2003 AGN JUN 17 Closed Session C

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SETTLEMENT AGREEMENT This Settlement Agreement ("Agreement") is made by and among the City of Azusa ("Azusa"), City of Banning (`Banning"), City of Colton ("Colton") (collectively, "Cities" and individually a "City") and Southern California Edison Company ("SCE") (collectively, "Parties"), effective as of the latest date of execution by each of the Parties, with respect to the following facts: RECITALS A. Azusa and SCE entered into the Edison -Azusa Restructuring Agreement in or about November 1997 (the "Azusa Restructuring Agreement"). B. Banning and SCE entered into the Edison -Banning Restructuring Agreement in or about November 1997 (the "Banning Restructuring Agreement"). C. Colton and SCE entered into the Edison -Colton Restructuring Agreement in or about November 1997 (the "Colton Restructuring Agreement"). D. The Azusa, Banning and Colton Restructuring Agreements (collectively, "Restructuring Agreements"), implemented a new set of arrangements to facilitate both SCE's and Cities' entry into the new marketplace. Paragraph 6.4.1 of the Restructuring Agreements, which expired December 31, 2000, sets forth provisions for determining the amounts billable to SCE by Cities for ancillary services. E. In or about September 9, 2002, SCE commenced an action in the Los Angeles County Superior Court, entitled Southern California Edison Company v. City of Azusa, City of Banning, City of Colton, Case No. BC281408 ("the Action"), seeking to recover amounts SCE claimed it was overcharged because Cities had invoiced and SCE had paid more than was due for ancillary services for Operating Reserves pursuant to the terms of Section 6.4.1 of the Restructuring Agreements and because Azusa and Colton billed SCE for some Ancillary Services based on prices other than the California Independent System Operator Corporation ("ISO") Day -Ahead market prices and seeking a declaration regarding SCE's audit rights under the Restructuring Agreements. F. It is the Parties' mutual desire that the Action be resolved by this Agreement without further expenditure of time and litigation expense. G. The Parties wish to document and formalize their agreement and provide for the payment to SCE of the amounts agreed to be due. NOW, THEREFORE, it is hereby agreed by and among the Parties as follows: 1. For the service period April 1998 through December 2000, SCE and Cities resolve, settle and compromise all disputes and claims regarding SCE's and Cities' obligations relating to the calculation of spinning and non -spinning operating reserves as -1- LW031260038