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.

EVERARO MJNSSY

Viccia
CALTER Z, WASHINGTON

Oise ol Celu. Sia
QEATUS E BASNETT

Larstand

Dear Mr. Walters:

Alarme Diractors

This is to inform you of the recent developments concerning the Electric Service Agreement between PEPCO and WMATA.

RUOUS PHILLIPS
HARLESE. BEATLEY JR.

Vilnia
JAUNES E COATES
JEARTA 2025. JR
Dieta! Columbia

CULTON A. SICCLES
PAL CHRISTELLER

Marylar.c

As you are aware, after many months of negotiations the
Authority's staff and PEPCO's staff consumated an Electric
Service Agreement.

On August 14, 1975 the Agreement yas presented to the
Authority's Board of Directors for approğal. A District
representative and member of the Boare requested additional
time for the District staff to evaluate the context of the
Agreement:

On August 19, 1975, a meeting vias held between the
Authority's staff and the District Depar-ent of Transporta-
tion staff, at which a very lengthy discussion ensued and
nany questions vere asked relating to the agreement. The.
Authority's stafi responded in detail, explaining the complete
.contents and the intent of the Agreement and the manner in
which it was developed.

On · August 21, 1975 the Electric Service Agreement was
again presented to the Authority's Board of Directors. The
Board was inforged thać the Service Agrezrent reached with PEPCO
was reasonable and non-preferential. The District representa-

tive requested that the Authority staff consumate, and
present to the Board of Directors, 2 complete agreement which
would include the Electric Service Agree.ent and electric rate.
The Board deferred action on this item uacil the last of
September 1975.

metro

SEP 2 - 1975

Mr. Frank Walters
Page 2

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,

a

Vernon K. Garrett, Jr.
..Director
Office of Engineering

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.

A.

History of Negotiations and Summary

of Agreement

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

-2

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.