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HomeMy WebLinkAbout2002-03-25 City CouncilTO: City of Palo Alto. City Manager’s Report HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE: SUBJECT: MARCH 25, 2002 CMR:170:02 EXTENSION OF EXISTING NATURAL GAS MASTER PURCHASE AGREEMENTS FOR A FIVE YEAR TERM RECOMMENDATION Staff recolmnends the City Council approve the extension of the term of two existing natural gas master purchase agreements from three to five years. Five year terms for the master purchase agreements will enable staff to implement the City of Palo Alto’s natural gas commodity procurement strategy. Staff recommends both agreements terminate March 17, 2007. BACKGROUND The City Manager has the general authority to enter into and execute contracts under Article IV of the Charter and Section 2.08.140 of the Palo Alto Municipal Code (PAMC). Under PAMC Section 2.30.120, the City Manager has the authority to negotiate and execute open purchase contracts for goods and services for terms of up to three years. Pal0Alto is currently a party to two natural gas .master purchase ageements, one with British Petroleum Energy Company (BP) and the other with Sempra Energy Trading Corp (Sempra). BP and Sempra are approved suppliers for the City based on a set ofcriteria approved by the Risk Oversight Committee (ROC). The ROC includes the’Director of Utilities, the Assistant City Manager, the Director of Administrative Services and the Senior Assistant City Attorney. The agreements were ratified by Council last year (CMR:420:01 and 341:01). These agreements enable, but do not obligate, Palo Alto to purchase natural gas commodity. Last winter’s unprecedented high gas prices and gas market volatility caused staff to develop a natural gas commodity purchasing plar~ On November 6, 2000, staff presented to the ROC a gas procurement plan whereby defined fractions.of each month’s gas requirement are purchased at a fixed price over a three year time horizor~ This "laddering" approach was implemented shortly thereafter. The plan was presented to the Finance Committee as an informational report in CMR:196:01 on April 17, 2001. CMR:170:02 Page 1 of 3 Staff utilizes the agreements with BP and Sempra to purchase competitively priced gas for the City’s natural gas customers under this strategy. DISCUSSION Under the "laddering" approach, the three year horizon is constantly changing and ¯ moving forward. Because these contracts were executed by the City Manager, the termination date is three years after the initial execution date. Hence, staff may not purchase any gas for delivery beyond three years from the date of execution. By extending the two existing agreements, staff will be able to implement the City’s natural gas commodity purchasing strategy in a streamlined manner. In addition to the transactions entered into thus far with these suppliers, staff expects to utilize these .master agreements to competitively procure gas supplies to meet City loads which average approximately 10,000 MMBtu/day or 3.5 million MMBtu/annum. The commodity cost of meeting the City load is expected to be $15-$20 million per annum. Staff is working on several additional master purchase agreements and will be bringing each to City Council for five-year term approval. ALTERNATIVE One alternative is to continue without the extension. This would result in the City having to sign several new agreements every month to keep up with the rolling three-year time horizon for gas procurement. However, utilizing staff and legal resources to work on several new agreements each month would result in less time being available to the actual value-added work of purchasing commodity. That is, the costs of such an approach outweigh the benefits of a streamlined contracting procedure. Another alternative is to abandon the laddering approach altogether and purchase gas supply on a monthly basis in the volatile wholesale market. This approach would be similar to that taken by Pacific Gas and Electric Company, wherein customers are exposed to wholesale market price volatility on a monthly basis. However, this approach would not meet the objective of providing stable prices. It would also reverse the direction of the last several years of having a transparent commodity purchasing strategy that satisfies risk management objectives. RESOURCE IMPACT Transactions for approximately $28 million have been entered into with these two suppliers already, of which approximately $7 million is for gas already delivered and paid for. The remaining $20 million in purchases were made towards meeting ~uture loads up to June 2004 as part of the laddering procurement strategy. These CMR: 170:02 Page 2 of 3 purchase costs have been incorporated in the City budget, customer rates, and the 10-year utility financial forecast. Upon approval of this recommendation, staff expects the City Manager to continue to purchase gas under these master agreements. Transaction volume may vary depending on month, and commitments already made but could range from zero to $3 million dollars/month. POLICY IMPICATIONS These recommendations are consistent with current City policy, Each transaction under these master agreements is executed in accordance with City’s risk management policies (CMR: 103:01) and risk management procedures approved by the ROC. These recommendations meet the objectives outlined in the Utilities Strategic Plan Strategy No. 3, "Streamline and manage business processes to allow CPAU to work efficiently and cost-effectively." ATTACHMENTS A: B: Base Contract for Short-Term Sale and Purchase of Natural Gas with BP Energy Company Base Contract for Short-Term Sale and Purchase of Natural Gas with Sempra energy Trading Corp. PREPARED BY: KARLA DAILEY, Resourcg~Plar~er DEPARTMENT HEAD: CITY MANAGER APPROVAL: H of Utilities Assistant City Manager .CMR: 170:02’Page 3 of 3 GENERAL TERMS AND CONDITIONS BASE CONTRACT FOR SHORT-TERM SALE AND PURCHASE OF NATURAL GAS SECTION 1. PURPOSE AND PROCEDURES 1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to the party receiving Gas and "Seller" refers to the party delivering Gas. The parties have selected either the "Oral" version or the "Written" version of transaction procedures as indicated on the Base Contract. Oral Transaction Procedure: A 1.2 The parties will use the following Transaction Co~ation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmission or telephon.e conversafi~ ~h the offer and acceptance constituting the agreement of the parties. The parties shall be legally bound from the time they so a~ ~transaction terms and may each rely thereon: Any such transaction shall be considered a "writing" and to have been "si~9~,~.~Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may, co~.~.~phonic transaction by sending the other party a Transaction Confirmation by fi~csimile. EDI or mutually agreeable~e~ ~ !tron~.~eans. Confirming Party adopts its confirming letterhead, or the like, as its si~,nature on any Transaction Confirmation as~ ~.~ation and authentication of Confirming Party. Written Transaction Procedure: 1.2 The parties will use ~ ~g T~’~;s~[,ction Cq~ion pr0cf~. S~~an agreement regarding a Gas purchase and sale tran.,~ [or a p~ Deliv~d, the ~ng P~., and t~ party may, record that agreement on a Transaction,ration a nica Transa I facs or mutually agreeableelectronic means, to the othe ,y the ~the Bu~ay fo!l~he d.at~ement. ~es acknowledge that their agreement will not be 1 until ~nge o~nflict~action ~i~assage of the Confirm Deadline without objection fl receivi~.~w~, as pr.~ln Secti~l ~ . ~ 1.3, If a sending party’s to in Section 1.2., such previousl3 the Confirm Deadline Confirmation. If there are any r Transaction Confirmation shall’ the differences in the Contract and any effective. Base Contract, and (iii) SECTION¯ 2 of the agreement referred such receiving party has- in writing by Transaction then neither that clearly resolves both the Base Confmmtion, (ii) the in this sentence. 2.1.¯ "Base Contract" shall by reference; that specifies 2.2."British 2.3."Business Da~ 2.4."Confirm Deadline" shall mean 5:00 p.m.zone on the Second Business Day following the Day a Transaction Confirmation is received, or if applicable, on the Business Day agreed to by the parties in the Base .Contract; provided, if the Transaction Confirmat{on is time stamped after 5:00 p.m. in the receiving p ,art, y’s time zone; it shall be deemed received at the opening of the next Business Day, 2.5."Confirming Party" shall mean the party designated in the Base C0nlract to prepare and forward Transaction Confinmtions to the other party. 2.6."Contract" shall mean the legally-binding relationship established by (i)the Base Contract and (ii) the provisions contaflaed in any effective Transaction Confirmation. 2.7. "Contract Price" shall mean the amount expressed in U.S. Dollars per MMBtu, as evidenced by the Contract Price on the Tramacfion Confirmation. 2.8."Contract Quantity" shall m~an the quantity of Gas to be delivered and taken as set forth in the Transaction Confirmation. "Cover Standard", if applicable, shall mean that ff ihere is an unexcused failure to take or deliver any quantity of Gas pursuant to this Copyright © 1996 Gas Industry Standards Board, Inc. All fights reserved. Page 1 of 7 GISBStandard 6.3.1 May 13, 1996 Contract, then the non-defaulting party shall use commercially reasonable efforts to obtain Gas or alternate fuels, or sell Gas, at a price reasonable for the delivery Or production area, as applicable, consistent withl the amount of notice provided by the defaulting party; the immediacy of the Buyer’s Gas consumption needs or Seller’s Gas sales requirements, as applicable; the quantities involved; and the anticipated length of failure by the defaulting party. 2.10. "Day" shall mean a peri~l of 24 consecutive hours, coextensive with a ".d,_ay" as defined by the Receiving Transporter ~ a particular. transaction. 2.11."Delivery Period" shall be the period during which deliveries are to be made as set forth in the Transaction Confirmation. 2.12."Delivery Point(s)" shall mean such point(s) as are mutually agreed upon betwgen Seller and Buyer as set forth in the Transaction Conflrmstion. 2.13. "EDI" shall mean an electronic data interchange pursuant to an agreement entered into by the parfi~s; spe~itically relating to the communication of Transaction Confimmtions under this Contract 2.14. "EFP" shall mean the purchase, sale or exchange of na~Cras as the "physical" side of an exchange for physical transaction involvinggas futures contracts. EFP shall incoqgomte the meaning and rem~.~"Firm". 2.15. "Firm" shall mean that either party may interrupt its pe~..-~:~e without liability only to the extent that such performarice is preven..ted for reasons of Force Majeure; provided, however, that during For~]~intermptions, the party invoking Force Majeure may be responsible forany Imbalance Charges as set forth in Section 4.3. related to ~ma~.~ after the nomination is made to the Transporter and until the change m deliveries,:d/_:r receipts is confirmed by the Transporter. ~ ~ . ¯ 2.16. Gas shall mean any mixture of hydrocarbons and non’~bmlS~tible gases in a gaseous state consisting primarily of methane. 2.17..."Imbalance Charges", the 2.18."Inten’uptible"not caused by an event of Force Majeure, with no liability,in Section 4.3. related to ¯ its interruption after ~~ Transporter., 2.19."MlylBtu~’’ shall mean 2.20."Month" shall ~ to the commencement of the first Day of the next calendar 2.21. "Payment Date" shall r ~ Selle~ for Gas received by Buyer in the previous Month. 2.22. "Receiving Transporter, the " Transporter delivering Cras 2.23."Scheduled Gas" shall 2.24 ~ Base Contract, under the listing applicable to the if them is no single price published for such location for of such high and low prices. If no as stated above) for the stated abow) 2.25.in the pumhase and sale transaction formed pursuant to Section 1. for a 2.26. "Transporter(s)" shall mean allGas gathering or pipeline companies, or local distribution companies, acting in the capacity transporter, transporting Gas for Seller or Buyer upstream or downstream, respectively, of the Delivery Point pursuant to a particular Transaction Confirmation. SECTION 3 PERFORMANCE OBLIGATION 3.1.Seller agrees to s~ll and deliver, and Buyer agrees to receive and purchase, the Contr~t Quantity for a particular transaction in accordance with the terms of the Contract Sal~ and purchases will be On a Firm or Interruptible basis, as specified in the Transaction Confirmation. The psrties have selected the "Cover Standard" version or the "Spot Price Standard" version as indicated on the Bsse~Contract. Cover Standard: 3.2 In ~ddition to any liability for Imbalance Charges, which shall not be recovered twice bythe following remedy, the exclusive and Copyright © 1996 Gas Industry Standards Board, Inc.Page 2 of 7 GISB Standard 6.3.1 ^ ...............May 13, 1996 ,sole remedy of the parties in the event of a breach of a Firm obligation shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the positive difference, if any, between the purchase price paid by Buyer utilizing the Cover Standard for replacement Gas or alternative fuels and the Contract Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), mt~ltiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s); or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the positive difference, if any, between the Contract Price and the price received by Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually taken by Buyer for such Day(s); or (iii) in the event that Buyer has used commercially reasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such replacement or sale is available, then the exclusive and sole remedy of the non-breaching party shall be any unfavorable difference between the Contract Price and~ the Spot Price, adjusted for such transportation to the applicable Delivery Point, multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller and received by Buyer for such Day(s). Spot Price Standard: 3.2 In addition to any liability for Imbalance Charges, sole remedy of the parties in the event of a breach of Seller on any Day(s), payment by Seller to Buyer in an delivered by Seller and received by Buyer for such Day(s), Price from the Spot Price; (ii)in the event of a breach difference betweenthe Contract Quantity and the actual c positive difference, if any, obtained by subtracting the a EXCEPT AS TI~S CO!qTRACT, FOR INCIDENTAL, SECTION 4. 4.1.Seller shall to effect such delivery’but not to transporting 4.2.The parties party shall give the other party quantifies of Gas to greater or lesser than t 4.3.The parties shall use invoice from a Transporter that If the Imbalance Charges were accept quantifies of Gas Charges paid by but shall not be limited to, SECTION 5. All Gas delivered by Seller and purposes of this Contract shall be one MMBtu dry. procedures of the Receiving Transporter. not be recovered twice by the following remedy, the exclusive and shall be recovery of the following: (i) in the event of a breach by the difference between the Contract Quantity and the actual quantity the positive difference, if any, obtained by subtracting the Contract Day(s), payment by Buyer to Seller in an amount equal to the by Seller and received by Buyer for such Day(s), multiplied by the Price fromthe Contract Price, OR OTHERWISE, at a pressure sufficient the s01e responsibility-for Transporter(s). Each in the transaction, .of the the Delivery Point(s) are- or Seller receives an f such Imbalance Charges. ; failure to- Seller for such Imbalance (which shall include, such Imbalance Charges, ~uanfity measurement for quantities hereunder shall be in accordance with the established SECTION 6. TAXES The parties have selected either the "Buyer Pays At and After Delivery Point" version or the "Seller Pays Before and At Delivery Point" version as indicated on the Base Contract. . ........... Buyer Pays At and After Delivery Point: Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by any government authority ("Yaxes") on or with respect to the Gas prior to the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at the Delivery Point(s) and all Taxes after the Delivery Point(s). If a party is required to remit or pay Taxes that are the other party’s responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other patty for such Taxes. Any party entitled to an exemption from any such Taxes or charges shall furnish the other party any necessary documentation thereof. Copyright © 1996 Gas Industry Standards Board, Inc.Page 3 of 7 GISB Standard 6.3.1 ¯ All rights reserved.May 13, 1996 Seller Pays Before and At Delivery Point: ~eller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by any government authority ("Taxes") on or with respect to he Gas prior to. the Delivery Point(s) and all Tax~s at the Delivery Point(s)., Buyer shah Pay or cause to be paid all Taxes on or with respect to the Gas after the Delivery Point(s). If a party is required to remit or pay Taxes which are the other party’s responsibility hereunder, the party responsible for such Taxes shah promptly reimburse the other patty for such Taxes. Any patty entitled to ~n exemption from any such Taxes or charges shah furnish the other party any necessary documentation thereof. SECTION 7. BILLING, PAYMENT AND AUDIT 7.1. Seller shall invoice Buyer for G~ delivered and received in the preceding Month and for any other applicable, charges, providing supporting documentation acceptable ~n induslry practice to support the amount charged. If the actual quantity delivered is not known by the billing, date, bilKng will be prepared based on the quantity of Scheduled Gas. The invoiced quantity will then be adjusted to the actual quantity on the following Month’s billing or as soon the1~tfter as actual delivery informationh is available. 7.2.Buyer shall remit the amount due in the manner specified~e Base Contract, in immediately available funds, on orbefore laterof Payment Date or 10 days afar mceil~t of the invoice by Buyer; pr~l that if the Payment Date is not a Business Day, payn~nt is due on the next Business Day following thatdate. If Buyer fails to remit the full ~ ~ayable by k when due, interest on the unpaid portion shall accrue at a rate equal to the lower of (i) the then-effective prime rate of interes~.~.~db.~,~ ~ under "Money Rates" by The Wall Street Journal, plus two pement per annum ~om the date due until the date of payment; or (ii) the ~u~ ~licable lawful interest rote. If Buyer, in good faith, disputes the amount of any such statement or any part thereof, Buyer will pay to Se~l~uch [ .~t as it concedes to be correct; provided, however, if Buyer disputes the amount due, Buyer must provide supporting documentation ac~le~ ~dustry practice to support the amount paid or disputed.. 7.3.In lhe event any payments are due ~e made in accordance with Section 7.2. above. 7.4.A pm~y shall have the :books and records of the other party only to the . made under the Contract. This to transactions under this Contract. documentation, within two paid in full by the party owing payment within 30 days ¯ SECTION 8. 8.1.Unless otherwise Seller shall have responsibility for and assume Point(s).. Buyer shall have responsibility for and 8.2. Seller warrants that it i it to Buyer, free and clear 8.3.Seller agrees to and costs of court ("Claims"), from any and all Gas or other charges thereon which attach before title fi’om any and all persons, arising from or out which attach after title passes to Buyer. 8.4.Notwithstanding 1 Claims to the extent that SECT!ON 9. 9.1. All Transaction Confirmations, invoices, payments and other communications made pursuant to the Base Contract ("Notices") shall be made to the addresses specified in writing.by the respective parties from time to time. 9.2.All Notices required hereunder may be sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service, first class mail or hand delivered. 9.3.Notice shall be given when received on a Business Day by the addressee. In the absence of proof of the actual receipt date, the following presumptions will apply. Notices sent by facsimile shall be deemed to have been received upon the sending party’s receipt of its facsimile machine’s confirmation of successful transmission, if the day on which such facsimile is received is not a BUsiness Day or is after five . p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving pray. Notice via first class mail shall be considered delivered two Business Days after mailing. Copyright © 1996 Gas Industry Standards Board, Inc.Page 4 of 7 GISB Standard 6.3.1 Idav 13.1996 SECTION 10. FINANCIAL RESPONSIBILITY 10.1. When reasonable grounds for insecurity of payment, or title to the Gas arise, either party may demand adequate assurance of performance. Adequate assurance shall mean sufficient security in the form and for the term reasonably specified by the party demanding assurance, including, but not limited to, a standby irrevocable letter of credit, a prepayment, a security interest in an asset acceptable to the demanding party or a performance bond or guarantee by a creditworthy entity. In the event either party shall (i) make an assignmentor any general arrangement for the benefit of creditors; (ii) default in the payment obligation to the other party; (iii) file a petition or o~therwise commence, authorizel or acquiesce in the commencement bf a proceeding or cause under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (iv).otherwise become bankrupt or insolvent (however evidenced); or (v) be unable to pay its debts as they fall due; then the other party shall have the right to either withhold and/or susEend deliveries or~payment, or terminate’ the Contract without prior notice~ in addition to any and all other remedies available hereunder. Seller may immediately suspend deliveries to Buyer hereunder in the event Buyer has not paid any amount due Seller hereunder on or before the second day following the date such payment is due. ,.~ 10.2. Each party reserves to itself all fights, set-offs, counte: Contract. 11.1. Except with regard to a party s obligation to mak~ party shall be liable to the other for failure to-perform a F’~ "Force Majeure" as employed herein means any cause non defined in Section 11.2. 11.2. Force Majeure shall earthquakes, fires, storms ot explosions, entire geographic regionl transportation and/or storage insurrections or wars; and regulation promulgated by a adverse impacts of a Force 11.3. Neither of the following ~ransportation is also covenants or obligations with from its responsibility 11.4. Notwithstanding disturbances shall be and other defenses which it is Or may be entitled to arising from the Tne~e under Section 7. and Imbalance Charges under Section 4, neither ,liga~,~ff, to the extent such failure was caused by Force Majeure. The term tasgNtbly within the control of the party Claiming suspension, as further landslides, lightning, area, floods, washouts, events affecting an (ill) interruption of firm riots, sabotage, statute, Qrdinance, or efforts to avoid the is affected by any or all iprimary, in-path, firm performance of such shall not be excused or other industrial 11.5. The party whose orally; however, written Upon providing written accept delivery of Gas as such obligations to the other notice may be given 1 as reasonably possible. obligation to make or deemed to have failed in SECTION 12. This Contract may be terminated on 30 days’ written notice, but shall remain in effect until the expiration of the latest Delivery Period of any Transaction ConfLrmation(s). The rights of either party pursuant to Section7.4., the obligations to make payment hereunder, and the obligation of either party to indemnify the other, pursuant hereto shall survive the termination of the Base Contract or any Transaction ConfLrmation. SECTION 13. MISCELLANEOUS 13.1. This Contract shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and the covenants, conditions, rights and obligations of this Contract shall run for the full term of this Contract. No assignment of this Contract, in whole or in part, will be made without the prior written consent of the non-assigning party, which consent will not be unreasonably withheld or delayed; provided, either party may transfer its interest to any parent or ’affiliate by assignment, merger or otherwise without the prior approval of the Other party. Upon any transfer and assumption, the transferor shall not be relieved of or discharged from any obligations hereunder. Copyright © 1996 Gas Industry Standards Board, Inc. All flghtg reserved. Page 5 of 7 GISB Standard 6.3.1 May 13, 1996 13.2. If any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such, ¯ determination shall not invalidate, void, or make unenforceable any other provision, agreement or covenant of this Contract. 13.3.!go waiver of any breach of this Contract shall be held to be a waiver of any other or subsequent breach. 13.4. This Contract sets forth all understandings between the parties respecting each transaction subject hereto, and any prior contracts, understandings andrepresentations, whether oral or written, relating to such transactions are merged into and superseded by this~Contract and any effective Transaction Confirmation(s). This Contract may be amended only by a writing executed by both parties. 13.5.The interpretation and performance of this Contract shall be governed by the laws of the state specified by the parties in the Base’ Contract,excluding, however, any conflict of laws rule which would apply the law of another jurisdiction. 13.6. q’his Contract and all.provisions herein will be subject to all applicable and valid statutes, rules, orders and regula~ons of any Federal, State, or local governmental authority having jurisdiction over the parties, their facilities," or Gas supply, this Contract or Transaction Confirmation or any provisions thereof. 13.7.There is no ,third party beneficiary to this Contract. 13.8.Each party to this Contract represents and warrants tha full and complete authority to enter into and perform this Contract, Each person who executes this Contract on behalf of either and warrants that it has full and complete authority to do.so and that such party will be bound thereby. Copyright© 1996 Gas Industry Standards Board, Inc. All r~ohte Page 6 of 7 GISB Standard 6.3.1 May 13. 1996 BASE CONTRACT FOR SHORT-TERM SALE AND PURCHASE OF. NATURAL GAS This Base Contract is. entered into as of the following date:March 1, 2001 The parties to this Base Contract-are-the-follov¢ing:- ......................................................................................................... BP Energy Company _. .__ . and Ci~ of Palo Alto .. .[ P. O. Box 3092 A Utilities Department, 250 Hamilton Avenuet 3ra Floor Houston TX 77253-3092 Duns #625275755 Contract # 600798 Attn:M~k Es~ada Phone:(949) 251-8696 F~:(9491 251-0230 Federal Tax ID Number: Invoices and Payments: Palo Alto CA 94301 Duns # 178928479 Contract # Attn:Raveen Maan Phone:(650) 329-2343 Fax: (6~ 945 000 389 :0) 326-1607 *** Please see Attn: Phone: Wire Transfer or ACH Nos. Of Please This Base Contract incorporates Natural Gas published by the General Terms and Conditions ~ Section 1.2 [] Transaction Procedure [] Section 2.4 [] Confirm Deadline [] Section 2.5 [] Confirming Party [].[] and Purchase of in said , Point 1very Point of delivery Section 3.2 [] Performance Obligation. [] S[ Note: The j~ollowing Spot Price Publication applies to both o preceding Standards and must be filled in afler a Standard is selectetL Section 2.24 "Gas Daily" Spot Price Pubfication: [] Special Provisions: 1 IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. BP Energy Company Title: Origination Manager :- West Date: By Title: Date. City of Palo Alto DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of purchase and sale of natural gas. This contract is intended for/nterrupfible txansactions or Firm transactions of one month or less and may not be suitable for F’um transactions of longer than one month. Further, GISB does not mandate the use of the Contract by any party. GISB DISCLA/MS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO GISB’S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRF_$ENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF T!TLE, NON-INFRINGEMENT, MERCHANT ABILITY, OR FITNESS OR SUITABL1TY FOR ANY PARTICULAR, PURPOSE(WHETHER OR NOT GISB KNOWS, HAS REASON TO KNOW, HAS .BEEN AD.VISED,.OR IS OTHERWISE IN FACT. AWARE OF ANY SUCH ...... PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL GISB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY. PUNITIVE OR CONSEOUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTR ACT TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY EXHIBIT~ Date:,199,__. Transaction Confirmation #: This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated . The terms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days of recei ~t unless otherwise specified in the Base Contract. SELLER:BUYER: Base Contract No. Attn: Phone: Fax: Base Contract No. Transporter: Transporter Contract Price: $.__ Delivery Period: Begin: Perfornmnce Firm (Fixed Quantity): __ MMB ms/day MMBms/day Delivery Point(s): __ (If a pooling point is Used, Special Conditions: Seller: By: Title: Date: Buyer: By: Title: Date: Copyright © 1996 Gas Industry Standards Board, Inc. All rights reserved. "GISBStandard 6.3.1 May 13, 1996 Special Provisions to the Base Contract for Short-Term Sale and Purchase of Natural Gas (GISB) dated March 1, 2001 between BP Energy Company and City of Palo Alto Section 1.2 Oral Transaction Procedure: of Section 1. Purpose and Procedures of the General Terms and Conditions is amended by adding the following sentence after the last. sentence of Section 1.2: The parties acknowledge that their agreement will not be binding-until the exchange of non-conflicting Transaction Confirmation or the passage of the Confirm Deadline without objection from the receiving party, as provided in Section 1.3. Amend Second sentence of Section .13.1 of Section 13. Miscellaneous of the General Terms and Conditions as follows: No assignment of this Contract, in whole or in part, will be made without the prior written consent of the non-assigning party, which consent will not be unreasonably withheld or delayed; however, either party may transfer its interest to any parent or affiliate by assignment, merger or otherwise without the prior approval of the other party; provided that a notice of assignment, merger or otherwise is given to the party not directly connected with the assignment or merger. Base Contract Date: March 1, 2001 BPEC Contract #: 600798 ATTACHMENT I GISB GAS SALES AND PURCHASE CONTRACT Notices. All billings, payments, statements, notices, and communications made pursuant to the Contract shall be made as follows: Notice to BPEC: BP Energy Company P. O. Box 3092 Houston, TX 77253-3092 Attn: Natural Gas Marketing FaxNo.: (281) 366-4934 Phone No.: (281) 366-4664 Notice to City of Palo Alto: ¯ City of Palo Alto - Utilities Department 250 Hamilton Avenue, 3rd Floor Palo Alto, CA 94301 Attn: Raveen Maan Fax No.: (650) 326-1607 Phone No: (650) 329-2343 Payments to BPEC: Chase Manhattan Bank, NY ABA 021000021 BP Energy Company Account No.: 910-2-548097 Payments to City of Palo Alto: City of Palo Alto - Utilities Department 250 Hamilton Avenue, 3rd Floor Palo Alto, CA 94301 Attn: Raveen Maan Billing and Accounting Matters: BP Energy Company P. O. Box 3092 Houston TX 77253-3092 Attn: Energy Accounting Fa~ No.: (281) 366-5313 Phone No.: (281) 366-4168 Billing and Accounting Matters: City of Palo Alto - Utilities Department 250 Hamilton Avenue~ 3r~ Floor Palo Alto, CA 94301 Attn: Raveen Maan Fax No.: (650) 326-1607 Phone No: (650) 329-2343 BASE CONTRACT FOR SHORT-TERM SALE AND PURCHASE OF NATURAL GAS This Base Contract is entered into as of the following date: July 31, 2001 The parties to this Base Contract are the following: SEMPRA ENERGY TRADING CORP.and 58 Cormaerce Road, Stamford, CT 06902 Duns # 60-9746565 Contract # Attn: LegaIDepartment Phone: (203) 355-5000 Fax: (203) 355-5410 Federal Tax ID Number: 13-3653551 Invoices and Payments: SEMPRA ENERGY TRADING CORP. 58 Commerce Road, Stamford, CT 06902 Attn: Energy Operations Phone: (203)355-5601 Fax: .(203) 366-5630 Wire the This Base Contract i published b, Section 1.2 Section 2.4 Confirm Deadline Section 2.5 Confirming Party Section 3.2 Performance Obl. Note: Standards and Section 2.24 Price [] Special IN WITNESS SEMPRA :ted, ~d: 4 CITY OF PALO ALTO Utilities Dept., 250 Hamilton Ave, 3~d fl, Palo Alto CA 94301 Duns# 17-892-8479 Contract # Attn: Raveen Maan Phone: 650-329-2343 Fax: (650) 326-1507 Federal Tax ID Number: 945-000-389 .CITY OF PALO ALTO utilities Dept., 250 Hamilton Ave, 3~a fl, Palo Alto CA 94301 Attn: Tarun Narayan Phone: .(650) 329-2362 Fax: (650) 323-8356 Bank of America .ase of Natural G-~ ms and Conditions Point ~ Point of delivery B VICE PRESIDENT ¯’-;. ":". :’-: : ".-" . " ......;. - ~ ’.--’" "’2-~, ......-’~""7~ ’ ~ :~" ~,~’:~’~ "’.";Z~-’.. ’..L~.’-£., ¯, .....~ . .................,, DISCLAIMER-. The purposes of this Contract are to facilitate trzde, avoid misunderstandings and make more definite ~he terms of contracts of purchase and sale of natural gas. This Contract is intended forInterrupfible transactions or ~ transactions of one month or less and may not be suitable for lifrra transactions of longer than one month. Fm-ther, GISB does not mandzte the use of this Contract by any party. GISB DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO GISB~S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR ~a~P~P~E~ATIO~.S., EXPaESS OR ~WPLmD, ORA~ OR wRrrr~, wrm RESPECT TO TInS coma~CT oR A~ PART a~R~OV,CLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDmONS OF TITLE, NON-INFRINGEIVIENT, MERCHANTABILITY, ORFITNESS OR SUITABILITY FOR ANY PARTICULAR PUI~OSE (WI~ETI~ER OR NOT GISB KNOWS, HAS REASON TO KNOW, IIAS BEEN ~NED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETI~R ALLEGED TO ARISE BY LAW, BY REASON OF8TOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF Tills CONTI~CT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL GISB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR~ONSEO~L D~A~ES AmSIN~ O~r OF AN~ USE OF T~ CONTACT. GENERAL TERMS AND CONDITIONS BASE CONTRACT FOR SHORT-TERM SALE AND PURCHASE OF NATURAL GAS SECTION 1. PURPOSE AND PROCEDURES 1.1.These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to the party receiving G and "Seller" refers to the party delivering Gas. The parties have selected either the "Oral" version ~r~he "Written" version of transaction proced,ures as indicated on the Base Contract.I.~.. ~\ 1.2 The parties will use the following Trans~[~ation~ -~ procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmission or telephone c~!i~ the offer and acceptance constituting the agreement of the parties. The parties shall be legally bound from the time t~~i~ransaction terms and may each rely thereon.Any such transaction shall be considered a "writing" and to have b~~~.Notwithstanding the foregoing sentence,’ the parties agree that Confirming Party shall, and the other, party .may " ~~f~telephonic transaction by sending the other party a Transaction Confirmation by facsi~r mutually agreeable, elaetmnic means. Confirrnin~ Party adnn! s_itmconfim~’ng letterhead, or the hke, as ,ts s~gnatu~~sact~trmahon !a.si~t~i~ntlficatm~uth~0:n~1 1.2 The par~j~?~[e the fol[~ansactk ~~ation pr~l Should $~j~4s come t~_2~ment regarding a Gas purchase a~{S-N~;ti!~nsactronI~ticular D~nod th4~~ng Par d th~4~}"~.~i’~ a, record thatagreement on a T~.~’~.t~]a Confln~__:.~f0"~d comm, Trans~:~nfirma~N~simile, ~~ally agreeable elec~o~c means, I~X~er p~N:i~)~bse of th ~s Day date ~~[aowledge ~at the~ agreement ~~ bindi~~ exchanl onflic cdon ~~;f ~e Co~rm prewously sent a TrN~g~j ~lCo~ ~,:.~~g~;4to~g p~ ~n ~g by Ne Nfferences ~~a? ~hon C~~ The end ~ff~~~g~~~d ~ bo~ ~e B~e Contact md my e$~a~}ansac~afion. I ~~::~~~afion rfi~ ~e Base Con acU 2.4. Co~ D~e" sh~ me~ 5:~ p.m. ~ ~e r~ ~~’~ zone on ~e s~nd B~s Day fo~o~g ~e Day a Tr~acdon Co~don is r~iv~, or ~ appUcable, on Se B~e ~~ to by ~e p~ ~ ~e B~e Contact; provide, g ~e Tr~acdon Coition is ~e s~p~ ~r 5:~ p.m. N ~e r~ei~g p~’s ~e rune, it sh~ be d~m~ r~eiv~ at ~e ope~g of Senext Bus~s Day. 2.5."Co~g P~" sh~ m~ ~e p~ d~i~a~ ~ Se B~e Contact ~ prep~e ~d fo~d Tr~acfion Co~afio~ to ~e o~er 2.6. "Contract" shall mean the legally-binding relationship estabfished by (i)the Base Contract and (ii) the provisions contained in any effective Transaction Confirmation. 2.7. "Contract Price" shall mean the amount expressed in U.S. Dollars per MMBtu, as evidenced by the Contract Price on the Transaction Confirmation. 2.8."Contract Quantity" shall mean the quantity of Gas to be delivered and taken as set forth ~n the Transaction Confirmation. 2.9."Cover Standard", if applicable, shall mean that if there is an unexcused failure to take or deliver any quantity of Gas pursuant to this Contract, then the non-defaulting party shall use commercially reasonable efforts to obtain Gas or alternate fuels, or sell Gas, at a price reasonable for’ ffae delivery or production area, as applicable, consistent with: the amount of notice provided by the defaulting party; the immediacy of the Buyer~ Gas consumption needs or Seller’s ,Gas sales requirements, as applicable; the quantities involved; and the antiqipated length of failure by the defaulting party.. 2.10. "Day" shall mean a period of 24 consecutive hours, coextensive with a "day". as defined by the Receiving Transporter in a particular transaction. 2.11:."Delivery Period" shall be the period during which deliveries are to be made as set forth in the Transaction Confirmation. 2.12."Defivery Point(s)" shall mean such point(s) as are mutually agreed Upon-between Seller and Buyer as set forth in the Transaction Confirmation. 2.13. "EDr’ shall mean an electronic data interchange p~uant to an agreement entered into by the parties, specifically relating to the communication of Transaction Confirmations under this Contrf~.~- 2.14. "EFP" shall mean the purchase, sale or exchange ~! Gas as the "physical" side of anexchange for physical transaction involving gas futures contracts. EFP of "Firm". ,, shall incorporate the meaning 2.15.. ’Firm’ shall mean that either party may in~~ ce without liability only to the extent that such performance is prevented, for reasons ofForce Majeure; provided, however, that duri~~! ~e interruptions, the party invoking Force Majeure may be responsible for any Imbalance Charges as set forth in-Section 4.3. re~lts ’rote~ ~n after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by the Transp~~ 2 2.16. "Cras" shall mean and ~on-combustible gases in a. 2.t7. Transporter’s 2.18. Force Majeure, with its interruption after 2.19. "MMBtu" 2.20. "Month" s the first Day of the n 2.21. "Payment i by Buyer in the prev 2.22. "Receivin~ Transporter delivefit 2.23."Schedulex 2.24 "Spot Pric~ listing applicable to ~ published for such k prices. If no price or~ stated above) for the stated above) for the 2.25. "Transacfi~ transaction formed p 2.26. "Transpo~gathering ~ transporter, transporting Gas forSeller or Buyer upstream, Confirmation. or of the Delivery Point , of mgthane. to satisfy the ! an event of 4.3: related to . commencement of received Transporter, the under the is no single price and low (determined as (determined as purchase and sale the capacity of a. ~ursuant to a particular Transaction SECTION 3 PERFORMANCE OBLIGATION 3.1. Seller agrees to sell and deliver, and Buyer agrees to receive and purchase, the Contract Quantity for a particular transaction in accordance ~ith the terms of the Contrac~ Sales and purchases will be on a Firm or Interruptible basis, as specified in the Transaction Confirmation. The parties have selected the "Cover Standard" version or the "Spot Price Standard" version as indicated on the Base Contract. Cover Standard: 3.2 In addition to any liability for Imbalance Charges, ..~.~,..,~ch sh’all not be recovered twice by the following remedy, the exclusive and sole remedy of the parties in the event of a breach of a F~ii~i~igation shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), paymen~ by Seller to Buyer in an ~?~qual to-the positive difference, if any, between the purchase price paid by Buyer utilizing the Cover Standard for replacement G~~ative fuels and the Contract Price, adjusted for commercially reasonable differences in transportation costs to or from the De~~), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s); ~~ent of a breach by Buyer on any Day(s), payment by Buyer to Sell6r in the amount equal to the positive difference, if/my, bff~(~,a.ct Price and the price received by Sefler utilizing the Cover Standard for the resale of such Gas, adjusted for commercid~l~~ifferences in transportation costs to or from the Delivery Point(s), multiplied by the differen.ce between the Contract Q~~antity actually taken by Buyer for such Day(s); or (iii) in the event that Buyer has used commerclal!y reasonable efforts to replac6 the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party, and no s~nt or_s_ale is avalla~e exclusive and so e ~~a,e,,, ~, pazcy shall be any unfavorable differe(~~n the C~rice and ce, ad’~ ~ff~’~le Delivery Point, multiplied by the dl ilbetw n~;qact Quar~~e quant!~!~y ~&!lby Buyer for such Day(s). Spot Price Stand 3.2 In additi~~ce Ch all n ~~!~ the exclusive andsole remedy of th~~qach of @~ation s ~~nt of a breach bySeller on any Day(~~r in an a~-~ to th~~ ~~l~e actual nnantitv ~ed by Bt~)~, Y~~-~ ~d by ~~ting the ContractPrice from the Sp~~’~lx an~-~a - - -¯~~ount equal to thedifference between ~~~’multiplied bv the .3.3TH~ EXCEPT RWISE i " ......i~!i~.. O E }’~~P,~ LIABLE UNDERS CO ~?i bR OTHERWISE,OR INCIDENTALS?) ¯._ Seller s o sure sufficientto ettect such transporting the ;: ~::~:,~;~ .. The P~~t~,-:.~, orter(s). E~ich q uues .o~ t_ras t~~e ~elivery Point(s) are greater or lesser than the Sc-’h~~, such party shall pro ~Y::~6 Lfy the other party. .zt ~ "~ F ...... uo, use commercially reasonable .......... tmposifion of any Imbalance Charges. If Buyer or Seller receives an invoice from a Transporter that incl.udes Imbalance Charges, the parties shall determine the vakidity as Well as the cause of such Imbalance Charges. If the Imbalance Charges were incurred as,a result of Buyer’s actions or inactions (which shall include, but shall not be limited to, Buyer’s failure to accept quantities Of Gas equal to the Scheduled Gas), then Buyer shall pay for such Imbalance Charges, or reimburse Seller for such Imbalance Charges paid by Seller to the Transporter. If the Imbalance Charges were incurred as a result of Seller’s actions or inactions (which shall include, but shall not be limited to, Seller’s failure to deriver quantities of Gas equal to the Scheduled Gas), then Seller shall pay for such Imbalance Charges, or reimburse Buyer for such Imbalance Charges paid by Buyer to the Trauspo~er. SE’CTION 5. QUALITY AND MEASUREMENT All Gas delivered by Seller Shall meet the quality and heat content requirements of the Receiving Transporter. The unit of quantity measurement for purposes of this Contract shall be one MMBtu dry. Measurement of Gas quantifies hereunder shall be in accordance with the established procedures of the Receiving Transporter. SECTION 6. TAXES [The parties hive selected either the "Buyer Pays At and After-Delivery Point" version or the "Seller Pays Before and At Delivery Point" version as indicated on the Base Contract. Buyer Pays At and After Delivery Point: ?!7 i"!~.,\ Seller shall pay or cause to be paid all taxes, fees, levies, ~ iii~censes or charges imposed by any government authority ("Taxes") on or with respect to the Gas prior to the Delivery Point(s)./!i i~..h_~;~ pay or cause to be paid all Taxes on or with respect to the Gas at the DeliVery Point(s) and all Taxes after the Delivery Point{ ~s requ~ed to remit or pay Taxes that are the other party’s responsibility hereunder, the party responsible for such Taxes shall ~r~ ~ ~j~rse the other party for such Taxes. Any party entitled to an ~xemption from any such Taxes or charges shall furnish the other\~~~:~’any ~ary documentation thereof." Seller Pays Before and At Delivery Point:~ ~’" SECTION 8. TITLE, WARRANTY AND INDEMNITY 8.1.Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the Delivery Point(s). Seller shall have responsibility for and assume any liabifity with respect to the Gas prior to its delivery to Buyer at the specified Delivery Point(s). Buyer shall have responsibility for and assume any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s). 8.~.’ Seller warrants that it wili have the right to convey and will transfer good and merchantable tide to all Gas sold hereunder and delivered by it to Buyer, flee and clear of all liens, encumbrances, and claims. 8.3.Seller agrees to indemnify Buyer and save it harmless from all losses, liabilities or claims including attorneys’ fees and costs of court ("Claims"), from any and all persons, arising from or out of claims of litle, personal injury or property damage from said Gas or other charges thereon which attach before rifle passes to Buyer. Buyer agrees to indemnify Seller and save it harmless from all Claims, from any and 011 persons, arising from or out of claims regarding payment, personal injury or property damage from said Gas or other charges thereon which attach after title passes to Buyer. 8.4.Notwithstanding the other provisions of this Section 8., as between Seller and Buyer, Seller will be liable for all Claims to the extent that such arise from the failure of ~ delivered by Seller to meet the ~of Section 5. SECTION 9. NOTICES 9.1. All Transaction Confirmations, invoices, shall be made to the addresses specified in wri@ 9.2.All Notices required hereunder may be overnight courier service, first class mail or hand 9.3.Notice shall be given when received on a following presumptions will apply. Notices sent by facsimile machine’s confirmation of successful transmission~ if the p.m., on a Business IS mail or courier 10.1. WhenreaI!i a i o performance. assurance, including) ~l~t~llh demandizg party orIi general arrangeme~! ~.e evidenced); or (v)~i deliveries or paym~ may immediately sl}~ ~li’~ x0.z ach par !y!set-offs, Contract.11:: SECTION 1 III!EO I,URE party.shall be liabk [i~ defined in Section ~ 11.2. , Force Ma e~r~;,,,, ........e but not be earthquakes, fires, storms or storm warnings, such as other communications made pursuant to the Base Contract ("Notices") ,from time to time. or mutually acceptable electronic means, a nationally recognized day on which such facsimile fs received 1Bnsines~ I title to~ ~n the fo~ tr of cred !i ~ment P~ ~t Buye~ ~nt due u~ ~ation, tot~ addressee. In the absence of proof of the ~ictual receipt date, the deemed to have been received upon the sending party’s receipt of its is not a Business Day or is after five ~otice by overnight confirmed by the aate assurance of ~ party demanding : acceptable to the assignment or any ition or otherwise for the protection (however and/or suspend Seller c on or before the arising from the ~ection 4, neither cure. The term as further ~llowing: (i) lightning, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption of firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections or wars; and (v) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, or regulation promulgated by a governmental authority having jurisdiction. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance. 11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by any or all of the following circumstances: (i) the curtailment of interruptible or secondary firm transportation unless primary, in-path, fm-n transportation is also curtailed; (ii) the party claiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations with reasonable dispatch; or (iii) economic hardship. The party claiming Force Majeure shall not be excused from !~,s. ~espon~ibility for Imbalance Charges. 11.4.Notwithstanding anything to the contrary herein, the parties agree that the settlement of strikes, lockouts or other industrial di~t~bances shall be entirely within the sole discretion of the party experiencing such disturbance. 11.5. The party whose performance is prevented by Force Majeure must provide notice to the other party. Initial notice may be given orally; however, written notification with reasonably full particulars of the event or occurrence is required as soon as reasonably possible. Upon providing written notification of Force Majeure to the other party, the affected party will be relieved of its obligation to make or accept defivery of Gas as applicable to the extent and for the duration of Force Majeure, and neither party shall be deemed to havre failed in such obligations to the other during such occurrence or event. SECTION This Contract may be terminated on 30 days’ written notice, but shall remain in effect until the expiration of the latest Delivery Period of any Transaction Confirmation(s). The rights of either party~ursuant to Section 7.4, the obligations to make payment hereunder, and the obligation of either party to indemnify the other, pursuant ~m..~ shall survive the termination of the Base Contract or any Transaction Con- firmation. . .i \ ¯ SECTION 13. MISCELLANEOUS/ ’/\ "-/..,A.~\ 13.1. This Contract shall be binding upon and in4~i~ ~e~:/~t of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and the covenants, conditio~,~ ~.gations of this Contract shall run for the full term of this Contract. No assignment of tl?i. ’s Contract, in whole or in part, will b~ ~~e prior written consent of the non-assigning party, which consent will ¯ not be unreasonably withheld or delayed; provided, ei~ t~Y transfer its interest to any parent or affiliate by assignment, merger or otherwise without the from any obligations 13.2. If any determination shall: 13.3. No 13.4. understandings and any 13.5. The Contract 13.6. State, or local Confirmation 13.7. There is 13.8. Each Each person who such party will be assumption, the transferor shall not be relieved of or discharged contracts,~this Contract and ~e4. in the Base ~ons of any Federal, or Transaction ! to do so and that TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY EXHIBIT A Letterhead/Logo Date:,199" Transaction Confirmation #: A This Transaction Confirmation is subject to the Base Co~ct between Seller and Buyer dated terms of this Transaction Cbnftrmation are binding unl~).~’~puted in writing within 2 Business ¯ specified in the Base Contract. ~j,~ SELLI~R:~ ~i:~ iUYER: Attn:~~; Attn: Phone: Fax: Base Contract Nc Transporter: Transporter Cone Contract Price: $ Delivery Period: Performance Ok Firm (Fixed Qu~ ¯ The Days of receipt unless otherwise V Seller: By: Title: Date: Buyer: By: . Title: Date:. EXHIBIT B SPECIAL PROVISIONS TO BASE CONTRACT FOR SHORT-TERM SALE AND PURCHASE OF NATURAL GAS The amendments to the Base Contract for Short-Term Sale and Purchase of Natural Gas and its accompanying General Terms and Conditions (collectively, the "Agreement"), set forth in this Exhibit B shall supplement and form part of the Agreement and shall govern with respect to any conflicting or inconsistent provision in the Agreement. Except as amended, the Agreement shall remain in full force and effect. 1. Delete the term "Short-Term" each place it appears in the Agreement. At the end of Section 1.3, add the following phrase: ’All Gas purchase and sale transactions are entered into in reliance on the fact that the General Terms and Conditions, each Gas purchase .and sale transactidn hereunder, and each Transaction Confirmation constitute a single agreement between the parties. All Gas purchase and sale transactions in effect on the date hereof, and all Gas purchase and sale transactions entered into between the parties on or after the date hereof shall be governed by this Agreement. The parties to this Agreement expressly intend that this Agreement govern all transactions for the purchase and sale of Gas between them, regardless of the term of such transaction." 3. Delete the words "or alternate fuels" in the second line of Section 2.9. 4. In Section 3.2, "Cover Standard", delete the words "or alternative fuels", in the fourth line and in the same section, add the following sentence to the end thereof: "The amount of such unfavorable difference shall be payable three Business Days after presentation of the non-breaching party’s invoice for such amount which shall set forth the basis upon which such amount was calculated. " 5. In Section 7.2, at the begirmlng thereof, add the words, "Except as set forth in Section 3.2,". 6. Add the following sentene~ to the end of Section 7.3: If on any day payments are due from the parties to each other under this Agreement or one or more Gas purchase and sale Transactions, tfien (subject to Section 10) the amount owing shall be offset so that only the net amount owing on that day shall be paid by the party owing the larger amount to the other party. 7. In Section 7.4, the first line, delete the words "and at reasonable times"-and after the word "examine" in the same line, insert the words "true and accurate copies oP’. 8. Add the following new Section 7.5 at the end of section 7: 7.5 If, at the time the parties enter into a Gas purchase and sale transaction under which one party is to sell Gas to the other, one or more other Gas purchase and sale transactions are outstanding under which Such other party is to sell Gas to such ftrst party for delivery during the same Delivery Period and at the same Delivery Point for payment on the same Payment Date, then (subject to’paragraph 10) all such offsetting transactions shall be netted into a single transaction under which (a) the party required to deliver the larger the same Delivery Point for payment on the same Payment Date, then (subject to paragraph 10) all Such offsetting transactions shall be netted into a single transaction under which (a) the party required to delivei the larger,amount of Gas shall deliver to the other party the difference between the amount of Gas it is to deliicer and the amount it is to receive under such offsetting transactions, and (b) the party owing the greater purchase price under such offsetting Gas purchase and sale transaction shall pay to the other party the difference between the amount it owes and ~the amount owed to it under, such offsetting transactions. The single resulting transaction shall be deemed entered into automatically and, once entered into, outstanding obligations under the offsetting transactions shall terminate. Such netting shall not affect that transaction’s status as a Forward Contract based on the date it was originally entered into. 9. In the Section 8.2, the first line, add an "(a) ’ after the word "that" and, at the end of the Section, add the folldwing: ", (b) its sale to Buyer is in compliance with all applicable laws and regulations, and (c) Buyer is not the first purchaser of the Gas. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 13.8, SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIIR.S, EXPRESS OR IMPLIED, WITH RESPECT TO GAS DELIVERED UNDER A TRANSACTION (INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO FITNESS FOR A PARTICULAR PURPOSE)" 10. In Section 9.3, the last sentence replace the words "two Business Days after mailing" with the words "upon actual receipt". 11. Make the following changes to Section 10.1: (a) Add the words "or performance" after the word "payment" in the first line; (b) Add the words "(each "a default")" after the words "in the event’! in th~ fourth line; (c) delete the word "or" before "(v)" in the eight line; (d) add the word "or" at the end of part (v) and add a new part (vi) that reads "fail to provide adequate assurance within 48 hours (but at least one Business Day) of demand therefor"; (e) delete the words "terminate the Contract without prior notice," and replace them with the words "upon notice or upon having taken reasonable efforts to provide notice, to terminate and liquidate any and all Forward Contracts, as defined below (including any portion of a Forward Contractnot yet fully delivered) then outstanding at any time or from time to time thereafter and to determine the Market Damages, as defined below, for each such Forward Contract and the net Market Damages due from one party to the other," after the words "payment, or" in the ninth line; and (f) add the words "by operation of law or otherwise." after the word "hereunder" in the ninth line. 12. Delete Section 10.2 in its entirety and add the following new Section 10.2 and 10.3: 10.2 "If an event in Section 10.1 occurs with respect to a party (the "Defaulting Party"), the other party (the "Performing Party") may (at its election) from time to time.set off any or all amounts which the Defaulting Party owes to it (whether tinder this Agreement, any Forward Contract or otherwise and whether or not then due) against any or all amounts which the Performing Party owes to the Defaulting I:klocs\glsb~exhibitb Party (whether under this Agreement, any Forward Contract or otherwise and whether or not then due),; provided that any amount not then due which is included in such setoff shall be discounted to present value as at the time of setoff (to take account of the period between the date of setoff and the date on which such amount would have otherwise been due). After a default, the Defaulting Part5i shallbe responsible forall costs and expenses incurred by the Performing Party as a result of a default (including, without limitation, reasonable attorneys’ fees and disbursements), and any amount which is not paid by the Defaulting Party when due shall bear interest until paid at the rate set forth in Section 7.2. 10.3 For purposes of this Agreement, (a) "Forward Contract" means a contract for the purchase and sale of Gas under this Agreement between the parties with a maturity date more than two days after such contract is entered into, and (b) "Market Damage" shall be calculated as the difference between the Contract Price for that Gas (and provided that if the Contract Price is not in U.S. Dollars, itshall be converted to U.S. Dollars at the then current open market exchange rate as of the relevant Payment Date), and the replacement or resale price, as the c, ase may be, multiplied by the relevant quantity of Gas not delivered or received as a result of the early liquidation, except that any such damages determined for a term in excess of a month shall be discounted to a present value as of the date of payment utilizfiag a rate of interest determined by the Performing Party in a commercially reasonable manner." 13. In Section 11.3, after part (iii) and before the period, add the foliowing phrase: " "(including, without limitation, loss of markets, increases or decreases in the market price of natural gas o~ the availability of.alternate gas supplies or markets at the same or different prices); (iv) regulatory disallowance of the pass through of the costs of natural gas or other related costs; (v) a State’s controlling or rationing production; (vi) increases or decreases in natural gas supply due to allocation or reallocation of production by well operators, pipelines or other parties; and (vii) any failure of a supplier or purchaser to perform, for reasons other than set forth in Section 11.2," 14. In Section 13.1, the fourth line thereof, add the word "however" before the. word " either" and add the following phrase after the word "affiliate": ", of equal or greater creditw0rthiness,". Add the following phrase at the end of the fifth line: "; provided that a notice of assignment, merger or otherwise is given to the party not directly ,connected with the assignment or merger". / 15. Add the following new.SectiOns 13.9, 13.10, and 13.1 lat the end of the Agreement: "13.9 Each Party waives its respective right to any jury trial with respect to any litigation arising under or in connection with this Agreement or any transaction. 13.10 Each Party may record all telephone conversations between them and any tape recordings may be submitted in evidence to any court or in any legal proceeding for the purpose of establishing any, matter relating to this Agreement or any tra~isaction. 13.11 If Buyer at any time exceeds the delivery credit line then in effect as from time to time established by Seller, Seller may, not later than the second Business Day before the last day on which Gas deliveries for that delivery month or Delivery Period, as applicable, can be nominated on Seller’s Transporter (the "Last Nomination Day"), require Buyer, to the extent of such excess, to prepay for that transaction or to provide an irrevocable letter of credit in Seller’s favor in a form and substance and having such terms and conditions as Seller shall reasonably specify, issued by a major bank which is and remains acceptable to Seller; such I:~docs~glsb~xifibitb prepayment will be made to, or such letter of credit received by, Seller within two Business Days after Seller’s request (but no later than the Business Day before the relevant Last Nomination Day). All charges at Buyer’s bank relating to any letter of credit are for Buyer’s account.