File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO DIVERSIFICATION ACTIVITIES
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NORTHEAST UTILITIES PUBLIC SERVICE COMPANY OF
WESTERN MASSACHUSETTS ELECTRIC COMPANY NEW HAMPSHIRE
174 Brush Hill Avenue NORTH ATLANTIC ENERGY
West Springfield, MA 08109 CORPORATION
100 Elm Street
Manchester, NH 03105
NORTHEAST UTILITIES SERVICE COMPANY NORTH ATLANTIC ENERGY
THE CONNECTICUT LIGHT AND POWER COMPANY SERVICE CORPORATION
NORTHEAST NUCLEAR ENERGY COMPANY Route 1, Lafayette Road
107 Selden Street Seabrook, NH 03874
Berlin, CT 06037
(Name of company or companies filing this statement
and addresses of principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company parent of each applicant or
declarant)
Robert P. Wax, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities
P. O. Box 270
Hartford, CT 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
Jeffrey C. Miller, Esq. John T. Muro
Assistant General Counsel Vice President - Retail Marketing
Northeast Utilities Service Company Northeast Utilities Service Company
107 Selden Street 107 Selden Street
Berlin, CT 06037 Berlin, CT 06037
Item 1. Description of Proposed Transaction
1. Authorization to Engage in Diversification Activities
Northeast Utilities, a registered electric utility holding company
("NU"), Northeast Utilities Service Company ("NUSCO"), North Atlantic Energy
Corporation ("NAEC"), North Atlantic Energy Service Corporation ("NAESCO"),
Northeast Nuclear Energy Company ("NNECO") and the principal operating
utility subsidiaries of NU, The Connecticut Light and Power Company, Public
Service Company of New Hampshire, and Western Massachusetts Electric Company
(the "Operating Companies") (NU, NUSCO, NAEC, NAESCO, NNECO and the Operating
Companies are hereinafter collectively called "Applicants") hereby request
authority to engage in the following diversification activities, to the
extent the following activities are deemed jurisdictional and not regulated
by the applicable state commissions as electric utility services, either
directly or through one or more special purpose direct or indirect
subsidiaries of any Applicant or joint ventures/alliances with other
unregulated companies, for nonassociates, including customers of the
Operating Companies, and associate companies, or through investments in
existing companies engaged in these activities (collectively, "NEWCOs"):
(A) develop and commercialize electrotechnologies related to energy
conservation, storage, conditioning and conversion, energy
efficiency, heating/cooling/climate conditioning, waste treatment,
greenhouse gas reduction, safety/security systems and similar
innovations; <F1>
(B) engage in the sale, leasing or renting, installation, operation and
servicing of electric appliances, devices or systems for
residential, commercial, governmental and industrial use, to
customers of associated and nonassociated utility companies; for
example lighting systems, home security or fire alarm systems,
power quality devices, energy monitoring systems and other energy
conversion, control or storage systems; <F2>
(C) engage in the sale, leasing, installation, operation, financing and
servicing of electric utility equipment such as power generating
equipment, back-up generators, fuel cells, solar and photovoltaic
systems, energy storage systems, motors, engines, drives and
controls, windturbines, environmental equipment and other similar
equipment, including the ownership and operation of "qualifying
facilities" within the meaning of the Public Utility Regulatory
Policies Act of 1978 as amended; <F3>
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<F1> The Commission has previously authorized various investments related to
the manufacturing, development and marketing of electrotechnologies. See
e.g. Southern Co., Release No. 35-23888 (1985); Entergy Corp., Release No.
35-25718 (1992); Allegheny Power System Inc., Release No. 35-26225 (1995) and
General Public Utilities Corp., Release No. 35- 26230 (1995).
<F2> The Commission has allowed registered holding companies to engage in the
sale and marketing of appliances or other energy-utilizing devices directly
or through affiliated companies. See e.g. Engineers Public Service Co.,
Release No. 35-3796 (1942); CNG Energy Company, Release No. 35-23734 (1985);
Consolidated Natural Gas Co., Release No. 35-26234 (1995); and PSI Energy,
Inc., Release No. 35-26412 (1995).
<F3> These activities are functionally related to the Applicant's core
utility operations.
(D) engage in the production, sale, conversion, and distribution of
thermal energy products, such as process steam, heat, hot water,
chilled water, ice/"snow", air conditioning, compressed air and
similar products; alternative fuels; and renewable energy
resources; <F4>
(E) engage in the sale of services (e.g. construction, consulting,
maintenance/repair, diagnostics/preventative care,
sales/representation services, marketing/distribution services,
contract operation, facilities licensing/permitting assistance,
safety inspection) or intellectual property (e.g. software,
training, data, patents) related to technical, operational,
management, administrative, financial, marketing and/or other
expertise, developed in the course of utility operations in such
areas as power plant, transmission and distribution system
engineering, development, design and rehabilitation; construction,
maintenance, installation and operation of all types of energy and
heating, ventilating and air conditioning equipment; specification,
installation and operation of high voltage equipment; fuel
procurement, delivery, management and sale; transportation and
fleet vehicle management; environmental licensing, testing and
remediation; credit and collections management (including billing
services); personnel training and development programs and other
similar areas; <F5>
(F) own, operate, install or manage fuel procurement, transportation,
handling and storage facilities, scrubbers, and resource recovery
and waste treatment facilities; <F6>
(G) develop and commercialize technologies or processes which utilize
by-products or waste from basic utility operations as an integral
component of such technologies or processes; <F7>
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<F4> The Commission has permitted the acquisition of steam production
facilities inside an industrial site and the development of, and limited
investments in, facilities for producing or recovering alternative fuels and
energy resources. See e.g. Southern Co., Release No. 35-26185 (1994);
Southern Co., Release No. 35-26221 (1982); New England Electric System,
Release No. 35-22719 (1995) and Cinergy Corp., Release No. 35-26474 (1996).
<F5> The Commission has authorized a number of registered holding companies
to engage in the sale of various services. See e.g., Southern Co., Release
No. 35-22132 (1981); American Electric Power Co., 35-22468 (1982); Middle
South Utilities Inc., Release No. 35-22818 (1983); Cedar Coal Company,
Release No. 35-23973 (1985); Entergy Corp., Release No. 35-26322 (1995) and
Consolidated Natural Gas Co., Release No. 35-26363 (1995).
<F6> The Commission has authorized various investments related to such
activities. See e.g., Ohio Power Co., Release No. 35-19594 (1976) (rail-to-
barge coal handling facility); Middle South Utilities, Inc., Release No. 35-
18221 (1973) (bulk oil storage facilities); Jersey Central Power & Light Co.,
Release No. 35-24664 (1988) (reservoir, dam and related facilities for
storage and discharge of water); and New England Electric System, Release No.
35-26277 (1995) (installation of equipment at power stations owned by
nonaffiliates to separate unburned carbon from coal ash).
<F7> New England Electric System, Release No. 35-2627 (1995).
(H) to the extent not provided by "exempt telecommunications companies"
associated with the Applicants under the Telecommunications Act of
1996, provide telecommunications service, data acquisition/control
systems or distribution/courier services supported primarily by
facilities utilizing existing utility structures, equipment and/or
rights-of-way, or using excess capacity of systems, property or
services originally installed or used primarily for the utility's
own use; <F8>
(I) to the extent not otherwise permitted under Rule 40, lend money to,
guarantee obligations of, and arrange for financing or finance
leases for, customers or potential customers of the Applicants and
joint venture partners or allied parties of the Applicants <F9>
primarily to facilitate investments in programs and/or equipment
which will encourage utility load growth through process
improvement, increased cost-effectiveness of electric power or any
other application of electrotechnologies which provides production
efficiencies or other benefits to the customer;
(J) purchase accounts receivable of associate companies and of
nonassociate companies whose primary revenues are derived from the
sale of electricity, and of other nonassociate companies, including
utility companies, that generate receivables from large numbers of
customers, subject to the 50 percent test found in the CSW series
of orders; <F10>
(K) engage in sales/representation and marketing/distribution services
for insurance programs provided by non-associate companies related
to electrical service to customers of the Applicants, including but
not limited to utility bill payment protection in the event of
unemployment, disability or death; also (provided entirely or in
part by associate companies) service contracts for maintenance of
electrical appliances or equipment; water heater life insurance and
appliance/equipment extended service warranty agreements;
(L) engage in the development and sale of any product or service
directly related to the electric vehicle, hybrid vehicle or
transportation market, including infrastructure support, energy
storage devices and sales or maintenance of vehicles or their
motive power components. <F11>
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<F8> The Commission has previously approved activities related to
communication services. See e.g., Southern Co., Release No. 35-23440 (1984)
and Release No. 35-26211 (1994).
<F9> The Commission has approved customer and non-customer financing
programs. See e.g., Consolidated Natural Gas Co., Release No. 35-26234
(1995); and American Electric Power Company, Release No. 35-26473 (1996).
<F10> See e.g. CSW Credit, Inc., Release No. 35-24157 (1986), authorizing
financing of subsidiary to provide funds to factor accounts receivable of
nonassociate electric utility companies.
<F11> The Commission has approved activities related to the development of
electric and gas vehicles. See e.g., Consolidated Natural Gas Co., Release
No. 35-25615 (1992); Central Power and Light Co., Release No. 35-26160
(1994) and Columbia Gas System, Inc., Release No. 35-26295 (1995).
(M) engage in the brokering, marketing, generation, production,
transportation, transmission, distribution, storage and sale of
energy (including but not limited to electricity or natural or
manufactured gas) and "paper products" such as futures, hedges,
load aggregations, fuel tolling, fuel conversions and other
instruments expected to be required in a competitive energy
marketplace; and
(N) sell, rent, lease or operate for the benefit of a third party any
surplus physical asset (land, mineral rights, timber, buildings,
air rights, equipment, material) originally acquired in good faith
for the operation of the utility business, including the right to
make any improvements necessary to make such assets marketable in a
free-market environment.
The Applicants request authority to (i) engage in the above activities
("Diversification Activities"); (ii) organize NEWCOs and transfer, sell,
convey and dispose of such assets and goods, and perform construction and
services for, and among each other and each NEWCO; (iii) make investments in
NEWCOs to enable them to engage in such Diversification Activities; (iv)
allow NEWCOs to finance their Diversification Activities by issuing
securities to parties other than the Applicants; (v) allow the Applicants to
issue guarantees of such NEWCOs' securities; and (vi) allow NU to issue
guarantees of such Applicants securities.
The Applicants believe these Diversification Activities have a clear
relationship to the core business of the Applicants, and undertaking these
Diversification Activities will permit the Applicants to respond to
competition in their core business from other energy companies. They
represent opportunities for the Applicants to provide additional services and
technologies to their customers and potential customers as well as other
consumers of energy while utilizing the Applicants' expertise and technical
resources developed in the course of their energy-related businesses. As
indicated above, most of these activities have previously been authorized by
the Commission. The Applicants do not intend to limit the Diversification
Activities to their service territory.
The Commission s proposed Rule 58 (Rel. No. 35-26313) may, if adopted,
supersede and make redundant a portion of this Application. However, the
Applicants intend to pursue any additional authority needed to perform the
full range of Diversification Activities specified herein whether or not Rule
58 is adopted.
Any construction for or services or goods provided by any associate
company to any other associate companies hereunder will be at cost in
compliance with Rules 90 and 91 or, subject to approval by the state
regulatory authorities where applicable, negotiated prices limited to a range
between cost and fair market value; services or goods sold by any Applicants
or NEWCOs to nonassociate companies will be provided at market or negotiated
prices.
The Diversification Activities of the Applicants and any NEWCO will be
conducted so that the risks associated with the operations of nonassociate
companies will be borne by the Applicants' shareholders and not the Operating
Companies or their ratepayers, unless permitted under applicable law or
approved by the applicable state regulatory agency. Separate audited
accounting records will be maintained for the Diversification Activities in
respect of each nonassociate customer.
Initially, the Applicants anticipate that each NEWCO may or may not have
paid employees. In addition, personnel employed by the Applicants or other
NEWCOs may provide a wide range of services on an as-needed basis to such
NEWCO pursuant to a service agreement, substantially in the form of Exhibit
B.1 hereto ("Service Agreement"), to be entered into between such NEWCO and
the Applicant or other NEWCO. Under this Service Agreement, the NEWCO will
reimburse the Applicant or other NEWCO for the cost of services provided,
computed in compliance with Rules 90 and 91 of the Act, as well as applicable
rules and regulations. All time spent by an Applicant's employees working
for such NEWCO will be billed to and paid by such NEWCO pursuant to the
Service Agreement.
Furthermore, the Applicants have acquired and will acquire certain
properties or other resources. The Applicants will provide such property and
resources to NEWCOs at cost, determined in compliance under Rules 90 and 91
of the Act, as well as applicable rules and regulations, and in accordance
with the Service Agreement.
Each NEWCO will maintain separate financial records and detailed
supporting records, including profit/loss statements. These records will be
available to any proper federal regulatory agency or state regulatory agency
for review. The accounting staff of NUSCO, pursuant to the Service Agreement
with each NEWCO, will be responsible for record keeping and maintaining audit
procedures which are in compliance with generally accepted accounting
principles.
2. Investment in, and Financing of, Applicants and NEWCOs.
The Applicants and any NEWCOs authorized by the Commission hereunder
propose to invest an aggregate of $300 million (less than 3 percent of NU's
1995 consolidated asset value) through December 31, 2000 in Diversification
Activities through any combination of (i) issuance of the Applicants' common
stock, (ii) cash capital contributions to the Applicants and any NEWCOs by
NU, (iii) loans or advances made by NU to the Applicants or any NEWCO and
loans or advances by any Applicants (other than NU) to any NEWCO, and (iv)
direct investments via loans to or stock purchase of companies principally
engaged in these Diversification Activities. In addition, the Applicants
propose to obtain loans from banks or other lenders or issue other recourse
obligations which may or may not be guaranteed by NU. Any such borrowings by
the Applicants from third parties that are guaranteed by NU would be included
in and subject to the $300 million investment authority requested by the
Applicants. The Applicants request approval for such transactions to the
extent they are not otherwise exempted under Rules 45 and 52 or other
applicable Rules of the Commission issued under the Act.
To the extent such investments involve NU loans to the Applicants, or
Applicants loans to any NEWCO, such loans will be made from time to time
prior to December 31, 2000, with maturities no later than December 31, 2015.
Such loans will bear an interest rate not exceeding the prevailing commercial
rates appropriate for loans of similar term length and comparable risk. In
the case of loans from lenders other than NU, the loans will be made with
maturities of no later than December 31, 2018 and with a fixed interest rate
not to exceed, on the date of the loan, prevailing commercial rates
appropriate for loans of similar term length and comparable risk. Any notes
sold to a lender other than an Applicant may be guaranteed by any Applicant
as to principal, premium, if any, and interest. In connection with any such
sale, lender fees such as underwriting and commitment fees may be paid in an
amount not greater than that which is generally recognized as reasonable and
customary for similar transactions (in any event, not to exceed 3 percent).
It is further proposed that any notes issued to any Applicant hereunder may,
at the option of such Applicant, be converted to capital contributions to the
Applicant through such Applicant s forgiveness of the debt represented
thereby.
3. Reporting
The Applicants will provide, not later than 60 days after the end of
the first three calendar quarters and not later than 90 days after the end of
the fourth quarter of each year, a notification of each investment made by an
Applicant, directly or indirectly, in any other Applicant or in any NEWCO in
the previous quarter pursuant to the authority granted herein in a form that
is consistent with proposed Form U-9C-3, as set forth in the Commission's
proposed Rule 58.
4. Other Matters
Except in accordance with the Act, neither NU nor any subsidiary thereof
(a) has acquired an ownership interest in an exempt wholesale generator
("EWG") or a foreign utility company ("FUCO") as defined in Sections 32 and
33 of the Act, or (b) now is or as a consequence of the transactions proposed
herein will become a party to, or has or will as a consequence of the
transactions proposed herein have a right under, a service, sales, or
construction contract with an exempt wholesale generator or a foreign utility
company. None of the proceeds from the transactions proposed herein will be
used by the Companies to acquire any securities of, or any interest in, an
exempt wholesale generator or a foreign utility company.
The NU system is in compliance with Rule 53(a), (b), and (c), as
demonstrated by the following determinations:
(i) NU's aggregate investment in EWGs and FUCOs (i.e., amounts invested
in or committed to be invested in EWGs and FUCOs, for which there
is recourse to NU) does not exceed 50 percent of the NU system's
consolidated retained earnings as reported for the four most recent
quarterly periods on NU's Form 10-K and 10-Qs. At December 31,
1995, the ratio of such investment ($39 million) to such
consolidated retained earnings ($1.0 billion) was 4 percent.
(ii) Encoe Partners, Central Termica San Miguel de Tucuman, S.A.
("C.T.S.M.T."), Ave Fenix and Plantas Eolicas, S.A. (NU's only EWGs
or FUCOs at this time) (collectively, "EWGs/FUCOs") maintain books
and records, and prepares financial statements in accordance with
Rule 53(a)(2). Furthermore, NU has undertaken to provide the
Commission access to such books and records and financial
statements, as it may request.
(iii) No employees of the NU system's public utility companies have
rendered services to the EWGs/FUCOs.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24
certificates that have been filed with the Commission under Rule 53
and (b) a copy of Item 9 of Form U5S and Exhibits G and H thereof
to each state regulator having jurisdiction over the retail rates
of the NU system public utility companies.
(v) Neither NU nor any NU subsidiary has been subject of a bankruptcy
or similar proceeding unless a plan of reorganization has been
confirmed in such proceeding. In addition, NU's average
consolidated retained earnings for the four most recent quarterly
periods has not decreased by 10 percent or more from the average
for the previous four quarterly periods.
(vi) In the previous fiscal year, NU's operating losses attributable to
its investment in the EWGs/FUCOs did not exceed 5 percent of NU's
consolidated retained earnings.
Item 2. Fees, Commissions and Expenses
No fees, commissions or expenses have been paid or will be paid or
incurred in connection with the proposed transactions, other than (i) the
Commission's $2,000 filing fee; (ii) expenses for legal, financial and other
services billed to the Applicants at reasonable cost by NUSCO not exceeding
$5,000, and (iii) such other expenses to be included in the Applicants'
quarterly report, which expenses cannot be estimated at this time.
Item 3. Applicable Statutory Provisions
Sections 6(a), 7, 9(a), 10, 11(b), 12 and 13(b) of the Public Utility
Holding Company Act of 1935 and Rules 23, 40, 45, 52, 53, 81, 87(b)(1), 90
and 91 thereunder are or may be applicable to the proposed transactions. To
the extent any other sections of the Act may be applicable to the proposed
transaction, the Applicants request appropriate orders thereunder.
Item 4. Regulatory Approval
Various state commissions may have jurisdiction over the licensing,
pricing and costs associated with the Diversification Activities. Such
approvals will be applied for and obtained by the Applicants as necessary.
Item 5. Procedure
It is respectfully requested that the Commission enter not later than
June 1, 1996 an appropriate order granting and permitting this
Application/Declaration to become effective.
No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The
Office of Public Utility Regulation within the Division of Investment
Management of the Commission may assist in the preparation of the
Commission's decision in this matter. There should be no 30 day waiting
period between the issuance and the effective date of any order issued by the
Commission in this matter, and it is requested that any such order be made
effective immediately upon the entry thereof.
Item 6. Exhibits and Financial Statements
(a) Exhibits
B.1 Form of Service Agreement
F.1. Opinion of Counsel (To be filed by amendment.)
G.1. Proposed Form of Notice under the Act.
(b) Financial Statements. Financial statements have not been included
because this transaction is not expected to have any material pro
forma effects on the financial statements of the Applicants.
Item 7. Information as to Environmental Effects
The issuance of an order with respect to this Application/Declaration
will not constitute a major federal action significantly affecting the
quality of the human environment. No other federal agency has prepared or is
preparing an environmental impact statement with respect to the proposed
transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this statement to be
signed on their behalf by the undersigned thereunto duly authorized.
NORTHEAST UTILITIES
NORTHEAST UTILITIES SERVICE COMPANY
NORTHEAST NUCLEAR ENERGY COMPANY
NORTH ATLANTIC ENERGY SERVICE CORPORATION
NORTH ATLANTIC ENERGY CORPORATION
THE CONNECTICUT LIGHT AND POWER COMPANY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By: /s/Jeffrey C. Miller
Their Attorney
Dated: March 27, 1996
Exhibit B.1
Draft - 3/27/96
FORM OF
MUTUAL SERVICE AGREEMENT BETWEEN
[INSERT NAME OF APPLICANT] and
[INSERT NAME OF NEW CORPORATION]
dated ______________, 19__
THIS AGREEMENT, made and entered into as of ____________, 199__ by and
between [INSERT NAME OF APPLICANT], a corporation organized under the laws of
the State of ________ (hereinafter sometimes referred to as "Existing
Company") and [INSERT NAME OF NEW CORPORATION], a corporation organized under
the laws of the State of _________ (hereinafter sometimes referred to as
"NEWCO").
W I T N E S S E T H:
WHEREAS, Existing Company and NEWCO are both subsidiaries of Northeast
Utilities ("NU"), a Massachusetts business trust, and, together with NU's
other direct and indirect subsidiaries form the NU System; and
WHEREAS, Existing Company is organized, staffed and equipped to render
to NEWCO services as herein provided; and
WHEREAS, in the course of its operations, Existing Company has acquired
and will acquire certain properties and other resources; and
WHEREAS subject to the provisions set forth herein, NEWCO is authorized
by order of the Commission dated ________, 199__, as it may be amended, or
applicable rule of the Securities and Exchange Commission (collectively, the
"Authorization") to utilize those services, properties and resources of
Existing Company to engage in certain Diversification Activities as
authorized in the Order; and
WHEREAS, economies and increased efficiencies benefiting the NU System
will result from the performance by Existing Company of services for NEWCO
and the provision of certain property and resources to NEWCO as herein
provided; and
WHEREAS, subject to the terms and conditions herein described Existing
Company is willing, upon request by NEWCO, to render such services and
provide such property and resources to NEWCO at cost, determined in
accordance with applicable rules, regulations and orders of the Commission,
taking into consideration the fulfillment of Existing Company's utility
responsibilities; and
WHEREAS, during the course of developing the Diversification Activities,
NEWCO may acquire new expertise or other properties and resources, which will
benefit the Existing Company; and
WHEREAS subject to the provisions set forth herein, the Existing Company
is authorized by the Authorization to utilize services, properties and
resources developed by NEWCO in the course of its Diversification Activities;
and
WHEREAS, NEWCO is willing, upon request by the Existing Company, to
render such services and provide such property and resources to Existing
Company at cost, determined in accordance with applicable rules, regulations
and orders of the Commission; and
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 those services described in Articles 3,
4 and 5 hereof.
B. "Non-Affiliate" means any corporation, company, agency,
government, business, entity or person other than NU, a direct
or indirect subsidiary of NU, or a person employed by NU or
any of such subsidiaries.
C. "Intellectual Property" means any process, program or
technique which is protected by the copyright, patent or
trademark laws, or by virtue of being a trade secret, and
which has been specifically and knowingly incorporated into,
exhibited in, or reduced to a tangible writing, drawing,
manual, computer program, product or similar manifestation or
thing.
2. Agreement to Furnish Services
A. Upon its receipt of a request therefor, either party will, if
it has or can have available the personnel and resources
needed to fill the request, furnish to the other party upon
the terms and conditions hereinafter set forth such of the
Services, at such times, for such periods and in such manner
as the other party may from time to time request; provided,
however, that the determination of whether a party has the
available personnel and resources to perform in accordance
with the request will be entirely within the discretion of
such party, and a party may at its option elect not to perform
any requested Service, except that, once having agreed to
perform pursuant to a request, a party cannot withdraw or
depart from such performance without the consent of the other
party. In making its determination as to the availability of
personnel and resources, a party may consider whether the use
thereof by the other party will interfere with its own use of
such personnel and resources.
B. The provision of Services by either party 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 either
party or such provision of Services.
3. Description of Services
The Services which may be provided hereunder are described as
follows:
A. Development of New Diversification Activities. Advise and
assist in the investigation of new energy-related activities,
the development of such new energy-related activities and the
provision of facilities all as approved by the Commission in
the Authorization.
B. Engineering. Perform general engineering work, including
system production and transmission studies and detailed design
work; 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. Sales and Marketing. Provide general sales, marketing and
promotional work and services.
D. Accounting, Statistical and Legal. Provide accounting,
statistical and legal services, including, but not limited to
advice and assistance in connection with the installation of
accounting systems and similar problems, requirements of
regulatory bodies with respect to accounting, studies of
accounting procedures and practices to improve efficiency,
book entries resulting from unusual financial transactions,
internal audits, employment of independent auditors,
preparation and analysis of financial and operating reports
and other statistical matters relating to customers,
preparation of reports to regulatory commissions, insurance
companies and others, standardization of accounting and
statistical forms in the interest of economy, and other
accounting, legal and statistical matters.
E. Budgeting. Advise and assist in matters involving the
preparation and development of capital and operating budgets,
cash and cost forecasts, and budgetary controls.
F. Business Promotion and Public Relations. Advise and assist 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.
G. Systems and Procedures. Advise and assist in the formation of
good 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.
H. Training. Assist in providing training to personnel of the
other party or of Non-Affiliates; develop and make available
training procedures, materials and facilities, and provide
instructors.
I. 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.
J. Other Services. Render advice and assistance in connection
with such other matters as either party may request and may be
able to perform with respect to the other party's business and
operations.
4. Provision of Personnel
Where specifically requested by either party, a party may loan its
employees to the other party. In that event, such loaned employees will be
under the sole supervision and control of the other party for such period or
periods of time as are necessary to complete the work to be performed by such
employees. Such employees may be withdrawn by either party from tasks
assigned by the other party only with the consent of such other party. Each
party will be responsible for the actions and activities of such employees
while engaged in the performance of the work for the other party to the same
degree as though such persons were employees of such other party. However,
as part of the Services, during periods when such employees are loaned to
another party, the employer party will continue to provide to, and with
respect to such employees those same payroll, pension, savings, tax
withholding, Social Security, unemployment, bookkeeping and other personnel
support services then being utilized by the employer company in connection
with compensating and benefiting such employees.
5. Exchange of Property and Resources
As part of the Services, each party will make available to the
other party its property, including Intellectual Property, and resources
heretofore or hereafter developed or obtained by such party in the course of
its operations at cost, (except as otherwise provided in Article 8 below),
provided, however, that such availability shall be dependent upon and subject
to any contractual commitments of either party to Non-Affiliates, applicable
laws and regulations, and the legal rights and entitlements of others.
6. Compensation
A. As compensation for Services actually requested by NEWCO and
rendered to it by Existing Company, NEWCO hereby agrees to
reimburse Existing Company for all costs properly chargeable
or allocable thereto, as controlled through a cost allocation
procedure. Such costs and the allocation thereof shall be
determined as outlined on Appendix A attached hereto and
incorporated herein by reference.
B. As compensation for Services actually requested by Existing
Company and rendered to it by NEWCO, Existing Company hereby
agrees to reimburse NEWCO for all costs properly chargeable or
allocable thereto, as controlled through a cost allocation
procedure. Such costs shall be determined as outlined on
Appendix A attached hereto and incorporated herein by
reference.
7. Requests for Services
The Services will be performed in accordance with requests issued
or made by or on behalf of either party, and all Services will be tracked to
enable specific work to be properly allocated by project or other appropriate
basis. Requests shall be as specific as practicable in defining the Services
requested to be performed and will set forth the scope and duration of the
Services to be performed and the specific employees to be loaned to the other
party pursuant to the requests. A party shall have the right from time to
time to amend, alter or rescind any request for services, 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
the other party; (ii) the costs for the Services covered by the request will
include any expense incurred as a direct result of such amendment,
alteration or rescission of the request, and (iii) no amendment, alteration
or rescission of a request will release a party from liability for all such
costs already incurred or contracted for to the request, regardless of
whether the work associated with such costs is discontinued by such
amendment, alteration or rescission.
8. Disposition of Intellectual Property
In the event either party ("Transferring Party") with the express
written consent of the other party ("Owner Party") sells or licenses to or
otherwise makes available for utilization by Non-Affiliates Intellectual
Property heretofore or hereafter developed or otherwise acquired by Owner
Party for its own use and as a result of such sale or license such
Intellectual Property is no longer available for use by Owner Party,
Transferring Party shall receive, as and when received from such Non-
Affiliates, a commission [to be negotiated] of all net profits (after
deducting marketing and any other applicable expenses incurred by
Transferring Party) earned from such sale or licensing, and Owner Party shall
receive a percentage of such net profits to be negotiated.
9. Limitation of Liability and Indemnification
In performing the Services hereunder (except to the extent such
Services are being performed by employees loaned to and under the supervision
of the other party), each party will exercise due care to assure that the
Services are performed in a workmanlike manner, meet the standards and
specifications set forth in the applicable request for such Services, and
comply with applicable standards of law and regulation. However, failure to
meet these obligations shall in no event subject either party to any claims
or liabilities other than to reperform the work and be reimbursed at cost for
such reperformance such that it fully complies with the request or standard,
as the case may be. Each party makes no other warranty with respect to its
performance of the Services, and the other party agrees to accept such
Services without further warranty of any nature. Each party shall and does
hereby indemnify and agree to save harmless and defend the other party from
liabilities, taxes, losses, obligations, claims, damages, penalties, causes
of action, suits, costs and expenses or judgments of any nature on account of
or resulting from: (i) injuries to or the death of any person; (ii) damage to
or loss of any property: (iii) any alleged or actual violation of law, court
order, or governmental agency rule or regulation committed by or existing
with respect to the party providing the Services or its employees, agents or
subcontractors; (iv) any alleged or actual breaches of contract by such
party; (v) any claims by or on account of any employee, agent or
subcontractor of such party; (vi) services or labor performed, labor force,
materials, provisions or supplies furnished or allegedly contracted for by or
on behalf of such party, its employees, agents or subcontractors; and/or
(vii) other damages; which in all cases, are attributable to or arise out of
the performance and prosecution of any project or work performed by or on
behalf of the other party, whether or not the same results or allegedly
results from the claimed or actual negligence or breach of warranty of, or
breach of contract or willful conduct by, the other party or of its
employees, agents or contractors or its or their subcontractors or any
combination thereof.
10. Miscellaneous
This Agreement shall be binding upon the successors and assigns of
the parties hereto, provided that neither party shall be entitled to assign
or subcontract out any of its obligations under this Agreement or under any
purchase order or work order issued hereunder without the prior written
approval of the other party. This Agreement may not be modified or amended
in any respect except in writing executed by the parties hereto. This
Agreement shall be construed and enforced under and in accordance with the
laws of the State of . This Agreement may be executed in
counterparts, each one of which when fully executed shall be deemed to have
the same 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 corporate names by their respective Presidents
or one of their respective Vice Presidents and their respective seals to be
hereunto affixed and attested by their respective Secretaries or one of their
respective Assistant Secretaries as of the day and year first above written.
[INSERT NAME OF EXISTING COMPANY]
(Existing Company)
ATTEST:
---------------- By: --------------------
Secretary President
[INSERT NAME OF NEW CORPORATION]
(NEWCO)
ATTEST:
---------------- By: --------------------
Secretary President
Exhibit G.1
Form of Proposed Notice
Northeast Utilities ("NU"), 174 Brush Hill Avenue, West Springfield,
Massachusetts 01090-0010, a registered electric utility holding company and
its subsidiaries Northeast Utilities Service Company, North Atlantic Energy
Corporation, North Atlantic Energy Service Corporation, Northeast Nuclear
Energy Company, The Connecticut Light and Power Company, Public Service
Company of New Hampshire, and Western Massachusetts Electric Company
(collectively, "Applicants") have filed an application/declaration under
Sections 6(a), 7, 9(a), 10, 11(b), 12 and 13(b) of the Public Utility Holding
Company Act of 1935 and Rules 23, 40, 45, 52, 53, 81, 87(b)(1), 90 and 91
thereunder for authority to engage in certain diversification activities,
both inside or outside of the service territories of NU s operating utility
subsidiaries, either directly or through investment in existing or future
subsidiary companies or joint ventures/alliances with other companies
(collectively, "NEWCOs").
Diversification activities proposed in the application/declaration
include research, development, commercialization, financing, marketing, sale,
leasing, licensing, operation, and maintenance, as appropriate, of various
products including electrotechnologies, electric utility or
telecommunications equipment, "qualifying facilities" within the meaning of
the Public Utility Regulatory Policies Act of 1978 as amended, electric
appliances and lighting systems, electric vehicles, thermal energy products,
alternative fuels, renewable energy resources, financial products and
intellectual property; sale or lease to, or operation for the benefit of,
third parties of surplus physical assets; and performance of engineering,
construction, fuel storage, telecommunications, procurement, transportation,
environmental, financial, management and personnel development and training,
and similar, services.
The Applicants seek authority through December 31, 2000 to form NEWCOs
and to invest up to $300 million in diversification activities, through a
combination of equity, debt, and guarantee obligations. Any loans from NU to
the Applicants or NEWCOs will mature no later than 2015 and will bear an
interest rate not exceeding the prevailing rates for loans of similar term
and risk. Any resources, services or goods provided by an Applicant or NEWCO
to an associate company in connection with diversification activities will be
provided pursuant to a written service agreement at cost or, subject to
approval by state regulatory authorities where applicable, negotiated prices
limited to a range between cost and fair market value, in compliance with
Rules 90 and 91 under the Act. Each NEWCO will maintain separate financial
records and detailed supporting records, including profit/loss statements.
NUSCO, pursuant to its service agreement with each NEWCO, will provide
recordkeeping, accounting and audit services in compliance with generally
accepted accounting principles.The Applicants will report to the Commission
quarterly concerning each investment made with respect to diversification
activities in the previous quarter.
