Common use of VIEWS OF THE BOARD Clause in Contracts

VIEWS OF THE BOARD. The Board considers that the scope of the MSA Xxxxxx has remained unchanged from that provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks to the hearing by the Chair and as further confirmed during the course of the hearing.18 The 13 Decision 2002-069, page 48‌ 15 Transcript, page 34 16 Transcript, page 507 17 Transcript, page 52‌ Board agrees with ATCO that the MSA Xxxxxx and this Decision should not re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding, including the Board’s acceptance of the out-sourcing arrangement with ATCO I-Tek. The Board notes the disagreement of the parties as to on the importance of the MSA being a renewal of the Original MSA. ATCO viewed the Renewal MSA as a renewal wherein ‘the changes made were in the nature of clarifications and a streamlining of a successful and cooperative relationship between ATCO I-Tek and its customers’.19 On that basis ATCO argued that it was not necessary, nor within the scope of the MSA Module, to re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding with respect to the provision of IT services by ATCO I-Tek to the ATCO Utilities. Interveners disagreed with ATCO’s views regarding the ‘renewal’ nature of the Renewal MSA and argued that a more comprehensive review was justified. The Board notes Calgary’s suggestion that the Renewal MSA should be subject to the same scrutiny as the Original MSA. The Board has considered these issues and, as previously noted, believes that a review of the terms and conditions of the Renewal MSA is appropriate and within the scope of the MSA Module. The Board has analyzed and compared aspects of the Renewal MSA with the Original MSA in this Decision. The Board believes that ultimately it must be satisfied that the Renewal MSA is a contract that a prudent utility would enter into, having regard to appropriate IT service and maintenance, and the protection of its core business. The Board has considered IPCCAA’s suggestion that additional scrutiny is required where market value is not easily defined. Further, the Board notes suggestions by interveners that the ATCO Utilities should be held to a higher standard due to the affiliate nature of the relationship between the ATCO Utilities and ATCO I-Tek. The Board agrees that the Renewal MSA must ultimately meet the requirements of the Code of Conduct decision (Decision 2003-040). However, the Board notes that ATCO has until October 31, 2003 to be in full compliance with the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be established, the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be established, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision to outsource is made). Ultimately, however, it is up to the utility to select and defend the method it believes to be the most appropriate in establishing FMV.

VIEWS OF THE BOARD. The Board disagrees with ATCO’s view that the ownership of IP rights is irrelevant and is not convinced by the ATCO Utilities’ reasons for agreeing to relinquish IP rights. The Board reiterates its concern in this regard that the ATCO Utilities may be not be in compliance with section 101 of the PUB Act with respect to their intended transfer to ATCO I-Tek of IP rights developed and paid for by the ATCO Utilities. Further, the Board is not convinced that a prudent utility operating at arm’s length with an outsourced service provider would relinquish ownership of IP rights to the service provider. The Board agrees with Calgary that were such ownership rights to be given up, then price concessions from the service provider would be evident. Even with price concessions, however, the Board is not convinced that transferring IP ownership to a third party would be an appropriate action by a utility. The Board notes that there was no technology or application plan that would enable the Board to verify ATCO’s strategy or approach with respect to client systems and third-party software. Similarly, the Board considers that one of the scope purposes of the MSA Xxxxxx has remained unchanged from is to provide documentation, structure, and certainty to affiliate relationships, rather than relying on informal arrangements or assurances. Further, the Board notes that provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks ATCO’s informal arrangements or assurances are not binding pursuant to the hearing by the Chair and as further confirmed during the course “Entire Agreement” provision of the hearing.18 Renewal MSA, which states that the agreement “supersedes all prior or contemporaneous agreements…discussions, whether oral or written…”.60 There appears to the Board to be no convincing reason for the ATCO Utilities to give up ownership of IP which they paid, or will pay, to develop. The 13 Decision 2002Board believes that it would be more prudent for the ATCO Utilities to retain the IP and then decide with each statement of work whether or not selling, sharing or otherwise trading a particular IP for concessions on the part of I-069Tek is in their interest. Since a statement of work may override the text of the agreement61, if 57 Exhibit 114, page 48‌ 15 4 58 Exhibit 102, page 41 59 Transcript, page 34 16 Transcript497-498 60 Renewal MSA, Article 18, 18.7, page 507 17 Transcript, page 52‌ Board agrees with ATCO that the MSA Xxxxxx and this Decision should not re-visit the full suite of affiliate issues addressed during 46‌ the ATCO Affiliate proceedingUtilities had no IP ownership rights, including they would have to consider and negotiate the Board’s acceptance ramifications of IP ownership in the out-sourcing arrangement preparation of each statement of work with ATCO I-Tek. The Board notes the disagreement of the parties as to on the importance of the MSA being a renewal of the Original MSA. ATCO viewed the Renewal MSA as a renewal wherein ‘the changes made were in the nature of clarifications and a streamlining of a successful and cooperative relationship between ATCO I-Tek and its customers’.19 On that basis ATCO argued considers that it was not necessary, nor within would be preferable to place the scope of the MSA Module, to re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding with respect to the provision of IT services by onus on ATCO I-Tek to be vigilant with respect to acquiring or sharing access to the ATCO UtilitiesIP it requires or is interested in and to pay an appropriate consideration for any such additional rights pursuant to each statement of work. Interveners disagreed with The Board is also not convinced by ATCO’s views regarding suggestion there would not be many new client developed systems or projects in the ‘renewal’ nature of the Renewal MSA and argued that a more comprehensive review was justifiedfuture. The Board notes Calgarythat there continues to be an annual 55,000-hour commitment on behalf of the ATCO Group for DME. Further, the Board notes that the 55,000 hours in the Original MSA was limited to enhancements that were under 40 person days effort, but no such restriction was included in the Renewal MSA. The Board considers that the lack of clarity regarding the 55,000 hours of DME casts some doubt on ATCO’s suggestion stated “buy vs. build” approach. Until the product of those DME hours is clarified it would appear that IP related to existing applications would continue to be added. The Board believes that the ATCO Utilities should retain the IP related to those applications, or any new applications, unless the ATCO Utilities agree to some other suitable form of compensation. The Board considers that while it might be possible to factor the proposed treatment of IP, as per the Renewal MSA, into the benchmarking study (i.e. reflect it in the FMV of ATCO I-Tek services) the Board does not believe it is fundamentally acceptable for the ATCO Utilities to be exposed to potential harm or increased costs, or to pay to build up ATCO I-Tek’s market leverage, as could result from the relinquishment of IP ownership in the Renewal MSA. The Board’s preference is to have the treatment of IP addressed in the Renewal MSA should be subject in similar fashion to the same scrutiny as the Original MSA. The Board has considered these issues and, as previously noted, believes that a review of the terms and conditions of directs ATCO to amend the Renewal MSA is appropriate and within to reflect the scope IP ownership provisions of the MSA ModuleOriginal MSA, including amendment of applicable definitions relating to IP ownership, in order to reflect that all improvements, enhancements, and modifications to existing custom designed programs, any new custom designed programs, and all ATCO I-Tek software substantially paid for by one or more ATCO Utilities are to be owned by the appropriate utility or utilities. The Board has analyzed and compared aspects of directs ATCO to file such amended provisions in the Renewal MSA with the Original MSA in this Decision. The Board believes that ultimately it must be satisfied that the Renewal MSA is a contract that a prudent utility would enter into, having regard to appropriate IT service and maintenance, and the protection of its core business. The Board has considered IPCCAA’s suggestion that additional scrutiny is required where market value is not easily defined. Further, the Board notes suggestions by interveners that the ATCO Utilities should be held to a higher standard due to the affiliate nature of the relationship between the ATCO Utilities and ATCO I-Tek. The Board agrees that the Renewal MSA must ultimately meet the requirements of the Code of Conduct decision (Decision 2003-040). However, the Board notes that ATCO has until October 31, 2003 to be in full compliance with the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be established, the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be established, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision to outsource is made). Ultimately, however, it is up to the utility to select and defend the method it believes to be the most appropriate in establishing FMVCompliance Filing.

VIEWS OF THE BOARD. The Having reviewed the Renewal MSA in general, and various of its amended and non-standard clauses in particular, the Board considers that must now consider whether the scope of the ATCO I-Tek Renewal MSA Xxxxxx has remained unchanged from that can be reliably reviewed by an IT price-benchmarking expert or organization in order to determine FMV for services provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks to the hearing by the Chair and as further confirmed during the course of the hearing.18 The 13 Decision 2002-069, page 48‌ 15 Transcript, page 34 16 Transcript, page 507 17 Transcript, page 52‌ Board agrees with ATCO that the MSA Xxxxxx and this Decision should not re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding, including the Board’s acceptance of the out-sourcing arrangement with ATCO I-Tek. The Board notes that there is relatively limited evidence on this particular question from witnesses directly involved in benchmarking. The Board is concerned that ATCO’s evidence does not provide sufficient assurance that a benchmarking organization would be able to readily deal with the disagreement Renewal MSA in light of some of the parties as issues raised by interveners. Moreover, an underlying concern is whether a contract with non-standard provisions would be a prudent contract for a utility to on execute regardless of whether the importance ‘non-standard’ provisions could be benchmarked. The Board has considered three approaches to resolving the question of how to treat the Renewal MSA prior to the commencement of the MSA being price benchmarking process. One option, as put forward by ATCO, is to allow the benchmarker to review the contract clauses as they stand, assigning a renewal cost impact to each of them. The second option, as suggested by Calgary, is to have the Original MSAbenchmarker review a revised contract, where all non-standard clauses are replaced by those more typical of industry norms. ATCO viewed The Board has also examined a third option, of replacing only those clauses that are outside of what the Board considers would be acceptable to a utility dealing with an arms-length third party. With regard to the first option, the Board notes that leaving the Renewal MSA as is, including the clauses noted by Calgary as being biased towards ATCO I-Tek, should have the effect of reducing the appropriate prices determined by the benchmarker, and the customers of the ATCO Utilities should receive a renewal wherein ‘benefit from that. The Board notes ATCO’s argument, “…that utility customers should not be subjected to the changes made were higher prices that would result from contracting for higher service levels than necessary.”135 However, the Board also recognizes that there is a risk that a benchmarker may not be able to properly evaluate certain of the clauses in the nature Renewal MSA. The Board is most concerned that the particular clauses of clarifications the Renewal MSA dealing with IP rights and contract termination could not only present a streamlining challenge to determining an appropriate value, but would also constitute a serious downgrading of the contractual security of the assets of the utilities. Therefore, the Board is not satisfied that it is appropriate to leave the Renewal MSA in its current form for the purpose of price benchmarking, nor is it satisfied that the Renewal MSA as presently drafted constitutes a successful prudent agreement for the utilities. The second option is to revise the Renewal MSA for the purposes of price benchmarking by substituting more typical clauses for all of those determined to be non-standard. The Board is of 135 ATCO Utilities Argument, page 10 the view that not all such non-standard clauses raise prudence issues, rather some can adequately be addressed through an assessment of an appropriate price discount by a qualified benchmarker. For example, the Board believes that a benchmarker should be able to examine and cooperative relationship set a fair market value in relation to the non-standard service levels in the Renewal MSA. Therefore, the Board has determined that it is not necessary to require an amendment to all clauses that may not be conventional. The Board is, however, of the view that affiliate agreements, for the purpose of benchmarking the value of utility affiliate transactions, must be measured against a standard of comparison to that which third-party organizations would reach in an arms-length transaction. While the Board accepts that some of the non-standard clauses of the Renewal MSA may be the subject of negotiation between arms-length parties, the Board is of the view that certain elements of the Renewal MSA would not be agreed to by prudent third parties. The Board has therefore followed the third option. In pursuing this option, the Board has adopted the approach of amending those clauses dealt with in sections 3.2.4 and 3.3.4, where prudence is an issue or where an appropriate discount may not be easily determined. This leaves the benchmarking exercise to determine an appropriate discount, if any, for other non-standard terms and conditions. The Board again notes that it does not have sufficient evidence on the record to be able to rule with certainty on the issue of the effect of non-standard clauses on the benchmarking process, and agrees with Calgary and FIRM/NCC that the benchmarking process must be transparent. The Board considers that it would assist all parties and the Board if the terms of reference explicitly required the benchmarker to identify which elements of the Renewal MSA it found to be non-standard or unusual, to explain how these non-standard components compare to industry norms, to clearly provide a value for any appropriate price discount or adjustment arising from each non-standard clause, and to comment on its ability to provide a confident estimate of such discount or adjustment. The Board expects the benchmarker’s report would include its supporting documentation for adjustments to prices relating to various components of the agreement. In particular, the Board expects that the adjustments would be itemized, and that the benchmarker would disclose the degree of confidence relating to specific adjustments (i.e. the number of data points relied upon, etc.). The Board also expects the benchmarker to disclose the degree of confidence for any price ranges developed and used in the process of determining the FMV of ATCO I-Tek services. Inclusion of these various elements in the benchmarker’s report would greatly enhance the transparency, and hopefully the confidence of stakeholders, in the benchmarking exercise. The Board notes that the termination provisions and treatment of IP in the Renewal MSA were found by the Board in Sections 3.2 and 3.3 of this Decision to not be in keeping with what could reasonably be expected between two arm’s length parties, and if they remained unamended would raise concerns about the prudence of the Renewal MSA. The Board believes that these provisions constituted a transfer of value from the ATCO Utilities to ATCO I-Tek and its customers’.19 On that basis ATCO argued that it was do not necessary, nor within adequately protect the scope interests of the ATCO Utilities or their customers. The Board therefore has directed that the Renewal MSA Modulebe amended, rather than attempt to rereflect these non-visit standard provisions in the full suite FMV of affiliate issues addressed during the ATCO Affiliate proceeding with respect to the provision of IT services by ATCO I-Tek to the ATCO Utilities. Interveners disagreed with ATCO’s views regarding the ‘renewal’ nature of the Renewal MSA and argued that a more comprehensive review was justified. The Board notes Calgary’s suggestion that the Renewal MSA should be subject to the same scrutiny as the Original MSA. The Board has considered these issues and, as previously noted, believes that a review of the terms and conditions of the Renewal MSA is appropriate and within the scope of the MSA Module. The Board has analyzed and compared aspects of the Renewal MSA with the Original MSA in this Decision. The Board believes that ultimately it must be satisfied that the Renewal MSA is a contract that a prudent utility would enter into, having regard to appropriate IT service and maintenance, and the protection of its core business. The Board has considered IPCCAA’s suggestion that additional scrutiny is required where market value is not easily defined. Further, the Board notes suggestions by interveners that the ATCO Utilities should be held to a higher standard due to the affiliate nature of the relationship between the ATCO Utilities and ATCO I-Tek. The Board agrees that the Renewal MSA must ultimately meet the requirements of the Code of Conduct decision (Decision 2003-040). However, the Board notes that ATCO has until October 31, 2003 to be in full compliance with the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be established, the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be established, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision to outsource is made). Ultimately, however, it is up to the utility to select and defend the method it believes to be the most appropriate in establishing FMVservices.

VIEWS OF THE BOARD. The Board agrees with ATCO that ‘service levels are a complex, detailed area’. The Board also notes that any change to service levels could impact either or both of prices and volumes. The Board considers, based on the record from the MSA Xxxxxx, that while the inter-relationship between service levels, prices and volumes for the various ATCO I-Tek services are undoubtedly well understood by ATCO I-Tek and the ATCO Utilities, they are not as well understood by 93 CAL-ATCOMSA-14 94 CAL-ATCOMSA-14 Preamble 95 Exhibit 308 - Calgary Further Written Evidence dated May 30, 2003, page 4 (a) March 2003 TNS Report interveners or the Board. The Board considers that the scope of the MSA Xxxxxx has remained unchanged from that provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks to the hearing by the Chair and as further confirmed during the course of the hearing.18 The 13 Decision 2002-069, page 48‌ 15 Transcript, page 34 16 Transcript, page 507 17 Transcript, page 52‌ Board agrees with ATCO that the MSA Xxxxxx and this Decision should not re-visit the full suite of affiliate issues addressed during onus is on the ATCO Affiliate proceeding, including Utilities to facilitate the Board’s acceptance and interveners’ understanding of the outinter-sourcing arrangement with ATCO I-Tek. The Board notes the disagreement of the parties as to on the importance of the MSA being a renewal of the Original MSA. ATCO viewed the Renewal MSA as a renewal wherein ‘the changes made were in the nature of clarifications and a streamlining of a successful and cooperative relationship between ATCO I-Tek service levels, prices, and its customers’.19 On that basis ATCO argued that it was not necessary, nor within the scope of the MSA Module, to re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding with respect to the provision of IT services by ATCO I-Tek to the ATCO Utilities. Interveners disagreed with ATCO’s views regarding the ‘renewal’ nature of the Renewal MSA and argued that a more comprehensive review was justifiedvolumes. The Board notes Calgary’s suggestion that attempt to prescribe various service levels, however, the Renewal MSA should be subject Board is reluctant to approve one piece of the IT ‘puzzle’ without knowing the impact on the other pieces, on the total cost to the same scrutiny as the Original MSAATCO Utilities and ultimately to ratepayers. The Board has considered these issues and, as previously noted, believes that a review of the terms and conditions of the Renewal MSA is appropriate and within the scope of the MSA Module. The Board has analyzed and compared aspects of the Renewal MSA with the Original MSA in this Decision. The Board believes that ultimately it must be satisfied notes Calgary’s submission that the Renewal MSA is a contract that a prudent utility would enter into, having regard to appropriate IT service and maintenance, and the protection of its core business. The Board has considered IPCCAA’s suggestion that additional scrutiny is required where market value is not easily defined. Further, the Board notes suggestions planning approach used by interveners that the ATCO Utilities should be held to a higher standard due to the affiliate nature of the relationship between the ATCO Utilities and ATCO I-TekTek is ‘much different from what one would expect from an independent, arms- length outsourcer’. As noted by Calgary, ATCO has neglected to provide an application plan and did not provide reasons for disregarding this aspect of the IT planning process. The Board agrees with Calgary that the information provided by the ATCO Utilities has not clarified the IT forecast sufficiently for the Board, or provided an adequate degree of comfort for the Board to prescribe or approve the service levels in this Decision. The Board reserves the right to revisit the appropriateness of service levels in a future proceeding. Notwithstanding the Board’s reluctance to change the service levels included in the Renewal MSA, the Board considers that the benchmarker should be in a position to assess whether the service levels are non-standard, and whether or not they can be benchmarked. The Board expects that the benchmarker should be able to address each of the targets submitted by Calgary, or their equivalent in the Renewal MSA, in addition to any other non-standard service levels which may be encountered. Accordingly, the Board directs that ATCO ensure, through the Collaborative Process and the adoption of terms of reference for benchmarking, that the benchmarker is directed to provide clear evidence as to the price reduction, price adjustment or price impact accruing to the ATCO Utilities owing to any service levels provided for in the Renewal MSA must ultimately meet that are determined by the requirements of the Code of Conduct decision (Decision 2003-040). However, the Board notes that ATCO has until October 31, 2003 benchmarker to be in full compliance non-standard and therefore problematic with the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be established, the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be established, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision to outsource is made). Ultimately, however, it is up respect to the utility to select and defend the method it believes to determination of fair market value, particularly those which may be the most appropriate in establishing FMVlower than ordinary service levels as suggested by Calgary.

VIEWS OF THE BOARD. The Board considers notes that the scope Original MSA did not contain gainsharing provisions, notwithstanding that gainsharing provisions appear to be a widely used feature in outsourcing arrangements, as submitted by Xx. Xxxxxxxx. Instead, ATCO has relied on annual price reviews tied to the performance of the MSA Xxxxxx has remained unchanged from that provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks IT market rather than gainsharing tied to the hearing by the Chair and as further confirmed during the course of the hearing.18 The 13 Decision 2002-069, page 48‌ 15 Transcript, page 34 16 Transcript, page 507 17 Transcript, page 52‌ Board agrees with ATCO that the MSA Xxxxxx and this Decision should not re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding, including the Board’s acceptance of the out-sourcing arrangement with ATCO I-Tek’s performance. The Board notes that Xx. Xxxxxxxx agreed xxxxxxxxxxx was the disagreement lowest priority on her list of four issues, and therefore, the parties as Board considers that while gainsharing provisions are widely used they are not mandatory. The Board believes that gainsharing could provide some attractions to customers, depending on the importance of the MSA being what was agreed to. The Board notes, based on interveners’ arguments, that xxxxxxxxxxx could provide a renewal of the Original MSA. ATCO viewed the Renewal MSA as a renewal wherein ‘the changes made were in the nature of clarifications and a streamlining of a successful and cooperative relationship better link between ATCO I-Tek Tek’s costs and its customers’.19 On that basis ATCO argued that it was not necessary, nor within the scope of the MSA Module, to re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding with respect to the provision of IT services by ATCO I-Tek prices charged to the ATCO Utilities. Interveners disagreed with The Board notes ATCO’s views regarding argument that the ‘renewal’ nature outsourcer in a gainsharing arrangement would typically require some form of financial concession that could increase the price of the Renewal MSA and argued outsourcing agreement. Likewise, the Board considers that a more comprehensive review was justifiedthe absence of gainsharing should also be reflected in ATCO I-Tek prices. The Board notes Calgary’s suggestion that parties generally appeared to accept that it was possible to assign a value to gainsharing, however parties disagreed with respect to the desirability of doing so. The Board considers that while it might be a subjective exercise, the benchmarker should be able to compensate for the inclusion/exclusion of gainsharing in the Renewal MSA should be subject to the same scrutiny as the Original MSA. The Board has considered these issues and, as previously noted, believes notes that a review interveners might be interested in participating in any debate with ATCO about the value of the terms and conditions of the Renewal MSA is appropriate and within the scope of the MSA Modulegainsharing. The Board has analyzed and compared aspects of the Renewal MSA with the Original MSA However in this Decisioncase, owing to the relatively low priority to which Xx. The Board believes that ultimately it must be satisfied that the Renewal MSA is a contract that a prudent utility would enter into, having regard to appropriate IT service and maintenanceXxxxxxxx assigned gainsharing in her four main issues of concern, and the protection of its core business. The Board has considered IPCCAA’s suggestion that additional scrutiny is required where market value is not easily defined. Further, the Board notes suggestions by interveners that the ATCO Utilities should be held to a higher standard due to the affiliate nature of the relationship between the ATCO Utilities and ATCO I-Tek. The Board agrees that the Renewal MSA must ultimately meet the requirements of the Code of Conduct decision (Decision 2003-040). However, the Board notes that ATCO has until October 31, 2003 to be in full compliance with the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be established, since the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as consider gainsharing to be in the nature of a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be establishedfundamental contract term, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision will not require gainsharing provisions to outsource is made). Ultimately, however, it is up be added to the utility Renewal MSA. The Board however directs that ATCO ensures, through the Collaborative Process and the draft terms of reference for benchmarking, that the benchmarker be directed to select and defend provide clear evidence as to the method it believes adjustment to be fair market value of ATCO I-Tek services accruing to the most appropriate ATCO Utilities owing to the lack of gainsharing provisions in establishing FMVthe Renewal MSA.

VIEWS OF THE BOARD. The Board considers that the scope of the MSA Xxxxxx has remained unchanged from that provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks to the hearing by the Chair and as further confirmed during the course of the hearing.18 The 13 Decision 2002-069, page 48‌ 15 Transcript, page 34 16 Transcript, page 507 17 Transcript, page 52‌ Board agrees with ATCO that the MSA Xxxxxx and this Decision should not re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding, including the Board’s acceptance of the out-sourcing arrangement with ATCO I-Tek. The Board notes that ATCO’s approach to remedies for non-performance is the disagreement of the parties as to on the importance of the MSA being a renewal of the Original MSA. ATCO viewed same in the Renewal MSA as a renewal wherein ‘the changes made were in the nature of clarifications and a streamlining of a successful and cooperative relationship between ATCO I-Tek and its customers’.19 On that basis ATCO argued that it was not necessary, nor within the scope of the MSA Module, to re-visit the full suite of affiliate issues addressed during the ATCO Affiliate proceeding with respect to the provision of IT services by ATCO I-Tek to the ATCO Utilities. Interveners disagreed with ATCO’s views regarding the ‘renewal’ nature of the Renewal MSA and argued that a more comprehensive review was justified. The Board notes Calgary’s suggestion that the Renewal MSA should be subject to the same scrutiny as in the Original MSA. The Board has considered notes, however, that these issues and, as previously noted, believes that a review of the terms and conditions of remedies included in the Renewal MSA is appropriate and within do not appear to be as rigorous to the scope of the MSA Moduleservice provider as in other outsourcing arrangements that Xx. Xxxxxxxx has participated in. The Board has analyzed and compared aspects notes that both the level of the Renewal MSA with penalty (5% of the Original MSA affected service versus a maximum 12% penalty on the full monthly fees), and the ability to recover the amount withheld are different from industry standards as discussed in this Decisionthe evidence of Xx. Xxxxxxxx. The Board believes that ultimately it must be satisfied also notes ATCO’s argument that the Renewal MSA ATCO Utilities service levels have consistently been met or exceeded and that ATCO I-Tek is a contract that a prudent utility would enter into, having regard incented to appropriate IT service and maintenance, and correct problems by the protection of its core businessholdback scheme. The Board has considered IPCCAAnotes that both ATCO and Calgary argued that financial penalties for non- performance, or the lack of financial penalties, would impact the FMV of the ATCO I-Tek prices charged. ATCO argued that large financial penalties would require an opportunity ‘for the service provider to earn upsides’. Alternatively, the Board considers the absence of the usual substantial and permanent financial penalties should be attractive to ATCO I-Tek, and should therefore be reflected by a noticeable adjustment to ATCO I-Tek prices. Otherwise, the Board believes that the ATCO Utilities would not be compensated for what appears to be relatively weak remedies, notwithstanding ATCO’s suggestion argument that additional scrutiny there is required where market value is not easily defineda good working relationship and failing that a good dispute resolution process. FurtherIn this regard, the Board notes suggestions by interveners intervener arguments that the ATCO Utilities should benchmarker would have to make assumptions and judgments to adjust for the non-standard remedies in the Renewal MSA. Interveners preferred that the remedy provisions be held to a higher standard due to standardized, rather than have the affiliate nature benchmarker assess the ‘value’ of the relationship between remedies included in the ATCO Utilities Renewal MSA, and adjust ATCO I-Tek’s prices. The Board agrees is not convinced that the Renewal MSA remedy provisions must ultimately meet be changed in order to enable the requirements benchmarker to address this non-standard aspect of the Code of Conduct decision (Decision 2003-040)Renewal MSA. HoweverAccordingly, the Board notes that is prepared to allow the remedy provisions to remain as presently contracted and directs ATCO has until October 31to provide, 2003 in the draft terms of reference to be in full compliance with discussed through the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be establishedCollaborative Process, the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be established, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision to outsource is made). Ultimately, however, it is up instructions to the utility benchmarker to select note the adjustment to the fair market value of ATCO I-Tek services due to the absence of the more usual substantial and defend the method it believes to be the most appropriate in establishing FMVpermanent penalties for non- performance.

VIEWS OF THE BOARD. The Board notes that ATCO and the interveners approached the termination provisions in a markedly differently way. ATCO argued for a ‘practical’ approach, where ATCO I-Tek was obligated to ‘ensure a smooth transition’. On the other hand, the interveners argued for an explicit transition plan, with guaranteed access to any “enhancements, custom programs and improvements they paid for, that any third party licenses that were held by I-Tek that were needed to continue the processing services were transferred to the utilities and that I-Tek would grant a license to its own proprietary technology to the utilities or their new outsourcer, together with any documentation, …46. The Board agrees with Calgary and FIRM/NCC that the 20% surcharge for an extension of contracted services, and the other termination provisions are not sufficiently protective of the ATCO Utilities. The Board notes that the original client systems could be transferred back to the utilities. However, the Board considers that the scope value of the MSA Xxxxxx has remained unchanged from that provided by letters dated April 25, 2003 and May 5, 2003, as summarized in the opening remarks to the hearing by the Chair and as further confirmed during the course original versions of the hearing.18 The 13 Decision 2002client systems transferred to ATCO I-069, page 48‌ 15 Tek (in 1999) would most certainly have depreciated quickly unless ownership of subsequent enhancements were also included. 44 Transcript, page 34 16 494 45 Transcript, page 507 17 Transcript494 to 495‌ The Board notes that the expansion of Clause 15.6 from the wording in the Original MSA appears to provide additional protection to ATCO I-Tek. This does not appear to be unreasonable, page 52‌ if the ATCO Utilities somehow caused ATCO I-Tek to want to terminate the Renewal MSA, as the outsourcer may have made arrangements with third parties or hired staff to meet the Clients’ needs. The Board agrees with that, depending on the circumstances, ATCO that the MSA Xxxxxx and this Decision I-Tek should not re-visit the full suite of affiliate issues addressed during be compensated if the ATCO Affiliate proceeding, including the Board’s acceptance of the out-sourcing Utilities were to prematurely terminate their outsourcing arrangement with ATCO I-Tek. The Board notes However, the disagreement of ATCO Utilities should not be responsible for ATCO I-Tek costs in the parties as event that ATCO I-Tek chose to on the importance of the MSA being a renewal of the Original MSA. ATCO viewed unilaterally terminate the Renewal MSA and the Board agrees with the suggestion of FIRM/NCC in this regard, that such a provision would be unreasonable. Moreover, the Board considers that there appears to have been little effort on the part of the ATCO Utilities to address the possibility of a transition plan, or even the minimal protection that would be required should the relationship with ATCO I-Tek be terminated, in accordance with the evidence offered by Xx. Xxxxxxxx. While the Board notes that the Renewal MSA is between affiliates, and that the ATCO Group might view the relationship with ATCO I-Tek as a renewal wherein ‘permanent’ or long-term arrangement, a generic obligation to ‘ensure a smooth transition’ cannot be considered a norm in terms of outsourcing arrangements. Further, there is no assurance that a corporate group such as the changes made ATCO Group would continue to hold its regulated utility companies or assets in perpetuity. The Board believes it should be concerned with the underlying issue of prudent management of utility property regardless of the identity of its ultimate corporate owner or its affiliates at any given time. Generally, with respect to termination provisions, the Board is inclined to believe that the ATCO Utilities have entered into arrangements with ATCO I-Tek that are more favourable to ATCO I- Tek than would have been the case if the ATCO Utilities were in contracting with an arm’s length third party service provider. This being the nature case, the Board is concerned that these provisions would constitute a transfer of clarifications and a streamlining of a successful and cooperative relationship between value from the ATCO Utilities to ATCO I-Tek and its customers’.19 On that basis ATCO argued that it was would not necessary, nor within adequately protect the scope interests of the MSA ModuleATCO Utilities or their customers. The Board notes, as will be discussed in the next section of this Decision, that a key consideration related to re-visit the full suite termination provisions involves the appropriate treatment of affiliate issues addressed during IP. ATCO contended that as long as the ATCO Affiliate proceeding with respect Utilities had access to the provision IP, the ownership rights to the IP would not be required by the ATCO Utilities. The Board could agree with ATCO’s suggested treatment of IT services IP were the ATCO Utilities inclined to abandon their systems at termination, however, the Board believes that forfeiture by the ATCO Utilities of ownership of IP rights (including improvements) could fundamentally reduce their options at termination and hamper their ability to terminate the Renewal MSA. The Board considers that if the ATCO Utilities chose to terminate or temporarily extend the Renewal MSA without ownership of the IP rights the ATCO Utilities would be required to purchase them from ATCO I-Tek, or continue to use them subject to a 20% surcharge. In addition to the treatment of IP rights, the Board notes that there are other considerations that must be addressed. For example, the Board notes that the termination provisions in the Renewal MSA indicate that client data would be returned by ATCO I-Tek in a format that could facilitate loading into another software application. However, while the ATCO Utilities would have to pay for the conversion of any data stored in a proprietary or confidential format, the Board considers that this aspect of the ATCO Utilities core business appears to be protected. The Board also considered ATCO’s suggestions that their approach to termination provisions and IP was impacted by their strategy to “buy not build”, and that the right to use third party software products and IP was more important than trying to secure ownership of all IP. The Board considers that the ATCO Utilities should continue to have access to third party software, and ownership of IP rights. In summary, the Board does not agree that the ATCO Utilities should accept a generic obligation to ensure a smooth transition with respect to termination provisions. The termination obligations should be clearly stated and should not create a costly obligation on the ATCO Utilities. Interveners disagreed with ATCO’s views regarding Further, the Board believes it is also fundamentally prudent that contract obligations of this kind provide basic protection to the ATCO Utilities in respect of the IP, data and third party software related to their core businesses, regardless of which corporate group the ATCO Utilities reside in, rather than allowing for a ‘renewalshort-coming’ nature of in the Renewal MSA and argued that a more comprehensive review was justifiedto be reflected in the FMV of ATCO I- Tek services. The Therefore, the Board notes Calgary’s suggestion directs that the Renewal MSA should be subject revised to include additional termination provisions related to a transition plan and the same scrutiny as obligation of ATCO I-Tek to assist with the Original MSAtransition. The Board has considered these issues and, as previously noted, believes that a review would not expect the 20% surcharge to apply to the implementation of the transition plan. The Board directs the ATCO Utilities to amend the terms and conditions of the Renewal MSA is appropriate and within the scope of the MSA Module. The Board has analyzed and compared aspects of the Renewal MSA in a manner consistent with the Original MSA Board’s findings in this Decision, including the attachment, by way of a schedule to the Renewal MSA, of a transition plan. In addition, the revisions should include the matters referred to by Xx. Xxxxxxxx as follows: If you could say in an amendment, that the utilities got to use the enhancements, custom programs and improvements they paid for, that any third party licenses that were held by I-Tek that were needed to continue the processing services were transferred to the utilities and that I-Tek would grant a license to its own proprietary technology to the utilities or their new outsourcer, together with any documentation, that would work.47 The Board believes that ultimately it must be satisfied that the Renewal MSA is directs ATCO to file such amended provisions in a contract that a prudent utility would enter into, having regard to appropriate IT service and maintenance, and the protection of its core business. The Board has considered IPCCAA’s suggestion that additional scrutiny is required where market value is not easily defined. Further, the Board notes suggestions by interveners that the ATCO Utilities should be held to a higher standard due to the affiliate nature of the relationship between the ATCO Utilities and ATCO I-Tek. The Board agrees that the Renewal MSA must ultimately meet the requirements of the Code of Conduct decision (Decision 2003-040). However, the Board notes that ATCO has until October 31, 2003 to be in full compliance with the Code of Conduct. With regard to XXXX’s suggestion that benchmarking was a preferred method by which FMV could be established, the Board does not believe Decision 2002-069 and Decision 2003-040 presented benchmarking as a preferred method. Rather, while the Board accepted benchmarking as a method by which FMV could be established, the Board would actually prefer tendering or some other objective and verifiable method in most instances (particularly when the initial decision to outsource is made). Ultimately, however, it is up to the utility to select and defend the method it believes to be the most appropriate in establishing FMVCompliance Filing.