Exhibit M-2
NEW CONSOLIDATED EDISON SERVICE COMPANY
POLICIES AND PROCEDURES
New CEI anticipates that services provided by the New CEI Service
Company and the Non Utility Service Co. will be documented through Service
Level Agreements (SLA's). The SLA's will document the types of services
being provided, the performance measures applicable to such services, and the
estimated cost and allocation method for the services. The SLA's will be
signed by the service provider and a representative of each subsidiary that
will receive the services.
Charges will be accumulated and billed to each New CEI subsidiary
company at the end of each month through the Accounting system. A time
keeping system is expected to be implemented which will allow for each
employee in the Service company to complete time records which will be
approved by work group supervisors. The New CEI subsidiary companies will
have the ability to review the charges on a monthly basis compared to the SLA
estimates. Meetings will be held quarterly, as needed, between service
providers and the subsidiary representatives to review performance against
the SLA's.
Management plans to develop strategic performance measures for New CEI
and its subsidiary companies as a business enterprise. These measures are
expected to include financial, operational and employee goals. Management
will develop targets against which to measure the performance of New CEI and
its subsidiaries on a consolidated basis. In addition, based upon these
strategic performance measures and targets, management will develop
performance measures and targets for each subsidiary. The financial targets
of the subsidiaries will encompass the SLA costs as well. In addition, the
Service Company functions will have cost and quality performance measures and
targets.
Service Level Agreements will be developed as part of the annual
planning and budgeting process. The cost estimates and allocations will be
reviewed by the subsidiary companies and meetings will be held to discuss the
level of services and cost of services proposed to be provided by the Service
Company functions. The New CEI subsidiaries will then include the SLA costs
in their business plans and these costs will become part of the financial
targets that are developed as part of the planning and budgeting process.
New CEI's Auditing Department will continuously conduct audits of the
functions of New CEI and its subsidiaries, including those of the Service
Companies, to ensure that proper internal controls exist and to determine if
they are functioning as intended and are efficient and effective. As a part
of the audit plan, the Internal Audit Department will perform audits of the
accounting system and related billings to New CEI subsidiary companies. The
purpose of the audits will be to render an opinion on the internal controls
over the allocation and billing process and compliance with Commission-
approved cost allocation billing methodologies. The Auditing Department will
perform its audit of the cost allocations and related billings every three
years.
The [Vice President and General Auditor of Internal Audits ] (the "Vice
President") will report to the Chairman of the Audit Committee of the Board
of Directors of New CEI (the "Audit Committee"). Administratively, the Vice
President will report to the President of the respective service company.
The Vice President will attend each meeting of the Audit Committee. In
accordance with New York Stock Exchange listing requirements, the Audit
Committee will be comprised solely of outside directors.
In November or December of each year, the results of the year's audit
activities will be reviewed with the Audit Committee and the following year's
audit plan will be reviewed and approved by the Audit Committee. The Audit
Committee will annually review its Charter to ensure that it will
sufficiently allow the Vice President to carry out his duties. The Vice
President will meet privately with the Audit Committee several times during
the year and will have the addresses and telephone numbers of the Audit
Committee members and will be free to contact them at any time. The Vice
President will be reminded in these private meeting sessions that he has such
freedom.
