Exhibit 2
SERVICE AGREEMENT
BETWEEN
ENTERGY ENTERPRISES, INC. AND
ENTERGY THERMAL, LLC
THIS AGREEMENT, made and entered into as of March 10,
1999 by and between Entergy Enterprises, Inc., a corporation
organized under the laws of the State of Delaware (hereinafter
sometimes referred to as "Service Company") and Entergy Thermal,
LLC, a limited liability company organized under the laws of the
State of Delaware ("Client Company").
W I T N E S S E T H:
WHEREAS, Service Company and Client Company are both
direct or indirect subsidiaries of Entergy Corporation, and
Client Company, together with Entergy Corporation and Entergy
Corporation's other direct or indirect subsidiaries and Service
Company form the Entergy System; and
WHEREAS, Service Company is authorized by the
Securities and Exchange Commission (the "Commission") under
Section 13 of the Public Utility Holding Company Act of 1935, as
amended (the "Act") to render to certain direct and indirect
subsidiaries of Entergy Corporation which are not domestic retail
electric utility companies ("Client Companies") certain services
and to render to Client Company services as herein provided; and
WHEREAS, in the performance of past and future services
for the Client Companies, Service Company has acquired and will
acquire certain properties and other resources; and
WHEREAS, Client Company is authorized under the Act to
utilize those services, personnel, properties and other resources
of Service Company; and
WHEREAS, economies and increased efficiencies
benefiting the Entergy System will result from the performance by
Service Company of services for Client Company; and
WHEREAS, subject to the terms and conditions herein
described, Service Company is willing, upon request by Client
Company, to render such services and provide such property and
resources to Client Company at cost, determined in accordance
with applicable rules, regulations and orders of the Commission
under the Act;
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements herein, the parties hereto hereby agree as
follows:
1. Definitions.
As used hereinafter, the following terms, in
addition to those elsewhere defined in this Agreement,
shall have the following meanings unless the context
otherwise requires:
A. "Services" shall mean the services
described in Article 3 hereof.
B. "Non-Affiliate" means any corporation,
company, agency, government, business, entity or person
other than (i) Entergy Corporation, (ii) a direct or
indirect subsidiary of Entergy Corporation, or (iii) a
person employed by Entergy Corporation, or any of such
subsidiaries.
2. Agreement to Furnish Services.
A. Service Company hereby agrees to furnish
or otherwise make available to Client Company, upon the
terms and conditions hereinafter set forth, the
Services set forth in Section 3 hereof. Service
Company will keep itself and its personnel available
and competent to render to Client Company the Services
on the same basis as such Services are provided to the
other Client Companies.
B. Upon its receipt of Client Company's
service request, Service Company will, if it has or can
have available the personnel and resources needed to
fill the service request, furnish to Client Company,
upon the terms and conditions hereinafter set forth,
such of the Services set forth in Section 3 hereof, at
such times, for such periods and in such manner as
Client Company may from time to time request; provided,
however, that the determination of whether Service
Company has the available personnel and resources to
perform in accordance with the service request will be
entirely within the discretion of Service Company, and
Service Company may at its sole option elect not to
perform any requested Services, except that, once
having agreed to perform pursuant to a service request,
Service Company shall not withdraw or depart from such
performance without the consent of Client Company.
C. The providing of Services by Service
Company pursuant to this Agreement shall in all cases
and notwithstanding anything herein contained to the
contrary be subject to any limitations contained in
authorizations, rules or regulations of those
governmental agencies, if any, having jurisdiction over
Service Company, Client Company, or such providing of
Services.
3. Description of Services.
A. General Executive and Advisory Services.
Advise and assist the officers and employees of
Client Company in connection with various phases of its
business and operations, including particularly (but
not exclusively) those phases which involve
coordination of planning or operations between Client
Company and other entities.
B. General Engineering. Perform general
engineering work, including system production and
transmission studies; prepare and analyze apparatus
specifications, distribution studies and standards,
civil engineering and hydraulic studies and problems,
and fuel supply studies; and advise and assist in
connection with analyses of operations and operating
and construction budgets.
C. Development of Other Business
Enterprises. Advise and assist Client Company in the
investigation of other business enterprises and the
development of such other business enterprises.
D. Design Engineering. Perform detailed
design work as requested by Client Company.
E. Purchasing. Render purchasing and group
purchasing services to Client Company, coordinate group
purchasing, and supply expediting services. All
requests for bids shall be made by and purchases
confirmed in the name of Client Company (or its
customer, if requested by Client Company).
F. Accounting and Statistical. Perform for
Client Company all such business, accounting, and
auditing services and install such internal accounting
and auditing procedures as are requested by Client
Company to maintain its books and records properly and
account for and safeguard its operations and
properties; advise and assist Client Company in
connection with the installation of accounting systems
and similar efforts, requirements of regulatory bodies
with respect to accounting, studies of accounting
procedures and practices to improve efficiency,
accounting entries resulting from financial
transactions, internal audits, employment of
independent auditors, preparation and analyses of
financial and operating reports and other statistical
matters relating to Client Company or its customers,
preparation of reports to regulatory commissions,
insurance companies and others, standardization or
accounting and statistical forms in the interest of
economy, and other accounting and statistical matters.
G. Finance and Treasury. Advise and assist
Client Company on financing matters, including short
and long range financial planning, determination of
types and terms of sales of securities, the preparation
of petitions and applications for the issuance of
securities and the preparation of various documents
required in connection therewith, negotiation and
structuring of financing arrangements, and all treasury
matters, including banking and investment of surplus
funds.
H. Taxes. Advise and assist Client Company
in connection with tax matters, including preparation
of Federal, State or foreign income and other tax
returns and of protests, claims and briefs where
necessary, tax accruals, and other matters in
connection with any applicable taxes, governmental fees
or assessments, and assistance in connection with audit
of returns by the Internal Revenue Service and State
Tax Agencies.
I. Risk Management. Advise and assist
Client Company in connection with risk management
matters including but not limited to insurance and
bonding, including contracts with insurers, trustees
and actuaries and the placing of individual or
blanket/group policies covering Client Company and/or
other Client Companies, and other insurance and bonding
problems as required.
J. Employee Benefits. Advise and assist
Client Company in connection with employee benefit
matters including but not limited to welfare and
pension matters.
K. Corporate. Advise and assist Client
Company in connection with corporate affairs, including
assistance and suggestions in connection with the
preparation of petitions and applications for the
issuance of securities, contracts for the sale or
underwriting of securities, maintenance of minutes of
directors' and stockholders' meetings and other
proceedings and of other related corporate records; and
also arrangements for stockholders' meetings, including
notices, proxies and records thereof, and for other
types of meetings.
L. Budgeting. Advise and assist Client
Company in matters involving the preparation and
development of capital and operating budgets, cash and
cost forecasts, and budgetary controls and preparation
of long-range forecasts.
M. Business Promotion and Public Relations.
Advise and assist Client Company in the development of
marketing and sales programs, in the preparation and
use of advertising and sales materials, and in the
determination and carrying out of promotional programs.
N. Employee Services. Furnish Client
Company with advisory and administrative services and
programs in connection with employee and employee
relations matters, payroll, recruitment, employee
placement, training, compensation, safety, labor
relations and health, welfare and employee benefits.
O. Systems and Procedures. Advise and
assist Client Company in the formation of sound
operating practices and methods of procedure, the
standardization of forms, the purchase, rental and use
of mechanical and electronic data processing, computing
and communications equipment, in conducting economic
research and planning and in the development of special
economic studies.
P. Regulatory Matters. Consultation and
advice with respect to regulatory matters, particularly
those involving the Securities and Exchange Commission
or the Federal Energy Regulatory Commission, and the
provision of liaison and assistance in processing
matters with the staffs of such commissions.
Q. System Operations Center. Make
available services from the operation of a System
Operations Center for the control of bulk power supply
and load dispatching within the Entergy System, with
Client Company, and with interconnected systems.
R. Data Processing Services. Make
available services from the operation of a data
processing Computer Center serving the Entergy System.
This may include: applications software development,
maintenance and enhancements; data communications
network design, operation and management; Computer
Center production operations; and information systems
consulting.
S. Access to and Use of Resources. Make
available to Client Company in the conduct of its
business and/or, to the extent necessary or appropriate
as required in the performance of its services to its
customers, access to, use of, or rights in all Service
Company's resources, including facilities, products,
processes, techniques, computer hardware and software,
technical information, training aids and properties,
vehicles, equipment, machines and other property,
whether owned, leased or licensed by or otherwise
available to Service Company.
T. Training. Assist Client Company in
providing training to personnel of Client Company or of
Non-Affiliates; develop and make available training
procedures, materials and facilities, and provide
instructors.
U. Legal Services. Provide services and
advice relating to litigation, contracts, leases, real
estate, property rights and other legal matters.
V. General. Make available services in the
areas of construction, planning and supervision,
design, management, programs, quality assurance,
licensing matters, research and development, and
communications systems and procedures.
W. Other Services. Render advice and
assistance in connection with such other matters as
Client Company may request and Service Company may be
able to perform with respect to Client Company's
business and operations.
4. Compensation for Services.
As compensation for Services actually requested by
Client Company and rendered to it by Service Company,
Client Company hereby agrees to pay to Service Company
all direct and indirect costs of such Services,
computed in accordance with applicable rules and
regulations (including, but not limited to, Rules 90
and 91) under the Act and appropriate accounting
standards. Bills will be rendered for the amount of
such costs on or before the 20th day of the succeeding
month and will be payable on or before the 60th day
thereafter. The cost of Services to be allocated to
and paid by Client Company shall include all direct
charges and Client Company's pro rata share of Service
Company's indirect costs, determined as outlined on
Exhibits I and II attached hereto and incorporated
herein by reference.
5. Service Requests.The Services performed in
accordance with service requests issued or made by or
on behalf of Client Company and accepted by Service
Company will be assigned an applicable service request
number to enable specific work to be properly allocated
by project or other appropriate basis. Service
requests (i) shall be in writing, (ii) shall be signed
by appropriate representatives of Client Company and
of Service Company, (iii) shall be as specific as
practicable in defining the Services requested to be
performed, and (iv) shall set forth the scope, duration
and estimated cost of the Services to be performed
pursuant to the service request. Client Company shall
have the right from time to time to amend, alter or
rescind any service request, provided that (i) any such
amendment or alteration which results in a material
change in the scope of the work to be performed or
equipment to be provided is agreed to by Service
Company, (ii) the costs for the Services covered by the
service request will include any expense incurred by
Service Company as a direct result of the service
request, and (iii) no amendment, alteration or
rescission of a service request will release Client
Company from liability for all such direct costs
already incurred or contracted for by Service Company
pursuant to the service request, regardless of whether
the work associated with such costs has been completed.
6. Miscellaneous.
This Agreement shall be binding upon the successor and
assigns of the parties hereto, provided that Service
Company shall not be entitled to assign or subcontract
out any of its obligations under this Agreement or
under any purchase order or service request issued
hereunder without the prior written approval of Client
Company. This Agreement shall be construed and
enforced under and in accordance with the laws of the
State of Arkansas. This Agreement may be executed in
counterparts, each one of which when fully executed
shall be deemed to have the same dignity, force and
effect as an original. No provision of this Agreement
shall be deemed waived nor breach of this Agreement
consented to unless such waiver or consent is set forth
in writing and executed by the party hereto making such
waiver or consent.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective names by their
respective Presidents or one of their respective Vice Presidents
and attested by their respective Secretaries or one of their
respective Assistant Secretaries as of the day and year first
above written.
ENTERGY ENTERPRISES, INC.
ATTEST:
/s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X.Xxxxxxxx
Senior Vice President - Law
and Secretary
ENTERGY BUSINESS SOLUTIONS,
LLC
ATTEST:
/s/ Xxxxxxxxxxx X. Screen By: /s/ Xxxx X. Xxxxx
President and Chief
Executive Officer
EXHIBIT I
Entergy Enterprises, Inc.
Accounting Methodology
The accounting system at Entergy Enterprises, Inc. will be based
on specific activities or specific units of work which are
assigned to the management of Enterprises. Each activity or
project will have its own assigned number. All direct expenses
and revenues will be posted to the project to which it relates.
Some costs, however, will relate to indirect expenses, e.g.,
administrative cost, rent, and telephone expense. As discussed
below, these costs will be allocated and billed to specific
projects based on one or more allocation methods, including but
not limited to a statistical analysis of a specific item such as
(i) direct labor hours, (ii) total payroll dollars charged, (iii)
base assignment of company employees, (iv) direct dollars
charged, and (v) revenues. By using project-based accounting, a
profit and loss analysis can be derived for each activity or
assignment made to the management of Entergy Enterprises.
Projects will be assigned to specific individuals within Entergy
Enterprises. Monthly reports will be produced to indicate the
results of the activity to each Project Manager. These reports
will include a detailed description of each specific charge or
allocation which has been made to that project. Each project
will have a budget and related revenue projections. The monthly
project reports will compare actuals to both of these items as
well as maintain life-to-date information to track the project
over its entire life span.
A location code will also be utilized to identify cost centers
within Entergy Enterprises. Specific cost centers will include
Corporate Development, Legal, Finance, Accounting,
Administration, Power Marketing, EPI Operations, and EPI
Development. Areas of control within Entergy Enterprises will be
assigned to specific individuals. Monthly summaries and detailed
cost reports will be distributed to the individuals responsible
for their review. Budgets will be developed to compare monthly
results at each cost center.
To assist Project Managers in performing the activities within
their project, the accounting system will use task codes and
identification codes. A task code relates to a specific activity
within a project and can be used if the Project Manager wishes to
track activities separately. Project reports will be sub-divided
by these tasks to allow easier tracking by the Project Manager.
Identification codes will be a separate item that the Project
Manager can use to group expenses by specific companies,
functions, or activities, e.g., a project where a company
representative would be visiting several outside corporate groups
for possible sales. Revenues and expenses can be tracked by each
company solicited. A second use for identification codes would
be where a project has phases that would be different from the
tasks that are expected to be accomplished. A Project Manager
may want to determine the actual costs of each of the phases
outside of the tasks being tracked. The use of identification
codes will allow the Project Manager to do so and still be able
to use task codes. Reports will be produced by breaking the
projects down by task and identification number on a monthly,
year-to-date, and life-to-date basis.
Type cost codes will be utilized in order to help management and
project leaders determine the types of costs they have incurred.
The type cost code will also be the base code used for budgeting
by cost center. The type cost code indicates the kind of
expenditure which has been incurred by the cost center. Several
of the codes which will be used are payroll, employee benefits,
legal costs, consultation cost, travel, business meals, rents,
temporary assistance, and office supplies. Each cost center will
receive a monthly report indicating its expenses by type cost
code in summary and detail showing monthly and year-to-date
amounts. The type cost code can be used to assist in the
analysis of the expenses of a specific project.
The account number will relate to the SEC Uniform System of
Accounts for Mutual Service Companies and Subsidiary Service
Companies. It will be sub-divided by major account and
subaccount. The subaccount will be used independently and will
allow the system to produce sub-ledgers. The account code used
will develop each company's general ledger, subsidiary ledgers,
and financial statements.
The accounting field structure will consist of the following:
Location; Company Code; Project Code; Task Number; Identification
Number; Type Cost Code; Account Number; Plant Account; Work
Order; and Account Type.
Plant accounts and work orders will be used to track specific
property acquisitions, if applicable. Account type will indicate
what type of information is in the field, such as dollars, KWH,
customers, etc.
As stated above, indirect expenses not associated with a project
will be allocated and billed to specific projects based on one or
more allocation factors. General expenses are costs which are
not directly associated with a specific project or are costs
which are difficult to precisely allocate to a specific project
without undue administrative burden. Examples of general
expenses are rent, payroll and account administration, banking
fees, telephones, office equipment rental, duplicating
expenditures, freight, office supplies, etc. Every day postage,
fax machine rental, and duplicating expenditures are examples of
indirect expenses which would create an administrative burden to
determine the specific project to charge. As noted above, the
only allocation factors Enterprises plans to choose from are (i)
direct labor hours charged, (ii) total payroll dollars charged,
(iii) base assignment of individual company employees, (iv)
direct dollars charged, and (v) revenues.
In summary, the accounting system of Enterprises can be divided
into four areas: Project Reporting, Financial Reporting,
Management Analysis, and Cost Centers. Each of these will
provide a different view of the results and expenses of the
operation.
EXHIBIT II
METHODS OF ALLOCATING COSTS AMONG ASSOCIATE COMPANIES (CLIENT)
RECEIVING SERVICES UNDER THIS AND SIMILAR SERVICE AGREEMENTS WITH
ENTERGY ENTERPRISES, INC. (ENTERPRISES)
1. The costs of rendering services by Enterprises will include
all direct costs and all indirect costs of doing business.
2. (a) Enterprises will maintain a separate record of the
expenses of each department. The expenses of each
department will include:
(i) those expenses that are directly
attributable to such department, and
(ii) a 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, including social security
taxes, vacations, paid absences, sickness, employee
disability expenses, and other employee welfare
expenses, rent and utilities, materials and supplies,
depreciation, and all other expenses attributable to
the department.
(c) Departmental expenses may be categorized into one
of two classes:
(i) those expenses which are directly
attributable to a specific project or service
rendered to a Client Company (Direct Costs), and
(ii) those expenses which are attributable to
the overall operation of the department and not to
a specific service provided to Client Companies
(Indirect Costs). Indirect Costs include all
costs incurred by a department which are necessary
to operate the department but do not vary with the
level of services provided to the Client.
Departmental Indirect Costs include:
(1) Administrative labor costs
associated with office and general service
employees.
(2) Occupancy costs including rent
and utilities.
(3) Depreciation.
(4) Other fixed costs attributable
to a department.
(5) Those costs incurred by a
department which are necessary to support
services to the Client and cannot be
practically assigned to individual projects.
3. Charges to Client for a particular service will be based on
direct costs related to the project or service being
performed and a portion of Enterprises' indirect costs. Such
indirect costs will be allocated and charged based on an
equitable allocation method determined by Enterprises (see
Exhibit I).
(NEW)
Exhibit III
ENTERTY ENTERPRISES, INC.
SERVICE REQUEST (SR)
NAME OF CUSTOMER ________________________________________________
SR NO. ____________________
SR DESCRIPTION
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
SCOPE AND DURATION OF WORK
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
ESTIMATED BUDGET
19__ 19__ 19__
______________ ______________ ______________
______________ ______________ ______________
______________ ______________ ______________
______________ ______________ ______________
______________ ______________ ______________
ENTERGY ENTERPRISES APPROVAL
NAME: ______________________________________ DATE: / /
TITLE: ______________________________________
CUSTOMER APPROVAL
NAME: ______________________________________ DATE: / /
TITLE: ______________________________________
_______________________________
Those companies to which Service Company shall not render
services are Arkansas Power & Light Company, Louisiana Power
& Light Company, Mississippi Power & Light Company, New
Orleans Public Service Inc., Entergy Operations, Inc.,
System Fuels, Inc., System Energy Resources, Inc., Entergy
Services, Inc., and such other similar direct or indirect
subsidiaries of Entergy Corporation now or hereafter
existing whose activities and operations are primarily
related to the domestic sale of electric energy at retail or
at wholesale to affiliates, or the provision of goods or
services thereto.
Note - the following is a list of the various kinds of services
that could be provided by Enterprises to its Client
Companies. However, this list is not intended to be
exhaustive, and the services to be provided to any
particular Client Company will depend upon, among other
factors, the nature of such company and the needs of its
business.
The representative of Client Company shall be an officer of
Client Company acting on its behalf in signing the service
request.
