FILE NO. 70-9755
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3
(AMENDMENT NO. 6)
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 One Canal Street
174 Brush Hill Avenue Holyoke, MA 01040
West Springfield, MA 01090-0010
The Connecticut Light and Power Company Public Service Company
NU Enterprises, Inc. of New Hampshire
Northeast Generation Service Company North Atlantic Energy
E.S. Boulos Company 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 Services, Inc.
Select Energy New York, Inc. 24 Prime Parkway
Mode 1 Communications, Inc. Natick, MA 01760
Northeast Utilities Service Company
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 Company Northeast Nuclear Energy
NorConn Properties, Inc. Company
Yankee Energy Services Company 107 Selden Street
107 Selden Street Berlin, CT 06037
Berlin, Connecticut 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.
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"), The Connecticut Light and Power Company
("CL&P"), Western Massachusetts Electric Company ("WMECO"),
Public Service Company of New Hampshire ("PSNH"), Holyoke Water
Power Company ("HWP"), North Atlantic Energy Corporation
("NAEC"), Northeast Nuclear Energy Company ("NNECO"), The Rocky
River Realty Company ("RR"), The Quinnehtuk Company
("Quinnehtuk") and Northeast Utilities Service Company ("NUSCO"),
each of which is a wholly-owned subsidiary of NU; Yankee Energy
System, Inc. ("YES"), a wholly-owned public utility holding
company subsidiary of NU and its wholly-owned subsidiaries,
Yankee Gas Services Company ("Yankee Gas"), Yankee Energy
Financial Services Company ("Yankee Financial"), Yankee Energy
Services Company ("YESCO") and NorConn Properties, Inc.
("NorConn"); and NU Enterprises, Inc. ("NUEI"), a wholly owned
nonutility holding company subsidiary of NU, and its direct and
indirect wholly-owned subsidiaries, 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"), Select Energy New York, Inc.
("SENY"), Mode 1 Communications, Inc. ("Mode 1") and Select
Energy Services, Inc., formerly HEC Inc. ("SESI") (each of the
above companies being an "Applicant" and collectively referred to
herein as 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 (i) the extension of certain
financing authorizations granted by the Commission in the prior
Commission order issued in this file and (ii) the granting of
certain additional authorizations as requested herein.
2. By order dated December 28, 2000 (Holding Co. Act Release
No. 27328) issued by the Commission in this File No. 70-9755 (the
"Prior Order"), the Applicants were authorized to continue
participation in the NU system money pool arrangement ("NU Money
Pool"), and, to the extent not exempt under Rules 45(b) and 52,
to enter into short-term debt transactions with NU and extend
credit to (and acquire promissory notes from) each other through
their participation in the NU Money Pool, through June 30, 2003.
In addition, authorization was granted in the Prior Order for NU
and five of its utility subsidiaries, CL&P, WMECO, PSNH, YES and
Yankee Gas, among others, (CL&P, WMECO, PSNH, YES and Yankee Gas
referred to collectively as the "Utility Borrowers") to issue
notes or commercial paper to unaffiliated third parties to
evidence short-term debt up to specified limits and within
specified parameters.
3. The Applicants now request that the Commission issue an
order in this file granting:
(i) an extension, from the date of the order requested
herein through June 30, 2006 (the "Authorization
Period"), of the authorizations granted by the
Commission in the Prior Order concerning
(a) the issuance of notes or commercial paper by NU
and the Utility Borrowers to unaffiliated third
parties to evidence short-term debt,
(b) the respective short-term debt limits of NU and
the Utility Borrowers; and
(c) participation by the Applicants in the NU
System Money Pool as described herein through June
30, 2004 (the "Pool Authorization Period")
provided that (i) the terms of the NU Money Pool
are modified to provide priority over the
borrowing of NU Money Pool Funds to the utility
subsidiaries of NU over the nonutility
subsidiaries and (ii) NU provides to the
Commission, by December 31, 2003, the results of a
feasibility study concerning the creation of a
separate money pool for nonutility subsidiaries of
NU;
(ii) authorization, through the Authorization Period,
for NU and the Utility Borrowers to enter into
Interest Rate Hedges (as described herein), and
(iii) authorization for Boulos, Woods and SENY to
participate in the NU Money Pool as both borrowers and
lenders and authorization for Woods Network to
participate in the NU Money Pool solely as a lender
through the Pool Authorization Period.
SHORT-TERM DEBT OF NU AND THE UTILITY BORROWERS
4. In this Amendment NU and the Utility Borrowers seek an order
of the Commission extending, through the Authorization Period,
the authorization granted in the Prior Order for their short-term
borrowing arrangements ("Short-term Debt"). NU and the Utility
Borrowers propose 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 by such companies through the NU Money Pool, the respective
limits for NU and the Utility Borrowers set forth below in
paragraph 22 (which limits are the same or less than the limits
provided in the Prior Order) ("Short-term Debt Limit"). The
Short-term Debt for NU and the Utility Borrowers has taken and
will take a variety of forms, including commercial paper
issuances and/ or unsecured notes, and in the case of the Utility
Borrowers, secured or unsecured notes, with banks or other
institutional lenders under credit facilities having commitment
periods not longer than the Authorization Period and 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 their request to
issue secured short-term debt pending completion of the record.
5. Commercial paper issued by NU or 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 NU or 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.
6. NU and the Utility Borrowers also propose 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 and
having commitment periods not longer than the Authorization
Period. 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 Short-term
Debt Limits of NU or such Utility Borrower.
7. The effective cost of money on all external Short-term Debt
of NU and the Utility Borrowers 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 500 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 the 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.
8. NU commits that, apart from the securities issued for the
purpose of funding money pool operations, no Short-term Debt may
be issued by NU in reliance upon this Order during the Authorization
Period, unless: (i) the security to be issued, if rated, is rated
investment grade; and (ii) all outstanding Short-term Debt of NU
that is rated is 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 1934 Act. NU
requests that the Commission reserve jurisdiction over the
issuance by NU of any Short-term Debt that is rated below
investment grade.
9. Subject to the applicable Short-term Debt Limits, NU and 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.
10. Current Financial Condition
(a) NU
For the twelve (12) months ended December 31, 2002, NU's
consolidated gross revenues and net income were approximately
$5.0 billion and $152 million, respectively. As of December 31,
2002, NU's consolidated capitalization consisted of 33.4% common
equity, 1.8% preferred stock, 28.6% of Rate Reduction Bonds, and
36.2% debt. When the Rate Reduction Bonds are excluded, NU's
consolidated capitalization consisted of 46.8% common equity,
2.4% preferred stock and 50.8% debt.
NU Credit Ratings (Senior Unsecured Debt)
Moody's S&P
Baa1 BBB
(b) The Utility Borrowers
The Connecticut Light and Power Company ("CL&P")
As of December 31, 2002, CL&P's consolidated capitalization
consisted of 24.1% common equity, 4.0% preferred stock, 43.2% of
Rate Reduction Bonds, and 28.7% of long-term and short-term debt.
When the Rate Reduction Bonds are excluded, CL&P's
consolidated capitalization consisted of 42.4% common equity,
7.0% preferred stock and 50.5% debt. The credit rating for
senior debt of CL&P is BBB+ by Standard and Poor's and A3 by
Moody's.
Western Massachusetts Electric Company ("WMECO")
As of December 31, 2002, WMECO's consolidated capitalization
consisted of 31.9% common equity, 28.8% of Rate Reduction Bonds,
and 39.3% of long-term and short-term debt. When the Rate
Reduction Bonds are excluded, WMECO's consolidated capitalization
consisted of 44.8% common equity and 55.2% debt. The credit
rating for senior unsecured debt of WMECO is BBB+ by Standard and
Poor's and A3 by Moody's.
Public Service Company of New Hampshire ("PSNH")
As of December 31, 2002, PSNH's consolidated capitalization
consisted of 26.0% common equity, 41.2% of Rate Reduction Bonds
issued pursuant to state law, and 32.8% of long-term and short-
term debt. When the Rate Reduction Bonds are excluded,
PSNH's consolidated capitalization consisted of 44% common equity
and 56% debt. The credit rating for senior secured debt of PSNH
is BBB+ by Standard and Poor's and A3 by Moody's.
Yankee Energy System, Inc. ("YES")
As of December 31, 2002, YES's consolidated capitalization
consisted of 77.7% common equity and 22.3% debt. YES is not
currently rated by Standard and Poor's, Moody's or Fitch.
Yankee Gas Services Company ("Yankee Gas")
As of December 31, 2002, Yankee Gas' consolidated
capitalization consisted of 76.8% common equity and 23.2% of
debt. Yankee Gas is not currently rated by Standard and Poor's,
Moody's or Fitch.
INTEREST RATE HEDGES
11. To the extent not exempt under rule 52, each of NU and the
Utility Borrowers also requests authorization to enter into
interest rate hedging transactions with respect to its
outstanding 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.
12. 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 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.
13. NU represents that each Interest Rate Hedge will qualify
for hedge accounting treatment on a continuing basis under
generally acceptable accounting practices ("GAAP"). NU 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
14. The proceeds from the Short-term Debt of NU 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), 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.
15. NU represents 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.
NU MONEY POOL
16. By the Prior Order, NU and certain utility and nonutility
subsidiaries were authorized to participate in the NU Money Pool.
In this Application, the Applicants seek authorization to
continue the NU Money Pool established under the authority
granted in the Prior Order through the Pool Authorization Period
and seek authorization for Boulos, Woods and SENY to be allowed
to participate in the Money Pool as both borrowers and lenders,
and for Woods Network to participate in the NU Money Pool solely
as a lender. The Applicants request that the Commission reserve
jurisdiction over the addition of any additional participants to
the NU Money Pool. (For purposes of this section, the Applicants,
with the exception of NUSCO, are referred to herein as the "Pool
Participants" and NU, YES, Mode 1, Woods Network and NGC are
referred to as the "Non-borrowing Nonutility Pool Participants").
The Pool Participants, other than the Non-borrowing Nonutility
Pool Participants, to the extent not exempted by rule 52, also
request authority to continue to enter into, from time to time,
unsecured short-term debt transactions through the NU Money Pool,
to contribute surplus funds to the NU Money Pool and to lend to
(and acquire promissory notes from) one another through the NU
Money Pool. The Non-borrowing Nonutility Pool Participants
request authority solely to contribute surplus funds and to lend
to the Pool Participants through the NU Money Pool.
17. The Applicants recognize that many registered holding
company systems have established two separate system money pools,
one for regulated utilities and the other for the system's
competitive or non-utility companies. NU has historically
maintained one system money pool in which both the utility and
non-utility companies are participants. NU commits to the
Commission to review and consider the possibility and feasibility
of establishing two separate system money pools. NU commits to
providing the Commission with the results of its review no later
than December 31, 2003.
18. The NU Money Pool will continue to be administered on behalf
of the Applicants by NUSCO under the direction of an officer of
NUSCO . The NU Money Pool will consist principally of
surplus funds received from Pool Participants, including NU. 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") are a source of funds for
making loans advances to certain of its subsidiaries through the
NU Money Pool. All External Funds will be subject to the Short-
term Debt limits of NU set forth in paragraph 22 hereof.
19. NU Money Pool transactions 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 Non-borrowing Nonutility Pool Participants), thereby
minimizing the need for short-term debt to be incurred by the
Pool Participants from external sources. Those Pool
Participants in the NU Money Pool who are regulated utility
subsidiaries of NU will have priority as borrowers from the NU
Money Pool.
20. The funds available through the NU Money Pool will be loaned
on a short-term basis to those Pool Participants, other than the
Non-borrowing Nonutility Pool Participants, that have short-term
debt requirements. If no such short-term requirements match the
amount of funds that are available 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 Massachusetts
Department of Telecommunications and Energy ("MDTE")
pursuant to Massachusetts General Laws Chapter 164,
Section 17A and the regulations thereunder.
21. 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,
equal to the daily Federal Funds Effective 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
may be incurred 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.3, Proposed Terms of The NU System Money Pool).
PROPOSED SHORT-TERM DEBT LIMITS OF UTILITY COMPANIES
22. The Prior Order imposed short-term debt limits, either
through the NU Money Pool or through unaffiliated third parties,
on NU, CL&P, WMECO, PSNH, HWP, NAEC, NNECO, YES and Yankee Gas.
None of these companies are seeking an increase in such limit.
In fact, as a result of industry restructuring, WMECO, PSNH, NAEC
and NNECO are now seeking a limit which is less than the limit
provided in the Prior Order. The short-term debt of NU,
CL&P, WMECO, PSNH, HWP, NAEC, NNECO, YES and Yankee Gas, through
the Authorization Period, that will be outstanding at any one
time, whether evidenced by short-term notes issued to lending
institutions, by commercial paper or through borrowings though
the NU Money Pool pursuant to the authority requested in this
Application, will not exceed the following:
Company Aggregate Limits
NU $400 Million
CL&P $375 Million
WMECO $200 Million
PSNH $100 Million
HWP $ 5 Million
NAEC $ 10 Million
NNECO $ 10 Million
YES $ 50 Million
Yankee Gas $100 Million
NU MONEY POOL DEBT LIMITS FOR NONUTILITY PARTICIPANTS
23. In the Prior Order, the Commission reserved jurisdiction
over the Applicants' request that there be no NU Money Pool
borrowing limit imposed on the Nonutility Pool Participants (as
defined below). The Applicants now request that the Commission
continue to reserve jurisdiction over such request and impose the
following limits on the NU Money Pool borrowing of the Nonutility
Pool Participants, until such reservation is released, as follows:
Quinnehtuk $ 10 Million
NUEI $100 Million
NGS $ 25 Million
Select $200 Million
RR $ 30 Million
Yankee Financial $ 10 Million
NorConn $ 10 Million
YESCO $ 10 Million
SESI $ 35 Million
Boulos $ 10 Million
Woods $ 10 Million
SENY $ 10 Million
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, 12 and
13 of the Act and Rules 43, 45, 52, 90 and 91 thereunder are
applicable to the transactions contemplated by this Application.
2. Within 45 days after the end of each calendar quarter, the
Applicants will file certificates of partial consummation
describing (i)the actual short-term debt of each Applicant,
including Nonutility Participants, through the NU Money Pool,
showing the names of the Participant incurring such debt, the
dates and amounts of all new short-term debt, the names of the
lenders, the maximum amount of notes outstanding to lending
institutions and the NU Money Pool and the total amount of notes
outstanding to lending institutions and the NU Money Pool at the
end of the quarter; (ii) the issue and sale of short-term notes
and commercial paper during that quarter by NU and the Utility
Borrowers pursuant to the authority requested herein; (iii) the
notional amount and principal terms of any Interest Rate Hedge
entered into during the quarter and the identity of the parties
to such instruments; and (iv) the amount and terms of any Short-
term Debt issued directly or indirectly by NU or a Utility
Borrower to third parties during the quarter. All other terms,
conditions, limitations and reporting obligations contained in
the Prior Order will apply to the proposed transactions.
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 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.
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. The NHPUC also has jurisdiction over the
issuance by PSNH of Interest Rate Hedges.
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.
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.2. 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, 2003 as that is the
date the Prior 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 December 31, 2002, NU's "aggregate
investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was
approximately $448.2 million, or approximately 59% of NU's
average "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended December 31, 2002 ($713.1
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 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 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, 2002 (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
December 31, 2002, with consolidated debt including all short-
term debt and non-recourse debt of the EWG, were as follows:
As of December 31, 2002
(thousands
of dollars) %
Common shareholders' equity $2,210,521 33.4
Preferred stock 116,200 1.8
Long-term and short-term debt 2,400,050 36.2
Rate Reduction Bonds 1,899,312 28.6
$6,626,312 100.0
If Rate Reduction Bonds are excluded the consolidated
capitalization ratio of NU as of December 31, 2002 is as follows:
As of December 31, 2002
(thousands
of dollars) %
Common shareholders' equity $2,210,521 46.8
Preferred stock 116,200 2.4
Long-term and short-term debt 2,400,050 50.8
$4,726,771 100.0%
6. NGC has made a positive contribution to earnings by
contributing $131.9 million in revenues in the 12-month period
ending December 31, 2002 and net income of $30.4 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:
(a) Exhibits (exhibits marked with an asterisk (*)
were previously filed, exhibits marked with an (#)
filed with the SEC in paper form)
*A.2 Proposed Terms of the NU Money Pool (Revised
April 2003)
A.3 Proposed Terms of the NU System Money Pool
(revised June 2003)
*D.1 New Hampshire Public Utilities Commission Order
20,416 Approving Participation of PSNH in NU Money
Pool (March 19, 1992)
D.2 MDTE Order Authorizing Participation by WMECO in
NU Money Pool
*D.3 New Hampshire Public Utilities Commission Order
23,841Approving $100 million of Short-term Debt
for PSNH
*F.2 Opinion of Counsel
*H.2 Form of Notice
#K.1 Balance Sheet and Income Statement of Nonutility
Participants for 2002
#K.2 Balance Sheet and Income Statement of
Nonutility Participants for 2001
(b) Financial Statements (previously filed)
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
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 4, 2003
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
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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In Holding Co. Act Release No. 35-27147 (March 7,
2000), the Commission noted that NU, CL&P, WMECO and PSNH would
all be below the Commission's benchmark of 30% common equity-to-
total capitalization ratio if Rate Reduction Bonds expected to be
issued were included in the calculation. The Commission found
that because of the exceptional circumstance of the state's
restructuring legislation, the following representations
mitigated the fact that the utilities were below the 30% test:
(1) that CL&P, PSNH and WMECO had investment grade ratings of BBB-
or better; (2) that CL&P, PSNH and WMECO's financial integrity
would not be impaired by the payment of dividends; (3) that CL&P,
PSNH and WMECO have and will continue to have, following the
consummation of the transactions, adequate cash and access to
working capital facilities to meet and support their normal
business operations; and finally (4) that it is in the public's
interest because both investors and consumers benefited. See also
Holding Co. Act. Release No. 35-27529 (May 11, 2002).
Id.
The Commission has. by order dated March 7, 2000 (HCAR
No. 27148)("Rule 53(c) Order") determined that NU's financing of
its investment in NGC, 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).
PSNH is authorized by order issued by the New Hampshire
Public Utilities Commission to participate in the NU Money Pool.
Thus the Applicants believe that the participation of PSNH in the
NU Money Pool is exempt from Commission jurisdiction pursuant to
Rule 52(a). To the extent the participation of PSNH is not
exempt from Commission approval under Rule 52, PSNH seeks
approval from the Commission herein. In addition, WMECO is
currently authorized to borrow through the NU Money Pool under
the Commission's Prior Order but has authorization from the
Massachusetts Public Utilities Commission (now the Massachusetts
Department of Telecommunications and Energy, the "MDTE") to lend
funds through the NU Money Pool only to CL&P, HWP, NNECO,
Quinnehtuk and RR, and is prohibited from lending funds to other
affiliates without further MDTE approval. The Applicants request
that the Commission reserve jurisdiction over any contributions
of funds by WMECO to borrowers other than CL&P, HWP, NNECO, RR
and Quinnehtuk, pending the issuance of an order from the MDTE.
Until the time that such an order is received, all lending of
funds by WMECO will be documented using grid notes.
NUSCO is not a participant of the NU Money Pool and
seeks authorization solely to administer the Money Pool under
Section 13 of the Act and Rules 90 and 91.
The Prior Order imposed the following short-term debt
limits on the utility subsidiaries of NU:
$400 million for NU
$250 million for WMECO
$375 million for CL&P
$ 75 million for NNECO,
$50 million for YES
$100 million for Yankee Gas
$ 5 million for HWP
$225 million for PSNH
$260 million for NAEC
NU will not be a borrower through the NU Money Pool.
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, 2004,
to issue securities representing unsecured indebtedness up to a
maximum of 20% of its capitalization. Based on its
capitalization as of December 31, 2002, CL&P is limited to $480
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, for general corporate purposes. (NHPUC Order 23,841,
November 9, 2001). However, in the event the NHPUC order is
revoked, lapses or is rescinded, or to the extent the issuance of
short-term debt in an amount up to $100 million is not exempt
pursuant to rule 52, PSNH wishes to have the flexibility to issue
short-term debt pursuant to Commission authorization hereunder.
In the Prior Order, the Commission reserved
jurisdiction over the Applicants' request that the Nonutility
Pool Participants have no limit on their short-term debt from the
money pool. As a result the Commission left in place limits on
the Nonutility Pool Participant's NU Money Pool borrowing
authority as follows: Quinnehtuk could borrow up to $16 million,
NUEI up to $100 million, NGS up to $20 million, Select up to $200
million, RR up to $30 million, Yankee Financial up to $10
million, NorConn up to $10 million, YESCO up to $30 million, SESI
up to $20 million and RMS up to $10 million.
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