NEW ENGLAND POWER COMPANY
Primary Service for Resale
SUPPLEMENT TO AMENDMENT TO SERVICE AGREEMENT
Dated as of: March 1, 1998
Parties: NEW ENGLAND POWER COMPANY,
a Massachusetts corporation (the "Company" or "NEP"),
and
MASSACHUSETTS ELECTRIC COMPANY and
NANTUCKET ELECTRIC COMPANY,
both Massachusetts corporations (collectively, the
"Customer" or "Mass. Electric").
WHEREAS, the Company and the Customer entered into an Amendment to
Service Agreement dated as of February 1, 1997 (the "Amendment"), setting
forth the conditions governing the termination of the sale by the Company and
the purchase by the Customer of all-requirements electric service under the
Company's FERC Tariff, Original Volume No. 1 (the "Tariff");
WHEREAS, on November 26, 1997, the Federal Energy Regulatory Commission
("Commission") accepted that Amendment in Docket No. ER97-678-000;
WHEREAS, pursuant to chapter 164 of the Massachusetts General Laws, the
Contract Termination Date under the Amendment will be March 1, 1998, the date
that the Customer will commence providing retail access to its ultimate
customers;
WHEREAS, the terms of the Amendment included the Company's provision of
wholesale Standard Offer Service to the Customer for a defined period
following the Contract Termination Date, all as defined in the Amendment, to
enable the Customer to meet its obligation to provide retail standard offer
service to certain customers;
WHEREAS, the Customer desires to arrange for a "Default Power Supply"
for retail customers who are not eligible for retail standard offer service
and who do not have another power supplier;
WHEREAS, the Customer has requested the Company to provide a Default
Power Supply to enable the Customer to provide retail default service during
an interim period commencing on March 1, 1998;
WHEREAS, the Company is willing to supply electric capacity and energy
to the Customer for a Default Power Supply, in accordance with the terms and
conditions of this Supplement to Amendment to Service Agreement
("Supplement");
WHEREAS, the Amendment to Service Agreement anticipated the sale of
certain oil and gas properties owned by New England Energy, Inc. ("NEEI"), and
provided that the estimated costs and sales proceeds included in the Contract
Termination Charge formula would be adjusted upon the sale of the NEEI
properties to reflect differences between the estimated and actual amounts;
WHEREAS, the sale of the NEEI properties occurred on February 5, 1998;
WHEREAS, a preliminary reconciliation of estimated to actual amounts
associated with NEEI included in the Contract Termination Charge results in a
reduction in the Customer's Contract Termination Charge obligation of
approximately $15 million;
WHEREAS, the Customer wishes to receive the net benefits from the sale
of the NEEI properties on an accelerated basis commencing on March 1, 1998 and
continuing over the twelve months thereafter;
WHEREAS, pursuant to chapter 164 of the Massachusetts General Laws,
retail customers eligible for service under the Customer's low-income rate R-2
have the right to return to Standard Offer Service from Mass. Electric at any
time, and retail customers have the option to return to Standard Offer Service
within 180 days after they commence service from a municipal aggregator;
WHEREAS, the Amendment presently limits the Company's obligation to
supply Standard Offer Service to the Customer on behalf of retail customers
that elect to return to retail standard offer service to those residential and
Rate G-1 customers who, during the first year after the Retail Access Date,
elect to return to Standard Offer Service within 120 days of taking service
from an alternative supplier; and
WHEREAS, during the period prior to the divestiture of substantially all
of NEP's non-nuclear generation facilities, the Company is willing to supply
electric capacity and energy to the Customer for the requirements of all
retail customers who can return to Standard Offer Service under the
Massachusetts statute.
NOW, THEREFORE, the Company and the Customer, in consideration of the
mutual agreements set forth herein, agree as follows:
1. All capitalized terms that are used this Supplement and are not
defined herein, but are defined in the Amendment or in the Tariff, shall have
the meaning there stated.
2. For the period commencing on March 1, 1998 and extending through
the first to occur of: (a) the date thirty (30) days after the Customer
notifies the Company that the Customer seeks to terminate its purchase
pursuant to this Supplement, said notification to occur upon the successful
completion of a competitive solicitation for a default service supplier or the
implementation of the New England Power Pool ("NEPOOL") Power Exchange; or (b)
the closing of the sale of substantially all of the Company's non-nuclear
generation to USGen New England, Inc. ("USGenNE"), such period to be referred
to as the "Interim Period," the Company shall provide a Default Power Supply
to the Customer in accordance with this section:
(a) The Default Power Supply shall be made available at the
Standard Offer Service prices stipulated in paragraph 7(a) of the
Amendment per kilowatt-hour delivered to the meters of the
Customer's ultimate customers receiving retail default service.
(b) Default Service shall be made available by the Company to
the Customer for resale to those ultimate customers in the
Customer's service territory who purchase retail default service
from the Customer during the Interim Period.
3. The Customer shall have no obligation to purchase its Default
Power Supply from the Company after the end of the Interim Period and the
Company shall have no obligation to sell or supply Default Power Supply to the
Customer after the end of the Interim Period. In the event the Company bids
to sell a Default Power Supply to the Customer beyond the end of the Interim
Period, the Company shall have no obligation to offer to supply such power at
the Standard Offer Service prices set forth in section 2 of this Supplement.
4. The Company further agrees to accelerate the return of net
benefits associated with the sale of the NEEI properties to the twelve months
from March 1998 through February 1999 by implementing a Reconciliation Factor
of a credit of $0.00093 per kilowatthour during that twelve month period.
5. The calculation of the Reconciliation Factor is shown on the
attached pages from the Amendment to Service Agreement, Appendix 1, First
Revised Page 7 of 25, and Schedule 3, First Revised Page 2 of 2. The costs
and revenues are preliminary and will be subject to a further reconciliation,
and any changes shall be reflected in the Reconciliation Account at the time
the adjustment or reconciliation is made.
6. For the period prior to the Divestiture Date, the Company shall
provide Standard Offer Service to the Customer for: (1) all retail customers
eligible for service under the Customer's residential rate R-2 who request
such service; and (2) any retail customer of the Customer exercising its right
to opt out of service from a municipal aggregator within 180 days of the date
from which the retail customer began receiving service from such municipal
aggregator.
7. This Supplement shall take effect as of March 1, 1998, or such
other date as permitted by the Commission.
8. The provisions of this Supplement shall override any inconsistent
provisions of the Amendment, but all provisions of the Tariff and the
Amendment (specifically including the recovery of NEEI amortization and return
as set forth in Sections 1.1.1(b)(iv) and 1.1.2.(b) and (c) of the Amendment
and Schedule 1, page 6, column 2) that are not inconsistent with this
Supplement, as well as the Service Agreement between the Company and the
Customer, shall remain in full force and effect.
9. The rights conferred and obligations imposed on the Customer and
the Company under this Supplement shall be binding on or inure to the benefit
of their successors in interest or assignees as if each such successor or
assignee was itself a signatory hereto.
IN WITNESS WHEREOF, the parties have executed this Supplement to
Amendment to Service Agreement as of the date first above written.
NEW ENGLAND POWER COMPANY
By_________________________________
Its_________________________________
MASSACHUSETTS ELECTRIC COMPANY and
NANTUCKET ELECTRIC COMPANY
By_________________________________
Their_______________________________