Exhibit K-3.2
REVISED VIRGINIA POWER SUPPORT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of
January, 2001, by and between Virginia Electric and Power
Company, a Virginia public service corporation ("Virginia
Power") and Dominion Resources Services, Inc., a Virginia
corporation ("DRS").
WHEREAS, Virginia Power is an electric utility engaged
in the sale of electric service at retail within its
service territories in Virginia and at wholesale within
those territories and elsewhere in the United States;
WHEREAS, DRS is a wholly owned subsidiary of Dominion
Resources, Inc. ("Dominion"), a registered holding company
subject to regulation as such by the Securities and
Exchange Commission ("SEC") under the Public Utility
Holding Company Act of 1935 ("1935 Act");
WHEREAS, DRS was formed to provide centralized
services to Dominion and its subsidiaries ("Dominion
Companies") as a subsidiary service company under Rule 88
of the SEC's rules and regulations for implementation of
the 1935 Act, 17 C. F. R. Section 250.88;
WHEREAS, DRS is an "affiliated interest" of Virginia
Power within the meaning of the Utility Affiliates Act,
Chapter 4 of Title 56 of the Code of Virginia, and
therefore contracts and arrangements for the furnishing of
services by Virginia Power to DRS are subject to approval
of the SCC;
WHEREAS, by its Order Approving, in part, and Denying,
In Part, Petitioners' Requests, issued December 29, 1999 in
Xxxx Xx. XXX000000, the Virginia State Corporation
Commission ("SCC") approved under the Affiliates Act,
subject to certain conditions, the Virginia Power Support
Agreement under which Virginia Power agreed to provide
certain services to DRS in an effort to promote
efficiencies and effectively utilize resources and
expertise and to thereby facilitate the provision by DRS of
centralized services to the Dominion Companies ("Original
Support Agreement");
WHEREAS, DRS is an affiliate of Virginia Power and
therefore certain types of contracts between DRS and
Virginia Power are subject to the requirements of North
Carolina G. S. 62-153;
WHEREAS, by its Order on Affiliated Contracts issued
January 27, 2000 in Docket No. E-22, Sub 385, the North
Carolina Utilities Commission ("NCUC") approved the
Original Support Agreement under North Carolina G.S. 62-
153, subject to certain conditions;
WHEREAS, by its Order Authorizing Acquisition of
Public Utility Companies and Related Transactions,
Approving Service company Arrangements, and Reserving
Jurisdiction issued December 15, 1999, SEC Release No. 3-
27113; 70-9477, the SEC approved the formation of and
proposed operation of DRS, including its performance under
Original Service Agreement; and
WHEREAS, DRS and Virginia Power wish to replace the
Original Support Agreement with this revised agreement
which will reduce the number of services provided by
Virginia Power to DRS and make certain other changes
designed to simplify and clarify the methods for allocation
of costs by Virginia Power.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. General Services to be Provided by Virginia Power. Exhibit
A hereto lists and describes all of the services that may
be provided by Virginia Power to DRS for the benefit of DRS
and/or the existing or future subsidiaries or affiliates of
Dominion. Such services are and will be provided to DRS
only on the mutual agreement of Virginia Power and DRS and
in accordance with the terms and conditions set forth
herein.
2. Compensation and Allocation. Virginia Power and DRS
recognize the importance of DRS paying the appropriate
compensation for the services provided hereunder, so that
there is no subsidization of either party by the other. To
that end, Virginia Power will maintain accurate records of
its operations that will enable it to determine the costs
of the services that it provides to DRS, and those books
and records will be open to examination by any state or
federal commission having jurisdiction over arrangements
and services to be furnished, and the staffs of those
commissions. DRS will compensate Virginia Power for the
services provided hereunder by payment of the costs
incurred to provide those services. Exhibit B hereto
contains rules for determining and allocating costs for
services provided to DRS by Virginia Power.
3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth
of Virginia, without regard to their conflicts of law
provisions.
4. Entire Agreement. This Agreement, together with its
exhibits, constitutes the entire understanding and
agreement of the parties with respect to its subject
matter, and effective upon the execution of this Agreement
by the respective parties hereof, any and all prior
agreements, understanding, or representations with respect
to this subject matter are hereby terminated and cancelled
in their entirety.
5. Waiver. No waiver by any party hereto of a breach of any
provision of this Agreement shall constitute a waiver of
any preceding or succeeding breach of the same or any other
provision hereof.
6. Non - Exclusive Rights and Obligations. Nothing herein
shall be construed to require DRS to obtain any of the
services enumerated herein from Virginia Power, nor to
require Virginia Power to provide any of such services to
DRS.
7. Effective Date and Term. This Agreement shall become
effective January 1, 2001 and it shall continue in effect
until terminated by either Virginia Power or DRS giving the
other sixty (60) days advance written notice of
termination.
This Agreement is subject to termination or modification at any time to the
extent its performance may conflict with the provisions of the 1935 Act, as
amended or with any rule, regulation or order of the SEC
adopted before or after the making of this Agreement. This
Agreement shall be subject to the approval of any state
commission or other state regulatory body whose approval
is, by the laws of such state, a legal prerequisite to the
execution and delivery or the performance of this
Agreement.
8. SCC Approval. Pursuant to the SCC's Order Approving Merger
in Joint Petition of Dominion Resources, Inc. and
Consolidated Natural Gas Company, For approval of agreement
and plan of merger under Chapter 5 of Title 56 of the Code
of Virginia, Case No. PUA990020, issued on September 17,
1999, Virginia Power shall have no obligation under this
Agreement except to the extent the Commission has approved
such obligation.
9. NCUC APPROVAL. Pursuant to the NCUC's Order Approving
Merger In the Matter of Application by Dominion Resources,
Inc., for Authorization under G.S. 62-111 to Engage in a
Business Combination Transaction, Docket No. E-22, Sub 380,
issued on October 18, 1999, Virginia:
(i) may not make or incur a charge under this
Agreement except in accordance with North
Carolina law and the rules, regulations and
orders of the NCUC promulgated thereunder;
and
(ii) may not seek to reflect in rates any cost
incurred or revenue level earned under an
agreement subject to the 1935 Act to the
extent disallowed by the NCUC.
10. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality, and enforceability
of the remaining provisions shall in no way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of this 1st day of
January, 2001.
Attest: Virginia Electric and Power Company
_________________________ By___________________________________
Attest: Dominion Resources Services, Inc.
_________________________ By__________________________________
Xxxxxx X. Xxxxxxxx, Executive Vice
President and Chief Financial Officer
EXHIBIT A
DESCRIPTION OF APPROVED SERVICES TO BE OFFERED BY
VIRGINIA ELECTRIC AND POWER COMPANY TO DOMINION RESOURCES
SERVICES, INC. UNDER THE REVISED VIRGINIA POWER SUPPORT
AGREEMENT
1. Accounting. Provide advice and assistance in accounting
matters, including the development of accounting practices,
procedures and controls, the maintenance of the general
ledger and related systems, the preparation and analysis of
financial statement reports, and the processing of certain
customer transactions.
2. Regulatory Provide advice and assistance with respect to
regulatory issues as well as regulatory compliance under
Federal and State laws.
3. Information Technology, Electronic Transmission and Computer
Services. Assist with the operation of an information
technology function including the development,
implementation and operation of a centralized data
processing facility and the management of a
telecommunications network. This function includes the
central processing of computerized applications and support
of individual applications. Provide computer
resource/network availability, including enterprise
telecommunications infrastructure, mainframe and
distributed computing hardware, operating systems, business
systems and applications, internet, intranet and mail
environments, software licenses and maintenance agreements.
4. Human Resources Advise and assist in the formulation and
administration of employee relations policies and programs
relating to labor relations, personnel administration,
training, wage and salary administration and safety.
5. Operations. Advise and assist in the study, planning,
engineering and construction of energy plant facilities.
Assist in the development of long-range operational
programs. Offer management, consulting and
advisory/technical services with respect to the physical
operation of energy plant facilities and the purchase, sale
and transfer of affiliated companies.
6. Business and Operations Services. Advise and assist in all
matters relating to operational capacity and the
preparation and coordination of operating studies. Provide
assistance with management of the purchase, sale, movement,
transfer and accounting of fuel and gas volumes. Compile
and communicate information relevant to operations.
Perform general business and operations support services,
including travel services, fleet, mail, plant and
facilities operation, maintenance and management.
7. Marketing. Assist in the planning, formulation and
implementation of marketing programs, as well as provide
associated marketing services to assist with improving
customer satisfaction, load retention and shaping, growth
of energy sales and deliveries, energy conservation and
efficiency. Assist in carrying out policies and programs
for the development of plant locations and of industrial,
commercial and wholesale markets and assist with community
redevelopment and rehabilitation programs.
8. Budgeting and Planning. Advise and assist in studying and
planning in connection with operations, budgets, economic
forecasts, rate structures, capital expenditures and
special projects.
9. Purchasing. Advise and assist in the purchase of materials,
supplies and services and the preparation and negotiation
of purchasing agreements.
10. Rates. Advise and assist in the analysis of rate
structures, the formulation of rate policies and the
negotiation of large contracts. Provide consulting in
connection with proceedings before regulatory bodies
involving rates and operations.
11. Research. Investigate and conduct research into problems
relating to production utilization, testing, manufacture,
transmission, storage and distribution of energy. Evaluate
and conduct research and development in promising areas and
advise and assist in the solution of technical problems
arising out of operations.
12. Customer Service. Provision of services and systems
dedicated to customer service, including billing,
remittance, credit, collections, customer relations, call
centers, energy conservation support and metering.
13. Energy Marketing. Provide services and systems dedicated to
energy marketing, including marketing and trading of gas
and electric power, energy price risk management, and
development of marketing and sales programs in physical and
financial markets.
14. Office Space and Equipment. Leasing of land, buildings,
furnishings and equipment, including computer hardware and
software and transportation equipment.
15. External Affairs. Provide services in support of corporate
strategies for managing relationships with federal, state
and local governments, agencies and legislative bodies.
Formulate and assist with public relations and
communications programs and administration of corporate
contribution and community affairs programs.
EXHIBIT B
METHODS OF ALLOCATION FOR VIRGINIA POWER
Virginia Power shall allocate costs independently to DRS
using the following methods:
I. The costs of rendering service by Virginia Power will
include all costs of doing business including interest
on debt and a return for the use of equity capital.
II. A. Virginia Power will maintain a separate record of the expenses
of each department. The expenses of each department will include:
1. those expenses that are directly
attributable to such department, and
2. an appropriate portion of those office
and housekeeping expenses that are not
directly attributable to a department
but which are necessary to the
operation of such department.
B. Expenses of the department will include salaries
and wages of employees, materials and supplies, and
all other expenses attributable to the department.
The expenses of a department will not include:
1. those incremental out-of-pocket
expenses that are incurred for the
direct benefit and convenience of an
individual company or group of
companies,
2. Virginia Power overhead expenses that
are attributable to maintaining the
corporate existence of Virginia Power,
and all other incidental overhead
expenses including rent and utilities,
depreciation, and those auditing fees,
internal auditing department expenses
and accounting department expenses
attributable to Virginia Power.
C. Virginia Power will establish annual budgets for
controlling the expenses of each department and for
determining estimated costs to be included in interim
monthly billing.
III A. There will be attributed to the salary or wage of an
employee who directly provides services to DRS, a percentage of all
other expenses of such employee's
department.
B. Employees who directly provide service to DRS will maintain a
record of the time they are employed in rendering such service
to DRS. An hourly rate will be
determined by dividing the total salary or wage
expense attributable to the employee by the productive
hours reported by such employee.
IV The charge to DRS for a particular service will be
determined by multiplying the hours reported by
employees in rendering such service to DRS by the
hourly rates applicable to such employees.
V To the extent appropriate and practical, the foregoing
computations of hourly rates and charges may be
determined for groups of employees within reasonable
salary range limits.
VI Those expenses of Virginia Power that are not included
in the annual expense of a department under Section
II. above will be charged to DRS as follows:
A. Incremental out-of-pocket costs incurred for the
direct benefit and convenience of DRS will be
charged directly to DRS.
B. Virginia Power overhead expenses referred to in
Section II. above will be charged to DRS in the
proportion that the charges made to DRS for
costs, other than those set forth in this Section
VI, are to the total of all department costs as
defined in Section II.
VII Notwithstanding the foregoing basis of determining
cost allocations for billing purposes, cost
allocations for certain services involving machine
operations, production or service units, or facilities
cost will be determined on an appropriate basis
established by Virginia Power.
VIII Monthly bills will be issued for the services rendered
to DRS on an actual or estimated basis. At the end of
each year, estimated figures will be revised to
reflect actual experience during such year and
adjustments will be made in amounts billed to give
effect to such revision.
IX If the use of a basis of allocation would result in an
inequity because of a change in operations or
organization, then Virginia Power may adjust the basis
to effect an equitable distribution.
