20070406Application.pdf

LOUIS F. RACINE ,,917,2005)
WILLIAM D. OLSON
W. MARCUS W. NYE
RANDALL C. BUDGE
JOHN A. BAILEY, JR.
JOHN R. GOODELL'
JOHN B. INGELSTROM
DANIEL C. GREEN**
BRENT O. ROCHE
KIRK B. HADLEY
FRED J. LEWIS
MITCHELL W. BROWN
ERIC L. OLSEN
CONRAD J. AIKEN'**
RICHARD A. HEARN, M.
DAVID E. ALEXANDERtt
LANE V. ERICKSON**
PATRICK N. GEORGE**
SCOTT J. SMITH
STEPHEN J. MUHONEN
BRENT L. WHITING
JUSTIN R. ELLIS
JOSHUA D. JOHNSON*
JONATHON S. BYINGTON
DAVE BAGLEY
CAROL TIPPI VOLYN**
THOMAS J. BUDGE
CANDICE M. MCHUGH**'
LAW OFFICES OF
RACINE OLSON NYE BUDGE Be BAILEY
CHARTERED
BOISE OFFICE
101 SOUTH CAPITOL
BOULEVARD, SUITE 208
BOISE, IDAHO 83702
TELEPHONE' [phone]FACSIMILE, [phone]
201 EAST CENTER STREET
POST OFFICE BOX 1391
POCATELLO, IDAHO 83204-1391
TELEPHONE [phone]
FACSIMILE [phone] IDAHO FALLS OFFICE
www.racinelaw.net
477 SHOUP AVENUE
SUITE 203A
IDAHO FALLS, ID 83402
TELEPHONE, [phone]
FACSIMILE, [phone]
SENDER'S E-MAIL ADDRESS: rcbl!j)racinelaw.net 'ALSO MEMBER WY "' IL BARS
**ALSO MEMBER UT BAR
**'ALSO MEMBER CO BAR
tALSO MEMBER D. C. BAR
ttALSO MEMBER MO BAR.ALSO MEMBER IL BAR
HALSO MEMBER WA BAR
April 5, 2007
, ':..-
OVERNIGHT MAILIUPS:
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Jean Jewell, Secretary
Idaho Public Utilities Commission
472 W. Washington Street
Boise, Idaho 83702
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Petition for a Declaratory Order of Bonneville Power Administration
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Dear Mrs. Jewell:
Re:
Enclosed please find for filing the original and seven copies of a Petition we are filing on
behalf of the Bonneville Power Administration for a Declaratory Order Disclaiming Jurisdiction.
Please file the same and place this matter on the Commission s agenda.
Given the nature of this matter as described in the Petition, we would respectfully request that
the Commission consider processing this matter by Modified Procedure. If you have any questions
or ifI can be of further assistance, please don t hesitate to contact me.
RCB:rr
Enclosurescc: Service List
Sincerely,
Randall C. Budge, ISB No. 1949
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
O. Box 1391; 201 E. Center Street
Pocatello, Idaho 83204-1391
Phone: [phone]
Fax: [phone]
E-mail: rcb~racinelaw.net
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A PETITION
FILED BY BONNEVILLE POWER
ADMINISTRATION FOR A
DECLARATORY ORDER
DISCLAIMING JURISDICTION
BPA-
CASE NO.we-07-
PETITION FOR A
DECLARATORY ORDER
OF BONNEVILLE POWER
ADMINISTRATION
COMES NOW Bonneville Power Association ("BP A" or "Petitioner ) and
pursuant to the Idaho Public Utility Commission s (the "Commission ) Rule of
Procedure 101 , Idaho Administrative Code ~ 31.01.01.101 (2006) ("lAC"), hereby
petitions the Commission to issue a Declaratory Order finding that the passive owner
lessor in a proposed lease financing of various electric transmission facilities to be used
exclusively in interstate commerce is not a public utility and therefore is not subject to
the jurisdiction of and regulation by the Commission.
PETITIONERS REPRESENT A TIVES
Petitioner s representatives in this matter are:
EAST: 160050213.
Robb F. Roberts
Bonneville Power Administration
Office of General Counsel
Routing LC- 7
905 Northeast 11th Avenue
O. Box 3621
Portland, Oregon 97232
Telephone: [phone]
Facsimile: [phone]
Email: rfroberts~bpa.gov
Randall C. Budge, ISB No. 1949
Racine, Olson, Nye, Budge & Bailey
O. Box 1391; 201 E. Center Street
Pocatello, Idaho 83204-1391
Phone: [phone]
Facsimile: 208-232-6109
Email: rcb~racinelaw.net
PETITIONER AND PETITIONER'S INTEREST IN THE MATTER
BP A is a federal power marketing administration within the U.S. Department of
Energy that markets wholesale electrical power and operates transmission facilities in the
West and Pacific Northwest. BP A proposes to enter into a lease financing transaction for
the acquisition, construction and/or installation of various, as of yet undetermined
transmission facilities, including system replacements, upgr~des, and additions, to be put
into service over time and primarily affecting existing transmission infrastructure ranging
from 69 kV to 1000 kV (the "Facilities
).
Some ofthe Facilities will be located in Idaho
and all of the Facilities will be used exclusively by BP A to provide interstate
transmission service and will not be available for use for bundled retail service.
The Facilities will be financed by a special purpose entity owner lessor (the
Owner Lessor ) and acquired, constructed and/or installed by BP pursuant to a
construction agency agreement between the Owner Lessor and BP A. The Owner Lessor
is unlikely to enter into the various agreements required to finance the Facilities ifthere is
any uncertainty that it will be subject to the jurisdiction of the Commission with respect
to the Facilities. BP A will be unable to proceed with the proposed lease transaction and
us EAST:160050213.
have the Facilities financed in the manner desired by BP A unless the Owner Lessor
enters into the proposed agreements. BP A therefore has significant interests in this
matter.
DECLARATORY RULING SOUGHT BY BPA
BP A hereby petitions the Commission for a Declaratory Order disclaiming
jurisdiction under Title 61 of the Idaho Code, and, specifically Sections 61-129 and 61-
501 , over the owner lessor BPA's proposed lease financing for the construction
acquisition and/or installation of certain electric transmission facilities to be used
exclusively in interstate commerce, including new transmission facilities to be located in
Idaho , as part of its infrastructure program. The Commission has jurisdiction over this
request under Idaho Code ~ 61-501 and Utah Power Company v. Idaho PUC, 112
Idaho 10, 730 P.2d 930 (1986). Moreover, the Commission has the authority to consider
the Petition for Declaratory Order pursuant to Rule 101 of the Commission s Rules of
Procedure, IDAP A 31.01.01.101.
CONTROLLING LAW
The statute, order, rule or other controlling law relied on by BP A to support this
Petition are:
Idaho Code Ann. ~ 61-129;
Idaho Code Ann. ~ 61-119;
Idaho Code Ann. ~ 61-118;
Humbird Lumber Co. v. Public Utilities Commission of State of
Idaho, et al.39 Idaho 505 , 228 P. 271 (1924);
Stoehr v. Natatorium Co.34 Idaho 217, 200 P. 132 (1921); and
EAST: 160050213.
LLP Power Generation, LLC IPUC Order No. 28793 at p. 3 (Jul.
2001).
BACKGROUND AND RELEVANT FACTS
As stated above, BP A proposes to enter into a lease financing arrangement under
which it would acquire, construct and/or install the Facilities for the purposes of
enhancing West and Northwest transmission grid ("Grid"reliability, ensuring
compliance with mandatory reliability standards, enabling the integration of new
generation into the Grid and managing Grid congestion.
While the Facilities will not be in support of distribution service, it is possible that
certain facilities lower than 69 kV may be financed in cases of voltage step-ups of
generation and station service to generating stations. BP A will install or construct the
Facilities on real property, real property easements or similar rights held by BP A on land
that is owned by a variety of parties, both private and governmental.
The Facilities will be owned by the Owner Lessor, special purpose entity
Northwest Infrastructure Financing Corporation II, a Delaware corporation, which will be
formed expressly for the purpose of arranging for the financing of the Facilities. All of
the capital stock of the Owner Lessor will be owned by JH Holdings, not individually but
acting solely in its capacity as trustee under a trust agreement between R. Management
Corporation, a Massachusetts corporation ("JHM"), as grantor, and JH Holdings
Corporation, a Massachusetts corporation ("JHH"), as trustee. All of the capital stock of
JHM and JHH will be owned by The 1960 Trust, an independent charitable support
organization qualified under Section 501(c)(3) of the Internal Revenue Code and
EAST: 160050213.
operated for the benefit of Harvard University. The Owner Lessor will not engage in any
business other than arranging for the acquisition and financing of the Facilities.
The Owner Lessor will initially finance the construction of the Facilities through
one or more bank loans. The Owner Lessor s sole source of funds to repay the loans will
be payments made by BP A under the lease of the Facilities to BP A. The Owner Lessor
and BP A will execute a master lease that will govern and incorporate from time to time
separate individual lease commitments between BP A and the Owner Lessor for related
Facilities (collectively, the "Lease ). Under the Lease, the Owner Lessor will lease its
undivided interest in each of the Facilities to BP A at the time each such Facility is
acquired, installed and/or constructed.
Pursuant to the Lease, BP A will acquire a leasehold interest in and possession of
the Facilities from the Owner Lessor. The term of the Lease will be seven (7) years from
the date that the master lease and the first lease commitment are executed. BP A will
agree in the Lease to operate and maintain the Facilities in the same manner as it operates
and maintains its other transmission facilities. To this end, the Owner Lessor will have
no operating responsibilities or control rights with respect to the Facilities under the
Lease or any other agreement.
Moreover, the Lease will not impede the ability of BP A to transfer operational
control over the Facilities to a regional transmission organization. The final Lease will
be substantially in the form ofthe draft Lease attached hereto as Exhibit 1.
US EAST:160050213.
GROUNDS FOR DISCLAIMING JURISDICTION
The Commission should issue a declaratory order disclaiming jurisdiction over
the Owner Lessor under title 61 of the Idaho Code because, under Idaho law, the Owner
Lessor is not a "public utility." The definition of "public utility" set out in Section 61-
129 of the Idaho Code includes electrical corporations, which, under Section 61-119 of
the Code include every person owning, operating" controlling, or managing any electric
plant for compensation in the State. An electric plant is any property used to facilitate the
production, gener;tion, transmission, delivery or furnishing of electricity. Idaho Code
Ann. ~ 61-118. Corporations declared to be public utilities are subject to the jurisdiction
control and regulation of the Commission. Idaho Code Ann. ~ 61-129.
Section 61-129 of the Code also establishes a two-part test for determining when
a utility corporation, such as an electrical corporation, is to be considered a "public
utility." First, a public utility must provide utility services directly or indirectly to the
public or some portion thereof. Idaho Code Ann. ~ 61-129. Second, the utility service
must be provided for compensation. Id. In construing the first part of this test, the Idaho
Supreme Court has held that satisfaction of the first prong depends on whether the
company has held itself out as ready, able and willing to serve the "public" with utility
Service. See Humbird Lumber Co. v. Public Utilities Commission of State of Idaho, et
al.39 Idaho 505, 228 P. 271 274 (1924). The Idaho Supreme Court has also determined
that furnishing utility service to one or a limited number of customers does not constitute
the delivery of utility service to the public or some portion thereof. Id.; Stoehr
Natatorium Co.34 Idaho 217, 200 P. 132 (1921).
us EAST:160050213.
The Commission applied these Idaho Supreme Court precedents in LLP Power
Generation, LLC IPUC Order No. 28793 at p. 3 (JuJ. 25, 2001).In that case, the
Commission found that the leasing of locomotive engines to third parties for the purpose
of generating power for sale in the regional wholesale market would not subject the lessor
to the Commission s regulatory jurisdiction. LLP Generation at p. 1. Specifically, the
Commission sided with the Commission Staff, which concluded that LLP's leasing of
locomotive engines did not constitute the provision of utility services to the "public
observing that LLP's sole activity would be the leasing of locomotive equipment to
others; the lessees would site the locomotives to generate power for sale. Id. at p. 2.
As in LLP Generation the Owner Lessor s sole activity will be leasing the
Facilities to BP A. It is BP A that will site and operate the Facilities in order to transmit
power. The Owner Lessor therefore will not dedicate or devote the Facilities to a public
use.On the contrary, under the Lease, BP A will have exclusive authority and
responsibility for the operation, maintenance, repair, replacement and use of the
Facilities. Therefore, because the Owner Lessor will not serve the public as required by
Section 61-129 of the Idaho Code, BPA respectfully requests that the Commission find
the Owner Lessor is not a public utility subject to Commission jurisdiction under Idaho
law.
Moreover, the Washington Utilities and Transportation Commission ("WUTC"
disclaimed jurisdiction over a nearly identical transaction involving BP A in 2004. In that
case, the WUTC issued an Order declaring that the neither the owner lessor nor the
indenture trustee of an electric transmission line to be operated by BP A would be public
EAST: 160050213.
service companies under Washington law and consequently neither would be subject to
WUTC regulation. 1 Given the similarity of the instant facts to those established in the
2004 WUTC case, as well as the similarity of Washington s and Idaho s classification
and regulation of public utilities, the WUTC case provides additional support for a
finding that the Owner Lessor is not "public utility" under Idaho law.
CONCLUSION
WHEREFORE, BP respectfully requests that the Commission issue a
declaratory order disclaiming jurisdiction under title 61 of the Idaho Code over the
passive owner lessor in BP A's proposed lease financing for the construction of certain
electric transmission facilities to be used exclusively in interstate commerce, including
new transmission facilities to be located in Idaho, as part of its infrastructure program.
BP A further respectfully requests the Commission process this Petition under
Modified Procedure by written submission rather than hearing pursuant to IDAP A
31.01.01.201-204.
I In the Matter of the Petition of the Bonneville Power Administration For a Declaratory Order Disclaiming
Jurisdiction, Docket No. UE-040088 Order No. 01
, p.
l (Feb. 20, 2004) (attached hereto as Exhibit B).2 FERC likewise found that the Owner Lessor in this BP A lease fmancing transaction was not public utility
under the Federal Power Act because it would be a solely passive investor in the power projects and would
have no control over the operation of the proposed facilities. u.S. Dept. of Energy, Bonneville Power
Administration, Order Granting Petition for Declaratory Order Disclaiming Jurisdiction, 118 FERC ~
240 (2007) (attached hereto as Exhibit C). The Commission should also disclaim jurisdiction over the
Owner Lessor with respect to the Facilities, as the Owner Lessor will be a solely passive investor in and
owner of, and will have no control over the operation, maintenance, repair, replacement or use of, the
Facilities.
EAST: 160050213.
DATED this 5th day of April, 2007.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
RANDALL C. BUDGE
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 5th day of April, 2007 , I mailed a true and
complete copy of the foregoing document, postage prepaid, to each of the following:
Jean Jewell, Secretary (Overnight Mail)
Idaho Public Utilities Commission
472 W. Washington Street
Boise, Idaho 83702
Randy Lobb
IPUC Staff
O. Box 83720
Boise, Idaho 83720-0074
Robb F. Roberts
Bonneville Power Administration
Office of General Counsel, Routing LC- 7
O. Box 3621
Portland, Oregon 97232
Michael D. Hornsteain
Orrick, Herrington & Sutcliffe LLP
3050 K Street, NW
Washington, DC 20007
EAST: 160050213.
~M L1~RANDALL C. BUDGE
(Service Date February 20, 20041
BEFORE THE WASHINGTON STATE
UTILITIES AND TRANSPORTATION COMMISSION
In the Matter of the Petition of DOCKET NO. UE-040088
DECLARATORY ORDER
BONNEVILLE POWER
ADMINISTRATION
ORDER NO. 01
For a Declaratory Order Disclaiming
Jurisdiction
.... ... .. .. ........ ................
Synopsis: The Commission enters an order declaring that the Owner Lessor and
Indenture Trustee of a specified electrical transmission line to be operated by the
Bonneville Power Administration, on the facts presented, would not be public service
companies under Washington law and consequently would not be subject to regulation as
public service companies.
PROCEDURE
The Bonneville Power Administration on January 21 2004, filed with the
Washington Utilities and Transportation Commission a petition for declaratory
order, seeking a determination that the Owner and the Trustee of certain
electrical transmission facilities would not be subject to Commission regulation
in a proposed financing arrangement, and asking the Commission to disclaim
jurisdiction.
The Commission served notice of the request to persons and entities that would
or might have an interest in such a declaratory order pursuant to RCW
34.05.240(3). The Commission received three responses: one from the
Washington State Department of Community and Economic Development, and
one from A vista Corp., a public service company providing electrical service to
portions of eastern Washington State, and one from PacifiCorp, a public service
company providing electrical service to portions of southern Washington State.
DOCKET NO. UE-040088
ORDER NO. 01
PAGE 2
II.THE FACTS PRESENTED
The Bonneville Power Administration ("Bonneville ) is an agency of the United
States government. It is a federal power marketing administration within the
Department of Energy that markets wholesale and interstate electrical
transmission services. It operates electrical power transmission facilities in the
Pacific Northwest, including facilities within the State of Washington.
The project, Bonneville proposes to construct a new facility, a 64-mile-long, 500
kV transmission line, linking Bonneville s existing Schultz Substation near
Ellensburg, to a planned Wautoma Substation, to be constructed near State Route
24 in Benton County. The facility is designed to relieve transmission congestion
on Bonneville s network transmission grid, including the North-of-Hanford path
in central Washington, where it is expected to add approximately 400 to 600 MW
of transfer capacity, and in the Interstate Highway 5 corridor during congestion
in spring and summer months. Construction of the facility will improve
reliability of the existing grid and will assist in providing firm transmission to
proposed new electrical generation facilities in the 1-5 corridor.
The financing, A special purpose entity (SPE) has been created, called
Northwest Infrastructure Financing Corp., incorporated under the laws of
Delaware. It will have the limited purposes of (a) acquiring, constructing, and
equipping the proposed facility; (b) leasing the facility to Bonneville; (c)
financing the facility through the issuance of debt; and (d) taking actions that
may be reasonably necessary to consummate a construction agency agreement
with Bonneville, the lease, and any related bond indentures.
The 1960 Trust, an independent charitable support organization under the
Internal Revenue Code, operated for the benefit of Harvard University, owns all
of the capital stock of J H Holdings Corporation (JHH) and J H Management
DOCKET NO. UE-O40088
ORDER NO. 01
PAGE 3
Corporation (JHM). JHH holds all of the capital stock of the SPE as trustee under
a trust agreement between it and JHM.
Construction Agency Agreement. Bonneville will enter into a construction
agency agreement, under which it will construct the proposed facility on behalf
of the SPE. Bonneville has already awarded a contract for major construction
work. It plans to have the line completed and energized by Spring 2006.
Lease. Bonneville and the SPE will enter a 30-year lease agreement, with the SPE
(holder of the facility) as lessor and Bonneville as lessee. The SPE will have no
control over and no obligations related to the operation, maintenance, repair or
replacement of the facility. Bonneville will accept those responsibilities under
the lease and will operate and maintain the facility in the same manner as it
operates and maintains facilities that it owns. In the event Bonneville defaults on
its obligations, Bonneville will surrender use and possession of the facility, and
the SPE's remedy is limited to securing a judgment for money damages. On
termination of the lease, Bonneville may purchase the facility for a nominal sum
or may renew the lease for one or more years, or may remove the facility.
The Trust. The SPE will enter into an indenture of trust with a commercial trust
bank authorized to conduct business in Washington State.
The SPE will issue bonds under the indenture. The bonds will be non-recourse
obligations, payable solely from Bonneville s payments to the SPE under the
lease. Bonneville will use the bond proceeds to pay costs of designing,
constructing, and acquiring the facility and to pay the costs of bond issuance.
Bonneville has the option to purchase all or any portion of the facility by making
a purchase option payment in the amount needed to redeem the applicable
portion of the outstanding bonds.
DOCKET NO. UE-040088
ORDER NO. 01
PAGE 4
Under the indenture, the SPE will pledge the trust estate (consisting primarily of
the SPE's interest in the lease, including its right to receive payments under the
lease) to the trustee. Bonneville retains the authority to cure any defaults of the
SPE under the indenture.
III.DISCUSSION
Proposed issues for resolution. The petition for a declaratory order identifies
two issues for resolution.
The first issue is whether the Commission should enter a declaratory order
disclaiming jurisdiction over the SPE and the Trustee under title 80 RCW where
under Washington law, neither the SPE nor the Trustee is a 'public service
company.
The second issue is whether the Commission should enter a declaratory order
based upon the exclusive jurisdiction of the Federal Energy Regulatory
Commission (FERC) over the proposed facility.
The Commission finds that resolving the first issue will permit entry of a
declaratory order, and that it therefore need not address the second.
Propriety of an order, The petitioner has demonstrated that the requirements of
RCW 34.05.240(1) are met.2 The petition demonstrates that there is uncertainty
1 We note that the federal Court of Appeals has recently decided in Detroit Edison v. Federal Energy
Regulatory Commission 333 F.3d 48 (D.C Cir. 2003) that states retain exclusive jurisdiction over
the distribution portion of unbundled delivery service, and believe that it is inappropriate to
resolve the question posed to us on the basis of preemptive federal jurisdiction.
2 The statute reads in relevant part as follows:
(1) Any person may petition an agency for a declaratory order with respect to the
applicability to specified circumstances of a rule, order, or statute enforceable by
the agency. The petition shall set forth facts and reasons on which the petitioner
relies to show: (a) That uncertainty necessitating resolution exists; (b) That there
DOCKET NO. UE-040088
ORDER NO. 01
PAGE 5
necessitating resolution, as the trustee and the owner could be seen to fall within
the definition of electrical company (any person and any person s trustee owning
electric plant for hire in Washington, RCW 80.04.010; electric plant including all
fixtures used for the transmission of electricity for hire Id.
).
The petition
demonstrates an actual controversy, showing that resolution of the issue is
needed before participants in the financing mechanism are likely to enter the
various agreements. The petition demonstrates that the uncertainty significantly
and adversely affects the petitioner, as it could be unable to complete the
financing for the project without an order; and the information of record shows
no adverse effect on others or the general public that might arise to outweigh the
adverse effect of uncertainty on the petitioner.
Finally, the Commission is authorized by RCW 80.04.015 to make the
determinations of fact, and to enter the appropriate orders, necessary to answer
the question of whether the SPE or the Indenture Trustee is conducting business
subject to regulation under Title 80 RCW.
Regulatory Jurisdiction over the Trustee and the SPE, Bonneville s petition
asks the Commission to disclaim jurisdiction over the SPE and the Indenture
Trustee under Title 80 RCW because neither entity is a "public service company
within the meaning of the law. It cites the Washington State Supreme Court
decisions in West Valley Land Co. v. Nob Hill Water Association, 107 Wn.2d 359, 729
2d 42 (1986), and Inland Empire Rural Electric, Inc., v. Department of Public Service
199 Wash. 527, 92 2d 258 (1939).
is actual controversy arising from the uncertainty such that a declaratory order
will not be merely an advisory opinion; (c) That the uncertainty adversely affects
the petitioner; (d) That the adverse effect of uncertainty on the petitioner
outweighs any adverse effects on others or on the general public that may likely
arise from the order requested;
.....
3 Two of the three entities filing comments, Avista and PacifiCorp, called attention to concerns
and possible adverse consequences of reliance on Bonneville s ground of federal preemption. No
comments identified any potential adverse consequences from reliance on the ground relating to
the statutes defining the entities that are subject to Commission regulation.
DOCKET NO. UE-040088
ORDER NO. 01
PAGE 6
In the Inland Empire case, the court determined that a corporation formed to
generate, manufacture, purchase, acquire, and distribute electricity over
transmission lines to its members only is not a public service company. The
Court said
A corporation becomes a public service corporation, subject to
regulation by the department of public service, only when, and to
the extent that, its business is dedicated or devoted to a public use.
The test to be applied is whether or not the corporation holds itself
out, expressly or impliedly, to supply its service or product for use
either by the public as a class or by that portion of it that can be
served by the utility, or whether, on the contrary, it merely offers to
serve only particular individuals of its own selection.
199 Wash 527 at 537. The more recent West Valley decision, 107 Wa.2d. 359, at
365, quotes this statement from Inland Empire with approval. In West Valley, the
court found that a corporation providing water service to over 3,700 shareholder-
members did not come within the Commission s regulatory jurisdiction because
it served only members and did not hold itself out as serving or ready to serve
the general public.
The undisputed facts presented to us are that neither the Trustee nor the SPE
proposes to dedicate or devote the facility to public use. Instead, Bonneville will
have exclusive authority and responsibility for operation and use of the facility.
Moreover, neither the SPE nor the Indenture Trustee will supply the facility for
transmission services to the public as a class, or for use by that portion of the
public that can be served. Instead, Bonneville will have sole, exclusive
possession of the project under the lease.
DOCKET NO. UE-040088
ORDER NO. 01
PAGE 7
Conclusion. The Commission concludes and declares that because neither the
Trustee nor the SPE will dedicate electric plant to a public use, neither entity, on
the facts presented, is subject to regulation as a public service company under the
provisions of Title 80 RCW.
IV.FINDINGS OF FACT
(1)The Washington Utilities and Transportation Commission is an agency of
the State of Washington vested with the authority to regulate electric
companies, in the public interest.
(2)The Bonneville Power Administration is a federal power marketing
administration within the Department of Energy that markets wholesale
and interstate electrical transmission services. It operates electrical power
transmission facilities in the Pacific Northwest, including facilities within
the State of Washington.
(3)Bonneville plans to meet its need for additional electrical transmission
capacity by constructing a 64-mile-long, 500 kV transmission line, linking
Bonneville s existing Schultz Substation near Ellensburg, and a planned
Wautoma Substation, to be constructed near State Route 24 in Benton
County.
(4)To finance the proposed transmission facility, a special purpose entity
(SPE) has been created that will have the limited purposes of (a) acquiring,
constructing, and equipping the proposed facility; (b) leasing the facility
to Bonneville; (c) financing the facility through the issuance of debt; and
(d) taking actions that may be reasonably necessary to consummate a
construction agency agreement with Bonneville, the lease, and any related
bond indentures.
DOCKET NO. UE-O40088
ORDER NO. 01
PAGE 8
(5)The 1960 Trust, an independent charitable support organization under the
Internal Revenue Code, operated for the benefit of Harvard University,
owns all of the capital stock of J H Holdings Corporation (JHH) and J H
Management Corporation (JHM). JHH holds all of the capital stock of the
SPE as trustee under a trust agreement between it and JHM. Bonneville
and the SPE will enter a 30-year lease agreement, with the SPE as lessor of
the transmission facility and Bonneville as lessee.
(6)The SPE and the Indenture Trustee will have no control over and no
obligations related to the operation, maintenance, repair or replacement of
the facility. Bonneville will accept those responsibilities under the lease
and will operate and maintain the facility in the same manner as it
operates and maintains facilities that it owns. The SPE and the Trustee
will provide the facility for use only by Bonneville and will not provide
service to the public.
(7)Uncertainty and an actual controversy exist over whether the SPE and the
Trustee will be subject to the Commission s regulatory jurisdiction on the
facts presented in the petition for declaratory order. The uncertainty has
an adverse effect on Bonneville by presenting a potential barrier to
completion of the facility. The record before the Commission
demonstrates no adverse effect on others or the general public from entry
of a declaratory order resolving the uncertainty and controversy.
CONCLUSIONS OF LAW
(1)The Washington Utilities and Transportation Commission has the
authority to enter a declaratory order that determines, on specified facts,
whether an owner or trustee of electrical plant is a public service company
and subject to the regulatory jurisdiction of the Commission. RCW
34.05.240; RCW 80.04.015
DOCKET NO. UE-O40088
ORDER NO. 01
PAGE 9
(2)The proposed transmission facility constitutes electric plant, fixtures to be
used for the transmission of electrical energy for hire. The Special
Purpose Entity and the Indenture Trustee fall within the definition of an
electrical company, which includes any person and any person s trustee
owning any electrical plant for hire within Washington State. RCW
80.04.010.
(3)The Special Purpose Entity and Indenture Trustee will not, on the facts
presented, offer electrical service to the public. The SPE and the Trustee
in those circumstances, are not public service companies. RCW 80.04.010.
West Valley Land Co. v. Nob Hill Water Association, 107 Wn.2d 359, 729
42 (1986), and Inland Empire Rural Electric, Inc., v. Department of Public
Service 199 Wash. 527, 92 2d 258 (1939).
(4)The Commission should enter an order declaring that the actions of the
Special Purpose Entity and the Trustee, under the facts presented in the
petition for declaratory order, do not fall within the regulatory jurisdiction
of the Commission.
VI.ORDER
The Commission declares and orders as follows:
The actions of the Special Purpose Entity and the Trustee related to the financing,
construction, and operation of the proposed transmission line linking
Bonneville s existing Schultz Substation near Ellensburg, and the planned
Wautoma Substation do not fall within the regulatory jurisdiction of the
Commission on the facts presented to the Commission.
DOCKET NO. UE-040088
ORDER NO. 01
PAGE 10
DATED at Olympia, Washington, and effective this 20th day of February, 2004.
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
MARILYN SHOW ALTER Chairwoman
RICHARD HEMSTAD, Commissioner
PATRICKJ. OSHIE, Commissioner
NOTICE TO PARTIES: This is a final order of the Commission, In addition
to judicial review, administrative relief may be available through a petition for
reconsideration, filed within 10 days of the service of this order pursuant to
RCW 34,05,470 and WAC 480-07-850, or a petition for rehearing pursuant to
RCW 80,04.200 or RCW 81,04,200 and WAC 480-07-870,
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UNITED STATES OF AMERICA
FEDERAL ENERGY REGULA TORY COMMISSION
Before Commissioners: Joseph T. Kelliher, Chairman;
Suedeen G. Kelly, Marc Spitzer
Philip D. Moeller, and Jon Wellinghoff.
S. Department of Energy
Bonneville Power Administration
Docket No. EL07 -36-000
ORDER GRANTING PETITION FOR DECLARATORY ORDER
DISCLAIMING JURISDICTION
(Issued March 23,2007)
1. On February 14 2007 , Bonneville Power Administration (BPA) filed a petition for
a declaratory order disclaiming Commission jurisdiction pursuant to section 201 of the
Federal Power Act (FP A), 16 u.S.c. ~ 824 (2000), over the owner lessor (Owner Lessor)
in a proposed sale and leaseback transaction. BP A states that the Owner Lessor: (1) will
not operate or control the operation of the facility at issue, and (2) will not be otherwise
engaged in the business of producing, selling, or transmitting electric energy.
2. In this order, we find that the Owner Lessor, as contemplated in the proposed
sale/leaseback arrangement, will be a passive investor that will not exercise control or
decision-making authority over the leased facilities at issue, and will not otherwise be
engaged in the business of selling or transmitting electric energy. Accordingly, the
Owner Lessor, to the extent that it operates in a manner consistent with the
representations in BP A's application, will not be a public utility within the meaning of
section 201 (e) of the FP A by virtue of the proposed sale/leaseback transaction.
Back2round
3. BP A proposes to construct certain electric transmission facilities, as yet
undetermined, primarily ranging from 69 kV to 1000 kV, to be located in the states of
Washington, Oregon, Idaho, California, Wyoming, Nevada, and Montana (the Facilities).
According to BP A, the Facilities will be owned by Northwest Infrastructure Financing
Corporation (Owner Lessor), a special purpose entity formed expressly for the purpose of
arranging for the acquisition and financing of the transaction. BP A states that all of the
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stock of the Owner Lessor will be owned by J H Holdings acting solely in its capacity as
trustee under a trust agreement between J.R. Management Corporation and J H Holdings
Corporation.
4. BP A states that the Owner Lessor will finance the acquisition and construction of
the Facilities through one or more bank loans (the Loans), and will use lease payments
made by BP A to the Owner Lessor under a master lease agreement to repay the Loans.
BP A asserts that at or before the time the first advance under the Loans is requested, the
Owner Lessor and BP A will execute a seven-year master lease agreement under which
the Owner Lessor will lease its undivided interest in each Facility to BP A as each Facility
is acquired, installed and/or constructed, and pursuant to which BP A will acquire
possession of each Facility. BPA further states that it will agree in the master lease
agreement that it will operate and maintain the Facilities in the same manner as it
operates and maintains its other transmission facilities.
5. BP A states that the Owner Lessor will have no operating responsibilities or control
rights with respect to the Facilities, nor is the Owner Lessor or its affiliates engaged in
the business of producing, selling, or transmitting electric energy. BP A asserts that
accordingly, the Owner Lessor should not be considered a "public utility," as defined
under section 201 (e) of the FP A.
6. The master lease agreement also has provisions dealing with defaults and
expiration of the lease. According to BP A, under certain circumstances, the Owner
Lessor may take possession of the Facilities upon the occurrence of certain events of
default by BP A,z BP A asserts that, previously, the Commission had not considered such
default provisions to be a present assignment of rights for purposes of section 201
jurisdiction.
7. At the end of each Facility s lease term, BPA may either: (1) purchase the
Facility, (2) renew the Facility lease for a term of one or more years for a nominal annual
rental payment, or (3) remove the Facility from the Facility site at its own expense.3 BPA
! All of the capital stock of these two entities is owned by The 1960 Trust, an
independent charitable support organization which is operated for the benefit of Harvard
University.
2 The specific events of default and the rights the passive participants may exercise
if default occurs are described in Article 6 of the master lease agreement.
3 The specific options at the end of the Facility lease are described in Article 7 of
the master lease agreement.
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,.,
states that, upon expiration of the Facility lease term, the Owner Lessor would have its
interests in the Facility terminated in the event BP A purchases or removes the Facility, or
retain its passive interest in the event BP A renews the Facility lease.
Notice Of Filing
8. Notice of BPA's filing was published in the Federal Register 72 Fed. Reg. 10,193
(2007), with protests and interventions due on or before March 5 2007. On March 9,
2007, NorthWestern Corporation (NorthWestern) filed a motion to intervene out-of-time
and a request for a technical conference. NorthWestern states that it does not oppose
BPA's petition, but it would like to understand more fully: (1) how the proposed
facilities impact the regional transmission grid, BPA's rates, and NorthWestern
customers; and (2) the identity of the Owner Lessor and any other transmission facilities
it may own.
Discussion
9. Pursuant to Rule 214(d) of the Commission s Rules of Practice and Procedure
18 c.F.R. ~ 385.214(d) (2006), the Commission will grant NorthWestern s late-filed
motion to intervene given its interest in the proceeding, the early stage of the proceeding,
and the absence of undue prejudice or delay.
10. BPA seeks a disclaimer of jurisdiction over the Owner Lessor of the Facilities
a determination that the Owner Lessor will not be regarded as a public utility as defined
in section 201 of the FP A.
11.Section 201 (b)(1)4 of the FP A states in pertinent part:
The provisions of this Part shall apply to the transmission of electric energy in
interstate commerce and to the sale of electric energy at wholesale in interstate
commerce. . .. The Commission shall have jurisdiction over all facilities used for
such transmission or sale of electric energy. . . .
Section 201(e)5 states that "(t)he term 'public utility . . . means any person who owns or
operates facilities subject to the jurisdiction of the Commission. . . . "
4 16 U.c. ~ 824(b)(1) (2000).
5 16 U.c. ~ 824(e) (2000).
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12. The application of section 201 of the FP A to entities with a passive interest in
jurisdictional facilities has been addressed by the Commission on numerous occasions.
The Commission employs a two-step analysis for determining whether a financial interest
in jurisdictional facilities constitutes sufficient ownership that holding such interests
would result in a finding of "public utility" status under the FP A. Under this precedent
the Commission first determines whether the passive participant will operate the
facilities. The Commission then determines whether the passive participant is otherwise
in the business of selling or transmitting electric energy. The Commission has concluded
that it would be inconsistent with the FP A to label the passive participants in certain
financial arrangements as public utilities, and subject them to the Commission
jurisdiction, where these participants hold only equitable or legal title to the facilities, and
are removed from the operation of the facilities and the sale or transmission of electric
energy.
13. In the instant case, BP A states that the Owner Lessor: (1) will have no operating
responsibilities or control rights with respect to the facilities at issue and (2) will not be
an entity otherwise engaged in the business of producing, selling, or transmitting electric
energy. In light of the facts presented in the petition and consistent with Commission
precedent, we find that the Owner Lessor, as contemplated in the proposed lease
financing arrangement, will be a passive investor that does not exercise control or
decision-making authority over the leased facilities , and is not otherwise in the business
of selling or transmitting electric energy. Accordingly, we will disclaim jurisdiction over
the Owner Lessor, as requested by BPA.
14. As to the default provision, BPA argues that this provision does not represent a
present assignment of rights and, therefore, should not subject the Owner Lessor to
jurisdiction under section 201 of the FP A. We agree that the lease provisions , as
See, e., Pacific Power Light Co., 3 FERC en 61 119 (1978); El Paso Electric
Co.36 FERC en 61 055 (1986); City of Vida Ii a, Louisiana 52 FERC en 61 199 (1990);
Oglethorpe Power Corp.77 FERC en 61 334 (1996); u.S. Dep t of Energy-Bonneville
Power Admin.106 FERC en 61 076 (2004)
7 If the facts change so that the passive participant operates the facilities in order to
make sales of electric energy at wholesale or to engage in transmission of electric energy
in interstate commerce, it will become a public utility and will be required to make
appropriate filings pursuant to section 205 of the FP A. 16 U.c. ~ 824d (2000). See
, Unicom Investments, Inc.91 FERC en 61 109 at 61 387, n.9 (2000).
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presented in the petition, are not a present assignment of rights to the Owner Lessor that
would subject it to jurisdiction under section 201 of the FP A. 8
15. With respect to NorthWestern s request for a technical conference, we do not find
this to be an appropriate proceeding in which to schedule a technical conference to
respond to NorthWestern s questions and thus , we deny the request.
The Commission orders:
BP A's request that the Commission disclaim jurisdiction over the Owner Lessor in
this proceeding, based on the facts presented by BP A in its petition, is hereby granted.
By the Commission.
(SEAL)
Philis J. Posey,
Acting Secretary.
See, e., Wisconsin Energy Corp.105 FERC I)I 61 029 at P 14 (2003); PPL
Large Scale Distributed Generation II, LLC, 96 FERC I)I 61 239 at 61 956 (2001);
Dynegy Danskammer, LLC, 94 FERC I)I 61 136 at 62 189 (2001).
OHS DRAFT 3/7/07
Contract No.
MASTER LEASE AGREEMENT
by and between
NORTHWEST INFRASTRUCTURE FINANCING CORPORATION II
as Lessor
AND
UNITED STATES OF AMERICA DEPARTMENT OF ENERGY
acting by and through the ADMINISTRATOR of the
BONNEVILLE POWER ADMINISTRATION
as Lessee
Dated as of (J 1 2007
THIS LEASE HAS BEEN ASSIGNED AS SECURITY FOR INDEBTEDNESS OF THE
LESSOR. SEE SECTION 8.2(b), (This Lease has been manually executed in counterparts
numbered consecutively from 1 through -' of which this is No, -' To the extent, if any,
that this Lease constitutes chattel paper (as such term is defined in the Uniform
Commercial Code of any applicable jurisdiction), no security interest in this Lease may be
created or perfected through the transfer or possession of any counterpart other than the
original executed counterpart identified as counterpart No, 1.)
OHS East:160038353.
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MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, made and entered into as of
2007 (the "Lease" or "Lease Agreement" or "this Agreement"), by and between
the Northwest Infrastructure Financing Corporation II (the "Lessor ), a Delaware corporation
and the United States of America Department of Energy acting by and through the Administrator
of the Bonneville Power Administration (the "Lessee ) (capitalized tenns used but not defined in
the recitals to this Lease Agreement shall have the respective meanings assigned such terms in
Section 1.1 hereof):
WITNESSETH
WHEREAS the Lessor is authorized to own, construct and lease transmission and
distribution facilities; and
WHEREAS prior to the execution and delivery of a Schedule hereto, the Lessee
shall have determined that the Project (as deEmed herein) described in such Schedule is needed to
maintain reliable and adequate electrical service to the Lessee s customers; and
WHEREAS the Lessee desires to lease each Project from the Lessor to provide
service to the Lessee s customers; and
WHEREAS the Lessee is authorized pursuant to law to construct, operate, lease
and lease-purchase transmission facilities, to provide transmission and other services and to enter
into agreements to carry out such authority:
NOW, THEREFORE, in consideration of the premises and the respective
representations, covenants and agreements hereinafter contained, the parties hereto do mutually
promise, covenant and agree as follows:
ARTICLE I
DEFINITIONS AND REPRESENTATIONS
Section 1.Definitions. Tenns not otherwise defined herein shall have the same
meanings as used in Appendix B attached hereto.
Section 1.Construction. In this Agreement, unless the context otherwise requires:
(a) The terms "hereby
, "
hereof'
, "
hereto
, "
herein
, "
hereunder" and any similar
terms, as used in this Agreement, refer to this Agreement (including all Schedules hereto), and
the term "hereafter" mean after, and the term "heretofore" means before, the date of the
execution and delivery of this Agreement.
(b) Words of the masculine gender mean and include correlative words of the
feminine and neuter genders and words importing the singular number shall mean and include
the plural number and vice versa.
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(c) Words importing persons include finns, associations, partnerships (including
limited partnerships), trusts, corporations and other legal entities, including public bodies, as well
as natural persons.
(d) Any headings preceding the texts of the several Articles and Sections 0 f this
Lease Agreement, and any table of contents appended to copies hereof, shall be solely for
convenience of reference and shall not constitute a part of this Lease Agreement, nor shall they
affect its meaning, construction or effect.
(e) All accounting tenns not otherwise defined herein shall have the meanings in
accordance with generally accepted accounting principles.
(f) Reference herein to an Article number (e., Article 4) or a Section
number (e., Section 6.2) shall be construed to be a reference to the designated Article number
or Section number hereof unless the context or use clearly indicates another or different meaning
or intent.
Section 1.3 Representations and Warranties by Lessor.The Lessor makes the
following representations and warranties as of the date of execution and delivery of this
Agreement and of each Schedule hereto:
(a) The Lessor is duly organized and existing under the laws of the State of
Delaware, and it is authorized and empowered to enter into the transactions contemplated by this
Agreement and to carry out its obligations hereunder.
(b) This Agreement constitutes the legal, valid and binding obligation of the
Lessor enforceable against the Lessor in accordance with its tenns, except to the extent that the
enforceability of this agreement may be limited by bankruptcy, moratorium or insolvency or
other laws affecting creditors' rights generally and subject to general rules of equity (regardless
of whether such enforceability is considered in an action at law or a proceeding in equity).
(c) There is no action, suit or proceeding before or pending or, to the best
knowledge of the Lessor, threatened against the Lessor, by or before any court, public board
public body, administrative agency or arbitration board wherein an unfavorable decision, ruling
or finding would adversely affect the transactions contemplated hereby, or which, in any way,
would adversely affect the validity of this Lease Agreement, or any agreement or instrument to
which the Lessor is a party and that is used or contemplated for use in consummation of the
transactions contemplated hereby.
(d) The execution, delivery and perfonnance of this Agreement and the
consummation of the transactions herein contemplated have been duly authorized by all requisite
action on the part of the Lessor and will not violate or conflict with any provision of law or any
order of any court or agency of government or any indenture, agreement or other instrument to
which the Lessor is a party or by which it or any of its property is subject to or bound, or be in
conflict with or result in a breach of or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or other instrument or result in the imposition of any Lien
of any nature whatsoever other than Pennitted Encumbrances.
OHS East:160038353.
41183-
(e) All consents, approvals or authorizations, if any, of any governmental
authority required on the part of the Lessor in connection with the execution and delivery of this
Agreement have been duly obtained.
Section 1.4 Representations and Warranties by Lessee The Lessee makes the
following representations and warranties as of the date of execution and delivery of this
Agreement and of each Schedule hereto:
(a) This Agreement constitutes the legal, valid and binding obligation of the
Lessee enforceable against the Lessee in accordance with its terms, except to the extent that the
enforceability of this Agreement is qualified by (a) limitations imposed by bankruptcy laws of
the United States or insolvency, reorganization, arrangement, moratorium or other laws relating
to or affecting the enforcement of creditors ' rights generally (under existing law the Lessee may
not be a debtor in a case commenced under the United States Bankruptcy Code), (b) general
principles of equity, regardless of whether such enforceability is considered in a proceeding in
equity or at law, (c) the exercise of judicial discretion in appropriate cases and (d) the limitations
on legal remedies against the United States under federal law.
(b) There is no action, suit or proceeding pending or to the knowledge of the
Lessee threatened against the Lessee by or before any court, public board, public body,
administrative agency or arbitration board that would materially adversely affect the ability of
the Lessee to perform its obligations under this Agreement and all authorizations, consents and
approvals of governmental bodies or agencies required to be obtained by the Lessee as of the
date hereof in connection with the execution and delivery of this Agreement or in connection
with the performance of the obligations of the Lessee hereunder have been obtained.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated have been duly authorized by all requisite
action on the part of the Lessee and will not vio late or conflict with any provision of law or any
order of any court or agency of government or any indenture, agreement or other instrument to
which the Lessee is a party or by which it or any of its property is subject to or bound, or be in
conflict with or result in a breach of or constitute (with due notice and/or lapse oftime) a default
under any such indenture, agreement or other instrument or result in the imposition of any Lien
of any nature whatsoever other than Permitted Encumbrances.
(d) All consents, approvals or authorizations, if any, of any governmental
authority required on the part of the Lessee in connection with the execution and delivery of this
Agreement have been duly obtained.
(e) No Event of Default, and no event that with the giving of notice or the passage
oftime, or both, would constitute an Event of Default, has occurred and is continuing.
ARTICLE II
LEASE OF PROJECT AND RENTAL PROVISIONS
Section 2.Lease of each Project.(a) The Lessor shall have all legal rights of title
and ownership of each Project. As of the effective date set forth in the applicable Schedule, the
OHS East160038353.
41183-
Lessor leases to the Lessee and the Lessee hereby leases from the Lessor, each Project, for and
during the term herein provided and upon and subject to the terms and conditions herein set
forth. The Lessor hereby delivers to the Lessee and the Lessee hereby accepts sole and exclusive
possession of each Project as of the effective date set forth in the applicable Schedule. A good
and valid 1easeho Id interest to all materials, equipment, machinery and other property intended to
be incorporated or installed as part of each Project shall vest in the Lessee immediately upon
delivery to or installation or payment by the Lessor for such property, whichever shall occur
fITst.
(b) The Lessee agrees that the right to use easements granted by the Lessee to the
Lessor pursuant to the Construction Agency Agreement shall not expire until the termination of
this Agreement.
(c) The Lessor covenants and agrees not to sell, convey, transfer, lease, mortgage
or encumber any Project or any part thereof except as specifically permitted under this
Agreement.
Section 2.2 Duration of Term. The term of this Agreement shall commence on
, 2007 and shall, subject to extension pursuant to Section 7.1 ( c), expire on (
2014) or such earlier date as all Projects have been purchased by the Lessee in accordance with
Section 7.1(a) or 1(b).
Section 2.Rental Provisions. Pledge of A~eement and Rent.(a) The Lessee
covenants to make rental payments in the amounts and at the times set forth on the Schedules
attached hereto. The Lessor agrees that such rental payments shall be paid by the Lessee directly
to the Custodian for deposit in the Loan Fund.
(b) The Lessee shall pay, as additional rent hereunder, all Impositions, as defmed
in and in accordance with the provisions of Section 3.6 hereof. If the Lessee fails to pay any
Imposition except as permitted by Section 3., the Lessor may make such payment and the
Lessee shall reimburse the Lessor therefor in accordance with paragraph (c).
(c) In the event the Lessee should fail to make or cause to be made any of the
payments required under the foregoing provisions of this Section, the item or installment not so
paid shall continue as an obligation of the Lessee until the amount not so paid shall have been
fully paid. Upon the occurrence and continuance of any Event of Default hereunder, each rental
payment shall be increased by the percentage specified in the applicable Schedule.
(d) The Lessee shall have the option to prepay its rental obligation and to exercise
its option to purchase all or any portion of any Project designated by the Lessee, in whole or in
part, at the times and in the manner provided in Article 7 hereof.
(e) It is agreed by the parties hereto that any amounts remaining in the Loan Fund
or the Reserve Fund upon expiration or earlier termination ofthe Lease Tenn, as provided in this
Agreement, shall belong to and be paid to the Lessee by the Lessor (or the Lessor shall cause the
Custodian to pay the same to the Lessee) as overpayment of rent. Furthermore, it is agreed by
the Lessor that any amounts that the Lessor elects to transfer to and/or deposit into the Reserve
OHS East 160038353.
41183-
Fund shall be credited by the Lessor against the next payments of the Lessee due under Section
3(a) hereof.
Section 2.4 Obligation of Lessee. The obligation of the Lessee to pay the rent and all
other payments provided for in this Agreement and to maintain each Project in accordance with
Section 3.3 of this Agreement shall be absolute and unconditional, irrespective of any defense or
any rights of set-off, recoupment or counterclaim or deduction and without any rights
suspension, deferment, diminution or reduction it might otherwise have against the Lessor, and
the obligation of the Lessee shall arise whether or not such Project has been completed as
provided in this Agreement or is operating or operable or its use is curtailed, suspended or
terminated. The Lessee s obligations hereunder shall be payable solely from the Bonneville
Fund and such obligations are not, nor shall they be construed to be, general obligations of the
United States, nor are such obligations intended to be or are they secured by the full faith and
credit of the United States.
ARTICLE III
CONSTRUCTION, OPERATION, MAINTENANCE, IMPOSITIONS, LEGAL
REQUIREMENTS
Section 3.Construction and Completion of the Projects. The Lessee acknowledges
that the Lessor is undertaking to construct each Project pursuant to the Construction Agency
Agreement and that the Lessee will be leasing each Project as it is being constructed. The Lessor
agrees that it will suspend, delay or terminate construction of any Project at the direction of the
Lessee and will not suspend, delay or terminate construction of any Project other than at the
direction of the Lessee. The Lessee may, at its option, but shall have no obligation to, construct
or complete any Project as Lessee under this Lease Agreement.
Section 3.Operation of each Project.(a) The Lessor shall have no control over, and
no obligation with respect to, any Project, including the operation, maintenance, repair
replacement or use of such Project. The purpose of the Lessor is to acquire, construct and equip
each Project, lease each Project to the Lessee pursuant to this Lease Agreement, finance each
Project through advances made under the Credit Agreement and take related actions. The Lessor
shall not amend its purposes as set forth in its articles of incorporation and by-laws on the date of
execution and delivery of this Agreement or engage in any activities or incur any obligations
unrelated to such purposes.
(b) The Lessee will pay all costs of operating each Project and will make all
decisions regarding the operation of each Project. The Lessee may, in its discretion, transfer
operational control to a regional transmission organization or other entity; provided that the
Lessee shall remain liable hereunder. The Lessee may suspend or terminate operation of any
Project in its discretion, provided that this Agreement shall remain valid, binding and
enforceable against the Lessee and there shall be no abatement, postponement or reduction in the
rent or other amounts payable by the Lessee under this Agreement.
Section 3_Maintenance. Alterations and Improvements.(a) During the term of this
Agreement, the Lessee will pay all costs of maintaining each Project and will maintain each
OHS East: 160038353.10
41183-
Project in the same manner in which the Lessee maintains similar facilities that it owns. The
Lessee may install any replacements, renewals and repairs to any Project that it deems necessary
or desirable (whether ordinary or extraordinary, structural or nonstructura1, foreseen or
unforeseen). The Lessor shall be under no obligation to replace, service, test, adjust, erect
maintain or effect replacements, renewals or repairs of any Project, to effect the replacement of
any inadequate, obsolete, worn-out or unsuitable parts of any Project, or to furnish any services
for any Project and the Lessee hereby agrees to assume full responsibility therefor.
(b) The Lessee may make such alterations of or additions to each Project or any
part thereof from time to time as it in its discretion may determine to be desirable for its uses and
purposes.
(c) The Lessee may install or permit to be installed, machinery, equipment and
other personal property on each Project and any such property shall not become part of such
Project unless the description of such Project is amended pursuant to Section 3.
(d) Except as otherwise provided in Section 5.3 hereof, unless the Lessor shall
consent thereto in writing, the Lessee shall not create, permit or suffer to exist any Lien against
any Project or any part thereof, or the interest of the Lessee in any Project or this Agreement
except for Permitted Encumbrances.
Section 3.4 Removal of Property of each Project.(a) The Lessee shall have the
privilege from time to time of removing from each Project any fixture or any item of personal
property provided that this Agreement shall remain valid, binding and enforceable following
such removal. The Lessee shall deposit in the Loan Fund (as a prepayment of the rent payment
then coming due) any amounts received by it from the sale of such removed property that are not
used by it to purchase replacement property that is installed as part of such Project.
(b) The removal from any Project of any property shall not entitle the Lessee to
any abatement or reduction in the rentals and other amounts payable by the Lessee under this
Agreement.
Section 3.Amendment of the Projects. The Lessor agrees that, at the request of the
Lessee, it will amend the definition of a Project as described in any Schedule hereto to (i) change
the location of such Project or (ii) to remove any part of the Project or (iii) to replace all or any
part of such Project with a substantially similar Project or part; provided that this Agreement
shall remain valid, binding and enforceable following any such amendment.
Section 3.Taxes. Assessments and Governmental Charges. The Lessee shall pay
when the same shall become due all taxes and assessments , general and specific, if any, levied
and assessed upon or against each Project, this Agreement, any estate or interest of the Lessor or
the Lessee in any Project or transfer of such estate or interest, or the rentals hereunder during the
term of this Agreement, and all assessments and other governmental charges and impositions
whatsoever, foreseen or unforeseen, ordinary or extraordinary, under any present or future law
and charges for public or private utilities or other charges incurred in the occupancy, use
operation, maintenance or upkeep of each Project, all of which are herein called "Impositions
The Lessor shall promptly forward to the Lessee any notice, bill or other statement received by
OBS East:160038353.
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the Lessor concerning any Imposition. The Lessee may pay any Imposition in installments if so
payable by law, whether or not interest accrues on the unpaid balance. The Lessee may contest
in good faith the validity, existence or applicability of any Imposition. Notwithstanding anything
herein to the contrary, the Lessee may withhold payment of such Imposition during such contest
so long as the failure to pay such Imposition does not adversely affect the validity and
enforceability of this Agreement or the other obligations of the Lessee hereunder.
Section 3.Compliance with LaVl'. The Lessee agrees that it will, throughout the term
of this Agreement and at its sole cost and expense, operate and maintain each Project in
compliance, in all material respects, with all Federal, state and local statutes, codes, laws , acts
ordinances, orders, judgments, decrees, rules, regulations and authorizations, whether foreseen or
unforeseen, ordinary or extraordinary, which shall now or at any time hereafter be binding upon
or applicable to such Project or the Lessee s operation and maintenance of such Project or any
portion thereof (including without limitation those relating to zoning, land use, environmental
protection, air, water and land pollution, toxic wastes, hazardous wastes, solid wastes, wetlands
health, safety, equal opportunity, minimum wages , and employment practices) (the "Legal
Requirements ), and will observe and comply with all conditions, requirements, and schedules
necessary to preserve and extend all rights, licenses, permits (including, without limitation
zoning variances, special exception and non-conforming uses), privileges, franchises and
concessions in connection with the operation and maintenance of such Project or any portion
thereof. The Lessee may in good faith contest the validity or applicability of any Legal
Requirement. Notwithstanding anything herein to the contrary, the Lessee may withhold
compliance with such Legal Requirement during such contest so long as such noncompliance
does not adversely affect the validity and enforceability of this Agreement or the other
obligations of the Lessee hereunder.
ARTICLE IV
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 4.Damage, Destruction and Condemnation
(a) In the event that at any time during the term of this Agreement the whole or
part of any Project shall be damaged or destroyed, or taken or condemned by a competent
authority for any public use or purpose, or by agreement between the Lessor and those
authorized to exercise such right, or if the temporary use of any Project shall be so taken by
condemnation or agreement (a "Loss Event"
(i)the Lessor shall have no obligation to rebuild, replace, repair or
restore such Project
(ii) there shall be no abatement, postponement or reduction in the rent
or other amounts payable by the Lessee under this Agreement, and
(iii) the Lessee will promptly give written notice to the Lessor of any
Loss Event of greater than $1 000 000 or any Loss Event that will temporarily or permanently
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result in a loss of use of such Project, which notice shall generally describe the nature and extent
of such Loss Event.
(b) The Lessee shall not be obligated to repair or replace any Project or purchase
any Project following a Loss Event so long as this Agreement shall remain valid, binding and
enforceable on the Lessee following such Loss Event. If the Lessee elects to repair or replace
any Project following a Loss Event, it shall do so with its own funds except to the extent
amounts are available for such purpose in the Project Fund, in which case the Lessee may use
such funds.
(c) All proceeds of insurance or condemnation awards or recoveries of claims
against contractors (or an amount equal to such proceeds, awards or recoveries) received by the
Lessor or the Lessee shall be deposited into the Project Fund, the Loan Fund or the Reserve
Fund, as agreed to by the Lessor and the Lessee.
ARTICLE V
ARTICULAR COVENANTS
Section 5.Expenses: Indemnity. (a) The Lessee shall payor reimburse the Lessor
for all reasonable costs and expenses of the Lessor incurred in connection with this Agreement.
(b) The Lessee shall at all times protect, indemnify and hold the Lessor, its
directors, officers, incorporators, stockholders, and any person(s) controlled by or
controlling the Lessor ("Lessor Indemnified Parties ) hannless of, from and
against
(i)all costs and expenses arising from or relating to compliance with
environmental laws and regulations and orders of governmental
agencies applicable to each Project or arising from or relating to
mitigation, remediation, or abatement of environmental impacts
any and all claims (whether in tort, contract or otherwise),
demands , expenses (including reasonable attorneys fees) and
liabilities for any loss, damage, injury and liability of every kind
and nature and however caused, including any liability arising
from failure to comply with applicable environmental laws
regulations or orders applicable to each Project, and taxes of any
kind and by whomsoever imposed on the Lessor in respect of each
Project
in each case arising from or relating to such Project or resulting from, arising out of, or in any
way connected with the financing of the costs of such Project; provided however, that the
Lessee shall have no indemnification obligation under this Section 5.1 (b) for any such costs
expenses, claims, demands, taxes or liabilities arising from the intentional misrepresentation or
willful misconduct of the Lessor or the Lessor Indemnified Parties. The indemnification set
forth in this Section 5.1 (b) shall be binding upon the Lessee for any and all claims, demands
(ii)
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expenses, liabilities and taxes set forth herein and shall survive the expiration or termination or
this Agreement.
Section 5.Financial Statements: No-Default Certificates. (a) The Lessee agrees
furnish to the Lessor, as soon as available and in any event within one-hundred eighty (180) days
after the close of each Fiscal Year of the Lessee, a copy of the annual audited financial
statements of the Lessee and the related statements of income, earnings , retained earnings and
changes in financial position for such Fiscal Year, prepared in accordance with generally
accepted accounting principles, accompanied by an opinion of an independent certified public
accountant.
(b) The Lessee shall immediately notify the Lessor of the occurrence of any Event
of Default of which it has knowledge. Any notice required to be given pursuant to this subsection
shall be signed by an Authorized Representative of the Lessee and set forth a description of the
default and the steps, if any, being taken to cure said default. If no steps have been taken, the
Lessee shall state this fact on the notice.
Section 5.Discharge of Liens (a) Except as permitted by Sections 3.2 and 8.
hereof, the Lessee shall not sell, assign, encumber (other than Permitted Encumbrances), convey
or otherwise dispose of its leasehold interest in any Project or any part thereof during the term of
this Agreement, without the prior written consent of the Lessor, and any purported disposition
without such consent shall be void; if any lien, encumbrance or charge is filed or asserted, or any
judgment, decree, order, levy or process of any court or governmental body is entered, made or
issued or any claim (such liens, encumbrances, charges, judgments , decrees, orders, levies
processes and claims being herein collectively called "Liens ), whether or not valid, is made
against any Project or any part thereof or the interest therein of the Lessor, the Lessee or against
any of the rentals or other amounts payable under this Agreement or the interest of the Lessee
under this Agreement other than Liens for Impositions and Permitted Encumbrances, the Lessee
forthwith upon receipt of notice ofthe filing, assertion, entry or issuance of such Lien (regardless
of the source of such notice) shall give written notice thereof to the Lessor and take all action
(including the payment of money and/or the securing of a bond) at its own cost and expense
(unless such Liens resulted solely from the willful misconduct or intentional misrepresentation of
the Lessor) as may be necessary or appropriate to obtain the discharge in full thereof and to
remove or nullify the basis therefor. Nothing contained in this Agreement shall be construed as
constituting the express or implied consent to or permission of the Lessor for the performance of
any labor or services or the fumishing of any materials that would give rise to any Lien against
the Lessor s interest in each Project.
(b) Notwithstanding the preceding paragraph, the Lessee shall not be required to
discharge any Lien against the interest of the Lessee in a Project as long as this Agreement will
remain valid, binding and enforceable. Nothing herein shall be construed as limiting the right of
the Lessee to sell the transmission capability of each Project, to use or sell transmission services
or capacity derived from each Project, to permit operational control of each Project by a regional
transmission organization or other entity in accordance with Section 3.2(b), to make each Project
available for use by third parties (provided that if such use is pursuant to an assignment or
sublease, the provisions of Section 8.2 must be complied with), or to permit interconnections to
be made with each Project.
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Section 5.4 Lessor s Authoritv: Covenant of Ouiet Enjoyment.The Lessor covenants
and agrees that it has full right and lawful authority to enter into this Agreement for the full tenn
hereof. So long as the Lessee shall pay the rent and all other sums payable by it under this
Agreement and shall duly observe all the covenants, stipulations and agreements herein
contained obligatory upon it and no Event of Default hereunder shall have occurred and be
continuing, the Lessee shall have, hold and enjoy, during the tenn hereof, peaceful, quiet and
undisputed possession of each Project, and the Lessor (at the sole cost and expense of the
Lessee) shall from time to time take all necessary action to that end, subject to Permitted
Encumbrances.
Section 5_No Warrantv of Condition or Suitability.THE LESSOR HAS NOT
MADE AND DOES NOT MAKE ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, FITNESS , DESIGN OPERATION OR
WORKMANSHIP OF ANY PART OF A PROJECT, ITS FITNESS FOR ANY PARTICULAR
PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS IN EACH PROJECT, OR
THE SUITABILITY OF EACH PROJECT FOR THE PURPOSES OR NEEDS OF THE
LESSEE OR THE EXTENT TO WHICH ADVANCES MADE PURSUANT TO THE CREDIT
AGREEMENT WILL BE SUFFICIENT TO PAY THE COST OF EACH PROJECT. THE
LESSEE IS SATISFIED THAT EACH PROJECT IS SUITABLE AND FIT FOR ITS
PURPOSES. THE LESSOR SHALL NOT BE LIABLE IN ANY MANNER WHATSOEVER
TO THE LESSEE OR ANY OTHER PERSON FOR ANY LOSS , DAMAGE OR EXPENSE
OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY, BY THE
PROPERTY OF ANY PROJECT OR THE USE OR MAINTENANCE THEREOF OR THE
FAILURE OF OPERATION THEREOF, OR THE REPAIR, SERVICE OR ADJUSTMENT
THEREOF, OR BY ANY DELAY OR F AlLURE TO PROVIDE ANY SUCH
MAINTENANCE, REPAIRS , SERVICE OR ADJUSTMENT, OR BY ANY INTERRUPTION
OF SERVICE OR LOSS OF USE THEREOF OR FOR ANY LOSS OF BUSINESS
HOWSOEVER CAUSED.
Section 5.Further Assurances. The Lessee will do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered such further acts
instruments, conveyances, transfers and assurances , including Unifonn Commercial Code
financing statements, at the sole cost and expense of the Lessee, as the Lessor deems reasonably
necessary or advisable for the implementation, effectuation, correction, confinnation or
perfection of this Agreement.
Section 5.Recording and Filing This Agreement as originally executed or a
memorandum thereof may, but shall not be required to be, recorded by the Lessee in such office
or offices as may at the time be provided by law as the proper place for the recordation hereof.
Section 5.Right to Cure Lessor Defaults.The Lessor hereby grants the Lessee full
authority for account of the Lessor to perfonn any covenant or obligation the nonperfonnance of
which is alleged to constitute a default by the Lessor in any notice received by the Lessee, in the
name and stead of the Lessor, with full power of substitution. The Lessor agrees to reimburse
the Lessee for all costs and expenses incurred by the Lessee in performing any such covenant or
obligation.
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Section 5.Federal and State Tax Treatment and Filing. The Lessor shall file all
Federal and state income tax returns required to be filed by it and makes an irrevocable election
not to claim depreciation on any Project for Federal income tax purposes and to file Federal
income tax returns that forgo all income and deduction items with respect to each Project that are
available to owners of property.
ARTICLE VI
EVENTS OF DEF AUL T; REMEDIES
Section 6.Events of Default. Anyone or more of the following events shall
constitute an "Event of Default" hereunder:
(a) Failure of the Lessee to pay any rental payment that has become due and
payable by the terms of Section 2.3(a) or 2.3(c) hereof;
(b) Failure of the Lessee to pay any amount due hereunder (other than under
Section 2.3(a) hereof) and continuance of such failure for thirty (30) days after notice of such
failure is given to the Lessee by the Lessor;
(c) Failure of the Lessee to observe and perform any covenant, condition or
agreement hereunder on its part to be performed (except as described in Section 6.1(a) or (b)
hereof) and (1) continuance of such failure for a period of thirty (30) days after receipt by the
Lessee of written notice specifying the nature of such default from the Lessor or (2) if by reason
of the nature of such default the same can be remedied, but not within the said thirty (30) days
the Lessee fails to proceed with reasonable diligence after receipt of said notice to cure the same
or fails to continue with reasonable diligence its efforts to cure the same;
(d) Any representation or warranty by the Lessee contained herein shall be
incorrect in any material respect on or as of the date when made;
(e) A Special BP A Event shall have occurred or the Lessee shall no longer be a
power marketing agency or an instrumentality of the United States;
(f) Any judgment or order for the payment of money in excess of $20 000 000
shall be rendered against the Lessee and such judgment or order shall remain unsatisfied for 30
consecutive days after it shall have been finally determined that such judgment or order shall be
payable from the Bonneville Fund;
(g) The Lessee shall (i) generally not pay its Debts as such Debts become due; or
(ii) admit in writing its inability to pay its Debts generally as they become due; or (iii) file a
petition in bankruptcy or seeking a composition of indebtedness; or (iv) make an assignment for
the benefit of its creditors; or (v) or any proceeding shall be instituted by or against the Lessee
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and, in the case of any such proceeding
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instituted against it (but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the appointment of a receiver
trustee, custodian or other similar official for, it or for any substantial part of its property) shall
occur; or the Lessee shall take any corporate action to authorize any of the actions set forth
above in this paragraph (g);
(h) The Lessee shall fail to pay any principal of or premium or interest on any
Debt, when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or
any other event shall occur or condition shall exist under any agreement or instrument relating to
any such Debt and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof; or
(i) Any material provision of this Agreement shall at any time and for any reason
cease to be valid and binding upon the Lessee, except pursuant to the terms hereof, or shall be
declared to be null and void, or the validity or enforceability thereof shall be contested by the
Lessee or any governmental authority or the Lessee shall deny that it has any further liability or
obligation hereunder.
Section 6.Remedies on Default. Whenever any Event of Default shall have occurred
and be continuing, the Lessor, subject to the next succeeding paragraph of this Section 6.2 and
subject to Section 6.8 hereof, may take whatever action at law or in equity permitted by law to be
taken against the Lessee as may appear necessary or desirable to collect the rent then due and
thereafter to become due, or to enforce performance or observance of any obligations
agreements or covenants of the Lessee under this Agreement.
The Lessor, during the term of this Agreement, waives any and all rights as owner
or as lessor of each Project to re-enter and take possession of such Project, to sublease such
Project, to terminate this Agreement and to exclude the Lessee from possession of such Project
upon the occurrence of an Event of Default under this Agreement. The Lessor and the Lessee
hereby declare that this Agreement does not create a security interest in any Project in favor of
the Lessor, and the Lessor hereby waives any rights it may have as a secured party with respect
to each Project under the Uniform Commercial Code in effect in any jurisdiction or otherwise.
No action taken pursuant to this Section 6.2 or Section 6.3 shall, except as
expressly provided herein, relieve the Lessee from the Lessee s obligations hereunder, all of
which shall survive any such action.
Section 6.Surrender of Project Upon Event of Default. Subject to Section 6., upon
the occurrence and continuance of an Event of Default under Section 6.1(a) hereof, the Lessee
shall, at the direction of the Lessor, given in its sole discretion, promptly surrender use and
possession of each Project to the Lessor or a designee of the Lessor.
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Section 6.4 Remedies Cumulative. The rights and remedies of the Lessor under this
Agreement shall be cumulative and shall not exclude any other rights and remedies of the Lessor
allowed by law or in equity with respect to any default under this Agreement. Failure by the
Lessor to insist upon the strict perfonnance of any of the covenants and agreements herein set
forth or to exercise any rights or remedies upon default by the Lessee hereunder shall not be
considered or taken as a waiver or relinquishment for the future of the right to insist upon and, to
the extent pennitted by law, to enforce by mandatory injunction, specific perfonnance or other
appropriate legal remedy strict compliance by the Lessee with all of the covenants and conditions
hereof, or of the rights to exercise any such rights or remedies, if such default by the Lessee be
continued or repeated.
Section 6.No Additional Waiver Implied bv One Waiver.In the event any covenant
or agreement contained in this Agreement should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. No waiver shall be binding unless it is
in writing and signed by the party making such waiver. No course of dealing between the Lessor
and the Lessee or any delay or omission on the part of the Lessor in exercising any rights
hereunder shall operate as a waiver.
Section 6.Effect on Discontinuance of Proceedings. In case any proceeding taken by
the Lessor on account of any Event of Default hereunder shall have been discontinued or
abandoned for any reason or shall have been detennined adversely to the Lessor, then, and in
every such case, the Lessor and the Lessee shall be restored to their respective fonner positions
and rights hereunder.
Section 6.Agreement to Pay Attorneys' Fees and Expenses . In the event the Lessee
should default under any of the provisions of this Agreement, and the Lessor should employ
attorneys and/or incur other expenses for the collection of rentals or other amounts payable
hereunder or the enforcement of perfonnance or observance of any obligation or agreement on
the part of the Lessee herein contained, the Lessee agrees that it will on demand therefor pay to
the Lessor the reasonable fees and disbursements of such attorneys and such other expenses so
incurred.
Section 6.Statutory Limitation on Legal Remedies Against the Lessee. The Lessor
acknowledges that its remedies against the Lessee are linlited to those provided under Federal
law, which provides that the exclusive remedy for breach of contract by the Lessee is a judgment
for money damages. The parties agree that such damages shall be measured by the amounts
required to be paid by the Lessee under this Agreement and not by the market value of a Project
or a leasehold interest in a Project.
ARTICLE VII
OPTIONS
Section 7.Options. (a) The Lessee has the option, upon seven (7) day s notice to the
Lessor, to make advance rental payments which, at the direction of the Lessee, shall be deposited
into the Loan Fund and credited against future rental payments as directed by the Lessee. The
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Lessee further has the option, upon seven (7) day s notice to the Lessor, to purchase all or any
portion of any Project by making a purchase option payment equal to the amount necessary to
enable the Lessor to prepay all or a portion of the loan incurred by the Lessor to acquire such
Project or portion thereof (together with the payment by the Lessor of all other amounts owed to
the lender and due upon such prepayment). The Lessee shall exercise its option to make such
advance rental payments or such purchase option by delivering a written notice of an Authorized
Representative of the Lessee to the Lessor, setting forth (i) the amount of the advance rental
payment or purchase option payment and (ii) the date on which such payment is to be made.
After any purchase of a portion of a Project, the rent payable pursuant to Section 2.3(a) for the
Project shall be reduced by the percentage specified in the applicable Schedule or by such other
amount as may be agreed to by the Lessor and the Lessee.
(b) The Lessor hereby grants the Lessee the option to purchase each and every
Project at the end of the term of this Agreement for a purchase option payment equal to the
amount necessary to enable the Lessor to prepay or pay all or a portion of the loan incurred by
the Lessor to acquire such Project or portion thereof (together with the payment by the Lessor of
all other amounts owed to the lender and due upon such prepayment) so long as no Event of
Default hereunder has then occurred and is continuing. Such option may be exercised at any
time during the term of this Agreement with respect to any or all Projects. The Lessee shall give
the Lessor written notice of the exercise of such option at least sixty (60) days prior to the
termination date of this Agreement.
(c) If the Lessee notifies the Lessor that it is not exercising its purchase option
pursuant to Section 7.1(b) hereof with respect to a Project, then, at the option of the Lessor, this
Agreement shall be extended for one year for $10 000 for such year and the Lessee shall be
obligated to remove such Project on behalf of the Lessor and deliver such Project to or at the
direction of the Lessor prior to the end of the term of this Agreement with respect to such
Project, as so extended. The cost of such removal and delivery shall be paid by the Lessee.
Section 7.Conveyance of Title. At the closing of any purchase of each Project or
any component pursuant to Article VII hereof, the Lessor will upon receipt of the purchase price
deliver to the Lessee good title to the property being purchased evidenced in writing by a bill of
sale or other instrument of conveyance, as such property then exists, subject to the following: (i)
those license and encumbrances (if any) to which said property was subject when conveyed to
the Lessor; (ii) those Liens resulting from the failure of the Lessee to perform or observe any of
the agreements on its part contained in this Agreement; and (iii) Permitted Encumbrances other
than this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.Force Majeure. In case by reason of force majeure either party hereto
shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then
except as otherwise expressly provided in this Agreement, if such party shall give notice and full
particulars of such force majeure in writing to the other party within a reasonable time after
occurrence of the event or cause relied on, the obligations of the party giving such notice (other
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than the obligations of the Lessee to make payments required to be made hereunder), so far as
they are affected by such force majeure, shall be suspended during the continuance of the
inability then claimed which shall include a reasonable time for the removal of the effect thereof
but for no longer period, and such party shall endeavor to remove or overcome such inability, .
with all reasonable dispatch. The tenn "force majeure " as employed herein, shall mean acts of
God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any
kind of the Government of the United States or of the applicable state or any civil or military
authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes
storms, floods, washouts, droughts, arrest, restraining of government and people, civil
disturbances, explosions, partial or entire failure of utilities, shortages oflabor, material, supplies
or transportation, or any other similar or different cause not reasonably within the control of the
party claiming such inability. It is understood and agreed that the settlement of existing or
impending strikes , lockouts or other industrial disturbances shall be entirely within the discretion
of the party having the difficulty and that the above requirements that any force majeure shall be
reasonably beyond the control of the party and shall be remedied with all reasonable dispatch
shall be deemed to be fulfilled even though such existing or impending strikes, lockouts and
other industrial disturbances may not be settled but could have been settled by acceding to the
demands of the opposing person or persons.
Section 8.Assignment or Sublease by Lessee; Assignment by Lessor.(a) The
Lessee may assign or transfer this Agreement or sublet the whole or any part of any Project so
long as (1) the Lessee shall remain liable to the Lessor for the payment of all rent and other
payments hereunder and for the full performance of all ofthe tenns, covenants and conditions of
this Agreement and (2) the Lessee shall deliver to the Lessor an Opinion of Counsel to the effect
that such assignment, transfer or sublease will not legally impair in any respect the obligations of
the Lessee for the payment of all rents nor for the full perfonnance of all of the tenns, covenants
and conditions of this Agreement. The Lessee shall furnish or cause to be furnished to the
Lessor a copy of any such assignment, transfer or sublease in substantially final fonn at least ten
(10) days prior to the date of execution thereof. The Lessee may also enter into contracts relating
to the use of a Project as provided in Sections 3.2(b) and 5.3(b).
(b) The Lessor has pledged and assigned to the lender as security for the
obligations ofthe Lessor under the Credit Agreement all of the Lessor s right, title and interest in
this Agreement (except for the Lessor s Reserved Rights), including all rental payments
hereunder, and in furtherance of said pledge the Lessor has agreed to cause such rental payments
to be paid to the Custodian for deposit in the Loan Fund. The Lessee hereby consents to the
above-described lien and security interest, and pledge and assignment of this Agreement and
agrees to make all rental payments and all payments under Article VII to the Custodian. The
Lessor has also pledged and assigned to the lender as security for the obligations of the Lessor
under the Credit Agreement all of the Lessor s right, title and interest in amounts held in the
Project Fund, the Loan Fund and the Reserve Fund created and held under the Custodial
Agreement. The Lessee hereby consents to the above-described lien and security interest and
acknowledges that the Lessor s agreement pursuant to Section 2.3(e) is subject to such lien and
the terms of the Custodial Agreement. The Lessee agrees to provide to the Lender a copy of each
notice given by the Lessee to the Lessor pursuant to Sections 4. 1 (a)(iii), 5.2(b), 7 .l(a), and 8.2(a)
at the same time as such notice is given to the Lessor and the Lender shall be a third party
beneficiary of the agreement of the Lessee contained in this sentence. The Lessee further
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acknowledges that (i) the Lessor has agreed that it shall not consent to certain actions of the
Lessee or shall not itself take certain actions under Sections 5., 7.1(a) or 8.3 without obtaining
the prior consent of the Lender and (ii) the Lessor has agreed that the Lender may give the
notice of default under Sections 6.1(b) or (c) on behalf of the Lessor.
Section 8.Amendments This Agreement may be amended only by a written
amendment signed by the parties hereto.
Section 8.4 Notices. All notices, certificates or other communications hereunder shall
be deemed sufficiently given if (a) mailed by United States certified mail, return receipt
requested, postage prepaid, or (b) if sent by a nationally recognized overnight courier, or (c)
delivered personally, addressed as follows:
(a)To the Lessor:Northwest Infrastructure Financing
Corporation II
c/o J.H. Management Corporation
One International Place, Room 3218
Boston, MA 02110-2916
Northwest Infrastructure Financing
Corporation II
c/o J.H. Management Corporation
O. Box 961500
Boston, MA 02196-1500
(b)To the Lessee:For overnight courier or personal delivery:
Manager, Capital and Risk Management
Bonneville Power Administration
905 NE 11th Avenue - KFW-
Portland, Oregon 97208
For United State mail:
O. Box 3621
FTC-
Portland, Oregon 97208
In all cases, with a copy to:
Project Manager
O. Box 61409
8100 NE Parkway Drive, Suite 50
Vancouver, WA 98666 1409
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The Lessor and the Lessee may, by notice given hereunder to each of the others
designate any further or different addresses to which subsequent notices, certificates or other
communications to them shall be sent.
Any notice, certificate or other communication hereunder shall, except as may expressly
be provided herein, be deemed to have been given or served two (2) days after the date the same
shall be deposited in the United States mails, postage prepaid, in the manner aforesaid or one (1)
day after the date that the same shall be deposited with a nationally recognized overnight courier
or on the date of delivery or refusal thereof, if delivered personally.
Section 8.Severability. If any clause, provision or Section of this Agreement be
ruled invalid by any court of competent jurisdiction, the invalidity of such clause, provision or
Section shall not affect any of the remaining provisions hereof.
Section 8.Inspection of Project.
(a) Upon reasonable notice , the Lessee shall pennit the Lessor and its respective
agents or representatives to inspect each Project at all reasonable times during business days and
business hours for the purpose of detennining whether or not the Lessee is in compliance with its
obligations hereunder. The Lessor shall have no duty to inspect any Project.
(b) In no event shall the Lessor or its agents, employees, contractors, other
invitees or assignees (including the lender) be entitled to access to the areas surrounding the
location of any portion of any Project that the Lessee has designated a confidential area unless
and until the entity and individual persons seeking access have signed and delivered to a
representative of the Lessee at such Project an agreement of confidentiality and nondisclosure in
the fonD and substance reasonably satisfactory to the Lessee. In addition, the Lessee s consent in
this Agreement to authorized access is for the limited purpose described in paragraph (a) above
and is not intended as a waiver of any rights granted by law to challenge a request or demand by
anyone to access a Project for the purpose of an inspection or search.
(c) Nothing in this Section 8.6 or elsewhere in this Agreement shall imply any
duty on the part of the Lessor to do any work, and perfonnance thereof by the Lessor shall not
constitute a waiver of the Lessee s default in failing to perform the same.
Section 8.Effective Date; Counterparts.This Agreement shall become effective
upon its execution and delivery. It may be simultaneously executed in several counterparts, each
of which shall be an original and all of which shall constitute but one and the same instrument.
Section 8.Binding Effect.This Agreement shall inure to the benefit of, and shall be
binding upon, the Lessor and the Lessee and their respective successors and assigns.
Section 8.Net Lease. It is the intention of the parties hereto that this Agreement be a
triple net lease" and this Agreement shall be construed to effect such intent.
Section 8.10 Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to choice of law doctrine
except that to the extent the parties ' rights and obligations are required to be governed by United
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States Federal law, then such rights and obligations shall be governed by United States Federal
law.
Section 8.11 Limited Recourse. No recourse under any obligation, covenant or
agreement of the Lessor contained in this Agreement shall be had against J. H. Management
Corporation ("JHM") or any incorporator, stockholder, officer, director or employee of the
Lessor or JHM, by the enforcement of any assessment or by any legal or equitable proceeding,
by virtue of any statute or otherwise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of the Lessor, and that no personal liability whatever
shall attach to or be incurred by the incorporators, stockholders, officers, directors or employees
ofthe Lessor or JHM, or any of them under or by reason of any of the obligations, covenants or
agreements of the Lessor contained in this Agreement, or implied therefrom, and that any and all
personal liability for breaches by the Lessor of any of such obligations, covenants or agreements
either at common law or at equity, or by statute or constitution, of JHM and every such
incorporator, stockholder, officer, director or employee is hereby expressly waived as a condition
of and in consideration for the execution of this Agreement; provided however that nothing in
this Section 8.11 shall relieve any of the foregoing persons or entities from any liability arising
from his, her or its willful misconduct or intentional misrepresentation.
Section 8.12 Infonnation Security.It is possible that information that is provided to the
Lessor by the Lessee or that comes into the possession of the Lessor as a result of its ownership
of each Project during the performance of this Agreement, may contain critical and sensitive
infonnation about such Project. "Project Information" means information about each Project
that is so designated at any time by the Lessee in writing to the Lessor.
The Lessee hereby designates the following information as Project Information:
Infonnation describing the precise location (survey coordinates) of each Project;
Information relating to the design, operation, maintenance or construction of each
Project;
Information describing schedules for the design, operation, maintenance or
construction of each Project, and
Information describing engineering or security vulnerabilities.
Project Information excludes any of the foregoing information if it has otherwise been
made available to the public by the Lessee or with the Lessee s consent.
The Lessor may disseminate Project Information among its officers, employees
attorneys, contractors, and other agents only as may be necessary in the performance of this
Agreement. The Lessor shall ensure that Project Information is not distributed, shared, or
otherwise made accessible to others not involved in the performance of this Agreement other
than with the prior consent of the Lessee or pursuant to a valid final order or direction by a
judicial, regulatory, administrative or other governmental body having jurisdiction thereof. If the
Lessor is requested to disclose any Project Information pursuant to a judicial, regulatory,
administrative or other governmental process , the Lessor shall immediately notify the Lessee.
The Lessee may thereupon defend against disclosure at the Lessee s expense. The Lessor will
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assist the Lessee in any such defense.
Section 8.13 Broker.Each of the parties represents to the other that it has not dealt with
any broker in connection with this transaction. If any claim is made by any broker who shall
claim to have acted or dealt with the Lessee or the Lessor in connection with this transaction, the
Lessee or the Lessor, as the case may be, will be responsible for payment of the brokerage
commission, fee or other compensation to which such broker is entitled.
Section 8.14 Entire Agreement.This Agreement contains all the promises, agreements
conditions, inducements and understandings between the Lessor and the Lessee relating to each
Project (other than the Construction Agency Agreement) and there are no promises, agreements
conditions, understandings , inducements, warranties or representations, oral or written, expressed
or implied, between them other than as herein set forth.
Section 8.15 Date of Agreement for Reference Purposes Only. The date of this
Agreement shall be for reference purposes only and shall not be construed to imply that this
Agreement was executed on the date first above written.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be executed
in its name and on its behalf by its duly authorized officer.
NORTHWEST INFRASTRUCTURE
FINANCING CORPORATION
as Lessor
By:
Name: R. Douglas Donaldson
Title: Treasurer
Date: 2007
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY acting by and
through the Administrator of the Bonneville
Power Administration
as Lessee
By:
Name: Stephen J. Wright
Title: Administrator and Chief
Executive Officer
Date: 2007
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STATE OF
) ss.
COUNTY OF
I certify that I know or have satisfactory evidence that is the person
who appeared before me, and said person acknowledged that said person signed this Lease Agreement, on oath
stated that said person was authorized to execute the instrument and acknowledged it as theof to be the free and voluntary act of such party
for the uses and purposes mentioned in the instrument.
Dated:
Notary Public
Print Name:
Notary public in and for the state of , residing at
My commission expires:
(Use this space for notarial stamp/seal)
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STATE OF
) SS.
COUNTY OF
I certify that I know or have satisfactory evidence that is the person
who appeared before me, and said person acknowledged that said person signed this Lease Agreement, on oath
stated that said person was authorized to execute the instrument and acknowledged it as theof to be the free and voluntary act of such party
for the uses and purposes mentioned in the instrument.
Dated:
Notary Public
Print Name:
Notary public in and for the state of , residing at
My commission expires:
(Use this space for notarial stamp/seal)
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APPENDICES
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Appendix A
DEFINITIONS
The following terms shall have the following meanings in this Agreement:
Agreement or Lease Agreement means the Master Lease Agreement dated as of
, 2007 between the Lessor and the Lessee, and shall include any and all
amendments thereof and supplements thereto and all Schedules thereto hereafter made in
conformity herewith.
Authorized Representative means , (i) in the case of the Lessor, the President, Vice
President or Treasurer thereof, or any officer or employee of the Lessor authorized to perfonn
specific acts or to discharge specific duties, (ii) in the case of the Lessee , those officers or
employees authorized to act pursuant to letters of authority issued from time to time by the
Administrator of the Lessee and delivered to the Lessor and (iii) in the case of the Construction
Agent, those officers or employees authorized to act pursuant to letters of authority issued from
time to time by the Administrator of the Construction Agent and delivered to the Lessor.
Bonneville Fund shall mean the fund established in the Treasury of the United
States pursuant to 16 U.c. ~ 838i(a), as amended from time to time; the amounts in such fund
are available for expenditure by the Lessee.
Business Day means a day (a) other than a day on which banks located in The
City 0 f New York, New York or the cities in which the principal 0 ffices of the Custodian, the
Lessee or the Lessor are located are required or authorized by law or executive order to close and
(b) on which the New York Stock Exchange is not closed.
dated as of (
Construction Agency Agreement means the Construction Agency Agreement
, 2007, between the Lessor and the Construction Agent.
Construction Agent means the United States of America, Department of Energy,
acting by and through the Administration of the Bonneville Power Administration, acting
pursuant to the Construction Agency Agreement.
Costs of Construction means all costs related to acquiring, installing and/or and/or
constructing each Project to completion, operation and/or energization, which costs shall include
but shall not be limited to (i) all costs of environmental review, engineering and architectural
services with respect to such Project, including the cost of design, test borings, surveys
estimates, plans and specifications and for supervising construction, as well as for the
perfonnance of all other duties required by or consequent upon the proper installation and/or
construction of, and the making of alterations, renovations, additions and improvements in
connection with, the completion, operation and/or energization of such Project; (ii) all costs paid
or incurred for labor, materials , services, supplies, machinery, equipment and other expenses and
to construction managers, contractors, suppliers, builders and materialmen in connection with the
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acquisition, installation and/or construction of such Project; and (iii) all Costs of Construction
Delay, Suspension or Tennination.
Costs of Construction Delay, Suspension or Tennination means (i) all costs of
environmental review, engineering and architectural services with respect to any Project
including the cost of design, test borings, surveys, estimates, plans and specifications and for
supervising construction, as well as for the perfonnance of all other duties required by or
consequent upon the proper installation and/or construction of, and the making of alterations
renovations, additions and improvements in connection with, the delay, suspension or
tennination of such Project; (ii) all costs paid or incurred for labor, materials, services, supplies
machinery, equipment and other expenses and to construction managers, contractors, suppliers
builders and materialmen in connection with the delay, suspension or termination of such
Project; and (iii) all costs which are required to be paid, under the tenns of any contract or
contracts, for the delay, suspension or tennination of a Project.
Credit Agreement means the Credit Agreement dated , 2007 between
Northwest Infrastructure Financing Corporation II and Citigroup Inc. and all amendments and
supplements thereto.
Custodial Agreement means the Custodial and Security Agreement dated
, 2007 among the Custodian, the Lessor, the Construction Agent and Citibank
A. and all amendments and supplements thereto.
Custodian means ( , or such other custodian identified by the Lessor
and acceptable to the Lessee, which executes a Custodial Agreement.
Debt means, the sum of the following (without duplication): (i) all obligations for
borrowed money or evidenced by bonds, debentures, notes or other similar instruments
(including principal, interest, fees and charges); (ii) all obligations (whether contingent or
otherwise) in respect of bankers ' acceptances , letters of credit, surety or other bonds and similar
instruments; (iii) all obligations to pay the deferred purchase price of property or services (other
than for borrowed money); (iv) all obligations under leases which shall have been, or should
have been, in accordance with generally accepted accounting principles, recorded as capital
leases (whether contingent or otherwise); (v) all obligations under operating leases that require
that rental payments be made over the term of such lease, based on the purchase price or
appraised value of the property subject to such lease plus a marginal interest rate, and used
primarily as a financing vehicle for, or to monetize, such property; (vi) all Debt (as described in
the other clauses of this defmition) and other obligations of others secured by a Lien on any asset
of the Lessee, whether or not such Debt is assumed by the Lessee; (vii) all Debt (as described in
the other clauses of this definition) of others guaranteed by the Lessee or in which the Lessee
otherwise assures a creditor against loss of the debtor or obligations of others; (viii) all
obligations or undertakings to maintain or cause to be maintained the financial position or
covenants of others or to purchase the Debt or property of others; (ix) obligations to deliver
goods or services not in the ordinary course of business in consideration of advance payments;
and (x) obligations to pay for goods or services not in the ordinary course of business whether or
not such goods or services are actually received: provided, however that
, "
Debt" shall not
include any payment responsibilities of the Lessee (A) with respect to bonds, notes or other
OHS East:160038353.
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evidences of indebtedness issued and sold by the Lessee to the United States Treasury, (B) to the
credit of the reclamation fund or other funds as are required by or pursuant to law to be made
into such funds in connection with reclamation projects in the Pacific Northwest, (C) to the credit
of miscellaneous receipts of the United States Treasury for all unpaid costs required by or
pursuant to law to be charged to and returned to the general fund of the United States Treasury
for the repayment of the Federal investment in the Federal Columbia River Power System, or (D)
to or on account of any other fund or account within the United States Treasury, provided
each case , that the United States Treasury (or such other obligee in respect of such Debt) has not
declared such Debt to be due and payable prior to its stated maturity or otherwise sought to
enforce payment (through legal proceedings, negotiations or otherwise) of such Debt.
Event of Default under the Lease Agreement shall have the meaning specified in
Section 6.1 ofthe Lease Agreement.
Federal Appropriations Obligation means the appropriated investment in the
Federal Columbia River Power System or any bond or other evidence of indebtedness issued by
the Lessee to investors other than the United States Treasury and payable from the Bonneville
Fund, the proceeds of which payor prepay such investment.
Fiscal Year of the Lessee or Fiscal Year means a year of 365 or 366 days , as the
case may be, commencing on October 1 and ending on September 30 or such other year of
similar length as to which the Lessee shall have given prior written notice thereof to the Lessor at
least sixty (60) days prior to the commencement thereof.
Impositions has the meaning specified in Section 3.
Indemnified Parties means the Lessor.
Legal Requirements shall have the meaning set forth for such tenn in Section 3.
ofthe Lease Agreement.
Lessee means the United States of America Department of Energy acting by and
through the Administrator of the Bonneville Power Administration.
Lessor means the Northwest Infrastructure Financing Corp. a Delaware
corporation.
Lien has the meaning specified in Section 5.
Loan Fund means the Loan Fund established and created pursuant to the
Custodial Agreement.
Loss Event has the meaning specified in Section 4.1(a).
Opinion of Counsel means a written opinion of counsel who may (except as
otherwise expressly provided in the Lease Agreement) be counsel for the Lessee or the Lessor.
Pennitted Encumbrances means, as of any particular time
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(i)this Agreement;
(ii) liens for real estate taxes, assessments, levies and other governmental
charges and other Impositions not yet payable , or payable without the addition of any
fine, penalty, interest or cost for non-payment;
(iii) utility, access and other easements and rights-of-way, restrictions and
exceptions that an Authorized Representative of the Lessee certifies to the Lessor will not
interfere with or impair the Lessee s use of a Project as provided in the Lease Agreement;
(iv) such minor defects , irregularities, encumbrances, easements, rights-of-way
(including agreements with any railroad the purpose of which is to service a railroad
siding) and clouds on title as normally exist with respect to property similar in character
to a Project and as do not, either singly or in the aggregate, materially impair the value or
use of the property affected thereby for the purpose for which it was acquired and held by
the Lessor under the Lease Agreement;
(v) any mechanics , workmen , repairmen , materialmen , contractors
warehousemen , carriers , suppliers' or vendors ' lien or right in respect thereof if
payment is not yet due and payable, all if and to the extent permitted by Section 5.
(vi) any mortgage, lien, security interest or other encumbrance which exists in
favor of the Lessor or to which the Lessor shall consent; and
(vii) so long as no Event of Default has occurred and is continuing hereunder
any Lien being contested by the Lessee at its sole expense by appropriate action
conducted in good faith and with due diligence.
Person means any individual, corporation, partnership, joint venture, association
joint stock company, limited liability company, trust, unincorporated organization or
government, any agency or political subdivision thereof or any other entity.
Project means each Project described in a Schedule to the Lease Agreement, as
amended as provided in Section 3.
Project Costs means all Costs of Construction.
Project Fund means the Loan Fund established and created pursuant to the
Custodial Agreement.
Reserve Fund means the Reserve Fund established and created pursuant to the
Custodial Agreement.
Reserved Rights means, collectively,
(i) the right of the Lessor in its own behalf to receive all Opinions of Counsel
reports, financial statements, certificates, insurance policies, binders or certificates, or
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other notices or communications required to be delivered to the Lessor under the Lease
Agreement;
(ii) the right of the Lessor to grant or withhold any consents or approvals
required of the Lessor under the Lease Agreement;
(iii) the right of the Lessor in its own behalf (or on behalf of the appropriate
taxing authorities) to enforce , receive amounts payable under, or otherwise exercise its
rights under Sections 2.3(b), 3., 3.7 and 5.1; and
(iv) the right of the Lessor in its own behalf to declare an Event of Default
under Section 6.1 of the Lease Agreement with respect to any of the Lessor s Reserved
Rights.
Special BPA Event means the occurrence of any of the following events: (i) the
Lessee s obligation to make payments with respect to (A) Federal Appropriations Obligation
shall, for any reason, become payable prior to the Lessee s obligations hereunder or (B) Treasury
Payments shall, for any reason, become payable prior to or on a parity with the Lessee
obligations hereunder or (ii) any change in the organization, structure, powers or authority ofthe
Lessee occurs which tenninates, suspends, or limits the Lessee s authority to (A) borrow from
the United States Treasury or (B) defer Treasury Payments in order to pay costs other than such
payments to the United States Treasury, but in the case of the events described in clause (ii)(A),
only if such suspension or limitation materially adversely affects the Lessee s ability to make
payments other than payments to the United States Treasury.
Treasurv Payments means the Lessee s payments to the United States Treasury for
purposes other than those on account of the Federal Appropriations Obligation.
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Appendix B
PROVISIONS REQUIRED BY STATUTE OR
EXECUTIVE ORDER
CONTRACT WORK HOURS AND SAFETY STANDARDS
This contract, if and to the extent required by applicable law and if not otherwise
exempted, is subject to the following provisions:
(a)
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Overtime Requirements
No contractor or subcontractor contracting for any part of the contract work which
may require or involve the employment of laborers or mechanics, shall require or
pennit any laborer or mechanic in any workweek in which such worker is
employed on such work to work in excess of eight (8) hours in any calendar day
or in excess of 40 hours in such workweek unless such laborer or mechanic
receives compensation at a rate not less than one and one-half times such
worker s basic rate of pay for all hours worked in excess of eight (8) hours in any
calendar day or in excess of forty (40) hours in such workweek, as the case may
be.
(b)Violation, Liability for Unpaid Wages; Liquidated Damages
In the event of any violation of the provisions of subsection (a), the contractor and
any subcontractor responsible therefor shall be liable to any affected employee for
such employee s unpaid wages. In addition, such contractor and subcontractor
shall be liable to the Government for liquidated damages. Such liquidated
damages shall be computed with respect to each individual laborer or mechanic
employed in violation of the provisions of subsection (a) in the sum of $10 for
each calendar day on which such employee was required or permitted to be
employed in such work in excess of eight (8) hours or in excess of such
employee s standard workweek of forty (40) hours without payment of the
overtime wages required by subsection (a) above.
(c)Withholding for Unpaid Wages and Liquidated Damages
Bonneville may withhold, or cause to be withheld, from any moneys payable on
account of work perfonned by the contractor or subcontractor, such sums as may
administratively be determined to be necessary to satisfy any liabilities of such
contractor or subcontractor for unpaid wages and liquidated damages as provided
in subsection (b) above.
(d)Subcontracts
The contractor shall insert in any subcontracts the clauses set forth in subsections
(a) through (c) of this provision and also a clause requiring the subcontractors to
included these clauses in any lower tier subcontracts which they may enter into
together with a clause requiring this insertion in any further subcontracts that may
in turn be made.
( e)Records
The contractor shall maintain payroll records containing the infonnation specified
in 29 CFR 516.2(a). Such records shall be preserved for three (3) years from the
completion of the contract.
CONVICT LABOR
In connection with the perfonnance of work under this contract, the contractor agrees, if
and to the extent required by law and if not otherwise exempted, not to employ any
person undergoing sentence of imprisonment except as provided by Public Law 89-176
September 10, 1965 (18 U.c. 4082(c)(2)) and Executive Order 11755 , December 19
1973.
EQUAL OPPORTUNITY
During the perfonnance of this contract, if and to the extent required by applicable law
and if not otherwise exempted, the contractor agrees as follows:
(a)
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The contractor will not discriminate against any employee or applicant for
employment because of race, color, religion, sex, or national origin. The
contractor will take affmnative action to ensure that applicants are employed, and
that employees are treated during employment, without regard to their race, color
religion, sex, or national origin. Such action shall include, but not be limited to
the following: employment, upgrading, demotion or transfer; recruitment or
recruitment advertising; layoff or tennination; rates of payor other fonDS of
compensation and selection for training, including apprenticeships. The
contractor agrees to post in conspicuous places , available to employees and
applicants for employment, notices to be provided by Bonneville setting forth the
provisions of the Equal Opportunity clause.
(b)The contractor will, in all solicitations or advertisements for employees placed by
or on behalf of the contractor, state that all qualified applications will receive
consideration for employment without regard to race, color, religion, sex, or
national origin.
(c)The contractor will send to each labor union or representative or workers with
which said contractor has a collective bargaining agreement or other contract or
understanding, a notice, to be provided by Bonneville, advising the labor union or
worker representative of the contractor s commitments under the Equal
Opportunity clause and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.
(d)The contractor will comply with all provisions of Executive Order 11246 of
September 24, 1965, and of the rules, regulations, and relevant orders of the
Secretary of Labor.
(e)The contractor will furnish all infonnation and reports required by Executive
Order 11246 of September 24, 1965, and by the rules, regulations, and orders of
the Secretary of Labor, or pursuant thereto, and will pennit access to said
contractor s books, records, and accounts by Bonneville and the Secretary of
(f)
(g)
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Labor for purposes of investigations to ascertain compliance with such rules
regulations , and orders.
In the event of the contractor s non-compliance with the Equal Opportunity clause
of this contract or with any of such rules, regulations, or orders, this contract may
be canceled, terminated, or suspended in whole or in part and the contractor may
be declared ineligible for further Government contracts in accordance with the
procedures authorized in Executive Order 11246 or September 24, 1965 , and such
other sanctions may be imposed and remedies invoked as provided in Executive
Order 11246 of September 24 , 1965 , or by rule, regulation, or order of the
Secretary of Labor, or as otherwise provided by law.
The contractor will include the provisions of paragraphs (a) through (g) in every
subcontract or purchase order unless exempted by rules, regulations, or orders of
the Secretary of Labor issued pursuant to Section 204 of Executive Order 11246
of September 24, 1965 , so that such provisions will be binding upon each
subcontractor or vendor. The contractor will take such action with respect to any
subcontract or purchase order as Bonneville may direct as a means of enforcing
such provisions including sanctions for noncompliance. In the event the
contractor becomes involved in, or is threatened with, litigation with
subcontractor or vendor as a result of such direction by Bonneville, the contractor
may request the Government to enter into such litigation to protect the interests of
the Government.
INTEREST OF MEMBER OF CONGRESS
No Member of or Delegate to Congress, or Resident Commissioner shall be admitted to
any share of part of this contract or to any benefit that may arise therefrom. Nothing,
however, herein contained shall be construed to extend to such contract if made with a
corporation for its general benefit.
ADDITIONAL PROVISIONS
The contractor agrees to comply with the clauses for Government contracts contained in
the following statutes, Executive Orders, and regulations to the extent applicable:
(a)the Rehabilitation Act of 1973, Public Law 93-112, as amended, and 41 CFR 60-
741 (afflfTIlative action for handicapped workers);
(b)the Vietnam Era Veterans Readjustment Assistance Act of 1974, Public
Law 92540, as amended, and 41 CFR 60-250 (affirmative action for disable
veterans and veterans of the Vietnam era);
(c)the Davis-Bacon Act, 40 U.C. 27b et seq., and 29 CFR 5 (required wage rates
for public buildings and works);
(d)Executive Order 11625 and 41 CFR 1-1.1310-2 (utilization of minority business
enterprises) ;
(e)Certification of Nonsegretated Facilities , 41 CFR 1-12.803-10.
FORM OF SCHEDULE
(Insert Proj ect Description, including a description of the proj ect components J
Effective Date of Lease Term for this Project:
Expected Project Completion Date:
Rental Payment Schedule:
Date Amount
Upon the occurrence and continuance of an Event of Default under the Agreement, each
rental payment shall be increased by _4. Percentage of each rental payment allocable to each Project component.
Project Component Percentage
5. The representations and warranties contained in Section 1.1 of the Agreement are true
and correct on the date hereof as if made on the date hereof.6. The Lessee has obtained all approvals required to be obtained by it relating to the
execution and delivery of this Schedule and the leasing of the Project described in paragraph
above.
7. No additional action is required to be taken by FERC or any state local public utility
commission to insure that the Lessor is not subject to any federal, state or local laws, rules and
regulations applicable to a public utility.
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY acting by and
through the Administrator of the Bonneville
Power Administration
as Lessee
By:
Name:
Title:
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ACCEPTED AND AGREED:
NORTHWEST INFRASTRUCTURE
FINANCING CORPORATION
as Lessor
By:
Name:
Title:
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RENT AL PAYMENT LEDGER
(for administrative purposes)
Date Total Lease Payments Due
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ARTICLE I
Section 1.1
Section 1.
Section 1.3
Section 1.4
ARTICLE II
Section 2.
Section 2.2
Section 2.
Section 2.4
ARTICLE III
Section 3.
Section 3.2
Section 3.
Section 3.4
Section 3.
Section 3.
Section 3.
ARTICLE IV
Section 4.
ARTICLE V
Section 5.
Section 5.2
Section 5.
Section 5.4
Section 5.
Section 5.
Section 5.
Section 5.
Section 5.
ARTICLE VI
Section 6.
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DEFINITIONS AND REPRESENTATIONS ...............................................
Definitions ....................,-........................................-.........................
Construction...........................................................-..........................
Representations and Warranties by Lessor................. -"""""",.,.""". 2
Representations and Warranties by Lessee ........................................
LEASE OF PROJECT AND RENTAL PROVISIONS ................................. 3
Lease of each Project ........................................................................
Duration of T enn .............................................................................. 4
Rental Provisions, Pledge of Agreement and Rent.............................
Obligation of Lessee.... ..... ......... ................. ..... ....... -................... ...... 5
CONSTRUCTION, OPERATION, MAINTENANCE
IMPOSITIONS , LEGAL REQUIREMENTS ...............................................
Construction and Completion ofthe Projects..................................... 5
Operation of each Project .....................-.....-...................................... 5
Maintenance , Alterations and Improvements .....................................
Removal of Property of each Project ................................................. 6
Amendment ofthe Projects............................................................... 6
Taxes, Assessments and Governmental Charges................................ 6
Compliance with Law....................................................................... 7
DAMAGE, DESTRUCTION AND CONDEMNATION .............................. 7
Damage, Destruction and Condemnation........................................... 7
PARTICULAR COVENANTS........................... ..... ........... .... ......... ............. 8
Expenses; Indemnity....... ............. .................... .-..... -... ...................... 8
Financial Statements; No-Default Certificates .."......-........................ 8
Discharge of Liens ....................... ....... ........... ......................... ..........
Lessor s Authority; Covenant of Quiet Enjoyment ............................ 9
No Warranty of Condition or Suitability.......................................... 10
Further Assurances...............................................................-..-.......
Recording and Filing............... -"."",."".",.",.,.""""""""""",..""" 1
Right to Cure Lessor Defaults ......................................................... 10
Federal and State Tax Treatment and Filing .................................... 10
EVENTS OF DEFAULT; REMEDIES.......................................................
Events of Default ............................................................................
Section 6.
Section 6.
Section 6.4
Section 6.
Section 6.
Section 6.
Section 6.
ARTICLE VII
Section 7.
Section 7.
ARTICLE VIII
Section 8.
Section 8.
Section 8.
Section 8.4
Section 8_
Section 8.
Section 8.
Section 8.
Section 8.
Section 8.
Section 8.
Section 8.
Section 8.
Section 8.14
Section 8.
Remedies on Default ....................................................................... 12
Surrender of Project Upon Evem of Default ....................................
Remedies Cumulative ..................................................................... 12
No Additional Waiver Implied by One Waiver................................
Effect on Discontinuance of Proceedings ........................................ 13
Agreement to Pay Attorneys ' Fees and Expenses ............................ 13
Statutory Limitation on Legal Remedies Against the Lessee ........... 13
OPTIONS...................................................................................................
Options .....................................................,.......................-.............
Conveyance of Title. .-"-"" ........... ........... ......... ................. .............. 14
MISCELLANEOUS ..............-.......................-......-..........................-..........
Force Majeure.......................................................................-.........
Assignment or Sublease by Lessee; Assignment by Lessor.............. 15
Amendments ...............-...............................-........................-..........
Notices............................................................................................
Severability......... ......... ....... ......... ......... ....... ....... ............... ..... .... .... 17
Inspection of Project .................,..................................................... 17
Effecti ve Date; Counterparts........................................................... 17
Binding Effect...............................................................................
Net Lease........................................................................................ 17
Law Governing ........................-...................................................... 17
Limited Recourse ............................................................................ 17
Information Security.. .......... .......... ................ ..... ................. ..... ...... 18
Broker.... .................... ......... .................... ..... ....... ...................... ...... 18
Entire Agreement .........-.................................................................. 19
Date of Agreement for Reference Purposes Only............................. 19
Appendix A Defmitions
Appendix B Provisions Required by Statute or Executive Order
Form of Schedule
Rental Payment Ledger
OHS East:160038353.
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