Climate Challenge Participation Letter

DOE's Energy Partnerships for a Strong Economy

This Participation Accord describes the commitments that Niagara Mohawk Power Corporation ("NMPC") and the United States Department of Energy (DOE) have made to participate in the Climate Challenge program in pursuit of the President's goals for reducing greenhouse gas emissions. The Climate Challenge Program is a joint, voluntary effort of DOE and the electric utility industry to reduce, avoid or sequester greenhouse gas emissions. The framework of the Climate Challenge Program was established in the Climate Challenge Program Memorandum of Understanding and exhibits thereto dated April 20, 1994 (the Climate Challenge Program MOU). See Attachment A hereto.

I.NMPC Commitments

A.
Consistent with paragraph II.B.1. of the Climate Challenge Program MOU, NMPC commits to limit Company carbon dioxide (CO2) emissions (in tons) to its 1990 baseline level. NMPC also commits to maintain its CO2 emissions at or below that level each year through the year 2000. The Company's 1990 baseline emissions and business activities included in the baseline will be documented in accordance with provision I.E. below.

B.

In support of the commitments in I.A., NMPC commits to undertake and will continue to undertake a variety of measures to limit its total greenhouse gas emissions. Examples of such measures which have been undertaken since 1990 or are expected to be undertaken in the future are attached as Attachment B.

C.

If in any year NMPC's baseline commitment level is not met, CO₂ reductions which are available from the cumulative total reductions achieved below the baseline level since 1990 through greenhouse gas reduction measures undertaken by NMPC, and which have not been transferred to any other party, will be applied to offset the exceedance (in tons) above the 1990 baseline CO₂ emissions level. If sufficient offsets are unavailable in any year, NMPC will determine the shortfall in tons of CO₂ and will investigate with DOE's assistance additional measures to limit or reduce such emissions.

D.
NMPC will report annually on activities and achievements under the Climate Challenge Program. Results achieved during each year will be reported in a clear and understandable manner that is consistent with the guidelines adopted pursuant to subsection 1605(b) Energy Policy Act and the Climate Challenge accounting protocols in Supplemental Guidance on Commitment Definitions and Reporting of the Climate Challenge Program MOU ("Exhibit B").

E.

Within 90 days of the signing of this Accord, NMPC will submit to DOE an initial annual report (1) identifying company business activities and the corresponding CO₂ emissions total included in its 1990 baseline level, (2) documenting annual CO₂ emissions beginning in 1990, (3) listing measures undertaken since 1990 which reduce, limit, or avoid emissions of CO₂ and other greenhouse gases, and (4) reporting results achieved versus the 1990 baseline commitment on an annual and cumulative basis. NMPC will also include in this report for informational purposes estimates of CO₂ emissions resulting from other energy purchase commitments. The initial report will serve as the model under this Accord for future annual reporting by NMPC that is in addition to reporting under 1605(b).

F.

The commitments specified above will apply through the year 2000. NMPC and DOE agree to reopen or revisit this Accord by December 31, 1998, to address NMPC's continued participation in the Climate Challenge Program and the nature of NMPC's commitments after the year 2000.

G.

NMPC will confer with DOE on or before December 31, 1996 to evaluate jointly the progress of NMPC in achieving its Climate Challenge goals and to discuss possible adjustments to its voluntary commitments.

H.

The Climate Challenge representative for NMPC will be Dr. Martin Smith, Chief Environmental Scientist, NMPC, 300 Erie Boulevard West, Syracuse, New York 13202. NMPC will notify DOE prior to or, in any event, no later than 30 days after any change in the representative.

A.
DOE, as outlined in the Climate Challenge MOU, and NMPC agree that the Climate Challenge should provide utilities with maximum flexibility to pursue cost-effective, customized strategies including but not limited to demand-side management, electrotechnologies, increased use of renewable energy sources, forestry and other CO₂ sequestration activities, fuel switching, efficiency improvement, and international projects.

B.
DOE, as outlined in the Climate Challenge MOU, and NMPC agree that the Climate Challenge should promote the development and demonstration of innovative methods to promote cooperative, joint utility efforts designed to support both national objectives related to global warming mitigation and individual utility environmental goals in an economically-efficient manner, including emissions reduction agreements between Climate Challenge participants to allow the participants to meet their Climate Challenge commitments in the most cost-effective manner.

C.

NMPC may transfer greenhouse gas emission reductions to other Climate Challenge participants, provided that the transferred emission reductions are below the baseline level and are:

1. The result of measures undertaken by NMPC; and

2. Not applied to offset NMPC emissions in another year in which NMPC emissions are in excess of the Company's 1990 baseline.

D.

NMPC agrees to provide DOE with a copy of any agreements covering transactions described in paragraph II.C. of this Accord.

A.
DOE's commitments to NMPC are those set out in section III of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B.

DOE will consider NMPC requests to intervene in regulatory proceedings of federal, state and local commissions and boards on issues pertinent to the Climate Challenge Program. Before DOE intervenes in regulatory and other proceedings pertaining to NMPC for purposes of addressing Climate Challenge Program issues, it will provide notice to NMPC.

C.

DOE will provide an annual report to NMPC describing the actions that it has taken to fulfill its commitments under section III and · Exhibit C of the Climate Challenge Program MOU and the results of those actions.

D.
The Climate Challenge Program representative for DOE, who will serve as liaison to NMPC, will be Allan Hoffman, U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, D.C. 20585 --(202)586-1786. DOE will notify DOE prior to or, in any event, no later than 30 days after any change in liaison responsibilities or personnel.

E.

DOE will consider request to assist NMPC its interactions with other regulatory agencies or governmental authorities (including but not limited to IRS, EPA, NYS Public Service Commission) in furtherance of the goals or commitments set forth herein, including the implementation of any cooperative action with another utility for purpose of achieving Climate Challenge objectives.

F.

In a manner and to an extent consistent with Department policy, DOE will support recognition of greenhouse gas emissions reductions achieved through voluntary efforts in any future national programs to mitigate climate change.

A.
Use of DOE-developed materials by NMPC will be governed by the provisions of section IV of the Utility Climate Challenge MOU.

B.

In additional to the foregoing provisions, DOE and NMPC agree to act in accordance with the following principles, statements and actions contained in the Utility Climate Challenge MOU, which are hereby incorporated by reference:

1. Principles - section 1.

2. General Provisions - section V.A-V.D, V.F and V.G.

C.

Either party may withdraw from this Participation Accord or any of its activities under the Climate Challenge Program without penalty and without being subject to remedies at law or equity.

                   NIAGARA MOHAWK POWER CORPORATION

                   BY:_____________________________
                   DATE: February 2, 1995



                   U.S. DEPARTMENT OF ENERGY

                   BY:____________________________
                   DATE: February 3, 1995

Please send comments to:
Lawrence.Mansueti@hq.doe.gov