Exhibit K-3.1
DRS Services Agreement
This DRS Services Agreement (this "Agreement") is entered
into as of the 1st day of January, 2001, by and between
_____________________, a corporation (the "Company"), and
DOMINION RESOURCES SERVICES, INC., a Virginia corporation,
("DRS"). DRS is sometimes referred to herein as "Service
Company".
WHEREAS, each of the Company and DRS is a direct or
indirect 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, the Company is a natural gas utility engaged in
the sale of natural gas service at retail within its
service territories in ______________;
WHEREAS, DRS has been formed for the purpose of providing
administrative, management and other services to Dominion
and its subsidiaries ("Dominion Companies") as a subsidiary
service company under Rule 88 of the rules and regulations
of the SEC for implementation of the 1935 Act, 17 C. F. R.
Section 250.88;
WHEREAS, the Company believes that it is in the interest of
the Company to provide for an arrangement whereby the
Company may, from time to time and at the option of the
Company, agree to purchase such administrative, management
and other services from DRS;
WHEREAS, DRS is an affiliate of the Company and therefore
certain types of contracts between DRS and the Company are
subject to the requirements of 66 Pa. C.S.A. Section 2101,
et seq.;
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 hereto, intending to be legally bound, hereby
agree as follows:
SERVICES OFFERED. Exhibit I hereto lists and describes all
of the services that are available from DRS. DRS hereby
offers to supply those services to the Company. Such
services are and will be provided to the Company only at
the request of the Company.
SERVICES SELECTED.
Initial Selection of Services. Exhibit II lists the
services the Company hereby agrees to receive from DRS.
Annual Selection of Services. DRS shall send an
annual service proposal form to the Company on or about
December 1 listing services proposed for the coming
calendar year. By December 31, the Company shall notify
DRS of the services the Company has elected to receive from
DRS during the following calendar year.
PERSONNEL. DRS will provide services by utilizing the
services of such executives, accountants, financial
advisers, technical advisers, attorneys, engineers,
geologists and other persons as have the necessary
qualifications.
If necessary, DRS, after consultation with the Company, may
also arrange for the services of nonaffiliated experts,
consultants and attorneys in connection with the
performance of any of the services supplied under this
Agreement.
COMPENSATION AND ALLOCATION. As and to the extent required
by law, DRS will provide such services at cost. Exhibit
III hereof contains rules for determining and allocating
costs for DRS.
TERMINATION AND MODIFICATION.
Modification of Services. The Company may modify its
selection of services at any time during the calendar year
by giving DRS written notice of the additional services it
wishes to receive, and/or the services it no longer wishes
to receive, from DRS. The requested modification in
services shall take effect on the first day of the first
calendar month beginning at least thirty (30) days after
the Company sent written notice to DRS.
Modification of Other Terms and Conditions. No other
amendment, change or modification of this Agreement shall
be valid, unless made in writing and signed by all parties
hereto.
Termination of this Agreement. The Company may terminate
this Agreement by providing sixty (60) days advance written
notice of such termination to DRS. DRS may terminate this
Agreement by providing sixty (60) days advance written
notice of such termination to the Company.
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, 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 said
state, a legal prerequisite to the execution and delivery
or the performance of this Agreement.
NOTICE. Where written notice is required by this
Agreement, said notice shall be deemed given when mailed by
United States registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
a. To the Company:
b. To DRS:
Dominion Resources Services, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of Virginia, without
regard to their conflict of laws provisions.
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 and thereto, any and all
prior agreements, understandings or representations with
respect to this subject matter are hereby terminated and
canceled in their entirety and are of no further force and
effect.
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.
ASSIGNMENT. This Agreement shall inure to the benefit of
and shall be binding upon the parties and their respective
successors and assigns. No assignment of this Agreement or
any party's rights, interests or obligations hereunder may
be made without the other party's consent, which shall not
be unreasonably withheld, delayed or conditioned; provided,
however, that, subject to the requirements of applicable
state and federal regulatory law, either party may assign
its rights, interests or obligations under this Agreement
to an affiliate, as that term is defined in the 1935 Act,
without the consent of the other party.
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.
EFFECTIVE DATE. This Agreement is effective as of January
1, 2001.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first above mentioned.
Company
By_________________________________
DRS:
By_________________________________
Xxxxxx X. Xxxxxxxx, Executive Vice
President and Chief Financial Officer
EXHIBIT I
DESCRIPTION OF SERVICES OFFERED BY DRS
UNDER THIS DRS SERVICES AGREEMENT
Accounting. Provide advice and assistance to Dominion
Companies in accounting matters, including the development
of accounting practices, procedures and controls, the
maintenance of the general ledger and related subsidiary
systems, the preparation and analysis of financial reports,
and the processing of certain accounts such as accounts
payable, accounts receivable, and payroll.
Auditing. Periodically audit the accounting records and
other records maintained by Dominion Companies and
coordinate their examination, where applicable, with that
of independent public accountants. The audit staff will
report on their examination and submit recommendations, as
appropriate, on improving methods of internal control and
accounting procedures.
Legal and Regulatory. Provide advice and assistance with
respect to legal and regulatory issues as well as
regulatory compliance, including 1935 Act authorizations
and compliance and regulatory matters under other Federal
and State laws.
Information Technology, Electronic Transmission and
Computer Services. Provide the organization and resources
for 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 in Dominion Companies.
Develop, implement, and process those computerized
applications for Dominion Companies that can be
economically best accomplished on a centralized basis.
Software Pooling. Accept from Dominion Companies ownership
of and rights to use, assign, license or sub-license all
software owned, acquired or developed by or for Dominion
Companies which Dominion Companies can and do transfer or
assign to it. Preserve and protect the rights to all such
software to the extent reasonable and appropriate under the
circumstances; license Dominion Companies, on a non-
exclusive, no-charge or at-cost basis, to use all software
which DRS has the right to sell, license or sub-license;
and, at the relevant Dominion Companies' expense, permit
Dominion Companies to enhance any such software and license
others to use all such software and enhancements to the
extent that DRS shall have the legal right to so permit.
Employee Benefits/Pension Investment. Provide central
accounting for employee benefit and pension plans of
Dominion Companies. Advise and assist Dominion Companies
in the administration of such plans and prepare and
maintain records of employee and company accounts under the
said plans, together with such statistical data and reports
as are pertinent to the plans.
Human Resources. Advise and assist Dominion Companies in
the formulation and administration of human resources
policies and programs relating to the relevant Dominion
Companies' labor relations, personnel administration,
training, wage and salary administration and safety.
Operations. Advise and assist Dominion Companies in the
study, planning, engineering and construction of energy
plant facilities of each Dominion Company and of the
Dominion Companies as a whole, and advise, assist and
manage the planning, engineering (including maps and
records) and construction operations of Dominion Companies.
Develop long-range operational programs for all the
Dominion Companies and advise and assist each such Dominion
Company in the coordination of such programs with the
programs of the other Dominion Companies.
Executive and Administrative. Advise and assist Dominion
Companies in the solution of major problems and in the
formulation and execution of the general plans and policies
of Dominion Companies. Advise and assist Dominion
Companies as to operations, the issuance of securities, the
preparation of filings arising out of or required by the
various Federal and State securities, business, public
utilities and corporation laws, the selection of executive
and administrative personnel, the representation of
Dominion Companies before regulatory bodies, proposals for
capital expenditures, budgets, financing, acquisition and
disposition of properties, expansion of business, rate
structures, public relationships and other related matters.
Business and Operations Services. Advise and assist
Dominion Companies in all matters relating to operational
capacity and the preparation and coordination of operating
studies. Manage Dominion Companies' purchase, movement,
transfer and accounting of fuel and gas volumes. Compile
and communicate information relevant to company operation.
Perform general business and operations support services,
including business, plant and facilities operation,
maintenance and management, travel, aviation, fleet and
mail services.
Exploration and Development. Advise and assist Dominion
Companies in all geological and exploration matters
including the acquisition and surrender of acreage and the
development of underground storage facilities.
Risk Management. Advise and assist Dominion Companies in
securing requisite insurance, in the purchase and
administration of all property, casualty and marine
insurance, in the settlement of insured claims and in
providing risk prevention advice.
Marketing. Plan, formulate and implement marketing
programs, as well as provide associated marketing services
to assist Dominion Companies with improving customer
satisfaction, load retention and shaping, growth of energy
sales and deliveries, energy conservation and efficiency.
Assist Dominion Companies 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.
Medical. Direct and administer all medical and health
activities of Dominion Companies. Provide systems of
physical examination for employment and other purposes and
direct and administer programs for the prevention of
sickness.
Corporate Planning. Advise and assist Dominion Companies
in the study and planning of operations, budgets, economic
forecasts, capital expenditures and special projects.
Supply Chain. Advise and assist Dominion Companies in the
procurement of real and personal property, materials,
supplies and services, conduct purchase negotiations,
prepare procurement agreements and administer programs of
material control.
Rates. Advise and assist Dominion Companies in the
analysis of their rate structure in the formulation of rate
policies, and in the negotiation of large contracts.
Advise and assist Dominion Companies in proceedings before
regulatory bodies involving the rates and operations of
Dominion Companies and of other competitors where such
rates and operations directly or indirectly affect Dominion
Companies.
Research. Investigate and conduct research into problems
relating to production, utilization, testing, manufacture,
transmission, storage and distribution of energy. Keep
abreast of and evaluate for Dominion Companies all research
developments and programs of significance affecting
Dominion Companies and the energy industry, conduct
research and development in promising areas and advise and
assist in the solution of technical problems arising out of
Dominion Companies' operations.
Tax. Advise and assist Dominion Companies in the
preparation of Federal and other tax returns, and generally
advise Dominion Companies as to any problems involving
taxes including the provision of due diligence in
connection with acquisitions.
Corporate Secretary. Provide all necessary functions
required of a publicly held corporation. Coordinate
information and activities among shareholders, the transfer
agent, and Board of Directors. Provide direct services to
security holders. Prepare and file required annual and
interim reports to shareholders and the SEC. Conduct the
annual meeting of shareholders and ensure proper
maintenance of corporate records.
Investor Relations. Provide fair and accurate analysis of
Dominion and its operating subsidiaries and its outlook
within the financial community. Enhance Dominion's
position in the energy industry. Balance and diversify
shareholder investment in Dominion through a wide range of
activities. Provide feedback to Dominion and its operating
subsidiaries regarding investor concerns, trading and
ownerships. Hold periodic analysts meetings, and provide
various operating data as requested or required by
investors.
Environmental Compliance. Provide consulting, cleanup, and
other activities as required by Dominion Companies to
ensure full compliance with applicable environmental
statutes and regulations.
Customer Services. Provide services and systems dedicated
to customer service, including billing, remittance, credit,
collections, customer relations, call centers, energy
conservation support and metering.
Energy Marketing. Provide services and systems dedicated
to energy marketing, including marketing and trading of
energy commodities and related services, and energy price
risk management and development of marketing and sales
programs in physical and financial markets.
Treasury/Finance. Provide services related to managing all
administrative activities associated with financing,
including management of capital structure; cash, credit and
risk management activities; investment and commercial
banking relationships; oversight of decommissioning trust
funds and general financing activities.
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, advertising,
and external/internal communications programs and with the
administration of corporate contribution and community
affairs programs.
EXHIBIT II
SERVICES THE COMPANY AGREES TO RECEIVE FROM DRS
SERVICE YES NO
1. Accounting _____
2. Auditing _____
3. Legal and Regulatory _____
4. Information Technology, Electronic Transmission
and Computer Services _____
5. Software Pooling _____
6. Employee Benefits/Pension Investment _____
7. Human Resources _____
8. Operations _________________
9. Executive and Administrative _____
10. Business and Operations Services _____
11. Exploration and Development _____
12. Risk Management _____
13. Marketing _____
14. Medical _____
15. Corporate Planning _____
16. Supply Chain _____
17. Rates _____
18. Research _____
19. Tax _____
20. Corporate Secretary _____
21. Investor Relations _____
22. Environmental Compliance _____
23. Customer Services _____
24. Energy Marketing _____
25. Treasury/Finance _____
26. External Affairs _____
EXHIBIT III
METHODS OF ALLOCATION FOR DRS
DRS shall allocate costs among companies receiving service
from it under this and similar service contracts using the
following methods:
The costs of rendering service by DRS will include all
costs of doing business including interest on debt but
excluding a return for the use of equity capital for which
no charge will be made to Dominion Companies.
A. DRS will maintain a separate record of the expenses of
each department. The expenses of each department will
include:
those expenses that are directly attributable to such
department, and
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, rent and utilities, materials and
supplies, depreciation, and all other expenses attributable
to the department. The expenses of a department will not
include:
those incremental out-of-pocket expenses that are incurred
for the direct benefit and convenience of an individual
Dominion Company or group of Dominion Companies,
DRS overhead expenses that are attributable to maintaining
the corporate existence of DRS, and all other incidental
overhead expenses including those auditing fees, internal
auditing department expenses and accounting department
expenses attributable to DRS.
C. DRS will establish annual budgets for controlling
the expenses of each department and for determining
estimated costs to be included in interim monthly billing.
A. Employees in each department will be divided into two
groups:
Group A will include those employees rendering service to
Dominion Companies, and
Group B will include those office and general service
employees, such as secretaries, file clerks and
administrative assistants, who generally assist employees
in Group A or render other housekeeping services and who
are not engaged directly in rendering service to each
Dominion Company or a group of Dominion Companies.
B. Expenses set forth in Section II. above will be
separated to show:
salaries and wages of Group A employees, and
all other expenses of the department.
C. There will be attributed to each dollar of a
Group A employee's salary or wage, that percentage of all
other expenses of such employee's department (as defined in
B above), that such employee's salary or wage is to the
total Group A salaries and wages of that department.
D. Group A employees in each department will
maintain a record of the time they are employed in
rendering service to each Dominion Company or group of
Dominion Companies. An hourly rate will be determined by
dividing the total expense attributable to a Group A
employee as determined under subsection C above by the
productive hours reported by such employee.
The charge to the Dominion Company for a particular service
will be determined by multiplying the hours reported by
Group A employees in rendering such service to each
Dominion Company by the hourly rates applicable to such
employees. When such employees render service to a group
of Dominion Companies, the charge to each Dominion Company
will be determined by multiplying the hours attributable to
the Dominion Company under the allocation formulas set
forth in Section IX of this Exhibit by the hourly rates
applicable to such employees.
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.
Those expenses of DRS that are not included in the annual
expense of a department under Section II. above will be
charged to Dominion Companies receiving service as follows:
A. Incremental out-of-pocket costs incurred for the
direct benefit and convenience of a Dominion Company or
group of Dominion Companies will be charged directly to
such Dominion Company or group of Dominion Companies. Such
costs incurred for a group of Dominion Companies will be
allocated on the basis of an appropriate formula.
B. DRS overhead expenses referred to in Section II above
will be charged to the Dominion Company either on the
proportion of direct charges to that Dominion Company or
under the allocation formulas set forth in Section IX of
this Exhibit.
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 DRS.
Monthly bills will be issued for the services rendered to
the Dominion Company on an actual or estimated basis.
Estimates will normally be predicated on service department
budgets and estimated productive hours of employees for the
year. 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.
When Group A employees render services to a group of
Dominion Companies, the following formulas shall be used to
allocate the time of such employees to the individual
Dominion Companies receiving such service:
A. The Service Department or Function formulas to be used
when employees render services to all Dominion Companies
participating in such service, for the services indicated
are set forth below.
Service Department
or Function
Basis of Allocation
Accounting:
Payroll Processing
Number of employees on the
previous December 31st.
Accounts Payable
Processing
Number of accounts payable
documents processed during
the preceding year ended
December 31st.
Fixed Assets
Accounting
Dominion Company fixed assets
added, retired or transferred
during the preceding year
ended December 31st.
Accounts Receivable
Processing
Number of payments processed
during the preceding year
ended December 31st.
Information
Technology, Electronic
Transmission, and
Computer Services:
LDC/EDC Computer
Applications
Number of customers at the
end of the preceding year
ended December 31st.
Other Computer
Applications
Number of users or usage of
specific computer systems at
the end of the preceding year
ended December 31st.
Network Computer
Applications
Number of network devices at
the end of the preceding year
ended December 31st.
Telecommunications
Applications
Number of telecommunications
units at the end of the
preceding year ended December
31st
Employee
Benefits/Pension
Investment:
Employee Benefits/
Pension Investments
The number of employee and
annuitant accounts as of the
preceding December 31st.
Human Resources:
Human Resources
The number of employees as of
the preceding December 31st.
Business and
Operations Services:
Energy Services
Energy sale and deliveries
for the preceding year ended
December 31st.
Facility Services
Square footage of office
space as of the preceding
year ended December 31st.
Fleet Administration
Number of vehicles as of the
preceding December 31st
Security
The number of employees as of
the preceding December 31st.
Gas Supply
Gas volumes purchased for
each Dominion Company for the
preceding year ended December
31st.
Risk Management:
Risk Management
Insurance premiums for the
preceding year ended December
31st.
Marketing:
Shared Projects
Annual marketing plan
expenses for the preceding
year ended December 31st.
Other Indirect Costs
Total marketing direct and
shared project costs billed
to each Dominion Company for
the preceding year ended
December 31st.
Medical:
Medical Services
Number of employees on the
previous December 31st.
Corporate Planning:
Corporate Planning
Total capitalization recorded
at preceding December 31st.
Supply Chain:
Purchasing
Dollar value of purchases for
the preceding year ended
December 31st.
Materials Management
Material inventory assets as
of the preceding year ended
December 31st.
Tax:
Tax Accounting and
Compliance
The sum of the total income
and total deductions as
reported for Federal Income
Tax purposes on the last
return filed.
Customer Services:
Customer Payment
(Remittance)
Processing
Number of customer payments
processed during the
preceding year ended December
31st.
Other Customer
Services
For metering, the number of
gas or electric meters for
the preceding year ended
December 31st; otherwise the
number of customers for the
preceding year ended December
31st.
Treasury/ Finance:
Treasury and Cash
Management
Total capitalization recorded
at preceding December 31st.
Rates
Total regulated company
operating expenses, excluding
purchased gas expense,
purchased power expense
(including fuel expense),
other purchased products and
royalties, for the preceding
year ended December 31st.
Research
Gross revenues from the sale
of natural gas (including
intercompany sales) and
electricity, recorded during
the preceding year ended
December 31st.
B. Company Group Formulas to be used in the absence of a
service department or function formula or when service
rendered by employees is for a different group of Dominion
Companies than those companies regularly participating in
such service:
Company Group
Basis of Allocation
All Dominion
Companies
(includes all
Dominion
Companies except
DRS)
Total operating expenses,
excluding purchased gas
expense, purchased power
expense (including fuel
expense), other purchased
products and royalties, for
the preceding year ended
December 31st for the
affected Dominion Companies.
C. If the use of a basis of allocation would result in an
inequity because of a change in operations or organization,
then DRS may adjust the basis to effect an equitable
distribution.
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