EXHIBIT B
SERVICE AGREEMENT
BETWEEN THE
ALLEGHENY ENERGY SERVICE CORPORATION
AND
______________________________
THE SERVICE AGREEMENT, between Allegheny Energy
Service Corporation, a corporation formed under the laws of
the State of Maryland (the "Service Company") and
__________________________, a corporation formed under the
laws of _______________________ (the "Company").
WITNESSETH:
WHEREAS, pursuant to a service agreement dated
November 22, 1963, the Service Company was created to
perform certain management duties on behalf of Allegheny
Power System, Inc. (currently known as Allegheny Energy,
Inc. and sometimes hereinafter referred to as the "System")
and its utility subsidiary companies and nonutility
subsidiary companies (the "Subsidiaries");
and
WHEREAS, the Service Company offers to provide a
central organization to furnish to the System and the
Subsidiaries, including Company, certain advisory,
supervisory and other services in accordance with said
current practices and procedures; and
WHEREAS, the Company wishes to accept the offer
proposed by the Service Company;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, and for other
good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be
reasonably bound, hereby agree as follows:
1. The Service Company hereby offers to furnish
to the Company the services detailed on Exhibit I attached
hereto and made a part hereof.
2. For all services rendered for the Company by
the Service Company, the Company agrees to pay the cost
thereof. For services rendered to one or of the companies
in the System, the applicable approved factor will be used.
3. The payment for services rendered by the
Service Company to the System and Subsidiaries shall cover
all the costs and expenses of its doing business, excluding
only a return for the use of equity capital, and that each
Subsidiary and the System shall pay its direct or fair
proportionate share.
4. Payment shall be made by the Company to the
Service Company on a monthly basis on or before the 20th day
of the succeeding month, upon receipt of a statement showing
the amount due. Certain charges billed by the Service
Company to the Company may not be due immediately and will
be so indicated on the statement of billing. Monthly
charges may be made on an estimated basis, but adjustments
will be made at the end of each calendar year so that all
charges for the calendar year will be in accordance with the
foregoing.
5. Nothing herein shall be construed to release
the officers and directors of the Company from the
performance of their respective duties or limit the exercise
of their powers as prescribed by law or otherwise.
6. This Service Agreement shall continue in full
force and effect from year to year but may be terminated by
either party upon 60 days' prior notice, and the Company may
terminate such contract at any time with or without notice
for any cause deemed by it to be sufficient.
7. The Service Agreement will be 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
Service Agreement and shall be subject to the approval of
any state commission or other regulatory body whose approval
is a legal prerequisite to its execution and delivery or
performance.
If your Company desires to accept this offer,
please cause it to be executed in the space provided below
by your duly authorized officers.
Very truly yours,
ALLEGHENY ENERGY SERVICE CORPORATION
By _________________________________
President
Attest:
__________________________
Secretary
Pursuant to authorization of the Board of Directors of this
Company, we hereby accept the above offer this _____ day of
_____,2001.
_______________________________________
By _________________________________
President
___________________________
Assistant Secretary
EXHIBIT I
Allegheny Energy Service Corporation Principal Functions
The following is a description of the principal
functions of Allegheny Energy Service Corporation ("AESC").
In accordance with the terms and conditions of the Service
Agreement dated ___________________, AESC may perform the
services described herein for ___________________.
1. Corporate Services
1. Accounting
(a) Payroll - Processes and verifies
timesheets and paychecks for ______________________
employees. Ensures compliance with payroll tax laws and
regulations.
(b) Asset Accounting - Maintains corporate
accounting records for Company's fixed assets in accordance
with regulatory requirements, corporate capital budget
management, and fixed asset return objectives.
(c) Taxes - Ensures compliance with all
federal, state and local tax laws (except payroll and
benefits matters). Prepares and files applicable returns,
gives instructions for timely payment of tax liabilities,
and coordinates the issuance of tax accounting instructions
to Company. Also provides tax planning services.
(d) Corporate Accounting - Gathers, reports,
and analyzes accounting and management information. Reviews
and corrects accounting data.
(e) Payment Processing - Processes invoices
from, and issues payment to, vendors for goods and services
provided to Company.
(f) Fuel Accounting - Initiates payment for
fuel receipts and compiles fuel data for report preparation
on fuel purchases and generation statistics to meet various
regulatory requirements.
2. Information Services
Provides electronic data processing services:
(a) Machine related computer activity -
services such as data processing for customer accounting,
payroll and general accounting, engineering planning,
purchasing and stores studies, forecasts and various other
administrative and engineering applications.
(b) Computer applications activity -
services such as feasibility studies for new applications,
development and/or acquisition of new applications,
enhancement of existing applications and other related
activity.
3. Financial Management
Oversees annual budgeting and capital management,
long-term forecasting, and financial planning.
4. Treasury
(a) Cash Processing - Maintains relationship
with banking institutions for lines of credit. Handles
customer xxxx processing, money pool (internal funding among
certain Allegheny Energy, Inc. companies, external short-
term borrowing and investing), and long-term financing and
cash forecasting.
(b) Risk Management - provides risk
financing through insurance purchases and other funding
mechanisms. Provides transfer of risk via contracts and
insurance certification for all contractors, lessees,
cogenerators, and PURPA projects. Provides risk control to
protect Company's properties from loss, and provides advice
to Legal, Claims, and Human Resources relative to liability
and worker's compensation issues, including litigation.
(c) Electronic Commerce - Provides guidance,
implementation, and oversight of Electronic Commerce (EC)
activities. EC is defined as any binding business
transaction conducted or consummated over an electronic
network between Company and its customers, suppliers,
financial institutions, or other entities.
5. Audit Services
Performs independent appraisals of significant
activities carried out within, and/or related to, Company
through application of financial, contract, operational and
compliance audit techniques. Provide consulting services
upon management request.
6. Legal
(a) Legal Services - Renders services
relating to financings, financial reporting, shareholders'
meetings, rates and other regulatory proceedings,
environmental matters, litigation, marketing, human
resources, contracts, real estate, leasing, corporate and
other legal matters.
(b) Corporate Secretary - Responsible for
creation, maintenance, and retention of corporate records;
liaison with Board of Directors; administration of
indentures (performed by Assistant Secretaries); support for
long-term financing, regulatory filings; handles
shareholder/bondholder relations and relationship with stock
transfer agent and bond trustee (records kept, checks sent,
etc., by outside agents.)
(c) Claims - Responsible for investigating
and taking other appropriate actions concerning claims made
against Company by third parties. Also responsible for
activities involved with collecting monies owed to Company
by third parties for property damage.
7. Regulation & Pricing
(a) Costing & Pricing - Provides cost of
service analysis. Identifies usage pattern trends to assist
marketing effort. Performs special studies requesting
internally or by regulatory agencies. Provides analyses
such as separation, cost of service and loss studies.
(b) Financial Analysis - Assembles and
provides primary support for regulatory filings. Maintains
contacts with state commission staff members. Performs
special financial studies.
(c) Fuel & Capital Recovery - Assembles and
provides primary support for fuel and depreciation
regulatory filings.
8. Human Resources
Initiates, maintains, supervises and administers
the human resources policies of Company. Assists Company's
management in maximizing the results from their employees.
This is accomplished by developing and administering
programs and policies, and consulting in five primary
functions. They are:
(a) Employee Relations - labor relations,
litigation/regulatory compliance, employee communications,
and employee policies.
(b) Employee Development - training program
development and delivery, performance evaluation and
management development.
(c) Medical Services - workers'
compensation, employee assistance program, and employee
wellness/awareness programs.
(d) Rewards - design and administration of
compensation, benefits, and recognition programs.
(e) Staffing - employment/placement,
succession planning and EEO/affirmative action.
In addition, Business Practices is a group within
HR which coordinates and participates in the development
and/or documentation of new and revised policies, business
practices, procedures, references and forms.
9. Governmental Affairs
Analyzes and provides views and recommendations on
state and federal legislation to assure fair and equitable
treatment of Company. Provides information to assist
management decision-making on company strategy and policy.
10. System Security
Originates, establishes, and administers security
standards, procedures and policies. Provides investigative
and loss prevention services in reference to the protection
of assets and its employees. Acts as liaison with federal,
state and local law enforcement agencies.
11. Procurement
Provides services and gives functional direction
in connection with the procurement of goods and services,
including market research, preparation of commitments,
requests for quotations, preparation of bid summaries, and
materials management.
12. Corporate Communications
Responsible for media relations, including the
financial and trade press, production of stockholder
publications, advertising, and numerous internal and
customer communications.
13. Allegheny Ventures, Inc.
Oversees the business development and operations
of and investments in products, services and ventures that
are not regulated as public utility services. Included are
unregulated power generators, power marketing and related
activities.
2. Business Xxxxx
0. Xxxxxxxxx Xxxxxxxx Xxxx (XXX)
(a) Customer Service Center - Answers all
incoming calls to Company via one toll-free number, responds
to customer inquiries, initiates new service, dispatches
service and line crews in response to power outages, handles
credit and collection activities, responds to customer and
public service/utility commission complaints, and manages
the meter reading and billing activities.
(b) Operations Services - Operations
Services provides the following services in the indicated
areas: Stores - Centralizes materials supply and
distribution; Technical Services - Provides electrical
equipment repair and testing; Transportation - Handles fleet
management and repair services; Safety, Quality and
Training - Develops safety and training programs; Building
Services - provides building maintenance and management, and
offices services; Substations - Builds, operates, and
maintains substations and equipment; T & D Operation -
Performs switching functions for all facilities above
distribution voltage; Forestry - Provides maintenance
services for electrical facilities rights-of-way; Planning -
Provides planning services for all non-network electrical
facilities; Lines Services - Provides lines support for
lines teams in service centers; and Telecommunications -
Provides support and maintenance for the telecommunications
systems.
(c) Various Regions - Each region supports
the processes for responding to electric service requests,
ensuring reliable service, and restoration of service.
2. Retail Marketing
Executes the marketing and sales of the products
and services of Company. Also performs economic development
activities which affect areas served by the Company.
3. Corporate Affairs
Maintains relationships with state regulatory
commissions, municipal and county governments and is
responsible for identifying state-level regulatory issues.
4. Transmission Business Unit (TBU)
Responsible for ensuring that adequate high-
voltage network facilities are available and on-line to
convey power produced from the power production operations
run by, or procured by, the Generation Business Unit (GBU)
to serve native load and to engage in wholesale transmission
sales to nonaffiliates. Will engage in marketing efforts
for sales of bundled and unbundled transmission services to
nonaffiliates and will be responsible for accommodating
requests for transmission service submitted by nonaffiliates
who qualify as customers for that service under federal
regulations. Finally, is responsible for maintaining the
optimal economic balance on a real-time basis between native
customer load and the output of the generation resources
supplied by the GBU.
5. Generation Business Unit (GBU)
Responsible for ensuring that adequate generation
is available to serve the native load customers of Company
by using its own generating facilities and the third-party
generation obtained through its marketing efforts. Primary
responsibilities include ensuring the cost-effective
operation and maintenance of our generating units, and
providing the most economic mix of generation by available
generating units and off-system purchases and sales. It
also provides advisory and supervisory services as needed.
The GBU will also broker energy services.
6. Planning and Compliance Business Unit (P&CBU)
Forecasts electric demand and energy requirements
for Company and develops plans to provide and integrate the
production and transmission facilities needed to serve the
electricity requirements of customers of the Company.
Oversees compliance with state and federal regulatory and
legal requirements.
3. Additional Services
Certain other services in addition to the above as
AESC may be able to provide to the Company.
A. Trading. To effect trading transactions for and
on behalf of New AE Supply involving electricity and other
types of energy commodities, and hedging and/or financial
transactions associated therewith, including derivatives,
future contracts, options and swaps, including, without
limitation, electric power, oil, natural and manufactured
gas, emission allowances, coal, refined petroleum products
and natural gas liquids and to provide incidental related
services, such as fuel management, storage and procurement
services
