**Exhibit99(aq)**

 

**UNITED STATES OF AMERICABEFORE THEFEDERAL ENERGY REGULATORY COMMISSION**

 

 
| **Maine Public Service Company** | **)** | **Docket No. EROO-1053-009** |
|----------------------------------|-------|------------------------------|

 

 

**SETTLEMENT AGREEMENT**

 

The Parties agree to thisSettlement Agreement, which is made as of 11th day of February, 2004. The termsof the Settlement Agreement are set forth below.

 

**I.****                                      DEFINITIONS**

 

**1.1****                               Commission:**Federal Energy Regulatory Commission.

 

**1.2****                               FormulaRate:**MPS’s formula rate in its OATT.

 

**1.3****                               MPS:**Maine Public Service Company.

 

**1.4****                               MPUC:**Maine Public Utilities Commission.

 

**1.5****                               OATT:**MPS’s Open Access Transmission Tariff.

 

**1.6****                               Parties:**Eastern Maine Electric Cooperative, Houlton Water Company, MPS, Van BurenLight and Power District, and WPS Energy Services, Inc.

 

**1.7****                               SettlementAgreement:**This Settlement Agreement in Maine PublicServiceCompany, Docket No. EROO-1053-009.

 

**1.8****                               2000Settlement Agreement:**The Settlement Agreement signed June 30, 2000,filed in Maine Public Service Company, Docket No. EROO-1053-000, andapproved by the Commission on September 15, 2000. Maine Pub. Serv.Co., 92 FERC 161,208 (2000).

 

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**II.****                                    ****TERMS**

 

**2.1****                              ****Resolution of issues.**Pursuant to Section 2.5 of the 2000 Settlement Agreement, NIPS metwith the Parties, the MPUC, and Commission Trial Staff to determine if any ofthe Parties, the MPUC, or Commission Trial Staff believe that the Formula Ratedoes not produce reasonable results. MPS and the Parties, the MPUC, andCommission Trial Staff were able to reach agreement. The agreement is reflectedin this Settlement Agreement. Additionally, pursuant to the 2000 SettlementAgreement, on June 16, 2003 in Docket No. EROO-1053-009, MPS filed aninformational filing setting forth the changed OATT charges effectiveJune 1, 2003 together with backup materials. This Settlement Agreement alsoresolves all issues in Docket No. EROO-1053-009 regarding the 2003informational filing. The Parties, the MPUC, and Commission Trial Staff agreethat upon Commission approval of this Settlement Agreement this proceedingshould be terminated.

 

**2.2****                              ****Formula Rate and OATT Provisions and Changes.**The Parties, the MPUC, and Commission TrialStaff agree to certain provisions and changes to MPS’s Formula Rate and OATT asspecified herein. Changes are shown in redline and non-redline format inAttachment A. These changes shall take effect on June 1, 2003, unlessotherwise noted in this Settlement Agreement. These provisions and changesinclude:

 

•                  A fixed 11 % return on common equity shallcontinue to be used. The formula makes clear that the return on common equitymay not be

 

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changedunless pursuant to section 205 or 206 of Federal Power Act, 16 U.S.C.§§ 824d, 824e.

 

•                  In calculating the weighted overall return,MPS’s actual long term debt and preferred costs will be calculated as specifiedin Note 1 of Statement AV of the Formula Rate. For the three years endingJune 1, 2006, MPS’s equity ratio will be (1) the actual equity ratio ascalculated according to Formula Rate Statement AV or (2) 53%, whichever is lower,and MPS’s debt ratio will be (a) the actual debt ratio as calculated accordingto Formula Rate Statement AV or (b) 100% less 53% less the actual preferredstock ratio, whichever is higher.

 

•                  Effective January 1, 2004, UPS willbegin booking depreciation accruals for the following plant accounts at therates specified, and depreciation expense reflecting these rates will beincluded in the MPS Formula Rate be used in the OATT charges to be effectiveJune 1, 2005. Formula Rate Statement AJ makes clear that the depreciationrates may not be changed unless pursuant to section 205 or 206 of FederalPower Act, 16 U.S.C. §§ 824d, 824e.

 

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| Account  352 Structures and Improvements         |   | 1.26   | %      |
|--------------------------------------------------|--------|--------|--------|
|                                             |   |   |   |
| Account  353 Station Equipment                   |   | 1.70   | %      |
|                                             |   |   |   |
| Account  355.1 Poles and Fixtures                |   | 2.48   | %      |
|                                             |   |   |   |
| Account  355.2 Rights-of-Way Clearing            |   | 1.33   | %      |
|                                             |   |   |   |
| Account  355.3 Environmental Permits             |   | 2.12   | %      |
|                                             |   |   |   |
| Account  356 Overhead Conductors and Dev.        |   | 1.48   | %      |
|                                             |   |   |   |
| Account  390 Structures and Improvements         |   | 2.03   | %      |
|                                             |   |   |   |
| Account  391.1 Office Furniture & Equipment  |   | 3.90   | %      |
|                                             |   |   |   |
| Account  391.2 Computers                         |   | 13.75  | %      |
|                                             |   |   |   |
| Account  391.21 DOS Circuit Installation         |   | 21.35  | %      |
|                                             |   |   |   |
| Account  391.216 OASIS Computer Hardware         |   | 13.75  | %      |
|                                             |   |   |   |
| Account  393 Stores Equipment                    |   | 2.18   | %      |
|                                             |   |   |   |
| Account  394 Tools & Garage Equipment        |   | 2.12   | %      |
|                                             |   |   |   |
| Account  395 Laboratory Equipment                |   | 3.69   | %      |
|                                             |   |   |   |
| Account  397.1 Communication Equipment-Radio     |   | 3.82   | %      |
|                                             |   |   |   |
| Account  397.2 Communication Equipment-Telephone |   | 3.82   | %      |
|                                             |   |   |   |
| Account  398 Misc. Equipment                     |   | 0.88   | %      |

 

•                  Depreciation rates for the following plantaccounts will be effective January 1, 2003 and depreciation expensereflecting accruals at these rates will be included in the MPS Formula Rate beused in the OATT charges to be effective June 1, 2004. Formula RateStatement AJ makes clear that the depreciation rates may not be changed unlesspursuant to section 205 or 206 of Federal Power Act, 16 U.S.C.§§ 824d, 824e.

 

| Account  350.2 Rights of Way |   | 0      | %      |
|------------------------------|--------|--------|--------|
|                         |   |   |   |
| Account  350.3 Land Rights   |   | 0      | %      |

 

Alsothe proposed amounts of depreciation accrual previously recorded throughDecember 31, 2002 and related to Account 350.2 and 350.3 will not bereversed and will continue to be recognized as credits to rate base.

 

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•                  MPS shall continue to include intangibleplant in rate base, and in addition, WS shall reduce intangible plant byaccumulated amortization (reflected on’ Formula Rate Statement AE) and includean amortization of intangible plant in the calculation of depreciation andamortization expense. Formula Rate Statement AJ shall be modified to includethe intangible amortization in total general plant depreciation and intangibleamortization. The transmission labor allocator shall be used to allocate totalgeneral plant depreciation and intangible amortization to the transmissionfunction. UPS shall use a three-year amortization period for computer hardwareand software related intangible plant, except that extraordinary softwareinvestment that on a project basis exceed $100,000 shall be amortized overseven years, with appropriate recognition of deferred taxes. In theinformational filing WS makes each year pursuant to Section 2.4 of thisSettlement Agreement, MPS shall include worksheets that detail the followinginformation regarding projects being amortized in Account 303: a description ofthe project, beginning and ending balances, the annual amortization and totalaccumulated amortization for that project. A sample worksheet is included inAttachment B of this Settlement Agreement.

 

•                  MPS shall allocate external regulatoryexpenses to all customers based  on aload ratio share basis beginning with test year 2002 expenses. The  current three-year amortization willcontinue. A conforming change to  FormulaRate Schedule lb shall be made.

 

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•                  A revenue credit for rents in Account 454(pole attachments, etc.) shall be added to the Formula Rate Statement AU. Aconforming change to Formula Rate Schedule 2 shall be made.

 

•                  MPS shall add a new. line item toSchedule 2 of the Formula Rate to reduce rate base for deferred directors’fees. The amount of directors’ fees to be shown on Schedule 2 of theFormula Rate will be developed on Formula Rate Statement AD2.

 

•                  MPS shall modify the Formula Rate StatementAF2 to reduce rate base by the net of amounts in Account 228.3 (i.e. Accounts228.310, 228.320, and 228.330) minus the amount in Account 186.991. MPS willaverage the beginning and end of year balances in the accounts and allocate thenet of the averages to the transmission function using the transmission laborallocator. Formula Rate Schedule 2 will be modified to add a line item forpensions and benefits.

 

•                  All costs (1) of generation, (2) of enteringthe generation business and (3) of any other non-transmission business(regulated or non-regulated) activities - including all deferred income taxesand an appropriate allocation of administrative and general expenses - shall beexcluded from the transmission rate. Any costs of starting or operating anybusiness other than transmission or distribution that have or will be incurredas of January 1, 2003 shall be separately identified and segregated sothat transmission customers can review those costs. MPS shall maintainsufficient records to enable customers to monitor these

 

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costsand to ensure that these costs are identified and not charged to transmissioncustomers, and to enable MPS to support and explain its allocation of costs.Any information provided by MPS regarding these costs will be treated assupporting documentation under Section 2.3 of the Settlement Agreement andany disputes concerning that information will be resolved under the terms ofSection 2.3 and not Section 2.4.

 

•                  In the informational filing WS makes eachyear pursuant to Section 2.4 of this Settlement Agreement, MPS shallinclude worksheets that detail the treatment of deferred taxes related toAccelerated Costs Recovery System (“ACRS”)/ Modified Accelerated Cost RecoverySystem (“MACRS”) property. Specifically, WS shall demonstrate by journal oraccount entries that the tax benefits related to the tax deductions for theretirement of ACRS/MACRS property and for costs of removal of that propertywere credited to Account 282 or 283. A sample worksheet is included inAttachment B of this Settlement Agreement.

 

•                  For retail transmission charges, MPS shallchange the retail transmission rates each year on October 1. Specifically,MPS shall add the following  language tothe Formula Rate Schedule 1.1.1: “Retail transmission price changes willtake effect October 1. The transmission revenue effect of  any difference (positive or negative)between when transmission price  changeswould normally occur (June 1) and when they actually occur  (October 1) will be accrued withinterest, calculated pursuant to Section

 

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35.19afor FERC’s regulations and included in the next determination of transmissionprices for retail transmission customers.”

 

•                  The following clean-up edits to the FormulaRate shall be made: (1) Schedule 2 shall be modified to add theappropriate line numbers. (2) Schedule 1b2 shall be changed to correct theaccount numbers listed. (3) The Schedule reference on line 2 ofSchedule 1.1.1 shall be corrected and the title revised. (4) MPS shallcorrect Statement AF2, note 2 by changing the 190 to 109. (5) Statement AUshall be modified to clarify that non-firm revenues are revenues credited andto reflect the total calculation method.

 

•                  MPS shall modify OATT Schedule 2,Reactive Support and Voltage Control from Generation Sources Service to specifythe allocation of reactive support costs. UPS shall allocate reactive supportcharges on a load ratio share basis. For wholesale customers, charges forreactive support shall occur each month on an as billed basis. For retailcustomers, the reactive support charges shall be rolled into the retailtransmission revenue requirement on a prospective yearly basis with a true-upthe next year. This change to Schedule 2 shall be effective April 1,2003. UPS also will add Schedule 4 to the Formula Rate to describe theallocation of reactive support costs and modify Schedule 1.1.2 to reflectthe allocation for retail transmission customers.

 

TheParties, the MPUC, and Commission Trial Staff agree that if there is a conflictbetween the Formula Rate and OATT changes listed in this Section

 

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2.2and changes reflected on the Formula Rate and OATT pages included in AttachmentA to this Settlement Agreement, the changes reflected on the Formula Rate andOATT pages included in Attachment A to this Settlement Agreement control.

 

**2.3****                              ****Informational Submission.**Consistent with the 2000 Settlement Agreement, before each annual(June 1) adjustment under MPS’s Formula Rate; MPS shall provide theParties, the MPUC, and Commission Trial Staff with the changed charges that MPSproposes to apply on June 1 together with back-up materials. MPS shall.use its best efforts to provide that information by May 15 of each year. MPSshall submit an informational filing with the Commission setting forth thechanged charges by June 15 of each year. If a Party disputes the annual chargechange, that Party shall possess the right to raise any issue with theCommission (even after June 15). MPS shall respond to reasonable requestsfor supporting documentation requested by any Party, the MPUC, or CommissionTrial Staff (even after June 15).

 

**2.4****                              ****Formula Rate Re-filing.**By March 1, 2006, MPS shall meet with the Parties, the MPUC, andCommission Trial Staff to determine if any of the Parties, the MPUC, orCommission Trial Staff believe that the Formula Rate does not producereasonable results. If MPS and the Parties, the MPUC, and Commission TrialStaff are unable to reach agreement, then MPS shall submit by April 30,2006, under section 205 of the Federal Power Act, 16

 

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U.S.C.§ 824d, a unilateral filing with the Commission restating or revising theFormula Rate.

 

**2.5****                              ****Computation.**AttachmentC to this Settlement Agreement shows the calculation changes and charges thatwill be effective for the twelve month period beginning June 1, 2003 underthe Formula Rate as revised to reflect this Settlement Agreement.

 

**2.6****                              ****Rebilling.**MPSshall rebill OATT customers for charges under the OATT related to theimplementation of the Rate Formula changes effective June 1, 2003. Therebilling shall include interest computed under 18 C.F.R. § 35.19a. Forthe purpose of keeping the total. retail transmission and distribution rateconstant until October 1, 2004, MPS**shall not rebill the retail transmissioncustomers until October 1, 2004. At the time of the retail transmissionrebilling, MPS shall include refunds with interest pursuant to 18 C.F.R.§ 35.19a for the rebilling and any appropriate surcharges with interestcalculated pursuant to FERC regulations, 18 C.F.R. § 35.19a, associatedwith the delay in implementation of the 2003 retail transmission change incharges from June 1, 2003 to October 1, 2003. Also included in therebilling will be the yet unbilled refunds and surcharges associated with pastperiods, including but not limited to those associated with the delay inimplementation of the 2002 retail transmission change in charges fromJune 1, 2002 to October 1, 2002, and the 2003 retail transmissionchange in charges from June 1, 2003 to November 1, 2003, and refundsassociated with settlement filed on March 7, 2003 in Docket No.ER03-1053-008.

 

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**2.7****                              ****No****PrinciplesEstablished.**By agreeing to this Settlement Agreement, no partyshall be deemed to have approved, accepted, or agreed to any principle ortheory or to any data that might be asserted to underlie this SettlementAgreement. This Settlement Agreement shall not be deemed in any respect toconstitute an admission by any party that an allegation or contention made orcontained in this proceeding is true or untrue or valid or invalid. Theacceptance or approval by the Commission of this Settlement Agreement shall notin any respect constitute a determination by the Commission as to the merits ofany allegation or contention made in this proceeding or affect in any way thedistribution of evidentiary burdens in future cases. Nothing in this SettlementAgreement shall constitute a “settled practice” within the meaning of PublicService Commission of NewYork v. FERC, 642 F.2d 1335 (D.C. Cir.1980).

 

**2.8****                              ****No Waiver of Section 205 and 206 Rights.**Nothing in this Settlement Agreement shallconstitute a waiver of any party’s Federal Power Act section 205 and 206rights. 16 U.S.C. § 824d, 824e.

 

**2.9****                              ****Acceptance by Commission.**This Settlement Agreement is expressly conditioned upon the Commission’s acceptance of the terms and conditionshereof, without modifications or omission. This Settlement Agreement is  submitted on the understanding and conditionthat, if the Commission does  not byorder approve this Settlement Agreement in its entirety and MPS or  the Parties object to the Commission’schanges, this Settlement Agreement  andall related documents in this proceeding shall be deemed of no effect

 

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and shall not constitutepart of the record in any proceeding or be used for any other purpose.

 

**2.10****                       ****Execution in Counterparts.**This Settlement Agreement may be executed in any number of counterpartswith the same effect as if each party had executed the same document. All suchcounterparts shall be construed together and shall constitute one instrument.

 

**2.11****                       ****Complete Agreement:**This Settlement Agreement together with Attachment A, B, and Crepresent the full and complete agreement of the Parties, the MPUC, andCommission Trial Staff.

 

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IN WITNESS WHEREOF, theParties, by their duly authorized agents, have hereunder executed thisSettlement Agreement, effective as of the date set forth above.

 

 
|   | MAINE PUBLIC SERVICE  COMPANY |
|--------|-------------------------------|
|   |                          |
|   |                          |
|   | /s/  Wendy N. Reed            |
|   |                          |
|   | Name                          | Wendy N. Reed |
|   |                          |
|   | Title                         | Attorney |
|   |                          |
|   | Dated                         | 2/06/2004 |
|        |                               |  |  |  |

 

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IN WITNESS WHEREOF, the.Parties, by their du1y authorized agents, have hereunder executed thisSettlement Agreement, effective *as*of the date set forth above.

 

 
|   | HOULTON WATER COMPANY |
|--------|-----------------------|
|   |                  |
|   |                  |
|   | /s/  John J. Bartus   |
|   |                  |
|   | Name                  | John J. Bartus |
|   |                  |
|   | Title                 | ATTORNEY FOR HOULTON  WATER COMPANY |
|   |                  |
|   | Dated                 | 30 JAN 2004 |
|        |                       |  |  |  |

 

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IN WITNESS WHEREOF, theParties, by their duly authorized agents, have hereunder executed thisSettlement Agreement, effective as of the date set forth above.

 

 
|   | WPS ENERGY SERVICES,  INC. |
|--------|----------------------------|
|   |                       |
|   |                       |
|   | /s/  Antonia A. Frost      |
|   |                       |
|   | Name                       | Antonia A. Frost |
|   |                       |
|   | Title                      | Counsel |
|   |                       |
|   | Dated                      | 2/6/04 |
|        |                            |  |  |  |

 

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INWITNESS WHEREOF, the Parties, by their duly authorized agents, have hereunderexecuted this Settlement Agreement, effective as of the date set forth above.**.**

 

 
|   | EASTERN MAINE ELECTRIC  COOPERATIVE, IN |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
|   | /s/  James L. Dean III                  |
|   |                                    |
|   | Name                                    | James L. Dean.  III |   |
|   |                                    |
|   | Title                                   | Chief Executive Off  Leer |   |
|   |                                    |
|   | Dated                                   | February 5, 2004 |   |
|        |                                         |  |  |  |  |  |  |  |

 

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IN WITNESS WHEREOF, the Parties, by their dulyauthorized agents, have hereunder executed this Settlement Agreement, effectivea off the date set forth above.

 

 
|   | **VAN -BUREN LIGHT AND POWER COMPANY** |
|--------|----------------------------------------|
|   |                                   |
|   |                                   |
|   | /s/  Maurice Saucier                   |
|   |                                   |
|   | Name                                   | Maurice Saucier |
|   |                                   |
|   | Title                                  | Chairman,  Board of Trustees |
|   |                                   |
|   | Dated                                  | February 3, 2004 |
|        |                                        |  |  |  |

 

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