Exhibit K-3.1
DRS Services Agreement
This DRS Services Agreement (this "Agreement") is entered into as of the
____ day of___________, 2001, by and between ________________________________,
a ______________________________ (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, 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;
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 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.
II. SERVICES SELECTED.
A. Initial Selection of Services. Exhibit II lists the services
the Company hereby agrees to receive from DRS.
B. 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.
III. PERSONNEL. The 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.
IV. 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.
V. TERMINATION AND MODIFICATION.
A. 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.
B. 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.
C. 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.
VI. 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:
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a. To the Company:
_________________________
_________________________
_________________________
b. To DRS:
Dominion Resources Services, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
VII. 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.
VIII. 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 cancelled in their entirety and are of no further
force and effect.
IX. 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.
X. 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.
XI. 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.
XII. EFFECTIVE DATE. This Agreement is effective as of _____________.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above mentioned.
Company:
By _________________________________
Name:____________________________
Title:___________________________
DRS:
By _________________________________
Xxxxxxxx X. Xxxxxxxxx
Vice President and Corporate Secretary
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EXHIBIT I
DESCRIPTION OF SERVICES OFFERED BY DRS
UNDER THIS DRS SERVICES AGREEMENT
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
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13. 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.
14. 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.
15. Corporate Planning. Advise and assist Dominion Companies in the
study and planning of operations, budgets, economic forecasts, capital
expenditures and special projects.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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
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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.
22. Environmental Compliance. Provide consulting, cleanup, and
other activities as required by Dominion Companies to ensure full compliance
with applicable environmental statutes and regulations.
23. Customer Services. Provide services and systems dedicated to
customer service, including billing, remittance, credit, collections,
customer relations, call centers, energy conservation support and metering.
24. Energy Marketing. Provide services and systems dedicated to
energy marketing, including marketing and trading of energy commodities, and
energy price risk management and development of marketing and sales programs
in physical and financial markets.
25. 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.
26. 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:
I 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.
II A. DRS will maintain a separate record of the expenses of each
department. The expenses of each department will include:
1. those expenses that are directly attributable to such
department, and
2. 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:
1. 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,
2. 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.
III A. Employees in each department will be divided into two groups:
1. Group A will include those employees rendering service
to Dominion Companies, and
2. 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:
1. salaries and wages of Group A employees, and
2. 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.
IV 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.
V 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.
VI 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.
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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.
VII 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.
VIII Monthly bills will be issued for the services rendered to the Dominion
Company on an actual basis. However, if such actual information is not
available at the time of preparation of the monthly xxxx, estimates
may be used. Estimates will normally be predicated on service
department budgets and estimated productive hours of employees
for the year. At the end of each quarter, estimated figures will be
revised and adjustments will be made in amounts billed to give effect
to such revision.
IX 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.
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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.
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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 recorded during the
preceding year ended December 31st.
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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 Total operating expenses, excluding
(includes all Dominion purchased gas expense, purchased
Companies except DRS) 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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