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HomeMy WebLinkAbout07262021 City Council Work Session Packet - CEA AgreementSeward City Council Work Session Packet Topic: Discuss Renegotiation Wholesale Power Contract with Chugach Electric Association July 26, 2021 City Council Chambers Beginning at 5: 00 p.m. Power Su I Y Contrac pp Seward Electric & Chugach Electric Association IN July 26, The Process Letters sent to Railbelt utilities and other providers in March Met with interested parties in April: CEA, HEA, MEA Meetings revealed that CEA has advantages based on rates, geographic position to Seward, availability to natural gas supplies, and knowledge of Seward Electric Conducted a half dozen meetings with CEA in negotiating the contract Terms of New Contract There will be no increase in the rates for Utility Charges and Demand Charges. Cost of Power charges will be the same as those CEA charges all customers. Current Energy Charge is $0.01451 per KWH and Demand Charge is 14.45 per KW Contract Length Contract is for a total of 9 years 3-year and 6-year off -ramps No increase in rates until CEA undertakes a rate case; within 2 to 3 years Seward needs to be active in CEA rate case to ensure it receives the financial benefit of the ML&P and CEA merger Benefitting from System Power Seward will get the benefit of CEA's Bradley power which now includes ML&P's interest in Bradley Lake. Seward also will receive power from Fire Island Wind. Other power plants include the South Central Power Plant and Plant 2A, which CEA acquired from ML&P. Negotiating for Natural Gas Seward has the ability to obtain its own gas supply after giving CEA 12 months' notice. CEA secures its gas giving 12 months notice to HilCorp. CEA does own the Beluga Gas Fields which are operated by HilCorp, providing CEA the lowest cost gas available from the Cook Inlet. Gas from HilCorp ranges up to $7.45 per MMBTU while Beluga provides gas to the CEA system as low as $3 per MMBTU Market Opportunities in the Railbelt During negotiations, Seward proposed buying its own economy energy from HEA, MEA, GVEA or even CIRI's Fire Island wind. CEA agreed to meet and confer in good faith to allow Seward to do that and accommodate such a modification to the agreement. Additional Service Opportunities CEA could provide: • Coordination and clearing of right-of-way • Employee training • Coordination and support for electric vehicle charging infrastructure • Assistance with dispatch and engineering services for the Fort Raymond power plant • Help with engineering for Seward substations and cyber security compliance • Implementing an AMI system to reduce line losses and increase reliability CEA Transmission Line Clearing CEA maintains distribution lines on Seward's transmission line from its Dave's Creek Substation to Seward's Lawing Substation. CEA has agreed to provide right-of-way clearing on its distribution lines from Dave's Creeks to Lawing without charging Seward. Under the existing contract, Seward pays two-thirds of clearing costs. Expanding Opportunities for Solar CEA agreed to raise net metering limits for Seward Electric. CEA expecting to increase their member's limits as high as 5 percent of its average retail demand. Summary Negotiations were productive and conducted in good faith No other utility could match CEA on rates CENs geographic position to Seward and on the Kenai Peninsula (Moose Pass, Cooper Landing) was an advantage CEA showed a sincere willingness to assist Seward Electric in key areas: mutual aid in outages, human resources and equipment in emergencies, employee training, system engineering and troubleshooting, improving technology (AMI Meters), ROW clearing and other initiatives New contract will provide an opportunity for developing an even stronger partnership of support between the two utilities Questions 2022 WHOLESALE POWER CONTRACT BETWEEN CHUGACH ELECTRIC ASSOCIATION, INC. AND THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM SECTION 1. PARTIES This 2022 Wholesale Power Contract ("Agreement"), dated as of June _, 2021, ("Signature Date"), is entered into by and between Chugach Electric Association, Inc., an Alaska non-profit electric cooperative corporation, having its offices at Anchorage, Alaska ("Chugach") and the City of Seward, Seward Electric System ("Seward") having its offices at Seward, Alaska. Chugach and Seward may hereinafter be referred to individually as a "Party" and collectively as the "Parties." SECTION 2. RECITALS WHEREAS, Chugach has furnished Electric Power to Seward under various contractual arrangements since July 1, 1961; WHEREAS, the current 2006 Agreement for the Sale and Purchase of Electric Power and Energy and Amendments No. 1 and 2 to that agreement terminate on December 31, 2021; WHEREAS, the Parties desire to continue Chugach's provision of Electric Power to Seward pursuant to the terms and conditions of this Agreement; WHEREAS, the Parties also desire to establish a framework to work together to identify and plan for additional opportunities to provide mutual aid, maximize efficiencies, and reduce the costs of operating and maintaining their respective electric systems where possible; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: SECTION 3. AGREEMENT 3.1 Sale and Purchase of Electric Power. Chugach shall sell and deliver to Seward, and Seward shall take and pay for, at the rates provided for in Section 4, all of Seward's Electric Power requirements from Chugach, subject to those terms and conditions hereinafter provided. Page 1 of 17 3.2 No Dedication of Resources. Nothing under this Agreement shall constitute either (i) a sale, lease, transfer, dedication, or conveyance of an ownership interest in or to any of Chugach's Generation or Transmission Resources, or (ii) an entitlement to the electric capacity or associated energy from any specific Generation or Transmission Resource. Chugach shall have sole authority, which it may exercise in its discretion, to manage, control, and operate all of its Generation and Transmission Resources, subject to Chugach's obligation to provide available Electric Power to Seward under this Agreement. 3.3 Electric Power Without Reserves, The Electric Power, which Chugach is obligated to sell to Seward under this Agreement, shall be provided without system production Reserves. Seward shall be responsible for providing its own Reserves. 3.4 Optional Gas Sully. Upon twelve (12) months advance written notice to Chugach, Seward may elect to provide its own supply of gas ("Seward Gas") to be used by Chugach to meet its obligation under this Agreement to generate, sell, and deliver Electric Power to Seward. To exercise this option, the Seward Gas supply must be made available to Chugach on a firm basis from the date the Seward Gas option becomes effective through the remaining Term of the Agreement. To the extent Seward exercises this option and an interruption in the Seward Gas supply occurs, Chugach shall be relieved of its obligation to provide Electric Power under this Agreement for so long as such interruption continues. Chugach shall have no obligation to take, or liability associated with, any Seward Gas that cannot be used by Chugach during (a) an interruption event under Section 3.5, or (b) an Uncontrollable Force event. The Parties shall negotiate in good faith regarding any additional terms and conditions necessary to effectuate the Seward Gas option if and when notice of such election is received by Chugach. 3.5 Interruption of Service. (a) To the extent Chugach's available power production and power purchase contract resources (not including economy or emergency power purchases) are insufficient to serve Chugach's other firm loads, Chugach may interrupt service to Seward as necessary (either completely or in part) to protect the continuity of service to Chugach's other firm loads, subject to the follow limitations: i. Chugach shall not be obligated, but will attempt in good faith, to provide reasonable advance notice to Seward of such interruptions, with such notice to be made by calling the emergency services dispatcher for the City of Seward at (907) 224-3338, or such other number as the Parties may from time to time agree upon in writing. ii. Chugach shall not be obligated, but will attempt in good faith, to purchase replacement emergency Electric Power from other utilities to avoid interruption under this Section. (b) Seward shall be responsible for all costs of supplying its own Electric Power to meet its system load during interruptions under this Section. Page 2 of 17 (c) Seward may interrupt service with Chugach to engage in test running of its own generation resources and Chugach may require up to forty-eight (48) hours advance written notice. 3.6 Delivery Points. Subject to Section 3.5, Chugach shall furnish the Electric Power purchased by Seward under this Agreement to Seward at: (i) Daves Creek Substation (high side of breaker 952), and (ii) near the Lawing Substation at approximately mile 25 of the Seward Highway, or such other delivery point(s) as mutually agreed to by the Parties in writing. Title and risk of loss of Electric Power delivered to Seward shall pass from Chugach to Seward at the delivery points, and Chugach shall have no responsibility for transmission and distribution beyond such delivery points for such delivered Electric Power. 3.7 Resale of Electric Power Prohibited: Limit on Amount of Electric Power. All Electric Power delivered to Seward under this Agreement shall be used exclusively to serve Seward's retail electric loads as ultimate consumers and end -users of the Electric Power and shall not be resold to any other entity or otherwise used or disposed of, by contractual agreement or otherwise, in any other manner or for any other purpose. To assist in enforcing this provision, the Parties agree that at no time will Seward take, and at no time will Chugach be obligated to supply, Electric Power under this Agreement in amounts in excess of Seward's system demand or requirements calculated at the time Electric Power is delivered to Seward. Nothing contained in this Section 3.7 shall preclude Seward from using Electric Power supplied hereunder to meet its retail electric loads while engaging in contemporaneous off -system sales of Electric Power available to Seward from its own or other sources. 3.8 Joint Use Agreement. The Joint Use Agreement attached as Exhibit A is made a part of this Agreement and incorporated by reference herein. 3.9 Economy Energy Transactions. In the event of changed market conditions related to economy energy, Seward may request that the Parties meet and confer regarding potential modifications to this Agreement that would allow Seward to meet a portion of its Electric Power needs through market economy energy transactions. The Parties shall negotiate such modifications in good faith; however, Chugach shall not be obligated to accommodate such a modification to the extent Chugach determines in its sole discretion that it would cause operational or economic hardship to Chugach. 3.10 Mutual Assistance. The Parties shall continue to work together and discuss potential additional opportunities and arrangements for Chugach and Seward to expand their commercial relationship in ways that will achieve mutual benefits and efficiencies for both Parties. The Parties believe that given their unique relationship, additional efficiencies could be gained through: (a) Coordination of right-of-way vegetation management activities through engagement of a mutually acceptable Qualified Contractor, as described in the Joint Use Agreement. Page 3of17 (b) Coordination of employee training activities where possible such that Seward employees are given the opportunity to attend Chugach sponsored training events (particularly in the area of safety training). (c) Coordination regarding electric vehicle charging infrastructure and renewable generation resources. (d) Coordination and assistance related to dispatch and engineering services for the Fort Raymond power plant. (e) Coordination and assistance with engineering for Seward substations and Railbelt cyber security compliance. (f) Coordination and assistance with Advanced Metering Infrastructure ("AMP') meter installation and connection to Chugach's system. 3.11 Treatment of Small Power Projects. (a) The aggregate installed capacity of all Small Power Projects selling electric capacity and/or energy to Seward shall not exceed 500 kW unless mutually agreed otherwise. (b) Metering. All Small Power Projects selling electric capacity and/or energy to Seward shall be individually metered and such metering information shall be available to Chugach for purposes of calculating Seward's monthly bills in conformance with this Section 3.11. (c) Energy Costs. Chugach's monthly invoice to Seward, based on Electric Power deliveries identified in Section 3.6, shall be reduced by a dollar amount equal to the kWh received by Seward from Small Power Projects multiplied by Chugach's tariffed rate for non - firm power purchases for that billing month. Unless and until an alternative avoided cost calculation is developed, the "Non -firm power rate" in the approved Chugach Tariff Sheet No. 97 (Purchase and Sales Rates for Qualified Cogeneration and Small Power Production Facilities) for each month shall be used to determine the amount by which Chugach's invoice shall be reduced based upon Seward's purchases from Small Power Projects. At any time prior to the end of this Agreement, Chugach may propose to the Regulatory Commission of Alaska ("Commission") an alternative avoided cost calculation to apply to Seward's purchases from Small Power Projects. Prior to filing any such proposal, Chugach shall meet with Seward to discuss how the proposed change, if approved, would affect Seward's monthly invoice. Any changes in the calculation of the avoided cost rate(s) are subject to the standard review and adjudicatory process of the Commission. Seward reserves the right to oppose any such proposal before the Commission. (d) Capacity Costs. All rates and resulting invoices charged by Chugach to Seward shall be computed as if the capacity received by Seward from Small Power Projects were received from Chugach. The wholesale billing rates charged by Chugach to Seward shall not be reduced to reflect any contribution of capacity from Small Power Projects. Page 4of17 (e) Except for the reduction in Chugach's monthly invoice to Seward computed pursuant to Section 3.11(c), all demand- and energy -related costs, other than fuel and purchased power charged by Chugach to Seward, shall not be reduced to reflect electric capacity or energy received by Seward from the Small Power Projects. Demand and energy provided by the Small Power Projects shall be included in monthly billing amounts and included in the determination of cost assignment in cost of service studies. (f) For purposes of Chugach's quarterly Fuel and Purchased Power Cost Adjustment Factor updates, the amounts credited to Seward pursuant to Section 3.11(c) for Seward's purchases of electric capacity and/or energy from Small Power Projects will be considered part of Chugach's system costs. Those costs shall be apportioned to all classes of service, including Seward, consistent with established cost -of -service methodologies. (g) Before allowing a Small Power Project to interconnect with Seward's facilities or equipment or accepting any electric capacity and/or energy from a Small Power Project, Seward shall confirm, to Chugach's satisfaction, its ability to provide Chugach with data that are compliant with and subject to all metering requirements of this Agreement. Seward shall require by contract with the Small Power Project that the Small Power Project will (A) pay to Chugach the installed cost of the Chugach meters/recorders designated by Chugach as necessary for Chugach to record the energy and capacity supplied by the Small Power Project to Seward; (B) provide, without charge, a telephone line (dedicated or shared) for telephone access by Chugach to the Chugach meters/recorders; and (C) provide to Chugach, without charge, full access to any Chugach -owned meters/recorders on the premises of the Small Power Project and any other rights that Chugach has with respect to other meters under this Agreement. 3.12 Treatment of Net Metered Non -Utility Generation. (a) This Agreement shall not be construed to prohibit Seward from purchasing or receiving from a Seward retail customer the electric output from an on -site Eligible Non -Utility Generation facility under a net metering service arrangement with the Seward retail customer, provided that the facility has a nameplate capacity of 25 kW or less, and provided that the total nameplate capacity of all Seward net metered generation facilities does not exceed the greater of two (2) percent of Seward's average retail demand or the amount permitted under Chugach's operating tariff for its retail members at the time. (b) Chugach's rates for Seward's purchases of Electric Power (including both monthly billing demand and determination of contribution to system peak, total system demand and energy requirements) under this Agreement shall be based on actual Chugach billing determinants. In this manner, the impact of net metering installations will be to reduce Seward's billing load and cost responsibility by the amount of actual generation received by Seward from net metered facilities. (c) Nothing in Sections 3.11 or 3.12 precludes Chugach from negotiating directly with any Small Power Projects or with any power supplier to purchase electric capacity and/or energy. Page 5 of 17 SECTION 4. RATES AND BILLING 4.1 General Ratemaking Provision. The rates and charges applicable under this Agreement shall be established, and shall be revised from time to time, in accordance with (a) the substantive ratemaking principles set forth in Section 4.2, and (b) the ratemaking procedures set forth in Section 4.3. This Agreement and rates proposed hereunder shall be submitted to the Commission for advance approval. The schedule of initial base rates under this Agreement are set forth in Chugach CPCN No.8, Tariff Sheet No. 99 (65th Revision). Chugach shall ensure that during the term of this Agreement Seward's total cost of Electric Power is not adversely affected by future supply arrangements executed with any third -party purchaser(s) of Electric Power ("Third -Party Transaction"). For clarity, "not adversely affected" shall mean that Seward's total cost of Electric Power shall not be higher than it otherwise would have been absent the new Third -Party Transaction. To the extent an adverse effect is determined by Seward to exist, Seward shall notify Chugach of such determination and seek to resolve the issue with Chugach in good faith. Disputes arising hereunder may be submitted to the Commission for resolution by either Party at any time. 4.2 Substantive Ratemakin Principles., rinciples. The rates and charges applicable under this Agreement shall be just and reasonable, not unduly discriminatory, and consistent with the terms and conditions of this Agreement and all other lawful obligations of Chugach. The rates and charges shall be based on cost -of -service studies designed to ensure that Chugach's total revenue requirement, including, but not limited to generation, transmission, and fuel and purchased power expenses, is divided fairly and appropriately between Chugach's generation, transmission, distribution, and customer functions so that no function will significantly or persistently cross - subsidize the other. Fuel and purchased power costs shall be recovered through Chugach's quarterly cost of power adjustment factor rates. All rates charged to Seward shall exclude any costs associated with power purchased by Chugach from the Fire Island Wind Project. Since Chugach is not committing any system production reserves to providing service to Seward under this Agreement, and Seward is relying on its own reserves, no Production Reserve Costs shall be allocated to Seward. 4.3 Ratemaking procedures. Chugach shall supply and be paid for Electric Power under this Agreement on a total requirements basis, except that Production Reserve Costs shall not be allocated to Seward, as discussed below. The following ratemaking and billing provisions shall apply: (a) Allocation of demand -related costs. Demand -related costs will be allocated to Seward for ratemaking purposes in accordance with a methodology that is consistent with the fairness principles set forth in Section 4.2 of this Agreement and will be based on Total System Demand, with the exception that no Production Reserve Costs will be allocated to Seward. (b) Computation of demand charges. To establish demand charges (expressed in dollars per kilowatt/month) for the sale of electric capacity in future rate cases, test period demand -related costs, excluding Production Reserve Costs, will be allocated to Seward based on its proportionate contribution to the overall system peak. Page 6 of 17 (c) Billing demand and payment for capacity. Seward's billing demand in each month shall be Seward's actual peak demand on the Chugach system for that month. (d) Payment for enemy. Chugach will charge and be paid for energy for each monthly billing period in an amount equal to Chugach's then applicable energy charge (excluding fuel and purchased power expenses) multiplied by Seward's total system energy requirements for that month, which energy requirements shall be metered at the Points of Delivery. Fuel and purchased power costs will be recovered through Chugach's cost of power adjustment factors, which are reduced by economy energy sales margins and wheeling revenues that would otherwise have been assigned to Seward based on Seward's proportionate share of the total system firm sales on the Chugach system. (e) BRU Contributed Capital Surcharge. Chugach will charge and be paid a monthly amount equal to the then applicable BRU Contributed Capital Surcharge multiplied by actual energy delivered by Chugach to Seward. (f) Customer Charge. Chugach will charge and be paid a monthly amount equal to the then applicable customer charge multiplied by the number of delivery point meters. (g) Good Faith. The Parties agree to operate their systems in good faith to accomplish the purpose of relying upon the power supply Reserves provided by Seward while providing Seward with a reduced demand cost allocation reflecting the unique nature of the service provided under this Agreement. (h) Billing. Seward shall pay bills within 15 days of receipt. In the event any portion of any bill is disputed, pending resolution of the billing dispute, the undisputed portion of each bill shall be paid to Chugach in timely fashion pending resolution of the disputed amount. (i) Margins (,capital credits. Seward shall be entitled to an allocation of margins (capital credits) based on Seward's contribution to Chugach's electric generation and transmission margins consistent with Chugach's bylaws. Upon retirement of patronage capital in a manner consistent with Chugach's bylaws and applicable board policies, such amount retired on behalf of Seward shall be divided and applied equally as an offset (credit) to Seward's subsequent twelve monthly bills for Electric Power. 4.4 Billing for Bradley Lake. (a) Chugach shall be entitled to schedule and receive Seward's share of Electric Power from the Bradley Lake Hydroelectric Project, including any Electric Power associated with the Battle Creek Project ("Bradley Project"). (b) Chugach shall be entitled to comingle any Electric Power Chugach receives under Section 4.4(a) with all other Electric Power available to Chugach and use such Electric Power to serve Chugach's system load. (c) Chugach shall pay the Alaska Energy Authority ("AEA") for Seward's share of costs incurred under the Bradley Project Power Sales Agreement ("Bradley PSA"), which includes Battle Creek Project costs, and the Memorandum of Proposed Transaction dated Page 7 of 17 December 17, 2020, whereby AEA acquired certain transmission assets from Homer Electric Association, Inc. These costs and the attendant energy and capacity from the Bradley Project will be included as a Chugach system resource for ratemaking purposes. This Bradley Lake billing arrangement is strictly for administrative efficiency and is expressly not an assignment of Seward's share of Bradley Project Electric Power to Chugach. (d) This Section 4.4 is not intended to alter, amend, or modify any of the Parties rights and obligations under the Bradley PSA or other agreements related to the Bradley Project. The intent of this arrangement is simply to increase administrative efficiency as between the Parties with respect to how Seward's share of Bradley Lake Electric Power is to be handled. SECTION 5. TERM This Agreement shall continue in full force and effect from the later of January 1, 2022, or the date Commission approval is received ("Effective Date") pursuant to Section 14.13 for a period of three (3) years ("Term"). The Term of this Agreement shall automatically extend for two (2) successive three (3) year terms unless either Party provides written notice of termination to the other Party at least one (1) year prior to the expiration of either the initial Term or any subsequent term thereafter. SECTION 6. PROVISIONS RELATING TO ELECTRICAL SERVICE 6.1 Electric Power to Be Made Available. Except when prevented by an Uncontrollable Force or when Chugach has interrupted service under Section 3.5 of this Agreement, Chugach shall use its best efforts to deliver a constant and uninterrupted supply of Electric Power to Seward at the delivery points designated in Section 3.6 in the amount of Seward's total demand for Electric Power. 6.2 Restoration of Service. In the case of a partial or total loss of service to Seward as a result of problems encountered on the Chugach system, including an Uncontrollable Force or interruption under Section 3.5 of this Agreement, Chugach will use its best efforts to restore service in a prompt and non-discriminatory manner. 6.3 No Duty to Third Parties. This Agreement shall not create on the part of Seward or Chugach any legal duty owed to the retail, wholesale, or wheeling customers of the other Party, including without limitation, any legal duty to maintain continuity of electric service to other Parties or customers. Nothing in the foregoing sentence shall limit the rights afforded Chugach or Seward under this Agreement. 6.4 Prudent Utility Practice. The Parties shall design, construct, maintain, operate, and repair their respective facilities and equipment in accordance with Prudent Utility Practice. Seward shall also design, construct, operate, maintain, and repair its facilities and equipment in a manner that ensures satisfaction of the following constraints: (a) Seward's load shall not cause sine -wave distortion or large, short -interval demand that will impair service or cause interference with telephone, television, or other Page 8 of 17 facilities, or other utilities' customers. (b) Seward's load shall not result in a deviation from phase balance of more than ten (10) percent at any time. (c) Seward and Chugach shall each supply their own Volt -Amperes Reactive ("VAR") requirements, as measured at the delivery point, to correct any power factor problems on their respective sides of the delivery point. Seward must maintain a minimum 90% power factor. In the event that Seward is unable to meet this power factor requirement, the Parties shall meet and confer regarding a mutually acceptable solution to the problem. 6.5 Reserves. (a) Chugach shall not be required to provide or maintain Reserves to support Seward's Generation Resources. (b) Seward shall be required to maintain sufficient Reserves to support any and all of its Generation resources at all times that Seward is operating its Generation Resources in parallel with Chugach's Generation Resources. (c) The Parties shall meet and confer regarding potential modifications to this Section 6.5 in the event of a material increase to Seward's Total System Demand as a result of a new large commercial customer coming onto Seward's system. 6.6 Voltage. The Electric Power provided hereunder shall be three-phase, alternating current, at nominal voltages ± 5% under normal conditions and ± 10% under emergency conditions. All Parties shall endeavor to maintain proper phase voltage balance on their respective systems. If a problem with voltage occurs, all Parties will use their reasonable best efforts to correct such problems. 6.7 Frequency. Chugach shall use its reasonable best efforts to maintain its system frequency at 60 hertz averaged over each twenty-four (24) hour period. SECTION 7. METERING 7.1 Performance of Meter Testing. With respect to metering equipment, the Parties shall each: (a) make or provide for biennial tests and inspections of all meters and recorders used for billing purposes under this Agreement in order to maintain a commercial standard of accuracy; (b) restore to a commercial standard of accuracy any meters found to be inadequate or inaccurate; and Page 9of17 (c) provide the other Party with the results of any such test or inspection that shows any inaccuracy more than 0.5 percent slow or fast. 7.2 Notice of Meter Testing. Each Party shall provide the other Party with written notice at least one (1) week prior to the performance of any meter tests or inspections. Each Party shall be permitted to have representatives present at such meter tests and inspections. 7.3 Right to Request Additional Meter Testing. Each Party shall make or provide for additional tests of its meters and recorders at the request of the other Party and in the presence of representatives of the requesting Party. The cost of any additional test requested by such Party shall be borne by the Party owning the equipment if such test shows a meter or recorder is inaccurate by more than 0.5 percent slow or fast. 7.4 Correction of Meter Errors. Metering errors shall be corrected in the manner applicable to utilities and wholesale customers prescribed in 3 AAC 52.465(d) and (e), as amended from time to time. SECTION 8. FORCE MAJEURE No Party shall be liable or responsible to the other Party, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement (except for any obligations to make payments to the other Party hereunder), when and to the extent such Party's ("Impacted Party") failure or delay is caused by or results from an Uncontrollable Force. The Impacted Party shall give notice to the other Party within three (3) days of the Uncontrollable Force event, stating the period of time the occurrence is expected to continue. The Impacted Party shall use diligent efforts to end the failure or delay and ensure the effects of such Uncontrollable Force event are minimized. The Impacted Party shall resume the performance of its obligations as soon as reasonably practicable after the removal of the cause. In the event that the Impacted Party's failure or delay remains uncured for a period of thirty (30) consecutive days following written notice given by it under this Section 8, the other Party may thereafter terminate this Agreement upon ten (10) days' written notice. Seward shall be responsible for meeting its own Electric Power needs when Chugach is unable to supply Electric Power as a result of an Uncontrollable Force. SECTION 10. INDEMNIFICATION AND LIMITATION OF LIABILITY 10.1 Indemnification. Each Party (as "Indemnifying Party") shall indemnify, defend, and hold harmless the other Party, and its managers, officers, directors, representatives, agents, employees, contractors, affiliates, and successors and assigns (collectively, "Indemnified Party") against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including professional fees and reasonable attorneys' fees, that are incurred by Indemnified Party (collectively, "Losses"), to the extent arising out of any third -party claims alleging: Page 10 of 17 (a) material breach by, or non -fulfillment of any provision of this Agreement binding on, the Indemnifying Party or Indemnifying Party's representatives, as applicable; (b) any negligent or more culpable act or omission of Indemnifying Party (including any reckless or willful misconduct) in connection with the performance of its obligations under this Agreement; (c) any bodily injury, death of any person, or damage to real or tangible personal property caused by the negligent or more culpable acts or omissions of Indemnifying Party (including any reckless or willful misconduct); or (d) any failure by Indemnifying Party to comply with any applicable federal, state, or local laws, regulations, or codes in the performance of its obligations under this Agreement. 10.2 Notice_ Defense_ and Settlement of Leal Proceeding. (a) If any legal proceeding shall be instituted, or any claim or demand made, against any Indemnified Party with respect to which the Indemnifying Party may be liable hereunder, the Indemnified Party shall give prompt written notice thereof, within thirty (30) days thereof by certified mail, return receipt requested, and promptly deliver a true copy of any summons or other process, pleading or notice to the Indemnifying Party. (b) In any action in which there is no reasonable possibility of joint liability of the Parties to this Agreement, the Indemnifying Party shall have the absolute right, at its sole expense and without the consent of the Indemnified Party, to defend and settle any such legal proceeding, claim or demand. However, the Indemnifying Party shall give notice, if possible, to the Indemnified Party of any proposed settlement. In no event shall the participation of the Indemnified Party in the defense and settlement of any legal proceeding claim or demand, interfere with or alter the Indemnifying Party's absolute right to control the defense and/or settlement of the legal proceeding, claim or demand. The Indemnified Party may, if it sees fit, participate in defense of any such legal proceeding, at its own expense. (c) Where joint liability of both Parties to this Agreement is a reasonable possibility, no Party which has exposure to joint liability shall be limited in their participation in the action. (d) If the Indemnified Party, without the prior consent of the Indemnifying Party (which consent, if requested, shall not be unreasonably withheld), makes any settlement with respect to any such legal proceeding, claim or demand, the Indemnifying Party shall be discharged of any liability hereunder with respect thereto. (e) The Indemnifying Parry shall pay all reasonable costs incurred by the Indemnified Party in any successful enforcement of this indemnity. 10.3 No Consequential or Indirect Damages. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY OR ANY OF ITS Page 11 of 17 REPRESENTATIVES SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR ENHANCED DAMAGES, LOST PROFITS OR REVENUES, OR DIMINUTION IN VALUE, ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH ANY BREACH OF THIS AGREEMENT, REGARDLESS OF (A) WHETHER SUCH DAMAGES WERE FORESEEABLE, (B) WHETHER OR NOT IT WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND (C) THE LEGAL OR EQUITABLE THEORY (STATUTE, CONTRACT, TORT OR OTHERWISE) UPON WHICH THE CLAIM IS BASED; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THE FOREGOING LIMITATIONS ON LIABILITY OR DAMAGES LIMIT THE LIABILITY OF ANY PARTY TO ANY OTHER PARTY FOR THIRD -PARTY CLAIMS FOR WHICH INDEMNIFICATION IS REQUIRED. SECTION 11. INSURANCE Each Party agrees to use its best efforts to obtain and maintain in full force and effect during the term of this Agreement, adequate insurance with responsible insurers as may be required by law. SECTION 12. DEFAULT AND DISPUTE RESOLUTION 12.1 Notice of Default. Upon failure of any Party to perform any obligation hereunder, the Party or Parties to whom such performance is due shall make demand in writing upon the defaulting Party. If such failure, other than a failure to pay Chugach when such payment is due, is not cured within thirty (30) days from the date of such demand it shall constitute a default at the expiration of such period. Chugach's bills to Seward shall constitute written demands for payment for purposes of this Section and Seward shall be considered to be in immediate default of their payment obligations if such bills are not fully paid within 10 days after they are due. 12.2 Performance Pending Resolution of Dispute. Pending resolution of any dispute, each Party shall continue to perform its obligations under this Agreement, including the obligations to deliver and receive Electric Power and the obligation to pay bills submitted by Chugach for such Electric Power. All Parties shall be entitled to seek immediate judicial enforcement of this continued performance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska, in Anchorage. 12.3 Consultation to Resolve Disputes. After notice is delivered and before default occurs under Section 12.1 the Parties shall in good faith endeavor to meet promptly and to resolve any dispute through good faith negotiation. If a Party has met its obligation of good faith under this Section 12.3, and if the dispute has not been resolved before default occurs, than that Party shall be entitled at any time thereafter to seek immediate judicial enforcement of this Agreement in the Superior Court for the State of Alaska, in Anchorage, by bringing any suit, action or proceeding, at law or in equity, including without limitation mandamus, injunction, damages and action for specific performance, as may be necessary or appropriate to enforce any covenant, agreement or obligation of this Agreement. Page 12 of 17 12.4 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.4. SECTION 13. RIGHT OF ACCESS AND REMOVAL Each Party will have access to the premises, facilities, or property of the other Party at all reasonable times for any purpose necessary or appropriate to the performance of this Agreement. Upon termination of this Agreement in accordance with the provisions hereof, each Party will remove any property or equipment which it may have installed on the premises of the other Party for any purposes hereunder. Seward shall provide Chugach with access to existing metering or allow Chugach to install any metering and equipment necessary or convenient to allow Chugach to track Seward's load and generation during periods of interruption of service from Chugach. SECTION 14. MISCELLANEOUS 14.1 Waiver. Any waiver at any time by any Party to this Agreement of its rights with respect to any default of the other Party hereto, or with respect to any other matter arising in connection with this Agreement, shall not be considered a waiver with respect to any prior or subsequent default, right, or matter. 14.2 Severabilitv. If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal, or unenforceable, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effectuate the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible. Page 13 of 17 14.3 Assignment. (a) General. Neither Party may assign any of its rights hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned, or delayed. Any purported assignment in violation of this Section shall be null and void. No assignment shall relieve the assigning Party of any of its obligations hereunder. (b) Assignment for Security. Notwithstanding Section 14.3(a), a Party, without the other Party's consent, may assign, transfer, mortgage, or pledge its interest in this Agreement as security for any obligation secured by an indenture, mortgage, or similar lien on its system assets without limitation on the right of the secured Party to further assign this Agreement; provided, however, that no such assignment shall relieve such Party of any obligations hereunder. 14.4 Successor and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns. 14.5 No Third -Party Beneficiaries. This Agreement is for the sole benefit of the Parties hereto and their respective successors and assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement. 14.6 Notices. Except as provided in Section 3.5(a), all notices, requests, consents, claims, demands, waivers, and other communications hereunder (each, a "Notice") shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or email (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail (in each case, return receipt requested, postage pre -paid). Notices must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a Notice given in accordance with this Section 14.6): If to Chugach: Chugach Electric Association, Inc. 5601 Electron Drive Anchorage, AK 99518 Email: Lee_Thibert@chugachelectric.com Attention: Lee Thibert, Chief Executive Officer with a copy to: Chugach Electric Association, Inc. 5601 Electron Drive Anchorage, AK 99518 Email: Matthew_Clarkson@chugachelectric.com Attention: Matthew Clarkson, EVP, General Counsel Page 14 of 17 If to Seward: City of Seward PO Box 167 Seward, AK 99664 Email: rmontgomery@cityofseward.net Attention: Rob Montgomery, Director, Seward Electric with a copy to: Boyd, Chandler & Falconer, LLP 911 W. 81h Ave 9302 Anchorage, AK 99501 Email: Bchandler@bcfaklaw.com Attention: Brooks Chandler, Seward City Attorney 14.7 Amendment and Modification. This Agreement may only be amended, modified, or supplemented by an agreement in writing signed by each Party hereto and approved by appropriate governing boards and regulatory agencies. 14.8 Entire Agreement. This Agreement, together with any other documents and exhibits incorporated herein by reference, constitutes the sole and entire agreement of the Parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, with respect to such subject matter. 14.9 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. 14.10 Cumulative Remedies. The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise. 14.11 Governing Law. This Agreement and all matters arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Alaska without giving effect to any choice or conflict of law provision or rule (whether of the State of Alaska or any other jurisdiction). 14.12 Relationship of the Parties. Nothing herein shall be construed to create a joint venture or partnership between the Parties hereto or an employer/employee or agency relationship. Neither Party hereto shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement, or undertaking with any third party. 14.13 Regulatory Approval. It is the Parties understanding that this Agreement, as a wholesale power agreement between public utilities governed by AS 42.05.431(b), will not take effect without the prior approval of the Commission, and will at all times after any such approval be subject to the Commission's continuing authority over wholesale power agreements. Page 15 of 17 14.14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement. SECTION 15. DEFINITIONS The following terms, when used in the Agreement and Exhibits hereto, shall have the meanings specified. "Electric Power" means electric energy or electric capacity or both but does not include reserve generation capacity. Where the context of this Agreement requires a distinction, electric energy is expressed in kilowatt hours (kWh) or megawatt hours (MWh), and electric capacity is expressed in kilowatts (kW) or megawatts (MW). "Eligible Non -Utility Generation" means electric generation from one or more of the following sources: (a) Solar photovoltaic and solar thermal energy; (b) Wind energy; (c) Biomass energy, including landfill gas or biogas produced from organic matter, wastewater, anaerobic digesters, or municipal solid waste; (d) Hydroelectric, geothermal, hydrokinetic energy or ocean thermal energy; or (e) Other sources that generally have similar environmental impacts. "Generation and Transmission Resources" or separately "Generation Resources" or "Transmission Resources" means all existing and future facilities (whether or not operable, and whether or not operating) used by Chugach for generation and/or transmission of electric power, including, in addition to physical generation and/or transmission facilities and facilities associated with the provision of fuel for electric power generation, Chugach's rights and obligations to obtain (by purchase, wheeling, or otherwise) electric power generated by other entities or fuel for the generation of electric power by Chugach, to the extent that the costs of such facilities and rights are allowably included in the rates charged to Chugach's retail consumers. "Production Reserve Costs" means those costs allocated to that portion of Chugach's power production capacity that represents available power production capacity (including contract power purchases, but not emergency power purchases) in excess of Chugach's system peak requirements. "Prudent Utility Practice" means at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, Page 16 of 17 or which in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not required to be the optimum practice, method, or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice includes due regard for manufacturer's warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Parties' generation, transmission, and distribution facilities, but also to appropriate structures, landscaping, painting, signs, lighting and other facilities. "Reserves" means the Electric Power needed to avert shortages of capacity and/or energy for the benefit of retail or wholesale consumers that a utility system is obligated to serve and which is available to that system either from facilities or from purchases or other arrangements, which such system is contractually entitled to rely upon for such purposes. "Small Power Project" means an Eligible Non -Utility Generation facility that has a nameplate capacity of greater than 25 M, but not greater than 500 M, is not a net metered generation system, and sells its electric output to Seward "Total System Demand" means the Seward demand (regardless of whether Seward is receiving power from Chugach or its own generation) registered during that 15-minute interval for each month in which the sum of each of the following is greatest in that month: (1) the demands metered at the delivery points described in Section 3.6, and (2) the demand on all Seward generation. Seward shall permit Chugach to install, or cause to be installed, suitable metering and registration equipment on its facilities. "Uncontrollable Force" means any cause beyond the control of a Party hereto and which by the exercise of due diligence that Party is unable to prevent or overcome, including but not limited to an act of God, fire, flood, volcano, epidemic, pandemic, earthquake, explosion, sabotage, an act of the public enemy, civil or military authority, including court orders, injunctions and orders of governmental agencies of competent jurisdiction, insurrection or riot, an act of the elements, failure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers. Strikes, lockouts, and other labor disturbances shall be considered Uncontrollable Forces, and nothing in this Agreement shall require either Party to settle a labor dispute against its best judgment; provided, that during any labor dispute all Parties shall make all reasonable efforts under the circumstances, including, to the extent permitted by law, the use of replacement personnel and/or management personnel and/or other personnel under the provisions of a mutual aid agreement, to ensure, if possible, the continued ability of the Parties to produce, deliver, receive, and distribute the Electric Power that is the subject matter of this Agreement. Page 17 of 17