11. Operating Reserve Account Requirement Calculation.

The Bond Indenture will provide that the Operating Reserve Account Requirement shall be calculated, in respect of each Revenue Requirement Period, as the greater of (a) the largest aggregate amount projected by DWR by which Operating Expenses exceed Power Charge Revenues during any consecutive seven calendar months commencing in such Revenue Requirement Period and (b) either (i) 18% of DWR's projected annual Operating Expenses for any Revenue Requirement Period in which DWR is procuring all or a portion of the Residual Net Short and which commences prior to 2006, or (ii) 12% of DWR's projected annual Operating Expenses for any Revenue Requirement Period in which DWR is not procuring all or a portion of the Residual Net Short or which commences after 2005; provided, however, that solely for purposes of (b) above, for Revenue Requirement Periods commencing after 2003, the projected amount shall not be less than the applicable percentage of Operating Expenses for the most recent 12 month period for which reasonably full and complete Operating Expense information is available, adjusted in accordance with the Indenture to the extent the Department no longer is financially responsible for any particular Power Supply Contract; and provided further, however, that at the time of the issuance of the Bonds such requirement may be set at an amount not to exceed the amount specified by the Summary of Material Terms. Notwithstanding the foregoing, in connection with the determination of whether additional Bonds under the Bond Indenture may be issued, the relevant calculation under clause (a) above shall made in respect of a consecutive seven (7) calendar month period in a twenty-four (24) month period commencing on the first day of the calendar month next succeeding the date of delivery of the additional Bonds.