TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY SERVICING AGREEMENT between PE ENVIRONMENTAL FUNDING LLC and THE POTOMAC EDISON COMPANY Servicer Dated as of April 11, 2007
Exhibit
10.8
between
PE
ENVIRONMENTAL FUNDING LLC
and
THE
POTOMAC EDISON COMPANY
Servicer
Dated
as
of April 11, 2007
TABLE
OF CONTENTS
|
ARTICLE
I DEFINITIONS
|
1
|
|
SECTION
1.01 DEFINITIONS
|
1
|
|
ARTICLE
II APPOINTMENT
AND AUTHORIZATION OF SERVICER
|
2
|
|
SECTION
2.01 APPOINTMENT
OF
SERVICER; ACCEPTANCE OF APPOINTMENT
|
2
|
|
SECTION
2.02 AUTHORIZATION
|
2
|
|
SECTION
2.03 DOMINION AND
CONTROL OVER TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY
|
2
|
|
ARTICLE
III BILLING
SERVICES
|
2
|
|
SECTION
3.01 DUTIES OF
SERVICER
|
2
|
|
SECTION
3.02 COLLECTION
OF
ENVIRONMENTAL CONTROL CHARGES
|
3
|
|
SECTION
3.03 SERVICING AND
MAINTENANCE STANDARDS
|
4
|
|
SECTION
3.04 MONTHLY AND
QUARTERLY SERVICER’S CERTIFICATES
|
4
|
|
SECTION
3.05 ANNUAL REPORTS
ON
SERVICING COMPLIANCE AND ATTESTATION, NOTICES OF SERVICER
DEFAULTS
|
4
|
|
SECTION
3.06 ANNUAL REPORT
BY
INDEPENDENT PUBLIC ACCOUNTANTS
|
5
|
|
SECTION
3.07 ADDITIONAL
SERVICER
REPORTING REQUIREMENTS
|
5
|
|
SECTION
3.08 TRANSFERRED
ENVIRONMENTAL CONTROL PROPERTY DOCUMENTATION
|
6
|
|
SECTION
3.09 COMPUTER RECORDS;
AUDITS OF DOCUMENTATION
|
6
|
|
SECTION
3.10 DEFENDING
TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY AGAINST CLAIMS
|
7
|
|
SECTION
3.11 OPINIONS OF
COUNSEL
|
7
|
|
ARTICLE
IV TRUE-UP
ADJUSTMENTS
|
8
|
|
SECTION
4.01 ROUTINE TRUE-UP
ADJUSTMENTS
|
8
|
|
SECTION
4.02 NON-ROUTINE
TRUE-UP
ADJUSTMENTS
|
9
|
|
ARTICLE
V THE
SERVICER
|
9
|
|
SECTION
5.01 REPRESENTATIONS
AND
WARRANTIES OF SERVICER
|
9
|
|
SECTION
5.02 INDEMNITIES
OF
SERVICER; RELEASE OF CLAIMS
|
11
|
|
SECTION
5.03 MERGER OR
CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
SERVICER
|
13
|
|
SECTION
5.04 ASSIGNMENT
OF
SERVICER’S OBLIGATIONS
|
13
|
|
SECTION
5.05 LIMITATION
ON
LIABILITY OF SERVICER AND OTHERS
|
13
|
|
SECTION
5.06 POTOMAC EDISON
NOT
TO RESIGN AS SERVICER
|
14
|
|
SECTION
5.07 DEFENDING
TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY AGAINST CLAIMS
|
14
|
|
SECTION
5.08 SERVICING
FEE
|
15
|
|
SECTION
5.09 SERVICER
ADVANCES
|
15
|
|
SECTION
5.10 SUBSERVICING
|
15
|
|
SECTION
5.11 REMITTANCES
|
16
|
|
SECTION
5.12 PAYMENT DATE
STATEMENTS
|
17
|
|
SECTION
5.13 SCHEDULE REVISION
DATE SCHEDULES
|
17
|
|
SECTION
5.14 PROTECTION
OF
TITLE
|
17
|
|
ARTICLE
VI SERVICER
DEFAULT
|
18
|
|
SECTION
6.01 SERVICER
DEFAULT
|
18
|
|
SECTION
6.02 NOTICE OF SERVICER
DEFAULT
|
19
|
|
SECTION
6.03 WAIVER OF PAST
DEFAULTS
|
19
|
|
SECTION
6.04 APPOINTMENT
OF
SUCCESSOR
|
19
|
|
SECTION
6.05 COOPERATION
WITH
SUCCESSOR
|
20
|
|
SECTION
6.06 SERVICER DEFAULT
UNDER RELATED TRANSACTION
|
20
|
| ARTICLE VII MISCELLANEOUS PROVISIONS |
2
|
SECTION
7.01 AMENDMENT
|
20
|
|
SECTION
7.02 NOTICES
|
22
|
|
SECTION
7.03 LIMITATIONS
ON
RIGHTS OF OTHERS
|
23
|
|
SECTION
7.04 SEVERABILITY
|
23
|
|
SECTION
7.05 SEPARATE
COUNTERPARTS
|
23
|
|
SECTION
7.06 HEADINGS
|
23
|
|
SECTION
7.07 GOVERNING
LAW
|
23
|
|
SECTION
7.08 ASSIGNMENT
TO
INDENTURE TRUSTEE
|
23
|
|
SECTION
7.09 NONPETITION
COVENANTS
|
23
|
|
SECTION
7.10 TERMINATION
|
24
|
|
SECTION
7.11 LIMITATION
OF
LIABILITY
|
24
|
EXHIBITS
EXHIBIT
A Servicing
Obligations
EXHIBIT
B Pending
Litigation
ANNEX
1
Form
of
Routine Adjustment Request
ANNEX
2
Form
of
Monthly Servicer’s Certificate
ANNEX
3
Form
of
Quarterly Servicer’s Certificate
ANNEX
4
Form
of
Officer’s Certificate
ANNEX
5
Form
of
Assessment of Servicing Criteria
ANNEX
6
Form
of
Regulation AB Compliance Certification
APPENDIX
A Master
Definitions
3
TRANSFERRED
ENVIRONMENTAL CONTROL PROPERTY SERVICING AGREEMENT dated as of April 11,
2007,
between PE ENVIRONMENTAL FUNDING LLC, a Delaware limited liability company
(the
“Issuer”),
and
THE POTOMAC EDISON COMPANY (“Potomac
Edison”),
a
Virginia and Maryland corporation, doing business as Allegheny Power, as
the
servicer of the Transferred Environmental Control Property (together with
each
successor to Potomac Edison (in the same capacity) pursuant to Section 5.03
or
6.04,
the
“Servicer”).
WHEREAS
the Servicer is willing to service the Transferred Environmental Control
Property purchased from the Seller by the Issuer from time to time in accordance
with the Sale Agreement;
WHEREAS
the Issuer, in connection with ownership of the Transferred Environmental
Control Property, desires to engage the Servicer to carry out the functions
described herein;
WHEREAS
the PSCWV or its attorney will enforce this Agreement pursuant to the Financing
Order for the benefit of the Customers to the extent permitted by applicable
Requirements of Law;
WHEREAS
the Environmental Control Bonds will not be “asset-backed securities” within the
meaning of Regulation AB, but the Issuer nevertheless has committed to comply
with all substantive ongoing periodic disclosure requirements that would
apply
under Regulation AB if the Environmental Control Bonds were “asset-backed
securities”; and
NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree
as
follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01 Definitions.
(a) “Agreement”
means
this Transferred Environmental Control Property Servicing Agreement, together
with all Exhibits, Annexes and Appendices hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
(b) Capitalized
terms used but not otherwise defined in this Agreement have the meanings
assigned to them in Appendix A to this Agreement.
(c) Non-capitalized
terms used in this Agreement which are defined in the Statute, as the context
requires, have the meanings assigned to such terms in the Statute, but without
giving effect to amendments to the Statute after the date hereof which have
a
material adverse effect on the Issuer or the Environmental Control
Bondholders.
(d) All
terms
defined in this Agreement have the defined meanings when used in any certificate
or document made or delivered pursuant hereto unless otherwise defined
herein.
(e) The
words
“hereof,”
“herein,”
“hereunder”
and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement;
Section, Annex, Schedule and Exhibit references contained in this Agreement
are
references to Sections, Annexes, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term “including”
shall
mean “including
without limitation.”
(f) The
definitions contained in this Agreement are applicable to the singular as
well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
ARTICLE
II
APPOINTMENT
AND AUTHORIZATION OF SERVICER
SECTION
2.01 Appointment
of Servicer; Acceptance of Appointment.
Subject to Section 5.04
and
Article VI, the Issuer hereby appoints the Servicer, and the Servicer hereby
accepts such appointment, to perform the Servicer’s obligations pursuant to this
Agreement on behalf of and for the benefit of the Issuer in accordance with
the
terms of this Agreement. This appointment and the Servicer’s acceptance thereof
may not be revoked except in accordance with the express terms of this
Agreement.
SECTION
2.02 Authorization.
With respect to all or any portion of the Transferred Environmental Control
Property, the Servicer shall be, and hereby is, authorized and empowered
by the
Issuer to (a) execute and deliver, on behalf of itself or the Issuer, as
the case may be, any and all instruments, documents or notices, and (b) on
behalf of itself or the Issuer, as the case may be, make any filing and
participate in proceedings of any kind with any Governmental Authorities,
including with the PSCWV. The Issuer shall furnish the Servicer with such
documents as have been prepared by the Servicer for execution by the Issuer,
and
with the other documents as may be in the Issuer’s possession, as necessary or
appropriate to enable the Servicer to carry out its duties hereunder. Upon
the
written request of the Servicer, the Issuer shall furnish the Servicer with
any
powers of attorney or other documents necessary or appropriate to enable
the
Servicer to carry out its duties hereunder.
SECTION
2.03 Dominion
and Control Over Transferred Environmental Control Property.
Notwithstanding any other provision herein, the Servicer and the Issuer agree
that the Issuer shall have dominion and control over the Transferred
Environmental Control Property. The Servicer hereby agrees that it shall
not
take any action that is not authorized by this Agreement or applicable
Requirements of Law, that is not consistent with its customary procedures
and
practices, or that shall impair the rights of the Issuer in the Transferred
Environmental Control Property, in each case unless such action is required
by
applicable Requirements of Law.
ARTICLE
III
BILLING
SERVICES
SECTION
3.01 Duties
of Servicer.
The Servicer shall have the following duties:
2
(a) Duties
of Servicer Generally.
The Servicer will manage, service, administer and make collections in respect
of
the Transferred Environmental Control Property. The Servicer’s duties will
include (i) calculating and billing the Environmental Control Charges,
collecting Environmental Control Charge Payments, and remitting all
Environmental Control Charge Collections to the Indenture Trustee;
(ii) responding to inquiries by Customers, Third Parties, the PSCWV, or any
Governmental Authority with respect to the Transferred Environmental Control
Property, including the Environmental Control Charges; (iii) accounting for
Environmental Control Charge Collections, investigating delinquencies,
processing and depositing collections and making periodic remittances,
furnishing periodic reports to the Issuer, the Indenture Trustee, the PSCWV
and
the Rating Agencies; (iv) selling defaulted or written off accounts in
accordance with the Servicer’s usual and customary practices; and
(v) taking action in connection with True-Up Adjustments according to the
procedures set forth herein and in Exhibit A hereto. Anything to the contrary
notwithstanding, the duties of the Servicer set forth in this Agreement shall
be
qualified in their entirety by applicable Requirements of Law as may be in
effect at the time such duties are to be performed. Without limiting the
generality of this Section 3.01(a), in furtherance of the foregoing, the
Servicer hereby agrees that it shall also have, and shall comply with, the
duties and responsibilities relating to data acquisition, usage, demand and
▇▇▇▇
calculation, billing, customer service functions, collections, payment
processing and remittance set forth in Exhibit A hereto.
(b) Notification
of Laws and Regulations.
The Servicer shall immediately notify the Issuer, the Indenture Trustee and
the
Rating Agencies in writing of Requirements of Law hereafter promulgated that
have a material adverse effect on the Servicer’s ability to perform its duties
under this Agreement.
(c) Other
Information.
Upon the reasonable request of the Issuer, the Indenture Trustee, the PSCWV
or
any Rating Agency, the Servicer shall provide to the Issuer, the Indenture
Trustee or such Rating Agency, as the case may be, any public financial
information in respect of the Servicer, or any material information regarding
the Transferred Environmental Control Property to the extent it is reasonably
available to the Servicer, as may be reasonably necessary and permitted by
applicable Requirements of Law, for the Issuer, the Indenture Trustee, the
PSCWV
or such Rating Agency to monitor the performance by the Servicer hereunder.
In
addition, so long as any of the Environmental Control Bonds of any Series
are
Outstanding, the Servicer shall provide the Issuer, the Indenture Trustee
and
the PSCWV within a reasonable time after written request therefor, any
information available to the Servicer or reasonably obtainable by it that
is
necessary to calculate the Environmental Control Charges applicable to each
Rate
Schedule.
(d) Preparation
of Reports to be Filed with the Commission.
The Servicer shall prepare or cause to be prepared any reports required to
be
filed by the Issuer under the securities laws, including without limitation,
if
so required, each Quarterly Servicer’s Certificate described in Section 3.04,
the
Officer’s Certificate of annual compliance described in Section 3.05,
the
Annual Accountant’s Report described in Section 3.06,
and any
certification required by Section 302
of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and Item 601 of Regulation S-K under the Exchange
Act.
SECTION
3.02 Collection
of Environmental Control Charges.
3
(a) The
Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Environmental
Control Charges, as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities
that
the Servicer conducts for itself or others. The Servicer shall not change
the
amount of or reschedule the due date of any scheduled payment of Environmental
Control Charges, except as contemplated in this Agreement or as required
by
applicable Requirements of Law; provided, however, that the Servicer may
take
any of the foregoing actions to the extent that such action would be in
accordance with customary billing and collection practices of the Servicer
with
respect to billing and collection activities that it conducts for
itself.
(b) Upon
a
partial payment of amounts billed, including amounts billed under special
contracts, such partial payments shall be allocated first to the Billed
Environmental Control Charge, including any past-due Environmental Control
Charges.
SECTION
3.03 Servicing
and Maintenance Standards.
The Servicer shall (a) manage, service, administer and make collections in
respect of the Transferred Environmental Control Property with reasonable
care
and in material compliance with applicable Requirements of Law using the
same
degree of care and diligence that the Servicer exercises with respect to
billing
and collection activities that the Servicer conducts for itself and others;
(b) follow standards, policies and procedures in performing its duties as
Servicer that are customary in the Servicer’s industry; (c) use all
reasonable efforts, consistent with its customary servicing procedures, to
enforce and maintain rights in respect of the Transferred Environmental Control
Property; and (d) calculate Environmental Control Charges in compliance
with applicable Requirements of Law, except where the failure to comply with
any
of the foregoing would not have a material adverse affect on the Issuer’s or the
Indenture Trustee’s interest in the Transferred Environmental Control Property.
The Servicer shall follow such customary and usual practices and procedures
as
it shall deem necessary or advisable in its servicing of all or any portion
of
the Transferred Environmental Control Property, which, in the Servicer’s
judgment, may include the taking of legal action pursuant to Section 3.09
hereof
or otherwise.
SECTION
3.04 Monthly
and Quarterly Servicer’s Certificates.
The Servicer will provide to the Issuer, the Indenture Trustee, the PSCWV
and
each of the Rating Agencies, so long as any Environmental Control Bonds of
any
Series are Outstanding, (a) not later than 15 days after the end of each
month after the Environmental Control Bonds are issued (excluding April,
2007),
or if such day is not a Business Day, the following Business Day, a written
report substantially in the form of Annex 2 hereto (the “Monthly
Servicer’s Certificate”);
and
(b) not later than 15 days following the end of each calendar quarter after
the Environmental Control Bonds are issued, a written report substantially
in
the form of Annex 3
hereto
(the “Quarterly
Servicer’s Certificate”).
SECTION
3.05 Annual
Reports on Servicing Compliance and Attestation, Notices of Servicer
Defaults.
(a) On
or
before March 31 of each year beginning March 31, 2008, and including
the March 31 following the Final Maturity Date of all Series of
Environmental Control Bonds, the Servicer shall deliver: (i) to the Issuer,
the Indenture Trustee, the PSCWV and each
4
Rating
Agency, an Officers’ Certificate substantially in the form of Annex 4
attached
hereto, stating that (A) a review of the activities of the Servicer during
the preceding calendar year (or relevant portion thereof) and of its performance
under this Agreement has been made under such officers’ supervision and
(B) to the best of such officers’ knowledge, based on such review, the
Servicer has complied with all its obligations under this Agreement in all
material respects throughout such period or, if there has been a Servicer
Default, or an act or omission, which with either the passage of time or
the
giving of notice, could become a Servicer Default, specifying each such event
of
default or act or omission known to such authorized officer and the nature
and
status thereof; (ii) to the Issuer and the PSCWV, a report regarding the
Servicer’s assessment of compliance with the servicing criteria during the
immediately preceding calendar year, as required under Rules 13a-18 and 15d-18
of the Exchange Act and Item 1122 of Regulation AB. Such report shall be
addressed to the Issuer and the PSCWV and signed by an authorized officer
of the
Servicer, and shall address each of the servicing criteria specified on a
certification substantially in the form of Annex 5
hereto
delivered to the Issuer concurrently with the execution of this agreement;
(iii) to the Issuer and the PSCWV, a report of a registered public
accounting firm reasonably acceptable to the Issuer that attests to, and
reports
on, the assessment of compliance made by the Servicer and delivered pursuant
to
the preceding clause (ii), as described in Section 3.06
hereof;
and (iv) to the Issuer, the Administrator and any other person that will be
responsible for signing the Regulation AB Compliance Certification, a
certification in the form attached hereto as Annex 6,
as
required by Rules 13a-14(d) and 15d-14(d) under the Exchange Act (pursuant
to
Section 302 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002) on behalf of the Issuer. The
Servicer acknowledges that the parties identified in this clause (a)(iv)
may
rely on the certification provided by the Servicer pursuant to such clause
in
signing a Sarbanes Certification and filing such with the PSCWV. In addition,
pursuant to Section 5.10,
the
Servicer shall cause each subservicer “participating in the servicing function”
within the meaning of Item 1122 of Regulation AB to deliver to the Issuer
an
assessment of compliance and accountants’ attestation as and when provided in
clauses (ii) and (iii) of this paragraph.
The
requirements of clauses (ii) through (iv) above shall be applicable only
so long
as the Issuer is required to make such filings under the Exchange
Act.
(b) Each
assessment of compliance provided by a subservicer pursuant to Section 3.05(a)
shall
address each of the servicing criteria specified on a certification
substantially in the form of Annex
5
hereto
delivered to the Issuer concurrently with the execution of this Agreement
by
such subservicer or, in the case of a subservicer subsequently appointed
as
such, on or prior to the date of such appointment. An assessment of compliance
provided by a subservicer pursuant to Section 3.05(a)
need not
address any elements of the servicing criteria other than those specified
by the
Servicer pursuant to Section 5.10.
(c) The
Servicer shall deliver to the Issuer, the Indenture Trustee, the PSCWV and
each
Rating Agency, promptly after having obtained knowledge thereof, but in no
event
later than five Business Days thereafter, written notice in an Officers’
Certificate of any Servicer Default and any event which with the giving of
notice or lapse of time, or both, would become a Servicer Default under
Section 6.01.
SECTION
3.06 Annual
Report by Independent Public Accountants.
5
(a) Servicer
shall cause a firm of independent certified public accountants (which may
also
provide other services to the Servicer, Potomac Edison or the Seller) to
prepare, and the Servicer shall deliver to the Issuer, the Indenture Trustee,
the PSCWV and each Rating Agency, on or before March 31 of each year,
beginning March 31, 2008 to and including the March 31 following the
Final Maturity Date of all Series of Environmental Control Bonds, a report
addressed to the Servicer (the “Annual
Accountant’s Report”),
which
may be included as part of the Servicer’s customary auditing activities, to the
effect that such firm has performed certain procedures agreed to between
the
Servicer and such firm in connection with the Servicer’s compliance with its
obligations under this Agreement during the preceding calendar year ended
December 31 (or, in the case of the first Annual Accountant’s Report, the
period of time from the Transfer Date until December 31, 2007, identifying
the
results of such procedures and including any exceptions noted. In addition,
so
long as the Issuer is required to make such filings under the Exchange Act,
the
Annual Accountant’s Report will include a report that attests to, and reports
on, the assessment made by the Servicer as to its compliance with the servicing
criteria set forth in (d) of Item 1122 of Regulation AB hereto and that such
attestation of the assessment of compliance was in accordance with Rules
1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the
Exchange Act and was made in accordance with standards for attestation
engagements issued or adopted by the Public Company Accounting Oversight
Board. In
the
event that the accounting firm providing such report requires the Indenture
Trustee to agree or consent to the procedures performed by such firm, the
Issuer
shall direct the Indenture Trustee in writing to so agree; it being understood
and agreed that the Indenture Trustee will deliver such letter of agreement
or
consent in conclusive reliance upon the direction of the Issuer, and the
Indenture Trustee will not make any independent inquiry or investigation
as to,
and shall have no obligation or liability in respect of the sufficiency,
validity or correctness of, such procedures.
(b) The
Annual Accountant’s Report shall also indicate that the accounting firm
providing such report is Independent of the Servicer within the meaning of
the
Code of Professional Conduct of the American Institute of Certified Public
Accountants or any superseding or amended standard adopted by the Public
Company
Accounting Oversight Board.
SECTION
3.07 Additional
Servicer Reporting Requirements.
The Servicer shall prepare, procure, deliver and/or file, or cause to be
prepared, procured, delivered or filed, any reports, attestations, exhibits,
certificates or other documents required to be delivered or filed with the
SEC
(and/or any other Governmental Authority) by the Issuer under the federal
securities or other applicable laws or in accordance with the Basic Documents,
including, but without limiting the generality of foregoing, filing with
the
SEC, if applicable, a copy or copies of (i) the Monthly Servicer’s Certificates
described in Section
3.04
(under
Form 10-D or any other applicable form), (ii) the Payment Date Statements
described in Section 3 of Exhibit A hereto (under Form 10-D or any other
applicable form), (iii) the annual statements of compliance, attestation
reports
and other certificates described in Section
3.05,
and
(iv) the Annual Accountant’s Report (and any attestation required under
Regulation AB) described in Section
3.06.
In
addition, the appropriate officer or officers of the Servicer shall (in its
separate capacity as Servicer) sign the Sponsor’s annual report on Form 10-K
(and any other applicable SEC or other reports, attestations, certifications
and
other documents), to the extent that the Servicer’s signature is required by,
and consistent with, the federal securities law and/or any other applicable
law.
6
SECTION
3.08 Environmental
Control Property Documentation.
To assure uniform quality in servicing the Transferred Environmental Control
Property and to reduce administrative costs, the Servicer shall keep on file,
in
accordance with its customary procedures, all Environmental Control Property
Documentation.
SECTION
3.09 Computer
Records; Audits of Documentation.
(a) Safekeeping.
The Servicer shall maintain accurate and complete accounts, records and computer
systems pertaining to the Transferred Environmental Control Property and
the
Transferred Environmental Control Property Documentation in accordance with
its
standard accounting procedures and in sufficient detail to permit the Annual
Reconciliation between Estimated Environmental Control Charge Collections
and
Actual Environmental Control Charge Collections in accordance with Section
5.11
and to
enable the Issuer to comply with this Agreement and the Indenture. The Servicer
shall conduct, or cause to be conducted, periodic audits of the Transferred
Environmental Control Property Documentation held by it under this Agreement
and
of the related accounts, records and computer systems, in such a manner as
shall
enable the Issuer and the Indenture Trustee, as pledgee of the Issuer, to
verify
the accuracy of the Servicer’s record keeping. The Servicer shall promptly
report to the Issuer, the PSCWV and the Indenture Trustee any failure on
the
Servicer’s part to hold the Transferred Environmental Control Property
Documentation and maintain its accounts, records and computer systems as
herein
provided and promptly take appropriate action to remedy any such failure.
Nothing herein shall be deemed to require an initial review or any periodic
review by the Issuer or the Indenture Trustee of the Transferred Environmental
Control Property Documentation.
(b) Maintenance
of and Access to Records.
The Servicer shall maintain the Transferred Environmental Control Property
Documentation at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or at such other office as shall be specified to the Issuer, the Indenture
Trustee and the PSCWV by written notice not later than 30 days prior to any
change in location. The Servicer shall permit the Issuer, the Indenture Trustee
and the PSCWV or their respective duly authorized representatives, attorneys,
agents or auditors at any time during normal business hours as the Issuer,
the
Indenture Trustee or the PSCWV shall reasonably request to inspect, audit
and
make copies of and abstracts from the Servicer’s records regarding the
Transferred Environmental Control Property, including the Environmental Control
Charges and the Transferred Environmental Control Property Documentation.
The
failure of the Servicer to provide access to such information as a result
of an
obligation or applicable Requirements of Law prohibiting disclosure of
information regarding customers shall not constitute a breach of this
Section 3.09(b).
SECTION
3.10 Defending
Transferred Environmental Control Property Against Claims.
The Servicer, on behalf of the Environmental Control Bondholders, shall
institute any action or proceeding necessary to compel performance by the
PSCWV
or the State of West Virginia of any of their obligations or duties under
the
Statute or the Financing Order with respect to the Transferred Environmental
Control Property. The costs of any such action shall be payable from the
Collection Account as an Operating Expense in accordance with the priorities
set
forth in Section 8.02(e)
of the
Indenture at the time such costs are incurred. The Servicer’s obligations
pursuant to this Section 3.10
shall
survive and continue notwithstanding the fact that the payment of Operating
Expenses pursuant to the priorities set forth in Section 8.02(e)
of the
Indenture may
7
be
delayed (it being understood that the Servicer shall not be required to advance
its own funds to satisfy its obligations hereunder).
SECTION
3.11 Opinions
of Counsel.
With respect to each series of Environmental Control Bonds, the Servicer
shall
deliver to the Issuer, the PSCWV and the Indenture Trustee:
(a) promptly
after the execution and delivery of this Agreement and of each amendment
hereto,
promptly after the execution of the Sale Agreement and of each amendment
thereto, promptly after the execution of the Transfer Agreement and of each
amendment thereto, and on the Transfer Date, an Opinion of Counsel either
(i) to the effect that, in the opinion of such counsel, all filings,
including filings with the PSCWV pursuant to the Statute, that are necessary
to
fully preserve and protect the interests of the applicable Indenture Trustee
in
the Transferred Environmental Control Property have been executed and filed,
and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (ii) to the effect that, in the opinion
of such counsel, no such action shall be necessary to preserve and protect
such
interest; and
(b) within
90
days after the beginning of each calendar year beginning with the first calendar
year beginning more than three months after the Transfer Date, an Opinion
of
Counsel, dated as of a date during such 90-day period, either (i) to the
effect that, in the opinion of such counsel, all filings with the PSCWV pursuant
to the Statute, have been executed and filed that are necessary to preserve
fully and protect fully the interest of the applicable Indenture Trustee
in the
Transferred Environmental Control Property, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) to the effect that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest.
Each
Opinion of Counsel referred to in clause (a) or (b) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
ARTICLE
IV
TRUE-UP
ADJUSTMENTS
SECTION
4.01 Routine
True-Up Adjustments.
(a) With
respect to each series of Environmental Control Bonds, the Servicer shall
file a
True-Up Adjustment Filing with the PSCWV at the following times: (i) at
least 15 days prior to each Semi-Annual True-Up Adjustment Date; and
(ii) at least 15 days prior to each Quarterly True-Up Adjustment Date
and each Monthly True-Up Adjustment Date.
(b) For
the
purpose of filing any Semi-Annual True-Up Adjustment Filing, the Servicer
shall
(i) update assumptions of projected future usage and demand of electricity
by Customers, expected delinquencies and Write-offs and future expenses relating
to Transferred Environmental Control Property and the Environmental Control
Bonds; (ii) calculate the Periodic Bond Payment Requirement based upon such
updated assumptions; and (iii) determine
8
the
Environmental Control Charge to be charged on and after the applicable True-Up
Adjustment Date.
(c) Each
True-Up Adjustment Filing shall be substantially in the form of Annex 1 to
this
Servicing Agreement.
(d) The
Servicer shall (i) take all reasonable actions and make all reasonable
efforts in order to effectuate any Routine True-Up Adjustment to the
Environmental Control Charge and (ii) promptly send to the Indenture
Trustee copies of all material notices and documents relating to such Routine
True-Up Adjustment.
(e) On
the
same date that the Servicer files any True-Up Adjustment Filing with the
PSCWV,
if the Routine True-Up Adjustment is intended to result in an increase in
the
amount of the Environmental Control Charge, the Servicer shall give public
notice through the publication of a Class I legal advertisement in Kanawha
County, will respond to any comments to such publication and will attend
any
hearing held in connection with any such True-Up Adjustment Filing.
SECTION
4.02 Non-Routine
True-Up Adjustments.
(a) Whenever
the Servicer determines that the existing True-Up Mechanism should be amended
or
revised to more accurately project and generate adequate collections of
Environmental Control Charge Payments, the Servicer shall file a Non-Routine
True-Up Adjustment Filing with the PSCWV designating the adjustments to such
True-Up Mechanism and any corresponding adjustments to the Environmental
Control
Charges, subject to the review and approval of the PSCWV pursuant to the
Financing Order, and the Servicer shall notify the Rating Agencies as promptly
as possible of the filing of any such Non-Routine True-Up Adjustment Filing.
Subject to clause (c) below, the Servicer shall also file for a Non-Routine
True-Up Adjustment Filing at the direction of the PSCWV.
(b) The
Servicer shall take all reasonable actions and make all reasonable efforts
to
secure any Non-Routine True-Up Adjustments.
(c) The
Servicer shall implement any resulting adjustments to the True-Up Mechanism
and
any resulting revised Environmental Control Charges as of the effective date
of
the Non-Routine True-Up Adjustment Filing. If any Non-Routine True-Up Adjustment
Filing is denied by the PSCWV, the Servicer shall notify the Issuer, the
Indenture Trustee and the Rating Agencies (not later than five days after
the
Servicer’s receipt of the PSCWV’s order denying such Non-Routine True-Up
Adjustment Filing).
(d) The
Servicer shall notify the Issuer, the Indenture Trustee and the Rating Agencies
of any request for a Non-Routine True-Up Adjustment initiated by the PSCWV
within five days of receipt of such request and shall take all necessary
actions
to prevent the implementation of such an adjustment if it would violate the
State Pledge.
9
ARTICLE
V
THE
SERVICER
SECTION
5.01 Representations
and Warranties of Servicer.
The Servicer makes the following representations and warranties as of the
Transfer Date, on which the Issuer and the PSCWV (on behalf of the Customers)
has relied and will rely in acquiring the Transferred Environmental Control
Property. The representations and warranties shall survive the sale of
any
of
the Transferred Environmental Control Property to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization
and Good Standing.
The Servicer is a corporation duly organized, validly existing and in good
standing under the laws of the states of its incorporation, with the corporate
power and authority to own its properties and to conduct its business as
such
properties are currently owned and such business is presently conducted,
and has
the power, authority and legal right to service the Transferred Environmental
Control Property.
(b) Due
Qualification.
The Servicer is duly qualified to do business as a foreign corporation in
good
standing or equivalent status, and has obtained all necessary licenses and
approvals in, all foreign jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Transferred Environmental Control Property as required by this Agreement)
requires such qualifications, licenses or approvals (except where the failure
to
so qualify or obtain such licenses and approvals would not be reasonably
likely
to have a material adverse effect on the Servicer’s business, operations,
assets, revenues, properties or prospects or materially and adversely affect
the
servicing of the Transferred Environmental Control Property).
(c) Power
and Authority.
The Servicer has the corporate power and authority to execute and deliver
this
Agreement and to carry out its terms; and the execution, delivery and
performance of this Agreement have been duly authorized by the Servicer by
all
necessary corporate action.
(d) Binding
Obligation.
This Agreement constitutes a legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms subject to
bankruptcy, receivership, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors’ rights generally from time to time
in effect and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law).
(e) No
Violation.
The consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof shall not conflict with, result in any breach
of
any of the terms and provisions of, nor constitute (with or without notice
or
lapse of time) a default under, the articles of incorporation or by-laws
of the
Servicer, or any other material indenture, agreement or other instrument
to
which the Servicer is a party or by which it shall be bound; nor result in
the
creation or imposition of any Lien upon any of its properties pursuant to
the
terms of any such indenture, agreement or other instrument (except as
contemplated in the Indenture and as set forth in the Sale Agreement); nor
violate any law or any order, rule or regulation applicable to the Servicer
of
any court or of any federal or state regulatory body,
10
administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or its properties.
(f) Approvals.
Except for filings with the PSCWV for revised Environmental Control Charges,
pursuant to Article IV and Annex 1 hereto and the filing of financing statements
or continuation statements under the UCC, no approval, authorization, consent,
order or other action of, or filing with, any court, federal or state regulatory
body, administrative agency or other governmental instrumentality is required
in
connection with the execution and delivery
by the Servicer of this Agreement, the performance by the Servicer of the
transactions contemplated hereby or the fulfillment by the Servicer of the
terms
hereof, except those that have been obtained or made.
(g) No
Proceedings.
Except as described in Exhibit B, to the Servicer’s knowledge, there are no
proceedings or investigations pending or, to the Servicer’s best knowledge,
threatened before any court, federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or its properties: (i) seeking to prevent issuance of the bonds or
the consummation of the transactions contemplated by this Agreement, any
other
Basic Document or, if applicable, any Additional Indenture or subsequent
sale
agreement, (ii) seeking any determination or ruling that might materially
and
adversely affect the performance by the Servicer of its obligations under,
or
the validity or enforceability against the Servicer of, this Agreement, any
other Basic Document or, if applicable, any Additional Indenture or subsequent
sale agreement, or (iii) relating to the Servicer and which might have a
material adverse affect on the federal or state income, gross receipts or
franchise tax attributes of the Environmental Control Bonds.
(h) Reports
and Certificates.
Each report and certificate delivered in connection with any filing made
to the
PSCWV by the Servicer on behalf of the Issuer with respect to Environmental
Control Charges or True-Up Adjustments will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may
be, is true and correct in all material respects; provided, however, that
to the
extent any such report or certificate is based in part upon or contains
assumptions, forecasts or other predictions of future events, the representation
and warranty of the Servicer with respect thereto will be limited to the
representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical performance
and the facts known to the Servicer on the date such report or certificate
is
delivered.
SECTION
5.02 Indemnities
of Servicer; Release of Claims.
(a) The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this
Agreement.
(b) The
Servicer shall indemnify the Issuer and the Indenture Trustee, for itself
and on
behalf of the Environmental Control Bondholders for which it acts as Indenture
Trustee, and each of their respective managers, members, officers, directors,
employees and agents for, and defend and hold harmless each such Person from
and
against, any and all Losses that may be imposed upon, incurred by or asserted
against any such Person as a result of (i) the Servicer’s willful
misconduct, bad faith or negligence in the performance of its duties under
this
11
Agreement
or (ii) the Servicer’s material breach of any of its obligations, duties,
representations or warranties that results in a Servicer Default under this
Agreement and (iii) litigation and related expenses relating to its status
and obligations as Servicer.
The
Servicer shall not be liable for any Losses resulting from the willful
misconduct, bad faith or negligence of any Person indemnified pursuant to
this
Section 5.02
(each,
an “Indemnified
Party”)
or
resulting from a breach of a representation or warranty made by such Indemnified
Party in any of the Basic Documents that gives rise to the Servicer’s breach.
The Environmental
Control Bondholders shall be entitled to enforce their rights and remedies
against the Servicer under this Section 5.02
solely
through a case of action brought for their benefit by the Indenture Trustee.
The
Servicer’s indemnification under this Section 5.02(b)
shall
survive the termination of this Agreement, and any amounts paid with respect
thereto shall be remitted and deposited with the Indenture Trustee for deposit
into the Collection Account
(c) The
Servicer shall indemnify the PSCWV, on behalf of the Customers, for any Losses
they incur by reason of the Servicer’s willful misconduct, bad faith or
negligence including without limitation Losses attributable to higher
Environmental Control Charges imposed on customers by reason of additional
Operating Expenses, for example the Issuer’s higher Servicing Fees payable to a
Successor Servicer. The PSCWV shall be entitled to enforce Section 5.02(c)
for the
benefit of Customers, and Customers may not enforce this indemnity. The
Servicer’s indemnification under this Section 5.02(c)
shall
survive the termination of this Agreement, and any amounts paid with respect
thereto shall be remitted and deposited with the Indenture Trustee for deposit
into the Collection Account, unless otherwise directed by the PSCWV.
(d) The
Servicer shall indemnify the Indenture Trustee and its officers, directors
and
agents for, and defend and hold harmless each such Person from and against,
any
and all Losses that may be imposed upon, incurred by or asserted against
any
such Person as a result of the acceptance or performance of the trusts and
duties contained herein and in the other Basic Documents to which the Indenture
Trustee is a party, except to the extent that any such Loss shall be due
to the
willful misconduct, bad faith or negligence of the Indenture Trustee. The
foregoing indemnity is extended to the Indenture Trustee solely in its
individual capacity and not for the benefit of the Environmental Control
Bondholders or any other Person. Such amounts shall be deposited and distributed
in accordance with the Indenture.
(e) The
Servicer’s indemnification obligations under Sections
5.02(b),(c)
and
(d)
for
events occurring prior to the removal or resignation of the Indenture Trustee,
or the termination of this Agreement with respect to the Issuer, shall survive
the resignation or removal of the Indenture Trustee or the termination of
this
Agreement with respect to the Issuer, and shall include reasonable costs,
fees
and expenses of investigation and litigation (including the Issuer’s and the
Indenture Trustee’s reasonable attorneys’ fees and expenses).
(f) Except
to
the extent expressly provided for in this Agreement or the other Basic Documents
(including the Servicer’s claims with respect to the Servicing Fees and the
Seller’s claim for payment of the purchase price of the Transferred
Environmental Control Property), the Servicer hereby releases and discharges
the
Issuer (including its respective managers, members, officers, directors and
agents, if any) and the Indenture Trustee (including
12
its
officers, directors and agents) (collectively, the “Released
Parties”)
from
any and all actions, claims and demands whatsoever, which the Servicer, in
its
capacity as Servicer, shall or may have against any such Person relating
to the
Transferred Environmental Control Property or the Servicer’s activities with
respect thereto other than any actions, claims and demands arising out of
the
willful misconduct, bad faith or negligence of the Released
Parties.
(g) If
any
action, claim, demand or proceeding (including any governmental investigation)
shall be brought or asserted against an Indemnified Party entitled to any
indemnification
provided for under this Section 5.02,
such
Indemnified Party shall promptly notify the Servicer in writing; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Servicer shall
have
been actually prejudiced as a result of such failure.
SECTION
5.03 Merger
or Consolidation of, or Assumption of the Obligations of,
Servicer.
Any Person (a) into which the Servicer may be merged or consolidated and
which succeeds to any material part of the electric distribution business
of the
Servicer, (b) which results from the division of the Servicer into two or
more Persons and which succeeds to any material part of the electric
distribution business of the Servicer, (c) which may result from any merger
or consolidation to which the Servicer shall be a party and which succeeds
to
any material part of the electric distribution business of the Servicer,
(d) which may succeed to the properties and assets of the Servicer
substantially as a whole and which succeeds to any material part of the electric
distribution business of the Servicer or (e) which may otherwise succeed to
any material part of the electric distribution business of the Servicer,
which
Person in any of the foregoing cases executes an agreement of assumption
to
perform every obligation of the Servicer hereunder, shall be the successor
to
the Servicer under this Agreement without further act on the part of any
of the
parties to this Agreement; provided, however, that (i) immediately after
giving effect to such transaction, no representation and warranty made pursuant
to Section 5.01
shall
have been breached and no Servicer Default, and no event which, after notice
or
lapse of time, or both, would become a Servicer Default, shall have occurred
and
be continuing, (ii) the Servicer shall have delivered to the Issuer, the
PSCWV and the Indenture Trustee an Officers’ Certificate and an Opinion of
Counsel stating that such consolidation, merger or succession and such agreement
of assumption comply with this Section 5.03
and that
all conditions precedent provided for in this Agreement relating to such
transaction have been complied with, (iii) the Rating Agencies shall have
received prior written notice of such transaction, (iv) the Servicer shall
have delivered to the Issuer, the Indenture Trustee, the PSCWV and each Rating
Agency an Opinion of Counsel either stating that, in the opinion of such
counsel, (A) all filings, including filings with the PSCWV pursuant to the
Statute, have been executed and filed that are necessary to preserve fully
and
protect fully the interests of the Issuer in the Transferred Environmental
Control Property and reciting the details of such filings or (B) no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the above
referenced agreement of assumption and compliance with clauses (i), (ii),
(iii)
and (iv) above shall be conditions precedent to the consummation of the
transactions referred to in clause (a), (b), (c), (d) or (e) above.
SECTION
5.04 Assignment
of Servicer’s Obligations.
The Servicer may not assign its obligations hereunder to any successor unless
either (i) the Rating Agency Condition has been
13
satisfied
and the PSCWV has approved such assignment, or (ii) the Servicer is
replaced by a Successor Servicer pursuant to Section 6.04.
SECTION
5.05 Limitation
on Liability of Servicer and Others.
(a) Neither
the Servicer nor any of its directors, officers, employees or agents shall
be
liable to the Issuer or its managers, the Indenture Trustee, the Environmental
Control Bondholders, the PSCWV or any other Person, except as provided under
this Agreement, for any action taken or for refraining from the taking of
any
action pursuant to this Agreement or for errors
in
judgment; provided, however, that this provision shall not protect either
the
Servicer or any other Person against any liability that would otherwise be
imposed by reason of willful misconduct, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of obligations
and
duties under this Agreement and provided further that nothing in this
Section 5.05
shall
limit the Servicer’s liabilities or obligations of the Servicer to indemnify as
set forth in Section 5.02
of this
Agreement. The Servicer and any of its directors, officers, employees or
agents
may rely in good faith on the advice of counsel reasonably acceptable to
the
Indenture Trustee or on any document of any kind, prima facie properly executed
and submitted by any Person, respecting any matters arising under this
Agreement.
(b) The
Servicer acknowledges that the PSCWV has authority to enforce all provisions
of
this Agreement for the benefit of Customers, including without limitation
the
enforcement of Section
5.02(c),
provided that such enforcement is consistent with the State Pledge.
(c) Except
as
provided in this Agreement, the Servicer shall not be under any obligation
to
appear in, prosecute or defend any legal action that is not incidental to
its
duties to service the Transferred Environmental Control Property in accordance
with this Agreement or related to its obligation to pay indemnification,
and
that in its reasonable opinion may cause it to incur any expense or
liability.
SECTION
5.06 Potomac
Edison Not To Resign as Servicer.
Subject to the provisions of Sections
5.03
and
5.04,
Potomac
Edison shall not resign from the obligations and duties hereby imposed on
it as
Servicer under this Agreement except upon a determination that the performance
of its duties under this Agreement shall no longer be permissible under
applicable Requirements of Law. Notice of any such determination permitting
the
resignation of Potomac Edison shall be communicated to the Issuer, the PSCWV,
the Indenture Trustee and each Rating Agency at the earliest practicable
time
(and, if such communication is not in writing, shall be confirmed in writing
at
the earliest practicable time), and any such determination shall be evidenced
by
an Opinion of Counsel to such effect delivered to the Issuer, the PSCWV and
the
Indenture Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until a Successor Servicer has been approved
by the PSCWV and shall have assumed the servicing obligations and duties
hereunder of Potomac Edison in accordance with Section 6.04.
SECTION
5.07 Defending
Transferred Environmental Control Property Against Claims.
The Servicer shall institute any action or proceeding necessary to compel
performance by each Third Party (at the earliest possible time) of any of
their
respective obligations or duties under
14
applicable
Requirements of Law with respect to the Transferred Environmental Control
Property. In addition, the Servicer shall institute any action or proceeding
necessary to compel performance by the PSCWV or the State of West Virginia,
or
any political subdivision, agency or other instrumentality of the State of
West
Virginia, of any of their respective obligations or duties under applicable
Requirements of Law with respect to the Transferred Environmental Control
Property. The Servicer further agrees to take such legal or administrative
actions, including without limitation defending against or instituting and
pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary to block or overturn any attempts
to
cause a repeal of, modification of or supplement to the Statute or
any
Financing Order. In any of the aforementioned actions or proceedings, the
Servicer shall not be required to advance its own funds to institute any
such
actions or proceedings and the Servicer's obligations pursuant to this
Section 5.07 shall continue for only so long as the Servicer is
being reimbursed on a current basis for its costs and expenses incurred in
undertaking such obligations. In
any
proceedings related to the exercise of the power of eminent domain by any
municipality to acquire a portion of Potomac Edison’s electric distribution
facilities, the Servicer shall assert that the court ordering such condemnation
must treat such municipality as a successor to Potomac Edison under the Statute
and Financing Order. The costs and expenses of any action described in this
Section
5.07
shall be
payable from the Collection Account as an Operating Expense in accordance
with
Section
8.02(e)
of the
Indenture.
SECTION
5.08 Servicing
Fee.
(a) Issuer
agrees to pay the Servicer, solely to the extent amounts are available therefor
in accordance with the Indenture, the Servicing Fee with respect to all Series
of Environmental Control Bonds issued by the Issuer. The Servicing Fee with
respect to a Series for a Payment Date shall be as follows: so long as Potomac
Edison acts as the Servicer, the Servicing Fee will be 0.05% per annum of
the
initial principal balance of the Environmental Control Bonds, payable
semi-annually, in arrears; if a Successor Servicer is appointed, the Servicing
Fee will be based on an amount approved by the PSCWV, but not in excess of
a per
annum rate equal to 1.25% of the initial principal balance of the Environmental
Control Bonds.
(b) The
Servicing Fee set forth in Section 5.08(a)
above
and the expenses provided for in Section 5.08(c)
below
shall be paid to the Servicer by the Indenture Trustee, on each Payment Date
in
accordance with the priorities set forth in Section 8.02(e) of the
Indenture, by wire transfer of immediately available funds from the Collection
Account to an account designated by the Servicer. Any portion of the Servicing
Fee not paid on such date shall be added to the Servicing Fee payable on
the
subsequent Payment Date.
(c) The
Issuer shall pay all expenses incurred by the Servicer in connection with
its
activities hereunder (including any fees to and disbursements by accountants,
counsel, or any other Person, any taxes imposed on the Servicer (other than
taxes based on the Servicer’s net income) and any expenses incurred in
connection with reports to Environmental Control Bondholders, subject to
the
priorities set forth in Section 8.02(e) of the Indenture). Except for
filing fees and fees and expenses for attorneys, accountants, printing or
other
professional services retained by the Issuer, (or procured by the Servicer
on
behalf of the Issuer) to meet the Issuer’s obligations under the Basic
Documents, the Servicer shall be required to pay all expenses incurred by
the
Servicer in performing its activities hereunder from the Servicer’s
own
15
resources,
without additional reimbursement as Operating Expenses in accordance with
Section 8.02(e) of the Indenture.
SECTION
5.09 Servicer
Advances.
The Servicer shall not make any advances of interest on or principal of any
series of the Bonds.
SECTION
5.10 Subservicing.
The Servicer may at any time appoint a subservicer to perform all or any
portion
of its obligations as Servicer hereunder; provided, however, that the Servicer
shall not permit any Third Party to ▇▇▇▇ or collect Environmental Control
Charges on behalf
of
the Issuer except (a) as a subcontractor under the active supervision of
the Servicer or (b) as required by applicable Requirement of Law and to the
extent permitted by applicable Requirement of Law or regulation, after written
notice of such appointment is furnished to the Rating Agencies; provided
further, however, that the Servicer shall remain obligated and be liable
to the
Issuer, the Indenture Trustee, and the Environmental Control Bondholders
and the
PSCWV for the servicing and administering of the Transferred Environmental
Control Property in accordance with the provisions hereof without diminution
of
such obligation and liability by virtue of the appointment of such subservicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Transferred Environmental
Control Property. The fees and expenses of the subservicer shall be as agreed
between the Servicer and its subservicer from time to time, and none of the
Issuer (or its members or managers), the Indenture Trustee, any Environmental
Control Bondholder or the PSCWV shall have any responsibility
therefor.
SECTION
5.11 Remittances.
(a) Subject
to Section 5.11(b),
the
Servicer shall remit daily all Estimated Environmental Control Charge
Collections (from whatever source) and all proceeds of other Collateral of
the
Issuer, if any, received by the Servicer to the Indenture Trustee under the
Indenture, for deposit pursuant to the Indenture.
(b) Notwithstanding
the foregoing clause (a), as long as (i) Potomac Edison or any successor to
Potomac Edison’s electric distribution business remains the Servicer,
(ii) no Servicer Default has occurred and is continuing and
(iii) (A) Potomac Edison or such successor maintains a long-term
rating of “A+” or better by Standard & Poor’s, a long-term rating of
“A2” or better by ▇▇▇▇▇’▇ and a long-term rating of “A” or better by Fitch, if
rated by Fitch, or a short-term rating of “A-1” by Standard & Poor’s, a
short-term rating of “P-1” by ▇▇▇▇▇’▇ and a short-term rating of “F1” by Fitch,
if rated by Fitch or (B) the Rating Agency Condition shall have been
satisfied with respect to all Rating Agencies (to which prior written notice
will be sent) (and any conditions or limitations imposed by such Rating Agencies
in connection therewith are complied with), the Servicer need not make the
daily
remittances required by such clause (a), but in lieu thereof, shall remit
all
Estimated Environmental Control Charge Collections (from whatever source)
and
all proceeds of other Collateral of such Issuer, if any, received by the
Servicer during any Collection Period to the Indenture Trustee, for deposit
pursuant to the Indenture, not later than the Business Day immediately preceding
the 25th day of each month.
16
(c) On
or
before each Remittance Date where the Servicer is not remitting a fixed sum
on
each date during the Billing Period, the Servicer will prepare and furnish
to
the Issuer and the Indenture Trustee a statement setting forth the aggregate
amount remitted or to be remitted by the Servicer to the Indenture Trustee
for
deposit on such Remittance Date pursuant to this Section 5.11
and the
Indenture.
(d) On
or
before each Reconciliation Date, the Servicer will reconcile Actual
Environmental Control Charge Collections with Estimated Environmental Control
Charge Collections in respect of the immediately preceding Reconciliation
Period. The Servicer shall calculate the amount of any Remittance Shortfall
or
Excess Remittance for the immediately preceding
Reconciliation Period, shall allocate such Remittance Shortfall or Excess
Remittance to each outstanding Series ratably based on the Environmental
Control
Charges billed for such Series for such Reconciliation Period, and (A) if
a
Remittance Shortfall exists, the Servicer shall make a supplemental remittance,
to the applicable General Subaccount of the applicable Collection Account
for
each Series within two (2) Servicer Business Days, or (B) if an Excess
Remittance exists, the Servicer shall be entitled either (i) to reduce the
amount of (A) each Daily Remittance, or, (B) if Potomac Edison has satisfied
the
conditions of Section
5.11(b),
each
Monthly Remittance, which the Servicer subsequently remits to the applicable
General Subaccount of the applicable Collection Account for application to
the
amount of such Excess Remittance until the balance of such Excess Remittance
has
been reduced to zero, the amount of such reduction becoming the property
of the
Servicer or (ii) so long as such withdrawal would not cause the amounts on
deposit in the applicable General Subaccount or the applicable Excess Funds
Subaccount for any Series to be insufficient for the payment of the next
installment of interest on the Environmental Control Bonds or principal due
at
maturity on the next Payment Date or upon acceleration on or before the next
Payment Date, to be paid immediately from such General Subaccount or Excess
Funds Subaccount such Series’ allocable share of the amount of such Excess
Remittance, such payment becoming the property of the Servicer. If there
is a
Remittance Shortfall, the amount which the Servicer remits to the applicable
General Subaccounts of the applicable Collection Accounts on the relevant
date
set forth above shall be increased by the amount of such Remittance Shortfall,
provided that
remittance of such increase will be the sole financial responsibility of
the
Servicer and shall neither be considered an Operating Expense nor be paid
out of
the Collection Account or included in the calculation of True-Up
Adjustments.
SECTION
5.12 Payment
Date Statements.
At least three Business Days before each Payment Date with respect to each
Series of Environmental Control Bonds, the Servicer shall prepare and furnish
to
the Issuer and the Indenture Trustee a statement setting forth the amounts
to be
paid to Environmental Control Bondholders of such Series pursuant to
Section 8.02(e) of the Indenture, as well as all other amounts to be paid
pursuant to Section 8.02(e) of the Indenture, including the Capital Equity
Return to be paid to the Seller.
SECTION
5.13 Schedule
Revision Date Schedules.
Prior to each Schedule Revision Date, the Servicer shall deliver to the Issuer
replacement Schedules A and replacement Schedules B to each Series
Supplement to which such Schedule Revision Date applies, adjusted to reflect
the
event giving rise to such Schedule Revision Date and setting forth the Expected
Sinking Fund Schedule for each Payment Date applicable thereto.
17
SECTION
5.14 Protection
of Title.
The Servicer shall execute and file such filings, including filings with
the
PSCWV pursuant to the Statute, and cause to be executed and filed such filings,
all in such manner and in such places as may be required by law fully to
preserve, maintain, and protect the interests of the Issuer in the Transferred
Environmental Control Property, including all filings required under the
Statute
relating to the transfer of the ownership or security interest in the
Transferred Environmental Control Property by the Seller to the Issuer or
any
security interest granted by the Issuer in the Transferred Environmental
Control
Property. The Servicer shall deliver (or cause to be delivered) to the Issuer
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
ARTICLE
VI
SERVICER
DEFAULT
SECTION
6.01 Servicer
Default.
If any one of the following events (a “Servicer
Default”)
shall
occur and be continuing:
(a) any
failure by the Servicer to remit to the Indenture Trustee on behalf of the
Issuer any required remittance that shall continue unremedied for a period
of
five Business Days after written notice of such failure is received by the
Servicer from the Issuer or Indenture Trustee; or
(b) any
failure by the Servicer or, so long as the Transferor and the Servicer are
the
same Person, the Transferor, as applicable, duly to observe or perform in
any
material respect any other covenant or agreement of the Servicer or the
Transferor, as the case may be, set forth in this Agreement or any other
Basic
Document to which it is a party, which failure shall (i) materially and
adversely affect the Transferred Environmental Control Property or the rights
of
Environmental Control Bondholders and (ii) continue unremedied for a period
of 60 days after written notice of such failure shall have been given to
the Servicer, the PSCWV or the Transferor, as the case may be, by the Issuer
or
the Indenture Trustee or after discovery of such failure by an officer of
the
Servicer, the PSCWV or the Transferor, as the case may be; or
(c) any
representation or warranty made by the Servicer in this Agreement shall prove
to
have been incorrect in a material respect when made, which has a material
adverse effect on the Issuer or the Environmental Control Bondholders and
which
material adverse effect continues unremedied for a period of 60 days after
the
date on which written notice thereof shall have been given to the Servicer
by
the Issuer, the PSCWV or the Indenture Trustee; or
(d) an
Insolvency Event occurs with respect to the Servicer;
then,
and
in each and every case, so long as the Servicer Default shall not have been
remedied, the Indenture Trustee, as assignee of the Issuer, may, or at the
direction of the Environmental Control Bondholders of a majority of the
Outstanding principal amount of the Environmental Control Bonds of all Series
or
by the PSCWV, by notice then given in writing to the Servicer (a “Termination
Notice”)
shall
terminate all the Servicer’s rights and obligations (other than the
indemnification obligations set forth in Section 5.02
hereof
and the Servicer’s obligation under Section 6.04
to
continue performing its functions as Servicer until a Successor Servicer
is
18
appointed)
of the Servicer under this Agreement. In addition, upon a Servicer Default
described in Section 6.01(a),
the
Issuer or the Indenture Trustee may apply to the PSCWV or any court of competent
jurisdiction to order the sequestration and payment of Environmental Control
Charge Collections arising with respect to the Transferred Environmental
Control
Property for the benefit of the Environmental Control Bondholders, the Issuer,
the Indenture Trustee, and any other assignee and financing parties (each
as
defined in the Statute). The Trustee shall not give a Termination Notice
upon
instruction of the PSCWV unless the Rating Agency Condition is
satisfied.
On
or
after the receipt by the Servicer of a Termination Notice, all authority
and
power of the Servicer under this Agreement, whether with respect to the
Transferred Environmental Control Property, including the Environmental Control
Charges, or otherwise, shall, upon appointment of a Successor Servicer pursuant
to Section 6.04,
without
further action, pass to and be vested in such Successor Servicer and, without
limitation, the Indenture Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes
of such
Termination Notice, including, but not limited to, completing the transfer
of
the Transferred Environmental Control Property Documentation and related
documents. The predecessor Servicer shall cooperate with the Successor Servicer,
the Indenture Trustee and the Issuer in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the Successor Servicer for administration by it
of all
cash amounts that are then held by the predecessor Servicer for remittance
to
the Collection Account or the Transferor, or that are thereafter be received
by
it. As soon as practicable after receipt by the Servicer of such Termination
Notice, the Servicer shall deliver the Transferred Environmental Control
Property Documentation to the Successor Servicer.
All
reasonable costs and expenses (including attorneys fees and expenses) incurred
in connection with transferring the Environmental Control Property Documentation
to the Successor Servicer and amending this Agreement to reflect such succession
as Servicer pursuant to this Section shall be paid by the predecessor
Servicer upon presentation of reasonable documentation of such costs and
expenses. Termination of Potomac Edison as Servicer shall not terminate Potomac
Edison’s rights or obligations as Transferor under the Transfer Agreement.
SECTION
6.02 Notice
of Servicer Default.
The Servicer shall deliver to the Issuer, the PSCWV, a Responsible Officer
of
the Indenture Trustee and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officers’ Certificate of any event or circumstance (such as
a breach of any representation or warranty made by the Servicer in this
Agreement) which, if not remedied, would become a Servicer Default under
Section 6.01.
SECTION
6.03 Waiver
of Past Defaults.
The Indenture Trustee, with the written consent of the PSCWV and the
Environmental Control Bondholders of a majority of the Outstanding principal
amount of the Environmental Control Bonds of all Series, may waive, in writing,
any default by the Servicer in the performance of its obligations hereunder
and
its consequences, except a default in making any required remittances to
the
Indenture Trustee of Environmental Control Charge Collections from Transferred
Environmental Control Property in
19
accordance
with Section 5.11
of this
Agreement. Upon any such waiver of a past default, such default shall cease
to
exist, and any Servicer Default arising therefrom shall be deemed to have
been
remedied for every purpose of this Agreement. No such waiver shall extend
to any
subsequent or other default or impair any right consequent thereto.
SECTION
6.04 Appointment
of Successor.
(a) In
the
event of the Servicer’s termination hereunder, the Indenture Trustee, as
assignee of the Issuer, at the direction of the Environmental Control
Bondholders of a majority of
the
outstanding principal amount of the Environmental Control Bonds or the PSCWV,
shall appoint a Successor Servicer, and the Successor Servicer shall accept
its
appointment by a written assumption in form acceptable to the Issuer and
the
Indenture Trustee. If, within 30 days after the delivery of the Termination
Notice, a Successor Servicer shall not have been appointed and accepted such
appointment, the Indenture Trustee may petition a court of competent
jurisdiction to appoint a Successor Servicer under this Agreement. A Person
shall qualify as a Successor Servicer only if (i) such Person is permitted
under PSCWV Regulations to perform the duties of the Servicer pursuant to
the
Statute, the Financing Order and this Agreement, (ii) the Rating Agency
Condition has been satisfied with respect to all Rating Agencies,
(iii) such Person enters into a servicing agreement with the Issuer having
substantially the same provisions as this Agreement, and (iv) if
applicable, its compensation is approved or acquiesced to by the PSCWV pursuant
to Section 5.08(a) hereof.
(b) Notwithstanding
the Servicer’s receipt of a Termination Notice, pursuant to Section 6.01
or the
Servicer’s resignation in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer
under
this Agreement and shall be entitled to receive the requisite portion of
the
Servicing Fees, until a Successor Servicer shall have assumed, in writing,
the
obligations of the Servicer hereunder as described below.
(c) Upon
appointment, the Successor Servicer shall be the successor in all respects
to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fees and all
the
rights granted to the predecessor Servicer by the terms and provisions of
this
Agreement.
(d) The
Successor Servicer may not resign unless it is prohibited from serving as
such
by applicable Requirements of Law.
SECTION
6.05 Cooperation
with Successor.
The Servicer covenants and agrees with the Issuer that it will, on an ongoing
basis, cooperate with the Successor Servicer and provide whatever information
is, and take whatever actions are, reasonably necessary to assist the Successor
Servicer in performing its obligations hereunder.
SECTION
6.06 Servicer
Default Under Related Transaction.
If a “servicer default” shall occur under the Transferred Environmental Control
Property Servicing Agreement dated April 11, 2007, between Monongahela Power
Company, as servicer, and MP Environmental Funding LLC, as issuer, and it
becomes necessary to find a successor servicer under such agreement, the
Servicer
20
agrees
to
assume such role as successor servicer under such servicing agreement in
accordance with the terms thereof, including,
for avoidance doubt, for the same servicing fee provided for
thereunder.
ARTICLE
VII
MISCELLANEOUS
PROVISIONS
SECTION
7.01 Amendment.
(a) Subject
to Section
7.01(b)
below,
this Agreement may be amended by the Servicer and the Issuer, with the consent
of the Indenture Trustee and the satisfaction of the Rating Agency Condition.
Promptly after the execution of any such amendment and consent, the Issuer
shall
furnish written notification of the substance of such amendment or consent
to
each of the Rating Agencies. Prior to the execution of any amendment to this
Agreement, the Issuer and the Indenture Trustee shall be entitled to receive
and
rely upon an Opinion of Counsel stating that the execution of such amendment
is
authorized or permitted by this Agreement and the Opinion of Counsel referred
to
in Section
3.10.
Subject
to paragraph (b) below, the Issuer and the Indenture Trustee may, but shall
not
be obligated to, enter into any such amendment which affects their own rights,
duties or immunities under this Agreement or otherwise.
(b) Notwithstanding
anything to the contrary in Section
7.01(a),
nor any
waiver required by Section
6.03
hereof,
no amendment or modification of this Agreement shall be effective except
upon
satisfaction of the conditions precedent in this Section
7.01(b).
(i) PSCWV
Condition.
At least 16 days prior to the effectiveness of any such amendment or
modification, and after obtaining the other necessary approvals set forth
in
Section 7.01(a),
except
for the consent of the Indenture Trustee and the Environmental Control
Bondholders if the consent of the Environmental Control Bondholders is required
or sought by the Indenture Trustee in connection with such amendment or
modification, the Issuer shall have delivered to the PSCWV’s executive director
and general counsel written notification of any proposed amendment or
modification, which notification shall contain:
(A) a
reference to Case Nos. 05-0402-E-CN and 05-0750-E-PC and any other case number
under which a Financing Order has been issued;
(B) an
Officer’s Certificate stating that the proposed amendment or modification has
been approved by all parties to this Agreement; and
(C) a
statement identifying the person to whom the PSCWV is to address any response
to
the proposed amendment or to request additional time.
21
(ii) The
PSCWV
or its authorized representative shall, within 15 days of receiving the
notification complying with Section
7.01(b)(i)
above,
either:
(A) provide
notice of its determination that the proposed amendment or modification will
not
under any circumstances have the effect of increasing the ongoing qualified
costs related to the Environmental Control Bonds,
(B) provide
notice of its consent or lack of consent to the person specified in Section
7.01(b)(i)(C)
above,
or
(C) be
conclusively deemed to have consented to the proposed amendment or
modification,
unless,
within 15 days of receiving the notification complying with Section
7.01(b)(i)
above,
the PSCWV or its authorized representative delivers to the office of the
person
specified in Section
7.01(b)(i)(C)
above
with a written statement requesting an additional amount of time not to exceed
15 days in which to consider whether to consent to the proposed amendment
or
modification. If the PSCWV or its authorized representative requests an
extension of time in the manner set forth in the preceding sentence, then
the
PSCWV shall either provide notice of its consent or lack of consent or notice
of
its determination that the proposed amendment or modification will not under
any
circumstances increase ongoing qualified costs to the person specified in
Section
7.01(b)(i)(C)
above
not later than the last day of such extension of time or be conclusively
deemed
to have consented to the proposed amendment or modification on the last day
of
such extension of time. Any amendment or modification requiring the consent
of
the PSCWV shall become effective on the later of (i) the date proposed by
the
parties to such amendment or modification or (ii) the first day after the
expiration of the 15-day period provided for in this Section
7.01(b)(ii),
or, if
such period has been extended pursuant hereto, the first day after the
expiration of such period as so extended.
(c) For
the
purpose of this Section
7.01,
an
“authorized representative” of the PSCWV means any person authorized to act on
behalf of the PSCWV, as evidenced by an Opinion of Counsel (which may be
the
general counsel) to the PSCWV.
SECTION
7.02 Notices.
(a) All
demands, notices and communications upon or to the Servicer, the Issuer,
the
Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, delivered personally, via facsimile, reputable overnight courier
or by
first class mail, postage prepaid, and shall be deemed to have been duly
given
upon receipt,
(i) in
the
case of the Servicer, to Potomac Edison, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.;
(ii) in
the
case of the Issuer or the Indenture Trustee, at the address provided for
notices
or communications to such Person in the Indenture;
22
(iii) in
the
case of Moody’s, to ▇▇▇▇▇’▇ Investors Service, Inc., ABS Monitoring Department,
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
(iv) in
the
case of Standard & Poor’s, to Standard & Poor’s Ratings
Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of Asset Backed
Surveillance Department;
(v) in
the
case of Fitch, to Fitch, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇,
Attention of ABS Surveillance; or, as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties; and
(vi) in
the
case of the PSCWV, Public Service Commission of West Virginia, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Executive
Secretary.
SECTION
7.03 Limitations
on Rights of Others.
The provisions of this Agreement are solely for the benefit of the Servicer,
the
Seller, the Issuer (including its managers and members), the Indenture Trustee,
on behalf of itself and the Environmental Control Bondholders, and the PSCWV,
on
behalf of itself and the Customers, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal
or
equitable right, remedy or claim in any Collateral or under or in respect
of
this Agreement or any covenants, conditions or provisions contained herein.
Notwithstanding anything to the contrary contained herein, for the avoidance
of
doubt, any right, remedy or claim to which any Customer may be entitled pursuant
to the Financing Order and this Agreement may be asserted or exercised only
by
the PSCWV for the benefit of such Customer.
SECTION
7.04 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any
other jurisdiction.
SECTION
7.05 Separate
Counterparts.
This Agreement may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all
such
counterparts shall together constitute but one and the same
instrument.
SECTION
7.06 Headings.
The headings of the various Articles and Sections herein are for convenience
of
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION
7.07 GOVERNING
LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF
WEST VIRGINIA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN
ACCORDANCE WITH SUCH LAWS.
23
SECTION
7.08 Assignment
to Indenture Trustee.
The Servicer hereby acknowledges and consents to the mortgage, pledge,
assignment and grant of a security interest by the Issuer to the Indenture
Trustee pursuant to the Indenture for the benefit of the Environmental Control
Bondholders of all right, title and interest of the Issuer in, to and under
the
Transferred Environmental Control Property owned by the Issuer and the proceeds
thereof and of any and all of the Issuer’s rights hereunder to the Indenture
Trustee. In no event shall the Indenture Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of
the
Issuer, hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
SECTION
7.09 Nonpetition
Covenants.
Notwithstanding any prior termination of this Agreement or the Indenture,
but
subject to a court of competent jurisdiction’s rights, upon application
by the Issuer or the Indenture Trustee, to order the sequestration and payment
of Environmental Control Revenues arising with respect to the Transferred
Environmental Control Property, notwithstanding any bankruptcy, reorganization
or other insolvency proceedings with respect to the debtor, pledgor or
transferor of the Transferred Environmental Control Property pursuant to
Section 24-2-4e(k)(4) of the Statute, the Servicer shall not, prior to the
date which is one year and one day after the termination of the Indenture,
petition or otherwise invoke or cause the Issuer to invoke the process of
any
court or government authority for the purpose of commencing or sustaining
an
involuntary case against the Issuer under the federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer
or any
substantial part of the property of the Issuer, or ordering the winding up
or
liquidation of the affairs of the Issuer.
SECTION
7.10 Termination.
This Agreement shall terminate when all Environmental Control Bonds issued
by
the Issuer have been retired, redeemed or defeased in full, and all Operating
Expenses and other amounts owed by the Issuer under the Indenture have been
paid
in full.
SECTION
7.11 Limitation
of Liability.
It is
expressly understood and agreed by the parties hereto that this Agreement
is
executed and delivered by U.S. Bank National Association, not individually
or
personally but solely as Indenture Trustee for the benefit of the Environmental
Control Bondholders, in the exercise of the powers and authority conferred
and
vested in it, and nothing herein contained shall be construed as creating
any
liability on U.S. Bank National Association, individually or personally,
to
perform any covenant either expressed or implied contained herein, all
such
liability, if any, being expressly waived by the parties who are signatories
to
this Agreement and by any Person claiming by, through or under such parties;
provided, however, that this provision shall not protect U.S. Bank National
Association against any liability that would otherwise be imposed by reason
of
willful misconduct, bad faith or negligence in the performance of duties
or by
reason of reckless disregard of obligations or duties under this
Agreement.
24
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
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PE
ENVIRONMENTAL FUNDING LLC,
Issuer
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||
|
by
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | |
|
Title:
Vice President
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||
|
|
||
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THE
POTOMAC EDISON COMPANY,
Servicer
|
||
|
by
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | |
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Title:
Vice President
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||
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Acknowledged
and Accepted:
U.S.
BANK NATIONAL ASSOCIATION,
not
in its individual
capacity but
solely as
Indenture
Trustee
on behalf of the
Environmental
Control
Bondholders
issued by
the
Issuer,
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||
|
by
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | |
|
Title:
Vice President
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||
25
EXHIBIT
A
SERVICING
OBLIGATIONS
The
Servicer agrees to comply with the following with respect to PE Environmental
Funding LLC, as Issuer:
SECTION
1. Definitions.
Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in
Appendix A to the Indenture dated as of April 11, 2007 between the Issuer
and U.S. Bank National Association, as Indenture Trustee.
SECTION
2. Indenture
Trustee and Servicer Payment Date Statements. At
least
three Business Days before each date on which distributions to the Indenture
Trustee and Servicer are to be made pursuant to Sections 8.02(e) and (h)
of the
Indenture, the Servicer shall provide the Indenture Trustee with a statement
setting forth the amounts to be distributed to each of the Indenture Trustee
and
Servicer pursuant to such Sections.
SECTION
3. Payment
Date Statements.
At
least three Business Days before each Payment Date, the Servicer shall provide
to the Issuer, the Indenture Trustee and each Rating Agency, a statement
indicating:
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1.
|
the
amount to be paid to Environmental Control Bondholders of each
Series and
Class in respect of principal on such Payment Date in accordance
with
Section 8.02 of the Indenture and each Series Supplement
thereto;
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2.
|
the
amount to be paid to Environmental Control Bondholders of each
Series and
Class in respect of interest on such Payment Date in accordance
with
Section 8.02 of the Indenture and each Series Supplement
thereto;
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3.
|
the
Environmental Control Bond Balance and the Projected Environmental
Control
Bond Balance for each Series and Class as of that Payment Date
(in each
case, after giving effect to the payments on such Payment
Date);
|
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4.
|
the
amount on deposit in the General Subaccount for each Series and
the
Scheduled Funding for each Series, as of that Payment Date (after
giving
effect to the transfers to be made from or into the General Subaccount
on
such Payment Date);
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5.
|
the
amount on deposit in the Capital Subaccount for each Series as
of that
Payment Date (after giving effect to the transfers to be made from
or into
the Capital Subaccount on such Payment
Date);
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6.
|
the
amount, if any, on deposit in the Excess Funds Subaccount as of
that
Payment Date (after giving effect to the transfers to be made from
or into
the Reserve Subaccount on such Payment
Date);
|
Exhibit
A-1
|
7.
|
the
amount, if any, on deposit in the Tranche Subaccount (after giving
effect
to the transfers to be made from or into the Tranche Subaccount
on such
Payment Date);
|
|
8.
|
the
amounts paid to the Indenture Trustee since the preceding Payment
Date
pursuant to Section 8.02(e) of the
Indenture;
|
|
9.
|
the
amounts paid to the Servicer since the preceding Payment Date pursuant
to
Section 8.02(e) of the Indenture;
and
|
|
10.
|
the
amount of any other transfers and payments to be made on such Payment
Date
pursuant to Sections 8.02(d), (e), (f), (g) and (i) of the Indenture;
and
|
|
11.
|
the
then-current Environmental Control Charge for each rate
class.
|
SECTION
4. Remittance
Date Statements.
At least
one Business Day before each Remittance Date, and in the case of Daily
Remittances, on the last Remittance Date of such month, the Servicer shall
prepare and furnish to the Issuer and the Indenture Trustee a statement setting
forth the aggregate amount remitted or to be remitted by the Servicer to
the
Indenture Trustee (net of any payments owed to the Servicer in accordance
with
Section 5.11(d) of the Servicing Agreement) for deposit on such Remittance
Date
pursuant to the Indenture.
SECTION
5. True-Up
Adjustments.
(a) Prior
to
each Calculation Date, the Servicer shall calculate
(i) the
Environmental Control Bond Balance as of such Calculation Date (a written
copy
of which shall be delivered by the Servicer to the Indenture Trustee within
five
Business Days following such Calculation Date) and
(ii) the
revised Environmental Control Charge with respect to the Transferred
Environmental Control Property in respect of each True-Up Adjustment Date
such
that the Servicer projects that Environmental Control Charge Collections
therefrom allocable to the Issuer will be sufficient so that:
(A) the
Environmental Control Bond Balance on the Payment Date immediately preceding
the
next True-Up Adjustment Date will equal the Projected Environmental Control
Bond
Balance as of such date or, if earlier with respect to any Series or Class
of
Environmental Control Bonds, as of the Payment Date immediately preceding
the
Expected Final Payment Date therefor;
(B) the
amount on deposit in the General Subaccount on the Payment Date immediately
preceding the next True-Up Adjustment Date will equal the Periodic Bond
Payment
Exhibit
A-2
Requirement
for such date or, if earlier with respect to any Series or Tranche of
Environmental Control Bonds, as of the Payment Date immediately preceding
the
Expected Final Payment Date therefor;
(C) the
amount on deposit in the Capital Subaccount on the Payment Date immediately
preceding the next True-Up Adjustment Date will equal its required level
for
such date or, if earlier with respect to any Series or Tranche of Environmental
Control Bonds, as of the Payment Date immediately preceding the Expected
Final
Payment Date therefor;
(D) the
amount on deposit in the Excess Funds Subaccount on the Payment Date immediately
preceding the next True-Up Adjustment Date, will equal zero; and
(E) the
Environmental Control Charge Collections will provide for (i) amortization
of
the remaining outstanding principal balance of each Series in accordance
with
the Expected Sinking Fund Schedule therefor, (ii) payment of all Operating
Expenses of the Issuer when due in accordance with the Indenture and (iii)
deposits to the General Subaccount such that the balance therein will equal
the
Periodic Bond Payment Requirement on each Payment Date.
(b) On
each
Semi-Annual Calculation Date, the Servicer shall file a Semi-Annual True-Up
Adjustment Filing with the PSCWV. On each Quarterly Calculation Date and
Monthly
Calculation Date, the Servicer may file a Quarterly True-Up Adjustment Filing
or
Monthly True-Up Adjustment Filing, as the case may be, if necessary. Each
True-Up Adjustment Filing shall include the data specified in the Statute
and
the Financing Order.
(c) On
each
True-Up Adjustment Date, the Servicer shall
(i) take
all
reasonable actions and make all reasonable efforts to effectuate all adjustments
to the Environmental Control Charge either approved by the PSCWV or effective
on
an interim basis pending final approval and
(ii) promptly
send to the Indenture Trustee copies of all material notices and documents
relating to such adjustments.
(d) [On
each
True-Up Adjustment Date, the Servicer shall provide Moody’s with a schedule
indicating any changes to the Environmental Control Charge. ]
(e) If
deemed
appropriate by the Servicer to protect Environmental Control Bondholders
and to
remedy a significant and recurring variance between Actual Environmental
Control
Charge Collections and Estimated
Exhibit
A-3
Environmental Control Charge Collections, as authorized by the Financing
Order,
the Servicer shall file Non-Routine True-Up Adjustments to the Environmental
Control Charge (as defined in the Financing Order) to accommodate material
changes to the True-Up Mechanism. Such filings shall be made at least 90
days
prior to the proposed effective date of the proposed adjustments. The Servicer
shall provide notice of such non-routine adjustment and resulting change
to the
Environmental Control Charge to Fitch.
Exhibit
A-4
ATTACHMENT
A
SERVICING
PROCEDURES
The
Servicer agrees to comply with the following servicing procedures to assess
its
compliance with applicable servicing criteria.
SECTION
1. Definitions.
(a) Whenever
used in this Attachment A, the following words and phrases shall have the
following meanings:
Applicable
MDMA
means,
with respect to each Customer, the meter data management agent or Third Party,
if any, providing meter reading services for that Customer's
account.
Applicable
Third Party
means,
with respect to each Customer, the Third Party, if any, providing billing
or
metering services to that Customer.
Billed
Environmental Control Charges
means
the amounts billed to Customers pursuant to the Environmental Control Charge,
whether billed directly to such Customers by the Servicer or indirectly through
a Third Party.
Bills
means
each of the periodic bills and the Closing Bills issued to Customers or Third
Parties by Potomac Edison.
Budget
Billing Plan
means a
levelized payment plan offered by Potomac Edison, which, if elected by a
Customer, provides for level monthly ▇▇▇▇ charges to such Customer. For
residential Customers, this charge is calculated by calculating actual
electricity charges for the previous year and dividing this amount by twelve.
The number which results from this calculation is charged to the residential
Customer each month. In the twelfth month, Potomac Edison bills the residential
Customer for actual use in that month, adjusted for any excess or deficit
the
Customer has paid Potomac Edison over the prior eleven months. If the Customer
owes Potomac Edison $4 or more over the normal budget amount, that Customer
has
the option of repaying the full amount in the twelfth month, or spreading
the
amount of this deficit in equal installments over the first four months of
the
Customer's next budget year. The procedure is similar for small industrial
and
commercial Customers.
Closing
▇▇▇▇
means
the final ▇▇▇▇ issued to a Customer at the time service is
terminated.
Environmental
Control Charge Effective Date
means
the date on which the initial Environmental Control Charge goes into effect
pursuant to the Financing Order.
Net
Write-Off Percent
means
the number (expressed as a percent) equal to
|
·
|
the
amount by which Write-Offs attributable to a particular billing
period
exceed Write-Off recoveries attributable to such billing period,
divided
by
|
|
·
|
the
total billed revenue attributable to such billing period.
|
Attachment
A-1
Servicer
Policies and Practices
means,
with respect to the Servicer’s duties under this Exhibit A, the policies and
practices of the Servicer applicable to such duties that the Servicer follows
with respect to comparable assets that it services for itself.
True-Up
Adjustment Filing
has,
with respect to the Issuer, the meaning given to such term in Appendix
A.
Variables
includes
the following variables used in calculating True-Up Adjustments:
|
·
|
the
estimated Net Write-Off Percent;
and
|
|
·
|
the
projected billed consumption to which the Environmental Control
Charge
applies.
|
Write-Offs
means
arrears that remain unpaid by Customers generally as of 45 days after the
issuance of the Closing Bills containing such charges, unless payment
arrangements are made and are being kept.
SECTION
2. Data
Acquisition.
(a) Installation
and Maintenance of Meters.
Except
to the extent that a Third Party is responsible for such services, the Servicer
shall use its best efforts to cause to be installed, replaced and maintained
meters in such places and in such condition as will enable the Servicer to
obtain usage measurements for each Customer approximately every thirty days
or
as provided in the applicable tariff.
(b) Meter
Reading.
At least
once each calendar month, the Servicer shall obtain usage measurements from
the
Applicable MDMA for each Customer; provided, however, that the Servicer may
determine any Customer’s usage on the basis of estimates in accordance with
applicable PSCWV Regulations.
(c) Cost
of Metering.
The
Issuer shall not be obligated to pay any costs associated with the metering
duties set forth in this Section 2, including, but not limited to, the costs
of
installing, replacing and maintaining meters, nor shall the Issuer be entitled
to any credit against the Servicing Fee for any cost savings realized by
the
Servicer or any Third Party as a result of new metering and/or billing
technologies.
SECTION
3. Usage
and ▇▇▇▇ Calculation.
The
Servicer shall obtain a calculation of each Customer’s usage (which may be based
on data obtained from such Customer’s meter read or on usage estimates
determined in accordance with applicable PSCWV Regulations) at least once
each
calendar month and shall determine therefrom each Customer’s individual charge
relating to the Environmental Control Charge to be included on such Customer’s
▇▇▇▇ pursuant to the Financing Order and PSCWV Regulations.
Attachment
A-2
SECTION
4. Billing.
The
Servicer shall implement the Environmental Control Charge as of the
Environmental Control Charge Effective Date and shall thereafter ▇▇▇▇ each
Customer or the Applicable Third Party for the respective Customer’s outstanding
current and past due charges relating to the Environmental Control Charge,
accruing until all payments of principal and interest on each Series of
Environmental Control Bonds and all other costs and expenses related to such
Series have been paid in accordance with the Indenture, all in accordance
with
the following:
(a) Frequency
of Bills; Billing Practices.
In
accordance with the Servicer’s then-existing Servicer Policies and Practices, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a ▇▇▇▇ to each Customer, or to an Applicable
Third Party, for such Customer’s respective Environmental Control Charge as a
general practice once approximately every 60 days or such other time period
as
allowed by the PSCWV, at the same time, with the same frequency and on the
same
▇▇▇▇ as that containing the Servicer’s own charges to such Customer or Third
Party, as the case may be. In the event that the Servicer makes any material
modification to these practices, it shall notify the Issuer, the Indenture
Trustee and the Rating Agencies as soon as practicable, and in no event later
than 60 Business Days after such modification goes into effect; provided,
however, that
(i) the
Servicer may not make any modification that will materially adversely affect
the
Environmental Control Bondholders and
(ii) the
Rating Agencies shall receive prior notice of any modification that would
change
the frequency with which Bills are issued or would change any tariff
charged.
(b) Format.
(i) Each
▇▇▇▇
to a Customer shall contain the charge corresponding to the Environmental
Control Charge owed by such Customer for the billing period. The Customer’s ▇▇▇▇
will contain in text or in a footnote, text substantially to the effect that
a
portion of the monthly charge representing that Transferred Environmental
Control Property is being collected on behalf of the Issuer as owner of the
Transferred Environmental Control Property.
(ii) The
Servicer shall deliver to the Applicable Third Party itemized charges for
such
Customer including the amount of such Customer’s Environmental Control Charge to
be remitted by the Servicer to the Issuer.
(iii) The
Servicer shall conform to such requirements in respect of the format, structure
and text of Bills delivered to Customers and
Attachment
A-3
Third
Parties as applicable PSCWV Regulations shall from time to time prescribe.
To
the extent that ▇▇▇▇ format, structure and text are not prescribed by the
Statute, other applicable Requirements of Law, the Servicer shall, subject
to
clauses (i) and (ii) above, determine the format, structure and text of all
Bills in accordance with its reasonable business judgment, its Servicer Policies
and Practices with respect to its own charges and prevailing industry
standards.
(c) Delivery.
The
Servicer shall deliver all Bills to Customers
(i) by
United
States mail in such class or classes as are consistent with the Servicer
Policies and Practices followed by the Servicer with respect to its own charges
or
(ii) by
any
other means, whether electronic or otherwise, that the Servicer may from
time to
time use to present its own charges to its Customers.
In
the
case of Customers that have elected Consolidated Third Party Billing, the
Servicer shall deliver all Bills to the Applicable Third Parties by such
means
as are prescribed by applicable PSCWV Regulations, or, if not prescribed
by
applicable PSCWV Regulations, by such means as are mutually agreed upon by
the
Servicer and the Applicable Third Party and are consistent with PSCWV
Regulations. The Servicer or a Third Party, as applicable, shall pay from
its
own funds all costs of issuance and delivery of all Bills, including but
not
limited to printing and postage costs as the same may increase or decrease
from
time to time.
SECTION
5. Customer
Service Functions.
The
Servicer shall handle all Customer inquiries and other Customer service matters
according to the same procedures it uses to service Customers with respect
to
its own charges.
SECTION
6. Collections;
Payment Processing; Remittance.
(a) Collection
Efforts; Policies; Procedures.
(i) The
Servicer shall use reasonable efforts to collect all Billed Environmental
Control Charges from Customers and Third Parties as and when the same become
due
and shall follow such collection procedures as it follows with respect to
comparable assets that it services for itself or others, including, as
follows:
(A) The
Servicer shall prepare and deliver overdue notices to Customers and Third
Parties in accordance with applicable PSCWV Regulations and the Servicer
Policies and Practices.
Attachment
A-4
(B) The
Servicer shall apply late payment charges to outstanding Customer and Third
Party balances in accordance with applicable PSCWV Regulations. All late
payment
charges collected shall be payable to and retained by the Servicer as a
component of its compensation under the Servicing Agreement, and the Issuer
shall not have any right to share in the same.
(C) The
Servicer shall deliver verbal and written final call notices in accordance
with
applicable PSCWV Regulations and Servicer Policies and Practices.
(D) The
Servicer shall adhere to and carry out disconnection policies in accordance
with
the Competition Act, other applicable law and PSCWV Regulations and Servicer
Policies and Practices.
(E) The
Servicer may employ the assistance of collections agents in accordance with
applicable PSCWV Regulations and Servicer Policies and Practices.
(F) The
Servicer shall apply Customer and Third Party deposits, Customers’ letters of
credit and Customer posted surety bonds to the payment of delinquent accounts
in
accordance with applicable PSCWV Regulations and Servicer Policies and Practices
and according to the priorities set forth in Sections
6(b)(ii), (iii) and
(iv)
of this
Exhibit A.
(G) The
Servicer shall promptly take all necessary action in accordance with applicable
PSCWV Regulations to terminate billing of Environmental Control Charges by
Third
Parties whose payments are 30 or more days delinquent, or as the then current
PSCWV Regulations and any billing services agreements allow, and to resume,
prospectively, to collect the Billed Environmental Control Charges directly
from
the applicable Customers. At such time, the Servicer will apply the Third
Party’s security deposit to satisfy charges billed previously by the Third Party
which remain outstanding, including outstanding Environmental Control
Charges.
(ii) The
Servicer shall not waive any late payment charge or any other fee or charge
relating to delinquent payments, if any, or waive, vary or modify any terms
of
payment of any amounts payable by a Customer, in each case unless such waiver
or
action:
Attachment
A-5
(A) would
be
in accordance with the Servicer’s customary practices or those of any Successor
Servicer with respect to comparable assets that it services for itself and
for
others;
(B) would
not
materially adversely affect the rights of the Environmental Control Bondholders;
and
(C) would
comply with applicable Requirements of Law;
provided,
however, that notwithstanding anything in the Servicing Agreement or this
Exhibit A to the contrary, the Servicer is authorized to write off any Billed
Environmental Control Charges in accordance with its Servicer Policies and
Practices.
(iii) The
Servicer shall accept payment from Customers in respect of Billed Environmental
Control Charges in such forms and methods and at such times and places as
it
accepts for payment of its own charges. The Servicer shall accept payment
from
Third Parties in respect of Billed Environmental Control Charges in such
forms
and methods and at such times and places as the Servicer and each Third Party
shall mutually agree in accordance with applicable PSCWV
Regulations.
(b) Payment
Processing; Allocation; Priority of Payments.
(i) The
Servicer shall post all payments received to Customer accounts as promptly
as
practicable, and, in any event, substantially all payments shall be posted
no
later than two Business Days after receipt.
(ii) Subject
to clause (iii) below, the Servicer shall apply payments received to each
Customer’s or Third Party’s account in proportion to the charges contained on
the outstanding ▇▇▇▇ to such Customer or Third Party.
(iii) Any
amounts collected by the Servicer that represent partial payments of the
total
▇▇▇▇ to a Customer or Third Party shall be allocated in accordance with the
priorities set forth in Section
3.02(b)
of the
Servicing Agreement.
(iv) The
Servicer shall hold all over-payments for the benefit of the Issuer and shall
apply such funds to future ▇▇▇▇ charges in accordance with clauses (ii) and
(iii) above as such charges become due.
(v) For
Customers on a Budget Billing Plan, the Servicer shall treat Environmental
Control Charge Collections received from such
Attachment
A-6
Customers
as if such Customers had been billed for the Environmental Control Charge
in the
absence of the Budget Billing Plan. Partial payment of a Budget Billing Plan
payment shall be allocated according to clause (iii) above, and overpayment
of a
Budget Billing Plan payment shall be allocated according to clause (iv)
above.
(c) Accounts;
Records.
(i) The
Servicer shall maintain accounts and records as to the Transferred Environmental
Control Property accurately and in accordance with its standard accounting
procedures and in sufficient detail to permit reconciliation between payments
or
recoveries with respect to the Transferred Environmental Control Property
and
the amounts from time to time remitted to the Collection Account in respect
of
the Transferred Environmental Control Property.
(ii) The
Servicer shall maintain accounts and records as to Third Parties performing
billing for Customers accurately and in accordance with its standard accounting
procedures and in sufficient detail to permit reconciliation between payments
or
recoveries with respect to the Transferred Environmental Control Property
and
amounts owed by such Customers in respect of the Environmental Control
Charge.
(d) Investment
of Environmental Control Charge Collections.
Any and
all interest accrued on Environmental Control Charge Collections prior to
the
remittance of such Environmental Control Charge Collections to the Issuer
or
Indenture Trustee shall be remitted by the Servicer to the Indenture Trustee
for
deposit in the Excess Funds Subaccount.
(e) Calculation
of Collections; Determination of Aggregate Remittance Amount.
(i) On
or
before each Remittance Date, the Servicer shall calculate the Estimated
Environmental Control Charge Collections received by the Servicer from or
on
behalf of Customers during prior Collection Periods in respect of all previously
Billed Environmental Control Charges.
(ii) In
accordance with Section
4.01
of the
Servicing Agreement and Annex 1, the Servicer shall update the Variables
and
shall prepare True-Up Adjustment Filings to reflect the updated Variables
when
required to do so pursuant to Annex 1.
(f) Remittances.
Attachment
A-7
(i) The
Servicer shall make remittances to the Issuer in accordance with Section
5.11
of the
Servicing Agreement.
(ii) In
the
event of any change of account or change of institution affecting the
remittances, the Issuer shall provide written notice thereof to the Servicer
by
the earlier of
|
·
|
five
Business Days from the effective date of such change,
or
|
|
·
|
five
Business Days prior to the next applicable Remittance
Date.
|
Attachment
A-8
EXHIBIT
B
PENDING
LITIGATION
None.
Exhibit
B-1
ANNEX
1
FORM
OF ROUTINE ADJUSTMENT REQUEST
DATE:
[Executive
Secretary]
Public
Service Commission of West Virginia
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Re:
Case Nos. 05-0402-E-CN and 05-0750-E-PC
Dear
__________________:
As
required by Section 24-2-4e(e) of the West Virginia Code §§ 24-2-4e(a)
through and including 24-2-4e(v) and pursuant to the orders dated April 7,
2006,
June 13, 2006 and January 17, 2007 in Case Nos. 05-0402-E-CN and 05-0750-E-PC
(the “Financing
Order”),
The
Potomac Edison Company (the “Company”)
as
Servicer (or any Successor Servicer) of the Transferred Environmental Control
Property, and on behalf of the Indenture Trustee under the Indenture, dated
as
of April 11, 2007 between the Issuer and the Indenture Trustee, as amended,
modified or supplemented from time to time, as assignee of PE Environmental
Funding LLC hereby proposes an adjustment to the Environmental Control Charges
(the “ECC”
or
“Environmental
Control Charges”).
Capitalized terms used but not otherwise defined herein have the meanings
given
such terms in the Servicing Agreement dated as of April 11, 2007 between
the
Issuer and the Company, as amended, modified or supplemented from time to
time,
or in Appendix A thereto.
This
proposed adjustment is intended to satisfy Section 24-2-4e(e) and the
Financing Order by ensuring that the ECC will recover amounts sufficient
to
timely provide all payments of debt service and other required amounts and
charges in connection with the Environmental Control Bonds during the upcoming
Remittance Period.
Using
the
formula approved by the Public Service Commission of West Virginia (the
“PSCWV”)
in the
Financing Order, this filing modifies the variables used in the ECC and provides
the resulting adjusted ECC. Attachments B-1 [and B-2] hereto show the resulting
values of the ECC, as calculated in accordance with the Joint Stipulation,
as
modified by the Financing Order, such modified Environmental Control Charges
to
be effective as of the first day of the upcoming Remittance Period. The
calculations of these values are appended to the Attachments
hereto.
In
accordance with the Financing Order, the proposed adjustments to the charges
will be effective automatically on the first day of the upcoming Remittance
Period. In the event that, prior to the first day of the upcoming Remittance
Period, it is determined by the PSCWV that a mathematical error in the
application of the formula-based mechanism exists, the Company shall correct
such error and make any necessary corrections to the adjustments of the
Environmental Control Charges. These adjusted Environmental Control Charges,
as
corrected, shall in any event take effect on the first day of the upcoming
Remittance Period. [For Quarterly True-Up Adjustments
Annex
1-1
and
Monthly True-Up Adjustments, on the fifteenth day of the quarter or month
next
succeeding the date of the Routine Adjustment Request.]
Respectfully
submitted,
Attachment
Annex
1-2
ATTACHMENT
A TO ANNEX 1
Table
I
below shows the current assumptions for each of the variables used in the
Environmental Control Charge calculation.
INPUT
VALUES FOR ENVIRONMENTAL CONTROL CHARGE
|
(a)
|
Measure
Date
|
|
(b)
|
For
each Rate Schedule:
|
|
(i)
|
Weighted
average days outstanding data
|
|
(ii)
|
Estimated
Net Write-Off Percent
|
|
(iii)
|
Projected
billed revenue to which Environmental Control Charges
apply
|
|
(iv)
|
Annual
class generation level MWh energy
|
|
(v)
|
Forecasted
annual class customer level MWh
energy
|
|
(vi)
|
Annual
class generation level 12 CP MW
demand
|
|
(vii)
|
Forecasted
annual class customer level demand
|
|
(c)
|
Retail
energy weighting ratio
|
|
(d)
|
Retail
demand weighting ratio
|
|
(e)
|
Total
generation level MWh energy (excl.
wholesale)
|
|
(f)
|
Total
generation level 12 CP MW demand (excl.
wholesale)
|
|
(g)
|
Expected
annual Write-Offs
|
|
(h)
|
Annual
ongoing transaction expenses
|
|
(i)
|
Current
Environmental Control Bonds outstanding
balance
|
|
(j)
|
Expected
Environmental Control Bonds outstanding balance as of
__/__/__
|
|
(k)
|
Accrued
but unpaid Environmental Control Bonds
interest
|
|
(l)
|
Deferred
unpaid Environmental Control Bonds
principal
|
|
(m)
|
Unpaid
ongoing transaction cost
|
|
(n)
|
Capital
Subaccount balance as of __/__/__
|
|
(o)
|
Available
True-Up Excess Funds Amount
|
|
(p)
|
Accrued
but unpaid Capital Equity Return
|
|
(q)
|
federal
corporate income tax rate
|
|
(r)
|
Applicable
state and local tax rates
|
Attachment
A-1 to Annex 1
ANNEX
2
FORM
OF MONTHLY SERVICER’S CERTIFICATE
PE
Environmental Funding LLC
$114,825,000
Environmental Control Bonds, Series A
Pursuant
to Section 3.04 of the Servicing Agreement dated as of April 11, 2007 (as
the same may be amended, supplemented or otherwise modified from time to
time,
the “Servicing Agreement”) between The Potomac Edison Company, as Servicer, and
PE Environmental Funding LLC, as Issuer, the Servicer does hereby certify
as
follows:
Capitalized
terms used in this Monthly Servicer’s Certificate have their respective meanings
as set forth in the Servicing Agreement. References herein to certain sections
and subsections are references to the respective sections of the Servicing
Agreement.
Billing
Period: [____________]
|
1.
|
Current
Billing Period
|
[___________]
|
|
CUSTOMER
CLASS [ ] of [ ]: [____________]
|
||
|
2.
|
Rate
Schedule #[ ] kWh Billed
|
[___________]
|
|
3.
|
Rate
Schedule #[ ] Weighted Average
|
[___________]
|
|
Environmental
Control Charge
|
||
|
Billed
Environmental Control Charge Collections
|
||
|
4.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
Estimated
Environmental Control Charge Collections
|
||
|
5.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
6.
|
Total
Residential Net Write-offs
as
% of Billed Environmental Control Charge Collections
[
] CUSTOMER CLASS [ ] OF [ ]:
[___________]
|
[__________]%
|
|
7.
|
Rate
Schedule #[ ] kWh Billed
|
[___________]
|
|
8.
|
Rate
Schedule #[ ] Weighted Average
|
[___________]
|
|
Environmental
Control Charge
|
||
|
9.
|
Rate
Schedule #[ ] kWh Billed
|
[___________]
|
|
10.
|
Rate
Schedule #[ ] Weighted Average
|
[___________]
|
|
Environmental
Control Charge
|
||
|
11.
|
Rate
Schedule #[ ] kWh Billed
|
[___________]
|
|
12.
|
Rate
Schedule #[ ] Weighted Average
|
[___________]
|
|
Environmental
Control Charge
|
||
|
13.
|
Rate
Schedule #[ ] kWh Billed
|
[___________]
|
|
14.
|
Rate
Schedule #[ ] Weighted Average
|
[___________]
|
|
Environmental
Control Charge
|
||
|
Billed
Environmental Control Charge Collections
|
Annex
2-1
|
15.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
16.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
17.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
18.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
19.
|
Total
Commercial Billed Environmental Control Charge Collections
|
$[__________]
|
|
Estimated
Environmental Control Charge Collections
|
||
|
20.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
21.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
22.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
23.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
24.
|
Total
Commercial Environmental Control Charge Collections
|
$[__________]
|
|
25.
|
Total
Commercial Net Write-offs as
a
%
of Billed Revenues [ ]
CUSTOMER
CLASS [ ] OF [ ]: [__________]
|
[__________]%
|
|
26.
|
Rate
Schedule #[ ] kWh Billed
|
[__________]
|
|
27.
|
Rate
Schedule #[ ] Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
28.
|
Rate
Schedule #[ ] kWh Billed
|
[__________]
|
|
29.
|
Rate
Schedule #[ ] Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
30.
|
Rate
Schedule #[ ] kWh Billed
|
[__________]
|
|
31.
|
Rate
Schedule #[ ] Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
32.
|
Rate
Schedule #[ ] kWh Billed
|
[__________]
|
|
33.
|
Rate
Schedule #[ ] Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
34.
|
Rate
Schedule #[ ] kWh Billed
|
[__________]
|
|
35.
|
Rate
Schedule #[ ] Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
36.
|
Rate
Schedule #[ ] kWh Billed
|
[__________]
|
|
37.
|
Rate
Schedule #[ ] Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
38.
|
Street
Lighting Rate Schedules
|
[__________]
|
|
39.
|
Street
Lighting Weighted Average
|
[__________]
|
|
Environmental
Control Charge
|
||
|
Billed
Environmental Control Charge Collections
|
||
|
40.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
41.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
42.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
43.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
44.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
45.
|
Rate
Schedule #[ ] Billed Environmental Control Charge
Collections
|
$[__________]
|
|
46.
|
Street
Lighting Rate Schedules Billed Environmental Control Charge
Collections
|
$[__________]
|
|
47.
|
Total
Industrial Billed Environmental Control Charge Collections
|
$[__________]
|
|
Estimated
Environmental Control Charge Collections
|
Annex
2-2
|
48.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
49.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
50.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
51.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
52.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
53.
|
Rate
Schedule #[ ] Environmental Control Charge
Collections
|
$[__________]
|
|
54.
|
Street
Lighting Rate Schedules Environmental Control Charge
Collections
|
$[__________]
|
|
55.
|
Total
Industrial Environmental Control Charge Collections
|
$[__________]
|
|
56.
|
Total
Industrial Net Write-offs as
a
%
of Billed Environmental Control Charge Collections [
]
|
[__________]%
|
|
AGGREGATE
ESTIMATED ENVIRONMENTAL CONTROL CHARGE COLLECTIONS
|
||
|
Aggregate
Environmental Control Charge Remittances for [Month, Year] Billing
Period
|
$[__________]
|
|
|
Aggregate
Environmental Control Charge Remittances for [Month, Year] Billing
Period
|
$[__________]
|
|
|
Aggregate
Environmental Control Charge Remittances for [Month, Year] Billing
Period
|
||
|
Aggregate
Environmental Control Charge Remittances for [Month, Year] Billing
Period
|
||
|
Aggregate
Environmental Control Charge Remittances to Date
|
$[__________]
|
IN
WITNESS HEREOF, the undersigned has duly executed and delivered this Monthly
Servicer’s Certificate this [__] day of [________________].
|
Name:
Title:
|
Annex
2-3
ANNEX
3
FORM
OF QUARTERLY SERVICER’S CERTIFICATE
Quarterly
Servicer’s Certificate
PE
Environmental Funding LLC
$114,825,000
Environmental Control Bonds, Series A
Pursuant
to Section 3.04 of the Servicing Agreement dated as of April 11, 2007
(as the same may be amended, supplemented or otherwise modified from time
to
time, the “Servicing Agreement”) between The Potomac Edison Company, as Servicer
and PE
Environmental
Funding
LLC, as Issuer, the Servicer does hereby certify as follows:
Capitalized
terms used in this Quarterly Servicer’s Certificate have their respective
meanings as set forth in the Servicing Agreement. References herein to certain
sections and subsections are references to the respective sections of the
Servicing Agreement.
Billing
Periods: [_____________]
Payment
Date: [_____________]
|
1.
|
Collections
Allocable and Aggregate Amounts Available for the Current Payment
Date:
|
|
i.
|
Balance
of Remittances for the [ ]
Collection Period
|
$[________]
|
|
|
ii.
|
Remittances
for the [ ]
Collection Period
|
$[________]
|
|
|
iii
a.
|
Remittances
for the [ ]
Collection Period
|
$[________]
|
|
|
iii
b.
|
Part
[ ]
Remittance for 'Daily Remittance Provision'
|
$[________]
|
|
|
iv.
|
Net
Earnings on General Subaccount
|
$[________]
|
|
|
v.
|
Net
Earnings on Capital Subaccount
|
$[________]
|
|
|
$[________]
|
|||
|
vi.
|
Net
Earnings on True-Up Excess Funds Subaccount
|
$[________]
|
|
|
vii.
|
General
Subaccount Balance
|
$[________]
|
|
viii.
|
True-Up
Excess Funds Subaccount Balance
|
$[________]
|
|
|
ix.
|
$[________]
|
||
|
x.
|
Capital
Subaccount Balance
|
$[________]
|
|
|
xi.
|
Collection
Account Balance
|
$[________]
|
|
2.
|
Outstanding
Principal Balance and Collection Account Balance as of Prior Payment
Date:
|
|
i.
|
Tranche
[ ]
Principal
Balance
|
$[________]
|
|
|
ii.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
iii.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
iv.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
v.
|
Environmental
Control Bond Principal Balance
|
$[________]
|
Annex
3-1
|
vi.
|
True-Up
Excess Funds Subaccount Balance
|
$[________]
|
|
|
vii.
|
Capital
Subaccount Balance
|
$[________]
|
|
3.
|
Required
Funding/Payments as of Current Payment
Date:
|
|
i.
|
Projected
Tranche [ ]
Environmental Control Bond Balance
|
$[________]
|
|
|
ii.
|
Projected
Tranche [ ]
Environmental Control Bond Balance
|
$[________]
|
|
|
iii.
|
Projected
Tranche [ ]
Environmental Control Bond Balance
|
$[________]
|
|
|
iv.
|
Projected
Tranche [ ]
Environmental Control Bond Balance
|
$[________]
|
|
|
v.
|
Projected
Environmental Control Bond Balance
|
$[________]
|
|
vi.
|
Required
Tranche [ ]
Coupon ([ ]%
per annum rate)
|
$[________]
|
|
|
vii.
|
Required
Tranche [ ]
Coupon ([ ]%
per annum rate)
|
$[________]
|
|
|
viii.
|
Required
Tranche [ ]
Coupon ([ ]%
per annum rate)
|
$[________]
|
|
|
ix.
|
Required
Tranche [ ]
Coupon ([ ]%
per annum rate)
|
$[________]
|
|
x.
|
Required
Capital Subaccount Funding
|
$[________]
|
|
4.
|
Allocation
of Remittances as of Current Payment Date Pursuant to Section 8.02(d)
of
the Indenture:
|
|
i.
|
Cumulative
Monthly Administration Fee during Relevant Quarter
|
$[________]
|
|
|
ii.
|
Indenture
Fees and Expenses
*
|
$[________]
|
|
|
iii.
|
Independent
Director’s Fee
**
|
$[________]
|
|
|
iv.
|
Servicing
Fee
|
$[________]
|
|
|
v.
|
Operating
Expenses (subject to $[ ]
cap)
|
$[________]
|
|
vi.
|
Quarterly
Interest
|
$[________]
|
|
1.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
||
|
2.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
||
|
3.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
||
|
4.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
|
vii.
|
Principal
Due and Payable
|
$[________]
|
|
viii.
|
Scheduled
Quarterly Principal
|
$[________]
|
|
1.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
||
|
2.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
||
|
3.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
||
|
4.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
|
ix.
|
Operating
Expenses (in excess of $[ ])
|
$[________]
|
|
|
x.
|
Funding
of Capital Subaccount (to required level)
|
$[________]
|
Annex
3-2
|
xi.
|
Required
Dividend Distributions to Potomac Edison
|
$[________]
|
|
|
xii.
|
Deposits
to True-Up Excess Funds Subaccount
|
$[________]
|
|
|
xiii.
|
Released
to Issuer upon Series Retirement: Collection Account
|
$[________]
|
|
5.
|
Outstanding
Principal Balance and Collection Account Balance as of Current
Payment
Date:
(after
giving effect to payments to be made on such payment
date):
|
|
i.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
ii.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
iii.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
iv.
|
Tranche
[ ]
Principal Balance
|
$[________]
|
|
|
v.
|
Environmental
Control Bond Principal Balance
|
$[________]
|
|
vi.
|
True-Up
Excess Funds Subaccount Balance
|
$[________]
|
|
|
vii
|
Capital
Subaccount Balance
|
$[________]
|
|
*
|
$[
]
per quarter, in advance plus expenses, in arrears.
|
||
|
**
|
Independent
Director’s Fee is paid in advance, first quarter. ([Quarter/Year],
directly by Issuer to directors)
|
|
6.
|
Subaccount
Draws as of Current Payment Date (if applicable, pursuant to Section
8.02(d) of the Indenture):
|
|
i.
|
True-Up
Excess Funds Subaccount
|
$[________]
|
|
|
ii.
|
Capital
Subaccount
|
$[________]
|
|
|
iii.
|
Total
Draws
|
$[________]
|
|
7.
|
Shortfalls
In Interest and Principal Payments as of Current Payment
Date:
|
|
i.
|
Quarterly
Interest
|
$[________]
|
|
1.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
||
|
2.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
||
|
3.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
||
|
4.
|
Tranche
[ ]
Environmental Control Bond Coupon Payment
|
$[________]
|
|
ii.
|
Quarterly
Principal
|
$[________]
|
|
1.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
||
|
2.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
||
|
3.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
||
|
4.
|
Tranche
[ ]
Environmental Control Bond Principal Payment
|
$[________]
|
|
8.
|
Shortfalls
in Required Subaccount Levels as of Current Payment
Date:
|
Annex
3-3
|
i.
|
Capital
Subaccount
|
$[________]
|
IN
WITNESS HEREOF, the undersigned has duly executed and delivered this Quarterly
Servicer’s Certificate this [__] day of [________________].
|
Name:
Title:
|
Annex
3-4
ANNEX
4
FORM
OF OFFICER’S CERTIFICATE
$114,825,000
PE
ENVIRONMENTAL FUNDING LLC
ENVIRONMENTAL
CONTROL BONDS, SERIES A
THE
POTOMAC EDISON COMPANY
OFFICER’S
CERTIFICATE
Pursuant
to Section 3.05(a) of the Servicing Agreement dated as of April 11, 2007
between PE
Environmental
Funding
LLC, as Issuer, and The Potomac Edison Company (the “Company”), as Servicer (as
the same may be amended, supplemented or otherwise modified from time to
time,
the “Servicing Agreement”; capitalized terms used but not defined herein have
the meanings assigned thereto in the Servicing Agreement), each of the
undersigned, [Authorized Officer], the duly elected [________________] of
and
[Authorized Officer], the [________________] of the Company, having carefully
examined the Servicing Agreement including Section 3.05 thereof, and the
definitions in the Servicing Agreement relating thereto and certain other
corporate documents and records, and having made such examination or
investigation as they consider necessary to enable the undersigned to express
any informed opinion, certifies that:
(i) a
review
of the activities of the Company during the period from January 1, [____]
through December 31, [____] and of its performance under the Servicing Agreement
has been made under the supervision of the undersigned, and
(ii) to
the
best of the knowledge of the undersigned, based on such review, the Company
has
complied with all conditions and covenants under the Servicing Agreement
throughout such period [or, if there has been an Event of Default, or an
act or
omission, which with either the passage of time or the giving of notice,
could
become an Event of Default, specify such event of default or act or omission
known to such authorized officer and the nature and status
thereof].
IN
WITNESS WHEREOF, the undersigned have executed this certificate this [__]
day of
[________________].
|
By:
|
||
|
Name:
Title:
|
||
|
By:
|
||
|
Name:
Title:
|
Annex
4-1
ANNEX
5
FORM
OF ASSESSMENT OF SERVICING CRITERIA
I,
________________________________, the _______________________ of the Servicer,
am responsible for assessing the Servicer’s compliance with the servicing
criteria set forth in Item 1122(d) of Regulation AB [that would apply if
the
Bonds were “asset-backed securities” under Item 1101(c) of Regulation AB] (the
“Servicing Criteria”).
With
respect to each of the Servicing Criteria, I have made the following assessment
of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB,
with
such discussion regarding the performance of such Servicing Criteria during
the
fiscal year covered by the Issuer’s Form 10-K Report (such fiscal year, the
“Assessment Period”):
[N.B.:
the descriptions are for reference as to how the form will be used on an
ongoing
basis for filing with the SEC]
|
Servicing
Criteria
|
Applicable
Servicing Criteria
|
|
|
Reference
|
Criteria
|
|
|
General Serving Considerations
|
||
|
1122(d)(1)(i)
|
Policies
and procedures are instituted to monitor any performance or other
triggers
and events of default in accordance with the transaction
agreements.
|
Applicable;
assessment below. [Assessment: cover true-up compliance
here]
|
|
1122(d)(1)(ii)
|
If
any material servicing activities are outsourced to third parties,
policies and procedures are instituted to monitor the third party’s
performance and compliance with such servicing activities.
|
Not
applicable; no servicing activities were outsourced.
|
|
1122(d)(1)(iii)
|
Any
requirements in the transaction agreements to maintain a back-up
servicer
for the environmental control property are maintained.
|
Not
applicable; documents do not provided for a back-up
servicer.
|
|
1122(d)(1)(iv)
|
A
fidelity bond and errors and omissions policy is in effect on the
party
participating in the servicing function throughout the reporting
period in
the amount of coverage required by and otherwise in accordance
with the
terms of the transaction agreements.
|
Not
applicable; rules of the Commission govern performance requirements
of
persons handling customer collections. [Utility to confirm bonding
requirements under current rules and regulations.]
|
|
Cash
Collection and Administration
|
||
|
1122(d)(2)(i)
|
Payments
on environmental control property are deposited into the appropriate
custodial bank accounts and related bank clearing accounts no more
than
two business days following receipt, or such other number of days
specified in the transaction agreements.
|
Applicable;
assessment below [Assessment: estimated collections were remitted
from the
Servicer to the Trustee each business day in accordance with
Section 5.10 of the Servicing
Agreement.]
|
Annex
5-1
|
1122(d)(2)(ii)
|
Disbursements
made via wire transfer on behalf of an obligor or to an investor
are made
only by authorized personnel.
|
Applicable;
assessment below.[Assessment: Wire transfers to the Trustee were
made by
authorized personnel.]
|
|
1122(d)(2)(iii)
|
Advances
of funds or guarantees regarding collections, cash flows or distributions,
and any interest or other fees charged for such advances, are made,
reviewed and approved as specified in the transaction
agreements.
|
Applicable,
but no current assessment required; no advances by the Servicer
or the
Trustee are permitted under the transaction documents.
|
|
1122(d)(2)(iv)
|
The
related accounts for the transaction, such as cash reserve accounts
or
accounts established as a form of overcollateralization, are separately
maintained (e.g., with respect to commingling of cash) as set forth
in the
transaction agreements.
|
Applicable,
but no current assessment is required; no reserve accounts are
held by the
Servicer. Excess funds and other transaction accounts are maintained
and
applied by the Trustee in accordance with the
Indenture.
|
|
1122(d)(2)(v)
|
Each
custodial account is maintained at a federally insured depository
institution as set forth in the transaction agreements. For purposes
of
this criterion, “federally insured depository institution” with respect to
a foreign financial institution means a foreign financial institution
that
meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange
Act.
|
Applicable,
but no current assessment required; all “custodial accounts” were
maintained by the Trustee and invested in accordance with indenture
requirements.
|
|
1122(d)(2)(vi)
|
Unissued
checks are safeguarded so as to prevent unauthorized
access.
|
Not
applicable; all transfers made by wire transfer.
|
|
1122(d)(2)(vii)
|
Reconciliations
are prepared on a monthly basis for all asset-backed securities
related
bank accounts, including custodial accounts and related bank clearing
accounts. These reconciliations are (A) mathematically accurate;
(B)
prepared within 30 calendar days after the bank statement cutoff
date, or
such other number of days specified in the transaction agreements;
(C)
reviewed and approved by someone other than the person who prepared
the
reconciliation; and (D) contain explanations for reconciling items.
These
reconciling items are resolved within 90 calendar days of their
original
identification, or such other number of days specified in the transaction
agreements.
|
Partially
applicable; reconciliations of estimated remittances of environmental
control charge remittances with actual storm-recovery bond collections
are
made on an annual basis as required by Section 5.10 of the Servicing
Agreement.; assessment below.
|
Annex
5-2
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Investor
Remittances and Reporting
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|
1122(d)(3)(i)
|
Reports
to investors, including those to be filed with the Commission,
are
maintained in accordance with the transaction agreements and applicable
Commission requirements. Specifically, such reports (A) are prepared
in
accordance with timeframes and other terms set forth in the transaction
agreements; (B) provide information calculated in accordance with
the
terms specified in the transaction agreements; (C) are filed with
the
Commission as required by its rules and regulations; and (D) agree
with
investors’ or the trustee’s records as to the total unpaid principal
balance and number of pledged assets serviced by the
Servicer.
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Applicable;
assessment below.
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1122(d)(3)(ii)
|
Amounts
due to investors are allocated and remitted in accordance with
timeframes,
distribution priority and other terms set forth in the transaction
agreements.
|
Applicable;
assessment below. [Assessment: Servicer has provided applicable
instructions to the trustee to allocate and remit funds to
investors.]
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1122(d)(3)(iii)
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Disbursements
made to an investor are posted within two business days to the
Servicer’s
investor records, or such other number of days specified in the
transaction agreements.
|
Not
applicable; transaction documents do not permit Servicer to disburse
payments to investors.
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1122(d)(3)(iv)
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Amounts
remitted to investors per the investor reports agree with cancelled
checks, or other form of payment, or custodial bank
statements.
|
Not
applicable; bondholders are paid by the Indenture Trustee in accordance
with terms of the Indenture.
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Asset
Administration
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1122(d)(4)(i)
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Collateral
or security on environmental control property is maintained as
required by
the transaction agreements or related documents.
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Applicable;
assessment below. [Assessment: Servicer has performed true-up adjustments
of Environmental Control Charges in accordance with Section 4.01 of
the Servicing Agreement.]
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1122(d)(4)(ii)
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Environmental
control property and related documents are safeguarded as required
by the
transaction agreements.
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Applicable;
assessment below. [Assessment: Servicer has maintained custody
over all
environmental control property records in accordance with
Section 3.08 of the Servicing Agreement.]
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1122(d)(4)(iii)
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Any
additions, removals or substitutions to the assets are made, reviewed
and
approved in accordance with any conditions or requirements in the
transaction agreements.
|
Applicable
but no current assessment required; no removals or substitutions
of
pledged assets are contemplated or allowed under the transaction
documents.
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Annex
5-3
|
1122(d)(4)(iv)
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Payments
on pledged assets, including any payoffs, made in accordance with
the
related environmental control property documents are posted to
the
Servicer’s obligor records maintained no more than two business days after
receipt, or such other number of days specified in the transaction
agreements, and allocated to principal, interest or other items
(e.g.,
escrow) in accordance with the environmental control transaction
documents.
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Applicable;
assessment below.[Assessment: The Servicer posted substantially
all
environmental control charge payments to customer accounts within
two
business days as required by Section 6(b) of Exhibit A—Payment
Processing: Allocation; Priority of Payments]
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1122(d)(4)(v)
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The
Servicer’s records regarding the environmental control property agree with
the Servicer’s records with respect to an obligor’s unpaid principal
balance.
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Not
applicable; because underlying obligation (environmental control
charge)
is not an interest bearing instrument
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1122(d)(4)(vi)
|
Changes
with respect to the terms or status of an obligor’s environmental control
property are made, reviewed and approved by authorized personnel
in
accordance with the transaction agreements and related asset
documents.
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Applicable;
assessment below [Assessment: Servicer has not waived or modified
term of
payment except in accordance with Section 6(a)(ii) of Exhibit
A-Servicing Procedures]
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1122(d)(4)(vii)
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Loss
mitigation or recovery actions (e.g., forbearance plans, modifications
and
deeds in lieu of foreclosure, foreclosures and repossessions, as
applicable) are initiated, conducted and concluded in accordance
with the
timeframes or other requirements established by the transaction
agreements.
|
Applicable;
assessment below. [Assessment: Loss mitigation or recovery actions
have
been conducted in accordance with Section 6(a) of Exhibit A—
Collections: Payment Processing; Remittance]
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1122(d)(4)(viii)
|
Records
documenting collection efforts are maintained during the period
any
pledged asset is delinquent in accordance with the transaction
agreements.
Such records are maintained on at least a monthly basis, or such
other
period specified in the transaction agreements, and describe the
entity’s
activities in monitoring delinquent environmental control charges
including, for example, phone calls, letters and payment rescheduling
plans in cases where delinquency is deemed temporary (e.g., illness
or
unemployment).
|
Applicable,
but does not require assessment. No explicit documentation requirement
with respect to delinquent accounts are imposed under the transactional
documents due to availability of “true-up” mechanism; and any such
documentation is maintained in accordance with applicable PSCWV
rules and
regulations.
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1122(d)(4)(ix)
|
Adjustments
to interest rates or rates of return for environmental control
property
with variable rates are computed based on the related environmental
control property documents.
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Not
applicable; environmental control charges are not interest bearing
instruments.
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Annex
5-4
|
1122(d)(4)(x)
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Regarding
any funds held in trust for an obligor (such as escrow accounts):
(A) such
funds are analyzed, in accordance with the obligor’s environmental control
property documents, on at least an annual basis, or such other
period
specified in the transaction agreements; (B) interest on such funds
is
paid, or credited, to obligors in accordance with applicable environmental
control property documents and state laws; and (C) such funds are
returned
to the obligor within 30 calendar days of full repayment of the
related
environmental control property, or such other number of days specified
in
the transaction agreements.
|
Applicable,
but does not require assessment; Servicer maintains customer deposits
in
accordance with the PSCWV rules and regulations.
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1122(d)(4)(xi)
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Payments
made on behalf of an obligor (such as tax or insurance payments)
are made
on or before the related penalty or expiration dates, as indicated
on the
appropriate bills or notices for such payments, provided that such
support
has been received by the Servicer at least 30 calendar days prior
to these
dates, or such other number of days specified in the transaction
agreements.
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Not
applicable.
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1122(d)(4)(xii)
|
Any
late payment penalties in connection with any payment to be made
on behalf
of an obligor are paid from the Servicer’s funds and not charged to the
obligor, unless the late payment was due to the obligor’s error or
omission.
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Not
applicable; Servicer cannot make advances of its own funds on behalf
of
customers under the transactional documents.
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1122(d)(4)(xiii)
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Disbursements
made on behalf of an obligor are posted within two business days
to the
obligor’s records maintained by the Servicer, or such other number of days
specified in the transaction agreements.
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Not
applicable; Servicer cannot make advances of its own funds on behalf
of
customers to pay principal or interest on the bonds. [See
Section 5.09. these costs are borne by the Servicer, not advanced by
the Servicer.]
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1122(d)(4)(xiv)
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Delinquencies,
charge-offs and uncollectible accounts are recognized and recorded
in
accordance with the transaction agreements.
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Applicable;
assessment below. [Assessment: Servicer has reconciled actual collections
of environmental control charges and estimated remittances on or
before
March 1 of the following year, per Section 5.11 of the Servicing
Agreement [need to include]. Servicer has applied partial payments
in
accordance with Section 3.02(b) and Section 6(b) of Exhibit A—
Payment Processing: Allocation; Priority of Payments]
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1122(d)(4)(xv)
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Any
external enhancement or other support, identified in Item 1114(a)(1)
through (3) or Item 1115 of Regulation AB, is maintained as set
forth in
the transaction agreements.
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Not
Applicable: No external credit support or derivatives were employed
[or:
Applicable; assessment below.]
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Annex
5-5
With
respect to each of the applicable Servicing Criteria, I have made the following
assessment in accordance with Item 1122(d) of Regulation AB, with such
discussion regarding the performance of such Servicing Criteria during the
fiscal year covered by the Issuer’s Form 10-K Report (such fiscal year the
“Assessment Period”).
1. Item
1122(d)(1)(i) : [include narrative of assessment]
2. [Continue
enumeration of applicable Servicing Criteria with appropriate narrative of
assessment]
Based
on
the aforementioned Servicing Criteria, I find that the Servicer has fulfilled
all of the applicable servicing obligations under the Servicing Agreement
in all
material respects through the Assessment Period, with the exception of the
following instance(s) of material noncompliance:
1. [Include
narrative of any material noncompliance with servicing obligations]
A
registered public accounting firm has issued an attestation report on the
party’s assessment of compliance with the applicable servicing criteria as of
and for the period ending the end of the Assessment Period.
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Date:
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By:
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Name:
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Annex
▇-▇
▇▇▇▇▇
▇
▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ COMPLIANCE CERTIFICATION
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Re:
|
Servicing
Agreement dated as of April 11, 2007 (the “Servicing
Agreement”),
between
PE
Environmental
Funding LLC, as issuer (the “Issuer”), and
The
Potomac Edison Company (the
“Servicer”).
|
I,
________________________________, the _______________________ of the Servicer,
certify to Issuer and the Administrator, [and other required parties] and
their
officers, with the knowledge and intent that they will rely upon this
certification, that:
1. I
have
reviewed the servicer compliance statement of the Servicer provided in
accordance with Item 1123 of Regulation AB as it would apply if the
Environmental Control Bonds were ‘asset-backed securities” under Item 1101(c) of
Regulation AB (the “Compliance Statement”) and Section 3.05(a)(iv) of the
Servicing Agreement, the report on assessment of the Company’s compliance with
the servicing criteria set forth in Item 1122(d) of Regulation AB (the
“Servicing Criteria”), provided in accordance with Rules 13a-18 and 15d-18 under
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 1122
of Regulation AB (the “Servicing Assessment”), the registered public accounting
firm’s attestation report provided in accordance with Rules 13a-18 and 15d-18
under the Exchange Act and Section 1122(b) of Regulation AB (the
“Attestation Report”), and all servicing reports, officer’s certificates and
other information relating to the servicing of the Environmental Control
Property during 200[ ] that were delivered by the Servicer to the [Issuer]
[Administrator] [Indenture Trustee] pursuant to the Agreement (collectively,
the
“ Servicing Information”);
2. Based
on
my knowledge, the Servicing Information, taken as a whole, does not contain
any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in the light of the circumstances under which
such
statements were made, not misleading with respect to the period of time covered
by the company Servicing Information;
3. Based
on
my knowledge, all of the Servicing Information required to be provided by
the
Servicer under the Agreement has been provided to the [Issuer] [Administrator]
[Indenture Trustee];
4. I
am
responsible for reviewing the activities performed by the Servicer as servicer
under the Agreement, and based on my knowledge and the compliance review
conducted in preparing the Compliance Statement and except as disclosed in
the
Compliance Statement, the Servicing Assessment or the Attestation Report,
the
Servicer has fulfilled its obligations under the Agreement in all material
respects; and
Annex
6-1
5. The
Compliance Statement required to be delivered by the Servicer pursuant to
the
Agreement, and the Servicing Assessment and Attestation Report required to
be
provided by the Servicer and by any subservicer pursuant to the Agreement,
have
been provided to the [Issuer] [Administrator] [Indenture Trustee]. Any material
instances of noncompliance described in such reports have been disclosed
to the
[Issuer] [Administrator] [Indenture Trustee]. Any material instance of
noncompliance with the Servicing Criteria has been disclosed in such
reports.
|
Date:
|
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By:
|
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|
Name:
Title:
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Annex
6-2
APPENDIX
A
to
SERVICING
AGREEMENT
Master
Definitions
Appendix
A-1