AN ORDINANCE relating to the City Light Department; authorizing the execution of the Energy Delivery and Exchange Agreement between The City of Seattle ("City") and Public Utility District No. 1 of Pend Oreille County, Washington ("District").

WHEREAS, the City has constructed and does operate and maintain the Boundary Project, Project No. 2144, duly licensed under the Federal Power Act; and

WHEREAS, the license for the Boundary Project contains Article 49, which provides for the City to assign up to 48,000 kilowatts from the Boundary Project to the District ("Article 49 Power"); and

WHEREAS, the City and the District desire to make the most economical and beneficial use of their electric generating and transmission resources; Now, Therefore,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. The Superintendent of the City Light Department is authorized to execute for and on behalf of the City the agreement entitled, "Energy Delivery and Exchange Agreement Between Public Utility District No. 1 of Pend Oreille County and The City of Seattle," substantially in the form of the attached agreement. The agreement provides for the City to deliver power to the District at delivery points within Pend Oreille County, and for the District to schedule at least 60 percent of its Article 49 power on all hours of the month. Such scheduling will enable the City to reduce its transmission demand on the Bonneville Power Administration system.

Section 2. Any act pursuant to the authority and prior to the effective date of this ordinance is hereby ratified and confirmed.

Section 3. This ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by Municipal Code Section 1.04.020.

Passed by the City Council the _____ day of ____________, 1995, and signed by me in open session in authentication of its passage this _____ day of _________________, 1995.

_____________________________________

President _______ of the City Council

ENERGY DELIVERY AND EXCHANGE AGREEMENT between PUBLIC UTILITY DISTRICT NO. 1 OF PEND OREILLE COUNTY and THE CITY OF SEATTLE

THIS ENERGY DELIVERY AND EXCHANGE AGREEMENT ("ENERGY DELIVERY AGREEMENT") is by and between Public Utility District No. 1 of Pend Oreille County, Washington, ("DISTRICT") a municipal corporation of the State of Washington, and the City of Seattle, Washington, ("CITY") a municipal corporation of the state of Washington. Each of the DISTRICT and the CITY is sometimes referred to individually in this Energy Delivery Agreement as "Party;" the DISTRICT and the CITY are sometimes referred to together in this Energy Delivery Agreement as "Parties."

RECITALS

WHEREAS, the DISTRICT is authorized to construct, operate and maintain electric generating, transmission, and distribution facilities to serve the DISTRICT'S electric loads in Pend Oreille County, Washington; and

WHEREAS, the DISTRICT owns and operates electric generating facilities in Pend Oreille County, including the Box Canyon Project, Project No. 2042 duly licensed under the Federal Power Act, and the Calispel Hydroelectric Development on Calispel Creek and the Sullivan Creek Project, Project No. 2225, duly licensed under the Federal Power Act; and

WHEREAS, the Parties entered into a Power Purchase Contract dated February 3, 1956 ("Power Purchase Contract") which, among other things, provides for the DISTRICT to deliver to the CITY a portion of the power generated by the Box Canyon Project; and

WHEREAS, the Parties entered into an agreement dated December 20, 1965 to provide for a manner of determining compensation to the DISTRICT for any backwater encroachment on the DISTRICT'S Box Canyon project as a result of the operation of the CITY'S Boundary Project ("Boundary Encroachment Agreement"); and

WHEREAS, the Parties entered into an agreement dated September 5, 1969 ("Box Canyon Settlement Agreement") to settle a dispute and to provide for the delivery of power by the DISTRICT to the CITY pursuant to the Power Purchase Contract; and

WHEREAS, the CITY has constructed and does operate and maintain the Boundary Project, Project No. 2144 duly licensed under the Federal Power Act; and

WHEREAS, the license for the Boundary Project contains an Article 49, which provides for the CITY to assign up to 48,000 kilowatts from the Boundary Project to the DISTRICT ("Article 49 Power"); and

WHEREAS, effective August 1, 1995, Article 49 Power exceeds the power generated by the Box Canyon Project which is delivered to the CITY pursuant to the Power Purchase Contract; and

WHEREAS, the CITY, pursuant to the Boundary Encroachment Agreement, returns power to the DISTRICT to replace the power lost by the DISTRICT as a result of the operation of the Boundary Project ("Boundary Encroachment Power"); and

WHEREAS, the Parties entered into a letter agreement dated May 13, 1992, enabling the Parties to exchange or sell electric energy that is surplus to their respective needs on an interruptible basis and at points of delivery mutually agreed to by the parties' schedulers or dispatchers ("Enabling Agreement"); and

WHEREAS, the DISTRICT'S existing electric loads in Pend Oreille County exceed the DISTRICT'S existing electric resources including Article 49 Power, power generated by the DISTRICT'S Box Canyon Project and used by the DISTRICT, and other resources; and

WHEREAS, the Parties desire to make the most economical and beneficial use of their electric generating and transmission resources.

NOW, therefore, in consideration of the foregoing facts, the DISTRICT and the CITY Parties agree to the following terms and conditions:

1. The Parties agree that to the extent that facilities are available, the CITY shall deliver all Article 49 Power and all Boundary Encroachment Power to the DISTRICT at a delivery point or points within Pend Oreille County.

2. The Parties agree that, so long as necessary to preserve the exemption from federal income taxation of the interest on bonds issued by the DISTRICT under the provisions of Section 142 (a)(8) of the Internal Revenue Code of 1986, and amended, (the "Code"), the DISTRICT will not be required under the terms of the Power Purchase Contract, the Box Canyon Settlement Agreement, the Boundary Encroachment Agreement, or Article 49 of the license for the Boundary Project to make any sale of electric power to the CITY that will cause the DISTRICT to be other than a net importer of electric power determined on an annual basis. This section shall not apply if it is no longer necessary to meet the requirements of Section 42 (a)(8) of the Code in order to preserve the exemption from federal income taxation of interest on such bonds (for example, if the bonds would qualify for treatment as bonds that are not private activity bonds because private business uses of the facility financed with bond proceeds declines).

3. The DISTRICT shall accept and receive the delivery of all Article 49 Power and all Boundary Encroachment Power delivered by the CITY at a delivery point or points within Pend Oreille County.

4. The Parties agree to cooperate and to make reasonable efforts to arrange for the construction, operation and maintenance of electric interconnection and transmission facilities in Pend Oreille County which are sufficient to deliver, transmit and receive the power to be delivered by the CITY to the District pursuant to legal requirements and agreements. An example of such cooperation is the proposed "Boundary Transmission Tap Line Agreement".

5. To the extent that economic and reasonable arrangements can be made, and to the extent that facilities are available, the Parties agree to Interchange and exchange electric power under the Enabling Agreement in a manner which results in the most economical delivery of power and the least transmission and associated electric losses for both Parties.

6. The DISTRICT shall schedule a minimum of 60 percent of the maximum Article 49 capacity in all hours of the month to enable the CITY to reduce its Boundary transmission demand on the Bonneville Power Administration ("Bonneville") system.

7. This Agreement shall be binding upon the DISTRICT and the CITY and their successors and assigns as of the date the last entity signs this Agreement. This Agreement shall be amended only with the express written consent of both Parties.

8. This Energy Delivery Agreement shall become effective on the date of the last signature for and on behalf of the Parties, and shall terminate on August 1, 2005, which is the end date of the Power Purchase Contract.

IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date first above written.

PUBLIC UTILITY DISTRICT NO. 1 CITY OF SEATTLE OF PEND OREILLE COUNTY BOARD OF COMMISSIONERS

By _____________________________ By_______________________________ General Manager Superintendent

Date: ___________________________ Date: _____________________________

GM:sjt (REG12-03.0)