EX-99.N5 18 l87086ex99-n5.txt LIST OF EXISTING SERVICE ARRANGEMENTS 1 EXHIBIT N-5 IDENTIFICATION AND DESCRIPTION OF SERVICE ARRANGEMENTS BETWEEN FIRSTENERGY CORP. AND ASSOCIATE COMPANIES PART A - SERVICES PROVIDED BY FIRSTENERGY AT COST FirstEnergy currently provides various services to its subsidiary companies. As described in Item 3.R.1 of the Application/Declaration on Form U-1, these services will be moved to a new "service company" as soon as practical consistent with continued efficient operation of the FirstEnergy system. The first table below lists the FirstEnergy department or function providing services, the recipients, the approximate number of employees involved and estimated expenses for the year ending December 31, 2001 regarding these services. These services are generally provided without a specific written agreement except in certain circumstances regarding services to ATSI. The estimated aggregate amount of services to be provided by FirstEnergy to the FirstEnergy utility subsidiaries in 2001 is: Ohio Edison, $80 million, Cleveland Electric, $67 million, Toledo Edison, $31 million, Penn Power, $12 million and ATSI, $10 million. FirstEnergy anticipates that the dollar amounts of services described below will remain relatively constant subject to reductions resulting from merger synergies and consolidation of service company functions with GPUS increased by the expansion of services necessary to accommodate the GPU Subsidiaries as client companies. FirstEnergy and GPU have appointed transition teams who are working to identify best practices and outline the organization of the service function to be in place following the interim period. FirstEnergy has not yet identified which of the functions listed below will be migrated to a new service company or in what time frame. That information will be developed in the interim period. In general, FirstEnergy expects that the new service company will provide all or most of the services listed below but generally will not engage in "utility operating" functions as has been the case at GPUS. FirstEnergy has a cost allocation manual and policies and guidelines for affiliated company transactions as required by the PUCO in connection with the Corporate Separation Plan. (See Case No. 99-2422-EL-ORD, January 20, 2000). These documents identify what companies provide services to associate companies, define "cost" as fully allocated cost including direct and actual costs plus indirect costs and other appropriate overheads. Cost is substantially the same as "cost" as defined in Rules 90 and 91. FirstEnergy has an automated accounting system to allow for separation of costs among its various business units. A valid responsibility area must be associated with all transactions before any entries can be made in the accounting system. Whenever appropriate, costs specifically attributable to an entity are charged directly to that entity. When services are provided by one entity to another, charges are billed through the 2 Value Based Management (VBM) system. Pricing is at cost unless a market price is allowed. Costs that cannot be directly billed are allocated. Whenever possible costs of services that can be directly assignable are assigned to the entity to whom such costs are attributable. Costs which have a joint benefit are allocated by an appropriate cost causation method (for example, employee benefit costs incurred by corporate support services are allocated based on labor dollars). Costs which have a joint benefit but cannot be allocated on a cost causative basis are allocated through general allocation factors such as revenues. "Corporate sustaining costs" are unattributable costs which jointly benefit all units, such as corporate governance activities such as shareholder services, investor relations, financial reporting, general corporate legal services, risk management and similar areas. These costs are allocated by general allocation factors. Finally, "unallocable" costs are captured at FirstEnergy and are not allocated to any subsidiary. These include FirstEnergy business diversification, political and philanthropic activities. Services currently provided by FirstEnergy are as follows:
APPROXIMATE FY 2001 APPROXIMATE NUMBER OF AMOUNT PROVIDING DEPARTMENT RECIPIENTS* EMPLOYEES ($ IN THOUSANDS) --------------------- ----------- --------------------- -------------------- Administrative Services All 116 30,443 Advanced Technologies All 12 13,019 Business Planning All 13 509 Claims All 7 475 Communications All 19 14,355 Consolidated Call Center FirstEnergy Utility 157 Subsidiaries 11,882 Controller's All 96 22,833 Corporate All 23 6,562 Corporate Administrative Group Admin All 2 793 Corporate Affairs All 7 13,574 Customer Account Services FirstEnergy Utility 83 Subsidiaries 19,726 Enterprise Risk Management All 8 2,727 Federal Government Affairs All 2 1,188 Finance Admin All 14 2,676 Government Affairs All 4 1,283 Human Resources All 93 6,929 Industrial Relations All 27 6,228
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APPROXIMATE FY 2001 APPROXIMATE NUMBER OF AMOUNT PROVIDING DEPARTMENT RECIPIENTS* EMPLOYEES ($ IN THOUSANDS) --------------------- ----------- --------------------- -------------------- Information Services All 414 57,995 Internal Auditing All 16 1,701 Legal All 18 20,848 Project & Support Services All 34 3,113 Rate All 23 5,241 Real Estate All 28 12,546 Supply Chain All 222 28,625 T&D Technical Services All 113 11,955 Treasury All 24 6,832 Workforce Development FirstEnergy Utility 44 Subsidiaries 4,784 Allocated FE Executive and Staff Costs FirstEnergy Utility 10 Subsidiaries, FES, Marbel, FEFSG, FE Generation, FENOC 5,602 Totals 1,718 314,444
* "All" meaning all associate companies including utility and non-utility PART B - SERVICES PROVIDED BY SUBSIDIARIES AT COST Certain Subsidiaries of FirstEnergy provide services to associate companies at cost as defined in Rules 90 and 91. As noted in Item 3.R.4 of the Application/Declaration on Form U-1, FirstEnegy is seeking approval under Rule 87 for the providing entity to continue to provide these services.
NATURE APPROXIMATE FY 2001 OF APPROXIMATE NUMBER OF AMOUNT PROVIDING DEPARTMENT RECIPIENTS* SERVICE EMPLOYEES ($ IN THOUSANDS) --------------------- ----------- -------------------- -------------------- -------------------- ATSI Transmission FirstEnergy Utility Transmission 89 172,592 Subsidiaries; Services at Tariff Transmission At Non-Utility Rates and Misc Tariff and Subsidiaries Technical Services 1,690 Misc at Cost Services at Cost
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NATURE APPROXIMATE FY 2001 OF APPROXIMATE NUMBER OF AMOUNT PROVIDING DEPARTMENT RECIPIENTS* SERVICE EMPLOYEES ($ IN THOUSANDS) --------------------- ----------- -------------------- -------------------- -------------------- FENOC ATSI Maintenance at 3 Davis Besse Plant 67 FES ATSI Pass Through -- Ancillary Services To Third Parties 10,546 FES FirstEnergy Utility Administrative 1 Subsidiaries Services 36 Genco ATSI Maintenance at 88 Burger Plant 32 Genco FirstEnergy Utility Environmental 30 Subsidiaries; Services Non-Utility Subsidiaries 1,021 Genco FirstEnergy Utility Generation 293 Subsidiaries, FENOC Technical Services, Maintenance 5,018 Genco ATSI Maintenance at 2 Sammis Plant 50 Northern Region (CEI) FENOC, ATSI, Genco, Maintenance & 909 FES Construction 8,741 Central Region (OE) FENOC, ATSI, Genco, Maintenance & 613 FES, FE Construction 15,685 Southern Region (OE) ATSI, Genco Maintenance & 264 Construction 8,721 Western Region (TE, OE) FENOC, ATSI, Genco, Maintenance & 551 FES, FE Construction 10,946 Eastern Region (OE, CEI, PP) FENOC, ATSI, Genco, Maintenance & 688 FES Construction 19,023
4 5 PART C - SERVICES PROVIDED AT MARKET PRICES Certain Subsidiaries of FirstEnergy provide services to associate companies at prices other than cost as defined in Rules 90 and 91. As noted in Item 3.R.4 of the Application/Declaration on Form U-1, FirstEnegy requests authorization to allow the arrangements identified in this Part C, as well as extensions, additions and replacements thereof in the ordinary course of business (the "At Market Service Arrangements"), to remain in place for a period ending not later than December 31, 2002 and requests an exemption or waiver under Section 13 from the cost standards of Rules 90 and 91, as applicable, for such At Market Service Arrangements.
NATURE APPROXIMATE FY 2001 OF APPROXIMATE NUMBER OF AMOUNT PROVIDING DEPARTMENT RECIPIENTS* SERVICE EMPLOYEES ($ IN THOUSANDS) --------------------- ----------- -------------------- --------------------- -------------------- FEFSG FirstEnergy; Ohio Maintenance, repair N/A 10,000 to 12,000 Edison; Toledo Edison and modifications of real property First Communications; ATSI Outgoing long N/A N/A FirstEnergy distance, incoming (Administrative Services toll free service Department) First Communications, ATSI Tele-communications N/A N/A FirstEnergy services other than (Administrative Services long distance or toll Department) free services such as point to point data circuits Advanced Tech. FE Corp Fiber-Optics N/A 1,000 Development Corp. (Administrative Services), FE Telecom
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