ML18040A327

Requests That Commission Act on 970918 Application as Promptly as Possible So That Proposed Reorganization Can Proceed in Timely Manner & Holding Company Structure Implemented.Order Adopting Terms of Settlement Encl

ML18040A327
Person / Time
Site:	Nine Mile Point
Issue date:	02/09/1998
From:	Borkowsky T AFFILIATION NOT ASSIGNED, NEW YORK STATE ELECTRIC & GAS CORP.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 9802120174
Download: ML18040A327 (230)

Text

CATEGORY 1 REGULAT Y INFORMATION DISTRIBUTION SYSTEM (RIDS)

ACCESSXON NBR:9802120174 DOC.DATE: 98/02/09 NOTARIZED: NO DOCKET FACIL:50-410.,Nine Mile Point Nuclear Station, Unit 2, Niagara Moha 05000410 AUTH.NAME AUTHOR AFFILIAT1ON BORKOWSKY,T.G. Affiliation Not Assigned '

New York State Electric E Gas Corp.

RECIP.NAME RECIPIENT AFFILIATION Document Control Branch (Document Control Desk)

SUBJECT:

Recpxests that Commission act on 970918 application as promptly as possible so that proposed reorganization can proceed in timely manner &. holding company structure A implemented.

DZSTR1BUTZON CODE: AOOZD CORTES RECEZVED:LTR ) ENCL 1 SZEE:

TITLE: OR Submittal: General Distribution E NOTES:

RECXPIENT COPIES RECIPIENT COPXES 0 ID CODE/NAME LTTR ENCL ID CODE/NAME LTTR ENCL PD1-1 LA 1 1 PD1-1 PD 1 1 HOOD,D 1 1 INTERNAL: ACRS 1 1 FILE CENT 1 1 1 NRR/DE/ECGB/A 1 1 MCB 1 1 NRR/DRCH/HICB 1 1 NRR/DSSA/SPLB 1 1 NRR/DSSA/SRXB 1 1 NUDOCS-ABSTRACT 1 1 OGC/HDS3 1 0 EXTERNAL: NOAC 1 1 NRC PDR 1 1 D U

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NOTE TO ALL "RIDS" RECIPIENTS:

PLEASE HELP US TO REDUCE WASTE. TO HAVE YOUR NAME OR ORGANIZATION REMOVED FROM DISTRIBUTION LISTS OR REDUCE THE NUMBER OF COPIES RECEIVED BY YOU OR YOUR ORGANIZATION, CONTACT THE DOCUMENT CONTROL DESK (DCD) ON EXTENSION 415-2083 TOTAL NUMBER OF COPIES REQUIRED: LTTR 14 ENCL 13

jl" LAW OFFICES OF HUBER LAWRENCE & ABELL 6OS THIRD AVENUE GREGORY J. BLASI NEW YORK, N. Y. IOIS8 JAMES C. BEH LEONARD SLUM WILLIAMD. SOOTH TARAS G. BORKOWSKY TELEPHONE DANIEL S. BROWN STUART A. CAPLAN (2 I 2) 662-6200 THEODORE F. DUVER WILLIAMJ. CRONIN ANDREW D. FISHER AMY A. DAVIS FACSIWI.C MICHAEL GUARARRA BETH A. DAVIS JOHN D. DRAGHI NICHOLAS A. GIANNASCA (2 I 2) BBI 5759 FRANK LEE JOHN R. MATSONo LORI D. MILSTEIN I

KENNETH M. JASINSKI WASHINGTON OFFICE BRIAN L. ROONEY BARBARA S. JOST DAN L. ROSENBAUM RICHARD M. LORENZO IOOI G STREET, N.W. MICHAEL S. SIEGEL FRANK J. MILLER WASHINGTON, D.C. 2OOOI MICHAEL M. ZAITZ GLENN B. ROBBINS JONATHAN D. SCHNEIDER I202) 731 3880 JAMES I. SEROTA NOT ADMITTED IN NEW YORK JOHN TROJANOWSKI DIRECT DIAL NORMAN ABELL ROBERT G. GRASSI HOWARD M. SCHMERTZ COVNSCL February 9, 1998 VIA HAND DELIVERY Nuclear Regulatory Commission Document Control Desk Washington, D. C. 20555 Re: Docket No. 50-410 Facilit 0 eratin License No. NPF-69 Gentlemen and Ladies:

On September 18, 1997, New York State Electric & Gas Corporation (NNYSEGH) filed an application with the Commission seeking the Commission's approval to transfer control over NYSEG's interest in the above-referenced license to a holding

'company to be formed over NYSEG (HApplication").

By letter dated October 20, 1997, a copy of the Agreement Concerning the Competitive Rate and Restructuring Plan of New York State Electric & Gas Corporation, dated October 9, 1997, executed by NYSEG, the Staff of the New York Public Service Commission, the New York State Department of Economic Development, the New York Power Authority, the National Association of Energy Services Companies and the Joint Supporters, a coalition of energy service companies (NOctober 9th Agreement" ), was filed with the Commission as a supplement to the Application.

By letter dated October 27, 1997, a revised Appendix A to the October 9th Agreement was filed with the Commission.

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HUBER LAWRENCE & ABELL February 9, 1998 Page 2 The October 9th Agreement filed with the Commission on October 20, 1997, as amended by the October 27, 1997 filing, was approved by the New York Public Service Commission ("NYPSC") at a session held on January 21, 1998. Attached hereto is a copy of the NYPSC's Order, issued and effective January 27, 1998 (the "Order" ), adopting the terms of the October 9th Agreement, subject to certain modifications and conditions. NYSEG unconditionally accepted the Order on February 4, 1998.

The changes to the October 9th Agreement set forth in the Order generally relate to retail rate matters which are not material to the issues raised in NYSEG s Application. With respect to Nine Mile 2, the order clarifies that NYSEG will have a reasonable opportunity to recover all prudently incurred Nine Mile 2 costs, subject to the duty of the NYPSC to set just and reasonable rates.

In accordance with the terms of the October 9th Agreement approved by the NYPSC and to facilitate the NYPSC mandated auction of NYSEG's coal-fired generation assets, NYSEG intends as soon as practicable to transfer these assets into a separate subsidiary. The creation of the holding company over NYSEG, however, will not be effected until Commission approval is obtained.

Both the NYPSC and the Federal Energy Regulatory Commission have determined that the formation of the holding company over NYSEG is in the public interest. NYSEG respectfully requests that the Commission act on the Application as promptly as possible so that the proposed Reorganization can proceed in a timely manner and the holding company structure implemented.

If you have any questions regarding this matter, please contact either myself at (212) 455-5504 or NYSEG's Special Counsel, Samuel Behrends, IV, at (202) 986-8018.

Respectfully submitted, Taras G. Borkowsky Attorney for New York State E ectric &

Gas Corporation cc: Hubert J. Miller Regional Administrator U.S. Nuclear Regulatory Commission Region I 475 Allendale Road King of Prussia, PA 19406-1415 See attached list

0 HUBER LAWRENCE 5c ABELL SERVICE LIST FOR NYSEG NRC FILING 02/09/98 Hand-deliveries to:

Robert S. Wood U.S. Nuclear Regulatory Agency Room ¹10 H16 One White Flint North 11555 Rockville Pike Rockville, MD 20852 Steven R. Hom U.S. Nuclear Regulatory Agency Room ¹15 D10 One White Flint North 11555 Rockville Pike Rockville, MD 20852 Darl S. Hood U.S. Nuclear Regulatory Agency Room ¹14 D15 One White Flint North 11555 Rockville Pike Rockville, MD 20852 Send regular copies via regular mail to thc following:

John V. Vinquist President MATS, Inc.

P.O. Box 63 Lycoming, NY 13093 John P. Spath NYSERDA 2 Empire Plaza Suite 1901 Albany, NY 12223-1253

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STATE. OF NEW YORK PUBLIC SERUICE COMMISSION At a session of the Public Service

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.9802120174 Commission held in the City of Albany on January 21, 1998 COMMISSIONERS PRESENT:

John F. O'Mara, Chairman Maureen O. Helmer Thomas J. Dunleavy CASE 96-E-0891 In the Matter of New York State Electric 8 Gas Corporation's Plans for'lectric Rate/

Restructuring Pursuant to Opinion No. 96-12.

CASE 93-E-0960 Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations of New York State Electric and Gas Corporation Tariff Filing Governing the Sale of Economic Development Power Generated by the New York State Power Authority to Specific Customers Recommended by the Allocation Board.

CASES 94-M-0349 et al. New York State Electric & Gas Corporation - Electric Rates.'ORDER ADOPTING TERMS OF SETTLEMENT SUBJECT TO MODIFICATIONS AND CONDITIONS (Issued and Effective January 27, 1998)

BY THE COMMISSION:

INTRODUCTION Opinion No. 96-12 required New York State Electric &.

Gas Corporation (NYSEG or the company), among others, to file a proposed plan for rates/restructuring, no later than October 1, 1996. Despite the parties'fforts to negotiate a resolution of the filings, no agreement was reached within the period. allotted, and testimony was filed by the parties on March 25, 1997. At our direction, the testimony addressed not only the rate/

restructuring proceeding, but a pending case involving the rates These include cases 94-M-0349, 93-E-0284, 93-E-0664, 95-M-0017, 95-E-0425, and 95-E-0426. See Opinion No. 95-17 (issued September 27, 1995).

CASES 96-E-0891 et al.

for the delivery of power from the New York Power Authority (NYPA) to Economic Development Power (EDP) customers,'s well as a 1995 rate settlement in which second- and third-year rate increases initially had been authorized. Evidentiary hearings were held during May 1997 and briefs were filed with the Administrative Law Judge in June and July.

Prior to the issuance of a recommended decision, NYSEG submitted an "Agreement Concerning the Competitive Rate and Restructuring Plan of New York State Electric &. Gas Corporation "~ (Settlement), which purported to resolve by agreement all of the issues in all of the cases. The Settlement was signed by Staff of the Department of Public Service (Staff),

NYSEG, the New York State Department of Economic Development (DED), NYPA, the National Association of Energy Services Companies (NAESCO), and the Joint Supporters.'n October 23, 1997, statements supporting the Settlement were filed by the signatories', and NYSEG filed its environmental assessment form (EAF). On November 1, 1997, statements in opposition were filed by Multiple Intervenors (MI), Wheeled Electric Power Company (WEPCO), the New York State Department of Law (DOL), the Public Utility Law Project (PULP), Public Interest Intervenors (PII),

the Retail Council, the New York State Consumer Protection Board (CPB), the Independent Power Producers of New York jointly with Enron Capital S Trade Resources (IPPNY/Enron), and Tioga/Tompkins Counties (Counties) . Evidentiary hearings to review the Settlement were held in November 1997 and public statement hearings were held in Lockport, Plattsburgh, Johnson City, Auburn, and. Hudson on various dates in October and November.

Case 93-E-0960.

A copy of the Settlement submitted on October 9, 1997, is attached as Appendix A.

The Joint Supporters is a voluntary unincorporated association of consumers and providers in favor of competitive opportunities for electric service.

(u a CASES 96-E-0891 et al.

A recommended decision was issued on December 3, 1997, in which the Judge found that the Settlement contained the basics of an acceptable plan, but that certain provisions should be reexamined by the parties. The recommended decision concluded that the Settlement should be returned to the parties for further negotiations on specified provisions. Briefs on exceptions were filed on December 22, 1997 by Staff, the company, MI, IPPNY/

Enron, PULP, PII, the Counties, CPB, Joint Supporters, NAESCO, and WEPCO.'eplies to exceptions were filed on December 17, 1997 by Staff, the company, MI, DED, IPPNY/Enron, and CPB.

SETTLEMENT

SUMMARY

In accordance with our directions, the submitted Settlement contains a five-year rate plan, provisions concerning the recovery and mitigation of strandable costs, a phased schedule for providing retail access and unbundled tariffs, a proposed holding company corporate structure, a funding source for public policy programs, reduced delivery rates for EDP power, and a number of other terms. These terms are briefly summarized below.

Under the Settlement rate plan, the company agrees to:

forgo the two previously approved rate increases; reduce large industrial and commercial customer rates by 5S per year for each of the next five years; reduce the rates for all other customers by 5% in the fifth year of the plan; and, reduce EDP wheeling rates by between 35% and 56%. The plan contains a 12% return on equity (ROE) earnings cap with all excess earnings to be used to benefit ratepayers and a 9% ROE earnings trigger that permits the company to petition for rate relief if earnings fall below that level.

Retail access under the Settlement occurs in three phases, with all customers being provided retail access by August 1999. Also by that time, the company has agreed to auction all of its fossil generating units and to structurally separate its DOL filed a letter supporting the remand recommendation.

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CASES 96-E-0891 et al.

business into a regulated wires company (RegSub) and a competitive generating company (GenSub), both owned by a holding company (HoldCo). Finally, the company has agreed to urge the cotenants of the Nine Mile II Nuclear Generating Unit (NM II) to auction that unit.

In the public policy program area, the Settlement sets aside approximately $ 13 million (approximately 1 mill/kWh) per year for the first three years of the rate plan to dedicate to public policy programs. The Settlement does not address specific programs, and the record indicates that the company's existing low-income assistance program (Fresh Start) may be discontinued.

Finally, the Settlement sets forth a customer service incentive involving two measures of the reliability of NYSEG's electric service. The incentive is a penalty-only mechanism, providing a maximum annual penalty of 15 basis points (bp).

The terms of the Settlement, briefly recited above, will offer a generally sound regulatory framework for NYSEG, its competitors, and its customers in the transition to fully competitive generation and energy services markets. Having reviewed these terms, the recommended decision, and the however, there are several aspects of the Settlement parties'xceptions, and other important issues that are not resolved to our satisfaction. For this reason, we are adopting the terms of the Settlement subject to the following modifications and conditions:

All industrial customers not eligible for 5%

annual rate decreases and not taking service under special contracts, will be provided retail access as of August 1, 1998.

2. The company will file marginal cost-based tariffs'ithin 30 days of this order applicable the customers'ncremental to energy usage above historic levels for all industrial and commercial customers who are not eligible for 5% annual rate decreases' The company is urged to consult with Staff prior to filing

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0 CASES 96-E-0891 et al.

' 3. If, but for the use of accelerated depreciation or amortization, the company's earnings would have exceeded the 12% earnings cap, it shall request approval from the Commission to use such accelerated depreciation or amortization. The company must request such approval as part of its reporting under the annual earnings cap. It should be understood that publicly disclosed earnings, which may reflect accelerated depreciation or amortization, will not be considered the basis upon which the earnings cap will be applied.

4. The Commission is reserving the right to reexamine the reasonableness of the generation back-out credit specified in the Settlement in the event market prices exceed the Settlement credit.

5. Regarding the company's provider of last resort responsibility to offer a low-income assistance program:

a. The company will continue its Fresh Start program until a replacement program is approved;

b. The company will file within 30 days of this order a proposed low-income assistance program, designed to provide service to all HEAP-eligible customers (an estimated 37,000) over the .term of the rate plan.

estimated that the program will It cost is about

$ 5 million annually. The company will consider in designing the program the best practices of other New York utilities and may propose a program operated by a third, party.

The company's proposal will be subject to comment by interested parties, who may also submit alternate proposals.

C. Of the approximately $ 5 million annual program cost, $ 2.5 million will be obtained from the $ 13 million set-aside in the Settlement and will be dedicated to energy efficiency and other similar low-income programs approved by the Commission for SBC funding. For the first few years of NYSEG's administration of the program,'he balance NYSEG's administration of the program may be re-examined

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if its program development and implementation is not

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of program costs will be covered by the proceeds from the sale of excess land.~

Thereafter, it is assumed that savings from reduced uncollectibles and a reduced level of arrearages will equal or exceed total program costs.'.

The Settlement is modified by adding the environmental provisions approved in the Con Edison proceeding, as set forth in Appendix B of this order. In addition, we recognize that we must carefully consider alternative energy sources during the transition to competition and opportunities present themselves (such as through if the passage of securitization will evaluate potential ways tolegislation), we accomplish further environmental benef its through environmental protection and energy efficiency programs.

7. The customer service incentive program (penalty only) will consist of five indicators: the two set forth in the Settlement and PSC complaint rates, overall customer satisfaction index, and contact customer satisfaction index as described in Appendix C of this order. Each of the five indicators will carry the possibility of a maximum annual penalty of 8 bp, or a total maximum annual penalty of 40. bp. All other aspects of the service incentive program will remain as set forth in the Settlement.

8. No New York State utility-affiliated load utility or New York State serving entity may be denied permission to participate in NYSEG's retail access program under the reciprocity provisions of the Settlement (Appendix A, p. 24) unless prior approval is granted by the Commission.

Funding from this source will be limited to $ 7.5 million over the first three years of the program.

The cost effectiveness of the program will be monitored by Staff and the company. The fourth and fifth year funding of the program will be revisited during the third year of the rate plan.

Cases 96-E-0897 et al., Consolidated Edison Com an of New York Inc. Rate/Restructurin Proceedin , Opinion No. 97-16 (issued November 3, 1997), mimeo pp. 43, 66; Order Adopting Terms of Settlement Subject to Conditions and Understandings (issued September 23, 1997), Appendix A, pp. 27, 54-55 '

CASES 96-E-0891 et al.

9. The following clause regarding remedies for RegSub violations as approved in the Con Edison proceeding shall be incorporated into the Set tlement.

The Commission may impose on RegSub remedial action (including redress or penalties, as applicable) for RegSub's violations of the standards of competitive conduct set forth in the Settlement. Ifin a the Commission finds that consistent pattern of RegSub has engaged material violations of the standards of competitive conduct, it shall provide RegSub notice and a reasonable opportunity to remedy such conduct. If RegSub fails to remedy such conduct within a reasonable period after receiving such notice, the Commission may take remedial action with respect to HoldCo to prevent RegSub from further code of conduct violations. Such remedial actions may include directing the HoldCo to divest the unregulated subsidiary, or some portion of the assets of the unregulated subsidiary, that is the subject of RegSub's consistent pattern of material violations but exclude directing the HoldCo to divest RegSub or imposing a service territory restriction on the unregulated subsidiary. If the HoldCo is directed to divest an unregulated subsidiary, it may not thereafter, without prior Commission approval, use a new or existing subsidiary of the HoldCo to conduct within its service territory the same business activities as the divested subsidiary (e.cC,, energy services) . RegSub and the HoldCo may exercise any or all of their administrative and judicial rights to seek a reversal or modification of remedial actions ordered by the Commission and may seek to obtain any and all legal and/or equitable relief from such remedial actions, including but not limited to injunctive relief.

Neither NYSEG nor its affiliates will challenge the 'Commission's authority to implement this paragraph

10. The EDP delivery rates set forth in the Settlement shall be frozen during the term of the five-year rate plan, in the same manner as other rates are frozen in the Settlement.

Cases 96-E-0897 et al., ~su ra, Order Adopting Terms of Settlement Subject to Conditions and Understandings, Appendix A, p. 50.

A CASES 96-E-0891 et al.

11. We understand the Settlement to provide (Appendix A, p. 27) the company with no more than a reasonable opportunity to recover all prudent NM II costs, subject to our duty to set just and reasonable r'ates, and this understanding supersedes any contrary language or interpretation of the Settlement.

12. Our adoption of the Settlement's terms is also subject to the express condition that NYSEG is committed to cooperate in the development of the infrastructure (e.cC., independent system operator, power exchange, etc.) needed to allow competition in New York.

Based on the above modifications, both PACE Energy Project (a member of PII) and the CPB have indicated their agreement with the Settlement, as adopted.

STATE ENVIRONMENTAL UALITY REVIEW ACT EVALUATION In conformance with the State Environmental Quality Review Act (SEQRA), we issued on May 30, 1996 a Final Generic Environmental Impact Statement (FGEIS), which evaluated the action adopted in Case 94-E-0952. We also required individual utilities to file an environmental assessment of their restructuring proposals. NYSEG filed its EAF concerning the Settlement on October 23, 1997.

The information provided by NYSEG in its EAF, the parties'omments and responses, and other information were evaluated in order to determine whether the potential impacts resulting from adoption of the Settlement's terms would be within the bounds and thresholds of the FGEIS adopted in 1996. The analysis examined several areas of potential impacts including the potential for increased air emissions due to load growth from reduced rates and reduced demand side management, and the potential incentive to over-invest in utility plant.

Arguably, all of the potential impacts need not be considered given that some result from Type II exempt rate actions. In any event, however, based on these analyses, the potential environmental impacts of the Settlement are found to be

CASES 96-E-0891 et al.

within the bounds and thresholds evaluated in the FGEIS.

Therefore, no further SEQRA action is necessary. The final EAF will be appended to the opinion to be issued later.

DISCUSSION Taking into account our overall responsibility to set just and reasonable rates, the company's statutory burden of proof, and our settlement guidelines, and having considered the evidence, comments, arguments, and EAF information, the terms of the Settlement, subject to the above described modifications and conditions, are found to be reasonable and in the public interest.

Among other things, these terms will help NYSEG consumers save or avoid $ 725 million of additional charges for electricity in the next few years and this will help attract businesses and stimulate economic activity. These savings will be achieved by substantial rate reductions over the term of the Settlement for the largest businesses in the NYSEG territory, a rate reduction for all other customers in year five, and by ensuring that previously approved rate increases will not become effective. The Settlement's terms also call for prompt divestiture of all the utility's fossil generation, thereby mitigating strandable costs and providing an environment for a robust, competitive electric generation market, and access to that market will be available to all NYSEG customers by August 1, 1999. With this framework and expected competition in the energy services sector, customers can expect to receive electricity bills lower than otherwise would be the case and enjoy greater choice of energy providers and services. At the same time, the Settlement's terms as modified fairly addiess environmental concerns and cost-effective low-income assistance during the transition to a fully competitive market. These are the essential elements of the competitive electricity market envisioned for New Yorkers and for the transition to that market.

Accordingly, the Settlement's terms are adopted in their entirety subject to the modifications and conditions listed

CASES 96-E-0891 et al.

above and the Settlement terms are incorporated by reference into this order. Inasmuch as the terms of the Settlement are interrelated, as are our modifications and conditions listed above, if any term, condition, or understanding is modified, vacated, or otherwise materially affected on judicial review, we may reexamine our entire decision.

Subsequent to the issuance of this abbreviated order, we shall issue a more comprehensive opinion and order describing the bases for our decision, and containing the final EAF. The statute of limitations for filing petitions for rehearing or clarification of our decision will be deemed to run from the date of issuance of'hat opinion.

The Commission orders:

1. The terms of the Settlement filed in these proceedings dated October 9, 1997 (Settlement), with the modifications and conditions described above and subject to the company's unconditional acceptance of this order, are adopted in their entirety and are incorporated as part of this order.

2. The potential environmental impacts of these terms are within the bounds and thresholds evaluated in the 1996 FGEIS, and therefore no further SEQRA action is necessary.

3. New York State Electric 8 Gas Corporation (NYSEG or the company) must submit a written statement of unconditional acceptance of the modifications and conditions contained in this order, signed and acknowledged by a duly authorized officer of NYSEG, by January 28, 1998. This filing date may be extended by a maximum of one week if the company files its consent to further extend its rate case suspension periods by a like amount. This statement should be filed with the Secretary of the Commission and served on all parties in this proceeding.

4. By not later than January 28, 1998, NYSEG shall cancel the tariff leaves listed in Appendix D to this order. If the company extends its rate case suspension periods, the Appendix D tariff leaves shall be cancelled no later than one day before the end of the extended suspension period.

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' . 5. NYSEG is directed to file by February 6, 1998, on not less than one day's notice, such tariff amendments as are necessary to effectuate the retail access program and rate reductions for large customers contemplated by the Settlement as adopted. NYSEG is also directed to file by February 25, 1998, to become effective April 1, 1998, such tariff amendments as are necessary to effectuate the rate reductions for incremental energy usage by small commercial and small industrial customers contemplated by the Settlement as adopted. The company shall serve copies of its filings upon all parties to these proceedings. Any comments on the filing to effectuate the retail access program and rate reductions for large customers must be received at the Commission's offices within 20 days of service of the company's proposed amendments. Any comments on the filing to effectuate the rate reductions for incremental energy usage must be received at the Commission's offices within ten days of service of the company's proposed amendments. The amendments shall not become effective on a permanent basis until approved by the Commission.

6. On or before March 2, 1998 NYSEG shall file a proposed low-income program as contemplated by the Settlement as adopted.

7. To the extent exceptions to the recommended decision issued in these proceedings on December 3, 1997 are not moot, or are otherwise granted, they are denied.

8. NYSEG, in cooperation with Staff, shall monitor the environmental. impacts of electric restructuring resulting from this order.

9. Cases 94-M-0349, 95-E-0425, 95-E-0426, and 93-E-0960 are 'closed.

10. Case 96-E-0891 is continued.

By the Commission, (SIGNED) JOHN C. CRARY Secretary

CASES 96-E-0891 et al.

APPENDIX A

0 NEH YORK STATE PUBLIC SERVICE COMMISSION X

In the Matter of New York State Electric

& Gas Corporation's Plans for Electric Case 96-E-0891 Rate/Restructuring Pursuant to Opinion No. 96-12 AGREEMENT CONCERNING THE COMPETITIVE RATE AND RESTRUCTURXNG PLAN OP NEW YORK STATE ELECTRIC fc GAS CORPORATION New York State Electric & Gas Corporation New York State Department Of Public Service New York State Department of Economic Development New York Power Authority National Association Of Energy Services Companies The Joint Supporters October 9, 1997

Table of Contents Pacae Z. Introduc txon ~ ~ ~ ~ o ~ ~ ~ ~ ~ o ~ ~ e ~ ~ 2 Procedural History of Opinion No. 96-12 3

2. The Requirements of Opinion No. 96-12

3. NYS EGP 1 an ~ ~ ~ ~ ~ ~ ~ ~ ~ a ~ ~ 5 NYSEG's 1995 Electric Settlement

5. Negotiations Among The Parties 7

6. Litigation of NYSEG's Modified Plan for Competition 8.

7. The Settlement Agreement 8 II. General Provisions 9 T erm ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I ~ ~ ~ ~ ~ ~ ~ ~ ~ 9

2. Relationship to 1995 Electric Settlement'..... 9

3. Relationship to Existing Gas Settlement Agreement . 9 ZIZ. Rat;e P lan ~ ~ ~ 0 ~ ~ ~ ~ ~ 0 ~ ~ ~ ~ ~ 10 Price Reductions, Price Freeze, Securitization and Additional Negotiated Rate Incentives . . . . . . . 10

2. 'Electric Earnings Cap 16

3. Electric Rate Design 16 Uncontrollable Costs 17

5. System Benefits Charge 18

6. Unbundling 20

7. Direct Charge Fees 21

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Table of Contents (cont Pacae IV. Retail Access 21 General Provisions 21

2. Customer Choice Pilot Program 22

3. Retail Access D'lvlslOn~

for City of Norwich and Lockport o o o ~ ~ o ~ o ~ ~ ~ ~ ~ o ~ ~ ~ ~ ~ 22 Retail Access for Remaining Customers 22

5. G RT o o ~ ~ ~ ~ o e ~ ~ ~ ~ ~ ~ ~ 24

6. Provider of Last Resort 24

7. Reciprocity 24

8. Rights and Obligations under Public Service Law Section 68 24 V. Cost Recovery ~ ~ ~ o o o \ ~ ~ 2D

1. Competitive Generation Plan . ~ e ~ o o ~ o ~ ~ ~ o 25

2. NUGs, NMP2, Hydroelectric and Regulatory Assets .. 27 VI. Mergers and Acquisitions................ 29 VII. Corporate Structure ............. '..... 29 VIII. Other Provisions ................... 34 IXo PlnalI ty o ~ ~ o ~ ~ ~ ~ ~ o ~ ~ ~ ~ ~ ~ o o o ~ ~ o o o 36 X. Ef fectiveness ..................... 36

0 Table of Contents (cont'd)

Appendices Appendix A: Forecast Summary of Kilowatthours and Revenue Effects Appendix B: Rate Schedules Appendix C: Uncontrollable Costs Appendix D: Method for Calculating CTC Append'x E: Target Levels for MUG Contracts Appendix F: Service Quality Mechanism Appendix G: Amortization Schedule for Electric Business of RegSub Appendix H: Economic Development Power Appendix l: Estimated Price Reductions

0' NEW YORK STATE PUBLIC SERVICE COMMZSSZON In the Matter of New York State Electric Qas Corporation's Plans for Electric Case 96-E-0891 Rate/Restructuring Pursuant to Opinion No. 96-12 AGREE5GKT CONCERNZNG THE COMPETITIVE RATE AND RESTRUCTURZNG PLAN NEW YORK STATE ELECTRZC 6, GAS CORPORATZON This agreement concerning the competitive rate and restructuring plan of New York State Electric & Gas Corporation (the "Agreement" ) is entered into as of this 9th day of October 1997 among New York State Electric k Qas Corporation ("NYSEG" or the "Company"'), the Department of Public Service Staff ("Staff" ), the New York State Department of Economic Development ("DED"), the New York Power Authority ("NYPA"), the National Association of Energy Services Companies ("NAESCO") and The Joint Supporters

(" Joint Supporters")~, hereinafter collectively referred to as the "Parties." The Parties agree as follows:

ln various provisions of this Agreement, these terms refer to the corporation as of the date of this Agreement and.,

where this Agreement applies to periods after the. formation of a holding company ("HoldCo"), to the electric business of RegSub which will continue to be the Commission-regulated electric and gas utility. After the corporate restructuring contemplated by Article VZZ of this Agreement, HoldCo will be the parent of RegSub and other subsidiaries, including but not limited to one or more generation companies ("GenSub") and energy services companies {"ESCO").

The Joint Supporters, a coalition of energy service providers, includes the following entities: CNG Energy Services Corporation, B.E.S.T., Znc., The E Cubed Company LLC, OnSite Energy, Znc., R.E.E.P., Znc., SYCOM Enterprises and Power Resource Managers (PRM), LLC.

lj I. Introduction In response to the Order Establishin Procedures and Schedule, issued October', 1996 in this proceeding by the Public Service Commission of the State of New York (the "Commission" ), representatives of NYSEG and Staff have been engaged in discussions regarding a rate plan for the Company's business operations and a restructuring of the Company. As a result of further discussions, the Parties have reached thih Agreement to resolve the issues raised in this proceeding and in the Commission's 0 inion and Order Recrardin Com etitive 0 ortunities for Electric Service, Opinion No. 96-12, issued May 20, 1996 (" Opinion No. 96-12")

in the Competitive Opnortunities proceeding (Case 94-E-0952) .

The issues raised in these proceedings are interrelated and complex and will have long-range impacts on the provision of electric sexvice in the Company's service territory. Notwithstanding the complexity of the issues, the Parties have resolved these matters by settlement rather than litigation. This Agreement gives fair consideration to the interests of NYSEG's customers, investors and other stakeholders and achieves the Commission's principles, vision and goals set forth in Opinion No. 96-12 and its Opinion No. 95-7, inion and Order Ado tin Princi les to Guide the Transition to Co etition, issued in Case 94-E-0952 on June 7, 1995.

Zn general, this Agreement provides for: (1) l'ower rates for all customers as contrasted to those that would have applied under NYSEG's 1995 electric settlement agreement; (2) a retail access program that will lead to retail choice of power supplier for all NYSEG customersthe commencing August 1, 1999; (3) a mechanism to assess market value of NYSEG' coal-fired generation; (4) authority to implement. a HoldCo structure in accordance with the terms

. set forth in Article VII below; (5) a rate with the objective of moving basic customer. service charges, and incremental demand and energy use toward marginal cost, while avoiding undue bill shock for any customer; (6) reasonable unbundling of existing'electric rates; and (7) an extension of the gas rate settlement after further negotiation.

2

6 0

1. Procedural Histo of Opinion No. 96-12 In 1993, the Commission initiated a proceeding to address issues related to potential competition in the regulated energy markets in New York State. Case 93-N-0229, Proceeding on Motion of the Commission to Address Competitive 0 ortunities Available to Customers of Electric and Gas Service and Develo Criteria for Utilit Res onses Order Institutincr Proceedin (March 19, 1993) (changed to Case 94-E-0952, by Order dated November 30, 1994, to reflect new focus on electric service) (the "Competitive Opportunities proceeding" ) .

Subsequently, the Commission issued its Opinion No. 94-15 which addressed the utilities'bility to enter into individually negotiated flex rate contracts with qualifying

.customers. Case 93-N-0229, 0 inion and Order Re ardin Flexible Rates, Opinion No. 94-15,. issued July 11, 1994. In that Opinion, the Commission stated that '"a second phase of proceeding may be helpful to investigate issues related 'his to the future regulatory regime in light of Competitive Opportunities." Id. at p. 35.

On August 9, 1994, the Commission instituted phase II of the Competitive Opportunities proceeding, Order Institutin Phase II of Proceedin, Case 93-M-0229 .(August 9, 1994) . This phase of the proceeding was intended "to identify regulatory and ratemaking practices that will assist in the transition to a more competitive electric industry designed to increase efficiency in the provision of electricity while maintaining safety, environmental, af ordability, and service quality goals." Id. at pp. 1-2.

Parties to Phase II of the proceeding were urged to work together to "examine issues related to the establishment of a fully efficient wholesale market for electricity and any p"icing reforms necessary to reflect those market ef ficiencies in retail customer rates." Id. at p. 3.

The Commission adopted, on June 7, 1995, final principles to guide the transition to greater competition in the electric industry. Case 94-E-0952, inion and Order Adootina Princi les to Guide the Transition to Co etition, Opinion No. 95-7, issued June 7, 1995.

On December 21, 1995, Administrative Law Judge A. Lee and Ronald Liberty, then-Deputy Director of the Ene"gy and Mater Division, issued a Recommended Decision addressing implementation of the restructuring principles.

3

0 Subsequently, on May 20, 1996, the Commission issued its Opinion No. 96-12.

2. The Re irements of inion No. 96-12 Opinion No. 96-12 sets forth the Commission's vision and goals for the future electric regulatory regime. The Commission's stated vision for the future of the electric utility industry includes the following factors: (1) effective competition in the generation and energy services sectors; (2) reduced prices resulting in improved economic development for the State as a whole; (3) increased consumer choice of supplier and service company; (4) a system operator that treats all participants fairly and ensures reliable service; (5) a provider of last resort for all consumers and the continuation of a means to fund necessary public policy programs; (6) ample and accurate information for consumers to use in making informed decisions; and (7) the availability of information that permits adequate oversight of the market to ensure its fair operation. Id.

at 24. In addition, the Commission reiterated that the principles adopted on June 7, 1995 "set forth the overall goals of the future regulatory regime by briefly stating the advantage to be gained and the limitations that are necessary as the State moves'oward a more competitive electric industry." Id. at p. 26. The Commission also established the following goals: (1) lowering rates for consumers; (2) increasing customer choice; (3) continuing reliability of service; (4) continuing programs that are in the public interest; (5) allaying concerns about market power; (6) continuing customer protections and the obligation to serve. Id. at pp. 26-27.

In its Opinion, the Commission di ected NYSEG and four other electric utilities to each file a rate and restructuring plan consistent with the Commission's policy and vision for increased competition. -Id. at pp. 74-75; see also id. at p. 92.

The Commission stated that these utility plans should address, at a minimum, the following matters: (1) the structure of the utility both in the short and long term, including a description of how that structure complies with the Commission's vision and, in cases where divestiture is not proposed, effective mechanisms that adequately address resulting market power concerns; (2) a schedule for the introduction of retail access to all of the utility's customers, and a set of unbundled tariffs that is consistent

with the retail access program; {3) a rate plan to be effective for a significant portion of the transition; and (4) numerous other issues relating to strandable costs, load pockets, energy services, and. public policy costs. Id. at pp. 75-76, 90.

In addition, the Commission'directed the utilities to collaborate with Staff and other interested parties to accomplish technical studies on subjects including load pockets, market prices, energy services companies and reporting requirements. Collaborative efforts were also directed to be held on public educational forums and on necessary Federal Energy Regulatory Commission ("FERC")

filings, which have centered on development of an independent system operator and power exchange. Id. at 63-64.

In a petition filed September 18,. 1996 in the Supreme Court of New York, Albany County, the electric utilities, including NYSEG, challenged certain aspects of the Commission's determinations made in Opinion No. 96-12. On November 25, 1996, Justice Joseph Harris issued a decision and order denying the petition of the electric utilities. A notice of appeal was filed by the electric utilities on December 24, 1996 and the appeal remains pending.

settlement is approved and becomes effective as set forth in If this Article X below, NYSEG will withdraw its appeal.

3 . NYSEQPlan In conyliance with the directives of Opinion No. 96-12, the Company submitted its rate and restructuring proposal called NYSEGPlan on September 27, 1996. On December 19, 1996, the Company filed a petition pursuant to which NYSEG has sought authority to form a holding company. The Commission subsequently notified the parties that the holding company petition would be addressed herein. Case 96-E-0891, Notice to the Parties (issued January 7, 1997).

4. NYSEG's 1995 Electric Settlement Order Concernin Electric Revenue and Rate Desi lta '.'- {issued September 27, 1995 in Case 94-M-0349), the Commission approved a three-year settlement agreement (the "1995 Electric Settlement" ) which replaced the third year of a previous agreement. In. the 1995 Electric Settlement, NYSEG agreed to forgo the 9.1% increase provided for in a 5

previously-approved agreement, and eliminated its fuel adjustment clause and its revenue decoupling mechanism and waived its right to most of the reconciliations and true-ups that had been provided under the prior agreement. The 1995 Electric Settlement resolved NYSEG's revenue requirement for a 36-month period by providing for the following increases~:

Year One: $ 45 079 000 (2 9 o)

Year Two: $ 45 250 000 (2 8o)

Year Three: $ 45,500,000 (2.7%)

Under the terms of the 1995 Electric Settlement, rate design for the first year was adopted and NYSEG was required to file its. proposal for Years 2 and 3 revenue allocation and rate design no later than six months before the Year 2 rates were to go into effect (February 1, 1996) . On January 31, 1996, NYSEG filed its proposed revenue allocation and rate design for the second and third years and subsequently .

submitted applicable tariffs on July 18, 1996 for Year 2.

On September 9, 1996, NYSEG petitioned for rehearing of the Commission s Order Sus endin Rate Filin issued August 26, 1996, which deferred through December 30, 1996 the rates in the July 18 tariff submission. On December 18, 1996, the Commission issued an order further extending the effective date of the July 18, 1996 tariffs to June 30, 1997. By letter dated May 29, 1997, the Company agreed to an extension of the suspension period, with certain conditions, pending the outcome of its rate/restructuring proceeding.

At its Open Session of June 25, 1997, -the Commission approved this extension of the maximum suspension period.

By its Order Sus endin Rate Filin , issued July 10, 1997, the Commission suspended the Year 3 rate increase that was scheduled to take effect on August 1, 1997.

In a petition filed and pending in the Supreme Court of the State of New York, Albany County, the Company is seeking a judgment annulling and setting aside the orders issued August 26, 1996 and December 18, 1996 and directing the Commission to issue an order granting rates for the second year increase under the 1995 Electric Settlement. On January 16, 1997, the Commission issued its Order Den in Petition for Rehearincr and Re irin Further Proceedin s.

In this order, the Commission:. (1) denied NYSEG's petition Years One, Two and Three refer to the twelve month Periods ending July 31, 1996, July 31, 1997 and July 31, 1998, respectively.

for rehearing; and (2) determined that the issue of whether NYSEG should receive the second year increase of 2.8% under the 1995 Electric Settlement would be reviewed in this proceeding.

5. Ne otiations Amon The Parties Case 96-E-0891 was established by the Commission to examine NYSEGPlan. On October 9, 1996, the Commission issued its Order Establishin P'rocedures and Schedule (the "October 9 Order" ). Xn the October 9 Order, the Commission established a schedule and assigned Administrative Law Judge Jeffrey E. Stockholm to preside over this proceeding. To date, 58 parties have intervened in,this proceeding.

Zn the October 9 Order, the Commission stated that a negotiated outcome is preferable to a litigated outcome and that discussions and negotiations among the parties are strongly encouraged. October 9 Order at p. 3. The ..

Commission also established a 90-day period for negotiations. To facilitate these negotiations, the Commission waived certain provisions of its settlement guidelines.

On November 1, 1996, NYSEG conducted a briefing session concerning the NYSEGPlan submission and technical experts were available at that session to answer questions. By letter dated November 14, 1996, NYSEG provided notice of impending settlement negotiations pursuant to applicable Commission rules and regulations. An all parties conference was held on December 4, 1996. Public Statement Hearings were held in Plattsburgh on November 20, 1996, in Binghamton on December 11, 1996 and in Elmiza on December 12, 1996.

ALJ Stockholm convened procedural conferences on November 18 and December 20, 1996 to review .the status of negotiations and discovery, to establish future procedures and schedules and to address other necessary matters. By notices issued December 19, 1996, January 9, February 13, February 27 and March 6, 1997, the Secretary of the Commission informed the parties that the period established in the October 9 Order for the submission of a settlement agreement would be extended for NYSEG, the last extension being to March 25, 1997. Without an executed settlement by that date, the parties proceeded to litigate the case.

7

6. Liti ation of NYSEG's Modified Plan for On March'25, 1997, NYSEG submitted direct testimony that updated, and'in certain respects revised, the testimony that had been filed in support of NYSEGPlan on September 27, 1996. In addition, the Company filed a Proposed Settlement Agreement (Exh. 117) . In a letter dated April 10, 1997, the Company explained that the Proposed Settlement Agreement supersedes the March 25th testimony where differences between the two appear.

Direct testimony was also submitted by the following parties: Staff; the American Association of Retired Persons

("AARP"); Independent Power Producers of New York, Inc. and Enron Trade z Capital Resources ("IPPNY/Enron"); Multiple Intervenors ("MI"); the Public Interest Intervenors ("PII");

EnerScope; NYPA; DED; the New York State Consumer Protection Board ("CPB");the Retail Council of New York (" Retail Council" ); the RE3SCO Restructuring Coalition ("RE3SCO");

and Wheeled Electric Power Company ("WEPCO").

A Procedural Conference was held before ALJ Stockholm on April 16, 1997 to address a variety of procedural issues.

The Company submitted responsive testimony on April 21, 1997. Staff and most of the other parties identified above filed rebu"tal testimony on May 6, 1997. Evidentiary Hearings were held in Albany, New York before ALJ Stockholm on May 15-16 and 19-22, 1997. The record in this proceeding comprises 3,718 pages of transcript. In addition, 205 exhibits were eceived in evidence. Initial and Reply Briefs we e submitted to ALJ Stockholm on June 13, 1997 and June 23, 1997, respectively.

7. The Settlement A reement Negotiations between the Company and Staff continued through the litigation phase of the case. On July 30, 1997, the Company filed with the Commission and ALJ Stockholm, and served upon all parties to 'the proceeding, a Joint Statement of Principles, which was executed on July 28, 1997 by counsel for NYSEG and Staff. NYSEG and Staff met with all interested parties in Albany on August 5 and 12, 1997 to explain the Statement of Principles and to discuss the parties'oncerns.

On August 20, 1997, a draft Agreement, incorporating the points covered in the Joint Statement of principles, was 8

0 sent to all active parties. A meeting of interested parties was held in Albany on August 26, 1997 to receive their comments on the draft Settlement Agreement. As a result of that meeting and subsequent discussions, several 'revisions were made and are now'eflected in the Agreement.

II. General Provisions The electric price cap and price reduction provisions of this Agreement cover the five-year period beginning with the effective date of tariffs implementing the Commission opinion approving this Agreement. That five-year period is referred to herein as the "Price Cap Period." Other provisions continue thereafter in accordance with the terms of this'Agreement. To more particulaxly define the Price Cap Period, the terms Year One, Year Two, Year Three, Year Four and Year Five describe the first, second; third, fourth and fifth twelve month period, respectively, after the commencement of the Price Cap Period.

2. Relationshi to 19 5 Electric Settlement

a. NYSEG is currently operating under the terms of the 1995 Electric Settlement, which expires July 31, 1998..

The increases for the second year, commencing August 1, 1996, and the third year commencing August 1, 1997, were suspended by the Commission pending the outcome of this proceeding, as stated in Article 'I.4 of this Agreement.

b. This Agreement supersedes the 1995 Electric Settlement. As a result, upon this Agreement becoming effective, NYSEG will (i) withdraw its pending Article 78 petition regarding the electric increase for the second year under the 1995 Electric Settlement, and (ii) forgo the increases scheduled for the second and third years of the 1995 Electric Settlement. NYSEG will withdraw that petition based upon a court-filed stipulation between NYSEG and the Commission.

3. Relationshi to Existin Gas Settlement A reement NYSEG is currently providing natural gas service consistent with a three-year gas settlement agreement approved by the Commission in Opinion No. 95-19, issued December 14, 1995. After further negotiations, it is expected that this gas settlement will be extended through 9

the Price Cap Period upon such terms as are agreed to by the Parties and are accepted by the Commission pursuant to a separate agreement or another proceeding.

XXX. Rate Plan

1. Price Reductions Price Freeze Securitization and Additional Ne otiated Rate Incentives

a. NYSEG will forgo the $ 45.25 million revenue increase approved as part of Year 2 and the $ 45.5 million revenue increase approved as part of. Year 3 under the 1995 Electric Settlement. Those forgone revenues will result in a price reduction of approximately 78 for residential and commercial customers from levels previously anticipated in the 1995 Electric Settlement.

b. Beginning with the effective date of Year 1 tariff leaves implementing the Commission opinion approving this Agreement, current electric rates will be reduced five percent on average each year for five years for the following eligible customer groups (including recognition of the legislated changes in New York State revenue taxes): (i) industrial customers with average on-peak demands of 500 kw or greater and (ii) all demand-billed customers with load factors of 68$ or greater. Customers receiving negotiated or incentive rates will become eligible for such rate reductions after their contracts and/or applicable tariff obligations with NYSEG 'expire unless those contracts and/or applicable tariffs permit them to become eligible for'uch rate reductions prior to the contract and/or applicable tarif f obligation expiration date.

Beginning with the tariff leaves implementing theeffective

c. date of the Year 5 Commission opinion approving this Agreement, the then-current electric rates will be educed by the amount necessary to produce a five percent rate reduction (which shall include recognition of the legislated changes in New York State revenue taxes) for all customers not eligible for the reductions described in Article III.l.b above. The five percent rate reduction is calculated in Appendix I. Customers receiving negotiated or incentive rates will become eligible for such rate reductions after their contracts and/or applicable tariff obligations with NYSEG expire unless those contracts and/or applicable tariffs permit them to become eligible for such rate reductions prior to the contract and/or applicable tar'ff obligat'on expiration date.

b

d. The forecast summary of kilowatthours ("kWh") and revenue effects due to revised rates for each service classification for each year of the Price Cap Period is attached hereto as Appendix A. This Agreement secures for NYSEG's customers substantial benefits over a five year Price Cap Period and the Agreement has benefits which extend beyond the Price Cap Period as the Company fosters a fully competitive environment through an auction of its generation plant and full xetail access for customers by August 1, 1999. As described in more detail below in Table 1, repeated as Appendix l to this Agreement, NYSEG has agreed to forego .rate increases previously approved by the Commission in the amount of $ 522.1 million while qualifying industrial and large commercial customers will receive rate reductions to stimulate economic development for the benefit of upstate New York. All residential and commercial customers will benefit from a price reduction of 11.7% by the fifth year. The total amount of the rate concessions called for in this Agreement is $ 725.4 million. The following table reflects the estimated reductions shown in Appendix I:

11

0 T~le 1 Estimated Price Reductions and Revenue Concessions included in the 1997 Electric Rate Settlement Agreement

($ /millions)

Pre-Year 1 Year 1 Yeer 2 ~Year Year 4 Year 5 Total 886 I287 1998 1999 2000 2001 2002 Elirninau f 199 & 1997 A r ved a e Increas 68.0 90.8 90.8 90.8 ~ 90.8 90.9 522.1 52% ~9% ~Go g.7%

Subtotal @99 8 22,1 Residential, Small Commercial, and Other Customers Eli Ie r ther D c or al Di~c nts Gross Revenue Tax S 0.8 133 13.5 13.6 Rate Reductions S Subtotal S Q.2% ~l J of Benefits for Residential, Small Commercial, and N tEli 'ef erD ~ or ~~ntracg 0'8.0 91.6 104.1 1043 158.9 621.0

7. % 7.1tro 7. % 11.7%

Industrial Customers with Demands of at Least 500 kw mers wi ad cl s F at ~t Gross Revenue Tax S 0.1 0.3 1.2 3.8 Rate Reductions S 6.4 124 2~4 2~9 Subtotal S 65 12.7 18.7 24.5 30.0 92.4

.7cro 4 2~26o 2.0 Total Benefits In addition to th S

above ouarsifiable saiines. the Connanv

%68.0 will ferro costs incurred 100.1 and revenues lost ~108$ 131$

with itreletrentine retail access.

191.9 725.4 12

0

e. In. the event that New York law is enacted to permit and facilitate the voluntary securitization of intangible assets, including but not limited to the generation asset provided for in Article V.l of this Agreement, and is so utilized. by NYSEG, net savings resulting from securitization will be returned to customers in a manner to be determined by the Commission.'.

To further business retention, revitalization and economic development during the Price Cap Period, NYSEG will supplement existing programs or institute new programs as specified more fully below. Except as otherwise specified herein, the parties intend that provisions of the existing tariffs referred to in this subparagraph f will continue during the price cap period:

c v ll >> es: For qualified loads in the zones currently in place, a discount of 4.0 cents per kWh will apply prospectively to new customers or growth from existing customers. Rates for existing EDZI qualifying load will continue at the current incentive discount during the Price Cap Period. .For zones that'may be created in the future, the following discounts .

shall apply: {i) for the first two zones created, the discount, shall be 4.0 cents per kWh; {ii) for any additional zones, the discount shall be 3.25 cents per kWh. NYSEG agrees to re-examine the level of the discounts and incorporate marginal cost pricing for such growth in the it filing makes no later than February 1, 1999 for rates that will apply in Year 3. Customers receiving the 4.0 cents per kWh discount and 3.25 cents per kWh discount specified above for growth will qualify for any greater EDZI discounts approved, in response to the Year 3 rate filing-For customers receiving the growth discounts specified above, the Company intends to maintain at least that level of discounts prospectively as long as the resultant rate charged customers does not fall below incremental cost.

ev' c 'v >> " a es: The eligibility criteria based on billing demand for customers eligible for the ERI will be reduced from 500 kw to 300 kw.

Customers taking service under the ERI special provision may opt instead for the 5% reductions described in Article III.l.b, provided that they have met or agree to continue to meet their commitments under this tariff and also provided that they meet the eligibility criteria for the 5% rate reductions set forth in this Agreement. All qualifying applicants may participate in appropriate conservation and DSM programs offered by the Company.

Business Retention Incentive "BRI"  : NYSEG will file a new tariff provision, to be known as the BRI, designed to augment its existing retention (~e , Self Generation Deferral Incentive, Industrial Incubator Incentive, Economic Development Incentive, EDZI, SC 13 and SC 14) and revitalization (~e , ERI) tariff provisions during the Price Cap Period. Any shortfall in net revenues received by NYSEG as a result of the BRI will be deferred with carrying charges for subsequent recovery from ratepayers in accordance with Article V.2.a., or from NUG contract savings in accordance with Article V.2.b. NYSEG will make available a total of 50 MN of capacity for this new service, with a phase-in of 10 MN per year for each year of the Price Cap Period. Criteria to determine which industrial and non-retail commercial business customers with minimum monthly billing demands of 250 kw shall be eligible for the BRI will be agreed upon by NYSEG and DED. 'ualifying customers must receive a comprehensive package of quantifiable economic incentives (which, among other incentives, may include real property tax incentives) from sources other than NYSEG equaling at least an amount of the customer's previous 12 consecutive months of electric bills that is the product of such aggregate bills times the percentage discount to be received from NYSEG as specified below for the years the customer will receive such discounts. Qualifying criteria for revitalization customers will be those identified in NYSEG's ERI special provision. NYSEG and DED will develop together objective criteria for retention customer eligibility and for measuring the value of the package actually received by the customer. When a customer qualifies for the BRI, it will receive, out of the aforesaid funding, discounts in energy and demand rates of 20 for ~

both the first and second years, 15% for both the third and fourth years and 10.,for the fifth year, if any. The above-specified BRI discounts shall apply only during the Price Cap Period. Customers taking service under the BRI may opt instead for the 5% reductions described in Article 1II.1.b or retail access provided for in Article IV provided they have met or agree to continue to meet all BRI job retention and/or revitalization commitments and the eligibility criteria for the 5% rate reductions or retail access set forth in this Agreement. This BRI program is not intended to diminish NYSEG's commitment to its SC 13 program.

sc 13: For 'industrial customers eligible for an SC 13 con-ract, the existing 2 MW minimum capacity threshold set forth in the SC 13 tariff will be reduced to 1 hK. For non-retail commercial business customers eligible for an SC 13 14

0 contract, the existing 5 MW minimum capacity threshold set forth in the SC 13 tariff will be reduced to 3-MW. NYSEG retains the flexibility to file further revisions to its SC 13 tariff.

SC l4: For customers eligible for an SC l4 contract, the existing criteria set forth in the SC l4 tariff will be modified as follows:

(i) an additional affidavit shall be developed that will enable a customer to represent that "but for" the combination of a comprehensive package of economic incentives or real property tax incentives and the award of an SC 14 contract, the business would not expand or locate in NYSEG's service territory; the growth threshold will be reduced from 500 kw of connected capacity to 250 kw in areas where there is underutilization of NYSEG's distribution facilities (as determined by NYSEG) and to 300 kw in all other areas; (iii) for an existing customer which increases its use of its existing facilities, a customer will be eligible for an SC 14 contract if it adds a shift in order to use equipment with total connected demand of 250 kw in underutilized areas and 300 kw in all other areas, that has not been in operation for a period of at least one year; and (i v) the baseload of SC 14 customers will be eligible for the 5% reductions specified in Article III.l-b, provided that such baseload meets the eligibility 'criteria under Article III. 1.b.

NYSEG retains the flexibility to file further revisions to its SC 14 tariff.

~ Availabilit of 5% Reductions and Retail Access to Reci ients of Incentive Rates: Unless otherwise specified above, recipients of any NYSEG incentive rates may qualify for the 5 ~ reductions described in Article III.l.b or retail access provided fox in Article IV by relinquishing eligibility under the incentive, provided that they have met the requirements of their tariff and the eligibility c"iteria for the 5-. rate reductions or retail access set forth in this Agreement.

15

t 0

2. Electric Earnin s Ca

a. During each year of the Price Cap Period, RegSub electric earnings will be capped at 12. of common equity, including any combined GenSub earnings prior to the completion of the auction or the subsecpxent appraisal process (if necessary).

Any such earnings in excess of 12%'will be return'ed to customers in a manner to be determined by the Commission. Any reduction in the common equity balance resulting from any writeoff or writedown of assets, or the repurchase of common stock,. will be eliminated before RegSub's electric return on equity is calculated under the earnings cap. The costs of any potential takeover defense mounted by NYSEG may be excluded from the earnings cap calculation at the discretion of the Commission.

b. During each year of the five-year Price Cap Period, the RegSub electric earnings floor will be 9.0% The Company may petition for rate relief if earnings fall below the floor. Such rate relief. will be prospective from the date of the filing. I

3. Electric Rate Desi f

a. As a rate objective, the parties agree that the basic service charge and the energy and demand charges upon which

~

customers make decisions about whether to consume more or less electricity should reflect marginal costs, while avoiding undue bill

~

shock for any customer. The Company agrees, however, to freeze rates for customers not covered by Article III.1.b. above for Years 1 and 2 of the Agreement, subject to the terms of this Agreement.

b. Year 1 and 2 rates forall service classifications are shown on the rate schedules attached hereto as Appendix B and made a part hereof. The Year 1 rates for customers covered by Article III.1.b. will be implemented upon the effective date of tariff leaves for Year 1 pursuant to the Commission Opinion approving this Agreement. The tariff leaves for Year 1 will be filed on one day's notice prior to the effective date. The Year 2 rates pursuant to Appendix B shall apply for Year 2 of the price Cap period, unless otherwise modified by the Company in accordance with the terms of this Agreement.

c. The Company will make a filing no later than February 1, 1999, that includes new electric rate designs for Years 3, 4 and 5 that address the marginal cost-based rate objectives for all classes. In connection with such filing, the Company intends to propose that the rate reductions provided for in Article III.1.b be preserved on a revenue neutral basis to the Company-16

0 Beginning in Year 3, NYPA savings for residential customers will be reflected in the basic service charge. These rates will be implemented upon Commission approval of tariff leaves to be effective at the beginning of Year 3 of the Price Cap Period, unless otherwise modified by the Company in accordance with the terrr~ of this Agreement. At the same time, the Commission will also approve tariff leaves to be effective at the beginning of Years 4 and S of the Price Cap Period, unless otherwise modified by the Company in accordance with the terms of this Agreement.

d. During the Price Cap Period, the Company may file with the Commission for approval of tariff changes to implement voluntary incentive rates to encourage changes in 'sales based upon marginal costs and for. minor revenue-neutral electric service price changes between and within cia'sses. Any proposed changes will be filed by RegSub upon 30 days notice and will be subject to Commission approval.

e. The NYPA savings for residential customers will be communicated to customers through a message on their term of the Price Period.

bill for the Cap

4. Uncontrollable Costs

a. The Company may petition to recover revenue for the following two categories of uncontrollable costs:

~ Category 1 As outlined in Appendix C, p. 1, this category covers nonrecurring events as a result of f'orce majeure, which shall include storm, flood, riot, terrorism, sabotage, war, strike or labor disturbance (other than by NYSEG's bargaining units) or acts of God. Category 1 costs also include those Category 2 costs that have been incurred before rates are changed to recover those increase'd costs. Aggregate costs in Category 1 during any of the specified 12-month periods in excess of a materiality threshold of 3S of RegSub's net electric income will be recovered through the aforesaid adjustment.

~ Category 2 - This category covers any costs incurred above the target levels specified in Appendix C, p. 2.

b. Recovery of Category 1 and Category 2 uncontrollable costs will be determined through a limited and expedited process similar to a traditional "second stage" review, and will not result in a reopener of any terms of this Agreement. The Company shall submit an annual filing which reports the variances of 17'

C 0

0

actual costs above the 3w materiality threshold for Category 1 items, and Category 2 targets and costs included on Appendix C,

p. 2 of 2. Any recovery of Category 1 or 2 cost increases achieved may be offset by Category 1 or 2 cost savings below the targets during the Price Cap Period, any electric earnings in excess of the 12% cap discussed below, and any net NUG contract cost savings achieved by contract termination or restructuring during the Price Cap Period. In the event that the variances from the target are negative, the amounts will be disposed of at the discretion of the Commission. The Appendix C, p. 2 of 2, target amounts, entitled "Other Programs in PSC's Discretion," represent monies available for use at the Commission's discretion in each of the identified years.

c. Notwithstanding a Company filing to recover 'costs pursuant to the Category 1 and 2 cost items, the Company shall make an annual filing for each of the years of the Price Cap Period to report on electric earnings and to defer any excess electric earnings that have not been used to offset rate recovery of uncontrollable costs as described above for the benefit of customers. In the event that in any year of the Price Cap Period the Company petitions for cost recovery under the uncontrollable cost recovery provision for Category 1 or 2 items, the Commission will be entitled to offset any such requestbeen with any electric realized but for earnings in excess of 12$ that would have the use by the Company of accelerated (increased) depreciation or amortization of any physical or regulatory assets. Such acceleration (increase) is permitted without pre-approval by the Commission.

5. S stem Benefits Char e

a. The Commission will make a determination'n .either the instant proceeding or in the pending System Benefits Charge

("SBC") collaborative in the Competitive Opportunities proceeding regarding the cost level and mechanism of recovering costs associated with certain public policy programs. If such a mechanism is approved by the Commission, the Parties support use of standard performance contracts with stipulated pricing as one way that could be used to disburse funds for energy efficiency programs .,

b. Except as otherwise provided in this Agreement or as determined by the Commission as part of the SBC collaborative in Case 96-E-0952, the Company shall have no further DSM obligations pursuant to the 1995 Settlement other than'he DSM evaluation report for year ending July 31,'997, and will not be required to 18

0 obtain approval for its 1997 DSM Plan. As a result, the Comgany wi.ll withdraw its petition for approval of that Plan.

RZMAZNDER OP THE PAGE ZNTEHTXONALLV LEFT BLANK 19

0

a. Commencing with the date on which NYSEG files tariffs implementing the Commission opinion approving this Agreement, or as soon thereafter as practicable, NYSEG electric retail rates will be unbundled as shown in Table II below:

Table II Year 1 Year 2 Years 3-5 Basic Service Basic Service Basic Service Charge Charge Charge System Benef its System Benefits System Benefits Charge Charge'ower Charge'ransmission Energy a Demand, Supply as appropriate Retail Access Delivery and CTC Credit, as Power Supply (Competitive appropriate Transition Charge)

Total Retail Access Transmission Credit, as appropriate Total Distribution Customer Service Retail Access Credit, as appropriate

. Total If any If any If any

b. Unbundling of "Transmission" from "Delivery and Power Supply" will be implemented based on the classification of transmission and distribution facilities determined by the Commission in Case 97-E-0251.

c. RegSub will endeavor to submit a cost of service study fo electric customer service functions by November 1, 1998, but in no event will such study be submitted later than service February 1.

1999. The Company agrees to unbundle the customer 20

0 function on an incremental cost basis with the filing of tariffs to be effective August 1, 1999.

7. Direct Char e Fees

a. NYSEG may petition to introduce revenue-neutral direct charge fees based on incremental costs for various electric services now performed by the Company. These services may include, but are not limited to, activation fees for customer name change or meter turn-on, reconnection fees where service is restored within 12 months of disconnection, fees to recover costs incurred where access'to a customer's property is not permitted, and fees related to customer payment in the field to avoid shut off. The filing will specify the nature of the fee, the rationale for the fee based on cost causation, and the amounts to be collected from customers.'V.

Retail Access

1. General Provisions

a. NYSEG will introduce direct retail access for eligible retail electric customers to other qualified suppliers pursuant to this Agreement. Prior to August 1, 1999, the availability to a customer of competitive market options through the retail access permitted under Article XV of this Agreement'annot be used to justify eligibility for a negotiated or incentive rate for either new load or revitalization purposes. Customers receiving service under tariffs allowing NYSEG negotiated or incentive rates will become eligible for retail access after their contracts and/or applicable tariff obligations expire unless their contracts with NYSEG permit such customer to become "

eligible earlier except as provided in Article ZXZ.1.f. NYSEG znay file a petition with the Commission for a retail access transaction fee on an incremental cost basis.

t

b. For the purposes of this Article EV, the market price of electric power and supply shall be assumed to include energy and capacity. The market price will be obtained from published sources, such as the Dow Zones and Reuters financial service, and eventually from an appropriate power exchange once by FERC and is operating.

it is approved

c. Concurrent with the Customer Choice pilot Program described in Paragraph 2 of this Article lV, NYSEG will begin a statewide education effort for its other retail customers using various communications media, 'which education effort will be subject to comment by the parties and approval by Staff ~

21

T

2. Customer Choice Pilot Pro ram

a. , Beginning November 1, 1997, NYSEG will implement a

'Customer Choice Pilot Program in satisfaction of the Commission's "Order Establishing Retail Access Pilot Program", issued June .23, 1997 in Case 96-E-0948 - Petition of Dairylea Cooperative, Znc.

to Establish Open-Access Pilot Program for .Farm and Food Processor Electricity Customers. Tariffs governing the Customer Choice Pilot Program were submitted on August 1, 1997 in Case 96-E-0948 and became effective on a temporary basis. on August 4, 1997.

3. Retail Access for Cit of Norwich and Lock ort Division

a. Beginning August 1, 1998, RegSub will introduce retail access to all customers in the City of Norwich and in RegSub's Lockport Division sub'ject to minimum load and aggregation recuirements as are necessary for the Company and are consistent with the minimization of barriers to competition. There are approximately 23,000 customers in the City of Norwich and the Lockport Division. All customers in this group who sign up with a new supplier will have power delivered by RegSub from their chosen suppliers commencing no later than December 31, 1998.

During this introductory period, customers who choose another supplier may be billed off-system, rather than through RegSub's Customer Information System ("CIS".) .

b. The retail access credit used to back out generation during the period prior to the completion of the auction as more part'cularly described in Article V.1 and the closing(s) thereon for Norwich and Lockport customers electing to switch suppliers shall be the market price defined. in Article lV.1.b plus an adder of four-tenths of one cent ($ 0.004) per kWh for customers el'gible for the 5: reductions pursuant to Article IIZ 1.b., and an adder of one cent ($ 0.01) per kNh for customers not eligible for the 5: reductions pursuant to Article ZZI 1.b., except for the flex rate customers defined in Article III 1.b. unless and until they are eligible as provided for in Article ZIZ 1.b. Zn no event shall such credit exceed three cents ($ 0.03) per M,,

including the Gross Receipts Tax ("GRT").

4. Retail 'Access for Remainin Customers

a. Beginning August 1, 1999, RegSub will offer retail access to all of its remaining customers who are not receiving service under RegSub negotiated or incentive rates, provided that the Independent System Operator (~ISO~) is first approved by the.

FERC -nd is operating. Notwithstanding the foregoing, customers 22

taking service under RegSub's negotiated or incentive rates shall be eligible for retail access after their contracts and/or applicable tariff obligations expire unless their contracts and/or applicable tariff obligations with NYSEG permit such customer to become eligible earlier. Customers selecting a new supplier will have power delivered by RegSub from their chosen suopliers commencing no later than December 31, 1999. The Company may petition for an extension of these deadlines if RegSub experiences unacceptable balancing/settlement problems or experiences severe customer order backlogs or approved by FERC is not operating. The if petition the ISO as first should clearly define the problems causing delay, NYSEG's potential solutions, and NYSEG's proposed revised schedule.

b. The retail access credit used to,back out generation during the period following the completion of the auction and closing(s) thereon through the end of the Price Cap Period for all customers electing to switch suppliers shall be ecpxal to (i) 3.23 cents per kWh including GRT through July 31, 2000, (ii) 3.47 cents per kWh including GRT from August 1, 2000 through July 31, 2001, and (iii) 3.71 cents per kWh including GRT from August 1, 2001 through the end of the Price Cap Period. The retail access credit provided to customers will be net of the CTC produced as a result of the auction described in Article V and will be adjusted without altering the system average retail access ciedit amounts set forth above. The method used to make this adjustment will be presented by the Company when it submits its cost of service study for electric customer service unbundling as described in Article III.6.c. At the end of the Price Cap Period, all costs (other than the non-bypassable. CTC) related to the assets subject to the auction/appraisal process hereunder shall be excluded from the rates charged by RegSub for all customers, and all customers shall pay the market price of generation plus any applicable GRT.

c. In the event the auction or appraisal process described in Article V and the closing(s) thereon are not comoleted by August 1, 1999, the retail access credit during the period commencing August 1, 1999 and ending upon the completion of the auction or appraisal process used to back out generation for all customers electing to switch suppliers shall be the market price of energy plus a four-tenths of one cent ($ 0.004) per kWh adder for customers eligible for the 5% reductions pursuant to Article III 1.b. and a one cent ($ 0.01) per kWh adder for customers not eligible for the 5% reductions pursuant to Article III 1.b.,

except for the flex rate customers defined in Article III unless and until they are eligible as provided for in Article III 1.b 1.b., but such credit shall in no event exceed 3.23 cents per kWh, including GRT.

23

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e

5.

a. All customers, including those who switch suppliers, shall pay the non-bypassable CTC plus any related GRT for as long as is necessary to permit the Company to recover the regulatory asset determined. by the auction process. Bills will disclose all generation-related credits and charges.

b. In the event the GRT is modified from the July 28, 1997 amounts, the backout figures listed in Article IV.4.b shall be changed by a corresponding amount.

6. Provider of Last Resort RegSub will be the provider of last resort during the Price Cap Period of this Agreement unless such status is changed by the Commission. For those eligible customers who do not receive

'electric supply from a new supplier, RegSub will deliver power, generated by RegSub or another entity, to such customers at the total cost of the bundled tariff rates in place at that time, but only for the Price Cap Period of this Agreement. For customers that have not made arrangements for electric supply at the end of the Price Cap Period, RegSub will'cquire electric supply from an appropriate power exchange and bill those customers for such supply at cost. Unless otherwise recpxired by law, RegSub may rely on the'SO to plan for power supply, assuming the ISO is approved by FERC and operating.

During each phase of the retail access program, HoldCo's ESCO will have full access to provide services to RegSub's retail customers within the conditions of HoldCo's structure described in Article VII of this Agreement. Also, to the extent any other New York State utility or New York State utility-affiliated load serving entity ("LSE") seeks to gain access to RegSub's service territo~, such LSE will not be allowed to serve as a supplier in RegSub's service territory unless the service territory of the LSE's affiliated, utility is open to retail access by RegSub and ESCO in an ecpxal or greater proportion.

8. Ri hts and Obli ations under Public Service Law Section 68 Except as specifically modified by this Agreement, RegSub's right and obligation under New York Law and its Public Service Law Section 68 Certificates to provide electric service to its customers remains unchanged notwithstanding the full 24

0 imp3.ementation of retail access and remains in full force and effect for the full term of this Agreement and thereafter unti3.

duly chan'ged.

V. Cost Recovery

1. Com etitive Generation Plan NYSEG owns, operates and maintains several coal-fired electric generation plants under traditional cost-of-service regulation supervised by the Commission. To promote a more fully competitive generation marketplace, mitigate the strandable costs associated with generation plants, achieve the Commission's goals, and prudently establish the fair market value of such NYSEG generation plants for the benefit of investors and customers, NYSEG will undertake to operate and to transfer its coal-fired plants pursuant to the following terms and conditions.

a. The NYSEG coal-fired electric generation that is covered by this competitive generation plan consists of its Kintigh, Homer City, Milliken, Goudey, Greenidge, Hickling and Jennison generating stations and their associated assets and liabilities (including without limitation, Somerset Railroad, environmental liabilities, pension costs, collectiv'e bargaining agreements, fuel contracts, land. and property rights, equipment and facilities, etc.).

b. The valuation of NYSEG's coal-fired electric generation plants shall be determined by a simultaneous multiple xound open auction process designed to obtain the highest final market value for purposes of mitigation of above-market costs and establishment of a regulatory asset for xecovexy of remaining above-market costs. All coal plants and associated assets and liabilities as set forth in Article V, Paragraph 1.a, wil3. be subject to such auction process. The process will not be designed to necessarily require NYSEG to divest its coal plants to a third party, except as otherwise agxeed to in this settlement. The Company's generating subsidiary (GenSub) can participate. as a bidder, and shall not have any special rights or privileges, including the right to close out the bidding by a matching bid. NYSEG shall provide at the same time (with appropriate confidentiality protections) all potential bidders with the same plant and operating information as NYSEG makes available to GenSub.

c. The ascending bid auction will continue for a given coal plant until no new bids are received. Bids will be compared in the auction process on a gross cash basis, and the Company 25

0 J

agrees to sell (or transfer to GenSub) the plants at the auction determined value without subsequent negotiation of value.

d. The auction process will be completed and the transaction(s) resulting therefrom shall close no later than August 1, 1999.

e. Xf no bids are received for a plant above the minimum hid requirement of the auction, an appraisal process will be used and completed no later than August 1, 1999, or as soon as practicable thereafter. The valuation, on an after-tax basis, achieved by the appraisal process shall be used in lieu of the value of net after tax auction proceeds for purposes of establishing the regulatory asset or credit as set forth below.

f. The protocols, terms and conditions to implement the auction and appraisal process developed by the Company in consultation with Staff will be submitted to the Parties for comment prior to submittal to the Commission for pre-auction approval, which submission will occur by approximately February 1, 1998. Such auction provisions will state time requirements for bids and have mechanisms to pre-qualify bidders willing and able to abide by auction requirements and to disqualify or penalize bidders for cause. The Commission may employ a consultant, at NYSEG's expense (recoverable from the auction proceeds), to advise the Commission on the design and implementation of the'uction process consistent with this Agreement. The Commission shall select the consultant from a list of at least three qualified individuals or firms selected jointly by the Company and Staff.

g Zn orde to facilitate a competitive generation market, an auction sale or transfer free and clear of the Company's mortgage indenture, and establishment of a minimum bid value for the auction process, the coal plants and associated assets and liabilities will be transferred to GenSub as soon as practicable after the creation of HoldCo and/or obtaining the mortgage trustee's release. GenSub earnings with respect to any such transferred plant will be combined with RegSub's earnings for the period prior to an auction sale or transfer of that plant for purposes of the electric earnings cap referred to in Article III.2. Upon such transfer, a regulatory asset of RegSub will be created for the difference between the book value of the coal plants and the valuation performed in accordance with the bond indenture. Such regulatory asset will be adjusted subsequently upon a sale or transfer based, on the cash proceeds resulting from the auction process net of tax, auction and transaction costs.

After a plant is sold or transferred, pursuant to the process 26,-

0 described in this Article, there will be no further adjustment of RegSub's regulatory assets that have been created as a consequence of this Article, except for federal income tax consequences.

h. Upon completion of the auction process and sale of any plant to an unrelated third party or GenSub, the regulatory asset or credit on RegSub's books will represent the difference between the net book value of the plant, less funded deferred taxes, and the net after-tax auction proceeds. This regulatory asset or credit will be grossed up in accordance with SFAS 109. Any net regulatory asset and carrying charges thereon (calculated based on the pre-tax costs of capital used by the Commission to determine the Company's retail rates, i.e., 12.43$ ) will be recovered from all'ustomers through the CTC over a period of time to be determined by the Commission at the conclusion of the auction process and which shall not exceed the weighted average remaining life of the auctioned assets as of the conclusion of the auction process and the closing(s) thereon. The method for calculating the CTC is attached hereto as Appendix D. In the event that the GenSub is the winning'bidder of any plant in the auction, any deferred tax liability on the gain will remain the responsibility of RegSub's customers by virtue of its inclusion in the calculation of the above-described regulatory asset or credit which may result from the auction. The amount of this future customer responsibility will be limited to the tax (calculated at the then current tax rate) which derives from the tax gain that would have been realized at the time of the transfer to the GenSub at the auction-determined value, had the sale been made to an unrelated third party grossed up in accordance with .SFAS 109. Any net regulatory credit will be used by RegSub to writedown the Company's Nine Mile II investment, and any such credit remaining after such write down will be used by RegSub as directed by the Commission.

2. NUGs NMP2 H droelectric and Reaulato Assets

a. Stranded cost recovery, including amortization of the RegSub regulatory assets associated with the coal plants, is presumed within overall rate objectives during the Price Cap Period and recovered through retail electric rates. After the Price Cap Period, remaining RegSub. regulatory assets, other than those resulting from the auction process, and hydro, non-utility generator ("NUG") and (except in the event'of the auction described below) nuclear fixed costs will be recovered (for the life of the amortization period, contract or license) through a non-bypassable wires charge. The regulatory asset created by the coal plant auction will continue to be recovered through the CTC.

27

The Company will propose to its cotenants the auctioning of ownership of Nine Mile Point ll, and will vote for such auction.

The auction and, the auction process, .including but not limited to measures to address the liability for decommissioning, would be subject to prior Commission approval, 'and any sale or transfer of any ownership of Nine Mile point Il would be subject to approval by the Commission, the Nuclear Regulatory Commission and any other regulatory bodies having jurisdiction. If NYSEG's ownership of Nine Mile Point II is duly sold or transferred to a non-NYSEG entity, then upon completion of such sale or transfer a regulatory asset of RegSub will be created on RegSub's books for any difference between the book value of such plant, less funded deferred taxes, and the net after-tax auction proceeds. Such regulatory asset will be grossed up in accordance with SPAS 109, and any net regulatory asset and carrying charges thereon (calculated based on 12.43%) will be recovered from all customers through a non-bypassable wires charge over 'a period of time to be determined by the Commission not to exceed fifteen years. If such sale or transfer occurs during the Price Cap Period, an appropriate adjustment to benefit NYSEG customers will be made for net nuclear operation, maintenance, fuel'nd tax savings, realized by NYSEG as a result of the sale or transfer, such adjustment to be applied first to reduce or eliminate the nuclear non-bypassable wires charge. If a net credit results from such sale or transfer, such credit will be used by RegSub as directed by the Commission. If Nine Mile Point II is not transferred to new ownership during. the Price Cap Period, nuclear variable costs, which would exclude decommissioning and wind down costs and 62.5-. of annual property taxes, will be put to market after the Price Cap Period pending the auction, provided that the Company's cotenants put the same to market. In year 5 of the Price Cap Period, RegSub will make a filing with the Commission for rates applicable to the year following the Price Cap Period,.

b. In the event NYSEG achieves NUG contract cost savings net of transaction costs from targets set forth in Appendix E of this Agreement during the Price Cap Period of this Agreement through NUG contract termination or restructuring, but excluding securitization, 80: of any net savings achieved through such NUG contract termination or restructuring shall be flowed through to customers in a manner to be determined by the Commission, subject to the allocation of such savings first to reimburse the Company for lost revenue resulting from implementation of the new EDP provisions set forth in Appendix H hereto and then to credit the regulatory asset created. to cover the shortfall in net revenues esulting from the implementation of the BRI tariff pursuant to Article III.1.f. The remaining 20% of any net savings achieved through such NUG contract termination or restructuring shall be 28

0 retained by the Company. The foregoing shall be subject to potential offset against uncontrollable costs in the event the Company petitions for uncontrollable cost recovery with respect to Category 1 or 2 items as more particularly described in Article III.4. of this Agreement. Commencing after the Price Cap Period, all net NUG contract cost savings are subject to flow through to customers in a manner to be determined by the Commission. The Parties agree that in order to provide such contract savings the negotiated, modification of the pricing terms would be in the public interest. The Parties will encourage and actively support the negotiated termination and/or restructuring of such contracts. Such termination and/or restructuring includes methods to provide NUG contract savings through negotiations that do not materially adversely affect the steam host. NYSEG shall consider the effects, and/or restructuring on the steam hosts.

if any, of termination VI. Mergers and Acquisitions

1. Pursuant to a petition filed jointly or individually by the Company, NYSEG shall have the flexibility to retain, on a cumulative basis, all savings associated with the acquisition or merger with another utility for a period of five years from the date of closing of any such merger or acquisition up to the amount of acquisition premium paid over the lessei of book value or fair market value of assets merged or acquired. Savings in excess of that recovery will be disposed of by order of the Commission.

2. The cost recovery provisions of this Agreement will continue in the combined entity.

3. Sta "f and the Commission will give expedited review and treatment to any petition by RegSub or HoldCo in connection with an acquisition or merger with another utility.

VII. Corporate Structure

1. NYSEG's petition to form HoldCo shall be approved, and NYSEG shall be authorized. to restructure its operations'y forming a holding company structure pursuant 'to a Plan of Exchange (the "Plan of Exchange" ) as more particularly set forth in this Agreement.

2. Under the terms of the Plan of Exchange, and subject to the rights of the holders of NYSEG's Common Stock (the "NYSEG Common Stock" ) to exercise their appraisal rights, all of the outstand'ng shares of NYSEG Common Stock will be exchanged on a 29

0 share-for-share basis for the common stock of HoldCo (the "Share Exchange" ) . Such common stock exchanged for NYSEG Common Stock is referred to herein as HoldCo Common Stock. NYSEG and HoldCo will make such regulatory filings as may be recpxired by law to ef fectuate the proposed restructuring.

3. Upon consummation of the Share Exchange, each person who owned NYSEG Common Stock immediately prior to the Share Exchange, other than those stockholders who properly exercise their appraisal rights, will own a corresponding number of shares and percentage of the outstanding HoldCo Common Stock, and HoldCo will own all of the outstanding shares of NYSEG Common Stock.

4. After the Share Exchange, NYSEG will be a regulated, wholly-owned utility subsidiary of HoldCo, herein referred to as RegSub, which will functionally separate electric delivery services from gas services.

5. After the Share Exchange, NYSEG shall be authorized to transfer to GenSub, in the form of a stock dividend or such other appropriate form, all of the common stock of Somerset Railroad Corporation, which is currently a wholly-owned subsidiary of NYSEG.

6.~ After the Share Exchange, NYSEG shall be authorized to transfer to HoldCo, in the form of a stock dividend or such other

~

appropriate form, all of the common stock of NGE Enterprises, Inc., which is currently a wholly-owned subsidiary of NYSEG.

~

~

7. RegSub shall be authorized to structurally separate its coal-fired generation assets and. liabilities by transferring such generation assets and liabilities to GenSub in accordance with Article V.l of this Agreement.

8. The following terms and conditions shall apply to RegSub and its.affiliates regarding affiliate operations and relationships.

a. Common stock dividends paid by RegSub to HoldCo will be limited in any calendar year to 100% of net income available for common stock. The calculation of net income will exclude any one-time, non-cash accounting charges. This restriction will exclude any one-time dividends to HoldCo attributable to major transactions such as asset sales, the transfer of generating assets associated with HoldCo. and GenSub formation, or securitization.

30

0

b. By a separate petition that will be reviewed and acted upon expeditiously, the terms of the current Commission Global Financing Order applicable to NYSEG (Case 95-M-1195) will extend through the term of this Agreement and be amended to include authorization for RegSub to enter into derivative or other risk management transactions with respec't to current or future financings. In addition, by a separate petition that will be reviewed and acted upon expeditiously, the terms of the Stock Repurchase Order applicable to NYSEG (Case 94-M-0954) will extend through the term of this Agreement and will be amended so that RegSub may,* from time to time, repurchase at book value from HoldCo such amount of shares of its common stock as RegSub determines in order to maintain the RegSub equity ratio at an appropriate level. These stock repurchases will be excluded from the calculation of excess earnings. These buyback provisions are in addition to the Commission's authorization to repurchase shares in Case 94-M-0954. In the event that RegSub's first mortgage bond rating falls below investment grade according to both Moody's and SEP, RegSub will be prohibited from repurchasing shares of common stock until its investment grade rating is restored.

c. Non-officer employees who transfer between RegSub and an unregulated affiliate will be prohibited, from transferring back to their original employer for a period of one year unless a specific waiver is received from the Commission or its designee.

Non-officer employees returning to RegSub may not transfer to an unregulated subsidiary for a minimum of one year from the date of the return unless a specific waiver is received from the Commission or its designee HoldCo and its affiliates, including RegSub, may have common officers.

d. RegSub and its affiliates will be pexmitted ofto maintain one common pension fund at HoldCo. For the purposes allocating pension expense (credit), excess pension fund assets as of August 1, 2002 will be attributed to RegSub. Subsequent gains or losses will be allocated to all affiliates.

e. No payment or imputation of royalties or positive benefits to ratepayers will be made by or with respect to RegSub or any affiliates given the special circumstance surrounding this Agreement. The "Order Approving Stipulation and Agreement, Subject to Conditions", issued April 28, 1992 in Case 91-M-0838 and the Stipulation and Agreement approved therein authorizing NYSEG to make investments in diversified activities are superseded.

31

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f. In addition, the following standards of conduct shall apply=

Separate Entities: Any affiliate will be set up as a, business entity separate from RegSub to foster competition in the utility's territory. Separate entities will help to minimize the potential for self-dealing and the perception of self-dealing by customers and other competitors.

Separation of books and records: Separation will include books, and records, non-officer employees, advertising and marketing ef forts, and energy purchasing (except for tariffed services). Where common costs are shared to'take advantage of economies of scale, direct cost allocation will be used where practical. However, if direct cost allocation is impractical, cost allocations will be accomplished by using a fully distributed cost method to be provided by NYSEG and approved by the Commission.

Ph sical Se aration: RegSub and HoldCo may occupy the same building. Any non-regulated affiliate, 'other than HoldCo, will'e located at a different location from RegSub to reduce the opportunity for, and appearance of, anti-competitive behavior or other inappropriate activities.

Generation employees may occupy the same building as .RegSub until completion of the auction required pursuant to the competitive generation plan.

Affiliate Transactions: Affiliate transactions will be minimized to protect against cross-subsidies. When transactions occur, they will be priced at tariff rates, if applicable, or at least at fully distributed costs In addition, such transactions will be at arms-length. All transactions in excess of $ 100,000, other than tariffed transactions and corporate governance and administrative services, between RegSub and either HoldCo or any affiliate will be pursuant to written contracts filed with the such Commission, and the provision of goods and services by contracts will be on a basis that neither disadvantages RegSub nor unduly prefers HoldCo or any affiliate.

Transfer of Assets: Any transfer of utility assets will be compensated to-RegSub based on the greater of book value or market value, except for the transfer of generation assets (coal plants, related equipment and contracts) as contemplated by this Agreement.

32

0 Transfer of Data 1nformation: RegSub will not provide any competitive information or data, including but not limited to any customer or market information relative to energy services, to its affiliated entities unless that same th' information or data is provided to all competitors at same time and under the same conditions.

Access to Books and Records: Staff will have direct access to the books and xecords of RegSub and, prior to the auction, of GenSub. For purposes of Public Service Law Section 110, Staff will also have direct access to the books and records of RegSub, GenSub, HoldCo, and, any majority-held affiliate. 'For the purpose of'uditing any Section its 110 transactions between RegSub and either HoldCo or af filiates, including GenSub, HoldCo will provide Commission designated personnel reasonable opportunity to audit any such transaction, subject to appropriate confidentiality agreements and trade secret protection.

Dis ute Resolution Process: A process will be established, in consultation with Department of Public Service Staff, for a competitor or customer to obtain Commission review if it believes that RegSub, or its affiliate in a transaction with RegSub, has acted in an anti-competitive manner. Complete records of disputes will be retained for Department of Public Service review.

Name and Re utation: There shall be no restrictions on HoldCo or any affiliate using the same name, trade name, trademarks, service name, service mark or a derivative of a name, of HoldCo or RegSub, or in identifying itself as being affiliated with HoldCo or RegSub. RegSub will not provide sales leads for customers in RegSub's service territory to any affiliate and will refrain from giving the appearance that RegSub speaks on behalf of an affiliate or that the affiliate speaks on behalf of RegSub. If a customer requests information about securing any service or product offe ed within the service territory by an affiliate, RegSub may provide a list of all companies known to RegSub operating in the service territory that provide the service or product, which may include the affiliate, but RegSub may not promote its affiliate.

RegSub experiences a downgrading or placement on creditwatch or review of its senior debt, RegSub management will notify the Di ector of Accounting .E. Finance of the New York State Department of Public Service.

33

Guarantee of Affiliate Debt: RegSub will not guarantee the notes, debentures, debt obligations or other securities of any affiliate, nor will security for any it pledge any of its assets as indebtedness of HoldCo or its affiliates.

~ Loans of lo ees: RegSub will not loan operating employees to its affiliates. Operating employees are those involved of business, which excludes (among in competitive lines other categories) corporate governance, finance, accounting, legal, and administrative services.

Behind-the-Meter Ener Services: NYSEG's RegSub will not conduct competitive behind-the-meter energy services, except that NYSEG RegSub will be permitted, to provide solutions to customer reliability and deliverability issues related to transmission and distribution.

VIII. Other Provisions

1. The Parties will negotiate in good faith modifications to NYSEG's SC-11 tariff relating to backup and maintenance services. The negotiation shall address recovery of the CTC where backup or maintenance service continues to be provided by NYSEG.

2. As described in more detail in Appendix P NYSEG's Service Quality Mechanism will be modified to be a potential penalty-only mechanism based on RegSub's performance on electric service reliability. RegSub's earnings cap threshold will be adjusted down for the period of the penalty in the event that a penalty is 'incurred.

3. Zn order to mitigate customers'bove-market cost .

burden, in its.sole discretion, RegSub shall have the flexibility to accelerate or increase amortization of regulatory assets, including the generation asset resulting from the competitive generation plan described in Article V.l.c. of this Agreement, accelerate or increase amortization of the Nine Mile Point 2

("NMP2") book balance, accelerate or increase depreciation, or make similar adjustments in the exercise of its business judgment. An amortization schedule is attached hereto as Appendix G. These expenses shall be included. in the annual calculation of RegSub's electric return on equity for earnings cap purposes, except that these adjustments shall be excluded from such annual calculation in the event that RegSub presents to the Commission a proposed cost-recovery charge for uncontrollable costs pursuant to Article III.4. of this Agreement. Zn addition, the Commission will be entitled to offset such proposed charge 34

0 with any RegSub earnings in excess of 12.0% on common equity that would have been realized but for the use of accelerated or increased amortization or accelerated or increased depreciation as above permitted. These adjustments shall be excluded in the calculation of any earnings shortfall for the purposes of Regsub filing for electric rate relief described in Article III.2 of this Agreement.

4. As set forth in Appendix G, NYSEG may apply any deferred credit balances as of the commencement of the Price Cap Period against any deferred. charges.

5. In its Order Reconvenin Pr'oceedin , issued September 20, 1996, in Case 93-E-0960, the Commission directed the parties to that proceeding to negotiate future Economic Development Power

("EDP") rates. Pursuant to a Memorandum of Understanding (the "Memorandum" ) executed December 6, 1996, the parties agreed to interim EDP rates pending litigation of all issues related to NYSEG's provision of EDP service in this proceeding (Case 96-E-0891). For the reasons explained in the Procedural Ruling of March 20, 1997, the due date for submission of testimony on the EDP rate issue was postponed from the date provided in the Memorandum. An agreement on EDP rates to resolve Case 93-E-0960 is attached, as Appendix H.

6. Any net savings from changes in Gross Receipts Taxes will be flowed through to NYSEG's customers subject to Article IV.5.

7. RegSub will make a filing at the beginning of Year 5 of the Price Cap Period to provide for recovery of delivery, NMP2 and NUG costs, recovery of or credit to regulatory assets (including the'generation asset described in Article V.1 of this Agreement) and recovery of the costs of electric power supply at market rates beginning after the Price.Cap Period, consistent with the terms of this Agreement.

8. NYSEG will withdraw the two Article 78 Proceedings referenced in this Agreement and the Article 78 proceeding to challenge the Commission's "Order Concerning Retail Access Proposal" issued in Case 96-E-0948 (the Dairylea Proceeding) through stipulation agreements between the Company and the Commission.

9. 1t is the intent of the Parties, and the Commission by virtue of its approval of this Agreement, that this Agreement meets the accounting requirements of .Statement of Financial Accounting Standards No. 71, throughout its term.

35

0

10. The Parties request an expedited process to obtain.

Commission approval of this Agreement.

IX. Pinality The Parties agree that Commission approval of this Agreement represents approval of its terms, and the Parties recognize that the concessions and assurances of NYSEG are being made, in substantial part, in reliance upon later actions of the Commission pursuant to the terms of this Agreement. Accordingly, the Parties hereby request that'he Commission's Order approving this Agreement expressly find that:

1) the mutual concessions and assurances set forth in this Agreement are inextricably interrelated;

2) that they will produce rates that are just and reasonable through the Price Cap Period;

3) that they justify the reasonable opportunity for continued recovery of strandable costs and the use of non-bypassable wire charges for that purpose subsequent to the Price Cap Period according to the terms of this Agreement;

4) that they achieve the Commission's goals and policy objectives in Opinion No. 96-12; and

5) that they further the public interest.

X. Effectiveness

1. The NYSEG restructuiing plan provided for under this Agreement is subject to any required approval of the NYSEG Board of Directors and stockholders and any regulatory body ofhaving jurisdiction. This Agreement is subject to. issuancechanges,a final Commission Order approving this Agreement without which order shall include or adopt the above-stated express findings.

In the event that any of said approvals is not received, then this Agreement and all of its terms and conditionsandshall be null, shall inure and void. This Agreement shall be binding upon, to the benefit of; any successor in interest to any Party-

2. The terms and provisions of this Agreement apply solely to and are binding only in the context of the purposes and of results of this Agreement. None of the terms and provisions this Agreement and none of the positions taken herein by any other Party Party may be referred to, cited or relied upon by any 36

0 as precedent in any other proceeding before this Commission or any other regulatory agency or before any court of law, except in furtherance of the purposes and results of this Agreement.

Executed as of the 9th day of October 1997 NEW YORK STATE ELECTRIC 2 GAS C RPORATION By.

NEW YORK STATE DEPARTMENT OF PUBLIC SERVICE By-NATtJRAL RESOURCES DEFENSE COUNSEL By:

NEW YORK STATE 'DEPARTK2PZ OF ECONOMIC DEVELOPMENT By:

NEW YORK POWER AUTHORITY By o THE J'OINT SUPPORTERS By:

37

0 Executed as of the first day of October 1997 NEW YORK STATE ELECTRIC R GAS CORPORATION By:

NEW YORK STATE DEPARTMENT OF PUBLIC SERVICE By e NEW YORK STATE DEPARTMENT OF ECONOMIC DEVELOPMENT By:

NEW YORK POWER AUTHORITY By-NATIONAL ASSOCIATION OF ENERGY SERVICES COMPANIES By.

TH INT PORTERS By:

38

0 Executed as of the first day of October 1997 NEW YORK STATE ELECTRIC & GAS CORPORATION By:

NEW YORK STATE DEPARTMENT OF PUBLIC SERVICE By:

NEW YORK STATE DEPARTMENT OF ECONOMIC DEVELOPMENT By:

NEW YORK POWER AUTHORITY ~

By:

NATIONAL ASSOCIATION OF ENERGY SERVICES COMPANIES By:

THE JOINT SUPPORTERS By:

39

0 ExecuteB as of the 9t> day of October 1997.

NEW YORK STATE ELECTRIC 9 GAS CORPORATION By o NEW YORK STATE DEPARTMENT OP PUBLIC S"RVICE By:

NEW YORK STATE DEPARTMENT OP ECON Dr PMENT By:

NEW YORK POWER AUTHORITY By:

NATIONAT ASSOCIATION OP ENERGY SERVICES COMPANIES By:

THE O'OINT SUPPORTERS By-

0 Executed as of the first day of October 1997 NATIONAL ASSOCIATION OP ENERGY SERVI , CO PANIES, INC.

0 APPENDIX A FORECAST

SUMMARY

OF KILONATTHOURS AND REVENUE EFFECTS

C i

a NEW YORK STATE ELECTR)C Si GAS CORPORAT)ON PSC CASE NO. 96E<89$

Appendix A Forecast Summary of Ntciwatthours and Revenue Effects Schedule A Due to Revised Rates Page1of5 Reflecting an RTS Factor of: 0354696 Year1 of Settlement Revenue Exsdn6 Increaser Total Percent PSC SC Revenue {Decrease) Revenue Change Ho. Ho. IIWH . 000 000 000 i/

Residential Reguhr 115 5+26,704 $ 485/82 nota (1) $ 483g82 nota (1)

Rasldendal Oay4gght $ 15 S $ ,738+$ S $ 221~ note {1) $ 221~ nots (1)

Res ldenttal Time of Use 115 12 333~9 $ 59r423 note (1) $ 39r423 note (1)

TOTAI. RESIDENTIAL 5+98~$ $744,688 nota (1) $ 744,688 note (1)

Genenl Senrlce Regular 115 6 205+58 $ 55,709 nots (1) $ 35,709 note (1)

Genenl Service Day&ight 115 9 6~0 $ 924 note (1) $ 924 nota (1)

Subtotal 211,758 $ 56,633 nota (1) $ 36,633 note (1)

General Serv~mand 115 2 lndustdab 500 IAV 0 $0 $0 $0 0.0%

Genenl Se~mand 1$ 5 2 High Load Factors68% 171,716 $ 15.796 ($ 793) $ 15,004 4.0i/i General Se~mand 115 2 AllOthers ~2,$ 89 $ 32$ ,025 note (1) $ 32$ ,025 nota (1)

Genenl Se~mand Genenl Service Time of Use General Servkr.TIme of Use 1$ 5 115 115 2

7-1 7-1 Total Industrtah500 IhV High Load Factors68%

2.753W5

$ 25~2 6S,772

$ 336,82$

$ 12910

$ 4470

($793)

($ 661)

($ 322)

$$ ~

$ 334@29

$ 5,948 4.0i/i 4.0i/i General Service-Tbne of Use 115 7-$ AllOthers 595,675 $ 64,908 nota (1) $ 64@08 note (1)

Genenl Sender-Time of Use 115 7-1 Total 789/947 $ 84,088 ($983) $83,$ 05 Subtotal 5~,755 $ 420,909 ($ 1,776) $ 4t9,135 44'OTAL GENERAL SERVICE 3,755,5$ I $ 457,542 ($ 1,776) $ 455,766 aA%

Industrtal~ LW Prtmary Servke Prtmary Servke Primary Servke 115 115 115 High Load Facton68%

Ag Others

$ 5~$

141 /87 0

$$ ~ $0

$ $ 5,776

$0

($ 67) not>> {1)

$ M58

$ 15,776

$0 4A%

ncns 0.0i/i (1)

Prtmary Servke 115 Total 156 Jff8 $ 17,10$ ($ 67) $ 17454 4A%

Prtmaty Servke-Time of 115 T-2 Industrtal~ IhV 377,783 $ 57,088 ($ 1/84) $ 35+OC NA'r$

Senrke Thee of Use 115 72 High load Factors68% 48~$ $ 4~$ ($ 214) $ 4357 4.0%

Use'rimary Prtmary Servke-Thee of Use 115 7-2 Aa Others 748/M5 $ 75.$ 23 nota (1) $ 75,123 note (1)

Primary Servke-Thee of Use 115 74 Teal 1,174,157 $ 1$ 6A42 ($ 2,099) $ 1$ 4i583 .M'A Subtnnsmttslon Servke 115 3S IndustrtaM00 hW 0 $0 $0 $0 0.0%

Subuansmlsslon Service 115 5S High Load Facto~i ~$ $ 182 ($9) $ 175 4.0i/i Subtransmlsslon Senrlce 115 AQ Othen 4,180 $474 note (1) $ 474 note (I)

Subtnnsmlsslon Service 115 35 Total 6~$ $ 656 {$9) $ 647 $ A%

Subtransmlsslon Time of Use 115 Ta tndusbta~ kW 494227 $ 41,841 ($ 2.119) $ 59,722 4.0%

Subtransmtsslon Time of Use 115 ,74 High load FactcNs68% 45,771 $ 3,688 ($186) $ 3~2 40%

Subtnnsmlsslon-Time of Use 115 74 Ag Others 222,157 $ 19949 note (1) $ 19+49 note {1)

Subtransmlsskn-Time of Use 115 74 Total 762,155 $ 65,478 ($ ~05) $ 43,173 45%

Tnnsmlsslon Time of Usa 115 74 Industdab500 IAV 60~ $ 4,945 ($ 248) $ 4i698 Tnnsmlsslon-Time of Usa 115 74 High Load Factoni68 / 0 $0 $0 $0 05%

Tnnsmlsslon.Time of Use 115 7< Ag Others 19$ ,620 $ 16~ nota (1) $ 16~ note (1)

Tnnsmtsslon.Time of Use 115 7% Total 252,078 $ 21 r450 ($ 248) $ 21~2 -1Z/i TOTALPRQAARY ~$ ,7$ 9 $ 221,167 {$4,727) $ 2$ 6r459 -2.1%i TOTALGENERAL SERVICE S PRIMARY i

6,$ 07~ $ 678,709 ($ 6,503) $ 672406 1.0yi Outdoor Ughttng 115 5 17,560 $ 5,7$ 3 note (1) $ 3,713 note (1)

SUBTOTAL 115 REVENUE $ 1~471 $ $ r427,$ 10 ($ 6,505) $ 1+20,607 ax%

Street Ughtlng 118 All 86,555 t18~ note (1) $ 18~ note (1)

SUBTOTALTAIIIFFREVENUE 11,609,706 $ 1,445,673 ($ 6,503) tti439,$ 70 Miscellaneous Contracts 1,T17,457 $ $ 0S.614 $0 $ 108,614 15/27,$ 65 5t~~ {$6,503) $ 1~7, EIIMRbBX Restdendal $ 744,688 $0 $744,688 0.0i/i Hon4cesidendal (not sub)ect to decnase) ETXRia a Ez2%5a 0.0i/i Subtotal Ii5$ 7P58 0 $ +$ 7i556 0.0%i lndusutal 6 High Load Factor $ 28417 ($ 6~) 121.814 4.0'/i 0.0i/i attsceltaneous contracts 39)L{il4 a taLfd5 Total $$ ~N7 ($ 6~) $ 1~7,784 AA%

(1) This appenct la does not renect the total reducdons to resldendat and other customers not eligible for other decreases or special discounts as showA on Appendix L tgrgti97 03$ I3 PM

0 NEW YORK STATE ELECTRIC 8 GAS CORPORATION PSC CASE NO. 9M4S9<<

Appendix A Forecast Summary of Kllowaehoura and Revenue Effects Schedule A Due to Revtsed Rates Page2ofs Reflecttng an RTS Factor of: 0.954696 Year 2 of Settlement Revenue Extsdng Increasef Total Peaent PSC SC Revenue {Decrease) Revenue Change No. No. MWH 000 000 000 i/

Restdendal Reguhr 115 1 5~~7 $ 486,633 note (1) $ 486~ note (1)

Resldenthl Dayit tght 115 8 <<,728~ $ 220,128 nots (1) $ 220,128 noto (1)

Resldendal Ttme of Use TOTALRESIDENTIAL 115 12 S~329/28 $ 38,913

$ 745,674 note {1) note (1)

$ 58/<<3

$ 745+A nots note (1)

{1)

General Senrke Regular 115 6 $ 36,074 note (1) $ 36@74 note (1)

General Senrke Day&tght 115 9 $ 933 note (1) $ 933 note (1)

Subtotal $ 3T,007 ~ note (1) /$

$ 37 7 note (1)

General Se~lt4mand 115 2 tndustrtab 500 IcW 0 $0 $0 $0 0.0i/i General Seer~mand 115 2 Htgh Load Factors68% 173424 $ 15,128 ($758) $ <<MTO <.0%

Generat SenrtcoerlDemand 115 2 AB Others 2.6OLII64 $ 323~ note (1) $ 323~5 note {1)

General Serv~mand 115 2 Total 2.778,089 $ 338,723 ~

{$758) $ 337/65 General Servke-Time of Use 115 7.1 Industha~ IhV <<26~ $ 12,377 {$634) $ 11,744 N.0%

General Servke-Ttme of Use 115 7-1 High Load FactorHR% 69,162 $ 6,143 ($307) SSAt36 &0%

GenerA Servtce-Time of Use 115 T.<< AllOthers 598~ $ 65,023 note {1) $ 65,023 note(1)

General Senrke-Time of Use 115 7,-1 Total 784+24 $ 83,S43 ($ 941) $ 82,602 -1.1%

Subtotal 3,~<<3 $ 424%6 ($ 1,699) $ 420~ WA%

TOTALGENERAL SERVICE 3 786/89 $ 459~ ($ 1,699) $ 457+74 Phmary Senrke 115 Industhahs00 tcW 0 $0 $0 $0 0.0%

Phmary Senrk>> 115 3ii High Load Factors6IPA Others 15,623 $ <<~ {$64) $ 1~ 4.0%

Pnmary Servke 115 JQI 142589 $ 15.899 note (1) $ 15499 note (1)

Phmary Servtce 115 Oia Total <<58+12 $ 1?,167 {$64) $ 17,103 4A'/i Phmary Service-Time of Use 115 M tndusb<<a~ tcW 581/60 $ 35~ , ($ <<WT) $ 33,765 A.0%

Prtmary Servke Time of Use 115 7.2 High Load Factors6IP/. 48,484 $ 4,072 ($ 204) $ 3/68 &0%

Phmary Servtce Tbne of Vse 115 7-2 AQ Othem T49,017 $ 75.156 nots(1) $ 75,156 note (1)

Phmary Servke.Tbne of Use 115 7.2 Total 1,178,861 $ <<<<4,80<< ($ 2,011) $ 112,789 <<.8%

Subtransmhston Servke 115 3S Indusbtat~ tcW 0 $0 $0 $0 0.0%

Subtransmhston Servtce 115 3S High Load Factoro68%

AllOthers

~9 $ 175 ($9) $ 166 <0%

Subtransmhston Service 115 5S 4,162 $ 472 note (1) $ 472 nots (1)

Subtransmlsslon Senrlce 115 5S Total 6r45<< $ 647 ($9) $ 638 1A%i Subtransmtasion-Ttme of Use 115 74 Industhab600 bW 498POT $ 40,130 {$2.035) $ 38,097 <.0%

Subtransmhston-Time of Use 115 M High Load Factoro68% 45,785 {$177) $ 3&6 Subtransmhston Tbne of Vse 115 74 Ag Others 21 7,695 $ 19,536 note(1) $ <<9~6 nots (1]

Subtransmhston-Ttme of Use 115 M Total 762i387 $ 63,169 ($22\0) $ 60459 N8'/e Transmhston-Ttme of Use Transmhston.Time of Use 115

<<1S 7<

7~

Industhab500 NV High Load Factoro68%

6<<,050 0

$ 4,74S ($ 237) $ 4~ 4.0%

$0 $0 $0 0.0%

Transmhston.TIme of the 115 TA Ag Others <<9~0 $ 16~9 note (1) $ <<6~9 note {1)

Transmlss ton.Time of Use 115 TA Total 253,600 $ 2<<424 {$237) $ 2<<,087 TOTALPRIMARY J ~41<< $ 217,108 ($ 4~0) $ 2<<2~ 2.1%

TOTALGENERAL SERVICE 4 PRIMART 6.<<45'<<0 $ 676~<<($ 6+20) $ 670,152 <.9i/i Outdoor Ughtlng 115 5 <<T~ $ 5,713 note (1) $ 3,T13 note {1)

SUBTOTAL 115 REVEIIUE <<<<,565/74 $ 1~,768 {$ 6~) $ <<,4<<9~8 Street Ug hung 118 Ag 86~ $ <<8~ note(1) $ <<8~ note(1)

SUSTOTAL TARIFF REVENUE <<<<,652409 $ <<,444M<<($ 6~) $ 1,458,101 Mhcettancous Contracts <<,753~ $ <<<<0~ $0 $ <<<<0~ OAI%

TOTALRETAIL SALES REVENUE 13,405,766 $ <<,554,551 AA/

S)IM)8dBY Resldendal $ T45,674 $0 $ 745,674 0.0'li Noniaestdendat (not sub ject to decrease) KXKQ g KARL 0.0%

Subtotal <<i32<<&7 0 <<i32<<4<<7 03I%

Indusbtal S High Load Factor <<23,<<<<4 (6~) 116,885 4.0%

0.0'/

Mlsceganeous Conuacts 11IL22(t g 31IL22g Total $ <<~,55<< ($ 6~) $ <<,548i32<< 4.4%

EGR (I) This appendbc does not reflect the total rectucdons to restdenthl and other customers not ellglble for other decreases or spechl discounts as shown on Appendh I.

10IOII97 03:03 PM

0 NEW YORK STATE ELECTRIC 8 GAS CORPORAT)ON PSC CASE NO. 96-E4)88 Appendix A Forecast Summary of KIIowatthours and Revenue Effects Schedule

• Due to Revised Rates Pageao(5 RegecttnganRTSFacterob . 0854696 Year 3 of Settlement Revenue Exhdng Incle assi Total Percent PSC SC Revenue {Decrease) Revenue Change No. No. MWH 000 000 000 '/

Resldenthl Reguhr 115 1 5475,940 $ 480,758 nota (1) $ 490,758 note (1)

Reskfentht Day4(fght 115 8 $ ,752,927 $ 220,762 note {1) $ 220,762 note (1)

Resldenthl Time of Use 115 12 528,023 $ S8,805 note (1) $ 58+05 note (1)

TOTALRESIDENTIAL 5,434,890 $ 750~ note (1) $ 750,505 note (1)

General S<<vlcc Reguhr 115 6 209,796 $ 56,476 note (1) $ 56A76 note (1)

Gen<<al Service Day+lght 115 9 6.660 $ 942 nota (1) $ 942 note (1)

Subtotal 216A57 $ 57,418 nota (1) $ 17,418 nota {1)

General Servtawdgemand General ServlcewrfDemand General Servl~tDamand 115 115 115 2

2 High Load F~/

Indusutab500 kW AllOth<<s 175,124 2,653A35 0

$ 326jk2$

$0

$ $ 4$ $ 8 note($ )

$0 $0

$ $ 5,79$

$ 526,821 O.oy.

A.o/i nota (1)

General Senrlceer}Demand General Servfce-Tone of Usa General Service.Tbne of Use 115 115 115

, 2 7-1 71 Htgh Load Total Indusuhh F~/500 kW 2,808~

$ 27,695 69,964

$34$ r$ 58

$ 11,845

$ 5.727

($ 727)

($ 607}

($ 295)

$$$ ~

$ 340,612

$ 5,432 w.oy A.oyi General Sanrke-Time of Lha 115 71 All Others 605~ $ 65,82$ note (1) $ 65+2$ note (1)

General Sarvke-Time of Lha 115 7.1 Total 805~ $ 85~ ($ 902) $ 82A89 -$

.1'Ayi Subtota) 3,612,095 $ 424,750 ($ 1,629) $ 425,101 TOTALGENERAL SERVICE 5,828~ $ 462,148 ($ 1,629) $ 460,519 4Ayi Prfmary 115 IndusutM500 kW 0 $0 $0 $0 O.oui Sarvke High Load Facto@68/ $ 1~4 Service'rfmary 115 15,761 ($ 61) $ 1,155 N.oyi Prtmary Servke 115 All Oth<<s 143,849 $ 16,024 note (1) $ 16,024 note (1)

Prtmary Servtca 115 'otal 159,610 $ 17~ {$6$ ) $ 17,176 i 4Ayi Prtmary Servka-Time of Lha 115 74 'ndustrIM500 kW S84,684 $ 34,102 ($ 1,741) $ 5~$ NAyi prfmary S<<vtca-Tbna of Use 1$ 5 7-2 )ggh Load F~Sy All Olh<<s 49,067 759~

$ 5,912 ($ 197) $ 3,715 w.oy Prfmary Service-Time of Vsa 115 7-2 $76,0S1 note (I) $ 76,051 note (1)

Prtmary Servka-Time of Usa 115 7-2 Total 1,183/24 $ 114,044 ($ 1 457) $ 112,107 -1 Tyi Subuansmhslon Servtce 115 3S Industrtab 500kW 0 $0 $0 $0 OA'/i Subuansmhskn Servke 115 SS Iggh Load Faaorr48y asos $ 167 {$8) '158 w.oy Subuansmhslon Servke 115 SS AllOthers 4,148 $ 471 note (I) $ 471 note {1)

Subtransmhston Senrke 115 SS Total 6,451 $ 658 ($8) $ 630 $ 4'!i M 503~

Subuansmhston-Time of Use Subtransmhskn.Time of Use Subtransmhslon-Time of Use 115 115 115 74 7Q Iggh Load F~y.

Industrtab 500 kW AllOthers 46A42 225,658

$ 38A67

$ 3472

$ $ 9,965

($ $ ,954)

($ 170) note (1)

$ S6.515 San

$ $ 9,865 4.0yi 4oyi note (1)

Subtransmlsslon-Time of Use 115 7< Total 775i$ 55 $ 61/02 ($ 2,124) $ 59,678 4A'A Transmhslon-Time of Use 115 7< tndustrlati500 kW 6$ ~2 $ 4i55$ ($227) $ 4424  %.0'I Transmhskn-TIme of Vsa 115 7< High Load Factoo68'Yi 0 $0 $0 $0 0.0/i Transmhslon.Time of Vse 115 74 AllOthers 184i339 $ $ 6,7$ 2 $0 $ 16,712 0.0 A Transmhslon-Time of Use 115 TA Total 255WI $ 21+$ 3 ($ 227) $ 2$ ,036 $

TOTAL PRIMARY 2iStuk52$ $ 21 4~ {$ 4it58) $ 210.628

.1'.04 TOTALGENERAL SERVICE 6 PRIMARY 64$ 6JFS $ 677,154 ($ 5~ $ 67$ ,147 Ouutoor Ughtlng 115 5 $ 7~ $ 5,715 note (I) $ 3,7$ 3 nota (1)

SUBTOTAL 115 REVENUE $ $ ,669i525 $ 1A51,150 ($ 5~7) $ 1,425,163 Street Ughdng 118 All %ASS $ 19,195 note (1) $ 19,185 nota (1)

SVSTOTAL TAIVFF REVENLIE 11,755,658 $ $ A50~ {$ 5~ $ 1,444,558 Mhcellanaous Contracts 1,755,457 $$ $ 0~ $0 $ 1104%

TOTAl. RETAILSALES REVENUE 15,509.115 $ 1i560A45 [$5,967) st, W 4i/i SLINbtbEX Reskf enttal $ 750405 ($0) $ 750~ 0.0'/

Non4tesldendal (not sub}ect to decrease) g O.oyi Subtotal 1,552,472 (0) 1~2,472 O.oi/

lndusutal 6 High Load Factor 117,875 (5/87) 111,886 Nhceoaneous Conuacts AA%

Total 21L22Q

$ 1,560,565 g

($ 5,987} $ 1~8 4)A%

(1) Tlds appendix does not rettect the total rsducdons to resldendal and other customers not ellglble for other

({ATES.'ecreases or spectal dhcounts as shown on Appendix I.

(2) Total Revenues wig be based on MWh shown above and rates resutdng from design approved resulting from flllng by Februrary 1, $ 999.

I 0/OI/97 0310 PM

0 4

rr NBVYORK STATE ELECTRIC 8 GAS CORPORATION PSC CASK ND. $ 6%4891 Appendix A Forecast Summary of Kikwatthours and Revenue Effects Schedule A Due to Revised Rates Page 4of 5, Reflecting an RTS Factor of: 0954696 Year 4 Of Settlement Rwenue Existing Incrsasef Total Percent PSC SC Revenue {Decrease) Rwenue

~

Change Na. Ha. I4WH 000 000 000 i/

Resldendat Regular 115 ar407,676 $ 4$ 5+gs note {1) $ 495~5 ncns (1)

Resldenthl Day4$ ght 115 8 1.747g72 $ 227.604 nots (1) $ nots {1)

Reside ndal Time of Use 115 12 330,600 $3$ ,094 nate (1) $ 39,0$ 4 nots {1)

TOTALRESIDEHTIAL 5.486,14$ $ 757~ note (1) $ 757+63 note (1)

GeneralServlceRegular 11S 6 212,T15 $ 36@55 note (1) $ 36rl55 nate (1)

Geneml Servke Day+lght 115 9 6,753 $ 954 note (1) $ 954 nate (1)

Subtotal 219,469 $ 37@10 note (1) $ 37+10 nate (1)

General Serv~hrmand 115 2 Industrfa&500 kW 0 $0 $0 $0 0.0i/i General Serv~emand 115 2 High Load Facto~8i/i 177A$ 2 $ 13@66 {$701) Sf 3/64 S.O'li General ServI~Demand 115 2 All Others 2.668,$ 03 $ 330417 note (1) $ 330@17 note {1)

General Secv~fDemand 115 2 Total 2,846~5 $ 344,782 ($701) $344,081 4&/i General Senrke-Time of Use 115 7-1 Industrfab500 kW 128,731 Sttr324 ($583) $ 10,741 General Servke Tbne of Use 115 7-1 High Load Factoco684 TO@36 $ 5,67$ ($ 2S4) $ 5494 S.0%

Geneml Servke-T)me of Use 115 7-1 All Others 615,029 $ 66r465 note (1) $ 66rt65 note (1)

General Service.TIme of Use 115 7.1 Total 8'14,696 $ $ 3A6$ ($ 867) $ 82,600 ~ 1.0/

Subtotal 3,661,0$ 1 $ 428450 ($ 1,569) $ 426,6$ 2 4A%

TOTALGENERAL SERVICE 3.$ 80,549 $ 466,160 ($ 1,569) $ 464591 Primary Service 115 Industrtab 500 kW 0 ~ $0 $0 0.0 /i Primary Senrke High Load Factam68/ ($ M) 3'15 15,916 $ 1,163 $ 1,104 S.0%

Primary Scrvke 115 AllOthers 145~2 $ 16,163 note (1) $ 16,163 nate {1)

, Pttrnaty Service 115 Total 161,178 $ I7426 ($ S9) $ 17467 S4%

Primary Service Tlrrle Senesce of Use 115 7 2 lndustlfab 500 kW 3$ 7,813 S.Oi/i

$ 32,662 ($ 1,664) $ 30,99$

Primary Srnrice Time o! Use 115 7-2 High Load Facto~ 4$ ,683 $ 3,75$ ($ 189) $ 3~I S.Oi/i Pnmary Service-Time of Use 115 72 All Others 770/19 $ 77,000 note (1) $ 77,000 note (1)

Primary Service-Time of Use 115 7-2 Total 1,208,015 $ 113/21 ($ 1,852) Sff(N$ ~ 1.6%

Subtlantmtsslon Service 115 3S Iud~500 kW 0 $0 $0 $0 0.0%

Subtransmtssion Servke 115 35 High Load Factom6$ % 2+16 $ 159 ($ $ ) $ 151 S.O'l, Subtransmlzslan Service 115 35 AllOthers 4,135 $ 470 note (1) $ 470 note {1)

Subtransmtsskn 115 35 Total 6,451 $ 630 ($8) $ 622 ~ td%

Subtransmhslon-Tune of Use 115 TS Indushfab 500 kW 507r349 $ 36r844 ($ 1,871) $ 34973 S.0 /i Subtransmlsslon.Time ot Use 115 TS High Load Factors 68'/i 4T,0$ 4 SL244 ($ 1 64) $ 3440 S.O/

Subtlansmtsslon-Tune crf Use 115 TS AII Others 229,743 $ 20i407 nate (1) $ 20A07 note (1)

Subtransmlsston-Time crf Use 115 TS Total 784,1$ 6 $ 60A$ 6 ($ 2,035) $ 5$ r460 4Ai/i Transrnlsslan.Time af Use 115 7% Industrcabr 500 kW 62,063 ($ 2I8) $ 4,145 S.0%

Transmission Time of Use 115 7< High Load FactomQPl 0 $0 $0 $0 00%

Transmission.TIme of Use 115 7~ All Othets 195,707 $ 162II4 note (1) $ 162it4 note (1)

Transmission lime ot Use 115 7< Total 257,770 $ 21,177 ($ 218) $ 20 10%

TOTAI. PRII4ARY 2.417,600 $ 212050 ($ 4,172) $ 20$ 2I7$ .2.0'/

TOTAL GENKRAL SERVICE S PRIHARY 6~8,149 $ 679+10 ($5i741) $ 673rt69 4S%

Outdoor Ugnung 115 5 17~ 33,T1 3 note (1) $ 3,713 note (1)

SUBTOTAL 115 REVENUE 11Wf~ Sf AC0485 ($ 5,741) Sf r434545 4A'j Street Ugrrdng 11$ All 86pLi $ 1IL563 nate (1) Sf $ ~3 note (1)

SUBTOTALTARIFF REVENUE 1 1+lN,f92 $ 1,458PCS ($ 5,741) $ 1A53,108 atlsccltaneous Contracts 1,753r457 St tiL220 $0 $ 110~

TOTAL RETAIl SALES REVENUE 13,641,649 $ 1,569,0QI ($ 5,741) $ 1 ~

SIIM)88RT.'csidcnual

$ 757463 $0 $ 757P6S 0.0'/i Han4testdendal (not sub)ect to decrease) IL322 g 5IL322 0.0i/i Subtotal 1~,6$ 6 0 1,345,686 0.0i/i Industrial 6 High Load Factor 113,1 63 (5,741) 107,422 S.O%

Miscellaneous Contracts 33IL22g g NA%

Total $ 1~,06$ ($ 5,741) St~rt28 WA'li E{GES; (1) This appendix does not rehect the total leducdons to resldendal and athercustomels not eligible for other decreases or special dtscounts as shawn on Appendix I.

{2) Total Revenues will be based on ttwh shown above and rates resulting from design approved rssuldng from Ollng by Febcurary 1 1 999.

~

10'01/97 0343 PM

NEW YORK STATE ELECTR{C 8 GAS CORPORATION PSC CASE NO. Q&8489t Appendix A Forecast Summary of Igtovratthours and Revenue Effects Schedule A Due to Revised Rates Page 5 of 5 Reflecting an RTS Factor of: 0.954696 Year 6 of Settlement Revenue Exhtlng Incr>>asar Total Percent PSC SC Revenue Oocreaso) Revenue Change No. No. 000 000 000 e/

Resldenthl Reguhr 115 1 3>>443>>696 note (1) $ 300/I94 nota (1)

Resldenthl Oay~ht 11S 8 1,766~7 $ 224,853 note f1) $ 224,853 note (1)

Resldcnthl Time of Use 115 12 334,056 $ 39,482 nota (1) $ 39,482 nato (1)

TOTAL RESIOENTIAL 5,543/Tt $ 765~ nota f1) $ 765>>229 note (1)

Gcncnl Service Reguhr 115 6 215,891 $ 37>>475 nota (1) $ 37>>475 note {1)

Gcnenl Service Daylight 115 9 6,862 $ 968 note (1) $ 968 note (1)

Subtotal 222,752 $ 38,443 nota (I) $ 38,443 note (1)

Genera! Scnrlc~amand 115 2 Industrlab 500 kW 0 $0 $0 $0 0.0>>/e General Scrvl~emand 115 2 High Load Facton6$ '/e 180,120 $ 13ASL ($ 674) $ 12,777 4AI /e Gen ant Sarvlc~Daotand 115 2 All Others 2,708~ $ 335>>)10 note (1) $ 335410 note {1)

Genenl Scrvlcoevrioemand 115 2 Total 2388,685 $ 348,761 ($ 674) $ 348,088 4W/e Gcnenl Scrvtc>>-T)ma of Usa 115 7-1 Industrtab 500 kW 129,791 $ 10A38 ($ 558) $ 10~ 4.0%

G cncnl Service-Time ot Use 115 7.1 High Load Facto~/, 72,032 $ 5.472 ($ 274) $ 5,199 4.0>>/e Gcncnl Service-Time of Use 115 7 1 All Others 625,467 $ 67/74 note (1) $ 67>>474 note (1)

Gencnl SenHce-Time of Lhe 115 7-1 Total SET~ $ 83,785 {$832) $ 82953 -1.0%

Subtotal 3,715,975 $ 432,546 {$1~5) $ 431,041 TOTAL GENERAL SERVICE 3,938,72$ $ 470,989 {$ 1~ $ 469~

PHmary Service 115 Iud~500 kW 0 $0 $0 $0 0.0 /e PHmary ServÃc 115 Iggh Load Facmrv68% 16,098 $ 1.116 f656) $ 1.060 4.0>>4 Primary Service 115 AllOthers 1 46,930 $ 16>>331 note (1) $ 1 6>>331 not>> (1)

P Hmary Scrvke 115 Total 1 63,028 $ 17.447 {$56) $ 17,390 44>>4 Primary Service-Tittle of Usc 115 72 IndustHab 500 kW 391,005 $ 31~ ($ 1,602) $ 29,688 4.0>>4 PHmary Service Tune of Usc 115 7-2 High Load Factora68% 50,512 $ 3,625 ($ 182) $ 3~ 4.0>>/e PHmary Service-Time of Use 115 72 All Others 763,027 $ 76,955 $0 $ 76~ 0.0'/e PHmary Scrvtcc Tlrne of Lhe 115 7-2 Total 1,204,544 $ 111,869 {$1,7S4) $ 110,0$ 5 1 6%

Subtnnsmhslon Scrvhc 115 3S Industrlat>>500 kW 0 $0 $0 $0 0 0'/

Subtnnsmhslon Service 115 3S High Load Factarv6$ / 2et34 $ 161 ($ 8) $ 153 4.0>>4 Subtransmlsslon Scrvlce 115 3S AllOthers 4,117 $ 469 note (1) $ 469 note (1)

Subtransmlsslon Service 115 3S Total 6,451 $ 630 ($$ ) $ 622 1.3'/e Subtnnsmlsslon-Time ot Use 115 74 industrie>500 kW 512,524 $ 35,357 ($ 1,796) $ 33Wt 4.0>>/e Subtnnsmisslon-Time of Use 115 74 High Load Facto~/ 47,791 $ 3.124 ($ 15$ ) $ 2,966 4 0'/

Subuansmhske.Time of Use 115 74 All Others 235,477 $ 20,822 note (1) $ 20.822 note (1)

Subtransmlsslon-Time of Usc 115 74 Total 795,792 $ 59,304 (5'l,954) $ 57~

Tnnsmlsslon-Time of Usc 115 TA Induatnab 500 kW 62.574 $ 4,182 ($ 20$ ) $ 3.974 4 0'/

Tnnsmlsslon.Thn e of Use 115 7< High Load Facton6$ '/e 0 $0 nota (1) $0 note (1)

Tnnsmhslon Time Of Use 115 TA All Others 197,617 $ 16.960 note {1) $ 16.960 note (1)

Transrnlsslon-Thne of Use 115 7% Total 260,1 91 $ 21.142 {$208) $ 20~ ~ 1.04 TOTAL PRO4ARY 2.430,006 $ 210491 ($ 4,011) $ 206>>380 -1.9>>/

TOTAL GENERAL SERVlCE 8 PRIMARY 6>>ISIL734 $ 681481 {$5416) $ 675,864 Outdoor Ughdng 115 5 17.560 $ 3.713 note {1) $ 3,713 note (1)

SUBTOTAL 115 REVENUE 11,930+65 $ 1,450422 {$5516) $ 1~806 4A>>4 Street Ughttng 118 All $ 6.335 $ 18W3 note (1) $ 18.563 note (1)

SUBTOTALTARIFF REVENUE 12,016,600 $ 1,468,$ SS ($ 5416) $ 1~

Mlsallaneous Cctracts 1,753,457 $ 110~0 $0 $ 110~

TOTAL RETAILSALES REVENUE 13I770>>037 St~a>>105 ($5+IS) $ 1,$ 73~

SIIIQ(bBX Rcs(denttal $ 765~ $0 $ 765~ 0.0>>/>>

Non+osldcndat (not sub)ect to decrease) 5RURl g R5JHR 04%

Subtotal 1>>360~9 0 1+60~ 0.0%

IndustHal 8, High Load Factor 108,616 (Sgt 6) 103AOO 4.0%

Mlscegancous Contncts 1ik229 44%

Total $ 1,579,105 ($ 5516) $ 1~3~9 44%

If{ZXS:

(1) Thh a ppendlx does not ro0ect tho total reductions to rasldendal and other customers not eligible for other decreases or special dhcounts as shown on Appendbr, L (2) Total Revenues wlo be based on Mwh shown above and ntcs rasuldng trom design approved r>>suldng tram III!ng by February 1, 1999.

10rOI/97 03:03PM

New York State Electric & Gas Corporation PSC C'ASE NO. 96-E4891 Revenue impact Appendix A OfReductionin Base Ratosand Gross RevenuoYax(GRT) Schedule 8 .

For industrial and High Load Factor Customers (a) Revenues at Previous Year's Level of GRT $ 128,316 {1) $ 123,189 $ 117 715 $ 112 501 $ 107 125 (b) Target Percent rate reduction (2) 5.0% 5.0% 5.0% 5.0% 5.0%

(c) Change in revenues due to GRT and rate decreases ($ 6.420) ($ 6,170) {$5,918) ($ 5.625) ($ 5,356)

(b) (a)

(d) Reduced Level of Revenues a't Revised Level of GRT S121.897 $ 117.019 $ 111,797 $ 106,876 $ 101.768

{aXc)

(e) Change in revenues due to GRT and rate decreases {$6.420) ($6,170) ($ 5.918) ($ 5,625) {S5.356)

(i) Change in revenues due to base rate decrease $ 6,336 $ 5,928 $ 5,003 $ 5,625 $ 5,356 (g) Change in revenues due to GRT decrease (S84) (S241) ($ 915) $0

{egt)

(1) Per Appendix A, Schedule A, Page 1 Existing Revenues"

{2) Per Appendix A, Schedule A. Pages 1-5 Percent Change SETLRTS2.WK4 05:18 PM 09J29/97

0 APPENDIX B RATE SCHEDULES

PSC Case No. 96-E-0891 Appendix B Page 1 of 9 New York State Electric & Gas Corporation Rate Schedules - Residential Years 1 -

2'.

C. No. 1 (Straight Meter)

Current Year 1 Year 2 Energy

$ 0.1237 $ 0.1237 $ 0.1237 Customer Charge S/month S7.43 $ 7.43 $ 7.43 S. C. No. 8 (Day-Night Meter)

Current Year 1 Year 2 Energy Day $ 0.1391 $ 0.1391 $ 0.1391 Night $ 0.0571 $ 0.0571 $ 0.0571 Customer Charge S/month

$ 9.23 $ 9.23 $ 9.23 S. C. No. 12 (TOU Meter)

Current Year 1 Year 2 Energ $ /kWh On-Peak $ 0.1928 $ 0.1928 $ 0.1928 Mid-Peak $ 0.1138 $ 0.1138 $ 0.1138 Off-Peak $ 0.0571 $ 0.0571 $ 0.0571 Customer Char e $ /month

$ 24.00 $ 24.00 $ 24.00 Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the filing described in Article lll.3.c.

10/06/97 APPBCONT.WK4

0 PSC Case No. 96-E-089i Appendix B Page2of9 New York State Electric 8 Gas Corporation Rate Schedules Non Residential (Small General Service) Years 1 -

2'.

C. No. 6 (Straight Meter)

Current Year 1 Year 2 Ene

'$0.14277 $ 0.14277 $ 0.14277 Customer Cha e $ /month

$ 7.43 $ 7.43 $ 7.43 S. C. No.9 (Day-Night Meter)

Current Year 1 Year 2 Ene Day $ 0.15512 $ 0.15512 $ 0.15512 Night $ 0.06422 $ 0.06422 $ 0.06422 Customer Char e $ /month

$ 923 $ 9.23 $ 923 Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the filing described in Article ill.3.c.

10/06/97 APPBCONT.WK4

PSC Case No. 96-EC891 Appendix B Page 3 of 9 Rate Schedules - Non Residential Years 1 -2 SC 2 General Service - Secondary-Current Year 1 Year 2 Hours Use $ /kWh HLF/Industnal All Other HLF/Industrial All Other First 200 S0.08379 $ 0.07965 $ 0.08379 $ 0.07581 $ 0.08379 201 to 350 $ 0.07292 $ 0.06932 $ 0.07292 $ 0.06597 $ 0.07292 Over 350 $ 0.05599 $ 0.05322 $ 0.05599 $ 0.05066 $ 0.05599 Demand AII kMf $ 11.35 $ 10.79 $ 11.35 $ 10.27 $ 11.35 ustomer Char e $ /month

$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Reactive Charge $ /RKVAH All RKVAH $ 0.00095 $ 0.00090 $ 0.00095 $ 0.00086 $ 0.00095 Qualifying High Load Factor (HLF) and Industrial Customers as per this Comprehensive Settlement Agreement.

-Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the filing described in Article lll.3.c., which will reflect reductions pursuant to Article Ill.1.b, freezes prices by service class pursuant to Article lll.3.a and reductions pursuant to Article lll.1.c.

10/06/97 APPBCON2.WK4 04:44 PM

PSC Case No. 96-c.-0891 Appendix B Page 4 of 9 Rate Schedules - Non Residential Years 1 -2 SC 7-1 Large General Service - Secondary Ene On-Peak Current S/kWh

$ 0.08755 HLF/industrial

$ 0.08322

'll Year 1 Other

$ 0.08755 HLF/Industrial

$ 0.07921 Year 2 All Other

$ 0.08755 Ene Off-Peak S/kWh

$ 0.05599 $ 0.05322 $ 0.05599 $ 0.05066 S0.05599 Demand On-Peak S/kW All kW $ 11.35 $ 10.79 $ 11.35 $ 1027 $ 11.35 Customer Cha e S/month

$ 9.15 $ 8.70 $ 9.15 $ 8.28 $ 9.15 eactive Cha e $ /RKVAH All RKVAH $ 0.00095 $ 0.00090 $ 0.00095 $ 0.00086 $ 0.00095 Qualifying High Load Factor {HLF) and Industrial Customers as per this Comprehensive SetUement Agreement.

-Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the filing described in Article Ill.3.c., which will reflect reductions pursuant to Article Ill.1.b, freezes prices by seivice class pursuant to Article lll.3.a and reductions pursuant to Article lll.1.c.

10/06/97 APPBCON2.WK4 04:44 PM

0 PSC Case No. 96-E<891 Appendix B Page 5 of 9 Rate Schedules - Non Residential Years 1 -2 SC 3 Primary Distribution Current Year 1 Year 2 Hours Use S/kWh HLF/Industrial All Other HLF/Industrial All Other First 200 $ 0.07803 $ 0.07417 $ 0.07803 $ 0.07060 $ 0.07803 201 to 350 $ 0.06802 S0.06466 $ 0.06802 $ 0.06154 $ 0.06802 Over 350 $ 0.05422 $ 0.05154 S0.05422 S0.04906 S0.05422 .

Demand S/kW AII kW $ 10.78 $ 10.25 $ 10.78 $ 9.75 $ 10.78 Customer Char e S/month

$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Reactive Charge S/RKVAH All RKVAH S0.00095 $ 0.00090 S0.00095 $ 0.00086 $ 0.00095 Quamying High Load Factor (HLF) and Industrial Customers as per this Comprehensive Settlement Agreement.

Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the filing described in Article lll.3.c., which will refiect reductions pursuant to Article lll.1.b, freezes prices hy service class pursuant to Article Ill.3.a. and reductions pursuant to Article Ill.1.c.

10/06/97 APPBCON2.WK4 04:44 PM

PSC Case No. 96-E-0891 Appendix S Page6of9 Rate SchedUles - Non Residential Years 1 -2 SC 7- 2 Large General Service - Primary Distribution Current Year1 Year 2 Ene On-Peak $ /kWh HLF/industrial All Other HLF/industrial All Other

$ 0.07932 $ 0.07540 $ 0.07932 $ 0.07177 $ 0.07932 Fne Off-Peak

$ 0.05422 $ 0.05154 $ 0.05422 $ 0.04906 $ 0.05422 Demand On-Peak $ /kw All kM/ . $ 11.68 $ 11.10 S11.68 $ 10.57 $ 11.68 Customer Charge $ /month

$ 9.15 $ 8.70 $ 9.15 $ 828 $ 9.15 eactive Char e S/RKVAH AII RKVAH $ 0.00095 $ 0.00090 $ 0.00095 $ 0.00086 $ 0.00095

- Oualifying High Load Factor (HLF) and Industrial Customers as per this Comprehensive Settlement Agreement.

Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the filing described in Article Ill.3.c., which will reflect reductions pursuant to Article lll.1.b, freezes prices by service class pursuant to Article lll.3.a and reductions pursuant to Article lll.1.c.

10/06/97 APPBCON2.WK4 04:44 PM

V PSC Case No. 96-E4891 Appendix 7 of 9 B'age Rate Schedules - Non Residential Years 1 -2

. SC 3 Sub-Transmission-Current Year 1 Year 2 Hours Use S/kWh HLF/industrial All Other HLF/industrial All Other First 200 $ 0.07499 '0.07128 $ 0.07499 $ 0.06785 $ 0.07499 201 to 350 $ 0.06498 $ 0.06177 $ 0.06498 . $ 0.05879 $ 0.06498 Over 350 $ 0.05118 $ 0.04865 $ 0.05118 $ 0.04631 $ 0.05118 Demand $ /kW All kW $ 8.68 $ 8.25 $ 8.68 $ 7.85 $ 8.68 Customer Char e S/month

$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Reactive Charge S/RKVAH All RKVAM $ 0.00095 $ 0.00090 $ 0.00095 $ 0.00086 $ 0.00095 Qualifying High Load Factor (HLF) and industrial Customers as per this Comprehensive Settlement Agreement.

Charges shown include a high voltage discount for SC 3 Sub-Transmission customers from the SC 3 Primary Distribution charges on Appendix B Page 5 of 9.

Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the fliing described in Article ill.3.c., which will reflect reductions pursuant to Article lll.1.b, freezes prices by service class pursuant to Article lll.3.a. and reductions pursuant to Article lll.1.c.

10/06/97 APPBCQN2.WK4 04:44 PM

PSC Cast No. 96-E-089t Appendix B Page 8 ef9 Rate Schedules - Non Residential Years 1 -2 SC 7-3 Large General Service - Sub-Transmission Current Year 1 Year 2 Ene On-Peak $ /kWh HLF/Industrial'0.07441 All Other HLF/Industrial All Other

$ 0.07073 $ 0.07441 $ 0.06732 $ 0.07441 Ene Off-Peak

$ 0.05165 $ O.O491O $ 0.05165 $ 0.04673 $ 0.05165 Demand On-Peak $ /kW'll kW $ 8.88 $ 8.88 $ 8.03 $ 8.88 Customer Cha e $ /month

$ 9.15 $ 8.70 $ 9.15 $ 828 $ 9.15 acove Cha e $ /RKVAH All RKVAH $ 0.00095 $ 0.00090 $ 0.00095 $ 0.00086 $ 0.00095 Qualifying High Load Fa'ctor {HLF) and Industrial Customers as per this Comprehensive Settlement Agreement.

Rate design for years 3 through 5 of the Price Cap Period will be determined pursuant to the fllin'g described in Article III.3.c., which will reflect reductions pursuant to Article lll.1.b, freezes prices by service ctass pursuant to Article III.3.a and reductions pursuant to Article Ill.1.c.

0 0/DG/97 APPBCON2.WK4 04:44 PM

0 PSC Case No. 96-E-0891 Appendix 8 Page 9 of 9

~

Rate Schedules - Non Residential Years 1 -2 SC 7% Large General Service - Transmission Current Year1 Year 2 Energy On-Peak $ /kWh HLF/Industrial All Other HLF/Industrial All Other

$ 0.07305 $ 0.06944 S0.07305 $ 0.06609 $ 0.07305 Ener Off-Peak

$ 0.05063 $ 0.04813 $ 0.05063 $ 0.04581 ,S0.05063 Demand On-Peak S/kW All kw $ 8.71 $ 8.28 S8.71 $ 7.88 $ 8.71 Customer Cha e S/month

$ 9.15 $ 8.70 $ 9.15 $ 8.28 S9.15 Reactive Char e $ /RKVAH AII RKVAH $ 0.00095 $ 0.00090 $ 0.00095 $ 0.00086 $ 0.00095 Qualifying High Load Factor (HLF) and Industrial Customers as per this Comprehensive Settlement Agreement.

-Rate design for years 3 through 5 of ihe Price Cap Period will be determined pursuant to the filing described in Article lll.3.c., which will reflect reductions pursuant to ANcle Ill.1.b, freezes prices by service class pursuant to Article Ill.3.a. and reductions pursuant to Article lll.1.c.

10/06/97 APPBCON2.WK4 04:44 PM

~ ~

APPENDIX C UNCONTROLLABLE COSTS

0 Appendix C Page I of2 lit(rot((roll:(iticCttxt I'nctors'ate ot I Cate of 2 Fre ttenc . ()ne-Tintc I vent On oin Cocts General Description of Quahfying Eventst Natural l)isastcrs, Actc of Tctforistn, Accounling, legis(alive, Reguh(ory, and Category 2 Cos(s Incurred Dcfotc orTax Changes RatesarcC(tan ed Erarnples ofl'otentiol Qual fying Events: - Storms - Clumgc in DSM I!xpenscs i(omblngs

- Rettoactivc Tax Iwvics FASI) Accountiug Ptonounccmcnts

- Changes in Federal Income Tax Rate Changes in Nuclear Decommissioning Costs

- NYI'ATransmission Ad'ushncnt Ct tat c Threshold Lt'tnitsfor Rate Recovery Aggregate Costs ht Fxccss of 3% of RegSub Variations frotn Targets Stated in Ncl Income Ai cmlixA,Pa e2 Recovery Metlrodt Thc Uncontrollable Costs Factors will be The Uncontrollable Cost I'actors wit( bc a ppliol lo each custmncr's appl(cd lo each cuslonlcf s bill In a manncf fo bc dctctlnincd by bill in a tnanncr to bc dctennincd by thc Commission. thc Comm(ss(on.

Timing of Ro(c ChargclRecovcry Period: Annually bt a manner and over a period to Annually Itt a manner and over a period bc dctcnnbtcd b thc Cotmnission. to bc determu>ed b ttto Commi~sion.

'Ihc Uncontrollablc Cost I'actors rclatc to cost increases and dcctcascs.

APPcn I'<)gc 2 <

Uncontrolltthle Cost Btctor Adjusttncnts'Saoo)

Ycv 1 Ycm2 Year 3 Year 4 Year 5 Nucleal)ccommissionin Costs:

h)tcmal Vund $ 208 $ 263 $ 26)3 $ 263 External h<n<l l,494 4 062 4,06)2 4.062 4,06)2 Total: 1,702 4.325 4,325 4,325 4,325 Manufactured Gas Plant Site Remediation Costs 1.569 2.163 2,640 2,640 2,640 Other Pro anrs in PSC's l)iscrction 13,327 13 406 13,509 NA NA NYPA Transition Ad'ustment M<u<<tato Rc ulator,lA. islative,Accountin an<lTnxChan es Total $ 16.598 $ 19,894 $ 20,474 $ 6.965 $ 6),965 Tl)e al>nvc targets arc Ihc a<nounts that arc covered within the rates st)cciticd in this Settle<neat.

I'rudcntl incurred clran cs from these a)nounts willbe included b> the Uncontrollable Cost 1'ac(or Ad usbnents.

NA means not applicable.

APPENDIX D METHOD FOR CALCULATING TiiE CTC

Appendix Page 1 of 6 New York State Electric 4 Gas Corporation Illustration of Method for Calculating the Competitive Transition Charge {CTC)

Summary of thc Estimated CTC Rates Based on Thrcc Potential Valuation Results of Coal-Fired Generation Assets

$ 550Million Below Book, Equal to Book, and $ 550MillionAboveBook

{ Cents pcr lovh )

Rate Year Ending Jul

~gxgQUtlg&e~lQktLoos g000 20((0.

$ 550 Million Below Book (page 2} 0.83 0.79 0.76 Equal to Book (page S} 0.31 0.30 0.29

$ 340 MillionAbove Book (page 4} 0.00 0.00 0.00

$ 550 Million Above Book (page 5} 0.00 0.00 0.00 Commencing August 5, 1999, retail access customers will be credited with the backout rates set forth ln Article IV.4.b of the Agreement, net of a CTC calculated as illustrated in this appendix.

Since the backout rate is based on generation costs divided by retail sales, retail access customers will also be responsible to compensate NYSEG for system losses between the supply point and the customer meter.

The valuations are for illustrative purposes and do not presume any actual value. The actual CTC will be based on the results of the auction valuation or subsequent appraisal pursuant to Article V.1 of the Agreement and actual balances of generation net assets on the books after the

auction, Based on these estimates, if the market value of the coal-fired generation assets is $ 340 million, the CTC would be zero. Any value in excess of that needed to produce a zero CTC will be disposed of pursuant to Article V.1.h of the Agreement.

in the event of a negative determination from the 1RS regarding normalization issues, it would be necessary to remove funded deferred taxes from the CTC.

Appendix 9 Page2 of 6 New York State Electric k, Gas Corporation Illustration of Method for Calculating thc Cornpctitive Transition Charge {CTC)

Based on Assurncd Market Value of Coal-Fired Gcncration Assets S$ 50 Million Below Book

{S 000)

Batancex at Dec 51 $ 996 2td7rtarn nctrxfing

~

Pntxxaa

~~ Work in t reecrrxy,Spare Paw. Prepaid Property

$ 1300.959 $ 45,884 $ 'i/46,543

$ 0 tra ~

%axes st tnxurance, ec 3efcrredTaxes-APB-$ $ Q35%

ncrcrrcd Taxes (46' 35m>>

8093 t (200,094)

QRQZt 1,065,669 (12.659)

REXl 30395 80g3$

(2$ 2.753)

GLRiD 1.096 064 lfatuexrf Ptarrts Tax Gain or (Loca)

Fedeg Incetnegax Sale Price 546 JÃ4 3ttnrraining Tax $ 3epreHahte Baaia (374,124) (4,762) (378+56) 7ax Deduction for Rertraining trrrrentory, Prepa)rtncntr. <<tc.

Waxahtc Ga'era Ques) 56347 XarRase Wax)ate fits 34csof Tac Abcneisctrrw)asarket Regulatory A@set Beginning Balanc>> 550,156 5$ 9,114 rrrrrrat Arnarkxadonnrrcugh2015 the End of ore Average Senrice Ufe CRUET GARB 549,650 519,114 458.042 427~ 39687tt Aemge Batance 564915 534/82 473+$ 0 442.774 K Cxrrtcf Gap8at Groused Vp for PIT per 1995 Scelertrerrt iZ8Zk 2282k

%nerd Carryall Ctmpo 70319 66,424 62~8 55,037 51441 Grcxacd Vp for FIT @ %RE Tuel 7 otrrruI CarstBcfrrte GRT $ 117,197 $ 113,402 $ 109,606 $ 105.510 $ 102.015 $ 98219 Aaausl~Sa'ca (ntrrrrtt) XX2K82i 124~L'i 1X55XR!iti QZK25X Q25R2R 1152%19%

Cc per$ 0WH (ceres) 01$ 5 084 Orbit 0.77 0.74 0.71 Rcrrenrrc1'ax E8 {UH LH LH RQf QSQ rnrtrral CZG Baaed On Saarket Value $ 550 Milrien BelcrN BOOk lt2k tc) Crc for Rate Year Enrang 3ufy L1R LDi

0 Appendix 9 Page3 of 6 New York State Electric & Gas Corporation Illustration o('Method for Calculating the Cornpctitivc Transition Charge (CTC)

Based on Assulncd Market Value of Coal-Fired Generation Assets Equal to Book (S 000)

Cateadar Years:

Balances at De>>31 1996 24aSPfarnlachrdinp CoaeucSon Work in Pfopfesa $ 5 400.959 $ 45.854 $ 5 346,843 Coat tnventory. Spare Pans, Prepaid Property

'Vases 8 insurance. eto. 80935 SOW5 53>>fersed Taaes APB-51 O35% (200.094) (12.659) (212,753) fd ~Deferred Taxes (CPC vs 35%) QH22) RRZB QKRih 30.395 'l.096.064 VAse ofPtarcs MRRQH Tae Gain ar (tees) trOFedea15ncarne Tac Sde isnceGamer 1,096.064 Rernaininp Tax, Dereciabte Basis (374,524) (4,762) (378,556)

Wae D>>duction for Rerrmnfop tnverrtory.

&cess>>)rsnerus. etc.

'Taeabte Caos or (Lass) 636247 Kae Rase mk Zae Uahi2g

~Tax (t.oss)

~Taa Atsove(Seto )aaarkct Reutatory Asset

$ 5>>SSinnon555tatance 222.656 250~ 199446 557~6 175.506 essssualArssart'mdoaucraspts 2055 the End of the Averape Service Life Q122()1 Q1I2(B QL220) Q1I2t)l QLI2f)l 250~ 199246 557~6 175,506, 164,056 552~

Average Bounce 216306 205,106 593~ 151.666 155226 tet Cost of Capital Crossed Vp for Rr per 1995 Seer>>ment 32dZk 12d25fs Award Cstrying Chntr ~ 26&5 25,495 24,038 21,524 Arsauaf Aasortizasiao Greased Vp for RT 1(L(Q1 1H)11 1(LO21 XfU)21

'Tcaa) Srsnrzit Cast More GRT $ 44PS2 $ 43526 $ 42.069 $ 40.612 $ 39,155 $ 37.698 Aresuat Retab Sales (orsrh) ~m21 m~Z meme nIK2u 1XIfik2R 1 &XX()2 sser XWH (ceres) 034 ODt 02S 027 Reversue Tax QI)2 QJK ()1)1 GTC Based oa Market Yatrre Equal ta Book %XX

v Appendix 9 Page< of 6 Ne'er York State Electric 4 Gas Corporation flustration of Method for Calculating the Competitive Transition Charge (CYC}

Based on Assumed Market Value of Coal-Fired Generation Assets S340 MillionAbove Book (S 000),

Balances at t}e>>31 1996

~litact hchdin9 Conshu>>5on Work in

%set}ress $ 1200959 $ 45.884 $ 1446.843 Coal hmnhxy.S pare Parts. Prepaid Pro pesty JTaxes 5 tnsrrrance, etc. 80931 80931 Xeeferred Taxes- APB-11 Q} 3599 (200.094) (12.659) (212.753) t0 ~~~T~~(4eavs359t) Qfi322) CUZQ QKRSD Ycct 1,085.669 30395 1.096.064 Kcsrrrnerslfalrro cfptants ~4LQH react Gacr>>r ~) 340.000 tir) Vrsrferalhrcorno Tax

~Price 1,436.064 Rerrraining Tax Dcpreciatrte Basis (374.124) (4,'762) (378.8SS)

'Tax Dertrrction fcr Rxrnaininl} hrventory, Vrea ayxoercx. etc.

Taxable Gain or {txrsx) 976347

~Rate 22!i.

Zm~

aoct~ax Nerve(Bctov0aaarkct R>>9utatory Asset

$ 9>>9axrinyBatan>>o '

Amalhnxxtizadon urrorr9h 2015- the and of the Average 5>>ivice Ufo 1597 1,597 O}2}

1,4'l9 1,419 0}2) 41 I

1241 1.152 Averape Bxtxn>>a 1,642 1.464 1475 1486 1,197 ir}Crxrtcr Cap>>at Crossed Vp for RT per 1995 Se Cfernxnt ~4 123Zk 182 12Z JT>>utt arnnrxal Amuat~5otcs J

CcctBcfore GRT QmtsrerltyyH (cercy}

(nova) ~~ $ 341 $ 330

~~~~is ~~ ~gQQ ~~

$ 319 $ 308 $ 297 $ 286 fX3QRJQX O.M I

ti} Crxrxs RxrrenoeTax LKl Stnnrrat CTC Based on Saarket Vahre $ 340 Minion Above Book U CTC for Rate Year Enr5ng Jrrty

0 Appendix D Page5of6 Nevr York State Electric & Gas Corporation Illustration ofhfcthod for Calculating the Competitive Transition Charge (CI'C)

Based on Assumed hfarket Value of Coal-Fired Generation Assets SSSO MillionAbove Book (S 000)

Balances at t)ec 31 1996 HXKR SK Isttaf acct Ptantkrchcno9 Construction Work in Pngrcss $ 12C0959 $ 45.664 $ $ 24654S Coal kveeecoy, Spare P~. Prepaid Propeny

~ Taxes S Insurance, etc.

DeferredTaxes APB-11

$ )efcrxcd 35%

Taxes (4699 vs 35'%)

t,065.669 (12.659)

QJQB 30395 60931

{212.753)

QLLih 1.096,064

%aha of places 1JdRQH Tax Gan or (toss) 550.000 00 Kedenllncorns Tac SaIc Price 1.646.064 Rnnafniny Tax $3eprecfahte Basis {374.$ 24) (4,762) {378.866)

'Tax 13eduction for Renaakkinrg nventhory,

$ xrepayrnerns, etc.

'Taxable Gain or {toss) 1.1 56247 Tac Rats

'Taciah@y 4~

3tacr Tax Gacr a (toss)

$ 9ctcf Taxhbovegschn+~kct Regulatory Asset Begcnniny Balance (134,6$ 4) (127,719) (120~4) (I $ 3~) '($ 06.434) (99~

Anaalhrnoc9a:ionurrough 2015 the End of the Average Service Ufe zm am zm zen Kra%ngSahaca ($ 27,7$ 9) (120,624) Q 13529) ($ 06.434)

Average Bahncs (131~ ($ 24,172) (I$ 7J)77) 009~ ($ 02~

tel Ccrraof Capcai Grossed tfpfor RT per 1995 Sedement mn

($ 63 $ 6) ($ 5,435) ($ 4~

Qh{12

{I3.671)

ELR1R Q{1212 QLSQ Z~74mccxl Ceca Before CRT ($ 27~1) {$ 26~ {$25,410 {$ 24~ ($ 23,~

Annual stctaaSales {mwh) ~{)~$

Cost per XWH (cents)

Cnrss Revenue Tax 4 Scnncc3 CTCBased on Llarket Vahrc $ 550 M16on Above Book tal CTC for Rate Tear Ending July

Appendix 9 Page 6 of 6 New York State E<lectric 8c Gas Corporation Illustration of Method for Calculating flic Compctitivc Transition Cliargc (C'fC)

Notes Relating to tlie CTC Calculation The items listed on pages 2 through 6 are the major net assets associated with coal-fired generation. Other assets or liabilities may be identified at the time of the auction.

The balances of coal Inventory, spare parts, prepayments and deferred taxes at December 3$ ,

1996 are estimates. Actual balances will be used in the calculation of the CTC following the auction.

ln the event of a negative determination from the IRS regarding normalization issues, it would be necessary to remove funded, deferred taxes from the CTC.

RegSub's tax liabilitywill be payable upon the sale nf the plants to a third party and will be included in the CTC.

The tax-depreciable basis of the successful bidder will be the purchased price of the plants. lf GenSub is the successful bidder, it will receive a stepped-up basis.

If GenSub is the successful bidder, Reg Sub's tax liabilitywill be included in the CTC, however it will not accrue a carrying charge because no cash payment would be made as fRS regulations allow RegSub to defer payment of the tax to match GenSub's stepped-up basis.

This appendix does not reflect recent legislated reductions of the gross revenue tax rate, Pursuant to the Agreement, the rate will be a%sted when the actual CTC is calculated, Any value ln excess of that needed to produce g zero CTC will be disposed of pursuant to Article V,1.h of the Agreement,

APPENDIX E TARGET LEVELS FOR NUG CONTRACTS

Appends 1 of 3k'age Ne+ York State Electr/c Ec Gas Corporatloa DescriptI'on of the Method that%ill be Used to Quantify Savings Associated with the Termination or Restructuring of NUG Contracts Net savings associated with the termination or restructuring of NUG contracts will be quantified as described in this appendix and shared pursuant to Section III.2.b of the Agreement.

Net savings will be calculated separately for individual NUGs and will be limited to changes directly resulting from the termination or restructuring of contracts.

Net savings will be calculated at the end of each rate year for inclusion in rates the following year.

The net savings will be determined as follows:

Amount of Avoided Gross Payments to NUGs Less Cost of Replacement Power (or Reduced Sales for Resale Revenue)

Less Cost to Terminate or Restructure the Contracts The avoided gross payments will be the diAerence between the forecast payments listed on Appendix H, Page 2 and the actual payments made to the NUG during the year, to the extent such changes were the result of contract termination or restructuring.

The cost of replacement power (or reduced sales for resale revenue) will be the weighted average market price for the year times the difference between the forecast mwh purchases listed on Appendix E, Page 3 and the actual mwh purchased from the NUG during the year, to the extent that such changes were the result of contract termination of restructuring.

The weighted average market. price will be determined as described in Article IV.1,b of the Agreement, Incremental costs incurred to eAect a contract termination or reformation will be deferred and amortized ratably over the remainder of the original contract period, Interest will be accrued on the unamortized balance nf termination and restructuring costs at the before-tax cost of capital allowed in the most recent NYSBG electric rate case (I 2.43% for the term of this agreement),

Sharing of the net benefit will bo according to Article V.2.b of the Agreement,

Appcndi Page 2 of 3 Neo Vork State Electric A Gas Corporation Cost of NUG Purchases Excluding Gas Import Tax Ki'orecast at Time of 1997 Rate Settlement

{ $ 000)

Prbata Generator Contract I $ 112,345 $ 117,241 St 19,366 SI23,752 Ccetract 2 152,993 156,644 159,031 165,782 179,261 Contract 3 19.936 19,669 19,219 18,679 18,147 Contract 4 17.901 IS,341 18,863 19,143 21,570 23'109,166 Contract 5 Contract 6 Contract 7 Contract 8 Contract 9 Contract 10 8,445 1,266 2,192 1,653 426 70 8,880 1,273 2,236 2,001 402 122 9,562 1,277 1,721 2,096 416 126 9,868 1,273 1,313 2,047 432 131 10,214 1,273 1,313 662 452 137 Contract 11 800 1,412 1,461 1,509 1,577 Contract 12 270 270 278 286 295 Contract 13 113 68 71 76 82 Contract 14 222 t79 I87 200 217 Contract 15 350 285 207 213 223 Contract 16 7 5 5 5 6.

Contract 17 40 40 40 40 40 Contract 18 792 972 1,071 1,141 1,192 Contract 19 3,179 3,365 3,365 3,365 3,365 Contract 20 15,614 14,902 14,902 14,902 14,902 Contract 21 626 603 603 603 603 Contract 22 312 ,315 315 315 315 Contract n 59 5R SR BR

P APyendIX 8 Page3 of 3 Nevp Yorl~ State Electric 8r. Gas Corporation NUG MWH Purchases Forecast at Time of 1997 Rate Settlement Prfvata Generator Contract I 1,259,220 1,223,510 I,255,7&0 1,228,040 1,221,310 Contract 2 1,883,062 1,864,018 1,833,498 1,828,131 1,907,943 Contract 3 103,670 103,360 103,360 103,770 103,530 Contract 4 360,000 360,000 364,800 364,800 404,880 Contract 5 128,760 128,760 134,050. 133,660 133,660 Contract 6 2 1,190 2l,t90 21,250 21,190 21,190 Contract 7 23,050 23,050 23,110 23,050 23,050 Contract 8 20,390 20,390 20,450 20,390 20,390 Contract 9 17,470 17,470 17,470 17,470 17.500 Contract 10 5,290 -5,290 5,290. 5,290 5,290 Contract I I 48,530 48,530 48,530 48,530 48,530 Contract l2 5,150 5,150 5,150 5,150 5,150 Contract 13 2,310 2,310 2,310 2,3 IO 2,310 Contract 14 6,090 6,090 6,090 6,090 6,090 Contract 15 6,890 6,&90 6,890 6,890 6,&90 Contract 16 170 170 170 170 170 Contract l7 670 670 670 670 670 Contract IS 8,330 8,330 8,330 8,330 8,330 Contract 19 37,950 37,950 37,950 37,940 37,950 Contract 20 216,910 216,910 217,090 217,090 217,090 Contract 21 6,750 6,750 6,750 6,750 6,750 Contract 22 3,730 3,730 3,730 3,730 3,730 Contract 23 $4 2$ ÃQ 2M KQ

0 APPENDIX F SERVICE QUALITY MECHANISM

0 Appendix F Page 1 of 2 Electric Service Quality Performance Mechanism An Electric Service Quality Performance Mechanism shall be ~alemented for the Price Cap Period. The mechanism provides NYSEG an incentive to render reliable electric service to its customers by avoiding a penalty due to unsatisfactory performance. The mechanism will make use of two reliability indices. They are:

The customer average interruption duration index

("CAIDZ"). This measures how long the average power outage lasts for an interrupted customer during each year of the Price Cap Period.

2. The system average interruption frequency index

("SAZFZ") . This measures how often the average customer is interrupted during each year of the Price Cap Period..

The calculation of CAZDI and SAIFZ conforms to PSC electric reliability standards and, therefore, interruptions due to "major storm", as defined in 16 NYCRR in Part 105, are excluded.

The two measures will be tracked separately for NYSEG on a systemwide comoosite basis (average of NYSEG district performance indicators) . The systemwide, composite figure'or each measure will be determined using performance indicators 90-applicable to each NYSEG district as established in Case Nos.

E-1119 and 95-E-0165. The threshold systemwide composite performance indicator for duration (CAIDI) shall be 2.08 for each year of the Price Cap Period. The threshold shall systemwide composite performance indicator for frequency (SAZFI) be 1.33 for each year of the Price Cap Period.

Zn the event that the systemwide composite performance indicator for CAIDI is within the range of 2.08 and 2.18 during any year of the Price Cap Period, NYSEG shall be assessed a penalty equal to 3.75 basis points. Zf the systemwide composite performance indicator for CAIDI exceeds 2.18 during any year of the Price Cap Period, NYSEG shall be assessed the maximum CAIDI penalty of 7.5 basis points.

0 Appendix F Page 2 of 2 In the event that the systemwide composite performance indicator for SAIFI is within the range of 1.33 and a.ao during any .year of the Price Cap Period, NYSEG shall be assessed a penalty equal to 3.75 basis points. If the systemwide composite performance indiCator for SAIFI exceeds 1.40 during any year of the Price Cap Period, NYSEG shall be assessed the maximum SAIFI penalty of 7.5 basis points.

The maximum aggregate penalty that could be assessed In the for each year of the Price Cap Period is 15 basis points.contained year that a penalty is incurred, the 12.0% earnings cap in the Settlement Agreement will be reduced by the number of-basis points of the penalty incurred. For example, if the maximum aggregate penalty is incurred, the ROE cap for that year would be 11.85%.

0 APPENDIX G AMORTIZATION SCHULE FOR ELECTRlC BUSlHESS OP REGSUB

0

~ l APlfll kP(IJEJllMHlhltllrslrrlll LUMP HJJh~~lAWVllrJWtklllrlP'rl 4JJMlPIIWNf41Atll$ tllll 1 P% ll l VPt . hPJA4Wtl41 APPeftdiX 8 l&JI1arWMA'4SQ4$ Ncw York Stntc Electric & Gns Corporation Amorfhallon Schcdulc for Electric tiustnrss of ltcgSub

($ Boo)

~ s Wltl'lll Ila,v ~ l." I'll,lL AJW Before Ysat.1 Xear3 Xear.2 Yegg Year 4 Year.5 (a)

Beginning Balance Sales for Resste Profit (4,835)

Fuet Costs 10,662 Soulh Corning Termination Costs (b) 17,328 Demand Side Management Program Costs 66,006 SFAS-112 OPEBs 3.175 fco Storm 1,426 Somorsel Non Cash Return 3,065 Jamosporl Pianl Abandonmonl 12,484 NYS Sales Tax Audil Deficiency 1,248 Federal income Tax TRA.86 Defetred Taxes 1,960 RRA.93 Deferred Taxes 1,768 R(t D Tax Credits '8,046 FIT Gross.up 6.249 Tolal 128,673 117,110 89,359 61,608 33,857 6,106 Amount Used to Provide 5% Price Reduction for Rosidenlisl and Olher Customers No't Eligible for Other Decreases or Special Discounls in Year 5 20,161 Annual Amortization (1.1.563) (27.751) (27,751) (27.761) (27.751) (27,751)

Ending Balance (d) Q7.1j9 AK59 Q.L'll L1(I, (188) rzrzrs=-.~u"-" ~ z~.r .~al-..rr es .. LW4  !%lL QJC rr l~"llrlrRkl'Llll 'lrsltlLlr This schadufo assumes thai lha P<ico Cap Pa<fad wig begin on January I ~ 199S (s) This schedule <sflscts Iha actual dafanad balances <sea<dad on NYSEO's baa'ks ot Jufy 31, 1997. plus sddilionsl nat c<adits fo< quslifiad d nan~ustigad panslans, snd DSM program costs d tosl <ovonuas <slating to periods bafa<o August I, 1997 thol vdg ba charged fa Iha dafanad accounts during the ramafnda< of 1997.

Ta sccam<nodsio Ihaso chsngas, tha amon<rattan fa< tha romsindar al 1997 msy bo roducad by on amount aqusl lo Iha nat olfoct on tacoma causad by Iho additional dafonsfs, In which cast tha amadiratlan du<lag tho P<lco Csp Parfodwglbe tncraasadbysconaspandiag amount.

Yyilhthaso oxcapiions. pursuant Io Iho la<ms of Iho Soliiamanl, ag of Iho i<us ups p<ovidad In Iho 1995 alacf<lc <alo soltlamanl, Inch<ding costs and bonag<ts associated wllh Nina Milo 2, pansians and NGE, wa<a dlscaniinuad on July 31, 1997.

(b) pursuant lo A<tlclo Vill.4 of the Agraamant, Iha $ 27.609 million not c<adil balanco sssoclatod with iloms sub)act Io frua up pa< Iha 1995 rato soitlamanl snd Iho $ 2.395 million dafanad credit balance associated with Iho "

gas import lax havo bean netted against Iho $ 44.031 rnilllon Soulh Corning dofa<rad debit balance, thereby reducing Iha non cash return thai will bo acc<uod as Iho remaining bafanco ls amadizad linearly over Iho five years of lha P<lco Cop Po<lod.

(c) Outing the Price Csp Period, NYSEO willcontinuo lo record an amorllrallan of $ 27.751mlllion annually, sub)act to Iho provisions of A<liclo Vill.3 and Iho modification in a" above..

(d) tt tho P<tco Cap Pa<lad commences on January I, 1999, Ihe<a wfft bo a $27 B million dafonod credit balance assoclalod wilhlha abave itorns at Iho ond ol Iho Price Cap Po<iod Tho Ag<oomant p<ovidos Iar Iho first

$ 20 IBI migtan of Ihal credit lo bo uaad Io tund ps<I of Iho $ 54 4 million p< leo <aductian In yaa< 5 for rosldaniisl and oiho< customs< s that s<a nat alioibla fa< a<ha< doc< aasas a< spaciat <tiscauats. Any ramaindor of Ihts a<adit wilt bo ucad at tho dlsc<atIon af the Commission.

This schedule doss not Include tho abova ms<kat costs of coal guod gona<ation bacausa Ihoy cannot bo ldantiriad until aitor Iho auction or subsequent appraisal.

~ e ~

0 APPENDIX H 0

Appendix H Page 3. of 6 NYPA POKER I During the Price Cap Period, NYSEG will deliver up to 38 MW's of Economic Development Power ("EDP") at the rates set forth in this paragraph l to:

a. existing EDP customers;

b. entities with an existing EDP allocation which has not been used to date; and

c. replacement EDP customers for reiinquished NYSEG EDP allocations, but deliveries to replacement customers and the two previous groups shall not exceed 35 heals.

In addition, during the Price Cap Period, NYSEG wiO deliver FitzPatrick High Load Factor Manufacturer ("EiLEM")Power at the rates set forth in this paragraph l to HLFM customers, provided that such load was not previously served by NYSEG.

The delivery rates for service to such EDP and HL'FM customers during the Price Cap Period shall be the sum of the following:

All such EDP and EKRvf customers shall pay NYSEG a transmission rate of $ 2.86/KW/month {which includes NYSEG's current Open Access Transmission Tariff ("OATI'") rates for trmsmission services and Scheduling, System Control and Dispatch Service; Reactive Power and Voltage Control from Appendix H

Page 2 of 6 Generation Sources Service; and Regulation and Frequency Response Service) subject to change, from time-to-time, during the Price Cap Period to reflect increases or decreases in the rates and charges under.

(1) NYSEG's OATT for transmission services; Scheduling, System Control and Dispatch Service; Reactive Power and Voltage Control from Generation Sources Service; and/or. Regulation and Frequency Response Service; or (2) a successor ISO Tariff for similar services when and if such ISO Tariff becomes effective. The changes in the transmission component of the delivery rates described in this subparagraph shall be subject to modification upon a unihteral filing by NYSEG with FERC and/or the PSC, as appropriate,'nd shaH become effective at the same time that the changes in the rates and charges under the QADI', or any successor ISO Tariff, become effective.

AH such EDP and HL'FM customers taking service below 34.5 kV shaH pay the following additional charges:

$ 3.81 per KW/month for delivery at the primary level, or

$ 4.32 per KW/month for delivery at the secondary level.

0

~ V C>>

Appendix H Page 3 of 6 Such EDP and HL'FM customers shall obtain energy loss compensation service, Opetating Reserve - Spinning Reserve Service, and Operating Reserve - Supplemental Reserve Service (collectively referred to as "voluntary ancillary services") from NYPA or another supplier other than NYSEG. If such EDP or HL'FM customer chooses to obtain the voluntary ancillary services from NYSEG, they will be provided at the rates and charges included in the then effective OATT, or for loss compensation services at rates and terms mutually agreed upon by NYSEG and such EDP or HL'FM customer. NYSEG reserves the right to make a unilateral filing with the FERC under Section 205 or any other applicable provision of the Federal Power Act to modify NYSEG's rates, charges, terms and conditions under the OATI'r any successor tariff. In addition, NYSEG reserves the right to make a unilateral filing with the Public Service Commission to modify NYSEG's rates, charges, terms and conditions for distribution services to such EDP and HLEM customers.

0 Appendix H Page 4 of 6

2. Subject to acceptance by EDPAB and/or NYPA as appropriate, the EDP or HL'FM customers described in the preceding paragraph have the option to change the delivery point and/or voltage level at which service is received during the Price Cap Period by paying the. applicable rates and charges.

3. NYPA agrees to modify, subject to Trustee approval, its Rural and Domestic Hydropower Contract with NYSEG to eliminate the "Restoration of %'ithdrawn Power and/or Energy" (Section K) provision.

4 NYSEG's standard tariff rates in accordance with the terms of the Agreement, including the CTC and retail access credit, shall be applied to the following:

a) all new or increased allocations of EDP above the applicable cap set forth in patagraph l and HL'FM power for load previously served by NYSEG; and b) customer loads for which the customer has relinquished or no longer receives all or part of its allocation of NYPA power.

The schedule for implementing retail-access set forth in the Agreement shall apply to the NYPA customers covered by the rates described in this paragraph 4.

Appendix H Page 5 of 6

5. Ifat any time the PSC or FERC determines that the rates, 'charges, terms or conditions set forth in paragraph 1 or 2 of this Appendix must be offered to any customer other than a customer eligible under the terms of this Appendix H, then NYSEG may make a unilateral filing with the PSC or FERC (pursuant to Section 205 or any other applicable provision of the Federal Power Act) to modify such rates, charges, terms or conditions for customers covered by the provisions of paragraphs 1 and 2. 'This paragraph 5 is not intended to limit the availability of EDP delivery rates to Power For Jobs Power as set forth in Section 189(j) of the Economic Development Law.

6. Nothing in this Appendix is intended to relieve NYPA or NYSEG or any customer covered by this Appendix of any. of their obligations under the ISO Tariff, when and ifimplemented.

7. NYSEG will refund to current EDP customers the difference between the rates in effect pursuant to NYSEG's EDP special provision on August 1, 1996, and $ 3.12 per KW/month for those EDP customers taking service at 34.5 kV and above. For those EDP customers taking service below 34.5 kV, the refund shall be the difference between the rates in effect for such customers pursuant to NYSEG's EDP special provision on August 1, 1996, and $ 8.53 per

~ ~

Appendix H Page 6 of 6 ZWJmonth. Subject to necessary regulatory approvals, the rates set forth in paragraph 1 of this Appendix H shall apply prospectively from the date of execution of this A~ment.

P

8. Nothing in this Agreement shall have any application to Niagara Expansion Power and Energy (as described in Section 1005 (13) of the New York Public Authorities Law).

9 Nothing in this Agreement affects or establishes the tates, charges, terms or conditions for EDP up to the cap agreed to herein, or EKRvi power that does not displace load previously served by NYSEG, af'ter the expiration of the Price Cap Period.

APPENDIX I TABLE OF RATE REDUCTIONS

APPENDIX I Estimated Price Reductions and Revenue Concessions Included. in the 1997 Electric Rate Settlement Agreement

($ /millions)

Q~Yr 1 Year 1 Yeer 2 ~Y ~Y4 ~p5 Total 1998 1999 2000 2001 2002 . ~

68.0 90.8 90.8 90.8 90.8 90.9 522.1

~6% ~9% 7%

Subtotal Residential, Small Commercial, and Other Customers t Eli le f ther Decreases or eci Diec un s Gross Revenue Tax S 0.8 3.3 13.3 13.5 13.6 te Reductions S Subtotal S 0.2% 1. %

Subtotal of Bena6ts for Residential, Small Commercial, and ther e e li le f rD n cs 68.0 91.6 94.1 104.1 104.3 158.9 621.0 7 t1% 7~% 7 7 11 7%

Industrial Customers with Demands of at Least 500 kw eto ere with Fact fat t Gross Revenue Tax S 0.1 0.3 ~ 1.2 3.8 Rate Reductions S 12.4 2~4 Subtotal S 12.7 18.7 24.5 30.0 92.4 9 7% ~4% ~% ~2. %

~DP Total Benefits S 68.0 $ 100.1 $ 108.8 124.8 $ 131~ 191.9 $ 725.4 in addiuon to the above ettantifiable savines. the Conrtanv will foreo costs inctttred and revenoes lost associated with itrnlenentine retail access.

CASES 96-E-0891 et al.

APPENDlX B

0 CASES 96-E-089l et. a3.. APPENDIX B

~

Page 1 of 2

4. The Company agrees to address certain restructuring-related issues raised by the Natural Resources Defense Council and others as follows:

Deferral of T&D Capital Projects: The Company will continue to develop detailed annual forecasts of transmission and distribution ("T&D")capital budget requirements and willidentify for each major T&D project (i.e. project's of $ 10 million or more), the location, reason for project, scope of project, projected capital'costs, appropriate load and other data. The Company will also perform load monitoring consisting of monitors at a significant sample of the trattmission and area substations scheduled for expansion/upgrade in the Qve-year T&D capital plan. 'The Company willevaluate and implement cost-effective measures as alternatives to major T&D projects that defer major T&D system projects through the use of technologies or services that could reduce peak T&D loads. For such costwffective projects, consideration will be given to technologies or services that minunize the environmental impacts of electricity usage including demand side and other new technologies where practicable..

Con Edison will continue to seek to minimize costs and environmental impacts for T&D projects that are not major T&Dprojects.

Customer Information: The Company and Staff agree that customer choice would be enhanced by the availability of environmental information concerning the power being provided to them.

To effectuate such disclosure, Con Edison and Staff agree to work with LSEs and others to develop and implement, where feasible, meaningful and cost-effective, an approach to providing customers with fuel mix and emission characteristics of the generation sources relied on by the load serving entity. Such an approach would facilitate informed customer choice, promote resource diversity and improve environmental quality.

Building Codt:s: Con Edison supports the adoption of improvef&Bding codes and standards as an appropriate mechanism for improving the energy efficiency of buildings and, in particular, their use of electricity. Con Edison supports the Summary of the Basic Requirements of the 1995 Model Energy Code and AS%ME 90.1 (1989). Nothing herein requires any party to support different proposals for energy efficiency standards.

54

CASES 96-E-0891 et al. APPENDIX B Page 2'of 2 Performance-Based Ratemaking: In its first major electric rate filing following Commission approval of this agreement, Con Edison will address the merits of performance-based ratemaking including the relationship between sales and distribution revenues and energy eQiciency and make ratemaking proposals as warranted.

The company also agrees to the following language:

The formation of a third-party administrator, appropriately implemented, would serve the objectives embodied in the Commission's May 20, 1996 order. Therefore, subject to the Commissions approval, there will be a third-party administator, and the Commission will choose the administrator of the SBC-funded programs..

r CASES 96-E-0891 et al.

APPENDIX. C

~o C~

f)g 96-E-0891 et al.

CASE Service Quality Performance Mechanism The electric Service Quality Performance Mechanism will incorporate the following individual customer service measures:

Overall Customer Satisfaction 'Index Customer Contact Satisfaction Index PSC Complaint Rate (Reliability measures agreed to in the settlement will remain unchanged.)

Overall Customer Satisfaction Index An overall customer satisfaction index will be calculated based on the results of the annual customer expectation survey and will reflect the percentage of customers satisfied with the service they receive from NYSEG. The survey will be conducted by an independent consultant on an annual basis from a representative sample of NYSEG customers from all regions of the company's service territory, and will include a proportionate number of the RegSub customers once retail access begins. The results of the last three annual surveys showed an average customer satisfaction level of 72.6%. If the overall satisfaction index for the Price Cap Period falls below 71% 'for any year of the agreement, the company will be subject to a minimum 2.0 basis-point penalty. If the annual survey results drop to 68% or below, the company will incur a maximum 8 basis point penalty.'he company will be assessed penalties on this indicator based on the following sliding scale.

Overall Customer Basis Point Satisfaction Index Penalt

< = 71.0 2.0 70.0 4.0

< = 69.0 6.0 68.0 8.0

I 0

CASE 96-E-0891 et. al.

Contact Satisfaction Surve The contact .satisfaction index measures .the level of satisfaction of customers who have had recent contact with the company. Each month, NYSEG will conduct a customer contact or follow-up survey comprised of a statistically valid sample of customers from each of the regions who have recently contacted the company, including a representative sample of customers who have requested a change in electric suppliers. A final annual average of the monthly survey results will be calculated for each year of the Price Cap Period. Based on a three year average of past performance, the company has received a customer satisfaction score of 84.7%. If the annual results are equal to or below 83.0%, "the company will be subject to a minimum 2.0 basis point penalty. If the annual results are equal to or below 80.0%, NYSEG will incur a maximum 8 basis point penalty. Penalties will be imposed on this indicator according to the following scale.

Contact Satisfaction Basis Point Index Penalt 83.0 2.0 82.0 4.0 81.0 6.0 80.0 8.0 PSC Com laint Rate A complaint target measured by PSC complaint rate data for the 12 month period covered by each year of the Price Cap Period.

For the past two years, NYSEG's PSC complaint rates has averaged 3.1. The company's PSC Complaint rate target will be

'.0 for each year of the Price Cap Period based on 12 months data. If the PSC Complaint Rate is above 4.0, the company will be incur a minimum 2.0 basis point penalty. If the company's PSC complaint rate for each 12 month period of the Price Cap Plan is above 7.0, the company will be subject to a

C 96-E-0891 et al.

' CASE maximum 8.0 basis point penalty. Penalties will be assessed based on'he following scale.

PSC Complaint Basis Point Rate Penalt

> = 4.0 2.0

> = 5.0 4.0 6.0 6.0

> = 7.0 8.0 Customer Surve s The company will consult staff in the event that it proposes to make'modifications to either of the survey instruments or the manner in which they are conducted.

Re ortin Re uirements The three customer service measures will be tracked and calculated separately on an annual basis. The company will submit the results of its service quality performance quarterly to the Consumer Services Division. The final report for each rate year of the Price Cap Period should include an assurance of the integrity of the results either by including verification of all reported survey data by a third party audit or an attestation by an officer of the company that the results are accurate and verifiable. The maximum penalty that could be assessed for each year of the Price Cap Period is 24 basis points. ln the year that a penalty is incurred, the earnings cap contained in the Settlement Agreement will be reduced by the number of basis points of the penalty .incurred.

For example, if the maximum aggregate penalty is incurred the ROE cap for that year would be reduced by 0.24%.

I 0

CASE 94-M-0349 APPENDIX D Page 1 of 2 SUBJECT'iling by NEW YORK STATE ELECTRIC & GAS CORPORATION (Second-stage)

Amendments to Schedule P.S.C. No. 115 Electricity Original Leaves Nos. 22-D, 26-B, 39-J and 39-K Second Revised Leaves Nos. 16-I and 16-J Third Revised Leaf No. 22-C Fourth Revised Leaf No. 49 Fifth Revised Leaf No; 65 Sixth Revised Leaves Nos. 29-D and 30-C Seventh Revised Leaf No. 26-A Eighth Revised Leaves Nos. 29-B and 41 Tenth Revised Leaves Nos. 24, 30 and 52 Eleventh Revised Leaf No. 54 Thirteenth Revised Leaves Nos. 29-A, 36 and 53 Sixteenth Revised Leaf No. 2 Eighteenth Revised Leaf No. 50 Twenty-Second Revised Leaf No. 46 Twenty-Fourth Revised Leaf No. 42 Twenty-Fifth Revised Leaf No. 44 Twenty-Ninth Revised Leaves Nos. 21, 35 and 40 Thirtieth Revised Leaf No. 22 Thirty-Third Revised Leaf No. 32 Thirty-Sixth Revised Leaf No. 31 Forty-Second Revised Leaf No. 18 Forty-Third Revised Leaves Nos. 20 and 23 Forty-Sixth Revised Leaf No. 17 Amendments to Schedule P.S.C. No. 118 Electricity First Revised Leaf No. 12A Third Revised Leaf No. 2 Sixth Revised Leaf No. 19 Eighth Revised Leaf No. 15 Tenth Revised Leaf No. 17, 22, and 23 Eleventh Revised Leaf No. 14 and 18 Twelfth Revised Leaf No. 24 Thirteenth Revised Leaf No. 25

rl

),p

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CASE 94-M-0349 APPENDIX D Page 2 of 2 Amendments to Schedule P.S.C. No.'15 Electricity (Third-stage)

Third Revised Leaves Nos. 16-I and 16-J Sixth Revised Leaf No. 65 Seventh Revised Leaves Nos. 29-D and 30-C Ninth Revised Leaves Nos. 29-B and 41 Eleventh Revised Leaf No. 30 Fourteenth Revised Leaf No. 36 Fifteenth Revised Leaf No. 29-A Seventeenth Revised Leaf No. 2 Twenty-Third Revised Leaf No. 46 Twenty-Fifth Revised Leaf No. 42 Twenty-Sixth Revised Leaf No. 44 Thirtieth Revised Leaves Nos. 35 and 40 Thirty-First Revised Leaf No. 22 Thirty-Fourth Revised Leaf No. 32 Thirty-Seventh Revised Leaf No. 31 Forty-Third Revised Leaf No. 18 Forty-Fourth Revised Leaves Nos. 20 and 23 Forty-Seventh Revised Leaf No. 17 Amendments to Schedule P.S.C. No. 118 Electricity Eleventh Revised Leaf No. 17, 22, and 23 Twelfth Revised Leaf No. 14 and 18 Fourteenth Revised Leaves Nos. 24 and 25 Supplement Nos. 138, 139, 143, 144, 146, 147, 148 and 150 to Schedule P.S.C. No. 115 Electricity Supplement Nos. 15, 16, 17, 18, 19, 20, 21 and 22 to Schedule P.S.C. No. 118 Electricity

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