HomeMy WebLinkAboutResolution - 5947 - Contract - LG&E Energy Marketing Inc.- Gas Sales - 06_25_1998Resolution No. 5947
Item No. 31
June 25, 1998
RESOLUTION
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
THAT the Mayor of the City of Lubbock BE and is hereby authorized and
directed to execute for and on behalf of the City of Lubbock a Gas Sales Contract by and
between the City of Lubbock and LG&E Energy Marketing, Inc., attached hereto, which
shall be spread upon the minutes of the Council and as spread upon the minutes of this
Council shall constitute and be a part of this Resolution as if fully copied herein in detail.
Passed by the City Council this 25th day of June , 1998.
, 07-r,' -1 Fix
- 1, . X.
-ATTEST:
Kaye Darnell, City Secretary
APPROVED AS TO CONTENT:
Paul Thompsoh, Director of Electric Utilities
APPROVED AS TO FORM:
Richard K. Casner, atural Resour Attorney
da/ccdocs/LG&EEnergy.res
June 18, 1998
Resolution No.5947
Item No. 31
June 25, 1998
GAS SALES CONTRACT
BY AND BETWEEN
LG&E ENERGY MARKETING INC.
AND
THE CITY OF LUBBOCK, TEXAS
DATED: July ol. 1998
PAGE
ARTICLE I
DEFINITIONS
2
ARTICLE 11
SALE AND PURCHASE OBLIGATIONS
8
ARTICLE III
PRICE
10
ARTICLE IV
TERM
12
ARTICLE V
BILLINGS AND PAYMENTS
13
ARTICLE VI
MEASUREMENT
13
ARTICLE VII
PRESSURES
15
ARTICLE VIII
QUALITY
16
ARTICLE IX
DELIVERY, TITLE AND RISK OF LOSS
16
ARTICLE X
DEFAULT
17
ARTICLE XI
WARRANTY
17
ARTICLE XII
TAXES
18
ARTICLE XIII
FORCE MAJEURE
18
ARTICLE XIV
IMBALANCES
19
ARTICLE XV
FINANCIAL RESPONSIBILITY
20
ARTICLE XVI
GOVERNING LAW
20
ARTICLE XVII
GOVERNMENT REGULATIONS
20
ARTICLE XVIII
AUDITING OF BOOKS AND RECORDS
21
ARTICLE XIX
ASSIGNMENT
21
ARTICLE XX
MISCELLANEOUS
21
EXHIBIT "A"
DELIVERY POINT(S)
24
EXHIBIT "B"
BRANDON, PLANT 2 DELIVERIES
25
THIS GAS SALES CONTRACT ("Contract") is hereby made and entered into this
i rt_ day of _ru,ly1, 1998 by and between LG&E Energy Marketing Inc. ("Seller") and
The City of Lubbock, Texas ("Buyer").
WHEREAS, Seller desires to sell natural gas on a firm basis to Buyer under the terms and
conditions of this Contract; and
WHEREAS, Buyer desires to purchase natural gas on a firm basis from Seller under the
terms and conditions of this Contract;
NOW THEREFORE, in consideration of the mutual promises and agreements made
herein, Buyer and Seller agree as follows:
ARTICLE I
Except where another meaning is expressly stated, the following terms, wherever they shall
appear in this Contract, shall have the following meanings:
1.1 `Base Index", with respect to any month, shall mean the price per MMBtu
reported in the first issue of Inside RE.R.C.'s Gas Market Report published in such month under
the table entitled "Prices of Spot Gas Delivered to Pipelines" for Northern Natural Gas Co.
(Texas, Oklahoma, Kansas) or under the table entitled "Market Center Spot -Gas Prices" for West
Texas Waha as selected by Buyer pursuant to Paragraph 2.2 hereof.
1.2 `Base Load Requirements" for any month, expressed on a daily basis, shall mean
that quantity nominated by Buyer, pursuant to Paragraph 2.2 hereof, at least four (4) days prior
to the beginning of any month, which is between the Minimum Daily Quantity and Maximum
Daily Quantity.
2
1.3 "Base Price" shall mean:
(i) During each of the first through fourth Contract Years:
A) For the first four million (4,000,000) MMBtu of gas delivered hereunder,
an amount equal to the Base Index plus fifteen cents ($0.15) per MMBtu.
B) For all volumes delivered hereunder in excess of four million (4,000,000)
MMBtu, an amount equal to the Base Index plus two and one-half cents
($0.025) per MMBtu; and
(ii) During each of the fifth through tenth Contract Years and for each Contract
Year thereafter, for all volumes delivered hereunder, an amount equal to the
Base Index plus two and one-half cents ($0.025) per MMBtu.
: G ' 1.
For all volumes delivered hereunder, an amount equal to the Base Index plus
two and one-half cents ($0.025) per MMBtu.
1.4 `British thermal unit" or 'Btu" shall mean the amount of energy required to raise
the temperature of one (1) pound avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5
degrees Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute.
1.5 "Contract Year" shall mean each period of twelve (12) consecutive months
beginning on the effective date of this Contract, and on each anniversary date thereof.
1.6 "Day" or "day" shall mean a period of twenty-four (24) consecutive hours,
beginning at 8:00 a.m., Central Time.
1.7 "Delivery Point(s)" shall mean the point(s) specified in Exhibit "A" hereto, as
may be amended from time to time upon mutual agreement of the parties.
1.8 "Imbalance Charges" shall mean any fees, penalties, costs or charges (in cash or
kind) assessed by a Transporter for failure to satisfy the Transporter's balancing and/or
nomination requirements.
i
1.9 "Minimum Daily Quantity" shall mean twelve thousand five hundred (12,500)
MMBtu of gas per day.
1.10 "Maximum Daily Quantity" shall mean forty five thousand (45,000) MMBtu of
gas per day.
1.11 "Minimum Annual Quantity" shall mean:
(i) for each of the first through fourth Contract Years, four million (4,000,000)
MMBtu of gas per year which qualifies as Baseload Requirements delivered
via Power -Tex Pipeline plus one million five hundred thousand (1,500,000)
MMBtu per year delivered via Power -Tex Pipeline and/or Red River Pipeline
in accordance with Appendix "B" attached hereto; and
(ii) for each of the fifth through tenth Contract Years and for each Contract Year
thereafter, five million five hundred thousand (5,500,000) MMBtu of gas per
year which qualifies as Baseload Requirements delivered via Power -Tex
Pipeline and/or Red River Pipeline.
1.12 "MMBtu" shall mean one million (1,000,000) British thermal units.
1.13 "Month" or "month" shall mean the period beginning at 8:00 a.m., Central Time,
on the first day of the calendar month and ending at 8:00 a.m., Central Time, on the first day of
the next succeeding calendar month.
1.14 "Natural gas" or "gas" shall mean natural gas produced from gas wells,
casinghead gas produced from oil wells, and residue gas remaining after the natural gas has been
treated for the removal of water, hydrocarbon compounds heavier than methane, or contaminants
as may be required to comply with the specifications set out in Article VIII hereof.
1.15 "Daily Index" with respect to each day shall mean the price reported in Gas Daily
as the Midpoint for Permian Basin Area, Northern (Mids 1-6) applicable to the day(s) of flow for
deliveries into Northern Natural Gas Company and/or the price reported in Gas Daily as the
Midpoint for Texas Intrastates, Waha area applicable to the day(s) of flow for deliveries into Red
River Pipeline at Waha.
4
1.16 "Daily Price" shall mean an amount equal to the Daily Index plus two cents
($0.02) per MMBtu.
1.17 "Daily Requirements", for any month, shall mean the volumes of gas purchased
and received by Buyer which are nominated by 8:45 a.m., Central Time, of the day immediately
preceding the day of deliveries in accordance with the procedures set forth in Paragraph 2.2
hereof. Volumes delivered hereunder which are designated as Daily Requirements shall not be
included in determining the Minimum Annual Quantity requirements as set forth in Section 1.11
hereof.
1.18 "Transportation Charges" shall mean the fee expressed in dollars per MMBtu
charged by the applicable delivery pipeline as follows:
(1) For Deliveries via Power -Tex Pipeline:
(i) During each of the first through fourth Contract Years:
A) For the first four million (4,000,000) MMBtu of gas delivered
hereunder per year which qualifies as Base Load Requirements, a
transportation rate of fifteen cents ($0.15) per MMBtu (inclusive of
fuel and shrinkage) will be charged for transportation on the Power -
Tex Pipeline.
B) For all volumes delivered hereunder in excess of four million
(4,000,000) MMBtu per year which qualify as Base Load
Requirements or all volumes delivered hereunder which qualify as
Daily Requirements or Intra-Day Requirements, a transportation rate
of $0.10 per MMBtu (inclusive of fuel & shrinkage) will be charged
for transportation on Northern Natural Gas Company to transport gas
to the inlet of the Power -Tex Pipeline. An additional transportation
charge of (1) $0.07 per MMBtu (inclusive of fuel and shrinkage) will
be charged for transportation on the Power -Tex Pipeline for volumes
delivered hereunder of up to four hundred, fifty eight thousand
5
(458,000) MMBtu per month and (2) $0.07 per MMBtu (inclusive of
fuel & shrinkage) will be charged to transport gas on the Power -Tex
Pipeline during the months of April through October and $0.05 per
MMBtu (inclusive of fuel and shrinkage) will be charged for this
service during the months of November through March for all volumes
delivered in excess of four hundred fifty eight thousand (458,000)
MMBtu per month.
ii) For each of the fifth through tenth Contract Years and each Contract
Year thereafter:
A) For all volumes delivered hereunder, a transportation rate of $0.10 per
MMBtu (inclusive of fuel & shrinkage) will be charged for
transportation on Northern Natural Gas Company to transport gas to
the inlet of the Power -Tex Pipeline. An additional transportation
charge of (1) $0.07 per MMBtu (inclusive of fuel & shrinkage) will be
included to cover transportation on the Power -Tex Pipeline for
volumes delivered hereunder of up to four hundred, fifty eight
thousand (458,000) MMBtu per month and (2). $0.07 per MMBtu
(inclusive of fuel & shrinkage) will be charged to transport gas on the
Power -Tex Pipeline during the months of April through October and
$0.05 per MMBtu (inclusive of fuel and shrinkage) will be charged for
this service during the months of November through March for all
volumes delivered in excess of four hundred fifty eight thousand
(458,000) MMBtu per month.
2) For Deliveries via Red River Pipeline:
The rate to be charged for transportation on Red River Pipeline
Company to the inlet of Lubbock Power & Light Company's Post
Lateral or any other mutually agreeable delivery points will be the
6
actual rate (inclusive of fuel & shrinkage) which Seller has negotiated
for this service.
1.19 "Transporter" shall mean Northern Natural Gas Company and/or Red River
Pipeline Company and their respective successors or assigns.
1.20. "Infra -Day Requirements" for any month shall mean the volumes of gas received by
Buyer in excess of such month's Base Load Requirements and Daily Requirements, if any.
Volumes delivered hereunder which are designated as Intra-Day Requirements shall not be
included in determining the Minimum Annual Quantity as set forth in Section 1.11 hereof.
1.21. "Option Price" shall be equal to the New York Mercantile Exchange ("NYMEX")
natural gas futures price on the date and time Buyer elects to price gas under the Fixed Price
Option provisions of Paragraph 3.3 hereof, plus or minus the NYMEX basis differential. The
NYMEX basis differential shall be determined monthly and shall be an amount equal to the
difference between the NYMEX near month posted closing price and the price reported in the
first issue of Inside F.E.R.C.'s Gas Market Report published during the month of flow under the
table entitled "Prices of Spot Gas Delivered to Pipelines" for Northern Natural Gas Company
(Texas, Oklahoma, Kansas) or under the table entitled "Market Center Spot Gas Prices" for West
Texas Waha.
1.22 "Fixed Price" shall mean:
(1) For deliveries via Power -Tex Pipeline:
(i) During each of the first through fourth Contract Years:
A) For the first four million (4,000,000) MMBtu of gas delivered hereunder,
an amount equal to the Option Price plus fifteen cents ($0.15) per MMBtu.
B) For all volumes delivered hereunder in excess of four million (4,000,000)
MMBtu, an amount equal to the Option Price plus two and one-half cents
($0.025) per MMBtu; and
7
(ii) During each of the fifth through tenth Contract Years and for each Contract
Year thereafter, for all volumes delivered hereunder, an amount equal to the
Option Price plus two and one-half cents ($0.025) per Wow.
(2) For deliveries via Red River Pipeline:
For all volumes delivered hereunder, an amount equal to the Option Price plus
two and one-half cents ($0.025) per MMBtu.
ARTICLE II
SALE AND PURCHASE OBLIGATIONS
2.1 Obligations. ions. During each Contract Year, Seller shall sell and deliver to Buyer, and
Buyer shall nominate, purchase and receive from Seller the Minimum Annual Quantity in effect
for that Contract Year. During days in which Buyer, pursuant to Paragraph 2.2 hereof, is
purchasing gas hereunder, Buyer agrees to nominate, purchase and receive from Seller a quantity
of gas not less than the Minimum Daily Quantity and up to the Maximum Daily Quantity.
2.2 Nominations. Buyer shall, no later than four (4) business days prior to the first day of
each month during the term hereof, notify Seller of (1) its Base Load Requirements for that
month (the "Monthly Nomination") and (2) the index to be used in calculating the Base Index as
defined in Paragraph 1.1 hereof. Thereafter, Buyer may increase its nominations to reflect
Buyer's Daily Requirements. Buyer must communicate such increase in nominations to Seller by
no later than 8:45 a.m., Central Time, of the day immediately preceding the day of deliveries. In
no event, however, shall Buyer reduce its Monthly Nomination below its Base Load
Requirements. In the event that Buyer, during any month, requires a change in its then -effective
nomination but fails to notify Seller in accordance with the deadlines specified in this Paragraph
2.2, Seller may agree, in its sole discretion, to alter Buyer's deliveries, but shall be under no
obligation to do so. In the event that Buyer, without following the above nomination procedures,
does receive gas in excess of the then -effective Baseload Requirements and the Daily
Requirements, if any, such gas shall be deemed Intra-Day Requirements. If, from time to time,
8
Buyer requires less gas than its then -effective Baseload Requirements, Buyer may notify Seller
and request that Seller assist Buyer in selling the excess gas. Seller's assistance shall include,
but shall not be limited to, the identification of potential buyers, analysis of price, identification
of necessary transportation, if any. Seller will provide Buyer each month during the term hereof,
a written summary of Seller's Monthly Nomination(s) and any nominations for Daily
Requirements or Intra-Day Requirements by the fifth business day of the following month.
2.3 Failure to Perform. In addition to any liability for Imbalance Charges, which shall
not be recovered twice by the following remedy, the exclusive and sole remedy of the parties in
the event of a failure to deliver or receive the nominated quantity shall be recovery of the
following: (i) in the event of a breach by Seller on any day(s), payment by Seller to Buyer in an
amount equal to the positive difference, if any, between the purchase price paid by Buyer for
replacement gas and the price specified hereunder, adjusted for commercially reasonable
differences in actual transportation costs incurred to or from the Delivery Point(s) multiplied by
the difference between the nominated quantity and the quantity actually delivered by Seller for
such day(s); or (ii) in the event of a breach by Buyer on any day(s), payment by Buyer to Seller
in the amount equal to the positive difference, if any, between the price specified hereunder and
the price received by Seller for the resale of such gas, adjusted for commercially reasonable
differences in actual transportation costs incurred to or from the Delivery Point(s), multiplied by
the difference between the quantity nominated and the quantity actually taken by Buyer for such
day(s); or (iii) in the event that Buyer has used commercially reasonable efforts to replace the gas
or Seller has used commercially reasonable efforts to sell the gas to a third party, and no such
replacement or sale is available, then the exclusive and sole remedy of the non -breaching party
shall be any unfavorable difference between the price specified hereunder and the applicable
Daily Index for the day(s) during which the breach occurred, adjusted for such transportation to
the applicable Delivery Point, multiplied by the difference between the quantity nominated and
the quantity actually delivered by Seller and received by Buyer for such day(s).
9
ARTICLE III
PRICE
3.1 Sales Price. For each MMBtu of gas delivered by Seller to Buyer which qualifies
as Base Load Requirements, Buyer shall pay to Seller an amount equal to the Base Price plus the
applicable Transportation Charge(s) and any applicable taxes pursuant to Article XII. For each
MMBtu of gas delivered by Seller to Buyer which qualifies as Daily Requirements, Buyer shall
pay to Seller an amount equal to the applicable Daily Price plus the applicable Transportation
Charge(s) and any applicable taxes pursuant to Article XII. For each MMBtu of gas delivered by
Seller to Buyer which qualifies as Infra -Day Requirements, Buyer shall pay to Seller the higher
of (1) the applicable Daily Price plus the applicable Transportation Charge(s) and any applicable
taxes pursuant to Article XII ,or (2) an amount equal to Seller's actual cost of gas plus two cents
($0.02) plus the applicable Transportation Charge(s) and any applicable taxes pursuant to Article
XII. For each MMBtu of gas delivered by Seller to Buyer which qualifies as Option Quantity, as
defined in Paragraph 3.3 hereof, Buyer shall pay to Seller an amount equal to the Fixed Price
plus the applicable Transportation Charge(s) and any applicable taxes pursuant to Article XII. In
the event that Buyer fails to take the Minimum Annual Quantity during any Contract Year,
Buyer shall pay Seller for each MMBtu of gas which constitutes the deficiency an amount equal
to the Base Price in effect on the last day of said Contract Year plus the Transportation Charge(s)
specified in Section 1.18 (1)(i)(A) hereof. Such amount, if any, shall be invoiced and paid in
accordance with the provisions of Article V hereof.
3.2 Unavailability of Price Indexing,, Information: In the event that information necessary
to determine the Base Index or Daily Index ceases to be available to Buyer and Seller, then the
parties shall immediately commence negotiations to establish a substitute pricing mechanism to
govern the remainder of the term of this Contract. The parties shall establish a substitute pricing
mechanism within fifteen (15) days of each such occurrence.
3.3 Fixed Price Option. Notwithstanding anything to the contrary in this Article III,
Buyer shall have the option to fix the price for a quantity of gas (the "Option Quantity") equal to
all or a portion of its Base Load Requirements and its Daily Requirements, if any, for any period
10
extending up to twelve (12) months from the time Buyer exercises such option. Buyer shall
make such election only on days during which the NYWX is open for business, by notifying
Seller in writing between the hours of 9:00 a.m. and 10:00 a.m. The Option Quantity and the
month(s) to be in effect shall be specified in the notice. The date of such election must be on or
before the fifteenth day of the month preceding the month in which deliveries subject to the
Option Price (as defined herein) are to commence. The election may be for deliveries for one or
more months, but deliveries during each month must be at a uniform rate throughout the month.
Once Buyer has exercised this option for any given period, the resulting Option Price or Option
Quantity cannot change. Buyer shall purchase and receive, or pay for if not taken, the Option
Quantity. Buyer must notify Seller in writing of the index to be used in determining the basis
differential (as defined in Section 1.21 hereof) by no later than 3:00 p.m., Central Time, three (3)
business days prior to the close of the NYWX contract. Buyer shall notify Seller no later than
11:00 a.m., Central Time, of the NY'NMX closing day of its desire to lock in a fixed price for the
near month. Buyer's failure to meet this 11:00 a.m. deadline will result in the use of the
NYWX contracts posted closing price for determining the Option Price.
3.4 Revenue Sharing. Seller agrees to share with Buyer the before tax net revenue of the
Power -Tex Pipeline, which is owned and operated by an affiliate of Seller. On or about the
thirty-fifth (35th) day following the initial month of this Contract, and each month thereafter,
Seller shall submit to Buyer, by first class United States mail, postage prepaid, a statement
showing gross revenue, total cost of gas, total operating expenses and before tax net revenue of
the Power -Tex Pipeline and the amount of Buyer's credit which represents five percent (5%) of
the before tax net revenue for each such month during the primary term of this Contract. In the
event that the before tax net revenue of the Power Tex Pipeline for any month is determined to be
negative, Buyer's share shall be determined to be zero.
3.5 Index Information. Seller shall routinely advise Buyer of the Base Index and Daily
Index.
11
3.6 Price Redetermination. If after the first Contract Year, Transporter increases the
rates it charges for transporting volumes delivered hereunder and/or the fuel and shrinkage
percentages associated with these deliveries, the Transportation Charge(s) and/or the fuel and
shrinkage percentages shall be escalated or increased by the amount of each such increase. Seller
shall notify Buyer of any such increase.
3.7 Exchange Agreement Administrative Fee. Buyer shall pay to Seller each month
during the first through fourth Contract Years only, an amount equal to two cents ($0.02) per
MMBtu on gas which Buyer receives during such month pursuant to an exchange agreement
with a third party. This fee will be applicable to the first four million (4,000,000) MMBtu of gas
received per year. Notwithstanding the above, during each of the first through fourth Contract
Years, Buyer shall be obligated to pay Seller an annual, minimum fee in the amount of eighty
thousand dollars ($80,000). No administrative fee shall be due from Buyer for any volumes of
gas which it receives pursuant to an exchange agreement with a third party which exceed four
million (4,000,000) MMBtu per year in each of the first through fourth Contract Years.
ARTICLE IV
TERM
This Contract shall become effective on July 1,1998 and shall continue in full force and
effect for a primary term of ten (10) years, and from Contract Year to Contract Year thereafter
until terminated by either party upon written notice to the other party, not less than sixty (60)
days prior to the commencement of any Contract Year following the primary term. Upon
termination of the primary term, Buyer may elect to utilize its own transportation for the purpose
of receiving gas hereunder. Such election shall be made in writing to Seller no less than ninety
(90) days prior to the termination of the primary term.
12
ARTICLE V
BILLINGS AND PAYMENTS
5.1 Invoices. Seller shall render to Buyer, on or before the tenth (10th) day of each
month, or as soon thereafter as practicable, an invoice for the preceding month showing the total
quantity of gas received by Buyer and the total amount due Seller therefore plus any other
amounts or credits due hereunder.
5.2 Payments and Interest. Buyer shall pay to Seller the invoice amount by no later
than ten (10) days following Buyer's receipt of Seller's invoice or the twentieth (20th) day of the
month, whichever occurs first. Each such payment shall be made by wire transfer in accordance
with the wiring instructions specified in Seller's invoices tendered hereunder. If Buyer fails to
pay any portion of any amounts due and owing to Seller when same is due, interest thereon shall
accrue at the prime rate of interest established by the Chase Manhattan Bank, or its successor, or
at the highest rate permitted by 1 aw, whichever is lower, from the date when such payment is
due until the same is paid.
5.3 Billing Adjustments. In the event that Buyer or Seller determine that the actual
quantity of gas delivered to Buyer during a calendar month was greater than or less than the
volume or quantity nominated by Buyer and for which payment has been made to Seller, then
Seller shall adjust for such underdelivery or overdelivery by debiting or crediting the invoice for
the succeeding month, or as soon thereafter as is practicable.
ARTICLE VI
MEASUREMENT
6.1 Measurement. The metering facilities measuring the volumes of gas delivered at
the Delivery Points hereunder shall be maintained and operated by Seller. The Btu content of the
gas shall be determined by gas chromatograph (or other methods as may be mutually agreed
upon) of such gas taken at the facilities at the Delivery Points. Such facilities and measurement
data with respect to the gas covered hereby shall at all reasonable times be subject to joint
inspection by the parties hereto. Seller shall routinely make available to Buyer electronically
13
generated measurement data. All gas delivered hereunder shall be measured in accordance with
the provisions of the Gas Measurement Committee Report No. 3 of the American Gas
Association, as amended from time to time and mutually agreeable to Buyer and Seller. The unit
of volume for measurement of gas delivered hereunder shall be one (1) cubic foot of gas at a base
temperature of sixty (60) degrees Fahrenheit and at an absolute pressure of fourteen and sixty-
five one hundredths pounds per square inch absolute (14.65 psia). Atmospheric pressure shall be
assumed to be thirteen and two -tenths pounds per square inch absolute (13.2 psia) at the Delivery
Points irrespective of the actual atmospheric pressure at such points from time to time.
Temperature shall be determined by a recording thermometer of standard make acceptable to
both parties. Specific gravity and Btu shall be determined by gas chromatograph or other
methods as may be mutually agreed upon. The numerical value of the continuous temperature
recorded during each fifteen minute period, the factor for specific gravity according to the latest
test therefor, and the correction for deviation from Ideal Gas Laws applicable during each fifteen
minute period shall be used to make proper computations of volumes hereunder. In determining
the gross heating value (Btu content) to be used hereunder, the gross heating value of the gas thus
obtained shall be adjusted to a dry basis at a temperature of sixty (60) degrees Fahrenheit at an
absolute pressure of fourteen and sixty-five one -hundredths (14.65) pounds per square inch
absolute.
6.2 Corrections and Meter -Calibration. At least once a month, and so far as
convenient and practicable upon the corresponding day of each month, the measuring party shall
calibrate its meters and appurtenant instruments, all in the presence of representatives of the other
party, as hereinafter provided, and the parties shall jointly observe any adjustment made. If the
aggregate error in these measuring devices is found upon testing to register not more than two
percent (2%) in error, then they shall be deemed to be correct. All measuring devices shall be
adjusted upon test to register accurately within the tolerance allowed by their respective
manufacturers. If the aggregate error in these measuring devices is more than two percent (2%)
in error, adjustments shall be made by applying the percentage of error to the volume involved
14
during the time the metering equipment was out of calibration, if this period can be ascertained.
If the length of time the metering equipment was out of calibration cannot be ascertained, then
the percentage of error will be applied to the volume delivered for one-half of the time elapsed
since the date of the last calibration. During the time any meter is out of repair or is being tested,
or in the event of sudden failure of any meter to register for any period accurately within the two
percent (2%) variation allowed herein, and if it is not feasible to install another meter, then the
volume of gas flowed shall be estimated using the best available information until a new or
repaired meter is installed. Adjustment and settlement shall be made at the regular monthly
periods on the basis of the amount of gas registered at like pressures for like periods of time
when the meter was registering accurately. Seller shall give Buyer notice of the time of all tests
of meters and appurtenant instruments sufficiently in advance of the holding such tests so that
Buyer may have its representatives present; provided, however, if Seller has given such notice to
Buyer and Buyer is not present at the time specified, then Seller may proceed with the tests as
though Buyer were present, and the results therefrom shall be deemed correct and accurate.
ARTICLE VII
PRESSURES
Seller shall deliver gas to Buyer at the Delivery Points and pressures shown on Exhibit
"A". Seller shall not be required to deliver gas at pressures greater than that shown on Exhibit
"A" unless mutually agreed upon by the parties. Buyer shall not be required to receive gas at
pressures less than that shown on Exhibit "A" unless mutually agreed upon by the parties.
Notwithstanding anything to the contrary, in the event that Seller is unable to deliver gas to
Buyer at Buyer's required pressures without the installation of compression, Seller shall install
and operate compression equipment as required to effect deliveries hereunder. All costs and
expenses related to the installation, operation and maintenance of such compression equipment
shall be the sole responsibility of Buyer. Such costs and expenses shall be invoiced and paid in
accordance with the terms of Article V hereof.
15
specifications:
form.
ARTICLE VIII
All gas delivered by Seller at the Delivery Points shall conform to the following
a.Liquids: The gas shall be commercially free from water and hydrocarbons in liquid
b. Hydrogen Sulfide: The gas shall not contain more than one quarter (1/4) grain of
hydrogen sulfide per one hundred (100) cubic feet.
C. Organic Sulfur: The gas shall not contain more than five (5) grains sulfur per one
hundred (100) cubic feet.
d. Carbon Dioxide: The gas shall not contain more than three percent (3%) carbon
dioxide by volume.
e. Dust. Gums. etc.: The gas shall be commercially free of dust, gums and other
solid matter.
f. Water Vapor: The gas shall not contain more than six (6) pounds of water in the
vapor phase per million cubic feet.
g. Heating Value: The gas shall have a gross heating value of not more than one
thousand one hundred twenty (1,120) and not less than nine hundred fifty (950) British thermal
units per cubic foot.
h. Temperature: The temperature of the gas shall not exceed one hundred twenty
(120) degrees.
ARTICLE IX
1 V_' WO,
All gas sold hereunder shall be delivered by Seller to Buyer at the Delivery Point(s). Title
to all gas sold and delivered hereunder shall pass to Buyer as the gas enters the outlet side of the
Delivery Point(s). Seller and Buyer each assume full responsibility and liability for and shall
16
indemnify and hold harmless the other party from and against all liability and expense on
account of any and all damages, claims or actions, including injury to and death of persons,
arising from any act or accident occurring when the gas is under the control of the indemnifying
party, unless such act or accident arises from the negligence or willful misconduct of the other
Ply•
ARTICLE X
DEFAULT
In the event that either party shall default in the performance of any of its obligations
hereunder, except for its obligation to deliver or receive gas which is covered under Paragraph
2.3 hereof, and said default is not rectified within seven (7) days of written notice of said default,
the non -defaulting party may, at its option, terminate this Contract upon written notice to the
defaulting party. Such termination shall not relieve the defaulting party from any liability
hereunder which accrued prior to the date of such termination. The non -defaulting party shall be
entitled to all expenses and fees, including reasonable attorneys' fees, suffered or incurred by it in
endeavoring to enforce this Contract or any provision hereof.
ARTICLE XI
WARRANTY
Seller represents and warrants that it has full right and authority to enter into this Contract
and that all gas will be delivered by Seller free from all liens, royalties, and encumbrances and
that all taxes in effect on the date of this Contract applicable prior to delivery shall have been or
will be paid.
17
ARTICLE XII
TAXES
Seller shall pay or cause to be paid taxes lawfully levied against Seller prior to the
delivery of the gas by Seller to Buyer hereunder and shall fully indemnify Buyer from and
against all claims with respect thereto. Unless specified otherwise, the price Buyer shall pay
Seller for gas sold and delivered shall include any applicable state or local gas revenue, utility,
sales or use tax which may be assessed as a result of sales of gas hereunder.
ARTICLE XIII
FORCE MA TEURE
13.1 Suspension of Performance. Subject to the other provisions of this Article XIH,
neither party shall be deemed in breach of any covenants or obligations imposed hereby in the
event that either party fails to observe or perform any such covenants or obligations and such
failure is occasioned by, in connection with, or in consequence of force majeure, as hereinafter
defined.
13.2 Force Majeure. For purposes of this Contract, the term "force majeure" shall
mean acts or events beyond the control of the party claiming force majeure, and which, by the
exercise of due diligence such party is unable to avoid or overcome, including, but not limited to,
acts of God, strikes, lockouts, or other industrial disturbances, riots, epidemics, landslides,
floods, fires, washouts, arrests and restraints, civil disturbances, explosions, breakage of or
accidents to machinery or lines of pipe, failure of equipment or materials, hydrate obstructions of
lines of pipe, weather related events affecting an entire geographic region, such as low
temperatures which cause freezing or failure of wells or lines of pipe, the failure or refusal of any
transporting pipeline to transport or deliver the gas sold hereunder, well blowouts, craterings,
compliance with acts, orders or regulations of any federal, state or local governmental authority,
or any other cause, whether or not of the same class or kind (but not including economic
18
hardship), reasonably beyond the control of either party and which, by exercise of due diligence,
such party is unable to overcome or avoid.
13.3 Notice. The party suspending performance under this Article XIII shall give
prompt notice to the other party (the initial notice may be verbal, but shall be immediately
confirmed in writing) and shall attempt to cure promptly the cause for such suspension. Upon
cessation of the cause for suspension, performance shall resume (or commence) as soon as
reasonably practicable, unless otherwise agreed to by the parties.
13.4 Settlement of Labor Disputes. Notwithstanding any other provisions hereof, the
parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be
entirely within the discretion of the particular party involved and such party may make settlement
at such time and on such terms and conditions as it may deem to be advisable and no delay in
making such settlement shall deprive such party of the benefit of Paragraph 13.1 hereof.
ARTICLE XIV
IMBALANCES
The parties shall use commercially reasonable efforts to avoid imposition of any
Imbalance Charges. If Buyer or Seller receives an invoice from a Transporter that includes
Imbalance Charges, the parties shall determine the validity as well as the cause of such
Imbalance Charges. If the Imbalance Charges were incurred as a result of Buyer's actions or
inactions (which shall include, but shall not be limited to, Buyer's failure to accept quantities of
gas equal to the nominated quantity), then Buyer shall pay for such Imbalance Charges, or
reimburse Seller for such Imbalance Charges paid by Seller to Transporter. If the Imbalance
Charges were incurred as a result of Seller's actions or inactions (which shall include, but shall
not be limited to, Seller's failure to deliver quantities of gas equal to the nominated quantity),
then Seller shall pay for such Imbalance Charges, or reimburse Buyer for such Imbalance
Charges paid by Buyer to Transporter.
19
ARTICLE XV
FINANCIAL RESPONSIBILITY
Should the creditworthiness or financial responsibility of either party become
unsatisfactory to the other party at any time during the term of this Contract, satisfactory security
may be required before further performance hereunder is undertaken. In the event either party
shall (i) make an assignment or any general arrangement for the benefit of creditors; (ii) default
in the payment or performance of any obligation to the other party under this Contract; (iii) file a
petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding
or cause under any bankruptcy or similar law for the protection of creditors or have such petition
filed or proceeding commenced against it; or otherwise become bankrupt or insolvent (however
evidenced); (v) be unable to pay its debts as they fall due or (vi) fail to give adequate security for
or assurance of its ability to perform its further obligations under this Contract within forty-eight
(48) hours of a reasonable requests by the other party, then the other party shall have the right to
withhold or suspend deliveries or terminate the Contract without prior notice, in addition to any
and all other remedies available hereunder or pursuant to law.
Each party reserves to itself all rights, set -offs, counterclaims, and other defenses which it
is or may be entitled to arising from or out of this Contract.
Texas.
ARTICLE XVI
GOVERNING LAW
This Contract shall be governed and construed in accordance with the laws of the State of
ARTICLE XVII
GOVERNMENT REGULATIONS
This Contract is made subject to, and the parties shall comply with, all valid and
applicable federal, state and local laws and all valid and applicable orders, rules and regulations
of all governmental authorities having jurisdiction in the premises.
20
ARMLE XVM
AXMr TMO OF BOOKS 11N11 'RECORDS
Each party's books, accounts and records relating to the sale and purchase of gas here=der may
be audited by the other party within twenty-four (24) months fallowing the end of a month for which much
sale, pu 4wa or payment was made. Sash patty may caaduct such. audit upon reasonable. written notice
to tiro other party, and the cast of such audit shall be at the auditing par" own expense. Arty claim
arising out of such audit mast be presented by the auditing party within two (2) moths of the completion
of the audit. Any ovctagc or underage sball be paid by the appropriate party within thirty (30) days after
detezmhtationtizer L
ARTICLE =
ASSIGNMENT
This Contract shall be binding upon and imn to the benefit of the parties hereto, their successors
and assigns. No assign uxut; or transfer by efther party alua be made without the prior, written approval of
the other party. which approval "tent be unreasonably withheld.
Nothing contained herein shall require cansent to transfer or assign this eoatract by virtue of the
sell or disposal by buyer of suhstantially all of t#= abetric generating facilities by it
ARITCLE XX
MISMLLANEOVS
20.1 Notices. Any notice provided for is this Contract or any notice which Buyer or Seller
may give to The other party shall be in writing tad shall be deemed delivered whoa mailed, telexed or
teleeopted to the 4ddfwk tola or telecopier number of the patties as (Allows:
5S,Y.T.SR All. Matters
LO&E Energy Marketing Ir.e.
2777 St= s Freeway, Suite 1700
D EL% Tw:as 75207
Arta: Vice Freddcat, western MarkcCng
Telephone l90.: (214) 640- 6733ntlecopier No.: (214) 640-6931
Page 21
BUYER: All Matters
City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457
Attn: Managing Director, Lubbock Power & Light
Telephone No.: (806) 775-2500
Telecopier No.: (806) 775-3112
or such other address, telex number, or telecopier number as a party may from time to
time designate by written notice.
20.2 Headings. The headings in this Contract are inserted for convenience of reference
only and shall not affect the meaning or construction thereof.
20.3 Waiver. No waiver by either party of any one or more defaults or breaches by the
other party in the performance of this Contract shall operate or be construed as a waiver of any
other defaults or breaches, whether of a like or of a different character. No waiver or
modification of this Contract shall occur as a result of course of performance.
20.4 Entire Agreement. This Contract contains the entire agreement of the parties and
there are no other promises, representations or warranties which form a part of this contract. Any
provision of this Contract which is construed to be prohibited or unenforceable shall be
ineffective only to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or the validity or unenforceability of this Contract as a whole.
20.5 Amendments. Any amendments or modifications to this Contract shall be in writing
and shall be signed by the parties hereto.
20.6 Limitation of Liability. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
HEREIN, IN NO EVENT WILL EITHER PARTY BE LIABLE UNDER THIS CONTRACT
FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES.
20.7 Telephonic Taping. Each of the parties hereto (i) consent to the recording of the
telephone conversations of their respective trading and marketing personnel directly responsible
for the administration of this Contract; and (ii)agree that any such electronic recordings may be
submitted in evidence in any suit, action or other proceedings in relation to this Contract.
22
IN WITNESS WHEREOF, this Contract has been properly executed by the parties
hereto as of the date first above written.
BUYER:
SELLER:
THE CITY OF LUBBOCK, TEXAS LG&E ENERGY MARKETING INC.
Alvin Jones
Windy Sito, klayoir
By:
A ST: Title: VP, M rk ting
Kayth Darnell, City Secretary
APPROVED AS TO CONTENT:
Paul Thomps n,
Director of Electric Utilities
APPROVED AS ORM:
Richard K._casner
Natural•Resources Attorney
23
EXHIBIT "A"
TO THAT GAS SALES CONTRACT
BY AND BETWEEN
LG&E ENERGY MARKETING INC.
AND
THE CITY OF LUBBOCK
DATED July 01, 1998
' • jz#
• Power-Tex/LP&L at the Holly Street Generating Plant;
• Power-Tex/Texas Tech Campus Cogeneration Facility
• Power-Tex/Energas at the existing Plant 2 Delivery Point
• Proposed Interconnect between Red River Pipeline
and LP&L's Post Lateral;
• Any other mutually agreeable points
MINIMUM DELIVERY POINT
PRESSURES (PSIG)
300
400
300
750
TO BE DETERMINED
If compression is installed, it is understood that the minimum delivery point pressures will be
revised to indicate the new values.
24
EXHIBIT `B"
TO THAT GAS SALES CONTRACT
BY AND BETWEEN
LG&E ENERGY MARKETING INC.
AND
THE CITY OF LUBBOCK
DATED July 01, 1998
1) Brandon Station: One million (1,000,000) MMBtu per year starting September 1, 1998.
2) Repowering Project at Plant No. 2: Five hundred thousand (500,000) MMBtu per year
commencing upon completion of repowering project (estimated to begin May 1, 1999).
25