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2005-150-RES WATER SERVICE CONTRACT TENASKA III TEXAS PARTNERS RESOLUTION NO. 2005-150 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS, APPROVING AND AUTHORIZING THE EXECUTION OF A WATER SERVICE CONTRACT BY AND BETWEEN THE CITY OF PARIS AND TENASKA III TEXAS PARTNERS, A TEXAS GENERAL PARTNERSHIP; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on the 13th day of March, 1989, the City of Paris and Tenaska III Texas Partners, a Texas General Partnership entered into an agreement for the sale of water by the City to the Partnership; and, WHEREAS, the aforesaid original contract was due to expire by its own terms unless extended by agreement of the parties on September 30,2005; and, WHEREAS, the City Council did heretofore in Resolution No. 2005-089 on the 8th day of August, 2005, approve and authorize the execution of a renewal and extension of a Water Service Contract through January 30, 2006, on the same terms and conditions as the original Water Service Contract; and, WHEREAS, the City and Tenaska III Texas Partners have completed negotiation of a new water service contract to establish the rates, terms, and conditions for the future sale of water to Tenaska III Texas Partners; and, WHEREAS, the proposed new water purchase contract allows Tenaska III Texas Partners to establish its anticipated maximum daily demand for water use, thereby affording the company the opportunity to establish its water demands in a manner best suiting the operations of its facility in Paris, Texas; and, WHEREAS, the City Council finds and determines that the proposed new water purchase contract is in the best interest of the City of Paris; THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved. Section 2. That the Mayor shall be and he is hereby authorized to execute and the City Clerk to attest to a new water purchase contract by and between the City of Paris and Tenaska III Texas Partners, a copy of which is attached hereto and for all purposes incorporated herein as Exhibit A. Section 3. That this resolution shall be effective from and after its date of passage. PASSED AND APPROVED this 12th day of December, 2005. ATTEST: APPROVED AS TO FORM: ,jJ, ~~.)l ~ D. Lestock, Assistant City Attorney J1N' Curtis Fendley, Mayor STATE OF TEXAS ~ ~ KNOW ALL MEN BY THESE PRESENTS: COUNTY OF LAMAR ~ WATER SERVICE CONTRACT WHEREAS, the City of Paris and Tenaska III Texas Partners have previously entered into an Agreement dated March 13, 1989 (the Original Water Service Contract) whereby the CITY would sell and supply and the PARTNERSHIP would receive and pay for potable water for use at the PARTNERSHIP'S co-generation plant (the "Plant") located within the city limits of the City of Paris; and, WHEREAS, the aforesaid Original Water Service Contract, since its original approval, has been amended and extended, the latest such extension dated August 8, 2005; and, WHEREAS, the CITY and the PARTNERSHIP desire to enter into an entirely new Water Service Contract to replace the aforesaid Original Water Service Contract, including the most recent extension thereof, the purpose of said new Water Service Contract to more accurately reflect the needs and demands of PARTNERSHIP for a supply of water and to implement a revised methodology for assessing rates charged to PARTNERSHIP for receipt of said water; and, WHEREAS, the CITY and the PARTNERSHIP agree that a new Water Service Contract, as the same is embodied herein is in the best interest of the respective parties. This Agreement, made and entered into this 12th day of December, 2005, and executed in multiple originals, each executed copy constituting an original, by and between the City of Paris, a municipal corporation of Lamar County, Texas, hereinafter referred to as CITY and Tenaska III Texas Partners, a Texas General Partnership, with its principal place of business located at 301 Lake Crook Road, Lamar County, Texas, hereinafter referred to as PARTNERSHIP, WITNESSETH: I. Service to be furnished 1.1 The CITY agrees to furnish and PARTNERSHIP agrees to purchase and take a supply of water in accordance with the terms and conditions hereof. Said supply of water shall be taken through an existing service by means of a 4-inch ISCO Magnetic Flow Tube, which includes a flow versus time recording device and a pressure versus time recording device connected to the CITY'S 33-inch potable water transmission line approximately 2.2 miles south of CITY'S Water Treatment Plant. Should PARTNERSHIP request that the meter herein described be replaced by a substitute meter, such replacement meter and all costs for the installation of the same shall be borne by PARTNERSHIP. If the meter herein described, or any replacement meter, shall by CITY be deemed to need replacement or repair, then the cost of such shall be borne equally by CITY and PARTNERSHIP. In either case, such meter replacement shall be accomplished without amendment to this Agreement by giving notice of the manufacturer's name, model and meter number of the new Tenaska III Water Service Contract - Page 1 EXHIBIT A. meter, which notice shall be delivered to the appropriate persons as provided for in Paragraph 9.8 ante, and which shall be affixed to this Agreement as an appendix. 1.2 The potable water furnished shall be used exclusively for the operation of PARTNERSHIP'S electrical cogeneration plant located at 301 Lake Crook Road, Paris, Lamar County, Texas. II. Quantities to be Furnished 2.1 The average daily supply of water furnished shall meet all reasonable requirements of PARTNERSHIP, subject to such limitations and rates as all are stated herein. The water delivered to PARTNERSHIP shall be at a minimum pressure of seventy-five (75) pounds per square inch; the cost of delivering such pressure is included in the rate established in Article VII. In no instance shall PARTNERSHIP require delivery of water under this Agreement in an amount exceeding 2.3 million gallons per day. 2.2 PARTNERSHIP will advise the CITY a minimum of forty-eight (48) hours prior to the implementation of any planned changes to PARTNERSHIP'S operations that would significantly affect the amount of water used by PARTNERSHIP for any extended period of time. For the purpose of this Agreement, a significant effect would be a change that would cause or contribute to PARTNERSHIP'S water consumption varying by 250,000 gallons or more on a daily basis and would exclude operational dispatch, forced (unplanned and immediate) outages, and maintenance outages. The PARTNERSHIP will notify the CITY by November 1st of each year concerning the current schedule of planned outages for the subsequent year. For any changes such as these, the CITY will maintain the right to limit any increase in water sold to PARTNERSHIP if it would adversely impact the integrity of the CITY'S water system. The CITY would then work with PARTNERSHIP, in good faith, to meet PARTNERSHIP'S water needs. III. Resale of Water 3.1 PARTNERSHIP may not permit any water furnished hereunder to be used for any purpose other than to supply the Plant without specific approval of the City Council of the CITY. IV. Rights to Test 4.1 The CITY reserves the right to inspect, test, calibrate, repair or replace the water meter used to measure PARTNERSHIP'S water consumption as required. Such replacement, calibration, or repair shall be charged to and paid one halfby CITY and one halfby PARTNERSHIP, except as provided in Paragraph 1.1. Tenaska III Water Service Contract - Page 2 V. Water quality 5.1 The CITY shall supply PARTNERSHIP with water of quality equal to or exceeding the State of Texas water quality requirements for water supplied for public use. 5.2 The CITY shall supply, upon request, but no more frequently than monthly, a water quality analysis report of the water supplied to PARTNERSHIP. In the event PARTNERSHIP desires a more comprehensive or more frequent chemical analysis of the water supplied, then the cost of such shall be borne by PARTNERSHIP. 5.3 The CITY bears no degree of responsibility for the water quality at any point beyond the meter described in Article I. PARTNERSHIP bears the responsibility for maintaining the water quality at any point beyond the meter and within PARTNERSHIP'S distribution system. 5.4 PARTNERSHIP shall notify and keep the CITY informed of persons responsible for the integrity of PARTNERSHIP'S distribution system. 5.5 Each of the parties shall immediately notify the other party's City Manager or Plant Manager, or such Manager's designee, as the case may be, of any emergency or condition which may affect the quality or quantity of water in either party's system. 5.6 The CITY reserves the right to make inspections of those facilities which may affect the quality of the water supplied to PARTNERSHIP and perform required tests. VI. Equipment and operation 6.1 PARTNERSHIP shall provide taps and all lines and valves beginning with the tap on the CITY'S 33-inch potable water transmission line. CITY shall maintain said taps at CITY'S expense and shall maintain the valve nearest the tap at PARTNERSHIP'S expense. City shall at PARTNERSHIP'S expense maintain the 12-inch service line and valves beginning at the valve nearest the tap, and all pipe and valves between the tap and the meter, excluding the valves immediately at the meter. PARTNERSHIP shall at PARTNERSHIP'S expense maintain meter isolation valves immediately at the meter and the meter emergency by-pass valves. PARTNERSHIP shall maintain at all times, in working order, a back-flow prevention device approved by the City, which device can be used for protecting the CITY'S system from contamination in the event of PARTNERSHIP'S system becoming contaminated, or in the event the integrity ofP AR TNERSHIP'S system is violated. The CITY shall provide the PARTNERSHIP with at least a 48-hour notice prior to any scheduled repairs to the Plant's water supply. 6.2 The CITY'S representative may regularly inspect the meter measuring the supply of water furnished and report when the same is known or suspected to be registering incorrectly. The Tenaska III Water Service Contract - Page 3 meter shall be repaired by a service representative qualified to work on the meter being repaired. In the event the meter must be replaced, CITY will determine a replacement meter and the method of replacement. The cost of maintenance or repair will be distributed in accordance with Paragraph 4.1. 6.3 The CITY'S representative assisted by a service representative qualified to work on the meter being repaired, will annually during each calendar year, test the accuracy and performance of the meter and will calibrate the meter measuring PARTNERSHIP'S consumption, to verify its accuracy. The CITY may, at its discretion, choose to calibrate the meter more frequently, if conditions so warrant. The cost of the calibration will be distributed in accordance with paragraph 4.1. A representative ofP AR TNERSHIP will be notified in advance of any testing and/or calibration and shall have the right to witness any such testing. All testing will be performed by a qualified representative or mutually agreed upon testing service. 6.4 When it is determined that the water meter has registered incorrectly, an estimate of the amount of water furnished through the faulty meter shall be prepared by CITY'S Director of Finance for the purpose of billing PARTNERSHIP. The estimate shall be based upon such method (such as a water usage measurement correlated to actual electrical generation) which would most accurately reflect the actual consumption for the period in which the meter failure occurred as mutually agreed upon by the City Manager and Plant Manager of the respective parties. 6.5 For the meter to be determined as "registering incorrectly," the meter must be found to be in error by plus or minus 2.5%, or greater. If the degree of error is plus or minus 2.5%, or greater, then the estimated amount of water furnished to PARTNERSHIP will be calculated as stated in the immediately preceding paragraph. VII. Rates 7.1 For purposes of billing under this Agreement, a day shall be that period of time beginning at 12:00 midnight and continuing through 11 :59 p.m. 7.2 PARTNERSHIP will be charged a two-part rate based on PARTNERSHIP'S treated water consumption and Maximum Day Demand. 7.3 Charges for treated water furnished to PARTNERSHIP during the Initial Period of this Agreement shall be from the date of execution through May 31, 2006 and have been computed as follows: 7.3.1 An annual demand charge per million gallons per day (MGD) of Maximum Day Demand of water delivered to PARTNERSHIP shall be $95,228 per MGD. 7.3.2. The volumetric charge shall be $0.60 per 100 cubic feet of treated water withdrawn by PARTNERSHIP from the CITY'S water utility system. Tenaska III Water Service Contract - Page 4 7.4 F or the Initial Period, PARTNERSHIP'S Maximum Day Demand shall be established at 1.8 MGD. 7.5 Each twelve (12) month period following the Initial Period, beginning June 1 and ending May 31 of the following year, shall be defined as a "Rate Year." 7.6 For cost of service studies following the Initial Period, historical data accumulated during each twelve-month period ending September 30 of the prior year, hereafter referred to as the "T est Year," shall be used. For the cost of service studies, the Maximum Day Demand will be the greater of the Maximum Day Demand from the historical Test Year or the amount requested by the PARTNERSHIP and accepted by the City. 7.7 Prior to the end of the Initial Period, a detailed Cost of Service Study will be performed by an independent utility rate consultant chosen by the CITY, such study to be performed in accordance with the methodology described in that excerpted portion of the R. W. Beck, Inc. study, May, 2005, attached as Exhibit 1. The Cost of Service Study shall be developed on an actual historical cost test year basis (for the Test Year) allowing for reasonable and necessary expenses of providing such water service and allowing for known and measurable adjustments, including satisfying the CITY'S obligations under current and future bond covenants. Thereafter, on an annual cycle, a detailed Cost of Service Study shall be performed by an independent rate consultant chosen by the CITY again using the same methodology as the excerpted portion of the Study in Exhibit 1, unless and until a different methodology is mutually agreed upon in writing by PARTNERSHIP and the CITY. CITY shall pay for the cost of each annual Cost of Service Study and allocate the cost across all customer classes. 7.8 During the Initial Period and any given Rate Year, should PARTNERSHIP'S actual Maximum Day Demand exceed the then current Maximum Day Demand established for the Initial Period or any given Rate Year, PARTNERSHIP will be assessed an excess demand charge of 1.5 times the Annual Demand Charge (per MGD) times the Excess Demand. Payment of the Excess Demand Charge shall be due thirty (30) days within receipt of invoice from the CITY. Beginning the month after this event, this event will also immediately change PARTNERSHIP'S current Maximum Day Demand and Monthly Demand Charge for this Agreement to the new actual Maximum Day Demand and adjusted Monthly Demand Charge. AS AN EXAMPLE, ADJUSTMENTS FOR AN INCREASE FROM A MAXIMUM DAY DEMAND OF 1.8 MGD TO A MAXIMUM DAY DEMAND OF 2.1 MGD ARE CALCULATED IN THE EXAMPLE GIVEN BELOW. Example: Maximum Day Demand Annual Demand Charge (per MGD) Total Initial Annual Demand Charge ($95,228 x 1.8 MGD) Monthly Demand Charge ($171,410/12 months) 1.8 MGD $ 95,228 $171,410 $ 14,284 Actual demand recorded Excess Demand (2.1 MGD -1.8 MGD) 2.1 MGD OJ MGD Tenaska III Water Service Contract - Page 5 Excess Demand Charge ($95,228 x 1.5 x OJ MGD Excess Demand) Additional amount due CITY in thirty (30) days $ 42,853 $ 42,853 Annual Demand Charge (per MGD) Adjusted Total Annual Demand Charge ($95,228 x 2.1 MGD) Adjusted Monthly Demand Charge ($199,979/12 months) $ 95,228 $199,979 $ 16,665 Should the new Maximum Day Demand again be exceeded during a given Rate Year, similar calculations and a designation of a Maximum Day Demand for the Rate Year shall be made. The highest Maximum Day Demand in a given Rate Year that exceeds the current Maximum Day Demand shall be used as the Maximum Day Demand in the subsequent year's cost of service study, unless a higher Maximum Day Demand is requested by PARTNERSHIP and accepted by the CITY. Example: Maximum Day Demand (initial estimate) Maximum Day Demand (Actual) Maximum Day Demand for subsequent cost of service study 1.8 MGD 2.1 MGD 2.1 MGD (or higher, at request of P ARlNERSHIP) If a higher Maximum Day Demand than actually experienced is requested by PARTNERSHIP, and accepted by the CITY, PARTNERSHIP'S Total Annual Demand Charge will be the Annual Demand Charge (per MGD), calculated using the actual Maximum Day Demand for the subsequent cost of service study, times the requested Maximum Day Demand. 7.9 PARTNERSHIP'S volumetric rate shall be based on PARTNERSHIP'S treated water consumption during the twelve-month prior Billing year, adjusted for any known and measurable changes. 7.10 The following example illustrates the calculation of PARTNERSHIP'S Annual Demand Charge (per MGD) and volumetric rate under this Agreement. Example: PARTNERSHIP'S Extra Capacity costs PARTNERSHIP'S Maximum Day Demand (MGD) PARTNERSHIP'S Annual Demand Charge (per MGD) $177,567 -7- 1.865 $ 95,228 PARTNERSHIP'S Base and Customer costs PARTNERSHIP'S water consumption (CCF) PARTNERSHIP'S volumetric rate (per CCF) $ 98,078 -7- 163.224 $ 0.60 Tenaska III Water Service Contract - Page 6 VIII. Payment of Charges 8.1 Rates under Article VII of this Agreement, for PARTNERSHIP'S treated water consumption, shall be billed by the CITY on a monthly basis with such billing being rendered on or about the same day each month. PARTNERSHIP'S monthly payment shall consist of the volumetric charge for actual water plus one-twelfth of the Annual Demand Charge, plus any additional amount due as calculated under Article VII of this Agreement for an adjustment to the Maximum Day Demand. In the event PARTNERSHIP shall fail to make any payment required by this Agreement within twenty-one (21) days following the billing date, the CITY may suspend water service authorized by the Agreement after providing PARTNERSHIP'S five (5) working days written notice of its intention to suspend service. It is agreed that this paragraph shall supersede Sections 34-29 and 34-30 of the Code of Ordinances of the City of Paris, to the extent that they concern water service, as well as any other Code of Ordinance provisions with which it may conflict. IX. Miscellaneous Provisions 9.1 It is agreed that in the event and to the extent that fire, explosion, accident, war, act of God or the public enemy or any natural disaster prevents the performance of either party hereto, such party shall be relieved of the consequences thereof, and there shall be no liability for payment on the part of PARTNERSHIP or for failure to deliver potable water on the part of the CITY, notwithstanding any other provision of this Agreement, so long as and to the extent that performance is prevented by such cause; provided, however, that the parties shall use all due diligence in their efforts to resume performance at the earliest practical time. 9.2 This Agreement shall be subject to and in all things governed by Article V, Chapter 34 of the Code of Ordinances of the City of Paris, dealing with Drought Contingencies, or any other similar provisions as the same shall be adopted by the City dealing with water conservation, water curtailment, or drought contingencies. 9.3 As of January 1, 2006, this Water Service Contract will replace in its entirety the Original Water Service Contract dated March 13, 1989, as subsequently amended, including that extension of said Original Water Service Contract dated August 8, 2005, entered into between the CITY and PARTNERSHIP, and this Agreement shall be in force and effect for a period ending January 31, 2009. Thereafter, a new service contract will be negotiated, provided this Agreement shall remain in full force and effect for a period not to exceed twelve (12) months or until a new contract is negotiated, whichever event occurs first. If a new contract is not negotiated as provided herein, the rate charged for water shall be as established in the CITY'S current rate ordinance for non-residential customers. Ifthe cost of water to PARTNERSHIP under this Water Service Contract in a Rate Year exceeds the cost to PARTNERSHIP under the normal tariff rates for a Commercial Class 4-inch meter, CITY shall reimburse PARTNERSHIP for such difference. Tenaska III Water Service Contract - Page 7 9.4 No officer, official or agent of the CITY has the power to amend, modify or alter this Agreement or waive any of its conditions or to bind the CITY by making any promise or representation not contained herein. 9.5 No officer, official or agent ofthe PARTNERSHIP has the power to amend, modify or alter this Agreement or waive any of its conditions or to bind the PARTNERSHIP by making any promise or representation not contained herein. 9.6 This Agreement, except by operation oflaw, shall not be assigned or transferred by either party, without the prior written consent of the other party; which consent shall not be unreasonably withheld; provided, however, that PARTNERSHIP shall have the right to pledge or mortgage its rights hereunder as security for its indebtedness without approval of the CITY. 9.7 The CITY will not be responsible in damages for any interruption or failure to supply water (subject to those limitations set out herein) and shall be saved and held harmless from all damage of any kind, nature and description which may arise as a result of making this Agreement and furnishing water hereunder, except where the CITY has the ability to supply the water (subject to those limitations set out herein) and refuses so to do, or where the CITY has failed to abide by any of its obligations under this Agreement. 9.8 Any written notice required or permitted under the terms of this Agreement shall be given and be deemed to have been duly served if either (1) delivered in person (including reputable overnight courier service), or (2) deposited certified mail, return receipt requested, postage prepaid in the United States mail, addressed to the designated representative of the respective parties which are designated as follows: TENASKA III TEXAS PARTNERS CITY Plant Manager T enaska III Texas Partners 301 Lake Crook Road Paris, TX 75460 City Manager City of Paris P.O. Box 9037 Paris, IX 75461-9037 With a copy to: Managing General Partner T enaska III Texas Partners 407 North ll7th Street Omaha, NE 68154 With a copy to: City Clerk City of Paris P.O. Box 9037 Paris, TX 75461-9037 9.9 If any term or provision of this Agreement shall be declared unconstitutional or void by any court of competent jurisdiction, the constitutionality and validity of the remainder of said Agreement shall not be affected thereby, and to this end the terms and provisions of said Agreement are declared to be severable. Tenaska III Water Service Contract - Page 8 9.10 Nothing contained in this Agreement shall be deemed or construed to create the relationship of principal and agent, partnership, joint venture, landlord and tenant, or any relationship or association whatsoever between CITY and PARTNERSHIP, other than as expressly set forth herein. 9.11 This Agreement sets forth the entire understanding between the parties, and any other understandings or agreements shall be cancelled and superseded by this Agreement upon the date of execution hereof. None of the terms of this Agreement shall be waived, discharged, altered or modified in any respect, except by an Agreement in writing signed by both parties and specifically referring to this Agreement. The captions in this Agreement are included for convenience only and shall not be taken into consideration in any construction or interpretation of this Agreement or any of its provisions. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Texas. Venue for any state court actions arising hereunder shall lie exclusively in the courts of Lamar County, Texas, and for any federal court action shall lie exclusively in the courts of the Eastern District of Texas. The provisions of this Agreement shall apply to, bind and inure to the benefit of the CITY and PARTNERSHIP, and their respective successors, legal representatives and permitted assigns, if any, and not to any third party. x. City's Authority to Contract 10.1 (a) The parties recognize and agree that Section 34-2 of the Code of Ordinances of the City of Paris requires that consumers or purchasers desiring water at minimum delivery pressure, particular flow rate, volume in excess of 1.5 million cubic feet per month, or which require construction of oversized additions to the CITY'S distribution system, be delivered water pursuant to a written contract upon such terms, conditions and at such rate as may be fixed by the City Council of the City of Paris. (b) This Agreement is such a written contract. ATTEST: Janice Ellis City Clerk PPR~VE AS T..O FORM -11..... __ ;Jl, ve~~-A D. Lestock, Assistant City Attorney Tenaska III Water Service Contract - Page 9 TENASKA III TEXAS PARTNERS, By Tenaska III Partners, Ltd., its Managing General Partner By Tenaska III, Inc., Managing Partner By: Larry V. Pearson, Executive Vice President ATTEST: Ronald N. Quinn, Secretary STATE OF TEXAS ~ COUNTY OF LAMAR ~ BEFORE ME, the undersigned authority, on this day personally appeared Curtis Fendley, Mayor of the City of Paris, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _ day of ,2005. Notary Public, State of Texas STATEOFNEBRASKA ~ COUNTY OF DOUGLAS ~ BEFORE ME, the undersigned authority, on this day personally appeared Larry V. Pearson, Executive Vice President of Tenaska, III, Inc., known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _ day of 2005. Notary Public, State of Nebraska Tenaska III Water Service Contract - Page 10