[Federal Register Volume 59, Number 106 (Friday, June 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13515]


[[Page Unknown]]

[Federal Register: June 3, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26058]

 

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

May 27, 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 June 20, 1994 to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549, and 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. (70-7932)

    The Southern Company (``Southern''), 64 Perimeter Center East, 
Atlanta, Georgia 30346, a registered holding company, its wholly owned 
nonutility subsidiary companies, Southern Electric International, Inc. 
(``SEI''), 900 Ashwood Parkway, Suite 500, Atlanta, Georgia 30338 and 
Southern Company Services, Inc. (``SCS''), 64 Perimeter Center East, 
Atlanta, Georgia 30346, and Southern's operating electric utility 
subsidiary companies Southern Nuclear Operating Company, 42 Inverness 
Center Parkway, Birmingham, Alabama 36242, Alabama Power Company, 600 
Piedmont Avenue NE., Atlanta, Georgia 30308; Mississippi Power Company, 
2992 West Beach, Gulfport, Mississippi 39501; Georgia Power Company, 
333 Piedmont Avenue NE., Atlanta, Georgia 30308; Gulf Power Company, 
500 Bayfront Parkway, Pensacola, Florida 32501; and Savannah Electric 
and Power Company (``Savannah''), 600 Bay Street East, Savannah, 
Georgia 31401 (``Operating Companies''), have filed an application-
declaration under sections 6(a), 7, 9(a), 10, 12(b), 12(c), 13(b), 32 
and 33 of the Act and Rules 43, 45, 46, 53, 54, 86, 87, 90 and 91 
thereunder.
    By Commission order dated October 20, 1987 (HCAR No. 24476) (``1987 
Order''), SEI was authorized to engage in the design, development, 
construction, ownership and operation of cogeneration and independent 
power facilities within and outside the United States. SEI also 
provides technical services to industrial and commercial concerns, 
unaffiliated utilities and foreign governments in both domestic and 
international markets, and markets intellectual property acquired or 
created by Southern system companies to unaffiliated third parties in 
accordance with Commission orders dated July 17, 1981 and December 18, 
1981 (HCAR Nos. 22132 and 22315A) (``Original Orders'').\1\
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    \1\In a related proceeding (see File No. 70-8173), Southern 
proposes to restate the operational and financing authority of The 
Southern Development and Investment Group, Inc. (``Development''), 
also a wholly owned nonutility subsidiary of Southern. It is 
proposed that Development will succeed to certain of SEI's 
consulting activities (generally, consulting activities that are not 
related to domestic power generation or foreign generation, 
transmission, or distribution), and to SEI's licensing of 
intellectual property, among other business activities.
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    As a part of a plan to reorganize various non-utility businesses of 
Southern and its subsidiaries along functional lines, Southern and SEI 
propose in this application-declaration to amend and restate SEI's 
existing financing and operational authority, SEI, SCS and the 
Operating Companies also propose to enter into intrasystem service 
agreements pursuant to which such companies may render services and 
sell goods to ``exempt wholesale generators,'' or ``EWGs,'' as defined 
in Section 32 of the Act, and ``foreign utility companies,'' or 
``FUCOs,'' as defined in Section 33, as well as to associate companies 
that own qualifying facilities (``QFs'') as defined under the Public 
Utility Regulatory Policies Act of 1978, as amended (``PURPA''), or 
other facilities that SEI may hereafter be authorized to acquire.
    Southern and SEI have adopted a plan of reorganization pursuant to 
which SEI proposes to organize and acquire all of the stock of a newly 
organized Delaware corporation (``Newco'') in exchange for certain 
assets of SEI consisting primarily of rights under certain existing 
consulting agreements with third parties and accounts receivable 
associated therewith, which will be assigned to Newco; computers; 
office equipment and furniture; and interests in certain software 
programs and other proprietary technology. Newco will also assume 
certain liabilities of SEI including accounts payable, accrued pension 
and retirement costs associated with employees to be transferred to 
Newco, and certain loss reserves under existing contracts. Immediately 
thereafter, the shares of Newco will be distributed to Southern as a 
dividend distribution, and Newco and Development will be merged 
pursuant to a plan adopted under applicable state law.
    SEI and Southern propose to relinquish the authority granted by the 
Commission in the Original Orders and the 1987 Order upon the effective 
date of the Commission's order relating to this application-declaration 
and to the application of Southern and Development, except with respect 
to any contracts and investments that are entered into or made by SEI 
prior to the effective date of such orders in reliance upon and in 
accordance with the Original Orders or the 1987 Order.
    SEI proposes to continue to engage in preliminary project 
development activities (``Development Activities'') relating to the 
potential acquisition and ownership of independent power facilities, 
including QFs and facilities to be owned or operated by EWGs and FUCOs, 
and other power production facilities located within the service 
territories of the Operating Companies or the service territories of 
other members of the Southeastern Electric Reliability Council, 
together with facilities and equipment that are ancillary to the 
foregoing, such as may be used for fuel production, conversion, 
handling and/or storage; electrical transmission; and energy 
management, recovery and efficiency (hereinafter referred to 
collectively as ``Projects''). With the exception noted below, in any 
case in which SEI's Development Activities culminate in a proposal to 
acquire the securities of or other interest in any EWG or EUCO, it is 
intended that Southern, rather than SEI, would consummate the 
acquisition in an exempt transaction pursuant to section 32 or 33 of 
the Act, as applicable, subject to complying with all rules and 
regulations promulgated thereunder. Any acquisition by Southern or SEI 
of an interest in any other type of Project, and any related financing, 
would be the subject of separate filings with this Commission.
    SEI requests authority to acquire the stock of and provide needed 
working capital to one or more foreign subsidiaries through which SEI 
would conduct its project Development Activities. SEI represents that 
in no case will any such subsidiary, directly or indirectly, acquire, 
own or operate any significant assets or facilities, other than a bank 
account, leased office space and related office equipment, issue or 
acquire any securities, other than common shares issued to SEI, or 
provide services or sell goods to any associate company. The sole 
function of any such subsidiary would be to engage in Development 
Activities on behalf of SEI in a foreign country or countries whose 
laws would subject SEI to significant restrictions or penalties if SEI 
were itself to maintain a legal presence in any such country. The 
capitalization of any such subsidiaries is expected to be less than 
$50,000.
    SEI also proposes to render project development, engineering, 
design, construction and construction management, operating, fuel 
management, maintenance and power plant overhaul, and other similar 
kinds of managerial and technical services to both affiliated Project 
entities and to non-affiliated developers, operators and owners of 
independent power projects and foreign and domestic utility systems. 
SEI proposes to render such services utilizing its own work force, and 
personnel and other resources of SCS and the Operating Companies 
obtained pursuant to service agreements (``Service Agreements'') as 
described below. SEI also proposes that in conjunction with providing 
services to non-affiliates, it may enter into separate agreements to 
sell or license intellectual property it has created or acquired from 
non-affiliates in connection with its authorized business activities.
    All services rendered by SEI to non-affiliates will be based upon 
the fair market value thereof. SEI also proposes to provide such 
services and sell goods to any Project entity that is an associate 
company (including but not limited to any EWG, FUCO, or QF) at fair 
market prices, and requests an exemption pursuant to section 13(b) from 
the requirements of rules 90 and 91 as applicable to such transactions 
in any case in which any one or more of the following circumstances 
shall obtain:
    1. Such Project entity derives no part of its income, directly or 
indirectly, from the generation, transmission, or distribution of 
electric energy for sale within the United States;
    2. Such Project entity is an EWG which sells electricity at market-
based rates which have been approved by FERC or the appropriate state 
public utility commission, or a QF which sells electricity at the 
purchaser's ``avoided cost'' determined in accordance with the 
regulations under PURPA, or sells electricity at rates negotiated at 
arms'-length with large industrial or commercial customers purchasing 
such electricity for their own use and not for resale;
    3. Such Project entity sells electricity at rates based upon its 
cost of service, as approved by FERC or any state public utility 
commission having jurisdiction, provided that: (i) the purchaser of 
such electricity is not an associate company of SEI within the Southern 
system, and (ii) the terms and conditions (including price) of the 
contract pursuant to which SEI agrees to provide such services or goods 
have been expressly approved by the holders of a majority of the equity 
interests of such Project entity other than Southern or any associate 
company of Southern.
    SEI owns the exclusive rights to a proprietary computer-based 
remote generator dispatch and control program, known as ``Standby 
Capacity Network'' (``SCN''). The SCN program enables a utility company 
remotely to access the capacity associated with stand-by or emergency 
generators owned by its large customers, such as hospitals, factories, 
and office buildings and operate the generators in parallel with its 
own grid. An SCN program could be implemented pursuant to a contract 
between a utility and SEI under which SEI would agree to install 
certain equipment (primarily controls) incorporating its proprietary 
software program and interconnection equipment and to act as the 
utility's agent in operating, maintaining and fueling the customer's 
standby generator. Under such an arrangement, SEI would be compensated 
by the utility. SEI would not seek to acquire any interest in the 
customer's generating equipment, and would not take title to the 
electricity generated. SEI would retain all right, title and interest 
to the proprietary software used in SCN.
    SEI proposes to market the SCN program to both affiliated and 
unaffiliated utilities and/or their respective customers. The program 
and related services would be sold to unaffiliated parties at prices to 
be negotiated based upon the fair market value thereof. As currently 
required under the terms of the Original Orders, SEI will make the 
proprietary technology incorporated into the SCN program available to 
the Operating Companies without charge (except for the actual expenses 
incurred by SEI in making such program available). If an Operating 
Company requests SEI to provide any related service, e.g., software 
support, training of Operating Company personnel, maintenance of the 
customer's equipment, or the like, SEI would be the associate company 
for the costs of such services, determined in accordance with rules 90 
and 91.
    Under the Original Orders, SEI has entered into Service Agreements 
with SCS and each of the Operating Companies (other than Savannah, 
which was not then a subsidiary of Southern) pursuant to which 
personnel and other resources of SCS and the Operating Companies may be 
made available to SEI, upon request, to support SEI in connection with 
its authorized activities. Under these agreements, SEI is obligated to 
reimburse SCS or an Operating Company, as the case may be, for the cost 
of such services, determined in accordance with Rules 9 and 91. The 
cost of services provided by an Operating Company to SEI includes all 
direct charges and certain indirect costs, such as pension costs, 
insurance, payroll taxes, and payments to employee benefits plans, and 
a portion of the administrative and general expenses of the Operating 
Company.
    The existing Service Agreements also obligate SEI to make any new 
intellectual or proprietary property, processes, programs, computer or 
other data bases, support services, training and other facilities and 
techniques developed in the course of SEI's business available for 
utilization by other Southern system companies without charge, except 
for the actual expenses incurred in making the same available, to the 
extent that SEI has or retains proprietary rights therein. Under the 
Service Agreements, SEI has a reciprocal right to receive such 
intellectual property from SCS and the Operating Companies without 
charge, except for the actual expenses incurred in making the same 
available.
    SCS and the Operating Companies propose to continue to render 
services and provide other resources to SEI in connection with SEI's 
authorized activities in accordance with the existing Service 
Agreements, as amended, to reflect the changes to SEI's authorized 
business activities and to comply with the Commission's rules relating 
to the rendering of services or sale of goods directly by SEI or 
indirectly by the Operating Companies and SCS to EWGs and FUCOs in 
which Southern holds an interest.
    SCS and the Operating Companies will not, without requesting the 
further approval of the Commission, render any services or sell any 
goods directly or indirectly to any EWG or FUCO in which Southern holds 
an interest, except pursuant to the Service Agreements, as herein 
proposed to be amended.
    Southern proposes to invest in SEI up to an aggregate of 
$250,000,000 from time to time through December 31, 1998, in addition 
to any investments in SEI that Southern shall have made pursuant to 
previous authorizations, including but not limited to the 1987 Order, 
prior to the effective date of the order in this proceeding. It is 
proposed that such additional investments may take the form of any 
combination of cash capital contributions to SEI, loans to SEI by 
Southern, and loans to SEI by one or more lenders other than Southern 
that are guaranteed by Southern.
    SEI proposes to issue promissory notes (``Notes'') from time to 
time through December 31, 1998 to Southern or to lenders other than 
Southern which have been guaranteed by Southern, provided that the sum 
of the aggregate principal amount of Notes at any time outstanding and 
Southern's additional investments in SEI shall not exceed $250 million. 
The Notes would have maturities no later than December 31, 2003, and 
would bear interest at a rate of not more than 3% over the prime rate 
at the bank to be designated by Southern in the case of Notes issued to 
lenders other than Southern, and a rate of not more than the prime rate 
in the case of Notes issued to Southern. In connection with any sale of 
Notes to lenders other than Southern, a commitment fee may be paid in 
an amount not greater than \1/2\ of 1% of the principal amount of the 
Note. It is anticipated that any such Notes may be guaranteed by 
Southern as to principal, premium, if any, and interest. It is further 
proposed that the Notes issued to Southern may, at the option of 
Southern, be converted to capital contributions to SEI through 
Southern's forgiveness of the debt (including any accrued interest) 
represented thereby.
    Southern also proposes, from time to time, to guarantee or act as 
indemnitor of commercial sureties required to support bid bonds and 
performance and other obligations (other than securities or other 
financial instruments) issued or undertaken by SEI in connection with 
its authorized activities.
    It is therefore proposed that Southern may (i) provide such 
guarantees of, and similar provisions and arrangements concerning, the 
performance and undertaking of other obligations by SEI (or any 
subsidiary of SEI), or of any Project entity (including but not limited 
to EWGs and FUCOs) in which Southern holds a direct or indirect 
interest, and of other obligations relating to SEI's authorized 
activities, and (ii) provide such indemnifications of and with respect 
to persons acting as surety on bonds or other obligations on behalf of 
such companies, in an aggregate amount outstanding at any one time of 
$800,000,000 through December 31, 2003; provided, that any guarantees 
or indemnifications outstanding at December 31, 2003 shall continue 
until expiration or termination in accordance with their terms; and 
provided further that the aggregate amount of such authorized 
guarantees or indemnifications of sureties shall be reduced dollar for 
dollar by any similar guarantees or indemnifications of sureties made 
or incurred by Southern pursuant to authority requested in File No. 70-
8173 in connection with the business activities of Development.
    As a further limitation to the foregoing, Southern states that the 
aggregate maximum amount of its exposure at any one time under all 
performance guarantees or indemnification or similar arrangements 
entered into on behalf of subsidiary companies that are EWGs or FUCOs 
shall not exceed $250,000,000, and that such amount shall be treated as 
part of Southern's ``aggregate investment'' in all such entities for 
purposes of rule 53(a). Southern proposes to negotiate specific 
guarantees and similar provisions and arrangements with third parties, 
and indemnifications of sureties, as the need to do so arises, without 
further Commission authorization.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-13515 Filed 6-2-94; 8:45 am]
BILLING CODE 8010-01-M