[Federal Register Volume 65, Number 204 (Friday, October 20, 2000)]
[Notices]
[Pages 63107-63110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27010]


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SECURITIES AND EXCHANGE COMMISSION

[Realease No. 35-27249]


Filings Under the Public Utility Holding Company Act of 1945, as 
Amended (``Act'')

October 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 undera 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 November 7, 2000, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
application(s) and/or 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 November 7, 2000, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

GPU, Inc (70-8695)

    GPU, Inc., 300 Madison Avenue, Morristown, New Jersey 07960 
(``GPU''), a registered holding company, has filed with the Commission 
a post-effective amendment to its declaration under sections 6(a) and 7 
and rules 53 and 54 of the Act.
    By prior Commission order in this proceeding dated December 8, 1995 
(HCAR No. 26426) (``1995 Order''), GPU, formerly General Public 
Utilities Corporation, was authorized to issue and sell from time to 
time through December 31, 2000 up to 250,000 authorized by unissued or 
previously reacquired shares of GPU common stock, $2.50 par value 
(``Common Stock''), to certain GPU system employees (``Participants'') 
under the GPU, Inc. and Secondary System Companies Employee Savings 
Plan for Nonbargaining Employees and the Employee Savings Plan for 
Bargaining Unit Employees for each of GPU's electric utility 
subsidiaries, Jersey Central Power & Light Company, Metropolitan Edison 
Company and Pennsylvania Electric Company (collectively, ``Savings 
Plans'').
    To date, GPU has not issued any shares of Common Stock under the 
1995 Order in connection with the Savings Plans. GPU requests an 
extension to December 31, 2005 of the time during which it may issue 
and sell the 250,000 authorized by unissued or previously reacquired 
shares of Common Stock under the Savings Plans, in order to maintain 
the flexibility the 1995 order affords.
    GPU currently has 350 million authorized shares of Common Stock of 
which 121,332,510 shares were outstanding at September 30, 2000. At 
October 11, 2000, the reported closing price of GPU Common Stock on the 
New York Stock Exchange was $32.38. GPU will use the net proceeds from 
the sale of additional stock to the Savings Plans to make cash capital 
contributions to its subsidiaries, for working capital, to repay 
outstanding indebtedness and for other corporate purposes.
    GPU states the Savings Plans are designed to encourage and assist 
savings and investment by eligible employees through voluntary 
contributions by employees of a portion of their compensation and by 
the matching of certain of these contributions by the Participant's 
employer.
    Amounts contributed to the Savings Plans by or on behalf of each 
Participant are held by a trustee. Separate plan accounts and, as 
necessary, sub-accounts are maintained for each Participant. The 
trustee invests the amounts held in plan accounts and sub-accounts in 
the investment fund or funds selected by the Participant. The 
investment funds from which Participants may choose currently consist 
of eleven funds including the ``GPU Stock Fund'' which is designed to 
provide employees with a convenient way to invest in GPU common stock 
by providing participants the opportunity to direct that all or a 
portion of their plan accounts be invested in the GPU Stock Fund.
    The Savings Plans currently provide that GPU Common Stock acquired 
for the GPU Stock Fund by the trustee be purchased in open market 
transactions through brokers. In order to provide additional equity 
capital, GPU proposes that shares of its Common Stock acquired by 
Participants through the GPU Stock Fund may be either purchased by the 
trustee, directly from GPU or in open market transactions, as is now 
the case.
    The purchase price per share paid by Participants would be the New 
York Stock Exchange closing price for GPU Common Stock for the date on 
which the purchase of the share is executed.

The Southern Company, et al.  (70-9727)

    The Southern Company (``Southern''), 270 Peachtree Street, N.W., 
Atlanta, Georgia 30303, a registered holding company, and its 
subsidiaries, Southern Energy, Inc. (``Southern Energy,'' formerly SEI 
Holdings, Inc.) and Southern Energy Resources, Inc. (``SERI,'' formerly 
Southern Electric International, Inc.), both of 900 Ashwood Parkway, 
Suite 500, Atlanta, Georgia 30338 (collectively, ``Applicants''), have 
filed an application-declaration under sections 6(a), 7, 9(a), 10, 12, 
13, 32 and 33 and rules 43, 44, 45, 53, 54, 90 and 91 of the Act.
    Applicants request authority in order: (1) To extend and renew the 
organizational and operational authority previously conferred by the 
Commission, (described below as ``Existing Organizational and

[[Page 63108]]

Operational Authority'') in The Southern Company, HCAR No. 26468 
(February 2, 1996) (``1996 Order'') beyond the current expiration date 
of December 31, 2000 \1\ in order to facilitate the divestiture by 
Southern of Southern Energy during calendar year 2001; \2\ (2) to 
obtain required authorizations pertaining to the implementation of the 
plan for the distribution during calendar year 2001 of the voting 
securities of Southern Energy by Southern to the common stock 
stockholders of Southern (``Distribution''); and (3) for Southern to 
retain the Existing Organizational and Operational Authority through 
June 30, 2005, subject to compliance with the other applicable rules, 
regulations and orders of the Commission.
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    \1\ The 1996 Order authorizes Southern to issue performance 
guarantees to Southern Energy through December 31, 2003.
    \2\ Applicants expect the divestiture to occur in the first half 
of 2001.
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I. Existing Organizational and Operational Authority

    Through its 1996 Order, the Commission authorized the Applicants to 
carry out the restructuring and consolidation of Southern's interests 
in exempt wholesale generator (``EWGs''), foreign utility companies 
(``FUCOs'') and Qualifying Facilities (``QFs'') (collectively, ``Exempt 
Projects'') and certain other non-utility activities under Southern 
Energy.
    The 1996 Order also authorized Applicants ``to organize one or more 
intermediate subsidiaries to make investments in Exempt Projects, other 
power projects, and Energy-Related Companies,\3\ and to provide project 
development and management services to projects and companies held by 
them (`Intermediate Subsidiaries'), and to organize one or more special 
purpose subsidiaries to engage in any of the activities in which [SERI] 
is currently authorized \4\ to engage (`Special Purpose Subsidiaries') 
* * *.'' \5\
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    \3\ The 1996 Order pre-dates the enactment of rule 58, however, 
the 1996 Order defined Energy-Related Companies in anticipation of 
the adoption of rule 58 and subject to the definition expressed in 
rule 58.
    \4\ By order dated December 30, 1994 (HCAR No. 26212), Southern 
Electric International, Inc. (now SERI) was authorized to engage in 
preliminary project development activities and the sale of operating 
construction, project management, administrative and other services 
to associates and nonassociates.
    \5\ HCAR No. 26468 (February 2, 1996).
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    The 1996 Order also authorized Southern Energy to acquire directly 
or indirectly, Energy Related Companies engaged in energy marketing 
(``Marketing Subsidiaries'').\6\ By order dated September 26, 1996 
(``September 1996 Order''),\7\ the Commission authorized Southern 
Energy, to broker or market electric power and other energy commodities 
throughout the United States, using one or more Marketing 
Subsidiaries.\8\ The Commission reserved jurisdiction in the September 
1996 Order over the expansion of these activities outside the United 
States. On May 13, 1999, the Commission also authorized the acquisition 
of Marketing Subsidiaries that engaged in energy marketing in Canada, 
through December 21, 2003.\9\
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    \6\ The order required that either the buyer or seller, or both, 
be located within the area covered by the Southeastern Electric 
Reliability Council (``SERC''). SERC includes all or part of the 
states in which the Public Utilities provide retail electric service 
(i.e., Georgia, Alabama, Mississippi and Florida) and all or part of 
North Carollina, South Carolina, Virginia, Tennessee and Kentucky. 
See also HCAR No. 27020 (May 13, 1999).
    \7\ Holding Co. Act Release No. 26581.
    \8\ The authority of the Marketing Subsidiaries is co-extensive 
with the energy marketing authority subsequently conferred by rule 
58.
    \9\ Holding Co. Act Release No. 27020.
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    The 1996 Order also authorized Special Purpose Subsidiaries to 
provide services or sell goods to any associate engaged in the 
development or operation of EWGs, FUCOs or QFs, either directly or 
indirectly through its related Intermediate Subsidiary, at fair market 
prices. The 1996 Order, under section 13(b) of the Act, exempted 
certain transactions from the requirements of rules 90 and 91 in which 
any of the following circumstances apply:
    1. The Exempt Project derives no part of its income, directly or 
indirectly, from the generation, transmission or distribution of 
electric energy for sale within the United States;
    2. The Exempt Project company is an EWG that sells electricity at 
market-based rates which have been approved by the Federal Energy 
Regulatory Commission (``FERC''), provided that the purchaser is not an 
associate public utility company of the Special Purpose Subsidiary 
within the Southern system; \10\
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    \10\ File No. 70-8733, Amendment No. 3, HCAR No. 26468 (February 
2, 1996). See also HCAR No. 26212 (December 30, 1994).
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    3. The Exempt Project company is a QF that sells electricity 
exclusively: (a) At rates negotiated at arms'-length to one or more 
industrial or commercial customers purchasing the electricity for their 
own use and not for resale; and/or (b) to an electric utility company 
of the Special Purpose Subsidiary within the Southern system, at the 
purchaser's ``avoided cost'' as determined in accordance with the 
regulations under the Public Utility Regulatory Policies Act of 1978; 
or
    4. The Exempt Project company is an EWG or QF that sells 
electricity at rates based upon its cost of service, as approved by 
FERC or any state public utility commission having jurisdiction, 
provided that the purchaser thereof is not an associate public utility 
company of such Special Purpose Subsidiary within the Southern system.
    By order dated December 30, 1994,\11\ the Commission authorized 
Special Purpose Subsidiaries to engage in development activities 
(``Development Activities'') pertaining to the potential acquisition 
and ownership of QFs and facilities to be owned or operated by EWGs and 
FUCOs, and other power production facilities which, when placed in 
operation, would be a part of Southern's ``integrated public-utility 
system,'' within the meaning of section 2(a)(29)(A) of the Act, 
together with ancillary facilities and equipment, such as may be used 
for fuel production, conversion, handling and/or storage; electrical 
transmission; and energy management, recovery and efficiency. The 
development activities of SERI and Special Purpose Subsidiaries include 
and are limited to project due diligence and design review; market 
studies; site inspection; preparation of bid proposals, including, 
posting of bid bonds, cash deposits or the like; application for 
required permits and/or regulatory approvals; acquisition of site 
options and options on other necessary rights; negotiation and 
execution of contractual commitments with owners of existing 
facilities, equipment vendors, construction firms, power purchasers, 
thermal host users, fuel suppliers and other project contractors; 
negotiation of financing commitments with lenders and equity co-
investors; and such other preliminary development activities as may be 
required in preparation for the acquisition or financing. SERI was 
authorized to expend up to $300 million in Development Activities,\12\ 
Applicants

[[Page 63109]]

seek to renew this authority until the date of the Distribution, which 
is expected to occur in 2001.
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    \11\ HCAR No. 26212.
    \12\ Authorized Development Activities also included rendering 
project development, engineering, design, construction and 
construction management, operating, fuel management, maintenance and 
power plant overhaul and other similar kinds of managerial and 
technical services (including intellectual property other than that 
created for or on behalf of the public utility company subsidiaries 
of Southern) to both affiliated Project entities and to non-
affiliated developers, operators and owners of independent power 
projects and foreign and domestic utility systems and industrial 
concerns. SERI was authorized to render these services utilizing its 
own work force, independent contractors, and personnel and other 
resources of associates obtained at cost under existing service 
agreements. HCAR No. 26212 (December 30, 1994), HCAR No. 26468 
(February 2, 1996). The 1996 Order extended this authority through 
December 31, 2000.
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    Southern requests that Southern Energy retain the Existing 
Organizational and Operational Authority through completion of the 
Distribution which is expected to occur in calendar year 2001.

II. Authority Sought With Respect to the Distribution and Post 
Distribution Authority for Southern

    Southern requests that Southern Energy retain the Existing 
Organizational and Operational Authority through completion of the 
Distribution in calendar year 2001 and that Southern be authorized to 
exercise the Existing Organizational and Operational Authority after 
the Distribution, through June 30, 2005, through one or more 
subsidiaries subject to the conditions and reporting requirements set 
forth in this file. In addition, Applicants request authority to expend 
$300 million on Development Activities, through June 30, 2005.

III. Formation and Transfer of Holdco

    Until the Distribution, Southern will own at least 80 percent of 
the common stock of Southern Energy. Southern intends to distribute all 
of its voting securities of Southern Energy to Southern's stockholders 
within twelve months of the initial offering of Southern Energy common 
stock.\13\
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    \13\ The initial offering to the public of Southern Energy 
common stock closed on October 2, 2000.
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    Pending the Distribution, Southern and Southern Energy intend to 
reorganize Southern and Southern Energy's activities so that, after the 
Distribution, Southern will retain certain components of the lines of 
business it now owns through Southern Energy.\14\ To accomplish this, 
Southern Energy and Southern Company Energy Solutions, Inc. 
(``Solutions'') \15\ will set up a new subsidiary (``Holdco''). 
Southern Energy and Solutions each plan to contribute energy-management 
business lines to Holdco.\16\ In exchange for its contribution to 
Holdco, Solutions will receive up to 20% of the voting stock of Holdco. 
In exchange for at least 80% of the voting stock of Holdco, \17\ 
Southern Energy would contribute the securities of two of its current 
Intermediate Subsidiaries, SE Finance Capital Corporation (``SE 
Finance'') and Southern Company Capital Funding, Inc.\18\ (``Capital 
Funding''), to Holdco.\19\ Each of these subsidiaries is an 
Intermediate Subsidiary of Southern Energy authorized under the 1996 
Order.
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    \14\ These components consist of Energy-Related activities 
authorized by rule 58 and certain FUCO activities. Applicants assert 
that most, if not all, of the steps taken prior to the Distribution 
fall within the authority conferred under the 1996 Order; rules 45, 
52, 57, 58, 87; and sections 32(g) and 33(c) of the Act. Applicants 
note that affiliate transactions are subject to the general 
supervision of the Commission under Section 12(f) of the Act. To the 
extent these activities require approval under any sections of the 
Act Applicants request this approval.
    \15\ Solutions is a direct subsidiary of Southern conducting 
Energy-Related operations under rule 58.
    \16\ Holdco will be an Intermediate Subsidiary as defined and 
authorized by the 1996 Order and the Existing Organizational and 
Operational Authority described above.
    \17\ The final percentages of ownership are to be determined 
based upon the relative value of the respective contributions to 
Holdco.
    \18\ As of March 31, 2000, Southern Energy's investment in 
Capital Funding was $52.7 million (including retained earnings of 
$2.3 million). Capital Funding has no subsidiaries.
    \19\ Applicants note the Holdco group operations do not include 
high growth businesses and are dominated by traditional public 
utility assets, including several natural gas distribution systems 
in the Netherlands that qualify as FUCOs.
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    SE Finance includes an Energy-Related Company component and a FUCO 
subsidiary component. The Energy-Related Company component includes 
three Energy-Related subsidiaries, Southern Energy Carbontronics, 
L.L.C. and two held by Southern Energy Clairton, L.L.C.\20\ SE Finance 
also owns the securities of four FUCOs: EPZ Lease, Inc., Dutch Gas 
Lease, Inc., SEI Gamog Lease, Inc. and Nuon Lease, Inc.
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    \20\ Each of these Energy-Related Companies participates in 
alternative fuel commercialization projects.
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    Southern Energy intends to distribute its securities of Holdco to 
Southern in redemption of a Special Class of Southern Energy Preferred 
Stock that was issued by Southern Energy to Southern. The Holdco group 
to be retained by Southern includes Engery-Related activities that the 
Commission has previously determined to be reasonably incidental and 
economically necessary to the operation of an integrated electric 
utility system and FUCO operations predominantly consisting of 
traditional public utility assets. \21\
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    \21\ Applicants state they could achieve the same structure 
under the 1996 Order through Southern Energy selling its interests 
in Exempt Projects, retaining only those interests to be retained by 
the Holdco group and combining Solutions with the Holdco group, as 
authorized under the 1996 Order and rule 58. In the Exercise of its 
business judgment, Southern has determined that greater value can be 
achieved through a tax-free distribution of Southern Energy to its 
stockholders than through a sale of portions or all of its business.
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    Southern anticipates that its wholesale power requirements will be 
satisfied in the future by a sixth operating company authorized by the 
FERC. An application to form this company is pending before this 
Commission.\22\ Accordingly, Southern further requests authority, to 
the extent required, to contribute the voting securities of Holdco to 
the sixth operating company. Southern's investment in one or more 
projects through subsidiary companies will be subject to the conditions 
imposed by rules 53 and 58 of the Act and subject to compliance with 
the reporting requirements established by the 1996 Order on a Southern 
consolidated basis.
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    \22\ S.E.C. File No. 70-9701.
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IV. Master Agreement and Ancillary Agreements

    Southern Energy and Southern have entered into a Master Separation 
and Distribution Agreement (``Master Agreement'') \23\ and the 
associated ancillary agreements (``Ancillary Agreements''), subject to 
their existing authority and rules, regulations and orders of the 
Commission.
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    \23\ The Master Agreement provided for separation of the 
Southern and Southern Energy businesses on September 1, 2000, which 
was shortly before the sale of common stock by Southern Energy to 
the public (the ``Separation Date''). Section 5.8 of the Master 
Agreement obligates the parties to implement the Master Agreement 
and the Ancillary Agreements to the fullest extent permitted by 
their existing authority and to cooperate to the end of achieving 
any further necessary authority. Section 5.11 of the Master 
Agreement provides for the distribution of Holdco. Section 5.12 of 
the Master Agreement provides that Southern will not cancel any 
outstanding guarantees, all of which are authorized under Southern's 
existing authority, and that Southern will extend credit support to 
Southern Company Energy Marketing through the Distribution, provided 
that the aggregate amount of credit support arrangements shall not 
exceed $425 million and may be canceled within six months following 
the Distribution. The credit support provided for is within the 
existing performance guarantee authority of Southern pertaining to 
Southern Energy and its subsidiaries. The 1996 Order authorizes 
Southern to issue performance guarantees up to $800 million through 
December 31, 2003.
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    The Ancillary Agreements appended to the Master Agreement include 
an Employee Matters Agreement,\24\ a Tax Indemnification Agreement,\25\ 
a Transitional Services Agreement, a Confidential Disclosure 
Agreement,\26\ a Technology and Intellectual Property

[[Page 63110]]

Ownership and License Agreement \27\ and an Indemnification and 
Insurance Matters Agreement. The Indemnification and Insurance Matters 
Agreement provides for a separation of insurance coverage and for 
mutual indemnification for claims based upon fault.\28\
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    \24\ The Employee Matters Agreement assures that affected 
employees will be covered by benefit plans, but avoids redundant 
benefit programs.
    \25\ Applicants state the Tax Indemnification Agreement will be 
separately filed under rule 45(c) of the Act.
    \26\ The Confidential Disclosure Agreement protects certain 
proprietary information.
    \27\ The Technology and Intellectual Property Ownership and 
License Agreement documents the intellectual property that Southern 
and Southern Energy are each authorized to use and does not require 
any future transfers of intellectual property following the 
Separation Date.
    \28\ Applicants assert that a claims indemnification agreement 
of this nature incidental to a genuine transaction does not involve 
an upstream or any extension of credit and is not an ``indemnity'' 
within the meaning of section 12 of the Act. See Mississippi Valley 
Generating Company, HCAR No. 12794 (February 9, 1955) and The 
Southern Company, HCAR No. 27134 (February 9, 2000) (both construing 
and applying Section 12(a) of the Act in accordance with Section 
1(c) of the Act and the legislative history showing an intent to 
protect public utility subsidiaries).
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    The Transitional Services Agreement provides for the continuation 
on an incidental basis of certain services currently provided to 
Southern Energy, including financial, human resources administration 
and payroll, accounting and treasury, engineering and technical 
consulting, information technology, procurement, government relations 
and legal services, for a term not to exceed two years from September 
1, 2000. As a result of the incidental nature of the services, neither 
Southern nor its subsidiaries will incur unreimbursed costs. After the 
Separation Date, the subsidiaries of Southern intend to restrict the 
services rendered to the Southern Energy group to the services 
enumerated in the Transitional Services Agreement, which are a subset 
of the currently authorized services.\29\
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    \29\ Southern's subsidiaries are authorized under rule 87 of the 
Act to provide goods and services at cost to Southern Energy and its 
subsidiaries in accordance with the limitations imposed by rule 87. 
Southern Company Services, Inc. (``Southern Services'') is further 
authorized under the 1996 Order and HCAR No. 26212 (December 30, 
1994) to provide services at cost to SERI. Southern Energy 
represents less than 3% of the total service billings of Southern 
Services. Southern anticipates a substantial reduction in the 
services rendered to Southern Energy following the Separation Date 
and a further reduction following the Distribution.
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    Southern further requests that the Commission take action, if 
deemed appropriate and consistent with the Act under section 12(f) of 
the Act \30\ with respect to the Master Agreement and the Ancillary 
Agreements, taking into account that Southern Energy will in all 
probability cease to be an associate company of Southern in 2001. 
Southern proposes that the authority to provide the ancillary services 
shall expire in accordance with the terms of the Master Agreement on or 
before September 1, 2002.\31\ Southern proposes to provide ancillary 
services on a wholly incidental basis and only as required to permit an 
orderly separation of the businesses without extraordinary losses or 
transition costs.
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    \30\ Section 12(f) of the Act confers plenary jurisdiction upon 
the Commission over affiliate transactions.
    \31\ Following the Distribution, Southern will principally 
provide engineering and technical services to Southern Energy 
through Solutions or any other rule 58 subsidiary authorized to 
provide energy-related engineering and technical services to third 
parties. The costs associated with Southern Services providing 
support services (other than energy-related engineering and 
technical services) are estimated to be less than 1% of the annual 
billings of Southern Service.
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V. Reporting Requirements

    The Applicants propose that a single consolidated quarterly report 
be filed by Southern and in accordance with rule 24 with respect to all 
activities of Southern and its subsidiaries authorized in this file. 
This report would replace the combined report currently being filed 
pursuant to the 1996 Order.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-27010 Filed 10-19-00; 8:45 am]
BILLING CODE 8010-01-M