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HomeMy WebLinkAboutMINUTES - 05252004 - C42 TO: BOARD OF SUPERVISORS ;' CONTRA FROM: BARTON J. GILBERT, DIRECTOR OF GENERAL SERVICES COSTA DATE: May 25, 2004 COUNTY SUBJECT: APPROVE ELECTRIC PROGRAM WINDUP AGREEMENT WITH , ABAG POWER TO FACILITATE PAYMENT TO THE COUNTY IN THE AMOUNT OF $3,664,549 SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION APRROVE a Windup Agreement with the Association of Bay Area Governments, Publicly Owned Energy Resources (ABAG POWER) to conclude the Direct Access Electric Aggregation Program and AUTHORIZE the County Administrator to execute the Windup Agreement. FINANCIAL IMPACT Approval of the Windup Agreement will facilitate payment to the County in the amount of $3,664,549 of which $545,196 is a return of the County's Working Capital Deposit and $3,119,351 is a credit due under the Direct Access Electric Aggregation Agreement between ABAG POWER and the County as a result of ABAG POWER's successful settlement in PG&E's bankruptcy. BACKGROUND ABAG Publicly Owned Energy Resources (ABAG POWER) is a Joint Powers Agency created by the Association of Bay Area Governments (ABAG) in 1993 to provide electricity and natural gas aggregation services to local governments in PG&E's service territory. Contra Costa County was a member of the ABAG POWER JPA, and was also a participant in the Direct Access Electric Aggregation Program. As a result of the energy crisis, the Electric Aggregation Program was suspended in June 2001 and all of the County's accounts were returned to PG&E service. At the time the program was suspended, the County had $545,193 on deposit with ABAG POWER. To date, these funds have been held by ABAG POWER to cover potential operating expenses of the Electric Program, as well as program windup costs. ABAG POWER now proposes to return these funds to the County. These funds will be distributed as soon as a majority of ABAG POWER members have executed the Windup Agreement. CONTINUED ON ATTACHMENT: X YES SIGNATURE: —,"RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE r APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON May 25, 2004 APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS Y UNANIMOUS(ABSENT NOE:IO 1 AYES: NOES: ABSENTS: ABSTAIN: MEDIA CONTACT:BARTON J.GILBERT(313-7100) Originating Dept.:General Services Department I HEREBY CERTIFY THAT THIS IS A TRUE cc: General Services Department AND CORRECT COPY OF AN ACTION TAKEN Administration AND ENTERED ON THE MINUTES OF THE BOARD Accounting OF SUPERVISORS ON THE DATE SHOWN. County Administrator's Office County Counsel ATTESTED IjX@y 25, 2004 Auditor-Controller(via CSD) JOHN SWEETEN,CLERK OF THE BOARD OF SUPERVISORS AND COUNTY J., i BY \ DEPUTY APPROVE ELECTRIC PROGRAM WINDUP May 25, 2004 AGREEMENT WITH ABAG POWER TO FACILITATE PAYMENT TO THE COUNTY IN THE AMOUNT OF $3,664,549 Separate from the deposit funds, ABAG POWER filed a claim in the PG&E bankruptcy case on behalf of Electric Program members to recover funds associated with Direct Access credits that PG&E had refused to pay in the months leading up to their bankruptcy filing. ABAG POWER subsequently reached a stipulated settlement with PG&E as to the amount of the claim ($17,000,000). The County's proportional share of this claim (including interest) is $3,119,351. In addition to the amounts noted above, ABAG POWER expects to have a small surplus of funds at the completion of the windup. The County's proportional share of this surplus will be calculated in accordance with the Wind Up Agreement and distributed by March 31, 2005. Furthermore, certain amounts from the ABAG POWER Electric Aggregation Program remain on deposit with the Northern California Power Authority (NCPA) to cover credit risks associated with energy purchased through the Independent Systems Operator (ISO) and California Power Exchange (PX). These amounts remain unrecovered due to court actions related to the PX bankruptcy and FERC regulatory actions related to potential ISO refunds. Should these amounts be recovered they will be proportionately distributed to former ABAG POWER Electric Program members. Risks. The Windup Agreement requires that certain risks be transferred from ABAG POWER to the County. These risks are summarized as follows: • PG&E or other agency (e.g., ISO) may try to collect charges from billing periods when the County's accounts were part of the ABAG POWER program. • The CPUC may at some time impose a surcharge on former Direct Access customers. The amounts on deposit with NCPA are insufficient to cover future credit requirements with the ISO and/or PX. County staff, including County Counsel, have reviewed the Windup Agreement and supporting documentation and find the risks acceptable. Approval of the Windup Agreement will authorize the County Administrator to execute the Windup Agreement with ABAG POWER, and receive distributions of funds as they become available. If a sufficient number of ABAG POWER members execute the Windup Agreement prior to June 10, 2004, these funds will be available to the County by June 30, 2004. BJG:NIL:ah Page 2 of 2 141882(10189) AGREEMENT between ABAG WOOER and County of Contra Costa to Wind Up Electric Program This Agreement between ABAG Publicly Owned Energy Resources (ABAG POWER), a joint exercise of powers agency created under the California Joint Powers Act (California Go rnment Code §§6500 et seq.), and County of Contra Costa (County), is made effective RECITALS A. The County became a signatory to the Joint Powers Agreement creating ABAG POWER (IPA) (Attachment A, Exhibit 1) and a Member of ABAG POWER. B. ABAG POWER has been, and continues to be, staffed by employees of the Association of Bay Area Governments (ABAG). C. The County and ABAG POWER entered into the Direct Access Electric Aggregation Agreement (DA Agreement) (a form of the DA Agreement is at Attachment A, Exhibit 2). Under the DA Agreement, the County was a participant in the direct access electric aggregation program (Electric Program) until the Electric Program was suspended effective June 30, 2001 (the Electric Program is described in more detail in Attachment B). D. During the operation of the Electric Program and pursuant to the DA Agreement, each Member was obligated to pay, and did pay, to ABAG POWER a proportionate share of Electric Program costs and Working Capital needs (Electric Program costs and Working Capital needs are described in more detail in Attachment B). E. Upon suspension of the Electric Program, ABAG POWER retained funds (previously paid by the Members as described in paragraph D) to pay (1) identified potential Electric Program liabilities, (2) the costs of winding up the Electric Program►, and (3) the costs of marshalling assets (amounts owed to ABAG PLOWER and Members) (liabilities, assets and costs are described in more detail in Attachments B and C). F. ABAG POWER has determined that it cannot, within a reasonable timeframe, (1) pay or eliminate certain potential liabilities, (2) marshal certain assets, or (3) eliminate identified potential liabilities associated with a major asset. Therefore, ABAG POWER and County agree to wind up the Electric Program under the following terms and conditions. 1. Payment. County accepts as a true and proper accounting of all sums due to it from a wind up of the Electric Program the following specific and contingent sums: a) Balancing Account -a sum to be determined pursuant to §4 b) Working Capital Deposits ($545,198) c) DA Credit-- ($3,119,351) Page f Wind Up Agreement d) ISO Escrow Deposit - to be determined pursuant to §5 e) PX Escrow Deposit - to be determined pursuant to §5 f) Wind Up Costs Hold Back - to be determined pursuant to §11 2. Payment Terms. ABAG POWER will pay to County the following sums: a) In complete payment of the Balancing Account owed County, such funds as are available as of July 1, 2004. Both the payment schedule and the amounts to be paid to County are determined by §4 of this Agreement. b) In complete payment of the Working Capital Deposits owed County, the sum of ($545,198) within fifteen (15) days after the County's execution and return of an original of this Wind Up Agreement or after ABAG POWER's receipt of the "Qualifying Agreement"as defined in §10, whichever is later. c) In complete payment of the DA Credit owed County, the sum of($3,119,351) within fifteen (15) days after the latest of the following: i) the County's execution and return of an original of this Wind Up Agreement, or li) after ABAG POWER's receipt of the"Qualifying Agreement" as defined in §10, or iii) receipt of the DA Credit from PG&E. d) In complete payment of the ISO Escrow Deposits owned the County, such funds that ABAG POWER may receive from time to time from the Northern California Power Authority (NCPA) until all funds available from the ISO Escrow Deposits are received. Both the payment schedule and the amounts to be paid to the County are determined by §5 of this Wind Up Agreement. e) In complete payment of the PX Escrow Deposit owed the County, funds that ABAG POWER may receive from time to time from NCPA until all funds available from the PX Escrow Deposit are received. Both the payment schedule and the amounts to be paid to County are determined by §5 of this Wind Up Agreement. f) In complete payment of the Wind Up Costs Hold Back, the amount determined under §11 of this Wind Up Agreement on or before July 1, 2010. 3. Funds a labia for D€sbursgment and Allocation Ratios. Based on ABAG POWER°s representation and warranties in §6 and such other documents as It deemed necessary,the County acknowledges that: a) funds available for disbursement were determined by ABAG POWER as described in greater detail in Attachment C. Further, County approves such determination. b) the payments described in §§1(a), (d), (e) and (f) of this Wind Up Agreement are the result of allocating all the Balancing Accounts, ISO Escrow Deposits, PX Escrow Deposits and Wind Up Costs Hold Backs available for disbursement among the Members in a ratio equal to each Member's electrical usage during the period of time such Member participated in the Electric Program to the total electrical usage by all Members who were participating in the Electric Program at the time of suspension ("Usage Ratio"). Further, County approves such allocation. c) Working Capital Deposits were made by the Members in accordance with ABAG POWER's financial records (see Attachment C). County acknowledges that the payment described in §1(b) of this Wind Up Agreement is the result of allocating the Working Capital Deposits available for disbursement among the Members in a ratio equal to the County's deposits to Working Capital to all Working Capital Deposits made by all Members who were participants in the Page 2 Wind Up Agreement Electric Program at the time of suspension ("Working Capital Ratio"), Further, County approves such allocation. d) the payment described in §1(c) is the result of allocating the DA Credit available for disbursement among the Members in a ratio equal to the CTC Reversals paid by County to all CTC Reversals paid by all Members ("CTC Reversal Ratio"). The method for determining said ratio is described in greater detail in Attachment C. Further, County approves such allocation. 4. Balancing Account Payment A Orr aunt and Schedule. The amount of the Balancing Account Payment to County is based on the total funds available for disbursement after payment of Working Capital Deposit and DA Credits and allocated to each Member by the Usage Ratio. ABAG POWER will have an independent financial audit conducted for fiscal year 2003-04 which will identify the total amount available for distribution. This amount will be allocated by the Usage Ratio and sent to County no later than March 31, 2005. 5. ISO Escrow De sit and PX scrow De osit Amoun and P men Shed e a) ISQ Escrow Deposit. The amount In the ISO Escrow Deposit available for disbursement to Members will be affected by regulatory and adjudicatory actions of the California Independent System Operator(ISD), California Public Utilities Commission (CPUC) or Federal Energy Regulatory Commission (FERC) (see Attachments 8 and D), As of December 31, 2003, the total amount in the ISO Escrow deposit is Five Hundred Eight Thousand Two Hundred Fourteen Dollars ($508,214). For a period of no less than two (2) years after the effective date of the Qualifying Agreement or December 31, 2006, whichever is later, ABAG POWER will monitor activities affecting fund balances in the ISO Escrow Deposit and will challenge or accept such recalculations at its sole reasonable discretion taking into account, among other factors, the amount of the recalculation, the probity of the underlying cause of the recalculation and the cast and probative value of challenging the recalculation. b) P)( Escrs w Deposit. The California Power Exchange (PX) is In bankruptcy. As of December 31, 2003, the total amount in the PX Escrow Deposit is One Million Fifty-Six Thousand Five Hundred Six Dollars ($1,056,506). For a period of no less than two (2) years after the effective date of the Qualifying Agreement or December 31, 2006, whichever Is later, ABAG POWER will monitor activities affecting fund balances in the PX Escrow Deposit and will challenge or accept such recalculations at its sole reasonable discretion taking into account, among other factors, the amount of the recalculation, the probity of the underlying cause of the recalculation and the cost and probative value of challenging the recalculation. Upon Its discharge from bankruptcy, the amount in the PX Escrow Deposit available for disbursement to Members will be determined. c) Payments. DCPA may release portions of the ISO and/or PX Escrow Deposits to ABAG POWER from time to time, ABAG POWER will place such amounts in an interest bearing account until all funds have been released or December 31, 2006, whichever is earlier. The County's share will be determined using the Usage Ratio. ABAG will pay County its shard of the amount in such accounts at that time. Any payments received by ABAG POWER after such disbursement will be paid to Electric Program Members if, in ABAG POWER`s sole discretion, it is cost effective to do so. Page 3 Wind Up Agreement 6. ABAG POWER's Representations and Warranties. a) ABAG POWER represents and warrants that the descriptions provided in Attachments A, B and C are, to the best of ABAG POWER's knowledge, true and accurate for the purposes of(i) ABAG POWER performing as required under the Wind Up Agreement, and (ii) the Electric Program Members determining the accuracy, fairness and appropriateness of the distribution of funds contemplated by this Agreement. b) In some instances, the operation of the Electric Program may have deviated from the description contained in Attachment B or Attachment C or may omit some factors. ABAG POWER represents and warrants that any such deviations or omissions would not have had a material effect on the amounts to be disbursed or the allocation of those amounts to any individual Member. c) ABAG POWER represents that the analysis provided in Attachment D is, as of April 15, 2084, a fair statement of the risk that the contingent liabilities described in Attachment D will become actual liabilities. However, ABAG POWER neither guaranties the outcome nor represents that such analysis is the only conclusion that can be reached. d) Only Electric Program Members who execute this Agreement are entitled to rely on the information, representations and warranties set forth in this section and Attachments A through D, inclusive and any exhibits thereto. 7. County Due Diligence and Acceptance of Representations and Warranties. The County has reviewed this Wind Up Agreement, each of the Attachments and Exhibits and such other documents as it has examined and has determined that there is no additional information which it requires in order to make an informed decision on whether to accept or reject the terms of this Agreement or in order to determine the amounts to which it is entitled under the IPA or the DA. Therefore, the County hereby: a) Releases ABAG POWER and ABAG from any and all liabilities or claims which the County, or anyone claiming through it, may have against ABAG POWER or ABAG for damages, injury or additional proceeds from the wind up of the Electric Program. b) Releases ABAG POWER and ABAG from any and all liabilities or claims which the County, or anyone claiming through it, may have against ABAG POWER or ABAG for any damages or injury arising out of the County's participation in the Electric Program. c) Accepts the Contingent Risks described in Attachment D. d) Agrees to defend and indemnify ABAG POWER and ABAG against any claims made by any person claiming any rights through the County for damages resulting from the County's participation in the Electric Program, its execution of this Wind Up Agreement or the performance of any of its obligations hereunder unless such is caused by fraud, gross negligence or Intentional misconduct of ABAG POWER or ABAG, or their respective members, directors, agents or employees. 8. Other Electric Prooram Members. The County acknowledges that each Member executing a Winn Up Agreement substantially identical toxthis Wind Up Agreement, excepting only the amounts set forth in §1 is a third parlay beneficiary of this Wind Up Agreement (hereinafter, a Member who executes a Wind Up Agreement is a "Third Page 4 Wind Up Agreement Party Beneficiary"). The County agrees that It will not make any claim against a Third Party Beneficiary for monies owed, or damages incurred by the County, as a result of the County's or such Member's participation in the Electric Program. 9. Covenants. a) The County hereby covenants that it will do the following: 1) Notify ABAG POWER of any information, written notices, bills or any other communication regarding a Contingent Risk, described in Attachment D, 2) Cooperate with ABAG POWER and all Third Party Beneficiaries to eliminate, mitigate or resolve the possibility that a Contingent Risk will be triggered, 3) Cooperate with ABAG POWER and all Third Party Beneficiaries to fairly and reasonably allocate costs associated with any Contingent Risk that is actually Incurred by the County, any Third Party Beneficiary or ABAG POWER, and 4) Pay to ABAG POWER its share of any Contingent Risk incurred by ABAG POWER, said share to be determined by the process described in subsection 9(c) of this section. b) ABAG POWER covenants that it will: 1) Notify the County and all Third Party Beneficiaries of any Information, written notices, bills or any other communication regarding a Contingent Risk, described in Attachment D, 2) Upon the occurrence of an event described in 9(a)(1) or 9(b)(1): (I) the Board of directors of ABAG POWER (Board) or the Executive Committee of the Board (Executive Committee), shall designate no fewer than five (5) and no more than eleven (11) Third Party Beneficiaries to form a Liability Allocation Committee (LAC). (ii) The Board or the Executive Committee shall delegate to the LAC, the exercise of ABAG POWER's rights under Section 9. c) ABAG POWER, on behalf of the LAC, covenants that the LAC shall: 1) Cooperate with the County and all Third Party Beneficiaries to eliminate, mitigate or resolve the possibility that a Contingent Risk will be triggered, 2) Cooperate with the County and all Third Party Beneficiaries to fairly and reasonably allocate costs associated with any Contingent Risk that is actually incurred by the County or any Third Party Beneficiary, and 3) The LAC shall confirm the reasonableness and fairness of the proposed allocation of costs by conducting a poli of Third Party Beneficiaries. If the proposed allocation is agreed to by a majority of Third Party Beneficiaries, then such plan is approved. For the purposes of this section, a majority is: (I) More than fifty percent (50%) of the votes cast determined by counting each Third Party Beneficiary as having one vote, and (ii) More than fifty percent (50/0) of the votes cast determined by weighing each Third Party Beneficiary's vote by the amount disbursed to it under this Agreement. 4) If the Third Party Beneficiaries do not approve a cost allocation pian under Section 9 (c)(3) then the costs associated with a Contingent Risk will be Page 5 Wind Up Agreement allocated among all Third Party Beneficiaries in accordance with CTC Reversal Ratio for any costs associated with recovery of DA Credits and in accordance with the Usage Ratio for costs associated with recovery of energy and/or UDC costs (see Attachment D). 5) Receive from the County the sham of any Contingent Risk',incurred by the County, said share to be determined by the process described in subsection 9(3) or 9(4) of this subsection. 6) Pay the liability. 10. Effectiveness of the Wind U12 Agreerrient. This Wind Up Agreement becomes effective only If Members owed a total of Twenty Million Dollars ($20,1300,000) under §§1(a)-(c) execute a Wind Up Agreement substantially identical to this Wind Up Agreement, excepting only the amounts set forth in §1. The executed Wind Up Agreement which triggers this section is the Qualifying Agreement. 11. Wind Up Cost Hold, ack i=ands. ABAG BOWER will retain the sum of One Hundred Thousand Dollars ($100,000) for the purposes described In §12. The funds will be separately accounted for by ABAG POWER and Will be disbursed to Electric Program Members in accordance with §2(f) and allocated among Electric Program Members in accordance with the Usage Ratio. 12. Permitte l„lses of"d U12 Cost Hold Back-Fu . ABAG POWER may use funds In the Wind Up Cost Hold Back to fund staff, consultants, attorneys or others engaged in any of the tasks described in §§5 and 9 of this Wind Up Agreement. ABAG POWER will send to each Electric Program Member an annual report on the use of funds and fund balances. 13. Termination of DA Agreement. The DA Agreement between ABAG POWER and the County Is hereby terminated. 14. AssignMrit. This Agreement shall not be assigned, transferred, hypothecated, or pledged by the County. 15. Amendment. §§1 and 2 of this Agreement may be amended at any time, but only by a writing signed by both parties. Any other section of this Agreement may be amended only by a writing signed by both parties and all Third Party Beneficiaries. 16. Head n s. The descriptive headings used in this Agreement are for convenience only and small not control or affect the meaning or construction of any of its provisions. 17. Contrgllino Law. This Agreement and all matters relating to It shall be governed by the lays of the State of California. 18. Binding on Successors, Etc. This Agreement shall be binding upon the successors, assigns, or transferees of ABAG POWER or the County as the case may be. This provision shall not be construed as an authorization to assign or transfer this Agreement other than as provided above. 19. Severability. Should any part of this Agreement be declared unconstitutional, invalid, or beyond the authority of either party to enter into or carry out, such decision shall not affect the validity of the remainder of this Agreement, which shall continue in full force and effect; provided that, the remainder of this Agreement can, Page 6 Wind lip Agreement absent the excised portion, be reasonably interpreted to give effect to the intentions of the parties. 20. Arbitration. Any disputes regarding the interpretation, effects, alleged breach or powers and duties arising out of this Agreement will be submitted to binding arbitration. An arbitration panel of three (3) individuals shall be formed as follows: a) Each Third Party Beneficiary and ABAG POWER shall have the right to submit the name and qualifications of an individual nominated for the panel. The individual shall be a member in good standing of the State Bar of California. ABAG POWER will compile a list of all such names, with the names of those submitted more than once, appearing as many times as they were submitted (List). b) Each Third Party Beneficiary which submitted a name and ABAG POWER, if it submitted a name, shall have the right to strike a name from the List. The order in which the Third Party Beneficiaries and ABAG POWER shall strike names shall be determined by lot. C) The striking process shall continue until only the names of three (3) qualified individuals are left. They shall constitute the arbitration panel. IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth below. Dated: MEMBER: Contra.4Costa Co n =tA n ini r for Title Dated: Approved as to form: Slivano B. Marchesi, County Counsel By:--;- Signature Print Name duty County Counsel Title Dated: 0 ABAG PUBLICLY OWNED ENERGY RESOURCES (ABAG POWER): V Eug Y. Le g, President Approved as tto �egal Form-and Content: By: �� Kenn th lk: Mo u sel ABAG Public wnedE ergy Resources (ABAG POWER) Page 7 Wind Up Agreement ATTACHMENT A Exhibit 1 ABAG POWER 30INT POWERS AGREEMENT Exhibit 2 DIRECT ACCESS ELECTRIC AGGREGATION AGREEMENT _. . EXHIBIT 1 JOINT POWERS AGREEMENT creating ABAG POWER The public entities listed In Appendix A (Members) entered into this Joint Powers Agreement (Agreement) creating ABAG Publicly Owned Energy Resources (ABAG POWER). All Members are public entities organized and operating under the laws of the State of California and each is a public agency as defined in California Government Code Section 6500. Recitals A. Government Code Sections 6500-6515, permitting two or more local public entities by agreement to,jointly exercise any power common to them, authorizes the Members to enter into this Agreement. B. Public entities consume energy in the form of natural gas and/or electricity and use telecommunications services in the performance of their essential governmental functions. C. Federal and State agencies responsible for the regulation of the natural gas, electric and telecommunications industries have determined that deregulation of these Industries is In the public Interest. D. Public entities have the opportunity to secure energy supplies and related services, manage energy consumption, obtain telecommunications services, manage the use of telecommunications services and determine conditions under which the private sector accesses and uses, in a cooperative and coordinated manner, public resources and Infrastructure used in the delivery of such energy and services. E. The Association of Bay Area Governments (ABAG), at its sole expense, has created and Implemented a natural gas aggregation to purchase natural gas and related services on behalf of the program participants and has formulated, but not yet implemented, a program to purchase electricity through direct access and procure related services on behalf of public entities in the Pacific Gas & Electric Company's (PG&E) service area. F. The formation of ABAG POWER enables the Members to take advantage of the opportunities described in paragraph D In such manner and at such time as the Members may decide. G. The governing board of each Member has determined that It is in the Member's best interest and in the public Interest that this Agreement be executed and that it Is participating as a Member of ABAG POWER. Agreement 1. f=ormation of ABAG POWER Pursuant to Chapter 5, Division 7, Title 1 of the Government Code of the State of California (commencing with Section 6500) (as amended z Wind Up Agreement—Attachment A from time to time, the JPA Law), the Members hereby create a separate joint powers agency which is named ABAG POWER. 2. Parties to Agreement. Each Member certifies that it intends to, and does, contract with every other Member which is a signatory to this Agreement and, in addition, with such other Member as may later be added as Members under Section 16. Each Member also certifies that the deletion of any Member from this Agreement does not affect this Agreement nor each remaining Member's intent to contract with the other Members then remaining. 3. Purpose. ABAG POWER will acquire, for use by its Members, energy including, but not limited to, natural gas and electricity, and of telecommunications services, and such other services and goods as may be necessary or convenient to optimize costs savings and to manage the use or the supply of energy or telecommunications services. 4. Membership. The following entities, or types of entities, are eligible for membership in ABAG POWER: (a) ABAG, (b) members of ABAG, and (c) any other public entity so long as such public entity is a cooperating member of ABAG at the time it joins ABAG POWER. 5. Umitatlon. Except as otherwise authorized or permitted by the JPA Law and for purposes of, and to the extent required by Government Code Section 6509, ABAG POWER is subject to the restrictions upon the manner of exercising the powers of the Member specified in the Bylaws. 6. Powers. ABAG POWER is authorized, In its own name, to do all acts necessary to fulfill the purposes of this Agreement referred to In Section 3 including, but not limited to, each of the following: (a) Make and enter into contracts; (b) Incur debts, liabilities and obligations; provided that no debt, liability or obligation of ABAG POWER is a debt, liability or obligation of any Member except as separately agreed to by a Member agreeing to be so obligated; (c) Acquire, held, construct, manage, maintain, sell or otherwise dispose of real and personal property by appropriate means, excepting only eminent domain; (d) Receive contributions and donations of property, funds, services and other forms of assistance from any source; (e) Sue and be sued In Its own name; (f) Employ agents and employees; (g) lease real or personal property as lessee and as lessor; (h) Receive, collect, invest and disburse moneys; (I) Issue revenue bonds or other forms of indebtedness, as provided by law; (j) Carry out other duties as required to accomplish other responsibilities as set forth in this Agreement; (k) Assign, delegate or contract with a Member or third party to perform any of the duties of the Board, Including, but not limited to, acting as administrator for ABAG POWER and (i) Exercise all other powers necessary and proper to carry out the provisions of this Agreement. 3 Wind Up Agreement--Attachment A These powers will be exercised in the manner provided by applicable law and as expressly set forth in this Agreement. 7. ,Appointment of Administrating Member. (a) ABAG is hereby appointed by the Members to execute the provisions of this Agreement and implement programs undertaken by ABAG POWER. The Members acknowledge that this designation may cause potential conflicts of interest to arise and waive any liability on the part of ABAG arising out of any such conflict of interest. ABAG may not be removed as the administrating Member except by reason of its fraud, grass negligence or gross mismanagement or by a vote of two-thirds (2/3) of the authorized directors of the Board. (b) ABAG POWER will compensate ABAG for services rendered. 8. Card of.E}hectors. (a) Dl=tors and Alternates. The Board is comprised of one director and, in a director's absence, an alternate director from each member. Each Member will appoint one director and one alternate. A director and/or alternate director may be, but is not required to be, an elected official of the Member. (b) Terra. Directors serve a term of five (5) years unless removed earlier by the appointing Member. Directors may serve any number of terms. (c) Comi2ensatigri. Directors and alternate directors are not entitled to compensation. The Board may authorize reimbursement of expenses incurred by directors or alternate directors. (d) ©ele ag tion of Powers. The Board is, pursuant to Section 9(b), required to delegate certain powers to specified committees and may delegate other powers to committees but may not delegate the power to dismiss ABAG or amend the Bylaws. 9. Cc�mmitteses. All directors are eligible for appointment to a committee. (a) Exec!jtive Committee. The Board may create an Executive Committee as set forth in the Bylaws. (b) Program Comm[ttees. The Beard hereby delegates the power to oversee implementation of a program to a Program Committee as set forth in the Bylaws, provided each such director represents a Member which is participating in the Program. (c) Other omm_ €tLees. The Board may create other committees as set forth In the Bylaws. 10. Officers and Emr2loy (a) The officers of ABAG POWER are the Chair, Vice-Chair, President, Chief Financial Officer/Treasurer and Secretary. (b) The Chair and Vice-Chair are directors elected or appointed by the Board at its first meeting. The term of office for Chair and Vice-Chair is one year beginning January 1. The President, Secretary and Chief Financial Officer/Treasurer serve as set forth in the Bylaws. The duties of the officers are described in the Bylaws. The Chair and Vice Chair assume their office upon election. The President, Chief Financial Officer/Treasurer and Secretary assume the duties of their offices upon 4 Wind Up Agreement--Attachment A formation of ABAG POWER. If either the Chair or Vice-Chair ceases to be a director,the resulting vacancy will be filled at the next meeting of the Beard. (c) The Chair and Vice-Chair are not entitled to compensation. The Board may authorize reimbursement of expenses Incurred by officers. (d) The Board may create such other offices and appoint Individuals to such offices as it consider's either necessary or convenient to carry out the purposes of this Agreement. 11. LiMita=n on Llabil[ty-off Mem ors r ! t and li i n AB WE Pursuant to Government Code Section 65()8.1, the debts, liabilities, and obligations of ABAG POWER do not constitute debts, liabilities, or obligations of any party to this Agreement. A Member may separately contract for or assume responsibility for specific debts, liabilities, or obligations of ABAG POWER. 12. Fiscal Year. The first fiscal year of ABAG POWER Is the period from the date of this Agreement through December 31, 1398. Each subsequent fiscal year of ABAG POWER ends on December 31. 13. Bud The Board may adopt, at Its sole discretion, an annual or multi-year budget not later than sixty (60) days before the beginning of a fiscal year. 14. Annual-Audits and Auditgeport�. The Chief Financial officer/Treasurer will cause an annual financial audit to be made by an independent certified public accountant with respect to all ABAG POWER receipts, disbursements, other transactions and entries Into the books. A report of the financial audit will be filed as a public record with each Member. The audit will be filed no later than required by State law. ABAG POWER will pay the cast of the financial audit and charge the cost against the Members In the same manner as other administrative costs. 15. Estabilshment ant_Adminlstratlon of Funds. (a) ABAG POWER Is responsible for the strict accountability of all fends and reports of all receipts and disbursements. It will comply with every prevision of law relating to the establishment and administration of funds, particularly Section 6505 of the California Government Code. (b) The funds will be accounted for on a furl accrual basis. (c) The Chief Financial Officer/Treasurer will receive, invest, and disburse funds only in accordance with procedures established by the Board and in conformity with applicable law. The Chief Financial Officer/Treasurer will procure a fidelity bond. 16. New Members. For the purpose of this section only, all Members admitted after January 1, 1999 are New Members. (a) A public entity may be admitted as a New Member only upon a two-thirds (2/3) vote of the Board and upon complying with all other requirements established by the Berard and the Bylaws. (b) Each applicant for membership as a New Member must pay all fees and expenses, If any, set by the Board. 17. Withdrawal. Members may withdraw In accordance with conditions set forth in the Bylaws provided that no Member may withdraw If such withdrawal would adversely affect a bond or other indebtedness issued by ABAG POWER, except withdrawal under such circumstances may be effected upon a two-thirds (2/3)vote of the Board. 5 Wind Up Agreement--Attachment A 18. Expulsion/Suspension. ASAG POWER may expel or suspend a Member by a two-thirds (2/3) vote of the Board for a breach of this Agreement or the Bylaws determined by the Board to be a material breach. The procedures for hearing and notice of expulsion;of a Member are provided In the Bylaws. 19. Termination and Distrl;_ bution. (a) This Agreement continues until terminated. However, it cannot be terminated until such time as all principal of and interest on bonds and other forms of indebtedness issued by ABAG POWER are paid in full. Thereafter, this Agreement may be terminated by the written consent of two-thirds (2/3) of the Members, provided, however, that this Agreement and ABAG POWER continue to exist after termination for the purpose of disposing of all claims, distribution or assets and all other functions necessary to conclude the obligations and affairs of ABAG POWER. (b) After completion of ABAG POWER"s purposes, any surplus money on deposit in any fund or account of ABAG POWER will be returned as required by law. The Board is vested with all powers of ABAG POWER for the purpose of concluding and dissolving the business affairs of ABAG POWER. 20. o `ces. Notice to each Member under this Agreement is sufficient if mailed to the Member and separately to the Member's Director to their respective addresses on file with ABAG POWER. 21. Prghibltlon.Adalat Assignment. No Member may assign a right, claim, or Interest it may have under this Agreement. No creditor, assignee or third party beneficiary of a Member has a right, claim or title to any part, share, interest, fund or asset of ABAG DOWER. However, nothing in this section prevents ABAG POWER from assigning any interest or right it may have under this Agreement to a third party. 22. Amendments. This Agreement may be amended by an affirmative vote of the governing bodies of [three-fourths (3/4)) of the Members acting through their governing bodies. A proposed amendment must be submitted to each Member at least thirty (30) days in advance of the date when the Member considers It. An amendment is to be effective immediately unless otherwise designated. Appendix A to the Agreement may be amended to correctly list current Members without separate action by the Members or the Board. 23. Severabillty. If a portion, term, condition or provision of this Agreement is determined by a court to be Illegal or in conflict with a law of the State of California, or is otherwise rendered unenforceable or ineffectual, the validity of the remaining portions, terms, conditions and provisions is not affected. 24. Uabilit o� f ABAQ P WER. Subject to limitations thereon contained in any trust agreement or other documents pursuant to which financing of ABAG POWER are implemented, funds of ABAG POWER may be used to defend, indemnify, and hold harmless ABAG POWER, any Member, any Director or alternate, and any employee or officer of ABAG POWER for their actions taken within the scope of their duties while acting on behalf of ABAG POWER. 25. governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California. 26. Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which constitutes but one and the same instrument. 6 Wind Up Agreement—Attachment A 27. Eff €v [date. This Agreement becomes effective and ABAG POWERex€sts as a separate public entity when the sum of the electric usage for all accounts committed by all Members under all Direct Access Electric Aggregation Agreements between the Member and ABAC equals or exceeds three hundred seventy thousand (370,000) mWh In a one year period. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year written below. CIIN N LY P L : 0i Date: By: APPROVED AS TO LEGAL FORM Legal Counsel Attest: 7 Wind Up Agreement—Attachment A APPENDIX A ABAG POWER MEMBERS 8 Wind Up Agreement-•Attachment A EXHIBIT 2 DIRECT ACCESS ELECTRIC AGGREGATION AGREEMENT by and between the ASSOCIATION OF SAY AREA GOVERNMENTS and PUBLIC AGENCY within the service territory of Pacific Gas&Electric Co. dated __ ' 1998 This Direct Access Electric Aggregation Agreement, hereinafter"Agreement", is made and entered into as of this day of 199 ., by and between the Association of Bay Area Governments (ABAG), a California joint powers agency, and (Public Agency), a California The parties hereby agree as follows: L Eligibility: Public Agency is a member or cooperating member of ABAG. ABAG will provide directly, or at Its option, will contract to provide for the purchase and management of a d€rect access electric aggregation program (Electric Program) for members and cooperating members of ABAG participating In said program Participant(s). 2. Atjthorlties: All parties understand and agree that the legal authority for the Program is granted by and subject to the California Public Utilities Commission (CPUC), as initially authorized by CPUC Decision No. 97-Cls-040 and as It may be modified and/or augmented through subsequent CPUC decisions, orders, rules, regulations, tariffs and rulings of the CPUC administrative law judges (collectively, Decision). 2.1 Public Agency is a customer of Pacific Gas &Electric (Utility) under the jurisdiction of the CPUC. Public Agency appoints ABAG as Its exclusive agent to coordinate Its participation In the Electric Program, on behalf of Public Agency for the accounts listed in Exhibit A (Accounts), which is attached hereto and incorporated herein. Public Agency represents and warrants that any prior agreement(s) for the purchase of electricity for the Accounts from a supplier other than the Utility, which Public Agency may have executed, will be terminated effective upon Commencement of Service as defined in Paragraph 31. 2.2 ABAG has reviewed the Decision and other materials developed by, or under the auspices of the CPUC. ABAG believes that the transactions set forth, or contemplated, In this Agreement will comply with CPUC requirements for direct access by electric consumers set forth in the Decision and current guidelines. ABAG has, simultaneous With this Agreement, commenced the process of creatine an independent joint powers agency (ABAG POWER) to aggregate the Accounts of Participants for the purpose of direct access. 3. Back- r und: The CPUC requires that all Utility customers be eligible for direct access by January 1, 1998. The regulatory requirements for customers to engage In direct access and for Electric Services Providers (ESP)to offer direct access to customers are under development as of June 25, 1997. In Paragraphs 4 and 5 ABAG has listed all such conditions of which ABAG Is actually aware. ABAG has used its best good faith effort to enumerate In said paragraph all such conditions which might ultimately be imposed on direct access customers and ESP's. However, ABAG cannot represent or warrant that the enumerated conditions represent all conditions currently contemplated by the CPUC or the affiliated committees, subcommittees or working groups responsible for developing such conditions. Further, ABAG cannot represent or warrant that the enumerated conditions will remain unchanged or that new conditions will not be imposed. Public Agency hereby agrees to hold ABAG harmless for any costs or direct or consequential damages, incurred by Pubic Agency, or by anyone making a claim through Public Agency. 4. CPUC Con itions to Public Agency's Partici a ion in Direct Access: Public Agency will take such action as may be necessary to meet all conditions imposed on Public Agency to participate in direct access as a customer, including but not limited to: (a) submit such documents as may be required by the CPUC to the appropriate entity, 2 Wind Lip Agreement Y-Attachment A (b) provide ABAG with such information as may be required by the Direct Access Service Request (DASR), (c) conform this Agreement to all requirements imposed by the CPUC for written contracts between direct access customers and ESP's, (d) install meters capable of providing hourly data and required data communications capabilities (Hourly Meters) for each Account, (e) pay, or caused to be paid, all stranded costs associated with the Utility meter replaced under section (d) of this paragraph, and (f) pay, or cause to be paid all outstanding balances for all Accounts. Under current CPUC proceedings, metering requirements may be met by a customer (a) requesting the Utility Distribution Company (UDC) to Install Hourly Meters, (b) installing Hourly Meters, or (c) causing Hourly Meters to be Installed by third parties (including the ESP). ABAG anticipates issuing a Request for Proposals to install Hourly Meters for all, or some of the accounts previously identified to ABAG as accounts which potential participants In the electric Program wished to aggregate. The choice of how Public Agency will fulfill the metering requirement and whether all Participants must make the same election for their respective Accounts will be mutually decided by ABAG and Public Agency at a later date based on (1) the probability of installing Hourly Meters for all Accounts by January 1, 1998, or the earliest possible date thereafter, (2) any additional costs incurred to Install Hourly Meters by such date, and (3) supply of Hourly Meters. 5. CRU Co-nditlQns Precedent to ABAG's gbliaations: ABAG will take such action as may be necessary to meet all conditions imposed on ABAG to participate in direct access as an ESP, including but not limited to: (a) register with the CPUC, (b) submit a DASR for each account, (c) enter into a Basic ESP Service Agreement with the UDC, (d) enter into the appropriate Billing Services Attachment to the Basic ESP Agreement, (e) enter into the appropriate Metering Services Attachment to the Basic ESP Agreement, (f) conform this Agreement to all requirements imposed by the CPUC for written contracts between direct access customers and ESP's, and (g) comply with ESP Credit Requirements. The CPUC has not established ESP Credit Requirements. ABAG anticipates meeting ESP Credit Requirements through the establishment of the Credit Reserve fund described in Paragraph 19. tai. Ej!gctrlc Sgp2.1y: Public Agency submitted to ABAG an expression of Interest in participating in the Electric Program by authorizing utility to release specified historical electric usage information to ABAG. After ABAG issued a Request for Proposals to provide electric supply, It has entered into Memoranda of Understanding for the provision of electric supply (MOU) with two (2) electric suppliers and anticipates an MOU with a third supplier. ABAG anticipates soliciting proposals for additional electric supply In Fall/Winter 1997. Public Agency acknowledges that in order to meet Public Agency's electric needs ABAG will enter into contracts for specified electric supply products (Contracted Supply) on behalf of Public Agency and will authorize purchases of electric supply on the spot market (Spot Supply) and sales of excess Contracted Supply on the spot market or to the supplier. 3 Wind Up Agreement-Attachment A 7. Services. ABAG has provided, or will provide, the following services for the benefit of Public Agency: 7.1 Analyze and evaluate electric load profiles and/or electric time of use data, transmission, distribution, billing and metering options, and electric supply acquisition and aggregation strategies; 7.2 Negotiate prices and quantities of an electric supply, scheduling services, billing services, and other services, products or equipment reasonably necessary for Public Agency's participation in the Electric Program through processes which may include but are not limited to Invitations to bid, requests for proposal or competitive negotiations. B. Direct Access Imi2i tation. For each Account for which ABAG and Public Agency fulfills the requirements of Paragraphs 4 and 5 and for which the UDC authorizes the commencement of direct access, ABAG will provide or cause to be provlded an electric supply and perform, or cause to be performed, the following services: (a) scheduling; (b) transmission; (c) distribution; (d) billing; (e) Hourly Metering; (f) general administrative, management, fiscal and consultation services necessary or convenient for the Electric Program. ABAG is negotiating contracts for the provision of scheduling and billing services. Transmission and distribution services will be provided to Public Agency through regulated tariffs. Hourly Metering options and the method for selecting the means of providing Hourly Metering is described in Paragraph 4. 9. Acaeogyg(atlonshlp: Public Agency authorizes ABAG to act as Its exclusive agent to Implement the Electric Program for the Accounts and does hereby constitute and appoint an authorized officer or agent of ABAG to act on its behalf as its lawful agent for the Implementation of the Electric Program. This authorization will Include the right to do and perform all acts, with full power to execute all documents requisite and necessary to be done In all matters relating to the purchase, sale, scheduling, transmission,distribution, metering and billing of electricity for the Electric Program, including without limitation,the power to release Public Agency's historic and current electric usage data to third party vendors and service suppliers. 10. NgjificatLon of Chances In Accounts: Public Agency will notify ABAG of changes in Public Agency's facilities or operations, which are reasonably expected to increase or decrease the consumption of electricity by more than ten percent (10%) as compared to historical levels. Public Agency may add accounts to Exhibit A upon prior written notice to ABAG and the submission of the appropriate form required by the CPUC or the Utility. Public Agency may delete accounts from Exhibit A only upon written consent of ABAG, which consent will not be unreasonably withheld, except that Public Agency may delete accounts without ABAG's consent if Public Agency abandons the facility or transfers the facility to another entity. 11. Rate Sche uie: As soon as practicable after ABAG has fixed the costs of the Contracted Supply, scheduling, transmission, distribution, billing, and, if applicable, Hourly Metering services, ABAG will establish up to ten (10) rates, each expressed as $x.xx/kWh 4 Wind Up Agreement-Attachment A and will allocate each Account to a rate (Rate Schedule). In addition to the costs identified In the preceding sentence, the Rate Schedule will Include an estimated cast for Spot Supply plus ABAG's fees for services rendered under this Agreement. 12. Invoiced Amounts: ABAG will invoice Public Agency, and Public Agency will pay, monthly in advance an amount based on ABAG's estimate of Public Agency's anticipated usage of electricity based on the Rate Schedule for each Account (InvoicedAmounts). 13. ContJngengy Reserve: Based on the size of the aggregation, ABAG will establish a prudent Contingency Reserve for the purpose of paying contingent transmission and/or distribution charges (e.g. Imbalance charges and congestion management charges) (Contingent Charges) plus an amount to cover ABAG's prudent cash flow requirements based on ABAG's reasonable estimates of late or delinquent payments from Participants. Public Agency will pay a portion of the Contingency Reserve In a ratio in which the numerator is the total estimated usage for all Its Accounts and the denominator is the total estimated usage for all accounts In the aggregation (Contingency Reserve Surcharge). The timing of the Contingency Reserve Surcharge payment(s) (e.g. up front lump sum or staggered even or uneven monthly amounts) will be determined by ABAG. 14. Credlt,Re-serve: Based on the size of the aggregation, ABAG will establish a Credit Reserve for the purpose of meeting CPUC established credit requirements for ABAG as an ESP. Public Agency will pay a portion of the Credit Reserve In a ratio in which the numerator Is the total estimated usage for all Its Accounts and the denominator Is the total estimated usage for all accounts in the aggregation (Credit Reserve Surcharge). The timing of the Credit Reserve Surcharge payment(s) (e.g. up front lump sum or staggered evert or uneven monthly amounts) will be determined by ABAG. 15. Involcesl&Aual Charges: For each Account, ABAG will Include In each monthly invoice Public Agency the meter cycle, actual usage during the meter cycle, and fees for actual electricity consumed based on the Rate Schedule plus an allocated portion of Contingent Charges Incurred, If any, plus any applicable late payment charges (Actual Charges). The Invoice will also Identify the prior balance, any payments since the previous Invoice, cumulative Invoiced Amounts, cumulative Actual Charges, and credit balances as calculated pursuant to Paragraph 17. Contingency Reserve Surcharges and Credit Reserve Surcharges will either be separately Invoiced or included In one Invoice based on ABAG's decision regarding the tinting of such surcharges and its agreement with the billing agent. 16. Payment: Invoices will be directed to and payment Is to be made by Public Agency directly to the escrow account designated pursuant to Paragraph 21 of this Agreement. Payment of the Invoiced Amount Is due immediately upon receipt of the Invoice. Late payment charges at the rate of one and a half percent (1.5%) per month calculated daily on the outstanding balance will be imposed commencing on the thirty-first (31st) day after the mailing date of the Invoice. Late payment charges may, at ABAG's sale discretion, be debited against Public Agency's Credit Account as defined In Paragraph 17. 17. Crit Aero, nnt: For each Invoice, ABAG will calculate (a) the difference between the Invoiced Amount and the Actual Charges for the meter cycle, and (b) the difference between the cumulative total of the Invoiced Amounts and the cumulative total of Actual Charges (Credit Account). Public Agency recognizes that the Credit Account is a calculation of payments, credits, debits and charges made pursuant to this Agreement and that ABAG will not be required to establish actual separate fund accounts with monies on behalf of, or in the name of Public Agency. Unless the parties otherwise agree, ABAG will,refund to Public Agency an amount equal to the Credit Account plus a portion of interest earned on all 5 Wind Up Agreement—Attachment A Credit Accounts in the Electric Program, said portion to be determined by the Electric Program Committee of ABAG POWER, within ninety (90) calendar days after termination or cancellation of this Agreement. 18. Contingency Reserve Fund: Public Agency acknowledges that during the term of this Agreement ABAG has the right to use monies in the Contingency Reserve Fund to pay Actual Charges incurred by Participants in the Electric Program as such Actual Charges become clue. ABAG will deposit into the Contingency Reserve Fund any Invoiced Amount payment, or portion thereof, which would, absent draw on the Contingency;Reserve Fund described in the preceding sentence, have been applied towards payment of the Actual Charges described in the preceding sentence. Within the Contingency Reserve Fund, ABAG will maintain a separate accounting of Public Agency's cumulative Contingency Reserve Surcharge payments, less any draws on the Contingency Reserve Fund to pay any Actual Charges incurred by Public Agency, plus any Invoiced Amount(s), or portion thereof, made by Public Agency and deposited into the Contingency Reserve Fund as provided for In this Paragraph (Contingency Reserve Fund Credit). Unless the parties otherwise agree, ABAG will refund to Public Agency an amount equal to the Contingency Reserve Fund Credit plus a portion of interest earned on the Contingency Reserve Fund, said portion to be determined by the Electric Program Committee of ABAG POWER, within ninety (90) calendar days after termination or cancellation of this Agreement. 19. Credit Reserved: ABAG does not anticipate any draws on the Credit Reserve Fund. Unless the parties otherwise agree, ABAG will refund to Public.Agency Its cumulative Credit Reserve Surcharge payments plus a portion of interest earned on the Contingency Reserve Fund, said portion to be determined by the Electric Program Committee of ABAG POWER, within ninety (90) calendar days after termination of this Agreement or the lifting of the requirement to maintain such a fund, whichever is earlier. 20. Late Charges: In the event Public Agency falls to make timely payment, consistent with the terms employed by ABAG, in addition to any other remedy it may have hereunder and notwithstanding the existence of any late payment penalty, ABAG may declare Public Agency to be in default and terminate the agreement. ABAG Is further authorized to invoice Public Agency for reasonable charges associated with demands for payment on late accounts as well as reasonable charges associated with suspension and resumption of service hereunder. 21. Payment cif Anal Ch rges; Subject to the terms and conditions of this Agreement, ABAG agrees to deposit all Invoiced Amount payment and pay Actual Charges as follows: 21.1 An escrow or lock box account for the purposes of receiving Invoiced Amount payments by Participants and paying Actual Charges will be established by ABAG. 21.2 The Instructions for this escrow or lock box account have been approved by ABAG, and will include a list of the authorized payees. 21.3 Only ABAG may authorize release of funds from the escrow or lock box account, and such will only be to those payees identified in the escrow Instructions and only for Actual Charges. 22. Disputes Rewarding Agtupl h rg!gs: Any disputes between the parties regarding the amount of any Actual Charges will be resolved pursuant to Section H of Exhibit B to this Agreement and the Credit Account, as defined in Paragraph 9.3 will be adjusted as soon as practicable to reflect the resolution of the dispute. 6 Wind Up Agreement Attachment A 23. Cance l_atlk n: 23.1 Cancellation-by Public Agency+: Commencing no earlier than one (1)full year from the Commencement date, public Agency may only withdraw or cancel'this Agreement consistent with the rules and regulations promulgated by the CPUC and in a manner which releases ASAG from all responsibility and liability related to the subject matter of the Agreement. Public Agency may camel the contact by giving ABAG sixty(60) days prior written notice Its Intent to terminate effective December 31 of that current year.. 23.2 Cancej#atlorl by ABAG: Actions by the utilities and/or CPUC to develop rules which are in conflict with sound business practices, or Impose unnecessary risk on either party to this Agreement, or substantially prevent ABAG from performing its,functions under this Agreement may result in the cancellation of this Agreement by ABAG. ABAG will give Public Agency written notice ninety (90) days prior to such cancellation and,both parties will work diligently to minimize the negative effects on ABAG and the Public Agency of such cancellation. 24. Power Pumhaslag_Pool C mmlttee: (Public Agency Representative), will be the Public Agency's representative to the Electric Program Committee of the Board of directors of ABAG POWER. The electric Program Committee will provide policy direction for the Electric Program. The Committee's powers will include admission of new Participants and the extension of any contracts for the purchase of electric supply and/or related services under rules and procedures adopted by the Committee. 25. Approvals; The Public Agency Representative may grant any approval, or give any direction required by this Agreement, In writing or orally. Written approvals or directions may be transmitted physically, by facsimile or electronically, Oral approvals will be confirmed in writing by either party. 26. A torneys' Fees: In the event either party invokes its right to arbitration under Section H of Exhibit B due to an alleged breach of this Agreement, the prevailing patty will be entitled to recover reasonable attorneys' fees and costs as determined by the arbitrator. 22. OwnersbJ12 of Files Re os Phot ra hs an Related D cum n s: Upson termination of the Agreement, any and all files, reports, photographs, plans;specifications, drawings, data, maps, models and related documents respecting In any way the subject matter of this Agreement,whether prepared by ABAG, the Public Agency or third parties and in whatever media they are stored will remain or will become the property of the Public Agency and the Public Agency will acquire title to, and copyright ownership of, all such documents. The Public Agency hereby grants to ABAG an irrevocable license to retain a copy of all records covered by this section for ABAG's files. 28. Ind emnit�y: Public Agency will indemnify and hold harmless ABAG and its directors, its remember agencies, Its agents and its employees from and against all claims, damages, losses and expenses including attorney's fees, arising out of or resulting from the performance or non-performance of the services required by this Agreement, unless such is caused by fraud, gross negligence or Intentional misconduct of ABAG, Its directors, its member agencies, its agents or Its employees. 29. AssignmentZ$ecurity Arrangements: Public Agency hereby acknowledges that ABAG will assign all Its rights and obligations under this Agreement, except the rights of ABAG and its directors, its member agencies, Its agents and its employees to indemnity under 7 Wind Up Agreement—Attachment A Paragraph 28, to ABAG POWER upon the formation of ABAG POWER. Nothing In this Agreement Impairs ABAG POWER`s right to have ABAG perform some or all of the obligations pursuant to a separate Agreement . 30, Notices: The following addresses for the giving of notices and invoices will be: Public Aaepcy Notiggs Name: Address: Telephone No.: Facsimile No.: Email: Attn.: Public Agency Invoicing Address Name: Address: Telephone No.: Facsimile No.: Email: Attn.. ABACI Notices ABAG P. 0. Box 2059 Oakland, CA 94604-2050 Assistant to the Executive Director Telephone No: 510-464-7900 Facsimile No: 510-464-7970 31. Commencement Gate and Term: This Agreement Is effective immediately upon execution and delivery by Moth parties and the execution and delivery of counterparts of this Agreement by other Participants with accounts which when combined with the Accounts totals an estimated three hundred seventy thousand (370,000) mWh in a one (1) year period, The Commencement Bate for Public Agency is the latest date on which any one of its Accounts Is placed in direct access status by the UDC. This Agreement terminates one (1) full year after the latest Commencement bate for any Participant, 32. Surafllty: If any prevision of this Agreement or the application of any such provision will be held by a court of competent jurisdiction to be invalid, void,:or unenforceable to any extent, the remaining provisions of this Agreement and the application thereof will remain in full force and effect and will not be affected, impaired,or Invalidated. 33. t n : The captions appearing in this Agreement are Inserted as a matter of convenience and in no way define or limit the provisions of this Agreement. 8 Wind Up Agreement Attachment A 34, Other Contract Provisions: This Agreement will be subject to the other standard provisions set forth In the attached Exhibit B, which is incorporated by this.reference. IN WITNESS WHEREOF, the parties have hereunto set their hands effective the date and year first above written. '.' AMP " P ON LY ASSOCIATION OF BAY AREA GOVERNMENTS By; late• Eugene Y. Leong, Executive Director Approved as to legal form and content: By: Date Kenneth K. Moy, Legal Counsel PUBLIC AGENCY By: date: Approved as to legal farm and content: By: Date: Account Number 9 Wind Up Agreement-Attach ment.A DIRECT ACCESS AGGREGATION AGREEMENT - EXHIBIT A List of Accounts DIRECT ACCESS AGGREGATION AGREEMENT- EXHIBIT B STANDARD CONTRACT PROVISIONS A. Time of Essence. Time is of the essence In this Agreement. B. Wally,;gr. The waiver by either party of a breach by the other of any provision of this Agreement shall not constitute a continuing waiver or a waiver of any subsequent breach either of the same or a different provision of this Agreement. C. Qntrolllnti Law. This Agreement and all matters relating to It shall be governed by the laws of the State of California. D. Binding on Successors, Etc. This Agreement shall be binding upon the successors, assigns, or transferees of ABAG or Public Agency as the case may be, This provision shall not be construed as an authorization to assign, transfer, hypothecate, or pledge this Agreement other than as provided above. E. Rtmrds/Audit. ABAG shall keep complete and accurate books and records of all financial aspects of its relationship with Public Agency In accordance with generally-accepted accounting principles. ABAG shall permit authorized representatives of Public Agency and/or any of Public Agency's governmental grantors to Inspect, copy, and audit all data and records of ABAG relating to its performance of services under this Agreement. ABAG shall maintain all such data and records Intact for a period of three (3) years after the date that services are completed hereunder or this Agreement Is otherwise terminated. F. Prohlblt d Interest, ABAG's officers, employees or agents shall neither solicit nor accept gratuities,favors or anything of monetary value from contractors, potential contractors, or parties to subcontracts. G. Insurance l2eauirerfs�nCs, (1} ABAG shall, at its own expense, obtain and maintain it effect at all times during the life of this Agreement the following Insurance: (a) Workers' compensation insurance as required by law. (b) Comprehensive general liability Insurance coverage of One Million dollars ($1,000,000) In the aggregate for products and/or completed operations and One Million Dollars ($1,000,000) per occurrence for automobiles. (c) Professional liability Insurance with minimum liability limits of Two Million Dollars ($2,000,000) In the aggregate. (2) All ABAG's Insurance policies shall contain an endorsement providing that written notice shall be given to Public Agency at least thirty(30) days prior to termination, Cancellation, or reduction of coverage In the policy or policies, and all policies shall be carried by an insurance company or companies acceptable to Public Agency.` (3) In addition, each policy or policies of insurance described In subparagraph (2) above will contain an endorsement providing for inclusion of Public Agency and its directors, officers, agents, and employees as additional Insureds with respect to the work or operations In connection with this agreement and providing that such Insurance is primary insurance and that no insurance of Public Agency will be called upon to contribute to a lass. 10 Wind Up Agreement-Attachment A (4) Promptly upon execution of this Agreement, ABAG will deliver to Public Agency certificates of insurance evidencing the above insurance Coverages. Such certificates will make reference to all provisions or endorsements required herein and will be signed on behalf of the Insurer by an authorized representative thereof. ABAG agrees that at any time upon written request by Public Agency to make available Copies of such policies certified by an authorized representative of the insured. (5) The foregoing requirements as to types and limits of insurance coverage to be maintained by ABAG and approval of policies by Public Agency are not intended to, and will not, in any manner limit or qualify the liabilities and obligations otherwise assumed by ABAG pursuant to this Agreement, including, but not limited to, liability assumed pursuant to ABAG`s insurance policies under Subsections (1)(b) of this section. (6) ABAG will require all subcontractors to comply with the insurance requirements described in Section G(1)(a)-(c), inclusive. H. Arhltratlon. Any dispute between ABAG and the Public Agency regarding the interpretation, effects, allegedbreach or powers and duties arising out of this Agreement will be submitted to binding arbitration. The arbitrator will be selected by agreement between the parties by lot from a list of up to six (6) arbitrators with each party submitting up to three (3) arbitrators. 11 Wind Up Agreement—Attachment A ATTACHMENT B BACKQROUNO The Members formed ABAG POWER to operate, among others, the Electric Program. Each Member agreed to pay Its share of all casts associated with the Electric Program and appointed ABAG POWER as its agent for the purposes of implementing the Electric Program. The Electric Program operated under rules promulgated by the California Public Utilities Commission (CPUC), the California Independent System Operator (ISO), the California Power Exchange (PX) and the conventions and practices established by each of the aforementioned entities and by PG&E pursuant to AB 1890 ("Deregulated Market"). The Electric Program provided electricity to accounts specified by each Member under the JPA and DA Agreement as defined in the body of the Wind Up Agreement to which this document is attached. ABAG POWER is a separate legal entity under the IPA. Each Member is represented on the ABAG POWER Board of Directors (Beard). ABAG POWER continues to operate a natural gas aggregation program. All program decisions are made under the policy direction of the Board or the Executive Committee of the Board. ABAG POWER used the following resources from the described entities in order to implement the Electric Program (a) electrical energy from various generators and brokers, (b) distribution and other services from PG&E, (c) electric grid services (reliability and control) from the ISO, (d) schedule coordination (as described below) from NCPA, (e) billing services from Arizona Public Services (APS), and (f) administrative and support services from the Association of Bay Area Governments (ABAG). In addition, ABAG POWER procured occasional services (not relevant to the wind up of the Electric Program) during the operation of the Electric Program. Occasional services included, but are not limited to, financial auditors, attorneys, electric meters sales and installation and meter reeding services. ABAG POWER paid for the resources described above with payments made by the Members. In order to maintain cash flow liquidity, Members funded Working Capital reserves for ABAG POWER through both their monthly payments for electricity and through Working Capital "calls."1 Under the Deregulated Market, all electric aggregators were required to pay for ancillary electric services (transmission and distribution costs, system reliability services, etc.) through the ISO. In addition, energy purchases made from the PX required certain security deposits be maintained. The PX and the ISO required such payments be made through a recognized "scheduling coordinator." At the beginning of the program,ABAG POWER billed Members on an estimated"levelized"schedule that included amounts necessary to fund a working capital reserve.This methodology was later abandoned in favor of a monthly bill based on actual expenses and a separate series of calfs for working capital contributions frrm the Members. ABAG POWER retained NCPA to act as the scheduling coordinator for the Electric Program. NCPA also served as scheduling coordinator for its own members. The Deregulated Market required electric aggregators to deposit funds into two escrow accounts, one with the ISO and the other with the PX. (The latter deposit was only required if the electric aggregator purchased energy from the PX.) NCPA made such deposits on behalf of ABAG POWER. The ISO and PX drew down on the escrow accounts to pay for monthly energy (PX), if any, and electric grid service charges (ISO). The escrow deposit funds were maintained at a level sufficient to pay for 90 days (estimated) worth of energy and ancillary service charges. ABAG POWER paid NCPA the funds necessary to maintain the escrow deposit funds at the required levels. The amounts in the funds were held by NCPA in trust for ABAG POWER. WIND UPS PLAN Upon the suspension of the Electric Program, ABAG POWER's billing agent, APS compiled charges attributed to Member accounts. This data indicated that there were service charges for transmission and other services from PG&E (UDC Charges) that had not been invoiced to ABAG POWER in the approximate amount of Three Million Three Hundred Thousand Dollars ($3,300,000). ABAG POWER also experienced a one-week period in August 2000 during which It did not purchase electricity for the Members die to unstable market conditions. Members continued to receive power. ABAG POWER has not been Invoiced for the costs of the energy consumed during this period. ABAG POWER estimates this cost to be approximately One Million Pour Hundred Thousand Dollars ($1,400,000) (based on load profiling and prevailing energy costs). Initially, ABAG POWER retained the funds it held in Its own accounts to pay for the uninvoiced UDC Charges and energy charges, and to pay ongoing wind up costs. ABAG POWER has concluded that: (a) some of the uninvoiced UDC Charges were Included in the Direct Access Credit calculation (see below), (b) the balance of the. uninvoiced UDC Charges have not been, and may never be Invoiced to ABAG POWER (for further discussion see Attachment D), and (c) the energy charges have not been, and may never be Invoked to ABAG POWER (for further discussion see Attachment O). Based on the foregoing, ABAG POWER is concluding the wind up of the Electric Program without Settling the potential liabilities for UDC Charges and energy described above. Further, ABAG POWER has concluded that the funds held by NCPA will not be released in the foreseeable future(see below). Therefore, ABAG POWER is concluding the wind up of the -Electr€c Program without-having received all of the funds held by NCPA In trust for ABAG POWER-in the ISO-Escrow €7eposit'and-trre PX-Escrow Deposit. Finally, ABAG POWER has settled its claim against PG&E for the Direct Accu Credits (see below). ABAG POWER is distributing the funds from the settlement as part of the wind up. 2 Wind Up Aent-Attmt B-v 18 4.2&44 cin D'xR ecT Access CReorr The Direct Access Credit results from the intersection of CPUC regulations and extraordinarily high prices for electricity in 2000. The following is excerpted from a CPUC draft document that describes what the Direct Access Credit is and how it is derived.z "Since 1998, PG&E and SCE have offered service to two distinct classes of customers. Bundled service customers received the full range of electric services from the utilities, which include energy procurement and delivery. PG&E and SCE customers could also choose, under the DA option, to purchase energy from an electric service provider (ESP). PG&E and SCE continue to deliver electricity to both [Direct Access] and bundled service customers. A. Rate Freeze Total rates were frozen at levels in effect on lune 10, 1996 for all customers. Bundled service customers paid these frozen rates for the duration of the transition period (January 1, 1998 through March 31, 2002 or a Commission-authorized Iearlier end date). These frozen tariff rates included a generation rate component. The generation rate was unbundled into a market price and a competition transition charge (CTC) component. The CTC was calculated residually as the difference between the fixed generation rate component and the market price, where the market pace was based on the utility's cost of procuring power from the PX and the California Independent System Operator (IS©). All customers pay the CTC and the CTC revenues were to be used to pay for the utility's stranded generation costs, also known as transition costs. B. The Avoided Cost Credit The utilities calculated a market price for billing purposes utilizing the cast and quantities of power purchased from the PX. This PX price was used to determine the contribution to the recovery of CTC (when compared to the generation rate component of frozen rates) and also represented the utilities'avoided cost of procuring energy. The PX component of the generation rate was either applied to recover the cost of purchasing power for bundled service customers or given as a credit to DA customers. The credit reflected the fact that DA customers had chosen to procure their energy through an ESP rather than the utility. So long as the market price, or DA credit, remained below the generation component of the Customer's frozen rate, the ©A customer continued to make a contribution to CTC in exactly the same manner as a similarly situated bundled service customer. C. The Zero Minimum Bill Provision Because the DA credit was based on the market price from the PX, It was possible that the credit would exceed either the generation rate component or the entire bill. If the PX credit exceeded the generation rate component, there was a negative CTC, i.e., no contribution to recovery of stranded costs. If the PX credit exceeded the entire amount of the bill, meaning that the PX credit was greater than the sum of the generation, distribution, transmission, public purpose, and the other rate components, there would be a negative bill. In other words, the DA customer would receive a credit for the entire utility bill. This is also known as a "credit" bill. = See Attachment D description of 5998 RAP-Draft Decision. 3 Wind Up Agreement Attmt B-vi$4-29.04 cin Prior to June 1999, under the adopted tariffs, DA customers receiving the PX credit could experience, at a minimum, a monthly bill of$0. In D.99-06-058, the Commission eliminated the zero minimum bill prevision. The elimination of the zero- minimum bili provision allowed DA customers to receive the entire PX credit even If it resulted in a negative (credit) bill. Prior to market dysfunctions in mid 2000, PX credits in excess of total monthly charges were generally carried over to succeeding months and were netted against positive bills. The dysfunction of California energy markets in 2000 through early 2001, undermined the original basis for calculating the DA credit. The prices charged the:utilities during the waning days of the PX were substantially higher than the cost of producing the energy; were regularly higher than the generation component of frozen rates, and in fact, were frequently se high that the CSA credit exceeded the entire amount of a DA customer's bill for the services the DA customer did take from the utility and the generation rate component. The PX collapsed in January 2001." Upon the suspension of the Electric Program, PG&E owed ABAG POWER approximately Twenty-fine Million Three Hundred Thousand Dollars ($21,300,000) in unpaid direct Access Credits. ABAG POWER filed a complaint with the CPUC to collect the credits. The CPUC Complaint was stayed when PG&E filed for Chapter 11 bankruptcy in April 2002. ABAG POWER serried Its claim against PG&E for Seventeen Minion Dollars ($17,000,000) plus bankruptcy required interest at the rate of 4.19% per annum. PG&E has paid Seventeen Million Dollars ($17,000,000) in principal and Two Million Four Hundred Thousand Dollars ($2,400,000)in Interest in fulfillment of the settlement. 4 Wind Up Agreement-Aamt B-v18 4-28-04 On ATTACHMENT C FINANCIAL INFORMATION ABAG POWER settled its DA credit claim with PG&E in late 2002 for $17.0 million plus Interest at an annual rate of 4.19% to accrue beginning December 1, 2000. Accordingly, staff reflected this settlement in the financial reports for fiscal year ending June 30, 2003, with all other necessary adjustments incorporated therein to prepare for winding up the Electricity Pool and distributing cash on hand to members by June 30, 2004. The Executive Committee approved all these book adjustments prior to the year-endclose, and our independent auditors have completed their audit of the June 30, 2003 financial reports. They expressed an unqualified opinion on these reports with no audit adjustments. Since ABAG POWER has received payment in full plus accrued interest from PG&E for settlement of the DA credit claim in April 2004, the payment dates as listed on the next page are realistic. Eased on the audited financial reports of ABAG POWER for the year ending June 30, 2003 that were duty approved by the Executive Committee at its meeting held.on February 18, 2004, the Electricity Pool has $23.8 million in total assets available for distribution to its members (see Exhibit A). Total assets will continue to: (a) Increase by accrued interest from the PG&E settlement and from the pool's investment in the Local Agency Investment Fund, and (b) Decrease by operating expenses necessary to wind up the pool. On October 27, 2003, the ABAG POWER Board of Directors approved the methodology for winding up the electric program and distributing funds. in accordance with this process, funds in the Electricity Pool will be distributed in three categories. Payabie to Nernberas Description Basis of Distribution DA Credit settlement less Total CTC reversal PG&E distribution approximately $740,000 (see table collected on next page) from each member Total working capital Other Working capital collected from each member Members' Balancing Accumulated operating Total KWH>usage Account Surplus/deficit The following table shows balances of total audited assets and proposed disbursements as of June 30, 2003 and current balances as of April 25, 2004 and target datesof distribution. Audited Interim Balances Balances Target 6/30/2003 4/15/2004 distribution ,MM 'MM Status Date Will increase by accrued Total Assets interest net of operating As stated 23.84 24.35 expenses below taxable to>Membem PG&E Distribution* 18.27 15.83 Will not change 5/15/2004 Other 5.41 5.41 Will not change 5/15/2004 Members' Balancing 0.15 0.12 Will decrease by operating 03/31/05, Account expenses after the FY 04 audit Total Disbursements 23.84 24.3£ * On February 18, 2004, the Executive Committee approved. (a) retaining $100,000 from the DA Credit settlement to pay for wind up expenses after June 3, 2004 (the residual balance in the hold back fund will be distributed before July 1, 2010), and (b) applying approximately $540,000 from the DA Credit settlement to pay"Other" (Working Capital). 2 Wind Up Agreement-Atfint C-428-04 On V-'), V,'04 10 ki Y.i.L a:0 •.7106J ! : �vut tc� d sr C t. m t st7 to C� o r. rz tv ry ® r� a v ro t» to w t4 N 1t7 `tl' m Y) 'e- cf G5 tc5 0 w N t*7 r7 w h.£) v 0 t7 O 0 N tt5Im �' r wr h to N - coCa S:C,) in in A u9 ttm N v7 r;.� , .r cv a z+7 %n r.. sc trs Cb u!) T•.. r7 CV w C R q� "C to + ;f i� .- t N Ci rd m t7 r t N LS C7 N tti zaJ t+'i tT iC w N tO' CY O t15 fat illi tot n.t?i di Cd h- t*) CT) iV iD fV m tS5 to N N tr�,f 43 0 N U0 M M N O Cif " N O O �` K`�F u Fli 1r7 Q). tV cG M In -0 Rt 10 C17 � c+5 +t t- W 0 w M 'd• ..« m V' m m w tO c5 It') c✓l t� QD �4^r7y cD t`t w M N Lti in t7! N iv.. 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''+.... .� ..- s.._ 3... 4.,� w O '+w 4 d LL 4 b a ® o O 8 z: © a -•_fir p{ , �1�...- UQ1,zUrU4 10:01rAA aZ� 01.3 Irar, %J0V VAIi. .4 ATTACHMENT d CONTINGENT RISKS RISK ANALYSIS Attached as Exhibit A is a table setting forth ABAG POWER's best reasonable effort at estimating the maximum reasonable liability (in total for the Electric Program) for each of the listed contingent liabilities. The table allocates total liability of the program to individual Members In accordance with the usage ratio, or CTC Reversal ratio, as appropriate. The allocation is for illustrative purposes only. ABAG POWER does not have sufficient information on which to base an estimate of how the entity imposing the liability would allocate the liabilities or how ABAG POWER and the Members ought to react to such allocation. A. UNIt+VOICED ENERGY CHARGES Description of Risk ABAG POWER is distributing to each of its Electric Program Members a proportionate share of the Working Capital contributions made by members in response to Working Capital calls by ABAG POWER and residual funds from operating costs paid by Members;during the Electric Program (Balancing Account). These funds were held, in part, in reserve for payment of charges for electrical energy consumed by members of the Electrical Program during a cine-week period In August 2001 when ABAG POWER was not purchasing electricity on behalf of the Electric Program (Gap Period). As of February 29, 2004, ABAG POWER has not been invoiced for electricity consumed during the Gap Period. Under the Wind Up Agreement, if ASAG POWER receives such a bill, each Member will be required to pay its proportionate share. cit r and Under normal operating conditions, ABAG POWER purchased on behalf of the Members of the Electric Program sufficient energy to meet their estimated needs. Purcfases were made from a variety of eiectricity generators and energy rernarketers, under various contractual formats (fixed price, indexed price, indexed price with "floors"and/or"ceilings,`.etc.), and at various prices. In all instances, one significant factor in the price of electricity is the Dour in which it Is consumed. Energy during certain"pear" periods was priced considerably higher than at other periods. In the summer of 2000, the electric market became highly unstable. ABAG POWER was having a difficult time meeting credit requirements which our scheduling coordinator and electricity sellers were imposing on the marketplace. Consequently, on August 2, 2000 ABAG POWER notified PG&E in writing of its difficulties, and actions being taken to rectify the situation, PG&E acknowledged that It had received ABAG POWER's notice, and although it believed that ABAG POWER was in default of its ESP Agreement, PG&E would allow ABAG POWER until August 7, 2000 to resolve the situation. Prior to this deadline, ABAG POWER was able to secure scheduling coordination services and contract for electricity at a reasonable price, without the additional credit requirements imposed by other energy providers and remarketers. proceeding is now trying to determine what"just and reasonable" rates should have been during specific times.Z The outcome will be an order requiring generators and marketers who overcharged to refund money to purchasers. In principle, the CPUC has the power to recalculate the Direct Access Credit based on the FERC ordered reduction in electricity prices. However, FERC has no jurisdiction over the CPUC and cannot compel such a recalculation. The result of such a recalculation would be a reduction in the amount of Direct Access Credit owed ABAG POWER.' The CPUC can undertake a regulatory process referred to as ratemaking in which the ultimate result could be the imposition of a surcharge on Electric Program Member accounts to recoup overpaid Direct Access Credits over a specified time period, or immediately. This risk exposure is punctuated by §4 of the Stipulation and Release under which PG&E and ABAG POWER are settling the Direct Access Credit claim (Stipulation and Release). §4 states: ,,[ABAG POWER] and PG&E expressly agree that this Stipulation and Release is a compromise and settlement of all claims and matters that are disputed as between the parties involving the 1998 RAP for the period through and including June 30, 2001, all issues that were raised, or could have been raised, In the CPUC Complaint, and all issues that were raised, or could have been raised, in the Claire. In the event that the CPUC issues any future ruling relating to the direct access credits at issue in the Claim, the CPUC Complaint or the 1998 RAP, the parties will use their best efforts to preserve the intent of this Stipulation and Release, consistent with applicable law."4 (emphasis added) This provision was negotiated when PG&E declined to give ABAG POWER a full indemnity against the possibility that the CPUC will take an action to impose a surcharge to recover Direct Access Credits paid to ABAG POWER (or its electricity members). PG&E agreed that the exposure exists but asserts that it cannot, as an entity regulated by the CPUC, agree to make ABAG POWER whole in the event of an adverse CPUC action. PG&E asserts that an indemnity provision would be characterized as an illegal circumvention (by PG&E) of the CPUC. ABAG POWER acceded to PG&E's argument and §4 is the negotiated compromise. Background On December 22, 2403, the U.S. Bankruptcy Court for Northern California, San Francisco Division confirmed a Plan of Reorganization for PG&E (Confirmed Plan). The Direct Access Credit was paid to ARAE POWER under the Stipulation and Release. The Stipulation and Release was approved by the court and is included in the Confirmed Pian as a Class 7 Claim. During the bankruptcy proceedings, PG&E and the CPUC submitted competing pians for the reorganization of PG&E. Simultaneously, PG&E was pursuing claims challenging certain actions by the CPUC during deregulation (CPUC Proceedings). Further, PG&E filed suit in Federal District Court for Northern California against the CPUC challenging various aspects of the deregulated energy market created under CPUC regulations and guidance. The CPUC 2 Pricing occurred on an hourly basis. 3 One estimate of the impact of known(in Spring 2003)FERC ordered reductions on ABAG POWER's Direct Access Credit resulted in a reduction of$4-5 million in Direct Access Credits owed.ABAG POWER believes the estimate to be reasonable. 4 The'1998 RAP'Is the ratesetting proceeding described below under the same name. The"CPUC Complaint'is ABAG POWER's initial complaint filed with the CPUC for payment of the Direct Access Credit. 4 Wind Up Agreement-Attmt D-4-28-04 All Legal Analysis From a legal perspective, the matter is a simple collection issue. Since ABAG POWER did not enter into a contract during the Gap period, there is no "seller"to invoice ABAG POWER for any energy that was consumed. There are only two sources of electricity flowing into the California grid that could have serviced the Electric Program during the Gap Period: the ISO and PG&E. The energy consumed by the Members could have been supplied through the ISO "imbalance energy." This is a reserve maintained by the ISO when contracted for energy supplies from PG&E and other electric service providers fall below the amount necessary to keep the grid operational. Electricity Program electricity consumption during the Gap Period could have come from this source. Alternatively, PG&E supplies such a large amount of electricity over any period of time that it could have been supplying part of the power for tate Electric Program during the Gap Period. The risk of incurring the liability is wholly dependent on the ability either of the ISO or of PG&E to"prove"that electricity consumed by Members during this periost was supplied by the party making the claim. ABAG POWER is without sufficient information to evaluate the likelihood of this risk occurring. ABAG POWER has reviewed the price of imbalance energy for the period in question. Imbalance energy prices tend to be the highest of all prices paid for electricity. Based on the price for imbalance energy an estimate of the amount of electricity that the Electric Program would have consumed during the Gap Period, the maximum exposure is estimated as One Million Four Hundred Twenty Thousand Collars ($1,420,000). Finally, ABAG POWER notes that as time goes on the ability of either the ISO or PG&E to collect the data necessary to generate an invoice and prove a claim diminishes. a. UDC CHARGES Description of Risk From information provided by the Program's billing agent (APS) we believe there may be UDC charges for which neither ABAG POWER nor its Members have been invoiced by PG&E. During the period July;2000 to June 2041 the amount of UDC charges billed to members (and collected by ABAG POWER) is greater-than the amount invoiced from PG&E. ABAG POWER is also aware of one instance in which UDC charges for the affected period were generated by PG&E in connection with an electric account for a Member's streetlight system. These accounts are unique in the PG&E billing system. Electricity consumed by a streetlight system is not metered and is charged on an estimated consumption basis. In the case of which ABAG POWER is aware, the Member had already paid PG&E for the asserted UDC charges. 2 Wind Up Agreement-Attila l7-4-28-04 All Based on APS Billing information and information from ABAG POWER's review of the DA Credit's owed by PG&E, ABAG POWER has concluded that the likely total exposure is approximately One Million Six Hundred Thousand Dollars ($1,500,000). LEGAL ANALYSIS PG&E applies UDC charges to individual accounts based on the amount of electricity consumed. As noted above, streetlight accounts are uniquely billed by PG&E. In the case that has come to ABAG POWER's attention, we believe that the Member has been billed twice for the same UDC charges. Other Members with streetlight accounts may encounter the same situation. C. ISO EscRow DLPOlSIT A IND PX EscRow DePOSIT Description of Risk The PX Escrow Deposit and ISO Escrow Deposit held by NCPA on behalf of ABAG POWER are subject to reduction or nonrefund. In the case of PX Escrow Deposit, all of the funds may be consumed in the course of settling the PX's bankruptcy claims. The ISO Escrow Deposit is subject to adjustments based on FERC ordered energy price rollbacks (sea detailed description in Section D below). The FERC ordered rollbacks can both increase and decrease the ISO Escrow Deposit. ABAG POWER bought electricity for use by the Electric Program and sold excess capacity into the marketplace at various times. At those instances in which ABAG POWER was purchasing electricity, the FERC ordered price reductions will generate a refund and an increase in the ISO Escrow Deposit. In those instances in which ABAG POWER sold energy into the marketplace, the FERC ordered rollbacks can reduce the amount available from the ISO Escrow Deposit. Based on ABAG POWER's review of the total amount of power sold during the period under consideration by FERC for price reductions, we conclude that the likely reductions do not exceed the amounts currently in the ISO Escrow Deposit. Under these circumstances, we believe the risk is nominal. D. D=RecT Access CREDITS Descricrtion of Risk ABAG POWER is distributing to each of its Electric Program Members a proportionate share of the funds received from PG&E as settlement of ABAG POWER's claim against PG&E for Direct Access Credits incurred during 2000 under the deregulated energy market in California. The Direct Access Credit is a result of the application of a rate formula,adopted by the CPUC. The formula includes contemporaneous energy prices and the Direct Access Credit is a by-product of high electricity prices in 2000.1 The FERC has been engaged in a proceeding to determine whether wholesale prices charged by electricity generators and marketers during 2000 in California were `just and reasonable." FERC has already found that at certain times such prices were not. The FERC i For a detailed description of Dict Access Credits,see Appendix A,"Direct Access Credit." 3 Wind Lip Agreement-Attmt D-4-28-44 All ratepayers who paid their utility bills two years ago to be subject to an unknown liability to be paidat an unknown future date. We need not elaborate on the intensive effort required by PG&E to recomputed individual bilis nor the intensive efforts and spent resources of end users to verify those recomputed bilis. Because we deny PG&E's proposal we do not reach the question of whether approval of the proposal would constitute retroactive ratemaking." I When we speak of refunds in this context, we refer not to money going back to DA [direct access] customers, but to a recommendation of their credit. If a refund is ordered, the credit would have been less and the DA customer would have been overpaid by PG&E thereby causing a repayment to PG&E. The same logistical objections raised by the AU to retroactive reductions in direct Access Credits stili stand and are amplified by the passage of yet another year since issuance of the 1998 RAP - Draft Decision and without further action by FERC.6 Further, the legal barriers to "retroactive ratemaking,"which the draft decision avoids, become a live issue. Independent of the arguments made in the 1998 RAP - Draft Decision, a strung legal argument can be made that the CPUC is estopped by the Settlement Opinion and Master Settlement Agreement from reducing the amount of the Direct Access Credit paid to ABAG POWER. The Settlement Opinion makes the following policy finding: "It is in the public interest that PG&E emerge from bankruptcy promptly.—To emerge from bankruptcy PG&E should pay its creditors. All allowed claims should be paid In full. (emphasis added)"7 On the date of the Settlement Decision, ASAG POWER's Stipulation and Release was an "allowed claim"and part of the record'before the CPUC. It will be difficult for the CPUC to defeat the argument that it is estopped from taking any (otherwise permitted) action that effectively modifies the Stipulation and Release or reduces the payment required by the Stipulation and Release. In addition, the Master Settlement Agreement states. "[PG&E and the CPUC] agree not to contest the validity and enforceability of [the Master Settlement Agreement], the [Confirmed Plan] or any order entered by the [Bankruptcy Court] contemplated by or required to supplement [the Master Settlement Agreement and the Confirmed Plan]."a AncillaE_rv_Analysis In addition to the "logic"of a bureaucratic recalculation of the Direct Access;Credits in response to the anticipated FERC ordered price reductions, there might be pressure on the CPUC to recover Direct Access Credits to reduce general utility rates. In response, one can raise the objection stated in the 1998 RAP -- Draft Decision that the costs to recalculate and recover"overpaid"credits may well exceed the recovery. Finally, please note that the post- bankruptcy CPUC ratemaking structure for PG&E includes the "regulatory asset." Under the terms of the Confirmed flan and the Master Settlement Agreement, the amount of the regulatory asset which must be amortized by ongoing electric rates will be reduced by any monies actually recovered by PG&E as a result of the same FERC price roliback.9 The direct 6 Although,the contested time period misses most of the times during which ABAG POWEWs Direct Access credit was generated. The same legal arguments apply and the FERC proceeding has expanded the tfineframe for ptential price rollbacks to include more of the period in which ABAG POWER's credits were"generated." Settlement Decision, p. 78. s Master Settlement Agreement,p. 18, §21. Master Settlement Agreement, pp. 8-3, §2.d. h Wind Up Agreement-Attmt D-4-28-04 All and PG&E reached a Master Settlement Agreement on all pending disputes, Including those before the Bankruptcy Court. The Master Settlement Agreement dismissed the lawsuits and the CPUC Proceedings with prejudice, and committed bath parties to supporting and implementing what ultimately became the Confirmed Pian. The dismissed CPUC proceedings do not include the 1998 RAP or ABAG POWER'S CPUC Complaint. The CPUC action to approve the Confirmed Plan and the Master Settlement Agreement is documented in the opinion issued for Investigation 02-04-026 (Settlement Opinion). The Master Settlement Agreement between the CPUC and PG&E has the following relevant features: 1. The CPUC agreed to include certain cost components in the CPUC's future regulatory and ratemaking proceedings as they affect PG&E. Such cost components included the sum of$2.2 billion designated the„regulatory asset." Rates established by the CPUC must be sufficient to (a) support all of the cost components necessary;to PG&E's continued viability as an ongoing public utility and (b) amortize the regulatory asset over a period of ten (10) years. 2. Within the constraints of the Confirmed Plan and the Master Settlement Agreement, the CPUC retains its regulatory authority over PG&E. 3. The current CPUC and future CPUCs are bound by the Master Settlement Agreement. 4. The CPUC acknowledges the continuing jurisdiction of the Bankruptcy Court to enforce the Confirmed Plan. Leoai Analysis The potential CPUC regulatory action on the Direct Access Credit can only be triggered by a FERC ordered reduction in wholesale electricity energy prices for 2000. Only PG&E and a Direct Access Credit recipient have standing to initiate an action to recalculate the Direct Access Credit. PG&E and ABAG POWER are estopped from so doing by §4 of the Stipulation and Release (see below). A recalculation of the Direct Access Credit can in theory be initiated by the CPUC. The impetus for a CPUC action is bureaucratic and triggered by FERC ordered price reductions. The central question is whether the CPUC can legally do so in the face of ABAG POWER's objections. The issue of recalculating Direct Access Credits based on FERC ordered refunds was raised by PG&E in a ratemaking action before the CPUC (Application 98-07-003, the "1998 RAP"filed in 1998). The Administrative Law Judge (AU) Issued a draft decision on April 3, 2003 but the CPUC has not taken any action on it and it is not currently on the CPUC agenda for consideration, public hearing or further action.5 The 1998 RAP - Draft Decision states in pertinent part: "In our opinion it would be unreasonable to recompute the [Direct Access] credit should FERC order refunds. We are confronted, initially, with three unknown factors: whether FERC will order refunds: when FERC will order refunds (and when the order becomes] final), and the amount of those refunds." As of this writing,.FERC has the matter under consideration. Any order of refunds, if substantial, is expected to be appealed. It is impossible to predict the date of a final order. The period in question, December 28, 2000 to January 18, 2001, is two years old and counting. It is unfair for s No action can be taken without CPUC approval. Draft ALJ decisions on deregulation matters have had a mixed reception before the CPUC. Some have been adopted as presented.others have been subject to substantial revision.The draft decision is Opinion Adopting a Post Power Exchange Direct Access Credit for Pacific Gas and Electric Company(1998 RAP- Draft Decision). 5 Wind Up Agreement-Attaint D-4-28-04 All effect of the FERC ordered rollback brings significant rate relief under the Confirmed P€an."3 In the context of generalized rate relief, it appears doubtful that the CPUC would be willing to undertake the ironic step of imposing a surcharge on certain classes of customers (including local government entities such as ABAG POWER's electricity members) in order to wring out the last bitter drop of savings generated by the FERC ordered refunds. Another impediment to such action by the CPUC is the specter of resurrecting the public debate about California's failed energy deregulation program. Conclusion The CPUC has the theoretical ability to reduce the Direct Access Credits paid to ABAG POWER. However, ABAG POWER can pose the following legal argument in position: (a)the CPUC is estopped from so doing by the CPUC'S findings and actions in reaching the Master Settlement Agreement with PG&E, and the CPUC's support for the Confirmed Plan under which the credits were paid, and (b) the logistical and equity issues raised in the 1998 RAP - Draft Decision. In the absence of any motivation to undertake such a step other than bureaucratic purity of process, ABAG POWER's opinion is than the risk is nominal. i°Master Settlement Agreement estimates a potential recovery by PG&E of in FERC ordered prig reductions. 7 Wind Up Agreement-At#mt I7-4-28-44 All ............................................................................................................................ .. ... . ....... ..................................................................................................................................................... EXHIBIT A TO ATTACHMENT D Allocation of Estimated Contin gant liabilities. This table Illustrates the allocation of ABAG POWER's estimate of the Electric Program liability for the donated charges among Electric Program members. Allocated amounts have been rounded to the nearest 10 dollars. Please see Attachment D for an explanation of the methodology and basis forthis (A) (B) (D) Uninvolced Direct Access Energy Charges(1) UDC Charges(2) Credits(3) Msmbers $1 420 $1,600,000 $4,676,000 Total City of Albany $ 4,920 $ 5,550 $ 9,350 $ 19,820 Town of Los Altos Hills 470 530 1,220 2,220 City of Antioch 74,030 83,420 184,090 321,540 City of Arcata 5,360 6,040 15,470 26,870 Town of Atherton 2,860 3,220 8,000 14,080 City of Benicia 18,160 20,470 50,600 89,230 City of Berkeley 4,060 4,570 65,190 63,820 County of Butte 28,680 32,310 107,610 168,600 City of Cloverdale 7,700 8,670 29,570 45,940 Comity of Monterey 78,860 86,860 151,450 319,170 County of Contra Costs 207,960 234,320 778,930 1,221,210 City Of Cotatl 3,960 4,460 10,690 19,110 City of Cupertino 20,620 23,230 49,040 92,890 City of Daly City 62,020 69,880 357,930 489,830 City of Davis 3,320 3,740 3,720 10,780 City of El Cerrito 5,130 5,780 16,530 27,440 City of Foster City 19,770 22,280 54,620 96,670 Golden Gate Bridge District 19,880 22,400 101,650 143,930 City of Gonzales 5,830 6,350 15,130 27,110 City of Half Moon Bay 2,840 3,200 7,180 13,220 H.A.R.D. 12,630 14,230 38,750 65,810 City of Hercules 7,890 8,890 22,280 39,060 Town of Hillsborough 11,460 12,910 30,760 55,130 Housing Auth. Co.of Alameda 1,880 2,120 6,690 10,690 City of Los Altos 7,760 8,740 20,970 37,470 Los Trancos Co.Water District tolo 1,140 1,330 3,480 City of Menlo Park 17,380 19,590 56,130 93,100 City of Millbrae 7,890 8,890 12,770 29,550 City of Milt Valley 15,860 17,870 50,970 84,700 City of Mllpftas 16,580 18,680 79,120 114,380 Town of Moraga 2,860 3,000 3,660 9,320 County of Napa 21,800 24,560 109,150 155,510 City of Newark 13,140 14,810 25,400 53,350 City of Orinda 2,410 2,720 5,150 10,280 City of Pacifica 12,260 13,820 28,160 54,240 City of Patterson 9,570 10,780 62,570 82,920 City of Petaluma 64,380 61,270 96,470 212,120 City of Pinola 14,220 16,020 72,080 102,320 City of Pleasanton 43,290 48,780 1:07,930 200,000 R.A.F.C. 17,870 20,130 84,580 102,580 City of Salinas 40,070 45,150 58,300 143,520 EXHIBIT A TO ATTACHMENT Q A1ic t Lon of Esttrroftd Contin+ nt Li�ibilif�s. This table illustrates the allocation of ABAG P13WER's estimate of the Electric Program liability for the denoted charges among Electric Program members. Allocated amounts have been rounded to the nearest 10 dollars. Please see Attachment 9 far an explanation of the methodology and basis for this {A) (B) (d) Uninvoiced Direct Access Energy Charges(1) UDC Charges(2) Credits(3) Members X1,420,000 $1,6100 00 , 0 $4676;000 Total City of Ban Carlos 10,380 11,700 27,170 49,250 City of San Leandro 49,380 55,640 139,200 244,220 City of Sart Mateo 44,790 50,460 117,720 212,970 County of San Mateo 148,120 166,9€O 582,550 897,570 City of San Pablo 9,370 10,550 23,580 43,500 City of Santa Rasa 82,740 93,230 188,£180 364,650 City of Saratoga 4,360 4,920 10,060 19,340 County of Sonoma 7,230 8,150 15,390 30,770 South Co.Fire Authority 910 1,020 3,800 5,730 City of Union City 2,880 3,240 17,130 23,250 City of Vacaville 7,770 8,760 26,690 43,220 City of Vallejo 91,810 103,450 346,500 541,760 West County Wastewater Dist. 20,620 23,240 131,420 175,280 Town of Windsor 24,810 27,950 93,390 148,150 City of Winters 8,570 7,410 11,540 2§,,520 Total $ 1,419,980 $ 1,600,000 $ 4,676,010 7,695,990 Notes: (1)Allocated by kWh usage (2)Allocated by kWh usage (3)Allocated on CTC Credit Reversals, Represents PG&E's estimate of the passible reduction In the CTG credits due to the FERC price mitigation hearings.