HomeMy WebLinkAboutReso 93-342 - Approve entering into and execute exceptional case facilities agreement between COR & PG&E for upgrade of the PG&E Natural Gas Pipeline serving the Redding Power Site to PG&E pursuant to said agreement RESOLUTION NO. 93- 3�Z
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING (1) ENTERING INTO AND THE MAYOR EXECUTING THE
EXCEPTIONAL CASE FACILITIES AGREEMENT BETWEEN THE CITY
OF REDDING AND PACIFIC GAS AND ELECTRIC COMPANY FOR THE
UPGRADE OF THE PG&E NATURAL GAS PIPELINE SERVING THE
REDDING POWER SITE; AND (2) THE PAYMENT OF $4,920,906
TO PG&E PURSUANT TO SAID AGREEMENT.
WHEREAS, the upgrading of the PGandE natural gas pipeline
serving the Redding Power site is an integral step in bringing
the generation facilities at the site on-line in a timely manner;
and
WHEREAS, the upgrading of the PGandE facilities will also
enable the City to receive the natural gas necessary to generate
sufficient electricity to avoid higher electricity costs from
other sources; and
i WHEREAS, over the past several months staff, legal counsel,
and MRW, a consulting firm specializing in natural gas
regulation, have negotiated the attached Exceptional Case
Facilities Agreement with PGandE; and
WHEREAS, said Agreement calls for the advancement of
$4, 920,906 . , which amount Black & Veatch, the Electric
Department' s engineering consultant for Redding Power matters,
has reviewed and found reasonable, both as to the design and the
costs of the upgrade; and
WHEREAS, staff has advised that the total upgrade costs of
$5 , 030,706 (of which $109, 800 has previously been advanced for
engineering) will be subject to refunds from PGandE—premised
upon the City' s future use of PGandE' s gas system to transport
natural gas to the Redding Power site; and
WHEREAS, based upon current projections for gas usage at the
Redding Power site, under a methodology negotiated by staff and
incorporated into the agreement, staff projects refunds of
approximately $2, 000,000 for the first year of operation, and a
total of more than $4,000,000 by the year 2005;
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of W
the City of Redding as follows:
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1. That it deemed in the best interests of the City' s
electric ratepayers that the City enter into the
Exceptional Case Facilities Agreement between the City
of Redding and Pacific Gas and Electric Company, a true
copy of which is attached hereto and incorporated
herein by reference.
2. That the Mayor is hereby authorized and directed to
sign said Agreement on behalf of the City of Redding;
and the City Clerk is hereby authorized and directed to
attest the signature of the Mayor and to impress the
official seal of the City of Redding thereto.
3 . That payment be made to PGandE pursuant to said
Agreement in the amount of $4,920 , 906 to be allocated
to the Electric Utility project financing.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
the City of Redding on the 21st day of September_, 1993 , and was
duly adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Dahl, Kehoe, Moss and._ Arness
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
CARL ARNESS, Mayor
City of Redding
ZEST:
CONNIE STROHMAYER, dalty Clerk
FO APPR ED:
RANDAL A. HAYS, City Attorney
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Pscinc Gas and Elect't.pany DISIRIMMON: • REFERENCES:
1 ❑ Appi•scant MLX#
❑ Division
EXCEPTIONAL CASE ❑ Acctg.Svcs. JOB#
'i FACILITIES AGREEMENT
II
CITY OF REDDING - A CALIFORNIA MUNICIPAL CORPORATION (Applicant) has
Ij requested PACIFIC GAS AND ELECTRIC COMPANY (PG&E) to install facilities and to
sell and/or transport gas to the Applicant for the operation of Applicant's permanent equipment
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(Equipment) as summarized in Exhibit A, attached and made a part hereof. The facilities
include, but are not limited to: gas main, valves, regulators, services, meters, and other
associated equipment (Facilities). A general description and approximate location of the
Facilities is shown on the sketch marked Exhibit B attached hereto and made a part hereof.
PG&E has estimated that the base annual revenues to be derived from the transportation of
natural gas for the operation of the Equipment may not completely support PG&E's capital
investment for the installation of the Facilities and, therefore, would place an unfair burden on
PG&E's other customers. However, PG&E is willing to install the necessary Facilities under the
exceptional case provisions of Paragraph E.7 of Gas Rule 15 of its Tariff Schedules on file with
II the California Public Utilities Commission (Commission), subject to the following terms and
conditions:
,I 1. INSTALLATION BASIS. PG&E agrees to construct the Facilities along the shortest
practical route, provided the Applicant agrees to pay PG&E, prior to construction by PG&E,
PG&E's capital costs, applicable taxes, and costs of ownership for that portion of the
Facilities not supported by base annual revenues derived from permanent loads served
directly from the Facilities. All Facilities provided by PG&E under this Agreement shall at
all times be and remain the property of PG&E.
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2. GENERAL ACCESS. Where it is necessary for PG&E to install Facilities on Applicant's
premises, Applicant hereby grants to PG&E: (a) the right to install, own, and maintain such
Facilities on Applicant's premises together with sufficient legal clearance between all
structures now or hereafter erected on Applicant's premises and any Facilities of PG&E, and
i (b) the right of ingress to and egress from Applicant's premises at all reasonable hours for
any purposes reasonably connected with the operation and maintenance of such Facilities.
3. LAND RIGHTS. Where formal rights-of-way, easements, land leases, or permits are
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required by PG&E for the installation of the Facilities on or over Applicant's property, or
the property of others, PG&E shall exercise its best efforts to obtain such authorizations,
provided however that PG&E shall not be obligated to install the Facilities unless and until
any necessary permanent rights-of-way, easements, land leases, or permits, satisfactory to
PG&E, are granted to or obtained for PG&E without cost to or condemnation by PG&E. In
the event that payments for or condemnation of such land rights are required and PG&E is
unwilling to proceed, Applicant shall have the option to obtain or pay for such land rights.
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If requested, Applicant shall assist PG&E in obtaining such authorizations.
4. BASIS OF ECONOMIC ANALYSIS
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(a) Total Construction Costs. Exhibit A identifies the estimated capital investment cost
by PG&E to install the necessary Facilities to provide service to the Applicant. The
estimated cost as shown in Exhibit A will be used to determine the Exceptional Case
Facility Charges.
(b) Estimated Base Annual Revenue. As shown on Exhibit A, PG&E will receive an
Estimated Base Annual Revenue from the sale of gas transportation service to the
Applicant, determined as follows:
The Base Annual Revenue is calculated by multiplying the appropriate gas transport
Noncore Fixed Cost Account Base Rate by the estimated annual gas usage, then
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adding the applicable customer and demand charges. The base rate can be found in
the Preliminary Statement Section of PG&E's Gas Tariff Schedules.
(c) Limitation of Liability. Applicant's Total Payment to PG&E for the Facilities shall not
exceed the amount set forth on line H of Exhibit A.
5. ECONOMIC ALLOWANCES
(a) Supported Capital Costs. As shown on Exhibit A, the Supported Capital Cost is the
maximum capital investment amount by PG&E which is supported by the Estimated
Base Annual Revenue to be derived by PG&E from the sale of transportation service
from the Facilities. The Supported Capital Cost is calculated by multiplying the current
"unit" Cost-to-Revenue Ratio by the Estimated Base Annual Revenue.
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(b) Cost-to-Revenue Ratio. The "unit" Cost-to-Revenue Ratio is calculated by dividing
the number one by the annual percentage rate, stated as a decimal, for
cost-of-ownership for utility-financed costs (derived from the monthly percentage listed
in Gas Rule 2.C).
'I 6. EXCEPTIONAL CASE FACILITY CHARGES
(a) Unsupported Capital Contribution. As shown on Exhibit A, this is the amount that
,i the Total Construction Costs to PG&E of furnishing and installing the Facilities exceeds
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the Supported Capital Costs. The Applicant shall pay PG&E the "Unsupported Capital
'i Contribution" amount, subject to refund, prior to construction by PG&E.
(b)Federal and State CIAC Tax. As shown on Exhibit A, in addition to the Unsupported
Capital Contribution amount,Applicant shall pay to PG&E the Contributions-In-
Aid-of-Construction (CIRC)Tax on the Unsupported Capital Contribution amount.
The CIRC Charge is subject to refund as described in the paragraph on Contribution
Adjustments and as described in this subparagraph.
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Should Applicant choose to challenge the application of the federal or state tax on the CIAC
made by Applicant, PG&E agrees to cooperate with Applicant in preparing and
supporting such application. Applicant shall bear the expenses of any such filing. If
such a ruling is received from the appropriate federal or state authority, PG&E shall
apply to the appropriate authority for a refund. If PG&E makes such an application,
i, Applicant shall reimburse PG&E for the actual administrative and clerical costs
incurred. Should it be determined that PG&E is not required to pay federal or state tax
on the CIRC made by Applicant and such tax is not collected or is refunded, PG&E
shall return the refund to Applicant. In the event that PG&E receives a refund of such
tax which includes interest to PG&E, PG&E shall return the interest on such payment to
Applicant.
(c) Cost-of-Ownership Annuity Fund. As shown on Exhibit A,Applicant shall also pay
to PG&E, in addition to the monthly rates and charges for transportation service, a
one-time refundable payment for a Cost-of-Ownership Annuity Fund. This fund
represents PG&E's present worth value of its continuing costs, in perpetuity, to own,
operate, and maintain that portion of the Facilities not supported by Base Revenues.
The fund amount is determined from the product of the Unsupported Capital
Contribution amount, the annual Cost-of-Ownership rate for customer-financed
(contributed) capital, and the present worth factor (at PG&E's current authorized rate of
return).
7. FACILITY CHANGES. After the start of construction, Applicant shall pay to PG&E on
demand and in advance of any additional work by PG&E, a nonrefundable amount for any
rearrangement, relocation, repair of damage, or replacement of the Facilities, which may be
required due to acts or omissions of Applicant, its agents, employees, contractors, or
subcontractors.
8. DELAYS IN CONSTRUCTION.
(a) Force Majeure. PG&E shall not be responsible for any delay in either the performance
of Applicant's responsibilities under this Agreement, or the installation or completion
of the Facilities by PG&E resulting from shortage of labor or materials, strike, labor
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disturbance, war, riot, weather conditions, governmental rule, regulation or order,
including orders or judgments of any court or commission, delay in obtaining necessary
land rights, act of God, or any other cause or condition beyond the control of PG&E.
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(b) Resources. PG&E shall have the right, in the event it is unable to obtain sufficient
supplies, materials, or labor for all of its construction requirements, to allocate materials
and labor to construction projects which it deems, in its sole discretion, most important
to serve the needs of its existing customers. Any delay in construction hereunder
resulting from such allocation shall be deemed to be a cause beyond PG&E's control.
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(c) Inflation. In the event that PG&E is prevented from commencing the installation of the
Facilities for reasons beyond its reasonable control within twelve months following the
effective date of this Agreement, PG&E shall have the right to revise the cost figures to
reflect any increases in costs since the original costs were determined. PG&E shall
notify the Applicant of such increased costs and give the option to either terminate this
Agreement or pay PG&E the additional charges.
9. CONTRIBUTION ADJUSTMENTS. The Unsupported Capital Contribution amount and
the associated CIRC Tax amount paid by Applicant under this Agreement shall be subject
either to a refund to Applicant without interest or an increased payment during the term of
this Agreement, as follows:
(a) Facility Charge Adjustments. PG&E will review the Unsupported Capital
Contribution amount annually and, if necessary, will adjust it for the actual average
Base Annual Revenue. The average Base Annual Revenue shall be determined by
(1)totaling each contract year's actual gas usage and dividing such total usage by the
number of years that this Agreement has been in effect, commencing with the date
facilities are available for service, (2)multiplying this average by the current year's
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Noncore Fixed Cost Account Base Rate, and (3) adding the current year customer and
demand charges (if any). Refunds or billings will be made within 90 days of the date
that PG&E performs its review. No additional refunds or billings under this section will
occur after the thirty-year adjustment is made.
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(b) Adjustment Period Limit. No refund will be made by PG&E in excess of the
refundable amount advanced by Applicant. Any unrefunded amount remaining at the
end of the thirty-year period will become the property of PG&E.
!j 10. COST-OF-OWNERSHIP ANNUITY FUND ADJUSTMENTS. When PG&E makes
Facility Charge Adjustments as provided in Section 9 of this Agreement, PG&E shall also
adjust the Cost-of-Ownership Annuity Fund as follows:
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(a) Annual Interest and Cost-of-Ownership Adjustment. Interest will be added annually
to the unused balance of the Cost-of-Ownership Annuity Fund before the current year's
cost-of-ownership charges are deducted. The interest rate shall be the twelve-month
average of the discount interest rate on prime, three-month commercial paper for each
month as reported in the Federal Statistical Release, G-13, or its successor publication.
The current year's cost-of-ownership charge shall be determined by multiplying the current
annual cost-of-ownership percentage for customer-financed (contributed) capital and
the newly adjusted Unsupported Capital Contribution amount as calculated in Section 9
of this Agreement.
(b) Annual Cost-of-Ownership Annuity Fund Recalculation. The current
cost-of-ownership percentage at the time of the review will be used to determine the
refunds or deficiency billings. The existing fund, as updated in (a) above, will be
compared to the new fund requirement. If the updated fund balance is greater than the
new fund requirement, the Applicant shall receive a refund of the difference.
Conversely, if the updated fund balance is less than the new fund requirement, the
Applicant shall pay an additional cost-of-ownership charge based on the difference
between the updated fund amount and the new fund requirement. The adjusted fund
amount becomes the new amount subject to future interest payments. Any unrefunded
amount remaining at the end of the thirty-year refund period will become the property
of PG&E.
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11. EFFECTIVE DATE AND TERM. This Agreement shall be binding when signed by
Applicant and PG&E; however, it shall not become effective until authorized by the
Commission. The term of this Agreement shall commence upon the date the facilities are
available for service and shall then continue in force for a period of thirty years, subject to
the termination provision of this Agreement and PG&E's Tariff Schedules.
12. PREMATURE TERMINATION. In the event that PG&E is prevented from completing
the installation of the Facilities for reasons contained in Section 8 within twelve months
following the start of construction, PG&E has the option to advise the Applicant in writing
of its intent to terminate this Agreement within thirty days. Applicant has the right to review
the circumstances within the thirty-day period and select any options available to
accomplish the objectives of this Agreement.
If this Agreement is terminated as set forth in this Section, the Facility Termination Charge
shall be Applicable, based on that portion of the installation then completed, if any, including
charges for any expense incurred by PG&E for any engineering, surveying, right-of-way
acquisition expenses, and other associated expenses for that portion of the installation not
installed or, in PG&E's sole judgement, not useful in supplying permanent service to
PG&E's other customers.
13. FACILITY TERMINATION.
(a) Facility Termination Charge. If Applicant discontinues use of its Equipment or
defaults hereunder in any respect, and PG&E discontinues service to Applicant as a
result thereof,Applicant shall pay PG&E on demand(in addition to all other monies
due PG&E hereunder)a reasonable termination charge for the cost as estimated by
PG&E of installing and removing or abandoning underground facilities in place, less
salvage, any such portion of PG&E's Facilities. CIRC tax will apply to the termination
charge.
(b) Credits. The unrefunded balance, if any, of the Applicant's Unsupported Capital
Contribution amount including the CIRC tax and any remaining Cost-of-Ownership
Annuity Fund amount shall be applied as a credit toward payment of the termination
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charge. If the unrefunded balance of the Applicant's Unsupported Capital Contribution
amount (including CIAC tax and the Cost-of-Ownership Annuity Fund) applicable to
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Facilities installed solely to serve Applicant is in excess of the installation and removal
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or abandonment costs, the excess amount shall be refunded without interest to
Applicant.
(c) Facility Removal - Applicant's Premises. PG&E shall be entitled to remove and shall
have a reasonable period of time in which to remove any portion of its Facilities located
on the Applicant's premises.
(d) Facility Removal - Other Premises. PG&E may, at its option and sole discretion,
remove, alter, rearrange, convey or retain in place any portion of the Facilities located
on other property off the Applicant's premises. Where all or any portion of the
Facilities located off the Applicant's premises are retained in place and used by PG&E
to provide permanent service to other customers, an equitable adjustment will be made
in the Facility Termination Charge.
14. INDEMNIFICATION. Applicant shall indemnify and hold harmless PG&E, its officers,
agents, and employees against all loss, damage, expense, and liability, resulting from injury
to or death of any person, including, but not limited to, employees of PG&E, Applicant, or
any third party, or for loss, destruction, damage to property, including, but not limited to,
property of PG&E,Applicant, or any third party, arising out of or in any way connected with
the performance of this Agreement and any and all construction activities, however caused,
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except to the extent caused by the active negligence or willful misconduct of PG&E, its
officers, agents, and employees. Applicant will, on PG&E's request, defend any suit
asserting a claim covered by this indemnity. Applicant will pay any cost that may be
incurred by PG&E in enforcing this indemnity, including reasonable attorney's fees.
15. ASSIGNMENT OF CONTRACT. Applicant may assign this Agreement, in whole or in
part, only if PG&E consents in writing and the party to whom the Agreement is assigned
(Assignee) agrees in writing to perform the obligations of Applicant hereunder. PG&E's
consent shall not be unreasonably withheld. Assignment of this Agreement shall not release
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Applicant from any of the obligations under this Agreement unless such a release is agreed
to in writing by PG&E and the Assignee. Such assignment, unless otherwise provided
therein, shall be deemed to include Applicant's right to any refunds then unpaid or which
may thereafter become payable.
16. COMMISSION JURISDICTION. This Agreement shall be subject to all of PG&E's
applicable tariff schedules on file with and authorized by the Commission and shall at all
times be subject to such changes or modifications as the Commission may direct from time
to time in the exercise of its jurisdiction. These may include, but are not limited to, changes
or modifications to monthly cost-of-ownership charges (higher or lower percentage rates),
extension rules, and rate schedules.
Executed this day of 19_
City of Redding
A California Municipal Corporation PACIFIC GAS & ELECTRIC COMPANY
(individual, corporation or partnership)
BY: BY:
(Signature) ( ignatu e)
Doug Burris
(Type or print name) (Type or print name)
TITLE: TITLE: Shasta District Manager
Mailing Address:
760 Parkview Avenue
Redding.CA 96001
Attachments:
Exhibit A(Economic Analysis and Payment Computation)
Exhibit B(Location sketch)
Rate Schedules
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Reference:
MLX#�
CDA #
EXHIBIT A —ECONOMIC ANALYSIS AND PAYMENT COMPUTATION
EXCEPTIONAL CASE FACILITIES AGREEMENT
I. GENERAL: Applicant Name: City of Redding
Location of Facilities: 17120 Clear Creek Road,Redding,CA
Type of Project: Redding Power Plant-To Meet Electric Pealing Demand
Rate Schedule: GTT(Interruptible Transport)
II. ESTIMATED ANNUAL ENERGY USAGE/BASE ANNUAL REVENUE
BTU/Hr. Therms Base Annual
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F4ui=cnt Conner Per Year Revenue
Gas:
Gas Turbines&Boilers 13 MMCF/Hr, 0 0
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TOTAL
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' III. COMPUTATION OF PAYMENT
A. TOTAL CONSTRUCTION COSTS(Capital Investment) ..................... $2,427,380
Less: Contingencies,M&-O,Betterments,
and Non-Capitalized Trench;
Plus: Transformers,Meters&Services
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B. ESTIMATED BASE ANNUAL REVENUE........................................... $0
C. SUPPORTED CAPITAL COSTS ............................................................ $0
Cast-to-Revenue Ratio x"B"
D. CONTRIBUTION BY OTHER UTILITIES............................................ $0
E. UNSUPPORTED CAPITAL CONTRIBUTION .................................... $2,427,380
Applicant Contribution,or"A"-"C"-"D"
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F. CIRC TAX.............................................................................................. $849,583
"E"times 35%for CIAC Tax
G. COST-OF-OWNERSHIP FUND CALCULATION ............................... S1,753,743
"E" x 9.87 Present Worth Factor x
.61%Monthly Cast-of-Ownership Percentage x 12 months
H. TOTAL EXTENSION PAYMENT SUBJECT TO REFUND ............... $5,030,706
"E"+"F'+"G"(if applicable)
I. MISC.CREDIT(i.e.,Gas Trenching,Engineering Advance,etc.) ........ <$109,800>
J. MISC.DEBIT SUBTOTAL...................................................................... $0
Trench Value(non capitalized) $0
CIAC Tax on Trench Value 50
Other(Inspection,etc.) 50
K. TOTAL PAYMENT("H" -"I"+"J") ..................................................... $4,920,906
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PROJECT DFSCREMON
The City of Redding(COR) is installing natural gas burning turbines at a site located along Clear Creek Rd. in Redding. They intend to
generate enough electricity with the turbines to meet their peak summer load requirements.
The natural gas turbines and boilers will have a natural gas load of approximately 1.3 MMCF per hour. The power plant is located
approximately 3 miles west of Highway 273 on Clear Creek Rd in Redding. The nearest practical gas source is transmission line 402
which parallels State Hwy. 273. In order to serve this load,approximately 3.3 miles of PG&E's gas transmission line "402' will be
paralleled with 10-inch steel from the corner of Balls Ferry and Adobe Roads to the corner of Panorama and Kimberly Roads. The
Normal Operating Pressure(NOP)of this line will be raised to 10% under the Maximum Allowable Operating Pressure(MAOP)which
is 600 psig, and 27 gas regulator stations must be rebuilt to operate under these new, increased pressures. The transmission gas
regulator station at line 402's tap will be rebuilt to handle this new load and a customer meter set will be installed at the corner of
i Eastside and Waverly Roads. The customer meter set will be designed to serve the 1.3 MMCF per hour load at transmission pressure.
Exhibit 'T
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