[Federal Register Volume 64, Number 190 (Friday, October 1, 1999)]
[Notices]
[Pages 53430-53433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25501]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27078]
Filings Under the Public Utility Holding Company Act of 1935, as
amended (``Act'')
September 24, 1999.
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated under the Act. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declarations(s) and any amendments is/are available for public
inspection through the Commission's Branch of Public Reference.
Interested persons wishing to comment or request a hearing on the
applications(s) and/or declaration(s) should submit their views in
writing by October 19, 1999, to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549-0609, and serve a copy on the
relevant applicant(s) and/or declarant(s) at the address(es) specified
below. Proof of service (by affidavit or, in case of an attorney at
law, by certificate) should be filed with the request. Any request for
hearing should identify specifically the issues of facts or law that
are disputed. A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued in
the matter. After October 19, 1999, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted
to become effective.
Ohio Valley Electric Corporation (70-8527)
Ohio Valley Electric Corporation (``Ohio Valley''), 3932 U.S. Route
23, P.O. Box 468, Piketon, Ohio 45661, an electric public utility
subsidiary company of American Electric Power Company, Inc. (``AEP''),
a registered holding company, has filed a post-effective amendment to
its declaration filed under sections 6(a) and 7 of the Act and rule 54
under the Act.
By orders dated December 28, 1994, December 12, 1996, and March 4,
1998 (HCAR Nos. 26203, 26624, and 26835, respectively) (``Existing
Authorization''), Ohio Valley was authorized to incur short-term debt
through the issuance and sale of notes to banks or other financial
institutions in an aggregate amount not to exceed $50 million
outstanding at any one time, from time to time through December 31,
2001, provided that no notes mature later than June 30, 2002.
Ohio Valley now proposes that the authorization in the Existing
Authorization be increased so that Ohio Valley may issue and sell notes
(``Notes'') in an aggregate amount not to exceed $100 million
outstanding at any one time, from time to time through December 31,
2003. The Notes will mature not more than 270 days after the date of
issuance or renewal, provided that no Notes will mature later than June
30, 2004. The Notes will bear interest at an annual rate not greater
than the prime commercial rate of Citibank, N.A. (or its successor) in
effect from time to time. These credit arrangements may require the
payment of a fee not greater than \1/5\ of 1% per annum of the size of
the line of credit made available by the bank and the maintenance of
additional balances of not greater than 20% of the line of credit. The
maximum effective annual interest cost will not exceed 125% of the
prime commercial rate in effect from time to time, or not more than 10%
on the basis of a prime commercial rate of 8%.
The proceeds of the short-term debt incurred by Ohio Valley will be
added to its general funds and used to pay its general obligations and
for other corporate purposes, including coal supply inventory.
Northeast Utilities, et al. (70-8875)
Northeast Utilities (``Northeast''), 174 Brush Hill Avenue, West
Springfield, Massachusetts 01090-0010, a registered holding company,
Northeast's public utility subsidiaries, The Connecticut Light and
Power Company (``CL&P''), 107 Selden Street, Berlin, Connecticut 06037,
Western Massachusetts Electric Company (``WMECO''), 174 Brush Hill
Avenue, West Springfield, Massachusetts 01090-0010, Holyoke Water Power
Company (``Holyoke''), Canal Street, Holyoke, Massachusetts 01040, and
Public Service Company of New Hampshire (``PSNH'') and North Atlantic
Energy Corporation (``North Atlantic''), each at 1000 Elm Street,
Manchester, New Hampshire 03015, and Northeast's nonutility
subsidiaries, NU Enterprises, Inc., Northeast Generation Service
Company, Northeast Generation Company, Select Energy, Inc., and Mode 1
Communications, Inc., each at 107 Selden Street, Berlin, Connecticut
06037, (collectively, ``Applicants'') have filed a post-effective
amendment to their application-declaration filed under sections 6(a),
7, 9(a), 10, and 12(b) of the Act and rules 43 and 45 under the Act.
By orders dated November 20, 1996, February 11, 1997, March 25,
1997, May
[[Page 53431]]
29, 1997, January 16, 1998, and May 13, 1999 (HCAR Nos. 26612, 26665,
26692, 26721, 26816, and 27022), the Commission authorized, among other
things, short-term borrowing, subject to certain limits, for Northeast,
CL&P, and WMECO through December 31, 2000 (``Authorization
Period'').\1\ The short-term borrowings for NU, CL&P, and WMECO include
a revolving credit facility to which CL&P and WMECO are parties
(``Existing System Revolver'') and an unsecured revolving credit
facility for Northeast (``Existing Northeast Facility''). Both the
Existing System Revolver and the Existing Northeast Facility expire on
November 21, 1999.
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\1\ The order dated May 13, 1999 (HCAR No. 27022) includes a
reservation of jurisdiction ``over Money Pool borrowings by PSNH
that are attributable to contributions by WMECO, pending the
approval of the [Massachusetts Department of Telecommunications and
Energy].''
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Applicants now seek authorization for: (1) Replacement of the
Existing System Revolver and Existing Northeast Facility with various
short-term borrowings subject to the parameters described below; (2)
WMECO to increase its short-term borrowing limit from $150 million to
$250 million for the remainder of the Authorization Period; and (3)
Northeast to increase its short-term borrowing limit from $200 million
to $400 million for the remainder of the Authorization Period. No
change is requested with respect to the limits on short-term debt
borrowings for CL&P, PSNH, Holyoke, or North Atlantic.
The short-term borrowings (``Debt'') for Northeast, CL&P, and WMECO
(``Borrowers'') will take a variety of forms, including short-term
notes issued to bank and nonbank lending institutions through formal
and informal credit lines, commercial paper issuances, open account
advances by Northeast to certain of its subsidiaries, and use of the
Northeast system money pool. The effective cost of money on the Debt
will not exceed 400 basis points over the base rate in effect from time
to time of the lending bank or financial institution or, if no such
base rate is identified, the base rate in effect from time to time of a
representative money center bank. The maturity of the Debt will not
exceed 364 days. The fees, commissions, or other expenses paid in
connection with the issuance of the Debt or the entering into of credit
facilities will not exceed 3% of the principal amount of the Debt.
Borrowings from banks and other financial institutions may be either
unsecured or secured. To the extent required, the provision of any
collateral to secure Debt will be approved by applicable state
regulatory commissions. Specific terms of any Debt will be determined
by the Borrowers at the time of issuance and will comply with these
parameters.
Northeast Utilities (70-9343)
Northeast Utilities (``NU''), a registered holding company, located
at 174 Brush Hill Avenue, West Springfield, Massachusetts 01090-0010
has filed a post-effective amendment to its declaration under section
12(b) of the Act and rule 45 under the Act.
By order dated November 12, 1998 (HCAR No. 26939) (``Order''), the
Commission authorized NU and NEWCO (now known as NU Enterprises
(``NUEI'')) \2\ to, among other things, provide guarantees and similar
forms of credit support or enhancements (collectively, ``Guarantee'')
to, or for the benefit of NUEI, NUEI's nonutility subsidiaries, or NU's
other to-be-formed direct or indirect energy-related companies, as
defined in rule 58 under the Act, in an aggregate amount not to exceed
$75 million, at any one time, through December 31, 1999.
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\2\ NUEI is engaged, through the use of multiple subsidiaries,
in various energy related and other activities.
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By order dated May 19, 1999, the Commission authorized an increase
in Guarantee authority from $75 million to $250 million. NU and NUEI
now propose to increase the Guarantee authority from $250 million to
$500 million and to extend the date through which guarantees may be
provided through December 31, 2002, under the terms and conditions of
the Order.\3\
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\3\ Rule 52 exempts NUEI's financial transactions with its
associate companies from Commission jurisdiction, however, this
information is provided for background purposes.
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LG&E Energy Corp. (70-9523)
LG&E Energy Corp. (``LG&E Corp.''), 200 West Main Street,
Louisville, Kentucky 40232, a Kentucky corporation and an electric and
gas public utility holding company currently exempt under section
3(a)(1) from all provisions of the Act except section 9(a)(2),\4\ has
filed an application for an order under sections 9(a)(2) and 10 of the
Act. LG&E Corp. seeks authorization of its proposed indirect
acquisition of a reconstituted Western Kentucky Energy Corp.
(``WKEC''), an indirect wholly owned nonutility subsidiary of LG&E
Corp., in connection with a consolidation among WKEC and two other
nonutility subsidiaries of LG&E Corp., with WKEC as the surviving
corporation (``Transaction''). The application also requests (1) an
order under section 3(a)(1) declaring LG&E Corp. and its wholly owned
subsidiary, LG&E Capital Corp. (``LG&E Capital''), exempt from all
provisions of the Act except section 9(a)(2), following the
Transaction, and (2) an order under section 3(a)(2) declaring LG&E
Corp.'s subsidiary, Kentucky Utilities Company (``KUC''), exempt from
all provisions of the Act except section 9(a)(2), following the
Transaction.\5\
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\4\ LG&E Corp.'s exemption was granted by order of the
Commission. See LG&E Energy Corp., Holding Co. Act Release No. 26866
(April 30, 1998).
\5\ KUC currently is a Kentucky electric utility and public
utility holding company exempt under section 3(a)(2) by order of the
Commission from all provisions of the Act except section 9(a)(2).
See Kentucky Utilities Company, 29 S.E.C. 289 (1949); KU Energy
Corporation, Holding Co. Act Release No. 25409 (Nov. 13, 1991). The
Commission recently affirmed KUC's exemption under section 3(a)(2).
See LG&E Energy Corp., Holding Co. Act Release No. 26866 (April 30,
1998).
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LG&E Corp. and Subsidiaries
LG&E Corp. has two wholly owned public utility subsidiaries,
Louisville Gas and Electric Company (``LG&E'') and KUC. LG&E, a
Kentucky corporation, is engaged primarily in the generation,
transmission and distribution of electricity to approximately 360,000
customers in Louisville and adjacent areas in Kentucky. LG&E's service
area covers approximately 700 square miles in 17 counties in Kentucky
with an estimated population of one million. LG&E also purchases,
distributes and sells natural gas to approximately 289,000 customers
within this service area and in limited additional areas. Included
within LG&E's service area is the Fort Knox Military Reservation, to
which LG&E transports gas and provides electric service, but which
maintains its own distribution systems.
Retail sales rates, services and other aspects of LG&E's electric
and gas retail operations are subject to the jurisdiction of the
Kentucky Public Service Commission (``Kentucky Commission''). The
Kentucky Commission also has regulatory authority over aspects of
LG&E's financial activities including security issuances, property
transfers involving asset values in excess of $100,000, and mergers
with other utilities. Wholesale rates for electric energy sold in
interstate commerce, wheeling rates for every transmission in
interstate commerce, and certain other activities of LG&E (including
its hydro-electric facilities) are subject to the jurisdiction of the
Federal Energy Regulatory Commission (``FERC'').
LG&E owns 4.9% of the common stock of Ohio Valley Electric
Corporation (``OVEC''), which has one wholly owned subsidiary, Indiana-
[[Page 53432]]
Kentucky Electric Corp. (``IKEC''). Each of OVEC and IKEC is an
electric utility company under the Act. For each of the three years in
the period ended December 31, 1998, LG&E derived less than 0.15% of its
income from its share of the earnings of OVEC.
KUC, a Kentucky and Virginia corporation, is engaged in producing,
transmitting and selling electric energy to approximately 449,00
customers in over 600 communities and adjacent suburban and rural areas
in 77 counties in central, southeastern and western Kentucky, and to
approximately 29,000 customers in 5 counties in southwestern Virginia.
In Virginia, KUC operates under the name Old Dominion Power Company.
KUC also sells electric energy at wholesale for resale in 12
municipalities in Kentucky.
KUC is subject to the jurisdiction of the Kentucky Commission and
the Virginia State Corporation Commission as to retail rates and
service, accounts, issuance of securities and in other respects. The
FERC has jurisdiction over certain of the electric utility facilities
and operations, wholesale sale of power and related transactions and
accounting practices of KUC, and in certain other respects. By reason
of owning and operating a small amount of electric utility property in
one county in Tennessee (having a gross book value of about $226,000),
KUC also may be subject to the jurisdiction of the Tennessee Regulatory
Authority as to retail rates, accounts, issuance of securities and in
other respects.
KUC owns 2.5% of the common stock of OVEC. KUC also owns 20% of
Electric Energy, Inc. (``EEI''), an Illinois corporation and an
electric utility company under the Act. EEI was formed in the early
1950s to provide electric energy to a uranium enrichment plant located
near Paducah, Kentucky. The enrichment plant was originally operated by
the Atomic Energy Commission and the Department of Energy and is
operated today by the United States Enrichment Corporation. EEI owns
the Joppa Plant, a 1,015 Mw coal-fired electric generating plant
located near Joppa, Illinois, and six 161 kilovolt transmission lines
which transmit power from the Joppa Plant to the Paducah enrichment
plant. EEI's common sock is held by KUC and three other utility
companies. EEI sells its excess electricity to its sponsoring utilities
for resale. The uranium enrichment facility is EEI's only end-user
customer. For each of the three years in the period ended December 31,
1998, KUC derived less than 3% of its net income from its share of the
earnings of EEI and OVEC.
LG&E CORP. has two other directly owned subsidiaries, LG&E Energy
Foundation, Inc., a tax-exempt charitable foundation and LG&E Capital,
which is involved in numerous nonutility, energy-related businesses
through various subsidiaries and joint ventures. Through its
subsidiaries, LG&E Capital has interests in and operates electric power
plants in several states and Spain. Each of these facilities is a
qualifying cogeneration facility under the Public Utility Regulatory
Policies Act of 1978, an exempt wholesale generator (``EWG'') under
section 32 of the Act or a foreign utility company (``FUCO'') under
section 33 of the Act. LG&E Capital also has interests in and operates
three natural gas distribution companies in Argentina, each of which is
a FUCO. LG&E Capital is involved through various subsidiaries in energy
marketing and trading and, with respect to natural gas, LG&E Capital
also is involved through subsidiaries in the gathering, processing,
storage and transportation of natural gas.\6\
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\6\ Effective June 30, 1998 LG&E Corp. discontinued its merchant
trading and sales business and announced its plans to sell its
natural gas gathering and processing business. LG&E Corp., however,
intends to maintain the technical systems and personnel necessary to
engage in power marketing sales from assets it owns or controls,
including LG&E, KUC and WKEC.
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For the year ended December 31, 1998, approximately 16% of LG&E
Corp.'s consolidated operating revenues and 18% of its consolidated
operating income were derived from the nonutility businesses. As of
December 31, 1998, approximately 20% of LG&E Corp.'s consolidated
assets were invested in nonutility businesses. For the twelve months
ended March 31, 1999, approximately 19% of LG&E Corp.'s consolidated
operating revenues and 23% of its consolidated operating income were
derived from nonutility businesses. As of March 31, 1999, approximately
22% of LG&E Corp.'s consolidated assets were invested in nonutility
businesses.
For the year ended December 31, 1998, LG&E Corp.'s operating
revenues on consolidated basis were $2.002 billion of which
approximately $659 million was derived from LG&E's electric operations,
$192 million was derived from LG&E's gas operations and $810 million
was derived from KUC's electric operations. Consolidated assets for
LG&E Corp. and its subsidiaries as of December 31, 1998 were
approximately $4.8 billion, of which approximately $3.0 billion
consisted of electric utility assets and $300 million consisted of gas
utility assets. As of April 30, 1999, there were 129,677,030
outstanding shares of the common stock of LG&E Corp. LG&E Corp. has no
preferred stock outstanding.
Description of Proposed Transaction
In the Transaction, LG&E Corp. proposes to acquire a reconstituted
WKEC indirectly, through the merger of two indirect nonutility
subsidiaries of LG&E Corp.--WKE Corp. and WKE Station Two Sub Inc.
(``Station Two'')--into WKEC, with WKEC as the surviving corporation.
WKE Corp. currently is a direct, wholly owned subsidiary of LG&E
Capital and the parent company of WKEC and Station Two. WKE Corp.
currently is certified as an EWG and Station Two is a nonutility
company under the Act.\7\ Each of WKE Corp., WKEC and Station Two was
formed in connection with a series of transactions involving Big Rivers
Electric Corporation (``Big Rivers''), a nonassociate utility company.
Under these transactions, WKEC leases the generating facilities of Big
Rivers and conducts the day-to-day operations of these facilities.
Station Two operates a generating facility of the City of Henderson,
Kentucky, that was previously operated by Big Rivers. LG&E Energy
Marketing, Inc. (``LEM''), another indirect nonutility subsidiary of
LG&E Corp., agreed to purchase electricity from the Big Rivers'
facilities and the City of Henderson's facility. The electricity from
the City of Henderson was previously purchased by Big Rivers. These
transactions took effect in July 1998.\8\
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\7\ In this regard, LG&E Corp. has received a no-action letter
from the staff of the Commission confirming that Station Two's
activities would not cause it to be deemed an electric utility
company under the Act. See WKE Station Two, Inc/Big Rivers Electric
Corporation, SEC No-Action Letter (July 13, 1998).
\8\ The Big Rivers transactions are described in more detail in
the no-action letter. See supra note 7.
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Because the City of Henderson's generating facility serves retail
customers, WKEC cannot operate this facility and maintain its status as
an EWG. Therefore, the duties and responsibilities relating to the Big
Rivers' facilities and the City of Henderson's facility were divided
among WKE Corp., WKEC, Station Two and LEM, even though these duties
were previously performed by one company, Big Rivers.
LG&E Corp. has determined that the separation of the duties and
responsibilities among WKE Corp., WKEC, Station Two and LEM, and the
constraints imposed upon WKEC in order to maintain its certification as
an
[[Page 53433]]
EWG have led to numerous operational inefficiencies. Consequently, LG&E
Corp. now desires to combine WKE Corp., WKEC and Station Two, with WKEC
as the surviving corporation. LG&E Corp. also may transfer certain
related contracts for the sale of energy, capacity and ancillary
services from LEM to WKEC. The Transaction is intended to simplify and
consolidate responsibility within a single company, WKEC, for operation
and management of all of the generating assets in western Kentucky that
are operated by LG&E Corp.'s affiliates, and for the sale of power and
ancillary services from those facilities. Following the Transaction,
WKEC will cease to meet the requirements of an EWG, will decertify as
an EWG and will become an electric utility company under the Act.
Therefore, consummation of the Transaction will result in the indirect
acquisition of an electric utility company by LG&E Corp.
The application states that the Transaction is expected to result
in substantial benefits to the public, investors and consumers,
including significant economies of scale, reduced labor costs and
reduced corporate and administrative expenses through the elimination
of redundancies and inefficiencies. As an example, the application
notes that the Transaction will promote more efficient use of the labor
force currently divided among WKE Corp., WKEC and Station Two, and will
eliminate the need to maintain separate computer systems and books and
records for each of those companies.
Proposed Post-Transaction Exemptions
LG&E Corp. states that, following the Transaction, it will continue
to qualify as an exempt holding company under section 3(a)(1) of the
Act, and LG&E Capital will qualify as an exempt holding company under
section 3(a)(1) of the Act, because each of LG&E Corp. and LG&E
Capital, and each of its public utility company subsidiaries from which
it derives a material part of its income, will be a Kentucky
corporation, will continue to be predominantly intrastate in character
and will continue to conduct its utility business substantially within
the Commonwealth of Kentucky.\9\
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\9\ In this regard, LG&E Corp. states that neither OVEC nor IKEC
will be a subsidiary of LG&E Corp. for purposes of the Act following
the Transaction because LG&E Corp.'s total indirect ownership of
OVEC will be 7.4%. Although EEI will be a subsidiary of LG&E Corp.
for purposes of the Act following the Transaction, and EEI is not a
Kentucky corporation, LG&E Corp. states that EEI will not be a
material public utility subsidiary of LG&E Corp. for purposes of
section 3(a)(1) because LG&E Corp. does not derive a material part
of its income from EEI (less than 3% in each of the last three
years).
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LG&E Corp. also states that, following the Transaction, KUC will
continue to qualify as an exempt holding company under section 3(a)(2)
of the Act because KUC is predominantly a public utility company whose
operations, as such, do not extend beyond the Commonwealth of Kentucky.
For the Commission by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-25501 Filed 9-30-99; 8:45 am]
BILLING CODE 8010-01-M
