BPU Docket No. GM04070721 | ||
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Petitioners point to their proposed rate freeze and accelerated payment of the ETG refund andpenalty (described above) as being among the several benefits resulting from the merger.
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• | Petitioners' proposal for a three year base rate freeze is not unreasonable but |
ETG should be required to file a benchmark base rate case at a specified time |
after the merger closing so that new rates can go into effect at the end of year |
three; (LeLash Direct at 8-10) |
• | Petitioners' request to make a filing with the Board, outside of a normal base rate |
case, to recover certain capital expenditures should be clarified as to the type of |
eligible expenditure, the prudence of the expenditure, the customer benefits |
derived therefrom, with any resulting recovery limited in duration to three years |
and rolled into base rates at the conclusion of the next base rate case; (LeLash |
Direct at 10-12) |
• | Petitioners' proposal to permit AGLR to make reasonable changes to ETG and |
retain the benefits from such changes should be modified to clarify that service |
quality levels should be maintained and/or improved as a prerequisite to AGLR |
retaining benefits, and a methodology for determining cost savings and benefits |
should be defined in detail; (LeLash Direct at 13-16) |
• | In lieu of Petitioners' proposal to permit Utilities to enter into a three year asset |
management agreement with Sequent Energy Management, Utilities should be |
required to conduct a competitive bidding process for the asset management |
contract; (LeLash Direct at 16-20) |
• | Petitioners' request that the Board reaffirm its existing policy regarding recovery |
of environmental remediation costs is reasonable; (LeLash Direct at 20-21) |
• | The scope of Petitioners' request to limit the Board's ability to impose adverse |
business or governance conditions on AGLR and its subsidiaries should be |
narrowed; (LeLash Direct at 21-22) |
• | The scope of Petitioners' request for absolution from any future Board imposed |
liability associated with the transactions and circumstances addressed by the |
Focused Audit should be clarified and narrowed; (LeLash Direct at 22-23) |
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• | Petitioners' request to award a service contract to an affiliate, AGL Services |
Company, should be modified to clarify that the Board has continuing oversight |
and control over the costs of related services; (LeLash Direct at 24-25) |
• | The Board should require Petitioners to provide additional information concerning |
potential reductions in employee levels, as well as additional, detailed information |
regarding employee benefit and pension plans. (LeLash Direct at 27-28). |
• | The Board should adopt affiliate rules or other conditions to prevent any |
agreement between ETG and Sequent from creating conflicts of interest. |
• | The Board should adopt guidelines for Sequent's management of ETG's assets |
which guidelines would become part of ETG's tariff. |
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3. | The BoardFINDS that it is in the public interest for ETG to implement a five year base rate stay-out following the transaction closing. In years four and five of the stay-out, ETG shall be subject to an earnings sharing mechanism as more fully described below. Further. ETG shall be required to make a base rate filing no later than three months after the end of the fourth year of the stay-out (March, 2009 assuming a December. 2004 closing), for rates to be effective at the beginning of the sixth year (January, 2010 assuming a December, 2004 closing). The base rate stay-out will not affect modifications to non-base rate tariff. |
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provisions, including but not limited to, the Societal Benefits Change, the Weather Normalization Clause, and the Basic Gas Supply Serivice rates. Commencing one year after the date of transaction closing, ETG shall file an annual financing report, for the previous 12 month period, which shall include ETG's revenues and costs and setting forth a calculatioan of the earned return on rate base and return on equity for ETG's regulated business. ETG shall file such report within 60 days of the 2-month period end. To the extent there are public credit ratings of ETG and/or NUI Utilities, the financial report shall include an assessment of those ratings. The annual financial reporting requirement provision will terminate upon the issuance of a final Order in the next base rate case. Upon the expiration of the first three years of the base rate stay-out, the Board shall, based on the annual ETG financial report filed with the Board, determine if ETG's earnings sharing with ratepayers is triggered for years 4 and 5 of the rate stay-out period based on the following sharing shall begin when the earned return on equity ("ROE") exceeds 100 basis points over the ROE authored (10%)by the Board in ETG's last general rate proceeding (i.e. 11%). If that annual period's earnings are sufficient to warrant sharing, 75% of earnings in excess of the 11% ROE will be credited to ratepayers. 7 ETG and AGLR agree that the financial reports filed with the Board pursuant to this paragraph will be calculated in a manner consistent with ETG's last base rate case. ETG shall not seek recovery of Goodwill 8 associated with the NUI acquisition or amortize Goodwill for financial reporting purposes. |
4. | ETG's asset management shall be performed by Sequent Energy Marketing for a term of three years commencing on April 1, 2005. The asset management agreement will have Sequent pay $4.0 million per year as a credit to ETG's BGSS costs without any offset or allowance for prepayment provisions. This payment is deemed to be a competitive rate based on ETG's current asset management agreement. Further, to the extent ETG acquires additional assets available for Sequent management, the Board will re-evaluate whether the fixed fee requires adjustment. Therefore, the Board authorizes ETG to allow Sequent Energy Management to assume the currently approved Cinergy Asset Management contract for a 3 year term immediately following the expiration of the current Cinergy contract on March 31, 2005. The following modifications will apply: 1) Sequent shall pay an annual fee of $4.0 million to ETG, 2) ETG will not be required to prepay Sequent for gas purchases, 3) the contract term will be 3 years (April 1, 2005 through March 31, 2008), 4) there will be a provision |
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permitting ETG to terminate the contract, without penalty to ETG9 in less than three years in the event the Board establishes regulations whichrequire all New Jersey regulated natural gas utilties to competitvely bid asset management services (provided, however, that Sequent's annual fees should be pro-rated if an early termination occurs), 5) ETG will be able to recall assets to meet firm system requirements that are managed by Sequent without penalty and 6) Sequent shall maintain a separate "book" related to the asset management of ETG interstate assets. The NJBPU Staff and Ratepayer Advocate will have the right to review the book, but any review of asset management will not change the amount paid to ETG by Sequent during the three year period. Prior to the end of the three year term of the Sequen t agreement, ETG shall competitively bid its asset management unless the Board has previously authorized an alternative asset management procedure for ETG, which may include performing asset management in AGL Services Company on behalf of ETG, or other options the Board deems in the public interest. ETG shall file an asset management plan with the Board at least 6 months prior to the expiration of the Sequent Asset Management Agreement ("AMA"). The Board will make a determination, based on the filing and applicable procedures, on the appropriateness of an asset management plan to be effective after March 31, 2008. Should the Board determine that the asset management function should be conducted by ETG or AGL Services Company on behalf of ETG, rather than by Sequent or a non-affiliated third party, then the Signatory Parties recommend that ETG or AGL Services Company be allowed to seek recovery of any incremental costs of performing such function from asset management proceeds in the asset management proceedi ng. |
6. | The Board reaffirms that ETG will continue to be eligible to file for periodic adjustments to its Remediation Adjustment Clause. The Board retains its authority to issue additional orders on Environmental Remediation matters as it deems appropriate and this condition does not limit the Board’s authority to modify its position in the future. |
7. | The Board authorizes ETG, by way of NUI Utilities, to participate in AGLR’s utility money pool as governed by the Public Utility Holding Company Act of 1935, as amended. AGLR agrees to establish a separate accounting of money pool activity for each division of NUI Utilities for funds disbursed by NUI Utilities to the AGLR Money Pool. AGLR further agrees that this will be accomplished by establishing separate divisions in the Company’s general accounting system. AGLR also agrees to establish a separate and distinct bank account solely for AGLR’s Utility Money Pool, where utility money pool funds shall be deposited and withdrawn and from which loans will be made. AGLR agrees to provide a quarterly report of ETG money pool activity that will include loans to and from the pool, interest and fees charged to the pool. AGLR agrees to certify that all ETG money pool transactions are for terms of one year or less. The Utility Money Pool will be subject to Board audit. |
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8. | The Board authorizes ETG, by way of NUI Utilities, to enter into a Services Agreement with AGL Services Company. ETG's management shall determinethe services it receives under such agreement annually. For all services obtained by ETG from AGLR affiliates, including under any Services Agreement with AGL Services Company, the Board retains authority to determine the reasonableness of the activity and the recovery of any associated costs, irrespective of SEC oversight and/or approval of the associated activities or cost allocations. |
9. | ETG shall be permitted to defer costs associated with any pension or Other Post-Employment Benefits (OPEB) net assets or liabilities as of the date of closing. ETG will continue to book the amount of pension and OPEB expenses currently authorized in ETG's rates, and will seek their recovery through the regulatory process within the Company's next base rate proceeding. In no event shall ETG recover from ratepayers any pension and OPEB expenses pursuant to this provision in excess of the pension and OPEB expenses that would have been booked in accordance with FAS 87 and FAS 106 in the absence of the merger This treatment is for the purposes of this proceeding, and for AGLR and ETG only, and is not intended to pre-determine the treatment, or preclude therecovery, of these costs in a future proce eding. |
10. | The Board reaffirms its position in its April 26, 2004 Order adopting the stipulation resolving the Focused Audit in Docket No. GA03030213. The Board, in that Order, stated that, "this settlement will end this regrettable episode in New Jersey regulatory history and permit the Company to move on to the important task of sale. The settlement also permits this Board to welcome, within a fair regulatory atmosphere, new ownership committed to public service to an important part of our State." As such, the Board should reaffirm that it absolves AGLR and all of its direct and indirect subsidiaries after closing of any futureBoard action associated with those activities or issues addressed in the Focused Audit. This does not precl ude the Board from exercising its jurisdiction and taking action against AGLR or any of its direct or indirect subsidiaries for any newactivities that occur after the date of the closing. ETG shall not attempt to recover from ratepayers any costs associated with any shareholder lawsuits that are based upon the matters upon which recommendations were made in the Liberty Audit Report and/or the Stier Anderson Report. |
11. | The Board reiterates that the conditions of the Order resolving the Focused Auditin Docket No. GA03030213 are not binding on AGLR or ETG following the closing of the acquisition, except as it relates to the disposition of the outstanding portion of the refund and the penalty, along with associated interest, contained therein, which outstanding amounts are $21 million and $1.6 million respectively.This does not, however, on a going-forward basis absolve either ETG or AGLRfrom full compliance with all applicable statutes, regulations and Orders of thisBoard with respect to all matters within the Board's jurisdiction. Upon approval of the merger and prior to closing, ETG shall submit a plan to the Board to refundthe outstanding $21 million to ratepayers as soon as practicable after closing, but in no event more than sixty (60) days after closing, unless the Board orders otherwise. AGLR shall submit the remaining $1 6 million of the penalty to the State of New Jersey pursuant to that plan. |
13. | The BoardDIRECTS that approval of the merger is conditioned on the following: |
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13. | The BoardDIRECTS that approval of the merger is conditioned on the following: |
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t. For the first year following closing, ETG shall provide outplacement assistance to any employee severed as a result of the acqusition. |
14. | AGLR shall commit to make $9 million available for the purpose of enhancing the severance package of non-bargaining unit and bargaining unit (union) employees(ETG and ETG-related NUI Corporation Mew Jersey employees) who are severed as a result of the merger.10 The details of how these funds will bedisbursed among such employees will be determined once specific employees have been identified for separation. Tne enhanced severance package shall be developed recognizing employee age and years of service and in a manner ge nerally consistent with the following guiding principles: a) the enhanced severance provisions shall be applicable to both bargaining and non-bargaining employees on a basis that will provide generally comparable severanceprovisions for all eligible employees (recognizing that union employees already have certain severance benefits pursuant to the bargaining agreement); b) the final allocation of severance enhancements shall be determined on the basis of the number of terminated employees in the bargaining and non-bargaining units: c) the enhanced severance plan shall be designed with a budget to ensure that the $9 million total is not exceeded; d) the enhanced severance plan shalladdress any issues regarding highly compensated employees, any applicablebargaining agreement restrictions, and the legality of any age thresholdprovisions; and e) the plan could incorporate a sliding scale based on years of service for terminated employees. During the two years after the merger closes, AGLR and ETG shall file reports every six months with the Board indicating how the $9 million has been disbursed to separated employees, and indicating the number of employees separated from ETG. |
15. | In accordance with the Merger Agreement, AGLR shall provide, at AGLR's cost, outplacement/counseling for all non-bargaining unit employees who are severedas a result of the merger. AGLR anticipates that it will continue to use Right Management, a national outplacement service. Right Management provides several different levels of outplacement services from clerical to executive. These services include workshops on resume writing, interview skills, skill assessment for employability provision of office space and intensive seminars and counseling. AGLR will provide the opportunity for non-bargaining unit employees who receive enhanced severance pursuant to Section 14 of the Term Sheet to receive an appropriate level of financial advisory services at AGLR's cost. |
16. | AGLR shall ensure that non-bargaining unit employees who are severed as a result of the merger receive adequate notice before such severance becomeseffective; for bargaining unit (union) employees, the collective bargainingagreement will control. |
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5. | The Board authorizes ETG to make any operational changes it deemsnecessary, subject to the provisions of Title 48, as long as safety, reliability andcustomer service are maintained or improved overtime. After closing, ETG shall identify within three months the service standards to be measured. After thatfiling ETG shall work with the NJBPU Staff and the Ratepayer Advocate to establish the appropriate base-line measures against which ETG will measure subsequent performance in the areas of safety, reliability and customer service. Those base-line measures shall be filed in the sixth month following closing. If these three parties cannot agree on appropriate base-line measures, the company shall submit its position to the Board and the parties shall have a right to comment. The agreed upon service standards shall be used to monitor ETG s performance after the merger and status reports providing monthly data relating |
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thereto shall be filed quarterly. The service standards shall remain in effect until a Board Order is issued in the next rate case. Thereafter, ETG will be subject to service standards established by the Board for all gas utilities in New Jersey in a generic rulemaking, if any. In the event the Board develops generic service standards for all gas utilities in New Jersey prior to ETG's net base rate case, the the Board will determine which service standards (generic or ETG-specific) should be used by ETG. Prior to the establishment of ETG-specific service standards, ETG shall file withthe Board quarterly reports containing monthly data that address safety, reliabilityand customer service. ETG shall file quarterly reports addressing customer complaints. ETG shall file these quarterly reports until the Board Staff, ETG andthe Ratepayer Advocate establish appropriate service levels as discussed aboveThe Board may order specific action by ETG if it finds material service degradation. ETG shall perform a customer satisfaction survey within 12 months of closing and provide the results to the Board and the Ratepayer Advocate. ETG shall conduct these surveys annually and provide the results tothe Board and the Ratepayer Advocate. |
13. | The BoardDIRECTS that approval of tie merger is conditioned on the following: |
c. ETG shall host quarterly meetings for the 12 months following closing todiscuss with NJBPU Staff and the Ratepayer Advocate issues related to operations, customer service, regulatory or other items determined by the Company, Staff or the Ratepayer Advocate. |
d. ETG and AGLR shall maintain sufficient staffing levels necessary to meet theservice standards established as a result of Section 6 of the Term Sheet. |
e. ETG shall participate in meetings related to the customer scorecard or other meetings held by the NJBPU related to safety, reliability and service. |
f. ETG shall notify the Board of any changes in the company's collection policies, but they shall in all respects comply with NJBPU regulations. |
i. ETG shall inform customers through bill inserts and other means of thechange in control. Board Staff and the Ratepayer Advocate shall review the bill inserts prior to mailing. |
n. ETG must certify its ability to comply with Title 48 of New Jersey Code related to safe and reliable service. |
r. ETG shall maintain at least two walk-in service locations in its service territoryuntil it completes an assessment of whether the current service centers or others may be appropriate. The assessment shall include an evaluation of whether a new service center in the Northwest territory is appropriate. ETG shall petition the Board before moving any walk-in location or reducing thenumber of walk-in locations. |
s. ETG shall maintain a liaison group to handle complaints received via theNJBPU, the Ratepayer AdvocateorNew Jersey Governor/legislative offices.This group shall be available 24 hours a day and have decision makingauthority to resolve (at least temporarily) issues related to service interruptionor restoration. |
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17. | AGLR shall not permit ETG's asset manager to take any actions that would adversely impact ETG's ability to redeliver, to the facilities of the participatingNJLEUC members, gas that is delivered by such members to the ETG City Gate.AGLR acknowledges that ETG's ITS/LVD service classification, which is the class applicable to the NJLEUC members, is ETG's highest priority non-firm service classification. AGLR acknowledges, further, that, generally speaking, this has meant historically that if a customer with an ITS/LVD service classification delivers gas to ETG's City Gate, ETG shall redeliver the gas to the customer. AGLR anticipates operating ETG in the same manner in the future. However,AGLR and ETG reserve the right to curtail service in accordance with the termsof ETG's tariff. |
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18. | AGLR shall cause ETG to maintain customer account balancing practicesfollowing the acquisition that are consistent with the customer account balancingpractices of ETG prior to the acquisition. The undertaking contained in theimmediately preceding sentence shall be applicable until the earlier of such time as ETG files a rate proceeding or there is pending another regulatory proceedingthat addresses the issue of customer account balancing. AGLR shall not permit ETG's asset manager to take any actions that would cau se ETG to implement customer account balancing restrictions that are not related to the requirementsof ETG's distribution system. |
1. | The BoardAPPROVES the transfer of control of ETG by means of a merger ofits ultimate parent, NUI, with a subsidiary of AGLR. |
2. | The BoardFINDS that the requirements ofN.J.S.A. 48:2-51.1 and 48:3-10 are met. |
12. | All authority and approvals herein are granted subject to the closing of the transactions contemplated by the Merger Agreement submitted by the petitioners. |
13. | The BoardDIRECTS that approval of the merger is conditioned on the following: |
a. ETG shall comply with all New Jersey laws and Board rules and applicable Board Orders. |
g. ETG and AGLR will play an active role as responsible corporate citizens in New Jersey and support economic development in New Jersey. |
h.ETG shall maintain or enhance its contribution to energy assistanceprograms for low income and senior citizen customers. In addition, ETG will make charitable contributions to organizations in ETG's service territory in amanner consistent with AGLR's contributions in its existing utility service territories, which charitable contributions shall not be recoverable from ETGcustomers. |
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j. ETG and AGLR shall make available upon request access to the books and records of ETG. If requested information cannot be made available in New Jersey, ETG will pay the reasonable and necessary travel expenses of NJBPU staff to travel to the place of such information. Reimbursement will be based on the New Jersey state policies on travel related expenses. |
k. ETG shall notify the NJBPU of any changes in the policies related to the company's books and records. |
l. AGLR shall notify the NJBPU when its annual report and SEC Form 10-K and 10-Qs and 8-Ks are available on the web and will provide one copy of each to the NJBPU within three business days of filing at the SEC. |
m. AGLR shall report to the NJBPU any change in AGLR's, NUI's or NUI Utilities' credit rating within one business day of any such change. |
o. AGLR shall establish a Board of Directors level committee or modify a currentBoard of Directors level committee whose responsibilities will include oversight of "ring fencing" issues and other corporate governance best practices in order to allow AGLR management to provide an annual certification to the NJBPU that the activities of AGLR's affiliates have not hada material adverse effect on ETG. |
p. ETG shall notify the NJBPU of any change in NUI Utilities' dividend policy asestablished by AGLR after closing. AGLR shall establish a dividend policyrequiring NUI Utilities to dividend no more than 70% of its quarterly earningsto AGLR. |
q. AGLR shall provide separately audited financial statements for NUI Utilitiesand ETG. |
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a. Except as described herein, this Order shall not affect nor in any way limit the exercise of the authority of the Board or the State of New Jersey in any future petition, or in any proceeding regarding rates, franchises, services, financing, accounting, capitalization, depreciation, maintenance, operations or any other matter affecting ETG. |
b. This Order shall not be construed as directly or indirectly fixing for any purpose whatsoever any value of tangible or intangible assets now owned or hereafter owned by Petitioners. |
c. Consummation of the above-referenced transaction must take place no later than 120 days from the date of this Order unless otherwise extended by the Board. |
d. Approval of the transactions herein shall not constitute a determination, nor in any way limit, any future determination of the Board, as to the treatment of indebtedness, capital structure and interest expense for ratemaking purposes in any rate proceeding under state or federal law. |
e. Within 30 days of issuance of this Order, AGLR's Board of Directors shall certifyto the NJBPU that they have reviewed this Board's Order and the attached Stipulation of Settlement and will assure full compliance with the terms thereof. |
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11. Assignments. This Stipulation shall be binding upon and inure to thebenefit of the parties hereto and their respective successors and permitted assigns. Neither thisStipulation nor any of the rights, interests or obligations hereunder shall be assigned or delegatedby any Signatory Party without the prior written consent of the other Parties.
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1. | The Signatory Parties recommend that the New Jersey Board of Public Utilities (NJBPU or Board) approve the transfer of control of Elizabethtown Gas Company (ETG) by means of a merger ofits ultimate parent, NUI, with a subsidiary of AGL Resources (AGLR) Inc. |
2. | The Signatory Parties recommend that the NJBPU find the requirements of NJSA 48:2-51.1 and 48:3-10 are met. |
3. | The Signatory Parties recommend that the NJBPU find it is in the public interest for ETG to implement a five year base rate stay-out following the transaction closing. In years four and five of the stay-out. ETG shall be subject to an earnings sharing mechanism as more fully described below. Further, ETG should be required to make a base rate filing no later than three months after the end of the fourth year of the stay-out (March, 2009 assuming a December, 2004 closing) for rates to be effective at the beginning of the sixth year (January, 2010 assuming a December, 2004 closing). The base rate stay-out v/ill not affect modifications to non-base rate tariff provisions, including but not limited to, the SBC. WNC. and BGSS rates. Commencing one year after the date of transaction closing, ETG shall file anannual financial report, for the previous 12 month period, which shall include ETG's revenues and costs and setting forth a calculation of the earned return on rate base andreturn on equity for ETG's regulated business. To the extent there are public creditratings of ETG and/or NUI Utilities, the financial report shall include an assessment of those ratings. The annual financial reporting requirement provision will terminate uponthe issuance of a final Order in the next base rate case. Upon the expiration of the first three yearsofthe base rate stay-out, the Boardshall, based on the annual ETG financial report filed with the Board, determine if ETG'searnings shanng with ratepayers is tnggered for years 4 and 5 of the rate stay-out periodbased on the following: shanng shall begin when the earned return on equity (ROE) exceeds 100 basis points over the ROE authorized (10%) by the Board in ETG's last general rate proceeding ( i.e. 11%). If that annual period's earnings are sufficient towarrant sharing, 75% of earnings in excess of the 11% ROE will be credited toratepayers.1 ETG and AGLR agree that the financial reports filed with the Boardpursuant to this paragraph will be calculated in a manner consistent with ETG's last baserate case. ETG shall not seek recovery of Goodwill" associated with the NUI acquisitionor amortize Goodwill for financial reporting purposes. |
4. | The Signatory Parties agree that ETG's asset management will be performed by SequentEnergy Marketing for a term of three years commencing on April 1, 2005. The assetmanagement agreement will have Sequent pay $4.0 million per year as a credit to ETG'sBGSS costswithout any offset or allowance for prepayment provisions. The SignatoryParties deem this payment to be a competitive rate based on E TG's current assetmanagement agreement. Further, to the extent ETG acquires additional assets availablefor Sequent management, the Signatory Parties will re-evaluate whether the fixed fee |
1 Earnings in excess of 11 % ROE will be credited within 30 days of the filing to customer classes in the sameproportion as the non-BGSS customer refund was allocated in the Focused Audit proceeding.
requires adjustment. Therefore, the Signatory Parties agree to recommend that the Board authorize ETG to allow Sequent Energy Management toassume the currently approvedCinergy Asset Management contract for a 3 year term immediately following theexpiration of the current Cinergy contract on March 31. 2005. The followingmodifications will apply: 1) Sequent shall pay an annual fee of $4.0 million to ETG. 2)ETG will not be required to prepay Sequent for gas purchases. 3) the contract term willbe 3 years (April 1, 2005 through March 31, 2008), 4) there will be a provisionpermitting ETG to terminate the contract, without penalty to ETG." in less than threeyears in the event the Board establishes regulations which require all New Jerseyregulated natural gas utilities to competitively bid asset management services (provided, however, that Sequent's annual fee should be pro-rated if an early termination occurs), 5) ETG will be able to recall assets to meet firm system req uirements that are managed bySequent without penalty, and 6) Sequent shall maintain a separate "book" related to theasset management of ETG interstate assets. The NJBPU Staff and Ratepayer Advocatewill have the right to review the book, but any review of asset management will notchange the amount paid to ETG by Sequent during the three year contract period. Priorto the end of the three year term of the Sequent agreement, ETG will competitively bid itsasset management unless the Board has previously authorized an alternative assetmanagement procedure for ETG which may include performing asset management inAGL Services Company on behalf of ETG, or other options the Board deems in thepublic interest. ETG shall file an asset management plan with the Board at least 6 |
months prior to the expiration of the Sequent Asset Management Agreement (AMA). The Signatory Parties recommend that the Board make a determination, based on thefiling and applicable procedures, on the appropriateness of an asset management plan tobe effective after March 31, 2008. Should the Board determine that the assetmanagement function should be conducted by ETG or AGL Services Company on behalfof ETG, rather than by Sequent or a non-affiliated third party, then the Signatory Partiesrecommend that ETG or AGL Services Company be allowed to seek recovery of anyincremental costs of performing such function from asset management proceeds in theasset management proceeding. |
5. | The Signatory Parties agree the Board should authorize ETG to make any operationalchanges it deems necessary as long as safety, reliability and customer service aremaintained or improved over time. After closing, ETG will identify within three monthsthe service standards to be measured. After that filing ETG will work with the NJBPUStaff and the Ratepayer Advocate to establish the appropriate base-line measures against which ETG will measure subsequent performance in the areas of safety, reliability andcustomer service. Those base-line measures will be filed in the sixth month followingclosing. If these three parties cannot agree on appropriate base-line measures, thecompany shall submitits position to the Board and the parties shall have a right tocomment. The agreed upon service standards shall be used to monitor ETG'sperformance after the merger and stat us reports providing monthly data relating theretoshall be filed quarterly. The service standards shall remain in effect until a Board Orderis issued in the next rate case. Thereafter, ETG will be subject to service standardsestablished by the Board for all gas utilities in New Jersey in a generic rulemaking, if |
any. In the event the Board develops genenc service standards for all gas utilities in NewJersey prior to ETG's next base rate case, then the Boardshould determine which servicestandards (generic or ETG-specific) should be used by ETG. Prior to the establishment of ETG-specific service standards, ETG shall berequired to file with the Board quarterly reports containing monthly data that addresssafety, reliability and customer service. ETG shall also be required to file quarterlyreports addressing customer complaints. ETG shall file these quarterly reports until the Board Staff, ETG and the Ratepayer Advocate establish appropr iate service levels asdiscussed above. The Board may order specific action by ETG if it finds material servicedegradation. ETG shall perform a customer satisfaction survey within 12 months ofclosing and provide the results to the Board and the Ratepayer Advocate. ETG shallconduct these surveys annually and provide the results to the Board and the RatepayerAdvocate. |
6. | The Signatory Parties recommend that the Board reaffirmits current position on ETG's Remediation Adjustment Clause. The Board retains its authority to issue additional orders on Environmental Remediation matters as it deems appropnate and this condition does not limit the Board's authority to modify its position in the future. |
7. | The Signatory Parties recommend that the Board authorize ETG, by way of NUI Utilities, to participate in AGLR's utility money pool as governed by the Public Utility Holding Company Act of 1935, as amended. AGLR agrees to establish a separate accounting of money pool activity for each division of NUI Utilities for funds disbursed by NUI Utilities to the AGLR Utility Money Pool. AGLR further agrees that this will be accomplished by establishing separate divisions in the Company's general accounting |
system. AGLR also agrees to establish a separate and distinct bank account solely forAGLR's Utility Money Pool, where utility money pool funds shall be deposited andwithdrawn and from which loans will be made. AGLR agrees to provide a quarterly-report of ETG money pool activity that will include loans to and from the pool, interestand fees charged to the pool. AGLR agrees to certify that all ETG money pooltransactions are for terms of one year or less. The Utility Money Pool will be subjec t toBoard audit. |
8. | The Signatory Parties recommend that the Board authorize ETG, by way of NUI Utilities, to enter into a Services Agreement with AGL Services Company. ETG's management shall determine the services it receives under such agreement annually. For all services obtained by ETG from AGLR affiliates, including under any Services Agreement withAGL Services Company, the Board retains authority to determine the reasonableness of the activity and the recovery of any associated costs, irrespective of SEC oversight and/or approval of the associated activities or cost allocations. |
9. | The Signatory Parties agree ETG should be permitted to defer costs associated with anypension or OPEB net assets or liabilities as of the date of closing. ETG will continue tobook the amount of pension and OPEB expenses currently authorized in ETG's rates, and will seek their recovery through the regulatory process within the Company's next base rate proceeding. In no event shall ETG recover from ratepayers pension and OPEB expenses pursuant to this provision in excess of the pension and OPEB expenses that would have been booked in accordance with FAS 87 and FAS 106 in the absence of the merger. This treatment is for the purposes of this proceeding, and for AGLR and ETG |
only, and is not intended to pre-determine the treatment, or preclude the recovery,ofthese costs in a future proceeding. |
10. | The Signatory Parties recommend that the Board reaffirm its position in the order adopting the stipulation resolving the Focused Audit in Docket No. GA03030213. TheBoard, in that order, stated that, "this settlement will end this regrettable episode in NewJersey regulatory history and permit the Company to move on to the important task ofsale. The settlement also permits this Board to welcome, within a fair regulatoryatmosphere, new ownership committed to public service to an important part of ourState." As such, the Board should reaffirm that it absolves AGLR and all ofits direct andindirect subsidiaries after closing of any future Board action associated with thoseactivities or issues addressed in the Focused Audit. This does not preclude the Boardfrom exercisingits jurisdiction and taking action against AGLR or any ofits direct orindirect subsidiaries for any new activities that occur after the date of the closing. For theavoidance of doubt, ETG shall not attempt to recover from ratepayers any costsassociated with any shareholder lawsuits that are based upon the matters upon whichrecommendations were made in the Liberty Audit Report and/or the Stier AndersonReport. |
11. | The Signatory Parties recommend the Board reiterates that the conditions of the order resolving the Focused Audit in Docket No. GA03030213 are not binding on AGLR orETG following the closing of the acquisition except as it relates to the disposition of theoutstanding portion of the refund and the penalty, along with associated interest,contained therein, which outstanding amounts are $21 million and $1.6 millionrespectively. Upon approval of the merger and prior to closing, ETG shall submit a plan |
to the Commission to refund the outstanding $21 million to ratepayers as soon aspracticable after closing, but in no event more than sixty (60) days afterclosing, unlessthe Board orders otherwise. AGLR shall submit the remaining $1.6 million of the penaltyto the State of New Jersey pursuant to that plan. |
12. | The Signatory Parties acknowledge that all authonty and approvals are granted subject to the closing of the transactions contemplated by the Merger Agreement submitted by thepetitioners. |
13. | The Signatory Parties recommend that the Board direct that approval of the merger be conditioned on the following: |
a. | ETG shall comply with all New Jersey laws and Board rules. |
b. | ETG shall honor all existing contracts based on the provisions contained in thosecontracts. This shall include contracts with customers, suppliers, vendors,employees, change of control agreements, etc. |
c. | ETG shall host quarterly meetings for the 12 months following closing to discusswith NJBPU Sraff and the Ratepayer Advocate issues related to operations,customer service, regulatory or other items determined by the Company, Staff orthe Ratepayer Advocate. |
d. | ETG and AGLR will maintain sufficient staffing levels necessary to meet theservice standards established as a result of Section 6 of the Term Sheet. |
e. | ETG shall participate in meetings related to the customer scorecard or othermeetings held by the NJBPU related to safety, reliability and service. |
f. | ETG shall notify the Board of any changes in the company's collection policies, but they shall in all respects comply with NJBPU regulations. |
g. | ETG and AGLR will play an active role as responsible corporate citizens in New Jersey and support economic development in New Jersey. |
h. | ETG shall maintain or enhanceits contribution to energy assistance programs forlow income and senior citizen customers. In addition, ETG will make charitablecontributions to organizations in ETG's service territory in a manner consistentwith AGLR's contributions in its existing utility service territories, whichcharitable contributions shall not be recoverable from ETG customers. |
i. | ETG shall inform customers through bill inserts and other means of the change incontrol. Board Staff and the Ratepayer Advocate shall review bill inserts prior tomailing. |
j. | ETG and AGLR shall make available upon request access to the books andrecords of ETG. If requested information cannot be made available in New-Jersey, ETG will pay the reasonable and necessary travel expenses of NJBPUstaff to travel to the place of such information. Reimbursement will be based onthe New Jersey state policies on travel related expenses. |
k. | ETG will notify the NJBPU of any changes in the policies related to thecompany's books and records. |
l. | AGLR shall notify the NJBPU whenits annual report and SEC Form 10-K and10-Qs and 8-Ks are available on the web and will provide one copy of each to theNJBPU within three business days of filing at the SEC. |
m. | AGLR will report to the NJBPU any change in AGLR's, NUI's or NU1 Utilities' credit rating within one business day of any such change. |
n. | ETG must certify its ability to comply with Title 48 of New Jersey Code relatedto safe and reliable service. |
o. | AGLR will establish a Board of Directors level committee or modify a currentBoard of Directors level committee whose responsibilities will include oversightof "ring fencing'" issues and other corporate governance best practices in order to allow AGLR management to provide an annual certification to the NJBPU Boardthat the activities of AGLR's affiliates have not had a material adverse effect onETG. |
p. | ETG will notify the NJBPU Board of any change in NUI Utilities' dividendpolicy as established by AGLR after closing. For the avoidance of doubt, AGLR will establish a dividend policy requiring NUI Utilities to dividend no more than70% of its quarterly earnings to AGLR. |
q. | AGLR will provide separately audited financial statements for NUI Utilities andETG. |
r. | ETG shall maintain at least two walk-in service locations in its service territoryuntil it completes an assessment of whether the current service centers or othersmay be appropriate. The assessment shall include an evaluation of whether a newservice center in the Northwest territory is appropriate. ETG shall petition theBoard before moving any walk-in location or reducing the number of walk-inlocations. |
s. | ETG shall maintain a liaison group to handle complaints received via the NJBPU,the Ratepayer Advocate or New- Jersey Governor/legislative offices. This group shall be available 24 hours a day and have decision making authority to resolve(at least temporarily) issues related to service interruption or restoration. |
t. | For the first year following closing, ETG shall provide outplacement assistance to any employee severed as a result of the acquisition. |
u. | The Capacity Planning function for ETG will be performed and maintainedseparate and apart from the individuals that conduct asset management activitiesto the extent asset management is not performed by ETG directly or AGLServices Company on behalf of ETG. |
14. | AGLR will commit to make $9 million available for the purpose of enhancing the severance package of non-bargaining unit and bargaining unit (union) employees (ETG and ETG-related NUI Corporation New Jersey employees) who are severed as a result of the merger. The details of how these funds will be disbursed among such employees will be determined once specific employees have been identified for separation. The Signatory Parties agree, however, that the enhanced severance package should be developed recognizing employee age and years of service and in a manner generally consistent with the following guiding principles: a) the enhanced severance provisions will be applicable to both bargaining and non-bargaining employees on a basis that will provide generally comparable severance provisions for all e ligible employees (recognizing that union employees already have certain severance benefits pursuant to the bargaining agreement); b) the final allocation of severance enhancements will be determined on the basis of the number of terminated employees in the bargaining and non-bargaining units: c) the enhanced severance plan will be designed with a budget toensure that the $9 million total is not exceeded; d) the enhanced severance plan will address any issues regarding highly compensated employees, any applicable bargaining agreement restrictions, and the legality of any age threshold provisions; and e) the plan could incorporate a sliding scale based on years of service for terminated employees. During the two years after the merger closes, AGLR and ETG will file reports every six months with the Board indicating how the $9 million has been disbursed to separated employees, and indicating the number of emplo yees separated from ETG. |
15. | In accordance with the Merger Agreemem, AGLR will provide, at AGLR's cost, outplacement/counseling for all non-bargain:ng unit employees who are severed as a result of the merger. AGLR anticipates that it will continue to use Right Management, a national outplacement service. Right Management provides several different levels of outplacement services from clerical to executive. These services include workshops on resume writing, interview skills, skill assessment for employability, provision of office space and intensive seminars and counseling. AGLR will provide the opportunity for non-bargaining unit employees who receive enhanced severance pursuant to Section 14 of the Term Sheet to receive an appropriate level of financial advisory services at AGLR's cost. |
16. | AGLR will ensure that non-bargaining unit employees who are severed as a result of the merger receive adequate notice before such severance becomes effective; for bargaining unit (union) employees, the collective bargaining agreement will control. |
17. | AGLR agrees that it will not permit ETG's asset manager to take any actions that would adversely impact ETG's ability to redeliver, to the facilities of the participating NJLEUC |
members, gas that is delivered by such members to the ETG City Gate. AGLRacknowledges that ETG's ITS/LVD service classification, which is the class applicable to the NJLEUC members, is ETG's highest priority non-firm service classification. AGLRacknowledges, further, that, generally speaking, this has meant historically that if acustomer with an ITS/LVD service classification delivers gas to ETG's City Gate. ETGwill redeliver the gas to the customer. AGLR anticipates operating ETG in the samemanner in the future. However, AGLR and ETG reserve the right to curtail service inaccordance with the terms of ETG's tariff. |
18. | AGLR agrees to cause ETG to maintain customer account balancing practices followingthe Acquisition that are consistent with the customer account balancing practices of ETGprior to the Acquisition. The undertaking contained in the immediately precedingsentence shall be applicable until the earlier of such time as ETG files a rate proceeding or there is pending another regulatory proceeding that addresses the issue of customer account balancing. AGLR also will agree that it will not permit ETG's asset manager totake any actions that would cause ETG to implement customer account balancingrestrictions that are not related to the requirements of ETG's distribution system. |