[Federal Register Volume 59, Number 48 (Friday, March 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5648]


[[Page Unknown]]

[Federal Register: March 11, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-25996]

 

Filings Under the Public Utility Holding Company Act of 1935 
(``Act'')

March 4, 1994.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated thereunder. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments thereto is/are available for public 
inspection through the Commission's Office of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by March 28, 1994, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549, a serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in case of an attorney at law, by 
certificate) should be filed with the request. Any request for hearing 
shall identify specifically the issues of fact or law that are 
disputed. A person who so requests will be notified of any hearing, if 
ordered, and will receive a copy of any notice or order issued in the 
matter. After said date, the application(s) and/or declaration(s), as 
filed or as amended, may be granted and/or permitted to become 
effective.

The Southern Company, et al. (70-8233)

    The Southern Company (``Southern''), a registered holding company, 
and Southern Company Communications, Inc. (``Communications''), both at 
64 Perimeter Center East, Atlanta, Georgia 30346, have filed an 
application-declaration under Sections 6(a), 7, 9(a), 10, 12(b) and 13 
of the Act and Rules 45, 50, 50(a) (5), 81, 87, 90, 91, 93 and 94 
thereunder.
    Southern proposes to form Communications and to acquire directly 
all of its authorized capital stock of 1,000 shares, with a par value 
of $1 per share. Communications will provide the following services 
(``Communications Services''): it will design, construct, finance, 
maintain and operate the Southern system's future communications 
systems, including a mobile radio network that, when complete, will 
provide contiguous or ``seamless'' mobile radio service; it will manage 
all equipment procurement and inventory maintenance activities, 
represent the Southern system in any necessary licensing activities 
before the Federal Communications Commission (``FCC'') and become the 
FCC licensee of the 800 MHz mobile radio system and acquire and hold 
any other rights or interests in property (e.g., leases of transmitter 
towers) necessary for the construction, networking, and efficient 
operations of this network; and it will provide operations, 
maintenance, management and technical services for frequency licensees 
in connection with frequencies which third parties own that are used in 
connection with the 800 MHz system of Communications.
    The new system will modernize, update and replace the existing 
mobile radio systems currently being utilized by the operating 
companies through a wireless system that performs the functions of two-
way voice, dispatch and data transfer on a seamless, integrated basis. 
The new system will consist of towers, transmitters, telecommunications 
network facilities, associated vehicular and portable mobile user 
equipment, and control stations spaced to provide coverage throughout 
Georgia, Alabama, northern Florida, on or north of Florida Highway 40 
(to cover the general service areas of Gulf Power Company, transmission 
corridors to interconnected utilities including Southern's largest 
wholesale customers and a corridor to Tallahassee), southern 
Mississippi (to cover the general service area of Mississippi Power 
Company) and a corridor to the state capital in Jackson, Mississippi 
(``Expanded Southern Territory'').
    Southern has initiated the license application process at the FCC 
to obtain the necessary frequencies and has contracted to obtain the 
necessary equipment and technology for the new system. The frequency 
applications have included Industrial Land Transportation (``ILT''), 
General Category and Specialized Mobile Radio (``SMR'') 800 MHz 
frequencies. Southern represents that there are not sufficient ILT and 
General Category frequencies available to meet Southern's needs in 
congested markets, such as Atlanta. Southern, however, will be able to 
use its ILT and General Category licenses to supplement the SMR 
frequencies it obtains through intercategory sharing procedures. 
Southern states that, taking technology and ecomonics into account, the 
minimum number of frequencies required in urban areas in 42 frequencies 
and that it will have between 42 and 50 frequency pairs across its 
system. Southern will seek additional frequency channel pairs in order 
to optimize use of the new system, but it states that it can meet its 
system needs with the currently obtainable frequencies.
    To permit system-wide coverage and interconnection with the public 
switch telephone network, the 800 MHz fixed transmitter stations will 
be networked together, employing microwave and landline 
telecommunications facilities. The telephone interconnects will permit 
direct communications between customers and filed personnel and quick 
access to information by filed personnel.
    The system would be primarily offered to associate public utility 
companies and to the industrial, commercial and other retail and 
wholesale customers of the associate companies, including 
interconnected utilities, as well as federal, state and local public 
safety, law enforcement, and emergency management governmental 
agencies, as well as other agencies of the governments of the states of 
Georgia, Alabama, Mississippi and Florida (``Base Service'').1 The 
Base Service would also include service to other affiliates and 
subsidiaries of Southern, to the extent they are located within the 
Expanded Southern Territory. Any excess capacity beyond the Base 
Service would be marketed to others.\2\ It is expected that users will 
be charged a monthly service fee in addition to a change based on the 
actual use of the system through assessed charges for times of use. The 
monthly service fee and the time of use charges will be based upon 
competitive fair market value pricing.
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    \1\Southern states that it is anticipated that a portion of such 
classes of users and other holders of radio frequency licenses may 
place their own radio frequencies within the new system and have 
Communications manage the frequencies so that they can be integrated 
on a compatible basis and operated in the overall service, but they 
would be reserved for emergency communications with the ability to 
``spill over'' to other frequencies when necessary.
    \2\Southern asserts that the term excess capacity, in the 
context used for the mobile radio system, means the capacity which 
does not interfere with or preclude the communications necessary for 
operation of the Base Service.
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    Communications proposes that the operating companies be charged the 
cost of providing Communication Services to them in accordance with 
Rules 81, and 91. Southern states that the rates involved are 
completely and normally subject to public regulation by the FCC and may 
also be subject to state regulation; thus, it states, the provision of 
mobile radio services will be charged to associate companies in the 
Southern system on the basis of market prices in accordance with Rule 
81--the transactions will be on terms which are comparable to those 
offered to non-associate customers having due regard to any differences 
of quality or quantity. Southern estimates that this will result in an 
annual reduction in costs to the operating companies of $6 million per 
year as compared to fully allocated costs. The operating expenses such 
as general and administrative expenses and overheads will be spread 
evenly over all users, regardless of class. Southern states that the 
operating companies and their ratepayers will be the beneficiaries of 
economies of scale because their proportionate share of overheads and 
general and administrative expenses and non-variable expenses will be 
reduced as a result of the participation of other customers. All other 
transactions between Communications and associate companies which are 
not subject to FCC and/or state rate regulation will be ``at cost'' in 
compliance with Rules 90 and 91.
    Southern's investment in the infrastructure for a system, confined 
solely to its service territory, would be approximately $132 million. 
Southern represents that, in order to build out a system which includes 
necessary coverage for the Base Service, an incremental investment of 
approximately $25 million in additional funds would be necessary. In 
addition, Southern anticipates requiring $22 million for frequency 
acquisition and working capital, making the overall initial investment 
for the new system estimated at $179 million.
    Southern contemplates that Communications' business will be 
financed with investments by Southern and loans obtained from external 
sources, including vendor financing, if available. Initially, Southern 
proposes to invest up to $179 million from time to time through 
December 31, 1998, for purchases of Communications' stock, loans and 
capital contributions to Communications, or guarantees of obligations 
of Communications, or any combination thereof. To the extent capital 
contributions involve loans from Southern, such loans will be made from 
time to time prior to September 30, 1998 with maturities no later than 
September 30, 2003. They will bear an interest rate equal to Southern's 
comparable cost of capital or, if no such comparability exists, a rate 
not to exceed the greater of the prime rate in effect on the date of 
the loan at a bank designated by Southern plus three percentage points 
or 12 percent per annum. To the extent loans are made by third parties 
within the overall $179 million capitalization of Communications (other 
than credit extended by equipment vendors),3 such loans will be 
evidenced by notes issued by Communications and will have a term of 
from 5 to 20 years, with an interest rate not to exceed the greater of 
the prime rate of interest plus three percentage points per annum, or 
12 percent per annum. Such loans may be guaranteed by Southern.
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    \3\Southern states that, when the new mobile radio system is 
installed, the equipment vendor will purchase the existing equipment 
from each of the operating companies for the market value thereof 
and give each one credit which they may use for purchases from the 
vendor.
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    Southern proposes that existing communications facilities of the 
Southern system may in the future be transferred or leased to 
Communications from other affiliated companies. Southern states that 
wholly owned facilities of the operating companies, such as towers or 
tower sites or landline connections, could be used to provide network 
interconnections of the new system through lease. Existing fiber optic 
capacity held by other Southern subsidiaries may be transferred to 
Communications on an ``at cost'' basis or leased to it, so as to link 
the transmitter stations, switches, computers, etc. In addition, radio 
frequency licenses in the 800 MHz band owned by Southern or the 
operating companies will be transferred to Communications, for which 
the operating companies will be reimbursed for their costs incurred in 
obtaining such licenses. Communications will bear all costs of 
transfer.
    Initially, a small management staff of approximately five to ten 
persons will be transferred to Communications. It is contemplated that 
Southern Company Services, Inc. will provide financial, accounting, 
data processing, and internal auditing services to Communications in 
accordance with the methods and accounts previously approved by the 
Commission. In addition, personnel from the operating companies and 
Southern Development and Investment Group, Inc. will provide necessary 
services to Communications on a full cost reimbursement basis utilizing 
a work order procedure.

IP Holding Company (70-8305)

    IP Holding Company (``Holding Company''), 500 South 27th Street, 
Decatur, Illinois, 62525, a Illinois corporation has filed an 
application under Sections 3(a)(1), 9(a)(2) and 10 of the Act, 
requesting the Commission to authorize its acquisition of all of the 
outstanding common stock of Illinois Power Company (``Illinois 
Power''), an Illinois electric and gas public-utility holding company 
exempt from registration under Section 3(a)(2) of the Act pursuant to 
Rule 2 (``Acquisition''). In addition, Holding Company requests that 
upon completion of the Acquisition, the Commission grant it an 
exemption under Section 3(a)(1) from all provisions of the Act, except 
Section 9(a)(2) thereof.
    As a result of the Acquisition, Holding Company would indirectly 
acquire 20% of the outstanding common stock of Electric Energy, Inc. 
(``EEI''), an Illinois corporation. EEI owns and operates a steam 
electric generating station near Joppa, Illinois and related 
transmission facilities. EEI's electric energy is sold to the U.S. 
Department of Energy for use in its uranium processing plant near 
Paducah, Kentucky, but Illinois Power has a right to purchase a 
specified percentage of the annual output of the Joppa facility.
    Illinois Power, an Illinois corporation, is engaged in the 
generation, transmission, distribution, and sale of electric energy and 
the distribution, transportation, and sale of natural gas in the State 
of Illinois. Illinois Power and EEI are ``electric utilities'' as 
defined in Section 2(a)(3) of the Act and ``public utilities'' as 
defined in Section 2(a)(5) of the Act. Illinois Power is also a ``gas 
utility'' as defined in Section 2(a)(4) of the Act.
    Holding Company was incorporated under Illinois law on November 12, 
1993, for the purpose of carrying out the proposed corporate 
restructuring in which Holding Company will become a holding company 
over Illinois Power. Currently, Holding Company owns all of the 
outstanding common stock of IP Merging Corporation (``Merging Corp.''), 
an Illinois corporation that has also been incorporated to effect the 
restructuring. Neither Holding Company nor Merging Corp. owns any 
utility assets.
    The Acquisition will be accomplished through a merger (``Merger'') 
of Illinois Power and Merging Corp. in which Illinois Power will be the 
surviving corporation. Illinois Power and Merging Corp. entered into an 
Agreement and Plan of Merger dated November 15, 1993 (``Merger 
Agreement''), and Holding Company, Illinois Power and Merging Corp. 
entered into a Supplemental Agreement dated November 15, 1993. The 
Merger will be done on a ``pooling of interests'' basis under generally 
accepted accounting principles. As result of the Merger, the common 
stock of Merging Corp. owned by Holding Company will be converted into 
common stock of Illinois Power. The outstanding common stock of 
Illinois Power will be converted, on a share-for-share basis, into 
common stock of Holding Company, and Illinois Power will become a 
subsidiary company of Holding Company.
    The Merger Agreement also provides that the present holders of 
Illinois Power common stock will cease to have any rights as Illinois 
Power shareholders after the restructuring, except holders of shares 
who have perfected their dissenters' rights in accordance with Illinois 
law will have the right to be paid fair value of such shares. After the 
Articles of Merger are filed with the Secretary of State of Illinois, 
certificates representing shares of Illinois Power common stock will 
represent, and be exchangeable for certificates representing shares of 
Holding Company common stock. The outstanding preferred stock and debt 
of Illinois Power will not be exchanged or changed in connection with 
the restructuring, and Holding Company will thus have no outstanding 
securities other than common stock immediately following the 
restructuring. Holders of Illinois Power preferred stock and debt 
securities will continue as security holders of Illinois Power, except 
for those holders of Illinois Power preferred stock who properly 
exercise statutory appraisal rights.
    Illinois Power's present subsidiary companies, except for IP Group, 
Inc. (``IP Group'') would remain its direct subsidiary companies. IP 
Group would become a direct subsidiary company of Holding Company.
    Illinois Power currently owns 100% of the capital stock of IP 
Group, Inc., which was formed to invest in and develop independent 
power projects, to provide services for such projects, and to engage in 
other non-utility businesses (``Non-utility Businesses''). The proposed 
restructuring is intended to permit Holding Company, through IP Group, 
to participate in Non-utility Businesses in a timely manner without the 
need for prior regulatory approvals to increase financial flexibility, 
to enhance managerial accountability for separate business activities, 
and to protect Illinois Power and its ratepayers from the risks and 
costs of non-utility projects.
    Holding Company is not currently a ``holding company'' under the 
Act because it does not own, control, or hold with power to vote ten 
percent or more of the voting securities of a public-utility company. 
Holding Company asserts that, following the consummation of the Merger, 
it will be a public-utility holding company entitled to an exemption 
under Section 3(a)(1) of the Act because it and each of its public-
utility subsidiary companies from which it will derive a material part 
of its income will be predominantly intrastate in character and will 
carry on their businesses substantially within the State on Illinois.

Public Service Co. of Oklahoma (70-8341)

    Public Service Company of Oklahoma (``PSCO''), P.O. Box 201, Tulsa, 
Oklahoma 74102, an electric public utility subsidiary of Central and 
South West Corporation, a registered holding company, has filed an 
application pursuant to Sections 9(a) and 10 of the Act.
    PSCO requests authorization to invest up to $2.5 million, through 
capital stock purchases, in Excel Energy Technologies, Limited 
(``Excel''), a Delaware corporation, pursuant to an October 14, 1993 
Debenture, Common Stock and Preferred Stock Purchase Agreement 
(``Purchase Agreement''), which was signed by Excel, PSCO, and ML 
Oklahoma Venture Partners, L.P. (``Partnership''), an unaffiliated 
Oklahoma limited partnership.
    Excel is engaged in research, development, and installation of 
proprietary energy management micro-processors (``Technology''). On 
April 9, 1993, PSCO and Excel entered into a Consulting and Research 
and Development Agreement (``Consulting Agreement'') to enhance jointly 
the application of the Technology. PSCO believes that the Technology 
might provide its commercial and residential customers with significant 
demand side management (``DSM'') opportunities.
    Pursuant to the Consulting Agreement, PSCO will provide Excel with, 
for example, commercial and industrial electric power usage patterns 
and Excel will provide PSCO with product research and development 
expertise, sales experience, a database of information on installed 
energy management systems, and otherwise will consult on DSM issues. 
PSCO believes Excel and the Technology can help it advance its DSM 
program with respect to, in particular, middle-market commercial 
customers.
    Excel, the Partnership, and PSCO expect to purchase, install, and 
maintain at least five Excel energy management systems, which will 
provide data to gauge their results and evaluate customer perceptions. 
PSCO will acquire no energy management system outside of its service 
territory. Excel, the Partnership, and PSCO also intend to market the 
Technology to other utilities and other interested parties. It is 
anticipated that, in the future, more than 50% of the sales of the 
Technology will be outside the service territory of PSCO. In 
consideration for its services and energy management systems under the 
Consulting Agreement, PSCO will pay Excel up to $1.35 million and 
provide Excel with market research data.
    Under the Purchase Agreement, PSCO has agreed to acquire from Excel 
(i) 3,882 shares of Series A Preferred Stock @ $30.67 per share, which 
shares represent 19.23% of all Series A Preferred Stock, (ii) 61,336 
shares of Series B Preferred Stock @ $30.67 per share, which shares 
represent 100% of all Series B Preferred Stock, (iii) 4,334 shares of 
Common Stock for $625, which shares represent 3% of all Common Stock. 
Series A Preferred Stock is voting stock, and the 3,882 shares of 
Series A Preferred Stock will represent 2.36% of the voting stock, and 
Series B Preferred Stock is non-voting stock. In addition, under the 
Purchase Agreement, PSCO has paid Excel $200,000 to finance the further 
development of the Technology. PSCO also requests authorization to 
invest an additional $500,000 in Excel, through capital stock 
purchases, to finance further technological development.
    Both series of preferred stock are convertible into common stock 
upon the terms and conditions set forth in the Certificate of 
Designations relative to the preferred stock. Series B Preferred Stock, 
however, is convertible into non-voting common stock. The application 
states that upon conversion of the non-voting stock into voting stock, 
PSCO will own 4.99% of the voting securities of Excel. Thus it is 
stated that Excel will neither be a subsidiary company under section 
2(a)(8)(A) of the Act nor an affiliate company under section 
2(a)(11)(A) of the Act.
    The application states that PSCO will divest its equity interest in 
Excel once PSCO has achieved its objectives under its DSM program and, 
in any event, prior to December 31, 2004, unless PSCO receives 
Commission approval to retain the equity interest for an additional 
period of time.
    PSCO concluded with Excel on September 14, 1993 a Registration 
Agreement, which provides for Excel to register the common stock under 
the Securities Act of 1933. Finally, PSCO and other shareholders of 
Excel concluded on October 14, 1993 a Shareholder Agreement that allows 
PSCO to elect a single member of the six-member Excel board of 
directors. PSCO states that other rights provided to PSCO under the 
Shareholder Agreement will allow PSCO to monitor the development of the 
Technology to ensure its Compatibility with the needs of PSCO and its 
retail customers.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-5648 Filed 3-10-94; 8:45 am]
BILLING CODE 8010-01-M