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2015-258ORDINANCE NO. 2015 -258 AN ORDINANCE AUTHORIZING THE CITY MANAGER, OR HIS DESIGNEE, TO EXECUTE AN AGREEMENT OR AGREEMENTS BETWEEN THE CITY OF DENTON ( "CITY ") AND THE TEXAS MUNICIPAL POWER AGENCY ( "TMPA ") THAT PROVIDES FOR THE TERMS AND CONDITIONS UNDER WHICH THE CITY, THROUGH DENTON MUNICIPAL ELECTRIC, WILL BE RESPONSIBLE FOR THE OPERATION, MAINTENANCE AND CONSTRUCTION OF ALL TMPA TRANSMISSION ASSETS IN DENTON COUNTY, TEXAS; AUTHORIZING THE EXPENDITURE OF FUNDS; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Denton operates a municipally -owned electric company and is a founding member of the Texas Municipal Power Agency; WHEREAS, TMPA owns transmission assets that deliver electric power to the City and TMPA uses the City of Garland, also a member of TMPA, to operate, maintain and construct the majority of its electric transmission infrastructure; WHEREAS, in 2013 TMPA authorized the City to construct, operate, maintain and own parts of the Denton 138kV electric transmission infrastructure; WHEREAS, the City has been operating for years as a first responder to repair TMPA electric transmission infrastructure in Denton County; WHEREAS, TMPA and the City have agreed that it would be more efficient and mutually beneficial for the City to operate, maintain and construct TMPA electric transmission assets in Denton County; WHEREAS, the City's plans for the operation, maintenance and construction of TMPA electric transmission assets have been reviewed and favorably received by both the Electric Reliability Council of Texas and the Texas Reliability Council; WHEREAS, the Public Utility Board has considered this matter and unanimously recommended that the City Council approve and authorize the execution of the requisite agreement or agreements necessary for the City to operate, maintain and construct TMPA electric transmission assets in Denton County WHEREAS, the City Council finds that this ordinance is in the best interest of both the citizens and ratepayers; NOW THEREFORE THE COUNCIL OF THE CITY OF DENTON ORDAINS: SECTION 1. The recitations contained in the Preamble to this ordinance are incorporated by reference into this Ordinance. SECTION 2. The City Manager, or his designee, is authorized (a) to execute on behalf of the City (i) the agreement, or agreements, substantially in the form of the attached Exhibit "A "; and, (ii) any other documents necessary for fulfilling the terms and conditions of the agreement or agreements; and (b) to make expenditures in accordance with the terms of the agreement and agreements. SECTION 3. If any section, article, paragraph, sentence, phrase, clause or word in this ordinance, or application thereof to any persons or circumstances, is held invalid or unconstitutional by a court of competent jurisdiction, such holding shall not affect the validity of the remaining portions of this ordinance; the City Council declares that it would have ordained such remaining portion despite such invalidity, and such remaining portion shall remain in full force and effect. SECTION 4. This ordinance shall become effective immediately upon its passage and approval. PASSED AND AI'PRO E' this the _ play o f ......... `" :.......�* 2015, (1 111, Il 1 �..� WATTS, MAYOR........ .. �........ ATTEST: JENNIFER WALTERS, CITY SECRETARY APP "VN�I AS I'O LEGAL FORM: AN 'A BURGESS, CITY ATTORNEY By� TRANSMISSION OPERATOR, MAINTENANCE, AND CONSTRUCTION SERVICES AGREEMENT This Transmission Operator, Maintenance, and Construction Services Agreement (the "Agreement ") is entered into on the day of "�.... _ 2015 (the "Effective Date ") between Texas Municipal Power Agency ( "TMPA ") and the City of Denton, Texas (the "City" or "Denton "). Recitals TMPA is the owner of an electric transmission system that has been constructed, operated, and maintained for the purpose of delivering power to the cities of Bryan, Garland, Denton, and Greenville (the "Member Cities ") and providing transmission service to wholesale transmission customers in ERCOT including any additions or modifications to the "TMPA Transmission System ". Exhibit A of this Agreement lists the TMPA assets in Denton County that are subject to this Agreement. This Agreement defines the operation, maintenance, and construction services for those TMPA assets which will be performed by Denton. Definitions Wherever used in this Agreement, the following terms shall have the meanings specified or referred to in this section. Agreement means this TRANSMISSION OPERATOR, MAINTENANCE, AND CONSTRUCTION SERVICES AGREEMENT between Denton and TMPA, including all exhibits or attachments, as the same may be amended, supplemented, or modified in accordance with its terms. EXHIBIT 1 Annual System Budget shall mean the fiscal year budget approved by the TMPA Board of Directors for the planned operation and maintenance of the TMPA Transmission System. The Annual System Budget will not be funded from bonds or other debt. Annual Capital Budget shall mean the fiscal year budget comprised of the transmission capital projects approved by the TMPA Board of Directors. ERCOT shall mean the Electric Reliability Council of Texas or its successor. FERC shall mean the Federal Energy Regulatory Commission or its successor federal agency. Field Operations refers to the operation of the TMPA Transmission System and shall mean either the manual or automatic process of switching, operating, clearing, and tagging TMPA Transmission System equipment for the purposes of maintaining, testing, servicing, removing, or installing equipment from transmission lines or stations. Good Utility Practice shall mean any of the practices, methods, and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods, and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method, or act to the exclusion of all others, but rather includes all acceptable practices, methods, or acts generally accepted in the region. NERC shall mean the North American Electric Reliability Corporation or its successor. Operating Costs shall mean the total actual costs (without mark -up) properly and reasonably incurred by Denton on behalf of TMPA in the ordinary course of business solely for the administration, operation, and maintenance of the TMPA Transmission ►a System, including without duplication: (i) wages and overhead costs for employees of Denton, including overtime, retirement plans, medical and life insurance, disability and occupational hazard insurance, employee benefits, employee savings plan, and employee taxes; (ii) employee recruitment and relocation costs; (iii) employee training, including tuition, travel, meals, and lodging; (iv) maintenance costs and expenses, including scheduled, routine, preventative, and unscheduled maintenance; (v) the cost of consumables, new and replacement spare parts, unloading, handling, and taking inventory of same; (vi) office expenses; (vii) capital expenditures or replacement of equipment approved in writing in advance by TMPA; (viii) care and handling of any hazardous waste; (ix) rolling stock expenses; (x) cost of compliance and permits; (xi) payments for leases of real or personal property or easements needed or used by or in connection with the TMPA Transmission System; (xii) payments due and payable to suppliers under subcontracts entered into by Denton in accordance with the terms of this Agreement, (xii) reasonable and customary employee transition expenses payable upon termination of the Term, and (xiv) costs of insurance. "Operating Costs" does not include the costs of improvements, expansions, and extensions of the TMPA Transmission System; such costs shall be for transmission capital projects and included in the Annual Capital Budget. Party shall mean either Denton or TMPA, and "Parties" shall mean Denton and TMPA, collectively. Protective Relay shall mean a device that detects abnormal power system conditions and, in response, initiates automatic control action. Protective Relay System shall mean a group of protective relays and associated sensing devices and communications equipment that detects system abnormalities and performs automatic control action to mitigate or reduce adverse effects of such abnormalities. PUCT shall mean the Public Utility Commission of Texas or its successor, Qualified Personnel shall mean individuals trained for their positions in accordance with Good Utility Practice. 3 Rolling Stock shall mean any motorized vehicle (personnel truck, crane, bucket truck, all- terrain vehicle, etc.) or any non - motorized trailers used for transporting equipment or supplies. Services shall mean all work, services, and other functions to be provided and performed by Denton for the operation, maintenance, and construction of the TMPA Transmission System as set forth in this Agreement. Supervisory Control and Data Acquisition (SCADA) shall mean a system that provides data acquisition, supervisory control and alarm display and control from remote field locations to control centers. Transmission Operator shall mean the entity registered with NERC as the transmission operator for all or portions of the TMPA Transmission System. THE shall mean the Texas Reliability Entity, Inc. or its successor. Agreement In consideration of the mutual obligations of the Parties as set forth below, TMPA and Denton agree as follows: Section 1.0 Transmission Operator, Maintenance, and Construction Services Functions 1.1 Denton, as Transmission Operator, shall perform the Transmission Operator, Maintenance, Construction Services, and other functions associated with the TMPA Transmission System that are described in this Agreement (the "Transmission Functions "). The transmission assets that are subject to this Agreement are described in Exhibit A. 1.2 In performing the Transmission Functions, Denton shall discharge the duties relevant to those functions under applicable Federal and State laws and regulations, including applicable rules and regulations of FERC, the PUCT, NERC, and ERCOT, including those enforced by the TRE. TMPA shall provide to Denton any and all information, documents, and access to facilities in its possession or control that are necessary to enable Denton to discharge its duties under this Agreement, including access to TMPA information systems, substations, and other property reasonably necessary to enable Denton to discharge its duties under this Agreement. For the TMPA Transmission System, TMPA and Denton will each make commercially reasonable efforts to utilize information and work management systems that are compatible with those of the other Party while ensuring such systems are on par with industry standards. TMPA shall cooperate with Denton's efforts to perform the Transmission Functions in accordance with any applicable NERC Standards and ERCOT Operating Guides and Protocols. Denton shall be responsible for creating and maintaining all necessary policies and procedures required for Denton to perform the Transmission Functions. 1.3 In performing its duties under this Agreement, Denton shall act in the capacity of an independent contractor to TMPA, and not as an agent except in those cases in which this Agreement expressly describes Denton's role as that of an agent. 5 Section 2.0 Transmission Functions 2.1 System Operation and Maintenance (O &M) In relation to the operation and maintenance of TMPA Transmission System assets listed in Exhibit A, Denton shall discharge the duties imposed on transmission owners in ERCOT by applicable Federal and State laws and regulations, including applicable rules and regulations of FERC, PUCT, NERC, and ERCOT. All operation and maintenance activities for the TMPA Transmission System listed in Exhibit A will be the responsibility of Denton. Denton shall control and direct maintenance activities in accordance with Good Utility Practice to maintain the service life of equipment and ensure systems remain in good working order during the term of this Agreement for all TMPA assets listed in Exhibit A, as well as additional TMPA Transmission System assets placed in- service in Denton County during the term of this Agreement. Furthermore, Denton shall also test, calibrate, set, and maintain all applicable TMPA -owned Protective Relay and SCADA Equipment in accordance with Good Utility Practice. The inventory of TMPA- owned Protective Relay and SCADA Equipment shall be listed for each station and maintained by applicable DME maintenance personnel. Denton shall be responsible for producing and maintaining all required documentation associated with the testing, commissioning, maintenance, and repair of TMPA transmission assets in Denton County. Ownership of such documentation shall be maintained within TMPA until a TMPA asset is replaced by a Denton -owned asset, in which case Denton will own the documentation. 2.2 Capital Construction In relation to the construction of TMPA Transmission System assets, Denton shall discharge the duties imposed on transmission owners in ERCOT by applicable Federal and State laws and regulations, including applicable rules and regulations of FERC, the PUCT, NERC, and ERCOT. All capital construction activities approved by the TMPA Board of Directors will be performed by Denton according to the terms of this Agreement. A status report for active TMPA Transmission System projects will be 6 submitted by Denton to the agent of the TMPA Board of Directors on a quarterly basis or within 30 days of a request. 2.3 Metering Denton shall be responsible for maintaining, testing, calibrating, repairing, replacing, and certifying ERCOT settlement meters for TMPA locations in Denton County. Denton will also maintain the communication paths and equipment necessary for ERCOT and other approved entities to poll the meters as required per ERCOT protocols or any other preexisting arrangements with TMPA for the assets in Denton County. Metering data required for generation settlements and Annual Load Data Reporting (ALDR) shall be collected and processed by Denton for the assets in Denton County on behalf of TMPA. 2.4 Security Denton shall be responsible for maintaining, monitoring, repairing, and installing when necessary, any security equipment used in substations listed in Exhibit A on or before the Projected Date for DME Operation. Where remote surveillance capabilities exist, Denton shall manage video surveillance services and store information as required by any applicable regulatory requirements. Denton shall also provide user -level access control management for any critical TMPA stations where such equipment is installed and those services are required. 2.5 Environmental Documentation For stations listed in Exhibit A, Denton shall maintain, update, and develop, when necessary, environmental compliance documentation for TMPA including Storm Water Pollution Prevention Plans (SWPPP). If regulatory reporting is required as the result of regulation or an incident, Denton will complete the reporting on behalf of TMPA for stations listed in Exhibit A. 2.6 Right -of -Way Maintenance For the transmission assets in Denton County, Denton shall maintain all existing and any new TMPA transmission right -of -way or transmission related real property owned by TMPA in accordance with Good Utility Practice and all applicable regulations from FERC, NERC, ERCOT, and PUCT. 2.7 Rate Filings Denton agrees to provide assistance to TMPA staff, attorneys, and consultants as needed for any interim or full rate case filing for TMPA assets in Denton County. 2.8 Regulatory Compliance Denton shall be responsible for all regulatory compliance on behalf of TMPA for the transmission function for assets in Denton County. This obligation includes any standards, requirements, or protocols that may now or at any time during the term of this Agreement be imposed on TMPA through Federal and State laws and regulations, or applicable rules or regulations by FERC, NERC, ERCOT, TRE, or PUCT. Denton shall administer regulatory compliance for TMPA according to applicable TMPA procedures and /or any Denton procedure as deemed necessary by Denton through the performance of this service. All TMPA regulatory audits, data submittals, or reports that are either scheduled or yet to be scheduled for the Denton County TMPA assets during the term of this Agreement shall be the responsibility of Denton. 2.9 Planning Denton shall perform the transmission planning function for the TMPA Transmission System assets in Denton County according to Good Utility Practice. Denton shall comply with any and all ERCOT protocols pertaining to transmission planning on behalf of TMPA for the Denton County TMPA assets. Routine planning studies, data submittals, and reports for the Denton County TMPA assets will be the responsibility of Denton during the term of this Agreement. Denton shall also represent the planning interests of TMPA for the Denton County TMPA assets through participation in ERCOT technical working groups when required or as deemed prudent through the provision of these services. 2.10 Work Scheduling and Outage Planning Denton shall perform work scheduling and outage planning for the Denton County TMPA assets according to Good Utility Practice. Denton shall comply with any and all ERCOT protocols pertaining to work scheduling and outage planning on behalf of TMPA for the Denton County TMPA assets. 2.11 Communications Denton shall be responsible for maintaining voice, data, and relay communications systems for the Denton County TMPA assets. This includes all phone lines, fiber, microwave, leased lines, power line carrier, and public network interfaces. 2.12 Fleet Maintenance Denton shall operate, maintain, and repair any rolling stock owned or leased by TMPA and used by Denton for the performance of Transmission Functions. TMPA rolling stock assets that, as determined by Denton, have become obsolete, surplus property, or otherwise require replacement may be conveyed or disposed of by Denton with the consent of TMPA. The manner of such conveyance or disposal shall be as mutually agreed between Denton and TMPA. 2.13 Inventory Control and Purchasing Denton shall manage the TMPA Transmission System inventory and purchasing functions for the Denton County TMPA assets according to Good Utility Practice.. 2.14 Contract Services Contract services for the TMPA transmission function shall be administered per Subsection 4.3 of this Agreement. 2.15 Legal Services (to the extent authorized in Subsection 4.4) Legal services for the Denton County TMPA assets shall be administered per Subsection 4.4 of this Agreement. 2.16 Field Operations Denton shall perform Field Operations for the Denton County TMPA assets using qualified personnel according to Good Utility Practice. Denton shall comply with any and all ERCOT protocols and National Electric Safety Code (NESC) requirements pertaining to Field Operation activities on behalf of TMPA. 2.17 Budgeting Budgeting for the TMPA transmission business function shall be administered per Section 3.0 of this Agreement. 2.18 Insurance 10 During the term of this Agreement, TMPA shall maintain insurance of the kind and in the amounts indicated in Section 11.0 of the Agreement. 2.19 TMPA's Responsibilities: a. Financing (O &M and Capital- see Section 3.0) b. Administration of Funds TMPA shall discharge its payment obligations under this Agreement in accordance with Section 3.0. C. Auditing (see Section 7.0 Audits) Section 3.0 Cost Reimbursement and Budgeting 3.1 Annual System Budget and Annual Capital Budget Costs shall be incurred in accordance with an annual system budget and a separate annual capital budget prepared by Denton and submitted to the agent of TMPA's Board of Directors for approval. Such budgets shall be prepared and submitted to the agent of TMPA by June 1 of each year. The TMPA Board of Directors will, with such changes as it considers advisable, approve annual system and capital budgets prior to October 1 of each fiscal year, to be effective on October 1. If for any reason a budget is not approved by October 1, the previous year's budget will be followed until the new budget is adopted. 3.2 Annual System Budget 11 A status report on the Annual System Budget will be provided by Denton on a quarterly basis and when requested by TMPA. Amounts in budget line items may be transferred by Denton to other line items without amending the Annual System Budget but the total amount budgeted in the Annual System Budget may not be exceeded without a budget amendment being adopted by the TMPA Board of Directors. On an annual basis, Denton shall perform an overhead cost allocation study relating to its overhead costs in the Annual System Budget and shall provide to TMPA the results of the study to ensure that Denton's overhead costs are determined in an appropriate manner. 3.3 Annual Capital Budget Denton shall be responsible for identifying system needs through sound planning practices. The TMPA capitalization policy will be used to determine if a system need warrants the consideration of a capital project. Denton shall submit capital project proposals (i.e. annual capital budget amendments) to the agent of the TMPA Board of Directors on an as- needed basis or as requested. A status report on the Annual Capital Budget will be provided by Denton on a quarterly basis and when requested by TMPA. Cost variances will be tracked by project and individual projects will be allowed to exceed the project budget by up to ten percent as long as the variance or sum of project cost variances do not exceed the approved Annual Capital Budget amount. When Denton determines that an individual project will exceed a ten percent variance, or that the total approved Annual Capital Budget amount will be exceeded, Denton shall submit an annual capital budget amendment to the agent of the TMPA Board of Directors for consideration. On an annual basis, Denton shall perform an overhead cost allocation study relating to its overhead costs in the Annual Capital Budget and shall provide to the agent of TMPA the results of the study to ensure that Denton's overhead costs are determined in an appropriate manner. 3.4 Reports Given at Regular Bi- Monthly TMPA Board Meetings Prior to the regular bi- monthly board meetings of the TMPA Board of Directors, Denton shall forward budgetary reports to TMPA's agent for budgetary matters. Such a report 12 to contain the type of data customarily provided to the Board by TMPA's manager of transmission. 3.5 Total Transmission Costs TMPA shall pay Denton all of the costs incurred by Denton in performing Denton's obligations under this Agreement based on actual cost of service, including all operation, maintenance, and capital expenses plus benefit and overhead costs (the "Total Transmission Costs "). To the extent the Total Transmission Costs can be forecasted, they shall be included in the annual system and capital budgets proposed by Denton. If at any time Denton determines that the then effective Annual System Budget or Annual Capital Budget will be exceeded, Denton shall submit to the agent for the TMPA Board of Directors for approval, a budget amendment recommendation. Approval of any such amendment shall not be unreasonably withheld. 3.6 Operating Costs Denton shall invoice TMPA monthly for Operating Costs for the Denton County TMPA assets. Costs for metering support functions will be invoiced separately from other Operating Costs and billed on a monthly basis when support is required. Billings and payments for contracted services that are not included in the monthly invoices shall be advance funded or reimbursed to Denton as mutually agreed. 3.7 Capital Expenditures 13 Billings and reimbursements for capital project expenditures will be made in accordance with mutually agreed procedures, which may differ from project to project. 3.8 Payments TMPA shall make payments to Denton within twenty (20) days of receipt of invoice. If TMPA is late in the payment of any charge or reimbursement under this Agreement, late payments shall bear per annual interest at a rate equal to the lesser of two percentage points (2 %) above the Prime Interest Rate as published in the Wall Street Journal on the day said statement becomes delinquent, or the maximum allowed by law to be charged TMPA. If any charge or reimbursement remains unpaid at the expiration of thirty (30) days after the receipt of the statement, TMPA shall be in default under this Agreement, and Denton may invoke the remedies specified in this Agreement or otherwise available by law. 3.9 Budgeted Funds as a Condition to Obligation to Perform Transmission Functions Denton shall have no obligation under this Agreement to perform any Transmission Function for which funds have not been included in either the Annual System Budget or the Annual Capital Budget; provided, however, in the event performance of a Transmission Function is necessary in order to respond to or prevent an emergency situation, involving persons or equipment, Denton shall proceed to perform same and TMPA shall amend the Annual System Budget, or Annual Capital Budget, as the case may be, to ensure that Denton is reimbursed for the costs incurred. Section 4.0 Equipment, Property, and Contracts 4.1 All SCADA and communications equipment acquired by Denton or TMPA to perform the Transmission Functions shall be compatible with the Denton EMS /SCADA Systems. 14 4.2 Ownership of equipment and property acquired by Denton to perform the Transmission Functions after the date of this Agreement shall be determined as follows; a. Each Party shall own equipment and property that it pays for. b. If the same equipment and property are paid for by both Parties, each Party will own an undivided interest in proportion to the percentage of the total costs paid by such Party for such equipment or property. C. To the extent TMPA owns property or equipment installed or incorporated into real property owned by Denton, Denton waives the law of fixtures so that TMPA's title to such property or equipment shall be preserved. d. To the extent Denton owns property or equipment installed or incorporated into real property owned by TMPA, TMPA waives the law of fixtures so that Denton's title to such property or equipment shall be preserved. e. The assignment of cost for additional property and /or equipment needed for Denton to perform the Transmission Functions after the date of this Agreement shall be determined through discussions and by mutual agreement between TMPA and Denton. 4.3 In performing the Transmission Functions, it may be necessary for Denton to contract for goods, services, or other matters with suppliers, contractors, and other third parties. Denton shall determine if a contract should be in the name of TMPA or in the name of Denton on a case -by -case basis. Contracts in the name of Denton will require no approval from TMPA but, to the extent practicable, should be assignable to TMPA. On termination of this Agreement, and to the extent such contracts are assignable, Denton shall assign such contracts to TMPA to the extent necessary to complete performance of such contracts with respect to the Denton County TMPA assets and to enforce warranties. 15 For a contract to be in the name of TMPA, TMPA's written consent shall be required. TMPA Board of Directors action will not be required to give such written consent if TMPA has a General Manager or other person functioning as a chief administrative officer who can provide the consent. In such written consent, TMPA may consent to Denton executing the contract as agent for TMPA, in which case Denton may sign the contract, if it so desires. The award of contracts in the name of TMPA must comply with the laws governing the award of such contracts. 4.4 Contracts with attorneys, including consultants working with such attorneys, who provide legal services to TMPA in relation to the Denton County TMPA assets shall be awarded only by TMPA. TMPA shall direct such attorneys to work with Denton on legal matters involving the TMPA Transmission System to the extent such attorneys may do so consistent with their professional obligations to TMPA. The defense of any litigation against TMPA or the prosecution of any litigation by TMPA must be authorized by TMPA. Section 5.0 Indemnification 5.1 With the exception of claims brought by TMPA under Subsection 11.1(b), TMPA agrees to indemnify and hold Denton and all of Denton's present, future, and former agents, employees, officials, and representatives (each in their official, individual, and representative capacities) harmless from any and all claims, demands, causes of action, judgments, liens, expenses (including attorney's fees), costs, penalties, and damages (whether common law or statutory; whether characterized as actual, punitive, consequential, incidental; and whether based on strict liability or liability assessed without fault) of any conceivable character, created by, arising from, or in any manner relating to the performance of Denton's obligations under this Agreement. The obligations of TMPA pursuant to this section shall survive any termination of this Agreement. 5.2 TMPA acknowledges that, in performing transmission operator duties on behalf of TMPA, Denton is exposed to significant regulatory liabilities in excess of the consideration being received by Denton under this Agreement. TMPA further acknowledges that the consideration to be received by Denton under this Agreement does not reflect that regulatory exposure and thus does not adequately compensate 16 Denton for the risks involved. As an integral and inseparable part of the consideration being given to Denton for undertaking the obligations of this Agreement, TMPA agrees to assume all responsibility for the payment of any monetary fine, administrative penalty, or civil penalty assessed by a regulatory authority (including NERC, ERCOT, PUCT or THE or any successor agency or entity) against Denton arising from Denton's performance as the transmission operator for TMPA REGARDLESS WHETHER THE FINE OR PENALTY IS INCURRED AS A RESULT OF DENTON'S NEGLIGENCE. To the extent allowed by law, each Party agrees to promptly notify the other Party in the event it receives notice of any investigation or proceeding, pending or proposed, that may result in the assessment of a fine or penalty against Denton, and each Party agrees to fully cooperate in the defense of any proceedings taken to assess or contest the fine or penalty. 5.3 The Parties agree that the rule requiring that an indemnity agreement be strictly construed in favor of the indemnifying Party shall not apply to this agreement. Section 6.0 Term of Agreement 6.1 This Agreement shall have a term commencing on the Effective Date and ending on September 1, 2018 (the "Initial Term "). a. For the first ninety (90) days of the Initial Term, Denton will not charge TMPA under this Agreement except for labor and associated costs of TMPA Transmission System employees transitioned to Denton or employees hired by Denton during such period to carry out functions under this Agreement. b. The Agreement shall not apply to assets that come under Denton ownership on the date that ownership is established. 6.2 This Agreement may be terminated as follows: a. In the event a Party (the "Defaulting Party ") is in breach of a material provision of this Agreement, the Party not in default (the "Non- Defaulting Party ") may provide to the Defaulting Party notice of the default and a reasonable opportunity, not less than sixty (60) days, to cure the breach. If the Defaulting Party fails to cure the breach within the 17 time specified, or (in the event the breach cannot be cured within such time) the Defaulting Party has failed to commence efforts necessary to cure the breach within such time, the Non - Defaulting Party may, by sending notice, terminate the Agreement. b. This Agreement may be terminated for convenience by the TMPA Board of Directors or by Denton by providing to the other Party, notice of termination at least eighteen (18) months in advance of the termination date stated in the notice. 6.3 Facility Condition at the End of Term. Upon expiration of the Term or termination of this Agreement, Denton shall leave TMPA assets in substantially as good a condition as at the Effective Date, normal wear and tear excepted. All special tools, improvements, inventory of supplies, spare parts, safety equipment, O &M Manuals, and drawings (in each case as provided to or obtained by or provided by Denton during the term of this Agreement) and any other items furnished as Operating Costs (excluding such items purchased as replacement of Denton property) under this Agreement that were obtained to support TMPA assets will be left at the Facility and will become or remain the property of TMPA subject to Subsection 4.2. If Denton has entered into any subcontracts for performance of any portion of the Services in its own name and not as agent for TMPA, then TMPA shall have the right, in its sole discretion, to directly assume and become liable for any such subcontracts, and Denton shall execute all documents and take all other reasonable steps requested by TMPA that may be required to assign to and vest in TMPA all rights, benefits, interests, and title in connection with such subcontracts; provided, however, that TMPA shall indemnify and hold harmless Denton for all liabilities arising out of events and obligations thereunder arising after the date of any such assumption. If requested by TMPA, Denton will cooperate with TMPA's efforts to re- employ employees who have been reassigned to Denton (if any) in conjunction with the execution of this Agreement. Section 7.0 Audits 7.1 TMPA may conduct operating and financial audits relating to the Transmission Functions performed under this Agreement. Denton will provide operating reports addressing transmission issues as needed or requested to the TMPA Board of Directors. 18 7.2 Denton shall keep records, desk logs, operating financial data, and supporting data in conformity with generally accepted utility principles and practices. These books, records, and supporting data shall be kept for at least three (3) years or in accordance with regulatory requirements, whichever is longer. 7.3 Following any audit of Denton under this Agreement, Denton may provide to the TMPA Board of Directors any comments regarding the audit results and audit recommendations as it desires. 7.4 Denton will provide to the TMPA Planning and Operating Committee reports as requested. Section 8.0 No Debt Created 8.1 To the extent, if any, that this Agreement imposes an obligation on either Party to make a payment or make an expenditure, such payment or expenditure shall be payable solely from current revenues that may be available for such purpose, and no debt is created under this Agreement within the meaning of Article XI, sections 5 or 7, Texas Constitution. 8.2 Without limiting Subsection 8.1, no obligation of Denton to make payment or expenditure under the Agreement shall be payable through funds raised by taxation. Section 9.0 Delegation of Authority to Amend Exhibits 9.1 Because of continuing changes in the design and configuration of the TMPA Transmission System as described in Exhibit A and because of the potential for changes to the contact information in Exhibit B, the Parties may, by mutual agreement through their staffs, without obtaining governing board approval from either Party, revise Exhibits A and B from time to time as circumstances may warrant. 19 Section 10.0 Governing Law This Agreement shall be governed by the laws of the State of Texas. The provisions and obligations of this Agreement are performable in Denton County, Texas such that exclusive venue for any action arising out of this Agreement shall be in Denton County, Texas. Section 11.0 Limitation of Liability; Covenant not to Sue; and Insurance 11.1 (a) Except as provided in paragraph (b) of this Subsection, TMPA covenants and agrees not to sue Denton, its directors, officers, employees, attorneys, servants, or agents, for money damages relating to any act or omission of Denton under this Agreement. Specifically, TMPA waives its right to bring any claims or causes of action against Denton, its directors, officers, employees, attorneys, servants, or agents, in contract or in tort or otherwise, including their negligence, in any way related to damages, costs or expenses incurred by TMPA due to any act or omission of Denton under this Agreement. TMPA acknowledges that there is no disparity of bargaining power between Denton and TMPA and that TMPA is under no compulsion to agree to this covenant not to sue as set out above. This covenant shall survive termination of this Agreement for any reason. (b) In the event, because of Denton's negligence or failure to perform the Transmission Functions in accordance with Good Utility Practice, injury to or destruction of TMPA property occurs, including to the TMPA Transmission System, TMPA may sue Denton for property damages. Denton's liability for damages shall be limited to the amount, per occurrence, that would be available to a Party seeking recovery or property damages from Denton under the Texas Tort Claims Act, as such Act may be amended from time to time in the future. 11.2 THE PARTIES AGREE THAT NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES OR FOR THE LOSS OF PROFIT OR REVENUE ARISING FROM THE PROVISION OF GOODS OR SERVICES UNDER THIS AGREEMENT EVEN IF ADVISED OF SUCH POSSIBILITY. all 11.3 For the purposes of protecting Denton from and against liability that may arise under this Agreement, TMPA agrees to maintain the following types and amounts of insurance during the term of the Agreement. a. Commercial excess liability coverage to include but not limited to coverage for products and completed operations, failure to supply, pollution liability, and wildfire liability coverage. Insurance shall contain minimum limits of $35 million per occurrence and $70 million aggregate with underlying limit or self- insured retention not to exceed $1 million per occurrence. Commercial excess insurance shall include Denton as an additional insured. b. Property insurance to include business interruption coverage with minimum limits of $50 million. Insurance shall include Denton as loss payee as their interest may appear. C. Commercial auto liability insurance or self- insurance to include but not limited to coverage for owned, non - owned, leased, and rented autos with minimum limits of $1 million per occurrence. Section 12.0 Notices 12.1 A notice under this Agreement shall be deemed sufficient if it is in writing and delivered personally or by nationally recognized courier service, or if sent by first class, certified, or registered US mail. Written notice shall also be deemed sufficient if sent electronically or by facsimile, confirmed by notice delivered or sent by one of the methods stated in the preceding sentence. Written notice shall be deemed given on the date when first received by one of the methods in this Subsection. Written notice shall be delivered or sent to the addresses designated in Exhibit B for the receipt of written notices. Section 13.0 Force Majeure 21 Other than the obligation to pay money when due, the obligations of each Party shall be subject to force majeure, including severe weather, floods, earthquakes and other natural disasters, strikes, work stoppages and slowdowns, riots and other civil disturbances, shortages, rationing or unavailability of supplies and raw materials, terrorism, and other unforeseeable matters outside the control of the Party claiming such intervention. The Party suffering from such force majeure shall notify the other Party within thirty (30) days of the onset of the force majeure event. Upon any claim of force majeure, the time for performance of the obligation interfered with shall be extended without additional charges and the Parties will cooperate to mitigate the effect of the force majeure event. Section 14.0 Disclaimer of Warranties Denton agrees that it shall pursue all of its obligations under this Agreement using Good Utility Practice, and using the same diligence and care with which it would undertake such matters regarding its own transmission system. DENTON EXPRESSLY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE SERVICES TO BE PERFORMED OR ANY GOODS TO BE PROVIDED UNDER THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, DENTON EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES REGARDING MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THOSE SERVICES OR THOSE GOODS, OR ANY PART THEREOF. THE LIMITED WARRANTIES CONTAINED IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS PROVIDED IN THE FIRST SENTENCE OF THIS SECTION, THE GOODS AND SERVICES BEING PROVIDED UNDER THIS AGREEMENT ARE BEING OFFERED AND SOLD "AS IS ", "WHERE -IS ". Section 15.0 Assignment Neither Party shall have the right to assign that Party's interest in this Agreement without the prior written consent of the other Party. 22 Section 16.0 Severability If any term or provision of this Agreement is held to be illegal, invalid, or unenforceable, the legality, validity, or enforceability of the remaining terms or provisions of this Agreement shall not be affected thereby, and in lieu of each such illegal, invalid, or unenforceable term or provision, there shall be added automatically to this Agreement a legal valid, or enforceable term or provision as similar as possible to the term or provision declared illegal, invalid, or unenforceable. Provided, however, that if the illegality, invalidity, or unenforceability of any term or terms renders the basic purposes of this Agreement illegal, invalid, or unenforceable or otherwise materially and adversely affects the utility or financial parameters of this Agreement, then either Denton or TMPA may, upon written notice to the other, terminate this Agreement and the Parties agree to enter into good faith negotiations to replace this Agreement with a contract as similar to the terms and conditions of this Agreement as legally permissible. Section 17.0 Waiver Both Denton and TMPA shall have the individual right to waive any requirement contained in this Agreement, which is intended for the waiving Party's benefit, but, except as otherwise provided herein, such waiver shall be effective only if in writing executed by the Party for whose benefit such requirement is intended. No waiver of any breach or violation of any term of this Agreement shall be deemed or construed to constitute a waiver of any other breach or violation, whether concurrent or subsequent, and whether of the same or of a different type of breach or violation. Any waiver may only be authorized at the direction or with the consent of the governing body of the waiving Party. Section 18.0 Paragraph Headings; Mutual Authorship The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. Both Parties have participated in the negotiation and preparation of 23 this Agreement and this Agreement shall not be construed either more or less strongly against or for either Party. Section 19.0 Binding Effect Except as limited herein, the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns. Section 20.0 Gender, Plurals, and Other Construction of Terms. Within this Agreement, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. The terms "include" or "including" shall be construed to be descriptive rather than limiting or restrictive, meaning the same as "including, without limitation ..." and "including, but not limited to ...." Section 21.0 Counterparts This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. Section 22.0 Exhibits All exhibits to this Agreement are incorporated herein by reference for all purposes wherever reference is made to the same. Section 23.0 Computation of Deadlines 24 If any deadline contained herein ends on a Saturday, Sunday, or a legal holiday recognized by the Texas Supreme Court, such deadline shall automatically be extended to the next day that is not a Saturday, Sunday, or legal holiday. Section 24.0 Entire Agreement It is understood and agreed that this Agreement contains the entire agreement between the Parties and supersedes any and all prior agreements, arrangements, or understandings between the Parties relating to the subject matter. No oral understandings, statements, promises, or inducements contrary to the terms of this Agreement exist. This Agreement cannot be changed or terminated orally and no written modification of this Agreement shall be effective unless executed by both Parties. Nothing in this Agreement amends the Power Sales Contract between TMPA and Denton, dated September 1, 1976, as amended, including Denton's obligation to pay its percentage of Annual System Costs (as defined in said Contract) in Section 3 of said Contract. Section 25.0 Relationship of Parties; No Third -Party Beneficiaries Nothing contained in this Agreement shall be deemed or construed by the Parties hereto or by any third party to create the relationship of principal and agent or of partnership, joint venture, or employment; it being expressly understood and agreed that no provision contained in this Agreement nor any act or acts of the Parties hereto shall be deemed to create any relationship between the Parties other than the relationship of independent parties contracting with each other solely for the purpose of effecting the provisions of this Agreement. Neither Party has the authority to enter into contracts or to assume any obligation for the other, nor to make warranties or representations on behalf of the other except in accordance with the express terms of this Agreement or as otherwise authorized in writing by the other. Except for the provisions of this Agreement relating to the indemnification of employees, agents, and representatives of Denton, there are no third -party beneficiaries to this Agreement and no third -party beneficiaries are intended by implication or otherwise. 25 Section 26.0 No Waiver of Immunity or Defense No Party, by execution of this Agreement, waives nor shall be deemed to have waived any immunity or defense that would otherwise be available to it including immunity from liability or suit for damages to one another or to any third party except as expressly provided in this Agreement or as otherwise provided by law. IN WITNESS WHEREOF, the Parties have signed this Agreement as of the Effective Date. CITY OF DENTON, TEXAS M for -AIMS IC919" TEXAS MUNICIPAL POWER AGENCY go NAME: 26 TITLE: ENCLOSURES EXHIBIT A - Description of TMPA Transmission System EXHIBIT B - Notice and Contact Information 27 E IN -C x LLJ c 0 u E 51 E �2 'o m ME E IC-) U u ro CS o < o I 0 u 8 a E 2 E Gb co m. E o E C E o 1 0 d E �i .2 - I 0 so ul wx E co u d E 2 > E ol 39 lu lu 1. O it ol k u E 0 E �E 9 2 co ml 10 2 u J A a V. E E- t; U 0 u . ro e T o b E 7� E I 40 u E E > E 2 u as O 2 .2 al I 9