[Federal Register Volume 67, Number 153 (Thursday, August 8, 2002)]
[Notices]
[Pages 51606-51609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20067]



[[Page 51606]]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27558]


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

August 2, 2002.
    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 August 26, 2002, 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 August 26, 2002, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Columbia Insurance Corporation, Ltd. (70-9371)

    Columbia Insurance Corporation, Ltd. (``CICL''), a wholly owned 
captive insurance subsidiary of Columbia Energy Group (``Columbia''), a 
registered holding company and a wholly owned subsidiary of NiSource 
Inc. (``NiSource''), also a registered holding company, and Columbia, 
all located at 801 East 86th Avenue, Merrillville, Indiana 46410-6272, 
have filed a post-effective amendment to their application-declaration 
filed previously with the Commission under sections 9(a), 10, and 12(b) 
of the Act and rules 45 and 54 under the Act.
    By order dated October 25, 1996 (HCAR No. 26596) (``1996 Order''), 
the Commission authorized Columbia to form and capitalize CICL to 
engage in the reinsurance of predictable losses under automobile and 
general liability and ``all-risk'' coverage of Columbia. By order dated 
July 23, 1999 (HCAR No. 27051) (``1999 Order'') the Commission 
authorized Columbia to expand the reinsurance activities of CICL to 
include all predictable risks related to the business of Columbia and 
to establish one or more direct subsidiaries to engage in the proposed 
reinsurance activities.
    CICL and Columbia now propose: (1) In instances where NiSource 
direct or indirect subsidiaries (``NiSource companies'') do not require 
evidence of coverage \1\ from rated or admitted insurers, that CICL 
have the ability to underwrite risks of all NiSource companies 
directly; \2\ (2) that CICL underwrite directly corporate deductible or 
self-insured reimbursement risk, such as workers' compensation coverage 
of NiSource companies; and (3) that CICL provide controlled unrelated 
third-party business risk coverage in situations where providing this 
coverage would directly or indirectly benefit NiSource companies.\3\
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    \1\ CICL and Columbia state that this practice of providing 
evidence of coverage is known as ``fronting'' and is an accepted 
practice for underwriting risks where the insured requires evidence 
of coverage from rated or admitted insurers for business or 
statutory reasons. They further state that the practice of 
``fronting'' creates additional cost to the insured.
    \2\ CICL and Columbia represent that by acting as a ``front'' 
company, CICL can eliminate as much as 40 percent of the premium 
charged on primary risk insurance policies and that this savings 
would benefit NiSource companies.
    \3\ CICL proposes to provide performance bonds and construction-
related insurance for contractors working on projects for NiSource 
subsidiaries.
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    CICL and Columbia state that no additional staff would be required 
to operate CICL in the proposed matter and that the current managers 
will be retained to provide administrative services. CICL and Columbia 
further state that, except for the modifications proposed, all other 
terms, conditions and limitations under the 1996 Order and 1999 Order 
will continue to apply.

Xcel Energy, Inc. (70-9635)

    Xcel Energy, Inc. (``Xcel''), a registered holding company, located 
at 800 Nicollet Mall, Minneapolis, Minnesota 55402, and its 
subsidiaries \4\ (collectively, ``Applicants'') have filed a post-
effective amendment to an application-declaration previously filed with 
the Commission under sections 6(a), 7, 32 and 33 of the Act and rules 
53 and 54 under the Act.
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    \4\ Xcel directly owns six utility subsidiaries that serve 
electric and/or natural gas customers in 12 states. These six 
utility subsidiaries are Northern States Power Company, a Minnesota 
corporation, Northern States Power Company, a Wisconsin corporation, 
Public Service Company of Colorado, Southwestern Public Service Co., 
Black Mountain Gas Company (``Black Mountain''), and Cheyenne Light, 
Fuel and Power Company (``Cheyenne''). Xcel's major nonutility 
subsidiaries are Viking Gas Transmission Company, NRG Energy, Inc. 
(``NRG''), Seren Innovations, Inc., e prime, inc., and Eloigne 
Company.
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    By order dated August 16, 2000 (HCAR No. 27212), the Commission 
authorized the merger of New Century Energies, Inc. and Northern States 
Power Company (``NSP'').\5\ By order dated August 22, 2000 (HCAR No. 
27218) (``Financing Order''), the Commission authorized, through 
September 30, 2003 (``Authorization Period''), the following: (1) Xcel, 
Cheyenne, and Black Mountain to engage in external financing; (2) Xcel 
and certain of its subsidiaries to engage in intrasystem financings, 
including guarantees; (3) Xcel and certain subsidiaries to enter into 
hedging transactions for existing and anticipated debt; (4) Xcel and 
certain subsidiaries to establish, guarantee the obligations of, and 
borrow the proceeds of the debt and preferred securities issued by, one 
or more special purpose financing entities; (5) Xcel and any subsidiary 
to acquire and restructure investments in one or more special purpose 
entities organized for the purpose of acquiring, financing, and holding 
the securities of one or more nonutility subsidiaries; and (6) Xcel and 
any Xcel's nonutility subsidiary to pay dividends out of capital and 
unearned surplus. In the Financing Order, the Commission reserved 
jurisdiction over Xcel's request to use the proceeds of the financings 
to invest in exempt wholesale generators (``EWGs''), as defined in 
section 32 of the Act, and foreign utility companies (``FUCOs''), as 
defined in section 33 of the Act, so long as Xcel's ``aggregate 
investment'' \6\ in these entities did not exceed 100 percent of its 
``consolidated retained earnings.'' \7\
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    \5\ Following this merger, NSP, as the surviving entity, changed 
its name to Xcel and registered as a public utility holding company 
under section 5 of the Act.
    \6\ ``Aggregate investment'' is defined in rule 53(a)(1)(i) to 
mean all amounts invested, or committed to be invested, in EWGs and 
FUCOs, for which there is recourse, directly or indirectly, to the 
holding company.
    \7\ ``Consolidated retained earnings'' is defined in rule 
53(a)(1)(ii) to mean the average of the consolidated retained 
earnings of the registered holding company system as reported for 
the most recent quarterly periods on the holding company's Form 10-K 
or 10-Q filed under the Securities Exchange Act of 1934, as amended.
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    By supplemental order dated March 7, 2002 (HCAR No. 27494) 
(``Supplemental Financing Order,'' and together with Financing Order, 
the ``Financing Orders''), the Commission released jurisdiction over 
the use of proceeds of certain financing transactions for

[[Page 51607]]

investments in EWGs and FUCO up to 100 percent of consolidated retained 
earnings. Both the Financing Order and the Supplemental Financing Order 
contain certain commitments, including a commitment by Xcel to maintain 
a level of common equity that will be at least 30 percent of 
consolidated total capitalization (``30 percent test'').
    As of March 31, 2002, Xcel's common equity was 30.8% of 
capitalization. Applicants state that there exist, however, 
circumstances that could result in the common equity of Xcel falling 
below 30% of capitalization and thus Xcel failing to satisfy the 30% 
test for a period of time. Applicants further state that Xcel is 
evaluating the business of NRG and its other businesses and is 
considering certain restructuring alternatives. Alternatives under 
consideration include the possible sale of selected generating assets 
of NRG and exiting other businesses that do not fit strategically with 
Xcel. Xcel states that it has announced plans to address credit and 
liquidity issues at NRG. Xcel states that its management and its board 
of directors (``Board'') have been considering the possible sale of 
some of the existing generating assets of NRG. Xcel's management has 
not yet completed its review of bids received to date for many of the 
NRG assets considered for sale, and the Board has not yet received or 
committed to management's recommended plan to sell such assets. In 
addition, Xcel's management and Board have not yet completed their 
review of other businesses for their strategic fit, and thus has not 
committed to a plan to sell any such businesses. This commitment is 
required before NRG's assets or the businesses are classified as ``held 
for sale.'' \8\
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    \8\ Applicants represent that the Statement of Financial 
Accounting Standards No. 144, Accounting for the Impairment or 
Disposal of Long-Lived Assets (``FASB 144'') sets forth the criteria 
for classification as ``held for sale''--including, among others, 
(a) management, having the authority to approve the action, commits 
to a plan to sell the asset, (b) the asset is being actively 
marketed for sale and (c) the sale of the asset is expected to be 
completed within one year.
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    Under generally accepted accounting principles, Xcel evaluates 
assets classified as ``held for use'' by comparing the book value to 
the discounted cash flows expected, and evaluates assets classified as 
``held for sale'' by comparing the carrying value of the asset to its 
fair value. Thus, if any asset being reclassified as ``held for sale'' 
has a fair value which is less than its book value, Xcel will record an 
impairment charge against income to reduce the carrying value of the 
asset to its fair value at the time it is classified as ``held for 
sale.'' Although the actual asset sales may not occur until later 
periods, this write-down must be made at the time that the asset is 
determined to be ``held for sale,'' not at the time of the completion 
of the sale.
    Applicants state that, in light of the recent erosion in power pool 
prices and related asset valuations within the independent power 
production sector, it is possible that Xcel could recognize an 
impairment loss as Xcel's Board considers, and later this year 
potentially approves, a plan to sell certain NRG or other assets. At 
this time, however, Xcel cannot predict what actions its Board will 
take regarding any commitment it may make to sell NRG or other assets, 
or how much, if any, impairment losses Xcel may be required to 
recognize in future periods as a result of such actions.
    Applicants state that there is the possibility that Xcel may be 
required to record a write-down as a result of future Board actions and 
the corresponding recognition of an impairment loss under FASB 144 with 
respect to NRG or other assets being reclassified as ``held for sale.'' 
As a result of the accounting treatment, Xcel will be required to 
record an impairment charge at the time that an asset is ``held for 
sale,'' and in advance of the completion of the sale and application of 
the net proceeds to the reduction of outstanding indebtedness. Because 
of the mismatch in timing between the recording of the write-downs and 
the application of sale proceeds to the reduction of indebtedness, the 
common equity of Xcel may fall below 30% of its capitalization. In such 
event, the conditions to the authorization granted in the Financing 
Orders would not be satisfied.
    Applicants expect that any reduction of Xcel's common equity ratio 
below 30% would be temporary. Applicants state that upon consummation 
of the sale of generating assets of NRG and other businesses, the 
outstanding indebtedness of Xcel and its subsidiaries will be reduced--
either by the application of net proceeds of such sale to repay 
outstanding indebtedness at NRG or as a result of the purchaser of a 
project assuming the project-related indebtedness.
    Applicants request authority to engage in the financing 
transactions authorized in the Financing Orders at a time when the Xcel 
30 percent test is not met, provided that the common equity of Xcel, as 
reflected on its most recent Form 10-K or Form 10-Q and as adjusted to 
reflect subsequent events that affect capitalization, be at least 24 
percent of total capitalization of Xcel and provided that the 
Applicants shall not engage in any of the financing transactions 
authorized in the Financing Orders at any time after June 30, 2003 
unless at such time the Xcel 30 percent test is met.
    Applicants represent that, with the exception of this proposed 
revision to the Financing Orders, all the terms and conditions of the 
Financing Orders will remain in effect. Applicants further represent 
that the net proceeds of the common stock of between $500 million and 
$800 million during 2002 issued by Xcel pursuant to the authorizations 
granted in the Financing Orders will be applied to repay debt of Xcel, 
NRG, and/or one or more of Xcel's subsidiaries.

The Southern Company, et al. (70-10073)

    The Southern Company (``Southern''), 270 Peachtree Street, NW., 
Atlanta, Georgia 30303, a registered holding company, and Georgia Power 
Company (``Georgia Power''), 241 Ralph McGill Boulevard, NE., Atlanta, 
Georgia 30308, a wholly owned public-utility company subsidiary of 
Southern (collectively, ``Applicants''), have filed an application-
declaration under sections 6(a), 7, 9(a), 10 and 12(b) of the Act and 
rules 45 and 54 under the Act.
    Southern and Georgia Power propose to organize and acquire, 
indirectly and directly, respectively, all the common stock of one or 
more special purpose subsidiaries (``Subsidiaries'') for the purpose of 
effecting various financing transactions described below through June 
30, 2006. Applicants state that, by using the Subsidiaries in these 
transactions, they would have greater access to new sources of capital 
and may reap certain tax benefits.
    Applicants request authority to issue and sell, through the 
Subsidiaries, up to an aggregate amount of $650 million in preferred 
securities (``Preferred Securities''). Each of the Preferred Securities 
would have a specified par amount, stated value amount, liquidation 
amount, or preference.
    The Subsidiaries may be organized in the following corporate forms: 
(1) Limited liability companies in any state jurisdiction considered 
advantageous by Georgia Power; (2) a limited partnership in any state 
jurisdiction considered advantageous by Georgia Power; (3) a business 
trust in any state jurisdiction considered advantageous by Georgia 
Power; or (4) any other entity or structure, foreign or domestic, that 
is considered advantageous by Georgia Power. In the event that any 
Subsidiary is organized as a limited liability company, Applicants may 
organize a second special purpose wholly-owned

[[Page 51608]]

subsidiary (``Investment Subsidiary'') for the purpose of acquiring and 
holding Subsidiary membership interests to comply with any requirements 
that a limited liability company have at least two members. In the 
event that any Subsidiary is organized as a limited partnership, 
Georgia Power may organize an Investment Subsidiary to act as the 
general partner of the Subsidiary. Further, Georgia Power may acquire, 
directly or indirectly through an Investment Subsidiary, a limited 
partnership interest in a Subsidiary to comply with any requirements 
that a Subsidiary would have a limited partner.
    Georgia Power and/or an Investment Subsidiary would acquire all the 
common stock or all of the general partnership or other common equity 
interests of any Subsidiary for an amount not less than the minimum 
required by law and not exceeding twenty-one percent of the total 
equity capitalization of any Subsidiary (``Equity Contribution'').\9\ 
Georgia Power may issue and sell to any Subsidiary, at any time, or 
from time to time, in one or more series, subordinated debentures, 
promissory notes or other debt instruments (``Notes'') under an 
indenture or other document. The Subsidiary would apply both the Equity 
Contribution and the proceeds from the sale of Preferred Securities to 
purchase Notes. Alternatively, Georgia Power may enter a loan agreement 
with any Subsidiary, under which the Subsidiary would loan to Georgia 
Power (``Loans'') both the Equity Contribution and the proceeds from 
the sale of the Preferred Securities and Georgia Power would issue 
Notes to the Subsidiary evidencing the borrowings.
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    \9\ The remaining equity would be obtained through the purchase 
of the Preferred Securities.
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    Applicants request authority for Georgia Power to guarantee: (1) 
Payment of dividends or distributions on the Preferred Securities of 
any Subsidiary if, and to the extent, that the Subsidiary has legally 
available funds; (2) payments to the Preferred Securities holders of 
amounts due upon liquidation of a Subsidiary or redemption of the 
Preferred Securities; and (3) certain additional amounts that may be 
payable regarding the Preferred Securities (collectively, 
``Guaranties'').
    Notes would have terms of up to fifty years. Prior to maturity, 
Georgia Power would pay interest on the Notes at a rate equal to the 
dividend or distribution rate on the related series of Preferred 
Securities. The dividend or distribution rate may be either a fixed 
rate or an adjustable rate to be determined on a periodic basis by 
auction or remarketing procedures according to a formula based on 
certain reference rates, or by other predetermined method. Interest 
payments would constitute each Subsidiary's only income and would be 
used to pay dividends or distributions on the Preferred Securities and 
dividends or distributions on the common stock or the general 
partnership or other common equity interests of the Subsidiary. 
Dividend payments or distributions on the Preferred Securities would be 
made on a monthly or other periodic basis and must be made to the 
extent that the Subsidiary has legally available funds and cash. 
However, Georgia Power may have the right to defer payment of interest 
on Notes for up to five or more years. Each Subsidiary would have the 
parallel right to defer dividend payments or distributions on the 
related series of Preferred Securities for up to five or more years, 
provided that if dividends or distributions on any series of Preferred 
Securities are not paid for up to 18 or more consecutive months, then 
the Preferred Securities holders may have the right to appoint a 
trustee, special general partner or other special representative to 
enforce the Subsidiary's rights under the Note or Guarantee. The 
dividend or distribution rates, payment dates, redemption and other 
similar provisions of each series of Preferred Securities would be 
substantially identical to the interest rates, payment dates, 
redemption and other provisions of the related Notes issued by Georgia 
Power.
    The Notes and related Guaranties would be subordinate to all other 
existing and future unsubordinated indebtedness for borrowed money of 
Georgia Power and may have no cross-default provisions with respect to 
other indebtedness of Georgia Power. However, Georgia Power may be 
prohibited from declaring and paying dividends on its outstanding 
capital stock and making payments related to pari passu debt unless all 
payments then due under the Notes and Guaranties, without giving effect 
to the deferral rights, have been made.
    It is expected that Georgia Power's interest payments on the Notes 
would be deductible for federal income tax purposes and that each 
Subsidiary would be treated as either a partnership or a passive 
grantor trust for federal income tax purposes. Consequently, holders of 
the Preferred Securities, Georgia Power and any Investment Subsidiary 
would be deemed to have received distributions from their ownership 
interests in any Subsidiary and would not be entitled to any 
``dividends received deduction'' under the Internal Revenue Code.
    Any series of Preferred Securities may be redeemable at the option 
of the issuing Subsidiary, with the consent or at the direction of 
Georgia Power, at a price equal to the Preferred Securities' par 
amount, stated value amount, liquidation amount, or preference, plus 
any accrued and unpaid dividends or distributions. The Preferred 
Securities may be redeemable at any time after a specified date not 
later than approximately ten years from their date of issuance or upon 
the occurrence of certain events. These events may be that: (1) The 
Subsidiary is required to withhold or deduct certain amounts in 
connection with dividend, distribution or other payments or is subject 
to federal income tax on interest received on the Notes issued to the 
Subsidiary; (2) it is determined that the interest payment by Georgia 
Power on the related Notes are not deductible for income tax purposes; 
or (3) the Subsidiary becomes subject to regulation as an ``investment 
company'' under the Investment Company Act of 1940, as amended. Any 
series of Preferred Securities may also be subject to mandatory 
redemption upon the occurrence of certain events. Georgia Power also 
may have the right in certain cases or in its discretion to exchange 
the Preferred Securities of any Subsidiary for the Notes or other 
junior subordinated debt issued to the Subsidiary.
    In the event that any Subsidiary is required to withhold or deduct 
certain amounts in connection with dividend, distribution or other 
payments, it may also be obligated to ``gross up'' such payments so 
that the Preferred Securities holders would receive the same payment 
after such withholding or deduction as they would have received if no 
withholding or deduction were required. In such event, Georgia Power's 
obligations under its related Note and Guaranty may also extend to the 
``gross up'' obligation. In addition, if any Subsidiary is required to 
pay taxes on income derived from interest payments on Notes issued to 
it, Georgia Power may be required to pay additional interest on the 
related Notes in an amount equal to the tax obligation.
    In the event of any voluntary or involuntary liquidation, 
dissolution or winding up of any Subsidiary, the holders of the 
Preferred Securities would be entitled to receive, out of the assets of 
the Subsidiary available for distribution to its shareholders, partners 
or other owners, an amount equal to the par, stated value or 
liquidation amount or preference of the Preferred Securities,

[[Page 51609]]

plus any accrued and unpaid dividends or distributions.
    Applicants state that each Subsidiary's activities would be limited 
to issuing and selling Preferred Securities and lending to Georgia 
Power or an Investment Subsidiary the proceeds from those sales and the 
Equity Contributions and any related activities. Applicants further 
state that a Subsidiary's common stock, general partnership or other 
common equity interests are not transferable, except to certain 
permitted successors, that its business and affairs would be managed 
and controlled by Georgia Power and/or its Investment Subsidiary or 
successor, and that Georgia Power or its successor would pay all 
expenses of the Subsidiary.
    The distribution rate to be borne by the Preferred Securities and 
the interest rate on the Notes would not exceed the greater of 300 
basis points over U.S. Treasury securities having comparable maturities 
or a gross spread over U.S. Treasury securities that is consistent with 
similar securities having comparable maturities and credit quality 
issued by other companies.
    Georgia Power would use the proceeds from the sale of the proposed 
securities to fund its ongoing construction program, pay scheduled 
maturities and/or refundings of its securities, repay short-term 
indebtedness to the extent outstanding, and for other general corporate 
purposes.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-20067 Filed 8-7-02; 8:45 am]
BILLING CODE 8010-01-P