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HomeMy WebLinkAbout5.12 Original ContractAPRIL 7, 1992 THE MAJORITY OF THE CONTENTS OF THIS FILE HAVE BEEN REMOVED FOR THE PURPOSE OF HAVING THEM MICROFILMED. 1 ASSIGNMENT AND AGREEMENT RELATING TO CANADIAN ENTITLEMENT EXCHANGE AGREEMENT ASSIGNMENT AND AGREEMENT RELATING TO CANADIAN ENTITLEMENT EXCHANGE AGREEMENT Contract No. 14 -03 -60376 THIS ASSIGNMENT AND AGREEMENT is executed as of this 10th day of March, 1966, between the Participants listed on Exhibit A, the Assignees listed on Exhibit B and the UNITED STATES OF AMERICA, Department of the Interior, acting by and through the BONNEVILLE POWER ADMINISTRATOR (hereinafter called the "Administrator RECITALS 1. Pursuant to a treaty between Canada and the United States relating to the cooperative development of the water resources of the Columbia River Basin signed at Washington, D. C., January 17, 1961, and ratified by the United States and Canada on September 16, 1964, Canada is entitled to receive certain power benefits. 2. Columbia Storage Power Exchange, a nonprofit corporation organized under the laws of the State of Washington (hereinafter called "CSPE and British Columbia Hydro and Power Authority on August 13, 1964, entered into the Canadian Entitlement Purchase Agreement pursuant to which CSPE acquired a portion of Canada's rights to down- stream power benefits under said Treaty for a term of years (hereinafter called "Canadian Entitlement"). 3. Each Participant, CSPE and the Administrator as of August 13, 1964, entered into a Canadian Entitlement Exchange Agreement (hereinafter called "Exchange Agreement a form of which is attached as Exhibit C, whereby rights to the Canadian Entitlement were transferred to the Participants and said Participants in turn transferred said rights to the Administrator and the Administrator, in accordance with the Exchange Agreements, unconditionally assured to each Participant the delivery of specified amounts of capacity and energy determined to be the equivalent of its Canadian Entitlement. 4. Each Participant desires to assign rights and obligations under its Exchange Agreement for a term of years and each Assignee, severally and not jointly, desires to accept such assignment. 5. The capacity and energy to which the Participants are entitled under the Exchange Agreements are not subject to the provisions of Public Law 88 -552, 78 Stat. 756 (1964). 6. The Administrator has determined that the assignment herein provided 1. is in the interest of the United States. 7. It is contemplated that the Administrator will have transmission capacity available for the delivery of the capacity and energy associated with the assignment herein provided over transmission lines connecting the Government's main system transmission grid in the Pacific Northwest (as defined in Public Law 88 -552, 78 Stat. 756 (1964) with transmission facilities available for the use of one or more of the Assignees at the Oregon California and /or Oregon- Nevada borders. NOW, THEREFORE, in consideration of the premises and the promises hereinafter set forth and the performance hereof, the parties hereto agree: SECTION 1. Definitions (a) "Contract Year" shall mean the 12-month period commencing at 12:01 a.m. Pacific Standard Time on April 1, 1968, or at the same time on April 1 of any year thereafter during the term of this Agreement. (b) "Intertie Lines" shall mean the transmission lines and related terminal facilities described in the Interne Report of the Secretary of the Interior dated June 1964, as amended and supplemented, together with transformation, conversion and related facilities at terminal and intervening substations. SECTION 2. Exhibits Exhibits A, B, C and D are by this reference incorporated herein as fully as though set forth verbatim in the body of this Agreement. SECTION 3. Term This Agreement shall be effective for the term commencing the later of April 1, 1968, or the date when the first of the AC Intertie Lines from John Day Substation to the Oregon California border is ready for operation at nominal voltage of 500 kv and ending at 12 p.m., March 31, 1980. SECTION 4. Assignments and Assumptions (a) Subject to paragraph (d) of this section each Participant assigns all of its rights and obligations under its Exchange Agreement (modified by Direction for Payments to Trustee dated August 13, 1964, a form of which is attached as Exhibit D to the Assignees severally in the decimal fractions appearing after the Assignees' names on Exhibit B. Each such assignment shall be subject to reservations pursuant to Section 5 hereof and the prohibi- tions of Section 21 of the Exchange Agreement. (b) Each Assignee, severally and not jointly, accepts its decimal fraction of 2. each such assignment and assumes the obligations associated therewith. (c) In the event of reservations by a Participant pursuant to Section 5 hereof, payments by the Assignee shall be reduced to the amounts determined in accordance with Section 6 hereof. (d) Notwithstanding any other provision of this Agreement, the amounts of capacity and energy to which each Assignee is entitled under this Agreement and the amounts which each Assignee is obligated to pay to CSPE and the Administrator shall not be increased above the amounts determined in accordance with the Exchange Agreements and Exhibits A and B of this Agreement for the Contract Year commencing April 1, 1968, until the two AC Intertie Lines from John Day Substation to the Oregon California border are ready for operation at a nominal voltage of 500 kv. SECTION 5. Reservations (a) Each Participant initially reserves from its Exchange Agreement assigned in Section 4 hereof that decimal fraction of the capacity and that decimal fraction of the energy to which it is entitled thereunder in each year appearing after such year on the portion of Exhibit A applicable to such Participant. (b) Each Participant shall have the right to make further reservations of capacity and energy from its Exchange Agreement assigned under Section 4 hereof, by giving written notice to each Assignee and the Administrator five (5) years in advance of the Contract Year when any such further reservation is to take effect; provided, that no such further reservation shall be made to become effective prior to April 1, 1973, unless otherwise agreed upon by the Assignees. Such notice shall specify a fraction which shall be the same for both capacity and energy. The numerals appearing in Columns 4 and 5 of the portion of Exhibit A applicable to such Participant for the Contract Year in which such further reserva- tion is to take effect and for each subsequent Contract Year shall be multiplied by such fraction and the products shall be deducted from the numerals appearing in Columns 4 and 5 and added to the numerals appearing in Columns 2 and 3. A revised Exhibit A reflecting such changed assignment shall be substituted for the previously effective Exhibit A. (c) In the event of a default under its Exchange Agreement by any Participant, the rights to capacity and energy and proportional associated rights and obligations which have been initially or subsequently reserved by the defaulting Participant shall not be subject to this Assignment and Agreement. Accordingly, such default shall neither increase nor decrease the quantities of capacity or energy which individual Assignees otherwise would 3. receive hereunder or the obligations associated therewith. (d) All rights and obligations under its Exchange Agreement are reserved to each Participant pro tanto with any reservation made pursuant to this Section. SECTION 6. Reservations Reductions in Payments (a) In the event of reservations by a Participant pursuant to Section 5(a) or Section 5 (b) hereof, the obligation to pay CSPE under its Exchange Agreement as modified by the Direction for Payments to Trustee assumed by each of the Assignees with respect to such Participant in Section 4 hereof shall be reduced for each Contract Year to the amount obtained by multiplying the obligation of such Assignee to such Participant by the decimal fraction derived from the following formula: FORMULA P K+ 4.3A K -}-4.3 in which P decimal fraction shown in Column 4 of Exhibit A. A decimal fraction shown in Column 5 of Exhibit A, and K the quotient obtained by dividing the Participant's share (in kilowatts) of capacity to which it is entitled under its Exchange Agreement by the same Participant's share (in kilowatts) of average energy to which it is entitled under its Exchange Agreement. (b) In the event of reservations by a Participant pursuant to Section 5(a) or Section 5(b) hereof, the obligation to pay the Administrator under the Exchange Agreement assumed by each of the Assignees in Section 4 hereof shall be reduced to the amount obtained by multiplying the amount of capacity (in kilowatts) to which such Assignee is then entitled, before reduction for losses, by the unit charge specified in Section 7 of the Exchange Agreement. (c) Both Participants and Assignees shall be entitled to the same notices and statements required to be given under the Exchange Agreement and each Assignee shall make the payments required of it hereunder at the time and in the manner prescribed in the Exchange Agreement as modified by the Direction for Payments to Trustee. Each Assignee shall be entitled to receive notices and statements at the address appearing after its name on Exhibit B. SECTION 7. Additional Payments It is the understanding of the parties that CSPE is not subject to taxation by the States of Washington, Oregon, Idaho or Montana or any subdivision of any one thereof. 4. In the event, however, that CSPE is or should become subject to payment of any such taxes, or any such taxes are proposed, during the term hereof, each Participant shall reimburse each Assignee an amount equal to the part of such taxes and of any expenses incurred by CSPE in connection with the levy or proposed levy relating to the rights and obligations assigned hereunder by such Participant; provided, that any amounts so paid each Assignee shall be returned to the Participants to the extent that the Assignee's payments hereunder are reduced by refunds of such taxes. Reimbursement shall be made within sixty (60) days following payment of said taxes or expenses by an Assignee or receipt by an Assignee of a reduction in its payments, as the case may be. SECTION 8. Delivery and Transmission Losses In accordance with the provisions of Section 5(d) of the Exchange Agreements, each Participant and the Administrator hereby specify as additional points of delivery in Exhibit C thereof, for the period of the Participant's assignment hereunder and for use to the extent of the capacity and energy herein assigned by such Participant, those points where the Intertie Lines cross the Oregon California and /or Oregon- Nevada border. The Adminis- trator shall make available to the Assignees capacity and energy under this Agreement at such additional points, after first making reductions for losses in the amount of 4.5 percent for capacity and 3.0 percent for energy. Title to the capacity and energy shall pass at such points. Notwithstanding the provisions of Section 14 of the Exchange Agreement, deliveries at the Oregon- Nevada border shall be in the form of direct current. The capacity and energy reserved hereunder by Participants shall be made available by the Administrator at the points of delivery and in the manner provided in the Exchange Agreement. SECTION 9. Default In the event that any Assignee (herein called "Defaulting Assignee fails or refuses for any reason to make any payment required under this Agreement and such failure or refusal continues for a period of thirty (30) days from the date when such payment shall have become due and payable, then thereafter each other Assignee's decimal fraction appear- ing after its name on Exhibit B shall be automatically increased for the remaining term of this Agreement. The amount of such automatic increase shall be the product obtained by multi- plying the decimal fraction of the Defaulting Assignee by a fraction, the numerator of which is the Assignee's decimal fraction and denominator of which is the total of the decimal fractions of all Assignees who are not Defaulting Assignees; provided, that the cumulative total of all such increases shall not, without the consent of the Assignee, exceed a maximum 5. of one fourth of its decimal fraction appearing after such Assignee's name in Exhibit B. All rights of a Defaulting Assignee shall inure to the benefit of the Assignee whose decimal fractions have been so increased to the extent of such increase. Notwithstanding such automatic increase in the decimal fractions of the other Assignees: (a) The obligation of a Defaulting Assignee to make payments for capacity and energy already made available to it shall not become the obligation of any other Assignee. (b) A Defaulting Assignee shall not be relieved of any of its liabilities under this Assignment and Agreement for the remaining term hereof and each of the Assignees whose decimal fraction is increased as aforesaid shall have a right of recovery against any Defaulting Assignee for all loss and damages sustained by such other Assignee as a result of such automatic increase in its decimal fraction, not to exceed the amount of its resulting automatic increase in payments for capacity and energy hereunder. (c) Any of the other Assignees, either individually or as a member of a group, may commence such suit, action or proceeding, at law or in equity, including suit for specific performance, as may be necessary or appropriate to enforce the obligations of a Defaulting Assignee under this Assignment and Agreement without regard to such automatic increase in the decimal fractions of the other Assignees. (d) To such extent as the amount by which an Assignee is in default exceeds the total of the increase in the decimal fractions of the other Assignees, each Participant shall have the right at its option to rescind and cancel this Agreement as to such Defaulting Assignee Such termination shall not relieve the Assignee from liability to the Participant arising out of the nonperformance of its obligations hereunder. SECTION 10. Curtailment (a) If the operation of the Government's facilities is affected as set forth in Sections 15(a) and 15(b) of the Exchange Agreement, the Administrator agrees chat each Assignee shall be treated by the Administrator not less favorably than the Participants with respect to the delivery of capacity and energy under the Exchange Agreements. (b) If an Uncontrollable Force, as hereinafter defined, occurs and by reason thereof energy to which an Assignee is entitled during the month in which the Uncontrollable Force occurs cannot be transmitted during the remainder of such month, the Administrator shall, to the extent of 15 percent of the amount of energy to which such Assignee was entitled hereunder during such calendar month, store such energy on the Government's system for 6. delivery to such Assignee during the calendar month immediately following the calendar month in which such energy was to be delivered to such Assignee, provided, however, the Administrator's obligation to receive for storage or to continue to store such energy shall be subject to availability on the Government's system of reservoir space for such storage after giving priority to the use of such reservoir space for his own purposes and for the purposes of other parties in the Pacific Northwest; and, provided, further, that the Administrator shall not be required to receive for storage or to continue to store such energy if such storage would place any Pacific Northwest customer in a less favorable position than if the energy had been delivered. As used in this paragraph Uncontrollable Force shall mean any event causing failure, damage or destruction of the Intertie Lines in California or Nevada, or any of them, which, by the exercise of reasonable diligence and foresight the affected Assignee or the owner or operator of such line or lines could not reasonably have been expected to avoid. All energy stored, spilled or returned pursuant to this subsection shall be accounted for in kilowatt- hours. If stored energy is spilled, the amount of energy spilled shall be determined by utilizing the then current conversion factor of the facility or facilities at which the spill occurred, as determined by the Administrator. The Administrator, to the extent feasible, shall inform the storing Assignee of changed conditions which might result in spill. Upon request of a storing Assignee, the Administrator shall make available to such Assignee in accordance with the provisions of Section 8 hereof, any or all energy, stored in accordance with the preceding paragraph which has not been spilled and for which the Administrator determines that he has hydrogenerating and transmission (other than Intertie Lines) capacity available in excess of his requirements for other purposes. The delivery of such stored energy shall be scheduled by the requesting Assignee during the calendar month immediately following the month in which the energy was stored so that the delivery thereof together with the delivery of energy to which such Assignee is entitled pursuant to the assignments hereunder will not exceed the capacity to which such Assignee is then entitled pursuant to such assignments. If such Assignee does not schedule such energy during such month, the Administrator shall have no further obligation hereunder to make such energy available to such Assignee. If the delivery of stored energy in accordance with the Assignee's schedule results in the spilling of water at projects downstream, the amount of such spill shall be converted to kilowatt -hours by utilization of the then current conversion 7. factor at the spilling project and such amount will be deducted from the amount of stored energy being stored for the Assignee requesting such delivery. If at the time of any spill two or more Assignees are storing energy pursuant to this subsection, such spill shall be chargeable to each of such Assignees in the ratio which the stored energy for each Assignee bears to the total amount of energy stored hereunder. (c) If the operation of the Government's transmission system is affected as set forth in Section 15 (a) and 15 (b) of the Exchange Agreement so that the Administrator is unable to make available to the Assignee all of the capacity assigned hereunder, or in the event of an Uncontrollable Force on the Intertie Lines which prevents the Assignee from accepting all the capacity assigned hereunder, the Administrator or any Participant shall, upon request of any Assignee, make available to such Assignee the best information it has regarding potential markets within or without the Pacific Northwest for the disposition of such capacity during the period of the suspension i n t e r r u p t i o n, or in t e rf e re n c e. If such capacity, or any portion thereof, is disposed of by such Assignees, or any of them, the Administrator, in consideration of the payments provided in Section 7 of the Exchange Agreement, shall make such capacity a v a 11 a b 1 e, during the period of the suspension, interruption or interference, at such point or points of delivery on the Administrator's transmission system as such Assignees, or such Assignee, shall designate, subject to the prior determination by the Administrator that transmission capacity from the point or points of generation to such point or points of delivery in excess of the then requirements of the Administrator is available; provided, however, that the Administrator shall not be required to make such capacity available at a designated point of delivery if the delivery of such capacity at such point would displace a market which would have been served by the Administrator if the deliveries to the Assignee had not been curtailed or interrupted. If the delivery voltage for any designated point of delivery is less than 230 kv, the t r a n s m i s s i on losses to such point shall be in c re a s e d to 5.5 percent for delivery at more than 69 kv and to 6.5 percent for delivery at 69 kv. or lower. SECTION 11. Execution in Counterparts This agreement may be executed in any number of counterparts in which case all such counterparts shall be deemed to constitute a single document with the same 8. I force and effect as if all parties hereto having signed a counterpart had signed all the other counterparts. IN WITNESS WHEREOF the parties hereto have executed this Assignment and Agreement as of the day and year herein first above written. UNiTED STATES OF AMERICA Department of the Interior By PUBLIC UTILITY DISTRICT NO. 1 OF BENTON COUNTY By VILLAGE OF BONNERS FERRY, IDAHO By By Bonneville Power Administration CENTRAL LINCOLN PEOPLES' UTILITY DISTRICT 9. (SEAL) (SEAL) ATTEST: (SEAL) ATTEST: (SEAL) ATTEST: (SEAL) ATTEST: /f .w &4 (SEAL) ATTEST: (SEAL) ATTEST: (SEAL) ATTEST: CITY OF PORT ANGELES, WASHINGTON PORTLAND GENERAL ELECTRIC COMPANY By PUGET SOUND POWER LIGHT COMPANY By RAVALLI COUNTY ELECTRIC COOPERATIVE, INC. By 16. PARTICIPANTS' ASSIGNMENT Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Public Utility District No. 1 of Benton County (0.8 P.O. Box 247 1968 -69 Kennewick, Washington 99336 thru 1979 -80 0 0 1.0 1.0 Village of Bonners Ferry, Idaho (0.05%) Municipal Light Water Dept. 1968 -69 Bonners Ferry, Idaho 83805 thru 1979 -80 0 0 1.0 1.0 Central Lincoln Peoples' Utility District (1.00%) 255 S. W. Coast Hwy. 1968 -69 Newport, Oregon 97365 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Chelan County (1.00 P.O. Box 1231 1968 -69 Wenatchee, Washington thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Clark County (3.00%) P.O. Box 1626 1968 -69 Vancouver, Washington 98663 thru 1979 -80 0 0 1.0 1.0 Clatskanie Peoples' Utility District (0.20 Clatskanie, Oregon 97016 1968 -69 thru 1979 -80 0 0 1.0 1.0 Coos -Curry Electric Cooperative, Inc. (0.50 P.O. Box 427 1968 -69 Coquille, Oregon 97423 thru 1979 -80 0 0 1.0 1.0 City of Coulee Dam, Washington (0.10%) Coulee Dam, Washington 99116 1968 -69 thru 1979 -80 0 0 1.0 1.0 EXHIBIT A Page 1 Page 2 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Public Utility District No. 1 of Cowlitz County (2.50%) 960 Commerce 1968 -69 Longview, Washington 98632 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Douglas County (0.20 1151 N. Main St. 1968 -69 E. Wenatchee, Washington 98802 thru 1979 -80 0 0 1.0 1.0 City of Eugene, Oregon (5.50 Eugene Water Electric Board 1968 -69 P.O. Box 112, Eugene, Oregon 97401 and 1969 -70 1.0 1.0 0 0 1970 -71 0.4163 0 0.5831 1.0 1971 -72 0.4205 0 0.5795 1.0 1972 -73 0.4251 0 0.5749 1.0 1973 -74 thru 1979 -80 1.0 1.0 0 0 Flathead Electric Cooperative, Inc. (0.10%) P.O. Box 199 1968 -69 Kalispell, Montana 59901 thru 1979 -80 0 0 1.0 1.0 City of Forest Grove, Oregon (0.30 P.O. Box 326 1968 -69 Forest Grove, Oregon 97116 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Franklin County (0.80 P.O. Box 1011 Pasco, Washington 99301 1968 -69 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 2 of Grant County (0.45 P.O. Box 878 Ephrata, Washington 98823 1968 -69 thru 1979 -80 0 0 1.0 1.0 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Public Utility District No. 1 of Grays Harbor County (1.50%) P.O. Box 480 1968 -69 Aberdeen, Washington 98520 thru 1979 -80 0 0 1.0 1.0 Idaho County Light and Power Cooperative Association, Inc. (0.10%) P.O. Drawer B 1968 -69 Grangeville, Idaho 83530 thru 1979 -80 0 0 1.0 1.0 Inland Power Light Company (0.50 East 320 Second Ave. 1968 -69 Spokane, Washington 99202 thru 1979 -80 0 0 1.0 1.0 Lane County Electric Cooperative, Inc. (0.40 P.O. Box 5195 1968 -69 Eugene, Oregon 97401 th ru 1979 -80 0 0 1.0 1.0 Lincoln Electric Cooperative, Inc. (Mont.) (0.10 P.O. Box 323 1968 -69 Eureka, Montana 59917 th ru 1979 -80 0 0 1.0 1.0 Lincoln Electric Cooperative, Inc. (Wash.) (0.10%) P.O. Box 167 1968 -69 Davenport, Washington 99122 thru 1979 -80 0 0 1.0 1.0 City of McMinnville, Oregon (0.40 Water Light Dept. 130 No. Baker St. 1968 -69 McMinnville, Oregon 97128 thru 1979 -80 0 0 1.0 1.0 1968 -69 thru 1979 -80 0 Missoula Electric Cooperative, Inc. (0.10,) P.O. Drawer 1486 Missoula, Montana 59801 0 1.0 1.0 Page 3 Page 4 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Nespelem Valley Electric Cooperative, Inc. (0.05 Nespelem, Washington 99155 1968 -69 thru 1979 -80 0 0 1.0 1.0 Northern Lights, Inc. (0.35 P.O. Box 712 1968 -69 Sandpoint, Idaho 83864 thru 1979 -80 0 0 1.0 1.0 Pacific Power Light Company (10.0 Public Service Bldg. 1968 -69 Portland, Oregon 97204 thru 1972 -73 0 0 1.0 1.0 1973 -74 0.4488 0 0.5512 1.0 1974 -75 0.4520 0 0.5480 1.0 1975 -76 0.4641 0 0.5359 1.0 1976 -77 0.4763 0 0.5237 1.0 1977 -78 0.4941 0 0.5059 1.0 1978 -79 0.5126 0 0.4874 1.0 1979 -80 0.5334 0 0.4666 1.0 Public Utility District No. 1 of Pend Oreille County (0.20 P.O. Box 276 1968 -69 Newport, Washington 99156 thru 1979 -80 0 0 1.0 1.0 City of Port Angeles, Washington (0.50 P.O. Box 951 1968 -69 Port Angeles, Washington 98362 th ru 1979 -80 0 0 1.0 1.0 Portland General Electric Company (17.50 621 S.W. Alder Portland, Oregon 97205 1968 -69 0.4084 0 0.5916 1.0 1969 -70 0.4115 0 0.5885 1.0 1970 -71 0.4163 0 0.5837 1.0 1971 -72 0.4205 0 0.5795 1.0 1972 -73 0.4251 0 0.5749 1.0 1973 -74 0.4488 0 0.5512 1.0 1974 -75 0.4520 0 0.5480 1.0 1975 -76 0.4641 0 0.5359 1.0 1976 -77 0.4763 0 0.5237 1.0 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Portland General Electric Company (con.) 1977 -78 0.4941 0 0.5059 1.0 1978 -79 0.5126 0 0.4874 1.0 1979 -80 0.5334 0 0.4666 1.0 Puget Sound Power Light Company (17.50 Puget Power Bldg. Box 535 Bellevue, Washington 98004 1968 -69 0.3916 0.3916 0.6084 0.6084 1969 -70 thru 1972 -73 1.0 1.0 0 0 1973 -74 0.6520 0.6520 0.3480 0.3480 1974 -75 0.6480 0.6480 0.3520 0.3520 1975 -76 0.8131 0.6509 0.1869 0.3491 1976 -77 0.8190 0.6537 0.1810 0.3463 1977 -78 0.8272 0.6589 0.1728 0.3411 1978 -79 0.6741 0.3320 0.3459 0.6680 1979 -80 0.6904 0.3371 0.3096 0.6629 Ravalli County Electric Cooperative, Inc. (0.10 Corvallis, Montana 59828 1968 -69 thru 1979 -80 0 0 1.0 1.0 City of Richland, Washington (0.80 P.O. Box 187 1968 -69 Richland, Washington 99352 thru 1979 -80 0 0 1.0 1.0 Salem Electric (0.40 P.O. Box 588 1968 -69 Salem, Oregon 97308 thru 1979 -80 0 0 1.0 1.0 Page 5 City of Seattle, Washington (12.50 1015 Third Ave. Seattle, Washington 98104 1968 -69 0.2741 0.2741 0.7259 0.7259 1969 -70 0.5926 0.5930 0.4074 0.4070 1970 -71 0.5812 0.5818 0.4188 0.4182 1971 -72 0.5737 0.5734 0.4263 0.4266 1972 -73 0.5619 0.5622 0.4381 0.4378 1973 -74 0.4561 0.4563 0.5439 0.5437 1974 -75 0.4535 0.4531 0.5465 0.5469 Page 6 Column 1 Column 2 Year Decimal Fraction of Apr. 1 Mar. 31 Capacity Reserved 1975 -76 1976 -77 1977 -78 1978 -79 1979 -80 1968 -69 thru 1979 -80 1968 -69 thru 1979 -80 1968 -69 thru 1979 -80 1968 -69 1969 -70 1970 -71 1971 -72 1972 -73 1973 -74 1974 -75 1975 -76 1976 -77 1977 -78 1978 -79 1979 -80 City of Seattle, Washington 0.4559 0.4556 0.4575 0.4610 0.2328 0.2362 0 0 0 0.2741 0.5926 0.5812 0.5737 0.5619 0.4561 0.4535 0.4559 0.4575 0.4610 0.2328 0.2362 Column 3 Decimal Fraction of Energy Reserved 0.4572 0.4611 0.2321 0.2358 Public Utility District No. 1 of Skamania County (0.20%) Stevenson, Washington 98648 0 Public Utility District No. 1 of Snohomish County (1.50 P.O. Box 1107 Everett, Washington 98201 0 (con.) City of Springfield, Oregon Springfield Utility Board P.O. Box 300 Springfield, Oregon 97477 Column 4 Decimal Fraction of Capacity Assigned 0.5441 0.5425 0.5390 0.7672 0.7638 1.0 1.0 0 1.0 City of Tacoma, Washington (12.50 Department of Public Utilities P.O. Box 11007 Tacoma, Washington 98411 0.2741 0.5930 0.5818 0.5734 0.5622 0.4563 0.4531 0.4556 0.4572 0.4611 0.2321 0.2358 0.7259 0.4074 0.4188 0.4263 0.4381 0.5439 0.5465 0.5441 0.5425 0.5390 0.7672 0.7638 Column 5 Decimal Fraction of Energy Assigned 0.5444 0.5428 0.5389 0.7679 0.7642 1.0 1.0 1.0 0.7259 0.4070 0.4182 0.4266 0.4378 0.5437 0.5469 0.5444 0.5428 0.5389 0.7679 0.7642 d Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned 1968 -69 thru 1979 -80 Tillamook Peoples' Utility District (0.50%) P.O. Box 433 Tillamook, Oregon 97141 1968 -69 thru 1979 -80 0 0 1.0 1.0 Vera Irrigation District No. 15 (0.20%) 601 N. Evergreen Veradale, Washington 99037 1968 -69 thru 1979 -80 0 0 1.0 1.0 The Washington Water Power Company (5.00 P.O. Drawer 1445 Spokane, Washington 99210 0 0 1.0 1.0 Page 7 ASSIGNEES (Names and addresses) DECIMAL FRACTION ASSUMED Los Angeles Department of Water and Power P.O. Box 111 Los Angeles, California Burbank Public Service Department P.O. Box 631 Burbank, California Glendale Public Service Department 119 North Glendale Avenue Glendale, California Sacramento Municipal Utility District P.O. Box 2391 Sacramento, California 95811 Pacific Gas and Electric Company 245 Market Street San Francisco, California 94106 San Diego Gas and Electric Company P.O. Box 1831 San Diego, California 92112 Southern California Edison Company P.O. Box 351 Los Angeles, California 90053 ASSIGNEES 0.207 0.020 0.020 0.076 0.338 0.048 0.291 EXHIBIT B s Canadian Entitlement Exchange Agreement executed by the United States of America acting by and through the Bonneville Power Administrator (Acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity herein described) and Columbia Storage Power Exchange and EXHIBIT INDEX Page SECTION 1— Definitions and Explanation of Terms 2 SECTION 2— Exhibits 3 SECTION 3 —Term of Agreement 3 SECTION 4— Transfer of Canadian Entitlement 3 SECTION 5— Exchange of Canadian Entitlement 3 SECTION 6— Payments to CSPE 5 SECTION 7— Payments to the Administrator 5 SECTION 8— Records and Accounts 6 SECTION 9— Adjustment of Participant's Percentage 6 SECTION 10— Default 6 SECTION 11— Modification of Contract Terms 7 SECTION 12— Particular Provisions Affecting Administrator 7 SECTION 13— Scheduling Arrangements 7 SECTION 14— Character of Service 7 SECTION 15— Continuity of Service 8 SECTION 16— Indivisibility of Agreement 10 SECTION 17— Notices and Computation of Time 10 SECTION 18— Interest of Member of Congress 10 SECTION 19 —Work Hours Overtime Compensation 10 SECTION 20— Convict Labor 10 SECTION 21— Assignment of Agreement 11 SECTION 22— Assignment to the Trustee 11 SECTION 23— Approval by Rural Electrification Administration 11 CANADIAN ENTITLEMENT EXCHANGE AGREEMENT This agreement is executed as of the 13th day of August, 1964, by and between UNITED STATES OF AMERICA (hereinafter referred to as the "Government acting by and through the Bonneville Power Administrator (hereinafter referred to as the "Administrator who is acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity hereinafter described, and COLUMBIA STORAGE POWER EXCHANGE, a nonprofit corporation organized under the laws of the State of Washington (hereinafter referred to as "CSPE and ,a (hereinafter referred to as the "Participant Recitals: 1. The President of the United States and the Prime Minister of Canada have executed the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin," signed at Washington, D. C., January 17, 1961 (here- inafter referred to as the "Treaty") 2. Under the terms of the Treaty, Canada is entitled to receive from the Government, as determined in accordance with the Treaty, one half of the average annual usable energy and one half of the dependable hydroelectric capacity which can be realized in the United States each year for the next sixty years as a result of the coordinated use of the improved stream flow on the Columbia River created by storage projects to be constructed in Canada pursuant to the terms of the Treaty. 3. CSPE has purchased from Canada for a term of years, through the Canadian Entity designated pursuant to the Treaty, Canada's rights to receive power and energy under the Treaty, and CSPE is authorized to incur indebtedness to finance such purchase, and to dispose of such rights under such arrangements as may be necessary to retire such indebtedness and pay the necessary expenses of CSPE incidental thereto. 4. The Participant is authorized to enter into and perform this agreement. 5. The Participant has found and determined that the execution of this agreement is necessary and advisable in order to provide for the actual and prospective needs of the Participant, and that the performance of this agreement will result in substantial economies to the Participant during the term hereof. 6. Pursuant to Article VIII of the Treaty, the United States and Canada have authorized the dis- position within the United States of a portion of the downstream power benefits to which Canada is entitled, subject to the general conditions and limitations set forth in exchanges of notes between the two countries. 7. The United States Entity, designated pursuant to Article XIV of the Treaty and acting in accordance with Article XI thereof, has approved the use for hydroelectric power purposes in the United States of the improvement in stream flow brought about by operation of the storage to be con- structed under the Treaty. 8. The Administrator is authorized to transmit and dispose of electric power and energy generated at various federal hydroelectric projects in the Pacific Northwest in accordance with the Bonneville Project Act, approved August 20, 1937, as amended, the Reclamation Project Act of August 4, 1939, the Flood Control Act of December 22, 1944, and pursuant to the following orders of the Secretary of the Interior: No. 2563 dated May 2, 1950, and No. 2860 dated January 19, 1962 as amended. Such projects, together with related transmission facilities owned by the Government, are hereinafter referred to as the "Columbia River Power System." 9. The Administrator is authorized by said Order No. 2860, as amended, to enter into such contracts, agreements, and arrangements, upon such terms and conditions and in such manner as he may deem necessary, as provided in said Bonneville Project Act, as amended. 10. The Administrator is authorized to enter into contracts with public and private power systems for the mutual exchange of unused excess power upon suitable exchange terms for the purpose of economical operation of, or providing emergency or breakdown relief for, the Columbia River Power System, and the Administrator has determined that (1) the implementation of the Treaty will make available to the Government large quantities of electric energy to meet the actual and prospective needs for such energy by publicly and privately owned public utilities, cooperatives and industries in the Pacific Northwest; (2) the Administrator will hereby be enabled to increase the net revenues to be received in the marketing of power from the Columbia River Power System; and (3) the mutual exchange of power as provided herein will result in a more economical operation of the Columbia River Power System. 11. The Government has determined that in order to accomplish the sale of Canada's entitlement to downstream power benefits in accordance with, and in implementation of, the Treaty and the Notes relating thereto exchanged between the United States and Canada on or prior to the effective date of this agreement (hereinafter referred to as the "Notes the Administrator must assure unconditionally the delivery, in exchange for such entitlement, of the agreed amounts of capacity and energy specified in the Canadian Entitlement Exchange Agreements. 12. The Administrator and the Division Engineer, North Pacific Division, Corps of Engineers, Department of the Army, have been designated the United States Entity pursuant to Article XIV of the Treaty, and the Administrator has been authorized to act for and on behalf of the United States Entity in the execution and performance of this agreement. 13. British Columbia Hydro and Power Authority, established under the British Columbia Hydro and Power Authority Act, 1964 (hereinafter referred to as `B. C. Hydro has been designated the Canadian Entity pursuant to Article XIV of the Treaty. Now, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows: SECTION 1— Definitions and Explanation of Terms For the purposes of this agreement (a) "Bond" or "Bonds" shall mean any bond or bonds, as the case may be, authenticated and delivered under the Bond Indenture (hereinafter defined) (b) "Bond Indenture" shall mean the trust indenture, dated as of September 1, 1964, by and between CSPE and Morgan Guaranty Trust Company, as trustee, securing the Bonds as originally executed, or, if amended or supplemented as in the Bond Indenture provided, as so amended or supplemented. (c) "Canadian Entitlement" shall mean all of the various rights and benefits acquired by CSPE pursuant to the provisions of the agreement, entitled the "Canadian Entitlement Purchase Agreement," between CSPE and B. C. Hydro, as such agreement is in effect at the time this agreement becomes effective. (d) "Canadian Entitlement Exchange Agreements" shall mean this and all similar agreements providing, in the aggregate, for the transfer by CSPE of one hundred percent of the Canadian Entitle- ment to the Participants, and the exchange by them of the Canadian Entitlement with the Administrator. 2 (e) "Contract Year" shall mean the twelve -month period commencing at 12:01 a.m. Pacific Stand- ard Time on April 1, 1968, or at the same time on April 1 of any year thereafter during the term of this agreement. (f) "Net Interest Cost" shall mean the quotient, expressed as a percentage (to the nearest 0.01 of 1% obtained by dividing (1) the interest payable over the term of the Bonds initially issued under the Bond Indenture from the date of such Bonds to the respective maturity dates thereof plus the amount by which the aggregate principal amount of such Bonds exceeds the purchase price paid to CSPE therefor or less the amount by which such purchase price exceeds the aggregate principal amount of such Bonds (in each case excluding accrued interest from such purchase price), by (2) the sum of the products obtained by multiplying the principal amount of such Bonds becoming due on each such maturity date by the number of years (including any fractions of a year) from the date of such Bonds to such maturity date; provided that Bonds for which a sinking fund has been established by the Bond Indenture shall be deemed to mature on the date of each sinking fund installment in the minimum principal amount required to be retired from such sinking fund installment. (g) "Participants" shall mean such of the organizations listed on Exhibit A as shall execute and deliver Canadian Entitlement Exchange Agreements. (h) "Participant's Percentage" shall mean the percentage appearing after the Participant's name on Exhibit A or such other percentage as shall be agreed to in writing by the parties hereto prior to the time this agreement becomes effective, as such percentage or such other percentage (as the case may be) may be adjusted in accordance with Section 9, and "participants' percentages" shall mean, as applied to any two or more participants, the percentages of such Participants under their Canadian Entitlement Exchange Agreements at the time such Agreements become effective, as such percentages may be adjusted in accord- ance with Section 9 of such Agreements. (i) "Trustee" shall mean the Trustee under the Bond Indenture for the time being, whether original or successor. SECTION 2— Exhibits Exhibits A, B and C are by this reference incorporated herein as fully as though set forth verbatim in the body of this agreement. SECTION 3 —Term of Agreement This agreement shall be effective upon the exchange of instruments of ratification of the Treaty, if such exchange occurs and the Bonds initially issued under the Bond Indenture are delivered prior to December 31, 1964 and at the time of such delivery the aggregate of the participants' percentages shall equal 100 per cent. It shall terminate on the later of (a) 12:00 p.m. on March 31, 2003, or (b) the date that all of the Bonds are paid or funds set aside for the payment or retirement thereof in accordance with the Bond Indenture. SECTION 4— Transfer of Canadian Entitlement CSPE hereby transfers and assigns to the Participant during the existence of this agreement the Participant's .Percentage of the Canadian Entitlement and the Participant hereby accepts such transfer and assignment and agrees to pay therefor as provided in Section 6. SECTION 5— Exchange of Canadian Entitlement (a) The Participant hereby transfers and assigns to the Administrator during the existence of this agreement the Participant's Percentage of the Canadian Entitlement, and the Administrator hereby accepts such transfer and assignment. (b) In exchange for such transfer and assignment to the Administrator of the Participant's Per- centage of the Canadian Entitlement, the Administrator agrees with CSPE and with the Participant that 3 during each month of each Contract Year the Administrator shall make available to the Participant the amounts of capacity and average energy computed as follows and as adjusted in accordance with Sections 5(c) and 5(d): (1) reduce the amounts of capacity and energy specified for each Contract Year in columns 2 and 3 of Exhibit B by 0.16 of one percent thereof for each 0.01 by which 4.59 percent exceeds the Net Interest Cost; provided, that such reduction, if any, shall not reduce the amounts of capacity and energy below those specified for such Contract Year in columns 4 and 5 of Exhibit B; (2) multiply the results obtained in Section 5(b) (1) by the Participant's Percentage. (c) A tabulation of the amounts of capacity and energy determined under Section 5(b) shall be submitted to the Administrator by the Participant within six months after the execution of this agreement. Such tabulation may be changed by the Participant from time to time, and each changed tabulation shall become effective at the beginning of the sixth Contract Year following its submission to the Administrator. Each such changed tabulation shall be subject to the following: (1) Within any Contract Year, energy may be exchanged with the Administrator for capacity in the ratio of one megawatt of average energy to 4.30 megawatts of capacity, provided that, except to the extent a greater ratio is reflected in Exhibit B, the amount of capacity to be made available in any Contract Year shall not exceed 2.5 times the average energy to be made available during such Contract Year. (2) Within any Contract Year, capacity may be exchanged with the Administrator for energy in the ratio of 4.30 megawatts of capacity to one megawatt of average energy, provided that if all such exchanges so tabulated would require the Administrator to provide energy in excess of the total amounts of energy to be made available to the Administrator in exchange for capacity under Section 5 (c) (1) of the Canadian Entitlement Exchange Agreements and the Administrator determines that such amount of excess energy cannot be made available, the Administrator shall allocate the amount of energy determined by him to be available for such purposes (which amount shall in no event be less than the energy exchanged for capacity under Section 5(c) (1) of the Canadian Entitlement Exchange Agreements) among the Participants requesting the exchange in proportion to their par- ticipants' percentages. The amount of average energy to be made available to the Participant during any Contract Year shall not exceed the amount of capacity to be made available to the Participant during such Contract Year. (3) The quotient obtained by dividing the capacity to he made available to the Participant during any Contract Year by the average energy to he made available to the Participant during such Contract Year shall not be greater or less than the corresponding quotient for the preceding Contract Year by more than 0.5 (five tenths). (4) The monthly amounts of energy specified in such tabulation for delivery in any Contract Year may be unequally distributed but only to the extent that the amount of energy specified in any month shall not be less than 85 percent of the highest amount of energy specified for the Participant in any one month of the Contract Year. (d) The Administrator shall make available to the Participant the amounts of capacity and energy determined in accordance with this Section 5 in the amounts and at the points of delivery specified and subject to the limitations set forth in Exhibit C, at unity power factor except as otherwise agreed upon between the Participant and the Administrator, and as adjusted for losses as specified in Exhibit C. CSPE agrees that Exhibit C may be changed and a new Exhibit C substituted therefor by agreement between the Participant and the Administrator without further notice to or approval by CSPE. (e) Within any month, the Administrator shall make available such energy as scheduled by the Participant up to the amount of capacity which the Administrator is obligated to make available to the Participant during such month. 4 5 SECTION 6— Payments to CSPE (a) Notwithstanding any suspension, interruption, interference, reduction or curtailment permitted by Section 15(a) and Section 15(b) but subject to the provisions of Section 15(e), the Participant shall, in full payment of the purchase price for the Participant's Percentage of the Canadian Entitlement, pay to CSPE an amount equal to the Participant's Percentage of the costs incurred by CSPE in purchasing the Canadian Entitlement, which amount shall be computed and paid as follows: (1) In each month an amount equal to the Participant's Percentage of the amounts which CSPE is required by the Bond Indenture, other than Section 7.02 thereof, to pay in such month to the Trustee including the fees and expenses of the Trustee and paying agents, other than amounts paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds; and (2) Amounts equal to the Participant's Percentage of all expenses incurred by CSPE for its sole corporate purposes other than amounts which CSPE is required by the Bond Indenture to pay to the Trustee and other than amounts paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds. (b) The Participant shall make the payments required under Section 6(a) (1) to be made in any month, on the 25th day of such month. CSPE shall cause to be mailed to the Participant statements setting forth, in reasonable detail and with appropriate reference to applicable provisions of the Bond Indenture, the amounts which the Participant is required to pay under Section 6(a) (1) during each Contract Year. Such a statement shall be mailed on or as soon as practicable after the beginning of each Contract Year and from time to time thereafter in the event of any changes in such required payments. The Participant shall make the payments under Section 6(a) (2) within twenty days after receipt from CSPE of a statement therefor. (c) On payments required to be made by the Participant under this Section 6 or Section 7 which are not paid when due, the Participant shall pay in addition to the amounts due a delayed payment charge of two percent of the unpaid amount due, except as to any portion thereof which may be disputed in good faith. Remittances postmarked at least five days prior to the due date or within 20 days after receipt of the applicable statement required by Section 6(b) will be accepted without assessment of the delayed payment charge. If the due date is a Sunday or a holiday, the next following business day shall be the last day on which payment may be made without addition of the delayed payment charge. In the case of payments due under Section 6(a), the delayed payment charge shall be paid to CSPE. In the case of payment due under Section 7, the delayed payment charge shall be paid to the Administrator. (d) Except as provided in Section 15(e), the obligation of the Participant to make payments as provided in this Section 6 shall not be subject to any reduction, whether by offset or otherwise. SECTION 7— Payments to the Administrator The Participant shall pay to the Administrator, in return for the use of the Government's trans- mission, transformation and related facilities in making capacity and energy available to the Participant pursuant to Section 5 hereof, for each month commencing April 1, 1968 and thereafter throughout the term of this agreement, within 30 days after date of a bill therefor, an amount equal to the product obtained by multiplying $0.125 by the number of kilowatts of capacity, before deduction for losses, which the Administrator has made available to the Participant during the month pursuant to Section 5 hereof, provided, however, that if the Participant is the owner of, or is a purchaser of a share of the output from, a nonfederal project supplying an "Allocation to Canadian Entitlement" under a "Canadian Entitlement Allocation Agreement" with the Administrator, such charge shall not apply to the amounts of capacity and energy made available to the Participant hereunder at the point where the owner of such project makes available such Allocation to Canadian Entitlement to the Government (designated in Exhibit C as a "Project Delivery Point to the extent that the amount of capacity made available to the Participant at such Project Delivery Point is not in excess of the amount of the "Capacity Allocation to Canadian Entitlement" supplied to the Government by the owner of such non- federal project at such Project Delivery Point and designated for the Participant in such Allocation Agreement. If such payments are not made as provided in this Section 7, except for amounts as may be disputed in good faith, the Administrator may, for the period of nonpayment, make available the capacity and energy required to be made available to the Participant in accordance with Section 5, at the high voltage bus of such of the Government's generating plants located on the Columbia River downstream from the Canadian border as the Administrator may designate, notwithstanding the provi- sions of Section 5(d). SECTION 8— Records and Accounts The Participant shall be entitled at any time to inspect by its agents, employees or accountants all of the books, records and papers of CSPE, and CSPE shall render to the Participant on or before the 1st day of July of each year an accounting of all receipts of and expenditures by CSPE during the preceding period from April 1 to March 31. SECTION 9— Adjustment of Participant's Percentage The Participant's Percentage shall be automatically increased for the remaining term of this agree- ment in the event that one of the Participants (herein called a "Defaulting Participant fails or refuses for any reason to make any payment required by Section 6 of the Canadian Entitlement Exchange Agreement of the Defaulting Participant and such failure or refusal continues for a period of 60 days from the date when such payment shall have become due and payable. The amount of such automatic increase shall be the product (expressed as a percentage) obtained by multiplying the participant's percentage of the Defaulting Participant by a fraction, the numerator of which is the Participant's Percentage and the denominator of which is the total of the participants' percentages of all Participants who are not Defaulting Participants; provided, however, that the cumulative total of all such increases shall not, without the consent of the Participant, exceed a maximum of one -fourth of the percentage appear- ing after the Participant's name in Exhibit A hereto. All -rights of a Defaulting Participant shall inure to the benefit of the Participants whose participants' percentages have been so increased to the extent of such increases. If the Participant's Percentage shall be increased as provided in this Section 9, the increase in capacity and energy to be made available by the Administrator pursuant to this agree- ment shall be made available at the point or points of delivery specified in Exhibit C and a new tabulation may be submitted pursuant to Section 5(c) relating to such increase, to be effective upon submission. If after giving effect to the foregoing provisions of Section 9 of the Canadian Entitlement Exchange Agreements, the participants' percentages of all Participants who are not Defaulting Participants shall not have been increased in an aggregate amount sufficient to provide for the payment by such Participants of 100% of the amounts required to be paid pursuant to Section 6 of all such Agreements, then in such event each Defaulting Participant shall, and hereby does, assign and transfer to CSPE that portion of its participant's percentage (and the rights associated therewith) which has not been assumed by the Participants who are not Defaulting Participants, but no such assignment and transfer shall relieve such Defaulting Participant of its liability for payments under its Canadian Entitlement Exchange Agreement. CSPE may, but shall not be required to, arrange for the transfer and sale, for the account of each such Defaulting Participant, of that portion of its participant's percentage (and such rights) so assigned and transferred. SECTION 10— Default In the event any of the Participants shall fail or refuse to pay any amounts due to CSPE under any of the Canadian Entitlement Exchange Agreements, the fact that any other Participant shall have assumed the obligation to make such payments pursuant to the provisions of Section 9 of any such Agreement shall not relieve the Defaulting Participant of its liability for such payments under its Agree- ment, and the Participants assuming such obligation, either individually or as a member of a group, shall have a right of recovery from the Defaulting Participant, and any Participant may commence such 6 suit, action or proceeding, at law or in equity, including suit for specific performance, as may be necessary or appropriate to enforce the obligations of the Defaulting Participant under its Agreement; provided, that if the cumulative obligations of the Defaulting Participant or Participants exceed the amount that is assumed by the other Participants under Section 9 of the Canadian Entitlement Exchange Agreements, CSPE shall be entitled to commence and prosecute such suit, action or proceeding as it may deem appropriate to recover such excess amounts. In the event and to the extent that the Participant fails or refuses for any reason to perform its obligations under this agreement, and such failure or refusal adversely affects the Government, the Government may commence such suit, action or proceeding, at law or in equity, including suit for specific performance, against the Participant as it may deem appropriate to protect the interests of the Government. SECTION 11— Modification of Contract Terms (a) This agreement cannot be amended, modified or otherwise changed by agreement of the parties in any manner that will impair or adversely affect the security, afforded by the provisions of this agree- ment, for the payment of the principal, interest and premium, if any, on the Bonds as they respectively become payable, so long as any of the Bonds are outstanding and unpaid or funds are not set aside for the payment or retirement thereof in accordance with the Bond Indenture. (b) This agreement is one of a series of similar agreements, which are uniform in all material respects, providing for the transfer by CSPE of one hundred percent of the Canadian Entitlement to the Participants and the exchange with the Administrator of such Entitlement for agreed amounts of power and energy to be delivered to the Participants by the Administrator. The Administrator shall, before the effective date of any amendment, modification or change of any of such agreements, excepting changes of Exhibit C and changes made prior to the time such agreements become effective in percentages set forth in Exhibit A, notify the Participant in writing of such amendment, modification or change, and this agreement shall, upon request by the Participant made not later than sixty days after the receipt of such notice, be amended, modified, or changed to include the same terms and conditions so granted to any other participant. (c) Without the written consent of the Participant and the Administrator, CSPE shall not amend, modify or otherwise change, or issue refunding Bonds under, the Bond Indenture so as to increase or accelerate the payments, individually or in the aggregate, to be made by the Participant to CSPE, or so amend, modify or otherwise change the sole corporate purposes specified in its Articles of Incor- poration as approved and filed May 11, 1964. SECTION 12— Particular Provisions Aflecting Administrator The Bond Indenture in execution form under which the initial Bonds are being issued and the contract for the sale of such Bonds in execution form, shall be subject to the approval of the Administrator. SECTION 13— Scheduling Arrangements (a) The Administrator shall make available to the Participant, in accordance with hourly schedules furnished by the Participant to the Administrator at least eight hours prior to each day, the amount of capacity and energy to which the Participant is entitled, as determined in accordance with Section 5.• If the Participant does not maintain dispatching facilities, the Administrator shall schedule deliveries as agreed between the Participant and the Administrator. (b) Deviation from scheduled deliveries shall be corrected as promptly as possible under conditions approximately equivalent to the conditions under which the deviation occurred. SECTION 14— Character of Service Electric energy shall be made available hereunder in the form of three -phase current alternating at a frequency of approximately sixty cycles per second. Deliveries thereof at the point or points of delivery 7 described in Exhibit C shall be made at the approximate voltage specified for such point. The amounts of electric energy and reactive power so delivered at such point or points during each month, and of the sixty minute integrated demands for such electric energy, shall be the amounts thereof determined from measurements made by the Government's watt -hour, var -hour and recording demand meters, respectively, installed to record the flow of electric energy and reactive power at the places and in the circuits specified in Exhibit C. SECTION 15— Continuity of Service (a) The Administrator may, for a period not in excess of 168 consecutive hours for any particular system emergency caused or created by any event reasonably beyond his control, interrupt or reduce deliveries of capacity or energy to or for the account of the Participant if such interruption or reduction is necessary in case of such system emergency, other than any circumstance covered by Section 15(b), and the Administrator shall not be liable for any damages sustained by the Participant as a result of the failure to make available capacity or energy during such period of interruption or reduction not in excess of 168 consecutive hours. For this purpose the term "system emergency" shall not include con- ditions of insufficient natural stream flows or any event caused by nonperformance by Canada or the Canadian Entity of its obligations under the Treaty and the Notes. (b) If the operation of the Government's transmission system is suspended, interrupted or interfered with as the result of (1) the occurrence of any event which is reasonably beyond its control (including, but not limited to, the failure or breakdown of transmission facilities, floods, fire, strikes or acts of God or the public enemy but excluding the failure or breakdown of generating facilities), or (2) repairs, maintenance or replacements made to assure continued transmission service to the Participant, the Admin- istrator shall not be obligated to deliver capacity or energy to or for the account of the Participant, as provided in this agreement, during such time and to such extent as such suspension, interruption or interference makes it reasonably impracticable to do so, and shall not be liable for any damages sustained by the Participant as a result of the failure to so deliver such capacity or energy during such time. (c) If the operations of the Government's facilities are suspended, interrupted, interfered with or curtailed due to any of the circumstances covered by Section 15(a) and 15(b), the Government shall exercise due diligence to resume such operations with all reasonable dispatch, and the Administrator shall restore any energy lost to the Participant as a result of such suspension, interruption, interference or curtailment under conditions approximately equivalent to the conditions under which the loss occurred. (d) The Government's "transmission system" as used in this Section 15 means the transmission facilities of the Columbia River Power System and: (1) transmission facilities of any utility used to make available capacity and energy to the Participant pursuant to this agreement, and (2) the transmission facilities of nonfederal project owners on the Columbia River used to transmit to the Administrator their agreed share of the capacity and energy to which Canada is entitled under the Treaty. (e) If for any reason other than as set forth in Sections 15(a). and 15(b) the Administrator does not make available in any particular month the capacity or energy required to be made available during such particular month pursuant to this agreement, the payments to be made by the Participant to CSPE in the month which next succeeds such particular month as provided in Section b (a) (1) shall be reduced by an amount computed by applying the following rates to the amounts of capacity and energy (before reduction of losses) not so made available in such particular month: $105.00 per megawatt of capacity for each week or fraction thereof and $2.70 per megawatt -hour of energy, each reduced by 0.16 of one per cent thereof for each 0.01 by which 4.27 per cent exceeds the Net Interest Cost For the purpose of such computation the amount of capacity and energy not made available by the Administrator shall include capacity and energy not made available as a result of the provisions of the following paragraph of this Section 15 (e). 8 If the Participant enters into commitments reasonably necessary to replace the capacity and energy required to be but not made available by the Administrator pursuant to the terms of this agreement, or if the Participant loses a then existing specific load or loads as the result of such non availability, then, even though the Administrator thereafter offers to increase deliveries on a specified date, the Participant shall be required to accept, and the Administrator shall only make available to the Participant, for a period of up to five years after the receipt of such offer, such reduced amounts of capacity and energy as shall be specified in a schedule for such five -year period submitted by the Participant to the Administrator; provided that such schedule shall be accompanied by a statement by the Participant in reasonable detail showing that it has made commitments reasonably necessary to replace, or that because of loss of load it cannot use as firm power resources, the difference between the capacity and energy required to be made available pursuant to the terms of this agreement and the 'educed amounts specified in such schedule; and further provided that such reduced amounts of capacity and energy, r respectively, specified in such schedule shall at least equal for each month the lowest respective amounts of capacity and energy made available to the Participant during any one or more months between the time when the Administrator first failed to make available full deliveries and the com- mencement of such five -year period. i (f) If in accordance with Section 15(e) the Participant's payment to CSPE in the month following any particular month is reduced, the Administrator shall be obligated to pay currently to the Participant an amount of cash computed by applying the following rates to the amounts of capacity and energy (before reduction for losses) not made available by the Administrator in such particular month: $105.00 per megawatt of capacity for each week or fraction thereof and $2.70 per megawatt -hour of energy, each reduced by 0.16 of one percent thereof for each 0.01 by which 4.27 percent exceeds the Net Interest Cost. For the purpose of such computation the amount of capacity and energy not made available by the Administrator shall include capacity and energy not made available as a result of the provisions of the last paragraph of Section 15(e). Notwithstanding the provisions of Section 6(b) all amounts paid to the Participant by the Administrator under this Section 15(f) shall forthwith upon receipt thereof be paid over to CSPE. Such payment by the Administrator shall be for the account of and as full liquidated damages to CSPE. The respective obligations of the Administrator and the Participant to make payments as provided in this Section 15(f) shall not be subject to any reduction, whether by offset or otherwise. (g) If there should be a dispute between the Participant and the Administrator concerning the facts set forth in any statement of the Participant accompanying a schedule submitted by the Participant to the Administrator pursuant to Section 15(e), such dispute shall be submitted promptly to arbitration. The Participant and the Administrator shall each appoint one arbitrator and the two arbitrators shall appoint a third arbitrator. The decision of at least two arbitrators shall be binding and conclusive upon the Participant and the Administrator. Pending the arbitrators' resolution of the dispute, the Participant shall continue to make the payments for the amounts of capacity and energy in dispute in accordance with Section 6; provided, however, that if it shall be determined that all or part of such payments made by the Participant pending outcome of the dispute, were an obligation of the Administrator under Section 15(f), then the Administrator shall be obligated to reimburse the Participant in full for the amounts which it is determined were the Administrator's obligation in the first instance. (h) Subject to the provisions of Section 15(a) and Section 15(b): (1) the obligation of the Administrator to make capacity and energy available to the Participant in accordance with Section 5 is, and shall remain, unconditional and (without limiting the generality of the foregoing) such obligation shall not be affected by any nonperformance by Canada or the Canadian Entity under the Treaty or the Notes; (2) the provisions of Section 15(e) and Section 15(f) do not, and shall not be construed to, in any manner modify, excuse, relieve, or provide an alternative to such obligation; and 9 (3) payments made by the Administrator to the Participant under Section 15(f) shall not relieve the Administrator from any liability he may have to the Participant for damages proximately resulting to the Participant from the failure of the Administrator to deliver capacity or energy under the provisions of Section 5. (i) Without limiting his obligations as set forth in this agreement, the Administrator shall first use the Canadian Entitlement in fulfilling his obligations under this agreement. SECTION 16— Indivisibility of Agreement This agreement is entire and indivisible and, accordingly, shall not be binding upon any of the parties hereto if it is not binding upon all of the parties hereto, but this agreement shall not be subject to termination by any party under any circumstances, whether based upon the default of any other party or otherwise. SECTION 17— Notices and Computation of Time Any notice required by this agreement to be given to any party shall be effective when it is received by such party, and in computing any period of time from such notice, such period shall commence at 12:00 p.m. on the date of receipt of such notice. SECTION 18— Interest of Member of Congress No member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this agreement or to any benefit that may arise therefrom. Nothing, however, herein contained shall be construed to extend to such agreement if made with a corporation for its general benefit. SECTION 19 —Work Hours Overtime Compensation In the event that any work is performed under this contract which may require or involve the employment of laborers or mechanics, no contractor or subcontractor contracting for any part of such work shall require or permit any laborer or mechanic, in any work week in which he is employed on such work, to work in excess of eight hours in any calendar day or in excess of 40 hours in such work week unless such laborer or mechanic receives compensation at a rate not less than one and one -half times his basic rate of pay for all hours worked in excess of eight hours in any calendar day or in excess of 40 hours in such work week, whichever is the greater number of overtime hours. In the event of any violations of the provisions of this Section 19, the contractor and any sub- contractor responsible therefor shall be liable to any affected employee for his unpaid wages and shall, in addition, be liable to the Government for liquidated damages. Such liquidated damages shall be computed, with respect to each individual laborer or mechanic employed in violation of the provisions of this Section 19, in the sum of $10 for each calendar day on which such individual was required or permitted to work in excess of eight hours or in excess of 40 hours in a work week without payment of the required overtime wages. The Administrator may withhold, or cause to be withheld, from any moneys payable on account of work performed pursuant to this contract, the full amount of unpaid wages required by this Section 19 and such sums as may be administratively determined to be necessary to satisfy any liabilities of such contractor or subcontractor for liquidated damages as provided in this Section 19. CSPE and the Participant shall each be deemed a "contractor" within the meaning of this Section 19. SECTION 20— Convict Labor Neither CSPE nor the Participant shall employ any person undergoing sentence of imprisonment at hard labor. 10 SECTION 21— Assignment of Agreement This agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the parties to this agreement, provided that the rights of the Participant under Section 5(c) shall not be transferable by assignment or otherwise to a party who is not one of the Participants. No assignment or transfer of this agreement shall relieve any party of any of its obligations hereunder, nor, except as provided in Section 9, shall such assignment or transfer change or modify the Administrator's obligation to make capacity and energy available in the amounts and at the points of delivery specified in Exhibit C without his prior consent. SECTION 22— Assignment to the Trustee It is intended that CSPE will assign to the Trustee all of the rights of CSPE under the Canadian Entitlement Exchange Agreements to the extent and for the period or periods provided by the Bond Indenture and the Participant and the Administrator hereby acknowledge and consent to such assignment. SECTION 23— Approval by Rural Electrification Administrator If the Participant is a party to an agreement or other instrument pursuant to which approval of this agreement by the Rural Electrification Administration is required as listed on Exhibit A, this agreement shall not be binding upon any of the parties hereto if it shall not have been approved by the Administrator of the Rural Electrification Administration or his delegate after the execution of this agreement and prior to the effectiveness hereof pursuant to Section 3. Evidence of such approval shall be noted on or attached to all executed counterparts of this agreement by the Government. If so approved this agreement shall be binding upon all of the parties hereto in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have executed this agreement in several counterparts. (SEAL) (SEAL) Attest: /s/ A. J. PORTER (SEAL) Attest: 11 UNITED STATES OF AMERICA By /s/ CHARLES F. LUCE Bonneville Power Administrator as the Administrator and for and on behalf of the United States Entity. COLUMBIA STORAGE POWER EXCHANGE By /S/ HOWARD C. ELMORE By [NAME OF PARTICIPANT] Exhibit A Participants Percentage Public Utility District No. 1 of Benton County 0.80% Village of Bonners Ferry, Idaho 0.05 Central Lincoln Peoples' Utility District 1.00 Public Utility District No. 1 of Chelan County 1.00 Public Utility District No. 1 of Clark County 3.00 Clatskanie Peoples' Utility District 0.20 *Coos -Curry Electric Cooperative, Inc. 0.50 City of Coulee Dam, Washington 0.10 Public Utility District No. 1 of Cowlitz County.... 2.50 *Public Utility District No. 1 of Douglas County 0.20 City of Eugene, Oregon 5.50 *Flathead Electric Cooperative, Inc. 0.10 City of Forest Grove, Oregon 0.30 Public Utility District No. 1 of Franklin County 0.80 Public Utility District No. 2 of Grant County 0.45 Public Utility District No. 1 of Grays Harbor County 1.50 *Idaho County Light and Power Cooperative Association, Inc. 0.10 *Inland Power Light Company 0.50 *Lane County Electric Cooperative, Inc. 0.40 *Lincoln Electric Cooperative, Inc. (Mont.) 0.10 *Lincoln Electric Cooperative, Inc. (Wash.) 0.10 City of McMinnville, Oregon 0.40 *Missoula Electric Cooperative, Inc. 0.10 *Nespelem Valley Electric Cooperative, Inc. 0.05 *Northern Lights, Inc.. 0.35 Pacific Power Light Company 10.00 Public Utility District No. 1 of Pend Oreille County 0.20 City of Port Angeles, Washington 0.50 Portland General Electric Company 17.50 Puget Sound Power Light Company 17.50 *Ravalli County Electric Cooperative, Inc... 0.10 City of Richland, Washington 0.80 Salem Electric 0.40 City of Seattle, Washington 12.50 Public Utility District No. 1 of Skamania County 0.20 Public Utility District No. 1 of Snohomish County 1.50 City of Springfield, Oregon 0.50 City of Tacoma, Washington 12.50 *Tillamook Peoples' Utility District 0.50 Vera Irrigation District No. 15 0.20 The Washington Water Power Company 5.00 Approval of this agreement by Rural Electrification Administration required. 12 i Column 1 Column 2 Column 3 Column 4 Column 5 Contract Year Capacity Energy Capacity (4/1 -3/31) (MW) (Average MW) (MW) 1968 -69 191 113 191 1969 -70 1026 603 972 1970 -71 1034 603 980 1971 -72 1042 603 987 1972 -73 1050 603 995 572 1973 -74 1452 800 1377 759 1974 -75 1461 800 1385 759 1975 -76 1454 779 1379 739 1976 -77 1448 758 1373 719 1977 -78 1436 727 1362 689 1978 -79 1423 693 1350 658 1979 -80 1403 654 1331 621 1980 -81 1382 614 1311 583 1981 -82 1367 574 1297 545 1982 -83 1322 548 1254 520 v 1983 -84 1282 521 1216 495 1984 -85 1234 492 1172 468 1985 -86 1195 468 1134 444 1986 -87 1152 440 1093 418 1987 -88 1109 414 1052 393 1988 -89 1066 387 1012 368 1989 -90 1072 367 1017 349 1990 -91 1077 347 1022 330 1991 -92 982 335 932 318 1992 -93 889 321 844 305 1993 -94 795 308 755 293 1994 -95 702 293 666 279 1995 -96 607 282 576 268 1996 -97 512 267 486 254 1997 -98 496 259 471 246 1998 -99 438 226 416 215 1999 -00 211 109 200 103 2000 -01 203 104 192 99 2001 -02 197 100 187 95 2002 -03 176 98 167 93 Points of Delivery (The material for this Exhibit will vary with each Participant) 13 Exhibit B u �,.67 Energy (Average MW) 113 X 0 572 572 572 Exhibit C I Form of DIRECTION FOR PAYMENTS TO TRUSTEE EXHIBIT D THIS AGREEMENT is executed as of the 13th day of August, 1964, and shall become effective at the same time as the Participant's Exchange Agreement referred to below. WHEREAS, the Participant whose consent is evidenced hereon has executed a Canadian Entitlement Exchange Agreement (the "Participant's Exchange Agreement with the United States of America, acting by and through the Bonneville Power Administrator, and Columbia Storage Power Exchange "CSPE a non profit, non -stock corporation organized under the laws of the State of Washington; and WHEREAS, CSPE is to execute and deliver its Bond Indenture, to be dated as of September 1, 1964, to Morgan Guaranty Trust Company, New York, New York (the "Trustee WHEREAS, in and by the Bond Indenture CSPE will transfer, assign and pledge with and set over to the Trustee, its successors in trust and assigns, all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement (including, without limitation, all reversionary rights, if any, in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements, except that unless an Event of Default shall have happened and be continuing, CSPE is to be permitted to receive and use for its corporate purposes the moneys payable to it pursuant to Section 6(a) (2) of the Exchange Agreements; and WHEREAS, the Participant has acknowledged and consented, and does hereby acknowledge and consent, to such transfer, assignment and pledge; and WHEREAS, in and by the Bond Indenture CSPE will covenant at any and all times to give such further assurances as may be necessary or desirable for, among other things, the better assuring, transferring, assigning and pledging to the Trustee of the rights, moneys and other property intended to be transferred, assigned or pledged by the Bond Indenture. WITNE SSE TH: (1) CSPE and the Trustee hereby irrevocably agree and CSPE irrevocably directs that, so long as any Bonds shall be issued and outstanding under the Bond Indenture, 1 each payment required to be made to CSPE by the Participant under Section 6 or 15 of the Participant's Exchange Agreement shall be made by the Participant directly to the Trustee, for the account of CSPE,'at the time that such payment is required by such Section 6 or 15 to be made to CSPE, except that unless an Event of Default shall have happened and be continuing, all moneys required to be paid by the Participant under Section 6(a) (2) of the Participant's Exchange Agreement shall be paid by it to CSPE to be used for the latter's corporate purposes. Any payment pursuant to the provisions of the Participant's Exchange Agreement, other than Section 6(a) (1) thereof, made directly to the Trustee shall be accompanied by a written statement setting forth the subsection or subsections of the Participant's Exchange Agreement under which such payment is made, and if more than one subsection is set forth, the amount paid under each subsection shall be stated. (2) CSPE shall be and remain obligated to keep and perform all of the cove- nants and agreements to be kept and performed by CSPE pursuant to the provisions of the Participant's Exchange Agreement. (3) Each term used herein which is not herein defined shall have the meaning set forth in the Bond Indenture. (4) This agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of CSPE and the Trustee. (SEAL) Attest: (SEAL) Attest: (SEAL) Attest: COLUMBIA STORAGE POWER EXCHANGE By MORGAN GUARANTY TRUST COMPANY, Trustee By The undersigned Participant does hereby consent to the foregoing agreement and direction. By Trust Officer August 26, 1964 NEW ISSUE Interest exempt from present Federal income taxes, in the opinion of Bond Counsel and Counsel to the Underwriters, based upon the existing statute and regulations and a specific ruling to that effect issued by the Internal Revenue Service with respect to the Bonds. $314 Columbia Storage Power Exchange (A Washington Nonprofit, Nonstock Corporation) Columbia Storage Power Exchange Revenue Bonds $106,520,000 Serial Bonds due annually April 1, 1970 to 1986, inclusive. $207,580,000 3 %g Term Bonds due April 1, 2003. The Bonds will be dated September 1, 1964; principal and interest (semi annually April 1 and October 1; first coupon April 1, 1965 for seven months) on coupon Bonds and principal on fully registered Bonds will be payable at the option of the holder at The Chase Manhattan Bank, New York, New York, Continental Illinois National Bank and Trust Company of Chicago, Chicago, Illinois, Seattle -First National Bank, Seattle, Washington or Bank of America National Trust and Savings Association, San Francisco, California. Payment of interest on fully registered Bonds will be made by the Trustee. Morgan Guaranty Trust Company of New York is Trustee. The Bonds will be issued in coupon form in the denomination of $5,000, registrable as to principal only, and in fully registered form in the denomination of $5,000, or any multiple thereof. Coupon and fully registered Bonds will be interchangeable as set forth herein. The Bonds will be subject to redemption prior to maturity (i) out of any sinking fund installments for the Term Bonds, on October 1, 1974 and on each April 1 and October 1 thereafter to and including April 1, 2003, and (ii) at the election of Columbia Storage Power Exchange, at any time on or after October 1, 1972, as a whole or in part (in inverse order of maturities in the case of any redemption in part of Serial Bonds), in each case at the respective redemption prices (expressed as percentages of the principal amount) set forth below, together with accrued interest to the redemption date: Redemption Prices At Election For the Period During Which Redeemed of CSPE Sinking Fund October 1, 1972 to and including September 30, 1974 104% Thereafter to and including September 30, 1978 104 1001/2% Thereafter to and including September 30, 1984 103 1001/2 Thereafter to and including September 30, 1989 102 100 Thereafter to and including September 30, 1994 101 100 Thereafter 100 100 AMOUNTS, COUPON RATES, MATURITIES, YIELDS OR PRICES (Due April 1) 3,200,000 3 1970 3.00% 6,000,000 3 1979 3.55% 5,780,000 3 1971 3.10 6,000,000 3.60 1980 100 6,465,000 3 1972 3.20 6,000,000 3.60 1981 100 6,810,000 3 1973 100 6,000,000 3.60 1982 3.65% 12,265,000 3 1974 3.30% 6,000,000 3.60 1983 3.65 6,000,000 3 1975 3.35 6,000,000 3.70 1984 100 6,000,000 3 1976 3.40 6,000,000 3.70 1985 100 6,000,000 3 1977 3.45 6,000,000 3.70 1986 100 6,000,000 3 1978 100 $207,580,000 3 Term Bonds due April 1, 2003 Price 100 (Approximate Yield 3.85% to Maturity) (Plus Accrued Interest) Blyth Co., Inc. Merrill Lynch, Pierce, Fenner Smith John Nuveen Co. Incorporated (Incorporated) Kidder, Peabody Co. Francis I. duPont Co. B. J. Van Ingen Co. Inc. Smith, Barney Co. Incorporated White, Weld Co. Carl M. Loeb, Rhoades Co. Blair Co., Granbery, Marache Incorporated These Bonds are offered for delivery when, as and if issued and received by the Underwriters, subject to prior sale, to the right to reject any order and to withdrawal or modification of the offer without notice. Legal matters relative to authorization and issue of these Bonds are subject to approval by Messrs. Wood, King, Dawson Logan, and by Messrs. Culp, Dwyer, Guterson Edwards, Bond Counsel and Counsel, respectively, to Columbia Storage Power Exchange. Certain legal matters will be passed upon by Messrs. Sullivan Cromwell, Counsel to the Under- writers. It is expected that the Bonds in definitive form will be ready for delivery on or about September 16, 1964. This does not constitute an offer to sell the Bonds in any State to any person to whom it is unlawful to make such an offer in such State. No dealer, salesman or any other person has been authorized to give any information or to make any representations, other than those contained herein in connection with the offering of the Bonds, and if given or made, such information or representations must not be relied upon. SUMMARY STATEMENT On January 17, 1961, the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin" was signed by the United States and Canada. Formal ratification of the Treaty and delivery of the 1964 Bonds are expected to occur simultaneously on or about September 16, 1964. The Treaty and the notes exchanged pursuant to the Treaty provide for the construction, maintenance and operation by Canada of storage dams and reservoirs in British Columbia on the Columbia River at Mica Creek and at Arrow Lakes, and on one or more tributaries of the Kootenay River near Duncan Lake (See Map on page 4) to provide an aggregate of 15 5 million acre -feet of usable storage. The controlled release of water so stored is expected to provide flood control benefits and will result in increased dependable capacity and average annual usable energy at hydroelectric power projects in the Columbia River Basin in the United States. The Treaty specifies that the United States and Canada are each entitled to one -half of this increase in capacity and energy. Canada has agreed to the sale of its entitlement to such capacity and energy to a single purchaser in the United States for a term of years for $254,400,000 (as adjusted) which is expected to be paid on or about September 16, 1964. To make this purchase Columbia Storage Power Exchange "CSPE a nonprofit, nonstock corporation, has been organized for the benefit of the three Public Utility Districts in the State of Washington owning hydroelectric projects on the main stem of the Columbia River. In turn, CSPE has entered into Canadian Entitlement Exchange Agreements (the "Exchange Agreements with the Bonneville Power Administrator (the "Administrator acting in his capacity as the Adminis- trator and acting for and on behalf of the United States Entity to be designated pursuant to the Treaty, and with certain Pacific Northwest electric utilities (the "Participants whereby CSPE has transferred 100% of the Canadian Entitlement to the Participants on a percentage share basis and the Participants have transferred the Canadian Entitlement to the Administrator in exchange for specified amounts of capacity and energy. The Exchange Agreements provide that the obligation of the Administrator to make available such capacity and energy to the Participants in accordance therewith is unconditional and such obligation is not affected by any failure by Canada to construct, maintain or operate the storage dams. The Participants comprise 14 utility districts, 11 municipalities and 12 cooperatives, which have purchased and exchanged with the Administrator 50% of the Canadian Entitlement, and four utility companies, which have purchased and exchanged with the Administrator the remaining 50% of the Canadian Entitlement. The following seven Participants have so purchased and exchanged 80.5% of the Canadian Entitlement: City of Eugene, Oregon (5.5 Pacific Power Light Company (10 Portland General Electric Company (17.5 Puget Sound Power Light Company (17.5 City of Seattle, Washington (12.5% City of Tacoma, Washington (12.5% and The Washington Water Power Company (5 The proceeds from the sale of the 1964 Bonds will be used to finance the purchase of the Canadian Entitlement by CSPE and to pay the corporate expenses of CSPE and interest on the 1964 Bonds to and including April 1, 1969. Commencing April, 1969 the aggregate annual payments to CSPE under the Exchange Agreements are required to be sufficient to pay the principal of and interest on the 1964 Bonds and the expenses of CSPE. The Attorney General of the United States has concurred in the opinion of the Solicitor of the Department of the Interior that, when delivered in the manner referred to in this Official Statement, the Exchange Agreements will be valid and binding agreements of the United States enforceable in accordance with their terms. 2 TABLE OF CONTENTS Page Summary Statement 2 Map— Existing and Potential Power Development, Columbia River and Main Tributaries 4 Purpose of Issue 5 Columbia Storage Power Exchange 5 Security for the 1964 Bonds 6 The Treaty 7 The Treaty and the Notes 7 The Canada -B. C. Agreement 8 The Canadian Entitlement Purchase Agreement 8 The Storage Dams and the Downstream Power Benefits 8 The Dams 8 The Downstream Power Benefits 9 Application of Bond Proceeds 10 Canadian Entitlement Exchange Agreements 10 Certain Definitions 11 Term of the Exchange Agreements 11 Payment for Canadian Entitlement 11 Adjustment of Payments 11 Obligation of the Administrator 12 Adjustment of Participant's Percentage....... 12 Certain Other Provisions 12 Canadian Entitlement Exchange Agreement Participants 13 Bonneville Power Administration 13 Table of Canadian Entitlement Exchange Agreement Participants— Certain Statistical and Financial Data for 1963 14 Allocation, Assignment and Coordination Agreements 16 The Allocation Agreements 16 The Assignment Agreements 16 The Coordination Agreement 16 Power Supply in the Pacific Northwest 16 Northwest Power Pool 16 Coordination Agreements 17 Power Requirements and Resources —West Group Area 17 Table of Loads and Resources —West Group Area Northwest Power Pool 18 Pacific Northwest- Pacific Southwest Intertie 18 Annual Power Costs 19 Table of Debt Service and Estimated Annual Power Costs 20 Description of the Bonds and Certain Provisions of the Indenture 22 Description of the 1964 Bonds 22 Refunding Bonds 23 Bond Fund; Flow of Funds 24 Excess Moneys in the Reserve Account 25 Investment of Funds 25 Certain Covenants 25 Events of Default; Remedies 26 Supplemental Indentures; Amendments 27 Tax Exemption 27 Litigation 27 Legal Opinions 27 Exhibits 28 Miscellaneous 28 Map Electric Utility Service Areas Center Spread Exhibit 1— Summary Engineering Report, dated August 26, 1964, of R. W. Beck and Associates 1 -1 Exhibit 2— Letter, dated July 27, 1964, of British Columbia Hydro and Power Authority 2 -1 Exhibit 3 —Form of Exchange Agreements 3 -1 Exhibit 4 —Form of Opinion of Messrs. Wood, King, Dawson Logan with respect to the legality of the 1964 Bonds 4 -1 3 PREPARED BY R.W. BECK and ASSOCIATES Analytical and Consulting Engineers Seattle, Washington Columbus, Nebraska Denver, Colorado E Portland lB Salem Phoenix, Arizona Vancouver Y REACH 7/2 notches ,W,1 S H Tacoma Co/umb/o BONNEVILLE (F) 5/8 .O •Ls WELLS 542 {(LOCK ISLAND T 2/2 WANAPUM 831 CHIEF JOSEPH (F) /024 Yakima 0 PRIEST RAPIDS 788 BEN FRANKLIN 352 Riv er MCNARY(F) 980 JOHN DAY(F) /350 THE DALLES(F) ///9 •0 OREGON Olympia BOUN ARY 540 SL�OCAN 47 BOX CANYON 60 0 Spokane WAWA EV N MI LOWER g R O ANITE(F LOWER MONUMENTAL (F) 405 River n KATKA I /00 IClnarwa ASOTIN(F 288 UPPER BONN FALLS LOWER BONNING •N FALLS 47 FALLS(F) 43 CABINET PENNY CLIFFS 292 IBBY (F) 344 NOXON RAPIDS 283 1. THOMPSON FALLS 30 KERR /68 HUN',Y. EdF) Butts DOWNIE.CREEK /000 REVELST CANTO BRITISH COLUMBIA rPi BRILLIANT cA- mks MURPHY CREEK GRAND COULEE(F) 1944 LITTLE GOOSE(F) 405 CE H RBOR(F) HELLS CANYON 340 OXBOW /90 BROWNLEE o EXISTING and POTENTIAL POWER DEVELOPMENT COLUMBIA RIVER and MAIN TRIBUTARIES LEGEND HIGH MOUNTAIN SHEEP /200 0 0 Boles Existing Dam, Under p' Construction, Licensed or Canadian Treaty Project Authorized or Under Active Consideration (F) /820 I DAHO Potential Site Federal Project Nameplate Rating- KW(000) ALBERTA p r OFFICIAL STATEMENT OF COLUMBIA STORAGE POWER EXCHANGE relating to its COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS August 26, 1964 This Official Statement, including the cover page, summary statement and the exhibits attached hereto, is furnished by Columbia Storage Power Exchange "CSPE in connection with the sale of $314,100,000 Columbia Storage Power Exchange Revenue Bonds, to be dated September 1, 1964 (the "1964 Bonds by CSPE to the underwriters and is for the information of all who may become holders of the 1964 Bonds. The 1964 Bonds are being issued under a Bond Indenture (the "Indenture to be dated as of September 1, 1964, between CSPE and Morgan Guaranty Trust Company of New York (the "Trustee PURPOSE OF ISSUE On January 17, 1961, the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin" (the "Treaty was signed for the United States by President Eisenhower and for Canada by Prime Minister Diefen- baker. Canada is entitled to one -half of the increase in dependable capacity and average annual usable energy in the United States, as defined in the Treaty, resulting from the construction and operation of three storage dams in British Columbia. Pursuant to the Canadian Entitlement Purchase Agreement (hereinafter described) Canada's rights to such one -half of the increased capacity and energy have been sold for a term of years to CSPE. The rights so sold, together with the various other rights and benefits acquired by CSPE under the Canadian Entitlement Purchase Agreement, are hereinafter sometimes referred to as the "Canadian Entitlement The proceeds from the sale of the 1964 Bonds will be used to finance the purchase by CSPE of the Canadian Entitlement and to pay the estimated corporate expenses of CSPE and interest on the 1964 Bonds to and including April 1, 1969. (See "Application of Bond Proceeds Formal ratification of the Treaty is expected to occur on or about September 16, 1964 and the delivery of the 1964 Bonds will occur simultaneously with such ratification (the "Ratification Date COLUMBIA STORAGE POWER EXCHANGE CSPE was organized on May 11, 1964 under the nonprofit, nonstock corporation law of the State of Washington for the benefit and with the approval of Public Utility District No. 1 of Chelan County, Washington, Public Utility District No. 1 of Douglas County, Washington, and Public Utility District No. 2 of Grant County, Washington (hereinafter referred to collectively as the "Districts CSPE has been organized as the instrumentality of the Districts to act on their behalf as the single purchaser of the Canadian Entitlement. The principal place of business of CSPE is 20 North Main Street, East Wenatchee, Washington. The corporate purposes of CSPE are limited to the execution, performance and enforcement of the contracts and indentures necessary to make a single purchase of the Canadian Entitlement, to incur indebtedness necessary to finance or refinance such purchase, and to dispose of the Canadian Entitlement under such arrangements as may be necessary to retire such indebtedness and pay the necessary incidental expenses of the corporation. Such purposes may be modified only by unanimous consent of the member- ship of CSPE. 5 Each of the organizations listed below has nominated a member of CSPE and such nominations were approved by the Districts. The management of CSPE is vested in a Board of Trustees presently composed of the 11 members of the corporation. Upon the death or resignation of any member, the organization which nominated or appointed him has the right to appoint a successor member. The nominating organizations and the members, trustees and officers of CSPE are as follows: Nominating Organizations Members Position Public Utility District No. 1 of Chelan County Public Utility District No. 1 of Douglas County Public Utility District No. 2 of Grant County Public Utility District No. 1 of Cowlitz County Public Utility District No. 1 of Pend Oreille County City of Seattle City of Tacoma City of Eugene Portland General Electric Company Puget Sound Power Light Company The Washington Water Power Company 6 Howard C. Elmore Fred W. Lieberg Everett B. Gibbons O. G. Hittle V. P. Campbell John M. Nelson C. A. Erdahl Byron Price A. J. Porter L. E. Karrer M. F. Hatch Trustee and President Trustee Trustee and Treasurer Trustee Trustee Trustee and Vice President Trustee Trustee Trustee and Secretary Trustee Trustee R. W. Beck and Associates, Seattle, Washington (the "Consulting Engineer has been employed by CSPE as its Consulting Engineer in matters relating to this financing. No part of any net earnings of CSPE may inure to the benefit of any member or other private person either before, upon or after dissolution of CSPE. Upon retirement of the indebtedness incurred to finance or refinance the purchase of the Canadian Entitlement, all the net assets of CSPE are to be distributed in equal shares to Public Utility District No. 1 of Chelan County, Public Utility District No. 1 of Douglas County, and Public Utility District No. 2 of Grant County, and as soon thereafter as prac- ticable CSPE is to be dissolved. The Districts have approved the issuance of the 1964 Bonds. SECURITY FOR THE 1964 BONDS CSPE has entered into Canadian Entitlement Exchange Agreements (the "Exchange Agreements with the United States, acting by and through the Bonneville Power Administrator (the "Administrator acting in his capacity as the Administrator and acting for and on behalf of the United States Entity to be designated pursuant to the Treaty, and with the organizations listed in Exhibit A thereto (the "Participants The Exchange Agreements provide for the transfer and assignment by CSPE of 100% of the Canadian Entitlement to the Participants on a percentage share basis and the transfer and assign- ment by the Participants of the Canadian Entitlement to the Administrator in exchange for specified annual amounts of capacity and energy to be made available during the period from April 1, 1968 through March 31, 2003. The Exchange Agreements provide that the obligation of the Administrator to make available such capacity and energy to the Participants in accordance therewith is unconditional and such obligation is not affected by any failure by Canada to construct, maintain or operate the storage dams. Commencing April, 1969 the aggregate annual payments to CSPE under the Exchange Agree- ments are required to be sufficient to pay the principal of and interest on the 1964 Bonds and the expenses of CSPE (See "Payment for Canadian Entitlement" and "Adjustment of Payments Pursuant to the Indenture CSPE is to transfer, assign and pledge with and set over to the Trustee all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements; provided, however, that unless there shall be an event of default under the Indenture, moneys which are payable to CSPE under the Exchange Agreements for its corporate purposes (other than for payments to the Trustee under the Indenture) may be retained and used by CSPE for such purposes. The Bonds are solely the obligations of CSPE and are not obligations of the Districts or any other person or organization. THE TREATY The Treaty and the Notes On March 16, 1961, the United States Senate gave its advice and consent to ratification of the Treaty. Following extended negotiations leading to arrangements for the sale of the Canadian Entitle- ment in the United States, the House of Commons and the Senate of Canada approved ratification on June 5, 1964 and June 10, 1964, respectively. The Treaty is to become effective upon exchange of instruments of ratification on the Ratification Date. In his message to the United States Senate President Eisenhower stated: "The treaty is an important step toward achieving optimum development of the water resources of the Columbia River Basin as a whole from which the United States and Canada will each receive benefits materially larger than either could obtain independently." The Treaty provides for regulation of the Canadian portion of the Columbia River to produce flood control, power and other incidental benefits in the United States as well as benefits in Canada. The Treaty obligates Canada, among other things, to construct, maintain and operate water storage facilities in British Columbia on the Columbia River near Mica Creek and Arrow Lakes and on one or more tributaries of the Kootenay River near Duncan Lake (See Map on page 4) to provide an aggregate of 15,500,000 acre -feet of storage usable for improving the flow of the Columbia River. In consideration for the construction, maintenance and operation of the three storage facilities, Canada will be entitled, among other things, to receive one -half of the downstream power benefits which are defined in the Treaty as the difference in the hydroelectric power capable of being generated in the United States with and without the use of Canadian storage as determined in accordance with the Treaty (See "The Downstream Power Benefits Under the Treaty Canada and the United States will, on the Ratification Date, designate entities which will be empowered to implement the Treaty. Canada will designate the British Columbia Hydro and Power Authority, established under the British Columbia Hydro and Power Authority Act, 1964 ("B. C. Hydro as the Canadian Entity (the "Canadian Entity and the United States will designate the Administrator and the Division Engineer, North Pacific Division, Corps of Engineers, Department of the Army, as the United States Entity (the "United States Entity On the Ratification Date the United States Entity, acting in accordance with Article XI of the Treaty, will approve the use for hydroelectric power purposes in the United States of the improvement in stream flow brought about by operation of the storage dams and will authorize the Administrator to act for and on behalf of the United States Entity in the execution and performance of the Exchange Agreements. Pursuant to an exchange of notes, dated January 22, 1964, between the Canadian Secretary of State for External Affairs and the Secretary of State of the United States, the sale of the Canadian Entitlement to a single purchaser in the United States through B. C. Hydro was authorized. CSPE was organized subsequently to act as this purchaser and has entered into the Canadian Entitlement Purchase Agreement with B. C. Hydro (the "Purchase Agreement for the purchase of the Canadian Entitlement for a term of years expiring 30 years from the respective dates on which the storage dams are required to be fully operative for power purposes. By notes to be exchanged on the Ratification Date the Purchase Agree- ment and the disposition of the Canadian Entitlement within the United States is to be approved by the United States and Canada. The notes exchanged in January and the notes to be exchanged on the Ratification Date are hereinafter referred to collectively as the "Notes The dates on which the dams are required by the Purchase Agreement to be fully operative for power purposes and the approximate amount of storage for each of the dams are as follows: Duncan Lake (1,400,000 acre -feet) on April 1, 1968; Arrow Lakes (7,100,000 acre -feet) on April 1, 1969; and Mica Creek (7,000,000 acre -feet) on April 1, 1973. CSPE is required to pay $254,400,000 in United States funds as of October 1, 1964 for the Canadian Entitlement, such amount being subject to adjustment in the event of payment on a date earlier than 7 October 1, 1964. The purchase price is to be paid to Canada pursuant to the Purchase Agreement and the Notes for application towards the cost of constructing the storage dams and is to be transferred by Canada to British Columbia pursuant to an Agreement between Canada and British Columbia, signed July 8, 1963 and supplemented January 13, 1964 "The Canada -B. C. Agreement In the event that the storage dams are not fully operative in accordance with the schedule set forth above or if, during the term of the Purchase Agreement, the storage is not operated as required by the hydroelectric operating plans formulated under the Treaty and the Canadian entitlement to downstream power benefits is thereby reduced, B. C. Hydro is obligated to make compensation therefor as described in the Purchase Agreement. If B. C. Hydro fails to make such compensation, Canada is obligated under the Notes to make such compensation to the United States. The Canada -B. C. Agreement The Canada -B. C. Agreement provides that all proprietary rights, title and interests of Canada arising under the Treaty belong to British Columbia absolutely for its own use, including, among other things, Canada's entitlement to downstream power benefits and moneys payable to Canada in return for flood control. For flood control in the United States provided by Canada under the Treaty, the United States is required to pay, in installments as the storage dams become operative, a total of $64,400,000 in United States funds, which is to be provided from Congressional appropriations. Canada shall, as soon as it receives the purchase price under the Purchase Agreement and other moneys under the Treaty, pay the equivalent thereof, in Canadian funds, to British Columbia. The Canada -B. C. Agreement also provides that British Columbia shall, among other things, at its own expense, construct or arrange for the construction of all the dams and operate or arrange for the operation of all the storages required by the Treaty. British Columbia is to finance the storage dams by use of the funds derived from the sale of the Canadian entitlement to downstream power benefits, from flood control benefits and from other sources as required. The letter of B. C. Hydro attached as Exhibit 2 to this Official Statement summarizes the construction program and other details in connection with the storage dams. The Canadian Entitlement Purchase Agreement The Purchase Agreement under which CSPE is purchasing the Canadian entitlement to down- stream power benefits from B. C. Hydro is to become effective on the Ratification Date and will terminate on March 31, 2003. B. C. Hydro has agreed with CSPE that it will undertake all requisite construction work so that the storage dams will be fully operative for power purposes on the dates indicated above. B. C. Hydro also has agreed that it will operate and maintain such storages in accordance with the provisions of the Treaty and any arrangements made pursuant to the Treaty. Any reduction in the Canadian entitlement to downstream power benefits because one or more of the Canadian storages is not fully operative for power purposes as scheduled or because of a failure to operate such storages in accordance with the Treaty shall require compensation either in cash or power, or both, by B. C. Hydro to CSPE as set forth in the Purchase Agreement. Pursuant to the Exchange Agreements all the rights of CSPE under the Purchase Agreement have been assigned to the Administrator and, during the existence of the Exchange Agreements, the Administrator is entitled to receive any compensation payable by B. C. Hydro in the event of any such reduction. 1' Ht. STORAGE DAMS AND THE DOWNSTREAM POWER BENEFITS The Dams Pursuant to the Treaty Canada is required to commence construction of the storage dams as soon as possible after the ratification of the Treaty. The 15,500,000 acre -feet of usable storage to be pro- vided in British Columbia from the three storage dams will more than double the 13,650,000 acre -feet presently available for regulation of the flows of the main stem of the Columbia River. 8 Some general and physical characteristics of the three storage dams, as set forth in the letter of B. C. Hydro attached as Exhibit 2 to this Official Statement, are outlined below: Location Consultants Drainage Area Average Flow Max. Recorded Flow Min. Recorded Flow Darn Type Dam Height Dam Crest Length Dam Volume Live Storage Capacity Length of Reservoir Scheduled Completion Date Flood Control Payment in U. S. Dollars The Downstream Power Benefits Duncan Lake Outlet of Duncan Lake Montreal Engineering Co. Ltd. 925 sq. miles 3,600 cfs 21,400 cfs 268 cfs Earthfill 120 feet 2,600 feet 6,400,000 cu. yds. 1,400,000 ac. ft. 28 miles 1 April, 1968 $11,100,000 9 Arrow Lakes 5 miles upstream from Castlegar CBA Engineering Ltd. 14,100 sq. miles 39,800 cfs 220,000 cfs 4,800 cfs Earthfill 190 feet 2,850 feet 8,500,000 cu. yds. 7,100,000 ac. ft. 145 miles 1 April, 1969 Mica Creek 90 miles upstream of Revelstoke Caseco Consultants Ltd. 8,220 sq. miles 20,700 cfs 112,000 cfs 2,140 cfs Earth and Rockfill 645 feet 2,500 feet 37,000,000 cu. yds. Stage 1— Storage only 7,000,000 ac. ft. Stage 2 —with at -site gen. 12,000,000 ac. ft. 85 miles 1 April, 1973 $52,100,000 $1,200,000 The United States has an option under the Treaty to commence construction, at its expense, of a dam on the Kootenai River near Libby, Montana, within five years after the Ratification Date. This project is expected to have a nameplate rating of 344,000 kw and usable storage of 5,000,000 acre -feet. Under the Treaty the downstream power benefits resulting from the construction and operation of the storage dams in Canada are to be shared one -half by the United States and one -half by Canada. It is estimated that on the average these benefits will be realized in the United States about 74% at Federal dams and about 26% at dams owned by the Districts. The ratification of the Treaty, which is dependent upon the purchase of the Canadian entitlement to downstream power benefits, will make possible the realization of both the Canadian half and the American half of the downstream power benefits at dams in the United States. The Canadian entitlement to downstream power benefits has been trans- ferred for a term of years, first to CSPE pursuant to the Purchase Agreement and then to the Administrator pursuant to the Exchange Agreements, but the American half of the downstream power benefits may be utilized by the owners of such dams. The estimated effect of the Canadian storage on dams owned by the United States and the Districts has been computed in accordance with principles set forth in the Treaty. The results of this computation for the year ending April 1, 1975 are shown in Appendix B to the Summary Engineering Report of the Consulting Engineer, which is attached as Exhibit 1 to this Official Statement. The downstream power benefits are defined under the Treaty as the difference in dependable hydro- electric capacity and average annual usable energy capable of being generated with Canadian storage and without Canadian storage at dams on the Columbia River Base System in the United States (See Appendix A to Exhibit 1) It is estimated that the dependable capacity and average annual usable energy comprising these benefits will increase each year from 1968 to a maximum of 2,770,000 kilowatts and 1,518,000 average kilowatts, respectively, by 1975. Thereafter the benefits decrease because the Pacific Northwest becomes less dependent on Canadian storage for the efficient operation of projects on the Columbia River as additional power resources are developed to meet increasing loads in the area (See "The Downstream Power Benefits" in Exhibit 1) The amounts of capacity and energy to be made available to the Participants by the Administrator pursuant to the Exchange Agreements have been stipulated on the basis of estimates as to the amount of such benefits and reflect the increase in such benefits to 1975 and the decrease thereafter. The interest, principal and sinking fund installments for the 1964 Bonds reflect such increase and decrease and the application of approximately level unit prices to the amounts of capacity and energy so stipulated (See "Table of Debt Service and Estimated Annual Power Costs APPLICATION OF BOND PROCEEDS CSPE estimates that the proceeds from the sale of the 1964 Bonds will be applied as follows: Payment to Canada ($254,400,000 as of October 1, 1964, adjusted for pay- ment on September 16, 1964) $253,929,534 Interest on 1964 Bonds from September 16, 1964 to and including April 1, 1969 53,483,972 Bond Discount and Other Financing Expenses 3,700,000 Estimated CSPE Administrative, Overhead and Other Costs and Expenses to and including April 1, 1969 (including fees and expenses of Trustee and Paying Agents) 504,000 Deposit in Reserve Account One Year's Interest on the 1964 Bonds $11,776,288 Less: Payments under Exchange Agree- ments for Year Ending April 1, 1969 $3,500,000 Estimated Investment Earnings 5,793,794 9,293,794 2,482,494 Principal Amount of 1964 Bonds $314,100,000 The amount deposited in the Reserve Account from the 1964 Bond proceeds, together with investment earnings on the capitalized funds in the Interest Account and Reserve Account and the $3,500,000 to be deposited in the Reserve Account during the year ending April 1, 1969, is estimated to result in a balance in the Reserve Account on April 1, 1969 equal to interest payable on the 1964 Bonds in the next succeeding 12 months. CANADIAN ENTITLEMENT EXCHANGE AGREEMENTS CSPE has entered into Canadian Entitlement Exchange Agreements with the United States, acting by and through the Bonneville Power Administrator (acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity), and with the organizations listed in Exhibit A thereto (the "Participants pursuant to which CSPE has transferred and assigned on a percentage share basis the Canadian Entitlement to the Participants and the Participants have transferred and assigned all of the Canadian Entitlement to the Administrator who has agreed with CSPE and each Participant to make available to such Participant specified amounts of capacity and energy. The Administrator is required to make such capacity and energy available commencing in April 1968 and each Participant is required to make the payments to CSPE described below under "Payment for Canadian Entitlement" commencing not later than such month. Except for the percentage of the Canadian Entitlement purchased by, and the points of delivery for, each Participant, the Exchange Agreements are uniform in all material respects. The following brief summary of certain of the terms of the Exchange Agreements is qualified by reference and subject to the complete terms thereof. The form of the Exchange Agreements is attached as Exhibit 3 to this Official Statement. 10 Certain Definitions There are set forth below definitions in summary form of certain terms contained in the Exchange Agreements and the Indenture which will hereafter be used in this Official Statement: Bonds: the 1964 Bonds and any Refunding Bonds authenticated and delivered under the Indenture; Serial Bonds: Bonds for which no sinking fund installments have been established; Term Bonds: Bonds for which sinking fund installments have been established; Exchange Agreements: all of the Canadian Entitlement Exchange Agreements providing, in the aggregate, for the transfer by CSPE of 100% of the Canadian Entitlement to the Participants, and the exchange by them of the Canadian Entitlement with the Administrator; and Participant's Percentage: as applied to any Participant, the percentage appearing after the Par- ticipant's name on Exhibit A to the Exchange Agreements, as such percentage may be adjusted pursuant to the Exchange Agreement of such Participant. Term of the Exchange Agreements The Exchange Agreements are to become effective on the Ratification Date and terminate on March 31, 2003, or the date when the Bonds are retired, whichever is later. Payment for Canadian Entitlement In full payment of the purchase price for its Participant's Percentage of the Canadian Entitlement each Participant has agreed to make the following payments to CSPE: (1) in each month an amount equal to its Participant's Percentage of the amounts which CSPE is required by the Indenture to pay in such month to the Trustee, including the fees and expenses of the Trustee and the Paying Agents (See "Bond Fund; Flow of Funds and (2) from time to time an amount equal to its Participant's Percentage of all expenses incurred by CSPE for its sole corporate purposes (See "Columbia Storage Power Exchange There are excluded from the foregoing payments amounts paid pursuant to the Indenture from the proceeds of the sale of the Bonds and amounts which CSPE would be required to pay to the Trustee in the event that the principal of the Bonds was declared due pursuant to the Indenture upon the occurrence of an event of default as defined therein. Adjustment of Payments In the case of certain system emergencies the Administrator may, for a limited period of time, inter- rupt or reduce deliveries of capacity or energy to a Participant and the Administrator shall not be liable for any damages sustained by such Participant as a result of such interruption or reduction. In addition, if the operation of the Government's transmission system is suspended, interrupted or interfered with as the result of (i) the occurrence of any event which is reasonably beyond its control (including, but not limited to, the failure or breakdown of transmission facilities, floods, fire, strikes or acts of God or the public enemy but excluding the failure or breakdown of generating facilities), or (ii) repairs, maintenance or replacements made to assure continued transmission service to a Participant, the Administrator shall not be obligated to deliver capacity or energy to such Participant during such time and to such extent as such suspension, interruption or interference makes it reasonably impracticable to do so, and shall not be liable for any damages sustained by such Participant as a result of the failure to deliver such capacity or energy during such time. Notwithstanding any suspension, interruption, interference or reduction described in the preceding two sentences, the Participant is required to continue to make full payment for its Participant's Percentage of the Canadian Entitlement and the Administrator is required to restore any energy lost to the Participant. If for any reason other than those set forth in the preceding paragraph the Administrator does not make available to a Participant in any particular month the capacity or energy to be made available during such month, the payments to be made in the following month by such Participant to CSPE of its 11 +r Participant's Percentage of the amounts which CSPE is required by the Indenture to pay in such month to the Trustee shall be reduced in an amount determined by multiplying the amounts of capacity and energy not so made available by specific dollar figures. If the Participant's payments to CSPE are so reduced, the Administrator is obligated to pay currently to the Participant an amount of cash equal to the amount of such reduction. Such payment by the Administrator to the Participant is for the account of and as full liquidated damages to CSPE and is to be paid by the Participant forthwith upon receipt to CSPE. If a Participant enters into commitments reasonably necessary to replace capacity and energy not made available by the Administrator or if a Participant loses a then existing specific load as a result of such non availability, then, even though the Administrator thereafter offers to increase deliveries, the Participant will not be required, for a period of up to five years after the receipt of such offer, to accept such increase in deliveries. During such period the amounts which the Participant is required to pay to CSPE will be reduced with the same effect as if the Administrator had not been able to make such increased deliveries, and the Administrator will be obligated to pay to the Participant, for the account of CSPE, the amounts by which such payments are reduced. The obligations of the Participants and of the Administrator to make the payments required by the Exchange Agreements are not subject to any reduction, whether by offset or otherwise. Although the obligation of the Administrator to make such payments is not conditioned upon Congressional appropria- tions, such appropriations would be necessary in order to provide the moneys required for such payments. Obligation of the Administrator Subject to the provisions of the Exchange Agreements permitting the Administrator to suspend, interrupt or reduce deliveries of capacity or energy as described in the first paragraph under "Adjustment of Payments the obligation of the Administrator to make capacity and energy available to the Participant is unconditional and such obligation is not affected by any nonperformance by Canada or B. C. Hydro under the Treaty. The provisions of the Exchange Agreements described above pursuant to which the Administrator is obligated to make cash payments to a Participant for the account of CSPE do not in any manner modify, excuse, relieve or provide an alternative to such obligation. Adjustment of Participant's Percentage A Participant's Percentage shall be automatically and proportionately increased in the event that any of the other Participants fail or refuse to make any payment to CSPE required by the Exchange Agreements and such failure or refusal continues for 60 days from the date when such payment became due and payable; provided, however, that the cumulative total of all such increases shall not, without the consent of such Participant, exceed a maximum of 25% of the percentage appearing after its name in Exhibit A to its Exchange Agreement. If, after giving effect to such adjustments, provision has not been made for the payment of all of the amounts required to be paid to CSPE by the Participants, each defaulting Participant shall assign to CSPE that portion of its Participant's Percentage which has not been assumed by non defaulting Participants. CSPE may arrange for the sale, for the account of such default- ing Participant, of the portion of its Participant's Percentage so assigned and transferred. The foregoing provisions do not, however, relieve any defaulting Participant of its liability to pay the full amounts due to CSPE under its Exchange Agreement. Certain Other Provisions The Exchange Agreements provide for payments by the Participants to the Administrator for the use of the Government's transmission, transformation and related facilities in making capacity and energy available to the Participants. The Exchange Agreements also contain provisions describing the character of service and the scheduling arrangements for capacity and energy to be supplied by the Administrator and provisions whereby the Participants and the Administrator may effect exchanges of capacity for energy and energy for capacity. CSPE, the Participants and the Administrator have agreed that the Exchange Agreements cannot be amended, modified or otherwise changed by the parties in any manner that will impair or adversely affect the security afforded by the provisions of the Exchange Agreements for the payment of the Bonds. Without the written consent of the Participants and the Administrator, CSPE may not amend, modify 12 or otherwise change the Indenture or the corporate purposes of CSPE or issue Refunding Bonds under the Indenture, so as to increase or accelerate the payments to be made by the Participants to CSPE. Each of the Exchange Agreements provides that it is entire and indivisible and, accordingly, is not binding upon any of the parties thereto if it is not binding upon all the parties thereto, but that it is not subject to termination by any party under any circumstances, whether based upon the default of any other party or otherwise. The Exchange Agreements provide that CSPE is to assign to the Trustee all of the rights of CSPE thereunder to the extent and for the period or periods provided by the Indenture and each of the Par- ticipants and the Administrator has acknowledged and consented to such assignment. Approval of certain of the Exchange Agreements, as set forth in Exhibit A thereto, is required by and has been obtained from the Rural Electrification Administration. CANADIAN ENTITLEMENT EXCHANGE AGREEMENT PARTICIPANTS The Participants are summarized as follows: Per Cent Number Participation Utility Districts 14 13.85% Municipalities 11 33.35 Cooperatives 12 2.80 Utility Companies 4 50.00 Total Participants 41 100.00% The Participants supply electric power in the major areas of Washington, Oregon, northern Idaho, and western Montana (See Map Center Spread) and served an average of 1,731,682 customers in 1963. Combined operating revenues plus other income of the Participants for 1963 was $381,231,708 and total net utility plant at the end of 1963 was $1,957,505,784. Peak loads aggregated 8,027,971 kilowatts. By April 1, 1973, when the three storage dams are expected to be operative, such peak loads are estimated to total 15,551,400 kilowatts. The table entitled "Canadian Entitlement Exchange Agreement Participants" sets forth the Partici- pant's Percentage and certain statistical and financial data for each Participant. BONNEVILLE POWER ADMINISTRATION The Bonneville Power Administration is an agency of the Department of the Interior, established to build the necessary transmission facilities to market, at wholesale, the power generated at Bonneville Dam, the first Federal multipurpose project completed on the Columbia River. The Administrator has been designated, either by Congressional Act or Secretarial Order, to build transmission facilities and to market power from 20 additional Federal hydroelectric projects now operating, which together with the Bonneville Project have a combined name plate rating of 6,678,150 kilowatts. The Administrator has also been designated to build transmission facilities and to market power from six projects under construction, totaling 2,560,000 kilowatts, and five authorized projects totaling 1,129,500 kilowatts. The 32 projects will have a combined name plate rating of 10,367,650 kilowatts. The projects for which the Administrator is the marketing agency, together with the Administrator's transmission facilities, are known and referred to herein as the Columbia River Power System. The Columbia River Power System now has available over 9,500,000 acre -feet of storage. Its power is marketed over an extensive system of high voltage Federal transmission lines, composed of about 9,000 circuit miles of lines with a capacity of 115,000 volts or higher. Of this amount about 5,200 circuit miles range in capacity from 230,000 volts to 345,000 volts. Over 320 circuit miles of new 500,000 volt transmission lines are either authorized or under construction. In addition, the Administrator will have available beginning in 1965 approximately 800,000 kilowatts from the Hanford New Production Reactor generating plant, as a result of exchange agree- ments entered into in 1963 with the Washington Public Power Supply System and its participants. 13 Participant Utility Districts Benton County P. U. D. No. 1 Central Lincoln P. U. D. Chelan County P. U. D. No. 1 (4) Clark County P. U. D. No. 1 Clatskanie P. U. D. Cowlitz County P. U. D. No. 1 (4) Douglas County P. U. D. No. 1 (4) Franklin County P. U. D. No. 1 Grant County P. U. D. No. 2 (4) Grays Harbor County P. U. D. No. 1 Pend Oreille P. U. D. No. 1 (4) Skamania County P. U. D. No. 1 Snohomish County P. U. D. No. 1 Tillamook P. U. D. Participant's Customers Percentage Residential Total 0.80% 9,883 1.00 10,963 1.00 14,160 3.00 32,260 0.20 1,412 2.50 20,197 0.20 4,184 0.80 6,734 0.45 11,315 1.50 18,997 0.20 2,181 0.20 1,894 1.50 64,836 0.50 7,111 Total Utility Districts 1 3.85% 206,127 Municipalities (Electric Utility Department) Bonners Ferry, Village of Coulee Dam, City of Eugene, City of Forest Grove, City of (5) McMinnville, City of Port Angeles, City of Richland, City of Seattle, City of Springfield, City of Tacoma, City of Vera Irrigation District No. 15 Total Municipalities Cooperatives Coos -Curry Electric Coop., Inc. Flathead Electric Coop., Inc. Idaho Co. L. P. Coop. Assn., Inc. Inland Power and Light Company Lane County Electric Coop., Inc. Lincoln Electric Cooperative, Inc. (Montana) Lincoln Electric Cooperative, Inc. (Washington) Missoula Electric Cooperative, Inc. Nespelem Valley Elec. Coop., Inc. Northern Lights, Incorporated Ravalli County Elec. Coop., Inc. Salem Electric Total Cooperatives Utility Companies Pacific Power Light Company (6) 10.00% 346,260 Portland General Electric Company 17.50 245,825 Puget Sound Power Light Company 17.50 227,012 The Washington Water Power Company (7) 5.00 129,068 Total Utility Companies 50.00% 948,165 Total 100.00% 1,516,255 0.05% 1,117 0.10 426 5.50 30,350 0.30 2,536 0.40 2,890 0.50 5,128 0.80 7,140 12.50 214,964 0.50 3,048 12.50 60,102 0.20 2,198 33.35% 329,899 0.50% 5,193 0.10 2,173 0.10 1,252 0.50 7,680 0.40 5,066 0.10 1,104 0.10 1,086 0.10 1,378 0.05 442 0.35 2,466 0.10 813 0.40 3,411 2.80% 32,064 14 1,471 469 34,626 3,081 4,289 6,027 7,492 240,459 3,286 68,314 2,304 371,818 Energy Sales (1,000 Kwh) 20,902 18,794 756,069 59,220 82,787 248,850 169,261 4,622,792 113,970 2,659,754 38,801 8,791,200 CANADIAN ENTITLEMENT EXCHANGE JTATISTICAL DATA Energy Net Purchases Generated (1,000 (1,000 Kwh) Kwh) 11,673 300,452 319,223 13,104 391,186 411,684 16,263 383,925 379,025 35,737 791,012 840,133 1,698 29,387 31,481 22,711 1,169,737 1,207,743 5,380 175,898 186,184 8,427 167,499 178,032 15,107 417,179 424,110 23,106 501,294 537,107 2,572 60,770 62,624 2,257 41,648 46,796 70,872 1,461,329 1,567,388 9,562 171,453 186,788 238,469 6,062,769 6,378,318 5,028 20,065 590,837 62,441 89,601 255,884 176,560 2,670,346 117,264 1,652,007 45,349 5,685,382 6,187 128,452 142,178 2,533 29,158 32,637 1,354 23,388 25,091 8,733 122,295 139,787 5,760 89,497 103,628 1,319 15,883 17,561 1,235 30,753 33,903 2,026 19,246 21,951 551 10,085 11,278 3,981 33,099 39,132 1,189 16,713 18,803 4,027 82,285 88,551 38,895 600,854 674,500 (1) Source -Data compiled by Consulting Engineer from material furnished by the Participants. (2) Operating revenues plus other income. (3) Includes depreciation and all taxes, including Federal income taxes where applicable. (4) Distribution system only. Certain Statistical and Total Requirement (1,000 Kwh) Peak Demand (Kw) 319,223 78,529 411,684 87,157 121 379,146 64,753 840,133 215,000 31,481 8,844 1,207,743 177,900 186,184 36,289 178,032 41,746 424,110 108,226 537,107 102,620 2,207 64,831 15,690 46,796 9,113 1,567,388 336,734 186,788 45,824 2,328 6,380,646 1,328,425 21,000 26,028 5,411 20,065 6,602 233,559 824,396 199,360 62,441 19,956 516 90,117 23,440 255,884 42,110 176,560 49,250 2,458,296 5,128,642 1,028,000 117,264 23,500 1,211,968 2,863,975 505,947 45,349 12,544 3,925,339 9,610,721 1,916,120 142,178 32,320 32,637 7,050 25,091 5,816 139,787 36,500 103,628 25,586 17,561 4,608 33,903 7,388 21,951 5,067 11,278 2,342 39,132 9,696 18,803 4,669 88,551 23,184 674,500 164,226 405,337 8,288,835 3,850,788 5,490,385 9,341,173 1,807,000 275,847 5,165,338 4,367,941 1,290,912 5,658,853 1,193,000 252,489 3,772,784 3,055,776 1,217,221 4,272,997 902,200 148,827 3,605,962 1,273,564 2,763,473 4,037,037 717,000 1,082,500 20,832,919 12,548,069 10,761,991 23,310,060 4,619,200 1,731,682 36,287,742 25,286,269 14,689,658 39,975.927 8,027,971 AGREEMENT PARTICIPANTS Financial Data for 1963 Total Income (2) 2,502,788 3,253,095 3,639,846 6,638,511 224,291 5,830,293 1,204,369 1,669,553 3,789,495 3,689,069 584,878 471,496 12,950,640 1,706,525 48,154,849 206,523 96,126 6,850,491 499,147 769,481 1,225,488 1,496,458 43,518,734 750,142 17,158,551 312,978 72,884,119 Purchased Power Expense 1,026,940 1,225,356 1,098,773 2,703,248 112,090 2,674,164 506,740 575,675 1,377,051 1,420,867 139,333 153,385 4,659,208 617,949 $18,290,779 30,829 34,729 1,996,359 218,481 294,794 649,272 607,486 5,936,961 335,827 3,270,883 142,398 $13,518,019 1,446,377 459,062 483,515 101,974 279,755 81,789 1,439,926 463,267 981,670 350,278 304,871 61,169 390,283 103,332 384,347 72,096 125,615 33,106 649,409 134,953 246,053 62,119 650,906 291,676 7,382,727 2,214,821 $102,990,574 53,840,510 49,239,405 46,739,524 $252,810,013 $381,231,708 $10,046,295 10,900,097 13,109,786 3,618,258 $37,674,436 $71,698,055 Generating Expense 3,406 9,5 49 11,2 35 13,130 37,320 21,862 332,6 24 35,367 1,536,8 18 721,767 2,648,438 Other Expenses(3) 889,506 1,409,725 1,451,208 2,706,571 92,288 1,990,905 486,903 650,997 1,379,220 1,438,029 285,239 194,744 3,803,491 673,498 17,452,324 94,899 28,074 2,648,803 200,326 131,799 412,754 773,852 23,959,102 285,263 7,944,564 96,392 36,575,828 776,679 211,868 146,232 855,746 311,269 125,605 263,208 221,680 49,986 333,424 118,761 293,233 FINANCIAL DAT/ 3,707,691 (5) Fiscal year ended June 30, 1963. (6) Includes Wyoming. (7) Includes certain operations other than electric. Total Operating Expense(3) 1,916,446 2,635,081 2,553,387 5,409,819 204,377 4,674,618 993,643 1,226,672 2,756,271 2,870,131 437,702 348,129 8,462,699 1,291,447 35,780,422 147,591 62,803 4,977,786 418,807 461,960 1,062,026 1,381,338 31,432,881 621,090 11,937,214 238,790 52,742,286 1,235,741 313,842 228,021 1,319,013 661,547 186,774 366,540 293,776 83,092 468,377 180,880 584,909 5,922,512 4,500,915 52,280,593 66,827,803 1,575,021 25,393,236 37,868,354 1,187,417 21,149,094 35,446,297 1,697,802 26,716,623 32,032,683 8,961,155 $125,539,546 $172,175,137 $11,646,913 $183,275,389 $266,620,357 15 Net Utility Plant 5,702,614 9,735,978 13,226,583 16,578,048 521,022 13,567,212 4,621,690 5,070,496 13,077,587 12,275,355 1,891,837 1,221,174 41,702,522 4,635,908 143,828,026 617,621 171,931 52,584,583 1,099,301 1,792,959 1,706,143 3,742,188 218,919,310 1,082,271 114,815,719 536,354 397,068,380 6,871,325 2,330,093 1,372,393 7,138,035 3,367,997 1,319,046 1,732,322 1,943,236 601,333 4,170,159 1,184,852 966.207 32,996,998 606,249,000(7) 270,770,182 247,638,879 258,954,319 $1,383,612,380 $1,957,505,784 Long Term Debt Capital and Surplus 2,056,260 4,753,968 6,083,000 4,898,118 8,409,000 6,178,686 10,093,088 10,386,467 689,701 3,004,000 13,035,060 3,816,987 1,131,686 2,782,000 3,256,408 7,413,000 7,922,772 13,751,643 1,809,000 1,263,383 795,782 1,040,861 17,610,375 31,185,365 6,434,672 156,884 70,307,164 99,651,002 989,483 282,533 28,000,000 25,976,772 1,427,750 2,285,525 2,997,963 4,056,917 125,335,000 120,3 86,315 802,600 645,712 55,650,000 68,022,361 831,085 209,787,600 $227,902,416 6,931,220 467,732 2,153,034 559,446 1,302,013 182,097 6,807,255 649,117 2,888,850 945,809 1,281,429 374,152 1,607,336 321,130 2,020,835 243,208 444,309 125,031 4,077,743 396,297 1,219,046 238,130 103,382 883,858 30,836,452 5,386,007 319,547,000(7) $238,281,000(7) 167,249,616 94,062,019 141,125,000 113,289,015 170,421,000 798,342,616 $1,109,273,832 89,871,982 $535,504,016 $868,443,441 ALLOCATION, ASSIGNMENT AND COORDINATION AGREEMENTS Certain collateral agreements have been executed which are intended to provide, among other things, for optimum use of the storage available for the hydroelectric generating facilities of the parties thereto but which do not relate to the validity of or security for the 1964 Bonds nor the validity of the Indenture, the Exchange Agreements or the Purchase Agreement. A brief reference to these agree- ments follows. The Allocation Agreements The Districts have agreed, pursuant to Canadian Entitlement Allocation Agreements (the "Alloca- tion Agreements to supply the Administrator, acting in his capacity as the Administrator and acting for and on behalf of the United States Entity, stipulated amounts of dependable hydroelectric capacity and average usable energy as the share of the Canadian entitlement to downstream power benefits attributable to their projects. The Allocation Agreements are to become effective on the Ratification Date and terminate on March 31, 2003. The Districts have the option of satisfying their obligation to deliver capacity to the Administrator by delivering such capacity or by making cash payments to the Administrator. In addition, the Districts have the option to purchase certain amounts of capacity from the Administrator, which is described in the Allocation Agreements as "supplemental capacity in order to realize their share of the American half of the downstream power benefits without installing additional generating facilities at such projects. The Assignment Agreements Pursuant to the provisions of other agreements, each entitled an Assignment and Agreement (the "Assignment Agreements the purchasers who are entitled to receive the output from the projects owned by the Districts (the "Power Purchasers have consented to and approved the action of the Districts in executing and performing the Allocation Agreements. The Assignment Agreements are to become effective simultaneously with the effectiveness of the Allocation Agreements and will continue in effect during the term of the Allocation Agreements. The Districts have assigned to the Power Purchasers the right to purchase the supplemental capacity which the Districts are entitled to purchase pursuant to the Allocation Agreements. The Power Purchasers have agreed to pay directly to the Administrator the amounts which the Districts would be required to pay for such supplemental capacity. The Power Purchasers have also agreed to make the deliveries of capacity or the cash payments in lieu thereof which the Districts are to make under the Allocation Agreements. The Coordination Agreement The ratification of the Treaty and the execution of the Purchase Agreement, the Exchange Agree- ments, the Allocation Agreements and the Assignment Agreements have made it desirable that a long term Pacific Northwest Coordination Agreement (the "Coordination Agreement be executed by certain organizations with power resources in the Pacific Northwest. Additional discussion of the Coor- dination Agreement and of its effect on the exchange of energy between the systems of the parties will be found under "Power Supply in the Pacific Northwest The Coordination Agreement is to become effective in January, 1965 and will terminate in 2003 and is intended to secure optimum use of the downstream power benefits resulting from the construction and operation of the storage dams pursuant to the Treaty. The Coordination Agreement provides for coordination of power resources of the parties thereto and is expected to result in economies of operation in the Pacific Northwest. Idaho Power Company (which is not a Participant or a party to the Coordination Agreement) has indicated that, since certain of its facilities are included in the Base System used for computing the downstream power benefits under the Treaty, it may institute proceedings, including court actions, chal- lenging the validity of the Coordination Agreement unless that Company is made a party thereto. The 1964 Bonds are to be issued and delivered notwithstanding the existence of any proceedings challenging the validity of the Coordination Agreement. POWER SUPPLY IN THE PACIFIC NORTHWEST Northwest Power Pool The Northwest Power Pool represents the voluntary efforts of the major power producing utilities of the Pacific Northwest to coordinate the operation of generation and transmission facilities. Since its 16 organization in the early 1940's the Pool has grown steadily in number of participants and magnitude of installed capacity as well as in degree of coordination. The present members of the Pool with representa- tion on its operating committee are: seven utility companies, Idaho Power Company, The Montana Power Company, Portland General Electric Company, Puget Sound Power Light Company, The Washington Water Power Company, Pacific Power Light Company, and Utah Power Light Company; three municipalities, Seattle, Tacoma, and Eugene; two public utility districts, Public Utility District No. 1 of Chelan County and Public Utility District No. 2 of Grant County; B. C. Hydro and West Kootenay Power Light Company in Canada; and the Administrator, the Corps of Engineers, Department of the Army, and the Bureau of Reclamation. The Northwest Power Pool area is divided into the East Group area and the West Group area. All of the Participants are in the West Group area which covers 210,000 square miles and comprises Washington, Oregon, northern Idaho, a portion of western Montana and a portion of northern California, with a population of approximately 5,000,000 and a combined installed generating capacity of 13,013,000 kilowatts. The largest single element in the West Group area is the Columbia River Power System, which has an aggregate nameplate rating of 6,515,000 kilowatts in this area. This Federal system alone supplies over one -half of the firm energy requirements of the West Group area. The total power requirements of the Pacific Northwest have approximately doubled every 10 years during the past 30 years. During the 1940's electric load growth was spurred by war -born industrial developments which introduced electro- process industries, such as aluminum, magnesium and ferrous alloy manufacturers, which were attracted by the availability of large quantities of low -cost power. During the 1950's the major portion of the electrical growth was due to the expansion of domestic and commercial loads. Since 1958, load growth in the West Group area has diminished and is currently estimated at an annual growth rate of approximately 6.3 per cent. Such rate of growth is estimated to continue so that the load will have doubled in the next 12 years. Coordination Agreements The need and desirability for the coordination of resources between utilities in the Pacific Northwest stems in part from the variations in the stream flows available for hydroelectric generation which without such coordination frequently results in one utility having surplus energy while, at the same time, one or more of the other utilities may be short of generation. Coordination, through interconnected facilities and stream flow regulation, permits more effective resource utilization and helps to meet the area's power requirements. The first formal coordination agreement among the major utilities (except the cities of Seattle and Tacoma) in the West Group area was entered into as of September 1, 1961 for a one year period fol- lowed by two successive agreements for one and ten years, respectively. The previously described long term Pacific Northwest Coordination Agreement has been executed in conjunction with the purchase and exchange of the Canadian Entitlement. The Coordination Agreement is an important step in furthering the efficient utilization of the water resources of the Columbia River. Power Requirements and Resources —West Group Area The West Group area has a combined installed capacity of 13,013,000 kilowatts, of which 12,573,000 kilowatts are hydroelectric generating facilities. The remainder consists of relatively small thermal electric plants which, for the most part, are maintained for standby or reserve capacity for use during critical water conditions on the hydroelectric system. In order to determine the ability of such a system to carry firm load, it is necessary to make such a determination on the basis of a critical low water period. The dependable capacity of such a system is the peak load associated with the firm energy load which could be carried during any year in which such a low water period occurred. The power resources and requirements of the West Group area are annually forecast by the Pacific Northwest Utilities Conference Committee in its West Group Forecast (the most recent edition issued on January 31, 1964). The West Group Forecast is intended for use as a guide to the programming of additional resources. The Forecast takes into account only existing resources and those resources actually under construction or licensed by the FPC or authorized for Federal construction for which 17 construction funds have been appropriated. A comparison of the total of such estimated resources over a 10 -year period with the total estimated firm peak load indicates the additional amounts of power which must be developed. The estimated resources available to meet the projected loads in terms of dependable capacity as obtained from the West Group Forecast, modified to include the High Mountain Sheep Project, which has been licensed since the Forecast was published, are summarized in the following table: Year Ending June 30 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 (1) (2) LOADS AND RESOURCES WEST GROUP AREA NORTHWEST POWER POOL Dependable Capacity (1,000 Kw) Firm Peak Load 11,142 11,870 12,797 13,620 14,593 15,512 16,508 17,491 18,522 19,637 20,846 Estimated Firm Resourcer Without With Canadian Canadian Storage Storage 11,415 12,117 12,390 13,731 14,798 15,093 15,199 17,100 17,695 17,665 17,701 11,415 12,117 12,390 13,731 15,241 17,051 17,167 18,985 19,609 19,845(4) (5) 19,892(4) (5) Additional Resources Required ,-(Excluding Reserves) Without With Canadian Canadian Storage Storage (273) (273) (247) (247) 407 407 (111) (111) (205) (648) 419 (1,539) 1,309 (659) 390 (1,494) 827 (1,087) 1,972 (208) (8) 3,145 954 Excludes reserves. Excludes secondary loads of approximately 500,000 kw in 1965, 1966 and 1967, and 560,000 kw thereafter, and excludes any sales or exchanges with the Pacific Southwest. Includes additional generating capacity, as planned at existing projects, to utilize Canadian Storage water, and includes all the downstream power benefits from such water. Includes the High Mountain Sheep Project licensed to the Pacific Northwest Power Company after the West Group Forecast was published. The license provides that the project shall be completed by 1971. The grant of the license has been appealed by the Washington Public Power Supply System and the Department of the Interior. Excludes existing steam and miscellaneous resources. These resources, prior to the completion of the Mica Creek Project and the extension of the critical low water period to encompass a period of more than one year, are normally considered as reserves, but would be capable of operation during critical low flow periods, thereby increasing dependable capacity in the Pacific Northwest by 700,000 kw. They have been included as firm resources in this table until July, 1973. After completion of the Mica Creek Project these resources are con- sidered as reserves only. Excludes Libby, Lower Granite, and Asotin, which have been authorized by Congress for Federal construction. No construction funds have been appropriated for these projects. These projects, when completed, will be capable of increasing dependable capacity in the Pacific Northwest by approximtaely 1,350,000 kw. Pacific Northwest- Pacific Southwest Intertie The Secretary of the Interior has recommended to the Congress a plan for a Pacific Northwest Pacific Southwest Intertie (the "Intertie consisting principally of four long distance extra -high voltage transmission lines with a total capacity of approximately 4,400,000 kilowatts. Three of the lines would extend from the Columbia River Power System to the load centers of California; the fourth, from the Columbia River Power System to Hoover Dam. Segments of the Intertie would be constructed by the Bonneville Power Administration, the Bureau of Reclamation, the Department of Water and Power of the City of Los Angeles, Pacific Gas Electric Company, Southern California Edison Company, San Diego Gas Electric Company, Portland General Electric Company, Pacific Power Light Company, and Arizona Public Service Company (or Arizona Power Authority). The Intertie would permit the sale and exchange of surplus capacity and energy between the Pacific Northwest and the Pacific South- 18 ANNUAL POWER COSTS The Consulting Engineer estimates that the power costs for the Canadian Entitlement, without wheeling, based on the amounts of capacity and energy to be made available to the Participants under the Exchange Agreements, will be $18.08 per kilowatt per year of dependable capacity or 3.44 mills per kilowatt -hour of energy at 60% load factor. These figures reflect combined unit costs of $5.05 per kilowatt per year of dependable capacity plus 2.48 mills per kilowatt -hour of energy and do not include transmission costs or state taxes (See "Annual Costs of CSPE" in Exhibit 1 where it is stated that such taxes are not expected to exceed 1% of the total payments to CSPE under the Exchange Agreements) A comparison of the average power costs to the Participants, as estimated by the Consulting Engineer, with the average power costs of hydroelectric projects recently financed by public utility districts on the Columbia River is shown below. Such costs exclude transmission charges in all cases. Estimates for such projects have been based on the net peaking capability of such projects and are set forth for the period during which debt retirements are projected to be made for each project. Average Power Cost. Per Kilowatt Mills per per year Kilowatt hour CSPE $18.08 3.44 Wells (2) 17.37 3.28 Rocky Reach 21.29 3.42 Rock Island 16.14 2.12 Priest Rapids( 11.90 2.55 Wanapum With 1959 bonds (from January 1, 1965) 15.62 2.96 With 1963 bonds (from January 1, 1970) 13.75 2.60 Based on 60% annual load factor and excludes state taxes. As set forth in the Official Statement dated October 4, 1963 of Public Utility District No. 1 of Douglas County, Washington. Based on actual construction costs and current operating costs. As set forth in the Official Statement dated July 30, 1963, of Public Utility District No. 2 of Grant County, Washington. west. The Congress has approved the Secretary's recommendation and has appropriated $45,500,000 to commence the construction of the federal portions of three of the lines with capacity of approximately 3,500,000 kilowatts. The estimates of costs for the hydroelectric projects listed above are based on the estimated capability of the projects before Canadian storage. Comparable estimates of annual power costs after the construction of Canadian storage will depend upon the future plans for expansion of each of the projects and the costs of such expansion. As these plans have not been formulated at the present time, the information required to make accurate estimates of the effect of Canadian storage on the foregoing costs is not available. For a more detailed discussion of power costs see "Comparison of Power Costs" in Exhibit 1. In the Summary Engineering Report attached as Exhibit 1 to this Official Statement, the Con- sulting Engineer has concluded as follows: "The economic benefits to each Participant under its Exchange Agreement are derived principally from the assurance of a supply of firm power for the term of such agreement at a reasonable fixed cost in comparison with estimated costs of power for such period from alterna- tive power sources. For some Participants the realization of long -term benefits under the Exchange Agreements may require absorption of higher costs during the early years. The short -term economic effect of the Exchange Agreements on each Participant can only be evaluated in the light of future developments and the individual circumstances of such Participant. Each of the Participants, however, will be able to utilize the capacity and energy to be made available to it pursuant to its Exchange Agreement, either in its own load or, in the early years, through remarketing." 19 DEBT SERVICE AND ESTIMATED 1964 Bonds Reserve Decrease 12 Months Outstanding Total Account in Ending Beginning Serial Bonds Sinking Fund Debt 15% of Total Beginning Reserve April 1 of Period Interest (a) due April 1 ,---Installments (b) Service Debt Service of Period (c) Account (c) (1) (2) (3) Principal (4) Premium (5) (6) (7) (8) 1970 $314,100 $11,776 3,200 $14,976 $2,246 $11,776 $104 1971 310,900 11,672 5,780 17,452 2,618 11,672 188 1972 305,120 11,484 6,465 17,949 2,692 11,484 210 1973 298,655 11,274 6,810 18,084 2,713 11,274 221 1974 291,845 11,053 12,265 23,318 3,498 11,053 503 1975 279,580 10,550 6,000 7,730 39 24,319 3,648 10,550 512 1976 265,850 10,038 6,000 7,965 40 24,043 3,606 10,038 520 1977 251,885 9,518 6,000 8,045 40 23,603 3,540 9,518 520 1978 237,840 8,998 6,000 7,875 39 22,912 3,437 8,998 513 1979 223,965 8,485 6,000 7,640 38 22,163 3,324 8,485 502 1980 210,325 7,983 6,000 7,235 36 21,254 3,188 7,983 492 1981 197,090 7,491 6,000 6,775 34 20,300 3,045 7,491 474 1982 184,315 7,017 6,000 6,310 32 19,359 2,904 7,017 457 1983 172,005 6,560 6,000 5,945 30 18,535 2,780 6,560 443 1984 160,060 6,117 6,000 5,620 28 17,765 2,665 6,117 436 1985 148,440 5,681 6,000 5,255 16,936 2,540 5,681 423 1986 137,185 5,258 6,000 4,915 16,173 2,426 5,258 467 1987 126,270 4,791 10,640 15,431 2,315 4,791 408 1988 115,630 4,383 10,205 14,588 2,188 4,383 392 1989 105,425 3,991 9,800 13,791 2,069 3,991 379 1990 95,625 3,612 9,710 13,322 1,998 3,612 376 1991 85,915 3,236 9,670 12,906 1,936 3,236 371 1992 76,245 2,865 9,355 12,220 1,833 2,865 359 1993 66,890 2,506 8,960 11,466 1,720 2,506 343 1994 57,930 2,163 8,560 10,723 1,608 2,163 328 1995 49,370 1,835 8,105 9,940 1,491 1,835 310 1996 41,265 1,525 7,685 9,210 1,382 1,525 293 1997 33,580 1,232 7,185 8,417 1,263 1,232 277 1998 26,395 955 7,125 8,080 1,212 955 271 1999 19,270 684 6,500 7,184 1,078 684 223 2000 12,770 461 3,490 3,951 593 461 130 2001 9,280 331 2,985 3,316 497 331 115 2002 6,295 216 2,885 3,101 465 216 111 2003 3,410 105 3,410 3,515 527 105 105 (000's (a) Interest capitalized to and including April 1, 1969. (b) The principal amounts shown for the years ending April 1, 1975 -2003, inclusive, represent semi annual sinking fund installments due in the twelve -month period ending on such dates. The Term Bonds are redeemable out of sinking fund installments at 100 of the principal amount thereof on October 1, 1974 to and including April 1, 1984 and at 100% thereafter. (c) $2,482,494 of 1964 Bond proceeds are initially deposited in the Reserve Account, which, together with Bond Fund investment earnings and the $3,500,000 required to be deposited in the Reserve Account during the year ending April 1, 1969, are estimated to result in the balance shown in the Reserve Account as of April 1, 1969. If on any April 1, the balance in the Reserve Account exceeds the amount which CSPE is required to pay into the Interest Account during the succeeding twelve -month period, the Trustee will apply one twelfth of such excess as a credit against the payments which CSPE is required to make into the Bond Fund in each of the twelve months beginning on such April 1. (d) Interest earnings are computed at an average rate of 3% per annum for the investment of moneys in the Reserve Account and at an average rate of 2% per annum for the investment of moneys in other accounts in the Bond Fund and are deposited in the Reserve Account. 20 ANNUAL POWER COSTS omitted) Net Annual Power Costs Net Credits of Interest (6) (8) Estimated Canadian Earned on (9) from CSPE and Entitlement(c) (f) Bond Preceding Fiduciary (5) (6) Fund (d) Period (e) Expenses (11) (10) (9) (10) (11) (12) $453 $100 $17,322 533 2,803 100 17,367 553 3,339 100 17,402 551 3,455 100 17,442 595 3,485 100 23,431 Stipulated Exchange Power (g)- Energy ,--Cost of Stipulated Exchange Power (f) Capacity (Average Total (Kw) Kw) Capacity Energy (15) (16) (13) (14) (15) (16) (17) 972 572 $4,903 $12,419 $17,322 980 572 4,948 12,419 17,367 987 572 4,983 12,419 17,402 995 572 5,023 12,419 17,442 1,377 759 6,952 16,479 23,431 583 4,596 100 23,471 1,385 759 6,992 16,479 23,471 575 4,743 100 23,006 1,379 739 6,962 16,044 23,006 554 4,701 100 22,542 1,373 719 6,932 15,610 22,542 535 4,614 100 21,835 1,362 689 6,876 14,959 21,835 513 4,485 100 21,102 1,350 658 6,816 14,286 21,102 488 4,339 100 20,203 1,331 621 6,720 13,483 20,203 464 4,168 100 19,277 1,311 583 6,619 12,658 19,277 433 3,983 100 18,380 1,297 545 6,548 11,832 18,380 421 3,794 100 17,621 1,254 520 6,331 11,290 17,621 397 3,644 100 16,886 1,216 495 6,139 10,747 16,886 371 3,498 100 16,078 1,172 468 5,917 10,161 16,078 360 3,334 100 15,365 1,134 444 5,725 9,640 15,365 310 3,253 100 14,593 1,093 418 5,518 9,075 14,593 281 3,033 100 13,843 1,052 393 5,311 8,532 13,843 261 2,861 100 13,099 1,012 368 5,109 7,990 13,099 243 2,709 100 12,711 1,017 349 5,134 7,577 12,711 237 2,617 100 12,325 1,022 330 5,160 7,165 12,325 211 2,544 100 11,609 932 318 4,705 6,904 11,609 195 2,403 100 10,883 844 305 4,261 6,622 10,883 176 2,258 100 10,173 755 293 3,812 6,361 10,173 164 2,112 100 9,419 666 279 3,362 6,057 9,419 136 1,965 100 8,727 576 268 2,908 5,819 8,727 133 1,811 100 7,969 486 254 2,454 5,515 7,969 111 1,673 100 7,719 471 246 2,378 5,341 7,719 97 1,594 100 6,768 416 215 2,100 4,668 6,768 72 1,398 100 3,246 200 103 1,010 2,236 3,246 47 795 100 3,118 192 99 969 2,149 3,118 38 659 100 3,007 187 95 944 2,063 3,007 34 614 100 2,862(h) 167 93 843 2,019 2,862 (e) Net credits result from excess moneys in the Reserve Account (see footnote (c)). Such excess moneys are available as a credit against amounts to be paid by CSPE in the twelve -month period succeeding the date of determination of such excess. (f) These figures do not reflect transmission costs and state taxes (See "Annual Costs of CSPE" in Exhibit 1). In addition, as to columns 15 and 16, these figures do not reflect exchanges by the Participants with the Administrator of capacity for energy and energy for capacity. Capacity and energy costs are computed on the basis of unit costs of $5.05 per year per kilowatt of capacity plus 2.48 mills per kilowatt -hour of energy. (g) The amounts of capacity and energy to which all Participants are entitled under the Exchange Agreements (See column 4 and 5 of Exhibit B thereto), which have been stipulated for each year on the basis of estimates as to the amount of the Canadian entitlement to downstream power benefits for such year. (h) Reflects use of moneys in the Reserve Account to retire Bonds. 21 DESCRIPTION OF THE BONDS AND CERTAIN PROVISIONS OF THE INDENTURE The 1964 Bonds will be issued pursuant to the provisions of the Indenture which sets forth in detail the terms and the covenants of CSPE with respect thereto. The following summary is a brief outline of certain provisions contained in the Indenture and is not to be construed as a full statement thereof. This summary is qualified by reference to and is subject to the complete Indenture, copies of which may be examined at the office of CSPE and the Trustee. Description of the 1964 Bonds Principal Amount, Date, Maturities and Interest. The 1964 Bonds will be dated September 1, 1964 and will bear interest payable semi annually on April 1 and October 1 (the first interest installment to be payable on April 1, 1965) at the respective rates per annum shown on the cover of this Official Statement. The principal and premium, if any, on the 1964 Bonds and interest on coupon 1964 Bonds will be payable at the option of the holder at the respective principal offices of the following paying agents: The Chase Manhattan Bank, New York, New York Continental Illinois National Bank and Trust Company of Chicago, Chicago, Illinois Seattle -First National Bank, Seattle, Washington Bank of America National Trust and Savings Association, San Francisco, California Interest on each fully registered 1964 Bond will be paid by check or draft mailed by the Trustee to the registered holder of such Bond. Definitive 1964 Bonds will be issued in coupon form in the denomination of $5,000, registrable as to principal only, and in fully registered form in the denominations of $5,000 or any multiple thereof. Coupon 1964 Bonds and fully registered 1964 Bonds are inter- changeable upon payment of the charges provided in the Indenture, except that coupon Bonds and fully registered Bonds are exchangeable without charge if surrendered for such purpose within 60 days after the first authentication of such Bonds and except that fully registered Bonds issued initially or within 60 days after such authentication are exchangeable once at any time without charge for coupon Bonds. $106,520,000 principal amount of Serial 1964 Bonds will mature serially each April 1 and will bear interest at the rates per annum shown below: Interest Interest Amount Maturity Rate Amount Maturity Rate 3,200,000 1970 3 /a 6,000,000 1979 3 5,780,000 1971 3 6,000,000 1980 3.60 6,465,000 1972 3 /a 6,000,000 1981 3.60 6,810,000 1973 3 /a 6,000,000 1982 3.60 12,265,000 1974 3 6,000,000 1983 3.60 6,000,000 1975 3 6,000,000 1984 3.70 6,000,000 1976 3 6,000,000 1985 3.70 6,000,000 1977 3 6,000,000 1986 3.70 6,000,000 1978 3 $207,580,000 principal amount of 3' /s Term 1964 Bonds will mature April 1, 2003, and will be entitled to semi annual sinking fund installments due at the times and in the amounts described below. (Section 2.02(a), (b), (c) and (d) and Section 3.08) Redemption. The 1964 Bonds will be subject to redemption prior to maturity, on at least 30 days' published notice, (i) out of the sinking fund installments set forth in the succeeding paragraph for the Term Bonds maturing on April 1, 2003, on October 1, 1974 and on each April 1 and October 1 thereafter to and including April 1, 2003, and (ii) at the election of Columbia Storage Power Exchange, at any time on or after October 1, 1972, as a whole or in part (in inverse order of maturities in the case of any redemption in part of Serial Bonds), in each case at the respective redemption prices 22 (expressed as percentages of the principal amount) set forth below, together with accrued interest to the date fixed for redemption: October 1, 1972 to and including September 30, 1974 104% Thereafter to and including September 30, 1978 104 1001/2 Thereafter to and including September 30, 1984 103 100 Thereafter to and including September 30, 1989 102 100 Thereafter to and including September 30, 1994 101 100 Thereafter 100 100 (Section 2.02(e) Sinking Fund Installments. The Term 1964 Bonds due April 1, 2003 will be entitled to sinking fund installments, due on the dates shown below, in amounts sufficient to redeem at the redemption prices set forth in the preceding paragraph, or (in the case of the last such installment) to pay at maturity, on such date the principal amount of such Bonds shown below: Year 1974 $3,825,000 1989 $4,950,000 $4,805,000 1975 $3,905,000 3,945,000 1990 4,905,000 4,790,000 1976 4,020,000 3,980,000 1991 4,880,000 4,630,000 1977 4,065,000 3,900,000 1992 4,725,000 4,435,000 1978 3,975,000 3,780,000 1993 4,525,000 4,240,000 1979 3,860,000 3,580,000 1994 4,320,000 4,010,000 1980 3,655,000 3,355,000 1995 4,095,000 3,805,000 1981 3,420,000 3,125,000 1996 3,880,000 3,560,000 1982 3,185,000 2,945,000 1997 3,625,000 3,525,000 1983 3,000,000 2,785,000 1998 3,600,000 3,215,000 1984 2,835,000 2,600,000 1999 3,285,000 1,725,000 1985 2,655,000 2,435,000 2000 1,765,000 1,475,000 1986 2,480,000 5,270,000 2001 1,510,000 1,425,000 1987. 5,370,000 5,050,000 2002 1,460,000 1,400,000 1988 5,155,000 4,850,000 2003 2,010,000 (Section 2.02(f)) Period During Which Redeemed Principal Amount April 1 October 1 Refunding Bonds Subject to certain conditions, CSPE may issue Refunding Bonds (the "Refunding Bonds of one or more series and ranking on a parity with the Bonds of other series, for the following purposes: (1) to refund all or any part of the outstanding Bonds of a series, provided, however, that the amounts payable in any twelve -month period in respect of the principal of and premium, if any, sinking fund installments and interest on the Refunding Bonds so issued may not exceed the amounts payable in such period in respect of the principal of and premium, if any, sinking fund installments and interest on the Bonds so refunded; or (2) to refund, at any time within one year prior to maturity, any Bonds for the payment of which upon maturity CSPE will not have sufficient funds. 23 Year Redemption Pricer At Election of For the CSPE Sinking Fund Principal Amount April 1 October 1 Refunding Bonds may be either Serial Bonds or Term Bonds or a combination thereof and shall mature not later than April 1, 2003. The Refunding Bonds of any series are required to mature on an April 1 and the due date of any sinking fund installment for Refunding Bonds may be either an April 1 or an October 1 or both. Payments in respect of the principal of and premium, if any, sinking fund installments and interest on the Refunding Bonds are required to be made into the Bond Fund established under the Indenture. (Section 2.03) Bond Fund; Flow of Funds Establishment of Bond Fund and Accounts Therein; Application of Proceeds of Sale of the 1964 Bonds. The Indenture establishes a Bond Fund and an Interest Account, Principal Account, Sinking Fund Account, and Reserve Account therein (hereinafter called, respectively, the "Bond Fund the "Interest Account the "Principal Account the "Sinking Fund Account" and the "Reserve Account From the proceeds of the sale of the 1964 Bonds there will be paid: (1) to the Government of Canada $254,400,000 in United States funds as of October 1, 1964 (subject to adjustment); (2) to the Trustee for deposit in the Interest Account an amount of cash equal to interest accrued and to accrue on the Bonds from the date of the Bonds to and including April 1, 1969; (3) to the Trustee for deposit in the Reserve Account the amount of $2,482,494; (4) to the Trustee for deposit in the Fiduciary Compensation Account established under the Indenture the amount of $254,000; and (5) to CSPE the balance of the proceeds of the sale of the Bonds, to be used by CSPE to pay expenses in connection with the issuance of the 1964 Bonds and other costs and expenses incurred or to be incurred by CSPE for its corporate purposes to and including April 1, 1969. (Sections 5.02, 5.03) Payments by CSPE into the Bond Fund. CSPE is required to pay or cause to be paid the amounts set forth below as follows and in the following order: (1) Into the Interest Account: not later than April 25, 1969, and on or before the 25th day of each calendar month thereafter, amounts sufficient in the aggregate to pay the semi -annual interest on the Bonds as the same becomes due and payable; (2) Into the Principal Account: not later than April 25, 1969, and on or before the 25th day of each calendar month thereafter, amounts sufficient in the aggregate to pay the annual principal of the Serial Bonds as the same becomes due and payable; (3) Into the Sinking Fund Account: not later than April 25, 1974, and on or before the 25th day of each calendar month thereafter, amounts sufficient in the aggregate to pay the semi annual sinking fund installments on the Term Bonds as the same become due and payable (to be used for the purchase or redemption or payment at maturity of the Term Bonds); (4) Into the Reserve Account: not later than April 25, 1968, and on or before the 25th day of each calendar month thereafter to and including March 25, 1969, the sum of $291,667; and on or before April 25, 1969, and on or before the 25th day of each calendar month thereafter, an amount equal to 15% of the aggregate of the amounts required to be paid in such month (before giving effect to any credits resulting from excess moneys in the Reserve Account as described below) into the Interest Account, Principal Account and Sinking Fund Account. (Section 5.04(a) 24 Other Payments. CSPE is also required to pay into the Reserve Account all moneys payable to it by the Participants which the Participants have received for the account of CSPE from the Adminis- trator as a result of capacity or energy not delivered by the Administrator pursuant to the Exchange Agreements. CSPE is required to pay into the Fiduciary Compensation Account the amount of the compensation, expenses, disbursements, advances and indemnification payable by CSPE to the Trustee or to any Paying Agent. (Sections 5.04(b), 8.08) Application of the Reserve Account. The Trustee is required promptly to make up any deficiency in the Interest Account, Principal Account, or Sinking Fund Account, by the withdrawal and transfer of cash from the Reserve Account. (Section 5.05) Excess Moneys in the Reserve Account If, on April 1, 1969, or any April 1 thereafter, there shall exist any moneys or Government Obligations in the Interest Account, Principal Account and Sinking Fund Account, after all required payments shall have been made from such accounts, such moneys or Government Obligations are required to be transferred into the Reserve Account. If, on April 1, 1969, or any April 1 thereafter, the moneys and value of Government Obligations in the Reserve Account (after giving effect to the foregoing transfer) shall exceed the amount required to be paid by CSPE into the Interest Account during the twelve -month period beginning on such April 1, the Trustee will pay from such excess to any Participant the amount, if any, by which the payments made by such Participant prior to such April 1 to the Trustee for the account of CSPE exceeded its Participant's Percentage of the payments required to be made to the Trustee by CSPE prior to such April 1, and will certify the remainder of such excess to CSPE. The Trustee will transfer and apply one twelfth of the amount of the remainder of such excess as a credit against the payment which CSPE is required to make in each of the twelve months beginning on such April 1 into the following accounts and in the following order: (i) into the Interest Account, and to the extent of any remainder; (ii) into the Principal Account, and to the extent of any remainder; (iii) into the Sinking Fund Account, and to the extent of any remainder; (iv) into the Reserve Account. (Section 5.07) Investment of Funds Moneys held in the Interest Account, Principal Account, Sinking Fund Account and, except as provided in the following sentence, the Reserve Account, are to be invested in Government Obligations maturing not later than five days prior to the respective dates when the moneys held in such accounts will be required for the purposes intended. Moneys in the Reserve Account not required to make up deficiencies in the other accounts in the Bond Fund or to be transferred and credited to such accounts as described in the preceding paragraph are to be invested in Government Obligations maturing or redeemable within six years from the date of investment. Government Obligations purchased as an investment of moneys in the various accounts in the Bond Fund are deemed to be a part of such accounts, but the income accruing thereon and any profit or loss realized therefrom is, as the case may be, to be credited to and deposited in or charged to and deducted from the Reserve Account. (Section 5.06) Certain Covenants Exchange Agreements; Purchase Agreement. CSPE agrees that it will not voluntarily consent to any amendment or rescission of, or take any action under or in connection with, any of the Exchange Agreements or the Purchase Agreement which will in any manner impair or adversely affect the rights of CSPE or of the Bondholders, and CSPE agrees to perform all of its obligations under the Exchange Agreements and the Purchase Agreement and to take such action from time to time as may be necessary to protect and safeguard the security for the payment of the Bonds afforded, directly or indirectly, by the provisions of such Agreements. (Section 6.07) 25 Issuance of Indebtedness. CSPE agrees that it will not issue any bonds or other evidences of indebtedness, other than the Bonds, which will rank on a parity with or prior to the Bonds. (Section 6.06) No Merger or Consolidation; Corporate Existence. CSPE agrees that it will not consolidate with, merge into, or sell, lease or otherwise dispose of any substantial portion of its property to, any person except pursuant to the Exchange Agreements. CSPE agrees that it will keep in full force and effect its corporate existence, rights and franchises and that it will not engage in any business or activity other than that for which it was originally created and established. CSPE also agrees that it will carry on its business in a manner that will not jeopardize the continued applicability of the ruling issued by the Internal Revenue Service, dated August 14, 1964. (Section 6.08) Books of Account; Reports to Bondholders. CSPE agrees to keep proper books of account in which complete entries will be made of all transactions of CSPE and of all payments made by or for the account of CSPE to the Trustee. Such books of account are to be subject to an annual audit by a firm of independent certified public accountants. Within 90 days after each April 1, CSPE is required to file with the Trustee, and send to any Bondholder filing with CSPE a written request therefor, a complete balance sheet and income and expense statement showing in reasonable detail the financial condition of CSPE as of the close of the twelve -month period ending on such April 1 and summarizing in reasonable detail the income and expenses of CSPE for such year, including the transactions relating to the Interest Account, Principal Account, Sinking Fund Account and Reserve Account. (Section 6.10) Events of Default; Remedies Under the Indenture, the happening of one or more of the following events constitutes an Event of Default: (i) default in the payment of the principal of and premium, if any, on, or default for 30 days in the payment of interest on, any Bonds; or (ii) default for 60 days in the payment of any sinking fund installment; or (iii) default for 60 days on the part of CSPE to make any payment required to be made into any account in the Bond Fund; or (iv) default for 60 days after notice thereof in the observance or per- formance of any of CSPE's other covenants and agreements under the Indenture; or (v) certain events in connection with the bankruptcy, insolvency or reorganization of CSPE. (Section 7.01) If an Event of Default shall have occurred and shall not have been remedied, the Trustee or the holders of 25% in principal amount of the Bonds then outstanding may declare the principal of all the Bonds and the interest thereon to be immediately due and payable, but such declaration may be annulled, under certain circumstances, by the Trustee or by the holders of not less than a majority in principal amount of the Bonds not then due by their terms and then outstanding. (Section 7.02) In case an Event of Default has occurred which has not been cured, the Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (Section 8.03) Whether or not an Event of Default shall have occurred or be continuing, the Trustee may and, at the request of the holders of not less than a majority in principal amount of the Bonds then outstanding and upon being furnished with reasonable security and indemnity, shall take such steps and institute such suits, actions or proceedings in its own name, or as Trustee, or in the name of CSPE, as the Trustee may deem appropriate for the protection and enforcement of the rights of CSPE, the Trustee and the Bondholders, to collect any amounts due or owing CSPE or the Trustee, or by injunction, mandamus, foreclosure or other appropriate proceeding in law or in equity to obtain other appropriate relief, and may enforce the specific performance of any covenant, agreement or condition contained in the Indenture, or in the Bonds, or in any contract to which CSPE is a party, including, without limitation, the Exchange Agreements. (Section 7.04) 26 The holders of a majority in principal amount of the Bonds at the time outstanding have the right to direct the time, method and place of conducting any remedial proceedings to be taken by, or of exercising any trust or power conferred on, the Trustee under the Indenture, provided that the Trustee shall have been furnished with reasonable security and indemnity and provided also that the Trustee may decline to follow any such direction if it shall be advised by counsel that the action or proceeding so directed may not lawfully be taken or that the action or proceeding so directed would involve it in personal liability or would be unjustly prejudicial to the Bondholders not parties to such direction. No Bondholder has any right to institute suit to enforce any provision of the Indenture or the execution of any trust thereunder (except to enforce the payment of principal or interest installments on his Bonds as they mature), unless the Trustee has been requested by the holders of not less than 25% in aggregate principal amount of the Bonds then outstanding to exercise the powers granted it by the Indenture or to institute such suit and unless the Trustee has refused or failed, within 60 days after receipt of such request and after having been offered adequate security and indemnity, to comply with such request. (Section 7.08) Supplemental Indentures; Amendments Without the consent of any Bondholder, CSPE and the Trustee may, from time to time and at any time, enter into supplemental indentures for the purpose of issuing Refunding Bonds pursuant to the Indenture and of curing any ambiguity or formal defect or omission in the Indenture or any supplemental indenture. (Section 10.01) The Indenture and the rights and obligations of CSPE, of the Trustee, and of the Bondholders may be modified or amended at any time by a supplemental indenture with the written consent of the holders of at least 66 of the principal amount of the Bonds then outstanding; provided, however, that no such modification or amendment shall extend the maturity of or reduce the interest rate on, or otherwise alter or impair the obligation of CSPE to pay the principal of and premium, if any, and interest on, any Bond at the time and place and at the rate and in the currency provided in the Indenture, without the express consent of the holder of such Bond. (Section 10.02) TAX EXEMPTION CSPE has received a ruling, dated August 14, 1964, from the Internal Revenue Service to the effect that (1) the interest on the 1964 Bonds will be excludable from the gross income of the recipients thereof; (2) the issue and transfer of the 1964 Bonds will be exempt from Federal documentary stamp taxes; and (3) the income obtained by CSPE from the purchase and sale of the Canadian Entitlement will not be subject to Federal income tax. LITIGATION There is no litigation pending or, to the knowledge of CSPE, threatened in any way questioning or affecting the validity of or security for the 1964 Bonds, any of the Exchange Agreements or the Purchase Agreement. As referred to under "Allocation, Assignment and Coordination Agreements there may be litigation with respect to the Coordination Agreement. LEGAL OPINIONS All legal matters incident to the authorization and issuance of the 1964 Bonds are subject to the approval of Messrs. Wood, King, Dawson Logan, Bond Counsel to CSPE, and of Messrs. Culp, Dwyer, Guterson Edwards, Counsel to CSPE. Certain legal matters relating to the laws of the Province of British Columbia and of Canada will be passed upon for the Underwriters by Messrs. Daly, Harvey Cooper and certain other legal matters will be passed upon by Messrs. Sullivan Cromwell, Counsel to the Underwriters. 27 EXHIBITS Attached hereto as part of this Official Statement are the following exhibits: Exhibit 1— Summary Engineering Report, dated August 26, 1964, of R. W. Beck and Associates; Exhibit 2— Letter, dated July 27, 1964, of British Columbia Hydro and Power Authority; Exhibit 3 —Form of Exchange Agreements; and Exhibit 4 —Form of Opinion of Messrs. Wood, King, Dawson Logan with respect to the legality of the 1964 Bonds. MISCELLANEOUS So far as any statements made in this Official Statement and the Exhibits attached hereto involve matters of opinion or of estimates, whether or not so expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the holders of any of the 1964 Bonds. The delivery of this Official Statement has been duly authorized by Columbia Storage Power Exchange. COLUMBIA STORAGE POWER EXCHANGE By /s/ HOWARD C. ELMORE, President 28 SEATTLE, WASHINGTON DENVER, COLORADO PHOENIX, ARIZONA COLUMBUS, NEBRASKA FILE NO. Board of Trustees Columbia Storage Power Exchange 20 North Main Street East Wenatchee, Washington Gentlemen: R. W. BECK AND ASSOCIATES ANALYTICAL AND CONSULTING ENGINEERS Subject: Summary Engineering Report Columbia Storage Power Exchange August 26, 1964 Presented herewith is a summary of our analyses, investigations and studies concerning the proposal by Columbia Storage Power Exchange "CSPE to purchase certain of Canada's entitlement to the downstream power benefits "Canadian Entitlement defined and computed pursuant to the "Treaty Relating to the Cooperative Development of the Columbia River between Canada and the United States of America signed at Washington, D. C. on January 17, 1961 "Treaty Ratification of the Treaty is expected to take place simultaneously with the delivery of the payment to Canada described below. CSPE proposes to purchase the Canadian Entitlement during the first thirty years of operation of each of the Treaty projects in Canada for a single payment, as of October 1, 1964, of $254,400,000 pursuant to a Canadian Entitlement Purchase Agreement "Purchase Agreement and to transfer and assign the Canadian Entitlement to certain electric utilities "Participants in the Pacific Northwest, pursuant to Canadian Entitlement Exchange Agreements "Exchange Agreements The Participants shall, pursuant to the Exchange Agreements, transfer and assign the Canadian Entitlement to the Bonneville Power Administrator "Administrator in exchange for stipulated amounts of power and energy which the Administrator shall deliver to the Participants. The downstream power benefits will result from the construction and operation by Canada of the Duncan Lake, Arrow Lakes and Mica Creek water storage projects located in the Columbia River Basin in Canada. For a full description of these projects see the letter from the British Columbia Hydro and Power Authority ("B. C. Hydro dated July 27, 1964, included as Exhibit 2 to the Official Statement to which this Report is attached. Under the Treaty, the United States, among other things, agrees to deliver to Canada one -half of the downstream power benefits in the United States, as therein defined, resulting from such construction. CSPE proposes to finance the purchase of the Canadian Entitlement through the issuance of its Columbia Storage Power Exchange Revenue Bonds "Bonds in the principal amount of $314,100,000 pursuant to a Bond Indenture "Indenture to be dated as of September 1, 1964, between CSPE and Morgan Guaranty Trust Company of New York. For a description of the Treaty, the Purchase Agreement, the Exchange Agreements and the Indenture, reference is made to the Official Statement. 1 -1 EXHIBIT 1 TELEPHONE MA 2 -5000 1500 TOWER BUILDING SEATTLE, WASHINGTON 98101 The Canadian Storage Operation Under the Purchase Agreement, B. C. Hydro agrees to construct dams for storage of water as follows: Usable Storage Date Project Location (Acre Feet) Operative Duncan Lake Duncan River(1) 1,400,000 April 1, 1968 Arrow Lakes Columbia River 7,100,000 April 1, 1969 Mica Creek Columbia River 7,000,000 April 1, 1973 (1) —A tributary of the Kootenay River which flows into the Columbia River. When operated for power purposes under the principles set forth in the Treaty, these storages will have a substantial beneficial effect on the ability of hydroelectric power projects in the Pacific North- west to meet loads. Without Canadian storage substantial amounts of water spill past the power projects on the Columbia River, primarily during high -flow periods when flows exceed the machine capability of the projects, and also during periods when flows do not exceed machine capability but cannot be used because of lack of demand. With Canadian storage less water will spill past the power projects on the Columbia River both during high -flow periods and during periods of low demand. By the addition of Canadian storage, water storage for power purposes in the Columbia River Basin will be more than doubled, providing substantial additional control of stream flows. Existing storage projects on the Columbia River and its tributaries have a total storage capability of approximately 13,650 000 acre -feet. Additional storage projects in the Pacific Northwest under construction or licensed for construction by the Federal Power Commission will have a total storage capacity of 4,200,000 acre -feet. Directly affected by the operation of the Canadian storage projects are the 11 hydroelectric projects in operation or under construction located downstream on the Columbia River in the United States. These 11 projects have a name -plate rating of 10,020,000 kilowatts of which 3,085,000 kilowatts or approximately 30 per cent is located in non Federal projects and the remaining 6,935,000 kilowatts or approximately 70 per cent is located in Federal projects. About 1,200 feet of the 1,290 -foot drop of the Columbia River between the Canadian border and the Pacific Ocean has been or is being developed for power purposes by these projects. The Downstream Power Benefits The downstream power benefits are defined under the Treaty as the difference in dependable hydro- electric capacity and average annual usable energy capable of being generated with Canadian storage and without Canadian storage at dams on the Columbia River Base System in the United States (See Appendix A). Canadian storage will increase dependable capacity in the Pacific Northwest by increasing the ability of generating plants to meet firm power loads during the critical low- stream -flow periods. Because of the seasonal characteristics of the firm power loads in the Pacific Northwest, the addition of steam generating capacity in future years will also increase the ability of hydroelectric generating plants to carry firm power loads during such periods. However, this increase in load carrying capability resulting from the addition of steam generating capacity would be greater without Canadian storage than with such storage, and thus as steam generating capacity is added, the dependable capacity benefits from Canadian storage will diminish. As steam power plants are constructed in the Pacific Northwest to meet increasing demands for power, water which is now spilled can be used by hydroelectric generating units to produce energy, thereby replacing higher cost steam power. Therefore, more of this water becomes usable and less is available to put into storage. Furthermore, as steam power plants are constructed, the installation of additional generating units at existing hydroelectric projects to provide capacity to supplement the added steam energy will become more economical. These generating units can use more of the high -flow water, reducing still further the amounts of water available for reservoir storage. As less water is available for storage, the average usable energy benefits from Canadian storage will diminish. The Treaty provides that, for the purposes of computing downstream power benefits, Canadian storage will be considered to be first added to a "Base System" of existing storage of 13,000,000 acre -feet. 1 -2 Storage existing in the Pacific Northwest not included in the Base System and storage to be developed at major new projects such as Dworshak, Mountain Sheep, and Libby will not be used in computing downstream power benefits. The projects included in the Base System are listed in Appendix A together with certain descriptive data. The downstream power benefits from Canadian storage computed in accordance with the principles established in the Treaty have been estimated through the year 2003. The projects at which these benefits are developed and the amounts of capacity and energy estimated to be developed at each project for the year ending April 1, 1975 are shown in Appendix B of this Report. The Canadian Entitlement The Treaty provides that Canada is entitled to one -half of such downstream power benefits. CSPE proposes to purchase Canada's entitlement to downstream power benefits: (a) applicable to Duncan Lake storage for 30 years from April 1, 1968 through March 31, 1998; (b) applicable to Arrow Lakes storage for 30 years from April 1, 1969 through March 31, 1999; and (c) applicable to Mica Creek storage for 30 years from April 1, 1973 through March 31, 2003. The amounts of capacity and energy constituting the Canadian Entitlement which CSPE proposes to purchase have been estimated on the basis of assumed future conditions and are set forth in Appendix C to this Report. The American Entitlement The downstream power benefits to be retained by the downstream project owners, after deducting the capacity and energy to which Canada is entitled, are frequently referred to collectively as the American Entitlement. Computed in accordance with the Treaty principles, the American Entitlement is equal in magnitude to the Canadian Entitlement. The American Entitlement accrues to the hydroelectric plants of the Base System which are listed in Appendix B. In order to fully realize the benefits of the American Entitlement, however, the owners of the down- stream projects on the Columbia River must install additional capacity at such projects or, in the alter- native, obtain capacity through purchase. The cost of the American Entitlement to each utility with an interest in a project at which such entitlement is developed varies, among other things, with the need of such utility for capacity and the ability of such utility to utilize secondary energy. Accordingly, the cost to each utility of the American Entitlement may fluctuate widely. Annual Costs of CSPE The annual costs and expenses of CSPE will consist of the amounts which CSPE is required to pay pursuant to the Indenture and all other expenses incurred by CSPE for its corporate purposes. The obligations of CSPE under the Indenture are described in the Official Statement. For the fees and expenses of the trustee and the paying agents payable under the Indenture and the auditing, legal and other expenses which CSPE is expected to incur we have included what we consider to be a reasonable allowance of $100,000 per year based on present levels of cost. In addition to the foregoing costs and expenses, CSPE may be required to pay certain state taxes. An official determination of the amount of taxes has not been received by CSPE. However, in the opinion of Counsel for CSPE the amount payable under present laws will not exceed 1% of the total payments to CSPE under the Exchange Agreements. In the absence of a final determination of taxes we have omitted them from our computa- tion of power costs. Estimated annual costs of CSPE are shown in the Table entitled "Debt Service and Estimated Annual Power Costs" in the Official Statement. Cost of Capacity and Energy to Participants The Exchange Agreement entered into between CSPE, each Participant, and the Administrator, provides that CSPE shall transfer and assign to the Participant, its Participant's Percentage of the Canadian Entitlement for which the Participant shall pay its Participant's Percentage of CSPE's costs. The Exchange Agreement further provides that the Participant shall transfer and assign its Participant's Percentage of the Canadian Entitlement to the Administrator in exchange for specified amounts of capacity and energy to be made available by the Administrator to the Participant. The amounts of capacity and energy which are to be made available to each Participant, less losses, are determined by 1 -3 R. W. BECK and ASSOCIATES ANALYTICAL AND 'CONSULTING ENGINEERS Seattle, Washington Denver, Colorado b Bandon WiBapa Ba 34 Aberdeen Mfr f i, a 3 Cfran1s Pa dmaif{ alIss Goldbndale }aJ�;Madras Goose Lake Wenatche J Lake 1 Albert COLD''' BIA Moses Lake 33 1,::.. Burns Couleh Dam r 2 John Day Malheur Lake Baker Banners err 22 ran Ile IDAHO Flathead OLake Missou +-r Grays O Tillamo ��(tlVER ''RA S ER. 2 CALIFORNIA OREG*N 12 Lakeview Harney Lake ALBERTA 20 MUNICIPALITIES 1 Bonners Ferry, Village of 2 Coulee Dam Light Department 3 Eugene Water and Electric Board 4 Forest Grove, City of 5 McMinnville, City of 6 Port Angeles, City of 7 Richland, City of 8 Seattle City Light 9 Springfield Utility Board 10 Tacoma City Light 11 Vera Irrigation District No 15 NT Map Scale 50 MILES 700 Service areas shown are from the best information available from the Bonneville Power Administration and are not intended to represent the actual claimed or legal boundaries o ELECTRIC UTILITY SERVICE AREAS COLUMBIA STORAGE POWER EXCHANGE a...4444 eek r NE DA t UTAH ELECTRIC UTILITIES COOPERATIVES 12 Central Electric Cooperative, Inc 13 Coos -Curry Electric Coop Inc 14 Flathead Electric Cooperative, Inc 15 Idaho Co L P Coop Assn., Inc 16 Inland Power and Light Company 17 Lane County Electric Coop Inc 18 Lincoln Elec Coop Inc (Mont 19 Lincoln Elec Coop., Inc (Wash 20 Missoula Electric Cooperative, Inc 21 Nespelem Valley Elec Coop Inc 22 Northern Lights, Incorporated 23 Ravalli County Electric Coop Inc 24 Salem Electric 25 26 27 28 29 30 31 32 33 34 35 36 37 38 P. U. D'S. Benton County P U D No 1 Central Lincoln P.U.D Chelan County P.U.D No. 1 Clark County P U.D No 1 Clatskanie P U.D. Cowlitz County P U D No 1 Douglas County P U D No 1 Franklin County P U D No 1 Grant County P.0 D No. 2 Grays Hbr. County P U D No 1 Pend Oreille County P U D No 1 Skamanla County P U D No 1 Snohomish County P U D No 1 Tillamook P U D ,PRi-WAT ANI E'YCOMPES� 39 Pacific Power and Light Company 40 Portland General Electric Company 41 Puget Sound Power Light Co. 42 Washington Water Power Company (i/For list of Participants see statistical table of Canadian Entitlement Exchange Agreement Participants I 1, WYOMING July 21, 1964 multiplying the amounts of capacity and energy shown in Columns 13 and 14 of the Table entitled "Debt Service and Estimated Annual Power Cost" in the Official Statement by its Participant's Percentage. In addition to payment of its Participant's Percentage of CSPE's annual costs, each Participant will pay transmission charges to the Administrator to the extent such Participant uses the Administrator's lines to effect delivery into the Participant's system of the capacity and energy to be made available to the Participant under its Exchange Agreement. If the Administrator's transmission facilities are used to deliver such capacity and energy, the Administrator will deliver the capacity and energy, less losses, to the Participant's point of delivery for a transmission charge as provided in Section 7 of the Exchange Agreements. Capacity and energy losses are to be computed to each point of delivery as follows: Delivery Voltage 230 kv 115 kv 69 kv and lower 1 -4 Capacity Energy 4.5% 3.0% 5.5% 3.5% 6.5% 4.0% The Exchange Agreement permits the Participant within certain limitations to exchange with the Administrator capacity for energy and energy for capacity at the rate of 4.3 kilowatts of capacity per year for one average kilowatt per year of energy (8,760 kilowatt- hours). If the Administrator has sufficient energy for such purpose, capacity may be exchanged for energy so long as the amount of average energy to be made available to the Participant in any year shall not exceed the amount of capacity to be so made available. Energy may be exchanged for capacity so long as the amount of capacity to be made available to the Participant in any year shall not exceed 2.5 times the amount of average energy to be so made available. To the majority of Participants, the exchange of capacity for energy permitted in the Exchange Agreements will result in a reduction in their overall power costs. To some, a reduction will be obtained through the exchange of energy for capacity. Each Participant is free to make the choice most favorable to it within the above limitations. Comparison of Power Costs The interest, principal and sinking fund installments for the Bonds have been scheduled so that each Participant's unit cost for capacity and energy shall be approximately the same each year during the term of its Exchange Agreement. The total unit costs of power made available to Participants, on a cost per kilowatt per year of capacity basis and on a kilowatt -hour basis for various load factors, is shown in Table I. Shown for comparison purposes are costs for an equivalent amount of power under the current Bonneville E -4 rate schedule (generally applicable to the Participants which do not own their own generation) and under the current Bonneville C -4 rate schedule (generally applicable to the utility companies, the large municipalities and certain of the other public agencies which own their own generation). TABLE I Unit Power Cost Per Kw Per Year Mills Per Kwh Load Factor Load Factor 40% 60% 100% 40% 60% 100% Exchange Agreement Power With Transmission Delivery Voltage 230 Kv $15.96 $20.50 $29.60 4.48 3.84 3.33 115 Kv 16.13 20.72 29.92 4.51 3.86 3.34 69 Kv below 16.30 20.94 30.24 4.53 3.88 3.36 Without Transmission 13.74 18.08 26.77 3.92 3.44 3.06 Bonneville Power With Transmission E -4 Rate 14.90 16.65 20.16 4.26 3.18 2.31 C -4 Rate 17.50 17.50 17.50 5.00 3.33 2.00 (1) Excludes state taxes. Available only to those utilities capable of taking Exchange Agreement power directly from non Federal projects. (3 Based on current rates which are subject to change at 5 -year intervals. (4) Also available to Participants who may purchase under E -4 rate schedule. We estimate that the power costs for the Canadian Entitlement, without wheeling, based on the amounts of capacity and energy to be made available to the Participants under the Exchange Agreements, will be $18.08 per kilowatt per year of dependable capacity or 3.44 mills per kilowatt -hour of energy at 60% load factor. These figures reflect combined unit costs of $5.05 per kilowatt per year of dependable capacity plus 2.48 mills per kilowatt -hour of energy and do not include transmission costs or state taxes. A comparison of the average power costs to the Participants with the average power costs of hydro- electric projects recently financed by public utility districts on the Columbia River is shown below. Estimates for such projects have been based on the net peaking capability of such projects and are set forth for the period during which debt retirements are projected to be made for each project. TABLE II CSPE Well0 Rocky Reach Rock Island Priest Rapids( Wanapum With 1959 bonds (from January 1, 1965) With 1963 bonds (from January 1, 1970) Average Power Costs Per Kilowatt Mills per per year Kilowatt hour $18.08 17.37 21.29 16.14 11.90 3.44 3.28 3.42 2.12 2.55 15.62 2.96 13.75 2.60 Based on 60% annual load factor and excludes state taxes. (2) As set forth in the Official Statement dated October 4, 1963 of Public Utility District No. 1 of Douglas County, Washington. Based on actual construction costs and current operating costs. (4) As set forth in the Official Statement dated July 30, 1963, of Public Utility District No. 2 of Grant County, Washington. The annual power costs shown in Table II do not include transmission costs. The cost of trans- mitting Exchange Agreement power in most cases is less than costs for transmitting capacity and energy from non Federal hydroelectric projects to load centers. The estimates of costs for the hydroelectric projects listed above are based on the estimated capability of the projects before Canadian storage. Comparable estimates of annual power costs after the construction of Canadian storage will depend upon the future plans for expansion of each of the projects and the costs of such expansion. As these plans have not been formulated at the present time, the information required to make accurate estimates of the effect of Canadian storage on the foregoing costs is not available. The energy available to the Participants is firm energy which is available on an assured basis. The energy available from the hydroelectric projects shown in Table II includes both firm and secondary energy. Firm energy is classified as energy available to a customer to meet his load requirements. Secondary energy is classified as energy available on a "when, as and if available" basis. As firm energy has a higher value than secondary energy, the value of the energy to be received by the Participants under the Exchange Agreements will be somewhat greater than the value of energy to the purchasers of the output of the projects shown. The Participants Attached as Appendix D is a table showing each Participant's share of CSPE's costs and the estimated amount of capacity each Participant will receive under its Exchange Agreement for the year ending April 1, 1970 (the first year when the Arrow Lakes Project is scheduled to be in operation) and 1 -5 for the year ending April 1, 1974 (the first year when all Canadian storage projects are scheduled to be in operation) compared to the Participant's existing peak load and its corresponding estimated peak loads. These two years represent the years when the percentage of capacity to be received from CSPE as compared to the total peak load of each of the Participants is the highest. Reference to Appendix D will show that in no event is any Participant with a Participant's Percentage of over one per cent taking more than 18.7 per cent of its estimated capacity requirements from CSPE. The Federal System —The Bonneville Power Administration The Federal System in the Pacific Northwest, for which the Administrator is marketing agent, obtains the greatest amount of power benefits from Canadian storage under the Treaty. Its six generating plants on the main stem of the Columbia River downstream from Canada develop approximately 70 per cent of the total developed head on the main stem and will receive about 74 per cent of the actual increase in generation at the downstream projects. In addition to the benefits obtained from the construction of 15,500,000 acre -feet of storage in Canada, the Treaty clears the way for future construction of the Federal storage and power project near Libby, Montana. This project is expected to have 344,000 kilowatts of installed capacity and 4,965,000 acre -feet of usable storage extending into Canada. Approval of Canada to permit flooding of Canadian lands for this project has been under negotiation for many years. The Treaty gives this approval and provides that Canada will clear the lands to be flooded at its expense. The Libby project must be started within 5 years and completed within 12 years of the date the Treaty is ratified in order for this approval to become effective. Most of the Federal hydroelectric projects for which the Administrator is marketing agent can be expanded by the installation of additional generating units. The cost of most of these additional units per kilowatt of installed capacity is estimated to be substantially less than the cost per kilowatt of the initial project installation, primarily because the basic water control structure has already been completed. Because the firm energy output of the Federal projects is primarily dependent upon the flow of water during the critical period, and since most of the Federal projects have sufficient installed capacity to use such stream flows, added units at the Federal projects do not, in most cases, add substantially to this firm energy output. Added storage, however, would permit increase in critical period stream flows and thus increase the firm energy output of the Federal projects. This, in turn, will increase Bonneville's ability to carry firm energy load. Energy for capacity exchanges under the Exchange Agreements may further provide the Federal System with additional energy with which to carry firm load through exchange for surplus capacity available from the added units contemplated. Coordination Agreement To make the best use of the resources within the area and the most effective use of the storage provided under the Treaty, a long -term Pacific Northwest Coordination Agreement "Coordination Agreement has been executed. The Coordination Agreement was developed as a result of experience obtained during the past three years, during which Pacific Northwest utilities were operating under pilot coordination contracts. The parties to the Coordination Agreement include all utilities in the West Group area of the Northwest Power Pool which have major generating plants in operation, plus the Montana Power Company and the Aluminum Company of America. Under the Coordination Agreement the parties agree to coordinate the operation of their respective systems so as to provide optimum firm load carrying capability for the coordinated system, to make available to each system its optimum firm load carrying capability and, consistent with these objectives, to produce the optimum usable secondary energy for each system. The Coordination Agreement contains detailed provisions with respect to planning and operating the coordinated system on virtually 1-6 a day -to -day and hour -to -hour basis so that the objectives of coordination can be fully realized. The coordination of resources to serve the area loads has provided very substantial benefits to the Pacific Northwest. Alternative Power Sources The loads of the Participants are estimated to continue growing throughout the term of the Exchange Agreements. The alternative sources of capacity and energy which may be available to the Participants to meet their increasing load requirements include additional hydroelectric and thermal projects, both fossil -fuel and nuclear, which may be constructed in the area and may also include power from other areas. In addition, for at least a portion of such term certain Participants are expected to be able to purchase increased amounts of capacity and energy from the Administrator. The Columbia River and its tributaries provide the major source of present power supply and constitute the major hydroelectric resources, both existing and potential within the Pacific Northwest. Of the 12,573,000 kilowatts of installed hydroelectric capacity in the West Group area, 10,854,300 kilowatts are on the Columbia River and its tributaries. The main stem of the Columbia River within the United States will be essentially fully developed when projects now under construction are completed, with the exception of approximately 44 feet of head at the Ben Franklin site. Although additional generating capacity may be installed at existing projects, the early installation of such additions is largely dependent upon the economic feasibility of such installation. Additional economical hydroelectric sites, both on the tributaries of the Columbia River and on the coastal rivers in the Pacific Northwest, are limited, and based upon current load growth estimates and upon analyses of available hydroelectric resources of the region, it is expected that the power and energy from all potential major economical projects will not be sufficient to supply the loads expected in the latter half of the 1970 -1980 decade. At the present time, the total generating capacity in the West Group area from thermal sources consists of 440,000 kilowatts of relatively high -cost steam plants. Nuclear -fired capacity in the amount of 800,000 kilowatts at the Hanford New Production Reactor generating plant is now under construction, with completion scheduled in late 1965. Numerous studies have been prepared of the feasibility of constructing a major steam plant near coal deposits at Cle Elum in central Washington. These studies indicate that the cost of power from such a plant would be above the cost of capacity and energy to be made available to the Participants under the Exchange Agreements. Over the past several years the U. S. Atomic Energy Commission has carried on an extensive program for the development of atomic energy for electric generation. Based upon official publications of the Commission, the estimated cost of power supply from nuclear plants will be in the order of 4.8 mills per kilowatt -hour by 1970, reducing to approximately 3.6 mills per kilowatt -hour by 1980, based upon 80 per cent plant factor operation. When coupled with additional peaking capacity to meet a normal utility load factor, the energy costs quoted above would increase. Conclusions Based on our analyses, investigations and studies, we are of the opinion that: A. The Canadian storage projects to be constructed and operated by B. C. Hydro under the Treaty will provide substantial power benefits to the Pacific Northwest. B. The provisions of the Exchange Agreements will result in a cost of capacity and energy to the Participants which is reasonable and compares favorably to costs of alternative power sources on a long -range basis. C. The economic benefits to each Participant under its Exchange Agreement are derived principally from the assurance of a supply of firm power for the term of such agreement at a reasonable fixed cost in comparison with estimated costs of power for such period from alterna- tive power sources. For some Participants the realization of long -term benefits under the 1 -7 Exchange Agreements may require absorption of higher costs during the early years. The short-term economic effect of the Exchange Agreements on each Participant can only be evaluated in the light of future developments and the individual circumstances of such Participant. Each of the Participants, however, will be able to utilize the capacity and energy to be made available to it pursuant to its Exchange Agreement, either in its own load or, in the early years, through remarketing. D. Without Canadian storage, the utilities of the West Group area, in which the Participants supply 80% of the retail load, would require substantial amounts of additional capacity and energy beginning in 1970. We have furnished to you the information contained in the Official Statement under the captions "The Downstream Power Benefits "Canadian Entitlement Exchange Agreement Participants" and the Table of Certain Statistical and Financial Data for 1963, "Power Supply in the Pacific Northwest "Annual Power Costs" and the Table of Debt Service and Estimated Annual Power Costs. In our opinion such information is correct and does not omit any statement which should be included or referred to therein. Respectfully submitted, R. W. BECK AND ASSOCIATES Project Hungry Horse Kerr. Thompson Falls Noxon Rapids Cabinet Gorge Albeni Falls Box Canyon Grand Coulee Chief Joseph Wells Rocky Reach Rock Island 4p Wanapum Priest Rapids Brownlee Oxbow Ice Harbor McNary John Day The Dalles Bonneville Kootenay Lake Chelan Couer d'Alene L. TOTAL 24 PROJECTS Ownership Federal Mont. Pwr. Co. Mont. Pwr. Co. WWP Co. WWP Co. Federal Pend Oreille PUD Federal Federal Douglas PUD Chelan PUD Chelan PUD Grant PUD Grant PUD Idaho Pwr. Co. Idaho Pwr. Co. Federal Federal Federal Federal Federal West Kootenay Pwr. Chelan PUD WWP Co. Stream S. Fk. Flathead Flathead Clark Fork Clark Fork Clark Fork Pend Oreille Pend Oreille Columbia Columbia Columbia Columbia Columbia Columbia Columbia Snake Snake Snake Columbia Columbia Columbia Columbia Lt. Co. Kootenay Chelan Couer d'Alene APPENDIX A Base System Stream Mile Above Mouth Usable ,-Normal Elevation Gross ,-Initial Installation Storage Pool Tailwater Head No. of Plant Acre -feet Feet Feet Feet Units Kilowatts (Nameplate) 5 3,161,000(1) 3560 3083 477 4 285,000 73 1,219,000 2893 2706 187 3 168,000 209 Pondage 2396 2336 60 6 30,000 170 Pondage 2331 2179 152 4 336,000 150 Pondage 2175 2078 97 4 200,000 90 1,155,000 2062 2034 28 3 42,600 34 Pondage 2031 1989 42 4 60,000 597 5,232,000(1) 1290(1) (2) 947 343 18 1,944,000 546 Pondage 946 775 171 16 1,024,000 516 Pondage 775 707 68 6 400,000 474 Pondage 707 614 93 7 711,550 453 Pondage 608(2) 570 38 10 212,100 415 Pondage 570 486 84 10 831,250 397 Pondage 486 406 80 10 788,500 285 974,000 2077 1805 272 4 360,400 273 Pondage 1805 1683 122 4 190,000 10 Pondage 440 343 97 3 270,000 292 Pondage 340 265 75 14 980,000 216 Pondage 265 161 104 8 1,080,000 192 Pondage 160 74 86 16(3) 1,119,000 145 Pondage 74 15 59 10 518,400 16 673,000 1745 0 676,000 1100 707 393 2 48,000 102 223,000 2128 13,313,000(1) 3128 166 11,598,800 Estimated Ultimate No. of of Plant Units Kilowatts (Nameplate) 4 285,000 3 168,000 8 65,000 5 420,000 6 300,000 3 42,600 4 60,000 34 3,672,000 27 1,728,000 10 666,700 11 1,118,150 10 212,100 16 1,330,000 16 1,261,600 6 540,600 5 237,500 6 540,000 20 1,400,000 20 2,700,000 24(3) 1,743,000 16 890,400 4 96,000 258 19,476,650 (1) In determining the base system capabilities with and without Canadian storage the Hungry Horse reservoir storage will be limited to 3,008,000 acre -feet (normal full pool elevation of 3560 feet) and the Grand Coulee project will not include the effect of adding flashboards, limiting the storage to 5,072,000 acre -feet (normal full pool eleva- tion of 1288 feet). The total usable storage of the Base System as so adjusted will be 13,000,000 acre -feet. (2) With flashboards. (3) Includes two 13,500 kilowatt units for fish attraction water. APPENDIX B Estimated Benefits to Downstream Plants Resulting from Canadian Storage Year ending April 1, 1975 Average Annual r--- Dependable Capacity Usable Energy Percent of Percent of Kw Total Kw Total Federal Grand Coulee 732,000 26.43% 622,000 40.97% Chief Joseph 328,000 11.84 178,000 11.72 Ice Harbor 68,000 2.46 McNary 212,000 7.65 86,000 5.67 John Day 304,000 10.97 120,000 7.91 The Dalles 244,000 8.81 108,000 7.11 Bonneville 126,000 4.55 40,000 2.64 Total Federal 2,014,000 72.71% 1,154,000 76.02% Non Federal Wells (Douglas PUD) 142,000 5.13% 72,000 4.74% Rocky Reach (Chelan PUD) 206,000 7.44 98,000 6.46 Rock Island (Chelan PUD) 54,000 1.95 18,000 1.19 Wanapum (Grant PUD) 186,000 6.71 92,000 6.06 Priest Rapids (Grant PUD) 168,000 6.06 84,000 5.53 Total Non Federal 756,000 27.29% 364,000 23.98% Total 2,770,000 100.00% 1,518,000 100.00% Computed by applying the principles contained in the Treaty to individual projects and reflects usability adjustment. Located on the Snake River. 1 -10 Estimated Downstream Power Benefits(1) Total r--Canadian Entitlement—, Usable Usable Dependable Energy Dependable Energy Year Capacity (1000 Avg. Capacity (1000 Avg. Ending April 1 (1000 Kw) Kw) (1000 Kw) Kw) 1969 382 226 191 113 1970 1944 1144 972 572 1971 1960 1144 980 572 1972 1974 1144 987 572 1973 1990 1144 995 572 1974 2754 1518 1377 759 1975 2770 1518 1385 759 1976 2758 1478 1379 735 1977 2746 1438 1373 719 1978 2724 1378 1362 689 1979 2700 1316 1350 658 1980 2662 1242 1331 621 1981 2622 1166 1311 583 1982 2594 1090 1297 545 1983 2508 1040 1254 520 1984 2432 990 1216 495 1985 2344 936 1172 468 1986 2268 888 1134 444 1987 2186 836 1093 418 1988 2104 786 1052 393 1989 2024 736 1012 368 1990 2034 698 1017 349 1991 2044 660 1022 330 1992 1864 636 932 318 1993 1688 610 844 305 1994 1510 586 755 293 1995 1332 558 666 279 1996 1152 536 576 268 1997 972 508 486 254 1998 942 492 471 246 1999 914 472 457 236 2000 884 456 442 228 2001 854 438 427 219 2002 826 420 413 210 2003 742 414 371 207 NOTE: As shown below CSPE has purchased only a portion of Canada's entitlement to the downstream power benefits for the years 1999 through 2003. Usable Dependable Energy Year Ending April 1 (000 K (lOKw) Avg. 1999 416 215 2000 200 103 2001 192 99 2002 187 95 2003 167 93 (1) Computed in accordance with Treaty principles. APPENDIX C Participants UTILITY DISTRICTS Benton County P. U. D. No. 1 Central Lincoln P. U. D. Chelan County P. U. D. No. 1 Clark County P. U. D. No. 1 Clakskanie P. U. D. Cowlitz County P. U. D. No. 1 Douglas County P. U. D. No. 1 Franklin County P. U. D. No. 1 Grant County P. U. D. No. 2 Grays Harbor County P. U. D. No. 1 Pend Orielle County P. U. D. No. 1 Skamania County, P. U. D. No. 1 Snohomish County P. U. D. No. 1 Tillamook P. U. D. Total Utility Districts COOPERATIVES Coos -Curry Electric Coop., Inc. Flathead Electric Coop., Inc. Idaho Co. L. P. Coop., Assn., Inc. Inland Power and Light Com- pany Lane County Electric Coop., Inc. Lincoln Electric Coop., Inc. (Montana) Lincoln Electric Coop., Inc. (Washington) Missoula Electric Coop., Inc. Nespelem Valley Elec. Coop., Inc. Northern Lights Incorporated Ravalli County Elec. Coop., Inc. Salem Electric Total Cooperatives UTILITY COMPANIES Pacific Power Light Com- pany( Portland General Electric Com- Pug an et Sound Power Light Company The Washington Water Power Company Total Utility Companies TOTAL Excludes Wyoming. Allocation of CSPE Cost Actual 1963 Peak Load (KW) APPENDIX D Estimated Peak Load (KW) 0.80% 78,529 127,000 1.00 87,157 149,700 1.00 64,753 106,000 3.00 215,000 313,400 0.20 8,844 48,600 2.50 177,900 353,000 0.20 36,289 55,300 0.80 41,746 64,400 0.45 108,226 163,000 1.50 102,620 151,500 0.20 15,690 28,000 0.20 9,113 17,200 1.50 336,734 594,900 0.50 45,824 60,700 13.85% 1,328,425 2,232,700 MUNICIPALmES Bonners Ferry, Village of 0.05% 5,411 5,700 Coulee Dam, City of 0.10 6,602 7,100 Eugene, City of 5.50 199,360 379,000 Forest Grove, City of 0.30 19,956 29,700 McMinnville, City of 0.40 23,440 38,300 Port Angeles, City of 0 50 42,110 61,300 Richland, City of 0.80 49,250 68,800 Seattle, City of 12.50 1,028,000 1,425,000 Springfield, City of 0.50 23,500 47,300 Tacoma, City of 12.50 505,947 761,000 Vera Irrigation District No. 15 0.20 12,544 16,900 Total Municipalities 33.35% 1,916,120 2,840,100 0.50% 32,320 52,300 0.10 7,050 8,200 0.10 5,816 8,500 0.50 36,500 48,900 0.40 25,586 51,900 0.10 4,608 5,900 0.10 7,388 7,900 0.10 5,067 8,000 0.05 2,342 3,100 0.35 9,696 14,900 0.10 4,669 6,800 0.40 23,184 36,700 2.80% 164,226 253,100 5.00 717,000 894,000 50.00% 4,400,200 6,793,000 100.00% 7,808,971 12,118,900 1 -12 Year Ending April 1, 1970 Share of Exchange Agreement Power of Peak (KW) Load Estimated Peak Load (KW) Year Ending April 1, 1974 Share of Exchange Agreement Power of Peak (KW) Load 7,776 6.1 151,000 11,016 7.3 9,720 6.5 177,500 13,770 7.8 9,720 9.2 126,000 13,770 10.9 29,160 9.3 423,400 41,310 9.8 1,944 4.0 55,400 2,754 5.0 24,300 6.9 453,000 34,425 7.6 1,944 3.5 74,400 2,754 3.7 7,776 12.1 84,800 11,016 13.0 4,374 2.7 198,000 6,197 3.1 14,580 9.6 184,600 20,655 11.2 1,944 6.9 34,000 2,754 8.1 1,944 11.3 21,600 2,754 12.8 14,580 2.5 814,000 20,665 2.5 4,860 8.0 73,200 6,885 9.4 134,622 6.0 2,870,900 190,725 6.6 486 8.5 6,400 688 10.8 972 13.7 7,300 1,377 18.9 53,460 14.1 519,000 75,735 14.6 2,916 9.8 42,100 4,131 9.8 3,888 10.2 50,300 5,508 10.9 4,860 7.9 72,800 6,885 9.5 7,776 11.3 80,000 11,016 13.8 121,500 8.5 1,634,000 172,125 10.5 4,860 10.3 61,400 6,885 11.2 121,500 16.0 921,000 172,125 18.7 1,944 11.5 19,500 2,754 14.1 324,162 11.4 3,413,800 459,229 13.5 4,860 9.3 64,200 6,885 10.7 972 11.9 9,300 1,377 14.8 972 11.4 9,300 1,377 14.8 4,860 9.9 54,000 6,885 12.8 3,888 7.5 72,500 5,508 7.6 972 16.5 7,100 1,377 19.4 972 12.3 8,600 1,377 16.0 972 12.2 10,000 1,377 13.8 486 15.7 3,700 688 18.6 3,402 22.8 17,600 4,820 27.4 972 14.3 8,100 1,377 17.0 3,888 10.6 47,600 5,508 11.6 27,216 10.8 312,000 38,556 12.4 10.00% 1,588,000 2,448,000 97,200 4.0 3,212,700 137,700 4.3 17.50 1,193,000 1,884,000 170,100 9.0 2,486,000 240,975 9.7 17.50 902,200 1,567,000 170,100 10.9 2,207,000 240,975 10.9 48,600 5.4 1,049,000 68,850 6.6 486,000 7.2 8,954,700 688,500 7.7 972,000 8.0 15,551,400 1,377,010 8.9 OFFICE OF THE CHAIRMAN Gentlemen: BRITISH COLUMBIA HYDRO AND POWER AUTHORITY Board of Trustees, Columbia Storage Power Exchange 20 North Main Street, East Wenatchee, Washington, U. S. A. EXHIBIT 2 July 27, 1964 This letter is written to summarize the construction program and other details in connection with the Duncan Lake, Arrow Lakes and Mica Creek Projects in British Columbia. History of Development The Columbia River and its tributaries drain an area of 259,000 square miles, mostly between the Rocky Mountains and the Cascade Range. The basin extends 250 miles north into Canada and 550 miles south into the United States. The Canadian portion of the basin comprising 39,500 square miles is located in the southeastern part of British Columbia. Although only about 15% of the river basin is located in Canada, approximately 30% of the total river flow originates in that area. The Columbia River rises in Columbia Lake in the Rocky Mountain trench and flows a distance of 480 miles in British Columbia before crossing into the northeast corner of the State of Washington. The river is 1,220 miles long and falls 2,650 feet from its source in Columbia Lake to the ocean. The nature of the river basin results in wide fluctuations in stream flow. Extremes of 550,000 cubic feet per second and 14,000 cubic feet per second have been estimated at the international boundary. At Revelstoke, British Columbia, the highest recorded flow was 99 times as great as the lowest. By contrast the flows of the St. Lawrence River have a range of only two to one. These characteristics demonstrate the great need for multi- purpose storage developments to alleviate flood damage and to increase the hydroelectric power storage resources of the river basin. In 1944, the Governments of Canada and the United States requested the International Joint Commission to undertake investigations to determine whether further development of the water resources of the Columbia River basin would be practical and advantageous to both countries. The Commission, which is a body established under the Boundary Waters Treaty of 1909 to deal with various matters including questions relating to waters that cross the international boundary, established the International Columbia River Engineering Board to undertake such investigations. The Board submitted its report in 1959 which indicated that there were a number of sites in Canada suitable for the construction of large storage reservoirs that could be used to regulate the Columbia River for the benefit of both the United States and Canada. In December 1959, the International Joint Commission upon request of the two Governments made a special report on principles for the calculation and apportionment of the benefits which would result from a cooperative development of the Columbia River basin. On February 11, 1960, direct negotiations began between representatives of Canada and the United States concerning the selection, construction, and cooperative use of specific projects which led to the signing of the Columbia River Treaty on January 17, 1961, at Washington, D. C. 2 -1 2 -2 On March 16, 1961, the United States Senate gave its advice and consent to the ratification of the Treaty. However, similar action by the Canadian Parliament did not take place. Following the Hyannisport meetings between President Kennedy and Prime Minister Pearson in the spring of 1963 formal negotiations resumed between the two countries. At the same time the first of a new series of meetings between representatives of British Columbia and Canada was held in Ottawa on June 3 and 4 and produced a draft agreement outlining the respective responsibilities of the two Governments in the development of the Columbia River. The Main Agreement was signed on July 8, 1963 and a Supple- mentary Agreement was signed on January 13, 1964. The Canadian United States negotiators held their initial 1963 meeting in Ottawa on August 1 and 2, when consideration was given to a draft of an Exchange of Notes and Protocol. These negotia- tions continued until January 1964 when agreement was reached on the final substance of the documents. On January 22, 1964 the Protocol and other documents relating to the Treaty were signed at Wash- ington, D. C. The House of Commons and the Senate of Canada approved ratification of the Treaty on June 5, 1964 and June 10, 1964, respectively. The Treaty is to become effective upon exchange of instru- ments of ratification. Description of Treaty Projects and Construction Program Duncan Lake Project The Duncan Lake Project will be located approximately 60 miles north of Nelson, British Columbia on the Duncan River below the outlet of Duncan Lake. This Project is proposed to be constructed for storage only with no immediate provision for power generation. The water level of the reservoir when full will be at elevation 1,892 with drawdown of 92 feet to provide 1,400,000 acre feet of usable storage. The Montreal Engineering Company, Ltd. is the engineering consultant on the Duncan Lake Project. Preliminary road work and dam site and camp clearing work is already under way at the site of the Duncan Lake Project. Bids for the main construction contract are to be opened on September 15, 1964. Award is expected to be made upon ratification of the Treaty and the successful bidder is to commence work within 14 days after such award. First stage cofferdam construction is scheduled to be completed during the winter of 1964 -65. Work for the spillway tunnels will commence in November, 1964 with completion of the intake and outlet structures scheduled for the spring of 1967. The con- struction schedule calls for the Project to be operative by April 1, 1968. Total cost of the Duncan Lake Project, including interest during construction at 5% per annum, is estimated at $33,300,000 (Canadian). Arrow Lakes Project The Arrow Lakes Project will be located approximately five miles west of Castlegar, British Columbia on the Columbia River. This Project is proposed to be constructed for storage only with no immediate provision for power generation. When completed, the Project will have approximately 7,100,000 acre feet of usable storage with a normal full surface elevation of 1,444 feet. CBA Engineer- ing Ltd. of Vancouver is the engineering consultant on the Arrow Lakes -Project. Initial construction on the Arrow Lakes Project commenced June 20, 1964 in connection with relocation of 31/2 miles of railway around the dam site. Bids on the main contract for construction of the dam are expected to be opened January 15, 1965 with an award scheduled by February 1, 1965. Commencement of construction is tentatively set for the spring of 1965. Cofferdam construction is to commence in the summer of 1965 and be completed prior to the spring run -off in 1966. The spillway is expected to be completed by May of 1967. The Project is scheduled to be operative by April 1, 1969. Total cost of the Arrow Lakes Project, including interest during construction at 5% per annum, is estimated at approximately $129,500,000 (Canadian). Mica Creek Project The Mica Creek Project will be located approximately 90 miles north of Revelstoke, British Columbia on the Columbia River. This Project is proposed to be constructed to provide storage for use at site and downstream with provision for installation of generating capacity at site of approximately 1,800,000 kw. The water level of the reservoir when full will be at elevation 2,475 with drawdown of 75 feet to provide the 7,000,000 acre feet of usable storage required under the Treaty. The Project will have a total of 12,000,000 acre feet of usable storage for at -site power purposes. Caseco Consultants Limited of Vancouver is the engineering consultant on the Mica Creek Project. Beginning in 1961 field investigations were resumed at Mica Creek on a large scale to prove the competency of the dam foundations, to locate a sufficient volume of suitable low cost fill material and concrete aggregate for the dam and appurtenant structures, and to explore rock conditions for the diversion works. It is proposed to award a contract for the diversion tunnels during the summer of 1965 and the main construction contract during the summer of 1967. The construction schedule calls for the Project to be operative by April 1, 1973. Total cost of the Mica Creek storage, including interest during construction at 5% per annum, is estimated at $245,200,000 (Canadian). General and Physical Characteristics of The Treaty Projects Location Consultants Drainage Area Average Flow Max. Recorded Flow Min. Recorded Flow Dam Type Dam Height Dam Crest Length Dam Volume Live Storage Capacity Length of Reservoir Scheduled Completion Date Flood Control Payment in U. S. Dollars Summarization of Costs Duncan Lake Outlet of Duncan Lake Montreal Engineering Co. Ltd. 925 sq. miles 3,600 cfs 21,400 cfs 268 cfs Earthfill 120 feet 2,600 feet 6,400,000 cu. yds. 1,400,000 ac. ft. 28 miles April 1, 1968 $11,100,000 2 -3 Arrow Lakes 5 miles upstream from Castlegar CBA Engineering Ltd. 14,100 sq. miles 39,800 cfs 220,000 cfs 4,800 cfs Earthfill 190 feet 2,850 feet 8,500,000 cu. yds. 7,100,000 ac. ft. 145 miles April 1, 1969 $52,100,000 $1,200,000 Mica Creek 90 miles upstream of Revelstoke Caseco Consultants Ltd. 8,220 sq. miles 20,700 cfs 112,000 cfs 2,140 cfs Earth and Rockfill 645 feet 2,500 feet 37,000,000 cu. yds. Stage 1— Storage only 7,000,000 ac. ft. Stage 2 —with at -site gen. 12,000,000 ac. ft. 85 miles April 1, 1973 The payments to be made by the United States in 1964, 1968, 1969 and 1973 will be well in advance of expenditures on construction. There will thus be surpluses to be invested for varying periods until construction is completed (and thereafter as well). To arrive at a single "time point" for evaluation of the arrangement in relation to Canadian costs, the date of completion of the last Treaty storage project was taken —April 1, 1973. Calculation was made on the basis that the entire payments should be regarded as earning interest, since they will either earn interest in fact (the funds available ahead of construction needs) or will "earn" it in the sense that they avoid the need to pay interest on funds that would otherwise have to be borrowed to cover the actual construction costs. Applying a rate of 5 per cent the payments are worth $501 million (Canadian) on April 1, 1973. The calculations are: Amount of Payment Value on April 1, 1973 Payment for $Million (Canadian) at date of $Million (Canadian) Power Benefits 274.8 October 1, 1964 416.1 Flood Control Duncan 12.0 April 1, 1968 15.3 Arrow 56.3 April 1, 1969 68.4 Mica 1.3 April 1, 1973 1.3 Total 501.1 To obtain a comparison with the costs of constructing the storage dams, the actual costs to be incurred can similarly have interest added to them for the time from the date of construction to April 1, 1973. The figures are: Project Duncan Storage Arrow Storage Mica Storage. General Costs These figures include interest on all costs during the construction period, and thus are complete costs at the date of finishing each storage project. As the figures show, there is a surplus of $53.4 million (Canadian) as of April 1, 1973. This will cover approximately 50 per cent of the cost of installing generators in the Mica dam in Canada with a capacity of 1.8 million kilowatts and capable of producing 6.6 billion kilowatt hours of energy annually. Columbia Board of Review Five outstanding authorities on power and storage dam construction have been commissioned to review all plans for construction of the storage Projects. The Board will visit each of the sites periodically and will advise and confer with the consultants responsible for each Project in connection with the progress of construction, the selection of construction materials and other matters affecting safety and economy. The five members of the Columbia Board of Review are: Capital Cost Cost and interest $Million at in- service to April 1, 1973 (Canadian) date of $Million (Canadian) 33.3 April 1, 1968 42.5 129.5 April 1, 1969 157.4 245.2 April 1, 1973 245.2 2.6 April 1, 1973 2.6 Total 447.7 Mr. John O. Gorman, Senior Officer of Ontario Hydro and Adviser on Geological and Foundation Investigations, who has made geological and soil studies on both the St. Lawrence Seaway and Niagara projects in addition to all other Ontario Hydro dams erected since 1940; Mr. J. Gordon Watson, Chairman of the South Saskatchewan River Development Board and Chief Engineer of the Prairie Farms Rehabilitation Administration; Lt. General Raymond A. Wheeler (U. S. Army, Retired), who was Chief Engi- neer for the United States Army in 1945 and who for the past two years has been chief Adviser on Water and Power for the International Bank for Recon- struction and Development; Mr. J. Barry Cooke, who has served as a member of the Review Panel for the Peace River project; and Mr. Calvin V. Davis, Chairman of the Board of Harza Engineering Company, Chicago, Illinois. 2 -4 Conclusion The British Columbia Hydro and Power Authority has expended in excess of $10,500,000 on the three Treaty Projects. Engineering costs alone have totaled in excess of $7,500,000, including engineer- ing costs of approximately $860,000 for the Duncan Lake Project, $3,500,000 for the Arrow Lakes Project and $3,400,000 for the Mica Creek Project. The sites of all three Projects have been estab- lished and extensive model testing of the design of the various features of each Project has been undertaken. It is our opinion, with respect to each of the three Projects, that: 1. the present plans and designs will achieve the optimum benefits available from the development of the site; 2. the program for construction is realistic and each Project will be completed by the com- pletion date described above; 3. the work on the three Projects will be completed within the total cost estimate; and 4. there are no major engineering or construction problems associated with any of the Projects that do not lend themselves to solution by standard engineering concepts. Yours sincerely, /s/ H. L. KEENLEYSIDE H. L. KEENLEYSIDE Chairman, British Columbia Hydro and Power Authority. CANADIAN ENTITLEMENT EXCHANGE AGREEMENT EXHIBIT 3 This agreement is executed as of the 13th day of August, 1964, by and between UNITED STATES OF AMERICA (hereinafter referred to as the "Government acting by and through the Bonneville Power Administrator (hereinafter referred to as the "Administrator who is acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity hereinafter described, and COLUMBIA STORAGE POWER EXCHANGE, a nonprofit corporation organized under the laws of the State of Washington (hereinafter referred to as "CSPE and ,a (hereinafter referred to as the "Participant Recitals: 1. The President of the United States and the Prime Minister of Canada have executed the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin," signed at Washington, D. C., January 17, 1961 (here- inafter referred to as the "Treaty 2. Under the terms of the Treaty, Canada is entitled to receive from the Government, as determined in accordance with the Treaty, one -half of the average annual usable energy and one -half of the dependable hydroelectric capacity which can be realized in the United States each year for the next sixty years as a result of the coordinated use of the improved stream flow on the Columbia River created by storage projects to be constructed in Canada pursuant to the terms of the Treaty. 3. CSPE has purchased from Canada for a term of years, through the Canadian Entity designated pursuant to the Treaty, Canada's rights to receive power and energy under the Treaty, and CSPE is authorized to incur indebtedness to finance such purchase, and to dispose of such rights under such arrangements as may be necessary to retire such indebtedness and pay the necessary expenses of CSPE incidental thereto. 4. The Participant is authorized to enter into and perform this agreement. 5. The Participant has found and determined that the execution of this agreement is necessary and advisable in order to provide for the actual and prospective needs of the Participant, and that the performance of this agreement will result in substantial economies to the Participant during the term hereof. 6. Pursuant to Article VIII of the Treaty, the United States and Canada have authorized the dis- position within the United States of a portion of the downstream power benefits to which Canada is entitled, subject to the general conditions and limitations set forth in exchanges of notes between the two countries. 7. The United States Entity, designated pursuant to Article XIV of the Treaty and acting in accordance with Article XI thereof, has approved the use for hydroelectric power purposes in the United States of the improvement in stream flow brought about by operation of the storage to be con- structed under the Treaty. 8. The Administrator is authorized to transmit and dispose of electric power and energy generated at various federal hydroelectric projects in the Pacific Northwest in accordance with the Bonneville Project Act, approved August 20, 1937, as amended, the Reclamation Project Act of August 4, 1939, the Flood Control Act of December 22, 1944, and pursuant to the following orders of the Secretary 3 -1 of the Interior: No. 2563 dated May 2, 1950, and No. 2860 dated January 19, 1962, as amended. Such projects, together with related transmission facilities owned by the Government, are hereinafter referred to as the "Columbia River Power System." 9. The Administrator is authorized by said Order No. 2860, as amended, to enter into such contracts, agreements, and arrangements, upon such terms and conditions and in such manner as he may deem necessary, as provided in said Bonneville Project Act, as amended. 10. The Administrator is authorized to enter into contracts with public and private power systems for the mutual exchange of unused excess power upon suitable exchange terms for the purpose of economical operation of, or providing emergency or breakdown relief for, the Columbia River Power System, and the Administrator has determined that (1) the implementation of the Treaty will make available to the Government large quantities of electric energy to meet the actual and prospective needs for such energy by publicly and privately owned public utilities, cooperatives and industries in the Pacific Northwest; (2) the Administrator will hereby be enabled to increase the net revenues to be received in the marketing of power from the Columbia River Power System; and (3) the mutual exchange of power as provided herein will result in a more economical operation of the Columbia River Power System. 11. The Government has determined that in order to accomplish the sale of Canada's entitlement to downstream power benefits in accordance with, and in implementation of, the Treaty and the Notes relating thereto exchanged between the United States and Canada on or prior to the effective date of this agreement (hereinafter referred to as the "Notes the Administrator must assure unconditionally the delivery, in exchange for such entitlement, of the agreed amounts of capacity and energy specified in the Canadian Entitlement Exchange Agreements. 12. The Administrator and the Division Engineer, North Pacific Division, Corps of Engineers, Department of the Army, have been designated the United States Entity pursuant to Article XIV of the Treaty, and the Administrator has been authorized to act for and on behalf of the United States Entity in the execution and performance of this agreement. 13. British Columbia Hydro and Power Authority, established under the British Columbia Hydro and Power Authority Act, 1964 (hereinafter referred to as `B. C. Hydro has been designated the Canadian Entity pursuant to Article XIV of the Treaty. Now, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows: SECTION 1— Definitions and Explanation of Terms For the purposes of this agreement (a) "Bond" or "Bonds" shall mean any bond or bonds, as the case may be, authenticated and delivered under the 'Bond Indenture (hereinafter defined). (b) "Bond Indenture" shall mean the trust indenture, dated as of September 1, 1964, by and between CSPE and Morgan Guaranty Trust Company, as trustee, securing the Bonds as originally executed, or, if amended or supplemented as in the Bond Indenture provided, as so amended or supplemented. (c) "Canadian Entitlement" shall mean all of the various rights and benefits acquired by CSPE pursuant to the provisions of the agreement, entitled the "Canadian Entitlement Purchase Agreement," between CSPE and B. C. Hydro, as such agreement is in effect at the time this agreement becomes effective. (d) "Canadian Entitlement Exchange Agreements" shall mean this and all similar agreements providing, in the aggregate, for the transfer by CSPE of one hundred percent of the Canadian Entitle- ment to the Participants, and the exchange by them of the Canadian Entitlement with the Administrator. 3 -2 (e) "Contract Year" shall mean the twelve -month period commencing at 12:01 a.m. Pacific Stand- ard Time on April 1, 1968, or at the same time on April 1 of any year thereafter during the term of this agreement. (f) "Net Interest Cost" shall mean the quotient, expressed as a percentage (to the nearest 0.01 of 1% obtained by dividing (1) the interest payable over the term of the Bonds initially issued under the Bond Indenture from the date of such Bonds to the respective maturity dates thereof plus the amount by which the aggregate principal amount of such Bonds exceeds the purchase price paid to CSPE therefor or less the amount by which such purchase price exceeds the aggregate principal amount of such Bonds (in each case excluding accrued interest from such purchase price), by (2) the sum of the products obtained by multiplying the principal amount of such Bonds becoming due on each such maturity date by the number of years (including any fractions of a year) from the date of such Bonds to such maturity date; provided that Bonds for which a sinking fund has been established by the Bond Indenture shall be deemed to mature on the date of each sinking fund installment in the minimum principal amount required to be retired from such sinking fund installment. (g) "Participants" shall mean such of the organizations listed on Exhibit A as shall execute and deliver Canadian Entitlement Exchange Agreements. (h) "Participant's Percentage" shall mean the percentage appearing after the Participant's name on Exhibit A or such other percentage as shall be agreed to in writing by the parties hereto prior to the time this agreement becomes effective, as such percentage or such other percentage (as the case may be) may be adjusted in accordance with Section 9, and "participants' percentages" shall mean, as applied to any two or more participants, the percentages of such Participants under their Canadian Entitlement Exchange Agreements at the time such Agreements become effective, as such percentages may be adjusted in accord- ance with Section 9 of such Agreements. (i) "Trustee" shall mean the Trustee under the Bond Indenture for the time being, whether original or successor. SECTION 2— Exhibits Exhibits A, B and C are by this reference incorporated herein as fully as though set forth verbatim in the body of this agreement. SECTION 3 —Term of Agreement This agreement shall be effective upon the exchange of instruments of ratification of the Treaty, if such exchange occurs and the Bonds initially issued under the Bond Indenture are delivered prior to December 31, 1964 and at the time of such delivery the aggregate of the participants' percentages shall equal 100 per cent. It shall terminate on the later of (a) 12 :00 p.m. on March 31, 2003, or (b) the date that all of the Bonds are paid or funds set aside for the payment or retirement thereof in accordance with the Bond Indenture. SECTION 4— Transfer of Canadian Entitlement CSPE hereby transfers and assigns to the Participant during the existence of this agreement the Participant's Percentage of the Canadian Entitlement and the Participant hereby accepts such transfer and assignment and agrees to pay therefor as provided in Section 6. SECTION 5— Exchange of Canadian Entitlement (a) The Participant hereby transfers and assigns to the Administrator during the existence of this agreement the Participant's Percentage of the Canadian Entitlement, and the Administrator hereby accepts such transfer and assignment. (b) In exchange for such transfer and assignment to the Administrator of the Participant's Per- centage of the Canadian Entitlement, the Administrator agrees with CSPE and with the Participant that 3 -3 during each month of each Contract Year the Administrator shall make available to the Participant the amounts of capacity and average energy computed as follows and as adjusted in accordance with Sections 5(c) and 5(d): (1) reduce the amounts of capacity and energy specified for each Contract Year in columns 2 and 3 of Exhibit B by 0.16 of one percent thereof for each 0.01 by which 4.59 percent exceeds the Net Interest Cost; provided, that such reduction, if any, shall not reduce the amounts of capacity and energy below those specified for such Contract Year in columns 4 and 5 of Exhibit B; (2) multiply the results obtained in Section 5(b) (1) by the Participant's Percentage. (c) A tabulation of the amounts of capacity and energy determined under Section 5(b) shall be submitted to the Administrator by the Participant within six months after the execution of this agreement. Such tabulation may be changed by the Participant from time to time, and each changed tabulation shall become effective at the beginning of the sixth Contract Year following its submission to the Administrator. Each such changed tabulation shall be subject to the following: (1) Within any Contract Year, energy may be exchanged with the Administrator for capacity in the ratio of one megawatt of average energy to 4.30 megawatts of capacity, provided that, except to the extent a greater ratio is reflected in Exhibit B, the amount of capacity to be made available in any Contract Year shall not exceed 2.5 times the average energy to be made available during such Contract Year. (2) Within any Contract Year, capacity may be exchanged with the Administrator for energy in the ratio of 4.30 megawatts of capacity to one megawatt of average energy, provided that if all such exchanges so tabulated would require the Administrator to provide energy in excess of the total amounts of energy to be made available to the Administrator in exchange for capacity under Section 5(c) (1) of the Canadian Entitlement Exchange Agreements and the Administrator determines that such amount of excess energy cannot be made available, the Administrator shall allocate the amount of energy determined by him to be available for such purposes (which amount shall in no event be less than the energy exchanged for capacity under Section 5(c) (1) of the Canadian Entitlement Exchange Agreements) among the Participants requesting the exchange in proportion to their par- ticipants' percentages. The amount of average energy to be made available to the Participant during any Contract Year shall not exceed the amount of capacity to be made available to the Participant during such Contract Year. (3) The quotient obtained by dividing the capacity to be made available to the Participant during any Contract Year by the average energy to be made available to the Participant during such Contract Year shall not be greater or less than the corresponding quotient for the preceding Contract Year by more than 0 5 (five tenths). (4) The monthly amounts of energy specified in such tabulation for delivery in any Contract Year may be unequally distributed but only to the extent that the amount of energy specified in any month shall not be less than 85 percent of the highest amount of energy specified for the Participant in any one month of the Contract Year. (d) The Administrator shall make available to the Participant the amounts of capacity and energy determined in accordance with this Section 5 in the amounts and at the points of delivery specified and subject to the limitations set forth in Exhibit C, at unity power factor except as otherwise agreed upon between the Participant and the Administrator, and as adjusted for losses as specified in Exhibit C. CSPE agrees that Exhibit C may be changed and a new Exhibit C substituted therefor by agreement between the Participant and the Administrator without further notice to or approval by CSPE. (e) Within any month, the Administrator shall make available such energy as scheduled by the Participant up to the amount of capacity which the Administrator is obligated to make available to the Participant during such month. 3 -4 SECTION 6— Payments to CSPE (a) Notwithstanding any suspension, interruption, interference, reduction or curtailment permitted by Section 15(a) and Section 15 (b) but subject to the provisions of Section 15(e), the Participant shall, in full payment of the purchase price for the Participant's Percentage of the Canadian Entitlement, pay to CSPE an amount equal to the Participant's Percentage of the costs incurred by CSPE in purchasing the Canadian Entitlement, which amount shall be computed and paid as follows: (1) In each month an amount equal to the Participant's Percentage of the amounts which CSPE is required by the Bond Indenture, other than Section 7.02 thereof, to pay in such month to the Trustee including the fees and expenses of the Trustee and paying agents, other than amounts paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds; and (2) Amounts equal to the Participant's Percentage of all expenses incurred by CSPE for its sole corporate purposes other than amounts which CSPE is required by the Bond Indenture to pay to the Trustee and other than amounts paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds. (b) The Participant shall make the payments required under Section 6(a)(1) to be made in any month, on the 25th day of such month. CSPE shall cause to be mailed to the Participant statements setting forth, in reasonable detail and with appropriate reference to applicable provisions of the Bond Indenture, the amounts which the Participant is required to pay under Section 6(a) (1) during each Contract Year. Such a statement shall be mailed on or as soon as practicable after the beginning of each Contract Year and from time to time thereafter in the event of any changes in such required payments. The Participant shall make the payments under Section 6(a) (2) within twenty days after receipt from CSPE of a statement therefor. (c) On payments required to be made by the Participant under this Section 6 or Section 7 which are not paid when due, the Participant shall pay in addition to the amounts due a delayed payment charge of two percent of the unpaid amount due, except as to any portion thereof which may be disputed in good faith. Remittances postmarked at least five days prior to the due date or within 20 days after receipt of the applicable statement required by Section 6(b) will be accepted without assessment of the delayed payment charge. If the due date is a Sunday or a holiday, the next following business day shall be the last day on which payment may be made without addition of the delayed payment charge. In the case of payments due under Section 6(a), the delayed payment charge shall be paid to CSPE. In the case of payment due under Section 7, the delayed payment charge shall be paid to the Administrator. (d) Except as provided in Section 15(e), the obligation of the Participant to make payments as provided in this Section 6 shall not be subject to any reduction, whether by offset or otherwise. SECTION 7— Payments to the Administrator The Participant shall pay to the Administrator, in return for the use of the Government's trans- mission, transformation and related facilities in making capacity and energy available to the Participant pursuant to Section 5 hereof, for each month commencing April 1, 1968 and thereafter throughout the term of this agreement, within 30 days after date of a bill therefor, an amount equal to the product obtained by multiplying $0.125 by the number of kilowatts of capacity, before deduction for losses, which the Administrator has made available to the Participant during the month pursuant to Section 5 hereof, provided, however, that if the Participant is the owner of, or is a purchaser of a share of the output from, a nonfederal project supplying an "Allocation to Canadian Entitlement" under a "Canadian Entitlement Allocation Agreement" with the Administrator, such charge shall not apply to the amounts of capacity and energy made available to the Participant hereunder at the point where the owner of such project makes available such Allocation to Canadian Entitlement to the Government (designated in Exhibit C as a "Project Delivery Point to the extent that the amount of capacity 3 -5 made available to the Participant at such Project Delivery Point is not in excess of the amount of the "Capacity Allocation to Canadian Entitlement" supplied to the Government by the owner of such non- federal project at such Project Delivery Point and designated for the Participant in such Allocation Agreement. If such payments are not made as provided in this Section 7, except for amounts as may be disputed in good faith, the Administrator may, for the period of nonpayment, make available the capacity and energy required to be made available to the Participant in accordance with Section 5, at the high voltage bus of such of the Government's generating plants located on the Columbia River downstream from the Canadian border as the Administrator may designate, notwithstanding the provi- sions of Section 5(d). SECTION 8— Records and Accounts The Participant shall be entitled at any time to inspect by its agents, employees or accountants all of the books, records and papers of CSPE, and CSPE shall render to the Participant on or before the 1st day of July of each year an accounting of all receipts of and expenditures by CSPE during the preceding period from April 1 to March 31. SECTION 9— Adjustment of Participant's Percentage The Participant's Percentage shall be automatically increased for the remaining term of this agree- ment in the event that one of the Participants (herein called a "Defaulting Participant fails or refuses for any reason to make any payment required by Section 6 of the Canadian Entitlement Exchange Agreement of the Defaulting Participant and such failure or refusal continues for a period of 60 days from the date when such payment shall have become due and payable. The amount of such automatic increase shall be the product (expressed as a percentage) obtained by multiplying the participant's percentage of the Defaulting Participant by a fraction, the numerator of which is the Participant's Percentage and the denominator of which is the total of the participants' percentages of all Participants who are not Defaulting Participants; provided, however, that the cumulative total of all such increases shall not, without the consent of the Participant, exceed a maximum of one -fourth of the percentage appear- ing after the Participant's name in Exhibit A hereto. All rights of a Defaulting Participant shall inure to the benefit of the Participants whose participants' percentages have been so increased to the extent of such increases. If the Participant's Percentage shall be increased as provided in this Section 9, the increase in capacity and energy to be made available by the Administrator pursuant to this agree- ment shall be made available at the point or points of delivery specified in Exhibit C and a new tabulation may be submitted pursuant to Section 5(c) relating to such increase, to be effective upon submission. If after giving effect to the foregoing provisions of Section 9 of the Canadian Entitlement Exchange Agreements, the participants' percentages of all Participants who are not Defaulting Participants shall not have been increased in an aggregate amount sufficient to provide for the payment by such Participants of 100% of the amounts required to be paid pursuant to Section 6 of all such Agreements, then in such event each Defaulting Participant shall, and hereby does, assign and transfer to CSPE that portion of its participant's percentage (and the rights associated therewith) which has not been assumed by the Participants who are not Defaulting Participants, but no such assignment and transfer shall relieve such Defaulting Participant of its liability for payments under its Canadian Entitlement Exchange Agreement. CSPE may, but shall not be required to, arrange for the transfer and sale, for the account of each such Defaulting Participant, of that portion of its participant's percentage (and such rights) so assigned and transferred. SECTION 10— Default In the event any of the Participants shall fail or refuse to pay any amounts due to CSPE under any of the Canadian Entitlement Exchange Agreements, the fact that any other Participant shall have assumed the obligation to make such payments pursuant to the provisions of Section 9 of any such Agreement shall not relieve the Defaulting Participant of its liability for such payments under its Agree- ment, and the Participants assuming such obligation, either individually or as a member of a group, shall have a right of recovery from the Defaulting Participant, and any Participant may commence such 3 -6 suit, action or proceeding, at law or in equity, including suit for specific performance, as may be necessary or appropriate to enforce the obligations of the Defaulting Participant under its Agreement; provided, that if the cumulative obligations of the Defaulting Participant or Participants exceed the amount that is assumed by the other Participants under Section 9 of the Canadian Entitlement Exchange Agreements, CSPE shall be entitled to commence and prosecute such suit, action or proceeding as it may deem appropriate to recover such excess amounts. In the event and to the extent that the Participant fails or refuses for any reason to perform its obligations under this agreement, and such failure or refusal adversely affects the Government, the Government may commence such suit, action or proceeding, at law or in equity, including suit for specific performance, against the Participant as it may deem appropriate to protect the interests of the Government. SECTION 11— Modification of Contract Terms (a) This agreement cannot be amended, modified or otherwise changed by agreement of the parties in any manner that will impair or adversely affect the security, afforded by the provisions of this agree- ment, for the payment of the principal, interest and premium, if any, on the Bonds as they respectively become payable, so long as any of the Bonds are outstanding and unpaid or funds are not set aside for the payment or retirement thereof in accordance with the Bond Indenture. (b) This agreement is one of a series of similar agreements, which are uniform in all material respects, providing for the transfer by CSPE of one hundred percent of the Canadian Entitlement to the Participants and the exchange with the Administrator of such Entitlement for agreed amounts of power and energy to be delivered to the Participants by the Administrator. The Administrator shall, before the effective date of any amendment, modification or change of any of such agreements, excepting changes of Exhibit C and changes made prior to the time such agreements become effective in percentages set forth in Exhibit A, notify the Participant in writing of such amendment, modification or change, and this agreement shall, upon request by the Participant made not later than sixty days after the receipt of such notice, be amended, modified, or changed to include the same terms and conditions so granted to any other participant. (c) Without the written consent of the Participant and the Administrator, CSPE shall not amend, modify or otherwise change, or issue refunding Bonds under, the Bond Indenture so as to increase or accelerate the payments, individually or in the aggregate, to be made by the Participant to CSPE, or so amend, modify or otherwise change the sole corporate purposes specified in its Articles of Incor- poration as approved and filed May 11, 1964. SECTION 12— Particular Provisions Affecting Administrator The Bond Indenture in execution form under which the initial Bonds are being issued and the contract for the sale of such Bonds in execution form, shall be subject to the approval of the Administrator. SECTION 13— Scheduling Arrangements (a) The Administrator shall make available to the Participant, in accordance with hourly schedules furnished by the Participant to the Administrator at least eight hours prior to each day, the amount of capacity and energy to which the Participant is entitled, as determined in accordance with Section 5. If the Participant does not maintain dispatching facilities, the Administrator shall schedule deliveries as agreed between the Participant and the Administrator. (b) Deviation from scheduled deliveries shall be corrected as promptly as possible under conditions approximately equivalent to the conditions under which the deviation occurred. SECTION 14— Character of Service Electric energy shall be made available hereunder in the form of three -phase current alternating at a frequency of approximately sixty cycles per second. Deliveries thereof at the point or points of delivery 3 -7 described in Exhibit C shall be made at the approximate voltage specified for such point. The amounts of electric energy and reactive power so delivered at such point or points during each month, and of the sixty- minute integrated demands for such electric energy, shall be the amounts thereof determined from measurements made by the Government's watt -hour, var -hour and recording demand meters, respectively, installed to record the flow of electric energy and reactive power at the places and in the circuits specified in Exhibit C. SECTION 15— Continuity of Service (a) The Administrator may, for a period not in excess of 168 consecutive hours for any particular system emergency caused or created by any event reasonably beyond his control, interrupt or reduce deliveries of capacity or energy to or for the account of the Participant if such interruption or reduction is necessary in case of such system emergency, other than any circumstance covered by Section 15 (b), and the Administrator shall not be liable for any damages sustained by the Participant as a result of the failure to make available capacity or energy during such period of interruption or reduction not in excess of 168 consecutive hours. For this purpose the term "system emergency" shall not include con- ditions of insufficient natural stream flows or any event caused by nonperformance by Canada or the Canadian Entity of its obligations under the Treaty and the Notes. (b) If the operation of the Government's transmission system is suspended, interrupted or interfered with as the result of (1) the occurrence of any event which is reasonably beyond its control (including, but not limited to, the failure or breakdown of transmission facilities, floods, fire, strikes or acts of God or the public enemy but excluding the failure or breakdown of generating facilities), or (2) repairs, maintenance or replacements made to assure continued transmission service to the Participant, the Admin- istrator shall not be obligated to deliver capacity or energy to or for the account of the Participant, as provided in this agreement, during such time and to such extent as such suspension, interruption or interference makes it reasonably impracticable to do so, and shall not be liable for any damages sustained by the Participant as a result of the failure to so deliver such capacity or energy during such time. (c) If the operations of the Government's facilities are suspended, interrupted, interfered with or curtailed due to any of the circumstances covered by Section 15(a) and 15(b), the Government shall exercise due diligence to resume such operations with all reasonable dispatch, and the Administrator shall restore any energy lost to the Participant as a result of such suspension, interruption, interference or curtailment under conditions approximately equivalent to the conditions under which the loss occurred. (d) The Government's "transmission system" as used in this Section 15 means the transmission facilities of the Columbia River Power System and: (1) transmission facilities of any utility used to make available capacity and energy to the Participant pursuant to this agreement, and (2) the transmission facilities of nonfederal project owners on the Columbia River used to transmit to the Administrator their agreed share of the capacity and energy to which Canada is entitled under the Treaty. (e) If for any reason other than as set forth in Sections 15(a) and 15(b) the Administrator does not make available in any particular month the capacity or energy required to be made available during such particular month pursuant to this agreement, the payments to be made by the Participant to CSPE in the month which next succeeds such particular month as provided in Section 6(a) (1) shall be reduced by an amount computed by applying the following rates to the amounts of capacity and energy (before reduction of losses) not so made available in such particular month: $105.00 per megawatt of capacity for each week or fraction thereof and $2.70 per megawatt -hour of energy, each reduced by 0.16 of one per cent thereof for each 0.01 by which 4.27 per cent exceeds the Net Interest Cost. For the purpose of such computation the amount of capacity and energy not made available by the Administrator shall include capacity and energy not made available as a result of the provisions of the following paragraph of this Section 15(e). 3 -8 If the Participant enters into commitments reasonably necessary to replace the capacity and energy required to be but not made available by the Administrator pursuant to the terms of this agreement, or if the Participant loses a then existing specific load or loads as the result of such non availability, then, even though the Administrator thereafter offers to increase deliveries on a specified date, the Participant shall be required to accept, and the Administrator shall only make available to the Participant, for a period of up to five years after the receipt of such offer, such reduced amounts of capacity and energy as shall be specified in a schedule for such five -year period submitted by the Participant to the Administrator; provided that such schedule shall be accompanied by a statement by the Participant in reasonable detail showing that it has made commitments reasonably necessary to replace, or that because of loss of load it cannot use as firm power resources, the difference between the capacity and energy required to be made available pursuant to the terms of this agreement and the reduced amounts specified in such schedule; and further provided that such reduced amounts of capacity and energy, respectively, specified in such schedule shall at least equal for each month the lowest respective amounts of capacity and energy made available to the Participant during any one or more months between the time when the Administrator first failed to make available full deliveries and the com- mencement of such five -year period. (f) If in accordance with Section 15(e) the Participant's payment to CSPE in the month following any particular month is reduced, the Administrator shall be obligated to pay currently to the Participant an amount of cash computed by applying the following rates to the amounts of capacity and energy (before reduction for losses) not made available by the Administrator in such particular month: $105.00 per megawatt of capacity for each week or fraction thereof and $2.70 per megawatt -hour of energy, each reduced by 0.16 of one percent thereof for each 0.01 by which 4.27 percent exceeds the Net Interest Cost. For the purpose of such computation the amount of capacity and energy not made available by the Administrator shall include capacity and energy not made available as a result of the provisions of the last paragraph of Section 15(e). Notwithstanding the provisions of Section 6(b) all amounts paid to the Participant by the Administrator under this Section 15(f) shall forthwith upon receipt thereof be paid over to CSPE. Such payment by the Administrator shall be for the account of and as full liquidated damages to CSPE. The respective obligations of the Administrator and the Participant to make payments as provided in this Section 15(f) shall not be subject to any reduction, whether by offset or otherwise. (g) If there should be a dispute between the Participant and the Administrator concerning the facts set forth in any statement of the Participant accompanying a schedule submitted by the Participant to the Administrator pursuant to Section 15(e), such dispute shall be submitted promptly to arbitration. The Participant and the Administrator shall each appoint one arbitrator and the two arbitrators shall appoint a third arbitrator. The decision of at least two arbitrators shall be binding and conclusive upon the Participant and the Administrator. Pending the arbitrators' resolution of the dispute, the Participant shall continue to make the payments for the amounts of capacity and energy in dispute in accordance with Section 6; provided, however, that if it shall be determined that all or part of such payments made by the Participant pending outcome of the dispute, were an obligation of the Administrator under Section 15(f), then the Administrator shall be obligated to reimburse the Participant in full for the amounts which it is determined were the Administrator's obligation in the first instance. (h) Subject to the provisions of Section 15(a) and Section 15(b): (1) the obligation of the Administrator to make capacity and energy available to the Participant in accordance with Section 5 is, and shall remain, unconditional and (without limiting the generality of the foregoing) such obligation shall not be affected by any nonperformance by Canada or the Canadian Entity under the Treaty or the Notes; (2) the provisions of Section 15(e) and Section 15(f) do not, and shall not be construed to, in any manner modify, excuse, relieve, or provide an alternative to such obligation; and 3 -9 (3) payments made by the Administrator to the Participant under Section 15(f) shall not relieve the Administrator from any liability he may have to the Participant for damages proximately resulting to the Participant from the failure of the Administrator to deliver capacity or energy under the provisions of Section 5. (i) Without limiting his obligations as set forth in this agreement, the Administrator shall first use the Canadian Entitlement in fulfilling his obligations under this agreement. SECTION 16— Indivisibility of Agreement This agreement is entire and indivisible and, accordingly, shall not be binding upon any of the parties hereto if it is not binding upon all of the parties hereto, but this agreement shall not be subject to termination by any party under any circumstances, whether based upon the default of any other party or otherwise. SECTION 17— Notices and Computation of Time Any notice required by this agreement to be given to any party shall be effective when it is received by such party, and in computing any period of time from such notice, such period shall commence at 12:00 p.m. on the date of receipt of such notice. SECTION 1 8—Interest of Member of Congress No member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this agreement or to any benefit that may arise therefrom. Nothing, however, herein contained shall be construed to extend to such agreement if made with a corporation for its general benefit. SECTION 19 —Work Hours— Overtime Compensation In the event that any work is performed under this contract which may require or involve the employment of laborers or mechanics, no contractor or subcontractor contracting for any part of such work shall require or permit any laborer or mechanic, in any work week in which he is employed on such work, to work in excess of eight hours in any calendar day or in excess of 40 hours in such work week unless such laborer or mechanic receives compensation at a rate not less than one and one -half times his basic rate of pay for all hours worked in excess of eight hours in any calendar day or in excess of 40 hours in such work week, whichever is the greater number of overtime hours. In the event of any violations of the provisions of this Section 19, the contractor and any sub- contractor responsible therefor shall be liable to any affected employee for his unpaid wages and shall, in addition, be liable to the Government for liquidated damages. Such liquidated damages shall be computed, with respect to each individual laborer or mechanic employed in violation of the provisions of this Section 19, in the sum of $10 for each calendar day on which such individual was required or permitted to work in excess of eight hours or in excess of 40 hours in a work week without payment of the required overtime wages. The Administrator may withhold, or cause to be withheld, from an y moneys payable on account of work performed pursuant to this contract, the full amount of unpaid wages required by this Section 19 and such sums as may be administratively determined to be necessary to satisfy any liabilities of such contractor or subcontractor for liquidated damages as provided in this Section 19. CSPE and the Participant shall each be deemed a "contractor" within the meaning of this Section 19. SECTION 20— Convict Labor Neither CSPE nor the Participant shall employ any person undergoing sentence of imprisonment at hard labor. 3 -10 SECTION 21— A ssignment of Agreement This agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the parties to this agreement, provided that the rights of the Participant under Section 5 (c) shall not be transferable by assignment or otherwise to a party who is not one of the Participants. No assignment or transfer of this agreement shall relieve any party of any of its obligations hereunder, nor, except as provided in Section 9, shall such assignment or transfer change or modify the Administrator's obligation to make capacity and energy available in the amounts and at the points of delivery specified in Exhibit C without his prior consent. SECTION 22— Assignment to the Trustee It is intended that CSPE will assign to the Trustee all of the rights of CSPE under the Canadian Entitlement Exchange Agreements to the extent and for the period or periods provided by the Bond Indenture and the Participant and the Administrator hereby acknowledge and consent to such assignment. SECTION 23— Approval by Rural Electrification Administrator If the Participant is a party to an agreement or other instrument pursuant to which approval of this agreement by the Rural Electrification Administration is required as listed on Exhibit A, this agreement shall not be binding upon any of the parties hereto if it shall not have been approved by the Administrator of the Rural Electrification Administration or his delegate after the execution of this agreement and prior to the effectiveness hereof pursuant to Section 3. Evidence of such approval shall be noted on or attached to all executed counterparts of this agreement by the Government. If so approved this agreement shall be binding upon all of the parties hereto in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have executed this agreement in several counterparts. (SEAL) (SEAL) Attest: /s/ A. J. PORTER (SEAL) Attest: 3 -11 UNITED STATES OF AMERICA By /s/ CHARLES F. LUCE Bonneville Power Administrator as the Administrator and for and on behalf of the United States Entity. COLUMBIA STORAGE POWER EXCHANGE By /s/ HOWARD C. ELMORE By [NAME OF PARTICIPANT] Exhibit A 3 -12 Participants Percentage Public Utility District No. 1 of Benton County 0.80% Village of Bonners Ferry, Idaho 0.05 Central Lincoln Peoples' Utility District 1.00 Public Utility District No. 1 of Chelan County 1.00 Public Utility District No. 1 of Clark County 3.00 Clatskanie Peoples' Utility District 0.20 *Coos -Curry Electric Cooperative, Inc. 0.50 City of Coulee Dam, Washington 0.10 Public Utility District No. 1 of Cowlitz County 2.50 *Public Utility District No. 1 of Douglas County 0.20 City of Eugene, Oregon 5.50 *flathead Electric Cooperative, Inc. 0.10 City of Forest Grove, Oregon 0.30 Public Utility District No. 1 of Franklin County 0.80 Public Utility District No. 2 of Grant County 0.45 Public Utility District No. 1 of Grays Harbor County 1.50 *Idaho County Light and Power Cooperative Association, Inc. 0.10 *Inland Power Light Company 0.50 *Lane County Electric Cooperative, Inc. 0.40 *Lincoln Electric Cooperative, Inc. (Mont.) 0.10 *Lincoln Electric Cooperative, Inc. (Wash.) 0.10 City of McMinnville, Oregon.... 0.40 *Missoula Electric Cooperative, Inc 0.10 *Nespelem Valley Electric Cooperative, Inc. 0.05 *Northern Lights, Inc.... 0.35 Pacific Power Light Company 10.00 Public Utility District No. 1 of Pend Oreille County 0.20 City of Port Angeles, Washington 0.50 Portland General Electric Company 17.50 Puget Sound Power Light Company 17.50 *Ravalli County Electric Cooperative, Inc. 0.10 City of Richland, Washington 0.80 Salem Electric 0.40 City of Seattle, Washington 12.50 Public Utility District No. 1 of Skamania County 0.20 Public Utility District No. 1 of Snohomish County 1.50 City of Springfield, Oregon 0.50 City of Tacoma, Washington 12.50 *Tillamook Peoples' Utility District 0.50 Vera Irrigation District No. 15 0.20 The Washington Water Power Company 5.00 Approval of this agreement by Rural Electrification Administration required. Points of Delivery (The material for this Exhibit will vary with each Participant) 3 -13 Exhibit B Column 1 Column 2 Column 3 Column 4 Column 5 Contract Year Capacity Energy Capacity Energy (4/1 -3/31) (MW) (Average MW) (MW) (Average MW) 1968 -69 191 113 191 113 1969 -70 1026 603 972 572 1970 -71 1034 603 980 572 1971 -72 1042 603 987 572 1972 -73 1050 603 995 572 1973 -74 1452 800 1377 759 1974 -75 1461 800 1385 759 1975 -76 1454 779 1379 739 1976 -77 1448 758 1373 719 1977 -78 1436 727 1362 689 1978 -79 1423 693 1350 658 1979 -80 1403 654 1331 621 1980 -81 1382 614 1311 583 1981 -82 1367 574 1297 545 1982 -83 1322 548 1254 520 1983 -84 1282 521 1216 495 1984 -85 1234 492 1172 468 1985 -86 1195 468 1134 444 1986 -87 1152 440 1093 418 1987 -88 1109 414 1052 393 1988 -89 1066 387 1012 368 1989 -90 1072 367 1017 349 1990 -91 1077 347 1022 330 1991 -92 982 335 932 318 1992 -93 889 321 844 305 1993 -94 795 308 755 293 1994 -95 702 293 666 279 1995 -96 607 282 576 268 1996 -97 512 267 486 254 1997 -98 496 259 471 246 1998 -99 438 226 416 215 1999 -00 211 109 200 103 2000 -01 203 104 192 99 2001 -02 197 100 187 95 2002 -03 176 98 167 93 Exhibit C WOOD, KING, DAWSON LOGAN ATTORNEYS AND COUNSELLORS AT LAW COLUMBIA STORAGE POWER EXCHANGE, East Wenatchee, Washington. Dear Sirs:- At your request we have examined into the validity of $314,100,000 Columbia Storage Power Exchange Revenue Bonds of Columbia Storage Power Exchange, a nonprofit, nonstock corporation duly organized under the nonprofit, nonstock corporation statute of the State of Washington "CSPE Said bonds are issuable in coupon form, registrable as to principal only, in the denomination of $5,000 each, and in fully registered form, without coupons, in the denominations of $5,000, or multiples thereof. The coupon bonds are numbered from 1 upwards and are dated September 1, 1964. The fully registered bonds are numbered from R1 upwards and the fully registered bonds initially issued are dated September 1, 1964. The bonds mature on April 1 in each of the years, in the amounts and bear interest, payable April 1, 1965, and semi annually thereafter on October 1 and April 1 as follows: Year 1970 1971 1972 1973 1974 1975 1976 1977 1978 DAVID M. WOOD (1892 -1960) GEORGE G. KING JOHN B. DAWSON LORENS F. LOGAN RUSSELL McINNES LEROY LOVE LEO E. SABATINE COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS, $314,100,000 Amount 3,200,000 5,780,000 6,465,000 6,810,000 12,265,000 6,000,000 6,000,000 6,000,000 6,000,000 Interest Rate 3 3 3 3 3 3 3 3 3 4-1 Year Amount 1979 1980 1981 1982 1983 1984 1985 1986 2003 EXHIIBIT 4 AREA CODE 212 TELEPHONE HANOVER 2 -0450 48 WALL STREET NEW YORK. 5. N. Y. September 1964 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 207,580,000 Interest Rate 3 3.60 3.60 3.60 3.60 3.70 3.70 3.70 3 The bonds are issued under a Bond Indenture (the "Indenture dated as of the first day of September, 1964, between CSPE and Morgan Guaranty Trust Company of New York, New York, New York, as Trustee (the "Trustee for the purpose of financing the purchase by CSPE of the Canadian Entitlement as defined in the Indenture (the "Canadian Entitlement and to pay the estimated corporate expenses of CSPE and interest on the bonds to and including April 1, 1969. The bonds are subject to redemption prior to maturity upon the terms and conditions set forth in the Indenture. We have examined the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin" signed at Washington January 17, 1961, and the protocol and notes exchanged thereunder (herein referred to collectively as the "Treaty the Canadian Entitlement Purchase Agreement between CSPE and the British Columbia Hydro and Power Authority organized under the British Columbia Hydro and Power Authority Act, 1964, executed the 13th day of August, 1964; the Canadian Entitlement Exchange Agreements between the United States of America, acting by and through the Bonneville Power Administrator (acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity designated under Article XIV of the Treaty), CSPE and the Participants as defined therein, executed as of the 13th day of August, 1964 (the "Exchange Agreements the Constitution and statutes of the State of Washington, certified copies of proceedings of the Board of Trustees of CSPE, and other proofs relating to the due organization and existence of CSPE and authorizing the issuance of said bonds, and such other records, certificates and other documents as we have considered necessary or appropriate for the purposes of this opinion. We have also examined an executed coupon bond and an executed fully registered bond of said issue. In our opinion CSPE is a nonprofit, nonstock corporation duly organized under the nonprofit, nonstock corporation statute of the State of Washington, and validly existing in good standing under the laws of that State; the Indenture has been duly authorized, executed and delivered and is a valid and legally binding instrument and creates the valid transfer, assignment and pledge to the Trustee which it states that it creates of the rights of CSPE under the Exchange Agreements and the rights, if any, of CSPE to and in the Canadian Entitlement (including without limitation all reversionary rights in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements, effective against all present and future creditors of CSPE, subject to any periodic filings of notification thereof as may be prescribed by applicable law (and CSPE has covenanted in the Indenture duly to make all such filings) and said bonds have been duly authorized, executed, authenticated, issued and delivered and are valid and legally binding obligations of CSPE, entitled to the benefits and security provided by the Indenture. It is also our opinion that the interest on said bonds is exempt from present Federal income taxes based upon the existing statute and regulations and a specific ruling to that effect issued by the Internal Revenue Service with respect to the bonds, dated August 14, 1964. Very truly yours, Canadian Entitlement Exchange Agreement executed by the United States of America acting by and through the Bonneville Power Administrator (Acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity herein described) and Columbia Storage Power Exchange and N c INDEX Page SECTION 1—Definitions and Explanation of Terms 2 SECTION 2—Exhibits 3 SECTION 3—Term of Agreement 3 SECTION 4—Transfer of Canadian Entitlement 3 SECTION 5—Exchange of Canadian Entitlement 3 SECTION 6—Payments to CSPE S SECTION 7—Payments to the Administrator 5 SECTION 8—Records and Accounts 6 SECTION 9—Adjustment of Participant's Percentage 6 SECTION 10—Default 6 SECTION 11—Modification of Contract Terms 7 SECTION 12—Particular Provisions Affecting Administrator 7 SECTION 13—Scheduling Arrangements 7 SECTION 14—Character of Service. 7 SECTION 15—Continuity of Service 8 SECTION 16—Indivisibility of Agreement 10 SECTION 17—Notices and Computation of Time 10 SECTION 18—Interest of Member of Congress 10 SECTION 19—Work Hours—Overtime Compensation 10 SECTION 20—Convict Labor 10 SECTION 21—Assignment of Agreement 11 SECTION 22—Assignment to the Trustee 11 SECTION 23—Approval by Rural Electrification Administration 11 CANADIAN ENTITLEMENT EXCHANGE AGREEMENT This agreement is executed as of the 13th day of August, 1964, by and between UNITED STATES OF AMERICA (hereinafter referred to as the "Government acting by and through the Bonneville Power Administrator (hereinafter referred to as the "Administrator who is acting in his capacity as Bonneville Power Administrator and acting for and on behalf of the United States Entity hereinafter described, and COLUMBIA STORAGE POWER EXCHANGE, a nonprofit corporation organized under the laws of the State of Washington (hereinafter referred to as "CSPE and ,a (hereinafter referred to as the "Participant Recitals: 1. The President of the United States and the Prime Minister of Canada have executed the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin," signed at Washington, D. C., January 17, 1961 (here- inafter referred to as the "Treaty"). 2. Under the terms of the Treaty, Canada is entitled to receive from the Government, as determined in accordance with the Treaty, one -half of the average annual usable energy and one -half of the dependable hydroelectric capacity which can be realized in the United States each year for the next sixty years as a result of the coordinated use of the improved stream flow on the Columbia River created by storage projects to be constructed in Canada pursuant to the terms of the Treaty. 3. CSPE has purchased from Canada for a term of years, through the Canadian Entity designated pursuant to the Treaty, Canada's rights to receive power and energy under the Treaty, and CSPE is authorized to incur indebtedness to finance such purchase, and to dispose of such rights under such arrangements as may be necessary to retire such indebtedness and pay the necessary expenses of CSPE incidental thereto. 4. The Participant is authorized to enter into and perform this agreement. 5. The Participant has found and determined that the execution of this agreement is necessary and advisable in order to provide for the actual and prospective needs of the Participant, and that the performance of this agreement will result in substantial economies to the Participant during the term hereof. 6. Pursuant to Article VIII of the Treaty, the United States and Canada have authorized the dis- position within the United States of a portion of the downstream power benefits to which Canada is entitled, subject to the general conditions and limitations set forth in exchanges of notes between the two countries. 7. The United States Entity, designated pursuant to Article XIV of the Treaty and acting in accordance with Article XI thereof, has approved the use for hydroelectric power purposes in the United States of the improvement in stream flow brought about by operation of the storage to be con- structed under the Treaty. 8. The Administrator is authorized to transmit and dispose of electric power and energy generated at various federal hydroelectric projects in the Pacific Northwest in accordance with the Bonneville Project Act, approved August 20, 1937, as amended, the Reclamation Project Act of August 4, 1939, the Flood Control Act of December 22, 1944, and pursuant to the following orders of the Secretary of the Interior: No. 2563 dated May 2, 1950, and No. 2860 dated January 19, 1962 as amended. Such projects, together with related transmission facilities owned by the Government, are hereinafter referred to as the "Columbia River Power System." 9. The Administrator is authorized by said Order No. 2860, as amended, to enter into such contracts, agreements, and arrangements, upon such terms and conditions and in such manner as he may deem necessary, as provided in said Bonneville Project Act, as amended. 10. The Administrator is authorized to enter into contracts with public and private power systems for the mutual exchange of unused excess power upon suitable exchange terms for the purpose of economical operation of, or providing emergency or breakdown relief for, the Columbia River Power System, and the Administrator has determined that (1) the implementation of the Treaty will make available to the Government large quantities of electric energy to meet the actual and prospective needs for such energy by publicly and privately owned public utilities, cooperatives and industries in the Pacific Northwest; (2) the Administrator will hereby be enabled to increase the net revenues to be received in the marketing of power from the Columbia River Power System; and (3) the mutual exchange of power as provided herein will result in a more economical operation of the Columbia River Power System. 11. The Government has determined that in order to accomplish the sale of Canada's entitlement to downstream power benefits in accordance with, and in implementation of, the Treaty and the Notes relating thereto exchanged between the United States and Canada on or prior to the effective date of this agreement (hereinafter referred to as the "Notes the Administrator must assure unconditionally the delivery, in exchange for such entitlement, of the agreed amounts of capacity and energy specified in the Canadian Entitlement Exchange Agreements. 12. The Administrator and the Division Engineer, North Pacific Division, Corps of Engineers, Department of the Army, have been designated the United States Entity pursuant to Article XIV of the Treaty, and the Administrator has been authorized to act for and on behalf of the United States Entity in the execution and performance of this agreement. 13. British Columbia Hydro and Power Authority, established under the British Columbia Hydro and Power Authority Act, 1964 (hereinafter referred to as `B. C. Hydro has been designated the Canadian Entity pursuant to Article XIV of the Treaty. Now, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows: SECTION 1— Definitions and Explanation of Terms For the purposes of this agreement (a) "Bond" or "Bonds" shall mean any bond or bonds, as the case may be, authenticated and delivered under the Bond Indenture (hereinafter defined). (b) "Bond Indenture" shall mean the trust indenture, dated as of September 1, 1964, by and between CSPE and Morgan Guaranty Trust Company, as trustee, securing the Bonds as originally executed, or, if amended or supplemented as in the Bond Indenture provided, as so amended or supplemented. (c) "Canadian Entitlement" shall mean all of the various rights and benefits acquired by CSPE pursuant to the provisions of the agreement, entitled the "Canadian Entitlement Purchase Agreement," between CSPE and B. C. Hydro, as such agreement is in effect at the time this agreement becomes effective. (d) "Canadian Entitlement Exchange Agreements" shall mean this and all similar agreements providing, in the aggregate, for the transfer by CSPE of one hundred percent of the Canadian Entitle- ment to the Participants, and the exchange by them of the Canadian Entitlement with the Administrator. 2 (e) "Contract Year" shall mean the twelve -month period commencing at 12:01 a.m. Pacific Stand- ard Time on April 1, 1968, or at the same time on April 1 of any year thereafter during the term of this agreement. (f) "Net Interest Cost" shall mean the quotient, expressed as a percentage (to the nearest 0.01 of 1% obtained by dividing (1) the interest payable over the term of the Bonds initially issued under the Bond Indenture from the date of such Bonds to the respective maturity dates thereof plus the amount by which the aggregate principal amount of such Bonds exceeds the purchase price paid to CSPE therefor or less the amount by which such purchase price exceeds the aggregate principal amount of such Bonds (in each case excluding accrued interest from such purchase price), by (2) the sum of the products obtained by multiplying the principal amount of such Bonds becoming due on each such maturity date by the number of years (including any fractions of a year) from the date of such Bonds to such maturity date; provided that Bonds for which a sinking fund has been established by the Bond Indenture shall be deemed to mature on the date of each sinking fund installment in the minimum principal amount required to be retired from such sinking fund installment. (g) "Participants" shall mean such of the organizations listed on Exhibit A as shall execute and deliver Canadian Entitlement Exchange Agreements. (h) "Participant's Percentage" shall mean the percentage appearing after the Participant's name on Exhibit A or such other percentage as shall be agreed to in writing by the parties hereto prior to the time this agreement becomes effective, as such percentage or such other percentage (as the case may be) may be adjusted in accordance with Section 9, and "participants' percentages" shall mean, as applied to any two or more participants, the percentages of such Participants under their Canadian Entitlement Exchange Agreements at the time such Agreements become effective, as such percentages may be adjusted in accord- ance with Section 9 of such Agreements. (i) "Trustee" shall mean the Trustee under the Bond Indenture for the time being, whether original or successor. SECTION 2— Exhibits Exhibits A, 13 and C are by this reference incorporated herein as fully as though set forth verbatim in the body of this agreement. SECTION 3 —Term of Agreement This agreement shall be effective upon the exchange of instruments of ratification of the Treaty, if such exchange occurs and the Bonds initially issued under the Bond Indenture are delivered prior to December 31, 1964 and at the time of such delivery the aggregate of the participants' percentages shall equal 100 per cent. It shall terminate on the later of (a) 12:00 p.m. on March 31, 2003, or (b) the date that all of the Bonds are paid or funds set aside for the payment or retirement thereof in accordance with the Bond Indenture. SECTION 4— Transfer of Canadian Entitlement CSPE hereby transfers and assigns to the Participant during the existence of this agreement the Participant's Percentage of the Canadian Entitlement and the Participant hereby accepts such transfer and assignment and agrees to pay therefor as provided in Section 6. SECTION 5— Exchange of Canadian Entitlement (a) The Participant hereby transfers and assigns to the Administrator during the existence of this agreement the Participant's Percentage of the Canadian Entitlement, and the Administrator hereby accepts such transfer and assignment. (b) In exchange for such transfer and assignment to the Administrator of the Participant's Per- centage of the Canadian Entitlement, the Administrator agrees with CSPE and with the Participant that 4 during each month of each Contract Year the Administrator shall make available to the Participant the amounts of capacity and average energy computed as follows and as adjusted in accordance with Sections 5(c) and 5(d): (1) reduce the amounts of capacity and energy specified for each Contract Year in columns 2 and 3 of Exhibit B by 0.16 of one percent thereof for each 0.01 by which 4.59 percent exceeds the Net Interest Cost; provided, that such reduction, if any, shall not reduce the amounts of capacity and energy below those specified for such Contract Year in columns 4 and 5 of Exhibit B; (2) multiply the results obtained in Section 5(b) (1) by the Participant's Percentage. (c) A tabulation of the amounts of capacity and energy determined under Section 5 (b) shall be submitted to the Administrator by the Participant within six months after the execution of this agreement. Such tabulation may be changed by the Participant from time to time, and each changed tabulation shall become effective at the beginning of the sixth Contract Year following its submission to the Administrator. Each such changed tabulation shall be subject to the following: (1) Within any Contract Year, energy may be exchanged with the Administrator for capacity in the ratio of one megawatt of average energy to 4.30 megawatts of capacity, provided that, except to the extent a greater ratio is reflected in Exhibit B, the amount of capacity to be made available in any Contract Year shall not exceed 2.5 times the average energy to be made available during such Contract Year. (2) Within any Contract Year, capacity may be exchanged with the Administrator for energy in the ratio of 4.30 megawatts of capacity to one megawatt of average energy, provided that if all such exchanges so tabulated would require the Administrator to provide energy in excess of the total amounts of energy to be made available to the Administrator in exchange for capacity under Section 5 (c) (1) of the Canadian Entitlement Exchange Agreements and the Administrator determines that such amount of excess energy cannot be made available, the Administrator shall allocate the amount of energy determined by him to be available for such purposes (which amount shall in no event be less than the energy exchanged for capacity under Section 5(c) (1) of the Canadian Entitlement Exchange Agreements) among the Participants requesting the exchange in proportion to their par- ticipants' percentages. The amount of average energy to be made available to the Participant during any Contract Year shall not exceed the amount of capacity to be made available to the Participant during such Contract Year. (3) The quotient obtained by dividing the capacity to be made available to the Participant during any Contract Year by the average energy to be made available to the Participant during such Contract Year shall not be greater or less than the corresponding quotient for the preceding Contract Year by more than 0.5 (five tenths). (4) The monthly amounts of energy specified in such tabulation for delivery in any Contract Year may be unequally distributed but only to the extent that the amount of energy specified in any month shall not be less than 85 percent of the highest amount of energy specified for the Participant in any one month of the Contract Year. (d) The Administrator shall make available to the Participant the amounts of capacity and energy determined in accordance with this Section 5 in the amounts and at the points of delivery specified and subject to the limitations set forth in Exhibit C, at unity power factor except as otherwise agreed upon between the Participant and the Administrator, and as adjusted for losses as specified in Exhibit C. CSPE agrees that Exhibit C may be changed and a new Exhibit C substituted therefor by agreement between the Participant and the Administrator without further notice to or approval by CSPE. (e) Within any month, the Administrator shall make available such energy as scheduled by the Participant up to the amount of capacity which the Administrator is obligated to make available to the Participant during such month. SECTION 6— Payments to CSPE (a) Notwithstanding any suspension, interruption, interference, reduction or curtailment permitted by Section 15 (a) and Section 15 (b) but subject to the provisions of Section 15(e), the Participant shall, in full payment of the purchase price for the Participant's Percentage of the Canadian Entitlement, pay to CSPE an amount equal to the Participant's Percentage of the costs incurred by CSPE in purchasing the Canadian Entitlement, which amount shall be computed and paid as follows: (1) In each month an amount equal to the Participant's Percentage of the amounts which CSPE is required by the Bond Indenture, other than Section 7.02 thereof, to pay in such month to the Trustee including the fees and expenses of the Trustee and paying agents, other than amounts paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds; and (2) Amounts equal to the Participant's Percentage of all expenses incurred by CSPE for its sole corporate purposes other than amounts which CSPE is required by the Bond Indenture to pay to the Trustee and other than amounts paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds. (b) The Participant shall make the payments required under Section 6(a)(1) to be made in any month, on the 25th day of such month. CSPE shall cause to be mailed to the Participant statements setting forth, in reasonable detail and with appropriate reference to applicable provisions of the Bond Indenture, the amounts which the Participant is required to pay under Section 6(a)(1) during each Contract Year. Such a statement shall be mailed on or as soon as practicable after the beginning of each Contract Year and from time to time thereafter in the event of any changes in such required payments. The Participant shall make the payments under Section 6(a) (2) within twenty days after receipt from CSPE of a statement therefor. (c) On payments required to be made by the Participant under this Section 6 or Section 7 which are not paid when due, the Participant shall pay in addition to the amounts due a delayed payment charge of two percent of the unpaid amount due, except as to any portion thereof which may be disputed in good faith. Remittances postmarked at least five days prior to the due date or within 20 days after receipt of the applicable statement required by Section 6(b) will be accepted without assessment of the delayed payment charge. If the due date is a Sunday or a holiday, the next following business day shall be the last day on which payment may be made without addition of the delayed payment charge. In the case of payments due under Section 6(a), the delayed payment charge shall be paid to CSPE. In the case of payment due under Section 7, the delayed payment charge shall be paid to the Administrator. (d) Except as provided in Section 15(e), the obligation of the Participant to make payments as provided in this Section 6 shall not be subject to any reduction, whether by offset or otherwise. SECTION 7— Payments to the Administrator The Participant shall pay to the Administrator, in return for the use of the Government's trans- mission, transformation and related facilities in making capacity and energy available to the Participant pursuant to Section 5 hereof, for each month commencing April 1, 1968 and thereafter throughout the term of this agreement, within 30 days after date of a bill therefor, an amount equal to the product obtained by multiplying $0.125 by the number of kilowatts of capacity, before deduction for losses, which the Administrator has made available to the Participant during the month pursuant to Section 5 hereof, provided, however, that if the Participant is the owner of, or is a purchaser of a share of the output from, a nonfederal project supplying an "Allocation to Canadian Entitlement" under a "Canadian Entitlement Allocation Agreement" with the Administrator, such charge shall not apply to the amounts of capacity and energy made available to the Participant hereunder at the point where the owner of such project makes available such Allocation to Canadian Entitlement to the Government (designated in Exhibit C as a "Project Delivery Point to the extent that the amount of capacity 5 made available to the Participant at such Project Delivery Point is not in excess of the amount of the "Capacity Allocation to Canadian Entitlement" supplied to the Government by the owner of such non- federal project at such Project Delivery Point and designated for the Participant in such Allocation Agreement. If such payments are not made as provided in this Section 7, except for amounts as may be disputed in good faith, the Administrator may, for the period of nonpayment, make available the capacity and energy required to be made available to the Participant in accordance with Section 5, at the high voltage bus of such of the Government's generating plants located on the Columbia River downstream from the Canadian border as the Administrator may designate, notwithstanding the provi- sions of Section 5(d). SECTION 8— Records and Accounts The Participant shall be entitled at any time to inspect by its agents, employees or accountants all of the books, records and papers of CSPE, and CSPE shall render to the Participant on or before the 1st day of July of each year an accounting of all receipts of and expenditures by CSPE during the preceding period from April 1 to March 31. SECTION 9— Adjustment of Participant's Percentage The Participant's Percentage shall be automatically increased for the remaining term of this agree- ment in the event that one of the Participants (herein called a "Defaulting Participant fails or refuses for any reason to make any payment required by Section 6 of the Canadian Entitlement Exchange Agreement of the Defaulting Participant and such failure or refusal continues for a period of 60 days from the date when such payment shall have become due and payable. The amount of such automatic increase shall be the product (expressed as a percentage) obtained by multiplying the participant's percentage of the Defaulting Participant by a fraction, the numerator of which is the Participant's Percentage and the denominator of which is the total of the participants' percentages of all Participants who are not Defaulting Participants; provided, however, that the cumulative total of all such increases shall not, without the consent of the Participant, exceed a maximum of one -fourth of the percentage appear- ing after the Participant's name in Exhibit A hereto. All rights of a Defaulting Participant shall inure to the benefit of the Participants whose participants' percentages have been so increased to the extent of such increases. If the Participant's Percentage shall be increased as provided in this Section 9, the increase in capacity and energy to be made available by the Administrator pursuant to this agree- ment shall be made available at the point or points of delivery specified in Exhibit C and a new tabulation may be submitted pursuant to Section 5(c) relating to such increase, to be effective upon submission. If after giving effect to the foregoing provisions of Section 9 of the Canadian Entitlement Exchange Agreements, the participants' percentages of all Participants who are not Defaulting Participants shall not have been increased in an aggregate amount sufficient to provide for the payment by such Participants of 100% of the amounts required to be paid pursuant to Section 6 of all such Agreements, then in such event each Defaulting Participant shall, and hereby does, assign and transfer to CSPE that portion of its participant's percentage (and the rights associated therewith) which has not been assumed by the Participants who are not Defaulting Participants, but no such assignment and transfer shall relieve such Defaulting Participant of its liability for payments under its Canadian Entitlement Exchange Agreement. CSPE may, but shall not be required to, arrange for the transfer and sale, for the account of each such Defaulting Participant, of that portion of its participant's percentage (and such rights) so assigned and transferred. SECTION 10— Default In the event any of the Participants shall fail or refuse to pay any amounts due to CSPE under any of the Canadian Entitlement Exchange Agreements, the fact that any other Participant shall have assumed the obligation to make such payments pursuant to the provisions of Section 9 of any such Agreement shall not relieve the Defaulting Participant of its liability for such payments under its Agree- ment, and the Participants assuming such obligation, either individually or as a member of a group, shall have a right of recovery from the Defaulting Participant, and any Participant may commence such 6 suit, action or proceeding, at law or in equity, including suit for specific performance, as may be necessary or appropriate to enforce the obligations of the Defaulting Participant under its Agreement; provided, that if the cumulative obligations of the Defaulting Participant or Participants exceed the amount that is assumed by the other Participants under Section 9 of the Canadian Entitlement Exchange Agreements, CSPE shall be entitled to commence and prosecute such suit, action or proceeding as it may deem appropriate to recover such excess amounts. In the event and to the extent that the Participant fails or refuses for any reason to perform its obligations under this agreement, and such failure or refusal adversely affects the Government, the Government may commence such suit, action or proceeding, at law or in equity, including suit for specific performance, against the Participant as it may deem appropriate to protect the interests of the Government. SECTION 11— Modification of Contract Terms (a) This agreement cannot be amended, modified or otherwise changed by agreement of the parties in any manner that will impair or adversely affect the security, afforded by the provisions of this agree- ment, for the payment of the principal, interest and premium, if any, on the Bonds as they respectively become payable,' so long as any of the Bonds are outstanding and unpaid or funds are not set aside for the payment or retirement thereof in accordance with the Bond Indenture. (b) This agreement is one of a series of similar agreements, which are uniform in all material respects, providing for the transfer by CSPE of one hundred percent of the Canadian Entitlement to the Participants and the exchange with the Administrator of such Entitlement for agreed amounts of power and energy to be delivered to the Participants by the Administrator. The Administrator shall, before the effective date of any amendment, modification or change of any of such agreements, excepting changes of Exhibit C and changes made prior to the time such agreements become effective in percentages set forth in Exhibit A, notify the Participant in writing of such amendment, modification or change, and this agreement shall, upon request by the Participant made not later than sixty days after the receipt of such notice, be amended, modified, or changed to include the same terms and conditions so granted to any other participant. (c) Without the written consent of the Participant and the Administrator, CSPE shall not amend, modify or otherwise change, or issue refunding Bonds under, the Bond Indenture so as to increase or accelerate the payments, individually or in the aggregate, to be made by the Participant to CSPE, or so amend, modify or otherwise change the sole corporate purposes specified in its Articles of Incor- poration as approved and filed May 11, 1964. SECTION 12— Particular Provisions Affecting Administrator The Bond Indenture in execution form under which the initial Bonds are being issued and the contract for the sale of such Bonds in execution form, shall be subject to the approval of the Administrator. SECTION 13-- Scheduling Arrangements (a) The Administrator shall make available to the Participant, in accordance with hourly schedules Furnished by the Participant to the Administrator at least eight hours prior to each day, the amount of capacity and energy to which the Participant is entitled, as determined in accordance with Section 5. If the Participant does not maintain dispatching facilities, the Administrator shall schedule deliveries as agreed between the Participant and the Administrator. (b) Deviation from scheduled deliveries shall be corrected as promptly as possible under conditions approximately equivalent to the conditions under which the deviation occurred. SECTION 14— Character of Service Electric energy shall be made available hereunder in the form of three -phase current alternating at a frequency of approximately sixty cycles per second. Deliveries thereof at the point or points of delivery 7 described in Exhibit C shall be made at the approximate voltage specified for such point. The amounts of electric energy and reactive power so delivered at such point or points during each month, and of the sixty minute integrated demands for such electric energy, shall be the amounts thereof determined from measurements made by the Government's watt -hour, var -hour and recording demand meters, respectively, installed to record the flow of electric energy and reactive power at the places and in the circuits specified in Exhibit C. SECTION 15— Continuity of Service (a) The Administrator may, for a period not in excess of 168 consecutive hours for any particular system emergency caused or created by any event reasonably beyond his control, interrupt or reduce deliveries of capacity or energy to or for the account of the Participant if such interruption or reduction is necessary in case of such system emergency, other than any circumstance covered by Section 15 (b), and the Administrator shall not be liable for any damages sustained by the Participant as a result of the failure to make available capacity or energy during such period of interruption or reduction not in excess of 168 consecutive hours. For this purpose the term "system emergency" shall not include con- ditions of insufficient natural stream flows or any event caused by nonperformance by Canada or the Canadian Entity of its obligations under the Treaty and the Notes. (b) If the operation of the Government's transmission system is suspended, interrupted or interfered with as the result of (1) the occurrence of any event which is reasonably beyond its control (including, but not Limited to, the failure or breakdown of transmission facilities, floods, fire, strikes or acts of God or the public enemy but excluding the failure or breakdown of generating facilities), or (2) repairs, maintenance or replacements made to assure continued transmission service to the Participant, the Admin- istrator shall not be obligated to deliver capacity or energy to or for the account of the Participant, as provided in this agreement, during such time and to such extent as such suspension, interruption or interference makes it reasonably impracticable to do so, and shall not be liable for any damages sustained by the Participant as a result of the failure to so deliver such capacity or energy during such time. (c) If the operations of the Government's facilities are suspended, interrupted, interfered with or curtailed due to any of the circumstances covered by Section 15 (a) and 15 (b), the Government shall exercise due diligence to resume such operations with all reasonable dispatch, and the Administrator shall restore any energy lost to the Participant as a result of such suspension, interruption, interference or curtailment under conditions approximately equivalent to the conditions under which the loss occurred. (d) The Government's "transmission system" as used in this Section 15 means the transmission facilities of the Columbia River Power System and: (1) transmission facilities of any utility used to make available capacity and energy to the Participant pursuant to this agreement, and (2) the transmission facilities of nonfederal project owners on the Columbia River used to transmit to the Administrator their agreed share of the capacity and energy to which Canada is entitled under the Treaty. (e) If for any reason other than as set forth in Sections 15(a) and 15(b) the Administrator does not make available in any particular month the capacity or energy required to be made available during such particular month pursuant to this agreement, the payments to be made by the Participant to CSPE in the month which next succeeds such particular month as provided in Section 6(a) (1) shall be reduced by an amount computed by applying the following rates to the amounts of capacity and energy (before reduction of losses) not so made available in such particular month: $105.00 per megawatt of capacity for each week or fraction thereof and $2.70 per megawatt -hour of energy, each reduced by 0.16 of one per cent thereof for each 0.01 by which 4.27 per cent exceeds the Net Interest Cost. For the purpose of such computation the amount of capacity and energy not made available by the Administrator shall include capacity and energy not made available as a result of the provisions of the following paragraph of this Section 15(e). 8 If the Participant enters into commitments reasonably necessary to replace the capacity and energy required to be but not made available by the Administrator pursuant to the terms of this agreement, or if the Participant loses a then existing specific load or loads as the result of such non availability, then, even though the Administrator thereafter offers to increase deliveries on a specified date, the Participant shall be required to accept, and the Administrator shall only make available to the Participant, for a period of up to five years after the receipt of such offer, such reduced amounts of capacity and energy as shall be specified in a schedule for such five -year period submitted by the Participant to the Administrator; provided that such schedule shall be accompanied by a statement by the Participant in reasonable detail showing that it has made commitments reasonably necessary to replace, or that because of loss of load it cannot use as firm power resources, the difference between the capacity and energy required to be made available pursuant to the terms of this agreement and the reduced amounts specified in such schedule; and further provided that such reduced amounts of capacity and energy, respectively, specified in such schedule shall at least equal for each month the lowest respective amounts of capacity and energy made available to the Participant during any one or more months between the time when the Administrator first failed to make available full deliveries and the com- mencement of such five -year period. (f) If in accordance with Section 15(e) the Participant's payment to CSPE in the month following any particular month is reduced, the Administrator shall be obligated to pay currently to the Participant an amount of cash computed by applying the following rates to the amounts of capacity and energy (before reduction for losses) not made available by the Administrator in such particular month: $105.00 per megawatt of capacity for each week or fraction thereof and $2.70 per megawatt-hour of energy, each reduced by 0.16 of one percent thereof for each 0.01 by which 4.27 percent exceeds the Net Interest Cost. For the purpose of such computation the amount of capacity and energy not made available by the Administrator shall include capacity and energy not made available as a result of the provisions of the last paragraph of Section 15(e). Notwithstanding the provisions of Section 6(b) all amounts paid to the Participant by the Administrator under this Section 15(f shall forthwith upon receipt thereof be paid over to CSPE. Such payment by the Administrator shall be for the account of and as full liquidated damages to CSPE. The respective obligations of the Administrator and the Participant to make payments as provided in this Section 15(f) shall not be subject to any reduction, whether by offset or otherwise. (g) If there should be a dispute between the Participant and the Administrator concerning the facts set forth in any statement of the Participant accompanying a schedule submitted by the Participant to the Administrator pursuant to Section 15(e), such dispute shall be submitted promptly to arbitration. The Participant and the Administrator shall each appoint one arbitrator and the two arbitrators shall appoint a third arbitrator. The decision of at least two arbitrators shall be binding and conclusive upon the Participant and the Administrator. Pending the arbitrators' resolution of the dispute, the Participant shall continue to make the payments for the amounts of capacity and energy in dispute in accordance with Section 6; provided, however, that if it shall be determined that all or part of such payments made by the Participant pending outcome of the dispute, were an obligation of the Administrator under Section 15 (f), then the Administrator shall be obligated to reimburse the Participant in full for the amounts which it is determined were the Administrator's obligation in the first instance. (h) Subject to the provisions of Section 15 (a) and Section 15 (b): (1) the obligation of the Administrator to make capacity and energy available to the Participant in accordance with Section 5 is, and shall remain, unconditional and (without limiting the generality of the foregoing) such obligation shall not be affected by any nonperformance by Canada or the Canadian Entity under the Treaty or the Notes; (2) the provisions of Section 15(e) and Section 15(f) do not, and shall not be construed to, in any manner modify, excuse, relieve, or provide an alternative to such obligation; and 9 (3) payments made by the Administrator to the Participant under Section 15(f) shall not relieve the Administrator from any liability he may have to the Participant for damages proximately resulting to the Participant from the failure of the Administrator to deliver capacity or energy under the provisions of Section 5. (i) Without limiting his obligations as set forth in this agreement, the Administrator shall first use the Canadian Entitlement in fulfilling his obligations under this agreement. SECTION 16— Indivisibility of Agreement This agreement is entire and indivisible and, accordingly, shall not be binding upon any of the parties hereto if it is not binding upon all of the parties hereto, but this agreement shall not be subject to termination by any party under any circumstances, whether based upon the default of any other party or otherwise. SECTION 17— Notices and Computation of Time Any notice required by this agreement to be given to any party shall be effective when it is received by such party, and in computing any period of time from such notice, such period shall commence at 12:00 p.m. on the date of receipt of such notice. SECTION 18 Interest of Member of Congress No member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this agreement or to any benefit that may arise therefrom. Nothing, however, herein contained shall be construed to extend to such agreement if made with a corporation for its general benefit. SECTION 19 —Work Hours Overtime Compensation In the event that any work is performed under this contract which may require or involve the employment of laborers or mechanics, no contractor or subcontractor contracting for any part of such work shall require or permit any laborer or mechanic, in any work week in which he is employed on such work, to work in excess of eight hours in any calendar day or in excess of 40 hours in such work week unless such laborer or mechanic receives compensation at a rate not less than one and one -half times his basic rate of pay for all hours worked in excess of eight hours in any calendar day or in excess of 40 hours in such work week, whichever is the greater number of overtime hours. In the event of any violations of the provisions of this Section 19, the contractor and any sub- contractor responsible therefor shall be liable to any affected employee for his unpaid wages and shall, in addition, be liable to the Government for liquidated damages. Such liquidated damages shall be computed, with respect to each individual laborer or mechanic employed in violation of the provisions of this Section 19, in the sum of $10 for each calendar day on which such individual was required or permitted to work in excess of eight hours or in excess of 40 hours in a work week without payment of the required overtime wages. The Administrator may withhold, or cause to be withheld, from any moneys payable on account of work performed pursuant to this contract, the full amount of unpaid wages required by this Section 19 and such sums as may be administratively determined to be necessary to satisfy any liabilities of such contractor or subcontractor for liquidated damages as provided in this Section 19. CSPE and the Participant shall each be deemed a "contractor" within the meaning of this Section 19. SECTION 20— Convict Labor Neither CSPE nor the Participant shall employ any person undergoing sentence of imprisonment at hard labor. 10 IN WITNESS WHEREOF, the parties hereto have executed this agreement in several counterparts. SECTION 21— Assignment of Agreement This agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the parties to this agreement, provided that the rights of the Participant under Section 5(c) shall not be transferable by assignment or otherwise to a party who is not one of the Participants. No assignment or transfer of this agreement shall relieve any party of any of its obligations hereunder, nor, except as provided in Section 9, shall such assignment or transfer change or modify the Administrator's obligation to make capacity and energy available in the amounts and at the points of delivery specified in Exhibit C without his prior consent. SECTION 22— Assignment to the Trustee It is intended that CSPE will assign to the Trustee all of the rights of CSPE under the Canadian Entitlement Exchange Agreements to the extent and for the period or periods provided by the Bond Indenture and the Participant and the Administrator hereby acknowledge and consent to such assignment. SECTION 23— Approval by Rural Electrification Administrator If the Participant is a party to an agreement or other instrument pursuant to which approval of this agreement by the Rural Electrification Administration is required as listed on Exhibit A, this agreement shall not be binding upon any of the parties hereto if it shall not have been approved by the Administrator of the Rural Electrification Administration or his delegate after the execution of this agreement and prior to the effectiveness hereof pursuant to Section 3. Evidence of such approval shall be noted on or attached to all executed counterparts of this agreement by the Government. If so approved this agreement shall be binding upon all of the parties hereto in accordance with its terms. (SEAL) (SEAL) Attest: /s/ A. J. PORTER (SEAL) Attest: UNITED STATES OF AMERICA By /s/ CHARLES F. LUCE Bonneville Power Administrator as the Administrator and for and on behalf of the United States Entity. COLUMBIA STORAGE POWER EXCHANGE By /s/ HOWARD C. ELMORE By [NAME OF PARTICIPANT] Participants Percentage Public Utility District No. 1 of Benton County 0.80% Village of Bonners Ferry, Idaho 0.05 Central Lincoln Peoples' Utility District 1.00 Public Utility District No. 1 of Chelan County 1.00 Public Utility District No. 1 of Clark County 3.00 Clatskanie Peoples' Utility District 0.20 *Coos -Curry Electric Cooperative, Inc. 0.50 City of Coulee Dam, Washington 0.10 Public Utility District No. 1 of Cowlitz County.... 2.50 *Public Utility District No. 1 of Douglas County 0.20 City of Eugene, Oregon 5.50 *flathead Electric Cooperative, Inc. 0.10 City of Forest Grove, Oregon 0.30 Public Utility District No. 1 of Franklin County 0.80 Public Utility District No. 2 of Grant County 0.45 Public Utility District No. 1 of Grays Harbor County 1.50 *Idaho County Light and Power Cooperative Association, Inc. 0.10 *Inland Power Light Company 0.50 *Lane County Electric Cooperative, Inc. 0.40 *Lincoln Electric Cooperative, Inc. (Mont.) 0.10 *Lincoln Electric Cooperative, Inc. (Wash.) 0.10 City of McMinnville, Oregon 0.40 *Missoula Electric Cooperative, Inc 0.10 *Nespelem Valley Electric Cooperative, Inc. 0.05 *Northern Lights, Inc.... 0.35 Pacific Power Light Company 10.00 Public Utility District No. 1 of Pend Oreille County 0.20 City of Port Angeles, Washington 0.50 Portland General Electric Company 17.50 Puget Sound Power Light Company 17.50 *Ravalli County Electric Cooperative, Inc.... 0.10 City of Richland, Washington.... 0.80 Salem Electric 0.40 City of Seattle, Washington 12.50 Public Utility District No. 1 of Skamania County 0.20 Public Utility District No. 1 of Snohomish County 1.50 City of Springfield, Oregon 0.50 City of Tacoma, Washington 12.50 *Tillamook Peoples' Utility District 0.50 Vera Irrigation District No. 15 0.20 The Washington Water Power Company 5.00 Approval of this agreement by Rural Electrification Administration required. 12 Exhibit A Column 1 Column 2 Column 3 Column 4 Column 5 Contract Year Capacity Energy Capacity Energy (4/1 -3/31) (MW) (Average MW) (MW) (Average MW) 1968 -69 191 113 191 113 1969 -70 1026 603 972 572 1970 -71 1034 603 980 572 1971 -72 1042 603 987 572 1972 -73 1050 603 995 572 1973 -74 1452 800 1377 759 1974 -75 1461 800 1385 759 1975 -76 1454 779 1379 739 1976 -77 1448 758 1373 719 1977 -78 1436 727 1362 689 1978 -79 1423 693 1350 658 1979 -80 1403 654 1331 621 1980 -81 1382 614 1311 583 1981 -82 1367 574 1297 545 1982 -83 1322 548 1254 520 1983 -84 1282 521 1216 495 1984 -85 1234 492 1172 468 1985 -86 1195 468 1134 444 1986 -87 1152 440 1093 418 1987 -88 1109 414 1052 393 1988 -89 1066 387 1012 368 1989 -90 1072 367 1017 349 1990 -91 1077 347 1022 330 1991 -92 982 335 932 318 1992 -93 889 321 844 305 1993 -94 795 308 755 293 1994 -95 702 293 666 279 1995 -96 607 282 576 268 1996 -97 512 267 486 254 1997 -98 496 259 471 246 1998 -99 438 226 416 215 1999 -00 211 109 200 103 2000 -01 203 104 192 99 2001 -02 197 100 187 95 2002 -03 176 98 167 93 Points of Delivery (The material for this Exhibit will vary with each Participant) 13 Exhibit B Exhibit C ESCROW AGREEMENT executed as of this 13th day of August, 1964. WITNESSETH: 1. Simultaneously herewith CSPE, the Administrator and the undersigned Participant have executed a Canadian Entitlement Exchange Agreement (the "Exchange Agreement Each term defined in the Exchange Agreement shall have the same meaning when used in this Agreement. 2. CSPE, the Administrator and the undersigned Participant have not delivered the Exchange Agreement and hereby hand the same to the undersigned Bank (the "Bank in escrow for delivery only upon the conditions hereinafter specified. 3. CSPE, the Administrator and the undersigned Participant agree, and the Bank is hereby irre- vocably instructed, that the Exchange Agreement shall be delivered out of escrow by the Bank for and on behalf of CSPE, the Administrator and the undersigned Participant, respectively, at the time and place of delivery of the Bonds initially issued under the Bond Indenture unless: (a) during the two hours following the delivery to the Board of Trustees of CSPE, at a meeting of such Board, of the proposal by the underwriters for the purchase of said Bonds, the Bank shall have received written notice from the undersigned Participant not to deliver the Exchange Agreement out of escrow to CSPE and the Administrator, or (b) the Net Interest Cost with respect to said Bonds shall exceed 4.59 or (c) after the expiration of the two -hour period specified in Section 3(a) hereof and prior to the time the Canadian Entitlement Exchange Agreements become effective by delivery out of escrow, any of such Agreements shall be amended so that the percentage appearing after the name of any organization (other than the undersigned Participant) in Exhibit A to such Agreements shall be increased to exceed the greater of the following: (i) the percentage so appearing plus 1 or (ii) the percentage so appearing multiplied by 125 and in either such case the Bank shall have received written notice from the undersigned Participant not to deliver the Exchange Agreement out of escrow, or (d) If the undersigned Participant is or is to be a party to the Coordination Agreement, to a Canadian Entitlement Allocation Agreement, or to an Assignment and Agreement under a Canadian Entitlement Allocation Agreement, as listed in Annex A to this Escrow Agreement, (i) the Canadian Entitlement Purchase Agreement shall be executed and delivered between CSPE and B. C. Hydro prior to the submission of the proposal referred to in (a) above and shall be amended after the expiration of the two -hour period specified in (a) above, or (ii) the Canadian Entitlement Purchase Agreement shall not be executed prior to such submission and shall be executed and delivered in a form different from the last proof thereof deposited with the Bank pursuant to Section 4 hereof at or prior to such submission, or (iii) the final form of the instruments of ratification of, or notes to be exchanged pursuant to, the Treaty shall be different from the latest proof thereof deposited with the Bank pursuant to Section 4 hereof at or prior to such submission, and (iv) the Bank shall have received written notice from the undersigned Participant that the effect of such amendment or such difference would be materially adverse to it and that the Bank shall not deliver the Exchange Agreement out of escrow. If pursuant to the foregoing provisions of this Section 3 the Exchange Agreement is not to be delivered out of escrow, or if said Bonds are not issued prior to December 31, 1964, the Bank shall destroy all counterparts of the Exchange Agreement. 4. CSPE agrees to deposit promptly with the Bank proofs of the Canadian Entitlement Purchase Agreement, the form of such Agreement as executed and all amendments thereto executed on or prior to the ratification of the Treaty. The Government agrees to deposit promptly with the Bank proofs of the instruments of ratification of, or notes to be exchanged pursuant to, the Treaty. The Bank agrees to make notation of the date and time of receipt of each of the foregoing documents on such document, to retain all such documents in its possession and make such documents available for inspection by the Participant until the ratification of the Treaty and thereafter to deliver all such documents to CSPE. The Bank also agrees to make a copy of each of the Canadian Entitlement Exchange Agreements available for inspection by the Participant. 5. Any notice hereunder shall be in writing and shall be delivered by hand to the Bank as follows: (a) if pursuant to Section 3(a) hereof, at the place of delivery of the proposal referred to in such subsection, which delivery shall be at the Olympic Hotel in Seattle, Washington, or (b) if pursuant to Sections 3(c) or 3(d) hereof, at the place of the delivery of the Bonds referred to in such subsection, which delivery shall be at the principal office of the Trustee in New York, N. Y. IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first above written. (SEAL) Attest: (SEAL) Attest: (SEAL) Attest: (SEAL) Attest: UNITED STATES OF AMERICA By COLUMBIA STORAGE POWER EXCHANGE By By SEATTLE -FIRST NATIONAL BANK By Bonneville Power Administrator Participant 3 Th ANNEX A Participants who are or are to be parties to a Coordination Agreement, a Canadian Entitlement Allocation Agreement, or an Assignment and Agreement under a Canadian Entitlement Allocation Agreement: Public Utility District No. 1 of Chelan County Public Utility District No. 1 of Cowlitz County Public Utility District No. 1 of Douglas County City of Eugene, Oregon City of Forest Grove, Oregon Public Utility District No. 2 of Grant County City of McMinnville, Oregon Pacific Power Light Company Public Utility District No. 1 of Pend Oreille County Portland General Electric Company Puget Sound Power Light Company City of Seattle, Washington City of Tacoma, Washington The Washington Water Power Company DIRECTION FOR PAYMENTS TO TRUSTEE THIS AGREEMENT is executed as of the 13th day of August, 1964, and shall become effective at the same time as the Participant's Exchange Agreement referred to below. WHEREAS, the Participant whose consent is evidenced hereon has executed a Canadian Entitlement Exchange Agreement (the "Participant's Exchange Agreement with the United States of America, acting by and through the Bonneville Power Administrator, and Columbia Storage Power Exchange "CSPE a non profit, non -stock corporation organized under the laws of the State of Washington; and WHEREAS, CSPE is to execute and deliver its Bond Indenture, to be dated as of September 1, 1964, to Morgan Guaranty Trust Company, New York, New York (the "Trustee WHEREAS, in and by the Bond Indenture CSPE will transfer, assign and pledge with and set over to the Trustee, its successors in trust and assigns, all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement (including, without limitation, all reversionary rights, if any, in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements, except that unless an Event of Default shall have happened and be continuing, CSPE is to be permitted to receive and use for its corporate purposes the moneys payable to it pursuant to Section 6(a) (2) of the Exchange Agreements; and WHEREAS, the Participant has acknowledged and consented, and does hereby acknowledge and consent, to such transfer, assignment and pledge; and WHEREAS, in and by the Bond Indenture CSPE will covenant at any and all times to give such further assurances as may be necessary or desirable for, among other things, the better assuring, trans- ferring, assigning and pledging to the Trustee of the rights, moneys and other property intended to be transferred, assigned or pledged by the Bond Indenture. WITNESSETH: (1) CSPE and the Trustee hereby irrevocably agree and CSPE irrevocably directs that, so long as any Bonds shall be issued and outstanding under the Bond Indenture, each payment required to be made to CSPE by the Participant under Section 6 or 15 of the Participant's Exchange Agreement shall be made by the Participant directly to the Trustee, for the account of CSPE, at the time that such payment is required by such Section 6 or 15 to be made to CSPE, except that unless an Event of Default shall have happened and be continuing, all moneys required to be paid by the Participant under Section 6(a) (2) of the Participant's Exchange Agreement shall be paid by it to CSPE to be used for the latter's corporate purposes. Any payment pursuant to the provisions of the Participant's Exchange Agreement, other than Section 6(a) (1) thereof, made directly to the Trustee shall be accompanied by a written statement setting forth the subsection or subsections of the Participant's Exchange Agreement under which such payment is made, and if more than one subsection is set forth, the amount paid under each subsection shall be stated. (2) CSPE shall be and remain obligated to keep and perform all of the covenants and agreements to be kept and performed by CSPE pursuant to the provisions of the Participant's Exchange Agreement (3) Each term used herein which is not herein defined shall have the meaning set forth in the Bond Indenture. (4) This agreement shall inure to the benefit of, and shall be binding upon, the respective successors anti assigns of CSPE and the Trustee. (SEAL) Attest: (SEAL) Attest. (SEAL) Attest: COLUMBIA STORAGE POWER EXCHANGE By MORGAN GUARANTY TRUST COMPANY, Trustee By Trust Officer The undersigned Participant does hereby consent to the foregoing agreement and direction. By l' A 4---,. s d 1 C t 1 A t. :I h r' A-d 4 1 1 4 t_,, ••,1 1 4.- t t „7 t..,. i 'N'''' i t C '3 4 4 0 i G (s •Th s-, r e-e L 1 ,4 r d (,,I 4f S r r It i 1 1 a J .1 4 4 .4 /7 i 2 2 re' t_ r Vr f (c) e r t; A 1 o 1 4r a Cl et) 41' r7 y '21 d ti re (0 r y 4 24 We 7'4 tp Pec I /et-- A /4 6f- 4 r, ,4) 4, 0.( 4 f .4 (,9 j:k A 'At A. S r-qs A oel 9 4.. 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Wit. .1 t 7( 1J 6h..0wpU r /c ,P A t p 7i4 ei Q /e6 s 1, )4,,„ee, tu,:z /L../A'' j. et' aa Tc cF 64,14 4 t l (Y G, r r it es9 /i� Ri J 5 .1 i f A F n f 71..c A C(' =6 r Uap4 04 t) e Y./kV o f i ?Z 7 Ca es of 7,5 U2 J A /4„ R 6 A Gt? A ,t'4 /4 1:1 A 0G2',rv2 r 10 6" /i}' n 4/A' it ),to 5 I i //L A 4- /eJ ./J en. .74 /o Y' C %14/ r l t" w /y I/L D 7 C ,4 s 0V: 14 14 !..J o ¢1 t1 7 (i Y./It t4/ 7/7 /'4' /'P •1 n J CANADIAN ENTITLEMENT EXCHANGE AGREEMENT executed by the UNITED STATES OF AMERICA acting by and through the BONNEVILLE POWER ADMINISTRATOR and COLUMBIA STORAGE POWER EXCHANGE and Draft No. 4 5 -29 -64 CANADIAN ENTITLEMENT EXCHANGE AGREEMENT This Exchange Agreement is executed this day of 1964, by and between UNITED STATES OF AMERICA, hereinafter referred to as "the Government," acting by and through the Bonneville Power Administrator, hereinafter referred to as "the Administrator," and COLUMBIA STORAGE POWER EXCHANGE, a nonprofit corporation organized under the laws of the State of Washington, hereinafter referred to as "CSPE," and hereinafter referred to as "the Participant Recitals: 1. The President of the United States and the Prime Minister of Canada have executed the "Treaty between the United States of America and Canada Relating to the Cooperative Development of the Water Resources of the Columbia River Basin," signed at Washington, D. C. January 17, 1961 (hereinafter referred to as the "Treaty 2. Under the terms of the Treaty, Canada is entitled to receive from the United States Government, as determined in accordance with the Treaty, one -half of the average annual usable energy and one -half of the dependable hydroelectric capacity which can be realized in the United States each year for the next sixty years as a result of the coordinated use of the improved stream flow on the Columbia River created by storage projects to be constructed in Canada pursuant to the terms of the Treaty. 3. CSPE has purchased from Canada for a term of years, through the Canadian Entity designated pursuant to the Treaty, Canada's rights to receive power and energy under the Treaty, and CSPE is authorized to incur indebtedness to finance such purchase, and dispose of such rights under such arrangements as may be necessary to retire such indebtedness and pay the necessary expenses of CSPE incidental thereto. 4. The Participant is authorized to enter into and perform this agreement. 5. The Participant has found that the execution of this agreement is necessary and advisable in order to provide for the actual and prospective needs of the Participant, and the performance of this agreement will result in substantial economies to the Participant during the term hereof. 6. Pursuant to Article VIII of the Treaty, the United States and Canada have authorized the disposition within the United States of a portion of the down- stream power benefits to which Canada is entitled, subject to the general conditions and limitations set forth in exchanges of notes between the two countries. 7. The United States entity, designated pursuant to Article XIV of the Treaty and acting in accordance with Article XI thereof, has approved the use for hydroelectric power purposes in the United States of the improvement in stream flow brought about by operation of the storage to be constructed under the Treaty. 8. The Administrator is authorized to transmit and idspose of electric power and energy generated at various federal hydroelectric projects in the Pacific Northwest in accordance with the Bonneville Project Act, approved August 20, 1937, as amended, the Reclamation Project Act of August 4, 1939, the Flood 2 Control Act of December 22, 1944, and pursuant to the following orders of the Secretary of the Interior: No. 2563 dated May 2, 1950, and No. 2860 dated January 19, 1962, as amended. Such projects, together with related transmission facilities owned by the Government, are hereinafter referred to as "the Colum- bia River Power System." 9. The Administrator is authorized by said Order No. 2860, as amended, to enter into such contracts, agreements, and arrangements, upon such terms and condi- tions, and in such manner as he may deem necessary, as provided in said Bonne- ville Project Act, as amended. 10. The Administrator is authorized to enter into contracts with public and private power systems for the mutual exchange of unused excess power upon suitable exchange terms for the purpose of economical operation of, or providing emer- gency or breakdown relief for, the Columbia River Power System, and the Admin- istrator has determined that (1) the implementation of the Treaty will make available to the Government large quantities of electric energy for the term of this agreement to meet the actual and prospective needs for such energy by publicly and privately owned public utilities, cooperatives and industries in the Pacific Northwest; (2) the Administrator, by entering into this agreement, will be enabled to increase the net revenues to be received in the marketing of power from the Columbia River Power System; and (3) the mutual exchange of power as provided herein will result in a more economical operation of the Columbia River Power System. 11. The Administrator has determined that in order to accomplish the sale of Canada's entitlement to downstream power benefits in accordance with, and in implementation of, the Treaty and the Notes, Attachments and Protocols executed on or prior to the effective date of this agreement, the Administrator must 3 assure unconditionally the delivery, in exchange for such entitlement of the agreed amount of power and energy specified in the Canadian Entitlement Exchange Agreements. 12. The Administrator and the Division Engineer, North Pacific Division, Corps of Engineers, Department of the Army, have been designated the United States Entity pursuant to Article XIV of the Treaty, and the Administrator has been authorized to act for the United States Entity in the execution and performance of this agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements here!_n contained, the parties hereto agree as follows: Section 1 Definitions and Explanation of Terms (a) "Bond" or "Bonds" shall mean any bond or bonds, as the case may be, authen- ticated and delivered under the Bond Indenture (hereinafter defined). (b) "Bond Indenture" shall mean the trust indenture, dated as of 1964, by and between CSPE and as trustee, securing the Bonds as originally executed, or, if amended or supplemented as in the Bond Indenture provided, as so amended or supplemented. (c) "Canadian Entitlement" shall mean all of the various rights and benefits acquired by CSPE pursuant to the provisions of the agreement, dated 1964, between CSPE, British Columbia Hydro and Power Authority, the Canadian Entity, designated pursuant to Article XIV of the Treaty (herein referred to as the "B.C. Hydro and the Administra- tor (such agreement being hereinafter referred to as the'$.C. Hydro Agreement (d) "Canadian Entitlement Exchange Agreements" shall mean this and all similar agreements providing, in the aggregate, for the transfer by CSPE of one hundred percent of the Canadian Entitlement to the Participants, and the exchange of such Entitlement with the Administrator. (e) "Contract Year" shall mean the twelve -month period commencing at 12 :01 a.m. Pacific Standard Time on April 1, 1968, and at the same time on April 1 of any year thereafter. (f) "Net Interest Cost" for the purpose of this agreement shall mean the per- centage (to the nearest 0.01 of 1%) obtained by dividing (1) the interest payable over the term of the Bonds initially issued under the Bond Inden- ture from the date of such Bonds to the respective maturity dates thereof plus the amount by which the aggregate principal amount of such Bonds exceeds the purchase price paid therefor or less the amount by which such purchase price exceeds the aggregate principal amount of such Bonds (in each case excluding accrued interest from such purchase price), by (2) the sum of the products obtained by multiplying the principal amount of such Bonds becoming due on each such maturity date by the number of years (in- cluding any fractions of a year) from the date of such Bonds to such maturity date; provided that such Bonds for which a sinking fund is estab- lished shall be deemed to mature en each sinking fund retirement date in the principal amount required to be retired on that date for the sinking fund. (g) "Participants" shall mean all of those organizations listed on Exhibit A. (h) The "Participant's Percentage" shall mean the percentage appearing after the Participant's name on Exhibit A, as it may be adjusted in accordance with Section 9. (i) "Trustee" shall mean the Trustee under the Bond Indenture for the time being, whether original or successor. 5 Section 2 Exhibits Exhibits A, B and C are by this reference incorporated herein as fully as though set forth verbatim in the body of this agreement. Section 3 Term of Agreement This agreement shall be effective upon the date of its execution and shall terminate on the later of the following: (a) 12 :00 p.m. on March 31, 2003, or (b) the date that all of the Bonds are paid or funds set aside for the payment or retirement thereof in accordance with the Bond Indenture. Section 4 Transfer of Canadian Entitlement CSPE hereby transfers and assigns to the Participant during the existence of this agreement the Participant's Percentage of the Canadian Entitlement. The Participant hereby accepts the Participant's Percentage of the Canadian Entitlement and agrees to pay therefor as provided in Section 6. Section 5 Exchange of Canadian Entitlement (a) The Participant hereby transfers and assigns the Participant's Percentage of the Canadian Entitlement to the Administrator during the existence of this agreement, and the Administrator hereby accepts such transfer and assignment. (b) In exchange for the Participant's Percentage of the Canadian Entitlement, the Administrator agrees with CSPE and with the Participant that during each month of each Contract Year the Administrator shall make available to the Participant the amounts of capacity and energy computed as follows and as adjusted in accordance with Section 5(c): (1) reduce the amounts of capacity and energy specified for each Contract 6 Year in columns 2 and 3 of Exhibit B by sixteen hundredths of one percent thereof for each 0.01 by which 4.59 percent exceeds the Net Interest Cost; provided, that such reduction, if any, shall not re- duce the amounts of capacity and energy below those specified for such Contract Year in columns 4 and 5 of Exhibit B; (2) multiply the results obtained in (1) by Participant's Percentage. (c) The amounts of capacity and energy determined under Section 5(b) shall be tabulated and the tabulation submitted to the Administrator by the Parti- cipant within six months after the execution of this agreement, provided that any silch tabulation may be changed by the Participant, to be effective at the beginning of the sixth Contract Year following submission of such changed tabulation. Such changed tabulation shall be subject to the fol- lowing limitations: (1) Energy may be exchanged with the Administrator for capacity in the ratio of one megawatt of average energy to 4.30 megawatts of capacity, provided that, except as specified in Exhibit B, the amount of capac- ity made available in any Contract Year shall not exceed 2.5 times the average energy made available during such Contract Year. (2) Capacity may be exchanged with the Administrator for energy on the same ratio as given above, provided that if such exchanges exceed the total amounts of energy available to the Administrator under Section 5(c)(1) and the Administrator determines that such amount of excess energy cannot be made available, the Administrator shall allo- cate the amount determined by him to be available for such purposes, (which shall in no event be less than the energy exchanged for capac- ity under Section 5(c)(1)), among the Participants requesting the 7 exchange in proportion to such requesting Participant's Percentage. The resulting amount of average energy made available to the Parti- cipant during any Contract Year shall not exceed the amount of capac- ity made available to such Participant. In addition to the limitations in (1) and (2) above, the ratio of the total of capacity deliveries to all Participants to the total of energy deliveries to all Participants as shown on all such tabula- tions in any Contract Year shall not differ by more than 0.3 (three tenths) from such ratio for the preceding year. (4) The monthly amounts of energy specified in such tabulation for deliv- ery in any Contract Year may be unequally distributed to the extent that no delivery in any month shall be less than 85 percent of the highest amount of energy scheduled for the Participant in any one month of the Contract Year. (d) The Administrator shall make available to the Participant the amounts of capacity and energy determined in accordance with this Section 5 in the percentages and at the points of delivery specified in Exhibit C at unity power factor as adjusted for losses as specified in Exhibit C. CSPE agrees that Exhibit C may be changed and a new Exhibit C substituted therefor by agreement between the Participant and the Administrator with- out further notice to or approval by CSPE. (e) Within any month, the Administrator shall make available such energy as scheduled by the Participant up to the amount of capacity as determined in accordance with this Section 5 which the Administrator is obligated to make available to the Participant during such month. (3) 8 Section 6 Payments to or for the Account of CSPE (a) Subject to the provisions of Section 16(e) hereof and notwithstanding any failure permitted by Section 16(a) and (b) hereof of the Administrator to make available capacity and energy to the Participant, the Participant shall, in payment for the Participant's Percentage of the Canadian Entitle- ment: (1) Pay to CSPE the Participant's Percentage of the amounts which CSPE is required by the Bond Indenture to pay to the Trustee including the fees and expenses of the Trustee and paying agents; and (2) Pay to CSPE the Participant's Percentage of all of the other costs and expenses incurred by CSPE for its corporate purposes and not provided for in Section 6(a)(1) of the Canadian Entitlement Exchange Agreements and not paid pursuant to the Bond Indenture from the proceeds from the sale of the Bonds. (b) The Participant shall make the payments under Section 6(a)(1) at the time and in the manner in which CSPE is required to make such payments pursuant to the provisions of the Bond Indenture. On or as soon as practicable after the beginning of each Contract Year, CSPE shall cause to be mailed to the Participant a statement of the amounts which the Participant is so required to pay during such Contract Year. The Participant shall make the payments under Section 6(a)(2) within twenty days after receipt from CSPE of a statement therefor and CSPE shall prepare and mail monthly to the Participant a statement shoving the portion of such costs and expenses of CSPE allocable to the preceding month which are payable by the Participant. (c) On payments required to be made by Participant under the terms of this Section 6 or Section 7 which are not paid promptly and when due, the 9 Participant shall pay in addition to the amounts due a delayed payment charge of two percent of the unpaid amount due, except as to any portion thereof which may be disputed in good faith. Remittances postmarked on or before the due date will be accepted without assessment of the delayed payment charge. If the due date is a Sunday or a holiday, the next fol- lowing business day shall be the last day on which payment may be made without addition of the delayed payment charge. In the case of payments due under Section 6(a), a delayed payment charge shall be paid to CSPE. In the case of payment due under Section 7, the delayed payment charge shall be paid to the Administrator. Section 7 Payments to the Administrator The Participant shall pay to the Administrator, in return for the use of the Government's transmission, transformation and related facilities in making capacity and energy available to the Participant pursuant to Section 5 hereof, for each month commencing April 1, 1968, and thereafter throughout the term of this Agreement, within 30 days after date of a bill therefor, an amount equal to the product obtained by multiplying $0.125 by the number of kilowatts of capacity, be- fore deduction for losses, which the Administrator is obligated to make available to the Participant during the month pursuant to Section 5 hereof. If such payments are not made as provided in this section, except for amounts as may be disputed in good faith, the Administrator may, for the period of nonpayment, make available the capacity and energy required to be made available to the Participant in accordance with Section 5, at the high voltage bus of such of the Government's generating plants located on the main stem of the Columbia River as the Administrator may designate, notwithstanding the provisions of Section 5(d). 10 Section 8 Records and Accounts The Participant shall be entitled at any time to inspect by its agents, employees or accountants all of the books, records and papers of CSPE, and CSPE shall render to the Participant on or before the 1st day of July of each year an accounting of all receipts and expenditures made by CSPE during the preceding period from April 1 to March 31. Section 9 Adjustment of Participant's Percentage The Participant's Percentage shall be automatically increased for the remaining term of this agreement in the event that one of the Participants (herein called a "Defaulting Participant fails or refuses for any reason to make any payment required by Section 6 of the Canadian Entitlement Exchange Agreement of the Defaulting Participant and such failure or refusal continues for a period of 60 days from the date when such payment shall have become due and payable. Such auto- matic increase shall be in the ratio which the Participant's Percentage bears to the percentage obtained by aggregating the Participant's Percentage with the Partic- ipant's percentages specified in the Canadian Entitlement Exchange Agreements of the other Participants who are not Defaulting Participants; provided, however, that, except as to payments required to be made pursuant to Section 6(a)(2) of this agreement, the cumulative total of all such increases shall not, without the consent of the Participant, exceed a maximum of one fourth of the percentage appearing after the Participant's name in Exhibit A hereto. All rights of a Defaulting Participant shall enure to the benefit of the Participants whose Participant's Percentages have been so increased to the extent of such increases. If the Participant's Per- centage shall be increased as provided in this Section, the increase in capacity and energy to be made available by the Administrator pursuant to this agreement shall be made available at the point or points of delivery specified in Exhibit C 11 and a new tabulation may be submitted pursuant to Section 5(c) relating to such increase, to be effective upon submission. If for any period the aggregate amounts of capacity and energy which the Administrator is obligated to make available to all Defaulting Participants exceeds one- fourth of the aggregate amounts of capacity and energy which the Administrator is obligated to make available to all Participants who are not Defaulting Partici- pants, it is hereby agreed that, unless one or more of the Participants shall have agreed to increase its or their Participants' Percentages by amounts equal in the aggregate to such excess, then in such event and for such period such Defaulting Participants shall, and hereby do, assign and transfer to CSPE their proportionate share of such excess of such capacity and energy, and CSPE may, but shall not be required to, arrange for the sale, for the account of such Defaulting Participants, of the capacity and energy made available by such assignment and transfer. Section 10 Default In the event any of the Participants shall fail or refuse to pay any amounts due to CSPE under any of the Canadian Entitlement Exchange Agreements, the fact that any other Participant shall have assumed the obligations to make such payments pursuant to the provisions of Section 9 of any such agreements shall not relieve the Defaulting Participant of its liability for such payments under its Agreement, and the Participants assuming such obligation, either individually or as a member of a group, shall have a right of recovery from the Defaulting Partici- pant, and any Participant may commence such suit, action or proceeding, at law or in equity, including suit for specific performance, as may be necessary or appro- priate to enforce the obligations of the Defaulting Participant under its Agree- ment; provided, that if the cumulative obligations of the Defaulting Participant or Participants exceed the amount that is assumed by the other Participants under 12 Section 9 of the Canadian Entitlement Exchange Agreements, CSPE shall be entitled to commence and prosecute such suit, action or proceeding as it may deem appropri- ate to recover such excess amounts. In the event and to the extent that any Participant fails or refuses for any reason to perform its obligations under this agreement, and such failure or refusal adversely affects the Government, the Government may commence such suit, action or proceeding, at law or in equity, including suit for specific performance, against the Defaulting Participant as it may deem appropriate to protect the interests of the Government. Section 11 Sale of Surplus Exchange Power (Language is being drafted to provide for disposition of any surplus power so as to protect the interest of the Government.) Section 12 Modification of Contract Terms (a) This agreement cannot be amended, modified or otherwise altered by agree- ment of the parties in any manner that will impair or adversely affect the security, afforded by the provisions of this agreement, for the pay- ment of the principal, interest and premium, if any, on the Bonds as they respectively become payable, so long as any of the Bonds are out- standing and unpaid or funds are not set aside for the payment or retire- ment thereof in accordance with the Bond Indenture. (b) This agreement is one of a series of similar agreements, which are uniform in all material respects, providing for the transfer by CSPE of one hundred percent of the Canadian Entitlement to Participants and the exchange with the Administrator of such Entitlement for scheduled amounts of power and energy to be delivered to such Participants by the Administrator. "The 13 Administrator shall, before the effective date of the modification, amend- ment or alteration of any of such agreements, excepting modifications of Exhibit C, notify the Participant in writing of such modification, amend- ment or alteration, and this agreement shall, upon request by the Partici- pant made within sixty days of receipt of such notice, be modified, amended or altered to include the same terms and conditions so granted to any other Participant. (c) The B.C. Hydro Agreement shall not be amended, modified or otherwise changed without the written consent of Participants whose participants' percentages aggregate at least 75 percent. (d) CSPE shall not, without the written consent of the Participant and the Administrator, amend, modify or otherwise change the Bond Indenture so as to increase or accelerate the Participant's payments to be made by the Participant to CSPE. Section 13 Particular Provisions Affecting Administrator The final form of the Bond Indenture to be initially executed and delivered and of the contract for the sale of the Bonds to be executed by CSPE shall be subject to the approval of the Administrator. Section 14 Scheduling Arrangements (a) The Administrator will make available to the Participant, in accordance with hourly schedules furnished by the Participant to the Administrator at least eight hours prior to each day the amount of capacity and energy to which the Participant is entitled, as determined in accordance with Section 5. If the Participant does not maintain dispatching facilities, the Administrator will schedule deliveries as agreed between the Partici- pant and the Administrator. 14 (b) Deviation from scheduled deliveries shall be corrected as promptly as possible under conditions approximately equivalent to the conditions under which the deviation occurred. Section 15 Character of Service Electric energy shall be made available hereunder in the form of three phase current alternating at a frequency of approximately sixty cycles per second. Deliveries thereof at the point or points of delivery described in Exhibit C shall be made at the approximate voltage specified for such point. The amounts of electric energy and reactive power so delivered at such point or points during each month, and of the sixty minute integrated demands for such electric energy, shall be the amounts thereof determined from measurements made by the Government's watt -hour, var -hour and recording demand meters, respectively, installed to record the flow of electric energy and reactive power at the places and in the circuits specified in said Exhibit C. Section 16 Continuity of Service (a) The Administrator may temporarily, for a period not in excess of 168 hours, interrupt or reduce deliveries of electric energy to or for the account of the Participant if such interruption or reduction is necessary in case of system emergencies. (b) If the operation of the Government's transmission system is suspended, interrupted or interfered with as the result of (1) the occurrence of any event which is reasonably beyond its control (including, but not limited to, the failure or breakdown of transmission facilities, floods, fire, strikes or acts of God or the public enemy), or (2) repairs, maintenance or replacements made to assure continued transmission service to the 15 Participant, the Administrator shall not be obligated to deliver electric energy to or for the account of the Participant, as provided in this agreement, during such time and to such extent as such suspension, inter- ruption or interference makes it reasonably impracticable to do so, and shall not be liable for any damages sustained by the Participant as a result of the failure to so deliver such electric energy during such time. (c) If the operations of the Government's facilities are suspended, interrupted, interfered with or curtailed due to any of the circumstances specified in subsections (a) and (b) of this section, the Government shall exercise due diligence to reinstate such operations with all reasonable dispatch, and the Administrator shall restore any energy lost to the Participant as a result thereof under conditions approximately equivalent to the condi- tions under which the loss occurred. (d) The Government's 'transmission system' as used in this section includes, in addition to the transmission facilities of the Columbia River Power System: (1) transmission facilities of any utility used to make available capacity and energy to the Participant pursuant to the agreement, and (2) the transmission facilities of non federal project owners on the main stem of the Columbia River used to transmit to the Administrator their proportionate share of the capacity and energy component of the Canadian Entitlement. (e) If for any reason other than those set forth in subsections (a) or (b) of this Section 16 the Administrator does not make available in any period the capacity and energy required to be made available pursuant to this agreement, the payments to be made to CSPE in such period by the Participant 16 as provided in Section 6(a) shall be reduced by an amount computed by applying the following rates to the amounts of capacity and energy not delivered in such period: 5.07 per megawatt -day for capacity and $2.70 per megawatt -hour of energy, each reduced by sixteen- hundredths of one percent thereof for each 0.01 by which 4.27 percent exceeds the Net Interest Cost. If the Participant enters into commitments reasonably necessary to replace the capacity and energy required to be but not made available by the Administrator pursuant to the terms of this agreement, or if the Participant loses a specific load or loads as the result of such non- availability, then, even though the Administrator thereafter offers to resume full deliveries, the Participant shall not, for a period of five years after the Administrator so advises the Participant that he can restore full deliveries hereunder, be required to accept or pay for under Section 6(a), and the Administrator shall not without the specific request of the Participant make available under this agreement, any amounts of capacity or energy greater than those so requested or made available dur- ing the months of the greatest deficiencies in deliveries; provided, how- ever, that this paragraph shall apply only to the extent that the amounts of capacity or energy which the Administrator so offers to make available have been so replaced and are unusable as firm power resources. (f) If during any period the Participant's payments to CSPE are reduced in accordance with Section 16(e), the Administrator shall be unconditionally obligated to pay currently to the Participant, to be paid by the Partici- pant to CSPE, an amount of cash equal to the amount by which the total payments which the Participant would otherwise be required to make during 17 such period pursuant to Section 6(a)(1) are reduced pursuant to the pro- visions of Section 18(e). The amount paid to the Participant by the Administrator hereunder for such period shall be forthwith upon receipt thereof paid over to CSPE. (g) The obligation of the Administrator to make capacity and energy available to the Participant in accordance with Section 5 is, and shall remain, unconditional and (without limiting the generality of the foregoing) such obligation shall not be affected by any nonperformance by Canada or the Canadian Entity under the Treaty or the Notes, Attachments, and Protocols thereunder or any claim or defense against CSPE or any of the Participants arising under other contracts, agreements, arrangements or transactions between such parties. The provisions of Section 16(e) do not, and shall not be construed to, in any manner modify, excuse, relieve, or provide an alternative to such obligation but are intended solely as a specific means of mitigating damages in the event of a failure or refusal of the Adminis- trator to fulfill his obligations under this Agreement. (h) If there should be a dispute between the Participant and the Administrator concerning the extent to which the capacity and energy which the Adminis- trator has offered to make available in any such period is usable by the Participant as a firm power resource during such period, such dispute shall be submitted promptly to arbitration. The Participant and the Administrator shall each appoint one arbitrator and the two arbitrators shall appoint a third arbitrator. The decision of at least two arbitrators shall be binding and conclusive upon the Participant and the Administrator. Pending the arbitrators' resolution of the dispute, the Participant shall continue to make the payments for the amounts of capacity and energy in 18 dispute in accordance with Section 6. Section 17 Construction of Contract. This agreement is entire and indivisible, and the obligations of the Administrator to make available to the Participant capacity and energy pursuant to Section 5 and the obligations of the Participant to make the payments required to be made by it under Section 6 shall be construed to be mutually dependent. Section 18 Notices and Computation of Time Any notice required by this agreement to be given to any party shall be effective when it is received by such party, and in computing any period of time from such notice, such period shall commence at 12 :00 P.M. on the date of receipt of such notice. Section 19 Interest of Member of Congress No Member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this agreement or to any benefit that may arise therefrom. Nothing, however, herein contained shall be construed to extend to such agreement if made with a corporation for its general benefit. Section 20 Work Hours Overtime Compensation In the event that any work is performed under this contract which may require or involve the employment of laborers or mechanics, no contractor or sub- contractor contracting for any part of such work shall require or permit any laborer or mechanic, in any work week in which he is employed on such work, to work in excess of eight hours in any calendar day or in excess of 40 hours in such work week unless such laborer or mechanic receives compensation at a rate not less than one and one half times his basic rate of pay for all hours worked in excess of eight hours in 19 any calendar day or in excess of 40 hours in such work week, whichever is the greater number of overtime hours. In the event of any violations of the provisions of this Section, the contractor and any subcontractor responsible therefor shall be liable to any affected employee for his unpaid wages and shall, in addition, be liable to the United States for liquidated damages. Such liquidated damages shall be computed, with respect to each individual laborer or mechanic employed in violation of the provisions of this section, in the sum of $10 for each calendar day on which such individual was re- quired or permitted to work in excess of eight hours or in excess of 40 hours in a work week without payment of the required overtime wages. The Administrator may withhold, or cause to be withheld, from any moneys payable on account of work performed pursuant to this contract, the full amount of unpaid wages required by this Section and such sums as may be administratively de- termined to be necessary to satisfy any liabilities of such contractor or subcon- tractor for liquidated damages as provided in this Section. CSPE and the Participant shall each be deemed a 'contractor' within the meaning of this Section. Section 21 Convict Labor Neither CSPE nor the Participant shall employ any person undergoing sen- tence of imprisonment at hard labor. Section 22 Assignment of Agreement This agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the parties to this agreement. No assign- ment or transfer of this agreement shall relieve any party of any of its obligations hereunder, nor shall such assignment or transfer change or modify the Administrator's 20 obligation to make capacity and energy available in the amounts and at the points of delivery specified in Exhibit C without his prior consent, except as provided in Section 9. Section 23 Assignment to the Trustee It is intended that CSPE will assign to the Trustee all of the rights of CSPE under the Canadian Entitlement Exchange Agreements to the extent and for the period or periods provided by the Bond Indenture and the Participant and the Admin- istrator hereby acknowledge and consent to such assignment. IN WITNESS WHEREOF, the parties hereto have executed this agreement in several counterparts. (seal) (seal) ATTEST: (seal) ATTEST: 21 UNITED STATES OF AMERICA By Bonneville Power Administrator as the Administrator and for and on behalf of the United States Entity COLUMBIA STORAGE POWER EXCHANGE BY By Exhibit A Participants Percentage Utility A 100 Utility B 4% Utility C 12% Utility D 9% Utility E 1% Utility F 10% Utility G 12% Utility H 10% Utility I 9 Utility J 5% Utility K 8% Utility L 10% Exhibit B Column 1 Contract Column 2 Column 3 Column 4 Column 5 Year Capacity Energy Capacity Energy (4/1 3/31) (MW) (Average MW) (MW) (Average MW) 1968 -69 191 113 191 113 1969 -70 1026v 603 972 572 1970 -71 1034 603 980 572 1971 -72 1042 603 987 572 1972 -73 1050 603 995 572 1973 -74 1452 800 1377 759 1974 -75 1461 800 1385 759 1975 -76 X454 779 1379 739 1976 -77 1448 758 1373 719 1977 -78 1436 727 1362 689 1978 -79 1423 693 1350 658 1979 -80 1403 654 1331 621 1980 -81 1382 614 1311 583 1981 -82 1367 574 1297 545 1982 -83 1322 548 1254 52o 1983 -84 1282 521 1216 495 1984 -85 1234 492 1172 468 1985 -86 1195 468 1134 444 1986 -87 1152 44o 1093 418 1987 -88 1109 414 1052 393 1988 -89 1066 387 1012 368 1989 -90 1072 367 1017 349 1990 -91 1077 347 1022 330 1991 -92 982 335 932 318 1992 -93 889 321 844 305 1993 -94 795 308 755 293 1994 -95 702 293 666 279 1995 -96 607 282 576 268 1996 -97 512 267 486 254 1 997 -98 496 259 471 246 1998 -99 438 226 416 215 1999 -00 211 109 200 103 2000 -01 203 104 192 99 2001 -02 197 100 187 95 2002 -03 176 98 167 93 EVERYBODY'S UTILITY POINTS OF DELIVERY If amounts of capacity and energy to be made available to the Partici- pants by the Administrator are not designated for delivery to specified points of delivery, but are to be made available to the Participant's system, the Administrator may for the purpose of determining transmis- sion charges under agreements entered into with the Participant subse- quent to the execution of this agreement, designate the amounts of capacity and energy which shall be deemed to be made available at each of the points of delivery on the Participant's system. (a) Exhibit C X POINT OF DELIVERY Location: At the point in the Government's X Substation where the 230 KV facilities of the Government and the Participant are connected; Voltage: 230 KV; Metering: In the Government's X Substation, in the 230 KV circuit over which the Government delivers such electric energy; Losses: Peak: 4.5% Energy: 3.0% (b) Y POINT OF DELIVERY: Location: At the point in the Government's Y Substation where the 115 KV facilities of the Government and the Participant are connected; Voltage: 115 KV; (c) (d) Metering: In the Government's Y Substation, in the 115 KV circuit over which the Government delivers such electric energy; Losses: Peak: 5.5% Energy: 3.5% Z POINT OF DELIVERY: Location: In the Government's Z Substation where the 69 KV facilities of the Government and the Participant are connected; Voltage: 69 KV or lower Metering: In the Government's Z Substation, in the 69 KV or lower circuit over which the Government delivers such electric energy; Losses: Peak: 6.5% Energy: 4.0% At the point of delivery on the Participant's main system specified in the Exchange Agreement between the Administrator and the Participant, Contract No. Losses: :To :CSPE Participants Gentlemen: UNITED STATES DEPARTMENT OF THE INTERIOR BONNEVILLE POWER ADMINISTRATION PORTLAND, OREGON 97208 June 18, 1965 In September 1964, you agreed to assign your' Canadian Entitlement Power to California utilities for a period of years, and Bonneville agreed to supply you an equivalent amount of power at BPA rates. Since that time, several discussions relative to the assignment of the Canadian Entitle- ment Power to California utilities have taken place with California utilities. Although representatives of all groups of CSPE participants carried on these negotiations, we agreed to inform all interested parties of the results. For a while, negotiations were at a stalemate over the question of taxes. The California utilities maintained that they could not agree to taxes that might be levied on this power, reasoning that- this would be an invitation to the Northwest state legislatures to levy taxes on this power if such taxes were to borne by the California utilities. Subsequently, the Washington legislature modified Washing-, ,ton's tax laws applicable to the export of power. A statement relative 'to the modification of the statute is enclosed. Also,' the dashington State Tax Commission has rendered an opinion that a State tax oannot be imposed on the Canadian power purchase in that this arrangement was necessary to implement the Treaty with Canada. A copy of this opinion is enclosed. With these safeguards, most purchasers of `CSPE power now feel they can 'take the risk of any tax expense. A draft of contract has been prepared by a legal committee headed by Mr. John Ellis. ,This draft, presented to the California utilities on June 15, 1965, is enclosed, and appears to be generally acceptable both to California utilities and Pacific,North west utilities.` A legal committee of the California utilities is now reviewing the draft and expects' to report back by June 30. We would expect shortly there- after that CSPE participants will proceed with the assignment agreements. Separate negotiations are going on among Seattle, Tacoma, Puget Sound Power Light, and the State of California for the 300 MW they agreed to sell the State for its water plan from 1968 to,1978, and 150 MW from 1978 to 1983., If you have any questions•ori this assignment, do not hesitate to contact your Area Power Manager who would be happy, 'to discuss it with you further. r Sincerely, yours, i� �svrsr✓�d ;Tit Bernard Goldhammer Assistant Administrator Enclosures 3 for Power Management a,� Dear Don: TCM:hr Mr. Donald D. Herrman, Manager City of Port Angeles 140 West Front Street Port Angeles, Washington 98362 In re CSPE Withdrawals 111 OFFICE OF CITY ATTORNEY Suite 202, Lincoln Building PORT ANGELES, WASH. 98362 March 10, 1971 As I understand the March 4, 1971 letter from the Public Power Council and the attached memo, they are suggesting that each public utility serve a 5 year notice that it intends to use power allocated to it, but now being used by private utilities. The only problem which I can see is the possible difficulty of forecasting what use would be made of this additional power in April of 1976. This, of course, may be a simple matter because of the small amount of power des- ignated for use by Port Angeles. I hope this answers your question since I can't see any legal complications in it. I would as- sume that if you did not exercise this right now that you would then have to wait at least another year be- fore you could start the 5 year period running. How, ever not having the agreement in front of me, it is possible that I am wrong because it may provide for an- other 5 year wait before you could then institute the 5 year call period. Very truly yours, TYLER C MOFFETT, City orney TYLER C. MOFFETT City A ttorney LP /ah Attach. Dear Mr. Richmond: Mr. H. R. Richmond, Administrator Bonneville Power Administration P. 0. Box 3621 Portland, Oregon 97208 April, 1976 333' 3 kws. May, 1976 30/J 3 June, 1976 ,poi/ O kws. July, 1976 3o a kws. August, 1976 -lot/ 3 kws September, 1976 3i4/7 34@ kws 140 WEST FRONT STREET PORT ANGELES, WASHINGTON 98362 The City of Port Angeles, pursuant to Section 5(c) o the Canadian Entitlement Exchange Agreement, �i-t kev-e. 179 to your office a schedule of capacity and average energy to be made a- vailable to us by the Administrator, 7 7G 7 2 We have decided to withdraw our 0.50 percent from pre iously assigned Northwest Private Utilities for our own use commencing April 1, 1976. We, therefor, request that kilowatts capacity and ime kilwatts average energy be made available to the City of Port Angeles at the City's metering point of the Administration's Port Angeles Substation for the 1976 -66 contract year commencing April 1, 1976. The amount of capacity and energy stated above represents the City of Port Angeles' 0.50 percent of columns 4 and 5 of Exhibit B, adjusted in accordance with Sec. 5(c)(1) as limited by Section 5(c)(3).44.4- °A?// rf�u�4,,,4 ,/x,I. s i L. �*soc, z 7-C 6 ,2,,.1e ot_ The monthly distribution of the energy to be delivered, pursuant to Section 5(c)(4) shall be as follows: p �t TOURIST MECCA OF THE NORTHWEST Donald D. Herrman City Manager March 9, 1971 /fri) /Je October, 1976 3 337 31M November, 1976 377 35Q0 kws. December, 1976 3%$- 3.8-000 kws. January, 1977 3s i 3 3 e kws. February, 1977 3y�2,3 3&0 kws. March, 1977 3.f 7-7 3 5 kws. Very truly yours, DDH /a lh Dear Mr. Luce: :'r Charles Luce ,1 _J neville Power Administration S. Department of the Interior ?o tlard, Oregon 97208 I 140 WEST FRONT STREET PORT ANGELES, WASHINGTON Enclosed is required tabulation of capacity and energy pursuant to Section 5 (c) of the Canadian Entitlement Exchange Agreement. Sub .::_czal is pe-' insturctions of your office in letter of March 15, 1965 ex'cending date of submittal to April 15, 1965. Dssired capacities and energy deliveries obtained by trade in ratio of 4.3 to 1 kilowatts are listed to the year 1966. Load conditions at may exist beyond 1986 are largely indeterminate of estimate. .:_:ice the contract provides for some degree of correction in years come, we trust you will find our listing satisfactory. 'lease feel free to contact us about any features of this schedule as yc' i may require. TOURIST MECCA OP THE NORTHWEST April 14, 1965 Yours truly, Donald D. Herrman, City Manager o 0 .-L Li' L 5 LIGHT DEP ARTM 98 -99 2080 1075 99-2000 1000 515 2000 -01 960 495 -02 935 475 02 -03 835 465 PORT ANGELES CITY LIGHT S ho y-e. Canadian Power Exchange Schedules for 0.5% e Year Capacity Av. Energy Adj. "Cap. Adj. Energy K.W. K.W. K.W. K.W. 1968 -64 955 565 1074 537 69 -70 4860 2860 5446 2723 70 -/1 4900 2860 5460 2730 71 -72 4935 2860 5470 2735 72 -73 4975 2860 5484 2742 73 -74 6885 3795 7366 3683 74 -75 6925 3795 7378 3689 75 -76 6895' 3695 7232 3616 7` -77 6865 3595 7086 3543 77-78 6810 3445' 6864 3432 78 -79 6750 3290 6634 3317 79 -80 6655 3105• 6352 3176 80- 6556 2915 6060 3030 6;. 2 6485 2725 5778 2889 82 6270 2600 5540 2770 83 -8 am 6080 2475 5308 2654 S4 -�5 58b0 2340 5054 2527 _:v 5670 2220 4830 2415 --87 5465 2090 1 -8„ 5260 1965 6c 5060 1840 9 -90 5085 1745 90-91 5110 1650 91 -92 4660 1590 92 -93 4220 1525 93 94 3775 1465 *Desired capacities and energy 94 95 3330 1395 deliveries obtained by trade 95 96 2880 1340 as provided for in Section 5 96 -97 2430- 1270 (c) of the Canadian Entitle 97 2355 1230 ment Exchange Agreement. CC �m%'� Ys� lam/! /1 e v D ,th 64 e/= 3 1/ d'e% C-('/"" (oo:0 ;e-ta �l; i'Yx�� -r �'I 4 G-i 70 g4 /f'k 7e,� h'r Fir'4h/,% De//7 a/rfo l�Gi rl vG„ /'U 3v, crz2� °rte 614•/ COW7/7) 2 rSol) -C33 2 r 9.r =-r5 x ?co) ix 7( /9,7o f8 V /a s' C. ,f e „r r rri,.z.9 4 74- 7''Z L/"J lrlC, Cf l J r 2-0, /06 tJ, y:)o k Ala s�e do zy�� l° etir 1 ;0.0 2s %yJ./. ''vv 7 ©4 %L' 'X` 3s 93 X f X zsd' 70 J6 X /2.i ffr .3070 2z/737. /b S'7'7 March 10, 1966 PARTICIPANTS' ASSIGNMENT Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Public Utility District No. 1 of Benton County (0.8 P.O. Box 247 1968 -69 Kennewick, Washington 99336 thru 1979 -80 0 0 1.0 1.0 Village of Bonners Ferry, Idaho (0.05 Municipal Light Water Dept. 1968 -69 Bonners Ferry, Idaho 83805 thru 1979 -80 0 0 1.0 1.0 Central Lincoln Peoples' Utility District (1.00 255 S. W. Coast Hwy. 1968 -69 Newport, Oregon 97365 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Chelan County (1.00 P.O. Box 1231 1968 -69 Wenatchee, Washington thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Clark County (3.00 P.O. Box 1626 1968 -69 Vancouver, Washington 98663 thru 1979 -80 0 0 1.0 1.0 Clatskanie Peoples' Utility District (0.20 Clatskanie, Oregon 97016 1968 -69 thru 1979 -80 0 0 1.0 1.0 Coos -Curry Electric Cooperative, Inc. (0.50 P.O. Box 427 1968 -69 Coquille, Oregon 97423 thru 1979 -80 0 0 1.0 1.0 1968 -69 thru 1979 -80 0 City of Coulee Dam, Washington (0.10%) Coulee Dam, Washington 99116 0 1.0 1.0 EXHIBIT A Page 1 Page 2 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Public Utility District No. 1 of Cowlitz County (2.50%) 960 Commerce 1968 -69 Longview, Washington 98632 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Douglas County (0.20%) 1151 N. Main St. 1968 -69 E. Wenatchee, Washington 98802 thru 1979 -80 0 0 1.0 1.0 City of Eugene, Oregon (5.50 Eugene Water Electric Board 1968 -69 P.O. Box 112, Eugene, Oregon 97401 and 1969 -70 1.0 1.0 0 0 1970 -71 0.4163 0 0.5837 1.0 1971 -72 0.4205 0 0.5795 1.0 1972 -73 0.4251 0 0.5749 1.0 1973 -74 thru 1979 -80 1.0 1.0 0 0 Flathead Electric Cooperative, Inc. (0.10%) P.O. Box 199 1968 -69 Kalispell, Montana 59901 thru 1979 -80 0 0 1.0 1.0 City of Forest Grove, Oregon (0.30 P.O. Box 326 1968 -69 Forest Grove, Oregon 97116 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 1 of Franklin County (0.80%) P.O. Box 1011 Pasco, Washington 99301 1968 -69 thru 1979 -80 0 0 1.0 1.0 Public Utility District No. 2 of Grant County (0.45%) P.O. Box 878 Ephrata, Washington 98823 1968 -69 thru 1979 -80 0 0 1.0 1.0 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Public Utility District No. 1 of Grays Harbor County (1.50%) P.O. Box 480 1968 -69 Aberdeen, Washington 98520 thru 1979 -80 0 0 1.0 1.0 Idaho County Light and Power Cooperative Association, Inc. (0.10 P.O. Drawer R 1968 -69 Grangeville, Idaho 83530 thru 1979 -80 0 0 1.0 1.0 Inland Power Light Company (0.50 East 320 Second Ave. 1968 -69 Spokane, Washington 99202 thru 1979 -80 0 0 1.0 1.0 Lane County Electric Cooperative, Inc. (0.40 P.O. Box 5195 1968 -69 Eugene, Oregon 97401 thru 1979 -80 0 0 1.0 1.0 Lincoln Electric Cooperative, Inc. (Mont.) (0.10 P.O. Box 32S 1968 -69 Eureka, Montana 59917 th ru 1979 -80 0 0 1.0 1.0 Lincoln Electric Cooperative, Inc. (Wash.) (0.10%) P.O. Box 167 1968 -69 Davenport, Washington 99122 th ru 1979 -80 0 0 1.0 1.0 City of McMinnville, Oregon (0.40 Water Light Dept. 130 No. Baker St. 1968 -69 McMinnville, Oregon 97128 thru 1979 -80 0 0 1.0 1.0 Missoula Electric Cooperative, Inc. (0.10 P.O. Drawer 1486 Missoula, Montana 59801 1968 -69 thru 1979 -80 0 0 1.0 1.0 Page 3 Page 4 Nespelem Valley Electric Cooperative, Inc. (0.05 Nespelem, Washington 99155 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned 1968 -69 thru 1979 -80 0 0 1.0 1.0 Northern Lights, Inc. (0.35 P.O. Box 712 1968 -69 Sandpoint, Idaho 83864 thru 1979 -80 0 0 1.0 1.0 Pacific Power Light Company (10.0 Public Service Bldg. 1968 -69 Portland, Oregon 97204 thru 1972 -73 0 0 1.0 1.0 1973 -74 0.4488 0 0.5512 1.0 1974 -75 0.4520 0 0.5480 1.0 1975 -76 0.4641 0 0.5359 1.0 1976 -77 0.4763 0 0.5237 1.0 1977 -78 0.4941 0 0.5059 1.0 1978 -79 0.5126 0 0.4874 1.0 1979 -80 0.5334 0 0.4666 1.0 Public Utility District No. 1 of Pend Oreille County (0.20 P.O. Box 276 1968 -69 Newport, Washington 99156 thru 1979 -80 0 0 1.0 1.0 City of Port Angeles, Washington (0.50 P.O. Box 951 1968 -69 Port Angeles, Washington 98362 th ru 1979 -80 0 0 1.0 1.0 Portland General Electric Company (17.50 621 S.W. Alder Portland, Oregon 97205 1968 -69 0.4084 0 0.5916 1.0 1969 -70 0.4115 0 0.5885 1.0 1970 -71 0.4163 0 0.5837 1.0 1971 -72 0.4205 0 0.5795 1.0 1972 -73 0.4251 0 0.5749 1.0 1973 -74 0.4488 0 0.5512 1.0 1974 -75 0.4520 0 0.5480 1.0 1975 -76 0.4641 0 0.5359 1.0 1976 -77 0.4763 0 0.5237 1.0 Column 1 Column 2 Column 3 Column 4 Column 5 Year Decimal Fraction Decimal Fraction Decimal Fraction Decimal Fraction of of of of Apr. 1 Mar. 31 Capacity Reserved Energy Reserved Capacity Assigned Energy Assigned Portland General Electric Company (con.) 1977 -78 0.4941 0 0.5059 1.0 1978 -79 0.5126 0 0.4874 1.0 1979 -80 0.5334 0 0.4666 1.0 Puget Sound Power Light Company (17.50 Puget Power Bldg. Box 535 Bellevue, Washington 98004 1968 -69 0.3916 0.3916 0.6084 0.6084 1969 -70 thru 1972 -73 1.0 1.0 0 0 1973 -74 0.6520 0.6520 0.3480 0.3480 1974 -75 0.6480 0.6480 0.3520 0.3520 1975 -76 0.8131 0.6509 0.1869 0.3491 1976 -77 0.8190 0.6537 0.1810 0.3463 1977 -78 0.8272 0.6589 0.1728 0.3411 1978 -79 0.6741 0.3320 0.3259 0.6680 1979 -80 0.6904 0.3371 0.3096 0.6629 Ravalli County Electric Cooperative, Inc. (0.10 Corvallis, Montana 59828 1968 -69 thru 1979 -80 0 0 1.0 1.0 City of Richland, Washington (0.80%) P.O. Box 187 1968 -69 Richland, Washington 99352 thru 1979 -80 0 0 1.0 1.0 Salem Electric (0.40 P.O. Box 588 1968 -69 Salem, Oregon 97308 thru 1979 -80 0 0 1.0 1.0 Page 5 City of Seattle, Washington (12.50%) 1015 Third Ave. Seattle, Washington 98104 1968 -69 0.2741 0.2741 0.7259 0.7259 1969 -70 0.5926 0.5930 0.4074 0.4070 1970 -71 0.5812 0.5818 0.4188 0.4182 1971 -72 0.5737 0.5734 0.4263 0.4266 1972 -73 0.5619 0.5622 0.4381 0.4378 1973 -74 0.4561 0.4563 0.5439 0.5437 1974 -75 0.4535 0.4531 0.5465 0.5469 Page 6 Column 1 Column 2 Year Decimal Fraction of Apr. 1 Mar. 31 Capacity Reserved 1975 -76 1976 -77 1977 -78 1978 -79 1979 -80 1968 -69 thru 1979 -80 1968 -69 thru 1979 -80 1968 -69 thru 1979 -80 1968 -69 1969 -70 1970 -71 1971 -72 1972 -73 1973 -74 1974 -75 1975 -76 1976 -77 1977 -78 1978 -79 1979 -80 0.4559 0.4575 0.4610 0.2328 0.2362 0 0 0 0.2741 0.5926 0.5812 0.5737 0.5619 0.4561 0.4535 0.4559 0.4575 0.4610 0.2328 0.2362 Column 3 Decimal Fraction of Energy Reserved City of Seattle, Washington (con.) 0.4556 0.4572 0.4611 0.2321 0.2358 Public Utility District No. 1 of Skamania County (0.20 Stevenson, Washington 98648 0 0 City of Springfield, Oregon Springfield Utility Board P.O. Box 300 Springfield, Oregon 97477 City of Tacoma, Washington (12.50 Department of Public Utilities P.O. Box 11007 Tacoma, Washington 98411 0.2741 0.5930 0.5818 0.5734 0.5622 0.4563 0.4531 0.4556 0.4572 0.4611 0.2321 0.2358 Column 4 Decimal Fraction of Capacity Assigned 0.5441 0.5425 0.5390 0.7672 0.7638 1.0 Public Utility District No. 1 of Snohomish County (1.50%) P.O. Box 1107 Everett, Washington 98201 1.0 0 1.0 0.7259 0.4074 0.4188 0.4263 0.4381 0.5439 0.5465 0.5441 0.5425 0.5390 0.7672 0.7638 Column 5 Decimal Fraction of Energy Assigned 0.5444 0.5428 0.5389 0.7679 0.7642 1.0 1.0 1.0 0.7259 0.4070 0.4182 0.4266 0.4378 0.5437 0.5469 0.5444 0.5428 0.5389 0.7679 0.7642 Column 1 Column 2 Year Decimal Fraction of Apr. 1 Mar. 31 Capacity Reserved 1968 -69 thru 1979 -80 1968 -69 thru 1979 -80 1968 -69 thru 1979 -80 Tillamook Peoples' Utility District (0.50%) P.O. Box 433 Tillamook, Oregon 97141 0 0 0 Column 3 Decimal Fraction of Energy Reserved 0 Vera Irrigation District No. 15 (0.20 601 N. Evergreen Veradale, Washington 99037 0 Column 4 Decimal Fraction of Capacity Assigned 1.0 1.0 The Washington Water Power Company (5.00 P.O. Drawer 1445 Spokane, Washington 99210 0 1.0 Page 7 Column 5 Decimal Fraction of Energy Assigned 1.0 1.0 1.0 To the Board of Trustees, ARTHUR ANDERSEN CO. SEATTLE, WASHINGTON Columbia Storage Power Exchange: We have examined the balance sheet of COLUMBIA STORAGE POWER EXCHANGE (a Washington nonprofit, nonstock corporation) as of April 1, 1965, and the related statement of fund receipts and disbursements for the period September 16, 1964 (commencement date of financial operations) through April 1, 1965. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and state- ment of fund receipts and disbursements present fairly the finan- cial position of Columbia Storage Power Exchange as of April 1, 1965, and fund transactions for the period September 16, 1964 through April 1, 1965, in conformity with generally accepted accounting principles. Seattle, Washington, April 26, 1965. CASH AND TEMPORARY CASH INVESTMENTS (Exhibit 2) DEFERRED CHARGES (Note): Debt discount Legal, engineering, printing and other costs of organizing and financing the corporation Prepaid insurance Deferred interest charges less interest income on investments COLUMBIA STORAGE POWER EXCHANGE BALANCE SHEET- -APRIL 1, 1965 ASSETS PREPAID COST OF CANADIAN POWER ENTITLEMENT (Note) $253,929,534.25 BOND FUND, consisting of cash and U. S. Government securities, at cost (Exhibit 2): Interest account Reserve account FIDUCIARY COMPENSATION ACCOUNT (Exhibit 2) PURCHASED AND ACCRUED INTEREST RECEIVABLE LIABILITIES COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS: Serial Bonds, 3 -1/4% to 3.70%, due annually April 1, 1970 to 1986 Term Bonds, 3 -7/8 due April 1, 2003, semi annual sinking fund redemptions to commence October 1, 1974 EXHIBIT 1 $46,669,982.45 3,685,416.92 50,355,399.37 197,226.99 3,151,646.99 573, 916.16 520.00 283,857.37 391,378.37 5,216,732.15 8,942,815.30 $106,520,000.00 207,580,000.00 $314,100,000.00 ACCOUNTS PAYABLE 211.65 The accompanying Note and Exhibits 3, 4, and 5 are an integral part of this balance sheet. $314,100,211.65 $314,100,211.65 ISSUE OF COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS: Principal amount Accrued interest at date of sale Bond discount Net proceeds Payment for Canadian Entitlement Deposits to accounts RECEIPTS: Gain and interest on investments Deposit to open account TRANSFER of funds as provided by Section 5.06(c) of the Bond Indenture COLUMBIA STORAGE POWER EXCHANGE STATEMENT OF FUND RECEIPTS AND DISBURSEMENTS FOR THE PERIOD SEPTEMBER 16 TO APRIL 1, 1965 Total $314,100,000.00 490,681.04 (3,151,646.99) $311,439,034.05 (253,929,534.25) Interest Account 57,509,499.80 $53,974,651.00 $2,482,494.00 $254,000.00 798,354.80 977,657.51 5.00 913,950.42 Bond Fund $(1,155,213.53) $1,155,213.53 The accompanying Note and Exhibits 3, 4, and 5 are an integral part of this statement. Reserve Account 59,220.00 590.01 EXHIBIT 2 Fiduciary General Compensation Account and Account Cash on Hand 3,897.08 5.00 58,487,162.31 $54,888,601.42 $2,541,714.00 $254,590.01 802,256.88 DISBURSEMENTS: Costs of legal, engineering, printing, trustee fees and other costs of organizing and financing the corporation (574,229.51) $(55,830.00) Purchased interest on fund investments (207,006.22) (193,962.59) (11,510.61) (1,533.02 $518,399.51) Interest paid on Columbia Storage Power Exchange Revenue Bonds (6,869,442.85) (6,869,442.85) (7,650,678.58) $(7,063,405.44) (11,510.61) $(57,363.02) $(518,399.51) BALANCE April 1, 1965, consisting of: Cash 7,699.55 2,555.98 874.79 4,268.78 U. S. Government securities, at cost 50,828,784.18 46,669,982.45 3,682,860.94 196,352.20 279,588.59 50,836,483.73 $46,669,982.45 $3,685,416.92 $197,226.99 283,857.37 Description INTEREST ACCOUNT: U. S. Treasury Bills, due 3/25/65 U S. Treasury Bills, due 3/22/65 U. S. Treasury Bills, due 8/31/65 U. S. Treasury Notes, 3 -7/8%, due 2/15/66 U. S. Treasury Notes, 3 -7/8%, due 2/15/66 U. S. Treasury Notes, 4%, due 8/15/66 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 3/4%, due 8/15/67 U. S. Treasury Notes, 3 -3/4%, due 8/15/67 U. S. Treasury Notes, 3 -3/4 due 8/15/67 U. S. Treasury Notes, 3 -3/4%, due 8/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -3/4 due 8/15/68 U. S. Treasury Bonds, 3 -3/4%, due 8/15/68 U. S. Treasury Bonds, 4%, due 2/15/69 U. S. Treasury Bonds, 4%, due 2/15/69 RESERVE ACCOUNT: U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Bonds, 4%, due 8/15/70 Principal Amount COLUMBIA STORAGE POWER EXCHANGE BOND FUND INVESTMENTS Purchases Purchased Interest $4,000,000 6,870,000 5,888,000 1,889,000 6,564.01 4,000,000 13,899.44 5,888,000 21,120.00 2,000,000 6,501.36 889,000 2,889.85 2,000,000 6,501.36 1,000,000 3,250.68 1,888,000 6,348.91 1,000,000 3,362.77 1,000,000 3,362.77 2,000,000 6,725.54 889,000 10,946.42 1,000,000 12,313.18 2,000,000 24,626.36 2,000,000 24,626.36 2,000,000 6,725.54 3,888,000 13,074.46 2,000,000 7,173.91 3,889,000 13,949.67 APRIL 1, 1965 Cost Cost 3,998,812.50 3,998,812.50 1,187.50 6,741,153.15 6,741,153.15 128,846.85 5, 675, 495. 35 1,887,229.06 3,996,875.00 5,899,960.00 1,983,125.00 881,499.06 1,983,125.00 991,406.25 1,875,020.00 993,125.00 992,968.75 1,986,250.00 878,720.94 988,125.00 1,976,562.50 1, 976, 562. 50 1,978,125.00 3,846,009.60 1,996,875.00 3,882,923.44 $193 $5 $10,739,965.65 $130,034.35 $47,108,000 $46,669,982.45 $46,631,698.23 $2,855,000 10,240.77 2,841,617.19 106,000 1,106.09 105,801.25 741,000 163.75 735,442.50 11,510.61 3,682,860.94 Redemptions Gain *Market values are based on published bid prices or, for U. S. Treasury Bills, published bid yield percentages as of April 1, 1965. The accompanying Note is an integral part of this statement. Balance April 1, 1965 Principal Amount 5,888,000 1,889,000 4,000,000 5,888,000 2,000,000 889,000 2,000,000 1,000,000 1,888,000 1,000,000 1,000,000 2,000,000 889,000 1,000,000 2,000,000 2,000,000 2,000,000 3,888,000 2,000,000 3,889,000 Cost 5,675,495.35 1,887,229.06 3,996,875.00 5,899,960.00 1,983,125.00 881,499.06 1,983,125.00 991,406.25 1, 875, 020.00 993,125.00 992,968.75 1,986,250.00 878,720.94 988,125.00 1,976,562.50 1,976,562.50 1,978,125.00 3,846,009.60 1,996,875.00 3,882,923.44 EXHIBIT 3 Market* 5,661,960.72 1,886,638.75 3,995,000.00 5, 884, 320.00 1,983,750.00 881,776.88 1,983,750.00 991,875.00 1,873,250.00 992,187.50 992,187.50 1,984,375.00 878,998.75 988,750.00 1,977,500.00 1,977,500.00 1,976,875.00 3,843,045.00 1,996,250.00 3,881,708.13 2,855,000 2,841,617.19 2,833,587.50 106,000 105,801.25 105,205.00 741,000 735,442.50 735,442.50 3,702,000 3,682,860.94 3,674,235.00 Description U. S. Treasury Notes, 4 -5/8%, due 5/15/65 U. S. Treasury Notes, 4%, due 11/15/65 U. S. Treasury Notes, 4%, due 5/15/66 U. S. Treasury Bonds, 3 -3/8%, due 11/15/66 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Bonds, 3 -5/8 due 11/15/67 U. S. Treasury Bonds, 3 -7/8%, due 5/15/68 U. S. Treasury Bonds, 3 -7/8%, due 11/15/68 U. S. Treasury Bonds, 4 due 2/15/69 U. S. Treasury Bonds, 4%, due 10/1/69 U. S. Treasury Bonds, 4%, due 10/1/69 COLUMBIA STORAGE POWER EXCHANGE FIDUCIARY COMPENSATION ACCOUNT INVESTMENTS APRIL 1, 1965 Principal Amount 15,000 15,000 15,000 16,000 16,000 16,000 16,000 16,000 15,000 53,000 4,000 $197,0 Purchased Interest 84.32 72.93 72.93 65.64 214.35 70.50 75.36 75.36 221.74 518.35 61.54 *Market values are based on published bid prices as of April 1, 1965. Cost 15,060.94 15,028.13 15,009.38 15,840.00 15,885.00 15,840.00 15,905.00 15,905.00 15,004.69 52,884.06 3,990.00 The accompanying Note is an integral part of this statement. Market* 15,018.75 15,004.69 14,990.63 15,845.00 15,870.00 15,820.00 15,900.00 15,865.00 14,971.88 52,751.56 3,981.25 $1,533.02 $196,352.20 $196,018.76 EXHIBIT 4 Description U. S. Treasury Bills, due 10/1/64 U. S. Treasury Bills, due 11/19/64 U. S. Treasury Bills, due 1/7/65 U. S. Treasury Bills, due 5/20/65 U. S. Treasury Bills, due 7/8/65 Principal Amount COLUMBIA STORAGE POWER EXCHANGE TEMPORARY CASH INVESTMENT OF GENERAL FUNDS $384,000 392,000 25, 000 400, 000 2 5, 000 Purchases Cost 383,504.21 389,592.14 24,762.22 392,438.22 24, 503.75 APRIL 1, 1965 Cost Redemptions Gain $383,504.21 495.79 389,592.14 2,407.86 24,762.22 2 237.78 137,353.38 755.65 $1,214,800.54 $935,211.95 $3,897.08 $285,000 $279,588.59 $279,415 *Market values are based on published bid yield percentages as of April 1, 1965, applied to the date of purchase of the applicable securities. The accompanying Note is an integral part of this statement. Balance April 1, 1965 Principal Amount 260,000 25, 000 Cost 255,084.84 24, 503.75 Market* EXHIBIT 5 254, 913 24, 502 COLUMBIA STORAGE POWER EXCHANGE NOTE TO FINANCIAL STATEMENTS APRIL 1, 1965 Pursuant to the treaty between the United States and Canada relating to the cooperative development of the water resources of the Columbia River Basin, Canada is required to construct three storage dams and reservoirs in Canada. The scheduled completion dates of the projects are April 1, 1968, 1969, and 1973. The controlled release of water stored by the dams is expected to result in increased dependable capacity and usable energy from hydro electric projects in the Columbia River Basin in the United States. The Exchange has purchased Canada's entitlement, under the Treaty, to said benefits for a term expiring 30 years from the dates on which the dams are required to be fully operative for power purposes. The Exchange has entered into Canadian Entitlement Exchange Agree- ments providing for the transfer and assignment of the Canadian Entitlement to participating organizations. The Exchange Agree- ments provide that commencing April 1, 1969, the aggregate annual payments, by the participating organizations, to the Exchange are required to be sufficient to pay the principal of and interest on the 1964 Bonds and the expenses of the Exchange. All rights of the Exchange under the Exchange Agreements together with certain other rights and property have been transferred, assigned and pledged to Morgan Guaranty Trust Company of New York, Trustee in accordance with the provisions of the Bond Indenture, dated as of September 1, 1964, which states that CSPE does, by these presents, transfer, assign, and pledge with and set over to the Trustee, its successors in trust and assigns, all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement (including, without limitation, all reversionary rights, if any, in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements; provided, however, that unless an Event of Default shall have happened and be continuing, CSPE shall be permitted to receive and to use for its corporate purposes the moneys payable to it pursuant to Section 6(a)(2) of the Exchange Agreements In order to match the cost of entitlement, interest, and corporate organization, engineering and other costs, until the projects are operable, with related revenues, all such costs prior to April 1, 1969, are being deferred and will be amortized during subsequent periods as revenues, based upon principal repayment requirements on the bonds, are received. To the Board of Trustees, ARTHUR ANDERSEN CO. SEATTLE, WASHINGTON Columbia Storage Power Exchange: We have examined the balance sheet of COLUMBIA STORAGE POWER EXCHANGE (a Washington nonprofit, nonstock corporation) as of April 1, 1966, and the related statement of fund receipts and disbursements for the fiscal year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and state- ment of fund receipts and disbursements present fairly the finan- cial position of Columbia Storage Power Exchange as of April 1, 1966, and fund transactions for the fiscal year then ended in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Seattle, Washington, April 22, 1966. 9 4-sitees- att4.0es-e.42 PREPAID COST OF CANADIAN POWER ENTITLEMENT (Note) BOND FUND, consisting of cash and U.S. Government securities, at cost (Exhibit 2): Interest account Reserve account FIDUCIARY COMPENSATION ACCOUNT (Exhibit 2) CASH AND TEMPORATY CASH INVESTMENTS (Exhibit 2) PURCHASED AND ACCRUED INTEREST RECEIVABLE DEFERRED CHARGES (Note): Debt discount Legal, engineering, printing and other costs of organizing and financing the corporation Prepaid insurance Deferred interest charges less interest income on investments COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS: Serial Bonds, 3 -1/4% to 3.70%, due annually April 1, 1970 to 1986 Term bonds, 3 -7/8%, due April 1, 2003, semi annual sinking fund redemptions to commence October 1,1974 ACCOUNTS PAYABLE A S S E T S L I A B I L I T I E S COLUMBIA STORAGE POWER EXCHANGE BALANCE SHEETS- -APRIL 1, 1966 AND 1965 602,048.19 381.77 The accompanying note is an integral part of this statement. 1966 1965 EXHIBIT 1 $253,929,534.25 $253,929,534.25 35,110,383.04 46,669,982.45 5,461,558.43 3,685,416.92 40,571,941.47 50,355,399.37 183,385.78 197,226.99 290,733.06 283,857.37 254,992.87 391,378.37 3,151,646.99 3,151,646.99 573,916.16 520.00 15,116,761.44 5,216,732.15 18,870,838.39 8,942,815.30 $314,101,425.82 $314,100,211.65 $106,520,000.00 $106,520,000.00 207,580,000.00 207,580,000.00 $314,100,000.00 $314,100,000.00 1,425.82 211.65 $314,101,425.82 $314,100,211.65 BALANCE, April 1, 1965 RECEIPTS: Gain and interest on investments Fees collected on bond interchange transactions TRANSFER of funds as provided by Section 5.06(c) of the Bond Indenture STATEMENT OF FUND RECEIPTS AND DISBURSEMENTS COLUMBIA STORAGE POWER EXCHANGE FOR THE YEAR ENDED APRIL 1, 1966 Total 60.00 Interest Account DISBURSEMENTS: Costs of legal, engineering, printing, trustee fees and other costs of organizing and financing the corporation (26,839.63) Purchased interest on fund investments (2,681.72) Interest paid on Columbia Storage Power Exchange Revenue Bonds (11,776,287.50) (11,776,287.50) BALANCE, April 1, 1966, consisting of: Cash 14,684.89 U. S. Government securities, at cost (Exhibits 3, 4, 5 and 6) Bond Fund Reserve Account 50,836,483.73 46,669,982.45 $3,685,416.92 $197,226.99 2,015,325.43 1,825,406.92 170,100,00 8,618.05 11,200.46 2,015,385.43 1,825,406.92 170,100.00 8,618.05 11,260.46 $(22,454.86) (4,384.77) (2,677.32) (4.4 $(11,805,808.85) $(11,776,287.50) (2,677.32) $(22,459.26) (4,384.77) (1,608,718.83) $1,608,718.83 Fiduciary Compensation Account 424.83 7,222.65 41,031,375.42 35,110,383.04 5,461,133.60 176,163.13 41,046,060.31 35,110,383.04 $5,461,558.43 $183,385.78 The accompanying note and Exhibits 3, 4, 5 and 6 are an integral part of this statement. General Account and Cash on Hand $283,857.37 EXHIBIT 2 60.00 7,037.41 283,695.65 $290,733.06 Description U. S. Treasury Bills, due 8/31/65 U. S. Treasury Notes, 3 -7/8%, due 2/15/66 U. S. Treasury Notes, 3 -7/8%, due 2/15/66 U. S. Treasury Notes, 4%, due 8/15/66 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 U. S. Treasury Notes, 3 -3/4%, due 8/15/67 U. S. Treasury Notes, 3 -3/4%, due 8/15/67 U. S. Treasury Notes, 3 -3/4%, due 8/15/67 U. S. Treasury Notes, 3 -3/4%, due 8/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 U. S. Treasury Bonds, 3 -3/4 due 8/15/68 U. S. Treasury Bonds, 3 -3/4%, due 8/15/68 U. S. Treasury Bonds, 4%, due 2/15/69 U. S. Treasury Bonds, 4%, due 2/15/69 U. S. Treasury Bills, due 9/23/65 U. S. Treasury Bills, due 3/24/66 U. S. Treasury Bills, due 3/24/66 Balance April 1, 1965 Principal Amount Cost 5,888,000 5,675,495.35 1,889,000 1,887,229.06 4,000,000 3,996,875.00 5,888,000 5,899,960.00 2,000,000 1,983,125.00 889,000 881,499.06 2,000,000 1,983,125.00 1,000,000 991,406.25 1,888,000 1,875,020.00 1,000,000 993,125.00 1,000,000 992,968.75 2,000,000 1,986,250.00 889,000 878,720.94 1,000,000 988,125.00 2,000,000 1,976,562.50 2,000,000 1,976,562.50 2,000,000 1,978,125.00 3,888,000 3,846,009.60 2,000,000 1,996,875.00 3,889,000 3,882,923.44 COLUMBIA STORAGE POWER EXCHANGE BOND FUND INTEREST ACCOUNT INVESTMENTS APRIL 1, 1966 Principal Amount 5,901,000 23,000 5,892,000 Purchases Cost 5,887,012.99 22,914.84 5, 865, 897.98 Cost 5,675,495.35 $212,504.65 1,887,229.06 1,770.94 3,996,875.00 3,125.00 Redemptions 5,887,012.99 22,914.84 5, 865, 897.98 Market values are based on published bid prices as of April 1, 1966. The accompanying note is an integral part of this statement. Gain 13,987.01 85.16 26,102.02 Balance April 1, 1966 Principal Amount 5,888,000 2,000,000 889,000 2,000,000 1,000,000 1,888,000 1,000,000 1,000,000 2,000,000 889,000 1,000,000 2,000,000 2,000,000 2,000,000 3,888,000 2,000,000 3,889,000 Cost 5,899,960.00 1,983,125.00 881,499.06 1,983,125.00 991,406.25 1,875,020.00 993,125.00 992,968.75 1,986,250.00 878,720.94 988,125.00 1,976,562.50 1,976,562.50 1,978,125.00 3,846,009.60 1,996,875.00 3,882,923.44 EXHIBIT 3 Market* 5,871,440%00 1,979,375.00 879,832.19 1,979,375.00 989,687.50 1,862,040.00 986,250.00 986,250.00 1,972,500.00 873,442.50 982,500.00 1,965,000.00 1,965,000.00 1,949,375.00 3,789,585.00 1,957,500.00 3,806,358.75 $47,108,000 $46,669,982.45 $11,816,000 $11,775,825.81 $23,335,425.22 $257,574.78 $35,331,000 $35,110,383.04 $34,795,510.94 Description U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Bonds, 4%, due 8/15/71 U. S. Treasury Bonds, 4%, due 8/15/71 U. S. Treasury Bonds, 4%, due 8/15/70 U. S. Treasury Notes, 5%, due 11/15/70 U. S. Treasury Bonds, 4%, due 2/15/72 Balance April 1, 1965 Principal Amount $2,855,000 $2,841,617.19 106,000 105,801.25 741,000 735,442.50 COLUMBIA STORAGE POWER EXCHANGE BOND FUND RESERVE ACCOUNT INVESTMENTS Cost APRIL 1, 1966 Purchases Principal Purchased Amount Interest 108,500 1,114.97 762,000 165.65 14,000 65.43 108,000 1,091.74 771,000 106.49 28,000 133.04 Market values are based on published bid prices as of April 1, 1966. -Cost 107,720.16 752,951.25 13,851.25 105,975.00 771,000.00 26,775.00 The accompanying note is an integral part of this statement. Balance April 1, 1966 Principal Amount $2,855,000 106,000 741,000 108, 500 762,000 14, 000 108,000 771,000 28,000 Cost $2,841,617.19 105,801.25 735,442.50 107,720.16 752,951.25 13,851.25 105,975.00 771,000.00 26,775.00 .Market* EXHIBIT 4 $2,762,212.50 102,555.00 716, 917.50 104,973.75 734,853.75 13,501.25 104,490.00 777,264.38 26,897.50 $3,702,000 $3,682,860.94 $1,791,500 $2,677.32 $1,778,272.66 $5,493,500 $5,461,133.60 $5,343,665.63 Description U. S. Treasury Notes, 4 -5/8%, due 5/15/65 15,000 U. S. Treasury Notes, 4%, due 11/15/65 15,000 U. S. Treasury Notes, 4%, due 5/15/66 15,000 U. S. Treasury Bonds, 3 -3/8%, due 11/15/66 16,000 U. S. Treasury Notes, 3 -5/8%, due 2/15/67 16,000 U. S. Treasury Bonds, 3 -5/8%, due 11/15/67 16,000 U. S. Treasury Bonds, 3 -7/8%, due 5/15/68 16,000 U. S. Treasury Bonds, 3 -7.8%, due 11/15/68 16,000 U. S. Treasury Bonds, 4 due 2/15/69 15,000 U. S. Treasury Bonds, 4%, due 10/1/69 53,000 U. S. Treasury Bonds, 4%, due 10/1/69 4,000 U. S. Treasury Bonds, 4%, due 10/1/69 Balance April 1, 1965 Principal Amount $197,000 Cost 15, 060.94 15,028.13 15,009.38 15,840.00 15,885.00 15,840.00 15,905.00 15,905.00 15,004.69 52,884.06 3,990.00 COLUMBIA STORAGE POWER EXCHANGE FIDUCIARY COMPENSATION ACCOUNT INVESTMENTS APRIL 1, 1966 Principal Purchased Amount Interest 10,000.00 $196,352.20 $10,000.00 Purchases Cost 4.40 9,900.00 The accompanying note is an integral part of this statement. Redemptions *Market values are based on published bid prices as of April 1 1966. Gain Principal Cost (Loss) Amount $15,060.94 $(60.94) 15,028.13 (28.13) 15,000 16,000 16,000 16,000 16,000 16,000 15,000 53,000 4,000 10,000 Balance, April 1, 1966 Cost 15,009.38 15,840.00 15,885.00 15,840.00 15,905.00 15,905.00 15,004.69 52,884.06 3,990.00 9,900.00 EXHIBIT 5 Market* 14,990.63 15,875.00 15,835.00 15,720.00 15,700.00 15,610.00 14,681.25 51,592.19 3,893.75 9,734.38 $4.40 9,900.00 $30,089.07 $89.07 $177,000 $176,163.13 $173,632.20 Description U. S. Treasury Bills, due 5/20/65 U. S. Treasury Bills, due 7/8/65 U. S. Treasury Bills, due 11/18/65 U. S. Treasury Bills, due 1/6/66 U. S. Treasury Bills, due 10/7/65 U. S. Treasury Bills, due 1/6/66 U. S. Treasury Bills, due 5/19/66 U. S. Treasury Bills, due 7/7/66 Balance April 1, 1965 Principal Amount Cost $260,000 $255,084.84 25,000 24,503.75 TEMPORARY CASH INVESTMENTS OF GENERAL FUNDS COLUMBIA STORAGE POWER EXCHANGE APRIL 1, 1966 Principal Amount 260,000 25,000 5,000 5,000 265,000 25,000 $285,000 $279,588.59 $585,000 Purchases Cost 254,802.60 24,508.25 4,951.30 4,948.80 259,291.90 24,403.75 Cost $255,084.84 24,503.75 254, 802.60 24,508.25 4,951.30 4,948.80 Redemptions Market values are based on published bid yield percentages as of April 1, 1966, applied to the date of purchase of the applicable securities. The accompanying note is an integral part of this statement. Gain 4,915.16 496.25 5,197.40 491.75 48.70 51.20 Balance April 1, 1966 Principal Amount 265,000 25,000 $572,906.60 $568,799.54 $11,200.46 $290,000 Cost 259,291.90 24,403.75 $283,695.65 Market* EXHIBIT 6 259,103.75 24,432.50 $283, 536.25 COLUMBIA STORAGE POWER EXCHANGE NOTE TO FINANCIAL STATEMENTS APRIL 1, 1966 Pursuant to the treaty between the United States and Canada relating to the cooperative development of the water resources of the Columbia River Basin, Canada is required to construct three storage dams and reservoirs in Canada. The scheduled completion dates of the projects are April 1, 1965, 1969, and 1973. The controlled release of water stored by the dams is expected to result in increased dependable capacity and usable energy from hydro electric projects in the Columbia River Basin in the United States. The Exchange has purchased Canada entitlement, under the Treaty, to said benefits for a term expiring 30 years from the dates on which the dams are required to be fully operative for power purposes. The Exchange has entered into Canadian Entitlement Exchange Agree- ments providing for the transfer and assignment of the Canadian Entitlement to participating organizations. The Exchange Agree- ments provide that commending April 1, 1969, the aggregate annual payments, by the participating organizations, to the Exchange are required to be sufficient to pay the principal of and interest on the 1964 Bonds and the expenses of the Exchange. All rights of the Exchange under the Exchange Agreements together with certain other rights and property have been transferred, assigned and pledged to Morgan Guaranty Trust Company of New York, Trustee in accordance with the provisions of the Bond Indenture, dated as of September 1, 1964, which states that CSPE does, by these presents, transfer, assign, and pledge with and set over to the Trustee, its successors in trust and assigns, all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement (including, without limitation, all reversionary rights, if any, in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements; provided, however, that unless an Event or Default shall have happened and be continuing, CSPE shall be permitted to receive and to use for its corporate purposes the moneys payable to it pursuant to Section 6(a)(2) of the Exchange Agreements In order to match the cost of entitlement, interest, and corporate organization, engineering and other costs, until the projects are operable, with related revenues, all such costs prior to April 1, 1969, are being deferred and will be amortized during subsequent periods as revenues, based upon principal repayment requirements on the bonds, are received. To the Board of Trustees, ARTHUR ANDERSEN CO. SEATTLE, WASHINGTON Columbia Storage Power Exchange: We have examined the balance sheet of COLUMBIA STORAGE POWER EXCHANGE (a Washington nonprofit, nonstock corporation) as of April 1, 1967, and the related statement of fund receipts and disbursements for the fiscal year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We have previously examined and reported on the financial statements for the preceding year. In our opinion, the accompanying balance sheet and state- ment of fund receipts and disbursements present fairly the finan- cial position of Columbia Storage Power Exchange as of April 1, 1967, and fund transactions for the fiscal year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Seattle, Washington, April 26, 1967. asziai 4t4zeor/f. PREPAID COST OF CANADIAN POWER ENTITLEMENT (Note BOND FUND, consisting of cash and U.S. Government securities, at cost (Exhibit 2): Interest account Reserve account FIDUCIARY COMPENSATION ACCOUNT (Exhibit 2) CASH AND TEMPORARY CASH INVESTMENTS (Exhibit 2) PURCHASED AND ACCRUED INTEREST RECEIVABLE DEFERRED CHARGES (Note): Debt discount Legal, engineering, printing and other costs of organizing and financing the corporation Prepaid insurance Deferred interest charges less interest income on investments ACCRUED INTEREST PAYABLE (revenue bonds) ACCOUNTS PAYABLE BALANCE SHEETS -APRIL 1, 1967 AND 1966 A S S E T S L I A B I L I T I E S COLUMBIA STORAGE POWER EXCHANGE 1 9 6 7 $253,929,534.25 $253,929,534.25 23,825,267.73 6,973,348.46 30,798,616.19 166,922.46 300,101.59 217,068.69 3,151, 646.99 627,367.53 434.00 25,362,761.53 29,142,210.05 $314,554,453.23 454,000.00 453.23 The accompanying note is an integral part of this statement. EXHIBIT 1 1 9 6 6 35,110,383.04 5,461,558.43 40,571,941.47 183,385.78 290,733.06 254,992.87 3,151,646.99 602,048.19 381.77 15,116, 761.44 18,870,838.39 $314,101,425.82 COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS: Serial Bonds, 3 -1 /4% to 3.70%, due annually April 1, 1970 to 1986 $106,520,000.00 $106,520,000.00 Term bonds, 3 -7/8%, due April 1, 2003, semi- annual sinking fund redemptions to commence October 1, 1974 207,580,000.00 207,580,000.00 $314,100,000.00 $314,100,000.00 1,425.82 $314,554,453.23 $314,101,425.82 RECEIPTS: Gain and interest on investments Fees collected on bond interchange transactions DISBURSEMENTS: Costs of legal, engineering, printing, trustee fees and other costs of organizing and financing the corporation Purchased interest on fund investments Interest paid on Columbia Storage Power Exchange Revenue Bonds TRANSFER of funds as provided by Section 5.06(c) of the Bond Indenture BALANCE, April 1, 1967, consisting of: Cash U.S. Government securities, at cost (Exhibits 3, 4, 5 and 6) COLUMBIA STORAGE POWER EXCHANGE STATEMENT OF FUND RECEIPTS AND DISBURSEMENTS FOR THE YEAR ENDED APRIL 1, 1967 (26,632.16) (2,209.75) Total Interest Account BALANCE, April 1, 1966, consisting of: Cash 14,684.89 424.83 7,222.65 7,037.41 U.S. Government securities, at cost (Exhibits 3, 4, 5 and 6) 41,031,375.42 35,110,383.04 5,461,133.60 176,163.13 283,695.65 41,046,060.31 35,1 $5,461,558.43 $183,385.78 $290,733.06 1,570,421.34 1,312,153.60 238,940.23 5,705.86 13,621.65 288.00 288.00 1,570,709.34 1 ,3 1 2,153.60 238,940.23 5,705.86 13,909.65 Bond Fund (11,322,287.50) (11,322.287.50) Reserve Account $(11,351,129,41) $(11,322,287.50) (2,131.61) $(22,169.18) (4,541.12) (1,274,981.41) $1,274,981.41 510,536.15 454,000.00 27,905.80 24,883.71 3,746.64 30,755,104.09 23,371,267.73 6,945,442.66 142,038.75 296,354.95 31,265,640.24 23,825,267.73 $6,973,348.46 $166,922.46 $300,101.59 The accompanying note and Exhibits 3, 4, 5 and 6 are an integral part of this statement. Fiduciary Compensation Account EXHIBIT 2 Cash and Temporary Cash Investments $(22, (4,541.12) (2,131.61) (78.14) Description U.S. Treasury notes, 4 due 8/15/66 U.S. Treasury notes, 3 -5/8 due 2/15/67 U.S. Treasury notes, 3 -5/8 due 2/15/67 U.S. Treasury notes, 3 -5/8%, due 2/15/67 U.S. Treasury notes, 3 -5/8 due 2/15/67 U.S. Treasury notes, 3 -3/4 due 8/15/67 U.S. Treasury notes, 3 -3/4 due 8/15/67 U.S. Treasury notes, 3 -3/4 due 8/15/67 U.S. Treasury notes, 3 -3/4 due 8/15/67 U.S. Treasury bonds, 3 -5/8 due 11/15/67 U.S. Treasury bonds, 3 -5/8 due 11/15/67 U.S. Treasury bonds, 3 -5/8 due 11/15/67 U.S. Treasury bonds, 3 -5/8 due 11/15/67 U.S. Treasury bonds, 3 -3/4 due 8/15/68 U.S. Treasury bonds, 3 -3/4 due 8/15/68 U.S. Treasury bonds, 4 due 2/15/69 U.S. Treasury bonds, 4 due 2/15/69 U.S. Treasury bills, due 8/18/66 U.S. Treasury bills, due 9/22/66 U.S. Treasury bills, due 3/22/67 U.S. Treasury bills, due 3/23/67 Balance April 1, 1966 Principal Amount 5,888,000 5,899,960.00 2,000,000 889,000 2,000,000 1,000,000 1,888,000 1,000,000 1,000,000 2,000,000 889,000 1,000,000 2,000,000 2,000,000 2,000,000 3,888,000 2,000,000 3,889,000 Cost 1,983,125.00 881,499.06 1,983,125.00 991,406.25 1,875,020.00 993,125.00 992,968.75 1,986,250.00 878,720.94 988,125.00 1, 976, 562.50 1, 976, 562.50 1,978,125.00 3,846,009.60 1, 996, 875.00 3, COLUMBIA STORAGE POWER EXCHANGE BOND FUND INTEREST ACCOUNT INVESTMENTS APRIL 1, 1967 Principal Amount, 5,890,000 5,915,000 3,913,000 2,000,000 Purchases Cost 5,887,742.17 5, 889, 409.41 3,897,212.13 1,991,240.00 Cost Redemptions 5,899,960,00 $x.1,960.00)$ 1,983,125.00 16,875.00 881,499.06 7,500.94 1,983,125.00 16,875.00 991,406.25 8,593.75 5,887,742.17 2,257.83 5, 25,590.59 3,897,212.13 15,787.87 1,991,240.00 8,760.00 *Market values are based on published bid prices as of April 1, 1967. The accompanying note is an integral part of this statement. Gain Principal (Loss) Amount 1,888,000 1,000,000 1,000,000 2,000,000 889,000 1,000,000 2,000,000 2,000,000 2,000,000 3,888,000 2,000,000 3,889,000 Balance April 1, 1967 Cost 1,875,020.00 993,125.00 992,968.75 1,986,250.00 878,720.94 988,125.00 1,976,562.50 1,976,562.50 1,978,125.00 3,846,009.60 1,996,875.00 3, EXHIBIT 3 Market* 1,885,050.00 998,437.50 998,437.50 1,996,875.00 886,499.69 997,187.50 1 ,994,375.00 1 ,994,375.00 1,990,000.00 3,868,560.00 1 ,993,125.00 3,875,631.56 $35,331,000 $35,110,383.04 $17,718,000 $17,665,603.71 $29,404,719.02 $90,280.98 $23,554,000 $23,371,267.73 $23,478,553.75 Description U.S. Treasury bonds, 4%, due 8/15/70 U.S. Treasury bonds, 4%, due 8/15/70 U.S. Treasury bonds, 4%, due 8/15/70 U.S. Treasury bonds, 4%, due 8/15/70 U.S. Treasury bonds, 4 due 8/15/70 U.S. Treasury notes, 5 due 11/15/70 U.S. Treasury bonds, 4%, due 8/15/71 U.S. Treasury bonds, 4 due 8/15/71 U.S. Treasury bonds, 4%, due 2/15/72 U.S. Treasury bonds, 4 due 2/15/72 U.S. Treasury bonds, 4 due 8/15/72 U.S. Treasury bonds, 2 -1 /2%, due 9/15/72 U.S. Treasury bonds, 2 -1/2 due 9/15/72 U.S. Treasury bonds, 4%, due 8/15/72 Balance April 1, 1966 Principal Amount $2,855,000 106,000 741,000 108, 500 108,000 771,000 762,000 14, 000 28,000 COLUMBIA STORAGE POWER EXCHANGE BOND FUND RESERVE ACCOUNT INVESTMENTS Cost $2,841,617.19 105,801.25 735,442.50 107,720.16 105,975.00 771,000.00 752,951.25 13,851.25 26,775.00 APRIL 1, 1967 Purchases Principal Purchased Amount Interest 120,000 715,000 31,000 144,000 576,000 1,206.63 155.43 25.69 616.57 127.29 Cost 114,900.00 660,257.81 27,086.25 125,865.00 556,200.00 *Market values are based on published bid prices as of April 1, 1967. The accompanying note is an integral part of this statement. Principal Amount $2,855,000 106,000 741,000 108,500 108,000 771,000 762,000 14,000 28,000 120,000 715,000 31,000 144,000 576,000 Balance April 1, 1967 Cost $2,841,617.19 105,801.25 735,442.5 107,720.16 105,975.00 771,000.00 752,951.25 13,851.25 26,775.00 114,900.00 660,257.81 27,086.25 125, 865.00 556,200.00 Market* EXHIBIT 4 $2,828,234.38 105,006.25 734,053.13 107,482.81 106,987.50 787,624.69 752,236.88 13, 820.63 27, 527.50 117,975.00 701,146.88 28,578.13 132,750.00 564,840.00 $5,493,500 $5,461,133.60 $1,586,000 $2,131.61 $1,484,309.06 $7,079,500 $6,945,442.66 $7,008,263.78 Description Balance April 1, 1966 Principal Amount U.S. Treasury notes, 4 due 5/15/66 15,000 15,009.38 U.S. Treasury notes, 3 -3/8%, due 11/15/66 16,000 15,840,00 U.S. Treasury notes, 3 5/8%, due 2/15/67 16,000 15,885.00 U.S. Treasury bonds, 3 -5/8%, due 11/15/67 16,000 15,840.00 U.S. Treasury bonds, 3 -7/8%, due 5/15/68 16,000 15,905.00 U.S. Treasury bonds, 3 -7/8%, due 11/15/68 16,000 15,905.00 U.S. Treasury bonds, 4%, due 2/15/69 15,000 15,004.69 U.S. Treasury bonds, 4%, due 10/1/69 53,000 52,884.06 U.S. Treasury bonds, 4%, due 10/1/69 4,000 3,990.00 U.S. Treasury bonds, 4%, due 10/1/69 10,000 9,900.00 U.S. Treasury bonds, 4%, due 10/1/69 $177,000 $176,163.13 $13,000 COLUMBIA STORAGE POWER EXCHANGE FIDUCIARY COMPENSATION ACCOUNT INVESTMENTS 13,000 APRIL 1, 1967 Purchases Principal Purchased Cost Amount Interest Cost 78.14 12,610.00 *Market values are based on published bid prices as of April 1, 1967. The accompanying note is an integral part of this statement. Redemptions Cost Gain Principal (Loss) Amount $15,009.38 (9.38) 15,840.00 160.00 15,885.00 115.00 16,000 16, 000 16,000 15,000 53,000 4,000 10,000 13,000 Balance April 1, 1967 Cost 15,840.00 15,905.00 15,905.00 15,004.69 52,884.06 3,990.00 9,900.00 12,610.00 $78.14 $12,610.00 $46,734.38 $265.62 $143,000 $142,038.75 EXHIBIT 5 Market* 15,955.00 15,950.00 15,925.00 14,948.44 52,652.19 3,973.75 9,934.38 12,914.69 $142,253.45 Description U.S. Treasury bills, due 5/19/66 U.S. Treasury bills, due 7/7/66 U.S. Treasury bills, due 11/17/66 U.S. Treasury bills, due 1/5/67 U.S. Treasury bills, due 5/18/67 U.S. Treasury bills, due 7/6/67 Balance April 1, 1966 COLUMBIA STORAGE POWER EXCHANGE TEMPORARY CASH INVESTMENTS OF GENERAL FUNDS Principal Amount Cost Amount $265,000 $259,291.90 25,000 24,403.75 270,000 30,000 270,000 35,000 APRIL 1, 1967 Principal Purchases Cost 263,428.20 29,254.50 262,224.00 34,130.95 Cost Redemptions Gain $259,291.90 5,708.10 24,403.75 596.25 263,428.20 6,571.80 29,254.50 745.50 Principal Amount 270,000 35,000 *Market values are based on published bid yield percentages as of April 1, 1967, applied to the date of purchase of the applicable securities. The accompanying note is an integral part of this statement. Balance April 1, 1967 Cost 262,224.00 34,13 $290,000 $283,695.65 $605,000 $589,037.65 $576,378.35 $13,621.65 305,000 $296,354.95 EXHIBIT 6 Market* 264,532.50 34,282.50 $298,815.00 COLUMBIA STORAGE POWER EXCHANGE NOTE TO FINANCIAL STATEMENTS APRIL 1, 1967 Pursuant to the treaty between the United States and Canada relating to the cooperative development of the water resources of the Columbia River Basin, Canada is required to construct three storage dams and reservoirs in Canada. The scheduled completion dates of the projects are April 1, 1968, 1969, and 1973. The controlled release of water stored by the dams is expected to result in increased dependable capacity and usable energy from hydro electric projects in the Columbia River Basin in the United States. The Exchange has purchased Canada's entitlement, under the Treaty, to said benefits for a term expiring 30 years from the dates on which the dams are required to be fully operative for power purposes. The Exchange has entered into Canadian Entitlement Exchange Agree- ments providing for the transfer and assignment of the Canadian Entitlement to participating organizations. The Exchange Agree- ments provide that commencing April 1, 1969, the aggregate annual payments, by the participating organizations, to the Exchange are required to be sufficient to pay the principal of the interest on the 1964 Bonds and the expenses of the Exchange. All rights of the Exchange under the Exchange Agreements together with certain other rights and property have been transferred, assigned and pledged to Morgan Guaranty Trust Company of New York, Trustee in accordance with the provisions of the Bond Indenture, dated as of September 1, 1964, which states that CSPE does, by these presents, transfer, assign, and pledge with and set over to the Trustee, its successors in trust and assigns, all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement (including, without limitation, all reversionary rights, if any, in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements; provided, however, that unless an Event of Default shall have happened and be continuing, CSPE shall be permitted to receive and to use for its corporate purposes the moneys payable to it pursuant to Section 6(a)(2) of the Exchange Agreements In order to match the cost of entitlement, interest, and corporate organization, engineering and other costs, until the projects are operable, with related revenues, all such costs prior to April 1, 1969, are being deferred and will be amortized during subsequent periods as revenues, based upon principal repayment requirements on the bonds, are received. To the Board of Trustees, Seattle, Washington, April 24, 1969. ARTHUR ANDERSEN CO. SEATTLE, WASHINGTON Columbia Storage Power Exchange: ARTHUR ANDERSEN CO. S 01 NORTON BUILDING SEATTLE, WASHINGTON 98104 We have examined the balance sheet of Columbia Storage Power Exchange (a Washington nonprofit, nonstock corporation) as of April 1, 1969, and the related statement of fund receipts and disbursements for the fiscal year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circum- stances. We have previously examined and reported on the financial statements for the preceding year. In our opinion, the accompanying balance sheet and state- ment of fund receipts and disbursements present fairly the financial position of Columbia Storage Power Exchange as of April 1, 1969, and fund transactions for the fiscal year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Otilt441 &)10114..24 0- A S S E T S PREPAID COST OF CANADIAN POWER ENTITLEMENT (Note) BOND FUND, consisting of cash and U. S. Government securities, at cost (Exhibit 2): Interest account Reserve account FIDUCIARY COMPENSATION ACCOUNT (Exhibit 2) CASH AND TEMPORARY CASH INVESTMENTS (Exhibit 2) PURCHASED AND ACCRUED INTEREST RECEIVABLE DEFERRED CHARGES (Note): Debt discount Legal, engineering, printing and other costs of organizing and financing the corporation Prepaid insurance Deferred interest charges less interest income on investments 1 9 6 9 BALANCE SHEETS -APRIL 1, 1969 AND 1968 1 9 6 5 $253,929,534.25 $253,929,534.25 11,703,933.04 12,464,945,59 8,175,425.77 12,464,948.89 19,579,355,51 3,151,646.99 3,151,646.99 683,846.95 434.00 656,000.43 43400 46,816,875.52 35,909,472,92 50,652,503 39,717,554.34 $317,600,194.55 $314,101,473.55 COLUMBIA STORAGE POWER EXCHANGE L I A B IL I T I E S COLUMBIA STORAGE POWER EXCHANGE REVENUE BONDS: Serial bonds, 3 =1/4% to 3.70 due annually April 1, 1970 to 1986 Term bonds, 3-7/8%, due April 1, 2003, semi annual sinking fund redemptions to commence October 1, 1974 Less- Current portion of serial bonds shown below 133,373.03 151,124.23 329,614.71 310,778.78 59,920.,21 113,123.17 ACCUMULATED NET REVENUES (Note) CURRENT LIABILITIES: Current portion of serial bonds shown above Accounts payable The accompanying note is an integral part of these statements. 1 9 6 9 EXHIBIT 1 1 9 6 5 $106,520,000.00 $106,520,000.00 207,550,000.00 207,580,000.00 $314,100,000.00 $314,100,000.00 3,200,000.00 3,500,004.12 3,200,000.00 190.43 3,200,190.43 $310,900,000.00 $314,100,000.00 1,473.58 1,473.58 $317,600,194.55 $314,101,473.58 BALANCE, April 1, 1968, consisting of: Cash U. S. Government securities, at cost (Exhibits 3, 4, 5 and 6) RECEIPTS: Gain and interest on investments Payments received from participants and assignees as provided by Section 5.04(a)(4) of the Bond Indenture (Note) Fees collected on bond interchange transactions DISBURSEMENTS: Costs of legal, engineering, printing, trustee fees and other costs of organizing and financing the corporation Purchased interest on fund investments Interest paid on Columbia Storage Power Exchange Revenue Bonds TRANSFER OF FUNDS, as provided by Section 5.06(c) of the Bond Indenture BALANCE, April 1, 1969, consisting of: Cash U. S. Government securities, at cost (Exhibits 3, 4, 5 and 6) COLUMBIA STORAGE POWER EXCHANGE STATEMENT OF FUND RECEIPTS AND DISBURSEMENTS FOR THE YEAR ENDED APRIL 1, 1969 Total 11,960.05 20,329,301.77 B o n d F u n d Interest Account Reserve Account EXHIBIT 2 Cash and Fiduciary Temporary Compensation Cash Account Investments 879.69 2,222.98 8,857.38 11,703,933.04 8,174,546.08 148,901.25 301,921.40 20,341,261,82 11,703,933.04 8,175,425.77 $151,124.23 $310,778.78 939,192.86 3,500,004,12 882,00 4,440,078.98 482,291.31 (30,011.67) (47,105.00) (11,776,287.50) (11,776,287.50) 426,684.18 6,015.37 24,202.00 3, 500,004.12 882.00 482,291.31 3,926,688.30 6,015.37 25,084.00 $(23,763.60) (6,248.07) (47,102.03) (2.97) $(11,853,404.17) $(11,776,287.50) (47,102.03) $(23,766.57) (6,248.07) 786,248.21 12,141,688.42 12,927,936.63 (409,936.85) 409,936.85 12,010,954.53 130,733.89 The accompanying note and Exhibits 3, 4, 5 and 6 are an integral part of this statement. 453,994.36 2,639.14 $329,614.71 $12,464,948.89 $133,373.03 $329,614.71 Description U. S. Treasury bonds, 3 3/4%, due 8/15/68 2,000,000.00 1,978,125 00 U S. Treasury bonds, 3 3/4%, due 8/15/68 U. S. Treasury bonds, 4%, due 2/15/69 U. S. Treasury bonds, 4%, due 2/15/69 U. S. Treasury bills, due 8/31/68 U S. Treasury bills, due 9/26/68 U. S. Treasury bills, due 9/26/68 U. S. Treasury bills, due 3/24/69 Balance, April 1, 1968 Principal Amount 3,888,000 00 2,000,000.00 3,889,000.00 Cost 3,846,009.60 1,996,875.00 3,882,923.44 COLUMBIA STORAGE POWER EXCHANGE BOND FUND INTEREST ACCOUNT INVESTMENTS APRIL 1, 1969 Principal Amount Purchases Balance, April 1, 1969 Cost The accompanying note is an integral part of this statement. Redemptions 3,846,009.60 41,990.40 1,996,875.00 3,125.00 3,882,923.44 6,076,56 718,000,00 716,484.22 716,484.22 1,515.78 5,200,000.00 5,171,132.01 5,171,132.01 28,867.99 720,000.00 717,888.00 717,888.00 2,112.00 6,037,000,00 6,006,231.42 6,006,231.42 30,768.58 $11,777,000.00 $11,703,933.04 $12,675,000„00 $12,611,735.65 $24,315,668.69 $136,331.31 EXHIBIT 3 Principal Cost Gain Amount Cost Market 1,978,125.00 21,875.00 April 1, 1968 Bala Ap Cost Princip Amouzit 1 617 .19 $2,$4 801.25 i�t�-On $2 855,aoo� oo 105, 50 DescT 735,442. due 7 0 107 2 8/15/ 106, 000,00 0 0 16 bonds, 4 due 8/15 0 741, O 0 7 975 .00 U.S. Trea bonds, 4% due $/15/70 00„00 105 000 p0 U.S. Treasury ury bonds 4� due $/15/70 7 1 000. 752 951 25 U.S. Trea bonds' 4 due 15/ 762,000:00 7 75. 0 Treasury bonds e 11/ 7 T n 5�/°, due 8/15/ 14,p00.00 26 Treas bonds, 4%, 4%, due 8/15/ 2$,000.00 8 U.S, Treasury bonds 4 due 2/15/ 12 U.S. Tre asury bon ds, 4 du e 2/15172 715,000,00 00 U.S. Treasury bonds, 4 8/15/72 576,000. 1 U.S. Treasury asury bonds, du e 8/15/72 00 U.S= Treasury bonds 2-1/2%, due 31,000. U.S• Trea sury bon due 144, 000. 00 U 9/15/ bon 2- 1/22-1/2%, U.s• Treasury 2�, due 30,000.00 9/15/72 bonds, 2 -1/ 00.00 Treasury 2-1/2% due 1 38,0 72 ds, U.S. 9 1 Trea sury bo d 505, 000,00 U 9/ ry bonds, 1 2 -1/ S 1 easury bonds, _1/2 due 34,000,00 1lr 72 2 easu 2 due 1 43,0 00 00 15/ ands ,QO 9/ Treasury b due 3 76,00 0 72 bonds, 4-1/8%, U 9/15 T easury bon due 12 2 ,000. T 4 U.2 /15rea bonds, 1/ due 2/15/74 Treasury bonds, 4 -1/ due U.S. 5 /easury bonds, 4 -1/8 due Tr d U.S. 15 bonds' 4 1/4/ due U• 5 Treasury 5/74 bands, 4 -1 /4I Treasury e U.S. 5/ b onds, du Treasury 4- 4 due U.S, 15Teasury bonds, 1/ 1/4 due U.S /15 easury bands, 4- 1/4`� 5/ IA STORAGE POWER C 0 _,1 ENT S APR IL 1 RESERVE ACCOUNT INVESTM BOND FUND 1969 13, ,851.25 114, 9p0.00 6 66',200. 00 27,0 125, 865.p0 27 ,7 125, 493,73 455, 289.06 3 0,515.p 0 12 197 3 50,855 00 113, 040.63 Purcha Purchased Cost Princip P Interest rchas Amoun PIO 315, 000.00 335, 000.00 310,0 306, 000. 00 389, p00.Q 0 299,0 319, 000.00 Princip r In ipal p.mo unt 2,855, 106,0 1 10 8 000.0 0 771,0 762, p00, 00 14, 000.00 2$,0 120, p00, 00 715,0 5 76,00 0 00 2$9 ,504.69 2,677. 3 06,$91. 41 3, 948 <21 289,850 >00 1, 53 290, 50$.75 2,685. 369, 4, 31283 3,660.31 $1 x$3, 303,b 4,899 86 p r i1 1, 196 Balance' A 31,00 144, 0p0.00 30,00 0.00 138,p 505, 000.00 3 4,000. 00 143, 000.00 3 76,00 0 00 1 22,00 0 00 315,0 335, 000.00 310, 000. 00 3 p6,000. 00 3 89,00 0 00 299, 000.00 319, 000.00 C 2,841, 105, 01.25 735'' 1 07,7 20 16 97 5 .00 105, 771,0 951. 7 13' 851,25 2 6,775. 00 114 ,900 .00 660,257 ,81 556, 200.00 27 ,086.25 125, 865.00 27,7 125,4 93.73 455,2 3 0,515. 00 1 26,19 7 50 3 50,855. 00 113 040.63 289,5 04,69 3 06,89 1 41 2 89,85 0 00 290, 50$.75 3 69,671. 56 283, 582.81 303,b Mark 776,4 $7.50 2 085. 720 1 516. 105 ',o30.00 756, 72 233 75 13, 361.25 26,4 60.00 1 6 1 6 3 8, 9 53$, 920.00 27, 94$.4 4 129,8 27 ,04 124, 415.63 455, 289.06 30,653. 128, 923 044 343, 100.00 1119 3 25 00 2$7 ,437 .50 305, 687.50 283, 650.00 279,9 355,9 273, 585,0C 291,885.0 Description U.S. Treasury notes, 5-5/8%, due 8/15/74 U.S. Treasury notes, 5 -5/8%, due 8/15/74 U.S. Treasury notes, 5 -5/8%, due 8/15/74 U.S. Treasury notes, 5 -5/8%, due 8/15/74 U.S. Treasury notes, 5 -5/8%, due 8/15/74 U.S. Treasury notes, 5 -5/8%, due 8/15/74 U.S. Treasury notes, 5 -3/4%, due 2/15/75 U.S. Treasury notes, 5 -3/4%, due 2/15/75 Balance, April 1, 1968 Principal Amount COLUMBIA STORAGE POWER EXCHANGE BOND FUND RESERVE ACCOUNT INVESTMENTS Cost APRIL 1, 1969 Principal Purchased Amount Interest *Market values are based on published bid prices as of April 1, 1969. The accompanying note is an integral part of this statement. Purchases Balance, April 1, 1969 Cost EXHIBIT 4 (Continued) Principal Amount Cost Market* 32,000,00 234.78 32,000.00 32,000,00 32,000.00 30,890.00 290,000.00 3,147.25 288,414.06 290,000.00 288,414.06 279,940.63 53,000.00 777.72 52,602.50 53,000.00 52,602.50 51,161.56 290,000,00 4,565.73 287,371.88 290,000.00 287,371.88 279,940.63 297,000 6,264.84 285,398.44 297,000.00 285,398.44 286,697.81 294,000.00 7,504.79 284,720.63 294,000.00 284,720.63 283,801.88 186,000 00 118.18 180,885.00 186,000.00 180,885.00 180,885.00 301,000.00 764.97 291,358.59 301,000.00 291,358.59 292,722.50 $8,427,500.00 $8,174,546.08 $4,016,000.00 $47,102.03 $3,836,408.45 $12,443,500.00 $12,010,954 53 $11,797,886.60 Description U.S. Treasury bonds, 3 -7/8%, due 5/15/68 U.S. Treasury bonds, 3 -7/8%, due 11/15/68 U.S. 'Treasury bonds, 4%, due 2/15/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bonds, 4%, due 10/1/69 U.S. Treasury bills, due 5/22/69 Balance, April 1, 1968 Purchases Redemptions Balance, April 1, 1969 Principal Amount Cost 16,000.00 15,905.00 COLUMBIA STORAGE POWER EXCHANGE FIDUCIARY COMPENSATION ACCOUNT INVESTMENTS Principal Purchased Gain Principal Amount Interest Cost Cost (Loss) Amount Cost Market* APRIL 1, 1969 $15,905.00 95.00 EXHIBIT 5 16,000.00 15,905.00 15,905.00 95.00 15,000.00 15,004,69 15,004.69 (4.69) 53,000.00 52,884.06 53,000.00 52,884.06 52,420.31 4,000.00 3,990.00 000.00 4, 3,990.00 3,956.25 10,000.00 9,900.00 10,000.00 9,900.00 9,890.63 13,000.00 12,610.00 13,000.00 12,610.00 12,857.81 14,000.00 13,938.75 14,000.00 13,938.75 13,846.88 9,000.00 8,763.75 9,000.00 8,763.75 8,901.56 9,000.00 2.97 8,932.50 9,000.00 8,932.50 8,901.56 20,000.00 19,714.83 20,000.00 19,714.83 19,831.49 $150,000.00 $148,901.25 $29,000.00 $2.97 $28,647.33 $46,814.69 $185.31 $132,000.00 $130,733.89 $130,606.49 *Market values are based on published bid prices of bonds as of April 1, 1969, and bid yield percentages of bills as of April 1, 1969, applied to the date of purchase of the applic- able securities. The accompanying note is an integral part of this statement. e 5/1 du bill 13.6. Treasury due 1 1/14/ 6$ U.S. Treasur bills U.S. Treasury bills' due 3131/69 Ba lance s Pri Amoun p0 $301,921. too $310, 000. AGE pO�ER EXC HANGE COLUMBIA STORAGE GENEg,p.L FUNDS Y CASK xN STS ENTS OF TEMP April 1 $310,0p The accompany Purc Princ ipal A 32 0,p00.00 32 6,p00.00 $646, Cost 3 10,6p0.71 319,2 $629,$ 6 Re dempt ion s Gain s $301,921.40 310, 600. 71 319, 275.$9 $931, 798.00 931 X79 _00 $301, 921.40 3p1 ,921, too this statement. note is an integral par o Prin Amo $,07$.60 9,3 99.29 6, 724.11 24,2 April 1 1969 Balance, A.p M COLUMBIA STORAGE POWER EXCHANGE NOTE TO FINANCIAL STATEMENTS APRIL 1, 1969 Pursuant to the treaty between the United States and Canada relating to the cooperative development of the water resources of the Columbia River Basin, Canada is required to construct three storage dams and reservoirs in Canada. The first project (Duncan Dam) was completed during 1967, the second (Arrow Dam) in 1968, and the scheduled completion date for the third project (Mica Dam) is April 1, 1973. The controlled release of water stored by the dams is expected to result in increased dependable capacity and usable energy from hydro- electric projects in the Columbia River Basin in the United States. The Exchange has purchased Canada's entitlement, under the treaty, to said benefits for a term expiring 30 years from the date on which the dams are required to be fully operative for power purposes. The Exchange has entered into Canadian Entitlement Exchange Agreements providing for the transfer and assignment of the Canadian Entitlement to participating organizations. The Exchange Agreements provide that commencing April 1, 1969, the aggregate annual payments, by the participating organizations, to the Exchange are required to be sufficient to pay the principal of, interest on, and reserve require- ments for the 1964 Bonds and the expenses of the Exchange. Such pay- ments for the comming fiscal year will approximate $16,700,000. X11 rights of the Exchange under the Exchange Agreements together with certain other rights and property have been transferred, assigned and pledged to Morgan Guaranty Trust Company of New York, Trustee, in accordance with the provisions of the Bond Indenture, dated as of September 1, 1964, which states that CSPE does, by these presents, transfer, assign, and pledge with and set over to the Trustee, its successors in trust and assigns, all the rights of CSPE under the Exchange Agreements and all the rights, if any, of CSPE to and in the Canadian Entitlement (including, without limita- tion, all reversionary rights, if any, in respect of the Canadian Entitlement) and all moneys and other property payable to or received by CSPE pursuant to or in connection with the Exchange Agreements; provided, however, that unless an_Event of Default shall have happened and be continuing, CSPE shall be permitted to receive and to use for its corporate purposes the moneys payable to it pursuant to Section 6(a)(2) of the Exchange Agreements :n order to match the cost of entitlement, interest, corporate organization, engineering and other costs, until the projects are operable, with related revenues, all such costs prior to April 1, 1969, are being deferred and will be amortized during subsequent periods as based upon principal repayment requirements on the bonds, are received. :n this regard, in accordance with Section 5.04(a)(4) of the Bond Indenture, the Exchange has collected $3,500,004.12 from its participants and assignees since April 25, 1968, for required deposits to the Bond Fund Reserve Account. This amount, which will be a normal recurring revenue item when the operation commences as of April 1, 1969, has been included in the accompanying balance sheet as "accumulated net revenues."