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in seeking approval by the District of Columbia Public Service Commission.
This process niste take a cuader of months to complete
Because of the additional time required if the rate schedule were to be incorporated in the present tentative agreenent, an approved contract would not be in effect relative to reimbursement of the Potonas Electra Power Company for the coastruction work performed. In the absence of such a contract it would be necessary to draft a "Letter of Intenen similar to that executed by you on July 7, 1972. · It was our mdarsteding earlier that the Washington Metropolitan Area Transit Authority, did not. want to handle the next phase of the project in that manner.
We are concerned about the abseace of a contractual document at the present time, and urge that the Washington Yezopoliiza Area Transit Authority Board of Directors reconsider their position in this natter, In the absence of either a signed contract or an adäiticaal "Letter of Intent" the only remaining course of action for the. Cospany would be to stop work on the project.
We will be glad to meet with you to discuss tais matter in more detail if you so desire.
Oise ol Celu. Sia
Dear Mr. Walters:
This is to inform you of the recent developments concerning the Electric Service Agreement between PEPCO and WMATA.
CULTON A. SICCLES
As you are aware, after many months of negotiations the
On August 14, 1975 the Agreement yas presented to the
On August 19, 1975, a meeting vias held between the
On · August 21, 1975 the Electric Service Agreement was
tive requested that the Authority staff consumate, and
SEP 2 - 1975
Mr. Frank Walters
in view of the develop.tients indicated herein and our. ...concern for continuing the electric service installation, it:
01d be appreciated if your response in.6252 rattars.mauld. be directed to the Authorityis General anezer
As always, your cooperation is appreciates.
Very truly yours,
Vernon K. Garrett, Jr.
At your request, we have undertaken an examination of the proposed agreement between Metro and Pepco for the provision of electric energy and equipment services. This memorandum constitutes our report on that agreement, It is based upon several meetings which we have held with Metro officials, a review of the relevant memoranda and correspondence pertaining to the agreement which the Metro officials provided us and follow-up conversations, We conclude, for the reasons more fully described in this report, that there remain a number of matters which, at the very least, ought to be clarified and ideally resolved before the agreement is finally approved by the Metro Board.
History of Negotiations and Summary
1. On July 7, 1972, Pepco and Metro entered into a letter of intent covering the provision of electric service connection facilities during Phase I of Metro. The letter of intent, which is presumably still in force, provides that all work performed by Pepco will be funded initially by "cash advances" made by metro. It calls for the negotiation and execution of a "separate general agreement" to govern the obligations and liabilities of Metro to Pepco in connection with the service connection facilities. The negotiations looking toward the creation of that separate general agreement have been conducted intermittently since the execution of the letter of intent and have culminated in the present proposed draft. We have been advised by Metro officials that some time ago a dispute arose as to the cash advances under the letter of intent; and that metro officials have been instructed .by its Board to make no futher payments until a final agreement has been entered into. As a result, Pepco
is owed some $2 million for work which it has previously performed. In addition, we are advised extensive additional construction involving Pepco is anticipated over the next several months. Pepco has taken the position that it is very reluctant to go forward with additional work until the total of the past-due amounts have been paid and until the definitive agreement has been entered into.
2. The proposed agreement deals exclusively with the installation of service connections and the provision of electric energy to Metro.1/ The salient provisions of the proposed agreement are these:
(a) Metro will buy all of its electric energy for operation of the subway system within Pepco's franchise areas (D.C., Maryland and a small portion of virginia) exclusively from Pepco. The contract is supposed to provide that all purchases of energy on Metro's contiguous right-of-way will be made pursuant to a newly created single rate designated "RT." Purchases of energy for delivery to other locations owned by Metro i.e., bus terminals, chiller plants, executive offices, ētc. are to be made at Pepco's generally applicable rate for that type of use.
(b) Pepco will install service connections in accordance with the technical standards specified by Metro. It will be compensated for this investment and labor in the form of Contributions-in-Aid-of-Construction. The Contribution-in-Aid-of-Construction requirement is premised upon the concept that Metro's technical standards will cause Pepco to incur a larger investment and more labor costs than the company would have incurred in connecting other (more "normal") customers. contribution-in-Aidof-construction thus purports to represent the difference between (i) the cost to Pepco of investment and construction in accordance with Metro's technical requirements and (ii) the lesser cost which Pepco would have incurred were it not for Metro's specific engineering standards.
1) During the course of construction in the streets, Metro has required considerable relocation of Pepco's underground facilities. These relocation projects are carried out by Pepco work crews but the utility is reimbursed by Metro. The relocation arrangements are the , subject of a separate agreement which, we are advised, was entered into some time ago.