Exhibit 99.2
EXECUTION COPY
AMENDMENT TO AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT (this
"Amendment") is made and entered into as of March 22, 2007 between the Long
Island Lighting Company d/b/a LIPA, a New York corporation ("LIPA"), a
wholly-owned subsidiary of the Long Island Power Authority, a corporate
municipal instrumentality of the State of New York and a body corporate and
politic and a political subdivision of the State of New York (the "Authority"),
and KeySpan Electric Services LLC, a limited liability company organized and
existing under the laws of the State of New York (the "Manager").
RECITALS
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WHEREAS, the parties hereto (or their predecessors) have entered into a
certain Management Services Agreement, dated as of June 26, 1997, as amended by
the Amendment thereto, dated as of March 29, 2002 (as so amended, the "Original
MSA") and as amended and restated by the Amended and Restated Management
Services Agreement, dated as of January 1, 2006 (the "Amended and Restated MSA")
in order to provide, among other things, for the operation and maintenance of
LIPA's T&D System (as defined in the Amended and Restated MSA);
WHEREAS, concurrently with the execution of the Amended and Restated MSA,
LIPA and Manager and, as applicable, certain of their respective Affiliates have
entered into a Settlement Agreement and Release, dated January 1, 2006 and an
Option and Purchase and Sale Agreement, dated January 1, 2006 and as amended by
letter agreement, dated as of December 11, 2006 (collectively with the Amended
and Restated MSA, the "2006 Agreements");
WHEREAS, on February 25, 2006, National Grid plc ("National Grid"),
National Grid US8 Inc. and KeySpan Corporation entered into a certain Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which National Grid US8
Inc., a wholly-owned subsidiary of National Grid, would merge with and into
KeySpan Corporation, with KeySpan Corporation as the surviving entity and
thereby becoming a wholly owned subsidiary of National Grid (the "Merger"),
subject to the terms and conditions of the Merger Agreement;
WHEREAS, concurrently with the execution of this Amendment and as a
condition to the effectiveness hereof, National Grid, LIPA and certain of their
respective Affiliates are entering into a certain (i) Agreement and Waiver,
dated Xxxxx, 00 0000, (xx) a First Amendment to Option and Purchase and Sale
Agreement, dated Xxxxx 00, 0000, (xxx) a Second Option and Purchase and Sale
Agreement, dated March 22, 2007, and (iv) certain other related agreements
referred to therein (collectively, the "National Grid Agreements"); and
WHEREAS, as provided in the Agreement and Waiver, LIPA and the Manager have
agreed to amend certain of the terms and conditions of the Amended and Restated
MSA, subject to the terms and conditions set forth in the Agreement and Waiver.
NOW, THEREFORE, in consideration of the premises and of such other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound agree as follows:
1. Defined Terms. Capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to them in the Amended and Restated
MSA.
2. Representation of LIPA
2.1 Scope of Services. Item (m) of paragraph (1) of subsection (B) of
Section 4.2 of the Amended and Restated MSA is amended to read in its entirety
as follows:
"(m) representation of LIPA before FERC, NYSPSC, NERC, NYISO, NY State
Reliability Council, ISO-NE, NPCC, PJM and North American Energy Standards Board
or such other regulatory or governmental group or entity as the parties may
mutually agree is appropriate and any working groups or committees of the
foregoing."
2.2 Rights and Responsibilities of LIPA. Item (d) of Section 4.5(A) of the
Amended and Restated MSA is amended to read in its entirety as follows:
"(d) to the extent the Manager acts as the representative of LIPA in
connection with the FERC, NYSPSC, NERC, the NYISO, the NY State Reliability
Council, the ISO-NE, the NPCC, the PJM and the North American Energy Standards
Board and any other similar institutions or organizations, the right to direct
the Manager's actions with respect thereto."
3. T&D System Supervisor; Manager Representatives. Subsection (C) of
Section 4.2 of the Amended and Restated MSA is amended to add a new paragraph
(ii) thereto, and to renumber the existing paragraph (ii) as paragraph (iii), as
follows:
"(ii) In the event that, by a final binding arbitration award, the Manager
is found to have failed to provide LIPA with the notice and approval rights set
forth in paragraph (i) above for the following T&D System Supervisor and Senior
Executives (or the same or other officials holding the same or comparable
positions) having responsibilities, in whole or in part, to provide services to
LIPA hereunder, such failure to comply will be deemed a breach of the Manager's
obligation to provide timely information to LIPA and will subject the Manager to
the Information Access penalty pursuant to Section 7.8K(6) hereof: Long Island
Electric T&D Officer, as the relationship manager and T&D System Supervisor (X.
Xxxxxxxx); Electric Generation Officer; Energy Portfolio Management Officer (X.
Xxxx); Strategy, Marketing & Energy Efficiency Officer (X. Xxxxxx); U.S. Supply
Chain Management Officer (X.Xxxxx); U.S. Sales and Account Management Officer
(X. Xxxxxx); U.S. Customer Accounting, Credit & Collections Officer; and head of
the Melville Contact Center.
4. Regulatory Representation of LIPA. Section 4.2 of the Amended and
Restated MSA is amended to add a new subsection (F) thereto as follows:
"(F) Regulatory Representation of LIPA. (i) As set forth under the Scope of
Services in Section 4.2(B)(m) above, the Manager's responsibilities include the
representation of LIPA before FERC, NYSPSC, NERC, NYISO, NY State Reliability
Council, ISO-NE, NPCC, PJM and North American Energy Standards Board or such
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other regulatory or governmental group or entity as the parties may mutually
agree is appropriate and any working groups or committee meetings ("Meetings")
of the foregoing whether in person or telephonic. The employees of the Manager
or its Affiliates acting on behalf of LIPA in such capacity are referred to
herein as "LIPA Regulatory Representatives")." The Manager shall designate a
coordinator of its LIPA Regulatory Representatives who shall be LIPA's principal
point of contact for any matters regarding the Manager's regulatory
representation of LIPA.
(ii) LIPA Regulatory Representatives shall at all times comply with the
rules and regulations of the FERC, NYSPSC, NYISO, NY State Reliability Council,
NPCC, ISO-NE, PJM, NERC and North American Energy Standards Board and LIPA's
Standard of Conduct and Code of Conduct as in effect from time to time.
(iii) LIPA shall designate one or more representatives to coordinate with
the LIPA Regulatory Representatives ("LIPA Regulatory Liaison") with respect to
each Meeting at which LIPA Regulatory Representatives are present and
representing LIPA at LIPA's request. Within a reasonable time after each
Meeting, LIPA Regulatory Representatives present and representing LIPA at such
Meeting shall provide LIPA with oral, and at LIPA's request written, summaries
of the issues addressed and matters discussed at each Meeting and the outcome
thereof.
(iv) LIPA Regulatory Representatives shall participate on conference calls
and at Meetings with LIPA's NYISO working group and shall prepare written
summaries of LIPA's positions with respect to various NYISO issues upon the
request of LIPA. Prior to NYISO and other regulatory Meetings, LIPA Regulatory
Representatives shall coordinate with the appropriate LIPA Regulatory Liaison
with regard to the positions to be taken and the decisions and/or votes to be
made on behalf of LIPA at such Meetings.
(v) LIPA Regulatory Representatives shall clearly identify themselves as
representatives of LIPA at Meetings. The Manager shall cause its employees and
the employees of its Affiliates (who are not LIPA Regulatory Representatives)
participating at Meetings to clearly identify themselves as representing the
Manager or such of its Affiliates and not LIPA. No LIPA Regulatory
Representative may represent the Manager or any of its Affiliates as long as the
LIPA Regulatory Representative is representing LIPA. The Manager understands and
agrees that the LIPA Regulatory Representatives may only advocate LIPA's
positions at Meetings. In the event an issue should arise at a Meeting on which
LIPA has not previously established a position, the LIPA Regulatory
Representative shall attempt to contact LIPA for guidance. If such guidance
cannot be timely obtained, the LIPA Regulatory Representative will provisionally
support a position that he reasonably believes best reflects LIPA's interests.
(vi) LIPA Regulatory Representatives shall, in accordance with LIPA's
Standard of Conduct and Code of Conduct, keep and maintain all information
disclosed by LIPA to such LIPA Regulatory Representative concerning LIPA, its
strategies, positions, plans and intentions confidential and may not disclose
such confidential information to other employees, directors, officers, managers
or other representatives of the Manager or its Affiliates without LIPA's prior
written approval. LIPA Regulatory Representatives shall also take such action as
may be necessary or appropriate from time to time in order to avoid actual or
apparent conflicts of interest.
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(vii) The Manager agrees that compensation, performance ratings and career
opportunities made available to those employees of the Manager or its Affiliates
acting as LIPA Regulatory Representatives shall not be negatively impacted by
the performance of the Manager or its Affiliates if such performance is based,
in whole or in part, on positions taken by the Manager or its Affiliates that
are different than the positions taken by LIPA.
(viii) The Manager shall provide a written summary of the requirements set
forth in paragraphs (i) through (vii) above to each LIPA Regulatory
Representative and each other employee of the Manager or its Affiliates as the
Manager, in consultation with LIPA, deems appropriate."
5. Staffing of On-Island Field Force and Storm Support. Section 4.6 of the
Amended and Restated MSA is amended to add a new subsection (D) thereto to read
as follows:
"(D) Staffing of On-Island Field Force and Storm Support. The Manager shall
maintain an appropriate level of field personnel (to include Electric Design &
Construction, Electric Service, Electric System Operations, Substation
Maintenance, and Meter & Test or their successors performing similar functions)
in LIPA's Service Area reasonably necessary to satisfy the Manager's contractual
obligations under this Agreement and to meet the target performance levels for
the Performance Metrics. The Manager shall provide LIPA with reasonable advance
notice of any proposed changes to the level of such field personnel in LIPA's
Service Area in order to enable LIPA to fairly consider Manager's proposed
changes, and the Manager shall consider LIPA's concerns before making any
changes to the staffing level of such field personnel that could be reasonably
expected to negatively impact service quality in LIPA's Service Area. In the
event of a storm or other adverse operational condition, National Grid shall
provide or cause to be provided field support, logistics support and mutual aid
services from its other business units to support LIPA as if LIPA were an
Affiliate of National Grid and, if necessary, shall cause its Affiliates to
provide field support, logistics support and mutual aid services to LIPA.
National Grid shall provide LIPA with mutual aid services in accordance with the
terms and conditions of National Grid's Mutual Assistance Agreement, then in
effect. LIPA will be afforded the opportunity to consult on any proposed changes
to National Grid's Mutual Assistance Agreement."
6. Customer Service Long Island Presence and Storm Support. Section 4.9 of
the Amended and Restated MSA is amended to add a new subsection (K) thereto to
read as follows:
"(K) Customer Service Long Island Presence and Storm Support. The Manager
shall maintain at all times during the Term hereof a call center on Long Island,
sufficiently staffed to handle normal call activity (excluding credit and
collections calls). The Manager agrees that during the Term hereof it will not
(1) reduce the number of customer walk-in centers from those in existence on
January 1, 2006 as well as the Far Rockaway customer walk-in facility without
LIPA's prior written approval, (2) relocate any customer walk-in centers without
LIPA's prior written approval (which LIPA may not unreasonably withhold), or (3)
outsource meter reading or meter services without LIPA's prior written approval.
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As provided in Section 4.6(D), in the event of a storm or other adverse
operational condition, National Grid shall provide or cause to be provided
customer service support to LIPA as if LIPA were an Affiliate of National Grid
and, if necessary, shall cause its Affiliates to provide customer service
support to LIPA."
7. Energy Efficiency Consulting Services. Article IV of the Amended and
Restated MSA is amended to add a new Section 4.26 thereto to read as follows:
"SECTION 4.26. CEI/DSM CONSULTING SERVICES. During the Term of this
Agreement, if requested by LIPA, the Manager shall devote 100 hours to reviewing
LIPA's energy efficiency programs in order to (i) identify potential
enhancements to LIPA's energy efficiency programs, (ii) suggest new program and
service options related to enhancing residential and commercial or industrial
energy efficiency, (iii) explore the applicability and usefulness of
retro-commissioning buildings, the national advanced buildings program, and the
engagement of a project expediter to LIPA, and (iv) review and recommend certain
improvements to LIPA's energy efficiency evaluation practices (the services in
items (i) through (iv) above, collectively, the "CEI/DSM Consulting Services").
All CEI/DSM Consulting Services shall be within the Scope of Services set forth
in Section 4.2 hereof."
8. Information Technology (IT) Steering Committee. Article IV of the
Amended and Restated MSA is further amended to add a new Section 4.27 thereto to
read as follows:
"SECTION 4.27. IT STEERING COMMITTEE. During the Term of the Agreement,
LIPA and the Manager will continue to fully participate in the evaluation of IT
projects and expenditures for T&D System services, giving full consideration to
Intelligrid architecture and LIPA's Critical Assets rights, within the IT
Steering Committee and make recommendations to KeySpan's IT Governance Committee
or its successor. LIPA and the Manager will fully consider (including modeling
as part of the evaluation process) the Intelligrid Architecture, LIPA's long
term costs, LIPA's rights to purchase Critical Assets and the Manager's business
objectives."
9. Definitions.
a. The following definitions contained in Appendix 1 to the Amended and
Restated MSA are amended to read in their entirety as follows:
"Information Access and Reporting Requirements" means collectively, those
certain obligations of the Manager as provided in Section 4.2(C)(ii), Section
4.14 and Section 4.15."
"Prevalent Utility Services" means, at any time, those services, programs,
practices and procedures provided or adopted at such time by (a) 50 percent or
more of the investor-owned electric utilities from a pool consisting of (i) the
investor-owned electric utilities within the NYISO; and (ii) investor owned
electric utilities within the ISO-NE each serving more than 250,000 customers;
and (iii) the PECO unit of Exelon Energy Delivery, or its successors (excluding,
however, for purposes of items (i), (ii) and (iii) companies owned or controlled
by National Grid plc); or (b) any National Grid USA service, program, practice
or procedure adopted for the benefit of 50 percent or more of National Grid
USA's customers (but excluding any such service, program, practice or procedure
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for which a National Grid USA company is specifically ordered to provide in
return for specific rate and/or tariff recovery by a public state utility
regulatory agency), with respect to the provision of electric transmission and
distribution services and associated customer service. With respect to
underground transmission facilities of 138kV and higher only, "Prevalent Utility
Services" means, at any time, those services, programs, practices and procedures
provided or adopted at such time by 50 percent or more of the utilities having
at least 50 miles of such underground transmission facilities and which are
members of the NPCC."
b. Appendix 1 to the Amended Restated MSA is further amended to add the
following defined terms thereto:
"CEI/DSM Consulting Services" has the meaning set forth in Section 4.26
hereof.
"Code of Conduct" means the KeySpan Code of Conduct concerning LIPA related
matters, dated as of March 14, 2006.
"LIPA Regulatory Liaison" has the meaning set forth in Section 4.2(F)
hereof.
"LIPA Regulatory Representatives" has the meaning set forth in Section
4.2(F) hereof.
"Meetings" has the meaning set forth in Section 4.2(F) hereof.
"Mutual Assistance Agreement" means the agreement by which certain of
National Grid USA's Affiliates provide mutual aid services to each other.
"Standard of Conduct" means the Standards of Conduct specified in FERC's
Order No. 2004.
10. Performance Metrics. The Expanded Electronic Transactions Metric in the
Metric Chart portion of Appendix 5 to the Amended and Restated MSA is amended to
add the following after the last sentence in the column entitled Metric
Description:
"The standard of performance for Contract Year 2010 and beyond will be
negotiated and established in Contract Year 2009."
11. CEI Performance Metric. Article 4 of the Amended and Restated MSA is
amended to add a new (C) to Section 4.4 thereto to read as follows:
"(C) CEI Performance Metric. LIPA and Manager have agreed to a Clean Energy
Initiative ("CEI") performance metric, as more fully described in Appendix 15
attached hereto. Except as otherwise expressly provided in Appendix 15, this CEI
performance metric shall not be subject to the terms and conditions of Sections
4.4(A) and 4.4(B) or Appendix 5 of this Agreement." [See Attachment A for the
new Appendix 15.]
12. Storm Hardening. Section 6.2 of the Amended and Restated MSA is amended
to add a new subsection (12) thereto as follows:
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"(12) For Contract Years 2008 through 2013, LIPA-approved incremental
funding or allocation of Capital Costs for storm hardening that exceed One
Million Dollars ($1,000,000)."
13. Effective Time of Amendment. This Amendment shall become legally
binding and effective only upon satisfaction of the following conditions
precedent (the date upon which all such conditions are satisfied, being the
"Effective Date"):
a. Approvals (reasonably satisfactory to LIPA and the Manager) from
the New York State Comptroller and the New York State Attorney
General (as to form) of this Amendment and the other National
Grid Agreements shall have been obtained and be in full force and
effect;
b. Each of the 2006 Agreements shall have become effective pursuant
to their respective terms and be in full force and effect; and
c. The Merger shall have been consummated.
14. Agreement Remains in Force. Except as expressly set forth in this
Amendment, the Amended and Restated MSA remains unmodified and in full force and
effect.
15. Headings. The headings contained in this Amendment are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Amendment.
16. Miscellaneous. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
permitted assigns and are not intended to confer upon any other Person, any
rights or remedies hereunder or thereunder and may be executed in two or more
counterparts which together shall constitute a single agreement.
17. Dispute Resolution. Any disputes arising out of, or relating to, this
Amendment shall be resolved in accordance with the dispute resolution provisions
in Section 7.8 of the Amended and Restated MSA.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
LONG ISLAND LIGHTING COMPANY d/b/a LIPA
By: /s/Xxxxxxx X. Xxxxxx
--------------------
Name: Xxxxxxx X. Xxxxxx
Title: CEO & President
KEYSPAN ELECTRIC SERVICES LLC
By: /s/Xxxx X. Xxxxxx Xx.
-------------------------
Name: Xxxx X. Xxxxxx Xx.
Title: Executive Vice President
Agreed to and Acknowledged:
NATIONAL GRID USA
By: /s/Xxxxxxxx X. Xxxxxx
-------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Executive Vice President and General Counsel
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Attachment A
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Appendix 15 to the Amended and Restated MSA:
Clean Energy Initiative Performance Metric
------------------------------------------
The parties hereby agree to the following Clean Energy Initiative performance
metric (the "CEI Metric"):
The CEI Metric is a three-part performance metric, as defined below, with a
maximum one million dollar per year penalty or performance bonus. Except as
expressly provided for herein, this performance metric is independent of all of
the other Performance Metrics, as described in Sections 4.4(A) and 4.4(B) and
Appendix 5 of this Agreement. The CEI Metric is contingent on LIPA and Manager,
on an annual basis, agreeing on a CEI program to be implemented and funded for
the following Contract Year. The parties will agree on the annual goals 90 days
in advance of the beginning of the year and agree to adjust the goals, if
necessary, during the year to reflect any significant changes in the CEI
programs. Payment of the Bonus to Manager in any and all of the three areas of
the performance metric is contingent upon the agreed upon KW and KWH goals for
the applicable Contract Year having been achieved without substantial deviation
among program sectors. The parties also agree that the CEI Metric will be
modified during the course of any Contract Year if there are significant changes
in the CEI program budget and/or the reallocation of funds among various
individual CEI programs. Finally, this CEI Metric shall be subject to the terms
and conditions contained in Appendix 5, paragraph 1(e) of this Agreement.
1. Budget - To provide an incentive to manage the full portfolio of CEI
programs within the budget constraints established by LIPA, Manager will
pay a penalty or receive a bonus based upon an after-the-fact comparison of
actual program spending for a Contract Year to the agreed budget for that
Contract Year as follows:
---------------------------------------- ------------------------------- --------------
Actual Spending vs. Budget Penalty Bonus
---------------------------------------- ------------------------------- --------------
Within 2.5% N/A $250,000
---------------------------------------- ------------------------------- --------------
> 2.5% but < 5% high or low N/A N/A
---------------------------------------- ------------------------------- --------------
5% Linear interpolation
between $0 at 5%
and $333,334 at
10%
---------------------------------------- ------------------------------- --------------
2. Cost-effectiveness - To provide an incentive for Manager to deliver the
agreed CEI program as cost effectively as possible, prior to the start of
each Contract Year an estimated cost per kWh and per kW will be calculated
for the upcoming Contract Year by dividing total program costs by
anticipated kWh and kW savings from the program expenditures. Manager will
pay a penalty or receive a bonus based upon an after-the-fact comparison of
actual program cost-effectiveness for a given Contract Year to the
estimated cost-effectiveness for that Contract Year as follows:
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------------------------------------------------ ----------------------------- ------------------------
Actual Cost-Effectiveness vs. Penalty Bonus
Estimate
------------------------------------------------ ----------------------------- ------------------------
Within 5.0% N/A N/A
------------------------------------------------ ----------------------------- ------------------------
Lower Than Estimate by > 5.0% Linear
interpolation
between $0 at
5.0% and
$333,333 at 10%
for each of kWh
and kW metrics
------------------------------------------------ ----------------------------- ------------------------
Higher Than Estimate by > 5.0% N/A Linear interpolation
between $0 at 5.0%
and $250,000 at
7.5% for each of
kWh and kW
metrics
------------------------------------------------ ----------------------------- ------------------------
3. Collaboration - To provide an incentive for Manger to collaborate fully
with LIPA and be responsive to comments and suggestions regarding program
administration, LIPA, in its sole discretion, will decide at the end of
each Contract Year whether Manger's performance in administering the CEI
program on LIPA's behalf was responsive to LIPA's program priorities and
other needs. If so, Manager shall receive a bonus of $250,000. If LIPA
should determine that a bonus is not payable in any given Contract Year, it
shall provide Manager a written review of the areas where improvement is
needed and work with Manager to develop an action plan to reduce or remove
any shortcomings in Manager's performance.
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