[Federal Register Volume 66, Number 212 (Thursday, November 1, 2001)]
[Notices]
[Pages 55212-55214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27441]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27458]


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

October 26, 2001.
    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 November 20, 2001, 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 November 20, 2001, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Conectiv, et al. (70-9899)

    Conectiv, a registered holding company, Atlantic City Electric 
Company (``ACE''), a public utility subsidiary of Conectiv, Conectiv 
Resource Partners, Inc. (``CRPI''), the Conectiv system's service 
company, each located at P.O. Box 231, Wilmington, Delaware 19899-0231, 
and Atlantic City Electric Transition Funding LLC (``Special Purpose 
Issuer''), Mail Code: 89KS33, P.O. Box 15597, Wilmington, Delaware 
19850-0231, (collectively, ``Applicants'') have filed an application-
declaration (``Application'') under sections 6(a), 7, 9(a), 10, 12(b), 
12(d), 12(f) and 13(b) of the Act and rules 42-45, 90, 91 and 54 under 
the Act.
    The proposals set forth in the Application relate to recovery of 
stranded costs resulting from the restructuring of the electric utility 
industry by the State of New Jersey.
    As of December 31, 2000, ACE served approximately 501,000 customers 
in its service, territory, covering an area of about 2,700 square miles 
in the southern one-third of New Jersey. ACE's customer base consists 
primarily of residential and commercial customers. ACE reported net 
income after extraordinary items of $54.4 million on revenue of $968.4 
million for the year ended December 31, 2000.
    The New Jersey Electric Discount and Energy Competition Act (the 
``Competition Act''), was signed into law in February 1999. The 
Competition Act provides, among other things, for the restructuring of 
the electric utility industry in New Jersey. The Competition Act 
requires the unbundling of electric services into separate generation, 
transmission, and distribution services with open retail competition 
for generation services. The Competition Act provides for utilities to 
recover the anticipated loss in value of their generation-related 
assets and the costs incurred under powder purchase contracts with 
nonutility generators of electricity that are not recoverable under 
market rates. The Competition Act also provides for the recovery of 
these stranded costs through a non-bypassable charge included in 
customers' bills (``Market Transition Charge'').
    The Competition Act authorizes a utility to securitize its right to 
recover stranded costs through the issuance of asset-backed debt 
securities (``Transition Bonds'') by the electric public utility or 
other financing entity approved by the New Jersey Board of Public 
Utilities (``BPU''). To the extent a utility's right to recover 
stranded costs is securitized, a portion of the Market Transition 
Charge is replaced by a non-bypassable irrevocable charge included in 
customers' electric bills (``Transition Bond Charge''), which is 
designed to meet the costs of paying the principal of and interest on 
the Transition Bonds and the costs associated with the issuance, credit 
enhancing, and servicing of the Transition Bonds. The Competition Act 
also authorizes the recovery of a related Market Transition Charge tax 
component (the ``MTC Tax''). The right to charge, collect, and receive 
the Transition Bond Charge, as well as the MTC Tax, constitute 
``Bondable Transition Property.'' In order to facilitate the issuance 
of Transition Bonds, ACE formed the Special Purpose Issuer March 28, 
2001, under a limited liability company agreement with ACE as its sole 
member, and acquired its securities under authority granted through 
prior Commission orders.
    The Competition Act authorizes the BPU to issue a ``bondable 
stranded costs rate order,'' such as a BPU financing order, approving, 
among other things, the issuance of transition Bonds to recover 
bondable stranded costs and related expenses of a public electric 
utility. A utility, a finance subsidiary of a utility or a third-party 
assignee of a utility may issue Transition Bonds.
    On June 25, 2001, ACE field a petition with the BPU requesting 
issuance by the BPU of a bondable stranded costs rate order under the 
Competition Act to allow ACE to monetize its bondable stranded costs, 
plus associated transaction costs and the cost of retiring its debt or 
equity or both. The final structure, pricing and other terms of the 
Transition Bonds will be subject to the approval of the BPU or its 
designee. BPU approval will be obtained prior to any sale of Transition 
Bonds.
    By order dated February 26, 1998, HCAR No. 26833, and by various 
supplemental orders \1\ (the ``Prior

[[Page 55213]]

Orders''), the Commission authorized Conectiv and its subsidiaries to 
engage in various financial transactions. Applicants now request 
authority, to the extent not already authorized in the Prior Orders, 
through May 31, 2006 (``Authorization Period''), for: (1) ACE to sell 
and/or assign Bondable Transition Property to the Special Purpose 
Issuer from time to time in exchange for the net proceeds from the sale 
of a series of Transition Bonds; (2) the Special Purpose Issuer to 
issue and sell Transition Bonds from time to time, in accordance with 
an underwriting agreement, in an aggregate principal amount up to $1.7 
billion to be authorized and approved by the BPU; (3) the Special 
Purpose Issuer to enter into interest rate swaps, interest rate hedging 
programs, and credit enhancement arrangement to reduce interest rate 
and credit risks with respect to, and to facilitate the issuance of, 
Transition bonds; (4) ACE to act as the servicer of the Bondable 
Transition Property and enter into a servicing agreement under the ACE 
or an affiliate will perform services for the Special Purpose Issuer 
and receive compensation determined on a market rate basis; \2\ (5) 
ACE, CRPI or any successor entity, or another affiliate to act as the 
administrator for the Special Purpose Issuer under an administration 
agreement and receive compensation which will be equal to a market rate 
fee,\3\ (6) the Special Purpose Issuer to use the proceeds from the 
Transition Bonds to pay the expenses of issuance and to purchase the 
Bondable Transition Property from ACE \4\; and (7) ACE to indemnify the 
Special Purpose Issuers.
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    \1\ Conectiv, NCAR No. 26907 (August 21, 1998); Conectiv, HCAR 
No. 26921 (Sept. 28, 1998); Conectiv, HCAR No. 26930 (Oct. 21, 
1998); Conectiv, et al., HCAR No. 27111 (Dec. 14, 1999); Conectiv, 
et al., HCAR No. 27213 (Aug. 17, 2000); and Conectiv, et al., HCAR 
No. 27415 (June 7, 2001).
    \2\ Accordingly, Applicants request an exemption from ``at 
cost'' standards of section 13(b) with respect to this request.
    \3\ Again, Applicants request an exemption from ``at cost'' 
standards of section 13(b) with respect to this request.
    \4\ ACE will use these proceeds to reduce its stranded costs 
through the buydown or buyout of long-term power purchase contracts 
with non-utility generators and through the retirement of its debt 
or equity or both, including the retirement of debt related to 
specific transactions completed prior to the issuance of the 
Transition Bonds for the buydown or buyout of long-term power 
purchase contracts with non-utility generators.
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National Fuel Gas Company, et al. (70-9959)

    National Fuel Gas Company (``National''), a registered holding 
company, its wholly owned nonutility subsidiary, Horizon Energy 
Development, Inc. (``Horizon,'') and Horizon's wholly owned nonutility 
subsidiary, Horizon energy Holdings, Inc. (``Holdings''), and Holding's 
subsidiaries (collectively, ``Applicants'') all located at 10 Lafayette 
Square, Buffalo, New York 14203, have filed an application-declaration 
under sections 6(a), 7, 9(a), 10, 12(b), 12(c), 12(f), 13(b), 32 and 33 
of the Act and rules 42, 43, 45(a), 46, 54, 90 and 91 under the Act.
    By order dated August 29, 1995 (HCAR Nos. 26364 (``Order''), 
through December 31, 2001, National and Horizon were authorized to 
engage in various transactions, through intermediate subsidiaries 
(``Intermediate Subsidiaries''), relating to potential direct or 
indirect investments in ``exempt wholesale generators'' (``EWGs'') and 
``foreign utility companies'' (``FUCOs''), as defined in sections 32 
and 33 of the Act, respectively.\5\ The Order also authorized National 
and Horizon to engage in related energy consulting activities.
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    \5\ Under the Order, Horizon organized one Intermediate 
Subsidiary, Holdings, to acquire Horizon Energy Development B.V. 
(``Development''). Development, in turn, acquired Horizon Energy 
Development s.r.o. (``HED'') and Power Development s.r.o. (together 
with Holdings, Development and HED, ``Existing Intermediate 
Subsidiaries''). The Existing Intermediate Subsidiaries and hold 
interests in three FUCOs.
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    Specifically, the Commission authorized National to organize and 
provide additional debt and equity capital to Horizon in an aggregate 
amount not to exceed $150 million outstanding at any time to invest in 
preliminary development activities relating to investments in, and 
financing the acquisition of, EWGs and FUCOs and for preliminary 
development activities and administrative activities relating to 
``qualifying facilities'' under the Public Utility Regulatory Policies 
Act of 1978, as amended. Under the Order, National and Horizon could 
organize and acquire, directly or indirectly, the securities of one or 
more Intermediate Subsidiaries formed of the purpose of acquiring and 
holding the debt or equity securities of one or more EWGs or FUCOs. In 
the alternative, Intermediate Subsidiaries were authorized to issue and 
sell debt and equity securities to finance EWG and FUCO acquisitions. 
Additionally, National and Horizon were authorized to issue guarantees 
and assume liabilities in connection with investments in EWGs and FUCOs 
and Intermediate Subsidiaries, subject to the $150 million investment 
limitation. Any National subsidiary company could provide services to 
EWGs that derive no part of their income, directly or indirectly, from 
the generation of electric energy for sale in the United States, or 
FUCOs and National and Horizon were authorized to provide consulting 
and operation services, at market prices, to unaffiliated third parties 
for foreign and domestic energy related projects.
    Subsequently, by order dated March 20, 1998 (HCAR No. 26847) 
(``March Order'') the Commission authorized National to engage in an 
external financing program \6\ and to use the proceeds from the 
financing to, among other things, make investments, directly or 
indirectly in EWGs and FUCOs, subject to the limitations of rule 53, 
and in ``energy-related companies,'' as defined in rule 58, and subject 
to the limitations of that rule. The March Order states that the 
investment authority was intended to supersede the investment 
limitation contained in the Order.\7\
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    \6\ Specifically, the Commission authorized National to issue 
and sell up to $750 million of short-term and long-term debt and to 
issue equity securities in an aggregate amount not exceeding $2 
billion. The Commission limited the use of proceeds from short-term 
debt sales to financing National's money pool operations and those 
from the sale of long-term debt and equity to investments in EWGs 
and FUCOs.
    \7\ Subsequent to the date of the Order, the Commission amended 
rules 45(b) and 52. Applicants assert that these rules will, in most 
cases, exempt from sections 6(a), 7 and 12(b) the issuance of 
securities by Horizon and by Intermediate Subsidiaries and 
guarantees by these companies of securities of their subsidiary 
companies.
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    The Applicants are now seeking to extend, and in certain respects 
modify, the authority contained in the Order for the period through 
September 30, 2006 (``Authorization Period''). It is intended that the 
authority granted in this proceeding replace and supersede the Order, 
except with respect to any transactions that have been carried out in 
reliance upon the 1995 Order.
    Specifically, the following transactions are proposed to be 
consummated during the Authorization Period. Horizon, Existing 
Intermediate Subsidiaries and Intermediate Subsidiaries propose to 
engage in preliminary developmental activities (``Development'') 
relating to investments in: (1) EWGs and FUCOs (``Exempt 
Subsidiaries''); (2) Existing Intermediate Subsidiaries; (3) any 
additional Intermediate Subsidiaries; (4) any other direct or indirect 
non-exempt Horizon subsidiaries that may be formed or acquired under 
rule 58 (``Rule 58 Subsidiaries''); and (5) other non-exempt nonutility 
companies, as may be authorized in any separate proceeding 
(``Authorized Subsidiaries,'' and, together with Existing Intermediate 
Subsidiaries, Intermediate Subsidiaries and Rule 58 Subsidiaries, 
``Non-Exempt Subsidiaries''). The expenses related to EWG and FUCO 
Development will be

[[Page 55214]]

included in the ``aggregate investment'' calculation required by rule 
53 if they lead to EWG or FUCO investments and to the extent that they 
were financed by National.
    National, Horizon or Intermediate Subsidiaries propose to acquire, 
directly or indirectly, the equity securities of one or more additional 
Intermediate Subsidiaries exclusively organized to acquire, finance and 
hold the securities of one or more existing or future Exempt 
Subsidiaries, Rule 58 Subsidiaries or Authorized Subsidiaries. Horizon 
and Intermediate Subsidiaries propose to provide administrative, 
operating, technical and management services (``Project Services'') and 
sell goods to other Horizon subsidiaries to the extent necessary to 
manage National's investments in Exempt Subsidiaries, Rule 58 
Subsidiaries and other Authorized Subsidiaries. Horizon and 
Intermediate Subsidiaries further propose, under certain circumstances, 
to provide Project Services and sell goods at fair market prices, under 
an exemption from the cost standard under section 13(b) of the Act and 
rules 90 and 91. \8\
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    \8\ Those circumstances include instances in which the company 
receiving the goods or services is: (1) A FUCO or foreign EWG not 
deriving any income, directly or indirectly, from the generation, 
transmission or distribution of electric energy for sale within the 
United States; (2) an EWG selling electricity to nonassociate 
companies at market-based rates approved by the Federal Energy 
Regulatory Commission (``FERC''); (3) a ``qualifying facility'' 
under the Public Utility Regulatory Policies Act of 1978, as amended 
(``PURPA''), selling electricity to industrial or commercial 
customers for their own use at negotiated prices or to electric 
utility companies at their ``avoided cost'', as defined under PURPA; 
(4) a domestic EWG or ``qualifying facility'' that sells electricity 
to nonassociate companies at cost based rates approved by FERC or a 
state commission; and (5) a Rule 58 Subsidiary or any other 
Authorized Subsidiary that: (a) is partially owned, provided that 
the ultimate purchaser of the goods or services is not an associate 
public utility company or an associate company that primarily 
provides goods and services to associate public utility companies; 
(b) is engaged solely in the business of developing, owning, 
operating and/or providing goods and services to nonutility 
companies described in items (1) through (4), above; or (c) does not 
derive, directly or indirectly, any material part of its income from 
sources within the United States and is not a public utility company 
operating within the United States.
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    Horizon and Intermediate Subsidiaries propose to provide guarantees 
and other forms of credit support (``Guarantees'') with respect to 
obligations of any other Horizon nonutility subsidiary company in an 
aggregate principal or nominal amount not to exceed $200 million at any 
one time outstanding, exclusive of any guarantees that are exempt under 
rules 45(b) and rule 52. The company providing any Guarantee may charge 
its associate company a fee in an amount not exceeding the actual cost 
of the liquidity required to support the Guarantee. Guarantees 
supporting obligations of any Rule 58 Subsidiary shall be subject to 
rule 58(a)(1).
    National, Horizon and Intermediate Subsidiaries propose to make 
loans to any other partially owned subsidiary of Horizon at interest 
rates and maturities designed to provide a return to the lending 
company of not less than its effective cost of capital. However, it is 
stated that no loans will be made to partially owned nonutility 
subsidiaries that sell goods and services to associate companies, 
except for those companies, enumerated above, to whom Horizon and 
Intermediate Subsidiaries propose to provide goods and services under a 
section 13(b) exemption to the ``at cost'' standard contained in rules 
90 and 91.
    National, Horizon and any Non-Exempt Subsidiaries request approval 
to reorganize the ownership structure and change the terms of the 
authorized stock capitalization of Horizon or any Non-Exempt 
Subsidiaries, without further Commission approval. In particular, 
National, Horizon or any Non-Exempt Subsidiary proposes to sell, 
contribute, or distribute by dividend the equity securities of one 
company to another. To the extent that these transactions are not 
exempt under the Act, Applicants propose to consolidate or reorganize, 
under any Intermediate Subsidiary, Horizon's ownership interests in 
existing and future nonutility subsidiaries. Further, Applicants 
request authorization for the purchasing company in a transaction 
structured as a sale of equity securities or assets to issue promissory 
notes evidencing all or a portion of the consideration given. It is 
stated that each transaction will comply with the applicable United 
States or foreign laws and accounting requirements and that the 
consideration for any sales transaction will equal the book value of 
the equity securities being sold. Finally, National, Horizon, or any 
Non-Exempt Subsidiary propose to change at any time the authorized 
number of shares or classes of shares of capital stock or the par value 
of any shares of capital stock of Horizon or any Non-Exempt Subsidiary, 
provided that the consent of all other shareholders is obtained in the 
case of a partially owned Non-Exempt Subsidiary.
    Horizon, directly or indirectly through any subsidiary, requests 
authority to provide engineering, operating, maintenance, consulting 
and other technical support services (``Consulting Services'') to third 
parties, including foreign governmental bodies, for energy projects. 
Consulting Service may include technology assessments, power factor 
correction and harmonics mitigation analysis, meter reading and repair, 
rate schedule design and analysis, environmental services, engineering 
services, billing services, risk management services, communication 
systems, information systems and data processing, system and strategic 
planning, finance, feasibility studies and other related services. 
Horizon requests authority to provide Consulting Services in both the 
United States and foreign countries at market prices.
    Horizon and Non-Exempt Subsidiaries request authority to pay 
dividends out of capital and unearned surplus and/or reacquire or 
retire any securities issued to an associate company. It is stated that 
these transactions will be effected to the extent allowed under 
applicable law and the terms of any credit or security instruments to 
which they may be parties.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-27441 Filed 10-31-01; 8:45 am]
BILLING CODE 8010-01-M