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HomeMy WebLinkAbout5.890 Original Contract 5.29D SETTLEMENT AGREEMENT THIS SETTLEMENT AGREEMENT (the "Agreement") is made and entered into as of June 25, 2008, by and between THE CITY OF PORT ANGELES (the "City") a municipal corporation organized under the laws of the State of Washington, and NIPPON PAPER INDUSTRIES USA CO., LTD., a Washington corporation ("NPIUSA"). The City and NPIUSA are sometimes referred to herein individually as "Party" and together as "the Parties." RECITALS A. The City has established an Electric Utility that is operated by the City's Department of Public Works and Utilities. B. For all time relevant to the Standstill Agreement referenced in paragraph E below, NPIUSA was the City's only "Industrial Transmission" power customer as defined in the City's Municipal Code Chapter 13.12.071 (Schedule IT-03 - Industrial Transmission), and consumed more than fifty (50) percent of the total amount of electricity provided by the City to its consumers of electricity. C. In December 1980, the Pacific Northwest Electric Power Planning and Conservation Act of 1980, P.L. 96-501 ("Northwest Power Act") was signed by the President. The Northwest Power Act established the Residential Exchange Program ("REP") in Section 5(c). In addition, Section 7(b) of the Northwest Power Act contained provisions that protected preference customers' rates. D. After the Bonneville Power Administration ("BPA'') entered into its 2000 REP settlement agreements with various investor owned utilities, petitions were filed before the Ninth Circuit Court of Appeals challenging BPA's actions. On May 3, 2007, the Ninth Circuit Court of Appeals ruled that BPA had exceeded its authority under Sections 5 and 7 of the Northwest Power Act in entering the REP agreements and that wholesale power rates charged by BPA and used to fund the REP were unlawful. See, e.g., Portland General Electric, et al. v. BPA, 501 F.3d 1009 (9th Cir. 2007); Golden Northwest Aluminum, Inc. v. BPA, 501 F.3d 1037 (9th Cir. 2007). The court's decisions mean that the portion of REP rate increases by BPA were and are unlawful. E. Effective March 24, 2008, the City entered into a Standstill and Interim Relief Payment Agreement ("Standstill Agreement") with BPA (Contract No. 08PB- 12397). Under the Standstill Agreement, the City received on April 2, 2008 an interim payment ("Standstill Payment") from BPA of $2,404,900. F. In the Standstill Agreement, BPA and the City acknowledge that BPA continues to collect the costs of REP settlement agreements in wholesale power rates charged by BPA to the City and that in addition to the Standstill Payment, a "true-up at a later date" could occur pursuant to provisions of the Standstill Agreement. The amount of any future "true-up" is referred to in the Standstill Agreement and in this 4840-2482-5346 02 DRAFT /062408/1650 Agreement as either a "SPA True-up Payment Amount" or a "Port Angeles True-up Payment Amount." Together, or collectively, a SPA True-up Payment Amount and a Port Angeles True-up Payment Amount are referred to in this Agreement as "True-up Payment" or "True-up Payments." G. On June 10, 2008, NPIUSA timely filed a claim with the City demanding that the City credit or refund to NPIUSA a share of the REP overpayments, including all interest, City public utilities taxes and State public utilities taxes associated with NPIUSA's overpayments ("NPIUSA's Claim"). H. The City disputes NPIUSA's Claim. I. The City has commenced efforts to collect overpayment of State public utilities taxes it collected in connection with electric power sales to NPIUSA through negotiation with the Washington Department of Revenue for a return of overpaid State public utilities taxes. J. SPA has also miscalculated wholesale power rates charged to the City for monthly transmission peak charges applicable during SPA's fiscal years 2002-2007. This has resulted in a credit ("Transmission Peak Credit") from SPA to the City. A portion of the Transmission Peak Credit, in the amount of $188,336, has been applied by the City as a credit to the May 2008 power billing from the City to NPIUSA. However, NPIUSA additionally claims interest, City public utilities taxes and State public utilities taxes associated with the Transmission Peak Credit. K. To avoid the expense, inconvenience and uncertainty of litigation, and to settle and resolve NPIUSA's Claim and its demand for unpaid amounts related to the Transmission Peak Credit, the Parties wish to forever settle, discharge and resolve any and all claims they may have against one another arising from NPIUSA's Claim and in connection with the Transmission Peak Credit and have, therefore, reached a full and final settlement of all claims as expressed below. L. This Agreement sets forth the terms and conditions under which (i) the Parties will settle any and all claims arising from NPIUSA's Claim, and (ii) NPIUSA's demand for additional amounts related to the Transmission Peak Credit. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the City and NPIUSA incorporate the foregoing recitals and agree as follows: 4840-2482-5346 02 DRAFT /062408/1650 ARTICLE I PAYMENTS 1.1 Payment to NPIUSA. The City shall pay $1,596,066 to NPIUSA within five (5) business days from the date of this Agreement. ARTICLE II COVENANTS CONCERNING FUTURE PAYMENTS 2.1 If there is a SPA True-up Payment Amount, then the City shall pay to NPIUSA within five (5) business days of receiving a lump sum from SPA or within thirty (30) days of receiving monthly credits to the City's monthly power bill from SPA the amount of the SPA True-up Payments multiplied by a fraction obtained by dividing NPIUSA's SPA wholesale generation cost by the City's total SPA wholesale generation cost, plus an additional 75% of the amount of City public utilities taxes paid by NPIUSA on such True-up Payment Amounts. 2.2 If there is a Port Angeles True-up Payment Amount, then NPIUSA shall pay to the City within five (5) business days of the City's payment to SPA of a lump sum, or in NPIUSA's monthly power billing payment to the City if the Port Angles True- up Payment is collected pursuant to SPA's General Rate Schedule Provisions as described in Section 9(a)(2) of the Standstill Agreement, the amount equal to $1,596,066 multiplied by a fraction, the denominator of which is $2,404,909 and the numerator of which is the Port Angeles True-up Payment Amount. 2.3 The City shall continue its efforts, in good faith, to collect from the Washington Department of Revenue a refund of State public utilities taxes it paid with respect to both the REP overpayments and the Transmission Peak Credit. The City shall cooperate with NPIUSA and permit NPIUSA to participate in any proceedings, including any conference for examination and review of the utility tax liability under RCW 82.32.170. The City shall request a refund (rather than a credit of the overpayment) as permitted by RCW 82.32.060. If the City is successful in obtaining a refund of public utilities taxes, the City shall pay to NPIUSA the portion of the refund attributable to NPIUSA's rates paid for the period of time on which the refund was made. ARTICLE III COVENANTS NOT TO SUE 3.1 In consideration of the City's covenants and agreements contained herein, NPIUSA hereby agrees that it will not, at any time hereafter, commence, maintain or prosecute any action at law or otherwise or assert any claim against the City, its elected officials, managers, agents, employees, attorneys, either past or present, for any actions, causes of action, obligations, costs, expenses, damages, losses, claims, 4840-2482-5346 02 DRAFT /062408/1650 liabilities, and demands of whatever character in law or in equity arising out of or in any way relating to NPIUSA's Claim or its demand for payment of unpaid amounts related to the Transmission Peak Credit, except for any claims expressly excluded by this Agreement, claims based upon a failure to comply with this Agreement, and any claims that arise in connection with the City's exercise of its right under Section 11 of the Standstill Agreement to terminate the Standstill Agreement. 3.2 In consideration of NPIUSA's covenants and agreements contained herein, the City hereby agrees that it will not, at any time hereafter, commence, maintain or prosecute any action at law or otherwise or assert any claim against NPIUSA, its affiliates, holding or parent company, officers, agents, employees, attorneys, either past or present, for any actions, causes of action, obligations, costs, expenses, damages, losses, claims, liabilities, and demands of whatever character in law or in equity arising out of or in any way relating to the NPIUSA Claim or NPIUSA's demand for payment of unpaid amounts related to the Transmission Peak Credit, except for any claims expressly excluded by this Agreement, claims based upon a failure to comply with this Agreement, and any claims that arise in connection with the City's exercise of its right under Section 11 of the Standstill Agreement to terminate the Standstill Agreement. ARTICLE IV MUTUAL RELEASES 4.1 City's Release of NPIUSA. With the exception of (i) the obligations required under this Agreement, and (ii) in the event that the City exercises its right under Section 11 of the Standstill Agreement to terminate the Standstill Agreement, the City hereby releases and forever discharges NPIUSA, its affiliates, holding or parent company, shareholders, subsidiaries, successors, representatives, assigns, agents, employees, officers, directors, and attorneys, and each of them (herein collectively referred to as the "Releasees") of and from any and all claims, debts, liabilities, demands, obligations, costs, actions, causes of action known or unknown, vested or contingent, which it now owns or holds or has at any time owned or held against the Releasees, arising out of or in connection with the NPIUSA Claim or NPIUSA's demand for payment of unpaid amounts related to the Transmission Peak Credit. 4.2 NPIUSA's Release of the City. With the exception of (i) the obligations required under this Agreement, and (ii) in the event that the City exercises its right under Section 11 of the Standstill Agreement to terminate the Standstill Agreement, NPIUSA hereby releases and forever discharges the City, its elected officials, managers, agents, employees and attorneys, and each of them (herein collectively referred to as the "Releasees") of and from any and all claims, debts, liabilities, demands, obligations, costs, actions, causes of action known or unknown, vested or contingent, which it now owns or holds or has at any time owned or held against the Releasees, arising out of or in connection with the NPIUSA Claim or NPIUSA's demand for payment of unpaid amounts related to the Transmission Peak Credit. 4840-2482-5346 02 DRAFT /062408/1650 ARTICLE V MISCELLANEOUS 5.1 Notices. Whenever under the provisions of this Agreement, it shall be necessary or desirable for one Party to serve any notice, request, demand, report or other communication on another party, the same shall be in writing and shall not be effective for any purpose unless served (a) personally, (b) by independent, reputable, overnight commercial courier, (c) by facsimile transmission (i) where the transmitting party includes a cover sheet identifying the name, location and identity of the transmitting Party, the phone number of the transmitting device, the date and time of transmission and the number of pages transmitted (including the cover page), (ii) where the transmitting device or receiving device records verification of receipt and the date and time of transmission receipt and the phone number of the other device, and (iii) where the facsimile transmission is immediately followed by service of the original of the subject item by personal delivery, overnight courier or first-class mail, or (d) by deposit in the United States mail, postage and fees fully prepaid, registered or certified mail, with return receipt requested, addressed as follows: If to NPIUSA: A. Personal delivery or other delivery requiring a street address: Teruo (David) Tamaki President Nippon Paper Industries USA Co., Ltd. 1902 Marine Drive Port Angles, WA 98363 Fax: (360) 452-6576 B. Mailing address: Harold Norlund Resident Mill Manager Nippon Paper Industries USA Co., Ltd. P.O. Box 271 Port Angles, WA 98362 Fax: (360) 452-6576 With a copy to: Riddell Williams P.S 1001 Fourth Avenue, Suite 4500 Seattle, WA 98154-1065 Attention: Harry E. Grant Fax: 206-389-1708 4840-2482-5346 02 DRAFT /062408/1650 . . If to the City: Mark Madsen City Manager 321 East 5th Street P.O. Box 1150 Port Angeles, WA 98362 With a copy to: Bill Bloor City Attorney City of Port Angeles 321 E Fifth St PO Box 1150 Port Angeles WA 98362-0217 Any Party may, from time to time, by notice in writing served upon the other party as aforesaid, designate an additional and/or a different mailing address in Washington or an additional and/or a different person to whom all such notices, requests, demands, reports and communications are thereafter to be addressed. Any notice, request, demand, report or other communication served personally shall be deemed delivered upon receipt, if served by mail or independent courier shall be deemed delivered on the date of receipt as shown by the addressee's registry or certification receipt or on the date receipt at the appropriate address is refused, as shown on the records or manifest of the U.S. Postal Service or independent courier, and, if served by facsimile transmission, shall be deemed delivered on the date of receipt as shown on the received facsimile (provided the original is thereafter delivered as aforesaid). 5.2 No Admission of Liability. The Parties understand and agree that this Agreement is the compromise of disputed claims and that the act of entering into and performing this Agreement does not constitute and shall not be construed as an admission of liability, fault or responsibility by any Party. 5.3 Further Acts. The Parties hereby agree to perform all further acts and to execute all documents necessary or reasonably desirable to effect the terms of this Agreement. 5.4 Attorney Fees and Costs. In the event of any dispute over the meaning, effect, performance or validity of this Agreement, the prevailing party shall be entitled to its costs and reasonable attorney fees. 5.5 No Third Party Beneficiaries. Nothing contained in this Agreement is intended or shall be construed as creating or conferring any rights, benefits or remedies upon, or creating any obligations of the parties hereto toward, any person or entity not a party to this Agreement. 5.6 Waiver. No waiver of any term, covenant or condition of this Agreement shall be valid unless in writing and signed by the obligee Party. No waiver by any party 4840-2482-5346 02 DRAFT /062408/1650 . . . . of any right or remedy under this Agreement shall be deemed to be a waiver of any other subsequent right or remedy under this Agreement. The consent by one Party to any act by the other Party requiring such consent shall not be deemed to render unnecessary the obtaining of consent to any subsequent act for which consent is required, regardless of whether similar to the act for which consent is given. 5.7 Governing Law. This Agreement shall be governed and construed in accordance with the internal laws of the State of Washington. 5.8 Construction and Interpretation of Agreement. The captions of the articles, sections and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument. 5.9 Counterparts. This instrument may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. 5.10 Entire Agreement; Amendment. This Agreement with incorporations shall constitute the entire and exclusive agreement between the Parties relating to the specific matters covered in this Agreement. All prior or contemporaneous verbal or written agreements, understandings, representations and/or practices relative to the foregoing are hereby superseded, revoked and rendered ineffective for any purpose. This Agreement may be altered, amended or revoked only by an instrument in writing signed by each Party hereto. No verbal agreement or implied covenant shall be held to vary the terms hereof, any statute, law or custom to the contrary notwithstanding. Both of the Parties are co-drafters of this Agreement. IN WITNESS WHEREOF, the Parties, intending to be legally bound, have executed this Agreement on the date first written above. CITY: THE CITY OF PORT ANGELES By: ~~~ N.ame:' ~ _ Title: Y (j CH- NPIUSA: NIPPON PAPER INDUSTRIES USA CO., LTD., a Washington corporation By: l~~ Name: It> V/..I 0 10. lo\.\Q. /GI Title: fltt') ;.J.I> .. t . 4840-2482-5346 02 DRAFT /062408/1650 SUPPLEMENT TO SETTLEMENT AGREEMENT BETWEEN CITY OF PORT ANGELES AND NIPPON PAPER INDUSTRIES USA CO., LTD. THIS SUPPLEMENTAL AGREEMENT is made effective this 2nd day of March, 2010, by and between the City of Port Angeles, a municipal corporation of the State of Washington, hereinafter referred to as "City ", and Nippon Paper Industries USA Co., Ltd., a Washington corporation, hereinafter referred to as "Nippon." In consideration of the benefits to be derived by this agreement, the parties recite, covenant, and agree as follow: 1. Recitals: a. The City and Nippon entered into an Settlement Agreement on June 25, 2008. Among other things, the Settlement Agreement, in Section 5.3, authorized the parties to enter into Supplemental Agreements as appropriate to carry out the purpose and intent of the Settlement Agreement. b. Section 2.3 of the Settlement Agreement creates a conditional obligation on the City to reimburse Nippon if the City receives a refund of State utility taxes. c. The City did not receive a refund of State utility taxes, but it did receive a conditional credit for State utility taxes. The amount of the credit is $83,836.41 ( "the Tax Credit'). The Tax Credit is subject to audit through December 31, 2013. In the event of an audit, the State could deny the Tax Credit in its entirety or limit the amount of it. d. Nippon claims that under the Settlement Agreement the City should pay the Tax Credit to it now. e. It is in the best interests of the citizens of Port Angeles to resolve this claim, avoiding the casts associated with a contested dispute, saving potential interest costs to the City, and satisfying a conditional legal obligation of the City under the Settlement Agreement. 2. Agreement. In compromise of its claim, Nippon agrees to accept the discounted present value of the tax credit. Therefore, the City agrees to pay to Nippon 4819 - 8160 - 4101.02 022610/0912/16682.00094 1 IN WITNESS WHEREOF, the Parties, intending to be legally bound, have executed this Agreement on the date first written above. CITY: NIPPON: ATTEST: 3. Hold Harmless. 4. Full Force and Effect. s J sa Hurd, City Clerk the sum of $73,058.59, which is the discounted present value of the Tax Credit. Nippon agrees to accept that amount as full and complete settlement, compromise, and satisfaction of the City's obligation under the Settlement Agreement on account of State utility taxes. Nippon releases the City from any and all claims it may have arising from, or related to, State utility taxes. In the event that the State later determines that the City is not entitled to all or a part of the Tax Credit, Nippon agrees to indemnify, hold the City harmless, and repay to the City Nippon's proportionate share of any amount up to but not exceeding $73,058.59, which the State later may reclaim or disallow from the Tax Credit. Except as expressly set forth in this Supplement, the Settlement Agreement of June 25, 2008 between the parties shall remain unchanged and in full force and effect. APP AS TO FOR William E. Bloor, City Attorney 4819 - 8160 - 4101.02 022610/0912116682.00094 2 THE OF PO T ANGELES By: /0 . Na ( i(k) Title: A Nippon Paper Industries USA Co., Ltd., a Washington corporation By: cir'e--47 Name: HA:- - Its Alpo r .. d Title: AR _v I lei -,-, cam 1 ai -