Operations and Maintenance Agreement
(Utilities)

Summary

This template is an operations and maintenance agreement for utilities that establishes how the companies which respectively own and operate a power plant will interact after the plant becomes operational. It deals with costs, reporting, indemnification, insurance, and the possible default of either party. This template contains practical guidance, drafting notes, and an alternate clause. A power plant is a complex system that generally costs hundreds of millions or even billions of dollars to complete. Because of this, they are often owned by large publicly-traded entities. However, the owner may not operate the plant. Instead, it may bring in an operator that specializes in operating that particular type of plant on behalf of public utilities. An operations and maintenance agreement (O&M Agreement) is essentially a service supply contract between the owner and the operator. It specifies the responsibilities of the power plant's operator, and aims to mitigate operational risk by guaranteeing to the owner that the operator will manage the power plant according to performance metrics defined in the O&M Agreement. For more information on operations and maintenance agreements, see Operation and Maintenance Contracts: Key Issues for Project Finance Investors, Developers and Lenders. For more information on power plant project development, see Acquisition, Construction, and Project Development, Solar Energy Project Development, and Solar Energy Technologies and Project Regulation. For additional information on how some of these power plant projects are financed, see Financing a Project with a Tax Equity Investment.