[Federal Register Volume 67, Number 228 (Tuesday, November 26, 2002)]
[Notices]
[Pages 70777-70782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29943]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27605]


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

November 19, 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 December 13, 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 December 13, 2002, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Northeast Utilities, et al. (70-9343)

    Northeast Utilities (``NU''), 174 Brush Hill Avenue, West 
Springfield, Massachusetts 01090-0010, a registered holding company, 
NU's wholly-owned nonutility subsidiary, NU Enterprises, Inc. 
(``NUEI''), and Northeast Utilities Service Company, both located at 
107 Selden Street, Berlin, Connecticut 06037, (collectively, the 
``Applicants'') have filed a post effective amendment to their 
application-declaration under section 12(b) and rules 45 and 54 under 
the Act.
    By order dated November 12, 1998 (HCAR No. 26939) (``Prior 
Order''), the Commission authorized NU and NUEI to, among other things, 
issue guarantees or provide similar forms of credit support or 
enhancements (collectively, ``Guarantees'') to, or for the benefit of 
NUEI, NUEI's nonutility subsidiaries, or NU's other to-be-formed direct 
or indirect energy-related companies, as defined in rule 58 of the Act. 
The Commission, through subsequent orders in this file, authorized an 
increase in this Guarantee authority to $500 million and the extension 
of the date through which Guarantees may be provided through December 
31, 2002, under the terms and conditions of the Prior Order. Applicants 
request in this filing to maintain the Guarantee authority at $500 
million and to extend the date through which the Guarantees may be 
provided through September 30, 2003, under the terms and conditions of 
the Prior Order.

American Electric Power Company, et al. (70-10088)

    American Electric Power Company Inc. (``AEP''), Central and South 
West Corporation (``CSW''), both registered holding companies under the 
Act, 1

[[Page 70778]]

Riverside Plaza, Columbus, Ohio 43215, and the following direct and 
indirect subsidiaries of AEP (collectively ``Subsidiaries'' and with 
AEP and CSW ``Applicants''), which include:
    (a) Public utility subsidiaries: AEP Generating Company 
(``Generating''), Appalachian Power Company (``Appalachian''), Central 
Power and Light Company (``CPL''), Columbus Southern Power Company 
(``Columbus''), Indiana Michigan Power Company (``Indiana''), Kentucky 
Power Company (``Kentucky''), Kingsport Power Company (``Kingsport''), 
Ohio Power Company (``Ohio''), Public Service Company of Oklahoma 
(``PSO''), Southwestern Electric Power Company (``SWEPCO''), West Texas 
Utilities Company (``West Texas''), and Wheeling Power Company 
(``Wheeling''), all located at 1 Riverside Plaza, Columbus, Ohio 43215 
(collectively, ``Utility Subsidiaries'');
    (b) Nonutility subsidiaries that participate in the AEP utility 
money pool: Cedar Coal Company, Central Appalachian Coal Company, 
Central Coal Company, Colomet Inc., Simco Inc., Southern Appalachian 
Coal Company, Blackhawk Coal Company, Conesville Coal Preparation 
Company, Franklin Real Estate Company, Indiana Franklin Realty Company, 
all located at 1 Riverside Plaza, Columbus, Ohio 43215 (collectively 
``Nonutility Participants In The Utility Money Pool''); and
    (c) Nonutility subsidiaries that wish to participate in the AEP 
nonutility money pool: Universal Supercapacitators LLC, AEP Coal Inc., 
AEP Power Marketing Inc., AEP Pro Serv Inc., AEP Retail Energy LLC, AEP 
T&D Services LLC, AEP Credit Inc., Industry and Energy Associates LLC, 
AEP C&I Company LLC, AEP Gas Power System GP LLC, AEP Gas Power GP LLC, 
AEP Retail Energy, AEP Texas Commercial & Industrial Retail CP LLC, AEP 
Communications Inc., AEP Communications LLC, C3 Networks GP LLC, C3 
Networks Limited Partnership, C3 Networks & Comm LP, AEP Fiber Venture 
LLC, C3 Communications Inc., AEP Energy Services Inc., AEP EmTech LLC, 
AEP Investments Inc., Ventures Lease Co. LLC, AEP Resource Services 
LLC, AEP Resources Inc., AEP Delaware Investment Company, AEP MEMCO 
LLC, AEP Elmwood LLC, United Sciences Testing Inc., AEP Energy Services 
Gas Holding Company, Mid-Texas Pipeline Company, Jefferson Island 
Storage & Hub LLC, AEP Acquisition LLC, AEP Energy Services Investments 
Inc., LIG Inc., LIG Pipeline Company, Tuscaloosa Pipeline Company, LIG 
Liquids Company LLC, Louisiana Intrastate Gas Company LLC, LIG Chemical 
Company, Houston Pipe Line Company, AEP Gas Marketing LP, HPL Holdings 
Inc., AEP Resources International Limited, AEP Resources Project 
Management Company Ltd., AEP Pushan Power LDC, CSW International Inc., 
AEP Delaware Investment Company II, AEP Delaware Investment Company 
III, AEP Holdings I, AEP Holdings II, AEP Energy Services UK Gen Ltd., 
AEP Energy Services Limited, CSW Energy Inc., CSW Power Marketing Inc., 
CSWE/Ft. Lupton Inc., Newgulf Power Venture, CSW Development I Inc., 
Eastex Cogeneration LP, CSW Eastex LP I Inc., CSW Energy Services Inc., 
EnerShop Inc., Mutual Energy SWEPCO LP, REP Holdco Inc., Mutual Energy 
CPL LP, REP General Partner LLC, Mutual Energy WTU LP, Mutual Energy 
Service Company LLC, AEP Ohio Commercial & Industrial Retail Company 
LLC, AEP Ohio Retail Energy LLC, Mutual Energy LLC, AEP Texas Retail GP 
LLC, POLR Power LP, Dolet Hills Lignite Company LLC, AEP Desert Sky GP 
LLC, AEP Desert Sky LP LLC, all located at 1 Riverside Plaza, Columbus, 
Ohio (collectively, ``Nonutility Money Pool Participants'') have filed 
an application-declaration (``Application'') under sections 6(a), 7, 
9(a), 10, 12(b) and 12(c) of the Act and rules 43, 45, 46 and 54 under 
the Act.
    Subsidiaries may also include direct or indirect subsidiaries that 
AEP may form under sections 32, 33 or 34 of the Act or rule 58 under 
the Act. All of AEP's direct and indirect Subsidiaries, other than 
Public Utility Subsidiaries, are referred to as nonutility subsidiaries 
(``Nonutility Subsidiaries''). All subsidiaries and AEP and CSW are 
sometimes referred to collectively as the ``Companies.''
    The Application seeks authority for various financing transactions 
(``Financing Plan'') as described below. In summary, the Application 
seeks the following authorizations and approvals of the Commission for 
the period ending March 31, 2006 (``Authorization Period''):
    (i) SWEPCO and Wheeling request authorization to issue long-term 
debt in amounts not to exceed $350 million and $40 million, 
respectively;
    (ii) AEP and its Public Utility Subsidiaries request aggregate 
short-term financing in the amount of $7.2 billion outstanding;
    (iii) CPL, Columbus, Ohio and West Texas seek interim authority 
until restructuring is implemented to issue short- and long-term debt 
in an amount not to exceed $3.9 billion;
    (iv) Subsidiaries seek authorization to organize financing entities 
for certain types of financings described more fully below;
    (v) Applicants seek authority to make tender offers for their 
securities and to repurchase their own securities from affiliates;
    (vi) AEP and certain Subsidiaries that are participants in the 
system utility money pool request the continuation of the money pool 
through the Authorization Period;
    (vii) AEP and certain Nonutility Subsidiaries request authority to 
form and continue a nonutility money pool on substantially the same 
terms and conditions as the utility money pool;
    (viii) AEP and its Subsidiaries request authority to issue 
guarantees and other forms of credit support in an aggregate amount not 
to exceed $900 million outstanding at any one time as more fully 
described below; and
    (ix) AEP and its Nonutility Subsidiaries request authorization for 
the Nonutility Subsidiaries to pay dividends out of capital or unearned 
surplus to the fullest extent allowed by law.
    By order dated December 30, 1997 (HCAR No. 35-26811), CSW and its 
electric public utility subsidiary companies, CPL, PSO, SWEPCO, WTU and 
Central and South West Services Inc., were authorized to engage in 
various financing and related transactions through December 31, 2002. 
By order dated June 14, 2000 (HCAR No. 35-27186), AEP was authorized to 
acquire by merger all of the outstanding common stock of CSW; and AEP, 
its operating subsidiaries and certain other subsidiaries were added to 
the CSW money pool. By order dated October 26, 2001 (HCAR No. 35-
27457), the money pool authority was extended to December 31, 2002, and 
certain sublimits related to restructuring of the AEP system were 
established.
    AEP, American Electric Power Services Company (``AEPSC''), CSW, 
CPL, Columbus, Ohio, SWEPCO and West Texas have pending before this 
Commission an application (``Restructuring Application''), for which 
the Commission issued a notice on June 14, 2002 (HCAR No. 27450). The 
application seeks authority to restructure their operations to comply 
with deregulation statutes in Texas and Ohio that will result in the 
separation of the generation and energy delivery functions of CPL, 
Columbus, Ohio, and West Texas. The authority sought in the 
Restructuring Application includes the issuance of short- and long-term 
debt by the new generation, distribution and transmission entities and 
guarantees relating to these new entities. It is possible that an order 
in this matter will

[[Page 70779]]

not be issued until after December 31, 2002. Interim financing 
authority for these companies is requested pending issuance of the 
restructuring order.
    The Applicants request authority to engage in financing 
transactions without further Commission approval for which the specific 
terms and conditions are not currently known but will engage in these 
transactions subject to the following conditions concerning the 
financial condition of the Applicants: (a) The effective cost of money 
on long-term debt borrowings issued will not exceed the greater of (i) 
450 basis points over comparable term U.S. Treasury securities or (ii) 
a gross spread over U.S. Treasury securities which is consistent with 
similar securities of comparable credit quality and maturities issued 
by other companies, (b) the maturity of indebtedness will not exceed 50 
years, (c) the underwriting fees, commissions, or other similar 
expenses paid in connection with the issue, sale or distribution of a 
security will not exceed 5% of the principal or total amount of the 
financing, (d) all debt issued by AEP will be unsecured, (e) except in 
accordance with a further order of the Commission, the Applicants will 
not publicly issue any long-term debt unless the securities are rated 
at the time of issuance at the investment grade level as established by 
at least one ``nationally recognized statistical rating organization,'' 
as that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of rule 
15c3-1 under the Securities Exchange Act of 1934.
    AEP states that it will maintain during the authorization period 
for itself and for all Public Utility Subsidiaries common equity of 30% 
of consolidated capital (including short-term debt); however, CPL 
requests that it be permitted to maintain a common equity ratio of 25% 
for so long as securitization bonds are outstanding.
    The proceeds from the sale of securities in external financing 
transactions by the Applicants will be added to their respective 
treasuries and subsequently used principally for general corporate 
purposes including: (i) The financing, in part, of capital 
expenditures; (ii) the financing of working capital requirements; (iii) 
the acquisition, retirement or redemption of securities previously 
issued by AEP or its Subsidiaries without the need for prior Commission 
approval; and (iv) other lawful purposes, including direct or indirect 
investment in energy related companies as defined in rule 58 (``Rule 58 
Companies''), other subsidiaries approved by the Commission, exempt 
wholesale generators (``EWGs''), and foreign utility companies 
(``FUCOs'').
    Applicants request approval for the following aggregate amounts of 
outstanding external financing during the Authorization Period (not 
including refinancing of outstanding securities):
    (i) Long-term debt limits: SWEPCO, $350,000,000; Wheeling, 
$40,000,000.
    (ii) Short-term borrowing limits through the Money Pool or external 
borrowings, or borrowings from AEP, as follows: Appalachian, 
$600,000,000; Indiana, $500,000,000; Kentucky, $200,000,000; 
Generating, $125,000,000; Kingsport, $40,000,000; PSO, $300,000,000; 
SWEPCO, $350,000,000; Wheeling, $40,000,000. In addition, AEP requests 
authority for short-term borrowings sufficient to fund the Utility 
Money Pool and the Nonutility Money Pool as well as its own 
requirements in an amount not to exceed $7,200,000,000.
    (iii) Interim limits: If the Restructuring Order referred to above 
is not obtained by December 31, 2002, the companies affected by 
restructuring will need interim authority to issue debt, including both 
long and short-term debt, both on the external market or from the 
Utility Money Pool, until restructuring is implemented as described in 
SEC File 70-9785. The companies involved in the restructuring request 
the following authority to issue debt if the Restructuring Order is not 
issued by the end of 2002: CPL, $1,400,000,000; Columbus, $800,000,000; 
Ohio, $1,200,000,000; West Texas, $500,000,000.

External Financing

    All external financing will be at rates or prices and under 
conditions based upon, or otherwise determined, by competitive capital 
markets. The Applicants request authority to sell securities covered by 
this Application in any of the following ways: (i) Through underwriters 
or dealers; (ii) directly to a limited number of purchasers or to a 
single purchaser, or (iii) through agents or dealers. If underwriters 
are used in the sale of the securities, the securities will be acquired 
by the underwriters for their own account and may be resold from time 
to time in one or more transactions, including negotiated transactions, 
at a fixed public offering price or at varying prices determined at the 
time of sale. The securities may be offered to the public either 
through underwriting syndicates (which may be represented by managing 
underwriters) or directly by one or more underwriters acting alone. The 
securities may be sold directly by AEP or a Subsidiary or through 
agents designated from time to time. If dealers are used in the sale of 
any securities, the securities will be sold to the dealers as 
principal. Any dealer may then resell such securities to the public at 
varying prices to be determined by the dealer at the time of resale.
    If debt securities are being sold, they may be sold in connection 
with ``delayed delivery contracts'' which permit the underwriters to 
locate buyers who will agree to buy the debt at the same price but at a 
later date than the date of the closing of the sale to the 
underwriters. Debt securities may also be sold through the use of 
medium-term notes and similar programs, including transactions covered 
by rule 144A under the Securities Act of 1933. Pollution control 
revenue bonds may be sold either currently or in forward refundings 
where the price of the securities is established currently for delivery 
at a future date.
    Long-Term Debt: Under current law, the public utility commissions 
in the states of Indiana, Virginia, Tennessee, Ohio, Oklahoma and 
Kentucky approve the issuance of long-term securities by public utility 
companies. Therefore, rule 52(a) under the Act provides an exemption 
from the Commission for the issuances of long term debt securities by 
all of AEP's Public Utility Subsidiaries except CPL, SWEPCO, West Texas 
and Wheeling. Financing authorization is being sought for CPL and West 
Texas in the Restructuring Application and in the request for interim 
limits above. SWEPCO and Wheeling seek long-term debt authority in 
amounts not to exceed $350 million and $40 million, respectively. Any 
long-term debt or other security would have such designations, 
aggregate principal amount, maturity, interest rate(s) or methods of 
determining these amounts, maturities or rates, interest payment terms, 
redemption provisions, non-refunding provisions, sinking fund terms, 
conversion or put terms and other terms and conditions as the 
Applicants may determine at the time of issuance.
    Short-Term Debt: The Public Utility Subsidiaries are members of the 
AEP utility money pool (``Money Pool'') and make short-term borrowings 
from the Money Pool. The Money Pool is funded by AEP currently through 
a commercial paper program. No participant in the Money Pool 
(``Participants'') may borrow from the Money Pool if the borrowing 
company could borrow more cheaply directly from banks or through the 
issuance of its own commercial paper. In the event funds are not 
available from the Money Pool, AEP and the Public Utility Subsidiaries 
seek authorization for the issuance of short-term debt in the form of 
bank loans,

[[Page 70780]]

commercial paper programs and other products in the amount set forth in 
above, as well as direct issuance from AEP. Commercial paper would be 
sold in established domestic or European commercial paper markets. 
Short-term borrowings will have maturities of less than one year from 
the date of issuance. The Public Utility Subsidiaries may engage in 
other types of short-term financing generally available to borrowers 
with comparable credit ratings as it may deem appropriate in light of 
its needs and market conditions at the time of issuance.
    AEP requests flexibility in the types of short-term debt by which 
it borrows externally to take advantage of new products being offered 
in the market for short-term securities, including but not limited to, 
the extendible commercial notes program currently being offered by 
certain commercial paper dealers and new products to provide alternate 
backup liquidity for commercial paper and short-term notes.
    Credit Enhancements: Applicants seek authority to obtain credit 
enhancement for securities to be offered as proposed in this 
Application. Credit enhancements could include insurance, a letter of 
credit or a liquidity facility. Applicants anticipate that even though 
they would be required to pay a premium or fee to obtain the credit 
enhancement, they would realize a net benefit through a reduced 
interest rate on new securities. Applicants would obtain credit 
enhancement only if it is economically beneficial to do so.
    Financing Entities: The Subsidiaries seek authority to organize new 
corporations, trusts, partnerships or other entities that would 
facilitate certain types of financings, such as the issuance of tax 
advantaged preferred securities. Request is also made for these 
financing entities to issue these types of securities to third parties. 
Additionally, request is made for authorization with respect to (i) the 
issuance of debentures or other evidences of indebtedness by the 
Subsidiaries to a financing entity in return for the proceeds of the 
financing and (ii) the acquisition by a Subsidiary of voting interests 
or equity securities issued by the financing entity to establish the 
Subsidiary's ownership of the financing entity (the equity portion of 
the entity generally being created through a capital contribution or 
the purchase of equity securities, such as shares of stock or 
partnership interests, involving an amount usually ranging from one to 
twenty-five percent of the capitalization of the financing entity). The 
Subsidiaries also request authorization to enter into expense 
agreements with their respective financing entities through which they 
would agree to pay all expenses of a financing entity. The Subsidiaries 
may also guarantee (i) payment of interest, dividends or distributions 
on the securities issued by their subsidiary financing entities if and 
to the extent such financing entities declare dividends or 
distributions or pay interest out of funds legally available for that 
purpose; (ii) payments to the holders of the securities issued by 
financing entities of amounts due upon liquidation of these entities or 
redemption of the securities of these entities; and (iii) certain 
additional amounts that may be payable in respect of these securities.
    Tender Offers and Repurchase of Securities: AEP and the 
Subsidiaries may determine to acquire outstanding securities 
(``Outstanding Securities'') through tender offers to the holders of 
Outstanding Securities. Tender offers may be conditioned upon receipt 
of a certain percentage of the Outstanding Securities. The tender offer 
price would be based on a number of factors, including the coupon rate 
of the Outstanding Securities, the date of expiration of the refunding 
protection of the Outstanding Securities, the redemption price on such 
expiration date and the then current market rates for similar 
securities, all of which are relevant to the decision of an informed 
holder as to whether to hold or sell Outstanding Securities. Holders of 
Outstanding Securities may be offered a fixed price for their 
Outstanding Securities, or the tender offer may be a ``fixed spread'' 
offer pursuant to which the Applicants will offer a price based upon a 
fixed spread over comparable U.S. Treasury securities. Any tender offer 
will be conducted in accordance with standard market practice, i.e., 
the length of time the offer will be held open, the method of 
solicitation, etc., at the time of the tender offer.
    AEP and the Subsidiaries would, in connection with any tender 
offer, retain one or more investment banking firms experienced in such 
matters to act as tender agent and dealer-manager. The dealer-manager 
will act as the agent in disseminating the tender offer and receiving 
responses to it. As a dealer-manager, the investment banking firm will 
not itself become obligated to purchase or sell any of the Outstanding 
Securities. The dealer-manager's fee will be determined following 
negotiation and investigation of fees in similar transactions and will 
include reasonable out-of-pocket expenses and attorney's fees. It is 
expected that the Applicants will be required, as is customary, to 
indemnify the dealer-manager for certain liabilities. The Applicants 
may also retain a depositary to hold the tendered Outstanding 
Securities pending the purchase of them or an information agent to 
assist in the tender offer. AEP and the Public Utility Subsidiaries 
also seek authority to repurchase their own securities issued to 
affiliates.

Hedging Transactions

    Interest rate hedging transactions with respect to existing 
indebtedness (``Interest Rate Hedges''), subject to certain limitations 
and restrictions, would be entered into in order to reduce or manage 
interest rate cost or risk. Interest Rate Hedges would only be entered 
into with counterparties (``Approved Counterparties'') whose senior 
debt ratings, or whose parent companies' senior debt ratings, as 
published by Standard and Poor's Ratings Group, are equal to or greater 
than BBB, or an equivalent rating from Moody's Investors' Service or 
Fitch Investor Service. Interest Rate Hedges will involve the use of 
financial instruments and derivatives commonly used in today's capital 
markets, such as interest rate swaps, options, caps, collars, floors, 
and structured notes (i.e., a debt instrument in which the principal 
and/or interest payments are indirectly linked to the value of an 
underlying asset or index), or transactions involving the purchase or 
sale, including short sales, of U.S. Treasury obligations. The 
transactions would be for fixed periods and stated notional amounts. In 
no case will the notional principal amount of any interest rate swap 
exceed that of the underlying debt instrument and related interest rate 
exposure. Applicants will not engage in speculative transactions. Fees, 
commissions and other amounts payable to the counterparty or exchange 
(excluding the swap or option payments) in connection with an Interest 
Rate Hedge will not exceed those generally obtainable in competitive 
markets for parties of comparable credit quality.
    Interest rate hedging transactions with respect to anticipated debt 
offerings (the ``Anticipatory Hedges'') and subject to certain 
limitations and restrictions would only be entered into with Approved 
Counterparties, and would be utilized to fix and/or limit the interest 
rate risk associated with any new issuance through (i) a forward sale 
of exchange-traded U.S. Treasury futures contracts, U.S. Treasury 
obligations and/or a forward swap (each a ``Forward Sale''); (ii) the 
purchase of put options on U.S. Treasury obligations (a ``Put

[[Page 70781]]

Options Purchase''); (iii) a Put Options Purchase in combination with 
the sale of call options on U.S. Treasury obligations (a ``Zero Cost 
Collar''); (iv) transactions involving the purchase or sale, including 
short sales, of U.S. Treasury obligations; or (v) some combination of a 
Forward Sale, Put Options Purchase, Zero Cost Collar and/or other 
derivative or cash transactions, including, but not limited to 
structured notes, options, caps and collars, appropriate for the 
Anticipatory Hedges. Anticipatory Hedges may be executed on-exchange 
(``On-Exchange Trades'') with brokers through the opening of futures 
and/or options positions traded on the Chicago Board of Trade or the 
Chicago Mercantile Exchange, the opening of over-the-counter positions 
with one or more counterparties (``Off-Exchange Trades''), or a 
combination of On-Exchange Trades and Off-Exchange Trades. Each 
Applicant will determine the optimal structure of each Anticipatory 
Hedge transaction at the time of execution. Applicants may decide to 
lock in interest rates and/or limit its exposure to interest rate 
increases. Applicants represent that each Interest Rate Hedge and 
Anticipatory Hedge will be treated for accounting purposes under 
generally accepted accounting principles. Applicants will comply with 
the then existing financial disclosure requirements of the Financial 
Accounting Standards Board associated with hedging transactions.

Extension of Authority for Utility Money Pool

    By order dated December 30, 1976 (HCAR No. 19829), and in 
subsequent orders (HCAR No. 26697 (March 28, 1997), HCAR No. 24855 
(April 5, 1989), HCAR No. 26254 (March 21, 1995), and HCAR No. 26854 
(April 3, 1998)), the Commission authorized Central and South West 
Corporation (``CSW''), a Delaware corporation and a registered holding 
company under the Act and a wholly owned subsidiary of AEP, to 
establish and utilize a system Money Pool to coordinate short-term 
borrowings for CSW, its electric subsidiary companies and Central and 
South West Services Inc. By order dated June 14, 2000 (HCAR No. 27186), 
the Commission authorized AEP to continue the Money Pool and to add its 
Utility Subsidiaries as well as Nonutility Participants In the Utility 
Money Pool as Participants in the AEP System Money Pool and established 
borrowing limits for all Participants. By Order dated October 26, 2001 
(HCAR No. 35-27457), AEP was authorized to increase its external 
borrowing from $5 billion to $6.910 billion through December 31, 2002, 
through the issuance and sale of short-term notes and commercial paper.
    All short-term borrowing needs of the Participants may be met by 
funds in the Money Pool to the extent funds are available. Each 
Participant shall have the right to borrow from the Money Pool from 
time to time, subject to the availability of funds and the limitations 
and conditions set forth in orders of this Commission; provided, 
however, that the aggregate amount of all loans requested by any 
Participant shall not exceed the applicable borrowing limits set forth 
in orders of the Commission and other regulatory authorities and 
agreements binding upon a Participant. No Participant shall be 
obligated to borrow from the Money Pool if lower cost funds can be 
obtained from its own external borrowing. AEP will not borrow funds 
from the Money Pool or any Participant.
    AEPSC, a subsidiary service company, acts as administrative agent 
of the Money Pool. Each Participant and AEP determine the amount of 
funds it has available for contribution to the Money Pool. The 
determination of whether a Participant or AEP at any time has surplus 
funds, or shall lend surplus funds to the Money Pool, will be made by a 
Participant's treasurer or by a designee of the Participant in his or 
her sole discretion on the basis of cash flow projections and other 
relevant factors. Each Participant may withdraw any of its funds at any 
time upon notice to AEPSC. Each Participant may borrow from the Money 
Pool to the extent of its Borrowing Limits for short-term debt.
    The Money Pool is composed from time to time of funds from the 
following sources: (i) Surplus funds of AEP; (ii) surplus funds of any 
of the Participants; or (iii) short-term borrowings by AEP. AEPSC 
administers the Money Pool by matching up, to the extent possible, 
short-term cash surpluses and loan requirements of AEP and the various 
Participants. Participants' requests for short-term loans are met first 
from surplus funds of other Participants which are available to the 
Money Pool and then from AEP corporate funds to the extent available. 
To the extent that Participant contributions of surplus funds to the 
Money Pool are insufficient to meet Participant requests for short-term 
loans, borrowings are made from outside the system. Funds which are 
loaned from Participants into the Money Pool which are not required to 
satisfy borrowing needs of other Participants will be invested by AEP 
on behalf of the lending Participants in one or more short-term 
instruments.
    The Money Pool makes funds available to Participants for the 
interim financing of their capital expenditure programs and their other 
working capital needs, to AEP to loan and to make capital contributions 
to any of the Participants, and in both instances to repay previous 
borrowings incurred. External borrowings by AEP will not be made unless 
there are no surplus funds in the treasuries of the Participants 
sufficient to meet borrowing needs. However, no loan will be made by 
AEP or any Participant if the borrowing company could borrow more 
cheaply directly from banks or through the sale of its own commercial 
paper. When more than one Participant is borrowing, each borrowing 
Participant will borrow pro rata from each fund source in the same 
proportion that the amount of funds provided by that fund source bears 
to the total amount of short-term funds available to the Money Pool.
    The interest rate applicable on any day to then outstanding loans 
through the Money Pool will be the composite weighted average daily 
effective cost incurred by AEP for short-term borrowings from external 
sources. If there are no borrowings outstanding then the rate would be 
the certificate of deposit yield equivalent of the 30-day Federal 
Reserve ``A2/P2'' Non Financial Commercial Paper Composite Rate 
(``Composite''), or if no composite is established for that day then 
the applicable rate will be the Composite for the next preceding day 
for which the Composite is established. If the Composite shall cease to 
exist, then the rate would be the composite which then most closely 
resembles the Composite and/or most closely mirrors the pricing AEP 
would expect if it had external borrowings.
    Interest income related to external investments will be calculated 
daily and allocated back to lending parties on the basis of their 
relative contribution to the investment pool funds on that date. Each 
Participant receiving a loan shall repay the principal amount of the 
loan, together with all accrued interest, on demand and in any event 
not later than the expiration date of the Commission's authorization 
for the operation of the Money Pool. All loans made through the Money 
Pool may be prepaid by the borrower without premium or penalty.

Nonutility Money Pool

    AEP and the Nonutility Money Pool Participants propose to form and 
participate in a separate system of inter-corporate borrowings 
(``Nonutility Money Pool''). The Nonutility Money Pool would be 
established and administered in the same manner and

[[Page 70782]]

subject to the same conditions as the Utility Money Pool described 
above.
    Applicants state that participation by a Nonutility Money Pool 
Participant in the Nonutility Money Pool would permit their available 
cash and/or short-term borrowing requirements to be matched on a daily 
basis with other Nonutility Money Pool Participants to minimize the 
need of the AEP system for external short-term borrowing. If the 
Nonutility Money Pool Participants are authorized to participate in the 
Nonutility Money Pool, funds will be loaned from the Nonutility Money 
Pool in the form of open account advances under the same terms and 
limitations as currently authorized for the Utility Money Pool. 
Participants in the Nonutility Money Pool will not engage in lending 
and borrowing transactions with Participants in the Utility Money Pool.

Guarantee of Indebtedness and Obligations

    AEP requests authorization to enter into guarantees, obtain letters 
of credit, enter into support or expense agreements or otherwise 
provide credit support from time to time through March 31, 2006, on 
behalf of any of its direct or indirect Subsidiaries in amounts up to 
$900,000,000. AEP also requests authority to guarantee the obligations 
of its direct or indirect Subsidiaries as may be appropriate or 
necessary to enable the subsidiaries to carry on the ordinary course of 
their businesses. Each of the Public Utility Subsidiaries seeks 
authorization to enter into guarantees and other credit support with 
respect to obligations of each of its subsidiaries. Nonutility 
Subsidiaries also request authority for each Nonutility Subsidiary to 
provide guarantees and other forms of credit support to other 
Nonutility Subsidiaries. Certain of the guarantees referred to above 
may be in support of the obligations of Subsidiaries that are not 
capable of exact quantification. In such cases, AEP will determine the 
exposure of the instrument for purposes of measuring compliance with 
the total guarantee limit. The aggregate amount of the guarantees will 
not exceed $900 million (excluding obligations exempt under rule 45 and 
authorized under other Commission orders).

Payments of Dividends Out of Capital or Unearned Surplus

    Section 12(c) of the Act and rule 46 under the Act generally 
prohibit the payment of dividends out of capital or unearned surplus, 
except according to an order of the Commission. AEP and the Nonutility 
Subsidiaries hereby request authority for the direct and indirect 
Nonutility Subsidiaries to pay dividends out of capital or unearned 
surplus to the fullest extent of the law.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.


Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-29943 Filed 11-25-02; 8:45 am]
BILLING CODE 8010-01-P