[Federal Register Volume 63, Number 186 (Friday, September 25, 1998)]
[Notices]
[Pages 51383-51388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25656]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26917]


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

September 18, 1998.
    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 under the Act. 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 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 October 13, 1998, 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 
should 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 October 13, 1998, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Entergy Corporation (70-9049)

    Entergy Corporation (``Entergy''), a registered holding company, 
639 Loyola Avenue, New Orleans, Louisiana 70113, has filed an 
application-declaration under sections 6(a), 7, 12(b), 32 and 33 of the 
Act and rules 45, 53 and 54 under the Act.
    Entergy, through its direct and indirect subsidiary companies, is 
engaged, among other things, in investing in and developing exempt 
wholesale generators (``EWGs'') and foreign utility companies 
(``FUCOs''), as each is defined in the Act. Entergy is currently 
authorized by several orders to finance these activities through the 
issuance and sale of debt and equity securities. Under the terms of two 
such orders,\1\ Entergy is authorized to issue and sell up to 30 
million shares of its common stock (``Common Stock'') under its 
dividend reinvestment and stock purchase plan. Under the terms of 
another such order, dated February 26, 1997 (HCAR No. 26674), Entergy 
is authorized to issue unsecured notes through December 31, 2002, in an 
aggregate principal amount at any time outstanding not to exceed $500 
million.
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    \1\ HCAR No. 25541 (June 6, 1996) and HCAR No. 26693 (March 25, 
1997).
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    Entergy now requests that the Commission exempt Entergy from the 
requirements of rule 53(a)(1) under the Act, to allow Entergy to issue 
securities for the purpose of investing in EWGs and FUCOs, and to issue 
guarantees relative to the obligations of these entities.\2\ Under the 
proposal, the aggregate amount of these securities and guaranties 
outstanding at any time would not, when added to Entergy's aggregate 
investment in EWGs and FUCOs, exceed 100% of Entergy's consolidated 
retained earnings.
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    \2\ Entergy is currently seeking Commission approval in a 
separate filing to finance its investments in EWGs and FUCOs through 
providing guarantees or other forms of credit support in respect of 
the securities or other obligations.
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    The consolidated retained earnings of Entergy through March 31, 
1998 were about $2.1936 billion. Entergy had aggregate investments of 
about $1.1838

[[Page 51384]]

billion through March 31, 1998 (or approximately 54% of its 
consolidated retained earnings).\3\
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    \3\ Entergy states that its aggregate investment in EWGs and 
FUCOs currently exceeds the 50% limitation in Rule 53(a)(1). It 
states that this is due to certain write-offs against Entergy's 
consolidated retained earnings, including a net decrease of 
approximately $140 million from the second quarter to the third 
quarter of 1997. Entergy attributes this net decrease primarily to 
the recording of a one-time ``windfall profits tax'' imposed by the 
British government on London Electricity plc, an indirect subsidiary 
of Entergy and a FUCO.
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Conectiv, et al. (70-9095)

    Conectiv, a registered public utility holding company under the 
Act, and Conectiv's subsidiary companies, Delmarva Power & Light 
Company (``Delmarva''), Conectiv Resource Partners, Inc. and Conectiv 
Energy Supply Company, all located at 800 King Street, Wilmington, 
Delaware 19899; Delmarva Capital Investments, Inc., Conectiv Services, 
Inc., Conectiv Communications, Inc., Delmarva Services Company, DCI I, 
Inc., DCI II, Inc., DCTC-Burney, Inc., Christiana Capital Management, 
Inc., Delmarva Operating Services Co., Conectiv Solutions, LLC, 
Conectiv Energy, Inc., Power Consulting Group, Inc., and Conectiv 
Plumbing LLC, all located at 252 Chapman Road, P.O. Box 6066, Newark, 
Delaware 19714; Atlantic City Electric Company, Atlantic Energy 
Enterprises, Inc., and Atlantic Energy International, Inc., all located 
at 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234; 
Atlantic Generation, Inc., Atlantic Southern Properties, Inc., ATE 
Investment, Inc., Conectiv Thermal Systems, Inc., CoastalComm, Inc., 
Atlantic Energy Technology, Inc., Binghamton General, Inc., Binghamton 
Limited, Inc., Pedrick Ltd., Inc., Pedrick Gen. Inc., Vineland Limited, 
Inc., Vineland General, Inc., Atlantic Jersey Thermal Systems, Inc., 
ATS Operating Services, Inc., The Earth Exchange, Inc., and Atlantic 
Paxton Cogeneration, Inc., all located at 5100 Harding Highway, Mays 
Landing, New Jersey 08330; and Petron Oil Corporation (``Petron''), 180 
Gordon Drive, Exton, Pennsylvania 19341-1328, collectively, 
``Applicants''), have filed a post-effective amendment to an 
application-declaration filed under sections 6(a), 7, 9(a), 10 and 
12(b) of the Act and rules 43(a), 45 and 54 under the Act.
    By order dated February 26, 1998 (HCAR No. 26833) (``Financing 
Order''), the Commission authorized Conectiv to issue short-term debt 
through December 31, 2000 up to an amount which, when aggregated with 
outstanding short-term debt issued by Delmarva, would not exceed $500 
million at any one time outstanding (``Short-Term Debt 
Authorization'').\4\ In the Financing Order, the Commission also 
authorized Conectiv to issue up to 10 million shares of its common 
stock (``Common Stock'') for benefit plans and a dividend reinvestment 
plan. In addition, the Financing Order authorized Conectiv and its 
subsidiaries to establish a system money pool (``Money Pool'').
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    \4\ Delmarva is limited by order of the Virginia State 
Corporation Commission to a maximum of $275 million short-term debt 
at any one time outstanding through December 31, 1999.
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    Conectiv now requests that the Short-Term Debt Authorization for 
Conectiv be increased from $500 million to $800 million. Conectiv 
states that it seeks no other changes to the authority granted by the 
Financing Order to incur short-term debt. The short-term debt will be 
used to provide working capital for the general corporate purposes of 
Conectiv and its subsidiaries and to fund the capital requirements of 
Conectiv's subsidiaries until long-term financing can be obtained.\5\
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    \5\ Conectiv states that general corporate purposes could 
include interim funding of the repurchase of outstanding long-term 
securities.
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    Applicants also request that the description of the benefit plans 
under which Common Stock may be issued be amended to include a prior 
Delmarva incentive plan. In the Financing Order, Conectiv was 
authorized to issue Common Stock under the terms of the Conectiv 
incentive compensation plan (the ``Conectiv Plan'') and of future 
compensation plans, subject to certain conditions. However, Conectiv 
states that options had been issued under an existing Delmarva long-
term incentive plan (the ``Delmarva Plan'') that were not extinguished 
upon the effective date of the acquisition of Delmarva and Atlantic 
Energy, Inc. by Conectiv. These options were converted to options to 
buy Common Stock. Conectiv proposes to expand its authority under the 
Financing Order so as to include authority to issue Common Stock under 
the Delmarva Plan as well as the Conectiv Plan and future plans.
    Finally, Applicants request authority for Petron to participate in 
the Money Pool. Conectiv states that Petron was purchased by Conectiv 
Energy Supply Company (previously Delmarva Energy Company) in an exempt 
acquisition of securities under rule 58 under the Act after the Money 
Pool was established.

GPU, Inc., et al. (70-9309)

    GPU, Inc. (``GPU''), 300 Madison Avenue, Morristown, New Jersey 
07962, a registered holding company, and its electric utility 
subsidiary companies, Jersey Central Power & Light Company (``JCP&L''), 
Metropolitan Edison Company (``Met-Ed'') and Pennsylvania Electric 
Company (``Penelec''), all located at 2800 Pottsville Pike, Reading 
Pennsylvania 19605, have filed a declaration under section 12(b) of the 
Act and rules 45 and 54 under the Act.
    By order dated March 24, 1997 (HCAR No. 26690) (``1997 Order''), 
GPU was authorized to enter into letter of credit reimbursement 
agreements (``Reimbursement Agreements'') with banks in aggregate face 
amounts of up to $40 million, through December 31, 2006. The letters of 
credit underlying the Reimbursement Agreements were executed to provide 
security for the workers compensation obligations of GPU subsidiaries 
GPU Service, Inc. (``GPUS''), JCP&L, GPU Nuclear Corporation (``GPUN'') 
and GPU Generation, Inc. (``GPUG'').\6\ The Commission reserved 
jurisdiction in that order over GPU's request to enter into similar 
letter of credit reimbursement agreements for the benefit of Met-Ed and 
Penelec. Separately, by orders dated April 14, 1993 (``1993 Order'') 
and March 15, 1994 (``1994 Order'') (HCAR Nos. 25793 and 26003, 
respectively), Met-Ed and Penelec, together, and JCP&L, alone, were 
authorized to enter into similar letter of credit reimbursement 
agreements to aggregate face amounts of up to $20 and $15 million, 
respectively, through December 31, 1998.\7\
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    \6\ GPU maintains two separate Reimbursement Agreements under 
the 1997 Order for workers compensation obligations related to New 
Jersey and Pennsylvania employees of JCP&L, GPUS, GPUN and GPUG, 
with face amounts of $9.68 million and $4.84 million, respectively, 
that expire December 31, 1998.
    \7\ Under authority of the 1993 Order, Penelec and Met-Ed each 
have reimbursement agreements with face amounts of $2.73 million and 
$706,000, also expiring December 31, 1998. JCP&L did not exercise 
its authority under the 1994 Order to enter into any reimbursement 
agreements.
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    GPUS now intends, through December 31, 2006, to enter into a 
reimbursement agreement for the New Jersey employees and a 
reimbursement agreement for the Pennsylvania employees of itself, 
JCP&L, Met-Ed, Penelec, GPUN and GPUG. GPU proposes to be a party to 
these agreements or to guarantee GPUS' obligations under them. GPU, 
JCP&L, Met-Ed and Penlec propose that an order in this matter supersede 
the 1993, 1994 and 1997 Orders, except that existing reimbursement 
agreements made under those orders will not be affected.
    Each agreement will have a face amount of up to $20 million and 
will be co-signed or guaranteed by GPU.

[[Page 51385]]

Drawings under the Reimbursement Agreements will bear interest at no 
more than the effective prime rate of the bank issuing a letter of 
credit. The terms for the Reimbursement Agreements will not exceed 
three years.
    GPUS will seek reimbursement directly from the associate company 
responsible for the drawing. It will allocate Reimbursement Agreement 
fees based on loss exposure (determined generally by payroll) in the 
relevant state.

Niagara Mohawk Holdings, Inc. (70-9339)

    Niagara Mohawk Holdings, Inc. (``Holdings''), 300 Erie Boulevard, 
Syracuse, New York 13202, a wholly owned subsidiary company of Niagara 
Mohawk Power Corporation (``Niagara Mohawk''), a New York gas and 
electric utility holding company exempt from registration under section 
3(a)(2) and rule 2 of the Act, has filed an application under sections 
3(a)(1), 9(a)(2) and 10 of the Act.
    Holdings proposes to acquire all of the outstanding common stock of 
Niagara Mohawk and, indirectly, 86% of the outstanding common stock of 
Beebee Island Corp. (``Beebee Island''), 67% of the outstanding common 
stock of Moreau Manufacturing Corp. (``Moreau''), and 50% of Canadian 
Niagara Power Company (``CNP'') as described below.
    The acquisition will be accomplished through an exchange 
(``Exchange'') of each outstanding share of Niagara Mohawk common stock 
for one share of Holdings common stock. As a result of the Exchange, 
Holdings will become a holding company, Niagara Mohawk will become a 
subsidiary of Holdings, and all of Holdings' common stock outstanding 
immediately after the Exchange will be owned by the former holders of 
Niagara Mohawk common stock outstanding immediately prior to the 
Exchange.
    After the Exchange, certain of Niagara Mohawk's existing nonutility 
subsidiaries will be transferred to Holdings and become subsidiaries of 
Holdings.\8\ Holdings will have no material assets other than its 
ownership of the stock of its subsidiaries. Holdings states that it 
will not assume or guarantee the current indebtedness of Niagara Mohawk 
in connection with the Exchange.
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    \8\ Niagara Mohawk's nonutility subsidiaries include: NM 
Uranium, Inc., NM Holdings, Inc. and NM Receivables Corp.
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    Niagara Mohawk is engaged in the generation, transmission, 
distribution and purchase of electricity in the eastern, central, 
northern and western sections of the State of New York having a total 
population of 3.5 million, and purchasing, transporting and 
distributing natural gas in the eastern, central and northern sections 
of the State of New York. Niagara Mohawk had $3,966,404,000 in 
consolidated operating revenues in 1997. Niagara Mohawk is subject to 
the regulatory authority of the New York Public Service Commission.
    Niagara Mohawk currently owns a subsidiary company, Opinac North 
America, Inc. (``Opinac NA''), which in turn owns Opinac Energy 
Corporation, Plum Street Enterprises, Inc. and Plum Street Energy 
Marketing, Inc. (a subsidiary of Plum Street Enterprises, Inc.). Opinac 
Energy Corporation owns 50% of CNP, a public utility as defined in the 
Act, which owns a 99.99% interest in Canadian Niagara Wind Power 
Company, Inc. and Cowley Ridge Partnership and generates electricity at 
the William B. Rankine Generating Station located in Niagara Falls, 
Ontario, Canada.\9\ CNP distributes electricity to residential, 
commercial and industrial customers in Niagara Falls and Fort Erie, 
Ontario. CNP also has an international electric interconnection with 
Niagara Mohawk and both sell power to, and purchase power from, Niagara 
Mohawk at wholesale. Otherwise, CNP conducts its business wholly within 
Canada.
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    \9\ Opinac Energy Corporation is an exempt holding company under 
section 3(a)(5) of the Public Utility Holding Company Act. (HCAR No. 
25632, September 16, 1992).
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    Niagara Mohawk also owns a majority interest in two additional 
utility companies: Beebee Island\10\ and Moreau.\11\ Beebee Island 
operates a 7.7 megawatt hydroelectric generating station located on the 
Black River in the State of New York. Moreau operates a 5.0 megawatt 
hydroelectric generating station located on the Hudson River in New 
York state. Beebee Island and Moreau have contractual agreements with 
their respective owners to sell 100% of their power in accordance with 
ownership percentages on a wholesale basis.
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    \10\ Niagara Mohawk owns 86% of the outstanding common stock of 
Beebee Island, the remaining 13% is owned by Ahlstrom Filtration, 
Inc.
    \11\ Niagara Mohawk owns 67% of the outstanding common stock of 
Moreau, the remaining 33% is owned by Finch, Pruyn and Company.
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    Holdings states that the proposed corporate restructuring is 
intended to permit Niagara Mohawk and its subsidiaries the financial 
and regulatory flexibility to compete more effectively in an 
increasingly competitive energy industry by providing a structure that 
can accommodate both regulated and unregulated lines of business.
    Holdings asserts that following the Exchange, 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 subsidiaries from 
which it derives a material part of its income will be predominately 
intrastate in character and will carry on their business substantially 
in the State of New York.

Northeast Utilities (70-9343)

    Northeast Utilities (``NU''), a registered holding company, located 
at 174 Brush Hill Avenue, West Springfield, Massachusetts 01090-0010, 
has filed an application-declaration under sections 6(a), 7, 9(a), 10, 
and 12(b) of the Act and rules 45 and 54 under the Act.
    NU requests authorization through December 31, 1999, to organize, 
acquire the capital stock, and provide financing in respect to a new, 
wholly owned subsidiary (``NEWCO''), which will, through multiple 
subsidiaries, engage in a variety of energy-related and other 
activities and acquire and manage nonnuclear generating plants. Upon 
formation, NEWCO will issue, and NU will acquire, one hundred shares of 
common stock, par value $1 per share for $100,000. NU further proposes 
through December 31, 1999, to invest up to $150 million \12\ for 
NEWCO's preliminary development activities and administrative costs 
associated with, among other things, (1) identifying and analyzing 
generation acquisition opportunities for these projects (in the 
aggregate amount of up to $10 million) and (2) developing and managing 
NEWCO's other investments (in the aggregate amount of up to $140 
million).
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    \12\ Each investment by NU in NEWCO will take the form of 
additional acquisitions of capital stock, capital contributions, 
open account advances or subordinated loans.
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    NEWCO proposes to participate in the auction of nonnuclear 
generating assets through formation of a wholly owned subsidiary GENCO. 
GENCO will issue, and NEWCO will acquire, one hundred shares of common 
stock, par value $1 per share. NEWCO will invest an additional $10 
million in GENCO through December 31, 1999. Subsequently, NEWCO will 
issue to NU and NU will acquire, 100 shares of NEWCO common stock for 
$100,000, and in turn, GENCO will issue to NEWCO and NEWCO will acquire 
100 shares of GENCO common stock for $10,000.
    NU and NEWCO also propose through December 31, 1999 to issue 
guarantees

[[Page 51386]]

or provide other forms of credit support or enhancements (collectively, 
``Guarantees'') to, or for the benefit of, nonutility companies and 
other direct or indirect subsidiaries or affiliates of NEWCO in an 
aggregate amount not to exceed $75 million. Guarantees may take the 
form of NU or NEWCO agreeing to guarantee, undertake reimbursement 
obligations, assume liabilities or other obligations with respect to or 
act as surety on, bonds, letters of credit, evidences of indebtedness, 
equity commitments, performance and other obligations undertaken by NU, 
NEWCO, GENCO, the nonutility companies or its affiliates.
    NU and NEWCO represent that the terms and conditions of the 
Guarantees will be established through arm's length negotiations based 
upon current market conditions. NU and NEWCO further undertake that any 
Guarantee they issue will be without recourse to any of the system 
operating companies to the extent not authorized under rule 52.
    NU and NEWCO represent that no Commission authorization is sought 
under this application-declaration for the acquisition or operation of 
any public utility company as defined under the Act.

Northern States Power Company (70-9337)

    Northern States Power Company (``NSP''), 414 Nicollet Mall, 
Minneapolis, Minnesota 55401, a Minnesota combination electric and gas 
public-utility company and a public-utility holding company exempt from 
registration by order under section 3(a)(2) of the Act,\13\ has filed 
an application under sections 3(a)(2), 9(a) and 10 of the Act in 
connection with its acquisition of all of the issued and outstanding 
common stock of Black Mountain Gas Company (``BMG''), an Arizona gas 
utility company.
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    \13\ See Northern States Power Co., Holding Co. ACt Release No. 
22334 (Dec. 23, 1981). Section 3(a)(2) of the Act provides for the 
exemption of a public-utility holding company that ``is 
predominantly a public-utility company whose operations as such do 
not extend beyond the State in which it is organized and States 
contiguous thereto.''
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    NSP is engaged primarily in the generation, transmission and 
distribution of electricity throughout a 30,000 square mile service 
area in Minnesota, South Dakota and North Dakota. NSP also purchases, 
distributes and sells natural gas to retail customers, and transports 
customer-owned gas, in approximately 118 communities within this area. 
NSP provides electric utility service in South Dakota and electric and 
gas utility service in Minnesota and North Dakota. Of the more than 2.5 
million people served by NSP, the majority are concentrated in the 
Minneapolis-St. Paul metropolitan area. In 1997, more than 73% of the 
electric retail revenue of NSP was derived from sales in the 
Minneapolis-St. Paul metropolitan area and more than 66% of its retail 
gas revenue was derived from sales in the St. Paul metropolitan area. 
As of December 31, 1997, NSP provided electric utility service to 
approximately 1,220,000 customers and gas utility service to 
approximately 375,000 customers.\14\
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    \14\ NSP is also engaged, directly and indirectly, in various 
nonutility businesses. For the year ended December 31, 1997, 
approximately 8% of NSP's consolidated operating revenues (before 
intercompany elminations) and 8% of its consolidated net income were 
derived from the nonutility businesses. As of December 31, 1997, 
approximately 20% of NSP's consolidated assets were invested in 
nonutility businesses.
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    NSP is subject to regulation by the Minnesota Public Utilities 
Commission (``Minnesota Commission''), the North Dakota Public Service 
Commission (``North Dakota Commission'') and the South Dakota Public 
Utilities Commission (``South Dakota Commission'') with respect to its 
retail sales rates, services and other aspects of its retail 
operations.\15\
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    \15\ Wholesale rates for electric energy sold in interstate 
commerce, wheeling rates for energy transmission in interstate 
commerce, and certain other activities of NSP and NSP-W, defined 
below, are subject to the jurisdiction of the Federal Energy 
Regulatory Commission (``FERC''). The operation and construction of 
NSP's Prairie Island and Monticello nuclear facilities are subject 
to regulation by the Nuclear Regulatory Commission.
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    NSP owns all of the outstanding common stock of Northern States 
Power Company (``NSP-W''), a Wisconsin public-utility company. NSP-W is 
engaged in the generation, transmission and distribution of electricity 
to approximately 206,700 retail customers in an approximately 18,900 
square mile area in northwestern Wisconsin; to approximately 9,200 
electric retail customers in an approximately 300 square mile area in 
the western portion of the Upper Peninsula of Michigan; and to 10 
wholesale customers in the same general area. NSP-W relies primarily on 
NSP for base load generation and purchases of power to meet the needs 
of its customers. The electric operations of NSP and NSP-W are fully 
integrated and all generating units are centrally dispatched by NSP.
    NSP-W also purchases, distributes and sells natural gas to retail 
customers, or transports customer-owned natural gas, in the same 
service territory to approximately 72,100 customers in Wisconsin and 
4,900 customers in Michigan. In 1997, NSP-W provided approximately 13% 
of NSP's consolidated revenues. NSP-W is subject to regulation by the 
Public Service Commission of Wisconsin (``Wisconsin Commission'') and 
the Michigan Public Service Commission (``Michigan Commission'') with 
respect to its retail sales rates, services and other aspects of its 
retail operations.
    For the year ended December 31, 1997, NSP's operating revenues on a 
consolidated basis were $3.2 billion, consisting of the following 
(before intercompany eliminations):

                          [Dollars in millions]
------------------------------------------------------------------------
                                          Electric     Gas
                                          utility    utility     Other
------------------------------------------------------------------------
NSP....................................     $2,101       $415         $0
NSP-W..................................        312         90          0
Non-Utility Subsidiaries...............          0          0        198
------------------------------------------------------------------------

    Consolidated assets of NSP and its subsidiaries at December 31, 
1997 were approximately $7.1 billion, consisting of $3.7 billion in net 
electric utility property, plant and equipment ($3.1 billion for NSP 
and $573 million for NSP-W); $415 million in net gas utility property, 
plant and equipment ($355 million for NSP and $60 million for NSP-W); 
$1.4 billion in nonutility subsidiary assets; and $1.6 billion in other 
corporate assets.
    For the twelve months ended March 31, 1998, NSP's operating 
revenues were $3.1 billion, consisting of the following (before 
intercompany eliminations):

                          [Dollars in millions]
------------------------------------------------------------------------
                                          Electric     Gas
                                          utility    utility     Other
------------------------------------------------------------------------
NSP....................................     $2,105       $378         $0
NSP-W..................................        312         82          0
Non-Utility Subsidiaries...............          0          0        198
------------------------------------------------------------------------

    Consolidated assets of NSP and its subsidiaries as of March 31, 
1998 were approximately $7.2 billion, consisting of $3.7 billion in net 
electric utility property, plant and equipment ($3.1 billion for NSP 
and $574 million for NSP-W); $414 million in net gas utility property, 
plant and equipment ($355 million for NSP and $59 million for NSP-W); 
$1.4 billion in nonutility subsidiary assets; and $1.7 billion in other 
corporate assets.
    As of July 31, 1998, there were 151,415,882 shares of common stock, 
$2.50 par value (``NSP Common Stock''), and 1,050,000 shares of 
cumulative

[[Page 51387]]

preferred stock, issued and outstanding. NSP-W does not have any 
preferred stock outstanding and all of its common stock is owned by 
NSP.
    In accordance with an Agreement and Plan of Merger dated as of 
December 29, 1997, and following receipt of necessary state regulatory 
approvals, BMG was merged into NSP, with NSP as the surviving 
corporation (``Merger''), on July 24, 1998. The Merger was approved by 
the Arizona Corporation Service Commission (``Arizona Commission''), 
the Minnesota Commission and the North Dakota Commission. The 
application states that the Merger was a transitional combination, an 
initial step designed to effect the objective, discussed below, of 
NSP's becoming the holding company of a second public-utility 
subsidiary, BMG.
    BMG, an Arizona corporation, is a gas utility company as defined in 
section 2(a)(4) of the Act.\16\ It provides natural gas distribution in 
an approximately 100 square mile area in Maricopa County, Arizona, and 
provides propane gas distribution in an approximately 20 square mile 
area in Coconino County, Arizona. As of the year ended December 31, 
1997, BMG provided utility services to 6,097 customers, primarily 
residential.\17\ The Arizona Commission regulates the retail rates of 
BMG. BMG is not subject to regulation under the jurisdiction of the 
FERC.\18\
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    \16\ BMG has no subsidiaries.
    \17\ Non-residential customers include two school districts, 
three resorts and multiple light commercial customers.
    \18\ BMG also provides nonutility services and bulk propane 
sales through its Lake Powell Propane division. Such nonutility 
services also include appliance repair. In 1997, revenues and net 
income from nonutility services totalled $865,000 and $190,000, 
respectively, representing 14% and 14.7% of BMG's operating revenue 
and net income, respectively, for the year ended December 31, 1997.
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    BMG's total operating revenues for the years ended December 31, 
1995, 1996 and 1997 were approximately $4.5 million, $5.2 million, and 
$6.2 million, respectively.\19\ For the same periods, BMG's net income 
was approximately $900,000, $975,000 and $1.3 million, respectively. 
BMG's net utility assets as of December 31, 1996 and 1997 were 
approximately $9.7 million and $10.3 million, respectively.
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    \19\ Of the total operating revenues of $6.2 million reported 
for the year ended December 31, 1997, $865,000 (14%) was 
attributable to BMG's nonutility operations. For the same period, 
BMG net income was approximately $1.3 million, of which $190,000 
(14.7%) was attributable to its nonutility operations.
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    On a pro forma basis, as of December 31, 1997, the combined gas 
operating revenues of NSP, NSP-W and BMG would have totaled 
approximately $510 million, of which BMG would have provided 
approximately 1% of the total. BMG would have represented approximately 
0.54% of consolidated net income, 0.24% of consolidated net utility 
plant and 0.19% of consolidated total assets.
    As of December 29, 1997, there were 911,492 shares of BMG common 
stock (``BMG Common Stock''), no par value, issued and outstanding. The 
shareholders of BMG Common Stock approved the Merger at a special 
meeting held on May 21, 1998.
     Upon consummation of the Merger, each share of BMG Common Stock 
(except shares owned by BMG as treasury stock or held by BMG 
shareholders who perfected dissenters' rights (``Dissenting Shares'')) 
was cancelled and converted into a fraction of a share of NSP Common 
Stock equal to the quotient derived by dividing (A) $17,750,000 by (B) 
the product of (i) the volume weighted average on the New York Stock 
Exchange for the twenty full trading days ending on the third full 
trading day prior to the date (``Effective Time'') the Merger became 
effective (``Average NSP Share Price'') and (ii) the number of shares 
of BMG Common Stock issued and outstanding immediately prior to the 
Effective Time.
    The application relates to the separation (``Spin-Off,'' and, 
together with the Merger, ``Transaction'') of the former assets of BMG 
into a wholly owned, first-tier subsidiary of NSP. NSP will cause the 
assets to be transferred following receipt of the requested order of 
the Commission. Upon completion of the Transaction, NSP will own 100% 
of the common stock of each of NSP-W and BMG. The application states 
that current utility operations of NSP and NSP-W and the nonutility 
activities of NSP's other subsidiaries will be unaffected. BMG, as a 
wholly owned subsidiary of NSP, will continue to distribute natural gas 
in Arizona and will continue to maintain its headquarters in that 
state. No significant changes to the operations of BMG are anticipated.
    The application states that the Transaction will produce benefits 
to the gas utility businesses of NSP, NSP-W and BMG. These benefits 
include: joint procurement of gas and other supplies; sharing of NSP's 
extensive technological, operational, gas purchasing and other 
expertise; enhanced computer services; and access to NSP's management, 
legal, financial, accounting and consulting services.
    The NSP, NSP-W and BMG gas systems are not physically 
interconnected. Following the Transaction, it is anticipated that gas 
purchasing economic efficiencies can be achieved by having NSP's gas 
department, which procures gas for NSP and NSP-W, meet the gas 
purchasing needs of BMG as well. Thus, some of each company's gas 
supply will be handled by the same entity and on a coordinated basis. 
The application states that, although these gas purchases for BMG will 
be made on an economic basis and not with the main goal of ensuring a 
common source of supply, given economies of scale and the past practice 
by the same purchasers, it can be expected that each of the three 
companies will continue to purchase significant amounts of their 
respective gas supply from the same fields (i.e., the Anadarko and 
Permian basins). NSP, NSP-W and BMG, through Burlington Resources, 
Inc., purchase gas from the following major supply fields:

------------------------------------------------------------------------
                 Field/basin                     NSP     NSP-W     BMG
------------------------------------------------------------------------
Hogoton/Anadarko.............................       X        X        X
Permian......................................       X                 X
Rocky Mountain...............................       X        X
Williston....................................       X
San Juan.....................................                         X
Alberta, Canada..............................       X        X
------------------------------------------------------------------------

Much of the rest of their respective gas supply will travel through the 
same pipelines even if it is not from the same field.\20\
---------------------------------------------------------------------------

    \20\ The purchased gas will be delivered through integrated 
interstate pipelines, all of which are open access transportation 
only pipelines under FERC order 636.
---------------------------------------------------------------------------

    The application further states that the combination of the NSP, 
NSP-W and BMG will tend toward the economic and efficient development 
of a coordinated gas system in that there will be centralized computer 
and customer service systems, marketing and operations planning and 
consulting between the three companies after the Transaction. Improved 
technology and centralized computer services for customer services and 
centralized planning will occur to the benefit of BMG and its 
customers.
    Consummation of the Spin-Off will require the prior approval of the 
Arizona Commission. NSP will also seek the approval of the Spin-Off by 
the Minnesota Commission and the North Dakota Commission. Following 
consummation of the Transaction, NSP and BMG expect to engage in 
various intercompany transactions. These affiliated interest 
transactions require prior approval of the Arizona Commission and the 
Minnesota Commission. Accordingly, as part of the application for 
approval of the Spin-Off, NSP will seek authorization for these

[[Page 51388]]

affiliated interest transactions from the Arizona and Minnesota 
Commissions.
    The waiting period under the Hart-Scott-Radion Antitrust 
Improvements Act of 1976, as amended, has expired. Apart from the 
approval of this Commission, the foregoing approvals are the only 
governmental approvals required for the Transaction.
    NSP requests an order under section 3(a)(2) exempting it from all 
provisions of the Act, except section 9(a)(2), following consummation 
of the Transaction. NSP states that it will continue to be entitled to 
an exemption under section 3(a)(2) because it will continue to be 
predominately a public utility company operating in Minnesota, its 
state of incorporation, and the contiguous states of North Dakota and 
South Dakota.
    For the Commission, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-25656 Filed 9-24-98; 8:45 am]
BILLING CODE 8010-01-M