MPSC Case No.: U-16892-R Respondent: K. Krishnamurthy Requestor: MEC-1 Question No.: MEC/DE-1.7 Page: 1 of 1 Question: Refer to Exhibit A-3. Explain why total system fuel costs (in $/MMBtu) were 6.6% higher than planned while total system fossil fuel costs increased 1.2% and nuclear fuel costs decreased 5.2%. Answer: Please refer to Exhibit A-3 in my Direct Testimony in this Case and the Table below. As shown in the Table below for 2012 i) The Actual Total System - Fossil fuel cost was ₵276.7/MMBtu, which was 1.2% above the PSCR PLAN Total System - Fossil fuel cost of ₵273.5/MMBtu. ii) The Actual Nuclear fuel cost was ₵59.7/MMBtu, which was 5.2% below the PSCR PLAN Nuclear fuel cost of ₵63.0/MMBtu. iii) The Actual Total System - Fossil fuel consumption (353,873,543 MBTU) was down 1.5% from the PSCR PLAN Total System - Fossil fuel consumption (359,153,837 MBTU) while the Actual Nuclear fuel consumption (55,728,746 MBTU) was down 36.8% from the PSCR PLAN Nuclear fuel consumption (88,220,000 MBTU). iv) The Actual consumption of the significantly lower cost Nuclear fuel was 36.8% lower than PSCR PLAN and comprised a significantly lower percentage (13.6%) of the Actual Total System fuel consumption than the Nuclear fuel percentage (19.7%) of the PSCR PLAN Total System fuel consumption. v) As a result of the significantly lower Nuclear fuel consumption, the actual Total System fuel cost of ₵247.2/MMBtu was 6.6% higher than the PSCR PLAN Total System fuel cost of ₵232.0/MMBtu. Line (a) (b) (c) (d) (e) (f) (g) (h) No. 1 2 PERCENTAGE DIFFERENCE 3 FUEL TYPE COST, $ MBTU ₵/MMBtu COST, $ MBTU ₵/MMBtu ACTUAL PLAN (₵/MMBtu) 4 5 TOTAL SYSTEM - FOSSIL $979,275,906 353,873,543 276.7 $982,303,741 359,153,837 273.5 1.2% 6 7 NUCLEAR $33,284,081 55,728,746 59.7 $55,591,470 88,220,000 63.0 -5.2% 8 9 TOTAL SYSTEM $1,012,559,986 409,602,289 247.2 $1,037,895,211 447,373,837 232.0 6.6% 2012 ACTUAL PSCR PLAN Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-36 - MEC/DE-1.7 Page 1 of 1 MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 242 of 873
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MPSC Case No.: U-16892-R Respondent: K. Krishnamurthy Requestor: MEC-1 Question No.: MEC/DE-1.7 Page: 1 of 1 Question: Refer to Exhibit A-3. Explain why total system fuel costs (in $/MMBtu)
were 6.6% higher than planned while total system fossil fuel costs increased 1.2% and nuclear fuel costs decreased 5.2%.
Answer: Please refer to Exhibit A-3 in my Direct Testimony in this Case and the
Table below.
As shown in the Table below for 2012 i) The Actual Total System - Fossil fuel cost was ₵276.7/MMBtu,
which was 1.2% above the PSCR PLAN Total System - Fossil fuel cost of ₵273.5/MMBtu.
ii) The Actual Nuclear fuel cost was ₵59.7/MMBtu, which was 5.2% below the PSCR PLAN Nuclear fuel cost of ₵63.0/MMBtu.
iii) The Actual Total System - Fossil fuel consumption (353,873,543 MBTU) was down 1.5% from the PSCR PLAN Total System - Fossil fuel consumption (359,153,837 MBTU) while the Actual Nuclear fuel consumption (55,728,746 MBTU) was down 36.8% from the PSCR PLAN Nuclear fuel consumption (88,220,000 MBTU).
iv) The Actual consumption of the significantly lower cost Nuclear fuel was 36.8% lower than PSCR PLAN and comprised a significantly lower percentage (13.6%) of the Actual Total System fuel consumption than the Nuclear fuel percentage (19.7%) of the PSCR PLAN Total System fuel consumption.
v) As a result of the significantly lower Nuclear fuel consumption, the actual Total System fuel cost of ₵247.2/MMBtu was 6.6% higher than the PSCR PLAN Total System fuel cost of ₵232.0/MMBtu.
Line (a) (b) (c) (d) (e) (f) (g) (h)
No.
1
2 PERCENTAGE DIFFERENCE
3 FUEL TYPE COST, $ MBTU ₵/MMBtu COST, $ MBTU ₵/MMBtu ACTUAL PLAN (₵/MMBtu)4
5 TOTAL SYSTEM - FOSSIL $979,275,906 353,873,543 276.7 $982,303,741 359,153,837 273.5 1.2%
9 TOTAL SYSTEM $1,012,559,986 409,602,289 247.2 $1,037,895,211 447,373,837 232.0 6.6%
2012
ACTUAL PSCR PLAN
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-36 - MEC/DE-1.7 Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 242 of 873
MPSC Case No.: U-16892-R Respondent: R. E. Palmer/Legal Requestor: MEC- 3 Question No.: MEC/DE-3.39e (1) Page: 1 of 1 Question: Refer to Mr. Palmer’s direct testimony at page REP-5 and to discovery
response MEC/DE-1.20. e. For each of the units listed in MEC/DE-1.20, provide the planned and
actual capacity factor for each year from 2008 to 2012. Answer: DTE Electric objects for the reason that the information requested is not
relevant or reasonably calculated to lead to the discovery of admissible evidence in this proceeding. The requested information is for years 2008 to present, which are outside the time frame for this proceeding with the exception of year 2012 which only addressed the reasonableness and prudence of DTE Electric’s power supply costs and expenses for the 2012 PSCR Reconciliation which is the proper subject time frame of this PSCR proceeding under Act 304 pursuant to MCL 460.6j(12). Subject to such objection, and without waiver thereof, DTE Electric would answer as follows:
2012 PSCR Plan 2012 ActualWinter NDC Capacity Factor Capacity Factor
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-37 - MEC/DE-3.39e Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 243 of 873
MPSC Case No.: U-16892-R Respondent: R. E. Palmer/Legal Requestor: MEC-1 Question No.: MEC/DE-1.20 Page: 1 of 1 Question: Refer to the direct testimony of Robert Palmer at REP-5, lines 11-19.
Provide the Company’s projected and actual loading factor, for each of its base load coal units, from 2008-2012.
Answer: DTE Electric objects for the reason that a subset of the information
requested is for the years 2008-2011, which are outside the timeframe for this proceeding, and is not relevant to the reasonableness and prudence of DTE Electric’s power supply costs and expenses for the 2012 PSCR Reconciliation, which is the proper subject timeframe of this PSCR plan proceeding under Act 304 pursuant to MCL 460.6j(3) and (4), nor is it reasonably calculated to lead to the discovery of admissible evidence. Subject to such objection, and without waiver thereof, DTE Electric would answer as follows:
2008 Loading Factor
2009 Loading Factor
2010 Loading Factor
2011 Loading Factor
2012 Loading Factor
Plan Actual Plan Actual Plan Actual Plan Actual Plan Actual
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-38 - MEC/DE-1.20 Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 244 of 873
MPSC Case No.: U-16892-R Respondent: A.P.Wojtowicz/R.E. Palmer/ Legal Requestor: MEC-1 Question No.: MEC/DE-1.6b Page: 1 of 2 Question: Refer to the direct testimony of Karthik Krishnamurthy at KK-7.
b. Identify and describe, for each month of 2012, how higher-than-forecast coal costs affected the dispatch price, dispatch rate, generation, and overall power supply cost (in $/kWh) of each of the Company’s coal-fired power plants.
Answer: DTE Electric objects for the reasons that the request is unduly
burdensome and overly broad. Subject to such objection, and without waiver thereof, DTE Electric would answer as follows:
The dispatch of the Company’s coal units is performed by MISO and is the
result of a combination of interrelating factors. The dispatch price of our coal units can vary depending on the coal blend that is being burned and the associated emission allowance expense. The price would be based off of the replacement fuel cost (of the blend to be burned) and would only be dispatched by MISO if it was economic to do so or if required for system reliability. Each coal blend changes the capacity limit of each unit differently, so the maximum output from any unit can vary. This means the actual generation from coal-fired power plants will change depending on the MISO dispatch and the blend of coal burned. The MISO dispatch rate of the Company’s coal-fired power plants depends on many factors including the wholesale energy market price, the availability of other market participants’ generation, the amount of load, and the various blends of coal. The overall power supply costs were minimized through the economic dispatch of our coal-fired power plants by MISO.
The contribution of higher coal costs on dispatch rate, generation, and overall power supply costs cannot be determined, but only estimated by performing a detailed hourly analysis of the plan and actual data and evaluating and speculating about numerous operating assumptions. Even a detailed hourly post-analysis would be extremely complicated and only result in an estimate because of multiple interacting variables that are not mutually exclusive and consideration in differing sequences could result in different conclusions. The data that would have to be considered would include, at a minimum; load, wholesale energy market prices, generation and assumptions about what generation would have been
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-39 - MEC/DE-1.6b Page 1 of 2
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 245 of 873
MPSC Case No.: U-16892-R Respondent: A.P.Wojtowicz/R.E. Palmer/ Legal Requestor: MEC-1 Question No.: MEC/DE-1.6b Page: 2 of 2
under different conditions (i.e., different market prices which can result in different power plant operations and different output capabilities).
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-39 - MEC/DE-1.6b Page 2 of 2
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 246 of 873
MPSC Case No.: U-16892-R Respondent: R. E. Palmer Requestor: MEC-1 Question No.: MEC/DE-1.21b Page: 1 of 1 Question: Refer to Exhibit A-13. b. Explain why actual plant generation was higher than projected at
Greenwood. Answer: During the summer of 2012 the weather was hotter than the weather
normalized projections and that resulted in higher than forecasted loads in the MISO footprint. The price of natural gas delivered to Greenwood was also lower than forecasted. The combination of those events and others within MISO resulted in the increased Greenwood generation.
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-40 - MEC/DE-1.21b Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 247 of 873
MPSC Case No.: U-16892-R Respondent: K. Krishnamurthy Requestor: ST-1 Question No.: ST/DE-1.20 Page: 1 of 1 Question: Does DTE Electric have firm capacity and firm supply for Greenwood? If
so, please indicate the volumes for each. Answer: DTE Electric does not have firm capacity and firm supply for natural gas
for the Greenwood generating station.
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-41 - ST/DE-1.20 Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 248 of 873
* Adjusted for Actual Outages** Belle River ran at a capacity factor over 80%, as such, no additional generation is estimated.
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-42 - DTE Electric Capacity and Generation Analysis Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 249 of 873
DTE Electric Fly Ash Analysis
PSCR Plan Year 2012
A B C D E F GNon-REF REF
Fly Ash Produced per Coal Ton - Non
REF Coal
Fly Ash Produced per Coal Ton -
REF Coal
Additional Fly Ash Produced per Coal Ton from REF Coal
REF Coal Consumed in 2012
Additional Fly Ash Produced
Additional Cost of Fly Ash Disposal @ $8.90/ton
(Ton) (Ton) (Ton) (Ton) (Ton) ($)MEC/DE-3-52c MEC/DE-3-52d Col. C - Col. B KK-10, ln 18-20 Col. D X Col E Col. F X $8.90
St. Clair 0.035 0.038 0.003 1,769,118 5,307 47,235 Belle River 0.035 0.038 0.003 1,735,213 5,206 46,330 Monroe 0.048 0.051 0.003 7,438,570 22,316 198,610 TOTALS 10,942,901 32,829 292,175
Direct Testimony of G. E. Sansoucy on Behalf of MEC MPSC Case No. U-16892-R - October 17, 2013 Exhibit: MEC-43 - DTE Electric Fly Ash Analysis Page 1 of 1
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 250 of 873
MPSC Case No.: U-17097 Respondent: K. Krishnamurthy/Legal Requestor: MEC-1 Question No.: MEC/DE-1.23a Page: 1 of 1 Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
a. Identities of the third party tax credit investors.
Answer: Detroit Edison objects for the reason that the information requested is not
relevant to the reasonableness and prudence of power supply costs and expenses that are the proper subject of PSCR proceedings under Act 304, nor is it reasonably calculated to lead to the discovery of admissible evidence. Subject to such objection, and without waiver thereof, Detroit Edison would answer as follows:
No.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 1 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 251 of 873
MPSC Case No.: U-17097 Respondent: K. Krishnamurthy/Legal Requestor: MEC-1 Question No.: MEC/DE-1.23b Page: 1 of 1 Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
b. Purchase price of the interests in the Fuel Companies sold to the third
party tax credit investors. Answer: Detroit Edison objects for the reason that the information requested is not
relevant to the reasonableness and prudence of power supply costs and expenses that are the proper subject of PSCR proceedings under Act 304, nor is it reasonably calculated to lead to the discovery of admissible evidence. Subject to such objection, and without waiver thereof, Detroit Edison would answer as follows:
No.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 2 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 252 of 873
MPSC Case No.: U-17097 Respondent: K. Krishnamurthy/Legal Requestor: MEC-1 Question No.: MEC/DE-1.23c Page: 1 of 1 Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
c. Projected or actual revenues accruing to DTE Energy Company and/or
any subsidiaries from the REF program, including but not limited to tax credit revenues and membership interest sale proceeds.
Answer: Detroit Edison objects for the reason that the information requested is not
relevant to the reasonableness and prudence of power supply costs and expenses that are the proper subject of PSCR proceedings under Act 304, nor is it reasonably calculated to lead to the discovery of admissible evidence. Subject to such objection, and without waiver thereof, Detroit Edison would answer as follows:
No.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 3 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 253 of 873
MPSC Case No.: U-17097 Respondent: J. C. Dau Requestor: MEC-1 Question No.: MEC/DE-1.23d Page: 1 of 1 Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
d. Status of the testing at Belle River.
Answer: The current plan is to continue testing Unit 1 in 2013. The testing is
planned around the Unit 1 outage that is currently scheduled for March 8, 2013 through May 23, 2013. The first test period is to begin January 1 to the start of the outage and the second test period is to begin after the outage for a minimum of 90 days. Any outcome as to a decision and or further testing on Unit 1 and/or 2 will be based on the test results.
No documents were relied upon to support the discovery response.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 4 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 254 of 873
MPSC Case No.: U-17097
Respondent: K. Krishnamurthy
Requestor: MEC-1
Question No.: MEC/DE-1.23e
Page: 1 of 1 Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
e. Revision of any agreements with any of the Fuel Companies related to
the REF program. Answer: To the extent that REF testing is continuing at BRPP, the Acceptance
Period Inventory Purchase Agreement is extended under the same Terms & Conditions to accommodate the sale of additional Coal Inventory.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 5 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 255 of 873
MPSC Case No.: U-17097 Respondent: K. Krishnamurthy/Legal Requestor: MEC-1 Question No.: MEC/DE-1.23f Page: 1 of 1 Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
f. Sale of any interests in any of the Fuel Companies.
Answer: Detroit Edison objects for the reason that the information requested is not
relevant to the reasonableness and prudence of power supply costs and expenses that are the proper subject of PSCR proceedings under Act 304, nor is it reasonably calculated to lead to the discovery of admissible evidence. Subject to such objection, and without waiver thereof, Detroit Edison would answer as follows:
No.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 6 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 256 of 873
MPSC Case No.: U-17097
Respondent: K. L. O’Neill
Requestor: MEC-1
Question No.: MEC/DE-1.23g
Page: 1 of 1
Question: Please state whether the Company or any of its witnesses has any more
information, on any of the following topics related to REF, than was provided in discovery responses and cross-examination in Case U-16892, and discovery and testimony (direct and rebuttal) in Case U-16434-R. For any affirmative answer, describe in detail the new information and produce any documents referenced, reviewed, or relied upon for the answer.
g. Disclosures to the Commission of any coal inventory sales to the Fuel
Companies. Answer: The Company submitted The Detroit Edison Company’s Affiliate
Transactions Compliance Report for the year 2011 as required by the order issued by the Michigan Public Service Commission dated January 21, 2003 in Case No. U-13502 which can be found at the following url:
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-33; Source: MEC-DE-1.23a-g (Krishnamurthy, Dau), U-17097 Page 7 of 7
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 257 of 873
9
1 STATE OF MICHIGAN
2 BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
3 In the matter of the application of
The Detroit Edison Company for Case No. U-16434-R
4 reconciliation of its power supply
cost recovery plan for the 12-month Volume No. 2
5 period ending December 31, 2011.
_____________________________________/
6
CROSS-EXAMINATION
7
Proceedings held in the above-entitled matter
8
before Mark D. Eyster, J.D., Administrative Law Judge
9
with Michigan Administrative Hearing System, at the
10
Michigan Public Service Commission, Constitution Hall,
11
525 West Allegan, Nisbet Room, Lansing, Michigan, on
12
Tuesday, January 8, 2013, at 9:03 a.m.
13
APPEARANCES:
14
DAVID MAQUERA, J.D.
15 JON P. CHRISTINIDIS, J.D.
DTE Energy
16 One Energy Plaza, #688WCB
Detroit, Michigan 48226
17
On behalf of The Detroit Edison Company
18
DON L. KESKEY, J.D.
19 Public Law Resource Center, PLLC
139 West Lake Lansing Road, Suite 210
20 East Lansing, Michigan 48823
21 On behalf of Michigan Community Action
Agency Association
22
23
24
25 (Continued)
Metro Court Reporters, Inc. 248.426.9530
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 1 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 258 of 873
10
1 APPEARANCES Continued:
2 CHRISTOPHER BZDOK, J.D.
EMERSON HILTON, J.D.
3 Olson, Bzdok & Howard PC
420 East Front Street
4 Traverse City, Michigan 49686
5 On behalf of Michigan Environmental Council
6 DONALD E. ERICKSON,
Assistant Attorney General
7 Special Litigation Division
525 West Ottawa, 6th Floor
8 Lansing, Michigan 48909
9 On behalf of Attorney General Bill Schuette
10 ANNE M. UITVLUGT,
Assistant Attorney General
11 6545 Mercantile Way, Suite 15
Lansing, Michigan 48911
12
On behalf of Michigan Public Service
13 Commission Staff
14 - - -
15
16
17
18
19
20
21
22
23 REPORTED BY: Lori Anne Penn (CSR-1315)
24
25
Metro Court Reporters, Inc. 248.426.9530
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MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 259 of 873
11
1 I N D E X
2 WITNESS: PAGE
3 John C. Dau
4 Testimony Bound In 19
5 Jeffrey A. Jewell
6 Testimony Bound In 29
7 Kelly A. Holmes
8 Testimony Bound In 39
9 Michael W. Shields
10 Testimony Bound In 58
11 James D. Good
12 Direct Examination by Mr. Maquera 83
Cross-Examination by Mr. Keskey 95
13 Cross-Examination by Mr. Bzdok 101
Cross-Examination by Mr. Erickson 103
14
Kevin L. O'Neill
15
Direct Examination by Mr. Maquera 107
16 Cross-Examination by Mr. Keskey 129
17 Gary E. Lapplander
18 Direct Examination by Mr. Maquera 136
Cross-Examination by Mr. Keskey 182
19
20
21
22
23
24
25
Metro Court Reporters, Inc. 248.426.9530
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MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 260 of 873
MPSC Case No. U-16434-R
January 8, 2013 - Transcript 2
Testimony of Gary E. Lapplander
Other testimony atpp. 12 through 135
removed as unrelated
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 4 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 261 of 873
136
1 JUDGE EYSTER: Briefly. We're off the
2 record.
3 (At10:01 a.m., there was a two-minute recess.)
4 JUDGE EYSTER: Back on the record.
5 MR. MAQUERA: Yes, your Honor. The
6 Company has no redirect for this witness.
7 JUDGE EYSTER: All right. Thank you.
8 You're excused.
9 (The witness was excused.)
10 - - -
11 MR. KESKEY: Your Honor, can we go off
12 the record a minute?
13 JUDGE EYSTER: Sure. We're off the
14 record.
15 (At 10:04 a.m., there was a 38-minute recess.)
16 (Documents marked for identification by the Court
17 Reporter as Exhibit Nos. MCA-12 through MCA-26.)
18 JUDGE EYSTER: We're back on the record.
19 G A R Y E. L A P P L A N D E R
20 was called as a witness on behalf of The Detroit Edison
21 Company and, having been duly sworn to testify the truth,
22 was examined and testified as follows:
23 DIRECT EXAMINATION
24 BY MR. MAQUERA:
25 Q Mr. Lapplander, would you please state your full name and
Metro Court Reporters, Inc. 248.426.9530
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 5 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 262 of 873
137
1 business address for the record?
2 A Gary E. Lapplander, One Energy Plaza, Detroit, Michigan
3 48226.
4 Q Mr. Lapplander, did you file or cause to be filed with
5 the Commission a document entitled the Qualifications and
6 Direct Testimony of Gary E. Lapplander, consisting of a
7 cover sheet and 21 pages of questions and answers?
8 A Yes.
9 Q Do you have any changes you wish to make to your direct
10 testimony?
11 A No.
12 Q Is that then the direct testimony that you are adopting
13 today?
14 A Yes.
15 Q And are you sponsoring any exhibits associated with your
16 direct testimony in this case?
17 A Yes.
18 Q For purposes of identification, would that be exhibit, or
19 include Exhibit A-10, consisting of 10 pages; Exhibit
20 A-11, consisting of two pages; and Exhibit A-24,
21 consisting of nine pages?
22 A Yes.
23 Q Were these exhibits prepared by you or for you or at your
24 direction?
25 A Yes.
Metro Court Reporters, Inc. 248.426.9530
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 6 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 263 of 873
138
1 Q Do you have any changes to make to any of those three
2 direct exhibits?
3 A No.
4 Q Mr. Lapplander, did you also cause to be filed with the
5 Commission a document entitled the Rebuttal Testimony of
6 Gary E. Lapplander, consisting of a cover sheet and 19
7 pages of questions and answers?
8 A Yes.
9 Q Do you have any changes you wish to make to your rebuttal
10 testimony?
11 A No.
12 Q Is that then the rebuttal testimony that you are adopting
13 today?
14 A Yes.
15 Q Did you sponsor any exhibits associated with your
16 rebuttal testimony in this case?
17 A Yes.
18 Q For purposes of identification, would those exhibits
19 include and be designated as Exhibit A-25, which consists
20 of one page; Exhibit A-26, which consists of one page,
21 Exhibit A-27, consisting of 82 pages; Exhibit A-28,
22 consisting of 61 pages; Exhibit A-29, consisting of one
23 page; Exhibit A-30, consisting of 806 pages; Exhibit
24 A-31, consisting of two pages; Exhibit A-32, consisting
25 of two pages; Exhibit A-33, consisting of one page; and
Metro Court Reporters, Inc. 248.426.9530
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 7 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 264 of 873
139
1 Exhibit A-34, consisting of two pages?
2 A Yes.
3 Q Were these exhibits prepared by you or for you or at your
4 direction?
5 A Yes.
6 Q Do you have any changes you wish to make to any of those
7 ten rebuttal exhibits?
8 A No.
9 MR. MAQUERA: Your Honor, Detroit Edison
10 moves to bind into the record the Direct Testimony and
11 Rebuttal Testimony of Gary E. Lapplander, and moves for
12 admission at the end of cross-examination of Exhibits
13 A-10, A-11 and A-24, and A-25, A-26, A-27, A-28, A-29,
14 A-30, A-31, A-32, A-33 and A-34, and tenders
15 Mr. Lapplander for cross-examination.
16 JUDGE EYSTER: O.K. Are there any
17 objections to the testimony being bound into the record?
18 MR. BZDOK: Judge, we have no objection
19 to the testimony. We anticipate some voir dire questions
20 relative to Exhibit A-30. I understand you're holding a
21 ruling on the admission of the exhibits until the end,
22 but I just wanted to put that there as a heads up.
23 JUDGE EYSTER: All right. Hearing no
24 objection, the testimony is bound into the record.
25 (Testimony bound in.)
Metro Court Reporters, Inc. 248.426.9530
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 8 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 265 of 873
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
In the matter of the Application of ) THE DETROIT EDISON COMPANY for ) Reconciliation of its Power Supply ) Case No. U-16434-R Cost Recovery Plan for the 12-month Period ) Ending December 31, 2011 )
QUALIFICATIONS
AND
DIRECT TESTIMONY
OF
GARY E. LAPPLANDER
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 9 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 266 of 873
THE DETROIT EDISON COMPANY QUALIFICATIONS OF GARY E. LAPPLANDER
Line No.
GEL - 1
Q. Would you please state your name and business address? 1
A. My name is Gary E. Lapplander. I am the Director - Fuel Supply for The Detroit 2
Edison Company (Detroit Edison or the Company). My business address is One 3
Energy Plaza, Detroit, Michigan 48226. I am testifying on behalf of Detroit 4
Edison. 5
6
Q. Would you please summarize your educational background? 7
A. I received a Bachelor of Science Degree in Mechanical Engineering in 1975 from 8
Western Michigan University (WMU). In 1978, I also received from WMU a 9
Bachelor of Science Degree in Automotive Engineering Technology. In 1982, I 10
received a Masters Degree in Business Administration from Wayne State 11
University, with a major in Finance. I have completed many Company-sponsored 12
courses and have attended numerous seminars to further my development with 13
Detroit Edison. 14
15
Q. Would you please describe your professional experience? 16
A. I began working for Detroit Edison in 1975, and for the period 1975 through 1981, I 17
held various positions within the Special Projects Group of the Mechanical 18
Engineering Division of the Generation Engineering Department. My primary 19
responsibilities focused on engineering economic analysis, thermodynamic analysis 20
of power plant cycles, cost/benefit analysis of new capital additions and various 21
regulatory matters. While I was a member of the Special Projects Group, I cross-22
trained with Strategic Planning, the Greenwood Project Management Organization 23
and the Greenwood Production Organization. 24
25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 10 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 267 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL- 2
In 1982, I joined the Planning and Development Division of the Fuel Supply 1
Department as a Fuel Resources Engineer. 2
3
In 1985, I undertook a one-year management training assignment as the Assistant 4
Maintenance Engineer at the Company’s River Rouge Power Plant. Upon my 5
return to Fuel Supply in 1986, I was promoted to Senior Fuel Resources Engineer 6
and had responsibility for the preparation of short and long-term fuel plans. A fuel 7
plan considers all aspects of the fuel supply function including fuel consumption, 8
fuel requirements, etc. Fuel plans form the basis for the development of fuel 9
expense and fuel requirement forecasts. In addition, I assisted in, or was 10
responsible for, the initial negotiations for long-term procurement of fuels and 11
related transportation. Also, I was involved with the development of fuel 12
specifications for individual electric power plants operated by the Company. 13
14
In 1991, I was appointed to the position of Director - Planning & Contracts, Fuel 15
Supply. My responsibilities included planning, development and procurement of 16
fossil fuels to meet the Company’s electric generating needs. In addition, I was 17
responsible for the negotiation and administration of the Company’s long-term 18
fossil fuel and related transportation contracts. 19
20
In 1994, I was appointed Director - Power Supply Initiatives/Business Planning. 21
My responsibilities included development and implementation of a management 22
and control system for Power Supply, assessment of utility deregulation and its 23
impact on the electric generating business and the introduction of risk management 24
in Power Supply. 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 11 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 268 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL- 3
In 1997, I was promoted to Director - Fuel Supply (the title for this position 1
changed from Manager in 2002 in conjunction with the reversal of the naming 2
convention that took place with the merger with Michigan Consolidated Gas 3
Company) the position I currently hold. 4
5
Q. What are your specific responsibilities as Director - Fuel Supply? 6
A. As Director I am responsible for fossil fuel supply and transportation requirements 7
for Detroit Edison’s fossil fueled electric generating assets, as well as the 8
Company’s coal transshipment facility, Midwest Energy Resources Company 9
(MERC). 10
11
Q. Are you a registered professional engineer? 12
A. Yes. I became registered as a professional engineer with the State of Michigan in 13
1980 by examination. 14
15
Q. Are you a member of any professional societies or organizations? 16
A. Yes. I am a member of the American Society of Mechanical Engineers. 17
18
Q. Have you testified or been involved in any hearings before the MPSC while 19
employed with Detroit Edison? 20
A. Yes. I have supplied direct testimony and/or testified in the Steam Heating Fuel 21
Cost Recovery Case No. U-7906, the 1984 and 1986 Power Supply Cost Recovery 22
Reconciliation Case Nos. U-7775-R and U-8291-R, respectively, the 1987, 1988 23
and 2012 Power Supply Cost Recovery Plan Case Nos. U-8578, U-8880 and U-24
16892, respectively, and Main Electric Rate Case Nos. U-8789, U-10102, U-13808, 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 12 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 269 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL- 4
U-15244 and U-14838. Also, I presented Supplemental and Rebuttal testimony in 1
Case Nos. U-7775-R, U-8020-R and U-16047-R. Furthermore, I assisted in the 2
development of testimony and/or provided support for Company witnesses in other 3
Main Electric Rate and Power Supply Cost Recovery cases. 4
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 13 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 270 of 873
THE DETROIT EDISON COMPANY DIRECT TESTIMONY OF GARY E. LAPPLANDER
Line No.
GEL - 5
Q. Mr. Lapplander, what is the purpose of your testimony in this case? 1
A. The purpose of my testimony is to support both the use of Reduced Emission Fuel 2
(REF or the Project) at various Detroit Edison Power Plants and the computation of 3
the REF Adder and to discuss why the REF business structure complies with the 4
Code of Conduct. 5
6
Q. Are you sponsoring any exhibits? 7
A. Yes. I am sponsoring the following exhibits 8
Exhibit Description 9
A-10 Overview of Reduced Emissions Fuel (REF) Projects 10
shipment scheduling, receiving and unloading of coal, coal sampling and analysis, 19
coal stockpile management and maintenance, etc. As stated previously, the MFC 20
will pay a Coal Fee Rate for these coal handling and consulting services. 21
22
In addition, an arrangement has been made for environmental indemnity protection 23
included in the Environmental Indemnity Agreement. Detroit Edison has also 24
entered into a License and Services Agreement where Detroit Edison has agreed to 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 29 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 286 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL- 21
provide for a fee, among other things, potable water, sanitary sewer and storm water 1
disposal to the MFC in order to make certain that Detroit Edison is not subsidizing 2
the MFC. 3
4
Q. Are the REF business arrangements at St. Clair and Belle River Power Plants 5
reasonable and prudent? 6
A. Yes. The REF business arrangements allow Detroit Edison customers to receive 7
cost reductions through their base rates. The REF adder will never exceed the 8
environmental benefit realized by the customer. Detroit Edison’s customers benefit 9
without assuming any technology, tax or capital risk. 10
11
Q. Is the REF business arrangement at the Monroe Power Plant reasonable and 12
prudent? 13
A. Yes. The REF business arrangement allows Detroit Edison customers to receive 14
cost reductions through their base rates while PSCR customers realize lower cost 15
through the Coal Fee Rate paid by the MFC to Detroit Edison and the value of 16
reduced SO2 and reduced mercury compliance costs. Detroit Edison’s customers 17
benefit without assuming any technology, tax or capital risk. 18
19
Q. Does this complete your direct testimony? 20
A. Yes, it does. 21
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 30 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 287 of 873
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
In the matter of the Application of ) THE DETROIT EDISON COMPANY ) For Reconciliation of its Power ) Case No. U-16434-R Supply Cost Recovery Plan for the ) 12 month- Period Ending ) December 31, 2011 )
REBUTTAL TESTIMONY
OF
GARY E. LAPPLANDER
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 31 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 288 of 873
THE DETROIT EDISON COMPANY REBUTTAL TESTIMONY OF GARY E. LAPPLANDER
Line No.
GEL Rebuttal - 1
Q. Are you the same Gary E. Lapplander who previously offered testimony in this 1
proceeding? 2
A. Yes, I am. 3
4
Q. Mr. Lapplander, what is the purpose of your testimony in this case? 5
A. The purpose of my testimony is to rebut the testimonies of Witness Mr. Crandall on 6
behalf of the Michigan Community Action Agency Association (MCAAA), 7
Witness Mr. McGarry, Sr. on behalf of the Attorney General Bill Schuette (AG) 8
and Witness Mr. Sansoucy on behalf of the Michigan Environmental Council and 9
the Natural Resources Defense Council (MEC), which pertain to Reduced 10
Emissions Fuel (REF). 11
12
Q. Are you sponsoring any rebuttal exhibits? 13
A. Yes. I am sponsoring the following exhibits: 14
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 32 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 289 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 2
Q. Were these exhibits prepared or obtained by you or under your direction? 1
A. Yes, they were. 2
3
Q. How would you characterize the above Witnesses testimonies? 4
A. In my opinion, there are underlying common claims to Witness Crandall’s and 5
Witness Sansoucy’s testimonies. Their arguments related to REF include i) 6
production tax credits, ii) the Code of Conduct, iii) the nature of arms-length 7
negotiations, and iv) the nature of Act 304 costs/working capital benefit. 8
9
Q. What is your opinion of the above Witnesses testimonies? 10
A. Each witness mischaracterizes the REF program, and includes inaccurate assertions 11
related to refined coal production tax credits, the code of conduct, working capital 12
benefits, and Detroit Edison’s arms-length negotiation with the Fuels Companies. 13
14
Production Tax Credits 15
Q. What is your interpretation of Witness Crandall’s argument related to the 16
production tax credits? 17
A. Please note that Witness Crandall, in his Direct Testimony, refers to the production 18
tax credits as clean coal tax credits. His Direct Testimony is replete with 19
unjustified assertions that the production tax credit should be granted to Detroit 20
Edison PSCR customers. 21
22
Q. What is your interpretation of Witness Sansoucy’s argument related to the 23
production tax credits? 24
A. Witness Sansoucy states that Detroit Edison “…in these negotiations, made no 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 33 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 290 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 3
attempt… to structure the use of REF in a manner that provides benefits to Detroit 1
Edison customers that are proportional to the benefits flowing to the Fuels 2
Companies and DTE”. He questions, without basis, the arms-length nature of the 3
negotiation between Detroit Edison and the Fuels Companies. 4
5
Q. Do you agree with their assertions and recommendations? 6
A. No. 7
8
Q. What is the nature of your disagreement on the production tax credit grant to 9
Detroit Edison’s PSCR customers? 10
A. Detroit Edison did not and could not have availed itself of the Production Tax 11
Credit because Detroit Edison cannot produce and sell REF to itself and qualify for 12
IRS Section 45 tax credits. Therefore, granting tax credit proceeds to Detroit 13
Edison’s PSCR customers is without any reasoned basis. 14
15
Q. Have you explained Detroit Edison’s position related to the production tax 16
credits? 17
A. Yes. I have explained in my Direct Testimony in this Case, Exhibit A-10, page 2 of 18
10, that the “Refined coal must be sold to an unrelated person to qualify for the tax 19
credit”. 20
21
Additionally, Detroit Edison previously explained that “The Fuel Companies were 22
created to comply with Internal Revenue Code §45(e)(8) – [cited below] -- which 23
requires an entity unrelated to the purchaser of REF to produce and sell REF to the 24
purchaser. If the production and sale of REF was undertaken by Detroit Edison 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 34 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 291 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 4
itself, no tax credits would be allowed. See Exhibit A-25. The requirement to sell 1
REF to an unrelated person set forth in Internal Revenue Code § 45(e)(8)A)(ii)(I) 2
would not be satisfied. 3
4 Internal Revenue Code § 45 Electricity produced from certain renewable 5 resources, etc. 6
(e) Definitions and special rules. 7
For purposes of this section — 8
(8) Refined coal production facilities. 9
(A) Determination of credit amount. In the case of a producer of 10 refined coal, the credit determined under this section (without 11 regard to this paragraph ) for any taxable year shall be increased by 12 an amount equal to $4.375 per ton of qualified refined coal— 13
(i) produced by the taxpayer at a refined coal production 14 facility during the 10-year period beginning on the date the 15 facility was originally placed in service, and 16
(ii) sold by the taxpayer— 17
(I) to an unrelated person, and 18
(II) during such 10-year period and such taxable year.” 19
20
Finally, the Company has repeatedly explained that “Detroit Edison does not 21
qualify for the production tax credits… Only the Fuels Companies qualify for 22
production tax credits.” See Exhibit A-26. 23
24
Q. What are the positions of other utilities that are utilizing or contemplating 25
REF application, related to the production tax credit? 26
A. Please see page 32 of Exhibit A-27 which is an attachment that was included in 27
Detroit Edison’s discovery response to question MCAAA/DE-1.30 in Case No. U-28
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 35 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 292 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 5
16892. Page 32 of Exhibit A-27 references the Direct Testimony of Mr. Robert K. 1
Neff on behalf of Ameren Missouri, and in his testimony he states, “Section 45 of 2
the Internal Revenue Tax Code provides for federal income tax credits for the 3
production and sale of refined coal from a qualified facility. These credits are 4
available to the third party owners of the refined coal facility. Ameren Missouri 5
will receive a payment from this third party owner for providing property and 6
handling of the coal through the lease and a fee for coal handling and licensing. 7
Ameren Missouri will not receive any tax credits directly from these agreements.” 8
ii) on page 11 of Exhibit A-28 which is an attachment that was included in Detroit 9
Edison’s discovery response to question MCAAA/DE-31j. Page 11, titled 10
“Simplified Clean Coal Plant Development Steps” of Exhibit A-28 which provides 11
a step-wise detail of the REF process by Arthur J. Gallagher & Co. (AJG). Step 3 12
on this slide states that “We sell majority portion of the plant to an investment 13
partner(s)…”. The “plant” referenced herein is their equivalent of the REF Facility 14
and the “investment partner(s)” are other than the Host Utility. Therefore, it 15
appears to me that, as is the case for Detroit Edison, the “Host Utility” does not 16
receive any tax credit and iii) on page 67 of Exhibit A-27 that references the Direct 17
Testimony of Mr. Brian P. Davey on behalf of Duke Energy Indiana, Inc. he states 18
that “…CERT will qualify for the tax credits; in exchange Duke Energy Indiana 19
will have the opportunity to become familiar with and learn about a potential 20
environmental compliance option without incurring any capital expenses…”. 21
Furthermore, on page 44 of this same attachment, Mr. Steven Meehan testifies that 22
“…CERT will use the tax credit to cover all CERT expenses including: cost of 23
capital, consumables, staffing, franchise fee, lease payment and other O&M 24
expenses…” and Mr. Meehan further states on page 46 that “…the risk of 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 36 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 293 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 6
qualifying for the tax credit is strictly borne by CERT…” 1
2
Q. What do you deduce from the above about the position of other utilities related 3
to the production tax credit? 4
A. I have reviewed the above public documents from the above mentioned companies 5
related to REF projects, and it appears to me that like Detroit Edison, these utilities 6
did not receive any production tax credits 7
8
Q. What are your thoughts regarding the ownership structure of the REF Facility 9
at the other utilities? 10
A. The ownership structures appear to be substantially similar to those of DTE 11
Energy’s Fuels Companies. i) Please see page 22 of Exhibit A-27 that references 12
the Direct Testimony of Mr. Mark C. Birk on behalf of Ameren Missouri when he 13
states in regards to CERT’s affiliate BP, the REF provider, that “All equipment and 14
infrastructure will be funded, installed, owned and operated by BP.” ii) Please also 15
see page 45 of Exhibit A-27 that references the Direct Testimony of Mr. Steven 16
Meehan on behalf of Duke Energy Indiana, Inc. where he states “CERT will also 17
pay Duke Energy Indiana a rental fee for the lease spaces…”. iii) In addition, on 18
page 12 of Exhibit A-28 related to the flow chart “Operations After Selling Portion 19
of Plant”, it is implied in this flow chart that the ownership and the daily operations 20
of the 17 deployed REF Facilities is an entity which is not the Host Utility. 21
Specifically, AJG and the financial partners have elected Taggart Global and not 22
the “Host Utility” to be the REF Facility’s a.k.a. Clean Coal Plant’s Plant Manager 23
for the daily operations. 24
25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 37 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 294 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 7
Q. What is your opinion based on all of the above discussions related to other 1
utilities? 2
A. Other utilities utilizing REF also do not own nor operate the REF facility and do not 3
get the production tax credits. 4
5
Q. Can you summarize your position related to the production tax credit? 6
A. The eligibility qualifications of the production tax credit and specifically the 7
requirement to sell REF to an unrelated person set forth in the Internal Revenue 8
Code would not be satisfied if Detroit Edison were to own the REF Facility and 9
Detroit Edison could not have availed itself of the tax credits. See Exhibit A-25. 10
Therefore, there is no reasoned basis to impute tax credit revenues to Detroit Edison 11
PSCR customers. 12
13
Additionally, I have explained in my Direct testimony on pages GEL-10, GEL-11, 14
GEL-18 and GEL-19 i) the tax risk and commitment to an unproven technology, 15
such as REF, at Detroit Edison’s generating facilities were not appropriate for a 16
regulated utility ii) DTE Energy Resources held an exclusive license to use the 17
unique and proprietary chemical additive technology, Chem-Mod, at Detroit Edison 18
sites and iii) the reason for the difference in REF arrangement at Monroe Power 19
Plant versus Belle River and St. Clair Power Plant is because of IRS interpretations 20
requiring different contractual structures at different points in the deployment of 21
REF projects at Detroit Edison power plants. As noted elsewhere in this testimony, 22
other utilities that are utilizing REF do not own the REF facility nor do they get the 23
tax credits. While Witness Crandall may not have the benefit of the Company’s 24
repeated explanations of REF, his client MCAAA surely has, so it is perplexing, in 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 38 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 295 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 8
this case, that Witness Crandall would assert, without any substantive support, that 1
“…REF transactions divert significant tax credit revenues from use and 2
transformation of the DECo 304 purchased coal….to unregulated affiliates of 3
DTE…” (page 4, lines 3-5). 4
5
Similarly, Witness Crandall’s computation, that the “..tax credit received for the 6
REF coal burned by DECO in 2011 was $18,413,000” (page 9, line 18) and his 7
testimony on the topic all assume Detroit Edison owns the REF Facility and 8
receives 100% of the tax credit which is in conflict with the Section 45 tax credit 9
provision that requires the taxpayer and/or owner to be unrelated to the consumer of 10
the Refined Coal. This line of argument should be totally rejected once and for all. 11
12
In my opinion, Witness Crandall’s statements concerning tax credit revenues and 13
computations, is misleading, erroneous and without basis. 14
15
Act 304 Costs, Working Capital and Other Benefits 16
Q. Do you agree with MCAAA Witness Crandall’s assertion that “...the REF 17
project does not comport with the requirements contained in Act 304…”? 18
A. No. Detroit Edison is not eligible for the production tax credits and therefore 19
cannot apply the tax credits to “…minimize the cost of fuel to the utility and 20
ultimately the Act 304 customers” as suggested by Witness Crandall on page 7, 21
lines 15-16 of his Direct testimony. In my Direct Testimony in this case, page 22
GEL-8, lines 1-14, I explain the positive impact to Detroit Edison’s Act 304 costs 23
that accrue to its PSCR customers and that the annual cost of the Refined Coal 24
Adder (RCA) has no impact on the PSCR costs for the BRFC and SCFC plants 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 39 of 190
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G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 9
since the value of the RCA is offset by the value of reduced SO2 emissions. Also, 1
the Coal Fee Rate amount credited to coal inventory at Monroe Power Plant was 2
$462,866, which lowers Detroit Edison’s PSCR costs, in addition to retaining the 3
value of the reduced SO2 emissions, and future savings related to reduced mercury 4
emissions compliance costs. Furthermore, in my Direct Testimony, in this case, 5
page GEL-13, lines 16-25, I explain how Detroit Edison’s customers benefit from 6
the sale of coal inventory to the Fuels Companies. 7
8
Q. Do you agree with Witness Sansoucy’s allegations that the 2009 working 9
capital component of rate base did not include a reduction in fuel inventory? 10
A. No, I do not agree. As I have previously testified in my rebuttal to MCAAA 11
Witness Peloquin in Case No. U-16047-R, page 16 (2 T292-293): “Mr. Peloquin is 12
technically correct that there was no specific reference in Case No. U-16472 to the 13
reduction of Detroit Edison’s working capital for the coal transferred to the REF 14
projects. However, there was a sale of coal inventory that occurred in December 15
2009. The month-over-month change in fuel inventory from November 2009 to 16
December 2009 was a $63.4 million reduction. Included in the $63.4 million 17
reduction was the sale of 1.7 million tons of coal for $38.6 million to the Belle 18
River and St. Clair Fuels Companies. In Detroit Edison’s rate case, Case No. U-19
16472, the 12-month ending historical period was the 12-months ending December 20
2009. To project the working capital component of rate base for the forecast 21
period, the starting point was the December 31, 2009 balance sheet values. The 22
resulting rate base therefore reflects the coal sale to the Fuels Companies in 23
December 2009. Thus, Mr. Peloquin is incorrect in his assertion that Detroit Edison 24
customers are being charged for all Detroit Edison fuel inventory, including any 25
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-34; Source: Examination of G. Lapplander (Jan. 8, 2013 direct and cross), U-16434-R Page 40 of 190
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 297 of 873
G. E. LAPPLANDER Line U-16434-R No.
GEL Rebuttal - 10
transfers to REF projects. Customers are experiencing lower base rates due to the 1
sale of coal inventory in December 2009.” This testimony was true, accurate, and 2
remains so now. 3
4
Q. Can you explain the 2011 working capital benefit to the Detroit Edison 5
customers on an equivalent $/ton basis? 6
A. For Belle River: 7
Present annual base rate benefits for Detroit Edison customers are the value of 8
Detroit Edison coal inventory sold to the Fuels Company of $22.72 million. In 9
2011, REF sold by the Fuels Company to Detroit Edison was 628,662 tons. Please 10
refer to Exhibit A-29. Applying the same Rate of Return and Revenue Multiplier, a 11
$3.89 per ton value to the ratepayers is calculated as follows: 12
Rate Base (millions): $22.72M 13
Rate of Return (source Exhibit A-29): 6.586% 14
Income Required (millions): $22.72M x 0.06586 = $1.496M 15
9 following grounds: Number one, it's incomplete because
10 of the lack of the Environmental Indemnity Agreement for
11 St. Clair. I think that's easily fixable. Number two,
12 because there's a redacted Section 9.4 in the agreement
13 as discussed, and there's no explanation for the
14 redaction. Number three is, as the witness indicated,
15 the exhibit was really the only -- the only documents --
16 this whole package was dumped in the record in the
17 rebuttal testimony, the only documents that related to
18 the rebuttal testimony were the Refined Coal Supply
19 Agreements, which were offered for the purpose of
20 rebutting Mr. Crandall on the issue of the right of the
21 fuel companies to buy coal from others, or to sell coal
22 to others, the rest of it was really just a record dump.
23 I make that last objection mindful of the fact that the
24 PFD you wrote in 16892, one of the issues that you had
25 was that the agreements themselves were not in the
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539
1 record. I'm also mindful of the fact that your Honor, as
2 well as some of us, have asked some additional questions
3 about some of these other exhibits. But I do think it
4 should have been part of the direct, not part of the
5 rebuttal, and I understand there's some countervailing
6 considerations that go in both directions on that. As I
7 indicated when Mr. Lapplander's exhibits were first moved
8 for exhibit, I was going to voir dire on A-30 and I've
9 done that, and that's the reasons for my objections.
10 JUDGE EYSTER: Mr. Maquera.
11 MR. KESKEY: May I input on that?
12 JUDGE EYSTER: Mr. Keskey.
13 MR. KESKEY: On balance, your Honor, we
14 think that Exhibit A-30 should be admitted, and the
15 reason for it is, while it may not be complete, in this
16 progression of cases that we've had now, I think this is
17 the fourth case of the REF issues, hopefully each case
18 sheds more light, more understanding through a process in
19 which it's been very hard in discovery to get
20 information. I would suggest that we're better off with
21 more information than less. And if something is
22 incomplete like one attachment, the remedy isn't striking
23 all of the agreements, the remedy should be the
24 requirement by your Honor to require the production of
25 the attachment, or at least set it for a motion that
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540
1 people can respond to that situation.
2 The same is true with the redaction. In
3 other words, we don't agree the redactions are proper,
4 but, you know, having some of the agreement in there
5 maybe is better than having none of it, and perhaps
6 there's a remedy to have the redacted page produced or
7 some process for considering a motion on that, or maybe
8 we can get it in the next case, because this is a
9 progression of trying to get more and more information.
10 And the final point perhaps with respect
11 to the fact that this was produced in the rebuttal phase
12 to a witness presented by MCAAA, it's better for the
13 utility to be required to place into the record their
14 agreements in a complete record than for parties to have
15 to try to carry the burden from having the utility
16 ultimately file a complete case, and we think that the
17 agreements help the record by providing documents that
18 the parties can brief for determining how and what are
19 all the facts and the arrangements as much as possible,
20 realizing we're not at perfection yet, we don't have all
21 the information.
22 So I think there's, balancing the
23 interests, I think that there's, it's more important to
24 have the agreements in the record than having them out of
25 the record.
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541
1 JUDGE EYSTER: Mr. Maquera.
2 MR. MAQUERA: With all due respect to my
3 fellow counsels, I take issue with some comments made
4 here today. The impression is that we haven't been
5 providing information or that we haven't been forthcoming
6 with information for the past several proceedings; we
7 have. These documents have been provided in discovery in
8 the past couple of cases, and in fact, I do recall that
9 MEC took issue in a past proceeding in either briefs or
10 exceptions or perhaps both that we hadn't provided the
11 actual contracts. Your Honor's PFD, as you fully well
12 recall, left the impression that the contracts were
13 desired; that PFD came out I believe during our rebuttal
14 phase.
15 Let me move on to some more relevant
16 considerations. Your Honor issued a scheduling order at
17 the beginning of this case, many months ago, and in that
18 scheduling order, a time for motions to strike prefiled
19 testimony and exhibits was clearly laid out by your
20 Honor. Nobody filed any motions to strike Exhibit A-30.
21 I think your Honor's scheduling orders are to be, should
22 be held enforceable.
23 Let's talk about contract relevance.
24 JUDGE EYSTER: Here's a question for you.
25 Can you supply the missing contract?
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542
1 MR. MAQUERA: And I was going to get to
2 that point, too, your Honor.
3 JUDGE EYSTER: Can you supply the
4 redacted portions?
5 MR. MAQUERA: So those redacted portions
6 were not redacted by the Company, they were redacted by
7 the counterparties, because I believe they're subject to
8 some confidentiality provisions. So at this time, your
9 Honor, no, I can not represent that the Company is able
10 to provide the redacted portions without talking to the
11 counterparties. There have been --
12 JUDGE EYSTER: Well, I mean we can -- we
13 do have confidentiality agreements that are signed
14 between the parties in cases, contested cases, procedure
15 for providing that information on a confidential basis.
16 Is there a reason why --
17 MR. MAQUERA: In a public body
18 proceeding, your Honor?
19 JUDGE EYSTER: Yes. Is there any reason
20 they can't be done in this case?
21 MR. MAQUERA: What would procedure be?
22 What does your Honor believe that procedure to be?
23 JUDGE EYSTER: Parties sign
24 confidentiality agreements, the document in question is
25 filed as a confidential version, which there is one
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543
1 provided to me. I have not seen the workings on the
2 other side of the bench, so I just -- but I'm assuming
3 the parties exchange the documents in a redacted -- or
4 unredacted form, I have not seen them. There's an entry
5 in the e-file that is blank, confidential version of it,
6 there's nothing there.
7 MR. MAQUERA: My understanding, your
8 Honor, is that that still doesn't escape the provisions
9 of the Freedom of Information Act, the process you just
10 outlined.
11 JUDGE EYSTER: O.K. So you're telling me
12 that the Commission doesn't get to look at your
13 contracts; is that what you're saying, is that in a
14 contested case hearing, the Commission doesn't get to
15 examine them, I don't get to look at them --
16 MS. UITVLUGT: Your Honor.
17 JUDGE EYSTER: -- that you can withhold
18 that evidence on the basis of some agreement you --
19 MR. MAQUERA: I don't think I said that,
20 your Honor. What I'm saying is that it doesn't escape
21 the provisions of the Freedom of Information Act.
22 JUDGE EYSTER: O.K. So what are you
23 trying to say then? Is there some other means by
24 which --
25 MR. MAQUERA: I believe what I said, your
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544
1 Honor, is that we didn't redact those portions of the
2 contracts at issue, the counterparties did.
3 JUDGE EYSTER: These are exhibits that
4 you've provided?
5 MR. MAQUERA: Which --
6 JUDGE EYSTER: Correct?
7 MR. MAQUERA: Yes, which MEC is trying to
8 strike now belatedly.
9 JUDGE EYSTER: Excuse me?
10 MR. MAQUERA: Which MEC is trying to
11 prohibit from being entered into evidence, yes.
12 JUDGE EYSTER: You've got a redacted
13 portion of it, it's redacted, I mean somebody marked it
14 off; to me, it doesn't matter.
15 MR. MAQUERA: It wasn't the Company.
16 JUDGE EYSTER: I don't know that it
17 really matters who did it. That's -- it's here in that
18 form, it's your exhibit. And if I'm -- I'm not sure what
19 your comment about FOIA was meant to suggest, but I took
20 that as you didn't believe that the confidentiality
21 procedures that are commonly used here were sufficient
22 for you to agree to use them because they could be
23 FOIAed?
24 MR. MAQUERA: That's my understanding,
25 your Honor.
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545
1 JUDGE EYSTER: Ms. Uitvlugt.
2 MS. UITVLUGT: Your Honor, if I may, with
3 respect to the FOIA issue on confidentiality agreements,
4 it is standard practice, and I believe in protective
5 orders issued by ALJs before the Commission, there's
6 language in there that includes that the Staff or whoever
7 will not provide the confidential agreement without first
8 contacting the party that deems the said information to
9 be confidential. The public provision is provided, and
10 in this instance or in my example, the Staff does not
11 give the confidential information, we advise that there
12 was confidential information, the Company is contacted in
13 order to allow the Company to fight whatever party is
14 requesting the information that that person deemed to be
15 confidential. That, at least that has been my working
16 understanding with this issue.
17 MR. ERICKSON: Your Honor, with regard to
18 confidentiality, I think you've got it right. The
19 redacted material was not identified as being anything
20 other than redacted material, there was no evidence in
21 Mr. Lapplander's accompanying rebuttal testimony that
22 indicated that there was a significant confidentiality in
23 the document. Not only that, there was no evidence that
24 showed, clearly showed how Detroit Edison would be harmed
25 by the disclosure of the information, and the fact that
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546
1 somebody else doesn't want it to be disclosed isn't the
2 ultimate test of it. And I think that at least, at least
3 the redacted material should be accompanied by some kind
4 of a verbal motion at this time which explains why the
5 information should be held confidential, and if you're
6 convinced that the confidentiality should be, a
7 protective order can be requested and those of us who
8 want to agree to a protective order to see the redacted
9 material ought to be able to see it. We don't really
10 know what, if any, impact that clause has on it.
11 Mr. Lapplander couldn't even understand it and really
12 give us the subject matter of the document, of that
13 redacted material, and the Company has provided nothing
14 that indicates the subject matter of the material is
15 truly confidential, and furthermore, that there would be
16 a clear harm to the Company if it was disclosed.
17 And so I guess my feeling is is either we
18 should, we should require that they disclose the redacted
19 material without a confidentiality agreement, or they
20 should, at most, be entitled to disclose the information
21 as part of a, under a protective order if people will
22 sign a nondisclosure agreement.
23 MR. MAQUERA: Your Honor, I haven't been
24 able to address the relevance of the contracts in the
25 question.
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547
1 MR. BZDOK: I stipulate that they're
2 relevant. I agree that they're relevant.
3 MR. CHRISTINIDIS: No, you didn't.
4 MR. BZDOK: Yeah, I did.
5 MR. CHRISTINIDIS: You objected, you said
6 they were relevant for a limited purpose.
7 MR. BZDOK: Oh, right, yes.
8 JUDGE EYSTER: What's the issue with
9 regards to relevance?
10 MR. MAQUERA: Apparently there is none.
11 Opposing counsel is agreeing that they are relevant.
12 MR. BZDOK: What I indicated was that
13 they, when I asked the witness about which of these
14 documents, which of these 28 documents were actually
15 germane to his rebuttal testimony, he agreed that only
16 the 3 Refined Coal Supply Agreements as amended were
17 germane to his rebuttal testimony.
18 MR. MAQUERA: And then the record
19 supports that there was extensive cross-examination for
20 about the past, oh, I don't know, about 16 business hours
21 that deal with the contracts in one form or another,
22 including cross-examination by your Honor.
23 MR. BZDOK: And I agreed that's a
24 countervailing consideration, and I so stated.
25 MR. MAQUERA: I mean, your Honor, we're
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1 not at the discovery phase of the case. You know, the
2 time to have addressed redacted portions would have been
3 through a timely filed motion to compel, and that hasn't
4 been done. We're at the cross-examination stage of the
5 case now, your Honor.
6 MR. BZDOK: The reason, as I understand
7 it, that rulings on motions to admit exhibits are
8 deferred until after cross-examination is to allow for
9 questions to be asked about those exhibits that may bear
10 on their ultimate admissibility. I asked the witness if
11 he knew why Section 9.4 was redacted, he said he didn't
12 know why it was redacted. So that -- I mean that bears
13 on -- and it's his exhibit, he was sponsoring it, he said
14 he didn't know why it was redacted.
15 JUDGE EYSTER: What's the rule on
16 documents, partial documents that have been moved for
17 admission requiring that the entire -- what rule is it?
18 MR. BZDOK: The rule of completeness
19 indicates that.
20 JUDGE EYSTER: Which rule, do you know
21 the rule number?
22 MR. BZDOK: Not off the top of my head.
23 JUDGE EYSTER: I'm looking for it.
24 MR. ERICKSON: MRE 104 I believe is the
25 rule of completeness in the Rules of Evidence. I believe
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1 MCR 2.302 has provisions for protective orders, which can
2 include redaction based upon a showing of a serious harm,
3 clear and serious harm, and a showing of confidentiality.
4 Let's assume for the sake of argument
5 this is confidential. There is absolutely no reason it's
6 been offered, including the testimony of Mr. Lapplander,
7 who said he didn't know why. I think that in the absence
8 of a showing of clear and serious harm to Detroit Edison
9 from disclosure, they should be required to provide that
10 as part of the exhibit, and we should take the exhibit.
11 MR. MAQUERA: Well, Judge, it's been a
12 few years since I engaged in civil practice in the
13 courts, but my understanding is that proper procedure
14 requires some sort of a motion to quash that would
15 provide an opportunity to a counter-party that is not a
16 party to a proceeding to assert their rights, such as
17 confidentiality provisions. What Mr. Erickson is
18 suggesting is having a ruling on the motion without --
19 JUDGE EYSTER: Who's going to file a
20 motion to quash?
21 MR. MAQUERA: -- without interested
22 parties involved who can weigh in on the matter.
23 MR. KESKEY: Your Honor.
24 JUDGE EYSTER: Mr. Keskey.
25 MR. KESKEY: Since this, these contracts
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1 were reportedly submitted as rebuttal to my witness, I
2 mean you'd have -- I think you have all but two pages
3 which are unredacted, which is a good step forward in
4 trying to understand this. With respect to the two pages
5 that are redacted, I mean a motion quash is not something
6 that we would have filed because it's like a double
7 negative, it's like you're going to move to quash
8 something that's redacted.
9 I think there is a cure, and that's
10 simply admit the exhibits as is and schedule the filing
11 of a motion or some kind of a cross-motion that the
12 redacted parts be produced, or if Edison wants to file a
13 motion for protective order, that they make that showing,
14 and then the responses are filed and the two pages are
15 submitted under seal if you rule in favor of
16 confidentiality under regular procedure at the Commission
17 that's used many, many times would then be utilized.
18 JUDGE EYSTER: Anything else?
19 MR. MAQUERA: Your Honor, just other
20 than, you know, the contracts were being offered to show
21 that, you know, the transactions involved were arm's
22 length deals. I mean out of 806 pages, which may very,
23 the page count may very well go up with the addition of a
24 particular missing agreement --
25 JUDGE EYSTER: Which is the missing
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1 agreement, I forgot?
2 MR. MAQUERA: I forgot, too, your Honor.
3 It was identified by the witness.
4 MR. BZDOK: Environmental Indemnity
5 Agreement for I believe St. Clair.
6 MS. UITVLUGT: That's what I have written
7 down.
8 MR. MAQUERA: So I don't know how long
9 that would be, but for the sake of argument, let's say
10 it's another 10 pages, so out of 816 pages, there's a
11 missing paragraph that was redacted by a counter-party.
12 I'm just really puzzled why there would be an objection
13 to entry of this offer of evidence, especially by a party
14 that has taken the Company to task for not entering these
15 exhibits or these contracts into evidence.
16 JUDGE EYSTER: Well, I think he stated
17 the reasons for, it's not --
18 MR. MAQUERA: I think that's judicial
19 estoppel. It's the same parties, it's the same issue,
20 and now he's taking an adverse position to what he took
21 formerly with respect to entry of this evidence. This is
22 evidence that has been provided to the same parties for
23 the past couple of proceedings.
24 MR. BZDOK: Let me --
25 JUDGE EYSTER: You know what, here's the
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1 thing: You guys may do discovery and have documents or
2 not have documents, I don't know, it's, I don't see it,
3 so --
4 MR. MAQUERA: Which is one of the many
5 reasons why --
6 JUDGE EYSTER: -- and so when I have to
7 write a PFD, and essentially all the arrangements are
8 contractual based and I get testimony from witnesses that
9 are trying to describe what's in contracts without
10 presenting a contract, that's why I put in the PFD, no
11 contracts have been presented. But I mean what you do in
12 discovery, that's not for me -- I mean I don't, I don't
13 necessarily know that. So that's -- there's two
14 different issues there, I guess, and I'm not sure what --
15 it's great if this was provided in discovery, I don't
16 know what was provided in discovery, it wasn't presented
17 to me.
18 MR. MAQUERA: Because we followed your
19 discovery order and --
20 JUDGE EYSTER: What's that?
21 MR. MAQUERA: I mean the parties complied
22 with your order with respect to discover to not supply
23 you with the actual responses with the exhibits.
24 JUDGE EYSTER: Right, I wouldn't normally
25 see discovery responses, yeah.
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1 MR. BZDOK: My concern on the provision
2 of this --
3 JUDGE EYSTER: Hang on a second. Which
4 one again was the one that's missing? That's for --
5 that's the St. Clair --
6 MR. BZDOK: Let me grab my computer. St.
7 Clair Environmental Indemnity --
8 MS. UITVLUGT: Your Honor, by my notes,
9 it's that.
10 JUDGE EYSTER: Mr. Maquera, you've
11 indicated that can be provided?
12 MR. MAQUERA: Yes, I see no reason -- I'm
13 not aware of a reason why since it's a duplicate
14 essentially of another document that is a part of Exhibit
15 A-30.
16 JUDGE EYSTER: O.K. And so the redacted
17 portions we have are what, page 595 --
18 MR. BZDOK: Judge, the only reason --
19 MR. ERICKSON: 618 and 19, I think.
20 JUDGE EYSTER: And then 618 and 19.
21 MR. BZDOK: 595, the witness filled in
22 the redacted number in cross, so that's not an issue, I
23 have not raised that as an issue.
24 JUDGE EYSTER: O.K. So we're not talking
25 about page 595?
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554
1 MR. BZDOK: Correct.
2 JUDGE EYSTER: So we're -- the motion,
3 your motion was to strike the entire exhibit?
4 MR. BZDOK: No. I was opposing the
5 motion to admit A-30.
6 JUDGE EYSTER: Yes. Your objection --
7 MR. BZDOK: You asked if there was any
8 objection to admitting --
9 (Multiple speakers.)
10 JUDGE EYSTER: Your objection was to the
11 entire exhibit, right? Or is it to lesser portions of
12 it?
13 MR. BZDOK: My concern about admitting
14 all of this stuff in a single record dump at the rebuttal
15 phase is that I'm going to get a brief that's going to
16 say, clause iv(4) that's never been discussed by any
17 witness in this case is suddenly going to become an issue
18 in the briefing post hearing, that's why I was concerned
19 about this being admitted at the rebuttal phase without
20 ever being part of the Company's direct case. If that
21 doesn't happen -- you know, if that happens, I can make a
22 motion to, you know, to, I suppose at that time, and that
23 resolves that concern. That's my concern about that
24 issue is that something's going to come out of left
25 field, because this is going to be in evidence really
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555
1 without explanation by the sponsoring witness of, you
2 know, why which agreement is being put in for what,
3 though we had some of that on cross here today.
4 The remedy on the motion to -- the remedy
5 on the completeness objection has already been stated,
6 they'll put that agreement in; the remedy on the redacted
7 section, if they can not obtain permission to provide
8 that unredacted I think is simply to not admit that
9 particular agreement as part of this exhibit.
10 JUDGE EYSTER: O.K. And that's, that's
11 the way I'm going to rule. The objection is sustained in
12 part I guess.
13 MR. BZDOK: Thank you.
14 JUDGE EYSTER: To the extent that if
15 you're not able to provide the complete agreement that
16 has, that includes page 618 and 619, the redacted
17 portion, then that part of the exhibit is not admitted.
18 Well, that part of the exhibit is not admitted into
19 evidence.
20 MR. MAQUERA: The rest of the agreement
21 is, is that my understanding?
22 JUDGE EYSTER: The agreement that that,
23 that those two redacted pages are a portion of is not
24 admitted, and I couldn't tell you right offhand which
25 pages of this that is. The rest of it's admitted. If
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556
1 you'd like to have it in -- if you'd like to have it
2 in --
3 MR. MAQUERA: Can I take a look at that
4 document, your Honor, to see if I can make an offer of
5 proof?
6 MR. BZDOK: That's the Refined Coal
7 Supply Agreement for Monroe, starts at page 596, runs to
8 page 669 of the exhibit. No, sorry. It runs to page,
9 through page 646 of the exhibit.
10 JUDGE EYSTER: If you can provide the
11 redacted portions of it, it's in. Right now you can't.
12 My preference would be that it's admitted into evidence,
13 but with a chunk of it missing for no reason, it stays
14 out.
15 MR. MAQUERA: For the reasons stated,
16 it's redacted by a counter-party.
17 JUDGE EYSTER: O.K.
18 MR. MAQUERA: May I make an offer of
19 proof as to what that particular document, what it
20 substantially showed, your Honor?
21 JUDGE EYSTER: Who's going to do that?
22 Do you have a witness to call? What are you going to do?
23 I guess I'm just confused as to what your plan is, what
24 you want to do here.
25 MR. MAQUERA: For purposes of preserving
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557
1 at appeal.
2 JUDGE EYSTER: I am not sure what you
3 want to do, how you want to proceed.
4 MR. ERICKSON: On a lighter note, your
5 Honor, have we admitted Exhibits MCAAA-27, 28 and 29, and
6 MEC-25?
7 MR. KESKEY: My exhibits were --
8 JUDGE EYSTER: We're off the record.
9 (At 6:39 p.m., a brief discussion was held off the
10 record.)
11 JUDGE EYSTER: We're back on the record.
12 Mr. Maquera.
13 MR. MAQUERA: Thank you, your Honor.
14 Just with respect to the Company's offer of proof in
15 regard to the document titled Refined Coal Supply
16 Agreement By and Between Monroe Fuels Company, LLC, and
17 the Detroit Edison Company, your Honor, this is a
18 document that is in regard to transactions between
19 Detroit Edison Company and the Monroe Fuels Company for
20 the sale of refined coal. And I just wanted to place on
21 the record an offer of proof that that is what the
22 agreement, substantially what it showed. And it begins
23 on I believe page 596 and runs through --
24 MR. BZDOK: 646.
25 MR. MAQUERA: Thank you. 646 of Exhibit
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558
1 A-30. And then in addition, just I would like to make an
2 objection with respect to a motion to strike not having
3 been timely filed with respect to this particular
4 exhibit.
5 JUDGE EYSTER: O.K. Let me just --
6 usually, and I don't know that, how specific it's
7 phrased, but I have generally the motions to strike, I
8 have considered those to be motions to strike the
9 testimony, oftentimes it includes the Company exhibits if
10 that testimony is stricken. And the reason that as of
11 late I have gone to not admitting the exhibits until
12 after cross has been conducted is for, I think Mr. Bzdok
13 indicates, that the reason he believed that was the
14 procedure was to allow for cross-examination, delaying a
15 decision on that until cross-examination be conducted and
16 the witnesses have been crossed with regards to those
17 exhibits so that if there's any objections to be made to
18 them, those objections can be made. That was something
19 I think that was done long before I was here, and in
20 fact, for many years I didn't follow that procedure, I
21 tended to admit the evidence -- or excuse me -- admit the
22 exhibits before cross had been conducted, and I can
23 remember how many attorneys sat there, and it wasn't that
24 many, but back when I started there was a few attorneys
25 that looked at me and said, well, basically what are you
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559
1 doing, and over the course of the last probably year or
2 so, it became evident to me why that procedure was the
3 way it was. So I don't know that it's that unusual to
4 wait to rule on the exhibits until after cross has been
5 conducted, and the reason for that is to allow the cross
6 of the witnesses and to determine whether or not there's
7 an objection to be made with regards to an exhibit.
8 So my preference is that that exhibit, if
9 it can be made available, be made available. So that's,
10 if you can do that, that would be great.
11 Is there a -- there's no other objections
12 to the remainder of the exhibits; is that correct?
13 MR. BZDOK: Correct.
14 JUDGE EYSTER: So those are all admitted
15 into evidence.
16 Is there anything else we need to address
17 before we leave? O.K. That's it for this evening,
18 everybody. I'll see you at 9:00. Thanks.
19 (At 6:45 p.m., the hearing adjourned to January 10,
20 2013, at 9:00 a.m.)
21 - - -
22
23
24
25
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560
1
2 C E R T I F I C A T E
3
4 I, Lori Anne Penn (CSR-1315), do hereby
5 certify that I reported in stenotype the proceedings had
6 in the above-entitled matter, that being Case No.
7 U-16434-R, before Mark D. Eyster, J.D., Administrative
8 Law Judge with Michigan Administrative Hearing System, at
9 the Michigan Public Service Commission, Constitution
10 Hall, 525 West Ottawa, Lansing, Michigan, on Wednesday,
11 January 9, 2013; and do further certify that the
12 foregoing transcript constitutes a true and correct
13 transcript of my stenotype notes.
14
15
16
17 ______________________________________
18 Lori Anne Penn, CSR-1315
19 33231 Grand River Avenue
20 Farmington, Michigan 48336
21
22
23 Dated: January 17, 2013
24
25
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MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 685 of 873
MPSC Case No.: U-16434-R Respondent: G. E. Lapplander Requestor: AG-1 Question No.: AG/DE-19 Page: 1 of 1 Question: Witness Lapplander states, “Detroit Edison was not aware of any other
supplier that was willing to make this type of investment at the time the REF project needed to move forward given the existing legislation” (GEL-10:25 - GEL-11:1). Prior to executing an agreement with the affiliate to administer the REF program, please identify and explain all Detroit Edison’s contacts with other third parties to provide REF or similar services and describe the specific outcomes of those contacts, including relevant dates.
Answer: DTE Energy Resources, Inc. has an exclusive license to offer the
technology used by the Fuels Companies i.e. the REF process to the Detroit Edison plants. Attachment AGDE-19 (see attached) is an unsolicited offer received from AJ Gallagher Coal, Inc., who received permission from DTE Energy Resources, Inc. to submit the offer for REF at River Rouge Power Plant. This unsolicited offer, for REF at the River Rouge Power Plant, was received in September, 2010 and no agreement was reached to locate a facility at the River Rouge Power Plant. There are no non-affiliate companies that provide REF services or functions for Detroit Edison at Detroit Edison power plants.
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-37; Source: AG/DE-19, U-16434-R Page 1 of 3
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MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-37; Source: AG/DE-19, U-16434-R Page 2 of 3
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 687 of 873
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-37; Source: AG/DE-19, U-16434-R Page 3 of 3
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 688 of 873
REFINED COAL SUPPLY AGREEMENT
by and between
BELLE RIVER FUELS COMPANY, LLC
and
THE DETROIT EDISON COMPANY
December 4, 2009
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .1Section 1.1. Definitions 1Section 1.2. Construction of Certain Terms and Phrases 8
ARTICLE II REPRESENTATIONS AND WARRANTIES 9Section 2.1. Representations and Warranties of Buyer 9Section 2.2. Representations and Warranties of Seller 10
ARTICLE III TERM 10Section 3.1. Term 10
ARTICLE IV AUTHORIZED REPRESENTATIVES 11Section 4.1. Authorized Representatives ii
ARTICLE V PRODUCTION AND SALE OF REFINED COAL IISection 5.1. Production and Sale 11Section 5.2. Sales to Third Parties 12Section 5.3. Annual Forecasts; Adjustments 13Section 5.4. Purchase by Buyer at Termination 13Section 5.5. Consistent Reporting 13
ARTICLE VI PURCHASE AND SALES OF SELLER COAL 13Section 6.1. Coal Purchase Contracts 13Section 6.2. Available Seller Coal 14Section 6.3. Purchase by Buyer at Termination 14
ARTICLE VII DELIVERIES; WEIGHTS; TITLE AND RISK OF LOSS 15Section 7.1. Deliveries 15Section 7.2. Weights 15Section 7.3. Feedstock Inventory Store Reconciliation 16Section 7.4. Measurement Methodology 17Section 7.5. Title and Risk of Loss 17
ARTICLE VIII REFINED COAL AND RESOLD COAL SPECIFICATIONS 17Section 8.1. Coal Specifications 17Section 8.2. Refined Coal Production Specifications and Use 18Section 8.3. Chemical Additives 18Section 8.4. Presumption Regarding Conforming Coal and Refined Coal 19Section 8.5. Warranty Disclaimer 19
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Section 9.4. O&M and Capital Cost Reimbument . 20Section 9.5. Invoicing and Payment 21Section 9.6. Business Days 23Section 9.7. Audit 23Section 9.8. Taxes and Other Liabilities 23
ARTICLE X FORCE MAJEURE 23Section 10.1. Force Maj cure 23
ARTICLE XI EARLY TERMINATION 24Section 11.1. Early Termination 24Section 11.2. Post-Termination Obligations; Survival 25
ARTICLE XII EVENTS OF DEFAULT AND REMEDIES 25Section 12.1. Event of Default 25Section 12.2. Remedies 26Section 12.3. Limitations of Seller Liability 27
ARTICLE XIII DISPUTE RESOLUTION 27Section 13.1. Dispute Resolution 27
ARTICLE XIV MISCELLANEOUS 28Section 14.1. Terms and Conditions of Sale 28Section 14.2. Confidentiality 28Section 14.3. Required Disclosure 29Section 14.4. Compliance with Laws and Governmental Approvals 29Section 14.5. Entire Agreement; Successors and Assigns 30Section 14.6. Notices 30Section 14.7. Assignment 31Section 14.8. Waiver; Invalidity 31Section 14.9. Limitations of LiabiLity and Exclusive Remedies 31Section 14.10. Headings 32Section 14.11. Counterparts 32Section 14.12. Applicable Law 32Section 14.13. Amendment 32Section 14.14. No Third Party Beneficiary 33
11
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EXHIBITS
EXHIBIT A Belle River SiteEXHIBIT B Delivery PointsEXHIBIT C Calculation of Detroit Edison BenefitsEXHIBIT D Calculation of MPPA BenefitsEXHIBIT E Operating Protocols
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REFINED COAL SUPPLY AGREEMENT
THIS REFINED COAL SUPPLY AGREEMENT (this “Agreement”), is made andentered into as of December 4, 2009, (the “Effective Date”), by and between BELLE RIVERFUELS COMPANY, LLC, a Delaware limited liability company (“Seller”), and THE DETROITEDISON COMPANY, a Michigan corporation (“Buyer”) (Seller and Buyer each a “Party,” andcollectively, the “Parties”).
RECITALS:
WHEREAS, Seller desires to provide refined coal produced at the Facility for use inBuyer’s Belle River Power Plant; and
WHEREAS, Buyer desires to purchase all of the feedstock requirements for the BelleRiver Power Plant in the form of Refined Coal output of the Facility, and otherwise in the formof Resold Coal, as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants, set forth in thisAgreement, and for other good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE IDEFINITIONS
Section 1.1. Definitions.
The following terms, when used in this Agreement, have the following meanings:
“Acceptance Period Coal Inventory Purchase Aweement” means the Acceptance PeriodCoal Inventory Purchase Agreement, to be entered into on or about the Commercial OperationsDate, by and between Detroit Edison and BR Fuels.
“Affiliate” of a specified Person means any Person that directly or indirectly through oneor more intermediaries controls, is controlled by, or is under common control with, suchspecified Person. As used in this definition of Affiliate, the term “control” of a specified Personincluding, with correlative meanings, the terms, “controlled by” and “under common controlwith,” means (a) the ownership, directly or indirectly, of 50 percent or more of the equity interestin a Person or (b) the power to direct or cause the direction of the management and policies of aPerson, whether through ownership of voting securities, by contract or otherwise; provided,however, that notwithstanding the foregoing, for purposes of this Agreement, members of BRFuels will be deemed to be an Affiliate of Seller, but, in no event will either Party be deemed tobe an Affiliate of the other Party.
“Agreement” has the meaning given to such term in the introductory paragraph hereof.
“Authorized Representative” means the individual or individuals designated as such byeach Party pursuant to Section 4.1.
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“Available Seller Coal” shall mean an amount of Conforming Coal that is in theFeedstock Inventory Store or in transit (or has been identified for delivery under a Coal PurchaseContract but is not yet in transit), in either case, as to which Seller has determined that is notneeded as Feedstock.
“Back-Up Coal Purchase Contract” has the meaning given to such term in Section 6.1(b).
“Belle River Power Plant” means the two fossil fuel-fired steam eLectric generating unitsknown as Belle River Unit No. I and Belle River Unit No. 2, each with a nominal rating of 650megawatts, together with related facilities, located at the Belle River Site.
“Belie River Site” means that certain property located in St. Clair County, Michigan, onwhich the Belle River Power Plant is located, more particularly described on Exhibit A.
“BR Fuels” means Belle River Fuels Company, LLC, a Delaware limited liabilitycompany.
“Business Day” means any day other than Saturday, Sunday and any day that is a legalholiday or a day on which banking institutions in Michigan are authorized by law orgovernmental action to close.
“Buyer” has the meaning given such term in the introductory paragraph hereof
“Buyer Annual Forecast” has the meaning given to such term in Section 5.3.
“Coal Consultant” has the meaning given to such term in the Coal Handling andConsulting Agreement.
4’Coal Handling and Consulting Agreement” means the Coal Handling and ConsultingAgreement, to be entered into on or about the Commercial Operations Date, by and betweenDetroit Edison and BR Fuels.
“Coal Consultant Fee” means the Coal Fee and the Coal Consultant Reimbursable Costsas defined in the Coal Handling and Consulting Agreement.
“Coal Inventory Price” means, for any given period, the per Ton amount derived bydividing (i) the sum of(A) the book value of the Seller Coal inventory at the beginning of theperiod (less the “Inventory Coal Purchase Price,” as defined in the MPPA Coal InventoryPurchase Agreement), plus (B) the total quality adjusted cost of all Seller Coal purchased duringsuch period (reflecting all quality and other allowances, adjustments and assessments under theapplicable Coal Purchase Contract, all related Third Party Impositions that are imposed on Sellerin this Agreement and transportation costs, and all other charges and costs relating to such periodand charged to Seller Coal inventory in accordance with Seller’s customary inventory accountingprocedures consistently applied), by (ii) the sum of (A) the volume in Tons of Seller Coalinventory on hand at the beginning of the period, plus (B) the volume in Tons of Se! [er Coalinventory purchased during such period.
2
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“Coal inventory Purchase Agreement” means the Coal inventory Purchase Agreement, tobe entered into on or about the Commercial Operations Date, by and between Detroit Edison andBR Fuels.
“Coal Purchase Contract” has the meaning given to such term in Section 6.1(a).
“Coal Specifications” means coal type, other specifications and price parameters for thecoal that Seller is to use as Feedstock in the production of Refined Coal for sale to Buyerhereunder and that Seller is to sell to Buyer and to other parties to the extent so directed byBuyer as Resold Coal hereunder, as provided in Section 8.1.
“Code” means the Internal Revenue Code of 1986, as amended.
“Collective Coal Inventory Purchase Agreements” means, collectively, the DetroitEdison Coal inventory Purchase Agreements and the MPPA Coal Inventory PurchaseAgreement.
“Commercial Qperations Date” has the meaning given to such term in the LicenseAgreement.
“Conforming Coal” means Seller Coal that meets the Coal Specifications in effect at thetime that the Coal Purchase Contract relating to such Seller Coal was entered into, and shallinclude, without limitation, Seller Coal presumed to be Conforming Coal pursuant to Section 8.4hereof and/or pursuant to the Collective Coal Inventory Purchase Agreements.
“Contract” means any agreement, lease, license, evidence of indebtedness, indenture, orother contract (including any design, construction, equipment or other warranty or guaranteeunder any of the foregoing).
“Contract Year” means each calendar year during the Term of this Agreement, wovidedthat: (a) the initial Contract Year shall commence on the Commercial Operations Date and shallend on December 31 of that year; and (b) the final Contract Year shall end on the date oftermination or expiration of this Agreement and shall commence on the immediately precedingJanuary 1.
“Delivery Point for Feedstocjc” means the point at transfer gate no. 03zm05 3 on feedconveyor CV 23 and at transfer gate no. 03zm054 on feed conveyor CV 24, designated as“Delivery Point for Feedstock” on Exhibi hereto.
“Delivery Point for Resold Coal” means: (a) for Resold Coal that is in transit or that hasbeen identified for delivery under a Coal Purchase Contract but is not yet in transit, the Point ofOrigin; and (b) for all other Resold Coal, the point at transfer gate no. 03zm053 on feedconveyor CV 23 and at transfer gate no. 03zm054 on feed conveyor CV 24, designated as“Delivery Point for Resold Coal” on Exhibit B hereto.
“Delivery Point for Refined Coal” means the point at which Refined Coal is dischargedfrom the product conveyor extending from the discharge point of the Facility onto product
3
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conveyors CV 19 and CV 20, designated as “Delivery Point for Refined Coal” on Exhibit Bhereto.
“Detroit Edison” means The Detroit Edison Company, a Michigan corporation.
“Detroit Edison Benefits” means the amount equal to the sum of(i) the Detroit EdisonFlyAsh Benefit, plus (ii) the Detroit Edison Mercury Benefit, plus (iii) the Detroit Edison SO2Benefit.
“Detroit Edison Coal Inventory Purchase Agreements” means (i) the Acceptance PeriodCoal Inventory Purchase Agreement, and (ii) the Coal Inventory Purchase Agreement.
“Detroit Edison Fly Ash Benefit” means the change in sales revenues and/or disposalexpenses for the fly ash produced at the Belle River Power Plant while using Refined Coal as afuel calculated in accordance with the formulas set forth in Exhibit C.
“Detroit Edison Mercury Benefit” means the benefits achieved as a result of reducedmercury emissions from the Belle River Power Plant while using Refined Coal as a fuelcalculated in accordance with the formulas set forth in Exhibit C.
“Detroit Edison PA2 Expense Increase” means the increase in Detroit Edison’s cost ofpurchasing power under PA2 power purchase agreements or any power purchase agreemententered into under the Public Utility Regulatory Policies Act of 1978, if any, that is due toDetroit Edison paying the Detroit Edison Refined Coal Adder calculated in accordance with theformulas set forth in Exhibit C.
“Detroit Edison Refined Coal Adder” means the amount calculated as set forth in ExhibitC.
“Detroit Edison Revenue Requirement” means Detroit Edison’s share of BR Fuels’annual revenue requirements calculated in accordance with the formula set forth in Exhibit C.
“Detroit Edison SO2 Benefit” means the benefits achieved as a result of reduced SO2emissions from the Belle River Power Plant while using Refined Coal as a fuel calculated inaccordance with the formulas set forth in Exhibit C.
“Effective Date” has the meaning given to such term in the introductory paragraphhereof
“Environmental Indemnity Agreement” means that certain Environmental IndemnityAgreement, dated as of August 24, 2009, by and between Detroit Edison and BR Fuels.
“Event of Default” has the meaning given to such term in Section 12.1.
“Event of Force Majeure” means any event beyond the reasonable control of the Partyaffected, including, without limitation, any act of God, strike, work stoppage or other labordisturbance, shortage of supplies, parts, materials, rail cars, barges or other freight transportvehicles customarily used, breakdowns or damage to or destruction of the Facility, the Belle
4
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River Power Plant, the St. Clair Power Plant or any part thereof or to plants or other facilities(including a forced outage or an extension of a scheduled outage of the Facility, the Belle RiverPower Plant, the St. Clair Power Plant or such plants, equipment or facilities to make repairs toavoid breakdowns thereof or damage thereto), act of public enemy, act of terrorism, war,blockade, riot, public unrest, lightning, fire, violent storm, flood, frozen river, canal, channel orlake, unforeseeable geological condition, drought, unusually severe weather conditions,explosion, government order or restraint, or other cause or event, whether of a similar ordissimilar nature, which, in the case of any of the foregoing: (a) could not have been reasonablyanticipated by the affected Party, and (b) cannot be reasonably avoided or circumvented by theaffected Party.
“Excess Amount” has the meaning given to such term in Section 7.3.
“Facility” means the refined coal production facility, comprised of one or moreproduction lines, to be constructed and owned by BR Fuels to be located at the Belle River Site.
“Feedstock” means coal utilized as feedstock by the Facility for the production ofRefined Coal.
“Feedstock Inventory Store” means the Seller Coal deposited and present in the areasidentified as “Coal Yard” and on all interconnecting conveyors shown in Exhibit B hereto (priorto crossing either the Delivery Point for Resold Coal or the Delivery Point for Feedstock, each asidentified on Exhibit B hereto).
“Follow-up Period” means the period commencing at the expiration of the InitialAcceptance Period and ending at the later of(i) the expiration of 60 days or such other period asagreed upon by the Parties, or (ii) such time as the reasonable determination is made by Buyer,after prompt review and analysis of the operating data and information relating to the use ofRefined Coal during the Initial Acceptance Period, that use of Refined Coal at the Belle RiverPower Plant will not likely result in a Reduction Event.
“Governmental Approvals” means any authorization, consent, concession, license,certificate, permit, waiver, privilege or approval from, or filing with, or notice to, anyGovernmental Body.
“Governmental Body” means the federal government of the United States, any state ofthe United States or political subdivision thereof, and any entity exercising executive, legislative,judicial, regulatory or administrative functions of or pertaining to government and any othergovernmental entity, instrumentality, agency, authority or commission.
“Increased Expenses” has the meaning given to such term in Section 9.4.
“Initial Accentance Period” means the period commencing on the CommercialOperations Date and ending at the later of (i) the expiration of 75 days following the CommercialOperations Date, or (ii) the last of 60 consecutive days during which the Facility is in operationwith at least 90 percent availability (or such lesser percentage determined by reducing 90 percentas necessary to reflect any reduction in the production and supply of Refined Coal as directed by
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Buyer (except by reason of a Reduction Event)), as such availability is measured on a calendarweek basis.
“Initial Term” has the meaning given to such term in Section 3.1.
“Knowledge” means, as to Buyer, the actual knowledge, after due inquiry, of thosepersons identified on Schedule 1.1(a) and, as to Seller, the actual knowledge, after due inquiry,of those persons identified on Schedule 1 Jj).
“Late Payment Rate” means a rate of interest per annum equal to the lesser of: (a) as toeach applicable day, the most recent published prime rate, as reported in The Wall Street Journal(Eastern Edition) under “Money Rates” or, if such rate does not so appear, in such othernationally recognized publication as Seller may, from time to time, specify to Buyer; or (b) themaximum rate of interest permitted by applicable Law.
“Law” means any law (including common law), statute, act, decree, ordinance, rule,directive (to the extent having the force of law), order, treaty, code or regulation (including anyof the foregoing relating to health and safety matters) or any interpretation of any of theforegoing, as enacted, issued or promulgated by any Governmental Body, including allamendments, modifications, extensions, replacements or re-enactments thereof.
“License Agreement” means that certain License and Services Agreement, dated as ofAugust 24, 2009, by and among BR Fuels, Detroit Edison and MPPA.
“Mer-Sorb” is a chemical additive identified in the patents listed in the Amended andRestated License Agreement, dated January 23, 2009, between Chem-Mod LLC and DTEEnergy Resources, Inc.
“MPPA” means Michigan Public Power Agency, a public body politic and corporateorganized pursuant to Act 448, Public Acts of Michigan 1976.
“MPPA Benefits” means the amount equal to the sum of(i) the MPPA FlyAsh Benefit,plus (ii) the MPPA Mercury Benefit, plus (iii) the MPPA SO2 Benefit.
“MPPA Coal Inventory Purchase Agreement” means the Coal Inventory PurchaseAgreement, to be entered into on or about the Commercial Operations Date, by and between BRFuels and MPPA.
“MPPA Fly Ash Benefit” means the change in sales revenues andlor disposal expensesfor the fly ash produced at the Belle River Power Plant while using Refined Coal as a fuelcalculated in accordance with the formulas set forth in Exhibit D.
“MPPA Mercury Benefit” means the benefits achieved as a result of reduced mercuryemissions from the Belle River Power Plant while using Refined Coal as a fUel calculated inaccordance with the formulas set forth in Exhibit D.
“MPPA Refined Coal Adder” means the lesser of the MPPA Benefits or the MPPARevenue Requirement.
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“MPPA Revenue Requirement” means MPPA’s share of BR Fuels’ annual revenuerequirements calculated in accordance with the formula set forth in Exhibit D.
“MPPA SO2 Benefit” means the benefits achieved as a result of reduced SO2 emissionsfrom the Belle River Power Plant while using Refined Coal as a fuel calculated in accordancewith the formulas set forth in Exhibit D.
“NJW means the National Institute of Standards and Technology.
“Operating Protocols” means those certain operating protocols and procedures set forthas Exhibit E.
“Party” and “Parties” have the meanings given to such terms in the introductoryparagraph hereof.
“Person” means any corporation, limited liability company, any form of partnership, anyjoint venture, trust, estate, Governmental Body, or other legal or commercial entity or any naturalperson.
“Point of Origin” means the location where the Seller Coal is loaded into a railcar (orother form of transport), FOB, for transport to Seller at the Belle River Site or to any other sitedesignated by Buyer.
“Project Documents” means: (a) this Agreement, (b) the Coal Handling and ConsultingAgreement, (c) the License Agreement, (d) the Detroit Edison Coal Inventory PurchaseAgreements, (e) the MPPA Coal Inventory Purchase Agreement, (1) the EnvironmentalIndemnity Agreement, (g) the Memorandum of Understanding with respect to the ParticipationAgreement, to be entered into on or about the Commercial Operations Date, by and betweenMPPA and Detroit Edison, (Ii) the St. Clair Supply Agreement and (i) the other documents,agreements, certificates and instruments executed or entered into by and between (i) BR Fuelsand MPPA and Detroit Edison, (ii) BR Fuels and Detroit Edison, and (iii) BR FueLs and MPPAin connection with the transactions contemplated thereby; provided that, in the case of clause(iii), Detroit Edison has received notice of and approved any such documents, agreements,certificates and instruments, such approval not to be unreasonably withheld.
“Reduction Event” has the meaning given to such term in Section 5.1(b).
“Refined Coal” means the refined coal product produced by Seller for sale to Buyerpursuant to this Agreement.
“Refined Coal Price” means the per Ton amount equal to the sum of (1) the CoalInventory Price, plus (ii) the Detroit Edison Refined Coal Adder, plus (iii) the MPPA RefinedCoal Adder.
“Renewal Term” has the meaning given to such term in Section 3.1.
“Resold Coal” means Available Seller Coal sold hereunder to Buyer or to third parties asdirected by Buyer.
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“Resold Coal Price” has the meaning given to such term in Section 9.2.
“S-Sorb Ill” is a chemical additive identified in the patents listed in the Amended andRestated License Agreement, dated January 23, 2009, between Chem-Mod LLC and DTEEnergy Resources, Inc.
“Section 45 Tax Credits” means the credits against federal income tax available underSection 45 of the Code or any successor provision.
“Seller” has the meaning given to such term in the introductory paragraph hereof
“Seller Coal” means coal purchased by Seller pursuant to a Coal Purchase Contract.
“Shortfall Amount” has the meaning given to such term in Section 7.3.
“St. Clair Fuels” means St. Clair Fuels Company, LLC, a Delaware limited liabilitycompany.
“St. Clair Power Plant” means the fossil fuel-fired steam electric generating facilitylocated at the St. Clair Site.
“St. Clair Site” means that certain property located in St. Clair County, Michigan adjacentto the Belle River Site, on which the fossil fuel-fired steam electric generating facility known asthe St. Clair Power Plant is owned and operated by Detroit Edison.
“St. Clair Supply Agreement” means the St. Clair Supply Agreement, to be entered intoon or about the Commercial Operations Date, by and between St. Clair Fuels and BR Fuels.
“Term” means, collectively, the Initial Term and any Renewal Term.
“Third Party Impositions” has the meaning given to such term in Section 9.7.
“Ton” means two thousand (2,000) pounds avoirdupois weight.
“Unloaded Weight” means the weight of the Seller Coal as documented by the supplierunder the applicable Coal Purchase Contract.
Section 1.2. Construction of Certain Terms and Phrases.
Unless the context of this Agreement otherwise requires: (a) words ofeither genderinclude the other gender; (b) words using the singular or plural also include the plural orsingular, respectively; (c) the terms “hereof;” “herein,” “hereby,” “hereto” and similar wordsrefer to this entire Agreement and not any particular Article, Section, Clause, Exhibit, Appendixor Schedule or any other subdivision of this Agreement; (d) references to “Article,” “Section,”“Clause,” “Exhibit,” “Appendix” or “Schedule” are to the Articles, Sections, Clauses, Exhibits,Appendices and Schedules, respectively, of this Agreement; (e) the words “include” or“including” shall be deemed to be followed by “without limitation” or “but not limited to”whether or not they are followed by such phrases or words of like import; and (0 references to
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“this Agreement” or any other agreement or document shall be construed as a reference to suchagreement or document, including any Exhibits, Appendices, Attachments and Schedulesthereto, as amended, modified or supplemented and in effect from time to time and shall includea reference to any document that amends, modifies or supplements it, or is entered into, made orgiven pursuant to or in accordance with its terms. Whenever this Agreement refers to a numberof days, such number shall refer to calendar days unless Business Days are specified. Allaccounting terms used herein and not expressly defined herein shall have the meanings given tothem under generally accepted accounting principles as promulgated by the FinancialAccounting Standards Board and as in effect on the Effective Date.
ARTICLE IIREPRESENTATIONS AND WARRANTIES
Section 2.1. çpesentations and Warranties of Buyer.
Buyer hereby represents and warrants as of the date hereof as follows:
(a) except as set forth in Schedule 2.1, Buyer’s execution and delivery of, andperformance under, this Agreement have been duly authorized and do not violate or conflict withany charter, bylaw, Law, Contract, permit or obligation applying to Buyer, the Belle River PowerPlant or the Belle River Site, other than such violations or conflicts that would not reasonably beexpected to have a material adverse effect on Buyer’s ability to perform its obligations under thisAgreement;
(b) except as set forth in Schedule 2.1, this Agreement constitutes a legal,valid and binding contractual obligation of Buyer, enforceable against Buyer in accordance withits terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,reorganization and similar laws affecting the enforcement of creditors’ rights generally;
(c) except as set forth in Schedule 2.1, no permit from, notice to, or consent,approval, authorization or order of any court or other Governmental Body or third party notalready given or obtained is required with respect to Buyer in connection with its execution anddelivery of, and performance under, this Agreement, including, without limitation, Buyer’spurchase, transportation, handling and use of Refined Coal and coal as fUel at the Belle RiverPower Plant;
(d) Buyer is validly existing and in good standing under the laws of the Stateof Michigan and is authorized to do business in each jurisdiction necessary for it to perform itsobligations under this Agreement, and Buyer has the right, power and authority, to enter into thisAgreement and to perform its obligations hereunder; and
(e) there is no pending or, to Buyer’s Knowledge, threatened action, suit,investigation, arbitration or other proceeding against Buyer that, if adversely determined, wouldreasonably be expected to have a material adverse effect on the ability of Buyer to perform itsobligations under this Agreement.
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Section 2.2. Representations and Warranties of Seller.
Seller hereby represents and warrants as of the date hereof as follows:
(a) Seller’s execution and delivery of; and performance under, this Agreementhave been duly authorized and do not violate or conflict with any charter, bylaw, Law, Contract,permit or obligation applying to Seller, other than such violations and conflicts that would notreasonably be expected to have a material adverse effect on Seller’s ability to perform itsobligations under this Agreement;
(b) this Agreement constitutes a legal, valid and binding obligation of Seller,enforceable against Seller in accordance with its terms, except as such enforceability may belimited by applicable bankruptcy, insolvency, reorganization and similar laws affecting theenforcement of creditors’ rights generally;
(c) no permit from, notice to, or consent, approval, authorization or order ofany court or other Governmental Body or third party not already given or obtained is requiredwith respect to Seller in connection with its execution and delivery of, and performance under,this Agreement, other than any such permit, notice, consent, approval authorization or orderrequired for the construction and operation of the Facility;
(d) Seller is validly existing and in good standing under the laws of the Stateof Delaware and is authorized to do business in each jurisdiction necessary for it to perform itsobligations under this Agreement, and Seller has the right, power and authority to enter into thisAgreement and perform its obligations hereunder; and
(e) there is no pending or, to Seller’s Knowledge, threatened action, suit,investigation, arbitration or other proceeding against Seller, that, if adversely determined, wouldreasonably be expected to have a material adverse effect on the ability of Seller to perform itsobligations under this Agreement.
ARTICLE IIITERM
Section 3.1. Term.
Subject to Section 11.1, the term of this Agreement will commence on the Effective Dateand will end on the tenth anniversary of the Commercial Operations Date (the “Initial Term”).This Agreement shall automatically renew for one additional five-year period thereafter (the“Renewal Term”), unless one Party provides to the other Party, at least 90 days prior to theexpiration of the Initial Term, written notice of its election that this Agreement not be renewedbeyond the Initial Term.
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ARTICLE IVAUTHORIZED REPRESENTATIVES
Section 4.1. Authorized Representatives.
The initial Authorized Representative of Seller is Katherine A. Panczak. The initialAuthorized Representative of Buyer is Patrick J. Temple. Each Party shall be entitled to relyupon any instructions or information given or provided by the Authorized Representative of theother Party (or any one designated individual if more than one individual is designated as suchother Party’s Authorized Representative), but no Authorized Representative shall have authorityunder this Section 4.1 to modify or amend this Agreement. Each Party shall have the right torevoke any appointment of any individual or individuals who had been appointed to act as itsAuthorized Representative with such revocation being effective upon receipt by the other Partyof the notice provided for in the following sentence. Each Party shall give to the other Partywritten notice of any such revocation of appointment and of the appointment of a new individualor individuals to act as its Authorized Representative.
ARTICLE VPRODUCTION AND SALE OF REFINED COAL
Section 5.1. Production and Sale.
(a) During each Contract Year, in accordance with the terms of, and except asotherwise provided in, this Agreement, (i) Buyer shall procure and purchase from Seller all of itsrequirements for coal and coal-based fuel at the Belle River Power Plant (other than any coalpurchased by Buyer under a Back-Up Coal Purchase Contract in accordance withSection 6.1(ç)), and (ii) Seller shall use commercially reasonable efforts, in accordance with theOperating Protocols, to produce and sell to Buyer Refined Coal in amounts necessary to satisfyBuyer’s requirements for coal and coal-based fuel at the Belle River Power Plant, and (iii) to theextent that such requirements are not fully satisfied by such Refined Coal as described in clause(ii), including without limitation, during a suspension event under the provisions of SectionsS.l(e’3, 8.2(c and 4, Seller shall sell to Buyer (and Buyer shall purchase) Available Seller Coal,in amounts necessary to satisfy such requirements, as Resold Coal.
(b) Buyer’s purchase of Refined Coal pursuant to this Section 5.1 shall bereduced to the extent necessary (i) to prevent damage (other than normal wear and tear thatwould be caused by the exclusive use of coal (other than Refined Coal) as fuel at the Belle RiverPower Plant) to the boilers, pollution control equipment or other operating components thatcomprise the Belle River Power Plant that would be caused by the use of Refined Coal as a fuelat the Belle River Power Plant, or (ii) to prevent material impairment to or a material adverseeffect on the operation and maintenance of the boilers, pollution control equipment or otheroperating components that comprise the BelIe River Power Plant or (iii) to prevent the violationof any permit or Governmental Approval (any of the foregoing circumstances described inclauses (i), (ii) and (iii) being referred to as a “Reduction Event”) and, to the extent that Buyer’srequirements are not fully satisfied by Refined Coal, Seller shall sell to Buyer (and Buyer shallpurchase) Available Seller Coal, in amounts necessary to satisfj such requirements, as ResoldCoal. The determination of a Reduction Event shall be made by Buyer in its good faith
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discretion. Buyer shall notify Seller promptly when Buyer determines that a Reduction Eventhas occurred. The Reduction Event will terminate when the circumstances bringing rise to theReduction Event are resolved or mitigated as agreed by Buyer and Seller in accordance withSection 5.1(d). The reduction of Buyer’s purchase of Refined Coal due to a Reduction Eventshall be of no greater scope and no longer duration than that which is necessary by reason of theReduction Event.
(c) During the Follow-up Period, unless and until otherwise agreed by theParties, each Party’s obligations under Section 5Jj) will be suspended to provide the Partiestime to review and analyze operating data and other information relating to the use by Buyer ofRefined Coal as fuel at the Belle River Power Plant during the Initial Acceptance Period. Duringthe Follow-up Period, Buyer shall have the right, but not the obligation, to purchase AvailableSeller Coal as Resold Coal from Seller as set forth in Section 5.1(a).
(d) During any Reduction Event, as soon as it is reasonably available, Buyerwill provide Seller with all information regarding the cause of the Reduction Event and otheroperating data and other information relating to the use of Refined Coal, and Buyer and Sellerwill cooperate, discuss and negotiate in good faith to develop and agree upon any priceadjustments or other remedial actions to avoid or limit the circumstances leading to theReduction Event and otherwise to improve, optimize and maximize the use of Refined Coal as afuel at the Belle River Power Plant on a going-forward basis. Examples ofpossible remedialactions include, without limitation, capital improvements to the Facility or the Belle River PowerPlant, resetting chemical additive levels as provided in Section 8.3(a), and resetting Buyer’srequirements for Refined Coal at a quantity less than 100 percent of its coal-based fuelrequirements for the Belle River Power Plant. Notwithstanding the foregoing, neither Party shallbe required hereunder to agree to any remedial action that would require it to incur additionalcosts or expenditures. In addition, Seller need not agree to any remedial action (and mayterminate any remedial action agreed to) that Seller believes in its sole discretion, could impair orjeopardize the ability of the Refined Coal to qualify for Section 45 Tax Credits.
(e) At any time that Seller fails to satisfy Buyer’s requirements for coal orcoal-based fuel at the Belle River Plant as required by Section 5.1(a), and Seller fails to deliverResold Coal in accordance with Section 5.1(a), then, upon notice by telephone to Seller, BuyershalT have the right to cause transfer gates on the product conveyors extending from the CoalYard to be switched such that Available Seller Coal bypasses the Facility and is delivereddirectly to the Delivery Point for Resold Coal for sale to and purchase by Buyer as Resold Coaland to maintain such transfer gate positions until such time as Seller provides to Buyerreasonably adequate assurances of Seller’s ability to perform in accordance with Section 5.1(a).
(f) Notwithstanding the foregoing, nothing contained in this Article V willprevent Buyer from discontinuing or reducing operation of one or both of the generating units atthe Belle River Power Plant prior to the end of the Term.
Section 5.2. Sales to Third Parties.
Any Refined Coal produced at the Facility and not purchased by Buyer, for any reason,may be sold by Seller to third parties or otherwise disposed of subject to compliance with
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applicable existing permits, Coal Purchase Contracts and coal transportation agreements. ThisSection 5.2 is not intended and shall not be construed to limit any remedies available to Sellerhereunder or under applicable Law.
Section 5.3. Annual Forecasts: Adjustments.
For each Contract Year during the Term, Buyer shall provide Seller with a good faithprojection (the “Buyer Annual Forecast”) of the aggregate quantity of Refined Coal and ResoldCoal it expects to require during each month of such Contract Year pursuant to the terms of thisAgreement. The Buyer Annual Forecast for the initial Contract Year shall be provided no laterthan the 30th day following the Commercial Operations Date. Each succeeding Buyer AnnualForecast shall be delivered no later than October 1 preceding the start of such Contract Year.Buyer shall update such forecast on a monthly basis to reflect any change in Buyer’s projections.Buyer shall provide any such amendment to Seller no less than 15 Business Days before the firstBusiness Day of each such month. The Buyer Annual Forecast is to be used solely forinformational purposes.
Section 5.4. Purchase by Buyer at Termination.
On the last thy of the Term, to the extent it has not already done so, Buyer shallpurchase, and Seller shall sell to Buyer, all Refined Coal on hand.
Section 5.5. Consistent Renorting.
Notwithstanding the means of sourcing fuel for the Belle River Power Plant prior to theCommercial Operations Date, Buyer covenants and agrees that it will not, and it will cause itsAffiliates not to, make or give any filing, return, ruling request, representation, allegation, noticeor report with or to any Governmental Body or court that contains, or otherwise presents inaccounting or financial records, reports or statements, or tax or information returns,characterizations of the transactions (or elements thereof) contemplated by the various ProjectDocuments that are inconsistent with the terms of such Project Documents, such as (by way ofexample and not limitation) any characterization that Feedstock purchased by Seller underapplicable Coal Purchase Contracts was purchased by Buyer or any other Person, or that RefinedCoal sold to Buyer hereunder was something other than Refined Coal.
ARTICLE VIPURCHASE AND SALES OF SELLER COAL
Section 6.1. Coal Purchase Contracts.
(a) It is contemplated that Seller, directly or through an Affiliate, will enterinto one or more contracts with third-party coal suppliers to purchase coal conforming to theCoal Specifications for use as Feedstock and for sale to Buyer, or others designated by Buyer, asprovided herein (each, a “Coal Purchase Contract”).
(b) It is fUrther contemplated that included among the Coal PurchaseContracts wilL be purchase contracts that Buyer has in place with coal suppliers on the
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Commercial Operations Date and that are to be assigned in whole or in part to Seller pursuant tothe Coal Inventory Purchase Agreement.
(c) For each Coal Purchase Contract entered into by Seller, Buyer may, butshall not be obligated to, enter into and maintain a back-up Contract to purchase coal from thesame third-party coal supplier on terms substantially similar to the terms contained in thecorresponding Coal Purchase Contract, including, without limitation, the quantity of coal to bepurchased thereunder, except that Buyer’s obligation to purchase a quantity of coal thereundershall be reduced by the quantity of coal purchased by Seller under the corresponding CoalPurchase Contract (each, a “Back-Up Coal Purchase Contract”).
(d) Notwithstanding anything to the contrary herein but subject to theprovisions of Sections 5.1(e), 8.2Cc) and j, Buyer’s sole remedies for Seller’s failure toproduce and sell Refined Coal hereunder shall be to: (i) purchase Resold Coal pursuant toSection 5.1 and to purchase coal under the Back-Up Coal Purchase Contracts; and (ii) terminatethis Agreement in accordance with Section Il .1 (1’).
Section 6.2. Available Seller Coal.
(a) At any point in time, to the extent that Seller has Available Seller Coal,Buyer may request to purchase, and upon such request Seller will sell to Buyer, or to others tothe extent so directed by Buyer, all (or such portion requested by Buyer) of such Available SellerCoal as Resold Coal at the applicable Resold Coal Price and otherwise as provided herein;provided, however, that, as to any Available Seller Coal that is to be sold to others or shipped foruse at a location or facility other than the Belle River Power Plant or St. Clair Power Plant,Seller’s obligation to sell such Available Seller Coal shall be subject to receiving Buyer’sundertaking to replace or cause to be replaced by arranging for one or more Coal PurchaseContracts for Conforming Coal, and providing for delivery in such a manner that Seller’sFeedstock requirements for production of Refined Coal, and its Refined Coal productionschedule, will not be impaired.
(b) At any point in time, to the extent that Seller has Available Seller Coal,Seller may request that Buyer purchase all or a portion of such Available Seller Coal, and uponsuch request, Buyer will purchase and Seller will sell to Buyer, or to others to the extent sodirected by Buyer, such Available Seller Coal (or the applicable portion thereof) as Resold Coalat the applicable Resold Coal Price and otherwise as provided herein, it being agreed, for theavoidance of doubt, that Seller’s exercise of such right shall not cause to arise an obligation byBuyer to replace Conforming Coal under Section 6.2(a),
Section 6.3. Purchase by Buyer at Termination.
At the end of the Term, Buyer shall purchase, and Seller shall sell to Buyer, allConforming Coal on hand or under contract as Resold Coal. To the extent that there is any CoalPurchase Contract in place at the end of the Term which, by its terms, obligates Seller topurchase Conforming Coal for a period extending beyond the end of the Term, each Party agreesthat Seller will assign such Coal Purchase Contract to Buyer and Buyer will assume Seller’srights and obligations thereunder. To the extent any such Coal Purchase Contract is not able to
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be so assigned, following the end of the Term, Seller shall sell and Buyer shall purchaseConforming Coal as Resold Coal in accordance with the terms and conditions hereof until theapplicable Coal Purchase Contract expires or otherwise terminates.
ARTICLE VIIDELIVERIES; WEIGHTS; TITLE AND RISK OF LOSS
Section 7.1. Deliveries.
(a) Refined Coal deliveries will be made at the Delivery Point for RefinedCoal based on Buyer’s requirements for use of Refined Coal as fuel in the Belle River PowerPlant.
(b) Deliveries of Available Seller Coal will be made at the applicableDelivery Point for Resold Coal as specified herein, and, assuming timely performance by thirdparties under the Coal Purchase Contracts and by the Coal Consultant under the Coal Handlingand Consulting Agreement and except as may be otherwise agreed by the Parties, such deliverieswill be made based on Buyer’s, or others’ to the extent so directed by Buyer) requirements foruse of Available Seller Coal as fuel.
Section 7.2. Weights.
(a) The weight of Refined Coal sold to Buyer hereunder during any applicableperiod will be established by weights of Feedstock measured by Buyer’s belt scales located onproduct conveyors CV 23 and CV 24, plus an agreed upon allowance for the chemical additiveused in the Refined Coal production process.
(b) The weight of Resold Coal sold to Buyer hereunder during any applicableperiod will be established by weights of Resold Coal measured by Buyer’s belt scales located onproduct conveyors CV 23 and CV 24.
(c) Buyer shall maintain and preserve, during the Term and for at least sixmonths after any termination of this Agreement, records of all weights taken under thisSection 7.2 and shall maintain the scales as provided below:
(i) At least once each calendar year, the accuracy of the scales shall bemaintained, tested and, if necessary, adjusted, in accordance with the guidelines outlined by theNIST Handbook #44, or other procedures which shall be mutually acceptable to Seller and Buyerarid in accordance with applicable Law. If any such test shows the scales to be in error, Buyershall cause them to be adjusted to within the tolerance specifications as designated by the scalemanufacturer;
(ii) Buyer shall give prompt notice by telephone (and confirm suchnotice in writing or by email or facsimile) to Seller the results of any testing and adjustment ofthe scales, and otherwise if and when the scales are discovered to be in error beyond thetolerance specifications as designated by the scale manufacturer;
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(iii) Seller shalL have the right, but not the duty, to have a representativepresent at any and all times to observe the determination of weights hereunder. In addition to thetesting described in Section 7.2(cXi), if Seller should at any time question the accuracy of thescales, Seller shall so advise Buyer and confirm the same in writing, and Buyer shall promptlyarrange testing of the scales. If such test shows the scales to be in error, Buyer shall cause themto be adjusted to within the tolerance specifications as designated by the scale manufacturer. Ifsuch test prompted by Seller pursuant to this Section 7.2(cYiii) shows the scale to be within theapplicable tolerance specifications, then Seller shall pay all costs of such test. Otherwise, Buyershall pay all costs of maintaining, testing and adjusting the scales hereunder.
(d) During any period when the scales are inoperable, determination of thequantities of Refined Coal and Resold Coal delivered hereunder shall be determined by aprocedure to be established at such time by agreement of Seller and Buyer and in accordancewith applicable Law.
Section 7.3. Feedstock Inventory Store Reconciliation.
(a) On a quarterly basis, the Coal Consultant shall cause to be performed aphysical inventory survey of the Feedstock Inventory Store. Promptly thereafter, a reconciliationof the Feedstock Inventory Store will be made, and the actual weight of Resold Coal sold fromthe Feedstock Inventory Store, and of Feedstock from the Feedstock Inventory Store used toproduce Refined Coal, during such quarter will be determined, based on: (i) the FeedstockInventory Store as measured on such date; (ii) the Feedstock Inventory Store as measured at theend of the prior quarter; (iii) the record of the Unloaded Weight of Seller Coal unloaded at theBelle River Site during the quarter; (iv) the record of the weight of Resold Coal moved from theFeedstock Inventory Store, as determined pursuant to Section 7.2(b), during the quarter; and(v) the record of the weight of Feedstock used to produce Refined Coal sold to Buyer, asdetermined pursuant to Section 7.2(a), during the quarter. To the extent that the sum of: (i) theFeedstock Inventory Store as measured at the end of the prior quarter; and (ii) the UnloadedWeight of Seller Coal unloaded at the Belle River Site during the quarter, exceeds the sum of:(x) the Feedstoek Inventory Store on the measurement date; (y) the weight ofResold Coalmoved from the Feedstock Inventory Store, as determined pursuant to Section 7.2(b), during thequarter; and (z) the weight of Feedstock used to produce Refined Coal sold to Buyer, asdetermined pursuant to Section 7.2(a), during the quarter, the difference (the “Excess Amount”)shall be attributable to Resold Coal sold to Buyer and Feedstock used to produce Refined Coalsold to Buyer, in the same proportions as reflected in clauses (y) and (z) above, and the sum ofsuch Excess Amount and the weights described in clauses (y) and (z) above will constitute theactual weight of Resold Coal sold, and Feedstock used, from the Feedstock Inventory Storeduring such quarter. Seller will invoice Buyer for such Excess Amount using the Coal InventoryPrice and the Resold Coal Price, as applicable, on the date the Excess Amount is recorded bySeller as a reduction of Feedstock Inventory Store, and Buyer will make payment, for suchExcess Amount in accordance with Article IX. To the extent that the sum of: (i) the FeedstockInventory Store as measured at the end of the prior quarter; and (ii) the Unloaded Weight ofSeller Coal unloaded at the Belle River Site during the quarter, is less than the sum of: (x) theFeedstock Inventory Store on the measurement date; (y) the weight of Resold Coal moved fromthe Feedstock Inventory Store, as determined pursuant to Section 7.2(1,], during the quarter; and(z) the weight of Feedstock used to produce Refined Coal sold to Buyer, as determined pursuant
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to Section 7.2(a), during the quarter, the deficiency (the “Shortfall Amount”) shall be attributableto Resold Coal purchased by Buyer and Feedstock used to produce Refined Coal sold to Buyer,in the same proportions as reflected in clauses (y) and (z) above, and, in such case, Seller willcredit Buyer for such Shortfall Amount in accordance with Article IX using the Coal InventoryPrice and the Resold Price, as applicable, on the date the Shortfall Amount is recorded by Selleras an increase in Feedstock Inventory Store. For purposes ofthis Section 7.3, in the case of thefirst quarter (or partial quarter, as the case may be) following the closing date under the CoalInventory Purchase Agreement, all references herein to “the Feedstock Inventory Store asmeasured at the end of the prior quarter” shalL mean the aggregate tonnage purchased under theCollective Coal inventory Purchase Agreements. The costs of taking such physical inventoriesshall be borne by Buyer.
(b) In addition to the reconciliation of the Feedstock inventory Store, the CoalConsultant shall cause to be performed a physical survey of Seller’s inventory located at theSuperior Midwest Energy Terminal annually. The survey shall be performed during eitherOctober or November of each Contract Year. Buyer shall provide Seller with the results of thephysical survey on or about December 15 of each year during Term. Seller will adjust itsinventory using the results of the survey before December 31 of the Contract Year.
Section 7.4. Measurement Methodology.
Notwithstanding Sections 7.2 and fl, Buyer shall have the right to increase thefrequency of scale testing to a quarterly basis. If Buyer elects to increase scale testing to aquarterly basis, Seller shall direct the Coal Consultant to adjust the frequency of the FeedstockInventory Store reconciliation to an annual basis.
Section 7.5. Title and Risk of Loss.
(a) Title and risk of loss, damage or destruction with respect to the RefinedCoal sold hereunder will pass to Buyer at the Delivery Point for Refined Coal,
(b) Title and risk of loss, damage or destruction with respect to the ResoldCoal sold hereunder will pass to Buyer at the applicable Delivery Point for Resold Coal.
ARTICLE VIIIREFINED COAL AND RESOLD COAL SPECIFiCATIONS
Section 8.1. Coal Specifications.
Buyer will specify to Seller the initial Coal Specifications upon request by Seller, andwill subsequently, from time to time during the Term as requested by Seller, confirm the CoalSpecifications then in effect. During the Term, Buyer may change the Coal Specifications fromtime to time. Notification of any such change shall be made in writing to Seller and to the CoalConsultant.
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Section 8.2. Refined Coal Production Specifications and Use.
(a) Refined Coal produced and sold to Buyer hereunder shall be producedfrom Feedstock that-was purchased pursuant to a Coal Purchase Contract and was ConformingCoal at the time delivered to the Belle River Site.
(b) Seller hereby covenants and warrants that Refined Coal produced and soldto Buyer hereunder shall be produced in accordance with the Operating Protocols.
(c) During any time that Seller is delivering Refined Coal without complyingwith the Operating Protocols:
(i) Buyer shall have the right to suspend immediately all deliveries ofRefined Coal by giving notice of the suspension to Seller. Such suspension shall remain in effectuntil such time as Seller provides to Buyer reasonably adequate assurances of Seller’s ability andintention to comply with the Operating Protocols in accordance with this Section 8.2. Afterreceipt of such notice, Seller shall commence appropriate action and use its best efforts to correctthe deficiency; and
(ii) Buyer shall have the right upon notice by telephone to Seller, tocause transfer gates on the product conveyors extending from the Coal Yard to be switched suchthat Available Seller Coal bypasses the Facility and is delivered directly to the Delivery Point forResold Coal for sale to and purchase by Buyer as Resold Coal and to maintain such transfer gatepositions until such time as Seller provides to Buyer reasonably adequate assurances of Seller’sability to perform in accordance with the Operating Protocols.
(d) Buyer hereby covenants that it will use all Refined Coal purchasedhereunder solely for use as ftzel in the Belle River Power Plant.
(e) Each Monday, Buyer shall provide to Seller the inputs or estimates of theinputs required for calculating the Detroit Edison Benefits and the MPPA Benefits for theprevious week (beginning on the previous Monday and ending on Sunday), as set forth onExhibit C or Exhibit D.
Section 8.3. Chemical Additives.
(a) Upon Buyer’s request and Seller’s approval, Seller will increase the levelof chemical additives used in the production of Refined Coal beyond that called for in theOperating Protocols (subject to the physical constraints of the Facility), and, in such event, Buyershall reimburse Seller for any additional costs and expenses incurred by Seller for andattributable to the use of the additional chemical additive. Notwithstanding the foregoing, ifafter such an increase, there occurs a Reduction Event, Seller shall have the right to reduce levelsof chemical additives back to levels called for in the Operating Protocols.
(b) Upon Buyer’s request, Seller shall for a period of up to seven days oftesting, supply additional Mer-Sorb, at its own expense, and increase the application rate forMer-Sorb to the level that the Parties mutually agree is likely reduce the mercury emissions fromthe Belle River Power Plant to the maximum level ofmercury emissions reductions that can be
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reasonably achieved by the application of additional Mer-Sorb to the Conforming Coal (allsubject to the physical constraints of the Facility); provided, however, that all costs and expenses(other than the cost of such additional Mer-Sorb) related to such testing shall be borne by Buyer.
(c) During any time during the Term that the Facility is not operating, Buyershall have the right to purchase from Seller, as Seller’s delivered cost, such chemical additivesfor use at the Belle River Power Plant; provided that Buyer shall be responsible for any capitalrelating to the handling, storage and use of such chemical additives so purchased, including withlimitation, any capital costs associated with or required for Buyer’s use of such chemicaladditives.
Section 8.4. Presumption Regarding Conforming Coal and Refined Coal.
BUYER AGREES THAT ANY RESOLD COAL OR FEEDSTOCK WILL BECONCLUSIVELY PRESUMED TO HAVE BEEN CONFORMING COAL IF SUCHCOAL WAS PURCHASED BY SELLER PURSUANT TO THE COLLECTIVE COALINVENTORY PURCHASE AGREEMENTS OR: (A) WAS PURCHASED BY SELLERPURSUANT TO A COAL PURCHASE CONTRACT THAT WAS ASSIGNED TOSELLER BY BUYER OR THAT WAS CERTIFIED BY THE COAL CONSULTANT ASPROVIDED IN THE COAL HANDLING AND CONSULTING AGREEMENT, AND (B)WAS NOT RECOMMENDED FOR REJECTION IN ACCORDANCE WITH THEAPPLICABLE COAL PURCHASE CONTRACT BY THE COAL CONSULTANTPURSUANT TO THE COAL HANDLING AND CONSULTING AGREEMENT, ANDWAS PREPARED, BLENDED AND DELiVERED TO THE APPLICABLE DELIVERYPOINT BY THE COAL CONSULTANT PURSUANT TO THE COAL HANDLING ANDCONSULTING AGREEMENT. ACCORDINGLY, BUYER WAIVES ANY RIGHT ITMIGHT HAVE TO REJECT OR TO REVOKE ACCEPTANCE OF, OR TO CLAIMDAMAGES OR ANY OTHER RELIEF WITH RESPECT TO ANY SUCH RESOLDCOAL OR ANY REFINED COAL PRODUCED FROM SUCH FEEDSTOCK BYREASON THAT SUCH RESOLD COAL OR FEEDSTOCK WAS NOT CONFORMINGCOAL.
Section 8.5. Warranty Disclaimer.
(a) EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE VIII,ALL RESOLD COAL AND REFINED COAL SOLD PURSUANT TO THISAGREEMENT IS SOLD “AS IS” AT THE APPLICABLE DELIVERY POINTPROVIDED HEREIN.
(b) EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE VIII,SELLER HEREBY DISCLAIMS ALL WARRANTIES (OTHER THAN THEWARRANTY OF TITLE) WHETHER EXPRESS OR IMPLIED, INCLUDING,WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY ANDFITNESS FOR A PARTICULAR PURPOSE AND ALL WARRANTIES REGARDINGTHE COMPATIBILITY OF ANY REFINED COAL WITH ANY BUYER EQUIPMENT.
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ARTICLE IXPRICE; BILLING AND PAYMENT
Section 9.1. Refined Coal Price.
For each Ton of Refined Coal produced and sold by Seller and purchased by Buyerhereunder during a Contract Year, Buyer shall pay to Seller the Refined Coal Price applicable tosuch Ton of Refined Coal.
Section 9.2. Resold Coal Price.
Buyer shall pay (or cause to be paid) to Seller for each Ton of Resold Coal purchased andsold hereunder the Resold Coal Price. The “Resold Coal Price” for Resold Coal purchased at asite other than the Belle River Site shall be the same quality adjusted price per Ton incurred or tobe incurred directly by Seller under any applicable Coal Purchase Contract, plus any applicabletransportation charges or other rail and transloading costs incurred by Seller. The “Resold CoalPrice” for Resold Coal sold from the Feedstock Inventory Store shall be the Coal Inventory Priceapplicable to such Ton of Resold Coal.
Section 9.3. Coal Consultant Fee Reimbursement.
Buyer shall reimburse Seller for the Coal Fee as and when paid under the Coal Handlingand Consulting Agreement.
Section 9.4. O&M and CaDital Cost Reimbursement.
(a) Seller shall reimburse Buyer for increased operation and maintenanceexpenses incurred and that Buyer demonstrates are related to Buyer’s use of Refined Coal (andnot increased levels of chemical additives pursuant to Section 8.3) as a fuel in the Belle RiverPower Plant that would not have been incurred from use of coal (other than Refined Coal), butonly to the extent such costs are not included in the calculation of Detroit Edison Benefits(“Increased Expenses”). Buyer shall give Seller prompt notice upon the occurrence of anyIncreased Expenses. If the Increased Expense is ongoing, either Party shall have the right tosuspend delivery of Refined Coal hereunder unless and until the Parties agree upon a resolutionof such Increased Expense; provided, however, that Buyer shall have the right to suspenddelivery of Refined Coal hereunder only to the extent that Buyer is not reimbursed for suchIncreased Expense. If Seller disputes an Increased Expense, Seller shall have the right towithhold reimbursement for such Increased Expense until such dispute has been resolved.
(b) Seller shall reimburse Buyer for any capital investments that Buyerdemonstrates are required of Buyer as a result of Buyer’s use of Refined Coal (and not increasedlevels of chemical additives pursuant to Section 8.3) as fuel in the Belle River Power Plant, tothe extent agreed to and approved by Seller, Either Party shall have the right to suspend deliveryof Refined Coal hereunder unless and until the Parties agree upon such capital investment andreimbursement or upon other resolution of such matter.
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(c) Notwithstanding the foregoing, Seller shall not be required to reimburseBuyer for any costs, expenses or capital investment that Buyer cannot demonstrate are amountsthat Buyer would not have incurred but for Buyer’s use of Refined Coal.
Section 9.5. Invoicing and Payment.
(a) Buyer shall pay Seller by electronic transfer (recipient’s account perSeller’s advice) in United States fUnds for all Refined Coal produced and sold by Seller andpurchased by Buyer hereunder. Seller shall submit to Buyer an invoice for the Refined Coaldelivered to Buyer hereunder during each week. Such invoice will be submitted within twoBusiness Days after the end of the applicable week and will include the weight of Refined Coaldelivered, an estimate of the Refined Coal Price applicable to such Refined Coal, the amount ofany applicable true-up adjustment and pertinent wire transfer instructions. Buyer shall makepayment within four days after receipt of each Seller invoice. From time to time, Seller, withassistance of the Coal Consultant, shall determine (i) the actual Refined Coal Price, (ii) the actualprice of the Detroit Edison Refined Coal Adder, and (iii) the actual price of the MPPA RefinedCoal Adder, in each case, applicable to the Refined Coal produced and sold during the mostrecent period following any prior true-up adjustment and any resulting true-up adjustment will bereflected (as an addition or reduction, as the case may be) on the weekly invoice next submittedby Seller hereunder.
(b) Buyer shall pay Seller by electronic transfer (recipient’s account perSeller’s advice) in United States funds for all Resold Coal from the Feedstock Inventory Storepurchased and sold hereunder. Seller shall submit to Buyer an invoice for the Resold Coal fromthe Feedstock Inventory Store delivered to Buyer hereunder during each week. Such invoicewill be submitted within two Business Days after the end of the applicable week and will includethe weight of such Resold Coal delivered, an estimate of the Resold Coal Price applicable tosuch Resold Coal, the amount of any applicable true-up adjustment and pertinent wire transferinstructions. Buyer shall make payment within four days after receipt of each Seller invoice.From time to time, Seller, with assistance of the Coal Consultant, shall determine the actualResold Coal Price applicable to the Resold Coal from the Feedstock Inventory Store delivered toBuyer hereunder during the most recent period following any prior true-up adjustment and anyresulting true-up adjustment will be teflected (as an addition or reduction, as the case may be) onthe weekly invoice next submitted by Seller hereunder. Following each inventory reconciliation(and determination of the actual Unloaded Weight of Resold Coal sold from the FeedstockInventory Store during such period) as to which it is determined that there is an Excess Amountor a Shortfall Amount as provided in Section 7.3, the amount of such Excess Amount or ShortfallAmount will be reflected (as an addition or reduction, as the case may be) on the weekly invoicenext submitted by Seller hereunder.
(c) Buyer shall pay Seller by electronic transfer (recipient’s account perSeller’s advice) in United States fimds for all Resold Coal purchased and sold hereunder otherthan from the Feedstock Inventory Store. Seller shall submit to Buyer an invoice for the ResoldCoal other than from the Feedstock inventory Store delivered to Buyer hereunder during eachweek. Such invoice will be submitted within two Business Days after the end of the applicableweek and will include the weight of such Resold Coal delivered, the Resold Coal Price
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applicable to such Resold Coal and pertinent wire transfer instructions. Buyer shall makepayment within four days after receipt of each Seller invoice.
(d) Buyer shall pay Seller by electronic transfer (recipient’s account perSeller’s advice) in United States finds for the reimbursement required under Section 9.3. Sellershall submit to Buyer an invoice for the Coal Fee during each week. Such invoice will besubmitted within two Business Days after the end of the applicable week and will includepertinent wire transfer instructions. Buyer shall make payment within four days after receipt ofeach Seller invoice.
(e) The Parties agree that each Party may, in computing the amount requiredto be paid by such Party upon termination of this Agreement, reduce the required amount of suchpayment by offsetting against such amount the aggregate amount due and owing (and not subjectto a good faith dispute) to such Party and all Affiliates of such Party by such other Partyhereunder and under the other Project Documents.
(1) in case any portion of an invoice submitted pursuant to this Section 9.5 isin bona tide dispute, the undisputed amount shall be payable when due. Any Party disputing anyportion of an invoice shall provide the other Party with notice describing the nature of the disputeas soon as reasonably possible.
(g) invoices shall be mailed, emailed or sent by facsimile to the Persons listedbelow, or such other Person or address as may be specified by Buyer:
The Detroit Edison CompanyOne Energy Plaza634 General OfficesDetroit, Michigan 48226Attention: John R. KlosEmail: klosjdteenergy.com
With a copy to:
The Detroit Edison CompanyOne Energy Plaza634 General OfficesDetroit, Michigan 48226Attention: John A. WagnerEmail: wagnerjdteenergy.com
(h) All amounts owed by a Party to the other Party under this Agreementmore than five Business Days beyond the date on which such amount is due and payable shallbear interest at the Late Payment Rate.
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Section 9.6. Business Days.
All payments to be made under this Agreement shall be made on a Business Day. If theday specified for payment is not a Business Day, such payment shall be made on the nextsucceeding day which is a Business Day.
Section 9.7. Audit.
Notwithstanding the payment of any amount pursuant to this Article IX, each Party shallremain entitled to conduct an audit and review of all costs and expenses subject toreimbursement by such Party hereunder, including, but not limited to, costs incurred and takeninto account in the calculation of the Detroit Edison Benefits, together with any supportingdocumentation, for a period of three years from and after the close of the calendar year in whichsuch costs were incurred, excluding those books and records related to costs based upon thestandard allowances and rates. If, pursuant to such audit and review, it is determined that anyamount previously paid by such Party did not constitute a due and payable item of costs, suchParty may submit a claim to the other Party indicating the amount and reason the cost is believednot to be reimbursable. If the Parties agree on such matter, the Party obligated to pay will remitthe amount within 30 calendar days. If there is not agreement on any item of cost, the Partieswill then meet and attempt to agree on the disposition of the item of cost. If the Parties are notable to resolve issues raised by such an audit and review, any disputed items will be resolved inaccordance with the provisions of Article XIII.
Section 9.8. Taxes and Other Liabilities.
(a) Seller shall be solely responsible for all assessments, fees, costs, expensesand taxes imposed by any Governmental Body or other third parties (“Third Party Impositions”)relating to Seller Coal that arise prior to any transfer of title to the Seller Coal hereunder, eitheras Resold Coal or after its conversion into Refined Coal, as provided herein; provided, however,that such Third Party Impositions shall, for purposes of this Agreement, be included in thedefinition and calculation of the Coal Inventory Price. Buyer shall be solely responsible for allThird Party Impositions relating to the Resold Coal or Refined Coal imposed at or after thetransfer of title to Buyer (other than franchise or income taxes which are related to the sale of theSeller Coal and are the responsibility of Seller), including, but not limited to, sales or use tax ifapplicable.
(b) Upon Buyer’s purchase of Refined Coal from Seller, Buyer shall provideSeller with a sales tax exemption certificate with the “industrial processing” exemption boxselected.
ARTICLE XFORCE MAJEURE
Section 10.1. Force Mai eure.
(a) Except as otherwise provided in this Section 10.1, a Party shall be excusedfrom performance under this Agreement, and shall not be considered to be in default hereunderfor failure to perform obligations under this Agreement, to the extent that such Party is unable to,
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or otherwise fails to, perform due to an Event of Force Majeure or the failure of the other Partyor any of its Affiliates to perform it obligations under any of the Project Documents. No Partyshall be relieved of any obligation for the payment of money as a result of an Event of ForceMajeure or relieved of any other obligations under this Agreement as a result of an Event ofForce Majeure solely because of increased costs or other adverse economic consequences thatmay result from performance by such Party.
(b) If a Party’s ability to perform its obligations under this Agreement isaffected by an Event of Force Majeure, such Party shall: (i) promptly notify the other Party inwriting of such event and its cause; and (ii) promptly supply such other available informationabout the Event of Force Majeure and its cause as may be reasonably requested by the otherParty.
(c) The suspension of performance by a Party due to an Event of ForceMajeure hereunder shall be of no greater scope and no longer duration than that which isnecessary by reason of the Event of Force Majeure. The affected Party shall use commerciallyreasonable efforts to promptly mitigate or remedy its inability to perform. However, no Partyshall be required hereunder to accede to the demands of labor or settle any strike or labor dispute.An Event of Force Majeure shall not excuse compliance with any Law or environmental permitsunless so provided under the applicable Law or permit.
ARTICLE XIEARLY TERMINATION
Section 11.1. Early Termination.
This Agreement shall terminate on a date prior to the date referred to in Section 3.1 underthe following circumstances:
(a) Upon mutual agreement of Buyer and Seller, which termination shall beeffective on the date agreed to by Buyer and Seller;
(b) If the Term (as defined in the License Agreement) under the LicenseAgreement expires or is terminated, which termination of this Agreement shall be effective as ofthe expiration or termination of the Term under the License Agreement;
(c) Upon the date specified in a termination notice sent by a non-breachingParty, so long as such date follows the expiration of any applicable notice and/or cure period, inaccordance with Article XII hereof;
(d) Upon the date specified in a notice of termination from Seller to Buyer, solong as such date follows the expiration of 30 days’ notice, if a change in Law or circumstancesthat results in a material increase in costs and expenses or a material reduction in revenue orbenefits in respect of Section 45 Tax Credits; Drovided that to the extent Seller terminates inaccordance with this Section 11.1(d), Seller shall not be required to produce and sell RefinedCoal pursuant to Section 5.1 from the date of the notice of termination until the effective date ofsuch termination;
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(e) Upon the date specified in a notice of termination by one Party to the otherParty, so long as such date follows the expiration of 30 days’ notice, if the other Party’sobligation to perform hereunder is excused due to an Event of Force Majeure and,notwithstanding the provisions of Section 10.1, the suspension of such other Party’s performancedue to the Event of Force Majeure has continued for at least six consecutive months;
(1) Upon the date specified in a notice of termination by Buyer to Seller, solong as such date follows the expiration of 30 days’ notice, if after the Follow-up Period, Sellerfails to produce Refined Coal for at least three consecutive months and such failure to produce isnot attributable in whole or part to Buyer;
(g) Upon the date specified in a notice of termination by one Party to the otherParty, so long as such date follows the expiration of 30 days’ notice, if after the Follow-upPeriod, deliveries of Refined Coal are suspended for at least three consecutive months;
(h) Upon the date specified in a notice of termination from Buyer to Seller, solong as such date follows the expiration of 30 days’ notice, if an order issued by the MichiganPublic Service Commission, or a change in Law, related to Buyer’s use of Refined Coal as a fuelin the Belle River Power Plant, this Agreement or any of the transactions contemplated by theProject Documents results in an increase in costs and expenses or a reduction in revenue toBuyer; or
(i) Upon the date specified in a notice of termination from Buyer to Seller, solong as such date follows the expiration of 30 days’ notice, if operation of one or both of thegenerating units at the Belle River Power Plant is discontinued.
(a) Any termination of this Agreement, irrespective of the reason therefor,shall not release either Party of any obligations incurred prior to the effective date of suchtermination nor, subject to Article XII hereof, waive any rights or remedies with respect to abreach of this Agreement giving rise to such termination.
(b) Any termination of this Agreement, irrespective of the reason therefor,shall not release either Party of any applicable rights and obligations pursuant to Section 5.4,Section 5.5, Section 6.3, Section 7.2(b), Section 11.2, Article XII, Article XIII or Article XIV.
ARTICLE XIIEVENTS OF DEFAULT AND REMEDIES
Section 12.1. Event of Default.
An “Event of DefauLt” shall mean the occurrence of any one or more of the followingevents:
(a) A breach by Buyer of its payment obligations under Article IX hereof,which breach is not cured within ten days from the date written notice thereof is given to Buyerby Seller;
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MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 29 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 717 of 873
(b) Any representation or warranty made by either Party in this Agreementshall at any time prove to be false or misleading in any material respect as ofthe date hereof,unless: (i) the fact, circumstance or condition that is the subject of such representation orwarranty is made true within 30 days after such Party becomes aware that it was false ormisleading (or within such longer period of time, not to exceed 90 days, as is necessary for suchParty with the exercise of diligence to cure such failure, if such failure is susceptible to beingmade true but cannot be cured with the exercise of diligence within such 30-thy period, and ifsuch Party commences within such 30-thy period and thereafter diligently and in good faithprosecutes the curing of such failure); and (ii) such cure removes any adverse effect on the otherParty of such fact, circumstance or condition being otherwise than as first represented; or unlesssuch fact, circumstance or condition being other than as first represented does not materiallyadversely affect the other Party, as the case may be;
(c) The failure by Buyer to purchase its requirements for coal, refined coaland coal-based feedstock as required in Section 5.1, which breach is not cured within ten daysfrom the date written notice thereof Is given to Buyer by Seller;
(d) A breach of a material provision hereof (other than a breach described inthe other subsections ofthis Section U).) by either Party, which breach is not cured within:(1) 60 days from the date written notice thereof is given to the breaching Party by the other Party;or (ii) if such breach caimot reasonably be cured within such 60 days, and the breaching Partyhas commenced and is diligently pursuing cure, within 90 days of the date written notice isgiven; or
(e) If either Party shall: (i) become insolvent or generally unable to pay itsdebts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee,receiver, sequestrator or other custodian for it or any of its property, or make a generalassignment for the benefit of its creditors; (iii) in the absence of any such application, consent oracquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator orother custodian for it or a substantial portion of its property, and such trustee, receiver,sequestrator or other custodian shall not be discharged within 60 days; (iv) permit or suffer toexist the commencement of any bankruptcy, reorganization, debt arrangement or other case orproceeding under any bankruptcy or insolvency law, or any dissolution, winding up orliquidation proceeding, in respect of it, and, if any such case or proceeding shall be consented toor acquiesced in by it or shall result in the entry ofan order for relief or shall remain for 60 daysundismissed; or (v) take any formal action authorizing, or in furtherance of, any of the foregoing.
Section 12.2. Remedies.
(a) Upon the occurrence of an Event of Default described in Section 12.1(c),Seller shall have the right, exercisable within 90 days following the occurrence of the Event ofDefault, by giving written notice to Buyer to such effect, to terminate this Agreement within 30days after the date of such notice.
(b) Upon the occurrence of the Event of Default described in Section 12.1(a),Section 12.1(k) or Section 12.1(d), the non-breaching Party shall have the right to terminate thisAgreement (so long as such Event of Default remains uncured) by giving written notice to the
26
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 30 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 30 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 718 of 873
breaching Party to such effect, which notice shall specify a date of termination that is not lessthan 90 days after written notice of the breach and not more than 120 days after written notice ofthe breach.
(c) Upon the occurrence of an Event of Default described in Section 12.1(e),the non-breaching Party shall have the right to terminate this Agreement immediately by givingwritten notice to the breaching Party to such effect.
(d) Notwithstanding any other provision of this Agreement to the contrary, theremedies contained in this Article XII shall not be applicable to any matter governed by theEnvironmental Law or pertaining to Hazardous Materials, as those terms are defined in theEnvironmental Indemnity Agreement, and the Parties acknowledge and agree that anyindemnification or other remedies as to such environmental matters are governed solely andexclusively by the Environmental Indemnity Agreement.
(e) Except as otherwise provided herein, in addition to the remedies specifiedin this Article XII, each Party shall have all rights and remedies as are available to it at law or inequity.
Section 12.3. Limitations of Seller Liability.
Notwithstanding anything to the contrary in this Agreement, the total aggregate liabilityof Seller for the payment of money to Buyer in any Contract Year under this Agreement,including without limitation, Seller’s breach or alleged breach of this Agreement but excludingSeller’s reimbursement obligations under Section 9.4, shall in no event exceed the aggregateamount paid by Buyer pursuant to Sections 9.1 and after deducting the Coal Inventory Priceassociated therewith and Resold Coal Price for Resold Coal purchased at a site other than theBelle River Site.
ARTICLE XIIIDISPUTE RESOLUTION
Section 13.1. Dispute Resolution.
(a) The Parties hereto agree: (i) to attempt to resolve all disputes arisinghereunder promptly, equitably and in a good faith manner; and (ii) to provide each other withreasonable access during normal business hours to any and all non-privileged records,information and data pertaining to any such dispute.
(b) Other than a claim for equitable relief; which may be brought directly toany court of competent jurisdiction, any claim or dispute arising out of any of the provisions ofthis Agreement or the breach thereof which the Parties are unable to resolve pursuant to Section13.1(a), shall be settled by arbitration to be conducted in Lansing, Michigan in accordance withthe American Arbitration Association Commercial Arbitration Rules. The arbitration shall beheld before a panel of three arbitrators. Each Party shall appoint an arbitrator within 30 days ofthe filing of the notice of intent to arbitrate. The arbitrators appointed by the Parties shallattempt to agree on the selection of the third arbitrator who will serve as chairman of thearbitration panel within 30 days from their appointment. If they cannot agree on an arbitrator
27
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MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 31 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 719 of 873
then either Party may move to have the arbitrator appointed by the American ArbitrationAssociation. Time shall be ofthe essence in the nomination of the arbitrators. If a Party fails toappoint an arbitrator within such 30 day period, that Party shall waive its right to appoint anarbitrator and the arbitration shall proceed with the appointed arbitrator. The arbitration awardby the arbitrator shall be final and binding and, unless the arbitrator expressly determines them tobe appropriate, shall not include costs or attorney’s fees, A judgment to enforce the arbitrationaward may be entered in any court of appropriate jurisdiction. Each Party shall bear the cost ofits appointed arbitrator and the Parties shall share equally the cost of the third arbitrator and theAmerican Arbitration Association. Upon the date of an arbitration award, if it is determined thatan amount is due from one Party to the other, then such amount will be paid to the Party towhom it is due within 15 days from the final settlement, or written determination of thearbitrator, as the case may be.
(c) During resolution of any dispute under this Article XIII, the Parties shallcontinue to perform all of their respective obligations under this Agreement without interruptionor slow down, except to the extent a Party is prevented from performing due to the nature of thedispute, until such dispute is resolved.
(d) The Parties agree that they may be joined as an additional party to anarbitration involving BR Fuels, MPPA or Detroit Edison under any of the other ProjectDocuments; provided, that the Party joined as an additional party to the arbitration is a properrespondent in the arbitration. Ifmore than one arbitration is begun under the Agreement or theProject Documents and any Person contends that two or more arbitrations involve substantiallythe same issues and should be heard in one proceeding, then the arbitration(s) that have beencommenced shall be dismissed and a new arbitration proceeding involving all of the parties shallbe commenced and a new arbitration panel shall be selected.
ARTICLE XIVMISCELLANEOUS
Section 14.1. Terms and Conditions of Sale.
The terms and conditions of sale applicable to each sale of Refined Coal under thisAgreement will be those stated in this Agreement, unless the Parties otherwise agree in writing.The terms and conditions of sale applicable to each sale of Resold Coal under this Agreementwill be those stated in this Agreement, unless the Parties otherwise agree in writing; providedthat any inconsistencies between the terms and conditions of this Agreement and any purchaseorder shall be resolved in favor of the terms and conditions set forth in this Agreement.
Section 14.2. Confidentiality.
Each Party shall hold, and shall use its best efforts to cause its Affiliates, agents, advisors(including counsel and consultants), any lender, potential lender, investor or potential investor tohold, in strict confidence from any other Person (other than any such Affiliate, agent or advisoror any lender, potential lender, investor or potential investor as permitted hereby) all documentsand information concerning the other Party or any of its Affiliates furnished to it, or its Affiliates,
28
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 32 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 32 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 720 of 873
agents or advisors (including counsel and consultants) which are marked confidential or canreasonably be interpreted to contain confidential information, whether before or after theEffective Date, by or on behalf of the other Party in connection with this Agreement or thetransactions contemplated hereby, and neither Party nor their Affiliates or any agent, advisor,lender, potential lender, investor or potential investor shall disclose any such information unless,subject to Section 14.3, required to disclose any such information by judicial or administrativeprocess (including in connection with obtaining from Governmental Bodies the necessaryapprovals of this Agreement and the transactions contemplated hereby) or by other requirementsof Law. Each Party may disclose such documents or information to its agents and advisors andany lender or potential lender or any investor or potential investor, provided that prior to receiptof any such information any such agent, advisor, lender, potential lenders, investor or potentialinvestor shall have executed a confidentiality agreement with such Party that incorporates therestrictions and exceptions set forth in this Section 14.2, and may disclose such documents orinformation in an action or proceeding brought by either Party in pursuit of its rights or in theexercise of its remedies hereunder. Notwithstanding the foregoing, this Section 14.2 shall notapply to such documents or information that were (i) previously known by the Party receivingsuch documents or information without breach of any confidentiality requirement or obligation,(ii) in the public domain (either prior to or after the ffirnishing of such documents or informationhereunder) through operation of Law, or by no fault of such receiving Party, or (iii) lateracquired by such receiving Party from another source if such receiving Party is not aware thatsuch source is under an obligation to the other Party to keep such documents and informationconfidential.
Section 14.3. Required Disclosure.
Any Party reasonably determining in good faith that it is required by Law or in the courseof tax audits or administrative orjudicial proceedings to disclose information that is otherwiserequired to be maintained in confidence pursuant to Section 14.2 may make disclosurenotwithstanding the provisions of Section 14.2; provided, however, that the Party making thedisclosure shall, to the extent possible, give prior notice to the other Party of the requirement andthe terms thereof and shall cooperate to the maximum extent practicable to minimize thedisclosure of the information to allow such Party at its cost and expense to obtain proprietary orconfidential treatment of such information by the third party to whom the information isdisclosed and, to the extent such remedies are available, to seek protective orders limiting thedissemination and use of the information. This Agreement does not alter the rights of eitherParty to object to the Law or proceedings requiring the disclosure.
Section 14.4. Compliance with Laws and Governmental Approvals.
In connection with the performance of this Agreement, each Party agrees to comply in allmaterial respects with all Laws, and each Party hereto agrees that it or its agent will usecommercially reasonable efforts to acquire and maintain, in a timely manner, all GovernmentalApprovals required by Law or Governmental Bodies to perform its obligations under thisAgreement.
29
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MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 33 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 721 of 873
Section 14.5. Entire Aneementz Successors and Assign.
This Agreement, together with the other Project Documents, constitutes the entireagreement and understanding between the Parties with respect to the subject matter herein andtherein and the transactions contemplated hereby and thereby, and any and all previousunderstandings, proposals, negotiations, agreements, commitments and representations, whetheroral or written, are merged herein and are superseded hereby. This Agreement shall be bindingupon and inure to the benefit of the Parties and their respective successors and permitted assigns.
Section 14.6. Notices.
Except as otherwise set forth in this Agreement, all notices, requests and othercommunications hereunder must be in writing and shall be delivered personally (by handdelivery or by overnight courier) or by facsimile transmission (with receipt of transmissionconfirmation) or mailed (certified mail postage prepaid, return receipt requested) to the Parties atthe following addresses or facsimile numbers and shall be effective upon receipt (when sent bypersonal delivery or certified mail) and upon receipt of transmission confirmation (when sent byfacsimile):
If to Buyer, to: The Detroit Edison CompanyOne Energy Plaza634 General OfficesDetroit, Michigan 48226Attention: Manager, Business Development andAdministration - Fuel SupplyFacsimile: (313) 235-6992
With a copy to: The Detroit Edison CompanyOne Energy Plaza641 General OfficesDetroit, Michigan 48226Attention: Director - Fuel SupplyFacsimile: (313) 235-6992
If to Seller, to: Belle River Fuels Company, LLC414 South Main StreetSuite 600AnnArbor,MI 48104Attention: General CounselFacsimile: (734) 302-8245
30
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 34 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 34 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 722 of 873
With a copy to: Belle River Fuels Company, LLC414 South Main StreetSuite 600Ann Arbor, MI 48104Attention: Katherine A. PanczakFacsimile: (734) 302-5335
provided, however, that either Party from time to time may change its address, facsimile numberor other information for the purposes of notices to such Party by giving notice specifying suchchange to the other Party.
Section 14.7. Assignment.
Neither this Agreement, nor any of the rights and obligations hereunder, may be assigned,transferred or delegated by either Party without the express prior written consent of the otherParty, which consent shall not be unreasonably withheld or delayed, except that either Party mayassign this Agreement to art Affiliate thereof without the prior written consent of the other Party;provided that any assignment to an Affiliate shall not release the assignor from any obligationsunder this Agreement unless otherwise expressly consented to by the other Party. For purposesof this Section 14.7, any change in control or majority ownership of Seller which causes Sellerno longer to be an Affiliate of DTE Energy Company (determined without regard to the provisoin the definition of “Affiliate” contained herein) shall be deemed an assignment.
Section 14.8. Waiver: Invalidity.
Any term or condition of this Agreement may be waived at any time by the Party that isentitled to the benefit thereof, but no such waiver shall be effective unless set forth in a writteninstrument duly executed by such waiving Party. The failure or delay ofeither Party to requireperformance by the other Party of any provision of this Agreement shall not affect its right torequire performance of such provision unless and until such performance has been waived bysuch Party in writing in accordance with the terms hereof. No waiver by either Party of any termor condition of this Agreement, in any one or more instances, shall be deemed to be or construedas a waiver of the same or any other term or condition of this Agreement on any future occasion.All remedies, either under this Agreement or by Law or otherwise afforded, shall be cumulativeand not alternative. The invalidity or unenforceability of any provision of this Agreement shallbe determined only by a court of competent jurisdiction. The Parties hereby agree to use goodfaith efforts to negotiate an equitable adjustment to any provisions of this Agreement determinedto be invalid or unenforceable with a view toward effecting the purposes of this Agreement, andthe validity or enforceability of the remaining provisions of this Agreement shall not be affectedthereby.
Section 14.9. Limitations of Liability and Exclusive Remedies.
(a) NEITHER PARTY NOR ITS AFFILIATES SHALL BE LIABLEUNDER THIS AGREEMENT TO THE OTHER PARTY OR ITS AFFILIATES FORCONSEQUENTIAL OR INDIRECT LOSS OR DAMAGE, INCLUDING, WITHOUT
31
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 35 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 35 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 723 of 873
LIMITATION, LOSS OF PROFIT, LOSS OF TAX BENEFIT OR CREDITS, LOSS OFGOODWILL OR ANY OTHER SPECIAL, PUNITIVE OR INCIDENTAL DAMAGESRESULTING FROM ANY VIOLATION OF OR DEFAULT UNDER TillSAGREEMENT.
(b) THE PROVISIONS OF THIS SECTION 14.9 SHALL APPLY TOALL CLAIMS BASED ON OR ARISING UNDER THIS AGREEMENT, WHETHER INCONTRACT, EQUITY, TORT OR OTHERWISE, REGARDLESS OF FAULT, GROSSOR OTHER NEGLIGENCE (IN WHOLE OR IN PART), STRICT LIABILITY,BREACH OF CONTRACT OR BREACH OF WARRANTY AND SHALL EXTEND TOTHE MEMBERS, MANAGERS, TRUSTEES, DIRECTORS, OFFICERS ANDEMPLOYEES, AGENTS AND RELATED PERSONS OR AFFILIATES OF EACHPARTY, AND THEIR RESPECTIVE MEMBERS, MANAGERS, DIRECTORS,TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
Section 14.10. Headings.
The headings contained in this Agreement are solely for the convenience of the Partiesand shall not be used or relied upon in any manner in the construction or interpretation of thisAgreement.
Section 14.11. Counterparts.
The Parties may execute this Agreement in counterparts, which shall, in the aggregate,when signed by both Parties constitute one and the same instrument, and, thereafter, eachcounterpart shall be deemed an original instrument as against any Party who has signed it.
Section 14.12. Applicable Law.
This Agreement, including the interpretation, construction, validity and enforceabilityhereof, and the transactions contemplated herein, and all disputes between the Parties under orrelated to this Agreement or the facts and circumstances leading to its execution or performance,whether in contract, tort or otherwise will be governed by the laws of the State of Michiganwithout regard to the conflict of laws rules thereof. IN ADDITION, EACH PARTY,KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY,WAIVES TRIAL BY JURY TN AND AS TO ANY LEGAL ACTION OR PROCEEDINGRELATING TO THIS AGREEMENT AND FOR ANY CLAIM, COUNTERCLAIM, CROSSCLAIM OR THIRD PARTY CLAIM THEREIN.
Section 14,13. Amendment.
No modification or amendment of any provisions of this Agreement shall be valid unlessit is in writing and signed by both Parties.
32
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MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 36 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 724 of 873
Section 14.14. No Third Party Beneficiary.
The terms and provisions of this Agreement are intended solely for the benefit of eachParty and their respective successors or permitted assigns, and it is not the intention of the Partiesto confer third-party beneficiary rights upon any other Person.
[Remainder ofpage intentionally left blank]
33
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 37 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 37 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 725 of 873
IN WETNESS WHEREOF, the Parties have executed this Refined Coal SupplyAgreement by their authorized representatives as of the date first above written.
BELLE RIVER FUELS COMPANY, LLC
-I
By:7?ZA 7)—ANameTjô RLMTitle: e€s ,nr
THE DETROIT EDISON COMPANY
Title: OY*&
34
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 38 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 38 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 726 of 873
EXHIBIT A
BELLE RIVER SITE
A-i
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 39 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 39 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 727 of 873
EXHIBIT B
DELIVERY POINTS
See attached on the next page.
B-i
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 40 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 40 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 728 of 873
c1
III
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 41 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 41 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 729 of 873
EXHIBITC
CALCULATION OF DETROIT EDISON BENEFITS
See attached.
13-I
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 42 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 42 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 730 of 873
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Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 43 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 43 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 731 of 873
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Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 44 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 44 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 732 of 873
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cont
rol t
echn
olog
y.
%Su
lfur I
nC
oalf
lA=
Ave
rage
perc
ent s
ulfu
r con
tent
ofco
alfo
rmon
thas
dete
rmin
edby
aver
agin
g,fo
rthe
cale
ndar
mon
th, t
heda
ilysa
mpl
epe
rcen
t sul
fur c
onte
nt(%
Sutfu
r)re
sults
repo
rted
byth
eB
uye?
sCe
ntra
l Fue
l Lab
.Th
eBu
yer s
hall
prov
ide
daily
coal
sam
ples
forB
elle
Rive
r Uni
t Ian
dUn
it2
toth
eB
uyer
sCe
ntra
l Fue
l
__
__
_
Lab,
whi
chsh
all e
ach
bean
alyz
edfo
r %Su
lfuri
nac
cord
ance
with
AST
Mst
anda
rds
and
repo
rted
toSe
ller w
ithin
5ca
lend
arda
ys.
=Th
enu
mbe
r ofS
O, a
llow
ance
sth
atw
ould
have
been
surr
ende
red
toth
eU
SEPA
if the
diffe
renc
ebe
twee
nSt
atus
Quo
SO,
Emis
sion
s and
Act
ualS
O,
Emiss
ions
wer
eem
itted
byth
eBe
lleRi
verP
ower
Plan
t.Fo
rexa
mpl
e,in
2010
unde
r the
curr
ent C
lean
Air I
nter
stat
eRi
de(C
AIR)
, two
SO,
alow
ance
sar
ere
quire
dto
besu
rren
dere
dfo
reve
ryon
eto
nof
SO, e
mitt
ed;t
here
fore
Alk
wan
ces
Not
Con
sum
ed=
(Sta
tus
Quo
SO3E
nis
sto
ns
-A
ctua
l SO
,E
rnis
slon
s..3
x2.
Dfl
lwlt
ens
Uni
tD
ataS
ourá
e
Act
ual S
O, E
mis
sions
lbsS
O,
tons
ceal
lbs 8
02to
nsce
el
Allo
wan
ces N
etC
onsu
med
lbsS
bsco
at(ta
ns)
Tran
sact
edSO
,Allo
wan
ceB
ene
($)
Act
ualT
ons
Coal
(tons
coal
)=
Act
ual t
onna
geof
coal
cons
umed
for t
heca
lend
arm
onth
asre
porte
din
P3M
asC
OA
LCO
NS
Co
mb
ust
ed
a
=Th
eac
tual
sale
pric
ere
aliz
edby
Buye
r for
the
sale
ofm
onth
lyA
llow
ance
sN
otC
onsu
med
.Bu
yer s
hus
eco
mm
erci
dyre
ason
able
effo
rtsto
sell
the
num
ber o
fAllo
wan
ces
Not C
onsu
med
durin
ga
cale
ndar
mon
thby
the
i2t d
ayof
the
folk
miri
gm
onth
.In
the
even
t Buy
erdo
esno
tsel
lthe
Mow
wic
esN
otC
onsu
med
, the
Arg
usAi
r Dail
ym
onth
lyin
dex
pric
e(A
DI) f
oron
eSO
,allo
wan
ce, a
spu
blis
hed
byA
rgus
Air d
ally
onth
ela
stbu
sine
ssda
yof
the
mon
th,
shal
l be
mul
tiplie
dby
the
num
ber o
fAllo
wan
ces
Not C
onsu
med
durin
gth
atsa
me
cale
ndar
mon
thto
estim
ate
the
mon
thly
Tran
sact
edSO
, Allo
wan
ceBe
nefit
. The
estim
ated
Tran
sact
edSO
,Allo
wan
ceBe
nefit
will
bere
conc
iled
with
in30
days
tore
flect
actu
alsa
les
pric
eIf
Buye
r mak
esa
trans
actio
nfo
rM
cman
ces
Not
Con
sum
edwi
thin
3m
onth
saf
ter t
hees
timat
edva
lue
was
used
.It
isth
ePa
rties
’ int
ent t
hatt
heSO
,pric
eIn
dex
used
for p
urpo
ses
ofth
eca
lcul
atio
nssp
ecifi
edab
ove
are
repr
esen
tativ
eof
the
curr
ent S
O,m
arke
t pric
e.In
the
even
t tha
tthe
AOl b
ecom
esun
aval
labi
e,or
Ifth
ePa
rties
agre
eth
atth
eab
ove-
spec
ified
does
nota
ccur
atel
yre
pres
ent t
hecu
rren
t SO
,mar
ket p
rice,
the
Parti
essh
all m
utua
llyag
ree
toan
alte
rnat
ive
orre
plac
emen
t SO
,pric
ein
dex
for t
heca
lcul
atio
ns.
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 45 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 45 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 733 of 873
•D
EC
oM
ercu
ryB
enefl
t0.
8139
XA
void
edM
ercu
ryC
ompl
ianc
eC
ost
Avo
ided
Mer
cury
Com
plia
nce
Cos
tC
alcu
lati
ons:
•If
Act
ualM
ercu
rCer
nclia
nceC
osL
Sta
isQ
uoM
ercu
ryC
onio
liaric
eC
ost
then
Avo
ided
Mer
cury
Com
plia
nceC
ost
0
IlAct
ualM
ercu
ryC
ceiU
ance
Cost
<Sta
tus
Quo
Mer
cury
Com
olia
nceC
cst
then
Avo
ided
Mer
cury
Com
plia
nce C
ost
(Sta
tus
Quo
Mer
cury
Com
plia
nceC
ost
+A
void
edCa
pita
lEff
ect
Sta
tus
Quo
Cal
cula
tion
s:-A
ctua
l Mer
cury
Com
phan
ceC
ost
4)
•St
atus
Quo
Mer
cury
Con
iplia
iceC
ost
=SQ
Sorb
ent C
ost
,+
SQFi
xed
O&M
y,ir
•If
Yea
r=
HC
omoa
nceC
)ale
-1.
SOC
apita
l Co
s1D
ECo
HgC
apita
lCo
st
•If
Yea
rH
aCor
nolia
nceD
ate-
1.S
QC
afr
taIC
ost
.1
=$0
Sta
tus
Quo
Sor
bent
Cos
tC
alcu
lati
ons:
•It
Yea
r<
HgC
ompl
ianc
eD
ate,
SQSo
rben
tCos
t Cal
cula
tions
=0
IfY
ear
HgC
omph
ance
Dat
e,SQ
Soitr
ent C
ostC
alcu
iaU
ons,
Sorb
ent U
sage
Rat
elb
)X
Flue
Gas
Flaw
Rat
e(
mm
acf
X52
5.60
0J!
!L)
XPl
antC
apac
ityF
acto
r,X
Deh
vere
dSo
rben
tUni
t Pric
e(.1
.)m
mac
fm
idye
arlb
Sta
tus
Quo
Fixe
dO
&M
Cal
cula
tion
s:
•If
Yea
r<
HgC
ompl
ianc
eD
ate,
SQFi
xed
O&
M,
=0
IfY
ear
Ha
Com
ohen
ceD
aia.
SQFi
xed
O&
M=
DEC
oH
gO
&M
Avo
ided
Capi
talE
ffect
Cal
cula
tion
s:1Y
r‘H
gC
omph
ance
Dat
e.A
void
edCa
pita
lEff
ect,
0
•ii
year
Hg
Com
phan
ceD
ate.
Avo
ided
Capi
talE
ffec
t,)
(SQ
Capi
talC
os
0-
Act
ualC
apita
lCo
st
*D
ECo
Cap
italF
aed
Cha
rge
Rat
e
IfY
ear
‘Hg
Cor
npka
nce
Dat
eA
void
edC
apita
l Eff
ect
=A
void
edCa
pita
lEffe
ct-
(Act
ualC
apita
lD
ECo
Capi
talF
ixed
Cha
rge
Rat
e)
r:B
enef
it
Mer
cury
Ben
efit
Cal
cula
tion
:
4
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 46 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 46 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 734 of 873
Act
ual C
apita
lCost
,,($)
=A
ctua
l ann
ual c
apita
l cos
t for
mer
cury
cont
rol e
quip
men
t for
Belle
Rive
r Pow
erPl
anta
sde
term
ined
froni
disc
rete
aeco
unts
dedi
cate
dto
Belle
Rive
r mer
cury
cont
rol e
quip
men
t
HgC
on
lace
Dat
e(y
ear)
=Fi
rstye
nHg
emis
sion
sar
ere
quire
dto
bere
mov
edfro
mBe
lleRi
vers
tack
emis
sion
s due
toSt
ate
andf
orFe
dera
l req
uire
men
ts
DEC
oHg
O&
M($)
=A
ctua
l O&M
expe
nses
incu
rred
for m
ercu
ryco
ntro
l atD
etroi
t Edi
son
plan
tsno
tcon
sum
ing
Refin
edCo
al, a
djus
ted
forB
elle
Rive
r Pow
erPl
ait
requ
irem
ents
with
out R
efin
edCo
alco
nsum
ptio
n.LI
actu
alD
etro
itEd
ison
cost
data
isun
avai
labl
e,EP
RIO
&M
will
beus
ed.
EPRI
O&
M,
($)=
1.00
0.00
0x
Infla
tion
Adj
ustm
ent F
acto
r.1,
000,
000
isa
fixed
valu
e,de
term
ined
usin
gth
eEP
RI-
base
dHg
Cos
t Tab
leth
atw
asde
velo
ped
usin
gth
eSe
ptem
ber 2
006
EPRI
Mer
cury
Cont
rol T
echn
olog
ySe
lect
ion
Gui
de
Sorb
ent U
sage
Rate
=D
eter
min
edfro
mEP
RI-
base
dSo
rben
i Inj
ectio
nR
ate
Tabl
e,ba
sed
onHg
Rem
oval
%an
dCo
alTy
pe;s
uch
tabl
eto
beup
date
das
mor
ecu
rrent
orre
leva
ntda
tais
publ
ished
byEP
RI.
Inth
eev
ent D
etro
itEd
ison
cond
ucts
appr
opria
teac
tivat
edca
rbon
inje
ctio
nte
sting
atBe
lleRi
ver o
ran
othe
rpl
ant s
uita
ble
tosim
uffit
eBe
lleRi
ver c
ondi
tions
, the
Sorb
ent U
sage
Rat
eva
lue d
eter
min
edfro
mth
atte
stin
gwi
llbe
used
.
Infla
tion
Adj
ustn
wnt
Fador
-=
Gro
ssD
omes
ticPr
oduc
tImp
licit
Pike
Defla
tor (
GDlP
D)r
’Yew
isan
nual
lyco
mpu
ted
and
publ
ishe
dby
US
Dep
artm
ent o
f Com
mer
ce
GD
PIP
Dm
rnec
f=
2.75
.Fi
xed
valu
e,ba
sed
onde
sign
data
assu
min
gfu
lllo
adop
erat
ion
mmPl
ait C
apac
ityF
acto
r-
=A
nnua
lCap
acity
Fact
orfo
rBel
leRi
ver f
orsp
ecifi
edye
ar. a
sdq
enni
ned
from
P3M
OU
TPIJ
LFA
C
Del
iver
edSo
rben
tUni
t Pric
e=
Unit
cost
for t
hepu
rcha
seof
treat
edac
tivat
edca
rbon
,as
dete
rmin
edus
ing
aver
age
annu
alpr
ice—
byD
etro
itEd
ison
for t
reat
edac
tivat
ed
___
carb
onpl
usco
stfo
rdel
iver
yto
Belle
Rive
r
=A
ctua
l cap
ital c
osts
incu
med
form
ercu
ryco
ntro
l atD
etro
itEd
ison
plai
ts, a
djus
ted
for B
elle
Rive
r Pow
erPl
ant c
ondi
tions
and
insta
llatio
nye
ar.
Ifac
tual
Det
roit
Ediso
nco
stda
taIs
unav
aila
ble,
EPRI
Capi
tal C
ost
awi
llbe
used
and
insta
llalio
nye
ar.
EPRI
Capi
tal C
ost
($)=
5,00
0,00
0x
Infla
tion
Adj
ustm
ent F
acto
r.5,
000,
000
isa
fixed
valu
e,de
term
ined
usin
gth
eEP
RI-
base
dHg
Cos
t Tab
leth
atw
asde
velo
ped
usin
gth
eSe
ptem
ber2
006
EPRI
Mer
cury
Cont
rolT
echn
olog
ySe
lect
ion
Gui
de
__
__
5
a
Dee
n.dT
errn
s
cury
Ben
efit
Uni
tD
iaS
ourc
o
($)=
Act
ualB
elle
Rive
rMer
cury
Com
plia
nce
Cos
tas
dete
rmin
edfro
mdi
scre
teac
coun
tsde
dica
ted
toBe
lleRi
ver m
ercu
ryco
ntro
l equ
ipm
ent,
whi
chwi
llbe
the
sum
ofall
mer
cury
cont
rolr
elat
edex
pend
iture
s,ex
clud
ing
capi
tal
I,m
mac
f
Flue
Gas
Flow
Rate
DEC
oHg
Capi
talC
ost
$ I,($)
DEC
oCa
pita
l FIx
edC
harg
eR
ate
=.1
5
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 47 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 47 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 735 of 873
Fly
Ash
Ben
efit
Cal
cula
tion
:
XC
oFl
yA
shB
enef
it=
0.81
39X
(Fly
Ash
Rev
enue
Ben
efit
•Fl
yA
shD
ispo
sal
Expe
nse
Ben
efit
)
Fly
Ash
Rev
enue
Ben
efit
Cal
cula
tion
:
4Fl
yA
shR
even
ueB
enef
it=
Act
ualF
lyA
shR
even
ue-
Stat
usQ
uoFl
yA
shR
even
ue
‘If
Yea
r<H
gC
ompl
ianc
eD
ate,
Stat
usQ
uoFl
yA
shR
even
ue
2To
tal G
uara
ntee
dP
aym
ent
tIf
Yea
rH
gC
ompl
ianc
eD
ate,
Stat
usQ
uoFl
yA
shR
even
ue,
=0
$A
ctua
lFly
Ash
Rev
enue
=Pr
ojec
tCon
tract
edFl
yA
shV
olum
eyer
XPr
ojec
t Con
tract
edFl
yA
shU
nit P
ricey
ew
Fly
Ash
Dis
po
sal
Ex
pen
seB
enef
itC
alcu
lati
on:
•Fl
yA
shD
ispo
sal
Expe
nse
Ben
efit
=(P
roje
ctC
ontra
cted
Fly
Ash
Vol
ume..
ear-
Stat
usQ
uoC
ontra
cted
Fly
Ash
Volu
me
3-In
crem
enta
lFly
Ash
lncr
ease
,)x
Var
iabl
eU
nitD
ispo
sal
Cos
t
IfY
ear
<H
gC
ompl
ianc
eD
ate,
Stat
usQ
uoC
ontra
cted
Fly
Ash
Volu
me
=To
tal G
uara
ntee
dV
olum
e,,
IfY
ear
Hg
Com
plia
nce
Dat
e,St
atus
Quo
Con
tract
edFl
yA
shV
olu
me
=0
IW
I
iB
enef
it
6
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 48 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 48 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 736 of 873
Dat
aSo
urce
Vol
ume
&Fl
yAsh
com
mitt
edfo
r sal
eun
derc
ontra
cts
inpl
ace
whe
nRe
fined
Coal
isus
edas
fuel
atBe
lleRi
ver P
ower
Plan
t
=Un
itpr
ice
com
mitt
edto
bepa
idto
Det
roit
Ediso
nun
derf
lyas
hco
ntra
cts
inpl
ace
whe
nRe
fined
Coal
isus
edas
fuel
atBe
lleRi
ver
Pow
erPl
ant
-Ac
tual
Annu
alVa
riabl
eD
ispos
alC
ost_
,Ac
tual
Annu
alFl
y Ash
Tons
Lan
dfll
le,
=C
ostf
orlan
dfill
ing
flyas
hpr
oduc
edat
Belle
Rive
rfor
spec
ified
year
,as
repo
rted
Wi(P
lant
Max
lmo
Acc
ount
).Th
isco
stex
clud
esfix
edco
sts
asso
date
dwi
thlan
dfill
.
-A
ctua
l ann
ualt
ons
offly
ash
prod
uced
atBe
lleRi
verf
orsp
ecifi
edye
arth
atw
ere
disp
osed
bylan
dflll
ing,
asre
porte
dIn
(Pla
ntM
aidm
o-
Acc
ount
j
=Fi
rst y
eart
hatH
gem
issi
ons
are
requ
ired
tobe
rem
oved
from
Belle
Rive
rsta
ckem
issi
ons
due
toSt
ate
and/
orFe
dera
l req
uire
men
ts
=A
nnua
lvol
ume
ofad
ditiv
esm
ixed
with
coal
byBR
FCto
prod
uce
Refin
edCo
al, a
sde
term
ined
from
BRFC
data
acqu
IsitI
onsy
stem
=V
alue
dete
rmin
edfro
mBe
lleRi
verF
lyA
shC
ontra
cts
Tabl
efo
r spe
cifie
dye
ar.
Tabl
e will
beam
ende
dto
inco
quat
efu
ture
cont
ract
adju
stm
ents
nota
ttrib
uted
toth
eus
eof
Refin
edCo
al.
-V
alue
dete
rmin
edfro
mBe
lleRi
ver F
lyA
shCo
ntra
cts
Tabl
efor
spec
ified
yea,
Tabl
ewi
llbe
amen
ded
toin
corp
orat
efu
ture
cont
ract
adju
stm
ents
nota
ttrib
uted
toth
eus
eof
Refin
edCo
al.
•.w
IIL
Gi
;hB
enef
itC
on
tin
ued
Def
lried
Tern
n
Proj
ect C
ontra
cted
Fly
Ash
Vd
um
e
Proj
ect C
ontra
cted
Fly A
shUn
itP
rice
,
Var
iabl
eUn
itD
ispos
alC
ost
a
Actu
alA
nnua
lVar
iabl
eD
ispos
alC
ost
Act
ual A
nnua
lFly
Ash
Tons
Lsn
dfll
led
HgCo
mpl
ianc
eD
ate
Incr
emen
tal F
lyA
shln
crea
se
ToM
Gua
rant
eed
V*m
e_
Tota
lGua
rant
eed
Pay
men
t
Unit
(tons
)
($/to
n)
(5/to
n)
(5)
(tons
)
(yea
r)
(tons
)
(tons
)
($)
7
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 49 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 49 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 737 of 873
DEC
o’s
Shar
eof
BRFC
’sR
even
ueR
equi
rem
ent:
•D
ECo’
sSh
amof
BR
FC’s
Rev
enue
Req
uire
men
ty9
81.3
9%X
(Ex
pen
sesy
+D
ECo
Allo
wed
Ret
urn
X(1
/(1-
Tax
Rat
e)X
(Net
Pla
nty
0,+
Non
Coa
lW
orki
ngC
apit
alye
ar))
+D
ECo
All
owed
Ret
urn
X(1
1(1-
Tax
Rat
e)X
DEC
oC
oalln
ven
tory
y)
Def
ined
Tan
s
Exp
ense
s
DEC
oA
llow
edR
etur
n
UnI
tD
Sourc
e
$=
Tota
lBR
FCre
ason
able
and
prud
ent e
xpen
ses
Incu
rred
for t
heye
arle
ssall
coal
and
coal
hand
ling
expe
nses
forw
hich
BR
FCIs
reim
burs
edby
eith
erEd
ison
orM
PPA
-Se
eN
ote
1.
=7.
16%
.
Tax
Rat
e
Net
Pla
nt
Non
Coal
Wor
king
Cap
ital .
DEC
oC
oal
Inve
ntor
yyeu
$Fe
dera
lSta
tuto
ryTa
xR
ate
+((1
-Fe
dera
lSta
tuto
ryTa
xR
ate)
X(S
tate
Inco
me
Tax
Rat
ein
clud
ing
Surc
harg
es)
e.g.
for2
009:
35%
+((1
—35
%) X
(4.9
5%+
0.8%
))38
.74%
$-
BRFC
’sN
etB
ook
Val
ueof
Cap
italA
sset
sat
Dec
embe
r31
ofth
eap
plic
able
year
Not
e:If
the
num
ber o
ffac
ilitie
sex
ceed
s—
the
appr
opria
tenu
mbe
roff
acili
ties,
Net
Pla
nt
will
bere
duce
dby
the
netb
ook
valu
eof
exce
ssfa
cilit
ies.
BRFC
’sW
orki
ngC
apita
l atD
ecem
ber3
1dof
the
appl
icab
leye
arLe
ssC
oat
Inve
ntor
y(C
oalI
ntra
nsit
+Co
alY
ard)
atth
e
($)=
Sam
eD
ate
(i.e.
Cur
rent
Ass
ets
—C
urre
ntU
abili
ties
—Co
alIn
vent
ory)
=BR
FC’s
Coa
lInv
ento
ryst
ored
inCo
alIn
trans
itan
dC
oalY
ard
(exc
ludi
ngth
eM
PPA
’spo
rtion
ofBR
FC’s
inve
ntor
y)at
Yea
rEn
d.
Not
e:W
hen
itis
antic
ipat
edth
atD
ECo’
sSha
reof
BRFC
’sR
even
ueR
equi
rem
ent w
illbe
less
then
the
DEC
oEn
viro
nmen
talB
enef
it,m
onth
lyin
voic
eswi
llbe
estim
ated
usin
gpr
ior y
earE
xpen
ses,
prio
ryea
rTax
Rate
,prio
ryea
rNet
Plan
t,pr
iory
earN
onC
oalW
orki
ngC
apita
land
prio
ryea
rDEC
oC
oal
Inve
ntor
y.
8
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 50 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 50 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 738 of 873
DE
Co
Avo
ided
Hg
Cap
italA
mor
tizat
ion
Cal
cula
tion
s:•
DECo
Avo
ided
HgCa
pita
lAm
othz
atio
n)=
Min
imum
(Avo
ided
HgC
apita
lBaIa
nce
1,.,l
1,M
axim
um(D
ECo
Envi
ronm
enta
lBe
nefit
-
DEC
o’s
Shar
eof
BRFC
’sR
even
ueR
equI
rem
ent,
0),D
ECo
Avo
ided
Cap
ital A
mor
tizat
ionC
ap
11)
€If
Yea
r=
2009
,Avo
ided
HgCa
pita
lBala
nce
=0
4?.If
Yea
r>2
009,
Avo
ided
HgCa
pita
lBaI
ance
)=
Avo
ided
HgCa
pita
lBal
ance
, .1)
+.8
139
‘(SQ
Cap
italC
os,,
_1
-A
ctua
lCap
italC
ost
s)—
DEC
oA
void
edHg
Cap
ital A
mof
tizat
ion(
,)
DEC
oA
void
edCa
pita
lAm
ortiz
atio
nC
anC
alcu
latio
ns
•If
Yea
r<
I-la
Com
plia
nce
Dat
e,D
ECo
Avo
ided
Cap
italA
mor
tizat
ion
Cap
=0
SIf
Yea
r=
HgC
ompl
ianc
eD
ate,
DEC
oA
void
edCa
pita
lAm
ortiz
atio
nC
ap=
0.81
39’U
SQCa
pita
l Co
s,,
11
-Act
ual C
apita
lo
s1
)f(20
20-H
gCo
mpl
ianc
eD
ate)
)
IfY
ear>
HgC
ompl
ianc
eD
ate,
DEC
oA
void
edCa
pita
lAm
ortiz
ation
Cap
=D
ECo
Avo
ided
Capi
talA
mor
tizat
ion
Cap
,‘.*mm
(DEC
oAvo
ided
Capi
tal A
mor
tizat
ionC
ap
11
-D
ECoA
void
edHg
Capi
talA
nion
zati
o%
,)
Sta
tus
Quo
Cal
cula
tion
s:
‘If
Yea
r=
HaCo
mpl
ianc
eD
ate
-IS
OCa
pital
Co
st=
DEC
oHg
Capi
tal C
ost
lfYea
gH
gCom
plia
nceD
ate-
1,S
OC
apit
alC
ost,,
,,)=
$0
9
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 51 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 51 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 739 of 873
Firs
tyea
rHg
emis
sion
sare
requ
ired
tobe
rem
oved
from
Belle
Rive
r sta
ckem
issi
ons d
ueto
Stat
ean
dlor
Fede
ral r
equi
rem
ents
=A
ctua
l ann
ual c
apita
lcos
tfor
mer
cury
cont
role
quip
men
t for
Belle
Rive
r Pow
erPl
ant a
sde
term
ined
from
disc
rete
acco
unts
dedi
cate
dto
Belle
Rive
r mer
cury
cont
rdeq
uipm
ent
=Ac
tual
capi
tal c
osts
Incu
rred
form
ercu
ryco
ntro
l atD
etroI
t Edi
son
plan
ts,ad
just
edfo
r Bel
leRi
ver P
ower
Plan
t con
ditio
nsan
dIn
stalla
tion
year
.If
actu
alD
etro
itEd
ison
cost
data
isun
avai
labl
e,EP
RICa
pita
l Co
sta
*11
beus
edan
din
stalla
tion
yea.
5,00
0,00
0x
Infla
tion
Adj
ustm
ent F
acto
r.5.
000,
000
isa
fixed
valu
e,de
term
ined
usin
gth
eEP
RI-
base
dHg
Cos
trab
leth
atw
asde
velo
ped
usin
gth
eSe
ptem
ber 2
006
EPRI
Mer
cury
Cont
rol T
echn
olog
ySe
lect
ion
Gui
de
=.1
5
Def
ined
Term
s
HgC
ompl
ance
Dat
e
Actu
alCa
pita
l Co
sts
DECo
HgCa
pita
l Cost
EPRI
Capi
talC
ost
DECo
Capi
talFi
xed
Char
geRa
te
Unf
t
(yea
r)
($) ($) ($)
10
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 52 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 52 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 740 of 873
PA2
Expen
seIn
crea
seC
alcu
lati
on:
qPA
2E
xpen
seIn
cre
ase
=
PA2
MW
HIB
RM
WH
y*
(DEC
OS
02B
enef
ityea
+D
ECo
Avo
ided
Kg
Cap
ital A
mor
tiza
bon(
))I(
1+PA
2M
WHI
BRM
WH
y0)
Dat
a Sou
rce
=Th
equ
antit
yof
elec
tddt
ypu
rcha
sed
byD
etro
itEd
ison
thro
ugh
cont
ract
sw
here
the
puce
peld
byDe
troit
Ediso
nis
afu
nctio
nof
Belle
Rive
rPo
wer
Plan
t fue
lexp
ense
.
=A
s def
ined
eadi
erin
this
Exhi
bit
=A
sdef
lned
easl
iec
inth
isEx
hibi
t
The
quan
tity
ofec
ftyp
rodu
ceda
tBel
IeR
verP
ower
Pla
ntby
Det
rota
suse
dinc
alin
gthe
pdce
Det
rotE
diso
npay
sisa
func
bono
tBe
lleRi
ver P
ower
Plan
tfue
l exp
ense
.
De(
In.d
Term
s
PA2
MW
K
DECo
S02
Ben
eflty
.
DEC
oSQ
HgCa
pite
lAm
oti
zadon
BR
MW
H.
1 MW
H
($) ($) M
WH
11
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 53 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 53 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 741 of 873
Acr
onyW
Syin
bol
Del
nItIo
n
$U
S,D
olla
r
lbpo
und
ma
ITfl
SQ O&M
MW
H
USEP
A
BACT
IrNlio
nac
tual
cubi
ofe
el
min
ute
Stat
usQ
uo
Ope
ratio
ns&
Mai
nten
ance
Meg
aW
attHo
ur
Uni
ted
Stat
esEn
viro
nmen
talP
rote
ctio
nA
genc
y
Bes
tAva
ilabl
e Con
trol T
edin
olog
y
12
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 54 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 54 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 742 of 873
EP
RI-
base
dS
orb
en
tIn
ject
ion
Rate
Table
Sor
bent
Usa
ge(l
blM
mac
f)by
Coa
lT
yp&
”S
orbe
ntH
gR
emov
al
Pow
der
Riv
erL
owSu
lfur
Bas
inE
aste
rnB
lend
502.
53.
360
9.4
5.7
Unt
reat
ed70
16.2
8.0
Act
ivat
ed75
10.8
Car
bon
80N
A13
.685
NA
16.4
90N
A19
.250
0.7
2.9
501.
34.
4
Tre
ated
701.
968
Act
ivat
ed75
7.2
Car
bon
803
68.
685
4.4
9.9
905.
211
.3
‘)D
ata
pulle
dfr
omEP
RI
Rep
ort,
Mer
cury
Con
trol
Tec
hnol
ogy
Sel
ecti
onG
uide
(Tec
hnic
alR
epor
t10
1267
2)S
epte
mbe
r20
06,
Tab
le3
4N
A=
Lim
ited
orno
data
avai
labl
e,no
tap
prop
riat
eop
tion,
orno
tac
hiev
able
orno
tco
nsis
tent
lyac
hiev
ab4e
base
don
avai
labl
ete
stda
taB
old
nu
mb
ers
wer
epro
vid
edIn
EPR
IR
eport
refe
rence
dIn
footn
ote
(llta
lic4z
ednu
mbe
rsw
ere
not
prov
ided
inE
PRI
repo
rtbu
tde
velo
ped
thro
ugh
linea
rin
terp
olat
ion
usin
gcl
oses
tE
PR
I-pr
ovid
edus
age
rate
sfo
rH
gR
emov
al%
grea
ter
and
low
erth
anit
alic
ized
valu
e.
Bel
leR
iver
EPR
IC
apita
lE
PRI
Fixe
dH
gR
educ
tIon
Cos
t($
)O
&M
($)
5050
00,0
001,
000,
000
605,
000,
000
1,00
0,00
070
5,00
0000
!.QPP
000
755,
000,
000
1.00
0,00
080
5,00
0,00
01,
000,
000
855,
000.
000
1,00
0,00
090
5000
,000
1,00
0,00
0
..
EP
RI-
base
dH
gC
ostT
able
13
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 55 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 55 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 743 of 873
MPP
AR
efin
edC
oal
Ad
der
Cal
cula
tion:
MPP
AR
efin
edC
oal
Adder
=M
inim
um(M
PP
AE
nvir
onm
enta
lB
enef
it,
MPP
A’s
Sh
are
of
BR
FC
’sR
even
ue
Req
uir
emen
t)+
MPP
AA
void
edH
gC
apit
al
Am
orti
zati
on
MPP
AE
nvir
onm
enta
lB
enef
it=
MPP
AS
02
Ben
efit
+M
PPA
Mer
cury
Ben
efit
+M
PPA
Fly
Ash
Ben
efit
I
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 56 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 56 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 744 of 873
MPP
AS
02
Ben
efit
Dec
MPP
AS
O2
Ben
efi
t=
MPP
A50
2B
ener,
t,,
Jan
Mon
thlyS
O2enefit
Cal
cula
tion*
:
ifA
ctua
lE
mes
slon
s..
Stat
usQ
uoSO
,Em
issl
ons,
then
MPP
ASO
, Ben
efit
,=
0
ifA
ctua
l SO,
Em
issi
ons
<S
tatu
sQ
uoSO
,Em
iss4
ons
then
MPP
ASO
, Ben
eftL
,=
0.186
1X
Tran
sact
edSO
, Allo
wan
ceB
enefi
t
Sta
tus
Quo
Cal
cula
tion
:)
Stat
usQ
uoSO2
Em
is*n
sth
(tons
SO,)
=Em
issio
nF
ador
X%
Sulfu
r inC
oal,
,AX
Act
ual T
ons
Coal
Com
bust
ed,
X0.
0005
Tab
lede
fini
ngte
rms
onne
xtpag
e
-
2
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 57 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 57 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 745 of 873
(tons
SO)
Tons
ofS
O2
emiss
ions
for t
heca
lend
arm
onth
, as
repo
rted
byth
e°2
Cont
inuo
usEm
issi
ons
Mon
itors
insta
lled
atBe
lleRi
ver U
nitI
and
2sta
ck(s
),D
ata
shal
l be
prov
ided
byD
etro
itEd
ison
toBR
FCby
thee
day
ofth
em
onth
fort
hepr
ior m
onth
’sem
issi
ons.
Emiss
ion
Fact
or33
.0Fi
xed
num
ber,
deve
lope
dby
adju
stin
gA
P-42
Emiss
ion
Fact
orof
35to
bette
rcor
rela
tewi
than
nual
502
emIs
sion
sre
porte
dfo
r Bel
leRi
verU
nit I
to
_____
Uni
ted
Stat
esEn
viro
nmen
tal P
rote
ctio
nA
genc
y(L
I$EP
A)fro
ni19
98th
roug
h20
07.
Ifad
ditio
nal c
ontro
ltec
hnol
ogy
IsIn
stalle
don
the
unit
toco
mpl
ywi
thfu
ture
envi
ronm
enta
l reg
ulat
ions
, the
Emiss
ion
Fact
orsh
all b
ead
just
edto
acco
untf
orch
ange
sin
Belle
Rive
r Uni
t1em
issi
ons
due
toth
ein
stalla
tion
ofth
eco
ntro
l tec
hnol
ogy.
Emiss
ionF
acto
r2
33A
Fixe
dnu
mbe
r,de
velo
ped
byad
justi
ngA
P-42
Emiss
ion
Fact
orof
35to
bette
rcor
rela
tewi
than
nual
SO
emis
sion
sre
porte
dfo
r Bel
leRi
ver U
nd2
toth
e
lbU
SEPA
from
1998
thro
ugh
2007
.Ifa
dditi
onal
cont
rolt
echn
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yis
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aled
onth
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itto
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ply
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egul
atio
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heEm
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ctor
shal
l be
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sted
toac
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t for
chan
ges
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lleRi
ver U
nit2
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ein
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eco
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l tec
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ogy.
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lfur I
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t sul
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onte
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onth
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ple
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roit
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etro
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ples
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elle
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r Uni
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it2
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eir C
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l
______
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yzed
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rted
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ldha
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hedi
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l SO2
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nter
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ale
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oron
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ance
. as
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ished
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rgus
Aird
aily
onth
ela
stbu
sine
ssda
yof
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mon
th,s
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enu
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llow
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sNo
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ring
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em
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lyTr
ansa
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ceBe
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,The
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fitwi
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ncile
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thin
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ice
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etro
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ison
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sum
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onth
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tert
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nten
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ce
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r pur
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ulat
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ecu
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ree
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tern
ativ
eor
repl
acem
ent S
O2
pace
inde
xfo
r the
calc
ulat
ions
.
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 58 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 58 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 746 of 873
eM
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4
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 59 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 59 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 747 of 873
Act
ual C
apita
l Cos
t
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mpl
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ate
DEC
oHg
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ver m
ercu
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l equ
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whi
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the
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clud
ing
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ual a
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l cap
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ost f
orm
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l equ
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r mer
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tion A
qust
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t Fac
tor.
1000
,000
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able
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l Tec
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eter
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basa
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ent
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ished
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eev
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etro
itEd
ison
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itabl
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ulat
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=2.
75.
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dva
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base
don
desi
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ally
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pute
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edby
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t Cap
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tor,
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iver
edSo
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ost
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ctor
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itco
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r the
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oit E
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sted
for B
elle
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r Pow
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and
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llatio
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roit
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ercu
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ost
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oCap
italF
lxed
Cha
’geR
ale
-=
.15
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 60 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 60 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 748 of 873
Fly
Ash
Ben
efit
Cal
cula
tion
:M
PPA
Fly
Ash
Ben
efIt
0.18
61X
(Fly
Ash
Rev
enue
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efity
ev+
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posa
lE
xpen
seB
enef
itj
Fly
Ash
Rev
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Ben
efit
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cula
tion
:
Fly
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eflt
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ualF
lyA
shR
even
ue.
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atus
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Ash
Rev
enues
CIf
Yea
r<H
gCo
mpl
ianc
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ate,
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evenue
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nie
nt
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e,St
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=0
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lyA
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even
ue,
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t Con
tract
edFl
yA
shV
olur
ne,j.
a,X
Proj
ectC
ontra
cted
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vea,
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posa
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xp
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efit
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cula
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posa
l Exp
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efity
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ject
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tract
edFl
yA
shV
olum
ev0
-St
atus
Quo
Con
tract
edFl
yA
shV
olu
mev
0-In
crem
enta
lFly
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ease
fer)
xV
aria
ble
Uni
t Dis
posa
l Cos
t
*If
Yea
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plia
nce
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e,St
atus
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tract
edFl
yA
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olum
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umev
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rH
gC
ompl
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ate,
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ontra
cted
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=0
6
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 61 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 61 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 749 of 873
Proj
ect C
ontra
cted
FlyA
shUn
itP
rice
Var
iabl
eUn
itD
ispos
alC
ost
Actu
alA
nnua
lVar
iabl
eD
ispos
alC
ost
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alAn
nual
flyA
shro
nsL
andf
lhle
HgCo
mpl
ianc
eD
ate
Incr
emen
tal F
lyAs
hIn
crea
se
Total
Gua
rant
eed
Vdu
me,
,
Total
Gua
rant
eed
Pay
men
t
(tons
)V
olum
eof
Fly
Ash
com
mitt
edfo
r sal
eun
derc
ontra
cts
inpl
ace
whe
nRe
fined
Coal
Isus
edas
fuel
aBe
lleRi
ver P
ower
Plai
t
-Un
itpu
ceco
mm
itted
tobe
paid
toBe
lleRi
ver u
nder
flyas
hco
ntra
cts
inpl
ace
whe
nRe
fined
Coal
isus
edas
fuel
atBe
lleRi
ver P
ower
-Pl
ant
-Ac
tual
Annu
alVa
riabl
eD
ispos
alC
ost
1.()
-Ac
tual
Annu
alFl
y Ash
Tons
Lan
dfdl
%.
$-
MPP
Aco
stfo
rlan
dflh
llng
flyas
hpr
oduc
edat
Belle
Rive
r for
spec
ified
year
, as
repo
rted
in[P
lant
Max
Ima
Acc
ount
).Th
isco
stex
clud
es-
flxe
dcos
tsas
soci
ated
with
landf
ill.
(5
)=
Act
ual a
nnua
l ton
sof
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oduc
edat
Belle
Rive
r for
spec
ified
year
that
wer
edi
spos
edby
landf
lllin
g,as
repo
rted
in(P
lant
Max
lmo
Acc
ount
)
(yea
r)=
Firs
t yea
r tha
tHg
emis
sion
sw
ere
quire
dto
bere
mov
edfro
mBe
lleRi
ver s
tack
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eto
Slat
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Fede
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(tons
)=
Ann
ual v
olum
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7
Case No.: U-16434-R Exhibit: A-30 Witness: G. E. Lapplander Page: 62 of 806
MPSC Case No. U-17097 - March 7, 2013 Exhibit MEC-38; Source: Exhibit A-30, U-16434-R Page 62 of 72
MPSC Docket U-17319, June 10, 2014 Exhibit MEC-70; Source: U-16434-R, U-16892-R, and U-17097 Page 750 of 873