FILE NO. 70-9755
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 7
(AMENDMENT NO. 11)
TO FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Northeast Utilities Holyoke Water Power Company
Western Massachusetts Electric Company 107 Selden Street
174 Brush Hill Avenue Berlin, CT 06037
West Springfield, MA 01090-0010
The Connecticut Light and Power Company Public Service Company
NU Enterprises, Inc. of New Hampshire
Northeast Generation Services Company North Atlantic
E. S. Boulos Company Energy Corporation
Woods Network Services, Inc. Energy Park
Woods Electrical Co., Inc. 780 North Commercial Street
Northeast Generation Company Manchester, NH 03101
Select Energy, Inc.
Select Energy New York, Inc. Select Energy Services, Inc.
Mode 1 Communications, Inc. 24 Prime Parkway
Northeast Utilities Service Company Natick, MA 01760
107 Selden Street
Berlin, CT 06037
Yankee Energy System, Inc. The Rocky River Realty Company
Yankee Gas Services Company The Quinnehtuk Company
Yankee Energy Financial Services Northeast Nuclear Energy
Company Company
NorConn Properties, Inc. Properties, Inc.
Yankee Energy Services Company 107 Selden Street
107 Selden Street Berlin, CT 06037
Berlin, CT 06037
(Name of companies filing this statement and addresses of principal
executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler, Esq.
Senior Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
(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 David R. McHale
Assistant General Counsel Vice President and Treasurer
Northeast Utilities Northeast Utilities
Service Company Service Company
P.O. Box 270 P.O. Box 270
Hartford, CT 06141-0270 Hartford, CT 06141-0270
The Application/Declaration in this file, as heretofore amended, is
further amended and restated as follow:
ITEM 1
DESCRIPTION OF PROPOSED TRANSACTION
BACKGROUND
1. Northeast Utilities ("NU"), a public utility holding company
registered under the Public Utility Holding Company Act of 1935,
as amended (the "Act"), located at 174 Brush Hill Ave., West
Springfield, MA; Yankee Energy System, Inc. ("YES"), a public
utility holding company subsidiary of NU, exempt from
registration under the Act, and Northeast Utilities Service
Company, NU's service company subsidiary ("NUSCO"), both located
at 107 Selden Street, Berlin, CT 06037; NU's direct and indirect
public utility subsidiaries, The Connecticut Light and Power
Company ("CL&P") and Yankee Gas Services Company (Yankee Gas"),
located at 107 Selden Street, Berlin, CT 06037, Western
Massachusetts Electric Company ("WMECO"), located at 174 Brush
Hill Avenue, West Springfield, MA 01090-0010, Public Service
Company of New Hampshire ("PSNH") located at Energy Park, 780
North Commercial Street, Manchester, NH 03101 and Holyoke Water
Power Company ("HWP"), located at 107 Selden Street, Berlin, CT
06037; and NU's direct and indirect nonutility subsidiaries,
Northeast Nuclear Energy Company ("NNECO"), The Rocky River
Realty Company ("RR"), The Quinnehtuk Company ("Quinnehtuk"),
Properties, Inc. ("Properties"), Yankee Energy Financial Services
Company ("Yankee Financial"), Yankee Energy Services Company
("YESCO"), NorConn Properties, Inc. ("NorConn"), NU Enterprises,
Inc. ("NUEI"), Northeast Generation Company ("NGC"), Northeast
Generation Services Company ("NGS"), E. S. Boulos Company
("Boulos"), Woods Electrical Company, Inc. ("Woods"), Woods
Network Services, Inc. ("Woods Network"), Select Energy, Inc.
("Select Energy") and Mode 1 Communications, Inc. ("Mode 1"), all
located at 107 Selden Street, Berlin, CT 06037, North Atlantic
Energy Corporation ("NAEC"), located at 780 North Commercial
Street, Manchester, NH 03101, Select Energy New York, Inc.
("SENY"), located at 507 Plum Street, Syracuse, NY 13204 and
Select Energy Services, Inc. ("SESI"), located at 24 Prime
Parkway, Natick, MA 01760 (collectively the "Applicants") submit
this amendment to the application/declaration in this File (the
"Amendment") pursuant to Sections 6(a), 7, 9(a), 10 and 12 of the
Act and Rules 43, 45 and 52 thereunder with respect to the
extension of certain financing authorizations granted by the
Commission in the prior Commission order and the release of
jurisdiction reserved in such order.
2. By order dated December 28, 2000 (Holding Co. Act Release
No. 27328) issued by the Commission in this File No. 70-9755 (the
"2000 Order"), the Applicants were authorized to continue
participation in the NU system money pool ("NU Money Pool"), and,
to the extent not exempt under Rules 45(b) and 52, for the
Applicants to enter into short-term debt transactions with NU and
to borrow from and extend credit to (and acquire promissory notes
from) each other through their participation in the NU Money
Pool, through June 30, 2003 subject to certain terms and
conditions set forth therein. In addition, authorization was
granted in the 2000 Order for NU and its utility subsidiaries and
YES to issue notes or commercial paper to unaffiliated third
parties to evidence short-term debt up to specified limits and
within specified parameters, through June 30, 2003. By
Commission order dated June 30, 2003, (Holding Co. Act Release
No. 35-27693, the "2003 Order") issued in this File, the
Commission extended the authorization period for the issuance of
short-term debt by CL&P, WMECO and Yankee Gas (the "Utility
Borrowers"), PSNH, YES and NU through June 30, 2006,
authorized such companies to enter into interest rate hedging
transactions related to short-term debt transactions through June
30, 2006 and extended the authorization period for participation
by the Applicants (other than Properties) in the NU Money Pool
through June 30, 2004, pending the submission by the
Applicants of a feasibility study concerning the creation of a
separate money pool for nonutility subsidiaries of NU.
3. The Applicants have prepared and submitted such a study to
the Commission and now request that the Commission issue an order
in this file granting:
(i) an extension or modification through June 30, 2007
(the "Authorization Period"), of the authorizations granted
by the Commission in the 2003 Order concerning
(a) the issuance of notes or commercial paper by NU,
YES and the Utility Borrowers to unaffiliated
third parties to evidence short-term debt,
(b) the respective short-term debt limits of NU, YES
and the Utility Borrowers;
(c) participation by the Applicants in the NU Money
Pool;
(d) entering into Interest Rate Hedges (as described
herein) by NU, YES and the Utility Borrowers;
(ii) authorization for Properties to participate in the NU
Money Pool both as borrower and lender; and
(iii) a release of jurisdiction over the removal of
limits on the NU Money Pool borrowings by RR, Quinnehtuk,
Yankee Financial, YESCO, NorConn, NUEI, NGS, Boulos, Woods,
Select Energy, NAEC, NNECO, SENY and SESI (together with
Properties, the "Nonutility Subsidiaries").
DESCRIPTION OF THE APPLICANTS
4. NU is a registered holding company under the Act and is the
parent company of the Northeast Utilities system (the NU system)
(See Corporate Organization Chart filed as Exhibit I herewith).
The NU system furnishes franchised retail electric service to
over 1.8 million customers in 420 cities and towns in
Connecticut, New Hampshire and western Massachusetts through
three of NU's wholly-owned electric utilities under the Act,
CL&P, PSNH and WMECO. CL&P, PSNH and WMECO furnish retail
franchise electric service in 149, 201 and 59 cities and towns in
Connecticut, New Hampshire and Massachusetts, respectively. In
December 2003, CL&P provided retail franchise service to
approximately 1.2 million customers in Connecticut, PSNH provided
retail service to approximately 456,000 customers in New
Hampshire and WMECO served approximately 206,000 retail customers
in Massachusetts. The NU system also furnishes franchised retail
natural gas service in a large part of Connecticut through Yankee
Gas, a gas utility under the Act, owned by YES, a public utility
holding company subsidiary of NU exempt from registration under
the Act by section 3(a)(1), Yankee Gas is the largest natural
gas distribution company in Connecticut serving approximately
192,000 residential, commercial and industrial customers in 71
cities and towns in Connecticut, including large portions of the
central and southwest sections of the state. HWP, although not
an electric utility under Massachusetts state law, owns
approximately 147 mw of coal-fired generation in Holyoke, MA and
is an electric utility under the Act. HWP, which is not an
exempt wholesale generator, sells the output of its electricity
generating station directly to its affiliate, Select Energy.
Prior to the sale by the NU system of all of its nuclear assets,
NAEC and NNECO were an owner and a manager, respectively, of
various nuclear generating assets; as a result of the sale of
such assets, by 2002 each company ceased being an electric
utility under the Act and are now nonutility companies. NU also
owns, directly or indirectly, Properties, RR, Quinnehtuk and
NorConn, which are real estate companies, NUSCO, the system's
principal service company, NUEI, the system's nonutility holding
company, NGC, an exempt wholesale generator, SESI, an energy
services company acquired pursuant to Commission Order, Mode 1
and Woods Network, each exempt telecommunications companies,
Yankee Financial, a financial services company and Select Energy,
SENY, NGS, Woods, Boulos and YESCO, each companies formed or
acquired pursuant to Rule 58.
EXTERNAL SHORT-TERM DEBT OF NU AND YES
5. In this Amendment NU seeks an order of the Commission
authorizing it to issue and sell from time to time during the
Authorization Period, external short-term debt in an aggregate
principal amount at any time outstanding not to exceed $450
million ("NU's Short-term Debt Limit") and YES seeks an order of
the Commission authorizing it to issue and sell from time to time
during the Authorization Period, external short-term debt in an
aggregate principal amount at any time outstanding not to exceed
$50 million ("YES Short-term Debt Limit"). External short-term
debt issued by NU and YES has taken and will take a variety of
forms, including commercial paper issuances and/or unsecured
notes with banks or other institutional lenders under credit
facilities on terms that are generally available to borrowers
with comparable credit ratings. All short-term debt issued by NU
or YES will have maturities of less than one year from the date
of issuance. Neither NU nor YES will issue any secured debt.
6. Commercial paper issued by NU or YES hereunder may be issued
manually or through The Depository Trust Company in the form of
book entry notes in denominations of not less than $50,000 of
varying maturities. Such commercial paper would typically be
sold to dealers at the discount rate prevailing at the date of
issuance for commercial paper of comparable quality and
maturities sold to commercial paper dealers generally. It is
expected that the dealers acquiring the commercial paper will
reoffer it at a discount to corporate and institutional
investors. No commercial paper will be issued by NU or YES
unless the issuer believes that the effective interest cost to it
will be equal to or less than the effective interest rate at
which it could issue short-term notes in an amount at least equal
to the principal amount of such commercial paper. The commercial
paper will be publicly issued and sold without registration under
the Securities Exchange Act of 1933 in reliance upon one or more
applicable exemptions from registration thereunder.
7. NU and YES also seek an extension through the Authorization
Period of the authorization to continue, or to establish and
maintain back-up credit lines with banks or other institutional
lenders to support their commercial paper program(s), and other
credit arrangements and/or borrowing facilities generally
available to borrowers with comparable credit ratings, providing
for revolving credit or other loans. All amounts drawn and
outstanding under these agreements and facilities will have
maturities less than one year from the date of draw and will be
counted against the proposed NU Short-term Debt Limit or the YES
Short-term Debt Limit, whichever the case may be.
8. The effective cost of money on all external short-term debt
of NU or YES will not exceed competitive market rates available
at the time of issuance for securities having the same or
reasonably similar terms and conditions issued by companies of
comparable credit quality, provided that in no event will the
effective cost of capital exceed 300 basis points over the
comparable term London Interbank Offered Rate ("LIBOR").
Issuance expenses in connection with any non-competitive offering
of short-term debt will not exceed 5% of the principal amount
thereof. Specific terms of any short-term debt will be
determined by NU or YES at the time of issuance and will comply
in all regards to the parameters of financing authorizations set
forth above. A copy of any new note or loan agreement executed
pursuant to this Authorization will be filed under cover of the
next quarterly report under Rule 24. Subject to the NU Short-
term Debt Limits, NU intends to renew and extend outstanding
short-term debt as it matures, to refund such short-term debt
with other similar short-term debt, to repay such short-term debt
or to increase the amount of their short-term debt from time to
time. Subject to the YES Short-term Debt Limit, YES intends to
renew and extend outstanding short-term debt as it matures, to
refund such short-term debt with other similar short-term debt,
to repay such short-term debt or to increase the amount of their
short-term debt from time to time
EXTERNAL SHORT-TERM DEBT OF THE UTILITY BORROWERS
9. The Utility Borrowers also seek an order of the Commission
authorizing each of them to issue and sell from time to time
during the Authorization Period, short-term debt in an aggregate
principal amount at any time outstanding not to exceed, when
added to any debt of such companies through the NU Money Pool,
the respective limits for the Utility Borrowers as follows: CL&P
- $450 million; WMECO - $200 million; and Yankee Gas - $150
million ("Utility Borrower Short-term Debt Limit"). The short-
term debt for the Utility Borrowers has taken and will take a
variety of forms, including commercial paper issuances and/or
secured or unsecured notes with banks or other institutional
lenders under credit facilities on terms that are generally
available to borrowers with comparable credit ratings. All short-
term debt will have maturities of less than one year from the
date of issuance. The Utility Borrowers request that the
Commission reserve jurisdiction over its request to issue secured
short-term debt pending completion of the record.
10. Commercial paper issued by a Utility Borrower hereunder may
be issued manually or through The Depository Trust Company in the
form of book entry notes in denominations of not less than
$50,000 of varying maturities. Such commercial paper would
typically be sold to dealers at the discount rate prevailing at
the date of issuance for commercial paper of comparable quality
and maturities sold to commercial paper dealers generally. It is
expected that the dealers acquiring the commercial paper will
reoffer it at a discount to corporate and institutional
investors. No commercial paper will be issued unless the Utility
Borrower issuing such commercial paper believes that the
effective interest cost to it will be equal to or less than the
effective interest rate at which such company could issue short-
term notes in an amount at least equal to the principal amount of
such commercial paper. The commercial paper will be publicly
issued and sold without registration under the Securities
Exchange Act of 1933 in reliance upon one or more applicable
exemptions from registration thereunder.
11. The Utility Borrowers also seek an extension through the
Authorization Period of the authorization to continue, or to
establish and maintain back-up credit lines with banks or other
institutional lenders to support their commercial paper
program(s), and other credit arrangements and/or borrowing
facilities generally available to borrowers with comparable
credit ratings, providing for revolving credit or other loans.
All amounts drawn and outstanding under these agreements and
facilities will have maturities less than one year from the date
of draw and will be counted against the proposed Utility Borrower
Short-term Debt Limits of such Utility Borrower.
12. The effective cost of money on all external short-term debt
of the Utility Borrowers will be subject to the same financing
parameters as NU set forth above. Specific terms of any short-
term debt will be determined by the respective Utility Borrowers
at the time of issuance and will comply in all regards to the
parameters of financing authorizations set forth above. A copy
of any new note or loan agreement executed pursuant to this
Authorization will be filed under cover of the next quarterly
report under Rule 24. Subject to the applicable Utility Borrower
Short-term Debt Limits, the Utility Borrowers intend to renew and
extend outstanding short-term debt as it matures, to refund such
short-term debt with other similar short-term debt, to repay such
short-term debt or to increase the amount of their short-term
debt from time to time.
INVESTMENT GRADE RESTRICTIONS
13. NU, YES and the Utility Borrowers commit that, apart from
the securities issued for the purpose of funding money pool
operations no securities may be issued in reliance upon the Order
issued in this file during the Authorization Period, unless: (i)
the security to be issued, if rated, is rated investment grade;
(ii) all outstanding securities of the issuer that are rated are
rated investment grade; and (iii) all outstanding securities of
NU and YES that are rated, are rated investment grade. For
purposes of this condition, a security will be considered
investment grade if it is so rated by at least one nationally
recognized statistical rating organization, as that term is used
in paragraphs (c)(2)(vi)(E), (F) and (H) of Rule 15c3-1 under the
Securities Exchange Act of 1934. NU, YES, PSNH and the
Utility Borrowers request that the Commission reserve
jurisdiction over the issuance by NU, YES PSNH and the Utility
Borrowers of any securities that do not meet these conditions.
14. Except in the case of CL&P and PSNH, NU, YES and its utility
subsidiaries commit that at all times during the Authorization
Period, each will maintain common equity of at least 30% of its
consolidated capitalization (common equity, preferred stock, long-
term debt and short-term debt) as reflected in the most recent
Form 10-K or Form 10-Q filed with the Commission, adjusted to
reflect changes in capitalization since the balance sheet date
therein. In the case of PSNH and CL&P, in Holding Co. Act
Release No. 35-27147 (March 7, 2000), the Commission noted that
such companies and the other Utility Borrowers could, from time
to time, be below the 30% ratio when their respective Rate
Reduction Bonds were included in the calculation of
capitalization. CL&P and PSNH plan to file a post-effective
amendment in that file to extend the period during which each may
be below a 30% common equity ratio beyond December 31, 2004.
The Commission found that the effect of being below the 30%
test as a result of the issuance of Rate Reduction Bonds was
mitigated because of the exceptional circumstance of the state's
restructuring legislation, as follows,: (1) that CL&P and PSNH
have investment grade ratings of BBB-or better; (2) that CL&P's
and PSNH's financial integrity would not be impaired by the
proposed transaction; (3) that CL&P and PSNH have and will
continue to have, adequate cash and access to working capital
facilities to meet and support their normal business operations;
and (4) that the proposed transaction would be in the public's
interest because both investors and consumers will benefit. CL&P
and PSNH represent that such factors continue to be present and
will continue through the Authorization Period.
15. Current Financial Condition
(a) NU
For the twelve (12) months ended December 31, 2003, NU's
consolidated gross revenues and net income were approximately
$6.1 billion and $116.4 million, respectively. As of December
31, 2003, NU's consolidated capitalization consisted of 33.5%
common equity, 1.7% preferred stock, 25.6% of Rate Reduction
Bonds, and 39.2% long-term and short-term debt. When the Rate
Reduction Bonds are excluded, NU's consolidated capitalization
consisted of 45.0% common equity, 2.3% preferred stock and 52.7%
debt. For the three (3) months ended March 31, 2004, NU's
consolidated gross revenues and net income were approximately
$1.8 billion and 67.4 million, respectively. As of March 31,
2004, NU's consolidated capitalization consisted of 34.4 % common
equity, 1.7% preferred stock, 24.9% of Rate Reduction Bonds, and
39.0% long-term and short-term debt. When the Rate Reduction
Bonds are excluded, NU's consolidated capitalization consisted of
45.8% common equity, 2.3% preferred stock and 51.9% debt.
NU Credit Ratings
As of the date of this Amendment, the corporate credit
rating for NU is BBB+ by Standard and Poor's and Baa1 by Moody's
and the ratings issued for NU's Senior Unsecured Debt were Baa1
by Moody's, and BBB by Standard and Poor's and Fitch.
(b) Utility and Holding Company Subsidiaries of NU
The Connecticut Light and Power Company
As of March 31, 2004, CL&P's consolidated capitalization
consisted of 24.6% common equity, 4.0% preferred stock, 37.4% of
Rate Reduction Bonds, and 34.0% of long-term and short-term debt.
When the Rate Reduction Bonds are excluded, CL&P's consolidated
capitalization consisted of 39.3% common equity, 6.4% preferred
stock and 54.3% debt. As of the date of this Amendment, the
corporate credit rating for CL&P is BBB+ by Standard and Poor's
and A3 by Moody's and the credit rating for its senior secured
debt is A- by Standard and Poor's and by Fitch and A2 by Moody's.
Its senior unsecured debt has a rating of BBB from Standard and
Poor's, A3 from Moody's and BBB+ from Fitch. CL&P's preferred
stock has a rating of BBB- by Standard and Poor's and Baa2 by
Fitch.
Western Massachusetts Electric Company
As of March 31, 2004, WMECO's consolidated capitalization
consisted of 33.4% common equity, 27.1% of Rate Reduction Bonds,
and 39.5% of long-term and short-term debt. When the Rate
Reduction Bonds are excluded, WMECO's consolidated capitalization
consisted of 45.8% common equity and 54.2% debt. As of the date
of this Amendment, the corporate credit rating for WMECO is BBB+
by Standard and Poor's and A3 by Moody's and the credit rating
for its senior unsecured debt is BBB+ by Standard and Poor's and
Fitch and A3 by Moody's. WMECO has no preferred stock.
Public Service Company of New Hampshire
As of March 31, 2004, PSNH's consolidated capitalization
consisted of 29.9% common equity, 35.8% of Rate Reduction Bonds,
and 34.3% of long-term and short-term debt. When the Rate
Reduction Bonds are excluded, PSNH's consolidated capitalization
consists of 46.6% common equity and 53.4% debt. As of the date
of this Amendment, the corporate credit rating for PSNH is BBB+
by Standard and Poor's and Baa1 by Moody's and the credit rating
for its senior secured debt is BBB+ by Standard and Poor's and
Fitch and A3 by Moody's. PSNH has no preferred stock.
Yankee Energy System, Inc.
As of March 31, 2004, YES's consolidated capitalization
consisted of 69.6 % common equity and 30.4% long-term and short-
term debt. YES is not currently rated by Standard and Poor's,
Moody's or Fitch. YES has no preferred stock.
Yankee Gas Services Company
As of March 31, 2004, Yankee Gas' consolidated capitalization
consisted of 69.5% common equity and 30.5% of long-term and short-term
debt. The corporate credit rating for Yankee Gas is BBB+ by Standard
and Poor's and Baa1 by Moody's. Yankee Gas has no preferred stock.
In addition, NU's other electric utility under the Act, HWP
(though not a Utility Borrower for the purposes of this
application), had a consolidated capitalization of 33.9% common
equity and 66.1% of long-term and short-term debt as of March
31, 2004, HWP is not rated by any rating agency.
INTEREST RATE HEDGES
16. To the extent not exempt under rule 52, each of NU, YES and
the Utility Borrowers also request an extension, through the
Authorization Period, of the authorizations granted in the 2003
Order to enter into interest rate hedging transactions with
respect to its outstanding short-term indebtedness ("Interest
Rate Hedges"), subject to the limitations and restrictions below,
in order to reduce or manage the effective interest rate cost.
Interest Rate Hedges would only be entered into with
counterparties ("Approved Counterparties") whose senior debt
ratings, or the senior debt ratings of any credit support
providers who have guaranteed the obligations of the Approved
Counterparties, as published by S&P, are equal to or greater than
BBB, or an equivalent rating from Moody's or Fitch, or through on-
exchange transactions.
17. Interest Rate Hedges will involve the use of financial
instruments commonly used in the capital markets, such as
options, interest rate swaps, locks, caps, collars, floors,
exchange-traded futures and options, and other similar
appropriate instruments. The transactions would be for fixed
periods and stated notional amounts as are generally accepted as
prudent in the capital markets. In no case will the notional
principal amount of any Interest Rate Hedge exceed that of the
underlying debt instrument. Neither NU, YES nor the Utility
Borrowers will engage in speculative transactions within the
meaning of such term in Statement of Financial Accounting
Standard 133, as amended ("FAS 133"). Transaction fees,
commissions and other amounts payable to brokers in connection
with an Interest Rate Hedge will not exceed those generally
obtainable in competitive markets for parties of comparable
credit quality.
18. NU, YES and the Utility Borrowers represent that each
Interest Rate Hedge will qualify for hedge accounting treatment
on a continuing basis under generally acceptable accounting
practices ("GAAP"). NU, YES and the Utility Borrowers will also
comply with the then existing financial disclosure requirements
of the Financial Accounting Standards Board associated with
hedging transactions. Currently FAS 133 is the applicable
standard.
USE OF PROCEEDS
19. The proceeds from the short-term debt of NU, YES and the
Utility Borrowers authorized by the Commission pursuant to this
Application will be used for (i) general corporate purposes,
including investments by and capital expenditures of NU and its
subsidiaries, including, without limitation, the funding of
future investments in exempt wholesale generators ("EWG"),
Foreign Utility Companies ("FUCO") (each to the extent permitted
under the Act or Commission order), Rule 58 Subsidiaries (to the
extent permitted under the Act or Commission order), and exempt
telecommunications companies ("ETC"), (ii) the repayment,
redemption, refunding or purchase by NU or any subsidiary of any
of its own securities from non-affiliates pursuant to Rule 42,
and (iii) financing working capital requirements of NU and its
subsidiaries.
20. NU, YES and the Utility Borrowers represent that no
financing proceeds will be used to acquire the securities of, or
other interests in, any company unless such acquisition has been
approved by the Commission in this or a separate proceeding or is
in accordance with an available exemption under the Act or rules
thereunder, including Sections 32 and 33 and Rules 53, 54 and 58.
NU states that the aggregate amount of proceeds of financing
approved by the Commission in this proceeding used to fund
investments in EWGs and FUCOs will not, when added to NU's
"aggregate investment" (as defined in Rule 53) in all such
entities at any point in time, exceed 50% of NU's average
"consolidated retained earnings" (also as defined in Rule 53),
except as permitted and authorized by the Commission.
Further, NU represents that proceeds of financing utilized to
fund investments in Rule 58 Subsidiaries will adhere to the
limitations of that rule or Commission Order.
THE NU MONEY POOL
21. By the 2003 Order, the Applicants, with the exception of
NUSCO and Properties, were authorized to continue to participate
in the NU Money Pool. NUSCO was authorized to continue to
administer the NU Money Pool. In this Application, the
Applicants seek authorization to continue the NU Money Pool
established under the authority granted in the 2003 Order through
June 30, 2007, subject to the same terms and conditions set forth
therein. The Applicants request that the Commission authorize
all of the Applicants, with the exception of NU, YES, NGC, Mode 1
and Woods Network, to continue participation in the NU Money Pool
as both lenders and borrowers, to the extent not exempted by rule
52, and to authorize the participation, as lenders only, and not
as borrowers, of NU, YES, NGC, Mode 1 and Woods Network. The
Applicants request that the Commission authorize, through the
Authorization Period, the participation of Properties in the NU
Money Pool, both as a lender and a borrower and that the
Commission reserve jurisdiction over the addition of any
additional participants to the NU Money Pool. The lending of
funds by WMECO to affiliates through the NU Money Pool is further
limited by order of the Massachusetts Department of
Telecommunications and Energy (formerly the Massachusetts Public
Utilities Commission, the "MDTE"), which order approved the
lending of funds only to CL&P, HWP, NNECO, Quinnehtuk and RR.
WMECO is not seeking authorization herein to lend money through
the NU Money Pool to any other affiliates.
22. The NU Money Pool will continue to be administered on behalf
of the Applicants by NUSCO under the direction of an officer of
NUSCO. NUSCO will not be a participant in the NU Money Pool.
The NU Money Pool will consist principally of surplus funds
received from the Applicants. In addition to surplus funds,
funds borrowed by NU through the issuance of short-term notes or
other debt, or by the selling of commercial paper ("External
Funds") may be a source of funds for making loans or advances to
the other Applicants through the NU Money Pool.
OPERATION OF THE NU MONEY POOL
23. Applicants do not propose any changes to the operation of
the NU Money Pool as it was approved in the 2003 Order.
Transactions under the NU Money Pool will be designed to match,
on a daily basis, the surplus funds of the pool participants with
the short-term borrowing requirements of the pool participants
(other than the pool participants who are lenders only), thereby
minimizing the need for short-term debt to be incurred by the
pool participants from external sources. The pool participants
in the NU Money Pool who are regulated utility subsidiaries of NU
will have priority as borrowers from the NU Money Pool over those
participants that are nonutility companies.
24. The funds available through the NU Money Pool will be loaned
on a short-term basis to those pool participants that have short-
term debt requirements. If no such short-term requirements match
the amount of funds that are available for the NU Money Pool for
the period such funds are available, NUSCO will invest the funds,
directly or indirectly, as described below and will allocate the
interest earned on such investments among the pool participants
providing such funds on a pro rata basis according to the amount
of the funds provided:
(i) interest-bearing accounts with banks;
(ii) obligations issued or guaranteed by the U.S. government
and/or its agencies and instrumentalities, including obligations
under repurchase agreements;
(iii) obligations issued or guaranteed by any state or
political subdivision thereof, provided that such obligations are
rated not less than "A" (or "A-1" or "P-1" or their equivalent
for short term debt) by a nationally recognized rating agency;
(iv) commercial paper rated not less than "A-1" or "P-1" or
their equivalent by a nationally recognized rating agency;
(v) moneymarket funds;
(vi) bank certificates of deposit,
(vii) Eurodollar funds; and
(viii) such other investments as are permitted by Section 9(c)
of the Act and Rule 40 thereunder and, with respect to
contributions of WMECO, approved by the MDTE pursuant to
Massachusetts General Laws Chapter 164, Section 17A and the
regulations thereunder.
25. All borrowings from and contributions to the NU Money Pool
will be documented and will be evidenced on the books of each
pool participant that is borrowing from or contributing surplus
funds to the NU Money Pool. Any pool participant contributing
funds to the NU Money Pool may withdraw those funds at any time
without notice to satisfy its daily need for funds. All short-
term debt through the NU Money Pool (other than from NU's
External Funds) will be payable on demand, may be prepaid by any
borrowing pool participant at any time without penalty and will
bear interest for both the borrower and lender, payable monthly,
at a rate equal to the daily Federal Funds Effective Rate (the
"Fed Funds Rate") as quoted by the Federal Reserve Bank of New
York. Short-term debt of pool participants derived from the
proceeds of External Funds of NU will bear interest at the same
rate paid by NU on such External Funds, and no such short-term
debt may be prepaid by the pool participant unless NU is made
whole for any additional costs that it may incur because of such
prepayment. NU will be fully reimbursed for all costs that it
incurs in relation to loans made through the NU Money Pool to the
pool participants. (See Exhibit A.5, Terms of the NU System Money
Pool).
SHORT TERM DEBT AND NU MONEY POOL DEBT LIMITS
26. In the 2003 Order, the Commission imposed limits on the
short-term borrowings, including those done through the NU Money
Pool (except for NU and YES, which may not borrow from the NU
Money Pool), of NU, CL&P, WMECO, PSNH, HWP, YES and Yankee Gas
as set forth below :
Company 2003 Order Limit
NU $400 Million
CL&P $375 Million
WMECO $200 Million
PSNH $100 Million
HWP $ 5 Million
YES $ 50 Million
Yankee Gas $100 Million
27. NU now requests that the Commission authorize the issuance of
external short-term debt pursuant to this Application up to $450
million at any one time outstanding and YES requests that the
Commission authorize the issuance of external short-term debt up
to $50 million at any one time outstanding. Neither NU nor YES
may borrow through the NU Money Pool.
28. CL&P, WMECO and Yankee Gas now request that the Commission
authorize the issuance of short-term debt by each of them, either
externally or through the NU Money Pool, up to an aggregate of
$450 million for CL&P; $200 million for WMECO; and $150 million
for Yankee Gas. HWP is not seeking authorization to issue
external short-term debt and seeks authorization to issue short-
term debt solely through the NU Money Pool up to $10 million at
any one time outstanding.
29. In the 2003 Order, the Commission approved the following NU
Money Pool borrowing limits for the Nonutility Subsidiaries as
follows:
Quinnehtuk $ 10 Million
NUEI $100 Million
NGS $ 25 Million
Select $200 Million
SENY $ 10 Million
RR $ 30 Million
Yankee Financial $ 10 Million
NorConn $ 10 Million
YESCO $ 10 Million
SESI $ 35 Million
Boulos $ 10 Million
Woods $ 10 Million
NAEC $ 10 Million
NNECO $ 10 Million
30. In the 2003 Order, the Commission reserved jurisdiction over
the Applicants' request that there be no NU Money Pool borrowing
limit imposed on the Nonutility Subsidiaries. The Applicants now
request that, to the extent not exempt under Rule 52, the
Commission release jurisdiction over the request that there be no
limit placed on the NU Money Pool borrowings of the Nonutility
Subsidiaries. Under Rule 52(b) the issue and sale of any
security of a nonutility subsidiary of a registered holding
company is exempt from section 6(a) of the Act if: "(1) the issue
and sale of the security are solely for the purpose of financing
the existing business of the 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." NU management believes
that, although using the Fed Funds Rate in place of calculating
each participant's "effective cost of capital" as described in
Rule 52 does not appear to satisfy the language of the Rule, it
otherwise satisfies the Act's concerns about preventing holding
company abuses, and creates a framework where "holding company
abuses are unlikely to exist." Using the Fed Funds Rate is a
reasonable and non-discriminatory method by which to determine
interest costs. This is especially true where, as is the case
here, there are many pool participants who have not issued debt
to non-affiliates on which to base their "effective cost of
capital." In fact, the Commission, in the release adopting Rule
52, alluded to tying a company's effective cost of capital to an
index such as the Fed Funds Rate ("In proposing the amendment to
Rule 52, the Commission contemplated that the effective cost of
capital for debt securities which have recently been issued by
the purchasing associate company will be the coupon rate of
interest plus all expenses . . . associated with the issue and
sale of such debt; and that, in the event the purchasing
associate company has not recently issued debt securities, the
effective cost of capital may be tied to an appropriate index
such as, but not limited to, the Federal Funds' rate or a
published bond index.") (Holding Co. Act Release 35-26311, June
20, 1995, 1995 SEC Lexis 1512, *11).
31. It is also interesting to note that the Commission does not
generally set a limit on the external short-term borrowings of
Nonutility Subsidiaries. Thus, the Nonutility Subsidiaries are
free to borrow from external sources should such Nonutility
Subsidiary's borrowing needs exceed the limit imposed by the
Commission. Such borrowings could result in unnecessary external
debt by the NU system if there were funds available through the
NU Money Pool. The result would be an inefficient use of funds by
the NU System as a whole. Applicants therefore request that the
Commission release jurisdiction over the amount of borrowings
through the NU Money Pool of the Nonutility Subsidiaries. The
maximum amount of NU Money Pool borrowings outstanding for each
Nonutility Subsidiary will be determined by NU and the management
of each Nonutility Subsidiary in accordance with business needs.
32. This request is substantially similar to the request
granted to Ameren Corp. by the Commission in Holding Co. Act
Release No. 35-27655 (February 27, 2003)(the return on funds lent
through a non-state regulated subsidiary money pool did not
"parallel the effective cost of capital of the associate company"
but was rather the CD yield equivalent of the 30-day Federal
Reserve "AA" Non-financial commercial paper composite rate and
the nonutility companies were not subject to a Commission imposed
money pool borrowing limit), and National Fuel Gas Company,
Holding Co. Act Release No. 35-27600 (November 12, 2002)
(interest rate applicable to borrowings of internal funds in a
money pool made up of utility and nonutility companies are the
rates for high-grade, unsecured, 30-day commercial paper sold
through dealers by major corporations as quoted in the Wall
Street Journal and nonutility subsidiaries did not have a
Commission imposed money pool borrowing limit but rather the
"maximum amount of money pool borrowings outstanding for each
Eligible Borrower will be determined by [National Fuel Gas
Company] and each Eligible Borrower in accordance with business
needs").
ITEM 2
FEES, COMMISSIONS AND EXPENSES
1. In addition to fees associated with specific borrowing or
issuances of commercial paper as set forth in Item 1 above, the
fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the
transactions described above are estimated as follows:
Northeast Utilities Service Company
(Legal, Financial, Accounting and
Other Services) Not in excess of $10,000
ITEM 3
APPLICABLE STATUTORY PROVISIONS
1. The Applicants believe that Sections 6, 7, 9(a), 10 and 12
of the Act and Rules 43, 45 and 52 thereunder are applicable to
the transactions contemplated by this Application.
2. The Applicants recognize that many registered holding
company systems maintain two distinct money pools, one for
utility companies and one for nonutility companies. As requested
by the Commission, the Applicants prepared a study on the
benefits of maintaining two separate money pools instead of the
one that is currently maintained. The study was filed with the
Commission as an exhibit to a Rule 24 certificate filed in this
File on December 23, 2003. The study found that there was no
substantial benefit to the NU System in maintaining separate
money pools. The study focused on historical borrowings by NU
companies through the period from January 2000 through September
2003. The study found that the use of two separate money pools,
one for NU's non-utility subsidiaries and one for NU's utility
subsidiaries, was feasible but, if used during the test period,
would not have resulted in a significant benefit to the NU
system. The study used the historical money pool data to
determine the change in (1) bank borrowings, (2) money market
investments, (3) interest expense and (4) interest income that
would have resulted from separate money pools. The study's
conclusion was that net interest expense for the NU system would
have increased by an aggregate of $2.7 Million over the 3.75 year
period of the study.
3. However, it should be noted that the study period does not
necessarily represent the typical financial condition of the NU
system. For example, during the test period, the utility
subsidiaries were in a positive cash position as a result of
selling substantially all of their generation assets during that
period and "securitizing" much of their stranded costs. This
circumstance led to fewer borrowings by the utility subsidiaries
(either externally or through the NU Money Pool) and fewer
external borrowings by NU to fund the Nonutility Subsidiaries.
In a more typical situation, it is possible that there would be
more borrowings required and the use of two money pools could
lead to a less efficient use of system funds. For example, such
an inefficient use of system funds would exist in a situation
where a Nonutility Subsidiary has excess cash and a utility
subsidiary needs to borrow cash. With one money pool, the
Nonutility Subsidiary could lend its excess cash through the
money pool at the Fed Funds rate for use by the utility
subsidiary. With two pools, the Nonutility Subsidiary's excess
cash would be trapped and NU would need to borrow funds from its
short-term credit facility to lend to the utility subsidiary
through the utility money pool. The interest rate paid by NU for
its borrowing would generally be higher than the interest earned
by the Nonutility Subsidiary on its overnight investment. The
end result would be an inefficient use of system cash and
increased administrative costs. Accordingly, there appears to be
no significant benefit to the NU System to maintain two separate
money pools.
4. Within 45 days after the end of each calendar quarter, the
Applicants will file certificates of partial consummation
describing the maximum borrowings from and loans to the NU Money
Pool during the quarter and the interest rate applied to such
borrowings and loans.
ITEM 4
REGULATORY APPROVALS
1. The approval of the MDTE is required pursuant to C.164,
Section 17A of the Massachusetts General Laws for the lending of
funds by WMECO to affiliates through the NU Money Pool. The MDTE
(formerly the Massachusetts Public Utilities Commission) granted
such approval on October 29, 1986 as to lending of funds to CL&P,
HWP, NNECO, Quinnehtuk and RR. Until further MDTE authorization
is granted, WMECO may not lend its funds to other companies
through the NU Money Pool. There is not currently an application
pending before the MDTE for further authorization.
2. NHPUC Order No. 20,416 (March 19, 1992), authorizes PSNH to
participate in the NU Money Pool. In addition, under New
Hampshire statute, PSNH may not issue short-term debt in excess
of 10% of its net fixed plant without prior NHPUC approval.
NHPUC Order 23,841, (November 9, 2001) authorizes PSNH to issue
up to $100 million in debt which is in excess of 10% of net fixed
plant debt limit. PSNH has filed an application with the NHPUC
seeking to increase the short-term debt authorization to $150
million. The NHPUC also has jurisdiction over the issuance by
PSNH of Interest Rate Hedges. An order was issued by the NHPUC on
May 21, 2004 authorizing PSNH to issue up to $100 million in
short-term debt. (Order No. 24328).
3. To the extent any Applicant issues secured debt, the
granting of such security may be subject to an order from the
relevant state utility commission.
4. Other than set forth above, no regulatory approvals, other
than those of the Commission requested herein are required for
the proposed activities for which Commission authorization is
sought herein.
ITEM 5
PROCEDURE
1. The Applicants hereby request that the Commission publish a
notice under Rule 23 with respect to the filing of this
Application as soon as practicable and that the Commission's
order be issued as soon as possible. A form of notice suitable
for publication in the Federal Register is attached hereto as
Exhibit H.3. 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, but not later than June 30, 2004 as that is the
date on which the authorizations granted in the 2003 Order
expires. 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 the date on which it is to
become effective, since it is desired that the Commission's
order, when issued, become effective immediately.
OTHER MATTERS
1. 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.
2. NU currently meets all of the conditions of Rule 53(a),
except for clause (1). At March 31, 2004, NU's "aggregate
investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was
approximately $448.2 million, or approximately 54.3% of NU's
average "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended March 31, 2004 ($825.7
million). With respect to Rule 53(a)(1), however, the Commission
has determined that NU's financing of its investment in 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 Co. 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.
3. 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.
4. The proposed transactions, considered in conjunction with
the effect of the capitalization and earnings of NU's EWG, 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
March 31, 2004 (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
5. The consolidated capitalization ratios of NU as of
March 31, 2004, with consolidated debt including all short-term
debt and non-recourse debt of the EWG, were as follows:
As of March 31, 2004
(thousands
of dollars) %
Common shareholders' equity $ 2,333,356 34.4%
Preferred stock 116,200 1.7
Long-term and short-term debt 2,642,413 39.0
Rate Reduction Bonds 1,682,500 24.9
$ 6,774,469 100.0
If Rate Reduction Bonds are excluded the consolidated capitalization
ratio of NU as of March 31, 2004 is as follows:
As of March 31, 2004
(thousands
of dollars) %
Common shareholders' equity $ 2,333,356 45.8
Preferred stock 116,200 2.3
Long-term and short-term debt 2,642,413 51.9
$ 5,091,969 100.0%
6. NGC has made a positive contribution to earnings by
contributing $146.8 million in revenues in the 12-month period
ending March 31, 2004 and net income of $38.3 million for the
same period. Although since the date of the Rule 53(c) Order,
the common equity ratio of NU on a consolidated basis has
decreased, it still remains at a financially healthy level, above
the 30% benchmark required by the Commission, and if Rate
Reduction Bonds are excluded, the consolidated common equity
ratio has increased. Accordingly, NU's investment in its EWG has
not had an adverse impact on NU's financial integrity.
ITEM 6
EXHIBITS AND FINANCIAL STATEMENTS
1. The following additional exhibits and financial statements
are filed herewith, exhibits marked with (*) have been previously
filed:
(a) Exhibits
*A.5 Terms of the NU System Money Pool (revised July
2003) (incorporated by reference to Rule 24
certificate filed November 17, 2003)
D.4 New Hampshire Public Utilities Commission Order
24,328 dated May 21, 2004 Approving $100 million
of Short-term Debt for PSNH
*F.3 Opinion of Counsel
*H.3 Form of Notice
I Corporate Organization Chart
(b) Financial Statements
1. Northeast Utilities Consolidated Balance Sheets, as
of December 31, 2003, Consolidated Statements of Income
and Statement of Retained Earnings for the 12 months
ended December 31, 2003 and Statement of Capitalization
as of December 31, 2003 (incorporated by reference to NU
Annual Report on Form 10K for the year ended December 31,
2003 filed with the Commission, File No. 1-5324).
2. Northeast Utilities Consolidated Balance Sheets, as
of March 31, 2004, Consolidated Statements of Income and
Statement of Retained Earnings for the 3 months ended
March 31, 2004 and Statement of Capitalization as of
March 31, 2004 (incorporated by reference to NU Quarterly
Report on Form 10-Q for the period ended March 31, 2004
filed with the Commission, File No. 1-5324).
ITEM 7
INFORMATION AS TO ENVIRONMENTAL EFFECTS
1. None of the matters that are the subject of this
Application involve a "major federal action" nor do they
"significantly affect the quality of the human environment" as
those terms are used in Section 102(2)(C) of the National
Environmental Policy Act. None of the proposed transactions that
are the subject of this Application will result in changes in the
operation of the Applicants that will have an impact on the
environment. The Applicants are not aware of any federal agency
which has prepared or is preparing an environmental impact
statement with respect to the transactions proposed herein."
[SIGNATURE PAGE TO FOLLOW]
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the Applicants have duly caused this
Application-Declaration to be signed on their behalf by the
undersigned thereunto duly authorized.
June 30, 2004
Northeast Utilities
Northeast Utilities Service Company
The Connecticut Light and Power Company
Western Massachusetts Electric Company
Public Service Company of New Hampshire
North Atlantic Energy Corporation
Holyoke Water Power Company
Northeast Nuclear Energy Company
Yankee Energy System, Inc.
Yankee Gas Services Company
The Rocky River Realty Company
The Quinnehtuk Company
NU Enterprises, Inc.
Northeast Generation Company
Northeast Generation Service Company
Properties, Inc.
Woods Electrical Co., Inc.
Woods Network Services, Inc.
E. S. Boulos Company
Select Energy, Inc.
Select Energy New York, Inc.
Mode 1 Communications, Inc.
Select Energy Services, Inc.
Yankee Energy Financial Services Company
Yankee Energy Services Company
NorConn Properties, Inc.
By: /s/ Randy A. Shoop
Name: Randy A. Shoop
Title: Assistant Treasurer-Finance
Northeast Utilities Service Company as Agent for
all of the above-named Applicants
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The 2000 Order also authorized external short-term debt
issuances by NAEC and NNECO (in addition to money pool
participation). This authorization for NAEC and NNECO to issue
external short-term debt was not extended in the 2003 Order as
neither NAEC nor NNECO were utilities under the Act at that time.
Both NAEC and NNECO are now non-utilities under the Act and are
included in this Application in the definition of Nonutility
Subsidiaries for purposes of participation in the NU Money Pool.
PSNH is not seeking short-term debt authorization herein as the
issuance of short-term debt by PSNH is authorized by order of the
New Hampshire Public Utilities Commission and is, thus, exempt
pursuant to Rule 52 under the Act. For this reason, PSNH is not
included in the definition of "Utility Borrower."
The 2003 Order also authorized Select Energy New York,
Inc. ("SENY") and R. M. Services, Inc. ("RMS") to participate in
the NU Money Pool both as borrower and lender. At the time of
filing of this amendment, NU is contemplating merging SENY into
its parent, Select, and, subsequent to such merger, SENY will no
longer exist as a legal entity. Accordingly, at that time, SENY
would no longer be a participant in the NU Money Pool and its
authorization to participate in the Money Pool would lapse. RMS
is also no longer a participant in the NU Money Pool.
Although the authorization period for the short-term debt
for NU and the Utility Borrowers does not expire until June 30,
2006, certain of the Utility Borrowers are seeking an increase in
their short-term debt limit and so the Applicants are seeking a
three year authorization period for all requests herein. The
order of the Commission being sought herein will replace and
supercede the 2003 Order.
See, Great Plains Energy Incorporated, Holding CO. Act
Release No. 35-27784, 70-9861 (December 29, 2003, Xcel Energy,
Inc., Holding Co. Act Release No. 27731 (September 30, 2003).
Rate Reduction Bonds (including Rate Reduction
Certificates) are state-authorized bonds issued by special
purpose entities formed by CL&P, WMECO and PSNH, respectively,
and are non-recourse to each respective utility.
The Commission has, by order dated March 7, 2000 (HCAR No.
27148)("Rule 53(c) Order"), authorized NU to invest an amount not
to exceed $481 million or 83% of its "average consolidated
retained earnings" in NGC. In addition, NU has filed an
application with the Commission seeking an increase in its
authorized EWG investment amount to an aggregate of $1 billion.
(See File No. 70-10177).
NU has filed an application with the Commission seeking
authorization to invest up to $500 million in excess of the Rule
58 limitations in Rule 58 companies (see File No. 70-10177).
The aggregate amount of unsecured debt that can be
incurred by CL&P is also restricted by the provisions in its
charter concerning its preferred stock. CL&P has authorization
from the holders of its preferred stock, through March 31, 2014,
to issue securities representing unsecured indebtedness up to a
maximum of 20% of its capitalization. Based on its
capitalization as of December 31, 2003, CL&P is limited to $503.1
million of unsecured indebtedness, an amount in excess of the
amount for which authorization is sought hereunder.
The aggregate amount of short-term debt that can be
incurred by PSNH is restricted by New Hampshire Statute and
Regulations to an amount equal to 10% of its net fixed plant
without further New Hampshire Public Utilities Commission
("NHPUC") approval. Any short-term debt of PSNH in excess of 10%
of net fixed plant would require NHPUC approval and thus would be
exempt from Commission jurisdiction pursuant to Rule 52(a). PSNH
currently has approval from the NHPUC to issue up to $100 million
in short-term debt, which is in excess of 10% of net fixed plant
debt limit, (NHPUC Order 23,841, November 9, 2001) and thus does
not require Commission approval, pursuant to Rule 52, for the
issuance of such short-term debt.
Although NAEC and NNECO are now largely inactive
nonutility subsidiaries as a result of the sale by the NU system
of all of its nuclear generating plants, NU is currently
maintaining both NAEC and NNECO as corporate entities. NAEC and
NNECO therefore request the ability to participate in the NU
Money Pool in the event there are any unforeseen liabilities
which arise out the companies' prior operations which would
require funds.
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