Exhibit N-1
TAX ALLOCATION AGREEMENT
This Agreement, dated as of , 2001, the date on which each
of the following companies became a member of the Parent Company affiliated
group, as defined in Section 1504(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) (the "Effective Date"), is made by and among
Consolidated Edison, Inc., (the "Parent Company"), Northeast Utilities, The
Connecticut Light and Power Company, Western Massachusetts Electric Company,
Holyoke Water Power Company, Northeast Utilities Service Company, Northeast
Nuclear Energy Company, Holyoke Power and Electric Company, The Rocky River
Realty Company, The Quinnehtuk Company, Charter Oak Energy, Inc., Charter Oak
Paris, Inc., HEC, Inc., Public Service Company of New Hampshire, North
Atlantic Energy Corporation, North Atlantic Energy Service Corporation,
Properties Inc., COE Development Corporation, COE Argentina II Corp., COE
Ave Fenix Corporation, HEC International Corporation, Mode I Communications
Inc., Select Energy, Inc., CL&P Receivables Corporation, NU Enterprises,
Inc., Northeast Generation Company, Northeast Generation Services Company,
Select Energy Portland Pipeline, Inc., Reeds Ferry Supply Co., Inc.,
HEC/Tobyhanna Energy Project, Inc., Yankee Energy System, Inc., Yankee Energy
Financial Services Company, NorConn Properties, Inc., Yankee Energy Services
Company, Yankee Gas Services Company and R.M. Services, Inc., Consolidated
Edison of New York, Inc., Consolidated Edison Solutions, Inc., Consolidated
Edison Energy, Inc., Consolidated Edison Development, Inc., CED Ada, Inc.,
Consolidated Edison Leasing, Inc., CED Management Company, Inc., Consolidated
Edison Energy Massachusetts, Inc., CED - Lakewood Inc., CED Generation
Lakewood Company, Consolidated Edison Communications, Inc., Orange and
Rockland Utilities, Inc., Rockland Electric Company and Pike County Light &
Power Company (hereinafter collectively "subsidiaries" and singly
"subsidiary") in accordance with Rule 45(c). The subsidiaries join in the
annual filing of a consolidated federal income tax return with the Parent
Company.
In consideration of the mutual benefits and obligations provided for
herein, the Parties to this Agreement hereby agree that the consolidated
federal income tax, as defined by Rule 45(c)(1), of the Parent Company and
the subsidiaries shall be allocated as follows:
(1) Apportionment of Parent Company Income or Loss. The net taxable income
or loss of the Parent Company computed on a separate return basis ("separate
taxable income") shall be apportioned among such subsidiaries in proportion
to the dividends paid by each subsidiary to the Parent Company. The separate
taxable income of the Parent Company or a subsidiary is the income or loss of
such company for a tax year, computed as though such company had always filed
a separate return on the same basis as used in the consolidated return, with
the following adjustments:
FN
References to Rule 45 are to Rule 45 of the Public Utility Holding Company
Act of 1935.
(a) Gains and losses on intercompany transactions shall be taken into
account as provided in Treas. Reg. Section 1.1502-13 and 13T.
(b) Gains and losses relating to inventory adjustments shall be taken into
account as provided in Treas. Reg. Section 1.1502-18.
(c) Dividends and other transactions with respect to stock, bonds, or other
obligations of members shall be reflected as provided in Treas. Reg. Section
1.1502-13(f) and -13(g).
(d) Excess losses shall be included in income as provided in Reg. Section
1.1502-19.
(e) In the computations of tax credits and recapture, Treas. Reg. Section
1.1502-3(f)(2) shall apply.
(f) Basis shall be determined under Treas. Reg. Section 1.1502-31 or Section
1.1502-32, and earnings and profits shall be determined under Treas. Reg.
Section 1.1502-33.
(g) Payments made or received under this Agreement shall be eliminated.
(h) tems attributable to a consolidated return year but not allowable on a
separate company basis (such as deductions for percentage depletion or net
operating loss carryovers or carrybacks), to the extent such items were
previously taken into account to reduce the consolidated taxable income shall
be excluded.
(2) Allocation of Consolidated Tax. The consolidated federal income tax, as
defined by Rule 45(c)(1), exclusive of capital gains taxes (see paragraph
(3)), and the alternative minimum tax (see paragraph (7)), and before the
application or recapture of any credits (see paragraph (4)) and the results
of any special benefits (see paragraph (5)), shall be allocated among the
subsidiaries based on their separate taxable income or loss, computed without
regard to net capital gains or losses, and after the application of paragraph
(1). Subject to the limitation provided in paragraph (10), such consolidated
federal income tax allocated to a subsidiary, which may be either positive or
negative, shall be equal to the separate taxable income of the subsidiary
(after elimination of capital gains and losses) multiplied times the highest
effective corporate federal income tax rate set forth in Section 11 of the
Code. However, no company shall receive a negative allocation greater (in
absolute value) than the amount by which its loss has reduced the
consolidated federal income tax liability. Conversely, a company shall
receive a negative allocation for any loss or deduction it cannot use
currently to the extent such loss or deduction reduces the consolidated
federal income tax liability. If the consolidated tax liability is greater
than the aggregate tax on the separate taxable income of the Parent Company
and each subsidiary ("separate return tax"), then no subsidiary shall receive
an allocation greater than its separate return tax, and the Parent Company
shall be liable for the excess of the consolidated tax over the sum of the
separate return taxes of the subsidiaries, subject to recovery in later years
from subsequent consolidated tax benefits.
(3) Allocation of Capital Gains Taxes. The portion of the consolidated tax
attributable to net capital gains and losses shall be allocated directly to
the subsidiaries giving rise to such items. The effects of netting capital
gains and losses in the current year shall follow the principles of paragraph
(2). The effects of capital loss carrybacks or carryforwards shall follow
the principles of paragraph (6). See Rules 45(c)(3) and 45(c)(5).
(4) Allocation of General Business Credits. General business credits
arising in a particular year shall be allocated among the subsidiaries giving
rise to such credits by multiplying the amount of consolidated general
business credits for such year utilized by a fraction, the numerator of which
is the amount of general business credit of the subsidiary for such year and
the denominator of which is the total amount of general business credit of
all such subsidiaries for such year. If the consolidated group is in a
credit carryforward situation, the utilized credit shall be allocated based
on the vintages that comprise the utilized credit. For purposes of the
consolidated return, the credits utilized are determined on a first-in first-
out basis with all credits generated by all subsidiaries in the earliest year
utilized first before credits generated in a subsequent year can be utilized.
For purposes of allocating the credits pursuant to this agreement, and in
accordance with the separate return limitation of paragraph (10), the credits
utilized shall be determined on a first-in first-out basis with the credits
generated by subsidiaries allocated positive taxes in paragraphs (2) and (3)
utilized first, for all available vintages, before credits generated by
subsidiaries allocated negative taxes in paragraphs (2) and (3) are utilized.
If the vintages of credits utilized pursuant to this agreement differ from
those utilized according to the consolidated return for a subsidiary, then
the vintages of credits utilized pursuant to this agreement shall be
exchanged among the affected subsidiaries. General business credits that are
lost due to reductions, limitations and expirations imposed by the Code or
the regulations thereunder shall be allocated in an appropriate and
reasonable manner.
(5) Allocation of Special Benefits. Any special benefits, such as the
effects of Section 1341 of the Code, shall be allocated directly to the
subsidiaries giving rise to them. See Rule 45(c)(3).
(6) Allocation of a Net Operating Loss. Should the Parent Company's
affiliated group generate a net operating loss for a tax year, each company
shall first receive an allocation of consolidated federal income tax, which
may be either positive or negative, as provided in paragraph (2); provided,
however, a negative allocation of the consolidated federal income tax shall
be made only to the extent that separate taxable income reduces consolidated
federal income tax for such tax year. The current consolidated net
operating loss shall then be apportioned to each subsidiary with a taxable
loss and carried back or forward to year(s) when the consolidated net
operating loss can be utilized. The consolidated reduction in tax resulting
from the carryback or carryforward of the net operating loss shall be
apportioned to loss subsidiaries in accordance with paragraphs (2) through
(5). For purposes of the consolidated return, the utilization of net
operating losses carried back or carried over is determined on a first-in
first-out basis with all net operatingMPANY
By:
Name:
Title:
Attest:
NORTHEAST GENERATION SERVICES COMPANY
By:
Name:
Title:
Attest:
SELECT ENERGY PORTLAND PIPELINE, INC.
By:
Name:
Title:
Attest:
REEDS FERRY SUPPLY CO., INC.
By:
Name:
Title:
Attest:
HEC/TOBYHANNA ENERGY PROJECT, INC.
By:
Name:
Title:
Attest:
YANKEE ENERGY SYSTEM, INC.
By:
Name:
Title:
Attest:
YANKEE ENERGY FINANCIAL SERVICES COMPANY
By:
Name:
Title:
Attest:
NORCONN PROPERTIES, INC.
By:
Name:
Title:
Attest:
YANKEE ENERGY SERVICES COMPANY
By:
Name:
Title:
Attest:
YANKEE GAS SERVICES COMPANY
By:
Name:
Title:
Attest:
R.M. SERVICES, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON OF NEW YORK, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON SOLUTIONS, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON ENERGY, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON DEVELOPMENT, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON LEASING, INC.
By:
Name:
Title:
Attest:
CED ADA, INC.
By:
Name:
Title:
Attest:
CED MANAGEMENT COMPANY, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON ENERGY MASSACHUSETTS, INC.
By:
Name:
Title:
Attest:
CED - LAKEWOOD INC.
By:
Name:
Title:
Attest:
CED GENERATION LAKEWOOD COMPANY
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON COMMUNICATIONS, INC.
By:
Name:
Title:
Attest:
ORANGE AND ROCKLAND UTILITIES, INC.
By:
Name:
Title:
Attest:
ROCKLAND ELECTRIC COMPANY
By:
Name:
Title:
Attest:
PIKE COUNTY LIGHT & POWER COMPANY
By:
Name:
Title:
