97-4167. Exemption of Acquisition by Registered Public-Utility Holding Companies of Securities of Nonutility Companies Engaged in Certain Energy-Related and Gas-Related Activities; Exemption of Capital Contributions and Advances to Such Companies

[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Rules and Regulations]
[Pages 7900-7919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4167]

[[Page 7899]]

_______________________________________________________________________

Part V

Securities and Exchange Commission

_______________________________________________________________________

17 CFR Parts 250 and 259

Exemption of Acquisition by Registered Public-Utility Holding Companies
of Securities of Nonutility Companies Engaged in Certain Energy-Related
and Gas-Related Activities; Exemption of Capital Contributions and
Advances to Such Companies; Final Rule

Federal Register / Vol. 62, No. 34 / Thursday, February 20, 1997 /
Rules and Regulations

[[Page 7900]]

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 250 and 259

[Release No. 35-26667; File No. S7-12-95]
RIN 3235-AG46

Exemption of Acquisition by Registered Public-Utility Holding
Companies of Securities of Nonutility Companies Engaged in Certain
Energy-Related and Gas-Related Activities; Exemption of Capital
Contributions and Advances to Such Companies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adopting new rule 58 and conforming
amendments to rules 45(b) and 52(b) under the Public Utility Holding
Company Act of 1935 (``Holding Company Act'' or ``Act''). Rule 58
exempts from the requirement of prior Commission approval a direct or
indirect acquisition by a registered holding company or its subsidiary
of an interest in an ``energy-related company,'' as defined in the
rule, subject to certain limitations and reporting requirements; and by
a gas registered holding company or its subsidiary of an interest in a
``gas-related company,'' as defined in the rule, subject to certain
reporting requirements. The rule and related rule amendments eliminate
unnecessary regulatory limitations on investments in certain businesses
that are closely related to the core utility business of the registered
system while establishing disclosure and reporting requirements that
promote the public interest and serve to protect consumers and
investors.

EFFECTIVE DATE: March 24, 1997.

FOR FURTHER INFORMATION CONTACT: Bonnie Wilkinson, Assistant Director,
Martha Cathey Baker, Senior Special Counsel, Sidney L. Cimmet, Senior
Special Counsel, or Robert P. Wason, Chief Financial Analyst, all at
(202) 942-0545, Office of Public Utility Regulation, Division of
Investment Management, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION: The Commission today is adopting rule 58 and
related amendments to rule 45(b) and rule 52(b) (17 CFR 250.45(b) and
250.52(b)) under the Public Utility Holding Company Act of 1935 (15
U.S.C. 79a et seq.). The Commission issued a release proposing rule 58
and the amendments to the existing rules on June 20, 1995.^{1
Subject to certain conditions, rule 58 provides an exemption, pursuant
to section 9(c)(3) of the Act, from the requirement of prior Commission
approval under sections 9(a)(1) and 10, for acquisitions by registered
holding companies and their subsidiaries of securities of companies
engaged in activities with which the Commission is familiar as a result
of its administrative experience and which are so closely related to
the ordinary course of the utility business as not to require case-by-
case analysis under sections 9(a)(1) and 10.
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\1\ Holding Co. Act Release No. 26313 (June 20, 1995), 60 FR
33642 (June 28, 1995) (``Proposing Release'').
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Rule 58 exempts from the requirement of prior approval the
acquisition by a registered holding company or its subsidiary company
of any securities of an energy-related company, subject to certain
limitations and reporting requirements. The rule defines an energy-
related company as one that derives, or will derive, substantially all
of its revenues from one or more activities specifically enumerated in
the rule. The exemption provided by the rule will be available only if
the aggregate investment by the registered holding company and its
subsidiaries in energy-related companies does not exceed the greater of
$50 million or 15% of consolidated capitalization.
Rule 58 also exempts from the requirement of prior approval the
acquisition by a gas registered holding company or its subsidiary
company of any securities of a gas-related company, subject to certain
reporting requirements. The rule defines a gas-related company as one
that derives, or will derive, substantially all of its revenues from
one or more activities permitted under the Gas Related Activities Act
of 1990 (``GRAA'').
Rule 58 requires a registered holding company that seeks to rely
upon the rule to file with this Commission and each state commission
having jurisdiction over the retail rates of the registered system
operating companies a quarterly report disclosing acquisitions pursuant
to the rule and certain other information required by proposed Form U-
9C-3. The reporting requirements are intended to enable the Commission
and the state and local regulatory authorities to monitor acquisitions
pursuant to the rule, including any transactions with rule 58 companies
involving the operating companies in registered systems.
The Commission is also adopting amendments to rule 45(b) and rule
52(b), which concern financings by registered system companies, in each
case to conform the rules to the limitations of rule 58. Rule 45(b) is
amended to qualify the exception that the rule creates to the
requirement of Commission approval under section 12(b) and rule 45(a)
for capital contributions and open account advances without interest to
a subsidiary company. As amended, the exception of rule 45(b) is
available if the aggregate amount of such financing transactions on
behalf of a subsidiary energy-related company conforms to the
limitations of rule 58. Rule 52(b) is similarly amended to qualify the
exemption that the rule provides from the requirement of prior
Commission approval under sections 6(a) and 7 for securities issued by
energy-related subsidiary companies to associate companies.
I. Introduction
This rulemaking arises in the broad context of nonutility
diversification by registered gas and electric public-utility holding
companies. Section 9(a)(1) of the Holding Company Act requires prior
Commission approval under the standards of section 10 for a direct or
indirect acquisition by a registered holding company of ``any
securities'' or ``any interest in any other business,'' i.e., any
nonutility interest.^{2 Section 10(c)(1) precludes approval of an
acquisition that would be ``detrimental to the carrying out of the
provisions of section 11.'' Section 11, described in the legislative
history of the Act as the ``very heart'' of the Act,^{3 requires the
Commission to confine the nonutility interests of such companies to
those that are ``reasonably incidental, or economically necessary or
appropriate to the operations of [an] integrated public-utility
system.'' ^{4 The Commission has interpreted the

[[Page 7901]]

provisions of section 11 to reflect a Congressional policy against
nonutility activities that bear no operating or functional relationship
to the utility operations of the registered system. ^{5 This
interpretation was intended to focus the attention of the registered
holding company on the needs of its operating utilities, and thereby
protect consumers and investors against the risks that might be
associated with unrelated businesses.^{6
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\2\ The Commission has read the latter phrase to encompass any
arrangement that entails the acquisition of a substantial interest
in a nonutility business undertaking. See, e.g., Public Service Co.
of Oklahoma, 45 S.E.C. 878, 883-4 (1975).
\3\ S. Rep. No. 621, 74th Cong., 1st Sess. (1935) (``Senate
Report'') at 11.
\4\ Section 11(b)(1) of the Act. Section 11(b)(1) further
provides that the Commission may so characterize a nonutility
interest that it finds to be ``necessary or appropriate in the
public interest or for the protection of investors or consumers and
not detrimental to the proper functioning of such system. * * *''
The interests of investors and consumers and the public interest
are the protected interests under the Holding Company Act. The
Commission has interpreted the public interest standard of the Act
to extend to the interest in a sound gas and electric utility
industry. See Eastern Utilities Assocs., Holding Co. Act Release No.
26232 (Feb. 15, 1995).
\5\ See generally Michigan Consolidated Gas Co., 44 S.E.C. 361,
363-66 (1970), aff'd, 444 F.2d 913 (D.C. Cir. 1971) (rejecting
proposed investment in low income housing projects). See also CSW
Credit, Inc., Holding Co. Act Release No. 25995 (Mar. 2, 1994)
(rejecting proposed expansion of transactions with nonassociate
companies by subsidiary engaged in factoring of utility accounts
receivable). By its terms, section 11 applies only to registered
holding companies. The Commission has never determined the limits on
diversification by exempt holding companies.
\6\ Section 11 was intended ``simply to provide a mechanism to
create conditions under which effective Federal and State regulation
will be possible.'' Senate Report at 11. As an historical matter,
the statute led to the refashioning of the structure and the
business practices of an entire industry. See, e.g., Joel Seligman,
The Transformation of Wall Street: A History of the Securities and
Exchange Commission and Modern Corporate Finance (rev. ed. 1995).
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Section 9(c)(3) of the Act provides an exemption from the
requirements of section 9(a)(1) for the acquisition of ``such
commercial paper and other securities, within such limitations as the
Commission may by rules and regulations or order prescribe as
appropriate in the ordinary course of business of a registered holding
company or subsidiary company thereof and as not detrimental to the
public interest or the interest of investors or consumers.'' The
Commission has previously issued orders under section 9(c)(3) exempting
from section 9(a)(1) acquisitions of small amounts of securities of
local industrial development corporations, affordable housing projects,
and venture capital concerns, among others. ^{7 The Commission has
also adopted rule 40(a)(5) under section 9(c)(3) to exempt such
acquisitions from the requirements of section 9(a)(1), provided that an
affiliate relationship does not result, and subject to certain annual
dollar limitations. ^{8 The Commission has noted that section
9(c)(3) may not be used to circumvent section 11(b)(1)'s prohibition of
the acquisition of an interest in a business unrelated to the core
utility business. ^{9
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\7\ See, e.g., Hope Gas, Inc., Holding Co. Act Release No. 25739
(Jan. 26, 1993) and Georgia Power Co., Holding Co. Act Release No.
25949 (Dec. 15, 1993) (securities of local venture capital
companies); Georgia Power Co., Holding Co. Act Release No. 26220
(Jan. 24, 1995) and East Ohio Gas Co., Holding Co. Act Release No.
25046 (Feb. 27, 1990) (securities of affordable housing
partnerships); Potomac Edison Co., Holding Co. Act Release No. 25312
(May 14, 1991) (shares of for-profit economic development
corporation).
\8\ Under rule 40(a)(5), a holding company or subsidiary may
acquire up to $5 million annually of the securities of economic
development companies created under special state laws promoting
economic development, and up to $1 million annually in local
industrial or nonutility enterprises.
\9\ Michigan Consolidated Gas Co., 44 S.E.C. at 366.
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As noted in the Proposing Release, ^{10 registered holding
companies have filed numerous applications in recent years seeking
authorization to engage in nonutility activities that the companies
contend complement, or are natural extensions of, the evolving gas and
electric industries. In considering these applications, the Commission
has attempted to balance the need for regulatory change due to industry
developments with the need for continued protection under the Act of
the public interest and the interest of investors and consumers.
^{11 The concept of a functional relationship has been expanded in
some cases, in a manner consistent with the purposes and limitations of
the Act, and the Commission has permitted some activities that would
benefit the registered system in ways less tangible and direct than
those considered and approved in orders of previous years. In some
cases the Commission approved as part of this development extensive
transactions with nonassociate companies and declined to limit the
transactions to the particular service territory of the registered
system utilities. To this extent, the Commission implicitly correlated
the functional relationship test with changes in the industry. ^{12
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\10\ 60 FR at 33643.
\11\ The Commission in some instances imposed percentage,
geographic or other limitations upon transactions on behalf of
nonassociate companies. These limitations were intended to ensure
that the particular nonutility interest would continue to benefit
the integrated system primarily and thereby conform to the
functional relationship requirement.
\12\ The Commission took a more flexible approach to functional
relationship in Southern Co., Holding Co. Act Release No. 26211
(Dec. 30, 1994). In that case, Southern proposed to develop a
communications system to provide services to both system companies
and nonassociates. While only a small additional investment in the
system was required to facilitate nonassociate transactions, a
majority of the revenues from the system could ultimately be derived
from these transactions. The Commission approved the proposal,
stating that the relative investment for associate and nonassociate
purposes is relevant to a determination of a functional
relationship. Alternatively, the Commission found a functional
relationship existed because the nonutility interest being acquired
(1) would involve the sale or lease of products or skills of some
complexity developed by the holding company at considerable expense
for the benefit of its utility subsidiaries and not readily
available to the rest of the public from other sources; (2) would
generally require little or no further investment by the holding
company; and (3) would permit the amortization of product
development expenses with little or no risk (citing Jersey Central
Power & Light Co., Holding Co. Act Release No. 24348 (Mar. 18,
1987), as approved in CSW Credit, Inc., note 5 above).
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Congress has enacted a number of important legislative measures to
facilitate acquisitions by registered holding companies of interests to
which section 11 was perceived to create barriers. In some instances,
the legislation treated acquisitions of essentially utility interests
as nonutility acquisitions for purposes of the Act, so as to avoid the
integration requirements of section 11. ^{13 In other instances, the
legislation permitted essentially nonutility activities that were
either closely related to core operations or otherwise deemed
appropriate for participation by registered holding companies. An
example of recent legislation relates to nonutility activities involved
in the supply of natural gas.
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\13\ Under the Public Utility Regulatory Policies Act of 1978
(``PURPA''), 16 U.S.C. 824a-3, and related legislation, a registered
holding company can acquire an interest in ``qualifying facilities''
(``QFs''), as defined in the regulations under PURPA, that are
unrelated to its core utility operations. See also the Energy Policy
Act of 1992, discussed below.
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In 1990, Congress enacted the Gas Related Activities Act to permit
a gas registered holding company to engage in transportation,
marketing, storage and other nonutility gas-related activities that are
not functionally related to the company's business. ^{14 The GRAA
provides that an acquisition of an interest in a company that engages
in certain gas-related activities, including storage, transportation
and wholesale sales, is deemed to meet the requirements of section
11(b)(1) of the Act. The GRAA further provides that an acquisition of
an interest in a company that engages in other activities relating to
the supply of natural gas is deemed to meet the requirements of section
11(b)(1), if the Commission finds that the acquisition is in the
interest of consumers of the holding company system and is not
detrimental to those consumers or to the proper functioning of the
registered system. ^{15
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\14\ Pub. L. No. 101-572, 104 Stat. 2810 (Nov. 15, 1990),
codified as a note to section 11 of the Act.
\15\ See, e.g., Columbia Gas System, Holding Co. Act Release
No. 25802 (Apr. 22, 1993) (authorizing subsidiary to engage in
marketing of natural gas). Section 2(b) of the GRAA requires the
Commission to determine whether the proposed activities will benefit
both the retail and the wholesale utility customers of the
registered system.
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In 1992, Congress acted to permit both gas and electric registered
holding companies to acquire interests in cogeneration and small power
production facilities, wherever located,

[[Page 7902]]

and to market and broker electric power through affiliated exempt
wholesale generators (``EWGs''). ^{16 In 1992, Congress also enacted
legislation to promote the development of alternative powered vehicles
as a part of a national energy policy to reduce automobile emissions.
The legislation permits gas registered holding companies to engage in
activities related to vehicular natural gas, as defined. ^{17
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\16\ Energy Policy Act, Pub. L. 102-486, 106 Stat. 2776 (1992).
These activities of EWGs are limited primarily to the sale of
electric power for resale.
\17\ See Articles IV, V and VI, Energy Policy Act of 1992, Pub.
L. 102-486, 106 Stat. 2777 (1992) (codified as a note to section 2).
These legislative developments are discussed at greater length in
the Proposing Release. 60 FR at 33644.
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As a result of Congressional action, combined with initiatives of
the Federal Energy Regulatory Commission (``FERC'') and the state and
local ratemaking authorities, the pace of change in the gas and
electric utility industry is accelerating. Today, the gas industry is
largely deregulated and the electric industry is undergoing a similar
process. ^{18 In addition to increasing competition at the wholesale
level, retail electric competition is developing more rapidly than
anticipated, due to state efforts. ^{19 Utilities and other
suppliers of energy appear poised to compete in retail markets. ^{20
As a result of these developments, the contemporary gas and electric
industries no longer focus solely upon the traditional production and
distribution functions of a regulated utility, but are instead evolving
toward a broadly based, competitive, energy services business. ^{21
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\18\ See generally The Regulation of Public-Utility Holding
Companies, Report of the Division of Investment Management,
Securities and Exchange Commission (June 1995) (``Report''), at 19-
22, 26-27 (surveying recent regulatory and other developments in the
electric and gas industries). Among other things, the Report notes
that following the Energy Policy Act, the FERC has engaged in a
series of initiatives to encourage the development of competitive
energy markets. Id. at 23. More recently, on April 24, 1996, the
FERC adopted Order No. 888, FERC Stats. & Regs. ] 31,036, which
represents a major step in the effort to increase competition in the
generation and transmission segments of the electric industry.
\19\ See, e.g., ``State Regulators Debate Taking a Stand on
National Retail Wheeling Legislation'', Energy Report (March 4,
1996) (describing state initiatives and possible support for federal
legislation establishing retail wheeling). At the state level, for
instance, New Hampshire has adopted a pilot program under which each
New Hampshire utility must allow customers representing three
percent of peak load to have access to alternative suppliers of
electricity for two years, beginning on or about May 28, 1996. Order
of the New Hampshire Public Utilities Commission on the Retail
Competition Pilot Program Establishing Final Guidelines and
Requiring Compliance Filings (Order No. 22,033, dated Feb. 28,
1996). Other states, such as Massachusetts, Rhode Island and
Illinois, are also implementing or considering programs to promote
retail competition.
\20\ The Commission has authorized registered holding companies
to engage, through nonutility subsidiaries, in the retail marketing
of electric power in specific states that have implemented plans and
programs for competition in retail electric markets, see, e.g.,
Eastern Utilities Assocs., Holding Co. Act Release No. 26519 (May
23, 1996) (authorizing retail sales of electric power pursuant to
pilot programs in New Hampshire and Massachusetts) and, more
recently, has authorized retail marketing of both electric power and
natural gas on a nationwide basis, subject to compliance with
applicable state law. SEI Holdings, Inc., Holding Co. Act Release
No. 26581 (Sept. 26, 1996).
\21\ The Commission acknowledged these developments in the
Proposing Release, 60 FR at 33643, and, again, in a recent order
authorizing a gas registered holding company to acquire an interest
in a partnership formed to engage in the wholesale brokering and
marketing of natural gas, electricity and other fuels. Consolidated
Natural Gas Co., Holding Co. Act Release No. 26512 (Apr. 30, 1996).
The order noted the growing competition among various companies,
including exempt holding companies, as well as stand-alone utilities
and other companies not subject to the Act, to meet increasing
customer demand for a full range of energy options.
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As discussed previously, the Commission has sought to respond to
developments in the industry by expanding its concept of a functional
relationship in a manner consistent with the purposes and limitations
of the Act. In several recent filings, the Commission has been
requested to reconsider some administrative restrictions employed in
the past. In approving these requests, the Commission determined, as
required by the Act, that its action would not be detrimental to the
interests protected under the Act. The Commission suggested that
various considerations, including developments in the industry, the
Commission's familiarity with the particular nonutility activities at
issue, the absence of significant risks inherent in the particular
venture, the specific protections provided for consumers and the
absence of objections by the relevant state regulators, made it
unnecessary to adhere rigidly to the types of administrative measures
discussed above.^{22 Further, a 1995 Commission staff report
recommended that the Commission replace the use of bright-line
limitations with a more flexible standard that would take into account
the risks inherent in the particular venture and the specific
protections provided for consumers.^{23
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\22\ See, e.g., Consolidated Natural Gas Co., Holding Co. Act
Release No. 26512 (approving wholesale marketing and brokering of
natural gas, electricity and other fuels, without percentage
limitations); Eastern Utilities Assocs., Holding Co. Act Release No.
26232 (removing percentage limitation previously placed upon demand-
side management and energy management services business of
registered holding company); Southern Co., Holding Co. Act Release
No. 26211 (considering, in assessment of a functional relationship,
the relative investment for associate and nonassociate companies).
\23\ Report at 81-87, 91-92.
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Finally, after the issuance of the Proposing Release, Congress
enacted legislation amending the Act to permit registered holding
companies, without prior Commission approval under sections 9(a)(1) and
10, to participate in a broad range of telecommunications activities
through a special purpose subsidiary, an ``exempt telecommunications
company'' (``ETC'').^{24 Once an entity is certified as an ETC by
the Federal Communications Commission, acquisition and retention by a
registered holding company of an interest in the entity is exempt from
substantive requirements under the Holding Company Act.^{25 As a
result of this legislation, the provisions of proposed rule 58
concerning telecommunications activities are no longer needed.
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\24\ Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat.
56 (1996) (``Telecommunications Act''), codified as section 34 of
the Act.
\25\ The Telecommunications Act does not provide that ETCs
themselves are exempt from regulation under the Act. See section 34.
However, the law contemplates that the role of the Commission will
consist largely of monitoring telecommunications investments of
registered holding companies. The Commission is authorized to
require reporting of investments in, and activities of, ETCs that
are likely to have a material impact on the financial or operational
condition of a registered holding company. See section 34(f).
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The Commission believes that the realities of the contemporary gas
and electric industries, and its experience in the administration of
sections 9 and 10 of the Act, permit a recognition that certain
activities are an integral part of the contemporary utility business,
and so may be deemed to be activities ``in the ordinary course of
business'' of a registered holding company within the meaning of
section 9(c)(3) of the Act. Rule 58 identifies such activities. The
rule is variously subject to qualifications and limitations that are
intended to ensure that acquisitions pursuant to the rule are
appropriate in the ordinary course of business, as contemplated by
section 9(c)(3), are consistent with prior orders under section 9(a)(1)
and 10, and are not detrimental to the protected interests.^{26
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\26\ As noted in the Proposing Release, rule 58 is intended
largely to encompass investments in companies engaged in activities
of the same or substantially similar character as those approved in
previous orders of the Commission under sections 9(a)(1) and 10. 60
FR at 33648.
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II. Proposed Rule 58

Rule 58 is intended to facilitate investments by registered holding
companies in energy-related and gas-related companies. Acquisitions
pursuant to the rule are considered to be

[[Page 7903]]

``appropriate in the ordinary course of business'' within the meaning
of section 9(c)(3), and are thus exempt from the requirement of prior
Commission approval under sections 9(a)(1) and 10.
The Commission received comment letters from, or on behalf of,
eleven registered holding companies, one exempt holding company, one
industry trade association, and one local regulatory authority.^{27
With the exception of the Council of the City of New Orleans (``New
Orleans''), all commenters support adoption of the rule ^{28 and, in
many cases, propose additional changes to expand the rule.^{29 New
Orleans opposes adoption of the rule,^{30 and requests, in the
alternative, a more restrictive rule. The comments received on various
aspects of the rule are discussed below. The Commission is adopting
rule 58 and the conforming amendments to rules 45 and 52 substantially
as proposed, but with a number of clarifications.
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\27\ The registered holding companies that submitted comments
are Allegheny Power System, Inc. (``Allegheny''), American Electric
Power Company, Inc. (``AEP''), Central and South West Corporation
(``CSW''), Cinergy Corp. (``Cinergy''), The Columbia Gas System,
Inc. (``Columbia''), Consolidated Natural Gas Company
(``Consolidated''), Eastern Utilities Associates (``EUA''), Entergy
Corporation (``Entergy''), General Public Utilities Corporation
(``GPU''), Northeast Utilities (``Northeast'') and The Southern
Company (``Southern''). The exempt holding company that submitted
comments is Wisconsin Energy Corporation (``Wisconsin Energy''), and
the industry association is the American Gas Association (``AGA'').
The local regulator that submitted comments is the Council of the
City of New Orleans. Copies of the comments are available for
inspection in File No. S7-12-95 in the Commission's public reference
room.
\28\ See, e.g., Comments of AEP (the rule would reduce
regulatory burdens on registered systems and permit them to compete
in the energy industry); and Columbia (the rule eliminates
unnecessary and costly regulatory burdens on registered systems).
Some commenters also note that, beyond adoption of rule 58, the
Commission should provide registered holding companies with the
flexibility to engage in utility-related businesses without
limitation. See, e.g., Comments of AGA (section 11 should be broadly
interpreted to permit gas systems to enter into any business
involving production, transmission, dissemination or marketing of
any form of consumable energy or any business or operation based on
the facilities, resources or expertise from the company's
operations); and CSW (restrictions on diversification prevent
registered systems from engaging in businesses that would benefit
customers and investors and impede efficient evolution of the
electric utility industry).
\29\ For example, one commenter notes that the rule should
generally be more flexible, so as to accommodate changes that may
arise as the restructuring of the electric industry continues.
Comments of Wisconsin Energy. The Commission notes, however, that
various issues, such as those that surround the possible
disaggregation of utility assets and horizontal integration of
utility functions, are beyond the scope of a rule that is intended
to exempt nonutility interests that are commonplace today and
closely related to the core utility business. The Commission
continues to examine the issues raised by industry restructuring,
and will undertake any necessary or appropriate rulemaking or other
administrative action in the future.
\30\ New Orleans opposes the rule on many grounds. Among other
things, New Orleans asserts that the rule constitutes ``deregulation
of nonutility investment by registered holding companies [that] is
unlawful and not in the public interest.'' It further asserts that
the rule does not adequately protect consumers from
``diversification risks and failures which are well known and
documented in this industry.'' New Orleans states that only the
Commission has the authority to regulate diversification and that it
has a ``duty to protect consumers'' in this area. Comments of New
Orleans at 3-4.
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A. Investments in Energy-Related Companies

Rule 58(a)(1) exempts from the requirement of prior Commission
approval under sections 9(a)(1) and 10, pursuant to section 9(c)(3),
the acquisition by a registered holding company or its subsidiary
company of securities of an ``energy-related company;'' provided, that
aggregate investment (as defined) in such companies does not exceed the
greater of 15% of consolidated capitalization or $50 million.
Investments made prior to effectiveness of the rule are excluded for
purposes of calculating the investment limitations.
The Proposing Release defines an ``energy-related company'' in
terms of the activities in which it may engage. Specifically, as
proposed, the rule would define an energy-related company as one that
engages in: (1) One or more of various categories of specific
activities set forth in the rule, described below, and (2) such other
nonutility activities as the Commission may from time to time approve
by order upon application under sections 9 and 10, and, so doing,
designate as energy-related for purposes of the rule. Rule 58 requires
that an energy-related company at all times derive substantially all of
its revenues from the activities designated in the rule.
The energy-related activities specified in subsection (b)(1) of the
rule as proposed were:

(1) The rendering of energy conservation and demand-side
management services;
(2) The development and commercialization of electrotechnologies
related to energy conservation, storage and conversion, energy
efficiency, waste treatment, greenhouse gas reduction, and similar
innovations;
(3) The manufacture, conversion, sale and servicing of electric
and compressed natural gas powered vehicles and ownership and
operation of related refueling and recharging equipment;
(4) The sale, installation, and servicing of electric and gas
appliances for residential, commercial and industrial heating and
lighting;
(5) The brokering and marketing of energy commodities, including
but not limited to electricity or natural or manufactured gas;
(6) The production, conversion, and distribution of thermal
energy products, such as process steam, heat, hot water, chilled
water, air conditioning, compressed air and similar products;
alternative fuels; and renewable energy resources;
(7) The sale of technical, operational, management, and other
similar kinds of services and expertise, developed in the course of
utility operations in such areas as power plant and transmission
system engineering, development, design and rehabilitation;
construction; maintenance and operation; fuel procurement, delivery
and management; environmental licensing, testing and remediation;
and other similar areas;
(8) The ownership or operation of QFs, and facilities necessary
or incidental thereto, including thermal energy utilization
facilities purchased or constructed primarily to enable the
qualifying facility to satisfy the useful thermal output
requirements under PURPA;
(9) The ownership or operation of fuel procurement,
transportation, handling and storage facilities, scrubbers, and
resource recovery and waste water treatment facilities;
(10) The production, transportation, distribution or storage of
all forms of energy other than electricity and natural or
manufactured gas;
(11) The development and commercialization of technologies or
processes that utilize coal waste by-products as an integral
component of such technology or process; and
(12) The ownership, sale, leasing or licensing of the use of
telecommunications facilities and equipment (such as fiber optic
lines, coaxial cable, or other communications capacity, towers and
tower sites and other similar properties).

The rule as proposed also specifically provided a means for the
Commission to add additional activities to the definition upon
application in the future.
1. Definition of ``Energy-Related Company''
a. General. The Commission received a substantial number of
comments concerning the definition of ``energy-related company.''
Several commenters assert that the definition should not consist of
enumerated categories of specific activities, but should instead be
broad and general.^{31 Although this approach would offer greater
flexibility,

[[Page 7904]]

the Commission believes that it is not consistent with the requirements
of section 9(c)(3) of the Act. As discussed previously, that section
provides an exemption only for acquisitions of securities that are made
in the ordinary course of business of the registered system and that
are not detrimental to the protected interests. Rule 58 is intended to
encompass activities with which the Commission is familiar as a result
of its administrative experience and that appear to be so closely
related to the ordinary course of the contemporary utility business as
not to require case-by-case analysis pursuant to sections 9(a)(1) and
10. For this reason, the Commission is retaining enumerated categories
in the rule as adopted.
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\31\ Comments of AGA, Columbia and Consolidated. Suggested
definitions would include any company engaged in a business based on
or developed from the facilities, resources, technology or expertise
of the registered system's operations (Comments of AGA and
Columbia); and any company engaged in a business involving the
production, transmission, dissemination or marketing of any form of
consumable energy (Comments of AGA).
---------------------------------------------------------------------------

Similarly, the Commission notes that the enumerated categories of
specific energy-related activities in rule 58 are exhaustive, rather
than illustrative. In order for a direct or indirect acquisition of
securities by a registered holding company or its subsidiary to qualify
for the exemption provided by the rule, the company in which the
interest is acquired must be engaged almost exclusively in the type of
activities specified in the rule. A registered holding company will
continue to apply to the Commission for prior approval of any
acquisitions concerning activities that fall outside the categories
identified by the rule as energy-related. Further, as discussed below,
to the extent that a company engages in activities in addition to those
permitted under rule 58, an application will also be required.
New Orleans suggests that the definition should include a
requirement that the permitted activity be functionally related to the
system's utility business under sections 10 and 11.^{32 Such a
requirement is unnecessary for several reasons. First, a finding of a
functional relationship is not required in order to qualify for an
exemption under section 9(c)(3).^{33 Moreover, even though a finding
of a functional relationship under section 11(b)(1) is not required in
this context, each of the activities permitted under the rule as
adopted has in many instances been found, by order upon application
under sections 9(a)(1) and 10, to satisfy the statutory requirements,
including those of section 11(b)(1).
---------------------------------------------------------------------------

\32\ As discussed above, the Commission has interpreted the
provisions of section 11 of the Act, referenced in section 10(c)(1),
to reflect a Congressional policy against nonutility activities that
bear no operating or functional relationship to the utility
operations of the registered system. See generally Michigan
Consolidated Gas Co., 44 SEC 361 at 363-65.
\33\ The Commission has determined that a transaction need not
satisfy the standards of section 11(b)(1) in order to qualify for
exemption under section 9(c)(3), but that section 9(c)(3) may not be
used to circumvent the requirements of section 11(b)(1) generally.
Id. at 366 (``Section 9(c)(3) cannot be employed to evade the
proscription of section 11(b)(1) prohibiting the acquisition by a
gas utility company of an interest in a business unrelated to its
business''); but see id. at 369 (``the majority unduly constricts
the scope of the section 9(c)(3) exemption when it holds that to be
entitled to such exemption a transaction must also meet the
standards of section 11(b)(1)'') (Commissioner Owens, concurring in
part and dissenting in part) and 370 (Commissioner Smith,
dissenting).
---------------------------------------------------------------------------

One commenter objects to the requirement that an energy-related
company derive ``substantially all'' of its revenues from activities
designated as ``energy-related,'' and suggests that the rule should
instead require that a company derive merely a stated portion, e.g., at
least 30%, from such activities.^{34 The Commission notes, however,
that this measure would permit registered holding companies to make
sizeable investments in companies engaged primarily in novel,
unspecified nonutility businesses. The Commission believes its
authority to create such a broad exemption by rule under section
9(c)(3) is subject to question.^{35 The Commission declines,
therefore, to adopt this suggestion. Any acquisition of an interest in
a nonutility business that does not derive substantially all of its
revenues from one or more of the activities set forth in the categories
of the rule will continue to require prior Commission approval by order
upon application.
---------------------------------------------------------------------------

\34\ Comments of CSW.
\35\ As noted previously, the Commission has found that section
9(c)(3), under which rule 58 is adopted, may not be used to
circumvent the requirements of section 11(b)(1) of the Act.
---------------------------------------------------------------------------

New Orleans objects to the proposed provision of the rule creating
a procedure for designating additional activities to be energy-related
by order upon application under section 10.^{36 New Orleans asserts
that new activities and investments should be approved only pursuant to
rulemaking, so that all parties have an opportunity to evaluate and
comment upon the relationship of the new activity to the core utility
business and the potential effects on ratepayers.
---------------------------------------------------------------------------

\36\ This mechanism was provided in subsection (b)(1)(xiii) of
the proposed rule.
---------------------------------------------------------------------------

In proposing this mechanism for updating the rule, the Commission
intended that all procedural requirements applicable to agency
rulemaking would be observed in connection with the proposed
designation by order of additional activities as energy-related for
purposes of rule 58, including in particular the requirements related
to public notice and opportunity to comment.^{37 On reconsideration,
however, the Commission has determined that this provision could result
in increased administrative burdens for both the registered holding
companies seeking approval of new activities and the Commission staff.
---------------------------------------------------------------------------

\37\ See e.g., the relevant provisions of the Administrative
Procedure Act, 5 U.S.C. 553, and the Commission's rules of practice,
17 CFR 201.192.
---------------------------------------------------------------------------

If rulemaking is undertaken in the context of consideration of an
application for approval of a specific nonutility investment, adherence
to required procedures, including an extended comment period for the
rulemaking and consideration of all views submitted, could delay
approval of the proposed transaction that is the subject of the
application. Further, repetitive paperwork in connection with the
rulemaking aspects of each such application could consume extensive
staff resources. Accordingly, this feature of proposed rule 58 has not
been retained.^{38 The Commission believes, however, that future
expansion of the scope of the rule, to reflect additional nonutility
activities found by the Commission to satisfy the standards of the Act,
is essential to achieve the rule's intended flexibility. The Commission
intends to evaluate periodically the coverage of the rule in light of
existing Commission orders under sections 9 and 10 of the Act, and
initiate rulemaking proceedings to reflect any appropriate changes.
---------------------------------------------------------------------------

\38\ A similar provision in the definition of ``gas-related
company'' has also been eliminated.
---------------------------------------------------------------------------

One commenter suggests that the definition of energy-related
company be expanded to include companies that derive substantially all
of their revenues from the listed activities, either directly or
indirectly.^{39 The requested revision would permit a registered
holding company system to use one or more intermediate subsidiaries
(i.e., ``project parents'') to invest in energy-related companies, yet
retain the benefit of the exemption afforded by the rule.^{40 The
Commission believes that this suggestion is consistent with the intent
of the rule as proposed. Use of an intermediate subsidiary could
further insulate the holding company and its other subsidiaries,
including utility subsidiaries, from any direct losses that could occur
with respect to rule 58 investments. At the same time, this measure
would offer greater flexibility in the structuring of these
investments.

[[Page 7905]]

Accordingly, the rule, as adopted, is modified to incorporate the
concept of indirect investment in energy-related companies through
project parents.^{41
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\39\ Comments of GPU.
\40\ The provisions of the Act that permit use of intermediate
holding companies in connection with investment in exempt wholesale
generators reflect the same concept. See section 32(a)(1).
\41\ This concept is also reflected in the definition of a gas-
related company.
---------------------------------------------------------------------------

The Commission notes, however, that any such intermediate
subsidiary, like the underlying energy-related companies, must derive
``substantially all'' of its revenues from the permitted activities. If
the company will engage in other activities, directly or indirectly,
prior Commission approval of an investment interest in such company
will be required.
b. Categories of energy-related activities. The Proposing Release
invited specific comment on whether the proposed rule should include
additional kinds or categories of energy-related activities. One
commenter suggests that customer financing for other energy-related
activities should be a separate category of permitted activity for an
energy-related company.^{42 The Commission notes that customer
financing has been approved in a number of cases involving activities
that are designated as energy-related under rule 58, and agrees that it
may be an appropriate activity for some energy-related companies.
However, this type of activity is better addressed in the context of
rule 48, as discussed below. The Commission therefore declines to
include customer financing as an energy-related activity under rule 58.
---------------------------------------------------------------------------

\42\ Comments of Northeast.
---------------------------------------------------------------------------

Another commenter suggests that any nonutility business in which
the applicable state commission would allow a regulated utility or
exempt holding company to engage or invest should be a permitted
activity for energy-related companies.^{43 That a state commission
permits utilities or holding companies that are subject to its
jurisdiction to engage in a given nonutility activity can be a strong
indication that the activity is appropriate, and, in a given case, it
may be persuasive evidence that some of the standards of the Act have
been satisfied. However, that a state commission has approved a type of
investment does not necessarily mean that it is in the ordinary course
of business of a registered holding company or its subsidiary for
purposes of section 9(c)(3). The Commission does not believe that rule
58 should incorporate such state determinations as a general matter,
without any indication as to the nature of the approved activities or
the relevant state law standards. Thus, the Commission will continue to
review any such activity on a case-by-case basis, giving due
consideration to the views of state regulators toward the activity in
question.
---------------------------------------------------------------------------

\43\ Comments of CSW.
---------------------------------------------------------------------------

As proposed, the rule did not indicate clearly whether an interest
in an energy-related company engaging in an enumerated activity could
be acquired pursuant to the rule by companies in electric holding
company systems, gas holding company systems, or both. As adopted, rule
58(b)(1) has been clarified in this regard to limit the exemption
solely to those activities that are considered to be in the ordinary
course of the type of utility business in which a particular holding
company system is engaged.^{44 Any proposal by a registered holding
company system to acquire an interest in a company engaged in
nonutility activities of a type not exempt under the rule for that type
of registered system may be the subject of an application for
Commission approval under sections 9(a) and 10.^{45
---------------------------------------------------------------------------

\44\ Holding company systems engaged in both the electric and
gas utility business will be considered, for purposes of the rule,
to be engaged only in one type of utility business, as determined by
the type of operations that constitute the holding company's primary
utility business.
\45\ For example, an electric registered holding company system
would be required to file an application and obtain authorization to
acquire an interest in a company engaged in ownership and operation
of refueling equipment for natural gas-powered vehicles. While
acquisition of an interest in such a company could be exempt under
rule 58 for a gas registered holding company system, it is not in
the case of an electric registered holding company.
---------------------------------------------------------------------------

Many commenters suggest specific changes or additions to the
categories of permitted activities set forth in the definition. A
number of comments request clarifications and propose additions to the
list of activities permitted for an energy related company. Some, but
not all, comments and revisions to the categories of permitted
activities are discussed below.
(1)Subsection (b)(1)(i): Energy and demand-side management
services. This category of activities was defined in the Proposing
Release to include the rendering of energy conservation and demand-side
management services.^{46 The Commission has previously considered
and approved by order under sections 9(a)(1) and 10 a broad range of
activities relating to the business of energy management and demand-
side management, including the following: Energy audits; facility
design and process enhancements; construction, maintenance and
installation of, and training client personnel to operate, energy
conservation equipment; design, implementation, monitoring and
evaluation of energy conservation programs; development and review of
architectural, structural and engineering drawings for energy
efficiencies; design and specification of energy consuming equipment;
and general advice on programs.^{47 Upon additional consideration,
the Commission has concluded that ``energy conservation services'' may
not be broad enough to cover the types of activities intended to be
exempted under this category. The term ``energy management services''
more accurately reflects the scope of the exempted activity.^{48 The
rule as adopted is revised accordingly. Apart from this clarification,
the subsection is adopted as proposed.^{49
---------------------------------------------------------------------------

\46\ No comments were received on this subsection.
\47\ See, e.g., Eastern Utilities Assocs., Holding Co. Act
Release No. 26232 (Feb. 15, 1995); and Northeast Utilities, Holding
Co. Act Release No. 25114-A (July 27, 1990).
\48\ See, e.g., New England Electric System, Holding Co. Act
Release No. 22719 (Nov. 19, 1982).
\49\ This subsection is intended to encompass all consumer-
oriented activities that represent components of a holding company
system's demand-side management and integrated-resource planning
functions, or that are intended to reduce customer energy costs or
lead to efficient use of energy resources by affecting energy
consumption. Customer financing is not encompassed by this
subsection.
---------------------------------------------------------------------------

Companies in both electric and gas registered systems may acquire
interests in companies engaging in the activities specified in this
subsection.
(2) Subsection (b)(1)(ii): development and commercialization of
electrotechnologies.
As used in the rule, electrotechnologies relate to energy
conservation, storage and conversion, energy efficiency, waste
treatment, greenhouse gas reduction and similar innovations.^{50 The
Commission has, on many occasions, approved investments by electric
registered system companies in technologies related to the electric
utility business.^{51 Because the Commission has not yet considered
proposals by registered gas system companies to engage in activities
related to such technologies, the Commission is not prepared at this
time to deem these activities to be appropriate in the ordinary course
of the utility business of such systems. Accordingly, the Commission is
revising the rule to

[[Page 7906]]

clarify that only electric registered holding companies and their
subsidiaries are permitted to acquire companies that engage in the
activities in this subsection. The subsection is otherwise adopted as
proposed.
---------------------------------------------------------------------------

\50\ No comments were received on this category of activities.
\51\ See, e.g., American Electric Power Co., Holding Co. Act
Release No. 25424 (Dec. 11, 1991) (acquisition of an interest in a
company that develops, manufactures and markets efficient light
bulbs); and Allegheny Power System, Inc., Holding Co. Act Release
No. 26085 (July 14, 1994) (investments in technologies related to
power conservation and storage, conservation and load management,
environmental and waste treatment, and power-related electronic
systems and components).
---------------------------------------------------------------------------

(3) Subsection (b)(1)(iii): electric and gas vehicles. As proposed,
this subsection included manufacture, conversion, sale and servicing of
electric and compressed natural gas powered vehicles, and ownership and
operation of related refueling and recharging equipment.^{52 The
Commission has determined that the subsection should be expanded to
include ownership, operation, sale, installation and servicing of
refueling, recharging and conversion equipment and facilities relating
to electric- and gas-powered vehicles,^{53 but should not extend to
manufacture of such equipment and facilities or to manufacture,
conversion and sale of the vehicles themselves.^{54 The Commission
has revised the subsection as adopted to make clear its intended scope.
---------------------------------------------------------------------------

\52\ No comments were received on this subsection.
\53\ The Commission has issued orders authorizing broader
involvement with respect to such activities than that reflected in
the rule as proposed. See, e.g., Columbia Gas System, Holding Co.
Act Release No. 26295 (May 23, 1995) (authorizing the sale,
ownership, operation, installation and servicing of natural gas
refueling equipment and sale of equipment and facilities for use in
vehicle conversion); and Consolidated Natural Gas Co., Holding Co.
Act Release No. 25615 (Aug. 27, 1992) (same).
\54\ The Commission has not yet approved these types of
activities by order under sections 9(a) and 10.
---------------------------------------------------------------------------

In addition, the Commission believes, based on existing precedent,
that it is appropriate to limit the described activities to those
appropriate for gas registered system companies and electric registered
system companies, respectively. The rule as adopted is revised to
reflect this limitation.
(4) Subsection (b)(1)(iv): appliance sales. As proposed, this
subsection included the sale, installation and servicing of electric
and gas appliances for residential, commercial and industrial heating
and lighting. Comments included suggestions that this category extend
to leasing ^{55 and customer financing arrangements; ^{56 and
that the equipment at issue include other energy-consuming devices
^{57 and equipment used for energy generation, both within and
outside the system's service territory.^{58
---------------------------------------------------------------------------

\55\ Comments of Consolidated and Northeast. Because the term
``sale,'' as defined in section 2(a)(23) of the Act, encompasses
dispositions by lease, the Commission believes that no change to the
subsection is needed.
\56\ Comments of Northeast. Northeast also raised the question
of customer financing in a broader context, suggesting the addition
to the rule of a category concerning the financing of other energy-
related activities. The Commission has determined to address this
issue in the context of rule 48, as discussed below.
\57\ Comments of CSW.
\58\ Comments of Northeast.
---------------------------------------------------------------------------

The Commission finds that it is appropriate to expand the types of
equipment addressed by the rule to include other types of energy-
consuming devices.^{59 Historically, the Commission approved the
activities addressed in this subsection to encourage consumption of
electricity and gas, to promote competition among fuels and, more
recently, to further energy conservation.^{60 The rule as adopted
has been revised, consistent with these precedents, to include electric
and gas appliances, equipment that promotes technologies that use gas
or electricity and equipment that enables use of gas or electricity as
an alternate fuel. Companies in both electric and gas holding company
systems may acquire interests in companies engaging in the activities
specified in this subsection.
---------------------------------------------------------------------------

\59\ Prior orders in this area under sections 9(a)(1) and 10
permit the sale, installation, servicing and/or financing of
significantly broader categories of equipment than appliances for
heating and lighting. See, e.g., Consolidated Natural Gas Co.,
Holding Co. Act Release No. 26234 (Feb. 23, 1995).
\60\ See e.g., Cities Service Co., 15 S.E.C. 962 (1944); General
Public Utilities Corp., Holding Co. Act Release No. 15184 (Feb. 9,
1965); and Louisiana Power & Light Co., Holding Co. Act Release No.
25445 (Dec. 26, 1991).
---------------------------------------------------------------------------

The Commission declines to adopt the suggestion that the rule
exempt sale, installation and servicing of generation equipment. These
activities may involve issues of broader concern, which lie outside the
ambit of this rulemaking.
(5) Subsection (b)(1)(v): brokering and marketing of energy
commodities.
This subsection covers the brokering and marketing of energy
commodities, including but not limited to electricity and natural or
manufactured gas. One commenter proposes that this subsection should be
expanded to cover energy-related commodities and should specify that it
covers other combustible fuels in addition to electricity and
gas.^{61 The Commission does not believe there is a basis to include
``energy-related commodities'' in this context. However, the subsection
is revised in the adopted rule to include other combustible
fuels.^{62
---------------------------------------------------------------------------

\61\ Comments of Consolidated.
\62\ Other combustible fuels would include, for example, coal,
oil, wood chips, oil shale, isobutane and propane.
---------------------------------------------------------------------------

As proposed, this subsection did not indicate the markets in which
the permitted activities could be carried out. The Commission's
existing orders in this area extend primarily to wholesale
markets.^{63 However, the Commission has authorized retail electric
marketing activities in states with established retail wheeling
programs,^{64 and, more recently, authorized retail marketing
activities with respect to both electric power and natural gas,
throughout the United States, subject to compliance with applicable
state statutes, regulations and orders with respect to such
sales.^{65 In view of these precedents, and in light of the rapid
development of competition in retail markets, as discussed above, this
subsection is intended to cover activities in both wholesale and retail
markets that are in compliance with applicable law.
---------------------------------------------------------------------------

\63\ See, e.g., Consolidated Natural Gas Co., Holding Co. Act
Release No. 26512 (Apr. 30, 1996) (approving wholesale marketing of
energy commodities, but reserving jurisdiction over retail marketing
activities until such time as state programs permitting such
activities are implemented).
\64\ See, e.g., Eastern Utilities Assocs., Holding Co. Act
Release No. 26519 (May 23, 1996) (participation in retail electric
pilot programs in New Hampshire and Massachusetts); and New England
Electric System, Holding Co. Act Release No. 26520 (May 23, 1996)
(same).
\65\ SEI Holdings, Inc., Holding Co. Act Release No. 26581
(Sept. 26, 1996). The Commission noted that industry trends and
competitive pressures make it important for registered system
companies to be poised to compete in new markets as they are
created, and that such participation appears to promote the goals of
U.S. energy policy, including increased competition and lower
utility rates.
---------------------------------------------------------------------------

This subsection, as proposed, also did not indicate whether a
registered holding company could acquire an interest in a company
dealing in all energy commodities or only in electric power or natural
gas, as appropriate. At the time the Proposing Release was issued, the
Commission's previous orders had, for the most part, limited
participation in gas marketing and brokering activities to gas holding
company systems, and electric marketing and brokering activities to
electric holding company systems. Since that time, however, the
Commission has considered and approved several proposals by registered
holding companies to engage in the brokering and marketing of energy
commodities, including but not limited to electricity and natural or
manufactured gas.^{66 The rule as adopted permits companies in both
electric and gas systems to acquire interests in

[[Page 7907]]

companies engaging in the activities described in this subsection.
---------------------------------------------------------------------------

\66\ Consolidated Natural Gas Co., Holding Co. Act Release No.
26512 (Apr. 30, 1996); UNITIL Corp., Holding Co. Act Release No.
26527 (May 31, 1996); and SEI Holdings, Inc., Holding Co. Act
Release No. 26581 (Sept. 26, 1996). Other companies in both electric
and gas holding company systems are also seeking similar
authorizations. See, e.g., National Fuel Resources, Inc., File No.
70-8651.
---------------------------------------------------------------------------

One commenter recommends that the Commission revise the subsection
to clarify that it concerns both regulated and unregulated
activities.^{67 Since rule 58 addresses only the acquisition of
securities of nonutility companies engaged in specified activities,
this comment is not reflected in the rule.
---------------------------------------------------------------------------

\67\ Comments of CSW. Unregulated activities are stated to be
those that are for the benefit of shareholders.
---------------------------------------------------------------------------

Several commenters suggest that the specified activities should
include ``risk management activities'' ^{68 and ``market hedging
tools.'' ^{69 The Commission has, in several instances, considered
such activities in connection with the brokering and marketing of
energy commodities. ^{70 In each case, the order was conditioned on
representations that hedging tools would be used only to minimize risks
associated with contracts for purchase or sale of energy commodities
and would not be used to engage in speculation. Such activities are a
means of limiting the risks associated with marketing of energy
commodities and, subject to compliance with the limitations noted
above, may be engaged in as part of the activities covered by this
subsection.
---------------------------------------------------------------------------

\68\ Comments of CSW.
\69\ Comments of Cinergy.
\70\ See, e.g., SEI Holdings, Inc., Holding Co. Act Release No.
26581 (Sept. 26, 1996); Consolidated Natural Gas Co., Holding Co.
Act Release No. 25926 (Nov. 16, 1993); and Consolidated Natural Gas
Co., Holding Co. Act Release No. 26512.
---------------------------------------------------------------------------

(6) Subsection (b)(1)(vi): Thermal energy products. This subsection
addresses the production, conversion and distribution of thermal energy
products,^{71 alternative fuels and renewable energy resources. The
Commission received one comment, suggesting that sale of such products
and servicing of thermal energy facilities should be added to the
permitted activities.^{72 The rule as adopted has been revised to
include these suggestions. The rule has also been revised to limit
availability of this subsection to electric registered holding company
systems.
---------------------------------------------------------------------------

\71\ Examples given in the rule include process steam, heat, hot
water, chilled water, air conditioning, compressed air and similar
products.
\72\ Comments of GPU.
---------------------------------------------------------------------------

(7) Subsection (b)(1)(vii): sale of services and expertise. This
section addresses the sale of technical, operational, management and
other kinds of services and expertise developed in the course of
utility operations.^{73 Commenters offer various requests for
expansion of this category.
---------------------------------------------------------------------------

\73\ Examples cited in the proposed rule include power plant and
transmission system engineering, development, design and
rehabilitation; construction; maintenance and operation; fuel
procurement, delivery and management; environmental licensing,
testing and remediation; and other similar areas. The activities
contemplated by the rule do not extend to any that would render a
company a public-utility company under the Act. See section 2(a)(3),
(4) and (5).
---------------------------------------------------------------------------

One registered holding company suggests that the category should
also include development, production, marketing and financing of such
services and expertise.^{74 The Commission notes, however, that the
subsection is intended to address services and expertise that exist as
a result of system utility operations. The development and production
of such services and expertise, solely for the purpose of sale, are
outside its scope. In addition, the marketing of such services and
expertise is implicit in the concept of sale, and thus need not be
specifically mentioned. As discussed below, the Commission believes
that customer financing is better addressed in the context of rule 48.
The Commission declines to adopt these proposed revisions to the rule.
---------------------------------------------------------------------------

\74\ Comments of Consolidated.
---------------------------------------------------------------------------

Two commenters suggest that expertise and services developed in the
course of nonutility operations should also be included.^{75 While
expertise related to some nonutility services may be appropriate for
inclusion in the activities covered by the rule, the Commission
believes that there is not yet an adequate basis for including them,
and will continue to consider proposals on a case-by-case basis.
---------------------------------------------------------------------------

\75\ Comments of AGA and Columbia.
---------------------------------------------------------------------------

A registered holding company suggests an expansion of this category
to include the sale of excess goods and assets.^{76 The Commission
declines to adopt this suggestion with respect to sale of utility
assets and resources by a nonutility company, primarily because those
activities could involve significant consumer protection issues, and
could also raise restructuring issues that are beyond the scope of the
rule. Some sales of excess nonutility assets and resources may be a
legitimate activity for rule 58 companies, but the Commission does not
believe that there is, as yet, an adequate basis for inclusion of such
activities in the rule. Consideration of these types of activities will
continue to be done on a case-by-case basis.
---------------------------------------------------------------------------

\76\ Comments of CSW.
---------------------------------------------------------------------------

Another registered holding company proposes that this category of
the rule be expanded to include the sale of administrative services and
equipment related to services and expertise.^{77 The Commission
notes, however, that administrative services, to the extent they are
within the scope of management services, need not be expressly
addressed. In addition, as discussed above, sales by a nonutility
subsidiary company of equipment used in utility operations, even
equipment related to the service being sold, could raise consumer
protection issues. Accordingly, the Commission declines to accept these
suggestions.
---------------------------------------------------------------------------

\77\ Comments of Northeast.
---------------------------------------------------------------------------

Commenters also suggest that the list of examples of the types of
services and expertise covered by this subsection be expanded.^{78
As discussed previously, the rule is intended to encompass the types of
activities that may be considered to be in the ordinary course of
business of a registered holding company. In this regard, the
Commission has taken into account its experience in administering
sections 9(a)(1) and 10 of the Act. To the extent that the commenters
request the inclusion of activities with which the Commission has
little or no familiarity, it is appropriate to continue case-by-case
review. Accordingly, the Commission declines to modify the adopted rule
as these commenters request.
---------------------------------------------------------------------------

\78\ Comments of Consolidated (gas exploration, development,
transmission or storage system design); CSW (waste management
activities); GPU (consulting and training); Cinergy (revenue
security and employee safety); and Northeast (distribution system
engineering, development design and rehabilitation, environmental
services, and transportation and fleet services).
---------------------------------------------------------------------------

It should also be noted in this regard that only those type of
services and expertise that are uniquely utility-related are intended
to fall within this category of activity. Activities that are more
generic are not intended to be a permitted activity for energy-related
companies.^{79
---------------------------------------------------------------------------

\79\ For instance, expertise in billing and customer service may
be developed in the course of utility operations. These types of
activities are not, however, uniquely utility-related and, thus, are
not encompassed by this subsection.
---------------------------------------------------------------------------

The Commission notes in connection with this subsection that any
use by a system nonutility company of personnel or other resources of
an associate public-utility company raises issues under section 13 of
the Act and rules thereunder ^{80 relating to pricing of

[[Page 7908]]

intrasystem transactions. Persons engaging in these activities and
relying upon the exemption provided by the rule are advised to consider
these requirements.
---------------------------------------------------------------------------

\80\ Section 13 prohibits registered holding companies from
entering into or performing any contract for service, construction
or the sale of goods with any associate utility or service company,
except as may be permitted by rule in special circumstances or in
the ordinary course of business. Section 13 also provides that
subsidiaries of registered holding companies, in entering into or
performing any such contracts, must comply with any limitations
imposed by the Commission as necessary or appropriate to insure that
such contracts are performed economically and efficiently for the
benefit of such associate companies at cost, fairly and equitably
allocated among such companies. Rules 85 through 92, adopted under
section 13, specify the situations in which such transactions are
permitted and generally provide that, with some exceptions, such
contracts must be performed at cost.
---------------------------------------------------------------------------

Companies in both electric and gas registered systems may acquire
interests in companies engaging in the activities specified in this
subsection. As adopted, this subsection has been revised only to the
extent necessary to eliminate redundant language.
(8) Subsection (b)(1)(viii): ownership and operation of QFs. This
subsection, as proposed, included ownership or operation of QFs and of
facilities necessary or incidental thereto.^{81 The Commission
received one comment on this provision, proposing that development of
QFs also be included in the rule.^{82 The Commission has approved
project development activities in connection with QFs in a number of
cases.^{83 Such activities are implicit in the subsection as
proposed, and the subsection has been revised to include them
specifically.
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\81\ Such facilities are stated to include thermal energy
utilization facilities purchased or constructed primarily to enable
the QF to satisfy the useful thermal output requirements under PURPA
and regulations thereunder.
\82\ Comments of GPU.
\83\ See, e.g., Southern Co., Holding Co. Act Release No. 26212
(Dec. 30, 1994); and Allegheny Power System, Inc., Holding Co. Act
Release No. 26229 (Feb. 3, 1995).
---------------------------------------------------------------------------

After careful review of the precedent in this area under sections
9(a)(1) and 10, the Commission has also determined that it is
appropriate to make clear that this subsection is intended to include
ownership and operation of only the types of incidental facilities that
are required in order to meet the requirements of PURPA.^{84
Subsection (viii), as adopted, has been revised accordingly.
---------------------------------------------------------------------------

\84\ The Commission has authorized registered holding companies
to invest in an 18 acre thermal host greenhouse, Central and South
West Corp., Holding Co. Act Release No. 25399 (Nov. 1, 1991), and an
integrated carbon dioxide plant steam host, Central and South West
Corp., Holding Co. Act Release Nos. 25477 (Feb. 18, 1992) and 25983
(Jan. 31, 1994). In each instance, the Commission found that the
incidental facility was necessary to the operation of the QF. The
Commission believes that it is appropriate for the subsection of the
rule to extend to investments in any type of incidental facility
that is needed for a facility to attain QF status.
---------------------------------------------------------------------------

Companies in both electric and gas registered systems may acquire
interests in companies engaging in the activities specified in this
subsection.
(9) Subsection (b)(1)(ix): fuel facilities, scrubbers, and resource
recovery and waste water treatment facilities. As proposed, this
subsection included ownership and operation of fuel procurement,
transportation, handling and storage facilities, scrubbers, and
resource recovery and waste water treatment facilities.^{85 One
registered holding company suggests that servicing of such facilities
should also be permitted.^{86 The subsection has been revised
expressly to permit such activity.
---------------------------------------------------------------------------

\85\ This subsection is not intended to encompass ownership or
operation of any facilities that would cause an energy-related
company to become an electric utility company under the Act. See
section 2(a)(3).
\86\ Comments of GPU.
---------------------------------------------------------------------------

Another registered holding company suggests that this subsection
should be expanded to permit use of excess system assets, such as
office equipment and space and excess space in billing
envelopes.^{87 The Commission believes that this request is more
appropriately directed to subsection (b)(1)(vii) and has addressed it
in that context.
---------------------------------------------------------------------------

\87\ Comments of Northeast.
---------------------------------------------------------------------------

The Commission orders on which inclusion of these activities is
based relate to generation of electricity. As a result, the rule's
exemption for the acquisition of a company that engages in activities
described in this subsection is available only for companies in
electric registered systems.^{88
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\88\ Many activities related to procurement, transportation and
storage of natural gas for sale are permitted for gas-related
companies, as discussed below.
---------------------------------------------------------------------------

(10) Subsection (b)(1)(x): production, transportation, distribution
or storage of other forms of energy. The activities in this subsection
concern all forms of energy other than electricity and natural or
manufactured gas. Commenting registered holding companies suggest that
the permitted activities should also include the sale of these forms of
energy,^{89 as well as all activities in the supply chain concerning
them, including development, exploration, research and testing.^{90
The commenters further propose that the subsection specifically include
sources of energy.^{91
---------------------------------------------------------------------------

\89\ Comments of GPU.
\90\ Comments of AGA, CSW and Columbia.
\91\ Comments of CSW.
---------------------------------------------------------------------------

The Commission has concluded that the activities in this proposed
subsection duplicate in many respects the activities included in other
subsections of the rule as adopted.^{92 Accordingly, this subsection
has been eliminated in the final rule.
---------------------------------------------------------------------------

\92\ For instance, subsection (v) covers marketing of energy
commodities; subsection (vi) covers production and sale of thermal
energy products, alternative fuels and renewable energy resources;
subsection (ix) covers ownership or operation of fuel procurement,
transportation, handling and storage facilities; and subsection (x)
covers utilization of certain waste by-products of the generation of
electricity. In addition, as discussed below, production of other
fuels may be a permitted activity for gas-related companies under
some circumstances.
---------------------------------------------------------------------------

(11) Subsection (b)(1)(xi): coal waste by-products. This subsection
includes development and commercialization of technologies or processes
that utilize coal waste by-products as an integral component. Two
registered holding companies comment on this subsection and request
that it be expanded to include all waste products and by-products of
generation of electricity and natural gas production, as well as
investments in facilities and equipment used in processes to improve
wastes and by-products or convert them into useful goods.^{93 The
Commission notes that, to date, it has considered only cases involving
coal waste products and by-products of electric generation, ^{94 and
this subsection is adopted as proposed.
---------------------------------------------------------------------------

\93\ Comments of Allegheny and Southern.
\94\ See Jersey Central Power & Light Co., Holding Co. Act
Release No. 24373 (April 16, 1987) (investment in company developing
a waste coal-fired generating unit); American Electric Power Co.,
Holding Co. Act Release No. 26014 (March 30, 1994) (acquisition of
securities of subsidiary that develops backfill material using fly
ash, a coal waste by-product); and New England Electric System,
Holding Co. Act Release No. 26277 (April 26, 1995) (investment in a
venture that installs equipment to separate unburned carbon from
coal ash).
---------------------------------------------------------------------------

Only companies in electric holding company systems may acquire an
interest in a company engaged in the activities in this subsection.
(12) Subsection (b)(1)(xii): telecommunications facilities. This
subsection addresses the ownership, sale, leasing or licensing of the
use of telecommunications facilities and equipment. The Commission
received numerous comments on the advisability and scope of this part
of the rule.^{95 In view of the passage in 1996 of the
Telecommunications Act, legislation that exempts from the requirement
of prior Commission approval the acquisition and retention by a
registered holding company of interests in companies engaged in a broad
range of telecommunications activities and businesses, these activities
are not included in the adopted rule.
---------------------------------------------------------------------------

\95\ Registered holding companies generally commented that this
section should be expanded to cover a broader range of
telecommunication services and products. Comments of CSW, Entergy
and GPU. New Orleans, however, commented that this subsection should
be eliminated as not in the public interest due to possible cross-
subsidization problems and lack of relationship to the core utility
business.
---------------------------------------------------------------------------

2. Limitation on Investment
As noted above, the exemption of rule 58 is available so long as
aggregate

[[Page 7909]]

investment by a registered holding company and its subsidiaries in
energy-related companies does not exceed the greater of 15% of
consolidated capitalization or $50 million. As proposed, investments in
such companies made pursuant to Commission order prior to the effective
date of the rule would be excluded for purposes of calculating the
limitation. In the Proposing Release, the Commission requested specific
comment on (1) whether the proposed investment limitation is reasonable
under the circumstances; (2) whether a different measure of financial
capacity, such as consolidated retained earnings, should be used
instead; and (3) whether it is appropriate to exclude prior investments
for purposes of the rule.
a. Need for a limitation. Some commenters consider an investment
limitation to be unnecessary. They note that the types of energy-
related businesses specified in the rule are closely related to the
utility industry ^{96 and that competitive markets and the financial
condition of any particular registered holding company establish
prudent limits on diversification.^{97 They state, further, that the
Commission can monitor the effects of diversification through its
review of holding company financing,^{98 and they note that
consumers are protected against potential cross-subsidization by
various factors, including the at-cost rules under section 13 of the
Act,^{99 rate regulation and the companies' need to be
competitive.^{100 Several commenters, however, state that if the
Commission determines that a limitation is appropriate, the proposed
limitation is reasonable.^{101 These commenters consider a more
restrictive standard to be unnecessary.^{102
---------------------------------------------------------------------------

\96\ Comments of Entergy.
\97\ Comments of AGA and Columbia.
\98\ Comments of Columbia and Entergy.
\99\ Rules 90, 91 and 92 under the Act, 17 CFR 250.90, 250.91
and 250.92.
\100\ Comments of AGA.
\101\ Comments of Consolidated, GPU and Southern.
\102\ Comments of AGA and GPU.
---------------------------------------------------------------------------

The Commission continues to believe that it is appropriate to limit
the aggregate investment of a registered holding company in energy-
related companies pursuant to the rule. Section 9(c)(3) by its terms
contemplates that the Commission will condition rules thereunder upon
such limitations as it may prescribe as appropriate in the ordinary
business of a registered holding company or its subsidiary company and
not detrimental to the public interest or the interest of investors or
consumers. An aggregate limitation upon investments pursuant to the
rule is appropriate to ensure that acquisitions of interests in energy-
related companies are not so material as to depart from the statutory
concept of transactions in the ordinary course of business or to raise
the possibility of detriment to the protected interests.^{103 The
Commission may revisit the need for an investment limitation in rule 58
in the future, after gaining experience with the use and effects of the
exemption provided by the rule.
---------------------------------------------------------------------------

\103\ The Commission notes that its jurisdiction over the
issuance and sale of securities by a registered holding company and
its subsidiaries to finance investments in nonutility companies
pursuant to rule 58 will also serve to minimize risk and to enable
the Commission to monitor the effects of nonutility activities on
the registered system. The Commission has jurisdiction over such
financing transactions under sections 6 and 7 of the Act, and must
consider certain effects of proposed financings in determining
whether the standards of the Act have been satisfied. See the
Proposing Release, 60 FR at 33646.
---------------------------------------------------------------------------

b. Basis for calculation of the limitation. New Orleans asserts
that either consolidated retained earnings or consolidated equity is
preferable to consolidated capitalization as a means to measure
shareholder funds that are not needed to meet the registered system's
utility service obligations.
The commenting registered holding companies oppose a standard based
on consolidated retained earnings. They note that such earnings can
vary significantly as a result of factors that do not affect financial
health, such as accounting changes and other nonrecurring
items.^{104 They also assert that consolidated retained earnings are
primarily an indicator of ability to raise new capital economically,
and, to this extent, lack relevance for the purpose of setting a
limitation upon investment under the rule.^{105
---------------------------------------------------------------------------

\104\ One registered holding company also observes in this
regard that a standard based on consolidated retained earnings would
create uncertainty in a registered holding company system's
planning. Comments of CSW.
\105\ Comments of Southern.
---------------------------------------------------------------------------

The registered holding companies generally support a standard based
on consolidated capitalization, because, in their view, it offers
flexibility ^{106 and a meaningful measure of system financial
integrity.^{107 These commenters explain that a flexible standard is
appropriate because the activities encompassed by the exemption of the
rule are closely related to the utility business and have been reviewed
and approved by order of the Commission.^{108
---------------------------------------------------------------------------

\106\ Comments of GPU and Northeast.
\107\ Comments of Allegheny and Southern.
\108\ Comments of CSW.
---------------------------------------------------------------------------

The Commission recently considered a question of the appropriate
basis for an investment limitation in the context of EWGs. Rule 53,
adopted under section 32 of the Act, provides a safe harbor for
approval of proposals to issue securities related to investments in
EWGs.^{109 To qualify for the rule's safe harbor, the aggregate
investment of the registered holding company system in EWGs and foreign
utility companies (``FUCOs'') cannot exceed 50% of the system's
consolidated retained earnings. In adopting rule 53, the Commission
determined that retained earnings was an appropriate standard against
which to measure the safe harbor limitation on these exempt
investments.
---------------------------------------------------------------------------

\109\ Section 32 of the Act provides that, in determining
whether to approve a proposed issuance of securities related to EWG
investments, the Commission may not make certain negative findings
under the Act unless the proposed transaction would have a
substantial adverse impact on the financial integrity of the
registered holding company system. Section 32(h)(3) and (4). Section
32 also directs the Commission to adopt regulations that would set
forth ``the actions which would be considered to have a substantial
adverse impact on the financial integrity of the registered holding
company system [and] ensure that the [financing in question] has no
adverse impact on any utility subsidiary or its customers, or on the
ability of State commissions to protect such subsidiary or customers
* * *.'' Section 32(h)(6). Rule 53 was adopted to effectuate these
provisions. If the rule's safe harbor are satisfied, the Commission
is precluded from making the negative findings specified in section
32(h)(3) and (4).
---------------------------------------------------------------------------

Although the Commission has found a standard based on consolidated
retained earnings to be appropriate in the context of rule 53, it does
not follow that it is appropriate in the case of investments in energy-
related companies. The Commission noted in adopting the safe harbor
provisions of rule 53 that investments in EWGs and FUCOs were new
activities, and that the potential risks, which could not accurately be
predicted, could conceivably be significant. The Commission rejected a
test based on consolidated capitalization, because it would not
directly reflect the effect of losses in connection with an EWG or FUCO
investment. The Commission concluded that the level of retained
earnings, which is directly sensitive to losses, was a more appropriate
standard against which to measure these investments.^{110 In
contrast, as discussed previously, investments under rule 58 are deemed
to be appropriate within the ordinary course of business of registered
systems and consistent with the

[[Page 7910]]

protected interests under the Act. The risks are more predictable and
presumably more limited. In rejecting alternative bases for the
investment limitation in rule 53, the Commission also noted that
consolidated capitalization ``relates principally to the capital
structure created to fund the holding company system's domestic
utilities * * *,'' ^{111 and thus is not a particularly appropriate
standard against which to measure investments in EWGs and FUCOs. This
is not the case for acquisitions of interests in energy-related
companies, whose activities, as previously discussed, are closely
related to the core utility business of a registered system. Because
total system capitalization is intended to support the system's utility
business, the Commission regards it as an appropriate measure of the
amount of capital that may be invested in utility-related businesses.
In addition, because consolidated capitalization is a more stable base
of calculation than retained earnings, the amount of the investment cap
would be less subject to fluctuations.
---------------------------------------------------------------------------

\110\ The Commission stated that ``(b)ecause EWGs and foreign
utility companies are still novel entities, there is little
experience on which to base predictions concerning their performance
* * *. [R]etained earnings would best capture the effect upon a
system's financial condition of reverses in EWG and foreign utility
company investments.'' Holding Co. Act Release No. 25886 (Sept. 23,
1993), 58 FR 51488, 51493 (Oct. 1, 1993).
\111\ Id.
---------------------------------------------------------------------------

The test in rule 53 was formulated to effectuate the specific
protections required by section 32.^{112 In contrast, section
9(c)(3), under which rule 58 is adopted, deals with a different type of
investment than that covered by section 32, i.e., one appropriate in
the ``ordinary course of business.'' Investors and consumers are
protected not only through the investment cap for energy-related
investments, but also through this limitation.
---------------------------------------------------------------------------

\112\ In discussing the investment limitation, the Commission
stated that rule 53 is ``intended to protect system financial
integrity and so protect utilities and their ratepayers.'' A ``key
factor'' in this regard is the ability of the holding company, which
is a source of capital for its utility subsidiaries, to obtain
financing at a reasonable cost. Retained earnings was chosen as the
basis of the safe harbor investment limitation, among other things,
because they are linked to the cost of capital, and thus provide a
``fundamental protection.'' 58 FR at 51492.
---------------------------------------------------------------------------

In view of these considerations, the Commission believes that a
consolidated capitalization standard is appropriate for purposes of a
limitation on exempt investments under rule 58. The final rule
incorporates this standard.
c. Treatment of previous investments. The Commission received a
significant number of comments concerning the proposed exclusion of
prior investments in energy-related companies, made pursuant to
Commission order, from the calculation of aggregate investment for
purposes of the limitation of the rule. New Orleans and one registered
holding company ^{113 assert that such prior investments should be
included in the calculation.^{114 The majority of commenters,
however, consider the ``grandfathering'' of these investments to be
appropriate. These commenters note that the investments have been found
to satisfy the requirements of the Act.^{115 Further, the commenters
assert that inclusion of prior investments would penalize those
registered holding companies that have successful energy-related
programs in place,^{116 and also prevent registered holding
companies from competing on an equal footing with exempt holding
companies and companies not subject to the Act.^{117 Finally, the
commenters contend that it would be burdensome to require a
determination of whether or not various prior investments are energy-
related for purposes of rule 58.^{118
---------------------------------------------------------------------------

\113\ Comments of Allegheny.
\114\ New Orleans believes that the total of existing
investments and future investments under rule 58 would be so great
as to be detrimental to ratepayers. As of December 31, 1995,
registered holding companies had invested approximately $1.25
billion in companies that would be energy-related companies within
the meaning of rule 58(a). As of that date, such investments
represented approximately 1.6% of consolidated capitalization of the
registered systems having such investments. On an individual basis,
no registered system had more than approximately 5.6% of its
consolidated capitalization invested in energy-related companies as
of December 31, 1995. The Commission believes that this level of
investment does not raise any significant issues of risks to the
interests protected by the Act. The Commission also notes that
because registered holding companies often make these investments
through nonutility subsidiaries, system operating companies and
their ratepayers are insulated from exposure to any direct losses
that may result from the investments.
\115\ Comments of CSW, EUA, GPU and Northeast.
\116\ Comments of EUA.
\117\ Comments of AGA.
\118\ Comments of EUA and GPU.
---------------------------------------------------------------------------

Several commenters propose that the limitation should exclude not
only investments made pursuant to Commission order prior to the rule,
but also previously-authorized investments that have not yet been made
as of the date of the rule.\119\ One commenter suggests, in addition,
that investments that the Commission may authorize by future order
should be excluded for purposes of the limitation of rule 58.\120\ This
commenter also requests the Commission to clarify whether previous
investments in energy-related companies pursuant to other exemptions
should be excluded from calculation of the investment limit. At issue
are investments by registered holding companies in their nonutility
subsidiaries pursuant to rules 52 and 45, as recently amended.\121\
---------------------------------------------------------------------------

\119\ Comments of AEP, Consolidated, EUA, Entergy and Southern.
\120\ Comments of Entergy.
\121\ See Holding Co. Act Release No. 26311 (June 20, 1995), 60
FR 33634 (June 28, 1995) (exempting from the requirement of prior
Commission approval capital contributions and non-interest bearing
open account advances by parent companies to nonutility
subsidiaries, and the issuance by nonutility subsidiaries and
acquisition by their parents of specified types of securities, the
proceeds of which are for use in the subsidiary's existing
business).
---------------------------------------------------------------------------

The Commission believes that all amounts that have actually been
invested in energy-related companies pursuant to Commission order prior
to the date of effectiveness of the rule should be excluded from the
calculation of aggregate investment under rule 58. The Commission also
believes it is appropriate to exclude from the calculation all
investments made prior to that date pursuant to available
exemptions.\122\
---------------------------------------------------------------------------

\122\ Under this interpretation, amounts invested by a
registered system company in an energy-related company during the
period between adoption and effectiveness will be excluded for
purposes of calculating aggregate investment; provided, that such
investments are used solely to fund activities in which the company
has previously been authorized to engage by order of the Commission
and that such amounts are not disproportionate to the current
operations of such business. Since these additional investments will
fund activities that the Commission has previously considered and
approved under sections 9(a)(1) and 10 of the Act, the Commission
does not believe that their exclusion raises any significant
concerns with respect to protection of the interests covered by the
Act. Any investments in existing energy-related companies made prior
to the effective date of the rule must be reported on Form U-9C-3.
---------------------------------------------------------------------------

The Commission believes, however, that any investment made after
the date of effectiveness of rule 58 should be included for purposes of
calculation of the limitation, regardless of whether these investments
are made pursuant to prior Commission order or available
exemptions.\123\ As for the question of whether investments approved by
order after the date of effectiveness of rule 58 should be excluded
from the calculation, the Commission believes that the issue is best
addressed on a case-by-case basis. This approach will enable the
Commission to consider the effect of the particular transaction on the
registered system.
---------------------------------------------------------------------------

\123\ As discussed below, the Commission is adopting amendments
to rules 52 and 45 that subject investments in energy-related
companies to the same limitations under these rules as are
applicable under rule 58. These limits apply to all energy-related
companies, regardless of whether the initial investment in such
company was made pursuant to order or pursuant to rule 58.
---------------------------------------------------------------------------

d. Definition of ``aggregate investment''. Rule 58, as proposed,
defined ``aggregate investment'' to mean all amounts invested, or
committed to be invested, in energy-related companies, for which there
is recourse, directly or indirectly, to the registered holding company.
The Commission

[[Page 7911]]

stated that the term was intended to have a meaning similar to that
provided by rule 53.\124\ The language of the definition, as proposed,
did not specifically include amounts invested by subsidiary companies
that are without guaranty by, or other recourse to, the parent holding
company. Such investments, which are exempt under subsection (a)(1)
from the requirement of Commission approval, are intended to be
included in calculating the limitation under the rule. The rule as
adopted reflects this intent.\125\
---------------------------------------------------------------------------

\124\ See Holding Co. Act Release No. 25886 (Sept. 23, 1993), 58
FR 51488 (Oct. 1, 1993). Rule 53(a)(1)(i) (17 CFR 250.53(a)(1)(i))
provides that aggregate investment includes all amounts invested, or
committed to be invested, in exempt wholesale generators and foreign
utility companies, for which there is recourse, directly or
indirectly, to the registered holding company. Among other things,
the term includes, but is not limited to, preliminary development
expenses that culminate in the acquisition of an exempt wholesale
generator or a foreign utility company; and the fair market value of
assets acquired by an exempt wholesale generator or a foreign
utility company from a system company (other than an exempt
wholesale generator or a foreign utility company).
\125\ An indirect investment made through an intermediate
subsidiary will only be counted once in the calculation of aggregate
investment.
---------------------------------------------------------------------------

In terms of the types of investments encompassed, the scope of the
definition of ``aggregate investment'' in rule 58 is intended to be
similar to that of rule 53. The term thus would include amounts
actually invested in an energy-related company, as well as amounts
committed to be invested under the terms of subscription agreements, or
stand-by or other similar capital funding agreements.

B. Investments by Gas Registered Holding Companies in Gas-Related
Companies

Rule 58(a)(2) exempts from the requirement of prior Commission
approval under sections 9(a)(1) and 10, pursuant to section 9(c)(3),
the acquisition by a gas registered holding company or its subsidiary
company of securities of a ``gas-related company,'' as defined. Such
acquisitions are not subject to any limitation as to amount. A ``gas-
related company'' is defined in the Proposing Release as a company that
derives, or will derive, substantially all of its revenues from
activities permitted under sections 2(a) and 2(b) of the GRAA and such
other nonutility activities as the Commission may, from time to time,
by order upon application under sections 9 and 10 and section 2(b) of
the GRAA, authorize a gas registered holding company to engage in, and,
in so doing, designate as gas-related for purposes of rule 58. The rule
contemplates that gas-related companies, like energy-related companies,
will derive substantially all of their revenues from the respective
activities designated in the rule.
1. Definition of ``Gas-Related Company''
Some commenters question whether registered holding companies that
have only electric utility operations or that have both electric and
gas utility operations should be entitled to invest in gas-related
companies on an unlimited basis under the rule.\126\ The portion of
rule 58 that permits such investments reflects and depends upon
findings under the GRAA that certain activities satisfy the
requirements of sections 10 and 11 of the Act. The GRAA is available
only to companies in systems in which the holding company is registered
solely by reason of ownership of voting securities of gas utility
companies. As a result, other registered holding company systems are
not entitled to the benefits of the GRAA or the related provisions of
rule 58. The language of the rule has been clarified to make this
explicit.
---------------------------------------------------------------------------

\126\ Comments of CSW and Cinergy.
---------------------------------------------------------------------------

Several commenters raise an issue concerning the scope of the
definition of gas-related company.\127\ The definition, as proposed,
can be read to include companies that derive substantially all of their
revenues from only the activities specified in section 2(a) of GRAA and
activities found by the Commission, by order, to satisfy the
requirements of section 2(b) of GRAA. This interpretation would not,
however, take into account that some activities specifically identified
in section 2(b) as being related to the supply of natural gas (i.e.,
exploration, development, production, marketing and manufacture of
natural or manufactured gas) were found by the Commission to be
permissible under the standards of the Act prior to the enactment of
the GRAA, and are not the subject of a subsequent order under that
legislation. Under rule 58 as proposed, a gas holding company system
might be required to obtain an order under section 2(b) of GRAA in
order for these gas-related activities to be covered by the rule's
exemption.
---------------------------------------------------------------------------

\127\ Comments of AGA, Columbia and Consolidated.
---------------------------------------------------------------------------

Activities of the type specified in section 2(b) of GRAA were
intended to be included in the activities in which gas-related
companies may engage, regardless of whether a Commission order
approving such activities was issued under GRAA \128\ or under sections
9(a) and 10 prior to the enactment of GRAA,\129\ or both.\130\ In all
of these cases, the Commission found that the standards of sections 10
and 11 were satisfied, either through traditional analysis or by means
of the assumptions created by GRAA. The rule has been clarified to
accomplish this result.
---------------------------------------------------------------------------

\128\ See, e.g., Consolidated Natural Gas Co., Holding Co. Act
Release No. 26363 (Aug. 28, 1995) (sale of propane services);
Columbia Gas System, Holding Co. Act Release No. 25802 (April 22,
1993) (marketing natural gas to nonaffiliates); National Fuel Gas
Co., Holding Co. Act Release No. 25437 (Dec. 20, 1991) (marketing,
storage and transportation of natural gas and pricing consultation);
National Fuel Gas Co., Holding Co. Act Release No. 25265 (March 5,
1991) (exploration and development of gas supply reserves); CNG
Transmission Corp., Holding Co. Act Release No. 25239 (Jan. 9, 1991)
(development, construction and operation of natural gas pipelines);
and Consolidated Natural Gas Co., Holding Co. Act Release No. 25224
(Dec. 21, 1990) (development of technologies to enhance the supply,
transportation and utilization of natural gas).
\129\ See, e.g., National Fuel Gas Co., Holding Co. Act Release
No. 24381 (May 1, 1987) (drilling and well maintenance and related
services); Consolidated Natural Gas Co., Holding Co. Act Release No.
23023 (Aug. 5, 1983) (sale of natural gas byproducts); National Fuel
Gas Co., Holding Co. Act Release No. 21903 (Feb. 2, 1981)
(construction of underground storage facilities); and Columbia Gas
System, Holding Co. Act Release No. 13610 (Nov. 27, 1957)
(extraction and sale of natural gas byproducts).
\130\ See, e.g., National Fuel Gas Co., Holding Co. Act Release
Nos. 26181 (Dec. 6, 1994) and 24381 (May 1, 1987) (pipeline
construction and maintenance and related services).
---------------------------------------------------------------------------

Several commenters also note that other activities associated with
the natural gas supply chain, such as exploration and production of
associated petroleum, were contemplated to be included in GRAA-
permitted activities and should be included in the activities permitted
to be engaged in by gas-related companies under rule 58.\131\ The
Commission agrees that the activities in which a gas-related company
may engage under rule 58 should be consistent with those contemplated
by GRAA.\132\
---------------------------------------------------------------------------

\131\ Comments of AGA and Columbia.
\132\ See, e.g., 136 Cong. Rec. S17586 (Oct. 27, 1990)
(Statement of Sen. D'Amato) (production and sale of oil and other
petroleum products may constitute ``production'' for purposes of
GRAA, if oil and natural gas are present in the geologic formation
underlying a particular well).
---------------------------------------------------------------------------

The definition, as proposed, contained a provision permitting
addition of new activities by order upon application. As discussed
above in the context of energy-related companies, this provision has
not been included in the rule as adopted.
The definition of a gas-related company has also been revised, as
was the definition of an energy-related company, to permit indirect
investment through intermediate subsidiaries.
2. Limitation on Investments in Gas-Related Companies
The Commission requested comment on whether a limitation on
investments

[[Page 7912]]

in gas-related companies is appropriate. Two commenters state that no
such limitation is needed.^{133 They note, among other things, that
because many activities involved in the gas business are nonutility
interests for purposes of the Act, investment in such activities is
necessarily significant, and any limitation would limit the usefulness
of the rule for gas registered systems.^{134 In view of the
Congressional intent, evidenced by the GRAA, that gas systems be
permitted to engage in certain gas-related activities without
restriction as to amount, the Commission has not revised the rule to
add a limitation on those activities.^{135
---------------------------------------------------------------------------

\133\ Comments of AGA and Consolidated.
\134\ Comments of Consolidated.
\135\ See the Proposing Release, 60 FR at 33647.
---------------------------------------------------------------------------

C. Other Conditions to Use of the Rule

The Commission sought comment on whether use of rule 58 should be
conditioned on meeting other types of requirements, and the form such
conditions should take. Commenters were invited to address the need for
additional conditions to use of the rule 58 exemption based on, for
example, the financial condition of the registered holding company
system, the extent of losses experienced by the system over recent
periods and prior bankruptcies of system companies.
The registered holding companies and the American Gas Association
uniformly state, for various reasons, that no further conditions to use
of rule 58 are needed in order for investors and consumers to be
protected from risks.^{136 One holding company suggests that, if
conditions are imposed, they should be based on current or future facts
rather than past circumstances.^{137 New Orleans, however, disagrees
and suggests that use of the rule be conditioned on a demonstration of
financial viability by the holding company. New Orleans also recommends
that consumer safeguards in the form of audit authority and access to
books and records for ratemaking authorities be added.^{138
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\136\ Comments of Allegheny (the rule's investment limitation
protects investors and ratepayers, and the Commission and the states
can monitor activities through Form U-9C-3); AEP (the investment
limitation and the fact that these activities are conducted
separately from utility operations provide protections); AGA (each
venture should be viewed on a prospective basis, not on the basis of
past experience; adverse developments can be monitored through
reports filed with the Commission, the FERC and state regulators);
Columbia (a ``no bankruptcy'' condition is contrary to the policy of
the bankruptcy laws, and bankruptcy is irrelevant where the company
emerges with an investment grade rating); Consolidated (the
Commission can invoke its jurisdiction if problems are perceived);
Entergy (the Commission can monitor investments in the context of
holding company financing approvals); GPU (the state regulators and
the FERC can protect ratepayers from risk); and Southern (the rule
addresses all conditions necessary for satisfaction of section 10;
no other conditions are needed to protect against cross-
subsidization, since rule 58 companies are still subject to the
intrasystem transaction provisions of the Act and such transactions
must be reported on Form U-9C-3).
\137\ Comments of Columbia.
\138\ Comments of New Orleans.
---------------------------------------------------------------------------

For several reasons, the Commission believes that no additional
conditions are required in order to protect investors and consumers
from the risks of these diversified activities. First, as noted above,
the rule addresses activities that the Commission has determined
previously to be so closely related to utility operations as to be in
the ordinary course of business of a registered holding company and
that, in many instances, have been approved in prior orders of the
Commission under sections 9(a)(1) and 10. In addition, reasonable
limitations on exempt investments in energy-related companies are an
important feature of the rule, designed to limit the financial exposure
of the registered system. Finally, through the filing of Form U-9C-3
under rule 58(c), both the Commission and interested state regulators
will have the opportunity to monitor the nature and scope of each
registered holding company system's activities pursuant to rule 58. In
view of these safeguards, the Commission is adopting the rule without
further condition.

III. Proposed Amendments to Rule 52 and Rule 45

The Proposing Release requested comment on proposed amendments to
rules 52 and 45 under the Act, to conform the rules to rule 58.^{139
Rule 52(b), as currently in effect, exempts from the requirement of
Commission approval under sections 6(a) and 7 of the Act the issue and
sale by a nonutility subsidiary of a registered holding company of any
common stock, preferred stock, bond, note or other form of
indebtedness, subject to certain conditions. Rule 52(d) further exempts
from the requirement of prior Commission approval under sections
9(a)(1) and 10 of the Act the acquisition by a registered holding
company of any such security, provided that the transaction does not
involve the formation of a new subsidiary.^{140
---------------------------------------------------------------------------

\139\ See the discussion of the need for these amendments in the
Proposing Release. 60 FR at 33648.
\140\ The Commission has proposed to amend rule 52 further to
expand the types of securities that qualify for the exemption. See
Holding Co. Act Release No. 26312 (June 20, 1995), 60 FR 33640 (June
28, 1995).
---------------------------------------------------------------------------

The exemptions under rule 52(b) and 52(d), both as previously in
effect and as proposed to be amended, are broader than the exemption in
proposed rule 58. Accordingly, the Commission proposed to amend rule 52
to add a limitation on the aggregate amount of securities that may be
issued and sold by energy-related companies and acquired by associate
companies, consistent with the limitation of rule 58.
Rule 45(b) currently exempts from the requirement of Commission
approval under section 12(b) of the Act and rule 45(a) thereunder
certain investments in existing subsidiaries by means of cash capital
contributions or open account advances. In particular, rule 45(b)(4)
exempts without limitation any capital contribution or open account
advance without interest to a subsidiary company. Because this
provision is inconsistent with the investment limitation in rule 58,
the Commission proposed to amend rule 45(b)(4) to conform the aggregate
amount of capital contributions and open account advances that may be
made to energy-related subsidiary companies to the limitations of rule
58.
Few commenters express any view on the proposed amendments to rules
52 and 45. Two registered holding companies support adoption of the
amendments.^{141 An exempt holding company opposes the amendments as
unnecessary and as potentially limiting the Commission's flexibility
under rule 58.^{142
---------------------------------------------------------------------------

\141\ Comments of Allegheny and Southern.
\142\ Comments of Wisconsin Energy.
---------------------------------------------------------------------------

Without the proposed conforming changes, registered holding
companies could use rule 58 to make initial acquisitions of securities
of energy-related companies, and arguably could use rules 45 and 52 to
make additional unlimited acquisitions of securities of such companies,
in each instance without Commission approval. To permit this result
would render meaningless the limitations of rule 58 on investments in
energy-related companies. In addition, a question would arise whether
section 9(c)(3), under which rule 58 is promulgated, permits such
acquisitions of securities without Commission oversight. The Commission
believes that the proposed amendments are necessary in order to carry
out the purposes of rule 58. Accordingly, the amendments are adopted in
the form proposed.

IV. Other Proposals in Connection With Rule 58

Several commenters propose changes to other rules or Commission
orders to

[[Page 7913]]

conform them to the provisions of rule 58. These proposals are
discussed below.

A. Rule 16

As currently in effect, rule 16 under the Act provides that any
company and its affiliates will be exempt from all obligations, duties
or liabilities imposed by the Act upon subsidiaries or affiliates of a
registered holding company, if (1) the company is not a public-utility
company, (2) the company engages primarily in certain specified
activities related to the supply of natural or manufactured gas, (3)
less than 50% of the voting stock of the company is owned by registered
holding companies, and (4) the acquisition by a registered holding
company of an interest in the company was approved by the Commission
upon application.^{143 Several commenters suggest that the coverage
of the rule 16 exemption be extended to energy-related companies and
gas-related companies, as defined in rule 58, and their
affiliates.^{144
---------------------------------------------------------------------------

\143\ 17 CFR 250.16.
\144\ Comments of Columbia and Consolidated.
---------------------------------------------------------------------------

The Commission believes that a proposal to amend rule 16 to make it
consistent with rule 58, and to enhance its usefulness (which is
limited at present), should be considered. Such an amendment, however,
is beyond the scope of this rulemaking.

B. Existing Limitations on Investments in Energy-Related Companies

In the past, the Commission in some instances incorporated
conditions and limitations in certain orders approving energy-related
activities, including a requirement that an energy-related company
derive at least 50% of its revenues from associate companies or from
specified geographic areas.^{145 As discussed above, these
geographic and other limitations are not included in rule 58 as
adopted.^{146 One commenter suggests that any 50% limitation in an
order approving the acquisition of an interest in a business that would
qualify as energy-related under rule 58 should cease to apply by virtue
of the rule, without any need for an amended order.^{147
---------------------------------------------------------------------------

\145\ For instance, the Commission has conditioned approval of
acquisitions of energy services and demand-side management
businesses on a requirement that at least 50% of revenues be derived
from a specified geographic area, within the system's retail service
territory and contiguous areas. See, e.g., Entergy Corp., Holding
Co. Act Release No. 25718 (Dec. 28, 1992); and Northeast Utilities,
Holding Co. Act Release No. 25114 (July 3, 1990). In addition, the
registered system was required in some instances to divest its
equity interest in the nonutility business within a specified
period. See, e.g., Entergy Corp., Holding Co. Act Release No. 25718.
\146\ The rule does not incorporate geographic limitations based
on the retail service territory of the registered holding company
system. However, based on existing precedent and the markets with
which the Commission is currently familiar, activities permitted by
the rule are limited to the United States. The rule has been
modified to make this limitation clear.
\147\ Comments of CSW.
---------------------------------------------------------------------------

The Commission agrees that, where an order approving the
acquisition or retention of a nonutility business by a registered
holding company system includes a limitation of the type discussed
above, and such limitation would not apply if the interest held by the
registered holding company system were acquired under rule 58, the
limitation in the order should no longer apply. These conditions are
effectively superseded by rule 58, and no further filings and orders
are needed to eliminate them.

C. Associate Transactions

Several commenters suggest that transactions between an energy-
related company and some or all of its associate companies should be
exempt from the requirements of the Act and rules thereunder,^{148
including the rules under section 13(b) of the Act. Section 13(b) of
the Act generally requires that intrasystem service, sales and
construction contracts be performed in accordance with such terms and
conditions as the Commission may prescribe, either by rule or order,
``as necessary or appropriate in the public interest or for the
protection of investors or consumers and to insure that such contracts
are performed economically and efficiently for the benefit of such
associate companies, at cost, fairly and equitably allocated among such
companies.'' Entergy Corporation suggests that rule 87 under the Act
^{149 be amended to provide that transactions subject to section
13(b) do not require an order upon application. General Public
Utilities Corporation suggests an amendment of rule 90 ^{150 to
exclude transactions between an energy-related company and its
associates from the at-cost standards. Northeast Utilities suggests
that all transactions between an energy-related company and its
affiliates should be exempt from the Act.
---------------------------------------------------------------------------

\148\ Comments of Entergy, GPU and Northeast.
\149\ Rule 87 specifies the cases in which subsidiaries of
registered holding companies may perform services or construction
for or sell goods to associate companies, subject to compliance with
the ``at cost'' rules and certain other conditions.
\150\ Rule 90 sets forth the general rule that any transaction
involving service, construction or sale of goods between a
subsidiary of a registered holding company and an associate company
must be performed at cost, as defined, and provides exceptions.
---------------------------------------------------------------------------

Section 13(b) authorizes the Commission to exempt conditionally or
unconditionally such transactions as it may determine, by rule or
order, to be consistent with the protected interests, if such
transactions ``(1) are with any associate company which does not
derive, directly or indirectly, any material part of its income from
sources within the United States and which is not a public-utility
company operating within the United States, or (2) involve special or
unusual circumstances or are not in the ordinary course of business.''
It does not appear that the Commission has previously considered its
authority to grant other exemptions from the requirements of section
13(b).
The commenters' requests are beyond the scope of the proposed
rulemaking. In addition, the Commission believes that it would be
inappropriate to address the issues raised in the limited context of
the activities addressed in rule 58. Nonutility companies in registered
holding company systems have, in any event, substantial freedom to
engage in transactions with associate nonutility companies under rule
87(b)(1).^{151 The Commission declines to accept the commenters'
suggestions.
---------------------------------------------------------------------------

\151\ 17 CFR 250.87(b)(1).
---------------------------------------------------------------------------

D. Rule 48

One commenter suggests that rule 48 under the Act be amended to
permit energy-related companies to engage in customer financing in
connection with their energy-related businesses.^{152 As noted
previously, customer financing in connection with certain energy-
related activities has been approved by order in the past. The
Commission considered whether customer financing should be included in
rule 58, either as a separate energy-related activity or as an aspect
of other energy-related activities.^{153 However, it appears that an
amendment to rule 48 would be the appropriate measure to address this
question.^{154
---------------------------------------------------------------------------

\152\ Comments of GPU. Rule 48 currently exempts financing in
connection with purchases by utility customers of standard electric
and gas appliances. 17 CFR 250.48.
\153\ See comments of Northeast.
\154\ Amendment of rule 48 is beyond the scope of this
rulemaking.
---------------------------------------------------------------------------

V. Quarterly Reports on Form U-9C-3

The Commission proposed that registered systems provide periodic
information with respect to all energy-related and gas-related company
subsidiaries on Form U-9C-3, in lieu of the separate rule 24
certificates required under the terms of any outstanding Commission
orders.^{155 This procedure

[[Page 7914]]

was intended to lessen the reporting burden for holding companies, and
to make available a single, comprehensive report covering all energy-
related and gas-related business activities of a registered holding
company for the interested state commissions, with which the report
must also be filed.
---------------------------------------------------------------------------

\155\ See the Proposing Release, 60 FR at 33648. Cinergy
suggests that, to the extent that information on securities
issuances is reported on Form U-9C-3, reports under rule 52 on Form
U-6B-2 reporting the same information should not be required. Such a
change may be appropriate, but is beyond the scope of this
rulemaking.
---------------------------------------------------------------------------

The Commission requested comment on the form and content of Form U-
9C-3. In particular, the Commission sought comment on whether a report
should be filed quarterly or on a semiannual or other basis. The
Commission also requested comment on whether any special reporting
requirements may be needed with respect to the revenues derived from
any activities of such companies other than the activities specified in
the rule, to ensure that energy-related and gas-related companies
derive substantially all of their revenue from such activities, as
required by the rule.
Several commenters assert that the form should not be adopted,
because Form U5S provides sufficient information to enable regulators
to protect consumers ^{156 and could be modified to require
reporting of rule 58 investments in a manner similar to treatment of
exempt wholesale generators and foreign utility companies.^{157 One
commenter suggests that no reporting requirements are needed with
respect to investments in gas-related companies, since there are no
limits on these investments.^{158 Most commenters suggest that
changes be made to the form if it is adopted.
---------------------------------------------------------------------------

\156\ Comments of AGA.
\157\ Comments of Columbia. See Item 9 of Form U5S, 17 CFR
259.5s.
\158\ Comments of Columbia.
---------------------------------------------------------------------------

With respect to the timing of reporting, one commenter, New
Orleans,^{159 specifically approves of quarterly filings, on the
ground that regulators need quarterly reports in order to monitor
activities and institute corrective action. Most industry commenters,
however, object to quarterly filings, because the information in the
proposed form duplicates other periodic reports, such as that on Form
U5S;^{160 because annual filings achieve the purpose of assuring
compliance with the conditions of the rule;^{161 because competitors
are not burdened with preparation of the form;^{162 because the
benefits of quarterly reporting do not justify its costs;^{163 and
because rule 58 companies should not be required to file more
frequently than holding companies and service companies.^{164 Many
of these commenters believe that annual filings are
appropriate,^{165 although one favors semiannual reporting,^{166
and another proposes that the bulk of the information be filed
annually, with quarterly filings used to report any changes during the
quarter.^{167 One commenter suggests that the form be clarified to
indicate that filings are to be made quarterly rather than
``continuously.'' ^{168 The Commission has concluded that the filing
of complete and current financial statements and other information
(particularly information on transactions between rule 58 companies and
their affiliates) in each quarterly report will facilitate appropriate
monitoring of acquisitions pursuant to the rule. The form, as adopted,
thus requires quarterly reporting.
---------------------------------------------------------------------------

\159\ Comments of New Orleans.
\160\ Comments of AGA and Columbia.
\161\ Comments of Entergy.
\162\ Comments of Allegheny.
\163\ Comments of Southern.
\164\ Id.
\165\ Comments of Allegheny, AGA, Columbia, Consolidated,
Entergy and Southern.
\166\ Comments of Cinergy.
\167\ Comments of AEP.
\168\ Comments of CSW. The rule has been revised to clarify that
the filing requirement is not continuous.
---------------------------------------------------------------------------

Many commenters express concern with the type of reporting required
by the proposed form, particularly the required financial statements.
The commenters believe that this requirement is burdensome, and
unnecessary, because registered systems file consolidating financial
statements in their annual reports on Form U5S; ^{169 because
separate financial information would be required even for a company in
which only a minor investment is made; ^{170 because state
regulators are interested in nonutility operations as a whole rather
than separate components; ^{171 and because separate financial
statements would be required for each subsidiary in cases where
investments are structured through several tiers of
subsidiaries.^{172 The Commission believes that the filing of
financial information for each investment under rule 58 is appropriate
to enable the Commission and the interested state commissions to
monitor activity under the rule. The Commission is, however, modifying
certain of the requirements in the form as proposed to deal with
certain issues raised by commenters on the proposal.
---------------------------------------------------------------------------

\169\ Comments of Columbia. Cinergy commented that financial
statements should be filed with the form only upon the initial
acquisition of securities of an energy-related or gas-related
company; thereafter, the consolidating financial statements in Form
U5S would provide sufficient updating information.
\170\ Comments of Allegheny and Southern.
\171\ Comments of Southern.
\172\ Comments of Allegheny and Southern.
---------------------------------------------------------------------------

The purpose of requiring financial statements is to provide
information on each significant investment, not to compel holding
companies to prepare financial statements for shell companies. As a
result, the form, as adopted, permits consolidation of the financial
statements of downstream subsidiaries with those of the first-tier
energy-related or gas-related company,^{173 so long as the first-
tier subsidiary owns interests only in companies engaged in one
permitted activity.
---------------------------------------------------------------------------

\173\ As discussed previously, indirect investment in energy-
related and gas-related companies through intermediate subsidiaries
is permitted under the rule as adopted.
---------------------------------------------------------------------------

The Commission also recognizes that the filing of financial
statements for companies in which the registered system holds only a
small interest may be overly burdensome without offering a significant
measure of protection for utility shareholders and consumers.
Accordingly, the form, as adopted, requires the filing of financial
statements only for companies in which the registered system has at
least a 50% equity or other ownership interest. The form provides that,
for all other rule 58 companies, the registered holding company will
make available to the Commission such financial statements as are
available to it.
A number of commenters express concern that the form will result in
disclosure of confidential financial and other commercially sensitive
information that may damage the holding company's competitive
position.^{174 The Commission agrees that confidentiality of certain
business information is an important concern. As noted in the Proposing
Release, however, the form does not require reporting of sensitive
information such as identity of customers. Further, applicants may
claim confidential treatment pursuant to rule 104 under the Act for
some items of information. Thus, commercially sensitive information
should have adequate protection.
---------------------------------------------------------------------------

\174\ Comments of Allegheny, Columbia and Southern.
---------------------------------------------------------------------------

Other changes in the final form include the following. The filing
instructions have been revised to reflect electronic filing under the
Commission's EDGAR system.^{175 Also, the report for the last period
in the reporting company's fiscal year will be

[[Page 7915]]

due 90 days, rather than 60 days, after the end of the period.^{176
Finally, the form has been clarified to require disclosure with respect
to all energy-related and gas-related companies in which investments
were made during the reporting period.^{177 Other specific comments
were not adopted, including a suggestion that all items except 5(b)
(relating to associate transactions) are unnecessary.^{178 In
addition, the form has been revised to provide a format for reporting
of the required information and to clarify generally the filing
instructions.
---------------------------------------------------------------------------

\175\ Comments of Consolidated and Northeast.
\176\ Comments of Northeast.
\177\ Comments of Cinergy.
\178\ Comments of Allegheny. While the reporting of associate
transactions is a primary purpose of the form, it is also intended
to solicit information through which the staff of the Commission and
interested state commissions can monitor compliance with the
limitations of the rule, including limitations on the type of
activities in which the company in question is engaged.
---------------------------------------------------------------------------

Commenters believe that no other new reporting requirements are
needed to assure that rule 58 companies derive substantially all of
their revenues from permitted activities.^{179 The Commission has
concluded that Form U-9C-3, together with other existing reporting
requirements, provides sufficient information for this purpose, and
that no additional new requirements are needed.
---------------------------------------------------------------------------

\179\ Comments of AGA (information in Form U5S is adequate for
this purpose); CSW (existing proposed reporting requirements could
be reduced and still provide this assurance); Consolidated (if
further assurance is needed, a statement of compliance could be
included in the Form U5S) and Entergy and Northeast (Form U-9C-3
provides sufficient information to put regulators on notice of other
activities).
---------------------------------------------------------------------------

VI. Conclusion

The Commission believes that registered holding company systems
should be relieved of the regulatory burden of having to file multiple
applications for authority to engage, through acquisitions of
securities, in nonutility activities that are closely related to
utility operations and that are of the same character or type as those
the Commission has allowed in previous cases. Rule 58 is intended to
permit investments in energy-related companies and gas-related
companies, as defined, without geographic limits based on the
registered system's service territory or other restrictions similar to
those incorporated in some previous orders. The Commission believes
that the limitation of the rule on the aggregate amount that a
registered holding company system may invest, directly or indirectly,
in energy-related companies should help to assure that the public
interest and the interest of investors and consumers will not be
adversely affected by acquisitions made pursuant to the rule. In
addition, the reporting requirements should enable the Commission and
interested state and local regulators to monitor financial and other
effects of such transactions.

Regulatory Flexibility Act Certification

Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Chairman of the Commission has certified as follows:

I, Arthur Levitt, Chairman of the Securities and Exchange
Commission, hereby certify pursuant to 5 U.S.C. 605(b) that proposed
rule 58 and proposed amendments to rules 45 and 52 under the Public
Utility Holding Company Act of 1935, as amended (15 U.S.C. 79 et
seq.), together concerning the acquisition by a registered holding
company and its subsidiaries of securities of certain nonutility
companies, without a filing requirement, will not have a significant
impact on a substantial number of small businesses. The reason for
this certification is that it does not appear that any small
businesses would be affected by the proposed rule and rule
amendments.

Arthur Levitt, Chairman

Dated: June 19, 1995.

The Commission did not receive any comments with respect to the
Chairman's certification.

Costs and Benefits

Rule 58 will substantially decrease regulatory costs for the twelve
(12) electric and three (3) gas registered holding companies. In
calendar year 1995, 35 applications would not have been filed had the
proposed rule 58 and related rule amendments been in place. Estimated
savings per application would have been approximately $28,000,
including related legal, accounting, and management costs. Thus, for 35
applications filed in calendar year 1995, the aggregate savings would
have been approximately $980,000 per year. Moreover, the reduction in
Commission staff hours would have been approximately 3,800 hours
(approximately 2 staff years). The only cost to the registered holding
companies in complying with the rule will be the cost of completing and
filing Form U-9C-3 on a quarterly basis. It is estimated that
approximately 16 hours will be required to complete each form at an
estimated cost of $100 per hour. Assuming 56 form submissions per year,
the cost of compliance reporting would approximate $89,600 per year.

Paperwork Reduction Act

The proposed rule and rule amendments are subject to the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501 et seq.) and have been submitted
to the Office of Management and Budget for approval for use through
September 30, 1998.

Statutory Authority

The Commission is adopting rule 58 and amending rules 45 and 52
pursuant to sections 6, 9, 12 and 20 of the Act.

List of Subjects in 17 CFR Parts 250 and 259

Electric utilities, Holding companies, Natural gas, Reporting and
recordkeeping requirements, Securities.

Text of Rules

For the reasons set out in the preamble, chapter II, title 17, of
the Code of Federal Regulations is amended as follows:

PART 250--GENERAL RULES AND REGULATIONS, PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935

1. The authority citation for part 250 continues to read as
follows:

Authority: 15 U.S.C. 79c, 79f(b), 79i(c)(3), 79t, unless
otherwise noted.

2. Section 250.45 is amended by revising paragraph (b)(4) to read
as follows:

Sec. 250.45 Loans, extensions of credit, donations and capital
contributions to associate companies.

* * * * *
(b) Exceptions. * * *
(4) Capital contributions or open account advances, without
interest, by a company to its subsidiary company; Provided, That
capital contributions or open account advances to any energy-related
company subsidiary, as defined in Sec. 250.58, shall not be exempt
hereunder unless, after giving effect thereto, the aggregate investment
by a registered holding company or any subsidiary thereof in such
company and all other such energy-related company subsidiaries does not
exceed the limitation in Sec. 250.58(a)(1).
* * * * *
3. Section 250.52 is amended by revising paragraph (b) to read as
follows:

Sec. 250.52 Exemption of issue and sale of certain securities.

* * * * *
(b) Any subsidiary of a registered holding company which is not a
holding company, a public-utility company, an investment company, or a
fiscal or financing agency of a holding company, a public-utility
company or an investment company shall be exempt from section 6(a) of
the Act (15 U.S.C. 79f(a)) and rules thereunder with respect to the
issue and sale of any

[[Page 7916]]

common stock, preferred stock, bond, note or other form of
indebtedness, of which it is the issuer if:
(1) The issue and sale of such security are solely for the purpose
of financing the existing business of such subsidiary company; and
(2) The interest rates and maturity dates of any debt security
issued to an associate company are designed to parallel the effective
cost of capital of that associate company; Provided, That any security
issued to an associate company by any energy-related company
subsidiary, as defined in Sec. 250.58, shall not be exempt hereunder
unless, after giving effect thereto, the aggregate investment by a
registered holding company or any subsidiary thereof in such subsidiary
and all other such energy-related company subsidiaries does not exceed
the limitation in Sec. 250.58(a)(1).
* * * * *
4. Section 250.58 is added to read as follows:

Sec. 250.58 Exemption of investments in certain nonutility companies.

(a) Exemption from Section 9(a). Section 9(a) of the Act (15 U.S.C.
79i(a)) shall not apply to:
(1) The acquisition by a registered holding company, or a
subsidiary company thereof, of the securities of an energy-related
company; Provided, That, after giving effect to any such acquisition,
the aggregate investment by such registered holding company and
subsidiaries in all such companies does not exceed the greater of:
(i) $50 million; or
(ii) 15% of the consolidated capitalization of such registered
holding company, as reported in the registered holding company's most
recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q
(Sec. 249.308a or Sec. 249.310 of this chapter) filed under the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78 et seq.); or
(2) The acquisition by a holding company that is registered solely
by reason of ownership of voting securities of gas utility companies,
or a subsidiary company thereof, of the securities of a gas-related
company.
(b) Definitions. For purpose of this section:
(1) The term energy-related company shall mean any company that,
directly or indirectly through one or more affiliates, derives or will
derive substantially all of its revenues (exclusive of revenues from
temporary investments) from one or more of the following activities
within the United States:
(i) The rendering of energy management services and demand-side
management services;
(ii) The development and commercialization of electrotechnologies
related to energy conservation, storage and conversion, energy
efficiency, waste treatment, greenhouse gas reduction, and similar
innovations;
(iii) The ownership, operation, sale, installation and servicing of
refueling, recharging and conversion equipment and facilities relating
to electric and compressed natural gas powered vehicles;
(iv) The sale of electric and gas appliances; equipment to promote
new technologies, or new applications for existing technologies, that
use gas or electricity; and equipment that enables the use of gas or
electricity as an alternate fuel; and the installation and servicing
thereof;
(v) The brokering and marketing of energy commodities, including
but not limited to electricity, natural or manufactured gas and other
combustible fuels;
(vi) The production, conversion, sale and distribution of thermal
energy products, such as process steam, heat, hot water, chilled water,
air conditioning, compressed air and similar products; alternative
fuels; and renewable energy resources; and the servicing of thermal
energy facilities;
(vii) The sale of technical, operational, management, and other
similar kinds of services and expertise, developed in the course of
utility operations in such areas as power plant and transmission system
engineering, development, design and rehabilitation; construction;
maintenance and operation; fuel procurement, delivery and management;
and environmental licensing, testing and remediation;
(viii) The development, ownership or operation of ``qualifying
facilities,'' as defined under the Public Utility Regulatory Policies
Act of 1978, as amended (``PURPA''), and any integrated thermal, steam
host, or other necessary facility constructed, developed or acquired
primarily to enable the qualifying facility to satisfy the useful
thermal output requirements under PURPA;
(ix) The ownership, operation and servicing of fuel procurement,
transportation, handling and storage facilities, scrubbers, and
resource recovery and waste water treatment facilities; and
(x) The development and commercialization of technologies or
processes that utilize coal waste by-products as an integral component
of such technology or process; Provided, That any company engaged in
the activities specified in paragraphs (b)(1)(ii), (b)(1)(iii) with
respect to electric powered vehicles, (b)(1)(vi), (b)(1)(ix) or
(b)(1)(x) of this section, shall be an ``energy-related company'' for
purposes of this section only if the securities of such company are
acquired, directly or indirectly, by a registered holding company whose
public-utility company subsidiaries are primarily electric utility
companies; and Provided further, That any company engaged in the
activities specified in paragraph (b)(1)(iii) of this section with
respect to compressed natural gas powered vehicles, shall be an
``energy-related company'' for purposes of this section only if the
securities of such company are acquired, directly or indirectly, by a
registered holding company whose public-utility company subsidiaries
are primarily gas utility companies.
(2) The term gas-related company shall mean any company that,
directly or indirectly through one or more affiliates, derives or will
derive substantially all of its revenues (exclusive of revenues from
temporary investments) from one or more of the following activities
within the United States:
(i) Activities permitted under section 2(a) of the Gas-Related
Activities Act of 1990, 104 Stat. 2810; and
(ii) Activities specified in section 2(b) of the Gas-Related
Activities Act and approved by order of the Commission under sections 9
and 10 of the Act (15 U.S.C. 79i-j).
(3) The term aggregate investment shall mean all amounts invested
or committed to be invested in energy-related companies, for which
there is recourse, directly or indirectly, to the registered holding
company or any subsidiary company thereof.
(c) Report on related business activities. For each quarter of the
fiscal year of the registered holding company in which any acquisition
that is exempt under this section is made, and for each such quarter
thereafter in which the acquired interest is held, the registered
holding company shall file with this Commission and with each state
commission having jurisdiction over the retail rates of the public-
utility subsidiary companies of such registered holding company a
Quarterly Report on Form U-9C-3 (Sec. 259.208 of this chapter). Such
filing shall be made within 60 days following the end of the first
three quarters of the fiscal year, and within 90 days after the end of
the fourth quarter.

[[Page 7917]]

PART 259--FORMS PRESCRIBED UNDER THE PUBLIC UTILITY HOLDING COMPANY
ACT OF 1935

5. The authority citation for part 259 continues to read as
follows:

Authority: 15 U.S.C. 79e, 79f, 79g, 79j, 79l, 79m, 79n, 79q and
79t.

6. Section 259.208 and Form U-9C-3 are added to read as follows:

Sec. 259.208 Form U-9C-3, for notification of acquisition of
securities exempt from section 9(a) pursuant to rule 58 (Sec. 250.58 of
this chapter).

This form shall be filed pursuant to Sec. 250.58(c) as the
certificate of notification of an acquisition of securities exempted
from the application of section 9(a) of the Act (15 U.S.C. 79a et seq.)
pursuant to Sec. 250.58.

[Editorial Note: The text of Form U-9C-3 appears in the appendix
to this document and will not appear in the Code of Federal
Regulations.]

Dated: February 14, 1997.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.

Appendix

Note: This form will not appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM U-9C-3

QUARTERLY REPORT PURSUANT TO RULE 58

----------------------------------------------------------------------
(Name of registered holding company)
----------------------------------------------------------------------
(Address of principal executive offices)

GENERAL INSTRUCTIONS

A. Use of Form

1. A reporting company, as defined herein, shall file a report
on this form within 60 days after the end of each of the first three
quarters, and within 90 days after the end of the fourth quarter, of
the fiscal year of the registered holding company. The period
beginning on the date of effectiveness of rule 58 and ending at the
end of the quarter following the quarter in which the rule becomes
effective shall constitute the initial period for which any report
shall be filed, if applicable.
2. The requirement to provide specific information by means of
this form supersedes and replaces any requirement by order of the
Commission to provide identical information by means of periodic
certificates under rule 24; but does not so supersede and replace
any requirement by order to provide information by means of an
annual report on Form U-13-60.
3. Information with respect to reporting companies that is
required by Form U-13-60 shall be provided exclusively on that form.
4. Notwithstanding the specific requirements of this form, the
Commission may informally request such further information as, in
its opinion, may be necessary or appropriate.

B. Statements of Monetary Amounts and Deficits

1. Amounts included in this form and in related financial
statements may be expressed in whole dollars, thousands of dollars
or hundred thousands of dollars.
2. Deficits and other similar entries shall be indicated by
either brackets or parentheses. An explanation should be provided by
footnote.

C. Formal Requirements

This form, including exhibits, shall be filed with the
Commission electronically pursuant to Regulation S-T (17 CFR 232.10
et seq.). A conformed copy of each such report shall be filed with
each state commission having jurisdiction over the retail rates of a
public-utility company that is an associate company of a reporting
company. Each report shall provide the name and telephone number of
the person to whom inquiries concerning the report should be
directed.

D. Definitions

As used in this form, the word ``reporting company'' means an
energy-related company or gas-related company, as defined in rule
58(b). All other words and terms have the same meaning as in the
Public Utility Holding Company Act of 1935, as amended, and the
rules and regulations thereunder.

ITEMS

ITEM 1--ORGANIZATION CHART

Energy or gas-related State of Percentage of voting
Name of reporting company company Date of organization organization securities held Nature of business

Instructions

1. Complete Item 1 only for the first three calendar quarters of
the fiscal year of the registered holding company.
2. Under the caption ``Name of Reporting Company,'' list each
energy-related and gas-related company and each system company that
directly or indirectly holds securities thereof. Add the designation
``(new)'' for each reporting company of which securities were
acquired during the period, and the designation ``(*)'' for each
inactive company.
3. Under the caption ``Percentage of Voting Securities Held,''
state the aggregate percentage of the outstanding voting securities
of the reporting company held directly or indirectly by the
registered holding company at the end of the quarter.
4. Provide a narrative description of each reporting company's
activities during the reporting period.

ITEM 2--ISSUANCES AND RENEWALS OF SECURITIES AND CAPITAL CONTRIBUTIONS

Person to whom Collateral Consideration
Company issuing security Type of Principal amount Issue or Cost of capital security was given with received for
security issued of security renewal issued security each security

[[Page 7918]]

Instruction

With respect to a transaction with an associate company, report
only the type and principal amount of securities involved.

Company contributing Company receiving Amount of capital
capital capital contribution

ITEM 3--ASSOCIATE TRANSACTIONS

Part I--Transactions Performed by Reporting Companies on Behalf of
Associate Companies

Reporting company rendering Associate company Types of services Direct costs Indirect costs Total amount
services receiving services rendered charged charged Cost of capital billed

Part II--Transactions Performed by Associate Companies on Behalf of
Reporting Companies

Reporting company rendering Associate company Types of services Direct costs Indirect costs Total amount
services receiving services rendered charged charged Cost of capital billed

Instructions

1. This item is used to report the performance during the
quarter of contracts among reporting companies and their associate
companies, including other reporting companies, for service, sales
and construction. A copy of any such contract not filed previously
should be provided as an exhibit pursuant to Item 6. B.
2. Parts I and II concern transactions performed by reporting
companies on behalf of associate companies, and transactions
performed by associate companies on behalf of reporting companies,
respectively.

ITEM 4--SUMMARY OF AGGREGATE INVESTMENT

Investments in energy-related companies:
Total consolidated capitalization as of $xxx,xxx .............. Line 1.
____________.
Total capitalization multiplied by 15% xxx,xxx .............. Line 2.
(line 1 multiplied by 0.15).
Greater of $50 million or line 2........... .............. $xxx,xxx Line 3.
Total current aggregate investment:
(categorized by major line of energy-
related business)
Energy-related business category 1..... xxx,xxx ..............
Energy-related business category 2..... xxx,xxx ..............
Etc.................................... xxx,xxx ..............
----------------
Total current aggregate investment. .............. xxx,xxx Line 4.
----------------
Difference between the greater of $50 .............. $xxx,xxx Line 5.
million or 15% of capitalization and the
total aggregate investment of the
registered holding company system (line 3
less line 4).
Investments in gas-related companies:
Total current aggregate investment:
(categorized by major line of gas-related
business)
Gas-related business category.......... xxx,xxx ..............
Gas-related business category 2........ xxx,xxx ..............
Etc.................................... xxx,xxx .............. ...............................
----------------
Total current aggregate investment. xxx,xxx
----------------

ITEM 5--OTHER INVESTMENTS

Major line of energy-related Other investment in Other investment in Reason for difference
business last U-9C-3 report this U-9C-3 report in other investment

Instruction

This item concerns investments in energy-related and gas-related
companies that are excluded from the calculation of aggregate
investment under rule 58.

ITEM 6--FINANCIAL STATEMENTS AND EXHIBITS

List all financial statements and exhibits filed as a part of
this report.

Instructions

A. Financial Statements

1. Financial statements are required for reporting companies in
which the registered holding company system has at least a 50%
equity or other ownership interest. For all other rule 58 companies,
the registered holding company shall make available to the
Commission such financial statements as are available to it.
2. For each reporting company, provide a balance sheet as of the
end of the quarter and income statements for the three-month and
year-to-date periods ending as of the end of the quarter, together
with any notes thereto. Financial statements shall be provided only
for the first three calendar quarters of the fiscal year of the
registered holding company.

[[Page 7919]]

3. If a reporting company and each of its subsidiaries engage
exclusively in a single category of energy-related or gas-related
activity, consolidated financial statements may be filed.
4. Separate financial statements need not be filed for inactive
companies or for companies engaged solely in the ownership of
interests in energy-related or gas-related companies.

B. Exhibits

1. Copies of contracts required to be provided by Item 3 shall
be filed as exhibits.
2. A certificate stating that a copy of the report for the
previous quarter has been filed with interested state commissions
shall be filed as an exhibit. The certificate shall provide the
names and addresses of the state commissions.
SIGNATURE
[Registered Holding Company]

By:--------------------------------------------------------------------
(Name)

----------------------------------------------------------------------
(Title)

----------------------------------------------------------------------
(Date)

[FR Doc. 97-4167 Filed 2-19-97; 8:45 am]
BILLING CODE 8010-01-P}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}}

Visit the Official Version

Document Information

Effective Date:: 3/24/1997
Published:: 02/20/1997
Department:: Securities and Exchange Commission
Entry Type:: Rule
Action:: Final rule.
Document Number:: 97-4167
Dates:: March 24, 1997.
Pages:: 7900-7919 (20 pages)
Docket Numbers:: Release No. 35-26667, File No. S7-12-95
RINs:: 3235-AG46: Exemption of Acquisition by Registered Public Utility Holding Companies of Securities of Nonutility Companies Engaged in Certain Energy Related and Gas Related Activities
RIN Links:: https://www.federalregister.gov/regulations/3235-AG46/exemption-of-acquisition-by-registered-public-utility-holding-companies-of-securities-of-nonutility-
PDF File:: 97-4167.pdf
CFR: (4): 17 CFR 250.45; 17 CFR 250.52; 17 CFR 250.58; 17 CFR 259.208