**Exhibit 10(c)**

 
| STATE OF MAINE                         |   | Docket No. 2006-24 |
|----------------------------------------|--------|--------------------|
| PUBLIC UTILITIES COMMISSION            |   |               |
|                                   |   | July 11, 2006      |
|                                   |   |               |
| MAINE PUBLIC SERVICE COMPANY           |   | CORRECTED(1) ORDER |
| Proposed Distribution Rate Increase of |   | APPROVING          |
| $3.24 Million or 19.7% Increase        |   | STIPULATION        |

 

ADAMS, Chairman;REISHUS, Commissioner

**I.****              SUMMARY**

We approve a Stipulation entered into by Maine Public Service Company(MPS) and the Office of the Public Advocate. By the terms of the Stipulation, MPS is authorized to increase its distributionrates by $1,750,000, or by 10.6%, effective July 15, 2006.  In conjunction with rate changes fortransmission and DSM (conservation) assessments effective the same day, MPStotal delivery rates will increase by 3.84%.

**II.****            BACKGROUND**

On March 13, 2006, MPS filed a request for an increase in distributionrates of $3.24 million, or 19.7%.  Afterissuing a notice of the proceeding, the Examiner granted petitions to interveneon behalf of the OPA, Houlton Water Company (Houlton) and Van Buren Light andPower District (Van Buren).(2)

After an initial case conference, the intervenors and Advisory Staffengaged in extensive discovery and participated in a technical conference, inwhich MPS representatives answered additional and follow-up questions.  After MPS filed responses to the oral data requestsposed at the technical conference, MPS, the OPA and the Advisory Staffparticipated in a number of settlement conferences.(3)  On June 23, 2006, MPS filed a Stipulationsigned by MPS and the OPA.  The Stipulationpurports to resolve all issues in the proceeding.  The Advisory Staff joined in the negotiationsand

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(1) The correction is to the last sentence in paragraph 3 on page2.  The word "provide" has beenchanged to "preclude" and a comma has been added after the wordaffiliate, in the same sentence.  Thischange corrects typographical errors in the July 6 version, and makes the Orderconsistent with the language in the Stipulation.

(2) The Examiner also granted limitedintervenor status to Bangor Hydro-Electric Company (limited to filing briefs orother written argument).

(3)The conferences were held at the Commission or by telephone and were noticed toall parties.

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recommendsapproval of the Stipulation.(4)  Houltonand Van Buren have not signed the Stipulation, but have indicated that they donot oppose the Stipulation.

**III.****           DESCRIPTION OF THE STIPULATION**

The parties agree that MPS will be permitted to increase its distributionrates by $1,750,000, resulting in a revenue requirement of $18,221,503.  The parties agree that the revenuerequirement is based upon a 2005 test year, a rate of return on common equityof 10.2% and a capital structure having a 50% equity component.

Although the stipulating parties do not agree on all the specific proforma adjustments that result in transforming the 2005 test year results intoan annual revenue requirement of $18,221,503, they do agree on certainratemaking adjustments that will have precedential effect going forward.  As set forth in Exhibit 4 to the Stipulation,the parties agree that stranded cost amortization expense and income taxexpense shall be excluded for cost allocation calculations when apportioningcommon costs of the Maine and Maritimes Corporation affiliated companies and thatthe MPS Cost Allocation Manual will be interpreted to be consistent withExhibit 4 in future distribution rate cases at the Commission and transmissionrate cases at FERC.

The parties also agree on future cost allocation for MPS’s Oraclefinancial software system which MPS implemented in June, 2004 and whichconsists of an Oracle data base implemented by Delinea and hosted by Delinia.  The parties agree that MPS will amortize thecosts associated with the Oracle System over 10 years, as stated in more detailin Section 6 (a) of the Stipulation.  Inaddition, the parties agree that one-third of the “administrative and general”costs associated with the Oracle System (defined as costs associated with thesoftware license maintenance fee, the Delinea hosting fee and Oracle-relatedtravel costs) shall be allocated to the parent company Maine & MaritimesGroup (MAM), and that the Cost Allocation Manual will be interpreted to precludethe recovery by MAM, or any MAM affiliate, of Oracle System costs in anycharges from MAM to MPS.

In the 2005 MPS transmission rate case, the FERC accepted a stipulationstating that the resolution of the cost recovery and cost allocation issuesarising from the implementation of the Oracle System by the Maine Commissionwould be used by the FERC as a template for the resolution of the same issuesfor transmission rate setting after 2005. Thus, the Oracle System cost allocation will be used in both futuredistribution and transmission rate cases.

The stipulating parties also agree to a Service Quality Performance Proposal.  The Proposal requires MPS to issue yearlyreports regarding its service performance in ten categories, but has nomonetary penalty or reward feature.  Theparties state that adoption of the Proposal is not intended to establish anypresumption that the

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(4)The parties to the Stipulation have waived the requirement in this case thatthe Advisory Staff's recommendations be contained in a written Examiner'sReport.

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categoriesselected, or performance benchmarks adopted should be used in any futurealternative rate plan or other service performance benchmarking plan.  Finally, the Advisory Staff, MPS and the OPAalso agree to engage in a collaborative effort with other interested parties toreview and, if warranted, redesign the Company’s Power Pact Program.

**IV.****           DECISION**

As we have now stated on many occasions, to accept astipulation the Commission must find that:

1.                                       theparties joining the stipulation represent a sufficiently broad spectrum ofinterests that the Commission can be sure that there is no appearance orreality of disenfranchisement;

2.                                       theprocess that led to the stipulation was fair to all parties; and

3.                                       thestipulated result is reasonable and is not contrary to legislative mandates.

*SeeCentral Maine Power Company, Proposed Increase in Rates,*DocketNo. 92-345(II), Detailed Opinion and Subsidiary Findings (Me. P.U.C. Jan. 10,1995), and *Maine Public Service Company,Proposed Increase in Rates (Rate Design),*Docket No. 95-052, Order(Me. P.U.C. June 26, 1996).  We have alsorecognized that we have an obligation to ensure that the overall stipulatedresult is in the public interest.  *See Northern Utilities, Inc., Proposed EnvironmentalResponse Cost Recovery,*Docket No. 96-678, Order ApprovingStipulation (Me. P.U.C. April 28, 1997). We find that the proposed Stipulation in this case meets these criteria.

The Stipulationbefore us was entered into by the utility, and the OPA.  In past cases, we have found that theseentities, representing often opposite views in the ratemaking process,constitute a sufficiently broad spectrum of interests to satisfy the firstcriteria.  *See Public Utilities Commission, Investigation of Stranded CostRecovery, Transmission and Distribution Utility Revenue Requirements and RateDesign of Bangor Hydro-Electric Company (Phase II),*Docket No.97-596, Order at 6 (Feb. 29, 2000) and *MainePublic Utilities Commission, Investigation of Retail Electric TransmissionServices and Jurisdictional Issues,*Docket No. 99-185, OrderApproving Stipulation (Maine Public Service Company) at 3 (Aug. 11, 2000).  In this case, we also note that our AdvisoryStaff was an active participant in the settlement process and has not indicatedany objection to the Stipulation.  Weare, therefore, satisfied that a broad spectrum of interests is represented bythe Stipulation.

Second, weconclude that the process that led to the Stipulation was fair.  The settlement process was initiated byprocedural order of the Examiner, and the settlement discussions took place atthe Commission or by phone conference to which parties were given the dial-innumber.

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Finally, we findthat the stipulated result is reasonable, not contrary to the public interestand consistent with Legislative mandates. Negotiations did not begin until the OPA and Advisory Staff reviewed MPS’sfiling and extensive data responses.  Bythat time, both OPA and Staff could identify the issues presented by MPS’srevenue requirement analysis and to have a preliminary view as to properresolution of those issues.

As indicatedabove, the Advisory Staff recommends approval of the Stipulation.  In Staff’s view, the Stipulation represents areasonable compromise of the issues presented by MPS’s rate case.  The issues as reported to us by our AdvisoryStaff, and as raised by either or both the OPA and Staff are: return on equityand equity ratio; recovery of start-up costs, mostly incurred in 2004, toimplement Sarbanes-Oxley requirements; sales forecast; the reasonableness ofthe Oracle System costs to MPS, including whether those costs are properlyallocated among MAM, MPS and the other subsidiaries; whether the common costallocator should include stranded costs and income taxes in the formula; thenon-recurring nature of certain test year expenses; and the effective tax ratefor MPS given that MPS does not file its own tax return but files as part ofthe consolidated return for MAM.

In Staff’s view,the Stipulation resolves these issues is in a manner that is both reasonableand consistent with the Commission’s precedent and produces a revenuerequirement that falls within a reasonable range.  Although the stipulating parties (and Staff)do not agree on the precise calculation of the stipulated revenue requirement,we have reviewed that Staff’s calculation of the revenue requirement value ofthose issues and its analysis of the likely outcomes if the case is fullylitigated and agree with Staff’s recommendation that the stipulated revenuerequirement is reasonable.  In addition,we agree with Staff’s conclusion that the resolution of those issues that arespecifically spelled out are also reasonable. The Commission employed a consultant to assist in determining thereasonableness of the Oracle System costs. There was some concern that the software system and hosting arrangementwas more elaborate than necessary for the T&D utility in order to meet theneeds of the entire MAM group.  In Staff’sview, the Oracle System going-forward cost allocation is reasonable (theallocation to MAM of one-third of the administrative and general costs) becauseit is based upon the estimated costs of an alternative financial softwaresystem used by another public utility.

The OPA’sconsultant raised the common cost allocation formula issue.  As stranded costs are not an operating cost,it seems logical to exclude them from the formula meant to allocate commonon-going costs.  Likewise, income taxesare negative for some of the affiliated companies.  It seems proper to also exclude then from theformula.  We note that the agreement toadopt this resolution of the common cost allocation formula in the transmissionrate case contest is a benefit that could not be achieved through litigation.

Accordingly, we

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ORDER

1.             Thatthe attached Stipulation filed on June 23, 2006 is approved;

2.             ThatMaine Public Service Company shall file rates that are consistent with thisOrder and the Stipulation; and,

3.             Thatthe Accounting Orders described in the Stipulation are granted by this OrderApproving Stipulation.

Dated at Augusta, Maine, this 11th day of July, 2006.
|   | BY ORDER OF THE COMMISSION      |   |
|--------|---------------------------------|--------|
|   |                            |   |
|   |                            |   |
|   | Dennis L. Keschl                |   |
|   | Acting Administrative  Director |   |

 

 
| COMMISSIONERS VOTING FOR: |   | Adams   |
|---------------------------|--------|---------|
|                      |   | Reishus |

 

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NOTICE OF RIGHTS TO REVIEW OR APPEAL

5 M.R.S.A. § 9061 requires the Public UtilitiesCommission to give each party to an adjudicatory proceeding written notice ofthe party’s rights to review or appeal of its decision made at the conclusionof the adjudicatory proceeding.  Themethods of review or appeal of PUC decisions at the conclusion of anadjudicatory proceeding are as follows:

1.             Reconsiderationof the Commission’s Order may be requested under Section 1004 of the Commission’sRules of Practice and Procedure (65-407 C.M.R.110) within 20 days of the dateof the Order by filing a petition with the Commission stating the grounds uponwhich reconsideration is sought.

2.             Appealof a final decision of the Commission may be taken to the Law Court byfiling, within **21 days** of the dateof the Order, a Notice of Appeal with the Administrative Director of theCommission, pursuant to 35-A M.R.S.A. § 1320(1)-(4) and the Maine Rules ofAppellate Procedure.

3.             Additionalcourt review of constitutional issues or issues involving the justness orreasonableness of rates may be had by the filing of an appeal with the LawCourt, pursuant to 35-A M.R.S.A. § 1320(5).

Note:                   The attachmentof this Notice to a document does not indicate the Commission’s view that theparticular document may be subject to review or appeal.  Similarly, the failure of the Commission toattach a copy of this Notice to a document does not indicate the Commission’sview that the document is not subject to review or appeal.

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Kimball L. Kenway

kkenway@curtisthaxter.com

# **ELECTRONICALLY FILED ON JUNE 23, 2006**

Dennis M. Keschl

Acting Administrative Director

Maine Public Utilities Commission

State House Station 18

Augusta, Maine  04333-0018

**Re:****                             MAINEPUBLIC SERVICE COMPANY: Proposed Rate Change****MPUC****Docket No. 2006-024**

**THIS IS A VIRTUAL DUPLICATE OFTHE ORIGINAL HARDCOPY****SUBMITTED TO THE COMMISSION IN ACCORDANCE WITH ITS ELECTRONICFILING INSTRUCTIONS**

Dear Dennis:

Enclosed forfiling in the above-noted matter please find a Stipulation which, if adopted bythe Commission, will resolve all issues in this case.  The Stipulation has been executed byMr. Bryant, on behalf of the Office of the Public Advocate, and theundersigned, on behalf of Maine Public Service Company (“MPS”).  The parties wish to extend their thanks tothe Commission Staff Advisors, who assisted the parties in achieving thisStipulation.

Please note thatthe Stipulation contemplates that the new distribution rates will beimplemented on July 15, together with the implementation of new transmissionand DSM rates.  We ask that the matter beplaced on the Commission’s agenda for prompt action so that we may proceed withthe compliance phase of this case.

The non-signatoryparties, Houlton Water Company, Van Buren Power and Light District, and BangorHydro-Electric Company, were provided with stipulation drafts and invited toparticipate in all of the settlement meetings and conferences calls leading tothis Stipulation.  MPS will be contactingthem to discuss the Stipulation in the next few days.

Thank you for yourattention to this matter.
|   | Very truly yours,  |
|--------|--------------------|
|   |                    |
|   | Kimball L.  Kenway |

 

cc.  All Parties(via electronic mail, except as otherwise requested)

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| **STATE OF MAINE**                         |       |                    |
|--------------------------------------------|------------|-------------------------|
| **PUBLIC UTILITIES COMMISSION**            | ** ** | **Docket  No. 2006-24** |
| ** **                                 | ** ** | ** **              |
| **MAINE PUBLIC SERVICE COMPANY**           |       |                    |
| **Proposed Distribution Rate Increase of** |       |                    |
| **$3.24 Million or 19.7% Increase**        | ** ** | **STIPULATION**         |

 

**A.****            Introduction,Procedural History, and Summary of Stipulation.**

On March 13, 2006, Maine Public Service Company (“MPS,”“the Company”) filed a request for an increase in its distribution rates of$3.24 Million, or 19.7%.  At the initialcase conference held on April 18, 2006, the Examiner granted full interventionstatus to the Office of the Public Advocate (“OPA”), Houlton Water Company andthe Van Buren Power and Light District, and limited intervention status toBangor Hydro-Electric Company.

OPA issued, and MPS responded to, a series of writtendata requests.  In addition, theCommission held a technical conference on May 11 generating several oral datarequests which MPS has also completed. The parties have also engaged in informal discovery via email andtelephone conferences.

The parties also discussed, and exchanged proposalsregarding, the adoption, for MPS, of a service quality index.

Beginning on June 9, the parties have engaged in goodfaith negotiations in an effort to settle and resolve all outstanding issues inthis case.  These discussions haveresulted in this Stipulation, in which the parties have agreed to the following(all as more fully set forth and described below):

1.  MPS shall beentitled to increase its distribution service rates by $1,750,000, or 10.6%, byfiling new distribution service rates designed to produce a distributionrevenue requirement of no more than $18,221,503, and a rate of return on commonequity of 10.2% (as shown on Exhibit 1), said rates to become effective forservice rendered on and after July 15, 2006.

2.  The Companyshall also implement:

(a) its new transmission rates, resulting from itsmost recent transmission rate filing before the FERC, and

(b) its new DSM rate resulting from the DSMassessments authorized by the Commission in Docket No. 2003-516

forservice rendered on and after July 15, the parties thereby intending to effecta simultaneous change in all three rates. The specific impact of each of the three rate changes is set forth onExhibit 2 of this Stipulation.  As shownon that Exhibit, the cumulative effect of the three simultaneous rate changesis an approximate increase to electrical delivery rates of 3.84%.

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3.  MPS’sservice performance shall be measured under the Service Quality Index standardsagreed to among the parties in accordance with Exhibit 3 of this Stipulation.

4.  MPS agreesto engage with the OPA, the Staff and any other interested parties in acollaborative effort to determine whether MPS’s PowerPact Program should beredesigned.

5.  At theconclusion of MPS’s 2005 transmission rate case, FERC Docket Nos. ER00-1053-016and ER00-1053-017 (the “2005 Transmission Rate Case”), the FERC accepted aStipulation contemplating that for the purpose of establishing post-2005 MPStransmission rates, the recoverability and inter-company cost allocationpertaining to the Company’s costs associated with the acquisition,installation, operation and maintenance of the Oracle system would depend uponthe determinations made and adopted by the Maine PUC in this case.  Accordingly, the parties have agreed to theamount of the adjustment to be made to the Company’s FERC-determinedtransmission revenue requirement based on the resolution of the Oracle costrecovery issue established in this Stipulation.

These issues are discussed in detail in the nextSection of this Stipulation.

The parties agree that the record in this case, uponwhich the Commission may judge the justness and reasonableness of the rates asstipulated, shall consist of the Company’s initial prefiled testimony andexhibits, the transcript of the May 11 Technical Conference, the Company’sresponses to the data requests propounded in this case and the Company’sSupplemental Testimony and Exhibits dated June 15, 2006.

**B. Stipulation.**

The parties hereby agree as follows:

**1.  DistributionRevenue Requirement and Related Issues.**

a.  RevenueRequirement.  MPS shall be entitledto increase its distribution rates on file with the Commission by an amountsufficient to produce an increase of not more than $1,750,000, resulting in adistribution revenue requirement of no more than $18,221,503. The agreed-uponrevenue requirement is based on

(i)  the Company’s actual audited calendar year2005 test year results of operations, subject to various pro-forma adjustmentsas described herein,

(ii)  a rate of return on common equity of 10.2%,and

(iii) a capital structurehaving a 50% equity component.(1)

b.  CostAllocation.  Set forth in Exhibit 4is the methodology agreed to by the parties for apportioning the common costsof the Maine and Maritimes Corporation affiliated companies, includingMPS.  The parties stipulate and agreethat henceforth, the MPS Cost Allocation Manual shall be interpreted in amanner consistent with the cost allocation methodology used in this Exhibit 4,which excludes stranded cost amortization expense and income tax expense fromthe calculation, both

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(1) The return on equity, equity ratio, cost rates ofeach component of the capital structure and weighted overall cost of capital asstipulated by the parties are set forth on Exhibit 1.

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forthe purposes of setting distribution rates and for the purposes of settingtransmission rates filed with the FERC.

**2.  Resolution of Oracle System Issue inTransmission Case.**

MPSimplemented a new financial software solution in June of 2004 consisting of anOracle data base implemented by Delinea and hosted by Delinea (collectively,the “Oracle System”).  In the 2005Transmission Rate Case, the FERC accepted a Stipulation stating that the termsof the resolution, by this Commission, of the cost recovery and cost allocationissues arising from the implementation of the Oracle System would be used bythe FERC as a template for the resolution of the same issues for the purposesof setting FERC-filed transmission rates after 2005.  In other words, the decision reached in thiscase regarding MPS’s recovery of Oracle System costs would be carried over andapplied on a going-forward basis (beginning in 2006) to determine the recoveryof such costs in the Company’s transmission rates.(2)

Accordingly,the parties (and, ultimately, the Commission) agree as follows:

(a)  Noportion of the investment or costs associated with the Oracle System shall bedisallowed for ratemaking purposes.

(b) MPS shall amortize the costs associated with the Oracle System as statedin Section 6(a) hereof.

(c) One-third of the “administrative and general” costs associated with theOracle System (consisting of the costs associated with the software licensemaintenance fee, the Delinea hosting fee, and Oracle-related travel costs)shall be allocated to the parent company, Maine and Maritimes Group (“MAM”);provided that the Cost Allocation manual shall be interpreted to preclude therecovery by MAM (or any MAM affiliate) of Oracle System costs in any chargesfrom MAM to MPS, or otherwise.

Theparties agree that this protocol shall be used to establish theOracle-System-related portion of the Company’s revenue requirement (a) for thepurpose of the transmission rate case currently

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(2)The relevant portion of the Agreement Regarding Maine Public Service Company’s2005 Informational Filing, the agreement among the parties resolving the 2005Transmission Rate Case, states (on page 3) as follows:

The parties further agree that for the 2006informational filing and subsequent filings during the current remaining lifeof the Oracle System software implemented in 2004, the Parties shall supportthe outcome of the 2006 distribution case in MPUC Docket No. 2006-24 regardingthe amount of Oracle System software costs determined by that case to berecoverable from ratepayers including the allocation of such costs betweenregulated and non-regulated activities, the allocation between distribution andtransmission, and the prudence of such costs, or any disallowance of thosecosts for ratemaking purposes; provided that, the outcome of the 2006distribution case in MPUC Docket No. 2006-24 does not apply to any costsassociated with the Oracle System software not specifically addressed in thatcase. 

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before the FERC, (b) infuture transmission rate cases before the FERC,(3) and (c) in futuredistribution rate cases before the Commission (and that the non-MPS partiesshall not oppose such treatment of such costs in future distributioncases).  The ratemaking treatment of theOracle System costs agreed to herein shall not constitute a precedent for theratemaking treatment to be accorded to the costs associated with any future MPSinformation technology acquisition.

**3.  Collaborative Review of Power Pact Program.**

TheStaff, the Company, and the OPA agree to engage in a collaborative effort withany other interested parties to review and, if warranted, redesign the Company’sPower Pact Program.

**4.  Service Performance Standards.**

Attachedas Exhibit 3 is a Service Quality Performance Proposal which the parties haveagreed to implement in accordance with its terms.  The Proposal requires MPS to issue yearlyreports regarding its service performance in ten categories, but has nomonetary penalty (or reward) feature. The adoption of the Proposal shall not establish any presumption thatthe categories selected, or the performance benchmarks adopted, should be usedin any future alternative rate plan (or other service performance benchmarkingplan) for MPS.

**5.  Rate Design; Compliance Rate Filing.**

Theagreed-upon distribution rate increase shall be implemented on an “across-the-board”basis, as said term is commonly used in proceedings before thisCommission.  MPS shall file the new ratesin the compliance phase of this Docket promptly following Commission approvalof this Stipulation, and the Staff agrees to process the proposed new ratespromptly so as to meet the July 15 rate implementation date for thesimultaneous rate change.

**6.  Accounting Orders.**

TheParties agree to the entry of Accounting Orders confirming that MPS shall:

A.              Amortize the cost ofthe Oracle System over a period of ten years, rather than the seven-year periodinitially proposed by MPS, said amortization to be applied retroactively to theJune 30, 2004 implementation date of the Oracle System.

B.                Implement newdistribution depreciation rates to become effective January 1, 2007, attachedas Exhibit 5.

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(3) The partiesand the Commission therefore agree not to oppose the Oracle-System-relatedportion of any MPS filing before the FERC for the recovery of MPS’s OracleSystem costs that uses the cost allocation and recovery principles for suchcosts included in this Stipulation.

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**7.  Standard Stipulation Provisions.**

a.  Purpose;Rejection of Part Constituted Rejection of Whole.  The parties are entering into thisStipulation for the purpose of finally disposing of all issues raised in thisDocket.  If the Commission does notaccept the entire Stipulation without material modification, then thisStipulation shall be null and void, and shall not be binding upon the partiesin this or any future proceeding.

b.  No Precedent.  The making of this Stipulation by the Partiesshall not constitute precedent as to any matter of fact or law, nor, except asexpressly provided otherwise herein, shall it foreclose any party from makingany contention or exercising any right, including the right of appeal, in anyCommission proceeding or investigation, or in any other trial or action.

c.  Examiner’s Report.  The parties agree to waive the provisions ofSection 752(b) of the Commission’s Rules of Practice and Procedure, requiringthat any Examiner’s Report be in writing and that the parties be afforded anopportunity to file written exceptions thereto. The parties thereby intend to permit the Advisors to provide an oralExaminer’s Report or recommendation to the Commission at or before thedeliberative session held in this Docket, or, if the Advisors wish, to providea written Examiner’s Report to the Commission with the parties waiving theright to file exceptions or comments hereto.

**IN WITNESSWHEREOF**, the parties have caused this Stipulation to be executed and deliveredby their duly constituted officers or their respective attorneys.
|        | OFFICE OF THE PUBLIC ADVOCATE      |
|--------|------------------------------------|
|   |                               |   |
|   |                               |   |
| Dated: |                               |   | By: |   |   |
|   |                               | Eric  J. Bryant, Esq. |
|   |                               |   |
|   |                               |   |
|   | MAINE PUBLIC SERVICE COMPANY       |
|   |                               |   |
|   |                               |   |
| Dated: |                               |   | By: |   |   |
|   |                               | Kimball L. Kenway, Esq. |
|   |                               |   |
|   |                               |   |
|   | HOULTON WATER COMPANY              |
|   |                               |   |
|   |                               |   |
| Dated: |                               |   | By: |   |   |
|   |                               | John C. Clark, General Manager |
|   |                               |   |
|   |                               |   |
|   | VAN BUREN LIGHT AND POWER DISTRICT |
|   |                               |   |
| Dated: |                               |   | By: |   |   |
|   |                               | Skip Dumais, Manager |

 

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**Exhibit1**

**Maine Public Service Company**

Costof Capital

MPUC Docket No. 2006-24
| ** **                             | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** | **Pre-Tax** | ** ** |
|----------------------------------------|------------|----------------------|------------|------------|------------|------------|------------|-------------|------------|
| **As filed on 6-15-06** | ** ** | **Proportion**       | ** ** | **Cost**   | ** ** | **WACC**   | ** ** | **WACC**    | ** ** |
| Common Equity                          |       | 50.00                | %          | 10.20      | %          | 5.10       | %          | 8.48        | %          |
| Short-Term Debt                        |       | 6.38                 | %          | 5.37       | %          | 0.34       | %          | 0.34        | %          |
| Long-Term Debt                         |       | 43.62                | %          | 6.90       | %          | 3.01       | %          | 3.01        | %          |
| Total                                  |       | 100.00               | %          |       |       | 8.45       | %          | 11.84       | %          |
|                                   |       |                 |       |       |       |       |       |        |       |
| Note (1):                              |       |                 |       |       |       |       |       |        |       |
| Federal Tax Rate  of:                  |       | 34.0000              | %          |       |       |       |       |        |       |
| State Tax Rate  of:                    |       | 8.9300               | %          |       |       |       |       |        |       |
| Weighted Tax  Rate of:                 |       | 39.8938              | %          |       |       |       |       |        |       |
|                                   |       |                 |       |       |       |       |       |        |       |
|                                   |       | 1 / (1 - 0.398938) = |       | 1.66370    |       |       |       |        |       |

 

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Exhibit _2

**Maine Public Service Company**

Notice of Rate Increase

Docket Nos. FERCER00-1053-012, MPUC 2003-516, and MPUC 2006-24
| ** **                                  | ** ** | **Total**         | ** ** | **T**             | ** ** | **D**             | ** ** | **DSM Mil Rate** | ** ** | **Stranded Cost** | ** ** |
|---------------------------------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|----------------------------|------------|------------------------|------------|
| **Class**                                   | ** ** | **% Change** | ** ** | **% Change** | ** ** | **% Change** | ** ** | **% Change**          | ** ** | **% Change**      | ** ** |
| Residential  (Rate A or A1)                 |       | 6.44              | %          | -3.35             | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Residential  (Rate AH or AHN)               |       | 6.05              | %          | -3.35             | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| General Service  (Rate C, CF, or MC-G)      |       | 5.10              | %          | -10.96            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Agricultural  Produce Storage (Rate F)      |       | 4.71              | %          | -10.96            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Snow Making Rate  (Rate SNO)                |       | 5.67              | %          | -10.96            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Municipal Water  Pumping Service (Rate D-2) |       | 4.41              | %          | 0.00              | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Rate ES or MC-M                             |       | 1.21              | %          | -19.68            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Rate EP                                     |       | 0.70              | %          | -18.70            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Rate EST                                    |       | 1.50              | %          | -15.22            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Rate EPT                                    |       | 0.22              | %          | -22.23            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Rate ST                                     |       | -1.82             | %          | -22.49            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Rate HT                                     |       | -4.09             | %          | -18.64            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
| Lighting (Rate  SL or T)                    |       | 10.50             | %          | 64.76             | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |
|                                        |       |              |       |              |       |              |       |                       |       |                   |       |
| Average Retail Rate  Increase               |       | 3.84              | %          | -13.43            | %          | 10.60             | %          | 20.00                      | %          | 0.00                   | %          |

 

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Exhibit 3

**MainePublic Service Company**MPUC Docket No. 2006-24**Service Quality Index Proposal**

**1.**             **Reporting Requirement:** Beginning April 1, 2007 and every April 1 thereafter, MPS shall reportto the Commission and to the Public Advocate its performance for the prior calendaryear pursuant to the indicators contained in this Service Quality Index.

**2.             CustomerAverage Interruption Duration Index (“CAIDI”)**:  The baseline is 71.2 minutes.  CAIDI is defined and calculated in accordancewith IEEE Standard 1366-1998, or any successor version.  When more than 5% of MPS’s customers areaffected by outages, all outages occurring in MPS’s service territoryassociated with that event will be excluded from the calculation of thisindicator until service is restored to 95% of the affected customers.  Inits annual report, MPS shall describe all circumstances leading to theexclusion of outage data under this section.

**3.             SystemAverage Interruption Frequency Index (“SAIFI”)**:   The baseline is 1.71.  SAIFI is defined and calculated in accordancewith IEEE Standard 1366-1998, or any successor version.  When more than 5% of MPS’s customers areaffected by outages, all outages occurring in MPS’s service territoryassociated with that event will be excluded from the calculation of thisindicator until service is restored to 95% of the affected customers.  Inits annual report, MPS shall describe all circumstances leading to theexclusion of outage data under this section.

**4.             ServiceOrder Timeliness**:  The baseline is 99.11% of all serviceorders fulfilled within three days of the day requested.  For thosecustomers who need permits or whose installation represents new construction,the three days shall begin to run from the date MPS personnel determine thecustomer is ready to receive service.

**5.             PersonnelAccidents Incidence****Rate**. Thebaseline shall be 3.5 lost-time accidents per 200,000 hours worked, as definedby OSHA.

**6.             MPUCComplaint Ratio**:  The baseline is set at 0.86 complaintsper 1,000 customers per year.  Complaints will be counted in the year theyare accepted by the Consumer Assistance Division (CAD) of the MPUC. Acceptance of complaints by the CAD will be in accordance with existing CADstandards.

**7.             BillError Rate**:  The baseline is 0.31% annual error rate forcustomer bills.

**8.             Percentof Business Calls Answered**: The baseline is 85% of calls answered within 30 seconds.  Forpurposes of this indicator, business calls are defined as calls to the Company’scustomer service business line, which receives both business calls and outagereports, as specified on customer bills and which are answered, either directlyor after referral from the Company’s Interactive Voice Response (IVR), by a MPSrepresentative ready to render assistance and to accept information necessaryto process the call.  The time is measured from the time the call isreceived at the Company or, in

1

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the event the call isinitially answered by the IVR system, from the time the customer elects tospeak to a Company representative.  Customers shall be given anopportunity to elect to speak to a Company representative at the first level ofoptions presented by the IVR system to the customer.  An acknowledgmentthat the customer is waiting on the lines does not constitute an answer.

**9.             EstimatedMeter Readings**.  Thebaseline is 1.5%. This indicator will be the percent of meter readings that areestimated.

**10.          Customer “Report Card**:”  Each April1, beginning in 2007, MPS will distribute an annual report card to allcustomers on the Company’s service quality and reliability performance for theprevious  calendar year as measured bythe SQI indicators.  The report card will list the indicators andbaselines and will indicate the Company’s actual performance for the previous ReportingYear.

MPS will includeon each customer’s first bill issued after April 1, 2007, the followingstatement:  “A Report Card related to MPS’s service quality performancefor the last year is provided with this month’s bill (and is also availableon-line at www.mainepublicservice.com)”.

At least thirtydays in advance of the issuance of the report card, MPS shall provide aproposed draft thereof to the OPA and the Commission.  MPS shall be entitled to issue the reportcard as drafted unless within fifteen days of the issuance of the proposeddraft either the OPA or the Commission notifies the Company in writing (with acopy to the Commission or the OPA, as the case may be) that it objects to thedraft.  If the Company receives a timelyobjection to the draft, it will suspend issuing the report card until such timeas the Commission has approved the report card for issuance to customers.

**11.          Rightto Reopen**.  There shallbe no automatic penalty pursuant to this Stipulation imposed on MPS for afailure to meet one or more of the baseline performance standards.  However, the parties agree that any party maymove to amend this Stipulation to add an automatic penalty provision similar tothat in effect for other investor-owned electric distribution companies ifthere is evidence that service quality performance has deteriorated.  In no case shall this Stipulation beinterpreted to prevent the Commission from exercising any authority it maypossess to open an investigation into any aspect of MPS’ service quality andcustomer service or to adopt additional service quality performance standardsapplicable to MPS or other electric distribution companies after notice andopportunity for hearing.

2

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**Exhibit4**

 

**MainePublic Service Company**

**MPUCDocket No. 2006-24**

**CommonCost Allocation Rates**

 
| ** **                        | ** ** | **Year-to-Date**       | ** ** | **Expense from**  | ** ** |
|-----------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                        | ** ** | **Ending**             | ** ** | **March through** | ** ** |
| ** **                        | ** ** | **February 2005** | ** ** | **November 2005** | ** ** |
| **MPS CONSOLIDATED:**             | ** ** | ** **             | ** ** | ** **             | ** ** |
| **Operation & Maintenance**   |       | 1,707,691              |       | 8,936,456              |       |
| **Depreciation**                  |       | 459,269                |       | 2,092,349              |       |
| **Amortization**                  |       | 48,969                 |       | 220,249                |       |
| **Taxes Other Than Income**       |       | 298,607                |       | 1,264,106              |       |
| **Total  Operating Expenses**     |       | 2,514,537              |       | 12,513,160             | *          |
| ** **                        | ** ** | ** **             | ** ** | ** **             | ** ** |
| **OTHER UNREGULATED AFFILIATES:** | ** ** | ** **             | ** ** | ** **             | ** ** |
| **Operation & Maintenance**   |       | 1,137,817              |       | 6,270,145              |       |
| **Depreciation**                  |       | 10,252                 |       | 60,362                 |       |
| **Amortization**                  |       | 22,603                 |       | 95,639                 |       |
| **Taxes Other Than Income**       |       | 15,656                 |       | 47,833                 |       |
| **Total Operating Expenses**      |       | 1,186,328              |       | 6,473,979              | *          |

 

**Common Costs Allocation Rates (Operating ExpensesExcluding Stranded Cost Amortization and Income Taxes):**

 
| **Maine Public Service Company** | ** ** | 67.9 | % | 65.9 | % |
|----------------------------------|------------|------|---|------|---|
| **Other Unregulated Affiliates** | ** ** | 32.1 | % | 34.1 | % |

 

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**Exhibit 5**

Maine Public ServiceCompany

Depreciation Rates

MPUC Docket No. 2006-24

 
| ** **   | ** ** | ** **                    | ** ** | **Current** | ** ** | **Proposed** |
|--------------|------------|-------------------------------|------------|-------------|------------|--------------|
| **Account**  | ** ** | **Description**               | ** ** | **Rate**    | ** ** | **Rate**     |
| Transmission |       |                          |       |        |       |         |
| 352          |       | Structures & Imp          |       | 1.26        |       | 1.99         |
| 353          |       | Substation Equip              |       | 1.70        |       | 1.58         |
| 355.1        |       | Poles, Towers                 |       | 2.48        |       | 2.40         |
| 355.2        |       | Right of Way                  |       | 1.33        |       | 1.20         |
| 355.3        |       | Environ Permits               |       | 2.12        |       | 1.20         |
| 356          |       | Overhead Conductor            |       | 1.48        |       | 2.41         |
|         |       |                          |       |        |       |         |
| Distribution |       |                          |       |        |       |         |
| 360          |       | Right of Way                  |       | 2.97        |       | 0.70         |
| 361          |       | Structures & Imp          |       | 2.46        |       | 1.43         |
| 362          |       | Substation Equip              |       | 2.68        |       | 2.01         |
| 364          |       | Poles & Fixtures          |       | 3.19        |       | 3.01         |
| 365          |       | Overhead Conductor            |       | 2.96        |       | 2.50         |
| 365010       |       | Overhead Conductor - Loring   |       | 0.99        |       | 2.50         |
| 366          |       | Underground Conduits          |       | 2.10        |       | 1.46         |
| 367          |       | Underground Con & Devices |       | 3.59        |       | 0.57         |
| 368.1        |       | Transformers                  |       | 3.35        |       | 4.70         |
| 368.2        |       | Capacitors                    |       | 3.14        |       | 4.70         |
| 369          |       | Services                      |       | 3.87        |       | 4.15         |
| 370          |       | Customers Meters              |       | 6.34        |       | 4.47         |
| 371.2        |       | Area Lighting & Signal    |       | 5.76        |       | 3.30         |
| 371.3        |       | Water Heater Controls         |       | 5.55        |       | 3.30         |
| 371.4        |       | Outage Detection Devices      |       | 3.14        |       | 3.30         |
| 373          |       | Street Lighting               |       | 4.28        |       | 3.32         |
|         |       |                          |       |        |       |         |
| General      |       |                          |       |        |       |         |
| 390          |       | Structures & Imp          |       | 2.03        |       | 1.87         |
| 391.1        |       | General Office Equipment      |       | 3.90        |       | 4.74         |
| 391.2        |       | Office & Computer Equip   |       | 13.75       |       | 6.34         |
| 391.21       |       | DOS Circuit                   |       | 21.35       |       | 6.34         |
| 391.216      |       | OASIS Equip                   |       | 13.75       |       | 6.34         |
| 393          |       | Stores Equipment              |       | 2.18        |       | 4.73         |
| 394          |       | Shop Equipment                |       | 2.12        |       | 5.74         |
| 395          |       | Lab Equipment                 |       | 3.69        |       | 6.77         |
| 397.1        |       | Communication - Radio         |       | 3.82        |       | 3.30         |
| 397.2        |       | Communication - Phone         |       | 3.82        |       | 3.30         |
| 398          |       | Misc Equipment                |       | 0.88        |       | 2.53         |

 

“exhibit 6 ofstipulation”

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