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With the implementation of the Invoicing Agreement and the commencement of billings <br />thereunder by SJCC, PNM, as San Juan operating agent, will make certain changes in its coal expense <br />invoicing to the Owners. Currently, cost responsibility for coal usage in 1996 is governed by <br />Modification No. 8 (Modification No. 8) to the Operating Agreement, which has been accepted for <br />filing by the Federal Energy Regulatory Commission (FERC). Upon implementation of the Invoicing <br />Agreement, the Owners agree that purchases of coal from SJCC will be invoiced to the Owners based <br />on two discrete consumption bands, as described below. <br />The Base Price (Base Price) band will be based on the first 5.6 million tons of coal delivered <br />to San Juan on an annualized basis. Such Base Price band will be invoiced by SJCC at a delivered <br />price of $1.799 per MMBtu. The total cost of monthly deliveries in the Base Price band will be <br />allocated among the Owners on the basis of station common ownership as listed in Exhibit III(g) of <br />the Operating Agreement. The Base Price band will be considered a fixed cost by the Owners for <br />purposes of cost allocation. <br />The Incremental (Incremental) band will be based on coal delivered in excess of the annualized <br />5.6 million tons, Coal delivered as Incremental price band coal shall be invoiced by SJCC at a <br />delivered price of $0.675 per MMBtu. The Incremental price band shall be considered a variable cost <br />by the Owners for purposes of,cost allocation. Owners shall only be eligible for allocation of <br />Incremental band coal pricing if their monthly coal consumption exceeds their pro rata share of a 5.6 <br />million ton annualized coal bum. <br />It is understood that the Invoicing Agreement provides for a reconciliation of the Invoicing <br />Agreement invoices to invoices prepared pursuant to the Coal Sales Agreement dated August 18, <br />1980 between SJCC, PNM, and TEP, as amended (CSA). Any resulting adjustment will be allocated <br />among the Owners on the basis of station common expenses as listed in Exhibit III(g) of the <br />Operating Agreement. <br />Monthly Invoices, Allocations, Nominations <br />Following the end of each calendar month beginning January, 1996, SJCC will provide PNM, <br />as operating agent for San Juan, an invoice that prices scheduled delivery of Base Price tons at a rate <br />of $1.799 per MMBtu and will also provide invoices that price incremental tons at the rate of $0.675 <br />per MMB tu. <br />Attachment No. 2 details the pro-rata share of the Base Price band tonnage for each individual <br />Owner on a monthly basis (Minimum Coal Delivery).