Appendix D - BC Hydro - Transmission

persons and property and the integrity of the Transmission System during suchsuspension and, if applicable, any costs incurred in connection with the cancellation orsuspension of material, equipment and laborlabour contracts which TransmissionProvider cannot reasonably avoid; provided, however, that prior to cancelingcancelling orsuspending any such material, equipment or laborlabour contract, Transmission Providershall obtain Interconnection Customer's authorization to do so.Transmission Provider shall invoice Interconnection Customer for such costs, plus anyapplicable taxes, pursuant to Article 12. 12 and shall use due diligence to minimize itscosts. In the event Interconnection Customer suspends work by Transmission Providerrequired under this LGIASGIA pursuant to this Article 5.16, and has not requestedTransmission Provider to recommence the work required under this LGIASGIA on orbefore the expiration of three (3) years following commencement of such suspension, thisLGIASGIA shall be deemed terminated. The three-year period shall begin on the date thesuspension is requested, or the date of the written notice to Transmission Provider, if noeffective date is specified.5.17 Taxes.5.17.1 Interconnection Customer Payments Not Taxable. The Parties intend thatall payments or property transfers made by Interconnection Customer toTransmission Provider for the installation of Transmission Provider'sInterconnection Facilities and the Network Upgrades shall be non-taxable,either as contributions to capital, or as an advance, in accordance with theInternal Revenue Code and any applicable state income tax laws and shall notbe taxable as contributions in aid of construction or otherwise under theInternal Revenue Code and any applicable state income tax laws.5.17.2 Representations and Covenants. In accordance with IRS Notice 2001-82and IRS Notice 88-129, Interconnection Customer represents and covenantsthat (i) ownership of the electricity generated at the Large Generating Facilitywill pass to another party prior to the transmission of the electricity on theTransmission System, (ii) for income tax purposes, the amount of anypayments and the cost of any property transferred to Transmission Provider forTransmission Provider's Interconnection Facilities will be capitalized byInterconnection Customer as an intangible asset and recovered using thestraight-line method over a useful life of twenty (20) years, and (iii) anyportion of Transmission Provider's Interconnection Facilities that is a "dual-useintertie", within the meaning of IRS Notice 88-129, is reasonably expected tocarry only a de minimis amount of electricity in the direction of the LargeGenerating Facility. For this purpose, “de minimis amount” means no morethan 5 percent of the total power flows in both directions, calculated inaccordance with the "5 percent test" set forth in IRS Notice 88-129. This is notintended to be an exclusive list of the relevant conditions that must be met toconform to IRS requirements for non-taxable treatment. At TransmissionProvider's request, Interconnection Customer shall provide TransmissionProvider with a report from an independent engineer confirming its- 24 -DM_VAN/BCT0007-BCT00129/6206155.10