EXHIBIT B-1(a)
AMENDED AND RESTATED
SERVICE AGREEMENT
BETWEEN
ENTERGY SERVICES, INC.
AND
ENTERGY ENTERPRISES, INC.
THIS AGREEMENT, made and entered into as of June 22, 1999 by
and between Entergy Services, Inc., formerly MSU System Services,
Inc., formerly Middle South Services, Inc., a corporation
organized under the laws of the State of Delaware (hereinafter
sometimes referred to as "Service Company") and Entergy
Enterprises, Inc., formerly Electec, Inc., a corporation
organized under the laws of the State of Louisiana (hereinafter
sometimes referred to as "EEI"), amends, restates and supercedes
in its entirety that certain Service Agreement made and entered
into as of January 24, 1984, by and between Service Company and
EEI, as heretofore amended by Amendments, effective January 1,
1989, January 1, 1991, January 1, 1992, January 1, 1996, January
1, 1998, and January 1, 1999 (the "Original Service Agreement").
W I T N E S S E T H:
WHEREAS, Service Company and EEI are both direct
subsidiaries of Entergy Corporation ("Entergy") and, together
with Entergy and its other direct and indirect subsidiaries
("Client System Companies"), form the Entergy System; and
WHEREAS, Service Company is organized, staffed and
equipped and is authorized by the Securities and Exchange
Commission (the "Commission") as a subsidiary service company
under Section 13 of the Public Utility Holding Company Act of
1935, as amended (the "Act"), to render to Client System
Companies certain services and to render to EEI services as
herein provided (hereinafter EEI and Client System Companies will
be sometimes collectively referred to as "Client Companies"); and
WHEREAS, in the performance of past and future services
for the Client Companies, Service Company has acquired and will
acquire certain properties and other resources; and
WHEREAS, EEI is authorized by orders of the Commission
dated July 8, 1993 (HCAR No. 25848), June 30, 1995 (HCAR No.
26322) and June 22, 1999 (HCAR No. 27039) to utilize those
services, properties and resources of Service Company, as well as
those provided by other companies of the Entergy System, (i) to
conduct preliminary development activities with respect to
potential investments by Entergy in various energy, energy-
related and other non-utility businesses, (ii) to provide various
management, administrative and support services to certain of its
associate companies, (iii) to provide consulting services to
certain of its associate companies and to non-associate
companies, and (iv) to provide, directly or indirectly, through
one or more
special purpose subsidiary companies of Entergy or EEI, power
project operations and maintenance services to non-associate
companies and to certain of its associate companies; and
WHEREAS, economies and increased efficiencies benefiting
the Entergy System will result from the performance by Service
Company of services for EEI and the provision of certain property
and resources to EEI as herein provided; and
WHEREAS, subject to the terms and conditions herein
described, Service Company is willing, upon request by EEI, to
render such services and provide such property and resources to
EEI; and
WHEREAS, pursuant to settlement arrangements entered into
by Entergy with certain of its state and local regulators in 1992
and 1993 (collectively, the "Settlement Agreements"), Entergy has
agreed (subject to the receipt of any requisite Commission
authorization) to implement certain special provisions pertaining
to affiliate transactions between Entergy's Regulated Utilities
and Nonregulated Businesses (each as defined in Article 1 of this
Agreement), including, without limitation, (i) a provision
requiring that any services rendered by Entergy's Regulated
Utilities (including Service Company) to its Nonregulated
Businesses (including EEI), be priced at cost plus 5%, and (ii) a
provision modifying the methodology, incorporated in the Original
Service Agreement, for the allocation of profits derived by EEI
from its marketing to non-affiliates of intellectual property
developed or otherwise acquired by Entergy's Regulated Utilities
(including Service Company); and
WHEREAS, by Order dated June 22, 1999 (HCAR No. 27040),
the Commission granted Entergy's application requesting, among
other things, an exemption from the "at cost" requirements of
Section 13(b) of the Act to permit implementation of the
provision of the Settlement Agreements requiring that services
rendered by Service Company to EEI be priced at cost plus 5%, and
(to the extent jurisdictional under the Act) implementation of
the profit sharing methodology required under the Settlement
Agreements in connection with the marketing by EEI of Service
Company developed or acquired intellectual property; and
WHEREAS, it is necessary and appropriate that the Original
Service Agreement be amended and restated for the purpose, among
other things, of incorporating the above referenced provisions of
the Settlement Agreements.
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements herein, the parties hereto hereby agree as
follows:
1.
Definitions
As used hereinafter, the following terms, in addition to
those elsewhere defined in this Agreement, shall have the
following meanings unless the context otherwise requires:
(A) "Services" shall mean the services described in Articles 3,
4 and 5 hereof.
(B) "Basic Services" shall mean all the Services described in
Article 5 and those Services in Article 3, but only insofar as
such Services, when rendered to EEI, relate to the internal
management of EEI's operations and systems.
(C) "Extra Services" shall mean all services other than Basic
Services.
(D) "Non-Affiliate" means any corporation, company, agency,
government, business, entity or person other than (i) Entergy,
(ii) a direct or indirect subsidiary of Entergy, or (iii) a
person employed by Entergy or any of such subsidiaries.
(E) "Intellectual Property" means any process, program or
technique which is protected by the copyright, patent or
trademark laws, or by virtue of it being a trade secret, and
which has been specifically and knowingly incorporated into,
exhibited in, or reduced to a tangible writing, drawing, manual,
computer program, product or similar manifestation or thing.
(F) "Regulated Utilities" means Entergy Arkansas, Inc., Entergy
Gulf States, Inc., Entergy Louisiana, Inc., Entergy New Orleans,
Inc., Entergy Mississippi, Inc., System Energy Resources, Inc.,
Entergy Operations Inc., System Fuels, Inc. and Service Company
and such other similar subsidiaries as Entergy shall create whose
activities and operations are primarily related to the domestic
sale of electric energy at retail or at wholesale to affiliates,
or the provision of services thereto.
(G) "Nonregulated Businesses" means Entergy Power, Inc., Entergy
Enterprises, Inc. and such other subsidiaries and affiliates as
Entergy shall create that are not domestic regulated electric or
combination electric and gas utilities primarily engaged in the
business of selling electric energy or natural gas at retail or
wholesale to affiliates or are not primarily engaged in the
business of providing services or goods to regulated electric or
combination electric and gas utility affiliates.
2. Agreement to Furnish Services
(A) Upon its receipt of EEI's work order or other request
therefor, Service Company agrees to furnish to EEI upon the terms
and conditions hereinafter set forth such of the Basic Services
requested by EEI, at such times, for such periods and in such
manner as EEI shall have requested. Service Company will, as and
to the extent required for EEI, keep itself and its personnel
available and competent to render to EEI the Basic Services on
the same basis as such services are provided the other Client
System Companies.
(B) Upon its receipt of EEI's work order or other request for
Extra Services, Service Company will, if it has or can have
available the personnel and resources needed to fill the work
order or request for Extra Services, furnish to EEI upon the
terms and conditions hereinafter set forth such of the Extra
Services, at such times, for such periods and in such manner as
EEI may from time to time request; provided, however, that the
determination of whether Service Company has the available
personnel and resources to perform in accordance with the work
order or request will be entirely within the discretion of
Service Company, and Service Company may at its sole option elect
not to perform any requested Extra Services, except that, once
having agreed to perform pursuant to a work order or request,
Service Company shall not withdraw or depart from such
performance without the consent of EEI. In making its
determination as to the availability of personnel and resources,
Service Company nay consider whether the use thereof by EEI will
interfere with its own use of such personnel and resources.
(C) The provision of Services by Service Company pursuant to
this Agreement shall in all cases and notwithstanding anything
herein contained to the contrary be subject to any limitations
contained in authorizations, rules or regulations of those
governmental agencies, if any having jurisdiction over Service
Company, EEI, or such provision of Services.
3. Description of Services
The Services to be provided by Service Company hereunder shall
include the following:
(A) General Executive and Advisory Services. Advise and assist
the officers and employees of EEI in connection with various
phases of its business and operations, including particularly but
not exclusively, those phases which involve coordination of
planning or operations between EEI and other entities.
(B) EWGs, FUCOs, Qualifying Facilities, etc. Advise and assist
EEI in rendering consulting services to customers regarding
possible investment and participation in, and related activities
with respect to (i) "exempt wholesale generators" and "foreign
utility companies," as such terms are defined in Sections 32 and
33, respectively, of the Act, (ii) "Qualifying Facilities",
including certain cogeneration facilities and small power
production facilities, as such terms are defined under the Public
Utility Regulatory Policies Act of 1978 and the rules and
regulations promulgated thereunder by the Federal Energy
Regulatory Commission, and (iii) other non-exempt domestic
electric generating facilities.
(C) Development of Other Business Enterprises. Advise and assist
EEI in the investigation of other business enterprises, and the
development of such other business enterprises as are approved by
the Commission or otherwise are permitted under the Act.
(D) General Engineering. Perform general engineering work,
including system production and transmission studies; prepare and
analyze apparatus specifications, distribution studies and
standards, civil engineering and hydraulic studies and problems,
and fuel supply studies; and advise and assist in connection with
analyses of operations and operating and construction budgets.
(E) Design Engineering. Perform detailed design work as
requested by EEI.
(F) Purchasing. Render purchasing and group purchasing services
to EEI, coordinate group purchasing, and supply expediting
services. All requests for bids shall be made by and purchases
confirmed in the name of EEI (or its customer, if requested by
EEI).
(G) Accounting and Statistical. Perform for EEI all such
bookkeeping, accounting, and auditing services and install such
internal accounting and auditing procedures as are required by
EEI or its customers to maintain its or their books and records
properly and account for and safeguard its or their operations
and properties; advise and assist EEI in connection with the
installation of accounting systems and similar efforts,
requirements of regulatory bodies with respect to accounting,
studies of accounting procedures and practices to improve
efficiency, book entries resulting from unusual financial
transactions, internal audits, employment of independent
auditors, preparation and analyses of financial and operating
reports and other statistical matters relating to EEI or its
customers, preparation of reports to regulatory commissions,
insurance companies and others, standardization of accounting and
statistical forms in the interest of economy, and other
accounting and statistical matters.
(H) Finance and Treasury. Advise and assist EEI on financing
matters, including short and long range financial planning,
determination of types and times of sales of securities, the
preparation of petitions and applications for the issuance of
securities and the preparation of various documents required in
connection therewith, negotiation and structuring of financing
arrangements and the provision of credit from banks, and all
treasury matters, including banking and investment of surplus
funds.
(I) Taxes. Advise and assist EEI in connection with tax matters,
including preparation of Federal, State or Foreign income and
other tax returns and of protests, claims and briefs where
necessary, tax accruals, and other matters in connection with any
applicable taxes, governmental fees or assessments, and
assistance in connection with audit of returns by the Internal
Revenue Service and State Tax Agencies.
(J) Risk Management. Advise and assist EEI in connection with
risk management matters including but not limited to insurance
and bonding, including contracts with insurers, trustees and
actuaries and the placing of individual or blanket/group policies
covering EEI and/or other Client Companies or its or their
customers, and other insurance and bonding problems as required.
(K) Employee Benefits. Advise and assist EEI in connection with
employee benefit matters including but not limited to welfare and
pension matters.
(L) Corporate. Advise and assist EEI in connection with
corporate affairs, including assistance and suggestions in
connection with the preparation of petitions and applications for
the issuance of securities, contracts for the sale of
underwriting of securities, preparation of schedules or steps
required in connection with general corporate matters and the
consummation thereof; maintenance of minutes of directors' and
stockholders' meetings and other proceedings and of other related
corporate records; and also arrangements for stockholders'
meetings, including notices, proxies and records thereof, and for
other types of meetings.
(M) Budgeting. Advise and assist EEI in matters involving the
preparation and development of capital and operating budgets,
cash and cost forecasts, and budgetary controls.
(N) Business Promotion and Public Relations. Advise and assist
EEI in the development of marketing and sales programs, in the
preparation and use of advertising and sales materials, and in
the determination and carrying out of promotional programs.
(O) Employee Services. Furnish EEI with advisory and
administrative services and programs in connection with employee
and employee relations matters, including matters relative to
employees loaned under Article 4 hereof, payroll, recruitment,
employee placement, training, compensation, safety, labor
relations and health, welfare and employee benefits.
(P) Regulatory Matters. Consultation and advice with respect to
regulatory matters, particularly those involving the Securities
and Exchange Commission or the Federal Energy Regulatory
Commission, and the provision of liaison and assistance in
processing matters with the staffs of such commissions.
(Q) Data Processing Services. Operation of a data processing
Computer Center to serve the Entergy System. This operation may
include: applications software development, maintenance and
enhancements; data communications network design, operation and
management; Computer Center production operations; and
information systems consulting.
(R) Systems and Procedures. Advise and assist EEI in the
establishment of good operating practices and methods of
procedure, the standardization of forms, the purchase, rental and
use of mechanical and electronic data processing, computing and
communications equipment, in conducting economic research and
planning and in the development of special economic studies.
(S) Access to and Use of Resources. Subject to those conditions
with respect to Service Company's discretion not to perform Extra
Services set forth in Article 2B, make available to EEI in the
conduct of its business and/or, to the extent necessary or
appropriate as required in the performance of its services to its
customers access to, use of, or rights in all Service Company's
resources, including facilities, products, processes, techniques,
computer hardware and software, technical information, training
aids and properties, vehicles, equipment, machines and other
property, whether owned, leased or licensed by or otherwise to,
Service Company.
(T) Training. Assist EEI in providing training to personnel of
EEI or its customers; develop and make available training
procedures, materials and facilities, and provide instructors.
(U) Legal Services. Provide services and advice relating to
litigation, contracts, leases, real estate, property rights and
other legal matters.
(V) General. Make available services in the areas of
construction planning and supervision, design, management,
programs, quality assurance, licensing matters, research and
development, and communications systems and procedures.
(W) Other Services. Render advice and assistance in connection
with such other matters as EEI may request and Service Company
may be able to perform with respect to EEI's business and
operations.
4. Provision of Personnel
Where specifically requested by EEI, Service Company may
loan its employees to EEI. In that event, such loaned employees
will be under the sole supervision and control of EEI for such
period or periods of time as are necessary to complete the work
to be performed by such employees. Such employees may be
withdrawn by Service Company from tasks assigned by EEI only with
the consent of EEI. EEI will be responsible for the actions and
activities of such employees while engaged in the performance of
the work to the same degree as though such persons were employees
of EEI. However, as part of Extra Services, Service Company,
during periods such employees are loaned to EEI, will continue to
provide to such employees those same payroll, pension, savings,
tax withholding, Social Security, unemployment, bookkeeping and
other personnel support services then being utilized by Service
Company in connection with compensating and benefiting such
employees. Compensation for employees loaned by Service Company
to EEI pursuant to this Article 4 shall be equal to Service
Company's cost of providing such employees, determined in
accordance with applicable rules and regulations (including, but
not limited to, Rules 90 and 91) under the Act and appropriate
accounting standards, plus a charge of 5% of the amount of such
cost.
5. Exchange of Intellectual Property
(A) Should EEI in the course of its business develop
Intellectual Property, it will make such Intellectual Property
available for utilization by Service Company without charge
(except the actual expenses incurred by EEI in connection with
making such Intellectual Property available to Service Company);
provided, however, that such availability shall be dependent upon
and subject to any contractual commitments of EEI to
Non-Affiliates, applicable laws and regulations, and the legal
rights and entitlements of others.
(B) As part of Services, Service Company will make available to
EEI for utilization by it all Intellectual Property heretofore or
hereafter developed or obtained by Service Company without charge
for costs incurred in the development thereof (except for the
actual expenses incurred by Service Company in making the same
available to EEI, and except as otherwise provided in Article 8
below); provided, however, that such availability shall be
dependent upon and subject to any contractual commitments of
Service Company to Non-Affiliates, applicable laws and
regulations, and the legal rights and entitlements of others.
6. Compensation of Service Company
As compensation for Services actually requested by EEI and
rendered to it by Service Company, EEI hereby agrees to pay to
Service Company (except as described in Article 5B) an amount
equal to (a) the cost of such Services, computed in accordance
with applicable rules and regulations (including, but not limited
to, Rules 90 and 91) under the Act and appropriate accounting
standards, plus (b) a charge of 5% of such cost. The cost of
Services under (a) above shall include direct charges and EEI's
pro rata share of certain of Service Company's costs and shall be
determined as outlined in Exhibits I and II attached hereto and
incorporated herein by reference. Bills for Services will be
rendered on or before the 15th day of the succeeding month and
will be payable on or before the 25th day of such month.
7. Work Orders
The Services will be performed in accordance with work
orders or requests issued or made by or on behalf of EEI and
accepted by Service Company, and all Services will be assigned an
applicable work order number to enable specific work to be
properly allocated by project or other appropriate basis. Work
orders shall be as specific as practicable in defining the
Services requested to be performed and shall set forth the scope
and duration of the Services to be performed and the specific
employees to be loaned to EEI pursuant to the work order. EEI
shall have the right from time to time to amend, alter or rescind
any work order, provided that (i) any such amendment or
alteration which results in a material change in the scope of the
work to be performed or equipment to be provided is agreed to by
Service Company, (ii) the costs for the Services covered by the
work order will include any expense incurred by Service Company
as a direct result of such amendment, alteration or rescission of
the work order, and (iii) no amendment, alteration or rescission
of a work order will release EEI from liability for all such
costs already incurred or contracted for by Service Company
pursuant to the work order, regardless of whether the work
associated with such costs has been completed.
8. Disposition of Intellectual Property
In the event EEI with the express written consent of Service
Company markets to Non-Affiliates Intellectual Property
heretofore or hereafter developed or otherwise acquired by
Service Company for one or more of the Client System Companies
that are Regulated Utilities, and such Intellectual Property is
actually used by Service Company on behalf of such Client System
Company(ies), all profits derived by EEI from such marketing
transactions shall be divided equally by Service Company and EEI,
after deducting all of EEI's incremental costs associated with
making the Intellectual Property available for sale, including
the cost of marketing such Intellectual Property; provided,
however, that in the event any Intellectual Property developed or
otherwise acquired by Service Company for use on behalf of such
Client System Company(ies) is not actually so used, and is
subsequently marketed by EEI to Non-Affiliates, EEI shall fully
reimburse Service Company for all of its costs incurred to
develop or otherwise acquire such Intellectual Property before
any profits derived from its marketing of such Intellectual
Property shall be so divided.
9. Limitation of Liability and Indemnification
In performing the Services hereunder (except to the extent
such Services are being performed by employees loaned to and
under the supervision of EEI), Service Company will exercise due
care to assure that the Services are performed in a workmanlike
manner, meet the standards and specifications set forth in the
applicable work order or request with respect to such Services,
and comply with applicable standards of law and regulation.
However, failure to meet these obligations shall in no event
subject Service Company to any claims or liabilities other than
to reperform the work and be compensated in accordance with this
Agreement for such reperformance so that it fully complies with
the work order, request or standard, as the case may be. Service
Company makes no other warranty with respect to its performance
of the Services, and EEI agrees to accept such Services without
further warranty of any nature. EEI shall and does hereby
indemnify and agree to save harmless and defend Service Company
from liabilities, taxes, losses, obligations, claims, damages,
penalties, causes of action, suits, costs and expenses or
judgments of any nature, on account of, or resulting from: (i)
injuries to or the death of any person; (ii) damage to or loss of
any property; (iii) any alleged or actual violation of law, court
order, or governmental agency rule or regulation committed by or
existing with respect to EEI or its employees, agents or
subcontractors; (iv) any alleged or actual breaches of contract
by EEI; (v) any claims by or on account of any employee, agent or
subcontractor of EEI; (vi) services or labor performed, labor
force, materials, provisions or supplies furnished on allegedly
contracted for by or on behalf of EEI, its employees, agents or
subcontractors; and/or (vii) other damages; which, in all cases,
are attributable to or arise out of the performance and
prosecution of any project or work performed by or on behalf of
EEI, whether or not the same results or allegedly results from
the claimed or actual negligence or breach of warranty of, or
willful conduct by, EEI or any of its employees, agents or
Contractors or its or their subcontractors or any combination
thereof.
10. Miscellaneous
This Agreement shall be binding upon the successors and
assigns of the parties hereto, provided that Service Company
shall not be entitled to assign or subcontract out any of its
obligations under this Agreement or under any purchase order or
work order issued hereunder without the prior written approval of
EEI. This Agreement shall be construed and enforced under and in
accordance with the laws of the State of Louisiana. This
Agreement may be executed in counterparts, each one of which when
fully executed shall be deemed to have the same dignity, force
and effect as an original. No provision of this Agreement shall
be deemed waived nor breach of this Agreement consented to unless
such waiver or consent is set forth in writing and executed by
the party hereto making such waiver or consent.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective corporate names by
their respective Presidents or one of their respective Vice
Presidents as of the day and year first above written.
ENTERGY SERVICES, INC.
By:
C. ▇▇▇▇ ▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
ENTERGY ENTERPRISES, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
EXHIBIT I
ENTERGY ENTERPRISES, INC.
Billing Procedure by
Entergy Services, Inc.
I. Introduction
This procedure establishes the guidelines for ▇▇▇▇▇▇▇▇ by Entergy
Services, Inc. (ESI) to Entergy Enterprises, Inc. (EEI). ESI
employs a computer based work order system for the accumulation
of costs and the allocation and billing of those costs to its
client companies. These client companies are primarily the
affiliated (Entergy System) companies. The current ESI
accounting system has been designed to facilitate compliance with
the FERC Uniform System of Accounts and generally accepted
accounting principles. All bills by ESI are at cost, plus a
charge of five percent (5%) of such cost.
The procedures to be employed in determining costs of Services
performed for EEI will follow the procedures outlined in Exhibit
II.
II. Method of Billing EEI
The cost of all Services performed by ESI for EEI will be
accounted for using the automated work order system. Sources of
this system are:
Payroll (time reports)
Accounts Payable (expense accounts and vendor invoices)
General Accounting Journal Entries
Charges for Services rendered will be billed at cost plus five
percent (5%) on or before the 15th day of the succeeding month.
All amounts billed will be payable by EEI on or before the 25th
day of such month.
III. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ of work orders to EEI will be made on a
predetermined basis. It is expected that the ▇▇▇▇▇▇▇▇ will
be 100 percent to EEI. Should there be instances where
services are jointly provided to other System companies,
costs will be allocated on an equitable basis and EEI's
share of such costs will be subject to an additional five
percent (5%) charge.
EXHIBIT II
METHODS OF ALLOCATING COSTS AMONG CLIENT COMPANIES RECEIVING
SERVICE UNDER THIS AND SIMILAR SERVICE AGREEMENTS WITH
ENTERGY SERVICES, INC. (ESI)
1. The cost of rendering services by ESI will include
all costs of doing business including interest on debt but
excluding a return for the use of ESI's initial equity
capital amount of $20,000.
2. (a) ESI will maintain a separate record of the expenses of
each department. The expenses of each department will
include:
(i) those expenses that are directly attributable to such
department, and
(ii) (ii) an appropriate portion of those office and housekeeping
expenses that are not directly attributable to a department but
which are necessary to the operation of such department.
(b) Expenses of the department will include salaries and
wages of employees, including social security taxes,
vacations, paid absences, sickness, employee disability
expenses, and other employee welfare expenses, rent and
utilities, materials, and supplies, depreciation, and all
other expenses attributable to the department.
(c) Departmental expenses will be categorized into one of two
classes:
(i) those expenses which are directly attributable to specific
services rendered to a Client Company or group of Client
Companies (Departmental Direct Costs), and
(ii) those expenses which are attributable to the overall
operation of the department and not to a specific service
provided to Client Companies (Departmental Indirect Costs).
Departmental Indirect Costs include:
(1) Administrative labor costs associated with office and
general service employees described in Section 3(a). This would
include not only thc salaries and wages of these employees but
also other related employment costs described in Section 2(b)
above
(2) Occupancy costs including rent and utilities.
(3) Depreciation.
(4) Materials and supplies, telephone use, postage, etc.
(5) Other costs attributable to a department.
(d) The indirect expenses of the department will not
include:
(i) those incremental out-of-pocket expenses that are incurred
for the direct benefit and convenience of a Client Company or a
group of Client Companies and are to be directly charged to such
Client Company or group of Client Companies; and
(ii) ESI's overhead expenses that are attributable to maintaining
the corporate existence of ESI, franchise and other general
taxes, and all other incidental overhead expenses including those
auditing fees and accounting department expenses attributable to
ESI (Indirect Corporate Costs).
(e) ESI will establish annual budgets for controlling the
expenses of each service department and those expenses
outlined above in Section 2(d) which are not department
specific.
3. (a) Employees in each department will be divided into two
classes:
(A) Those employees rendering service to Client Companies (Class
A), and
(B) Those office and general service employees, such as
secretaries, stenographers, telephone operators and file clerks,
who generally assist employees in Class A or render other house-
keeping services and who are not engaged directly in rendering
service to a Client Company or a group of Client Companies. In
the event that any such office or general service employees are
assigned to functions that are attributable to services being
performed for Client Companies, such employees shall be
reclassified as Class A employees.
(b) Expenses set forth in Section 2 above will be separated to
show:
(i) salaries and wages of Class A employees, and
(ii) all other expenses of the department.
(c) Class A employees in each department will maintain a
record of the time they are employed in rendering service to
each Client Company or group of Client Companies. The
hourly rate for each Class A employee will be determined
each month.
4. (a) The charge to Client Company or a group of
Client Companies for a particular service will be the sum of
the figures derived by multiplying the hours reported by
each Class A employee in rendering such service by the
hourly rate applicable to such employee and other direct
allocated expenses.
(b) Departmental Indirect Costs as defined in Section 2(c)(ii)
will be allocated in proportion to the direct salaries and wages
charged.
5. Those expenses of ESI that are not included in the expense
of a department under Section 2 above will be charged to Client
Companies receiving service as follows:
(a) Incremental out-of-pocket costs incurred for the direct
benefit and convenience of a Client Company or a group of Client
Companies will be charged direct to such company or group of
companies.
(b) The Indirect Corporate Costs of ESI referred to above in
Section 2(d)(ii) will be allocated among the Client Companies in
the same proportion as the charges to the Client Companies,
excluding Indirect Corporate Costs.
(c) If the method of allocation of Departmental Indirect Costs
(Section 4(b)), or Indirect Corporate costs (Section 5(b)), would
result in an inequity because of a change in operation or
organization of the Client Companies, then ESI may adjust the
basis to effect an equitable distribution. Any such change in
allocation shall be made only after first giving to the
Commission written notice of such proposed changes not less than
60 days prior to the proposed effectiveness of any such change.
6. On the basis of the foregoing, monthly bills will be rendered
to Client Companies. Billing procedures and amounts will be
open to audit by Client Company and by any regulatory
authority having jurisdiction in respect of the Client
Company.
7. When services are rendered to a group of Client Companies,
costs of such service shall be allocated equitably among the
Companies based on the nature and scope of the service
rendered according to the formulae outlined in Exhibit II,
Supplement.
EXHIBIT II
Supplement
ALLOCATION FORMULAE FOR
GROUPS OF CLIENT COMPANIES
Note: Each allocation formula will be based on data relevant
to participating Client Companies to whom the services are
provided and the department providing the service.
ENERGY SALES
Based on total kilowatt-hours of energy sold to consumers.
Used primarily for the allocation of costs associated with
the financial analyses of sales and related items.
CUSTOMERS
Based on a twelve-month average of residential, commercial,
industrial, government, and municipal general business
electric and gas customers.
Used primarily for the allocation of costs associated with
the support of customer based services. Would include
customer service and support, marketing, economic forecasts,
environmental services, financial and regulatory analyses
and customer information systems.
EMPLOYEES
Based on the number of full-time employees at period end.
Used primarily for the allocation of costs associated with
the support of employee-based services. Would include
administration of employee benefits programs, employee
communications, employee training, various facilities-based
benefits and information technology desktop support.
RESPONSIBILITY RATIO
Based on the ratio of the company's load at time of system
peak load. The peak load is the average of the twelve
monthly highest clock-hour demands in kilowatts of the
interconnected system occurring each month coincident with
the system peak load.
Used primarily for the allocation of costs incurred in
fossil plant support and integrated planning.
COMPOSITE - TRANSMISSION. DISTRIBUTION/CUSTOMER SERVICE
Based on four components of equal weighting: kilowatt-hour
energy sales; average customers; number of distribution and
customer service/support employees; and the
Transmission/Substation Composite Allocation Method.
Used primarily for the allocation of costs incurred in the
support of the overall transmission and distribution system
of Entergy's Operating Companies. These costs are related to
sales, transmission lines or substations, customers or
customer service/support employees.
TRANSMISSION LINE MILES
Based on the number of miles of transmission lines, weighted
for design voltage (Voltage ~ 400kv = 1; Voltage >=400kv
=2).
Used primarily for the allocation of costs associated with
project design, maintenance and installation of Entergy
transmission lines.
SUBSTATIONS
Based on the number of high voltage substations weighted for
Voltage (Voltage < 500kv = 1; Voltage >= 500kv = 2).
Used primarily for the allocation of related engineering and
technical support for transmission and distribution
substation operations and maintenance as well as for
engineering and project management associated with
substation construction.
COMPOSITE - TRANSMISSION LINES/SUBSTATIONS
Based on two components: Transmission Line Miles (30%
weighting) and the Number of High Voltage Substations (70%
weighting).
Used primarily for the allocation of the costs associated
with the support of the transmission and distribution
function that have both a transmission line component as
well as a substation or load component.
GAS CONSUMPTION
Based on the volume of natural gas consumed annually by all
gas fired generating units within the Entergy System.
Used for the allocation of costs associated with services in
support of gas purchased for gas fired generation units.
TAX INCOME AND DEDUCTION RATIO
Based on the prior years' Federal Income Tax return, total
Income and Deductions.
Used for the allocation of costs associated with the
preparation of consolidated Federal income tax returns and
research of Federal tax issues.
LEVEL OF ESI SERVICE
Based on ESI total ▇▇▇▇▇▇▇▇ to each System company,
excluding corporate overhead.
Used for the allocation of costs associated with support of
ESI as a legal entity.
SYSTEM CAPACITY (NON-NUCLEAR)
Based on the power level, in kilowatts, that could be
achieved if all non-nuclear generating units were operating
at maximum capability simultaneously.
Used primarily for the allocation of costs associated with
the support of the fossil operations of the System. This
would include services provided by plant support,
environmental and purchasing.
LABOR DOLLARS BILLED
Based on total labor dollars billed to each company.
Used primarily to allocate the costs associated with
employee benefits plans, payroll taxes, departmental
indirect costs and performance based compensation plans for
ESI employees.
DISTRIBUTION LINE MILES
Based on the number of miles of distribution lines of 34.5kv
or less.
Used primarily for the allocation of costs associated with
project design, maintenance and installation of Entergy
distribution lines.
COAL CONSUMPTION
Based on the quantity of tons of coal delivered for a twelve
month period to each coal plant within the Entergy System.
Used for the allocation of costs associated with services in
support of coal purchased for coal generating units
ACCOUNTS PAYABLE TRANSACTIONS
Based on the number of accounts payable transactions
processed annually for each Entergy System Company.
Used for the allocation of costs associated with the support
of the accounts payable function.
SQUARE FOOTAGE
Based on square footage occupied by ESI functional business
units.
Used primarily to allocate the costs associated with
facilities supervision and support.
INSURANCE PREMIUMS (NON-NUCLEAR)
Based on non-nuclear insurance premiums.
Used for the allocation of costs associated with risk
management.
ASSET RECORDS
Based on the number of asset records at period end.
Used for the allocation of costs associated with the fixed
asset accounting function.
AVERAGE OUTSTANDING CAPITAL EXPENDITURE AUTHORIZATIONS
(CEA'S)
Based on a twelve-month average of outstanding CEA's.
Used for the allocation of costs associated with the capital
project costing accounting function.
TOTAL ASSETS
Based on total assets at period end.
Used primarily to allocate costs associated with the
oversight and safeguarding of corporate assets. This would
include services provided by financial management and
certain finance functions, among others. Also used when the
services provided are driven by the relative size and
complexity of the System Companies and there is no
functional relationship between the services and any other
available allocation formula.
BANK ACCOUNTS
Based on the number of bank accounts at period end.
Used for the allocation of costs associated with daily cash
management activities.
COMPUTER USAGE COMPOSITE
Based on three components: Customers (52% weighting),
General Ledger Transactions (29% weighting) and Employees
(19% weighting), with weighting based on historical usage.
Used primarily for the allocation of costs associated with
the mainframe computer, unix servers and related database
administration.
GENERAL LEDGER TRANSACTIONS
Based on the number of general ledger transactions for the
period.
Used primarily for the allocation of costs associated with
general ledger activities, including related information
systems, and for general accounting activities.
CUSTOMERS AND EMPLOYEES COMBINATION
Based on the equal weighting of a twelve-month average of
residential, commercial, industrial, government and
municipal general business electric and gas customers and on
the number of full-time employees at period end.
Used primarily for systems that support both customers and
employees.
FIBER
Based on capacity and use of the Entergy System's fiber
optic network.
Used primarily for the allocation of fiber optic operations
and maintenance expenses.