[Federal Register Volume 65, Number 93 (Friday, May 12, 2000)]
[Notices]
[Pages 30650-30651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11961]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27174]


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

May 5, 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 transaction(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 May 30, 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 May 30, 2000, the application(s) and/declaration(s), 
as filed or as amended, may be granted and/or permitted to become 
effective.

Conectiv, et al. (70-9655)

    Conectiv, a registered public utility holding company; Atlantic 
City Electric Company (``ACE''), and Delmarva Power & Light Company 
(``Delmarva''), each a public utility subsidiary of Conectiv; ACE-REIT, 
Inc. (``ACE-REIT''), Conectiv Atlantic Generation, LLC (``CAG''), 
nonutility subsidiaries of ACE; and Conectiv Delmarva Generation, Inc. 
(``CDG''), a nonutility subsidiary of Delmarva (collectively, 
``Applicants''), all located at 800 King Street, Wilmington, Delaware 
19899, have filed an application-declaration under sections 6(a), 7, 
9(a), 10, 12(c), 12(d) and 32 of the Act and rules 43, 45, 46 and 54 
under the Act.
    Applicants state that Conectiv intends to convert Delmarva and ACE 
into subsidiaries that provide only regulated electric transmission and 
distribution services and, in the case of Delmarva, regulated gas 
distribution services. As part of this plan, Convectiv is implementing 
a strategy of divesting baseload generating facilities and retaining 
``mid-merit'' facilities, e.g., those facilities that can quickly 
increase or decrease their KW per hour output level on an economic 
basis. In connection with this strategy, Delmarva and ACE intend to 
transfer ownership of certain generating facilities to a special 
purpose holding company, Conectiv Energy Holding Company (``CEH''), 
that Conectiv proposes to establish and own, to hold these facilities. 
The Delmarva facilities have approximately 1,364 MW of net generating 
capacity, with an approximate value of $301.4 million net of deferred 
taxes (``Delmarva Generation Assets'').\1\ The ACE facilities have 
approximately 502 MW of net generating capacity valued at approximately 
$77.2 million net of deferred taxes (``ACE Generation Assets''). 
Applicants request several authorizations to accomplish this transfer 
and for other related matters.
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    \1\ These assets include approximately 127 MW of net generating 
capacity (with book value of $26 million net of deferred taxes) to 
be transferred by Delmarva to CDG that may be transferred to a 
nonassociate exempt wholesale generator (``EWG'') in exchange for 
like-kind assets under a like-kind exchange agreement. In addition, 
ACE and Delmarva intend to transfer certain other generating assets 
to EWGs and propose in another filing, S.E.C. File NO. 70-9607, to 
transfer certain generating assets to nonassociate non-EWGs.
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Transfer of ACE and Delmarva Generation Assets

    ACE proposes to acquire additional ownership interests in its 
subsidiary, CAG, which is currently inactive, and to transfer the ACE 
Generation Assets to CAG, in exchange for those interests. ACE also 
requests authority to acquire additional common stock of its 
subsidiary, ACE-REIT, which is also inactive, and to transfer to ACE-
REIT its ownership interest in CAG in exchange for that common 
stock.\2\ ACE proposes to issue a dividend to Conectiv of ACE-REIT's 
common stock.
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    \2\ Applicants propose to use ACE-REIT as an intermediate 
holding company over the ACE Generation Assets in order to minimize 
the tax consequences of the transfer.
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    Similarly, Delmarva proposes to acquire additional common stock of 
its subsidiary, CDG, which is currently inactive, and to transfer the 
Delmarva Generation Assets to CDG in exchange for that common stock. 
Delmarva proposes to issue a dividend to Conectiv of CDG's common 
stock. In accordance with generally accepted accounting principles: The 
dividends by ACE of ACE-REIT common stock and by Delamarva of CDG 
common stock will be treated as dividends out of capital surplus.\3\
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    \3\ Applicants note that the capital dividend by Delmarva of the 
CDG common stock will cause its common equity to total 
capitalization ratio to fall below 30% until the sale of other 
generation assets to third parties is completed. The closing of this 
sale is scheduled for September 1, 2000 subject to the prior receipt 
of certain state regulatory approvals. The capital dividend by ACE 
will also cause the common equity to total capitalization ratio for 
ACE to fall below 30%.
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    In addition, Conectiv requests authority to establish and acquire 
all of the common shares of CEH \4\ as an intermediate holding company 
that would hold the equity securities of CDG, ACE-REIT and indirectly, 
CAG.\5\ Accordingly, Applicants request authority for Conectiv to 
contribute the equity securities of CDG and ACE-REIT and, indirectly, 
CAG to CEH. These transactions would make CDG and ACE-REIT direct 
subsidiaries and CAG and indirect subsidiary of CEH. Applicants also 
request that the Commission deem ACE-REIT not to be a utility holding 
company solely for purposes of section 11(b)(2) of the Act.
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    \4\ CEH will not be an operating company, will have no employees 
and will function as an intermediary holding company that will be a 
utility holding company until such time as CDG and CAG are qualified 
as EWGs. Applicants state that following authorization by the 
Commission, CEH will issue a nominal number of shares of equity to 
Conectiv in exchange for a nominal amount of cash not to exceed 
$1000.
    \5\ Conectiv intends for CEH to invest in one or more EWGs and 
to consolidate or dispose of ownership interests in any such EWG so 
long as the aggregate limitation on such investments, imposed by 
rule 53 or other applicable order, is not exceeded. Separately, 
Conectiv intends to contribute to CEH the equity securities of a 
rule 58 company engaged in energy marketing, Conectiv Energy Supply, 
Inc.
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Financings

    Applicants request authority for CEH, ACE-REIT, CAG and CDG to 
engage in certain financings until such time as CAG and CDG qualify as 
EWGs and the financing of the companies can be accomplished through 
rule 52 or until March 31, 2000, whichever first occurs (``Authorized 
Period''). Specifically, CEH requests authority to issue equity or 
long- or short-term debt securities to

[[Page 30651]]

Conectiv to finance its ongoing business needs through the 
Authorization Period. Any debt will bear interest at a rate designed to 
approximate Conectiv's cost of money and will mature in 30 years or 
less. Conectiv also requests authorization for CEH to participate in 
the Conectiv system money pool (``Money Pool''). The total debt and 
equity proposed to be issued by CEH, either directly to Conectiv or 
through the Money Pool, will not exceed $750 million, less the amount 
of any debt issued by a CEH subsidiary directly to Conectiv, as 
described below.
    In addition, ACE-REIT, CAG and CDG request authority to issue 
equity or long- or short-term debt securities to CEH or Conectiv 
through the Authorization Period. Any debt issued will mature in 30 
years or less and will bear interest at a rate designed to approximate 
the lender's cost of money. Also, Applicants request authority for CAG, 
CDG, and ACE-REIT to participate in the Money Pool. Applicants propose 
that the total amount of debt and equity securities issued, either 
directly to Conectiv or through the Money Pool, by CDG will not exceed 
$150 million and by ACE-REIT and CAG will not exceed $100 million each.

Like Kind Exchange

    Applicants anticipate that facilities having approximately 127 MW 
of net generating capacity owned by Delmarva to be transferred to CDG, 
will be subject to an obligation to transfer these assets to a 
nonassociate in a like-kind exchange (``To Be Transferred Assets''). 
First, Conectiv Energy, Inc. (``CEI''), which owns certain generating 
assets currently under construction (``New Hay Road Facilities''), 
would be transferred to a third party intermediary. Then, the To Be 
Transferred Assets would be sold to the nonassociate in exchange for 
the acquisition by CDG of either: (a) the New Hay Road Facilities at a 
time when the investment in the New Hay Road Facilities equals or 
approximates the value of the To Be Transferred Assets; or (b) other 
suitable generation assets (either, ``To Be Acquired Assets''). If CDG 
is not an EWG at the time of the acquisition of the To Be Acquired 
Assets, Applicants request authority to acquire those assets as utility 
assets.

Western Resources, Inc. 70-9665

    Western Resources, Inc. (``WRI''), 818 Kansas Avenue, Topeka, 
Kansas 66612, a Kansas utility company and a public utility holding 
company claiming an exemption under section 3(a) by rule 2 from all 
provisions of the Act, except section 9(a)(2), has filed an application 
under sections 9(a)(2) and 10 of the Act in connection with the 
acquisition of a utility subsidiary.
    WRI conducts utility operations through its KPL division and its 
subsidiary, Kansas Gas and Electric Company (``KGE''), which together 
provided approximately 628,000 customers in 471 communities in the 
state of Kansas with electricity. In addition, WRI has a 45% economic 
interest in ONEOK, Inc., an Oklahoma corporation that distributes 
natural gas to more than 1.4 million customers with natural gas.\6\ 
Through various other subsidiaries, WRI is engaged in owning interests 
in power plants and projects and providing monitored security alarm and 
home paging services. For the year ending December 31, 1999, WRI 
reported consolidated revenues of approximately $2.0 million and net 
income of $12.5 million and had $8.0 billion in consolidated assets at 
the end of that period.
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    \6\ The economic interest is derived solely from approximately 
9.9% of the voting stock and shares of nonvoting convertible 
preferred stock of ONEOK. The staff of the Commission issued a no-
action letter in 1997 on the proposition that ONEOK is not a 
subsidiary of WRI and that WRI does not control ONEOK. (See Western 
Resources, Inc., SEC No-Action Letter (Nov. 24, 1997).
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    One nonutility subsidiary company, Westar Generating II Inc. 
(``WG''), is engaged in constructing two General Electric combustion 
turbine generators (``CTs''). The CTs are expected to be rated for a 
capacity of approximately 74 MW of net dependable capacity at peak 
conditions and are expected to become commercially operational at a KGE 
generating facility on June 1, 2000. Once the construction is complete 
and operation begins, WG will qualify as a public utility under section 
2(a)(3) of the Act. Accordingly, WRI has requested authority to acquire 
WG as a public utility company.
    WRI's costs associated with the acquisition of WG will be equal to 
that of the equipment and construction costs incurred by WG, which is 
expected to be approximately $63 million. The CTs will be connected to 
KGE at its generating facility directly through a new buss to be tied 
to a grid located at the facility. Initially, WG intends to sell all 
capacity and energy generated by the CTs to WRI at a cost-based rate 
under a power purchase agreement between WRI and WG.
    In addition, WRI intends to claim an exemption as an intrastate 
holding company under section 3(a) of the Act and rule 2 with regards 
to the ownership of WR as a public utility company.

    For the Commission by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-11961 Filed 5-11-00; 8:45 am]
BILLING CODE 8010-01-M