[Federal Register Volume 62, Number 129 (Monday, July 7, 1997)]
[Notices]
[Pages 36325-36327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17541]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26735]


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

June 27, 1997.
    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 July 21, 1997, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 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.

Consolidated Natural Gas Company, et al. (70-8577) (70-8577)

    Consolidated Natural Gas Company (``CNG''), a registered holding 
company located at CNG Tower, 625 Liberty Avenue, Pittsburgh, 
Pennsylvania 15222-3199, and its wholly-owned nonutility subsidiary 
companies, CNG Energy Services Corporation (``Energy Services'') and 
CNG Products and Services, Inc., (``Products and Services''), \1\ 
located respectively at One Park Ridge Center, Pittsburgh, Pennsylvania 
15244-0746 and CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania 
15222-3199 (collectively ``Applicants''), have filed a post-effective 
amendment to their application-declaration under sections 6(a), 7, 
9(a), 10 and 12(b) of the Act and rules 43, 45 and 54 thereunder 
seeking a supplemental order pertaining to the provision of certain 
energy-related services and related loan financing. A notice of the 
filing of the initial application-declaration was issued by the 
Commission on July 21, 1995 (Holding Co. Act Release No. 26337) and an 
initial order was issued on August 28, 1995 (Holding Co. Act Release 
No. 26363).
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    \1\ CNG incorporated CNG Special Products and Services, Inc., in 
1995, as a wholly-owned non-utility subsidiary of its CNG Energy 
Services Corporation subsidiary. The name was changed in late 1995 
to CNG Products and Services, Inc. Products and Services provides 
energy-related, customer-convenience type services to customers of 
the local distribution companies in the CNG System and to others, 
primarily customers of non-affiliated utilities. The ``CNG System'' 
consists of CNG and its wholly-owned utility and non-utility 
subsidiaries.
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    The initial order authorized Products and Services to provide 
customers with ten categories of energy-related services (collectively, 
``Original Customer Services''). \2\ It also authorized CNG to provide 
Products and Services with up to $10 million in related revolving loan 
financing through December 31, 2000. Applicants now seek a supplemental 
order authorizing additional categories of energy-related services and 
allowing Products and Services to provide financing to customers \3\ in 
connection with the sale and installation of certain energy-related 
equipment (collectively, ``New Customer Services'').
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    \2\ The specific customer services approved by the initial order 
were as follows: (1) ``Service Line Maintenance Program'' (repair of 
service lines owned by and located on customers' property, in 
exchange for a nominal monthly fee); (2) ``Appliance Guard'' (an 
extended service warranty covering the cost of repairing customers' 
appliances); (3) ``Payment Power'' (bill payment protection, up to 
$400 a month for six months); (4) ``Routine Furnace Services'' 
(routine furnace inspection and repair); (5) ``One-Package Appliance 
Inspection and Replacement'' (annual inspection, maintenance or 
replacement of any appliance, including hot water heaters); (6) 
``Community Bill Payment Center'' (a centralized bill payment center 
for ``one stop'' payment of all utility and municipal bills); (7) 
``Energy Audits and Services'' (energy audits for institutional 
customers together with a turn-key service package); (8) ``Propane 
Services'' (in areas where it is not economical for local 
distribution companies to extend natural gas service via underground 
pipelines); (9) ``Gas Fired Electric Generators'' (installation of 
temporary or permanent gas-fired turbines for on-site generation and 
consumption of electricity); and (10) ``Pipeline Maintenance, 
Construction and Managerial Support Services for Others'' 
(management, construction and required maintenance for pipelines 
owned by non-affiliated utilities and provision of consulting 
services to small non-affiliated utilities).
    \3\ As in the initial order, the term ``customers'' refers to 
both customers of CNG's local distribution companies (``LDCs'') and 
others, primarily customers of utilities not affiliated with CNG. 
CNG has five wholly-owned LDCs: (1) The East Ohio Gas Company, 
serving approximately 1,081,000 customers primarily in northeastern 
Ohio; (2) The People's Natural Gas Company, serving approximately 
332,000 customers in southwestern Pennsylvania; (3) Virginia Natural 
Gas, Inc., serving approximately 184,000 customers in southeastern 
Virginia; (4) Hope Gas, Inc., serving approximately 111,000 
customers in central and northern West Virginia; and (5) West Ohio 
Gas Company, serving approximately 60,000 customers in a region in 
western Ohio centered around Lima.
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    The proposed New Customer Services would consist of the following: 
(1) Energy-Related Equipment--Products and Services would sell and 
install (a) energy-related appliances such as furnaces, air 
conditioners, hot water heaters, heat pumps, gas grills, gas lights, 
gas logs and related fireplace equipment, natural gas vehicle (``NGV'') 
conversion equipment (to convert a non-gas powered vehicle to ``dual-
fuel'' capability) and the NGV refueling equipment necessary to allow 
customers to refuel their NGVs at home, and other similar appliances, 
and (b) energy-related products that enhance safety, increase energy 
efficiency, or provide energy-related information, such as home 
security systems (including carbon monoxide, smoke and fire detectors, 
and fire extinguishers), energy consumption monitoring devices 
(including software programs), demand side management devices to 
increase energy efficiency or reduce energy consumption, and other 
similar products. (2) Energy-Related Safety Inspection and Repair 
Services--Products and Services would offer residential and commercial 
customers a safety inspection and repair service to detect and correct 
problems such as carbon monoxide leaks, and faulty equipment wiring. 
(3) Energy-Related Electronic Measurement Services--Products and 
Services would offer

[[Page 36326]]

residential, commercial and industrial customers a variety of enhanced 
measurement and billing services (such as, in the case of residential 
consumers, the ability to use a home phone or computer to determine 
what their energy bill is at any point during the month, or, in the 
case of large commercial consumers, the ability to continuously monitor 
energy consumption, prices and fuel-switching opportunities) that will 
enable them to better monitor and control their energy consumption and 
expenditures. (4) Energy-Related Marketing and Consulting Services--
Products and Services would offer marketing services to non-affiliated 
businesses by providing non-affiliated LDCs and other third parties 
with bill insert and automated meter reading services as well as other 
consulting services such as advice in how to set up a billing mechanism 
or marketing program.\4\ (5) Risk Management Products for Gas 
Customers--A variety of financial instruments may be made available to 
gas customers interested in hedging energy price or consumption 
fluctuations under existing contracts. These instruments will not be 
used for speculative purposes. (6) Expanded Service Line Maintenance 
Program--Products and Services proposes to expand the scope of the 
Service Line Maintenance Program approved in the initial order to cover 
any type of energy-related service line (wire or pipe) owned by the 
customer. In exchange for a nominal monthly fee, Products and Services 
would agree to pay for any needed repairs to customers' lines.\5\ 
Applicants state that Products and Services does not, and will not as a 
result of this expanded maintenance program, own or operate any 
facilities or utility assets as defined in sections 2(a)(3), 2(a)(4) or 
2(a)(18) of the Act. (7) Customer Financing--Applicants seek 
authorization for Products and Services to offer its own or to broker 
non-associate third-party financing to commercial, industrial and 
residential customers (``Customer Financing'') to facilitate purchases 
by its customers of goods and services included within the Energy-
Related Equipment category of New Customer Services. Customer Financing 
also would be available for purchases by CNG's gas utility customers of 
Energy-Related Equipment where the customer is not otherwise purchasing 
goods and services promoted by Products and Services. Customer 
Financing would take the form of direct loans, installment purchase 
arrangements and loan guarantees. (8) Incidental Products and 
Services--Applicants seek authorization to provide certain incidental 
products and services related to the seven categories of New Customer 
Services listed above and the ten categories of Original Customer 
Services authorized in the initial order (``Incidental Products and 
Services''). The proposed Incidental Products and Services would be 
closely related to the consumption of energy and/or the maintenance of 
property by customers. The need for such products and services would 
arise as a result of, or evolve out of, and would not differ materially 
from, the Original Customer Services and/or New Customer Services 
described above.\6\ (The Original Customer Services and the proposed 
New Customer Services, are hereafter collectively referred to as 
``Customer Services.'')
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    \4\ Applicants state that this category of New Customer Services 
expands on the ``Pipeline Maintenance, Construction and Managerial 
Support Services for Others,'' category of Original Customer 
Services approved by the initial order.
    \5\ Applicants believe that customers will find it more 
convenient and cost effective to pay one monthly fee to Products and 
Services instead of separate monthly fees to a variety of utilities 
(gas, electric, telephone, cable, water, etc.).
    \6\ Applicants state that the Proposed Incidental Products and 
Services would not involve the manufacture of energy-consuming 
equipment but could be related to, among other things, the 
maintenance, financing, sale or installation of such equipment.
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    Products and Services conducts or will conduct its Customer 
Services business both within and outside of the four states of 
Virginia, West Virginia, Pennsylvania and Ohio where the CNG System 
LDCs are located (collectively, ``LDC States''). However, applicants 
state that during the twelve-month period beginning on the first day of 
the Month following the date on which Products and Services commences 
its New Customer Services business pursuant to a supplemental order 
issued by the Commission in this matter, and for each subsequent 
calendar year thereafter, total Customer Services revenues of Products 
and Services derived from customers in the LDC States will exceed total 
Customer Service revenues of Products and Services derived from 
customers in all other states.
    Applicants state that CNG's LDCs will assist Products and Services 
with customer billing, accounting, and other energy-related services 
and anticipate that these services can be provided to Products and 
Services by the current staff at the LDCs. They state that all services 
required to conduct the Customer Services and Incidental products and 
Services businesses that are provided to Products and Services by the 
LDCs or any other CNG System company will be billed at cost in 
accordance with section 13(b) of the Act and rules 87, 90 and 91 
thereunder.

Public Service Company of Oklahoma (70-9055)

    Public Service Company of Oklahoma (``PSOK''), 212 East 6th Street, 
Tulsa, Oklahoma, 74119-1212, a wholly-owned electric utility subsidiary 
of Central and South West Corporation (``CSW''), a registered holding 
company, has filed an application under sections 9(a) and 10 of the Act 
and rule 54 thereunder seeking authorization to acquire up to 712,000 
total shares (up to 4.9% of the voting shares) of Scientech, Inc. 
(``Scientech''), a privately owned Idaho corporation that provides 
utility related services (and some ancillary and minor products such as 
replacement parts and components for commercial nuclear facilities) to 
the nuclear utility industry (``utility services business'') and 
certain United States Government agencies (``government agency services 
business'').\7\
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    \7\ Scientech has four wholly-owned subsidiaries, three majority 
owned subsidiaries and one minority owned subsidiary. The wholly-
owned subsidiaries are UNC Analytical Services, Inc. (d/b/a Belfort 
Engineering and Environmental Services, Inc.), Grant Environmental, 
Inc., NUS Information Services, Inc., and NUS Instruments, Inc. The 
majority owned subsidiaries are SRVNet, Inc., Technology 
Applications, Inc., and SCIENTECH de Venezuela, Inc. The minority 
owned subsidiary is SEMTECH, Inc.
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    Scientech's utility services business is aimed at electric 
utilities, which are restructuring and outsourcing in an increasingly 
competitive environment. Scientech provides services (including 
engineering and other services), systems (including security systems), 
and instruments, which describe, regulate, monitor and enhance the 
safety and reliability of plant operations and their environmental 
impacts (collectively, ``risk and reliability services'').\8\ Nearly 
40% of Scientech's utility services business involves the analysis and 
evaluation of operational safety and risk using proprietary software. 
Approximately 20% of Scientech's utility services business is 
associated with engineering and operational support activities 
involving nuclear materials and facilities, design and

[[Page 36327]]

installation of microwave transmission systems, and training and 
simulator instruction for nuclear power plants. Approximately 10% of 
Scientech's utility services business is involved with the design and 
installation of enhanced physical security systems, and another 10% 
involves support services related to environmental compliance and 
cleanup. Information management and other network services account for 
15% of Scientech's utility services business, and the other 5% involves 
software sales, including software used to support power plant 
operations.
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    \8\ Scientech also provides risk and reliability services 
internationally. These services, which totaled approximately $1.3 
million for the fiscal year ended January 31, 1997, are currently 
being provided to the governments of and/or utilities in Canada, 
Japan, Korea, and former Soviet Block countries. Approximately 75% 
of these services are being funded under contract with the 
Department of Energy and the Nuclear Regulatory Commission. Most of 
the remaining work is performed under direct contract with Japanese 
and Canadian utilities.
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    Under contracts with the Department of Energy relating to the 
nuclear industry, Scientech provides government agency services to the 
Department of Defense and the Nuclear Regulatory Commission. 
Scientech's government agency services business principally involves 
the design and installation of enhanced physical security systems and 
work requiring skills in safety analysis and assessment, knowledge of 
secure handling of nuclear materials, technical review, technical 
policymaking, and technical policy implementation.
    A majority of Scientech's $53 million in actual revenues for its 
fiscal year ended January 31, 1997 came from its government agency 
services business. However, Scientech has adopted a strategy of 
reducing its reliance on government contracts an applying its expertise 
to capture a greater share of the utility services market. In September 
1996, Scientech purchased the business and a portion of the assets 
(primarily customer accounts receivable and other current assets 
relating to utility services customers) of Halliburton NUS, a nuclear 
utility services provider. On a pro forma basis, including the 
Halliburton NUS acquisition, Scientech's utility services and 
government contracts businesses would have each accounted for 
approximately 48% of total of total revenues of approximately $70 
million.
    Scientech also applies some of its expertise to applications 
outside of government agencies and the utility industry. It has sold 
environmental services to mining operations, internet services to non-
utilities and risk and reliability services to the industrial sector. 
These services totalled approximately $2 million for the fiscal year 
ended January 31, 1997, which was approximately 3% of Scientech's total 
revenue. Based on Scientech's present business strategy and its view of 
optimum growth opportunities, it is anticipated that Scientech will 
continue to provide the same or similar types of products and services 
to non-utility and non-government customers and the percentage of 
Scientech's total revenue from sales of products and services to such 
customers will not materially increase.
    Scientech's through its subsidiary, NUS Information Services, Inc., 
has performed a small amount of work at the South Texas Project 
(``STP''), a nuclear generating facility partially owned by a CSW 
electric utility subsidiary, Central Power and Light Company. 
Currently, STP is subscribing to four informational database services 
provided by NUS Information Services, Inc. It also has an open work 
order for database maintenance. No other services are presently being 
provided by Scientech or its subsidiaries to the CSW system.\9\ After 
consummation of PSOK's proposed investment in Scientech, Scientech and/
or its subsidiaries may provide additional services or products to the 
CSW system, although no such services or products have been identified 
at this time.\10\
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    \9\ The CSW system is comprised of CSW and its utility and non-
utility subsidiaries. The four utility subsidiaries of the CSW 
system are Central Power & Light Company, PSOK, Southwestern 
Electric Power Company and West Texas Utilities Company.
    \10\ Applicant contends that Commission authorization under 
section 13(b) of the Act is not required for Scientech and/or its 
subsidiaries to provide services to the CSW system because, as 
discussed below, PSOK will never own more than 4.9% of the voting 
stock of Scientech and, consequently, Scientech will be neither an 
affiliate nor a subsidiary company as defined in the Act.
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    PSOK has entered into a Stock Purchase Agreement, dated June 2, 
1997, between Dr. Lawrence J. Ybarrondo, Chairman of the Board of 
Directors and founder of Scientech (and certain related trusts and 
family members) (collectively, the ``Sellers'') and PSOK.\11\ Pursuant 
to the Stock Purchase Agreement, and subject to certain conditions 
including receipt of an order from the Commission approving this 
application, PSOK shall purchase from the Sellers, at a purchase price 
of $6.00 per share, or an aggregate purchase price of $3,036,000, an 
aggregate of 506,000 shares of Scientech common stock (representing 
approximately 25% of the total outstanding capital stock of Scientech), 
consisting of 70,000 shares of Class A Voting Common Stock (``Class A 
Stock'') and 436,000 shares of Class B Nonvoting Common Stock (``Class 
B Stock'').\12\ The 70,000 shares of Class A Stock represent 4.5% of 
the Class A Stock to be outstanding immediately following consummation 
of PSOK's proposed investment in Scientech and the 436,000 shares of 
Class B Stock represent 100% of the Class B Stock to be outstanding 
immediately following consummation of PSOK's proposed investment.
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    \11\ Sellers and PSOK have also entered into an Escrow 
Agreement, Shareholders Agreement and Registration Rights Agreement, 
all dated June 2, 1997.
    \12\ Each share of Class A Stock entitles its holder to one vote 
on any matter coming before the Scientech shareholders for a vote. 
The holders of Class B Stock are not entitled to vote on any matter 
coming before the shareholders, except that no amendment to 
Scientech's Articles of Incorporation may be effected without the 
affirmative vote of holders of a majority of the outstanding shares 
of Class B Stock.
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    The Stock Purchase Agreement also grants, subject to receipt of the 
Commission approval sought in this application, an option for PSOK to 
purchase from Sellers an additional 206,000 shares of Class B Stock, 
not later than September 2, 1998, at a purchase price per share of 
$9.00 (``Option Shares''). Purchase of these additional shares would 
give PSOK ownership of approximately 34% of the total outstanding 
capital stock of Scientech. The acquisition of all shares, including 
any Option Shares, will be funded by PSOK out of internally generated 
funds.
    Each holder of Class B Stock has the right, at any time, at the 
option of the holder and without payment of any further consideration, 
to exchange each share of Class B Nonvoting Stock into one share of 
fully paid Class A Voting Stock.\13\ However, Applicant states that 
PSOK will not take any action that would cause PSOK to own or control, 
and PSOK will not own or control, more tan 4.9% of the voting stock of 
Scientech at any one time.

    \13\ Holders of Class A Stock have a corresponding right to 
convert their Class A shares into Class B shares.
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    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-17541 Filed 7-2-97; 8:45 am]
BILLING CODE 8010-01-M