Form of Service Agreement
This Service Agreement (this "Agreement") is entered into as of the ____
day of __________, 1999, by and between [insert name of subsidiary], a
__________ corporation (the "Company") and SCANA Service Company, a South
Carolina corporation ("SCANA Service").
WHEREAS, SCANA Service is a direct or indirect wholly owned subsidiary of
SCANA Corporation;
WHEREAS, SCANA Service has been formed for the purpose of providing
administrative, management and other services to subsidiaries of SCANA
Corporation; and
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 SCANA Service;
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:
I. SERVICES. SCANA Service supplies, or will supply, certain
administrative, management or other services to Company similar to those
supplied to other subsidiaries of SCANA Corporation. Such services are and will
be provided to the Company only at the request of the Company. Exhibit I hereto
lists and describes all of the services that are available from SCANA Service.
II. PERSONNEL. SCANA Service provides and will provide such services by
utilizing the services of their executives, accountants, financial advisers,
technical advisers, attorneys and other persons with the necessary
qualifications.
If necessary, SCANA Service, 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.
III. COMPENSATION AND ALLOCATION. As and to the extent required by law,
SCANA Service provides and will provide such services at cost. Exhibit I hereof
contains rules for determining and allocating such costs.
IV. TERMINATION AND MODIFICATION. The Company may terminate this Agreement
as to by providing 60 days written notice of such termination to SCANA Service.
SCANA Service may terminate this Agreement by providing 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 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 Agreement. This Agreement shall be subject to the
1
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.
V. ANNUAL SERVICE REQUESTS. SCANA Service will send an Annual Service
Request to the Company each year on or before _____________ of each year listing
services proposed for the coming year based on services provided during the past
year.
VI. NOTICE. Where written notice is required by this Agreement, all
notices, consents, certificates, or other communications hereunder shall be in
writing and 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 SCANA Service:
--------------------
--------------------
--------------------
--------------------
VII. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina, without regard to their
conflict of laws provisions.
VIII. MODIFICATION. No amendment, change or modification of this Agreement
shall be valid, unless made in writing and signed by all parties hereto.
IX. 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 or effect.
X. 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.
XI. ASSIGNMENT. This Agreement shall inure to the benefit and shall be
binding upon the parties and their respective successors and assigns. No
assignment of this Agreement or any party's
2
rights, interests or obligations hereunder may be made without the other party's
consent, which shall not be unreasonably withheld, delayed or conditioned.
XII. SEVERABILITY. If any provision or provisions of this Agreement shall
be held by a court of competent jurisdiction 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 ________ day of ________, 1999.
SCANA SERVICE COMPANY
By: _____________________________
Name:
Title:
[Subsidiary]
By: _____________________________
Name:
Title:
The undersigned requests all of the services listed in Exhibit I from SCANA
Service, except for _______________________________________. Services will begin
_____________.
[Subsidiary]
By: _____________________________
Name:
Title:
3
EXHIBIT I
Description of Services, Cost Accumulation, Assignment and
Allocation Methodologies for
SCANA Service Company
This document sets forth the methodologies used to accumulate the costs of
services performed by SCANA Service Company ("SCANA Service") and to assign or
allocate such costs to other subsidiaries and business units within SCANA
Corporation ("Client Entities").
Cost of Services Performed
SCANA Service maintains an accounting system that enables costs to be
identified by Cost Center, Account Number or Project, Activity, Resource, and
Event ("Account Codes"). The primary inputs to the accounting system are time
records of hours worked by SCANA Service employees, accounts payable
transactions and journal entries. Charges for labor are made at the employees'
effective hourly rate, including the cost of pensions, other employee benefits
and payroll taxes. To the extent practicable, costs of services are directly
assigned to the applicable Account Codes. The full cost of providing services
also includes certain indirect costs, e.g., departmental overheads,
administrative and general costs, and taxes. Indirect costs are associated with
the services performed in proportion to the directly assigned costs of the
services or other relevant cost allocators.
Cost Assignment and Allocation
SCANA Service costs will be directly assigned, distributed or allocated to
Client Entities in the manner prescribed below.
13. Costs accumulated in Account Codes for services specifically
performed for a single Client Entity will be directly assigned or charged
to such Client Entity.
14. Costs accumulated in Account Codes for services specifically
performed for two or more Client Entities will be distributed among and
charged to such Client Entities using methods determined on a case-by-case
basis consistent with the nature of the work performed.
15. Costs accumulated in Account Codes for services of a general
nature which are applicable to all Client Entities or to a class or classes
of Client Entities will be allocated among and charged to such Client
Entities by application of one or more of the allocation methods described
below.
Page 2
Allocation Methods
The following methods will be applied, as indicated in the Description of
Services section that follows, to allocate costs for services of a general
nature.
1. Net Revenue Ratio - A ratio based on the excess of sales revenue
over the applicable cost of sales, e.g., cost of fuel for generation, gas
for resale or the direct costs of non-utility goods sold. This ratio will
be determined annually based on actual results of operations for the
previous calendar year and may be adjusted for any known and reasonably
quantifiable events, or at such time, based on results of operations for a
subsequent twelve-month period, as may be required due to significant
changes.
2. Number of Customers Ratio - A ratio based on the number of retail
electric and/or gas customers. This ratio will be determined annually based
on the actual number of customers at the end of the previous calendar year
and may be adjusted for any known and reasonably quantifiable events, or at
such time as may be required due to significant changes.
3. Number of Employees Ratio - A ratio based on the number of
employees benefiting from the performance of a service. This ratio will be
determined annually based on actual counts of applicable employees at the
end of the previous calendar year and may be adjusted for any known and
reasonably quantifiable events, or at such time as may be required due to
significant changes.
4. Capital Expenditures Ratio - A ratio based on capital expenditures,
including capitalized financing costs. This ratio will be determined
annually based on actual capital expenditures during the previous calendar
year and may be adjusted for any known and reasonably quantifiable events,
or at such time, based on capital expenditures for a subsequent
twelve-month period, as may be required due to significant changes.
5. Information Systems Chargeback Rates - Rates for services,
including but not limited to Software, Consulting, Mainframe, Midtier and
Network Connectivity Services, are based on the costs of labor, materials
and Information Services overheads related to the provision of each
service. Such rates are applied based on the specific equipment employed
and the measured usage of services by Client Entities. These rates will be
determined annually based on actual experience and may be adjusted for any
known and reasonably quantifiable events, or at such time as may be
required due to significant changes.
Description of Services
A description of each of the services performed by SCANA Service, which may
be modified from time to time, is presented below. As discussed above, where
identifiable, costs will be directly assigned or distributed to Client Entities.
For costs accumulated in Account Codes which are for services of a general
nature that cannot be directly assigned or distributed, the
Page 3
method or methods of allocation are also set forth. Substitution or changes may
be made in the methods of allocation hereinafter specified, as may be
appropriate, and will be provided to state regulatory agencies and to each
affected Client Entity.
1. Information Systems Services - Provides telecommunications and
electronic data processing services. Costs of a general nature are
allocated using the Information Systems Chargeback Rates.
2. Human Resources - Establishes and administers policies and oversees
compliance with regulations in the areas of employment, compensation and
benefits; processes payroll; administers corporate training. Costs of a
general nature are allocated using the Number of Employees Ratio.
3. Financial Services - Provides accounting, tax, treasury, investor
relations, hedging activities, insurance, risk management, financial
planning and rate services. Costs of a general nature are allocated using
an average of the Net Revenue and Capital Expenditures Ratios.
4. Legal Services - Provides various legal services and general legal
oversight; handles claims. Costs of a general nature are allocated using an
average of the Net Revenue, Number of Employees, and Capital Expenditures
Ratios.
5. Corporate Services - Provides corporate secretarial, shareholder
administration, security, public relations, corporate communication,
purchasing, mail, remittance processing, billing, facilities management and
aviation services. Costs of a general nature are allocated using the Net
Revenue, Number of Customers, Number of Employees and Capital Expenditures
Ratios, as applicable, and averages thereof.
6. Marketing - Establishes strategies and provides oversight for
marketing, sales and branding of utility and related services. Costs of a
general nature are allocated using the Number of Customers Ratio.
7. Corporate Compliance - Oversees compliance with all laws,
regulations and policies applicable to all of SCANA Corporation's
businesses; directs compliance training. Costs of general nature are
allocated using the Number of Employees Ratio.
8. Internal Auditing - Reviews internal controls and compliance
therewith. Costs of a general nature are allocated using an average of the
Net Revenue and Capital Expenditures Ratios.
9. Strategic Planning - Develops corporate strategies and business
plans. Costs of a general nature are allocated using an average of the Net
Revenue and Capital Expenditures Ratios.
Page 4
10. Governmental Affairs and Economic Development - Maintains
relationships with government policy makers, conducts lobbying activities
and engages in activities to promote economic growth in areas served by
Client Entities. Costs of a general nature are allocated using the Number
of Customers Ratio.
11. Gas Supply and Capacity Management - Provides gas supply and
capacity management services for regulated Client Entities. Costs of a
general nature are allocated using the Net Revenue Ratio.
12. Environmental Services - Monitors environmental regulations and
recommends strategies for complying therewith. Costs of a general nature
are allocated using an average of the Net Revenue and Capital Expenditures
Ratio.
13. Executive - Provides executive and general administrative
services. Costs of general nature are allocated in proportion to the
distribution of all other SCANA Service costs.
