SERVICE AGREEMENT
BETWEEN
ALLEGHENY ENERGY SERVICE CORPORATION
AND
WEST PENN FUNDING [II] LLC
THIS SERVICE AGREEMENT, dated as of ---------, between Allegheny
Energy Service Corporation, a corporation formed under the laws of the State of
Maryland, (the "Service Company" or "AESC") and [West Penn Funding, LLC, a
limited liability company formed under the laws of the State of Delaware] (the
"Company").
WITNESSETH:
----------
WHEREAS, the Service Company was created to perform certain management
duties on behalf of Allegheny Energy, Inc. (the "System"), its utility
subsidiary companies and its non-utility subsidiary companies (the
"Subsidiaries"); and
WHEREAS, the Service Company offers to provide a central organization
to furnish to the System, the Subsidiaries and the Company certain advisory,
supervisory and other services in accordance with current practices and
procedures; and
WHEREAS, the Company wishes to accept the offer proposed by the
Service Company as of the date set forth above;
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 the Company the
services detailed on Exhibit I attached hereto and made a part hereof.
2. For all services rendered for the Company by the Service Company,
the Company agrees to pay the cost thereof. For services rendered to one or more
Subsidiaries and/or the System and/or the Company, the allocation will be based
on the average of the prior three years' direct costs charged by the Service
Company to each Subsidiary and the Company. Until a three-year history for the
Company is developed, the Company'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 of the Company is
available, AESC will calculate an allocation percentage for the Company. If the
difference between that allocation percentage and the one used for any of the
Company's first three years is material, then AESC will recalculate all
allocation percentages for those years in which the difference was material and
the Company, the Subsidiaries or the System will each either pay an additional
amount or receive a full refund of a particular amount for that year.
3. The payment for services rendered by the Service Company to the
System, the Subsidiaries and the Company shall cover all the costs and expenses
of its doing business, excluding only a return for the use of equity capital,
and each Subsidiary, the System and the Company shall pay its direct or fair
proportionate share.
4. Payment shall be made by the Company 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 the Company 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 the Company from the performance of their respective duties or
limit the exercise of their powers as prescribed by law or otherwise.
6. This 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 the Company 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.
If the Company desires to accept this offer, please cause it to be
executed in the space provided below by your duly authorized officers.
Very truly yours,
ALLEGHENY ENERGY SERVICE CORPORATION
By
---------------------------------
Attest:
-----------------------------------
Secretary
Pursuant to authorization of the Board of Directors of this Company, we hereby
accept the above offer to be effective as of the date set forth above.
[WEST PENN FUNDING, LLC]
By
---------------------------------
Attest:
-----------------------------------
Secretary
Exhibit I
Allegheny Energy Service Corporation Principal Functions
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In accordance with the terms and conditions of the Service Agreement
dated as of ---------, the Service Company shall perform for the Company the
following services:
1. Provide technical support as needed to evaluate, implement,
and develop opportunities related to the System's electric
business (including, but not limited to, any engineering,
construction, management and/or operating activities
associated with the development of bulk power supply
opportunities).
2. Planning and implementation of financial programs to raise
the funds required for the Company, 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
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 tax returns and
following developments in federal, state, and
local taxation regulations.
g) Administration of insurance.
h) Internal auditing.
i) Corporate security.
5. To the extent that the Company does not maintain its own
separate payroll, services will be provided by Service
Company employees as needed by the Company. These services
shall include but shall not be limited to any line work,
meter reading, customer service functions (including a
customer call center), planning, construction, operations,
and maintenance of facilities.
6. Certain other services in addition to the above as the
Service Company may be able to provide and/or the Company
may require or request.
