As filed with the Securities and Exchange Commission on February 3, 2000
File No. 70-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM U-1 APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Sierra Pacific Resources
6100 Neil Road
Reno, Nevada 89511
(Name of company or companies filing this statement
and address of principal executive offices)
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Michael R. Niggli
Chairman and Chief
Executive Officer
Sierra Pacific Resources
6100 Neil Road
Reno, Nevada 89511
(702) 834-3600
(Name and addresses of agents for service)
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The Commission is requested to send copies of all notices,
orders and communications in connection with this
Application to:
Clifford (Mike) M. Naeve, Esq.
William C. Weeden
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
A. INTRODUCTION AND GENERAL REQUEST
1. GENERAL
Sierra Pacific Resources, a Nevada corporation exempt from
registration by order under Section 3(a)(1) of the Public Utility Holding
Company Act of 1935, as amended (the "Act")("Sierra Pacific"), filed an
Application/Declaration on Form U-1 (File No. 70-9____) (the "Merger U-1") with
the Securities and Exchange Commission (the "Commission") under Sections 9(a)(2)
and 10 seeking approvals relating to the proposed acquisition by Sierra Pacific
of Portland General Electric Company, a Oregon corporation ("PGE"), under which
PGE will become a wholly owned subsidiary of Sierra Pacific (the "Merger").
Sierra Pacific will register as a holding company under the Act upon the
consummation of the acquisition contemplated in the Merger U-1.
2. GENERAL REQUEST
This Application/Declaration seeks the authorization and approval by
the Commission with respect to the provision of intra-system services following
the Merger and registration of Sierra Pacific as a holding company.
Specifically, Sierra Pacific requests that the Commission approve the
designation of SPRSC (as defined below) as a subsidiary service company in
accordance with the provisions of Rule 88 under the Act and the Services
Agreement (as defined below) and find that SPRSC is so organized and will
conduct its operations so as to meet the requirements of Section 13 of the Act
and the Commission's rules under the Act.
B. DESCRIPTION OF THE PARTIES TO THE TRANSACTION
Following the consummation of the Merger, Sierra Pacific will have
three operating public utility company subsidiaries (the "Utility
Subsidiaries"): Sierra Pacific Power Company ("SPPC"), a public utility company
that provides retail electric service in Nevada and northeastern California,
sells electric power at wholesale, distributes natural gas at retail in
northwestern Nevada, and provides water service; Nevada Power Company ("Nevada
Power"), a public utility company that provides retail electric service
predominantly to the residents of Clark County, Nevada, provides limited service
to the Federal Department of Energy (U.S. Government Test Site) in Nye County,
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Nevada, and sells electric power at wholesale; and PGE, a public utility
company, which provides electric power service in northwestern Oregon and sells
electric power at wholesale. A list of Sierra Pacific's other subsidiaries is
set forth in the Merger U-1 and the exhibits thereto. Sierra Pacific's direct
and indirect utility and non-utility subsidiaries following the Merger are
referred to in this Application individually as a "Subsidiary" and collectively
as "Subsidiaries."
Sierra Pacific Resource Services Company, a subsidiary service company
("SPRSC"), will enter into a services agreement (the "Services Agreement") with
each of the Subsidiaries. (A copy of the form of the Services Agreement as well
as an appendix entitled "Service Company Policy and Procedures" are filed as
Exhibits B-1 and B-2, respectively.) Following the Merger, SPRSC will provide
the Subsidiaries with a variety of administrative, management, environmental and
support services, either directly or through agreements with associate or
non-associate companies, as needed. Prior to the consummation of the Merger,
SPRSC will be incorporated in the State of Nevada to serve as the service
company for the Sierra Pacific system.
The authorized capital stock of SPRSC will consist of 100 shares of
common stock, no par value per share. Upon consummation of the Merger, all
issued and outstanding shares of SPRSC common stock will be held by Sierra
Pacific.
C. INTRA-SYSTEM PROVISION OF SERVICES
1. SERVICE COMPANY
In order to ensure adequate oversight and realize economies of scale,
certain administrative and service functions for the Sierra Pacific system will
be consolidated and provided through SPRSC. As a general rule, the individual
system companies will maintain services that can benefit from individualized
application at the company level, with SPRSC offering system-wide coordination
and strategy, oversight and other services where economies can be captured by
the centralization of services. In particular, it is anticipated that, subject
to the requirements or limitations of state and federal law, the following
classes of services may be offered by SPRSC, through departments that will be
established following its formation and that may offer more than one class of
services, to system companies:
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a. ACCOUNTING
Accounting services will include the maintaining the books and records
of Sierra Pacific and its affected affiliates, the preparation of financial and
statistical reports, and tax filings, and the supervision of compliance with the
applicable laws and regulations. Accounting services also include support of
accounting systems.
b. ADMINISTRATION SUPPORT
Administrative support encompasses mailroom, records management,
graphics, and other general administrative and support activities.
c. COMMUNITY AND ECONOMIC DEVELOPMENT
These services involve the provision of community support and economic
development services to the service territories of the Utility Subsidiaries.
d. CORPORATE COMMUNICATIONS
Corporate communications involves the preparation and dissemination of
information to employees, customers, government agencies, communities and the
media.
e. CORPORATE PLANNING
The corporate planning services facilitate preparation of strategic
plans, monitor trends, and evaluate business opportunities. They also involve
facilitating process improvements and preparation of budgets and financial
forecasts.
f. CUSTOM ACCOUNT SALES
Custom account sales personnel provide sales services to large
commercial and industrial customers of the Utility Subsidiaries.
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g. CUSTOMER SERVICES
Customer services personnel perform customer billing, perform meter
services, handle customer inquiries, remittance processing and complaints, and
provide related customer information services.
h. DESIGN ENGINEERING
Design engineering services involve the design and monitoring of
construction of electric transmission and distribution lines and substations.
i. BUSINESS SUPPORT SERVICES
Business support services involve the provision of planning,
benchmarking, activity tracking and budget support services to the Utility
Subsidiaries.
j. BULK POWER TRANSPORT
This service encompasses supervision and coordination of the electric
transmission system control operations for the Utility Subsidiaries.
k. ENVIRONMENTAL
Environmental services focus on establishing of policies and
procedures for compliance with environmental laws and regulations, research on
emerging environmental issues, and monitoring compliance with environmental
requirements. Environmental services personnel also conduct oversight of
environmental clean up projects.
l. EXECUTIVES
Executive services encompass executive management and general
administrative services.
m. FACILITIES AND REAL ESTATE
Facilities and real estate services personnel operate and maintain
office buildings and service centers. They procure real estate, office furniture
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and equipment, and administer real estate leases, as well as contracts to
provide security, housekeeping and maintenance services for Sierra Pacific
system facilities.
n. FINANCE AND TREASURY
Finance and treasury services involve coordination of activities
related to securities issuance, including maintaining relationships with
financial institutions, cash management, investing activities and monitoring
capital markets. Finance and treasury service personnel also perform financial
and economic analysis and administer the insurance program.
o. GOVERNMENTAL AFFAIRS
Governmental affairs personnel lobby government officials and monitor,
review, and research legislation.
p. HUMAN RESOURCES
Human resources services involve establishment and administration of
policies and supervision of compliance with legal requirements in the areas of
employment, compensation, benefits and employee health, welfare, and safety.
They also include processing of payroll and employee benefit payments, and the
coordination of contract negotiation and relations with labor unions.
q. INFORMATION SYSTEMS
Information systems personnel plan, design, engineer, install,
operate, and maintain voice and data networks.
r. INTERNAL AUDIT
Internal audit personnel review internal controls and procedures to
ensure assets are safeguarded and transactions are properly authorized and
recorded. They also evaluate contract risks.
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s. LEGAL
Legal services personnel provide legal services related to labor and
employment law, litigation, contracts, rates and regulation, environmental
matters, real estate and other legal matters.
t. MARKETING SERVICES
Marketing services include market load research and new product
development for the Utility Subsidiaries and affiliates.
u. PAYMENT AND REPORTING
Payment and reporting personnel processes payments to vendors of
Sierra Pacific and its Subsidiaries and prepare statistical reports.
v. PURCHASED POWER AND ELECTRIC TRADING
The purchased power and electric trading service function involves the
purchase of electric power for and the provision of electric trading services to
the electric generation systems of the Utility Subsidiaries, including risk
management, weather risk, and contract management.
w. RATES AND REGULATION
Rates and regulation services encompass the determination of revenue
requirements for the Utility Subsidiaries and rates for electric, gas, and water
customers. Rates and regulation services personnel coordinate regulatory
compliance requirements and maintain relationships with regulatory authorities.
x. RESIDENTIAL AND BUSINESS SALES
Residential and business sales personnel provide sales and support to
electric residential and business customers of the Utility Subsidiaries.
y. RESOURCE ACQUISITION AND ANALYSIS
These services involve management of fuels for the generation
facilities of the Utility Subsidiaries. Resource acquisition and analysis
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personnel ensure compliance with price and quality provisions of fuel contracts
and arrange for transportation of fuel to the desired location.
z. SHAREHOLDER RELATIONS
Shareholder relations personnel provide communications to investors
and the financial community. They also coordinate the transfer agent and
shareholder record-keeping functions.
aa. SUBSTATION ENGINEERING AND SUPPORT
This service function involves the provision of management support
services to the substation engineering and support organizations of the Utility
Subsidiaries.
bb. SUPPLY CHAIN
Supply chain services involve functions connected with the procurement
of materials, including the management of materials and supplies inventories.
cc. TRANSMISSION SUPPORT SERVICES
These services involve provision of management support services to the
transmission construction, maintenance, operations, and engineering and right of
way organizations of the Utility Subsidiaries.
dd. TRANSPORTATION
Transportation services personnel oversee the vehicle fleets of the
Utility Subsidiaries.
ee. WHOLESALE AND BULK POWER SALES
These services involve provision of sales and to support to electric
wholesale customers of the Utility Subsidiaries.
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ff. GENERATION SUPPORT SERVICES
Generation services involve the provision of management, drafting, and
engineering services for all power plants, unit commitment and maintenance
scheduling, and centralized maintenance crews that serve power plants, as well
as technology evaluation.
As compensation for services, the Services Agreement will provide that
the client companies "pay to SPRSC the cost of such services, computed in
accordance with the applicable rules and regulations (including, but not limited
to Rules 90 and 91) under the Act and appropriate accounting standards." Where
more than one company is involved in or has received benefits from a service
performed, the Services Agreement will provide that client companies will pay
their fairly allocated pro rata share in accordance with the methods set out in
a schedule to the Services Agreement. Thus, charges for all services provided by
SPRSC to affiliated utility companies and non-utility companies will be on an
"at cost" basis as determined under Rules 90 and 91 under the Act.
No change in the organization of SPRSC, the type and character of the
companies to be serviced, the methods of allocating cost to associate companies,
or in the scope or character of the services to be rendered subject to Section
13 of the Act, or any rule, regulation or order thereunder, shall be made unless
and until SPRSC shall first have given the commission written notice of the
proposed change not less than 60 days prior to the proposed effectiveness of any
such change. If, upon the receipt of any such notice, the Commission shall
notify SPRSC within the 60-day period that a question exists as to whether the
proposed change is consistent with the provisions of Section 13 of the Act, or
of any rule, regulation or order thereunder, then the proposed change shall not
become effective unless and until SPRSC shall have filed with the Commission an
appropriate declaration regarding such proposed change and the Commission shall
have permitted such declaration to become effective.
Sierra Pacific will structure the Services Agreement so as to comply
with Section 13 of the Act and the Commission's rules and regulations
thereunder.
Rule 88 (b) provides that "(a) finding by the commission that a
subsidiary company of a registered holding company . . . is so organized and
conducted, or is to be so conducted, as to meet the requirements of Section
13(b) of the Act with respect to reasonable assurance of efficient and
economical performance of services or construction or sale of goods for the
benefit of associate companies, at cost fairly and equitably allocated among
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them (or as permitted by [Rule 90], will be made only pursuant to a declaration
filed with the Commission on Form U-13-1, as specified in the instructions for
that form, by such company or the persons proposing to organize it."
Notwithstanding the foregoing language, the Commission has on at least two
recent occasions made findings under Section 13(b) based on information set
forth in an application on Form U-1, without requiring the formal filing on a
Form U-13-1. See Unitil Corp., 51 SEC Docket 562 (Apr. 24, 1992); CINergy Corp.,
57 SEC Docket 2353 (Oct. 21, 1994). In this Application, Sierra Pacific has
submitted substantially the same application information as would have been
submitted in a Form U-13-1.
Accordingly, it is submitted that it is appropriate to find that SPRSC
will be so organized and shall be so conducted as to meet the requirements of
Section 13(b), and that the filing of a Form U-13-1 is unnecessary, or,
alternatively, that this Application should be deemed to constitute a filing on
Form U-13-1 for purposes of Rule 88.
2. OTHER SERVICES
Sierra Pacific requests authorization for the Subsidiaries to enter,
from time to time, into leases of office or other space with other associate
companies. Any such lease will comply with the requirements of Rules 87, 90 and
91. See Central Power & Light Company, Holding Co. Act Release No. 26408 (Nov.
13, 1995).
The Utility Subsidiaries may also provide to one another services
incidental to their utility businesses such as maintenance and emergency repairs
and the services of personnel with specialized expertise. These services will be
provided at cost in accordance with the standards of the Act and Rules 87, 90
and 91 under the Act.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
Estimated Legal Fees and Expenses $ **
Estimated Miscellaneous Expenses $ **
- --------
Total $ **
** To be filed by amendment.
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ITEM 3. APPLICABLE STATUTORY PROVISIONS
Section 13 of the Act and Rules 88, 90 and 91 are considered
applicable to the proposed transactions.
To the extent that the proposed transactions are considered by the
Commission to required authorization, exemption or approval under any section of
the Act or the rules and regulations other than those set forth above, request
for such authorization, exemption or approval is hereby made.
ITEM 4. REGULATORY APPROVALS
SPPC is subject to the jurisdictions of the Federal Energy Regulatory
Commission ("FERC"), the Nevada Public Utility Commission ("PUCN"), and the
California Public Utility Commission. Nevada Power is subject to the
jurisdictions of the FERC and the PUCN. PGE is subject to the jurisdictions of
Oregon Public Utility Commission ("OPUC") and the FERC. Each of these
commissions have enacted rules governing the transactions among the regulated
utilities and affiliated companies. The PUCN has an open docket to consider a
shared services agreement proposed by Sierra Pacific which predates the PGE
acquisition. The Services Agreement will supplant the earlier proposed agreement
in that pending docket. The Services Agreement must also be filed with the OPUC.
No approval will be required in California.
Except as stated above, no state or federal regulatory agency other
than the Commission under the Act has jurisdiction over the proposed
transactions.
ITEM 5. PROCEDURE
The Applicants respectfully request that the Commission issue and
publish not later than March 3, 2000, the requisite notice under Rule 23 with
respect to the filing of this Application, such notice to specify a date not
later than March 28, 2000, by which comments may be entered and a date not later
than September 1, 2000, as a date after which an order of the Commission
granting and permitting this Application to become effective may be entered by
the Commission.
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The Applicants hereby (i) waive a recommended decision by a hearing
officer, (ii) waive a recommended decision by any other responsible officer or
the Commission, (iii) consent that the Division of Investment Management may
assist in the preparation of the Commission's decision and (iv) waive a 30-day
waiting period between the issuance of the Commission's order and the date on
which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
a. EXHIBITS.
A-1 Articles of Incorporation of SPRSC**
A-2 By-Laws of SPRSC**
B-1 Form of Services Agreement between SPRSC and each Subsidiary
B-2 Service Company Policies and Procedures
F-1 Opinion of Counsel**
F-2 Past Tense Opinion of Counsel**
H-1 Proposed Form of Notice
**To be filed by amendment.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The Transaction will not involve major federal action significantly
affecting the quality of the human environment as those terms are used in
Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Section
4321 et seq. ("NEPA"). First, no major federal action within the meaning of NEPA
is involved Second, consummation of the Transaction will not result in changes
in the operations of PGE or the subsidiaries of Sierra Pacific that would have
any significant impact on the environment. To the Applicants' knowledge, no
federal agency is preparing an environmental impact statement with respect to
this matter.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned Applicants have duly caused this Application to be
signed on their behalf by the undersigned thereunto duly authorized.
SIERRA PACIFIC RESOURCES:
By: /s/ Date: / /00
--------------------------- --------
Name: _________________________
Title: _________________________
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Exhibit B-1
Form of Service Agreement
This Service Agreement (this "Agreement") is entered into as of the
____day of _______, 2000, by and between [insert name of subsidiary],
a__________ corporation (the "Company") and Sierra Pacific Resources Services
Company, a Nevada corporation ("SPRSC").
WHEREAS, SPRSC is a direct or indirect wholly owned subsidiary of
Sierra Pacific Resources Inc. WHEREAS, SPRSC has been formed for the purpose of
providing administrative, management and other services to subsidiaries of
Sierra Pacific Resources Inc.; and
WHEREAS, the Company believes that it is in the interest of the
Company to provide for an arrangement whereby the Company may, from time to time
and at the option of the Company, agree to purchase such administrative,
management and other services from SPRSC;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. SERVICES. SPRSC supplies, or will supply, certain administrative,
management or other services to Company similar to those supplied to other
subsidiaries of Sierra Pacific Resources, Inc. Such services are and will be
provided to the Company only at the request of the Company. Exhibit I hereto
lists and describes all of the services that are available from SPRSC.
II. PERSONNEL. SPRSC provides and will provide such services by
utilizing the services of their executives, accountants, financial advisers,
technical advisers, attorneys and other persons with the necessary
qualifications.
III. COMPENSATION AND ALLOCATION. As and to the extent required by
law, SPRSC provides and will provide such services at cost. Exhibit I hereof
contains rules for determining and allocating such costs.
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IV. LIMITATION OF LIABILITY AND INDEMNIFICATION. In performing the
services hereunder, SPRSC will exercise due care to assure that the services are
performed appropriately, meet the standards and specifications set forth in any
applicable request for service and comply with the standards of all applicable
laws and regulations. However, failure to meet these obligations shall in no
event subject SPRSC to any claims by or liabilities to the Company other than to
reperform the services and be reimbursed at cost for such reperformance. SPRSC
makes no other warranty with respect to its performance of the services, and the
Company agrees to accept such services without further warranty of any nature.
To the fullest extent allowed by law, the Company shall and does hereby
indemnify and agree to save harmless and defend SPRSC, its agents and employees
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 the performance and prosecution of any services performed on
behalf of the Company pursuant to this Agreement, whether or not the same
results or allegedly results from the claimed or actual negligence or breach of
warranty of, or willful conduct by, SPRSC or any of its employees, agents,
clients, or contractors or its or their subcontractors or any combination
thereof.
V. TERMINATION AND MODIFICATION. The Company may terminate this
Agreement by providing 60 days written notice of such termination to SPRSC.
SPRSC may terminate this Agreement by providing 60 days written notice of such
termination to the Company.
This Agreement is subject to termination or modification at any time
to the extent its performance may conflict with the provisions of the Public
Utility Holding Company Act of 1935, as amended, or with any rule, regulation or
order of the Securities and Exchange Commission adopted before or after the
making of this Agreement. This Agreement shall be subject to the approval of any
state commission or other state regulatory body whose approval is, by the laws
of said state, a legal prerequisite to the execution and delivery or the
performance of this Agreement.
VI. ANNUAL SERVICE REQUESTS. SPRSC will send an Annual Service Request
to the Company each year on or before _____________ of each year listing
services proposed for the coming year based on services provided during the past
year.
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VII. ACCESS TO BOOKS AND RECORDS. To facilitate participation by the
Company in an annual review of the performance of SPRSC to be conducted by all
companies receiving services from SPRSC, the Company shall have access to the
books and records of SPRSC during normal business hours. The Company agrees to
make all reasonable efforts to ensure that such access does not impair the
ability of SPRSC to fulfill its obligations under any service agreement.
VIII. NOTICE. Where written notice is required by this Agreement, all
notices, consents, certificates, or other communications hereunder shall be in
writing and shall be deemed given when mailed by United States registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
(a) To the Company:
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(b) To SPRSC:
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IX. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, without regard to their
conflict of laws provisions.
X. MODIFICATION. No amendment, change or modification of this
Agreement shall be valid, unless made in writing and signed by all parties
hereto.
XI. ENTIRE AGREEMENT. This Agreement, together with its exhibits,
constitutes the entire understanding and agreement of the parties with respect
to its subject matter, and effective upon the execution of this Agreement by the
respective parties hereof and thereto, any and all prior agreements,
understandings or representations with respect to this subject matter are hereby
terminated and canceled in their entirety and are of no further force or effect.
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XII. WAIVER. No waiver by any party hereto of a breach of any
provision of this Agreement shall constitute a waiver of any preceding or
succeeding breach of the same or any other provision hereof.
XIII. ASSIGNMENT. This Agreement shall inure to the benefit and shall
be binding upon the parties and their respective successors and assigns. No
assignment of this Agreement or any party's rights, interests or obligations
hereunder may be made without the other party's consent, which shall not be
unreasonably withheld, delayed or conditioned.
XIV. SEVERABILITY. If any provision or provisions of this Agreement
shall be held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of this ________ day of ________, 2000.
SPRSC
By:
-----------------------------------
Name:
Title:
[Subsidiary]
By:
-----------------------------------
Name:
Title:
The undersigned requests all of the services listed in Exhibit I from
SPRSC, except for _______________________________________. Services will begin
_____________.
[Subsidiary]
By:
-----------------------------------
Name:
Title:
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EXHIBIT I
Description of Services, Cost Accumulation, Assignment and
Allocation Methodologies for SPRSC
This document sets forth the methodologies used to accumulate the
costs of services performed by Sierra Pacific Resources Service Company
("SPRSC") and to assign or allocate such costs to other subsidiaries and
business units within Sierra Pacific Resources ("Client Entities").
Cost of Services Performed
SPRSC maintains an accounting system that enables costs to be
identified by Cost Center, Account Number or Project, Activity, and Resource
("Account Codes"). The primary inputs to the accounting system are time records
of hours worked by SPRSC employees, accounts payable transactions and journal
entries. Charges for labor are made at the employees' effective hourly rate,
including the cost of pensions, other employee benefits and payroll taxes. To
the extent practicable, costs of services are directly assigned to the
applicable Account Codes. The full cost of providing services also includes
certain indirect costs, e.g., departmental overheads, administrative and general
costs, and taxes. Indirect costs are associated with the services performed in
proportion to the directly assigned costs of the services or other relevant cost
allocators. Cost Assignment and Allocation SPRSC costs will be directly
assigned, distributed or allocated to Client Entities in the manner prescribed
below.
1. Costs accumulated in Account Codes for services specifically performed
for a single Client Entity will be directly assigned or charged to
such Client Entity.
2. Costs accumulated in Account Codes for services specifically performed
for two or more Client Entities will be distributed among and charged
to such Client Entities using methods determined on a case-by-case
basis consistent with the nature of the work performed.
3. Costs accumulated in Account Codes for services of a general nature
which are applicable to all Client Entities or to a class or classes
of Client Entities will be allocated among and charged to such Client
Entities by application of one or more of the allocation methods
described below.
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Allocation Methods
The following methods will be applied, as indicated in the Description
of Services section that follows, to allocate costs for services of a general
nature.
a. Commercial Sales Ratio
Based on firm kilowatt-hour electric sales to business customers that
purchase less than 250 kilowatts for the immediate preceding year, the numerator
of which is for an Operating Company or an affiliate and the denominator of
which is for all Operating Companies and affected affiliate companies. This
ratio will be determined annually, or at such time as may be required due to a
significant change.
b. Commercial & Industrial Sales Ratio
Based on kilowatt-hour electric sales to large commercial and
industrial customers that purchase greater than 250 kilowatts for the immediate
preceding year, the numerator of which is for an Operating Company or commercial
and industrial customers that purchase greater than 250 kilowatts for the
immediate preceding year and the denominator of which is for all Operating
Companies and affected affiliate companies . This ratio will be determined
annually, or at such time as may be required due to a significant change.
c. Distribution Plant Ratio
Based on the net distribution plant balance at the end of the
immediate preceding year end, the numerator of which is for an Operating Company
or an affected affiliate company and the denominator of which is for all
Operating Companies and affected affiliate companies. This ratio will be
determined annually, or at such time as may be required due to a significant
change.
d. Electric kWh Generation Ratio
Based on the electric kWh generated for the immediately preceding
year, the numerator of which is for an Operating Company and the denominator of
which is for all Operating Companies. This ratio will be determined annually, or
at such time as may be required due to significant changes.
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e. Electric kWh Purchased Ratio
Based on the electric kWh purchased for the immediately preceding
year, the numerator of which is for an Operating Company and the denominator of
which is for all Operating Companies. This ratio will be determined annually, or
at such time as may be required due to significant changes.
f. Total kWh Sales Ratio
Based on total kilowatt-hour electric sales (and/or the equivalent
cubic feet of natural gas sales based on a Btu content, where applicable),
excluding inter-system sales, for the immediately preceding year, the numerator
of which is for an Operating Company or an affiliate and the denominator of
which is for all Operating Companies and affected affiliate companies . This
ratio will be determined annually, or at such time as may be required due to a
significant change.
g. Payment Transaction Ratio
Based on the sum of the number of payment transactions processed for
the immediately preceding year, the numerator of which is for an Operating
Company or an affected affiliate company and the denominator of which is for all
Operating Companies and affected affiliate companies. This ratio will be
determined annually, or at such time as may be required due to significant
changes.
h. Residential Sales Ratio
Based on kilowatt-hour electric sales to residential customers for the
immediate preceding year, the numerator of which is for an Operating Company or
an affiliate and the denominator of which is for all Operating Companies and
affected affiliate companies . This ratio will be determined annually, or at
such time as may be required due to a significant change.
i. Substation Plant Ratio
Based on the sum of the net substation plant balance for the
immediately preceding year, the numerator of which is for an Operating Company
or an affected affiliate company and the denominator of which is for all
Operating Companies and affected affiliate companies. This ratio will be
determined annually, or at such time as may be required due to a significant
change.
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j. Total Assets Ratio
Based on the sum of the total assets at the end of the immediate
preceding year, the numerator of which is for an Operating Company or affected
affiliate company and the denominator of which is for all Operating Companies
and affected affiliate companies. This ratio will be determined annually, or at
such time as may be required due to significant changes.
k. Total Common Equity Ratio
Based on the common equity at the end of the immediately preceding
year, the numerator of which is for an Operating Company or an affected
affiliate company and the denominator of which is for all Operating Companies
and affected affiliate companies. This ratio will be determined annually, or at
such time as may be required due to significant changes.
l. Total Customers Ratio
Based on the total electric customers (and/or gas or water customers,
or residential, business and large commercial and industrial customers where
applicable) at the end of the immediately preceding year, the numerator of which
is for an Operating Company or an affected affiliate company and the denominator
of which is for all Operating Companies and affected affiliate companies. This
ratio will be determined annually, or at such time as maybe required due to a
significant change.
m. Total Employees Ratio
Based on the number of employees at the end of the immediately
preceding year, the numerator of which is for an Operating Company or an
affected affiliate company and the denominator of which is for all Operating
Companies and affected affiliate companies. This ratio will be determined
annually, or at such time as may be required due to a significant change.
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<PAGE>
n. Total Revenue Ratio
Based on the revenue at the end of the immediately preceding year, the
numerator of which is for an Operating Company or an affected affiliate company
and the denominator of which is for all Operating Companies and affected
affiliate companies. This ratio will be determined annually, or at such time as
may be required due to significant changes.
o. Transmission Plant Ratio
Based on the net transmission plant balance at the end of the
immediately preceding year, the numerator of which is for an Operating Company
or an affected affiliate company and the denominator of which is for all
Operating Companies and affected affiliate companies. This ratio will be
determined annually, or at such time as may be required due to a significant
change.
A description of each of the services that may be performed by SPRSC,
which may be modified from time to time, is presented below. As discussed above,
where identifiable, costs will be directly assigned or distributed to Client
Entities. For costs accumulated in Account Codes which are for services of a
general nature that cannot be directly assigned or distributed, the method or
methods of allocation are also set forth. Substitution or changes may be made in
the methods of allocation hereinafter specified, as may be appropriate, and will
be provided to state regulatory agencies and to each affected Client Entity.
a. Accounting
Maintains the books and records of Sierra Pacific Resources and its
affected affiliates, prepares financial and statistical reports,
prepares tax filings and supervises compliance with the applicable
laws and regulations. Supports the accounting systems.
b. Administration Support
Provides mailroom, records management, graphics, aircraft and other
general administrative and support activities.
c. Community And Economic Development
Provides community support and economic development services to the
service territories of the Operating Companies.
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<PAGE>
d. Corporate Communications
Prepares and disseminates information to employees, customers,
government agencies, communities and the media.
e. Corporate Planning
Facilitates preparation of strategic plans, monitors trends and
evaluates business opportunities. Facilitates process improvements.
Prepares budgets and financial forecasts.
f. Custom Account Sales
Provides sales services to large commercial and industrial customers
of the Operating Companies.
g. Customer Services
Performs customer billing, performs meter services, handles customer
inquiries, remittance processing and complaints and provides related
customer information services.
h. Design Engineering
Designs and monitors construction of electric transmission and
distribution lines and substations.
i. Business Support Services
Provides planning, benchmarking, activity tracking and budget support
services to the operating companies.
j. Bulk Power Transport
Supervises and coordinates the electric transmission system control
operations for the operating companies.
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k. Environmental
Establishes policies and procedures for compliance with environmental
laws and regulations. Researches emerging environmental issues and
monitors compliance with environmental requirements. Oversees
environmental clean up projects.
l. Executives
Provides executive management and general administrative services.
m. Facilities and Real Estate
Operates and maintains office buildings and service centers. Procures
real estate and administers real estate leases. Administers contracts
to provide security, housekeeping and maintenance services for such
facilities. Procures office furniture and equipment.
n. Finance and Treasury
Coordinates activities related to securities issuance, including
maintaining relationships with financial institutions, cash
management, investing activities and monitoring the capital markets.
Performs financial and economic analysis and administers insurance
program.
o. Governmental Affairs
Lobbies government officials and monitors, reviews and researches
governmental legislation.
p. Human Resources
Establishes and administers policies and supervises compliance with
legal requirements in the areas of employment, compensation, benefits
and employee health, welfare and safety. Processes payroll and
employee benefit payments. Coordinates contract negotiation and
relations with labor unions.
q. Information Systems
Plans, designs, engineers, installs, operates, and maintains the
companies' voice and data networks.
11
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r. Internal Audit
Reviews internal controls and procedures to ensure assets are
safeguarded and transactions are properly authorized and recorded.
Evaluates contract risks.
s. Legal
Provides legal services related to labor and employment law,
litigation, contracts, rates and regulation, environmental matters,
real estate and other legal matters.
t. Marketing Services
Provides marketing services including market load research and new
product development for operating companies and affiliates.
u. Payment and Reporting
Processes payments to vendors of Sierra Pacific Resources and its
affected affiliates, and prepares statistical reports.
v. Purchased Power and Electric Trading
Purchases power and provides electric trading services to the
operating companies electric generation systems, including risk
management, weather risk, and contract management.
w. Rates and Regulation
Determines the operating companies' revenue requirements and rates for
electric, gas and water customers. Coordinates regulatory compliance
requirements and maintains relationships with the regulatory bodies.
x. Residential and Business Sales
Provides sales and support to electric residential and business
customers of the operating companies.
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y. Resource Acquisition and Analysis
Manages fuels for the operating companies generation facilities.
Ensures compliance with price and quality provisions of fuel contracts
and arranges for transportation of fuel to the desired location.
z. Shareholder Relations
Provides communications to investors and the financial community.
Coordinates the transfer agent and shareholder record keeping
functions.
aa. Substation Engineering and Support
Provides management support services to the substation engineering and
support organizations of the operating companies.
bb. Supply Chain
Provides services in connection with the procurement of materials
including the management of materials and supplies inventories.
cc. Transmission Support Services
Provides management support services to the transmission construction,
maintenance, operations and engineering and right of way organizations
of the operating companies.
dd. Transportation
Oversees the operating companies' fleet.
ee. Wholesale and Bulk Power Sales
Provides sales and to support to electric wholesale customers of the
operating companies.
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ff. Generation Support Services
Provides management, drafting, and engineering services for all power
plants, unit commitment and maintenance scheduling and centralized
maintenance crews that serve power plants, as well as new technology
evaluation.
14
Exhibit B-2
SIERRA PACIFIC RESOURCES SERVICES COMPANY
POLICIES AND PROCEDURES
FEBRUARY 2000
<PAGE>
SIERRA PACIFIC RESOURCE SERVICES
POLICIES AND PROCEDURES
TABLE OF CONTENTS
INTRODUCTION...................................................................x
ACCOUNTING PROCEDURES..........................................................x
SERVICE REQUEST AND APPROVAL...................................................x
SERVICE REQUEST FORM...........................................................x
SERVICE REQUEST GUIDELINES.....................................................x
MONITORING AND CONTROL.........................................................x
ALLOCATION FACTORS UPDATE......................................................x
TIME REPORTING.................................................................x
BILLING AND REVIEW.............................................................x
DISPUTE RESOLUTION.............................................................x
INTERNAL AUDIT CONTROL.........................................................x
BUDGETING......................................................................x
EVALUATION AND MEASUREMENT.....................................................x
2
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INTRODUCTION
Sierra Pacific Resources Services Company ("SPRSC") will provide Sierra
Pacific Power ("SPP"), Nevada Power ("NP"), and Portland General Electric
("PGE") (collectively referred to as the "Operating Companies"), and other
affiliates of the Sierra Pacific Resources system with a variety of
administrative, management, engineering, construction, and support
services. SPRSC will be subject to the rules and regulations of the
Securities and Exchange Commission ("SEC") pursuant to the Public Utility
Holding Company Act of 1935, as amended ("PUCHA"), and, in particular,
Section 13 thereof.
SPRSC will provide such services in accordance with service agreements
which will be entered into with the Operating Companies and affiliates. The
service agreements will be administered in accordance with PUHCA and the
SEC's regulations thereunder. SPRSC will establish an accounting system
which uses service id's (referred to as "Service IDs"), for the purpose of
charging costs to the appropriate Operating Company and/or affiliates. The
use of Service IDs will allow SPRSC to supply accounting records and
information to the Operating Companies and affiliates in enough detail to
allow them to record and report their costs in accordance with the Federal
Energy Regulatory Commission ("FERC") Uniform System of Accounts.
The major objective of SPRSC is to consolidate support services in order to
provide those services to the Operating Companies and affiliates of Sierra
Pacific Power ("SPE") more effectively and efficiently than each company
could provide for itself. To achieve this end, SPRSC will strive to be cost
competitive and focus on providing value added services to all customers.
ACCOUNTING PROCEDURES
SPRSC will utilize Service IDs for the purpose of allocating costs to the
appropriate Operating Company and/or affiliates. A Service ID will be
established and recorded with each SPRSC transaction as it is the Service
ID which dictates how the costs are to be allocated between the Operating
Companies and affiliates. In summary, SPRSC will use the following five
types of Service IDs:
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DIRECT SERVICE ID - A Direct Service ID will be used when the service being
provided is performed for a specific Operating Company or affiliate. The
Operating Company or affiliate specified will be charged 100% of the costs.
For example, if SPRSC Tax Services is providing tax services such as tax
return preparation or tax advisory services directly to NPS, 100% of the
costs to provide those services will be billed to NPS using the 100% direct
charge Service ID for Tax Services.
DISTRIBUTED SERVICE ID - A Distributed Service ID will be used for specific
services that will be distributed to two or more Operating Companies or
affiliates. An example of when to use a Distributed Service ID is if Tax
Services prepares the consolidated federal income tax return for all SPRSC
companies. The SPRSC costs to prepare the tax return will be distributed to
all of the companies using a Distributed Service ID which will specify the
appropriate allocation factor. Please refer to Attachment 1 which defines
the allocation factors that may be used.
LABOR OVERHEAD SERVICE ID - The Labor Overhead Service ID will be used to
charge overhead costs associated with labor, such as pension and benefits,
and payroll taxes. The Labor Overhead costs will be charged to the
Operating Companies and affiliates based on the SPRSC labor costs that were
charged.
A&G OVERHEAD SERVICE ID - The A&G Overhead Service ID will include, but not
be limited to, property insurance, rent, depreciation, property taxes, etc.
These overhead costs will also be charged to the Operating Companies and
affiliates based on the SPRSC labor costs that are charged.
CONSTRUCTION OVERHEAD SERVICE ID - The Construction Overhead Service ID
will be used to accumulate overhead costs to be charged to capital projects
on the books of the Operating Companies and/or affiliates, such as
engineering and supervision overheads, and continuing property record
overheads.
The Service ID, along with certain segments of SPRSC's account number, will
provide the detailed information necessary to bill the Operating Companies
and affiliates. Certain segments of the account number used to record the
transaction will provide information such as the SPRSC unit performing the
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work, the Operating Company and/or affiliate being charged and the type of
activity being performed.
SPRSC POLICIES AND PROCEDURES
SERVICE REQUEST AND APPROVAL PROCEDURES
Each functional department of SPRSC will be assigned a minimum of one
Direct and one Indirect Service ID by SPRSC Accounting. The Direct Service
ID will be used when performing specific routine services for one Operating
Company or affiliate. The SEC requires that, whenever feasible, SPRSC costs
should be directly charged to the Operating Companies or affiliates. These
services will be reviewed and agreed upon with the Operating Companies and
affiliates at the beginning of each calendar year. Examples of routine
services include the monthly closing of the financial accounting and
budgeting systems, preparing financial reports, and preparing a financial
forecast. An Indirect Service ID will be used to allocate those costs that
cannot be directly assigned. Again, these types of costs, which will be
incurred by SPRSC, will be reviewed and approved by the affected Operating
Companies and affiliates at the beginning of each year.
Distributed Service IDs will be assigned on a case-by-case basis depending
upon the special service or project provided by SPRSC.
All activities performed by SPRSC for the Operating Companies and
affiliates must have a completed Service Request form. For routine services
provided and indirect costs charged, a Service Request form will be
completed at the beginning of each year. For the performance of non-
routine, or special services, a Service Request form will be initiated by
the Operating companies and affiliates or by SPRSC. Examples of
non-routine, or special services include requests to prepare rate case
testimony, special securities financings and special studies or analyses.
The method of cost allocation will be determined on a case-by-case basis
consistent with the nature of the work performed.
Approvals are required by the organization that is requesting the work, the
SPRSC service provider and the Service ID Administrator in the Accounting
Organization.
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SERVICE REQUEST FORM
The following describes the information required to complete the Service
Request Form. Please refer to Attachment 2 for a draft of the Service
Request Form.
Service ID Name To be assigned by SPRSC Accounting.
Service ID Number To be assigned by SPRSC Accounting.
Allocation Basis To be assigned by the Customer, Service
Provider and SPRSC Accounting.
Allocation Factor (%) To be calculated by SPRSC Accounting.
Start Date Date work is to be started. To be based
on agreement between the customer and
the service provider.
Change Date Date scope of work is to be modified. To
be agreed upon by customer and service
provider.
Scheduled Completion Date work is scheduled to be completed
based on agreement between the customer
and the service provider.
Business Unit ID Corporate Input Number.
Account Number (NPS) Account Number.
Customer Manager requesting the service and who
will be charged for the service.
Contact Person Name of individual to contact for
additional information.
Phone Number Phone number of contact person.
Date Date service request initiated.
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Description of Service Description of the type of service to be
performed and any other additional
information necessary to explain the
request.
Estimated Costs The service provider will estimate the
cost prior to approval of the request.
APPROVALS:
Customer The manager that is paying for the
service is required to approve the work.
Service Provider The service provider must also approve
the request.
SPRSC Accounting The SPRSC Service ID Administrator must
authorize the request.
Corporate Input Number - Account Number
Business Unit The legal entity to which the accounting transaction is
posted.
Account The account number to which the accounting transaction is
posted.
Department The department identification to which the accounting
transaction is posted.
Product A service sold by the legal entity.
Project A logical group of activities that can be linked to the
service ID.
Activity A more detailed description of each activity or service
being performed.
Resource Type Indicates the type of resource (i.e., labor, materials,
etc.)
Resource Category Used to identify what is being worked on.
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Affiliate For transactions that are directly billed, this field will
indicate the legal entity with which the transaction took
place.
SERVICE REQUEST GUIDELINES
A request for a new Service ID may be appropriate when a new service or
project is identified. However, the cost of the new service or project may
be able to be captured in an existing Service ID. The following guidelines
should be used in determining when a new Service ID is appropriate.
1. No existing Service ID uses the billing method that is most
appropriate for the new service or project.
2. No existing Service ID distributes costs to the desired Operating
Companies and affiliates for this new service or project
3. One or two above, PLUS the total estimated annual cost of the new
service or project is greater than $25,000.
4. There is a specific regulatory requirement to allocate costs in a
specific manner regardless of amount for the new service or project
MONITORING AND CONTROL
The SPRSC Service ID Administrator in SPRSC Accounting is responsible for
reviewing, monitoring and maintaining the Service ID system. The
Administrator also authorizes new Service IDs and ensures that the
allocation factors are proper, accurate and kept up to date including
ensuring that the revision process is in accordance with the SEC
regulations. Additionally, the Service ID Administrator will be responsible
for coordinating the monthly billing process as described in the Billing
Policies and Procedures.
SERVICE ID ALLOCATION FACTORS UPDATE AND REVISIONS
The SPRSC Service ID Administrator in SPRSC Accounting will have the
primary responsibility for ensuring that the Service ID allocation factors
are proper, accurate and kept up to date. All allocation factors utilized
must be approved by the SEC.
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To the greatest extent possible, the allocation factors will be based on
cost drivers specifically applicable to the service being provided. SPRSC
Accounting will decide on the appropriate allocation factors for the
indirect Service ID's. SPRSC Accounting, the customer and the service
provider together will decide on the proper allocation factor(s) for the
distributed SID's.
The SPRSC Service ID Administrator will be responsible for evaluating new
allocation methodologies and determining if SEC approval is required. The
SPRSC Administrator will coordinate SEC approval efforts, if necessary,
with the Legal Department.
TIME REPORTING
Every employee of Sierra Pacific Resource Services (SPRSC) must keep track
of their time in order to bill the Operating Companies and affiliates
accurately. The following guidelines are provided to ensure accurate and
efficient time keeping.
A customized time tracking form for your area can be obtained from the
SPRSC Accounting Service ID Administrator.
- Employees should keep track of their time in one hour increments. *
It is recommended that time be entered by the time keeper daily and at the
very minimum on a weekly basis. In either case, time must be entered
by the payroll cut off dates.
The employee's manager will approve the time report weekly. Each weekly
time sheet will be signed by the manager.
*Please note that if you are repeatedly spending less than an hour on a
particular activity for the week, and total time spent for the week will be
one hour or more, then record time spent on that activity for the week
rather than by the day. For example, if you work 20 minutes per day for one
week on a special project for NP, then you would record 2 hours for that
activity for that week.
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BILLING AND REVIEW
Each Operating Company and affiliate will receive a monthly bill detailing
the work performed by SPRSC. Each bill or invoice will contain the
following information:
- Company
- Type of service provided by function and activity (i.e., accounting,
close the books)
- Direct Charges
- Indirect Charges
- Account number charged
- Service ID number
- Amount
Detailed information such as time sheets, unit being charged and the unit
performing the work will be available upon request.
The Service ID Administrator in SPRSC Accounting is responsible for
establishing and administering the SPRSC Service IDs and billing policies
and procedures. Please refer to the Service ID Allocation Factors Update
and Revision Procedures for additional detail.
After the Service IDs are processed and transactions are posted to SPRSC,
billings are generated. The Service ID Administrator reviews the billings
for errors at this time. The Service ID Administrator will also verify that
the Service ID 's have the correct allocators. Any material discrepancies
identified will be corrected prior to the generation of the financial
statements. After the financial statements are generated, the Service ID
Administrator will reconcile the billings to the SPRSC general ledger. If
an error is found after the statements are generated, the correction will
be made the following month.
Upon receipt of the billing, the Operating Companies and affiliates will
review and reconcile the billing. Any discrepancies found at this time are
10
<PAGE>
discussed with the Service ID Administrator and corrections are made to the
subsequent month's bill.
DISPUTE RESOLUTION PROCEDURE
In the event there is a dispute between the Operating Company and/or
affiliate and a SPRSC service provider regarding a billing methodology
and/or amount, representatives from the Operating Company and/or affiliate
receiving service and the SPRSC service provider along with the SPRSC
Service ID Administrator will meet to discuss the issues. Depending upon
the magnitude of the dispute, the Business Controls Coordinator may also
assist in the dispute resolution discussions. If a resolution cannot be
reached among these parties, the issue will be referred to each parties'
executive management for final resolution.
INTERNAL AUDIT CONTROL
SPRSC's Internal Audit department will conduct periodic reviews of its
operating methods as well as computer systems to ensure that the services
provided are authorized, documented and accurately recorded in SPRSC's
books and records. The Internal Audit department will also conduct reviews
of the Service ID cost allocation methods to ensure that such methods
comply with those approved by the SEC.
The Internal Audit Director establishes audits to be performed, and how the
audits are to be carried out, with the Sierra Pacific Resources Internal
Audit Committee. For normal subordinate-superior relationships, and to
ensure that the Internal Audit department's review is objective and its
findings are adequately addressed, the director of the Internal Audit
Department will report directly to the Chairman and CEO of Sierra Pacific
Resources.
BUDGETING
After the transition phase (approximately 6 months after the effective date
of the merger), budgeting for SPRSC will be a joint effort between SPRSC
and the Operating Companies and affiliates. All managers of SPRSC will be
responsible for preparing annual budgets in order to provide budget
information to the Operating Companies and affiliates. Services to be
provided to the Operating Companies and affiliates will be identified and
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<PAGE>
agreed upon and cost estimates will be prepared annually. These estimates
will be approved by the Operating Companies and affiliates as previously
noted. Budget variance reports will be generated each month and SPRSC will
have the primary responsibility for analyzing and explaining cost
variances. SPRSC will be accountable for costs for services that are
considered governance activities. SPRSC and the affiliate companies will
jointly be accountable for the cost of discretionary services.
EVALUATION OF SERVICES
In order to encourage efficiency and effectiveness in the operations of
SPRSC, all of the companies entering into a service agreement with SPRSC
will annually evaluate SPRSC's performance under the service agreements.
These companies will, on the basis of their evaluations, recommend steps
that SPRSC can make to improve performance of its services under the
service agreements.
12
Exhibit H-1
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. / , 2000
- --------------------------------------------
)
In the Matter of )
)
Sierra Pacific Resources )
6100 Neil Road )
Reno, Nevada 89511 )
)
and )
)
Portland General Electric Company )
121 SW Salmon Street )
Portland, Oregon 97204 )
)
(70- ) )
)
- --------------------------------------------)
Sierra Pacific Resources ("Sierra Pacific"), a Nevada corporation
exempt from registration under section 3(a)(1) of the Public Utility Holding
Company Act of 1935 ("Act"), 6100 Neil Road, Reno, Nevada 89511, has filed an
application under section 13 of the Act and rules 88, 90, and 91 under the Act.
Sierra Pacific has also filed a related application in File No.70-____
seeking approvals required to complete its proposed acquisition ("Merger") of
Portland General Electric Company ("PGE"), an electric utility company.
Following the Merger, Sierra Pacific will register as a holding company under
the Act. The Sierra Pacific holding company system will include two public
utilities in addition to PGE, Sierra Pacific Power Company and Nevada Power
Company. Sierra Pacific proposes in its application to form a service company
subsidiary, Sierra Pacific Resources Services Company ("SPRSC"). SPRSC will be
incorporated in Nevada and will act as the Sierra Pacific holding company
system's service company following the Merger.
In order to ensure adequate oversight and realize economies of scale,
certain administrative and service functions for the Sierra Pacific system will
be consolidated and provided through SPRSC. As a general rule, the individual
system companies will maintain services that can benefit from individualized
application at the company level, with SPRSC offering system-wide coordination
and strategy, oversight and other services where economies can be captured by
the centralization of services. SPRSC will enter into a services agreement
("Services Agreement") with each of the subsidiaries in the Sierra Pacific
system. Under these agreements, SPRSC will provide the subsidiaries with a
variety of administrative, management, environmental and support services,
either directly or through agreements with associate or non-associate companies,
as needed.
<PAGE>
As compensation for services, the Services Agreement will provide that
the client companies pay to SPRSC the cost of such services, computed in
accordance with the applicable rules and regulations (including, but not limited
to rules 90 and 91) under the Act and appropriate accounting standards. Where
more than one company is involved in or has received benefits from a service
performed, the Services Agreement will provide that client companies will pay
their fairly allocated pro rata share in accordance with the methods set out in
a schedule to the Services Agreement. Thus, charges for all services provided by
SPRSC to affiliated utility companies and non-utility companies will be on an
"at cost" basis as determined under rules 90 and 91 under the Act.
Sierra Pacific will structure the Services Agreement so as to comply
with Section 13 of the Act and the Commission's rules and regulations
thereunder.
Sierra Pacific also requests authorization for the subsidiaries in its
holding company system to enter, from time to time, into leases of office or
other space with other associate companies. Any such lease will comply with the
requirements of Rules 87, 90 and 91.
Sierra Pacific's utility subsidiaries may also provide to one another
services incidental to their utility businesses such as maintenance and
emergency repairs and the services of personnel with specialized expertise.
These services will be provided at cost in accordance with the standards of the
Act and rules 87, 90 and 91 under the Act.
2
