AFFILIATED INTEREST AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into this 1st day of May,
2001, by and among Wisconsin Energy Corporation ("Wisconsin
Energy"), the Utility Affiliates (as defined below) and the other
Nonutility Affiliates (as defined below) in the holding company
system of Wisconsin Energy which have become parties hereto by
signature below or by endorsement as provided herein.
W I T N E S S E T H
WHEREAS, the Wisconsin Energy is a "holding company" as
defined in Sec. 196.795(1)(h), Wis. Stats.; and
WHEREAS, the Utility Affiliates are public utilities in the
holding company system of Wisconsin Energy and are "public
utility affiliates" as defined in Sec. 196.795(1)(L), Wis.
Stats.; and
WHEREAS, the Nonutility Affiliates (including Wisconsin
Energy) are companies in the holding company system of Wisconsin
Energy and are "nonutility affiliates" as defined in Sec.
196.795(1)(j), Wis. Stats.; and
WHEREAS, from time to time a Utility Affiliate may perform
various services involving the use of its "public utility
affiliate employees," as defined in Sec. 196.795(1)(Lm), Wis.
Stats., for any or all of the Nonutility Affiliates; and
WHEREAS, from time to time a Utility Affiliate may make its
"property," as defined in Sec. 196.795(5)(s), Wis. Stats.,
available to, or for use by, any or all of the Nonutility
Affiliates; and
WHEREAS, from time to time, a Utility Affiliate may lease or
rent office space to Wisconsin Energy and/or any of the other
Nonutility Affiliates as provided by Sec. 196.795(5)(k)2., Wis.
Stats.; and
WHEREAS, from time to time any or all of the Nonutility
Affiliates may, using their employees or property, perform
various services for and/or lease or rent property to a Utility
Affiliate; and
WHEREAS, Wisconsin Energy as the parent holding company of
the Utility Affiliates and the Nonutility Affiliates (other than
itself) will incur costs as a result of providing various
services for the common benefit of the companies in its holding
company system, which services such companies, if they were not
in a holding company system, would have to provide for
themselves;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
---------
A Utility Affiliate may furnish such services involving use
of its property and/or public utility affiliate employees to the
Nonutility Affiliates as they may from time to time request, at
the rates set forth in Article IV, upon the terms and conditions
herein set forth.
A Utility Affiliate shall have the right, exercisable at its
sole discretion, to refuse to perform services or provide
property to any Nonutility Affiliate.
The parties understand that the Utility Affiliates are
subject to the provisions of Sec. 196.795(5)(r), (s), Wis.
Stats., regarding the use of any "public utility affiliate
employee" or "property" and agree that the Utility Affiliates
shall minimize the use of any "public utility affiliate employee"
and "property" by the Nonutility Affiliates.
ARTICLE II
----------
A Utility Affiliate may, if in its sole discretion it elects
to do so, provide to a Nonutility Affiliate upon request,
property, as defined in Section 196.795(5)(s), Wis. Stats.,
independent of and not related to the provision of any services.
Such property shall be provided in accordance with the provisions
of Sec. 196.795(5)(s), Wis. Stats., and the Utility Affiliate
shall be compensated for such property at the greater of the cost
or the fair market value of such property.
ARTICLE III
-----------
A Utility Affiliate may, if in its sole discretion it elects
to do so, lease or rent office space to a Nonutility Affiliate
upon request with rental payments to be based upon the greater of
fair market value or the Utility Affiliate's cost. For purposes
of this Article III, rental payments based upon fair market value
shall be determined by the going rental rate for similar
properties in the same geographic area on similar terms.
ARTICLE IV
----------
Compensation for services provided by a Utility Affiliate to
a Nonutility Affiliate shall be at the greater of the cost to
Utility Affiliate or the fair market value of such services. For
purposes of this Agreement, the cost to the Utility Affiliate of
each such service shall be determined as follows:
1. Each Utility Affiliate employee who in any month was
involved in providing any service to a Nonutility Affiliate shall
for that month identify the service, the Nonutility Affiliate for
which he or she provided such service and the time spent
providing such service. An officer of the Utility Affiliate (and
any person who is considered as a member of such officer's
incidental supporting staff) who participates in providing a
service to a Nonutility Affiliate of which he or she is not an
officer shall be deemed to be a Utility Affiliate employee for
purposes of this Article IV.
2. The hourly rates shall be computed for employees
identified in paragraph 1 above, which shall include vacation,
absent time, benefits and payroll taxes.
3. The sum of the number of hours spent by each employee
identified in paragraph 1 above providing each service to a
Nonutility Affiliate shall be multiplied by the hourly rate as
determined for that employee under paragraph 2 above.
4. An overhead rate shall be established for the Utility
Affiliate based upon:
a. costs associated with training and professional
development;
b. costs of office space based upon a return of
original cost and a return on the depreciated original
cost, based on the Utility Affiliate's latest overall
rate of return authorized by the Public Service
Commission of Wisconsin and adjusted for the income tax
effect and/or actual rental payments made by the
Utility Affiliate;
c. costs of office supplies;
d. costs for office furniture and equipment based
upon a return of original cost and a return on the
depreciated original cost, based on the Utility
Affiliate's latest overall rate of return authorized by
the Public Service Commission of Wisconsin and adjusted
for the income tax effect; and
e. costs for administrative and general support.
The total labor charges determined in paragraph 3 shall be
increased by the overhead rate.
5. The number of miles traveled in the specific month by
Utility Affiliate's employees in their own vehicles in performing
each service for the Nonutility Affiliates shall be multiplied by
the appropriate per mile rate at which the Utility Affiliate
reimburses its employees for the use of their own personal
vehicles for utility business. The use of Utility Affiliate
vehicles in performing services for the Nonutility Affiliates
will be billed at the prevailing hourly rate (rate charged to the
Utility Affiliate accounts and customers for work performed) plus
overhead.
6. An amount representing a reasonable return on equity
shall be established for the services provided to the Nonutility
Affiliates based on the Utility Affiliate's latest overall rate
of return authorized by the Public Service Commission of
Wisconsin and adjusted for the income tax effect and any return
already included under paragraph 4 above.
The sum of the charges calculated in paragraphs 4, 5 and 6 shall
constitute the cost of service provided by the Utility Affiliate
to the Nonutility Affiliate.
The fair market value of a service provided by a Utility
Affiliate to a Nonutility Affiliate shall be equal to the cost
which the Nonutility Affiliate would have incurred to obtain such
service if the Utility Affiliate could not or would not provide
such service. In determining the fair market value of a service
it provides, the Utility Affiliate shall make a good faith effort
to identify the resources necessary to perform the service and
the value of such service based on a general knowledge of the
relevant market for such or a similar service as well as, if
available, comparison with bids or quotations for such or a
similar service. If the Utility Affiliate, despite its good
faith efforts, is not able to determine the fair market value of
a service, the fair market value shall be deemed to be equal to
110 percent of the Utility Affiliate's cost, calculated as
described in this Article IV.
The fair market value of a service provided by the Utility
Affiliate to a Nonutility Affiliate shall be compared to the cost
to the Utility Affiliate of providing the service and a bill will
be prepared reflecting the greater of the fair market value or
the cost of providing the service. Bills shall be sent to each
Nonutility Affiliate for the charges associated with the services
rendered to each Nonutility Affiliate by the end of the month
following the month on which the charges were based. Bills shall
be due and payable thirty (30) days after issuance.
Charges of third party suppliers, to the maximum extent
practicable, shall be paid directly by the appropriate company.
Any invoices paid by any party on behalf of any other party will
be billed to the appropriate company.
ARTICLE V
---------
A Nonutility Affiliate may, if in its sole discretion it
elects to do so, provide services or property (both real and
personal) to a Utility Affiliate upon request.
ARTICLE VI
----------
Compensation for services provided by a Nonutility Affiliate
to a Utility Affiliate shall be at the lesser of the fair market
value or the cost to the Nonutility Affiliate of such services.
For purposes of this Agreement, the cost of each such service
shall be determined as follows:
1. Each employee of a Nonutility Affiliate, except those
persons who are officers of both the Nonutility Affiliate and the
Utility Affiliate, who in any month was involved in providing any
service to the Utility Affiliate shall for that month specify the
time spent providing each service to the Utility Affiliate.
2. Hourly rates shall be computed for employees identified
in paragraph 1 above which shall include vacation, absent time,
benefits and payroll taxes.
3. The sum of the number of hours spent by each employee
identified in paragraph 1 above providing each service to the
Utility Affiliate shall be multiplied by the hourly rate as
determined in paragraph 2 above.
4. An overhead rate shall be established for the
Nonutility Affiliate based upon:
a. costs associated with training and professional
development;
b. costs of office space based upon a return of
original cost and a return on the depreciated original
cost, based upon the Nonutility Affiliate's latest cost
of capital and adjusted for tax effects, and/or actual
rental payments made by the Nonutility Affiliate;
c. costs of office supplies;
d. costs for office furniture and equipment based
upon a return of original cost and a return on the
depreciated original cost, based on the Nonutility
Affiliate's latest cost of capital and adjusted for the
income tax effect; and
e. costs for miscellaneous administrative and general
support.
The total labor charges determined in paragraph 3 shall be
increased by the overhead rate.
5. The number of miles traveled in the specific month by
the Nonutility Affiliate's employees in their own vehicles or in
the Nonutility Affiliate's vehicles in performing services for
the Utility Affiliate shall be multiplied by the appropriate per
mile rate at which the Nonutility Affiliate reimburses its
employees for the use of their own personal vehicles for its
business.
6. An amount representing a reasonable return on equity
shall be established for the services provided to the Utility
Affiliate and adjusted for the income tax effect and any return
already included under paragraph 4 above.
The sum of the charges calculated in paragraphs 4, 5 and 6 shall
constitute the cost of services provided by the Nonutility
Affiliate to the Utility Affiliate.
The fair market value of a service provided by a Nonutility
Affiliate to a Utility Affiliate shall be equal to the cost which
the Utility Affiliate would have incurred to obtain such service
if the Nonutility Affiliate could not or would not provide such
service. In determining the fair market value of a service it
provides, the Nonutility Affiliate shall make a good faith effort
to identify the resources necessary to perform the service, and
the value of such services based on a general knowledge of the
relevant market for such or a similar service as well as, if
available, comparison with bids or quotations for such or a
similar service. If the Nonutility Affiliate, despite its good
fair efforts, is not able to determine the fair market value of a
service, the fair market value shall be deemed to be equal to 110
percent of the Nonutility Affiliate's cost, calculated as
described in this Article VI.
The fair market value of a service provided by a Nonutility
Affiliate to a Utility Affiliate shall be compared to the cost to
the Nonutility Affiliate of providing the service and a bill will
be prepared reflecting the lesser of the fair market value or the
cost of providing the service. Bills shall be sent to the
Utility Affiliate for the charges associated with the services
rendered to it by the end of the month following the month on
which the charges were based. Bills shall be due and payable
thirty (30) days after issuance.
Charges of third party suppliers, to the maximum extent
practicable, shall be paid directly by the appropriate company.
Any invoices paid by any party on behalf of any other party will
be billed to the appropriate company.
ARTICLE VII
-----------
Property, both real and personal, which a Nonutility
Affiliate provides by lease, rental or sale to a Utility
Affiliate shall be priced at the lesser of fair market value or
the Nonutility Affiliate's cost.
ARTICLE VIII
------------
Wisconsin Energy (a Nonutility Affiliate) will experience,
as the holding company, costs and expenses in performing certain
activities which, in the absence of a holding company, would have
been performed by the Utility Affiliates and the other Nonutility
Affiliates. Such costs and expenses shall be referred to as
"holding company system costs." Examples, without limitation
because of identification, of activities which will create such
holding company system costs are as follows:
O stockholder relations and communications
O maintenance of stockholder records
O stock and other securities transfer and recordation
O payment of dividends on securities
O administration of stock plans
O preparation and submittal of reports to stockholders, the
Securities and Exchange Commission and other state and/or federal
regulatory tabulation
O stockholders' meetings
O preparation and filing of financing documents including
indentures, registration statements, prospectuses, stock
certificates and any other documents or instruments required or
related to the issuance, sale or purchase of securities by
federal or state laws or regulations
O consolidation of accounting data
O preparation and filing of consolidated tax returns
The allocation of holding company system costs among the
Utility Affiliates and the Nonutility Affiliates (excluding
Wisconsin Energy) as a group, shall be based upon an equal
weighting of the assets, operating expenses (less income taxes)
and gross payroll of each Utility Affiliate and, as a group, the
Nonutility Affiliates (excluding Wisconsin Energy). Companies
which are not wholly owned by Wisconsin Energy shall have their
assets, operating expenses and gross payroll reduced pro rata to
reflect Wisconsin Energy's ownership interest.
The allocation factors will be determined annually. Each
affiliate's percentage of total assets, operating expenses (less
income taxes) and gross payroll will be calculated by comparing
such items to the sum of the affiliates' assets, operating
expenses (less income taxes) and gross payroll. Such figures
will be determined for the three years preceding the year for
which the allocation is to be made. The percentages of assets,
operating expenses and payroll so determined for each affiliate
will themselves be averaged to arrive at each affiliate's overall
average percentage to be used in allocating holding company
system costs.
If and when new affiliates join the Wisconsin Energy system,
allocation factors will be determined as if the affiliate joining
the system were in the system for the entire period covered by
the calculation. These new allocation factors shall be applied
to the holding company system cost pool commencing on the
effective date of the new affiliate's acquisition or formation.
If an affiliate does not have operating results for any
portion of the period, its share of holding company system costs
will be based upon financial analysis until such time as actual
operating results are available.
Any costs incurred by WICOR, Inc. as a holding company
within a holding company shall be allocated to the WICOR family
of companies. The allocation of the WICOR holding company system
costs among the Utility Affiliate and the Nonutility Affiliates
(excluding WICOR, Inc.) as a group, shall be based upon an equal
weighting of the assets, operating expenses (less income taxes)
and gross payroll of the Utility Affiliate and, as a group, the
Nonutility Affiliates (excluding WICOR, Inc.).
ARTICLE IX
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Each person who is an officer both of a Utility Affiliate
and of one or more of the Nonutility Affiliates or a person who
is a member of the incidental supporting staff of such officer,
shall keep a daily record of the amount of time devoted to the
Nonutility Affiliates. If the ratio between the number of hours
devoted in any calendar year by such person to the Nonutility
Affiliates as a group and 2080 hours exceeds the ratio between
the compensation received by such person for that year from the
Nonutility Affiliates as a group and such person's total system
compensation (similarly computed), there shall be a payment made
by Wisconsin Energy, in behalf of the Nonutility Affiliates, to
the Utility Affiliate for its own account of an amount sufficient
to equalize the ratios.
ARTICLE X
---------
This Agreement shall become effective upon the execution by
all parties and approval by the Public Service Commission of
Wisconsin and shall remain in effect until cancelled upon sixty
(60) days written notice given by all of the Utility Affiliates
or all of the Nonutility Affiliates or until replaced by a
successor agreement.
This Agreement may be amended or modified by mutual
agreement of all the parties at any time. Any such modification
or amendment shall not become effective until approved by the
Public Service Commission of Wisconsin.
It is contemplated that as Wisconsin Energy acquires or
forms new Utility Affiliates and Nonutility Affiliates, such
companies will become parties to this Agreement by endorsement.
Nothing herein contained shall be construed to release the
officers and directors of any of the parties from the obligation
to perform their respective duties, or to limit the exercise of
their powers in accordance with the provisions of law or
otherwise. The performance of this Agreement shall be subject to
valid rules, regulations and orders of any regulatory body having
jurisdiction, including approval by the Public Service Commission
of Wisconsin.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized as of the day and year first above
written.
WISCONSIN ENERGY CORPORATION
(Holding Company/Nonutility Affiliate)
By: /s/THOMAS H. FEHRING
--------------------
Title: Corporate Secretary
WISCONSIN ELECTRIC POWER COMPANY
(Utility Affiliate)
By: /s/JEFFREY WEST
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Title: Treasurer
WISCONSIN GAS COMPANY
(Utility Affiliate)
By: /s/JEFFREY WEST
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Title: Treasurer
WICOR, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WICOR ENERGY SERVICES COMPANY
(Nonutility Affiliate)
By: /s/JEFFREY WEST
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Title: Treasurer
WICOR INDUSTRIES, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WICOR FOREIGN SALES CORP.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WEXCO OF DELAWARE, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
STA-RITE INDUSTRIES, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
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Title: Treasurer
SHURFLO PUMP MANUFACTURING CO.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
HYPO CORPORATION
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
FIELDTECH, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
EDISON SAULT ELECTRIC COMPANY
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WISCONSIN ENERGY CAPITAL CORPORATION
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WMF CORP.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
BOSTCO LLC
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WISPARK LLC
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
LEASEHOLD CAPITAL CORPORATION
(Nonutility Affiliate)
By: /s/J.P. FRANKE
--------------
Title: President
SYNDESIS DEVELOPMENT CORPORATION
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WISVEST CORPORATION
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WITECH CORPORATION
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
DELTA GROUP, INC.
(Nonutility Affiliate)
By: /s/J. STEPHEN ANDERSON
----------------------
Title: Director
FURNITURE HOLDINGS, INC.
(Nonutility Affiliate)
By: /s/J. STEPHEN ANDERSON
----------------------
Title: Director
THOR TECHNOLOGY CORPORATION
(Nonutility Affiliate)
By: /s/J. STEPHEN ANDERSON
----------------------
Title: Director
BADGER SERVICE COMPANY
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WEC INTERNATIONAL, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
WEC NUCLEAR CORPORATION
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
MINERGY CORP.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer
NORTHERN TREE SERVICE, INC.
(Nonutility Affiliate)
By: /s/JEFFREY WEST
---------------
Title: Treasurer