and
others;
WHEREAS, Transco intends to operate as an independent transmission company
under the oversight, and within the structure, of the Southwest Power Pool
("SPP") as part of the SPP Partnership RTO;1
WHEREAS, Transco has received approval from the Federal Energy Regulatory
Commission to operate as a regional transmission organization pursuant to Order
Nos. 888 and 2000 of the Federal Energy Regulatory Commission; and
WHEREAS, the Parties are entering into this Agreement to provide for the
terms and conditions under which Transco shall be authorized to exercise
Functional Control over the Transmission Owner's electric transmission
facilities, and perform additional functions with respect to such facilities, as
more fully set forth herein.
NOW THEREFORE, in order to carry out the transactions contemplated by this
Agreement, and in consideration of the promises, covenants, terms and conditions
hereinafter set forth, the Transmission Owner and Transco, intending to be
legally bound hereby, agree as follows:
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1 The Pro Forma Operating Agreement assumes that the Transco will operate
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as part of the SPP Partnership RTO.
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ARTICLE DEFINITIONS
Whenever used in this Agreement as capitalized terms, the following terms
shall have the meanings specified in this Article I.
AGENCY AGREEMENT means an agreement in the form of Appendix B hereto
entered into by Transco and an owner of Non-transferred Transmission Facilities
to allow Transco to provide Transmission Service and Wholesale Distribution
Service over the owner's Non-transferred Transmission Facilities, which are
necessary for the provision of such service, but the Functional Control of which
will not be transferred to Transco.
ANCILLARY SERVICES means those services that are necessary to support the
transmission of capacity and energy from resources to loads while maintaining
reliable operation of the Transmission System in accordance with Good Utility
PRACTICE.
CODE OF CONDUCT means the Code of Conduct attached to the Transco LLC
Agreement.
CONTROL AREA means an electric power system or combination of electric
power systems to which a common automatic generation control scheme is applied
in order to: (i) match, at all times, the power output of the generators within
the electric power system(s) and capacity and energy purchased from entities
outside the electric power system(s), with the load within the electric power
system(s); (ii) maintain scheduled interchange with other Control Areas, within
the limits of Good Utility Practice; (iii) maintain the frequency of the
electric power system(s) within reasonable limits in accordance with Good
Utility Practice; and (iv) provide sufficient generating capacity to maintain
operating reserves in accordance with Good Utility Practice.
CONTROL AREA OPERATORS means an entity that is responsible for monitoring
and controlling the electric power system and perform the Control Area function.
DELIVERING PARTY means the entity supplying capacity and energy to be
transmitted at Point(s) of Receipt.
DESIGNATED AGENT means any entity that performs actions or functions on
behalf of Transco, an Eligible Customer, or the Transmission Customer required
under the OATT.
DISTRIBUTION FACILITIES means the facilities owned and operated or
controlled by a Transmission Owner, or which another owner has agreed to operate
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at the request and in cooperation with a Transmission Owner, and which are used
to provide Wholesale Distribution Service.
ELIGIBLE CUSTOMER means (i) any electric utility (including the
Transmission Owner(s) and any power marketer), Federal power marketing agency,
or any person generating electric energy for sale or resale is an Eligible
Customer under the OATT. Electric energy sold or produced by such entity may be
electric energy produced in the United States, Canada or Mexico. However, with
respect to transmission service that the Commission is prohibited from ordering
by Section 212(h) of the Federal Power Act, such entity is eligible only if the
service is provided pursuant to a state requirement that a Transmission Owner
offer the unbundled transmission service, or pursuant to a voluntary offer of
such service by the Transmission Owner, (ii) any retail customer taking
unbundled transmission service pursuant to a state requirement that the
Transmission Owner offer the transmission service, or pursuant to a voluntary
offer of such service by the Transmission Owner, is an Eligible Customer under
the OATT. A Transmission User shall receive transmission service under the
Tariff only if it complies with the obligations of Transmission Customers and
Transmission Users delineated in Section 39 of the OATT.
FUNCTIONAL CONTROL means the ability of Transco to control the operation of
the Transmission Facilities subject to this Operating Agreement by delegating
tasks to the Transmission Owners or Control Area Operators within Transco. The
Transmission Owners or Control Area Operators may perform actual physical
operations or tasks under the direction of Transco. Functional Control is
subject to the Partnership RTO Operating Protocol and Procedures between Transco
and the SPP.
FERC OR COMMISSION means the Federal Energy Regulatory Commission, or any
successor agency.
GENERATION OWNER means an entity that owns or controls the electric power
generation facility which produces electrical energy and which is electrically
interconnected to the Transmission System.
GOOD UTILITY PRACTICE means 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 to
be acceptable practices, methods, or acts generally accepted in the region.
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NERC means the North American Electric Reliability Council, applicable
regional electric reliability councils or successor organizations.
NERC INTERREGIONAL SECURITY NETWORK means a near-real-time data exchange
application for the purpose of sharing operational security information. The ISN
utilizes an Inter-Control Center Communication Protocol (ICCP) based application
for exchanging operational security data over the NERC communication network.
NETWORK INTEGRATION TRANSMISSION SERVICE means the transmission service
provided under Part III of the OATT.
NETWORK UPGRADE means a modification or addition to transmission-related
facilities that are integrated with and support the Transmission System for
general benefit of all users of such Transmission System.
NON-TRANSFERRED TRANSMISSION FACILITIES means certain transmission
facilities and Distribution Facilities, Functional Control over which will not
be transferred to Transco under Section 203 of the Federal Power Act, but which
are necessary for the provision of Transmission Service or Wholesale
Distribution Service to Eligible Customers pursuant to the OATT and which are
subject to the Agency Agreement.
OATT means the SPP RTO Open Access Transmission Tariff, including the
Transco rate schedules therein, on file with the FERC, as the same may be
amended from time to time.
OPEN ACCESS SAME-TIME INFORMATION SYSTEM ("OASIS") means the information
system and standards of conduct contained in Part 37 of the Commission's
regulations and all additional requirements implemented by subsequent Commission
orders dealing with OASIS.
OPERATING PROTOCOL means the Transco Operating Protocol, as the same may be
amended from time to time. The Operating Protocol are attached to this Agreement
at Appendix C.
SPP PARTNERSHIP RTO means the RTO under which the Transco operates as an
independent transmission company under the oversight and within the structure of
the SPP.
PARTY means any entity that has signed this Agreement and is bound
hereunder.
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POINT(S) OF DELIVERY means point(s) on the Transmission System where
capacity and energy transmitted by Transco will be made available to the
Receiving Party under Part II of the OATT.
POINT(S) OF RECEIPT means point(s) of interconnection on the Transmission
System where capacity and energy will be made available to Transco by the
Delivering Party under Part II of the OATT.
POINT-TO-POINT TRANSMISSION SERVICE means the reservation and transmission
of capacity and energy on either a firm or non-firm basis from Point(s) of
Receipt to Point(s) of Delivery under Part II of the OATT.
POWER PURCHASER means the entity that is purchasing the capacity and energy
to be transmitted under the OATT.
PRICING AND REVENUE DISTRIBUTION PROTOCOL means the protocols governing the
payments and revenue distributions by the Transco to Transmission Owners, which
protocols are attached hereto at Appendix D.
RECEIVING PARTY means the entity receiving the capacity and energy
transmitted by Transco to Point(s) of Delivery.
REGIONAL TRANSMISSION PLANNING PROCESS bmeans the Transco Regional
Transmission Planning Process, as the same may be amended from time to time.
REGIONAL TRANSMISSION ORGANIZATION ("RTO") means an entity that operates
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electric transmission assets in compliance with FERC's regulations.
SERVICE AGREEMENT means the initial agreement and any amendments or
supplements thereto entered into by the Transmission Customer and Transco for
service under the OATT.
STANDARDS OF CONDUCT means the standards set forth in Appendix C to this
Agreement.
TRANSCO LLC AGREEMENT means the Limited Liability Company Agreement setting
forth the rights, responsibilities, and obligations of the members of Transco in
form and substance acceptable to them.
TRANSFERRED FACILITIES means electric transmission facilities, Functional
Control over which has been transferred to Transco pursuant to an Operating
Agreement.
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TRANSMISSION CUSTOMER means any Eligible Customer (or its Designated Agent)
that (i) executes a Service Agreement, or (ii) requests in writing that Transco
file with the Commission a proposed unexecuted Service Agreement to receive
transmission service under Part II of the OATT.
TRANSMISSION OWNER means an entity which (a) has executed an Operating
Agreement with Transco to transfer Functional Control of transmission facilities
to Transco or (b) is the Transco at such time as Transco begins operation as a
Transco.
TRANSMISSION SERVICE means Transmission Service provided under the OATT on
a firm and non-firm basis.
TRANSMISSION SERVICE DATE means the date upon which Transco begins
providing Transmission Service under the OATT.
TRANSMISSION SYSTEM means the facilities owned, controlled or operated by
Transco that are used to provide transmission service under Part II and Part III
of the OATT. The Transmission System includes facilities, the Functional Control
of which has been transferred to Transco subject to Commission approval under
Section 203 of the Federal Power Act (i.e., Transferred Facilities). In
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addition, the Transmission System includes other facilities that are not
controlled or operated by Transco but are facilities that Transco is allowed to
use pursuant to an Agency Agreement in providing service under the OATT (i.e.,
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Non-transferred Transmission Facilities). Transmission System may include
Transferred Facilities, Non-transferred Transmission Facilities or both, as the
context requires.
TRANSMISSION TRANSACTION means use or reservation of the Transmission
System for Point-To-Point and/or Network Integration Transmission Service
pursuant to a Service Agreement and the OATT.
TRANSMISSION USER means all entities which are any one or more of the
following: (a) Transmission Customer, (b) Delivering Party, (c) Power Purchaser,
(d) Receiving Party, (e) Transmission Owner which utilizes the Transmission
System to effectuate a Transmission Transaction, or (f) broker or marketer or
any other intermediary that is a party to a Transmission Transaction.
WHOLESALE DISTRIBUTION SERVICE means the provision of distribution service
to wholesale customers over Distribution Facilities as necessary to effectuate a
Transmission Transaction under the OATT.
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ARTICLE II
AUTHORIZATION BY TRANSMISSION OWNER
TO OPERATE TRANSMISSION FACILITIES
Pursuant to this Operating Agreement, the Transmission Owner authorizes
Transco to exercise Functional Control over the Transferred Facilities which are
specifically identified in Appendix A, to offer non-discriminatory open access
to such facilities and other facilities comprising the Transmission System in
accordance with the terms and conditions of the OATT, to operate the Transco as
an independent transmission company as part of the SPP Partnership RTO, to
collect and remit to the Transmission Owner revenues from the provision of such
transmission service, and to perform all duties and functions specified in this
Agreement.
ARTICLE III
RIGHTS, POWERS, AND OBLIGATIONS OF TRANSCO
3.1 OPERATION AND PLANNING.
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3.1.1 FUNCTIONAL CONTROL. The Transmission Owner authorizes Transco to
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exercise Functional Control over the operation of the Transferred Facilities as
necessary to effectuate Transmission Transactions. Such control shall be
exercised in accordance with Good Utility Practice and shall conform to
applicable reliability guidelines, policies, standards, rules, regulations,
orders, license requirements, each Transmission Owner's specific reliability
requirements and operating guidelines, and all applicable requirements of
federal or state laws or regulatory authorities. Disputes regarding reliability
requirements and operating guidelines not resolved by negotiations shall be
resolved through the dispute resolution process provided for in the OATT.
Pending resolution of such disputes, the Transmission Owner's specific
reliability requirements and operating guidelines shall be used by Transco with
respect to the Transmission Owner' s facilities until the issue is resolved. The
methods of Functional Control are described in more detail in the Operating
Protocol attached at Appendix C.
3.1.2 RELIABILITY. Transco shall have responsibility for the reliability of
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the Transferred Facilities in connection with its rights, powers, and
obligations under this Agreement. The responsibilities of Transco and the
Transmission Owner in maintaining the reliability of the Transferred Facilities
are described in more detail in the Operating Protocol and the Transco's
planning process.
3.1.3 PLANNING ACTIVITIES. Transco shall engage in such planning activities
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as are necessary to fulfill its obligations under this Agreement and the OATT.
The responsibilities of Transco and the Transmission Owner for planning the
Transmission System are described in more detail in the Transco's planning
process as it now exists or may hereafter be amended.
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3.1.4 PERFORMANCE OF REGULATORY OBLIGATIONS. Transco shall comply with
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existing transmission, reporting, operating, filing, and planning obligations of
the Transmission Owner that are imposed by federal or state laws or regulatory
authorities which can no longer be performed solely by the Transmission Owner
following transfer of Functional Control of the Transferred Facilities to
Transco.
3.2 NON-DISCRIMINATORY TRANSMISSION SERVICE.
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3.2.1 TYPE OF SERVICE.
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(a) Transco shall offer transmission service over the entire
Transmission System to all "Eligible Customers," as defined in the OATT,
including the Transmission Owner, on a non-discriminatory basis, pursuant
to the OATT and the Agency Agreement.
(b) The Transmission Owner shall enter into an Agency Agreement in the
form of Appendix B, which authorizes Transco to provide transmission
services on behalf of the Transmission Owner over Non-transferred
Transmission Facilities.
3.2.2 PRICING. Transco may propose to the FERC such transmission pricing
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for transmission service as is necessary to fulfill its obligations under this
Agreement and may propose to the FERC such changes in prices, pricing methods,
terms, and conditions as are necessary to continue to fulfill such obligations;
provided, however, that the pricing methodology set forth in the Pricing and
Revenue Distribution Protocol, attached at Appendix D, shall be changed only in
accordance with that Protocol.
3.2.3 STANDARDS OF CONDUCT. Transco, its directors, officers, employees,
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contractors, and agents shall adhere to the Standards of Conduct contained in
the Transco LLC Agreement.
3.2.4 OASIS. Transco and SPP shall administer a single OASIS site or
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successor system(s) pursuant to the OATT. The OASIS shall conform to the
requirements for such systems as specified by the FERC.
3.2.5 ANCILLARY SERVICES. Transco shall offer, as part of the OATT, such
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Ancillary Services as are required by the FERC to be offered. Transco shall
obtain such services from suppliers, in a manner which minimizes cost,
consistent with its reliability responsibilities and other obligations under
this Agreement. In obtaining such Ancillary Services, Transco shall afford no
undue preference or disadvantage to any supplier, including the Transmission
Owner or its affiliates. Transco's responsibility as the provider of Ancillary
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Services and the Transmission Owner's responsibility as a supplier of Ancillary
Services are described in the Operating Protocol and the OATT.
3.3 RESPONSIBILITIES OF TRANSCO TO THE TRANSMISSION OWNER.
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3.3.1 RELATIONSHIP. Transco and its directors, officers, employees, and
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agents shall owe the same fiduciary duties to the Transmission Owners under this
Agreement that the Managing Member owes to LLC members under ss. 9.1(b) of the
Transco LLC Agreement.
3.3.2 REVENUES. All revenues received by Transco for transmission service
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under the OATT shall be held, used, managed, and distributed in accordance with
the Pricing and Revenue Distribution Protocols as it now exists or is hereafter
amended; provided, however, that the Pricing and Revenue Distribution Protocols
shall be changed only in accordance with those Protocols.
3.3.3 NON-DISCRIMINATION. Transco shall not perform its duties and
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functions under this Agreement in a manner that discriminates in favor of or
against the facilities of any Transmission Owner, or in a manner that
discriminates in favor of or against the Transmission Owner or any other
Transmission Owner or their affiliates.
3.4 ADDITIONAL OBLIGATIONS.
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3.4.1 ASSUME LIABILITY. As between the Parties to this Agreement, Transco
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shall assume liability for any injury or damage to persons or property arising
from Transco's own acts or neglect, including the acts or neglect of its
directors, officers, employees, agents, and contractors, and shall release,
indemnify, and hold harmless the Transmission Owner from and against all
damages, losses, claims, demands, suits, recoveries, costs and expenses, court
costs, attorney fees, and all other obligations by or to third parties, arising
from Transco's performance or neglect of its obligations (whether arising from a
finding of negligence, strict liability or other fault or responsibility) under
this Agreement, except in cases where, and only to the extent that, the gross
negligence or intentional wrongdoing of a Transmission Owner, or the
Transmission Owners as a group, contributes to the claimed injury or damage.
3.4.2 DISPUTE RESOLUTION. Disputes between and among Transco and the
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Transmission Owners, individually or collectively, will be resolved in
accordance with the procedures set forth in the OATT.
3.4.3 INSPECTION AND AUDITING PROCEDURES. Transco shall grant each
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Transmission Owner such access to Transco's books and records as is necessary to
verify and audit compliance by Transco with this Agreement. Such access shall be
at reasonable times and under reasonable conditions. Transco shall also comply
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with the accounting and reporting requirements of federal and state regulatory
authorities (including, but not limited to, the State of Delaware) having
jurisdiction over Transco with respect to the business aspects of its business
operations. Contacts between Officers, employees, and agents of any Transmission
Owner and those of Transco pursuant to this Section 3.4.3 shall be strictly
limited to the purposes of this Section 3.4.3 and shall comply with the
applicable Code of Conduct.
3.4.4 STRANDED COST RECOVERY CHARGES. If the Commission approves stranded
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cost charges to be recovered through schedules to be implemented by Transco,
Transco as agent shall charge and collect the applicable charge(s) from the
appropriate Transmission User(s) and distribute the amounts directly to the
appropriate Transmission Owner(s).
3.4.5 AGREEMENT WITH OTHER TRANSMISSION OWNERS. Transco shall execute an
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Operating Agreement identical in substance to this Agreement with each entity
that owns or controls facilities included in the Transmission System, other than
those that contribute Transmission Assets to the Transco under the Transco LLC
Agreement.
3.5 ENFORCEMENT AUTHORITY.
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3.5.1 VIOLATIONS. Transco shall have the authority to impose penalties or
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other sanctions for any of the following actions by a Transmission Owner
(subject to the dispute resolution procedures discussed below):
(a) material and willful violations of the Operating Protocol, the
Annual Regional Planning Summit, or other Transco policies related to the
operation of Transmission Facilities;
(b) intentionally ignoring or disobeying any reasonable and material
directive from Transco related to the operation of Transmission Facilities,
including, without limitation, operating orders or directives issued by
Transco;
(c) engaging in material and willful behavior which manipulates
available transmission capability to the detriment of other Transmission
Users;
(d) material and willful violation of Transco operating standards; or
(e) willful violation of material provisions of this Agreement.
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3.5.2 PENALTIES. As a penalty for violations specified in Section 3.5.1,
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Transco may withhold transmission revenues from a Transmission Owner until the
violation ceases and any forfeiture is fully paid. The Transco will develop and
file with FERC its penalty structure.
3.5.3 DISPUTE RESOLUTION. All enforcement actions of Transco shall be
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subject to the dispute resolution provision provided for in the OATT. Transco
shall be required to refund any forfeitures, including interest (under 18 C.F.R.
ss. 35.19(a)), which it is determined that Transco was not justified in
imposing. In such event, Transco shall not be subject to any additional
liability.
ARTICLE IV
RIGHTS, POWERS, AND OBLIGATIONS OF THE TRANSMISSION
OWNERS AND TRANSMISSION USERS
4.1 OPERATION AND PLANNING.
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4.1.1 REDISPATCH, CURTAILMENT AND ANCILLARY SERVICE.
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(a) Each Transmission Owner shall follow the directions of Transco in
operating the Transmission System. No Transmission Owner shall take any
action which unduly interferes with the provision of transmission service
by Transco.
(b) Transco shall enter into generation interconnection agreements
with all Generation Owners that could affect the reliability or capability
of the Transmission System requiring such entities to follow the directions
of Transco in redispatching generation, providing ancillary services,
providing reactive and voltage control from generating resources, in
accordance with the OATT and the Operating Protocol.
(c) Transco shall enter into operating agreements, Point-To-Point
Transmission Service agreements or Network Integration Transmission Service
agreements, as appropriate, with all Transmission Customers (including
Transmission Owners) for the purpose of ensuring reliable operations of the
Transmission System. The agreements will define coordination necessary with
the Transmission Customer's facilities (including distribution facilities)
to ensure reliability in the planning and operation of the Transmission
System and emergency response (including curtailments) to conditions that
could threaten the integrity of the Transmission System.
4.1.2 MAINTENANCE PRACTICES. Each Transmission Owner shall maintain its
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transmission facilities in accordance with Good Utility Practice and shall
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follow the maintenance requirements set forth in more detail in the Operating
Protocol for both generation and transmission facilities.
4.1.3 CONSTRUCTION.
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(a) The Transmission Owners (including Transco) shall have the
obligation to construct new transmission facilities reviewed, approved and
ordered to be built by the SPP and Transco through the Transco's planning
process. The SPP and Transco will develop non-discriminatory criteria to
determine which Transmission Owner will be obligated to construct the new
facilities based upon where the new transmission facilities will be
directly connected. If the new transmission facilities will be directly
connected to the existing facilities of one Transmission Owner, that
Transmission Owner will be obligated to construct the new facilities. If
two or more Transmission Owners will be interconnected directly to the new
facilities, Transco will assign construction responsibilities in a fair and
non-discriminatory manner.
(b) The Transmission Owner may satisfy its construction
responsibilities by arranging for a third party to finance and own the new
transmission facilities. If the third party fails to perform within a
reasonable period of time, the Transmission Owners and Transco will remain
obligated to undertake the construction. Transco will determine in a
non-discriminatory manner whether such third party can meet all necessary
criteria for financing and owning transmission in the area. It is
envisioned that such third parties will be able to finance and own
transmission in the Transco region. Any such third party Transmission Owner
shall enter into an Operating Agreement with Transco.
(c) All construction obligations will be subject to the Transco's
planning process.
4.1.4 ACQUISITION. In the event a Transmission Owner acquires transmission
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facilities not identified in Appendix A to this Agreement, such facilities shall
not become subject to Transco's Functional Control pursuant to this Agreement
unless and until both (i) Transco, on its own initiative or in response to the
request of any person, requests the Transmission Owner to assign such facilities
to its control and (ii) the Transmission Owner consents. If any transmission
facilities are added to the Transmission System as set forth above, the Parties
shall prepare a revised Appendix A.
4.1.5 STRANDED COSTS. A Transmission Owner may seek to recover stranded
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costs from Transmission User(s) in accordance with the terms, conditions and
procedures set forth in FERC Order No. 888. However, the Transmission Owner must
separately file any specific proposed stranded cost charge under Section 205 of
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the Federal Power Act. If the Commission approves stranded cost charges to be
recovered through schedules to be implemented by Transco, Transco as agent shall
charge and collect the applicable charge(s) from the appropriate Transmission
User(s) and distribute the amounts directly to the Transmission Owner.
4.1.6 OTHER OBLIGATIONS. Each Transmission Owner, where applicable, shall
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comply with the requirements of the Operating Protocol and the Transco's
planning process.
4.1.7 LOCAL FURNISHING BONDS. No responsibility of the Transmission Owner
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hereunder shall conflict with the provisions of the OATT relating to facilities
financed with local furnishing bonds.
4.2 ADDITIONAL OBLIGATIONS.
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4.2.1 PROVIDING INFORMATION. Each Transmission Owner shall provide such
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information to Transco as is necessary for Transco to perform its obligations
under this Agreement and the OATT. Information designated as confidential shall
be treated as confidential unless disclosure is required by Code of Conduct or
by a court or agency of competent jurisdiction.
4.2.2 FACILITIES ACCESS. Each Transmission Owner shall allow Transco such
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access to Transmission System facilities as is necessary (i) to verify and audit
compliance by the Transmission Owner with this Agreement or (ii) for Transco to
perform its obligations under this Agreement. Such access shall be at reasonable
times and under reasonable conditions.
4.2.3 INSPECTION AND AUDITING PROCEDURES. Each Transmission Owner shall
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grant Transco such access to the Transmission Owner's books and records as is
necessary (i) to verify and audit compliance by the Transmission Owner with this
Agreement or (ii) for Transco to perform its obligations under this Agreement.
Such access shall be at reasonable times and under reasonable conditions. Each
Transmission Owner shall also comply with the accounting and reporting
requirements of any federal or state regulatory authorities (including, but not
limited to, the State of Delaware) having jurisdiction over the Transmission
Owner with respect to aspects of Transco's business operations. Contacts between
officers, employees, and agents of Transco and those of the Transmission Owner,
pursuant to this Section 4.2.3 shall be strictly limited to the purpose of this
Section 4.2.3 and shall conform to the Standards of Conduct.
4.2.4 ASSUME LIABILITY. As between the Parties to this Agreement, each
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Transmission Owner ("Indemnifying Owner") shall assume liability for any injury
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or damage to persons or property arising from its own acts or neglect, including
the acts or neglect of its directors, officers, employees, agents, or
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contractors, and shall release, indemnify and hold harmless Transco and each
other Transmission Owner ("Indemnified Owners") from any damages, losses,
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claims, demands, suits, recoveries, costs and expenses, court costs, attorney
fees, and all other obligations by or of third parties, arising from the
Indemnifying Owner's performance or neglect of its obligations (whether arising
from a finding of negligence, strict liability or other fault or responsibility)
under this Agreement except in cases where, and only to the extent that, the
gross negligence or intentional wrongdoing of Transco or the Indemnified
Owner(s) contributes to the claimed injury or damage.
Except as provided in the OATT, each Transmission Owner shall not be liable
for any costs or expenses relating to the operation, repair, maintenance,
or improvement of any of the transmission facilities committed to the
Transmission System by any other Transmission Owner.
ARTICLE V
TERMINATION AND WITHDRAWAL OF FACILITIES
5.1 WITHDRAWAL NOTICE. Upon submission of a written notice of withdrawal to
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Transco, a Transmission Owner may commence a process of withdrawal of all of its
facilities from the Transmission System. Such withdrawal shall not be effective
until the later of (i) twelve (12) months after such notice is given, or (ii)
the effective date of any federal or state regulatory approval required to
effectuate such withdrawal. In the event of a merger, consolidation,
reorganization, sale, spin-off, or foreclosure, as a result of which
substantially all of the Transmission Owner's transmission facilities which are
part of the Transmission System are acquired by another entity, that entity
shall have the right to withdraw its facilities from Transco in accordance with
the foregoing. Any withdrawal shall be subject to the provisions of Section 5.2
of this Agreement.
5.2 EFFECT OF WITHDRAWAL BY A TRANSMISSION OWNER ON CONTRACTUAL OBLIGATIONS.
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In the event of withdrawal of a Transmission Owner pursuant to Section 5.1:
5.2.1 TRANSMISSION CUSTOMERS HELD HARMLESS. Transmission Customers taking
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service which involves the withdrawing Transmission Owner and which involves
transmission contracts executed before the Transmission Owner provided notice of
its withdrawal shall continue to receive service for the remaining term of the
contract at the same rates, terms, and conditions that would have been
applicable if there were no withdrawal, unless such contracts are modified by
FERC in accordance with its statutory authority or by agreement of the Parties.
The withdrawing Transmission Owner shall continue providing service to such
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Transmission Customers and shall receive no more in revenues for that service
than if there had been no withdrawal by such Transmission Owner.
5.2.2 EXISTING OBLIGATIONS. All financial obligations incurred and payments
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applicable to time periods prior to the effective date of such withdrawal shall
be honored by Transco and the withdrawing Transmission Owner.
5.2.3 CONSTRUCTION OF FACILITIES. Obligations relating to the construction
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of new facilities pursuant to the Transco's planning process, which imposed
duties upon the withdrawing Transmission Owner prior to such Transmission
Owner's withdrawal, shall be renegotiated as between Transco and the withdrawing
Transmission Owner. If such obligations cannot be resolved through negotiations,
they shall be resolved in accordance with the dispute resolution procedures
under the OATT.
5.2.4 OTHER OBLIGATIONS. Other obligations between Transco and the
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withdrawing Transmission Owner shall be renegotiated as between Transco and the
withdrawing Transmission Owner. If such obligations cannot be resolved through
negotiations, they shall be resolved in accordance with the dispute resolution
procedures provided for in this Agreement.
5.3 REGULATORY AND OTHER APPROVALS OR PROCEDURES. The withdrawal by a
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Transmission Owner of its facilities from Transco shall be subject to applicable
federal and state regulatory approvals or other regulatory procedures as set
forth in Section 5.1 of this Agreement.
ARTICLE VI
TERM OF AGREEMENT
This Agreement shall become effective upon the Transmission Service Date.
With respect to a Transmission Owner which begins participation after such date,
this Agreement shall become effective on the date the Transmission Owner signs
this Agreement. This Agreement shall continue in effect, for any Transmission
Owner, until the effective date of termination by that Transmission Owner
pursuant to Article V of this Agreement; provided, however, that the provisions
of Section 5.2 pertaining to the obligations of a withdrawing Transmission Owner
shall survive the termination of this Agreement.
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ARTICLE VII
DISPUTE RESOLUTION
All disputes between the Transco and the Transmission Owners shall be
subject to the dispute resolution procedures under the OATT.
ARTICLE VIII
FORCE MAJEURE
Notwithstanding any provision in this Agreement to the contrary, neither
Party shall be liable in damages or otherwise, or be responsible to the other
Party, for failure to carry out any of its obligations under this Agreement
(other than any payment obligations) if and only to the extent that it is unable
to so perform or is prevented from performing such obligation by an event of
Force Majeure. However, a Party whose performance under this Agreement is
hindered by an event of Force Majeure shall make all reasonable obligations to
perform its obligations under this Agreement. For purposes of this Agreement, an
event of Force Majeure means 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, any Curtailment, order, regulation or
restriction imposed by governmental military or lawfully established civilian
authorities, or any other cause beyond a Party's control.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 DESCRIPTIVE HEADINGS. The descriptive headings of Articles, Sections,
--------------------
subsections and other provisions of this Agreement have been inserted for
convenience of reference only and shall not define, modify, restrict, construe,
or otherwise affect the construction or interpretation of any of the provisions
of this Agreement.
9.2 GOVERNING LAW. This Agreement shall be interpreted, construed, and
-------------
governed by the laws of the State of Delaware without giving effect to the
conflict of law principles thereof, except to the extent preempted by the laws
of the United States of America.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
----------------------
and be binding upon, each of the Parties, their respective successors and
permitted assigns. This Agreement shall not be assigned by either Party, by
operation of law or otherwise, without the prior approval of the other Party,
except to a successor in the operation of the Transmission Owner's transmission
facilities committed to the Transmission System by reason of a merger,
consolidation, reorganization, sale, spin-off, or foreclosure, as a result of
which substantially all such transmission facilities are acquired by such
successor and such successor becomes a Transmission Owner under this Agreement.
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9.4 NO IMPLIED WAIVERS. Except as otherwise provided in this Agreement, any
------------------
failure of any Party to comply with any obligation, covenant, agreement, or
condition herein may be waived by the Party entitled to the benefits hereof only
by a written instrument signed by the Party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any preceding, subsequent or other failure.
9.5 SEVERABILITY. Except for Article V of this Agreement, in the event any
------------
one or more of the provisions of this Agreement should be held invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions hereof shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The Parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions and with a view towards
effecting the purpose of this Agreement; provided, however, that if such
negotiations are unsuccessful, then the Parties may exercise their individual or
collective withdrawal or termination rights available under this Agreement.
9.6 REPRESENTATIONS AND WARRANTIES. Each Party, with respect to itself,
------------------------------
represents and warrants to the other Party as of effective date of this
Agreement as follows:
(i) It is duly organized, validly existing, and in good standing under
the laws of the jurisdiction where organized, and is qualified to do
business in the jurisdictions necessary to perform this Agreement.
(ii) The execution, delivery, and performance of this Agreement are
within its powers, have been duly and validly authorized by all requisite
action, and do not conflict with any applicable law, any of the terms or
conditions of its governing documents, or with any other binding agreement
except third-party joint agreements covered by Section 9.12.
(iii) This Agreement has been duly executed and delivered by the Party
and this Agreement constitutes the legal, valid, and binding obligation of
the Party enforceable against it in accordance with its terms except
insofar as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
or other similar laws affecting the enforcement of creditor's rights
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generally, and by general principles of equity regardless of whether such
principles are considered in a proceeding at law or in equity.
(iv) Except as expressly set forth in writing, it has, or will have as
of the time required, all regulatory authorizations necessary for it to
legally perform its obligations under this Agreement.
(v) There are no bankruptcy, insolvency, reorganization, receivership,
or other similar proceedings pending or being contemplated by it, or to its
knowledge threatened against it.
(vi) There are no actions at law, suits in equity, proceedings, or
claims pending or, to its knowledge, threatened against it before or by any
federal, state, foreign, or local court, tribunal, or governmental agency
or authority that might materially delay, prevent, or hinder the
performance of its obligations hereunder.
9.7 FURTHER ASSURANCES. Each Party 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 and useful to
carry out the intent and purpose of this Agreement and as are not inconsistent
with the provisions of this Agreement.
9.8 NOTICES. Except as otherwise expressly provided herein, notices
-------
required under this Agreement shall be in writing and shall be sent by U.S.
mail, overnight courier, hand delivery, facsimile, or other reliable electronic
means to the address of each Party as is furnished by such Party. Any notice
required under this Agreement shall be deemed to have been given either upon
delivery, if by U.S. mail, overnight courier, or hand delivery, or upon
confirmation, if given by facsimile or other reliable electronic means.
9.9 LIMITATIONS ON LIABILITY. Notwithstanding any other provision of this
------------------------
Agreement, no Transmission Owner shall be liable to any other Transmission Owner
or Transmission User for any actions taken pursuant to the direction of Transco
except in cases of the gross negligence or intentional wrongdoing of such
Transmission Owner, Member or Transmission User.
9.10 ENTIRE AGREEMENT. This Agreement, including any attachments to this
----------------
Agreement, and other agreements referenced herein constitute the entire
agreement between the Parties with respect to the subject matter of this
Agreement, and no previous or contemporary oral or written representations,
agreements, or understandings made by any Transmission Owner or of Transco shall
be binding unless contained in this Agreement, including the appendices attached
hereto, the OATT, the Agency Agreement, or other agreements referenced herein.
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This Agreement shall not be amended except by the written agreement of the
Parties; provided, that the effectiveness of any such amendment shall be
conditioned upon the execution of the same amendment by all other Transmission
Owners.
9.11 GOOD FAITH EFFORTS. The Transmission Owner agrees that it shall in
------------------
good faith take all reasonable actions necessary to permit it to fulfill its
obligations under this Agreement. Where the consent, agreement, or approval of
the Transmission Owner must be obtained hereunder, such consent, agreement, or
approval shall not be unreasonably withheld, conditioned, or delayed. Where the
Transmission Owner is required or permitted to act, or omit to act, based on its
opinion or judgment, such opinion or judgment shall not be unreasonably
exercised. To the extent that the jurisdiction of any federal or state
regulatory authority applies to any part of this Agreement and/or the
transactions or actions covered by this Agreement, each Transmission Owner shall
cooperate with Transco and all other Transmission Owners to secure any necessary
or desirable approval or acceptance of such regulatory authorities of such part
of this Agreement and/or such transactions or actions.
9.12 THIRD-PARTY JOINT AGREEMENTS. This Agreement, including the Appendices
----------------------------
to this Agreement, the OATT, and the Agency Agreement shall not be construed,
interpreted, or applied in such a manner as to cause the Transmission Owner to
be in material breach, anticipatory or otherwise, of any agreement in effect on
the effective date of this Agreement between the Transmission Owner and one or
more third parties for the joint ownership, operation, or maintenance of any
electrical facilities covered by this Agreement, the OATT, or the Agency
Agreement. If the Transmission Owner has such a third-party joint agreement, it
shall discuss with Transco and the other Transmission Owners any material
conflict between such third-party joint agreement and this Agreement, the OATT,
or the Agency Agreement raised by a third party to such joint agreement, but the
resolution of such a conflict shall, vis-a-vis Transco and the other
Transmission Owners, be and remain within the sole discretion of the
Transmission Owner; provided, however, that the Transmission Owner shall, if the
conflict is otherwise unresolved, utilize the available remedies and dispute
resolution procedures to resolve such conflict, including, but not limited to,
submitting such conflict to the FERC for resolution; provided, further, that
unless so ordered by the FERC or a court having jurisdiction, in no event shall
the Transmission Owner enter into a resolution of such conflict which would
impair the reliability of the Transmission System.
9.13 NO PARTNERSHIP. This Agreement is not intended, and shall not be
--------------
construed, interpreted or applied, to create a partnership or joint venture
between the Parties and, with the exception of Transco pursuant to the terms of
this Agreement and the Agency Agreement, no Transmission Owner shall be entitled
to act as an agent for any other Transmission Owner with respect to Transco.
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9.14 CURRENT DOCUMENTS. Transco and the SPP shall maintain current versions
-----------------
of all protocols, the OATT, the Agency Agreement, and the Transco LLC Agreement
and all amendments thereto and shall post such documents on its Internet World
Wide Web Site or equivalent form of electronic posting and provide such
documents to the Transmission Owner.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the Transmission Owner and Transco have caused this
Operating Agreement to be signed by their respective duly authorized officers or
personnel as of the date first above written.
[FULL NAME OF TRANSCO]
By:
------------------------------------
Name:
Title:
Date:
[FULL NAME OF TRANSMISSION OWNER]
By:
------------------------------------
Name:
Title:
Date:
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APPENDIX A
DESCRIPTION OF FACILITIES
[TO BE ADDED]
00
XXXXXXXX X
PRO FORMA AGENCY AGREEMENT
--- -----
(See Attachment F to the Application)
23
APPENDIX C
OPERATING PROTOCOL
[TO BE ADDED]
24
APPENDIX D
PRICING AND REVENUE DISTRIBUTION
PROTOCOL
[TO BE ADDED]
25
