Exhibit B
SERVICE AGREEMENT
BETWEEN
ALLEGHENY POWER SERVICE CORPORATION
AND
ALLEGHENY ENERGY SOLUTIONS, INC.
THIS SERVICE AGREEMENT will be effective September 3,
1997, between Allegheny Power Service Corporation, a corporation
formed under the laws of the State of Maryland, (the "Service
Company") and Allegheny Energy Solutions, Inc., a corporation
formed under the laws of the State of Delaware ("AES").
WITNESSETH:
WHEREAS, the Service Company was created to perform
certain management duties on behalf of Allegheny Power System,
Inc. (the "System"), its utility subsidiary companies (the
"Subsidiaries") and its nonutility subsidiary companies (the
"Nonutility Subsidiaries"); and
WHEREAS, the Service Company offers to provide a central
organization to furnish to the System, the Subsidiaries and the
Nonutility Subsidiaries certain advisory, supervisory and other
services in accordance with current practices and procedures; and
WHEREAS, AES wishes to accept the offer proposed by the
Service Company.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto, intending to be reasonably bound, hereby agree as
follows:
1. The Service Company hereby offers to furnish to AES
the services detailed on Exhibit I attached hereto and made a
part hereof.
2. For all services rendered to AES by the Service
Company, AES agrees to pay the cost thereof. For services
rendered to one or more Subsidiaries, Nonutility Subsidiaries
and/or the System and/or AES, the allocation will be based on the
average of the prior three years' direct costs charged by the
Service Company to each Subsidiary, Nonutility Subsidiary and
AES. Until a three-year history for AES is developed, AES's
costs will be deemed to be the same as the average of the
System's prior three years' direct costs, thereby reducing each
Subsidiary's share proportionately. Once a three-year history
for AES is available, APSC will calculate an allocation
percentage for AES. If the difference between that allocation
percentage and the one used for any of AES's first three years is
material, then APSC will recalculate all allocation percentages
for those years in which the difference was material and AES, the
Subsidiaries, the Nonutility Subsidiaries or the System will each
either pay an additional amount or receive a refund of a
particular amount for that year.
3. The payment for services rendered by the Service
Company to the System, the Subsidiaries, the Nonutility
Subsidiaries and AES shall cover all the costs and expenses of
its doing business, excluding only a return for the use of equity
capital, and that each Subsidiary, Nonutility Subsidiary, the
System and AES shall pay its direct or fair proportionate share.
4. Payment shall be made by AES to the Service Company
on a monthly basis on or before the 20th day of the succeeding
month, upon receipt of a statement showing the amount due.
Certain charges billed by the Service Company to AES may not be
due immediately and will be so indicated on the statement of
billing. Monthly charges may be made on an estimated basis, but
adjustments will be made at the end of each calendar year so that
all charges for the calendar year will be in accordance with the
foregoing.
5. Nothing herein shall be construed to release the
officers and directors of AES from the performance of their
respective duties or limit the exercise of their powers as
prescribed by law or otherwise.
6. The offer set forth herein shall become a contract
effective as of the date of signing. Such Service Agreement shall
continue in full force and effect from year to year but may be terminated
by either party upon 60 days' prior notice, and AES may terminate
such contract at any time with or without notice for any cause
deemed by it to be sufficient.
7. The Service Agreement will be subject to termination
or modification at any time to the extent its performance may
conflict with the provisions of the Public Utility Holding
Company Act of 1935, as amended, or with any rule, regulation or
order of the Securities and Exchange Commission adopted before or
after the making of this Service Agreement and shall be subject
to the approval of any state commission or other regulatory body
whose approval is a legal prerequisite to its execution and
delivery or performance.
ALLEGHENY POWER SERVICE CORPORATION
By /s/ X. X. Xxxx
President
Attest:
/s/ Xxxxxx X. Xxxx
Secretary
Allegheny Energy Solutions, Inc.
By /s/ Xxxx X. Xxxx
President
Attest:
/s/ Xxxxxx X. Xxxx
Secretary
Exhibit I
Allegheny Power Service Corporation Principal Functions
In accordance with the terms and conditions of the
Service Agreement dated September 3, 1997, Allegheny Power
Service Corporation shall perform for AES the following services
as requested:
1.Provide technical support as needed to offer power
marketing services and to manage AES's interest in
Fort Xxxxxx Unit No. 1.
2.Planning and implementation of financial programs
to raise the funds required for AES, including
handling arrangements for bank borrowings and sales
of securities and relationships with investors and
analysts.
3.Counsel on corporate, legal and regulatory matters
and on important contractual relationships.
4.Provide general and administrative services
including, but not limited to, the following:
a) Purchasing.
b) Customer billing and accounting.
c) Information services, including computer
applications and programming and electronic
data processing.
d) Preparation of consolidated financial statements
and cost, statistical, and financial data, as required.
e) Assistance with respect to certain personnel matters,
including, but not limited to, employee benefit matters.
f) Preparation and filing of consolidated income tax
returns and following developments in federal and state
taxation regulations.
g) Administration of insurance.
h) Internal auditing.
i) Corporate security.
5. Certain other services in addition to the above as
Allegheny Power Service
Corporation may be able to provide and/or AES may require or request.
