Exhibit 10.20
NORTHEAST UTILITIES SERVICE COMPANY
FORM OF
SERVICE CONTRACT
AGREEMENT made and entered into as of the 1st day of July ,
1966, by and between NORTHEAST UTILITIES SERVICE COMPANY (hereinafter
referred to as Service Company) and
(hereinafter referred to as Associate Company).
WHEREAS, by order in File No. 37-65, the Securities and Exchange
Commission (hereinafter referred to as SEC) approved and authorized, under
the Public Utility Holding Company Act of 1935 (hereinafter referred to as
the Act), the organization and conduct of business of Service Company in
accordance herewith, as a wholly owned subsidiary service company of
Northeast Utilities (hereinafter referred to as Northeast); and
WHEREAS, Service Company is willing to render services as provided
herein to Northeast and its associated subsidiaries (hereinafter
collectively referred to as the System) at cost, determined in accordance
with applicable rules and regulations under the Act; and
WHEREAS, economies, increased efficiencies and other benefits will
result to the System from the performance by Service Company of services as
herein provided:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, it is agreed as follows:
Section 1. Agreement to Furnish Services.
Service Company agrees to furnish to Associate Company and other
System companies, upon the terms and conditions herein provided, the
services hereinafter referred to in Section 2 hereof at such times and for
such periods as may be required, and Service Company will, as and to the
extent required to provide such services to the system, keep itself and its
personnel available and competent to render such services to the System so
long as it is authorized so to do by federal and state regulatory agencies
having jurisdiction.
For the purpose of providing services as herein provided, Service
Company proposes to establish various departments, one or more of which
will participate in providing particular services hereinafter described.
Service Company reserves to itself the privilege, without amendment hereof
or express prior agreement by Associate Company or other System companies,
from time to time to establish new departments, to subdivide or otherwise
reorganize any of the departments established by it, and to reallocate
services among various departments.
Service Company will also provide for Associate Company and other
System companies as required such other services not referred to in
Section 2 hereof as Service Company may conclude it may furnish with
economies and increased efficiencies to the System or such other services
as Associate Company or other System companies may require and Service
Company is competent to perform.
Services will also be furnished to other System companies under
agreements similar in all respects hereto and may also be furnished, in
Service Company's discretion, to others, provided that by so doing the cost
of services to Associate Company or other System companies will not be
increased.
In supplying services hereunder, Service Company may arrange for
services of such executives, financial advisers, accountants, attorneys,
technical advisers, engineers and other persons as are required for or
pertinent to the rendition of such services.
Section 2. Services to be Performed.
Subject to the provisions of Section 1 hereof, Service Company will
provide to Associate Company and other System companies, the following
services:
(A) General System Management: Executive, administrative,
managerial, coordinating and advisory services, particularly with respect
to the formulation and effectuation of policies and programs affecting or
relating to the System as a whole, including financial, accounting, and
economic policies and programs, power supply, public and employee
relations, regulation, contractual arrangements, administrative and other
proceedings, industry-wide activities and like matters.
(B) Other Functions and Activities: Studying, planning, advise,
assistance, guidance, supervision, direction, administration, maintenance,
handling, performance and operation, as may be required, in connection with
the following functions and activities:
(i) Corporate and Secretarial: Policies and practices relating
to the performance of corporate secretarial functions and activities,
including the preparation and maintenance of official corporate records,
reports, minutes and correspondence in accordance with assigned
responsibilities and duties.
(ii) Financial Planning: Financial structures; financial
programs to raise funds required or to effect savings through refinancing;
relations with commercial banks and negotiation of short-term borrowings;
relationships with investment bankers, analysts, analyst societies,
securities holders, stock holders, stock exchanges and indenture trustees,
transfer agents and registrars; general treasury, banking and financial
matters.
(iii) Accounting: General accounting, customer accounting and
related records; depreciation, accounting procedures and practices to
improve efficiency; internal auditing, relations with independent auditors
and appearances before and requirements of regulatory bodies with respect
to accounting matters; and financial and operating reports and other
statistical matters and analyses thereof.
(iv) Taxes: Consolidated and other income tax returns and other
federal, state and municipal tax returns, and all matters related thereto,
including relations with the Internal Revenue Service and other taxing
authorities, the examination and processing of tax returns, assessments and
claims, and developments in federal, state and municipal taxes.
(v) Insurance: Insurance programs and matters, including
pension and other employee benefit plans and programs; and relations with
insurance brokers and agents.
(vi) Budgets: Operating, construction and cash budgets, and
similar studies or documents, including estimates and other information
required therefor or related thereto.
(vii) Data Processing: Computer and other data processing
activities.
(viii) Bulk Power Supply: The bulk power supply system from
sources of supply through to bulk substations, to achieve reliable service
at minimum cost, including forecasts of electric loads; power supply
arrangements among System companies; power supply relations with other
utilities; forecasts of gas requirements and the procurement of gas
supplies; design, engineering and scheduling of electric and gas production
and transmission facilities; the design, engineering and scheduling of
major and unusual distribution facilities; and System electric load
dispatching operations and related matters.
(ix) Engineering Research and Standardization: Engineering
activities in the fields of research, design, construction and
standardization; technical specifications and standard designs for and
procedures and methods of utilizing materials, equipment and associated
services; technical support and engineering as required in all areas of the
System's operations.
(x) System Operations: Electric and gas operations, including
production, transmission and distribution of electricity and gas; the
construction, operation and maintenance of electric and gas facilities; and
in general all electric and gas construction, maintenance and operating
activities.
(xi) Other Administrative Services: Management-union and all
other employee relation activities, including the definition of major
organizational responsibilities and the translation of those
responsibilities into effective organization structures; employee welfare
and other programs and problems; business methods and procedures; and
transportation activities and matters.
(xii) Purchasing and Stores: The purchasing and handling of
materials and supplies, fuel and equipment, including such activities as
buying, traffic, expediting and stock control, and scrap and salvage sales;
major and long-term purchase contracts pertaining to the foregoing; and
contacts with market conditions and principal suppliers.
(xiii) Commercial Activities: Electric, gas and other sales;
customer service facilities; rate matters and rate structures; and area
development plans and activities.
(C) Officers and other employees of Service Company will, on request
of Associate Company, serve, without charge other than as herein provided,
as officers or representatives of such Company.
Section 3. Agreement to Take and Pay for Services.
Associate Company agrees to take from Service Company such of the
services to be performed by Service Company as may be required and to pay
to Service Company the cost of such services determined as herein provided.
It is the intent of this Agreement that the payment for services rendered
by the Service Company to the System shall cover all the costs of its doing
business (less credits for services to others any other miscellaneous
income items), including reasonable compensation for necessary capital as
permitted by Rule 91 of the SEC under the Act. The methods and procedure
for determining the cost of services performed for Associate Company are
set forth in Appendix A hereto.
Bills will be rendered for each calendar month on or before the
twentieth day of the succeeding month and will be payable on presentation
and not later than the last day of that month. Monthly charges may be made
in whole or in part for particular expenses on an estimated basis, subject
to adjustment, so that all charges for services during a calendar year will
be made on an actual basis.
4. Effective Date; Term; and Cancellation.
This Agreement shall become and be effective as of the date hereof and
it shall continue in effect, unless sooner terminated as herein provided,
for a period of one year. It may be renewed from time to time for similar
one-year periods by mutual agreement. This Agreement shall also be subject
to termination and shall terminate, without any action by either of the
parties, to the extent and from the time that performance may conflict with
the Act or with any rule, regulation or order of the SEC adopted before or
after the making hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, by their respective officers thereunto duly authorized,
all as of the day and year first above written.
NORTHEAST UTILITIES SERVICE COMPANY
By
Its President
Attest:
Secretary ASSOCIATE COMPANY
By
Its President
Attest:
Secretary
APPENDIX A
DESCRIPTION OF METHODS AND PROCEDURE
FOR ALLOCATING COST OF SERVICES
JOB OR WORK ORDERS FOR SERVICE
There shall be job or work orders covering services to be performed
for Associate Company or other System companies. These orders may be
either general or specific. Services of a continuing nature, such as
accounting, financial planning and dispatching, will be covered by general
job or work orders; specific job or work orders will cover such things as
issues of securities, special studies or construction projects. General
orders, as well as specific orders, will specify the nature of the services
to be performed thereunder in sufficient detail that charges therefor may
be determined as herein provided and properly accounted for by the
Associate Company under its prescribed Uniform System of Accounts.
CHARGES FOR SERVICES
General
Charges for services rendered to Associate Company and other System
companies will be made on the bases of benefits conferred and of actual
cost (including reasonable compensation for necessary capital as permitted
by Rule 91 of the SEC under the Act), fairly and equitably allocated.
Specific Services
Charges for specific services performed will be made to the
appropriate specific job or work order number assigned to accumulate the
charges applicable to the particular activity. These charges will include
both direct and indirect costs involved in providing the specific services.
General Services
Charges for general services performed will be made to the appropriate
general job or work order number assigned to accumulate the charges
applicable to the particular activity. These charges will include both
direct and indirect costs involved in providing the general services.
NATURE OF CHARGES AND METHOD OF ALLOCATION
Direct Charges
Direct charges consist of those costs which can practicably be
recorded separately and identified not only by job or work order number and
department but also as to source, such as time reports for each employee,
vehicle reports, invoices and other source documents. Time reports will be
maintained for each employee, including officers, in such detail as may be
appropriate for such employee and the nature of the services performed.
Employees (other than stenographic, secretarial, clerical, and other
workers engaged in rendering support services) will record on their time
reports hours chargeable to the appropriate job or work order numbers and
the nature of the work performed.
Northeast will be charged with 25% of the costs chargeable to job or
work orders for general services not of an operating or functional nature
related primarily to the System subsidiary companies but primarily of
benefit to and performed for Northeast and the System as a whole. The
balance of the charges to such job or work orders will be allocated to
among System subsidiary companies as provided hereafter under "Charges to
System Companies - General Services."
Indirect Charges or Overhead Expenses
Indirect charges or overhead expenses consist of all costs of the
Service Company, other than direct charges described above. These charges
may be classified into the following two general categories:
1. General Service Company Overheads - These charges include costs which
cannot be identified as applicable to either a particular job or work
order number or department and which must be allocated to the various
Service Company departments on a fair and equitable basis. The
following items are illustrative, and not all-inclusive, of the types
of costs which may be so-allocated to the extent above provided:
rents; office supplies and expenses; depreciation; building operation
and maintenance; insurance; reasonable compensation for necessary
capital; general services, such as stenographic, files, mail, etc.,
including salaries, employee benefits, and expenses of related
employees; and other general overheads.
These overhead costs will be allocated to each department on
the basis of functional relationship, such as number of personnel,
space occupied, use, etc.
2. Departmental Overheads - These charges include costs which can be
identified as applicable to a particular department but which cannot
be directly associated with a particular job or work order number.
These costs will consist of the following:
(a) Wages and salaries of stenographic, secretarial, clerical and
other workers in the department engaged in rendering support
services.
(b) Lost or nonproductive time for vacations, personal time off,
sickness, holidays, etc., of all employees in department.
(c) Payroll-related Federal and State taxes and group benefit plans
for pension, life insurance, hospitalization and medical, etc.,
of all employees in department.
(d) Miscellaneous supplies and expense.
(e) General Service Company overheads allocated to the particular
department as set forth in item 1 above.
The indirect charges of a particular department, as outlined in this
item 2, will be distributed to the active specific or general job or
work orders for which work is being performed by that department on
the same proportionate basis as the actual direct payroll charges of
that department.
CHARGES TO OTHER THAN SYSTEM COMPANIES
Services performed for other than System companies will be billed and
paid for by them on an appropriate basis. All amounts so billed will be
credited to the appropriate job or work orders before any charges are made
therefrom to System companies.
CHARGES TO SYSTEM COMPANIES
Specific Services
Charges for specific services recorded in the appropriate job or work
order numbers, including overhead items, will be billed to the company or
companies for whom the services are performed.
General Services
Charges for general services recorded in the appropriate job or work
order numbers, including overhead items, will be allocated among System
subsidiary companies on one of the following bases determined on the basis
of functional relationship to be the most fair and equitable:
1. Revenues - The relation of each company's gross operating
revenues (electric, gas or total, as may be appropriate) to the
sum of the operating revenues of all System companies (electric,
gas or total, as may be appropriate) for the preceding calendar
year.
2. Electric Peak Load - The relation of each company's annual
electric peak load to the combined electric peak load of all
System companies for the preceding calendar year.
3. Peak Day Sendout - The relation of each company's gas peak day
sendout to the combined gas peak day sendout of all System
companies for the preceding calendar year.
4. Customers Billed - The relation of each company's total customers
billed to the combined total customers billed of all System
companies for the preceding calendar year.
5. Other - Such other basis or bases as experience may show will
provide on a functional relationship, a more fair and equitable
allocation of particular charges than any of the foregoing.
DEPARTMENT COST CONTROLS
Annual operating budgets, on a departmental basis, will be used and
costs will be controlled independently for each department so as to
maintain a periodic check on the balances, if any, over or underbilled to
insure that services rendered are being billed at cost. Each department
will be charged with all of its expenses, including overhead items
allocated to it, and will be credited with amounts billed from the
department for services rendered. The accounts of each department will be
maintained so as to be substantially in balance at all times. Accordingly,
semiannual reviews will be made of balances to determine to what extent the
billings should be adjusted to reflect actual cost.
BILLING
Bills will be provided Associate Company in sufficient detail so as to
identify the services rendered and permit proper accounting distribution of
the charges under the Associate Company's prescribed Uniform System of
Accounts. Detail on the bill will include: (1) Department; (2) Function
or type of service; (3) Nature of charges, whether direct or indirect
(overhead); and (4) Source of charges, if direct.