File No. 70-9793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POS AMC
Amendment No. 10
(Post-Effective Amendment No. 7)
to
FORM U-l
APPLICATION/DECLARATION
UNDER
FIRSTENERGY CORP.
FIRSTENERGY SERVICE COMPANY
OHIO EDISON COMPANY
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
THE TOLEDO EDISON COMPANY
PENNSYLVANIA POWER COMPANY
JERSEY CENTRAL POWER & LIGHT COMPANY
PENNSYLVANIA ELECTRIC COMPANY
METROPOLITAN EDISON COMPANY
76 South Main Street
Akron, Ohio 44308
FirstEnergy Corp.
Leila L. Vespoli, Douglas E. Davidson, Senior Vice President and General Esq. Counsel Thelen Reid & Priest LLP FirstEnergy Corp. 40 West 57th Street 76 South Main Street New York, New York 10019 Akron, Ohio 44308 ------------------------------------------------------------------ |
(Names and addresses of agents for service)
FirstEnergy Corp., FirstEnergy Service Company, Ohio Edison Company, The Cleveland Electric Illuminsting Company, The Toledo Edison Company and Pennsylvania Power Company, Jersey Central Power & Light Company, Metropolitan Edison Company, Pennsylvania Electric Company (collectively "Applicants") hereby amend in its entirety Amendment No. 9 (Post-Effective Amendment No. 6) to Form U-1 filed by FirstEnergy Corp., FirstEnergy Service Company and GPU Service, Inc. ("GPU Service") in docket No. 70-9793 on May 29, 2003 as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
A. Background. By Order dated October 29, 2001 in this proceeding (Holding Co. Act Release No. 27459) (the "Merger Order"), as supplemented by orders dated November 8, 2001 (Holding Company Act Release No. 27483) and December 23, 2002 (Holding Company Act Release No. 27628), the Commission authorized the merger between FirstEnergy Corp. ("FirstEnergy"), an Ohio corporation, and GPU, Inc. ("GPU"), a Pennsylvania corporation. The merger became effective on November 7, 2001, with FirstEnergy as the surviving entity, and FirstEnergy registered under the Act as a holding company on the same day. As a result of the merger, FirstEnergy directly or indirectly owns all of the outstanding common stock of ten electric utility subsidiaries, Ohio Edison Company ("Ohio Edison"), The Cleveland Electric Illuminating Company ("Cleveland Electric"), The Toledo Edison Company ("Toledo Edison"), American Transmission Systems, Incorporated, Jersey Central Power & Light Company ("JCP&L"), Pennsylvania Electric Company ("Penelec"), Metropolitan Edison Company ("Met-Ed"), Pennsylvania Power Company ("Penn Power"), York Haven Power Company, and The Waverly Electric Power & Light Company, which together provide service to approximately 4,300,000 retail and wholesale electric customers in a 37,200 square-mile area in Ohio, New Jersey, New York and Pennsylvania; and one gas utility subsidiary, Northeast Ohio Natural Gas Corp. ("Northeast"), which provides gas distribution and transportation service to approximately 5,000 customers in central and northeast Ohio. FirstEnergy's electric and gas utility subsidiaries are referred to herein collectively as the "Utility Subsidiaries."
FirstEnergy also directly owns all of the issued and outstanding common stock of FirstEnergy Service Company ("ServeCo"), an Ohio corporation, which was organized in 2001 in order to become a new service company subsidiary of FirstEnergy. On June 1, 2003, GPU Service, Inc. ("GPU Service"), a Pennsylvania corporation, which was formerly a direct service company subsidiary of GPU, and was, until then, a direct subsidiary of FirstEnergy, was merged into ServeCo. FirstEnergy also directly or indirectly holds investments in numerous non-utility subsidiaries that are engaged in a variety of energy-related, exempt, or otherwise functionally related non-utility businesses (collectively, the "Non-Utility Subsidiaries"), including FirstEnergy Generation Corp. ("GenCo") and FirstEnergy Nuclear Operating Company ("FENOC"). Reference is made to Appendix A to the Merger Order for a description of these Non-Utility Subsidiaries. The Utility and Non-Utility Subsidiaries of FirstEnergy are collectively referred to herein as the "Subsidiaries."
Under the Merger Order, the Commission granted FirstEnergy a temporary exemption under its rules in order to enable FirstEnergy to continue to provide
to the pre-merger Subsidiaries of FirstEnergy certain common corporate services,1 until such time as all of the service functions performed by FirstEnergy and GPU Service have been consolidated in ServeCo.2 The Merger Order specified that ServeCo would begin at least minimal operations within 90 days following closing of the merger, and that all service functions of FirstEnergy and GPU Service would be transferred to ServeCo not later than February 1, 2003. Employees of FirstEnergy were transferred to ServeCo by January 1, 2002 and FirstEnergy no longer has any employees and no longer provides any services. Through May 31, 2003, GPU Service continued to use the allocation methods and policies and procedures GPU Service ("GPU Methods") used prior to the Merger. By Supplemental Order dated January 31, 2003 (Holding Company Act Release No. 27647), the Commission authorized an extension of time until June 1, 2003 for full compliance of ServeCo's activities in order to coincide with FirstEnergy's implementation of the SAP Enterprise IT Solution project.3 On June 1, 2003, GPU Service was merged into ServeCo. By Supplemental Order dated June 2, 2003 (Holding Company Act Release No. 27682) (the "June 2 Order"), the Commission granted an additional one month extension to June 30, 2003, authorizing the FirstEnergy System to continue its service company activities. Since June 1, 2003, ServeCo has been functioning as the FirstEnergy System service company in accordance with the arrangements described herein.
ServeCo's authorized capitalization consists of 850 shares of common stock with no par value, of which one (1) share is issued and outstanding and held by FirstEnergy. ServeCo will derive substantially all of its needs for additional working capital from borrowings under FirstEnergy's non-utility money pool (as authorized in the Merger Order) and/or additional equity investments by FirstEnergy pursuant to Rule 45(b)(4) or Rule 52(b), as applicable.
Manual (the "ServeCo Manual"). By June 1, 2003, all personnel of GPU Service were transferred to and became employees of either ServeCo., or in the case of certain GPU Service employees who provide service only to one Utility Subsidiary, to the appropriate Utility Subsidiary. Upon full implementation of this reorganization, it is expected that ServeCo will have approximately 3,580 employees in multiple locations organized in thirty departments. Applicants now seek an order (1) authorizing the consolidation of FirstEnergy's service company functions in ServeCo, (2) approving ServeCo's policies and procedures, (3) approving the Service Agreement, the form of which is attached hereto as Exhibit N-7 and (4) approving, through August 1, 2006, the Utility-to-Utility Service Agreement, the form of which is attached hereto as Exhibit N-8. Because the New Jersey Board of Public Utilities ("NJBPU") has not yet approved JCP&L's petition seeking authority for it to enter into the Service Agreement, Applicants request that the Commission reserve jurisdiction with respect to JCP&L's participation thereunder and extend the interim authority granted in the June 2 Order with respect to JCP&L until the NJBPU approves JCP&L's participation in the Service Agreement.
C. Services to be rendered by ServeCo. Following the proposed consolidation of service functions in ServeCo, ServeCo will enter into a Service Agreement with FirstEnergy, each of the Utility Subsidiaries, and each other associate company in the FirstEnergy system that requests services from ServeCo. The Service Agreement will be in the form attached hereto as Exhibit N-7. ServeCo will provide its associate companies with services in the following departments, which are described in fuller detail in Exhibit A to the Service Agreement: administrative services, business development, call center, claims, communications, controllers, corporate and shareholder services, corporate affairs and community involvement, credit management, energy delivery and customer service, economic development, enterprise risk management, FirstEnergy technologies, technology and support services, governmental affairs, human resources, industrial relations, information technology, insurance services, internal audit, investment management, investor relations, legal, performance planning, rates and regulatory affairs, real estate, supply chain, transmission & distribution technical services, treasury and workforce development.
ServeCo as a separate corporate entity, will be allocated to associate companies using one or a combination of the methods of allocation that are described in Exhibit "A" to the Service Agreement.
ServeCo will maintain its accounts, cost-accounting procedures and other records in accordance with the requirements of the Commission's Uniform System of Accounts for Mutual Service Companies and Subsidiary Service Companies. ServeCo will file an annual report on Form U-13-60 in accordance with Rule 94.
As provided in the Merger Order, and for so long as FirstEnergy remains a "registered holding company" under PUHCA, no change in the organization of ServeCo, the type and character of the companies to be serviced, the methods of allocating costs to associate companies, or in the scope or character of the services to be rendered subject to Section 13 of the Act, or any rule, regulation or order thereunder, shall be made unless and until ServeCo shall first have given the Commission written notice of the proposed change not less than 60 days prior to the proposed effectiveness of any such change. If, upon the receipt of any such notice, the Commission shall notify ServeCo within the 60-day period that a question exists as to whether the proposed change is consistent with the provisions of Section 13 of the Act, or of any rule, regulation or order thereunder, then the proposed change shall not become effective unless and until the ServeCo shall have filed with the Commission an appropriate declaration regarding such proposed change and the Commission shall have permitted such declaration to become effective.
1. Cost Allocation Methodology
ServeCo categorizes costs of services provided to affiliates into three primary categories. Directly Assignable costs represents expenses incurred for activities and services exclusively for the benefit of one affiliate, and in many respects, are captured through individual department workorder systems for specific project billing purposes. Directly Attributable costs represent expenses incurred for activities and services that benefit more than one affiliate and which can be assigned using direct measures of costs causation. The majority of costs incurred by ServeCo fall into the above two categories.
By the very nature of a service corporation, a portion of ServeCo's expenses will not be directly related to specific current operations or functions of individual Subsidiaries. Nor are these costs amenable to many of the cost accounting procedures, which frequently concentrate upon identification of variable, fixed and semi-fixed costs. Accordingly, it is necessary to develop formulae that recognize the overall contribution of ServeCo to both the current and future operations of the FirstEnergy system. After all direct charges have been made, the remaining costs (Indirect Costs) in each department in ServeCo must be fairly and equitably allocated among FirstEnergy and the Subsidiaries.
As a registered public utility holding company, FirstEnergy's primary business is that of owning and operating electric public utilities. As the electric industry moves through restructuring to permit competition in business areas once the sole province of historical monopolies, FirstEnergy has begun to enter competitive energy and energy services businesses to the extent permitted by state and federal restrictions. Codes of conduct govern the relationship
between the Utility Subsidiaries and their affiliated competitive businesses, namely, the Non-Utility Subsidiaries. As a public utility holding company, FirstEnergy has invested capital for infrastructure over many years in the Utility Subsidiaries so that they may develop the support services necessary to serve their customers. The costs associated with these infrastructure investments (e.g., accounting and human resources systems, telephone circuits and other communications equipment, mainframe CPU, printers and data storage development tools and client servers and storage not dedicated to the competitive unit) were originally incurred, and would continue to be incurred, regardless of whether or not the Non-Utility Subsidiaries were part of FirstEnergy. These Indirect Costs will be allocated among all of FirstEnergy's Subsidiaries using a multi-variable formula, which gives weight to more than one measure of the size of the various Subsidiaries' operations within the FirstEnergy system, and is particularly relevant under these circumstances. This formula is not intended to effect, and will not result in, the allocation of these Indirect Costs exclusively to the Utility Subsidiaries.
In accordance with Rule 90(b), ServeCo will direct charge its associate companies for all costs of products and services where possible. The costs of products and services provided by ServeCo that cannot be charged directly to the Subsidiary or Subsidiaries receiving the product or service will be allocated among all Subsidiaries (and FirstEnergy, where applicable) by utilizing one of the methods described below. The key determinants in assigning the allocation methods were the business operations of the Subsidiary or Subsidiaries receiving the benefit of the product and service, and the associated cost driver for each product and service. FirstEnergy has developed eighteen methods of allocation for charging a share of the Indirect Costs to the Subsidiaries benefiting from the particular product or service being provided:
a. "Multiple Factor - All" - For the Indirect Costs for products or services benefiting the entire FirstEnergy system, FirstEnergy and all Subsidiaries will bear a fair and equitable portion of such costs. FirstEnergy will bear 5% of these Indirect Allocations. The remaining Indirect Allocations will be allocated among the Utility Subsidiaries and the Non-Utility Subsidiaries benefiting from the services provided, based on FirstEnergy's equity investment in the respective groups. A subsequent allocation step will then occur. Among the Utility Subsidiaries, allocations will be based upon the "Multiple Factor - Utility" method. Among the Non-Utility Subsidiaries, allocations will be based upon the "Multiple Factor - Non-Utility" method. This allocation method will be used by the following ServeCo departments: Executive, Communications, Controllers, Credit Management, Claims, Enterprise Risk Management, Internal Audit, Investment Management, Investor Relations, Real Estate, Treasury, Legal and Performance Planning.
b. "Multiple Factor - Utility" - For the Indirect Costs for a product or service solely benefiting one or more of the Utility Subsidiaries, each such Utility Subsidiary so benefiting will be charged a portion of the Indirect Costs based on the sum of the weighted averages of the following factors:
1. Gross transmission and/or distribution plant
2. Operating and maintenance expense excluding purchase
power and fuel costs
3. Transmission and/or distribution revenues, excluding transactions with affiliates
These three factors have been determined to be the most appropriate for the Utility Subsidiaries in the FirstEnergy system. Each factor will be weighted equally so that no one facet of the electric utility operations inordinately influences the distribution of Indirect Costs. This allocation method will be used in the following ServeCo departments: Administrative Services, Corporate, Controllers, Customer Service, Economic Development, Internal Audit, Transmission and Distribution Technical Services, Workforce Development, Communications, Corporate Affairs and Community Involvement, FirstEnergy Technologies, Investor Relations, Rates and Regulatory Affairs, Real Estate and Legal.
c. "Multiple Factor - Non-Utility" - For the Indirect Costs for products or services solely benefiting the Non-Utility Subsidiaries, each Non-Utility Subsidiary so benefiting receiving the product or service will be charged a proportion of the Indirect Costs based upon the total assets of each Non-Utility Subsidiary, including the generating assets under operating leases from the Utility Subsidiaries. This allocation method will be used in the following ServeCo departments: Communications, Investment Management and Legal.
d. "Multiple Factor - Utility and Non-Utility" - For the Indirect Costs for a product or service benefiting one or more of the Utility and Non-Utility Subsidiaries, each such Subsidiary so benefiting is first assigned a distribution ratio that is in proportion to the Indirect Costs based on FirstEnergy's equity investment in such Subsidiaries. Following this distribution, a subsequent allocation step will then occur. Among the Utility Subsidiaries, allocations will be based upon the "Multiple Factor-Utility." Among the Non-Utility Subsidiaries, allocations will be based upon "Multiple Factor - Non-Utility". This allocation method will be used in the following ServeCo departments: Administrative Services, Call Center, FirstEnergy Technologies, Technology & Support Services, Information Technology, Rates and Regulatory Affairs, Supply Chain, Controllers, Credit Management, Insurance Services, Treasury and Legal.
e. "Direct Charge Ratio" - The ratio of direct charges for a particular product or service to an individual Subsidiary as a percentage of the total direct charges for a particular product or service to all Subsidiaries benefiting from such services. Indirect Costs are then allocated to each Subsidiary based on the calculated ratios. This allocation method will be used by Information Technology Department of ServeCo.
f. "Number of Customers Ratio" - For costs of products and services driven by the number of Utility customers, the allocation method that will be used will be the number of Utility customers for the respective Utility Subsidiary receiving the product or service divided by the total number of Utility customers. This allocation method will be used by the Customer Service Department of ServeCo.
g. "Number of Shopping Customers Ratio" - A "shopping customer" is defined as a Utility customer who has selected a competitive electric generation supplier. For costs of products and services driven by the number of shopping customers, the allocation method that will be used will be the number of shopping customers for the respective Utility Subsidiary receiving the product or service divided by the total number of shopping customers. This allocation method will be used by the Customer Service Department of ServeCo.
h. "Number of Participating Employees - General" - For costs of products and services driven by all participating employees within the FirstEnergy system, the allocation method that will be used will be the number of participating employees for the respective Subsidiary receiving the product or service divided by the total number of participating employees. This allocation method will be used in the following ServeCo departments: Workforce Development, Corporate Affairs and Community Involvement, Human Resources and Industrial Relations.
i. "Number of Participating Employees - Utility and Non-Utility"
- For costs of products and services driven by participating employees
who work for the Utility and Non-Utility Subsidiaries, the Subsidiaries
receiving the product or service are first assigned a distribution ratio
that is in proportion to the Indirect Costs based on FirstEnergy's
equity investment in the respective groups. Costs are further allocated
by using the number of participating employees for the respective
Subsidiary divided by the total number of participating FirstEnergy
employees. This allocation method will be used in the following ServeCo
departments: Communications, Human Resources, Investment Management and
Legal.
j. "Gigabytes Used Ratio" - Number of gigabytes utilized by a Subsidiary receiving the product or service divided by the total number of gigabytes used by the FirstEnergy system companies applicable to that respective product or service. This allocation method will be used by the Information Technology Department of ServeCo.
k. "Number of Computer Workstations Ratio" - Number of computer workstations utilized by a Subsidiary receiving the product or service divided by the total number of computer workstations in use by the FirstEnergy system companies applicable to that respective product or service. This allocation method will be used by the Information Technology Department of ServeCo.
l. "Number of Billing Inserts Ratio" - Number of billing inserts performed for a Subsidiary receiving the product or service divided by the total number of billing inserts performed for the FirstEnergy system companies applicable to that respective product or service. This allocation method will be used by the Information Technology Department of ServeCo.
m. "Number of Invoices Ratio" - Number of invoices processed for a Subsidiary receiving the product or service divided by the total number of invoices processed for the FirstEnergy system companies applicable to that respective product or service. This allocation method
is not currently in use but will be used by the Controller's Department of ServeCo once some historical information is available within FirstEnergy's automated system.
n. "Number of Payments Ratio" - Number of monthly payments processed for a Subsidiary divided by the total monthly number of payments processed for the FirstEnergy system companies applicable to that respective product or service. This allocation method will be used by the Customer Service Department of ServeCo.
o. "Daily Print Volume" - Average daily print volume performed for a Subsidiary receiving the service divided by the total average daily print volume performed for the entire FirstEnergy system. This allocation method will be used by the Information Technology Department of ServeCo.
p. "Number of Intel Servers" - Number of Intel servers utilized by a Subsidiary receiving the product or service divided by the total number of Intel servers utilized by the FirstEnergy system. This allocation method will be used by the Information Technology Department of ServeCo.
q. "Application Development Ratio" - Number of application development hours budgeted for a Subsidiary receiving the service divided by the total number of budgeted application development hours for the year. This allocation method will be used by the Information Technology Department of ServeCo.
r. "Server Support Composite" - The average ratio of unix gigabytes, SAP gigabytes and Intel number of servers for a Subsidiary receiving the service. This allocation method will be used by the Information Technology Department of ServeCo.
The operations of, and services performed by, ServeCo will be essentially the same as those undertaken by GPU Service, except that GPU Service employees who worked for what was known as the "GPU Operations Division" have been transferred to the various operating utilities and thus those "operations-related" services will not be performed by ServeCo, but will be undertaken at the operating utility level. All other services offered by ServeCo will be the same as those offered by GPU Service.
2. Internal Audit Procedures
The Internal Audit division ("IA") of FirstEnergy has undertaken a five-phase audit of ServeCo that is expected to take place over the next three to five years. Phase I, which has been completed, was a proactive review of ServeCo's processes, approaches, assessment tables and cost allocation methodologies. At the completion of this phase of the audit, which was prior to the SAP implementation, IA concluded that the cost allocation methodologies were consistent with management intent and followed the guidelines set forth in Exhibit A to the Service Agreement.
Phase II, which is expected to be completed by September 4, 2004, is a detailed review to ensure that the ServeCo employees are implementing processes and inputting charges correctly to comply with the Act. This phase is scheduled to begin in late 2003 or early 2004. The multiple factor allocation formula will be reviewed to determine if the five percent charged to FirstEnergy is a reasonable amount so that FirstEnergy is allocated a fair and equitable amount of ServeCo's charges.
Phase III, which is expected to begin by October 1, 2004, will be a review of the ServeCo allocation methods, a review and validation of ServeCo's billing methodologies. Additionally, IA will review ServeCo's budget process including its cost controls, cost accountability, reports, budget variances and the role of operating company management in the budgeting process. IA will also review tax allocations in this phase of the audit.
Phase IV, which is expected to begin by January 1, 2005, will consist of a review of benchmarking data to determine whether pricing of services is at an appropriate level and whether the quality of services that are provided is adequate. Finally, Phase V will be a review of the Service Agreement vis-a-vis the scope of service described therein and the actual services provided.
The following chart illustrates the organization of ServeCo.
| Senior Vice President, Corporate Affairs and | | Community Involvement, Human Resources | | and Communications | |-------------------------------------------------------| | | Corporate Affairs and Community Involvement | |
D. Services to be rendered by certain Utility Subsidiaries to each other.
FirstEnergy organizes and conducts its Utility Subsidiary operations on a regional basis.5 These regions operate and are managed as separate business units. The regional structure focuses on moving accountability and decision making closer to customers with an emphasis on decentralized operations and providing cost effective, high-quality service to customers.
charged. Other costs not directly assigned will be allocated to the utility subsidiary benefiting from the service, utilizing a combination of the multiple factor-utility and the number of customers formula specified in the Agreement. This will allow the regional management to operate regions as separate units, and provide the most effective service possible to the customers of the Utility Subsidiaries. ServeCo will include in each U-13-60 that it files with the Commission information regarding the services provided under the Utility-to-Utility Service Agreement with respect to what entities have provided services, what entities have received services and the type of services provided.
None of the services provided pursuant to the Utility-to-Utility Service Agreement are services that would typically be provided by mutual service companies approved by the Commission in accordance with Rule 88 under the Act. Indeed, Applicants maintain that it would be problematic if a mutual service company were to provide such services. These services will not encroach upon, or be duplicative of, the services provided by ServeCo. No decision-making functions will be offered pursuant to the Utility-to-Utility Service Agreement.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
FirstEnergy estimates that the additional fees, commissions and expenses incurred or to be incurred in connection with the proposed transaction will not exceed $25,000.
The proposed transaction is also subject to the requirements of Rule 54.
Rule 54 provides that in determining whether to approve an application by a
registered holding company which does not relate to any exempt wholesale
generator ("EWG") or "foreign utility company" ("FUCO"), the Commission shall
not consider the effect of the capitalization or earnings of any subsidiary
which is an EWG or a FUCO upon the registered holding company if paragraphs (a),
(b) and (c) of Rule 53 are satisfied.
The proposed transactions are also subject to the requirements of Rules
53 and Rule 54. Under Rule 53(a), the Commission shall not make certain
specified findings under Sections 7 and 12 in connection with a proposal by a
holding company to issue securities for the purpose of acquiring the securities
of or other interest in an EWG, or to guarantee the securities of an EWG, if
each of the conditions in paragraphs (a)(1) through (a)(4) thereof are met,
provided that none of the conditions specified in paragraphs (b)(1) through
(b)(3) of Rule 53 exists. Rule 54 provides that the Commission shall not
consider the effect of the capitalization or earnings of subsidiaries of a
registered holding company that are EWGs or FUCOs in determining whether to
approve other transactions if Rule 53(a), (b) and (c) are satisfied.
FirstEnergy currently meets all of the conditions of Rule 53(a), except for clause (1). In the Merger Order, the Commission, among other things, authorized FirstEnergy to invest in EWGs and FUCOs so that FirstEnergy's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs does not exceed $5 billion, which $5 billion amount is greater than the amount which would be permitted by clause (1) of Rule 53(a) which, based on FirstEnergy's consolidated retained earning of $1.84 billion as of March 31, 2003, would be $920 million. The Merger Order also specifies that this $5 billion amount may include amounts invested in EWGs and FUCOs by FirstEnergy and GPU at the time of the Merger Order ("Current Investments") and amounts relating to possible transfers to EWGs of certain generating facilities owned by certain of FirstEnergy's operating utilities ("GenCo Investments"). FirstEnergy has made the commitment that through June 30, 2003, its aggregate investment in EWGs and FUCOs other than the Current Investments and GenCo Investments ("Other Investments") will not exceed $1.5 billion (the "Modified Rule 53 Test").
As of March 31, 2003, and on the same basis as set forth in the Merger Order, FirstEnergy's aggregate investment in EWGs and FUCOs was approximately $1.31 billion,8 an amount significantly below the $5 billion amount authorized in the Merger Order. Additionally, as of March 31, 2003, consolidated retained earnings were $1.84 billion. By way of comparison, FirstEnergy's consolidated retained earnings as of December 31, 2001 were $1.52 billion.
and 5.1% notes payable. As of December 31, 2001, those ratios were as follows:
30.3% common equity, 3.1% cumulative preferred stock, 2.2% subsidiary-obligated
mandatorily redeemable preferred securities, 60.9% long term debt and 3.5% notes
payable. Additionally, the proposed transactions will not have any material
impact on FirstEnergy's capitalization. Further, since the date of the Merger
Order, FirstEnergy's investments in EWGs and FUCOs have contributed positively
to its level of earnings, other than for the negative impact on earnings due to
FirstEnergy's writedowns of its investments in Avon Energy Partners Holdings
("Avon") and GPU Empresa Distribuidora Electrica Regional S.A. ("Emdersa").9
Further, since the date of the Merger Order, and, after taking into account the effects of the Merger, there has been no material change in FirstEnergy's level of earnings from EWGs and FUCOs.
Subsidiary Standard & Poors10 Moody's11 Fitch12 Ohio Edison BBB- Baa2 --- Cleveland Electric BBB- Baa3 --- Toledo Edison BBB- Baa3 BB Penn Power BBB- Baa2 --- JCP&L BBB --- --- Met-Ed BBB --- --- Penelec BBB A2 BBB+ |
FirstEnergy satisfies all of the other conditions of paragraphs (a) and
(b) of Rule 53. With respect to Rule 53(a)(2), FirstEnergy maintains books and
records in conformity with, and otherwise adheres to, the requirements thereof.
With respect to Rule 53(a)(3), no more than 2% of the employees of FirstEnergy's
domestic public utility companies render services, at any one time, directly or
indirectly, to EWGs or FUCOs in which FirstEnergy directly or indirectly holds
an interest. With respect to Rule 53(a)(4), FirstEnergy will continue to provide
a copy of each application and certificate relating to EWGs and FUCOs and
relevant portions of its Form U5S to each regulator referred to therein, and
will otherwise comply with the requirements thereof concerning the furnishing of
information. With respect to Rule 53(b), none of the circumstances enumerated in
subparagraphs (1), (2) and (3) thereunder have occurred.
FirstEnergy requests that the Commission issue a supplemental order approving the interim operations proposed herein not later than June 1, 2003. It is further requested that: (i) there not be a recommended decision by an Administrative Law Judge or other responsible officer of the Commission, (ii) the Division of Investment Management be permitted to assist in the preparation of the Commission's decision and (iii) there 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.
(a) Exhibits:
D-12 - Application of JCP&L to NJBPU for Approval of Service Agreement -- previously filed.
D-13 - NJBPU Order -- to be filed by amendment.
D-14 - Application of Penn Power, Penelec and Met-Ed to PPUC for Approval of Service.
D-15 - PPUC Order.
F-1.2(a) - Opinion of Gary D. Benz, Esq.
N-7 - Revised Form of Service Agreement (including Allocation Methods).
N-8 - Utility-to-Utility Service Agreement - previously filed.
N-9 - Policies and Procedures Manual - Paper filing only.
N-10 - Breakdown of Services Provided in 2002 pursuant to Utility-to-Utility Arrangement
(b) Financial Statements:
Omitted as not relevant to the proposed transaction.
(a) The proposed transaction does not involve a major Federal action significantly affecting the quality of the human environment.
(b) No federal agency has prepared or is preparing an environmental impact statement with respect to the proposed transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned companies have duly caused this statement to be signed on their behalves by the undersigned thereunto duly authorized.
FIRSTENERGY CORP.
FIRSTENERGY SERVICE COMPANY
OHIO EDISON COMPANY
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
THE TOLEDO EDISON COMPANY
PENNSYLVANIA POWER COMPANY
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By: /s/Harvey L. Wagner
-----------------------------
Harvey L. Wagner
Vice President and Controller
Date: June 30, 2003
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Exhibit D-14
[LETTERHEAD OF RYAN, RUSSELL, OGDEN & SELTZER LLP]
October 31, 2002
James J. McNulty, Secretary
Pennsylvania Public Utility Commission
Commonwealth Keystone Building
400 North Street
Harrisburg, PA 17120
Dear Mr. McNulty:
Enclosed herewith for filing are an original and three copies of a form of Service Agreement pursuant to which FirstEnergy Service Company ("ServeCo") will provide various services to FirstEnergy Corp. ("FirstEnergy") utility subsidiaries in Pennsylvania. Also enclosed for reference (as Attachment A hereto) are copies of an Application that has been filed with the Securities and Exchange Commission ("SEC") pursuant to the Public Utility Holding Company Act of 1935 ("PUHCA"), describing the proposed affiliated service company arrangements and seeking SEC approval for the form of Service Agreement (which also was attached, as Exhibit N-7, to the SEC Application).
As a result of the FirstEnergy/GPU merger, FirstEnergy became a registered holding company under PUHCA. The SEC has directed FirstEnergy to file an application seeking authorization for the ServeCo (as a wholly-owned FirstEnergy subsidiary) to provide all common corporate services to FirstEnergy and its utility and non-utility subsidiaries. In summary, the ServeCo will replace the former GPU Service, Inc. as the primary provider of various corporate, managerial and administrative support services to Metropolitan Edison Company ("Met-Ed"), Pennsylvania Electric Company ("Penelec") and Pennsylvania Power Company ("Penn Power"). The scope of these services is described more fully in the attached form of Service Agreement as well as in the SEC filing.
We are requesting approval from the Commission of the form of Service Agreement on behalf of Met-Ed, Penelec and Penn Power, pursuant to Section 2102 of the Public Utility Code.
The ServeCo will not perform the "operations" services for FirstEnergy's Pennsylvania utility subsidiaries, which are organized and conduct their operations on a regional basis as separate business units.
As described in the SEC filing, the ServeCo will be a mutual service company in accordance with Rules 87, 88 and 93 under PUHCA. As such, cost accounting procedures will be implemented consistent with the "at-cost" provisions of Rules 90 and 91 under PUHCA.
Please contact the undersigned in the event you have any questions with respect to these affiliated interest arrangements. The SEC has required FirstEnergy to transfer all service functions to the ServeCo no later than February 1, 2003. FirstEnergy has asked the SEC to permit a delay in that implementation date to April 1, 2003, to coincide with the installation of new SAP Enterprise software. We respectfully request that the Commission take action to approve the form of Service Agreement, as provided in Section 2102, within a timeframe that will accommodate the SEC's requirements governing the timing of the transfer of services.
Very truly yours,
RYAN, RUSSELL, OGDEN & SELTZER LLP
/s/ W. Edwin Ogden
-----------------------
W. Edwin Ogden
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Enclosures
Exhibit D-15
COMMONWEALTH OF PENNSYLVANIA
PENNSYLVANIA PUBLIC UTILITY COMMISSION
P.O. BOX 3265, HARRISBURG, PA 17105-3265
FEBRUARY 4, 2003
RYAN RUSSELL OGDEN & SELTZER LLP
SUITE 301
1100 BERKSHIRE BLVD
READING PA 19610-1221
ATTN: MR W EDWIN OGDEN
Re: G-00020987 - Affiliated Interest Agreement between FirstEnergy Corp and FirstEnergy Service Company
Dear Mr. Ogden:
On October 31, 2002, FirstEnergy Corp ("FirstEnergy") filed an Affiliated Interest Agreement with FirstEnergy Service Company. ("ServeCo"). This Agreement was filed in accordance with the requirements of Section 2102(b) of the Public Utility Code, 66 Pa. C.S.ss.2102(b).
This Affiliated Interest Agreement concerns a Service Agreement between ServeCo and FirstEnergy; whereas ServeCo will provide various services to FirstEnergy's utility subsidiaries in Pennsylvania.
As a result of the FirstEnergy/GPU merger, FirstEnergy became a registered holding company under the Public Utility Holding Company Act of 1935 ("PUHCA"). The Securities and Exchange Commission ("SEC") has directed FirstEnergy to file an application seeking authorization for ServeCo (as a wholly-owned FirstEnergy subsidiary) to provide all common corporate services to FirstEnergy and its utility and non-utility subsidiaries. Basically, ServeCo will replace the former GPU Service, Inc. as the primary provider of various corporate, managerial and administrative support services to Metropolitan Edison Company ("Met Ed"), Pennsylvania Electric Company ("Penelec") and Pennsylvania Power Company ("Penn Power"). ServeCo will not perform the "operations" services for FirstEnergy's Pennsylvania utility subsidiaries, which are organized and conduct their operations on a regional basis as separate business units.
ServeCo will be a mutual service company in accordance with Rules 87, 88 and 93 under PUHCA. As such, cost accounting procedures will be implemented consistent with the "at-cost" provisions of Rules 90 and 91 under PUHCA.
FirstEnergy is planning implementation of this Service Agreement on April 1, 2003.
Upon review of the Company's filing, it does not appear that this filing is unreasonable or contrary to the public interest. Therefore, this filing is hereby approved. However, approval of this filing does not constitute a determination that such filing is consistent with the public interest, and that the associated costs or expenses are reasonable or prudent for the purposes of
determining just and reasonable rates. Furthermore, the Commission's approval is contingent upon the possibility that subsequent audits, reviews, and inquiry, in any Commission proceeding, maybe conducted, pursuant to 66 Pa. C. S.ss.ss.2102, et seq.
In addition, this approval will apply only to the agreement(s), service(s), matters, and parties specifically and clearly defined under this instant filing as well as under any associated and previously filed filings.
Sincerely,
/s/ James J. McNulty
_______________________
James J. McNulty
Secretary
|
Cc: Kerry Klinefelter, FUS
Janet Patrick, Secretary's Bureau
Exhibit F-1.2(a)
June 30, 2003
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: FirstEnergy Corp.
FirstEnergy Service Company
SEC File No. 70-9793
Ladies and Gentlemen:
I have examined Post-Effective No. 2 to the Application/Declaration on Form U-1, dated October 15, 2002, under the Public Utility Holding Company Act of 1935, as amended (the "Act"), filed by FirstEnergy Corp. ("FirstEnergy"), FirstEnergy Service Company ("ServeCo") and GPU Service, Inc. ("GPU Service") with the Securities and Exchange Commission and docketed in SEC File No. 70-9793, as amended by Post-Effective Amendment No. 4 thereto, dated January 31, 2003, Post-Effective Amendment No. 6 thereto, dated May 29, 2003 and Post-Effective Amendment No. 7 thereto, dated the date hereof of which this opinion is to be a part. (The Application/Declaration, as so amended, is hereinafter referred to as the "Application.")
The Application contemplates, among other things, the consolidation of FirstEnergy's service company functions in ServeCo, the approval of ServeCo's policies and procedures and service agreement and a service agreement among certain of FirstEnergy's operating company subsidiaries.
In connection with this opinion, I (or persons under my supervision or control) have examined copies, signed, certified or otherwise proven to my satisfaction, of the charter documents and Amended Code of Regulations of FirstEnergy. I have also examined such other documents, instruments and agreements, and have made such further investigation as I have deemed necessary as a basis for this opinion.
I am Associate General Counsel of FirstEnergy, and have acted as such in connection with the filing of the Application.
Based upon and subject to the foregoing, and assuming that the transactions therein proposed are carried out in accordance with the Application, I am of the opinion that when the Commission shall have entered an order forthwith granting the Application:
(a) all state laws applicable to the proposed transaction will have been complied with; and
(b) the consummation of the proposed transaction will not violate the legal rights of the holders of any securities issued by FirstEnergy, or any "associate company" thereof, as defined in the Act.
I hereby consent to the filing of this opinion as an exhibit to the Application and in any proceedings before the Commission that may be held in connection therewith.
Very truly yours,
Gary D. Benz
Exhibit N-7
FORM OF SERVICE AGREEMENT
This Service Agreement ("Agreement") is entered into as of the 1st day of June, 2003, by and between each of the associate companies listed on the signature page hereto (each a "Client Company"), and FirstEnergy Service Company, an Ohio corporation ("Service Company").
WHEREAS, Service Company is a direct wholly-owned subsidiary of FirstEnergy Corp., a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act");
WHEREAS, Service Company has been formed for the purpose of providing administrative, management and other services to FirstEnergy Corp. and its associate companies, including Client Company (together, the "Client Companies"); and
WHEREAS, Client Company believes that it is in its interest to enter into an arrangement whereby Client Company may agree to purchase such administrative, management and other services from Service Company as Client Company may choose at cost as determined in accordance with this Agreement and Rules 90 and 91 under the Act;
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:
Service Company agrees to provide certain administrative, management or other services (the "Services") to Client Company similar to those supplied to other Client Companies of Service Company. Such services are and will be provided to Client Company only at the request of Client Company. Exhibit A hereto lists and describes all of the Services that are available from Service Company.
In order to provide the Services, Service Company will employ executive officers, accountants, financial advisers, technical advisers, attorneys and other persons with the necessary qualifications. If necessary, Service Company may also arrange for the services of nonaffiliated experts, consultants and attorneys in connection with the performance of any of the Services provided under this Agreement.
As and to the extent required by law, Service Company provides and will provide such services at fully allocated cost, determined in accordance with Rules 90 and 91 under the Act. Exhibit A hereof contains rules for determining and allocating such costs.
Either party to this Agreement may terminate this Agreement by providing 60 days written notice of such termination to the other party. This Agreement is subject to termination or modification at any time to the extent its performance may conflict with the provisions of the Act or with any rule, regulation or order of the Securities and Exchange Commission (the "Commission") 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.
Client Company and Service Company will prepare a Service Request on or before September 30th of each year listing Services to be provided to Client Company by Service Company and any special arrangements related to the provision of such Services for the coming year, based on Services provided during the preceding year. Client Company and Service Company may supplement the Service Request during the year to reflect any additional or special Services that Client Company wishes to obtain from Service Company, and the arrangements relating thereto.
Unless otherwise set forth in a Service Request, payment for Services provided by Service Company shall be by making remittance of the amount billed or by making appropriate accounting entries on the books of Client Company and Service Company. Billing will be made on a monthly basis, with the bill to be rendered as soon as practicable after the close of the month, and remittance or accounting entries completed within 30 days of billing. Any amount remaining unpaid after 30 days following receipt of the bill shall bear interest thereon from the due date of the bill until payment at a rate equal to the prime rate on the due date.
Where written notice is required by this Agreement, all notices, consents, certificates, or other communications hereunder shall be in writing and shall be deemed given when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
To Client Company: c/o President
76 South Main St.
Akron, Ohio 44308
To Service Company: c/o Vice President and Controller
76 South Main Street
Akron, Ohio 44308
8. GOVERNING LAW.
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This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to its conflict of laws provisions.
No amendment, change or modification to this Agreement shall be valid, unless made in writing and signed by both parties hereto.
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, 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, except to the extent transactions thereunder have taken place prior to such effective date in which case such agreements will govern the terms of such transactions.
No waiver by either 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.
This Agreement shall inure to the benefit and shall be binding upon the parties and their respective successors and assigns. No assignment of this Agreement or either 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.
If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction 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 June, 2003.
FirstEnergy Service Company
By:_____________________________________________
Harvey L. Wagner, Vice President & Controller
Client Companies:
[ LIST ]
By: ________________________________
Name: ________________________________
Title:________________________________
EXHIBIT A
Overview
This Exhibit provides a description of all services provided by Service Company departments and the cost allocation methodologies to be used in connection therewith. All products and services are subject to Service Level Standards as negotiated between the Service Company department and Client Company. Each Client Company is classified as either a "Utility Subsidiary" or a "Non-Utility Subsidiary" as defined in the Commission's Order dated October 29, 2001 (Holding Co. Act Release No. 27459), as supplemented by a supplemental order dated November 8, 2001 (Holding Company Act Release No. 27483).
Overview
The costs of services provided by Service Company will be directly assigned, distributed or allocated by activity, project, program, work order or other appropriate basis. The primary basis for charges to affiliates is the direct charge method. The methodologies listed below pertain to all other costs which are not directly assigned but which make up the fully allocated cost of providing the product or service. The costs of product and services provided by the ServeCo that cannot be charged directly to the Subsidiary receiving the product or service will be allocated among the associate companies by utilizing one of the methods described below that most accurately distributes the costs. The method of cost allocation varies based on the department rendering the service. The allocation methods used by Service Company are as follows:
a. "Multiple Factor - All" - For the Indirect Costs for products or services benefiting the entire FirstEnergy system, FirstEnergy and all Subsidiaries will bear a fair and equitable portion of such costs. FirstEnergy will bear 5% of these Indirect Costs. The remaining Indirect Costs will be allocated among the Utility Subsidiaries and the Non-Utility Subsidiaries benefiting from the services provided based on FirstEnergy's equity investment in the respective groups. A subsequent allocation step will then occur. Among the Utility Subsidiaries, allocations will be based upon the "Multiple Factor - Utility" method. Among the Non-Utility Subsidiaries, allocations will be based upon the "Multiple Factor - Non-Utility" method.
b. "Multiple Factor - Utility" - For the Indirect Costs for a product or service solely benefiting one or more of the Utility Subsidiaries, each such Utility Subsidiary so benefiting will be charged a portion of the Indirect Costs based on the sum of the weighted averages of the following factors:
1. Gross transmission and/or distribution plant
2. Operating and maintenance expense excluding purchase power and
fuel costs
3. Transmission and/or distribution revenues,
excluding transactions with affiliates
These three (3) factors have been determined to be the most appropriate for the Utility Subsidiaries in the FirstEnergy system. Each factor will be weighted equally so that no one facet of the electric utility operations inordinately influences the distribution of Indirect Costs.
c. "Multiple Factor - Non-Utility" - For the Indirect Costs for products or services solely benefiting the Non-Utility Subsidiaries, each Non-Utility Subsidiary so benefiting receiving the product or service will be charged a proportion of the Indirect Costs based upon the total assets of each Non-Utility Subsidiary, including the generating assets under operating leases from the Utility Subsidiaries.
d. "Multiple Factor - Utility and Non-Utility" - For the Indirect Costs for a product or service benefiting one or more of the Utility and Non-Utility Subsidiaries, each such Subsidiary so benefiting is first assigned a distribution ratio that is in proportion to the Indirect Costs based on FirstEnergy's equity investment in such Subsidiaries. Following this distribution, a subsequent allocation step will then occur. Among the Utility Subsidiaries, allocations will be based upon the "Multiple Factor-Utility." Among the Non-Utility Subsidiaries, allocations will be based upon "Multiple Factor - Non-Utility"
e. "Direct Charge Ratio" - The ratio of direct charges for a particular product or service to an individual Subsidiary as a percentage of the total direct charges for a particular product or service to all Subsidiaries benefiting from such services. Indirect Costs are then allocated to each Subsidiary based on the calculated ratios.
f. "Number of Customers Ratio" - For costs of products and services driven by the number of Utility customers, the allocation method that will be used will be the number of Utility customers for the respective Utility Subsidiary receiving the product or service divided by the total number of utility customers.
g. "Number of Shopping Customers Ratio" - A "shopping customer" is defined as a Utility customer who has selected a competitive electric generation supplier. For costs of products and services driven by the number of shopping customers, the allocation method that will be used will be the number of shopping customers for the respective Utility Subsidiary receiving the product or service divided by the total number of shopping customers.
h. "Number of Participating Employees - General" - For costs of products and services driven by all participating employees within the FirstEnergy system, the allocation method that will be used will be the number of participating employees for the respective Subsidiary receiving the product or service divided by the total number of participating employees.
i. "Number of Participating Employees - Utility and Non-Utility" - For costs of products and services driven by participating employees who work for the Utility and Non-Utility Subsidiaries, the Subsidiaries receiving the product or service are first assigned a distribution ratio that is in proportion to the Indirect Costs based on FirstEnergy's equity investment in the respective groups. Costs are further allocated by using the number of participating employees for the respective Subsidiary divided by the total number of participating FirstEnergy employees.
j. "Gigabytes Used Ratio" - Number of gigabytes utilized by a Subsidiary receiving the product or service divided by the total number of gigabytes used by the FirstEnergy system companies applicable to that respective product or service.
k. "Number of Computer Workstations Ratio" - Number of computer workstations utilized by a Subsidiary receiving the product or service divided by the total number of computer workstations in use by the FirstEnergy system companies applicable to that respective product or service.
l. "Number of Billing Inserts Ratio" - Number of billing inserts performed for a Subsidiary receiving the product or service divided by the total number of billing inserts performed for the FirstEnergy system companies applicable to that respective product or service.
m. "Number of Invoices Ratio" - Number of invoices processed for a Subsidiary receiving the product or service divided by the total number of invoices processed for the FirstEnergy system companies applicable to that respective product or service.
n. "Number of Payments Ratio" - Number of monthly payments processed for a Subsidiary divided by the total monthly number of payments processed for the FirstEnergy system companies applicable to that respective product or service.
o. "Daily Print Volume" - Average daily print volume performed for a Subsidiary receiving the service divided by the total average daily print volume performed for the entire FirstEnergy system.
p. "Number of Intel Servers" - Number of Intel servers utilized by a Subsidiary receiving the product or service divided by the total number of Intel servers utilized by the FirstEnergy system.
q. "Application Development Ratio" - Number of application development hours budgeted for a Subsidiary receiving the service divided by the total number of budgeted application development hours for the year.
r. "Server Support Composite" - The average ratio of unix gigabytes, SAP gigabytes and Intel number of servers for a Subsidiary receiving the service.
Product or Service Product / Service Description Indirect Allocation
Methods
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Field All Inbound Field calls related to billing, Multiple Factor -
Regulated Calls credit, new service, service order Utility and Non-
completion, outages, and other Utility
miscellaneous activities.
Field All Inbound Field calls related to billing, Multiple Factor -
Unregulated Calls credit, new service, service order Utility and Non-
completion, outages, and other Utility
miscellaneous activities.
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Product or Service Product / Service Description Indirect Allocation
Methods
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Supplier Services Provide customer services support Number of Shopping
to electric generation suppliers, Customers Ratio
administer and maintain Electronic
Data Interface (EDI) functions and
invoice suppliers.
Regulatory Interface Liaison to ensure Customer Choice Number of Shopping
and Process requirements and develop and Customers Ratio
Improvement: execute plans to improve
Supplier supplier services processes.
Market Support Administer and support MSG supplier Number of Shopping
Generation (MSG) functions. Customers Ratio
Administration
Regulatory Respond to regulatory complaints Number of Customers
Interface and from customers and develop and Ratio
Process execute plans to improve regulatory
Improvement: compliance processes.
Regulatory
Compliance Work with regions to communicate Multiple Factor -
and ensure regulatory requirements. Utility
Power Billing Provide billing functions for Number of Customers
large commercial/industrial Ratio
contract customers.
Revenue Reporting Perform and manage revenue Number of Customers
reporting functions. Ratio
Billing Exception Process billing exceptions. Number of Customers
Processing Ratio
Remittance Process customer payments and Number of Payments
Processing deposit funds. Ratio
Human Services Coordinate and administer the Number of Customers
various social services programs. Ratio
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Arrears Management/ Coordinate and perform arrears, Number of Customers
Outsourcing Services credit and bankruptcy functions. Ratio
Incorporated (OSI) Manage outside collections
Administration agencies'performance and OSI
credit activities.
Revenue Protection Perform revenue reporting and Number of Customers
Administration compliance functions. Ratio
Metrics and Manage Customer Services and Call Number of Customers
Budget/Customer Center Departments' budgets and Ratio
Satisfaction measure performance and customer
Measurement satisfaction results.
Policy/Procedures Develop, document and communicate Number of Customers
Development and Customer Services policies and Ratio
Documentation procedures.
Bill Administration/ Design standardized customer Number of Customers
Forms Administration bills, envelopes, and forms. Ratio
Meter Reading Coordinate Meter Reading schedules Number of Customers
Support and routing activities. Ratio
Customer Information Operate and maintain CIS. Number of Customers
System (CIS) Control Ratio
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ECONOMIC DEVELOPMENT
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Product or Service Product / Service Description Indirect Allocation
Methods
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Economic Foster economic development to Multiple Factor -
Development encourage capital investment in Utility
Services FirstEnergy's service areas.
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Product or Service Product / Service Description Indirect Allocation
Methods
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Forestry Provide forestry services. Multiple Factor -
Utility
Distribution Services include Joint User Multiple Factor -
Reliability and contracts, public works Utility
Asset Records coordination, reliability reporting
to regions and Public Utility
Commissions, mutual assistance
coordination, PowerOn support,
cable locate ticket screening
and tariff support.
A-6
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Design Standards Services include line material Multiple Factor -
and - construction standards, Utility
distribution line and underground
maintenance practices and support,
new business process support,
and service practices.
Substation Services include Substation Multiple Factor -
Services Support maintenance plan coordination, Utility
practices and support, mobile
substation administration and
planning, and environmental
compliance support.
Equipment Services include the maintenance, Multiple Factor -
Repair/Testing installation, maintenance, testing Utility
Services and repair of utility equipment.
Fleet Services Develop fleet strategy, and perform Multiple Factor -
perform fleet maintenance Utility
practices support.
Financial Services Identify revenue enhancements and Multiple Factor -
cost reductions. Utility
Substation Design Perform substation and transmission Multiple Factor -
and Transmission- line design and project management Utility
Line Maintenance and transmission line and substation
Support design and material standards,
right-of-way and survey services,
transmission line maintenance plan
coordination, practices and support,
FAA activity coordination.
Planning and Perform planning and protection Multiple Factor -
Protection support for subtransmission system Utility
and overall radial system
capacity planning overview, and
interconnection coordination for
distributed technology applications
on distribution system.
Capital Budget and Capital budget development and Multiple Factor -
Equipment Support support, and major equipment Utility
specifications and procurement/
repair activities for major
equipment.
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Product or Service Product / Service Description Indirect Allocation
Methods
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Transmission and Develop and facilitate technical Number of
Distribution and safety training for workers Participating
Skills Training associated with distribution Employees - General
activities, including line,
substation, meter, fleet, warehouse,
field engineering, and dispatch.
Provide support through equipment
evaluation, training analyses, job
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assessments, and project coordination.
Customer Service Develop and facilitate skills Multiple Factor -
Skills Training training for customer service Utility
groups.
External Learning Develop educational partnerships Multiple Factor -
Opportunities with colleges to offer two-year Utility
Through the Power degrees in electric utility
Systems Institute technology.
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Product or Service Product / Service Description Indirect Allocation
Methods
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Provide Provides services in production Multiple Factor -
Administrative printing, document imaging, graphic Utility and Non-
Support Services services, food services, corporate Utility or Multiple
mailroom and corporate courier. Factor Utility*
Provide Records Provides services in records Multiple Factor -
Management Services storage, records retrieval, Utility and Non-
records retention, records Utility or Multiple
planning and engineering records. Factor Utility*
Provide Business Provides services in convenience Multiple Factor -
Services copiers, fax machines, pagers, Utility and Non-
printers, and business information Utility or Multiple
center. Factor Utility*
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* For services rendered only to the utilities.
EXECUTIVE
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Product or Service Product / Service Description Indirect Allocation
Methods
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COMMUNICATIONS
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Product or Service Product / Service Description Indirect Allocation
Methods
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Public Relations Provides services in Multiple Factor -
media relations, financial All
communications, annual reports,
executive presentation, public
relations counsel, corporate
writing, internet support and
special projects.
Employee Provides services with update, Number of
Communications retirees, satellite broadcast, Participating
human resource-related Employees - Utility
communications and and Non-Utility
special projects.
Production Provides services related to Multiple Factor -
display,photography, Corporate ID, All
video and employee merchandise.
Sponsorship Provides services related to Multiple Factor -
sports marketing, university All
support and special projects.
Non-Utility Provides services related to Multiple Factor -
Advertising broadcast/print, collateral, direct Non-Utility
mail, internet/intranet,
display/merchandise, yellow/white
pages, production/agency support
and special projects.
Utility Provides services related to TV, Multiple Factor -
Advertising radio, print, outdoors, Utility
Internet/Intranet, special projects,
production, agency support and
creative media placement.
A-8
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Utility Provides services developing Multiple Factor -
Bill Inserts regulated bill service to Ohio, Utility
Pennsylvania and New Jersey.
Utility : Yellow/ Provides services with regulated Multiple Factor -
White Pages yellow/white pages. Utility
Utility: Research Provides research services. Multiple Factor -
Utility
Ohio Consumer Provides services related to Ohio Multiple Factor -
Education Consumer Education statewide and Utility
locally.
Ohio Deregulation Provides service related to Multiple Factor -
Education Deregulation Education. Utility
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CORPORATE AFFAIRS AND COMMUNITY INVOLVEMENT
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Product or Service Product / Service Description Indirect Allocation
Methods
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Corporate Affairs Provide administrative support Multiple Factor -
Activities through oversight of the business Utility
practices and planning and
implementation of staff, senior
management and related meetings.
Serves as community liaison.
Direct Community Provides direction in employee Multiple Factor -
Involvement volunteerism, supports viable Utility
Initiatives community partnerships and
educational initiatives.
Energy Efficiency Directing and coordinating Ohio Multiple Factor -
Programs Weatherization and Energy Utility
Efficiency Programs for Low
Income Customers.
Community Consults to regional operations and Multiple Factor -
Initiatives other business units and client Utility
Consulting Services managers for the various community
programs.
Contributions Directs, coordinates, monitors, Multiple Factor -
Management and manages contributions. Utility
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CORPORATE
Product or Service Product / Service Description Indirect Allocation
Methods
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Investor Services Stock administration, perform None
recordkeeping, transfer agent, (All Direct Charge
registrar, paying agent, reinvest- to Holding Co.)
ment plan administration and other
services for shareholders.
Board of Directors Support and administration of Board None
Support of Directors meetings and director (All Direct Charge
compensation. to Holding Co.)
Annual Meeting Coordinate the Annual Meeting of None
Coordination Shareholders, including the (All Direct Charge
preparation and mailing of proxy to Holding Co.)
materials and annual reports and the
tabulation of proxies.
Indenture Administer the company's indentures Multiple Factor -
Compliance Utility
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HUMAN RESOURCES
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Product or Service Product / Service Description Indirect Allocation
Methods
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Manage Employee Provide management and supervision Number of
Executive for employee and executive Participating
Compensation and compensation and benefits. Employees - General
Benefits
Manage Workers Provide management and supervision Number of
Compensation and for workers compensation and Participating
Disability disability programs. Employees - General
Management
Provide and Design, prepare and conduct Number of
Coordinate Human training. Participating
Resources Training Employees - General
Provide Employment Provide staffing, relocation and Number of
Services employment expertise. Participating
Employees - General
Provide HRIS Provide and maintain Human Number of
Services Resources information. Participating
Employees - General
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Provide Diversity Manage Affirmative Action programs, Number of
Management Services provide EEO/AA consulting services, Participating
and respond to charges. Employees - General
Manage/Administer Establish compliance, develop, Number of
Medical Services implement, and administer medical Participating
and Wellness and wellness programs. Employees - General
Programs
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Product or Service Product / Service Description Indirect Allocation
Methods
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Provide Labor Provide contract negotiation Number of
Contract services for all labor agreements. Participating
Negotiations Employees - General
Provide Labor Provide labor consulting services. Number of
Consulting Services Participating
Employees - General
Manage/Administer Develop, implement and administer Number of
Safety Programs occupational safety programs. Participating
Employees - General
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REAL ESTATE
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Product or Service Product / Service Description Indirect Allocation
Methods
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Facilities Management and maintenance of Multiple Factor -
Management office facilities. All or Multiple
Factor Utility*
Facilities Manage office design services, Multiple Factor -
Planning and furniture, project management and All or Multiple
Project Management other capital improvements. Factor Utility*
Management of Real Support internal and external Multiple Factor -
Estate Assets inquiries regarding the All or Multiple
acquisition,divestiture and Factor Utility*
management of real estate assets
Manage/Administer Administer physical security, Multiple Factor -
Security Programs special investigations, security All or Multiple
audits, security consultation Factor Utility*
and contract guard services.
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* For services rendered only to the utilities.
FIRSTENERGY TECHNOLOGIES
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Strategic Develop, support and implement EPRI Multiple Factor -
Technologies programs, industry initiatives, Utility
research and development programs
collaboratives and activities with
universities, labs and the
Department of Energy.
A-11
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New Technology Perform assessment activities for Multiple Factor -
Assessment strategic technology pilots, Utility and
technology assessments, marketing Non-Utility
tests, customer pilots and due
diligence reviews.
Technical Develop, analyze and support Multiple Factor -
Application and strategic alliances, joint Utility and
Product Innovation ventures, strategic startups, Non-Utility
direct investments and Portfolio
initiatives.
New Technology and Develop, support and implement the Multiple Factor -
Product Market following initiatives: tailored Utility and
Deployment solutions with existing products, Non-Utility
commercial packages, operational
efficiencies and business area
solutions.
Demand Response Provide support for corporate Multiple Factor -
Initiatives demand response initiatives. Utility and
Non-Utility
Renewable Energy Provide support for various Multiple Factor -
Program and Strategy corporate and regulatory Utility
initiatives to develop and
implement renewable energy
programs and products.
Regulated Programs Develop, support and implement Multiple Factor -
and Services programs and strategies to meet Utility
corporate initiatives and regulatory
mandates and commitments related to
Comprehensive Resource Assessment
(CRA), customer end-use technology,
distributed generation and load
management.
Project Develop and implement end-use and Multiple Factor -
Implementation distributed generation Utility and
Management Services technology-based products and Non-Utility
services.
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TECHNOLOGY AND SUPPORT SERVICES
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Provide Network Provide Internal Network Services. Multiple Factor -
Services Utility and
Non-Utility
Maintain wireless Maintain internal wireless cell Multiple Factor -
cell sites and sites and fiber optic network; Utility and
fiber optics provide engineering, procurement, Non-Utility
network and installation services.
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INFORMATION TECHNOLOGY
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Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Application Create new or enhance existing Directly Billed
Development applications; including analysis
design coding, testing, system
integration, and implementation, as
well as any required technical
writing or project manual
development.
Development Supervision of application develop- Application
Supervision and ment employees and the support of Development Ratio
Tool Support development software tools.
Client Server Suppport of storage requirements Server Support
Storage Support for all server applications. Composite Ratio
Server Support Create and support the network Number of Intel
(Intel) and server infrastructure to Servers Ratio
accommodate windows and NT
client server applications.
Server Support Create and support the network and Gigabytes Used
(Unix, SAP) server infrastructure to accommodate Ratio
unix and SAP client server appli-
cations.
Mainframe Processing Execute mainframe applications, Gigabytes Used
and Storage including an appropriate portion of Ratio
Support support, started tasks, mainframe
backups and microfiche services.
Desktop Support Help desk email and end-user tools, Number of Computer
remote access, repair services, and Workstations Ratio
general workstation support.
Network Services Includes voice, data, EMS and radio Direct Charge Ratio
access.
Inserting Services Provide document bursting, Number of Billing
inserting and mailing. Inserts Ratio
Printing Services Provide mainframe and client server Daily Print Volume
printing services at the data Ratio.
center.
Technical Provide consulting support to Directly Billed
Consulting departments and end-users to
enable them to leverage their IT
capabilities. Provide advice and
consultation regarding desktop setups
and configurations.
Training Provide IT training. Multiple Factor -
Utility and
Non-Utility
Business Support business application Directly Billed
Application Support related software licenses and/or
hardware maintenance provided by
an outside vendor.
Data Security Disaster recovery and data Multiple Factor -
security services. Utility and
Non-Utility
Project Management Oversee technology projects. Multiple Factor -
Office Utility and
Non-Utility
Provide Provide telecommunication services Direct Charge Ratio
Telecommunication and equipment.
Services
Portal Support Support the infrastructure to Multiple Factor -
accommodate internet and intranet Utility and Non-
application access. Utility
|
PERFORMANCE PLANNING
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Performance Develop, support and execute Multiple Factor
Planning Services performance planning services. - All
--------------------------------------------------------------------------------
|
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Strategic Provide assistance in materials Multiple Factor -
Planning, Demand and services planning (demand Utility and
Management and management) and performs special Non-Utility
Procurement procurement projects.
Projects
Goods and Services Procure material, equipment and Multiple Factor -
Procurement contractor services. Establish, Utility and
manage and administer programs, Non-Utility
which allow internal customers to
obtain goods without having to
process the need through Procurement.
Develop specifications, construction
standards, schedules, and bills of
materials.
Materials Maintain the computerized Multiple Factor -
Management Support purchasing and materials Utility and
management systems, and material Non-Utility
related modules; maintain and/or
modify select management reports.
Analyze Supply Chain processes
and measure performance. Monitor
and forecast demand to ensure a
continuous supply of materials.
Investment Develop and implement plans for Multiple Factor -
Recovery Projects disposition of surplus assets. Utility and
Non-Utility
Process, Refurbish Perform recovery processing, Multiple Factor -
and Sell Materials investment recovery processing, Utility and
refurbishing and selling materials. Non-Utility
Provide Receive and place material into Multiple Factor -
Warehousing stock, insure quality requirements Utility and
Services - are met at receipt, maintain Non-Utility
Non-nuclear inventory counts, and update
information systems. Fill customer
requests for material from stock.
Provide Receive and place material into None
Warehousing stock, insure quality requirements (All direct
Services - are met at receipt, maintain charged)
Nuclear inventory counts, and update
information systems. Fill customer
requests for material from stock.
A-14
|
Warehousing Space Provide warehousing space to Multiple Factor -
Charge internal customers. Utility and
Non-Utility
--------------------------------------------------------------------------------
|
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Accounting Research Provide accounting research and Multiple Factor -
consulting to ensure compliance All
with existing and proposed
financial reporting, and regulatory
accounting requirements.
Accounts Payable Nonpayroll corporate disbursement Multiple Factor -
services including account All
distribution to the general ledger.
Resolve problems associated with
invoice processing and maintain the
accounts payable system.
Billing Services Prepare non-retail electric Multiple Factor
billings. Utility
Infrastructure and Prepare Corporate Sustaining Multiple Factor -
Corporate Reporting reports, subsidiary accounting and All
Accounting and corporate budgeting, which includes
Budgeting reporting and support of the ledger,
property records and SAP system.
Due Diligence Assist value centers to determine None
whether proposed business (All direct
acquisitions/combinations and charged)
similar transactions are desirable
from a financial perspective;
extensive review/analysis following
preliminary review and firm intent
to proceed with transaction through
commitment and closing phases.
Value Center Maintain the property accounting Multiple Factor -
Accounting and system and provide value center Utility and
Budgeting accounting such as management Non-Utility
reporting.
Property Record Maintain corporate continuing Multiple Factor -
Maintenance property records. Utility and Non-
Utility or Multiple
Factor Utility*
Tax Consulting and Conduct tax research and tax Multiple Factor -
Research consulting to assure compliance All
with statues, while evaluating
alternative tax strategies within
the constraints of regulations that
provide additional shareholder value
to the company. In addition, provide
tax-consulting advice to the value
centers on tax compliance and
reporting issues, which includes
business "start-up" support to
organizations requiring assistance.
|
* For services rendered only to the utilities.
Tax Compliance Prepare and process all schedules Multiple Factor -
and information associated with All or Multiple
corporate and subsidiary tax Factor Utility*
returns, audits, and tax litigation,
assuring compliance with tax
regulations and statues.
--------------------------------------------------------------------------------
|
* For services rendered only to the utilities.
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Credit Analysis Provide detailed written credit Multiple Factor -
and Supporting analysis issuing recommendations on Utility and
Functions counterparty creditworthiness and Non-Utility
assigning credit limits.
Credit Policies Develop and support credit policies Multiple Factor -
and Procedures and procedures for managing credit Utility and
risk. Implement and support Non-Utility
standardized credit approval
processes.
Credit Management Develop and support credit Multiple Factor -
Information System management reports and calculate All
credit exposure on a corporate
wide basis.
--------------------------------------------------------------------------------
|
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
General Risk Develop and maintain an enterprise Multiple Factor -
Management risk management system. All
|
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Insurance Policies Manage and support insurance Multiple Factor -
policies for all the business Utility and
units. Non-Utility
Loss Control Manage and support property Multiple Factor -
Services inspections to prevent losses. Utility and
Non-Utility
Surety Bonds Manage and support Surety Bonds. Multiple Factor-
Utility and
Non-Utility
Risk Transfer and Manage and support risk transfer Multiple Factor -
Risk Mitigation and risk mitigation services. Utility and
Services Non-Utility
Ancillary Coverages Manage and support ancillary None (All direct
coverages. charged)
--------------------------------------------------------------------------------
|
INTERNAL AUDIT
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Audit Services Perform the following internal Multiple Factor -
audit services based on risk levels All or Multiple
and /or requests: financial, Factor - Utility*
performance analysis, safeguarding
of assets, computer- related
and fraud investigations.
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Qualified and Establish and implement investment Number of
Non-qualified policy and asset allocation Participating
Pension and strategy and monitor investment Employees - Utility
Savings Plan performance. and Non-Utility
FirstEnergy Establish and implement investment Multiple Factor -
Foundation policy and asset allocation All
strategy and monitor investment
performance.
Voluntary Employee Establish and implement investment Number of
Benefit Association policy and asset allocation Participating
(VEBA) strategy and monitor investment Employees - Utility
Trust performance. and Non-Utility
Nuclear Establish and implement investment None
Decommissioning policy and asset allocation (All direct
strategy and monitor investment charged)
performance.
Non-Utility Establish and implement investment Multiple Factor -
Generator Trust policy and asset allocation Non-Utility
strategy and monitor investment
performance.
Spent Nuclear Fuel Establish and implement investment None
policy and asset allocation (All direct
strategy and monitor investment charged)
performance.
Low-Income Housing Establish and implement investment Multiple Factor -
Tax Credit policy and asset allocation All
Partnership strategy and monitor investment
performance.
--------------------------------------------------------------------------------
INVESTOR RELATIONS
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Investor Compile and communicate information Multiple Factor -
Information to investors. Utility* or Direct
Charge to Holding
Co.
Investor Education Target and educate potential None
investors to promote FirstEnergy's (All Direct Charge
valuation characteristics to Holding Co.)
and business strategy.
Regulations Ensure compliance with SEC Fair Multiple Factor -
Compliance Disclosure regulations. All
FirstEnergy Provide education to management of Multiple Factor -
Management business concerns and valuation All
Education issues of analyst/investors
FirstEnergy Actively promote understanding of Multiple Factor -
Employee Education financial and investor relations' All
issues.
--------------------------------------------------------------------------------
|
* For services rendered only to the utilities.
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Regulatory Manage regulatory activities and Multiple Factor -
Activities and interfaces, including tariff Utility
Consulting development and interpretation.
Monitor and participate in
regulatory affairs at the local,
state and federal levels.
Customer Pricing Develop pricing programs for Multiple Factor -
and Contracting regulated electric service for Utility
retail and wholesale customers,
including "unbundled" costs and
prices for generation, transmission
and distribution service and support
justification to regulators. Provide
support in developing pricing for
special-purpose customer programs and
non-regulated energy services (e.g.
prepayment, economic development,
interruptible load, conjunctive-
billing electric service programs).
Billing Support Provide assistance calculating Multiple Factor -
customer (external and internal) Utility
invoices and operate and maintain
systems to render, collect and
account for these invoices.
Sales and Load Develop short-term and long-term Multiple Factor -
Forecasting sales forecast, peak load Utility and Non-
projections and customer counts Utility
--------------------------------------------------------------------------------
|
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Capital Structure Perform all activities related to Multiple Factor -
Management and acquiring capital and establish All
Administration and administer funding, legal
documentation, and record-keeping
activities associated with finance
programs
Corporate Funds Plan, manage, and operate the Multiple Factor -
Management corporate "cash-flow-cycle." All
Corporate Provide regulatory support, Multiple Factor -
Forecasting strategy support, financial modeling
all and forecasting, financial and
economic analysis and development
of annual corporate KPI target.
A-18
|
Capital Project Provide analytical support in the Multiple Factor -
Evaluation and areas of financing, profitability, Utility and
Support capital structure and cash flow. Non-Utility
Investor Relations Provide institutional and retail Multiple Factor -
Activities security holder, buy and sell-side All
analysts, rating agencies, and
other key members of the financial
community with qualitative and
quantitative information.
--------------------------------------------------------------------------------
|
BUSINESS DEVELOPMENT
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Mergers and Support, evaluate and assist in None (All direct
Acquisitions the management of merger, asset charged)
Support acquisition and asset disposition
activities.
Internal Consulting Perform strategic analysis/business None (All direct
fit, and economic analysis. Provide charged)
integration and transitional
management services as needed.
--------------------------------------------------------------------------------
|
GOVERNMENTAL AFFAIRS
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Federal Activities associated with None (All direct
Governmental developing and maintaining charged)
Affairs Support relationships with federal
government institutions;
includes lobbying, and other
support activities.
State Governmental Activities associated with None (All direct
Affairs Support developing and maintaining charged)
relationships with state government
institutions; includes lobbying,
and other support activities.
--------------------------------------------------------------------------------
|
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Provide Activities associated with None (All direct
Governmental developing and maintaining charged)
Affairs Support relationships with government
institutions; includes lobbying,
litigation, and other support
activities.
Nuclear Legal Provide legal advice for federal None (All direct
Consultation and and state nuclear matters. charged)
Case Management
|
Human Resources Provide legal advice for human Multiple Factor -
Legal Consultation resource matters (including workers Utility and
& Case Management compensation, union negotiations, Non-Utility
arbitrations, class action lawsuits,
etc.).
Employee Benefits Provide legal advice for employee Number of
Legal Consultation benefits matters (including health Participating
& Case Management and welfare benefits, tax-qualified Employees - Utility
and non-tax qualified benefit plans and Non-Utility
and programs, pension administration,
etc.).
Tax Legal Provide legal advice for tax Multiple Factor -
Consultation & matters including federal, state All
Case Management & local tax matters (land tax,
sales & use tax, IRS, etc.).
Bankruptcy Legal Provide legal advice for bankruptcy Multiple Factor -
Consultation & matters. Utility and
Case Management Non-Utility
International Provide legal advice for None (All direct
Legal Consulation international matters- contract charged)
& Case Management negotiations, sale/lease agreements.
Non-Utility Legal Provide legal advice on federal and Multiple Factor -
Consultation & state matters to Non-Utility Non-Utilities
Case Management Subsidiaries.
Regulatory Legal Provide legal advice for federal Multiple Factor -
Consultation & and state regulatory matters. Utility
Case Management
Environmental Provide legal advice for None (All direct
Legal Consultation environmental matters (other than charged)
& Case Management PCB - related matters) -
federal (EPA) and state (EPA),
regulatory/legislative compliance
issues.
PCB Environmental Provide legal advice for PCB- Multiple Factor -
Legal Consultation related matters - federal (EPA) Utility
& Case Management and state (EPA), regulatory/
legislative compliance issues.
Real Estate Legal Provide legal advice for real Multiple Factor -
Consultation & estate matters. Utility and
Case Management Non-Utility
A-20
|
Corporate Legal Provide legal advice for general Multiple Factor -
Consultation & corporate and transactional matters All
Case Management (including SEC filings, Board of
Directors matters, PUHCA, Financings,
Securities Matters, Intellectual
Property, Technology, General
Counsel matters, etc.).
Claims Legal Provide legal advice for Claims Multiple Factor
Consultation & matters. - All
Case Management
--------------------------------------------------------------------------------
|
CLAIMS
--------------------------------------------------------------------------------
Indirect Allocation
Product or Service Product / Service Description Methods
--------------------------------------------------------------------------------
Process Receivable Provide management, supervision, Multiple Factor
Claims and performance of tasks associated - All
with the resolution and chargeback
of receivable claims.
Provide Corporate Claims support in evaluating Multiple Factor
Support claims, and procuring appropriate - All
external/internal legal resources.
--------------------------------------------------------------------------------
|
Exhibit N-10
Type of Services Rendered Amount
-------------------------- ---------
CEI to OE Line Operations $ 1,646
Engineering Services 11,880
Garage Services 80,591
---------
Total Services CEI to OE $ 94,117
=========
CEI to Penn Line Operations $ 39,961
Garage Services 30,344
---------
Total Services CEI to Penn $ 70,305
=========
OE to CEI Line Services $ 3,341
Substation Services 92,875
Engineering Services 382,211
Dispatching Services 187,027
Forestry Services 18,722
Human Services 38,673
Customer Services 47,616
Credit 7,617
Meter Reading 38,722
Meter Services 109,729
Stores Services 10,713
Garage Services 53,956
Regional Administration 75,381
VP Administration 17,101
Customer Support 112,040
---------
Total Services OE to CEI $ 1,195,724
=========
OE to Penn Line Services $ 43,735
Engineering Services 411,007
Dispatching Services 487,862
Forestry Services 24,570
Human Services 104,078
Walk In Centers 11,302
Customer Services 154,546
Credit 41,917
Meter Reading 55,430
Meter Services 85,357
Stores Services 295
Garage Services 27,322
Facilities Services 786
Regional Administration 196,069
VP Administration 47,813
Customer Support 25,010
---------
$ 1,717,099
=========
Penn to CEI Credit $ 12,681
Regional Administration 1,443
Engineering Services 412
Substation Services 7,424
---------
Total Services Penn to CEI $ 21,960
=========
|
Penn to OE Walk In Centers $ 825
Customer Support 670
Regional Administration 7,165
Engineering Services 10,465
Line Services 8,816
Meter Reading 2,062
Meter Services 927
---------
Total Services Penn to OE $ 30,930
=========
TE to OE Meter Services $ 92,331
Human Resources 18,466
Dispatching Services 51,705
Forestry 14,773
Claims 11,080
Store Services 48,012
Facilities Services 18,466
Regional Administration 18,467
---------
Total Services TE to OE $ 273,300
=========
Total $ 3,403,435
=========
|