EX-99 3 u1_exhibitn-7.txt EXHIBIT N-7 Exhibit N-7 FORM OF SERVICE AGREEMENT This Service Agreement ("Agreement") is entered into as of the 1st day of April, 2003, by and between each of the associate companies listed on the signature page hereto (each a "Client Company"), and FirstEnergy Service Company, an Ohio corporation ("Service Company"). WHEREAS, Service Company is a direct wholly-owned subsidiary of FirstEnergy Corp., a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"); WHEREAS, Service Company has been formed for the purpose of providing administrative, management and other services to FirstEnergy Corp. and its associate companies, including Client Company (together, the "Client Companies"); and WHEREAS, Client Company believes that it is in its interest to enter into an arrangement whereby Client Company may agree to purchase such administrative, management and other services from Service Company as Client Company may choose at cost as determined in accordance with this Agreement and Rules 90 and 91 under the Act; NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DESCRIPTION OF SERVICES. ----------------------- Service Company agrees to provide certain administrative, management or other services (the "Services") to Client Company similar to those supplied to other Client Companies of Service Company. Such services are and will be provided to Client Company only at the request of Client Company. Exhibit A hereto lists and describes all of the Services that are available from Service Company. 2. PERSONNEL. --------- In order to provide the Services, Service Company will employ executive officers, accountants, financial advisers, technical advisers, attorneys and other persons with the necessary qualifications. If necessary, Service Company may also arrange for the services of nonaffiliated experts, consultants and attorneys in connection with the performance of any of the Services provided under this Agreement. 1 3. COMPENSATION AND ALLOCATION. --------------------------- As and to the extent required by law, Service Company provides and will provide such services at fully allocated cost, determined in accordance with Rules 90 and 91 under the Act. Exhibit A hereof contains rules for determining and allocating such costs. 4. TERMINATION AND MODIFICATION. ---------------------------- Either party to this Agreement may terminate this Agreement by providing 60 days written notice of such termination to the other party. This Agreement is subject to termination or modification at any time to the extent its performance may conflict with the provisions of the Act or with any rule, regulation or order of the Securities and Exchange Commission (the "Commission") adopted before or after the making of this Agreement. This Agreement shall be subject to the approval of any state commission or other state regulatory body whose approval is, by the laws of said state, a legal prerequisite to the execution and delivery or the performance of this Agreement. 5. SERVICE REQUESTS. ---------------- Client Company and Service Company will prepare a Service Request on or before September 30th of each year listing Services to be provided to Client Company by Service Company and any special arrangements related to the provision of such Services for the coming year, based on Services provided during the preceding year. Client Company and Service Company may supplement the Service Request during the year to reflect any additional or special Services that Client Company wishes to obtain from Service Company, and the arrangements relating thereto. 6. BILLING AND PAYMENT. ------------------- Unless otherwise set forth in a Service Request, payment for Services provided by Service Company shall be by making remittance of the amount billed or by making appropriate accounting entries on the books of Client Company and Service Company. Billing will be made on a monthly basis, with the bill to be rendered as soon as practicable after the close of the month, and remittance or accounting entries completed within 30 days of billing. Any amount remaining unpaid after 30 days following receipt of the bill shall bear interest thereon from the due date of the bill until payment at a rate equal to the prime rate on the due date. 7. NOTICE. ------ Where written notice is required by this Agreement, all notices, consents, certificates, or other communications hereunder shall be in writing and shall be deemed given when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows: 2 To Client Company: c/o President 76 South Main St. Akron, Ohio 44308 To Service Company: c/o Vice President and Controller 76 South Main Street Akron, Ohio 44308 8. GOVERNING LAW. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to its conflict of laws provisions. 9. MODIFICATION. ------------ No amendment, change or modification to this Agreement shall be valid, unless made in writing and signed by both parties hereto. 10. ENTIRE AGREEMENT. ---------------- This Agreement, together with its exhibits, constitutes the entire understanding and agreement of the parties with respect to its subject matter, and effective upon the execution of this Agreement by the respective parties hereof, any and all prior agreements, understandings or representations with respect to this subject matter are hereby terminated and canceled in their entirety and are of no further force and effect, except to the extent transactions thereunder have taken place prior to such effective date in which case such agreements will govern the terms of such transactions. 11. WAIVER. ------ No waiver by either party hereto of a breach of any provision of this Agreement shall constitute a waiver of any preceding or succeeding breach of the same or any other provision hereof. 12. ASSIGNMENT. ---------- This Agreement shall inure to the benefit and shall be binding upon the parties and their respective successors and assigns. No assignment of this Agreement or either party's rights, interests or obligations hereunder may be made without the other party's consent, which shall not be unreasonably withheld, delayed or conditioned. 13. SEVERABILITY. ------------ If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of this 1st day of April, 2003. FirstEnergy Service Company By:_________________________________ Harvey L. Wagner, Vice President & Controller Client Companies: [LIST] By: __________________________________ Name: ________________________________ Title: _________________________________ 4 EXHIBIT A --------- DESCRIPTION OF SERVICES AND ALLOCATION METHODOLOGY -------------------------------------------------- 1. Description Of Services ----------------------- Overview This Exhibit provides a description of all services provided by Service Company departments and the cost allocation methodologies to be used in connection therewith. All products and services are subject to Service Level Standards as negotiated between the Service Company department and Client Company. Each Client Company is classified as either a "Utility Subsidiary" or a "Non-Utility Subsidiary" as defined in the Commission's Order dated October 29, 2001 (Holding Co. Act Release No. 27459), as supplemented by a supplemental order dated November 8, 2001 (Holding Company Act Release No. 27483). 2. Cost Allocation Methodology --------------------------- Overview The costs of services provided by Service Company will be directly assigned, distributed or allocated by activity, project, program, work order or other appropriate basis. The primary basis for charges to affiliates is the direct charge method. The methodologies listed below pertain to all other costs which are not directly assigned but which make up the fully allocated cost of providing the product or service. The costs of product and services provided by the ServeCo that cannot be charged directly to the Subsidiary receiving the product or service will be allocated among the associate companies by utilizing one of the methods described below that most accurately distributes the costs. The method of cost allocation varies based on the department rendering the service. The allocation methods used by Service Company are as follows: a. "Multiple Factor - All" - For the Indirect Costs for products or services benefiting the entire FirstEnergy system, FirstEnergy and all Subsidiaries will bear a fair and equitable portion of such costs. FirstEnergy will bear 5% of these Indirect Costs. The remaining Indirect Costs will be allocated among the Utility Subsidiaries and the Non-Utility Subsidiaries based on FirstEnergy's equity investment in the respective groups. A subsequent allocation step will then occur. Among the Utility Subsidiaries, allocations will be based upon the "Multiple Factor - Utility" method. Among the Non-Utility Subsidiaries, allocations will be based upon the "Multiple Factor - Non-Utility" method. b. "Multiple Factor - Utility" - For the Indirect Costs for a product or service solely benefiting one or more of the Utility Subsidiaries, each such Utility Subsidiary will be charged a portion of the Indirect Costs based on the sum of the weighted averages of the following factors: A-1 1. Gross transmission and/or distribution plant 2. Operating and maintenance expense excluding purchase power and fuel costs 3. Transmission and/or distribution revenues, excluding transactions with affiliates These three (3) factors have been determined to be the most appropriate for the Utility Subsidiaries in the FirstEnergy system. Each factor will be weighted equally so that no one facet of the electric utility operations inordinately influences the distribution of Indirect Costs. c. "Multiple Factor - Non-Utility" - For the Indirect Costs for products or services solely benefiting the Non-Utility Subsidiaries, each Non-Utility Subsidiary receiving the product or service will be charged a proportion of the Indirect Costs based upon the total assets of each Non-Utility Subsidiary, including the generating assets under operating leases from the Utility Subsidiaries. d. "Multiple Factor - Utility and Non-Utility" - For the Indirect Costs for a product or service benefiting one or more of the Utility and Non-Utility Subsidiaries, each such Subsidiary is first assigned a distribution ratio that is in proportion to the Indirect Costs based on FirstEnergy's equity investment in such Subsidiaries. Following this distribution, a subsequent allocation step will then occur. Among the Utility Subsidiaries, allocations will be based upon the "Multiple Factor-Utility." Among the Non-Utility Subsidiaries, allocations will be based upon "Multiple Factor - Non-Utility" e. "Direct Charge Ratio" - The ratio of direct charges for a particular product or service to an individual Subsidiary as a percentage of the total direct charges for a particular product or service to all Subsidiaries. Indirect costs are then allocated to each Subsidiary based on the calculated ratios. f. "Enterprise Distribution - For the Indirect Costs for products and services that benefit the entire FirstEnergy system, FirstEnergy and all Subsidiaries will bear a fair and equitable portion of such costs. FirstEnergy will bear 5% of these Indirect Costs. The remaining Indirect Costs will be allocated among the Utility Subsidiaries and Non-Utility Subsidiaries based on FirstEnergy's equity investment in the respective groups. g. "Number of Customers Ratio" - For costs of products and services driven by the number of Utility customers, the allocation method that will be used will be the number of Utility customers for the respective Utility Subsidiary receiving the product or service divided by the total number of utility customers. h. "Number of Shopping Customers Ratio" - A "shopping customer" is defined as a Utility customer who has selected a competitive electric generation supplier. For costs of products and services driven by the number of shopping customers, the allocation method that will be used will be the number of shopping customers for the respective Utility Subsidiary receiving the product or service divided by the total number of shopping customers. A-2 i. "Number of Participating Employees - General" - For costs of products and services driven by all participating employees within the FirstEnergy system, the allocation method that will be used will be the number of participating employees for the respective Subsidiary receiving the product or service divided by the total number of participating employees. j. "Number of Participating Employees - Utility and Non-Utility" - For costs of products and services driven by participating employees who work for the Utility and Non-Utility Subsidiaries, the Subsidiaries receiving the product or service are first assigned a distribution ratio that is in proportion to the Indirect Costs based on FirstEnergy's equity investment in the respective groups. Costs are further allocated by using the number of participating employees for the respective Subsidiary divided by the total number of participating FirstEnergy employees. k. "Square Footage Used Ratio" - Amount of square footage occupied by a Subsidiary receiving the product or service divided by the total amount of square footage occupied by all FirstEnergy system companies applicable to that respective product or service. l. "Gigabytes Used Ratio" - Number of gigabytes utilized by a Subsidiary receiving the product or service divided by the total number of gigabytes used by the FirstEnergy system companies applicable to that respective product or service. m. "Number of Computer Workstations Ratio" - Number of computer workstations utilized by a Subsidiary receiving the product or service divided by the total number of computer workstations in use by the FirstEnergy system companies applicable to that respective product or service. n. "Number of Billing Inserts Ratio" - Number of billing inserts performed for a Subsidiary receiving the product or service divided by the total number of billing inserts performed for the FirstEnergy system companies applicable to that respective product or service. o. "Number of Invoices Ratio" - Number of invoices processed for a Subsidiary receiving the product or service divided by the total number of invoices processed for the FirstEnergy system companies applicable to that respective product or service. p. "Number of Payments Ratio" - Number of monthly payments processed for a Subsidiary divided by the total monthly number of payments processed for the FirstEnergy system companies applicable to that respective product or service. A-3 3. Descriptions of Products and Services ------------------------------------- CALL CENTER -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Field All Inbound Field calls related to billing, Number of Customers Regulated Calls credit, new service, service order Ratio completion, outages, and other miscellaneous activities. Field All Inbound Field calls related to billing, Number of Shopping Unregulated Calls credit, new service, service order Customers Ratio completion, outages, and other miscellaneous activities. -------------------------------------------------------------------------------- CUSTOMER SERVICE -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Supplier Services Provide customer services support Number of Shopping to electric generation suppliers, Customers Ratio administer and maintain Electronic Data Interface (EDI) functions and invoice suppliers. Regulatory Interface Liaison to ensure Customer Choice Number of Shopping and Process requirements and develop and Customers Ratio Improvement: execute plans to improve Supplier supplier services processes. Market Support Administer and support MSG supplier Number of Shopping Generation (MSG) functions. Customers Ratio Administration Regulatory Respond to regulatory complaints Number of Customers Interface and from customers and develop and Ratio Process execute plans to improve regulatory Improvement: compliance processes. Regulatory Compliance Work with regions to communicate Multiple Factor - and ensure regulatory requirements. Utility Power Billing Provide billing functions for Number of Customers large commercial/industrial Ratio contract customers. Revenue Reporting Perform and manage revenue Number of Customers reporting functions. Ratio Billing Exception Process billing exceptions. Number of Customers Processing Ratio Remittance Process customer payments and Number of Payments Processing deposit funds. Ratio Human Services Coordinate and administer the Number of Customers various social services programs. Ratio A-4 Arrears Management/ Coordinate and perform arrears, Number of Customers Outsourcing Services credit and bankruptcy functions. Ratio Incorporated (OSI) Manage outside collections Administration agencies'performance and OSI credit activities. Revenue Protection Perform revenue reporting and Number of Customers Administration compliance functions. Ratio Metrics and Manage Customer Services and Call Number of Customers Budget/Customer Center Departments' budgets and Ratio Satisfaction measure performance and customer Measurement satisfaction results. Policy/Procedures Develop, document and communicate Number of Customers Development and Customer Services policies and Ratio Documentation procedures. Bill Administration/ Design standardized customer Number of Customers Forms Administration bills, envelopes, and forms. Ratio Meter Reading Coordinate Meter Reading schedules Number of Customers Support and routing activities. Ratio Customer Information Operate and maintain CIS. Number of Customers System (CIS) Control Ratio -------------------------------------------------------------------------------- ECONOMIC DEVELOPMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Economic Foster economic development to Multiple Factor - Development encourage capital investment in Utility Services FirstEnergy's service areas. -------------------------------------------------------------------------------- TRANSMISSION & DISTRIBUTION TECHNICAL SERVICES -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Forestry Provide forestry services. Multiple Factor - Utility Distribution Services include Joint User Multiple Factor - Reliability and contracts, public works Utility Asset Records coordination, reliability reporting to regions and Public Utility Commissions, mutual assistance coordination, PowerOn support, cable locate ticket screening and tariff support. A-5 Design Standards Services include line material Multiple Factor - and - construction standards, Utility distribution line and underground maintenance practices and support, new business process support, and service practices. Substation Services include Substation Multiple Factor - Services Support maintenance plan coordination, Utility practices and support, mobile substation administration and planning, and environmental compliance support. Equipment Services include the maintenance, Multiple Factor - Repair/Testing installation, maintenance, testing Utility Services and repair of utility equipment. Fleet Services Develop fleet strategy, and perform Multiple Factor - perform fleet maintenance Utility practices support. Financial Services Identify revenue enhancements and Multiple Factor - cost reductions. Utility Substation Design Perform substation and transmission Multiple Factor - and Transmission- line design and project management Utility Line Maintenance and transmission line and substation Support design and material standards, right-of-way and survey services, transmission line maintenance plan coordination, practices and support, FAA activity coordination. Planning and Perform planning and protection Multiple Factor - Protection support for subtransmission system Utility and overall radial system capacity planning overview, and interconnection coordination for distributed technology applications on distribution system. Capital Budget and Capital budget development and Multiple Factor - Equipment Support support, and major equipment Utility specifications and procurement/ repair activities for major equipment. -------------------------------------------------------------------------------- WORKFORCE DEVELOPMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Transmission and Develop and facilitate technical Number of Distribution and safety training for workers Participating Skills Training associated with distribution Employees - General activities, including line, substation, meter, fleet, warehouse, field engineering, and dispatch. Provide support through equipment evaluation, training analyses, job assessments, and project coordination. A-6 Customer Service Develop and facilitate skills Multiple Factor - Skills Training training for customer service Utility groups. External Learning Develop educational partnerships Multiple Factor - Opportunities with colleges to offer two-year Utility Through the Power degrees in electric utility Systems Institute technology. -------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Provide Provides services in production Multiple Factor - Administrative printing, document imaging, graphic Utility and Support Services services, food services, corporate Non-Utility mailroom and corporate courier. Provide Records Provides services in records Multiple Factor - Management Services storage, records retrieval, Utility and records retention, records Non-Utility planning and engineering records. Provide Business Provides services in convenience Multiple Factor - Services copiers, fax machines, pagers, Utility and printers, and business information Non-Utility center. -------------------------------------------------------------------------------- COMMUNICATIONS -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Public Relations Provides services in Multiple Factor - media relations, financial All communications, annual reports, executive presentation, public relations counsel, corporate writing, internet support and special projects. Employee Provides services with update, Number of Communications retirees, satellite broadcast, Participating human resource-related Employees - Utility communications and and Non-Utility special projects. Production Provides services related to Multiple Factor - display,photography, Corporate ID, All video and employee merchandise. Sponsorship Provides services related to Multiple Factor - sports marketing, university All support and special projects. Non-Utility Provides services related to Multiple Factor - Advertising broadcast/print, collateral, direct Non-Utility mail, internet/intranet, display/merchandise, yellow/white pages, production/agency support and special projects. Utility Provides services related to TV, Multiple Factor - Advertising radio, print, outdoors, Utility Internet/Intranet, special projects, production, agency support and creative media placement. A-7 Utility Provides services developing Multiple Factor - Bill Inserts regulated bill service to Ohio, Utility Pennsylvania and New Jersey. Utility : Yellow/ Provides services with regulated Multiple Factor - White Pages yellow/white pages. Utility Utility: Research Provides research services. Multiple Factor - Utility Ohio Consumer Provides services related to Ohio Multiple Factor - Education Consumer Education statewide and Utility locally. Ohio Deregulation Provides service related to Multiple Factor - Education Deregulation Education. Utility -------------------------------------------------------------------------------- CORPORATE AFFAIRS AND COMMUNITY INVOLVEMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Corporate Affairs Provide administrative support Multiple Factor - Activities through oversight of the business All practices and planning and implementation of staff, senior management and related meetings. Serves as community liaison. Direct Community Provides direction in employee Multiple Factor - Involvement volunteerism, supports viable All Initiatives community partnerships and educational initiatives. Energy Efficiency Directing and coordinating Ohio Multiple Factor - Programs Weatherization and Energy Utility Efficiency Programs for Low Income Customers. Community Consults to regional operations and Multiple Factor - Initiatives other business units and client Utility Consulting Services managers for the various community programs. Contributions Directs, coordinates, monitors, Multiple Factor - Management and manages contributions. All -------------------------------------------------------------------------------- A-8 CORPORATE -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Investor Services Perform recordkeeping, transfer Multiple Factor - agent, registrar, paying agent, All reinvestment plan administration and other services for shareholders. Board of Directors Support and administration of Board Multiple Factor - Support of Directors meetings and director All compensation. Annual Meeting Coordinate the Annual Meeting of Multiple Factor - Coordination Shareholders, including the All preparation and mailing of proxy materials and annual reports and the tabulation of proxies. Stock Based Administration of the stock based Number of Benefit Program benefit program. Participating Employees - General Compliance Provide reporting to regulatory Multiple Factor - Reporting bodies. All Indenture Administer the company's indentures Multiple Factor - Compliance Utility -------------------------------------------------------------------------------- HUMAN RESOURCES -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Manage Employee Provide management and supervision Number of Executive for employee and executive Participating Compensation and compensation and benefits. Employees - Utility Benefits and Non-Utility Manage Workers Provide management and supervision Number of Compensation and for workers compensation and Participating Disability disability programs. Employees - Utility Management and Non-Utility Provide and Design, prepare and conduct Number of Coordinate Human training. Participating Resources Training Employees - Utility and Non-Utility Provide Employment Provide staffing, relocation and Number of Services employment expertise. Participating Employees - Utility and Non-Utility Provide HRIS Provide and maintain Human Number of Services Resources information. Participating Employees - Utility and Non-Utility A-9 Provide Diversity Manage Affirmative Action programs, Number of Management Services provide EEO/AA consulting services, Participating and respond to charges. Employees - Utility and Non-Utility Manage/Administer Establish compliance, develop, Number of Medical Services implement, and administer medical Participating and Wellness and wellness programs. Employees - Utility Programs and Non-Utility -------------------------------------------------------------------------------- INDUSTRIAL RELATIONS -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Provide Labor Provide contract negotiation Number of Contract services for all labor agreements. Participating Negotiations Employees - General Provide Labor Provide labor consulting services. Number of Consulting Services Participating Employees - General Manage/Administer Develop, implement and administer Number of Safety Programs occupational safety programs. Participating Employees - General -------------------------------------------------------------------------------- REAL ESTATE -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Facilities Management and maintenance of Square Footage Management office facilities. Ratio Facilities Manage office design services, Square Footage Planning and furniture, project management and Ratio Project Management other capital improvements. Management of Real Support internal and external Multiple Factor - Estate Assets inquiries regarding the Utility and acquisition,divestiture and Non-Utility management of real estate assets Manage/Administer Administer physical security, Multiple Factor - Security Programs special investigations, security Utility and audits, security consultation Non-Utility and contract guard services. -------------------------------------------------------------------------------- FIRSTENERGY TECHNOLOGIES -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Strategic Develop, support and implement EPRI Multiple Factor - Technologies programs, industry initiatives, Utility research and development programs collaboratives and activities with universities, labs and the Department of Energy. A-10 New Technology Perform assessment activities for Multiple Factor - Assessment strategic technology pilots, Utility and technology assessments, marketing Non-Utility tests, customer pilots and due diligence reviews. Technical Develop, analyze and support Multiple Factor - Application and strategic alliances, joint Utility and Product Innovation ventures, strategic startups, Non-Utility direct investments and Portfolio initiatives. New Technology and Develop, support and implement the Multiple Factor - Product Market following initiatives: tailored Utility and Deployment solutions with existing products, Non-Utility commercial packages, operational efficiencies and business area solutions. Demand Response Provide support for corporate Multiple Factor - Initiatives demand response initiatives. Utility and Non-Utility Renewable Energy Provide support for various Multiple Factor - Program and Strategy corporate and regulatory Utility initiatives to develop and implement renewable energy programs and products. Regulated Programs Develop, support and implement Multiple Factor - and Services programs and strategies to meet Utility corporate initiatives and regulatory mandates and commitments related to Comprehensive Resource Assessment (CRA), customer end-use technology, distributed generation and load management. Project Develop and implement end-use and Multiple Factor - Implementation distributed generation Utility and Management Services technology-based products and Non-Utility services. -------------------------------------------------------------------------------- FIRSTENERGY TELECOM -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Provide Network Provide Network Services. Multiple Factor - Services Utility and Non-Utility Maintain wireless Maintain wireless cell sites and Multiple Factor - cell sites and fiber optic network; provide Utility and fiber optics engineering, procurement, and Non-Utility network installation services. A-11 INFORMATION SYSTEMS DEPARTMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Development and Create new or enhance existing Direct Charge Ratio Tool Support applications; including analysis, design coding, testing, system integration, and implementation, as well as any required technical writing or project manual development. Client Server Create and support the network Gigabytes Used Support and server infrastructure to Ratio accommodate client server applications. Service includes an appropriate portion of started tasks, backups and recoveries. Mainframe Support Execute mainframe applications, Gigabytes Used including an appropriate portion Ratio of support, started tasks, mainframe backups and microfiche services. Desktop Support Help desk and repair services, and Number of Computer workstation support. Workstations Ratio Network Support Includes E-mail, network access, Direct Charge Ratio client server access, mainframe access, internet access and intranet access. Inserting Services Provide document bursting, Number of Billing inserting and mailing. Inserts Ratio Printing Services Provide mainframe printing Direct Charge services Ratio for production and development environments. Remote Access Provide dial-in access to the Multiple Factor - network. Utility and Non-Utility Technical Provide consulting support to Multiple Factor - Consulting departments and end-users to Utility and enable them to leverage their IT Non-Utility capabilities. Provide advice and consultation regarding desktop setups and configurations. Training Provide IT training. Multiple Factor - Utility and Non-Utility Special Projects Supervise special projects. Multiple Factor - Utility and Non-Utility Business Support business application Multiple Factor - Application Support related software licenses and/or Utility and hardware maintenance provided by Non-Utility an outside vendor. Data Security Disaster recovery and data Multiple Factor - security services. Utility and Non-Utility Project Management Manage technology projects. Multiple Factor - Office Utility and Non-Utility Provide Provide telecommunication services Direct Charge Ratio Telecommunication and equipment. Services Web Hosting Support network and server Direct Charge Ratio infrastructure to accommodate e-business and intranet applications. Service includes an appropriate portion of started tasks, backups and recoveries. -------------------------------------------------------------------------------- A-12 PERFORMANCE PLANNING -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Performance Develop, support and execute Enterprise Planning Services performance planning services. Distribution -------------------------------------------------------------------------------- SUPPLY CHAIN -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Strategic Provide assistance in materials Multiple Factor - Planning, Demand and services planning (demand Utility and Management and management) and performs special Non-Utility Procurement procurement projects. Projects Goods and Services Procure material, equipment and Multiple Factor - Procurement contractor services. Establish, Utility and manage and administer programs, Non-Utility which allow internal customers to obtain goods without having to process the need through Procurement. Develop specifications, construction standards, schedules, and bills of materials. Materials Maintain the computerized Multiple Factor - Management Support purchasing and materials Utility and management systems, and material Non-Utility related modules; maintain and/or modify select management reports. Analyze Supply Chain processes and measure performance. Monitor and forecast demand to ensure a continuous supply of materials. Investment Develop and implement plans for Multiple Factor - Recovery Projects disposition of surplus assets. Utility and Non-Utility Process, Refurbish Perform recovery processing, Multiple Factor - and Sell Materials investment recovery processing, Utility and refurbishing and selling materials. Non-Utility Provide Receive and place material into Multiple Factor - Warehousing stock, insure quality requirements Utility and Services - are met at receipt, maintain Non-Utility Non-nuclear inventory counts, and update information systems. Fill customer requests for material from stock. Provide Receive and place material into None Warehousing stock, insure quality requirements (All direct Services - are met at receipt, maintain charged) Nuclear inventory counts, and update information systems. Fill customer requests for material from stock. A-13 Warehousing Space Provide warehousing space to Multiple Factor - Charge internal customers. Utility and Non-Utility -------------------------------------------------------------------------------- CONTROLLERS -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Accounting Research Provide accounting research and Enterprise consulting to ensure compliance Distribution with existing and proposed financial reporting, and regulatory accounting requirements. Accounts Payable Nonpayroll corporate disbursement Number of Invoices services including account Processed distribution to the general ledger. Resolve problems associated with invoice processing and maintain the accounts payable system. Billing Services Prepare non-retail electric None billings. (All direct charged) Infrastructure and Prepare Corporate Sustaining Multiple Factor - Corporate Reporting reports, subsidiary accounting and All Accounting and corporate budgeting, which includes Budgeting reporting and support of the ledger, property records and SAP system. Due Diligence Assist value centers to determine None whether proposed business (All direct acquisitions/combinations and charged) similar transactions are desirable from a financial perspective; extensive review/analysis following preliminary review and firm intent to proceed with transaction through commitment and closing phases. Value Center Maintain the property accounting Multiple Factor - Accounting and system and provide value center Utility and Budgeting accounting such as management Non-Utility reporting. Property Record Maintain corporate continuing Multiple Factor - Maintenance property records. Utility and Non-Utility Tax Consulting and Conduct tax research and tax Multiple Factor - Research consulting to assure compliance All with statues, while evaluating alternative tax strategies within the constraints of regulations that provide additional shareholder value to the company. In addition, provide tax-consulting advice to the value centers on tax compliance and reporting issues, which includes business "start-up" support to organizations requiring assistance. A-14 Tax Compliance Prepare and process all schedules Multiple Factor - and information associated with All corporate and subsidiary tax returns, audits, and tax litigation, assuring compliance with tax regulations and statues. -------------------------------------------------------------------------------- CREDIT MANAGEMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Credit Analysis Provide detailed written credit Multiple Factor - and Supporting analysis issuing recommendations on Utility and Functions counterparty creditworthiness and Non-Utility assigning credit limits. Credit Policies Develop and support credit policies Multiple Factor - and Procedures and procedures for managing credit Utility and risk. Implement and support Non-Utility standardized credit approval processes. Credit Management Develop and support credit Multiple Factor - Information System management reports and calculate All credit exposure on a corporate wide basis. -------------------------------------------------------------------------------- ENTERPRISE RISK MANAGEMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- General Risk Develop and maintain an enterprise Multiple Factor - Management risk management system. All -------------------------------------------------------------------------------- INSURANCE SERVICES -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Insurance Policies Manage and support insurance Multiple Factor - policies for all the business Utility and units. Non-Utility Loss Control Manage and support property Multiple Factor - Services inspections to prevent losses. Utility and Non-Utility Surety Bonds Manage and support Surety Bonds. Multiple Factor- Utility and Non-Utility Risk Transfer and Manage and support risk transfer Multiple Factor - Risk Mitigation and risk mitigation services. Utility and Services Non-Utility Ancillary Coverages Manage and support ancillary None (All direct coverages. charged) -------------------------------------------------------------------------------- A-15 INTERNAL AUDIT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Audit Services Perform the following internal Multiple Factor - audit services based on risk levels All and /or requests: financial, performance analysis, safeguarding of assets, computer- related and fraud investigations. -------------------------------------------------------------------------------- INVESTMENT MANAGEMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Qualified and Establish and implement investment Number of Non-qualified policy and asset allocation Participating Pension and strategy and monitor investment Employees - Utility Savings Plan performance. and Non-Utility FirstEnergy Establish and implement investment Multiple Factor - Foundation policy and asset allocation All strategy and monitor investment performance. Voluntary Employee Establish and implement investment Number of Benefit Association policy and asset allocation Participating (VEBA) strategy and monitor investment Employees - Utility Trust performance. and Non-Utility Nuclear Establish and implement investment None Decommissioning policy and asset allocation (All direct strategy and monitor investment charged) performance. Non-Utility Establish and implement investment Multiple Factor - Generator Trust policy and asset allocation Non-Utility strategy and monitor investment performance. Spent Nuclear Fuel Establish and implement investment None policy and asset allocation (All direct strategy and monitor investment charged) performance. Low-Income Housing Establish and implement investment Multiple Factor - Tax Credit policy and asset allocation All Partnership strategy and monitor investment performance. -------------------------------------------------------------------------------- INVESTOR RELATIONS -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Investor Compile and communicate information Multiple Factor - Information to investors. All Investor Education Target and educate potential Multiple Factor - investors to promote FirstEnergy's All valuation characteristics and business strategy. Regulations Ensure compliance with SEC Fair Multiple Factor - Compliance Disclosure regulations. All FirstEnergy Provide education to management of Multiple Factor - Management business concerns and valuation All Education issues of analyst/investors FirstEnergy Actively promote understanding of Multiple Factor - Employee Education financial and investor relations' All issues. -------------------------------------------------------------------------------- A-16 RATES AND REGULATORY AFFAIRS -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Regulatory Manage regulatory activities and Multiple Factor - Activities and interfaces, including tariff Utility Consulting development and interpretation. Monitor and participate in regulatory affairs at the local, state and federal levels. Customer Pricing Develop pricing programs for Multiple Factor - and Contracting regulated electric service for Utility retail and wholesale customers, including "unbundled" costs and prices for generation, transmission and distribution service and support justification to regulators. Provide support in developing pricing for special-purpose customer programs and non-regulated energy services (e.g. prepayment, economic development, interruptible load, conjunctive- billing electric service programs). Billing Support Provide assistance calculating Multiple Factor - customer (external and internal) Utility invoices and operate and maintain systems to render, collect and account for these invoices. Sales and Load Develop short-term and long-term Multiple Factor - Forecasting sales forecast, peak load Utility projections and customer counts -------------------------------------------------------------------------------- TREASURY -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Capital Structure Perform all activities related to Multiple Factor - Management and acquiring capital and establish and All Administration administer funding, legal documentation, and record-keeping activities associated with finance programs Corporate Funds Plan, manage, and operate the Multiple Factor - Management corporate "cash-flow-cycle." All Corporate Provide regulatory support, Multiple Factor - Forecasting strategy support, financial modeling All and forecasting, financial and economic analysis and development of annual corporate KPI target. A-17 Capital Project Provide analytical support in the Multiple Factor - Evaluation and areas of financing, profitability, Utility and Support capital structure and cash flow. Non-Utility Investor Relations Provide institutional and retail Multiple Factor - Activities security holder, buy and sell-side All analysts, rating agencies, and other key members of the financial community with qualitative and quantitative information. -------------------------------------------------------------------------------- BUSINESS DEVELOPMENT -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Mergers and Support, evaluate and assist in the None (All direct Acquisitions management of merger, asset charged) Support acquisition and asset disposition activities. Internal Consulting Perform strategic analysis/business None (All direct fit, and economic analysis. Provide charged) integration and transitional management services as needed. -------------------------------------------------------------------------------- GOVERNMENTAL AFFAIRS -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Federal Activities associated with None (All direct Governmental developing and maintaining charged) Affairs Support relationships with federal government institutions; includes lobbying, and other support activities. State Governmental Activities associated with None (All direct Affairs Support developing and maintaining charged) relationships with state government institutions; includes lobbying, and other support activities. -------------------------------------------------------------------------------- LEGAL -------------------------------------------------------------------------------- Product or Service Product / Service Description Indirect Allocation Methods -------------------------------------------------------------------------------- Provide Activities associated with None (All direct Governmental developing and maintaining charged) Affairs Support relationships with government institutions; includes lobbying, litigation, and other support activities. Nuclear Legal Provide legal advice for federal None (All direct Consultation and and state nuclear matters. charged) Case Management A-18 Human Resources Provide legal advice for human Multiple Factor - Legal Consultation resource matters (including workers Utility and & Case Management compensation, union negotiations, Non-Utility arbitrations, class action lawsuits, etc.). Employee Benefits Provide legal advice for employee Number of Legal Consultation benefits matters (including health Participating & Case Management and welfare benefits, tax-qualified Employees - Utility and non-tax qualified benefit plans and Non-Utility and programs, pension administration, etc.). Tax Legal Provide legal advice for tax Multiple Factor - Consultation & matters including federal, state All Case Management & local tax matters (land tax, sales & use tax, IRS, etc.). Bankruptcy Legal Provide legal advice for bankruptcy Multiple Factor - Consultation & matters. Utility and Case Management Non-Utility International Provide legal advice for None (All direct Legal Consulation international matters- contract charged) & Case Management negotiations, sale/lease agreements. Non-Utility Legal Provide legal advice on federal and Multiple Factor - Consultation & state matters to Non-Utility Non-Utilities Case Management Subsidiaries. Regulatory Legal Provide legal advice for federal Multiple Factor - Consultation & and state regulatory matters. Utility Case Management Environmental Provide legal advice for None (All direct Legal Consultation environmental matters (other than charged) & Case Management PCB - related matters) - federal (EPA) and state (EPA), regulatory/legislative compliance issues. PCB Environmental Provide legal advice for PCB- Multiple Factor - Legal Consultation related matters - federal (EPA) Utility & Case Management and state (EPA), regulatory/ legislative compliance issues. Real Estate Legal Provide legal advice for real Multiple Factor - Consultation & estate matters. Utility and Case Management Non-Utility A-19 Corporate Legal Provide legal advice for general Multiple Factor - Consultation & corporate and transactional matters All Case Management (including SEC filings, Board of Directors matters, PUHCA, Financings, Securities Matters, Intellectual Property, Technology, General Counsel matters, etc.). Claims Legal Provide legal advice for Claims Direct Charge Ratio Consultation & matters. Case Management -------------------------------------------------------------------------------- CLAIMS -------------------------------------------------------------------------------- Indirect Allocation Product or Service Product / Service Description Methods -------------------------------------------------------------------------------- Process Receivable Provide management, supervision, Direct Charge Ratio Claims and performance of tasks associated with the resolution and chargeback of receivable claims. Provide Corporate Claims support in evaluating Direct Charge Ratio Support claims, and procuring appropriate external/internal legal resources. -------------------------------------------------------------------------------- A-20