[Federal Register Volume 64, Number 190 (Friday, October 1, 1999)]
[Notices]
[Pages 53430-53433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25501]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27078]


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

September 24, 1999.
    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 
declarations(s) and any amendments is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
applications(s) and/or declaration(s) should submit their views in 
writing by October 19, 1999, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549-0609, 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 facts 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 19, 1999, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Ohio Valley Electric Corporation (70-8527)

    Ohio Valley Electric Corporation (``Ohio Valley''), 3932 U.S. Route 
23, P.O. Box 468, Piketon, Ohio 45661, an electric public utility 
subsidiary company of American Electric Power Company, Inc. (``AEP''), 
a registered holding company, has filed a post-effective amendment to 
its declaration filed under sections 6(a) and 7 of the Act and rule 54 
under the Act.
    By orders dated December 28, 1994, December 12, 1996, and March 4, 
1998 (HCAR Nos. 26203, 26624, and 26835, respectively) (``Existing 
Authorization''), Ohio Valley was authorized to incur short-term debt 
through the issuance and sale of notes to banks or other financial 
institutions in an aggregate amount not to exceed $50 million 
outstanding at any one time, from time to time through December 31, 
2001, provided that no notes mature later than June 30, 2002.
    Ohio Valley now proposes that the authorization in the Existing 
Authorization be increased so that Ohio Valley may issue and sell notes 
(``Notes'') in an aggregate amount not to exceed $100 million 
outstanding at any one time, from time to time through December 31, 
2003. The Notes will mature not more than 270 days after the date of 
issuance or renewal, provided that no Notes will mature later than June 
30, 2004. The Notes will bear interest at an annual rate not greater 
than the prime commercial rate of Citibank, N.A. (or its successor) in 
effect from time to time. These credit arrangements may require the 
payment of a fee not greater than \1/5\ of 1% per annum of the size of 
the line of credit made available by the bank and the maintenance of 
additional balances of not greater than 20% of the line of credit. The 
maximum effective annual interest cost will not exceed 125% of the 
prime commercial rate in effect from time to time, or not more than 10% 
on the basis of a prime commercial rate of 8%.
    The proceeds of the short-term debt incurred by Ohio Valley will be 
added to its general funds and used to pay its general obligations and 
for other corporate purposes, including coal supply inventory.

Northeast Utilities, et al. (70-8875)

    Northeast Utilities (``Northeast''), 174 Brush Hill Avenue, West 
Springfield, Massachusetts 01090-0010, a registered holding company, 
Northeast's public utility subsidiaries, The Connecticut Light and 
Power Company (``CL&P''), 107 Selden Street, Berlin, Connecticut 06037, 
Western Massachusetts Electric Company (``WMECO''), 174 Brush Hill 
Avenue, West Springfield, Massachusetts 01090-0010, Holyoke Water Power 
Company (``Holyoke''), Canal Street, Holyoke, Massachusetts 01040, and 
Public Service Company of New Hampshire (``PSNH'') and North Atlantic 
Energy Corporation (``North Atlantic''), each at 1000 Elm Street, 
Manchester, New Hampshire 03015, and Northeast's nonutility 
subsidiaries, NU Enterprises, Inc., Northeast Generation Service 
Company, Northeast Generation Company, Select Energy, Inc., and Mode 1 
Communications, Inc., each at 107 Selden Street, Berlin, Connecticut 
06037, (collectively, ``Applicants'') have filed a post-effective 
amendment to their application-declaration filed under sections 6(a), 
7, 9(a), 10, and 12(b) of the Act and rules 43 and 45 under the Act.
    By orders dated November 20, 1996, February 11, 1997, March 25, 
1997, May

[[Page 53431]]

29, 1997, January 16, 1998, and May 13, 1999 (HCAR Nos. 26612, 26665, 
26692, 26721, 26816, and 27022), the Commission authorized, among other 
things, short-term borrowing, subject to certain limits, for Northeast, 
CL&P, and WMECO through December 31, 2000 (``Authorization 
Period'').\1\ The short-term borrowings for NU, CL&P, and WMECO include 
a revolving credit facility to which CL&P and WMECO are parties 
(``Existing System Revolver'') and an unsecured revolving credit 
facility for Northeast (``Existing Northeast Facility''). Both the 
Existing System Revolver and the Existing Northeast Facility expire on 
November 21, 1999.
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    \1\ The order dated May 13, 1999 (HCAR No. 27022) includes a 
reservation of jurisdiction ``over Money Pool borrowings by PSNH 
that are attributable to contributions by WMECO, pending the 
approval of the [Massachusetts Department of Telecommunications and 
Energy].''
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    Applicants now seek authorization for: (1) Replacement of the 
Existing System Revolver and Existing Northeast Facility with various 
short-term borrowings subject to the parameters described below; (2) 
WMECO to increase its short-term borrowing limit from $150 million to 
$250 million for the remainder of the Authorization Period; and (3) 
Northeast to increase its short-term borrowing limit from $200 million 
to $400 million for the remainder of the Authorization Period. No 
change is requested with respect to the limits on short-term debt 
borrowings for CL&P, PSNH, Holyoke, or North Atlantic.
    The short-term borrowings (``Debt'') for Northeast, CL&P, and WMECO 
(``Borrowers'') will take a variety of forms, including short-term 
notes issued to bank and nonbank lending institutions through formal 
and informal credit lines, commercial paper issuances, open account 
advances by Northeast to certain of its subsidiaries, and use of the 
Northeast system money pool. The effective cost of money on the Debt 
will not exceed 400 basis points over the base rate in effect from time 
to time of the lending bank or financial institution or, if no such 
base rate is identified, the base rate in effect from time to time of a 
representative money center bank. The maturity of the Debt will not 
exceed 364 days. The fees, commissions, or other expenses paid in 
connection with the issuance of the Debt or the entering into of credit 
facilities will not exceed 3% of the principal amount of the Debt. 
Borrowings from banks and other financial institutions may be either 
unsecured or secured. To the extent required, the provision of any 
collateral to secure Debt will be approved by applicable state 
regulatory commissions. Specific terms of any Debt will be determined 
by the Borrowers at the time of issuance and will comply with these 
parameters.

Northeast Utilities (70-9343)

    Northeast Utilities (``NU''), a registered holding company, located 
at 174 Brush Hill Avenue, West Springfield, Massachusetts 01090-0010 
has filed a post-effective amendment to its declaration under section 
12(b) of the Act and rule 45 under the Act.
    By order dated November 12, 1998 (HCAR No. 26939) (``Order''), the 
Commission authorized NU and NEWCO (now known as NU Enterprises 
(``NUEI'')) \2\ to, among other things, provide guarantees and similar 
forms of credit support or enhancements (collectively, ``Guarantee'') 
to, or for the benefit of NUEI, NUEI's nonutility subsidiaries, or NU's 
other to-be-formed direct or indirect energy-related companies, as 
defined in rule 58 under the Act, in an aggregate amount not to exceed 
$75 million, at any one time, through December 31, 1999.
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    \2\ NUEI is engaged, through the use of multiple subsidiaries, 
in various energy related and other activities.
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    By order dated May 19, 1999, the Commission authorized an increase 
in Guarantee authority from $75 million to $250 million. NU and NUEI 
now propose to increase the Guarantee authority from $250 million to 
$500 million and to extend the date through which guarantees may be 
provided through December 31, 2002, under the terms and conditions of 
the Order.\3\
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    \3\ Rule 52 exempts NUEI's financial transactions with its 
associate companies from Commission jurisdiction, however, this 
information is provided for background purposes.
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LG&E Energy Corp. (70-9523)

    LG&E Energy Corp. (``LG&E Corp.''), 200 West Main Street, 
Louisville, Kentucky 40232, a Kentucky corporation and an electric and 
gas public utility holding company currently exempt under section 
3(a)(1) from all provisions of the Act except section 9(a)(2),\4\ has 
filed an application for an order under sections 9(a)(2) and 10 of the 
Act. LG&E Corp. seeks authorization of its proposed indirect 
acquisition of a reconstituted Western Kentucky Energy Corp. 
(``WKEC''), an indirect wholly owned nonutility subsidiary of LG&E 
Corp., in connection with a consolidation among WKEC and two other 
nonutility subsidiaries of LG&E Corp., with WKEC as the surviving 
corporation (``Transaction''). The application also requests (1) an 
order under section 3(a)(1) declaring LG&E Corp. and its wholly owned 
subsidiary, LG&E Capital Corp. (``LG&E Capital''), exempt from all 
provisions of the Act except section 9(a)(2), following the 
Transaction, and (2) an order under section 3(a)(2) declaring LG&E 
Corp.'s subsidiary, Kentucky Utilities Company (``KUC''), exempt from 
all provisions of the Act except section 9(a)(2), following the 
Transaction.\5\
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    \4\ LG&E Corp.'s exemption was granted by order of the 
Commission. See LG&E Energy Corp., Holding Co. Act Release No. 26866 
(April 30, 1998).
    \5\ KUC currently is a Kentucky electric utility and public 
utility holding company exempt under section 3(a)(2) by order of the 
Commission from all provisions of the Act except section 9(a)(2). 
See Kentucky Utilities Company, 29 S.E.C. 289 (1949); KU Energy 
Corporation, Holding Co. Act Release No. 25409 (Nov. 13, 1991). The 
Commission recently affirmed KUC's exemption under section 3(a)(2). 
See LG&E Energy Corp., Holding Co. Act Release No. 26866 (April 30, 
1998).
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LG&E Corp. and Subsidiaries

    LG&E Corp. has two wholly owned public utility subsidiaries, 
Louisville Gas and Electric Company (``LG&E'') and KUC. LG&E, a 
Kentucky corporation, is engaged primarily in the generation, 
transmission and distribution of electricity to approximately 360,000 
customers in Louisville and adjacent areas in Kentucky. LG&E's service 
area covers approximately 700 square miles in 17 counties in Kentucky 
with an estimated population of one million. LG&E also purchases, 
distributes and sells natural gas to approximately 289,000 customers 
within this service area and in limited additional areas. Included 
within LG&E's service area is the Fort Knox Military Reservation, to 
which LG&E transports gas and provides electric service, but which 
maintains its own distribution systems.
    Retail sales rates, services and other aspects of LG&E's electric 
and gas retail operations are subject to the jurisdiction of the 
Kentucky Public Service Commission (``Kentucky Commission''). The 
Kentucky Commission also has regulatory authority over aspects of 
LG&E's financial activities including security issuances, property 
transfers involving asset values in excess of $100,000, and mergers 
with other utilities. Wholesale rates for electric energy sold in 
interstate commerce, wheeling rates for every transmission in 
interstate commerce, and certain other activities of LG&E (including 
its hydro-electric facilities) are subject to the jurisdiction of the 
Federal Energy Regulatory Commission (``FERC'').
    LG&E owns 4.9% of the common stock of Ohio Valley Electric 
Corporation (``OVEC''), which has one wholly owned subsidiary, Indiana-

[[Page 53432]]

Kentucky Electric Corp. (``IKEC''). Each of OVEC and IKEC is an 
electric utility company under the Act. For each of the three years in 
the period ended December 31, 1998, LG&E derived less than 0.15% of its 
income from its share of the earnings of OVEC.
    KUC, a Kentucky and Virginia corporation, is engaged in producing, 
transmitting and selling electric energy to approximately 449,00 
customers in over 600 communities and adjacent suburban and rural areas 
in 77 counties in central, southeastern and western Kentucky, and to 
approximately 29,000 customers in 5 counties in southwestern Virginia. 
In Virginia, KUC operates under the name Old Dominion Power Company. 
KUC also sells electric energy at wholesale for resale in 12 
municipalities in Kentucky.
    KUC is subject to the jurisdiction of the Kentucky Commission and 
the Virginia State Corporation Commission as to retail rates and 
service, accounts, issuance of securities and in other respects. The 
FERC has jurisdiction over certain of the electric utility facilities 
and operations, wholesale sale of power and related transactions and 
accounting practices of KUC, and in certain other respects. By reason 
of owning and operating a small amount of electric utility property in 
one county in Tennessee (having a gross book value of about $226,000), 
KUC also may be subject to the jurisdiction of the Tennessee Regulatory 
Authority as to retail rates, accounts, issuance of securities and in 
other respects.
    KUC owns 2.5% of the common stock of OVEC. KUC also owns 20% of 
Electric Energy, Inc. (``EEI''), an Illinois corporation and an 
electric utility company under the Act. EEI was formed in the early 
1950s to provide electric energy to a uranium enrichment plant located 
near Paducah, Kentucky. The enrichment plant was originally operated by 
the Atomic Energy Commission and the Department of Energy and is 
operated today by the United States Enrichment Corporation. EEI owns 
the Joppa Plant, a 1,015 Mw coal-fired electric generating plant 
located near Joppa, Illinois, and six 161 kilovolt transmission lines 
which transmit power from the Joppa Plant to the Paducah enrichment 
plant. EEI's common sock is held by KUC and three other utility 
companies. EEI sells its excess electricity to its sponsoring utilities 
for resale. The uranium enrichment facility is EEI's only end-user 
customer. For each of the three years in the period ended December 31, 
1998, KUC derived less than 3% of its net income from its share of the 
earnings of EEI and OVEC.
    LG&E CORP. has two other directly owned subsidiaries, LG&E Energy 
Foundation, Inc., a tax-exempt charitable foundation and LG&E Capital, 
which is involved in numerous nonutility, energy-related businesses 
through various subsidiaries and joint ventures. Through its 
subsidiaries, LG&E Capital has interests in and operates electric power 
plants in several states and Spain. Each of these facilities is a 
qualifying cogeneration facility under the Public Utility Regulatory 
Policies Act of 1978, an exempt wholesale generator (``EWG'') under 
section 32 of the Act or a foreign utility company (``FUCO'') under 
section 33 of the Act. LG&E Capital also has interests in and operates 
three natural gas distribution companies in Argentina, each of which is 
a FUCO. LG&E Capital is involved through various subsidiaries in energy 
marketing and trading and, with respect to natural gas, LG&E Capital 
also is involved through subsidiaries in the gathering, processing, 
storage and transportation of natural gas.\6\
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    \6\ Effective June 30, 1998 LG&E Corp. discontinued its merchant 
trading and sales business and announced its plans to sell its 
natural gas gathering and processing business. LG&E Corp., however, 
intends to maintain the technical systems and personnel necessary to 
engage in power marketing sales from assets it owns or controls, 
including LG&E, KUC and WKEC.
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    For the year ended December 31, 1998, approximately 16% of LG&E 
Corp.'s consolidated operating revenues and 18% of its consolidated 
operating income were derived from the nonutility businesses. As of 
December 31, 1998, approximately 20% of LG&E Corp.'s consolidated 
assets were invested in nonutility businesses. For the twelve months 
ended March 31, 1999, approximately 19% of LG&E Corp.'s consolidated 
operating revenues and 23% of its consolidated operating income were 
derived from nonutility businesses. As of March 31, 1999, approximately 
22% of LG&E Corp.'s consolidated assets were invested in nonutility 
businesses.
    For the year ended December 31, 1998, LG&E Corp.'s operating 
revenues on consolidated basis were $2.002 billion of which 
approximately $659 million was derived from LG&E's electric operations, 
$192 million was derived from LG&E's gas operations and $810 million 
was derived from KUC's electric operations. Consolidated assets for 
LG&E Corp. and its subsidiaries as of December 31, 1998 were 
approximately $4.8 billion, of which approximately $3.0 billion 
consisted of electric utility assets and $300 million consisted of gas 
utility assets. As of April 30, 1999, there were 129,677,030 
outstanding shares of the common stock of LG&E Corp. LG&E Corp. has no 
preferred stock outstanding.

Description of Proposed Transaction

    In the Transaction, LG&E Corp. proposes to acquire a reconstituted 
WKEC indirectly, through the merger of two indirect nonutility 
subsidiaries of LG&E Corp.--WKE Corp. and WKE Station Two Sub Inc. 
(``Station Two'')--into WKEC, with WKEC as the surviving corporation.
    WKE Corp. currently is a direct, wholly owned subsidiary of LG&E 
Capital and the parent company of WKEC and Station Two. WKE Corp. 
currently is certified as an EWG and Station Two is a nonutility 
company under the Act.\7\ Each of WKE Corp., WKEC and Station Two was 
formed in connection with a series of transactions involving Big Rivers 
Electric Corporation (``Big Rivers''), a nonassociate utility company. 
Under these transactions, WKEC leases the generating facilities of Big 
Rivers and conducts the day-to-day operations of these facilities. 
Station Two operates a generating facility of the City of Henderson, 
Kentucky, that was previously operated by Big Rivers. LG&E Energy 
Marketing, Inc. (``LEM''), another indirect nonutility subsidiary of 
LG&E Corp., agreed to purchase electricity from the Big Rivers' 
facilities and the City of Henderson's facility. The electricity from 
the City of Henderson was previously purchased by Big Rivers. These 
transactions took effect in July 1998.\8\
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    \7\ In this regard, LG&E Corp. has received a no-action letter 
from the staff of the Commission confirming that Station Two's 
activities would not cause it to be deemed an electric utility 
company under the Act. See WKE Station Two, Inc/Big Rivers Electric 
Corporation, SEC No-Action Letter (July 13, 1998).
    \8\ The Big Rivers transactions are described in more detail in 
the no-action letter. See supra note 7.
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    Because the City of Henderson's generating facility serves retail 
customers, WKEC cannot operate this facility and maintain its status as 
an EWG. Therefore, the duties and responsibilities relating to the Big 
Rivers' facilities and the City of Henderson's facility were divided 
among WKE Corp., WKEC, Station Two and LEM, even though these duties 
were previously performed by one company, Big Rivers.
    LG&E Corp. has determined that the separation of the duties and 
responsibilities among WKE Corp., WKEC, Station Two and LEM, and the 
constraints imposed upon WKEC in order to maintain its certification as 
an

[[Page 53433]]

EWG have led to numerous operational inefficiencies. Consequently, LG&E 
Corp. now desires to combine WKE Corp., WKEC and Station Two, with WKEC 
as the surviving corporation. LG&E Corp. also may transfer certain 
related contracts for the sale of energy, capacity and ancillary 
services from LEM to WKEC. The Transaction is intended to simplify and 
consolidate responsibility within a single company, WKEC, for operation 
and management of all of the generating assets in western Kentucky that 
are operated by LG&E Corp.'s affiliates, and for the sale of power and 
ancillary services from those facilities. Following the Transaction, 
WKEC will cease to meet the requirements of an EWG, will decertify as 
an EWG and will become an electric utility company under the Act. 
Therefore, consummation of the Transaction will result in the indirect 
acquisition of an electric utility company by LG&E Corp.
    The application states that the Transaction is expected to result 
in substantial benefits to the public, investors and consumers, 
including significant economies of scale, reduced labor costs and 
reduced corporate and administrative expenses through the elimination 
of redundancies and inefficiencies. As an example, the application 
notes that the Transaction will promote more efficient use of the labor 
force currently divided among WKE Corp., WKEC and Station Two, and will 
eliminate the need to maintain separate computer systems and books and 
records for each of those companies.

Proposed Post-Transaction Exemptions

    LG&E Corp. states that, following the Transaction, it will continue 
to qualify as an exempt holding company under section 3(a)(1) of the 
Act, and LG&E Capital will qualify as an exempt holding company under 
section 3(a)(1) of the Act, because each of LG&E Corp. and LG&E 
Capital, and each of its public utility company subsidiaries from which 
it derives a material part of its income, will be a Kentucky 
corporation, will continue to be predominantly intrastate in character 
and will continue to conduct its utility business substantially within 
the Commonwealth of Kentucky.\9\
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    \9\ In this regard, LG&E Corp. states that neither OVEC nor IKEC 
will be a subsidiary of LG&E Corp. for purposes of the Act following 
the Transaction because LG&E Corp.'s total indirect ownership of 
OVEC will be 7.4%. Although EEI will be a subsidiary of LG&E Corp. 
for purposes of the Act following the Transaction, and EEI is not a 
Kentucky corporation, LG&E Corp. states that EEI will not be a 
material public utility subsidiary of LG&E Corp. for purposes of 
section 3(a)(1) because LG&E Corp. does not derive a material part 
of its income from EEI (less than 3% in each of the last three 
years).
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    LG&E Corp. also states that, following the Transaction, KUC will 
continue to qualify as an exempt holding company under section 3(a)(2) 
of the Act because KUC is predominantly a public utility company whose 
operations, as such, do not extend beyond the Commonwealth of Kentucky.

    For the Commission by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-25501 Filed 9-30-99; 8:45 am]
BILLING CODE 8010-01-M