VIRGINIA POWER SUPPORT AGREEMENT
THIS AGREEMENT is entered into as of the ____ day of ____, 1999, by and
between Virginia Electric and Power Company, a Virginia public service company
("Virginia Power") and Dominion Resources Services, Inc., a Virginia corporation
("DRI Services").
WHEREAS, Virginia Power is an electric utility engaged in the sale of
electric service at retail within its service territories in Virginia and North
Carolina and at wholesale within those territories and elsewhere in the United
States;
WHEREAS, DRI Services is a wholly owned subsidiary of Dominion Resources,
Inc. ("DRI") which was formed in anticipation of DRI becoming a registered
utility holding company under the Public Utility Holding Company Act of 1935
("PUHCA");
WHEREAS, under PUHCA, DRI will be prohibited from providing services to its
subsidiaries and affiliates and, upon approval of the form Service Agreement
under which DRI Services and Consolidated Natural Gas Service Company, Inc. will
provide services to their affiliates, sought contemporaneously herewith, all of
the services currently offered by DRI to its subsidiaries will be offered
through DRI Services (including those services currently offered by DRI to
Virginia Power under the Cost Allocation and Service Agreement approved by the
Virginia State Corporation Commission in Case No. PUE830060 (the "CASA"));
WHEREAS, under the CASA and certain other existing agreements which have
been approved by the Virginia State Corporation Commission (the "Commission"),
Virginia Power currently provides services to DRI and/or DRI's subsidiaries (the
"Pre-Approved Services");
WHEREAS, as a result of DRI becoming a registered holding company, it will
no longer be desirable or efficient for Virginia Power to continue to provide
the Pre-Approved Services directly to DRI;
WHEREAS, Virginia Power now desires to provide certain services to DRI
Services, and DRI Services wishes to receive such services from Virginia Power,
in an effort to promote efficiencies and effectively utilize Virginia Power
resources and expertise; and
WHEREAS, DRI Services is an "affiliated interest" of Virginia Power within
the meaning of the Utility Affiliates Act, Chapter 4 of Title 56 of the Code of
Virginia, and therefore contracts and arrangements for the furnishing of
services by Virginia Power to DRI Services are subject to approval of the
Commission;
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 agree as follows:
1. General Services to be Provided by Virginia Power. Exhibit A hereto
lists and describes all of the services that may be provided by Virginia Power
to DRI Services for the benefit of DRI Services and/or the existing or future
subsidiaries or affiliates of DRI. Such services are and will be provided to DRI
Services only on the mutual agreement of Virginia Power and DRI Services and in
accordance with the terms and conditions set forth herein.
2. Compensation and Allocation. Virginia Power and DRI Services recognize
the importance of DRI Services paying the appropriate compensation for the
services provided hereunder, so that there is no subsidization of either party
by the other. To that end, Virginia Power will maintain accurate records of its
operations that will enable it to determine the costs of the services that it
provides to DRI Services, and those books and records will be open to
examination by any state or federal commission having jurisdiction over
arrangements and services to be furnished, and the staffs of those commissions.
DRI Services will compensate Virginia Power for the services provided hereunder
by payment of the costs incurred to provide those services. Exhibit B hereto
contains rules for determining and allocating costs for services provided to DRI
Services by Virginia Power.
3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without regard to
their conflicts of law provisions.
4. 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, any and all prior agreements, understanding, or
representations with respect to this subject matter are hereby terminated and
cancelled in their entirety.
5. 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.
6. Non-Exclusive Rights and Obligations. Nothing herein shall be construed
to require DRI Services to obtain any of the services enumerated herein from
Virginia Power, nor to require Virginia Power to provide any of such services to
DRI Services.
7. Effective Date and Term. This Agreement shall become effective when it
has been approved by the Commission and executed by the parties, and it shall
continue in effect until terminated by either Virginia Power or DRI Services
giving the other sixty (60) days advance written notice of termination.
This Agreement is subject to termination or modification at any time to the
extent its performance may conflict with the provisions of PUHCA, 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
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commission or other state regulatory body whose approval is, by the laws of such
state, a legal prerequisite to the execution and delivery or the performance of
this Agreement.
8. Severability. If any provision or provisions of this Agreement shall be
held 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 ____, 1999.
Attest: By Virginia Electric and Power Company:
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Attest: By Dominion Resources Services, Inc.:
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EXHIBIT A
DESCRIPTION OF APPROVED SERVICES TO BE OFFERED BY VIRGINIA ELECTRIC AND POWER
COMPANY TO DOMINION RESOURCES SERVICES, INC. UNDER THE AFFILIATE SERVICES
AGREEMENT
1. Accounting. Provide advice and assistance in accounting matters, including
the development of accounting practices, procedures and controls, the
maintenance of the general ledger and related systems, the preparation and
analysis of financial statement reports, and the processing of certain accounts
payable, payroll, customer and cash management transactions.
2. Auditing. Periodically audit accounting records and other records and
coordinating audit examinations where applicable, with that of independent
public accountants. The audit staff will report on their examination and submit
recommendations, as appropriate, on improving methods of internal control and
accounting procedures.
3. Legal and Regulatory. Provide advice and assistance with respect to legal and
regulatory issues as well as regulatory compliance under Federal and State laws.
4. Information Technology, Electronic Transmission and Computer Services. Assist
with the operation of an information technology function including the
development, implementation and operation of a centralized data processing
facility and the management of a telecommunications network. This function
includes the central processing of computerized applications and support of
individual applications. Provide computer resource/network availability,
including enterprise telecommunications infrastructure, mainframe and
distributed computing hardware, operating systems, business systems and
applications, internet, intranet and mail environments, software licenses and
maintenance agreements.
5. Employee Benefits/Pension Investment. Advise and assist in the administration
of employee benefit and pension plans and prepare and maintain records of
employee and company accounts under the said plans, together with such
statistical data and reports as are pertinent to the plans.
6. Employee Relations. Advise and assist in the formulation and administration
of employee relations policies and programs relating to labor relations,
personnel administration, training, wage and salary administration and safety.
7. Operations. Advise and assist in the study, planning, engineering and
construction of energy plant facilities. Assist in the development of long-range
operational programs. Offer management, consulting and advisory/technical
services with respect to the physical operation of energy plant facilities and
the purchase, sale and transfer of affiliated companies.
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8. Executive and Administrative. Advise and assist in the solution of major
problems and in the formulation and execution of general plans and policies.
Advise and assist as to operations, the issuance of securities, the preparation
of filings arising out of or required by the various Federal and State
securities, business, public utilities and corporation laws. The selection of
executive and administrative personnel, representation before regulatory bodies,
proposals for capital expenditures, budgets, financings, acquisition and
disposition of properties, expansion of business, rate structures, public
relationships and other related matters.
9. Business and Operations Services. Advise and assist in all matters relating
to operational capacity and the preparation and coordination of operating
studies. Provide assistance with management of the purchase, sale, movement,
transfer and accounting of volumes to ensure continued recovery of all prudently
incurred energy purchase costs through local jurisdictional cost recovery
mechanisms. Compile and communicate information relevant to operations. Perform
general business and operations support services, including travel services,
fleet, mail, plant and facilities operation, maintenance and management.
10. Exploration and Development. Advise and assist in geological and exploration
matters including the acquisition and surrender of acreage and the development
of underground storage facilities.
11. Risk Management. Risk management services such as the securing of requisite
insurance, the purchase and administration of property, casualty and marine
insurance, the settlement of insured claims and the provision of risk prevention
advice.
12. Marketing. Assist in the planning, formulation and implementation of
marketing programs, as well as provide associated marketing services to assist
with improving customer satisfaction, load retention and shaping, growth of
energy sales and deliveries, energy conservation and efficiency. Assist in
carrying out policies and programs for the development of plant locations and of
industrial, commercial and wholesale markets and assist with community
redevelopment and rehabilitation programs.
13. Budgeting and Planning. Advise and assist in studying and planning in
connection with operations, budgets, economic forecasts, rate structures,
capital expenditures and special projects.
14. Purchasing. Advise and assist in the purchase of materials, supplies and
services and the preparation and negotiation of purchasing agreements.
15. Rates. Advise and assist in the analysis of rate structures, the formulation
of rate policies and the negotiation of large contracts. Provide consulting in
connection with proceedings before regulatory bodies involving rates and
operations.
16. Research. Investigate and conduct research into problems relating to
production utilization, testing, manufacture, transmission, storage and
distribution of energy. Evaluate and conduct research and development in
promising areas and advise and assist in the solution of technical problems
arising out of operations.
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17. Tax. Advise and assist in the preparation of separate and consolidated tax
returns (Federal and State), interpretations of tax laws, administration of tax
audits, payment of taxes and related matters.
18. Environmental Compliance. Provide consulting and related services to ensure
full compliance with applicable environmental statutes and regulations.
19. Customer Service. Provision of services and systems dedicated to customer
service, including billing, remittance, credit, collections, customer relations,
call centers, energy conservation support and metering.
20. Energy Marketing. Provide services and systems dedicated to energy
marketing, including marketing and trading of gas and electric power, energy
price risk management, and development of marketing and sales programs in
physical and financial markets.
21. Treasury/Finance. Provide services related to managing all administrative
activities associated with financing, including management of capital structure;
cash, credit and risk management activities; investment and commercial banking
relationships; oversight of decommissioning trust funds and general financing
activities.
22. Office Space and Equipment. Leasing of land, buildings, furnishings and
equipment, including computer hardware and software and transportation
equipment.
23. External Affairs. Provide services in support of corporate strategies for
managing relationships with federal, state and local governments, agencies and
legislative bodies. Formulate and assist with public relations and
communications programs and administration of corporate contribution and
community affairs programs.
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EXHIBIT B
METHODS OF ALLOCATION FOR VIRGINIA POWER
Virginia Power shall allocate costs independently to DRI Services using the
following methods:
I. The costs of rendering service by Virginia Power will include all costs of
doing business including interest on debt but excluding a return for the
use of equity capital for which no charge will be made to DRI Services.
II. A. Virginia Power will maintain a separate record of the expenses of each
department. The expenses of each department will include:
1. those expenses that are directly attributable to such department,
and
2. an appropriate portion of those office and housekeeping expenses
that are not directly attributable to a department but which are
necessary to the operation of such department.
B. Expenses of the department will include salaries and wages of
employees, rent and utilities, materials and supplies, depreciation,
and all other expenses attributable to the department. The expenses of
a department will not include:
1. those incremental out-of-pocket expenses that are incurred for
the direct benefit and convenience of an individual company or
group of companies,
2. Virginia Power overhead expenses, including expenses of the
corporate secretary's department that are attributable to
maintaining the corporate existence of Virginia Power, and all
other incidental overhead expenses including those auditing fees,
internal auditing department expenses and accounting department
expenses attributable to Virginia Power.
C. Virginia Power will establish annual budgets for controlling the
expenses of each department and for determining estimated costs to be
included in interim monthly billing.
III. A. Employees in each department will be divided into two groups:
1. Group A will include those employees who may render service to
DRI Services, and
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2. Group B will include those office and general service employees,
such as secretaries, file clerks and administrative assistants,
who generally assist employees in Group A or render other
housekeeping services and who are not engaged directly in
rendering service to DRI Services.
B. Expenses set forth in Section II. above will be separated to show:
1. salaries and wages of Group A employees, and
2. all other expenses of the department.
C. There will be attributed to each dollar of a Group A employee's salary
or wage, that percentage of all other expenses of his department (as
defined in B above), that his salary or wage is to the total Group A
salaries and wages of that department.
D. Group A employees in each department will maintain a record of the
time they are employed in rendering service to DRI Services. An hourly
rate will be determined by dividing the total expense attributable to
a Group A employee as determined under subsection C above by the
productive hours reported by such employee.
IV. The charge to DRI Services for a particular service will be determined by
multiplying the hours reported by Group A employees in rendering such
service to DRI Services by the hourly rates applicable to such employees.
V. To the extent appropriate and practical, the foregoing computations of
hourly rates and charges may be determined for groups of employees within
reasonable salary range limits.
VI. Those expenses of Virginia Power that are not included in the annual
expense of a department under Section II. above will be charged to DRI
Services as follows:
A. Incremental out-of-pocket costs incurred for the direct benefit and
convenience of DRI Services will be charged directly to such company.
B. Virginia Power overhead expenses referred to in Section II. above will
be charged to DRI Services in the proportion that the charges made to
DRI Services for costs, other than those set forth in this Section VI,
are to the total of all department costs as defined in Section II.
VII. Notwithstanding the foregoing basis of determining cost allocations for
billing purposes, cost allocations for certain services involving machine
operations and
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production units will be determined on an appropriate basis established by
Virginia Power relating to the direct use of machine equipment or
production units.
VIII.Monthly bills will be issued for the services rendered to DRI Services on
an actual or estimated basis. Estimates will normally be predicated on
service department budgets and estimated productive hours of employees for
the year. At the end of each year, estimated figures will be revised to
reflect actual experience during such year and adjustments will be made in
amounts billed to give effect to such revision.
IX. If the use of a basis of allocation would result in an inequity because of
a change in operations or organization, then Virginia Power may adjust the
basis to effect an equitable distribution.
