Exhibit N-7
FORM OF SERVICE AGREEMENT
This Service Agreement ("Agreement") is entered into as of the 1st day of
April, 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:
1. DESCRIPTION OF SERVICES.
-----------------------
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.
2. PERSONNEL.
---------
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.
1
3. COMPENSATION AND ALLOCATION.
---------------------------
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.
4. TERMINATION AND MODIFICATION.
----------------------------
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.
5. SERVICE REQUESTS.
----------------
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.
6. BILLING AND PAYMENT.
-------------------
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 ▇▇▇▇ 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 ▇▇▇▇ shall bear interest thereon
from the due date of the ▇▇▇▇ until payment at a rate equal to the prime rate
on the due date.
7. NOTICE.
------
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:
2
To Client Company: c/o President
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
To Service Company: c/o Vice President and Controller
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
8. GOVERNING LAW.
-------------
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.
9. MODIFICATION.
------------
No amendment, change or modification to this Agreement shall be valid,
unless made in writing and signed by both parties hereto.
10. ENTIRE AGREEMENT.
----------------
This Agreement, together with its exhibits, constitutes the entire
understanding and agreement of the parties with respect to its subject matter,
and effective upon the execution of this Agreement by the respective parties
hereof, any and all prior agreements, 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.
11. WAIVER.
------
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.
12. ASSIGNMENT.
----------
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.
13. SEVERABILITY.
------------
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.
3
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of this 1st day of April, 2003.
FirstEnergy Service Company
By:_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President &
Controller
Client Companies:
[LIST]
By: __________________________________
Name: ________________________________
Title: _________________________________
4
EXHIBIT A
---------
DESCRIPTION OF SERVICES AND ALLOCATION METHODOLOGY
--------------------------------------------------
1. Description Of Services
-----------------------
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).
2. Cost Allocation Methodology
---------------------------
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 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 will be charged a portion of
the Indirect Costs based on the sum of the weighted averages of the
following factors:
A-1
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 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 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. Indirect costs are then allocated to each Subsidiary based
on the calculated ratios.
f. "Enterprise Distribution - For the Indirect Costs for products
and services that benefit 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 Non-Utility
Subsidiaries based on FirstEnergy's equity investment in the respective
groups.
g. "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.
h. "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.
A-2
i. "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.
j. "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.
k. "Square Footage Used Ratio" - Amount of square footage occupied
by a Subsidiary receiving the product or service divided by the total
amount of square footage occupied by all FirstEnergy system companies
applicable to that respective product or service.
l. "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.
m. "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.
n. "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.
o. "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.
p. "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.
A-3
3. Descriptions of Products and Services
-------------------------------------
CALL CENTER
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Product or Service Product / Service Description Indirect Allocation
Methods
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Field All Inbound Field calls related to billing, Number of Customers
Regulated Calls credit, new service, service order Ratio
completion, outages, and other
miscellaneous activities.
Field All Inbound Field calls related to billing, Number of Shopping
Unregulated Calls credit, new service, service order Customers Ratio
completion, outages, and other
miscellaneous activities.
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CUSTOMER SERVICE
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Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
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
A-4
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.
▇▇▇▇ 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
--------------------------------------------------------------------------------
Economic ▇▇▇▇▇▇ economic development to Multiple Factor -
Development encourage capital investment in Utility
Services FirstEnergy's service areas.
--------------------------------------------------------------------------------
TRANSMISSION & DISTRIBUTION TECHNICAL SERVICES
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
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-5
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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WORKFORCE DEVELOPMENT
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
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
assessments, and project coordination.
A-6
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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ADMINISTRATIVE SERVICES
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Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Provide Provides services in production Multiple Factor -
Administrative printing, document imaging, graphic Utility and
Support Services services, food services, corporate Non-Utility
mailroom and corporate courier.
Provide Records Provides services in records Multiple Factor -
Management Services storage, records retrieval, Utility and
records retention, records Non-Utility
planning and engineering records.
Provide Business Provides services in convenience Multiple Factor -
Services copiers, fax machines, pagers, Utility and
printers, and business information Non-Utility
center.
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COMMUNICATIONS
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Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
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-7
Utility Provides services developing Multiple Factor -
▇▇▇▇ Inserts regulated ▇▇▇▇ 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
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Corporate Affairs Provide administrative support Multiple Factor -
Activities through oversight of the business All
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 All
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. All
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A-8
CORPORATE
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Investor Services Perform recordkeeping, transfer Multiple Factor -
agent, registrar, paying agent, All
reinvestment plan administration
and other services for shareholders.
Board of Directors Support and administration of Board Multiple Factor -
Support of Directors meetings and director All
compensation.
Annual Meeting Coordinate the Annual Meeting of Multiple Factor -
Coordination Shareholders, including the All
preparation and mailing of proxy
materials and annual reports and the
tabulation of proxies.
Stock Based Administration of the stock based Number of
Benefit Program benefit program. Participating
Employees - General
Compliance Provide reporting to regulatory Multiple Factor -
Reporting bodies. All
Indenture Administer the company's indentures Multiple Factor -
Compliance Utility
--------------------------------------------------------------------------------
HUMAN RESOURCES
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Manage Employee Provide management and supervision Number of
Executive for employee and executive Participating
Compensation and compensation and benefits. Employees - Utility
Benefits and Non-Utility
Manage Workers Provide management and supervision Number of
Compensation and for workers compensation and Participating
Disability disability programs. Employees - Utility
Management and Non-Utility
Provide and Design, prepare and conduct Number of
Coordinate Human training. Participating
Resources Training Employees - Utility
and Non-Utility
Provide Employment Provide staffing, relocation and Number of
Services employment expertise. Participating
Employees - Utility
and Non-Utility
Provide HRIS Provide and maintain Human Number of
Services Resources information. Participating
Employees - Utility
and Non-Utility
A-9
Provide Diversity Manage Affirmative Action programs, Number of
Management Services provide EEO/AA consulting services, Participating
and respond to charges. Employees - Utility
and Non-Utility
Manage/Administer Establish compliance, develop, Number of
Medical Services implement, and administer medical Participating
and Wellness and wellness programs. Employees - Utility
Programs and Non-Utility
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INDUSTRIAL RELATIONS
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Facilities Management and maintenance of Square Footage
Management office facilities. Ratio
Facilities Manage office design services, Square Footage
Planning and furniture, project management and Ratio
Project Management other capital improvements.
Management of Real Support internal and external Multiple Factor -
Estate Assets inquiries regarding the Utility and
acquisition,divestiture and Non-Utility
management of real estate assets
Manage/Administer Administer physical security, Multiple Factor -
Security Programs special investigations, security Utility and
audits, security consultation Non-Utility
and contract guard services.
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FIRSTENERGY TECHNOLOGIES
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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-10
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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FIRSTENERGY TELECOM
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Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Provide Network Provide Network Services. Multiple Factor -
Services Utility and
Non-Utility
Maintain wireless Maintain wireless cell sites and Multiple Factor -
cell sites and fiber optic network; provide Utility and
fiber optics engineering, procurement, and Non-Utility
network installation services.
A-11
INFORMATION SYSTEMS DEPARTMENT
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Product or Service Product / Service Description Indirect Allocation
Methods
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Development and Create new or enhance existing Direct Charge Ratio
Tool Support applications; including analysis,
design coding, testing, system
integration, and implementation,
as well as any required technical
writing or project manual development.
Client Server Create and support the network Gigabytes Used
Support and server infrastructure to Ratio
accommodate client server
applications. Service includes an
appropriate portion of started tasks,
backups and recoveries.
Mainframe Support Execute mainframe applications, Gigabytes Used
including an appropriate portion Ratio
of support, started tasks, mainframe
backups and microfiche services.
Desktop Support Help desk and repair services, and Number of Computer
workstation support. Workstations Ratio
Network Support Includes E-mail, network access, Direct Charge Ratio
client server access, mainframe
access, internet access and
intranet access.
Inserting Services Provide document bursting, Number of Billing
inserting and mailing. Inserts Ratio
Printing Services Provide mainframe printing Direct Charge
services Ratio for production and
development environments.
Remote Access Provide dial-in access to the Multiple Factor -
network. Utility and
Non-Utility
Technical Provide consulting support to Multiple Factor -
Consulting departments and end-users to Utility and
enable them to leverage their IT Non-Utility
capabilities. Provide advice and
consultation regarding desktop setups
and configurations.
Training Provide IT training. Multiple Factor -
Utility and
Non-Utility
Special Projects Supervise special projects. Multiple Factor -
Utility and
Non-Utility
Business Support business application Multiple Factor -
Application Support related software licenses and/or Utility and
hardware maintenance provided by Non-Utility
an outside vendor.
Data Security Disaster recovery and data Multiple Factor -
security services. Utility and
Non-Utility
Project Management Manage technology projects. Multiple Factor -
Office Utility and
Non-Utility
Provide Provide telecommunication services Direct Charge Ratio
Telecommunication and equipment.
Services
Web Hosting Support network and server Direct Charge Ratio
infrastructure to accommodate
e-business and intranet applications.
Service includes an appropriate
portion of started tasks, backups
and recoveries.
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A-12
PERFORMANCE PLANNING
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Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Performance Develop, support and execute Enterprise
Planning Services performance planning services. Distribution
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SUPPLY CHAIN
--------------------------------------------------------------------------------
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-13
Warehousing Space Provide warehousing space to Multiple Factor -
Charge internal customers. Utility and
Non-Utility
--------------------------------------------------------------------------------
CONTROLLERS
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Accounting Research Provide accounting research and Enterprise
consulting to ensure compliance Distribution
with existing and proposed
financial reporting, and regulatory
accounting requirements.
Accounts Payable Nonpayroll corporate disbursement Number of Invoices
services including account Processed
distribution to the general ledger.
Resolve problems associated with
invoice processing and maintain the
accounts payable system.
Billing Services Prepare non-retail electric None
▇▇▇▇▇▇▇▇. (All direct
charged)
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
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.
A-14
Tax Compliance Prepare and process all schedules Multiple Factor -
and information associated with All
corporate and subsidiary tax returns,
audits, and tax litigation, assuring
compliance with tax regulations and
statues.
--------------------------------------------------------------------------------
CREDIT MANAGEMENT
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
ENTERPRISE RISK MANAGEMENT
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
General Risk Develop and maintain an enterprise Multiple Factor -
Management risk management system. All
--------------------------------------------------------------------------------
INSURANCE SERVICES
--------------------------------------------------------------------------------
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)
--------------------------------------------------------------------------------
A-15
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
and /or requests: financial,
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. All
Investor Education Target and educate potential Multiple Factor -
investors to promote FirstEnergy's All
valuation characteristics
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.
--------------------------------------------------------------------------------
A-16
RATES AND REGULATORY AFFAIRS
--------------------------------------------------------------------------------
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
projections and customer counts
--------------------------------------------------------------------------------
TREASURY
--------------------------------------------------------------------------------
Product or Service Product / Service Description Indirect Allocation
Methods
--------------------------------------------------------------------------------
Capital Structure Perform all activities related to Multiple Factor -
Management and acquiring capital and establish and All
Administration 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-17
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 the None (All direct
Acquisitions 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.
--------------------------------------------------------------------------------
LEGAL
--------------------------------------------------------------------------------
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
A-18
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-19
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 Direct Charge Ratio
Consultation & matters.
Case Management
--------------------------------------------------------------------------------
CLAIMS
--------------------------------------------------------------------------------
Indirect Allocation
Product or Service Product / Service Description Methods
--------------------------------------------------------------------------------
Process Receivable Provide management, supervision, Direct Charge Ratio
Claims and performance of tasks associated
with the resolution and chargeback
of receivable claims.
Provide Corporate Claims support in evaluating Direct Charge Ratio
Support claims, and procuring appropriate
external/internal legal resources.
--------------------------------------------------------------------------------
A-20