[Federal Register Volume 65, Number 171 (Friday, September 1, 2000)]
[Notices]
[Pages 53242-53245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22417]



[[Page 53242]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27222]


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

August 25, 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 September 19, 2000, 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 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 September 19, 2000, the application(s) and/
or declaration(s), as filed or as amended, may be granted an/or 
permitted to become effective.

Indiana Michigan Power Company (70-6458)

    Indiana Michigan Power Company (``I&M''), One Summit Square, P.O. 
Box 60, Fort Wayne, Indiana 46801, an electric utility subsidiary of 
American Electric Power Company, Inc., a registered holding company, 
has filed a post-effective amendment under sections 9(a), 10 and 12(d) 
of the Act and rule 54 under the Act to an application-declaration 
previously filed under the Act.
    By orders dated June 11, 1980, June 25, 1980, December 4, 1984, 
December 12, 1984, August 2, 1985, October 5, 1994, June 26, 1995 and 
February 28, 2000 (HCAR Nos. 21618, 21642, 23514, 23528, 23781, 26136, 
26319 and 27143, respectively) (``Orders''), I&M was authorized to 
enter into and amend agreements (collectively, ``Agreements'') with the 
city of Rockport, Indiana (``City'') in connection with the 
construction and installation of pollution control facilities at I&M's 
Rockport generating station (``Facilities''). Under the Agreements, the 
City may issue and sell, in several series, its pollution control 
revenue bonds and pollution control refunding bonds (together, 
``Bonds'').
    The Orders also authorized I&M to convey the Facilities to the City 
and to reacquire them at a purchase price, payable on an installment 
basis semi-annually, in amounts that enable the City to pay, when due, 
the interest and principal on the Bonds and certain other fees and 
expenses. Currently, the City has issued three series of Bonds in an 
outstanding aggregate principal amount of $150 million.
    Under the most recent order (``February Order''), the Commission 
authorized I&M to cause the City to issue and sell, under the terms of 
the Agreements, through June 30, 2000 (``Authorization Period''), one 
or more additional series of Refunding Bonds in the aggregate principal 
amount of up to $50 million. However, the Bonds authorized in the 
February Order were not issued during the Authorization Period.
    It is now proposed that the Authorization Period be extended to 
June 30, 2002. The Bonds will mature on a date not more than thirty 
years from the date of issuance. The proceeds will be used to provide 
for the early redemption of the entire outstanding principal amount of 
$50 million of the City's Series 1985 A Floating Rate Weekly Demand 
Bonds, due August 1, 2014.

New England Power Service Company (70-9673)

    New England Power Service Company (``NEPSCO''), a direct wholly 
owned nonutility service subsidiary company of National Grid USA 
(``Grid''), a registered holding company, and an indirect wholly owned 
subsidiary of The National Grid Group PLC (``NGG''), a registered 
public utility holding company, located at 25 Research Drive, 
Westborough, Massachusetts 01582, has filed a declaration under 
sections 12(c) and 13(b) of the Act and rules 90 and 91 under the Act.
    By order dated December 21, 1979 (HCAR No. 21354), the Commission 
authorized NEPSCO to include in its service charges to associate 
companies in the New England Electric System (``NEES'') \1\ a rate of 
return on equity capital (excluding retained earnings and accumulated 
other comprehensive income) equal to the authorized rate of return on 
common equity for its associate, the New England Power Company. Under 
this formula, NEPSCO currently uses an equity rate of return of 11.25%. 
NEPSCO requests permission to reduce its common stock and paid-in 
capital from a total of $16.3 million to $5 million by means of a 
distributive dividend to Grid from paid-in capital, through December 
31, 2004.
---------------------------------------------------------------------------

    \1\ By order dated March 15, 2000 (HCAR No. 27154), the 
Commission approved the acquisition of NEES by NGG. NEES has changed 
its name to National Grid USA.
---------------------------------------------------------------------------

    The recapitalization proposed in this filing would be completed on 
or before the thirtieth day following the Commission's order granting 
the authority requested in this file and in file no. 70-9089.\2\
---------------------------------------------------------------------------

    \2\ In file no. 70-9089 (filed June 12, 2000), National Grid USA 
requested increased borrowing authority for its service company and 
select utilities. That request will have no effect on the rate of 
return on equity capital or the overall reduction of NEPSCO's equity 
to $5 million.
---------------------------------------------------------------------------

    NEPSCO proposes to continue to be allowed to include in its service 
charges: (1) The actual interest on funds borrowed, and (2) as 
reasonable compensation for its equity capitalization, a return on the 
book value of its equity (excluding retained earnings and accumulated 
other comprehensive income). NEPSCO requests permission so that 
following the reduction in capital, the rate of return on equity 
capital through December 31, 2004, would be fixed at 10.5%, the allowed 
rate of return stipulated in a settlement entered into by its 
affiliate, The Narragansett Electric Company, with the Rhode Island 
Public Utilities Commission.

The Connecticut Light and Power Company, et al. (70-9697)

    The Connecticut Light and Power Company (``CLP''), 107 Selden 
Street, Berlin, Connecticut 06037, Western Massachusetts Electric 
Company (``WME''), 174 Brush Hill Avenue, West Springfield, 
Massachusetts 01090, and Public Service Company of New Hampshire 
(``PSC''), 1000 Elm Street, Manchester, New Hampshire 03101 
(collectively, ``Applicants''), each an electric utility subsidiary 
company of Northeast Utilities (``NU''), a registered holding company, 
have filed an application-declaration under sections 6(a), 7, 9(a), 10, 
and 13(b) of the Act and rules 45, 46, 90 and 91 under the Act.
    CLP, WME and PSC provide electric power at retail to customers in 
Connecticut, Massachusetts and New Hampshire, respectively. Each of 
these states has enacted an electric utility restructuring law 
(``Restructuring Law''), which introduces retail competition for

[[Page 53243]]

electric services. To facilitate the transition to competition, the 
Restructuring Laws contain provisions that permit electric utilities to 
recover some, or all of certain costs resulting from the transition to 
competition (``Transition Costs'').\3\ The recovery will take place 
through the collection, from electricity consumers, of a non-bypassable 
special charge that is based on the amount of electricity purchased 
(``Market Transition Charge'').
---------------------------------------------------------------------------

    \3\ Transition Costs include regulatory assets, long-term 
purchased power commitments and other costs, including investments 
in generating plants, spent-fuel disposal, retirement costs and 
reorganization costs, for which an opportunity for recovery is 
allowed in an amount determined by the state public utility 
commissions to be just and reasonable.
---------------------------------------------------------------------------

    The Restructuring Laws also contain provisions authorizing the 
state utility commissions (``PUCs'') to approve the issuance of debt 
securities (``Transition Bonds'') by a utility as a mechanism to 
mitigate Transition Costs and reduce customer rates.\4\ Each Applicant 
has submitted requests to its PUC to approve the recovery of specified 
amounts of Transition Costs, to allow the issuance of Transition Bonds 
and to establish special purpose entities (``SPEs'') that will issue 
the Transition Bonds.
---------------------------------------------------------------------------

    \4\ Applicants state that the issuance of Transition Bonds would 
reduce rates because each Applicant is required to use the proceeds 
to reduce its capitalization, thus reducing its revenue 
requirements.
---------------------------------------------------------------------------

    The Transition Bonds would be secured by a portion of the Market 
Transition Charge (``Transition Bond Charge'').\5\ To facilitate 
securitization, the Restructuring Laws have established the right to 
collect the Transition Bond Charge as a separate property right 
(``Transition Property'') that includes all right, title, and interest 
in and all revenues, collections, claims, payments, money, or proceeds 
of or arising from the Transition Bond Charge.
---------------------------------------------------------------------------

    \5\ The Transition Bond Charge will be established at a level 
(or at different levels during specified periods over the life of 
Transition Bonds) intended to provide for the full recovery of 
payments of interest and principal on Transition Bonds, credit 
enhancement, including any liquidity reserves, and an amount for 
overcollateralization. The amount is expected to reach at least 
0.50% of the initial principal amount of the Transition Bonds.
---------------------------------------------------------------------------

    Applicants accordingly request authority through August 31, 2005 
for several transactions. In summary, Applicants request authority (1) 
to create and acquire interests in special purpose entities (``SPEs''), 
(2) for the SPEs to issue Transition Bonds or other related debt 
instruments either to the public or to state government-sponsored 
trusts (``Trusts''), and (3) for each Applicant to enter into 
agreements to provide services to the SPEs at other than cost.
    Each Applicant will contribute as equity to its subsidiary SPE cash 
equal to at least 0.50% of the initial principal balance of Transition 
Bonds issued with respect to that SPE (``Capital Amount'').\6\ The 
Capital Amount invested in an SPE and any investment earnings on that 
amount, to the extent not used to satisfy obligations on the related 
Transition Bonds, will be returned to its parent Applicant after the 
Transaction Bonds are paid in full.
---------------------------------------------------------------------------

    \6\ This capitalization is required in order for the Applicant 
to treat the Transition Bond issuance by its subsidiary SPE as debt 
for tax purposes.
---------------------------------------------------------------------------

    The SPEs will issue Transition Bonds to underwriters, who in turn 
will sell the bonds to public investors. Applicants state that the 
following principal amount of Transition Bonds will not in aggregate 
outstanding principle amount exceed $1.489 billion for CLP, $303 
million for WME and $725 million for PSC. Proceeds from the sale of 
Transition Bonds issued by an SPE, less any transaction costs paid by 
the SPE, will be transferred to its parent Applicant in consideration 
for the transfer of the Transition Bond Property by the Applicant to 
the SPE.
    Transition Bonds will be in the form of promissory notes of the 
SPEs. Transition Bonds issued by an SPE will be nonrecourse to its 
parent Applicant, but will be secured by the assets of the SPE. 
Transition Bonds will not be subordinated to the claims of any 
creditors or the equity owner of the issuing SPE, other than for 
payments of trustee, servicing, and administrative fees.
    The Transition Bonds will be issued in one or more series. Each 
series of Transition Bonds may be offered in one or more classes, each 
expected to have a different principal amount, term,interest rate, and 
amortization schedule. Each Applicant expects that the weighted average 
all-in cost of the Transition Bonds issued on its behalf will not 
exceed the applicable U.S. Treasury bond benchmark security plus 300 
basis points.
    Applicants also expect that the Transition Bonds will have legal 
maturities not longer than 15 years and that the longest-term 
Transition Bonds will have scheduled maturities that are at least 6 
months earlier, as necessary to meet the rating agencies' triple-A 
rating standards. An SPE may enter into swap agreements or other 
hedging arrangements solely to permit the issuance of variable rate 
Transition Bonds. The cost of any such agreements or arrangements will 
be included in the weighted average all-in cost calculation referred to 
above.
    Each Applicant requests authority to enter into administration 
agreements (``Administration Agreements'') with its subsidiary SPE, to 
perform administrative services, including collection, and provide 
facilities for the SPE to ensure that it is able to perform such day-
to-day operations as are necessary. Under the Administrative 
Agreements, Applicants will be entitled to receive an administration 
fee for their provision of services. In addition, each Applicant will 
collect the billed Transition Bond Charge for a fee as a servicer for 
the Transition Bonds. In order to support the SPEs' status as a 
bankruptcy remote entity, separate and apart from their parent 
Applicants, and to satisfy related rating agency and legal opinion 
requirements, these fees must be comparable to one negotiated in a 
market-based, arm's length transaction. Although the fees to be charged 
by an Applicant are expected to approximate its estimate of the actual 
cost of providing these services and facilities, Applicants cannot be 
certain that the fees will meet the ``at cost'' requirements of Section 
13(b) and Rules 90 and 91 of the Act. Accordingly, Applicants request 
an exemption from these requirements for those services.
    Applicants also propose to use an alternative structure with 
respect to the proposed transactions. Under the alternate format, the 
SPEs will issue promissory notes (``SPE Debt Securities''), not to the 
public, but to Trusts. In turn, the Trusts will issue securities to the 
public through underwriters in the form of pass-through certificates 
(``Pass-Through Certificates'') representing beneficial ownership 
interests in the SPE Debt Securities held by the Trusts. The Pass-
Through Certificates will be issued in an aggregate principal amount 
equal to the aggregate principal amount of the SPE Debt Securities. The 
SPE Debt Securities will be secured in the same fashion and to the same 
extent as the Transition Bonds.
    Each class of each series of Pass-Through Certificates will have 
terms and characteristics that are substantially identical to the 
corresponding class of SPE Debt Securities. As with the Transition 
Bonds, any SPE or Trust may enter into swap agreements or other hedging 
arrangements solely to permit the issuance of variable rate Pass-
Through Certificates. In such case, ownership of Pass-Through 
Certificates would also represent beneficial ownership interests in 
those agreements or arrangements. The cost of any such agreements or 
arrangements will be

[[Page 53244]]

included in a weighted average all-in cost calculation, which will not 
exceed the rates described under the first transactional structure 
described above.
    As with the first structure, each Trust will transfer the proceeds 
from the issuance of the Pass-Through Certificates, net of its 
transaction expenses, if any, to the related SPE, as consideration for 
the SPE Debt Securities. In turn, the SPE will then transfer to its 
parent Applicant, as consideration for the transfer of the Transition 
Bond Property to the SPE, the balance of those Transition Bond 
proceeds, net of any remaining transaction expenses.
    Applicants plan to apply the proceeds of securitization, among 
other things, to pay for transaction costs, to buy out or renegotiate 
existing purchased power agreements with independent power producers, 
and to reduce their capitalization.

Vectren Corporation, et al. (70-9703)

    Vectren Corporation (``Vectren''), an Indiana public-utility 
holding company exempt from registration under section 3(a)(1) of the 
Act by rule 2, and its wholly owned subsidiary Vectren Utility 
Holdings, Inc. (``VUHI'') have filed an application under sections 
9(a)(2) and 10 of the Act in connection with: (1) The formation of 
VUHI, which will serve as an intermediate holding company over 
Vectren's public-utility subsidiaries; and (2) the indirect 
acquisition, through VUHI, of a public-utility company that will hold 
certain of the natural gas distribution assets (the ``DP&L Assets'') of 
The Dayton Power & Light Company (``DP&L'') (collectively, the 
``Transactions''). In addition, both Vectren and VUHI request that the 
Commission grant them an exemption under section 3(a)(1) of the Act 
from all provision of the Act, except section 9(a)(2).
    Vectren was formed on March 31, 2000 from the combination of 
Indiana Energy, Inc. and SIGCORP., Inc. See Vectren Corp., Holding Co. 
Act Release No. 27150 (Mar. 8, 2000) (``March 2000 Order''). Vectren 
has established VUHI, a new Indiana subsidiary, to serve as the 
intermediate holding company for Vectren's utility interests. Vectren 
will contribute the common stock of its public-utility subsidiary 
companies to VUHI.
    Vectren, through its public-utility subsidiary companies, Southern 
Indiana Gas and Electric Company (``SIGECO''), Community Natural Gas 
Company, Inc. (``Community'') and Indiana Gas Company (``Indiana 
Gas''), provides electric and/or gas utility service to customers in 
southern and central Indiana. In the March 2000 Order, the Commission 
determined that the gas operations of SIGECO, Community and Indiana Gas 
constitute a gas integrated public-utility system and that Vectren may 
own the SIGECO electric operations as an additional integrated public-
utility system.
    Indiana Gas provides gas distribution service to approximately 
510,000 customers in Indiana. for the twelve months ended June 30, 
2000, Indiana Gas had operating revenues of approximately $455.7 
million and assets, as of June 30, 2000, of approximately $698.3 
million. Indiana Gas purchases approximately 50% of its total system 
gas supply requirements from the Gulf Coast production basin and 
approximately 48% from production in the Mid-Continent basin. The 
interstate pipelines that transport pipeline supplies to the Indiana 
Gas service territory include ANR Pipeline Company (``ANR''), CMS 
Panhandle Eastern Pipeline Company (``CMS Panhandle''), Texas Eastern 
Transmission Company (``Texas Eastern''), Texas Gas Transmission 
Corporation (``Texas Gas'') and Midwestern Gas Transmission Company 
(``Midwestern'') (via ANR).
    SIGECO provides retail gas distribution service to approximately 
107,000 customers and electric distribution service at retail to 
approximately 126,000 customers in Indiana. for the twelve months ended 
June 30, 2000, SIGECO had operating revenues of approximately $385.5 
million and assets, as of June 30, 2000, of approximately $878.4 
million. SIGECO's gas utility operations are located in a single 
contiguous area in southwestern Indiana. SIGECO purchases nearly 100% 
of its system supply gas requirements from the Gulf Cost production 
basin. SIGECO has contracted for firm transmission capacity on five 
interstate gas pipelines: Texas Gas Midwestern, Tennessee Gas Pipeline 
Company, ANR and Texas Eastern.
    Vectren also owns approximately 33% of the outstanding common stock 
of Community, a small Indiana gas distribution company. Community has 
several service territories in southwestern Indiana that are adjacent 
to or near the gas service territory of SIGECO. Community has 6,638 
natural gas customers.
    Indiana Gas, SIGECO and Community are subject to regulation as to 
rates and other matters, including affiliate transactions, by the 
Indiana Utility Regulatory Commission.
    DP&L is a wholly owned subsidiary of DPL, Inc., a public-utility 
holding company that claims exemption from registration under section 
3(a)(1) of the Act by rule 2. DP&L provides electric and gas service to 
customers in west central Ohio. For the twelve months ended June 30, 
2000 DP&L had approximately $219.4 million of gross operating revenues 
from its gas utility operations and approximately $425 million in gas 
assets as of June 30, 2000. Of interest here, DP&L provides retail gas 
distribution to approximately 300,000 customers. Under DP&L's 
operation, the gas assets were supported by long-term firm pipeline 
transportations with ANR, Texas Gas, CMS Panhandle, Columbia Gas 
Transmission Corporation and Columbia Gulf Transmission Corporation. 
DP&L is also interconnected with CNG Transmission Corporation.
    Vectren and one of its subsidiaries. Vectren energy Delivery of 
Ohio, Inc. (formerly, Number-3CHK, Inc.) (referred to here as 
``OhioCoO''), have entered into an agreement to purchase the ``DP&L 
Assets'' for a purchase price of approximately $425 million. The DP&L 
Assets are located in a single area that is adjacent to, and contiguous 
with, the service territory of the existing Vectren gas operations.
    Vectren proposes to acquire the DP&L Assets as a tenancy in common 
through two separate subsidiaries. Specifically, Indiana Gas will 
acquire an approximately 47% ownership in the DP&L Assets and OhioCo 
will acquire the remaining approximately 53% ownership interest. OhioCo 
will operate the DP&L Assets. Because Ohio law requires domestic 
incorporation of any entity that provides utility services in Ohio, 
Indiana Gas has incorporated under Ohio law as well as Indiana law. 
After the acquisition of the DP&L Assets, the gas distribution system 
jointly owned by OhioCo and Indiana Gas will be subject to regulation 
as to rates and other matters by the Public Utilities Commission of 
Ohio.
    DP&L interstate pipeline contracts that are used in connection with 
the operation of the DP&L Assets will be transferred to Vectren as part 
of the asset acquisition. The existing DP&L commodity purchase 
contracts will not be transferred to Vectren, however. Instead, Vectren 
will access commodity through the use of transferred transportation 
contracts from the same sources that have been available to DP&L 
historically.
    As a result of the proposed Transactions, Vectren and VUHI will be 
affiliates of Indiana Gas, SIGECO, Community and OhioCo. Vectren will 
be a holding company over VUHI,

[[Page 53245]]

Indian Gas, SIGECO, Community and OhioCo, and VUHI will be a holding 
company over Indiana Gas, SIGECO, Community and OhioCo. The application 
states that, following the Transactions, both Vectren and VUHI will 
qualify for exemption from registration under section 3(a)(1) of the 
Act because each holding company and each public-utility company from 
which it derives, directly or indirectly, any material part of its 
income, will be predominantly intrastate in character and will carry on 
their businesses substantially in Indiana, the state in which the 
holding company and each such public-utility company is organized.

Cinergy Corporation (70-9731)

    Cinergy Corporation (``Cinergy''), 139 East Fourth Street, 
Cincinnati, Ohio 45202, a registered holding company, has filed an 
application-declaration under sections 6(a), (7), 9(a), 10 and 12(c) of 
the Act and rules 42 and 54 under the Act.
    Cinergy proposes to adopt a shareholder rights plan (``Plan'') and 
to enter into a related Rights Agreement (``Agreement'') with the Fifth 
Third Bank, acting as transfer agent, to implement the Plan. Under the 
Plan, Cinergy's Board of Trustees (``Board'') proposes to declare a 
dividend of one right (``Right'') for each outstanding share of Cinergy 
common stock, $0.01 par value (``Common Stock''). Each Right would 
entitle the holder to purchase one share of Common Stock at a price of 
$100.00 per share, subject to adjustment (``Exercise Price''). The 
dividend will be payable to stockholders of record on the tenth 
business day after the Commission has issued an order requested in this 
filing (``Record Date'').
    Initially, the Rights would not be exercisable and may only be 
traded together with the Common Stock certificates that are outstanding 
on the Record Date. The Rights may be exercised and traded 
independently of the underlying Common Stock on the Distribution Date, 
which is defined in the Agreement as the earlier of two dates. The 
first is ten business days after the first public announcement that any 
person or group (``Acquiring Person'') has acquired beneficial 
ownership of ten percent or more of Common Stock without Board approval 
(``Acquisition Event''). The second is ten business days (unless 
extended by the Board) after any person or group has commenced a tender 
or exchange offer, which would, upon its consummation, result in the 
person or group becoming an Acquiring Person. On the occurrence of 
either event, each Right will be evidenced by a transferable Right 
certificate.
    If an Acquisition Event has occurred, Right holders (other than 
Acquiring Persons and certain of their transferees) will have the right 
to receive Common Stock having a market value equal to two fines the 
effective Exercise Price (``Discount Purchase Price'') for each Right 
exercised. In addition, each Right holder (other than Acquiring Persons 
and certain of their transferees) will have the right, following an 
Acquisition Event, to receive the acquiror's common stock having a 
market value equal to the Discount Purchase Price for each Right 
exercised, under certain circumstances. The circumstances are: (1) 
Cinergy is acquired by another person or entity not controlled by 
Cinergy (``Acquiror'') in a business combination in which Cinergy is 
not the continuing or surviving entity; (2) an Acquiror consolidates 
with or merges into Cinergy in a business combination in which Cinergy 
is the continuing or surviving entity and all or part of the Common 
stock is exchanged for the securities or property of any other person; 
or (3) 50% or more of Cinergy's consolidated assets or earning power is 
sold or transferred to an Acquirer. If an Acquisition Event occurs, all 
Rights held by Acquiring Persons (and certain of their transferees) 
other related persons, become full and void.
    Cinergy may redeem the Rights, as a whole, at an adjustable price 
of $0.01 per Right, at any time prior to the earlier of the close of 
business on the date on which any person has become an Acquiring Person 
and the final expiration date of the Rights. The Rights will expire ten 
years from the date of the Agreement, unless Cinergy has redeemed or 
exchanged them earlier.
    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-22417 Filed 8-31-00; 8:45 am]
BILLING CODE 8010-01-M