-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F3Vihd7iu+ttz+zTyo/Uzg/6B7LfHIa+iooCSKDSyAyLgxZbs5gBHwf/MCsjnEGF C9GKtnZENx8scijCzsUXhA== /in/edgar/work/0000715957-00-500011/0000715957-00-500011.txt : 20000927 0000715957-00-500011.hdr.sgml : 20000927 ACCESSION NUMBER: 0000715957-00-500011 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000925 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOMINION RESOURCES INC /VA/ CENTRAL INDEX KEY: 0000715957 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 541229715 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: SEC FILE NUMBER: 070-09477 FILM NUMBER: 728178 BUSINESS ADDRESS: STREET 1: 120 TREDEGAR STREET STREET 2: P O BOX 26532 CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8048192000 MAIL ADDRESS: STREET 1: P O BOX 26532 STREET 2: 901 EAST BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23261 U-1/A 1 u1asrvc.txt File No. 70-09477 As filed with the Securities and Exchange Commission on September 25, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM U-1 APPLICATION-DECLARATION - ----------------------------------------------------------- - ------------ POST-EFFECTIVE AMENDMENT NO. 8 TO APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 - ----------------------------------------------------------- - ----------- Dominion Resources, Inc. 120 Tredegar Street Richmond, VA 23219 Consolidated Natural Gas Company 120 Tredegar Street Richmond, VA 23219 (Name of company filing this statement and address of principal executive offices) - ----------------------------------------------------------- - --------- Dominion Resources, Inc. (Name of top registered holding company parent of each applicant or declarant) - ----------------------------------------------------------- - ----------- James F. Stutts Vice President and General Counsel Dominion Resources, Inc. 120 Tredegar Street Richmond, VA 23219 (Name and address of agent for service) - ----------------------------------------------------------- - -------- The Commission is also requested to send copies of any communication in connection with this matter to: Norbert F. Chandler, Esq. Managing Counsel Consolidated Natural Gas Service Company, Inc. CNG Tower, 625 Liberty Street Pittsburgh, PA 15222 Tia S. Barancik, Esq. LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street New York, NY 10019-5389 APPLICATION-DECLARATION UNDER SECTIONS 9(a), 10, 12 , and 13 OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 FOR APPROVAL OF REVISED SERVICE AGREEMENT AND RELATED MATTERS Item 1. Description of Proposed Transactions. This post-effective amendment to the Application- Declaration of the Applicants in File No. 70-9477 is submitted, under the Public Utility Holding Company Act of 1935 (the "Act") in connection with proposed changes in the standard service agreement (the "Current Agreement") of Dominion Resources Services, Inc. ("DRI Services") and Consolidated Natural Gas Service Company, Inc.("CNG Services"). The Current Agreement was put in place following the merger (the "Merger") of Dominion Resources, Inc. ("DRI") and Consolidated Natural Gas Company ("CNG"), which was approved in this proceeding by the Securities and Exchange Commission (the "Commission") on December 15, 1999, HCAR No. 35-27113 (the "Order"), and completed on January 28, 2000. This amendment supplements and completes the record with respect to certain matters set forth in the Order. CNG Services was formed in 1966, and DRI Services was formed by DRI as a new subsidiary service company in late 1999 in anticipation of the Merger. After closing of the Merger, DRI Services and CNG Services entered into the Current Agreement, a new single system-wide service agreement, with DRI and all principal subsidiaries of DRI including subsidiaries of CNG. The Current Agreement was modeled on the service agreement in effect for the CNG system prior to the Merger. The DRI-CNG combined system has thus to date been operating with two service companies, and each system company has had the opportunity to elect to purchase services from either service company. The Order requires that no later than March 31, 2001, all service functions will be centralized and a single service company will provide all routine service functions to the DRI-CNG combined system. The Order further authorized that, for a limited period of time ending no later than March 31, 2001, Virginia Electric and Power Company ("Virginia Power"), an electric utility company subsidiary of DRI, can provide certain services to system companies under a subcontract with DRI Services (the "Virginia Power Support Agreement"). DRI has committed to make whole any company for any excess payment made to Virginia Power. The Virginia Power Support Agreement has and continues to serve as a practical and efficient means for Virginia Power to provide to DRI Services the same types of services that it has historically provided to DRI system companies. The Virginia Power Support Agreement was established primarily to be the Virginia State Corporation Commission ("VSCC") approved contractual framework for which services may be performed by Virginia Power for its affiliates. The Order also authorized Ancillary Service Agreements under which individual system companies subject to VSCC jurisdiction can contract with other associate companies for specific services. The VSCC has not approved the Ancillary Service Agreement for use by Virginia Power or Virginia Natural Gas Company ("VNG"), the only DRI system utility companies subject to VSCC jurisdiction. However such agreements have been put into place among the other DRI system gas utility companies and Dominion Transmission, Inc. pursuant to Rule 87. DRI and CNG now propose the following. 1. The merger of CNG Services into DRI Services. CNG Services, a Delaware corporation, has issued and outstanding 100 shares of common stock, $100 par value per share. DRI Services, a Virginia corporation, has issued and outstanding 100 shares of common stock, no par value per share. CNG Services will be merged with DRI Services, with DRI Services being the surviving corporation. All the outstanding common stock of CNG Services will be cancelled pursuant to the merger. 2. Adoption of a new standard system service agreement. DRI has completed an analysis and review of services currently centralized and considered efficiencies to be gained by a combination of the two service companies, and, as a result, propose revisions to the Current Agreement. Changes will be made to the basis of allocation to reflect consideration of what services and groups will be in the combined services company. Certain wording changes will also be made to the Current Agreement in order to update references, eliminate unnecessary detail, clarify the mechanics of the methods of cost allocation and better align the allocation basis with the cost driver of the service. Accordingly, a revised DRI system service agreement (the "New Agreement") would be executed, effective January 1, 2001, by DRI Services with all the subsidiaries of DRI with which it is a party under the Current Agreement. The New Agreement will supersede and replace all of such earlier service agreements. A form of the New Agreement is attached as Exhibit K-3.1. A matrix showing the changes to allocations methods together with a copy of the Current Agreement marked to show changes between it and the New Agreement will be provided to the staff as supplemental information. Request is made for approval of the New Agreement. Request is also made for authority for DRI Services to use a "60-day letter proceeding" to obtain any required Commission clearance with respect to changes to the New Agreement. In this regard, no change in the organization of DRI Services, the type and character of the companies to be serviced, the method of allocating costs to associate companies, or in the scope or character of services to be rendered, shall be made unless and until DRI Services shall have given the Commission written notice of such proposed changes not less than 60 days prior to the effectiveness of any such change. If upon the receipt of any such notice, the Commission within the 60-day period shall notify DRI Services that a question exists as to whether the aforesaid proposed change is consistent with the provisions of Section 13 of the Act, or any rule, regulation or order thereunder, the proposed change shall not become effective unless and until DRI Services shall have filed with the Commission an appropriate declaration with respect to such proposed change, and the Commission shall have permitted such declaration to become effective. 3. Amendment and continuation of the Virginia Power Support Agreement During the post-Merger transition period to date, considerable personnel and service functions have been moved from Virginia Power to DRI Services to centralize functions and services. It has been determined by DRI that movement of other functions at this time would be disruptive and would create no significant efficiencies. DRI has moved (or will move effective January 1, 2001) the following functions from Virginia Power into DRI Services. Auditing Legal Employee Benefits/Pension Investment Executive and Administrative Environmental Compliance Risk Management Tax Treasury/Finance However, Virginia Power still retains some service functions primarily needed in its own operations but which are also of some importance to its affiliates. The Commonwealth of Virginia has mandated disaggregation of generating facilities by electric utility companies subject to its jurisdiction by January 1, 2002, which date is subject to possible extension by the state legislature. Further changes are likely in Virginia Power's service arrangements not only in connection with the disaggregation of its generating assets, but also in connection with further anticipated changes in the DRI system to ultimately conform its legal structure to its functional business structure. It is therefore proposed that the Virginia Power Support Agreement be terminated and replaced with a revised Virginia Power Support Agreement ("Revised Virginia Power Support Agreement") which would be substantially reduced in scope from the current agreement. Request is made to approve the Revised Virginia Power Support Agreement for use until July 1, 2002 to allow time during the aforementioned structural changes for further study of and adjustments to Virginia Power's methods of rendering services to DRI affiliates. Virginia Power may, after July 1, 2002, provide de minimis services to associate companies through DRI Services. A form of the Revised Virginia Power Support Agreement is filed as Exhibit K-3.2. Costs that are to be allocated under the Revised Virginia Power Support Agreement will include all costs of doing business including interest on debt and a return for the use of equity capital. A copy of the current Virginia Power Support Agreement marked to show changes between it and the new agreement will be provided to the staff as supplemental information. In connection with the transfer of service functions and personnel from Virginia Power to DRI Services, Virginia Power may sell furnishings, fixtures and equipment relating to the transferred functions to DRI Services at cost. It is estimated that these assets will have an aggregate net book value of approximately $20 million. Even though the assets are in Virginia Power's rate base, such assets are deemed to not be "utility assets' as defined in Section 2(a)(18) of the Act because they are not facilities in place for the production, transmission, transportation or distribution of electric energy. Additionally, certain assets and liabilities in the form of employee benefit related accounts will be transferred from Virginia Power to DRI Services. The North Carolina Utilities Commission approved the Merger upon several regulatory conditions with which DRI is required to comply. One of the conditions was that in any filing with the Commission under the Act made in connection with asset transfers involving Virginia Power doing business in North Carolina as North Carolina Power ("NC Power"), DRI is to make a request that the Commission include certain language in its order. DRI, therefore, requests that the following language be included in the order to be issued in this proceeding: Approval of this application in no way precludes the North Carolina Utilities Commission from scrutinizing and establishing the value of the asset transfer for purposes of determining the rates for services rendered to NC Power's customers. It is the Commission's intention that the North Carolina Utilities Commission retain the right to review and determine the value of such asset transfer for purposes of determining rates. 4. DRI Services to succeed CNG Services Pursuant to the merger of CNG Services into DRI Services, DRI Services will succeed to all the legal rights and obligations of CNG Services. Commensurately, request is made for DRI Services to succeed to all authorizations granted by the Commission to CNG Services under the Act. Particularly, DRI Services would take the place of CNG Services with respect to the CNG Money Pool. By orders dated June 12 and July 16, 1986 (HCAR Nos. 24128 and 24150), as amended by orders dated May 27, 1987 (HCAR No. 24399), February 14, 1990 (HCAR No. 25040), May 13,1991 (HCAR No. 25311), April 8, 1994 (HCAR No. 26021), and July 18, 1997 (HCAR No. 26742), the Commission permitted the application-declaration of CNG and subsidiaries to become effective, thereby authorizing the establishment of the CNG Money Pool. CNG Services both administers and participates in the CNG Money Pool. After satisfaction of the borrowing needs of the CNG subsidiary companies authorized to participate in the Money Pool, CNG Services, as agent for the Pool, invests excess funds and allocates the earnings among those participant companies providing such excess funds. Subsequent to the merger of the two service companies, DRI Services would administer and participate in the CNG Money Pool with respect to the activities of the CNG subsidiaries in the same capacity as CNG Services does now. During the quarter ended June 30, 2000, CNG Services contributed $73,681,000 to the money pool, withdrew $45,964,000 from the money pool, and had an outstanding credit of $36,917,000 at the end of the quarter. The extent of CNG Services participation in the Money Pool during the past several months has been abnormally high due to Merger related activities. The degree of participation by CNG Services (and DRI Services after January 1, 2001) in the Money Pool is expected to be substantially lower in the future. On May 8, 2000, Dominion and CNG entered into a Stock Purchase Agreement, with AGL Resources Inc. ("AGL") dated as of May 8, 2000 ("Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, CNG will sell all of the outstanding common stock of VNG to AGL for $500 million in cash, or $550 million if at the option of CNG, the parties elect to treat the transaction as a sale of assets for tax purposes, commonly referred to as a Section 338(h)(10) election. This sale was made pursuant to a commitment made by DRI and CNG to the VSCC to sell VNG in order to obtain such commission's approval, in September 1999, of the merger of Dominion and CNG. In connection with the sale of VNG, CNG and AGL propose to enter into an agreement pursuant to which CNG or its affiliates will provide transition services to VNG for a period of one year subsequent to the effective date of the sale. It is anticipated that some of such services will be of the same type that are currently being provided by CNG Services to VNG. Such services will be provided to VNG by DRI Services and its affiliates subsequent to the merger of CNG Services into DRI Services. A form of the transition services agreement between CNG and AGL is Exhibit 5.11.1 to the Stock Purchase Agreement, which itself has been filed on June 26, 2000 as Exhibit B-2 to Post-Effective Amendment No. 6 in the proceeding under File No. 70-9477. 5. Status of Ancillary Service Agreements. The Ancillary Service Agreements may be amended in a manner similar to the amendment to the Current Agreement. In addition, Ancillary Service Agreements will be entered by certain subsidiaries of CNG (including gas utility companies) to allow provision of services by such subsidiaries to DRI Services which will, in turn, provide the services through the New Agreement to Virginia Power. This would be in accordance with the VSCC's intent to have all services from and to Virginia Power to be run through DRI Services for ease of regulatory oversight. Item 2. Fees, Commissions and Expenses. The fees, commissions and expenses to be paid or incurred, directly or indirectly, in connection with seeking the authorizations herein requested are estimated as follows: Fee, Commission or Expense Thousands Legal Fees and Expenses $50 ======= Total $50 Item 3. Applicable Statutory Provisions. The following sections of the 1935 Act and the Commission's rules thereunder are or may be directly or indirectly applicable to the proposed transactions for which authorization is sought in this Application- Declaration. Section of/Rule under Transactions to which such the 1935 Act Section/Rule is or may be applicable Sections 9(a) and 10 Merger of CNG Services into DRI Services Section 12(b) DRI Services participation in the CNG Money Pool Section 13 Adoption of revised service agreements Item 4. Regulatory Approvals. Approval of the revised New Agreement will be sought from the state utility commissions of Virginia, North Carolina, Pennsylvania and West Virginia. Approval of the revised Virginia Power Support Agreement will be sought from the state utility commissions in Virginia and North Carolina. DRI and CNG require no other regulatory approvals or consents to complete the transactions contemplated by this post-effective amendment. Item 5. Procedure. The Commission is respectfully requested forthwith to issue an order of the Commission granting and permitting this post-effective amendment to this Application-Declaration to become effective. It is submitted that a recommended decision by a hearing or other responsible officer of the Commission is not needed for approval of the disposition of VNG. The Division of Investment Management may assist in the preparation of the Commission's decision. There should be no waiting period between the issuance of the Commission's order and the date on which it is to become effective. Item 6. Exhibits and Financial Statements. Exhibit D-7.1 Application to the Virginia State Corporation Commission. Exhibit D-7.2 Order of the Virginia State Corporation Commission. (To be filed by amendment) Exhibit D-8.1 Application to the North Carolina Utilities Commission. Exhibit D-8.2 Order of the North Carolina Utilities Commission. (To be filed by amendment) Exhibit D-9.1 Application to the Pennsylvania Public Utility Commission. Exhibit D-9.2 Order of the Pennsylvania Public Utility Commission. (To be filed by amendment) Exhibit D-10.1 Application to the West Virginia Public Service Commission. Exhibit D-10.2 Order of the West Virginia Public Service Commission (To be filed by amendment) Exhibit K-3.1 Form of New Service Agreement. Exhibit K-3.2 Form of Revised Virginia Power Support Agreement. Item 7. Information as to Environmental Effects. The changes in service company arrangements neither involve a "major federal action" nor "significantly affect the quality of the human environment" as those terms are used in Section 10(2)(C) of the National Environmental Policy Act, 42 U.S.C. Section 4321, et seq. The only federal actions related to the changes in service company arrangements pertain to the Commission's approval of this post-effective amendment to this Application-Declaration under the 1935 Act and the other approvals and actions described in Item 4 above. The changes in service company arrangements will not result in changes in the operations of DRI, CNG or any of their respective subsidiaries that would have any impact on the environment. No federal agency is preparing an environmental impact statement with respect to this matter. Pursuant to the Public Utility Holding Company Act of 1935, each of the undersigned companies has caused this Application-Declaration to be signed on its behalf by the undersigned thereunto duly authorized. DOMINION RESOURCES, INC. CONSOLIDATED NATURAL GAS COMPANY By: James F. Stutts By: James F. Stutts __________________ __________________________ Name: James F. Stutts Name: James F. Stutts Title: Vice President and Title: Vice President and General Counsel General Counsel Date: September 25, 2000 Date: September 25, 2000 EX-4 2 wvapp.txt Exhibit D-10.1 September 25, 2000 Mrs. Sandra Squire Executive Secretary Public Service Commission Of West Virginia P.O. Box 812 Charleston, WV 25323 Re: Case No. 00-_______________-G-PC Hope Gas, Inc. Petition for Consent and Approval of Services Agreement between Affiliates Dear Mrs. Squire: On Behalf of Hope Gas, Inc., enclosed, please find an original and thirteen (13) copies of a Petition of Hope Gas, Inc. for Consent and Approval to Enter Into a Contract for Services With an Affiliated Corporation. I would appreciate your stamping one of the enclosed copies of this filing as "received", and returning it to me at the address listed above. Thank you for your attention to this matter. Sincerely, Susan G. George Chief Counsel STATE OF WEST VIRGINIA PUBLIC SERVICE COMMISSION CHARLESTON Case No. 00-_____________-G-PC HOPE GAS, INC. Petition for Approval of Service Agreement Between Affiliates PETITION OF HOPE GAS, INC. FOR CONSENT AND APPROVAL TO ENTER INTO A CONTRACT FOR SERVICES WITH AN AFFILIATED CORPORATION Hope Gas, Inc. dba Dominion Hope (hereinafter "Dominion Hope" or "Petitioner") respectfully petitions the Commission for consent and approval to enter into a contractual arrangement with its sister affiliate, Dominion Resource Services, Inc. (hereinafter "DRS"), in which Hope will be receiving from its affiliate a variety of management, administrative and other services. In support of this petition, Petitioner respectfully represents as follows: 1. The name and address of the Petitioner are: Hope Gas, Inc. dba Dominion Hope P. O. Box 2868 Clarksburg, WV 26302-2868 2. The name and address of the affiliate that will be providing certain management, administrative or other services from or to Petitioner are: Dominion Resources Services, Inc. P.O. Box 26532 120 Tredegar Street Richmond, VA 23219 Petitioner and DRS are wholly owned subsidiaries of Dominion Resources, Inc. (hereinafter "DRI"). Waiver of the requirement to produce the certificate of incorporation of DRS is hereby requested since provision of this document would serve no discernible useful purpose. DRS is not subject to the jurisdiction of this Commission. 3. The agreement for which Dominion Hope seeks approval in this instance is a service agreement for a variety of administrative, management, and other services by DRS, which will supplant an agreement between Hope Gas, Inc. and DRS and Consolidated Natural Gas Service Company, Inc. (hereinafter CNG Services). The existing service agreement was approved by this Commission by order dated January 14, 2000, Case No. 99-1552-G-PC. CNG Services was formed in 1966, and DRS was formed by DRI in anticipation of the merger of DRI and Consolidated Natural Gas Company (hereinafter "CNG"). After closing of the merger on January 28, 2000, which was approved by this Commission by order dated July 27, 1999, Case No. 99-0462- G-PC, DRS and CNG Services entered into the aforementioned existing service agreement. To date, the DRI/CNG combined system has been operating with two service companies, DRS and CNG Services, both subsidiaries of DRI. By order of the Securities and Exchange Commission, all service functions for the DRI/CNG combined system are to centralized and provided by a single company no later than March 31, 2001. DRI has completed an analysis and review of efficiencies to be gained by the combination of the two service companies and proposes revisions to the aforementioned existing agreement. Changes will be made to the basis of allocation to reflect what services and groups will be in the combined services company. Certain wording changes will also be made to the existing services agreement in order to update references, eliminate unnecessary detail, and clarify the mechanics of the methods of cost allocation. A copy of the proposed agreement between Dominion Hope and DRS is attached hereto as "Exhibit A", and a comparison between the existing agreement and the proposed agreement is attached as "Exhibit B". 4. The financial condition of Petitioner was reviewed in Dominion Hope's most recent base rate case, Case No. 98-0001-G-42T. Waiver of the requirement to produce information on the financial condition of DRS is hereby requested since provision of this information would serve no discernible useful purpose. DRS is not subject to the jurisdiction of this Commission. 5. The proposed agreement will have no deleterious effect upon Petitioner's provision of natural gas service in West Virginia. 6. The prayer of the Petitioner should be granted since the proposed agreement (i) is fair and reasonable, (ii) gives nothing party thereto an advantage over the other and (iii) is in the public interest. Furthermore, the benefits derived from this agreement will enable Petitioner to conduct its public utility business more efficiently. WHEREFORE, Petitioner respectfully requests that the Commission grant its consent and approval to Dominion Hope's entering into this proposed Service Agreement; that notice and hearing be dispensed with; and that the Commission grant Dominion Hope such further authority in connection with this petition as may be just and proper. Respectfully submitted, HOPE GAS, INC. By_________________________________ Susan G. George, Esquire Chief Counsel Hope Gas, Inc. P. O. Box 2868 Clarksburg, WV 26302- 2868 (304) 623-8679 West Virginia I.D. #7390 Dated: September 25, 2000 EX-2 3 ncappl.txt Exhibit D-8.1 STATE OF NORTH CAROLINA UTILITIES COMMISSION RALEIGH DOCKET NO. E-22, SUB 385 BEFORE THE NORTH CAROLINA UTILITIES COMMISSION In the Matter of Petition By Virginia Electric and Power Company, dba North Carolina Power, for Approval of Certain Exemptions and/or Contracts with Affiliates ) ) ) ) ) ) ) PETITION FOR APPROVAL OF CONTRACTS WITH AFFILIATE AND FOR TRANSFERS OF ASSETS AND LIABILITIES TO AFFILIATE AND EXEMPTION OF FUTURE SIMILAR TRANSFERS FROM G. S. 62-153 By Order of the North Carolina Utilities Commission (the "Commission") dated July 27, 2000 in the instant proceeding, the Commission approved under G. S 62- 153: (1) that certain agreement between Dominion Resources Services, Inc. ("DRS"), Consolidated Natural Gas Service Company, Inc. ("CNG Service") and Virginia Electric and Power Company, dba North Carolina Power ("NC Power"), (the "Original Services Agreement") and (2) that certain agreement between NC Power and DRS ("Original Support Agreement"), both filed with and made part of such proceeding. The Commission imposed, as a condition to the Order approving the Original Services Agreement and Original Support Agreement, a requirement that no changes be made to the terms and conditions of the Original Services Agreement or the Original Support Agreement without prior Commission approval in this docket. The parties to the Original Services Agreement now wish to replace that agreement with a new service agreement that reflects the proposed merger of DRS and CNG Service and the adoption of certain modified allocation methodologies which will more accurately reflect the operations of the companies to whom services are provided. Accordingly, NC Power hereby requests Commission approval of the new service agreement between DRS and NC Power, a true copy of which is attached hereto as Exhibit 1 (the "New Services Agreement") and NC Power requests Commission authorization to terminate the Original Services Agreement. The parties to the Original Support Agreement wish to make certain revisions to that agreement in order to reduce the number of services covered by the agreement and to clarify certain aspects of the agreement's cost allocation methodologies. Accordingly, NC Power hereby requests Commission approval of a new support agreement, a true copy of which is attached hereto as Exhibit 2 ("New Support Agreement") and authorization to terminate the Original Support Agreement. The reduction in NC Power services to DRS reflects successful efforts to transfer those services from NC Power to DRS and to staff DRS with employees associated with those services. It is necessary also to transfer to DRS certain NC Power general plant assets and equipment under capital leases associated with those services and employees and certain employee benefit-related assets and liabilities. Accordingly, NC Power and DRS hereby request the Commission to approve the transfer of those assets and liabilities. Finally, NC Power requests the Commission to exempt similar future transfers from the requirements of G. S. 62-153. In support of this Petition, NC Power respectfully states as follows: Petitioners 1. NC Power is a Virginia public service corporation providing electric service to customers in its service territory in Virginia and North Carolina. NC Power is a wholly-owned subsidiary of Dominion Resources, Inc. ("Dominion"). Dominion is a "holding company" as defined in the Public Utility Holding Company Act of 1935 ("1935 Act") and is subject to regulation as such by the Securities and Exchange Commission ("SEC"). DRS and CNG Service also are subsidiaries of Dominion. The attorneys of record for NC Power are: Edward L. Flippen Stephen H. Watts, II Kodwo Ghartey-Tagoe McGuireWoods, LLP One James Center 901 East Cary Street Richmond, Virginia 23219 (804) 775-1000 (Phone) Pamela Johnson Sharon L. Burr Jill Hayek Dominion Resources Services, Inc. P.O. Box 26666 Richmond, Virginia 23261-6666 (804) 771-3549 (Phone) NC Power's address is: Virginia Electric and Power Company 701 East Cary Street Richmond, Virginia 23219 New Services Agreement 2.Under the 1935 Act, registered holding companies are prohibited from performing services for or selling goods to their subsidiaries. One of the benefits of a holding company structure, however, is that the members can operate more efficiently by sharing the cost of centralized services. In order to allow registered holding companies to take advantage of such efficiencies, the SEC has authorized registered holding companies to establish a service company subsidiary to provide centralized services to the registered holding company and its subsidiaries. 1935 Act, Section 13(b) and Rule 88. 3.Consolidated Natural Gas Company ("CNG") established such a subsidiary, CNG Service, to perform centralized services for CNG subsidiaries at their election. Additionally, in anticipation of becoming a registered holding company in connection with its acquisition of CNG, Dominion established a service company subsidiary, DRS, to offer centralized services for Dominion and its subsidiaries ("Dominion Companies"). When DRS became operational, it had no experience with operations of a centralized service company under the 1935 Act. Additionally, at such time CNG Service had no experience with the provision of services to the types of business operations, including major electric generation, transmission and distribution businesses, owned by Dominion. Under these circumstances it was not realistic for either such service company to be the exclusive provider of centralized services for all of the Dominion Companies. Accordingly, the Commission and the SEC each granted authority for DRS and CNG Service to operate in tandem under the Original Services Agreement, so that all of the Dominion Companies would be able to obtain from DRS and CNG Service those services necessary to meet their needs. 4.On December 15, 1999, the SEC issued an Order Authorizing Acquisition of Public Utility Companies and Related Transactions; Approving Service Company Arrangements; and Reserving Jurisdiction in which it, in part, approved the formation of DRS and the participation of DRS, CNG Service and NC Power in the Original Services Agreement and the participation by DRS and NC Power in the Original Support Agreement (Dominion Resources, Inc and Consolidated Natural Gas Company, Release No. 35-27113; 70-9477) (the "SEC Order"). The SEC Order provides, in part, for Dominion to submit a revised centralized services agreement to the SEC for a supplemental order on or before February 1, 2001. Pursuant to the SEC Order, the revised service agreement is to reflect the consolidation of most services into a single service provider, together with any requested amendments and modifications designed to reflect the efficiencies and administrative synergies of the combined operations of Dominion and CNG. In order to comply with the SEC Order, DRS and CNG Service propose to merge effective January 1, 2001, with DRS being the surviving entity. DRS would then be the sole subsidiary service company for the Dominion Companies. 5.In order to reflect the merger of DRS and CNG Service described above, NC Power proposes to terminate the Original Services Agreement, which would be replaced by the New Services Agreement. In addition to changes reflecting the consolidation of DRS and CNG Service, certain of the allocation provisions have been modified to better align the allocation bases with the cost drivers of the services. A detailed description and explanation of these modifications is contained in Exhibit 3. A blacklined version of the New Services Agreement compared to the Original Services Agreement is contained in Exhibit 4. New Support Agreement 6.The Original Support Agreement was established to enable DRS to obtain from NC Power certain services necessary for DRS to provide centralized services to the Dominion Companies. The SEC Order also provided that any revisions to the Original Support Agreement were to be reflected in the Dominion filing to be made with the SEC by February 1, 2001. DRS has determined that, although it no longer needs, or will not need as of January, 2001, all of the services contemplated by the Original Support Agreement, it will continue to need certain services from NC Power covered by that agreement. DRS and NC Power have identified a number of services that should be removed from the agreement (Auditing, Legal, Employee/Benefits/Pension Investment, Executive and Administration, Environmental Compliance, Exploration and Development, Risk Management, Tax and Treasury/Finance), as well as certain other revisions that should be made to clarify the agreement's cost allocation methodologies. In order to make these revisions, DRS and NC Power propose to terminate the Original Support Agreement and replace it with the New Support Agreement between DRS and NC Power. A blacklined version of the New Support Agreement compared to the Original Support Agreement is contained in Exhibit 5. 7.As proposed, immediately upon the merger of DRS and CNG Service, (a) the Original Services Agreement would be terminated, and NC Power and DRS would replace it by executing the New Services Agreement in the form of Exhibit 1; and (b) the Original Support Agreement would be terminated and NC Power and DRS would replace it by executing the New Support Agreement in the form of Exhibit 2. Therefore, NC Power and DRS request this Commission to approve the New Services Agreement and New Support Agreement under the Affiliates Act, such that NC Power and DRS may enter into the New Services Agreement and New Support Agreement without the need to file for further approval from the Commission. Transfer of NC Power Assets and Liabilities to DRS 8.Since the Original Services Agreement became effective, NC Power and DRS have worked to reduce the number and types of services that DRS needs from NC Power. As a result of this effort, a number of services have been transferred (or will be transferred as of January 1, 2001) from NC Power to DRS, such that DRS is able to reduce the list of services covered by the Original Support Agreement, as stated above. As this effort has progressed, DRS has become, or will become by January 1, 2001, staffed with employees to perform the transferred services. It is necessary also for certain NC Power assets associated with the transferred services to be transferred to DRS, as well. 9.NC Power proposes to transfer three primary classes of assets to DRS: (a) general plant; (b) equipment covered under capital leases and (c) certain employee benefit-related assets and liabilities. General plant to be transferred includes office furniture and fixtures, data processing equipment hardware, communications equipment and miscellaneous equipment. The data processing equipment includes personal computers owned by NC Power, as well as printers, fax machines and other peripheral- type equipment. The communications equipment includes telephone system, voice mail system, microwave radio and fiber optic transceiver assets. The equipment covered by capital leases is primarily personal computers. The general plant assets are currently accounted for by using mass asset accounting. As a result, the assets to be transferred have been determined based on an allocation as described below. The asset amounts to be transferred to DRS were determined by first identifying those NC Power locations that house DRS employees. Calculations of the total gross amounts of general plant were made for each location. These costs were allocated to DRS based on head counts. A proportionate share of the depreciation was allocated to the assets to be transferred. Assets held under capital leases were assigned to DRS based on a head count of the total number of DRS employees. An estimated summary of these assets to be transferred is contained in Exhibit 6. A schedule showing the estimated journal entries accounting for the transfer of these NC Power assets to DRS is contained in Exhibit 7. Finally, certain employee benefit-related accounts relating to benefits of employees and executives of NC Power that are now employees of DRS need to be transferred to DRS. Beginning on the date of employee transfer, the accruals for such benefits have been recorded at DRS. However, amounts previously accrued for these employees/executives are still reflected on the books of NC Power. As ultimate payment of such benefits will be made from DRS, assets and liabilities associated with these employee benefits which have been accumulated at NC Power should be transferred to DRS. A schedule showing the estimated journal entries accounting for the transfer of these employee benefit- related assets and liabilities is contained in Exhibit 8. In the future, DRS expects to continue its efforts to develop its own capacity to perform services covered by the New Support Agreement. As that occurs, and as DRS staffs accordingly, the need will continue to arise for additional general plant assets, assets under capital leases and employee benefit- related assets and liabilities to be transferred from NC Power to DRS. NC Power and DRS respectfully request the Commission to exempt such future transfers of assets and liabilities from the approval requirements of G. S. 62 153 so long as such transfers are conducted in accordance with the procedures approved by the Commission in this proceeding, timely reports of such transfers are submitted to the Commission, and subject to such other limitations as the Commission determines are appropriate. 10.In order for DRS to be able to perform the services that will no longer be performed by NC Power beginning January 1, 2001, DRS needs to acquire the assets and liabilities proposed to be transferred from NC Power described above. NC Power and DRS request the Commission to approve the transfer of assets and liabilities, as proposed. WHEREFORE, NC Power respectfully requests the Commission to issue an order; (a) approving the New Services Agreement and the New Support Agreement, (b) terminating the Original Services Agreement and the Original Support Agreement, (c) approving the proposed transfer of NC Power assets and liabilities to DRS, all effective on the later of January 1, 2001 or the closing of the merger between DRS and CNG Service; and (d) exempting future similar transfers of assets and liabilities from NC Power to DRS from the prior approval requirements of G. S. 62-153. Respectfully submitted this 22nd day of September, 2000. VIRGINIA ELECTRIC AND POWER COMPANY, dba NORTH CAROLINA POWER By: Stephen H. Watts, II Counsel for North Carolina Power Edward L. Flippen Kodwo Ghartey-Tagoe Stephen H. Watts, II McGuireWoods, LLP One James Center 901 East Cary Street Richmond, Virginia 23219 Pamela Johnson Sharon L. Burr Jill Hayek Dominion Resources Services, Inc. P.O. Box 26666 Richmond, Virginia 23261-6666 VERIFICATION I am attorney representing VIRGINIA ELECTRIC AND POWER COMPANY, dba North Carolina Power ("NC Power"), in connection with its Petition for Approval of Contracts with Affiliate and Transfers of Assets and Liabilities to Affiliate in Docket No. E-22, Sub 385; I am authorized on behalf of NC Power to submit this Petition on its behalf; I am familiar with the contents of said petition; and the statements of fact contained therein are true and correct to the best of my knowledge. Stephen H. Watts, II Subscribed and sworn to me this 22nd day of September, 2000. Carol A. Rifenberrick Notary Public My Commission Expires:December 31, 2000 EX-1 4 virappl.txt Exhibit D-7.1 COMMONWEALTH OF VIRGINIA BEFORE THE STATE CORPORATION COMMISSION Joint Petition of VIRGINIA ELECTRIC AND POWER COMPANY, Principal Petitioner CASE NO. PUA990068 and DOMINION RESOURCES SERVICES, INC., and CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC., Affiliate Petitioners For approval and termination of agreements, transfer of assets and liabilities under Chapter 4, Title 56, Code of Virginia of 1950, as amended, and for exemption of future similar transactions from the requirements of Section 56-77A of the Code of Virginia, as amended PETITION FOR APPROVAL AND TERMINATION OF AGREEMENTS, TRANSFER OF ASSETS AND LIABILITIES UNDER CHAPTER 4, TITLE 56, CODE OF VIRGINIA OF 1950, AS AMENDED, AND FOR EXEMPTION OF FUTURE SIMILAR TRANSACTIONS FROM THE REQUIREMENTS OF Section 56-77A OF THE CODE OF VIRGINIA, AS AMENDED By Order of the Virginia State Corporation Commission (the "Commission") dated December 29, 1999 in the instant proceeding, the Commission approved (1) that certain agreement between Dominion Resources Services, Inc. ("DRS"), Consolidated Natural Gas Service Company, Inc. ("CNG Service") and Virginia Electric and Power Company ("Virginia Power") (the "Original Services Agreement") and (2) that certain agreement between Virginia Power and DRS ("Original Support Agreement"), both filed with and made part of such proceeding. The Commission imposed, as a condition to the Order approving the Original Services Agreement and Original Support Agreement, a requirement that no changes be made to the terms and conditions of the Original Services Agreement or the Original Support Agreement without prior Commission approval. The parties to the Original Services Agreement now wish to replace that agreement with a new service agreement that reflects the proposed merger of DRS and CNG Service and the adoption of certain modified allocation methodologies which will more accurately reflect the operations of the companies to whom services are provided. Accordingly, Virginia Power and DRS hereby request Commission approval of the new service agreement between DRS and Virginia Power, a true copy of which is attached hereto as Exhibit 1 (the "New Services Agreement") and Virginia Power, DRS and CNG Service request Commission authorization to terminate the Original Services Agreement. The parties to the Original Support Agreement wish to make certain revisions to that agreement in order to reduce the number of services covered by the agreement and to clarify certain aspects of the agreement's cost allocation methodologies. Accordingly, Virginia Power and DRS hereby request Commission approval of a new support agreement, a true copy of which is attached hereto as Exhibit 2 ("New Support Agreement") and authorization to terminate the Original Support Agreement. The reduction in Virginia Power services to DRS reflects successful efforts to transfer those services from Virginia Power to DRS and to staff DRS with employees associated with those services. It is necessary also to transfer to DRS certain Virginia Power general plant assets and equipment under capital leases associated with those services and employees and certain employee benefit-related assets and liabilities. Accordingly, Virginia Power and DRS hereby request the Commission to approve the transfer of those assets and liabilities. Finally, Virginia Power requests under Virginia Code Section 56-77B exemption of similar future transfers from the requirements of subsection A of that section. A completed Transaction Summary in support of this Petition is contained in Exhibit 3 to this Petition. In support of this Petition, Virginia Power, DRS and CNG Service respectfully state as follows: Petitioners 1. Virginia Power is a Virginia public service corporation providing electric service to customers in its service territory in Virginia and North Carolina. Virginia Power is a wholly-owned subsidiary of Dominion Resources, Inc. ("Dominion"). Dominion is a "holding company" as defined in the Public Utility Holding Company Act of 1935 ("1935 Act") and is subject to regulation as such by the Securities and Exchange Commission ("SEC"). DRS and CNG Service also are subsidiaries of Dominion. The attorneys of record for Virginia Power, DRS and CNG Service are: Edward L. Flippen Stephen H. Watts, II McGuireWoods, LLP One James Center 901 East Cary Street Richmond, Virginia 23219 (804) 775-1000 (Phone) The attorneys of record for Virginia Power are: Pamela Johnson Sharon L. Burr Dominion Resources Services, Inc. P.O. Box 26666 Richmond, Virginia 23261-6666 (804) 771-3549 (Phone) Virginia Power's address is: Virginia Electric and Power Company 701 East Cary Street Richmond, Virginia 23219 New Services Agreement 2. Under the 1935 Act, registered holding companies are prohibited from performing services for or selling goods to their subsidiaries. One of the benefits of a holding company structure, however, is that the members can operate more efficiently by sharing the cost of centralized services. In order to allow registered holding companies to take advantage of such efficiencies, the SEC has authorized registered holding companies to establish a service company subsidiary to provide centralized services to the registered holding company and its subsidiaries. 1935 Act, Section 13(b) and Rule 88. 3. Consolidated Natural Gas Company ("CNG") established such a subsidiary, CNG Service, to perform centralized services for CNG subsidiaries at their election. Additionally, in anticipation of becoming a registered holding company in connection with its acquisition of CNG, Dominion established a service company subsidiary, DRS, to offer centralized services for Dominion and its subsidiaries ("Dominion Companies"). When DRS became operational, it had no experience with operations of a centralized service company under the 1935 Act. Additionally, at such time CNG Service had no experience with the provision of services to the types of business operations, including major electric generation, transmission and distribution businesses, owned by Dominion. Under these circumstances it was not realistic for either such service company to be the exclusive provider of centralized services for all of the Dominion Companies. Accordingly, the Commission and the SEC each granted authority for DRS and CNG Service to operate in tandem under the Original Services Agreement, so that all of the Dominion Companies would be able to obtain from DRS and CNG Service those services necessary to meet their needs. 4. On December 15, 1999, the SEC issued an Order Authorizing Acquisition of Public Utility Companies and Related Transactions; Approving Service Company Arrangements; and Reserving Jurisdiction in which it, in part, approved the formation of DRS and the participation of DRS, CNG Service and Virginia Power in the Original Services Agreement and the participation by DRS and Virginia Power in the Original Support Agreement (Dominion Resources, Inc and Consolidated Natural Gas Company, Release No. 35-27113; 70-9477) (the "SEC Order"). The SEC Order provides, in part, for Dominion to submit a revised centralized services agreement to the SEC for a supplemental order on or before February 1, 2001. Pursuant to the SEC Order, the revised service agreement is to reflect the consolidation of most services into a single service provider, together with any requested amendments and modifications designed to reflect the efficiencies and administrative synergies of the combined operations of Dominion and CNG. In order to comply with the SEC Order, DRS and CNG Service propose to merge effective January 1, 2001, with DRS being the surviving entity. DRS would then be the sole subsidiary service company for the Dominion Companies. 5. In order to reflect the merger of DRS and CNG Service described above, Virginia Power, DRS and CNG Service propose to terminate the Original Services Agreement, which would be replaced by the New Services Agreement. In addition to changes reflecting the consolidation of DRS and CNG Service, certain of the allocation provisions have been modified to better align the allocation bases with the cost drivers of the services. A detailed description and explanation of these modifications is contained in Exhibit 4. A blacklined version of the New Services Agreement compared to the Original Services Agreement is contained in Exhibit 5. New Support Agreement 6. The Original Support Agreement was established to enable DRS to obtain from Virginia Power certain services necessary for DRS to provide centralized services to the Dominion Companies. The SEC Order also provided that any revisions to the Original Support Agreement were to be reflected in the Dominion filing to be made with the SEC by February 1, 2001. DRS has determined that, although it no longer needs, or will not need as of January, 2001, all of the services contemplated by the Original Support Agreement, it will continue to need certain services from Virginia Power covered by that agreement. DRS and Virginia Power have identified a number of services that should be removed from the agreement (Auditing, Legal, Employee/Benefits/Pension Investment, Executive and Administration, Environmental Compliance, Exploration and Development, Risk Management, Tax and Treasury/Finance), as well as certain other revisions that should be made to clarify the agreement's cost allocation methodologies. In order to make these revisions, DRS and Virginia Power propose to terminate the Original Support Agreement and replace it with the New Support Agreement between DRS and Virginia Power. A blacklined version of the New Support Agreement compared to the Original Support Agreement is contained in Exhibit 6. 7. As proposed, immediately upon the merger of DRS and CNG Service, (a) the Original Services Agreement would be terminated, and Virginia Power and DRS would replace it by executing the New Services Agreement in the form of Exhibit 1; and (b) the Original Support Agreement would be terminated and Virginia Power and DRS would replace it by executing the New Support Agreement in the form of Exhibit 2. Therefore, Virginia Power and DRS request this Commission to approve the New Services Agreement and New Support Agreement under the Affiliates Act, such that Virginia Power and DRS may enter into the New Services Agreement and New Support Agreement without the need to file for further approval from the Commission. Transfer of Virginia Power Assets and Liabilities to DRS 8. Since the Original Services Agreement became effective, Virginia Power and DRS have worked to reduce the number and types of services that DRS needs from Virginia Power. As a result of this effort, a number of services have been transferred (or will be transferred as of January 1, 2001) from Virginia Power to DRS, such that DRS is able to reduce the list of services covered by the Original Support Agreement, as stated above. As this effort has progressed, DRS has become, or will become by January 1, 2001, staffed with employees to perform the transferred services. It is necessary also for certain Virginia Power assets associated with the transferred services to be transferred to DRS, as well. 9. Virginia Power proposes to transfer three primary classes of assets to DRS: (a) general plant; (b) equipment covered under capital leases and (c) certain employee benefit-related assets and liabilities. General plant to be transferred includes office furniture and fixtures, data processing equipment hardware, communications equipment and miscellaneous equipment. The data processing equipment includes personal computers owned by Virginia Power, as well as printers, fax machines and other peripheral-type equipment. The communications equipment includes telephone system, voice mail system, microwave radio and fiber optic transceiver assets. The equipment covered by capital leases is primarily personal computers. The general plant assets are currently accounted for by using mass asset accounting. As a result, the assets to be transferred have been determined based on an allocation as described below. The asset amounts to be transferred to DRS were determined by first identifying those Virginia Power locations that house DRS employees. Calculations of the total gross amounts of general plant were made for each location. These costs were allocated to DRS based on head counts. A proportionate share of the depreciation was allocated to the assets to be transferred. Assets held under capital leases were assigned to DRS based on a head count of the total number of DRS employees. An estimated summary of these assets to be transferred is contained in Exhibit 7. A schedule showing the estimated journal entries accounting for the transfer of these Virginia Power assets to DRS is contained in Exhibit 8. Finally, certain employee benefit-related accounts relating to benefits of employees and executives of Virginia Power that are now employees of DRS need to be transferred to DRS. Beginning on the date of employee transfer, the accruals for such benefits have been recorded at DRS. However, amounts previously accrued for these employees/executives are still reflected on the books of Virginia Power. As ultimate payment of such benefits will be made from DRS, assets and liabilities associated with these employee benefits which have been accumulated at Virginia Power should be transferred to DRS. A schedule showing the estimated journal entries accounting for the transfer of these employee benefit-related assets and liabilities is contained in Exhibit 9. In the future, DRS expects to continue its efforts to develop its own capacity to perform services covered by the New Support Agreement. As that occurs, and as DRS staffs accordingly, the need will continue to arise for additional general plant assets, assets under capital leases and employee benefit-related assets and liabilities to be transferred from Virginia Power to DRS. Virginia Power and DRS respectfully request the Commission to exercise its authority under Section 56-77A to exempt such future transfers of assets and liabilities from the prior approval requirements of Section 56-77B so long as such transfers are conducted in accordance with the procedures approved by the Commission in this proceeding, timely reports of such transfers are submitted to the Commission, and subject to such other limitations as the Commission determines are appropriate. 10. In order for DRS to be able to perform the services that will no longer be performed by Virginia Power beginning January 1, 2001, DRS needs to acquire the assets and liabilities proposed to be transferred from Virginia Power described above. Virginia Power and DRS request the Commission to approve the transfer of assets and liabilities, as proposed. WHEREFORE, Virginia Power respectfully requests the Commission to issue an order; (a) approving the New Services Agreement and the New Support Agreement, (b) terminating the Original Services Agreement and the Original Support Agreement, (c) approving the proposed transfer of Virginia Power assets and liabilities to DRS, all effective on the later of January 1, 2001 or the closing of the merger between DRS and CNG Service; and (d) exempting under Section 56-77B future similar transfers of assets and liabilities from Virginia Power to DRS from the prior approval requirements of subsection A of that section. Respectfully submitted, VIRGINIA ELECTRIC AND POWER COMPANY By: G. Scott Hetzer Senior Vice President and Treasurer DOMINION RESOURCES SERVICES, INC. By: James L. Trueheart Group Vice President and Chief Administrative Officer CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. By: James L. Trueheart Group Vice President VERIFICATION I, G. Scott Hetzer, Senior Vice President and Treasurer of VIRGINIA ELECTRIC AND POWER COMPANY, do solemnly swear that the facts stated in the foregoing petition and Exhibits thereto are to the best of my knowledge and belief true and correct and that said statements of fact constitute a complete statement of matters to which they relate. G. Scott Hetzer Subscribed and sworn to me this 22 day of September, 2000. Brenda G. Long Notary Public My Commission Expires: August 31, 2003 VERIFICATION I, James L. Trueheart,Group Vice President and Chief Administrative Officer of DOMINION RESOURCES SERVICES, INC., do solemnly swear that the facts stated in the foregoing petition and Exhibits thereto are to the best of my knowledge and belief true and correct and that said statements of fact constitute a complete statement of matters to which they relate. James L. Trueheart Subscribed and sworn to me this 22nd day of September, 2000. Brenda G. Long Notary Public My Commission Expires: August 31, 2003 VERIFICATION I, James L. Trueheart, Group Vice President of CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC., do solemnly swear that the facts stated in the foregoing petition and Exhibits thereto are to the best of my knowledge and belief true and correct and that said statements of fact constitute a complete statement of matters to which they relate. James L. Trueheart Subscribed and sworn to me this 22nd day of September, 2000. Brenda G. Long Notary Public My Commission Expires: August 31, 2003 EX-3 5 pennapp.txt Exhibit D-9.1 September 25, 2000 James McNulty, Secretary Pennsylvania Public Utility Commission P.O. Box 3265 Harrisburg, PA 17105-3265 Re: Affiliated Interest Agreement between The Peoples Natural Gas Company d/b/a Dominion Peoples and Dominion Resource Services, Inc.; G-________ Dear Secretary McNulty: The Peoples Natural Gas Company d/b/a Dominion Peoples (hereinafter "Dominion Peoples") hereby makes this filing pursuant to 66 Pa. C. S. Section 2101-2107 concerning relations with affiliated interests. In particular, Dominion Peoples is seeking approval of an agreement, a copy of which is attached hereto as "Exhibit A", between Dominion Peoples and Dominion Resources Services, Inc. (hereinafter DRS) in anticipation of the merger of DRS and Consolidated Natural Gas Services Company, Inc. (hereinafter CNG Services) into one company. The agreement for which Dominion Peoples seeks approval in this instance is a service agreement for a variety of administrative, management, and other services by DRS, which will supplant an agreement between The Peoples Natural Gas Company and Dominion Resources Services, Inc. and CNG Services. The existing service agreement was approved by this Commission by order dated January 12, 2000 at Docket No. G-00990713. CNG Services was formed in 1966, and DRS was formed by Dominion Resources, Inc. (hereinafter DRI) in anticipation of the merger of DRI and CNG. After closing of the merger on January 28, 2000, which was approved by this Commission by order dated June 25, 1999 at Docket No. A-122250F0010, DRS and CNG Services entered into the aforementioned existing service agreement. To date, the DRI/CNG combined system has been operating with two service companies, DRS and CNG Services, both subsidiaries of DRI. By order of the Securities and Exchange Commission, all service functions for the DRI/CNG combined system are to centralized and provided by a single company no later than March 31, 2001. DRI has completed an analysis and review of efficiencies to be gained by the combination of the two service companies and proposes revisions to the aforementioned existing agreement. Changes will be made to the basis of allocation to reflect what services and groups will be in the combined services company. Certain wording changes will also be made to the existing services agreement in order to update references, eliminate unnecessary detail, and clarify the mechanics of the methods of cost allocation. A comparison of the existing agreement and the proposed agreement is attached hereto as "Exhibit B". Dominion Peoples seeks approval of the new services agreement in anticipation of the merger of DRS and CNG Services in the first quarter of 2001 after all other necessary regulatory approvals have been obtained. The new service agreement will become effective as of the effective date of the DRS/CNG Services Merger. Please date stamp and return to me the enclosed copy of this transmittal letter in the envelope provided. Thank you. Very truly yours, Susan Garland George Enclosure SGG arw EX-5 6 drsagr.txt Exhibit K-3.1 DRS Services Agreement This DRS Services Agreement (this "Agreement") is entered into as of the 1st day of January, 2001, by and between _____________________, a corporation (the "Company"), and DOMINION RESOURCES SERVICES, INC., a Virginia corporation, ("DRS"). DRS is sometimes referred to herein as "Service Company". WHEREAS, each of the Company and DRS is a direct or indirect wholly-owned subsidiary of Dominion Resources, Inc. ("Dominion") a registered holding company subject to regulation as such by the Securities and Exchange Commission ("SEC") under the Public Utility Holding Company Act of 1935 ("1935 Act"); WHEREAS, the Company is a natural gas utility engaged in the sale of natural gas service at retail within its service territories in ______________; WHEREAS, DRS has been formed for the purpose of providing administrative, management and other services to Dominion and its subsidiaries ("Dominion Companies") as a subsidiary service company under Rule 88 of the rules and regulations of the SEC for implementation of the 1935 Act, 17 C. F. R. Section 250.88; WHEREAS, the Company believes that it is in the interest of the Company to provide for an arrangement whereby the Company may, from time to time and at the option of the Company, agree to purchase such administrative, management and other services from DRS; WHEREAS, DRS is an affiliate of the Company and therefore certain types of contracts between DRS and the Company are subject to the requirements of 66 Pa. C.S.A. Section 2101, et seq.; NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SERVICES OFFERED. Exhibit I hereto lists and describes all of the services that are available from DRS. DRS hereby offers to supply those services to the Company. Such services are and will be provided to the Company only at the request of the Company. SERVICES SELECTED. Initial Selection of Services. Exhibit II lists the services the Company hereby agrees to receive from DRS. Annual Selection of Services. DRS shall send an annual service proposal form to the Company on or about December 1 listing services proposed for the coming calendar year. By December 31, the Company shall notify DRS of the services the Company has elected to receive from DRS during the following calendar year. PERSONNEL. DRS will provide services by utilizing the services of such executives, accountants, financial advisers, technical advisers, attorneys, engineers, geologists and other persons as have the necessary qualifications. If necessary, DRS, after consultation with the Company, may also arrange for the services of nonaffiliated experts, consultants and attorneys in connection with the performance of any of the services supplied under this Agreement. COMPENSATION AND ALLOCATION. As and to the extent required by law, DRS will provide such services at cost. Exhibit III hereof contains rules for determining and allocating costs for DRS. TERMINATION AND MODIFICATION. Modification of Services. The Company may modify its selection of services at any time during the calendar year by giving DRS written notice of the additional services it wishes to receive, and/or the services it no longer wishes to receive, from DRS. The requested modification in services shall take effect on the first day of the first calendar month beginning at least thirty (30) days after the Company sent written notice to DRS. Modification of Other Terms and Conditions. No other amendment, change or modification of this Agreement shall be valid, unless made in writing and signed by all parties hereto. Termination of this Agreement. The Company may terminate this Agreement by providing sixty (60) days advance written notice of such termination to DRS. DRS may terminate this Agreement by providing sixty (60) days advance written notice of such termination to the Company. This Agreement is subject to termination or modification at any time to the extent its performance may conflict with the provisions of the 1935 Act, or with any rule, regulation or order of the SEC adopted before or after the making of this Agreement. This Agreement shall be subject to the approval of any state commission or other state regulatory body whose approval is, by the laws of said state, a legal prerequisite to the execution and delivery or the performance of this Agreement. NOTICE. Where written notice is required by this Agreement, said notice shall be deemed given when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows: a. To the Company: b. To DRS: Dominion Resources Services, Inc. 120 Tredegar Street Richmond, VA 23219 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of Virginia, without regard to their conflict of laws provisions. ENTIRE AGREEMENT. This Agreement, together with its exhibits, constitutes the entire understanding and agreement of the parties with respect to its subject matter, and effective upon the execution of this Agreement by the respective parties hereof and thereto, any and all prior agreements, understandings or representations with respect to this subject matter are hereby terminated and canceled in their entirety and are of no further force and effect. WAIVER. No waiver by any party hereto of a breach of any provision of this Agreement shall constitute a waiver of any preceding or succeeding breach of the same or any other provision hereof. ASSIGNMENT. This Agreement shall inure to the benefit of and shall be binding upon the parties and their respective successors and assigns. No assignment of this Agreement or any party's rights, interests or obligations hereunder may be made without the other party's consent, which shall not be unreasonably withheld, delayed or conditioned; provided, however, that, subject to the requirements of applicable state and federal regulatory law, either party may assign its rights, interests or obligations under this Agreement to an affiliate, as that term is defined in the 1935 Act, without the consent of the other party. SEVERABILITY. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby. EFFECTIVE DATE. This Agreement is effective as of January 1, 2001. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above mentioned. Company By_________________________________ DRS: By_________________________________ Thomas N. Chewning, Executive Vice President and Chief Financial Officer EXHIBIT I DESCRIPTION OF SERVICES OFFERED BY DRS UNDER THIS DRS SERVICES AGREEMENT Accounting. Provide advice and assistance to Dominion Companies in accounting matters, including the development of accounting practices, procedures and controls, the maintenance of the general ledger and related subsidiary systems, the preparation and analysis of financial reports, and the processing of certain accounts such as accounts payable, accounts receivable, and payroll. Auditing. Periodically audit the accounting records and other records maintained by Dominion Companies and coordinate their examination, where applicable, with that of independent public accountants. The audit staff will report on their examination and submit recommendations, as appropriate, on improving methods of internal control and accounting procedures. Legal and Regulatory. Provide advice and assistance with respect to legal and regulatory issues as well as regulatory compliance, including 1935 Act authorizations and compliance and regulatory matters under other Federal and State laws. Information Technology, Electronic Transmission and Computer Services. Provide the organization and resources for the operation of an information technology function including the development, implementation and operation of a centralized data processing facility and the management of a telecommunications network. This function includes the central processing of computerized applications and support of individual applications in Dominion Companies. Develop, implement, and process those computerized applications for Dominion Companies that can be economically best accomplished on a centralized basis. Software Pooling. Accept from Dominion Companies ownership of and rights to use, assign, license or sub-license all software owned, acquired or developed by or for Dominion Companies which Dominion Companies can and do transfer or assign to it. Preserve and protect the rights to all such software to the extent reasonable and appropriate under the circumstances; license Dominion Companies, on a non- exclusive, no-charge or at-cost basis, to use all software which DRS has the right to sell, license or sub-license; and, at the relevant Dominion Companies' expense, permit Dominion Companies to enhance any such software and license others to use all such software and enhancements to the extent that DRS shall have the legal right to so permit. Employee Benefits/Pension Investment. Provide central accounting for employee benefit and pension plans of Dominion Companies. Advise and assist Dominion Companies in the administration of such plans and prepare and maintain records of employee and company accounts under the said plans, together with such statistical data and reports as are pertinent to the plans. Human Resources. Advise and assist Dominion Companies in the formulation and administration of human resources policies and programs relating to the relevant Dominion Companies' labor relations, personnel administration, training, wage and salary administration and safety. Operations. Advise and assist Dominion Companies in the study, planning, engineering and construction of energy plant facilities of each Dominion Company and of the Dominion Companies as a whole, and advise, assist and manage the planning, engineering (including maps and records) and construction operations of Dominion Companies. Develop long-range operational programs for all the Dominion Companies and advise and assist each such Dominion Company in the coordination of such programs with the programs of the other Dominion Companies. Executive and Administrative. Advise and assist Dominion Companies in the solution of major problems and in the formulation and execution of the general plans and policies of Dominion Companies. Advise and assist Dominion Companies as to operations, the issuance of securities, the preparation of filings arising out of or required by the various Federal and State securities, business, public utilities and corporation laws, the selection of executive and administrative personnel, the representation of Dominion Companies before regulatory bodies, proposals for capital expenditures, budgets, financing, acquisition and disposition of properties, expansion of business, rate structures, public relationships and other related matters. Business and Operations Services. Advise and assist Dominion Companies in all matters relating to operational capacity and the preparation and coordination of operating studies. Manage Dominion Companies' purchase, movement, transfer and accounting of fuel and gas volumes. Compile and communicate information relevant to company operation. Perform general business and operations support services, including business, plant and facilities operation, maintenance and management, travel, aviation, fleet and mail services. Exploration and Development. Advise and assist Dominion Companies in all geological and exploration matters including the acquisition and surrender of acreage and the development of underground storage facilities. Risk Management. Advise and assist Dominion Companies in securing requisite insurance, in the purchase and administration of all property, casualty and marine insurance, in the settlement of insured claims and in providing risk prevention advice. Marketing. Plan, formulate and implement marketing programs, as well as provide associated marketing services to assist Dominion Companies with improving customer satisfaction, load retention and shaping, growth of energy sales and deliveries, energy conservation and efficiency. Assist Dominion Companies in carrying out policies and programs for the development of plant locations and of industrial, commercial and wholesale markets and assist with community redevelopment and rehabilitation programs. Medical. Direct and administer all medical and health activities of Dominion Companies. Provide systems of physical examination for employment and other purposes and direct and administer programs for the prevention of sickness. Corporate Planning. Advise and assist Dominion Companies in the study and planning of operations, budgets, economic forecasts, capital expenditures and special projects. Supply Chain. Advise and assist Dominion Companies in the procurement of real and personal property, materials, supplies and services, conduct purchase negotiations, prepare procurement agreements and administer programs of material control. Rates. Advise and assist Dominion Companies in the analysis of their rate structure in the formulation of rate policies, and in the negotiation of large contracts. Advise and assist Dominion Companies in proceedings before regulatory bodies involving the rates and operations of Dominion Companies and of other competitors where such rates and operations directly or indirectly affect Dominion Companies. Research. Investigate and conduct research into problems relating to production, utilization, testing, manufacture, transmission, storage and distribution of energy. Keep abreast of and evaluate for Dominion Companies all research developments and programs of significance affecting Dominion Companies and the energy industry, conduct research and development in promising areas and advise and assist in the solution of technical problems arising out of Dominion Companies' operations. Tax. Advise and assist Dominion Companies in the preparation of Federal and other tax returns, and generally advise Dominion Companies as to any problems involving taxes including the provision of due diligence in connection with acquisitions. Corporate Secretary. Provide all necessary functions required of a publicly held corporation. Coordinate information and activities among shareholders, the transfer agent, and Board of Directors. Provide direct services to security holders. Prepare and file required annual and interim reports to shareholders and the SEC. Conduct the annual meeting of shareholders and ensure proper maintenance of corporate records. Investor Relations. Provide fair and accurate analysis of Dominion and its operating subsidiaries and its outlook within the financial community. Enhance Dominion's position in the energy industry. Balance and diversify shareholder investment in Dominion through a wide range of activities. Provide feedback to Dominion and its operating subsidiaries regarding investor concerns, trading and ownerships. Hold periodic analysts meetings, and provide various operating data as requested or required by investors. Environmental Compliance. Provide consulting, cleanup, and other activities as required by Dominion Companies to ensure full compliance with applicable environmental statutes and regulations. Customer Services. Provide services and systems dedicated to customer service, including billing, remittance, credit, collections, customer relations, call centers, energy conservation support and metering. Energy Marketing. Provide services and systems dedicated to energy marketing, including marketing and trading of energy commodities and related services, and energy price risk management and development of marketing and sales programs in physical and financial markets. Treasury/Finance. Provide services related to managing all administrative activities associated with financing, including management of capital structure; cash, credit and risk management activities; investment and commercial banking relationships; oversight of decommissioning trust funds and general financing activities. External Affairs. Provide services in support of corporate strategies for managing relationships with federal, state and local governments, agencies and legislative bodies. Formulate and assist with public relations, advertising, and external/internal communications programs and with the administration of corporate contribution and community affairs programs. EXHIBIT II SERVICES THE COMPANY AGREES TO RECEIVE FROM DRS SERVICE YES NO 1. Accounting _____ 2. Auditing _____ 3. Legal and Regulatory _____ 4. Information Technology, Electronic Transmission and Computer Services _____ 5. Software Pooling _____ 6. Employee Benefits/Pension Investment _____ 7. Human Resources _____ 8. Operations _________________ 9. Executive and Administrative _____ 10. Business and Operations Services _____ 11. Exploration and Development _____ 12. Risk Management _____ 13. Marketing _____ 14. Medical _____ 15. Corporate Planning _____ 16. Supply Chain _____ 17. Rates _____ 18. Research _____ 19. Tax _____ 20. Corporate Secretary _____ 21. Investor Relations _____ 22. Environmental Compliance _____ 23. Customer Services _____ 24. Energy Marketing _____ 25. Treasury/Finance _____ 26. External Affairs _____ EXHIBIT III METHODS OF ALLOCATION FOR DRS DRS shall allocate costs among companies receiving service from it under this and similar service contracts using the following methods: The costs of rendering service by DRS will include all costs of doing business including interest on debt but excluding a return for the use of equity capital for which no charge will be made to Dominion Companies. A. DRS will maintain a separate record of the expenses of each department. The expenses of each department will include: those expenses that are directly attributable to such department, and an appropriate portion of those office and housekeeping expenses that are not directly attributable to a department but which are necessary to the operation of such department. B. Expenses of the department will include salaries and wages of employees, rent and utilities, materials and supplies, depreciation, and all other expenses attributable to the department. The expenses of a department will not include: those incremental out-of-pocket expenses that are incurred for the direct benefit and convenience of an individual Dominion Company or group of Dominion Companies, DRS overhead expenses that are attributable to maintaining the corporate existence of DRS, and all other incidental overhead expenses including those auditing fees, internal auditing department expenses and accounting department expenses attributable to DRS. C. DRS will establish annual budgets for controlling the expenses of each department and for determining estimated costs to be included in interim monthly billing. A. Employees in each department will be divided into two groups: Group A will include those employees rendering service to Dominion Companies, and Group B will include those office and general service employees, such as secretaries, file clerks and administrative assistants, who generally assist employees in Group A or render other housekeeping services and who are not engaged directly in rendering service to each Dominion Company or a group of Dominion Companies. B. Expenses set forth in Section II. above will be separated to show: salaries and wages of Group A employees, and all other expenses of the department. C. There will be attributed to each dollar of a Group A employee's salary or wage, that percentage of all other expenses of such employee's department (as defined in B above), that such employee's salary or wage is to the total Group A salaries and wages of that department. D. Group A employees in each department will maintain a record of the time they are employed in rendering service to each Dominion Company or group of Dominion Companies. An hourly rate will be determined by dividing the total expense attributable to a Group A employee as determined under subsection C above by the productive hours reported by such employee. The charge to the Dominion Company for a particular service will be determined by multiplying the hours reported by Group A employees in rendering such service to each Dominion Company by the hourly rates applicable to such employees. When such employees render service to a group of Dominion Companies, the charge to each Dominion Company will be determined by multiplying the hours attributable to the Dominion Company under the allocation formulas set forth in Section IX of this Exhibit by the hourly rates applicable to such employees. To the extent appropriate and practical, the foregoing computations of hourly rates and charges may be determined for groups of employees within reasonable salary range limits. Those expenses of DRS that are not included in the annual expense of a department under Section II. above will be charged to Dominion Companies receiving service as follows: A. Incremental out-of-pocket costs incurred for the direct benefit and convenience of a Dominion Company or group of Dominion Companies will be charged directly to such Dominion Company or group of Dominion Companies. Such costs incurred for a group of Dominion Companies will be allocated on the basis of an appropriate formula. B. DRS overhead expenses referred to in Section II above will be charged to the Dominion Company either on the proportion of direct charges to that Dominion Company or under the allocation formulas set forth in Section IX of this Exhibit. Notwithstanding the foregoing basis of determining cost allocations for billing purposes, cost allocations for certain services involving machine operations, production or service units, or facilities cost will be determined on an appropriate basis established by DRS. Monthly bills will be issued for the services rendered to the Dominion Company on an actual or estimated basis. Estimates will normally be predicated on service department budgets and estimated productive hours of employees for the year. At the end of each year, estimated figures will be revised to reflect actual experience during such year and adjustments will be made in amounts billed to give effect to such revision. When Group A employees render services to a group of Dominion Companies, the following formulas shall be used to allocate the time of such employees to the individual Dominion Companies receiving such service: A. The Service Department or Function formulas to be used when employees render services to all Dominion Companies participating in such service, for the services indicated are set forth below. Service Department or Function Basis of Allocation Accounting: Payroll Processing Number of employees on the previous December 31st. Accounts Payable Processing Number of accounts payable documents processed during the preceding year ended December 31st. Fixed Assets Accounting Dominion Company fixed assets added, retired or transferred during the preceding year ended December 31st. Accounts Receivable Processing Number of payments processed during the preceding year ended December 31st. Information Technology, Electronic Transmission, and Computer Services: LDC/EDC Computer Applications Number of customers at the end of the preceding year ended December 31st. Other Computer Applications Number of users or usage of specific computer systems at the end of the preceding year ended December 31st. Network Computer Applications Number of network devices at the end of the preceding year ended December 31st. Telecommunications Applications Number of telecommunications units at the end of the preceding year ended December 31st Employee Benefits/Pension Investment: Employee Benefits/ Pension Investments The number of employee and annuitant accounts as of the preceding December 31st. Human Resources: Human Resources The number of employees as of the preceding December 31st. Business and Operations Services: Energy Services Energy sale and deliveries for the preceding year ended December 31st. Facility Services Square footage of office space as of the preceding year ended December 31st. Fleet Administration Number of vehicles as of the preceding December 31st Security The number of employees as of the preceding December 31st. Gas Supply Gas volumes purchased for each Dominion Company for the preceding year ended December 31st. Risk Management: Risk Management Insurance premiums for the preceding year ended December 31st. Marketing: Shared Projects Annual marketing plan expenses for the preceding year ended December 31st. Other Indirect Costs Total marketing direct and shared project costs billed to each Dominion Company for the preceding year ended December 31st. Medical: Medical Services Number of employees on the previous December 31st. Corporate Planning: Corporate Planning Total capitalization recorded at preceding December 31st. Supply Chain: Purchasing Dollar value of purchases for the preceding year ended December 31st. Materials Management Material inventory assets as of the preceding year ended December 31st. Tax: Tax Accounting and Compliance The sum of the total income and total deductions as reported for Federal Income Tax purposes on the last return filed. Customer Services: Customer Payment (Remittance) Processing Number of customer payments processed during the preceding year ended December 31st. Other Customer Services For metering, the number of gas or electric meters for the preceding year ended December 31st; otherwise the number of customers for the preceding year ended December 31st. Treasury/ Finance: Treasury and Cash Management Total capitalization recorded at preceding December 31st. Rates Total regulated company operating expenses, excluding purchased gas expense, purchased power expense (including fuel expense), other purchased products and royalties, for the preceding year ended December 31st. Research Gross revenues from the sale of natural gas (including intercompany sales) and electricity, recorded during the preceding year ended December 31st. B. Company Group Formulas to be used in the absence of a service department or function formula or when service rendered by employees is for a different group of Dominion Companies than those companies regularly participating in such service: Company Group Basis of Allocation All Dominion Companies (includes all Dominion Companies except DRS) Total operating expenses, excluding purchased gas expense, purchased power expense (including fuel expense), other purchased products and royalties, for the preceding year ended December 31st for the affected Dominion Companies. C. If the use of a basis of allocation would result in an inequity because of a change in operations or organization, then DRS may adjust the basis to effect an equitable distribution. 5 5 2 7 EX-6 7 vpsa.txt Exhibit K-3.2 REVISED VIRGINIA POWER SUPPORT AGREEMENT THIS AGREEMENT is entered into as of the 1st day of January, 2001, by and between Virginia Electric and Power Company, a Virginia public service corporation ("Virginia Power") and Dominion Resources Services, Inc., a Virginia corporation ("DRS"). WHEREAS, Virginia Power is an electric utility engaged in the sale of electric service at retail within its service territories in Virginia and at wholesale within those territories and elsewhere in the United States; WHEREAS, DRS is a wholly owned subsidiary of Dominion Resources, Inc. ("Dominion"), a registered holding company subject to regulation as such by the Securities and Exchange Commission ("SEC") under the Public Utility Holding Company Act of 1935 ("1935 Act"); WHEREAS, DRS was formed to provide centralized services to Dominion and its subsidiaries ("Dominion Companies") as a subsidiary service company under Rule 88 of the SEC's rules and regulations for implementation of the 1935 Act, 17 C. F. R. Section 250.88; WHEREAS, DRS is an "affiliated interest" of Virginia Power within the meaning of the Utility Affiliates Act, Chapter 4 of Title 56 of the Code of Virginia, and therefore contracts and arrangements for the furnishing of services by Virginia Power to DRS are subject to approval of the SCC; WHEREAS, by its Order Approving, in part, and Denying, In Part, Petitioners' Requests, issued December 29, 1999 in Case No. PUA990068, the Virginia State Corporation Commission ("SCC") approved under the Affiliates Act, subject to certain conditions, the Virginia Power Support Agreement under which Virginia Power agreed to provide certain services to DRS in an effort to promote efficiencies and effectively utilize resources and expertise and to thereby facilitate the provision by DRS of centralized services to the Dominion Companies ("Original Support Agreement"); WHEREAS, DRS is an affiliate of Virginia Power and therefore certain types of contracts between DRS and Virginia Power are subject to the requirements of North Carolina G. S. 62-153; WHEREAS, by its Order on Affiliated Contracts issued January 27, 2000 in Docket No. E-22, Sub 385, the North Carolina Utilities Commission ("NCUC") approved the Original Support Agreement under North Carolina G.S. 62- 153, subject to certain conditions; WHEREAS, by its Order Authorizing Acquisition of Public Utility Companies and Related Transactions, Approving Service company Arrangements, and Reserving Jurisdiction issued December 15, 1999, SEC Release No. 3- 27113; 70-9477, the SEC approved the formation of and proposed operation of DRS, including its performance under Original Service Agreement; and WHEREAS, DRS and Virginia Power wish to replace the Original Support Agreement with this revised agreement which will reduce the number of services provided by Virginia Power to DRS and make certain other changes designed to simplify and clarify the methods for allocation of costs by Virginia Power. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. General Services to be Provided by Virginia Power. Exhibit A hereto lists and describes all of the services that may be provided by Virginia Power to DRS for the benefit of DRS and/or the existing or future subsidiaries or affiliates of Dominion. Such services are and will be provided to DRS only on the mutual agreement of Virginia Power and DRS and in accordance with the terms and conditions set forth herein. 2. Compensation and Allocation. Virginia Power and DRS recognize the importance of DRS paying the appropriate compensation for the services provided hereunder, so that there is no subsidization of either party by the other. To that end, Virginia Power will maintain accurate records of its operations that will enable it to determine the costs of the services that it provides to DRS, and those books and records will be open to examination by any state or federal commission having jurisdiction over arrangements and services to be furnished, and the staffs of those commissions. DRS will compensate Virginia Power for the services provided hereunder by payment of the costs incurred to provide those services. Exhibit B hereto contains rules for determining and allocating costs for services provided to DRS by Virginia Power. 3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to their conflicts of law provisions. 4. Entire Agreement. This Agreement, together with its exhibits, constitutes the entire understanding and agreement of the parties with respect to its subject matter, and effective upon the execution of this Agreement by the respective parties hereof, any and all prior agreements, understanding, or representations with respect to this subject matter are hereby terminated and cancelled in their entirety. 5. Waiver. No waiver by any party hereto of a breach of any provision of this Agreement shall constitute a waiver of any preceding or succeeding breach of the same or any other provision hereof. 6. Non - Exclusive Rights and Obligations. Nothing herein shall be construed to require DRS to obtain any of the services enumerated herein from Virginia Power, nor to require Virginia Power to provide any of such services to DRS. 7. Effective Date and Term. This Agreement shall become effective January 1, 2001 and it shall continue in effect until terminated by either Virginia Power or DRS giving the other sixty (60) days advance written notice of termination. This Agreement is subject to termination or modification at any time to the extent its performance may conflict with the provisions of the 1935 Act, as amended or with any rule, regulation or order of the SEC adopted before or after the making of this Agreement. This Agreement shall be subject to the approval of any state commission or other state regulatory body whose approval is, by the laws of such state, a legal prerequisite to the execution and delivery or the performance of this Agreement. 8. SCC Approval. Pursuant to the SCC's Order Approving Merger in Joint Petition of Dominion Resources, Inc. and Consolidated Natural Gas Company, For approval of agreement and plan of merger under Chapter 5 of Title 56 of the Code of Virginia, Case No. PUA990020, issued on September 17, 1999, Virginia Power shall have no obligation under this Agreement except to the extent the Commission has approved such obligation. 9. NCUC APPROVAL. Pursuant to the NCUC's Order Approving Merger In the Matter of Application by Dominion Resources, Inc., for Authorization under G.S. 62-111 to Engage in a Business Combination Transaction, Docket No. E-22, Sub 380, issued on October 18, 1999, Virginia: (i) may not make or incur a charge under this Agreement except in accordance with North Carolina law and the rules, regulations and orders of the NCUC promulgated thereunder; and (ii) may not seek to reflect in rates any cost incurred or revenue level earned under an agreement subject to the 1935 Act to the extent disallowed by the NCUC. 10. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of this 1st day of January, 2001. Attest: Virginia Electric and Power Company _________________________ By___________________________________ Attest: Dominion Resources Services, Inc. _________________________ By__________________________________ Thomas N. Chewning, Executive Vice President and Chief Financial Officer EXHIBIT A DESCRIPTION OF APPROVED SERVICES TO BE OFFERED BY VIRGINIA ELECTRIC AND POWER COMPANY TO DOMINION RESOURCES SERVICES, INC. UNDER THE REVISED VIRGINIA POWER SUPPORT AGREEMENT 1. Accounting. Provide advice and assistance in accounting matters, including the development of accounting practices, procedures and controls, the maintenance of the general ledger and related systems, the preparation and analysis of financial statement reports, and the processing of certain customer transactions. 2. Regulatory Provide advice and assistance with respect to regulatory issues as well as regulatory compliance under Federal and State laws. 3. Information Technology, Electronic Transmission and Computer Services. Assist with the operation of an information technology function including the development, implementation and operation of a centralized data processing facility and the management of a telecommunications network. This function includes the central processing of computerized applications and support of individual applications. Provide computer resource/network availability, including enterprise telecommunications infrastructure, mainframe and distributed computing hardware, operating systems, business systems and applications, internet, intranet and mail environments, software licenses and maintenance agreements. 4. Human Resources Advise and assist in the formulation and administration of employee relations policies and programs relating to labor relations, personnel administration, training, wage and salary administration and safety. 5. Operations. Advise and assist in the study, planning, engineering and construction of energy plant facilities. Assist in the development of long-range operational programs. Offer management, consulting and advisory/technical services with respect to the physical operation of energy plant facilities and the purchase, sale and transfer of affiliated companies. 6. Business and Operations Services. Advise and assist in all matters relating to operational capacity and the preparation and coordination of operating studies. Provide assistance with management of the purchase, sale, movement, transfer and accounting of fuel and gas volumes. Compile and communicate information relevant to operations. Perform general business and operations support services, including travel services, fleet, mail, plant and facilities operation, maintenance and management. 7. Marketing. Assist in the planning, formulation and implementation of marketing programs, as well as provide associated marketing services to assist with improving customer satisfaction, load retention and shaping, growth of energy sales and deliveries, energy conservation and efficiency. Assist in carrying out policies and programs for the development of plant locations and of industrial, commercial and wholesale markets and assist with community redevelopment and rehabilitation programs. 8. Budgeting and Planning. Advise and assist in studying and planning in connection with operations, budgets, economic forecasts, rate structures, capital expenditures and special projects. 9. Purchasing. Advise and assist in the purchase of materials, supplies and services and the preparation and negotiation of purchasing agreements. 10. Rates. Advise and assist in the analysis of rate structures, the formulation of rate policies and the negotiation of large contracts. Provide consulting in connection with proceedings before regulatory bodies involving rates and operations. 11. Research. Investigate and conduct research into problems relating to production utilization, testing, manufacture, transmission, storage and distribution of energy. Evaluate and conduct research and development in promising areas and advise and assist in the solution of technical problems arising out of operations. 12. Customer Service. Provision of services and systems dedicated to customer service, including billing, remittance, credit, collections, customer relations, call centers, energy conservation support and metering. 13. Energy Marketing. Provide services and systems dedicated to energy marketing, including marketing and trading of gas and electric power, energy price risk management, and development of marketing and sales programs in physical and financial markets. 14. Office Space and Equipment. Leasing of land, buildings, furnishings and equipment, including computer hardware and software and transportation equipment. 15. External Affairs. Provide services in support of corporate strategies for managing relationships with federal, state and local governments, agencies and legislative bodies. Formulate and assist with public relations and communications programs and administration of corporate contribution and community affairs programs. EXHIBIT B METHODS OF ALLOCATION FOR VIRGINIA POWER Virginia Power shall allocate costs independently to DRS using the following methods: I. The costs of rendering service by Virginia Power will include all costs of doing business including interest on debt and a return for the use of equity capital. II. A. Virginia Power will maintain a separate record of the expenses of each department. The expenses of each department will include: 1. those expenses that are directly attributable to such department, and 2. an appropriate portion of those office and housekeeping expenses that are not directly attributable to a department but which are necessary to the operation of such department. B. Expenses of the department will include salaries and wages of employees, materials and supplies, and all other expenses attributable to the department. The expenses of a department will not include: 1. those incremental out-of-pocket expenses that are incurred for the direct benefit and convenience of an individual company or group of companies, 2. Virginia Power overhead expenses that are attributable to maintaining the corporate existence of Virginia Power, and all other incidental overhead expenses including rent and utilities, depreciation, and those auditing fees, internal auditing department expenses and accounting department expenses attributable to Virginia Power. C. Virginia Power will establish annual budgets for controlling the expenses of each department and for determining estimated costs to be included in interim monthly billing. III A. There will be attributed to the salary or wage of an employee who directly provides services to DRS, a percentage of all other expenses of such employee's department. B. Employees who directly provide service to DRS will maintain a record of the time they are employed in rendering such service to DRS. An hourly rate will be determined by dividing the total salary or wage expense attributable to the employee by the productive hours reported by such employee. IV The charge to DRS for a particular service will be determined by multiplying the hours reported by employees in rendering such service to DRS by the hourly rates applicable to such employees. V To the extent appropriate and practical, the foregoing computations of hourly rates and charges may be determined for groups of employees within reasonable salary range limits. VI Those expenses of Virginia Power that are not included in the annual expense of a department under Section II. above will be charged to DRS as follows: A. Incremental out-of-pocket costs incurred for the direct benefit and convenience of DRS will be charged directly to DRS. B. Virginia Power overhead expenses referred to in Section II. above will be charged to DRS in the proportion that the charges made to DRS for costs, other than those set forth in this Section VI, are to the total of all department costs as defined in Section II. VII Notwithstanding the foregoing basis of determining cost allocations for billing purposes, cost allocations for certain services involving machine operations, production or service units, or facilities cost will be determined on an appropriate basis established by Virginia Power. VIII Monthly bills will be issued for the services rendered to DRS on an actual or estimated basis. At the end of each year, estimated figures will be revised to reflect actual experience during such year and adjustments will be made in amounts billed to give effect to such revision. IX If the use of a basis of allocation would result in an inequity because of a change in operations or organization, then Virginia Power may adjust the basis to effect an equitable distribution. -----END PRIVACY-ENHANCED MESSAGE-----