UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM U-9C-3
QUARTERLY REPORT PURSUANT TO RULE 58
For the quarterly period ended March 31, 1999
Northeast Utilities
------------------------------------
(Name of registered holding company)
Selden Street, Berlin, CT. 06037
----------------------------------------
(Address of principal executive offices)
Name and telephone number of officer to whom inquiries
concerning this report should be directed:
John J. Roman, Vice President and Controller
Telephone number: 860-665-5000
GENERAL INSTRUCTIONS
A. Use of Form
1. A reporting company, as defined herein, shall file a report on this
form within 60 days after the end of each of the first three quarters,
and within 90 days after the end of the fourth quarter, of the fiscal
year of the registered holding company. The period beginning on the
date of effectiveness of rule 58 and ending at the end of the quarter
following the quarter in which the rule becomes effective shall
constitute the initial period for which any report shall be filed,
if applicable.
2. The requirement to provide specific information by means of this form
supersedes any requirement by order of the Commission to provide
identical information by means of periodic certificates under rule
24; but does not so supersede and replace any requirement by order to
provide information by means of an annual report on Form U-13-60.
3. Information with respect to reporting companies that is required by
Form U-13-60 shall be provided exclusively on that form.
4. Notwithstanding the specific requirements of this form, this Commission
may informally request such further information as, in its opinion,
may be necessary or appropriate.
B. Statements of Monetary Amounts and Deficits
1. Amounts included in this form and in related financial statements may be
expressed in whole dollars, thousands of dollars or hundred thousands of
dollars.
2. Deficits and other similar entries shall be indicated by either brackets
or parentheses. An explanation should be provided by footnote.
C. Formal Requirements
This form, including exhibits, shall be filed with Commission
electronically pursuant to Regulation S-T(17 CFR 232.10 et seq.).
A conformed copy of each such report shall be filed with each state
commission having jurisdiction over the retail rates of a public utility
company that is an associate company of a reporting company. Each report
shall provide the name and telephone number of the person to whom
inquiries concerning the report should be directed.
D. Definitions
As used in this form, the word "reporting company" means an energy-related
company or gas-related company, as defined in rule 58(b). All other words
and terms have the same meaning as in the Public Utility Holding Company
Act of 1935, as amended, and the rules and regulations thereunder.
ITEM 1 - ORGANIZATION CHART
- ---------------------------
Instructions
- ------------
1. Complete Item 1 only for the first three calendar quarters of the fiscal
year of the registered holding company.
2. Under the caption "Name of Reporting Company," list each energy-related
and gas-related company and each system company that directly or indirectly
holds securities thereof. Add the designation "(new)" for each reporting
company of which securities were acquired during the period, and the
designation"(*)" for each inactive company.
3. Under the caption "Percentage of Voting Securities Held," state the
aggregate percentage of the outstanding voting securities of the reporting
company held directly or indirectly by the registered holding company at
the end of the quarter.
4. Provide a narrative description of each reporting company's activities
during the reporting period.
- ----------------------------------------------------
<TABLE>
<CAPTION> Percentage Activities
Energy of Voting reported
Name of or Gas Date of State of Securities Nature of during the
Reporting Co. Related Organization Organization Held Business period
- ----------------- ------- ------------ ------------ ----------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
NU Holding 1/4/99 Connecticut 100% by Unregulated (A)
Enterprises, Inc. Northeast businesses
(New) Utilities holding
company
Select Energy 9/26/96 Connecticut 100% by Invest in (B)
Energy, Inc. NU energy-related
Enterprises, Inc. activities
Select Gas 3/17/99 Connecticut 100% by Invest in None
Energy NU gas-related
Portland Enterprises, Inc. activities
Pipeline, Inc.
(New)
Northeast Energy 1/4/99 Connecticut 100% by Invest in (C)
Generation NU energy-related
Services Enterprises, Inc. activities
Company
(New)
</TABLE>
(A) NU Enterprises, Inc. is not the "reporting company" but is included in
this Item 1 because it holds, directly or indirectly, voting securities
issued by reporting companies as indicated above.
(B) Select Energy, Inc. is a retail energy services and power marketing
company. Select Energy received approval from the Federal Energy
Regulatory Commission to become a competitive wholesale power marketer
effective December 1, 1998. As a result, Select Energy provides both
wholesale and retail energy, and energy services.
Select Energy participates in retail pilot programs and open-access
retail electricity markets in the Northeast. Select markets natural gas
as well as energy-related products and services in order to enhance its
core electricity service and customer relationships. These services
include energy services, productivity, business and financial, and
residential services. Select Energy is a registered electricity supplier
in the states of Rhode Island, Massachusetts, New Hampshire, New York and
Pennsylvania. Select Energy is a registered gas marketer in the state of
Connecticut and also with certain local distribution companies in
Massachusetts and Rhode Island.
(C) Effective January 4, 1999, Northeast Generation Services Company (NGS)
was established to provide a full range of energy-related operation and
maintenance services for large industrial, institutional and power
generation customers throughout the 11-state Northeast area. NGS'
current business segments focus on providing turnkey manage and operate
services (MOS) and also a full range of Industrial Services (IS) and
Consulting Services (CS).
MOS is a service that is designed for generation asset owners. NGS has
the ability to offer station management and operation services with a
focus on optimizing the value of that specific asset with the owner.
Within the IS platform, its offerings include mechanical and electrical
construction and maintenance services, as well as environmental
maintenance/compliance services. Within the CS platform, the product and
service offerings include engineering and environmental consulting
services, with an emphasis on power plant system design.
ITEM 2 - ISSUANCES AND RENEWALS OF SECURITIES AND CAPITAL CONTRIBUTIONS
- -------------------------------------------
Instruction
- -----------
With respect to a transaction with an associate company, report
only the type and principal amount of securities involved.
- -------------------------------------------
<TABLE>
<CAPTION>
Person
Company Type of Principal to Whom Collateral Consideration Company Amount of
Issuing Security Amount of Issue or Cost of Security Given With Received for Contributing Capital
Security Issued Security Renewal Capital Was Issued Security Each Security Capital Contribution
- ------------- -------- --------- -------- ------- ---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select
Energy, Inc. No transactions this quarter
Select
Energy NU
Portland Common Enterprises,
Pipeline, Inc. Stock $100 Issue N/A Inc. N/A $10,000 N/A N/A
Northeast
Generation NU
Services Common Enterprises,
Company Stock $100 Issue N/A Inc. N/A $10,000 N/A N/A
</TABLE>
ITEM 3 - ASSOCIATE TRANSACTIONS
- ------------------------------------------------------------------------------
Instructions
- ------------
1. This item is used to report the performance during the quarter of contracts
among reporting companies and their associate companies, including other
reporting companies, for service, sales and construction. A copy of any
such contract not filed previously should be provided as an exhibit
pursuant to Item 6.B.
2. Parts I and II concern transactions performed by reporting companies on
behalf of associate companies, and transactions performed by associate
companies on behalf of reporting companies, respectively.
- ------------------------------------------------------------------------------
Part I - Transactions performed by reporting companies on behalf
of associate companies.
Total Amount
Billed*
Reporting Associate
Company Company Types of Three Months
Rendering Receiving Services Ended
Services Services Rendered March 31, 1999
- ----------------------- ------------ -------------- --------------
(Thousands
of Dollars)
Select Energy, Inc. Northeast Gas Services $8
Utilities =============
Service
Company
Part II - Transactions performed by associate companies on behalf of
reporting companies.
Total Amount
Billed*
Associate Reporting
Company Company Types of Three months
Rendering Receiving Services ended
Services Services Rendered March 31, 1999
- ----------------------- ------------ -------------- --------------
(Thousands
of Dollars)
Northeast Utilities Select Supplies centralized
Service Company Energy, Inc. accounting,
administrative, data
processing, engineering,
financial, legal,
operational, planning,
purchasing and other
services 6,154
Purchased power 79,428
Special deposits 644
Miscellaneous 636
-------------
Total $86,862
=============
Public Service Company Select Marketing services 14
of New Hampshire Energy, Inc. Power sales agreement 937
-------------
Total $951
=============
HEC INC. Select Consulting and
Energy, Inc. Engineering services $86
=============
Northeast Utilities Northeast Supplies centralized
Service Company Generation accounting,
Services administrative, data
Company processing, engineering,
financial, legal,
operational, planning,
purchasing and other
services 954
Miscellaneous 13
-------------
Total $967
=============
* 'Total Amount Billed' is direct costs only.
ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT
Investments in energy-related companies:
- ---------------------------------------
(Thousand of Dollars)
Total consolidated capitalization as of 3/31/99 $5,589,068 line 1
Total capitalization multiplied by 15%
(line 1 multiplied by .15) 838,360 line 2
Greater of $50 million or line 2 838,360 line 3
Total current aggregate investment:
(categorized by major line of
energy-related business):
Select Energy, Inc. 547
Northeast Generation Services Company (580)
----------- line 4
Total current aggregate investment (33)
---------
Difference between the greater of $50 million or 15% of
capitalization and the total aggregate investment of the line 5
registered holding company system $838,393
=========
Investments in gas-related companies:
- ------------------------------------
Total current aggregate investment:
(categorized by major line of
gas-related business):
Select Energy Portland Pipeline, Inc. $10
-----------
Total current aggregate investment $10
=========
ITEM 5 - OTHER INVESTMENTS
- ------------------------------------------------------------------
Instruction
- -----------
This item concerns investments in energy-related and gas-related
companies that are excluded from the calculation of aggregate
investment under rule 58.
- ------------------------------------------------------------------
Major Line Other Other
of Energy- Investment Investment
Related in Last in This Reason for Difference
Business U-9C-3 Report U-9C-3 Report in Other Investment
- ------------- ------------- ------------- ------------------------
NONE
ITEM 6 - FINANCIAL STATEMENTS AND EXHIBITS
- -----------------------------------------------------------------------------
Instructions
- ------------
A. Financial Statements
1. Financial statements are required for reporting companies in which the
registered holding company system has at least 50% equity or other
ownership interest. For all other rule 58 companies, the registered
holding company shall make available to the Commission such financial
statements as are available to it.
2. For each reporting company, provide a balance sheet as of the end of the
quarter and income statements for the three-month and year-to-date periods
ending as of the end of the quarter, together with any notes thereto.
Financial statements shall be for the first three quarters of the fiscal
year of the registered holding company.
3. If a reporting company and each of its subsidiaries engage exclusively in
a single category of energy-related or gas-related activity, consolidated
financial statements may be filed.
4. Separate financial statements need not be filed for inactive companies or
for companies engaged solely in the ownership of interests in energy-
related or gas-related companies.
B. Exhibits
1. Copies of contracts required to be provided by Item 3 shall be filed as
exhibits.
2. A certificate stating that a copy of the report for the previous quarter
has been filed with interested state commissions shall be filed as an
exhibit. The certificate shall provide the names and addresses of the
state commissions.
- -----------------------------------------------------------------------------
A. Financial Statements
Select Energy, Inc.:
Balance Sheet - As of March 31, 1999
Income Statement-Three months ended March 31, 1999
Select Energy Portland Pipeline, Inc.:
Balance Sheet - As of March 31, 1999
Income Statement-No activity as of March 31, 1999
Northeast Generation Services Company:
Balance Sheet - As of March 31, 1999
Income Statement-Three months ended March 31, 1999
Northeast Utilities (PARENT):
Balance Sheet - As of March 31, 1999
Income Statement-Three months ended March 31, 1999
B. Exhibits
Exhibit No. Description
- ----------- -----------
6.B.1.1 * Northeast Utilities Service Company (NUSCO) Service Contract
dated as of October 7, 1996 between NUSCO and NUSCO Energy
Partners, Inc. (Filed quarter ended June 30, 1997)
6.B.1.2 ** Bulk Power Supply Service Agreement dated as of May 27, 1996,
between Public Service Company of New Hampshire (PSNH) and
PSNH Energy. (Filed quarter ended June 30, 1997)
6.B.1.3 *** Retail Competition Pilot Program Service Agreement dated as
of June 12, 1996 between PSNH and PSNH Energy. (Filed quarter
ended June 30, 1997)
6.B.1.4 Amendment to Bulk Power Supply Service Agreement dated as
of May 29, 1998 between Public Service Company of New
Hampshire and Select Energy, Inc. (Filed quarter ended
June 30, 1998)
6.B.1.5 Northeast Utilities Service Company, acting as agent for the
Connecticut Light and Power Company, Western Massachusetts
Electric Company, Holyoke Water Power Company, Holyoke Power
and Electric Company and Public Service Company of New
Hampshire, and Select Energy, service under Tariff No. 6,
effective June 1, 1998. (Filed quarter ended June 30, 1998)
6.B.1.6 Northeast Utilities Service Company, acting as agent for the
Connecticut Light and Power Company, Western Massachusetts
Electric Company, Holyoke Water Power Company, Holyoke Power
and Electric Company and Public Service Company of New
Hampshire, and Select Energy, service under Tariff No. 7,
effective June 1, 1998. (Filed quarter ended June 30, 1998)
6.B.1.7 Copy of contract required by Item 3-filed under confidential
treatment pursuant to Rule 104(b). (Filed quarter ended
September 30, 1998)
6.B.1.8 Copy of contract required by Item 3-filed under confidential
treatment pursuant to Rule 104(b). (Filed quarter ended
September 30, 1998)
6.B.1.9 Northeast Utilities Service Company (NUSCO) Service Contract
dated as of March 17, 1999 between NUSCO and Select Energy
Portland Pipeline, Inc.
6.B.1.10 Northeast Utilities Service Company (NUSCO) Service Contract
dated as of January 4, 1999 between NUSCO and Northeast
Generation Services Company.
6.B.1.11 Copy of contract required by Item 3-filed under confidential
treatment pursuant to Rule 104(b).
6.B.1.12 Copy of contract required by Item 3-filed under confidential
treatment pursuant to Rule 104(b).
- -------------------
* NUSCO Energy Partners, Inc. changed its name to Select Energy, Inc.
** Select Energy, Inc. subsequently acquired PSNH Energy's interest in
these contracts.
*** PSNH Energy was a trade name of NUSCO Energy Partners, Inc. and
is a trade name of Select Energy, Inc.
6.B.2.1 The company certifies that a conformed copy of Form U-9C-3
for the previous quarter was filed with the following state
commissions:
Mr. Robert J. Murphy
Executive Secretary
Department of Public Utility Control
10 Franklin Square
New Britain, CT 06051
Ms. Mary L. Cottrell, Secretary
Massachusetts Department of Telecommunications and Energy
100 Cambridge Street
Boston, MA 02202
Mr. Thomas B. Getz
Executive Director and Secretary
State of New Hampshire
Public Utilities Commission
8 Old Suncook Road, Building One
Concord, NH 03301-7319
SELECT ENERGY, INC.
BALANCE SHEET
(Unaudited)
March 31,
1999
--------------
(Thousands
of Dollars)
ASSETS
- ------
Fixed Assets:
Work in progress $ 2,011
--------------
Other Investments:
Special Deposits $ 3,146
--------------
Current Assets:
Cash $ 783
Accounts receivable 24,505
Taxes receivable 11,839
Accrued Utility Revenue 7,848
Prepayments and other 785
--------------
45,760
--------------
Deferred Charges:
Accumulated deferred income taxes 69
Unamortized debt expense 591
--------------
660
--------------
Total Assets $ 51,577
==============
Note: In the opinion of the Company, all adjustments necessary
for a fair presentation of financial position for the
periods shown have been made.
See accompanying notes to financial statements.
SELECT ENERGY, INC.
BALANCE SHEET
(Unaudited)
March 31,
1999
--------------
(Thousands
of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shares, $1 par value. Authorized
and outstanding 100 shares $ -
Capital surplus, paid in 21,051
Retained earnings (20,504)
--------------
Total capitalization 547
--------------
Current Liabilities:
Accounts payable 26,065
Accounts payable to associated companies 24,709
Accrued taxes 20
Accrued interest 31
Other 151
--------------
50,976
--------------
Deferred Credits:
Other 54
--------------
54
--------------
Total Capitalization and Liabilities $ 51,577
==============
Note: In the opinion of the Company, all adjustments necessary
for a fair presentation of financial position for the
periods shown have been made.
See accompanying notes to financial statements.
SELECT ENERGY, INC.
INCOME STATEMENT
(Unaudited)
Three Months
Ended
March 31,
1999
--------------
(Thousands
of Dollars)
Operating Revenues $ 86,430
--------------
Operating Expenses:
Operation
Purchased power - energy 66,211
Other 26,100
Maintenance 17
Federal and state income taxes (2,480)
Taxes other than income taxes 489
--------------
Total operating expenses 90,337
--------------
Operating Loss (3,907)
--------------
Other Income:
Other, net 106
--------------
Other income, net 106
--------------
Loss before interest charges (3,801)
--------------
Interest Charges:
Interest on long-term debt 66
Other interest 383
--------------
Interest charges 449
--------------
Net Loss $ (4,250)
==============
Note: In the opinion of the Company, all adjustments necessary
for a fair presentation of financial position for the
periods shown have been made.
See accompanying notes to financial statements.
SELECT ENERGY PORTLAND PIPELINE, INC.
BALANCE SHEET
(Unaudited)
March 31,
1999
--------------
(Thousands
of Dollars)
ASSETS
- ------
Current Assets:
Cash $ 10
--------------
10
--------------
Total Assets $ 10
==============
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shares, $1 par value. Authorized
and outstanding 100 shares $ -
Capital surplus, paid in 10
--------------
Total capitalization 10
--------------
Total Capitalization and Liabilities $ 10
==============
Note: In the opinion of the Company, all adjustments necessary
for a fair presentation of financial position for the
periods shown have been made.
See accompanying notes to financial statements.
NORTHEAST GENERATION SERVICES COMPANY
BALANCE SHEET
(Unaudited)
March 31,
1999
--------------
(Thousands
of Dollars)
ASSETS
- ------
Current Assets:
Taxes receivable 402
--------------
402
--------------
Total Assets $ 402
==============
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shares, $1 par value. Authorized
and outstanding 100 shares $ -
Capital surplus, paid in 10
Retained earnings (590)
--------------
Total capitalization (580)
--------------
Current Liabilities:
Accounts payable 531
Accounts payable to associated companies 451
--------------
982
--------------
Total Capitalization and Liabilities $ 402
==============
Note: In the opinion of the Company, all adjustments necessary
for a fair presentation of financial position for the
periods shown have been made.
See accompanying notes to financial statements.
NORTHEAST GENERATION SERVICES COMPANY
INCOME STATEMENT
(Unaudited)
Three Months
Ended
March 31,
1999
--------------
(Thousands
of Dollars)
Operating Revenues $ -
--------------
Operating Expenses:
Operation and maintenance 896
Federal and state income taxes (400)
Taxes other than income taxes 101
--------------
Total operating expenses 597
--------------
Operating Loss (597)
Other, net 7
--------------
Net Loss $ (590)
==============
Note: In the opinion of the Company, all adjustments necessary
for a fair presentation of financial position for the
periods shown have been made.
See accompanying notes to financial statements.
NORTHEAST UTILITIES (PARENT)
BALANCE SHEET
(Unaudited)
March 31,
1999
--------------
(Thousands
of Dollars)
ASSETS
- ------
Other Property and Investments:
Investments in subsidiary companies, at equity........ $ 2,148,430
Investments in transmission companies, at equity...... 17,931
Other, at cost........................................ 59
--------------
2,166,420
--------------
Current Assets:
Notes receivable from affiliated companies............ 63,100
Notes and accounts receivables........................ 495
Accounts receivable from affiliated companies......... 577
Taxes receivable...................................... 9,672
Prepayments........................................... 24
--------------
73,868
--------------
Deferred Charges:
Accumulated deferred income taxes..................... 5,096
Unamortized debt expense.............................. 73
Other................................................. 533
--------------
5,702
--------------
Total Assets...................................... $ 2,245,990
==============
Note: In the opinion of the Company, all adjustments necessary for a
fair presentation of financial position for the period shown
have been made.
See accompanying notes to financial statements.
NORTHEAST UTILITIES (PARENT)
BALANCE SHEET
(Unaudited)
March 31,
1999
--------------
(Thousands
of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shares, $5.00 par value--Authorized
225,000,000 shares; 137,120,608 shares issued and
131,187,105 shares outstanding...................... $ 685,603
Capital surplus, paid in............................. 939,674
Deferred benefit plan--employee stock
ownership plan...................................... (137,334)
Retained earnings.................................... 579,213
Accumulated other comprehensive income............... 1,524
--------------
Total common shareholders' equity.................. 2,068,680
Long-term debt....................................... 152,000
--------------
Total capitalization.......................... 2,220,680
--------------
Current Liabilities:
Accounts payable..................................... 773
Accounts payable to affiliated companies............. 941
Long term debt--current portion...................... 19,000
Accrued interest..................................... 4,195
--------------
24,909
--------------
Other Deferred Credits................................. 401
--------------
Total Capitalization and Liabilities............. $ 2,245,990
==============
Note: In the opinion of the Company, all adjustments necessary for a
fair presentation of financial position for the period shown
have been made.
See accompanying notes to financial statements.
NORTHEAST UTILITIES (PARENT)
STATEMENT OF INCOME
(Unaudited)
Three Months
Ended
March 31,
1999
--------------
(Thousands
of Dollars)
Operating Revenues.................................. $ -
--------------
Operating Expenses:
Operation expense................................. 1,553
Federal and state income taxes.................... (1,562)
Taxes other than income taxes..................... 1
--------------
Total operating expenses..................... (8)
--------------
Operating Income.................................... 8
--------------
Other Income:
Equity in earnings of subsidiaries................ 20,947
Equity in earnings of transmission companies...... 735
Other, net........................................ 615
--------------
Other income, net............................ 22,297
--------------
Income before interest charges............... 22,305
--------------
Interest Charges:
Interest on long-term debt........................ 3,762
Other interest.................................... 99
--------------
Interest charges............................ 3,861
--------------
Net Income for Common Shares........................ $ 18,444
==============
Earnings per Common Shares.......................... $ 0.14
==============
Common Shares Outstanding (average) 131,110,491
==============
Note: In the opinion of the Company, all adjustments necessary for a
fair presentation of the results of operations for the period
shown have been made.
See accompanying notes to financial statements.
Northeast Utilities
Select Energy, Inc.
Select Energy Portland Pipeline, Inc.
Northeast Generation Services Company
Notes to Financial Statements
1. About Northeast Utilities
Northeast Utilities (NU) is the parent company of the Northeast Utilities
system (the NU system). The NU system furnishes franchised retail electric
service in Connecticut, New Hampshire and western Massachusetts through three
wholly owned subsidiaries: The Connecticut Light and Power Company (CL&P),
Public Service Company of New Hampshire (PSNH) and Western Massachusetts
Electric Company (WMECO). Another wholly owned subsidiary, North Atlantic
Energy Corporation (NAEC), sells all of its entitlement to the capacity and
output of the Seabrook nuclear power plant to PSNH under two life-of-unit,
full cost recovery contracts. A fifth wholly owned subsidiary, Holyoke Water
Power Company (HWP), is also engaged in the production and distribution of
electric power. The NU system also furnishes firm and other wholesale
electric services to various municipalities and other utilities, and
participates in limited retail access programs, providing off-system retail
electric service. The NU system serves in excess of 30 percent of New
England's electric needs and is one of the 24 largest electric utility
systems in the country as measured by revenues.
Several wholly owned subsidiaries of NU provide support services for the
NU system companies and, in some cases, for other New England utilities.
Northeast Utilities Service Company provides centralized accounting,
administrative, information resources, engineering, financial, legal,
operational, planning, purchasing and other services to the NU system
companies. Northeast Nuclear Energy Company acts as agent for the NU
system companies and other New England utilities in operating the Millstone
nuclear generating facilities. North Atlantic Energy Service Corporation has
operational responsibility for the Seabrook nuclear generating facility.
Three other subsidiaries construct, acquire or lease some of the property
and facilities used by the NU system companies. In addition, CL&P and WMECO
each have established a special purpose subsidiary whose business consists
of the purchase and resale of receivables.
Charter Oak Energy, Inc. (COE), HEC Inc. (HEC), Mode 1 Communications, Inc,
(Mode 1), Select Energy, Inc. (Select Energy), Select Energy Portland
Pipeline, Inc. (SEPPI), NU Enterprises, Inc. (NUEI), Northeast Generation
Company (NG) and Northeast Generation Services Company (NGS) are other NU
system companies which engage in a variety of activities.
Directly and through subsidiaries, COE has an investment in a foreign utility
company as permitted under the Energy Policy Act of 1992. This investment is
accounted for on an equity basis based upon COE's level of participation.
NU has put COE up for sale.
HEC provides energy management services for the NU system's and other
utilities' commercial, industrial and institutional electric customers.
Mode 1 and Select Energy develop and invest in telecommunications and in
energy-related activities, respectively.
During the first quarter of 1999, NU established three new subsidiaries:
NUEI, NG and NGS. Directly or through multiple subsidiaries, these
entities will engage in a variety of energy-related activities, including the
acquisition and management of non-nuclear generating plants. NUEI, a direct
subsidiary of the NU system, acts as the holding company for the system's
unregulated businesses. Also, as of January 4, 1999, NU transferred three
subsidiaries, Select Energy, HEC and Mode 1 to NUEI.
During March 1999, NU also formed SEPPI, a single-purpose subsidiary of NUEI,
for the purpose of acquiring a 5 percent partnership interest in the Portland
Natural Gas Transmission System Partnership (PNGTS).
2. About Select Energy, Inc.
NU organized NUSCO Energy Partners, Inc. (NEP), in 1996. NEP acquired PSNH's
interest in the New Hampshire retail electric competition pilot program in
late 1996. During 1997, NEP changed its name to Select Energy, Inc. Select
Energy received approval from the Federal Energy Regulatory Commission to
become a competitive wholesale power marketer effective December 1, 1998.
Select Energy is a subsidiary of NUEI.
Select Energy serves as a vehicle for participation in retail pilot
competition programs and open-access retail and wholesale electric
markets in the Northeast and other areas of the country as appropriate.
In addition, Select Energy markets natural gas and develops and markets
energy-related products and services in order to enhance its core
electric service and customer relationships. Select Energy has taken
steps to establish strategic alliances with other companies in various
energy-related fields including fuel supply and management, power
quality, energy efficiency and load management services.
3. About Northeast Generation Services, Inc.
NGS, another subsidiary of the NUEI, was formed on January 4, 1999. NGS
provides management, operations, and maintenance services to the electric
generation market and industrial and large commercial customers in the
11-state region. NGS also provides consulting services which includes
engineering, construction management, permitting and compliance management.
4. Public Utility Regulation
NU is registered with the Securities and Exchange Commission (SEC) as a
holding company under the Public Utility Holding Company Act of 1935 (1935
Act). NU and its subsidiaries are subject to the provisions of the 1935 Act.
Arrangements among the NU system companies, outside agencies and other
utilities covering interconnections, interchange of electric power and sales
of utility property are subject to regulation by the Federal Energy Regulatory
Commission (FERC) and/or the SEC. The NU system operating subsidiaries are
subject to further regulation for rates, accounting and other matters by the
FERC and/or applicable state regulatory commissions.
5. Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
6. Special Deposits
Special deposits include amounts representing collateral posted by the company
should Select Energy become delinquent in payments under its various power
purchase and sales agreements. The balance of special deposits on Select's
balance sheets at March 31, 1999 was approximately $3.1 million.
QUARTERLY REPORT OF SELECT ENERGY, INC.
SIGNATURE CLAUSE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935 and the rules and regulations of the Securities and
Exchange Commission issued thereunder, the undersigned company has
duly caused this report to be signed on its behalf by the undersigned
officer thereunto duly authorized.
NORTHEAST UTILITIES
-----------------------------
(Registered Holding Company)
By: /s/ John J. Roman
-----------------------------
(Signature of Signing Officer)
John J. Roman
-----------------------------
Vice President and Controller
-----------------------------
Date: May 28, 1999
-----------------------------
NORTHEAST UTILITIES SERVICE COMPANY
SERVICE CONTRACT
AGREEMENT made and entered into as of the 17th day of March, 1999, by and
between NORTHEAST UTILITIES SERVICE COMPANY (hereinafter referred to as
Service Company) and SELECT ENERGY PORTLAND PIPELINE, INC. (hereinafter
referred to as Associate Company).
WHEREAS, by order in File No. 37-65, the Securities and Exchange Commission
(hereinafter referred to as SEC) approved and authorized, under the Public
Utility Holding Company Act of 1935 (hereinafter referred to as the Act),
the organization and conduct of business of Service Company in accordance
herewith, as a wholly owned subsidiary service company of Northeast Utilities
(hereinafter referred to as Northeast); and
WHEREAS, Service Company is willing to render services as provided herein to
Northeast and its associated subsidiaries (hereinafter collectively referred
to as the System) at cost, determined in accordance with applicable rules and
regulations under the Act; and
WHEREAS, economies, increased efficiencies and other benefits will result to
the System from the performance by Service Company of services as herein
provided:
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
herein, it is agreed as follows:
Section 1. Agreement to Furnish Services.
Service Company agrees to furnish to Associate Company and other System
companies, upon the terms and conditions herein provided, the services
hereinafter referred to in Section 2 hereof at such times and for such periods
as may be required, and Service Company will, as and to the extent required
to provide such services to the System, keep itself and its personnel
available and competent to render such services to the System so long as it
is authorized so to do by federal and state regulatory agencies having
jurisdiction.
For the purpose of providing services as herein provided, Service Company
proposes to establish various departments, one or more of which will
participate in providing particular services hereinafter described. Service
Company reserves to itself the privilege, without amendment hereof or express
prior agreement by Associate Company or other System companies, from time to
time to establish new departments, to subdivide or otherwise reorganize any
of the departments established by it, and to reallocate services among various
departments.
Service Company will provide for Associate Company and other System companies
as required such other services not referred to in Section 2 hereof as Service
Company may conclude it may furnish with economies and increased efficiencies
to the System or such other services as Associate Company or other System
companies may require and Service Company is competent to perform.
Services will also be furnished to other System companies under agreements
similar in all respects hereto and may also be furnished, in Service Company's
discretion, to others, provided that by so doing the cost of services to
Associate Company or other System companies will not be increased.
In supplying services hereunder, Service Company may arrange for services of
such executives, financial advisers, accountants, attorneys, technical
advisers, engineers and other persons as are required for or pertinent to the
rendition of such services.
Section 2. Services to be Performed.
Subject to the provisions of Section 1 hereof, Service Company will provide
to Associate Company and other System companies the following services:
(A) General System Management: Executive, administrative, managerial,
coordinating and advisory services, particularly with respect to the
formulation and effectuation of policies and programs affecting or
relating to the System as a whole, including financial, accounting,
and economic policies and programs, power supply, public and employee
relations, regulation, contractual arrangements, administrative and other
proceedings, industry-wide activities and like matters.
(B) Other Functions and Activities: Studying, planning, advise, assistance,
guidance, supervision, direction, administration, maintenance, handling,
performance and operation, as may be required, in connection with the
following functions and activities:
(i) Corporate and Secretarial: Policies and practices relating to the
performance of corporate secretarial functions and activities,
including the preparation and maintenance of official corporate
records, reports, minutes and correspondence in accordance with
assigned responsibilities and duties.
(ii) Financial Planning: Financial structures; financial programs to
raise funds required or to effect savings through refinancing;
relations with commercial banks and negotiation of short-term
borrowings; relationships with investment bankers, analysts, analyst
societies, securities holders, stock holders, stock exchanges and
indenture trustees, transfer agents and registrars; general
treasury, banking and financial matters.
(iii) Accounting: General accounting, customer accounting and related
records; depreciation, accounting procedures and practices to improve
efficiency; internal auditing, relations with independent auditors
and appearances before and requirements of regulatory bodies with
respect to accounting matters; and financial and operating reports
and other statistical matters and analyses thereof.
(iv) Taxes: Consolidated and other income tax returns and other federal,
state and municipal tax returns, and all matters related thereto,
including relations with the Internal Revenue Service and other
taxing authorities, the examination and processing of tax returns,
assessments and claims, and developments in federal, state and
municipal taxes.
(v) Insurance: Insurance programs and matters, including pension and
other employee benefit plans and programs; and relations with
insurance brokers and agents.
(vi) Budgets: Operating, construction and cash budgets, and similar
studies or documents, including estimates and other information
required therefor or related thereto.
(vii) Data Processing: Computer and other data processing activities.
(viii) Bulk Power Supply: The bulk power supply system from sources of
supply through to bulk substations, to achieve reliable service at
minimum cost, including forecasts of electric loads; power supply
arrangements among System companies; power supply relations with
other utilities; forecasts of gas requirements and the procurement
of gas supplies; design, engineering and scheduling of electric and
gas production and transmission facilities; the design, engineering
and scheduling of major and unusual distribution facilities; and
System electric load dispatching operations and related matters.
(ix) Engineering Research and Standardization: Engineering activities in
the fields of research, design, construction and standardization;
technical specifications and standard designs for and procedures and
methods of utilizing materials, equipment and associated services;
technical support and engineering as required in all areas of the
System's operations.
(x) System Operations: Electric and gas operations, including
production, transmission and distribution of electricity and gas;
the construction, operation and maintenance of electric and gas
facilities; and in general all electric and gas construction,
maintenance and operating activities.
(xi) Other Administrative Services: Management-union and all other
employee relation activities, including the definition of major
organizational responsibilities and the translation of those
responsibilities into effective organization structures; employee
welfare and other programs and problems; business methods and
procedures; and transportation activities and matters.
(xii) Purchasing and Stores: The purchasing and handling of materials
and supplies, fuel and equipment, including such activities as
buying, traffic, expediting and stock control, and scrap and salvage
sales; major and long-term purchase contracts pertaining to the
foregoing; and contacts with market conditions and principal
suppliers.
(xiii) Commercial Activities: Electric, gas and other sales; customer
service facilities; rate matters and rate structures; and area
development plans and activities.
(xiv) Marketing and Sales Activities: Marketing, sales and pricing
strategies and plans; market research and support activities;
technical services; new business and product development; trade
ally and strategic alliance services; and marketing and sales
training and support.
(C) Officers and other employees of Service Company will, on request of
Associate Company, serve, without charge other than as herein provided,
as officers or representatives of such Company.
Section 3. Agreement to Take and Pay for Services
Associate Company agrees to take from Service Company such of the services to
be performed by Service Company as may be required and to pay to Service
Company the cost of such services determined as herein provided. It is the
intent of this Agreement that the payment for services rendered by the Service
Company to the System shall cover all the costs of its doing business (less
credits for services to others and any other miscellaneous income items),
including reasonable compensation for necessary capital as permitted by
Rule 91 of the SEC under the Act. The methods and procedure for determining
the cost of services performed for Associate Company are set forth in
Appendix A hereto.
Bills will be rendered for each calendar month on or before the twentieth day
of the succeeding month and will be payable on presentation and not later
than the last day of that month. Monthly charges may be made in whole or
in part for particular expenses on an estimated basis, subject to adjustment,
so that all charges for services during a calendar year will be made on an
actual basis.
Section 4. Effective Date; Term; and Cancellation.
This Agreement shall become and be effective as of the date hereof and it
shall continue in effect, unless sooner terminated as herein provided,
for a period of one year. It may be renewed from time to time for similar
one-year periods by mutual agreement. This Agreement shall also be subject
to termination and shall terminate, without any action by either of the
parties, to the extent and from the time that performance may conflict
with the Act or with any rule, regulation or order of the SEC adopted
before or after the making hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, by their respective officers thereunto duly authorized,
all as of the day and year first above written.
NORTHEAST UTILITIES SERVICE COMPANY
By: _______________________________
Michael G. Morris
Chairman, President and
and Executive Officer
Attest:
____________________________
Assistant Secretary
SELECT ENERGY PORTLAND PIPELINE, INC.
By: ____________________________
David R. McHale
Vice President and Treasurer
Attest:
____________________________
Assistant Secretary
APPENDIX A
DESCRIPTION OF METHODS AND PROCEDURE
FOR ALLOCATING COST OF SERVICES
JOB OR WORK ORDERS FOR SERVICE
There shall be job or work orders covering services to be performed for
Associate Company or other System companies. These orders may be either
general or specific. Services of a continuing nature, such as accounting,
financial planning and dispatching, will be covered by general job or work
orders; specific job or work orders will cover such things as issues of
securities, special studies or construction projects. General orders, as
well as specific orders, will specify the nature of the services to be
performed thereunder in sufficient detail that charges therefor may be
determined as herein provided and properly accounted for by the Associate
Company under its prescribed Uniform System of Accounts.
CHARGES FOR SERVICES
General
Charges for services rendered to Associate Company and other System companies
will be made on the bases of benefits conferred and of actual cost (including
reasonable compensation for necessary capital as permitted by Rule 91 of the
SEC under the Act), fairly and equitably allocated.
Specific Services
Charges for specific services performed will be made to the appropriate
specific job or work order number assigned to accumulate the charges
applicable to the particular activity. These charges will include both direct
and indirect costs involved in providing the specific services.
General Services
Charges for general services performed will be made to the appropriate general
job or work order number assigned to accumulate the charges applicable to the
particular activity. These charges will include both direct and indirect
costs involved in providing the general services.
NATURE OF CHARGES AND METHOD OF ALLOCATION
Direct Charges
Direct charges consist of those costs which can practicably be recorded
separately and identified not only by job or work order number and department
but also as to source, such as time reports for each employee, vehicle
reports, invoices and other source documents. Time reports will be maintained
for each employee, including officers, in such detail as may be appropriate
for such employee and the nature of the services performed. Employees (other
than stenographic, secretarial, clerical, and other workers engaged in
rendering support services) will record on their time reports hours chargeable
to the appropriate job or work order numbers and the nature of the work
performed.
Northeast will be charged with 25% of the costs chargeable to job or work
orders for general services not of an operating or functional nature
related primarily to the System subsidiary companies but primarily of benefit
to and performed for Northeast and the System as a whole. The balance of the
charges to such job or work orders will be allocated to among System
subsidiary companies as provided hereafter under "Charges to System Companies
- - General Services."
Indirect Charges or Overhead Expenses
Indirect charges or overhead expenses consist of all costs of the Service
Company, other than direct charges described above. These charges may be
classified into the following two general categories:
1. General Service Company Overheads - These charges include costs which
cannot be identified as applicable to either a particular job or work
order number or department and which must be allocated to the various
Service Company departments on a fair and equitable basis. The following
items are illustrative, and not all-inclusive, of the types of costs which
may be so-allocated to the extent above provided: rents; office supplies
and expenses; depreciation; building operation and maintenance; insurance;
reasonable compensation for necessary capital; general services, such as
stenographic, files, mail, etc., including salaries, employee benefits,
and expenses of related employees; and other general overheads.
These overhead costs will be allocated to each department on the basis of
functional relationship, such as number of personnel, space occupied,
use, etc.
2. Department Overheads - These charges include costs which can be identified
as applicable to a particular department but which cannot be directly
associated with a particular job or work order number. These costs will
consist of the following:
(a) Wages and salaries of stenographic, secretarial, clerical and other
workers in the department engaged in rendering support services.
(b) Lost or nonproductive time for vacations, personal time off, sickness,
holidays, etc., of all employees in department.
(c) Payroll-related Federal and State taxes and group benefit plans for
pension, life insurance, hospitalization and medical, etc., of all
employees in department.
(d) Miscellaneous supplies and expense.
(e) General Service Company overheads allocated to the particular
department as set forth in item 1 above.
The indirect charges of a particular department, as outlined in this
item 2, will be distributed to the active specific or general job or work
orders for which work is being performed by that department on the same
proportionate basis as the actual direct payroll charges of that
department.
CHARGES TO OTHER THAN SYSTEM COMPANIES
Services performed for other than System companies will be billed and paid
for by them on an appropriate basis. All amounts so billed will be credited
to the appropriate job or work orders before any charges are made therefrom
to System companies.
CHARGES TO SYSTEM COMPANIES
Specific Services
Charges for specific services recorded in the appropriate job or work order
numbers including overhead items, will be billed to the company or companies
for whom the services are performed.
General Services
Charges for general services recorded in the appropriate job or work order
numbers, including overhead items, will be allocated among System subsidiary
companies on one of the following bases determined on the basis of functional
relationship to be the most fair and equitable:
1. Revenues - The relation of each company's gross operating revenues
(electric, gas or total, as may be appropriate) to the sum of the operating
revenues of all System companies (electric, gas or total, as may be
appropriate) for the preceding calendar year.
2. Electric Peak Load - The relation of each company's annual electric peak
load to the combined electric peak load of all System companies for the
preceding calendar year.
3. Peak Day Sendout - The relation of each company's gas peak day sendout to
the combined gas peak day sendout of all System companies for the preceding
calendar year.
4. Customers Billed - The relation of each company's total customers billed
to the combined total customers billed of all System companies for the
preceding calendar year.
5. Other - Such other basis or bases as experience may show will provide, on
a functional relationship, a more fair and equitable allocation of
particular charges than any of the foregoing.
DEPARTMENT COST CONTROLS
Annual operating budgets, on a departmental basis, will be used and costs
will be controlled independently for each department so as to maintain a
periodic check on the balances, if any, over or underbilled to insure that
services rendered are being billed at cost. Each department will be charged
with all of its expenses, including overhead items allocated to it, and will
be credited with amounts billed from the department for services rendered.
The accounts of each department will be maintained so as to be substantially
in balance at all times. Accordingly, semiannual reviews will be made of
balances to determine to what extent the billings should be adjusted to
reflect actual cost.
BILLING
Bills will be provided Associate Company in sufficient detail so as to
identify the services rendered and permit proper accounting distribution
of the charges under the Associate Company's prescribed Uniform System of
Accounts. Detail on the bill will include: (1) Department; (2) Function
or type of service; (3) Nature of charges, whether direct or indirect
(overhead); and (4) Source of charges, if direct.
NORTHEAST UTILITIES SERVICE COMPANY
SERVICE CONTRACT
AGREEMENT made and entered into as of the 4th day of January, 1999, by and
between NORTHEAST UTILITIES SERVICE COMPANY (hereinafter referred to as
Service Company) and NORTHEAST GENERATION SERVICES COMPANY (hereinafter
referred to as Associate Company).
WHEREAS, by order in File No. 37-65, the Securities and Exchange Commission
(hereinafter referred to as SEC) approved and authorized, under the Public
Utility Holding Company Act of 1935 (hereinafter referred to as the Act),
the organization and conduct of business of Service Company in accordance
herewith, as a wholly owned subsidiary service company of Northeast Utilities
(hereinafter referred to as Northeast); and
WHEREAS, Service Company is willing to render services as provided herein to
Northeast and its associated subsidiaries (hereinafter collectively referred
to as the System) at cost, determined in accordance with applicable rules and
regulations under the Act; and
WHEREAS, economies, increased efficiencies and other benefits will result to
the System from the performance by Service Company of services as herein
provided:
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
herein, it is agreed as follows:
Section 1. Agreement to Furnish Services.
Service Company agrees to furnish to Associate Company and other System
companies, upon the terms and conditions herein provided, the services
hereinafter referred to in Section 2 hereof at such times and for such periods
as may be required, and Service Company will, as and to the extent required to
provide such services to the System, keep itself and its personnel available
and competent to render such services to the System so long as it is
authorized so to do by federal and state regulatory agencies having
jurisdiction.
For the purpose of providing services as herein provided, Service Company
proposes to establish various departments, one or more of which will
participate in providing particular services hereinafter described. Service
Company reserves to itself the privilege, without amendment hereof or express
prior agreement by Associate Company or other System companies, from time to
time to establish new departments, to subdivide or otherwise reorganize any
of the departments established by it, and to reallocate services among various
departments.
Service Company will provide for Associate Company and other System companies
as required such other services not referred to in Section 2 hereof as Service
Company may conclude it may furnish with economies and increased efficiencies
to the System or such other services as Associate Company or other System
companies may require and Service Company is competent to perform.
Services will also be furnished to other System companies under agreements
similar in all respects hereto and may also be furnished, in Service Company's
discretion, to others, provided that by so doing the cost of services to
Associate Company or other System companies will not be increased.
In supplying services hereunder, Service Company may arrange for services of
such executives, financial advisers, accountants, attorneys, technical
advisers, engineers and other persons as are required for or pertinent to
the rendition of such services.
Section 2. Services to be Performed.
Subject to the provisions of Section 1 hereof, Service Company will provide
to Associate Company and other System companies the following services:
(A) General System Management: Executive, administrative, managerial,
coordinating and advisory services, particularly with respect to the
formulation and effectuation of policies and programs affecting or
relating to the System as a whole, including financial, accounting,
and economic policies and programs, power supply, public and employee
relations, regulation, contractual arrangements, administrative and
other proceedings, industry-wide activities and like matters.
(B) Other Functions and Activities: Studying, planning, advise, assistance,
guidance, supervision, direction, administration, maintenance, handling,
performance and operation, as may be required, in connection with the
following functions and activities:
(i) Corporate and Secretarial: Policies and practices relating to the
performance of corporate secretarial functions and activities,
including the preparation and maintenance of official corporate
records, reports, minutes and correspondence in accordance with
assigned responsibilities and duties.
(ii) Financial Planning: Financial structures; financial programs to
raise funds required or to effect savings through refinancing;
relations with commercial banks and negotiation of short-term
borrowings; relationships with investment bankers, analysts,
analyst societies, securities holders, stock holders, stock exchanges
and indenture trustees, transfer agents and registrars; general
treasury, banking and financial matters.
(iii) Accounting: General accounting, customer accounting and related
records; depreciation, accounting procedures and practices to improve
efficiency; internal auditing, relations with independent auditors
and appearances before and requirements of regulatory bodies with
respect to accounting matters; and financial and operating reports
and other statistical matters and analyses thereof.
(iv) Taxes: Consolidated and other income tax returns and other federal,
state and municipal tax returns, and all matters related thereto,
including relations with the Internal Revenue Service and other
taxing authorities, the examination and processing of tax returns,
assessments and claims, and developments in federal, state and
municipal taxes.
(v) Insurance: Insurance programs and matters, including pension and
other employee benefit plans and programs; and relations with
insurance brokers and agents.
(vi) Budgets: Operating, construction and cash budgets, and similar
studies or documents, including estimates and other information
required therefor or related thereto.
(vii) Data Processing: Computer and other data processing activities.
(viii) Bulk Power Supply: The bulk power supply system from sources of
supply through to bulk substations, to achieve reliable service at
minimum cost, including forecasts of electric loads; power supply
arrangements among System companies; power supply relations with
other utilities; forecasts of gas requirements and the procurement
of gas supplies; design, engineering and scheduling of electric and
gas production and transmission facilities; the design, engineering
and scheduling of major and unusual distribution facilities; and
System electric load dispatching operations and related matters.
(ix) Engineering Research and Standardization: Engineering activities
in the fields of research, design, construction and standardization;
technical specifications and standard designs for and procedures and
methods of utilizing materials, equipment and associated services;
technical support and engineering as required in all areas of
the System's operations.
(x) System Operations: Electric and gas operations, including
production, transmission and distribution of electricity and gas;
the construction, operation and maintenance of electric and gas
facilities; and in general all electric and gas construction,
maintenance and operating activities.
(xi) Other Administrative Services: Management-union and all other
employee relation activities, including the definition of major
organizational responsibilities and the translation of those
responsibilities into effective organization structures; employee
welfare and other programs and problems; business methods and
procedures; and transportation activities and matters.
(xii) Purchasing and Stores: The purchasing and handling of materials
and supplies, fuel and equipment, including such activities as
buying, traffic, expediting and stock control, and scrap and salvage
sales; major and long-term purchase contracts pertaining to the
foregoing; and contacts with market conditions and principal
suppliers.
(xiii) Commercial Activities: Electric, gas and other sales; customer
service facilities; rate matters and rate structures; and area
development plans and activities.
(xiv) Marketing and Sales Activities: Marketing, sales and pricing
strategies and plans; market research and support activities;
technical services; new business and product development; trade
ally and strategic alliance services; and marketing and sales
training and support.
(C) Officers and other employees of Service Company will, on request of
Associate Company, serve, without charge other than as herein provided,
as officers or representatives of such Company.
Section 3. Agreement to Take and Pay for Services
Associate Company agrees to take from Service Company such of the services
to be performed by Service Company as may be required and to pay to Service
Company the cost of such services determined as herein provided. It is the
intent of this Agreement that the payment for services rendered by the
Service Company to the System shall cover all the costs of its doing business
(less credits for services to others and any other miscellaneous income
items), including reasonable compensation for necessary capital as permitted
by Rule 91 of the SEC under the Act. The methods and procedure for
determining the cost of services performed for Associate Company are set
forth in Appendix A hereto.
Bills will be rendered for each calendar month on or before the twentieth
day of the succeeding month and will be payable on presentation and not later
than the last day of that month. Monthly charges may be made in whole or in
part for particular expenses on an estimated basis, subject to adjustment,
so that all charges for services during a calendar year will be made on an
actual basis.
Section 4. Effective Date; Term; and Cancellation.
This Agreement shall become and be effective as of the date hereof and it
shall continue in effect, unless sooner terminated as herein provided, for a
period of one year. It may be renewed from time to time for similar one-year
periods by mutual agreement. This Agreement shall also be subject to
termination and shall terminate, without any action by either of the parties,
to the extent and from the time that performance may conflict with the Act
or with any rule, regulation or order of the SEC adopted before or after the
making hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, by their respective officers thereunto duly authorized, all as of
the day and year first above written.
NORTHEAST UTILITIES SERVICE COMPANY
By: _______________________________
Michael G. Morris
Chairman, President
and Chief Executive Officer
Attest:
____________________________
Assistant Secretary
NORTHEAST GENERATION SERVICES COMPANY
BY: ____________________________
Bruce D. Kenyon
President and Chief Executive Officer
Attest:
____________________________
Assistant Secretary
APPENDIX A
DESCRIPTION OF METHODS AND PROCEDURE
FOR ALLOCATING COST OF SERVICES
JOB OR WORK ORDERS FOR SERVICE
There shall be job or work orders covering services to be performed for
Associate Company or other System companies. These orders may be either
general or specific. Services of a continuing nature, such as accounting,
financial planning and dispatching, will be covered by general job or work
orders; specific job or work orders will cover such things as issues of
securities, special studies or construction projects. General orders,
as well as specific orders, will specify the nature of the services to be
performed thereunder in sufficient detail that charges therefor may be
determined as herein provided and properly accounted for by the Associate
Company under its prescribed Uniform System of Accounts.
CHARGES FOR SERVICES
General
Charges for services rendered to Associate Company and other System
companies will be made on the bases of benefits conferred and of actual
cost (including reasonable compensation for necessary capital as permitted
by Rule 91 of the SEC under the Act), fairly and equitably allocated.
Specific Services
Charges for specific services performed will be made to the appropriate
specific job or work order number assigned to accumulate the charges
applicable to the particular activity. These charges will include both
direct and indirect costs involved in providing the specific services.
General Services
Charges for general services performed will be made to the appropriate
general job or work order number assigned to accumulate the charges
applicable to the particular activity. These charges will include both
direct and indirect costs involved in providing the general services.
NATURE OF CHARGES AND METHOD OF ALLOCATION
Direct Charges
Direct charges consist of those costs which can practicably be recorded
separately and identified not only by job or work order number and department
but also as to source, such as time reports for each employee, vehicle
reports, invoices and other source documents. Time reports will be maintained
for each employee, including officers, in such detail as may be appropriate for
such employee and the nature of the services performed. Employees (other than
stenographic, secretarial, clerical, and other workers engaged in rendering
support services) will record on their time reports hours chargeable to the
appropriate job or work order numbers and the nature of the work performed.
Northeast will be charged with 25% of the costs chargeable to job or work
orders for general services not of an operating or functional nature related
primarily to the System subsidiary companies but primarily of benefit to and
performed for Northeast and the System as a whole. The balance of the charges
to such job or work orders will be allocated to among System subsidiary
companies as provided hereafter under "Charges to System Companies - General
Services."
Indirect Charges or Overhead Expenses
Indirect charges or overhead expenses consist of all costs of the Service
Company, other than direct charges described above. These charges may be
classified into the following two general categories:
1. General Service Company Overheads - These charges include costs which
cannot be identified as applicable to either a particular job or work
order number or department and which must be allocated to the various
Service Company departments on a fair and equitable basis. The following
items are illustrative, and not all-inclusive, of the types of costs which
may be so-allocated to the extent above provided: rents; office supplies
and expenses; depreciation; building operation and maintenance; insurance;
reasonable compensation for necessary capital; general services, such as
stenographic, files, mail, etc., including salaries, employee benefits,
and expenses of related employees; and other general overheads.
These overhead costs will be allocated to each department on the basis
of functional relationship, such as number of personnel, space occupied,
use, etc.
2. Department Overheads - These charges include costs which can be identified
has applicable to a particular department but which cannot be directly
associated with a particular job or work order number. These costs will
consist of the following:
(a) Wages and salaries of stenographic, secretarial, clerical and other
workers in the department engaged in rendering support services.
(b) Lost or nonproductive time for vacations, personal time off,
sickness, holidays, etc., of all employees in department.
(c) Payroll-related Federal and State taxes and group benefit plans for
pension, life insurance, hospitalization and medical, etc., of all
employees in department.
(d) Miscellaneous supplies and expense.
(e) General Service Company overheads allocated to the particular
department as set forth in item 1 above.
The indirect charges of a particular department, as outlined in this
item 2, will be distributed to the active specific or general job or
work orders for which work is being performed by that department on
the same proportionate basis as the actual direct payroll charges of
that department.
CHARGES TO OTHER THAN SYSTEM COMPANIES
Services performed for other than System companies will be billed and paid
for by them on an appropriate basis. All amounts so billed will be credited
to the appropriate job or work orders before any charges are made therefrom
to System companies.
CHARGES TO SYSTEM COMPANIES
Specific Services
Charges for specific services recorded in the appropriate job or work order
numbers including overhead items, will be billed to the company or companies
for whom the services are performed.
General Services
Charges for general services recorded in the appropriate job or work order
numbers, including overhead items, will be allocated among System subsidiary
companies on one of the following bases determined on the basis of functional
relationship to be the most fair and equitable:
1. Revenues - The relation of each company's gross operating revenues
(electric, gas or total, as may be appropriate) to the sum of the
operating revenues of all System companies (electric, gas or total,
as may be appropriate) for the preceding calendar year.
2. Electric Peak Load - The relation of each company's annual electric peak
load to the combined electric peak load of all System companies for the
preceding calendar year.
3. Peak Day Sendout - The relation of each company's gas peak day sendout to
the combined gas peak day sendout of all System companies for the
preceding calendar year.
4. Customers Billed - The relation of each company's total customers billed
to the combined total customers billed of all System companies for the
preceding calendar year.
5. Other - Such other basis or bases as experience may show will provide,
on a functional relationship, a more fair and equitable allocation of
particular charges than any of the foregoing.
DEPARTMENT COST CONTROLS
Annual operating budgets, on a departmental basis, will be used and costs will
be controlled independently for each department so as to maintain a periodic
check on the balances, if any, over or underbilled to insure that services
rendered are being billed at cost. Each department will be charged with all
of its expenses, including overhead items allocated to it, and will be
credited with amounts billed from the department for services rendered.
The accounts of each department will be maintained so as to be substantially
in balance at all times. Accordingly, semiannual reviews will be made of
balances to determine to what extent the billings should be adjusted to
reflect actual cost.
BILLING
Bills will be provided Associate Company in sufficient detail so as to
identify the services rendered and permit proper accounting distribution
of the charges under the Associate Company's prescribed Uniform System
of Accounts. Detail on the bill will include: (1) Department; (2) Function
or type of service; (3) Nature of charges, whether direct or indirect
(overhead); and (4) Source of charges, if direct.
