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<br />MEMORANDUM OF UNDERSTANDING <br /> <br />BETWEEN: <br /> <br />The City of Eugene, a municipal <br />corporation of the State of Oregon <br /> <br />(City) <br /> <br />AND: <br /> <br />The Eugene Water & Electric Board, <br />a municipal utility owned by City <br />of Eugene <br /> <br />(EWEB) <br /> <br />EFFECTIVE <br />DATE: <br /> <br />July 1, 1996 <br /> <br />RECITALS <br /> <br />A. The Eugene Water & Electric Board (EWEB) has generated significant revenues <br />through sales for resale which have benefitted the City of Eugene (City) through payments <br />pursuant to Section 44(4) of the Eugene Charter of 1976, and EWEB' s customers through <br />lower rates. <br /> <br />B. With the passage of the National Energy Policy Act of 1992 (EPAct92), there <br />have been and continue to be significant changes in the wholesale electric markets. <br /> <br />C. Current market conditions make it very difficult for EWEB to make sales to <br />other entities which market or sell power ("Power Entities") for resale which generate <br />sufficient margins to make its payments to City and to return benefits to EWEB' s customers. <br />The current formula (six percent), when applied to the gross revenues of such a potential sale, <br />is often larger than the entire net revenues from the sale and causes EWEB to forego sales for <br />resale opportunities. <br /> <br />D. EWEB and City believe it is in their best interest to alter the payment terms for <br />sales for resale to adjust to the changing market conditions. The purpose of this agreement is <br />to memorialize the understanding between the parties, which has been approved by their <br />respective Board and Council. <br /> <br />AGREEMENT <br /> <br />1. EWEB and City agree that until December 31, 1997 ("Trial Period"), payments <br />to City for future sales to Power Entities for resale activity shall be based on a revised <br />formula. This formula shall be: <br />