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Life-of-The-Unit, Firm Power Contractual Arrangement
Understanding Life-of-The-Unit, Firm Power Contractual Arrangement
Definition & Meaning
The term "life-of-the-unit, firm power contractual arrangement" refers to an agreement between a utility provider and a customer, such as an industrial company, where the customer secures a specified amount of electricity generated by a particular power unit. This arrangement ensures that the customer pays their share of the unit's overall costs. The contract can be structured in several ways:
For the entire operational life of the power unit.
For a minimum duration of 30 years, which may include options for early termination.
For a period of at least 25 years or 70 percent of the unit's expected useful life, with rights to purchase or re-lease some capacity at the end of the term.
Table of content
Legal Use & context
This term is primarily used in energy law and contract law, particularly in the context of power generation and sales agreements. It is relevant for utilities, industrial customers, and legal professionals involved in drafting or negotiating energy contracts. Users may find templates for such agreements on platforms like US Legal Forms, which can help them manage these contracts effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A manufacturing company enters into a life-of-the-unit contract with a local power plant, ensuring a steady supply of electricity for its operations. The contract is set for 30 years, allowing the company to plan its energy costs effectively.
Example 2: A city utility department signs a firm power contract for a new generating unit, committing to purchase 70 percent of the unit's output for 25 years, with an option to buy additional capacity after the term ends. (hypothetical example)
State-by-state differences
State
Contract Duration Requirements
California
Minimum 25 years or 70% of economic life.
Texas
30-year minimum with early termination options.
New York
Life-of-the-unit agreements preferred.
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Description
Difference
Power Purchase Agreement
A contract for the sale of electricity between a power producer and a buyer.
Focuses on price and delivery rather than capacity reservation.
Capacity Agreement
An arrangement to reserve a certain amount of power capacity.
May not include energy delivery or cost-sharing provisions.
Common misunderstandings
What to do if this term applies to you
If you are considering entering into a life-of-the-unit, firm power contractual arrangement, it is advisable to:
Review your energy needs and capacity requirements.
Consult with legal professionals to understand the implications of the contract.
Explore US Legal Forms for templates that may assist in drafting or negotiating your agreement.
Consider the long-term costs and benefits of the arrangement.
Find the legal form that fits your case
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