[Federal Register Volume 69, Number 39 (Friday, February 27, 2004)]
[Rules and Regulations]
[Pages 9399-9400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4321]



[[Page 9399]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27803]


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

February 20, 2004.
    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 March 16, 2004, 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 March 16, 2004, 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. (70-10177)

    Northeast Utilities (``NU''), 174 Brush Hill Avenue, West 
Springfield, Massachusetts 01089, a registered public-utility holding 
company under the Act, NU's wholly owned nonutility subsidiary, NU 
Enterprises, Inc. (``NUEI''), and NUEI's wholly owned subsidiary, 
Select Energy, Inc. (``Select''), both located at 107 Selden Street, 
Berlin, Connecticut 06037 (collectively with NU and NUEI, 
``Applicants''), have filed an application-declaration 
(``Application'') under sections 6(a), 7, 9(a), 10, 12(b) and (c), 32 
and 33 of the Act and rules 43, 45, 46, 53 and 54.
    NU, NUEI and Select propose that the Commission authorize:
    (1) NU and NUEI to invest, either directly or indirectly, up to 
$500 million in excess of the amount permitted to be invested under 
rule 58 in ``energy-related companies,'' through June 30, 2007 (the 
``Authorization Period'');
    (2) NU and NUEI to guarantee, indemnify and otherwise provide 
credit support (``Guarantees'') of up to $750 million (``Guarantee 
Limit'') of the debt or obligations of NU's nonutility subsidiaries or 
affiliates (including Select and any nonutility subsidiary or affiliate 
that may be formed or acquired during the Authorization Period) 
(``Nonutility Subsidiaries''), through the Authorization Period;
    (3) Select to (a) engage in energy marketing and trading anywhere 
in the world, subject to the Commission's reservation of jurisdiction 
on the provision of such services outside of the United States, Mexico 
and Canada, and (b) render energy management services and consulting 
services anywhere in the world;
    (4) NU, under rule 53(c), to invest in exempt wholesale generators, 
as defined in section 32 of the Act (``EWGs''), in an aggregate amount 
(which includes the amount of NU's current EWG investment of $449 
million) not exceeding a total of $1 billion (``EWG Investment 
Limit''), through the Authorization Period; and
    (5) NU and NUEI to sell or to cause any subsidiary to sell or 
otherwise transfer (a) its nonutility businesses, (b) the securities of 
current subsidiaries engaged in some or all of these nonutility 
businesses or (c) nonutility investments which do not involve a 
subsidiary (i.e., less than 10% voting interest), in each case to a 
different subsidiary, and to acquire the assets of such businesses, 
subsidiaries or other then-existing investment interests, through the 
Authorization Period.
    NU and NUEI \1\ seek Commission authorization to invest an 
additional amount, of up to $500 million, in excess of the amount 
permitted the Applicants currently under rule 58 in currently existing 
and new ``energy-related companies,'' as defined in rule 58, through 
the Authorization Period, as discussed further below. The Applicants 
anticipate that the investments will include securities acquisitions, 
open account advances and the issuance of Guarantees.
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    \1\ NU, a Massachusetts business trust, NUEI and Select are part 
of the Northeast Utilities system of companies (the ``NU System''). 
NU is the parent and is not itself an operating company. The NU 
System provides franchised retail electric service in Connecticut, 
New Hampshire and western Massachusetts through three of NU's wholly 
owned subsidiaries (The Connecticut Light and Power Company 
(``CL&P''), Public Service Company of New Hampshire (``PSNH'') and 
Western Massachusetts Electric Company (``WMECO'' and collectively 
with CL&P and PSNH, the ``NU Utility Companies'')). The NU Utility 
Companies, together, also provide wholesale electric service to 
various municipalities and other utilities throughout the northeast 
United States. In addition, NU owns Holyoke Water Power Company 
(``HWP''), a utility for purposes of the Act. HWP owns a 147 
megawatt coal-fired plant in Holyoke, Massachusetts, and sells all 
of the output of its generation assets indirectly to Select under a 
wholesale contract. NU is also the parent of Yankee Energy System, 
Inc. (``YES''), an exempt gas utility holding company. YES is 
primarily engaged in the retail distribution of natural gas through 
its wholly owned subsidiary, Yankee Gas Services Company (``Yankee 
Gas''), a Connecticut retail gas distribution company, and also has 
several nonutility subsidiaries.
    NUEI acts as the holding company for NU's unregulated 
businesses. NUEI has numerous direct and indirect nonutility 
subsidiaries, including, along with Select, Northeast Generation 
Company (``NGC'') (currently the NU System's only EWG), Mode 1 
Communications, Inc. and Woods Network Services, Inc., (both exempt 
telecommunications companies, as defined in section 34 of the Act), 
Select Energy Services, Inc. (formerly, HEC Inc.) (a nonutility 
subsidiary whose securities NUEI acquired pursuant to Commission 
authorization (see Holding Co. Act Release No. 26939, Nov. 12, 
1998)) and other ``energy-related companies,'' as defined in rule 58 
(such as Northeast Generation Services Company and E.S. Boulos 
Company).
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    NU's need to increase its ability to invest in its rule 58 
companies is driven primarily by the expanded activity of Select.\2\ NU 
states that it, like many utilities during the industry restructuring 
which has evolved in the United States, has divested most of its 
generating assets and increased its focus on the marketing and 
brokering of energy and related services. Moreover, energy marketing 
and brokering activities have become an integral part of NU's business 
and its strategy for competing in the restructured energy industry, as 
shown in the increasing revenues of, and NU's investment in, Select.\3\ 
NU anticipates that, as its

[[Page 9400]]

energy marketing and brokering business continues to grow, it will find 
it necessary to make additional investments in its energy-related 
companies of up to $500 million. For this reason, under sections 9 and 
10 of the Act, NU is seeking authorization to invest up to an 
additional $500 million in new and existing rule 58 energy-related 
companies through the Authorization Period, including Guarantees. NU 
and NUEI also request that, at the end of the proposed Authorization 
Period, any investments made in those companies, in excess of the rule 
58 limit, be permitted to continue when any unused portion must 
expire.\4\
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    \2\ Select, a Connecticut corporation, began active operation 
under rule 58 in 1998. Applicants state that, since that time, 
Select has engaged in brokering and marketing of energy commodities, 
including electricity and natural gas, and sale of energy-related 
products and services as permitted under rule 58(b)(1)(iv) and (v). 
It engages in a wide variety of wholesale and retail transactions 
and is licensed in approximately 11 states to do energy brokering 
and marketing. Select has contracts with major utilities to provide 
standard offer service for such utilities' customers. In connection 
with electric industry restructuring and the introduction of 
competition, Select has become a major part of NU's business as its 
revenues have grown from approximately $29 million in 1998 to 
approximately $2.5 billion in 2003. Select has become a major 
participant in energy marketing and brokering in the northeast. Late 
in 2001, Select acquired the securities of Niagara Mohawk Energy 
Marketing, Inc., another energy marketing and brokering company in 
upstate New York, pursuant to rule 58, and renamed it Select Energy 
New York, Inc. (``SENY'').
    \3\ Applicants state that NU's competitive businesses (including 
rule 58 energy-related businesses) have grown significantly since 
the formation of Select in 1998 (with revenues exceeding $2.5 
billion in 2003) and, as of September 30, 2003, NU's investment in 
rule 58 companies aggregated to approximately $943 million (against 
a rule 58 limitation for NU of approximately $1.01 billion). A large 
portion of the investment is in the form of NU Guarantees ($258 
million). As of September 30, 2003, NU's investment in Select and 
SENY, including Guarantees, computed for purposes of rule 58, 
aggregate to approximately $846 million of NU's aggregate investment 
in rule 58 companies of $943 million. Of that amount, Guarantees 
issued for NU's nonutility subsidiaries made up approximately $258 
million with guarantees for Select and SENY accounting for $184.5 
million.
    \4\ Applicants state that no authorization is sought for off-
balance sheet financing nor are any of the Applicants currently 
involved in such financing. Furthermore, Select does not own or deal 
in off balance sheet assets or exercise control over any assets that 
are not fully disclosed.
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    Secondly, Applicants now seek an order authorizing the issuance of 
guarantees up to an aggregate amount of $750 million for their 
nonutility subsidiaries and affiliates, including any Nonutility 
Subsidiaries that may be formed or acquired during the Authorization 
Period. Through June 30, 2004, the Commission authorized NU and NUEI 
to, among other things, issue guarantees and similar forms of credits 
support or enhancements for NU and NUEI's Nonutility Subsidiaries in an 
aggregate amount not to exceed $500 million by its order dated 
September 30, 2003. Holding Co. Act Release No. 27730 (Sept. 30, 2003). 
The authorization sought, and described above, to invest in rule 58 
energy-related companies, under section 9 and 10 of the Act, and this 
authorization for NU and NUEI to provide credit support to its 
competitive affiliates up to the Guarantee Limit will enable NU to grow 
its competitive businesses as appropriate and necessary to continue to 
compete with other energy marketing companies.
    NU also seeks authority for Select to engage in a variety of 
activities related to its energy marketing and brokering business, 
including: (i) The brokering, marketing and trading of other energy 
commodities, including gas and electric transmission entitlements, 
weather hedging products, emission credits and financial derivative 
products (i.e., ``paper products'') in respect of any of these 
commodities (including, but not limited to, hedges, swaps, forwards, 
options and the like), anywhere in the world, but request the 
Commission to reserve jurisdiction on the provision of such services 
outside of the United States, Mexico and Canada, and (ii) the rendering 
of energy management services and demand-side management services 
anywhere in the world.
    NU also requests authorization to increase the aggregate amount it 
may invest in EWGs to up to $1.0 billion during the Authorization 
Period (an amount that would include NU's current investment of $449 
million in its only EWG). The Commission previously has authorized NU's 
investment in EWGs in an amount in excess of the 50% safe harbor limit 
provided by rule 53, by order dated March 7, 2000 (``March 7, 2000 
Order''). Holding Co. Act Release No. 27148 (Mar. 7, 2000). NU states 
that the ownership of additional generation, on satisfactory terms, is 
important to support NUEI's energy trading and marketing business. NU 
further states that the proposed EWG investment limit represents 
approximately 125% of NU's average ``consolidated retained earnings'' 
as defined in rule 53(a)(1), for the four quarterly periods ending 
September 30, 2003, and that the proposed investment limit of $1 
billion compares favorably with the EWG investment limits authorized by 
the Commission.\5\
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    \5\ The proposed aggregate EWG investment would be equal to 
approximately 125% of NU's average consolidated retained earnings 
for the four quarters ended September 30, 2003. The proposal would 
be an increase from the current authorization of approximately 83%. 
See March 7, 2000, Order.
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    Finally, NU seeks authority to engage in internal corporate 
reorganizations to better organize its Nonutility Subsidiaries and 
investments. NU currently engages, directly or indirectly through its 
Nonutility Subsidiaries, in certain nonutility businesses. No authority 
is sought to make new investments or to change the organization for the 
Utility Subsidiaries. ``Utility Subsidiary'' for the purposes of this 
section means the NU Utility Companies and Yankee Gas. NU requests 
approval to consolidate or otherwise reorganize all or any part of its 
direct and indirect ownership interests in Nonutility Subsidiaries, and 
the activities and functions related to these investments.\6\ The 
internal transactions would be undertaken to eliminate corporate 
complexities, to combine related business segments for staffing and 
management purposes, to eliminate administrative costs, to achieve tax 
savings, or for other ordinary and necessary business purposes. NU 
requests authority to engage in such transactions through the 
Authorization Period. The transactions proposed will not involve the 
sale, transfer or other disposition of any utility assets of any 
Utility Subsidiary to any other person, nor will they involve any 
change in the corporate ownership of, or involve any restructuring of, 
the Utility Subsidiaries.
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    \6\ Applicants state that, to effect any consolidations or other 
reorganizations, NU or NUEI may either contribute the equity 
securities of one Nonutility Subsidiary to another Nonutility 
Subsidiary or sell (or cause a Nonutility Subsidiary to sell) the 
equity securities or all or part of the assets of one Nonutility 
Subsidiary to another one. The transactions may also take the form 
of a Nonutility Subsidiary selling or transferring the equity 
securities of a subsidiary or all or part of such subsidiary's 
assets as a dividend to another Nonutility Subsidiary, and the 
acquisition, directly or indirectly, of the equity securities or 
assets of the subsidiary, either by purchase or by receipt of a 
dividend. The purchasing Nonutility Subsidiary in any transaction 
structured as an intrasystem sale of equity securities or assets may 
execute and deliver its promissory note evidencing all or a portion 
of the consideration given.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4321 Filed 2-26-04; 8:45 am]
BILLING CODE 8010-01-P