[Federal Register Volume 61, Number 51 (Thursday, March 14, 1996)]
[Notices]
[Pages 10604-10605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6090]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26487]


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

March 8, 1996.
    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 declarations(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 April 1, 1996, 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.

Unitil Corporation, et al.

    Unitil Corporation (``Unitil''), a registered holding company,\1\ 
Unitil's wholly-owned non-utility subsidiary, Unitil Resources, Inc. 
(``URI''), and Unitil's wholly-owned service company subsidiary, Unitil 
Service Corp. (``Unitil Service'') (collectively ``Applicants''), all 
located at 216 Epping Road, Exeter, New Hampshire, 03833, have filed an 
application-declaration under sections 6(a), 7, 9(a), 10, 12, and 13(b) 
of the Act and rules 45, 54, 87, 90, and 91 thereunder.

    \1\ Unitil has four utility subsidiaries: Fitchburg Gas and 
Electric Light Company (``FG&E''), Concord Electric Company 
(``Concord''), Exeter & Hampton Electric Company (``E&H'') and 
Unitil Power Corporation.
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    Pursuant to a Commission order dated May 24, 1993 (HCAR No. 25816), 
URI is currently engaged in the business of providing certain energy 
related management and consulting services, including electric power 
brokering, to entities outside the Unitil holding company system. 
Applicants request authorization for URI to expand its authorized 
activities to include engaging in transactions as a wholesale and 
retail marketer of electricity, natural gas and other energy 
commodities (``collectively, ``Energy Marketing''),\2\ and providing 
customers with certain energy related services involving technical 
assistance and energy management (collectively, ``Energy Management 
Services'') \3\ While initially concentrated in the New England region, 
URI's potential customer base may include individuals and entities 
located outside the New England region.

    \2\ Applicants state that URI's Energy Marketing activities will 
involve arranging the sale and purchase, transportation, 
transmission and storage of electricity, natural gas or other energy 
commodities for a commission as well as entering into contracts to 
purchase electricity, natural gas or other energy commodities from 
suppliers and resell them to utility and nonutility customers. 
Applicants state that energy marketing arrangements may be 
undertaken for long or short term durations and pursuant to 
individualized terms and conditions, and that sales of energy to 
groups of customers would likely be aggregated together for purposes 
of obtaining competitive wholesale energy supplies. Applicants state 
that, in some cases, URI may acquire energy supplies and then market 
that energy to customers as competitively as possible, whereas in 
other cases, URI may establish contracts with customers and then 
acquire energy supplies to meet the customers' requirements. 
Although the Energy Marketing transactions URI proposes to engage in 
may take a variety of different forms, in a typical transaction, URI 
will purchase power from a utility or nonutility generator, contract 
with other utilities for the transmission of the power, and resell 
the power to a utility or end-user. Applicants expect that the bulk 
or URI's Energy Marketing activities will involve marketing 
electricity or gas, but state the URI needs to be able to engage in 
transactions involving other energy commodities, such as oil, 
refined petroleum products, gas liquids, coal, wood and other 
similar combustible substances, in order to compete effectively with 
other suppliers in the marketplace who can provide a full range of 
energy options to meet customer demands.
    \3\ Applicants state that such Energy Management Services may 
include demand side management, and energy usage consulting 
services, as well as limited engineering services pertaining to 
power quality management (ensuring uninterruptible supplies, proper 
grounding of equipment and related matters) and power factor 
correction, both of which are designed to help customers manage 
their power efficiency, supply and cost. Applicants state that 
Concord, E&H and FG&E currently provide demand side management 
services to their customers, including, among other things, hot 
water heater tank and pipe wrapping, energy efficient lighting, 
heating and cooling programs, energy audits and the provision of 
rebates in connection with energy efficient equipment. Concord, E&H 
and FG&E also currently provide engineering services pertaining to 
power quality management and power factor correction for their own 
systems and, on occasion, for their customers. Applicants note that 
some employees of Unitil's public utility subsidiaries may perform 
certain of the technical engineering functions that are part of 
URI's demand side management services but state that the performance 
of such functions will not impair the employees' ability to provide 
services to the relevant utility subsidiaries. Applicants expect 
that URI's Energy Marketing and Energy Management Services will 
often be marketed jointly to customers as a complete energy services 
package and state that the ability to offer both types of services 
will enable URI to offer complete energy management services and 
solutions to customers on a competitive basis.
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    Applicants also seek authorization for Unitil to indemnify and 
guarantee the power and fuel transactions of URI, through December 31, 
2000 and in an amount not to exceed $30 million in the

[[Page 10605]]
aggregate,\4\ and for Unitil Service to provide URI with facilities, 
personnel and services necessary for its energy Marketing and Energy 
Management Services activities.\5\

    \4\ Applicants state that URI may, from time to time, need 
Unitil to indemnify third parties, to guarantee performance of its 
obligations or payment of its debts and/or to act as surety for its 
activities. The need for such guarantee authority grows out of 
customary market practice pursuant to which energy marketing 
companies, which often are not highly capitalized, demonstrate their 
financial credibility to customers. Applicants state that the usual 
method for establishing the financial credibility of the marketing 
company is by the parent (such as Unitil) standing behind its 
subsidiary through guarantees, thus allowing the subsidiary to 
compete effectively in increasingly deregulated markets.
    \5\ Applicants state that services would be provided by Unitil 
Service pursuant to its service agreement with URI and may include 
gas and power supply planning and contracting, marketing, sales, 
customer services, engineering, operations management, conservation 
services design and contracting and related management and 
professional services. Applicants note that Unitil Service currently 
provides similar services to other Unitil system companies and state 
that Unitil Service personnel have extensive knowledge of the 
markets for electric power and natural gas and are experienced in 
evaluating potential electric power and natural gas suppliers, 
negotiating contracts and arranging for the transmission and pooling 
of electric power. URI would reimburse Unitil Service at cost for 
the services provided in the same manner as any other Unitil 
affiliate company. Applicants state that the provision of these 
services to URI by Unitil Service will not impair Unitil Service's 
ability to provide services to other Unitil system companies. They 
also note that, if needed in the future, URI could employ its own 
staff to provide these services.
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    Applicants state that URI must obtain authorization from the 
Federal Energy Regulatory Commission (``FERC'') before engaging in 
wholesale electric power marketing activities and from the appropriate 
state authorities before engaging in retail electric power marketing 
activities. Applicants state that URI will not enter into any electric 
power purchase or sale contracts that are not within federal or state 
regulatory purview and that its activities in developing wholesale and 
retail electric power markets will, therefore, be subject to 
appropriate limitations, conditions and controls.\6\ Applicants state 
that URI's gas and energy commodity marketing activities and its Energy 
Management Services activities will also be undertaken in accordance 
with all applicable federal and state laws.

    \6\ Applicants note, for example, that FERC regulations would 
preclude URI from purchasing electric energy or capacity from, or 
selling these products to, any affiliated companies in the Unitil 
system unless specifically authorized by the FERC. In addition, 
under FERC regulations, URI would be unable to charge competitive, 
market based rates at wholesale unless its affiliated public utility 
companies have filed open access transmission tariffs acceptable to 
the FERC, and until URI has satisfied the FERC that it has mitigated 
any market power which it may have. Applicants also state that, 
while URI is not deemed a utility under most state laws, URI would 
only be able to undertake retail power marketing activities in the 
context of state legislative or regulatory initiatives, such as the 
New Hampshire Retail Wheeling Pilot Program and the Massachusetts 
Industry Restructuring Proceedings. Thus, Applicants say, URI's 
retail activities would be effectively limited to those permitted by 
state regulators. Applicants also note that Unitil has notified the 
New Hampshire Public Utility Commission and the Massachusetts 
Department of Public Utilities, the two state commissions with 
jurisdiction over the public utility subsidiaries in the Unitil 
system, of the plan to expand URI's business activities.
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New England Electric System (70-8803)

    New England Electric System (``NEES''), a registered holding 
company, located at 25 Research Drive, Westborough, Massachusetts 
01582, has filed an application-declaration under sections 6(a), 7, 
9(a), 10, 12(b) and 13(b) of the Act and rule 45 thereunder.\7\

    \7\ NEES owns three retail electric utility companies (``Retail 
Companies'') serving New Hampshire, Massachusetts, and Rhode Island, 
as well as New England Power Company (``NEP''), which generates, 
purchases, transmits, and sells electric energy in wholesale 
quantities primarily to the Retail Companies.
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    NEES proposes to form one or more direct or indirect new 
subsidiaries (``Marketing Companies'') in Massachusetts, Rhode Island, 
New Hampshire, New York, New Jersey, Pennsylvania, Maryland and 
Delaware to engage in the business of wholesale and retail marketing of 
electricity.\8\ Marketing Companies in Massachusetts, Rhode Island and 
New Hampshire that elect to provide Standard Offer Service may provide 
such services only to customers of affiliated Retail Companies. In 
addition, NEES proposes to establish Marketing Companies in each of 
these three states, as well as the other states noted above, that will 
market electricity to retail and wholesale customers of affiliated 
Retail Companies that do not choose Standard Offer Service and to 
customers of nonaffiliated electric utilities (``General Marketing 
Companies'').\9\

    \8\ New Hampshire has adopted a pilot program to establish 
retail electric competition, under which each New Hampshire utility 
must allow customers representing three percent of their peak loads 
to have access to alternative suppliers of electricity for two 
years, starting on or about May 28, 1996. Massachusetts and Rhode 
Island also are considering programs to promote retail competition. 
Under a proposal developed by NEES, customers could elect to receive 
service under a standard offer from an affiliate of their incumbent 
utility (``Standard Offer Service''), the pricing of which would be 
approved by regulators.
    \9\ Under New Hampshire's pilot program, a General Marketing 
Company would have limited ability to contract with customers of 
nonaffiliated electric utilities within New Hampshire.
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    The Marketing Companies also propose to provide a broad range of 
energy and related services to customers, including but not limited to 
audits, power quality, fuel supply, repair, maintenance, construction, 
design, engineering and consulting.
    Initially, the Marketing Companies are expected to have only a few 
employees, primarily sales staff. Technical and support staff needed 
for a particular project could be assigned for the duration of that 
project from NEES, NEP and/or the Retail Companies. No more than 1% of 
the employees of NEES, NEP and/or the Retail Companies will render, 
directly or indirectly, services to the Marketing Companies at any one 
time. All costs associated with such staff (including compensation, 
overheads and benefits) would be fully reimbursed by the Marketing 
Company to which they were assigned in accordance with rules 90 and 91. 
Reimbursements for these costs will be on a thirty-day cycle in 
accordance with service contracts to be entered.
    NEES proposes initially to finance the Marketing Companies by 
purchasing 1,000 shares of their capital stock, for a total purchase 
price of $1,000. Subsequently, NEES intends to make capital 
contributions and/or loans to the Marketing Companies from time to time 
through December 31, 1999, provided that such contributions and/or 
loans for all Marketing Companies will not exceed $15 million. Any 
loans will be in the form of noninterest bearing subordinated notes 
payable in twenty years or less from the date of issue. The Marketing 
Company may prepay any or all of the outstanding notes without premium 
or penalty. NEES shall only make such loans provided: (a) There shall 
be in full force and effect appropriate orders of all regulatory 
authorities having jurisdiction; (b) the making of such loan shall not 
contravene any provision of law or any provisions of the certificate of 
incorporation or by-laws or any binding agreement of the Marketing 
Company; (c) and the making of such loan shall not contravene any 
provision of law or any provision of the Agreement and Declaration of 
Trust of NEES. To the extent that these loans require state commission 
approval, rule 52 of the Act may apply.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
FR Doc. 96-6090 Filed 3-13-96; 8:45 am]
BILLING CODE 8010-01-M