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Interstate Power Transmission Assets-rHri c:r rY ©~ Dubuque --.... ~T T R E All-America City 1J L! :~ M~st~rpiece ors tl~~ Misslssi~ppi zao7 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Interstate Power & Light Company Proposed Partial Assignment of Electric Franchise Revising to the Sale of Transmission Assets DATE: November 26, 2007 City Attorney Barry Lindahl is recommending approval of the partial assignment by Interstate Power & Light Company to ITC Midwest LLC, a Michigan limited liability company, of its rights, liabilities and obligations related to certain transmission assets under the City of Dubuque Electric Franchise. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager THE CITY OF DUB E MEMORANDUM Masterpiece on the BARRY LINDA L CITY ATTORNE To: Michael C. Van Milligen City Manager DATE: November 26, 2007 RE: Interstate Power & Light Company Proposed Partial Assignment of Electric Franchise Revising to the Sale of Transmission Assets The City's electric franchisee, Interstate Power and Light Company (Interstate), has entered into an Asset Sale Agreement with ITC Midwest LLC (ITC), a Michigan limited liability company, for the sale of Interstate's electric transmission assets. The sale is conditioned upon the City's consent to the assignment by Interstate of its rights, liabilities, and obligations related to certain transmission assets (the "Purchased Transmission Assets", as defined in the Asset Sale Agreement), under the City of Dubuque Electric Franchise, Ordinance No. 58-93, as amended. Interstate has requested that the City consent to the attached Partial Assignment related to the Purchased Transmission Assets. See attached September 11, 2007 letter from John O. Larsen, Vice President-Technical and Integrated Services. Section 16 of the Electric Franchise provides as follows: No sale, assignment or lease of this franchise shall be effective until it is approved by the city council and until the company has filed in the office of the city clerk written notice of the proposed sale, transfer, disposition or assignment, such notice to clearly summarize the proposed procedure and the terms and conditions thereof. Such approval by the city shall not be unreasonably withheld. The proposed vendor, assignee or lessee shall similarly file an instrument, duly executed, reciting such proposal, accepting the terms of this franchise and agreeing to perform all the conditions thereof. This provision shall not apply, however, to sales, assignment, or transfers made pursuant to a corporate reorganization, divestiture, or consolidation, or to a sale of all or substantially all of the electric distribution properties of Interstate Power Company. OFFICE OF THE CITY ATTORNEY DUBUQUE, IOWA SUITE 330, HARBOR VIEW PLACE, 30O MAIN STREET DUBUQUE, IA 52001-6944 TELEPHONE (563) 583-4113 / FAx (563) 583-1040 / EnnAIL balesq@cityofdubuque.org Section 1.1 of the Asset Sale Agreement between Interstate and ITC defines the "Purchased Transmission Assets" which are the subject to the sale and the Partial Assignment: "Purchased Transmission Assets" means each individual Transmission Land Right, Transmission Line Facility and Transmission Substation Facility. "Transmission" means (i) the transmission of electricity at nominal voltages that are greater than or equal to 34.5 kV or (ii) the transmission of electricity regardless of the nominal voltage at which such facility is designed to operate or does operate, if the facilities are subject to the jurisdiction of FERC as transmission. "Transmission Easement" means any Easement, in which Seller has any right, title or interest and upon which a Transmission Line Facility or Transmission Substation Facility is located or otherwise used or held for use by Seller primarily in Transmission, including those set forth on Schedule 1.1-D, except for the Shared Easements and Easements set forth on Schedule 1.1-E. "Transmission Fee Interest" means real property owned in fee simple by Seller upon which any Transmission Line Facility or Transmission Substation Facility is located or otherwise used or held for use by Seller primarily in Transmission, including those set forth on Schedule 1.1-F, except for the real property owned in fee simple set forth on Schedule 1.1- G. "Transmission Land Right" means each individual Transmission Fee Interest, Transmission Easement and Transmission Lease. "Transmission Lease" means each Contract pursuant to which Seller, as lessee, licensee or contract party leases, licenses or otherwise obtains a contract right to the possession and/or use of a parcel of real property upon which a Transmission Line Facility or Transmission Substation Facility is located or otherwise used or held for use by Seller primarily in Transmission, including those set forth on Schedule 1.1-H, except for those Contracts set forth on Schedule 1.1-I. "Transmission Lines" means the lines identified on Schedule 1.1-J. "Transmission Line Facility" means any and all facilities and assets including, without limitation, any duct, wire, line, conduit, pole, tower, equipment or other structure used for Transmission, including any of the foregoing that are part of any Transmission Line or Transmission Substation Facility, are connected to any Transmission Line or Transmission Substation Facility, or are otherwise required to own, use or operate each Transmission Line or Transmission Substation Facility in the manner owned, used or operated by Seller prior to the Closing, but excluding (i) any Transmission Substation Facility and (ii) those assets set forth on Schedule 1.1-K. "Transmission Substation Facility" means any and all facilities, assets, equipment, including, without limitation, towers, poles, transformers, circuit breakers, meters, and wires located at any substation that are used for Transmission including those assets set forth in Schedule 1.1-L, but excluding those assets set forth on Schedule 1.1-M. Under the Partial Assignment, Interstate will retains its rights and obligations to its facilities in Dubuque other than the Purchased Transmission Assets. ITC will assume all responsibility for the Purchased Transmission Assets. Also attached is a letter from Interstate Power Company President Tom Aller indicating that consent to the Partial Assignment will not affect the franchise fees collected by the City under the City of Dubuque Electric Franchise. I recommend that the Partial Assignment be submitted to the City Council for consideration and approval of the Consent to Assignment. Attachment PARTIAL ASSIGNMENT This Partial Assignment ("Partial Assignment") is made by and between Interstate Power and Light Company, an Iowa corporation ("Assignor") and ITC Midwest LLC, a Michigan limited liability company ("Assignee"). Pursuant to the Asset Sale Agreement by and between Assignor and Assignee dated as of January 18, 2007 (the "Asset Sale Agreement"), Assignor hereby assigns to Assignee that portion, and only that portion, of Assignor's right, title and interest in and to its electric franchise with the City of Dubuque related to the Purchased Transmission Assets as defined in the Asset Sale Agreement. The electric franchise is codified in the Dubuque City Code as Ordinance No. 58-93 and was amended by Ordinance No. 21-04. The Ordinances are hereinafter referred to collectively as the Franchise Agreement. It is agreed and understood that Assignor will retain its rights and obligations under the Franchise Agreement to its facilities other than the Purchased Transmission Assets, and will remain solely responsible for maintenance, damages and repair of such facilities located on, under, over or within the City of Dubuque. Assignee shall assume all risk of loss and shall be solely responsible for maintenance, damages and repair of all Purchased Transmission Assets located on, under, over or within the City of Dubuque Subject to the limitations contained herein or in the Franchise Agreement, this Partial Assignment, and the rights, obligations and interests assigned hereby, shall be binding upon and inure to the benefit of Assignor and Assignee and each and all of their respective successors and assigns. This Partial Assignment shall be construed in accordance with the laws of the State of Iowa. Assignee acknowledges receipt of the Franchise Agreement, hereby accepts this Partial Assignment of the Franchise Agreement, agrees to be bound by the terms and conditions of said Franchise Agreement, and agrees to assume all obligations and liabilities of Assignor to the Purchased Transmission Assets located in the City of Dubuque and covered under the Franchise Agreement. Assignee agrees to execute any and all necessary documents as requested by the City of Dubuque to verify the partial assignment and agrees to forward same to the attention of Barry A. Lindahl, Esq. City Attorney 300 Main Street Suite 330 Dubuque IA 52001 telex 563 583-4113 fax: 563 583-1040 No provision set forth in this Partial Assignment shall be deemed to enlarge, alter or amend the terms or provisions of the Franchise Agreement. Notwithstanding anything herein to the contrary, this Partial Assignment is being executed and delivered pursuant to the Asset Sale Agreement and is subject in all respects to the terms, conditions and limitations thereof. Specifically, the parties acknowledge that this Partial Assignment will only become effective upon the Closing of the sale of the Purchased Assets as defined in the Asset Sale Agreement between Assignor and Assignee as defined therein. This Partial Assignment may be executed in one or more counterparts, all of which when taken together, shall constitute one and the same instrument. This Assignment is made, executed and delivered pursuant to the above-reference Asset Sale Agreement. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be signed as of the day of , 200_, to be effective as of Closing Date as defined above . ASSIGNOR: INTERSTATE POWER AND LIGHT COMPANY an Iowa corporation By: Print Name: Title: ACKNOWLEDGEMENT STATE OF IOWA ) COUNTY OF ) Personally came before me this day of , 200_ ,the above- named , as of Interstate Power and Light Company, an Iowa corporation, to me known to be the person who executed the foregoing instrument in such capacity and acknowledged the same. Notary Public, Iowa Print Name: My Commission: _ ASSIGNEE: ITC MIDWEST LLC a Michigan limited liability company By: Print Name: Title: ACKNOWLEDGEMENT STATE OF IOWA ) COUNTY OF ) Personally came before me this day of , 200_ ,the above- named , as of ITC Midwest LLC, a Michigan limited liability company, to me known to be the person who executed the foregoing instrument in such capacity and acknowledged the same. Notary Public, Iowa Print Name: My Commission: CONSENT TO ASSIGNMENT The City of Dubuque hereby consents to the partial assignment of rights and obligations of Interstate Power and Light Company ("Assignor") to ITC Midwest LLC ("Assignee") under the Franchise Agreement described above, and limited solely to the Purchased Transmission Assets described above. The City of Dubuque acknowledges that such partial assignment will only become effective upon the Closing of the sale of the Purchased Assets as defined in the Asset Sale Agreement between Assignor and Assignee. Dated this 3rd day of December , 2007. CITY OF DUBQUUE By: Roy D. Buol Title: Mayor ALLIANT ENERGY. Interstate Power and Light November 26, 2007 City of Dubque Barry A. Lindahl, Esq. Harbor View Place 300 Main Street Suite 330 Dubuque IA 52001 Dear Mr. Lindahl, Thomas L. Alter President Interstate Power and Light Co. Alliant Energy 200 First Street SE P.O. Box 351 Cedar Rapids, IA 52406-0351 Office: 319.786.4268 Fax: 319.786.7720 tomalley@alliantenergy. com In a letter dated November 16, 2007 I outlined our proposed sale of the Interstate Power and Light (IPL) transmission system to ITC Midwest, LLC. Since Dubuque currently collects a franchise fee, I wanted to follow up with you with details on the franchise fee collection practices currently in place and inform you that we see no reason why these practices would be adjusted after the closing of this sale. Your community's franchise fee will continue to be collected by IPL and dispersed to your community without change. It is appropriate to continue this action for the following two reasons: 1) Transmission costs are currently collected through the rates we assess on the sale of electricity to our customers. After the sale, transmission costs, which will be billed to IPL by ITC Midwest, LLC, will continue to be collected through our rates. 2) ITC Midwest, LLC will not engage in the sale of electricity within your community. Rather, they will only be selling space within the transmission system they own. Thus, the fee prescribed in Section 1 of the Amendment to the Franchise Agreement (Ordinance 22-04) of the agreement between your community and IPL does not apply to the business of ITC Midwest, LLC. As I mentioned in my previous letter, IPL is confident that the sale of our transmission assets to ITC Midwest, LLC will strongly support the opportunities for economic development and renewable energy growth within our state. They will be a great partner for both IPL, the state of Iowa and the City of Dubuque. If you need further details or have additional questions related to the franchise fee collection process or any other aspect of the transmission system asset sale, please do not hesitate to contact our Community Relations team at 319-786-7266. Best regards, Tom L. Alter President, Interstate Power and Light Company ALLIANT ENERGY. interstate Power and Light November 16, 2007 City of Dubuque Jeanne Schneider, City Clerk 50 W 13th Street Dubuque, Iowa 52001-4864 Dear Jeanne Schneider, Thomas L. Alter President Interstate Power and Light Co. Alliant Energy 200 First Street SE P.O. Box 351 Cedar Rapids, IA 52406-0351 Office: 319.786.4268 Fax: 319.786.7720 tomalley@alliantenergy.com Every day, Interstate Power and Light Company (IPL) strives to generate reliable, cost-effective energy and deliver valuable energy-related services to all our communities, businesses and residential homes that we are privileged to serve. I want to take this opportunity to communicate with you, as one of our community customers, on one of our company's initiatives that furthers our commitment to provide energy for a new generation. In January 2007, IPL entered into an agreement to sell its transmission assets in Iowa, Minnesota, Illinois and Missouri to ITC Midwest LLC (ITC), a subsidiary of ITC Holdings Corp (the "Asset Sale Agreement"). Now, almost 11 months later, IPL and ITC continue work on required filings, regulatory approvals and operations planning to make this transition effective by the end of 2007. Enclosed is a sample of the form "Notice of Franchise Partial Assignment" for your community. Once the sale pursuant to the Asset Sale Agreement occurs, following final regulatory approval of the sale, we will deliver to you the executed "Notice of Franchise Partial Assignment" transferring the responsibility of the transmission system to ITC covered within the City of Dubuque's electric franchise agreement. IPL will retain the responsibility of your community's distribution system through the expiration date of our existing franchise arrangement. . Let me assure you that this partial assignment and sale will not affect the safe, reliable electric service you currently expect and receive from IPL. Electricity will continue to flow to serve your city, businesses and homes as it always has. In fact, we believe this effort will only improve IPL's ability to meet current and future electricity needs of our customers. This sale supports IPL's commitment to act in the long-term best interests of our customers, shareowners and our service area in economic development, low-cost energy, reliability and supporting the Federal Energy Policy. • Economic Development -investing in and expanding to support Iowa's and Minnesota's burgeoning renewable and alternative fuel's industries. • Low Cost Energy -focusing on mitigating transmission congestion and allow for expansion and upgrading on a regional level. • Reliability - keeping a safe, reliable and robust system for long-tern economic growth of our service area. • Federal Energy Policy -the Federal Energy Regulatory Commission has endorsed regionally owned and operated transmission systems. As a valued community customer of IPL, we also want to share the enclosed pertinent information of the planned sale that might help your community leadership answer potential questions from your residents. Your residents and businesses are our customers. IPL is committed to communicating to our customers in numerous manners, including through their community's leadership. That's why we've enclosed informational materials on ITC and frequently asked questions and answers for your reference. If you have residents or businesses that request additional information about this pending sale, we encourage you to offer this information or direct their questions to our Community Relations Department at 319-786- 7266. IPL has proudly served our customers for over 100 years with safe, reliable electric service and plans to continue to do so for many years to come. Best regards, ~'j'Yt Tom L. Aller President, Interstate Power and Light Company * SAMPLE* FORM OF NOTICE OF FRANCHISE PARTIAL ASSIGNMENT December , 2007 City of (CITY) (NAME,) (TITLE) (CITY HALL ADDRESS) (CITY, ST ZIP) Dear (NAME), We are writing on behalf of Interstate Power and Light Company and ITC Midwest LLC to notify you that the proposed sale of transmission assets between Interstate Power and Light Company, an Iowa corporation ("Assignor") and ITC Midwest LLC, a Michigan limited liability company ("Assignee"), as contemplated in the Asset Sale Agreement by and between Assignor and Assignee dated as of January 18, 2007 (the "Asset Sale Agreement"), has now closed. Accordingly Assignor has now assigned to Assignee that portion, and only that portion, of Assignor's right, title and interest in and to its Electric Franchise Agreement [ordinance number or franchise number], dated [insert commencement date] currently in effect and expiring on [expiration date] (the "Electric Franchise Agreement") with the City of [city name] ("City") related to the Purchased Transmission Assets as defined in the Asset Sale Agreement. Assignee has assumed responsibility for the transmission facilities located within your community and has agreed to be bound by the terms and conditions of the Electric Franchise Agreement. Assignee has agreed to execute any and all documents required to verify the partial assignment pursuant to the existing Electric Franchise Agreement and agrees to forward the same to the City. No provision set forth in this Partial Assignment shall be deemed to enlarge, alter or amend the terms or provisions of the Electric Franchise Agreement. Interstate Power and Light Company By: ITC Midwest LLC By ITC Holdings Corp., as sole member Interstate Power and Light Co. An Alliant Energy Company 200 First Street SE P.O. Box 351 Cedar Rapids, IA 52406-0351 Office: 1.800.822.4348 www. al lianten ergy. com September 11, 2007 City of Dubuque 50 West 13~' Street Dubuque, IA 52001-48644701 RE: Consent to Partial Assignment of Electric Franchise Ordinance No. 58-93 as amended by Ordinance 21-04 between the City of Dubuque ("City") and Interstate Power and Light Company ("IPL") Attention: Michael C. Van Milligen -City Manager This request is in reference to the above referenced Municipal Franchise between the City and IPL which was passed and approved October 4, 1993, and the amendment thereto passed and approved Apri15, 2004. On January 18, 2007, IPL entered into an Asset Sale Agreement ("ASA") for the proposed sale of its electric transmission assets (as defined in the ASA) to ITC Midwest LLC ("Buyer"). The sale (hereinafter referred to as the "Transaction") is conditioned upon the receipt of necessary regulatory approvals and is expected to close by the end of this calendar year. Buyer is a wholly-owned subsidiary of ITC Holdings Corp. ("ITC"), a Michigan corporation listed on the New York Stock Exchange. ITC is the largest independent electric transmission company and the tenth largest electric .transmission company in the country based on electric sales. In addition to TTC Midwest LLC, ITC also owns two operating subsidiaries, TTC Transmission and Michigan Electric Transmission Company ("METC"). ITC Transmission and METC operate contiguous, fully-regulated, high-voltage systems in Michigan's Lower Peninsula that transmit electricity to local electricity distribution facilities from generating stations throughout Michigan. As Buyer will become, ITC Transmission and METC are subject to the jurisdiction of the Federal Energy Regulatory Commission and are members of the Midwest Independent System Operator. Upon the consummation of the Transaction, IPL plans to assign and transfer to Buyer all of its rights, liabilities and obligations related to the transmission assets covered by the Municipal Franchise (the "Partial Assignment"). Effective as of the closing of the Transaction, Buyer will assume the performance of all rights, liabilities and obligations of IPL related to the transmission assets existing or arising under the franchise agreement before, on or after the Partial Assignment. After the closing of the Transaction, IP&L will no longer be responsible for any liabilities or obligations with respect to transmission assets in Owatonna. Nothing in this partial assignment would affect the distribution facilities. We are writing to advise you of the Transaction and to ask you to consent to the Partial Assignment. A representative of IP&L will contact you to confirm that you have received this letter and to answer any questions you may have with respect to the Transaction. Please indicate your consent to the Assignment by signing both copies of this letter and returning one of the signed letters to the attention of Jeff Rosencrants, 200 First Street SE, P.O. Box 351, Cedar Rapids, IA 52406-0351, jeffrosencrants(a~alliantenergy com no later than thirty (30) days following your receipt of this letter. You will be notified of the completion of the Assignment promptly after the closing of the Transaction. INTERSTATE POWER AND LIGHT COMPANY By: John O. Larsen Vice President -Technical and Integrated Services The undersigned acknowledges and agrees to the foregoing and hereby consents to the Partial Assignment of the Franchise Agreement to TTC Midwest LLC who shall, effective as of the closing of the Transaction, assume all rights, liabilities and obligations of IPL under said Franchise Agreement. City of Dubuque By: Name: Title: Date: