[Federal Register Volume 65, Number 54 (Monday, March 20, 2000)]
[Notices]
[Pages 15024-15029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6754]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27152]


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

March 13, 2000.
    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 transactions(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) 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 
application(s) and/or declaration(s) should submit their views in 
writing by April 4, 2000, to the Secretary, Securities and Exchange 
Commission, Washington, DC 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 the 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 April 4, 2000, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

National Fuel Gas, et al. 70-9153

    National Fuel Gas Company (``NFG''), a registered holding company, 
NFG's wholly owned gas utility subsidiary, National Fuel Gas 
Distribution Corporation, and NFG's nonutility subsidiaries, National 
Fuel Gas Supply Corporation, Highland Land & Minerals, Inc., Leidy Hub, 
Inc., Horizon Energy Development, Inc., Data-Track Account Services, 
Inc. and Seneca Independence Pipeline Company, each of 10 Lafayette 
Square, Buffalo, New York 14203, Seneca Resources Corporation, Niagara 
Independence Marketing Company and Upstate Energy Inc., each of 1201 
Louisiana Street, Suite 400, Houston, Texas 77002, and National Fuel 
Resources, Inc. (collectively, ``Current Money Pool Participants'') and 
NFR Power, Inc. (``Power'') \1\ of 165 Lawrence Bell Drive, Suite 120, 
Williamsville, New York 14221 (collectively, ``Applicants'', the 
Applicants, other than NFG, are referred to collectively as 
``Subsidiaries''), have filed with this Commission a post-effective 
amendment under sections 6(a), 7, 9(a), 10, 12(b), 12(f) and 32 of the 
Act, and rules 45, 53 and 54 under the Act to their application-
declaration filed under sections 6(a), 7, 9(a), 10, 12(b), 12(f), 32 
and 33 of the Act, and rule 53 under the Act.
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    \1\ Power is a nonutility subsidiary of NFG, and, as a result of 
a determination of the Federal Energy Regulatory Commission dated 
March 29, 1996 (Docket No. EG96-47-000), is an exempt wholesale 
generator as defined in section 32(a)(1) of the Act.
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    By order dated March 20, 1998 (HCAR No. 26847) (``March Order''), 
the Current Money Pool Participants were authorized to engage in 
various financing and related transactions through December 31, 2002 
(``Authorization Period''). The March Order also authorized, among 
other things, the Current Money Pool Participants to continue to engage 
in a money pool arrangement (``Money Pool'') through the Authorization 
Period.
    Applicants now request authorization for Power to become a limited 
participant in the Money Pool through the Authorization Period. 
Specifically, Power's participation would be limited to depositing 
surplus funds that it may have from time to time into the Money Pool 
and withdrawing its own funds as needed. In addition, Power's 
participation would be subject to the terms and conditions for Money 
Pool participation contained in the March Order.
    The March Order also authorized NFG to guarantee securities of, and 
provide other forms of credit support with respect to obligations of, 
its Subsidiaries in an aggregate amount not to exceed $2 billion at any 
time during the Authorization Period (``Guarantee Authority''). NFG 
proposes to guarantee securities of Power, and to provide other forms 
of credit support with respect to obligations of Power as may be 
necessary or appropriate to enable Power to carry on in the ordinary 
course of business. Such guarantees and credit support to Power would 
be subject to the terms and conditions of the Guarantee Authority 
contained in the March Order.

GPU, Inc., et al. (70-9599)

    GPU, Inc. (``GPU''), a registered public utility holding company, 
and its wholly owned subsidiary, GPX Acquisition Corp. (``Acquisition 
Corp.'', and together with GPU, ``Applicants''), both located at 300 
Madison Avenue, Morristown, New Jersey 07962, have filed an 
application-declaration under sections 6(a), 7, 9(a), 10, 11(b)(1), 12, 
and 13(b) of the Act and rules 51, 54, 90 and 91 under the Act.
    The Applicants propose to acquire for cash all of the issued and 
outstanding common shares of MYR Group, Inc. (``MYR''), a Delaware 
corporation (the ``Merger''), under the terms of a Plan and Agreement 
of Merger, dated as of December 21, 1999 (``Merger Agreement''). MYR is 
a publicly held utility infrastructure services and electrical 
contracting company headquartered in Rolling Meadows, Illinois. MYR's 
common stock is registered under section 12(b) of the Securities 
Exchange Act of 1934, as amended (``Exchange Act''), and is listed for 
trading on the New York Stock Exchange.
    Under the terms of the Merger Agreement, Acquisition Corp. on 
December 29, 1999 commenced a cash tender offer in accordance with 
section 14 of the Exchange Act (``Tender Offer'') to acquire MYR common 
stock subject to the terms and conditions of the Tender Offer.\1\ 
Following completion of the Tender Offer, Acquisition Corp. will be 
merged with and into MYR, with MYR as the surviving entity. MYR will 
then become a direct wholly owned subsidiary of GPU. On February 24, 
2000, the Applicants extended the

[[Page 15025]]

Tender Offer expiration date from February 29, 2000 to March 24, 2000.
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    \1\ The Tender Offer is subject to the terms and conditions of 
rule 51 under the Act, which states that consummation of the Tender 
Offer is expressly conditioned upon Commission approval of the 
Merger under the Act.
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    Under the Merger Agreement, GPU has agreed to pay MYR common-stock 
shareholders $30.10 per share in cash for their shares. MYR currently 
has 6,429,135 shares of common stock outstanding (including 335,927 
shares issued under MYR's restricted stock plans). An additional 
882,086 MYR shares are issuable under outstanding MYR convertible 
debt,\2\ and a total of 756,650 shares of MYR common stock are issuable 
under outstanding stock options. Holders of these stock options may 
elect to convert these options into options to purchase shares of GPU 
common stock, as described below, or may elect to receive cash in an 
amount per share equal to the difference between $30.10 and the per 
share exercise price. The aggregate purchase price for all shares of 
MYR common stock outstanding, after taking into account the offsetting 
payments attributable to the future exercise of stock options, is 
approximately $215 million.
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    \2\ MYR redeemed all of this outstanding convertible debt on 
March 5, 2000 in accordance with the optional redemption provisions 
of these securities. The total redemption price was $2,272,538.
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    Subject to Commission authorization, GPU has agreed to allow the 
holders of MYR stock options and the holders of outstanding shares of 
MYR restricted stock to elect, in lieu of the cash payments described 
above, to: (1) Receive options to purchase shares of GPU common stock 
in exchange for MYR stock options; or (2) receive shares of GPU common 
stock in exchange for MYR restricted stock. GPU therefore seeks 
authority to issue shares of GPU's common stock for this purpose. The 
amount of GPU common stock issued or issuable under this arrangement 
will be determined according to a formula intended to provide holders 
of MYR stock options and MYR restricted stock with equivalent value in 
GPU common stock. The ``Exchange Ratio'' will be determined by dividing 
$30.10 by the average closing price of GPU common stock for the five 
trading days immediately preceding the date of consummation of the 
Merger (the ``Operative Price''). The number of shares of GPU common 
stock issuable in respect of any assumed MYR stock option shall be 
equal to the product of the number of shares of MYR common stock 
covered by such option multiplied by the Exchange Ratio, and the per 
share exercise price for the GPU common stock so issuable shall be 
equal to the quotient determined by dividing the exercise price per 
share specified for such MYR stock option by the Exchange Ratio. The 
number of shares of GPU common stock issuable in respect of any assumed 
outstanding shares of MYR restricted stock shall be equal to the 
product of the number of shares of this restricted stock multiplied by 
the number determined by dividing $30.10 by the Operative Price.
    GPU will finance the purchase price of MYR with short-term bank 
borrowings under its existing lines of credit. GPU will account for the 
acquisition under the ``purchase method'' of accounting. The expected 
acquisition premium, the amount of which has not been quantified, will 
be amortized over a period yet to be determined.
    MYR's business consists of providing utility transmission and 
distribution, infrastructure and related commercial and industrial 
electrical (and some mechanical) contracting services to utility, 
industrial, mining, institutional and governmental entities on a 
nationwide basis. MYR is the fifth largest specialty contractor in the 
United States and has eight operating subsidiaries across the 
country.\3\ For the nine-month period ended September 30, 1999, MYR had 
total consolidated assets of $120,769,000, consolidated gross revenues 
(referred to as ``contract revenues'') of $348,116,000; and 
consolidated net income of $9,281,000.\4\
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    \3\ MYR operates through the following subsidiary companies: 
L.E. Myers Co. in the Southeast, Midwest and Northeast; Harlan 
Electric Company in Michigan, the Northeast and the Ohio Valley; 
Sturgeon Electric Company, Inc. in the West; Hawkeye Construction, 
Inc. in the Pacific Northwest; D.W. Close Company, Inc. in Seattle; 
Power Piping Company in Pennsylvania, Virginia and the Ohio River 
Valley; ComTel Technology, Inc. in Colorado and Arizona; and MYRcom 
in the Southeast and Southwest.
    \4\ Financial data for the nine months ended September 30, 1999 
has been derived from unaudited financial statements.
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    MYR's transmission and distribution services (``T&D Services'') 
represented approximately 54% of MYR's 1999 gross revenues and is MYR's 
predominant business activity. T&D Services include the construction 
and maintenance of transmission and distribution power lines and 
substations for utility, industrial, institutional and governmental 
facilities. MYR also performs storm and other emergency restoration 
services for utility networks.
    MYR's infrastructure services include telecommunications 
installation services and traffic signalization work, each of which 
represented less than 10% of MYR's 1999 gross revenues. 
Telecommunications services are provided to primary telecommunications 
carriers, regional service providers and commercial clients and include 
the construction of telecommunications towers, installation of overhead 
and underground copper and fiber optic cables, and installation and 
maintenance of LAN/WAN, telephone, video, data, and other similar 
communication systems.
    Traffic signalization services generally consist of electrical 
construction and maintenance of traffic and light rail signalization 
equipment, such as fiber optic interconnections for traffic management 
systems, ramp metering, and highway lighting installation. Customers 
for these services include government transportation agencies, regional 
transit districts and municipalities.
    MYR's commercial and industrial services (``C&I Services'') 
primarily consist of electrical construction activities such as the 
installation of complete electrical system wiring for utilities and 
commercial and industrial facilities. MYR also performs some related 
heavy mechanical construction services involving the installation of 
complex piping systems and related mechanical equipment and 
instrumentation for major new construction projects. In 1999, C&I 
Services accounted for approximately 33% of MYR's gross revenues.
    MYR has entered into a letter of intent (``LOI'') to acquire from 
the two sole stockholders all of the issued and outstanding stock of a 
relatively small, privately held transmission and distribution 
electrical contracting company located in Colorado (``T&D Co.''). T&D 
Co. is a regional utility infrastructure contractor engaged solely in 
the construction and installation of electrical substation, 
transmission and distribution facilities for both investor-owned and 
municipal utility systems as well as governmental entities.\5\ In 
addition, T&D Co. constructs and installs fiber optic lines. For 1999, 
T&D Co.'s gross revenues were approximately $18 million. MYR currently 
expects to complete its acquisition of T&D Co. prior to GPU's 
acquisition of MYR. MYR intends to fund the entire purchase price 
(approximately $5 million) from internal sources.
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    \5\ T&D Co.'s largest customers during 1998 (accounting for 
about 72% of its gross revenues) were Bonneville Power 
Administration; IREA; M&A Electric Association; Tri-State G&T Luke 
Air Force Base; Lea County Electric; Texas-New Mexico Power; and 
Western Area Power Administration.
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    In the event that the T&D Co. transaction is not completed prior to 
GPU's acquisition of MYR common stock under the Tender Offer, 
Applicants request further authorization for MYR to acquire the T&D Co.

[[Page 15026]]

common stock for an aggregate purchase price not to exceed $5 million.
    After the Merger, MYR will provide T&D Services, C&I Services, and 
other related infrastructure services to both non-affiliates and 
affiliates of GPU, including GPU's wholly owned utility subsidiary 
companies.\6\ All services provided by MYR to affiliates within the GPU 
system will be provided at cost pursuant to Rules 90 and 91 under the 
Act except to the extent the Commission may grant an exemption from 
such rules or as otherwise provided in the Act. All services provided 
by MYR to non-affiliates would be offered at market-based rates
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    \6\ GPU's utility subsidiaries are: Jersey Central Power & Light 
Company; Pennsylvania Electric Company; and Metropolitan Edison 
Company.
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New Century Energies, Inc., et al. (70-9539)

    New Century Energies, Inc. (``NCE''), a registered public utility 
holding company located at 1225 Seventeenth Street, Denver, Colorado, 
80202, and Northern States Power Company (``NSP''), public utility 
holding company exempt from registration by order under section 3(a)(2) 
of the Act,\1\ located at 414 Nicollet Mall, Minneapolis, Minnesota, 
55401, (collectively ``Applicants'') have filed an application-
declaration under sections 6(a), 7, 9(a), 9(c)(3), 10, 12(d), 13(b) of 
the Act, and rules 44, 54, 87, 90 and 91 under the Act.
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    \1\ See Northern States Power Co., Holding Co. Act Release No. 
22334 (Dec. 23, 1981). Section 3(a)(2) of the Act provides an 
exemption from registration to a holidng 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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    In summary, NCE and NSP propose to combine their businesses under a 
new holding company, Xcel Energy Inc. Under an Agreement and Plan of 
Merger, dated as of March 24, 1999 (the ``Merger Agreement''), NCE will 
merge with and into NSP (``Merger''). NSP, as the surviving 
corporation, will change its name to Xcel Energy Inc. (``Xcel''). Also 
as part of the Merger, NSP intends to transfer its existing utility 
operations currently at the parent company level to a newly formed, 
wholly owned utility subsidiary of Xcel (``New NSP'').\2\ Xcel will 
have six public-utility subsidiaries after the Merger: Public Service 
Company of Colorado (``PSC''), Cheyenne Light, Fuel and Power Company 
(``Cheyenne'') and Southwestern Public Service Company (``SPS'') 
(collectively, the ``NCE Operating Companies''), New NSP, Black 
Mountain Gas Company (``BMG'') \3\ and NSP's current utility 
subsidiary, NSP-Wisconsin (``NSP-W'' and, together with BMG and New 
NSP, ``NSP Operating Companies'') (collectively, ``Xcel Operating 
Companies''). Xcel will register under section 5 of the Act following 
the merger. In addition, NSP and NCE propose to engage in various 
intrasystem transactions. NCE further requests an extension of time 
provided in an earlier Commission order to complete a planned 
interconnection between SPS and PSC.
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    \2\ NSP requests authority to organize and capitalize New NSP 
for this purpose.
    \3\ Black Mountain Gas Company will be the name of a company NSP 
has separately proposed to establish (in File No. 70-9337), that 
would assume the assets and operations of NSP's gas and propane 
utlity business in Arizona, currently run as a division of NSP.
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I. Background

A. NCE
    In accordance with an order of the Commission dated August 1, 1997 
(``1997 Order''),\4\ NCE's utility operations consist for three 
integrated utility systems. The two electric utility integrated systems 
include (1) PSC's and SPS's electric utility operations and (2) the 
Cheyenne system. The integrated gas utility system is comprised of 
PSC's and Cheyenne's gas utility operations.\5\
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    \4\ See New Century Energies, Inc., HCAR No. 26748 (August 1, 
1997) (authorizing the formation of the NCE system).
    \5\ SPS has no gas utility operations.
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    PSC serves approximately 1.;2 million electric customers and 
approximately one million gas customers in Colorado. PCS's transmission 
facilities are located in Colorado. PSC is a member of the Western 
Systems Coordinating Council (``WSCC''), an interstate network of 
transmission facilities owned by public entities and investor-owned 
utilities. WSCC is the regional reliability coordinating organization 
for member electric power systems in the entire western electric grid 
of the United States (``Western Interconnect''). Nearby PSC are the two 
high voltage direct current (``HVDC'') between the WSCC and the eastern 
electrical grid of the United States (``Eastern Interconnect''). PSC is 
subject to rate regulation by the Public Utilities Commission of the 
State of Colorado. PSC is also subject to wholesale rate regulation by 
the Federal Energy Regulatory Commission (the ``FERC'') under the 
Federal Power Act, as amended (the ``FPA'') and the Natural Gas Act of 
1935, as amended (the ``NGA'')
    SPS, a New Mexico corporation, serves approximately 1.2 million 
electric customers in portions of Texas, New Mexico, Oklahoma and 
Kansas. SPS' transmission system is located in parts of Texas, New 
Mexico, Oklahoma and Kansas. SPS is a member of the Southwest Power 
Pool (``SPP'') and has the ability to purchase or sell energy from 
power producers in the Eastern Interconnect through its interconnection 
with Public Service Company of Oklahoma (``PSO''), and electric public 
utility subsidiary of Central and South West Corporation, a registered 
holding company, and West Plains Energy-Kansas, a division of UtiliCorp 
United Inc., a holding company exempt from registration under the Act. 
SPS also has the ability to purchase and sell energy from power 
producers in the Western Interconnect through its interconnection with 
the WSCC. SPS is regulated by the Public Utility Commission of Texas, 
the New Mexico Public Regulation Commission, the Kansas Corporation 
Commission and the Oklahoma Corporation Commission. SPS is also subject 
to regulation by the FERC under the FPA.
    Cheyenne, also a member of WSCC, serves approximately 35,000 
electric customers and 28,000 gas customers in and around Cheyenne, 
Wyoming. Cheyenne's limited transmission facilities, which are located 
in Wyoming, serve primarily to deliver power that Cheyenne purchases 
from its full requirements supplier, PacifiCorp.\6\ Cheyenne is subject 
to regulation by the Wyoming Public Service Commission.\7\
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    \6\ The lines consist of two 115 kilovolt transmission line 
segments that total 25.5 miles in length.
    \7\ Cheyenne does not have any wholesale load.
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    NCE also owns, directly or indirectly, various nonutility 
subsidiaries.\8\ NCE's two directly owned non-utility subsidiaries are 
West Gas InterState, Inc., a natural gas pipeline company subject to 
FERC jurisdiction under the NGA, and NC Enterprises, Inc., a holding 
company for NCE's foreign operations and most of its nonutility 
businesses.
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    \8\ The application states that the nonutility operations of NCE 
have all been previously authorized under the Act or have been 
established under a rule or statutory exemption.
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    As of September 30, 1999, 115,533,704 shares of NCE Common Stock 
and no shares of NCE preferred stock were issued and outstanding. The 
consolidated assets of NCE, as of September 30, 1999, were 
approximately $8.1 billion, representing $5.1 billion in net electric 
utility property, plant and equipment ($1.7 billion for SPS, $3 billion 
for PSC and $42 million for Cheyenne); $808 million in net gas utility 
property, plant and equipment (&779 million for PSC and $29 million for 
Cheyenne); $443 million in nonutility subsidiary property, plant

[[Page 15027]]

and equipment; and $1.7 billion in other corporate assets.
    Revenues for Cheyenne NCE's utility operations for the 12 months 
ended September 30, 1999 are as follows ($ in millions):

------------------------------------------------------------------------
                                                  Electric
                                                  utility    Gas utility
                                                  revenues     revenues
------------------------------------------------------------------------
SPS...........................................          717  ...........
PSC...........................................        1,156          477
Cheyenne......................................           40           19
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B. NSP
    NSP is engaged primarily in the generation, transmission and 
distribution of electricity throughout a 30,000 square mile service 
area in Minnesota, North Dakota and South Dakota. NSP also purchases, 
distributes and sells natural gas to retail customers in this area and 
transports customer-owned gas in approximately 118 communities within 
this area and in Arizona.\9\ As of September 30, 1999, NSP provided 
retail electric utility service to approximately 1.2 million customers 
and gas utility service to approximately 385,000 customers. NSP-W 
generates, transmits and distributes electricity to approximately 
210,400 retail customers in an area of approximately 18,900 square 
miles in northwestern Wisconsin and to approximately 9,100 electric 
retail customers in an area of approximately 300 square miles in the 
western portion of Michigan's Upper Peninsula. In addition, NSP-W 
purchases, distributes and sells natural gas to retail customers or 
transports customer-owned natural gas in the same service territory to 
approximately 78,000 in Wisconsin and 5,000 customers in Michigan.\10\
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    \9\ As noted above, NSP currently serves these customers in 
Arizona out of a division that NSP intends to incorporate.
    \10\ In 1998, NSP-W provided approximately 13% of NSP's 
consolidated revenues.
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    The electric transmission system of NSP and NSP-W is located 
throughout the service territories of the two utilities in Minnesota, 
North and South Dakota, Michigan and Wisconsin. NSP and NSP-W are 
directly connected with each other through numerous transmission lines 
that they own.\11\ In addition, NSP and NSP-W are members of the Mid-
Continent Area Power Pool (``MAPP''), the regional reliability council 
for numerous electric providers in portions of the Midwest. The NSP 
electric system is interconnected with 19 other utility systems, 
including utilities in MAPP and in the Mid-America Interconnected 
Network.
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    \11\ The Commission has previously determined that the electric 
and gas properties, respectively, of NSP each constitute an 
integrated public-utility system. See Northern States Power Co., 
supra at note 1.
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    Retail sales rates, services and other aspects of NSP's retail 
operations are subject to the jurisdiction of the Minnesota Public 
Utilities Commission (``Minnesota Commission''), the North Dakota 
Public Service Commission, the South Dakota Public Utilities Commission 
and the Arizona Corporation Commission within their respective states. 
Retail sales rates, services and other aspects of NSP-W's retail 
operations are subject to the jurisdiction of the Wisconsin Public 
Service Commission (``Wisconsin Commission'') and the Michigan 
Commission. Certain activities of NSP and NSP-W, including wholesale 
rates for interstate sales of electricity, the interstate transmission 
of electricity and the sale of natural gas for resale, are subject to 
the jurisdiction of the FERC.
    NSP is also engaged in various nonutility businesses. NSP directly 
provides: (i) an appliance services program for its residential 
customers, (ii) construction of natural gas distribution systems for 
third parties (primarily end-users and municipal gas systems), (iii) 
sale and installation of power quality instruments primarily to protect 
customers' equipment from electric surges, (iv) sale of steam to 
industrial customers in NSP's service territory, and (v) installation 
and maintenance of street lighting for municipalities and other 
customers.
    In addition, NSP owns the following subsidiaries: (i) NSP Financing 
I, a special purpose business trust; (ii) Viking Gas Transmission 
Company, an interstate natural gas pipeline subject to FERC 
jurisdiction under the NGA; (iii) Eloigne Company (``Eloigne''), an 
investor in projects that qualify for low-income housing tax credits; 
(iv) Energy Masters International, Inc. (``Energy Masters''), an energy 
services company; (v) Seren Innovations, Inc., a company that provides 
cable, telephone and high-speed internet access; (vi) Ultra Power 
Technologies, Inc., a company that markets power-cable testing 
technology; (vii) First Midwest Auto Park, Inc., an owner of a parking 
garage; (viii) United Power and Land Company, a real estate investment 
company; (ix) NRG Energy, Inc., a holding company for many of NSP's 
nonutility businesses, including significant investments in the 
independent power projects and foreign operations; (x) Reddy Kilowatt 
Corporation, the owner of certain energy-related intellectual property 
rights; (xi) Nuclear Management Company (``NMCC''), a limited liability 
company that will provide services to the nuclear operations of its 
members; and (xii) Natrogas, Inc., a provider of propane services.\12\
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    \12\ NSP owns 100% of all of these businesses with the exception 
of its 25% membership interest in NMC.
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    Further, Eloigne, Energy Masters and NRG Energy have their own non-
utility subsidiaries. Eloigne's subsidiaries all invest in affordable 
housing projects, while Energy Masters' subsidiary, Energy Solutions 
International, Inc., provides energy services. According to the 
Applications, NRG Energy's subsidiaries include exempt wholesale 
generators (``EWGs''), qualifying facilities (``QFs''), QF holding 
companies, foreign utility companies (``FUCOs''), and other companies 
engaged either in activities specified in the various subparts of rule 
58(b)(1) or in other nonutility activities that comply with Commission 
precedent.\13\
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    \13\ These activities include payroll and related services, 
operations and management services, international power project 
business development, and non-profit community development 
activities.
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    NSP-W owns Clearwater Investments, Inc., an investor in housing 
projects that qualify for low-income housing tax credits, and NSP Land, 
Inc., a real estate investment company. NSP-W also owns &75.86% of 
Chippewa and Flambeau Improvement Company, a company that builds and 
operates dams and reservoirs for hydro-electric plants.
    As of September 30, 1999, there were 154,358,267 shares of NSP 
Common Stock and 1,050,000 shares of NSP cumulative preferred stock 
issued and outstanding. Consolidated assets of NSP and its subsidiaries 
as of September 30, 1999 were approximately $8.7 billion, consisting of 
$3.5 billion in net electric utility property, plant and equipment 
($2.9 billion for NSP and $622 million for NSP-W); $459 million in net 
gas utility property, plant and equipment ($395 million for NSP and $64 
million for NSP-W); and $2.9 billion in nonutility subsidiary assets, 
and $1.7 billion in other corporate assets.
    Revenues for NSP's utility operations for the year ended September 
30, 1999 are as follows (before intercompany eliminations ( ($ in 
millions):

------------------------------------------------------------------------
                                                  Electric
                                                  utility    Gas utility
                                                  revenues     revenues
------------------------------------------------------------------------
NSP...........................................        2,343          360
NSP-W.........................................          335           81
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II. Description of the Merger

    Under the Merger Agreement, each share of NCE common stock issued 
and outstanding immediately prior to the effective time of the Merger, 
together with any NCE Rights (as defined

[[Page 15028]]

below),\14\ will be converted into the right to receive 1.55 shares 
(the ``Conversion Ratio'') of NSP common stock,\15\ and each share of 
NCE common stock, together with any NCE Right, owned by NSP or a 
subsidiary or held in the treasury of NCE, will be canceled.\16\ Based 
upon the capitalization of NCE and NSP on March 24, 1999 (the date on 
which the Merger Agreement was signed) and the Conversion Ratio, NCE 
and NSP shareholders would own 54% and 46%, respectively, of the common 
equity of Xcel as of that date. As a result of the Merger, PSC, SPS and 
Cheyenne will come subsidiaries of Xcel along with New NSP and NSP-
W.\17\
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    \14\ The ``NCE Rights'' are rights issued by NCE that entitled 
registered holders of purchase from NCE one-hundredth of a share of 
Series A Junior Participating Preferred Stock for each NCE Right. 
The NCE Rights were distributed a dividend on each outstanding share 
of NCE Common Stock as part of NCE's shareholder rights plan, which 
was approved in the 1997 Order.
    \15\ As noted above, NSP will change its name to Xcel at or 
before the Merger.
    \16\ Each issued and outstanding share of NSP Common Stock and 
each share of preferred stock of NSP issued and outstanding 
immediately prior to the effective time of the Merger will remain 
outstanding.
    \17\ As noted above, NSP has proposed that BMG become a 
subsidiary of Xcel after the Merger. See note 3 supra.
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III. The Combined Operations

A. Overview
    The application states that the gas utility operations of the NSP 
Operating Companies, PSC and Cheyenne, together will constitute a gas 
integrated public-utility system within the meaning of section 
2(a)(29)(B) of the Act. In addition, the application states that the 
electric utility operations of the NSP Operating Companies, PSC and SPS 
will be an electric integrated public-utility system (the ``Primary 
System'') within the meaning of section 2(a)(29)(A).\18\
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    \18\ The Commission determined in the 1997 Order that NCE could 
own the electric operations of Cheyenne as an additional electric 
integrated system.
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    Applicants state that the Primary System will not engage in joint 
economic dispatch. As more particularly described below. Applicants 
contend that the Primary System will be integrated through, among other 
things, the coordination of transmission operations, the coordination 
of generation operations, and the coordination of marketing and 
administrative operations.
B. The Primary System
    1. Transmission Coordination. Applicants state that three of the 
Xcel Operating Companies, i.e., NSP, NSP-W and SPS, will participate in 
the Midwest Independent Transmission System Operator, Inc. 
(``MISO'').\19\ Applicants state that participation in MISDO will 
consolidate in MISO management and control of Applicants' transmission 
facilities, along with those of the other MISDO members, and through 
their access to the MISO transmission tariff, will enable Applicants to 
transact with each other and with the other MISO members at single-
system transmission rates.
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    \19\ The participating transmission owners in MISO currently 
are: Allegheny Energy, Alliant Corporation (on behalf of IES 
Utilities, Inc., Interstate Power Company, South Benoit Water, Gas & 
Electric Company, and Wisconsin Power Company), Ameren (on behalf of 
Central Illinois Public Service Company and Union Electric Company), 
Central Illinois Light Company, Cinergy Corp. (on behalf of 
Cincinnati Gas & Electric Company, PSI Energy, Inc., and Union 
Light, Heat & Power), Commonwealth Edison Company (including 
Commonwealth Edison Company of Indiana), Hoosier Energy Rural 
Electric Cooperative, Inc., Illinois Power Company, Kentucky 
Utilities Company, Louisville Gas & Electric Company, Northern 
States Power Company, Southern Illinois Power Cooperative, Southern 
Indiana Gas & Electric Company, Wabash Valley Power Association, 
Inc. and Wisconsin Electric Power Company. PSC will not be a member 
of MISO.
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    At present, PSO whose service territory lies between SPS and Ameren 
Corporation (``Ameren''), the nearest member of MISO, does not plan to 
become a member of MISO. Applicants anticipate, however, that, by the 
time that MISO becomes fully operational, it will have attracted 
additional members, which will permit SPS to be connected with MISO 
through intervening MISO-member utilities. For example, if the SPP were 
to join MISO,\20\ Applicants state that there would be a MISO 
transmission region between SPS and NSP that would be contiguous to 
both utilities. Absent changes that result in a connection between SPS, 
another MISO member and NSP, however, SPS intends to obtain a firm, 200 
MW bi-directional transmission path from the point at which SPS 
connects with PSO to the point at which PSO connects with Ameren.
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    \20\ Applicants state that the SPP currently plans to join MISO.
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    Applicants also state that, whether or not these changes occur, 
they plan to achieve additional operational efficiencies for the 
combined electric operations through reservation of a 100 MW firm 
transmission unit-directional path from SPS to New NSP, through SPP and 
Ameren for the period 2002 through 2004 (the ``Contract Path'').\21\ 
The Contract Path would permit a flow of 100 MW from a point of receipt 
in SPS's service territory (its Tolk generating station) to a point of 
delivery in NSP-W's service territory (its Sherbourne County generation 
station).
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    \21\ Applicants state that the Contract Path, like virtually 
every firm contract path, has some market concentrating effects as a 
result of loop-flows, as well as market-deconcentrating effects. For 
this reason, Applicants have treated the Contract Path as a separate 
option from MISO in their filing for FERC approval of the Merger.
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    2. Coordination of Generation Operations. Applicants state that 
they have entered into a joint operating agreement (``Joint Operating 
Agreement''), according to which they will coordinate the operation and 
dispatch of the electric generating resources of the Xcel Operating 
Companies. Applicants assert that although not providing for joint 
economic dispatch the Joint Operating Agreement will provide for 
coordinated dispatch. Under this arrangement, system dispatchers will 
arrange for economy energy sales where the sales would lower the 
operating costs of the purchasing Xcel Operating Company.
    The Joint Operating Agreement also provides for short-term capacity 
and associated energy sales, subject to the same limitations. In 
addition, the Joint Operating Agreement provides for joint generation 
planning and the common procurement of resources. Further, the Joint 
Operating Agreement vests New Century Services, Inc., (to be renamed 
Xcel Energy Services Inc.) (``New Century Services''), currently NCE's 
service company subsidiary, with the responsibility of arranging joint 
sales and purchases of electricity and makes provision for the 
allocation of associated costs and revenues.
    3. Marketing and Administrative Coordination. The Xcel Operating 
Companies will coordinate through joint marketing efforts, both as 
buyers and sellers. The Xcel Operating Companies already have the 
ability to reach common suppliers, purchasers, and trading hubs in 
various combinations.
    Applicants state that virtually all administrative and general 
services will be performed for the Xcel system by New Century Services. 
Applicants note that the accounting functions of the combined system 
will be consolidated. Applicants further state that there will also be 
coordination and integration of information system networks; customer 
service; procurement organizations; organized structures for power 
generation, energy delivery and customer relations; and support 
services.
C. Combined Gas Operations
    The Xcel gas system will operate in Michigan, Wisconsin, Minnesota, 
North Dakota, South Dakota, Wyoming,

[[Page 15029]]

Colorado and Arizona. Applicants state that approximately 74% of the 
324.7 billion cubic feet of natural gas purchased by the applicants 
during 1998 were from common supply sources. Applicants also state that 
NSP and NCE share access, through their respective pipeline 
transporters, to several industry-recognized market and supply-area 
hubs.

IV. Proposed Intrasystem Transactions

A. Extension of Service Company Subsidiary Services
    Applicants propose that New Century Services be the service company 
subsidiary for the Xcel system. Applicants request a finding that New 
Century Services is so organized and will be so conducted as to meet 
the requirements of section 13(b) with respect to all associates in the 
Xcel system. New Century Services will provide Xcel, New NSP, NSP-W, 
PSC, SPS and Cheyenne, under the Utility Service Agreement, and the 
nonutility subsidiaries of the combined system, under the Non-Utility 
Service Agreement, with various services. These include: 
administrative, management and support services, including services 
relating to support of electric and gas plant operations (i.e., energy 
supply management of the bulk power and natural gas supply, procurement 
of fuels, dispatch of generating units, coordination of electric and 
natural gas distribution systems, maintenance, construction and 
engineering work); customer bills and related matters; materials 
management; facilities; real estate; rights of way; human resources; 
finance; accounting; internal auditing; information systems; corporate 
planning and research; public affairs; corporate communications; legal; 
environmental matters; and executive services. These services will 
comply with the at-cost standards of section 13(b) and rules 87, 90 and 
91 under the Act, unless otherwise exempted as discussed below.
B. Services, Goods and Assets Involving the Xcel Operating Companies
    The Xcel Operating Companies may provide to one another and other 
associate companies services incidental to their utility businesses, 
such as power plant maintenance overhauls and power plant and storm 
outage emergency repairs. These services will be provided in accordance 
with rules 87, 90 and 91. Moreover, in accordance with these rules, an 
Xcel Operating Company may provide certain goods through a leasing 
arrangement or otherwise to one or more other Xcel Operating Companies, 
and may use certain assets for the benefit of one or more other 
associate companies.
    In addition to the foregoing, NSP and NSP-W are currently providing 
goods and services to, or receiving goods and services from, affiliated 
interests, as defined under applicable state law, in accordance with 
agreements approved by the Minnesota Commission. Those transactions 
between NSP or NSP-W and these affiliated interests performed in 
accordance with Minnesota law are generally priced on a ``fully 
allocated cost'' basis. To the extent necessary, Applicants request an 
exemption under section 13(b) of the Act from the at-cost requirements 
of section 13 and rules 90 and 91 with respect to these transactions.
C. Nonutility Sale of Goods and Services to EWGs, FUCOs and QFs
    The 1997 Order and an order of the Commission dated April 7, 1999 
(``1999 Order'') \22\ granted an exemption from the at-cost 
requirements of section 13 and rules 90 and 91 for the sale of goods 
and services by New Century Services and certain nonutility 
subsidiaries of NCE to associate QFs, EWGs and FUCOs (``Associate 
Exempt Entities'') where certain conditions were met (``Nonutility 
Exemption''). In the 1999 Order, the Commission reserved jurisdiction 
over a request for an exemption from the at-cost standards for the sale 
by these subsidiaries of goods and services to exempt telecommunication 
companies under section 34 of the Act, to rule 58 companies, or to 
other nonutility subsidiaries that do not derive any part of their 
income from sales of goods, services or other property to the NCE 
Operating Companies (``Requested Additional Exemption''). Applicants 
now request that the Nonutility Exemption and the Requested Additional 
Exemption be extended, on the same conditions as those described in the 
1999 Order, to the sale of goods and services by certain Xcel 
nonutility subsidiaries.
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    \22\ HCAR No. 27000.
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    Applicants also note that the 1997 NCE Order exempted two NCE 
nonutility subsidiaries, Utility Engineers Corporation (``UE'') and 
Quixx Power Services, Inc. from the at-cost requirements of section 
13(b) with respect to the sale of services to an associate QF.\23\ 
Applicants request that this exemption be extended, to the extent 
necessary following the Merger, to transactions that are still ongoing.
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    \23\ The 1997 Order noted that power from the QF would be sold 
to SPS.
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D. Other Sales of Goods and Services by Nonutility Subsidiaries
    Applicants note that the 1997 NCE Order authorized an NCE 
nonutility subsidiary, UE, to perform engineering, development, design, 
construction and other related services to the NCE Operating Companies 
at cost. Applicants now request that this authority be extended to 
enable UE to provide such services to Xcel Operating Companies.
    In addition, Applicants request authority for NMC to provide 
services to New NSP. Applicants note that the Commission recently 
authorized NMC to provide certain services to IES Utilities, Inc., a 
utility subsidiary of another registered holding company, Alliant 
Energy corporation.\24\ The services to be provided by NMC to New NSP 
will comply with the at cost standards of section 13(b).

V. Extension of Time To Construct Interconnection

    The 1997 Order requires that, ''[i]n the event that New Century 
Energies at any time determines not to construct the tie, or the tie is 
not substantially completed within five years of the date of 
consummation of the [PSC/SPS] merger [interconnecting SPS with PSC 
(``SPS-PSC Interconnection'')], New Century Energies will file a post-
effective amendment concerning the measures it will take to ensure that 
the requirements of section 2(a)(29)(A) are satisfied.''
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    \24\ Alliant Energy Corporation, et al., HCAR No. 27096 (October 
26, 1999).
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    Applicants state that the project to complete the SPS-PSC 
Interconnection will be accomplished in a phased approach and will 
require various regulatory approvals. The first phase will involve 
construction of a 230-mile, 345 kV line from Amarillo, Texas to 
Holcomb, Kansas, expected to be completed in the third quarter of 2001. 
The second phase will involve construction of a 100-mile, 345 kV line 
from Holcomb to Lamar, Colorado and a HVDC facility that would 
interconnect the PSC and SPS systems, as well as the WSCC and SPP 
regional transmission grids. The application states that this second 
phase is now scheduled for completion in 2004.

    For the Commission by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-6754 Filed 3-17-00; 8:45 am]
BILLING CODE 8010-01-M