[Federal Register Volume 68, Number 167 (Thursday, August 28, 2003)]
[Notices]
[Pages 51809-51818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-22030]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27716]


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

August 22, 2003.
    Notice is hereby given that the following filings have been made 
with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by September 15, 2003 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 September 15, 2003, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Xcel Energy Inc. (70-10072)

    Xcel Energy Inc., a registered holding company, 800 Nicollet Mall, 
Minneapolis, Minnesota 55402 (``Declarant'' or ``Xcel Energy'') has 
filed a declaration under section 12(d) of the Act and rules 44 and 54 
under the Act.
    Declarant requests authority to sell its ownership interest in 
Black Mountain Gas Company, a Minnesota corporation and gas utility 
company (``Black

[[Page 51810]]

Mountain'') to a non-affiliated third party, Southwest Gas Corporation 
(``Southwest'').
    Xcel Energy directly owns six utility subsidiaries that serve 
electric and/or natural gas customers in twelve states. These six 
utility subsidiaries are Black Mountain; Northern States Power Company; 
Northern States Power Company; Public Service Company of Colorado; 
Southwestern Public Service Co.; and Cheyenne Light, Fuel and Power 
Company. Their service territories include portions of Arizona, 
Colorado, Kansas, Michigan, Minnesota, New Mexico, North Dakota, 
Oklahoma, South Dakota, Texas, Wisconsin and Wyoming. Xcel Energy also 
owns or has an interest in a number of nonregulated businesses, the 
largest of which is NRG Energy Inc. (``NRG''), an independent power 
producer.\1\
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    \1\ On May 14, 2003, NRG filed a voluntary petition for relief 
under chapter 11 of the U.S. Bankruptcy Code in the United States 
Bankruptcy Court for the Southern District of New York (the ``New 
York Bankruptcy Court''). The making of this voluntary filing 
constitutes an order for relief under the Bankruptcy Code and NRG as 
a result became a debtor in possession subject to the jurisdiction 
of the bankruptcy court and the requirements of the Bankruptcy Code. 
Under the requirements of the Bankruptcy Code (11 U.S.C. 363), any 
significant or out of the ordinary course transactions by NRG 
require the prior approval of the New York Bankruptcy Court.
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    Black Mountain operates in Arizona and is certified by the Arizona 
Corporation Commission to provide natural gas and propane service 
within the State of Arizona. Black Mountain currently provides service 
to approximately 8,500 gas customers and about 2,500 propane customers 
and had revenues of approximately $9.5 million in 2002.
    Southwest is a natural gas service company serving over 1.4 million 
households, businesses and industries in Arizona, Nevada and portions 
of California. Southwest is certified to provide natural gas service in 
Arizona.
    On May 24, 2002, Xcel and Southwest entered into a Stock Purchase 
Agreement under which Xcel Energy agreed to sell and transfer to 
Southwest, and Southwest agreed to purchase from Xcel Energy, all of 
the issued and outstanding common stock of Black Mountain (the 
``Stock''). In consideration for the sale and transfer of the Stock, 
Southwest agreed to pay to Xcel Energy $18,700,000 in cash plus an 
additional amount of up to $6,500,000 necessary to redeem, retire or 
defease certain long-term debt of Black Mountain at or prior to closing 
(``Consideration''). Declarant maintains that the Consideration was 
determined through arms-length negotiations between representatives of 
Xcel Energy and Southwest and that the Consideration constitutes fair 
and adequate compensation for the Stock. Declarant states that in order 
to verify the fairness and adequacy of Consideration, Xcel Energy 
considered, among other factors, the discounted cash flow of Black 
Mountain and examined comparable transactions, including Xcel Energy's 
acquisition of Black Mountain. The Consideration to be received by Xcel 
Energy will be contributed to Xcel Energy's general funds and used for 
general corporate purposes.

Progress Energy, Inc., et al. (70-10130)

    Progress Energy, Inc. (``Progress Energy''), a registered holding 
company; Progress Energy's utility subsidiaries: Carolina Power & Light 
Company (``CP&L''), Florida Power Corporation (``FPC''), and North 
Carolina Natural Gas Corporation (``NCNG''); and Progress Energy's 
nonutility subsidiaries: Florida Progress Corporation (``Florida 
Progress''), Progress Energy Service Company, LLC (``Progress 
Service''), PV Holdings, Inc. (``PV Holdings''), Progress Ventures, 
Inc. (``Progress Ventures''), Strategic Resource Solutions Corp. 
(``SRS''), Progress Energy Solutions, Inc. (``Progress Solutions''), 
Progress Real Estate Holdings, Inc. (``Progress Real Estate''), 
CaroFund, Inc., CaroHome, LLC, Capitan Corporation, Caronet, Inc. 
(``Caronet''), CaroFinancial, Inc., NCNG Cardinal Pipeline Investment 
Corporation, NCNG Pine Needle Investment Corporation, Cape Fear Energy 
Corp., Progress Capital Holdings, Inc. (``Progress Capital''), Progress 
Fuels Corporation (``Progress Fuels''), Progress Telecommunications 
Corporation (``Progress Telecommunications''), FPC Del, Inc. (``FPC 
Del''), and Florida Progress Funding Corporation (``Progress Funding'') 
have filed an application-declaration, as amended (``Application''), 
under sections 6(a), 7, 9(a), 10, and 12 of the Act and rules 26(c), 
42, 43, 45, 46, 53, and 54 under the Act. The address for all of the 
Applicants is 410 South Wilmington Street, Raleigh, North Carolina 
27602, except for FPC, Florida Progress, Progress Capital, FPC Del, and 
Progress Funding, for whom the address is One Progress Plaza, St. 
Petersburg, Florida 33701.
    CP&L, FPC and NCNG are referred to collectively as the ``Utility 
Subsidiaries.'' The term ``Nonutility Subsidiaries'' includes the 
nonutility subsidiaries named above and their respective subsidiaries, 
as well as any other nonutility company later acquired or formed, 
directly or indirectly, by Progress Energy under rule 58 or pursuant to 
an order of the Commission. The Utility Subsidiaries and Nonutility 
Subsidiaries are referred to collectively as the ``Subsidiaries.'' 
Progress Energy, Florida Progress and the Subsidiaries are referred to 
collectively as the ``Applicants.''
    Applicants request authority to engage in various financing 
transactions, credit support arrangements, and other related proposals, 
as more fully discussed below, commencing on the effective date of an 
order issued in this proceeding and ending September 30, 2006 
(``Authorization Period'').
    In a separate application (File No. 70-10115), Progress Energy is 
seeking authorization pursuant to section 12(d) of the Act to sell all 
of the issued and outstanding common stock of NCNG, and NCNG's interest 
in Eastern North Carolina Natural Gas Company (``Eastern NCNG''). If 
the sale of NCNG and Eastern NCNG is consummated before the issuance of 
an order in this proceeding, the Application will be amended to delete 
NCNG and its subsidiaries as Applicants.

I. Introduction

    Progress Energy is authorized under its Amended and Restated 
Articles of Incorporation to issue 500,000,000 shares of common stock, 
without par value (``Common Stock''), of which 239,823,869 shares were 
issued and outstanding as of March 31, 2003. Progress Energy is also 
authorized under its Amended and Restated Articles of Incorporation to 
issue 20,000,000 shares of preferred stock, without par value 
(``Preferred Stock''), of which none are currently issued and 
outstanding.
    At March 31, 2003, Progress Energy had outstanding $4.8 billion 
principal amount of senior unsecured notes having various maturity 
dates from 2004 through 2031. Progress Energy also has in place $880.2 
million in committed bank lines of credit primarily used to support its 
commercial paper program. At March 31, 2003 Progress Energy had $91.8 
million of commercial paper outstanding. Progress Energy's senior 
unsecured debt is currently rated BBB by Standard & Poor's Inc. 
(``S&P'') and Baa2 by Moody's Investor Service (``Moody's''). Progress 
Energy's commercial paper is rated A-2 by S&P and P-2 by Moody's.
    For the twelve months ended December 31, 2002, Progress Energy had 
total operating revenues of $7,945,120,000 of which $6,600,689,000 
(83.1%) were derived from electric utility operations and 
$1,344,431,000

[[Page 51811]]

(16.9%) from nonutility businesses, including sales of electricity by 
Progress Energy's exempt wholesale generator (``EWG'') subsidiaries. 
For the three months ended March 31, 2003, Progress Energy had total 
operating revenues of $2,016,004,000, of which $1,653,887,000 (82%) 
were derived from electric utility operations and $362,117,000 (18%) 
from nonutility businesses.
    At March 31, 2003, Progress Energy had total consolidated assets of 
$23,172,892,000 including net utility plant of $12,033,791,000 (as of 
December 31, 2002 and March 31, 2003, NCNG's results of operations and 
assets and liabilities were reported as ``discontinued operations'' 
and, therefore, are not included in Progress Energy's year-end or March 
31, 2003 year-to-date consolidated operating revenues and utility plant 
accounts).

II. Current Financing Authority

    By order dated December 12, 2000 in File No. 70-9659 (Holding Co. 
Act Release No. 27297), as supplemented and modified by orders dated 
September 20, 2001 (Holding Co. Act Release No. 27440), March 15, 2002 
(Holding Co. Act Release No. 27500), April 18, 2002 (Holding Co. Act 
Release No. 27522), and May 5, 2003 (Holding Co. Act Release No. 27673) 
(collectively, the ``December 2000 Order''), the Commission authorized 
Progress Energy and its Subsidiaries to engage in a program of external 
financing, intrasystem financing, and other related transactions from 
time to time through September 30, 2003.
    Under the December 2000 Order, the Commission authorized, among 
other things:
    (i) Progress Energy to issue and sell common stock, preferred 
securities, unsecured long-term debt, short-term debt and other 
securities, including to issue and/or purchase shares of its common 
stock in the open market for purposes of reissuing the shares under its 
dividend reinvestment plan and other stock-based plans maintained for 
the benefit of employees, officers, and non-employee directors 
(collectively, the ``Stock Plans'');
    (ii) Progress Energy to maintain the credit arrangements entered 
into to finance, in part, the acquisition of Florida Progress;
    (iii) Progress Energy to enter into and perform interest rate 
hedging transactions to manage volatility of interest rates associated 
with its outstanding indebtedness and with respect to anticipated debt 
offerings;
    (iv) CP&L to issue and sell short-term debt;
    (v) NCNG to issue and sell long-term debt and preferred securities;
    (vi) Progress Energy to issue guarantees and provide other forms of 
credit support with respect to obligations of its subsidiaries;
    (vii) Florida Progress to maintain guarantees of obligations 
outstanding at the time Florida Progress was acquired, as well as other 
forms of credit support provided by Progress Capital to its nonutility 
subsidiaries;
    (viii) Nonutility subsidiaries of Progress Energy to provide 
guarantees and other forms of credit support for other Nonutility 
subsidiaries;
    (ix) Progress Energy to establish and fund, and the Utility 
Subsidiaries and certain Nonutility Subsidiaries to participate in 
separate money pool systems (the ``Utility Money Pool,'' the 
``Nonutility Money Pool'' and, together, the ``Money Pools'');
    (x) Progress Energy and the Nonutility Subsidiaries to make loans 
to less than wholly-owned Nonutility Subsidiaries;
    (xi) Progress Energy and Subsidiaries to acquire, directly or 
indirectly, the equity securities of one or more special purpose 
entities (``Financing Subsidiaries'') created specifically for the 
purpose of facilitating a financing and to guarantee the securities 
issued by such Financing Subsidiary;
    (xii) Nonutility Subsidiaries to declare and pay dividends out of 
capital and unearned surplus, subject to certain limitations;
    (xiii) Progress Energy and its consolidated subsidiaries to enter 
into an agreement allocating taxes;
    (xiv) Progress Energy to invest up to $1 billion in certain 
nonutility assets in the United States; and
    (xv) Progress Energy to spend up to $250 million on certain 
development activities relating to nonutility business activities.
    In addition to the financing and investment activities authorized 
above, the Applicants are also authorized under to the December 2000 
Order to engage in the following transactions for a period of time that 
is not limited by the authorization period under the December 2000 
Order:
    (xvi) Progress Energy to organize and acquire, directly or 
indirectly, the securities of one or more intermediate Nonutility 
Subsidiaries (``Intermediate Subsidiaries'') to act as holding 
companies for Nonutility Subsidiaries and to consolidate or otherwise 
reorganize its ownership interests in existing and future Nonutility 
Subsidiaries under Intermediate Subsidiaries, and to engage in 
development and administrative activities relating to the nonutility 
businesses;
    (xvii) Wholly-owned Subsidiaries are authorized to change their 
capitalization;
    (xviii) Nonutility Subsidiaries are authorized to engage in certain 
energy-related activities permitted by rule 58 outside the United 
States, subject to the reservation of jurisdiction of certain energy-
related activities;
    (xix) Nonutility Subsidiaries are authorized to render services to 
each other at fair market prices in certain circumstances; and
    (xx) Progress Energy and NCNG are authorized to pay dividends out 
of capital surplus, subject to specified limitations.
    Finally, pursuant to an order dated July 17, 2002 (Holding Co. Act 
Release No. 27551), the Commission authorized Progress Energy to 
increase its ``aggregate investment'' as defined under rule 53(a) in 
EWGs to $4 billion using the proceeds of financings and guarantees 
previously authorized, or authorized in the future. The Commission 
reserved jurisdiction over the use of the proceeds of authorized 
financings to invest in foreign utility companies (``FUCOs'').
    Applicants state that the authority sought in the current 
Application will supersede and replace the current authorization of the 
Applicants under the December 2000 Order to engage in the financing 
activities and related transaction described above in subsections (i) 
through and including (xv). The authorizations for the transactions 
described in paragraphs (xvi) through and including (xix) will remain 
unchanged. Progress Energy and NCNG are requesting a modification of 
their authority to pay dividends out of capital and unearned surplus 
(as set forth in paragraph (xx) above) in order to reflect changes to 
purchase accounting rules that became effective after the December 2000 
Order.

III. Financing Conditions

    Applicants request authority to engage in various financing 
transactions during the Authorization Period. Applicants state that the 
following general terms will be applicable, where appropriate, to the 
proposed financing activities requested by the Applicants:
A. Effective Cost of Money
    The effective cost of capital on unsecured notes and debentures and 
other forms of unsecured long-term debt securities (``Long-term 
Debt''), Preferred Stock or other types of preferred securities 
(including specifically trust preferred securities or monthly income

[[Page 51812]]

preferred securities) (together, ``Preferred Securities''), equity-
linked securities (``Equity-Linked Securities), and commercial paper, 
unsecured promissory notes and other forms of unsecured indebtedness 
having maturities of less than one year (``Short-term Debt'') will not 
exceed competitive market rates available at the time of issuance for 
securities having the same or reasonably similar terms and conditions 
issued by similar companies of reasonably comparable credit quality; 
provided that in no event will the effective cost of capital (1) on any 
series of Long-term Debt exceed 500 basis points over a U.S. Treasury 
security having a remaining term equal to the term of such series, (2) 
on any series of Preferred Securities or Equity-Linked Securities 
exceed 600 basis points over a U.S. Treasury security having a 
remaining term equal to the term of such series, and (3) on Short-term 
Debt exceed 500 basis points over the London Interbank Offered Rate for 
maturities of less than one year.
B. Maturity
    The maturity date of any Long-term Debt will not exceed 50 years 
after issuance. Preferred Securities and Equity-Linked Securities will 
be redeemed no later than 50 years after the issuance, unless converted 
into shares of Common Stock, except that Preferred Stock issued 
directly by Progress Energy may be perpetual in duration.
C. Issuance Expenses
    The underwriting fees, commissions or other similar remuneration 
paid in connection with the non-competitive issue, sale or distribution 
of securities pursuant to this Application will not exceed the greater 
of (1) 5% of the principal or total amount of the securities being 
issued or (2) issuance expenses that are generally paid at the time of 
the pricing for sales of the particular issuance, having the same or 
reasonably similar terms and conditions issued by similar companies of 
reasonably comparable credit quality.
D. Common Equity Ratio
    At all times during the Authorization Period, Progress Energy and 
each Utility Subsidiary will maintain common equity of at least 30% of 
its consolidated capitalization (common equity, preferred stock, long-
term debt and short-term debt); provided that Progress Energy will in 
any event be authorized to issue Common Stock (including pursuant to 
the Stock Plans) to the extent authorized by Commission order.
E. Investment Grade Ratings
    Applicants further represent that, except for securities issued for 
the purpose of funding Money Pool operations, no guarantees or other 
securities, other than Common Stock, may be issued in reliance upon the 
authorization that may be granted by the Commission in accordance with 
this Application, unless (1) the security to be issued, if rated, is 
rated investment grade; (2) all outstanding securities of the issuer 
that are rated are rated investment grade; and (3) all outstanding 
securities of the top level registered holding company that are rated 
are rated investment grade. For purposes of this provision, a security 
will be deemed to be rated ``investment grade'' if it is rated 
investment grade 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. 
Applicants request that the Commission reserve jurisdiction over the 
issuance of any such securities that are rated below investment grade. 
Applicants further request that the Commission reserve jurisdiction 
over the issuance of any guarantee or other securities at any time that 
the conditions set forth in clauses (1) through (3) above are not 
satisfied.
F. Use of Proceeds
    The proceeds from the sale of securities in external financing 
transactions will be used for general corporate purposes including (1) 
financing, in part, of the capital expenditures of Subsidiaries, (2) 
financing working capital requirements of Progress Energy and its 
Subsidiaries, (3) the acquisition, retirement or redemption under rule 
42 of securities previously issued by Progress Energy or its 
Subsidiaries or as otherwise authorized by Commission, (4) direct or 
indirect investments in companies authorized under the Act or by rule, 
including investments in EWGs and ``energy-related companies'' under 
rule 58, and (5) other lawful purposes. The Applicants represent that 
no such financing proceeds will be used to acquire the securities of a 
new subsidiary unless such acquisition is consummated in accordance 
with an order of the Commission or an available exemption under the 
Act.

IV. Progress Energy External Financing

    Progress Energy requests authority to increase its capitalization 
by issuing and selling from time to time during the Authorization 
Period, directly or indirectly through one or more Financing 
Subsidiaries: (1) additional shares of Common Stock and/or options, 
warrants, forward equity purchase contracts, or other rights that are 
exercisable or exchangeable for or convertible into Common Stock, (2) 
Preferred Securities and Equity-Linked Securities, and (3) Long-term 
Debt, in an aggregate amount not to exceed $2.8 billion (excluding 
securities issued for purposes of refunding or replacing other 
outstanding long-term securities where Progress Energy's capitalization 
is not increased as a result) (``External Financing Limit''). In 
addition, Progress Energy requests authorization to issue and sell 
Short-term Debt in an aggregate principal amount at any time 
outstanding not to exceed $1.5 billion.
    Progress Energy may issue and sell Common Stock (and/or options, 
warrants, forward equity purchase contracts, or other rights that are 
exercisable or exchangeable for or convertible into Common Stock), 
Preferred Securities, Equity-Linked Securities and Long-term Debt: (1) 
Through underwriters, initial purchasers or dealers, (2) through 
agents, (3) directly to a limited number of purchasers or a single 
purchaser, or (4) directly to employees of Progress Energy or its 
Subsidiaries (or to trusts established for their benefit), 
shareholders, officers and directors under the Stock Plans. If 
underwriters are used, 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 a managing 
underwriter or underwriters designated by Progress Energy) or directly 
by one or more underwriters acting alone, or may be sold directly by 
Progress Energy or through agents designated by Progress Energy from 
time to time. If dealers are utilized, Progress Energy will sell the 
securities to the dealers, as principals. Any dealer may then resell 
the securities to the public at varying prices to be determined by the 
dealer at the time of resale. If Common Stock is being sold in an 
underwritten offering, Progress Energy may grant the underwriters a 
``green shoe'' option permitting the purchase from Progress Energy at 
the same price additional shares then being offered solely for the 
purpose of covering over-allotments.

[[Page 51813]]

A. Common Stock
    Progress Energy proposes to issue and sell Common Stock (and/or 
options, warrants, forward equity purchase contracts or other rights 
exercisable or exchangeable for or convertible into Common Stock) in 
accordance with underwriting agreements of a type generally standard in 
the industry. Public distributions may be made through private 
negotiation with underwriters, dealers or agents or effected through 
competitive bidding among underwriters. In addition, sales may be made 
through private placements or other non-public offerings to one or more 
persons. All such sales will be at rates or prices and under conditions 
negotiated or based upon, or otherwise determined by, competitive 
capital markets.
    Progress Energy also proposes to issue Common Stock in public or 
privately-negotiated transactions as consideration for the equity 
securities or assets of other companies, provided that the acquisition 
of any such equity securities or assets has been authorized by the 
Commission or is exempt under the Act or the rules thereunder. Progress 
Energy may use original issue shares of Common Stock in such 
transactions or use Common Stock purchased on the open market for such 
purpose.
    The ability to offer Common Stock as consideration in connection 
with an acquisition may make the transaction more economical for 
Progress Energy as well as for the seller of the business being 
acquired. If original issue shares of Common Stock are used in such 
transactions, the value of such shares would be based upon the closing 
price on the day prior to the date of issuance (or, if appropriate, the 
date of a binding contract providing for the issuance of the Common 
Stock) or based upon average high and low prices for a period as 
negotiated by the parties and counted against the proposed External 
Financing Limit.
B. Preferred Securities
    Applicants request authorization to issue Preferred Securities in 
one or more series with such rights, preferences and priorities as may 
be designated in the document creating each series, as determined by 
Progress Energy's Board of Directors. Dividends or distributions on the 
securities will be made periodically and to the extent funds are 
legally available for such purpose, but may be made subject to terms 
which allow the issuer to defer dividend payments for specified 
periods. Progress Energy may also issue and sell Equity-Linked 
Securities, typically in the form of stock purchase units, which 
combine a security with a fixed obligation (e.g., preferred stock or 
debt) with a stock purchase contract that is exercisable (either 
mandatorily or at the option of the holder) within a relatively short 
period (e.g., three to six years after issuance).
C. Long-Term Debt
    Applicants request authority to issue Long-term Debt directly by 
Progress Energy or indirectly through one or more Financing 
Subsidiaries in the form of notes, medium-term notes or debentures 
under one or more indentures, or long-term indebtedness under 
agreements with banks or other institutional lenders. Each series of 
Long-term Debt would have such designation, aggregate principal amount, 
maturity, interest rate(s) or methods of determining the same, terms of 
payment of interest, redemption provisions, sinking fund terms and 
other terms and conditions as Progress Energy may determine at the time 
of issuance. Any Long-term Debt (1) may be convertible into any other 
securities of Progress Energy, (2) will have maturities ranging from 
one to 50 years, (3) may be subject to optional and/or mandatory 
redemption, in whole or in part, at par or at various premiums above 
the principal amount thereof, (4) may be entitled to mandatory or 
optional sinking fund provisions, (5) may provide for reset of the 
coupon under a remarketing arrangement, (6) may be subject to tender or 
the obligation of the issuer to repurchase at the election of the 
holder or upon the occurrence of a specified event, (7) may be called 
from existing investors by a third party, and (8) may be entitled to 
the benefit of affirmative or negative financial or other covenants.
D. Short-Term Debt
    Progress Energy proposes to issue and sell from time to time Short-
term Debt in an aggregate principal amount at any time outstanding not 
to exceed $1.5 billion. Specifically, Progress Energy may sell 
commercial paper, from time to time, in established domestic or 
European commercial paper markets. Such commercial paper would 
typically be sold to dealers at the discount rate per annum prevailing 
at the date of issuance for commercial paper of comparable quality and 
maturities sold to commercial paper dealers generally. It is expected 
that the dealers acquiring commercial paper from Progress Energy will 
reoffer such paper at a discount to corporate, institutional and, with 
respect to European commercial paper, individual investors. It is 
anticipated that Progress Energy's commercial paper will be reoffered 
to investors such as commercial banks, insurance companies, pension 
funds, investment trusts, foundations, colleges and universities, 
finance companies and nonfinancial corporations. Progress Energy also 
proposes to maintain and renew from time to time committed bank lines 
of credit, provided that only the principal amount of any actual 
borrowings under the lines of credit will be counted against the 
proposed limit on Short-term Debt set forth above. Progress Energy may 
also engage in other types of short-term financing, including 
borrowings under uncommitted lines, 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.
E. Stock Plans
    Progress Energy requests authorization to issue shares of its 
Common Stock, and/or options, warrants, stock appreciation rights, 
units, hypothetical shares and similar securities for purposes of 
delivery under its Stock Plans, as they may be amended or extended, or 
similar plans or plan funding arrangements that may be adopted in the 
future. The net proceeds of any new issuances of shares of Common Stock 
by Progress Energy will be counted toward the external Financing Limit. 
Progress Energy also requests authorization to purchase or cause to be 
purchased on the open market up to 11 million shares of Common Stock 
for purposes of delivery under its Stock Plans.

V. Utility Subsidiary Financing

    CP&L and NCNG request authorization to issue and sell the following 
securities during the Authorization Period:
A. Short-Term Debt of CP&L
    CP&L requests authorization to issue and sell from time to time 
during the Authorization Period Short-term Debt in an aggregate 
principal amount outstanding at any one time not to exceed $1 billion. 
Subject to such limitation, CP&L would engage in short-term financing 
as it may deem appropriate in light of its needs and market conditions 
at the time of issuance. Short-term financing could include, without 
limitation, commercial paper sold in established domestic or European 
commercial paper markets in a manner similar to Progress Energy, bank 
lines and debt securities issued under its indentures and note 
programs.

[[Page 51814]]

B. Long-term Debt of NCNG
    NCNG requests authorization (for so long as it shall remain a 
subsidiary of Progress Energy) to make direct borrowings from Progress 
Energy in an amount which, when added to borrowings by NCNG under the 
Utility Money Pool shall not exceed $750 million. The interest rate and 
maturity on any note evidencing direct borrowings from Progress Energy 
will be designed to parallel the effective cost of capital of Progress 
Energy. The maturity on any note issued to Progress Energy will not 
exceed 50 years from the date of issuance.

VI. Financing by Nonutility Subsidiaries

    If a Nonutility Subsidiary that is not wholly-owned engages in 
activities related to the development and expansion of energy, 
transportation, telecommunications or other functionally-related, 
nonutility businesses, authority is requested for Progress Energy or a 
Nonutility Subsidiary, as the case may be, to make loans to the non-
wholly owned subsidiaries at interest rates and maturities designed to 
provide a return to the lendor of not less than its effective cost of 
capital. The borrower will not sell any services to any associate 
Nonutility Subsidiary unless the associate Nonutility Subsidiary falls 
within one of the categories of companies to which goods and services 
may be sold on a basis other than ``at cost'' under the terms of the 
December 2000 Order. Furthermore, if any loans are made, Progress 
Energy will include in the next certificate filed under rule 24 in this 
proceeding substantially the same information as that required on Form 
U-6B-2 with respect to the transaction.

VII. Guarantees

A. Progress Energy Guarantees
    Progress Energy requests authorization to enter into guarantees, 
obtain letters of credit, enter into expense agreements or otherwise 
provide credit support (collectively, ``Progress Guarantees'') with 
respect to the obligations of any Subsidiary as may be appropriate to 
enable the Subsidiary to carry on in the ordinary course of its 
business, in an aggregate principal amount not to exceed $3 billion 
outstanding at any one time; provided however, that the amount of any 
Progress Guarantees in respect of obligations of any Subsidiaries shall 
also be subject to the limitations of rule 53(a)(1) or rule 58(a)(1), 
as applicable.
    Progress Energy proposes to charge each Subsidiary a fee for each 
guarantee provided on its behalf that is not greater than the cost, if 
any, of obtaining the liquidity necessary to perform the guarantee (for 
example, bank line commitment fees or letter of credit fees, plus other 
transactional expenses) for the period of time the guarantee remains 
outstanding.
    The debt of a Financing Subsidiary guaranteed by Progress Energy 
will comply with the External Financing Limit. However, in order to 
avoid double counting the amount of any Progress Guarantee issued with 
respect to securities issued by a Financing Subsidiary will not be 
counted against the proposed limit on Progress Guarantees.
    Progress Guarantees may, in some cases, be provided to support 
obligations of Subsidiaries that are not readily susceptible of exact 
quantification or that may be subject to varying quantification. In 
that event, Progress Energy will determine the exposure under the 
guarantee for purposes of measuring compliance with the proposed limit 
on Progress Guarantees set forth above by appropriate means, including 
estimation of exposure based on loss experience or projected potential 
payment amounts. Any estimates will be made in accordance with 
generally accepted accounting principles, and will be reevaluated 
periodically.
B. Nonutility Subsidiary Guarantees
    In addition to guarantees that may be provided by Progress Energy, 
Nonutility Subsidiaries request authority to provide to other 
Nonutility Subsidiaries guarantees and other forms of credit support 
(``Nonutility Guarantees'') in an aggregate principal amount not to 
exceed $500 million outstanding at any one time, in addition to any 
guarantees and other forms of credit support that are exempt under rule 
45(b) and rule 52(b); provided however, that the amount of Nonutility 
Guarantees in respect of obligations of any Subsidiary that is an 
``energy-related company'' as that term is defined under rule 58 shall 
remain subject to the limitations of rule 58(a)(1). The Nonutility 
Subsidiary providing any credit support may charge its associate 
company a fee for each guarantee provided on its behalf determined in 
the same manner as specified above.
C. Guarantees Issued by Florida Progress and Its Nonutility 
Subsidiaries
    Florida Progress has in the past provided guarantees with respect 
to certain long-term and short-term indebtedness of Progress Capital 
and preferred securities issued by Progress Funding (via a special 
purpose trust), the proceeds of which are used to provide financing for 
Florida Progress's other subsidiaries. In addition, Florida Progress 
and Progress Capital have provided guarantees and/or other forms of 
credit support to third parties on behalf of Florida Progress's 
Nonutility Subsidiaries in the form of standby letters of credit, 
surety bonds, and guarantees of performance under leases and other 
agreements. Florida Progress and its Nonutility Subsidiaries request 
authorization to maintain in effect all of the outstanding guarantees 
and other forms of credit support described above, and to amend, renew, 
extend or replace such guarantees, as necessary. Further, the 
Applicants request that such guarantees and other forms of credit 
support not count against the $500 million limit proposed above on 
future Nonutility Guarantees.

VIII. Hedging Transactions

A. Interest Rate Hedges
    Progress Energy, and to the extent not exempt under rule 52, the 
Subsidiaries, request authorization to enter into interest rate hedging 
transactions with respect to existing indebtedness (``Interest Rate 
Hedges''), subject to certain limitations and restrictions, in order to 
reduce or manage interest rate cost. Interest Rate Hedges would only be 
entered into with counterparties whose senior debt ratings, or the 
senior debt ratings of the parent companies of the counterparties, as 
published by S&P, are equal to or greater than BBB, or an equivalent 
rating from Moody's, Fitch-Ratings, or Duff and Phelps (``Approved 
Counterparties'').
    Interest Rate Hedges will involve the use of financial instruments 
commonly used in today's capital markets, such as interest rate swaps, 
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. Thus the Applicants will not engage in 
speculative transactions. Fees, commissions and other amounts payable 
to the counterparty or exchange (excluding, however, the swap or option 
payments) in connection with an Interest Rate Hedge will not exceed 
those generally obtainable in

[[Page 51815]]

competitive markets for parties of comparable credit quality.
B. Anticipatory Hedges
    Progress Energy and the Subsidiaries request authorization to enter 
into interest rate hedging transactions with respect to anticipated 
debt offerings (the ``Anticipatory Hedges''), subject to certain 
limitations and restrictions. Anticipatory Hedges 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 
(1) a forward sale of exchange-traded U.S. Treasury futures contracts, 
U.S. Treasury obligations and/or a forward swap (each a ``Forward 
Sale''), (2) the purchase of put options on U.S. Treasury obligations 
(a ``Put Options Purchase''), (3) a Put Options Purchase in combination 
with the sale of call options on U.S. Treasury obligations (a ``Zero 
Cost Collar''), (4) transactions involving the purchase or sale, 
including short sales, of U.S. Treasury obligations, or (5) 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, 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 (``CBOT''), 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. Progress Energy or a Subsidiary will determine the 
optimal structure of each Anticipatory Hedge transaction at the time of 
execution. Progress Energy or a Subsidiary may decide to lock in 
interest rates and/or limit its exposure to interest rate increases.
    The Applicants will comply with Statement of Financial Accounting 
Standard (``SFAS'') 133 (Accounting for Derivative Instruments and 
Hedging Activities) and SFAS 138 (Accounting for Certain Derivative 
Instruments and Certain Hedging Activities) or other standards relating 
to accounting for derivative transactions as are adopted and 
implemented by the Financial Accounting Standards Board (``FASB''). The 
Applicants represent that each Interest Rate Hedge and each 
Anticipatory Hedge will qualify for hedge accounting treatment under 
the current FASB standards in effect and as determined as of the date 
such Interest Rate Hedge or Anticipatory Hedge is entered into. The 
Applicants will also comply with any future FASB financial disclosure 
requirements associated with hedging transactions.

IX. Money Pools

    Progress Energy and the Utility Subsidiaries request authorization 
to continue to maintain and fund the Utility Money Pool, and CP&L and 
NCNG also request authorization to make unsecured short-term borrowings 
from the Utility Money Pool. The Utility Subsidiaries request 
authorization to contribute surplus funds to the Utility Money Pool, 
and to lend and extend credit to (and acquire promissory notes from) 
one another through the Utility Money Pool. In addition, Progress 
Energy and the Nonutility Subsidiaries request authorization to 
continue to maintain and fund the Nonutility Money Pool. The Nonutility 
Money Pool activities of all of the Nonutility Subsidiaries are exempt 
from the prior approval requirements of the Act under rules 45(b) and 
52. Progress Energy is requesting authorization to contribute surplus 
funds and/or to lend and extend credit to (1) the Utility Subsidiaries 
through the Utility Money Pool and (2) the Nonutility Subsidiaries 
through the Nonutility Money Pool.
A. Utility Money Pool
    Under the Utility Money Pool agreement, short-term funds are 
available from the following sources for short-term loans to the 
Utility Subsidiaries from time to time: (1) Surplus funds in the 
treasuries of Utility Money Pool participants other than Progress 
Energy; (2) surplus funds in the treasury of Progress Energy (funds in 
clauses (1) and (2) being referred to as ``Internal Funds''); and (3) 
proceeds from bank borrowings by Utility Money Pool participants or the 
sale of commercial paper by Progress Energy or the Utility Subsidiaries 
for loan to the Utility Money Pool (the ``External Funds'').
    Funds are made available from sources, and in the order, as 
Progress Service, as administrator for the Utility Money Pool, may 
determine would result in a lower cost of borrowing, consistent with 
the individual borrowing needs and financial standing of the companies 
providing funds to the pool. The determination of whether a Utility 
Money Pool participant at any time has surplus funds to lend to the 
Utility Money Pool is made by the participant's chief financial officer 
or treasurer, or their designee, on the basis of cash flow projections 
and other relevant factors, and in the participant's sole discretion.
    The cost of compensating balances, if any, and fees paid to banks 
to maintain credit lines and accounts by Utility Money Pool 
participants lending External Funds to the Utility Money Pool are 
initially paid by the participant maintaining the line. A portion of 
such costs--or all of such costs if a Utility Money Pool participant 
establishes a line of credit solely for purposes of lending any 
External Funds obtained into the Utility Money Pool--are retroactively 
allocated every month to companies borrowing the External Funds in 
proportion to each participant's estimated peak short-term borrowing 
requirement.
    Borrowings by Utility Money Pool participants are made pro rata 
from each participant that lends funds to the Utility Money Pool, in 
the proportion that the total amount loaned by each such lending 
company bears to the total amount then loaned through the Utility Money 
Pool. On any day when more than one fund source (e.g., if there are 
External Funds as well as Internal Funds), with different rates of 
interest, is used to fund loans through the Utility Money Pool, each 
borrower would borrow pro rata from each such fund source in the 
Utility Money Pool 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 Utility Money Pool. CP&L and NCNG (for so long 
as it remains a subsidiary of Progress Energy) each request 
authorization to borrow up to $400 million at any time outstanding 
under the Utility Money Pool. No loans through the Utility Money Pool 
may be made to, and no borrowings through the Utility Money Pool may be 
made by, Progress Energy.
    If only Internal Funds make up the funds available in the Utility 
Money Pool, the interest rate applicable and payable to or by Utility 
Subsidiaries for all loans of Internal Funds would be equal to the rate 
for high-grade unsecured 30-day commercial paper sold through dealers 
by major corporations as quoted in The Wall Street Journal.
    If only External Funds comprise the funds available in the Utility 
Money Pool, the interest rate applicable to loans of External Funds 
would be equal to the lending company's cost for the External Funds 
(or, if more than one Utility Money Pool participant had made available 
External Funds on such day, the applicable interest rate would be a 
composite rate equal to the weighted average of the cost incurred by 
the respective Utility Money Pool participants for the External Funds).

[[Page 51816]]

    In cases where both Internal Funds and External Funds are 
concurrently borrowed through the Utility Money Pool, the rate 
applicable to all loans comprised of such ``blended'' funds would be a 
composite rate equal to the weighted average of (1) the cost of all 
Internal Funds contributed by Utility Money Pool participants 
(determined as set forth in the second-preceding paragraph above) and 
(2) the cost of all such External Funds (determined as set forth in the 
immediately preceding paragraph above). In circumstances where Internal 
Funds and External Funds are available for loans through the Utility 
Money Pool, loans may be made exclusively from Internal Funds or 
External Funds, rather than from a ``blend'' of such funds, to the 
extent it is expected that such loans would result in a lower cost of 
borrowing.
    Funds not required by the Utility Money Pool to make loans (with 
the exception of funds required to satisfy the Utility Money Pool's 
liquidity requirements) would ordinarily be invested in one or more 
short-term investments, including: (1) Interest-bearing accounts with 
banks; (2) obligations issued or guaranteed by the U.S. government and/
or its agencies and instrumentalities, including obligations under 
repurchase agreements; (3) obligations issued or guaranteed by any 
state or political subdivision thereof, provided that such obligations 
are rated not less than ``A'' by a nationally recognized rating agency; 
(4) commercial paper rated not less than ``A-1'' or ``P-1'' or their 
equivalent by a nationally recognized rating agency; (5) money market 
funds; (6) bank certificates of deposit; (7) Eurodollar funds; and (8) 
such other investments as are permitted by section 9(c) of the Act and 
rule 40.
    The interest and investment income earned on loans and investments 
of surplus funds is allocated among the participants in the Utility 
Money Pool in accordance with the proportion each participant's 
contribution bears to the total amount of funds in the Utility Money 
Pool and the cost of funds contributed to the Utility Money Pool by the 
participant. Each Applicant receiving a loan through the Utility Money 
Pool is required to repay the principal amount, together with interest 
accrued thereon, on demand and in any event no later than one year 
after the date of the loan. All loans made through the Utility Money 
Pool may be prepaid by the borrower without premium or penalty.
B. Nonutility Money Pool
    The Nonutility Money Pool is operated and funded in substantially 
the same manner as the Utility Money Pool, except that funds 
contributed by Progress Energy to the Money Pools are made available to 
the Utility Money Pool first and then to the Nonutility Money Pool. The 
manner of calculating interest on funds contributed to, and borrowings 
from, the Nonutility Money Pool is as described above under Utility 
Money Pools. No loans through the Nonutility Money Pool may be made to, 
and no borrowings through the Nonutility Money Pool may be made by, 
Progress Energy.
    The current participants in the Nonutility Money Pool are Progress 
Energy, Progress Service, SRS, PV Holdings, Progress Ventures, and 
Progress Capital. It is proposed that the following additional 
Nonutility Subsidiaries be permitted to participate in the Nonutility 
Money Pool: Progress Real Estate, Progress Fuels, Progress Solutions, 
Progress Telecommunications, and Caronet. The Applicants request that 
the Commission reserve jurisdiction over the addition of any other 
existing or future Nonutility Subsidiaries as participants in the 
Nonutility Money Pool.

X. Other Transactions

A. Financing Subsidiaries
    The Applicants request authority to acquire, directly or 
indirectly, the equity securities of one or more Financing Subsidiaries 
created specifically for the purpose of facilitating the financing of 
the authorized and exempt activities (including exempt and authorized 
acquisitions) of Progress Energy and the Subsidiaries through the 
issuance of Long-term Debt or Preferred Securities to third parties. 
Any Financing Subsidiary organized in accordance with the authority 
granted by the Commission in this proceeding shall be organized only 
if, in management's opinion, the creation and utilization of such 
Financing Subsidiary will likely result in tax savings, increased 
access to capital markets and/or lower cost of capital to the parent 
company of the Financing Subsidiary.
    Authorization also is requested for any Financing Subsidiary to 
dividend, loan or otherwise transfer the proceeds of a financing to, or 
as directed by, the Financing Subsidiary's parent company; provided 
however, that a Financing Subsidiary of a Utility Subsidiary will 
dividend, loan or otherwise transfer proceeds of a financing only to a 
Utility Subsidiary.
    Progress Energy and its Subsidiaries request authorization to 
guarantee or enter into expense agreements in respect of the 
obligations of any Financing Subsidiaries that they organize, to the 
extent not otherwise exempt under rules 45(b)(7) and 52. The amount of 
any equity or long-term debt securities issued by any Financing 
Subsidiary shall be counted against any limitation on the amounts of 
similar types of securities that may be issued directly by the parent 
company of a Financing Subsidiary, as set forth in this Application or 
in any other application/declaration that may be filed in the future, 
to the extent that such securities are guaranteed by such parent 
company. In that case, however, the guaranty by the parent company 
would not also be counted against the limitations on Progress 
Guarantees or Nonutility Guarantees, as the case may be.
    Progress Energy and, to the extent not exempt under rule 52, 
Subsidiaries also request authorization to issue their subordinated 
unsecured notes (``Subordinated Notes'') to any Financing Subsidiary to 
evidence the loan of financing proceeds by a Financing Subsidiary to 
its parent company. The principal amount, maturity and interest rate on 
any such Subordinated Notes will be designed to parallel the amount, 
maturity and interest or distribution rate on the securities issued by 
a Financing Subsidiary in respect of which the Subordinated Note is 
issued.
B. Investments in Energy-Related Assets
    Progress Energy currently has authority to acquire or construct in 
one or more transactions from time to time nonutility energy assets in 
the United States, including, without limitation, natural gas 
production, gathering, processing, storage and transportation 
facilities and equipment, liquid oil reserves and storage facilities, 
and associated facilities (collectively, ``Energy-Related Assets''), 
that are incidental to the energy marketing, brokering and trading 
operations of Progress Energy's subsidiaries, subject to an investment 
limitation of $1 billion (``Investment Limitation'').
    Progress Energy seeks to extend its authorization to invest in 
Energy-Related Assets (or in the equity securities of companies 
substantially all of whose assets consist of Energy-Related Assets), 
subject to the Investment Limitation. Such Energy-Related Assets (or 
equity securities of companies substantially all of whose assets 
consist of Energy-Related Assets) may be acquired for cash or in 
exchange for Common Stock or other securities of

[[Page 51817]]

Progress Energy or a Nonutility Subsidiary of Progress Energy, or any 
combination of the foregoing.\2\ If Common Stock of Progress Energy is 
used as consideration in connection with any such acquisition, its 
market value on the date of issuance will be counted against the 
proposed Investment Limitation. The stated amount or principal amount 
of any other securities issued as consideration in any such transaction 
will also be counted against the Investment Limitation. Under no 
circumstances will any Nonutility Subsidiary acquire, directly or 
indirectly, any assets or properties the ownership or operation of 
which would cause such company to be considered an ``electric utility 
company'' or ``gas utility company'' as defined under the Act.
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    \2\ In some instances, companies substantially all of whose 
assets consist of Energy-Related Assets may also be engaged in 
nonutility activities that would be permitted by rule 58 (e.g., 
energy marketing, ownership, operation and servicing of fuel 
procurement, transportation, handling and storage facilities).
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C. Payment of Dividends
    1. By Progress Energy and NCNG. Progress Energy seeks authorization 
to declare and pay dividends on Common Stock and/or redeem or 
repurchase outstanding shares of Common Stock from time to time out of 
capital and unearned surplus, to the extent permitted under applicable 
corporate law and the terms of any applicable covenants in their 
respective financing documents, in an amount equal to (A) the sum of 
(1) CP&L's consolidated retained earnings prior to formation of 
Progress Energy as a holding company over CP&L in 2000, (2) Florida 
Progress's retained earnings prior to its acquisition in 2000 by 
Progress Energy, and (3) NCNG's retained earnings prior to the 
acquisition of NCNG by CP&L in 1999, plus (B) the amount, if any, 
recorded as an impairment to goodwill in accordance with SFAS No. 142. 
Progress Energy and NCNG request that the Commission reserve 
jurisdiction over the preceeding proposals pending completion of the 
record.
    NCNG seeks authorization to pay dividends out of capital and 
unearned surplus in an amount equal to NCNG's retained earnings prior 
to the acquisition of NCNG by CP&L in 1999.
    2. By Nonutility Subsidiaries. Progress Energy also proposes, on 
behalf of itself and each of its current and future non-exempt 
Nonutility Subsidiaries that they be permitted to pay dividends with 
respect to their securities and/or acquire, retire or redeem any of 
their securities that are held by any associate company or affiliate 
from time to time, out of capital and unearned surplus (including 
revaluation reserve), to the extent permitted under applicable 
corporate law.
D. Expenditures in Connection With Development Activities
    Progress Energy, through its Nonutility Subsidiaries (including 
Intermediate Subsidiaries) requests a continuation of its current 
authority to make expenditures in connection with certain preliminary 
development activities relating to exempt or authorized nonutility 
businesses in an amount at any time outstanding not to exceed $250 
million. Progress Energy proposes a ``revolving fund'' concept for 
permitted expenditures on the development activities. Thus, to the 
extent a Nonutility Subsidiary in respect of which expenditures for 
development activities were made subsequently becomes an EWG or FUCO or 
qualifies as an ``energy-related company'' under rule 58, the amount so 
expended will cease to be considered an expenditure for development 
activities, but will instead be considered as part of the ``aggregate 
investment'' in such entity under rule 53 or 58, as applicable.
E. Tax Allocation Agreement
    The Applicants are authorized to file consolidated income tax 
returns and allocate the consolidated income tax liability of the group 
in accordance with a Tax Allocation agreement that does not satisfy all 
of the requirements of rule 45(c). Under the Tax Allocation agreement, 
Progress Energy is permitted to retain the benefit (i.e., the tax 
savings) in consolidated tax liability that is attributable to the 
interest expense on the debt incurred to acquire Florida Progress, 
subject to certain limitations and restrictions.
    The Applicants request authorization to continue to file 
consolidated income tax returns for tax years ending during the 
Authorization Period under the previously approved Tax Allocation 
agreement. The Applicants will supplement the quarterly report under 
rule 24 filed in this proceeding for the quarterly period in which they 
file their consolidated federal income tax return with information 
showing the calculation of the portion of Progress Energy's loss that 
is attributable to interest expense on the debt incurred to acquire 
Florida Progress and a spreadsheet showing the actual allocation of 
income taxes to each of the members of the consolidated group and the 
allocation of income taxes to each of the members of the consolidated 
group that would be required by rule 45(c).

Interstate Power and Light Company (70-10150)

    Interstate Power and Light Company (``IP&L''), a wholly-owned 
public-utility subsidiary of Alliant Energy Corporation (``Alliant''), 
a registered holding company under the Act, 200 First Street SE., Cedar 
Rapids, Iowa, has filed an application-declaration (``Application'') 
under sections 6(a), 7, 9(a) and 10 of the Act and rule 54 under the 
Act.
    IP&L requests authority to enter into an amendment to a fuel lease 
it has with Arnold Fuel Inc. (``Arnold''). IP&L is engaged principally 
in the generation, purchase, transmission, distribution and sale of 
electric power and the purchase, distribution, transportation and sale 
of natural gas in portions of Iowa, Minnesota and Illinois. IP&L also 
provides steam service in selected markets in Iowa. IP&L owns a 70% 
undivided interest in the Duane Arnold Energy Center (``DAEC''), a 580 
megawatt (net capacity) boiling water nuclear reactor located near 
Palo, Iowa, which was placed in commercial operation in 1974.\3\ IP&L 
\4\ leases its 70% undivided interest in the nuclear fuel required for 
the DAEC according to a fuel lease, dated August 21, 1973, as amended 
(``Fuel Lease'') with Arnold. Unless terminated by either party, the 
term of the Fuel Lease is automatically extended on an annual basis, 
provided that the term of the Lease Agreement may not be extended 
beyond December 31, 2023.
---------------------------------------------------------------------------

    \3\ The remaining 30% undivided interest in the DAEC is owned by 
Central Iowa Power Cooperative and Corn Belt Power Cooperative. The 
DAEC is operated by Nuclear Management Company, LLC, an indirect, 
20% owned, non-utility subsidiary of Alliant.
    \4\ IP&L is successor to Iowa Electric Light and Power Company.
---------------------------------------------------------------------------

    Under the terms of the Fuel Lease, Arnold is obligated to acquire 
and pay the acquisition costs relating to IP&L's 70% undivided interest 
in the separate nuclear fuel assemblies and components (including 
replacement nuclear material) which, when acquired, becomes a part of 
the nuclear fuel leased to IP&L (``Nuclear Fuel''). Arnold currently 
finances the costs relating to the Nuclear Fuel by issuing commercial 
paper promissory notes and/or receiving revolving credit loans under a 
credit agreement (``Credit Agreement'') between Arnold and Bank One, 
NA, individually and as agent bank, and other banks that may become 
parties to the financing. Commercial paper notes may have maturities of 
up to 270 days. Revolving credit loans under the Credit Agreement 
mature on April 28, 2004 and bear interest at the ``Alternate Base 
Rate,'' which is a fluctuating rate of

[[Page 51818]]

interest equal to the higher of (1) the Federal Funds Effective Rate 
plus 0.5% or (2) the corporate base rate of Bank One from time to time. 
The aggregate amount of commercial paper notes and revolving credit 
loans under the Credit Agreement may not exceed $60 million. Arnold is 
currently obligated under the Credit Agreement to pay a facility fee of 
10 basis points per annum on each lending bank's commitment.
    IP&L is obligated under the Fuel Lease to make quarterly lease 
payments (``Basic Rent''), consisting of a ``Quarterly Lease Charge,'' 
which, for any calendar quarter, is the sum of the aggregate of the 
``Daily Lease Charges,'' plus a ``Burn-Up Charge,'' which is the 
portion of the Nuclear Fuel that is consumed in producing heat during 
the quarterly rent period. The Daily Lease Charge for any calendar day 
is equal to the sum of (1) an accrual for all interest expense and 
amortization of debt discount with respect to all commercial paper 
issued by and all revolving credit loans obtained by Arnold under the 
Credit Agreement which are outstanding at the close of business of such 
day, (2) an accrual for such day with respect to all commitment fees 
and other fees, costs and expenses (including issuing agent's fees) of 
Arnold under the Credit Agreement, and (3) a charge determined by 
dividing (x) \1/8\th of 1% of the ``Stipulated Loss Value'' of the 
Nuclear Fuel (essentially Arnold's unrecovered cost of the Nuclear Fuel 
purchased and leased to IP&L) at the close of business on such day by 
(y) 365. The Fuel Lease and Arnold's current financing arrangements 
were all in place at the time Alliant became a registered holding 
company in 1998.
    IP&L requests authorization to enter into an amendment to the Fuel 
Lease to reflect certain proposed changes to the financing arrangements 
by which Arnold will finance the cost of Nuclear Fuel. Specifically, 
authorization is requested for Arnold to issue from time to time during 
the term of the Lease Agreement up to $30 million of senior secured 
notes (``Notes'') under one or more note purchase agreements with 
banks, insurance companies or other institutional lenders. Each Note 
will have a maturity date of between one year and seven years from the 
date of issuance and bear interest on the unpaid principal prior to 
maturity or default at a rate not to exceed 400 basis points over the 
yield to maturity of a U.S. Treasury security having a comparable term. 
Each Note may be subject to redemption at IP&L's option upon payment of 
a premium equal to the excess, if any, of (a) the net present value of 
the future stream of payments under the Note as if held to maturity, 
discounted at a rate determined pursuant to the applicable note 
purchase agreement, over (b) the principal amount of the Note. Under 
the Fuel Lease, as amended, the calculation of the ``Daily Lease 
Charge'' will be modified to reflect accruals for interest on and 
placement fees and other expenses relating to the Notes.
    In connection with the foregoing, IP&L and Bank One, NA will enter 
into an amended Credit Agreement under which the aggregate commitments 
of the lending banks will be reduced from $60 million to $30 million. 
Under the amended Credit Agreement, the facility fee will be increased 
from 10 basis points per year to 15 basis points per year on each 
lending bank's commitment. The interest rate options applicable to 
borrowings under the Credit Agreement will remain unchanged.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-22030 Filed 8-27-03; 8:45 am]
BILLING CODE 8010-01-P