Exhibit 10(e)
MEMORANDUM OF UNDERSTANDING
WHEREAS, New England Power Company (NEP) provides all
requirements electric service at wholesale to its retail
affiliates, Massachusetts Electric Company, The Narragansett
Electric Company, and Granite State Electric Company (the NEES
Retail Companies) operating in the respective states of
Massachusetts, Rhode Island, and New Hampshire;
WHEREAS, the Massachusetts Department of Public Utilities, the
Rhode Island Public Utilities Commission, and the New Hampshire
Public Utilities Commission regulate the retail rates of the NEES
Retail Companies, which retail rates include wholesale purchased
power costs paid to NEP under wholesale rates regulated by the
Federal Energy Regulatory Commission;
WHEREAS, NEP's cost of providing service and wholesale rates
are affected by the new resources that NEP adds to meet the
electricity requirements of retail customers in Massachusetts,
Rhode Island, and New Hampshire;
WHEREAS, the State Commissions have in place independent
processes through which they review the resource plans and
decisions by NEP prior to the time that those decisions are
reflected in wholesale rates to the NEES Retail Companies; and
WHEREAS, the State Commissions, the NEES Retail Companies, and
NEP believe that plans and resource decisions can be implemented
most effectively under a coordinated, consensual, and consistent
process of review;
NOW THEREFORE, NEP and the NEES Retail Companies commit to do
the following:
I. Definitions.
As used in this Memorandum:
(A) "Regional Integrated Resource Plan" means a fifteen-year,
system wide resource plan filed by NEP and each NEES
Retail Company with each respective State Commission that
includes: (1) a forecast of demands and kilowatthour
usage by retail customers; (2) an inventory of existing
resources; (3) an identification of additional resource
needs; (4) a projection of the amount of capacity to be
added through Significant New Supply Side Commitments and
other supply side resources that are not Significant New
Supply Side Commitments; (5) a projection of demand side
resources expected to be developed over the planning
horizon; (6) plans for compliance with new environmental
laws, regulations, orders, or consent decrees before
courts or regulatory agencies at existing units involving
significant expenditures, including NEP's proposals to
achieve compliance with the regulatory requirements under
the Clean Air Act Amendments of 1990 at its eight units
at the Salem Harbor and Brayton Point Stations and an
evaluation of those proposals against other alternatives
in the market; (7) a two-year implementation plan
designed to detail how the Regional Integrated Resource
Plan will be developed and implemented in the first two
years; and (8) any other information required to be filed
with the State Commission under state law or State
Commission regulation.
(B) "Significant New Supply Side Commitment" means a
commitment to either (1) a new contract with a power
supplier ("Purchased Power Contract") or (2) a new
generating project proposed by NEP that is incorporated
in a unit power contract with the NEES Retail Companies
pursuant to Paragraph III ("NEP Unit Power Contract"),
which commitment: (a) is executed or whose construction
will commence after the Regional Integrated Resource Plan
is filed; (b) extends for a period of three years or
longer; (c) involves the purchase of an entitlement in at
least 30 megawatts of additional capacity or requires the
construction of a new generating unit having a total
capacity greater than 30 megawatts; and (d) is intended
to serve the electricity requirements of the NEES retail
companies.
(C) "FERC" means the Federal Energy Regulatory Commission.
(D) "State Commission" means the Massachusetts Department of
Public Utilities, New Hampshire Public Utilities
Commission, and Rhode Island Public Utilities Commission
together with any other agency or agencies that are
authorized under state law to receive or review utility
forecasts and plans in Massachusetts, New Hampshire, and
Rhode Island.
(E) "All Requirements Tariff" means FERC Electric Tariff,
Original Volume Number 1 of New England Power Company
under which NEP makes all-requirements sales to the NEES
Retail Companies and other wholesale customers.
II. Coordinated State Review of the Regional Integrated Resource
Plans for the NEES Companies.
(A) NEP and each NEES Retail Company shall jointly and
concurrently file at least once every two years a
Regional Integrated Resource Plan with each NEES Retail
Company's respective State Commission.
(B) Each State Commission will review the Regional Integrated
Resource Plan in accordance with state law.
(C) Within 30 days following either (1) the completion of
reviews or the receipt of rulings by all State
Commissions on the Regional Integrated Resource Plan
filing or (2) one year following the filing of the
Regional Integrated Resource Plan, whichever occurs
first, NEP and the NEES Retail Companies shall file a
compliance plan which shall:
(a) notify all State Commissions that the rulings
on the Regional Integrated Resource Plans are
consistent; or
(b) notify all State Commissions that the rulings
on the Regional Integrated Resource Plan are
inconsistent, identify all such inconsistencies,
propose a resolution designed to reconcile the
inconsistencies, and request a joint hearing before
the State Commissions on the compliance filing.
(D) The State Commissions shall have the opportunity to
supplement or revise their rulings in response to the
compliance plan under Paragraph II.(C) by acting within
90 days of the request.
III. State Commission Review of Significant New Supply Side
Commitments.
(A) On or before its next general wholesale rate filing, NEP
shall file with FERC amendments to its All Requirements
Tariff requiring: (1) all Significant New Supply Side
Commitments, wherever located, to be made initially by
the NEES Retail Companies, subject to review by their
respective State Commissions under Paragraph III.(B), and
conditioned upon a successful completion of that review,
and (2) all Significant New Supply Side Commitments
remaining after state review to be assigned by the NEES
Retail Companies to NEP under Paragraph III.(C).
(B) The NEES Retail Companies shall execute all Purchased
Power Contracts that represent Significant New Supply
Side Commitments and all such contracts shall include a
provision requiring an assignment to NEP in accordance
with the terms of Paragraph III.(C). In addition, the
NEES Retail Companies shall sign NEP Unit Power Contracts
for all projects constructed and owned by NEP that
represent Significant New Supply Side Commitments under
which NEP's rate recovery of appropriate project costs
will be through its All Requirements Tariff. The NEES
Retail Companies shall file each of these Significant New
Supply Side Commitments with their respective State
Commissions before the Significant New Supply Side
Commitment becomes effective. Each State Commission
shall have 90 days to review the Significant New Supply
Side Commitment; provided, however, that any State
Commission may extend the review period for itself and
all other State Commissions for up to an additional 30
days by issuing a notice or order extending the review
period. If during the review period, as it may be
extended, any State Commission, acting pursuant to state
law and subject to appellate review, objects to the
Significant New Supply Side Commitment or any of its
terms, then the Significant New Supply Side Commitment
shall be rendered null and void, and NEP and all NEES
Retail Companies shall be precluded from going forward
with the Significant New Supply Side Commitment.
(C) If no State Commission objects to a Significant New
Supply Side Commitment within the review period, the
Significant New Supply Side Commitment shall become
effective in accordance with its terms. If the
Significant New Supply Side Commitment is a Purchased
Power Contract, the NEES Retail Companies shall assign it
to NEP, and if the Significant New Supply Side Commitment
is a NEP Unit Power Contract, NEP may proceed with the
project's development.
(D) If after the date this Memorandum is executed:
(1) A NEES Retail Company terminates all or any part of
its purchases under the All-Requirements Tariff; or
(2) A new law, rule, or order promulgated by a
legislature, court, regulatory agency or other
lawful authority limits the right of any NEES
Retail Company to be the exclusive seller of
electricity at retail within its current franchise
territory; or
(3) A new law, rule, or order promulgated by a
legislature, court, regulatory body or other lawful
authority limits NEP's right to make sales to any
NEES Retail Company under the All-Requirements
Tariff at prices established using NEP's reasonable
and prudent cost of providing service as determined
by FERC,
then the costs that NEP has incurred to serve that NEES
Retail Company shall be allocated to and paid by that
NEES Retail Company and not allocated to or paid by any
other NEES Retail Company.
(E) The procedures established in this Section do not
represent in any way a preapproval process for the rate
recovery by NEP of the costs associated with the
Significant New Supply Side Commitment, and no action or
failure to object by a State Commission shall bind the
State Commission in any way in any future wholesale rate
proceeding before the FERC in which NEP seeks rate
recovery of the costs associated with the Significant New
Supply Side Commitment. Specifically, failure to object
to a Significant New Supply Side Commitment shall not
preclude the State Commission from arguing to FERC in a
later wholesale rate proceeding that NEP's entry into the
Significant New Supply Side Commitment was unreasonable
or imprudent.
(F) The procedures set forth in this Section shall apply only
to the development of Significant New Supply Side
Commitments. Nothing in this Memorandum shall restrict
or limit the rights or management discretion of NEP or
the NEES Retail Companies to operate and manage their
existing resources and the Significant New Supply Side
Commitments that become effective or are developed
following the State Commission reviews under this
Memorandum, provided, however, that nothing in this
Memorandum shall affect the existing authority of FERC,
or the State Commissions with rate jurisdiction over
reassigned resources, to determine following an
investigation in which interested persons are permitted
to intervene whether the costs incurred are appropriately
recovered in jurisdictional rates. Significant New
Supply Side Commitments shall not include investments or
improvements associated with: (1) the ongoing operation
or management of existing units and the Significant New
Supply Side Commitments that have been developed under
this Memorandum; or (2) compliance with environmental
laws, regulations, orders, or consent decrees before
courts or regulatory agencies. The Manchester Street
Repowering Project, the replacement of units at the
Vernon Hydro Station, and purchased power contracts made
prior to the effective date of this Agreement are
committed resources and shall not be included in the
definition of a Significant New Supply Side Commitment
and shall not be subject to the procedures set forth in
this Memorandum, provided, however, that all contracts
executed as a result of NEP's request for proposals dated
December 17, 1991 (the Green RFP) shall be treated as
Significant New Supply Side Commitments and shall be
subject to the procedures set forth in this Memorandum.
IV. Conservation and Load Management Programs.
(A) In an Offer of Partial Settlement filed with and approved
by FERC in Docket Nos. ER 88-630-000 et al. (the W-10
Partial Settlement), NEP agreed to cease wholesale rate
recovery of Nondispatchable Program Costs associated with
conservation and load management (C&LM) programs
"whenever a state commission includes Nondispatchable
Program Costs of that affiliate in retail rates." (W-10
Partial Settlement, II.E.3.). NEP also reserved its
right to seek recovery "in wholesale rates for any
expenditures related to C&LM . . . incurred on or after
January 1, 1993." (Id at II.E.5.). Following the
approval of the W-10 Partial Settlement, each of the
State Commissions has included the Nondispatchable
Program Costs of its respective NEES Retail Company in
retail rates and NEP hereby waives its right under
Section II.E.5 of the W-10 Partial Settlement to seek
recovery of Nondispatchable Program Costs in wholesale
rates during the effective period of this Memorandum of
Understanding. Nothing in this Memorandum shall affect
or restrict NEP's ability to seek recovery of Planning
and Dispatchable Program Costs in wholesale rates or
prevent the reallocation of these costs back to the NEES
Retail Companies, provided, however, that if NEP seeks to
recover these costs, NEP will continue its practice of
filing all relevant cost recovery information with the
State Commissions at the same time that it files this
information with FERC. For purposes of this Memorandum,
"Planning and Dispatchable Program Costs" and
"Nondispatchable Program Costs" shall have the same
meanings as in the W-10 Partial Settlement (II.D.1. and
2.).
(B) NEP agrees to make available to each State Commission
information, data, and analysis necessary to establish
the cost effectiveness of each NEES Retail Company's C&LM
program when that program is evaluated from the
perspective of the integrated NEES System based on NEP's
marginal costs of providing electricity supplies in the
context of the integrated, least cost resource plan, as
well as from the perspective of the NEES Retail Companies
based on NEP's wholesale rate.
V. Term of Memorandum.
The Term of this Memorandum shall commence when each State
Commission has approved this Agreement and FERC has approved NEP's
filing under Paragraph III.(A), and shall continue for the life of
any Significant New Supply Side Commitment that has become
effective under this Memorandum, provided, however, that NEP or any
NEES Retail Company may terminate their obligations to continue the
contracting and filing procedure for future Significant Supply Side
Commitments under Paragraph III, and NEP may rescind the
modifications to its All-Requirements Tariff made pursuant to
Paragraph III(A) by giving two years written notice to each State
Commission. Notwithstanding the foregoing, NEP or any NEES Retail
Company may immediately terminate such obligations and rescind such
modifications if the following conditions are no longer met:
(A) All Significant New Supply Side Commitments, all
contracts with qualifying facilities wherever they are
located, and all other purchases from any supply side
resource having a capacity greater than one megawatt are
assigned to NEP by the NEES Retail Companies except for
any qualifying facilities signed by Massachusetts
Electric Company pursuant to the October 21, 1991 Offer
of Settlement approved in Docket Nos. E.F.S.C. 91-24 and
D.P.U. 91-114;
(B) An exemption for NEP and Massachusetts Electric Company
from the Massachusetts Integrated Resource Management
regulations set forth in 220 C.M.R. 10.00 et seq. is
granted and remains in effect, and the review of
Significant New Supply Side Commitments under this
Memorandum is the exclusive procedure for the prior
review of Significant New Supply Side Commitments by
State Commissions other than any further reviews that may
be required by environmental and siting laws within the
state in which the project is to be located or;
(C) Nondispatchable Program Costs are recovered in retail
rates, and the State Commissions recognize as reasonable
and appropriate all conservation and load management
commitments made by or to other State Commissions when
reviewing the Regional Integrated Resource Plans that are
filed under Section I.B.
Granite State Electric Company Massachusetts Electric Company
s/Lydia M. Pastuszek s/John H. Dickson
By: Lydia M. Pastuszek By: John H. Dickson
Title: President Title: President
New England Power Company The Narragansett Electric Company
s/Jeffrey D. Tranen s/Robert L. McCabe
By: Jeffrey D. Tranen By: Robert L. McCabe
Title: President Title: President
DATE: July 21, 1993