NO. 70-9839
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 11
TO
APPLICATION/DECLARATION
ON
FORM U-1
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Northeast Utilities
Western Massachusetts Electric Company
174 Brush Hill Road
West Springfield, MA 01089
The Connecticut Light and Power Company
107 Selden Street
Berlin, CT 06037
(Names of companies filing this statement and addresses of
principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
Jeffrey C. Miller, Esq. David R. McHale
Assistant General Counsel Vice President and Treasurer
Northeast Utilities Service Northeast Utilities Service Company
Company 107 Selden Street
107 Selden Street Berlin, CT 06037
Berlin, CT 06037
The Application/Declaration in this file, as heretofore
amended, is hereby further amended and restated in its entirety to
read as follows:
"ITEM 1
DESCRIPTION OF PROPOSED TRANSACTIONS
Introduction
1. Northeast Utilities ("NU"), a public utility holding
company registered under the Public Utility Holding Company
Act of 1935, as amended ("the Act"), The Connecticut Light
and Power Company ("CL&P") and Western Massachusetts
Electric Company ("WMECO"), each an electric utility
subsidiary of NU, (collectively, the "Applicants"), hereby
submit this application/declaration (the "Application")
pursuant to Sections 6(a), 7, 9(a), 10 and 12(c) of the Act
and Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder with
respect to (a) the repurchase of stock out of capital or
unearned surplus from NU by each of CL&P and WMECO from
proceeds from the sale of their respective interests in the
Millstone Station nuclear generating facility ("Millstone")
and (b) the repurchase of stock out of capital or unearned
surplus by CL&P out of proceeds from the sale of Millstone
in accordance with the provisions of CL&P's dividend
covenant under its First Mortgage Indenture and Deed of
Trust dated May 1, 1921 to the Bankers Trust Company as
trustee (the "Mortgage Indenture"), all through December
31, 2003 (the "Authorization Period") and so long as the
senior debt securities of the respective company remain
rated investment grade by at least one rating agency. As
described in greater detail below, the authorizations
sought herein relate to the capital restructuring of the NU
system in connection with the nuclear generating asset
divestiture as required by the electrical industry
restructuring initiatives in the State of Connecticut and
the Commonwealth of Massachusetts. The Applicants intend
to use the proceeds of the Millstone sale, among other
things, to reduce and adjust their capital structures by
retiring outstanding debt, preferred stock and common
equity. As a result, CL&P and WMECO (collectively, the
"Utilities") will be able to lower the rates charged to
their customers, and the NU system will gain greater
financial flexibility. In addition, NU's value to its
shareholders will be enhanced. The senior debt rating of
CL&P issued by Standard & Poor's was upgraded to "A-" while
the senior debt ratings of CL&P issued by Moody's Investor
Service, Inc. was upgraded to "A2". The unsecured debt
ratings of WMECO issued by Standard & Poor's was upgraded
to "BBB+" while the unsecured debt ratings of WMECO issued
by Moody's Investor Service, Inc. was upgraded to "A3".
Background
2. In a previous proceeding under the Act - see Northeast
Utilities, et al., Application/Declaration on Form U-1, as
amended, File No. 70-9541 (the "Use of Proceeds Filing"),
granted and permitted to become effective in HCA Rel. No.
27147 (March 7, 2000) (the "Use of Proceeds Order") - the
Utilities sought and were granted authorization, among
other things, to pay dividends to, and/or repurchase shares
of their respective stock from, NU out of capital or
unearned surplus using the proceeds from the sale of non-
nuclear generating assets and the issuance of rate
reduction bonds ("RRBs") but not from the sale of nuclear
assets. The sale of nuclear assets was not foreseen at the
time of such filing as resulting in any substantial net
cash to the Utilities. A dramatic positive change in the
market for nuclear plants created the need for this filing.
This Application deals with the use of proceeds from the
sale of Millstone. In another proceeding under the Act -
see Northeast Utilities, et al, Application/Declaration on
Form U-1, as amended, File No. 70-9697 (the "RRB Filing"),
the Utilities sought specific authorization to issue the
RRBs referenced in the Use of Proceeds Filing. As
described in the Use of Proceeds Filing and in the RRB
Filing, the Utilities have used the proceeds of
divestitures of generating assets and issuances of RRBs,
among other things, to reduce and adjust their capital
structures by retiring outstanding debt, preferred stock
and common equity, and to buy down existing power purchase
agreements with independent power producers.
State Restructuring
3. The states in which CL&P and WMECO operate -
Connecticut and Massachusetts, respectively - have enacted
legislation that restructures the electric industries in
such states by introducing retail competition in electricity
generation. The new laws allow customers to choose their
electric suppliers. Accordingly, energy on competitive market
forces rather than being set by the state regulatory commission.
The transmission and distribution of electricity will continue
to be provided by the local utilities at regulated rates.
The restructuring statutes also require electric utilities
to institute rate reductions and adopt rate caps in amounts
that vary from state to state. More detailed accounts of
the restructuring of the electric industries in Connecticut
and Massachusetts are contained in the Use of Proceeds
Filing.
4. The restructuring statutes in Connecticut and
Massachusetts also allow for the issuance of RRBs to
finance portions of a utility's stranded costs, as
determined to be appropriate by the respective commissions,
through securitization transactions . The savings
generated through the use of rate reduction bonds
ultimately result in a reduction of electric rates.
Connecticut law limits the use of securitization to non-
nuclear generation-related regulatory assets and costs
associated with the renegotiation of purchased-power
contracts. CL&P may not securitize any of its nuclear
stranded costs. Massachusetts law allows WMECO to
securitize such costs. A more detailed description of the
proposed RRB transactions is contained in the RRB Filing.
5. As vertically integrated utilities with both generation
assets and transmission and distribution assets, CL&P and
WMECO were required to restructure their companies to comply
with state statutory provisions. The restructuring laws include,
among other things, strong incentives to divest generating assets.
This divestiture, combined with authorization for the issuance of
RRBs as part of the restructuring process, has left the Utilities
in a unique financial position in that they experienced a
significant decrease in the amount of tangible assets that they
own and received a substantial influx of cash almost
simultaneously.
6. Pursuant to Connecticut's statutory restructuring
requirements and order of the Department of Public Utility Control
(the "DPUC"), CL&P was allowed to recover the full amount of its
stranded costs through the divestiture of its non-nuclear
generating assets at auction by January 1, 2000 and its nuclear
generating assets at auction by January 1, 2004 and taking
steps to mitigate its stranded costs. Massachusetts imposed
similar conditions upon WMECO.
7. As of the date of this filing, virtually all of the
non-nuclear electric generating assets of CL&P and WMECO have been
sold. However, the applicable state deregulation laws mandate
that any gains on the sale of the electric generating assets
reduce stranded cost recovery, and so neither CL&P nor WMECO
recognized any earnings effect and no accretion to their
respective retained earnings account when those gains were
realized. Accordingly, CL&P and WMECO were left with a large
amount of cash and no ability to pay dividends to NU or
otherwise move cash upstream to NU. To remedy this problem,
CL&P, WMECO and certain of their affiliates filed the Use of
Proceeds Filing.
8. In the Use of Proceeds Filing, CL&P indicated that it
expected to receive net proceeds of approximately $1.191 billion
from the sales of non-nuclear generating assets and net proceeds
of $1.489 billion from the issuance and sale of rate reduction
bonds, a total of approximately $2.680 billion. WMECO indicated
that it expected to receive net proceeds of approximately $233
million from the sales of non-nuclear generating assets and net
proceeds of approximately $303 million from the issuance and sale
of rate reduction bonds, a total of approximately $536 million.
The Use of Proceeds Order authorized CL&P to use up to $310
million of such proceeds to reduce its common equity, and WMECO to
use up to $145 million of such proceeds to reduce its common
equity. In the RRB Filing, CL&P updated its expectations
concerning proceeds from the issuance of RRBs and stated that it
expected to receive proceeds of approximately $1.551 billion from
the issuance of RRBs.
9. Both companies have issued RRBs and have sold their non-
nuclear generating assets. CL&P realized $1.187 billion from the
sale of its non-nuclear generating assets and WMECO realized $231
million from the sale of its non-nuclear generating assets. CL&P
used approximately $300 million to reduce its common equity and
WMECO used approximately $90 million to reduce its common equity.
Sale of Nuclear Assets
10. CL&P owned an 81% interest in the Millstone 1 nuclear
generating facility ("Millstone 1") which was permanently shut
down, an 81% interest in the 870 Mw Millstone 2 nuclear
generating facility ("Millstone 2") and approximately 53% of
the 1,154 Mw Millstone 3 nuclear generating facility ("Millstone
3") located in Waterford, Connecticut. WMECO owned a 19%
interest in Millstone 1 and in Millstone 2 and approximately
a 13% interest in Millstone 3. In accordance with Connecticut and
Massachusetts restructuring laws, CL&P and WMECO (and most of the
other joint owners of Millstone 3) divested these assets, via
public auction. Dominion Resources, Inc. ("Dominion") was the
successful bidder with a bid of approximately $1.298 billion.
On October 19, 2000, the DPUC's Utility Operations and Management
Analysis unit approved the sale of CL&P's interest in Millstone to
Dominion, and on January 9, 2001 the DPUC released a draft
decision approving the sale. The Massachusetts Department of
Telecommunications and Energy approved the sale of WMECO's
interest in Millstone in December 2000. The sale was completed
on March 31, 2001. As a result of the sale, CL&P realized
approximately $843 million and WMECO realized approximately $196
million. Similar to the treatment of proceeds realized from the
sale of the non-nuclear generating assets, the proceeds from the
sale of Millstone to CL&P and WMECO did not increase their
respective retained earnings. The Utilities applied the bulk of
the proceeds to retire debt, lease obligations and preferred stock
under Rule 42.
Approval of the Payment of Dividends to or the Repurchase of
Stock from NU by CL&P and WMECO.
11. The Utilities plan to apply the remaining net proceeds of the
sale of Millstone during the Authorization period to retire common
stock from capital surplus or pay dividends out of retained
earnings. Apart from Millstone proceeds they intend to return
to NU in the form of dividends paid from retained earnings,
CL&P and WMECO presently expect to use not more than $100 million
and $21 million, respectively, of Millstone proceeds to reduce
their common equity capitalizations through the repurchase of
stock individually, "CL&P Returned Equity" and "WMECO Returned
Equity" respectively).
12. In order to effectively reduce common equity, CL&P and WMECO
seek Commission authorization to use all or a portion of,
respectively, the CL&P Returned Equity and the WMECO Returned
Equity to buy back a portion of their outstanding common stock
owned by NU out of capital or unearned surplus. Since, as
described earlier, the receipt of the proceeds from the sale of
Millstone does not result in net income giving rise to earned
surplus, Rules 42 and 46 require Commission approval for the
Utilities to repurchase their stock , to the desired extent.
13. The Commission has previously approved the payment of
dividends and repurchase of stock out of capital or unearned
surplus by a utility subsidiary of a registered holding
company when the payment would not impair the subsidiary's
ability to meet its obligations and the subsidiary's assets
would be sufficient to meet any anticipated expenses or
liabilities (See, e.g., AEP Generating Co., H.C.A. Rel. No.
26754 (August 12, 1997)) and specifically allowed CL&P and
WMECO to pay dividends or repurchase stock out of capital or
unearned surplus pursuant to the Use of Proceeds Order. As
described above, CL&P and WMECO would not face adverse
financial consequences as a result of the payment to NU.
Rather, CL&P and WMECO are reacting to a unique situation,
the sale of nuclear generating assets, which resulted in a
large influx of cash without creating any additional earned
surplus. Each of CL&P and WMECO currently has, and following
the consummation of the transactions described herein, will
continue to have, through the Authorization Period, adequate
cash and access to working capital facilities to meet and
support its normal business operations. The proposed
repurchases of common stock would not impair the financial
integrity of CL&P or WMECO because, after such repurchase,
each utility would still have adequate cash to operate its
business operations through the Authorization Period. The
Commission has recently approved the use of proceeds from the
sale of generating assets to repurchase the selling entity's
stock from its parent registered holding company in order to
keep its capital structure balanced, in the same manner as
the Utilities propose to do here. Northeast Utilities,
supra, New England Elec. System, H.C.A. Rel. No. 26918 (Sept.
25, 1998).
Approval of the Payment of Additional Amounts under the CL&P
Mortgage Indenture restriction, dated May 1, 1921.
14. In addition to the other transactions described herein,
the Applicants request that the Commission exercise its
reserved power as provided in the dividend covenant in CL&P's
Mortgage Indenture so as to permit CL&P, during the Authorization
Period, to effect dividend payments, the repurchase of its
shares or any combination thereof, notwithstanding the fact that
the CL&P Returned Equity does not represent net earnings giving
rise to earned surplus. The full text of the dividend covenant,
Section 6.13 of the Mortgage Indenture, is attached hereto as
Exhibit J.
15. The dividend covenant provides, among other things, that
cash dividends may not be paid on the capital stock of CL&P,
or distributions made, or capital stock purchased by CL&P, in
an aggregate amount which exceeds CL&P's earned surplus after
December 31, 1966, plus the earned surplus of CL&P accumulated
prior to January 1, 1967 in an amount not exceeding $13,500,000,
plus such additional amount as may be authorized or approved by
the Commission under the Act. CL&P hereby is requesting that the
Commission approve such an additional amount to enable the
repurchase of stock, as described above. The actual amount over
such limit for which authorization is being sought depends on the
amount of CL&P's earned surplus at the time of the stock
repurchase. However, the maximum aggregate amount of capital
expected to be transferred to NU through these means during the
Authorization Period will not exceed $100 million. The Commission
has previously approved the payment of additional amounts under
this and similar dividend restrictions upon a finding that such
approval was in the public interest. See, e.g., Northeast
Utilities, H.C.A. Rel. No 27147, (March 7, 2000); AEP Generating
Co., H.C.A. Rel. No. 24989 (Nov. 21, 1989); Southern Elec. Gen.
Co., H.C.A. Rel. No. 14417 (April 25, 1961). The requested
repurchase of CL&P stock from restructuring proceeds are in the
public interest as they will not impair CL&P's ability to meet its
obligations and will result in the benefits to the NU system, NU's
shareholders and the Utilities' customers described above. Without
such authorization, much of the extraordinary funds received by
CL&P through the sale of Millstone would remain trapped at CL&P
and cause its rates to be higher than necessary. Thus, such
payments will not negatively affect the interests sought to be
protected under the dividend restriction and CL&P's request should
be approved.
Inability to meet the Commission's 30% Common Equity Ratio Test
16. In the Use of Proceeds Filing, the Utilities noted
that the addition of the then anticipated securitization debt to
the balance sheets of CL&P and WMECO on a pro forma basis with the
reduced capitalization of the Utilities as a result of the
authorization granted in such file, would cause the Utilities (and
NU on a consolidated basis) to fail the Commission's benchmark
of 30% common equity-to-capitalization test, with their respective
pro forma common equity ratios at 19.1% and 16.6% and NU at 29.1%.
As indicated in the Use of Proceeds Filing, however, the ratings
of the respective senior debt securities of CL&P and WMECO will be
unaffected or will be improved by the issuance of the rate
reduction bonds, as such bonds are not considered obligations of
the Utilities by the ratings agencies. As indicated earlier
herein, both CL&P and WMECO have used proceeds from the sale
of non-nuclear generating assets to reduce their respective
capitalization. After giving effect to the sale of Millstone, the
issuance of the RRBs and the paydown of debt and equity with the
proceeds, the pro forma common equity ratios of CL&P and WMECO
(and NU on a consolidated basis), as of September 30, 2001,
(without including the issuance of the RRBs as debt of the
companies) would remain above 30%, with CL&P at 41%, WMECO at
44% and NU consolidated at 46%. Giving effect to the Millstone
transactions, the issuance of the RRBs and including the issuance
of the RRBs as debt of the respective companies, the respective
pro forma common equity ratios as of September 30, 2001 of CL&P,
and WMECO would fall below the 30% benchmark with CL&P at 21.7%
and WMECO at 29.3 The DPUC issued a decision in December 2001
permitting CL&P to return approximately $188 million of common
equity to NU, and found that a proposed equity ratio of 45%,
without considering RRBs, was appropriate. The DTE has made no
findings to date on WMECO's capital structure but is expected
to consider the use of Millstone proceeds in its regular March
2002 annual transition charge reconciliation proceeding. See
Item 4 (paragraph 27) for further information. The transactions
described herein and the issuance of the RRBs would not cause
NU on a consolidated basis to fall below 30%. (See Exhibit
K.2 hereto). CL&P and WMECO presently anticipate that the
debt associated with the RRBs will have been amortized by no
later than twelve years after the respective date when such
company has issued the maximum principal amount of RRBs which
it intends to issue. Thus CL&P's and WMECO's common equity
ratios will exceed 30% by no later than the end of such
period. In all likelihood, a sufficient amount of
securitization debt will be amortized prior to the end of
such twelve year period to restore both CL&P's and WMECO's
common equity ratio to over 30% prior to that date. Based on
the terms and amortizations of the RRBs issued by CL&P and
WMECO, the Applicants believe that the common equity ratio of
CL&P will be above 30% by December 31, 2007 and that of WMECO
will be above 30% by December 31, 2002 (See Exhibit L-1
hereto). If by the end of the Authorization Period in the
case of the Utilities, the respective company is not above
30% common equity, further authorization from the Commission
will be required.
Summary of Requested Action
17. The Applicants request that the Commission issue an
order authorizing: (a) the Utilities to repurchase common
stock from, NU out of capital or unearned surplus during the
Authorization Period so long as the senior debt securities of
the respective company is rated investment grade by at least
one rating agency, in an amount up to $100 million in the
case of CL&P and up to $21 million in the case of WMECO, all
from proceeds received from the sale of Millstone, and (b)
CL&P to repurchase common stock out of capital or unearned
surplus by CL&P from NU in the same amount under its Mortgage
Indenture dividend covenant during the Authorization Period.
The amounts for which authorization is sought herein is
distinct from and does not affect the amounts for which
authorization was sought and granted by the Use of Proceeds
Order.
ITEM 2
FEES, COMMISSIONS AND EXPENSES
18. The fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection
with the proposed transactions by the Applicants are not expected
to exceed $20,000 and are expected to be comprised primarily of
fees for ordinary legal, accounting and investment banking
services. None of such fees, commissions or expenses will be paid
to any associate company or affiliate of the Applicants except for
payments to Northeast Utilities Service Company for financial and
other services.
ITEM 3
APPLICABLE STATUTORY PROVISIONS
19. Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and
Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder are or may be
applicable to the proposed transactions. To the extent any
other sections of the Act or Rules thereunder may be applicable
to the proposed transaction, the Applicants request appropriate
orders thereunder.
20. NU will file reports with the Commission within 60 days
after the end of each calendar quarter, providing, among other
things,
i. A total capitalization calculation to include a
breakdown of the common stock equity account and by percentage
for each equity and debt category for the period ending for
each Applicant that indicates the amount of dividends paid to NU
and/or the amount of stock repurchased from NU during the quarter;
total capitalization is to include all short-term debt and current
maturities.
ii. The current senior debt ratings of CL&P and WMECO,
including a representation that such ratings are at or above
investment grade.
iii. The Utilities' cash-on-hand both during the quarter
and as of the end of each quarter and a representation as to
whether internal cash funds available during the quarter were
sufficient to fund each company's normal business operations
or had to be supplemented with borrowing from working capital
facilities.
Other Matters
21. Except in accordance with the Act, neither NU nor
any subsidiary thereof (a) has acquired an ownership
interest in an EWG or a FUCO, as defined in Sections 32 and
33 of the Act, or (b) now is or as a consequence of the
transactions proposed herein will become a party to, or has
or will as a consequence of the transactions proposed herein
have a right under, a service, sales, or construction
contract with an EWG or a FUCO. None of the proceeds from
the transactions proposed herein will be used by NU and its
subsidiaries to acquire any securities of, or any interest
in, an EWG or a FUCO.
22. NU currently meets all of the conditions of Rule
53(a), except for clause (1). At December 31, 2001, NU's
"aggregate investment," as defined in Rule 53(a)(1), in EWGs
and FUCOs was approximately $448.2 million, or approximately
71% of NU's average "consolidated retained earnings," also
as defined in Rule 53(a)(1), for the four quarters ended
September 30, 2001 ($631.8 million). With respect to Rule
53(a)(1), however, the Commission has determined that NU's
financing of its investment in Northeast Generation Company
("NGC"), NU's only current EWG or FUCO, in an amount not to
exceed $481 million or 83% of its "average consolidated
retained earnings" would not have either of the adverse
effects set forth in Rule 53(c). See Northeast Utilities,
Holding Company Act Release No. 27148, dated March 7, 2000
(the "Rule 53(c) Order"). NU continues to assert that its
EWG investment in NGC will not adversely affect the System.
23. In addition, NU and its subsidiaries are in
compliance and will continue to comply with the other
provisions of Rule 53(a) and (b), as demonstrated by the
following determinations:
(i) NGC maintains books and records, and prepares
financial statements, in accordance with Rule 53(a)(2).
Furthermore, NU has undertaken to provide the Commission
access to such books and records and financial statements,
as it may request;
(ii) No employees of NU's public utility subsidiaries
have rendered services to NGC;
(iii) NU has submitted (a) a copy of each Form U-1 and
Rule 24 certificate that has been filed with the Commission
under Rule 53 and (b) a copy of Item 9 of the Form U5S and
Exhibits G and H thereof to each state regulator having
jurisdiction over the retail rates of NU's public utility
subsidiaries;
(iv) Neither NU nor any subsidiary has been the subject
of a bankruptcy or similar proceeding unless a plan of
reorganization has been confirmed in such proceeding;
(v) NU's average CREs for the four most recent quarterly
periods have not decreased by 10% or more from the average
for the previous four quarterly periods; and
(vi) In the previous fiscal year, NU did not report
operating losses attributable to its investment in
EWGs/FUCOs exceeding 3 percent of NU's consolidated retained
earnings.
24. The proposed transactions, considered in
conjunction with the effect of the capitalization and
earnings of NU's EWGs and FUCOs, would not have a material
adverse effect on the financial integrity of the NU system,
or an adverse impact on NU's public-utility subsidiaries,
their customers, or the ability of State commissions to
protect such public-utility customers. The Rule 53(c) Order
was predicated, in part, upon an assessment of NU's overall
financial condition which took into account, among other
factors, NU's consolidated capitalization ratio and its
retained earnings, both of which have improved since the
date of the order. NU's EWG investment (it has no FUCO
investment), has been profitable for all quarterly periods
ending June 30, 2000 through December 31, 2001 (NGC was
acquired in March 2000). As of December 31, 1999, the most
recent period for which financial statement information was
evaluated in the Rule 53(c) Order, NU's consolidated
capitalization consisted of 35.3% common equity and 64.7%
debt (including long and short-term debt, preferred stock,
capital leases and guarantees). As of June 30, 2000, the
end of the first quarter after the issuance of the Rule
53(c) Order, the consolidated capitalization ratios of NU,
with consolidated debt including all short-term debt and non-
recourse debt of the EWG, were as follows:
As of June 30, 2000
(thousands
of dollars) %
Common shareholders' equity 2,365,854 36.9
Preferred stock 277,700 4.3
Long-term and short-term debt 3,768,353 58.8
6,411,907 100.0
25. The consolidated capitalization ratios of NU as of
December 31, 2001, with consolidated debt including all
short-term debt and non-recourse debt of the EWG, were as
follows:
As of December 31, 2001
(thousands
of dollars) %
Common shareholders' equity 2,117,640 30.8
Preferred stock 116,200 1.7
Long-term and short-term debt 2,633,518 38.2
Rate Reduction Bonds 2,018,351 29.3
6,885,709 100.0
26. NU's consolidated retained earnings increased from
$581.8 million as of December 31, 1999 to $678.4 million as
of December 31, 2001. NGC has made a positive contribution
to earnings by contributing approximately $238 million in
revenues from inception (March 2000) through December 31,
2001 and net income of $68.6 million for the same period.
Accordingly, since the date of the Rule 53(c) Order, the
capitalization and earnings attributable to NU's investments
in EWGs and FUCOs has not had an adverse impact on NU's
financial integrity.
ITEM 4
REGULATORY APPROVALS
27. The Connecticut Department of Public Utility Control (the
"DPUC") has jurisdiction over CL&P's plan of divestiture of
Millstone, and in its order approving the divestiture plan, the
DPUC required that within 180 days following the closing,
CL&P file information regarding the disposition of the proceeds,
including an itemization of costs that will be netted against the
proceeds and detailed tax calculations. CL&P advised the DPUC
that it intended to rebalance its capital account through the
reacquisition of equity, including the repurchase of approximately
$188 million of common stock from NU. On March 16, 2001, the DPUC
issued a temporary order requiring CL&P to use the proceeds in a
way to result in a common equity ratio (not including the RRBs as
debt) for CL&P between 45% and 50% ("Common Equity Ratio
Requirement"). (See Exhibit D attached hereto). In December,
2001, the DPUC issued its final decision in the filing in which it
discontinued the Common Equity Ratio Requirement (See Exhibit D-1
attached hereto). NU now anticipates that CL&P will repurchase
not more than $100 million of common stock from NU and pay
approximately $88 million to NU as a dividend out of retained
earnings.
28. The Massachusetts Department of Telecommunications and
Energy (DTE) has jurisdiction over the rate-making effect of
WMECO's use of proceeds from the Millstone sale but there is no
express prohibition pertaining to the actual use of the cash
proceeds. In approving the sale of WMECO's share of Millstone,
the DTE stated that it was not ruling on the use of proceeds but
would examine the allocations of the benefits of such proceeds
as among shareholders and ratepayers in an annual transition
charge reconciliation proceeding after the sale was completed.
WMECO made such a filing in March 2002. No other state or
Federal regulatory approval, other than the approval of the
Commission pursuant to this Application, is required to consummate
the transactions described herein. The transactions described
herein will be effected in compliance with all applicable state
and federal laws and regulations.
ITEM 5
PROCEDURE
29. The Applicants respectfully request the Commission's
approval, pursuant to this Application, of all transactions
described herein, whether under the sections of the Act and
Rules thereunder enumerated in Item 3 or otherwise. It is
further requested that the Commission issue an order
authorizing the transactions proposed herein at the earliest
practicable date. The closing of the Millstone sale is
scheduled for April 1, 2001 and the Applicants intend to use
the proceeds immediately for the debt and capital reductions
described herein. Additionally, the Applicants (i) request
that there not be any recommended decision by a hearing
officer or by any responsible officer of the Commission, (ii)
consent to the Office of Public Utility Regulation within the
Division of Investment Management assisting in the
preparation of the Commission's decision, and (iii) waive the
30-day waiting period between the issuance of the
Commission's order and on the date on which it is to become
effective, since it is desired that the Commission's order,
when issued, become effective immediately.
ITEM 6 EXHIBITS AND FINANCIAL STATEMENTS
(asterisked (*) items have been previously filed)
30. (a) Exhibits
D. Temporary Order of the Connecticut DPUC dated March
16, 2001*
D.1 Decision from the Connecticut DPUC dated December
12, 2001.*
F. Opinion of Counsel*
H. Proposed Form of Notice*
J. CL&P Mortgage Indenture Dividend Covenant*
K. Common Equity Ratios*
K.1 Revised Common Equity Ratios*
K.2 Revised Common Equity Ratios*
L. Amortization Schedule for RRBs*
L.1 Revised Amortization Schedule for RRBs*
(b) Financial Statements*
1 Northeast Utilities and Subsidiaries (consolidated)
1.1 Balance Sheet, per books and pro forma, as of
September 30, 2000.
1.2 Statement of Income, per books and pro forma,
for 12 months September 30, 2000 and capital structure, per
books and pro forma, as of September 30, 2000.
2 The Connecticut Light and Power Company
2.1 Balance Sheet, per books and pro forma, as of
September 30, 2000
2.2 Statement of Income and Surplus, per books and
pro forma, for 12 months ended September 30, 2000 and capital
structure, per books and pro forma, as of September 30, 2000.
3 Western Massachusetts Electric Company
3.1 Balance Sheet, per books and pro forma, as of
September 30, 2000.
3.2 Statement of Income and Surplus, per books and
pro forma, for 12 months ended September 30, 2000 and capital
structure, per books and pro forma, as of September 30, 2000.
ITEM 7
INFORMATION AS TO ENVIRONMENTAL EFFECTS
31. (a) The financial transactions described herein do not
involve a major Federal action significantly affecting the
quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies
have duly caused this statement to be signed on their behalf
by the undersigned thereunto duly authorized.
NORTHEAST UTILITIES
WESTERN MASSACHUSETTS ELECTRIC COMPANY
THE CONNECTICUT LIGHT AND POWER COMPANY
By: /s/ Randy A. Shoop
Name: Randy A. Shoop
Title: Assistant Treasurer - Finance - Northeast
Utilities Service Company,
as Agent for the above named companies.
Date: May , 2002
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An Act Concerning Electric Restructuring, 1998 Conn. Acts.
98-28 (Reg. Sess.); The Massachusetts Electric Industry
Restructuring Act, 1997 Mass. Acts 164.
Securitization is the financing of a specific asset or pool
of assets, through the issuance of securities, frequently referred
to as "asset-backed securities" ("ABS"). These securities are paid
solely from the revenue stream arising from the pool of assets,
and as a result, their ratings are dependent upon the
predictability or volatility of that cash flow. The structure of
a typical ABS transaction is based on the underlying assets and
the expected cash flows to be generated by those assets. In
general, the original owner of the underlying asset sells the
asset to a special-purpose financing entity. That entity then
issues securities (directly or indirectly), for which the primary
source of payment of principal and interest is the cash flow
generated by the underlying asset that was sold. See, also, the
RRB Filing.
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