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EXHIBIT 10b(2)(1)
AMENDMENT NO. 1 TO
CAPCO TRANSMISSION FACILITIES AGREEMENT
THIS AGREEMENT, effective as of the 1st day of January 1, 1993, by and
among The Cleveland Electric Illuminating Company, an Ohio corporation
("CEI"); Duquesne Light Company, a Pennsylvania corporation ("DL"); Ohio
Edison Company, an Ohio corporation; Pennsylvania Power Company, a
Pennsylvania corporation ("PP") and a wholly-owned subsidiary of Ohio Edison
Company which Company and its said subsidiary, except as otherwise provided
herein, are considered as a single Party for the purposes of this Agreement
and referred to as ("OE"); and The Toledo Edison Company, an Ohio corporation
("TE"), each of which is sometimes referred to as a Party, and collectively as
the Parties.
W I T N E S S E T H:
WHEREAS, the Parties entered into the CAPCO Transmission Facilities
Agreement as of September 14, 1967 (herein referred to as the "Agreement");
and
WHEREAS, the Parties entered into an Agreement on January 7, 1993, and
approved an Addendum to the CAPCO Accounting and Procedure Manual to supersede
applicable sections of the manual on a prospective basis as of January 1, 1993
(said Agreement being herein referred to as the "Addendum to CAPCO Accounting
and Procedure Manual" or "Addendum"); and
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WHEREAS, the provisions of the Addendum to the CAPCO Accounting and
Procedure Manual are intended to supersede any provisions of the Agreement
which conflict with or are inconsistent with the Addendum, so that such
conflicts and inconsistencies shall be removed by appropriate written amend-
ments to the Agreement or by other appropriate action; and
WHEREAS, the Parties desire to further amend the Agreement as hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein set forth, the Parties agree as follows:
1. Section 7.02 of the Agreement is amended to read as follows:
The Party owning a CAPCO Line or portion thereof shall bill each
other Party monthly for such other Party's Investment Responsibility
with respect thereto. The invoice date shall be established as soon
as possible after the close of each calendar month, and the owning
Party shall prepare and make all reasonable efforts to transmit
invoices on or before the invoice date to each other Party for such
other Party's Investment Responsibility. The amount billed will be
payable in good funds the 15th calendar day after the invoice date
except that, if the 15th calendar day is not a business day, the
amount billed will be payable the next business day. Good funds shall
consist of checks received at least one business day prior to the due
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date and wire transfers received by noon on the due date. Interest on
unpaid invoice amounts will be compounded monthly and prorated for any
partial month based on a 365-day year, and will accrue at a rate equal
to Chase Manhattan Bank's prime rate on the first day of the then
current calendar quarter plus two percentage points for a period of up
to one year and for any period thereafter at the higher of this rate
or a rate equal to the billing Party's cost of capital which shall
consist of the weighted average of the billing Party's long-term debt
cost and preferred stock cost rates determined for issues outstanding
on December 31 of the prior year and a common equity cost rate to be
effective January 1 of each year equal to the average return on common
equity for at least 50 major electric utilities with positive returns
on common equity as reported in the prior year's December issue of the
C.A. Turner Utility Reports or as reported in the prior year's latest
issue of another report mutually agreed to by the Parties. The
weighting for this calculation shall be the billing Party's capital
structure at December 31 of the prior year, consisting solely of
long-term debt, preferred stock and common equity, as reported in its
FERC Form 1 or in another mutually agreed upon source. Invoices may
not be changed or adjusted after four years from the invoice date, and
invoice amounts to be refunded by the billing Party shall accrue
interest as noted above, but invoice amounts payable to the billing
Party for additional amounts shall not accrue interest.
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To the extent practicable all charges payable or receivable under
this Agreement shall be offset and reduced to a net basis in order to
provide a minimum practicable number of payments among the Parties.
Such statements may be rendered on an estimated basis subject to
corrective adjustments in subsequent statements.
2. Section 17.01 of the Agreement is amended to read as follows:
Any waiver at any time by any Party of its rights with respect to
any matter arising in connection with this Agreement shall not be
deemed a waiver with respect to any subsequent similar matter. Any
delay, short of the statutory period of limitation, in asserting or
enforcing any right under this Agreement, shall not be deemed a waiver
of such right, except as provided in Section 7.02 and Section 14.01.
3. Exhibit B - Computation of Investment Responsibility of the Agreement
is amended to read as attached:
4. Except as herein above amended, all of the terms and conditions of the
Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers this 23rd day of December, 1993.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By: TERRENCE G. LINNERT
Title: Vice President
DUQUESNE LIGHT COMPANY
By: G.R. BRANDENBERGER
Title: Vice President
OHIO EDISON COMPANY
By: ARTHUR P. GARFIELD
Title: Vice President
PENNSYLVANIA POWER COMPANY
By: J. R. EDGERLY
Title: Vice President
THE TOLEDO EDISON COMPANY
By: TERRENCE G. LINNERT
Title: Vice President
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EXHIBIT B
Page 1 of 5
COMPUTATION OF INVESTMENT RESPONSIBILITY
In General
The capital carrying charges for a billing period shall be the capital revenue
requirements for the aggregate of the adjusted CAPCO investment vintages
related to the CAPCO facility. All vintage investments associated with a
facility are considered to be supported by the same pool of capital sources as
reflected currently on the books of the CAPCO company owning the facility.
All income taxes are calculated using statutory tax rates (Federal and state)
currently in effect for the billing period.
Investment Basis
1. The original vintage investments committed to a facility will remain the
basis for all calculations throughout the agreed-upon book depreciation
life, undiminished by any retirements which may occur. The purpose of
this provision is to ensure the complete recovery of the investment
principal placed into service by a given company for the mutual benefit of
the participating CAPCO companies.
2. The existing investment at January 1 of each year shall become the basis
for calculating an annual fixed charge for that year, billable in monthly
increments.
3. New investments placed in service during a given year will incur carrying
charges, excluding both book and tax depreciation effects, billable
monthly effective with the first month following the month in which the
investment is placed in-service. Full fixed charge computations for these
new investments, including both book and tax depreciation effects, will
begin January 1 of the following year (see 2. above). For these purposes,
the initial year (i.e., year #1) for each vintage for book and tax
depreciation purposes shall begin with the first full calendar year
following the initial in-service year.
Book Depreciation
Book depreciation, current and accumulated, shall be calculated for each
vintage in accordance with the straight-line method utilizing agreed-upon
lives for the facilities involved, without regard for any possible interim
investment retirements.
Tax Depreciation
Tax depreciation, current and accumulated, shall be calculated for each
vintage investment in accordance with the applicable tax depreciation system
in effect at the time of the original investment for that vintage.
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EXHIBIT B
Page 2 of 5
Property Insurance Rates
The billing Party shall use a current rate per gross plant investment dollar
to incorporate property insurance costs into the carrying charges for a
facility.
Capital Structure and Cost Rates
Capital Structure: The billing Party will use its capital structure at
December 31 of the prior year, consisting solely of long-term debt, preferred
stock and common equity, as reported in its FERC Form 1 or other mutually
agreed upon source.
Capital Cost Rates:
1. Debt and preferred stock cost rates are the billing Party long-term debt
cost and preferred stock cost rates, determined for issues outstanding at
December 31 of the prior year.
2. The common equity cost rate for CAPCO billing purposes is equal to the
average return on common equity for major electric utilities. The rate to
be effective January 1 of each year will be the average rate reported in
the prior year's December issue of the "C.A. Turner Utility Reports" or as
reported in the prior year's latest issue of another report mutually
agreed to by the Parties. Individual utilities with "zero" or negative
returns on common equity will be excluded from the calculation of the
average return. This average shall include the return on common equity
for at least 50 electric utilities.
Tax Rates
1. Federal Income Tax: The billing Party shall use the current federal
statutory income tax rate for all calculations.
2. State Income Tax: The billing Party shall use its current state statutory
income tax rate for all calculations.
3. Other Taxes: The billing Party shall use its current rates or rate
equivalents for all calculations.
Computation
Each Party's Investment Responsibility with respect to a CAPCO Line or portion
thereof shall be an amount equal to the sum of (1), (2) and (3) below:
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EXHIBIT B
Page 3 of 5
(1) The product of (a) Fixed Charges on the CAPCO Investment Basis and
(b) such Party's allocation percentage. Fixed Charges are defined as the
sum of
(i) book depreciation on the Investment Basis for the period, plus
(ii) return on debt and on common and preferred equity, computed by
applying the weighted capital cost rate for each capital component
to the average undepreciated balance for the period for each
investment vintage, plus
(iii) income taxes on the equity portions of return adjusted for the
effect of any differential in the book and tax depreciation
amounts for the period.
For the purpose of this subparagraph (1), retirements of property from
land Account 350 shall be deducted from the adjusted investment basis of
a given facility, but retirements from depreciable Accounts 352, 353 and
Accounts 354, 355, 356, 359 and 397 shall not be deducted from the
adjusted investment basis of the facility.
Additions to or replacements of property in a given facility in
depreciable Accounts 352, 353 and 354, 355, 356, 359 and 397 shall be
treated as new facilities with new vintage dates except that all such
additions or replacements occurring in the same calendar year will be
considered to have a common vintage month.
(2) The product of (a) the Party's allocation percentage of Investment
Responsibility and (b) the sum of the applicable insurance charges,
property taxes, capital stock taxes, gross receipts tax, or other taxes
incurred by the owning Party in respect to the Line.
(3) The product of (a) the Party's allocation percentage of Investment
Responsibility and (b) the sum of the balances of the Cost, as defined in
Section 2.03, of the Line carried in Accounts 352 and 353 on the owning
Party's books at the end of the preceding month multiplied by the monthly
operation and maintenance expense factor applicable to transmission
substations determined as provided below, and such Cost balances of the
Line carried in Accounts 354, 355, 356, 359 and 397 on the owning Party's
books at the end of the preceding month multiplied by the monthly
operation and maintenance expense factor applicable to transmission
lines, determined as provided below.
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EXHIBIT B
Page 4 of 5
The monthly operation and maintenance expense factor referred to above
for transmission substations is one-twelfth (1/12) of a three-year moving
average ratio, calculated annually, in which the numerator is the most
recent three-calendar-year sum of operation and maintenance expenses
incurred by the billing Party in respect of all 345 kV or higher voltage
transmission substations operated by the billing company and the
denominator is the sum of the calendar year-end Cost balances of such
transmission substations carried in Plant Accounts 352 and 353 on the
books of the billing Party for the corresponding three years. The
operation and maintenance expenses and Cost balances of main step-up
transformers and of the electrical connections and supports from the
transformer to the dead-end insulator attached to the switchyard
structures shall be excluded in determining the expense factor for
transmission substations.
The monthly expense factor for transmission lines is one-twelfth (1/12)
of a three-year moving average ratio, calculated annually, in which the
numerator is the most recent three-calendar-year sum of operation and
maintenance expenses incurred by the billing company in respect of all
345 kV or higher voltage transmission lines operated by the billing
company and the denominator is the sum of the calendar year-end Cost
balances of such transmission lines carried in Plant Accounts 354, 355,
356, 359 and 397 on the books of the billing company for the corre-
sponding three years.
The operation and maintenance expenses reflected in the expense factors
shall consist of the following types of expenses:
a. Direct expenses of operation and maintenance.
b. An allocation of general transmission operation and maintenance
expenses which are associated with all transmission facilities and
functions, such as load dispatching.
c. An allocation of administrative and general expenses.
d. Applicable labor and material additive costs.
For purposes of this Exhibit B, adjusted investment basis is the Cost of the
asset, as defined in Section 2.03, of a CAPCO Line remaining after giving
effect to the following exclusions as applicable:
a. Investment tax credit.
b. Contributions in aid of construction.
c. Reimbursements.
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EXHIBIT B
Page 5 of 5
d. Accumulated book depreciation or amortization prior to designation as
a CAPCO Line.
e. Payroll taxes and pensions capitalized for book purposes but expensed
currently for tax purposes, multiplied by the applicable composite
income tax rate.
f. Other adjustments as required to avoid inequity.