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38 Title Page Southern California Edison Company Tariff Title: Rate Schedule Tariff Record Title: Rate Schedule FERC No. 425 FERC FPA Electric Tariff AMENDED AND RESTATED ELDORADO SYSTEM OPERATINGAGREEMENT AMONG DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES NEVADA POWER COMPANY (d/b/a NV ENERGY) SALT RIVER AGRICULTURAL IMPROVEMENT AND POWER DISTRICT AND SOUTHERN CALIFORNIA EDISON COMPANY Contract Effective Date: 12/16/69 Tariff Record Proposed Effective Date: 04/30/ Version Number: PAB004 Option Code: A

39 Page No. 1 AMENDED AND RESTATED ELDORADO SYSTEM OPERATING AGREEMENT TABLE OF CONTENTS 1. PARTIES RECITALS AGREEMENT EFFECTIVE DATE DEFINITIONS PERFORMANCE OF OPERATING WORK CAPACITY ENTITLEMENTS IN ELDORADO SYSTEM CURTAILMENT OF TRANSMISSION CAPACITY IN THE ELDORADO SYSTEM AND THE LUGO-MOHAVE LINE REALLOCATION OF CAPACITY ENTITLEMENTS DURING CURTAILMENT TRANSMISSION LOSSES IN THE ELDORADO SYSTEM OPERATING EMERGENCY EXPENSES OF OPERATING WORK SPARE PARTS BILLING AND PAYMENT TAXES ANNUAL BUDGETS CAPITAL IMPROVEMENTS SCHEDULING OPERATING INSURANCE LIABILITY ADMINISTRATION PROVISIONS OF CO-TENANCY AGREEMENT TERMINATION AUTHORIZATION AND APPROVALS...36

40 Page No RIGHTS AND REMEDIES GOVERNING LAW...36 EXHIBITS A ALLOCATION OF OVERHEAD EXPENSES A-1-3 B PAYROLL TAX RATIO B-1 C WORKMEN S COMPENSATION RATIO C-1 D BENEFITS RATIO D-1 E A&G RATIO E-1 F CAPITAL A & G RATIO F-1 G DETERMINATION OF OPERATION AND MAINTENANCE G-1 AND CONSTRUCTION LABOR RATIOS TO BE USED IN EXHIBITS E AND F H MOHAVE 500-KV SWITCHYARD COST RESPONSIBILITIES H-1 AND ONE-LINE DIAGRAM

41 Page No. 3 AMENDED AND RESTATED ELDORADO SYSTEM OPERATING AGREEMENT 1. PARTIES: The parties to this Amended and Restated Eldorado System Operating Agreement (Operating Agreement) are: DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and existing under the Charter of the City of Los Angeles, a municipal corporation of the State of California (City); NEVADA POWER COMPANY, doing business as NV Energy, a Nevada corporation (Nevada); SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district, organized and existing under the laws of the State of Arizona (Salt River Project); and SOUTHERN CALIFORNIA EDISON COMPANY, a California corporation (Edison). 2. RECITALS: This Operating Agreement is made with reference to the following facts, among others: 2.1. On June 28, 1967, Nevada, Salt River Project and Edison entered into the Eldorado System Construction Agreement On December 20, 1967, Nevada, Salt River Project and Edison entered into the Eldorado System Conveyance and Co-Tenancy Agreement On December 23, 1968, City and Edison entered into the Eldorado System Construction Agreement Assignment and into the Eldorado System Conveyance 2 and Eldorado System Conveyance and Co-Tenancy Agreement Assignment As of April 29, 2011, the owners of the Mohave Project, the Eldorado Co- Owners, and Nevada executed an Agreement Between the Mohave Co- Owners, the Eldorado Co-Owners, and Nevada Power Company Regarding the Mohave Generating Station Bay Positions in the Mohave 500 kv Switchyard ( Switchyard Agreement ) Pursuant to the terms of the Switchyard Agreement, Nevada will be provided the right to use the former Mohave Project Unit No. 1 bay

42 Page No. 4 position in the Mohave 500-kv Switchyard as a terminus for a second 500- kv transmission line between Nevada s Laughlin Substation and the Mohave 500-kv Switchyard ( Second Laughlin Line ). Nevada will assume cost responsibility for such bay position in the Mohave 500-kv Switchyard upon the in-service date of the Second Laughlin Line as provided herein. 3. AGREEMENT: The Co-Owners agree as follows: 4. EFFECTIVE DATE: This Operating Agreement was executed by all of the Co-Owners, effective as of December 16, DEFINITIONS: The following terms, when used herein, whether in the singular or the plural, shall have the meaning specified: 5.1. A&G RATIO: The ratio to be determined in accordance with the method set forth in Exhibit E hereof ACCOUNTING PRACTICE: Generally accepted accounting principles, in accordance with the FPC Accounts, applicable to electric utility operations AUDITING COMMITTEE: The Auditing Committee established pursuant to Section 9.1 of the Co-Tenancy Agreement BENEFITS RATIO: The ratio to be determined in accordance with the method set forth in Exhibit D hereof. 5.4A CAPACITY: Electrical rating expressed in kilowatts or kilovolt-amperes. 5.4B CAPACITY ENTITLEMENT: The capacity entitlement of each Co- Owner in the Eldorado System pursuant to Sections 7.1, 7.2 and 7.3 of this Operating Agreement. For purposes of Sections 7.5 and 7.6 of this Operating Agreement, Edison's Capacity Entitlement shall be 884 MW CAPITAL A&G RATIO: The ratio to be determined in accordance with the method set forth in Exhibit F hereof.

43 Page No CAPITAL IMPROVEMENTS: Any enlargement or improvement of any existing land or land rights, structures, facilities or equipment constituting a part of the Eldorado System, or the substitution thereof of other land or rights, structures, facilities or equipment, where such substitution constitutes an enlargement or improvement as compared with that for which it is substituted, and which, in accordance with Accounting Practice, would be capitalized COMPONENT(S) OF THE ELDORADO SYSTEM: Those facilities described in Section 5.10 of the Co-Tenancy Agreement CONTROL AREA: All or a part of a Co-Owner's electric system, or a combination thereof with one or more other electric systems, to which a common generation control scheme is applied COORDINATING COMMITTEE: The Coordinating Committee established pursuant to Section 9.1 of the Co-Tenancy Agreement CO-OWNER(S): Any, some or all of Nevada, Salt River Project, City and Edison CO-TENANCY AGREEMENT: The Eldorado System Conveyance and Co-Tenancy Agreement, as amended. 5.11A EDISON MOHAVE FACILITIES: Edison's series capacitors and shunt reactors located on the Mohave Plant Site (as defined in the Mohave Project Operating Agreement dated as of July 6, 1970, as amended) for the Lugo-Mohave Line including power circuit breakers, controls, relays, wiring, metering and any other equipment necessary for a complete installation and operation of such capacitors and reactors ELDORADO-MEAD LINES: The No. 1 and No. 2 Eldorado-Mead 220- kv AC transmission lines as described in Section of the Co- Tenancy Agreement ELDORADO SUBSTATION: The facilities as shown on Exhibit 5 to the Co-Tenancy Agreement, at pages 3, 4 and 5 thereof, the General Facilities and other miscellaneous equipment necessary for the operation of all such facilities.

44 Page No ELDORADO SYSTEM: All of the Components of the Eldorado System ENERGY: Kilowatt-hours ENGINEERING AND OPERATING COMMITTEE: The Engineering and Operating Committee established pursuant to Section 9.1 of the Co- Tenancy Agreement FPC ACCOUNTS: The Federal Energy Regulatory Commission's Uniform System of Accounts prescribed for Public Utilities and Licenses (Class A and Class B) in effect on January 1, 1970, subject to the provisions of the Federal Power Act, as such System of Accounts may be in effect from time to time. References in this Operating Agreement to specific FPC Account Number(s) shall mean the FPC Account Number(s) in effect as of the execution date of this Operating Agreement or any successor FPC Account Number(s) GENERAL FACILITIES: The facilities at Eldorado Substation, other than the following: transmission line termination facilities, transformer banks, transformer bank termination facilities, tertiary shunt reactors, and property to be owned solely by Edison as listed on Exhibit 5 to the Co- Tenancy Agreement, at page 15 thereof LUGO-MOHAVE LINE: The 500-kv AC transmission line between the points of termination in the Mohave 500-kv Switchyard and Edison's Lugo 500-kv Substation LUGO-ELDORADO LINE: The 500-kV AC transmission line between the points of termination in the 500-kV switchyard at Eldorado Substation and Edison's Lugo Substation MOHAVE PROJECT: A 1,510 megawatt nameplate rating electrical generating station under construction by the Co-Owners in Clark County, State of Nevada MOHAVE-ELDORADO LINE: The 500-kv AC transmission line from the Mohave 500-kv Switchyard to the Eldorado Substation as described in Section of the Co-Tenancy Agreement.

45 Page No MOHAVE 500-kv SWITCHYARD: The 500-kv ac switchyard located on the Mohave Plant Site (as such site is defined in the Mohave Project Operating Agreement dated as of July 6, 1970, as amended) which is part of the Eldorado System. The Mohave 500-kv Switchyard is described more particularly in Exhibit 5 of the Co-Tenancy Agreement. 5.23A NEVADA MOHAVE FACILITIES: Nevada's 25 mva, kv transformer bank (plus a spare transformer unit), power circuit breakers, controls, relays, wiring, metering, and any other equipment necessary to establish and operate a 13-kv, 25 mva Capacity delivery point to Nevada OPERATING AGENT: The Co-Owner responsible for the operation and maintenance of the Eldorado System pursuant to this Operating Agreement OPERATING EMERGENCY: An unplanned event or circumstance which reduces or may reduce the amount of transmission capacity of the Eldorado System that may be made available under prudent operating criteria OPERATING INSURANCE: Policies of insurance to be procured and maintained in accordance with Section 19 hereof OPERATING WORK: Engineering, contract preparation, purchasing, repair, supervision, training, expediting, inspection, testing, protection, operation, use, management, replacement, retirement, reconstruction and maintenance of and for the Eldorado System. Operating Work shall include "Eldorado Work" under the Facilities Services Agreement dated as of November 29, 2000 between the Co-Owners and the participants in the Mohave Project OPERATING WORK LIABILITY: Liability of one or more Co-Owners for any loss, damage, claim, cost, charge or expense of any kind or nature (including direct, indirect or consequential loss, damage, claim, cost, charge or expense) suffered or incurred by any party other than a Co- Owner, whether or not resulting from the negligence of any Co-Owner, its directors, officers, employees, or any other person or entity whose

46 Page No. 8 negligence would be imputed to such Co-Owner, that has resulted or may result in the future from: The performance or non performance of Operating Work or of the obligations of any Co-Owner under any of the System Agreements The operation, maintenance, use or ownership of the Eldorado System OWNERSHIP RATIOS: Those ratios of the Components of the Eldorado System as set forth in Exhibit 5 to the Co-Tenancy Agreement INTENTIONALLY LEFT BLANK PAYROLL TAX RATIO: The ratio to be determined in accordance with the method set forth in Exhibit B hereof POWER: Megawatts SPARE PARTS: Spare parts or equipment, the cost of which is capitalized, which are stocked at the Eldorado System for emergency use and which are not scheduled for periodic replacement SYSTEM AGREEMENTS: The agreements defined as System Agreements in Section 5.33 of the Co-Tenancy Agreement, the Eldorado System Construction Agreement Assignment, and the Eldorado System Conveyance and Co-Tenancy Agreement Assignment, as said agreements may be supplemented or amended. References in this Operating Agreement to any specific System Agreement by name shall refer to said agreement as it may be supplemented or amended UNITS OF PROPERTY: Retirement units as described in the Federal Power Commission s List of Units of Property for Use in Connection with Uniform System of Accounts Prescribed for Public Utilities and Licensees, in Effect on January 1, 1961, or other items of property which are capitalized in accordance with Accounting Practice WILLFUL ACTION: Action taken or not taken by a Co-Owner (including the Operating Agent) at the direction of its directors, officers or employees having management or administrative responsibility affecting its

47 Page No. 9 performance under any of the System Agreements, which action is knowingly or intentionally taken or failed to be taken with conscious indifference to the consequences thereof, or with intent that injury or damage would result or would probably result therefrom. Willful Action does not include any act or failure to act which is merely involuntary, accidental or negligent Action taken or not taken by a Co-Owner (including the Operating Agent) at the direction of its directors, officers or employees having management or administrative responsibility affecting its performance under any of the System Agreements, which action has been determined by final arbitration award or final judgment or judicial decree to be a material default under any of the System Agreements and which occurs or continues beyond the time specified in such arbitration award or judgment or judicial decree for curing such default or, if no time to cure is specified therein, occurs or continues thereafter beyond a reasonable time to cure such default Action taken or not taken by a Co-Owner (including the Operating Agent) at the direction of its directors, officers or employees having management or administrative responsibility affecting its performance under any of the System Agreements, which action is knowingly or intentionally taken or failed to be taken with the knowledge that such action taken or failed to be taken is a material default under the System Agreements The phrase "employees having management or administrative responsibility" as used in this Section 5.36 means employees of a Co-Owner (including the Operating Agent) who are responsible for one or more of the executive functions of planning, organizing, coordinating, directing, controlling, and supervising such Co- Owner's performance under any of the System Agreements.

48 Page No WORKMEN'S COMPENSATION RATIO: The ratio to be determined in accordance with the method set forth in Exhibit C hereof. 6. PERFORMANCE OF OPERATING WORK: The Operating Work shall be performed as follows: 6.1. Edison shall be the Operating Agent City, Nevada, and Salt River Project hereby appoint Edison as their agent and Edison hereby agrees to undertake, as their agent and as principal on its own behalf, the responsibility for the performance of Operating Work in accordance with this Operating Agreement Subject to this Operating Agreement, the Operating Agent shall: Perform the Operating Work in accordance with generally accepted practices in the electric utility industry as such practices may be affected by the design and operational characteristics of the Eldorado System, the rights and obligations of the Co-Owners under the System Agreements, and any other special circumstances affecting the Operating Work Contract for, furnish, and obtain the services and studies necessary for performance of Operating Work Execute, enforce and comply with all contracts entered into in the name of the Operating Agent, acting as principal on its own behalf and as agent for all of the other Co-Owners, in connection with the performance of Operating Work Furnish and train the necessary personnel for performance of Operating Work Comply with any and all laws and regulations applicable to the performance of Operating Work, including all applicable provisions of any workmen's compensation acts Purchase and procure, through and from any sources as it may select, the equipment, apparatus, machinery, materials, tools, and supplies necessary for the performance of Operating Work.

49 Page No Keep and maintain records of monies received and expended, obligations incurred, credits accrued, and contracts entered into in connection with the performance of Operating Work and make such records available for inspection by the other Co-Owners at reasonable times and places Not suffer any liens to remain in effect unsatisfied against the Eldorado System (other than the liens permitted under Section 11.1 of the Co-Tenancy Agreement, for taxes or assessments not yet delinquent, for workman s compensation awards, for labor and material not yet delinquent, or undetermined charges for liens incidental to the performance of Operating Work); provided, however, that the Operating Agent shall not be required to pay or discharge any such lien as long as the Operating Agent in good faith shall be contesting the same or the lawfulness or validity thereof, which contest shall operate during the pendency thereof to prevent the collection or enforcement of such lien so contested Provide the Engineering and Operating Committee and the Auditing Committee with all written statistical and administrative reports, operating reports, written budgets, accounting records and information, and other records including station operating logs pertaining to Operating Work which may be necessary for such Committee to perform their responsibilities hereunder Keep the Co-Owners fully and promptly advised of major changes in conditions or other major developments which affect the performance of Operating Work, as well as known defaults under System Agreements, and furnish the Co-Owners with copies of any notices given or received pursuant to the System Agreements Arrange for the placement and maintenance of the Operating Insurance Present claims to any insurer for losses and damages covered by valid and collectible Operating Insurance procured by the

50 Page No. 12 Operating Agent and by any Co-Owner directly from an insurer. Investigate, adjust, settle, decline and defend claims against the Co-Owners arising out of the performance of Operating Work when said claims are not covered by valid and collectible Operating Insurance; provided, that the Operating Agent shall obtain the agreement of the Co-Owners acting through the Coordinating Committee prior to disposing of any claim or combination of claims arising out of the same occurrence which exceeds twenty-five thousand dollars ($25,000) Assist, as requested, any Co-Owner and its insurer in the investigation, adjustment, and settlement of any loss or claim arising out of Operating Work for which payment may be made on account of valid and collectible Operating Insurance applicable thereto procured by such Co-Owner; provided, that the Operating Agent may agree (by separate agreement) that a Co-Owner procuring any policy or policies of Operating Insurance in accordance with Section 19.2 hereof shall have the authority and responsibility to (i) present, investigate, adjust, settle, decline and defend claims or potential claims covered by said policies in favor of the Co-Owners and against any one or more of said insurers; and (ii) present, investigate, adjust, settle, decline and defend claims against the Co-Owners arising out of the performance of Operating Work when said claims or portions thereof are not covered by said policies; and provided further, that such Co-Owner shall obtain the agreement of the Co-Owners, acting through the Coordinating Committee, prior to the settlement of any claim or combination of claims arising out of the same occurrence which exceeds twenty-five thousand dollars ($25,000) Upon the request of any Co-Owner, provide such Co-Owner, in reasonable quantity without direct charge therefore, a copy or copies of any reports, studies, record, list, budget, manual,

51 Page No. 13 accounting or billing summary, classification of accounts or other documents or revisions of any of the aforesaid items, all as prepared in accordance with this Operating Agreement The other Co-Owners shall lend and be properly reimbursed for all necessary and available assistance as may be requested by the Operating Agent in the performance of Operating Work In addition to performing Operating Work, the Operating Agent shall, but not as Operating Agent, operate and maintain the Edison Mohave Facilities as though such facilities were part of the Eldorado System, and allocate all costs and expenses applicable to such facilities in accordance with Section hereof. Nevada shall operate and maintain the Nevada Mohave Facilities at its expense. 7. CAPACITY ENTITLEMENTS IN ELDORADO SYSTEM: 7.1. Nevada and Salt River Project shall have a Capacity Entitlement in each Component of the Eldorado System as follows: Nevada 222 MW Salt River Project 158 MW 7.2. City shall have a Capacity Entitlement of 316 MW in each Component of the Eldorado System in which it has an undivided ownership interest as set forth in Section 7.2 of the Co-Tenancy Agreement Edison shall have a Capacity Entitlement of 884 MW in the Mohave 500- kv Switchyard. Edison shall have a Capacity Entitlement in each other Component of the Eldorado System equal to the difference between (a) the sum of the Capacity Entitlements therein of Nevada, Salt River Project and the City, and (b) the entire capacity of each such other Component of the Eldorado System Subject to the provisions of this Section 7.4, each Co-Owner shall be entitled to have an amount of Power and Energy transmitted through each Component of the Eldorado System equal to its Capacity Entitlement in each such Component of the Eldorado System.

52 Page No Each Co-Owner shall be entitled to use for any purpose all or any part of the unused capacity in the Mohave 500-kv Switchyard to the extent that such use does not interfere with or impair the Capacity Entitlements described in Section 7 or does not create an overloaded condition on any of the Mohave 500-kv Switchyard facilities. When the unused capacity in the Mohave 500-kv Switchyard facilities is a limiting factor and two or more Co- Owners desire to use such unused capacity, they shall do so in proportion to their respective Capacity Entitlements therein Co-Owners desiring to use unused capacity in the Mohave 500-kv Switchyard pursuant to Section hereof shall notify the Operating Agent of the time, amounts and conditions of the use desired. Such notification may be oral if it is made in accordance with procedures established by the Engineering and Operating Committee and reduced to writing as soon as practicable. The Operating Agent shall determine if the required capacity is available, or anticipated to be available, and shall so notify the affected Co-Owners, and shall permit such use to the extent such capacity is available but subject to the terms of relinquishment to be established by the Engineering and Operating Committee The capacity of each component of the Mohave 500-kv Switchyard facilities shall be established by the Engineering and Operating Committee. Such capacities may be revised by the Operating Agent with the concurrence of the Engineering and Operating Committee if changes in components or conditions of the use thereof shall require such revisions In the event the Operating Agent, determines, pursuant to Section 8 hereof, that it is necessary to curtail the transmission capacity of the Mohave-Eldorado Line, then each Co-Owner shall be entitled to have an amount of Power, and the Energy associated therewith, equal to its Capacity Entitlement in the Mohave-Eldorado Line, transmitted from the

53 Page No. 15 Mohave 500-kv Switchyard to the Eldorado Substation through the Lugo- Mohave and Lugo-Eldorado Lines, which lines are owned solely by Edison (not as a Co-Owner), and through the remaining capacity of the Mohave-Eldorado Line; provided, however, that if the amount of available transmission capacity in the Lugo-Mohave or Lugo-Eldorado Lines, as determined by Edison (not as Co-Owner), and the amount of remaining transmission capacity in the Mohave-Eldorado Line is not sufficient to transmit said amount of Power and Energy, then all Co-Owners shall be entitled to the amount of such available and remaining transmission capacities in proportion to their respective Capacity Entitlements in the Mohave-Eldorado Line In the event Edison (not as a Co-Owner) determines that it is necessary to curtail the transmission capacity of the Lugo-Mohave Line, then each Co- Owner shall be entitled to have an amount of Power, and the Energy associated therewith, equal to its Capacity Entitlement in the Mohave- Eldorado Line, transmitted from the Mohave 500-kv Switchyard to the Eldorado Substation through the Mohave-Eldorado Line and through the remaining capacity of the Lugo-Mohave Line; provided, however that if the amount of available transmission capacity in the Mohave-Eldorado Line, as determined by the Operating Agent pursuant to Section 8 hereof, and the amount of remaining transmission capacity in the Lugo-Mohave Line, as determined by Edison (not as a Co-Owner), is not sufficient to transmit said amount of Power and Energy, then all Co-Owners shall be entitled to the amount of such available and remaining transmission capacities in proportion to their respective Capacity Entitlements in the Mohave-Eldorado Line In the event the Operating Agent determines, pursuant to Section 8 hereof, that it is necessary to curtail the transmission of Power and Energy in the Eldorado-Mead Lines, then the Co-Owners owning said Component of the Eldorado System shall be entitled to the amount of the remaining

54 Page No. 16 transmission capacity in proportion to their ownership interests in the Eldorado-Mead Lines. 8. CURTAILMENT OF TRANSMISSION CAPACITY IN THE ELDORADO SYSTEM AND THE LUGO-MOHAVE LINE: 8.1. The Operating Agent shall as soon as practicable notify the dispatchers of each Co-Owner of an occurrence of an Operating Emergency and the amount of any resulting curtailment which shall be determined as follows: Provided that the determination is not made pursuant to Section hereof, the Operating Agent shall determine the amount of curtailment and notify the Co-Owners of the remaining capacity entitlements The Engineering and Operating Committee shall direct joint studies, and based on such studies shall determine the amount of curtailment for specific Operating Emergencies. Assumption for such studies shall be made as follows: Assumptions concerning the operating conditions under such Operating Emergencies within the Eldorado System shall be determined by the Engineering and Operating Committee Assumptions concerning the operating conditions on facilities affecting, but not part of, the Eldorado System under such Operating Emergencies shall be determined by the Engineering and Operating Committee; provided that, if agreement is not reached by such Committee, such assumptions shall be determined by the owner of such facilities Assumptions regarding necessary reliability for each of the interconnected systems shall be determined by the Engineering and Operating Committee; provided that, if agreement is not reached by such Committee, such

55 Page No. 17 assumptions shall be determined by the owner of the system. 9. REALLOCATION OF CAPACITY ENTITLEMENTS DURING CURTAILMENT: 9.1. Any Co-Owner not scheduling an amount of Power equal to its maximum Capacity Entitlement available to it during any curtailment of any Component of the Eldorado System, other than the Eldorado-Mead Lines, may, but is not obligated to, declare that the difference between such maximum Capacity Entitlement and such Co-Owners' actual schedule of power is unused transmission capacity. Any such unused transmission capacity shall be made available to other Co-Owners for the purpose of transmission of power Edison, during periods of curtailment of the Eldorado-Mead Lines, shall make available to Salt River Project and Nevada, for the purpose of transmitting Mohave Project Power, any of its unused capacity in such lines. 10. TRANSMISSION LOSSES IN THE ELDORADO SYSTEM: Transmission losses in the Eldorado System shall be determined by the Engineering and Operating Committee. 11. OPERATING EMERGENCY: In the event of an Operating Emergency, the Operating Agent shall take any and all steps reasonably necessary and required to terminate the Operating Emergency, subject to the provisions of this Section As soon as practicable after the commencement of an Operating Emergency, the Operating Agent shall advise the Co-Owners of the occurrence of the Operating Emergency, its nature and the steps taken or to be taken to terminate the Operating Emergency, including a preliminary estimate of the expenditures required to terminate the Operating Emergency In the event the Operating Agent determines that the estimated amount required to terminate an Operating Emergency resulting in damage to the

56 Page No. 18 Eldorado System would exceed the replacement cost of the largest Eldorado System transformer, the Operating Agent shall so notify the Co- Owners and shall call a meeting of the Engineering and Operating Committee to be held not later than five (5) days following such determination. At such meeting the Operating Agent shall submit the following information: The estimated date when the Operating Emergency can be terminated The person or persons whom the Operating Agent proposes would perform the work and furnish the materials required to terminate the Operating Emergency The estimated amount of overtime, if any, which would be paid in order to expedite the termination of the Operating Emergency The costs that are proposed to be capitalized, facilities to be retired, and salvage to be realized The costs that are proposed to be charged as maintenance expense Such other information as may be necessary and required by the Engineering and Operating Committee to recommend the manner in which the Operating Emergency is to be terminated The Engineering and Operating Committee shall review and approve the items as set forth in Section 11.3 hereof relative to the termination of the Operating Emergency or shall recommend to the Operating Agent an alternate thereto In the event the Operating Emergency results in the destruction or damage of less than substantially all of the Eldorado System and the Co-Owners are unable to agree on the manner of repair, restoration or reconstruction, the Operating Agent, pending the resolution of such disagreement, shall be authorized to proceed with such repair, restoration, or reconstruction in accordance with generally accepted practices in the utility industry as such practices may be affected by special conditions existing at the time of the Operating Emergency.

57 Page No The costs incurred and amounts expended and charged to maintenance expense by the Operating Agent for repair, restoration, and reconstruction of the Eldorado System arising out of an Operating Emergency shall be allocated to the Co-Owners in proportion to their ownership in the Components of the Eldorado System being repaired, restored, or reconstructed, and shall be billed in accordance with Section 14 hereof. Such costs incurred and amounts expended by the Operating Agent which are for Capital Improvements shall be allocated to the Co-Owners in proportion to their ownership in the Components of the Eldorado System being repaired, restored or reconstructed and shall be billed in accordance with Section 14 hereof Edison, at its sole expense and responsibility, and Nevada, at its sole expense and responsibility, shall effect all repairs, restoration or reconstruction to Edison Mohave Facilities and Nevada Mohave Facilities, respectively, in coordination with the Operating Agent. 12. EXPENSES OF OPERATING WORK: In determining the expenses of Operating Work, the Operating Agent shall include the following expenses to the extent that they are chargeable to the Eldorado System in accordance with Accounting Practice: The operation expenses chargeable to FPC Accounts 560 and 562 through 567, inclusive The maintenance expenses chargeable to FPC Accounts 568 through 573, inclusive Overhead expenses applicable to the expenses included in Sections and hereof incurred by the Operating Agent. Such overhead expenses shall be determined in accordance with Exhibit A hereto Applicable labor loading charges for Operating Agent's employees whose salaries and wages are charged to the operation and maintenance expense accounts. Such labor loading charges shall include, but not be limited to, time off allowances, employee

58 Page No. 20 payroll taxes chargeable to FPC Account 408 and employee pensions and benefits chargeable to FPC Account The Operating Agent's administrative and general expenses associated with the performance of Operating Work as determined in accordance with Section 12 hereof All costs incurred by the Operating Agent which are chargeable to FPC Accounts 408 (excluding payroll and ad valorem taxes), 924, and A portion of the load dispatching salaries and expenses incurred by Edison which are chargeable to FPC Account 561. Such portion shall be determined by multiplying the total of such salaries and expenses charged to FPC Account 561 by a ratio, the numerator of which is the total payroll charged to the Eldorado System, and the denominator of which is the total payroll supervised by Edison's Manager of Power Supply, excluding salaries charged to FPC Account Payroll tax expenses incurred by the Operating Agent which are allocable to the Eldorado System pursuant to Section hereof shall be determined by multiplying the sum of the Operating Agent's total labor charges included in the expenses determined in accordance with Sections , , and hereof by the Payroll Tax Ratio. Such Payroll Tax Ratio shall be applied as set forth in Sections 12.6 and 12.7 hereof Employee pensions and benefits expenses incurred by the Operating Agent which are allocable to the Eldorado System pursuant to Section hereof shall be determined by multiplying the sum of the Operating Agent's total labor charges included in the expenses determined in accordance with Sections , , and the hereof by the Benefits Ratio. Such Benefits Ratio shall be applied as set forth in Sections 12.6 and 12.7 hereof That portion of employee workmen's compensation insurance expenses incurred by the Operating Agent which is allocable to the Eldorado

59 Page No. 21 System as part of administrative and general expenses pursuant to Section hereof and to the labor expense portion of FPC Account 926 shall be determined by multiplying the sum of the Operating Agent's total labor charges included in FPC Accounts 920, 921, 926, and 932 by the Workmen's Compensation Ratio. Such Workmen's Compensation Ratio shall be applied as set forth in Sections 12.6 and 12.7 hereof The Operating Agent's administrative and general expenses which are allocable to operation and maintenance of the Eldorado System pursuant to Section hereof shall be equal to the sum of: (1) the total labor charges included in the expenses determined in accordance with Sections , , and hereof multiplied by a decimal fraction, hereinafter referred to as the Operating A & G Ratio, and (2) one percent (1%) of the total non-labor charges included in the expenses determined in accordance with said Sections , , and Such Operating A & G Ratio shall be derived and applied as set forth in Sections 12.6 and 12.7 hereof At the start of each calendar year an estimated Payroll Tax Ratio, Workmen's Compensation Ratio, Benefits Ratio, and Operating A & G Ratio shall be used. Such ratios shall be based on the Operating Agent's system-wide expenses for the preceding calendar year; provided, that by agreement of the Auditing Committee, such ratios may be adjusted to more nearly reflect the expenses of the current year because of tax legislation, labor contract negotiations, or other factors not reflected in the prior year's costs As soon as practicable after the end of each calendar year the actual Payroll Tax Ratio, Workmen's Compensation Ratio, Benefits Ratio, and Operating A & G Ratio for such year shall be determined in accordance with the method set forth in Exhibits B, C, D, and E hereto respectively, by using said year's actual system-wide expenses of the Operating Agent. Using said actual ratios, the portions of the Operating Agent's payroll tax expenses, employee workmen's compensation insurance expenses,

60 Page No. 22 employee pensions and benefits expenses, and administrative and general expenses for which the Co-Owners are obligated hereunder shall be determined for such year. To the extent that such expenses are more or less than those already paid by the Co-Owners during said year, the Operating Agent shall bill or credit the Co-Owners for the amount of such difference Any Co-Owner may request that the method used to determine the Operating Agent's payroll tax expenses, employee workmen's compensation insurance expenses, employee pensions and benefits expenses, and administrative and general expenses be submitted to the Auditing Committee for review if such Co-Owner believes that such method results in an unreasonable burden on it; provided, that such review may be requested only after October l, 1971, and thereafter at intervals of not less than two (2) years each. After any such request the Auditing Committee shall review said method and shall attempt to determine whether or not said unreasonable burden does exist. If after such review the Auditing Committee determines that the application of said method does result in an unreasonable burden on one or more of the Co-Owners, the Auditing Committee shall determine and recommend a modified method to the Coordinating Committee so that such unreasonable burden would be eliminated if such modified method is adopted by the Coordinating Committee. If after such review the Auditing Committee is unable to agree on whether or not such unreasonable burden does exist or is unable to agree on said modified method for eliminating said unreasonable burden, the Auditing Committee shall submit the entire matter to the Coordinating Committee Any modified method adopted by the Coordinating Committee or determined through arbitration shall not be retroactive and shall become effective on the first day of the calendar year next following such adoption or determination. Said modified method shall stay in effect no less than two years.

61 Page No The costs of Operating Work shall be allocated to the Co-Owners as follows: Operation expenses associated with the Eldorado Substation shall be allocated to the Co-Owners in accordance with the ownership percentages of the General Facilities in the Eldorado Substation Operation expenses associated with the Mohave-Eldorado Line and the Eldorado-Mead Lines, and all maintenance costs associated with the Eldorado System, shall be allocated to the Co- Owners in accordance with the ownership percentages of the Component of the Eldorado System associated with such expenses Prior to allocating the costs of Operating Work set forth in this Section 12 to the Co-Owners, the Operating Agent shall deduct from such costs the payments to be made by Edison relating to the Edison Mohave Facilities as well as the payments to be made by other third parties under other agreements, with respect to the Mohave 500-kv Switchyard. Exhibit H sets forth the cost responsibilities for Operating Work associated with the Mohave 500-kv Switchyard. The Operating Agent shall charge Edison for, and Edison shall pay monthly, in addition to its share of the costs of Operating Work, any maintenance charges applicable to the Edison Mohave Facilities. 13. SPARE PARTS: The Operating Agent shall maintain a Spare Parts inventory for the Eldorado System initially purchased pursuant to Section 8 of the Eldorado System Construction Agreement in accordance with the policies established by the Engineering and Operating Committee pursuant to Section hereof The Operating Agent shall purchase all replacements of Spare Parts and, shall allocate the costs thereof to the Co-Owners in proportion to their ownership in the Component of the Eldorado System for which the Spare Part is committed or if such commitment cannot be made the allocation of

62 Page No. 24 the costs of said Spare Parts shall be as determined by the Auditing Committee Spare parts for Edison Mohave Facilities and Nevada Mohave Facilities shall be at the sole cost and responsibility of Edison and Nevada, respectively. 14. BILLING AND PAYMENT: The Operating Agent shall bill the Co-Owners (other than Edison) for costs incurred under the Operating Agreement as follows: Costs described in Sections 11, 12 (except Section ), 13, and 17 hereof for a current month shall be billed on an estimated basis on or before the first business day of each such month and payment shall be due and payable by the 15 th day of such month or fifteen (15) days after date of submission, whichever is later. Adjustments for actual costs incurred for each such month shall be reflected in the bill for the month which follows the date of determination of such actual costs Costs described in Sections 15, 19, and 20 hereof shall be billed not less than eight (8) business days prior to their due date and shall be due and payable not less than three (3) business days prior to such date or five (5) business days following receipt of the bill, whichever is later. If such expenditures or obligations do not have a specified due date, they shall be billed within a reasonable time following the incurrence of such expenditure or obligation and shall be due and payable within five (5) business days following receipt of the bill. 15. TAXES: The Co-Owners shall use their best efforts to have any taxing authority imposing any taxes or assessments on the Eldorado System assess and levy such taxes or assessments directly against each Co-Owner All taxes or assessments levied against each Co-Owner's ownership interest in the Eldorado System shall be the sole responsibility of the Co- Owner upon whom said taxes and assessments are levied, unless such

63 Page No. 25 taxes or assessments were levied directly against an individual Co-Owner in behalf of any or all of the other Co-Owners If property taxes or assessments are levied and assessed in a manner other than specified in Section 15.1 hereof, the Coordinating Committee shall have the responsibility to establish equitable standard practices and procedures for the apportionment among the Co-Owners of such taxes and assessments and the payment thereof. 16. ANNUAL BUDGETS: No later than August 10 of each calendar year, the Operating Agent shall prepare and submit to the Engineering and Operating Committee for its review and approval the proposed annual capital expenditures budget, annual manpower budget, and annual operating and maintenance budget for Operating Work for the next calendar year of operation No later than September 10 of each calendar year, the Engineering and Operating Committee shall approve an annual manpower budget, an annual operating and maintenance budget for Operating Work, and an annual capital expenditures budget for the next calendar year. If such budgets are not approved by the Engineering and Operating Committee in final form prior to the beginning of the next calendar year, the Operating Agent shall nevertheless continue to perform Operating Work, except such Operating Work requiring unauthorized Capital Expenditures, in accordance with Section 6 hereof until such time as such budgets have been approved or otherwise determined in accordance with the System Agreements Any information required from any Co-Owners by the Operating Agent in preparing the aforesaid proposed budgets shall be supplied by such Co- Owner The Engineering and Operating Committee may at any time during the year approve revisions to the annual capital expenditures budget (subject to the provisions of Section 17.2 hereof), annual manpower budget, and the annual operating and maintenance budget for Operating Work.

64 Page No CAPITAL IMPROVEMENTS: All Capital Improvements, including a contingency allowance for capital expenditures if necessitated by an Operating Emergency, shall be included in the annual capital expenditures budget. After such budget has been approved by the Engineering and Operating Committee, each Co-Owner shall be obligated for the costs incurred for such Capital Improvements in proportion to its Ownership Ratio, and each Co-Owner's rights, titles, and interests therein shall be in proportion to its Ownership Ratio At any time the Engineering and Operating Committee may authorize Capital Improvements not included in the annual capital expenditures budget; provided, that any single Capital Improvement exceeding the sum of one million dollars ($1,000,000) shall be subject to authorization by the Coordinating Committee The Operating Agent shall submit to the Co-Owners a forecast of cash requirements by months for any Capital Improvements. Said forecast shall be submitted on a yearly basis after final budget approvals have been made. A revised forecast shall be submitted when the capital expenditures budget is revised and approved, or when significant changes in monthly expenditures from those previously forecast are anticipated The Operating Agent shall be responsible for the design and construction of all Capital Improvements The costs of Capital Improvements shall include: All costs incurred by the Operating Agent (other than obligations for interest during construction) which conform to the provisions of Electric Plant Instruction 3 of the FPC Accounts entitled, "Components of Construction Cost;" provided, however, that (i) charges pursuant to Items (8) (injuries and damages) and (14) (insurance) of said Instruction 3 shall not include any costs shared by the Co-Owners pursuant to Section 19 hereof, and (ii) charges pursuant to Item (16) (taxes) of said Instruction 3 shall not include any taxes shared by the Co-Owners pursuant to Section 15 hereof.

65 Page No. 27 However, such charges shall include costs of any injuries or damages arising out of and occurring during the course of construction of Capital Improvements and the cost of any additional insurance which the Operating Agent deems necessary to protect the interests of the Co-Owners during the effectuation of such Capital Improvements prior to the time the coverage provided in Section 19 hereof becomes applicable thereto If any Capital Improvements are made by the Operating Agent's employees, the employee payroll taxes and employee pensions and benefits shall be determined by multiplying the sum of the Operating Agent's labor charges included in Section hereof by the Payroll Tax Ratio and the Benefits Ratio determined pursuant to Exhibit B and Exhibit D hereto, respectively The Operating Agent's administrative and general expenses allocable to Capital Improvements shall be equal to the sum of: (1) the Operating Agent's total labor charges included in Section hereof multiplied by a decimal fraction, hereinafter referred to as the Capital A & G Ratio, and (2) one percent (1%) of the total non-labor charges included in said Section Said Capital A&G Ratio shall be determined in accordance with the method shown on Exhibit F hereto Estimated Benefits and Capital A&G Ratios for application in this Section 17 shall be used and year-end adjustments shall be made in a manner similar to that described in Sections 12.6 and 12.7 hereof Units of Property retired from service shall be disposed of by the Operating Agent on the best available terms as soon as practicable, and the proceeds, if any, received therefrom shall be credited or distributed to the Co-Owners in proportion to their Ownership Ratios in such units Edison, at its sole expense and responsibility, or Nevada, at its sole expense and responsibility, shall make all capital improvements and

66 Page No. 28 retirements to Edison Mohave Facilities or Nevada Mohave Facilities, respectively, in coordination with the Operating Agent. 18. SCHEDULING: The Operating Agent shall notify the Operating Agent from the Mohave Project of the maximum transmission capacity available to each of the Co- Owners during periods of curtailment Edison shall schedule the quantity of Power from the Mohave Project that is caused to be delivered by a Co-Owner other than Edison for such Co- Owner's account from the Mohave 500-kv Switchyard to the points of electrical interconnection of the Eldorado System as directed by such Co- Owner Co-Owners other than Edison shall schedule to Edison the losses associated with the schedules of Power deliveries pursuant to Section 18.2 hereof in the amounts determined pursuant to Section 10 hereof Co-Owners other than Edison using their transmission capacity for transactions other than the delivery of Mohave Project Power and Energy shall notify Edison and the receiver of such transactions and shall schedule losses associated with such transactions to Edison in amounts determined pursuant to Section 18 hereof. 19. OPERATING INSURANCE: The Operating Agent shall procure the following types of Operating Insurance which shall by their terms become effective as of the in-service date of each of the Components of the Eldorado System, and shall be maintained in full force and effect by the Operating Agent during the remainder of the term of this Operating Agreement Comprehensive bodily injury and property damage liability insurance, including automobile liability insurance, covering the Eldorado System Workmen's compensation insurance covering employees of the Operating Agent engaged in the performance of Operating Work.