Exhibit 10.4
SERVICE AGREEMENT
THIS AGREEMENT, made and entered into as of January 10, 2001, between
SOUTHERN COMPANY SERVICES, INC., a corporation organized under the laws of the
State of Alabama (hereinafter sometimes referred to as the "Service Company")
and SOUTHERN POWER COMPANY, a corporation organized under the laws of the State
of Delaware (hereinafter sometimes referred to as "Client Company");
WITNESSETH:
THAT, WHEREAS, Service Company is willing to provide Client Company
certain services upon request by Client Company; and
WHEREAS, Client Company wishes to obtain such services from Service
Company;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, the parties hereto agree as follows:
1. Agreement to Furnish Services
Service Company agrees to furnish to Client Company, upon the terms and
conditions hereinafter set forth, such of the services described in Article 2
hereof, at such times, for such periods and in such manner as Client Company may
from time to time require.
2. Description of Services
Service Company will, as and to the extent required for Client Company,
keep itself and its personnel available and competent to render to Client
Company, the following services:
A. Power Pool Operations
The maintenance of a central dispatching office to coordinate
the bulk power supply, if any, of Client Company and other client
companies working with their Operating Committee, with the objective of
reducing power costs and improving service reliability; and in
connection with the foregoing to act as Client Company's agent pursuant
to the intercompany interchange contract; to prepare the intercompany
billing under such contract; to assist in negotiating and administering
power purchase contracts on behalf of Client Company and other client
companies; to make studies of power costs for use in hearings before
regulatory Commissions; to make studies of present and future load
characteristics and of future requirements for additional generating
and transmission facilities; and, where appropriate, to prepare reports
related to these activities.
B. General Executive and Advisory Services
To advise and assist the officers and employees of Client
Company in connection with various phases of its business and
operations, including particularly but not exclusively, those phases
which involve coordination of planning or operation between Client
Company and other client companies or otherwise have a direct effect
not only on Client Company but also on the Southern system or other
members thereof.
C. General Engineering
The maintenance of an organization staffed and equipped to
perform for Client Company general engineering work, including system
production and transmission studies, preparation and analysis of
electrical apparatus specifications, distribution studies and
standards, civil engineering and hydraulic studies and problems, fuel
supply studies, advice and assistance in connection with analyses of
operations and operating and construction budgets. The members of this
group will keep informed as to improvements and developments in the art
of generation, transmission and distribution of electricity through
frequent contacts with the manufacturers of electrical equipment,
through membership in the various national and regional engineering
societies and through participation in the committee work of such
societies and trade associations of the utility industry. Service
Company will make available to Client Company the information thus
gained with respect to such developments.
D. Design Engineering
To perform detailed design work for Client Company for
fossil-fueled generating plants, hydroelectric generating plants,
transmission lines and substations and otherwise as required by Client
Company; to make available to Client Company and other client companies
as required, the services of a specialist or specialists on various
phases of plant operation; and also to make available as required,
inspection and supervision personnel for generating plant, transmission
line and substation and other construction and operation.
E. Purchasing
To render services to Client Company in connection with
purchasing, including the coordination of group purchasing, and to
supply expediting services. All requests for bids shall be made by and
purchases confirmed in the name of Client Company or of Service Company
as agent therefor, and all contracts of purchase shall be likewise
made.
F. Accounting
To advise and assist Client Company in connection with the
installation of new accounting systems and similar problems,
appearances before regulatory commissions, requirements of Federal and
State regulatory bodies with respect to accounting, studies of
accounting procedures and practices to improve efficiency, book entries
resulting from unusual financial transactions, internal audits,
employment of independent auditors, preparation and analyses of
financial and operating reports and other statistical matters relating
to Client Company and other client companies, analyses of securities of
other utility companies, preparation of annual reports to stockholders,
regulatory commissions, insurance companies and others, standardization
of accounting and statistical forms in the interest of economy, and
other accounting and statistical matters.
G. Finance and Treasury
To advise and assist Client Company on (a) financing matters,
including determination of types and times of sale of long and
short-term securities, refunding studies, sinking fund problems, and
(b) all treasury matters, including banking problems and investment of
surplus funds, and (c) maintenance of books of accounts and other
related corporate records.
H. Taxes
To advise and assist Client Company in connection with tax
matters, including preparation of Federal and State income and other
tax returns and of protests, claims and briefs where necessary, tax
accruals, and other matters in connection with Client Company's taxes.
I. Insurance and Pensions
To advise and assist Client Company in connection with
insurance and pension matters, including contracts with insurers,
trustees and actuaries and the placing of blanket and group policies
covering Client Company and other client companies, and other insurance
problems as required.
J. Corporate
To advise and assist Client Company in connection with its
corporate affairs, including assistance and suggestions in connection
with the preparation of petitions and applications for the issuance of
securities, contracts for the sale or underwriting of securities,
preparation of schedules of steps required in connection with major
financial and other corporate matters and the consummation thereof, and
the preparation of various documents required in connection therewith,
contacts with trustees, transfer agents and registrars; maintenance of
minutes of directors' and stockholders' meetings and other proceedings
and of other related corporate records; and also arrangements for
stockholders' meetings, including notices, proxies and records thereof
and for other types of meetings relating to its securities.
K. Rates
To study comparative rate levels for various classes of
service, in different areas and for different operating conditions, and
keep in touch with trends in rate design, and to make such information
available to Client Company; to advise Client Company on matters
relating to rates and valuation, the design of new and improved rate
schedules, and their effect upon Client Company's revenues, the cost of
competitive services, earning trends, the desirability of rate changes,
rate audits, service rules and regulations, commodity and tax clauses,
minimum charges, metering problems, special industrial contracts,
resale rates and rural extension plans; and to assist Client Company in
the preparation of petitions and applications required in connection
with rate changes.
L. Budgeting
To advise and assist Client Company in matters involving the
preparation and development of construction and operating budgets, cash
and cost forecasts, and budgetary controls.
M. Business Promotion and Public Relations
To advise and assist Client Company in area development
activities, in the development of residential, commercial and
industrial sales programs, in the preparation and use of advertising,
and in the determination and carrying out of public information
programs, including those arising out of regulatory and legislative
matters.
N. Employee Relations
To furnish Client Company with advisory services in connection
with employee relations matters, including recruitment, employee
placement, training, compensation, safety, labor relations and health,
welfare and employee benefits.
O. Systems and Procedures
To advise and assist Client Company in the formation of good
operating practices and methods of procedure, the standardization of
forms, the purchase, rental and use of mechanical and electronic data
processing, computing and communications equipment, in conducting
economic research and planning and in the development of special
economic studies.
P. Wholesale Power Purchase and Sale To render services to
Client Company in connection with the purchase and sale of electric
power on the wholesale market, including the purchase and sale of
transportation and transmission capacity in connection with power
generation and delivery and the negotiation and administration of
derivative transactions, including without limitation those entered
into pursuant to master swap agreements; to make studies and, where
appropriate, prepare reports on present and future requirements and
abilities concerning the purchase and sale of electric power for
resale; and to perform other services in connection with such sales and
purchase as are required.
Q. Other Services
To render advice and assistance in connection with such
other matters as Client Company may request and Service Company may be
able to perform with respect to Client Company's business and
operations
3. Compensation of Service Company
As compensation for such services rendered to it by Service Company,
Client Company hereby agrees to pay to Service Company the cost of such
services. Bills will be rendered for the amount of such cost on or before the
10th day of the succeeding month and will be payable on or before the 20th day
of such month. Cost of services to be paid by Client Company shall include
direct charges and Client Company's pro rata share of certain of Service
Company's costs, determined as set forth below:
Direct Charges
To the extent that the costs incurred by Service Company in
connection with services rendered by it to Client Company can be
identified and related to a particular transaction, direct charges will
be made by Service Company against Client Company.
B. Prorated Charges
Such costs incurred by Service Company each month as cannot be
charged by Service Company directly to the companies for which it
performs services will be distributed among such companies in a fair
and equitable manner as set forth in the Southern Company Services,
Inc. Cost Allocation Manual which is incorporated herein by reference.
The Service Company may revise the Cost Allocation Manual from time to
time, subject to the approval of the Client Company and to any
necessary regulatory approval, and the revised Cost Allocation Manual
shall be incorporated herein by reference upon the effective date of
the revision.
4. Companies to be Served
Service Company agrees that during the term hereof it will render
services as required by companies in the Southern System and that all such
companies will compensate Service Company as provided in Section 3 hereof.
5. Appointment of Service Company as Agent
Client Company hereby appoints Service Company to act as its agent in
the performance of the services furnished pursuant to Sections 2 and 4. Such
authorization shall include, without limitation, the rights and authority to
perform, negotiate, execute and administer agreements pursuant to which Client
Company will (i) purchase and sell electric power for resale, (ii) purchase and
sell fuels and related services in connection with power generation, (iii)
purchase and sell utility equipment and facilities and related services, (iv)
purchase and sell transportation and transmission capacity in connection with
power generation and delivery, (v) engage in derivative transactions, including
(without limitation) those entered into pursuant to master swap agreements (the
"Contracts"), and (vi) purchase and sell other goods and services. Service
Company's agency with respect to the Contracts shall include without limitation
the right to collect payments required under such Contracts, to advance payments
on Client Company's behalf, and to accept and give notices and other
communications on behalf of Client Company. .
6. Effective Date - Term - Cancellation
After execution by the parties hereto this agreement shall become
effective as of January 10, 2001, subject to receipt of any required regulatory
approval, and shall remain in effect until terminated by mutual agreement of
said parties.
It is also understood and agreed that nothing herein shall be construed
to release the officers and directors of Client Company from the obligation to
perform their respective duties, or to limit the exercise of their powers in
accordance with the provisions of law or otherwise, and this agreement shall be
cancelled to the extent and from the time that performance hereunder may
conflict with any rule, regulation or order of the Securities and Exchange
Commission adopted before or after the execution hereof.
7. Limitation of Liability. As between Client Company and Service
Company, Client Company will be solely responsible for all liabilities,
obligations, and performance under any Contract executed pursuant to this
Agreement, whether or not Service Company's role as agent for Client Company is
disclosed to the other party to such contract. Service Company will not warrant
or guaranty or otherwise be secondarily liable for performance by Client Company
under any Contract or under any other agreement the Client Company may enter in
relation to such Contract, including (without limitation) subcontracts, purchase
orders and other similar agreements. Client Company shall defend, hold harmless,
and indemnify Service Company against any claim made by any third party in
connection with the subject matter of such Contract.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their duly authorized officers and their respective seals to be
affixed as of the day and year first above written.
SOUTHERN COMPANY SERVICES, INC.
By:
Its President
Attest:
Secretary
SOUTHERN POWER COMPANY
By:
Its President
Attest:
Secretary
