ORDINANCE _________________

AN ORDINANCE relating to the City Light Department; authorizing the Superintendent or his designee to enter into Amendment No. 1 to North Mountain Substation Power Transfer Agreement with Public Utility District No. 1 of Snohomish County, Washington, which will provide for interconnection of a small generator and the return of any surplus generation that flows into the City's transmission system.

WHEREAS, in 1991, the Public Utility District No. 1 of Snohomish County, Washington ("District") and the City executed a Power Transfer Agreement that provides for the transfer of power from Bonneville Power Administration to the District at the City's North Mountain Substation; and

WHEREAS, the District has negotiated an agreement with one of its retail customers to interconnect a 7.25-MW generator at a lumber mill near Darrington, Washington; and

WHEREAS, the Power Transfer Agreement specifically prohibits the District from interconnecting generation in the area served by the North Mountain Substation without first negotiating an amendment of its Power Transfer Agreement with the City to provide for such interconnection; and

WHEREAS, the District and the City have determined that the proposed Hampton Mill Generator may safely interconnect to the District's distribution system in the Darrington area and operate as planned with no adverse impact on the City's transmission system; and

WHEREAS, the District and the City have agreed that the City should be compensated for tracking and returning any surplus generation that flows into the City's transmission system; and

WHEREAS, the District and the City have negotiated Amendment No. 1 to the North Mountain Substation Power Transfer Agreement, which will provide for interconnection of the Hampton Mill Generator and update the joint operating criteria to ensure safe and reliable operation of the generator; NOW, THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. The Superintendent of the City Light Department, or his designee, is hereby authorized to enter into Amendment No. 1 to the North Mountain Substation Power Transfer Agreement, substantially in the form attached to this ordinance as Exhibit A. This amendment allows the City to accommodate the desire of the Public Utility District No. 1 of Snohomish County, Washington ("District") to interconnect a generator to its customer in the Darrington area under specific operating criteria that will provide for safe and reliable operation of the City's electric system. The amendment also allows the City Light Department to charge an additional fee to track and return to the District any surplus generation that may flow into the City's electric system as a result of the operation of the Hampton Generating Project. The Superintendent, or his designee, is further authorized to revise the amended Power Transfer Agreement in the future to accommodate changes in the capacity of the Hampton Generating Project or interconnection of new generators that the City Light Department then determines would have no significant impact on its operations.

Section 2. Any acts taken in furtherance of this ordinance that are taken after its passage, but prior to its effective date, are 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 _________, 2006, and signed by me in open session in authentication of its passage this _____ day of __________, 2006.

_________________________________

President __________of the City Council

Approved by me this ____ day of _________, 2006.

_________________________________

Gregory J. Nickels, Mayor

Filed by me this ____ day of _________, 2006.

____________________________________

City Clerk

(Seal)

Exhibit A: Amendment No. 1 to North Mountain Substation Power Transfer Agreement

Cindy Wright/CW

SCL Power Transfer Agreement Amendment ORD

July 18, 2006

Version 2

1

Exhibit A

AMENDMENT NO. 1 TO NORTH MOUNTAIN SUBSTATION

POWER TRANSFER AGREEMENT

This Amendment No. 1 to the North Mountain Substation Power Transfer Agreement ("Amendment") is entered into as of ____________, 2006 by and between the City of Seattle, Washington, acting by and through its City Light Department ("City") and Public Utility District No. 1 of Snohomish County, Washington ("District") to amend the North Mountain Substation Power Transfer Agreement dated September 15, 1991 ("Power Transfer Agreement"). The City and the District are each sometimes referred to individually in this Amendment as "Party"; the City and the District are sometimes referred to together in this Amendment as "Parties." Capitalized terms used in this Amendment, unless otherwise defined herein, have the meanings set forth for such terms in the Power Transfer Agreement. In consideration of the mutual promises contained herein, the Parties hereby agree to amend the Power Transfer Agreement as follows:

1. Subsection 2.2 is deleted in its entirety and the following is substituted in lieu thereof:

2.2 Exhibit A, which, together with other designated exhibits herein, is attached hereto and by this reference made a part of this Agreement, sets forth the estimated Annual Peak Demand of the District's operations in the Darrington area to be served by the North Mountain Substation. Exhibit A will be revised by the City's representative annually as of August 1 as appropriate in the manner described in Section 14 to reflect the highest actual peak demand measured at the Point of Delivery for the previous 12 months, except it shall not be set at a demand level less than 11 MW and is subject to the Maximum Peak Demand limitation set forth in Subsection 2.1.

2. Subsection 2.4 is deleted in its entirety and the following is substituted in lieu thereof:

2.4 The transfer service provided pursuant to the Agreement is predicated on the fact that no generating facilities, other than the 7.25 MW Hampton Wood Waste Generating Project or its successor project of the same capacity ("Generating Project"), are currently operating in the Darrington area and interconnected to the District's distribution system. The District agrees that it will not increase the generating capability of the Generation Project nor interconnect any other generation (including cogeneration, etc.) facility to the District's distribution system in the Darrington area without the City's approval.

3. The following new section shall be added immediately following Section 2.6:

2.7 In the event that generation from the Generating Project exceeds the District's load in the Darrington area ("Excess Generation") and flows onto the City's transmission lines at the point of interconnection between the parties at North Mountain Substation, the City will return such Excess Generation to the District consistent with the procedures defined below.

2.7.1 The City shall track the hourly net energy inflow at the point of interconnection between the parties at North Mountain Substation in order to return such Excess Generation to the District at Snohomish Substation. From Wednesday through Tuesday each week, the City shall record the hourly net energy amount of Excess Generation in whole megawatts (MW) as read from the City's meters at the point of interconnection between the parties in the North Mountain Substation, which is recorded in the City's Energy Management System (Actual Interchange Log). By the close of business on Friday of each week, the City and the District shall confirm the plan for scheduling the return of hourly Excess Generation; otherwise the City may schedule the return of Excess Generation according to the data from its Energy Management System. By Tuesday each week, the City shall schedule, in accordance with accustomed industry scheduling practices and procedures, the return of hourly Excess Generation to the District for the following Wednesday through Tuesday during like hours and in the same amounts as occurred 336 hours (two weeks) earlier. These scheduling procedures may be modified by mutual agreement documented in writing and signed by both parties.

2.7.2. For the services provided by the City related to return of Excess Generation described above, the District shall pay the City a flat fee added to the monthly invoice prepared pursuant to Section 7 and paid according to this Power Transfer Agreement. The amount of the flat fee shall be $1,000 per calendar month. The parties shall mutually review the fee for Excess Generation return service under the following circumstances: (1) every five years beginning August 1, 2011, (2) if the amount of hourly Excess Generation exceeds 7 MW, or (3) if the occurrence of Excess Generation exceeds 300 hours per month. Upon review of the service fee, if the parties cannot reach mutual agreement, the City may discontinue providing the Excess Generation return service to the District and the City shall have no further responsibility with respect to return of Excess Generation to the District.

2.7.3 Should the City file an open access transmission tariff with its regulatory entity prior to the expiration of this Agreement, the City may convert the Excess Generation return service described herein to a comparable service that is made available under the City's approved tariff.

2.7.4 The District may terminate the return service described in this Section 2.7 upon one year's written notice to the City and upon the effective date of such termination, the City shall have no further responsibility with respect to return of Excess Generation.

4. Subsection 6.1 is deleted in its entirety and the following is substituted in lieu thereof:

6.1 Scheduling, dispatching, communications and other aspects of this Agreement will be established and coordinated between the District and the City in accordance with the operating criteria set forth in Exhibit C, Revision No. 1, North Mountain Substation Operating Criteria dated June 2006. Exhibit C may be changed by the City's Representative by notice to the District's Representative given in the manner described in Section 14.

5. Sections 14 is deleted in its entirety and the following is substituted in lieu thereof:

14.0 Representatives of the Parties Notices

All notices described herein shall be in writing and be delivered to the Representatives of the Parties as follows:

14.1 To the City:

Customer Service and Energy Delivery Officer

Seattle City Light

PO Box 34023

Seattle, WA 98124-4023

With copies of any notices, demands or requests also sent to:

Manager, Wholesale Contracts

Power Management Division

Seattle City Light

PO Box 34023

Seattle, WA 98124-4023

14.2 To the District:

Assistant General Manager

Distribution and Engineering Services

Snohomish County Public Utility District

1802 75th Street SW, Mail Stop 01

PO Box 1107

Everett, WA 98206

With copies of any notices, demands or requests also sent to:

Substation Engineering Manager

Snohomish County Public Utility District

1802 75th Street SW, Mail Stop 01

PO Box 1107

Everett, WA 98206

14.3 Any notice, demand or request to either Party under this Agreement, or any revision of Exhibits provided for herein shall be deemed properly given or made on the date delivered in person, in writing, or sent via certified mail, return receipt requested, by the Representative of one Party to the Representative of the other Party.

6. All of the provisions of the Power Transfer Agreement, as modified by this Amendment, remain in full force and effect.

THE CITY OF SEATTLE, PUBLIC UTILITY DISTRICT NO. 1 OF

CITY LIGHT DEPARTMENT SNOHOMISH COUNTY

By: Ordinance attachment Do By: _____________________

Not Sign

Name: Chris Heimgartner Name: _____________________

Title: Customer Service and Energy Title: _____________________

Delivery Officer

Attachment 1: North Mountain Substation Operating Criteria

Page 4 of 4

Exhibit A to Ordinance

Attachment 1 to Exhibit A

NORTH MOUNTAIN SUBSTATION OPERATING CRITERIA

I. DISPATCHING

Under normal conditions, the City's Power Dispatcher has authority and the responsibility for operation of the 230-kV components of the North Mountain Substation and the District's Power Dispatcher has authority and the responsibility for operation of the 12-kV components of the Substation. The City's Power Dispatcher shall act as the intermediary between the District's Power Dispatcher and Bonneville Power Administration's Transmission Business Line ("BPAT") for the purpose of North Mountain Substation transmission operations.

1) Reactive and Voltage Control

The City's Power Dispatcher shall have the right to require switching changes within the capability of the North Mountain Substation by telephone request to the District's Power Dispatcher. Such changes shall be made within twenty (20) minutes of the request.

The Parties' Power Dispatchers shall mutually establish standing orders to require the 7.25 MW Hampton Lumber Generator (the "Generating Project") to absorb reactive power (i.e., volt-amperes reactive or "VAR") upon request by the City's Power Dispatcher. The purpose is to reduce excessive voltage in the City's 230-kV system. The amount of reactive power that the Generating Project may be required to absorb shall be limited to the Generating Project's safe and stable operating limits. The City's Power Dispatcher, at his/her sole discretion may verbally request that the District's Power Dispatcher assist the City in altering the 230-kV voltage and the District's Power Dispatcher shall use his/her best efforts to accommodate such request. The District's Power Dispatcher shall be responsible for calling the Generating Project's Operator and completing required adjustments within 20 minutes of contact by the City's Power Dispatcher. The District shall provide the City's Power Dispatcher with the Generating Project's current generation capability curve, which will be used to determine the safe and stable operating limits.

2) Switchyard Control

The North Mountain 230-kV transformer bushings (high side) shall be recognized as the interconnection point between the District and the City. Switches labeled "Disconnect 240 Bank 11" and "Disconnect 240 Bank 12" and all equipment on the City's side of the jurisdictional boundary shall be under control of the City's Power Dispatcher. All equipment associated with the District's distribution system on the District's side (i.e., the 12-kV or "low" side) of the transformer shall be under control of the District's Power Dispatcher.

3) North Mountain Emergency Operating Plan

The District's Power Dispatcher and the City's Power Dispatcher shall establish standing orders that provide that under certain emergency conditions, the City may, in its sole discretion, make verbal requests directly to the District's Substation Operator to change the distribution station configuration to assist in arresting emergency conditions, pursuant to the arrangements specified in the 1991 North Mountain Substation Operation and Maintenance Agreement between the Parties, as amended.

If the emergency condition results in a system blackout or separation of the City's generation from the City's control area (i.e., one or more generators trip off-line), the first priority of the Parties' Power Dispatchers shall be to restore the electric system and bring voltage and frequency into acceptable operating ranges. During the system restoration, the City's Power Dispatcher may, in his/her sole discretion, verbally request that the District's Power Dispatcher shut down or separate the Generation Project from the District's distribution system and the District's Power Dispatcher shall promptly comply with such request. During the system restoration process, the City may adjust its generation schedules appropriately.

4) Generator Operating Status

The District's Power Dispatcher shall notify the City's Power Dispatcher of any change in operating status of the Generating Project within 20 minutes of "running" status or "out-of-service" status. In the case where there are repeated starts and stops of the Generating Project for testing, a single call to notify the City Dispatcher of the test is sufficient. When the test is complete and the system is restored to normal, the District's Power Dispatcher shall also notify the City's Power Dispatcher of the new change of status.

5) Increased Output Notification

The District's Power Dispatcher shall promptly notify the City's Power Dispatcher of any increase in the output of the Generating Project exceeding 8.7 MW (120 percent of 7.25 MW). If the Generating Project output is expected to exceed 8.7 MW on a sustained basis for more than 14 days, the District's Chief Dispatcher shall so notify the City's Customer Service and Energy Delivery Officer in writing, with a copy to the City's Director of System Operations. The letter shall clearly outline the increase in planned generation and duration of the increase.

6) Curtailment of the Generating Project

The City's Power Scheduler (or the City's Power Dispatcher in an emergency) shall have the right to curtail or interrupt the operation of the Generating Project, in part or in whole, to prevent overload of the City's facilities due to (a) failure of a sectionalizing breaker at the City's Bothell Substation, (b) scheduled or unscheduled outages of multiple 230-kV lines between the City's Skagit generating plants and Bothell Substation, or (c) multiple 115kV line outages in the City's electric system.

7) Other Notification Requirements

The District's Power Dispatcher shall immediately notify the City's Power Dispatcher of any abnormal distribution system switching conditions, including the closure of the District's 12-kV interconnection to its Oso Substation.

The City's Power Dispatcher shall immediately notify the District's Power Dispatcher of any conditions on the City's system that will adversely affect the transfer of energy under this Agreement.

A Party shall provide advance notice to the other Party of routine maintenance at any points of integration or delivery customarily used under this Agreement.

II. SCHEDULING

The power that is transferred to the District pursuant to this Agreement is delivered (unscheduled) to the City at its interconnections with BPAT, while the City simultaneously delivers (unscheduled) an equivalent amount of power to the District at the North Mountain Substation. Any scheduling necessary for power transfers between BPAT and the City made pursuant to this Agreement shall be done on Pacific Time between the City's Power Scheduler and BPAT's dispatchers.

1) Actual Transmission

The City will provide BPAT with hourly readings of kilowatt-hour meters from the North Mountain Substation until BPAT's telemetry at Snohomish Substation is expanded or until such time that BPAT no longer has use for such information.

2) Losses

The District shall compensate the City for losses on the City's transmission system associated with power transfers to the District in accordance with Section 7 of this Agreement.

3) Excess Generation

The City will track net hourly energy inflow of Excess Generation from the Generating Project to the City's system and shall return such energy to the District as provided in Section 2.7 of this Agreement.

III. CONTROL AREA SERVICES

BPAT provides the District control area services including Automatic Generation Control ("AGC"). BPAT monitors the District's load and provides load following generation including the District's demand at North Mountain Substation.

1) AGC Telemetering

The Parties have agreed that the North Mountain 230-kV breakers 24095 and 240-96 (breakers for the Gorge-North Mountain transmission line) shall be recognized as the AGC telemetering points separating the District from the City. Thus, all the District's North Mountain Substation load, transformer losses and losses on the Snohomish-North Mountain 230 kV transmission line shall be considered parts of the District's aggregate load served by BPAT's control area services, including AGC control.

Exhibit C, Revision No. 1

June 2006

Power Transfer Agreement

Page 1 of 4 Attachment 1 to Exhibit A to Ordinance