EXHIBIT B-2
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GREAT PLAINS ENERGY
SERVICES INCORPORATED
SERVICE AGREEMENT
PROCEDURES
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_______, 2002
1
INTRODUCTION
Great Plains Energy Services Incorporated ("GPES") will provide a
variety of administrative, management and support services to
Great Plains Energy Incorporated ("GPE") and other GPE system
companies and business units (Client Companies). GPES will be
subject to the rules and regulations of the Securities and
Exchange Commission (SEC) pursuant to the Public Utility Holding
Company Act of 1935 (PUHCA), and in particular, to Section 13
thereof.
SERVICE AGREEMENTS AND SERVICE REQUESTS
GPES will enter into a Service Agreement with a Client Company
that is substantially similar to the Service Agreement attached
hereto as Exhibit A. The Service Agreement will set forth in
general terms the services to be performed by GPES directly or
indirectly for a Client Company. GPES and each Client Company
will prepare work orders, in the form of Service Requests, to
specify the services to be performed by GPES for a Client
Company. A sample Service Request is attached hereto as Exhibit
B. Additional documentation of work to be performed pursuant to
Service Requests may be used by the parties.
The purpose of the Service Request is to establish service
expectations between GPES and each Client Company. Each Service
Request will be reviewed and agreed upon on an as needed basis by
authorized representatives of GPES and each Client Company. In
conjunction with this review of Service Requests, the allocation
methods and ratios presented in Service Agreement Appendices A
and B shall be reviewed and agreed upon by the parties.
Each Service Request is approved by the individual(s) authorized
to represent GPES and the Client Company related to the services
to be provided.
ACCOUNTING PROCEDURES
GPES will maintain a process which allows it to accumulate costs
in Project IDs. Where possible, these costs will be charged out
to Client Companies using direct charging methodologies,
including time and materials. Project IDs collect resource costs
for services and activities described in the Service Request.
This process supports the philosophy of billing costs to the
Client Company on an appropriate basis. GPES will use this
process to maintain accounting systems to record all of its
costs.
Costs will be billed to Client Companies as work is performed and
costs are incurred. The GPES Accounting Division is responsible
for ensuring that all of the billing methodologies are consistent
with the Service Agreement approved by the SEC.
DIRECT COSTS are defined as those that can be identified as being
applicable to services performed for a single Client Company or
group of Client Companies. Direct costs include the fully
distributed cost of providing that particular service. The fully
distributed costs include labor costs, labor related costs (such
as pensions and benefit costs, and facility costs), IT costs,
outside services where applicable, back office support costs of
running GPES, and other non-labor costs
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such as materials and supplies. Direct Costs will be charged
to the Client Company or Client Companies responsible for the
activity.
INDIRECT COSTS include those costs of a general nature such as
general services, and other support costs which cannot be
specifically identified to a client company or companies or to a
specific service and therefore must be allocated. An example of
Indirect Costs is Corporate Services, which consists of, for
example, functions such as corporate finance, corporate
secretary, internal audits, investor relations, external
reporting and corporate communications. The allocation to
Client Companies will be based on factors identified in Appendix
B attached to the Service Agreement.
SERVICES AND SERVICE REQUESTS
Initially, GPES and the Client Companies will have the
responsibility to determine which services will be provided by
GPES, except for Corporate Services (as defined in the Service
Agreement), which shall be provided by the Service Company and
cannot be declined by the Client Companies. Thereafter, Client
Companies will have the responsibility to request new or
additional services from GPES.
Services provided will be reviewed on an as needed basis by GPES
and Client Companies. Service Requests will be prepared for on-
going or special services which benefit one or more Client
Companies. Examples of on-going services are payroll processing
and IT desktop support. Examples of special services include
requests to prepare FERC Form 1 schedules, projects and special
studies and analyses. Service Requests will be approved by the
individual(s) authorized to represent GPES and each Client
Company in accordance with applicable policies and procedures. In
all cases, the authorized approvers representing GPES and the
Client Company will be different individuals.
Each Service Request will contain one or more Project IDs which
will be used to accumulate the costs to the Service Company of
providing the services under the Service Request. A new Service
Request will be executed by Service Company and Client in the
event a new service category is added to Appendix A of the
Service Agreement (subject, however, to the provisions of Section
1.1 of the Service Agreement). A new Service Request,
establishing new or different Project IDs, may be also
appropriate for a project or activity falling within the
categories of services contained in Appendix A. However, the
cost of the activity or project may be able to be captured in an
existing Service Request. The following items, among others, may
be considered in determining the need for a new Service Request:
1. No existing Service Request uses a billing methodology that
is appropriate for the activity or project.
2. No existing Service Request distributes costs to GPE, the
desired Client Company or affiliates for the activity or project.
3. The total estimated annual cost of the activity or project
is greater than $100,000.
4. There is a regulatory or corporate requirement to allocate
or accumulate costs in a specific manner for an activity or
project.
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SERVICE REQUEST MONITORING AND CONTROL
GPES Accounting Division is responsible for reviewing, monitoring
and maintaining the Service Request system. GPES Accounting
Division will also authorize new Service Requests.
ALLOCATION FACTORS UPDATE AND REVISIONS
Allocation factors will be based on cost drivers specifically
applicable to the service provided.
GPES Accounting Division will have the primary responsibility for
ensuring that allocation factors are correct, accurate and
current. Allocation factors utilized by GPES must be approved by
the SEC.
GPES Accounting Division will be responsible for evaluating new
allocation methodologies and will coordinate SEC approval efforts
with the Legal Department. Changes to allocations require
advance written notice to the SEC of not less than 60 days prior
to the proposed effective date of the change. If a formula is
used to allocate costs, then changes to the formula require
advance notice to the SEC as described. Updates to variables in
the formula do not require SEC notification.
A list of current allocations will be filed annually with the SEC
on Form U-13-60.
TIME REPORTING
All GPES employees, including executives, shall keep, within
reasonable cost, time records supporting labor charged to
separately identifiable goods and services performed for Client
Companies.
Employees will record time daily in a minimum of half-hour
increments. The employee's supervisor or authorized delegate
will review and approve time reports. Time records will be
maintained in accordance with record retention requirements set
forth in 00 XXX 000, but in any event, will be maintained for at
least six years.
BILLING AND REVIEW
GPES shall prepare a monthly invoice detailing the work performed
by Service Request for each Client Company. Payment shall be
made by the Client Company by making remittance or by making
(offsetting) accounting entries of the amount billed. Payment
term (or appropriate offsetting accounting entries) is thirty
days of receipt.
DISPUTE RESOLUTION PROCEDURE
In the event there is a dispute between the Client Company and
GPES regarding a billing methodology and/or amount, GPES
Accounting Division and representatives of the Client Company
will meet to discuss the issue. If a resolution cannot be
reached among the parties, the issue will be referred to the GPE
Advisory Committee for final disposition.
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INTERNAL AUDIT CONTROL
Audit Services, under the direction of the Senior Vice President
- Corporate Services, will conduct periodic reviews of GPES's
business processes and systems to ensure that the services
provided are properly documented and charged to the Client
Companies on an appropriate basis. Reviews shall be performed
such that all major service areas are evaluated over time. Audit
Services will also conduct reviews of transactions and Service
Request charge methods to assess whether they comply with SEC
requirements.
Audit Services maintains an independent role and has direct
contact to GPE's Audit Committee. Audit findings, recommendations
and progress toward resolution of findings are reported to the
Audit Committee and senior management as appropriate.
BUDGETING
After the transition phase, budgeting for GPES will be a joint
effort between it and other Client Companies. Renewal / revision
of Service Requests for the upcoming budget period will provide
the basis for preparing budgets.
EVALUATION
GPES will review its costs for competitiveness on a regular
basis. Benchmarking and other measurement techniques will be
used to the extent deemed appropriate and agreed-to between GPES
and Client Companies. Additionally, GPES will also initiate a
customer review process to gauge the value and quality of the
services provided. Results will be shared with the Client
Companies to allow them to evaluate cost effectiveness and assess
alternate options.
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EXHIBIT A
SERVICE AGREEMENT
6
EXHIBIT B
SERVICE REQUEST NO.______
BETWEEN GREAT PLAINS ENERGY SERVICES INCORPORATED AND [CLIENT
COMPANY]
_________________________________________________________________
GENERAL INFORMATION
PURPOSE
TERM OF SERVICE
SCOPE OF SERVICES
SERVICE RESPONSIBILITY MATRIX
(beginning of box table)
SERVICES, TASKS
_________________________________ _______ _____
(end of box table)
SERVICE COSTING SCHEDULE
(beginning of box table)
SERVICE/TRANSACTION ALLOCATION FACTOR(S)
___________________ ____________________
(end of box table)
BILLING TABLE:
(beginning of box table)
SERVICE/TRANSACTION ESTIMATED MONTHLY BILLING
___________________ _________________________
(end of box table)
B-1
(beginning of box table)
SIGNATURES __________________________________________________
Great Plains Energy Services Name (Client)
Incorporated Title
___________________ ______ ___________________ ______
Signature Date Signature Date
___________________ ___________________
Name Name
___________________ ___________________
Title Title
(end of box table)
B-2
