[Federal Register Volume 69, Number 111 (Wednesday, June 9, 2004)]
[Notices]
[Pages 32374-32385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12995]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27852]


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

June 2, 2004.
    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 June 25, 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 June 25, 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. (70-9755)

    Northeast Utilities (``NU''), a registered holding company; Western 
Massachusetts Electric Company (``WMECO''), a wholly owned, direct 
public-utility company subsidiary of NU, both located at 174 Brush Hill 
Ave., West Springfield, Massachusetts 01090-0010; Public Service 
Company of New Hampshire (``PSNH''), a wholly owned, direct public-
utility company subsidiary of NU; and North Atlantic Energy Corporation 
(``NAEC''), a wholly owned, direct nonutility subsidiary of NU, both 
located at Energy Park, 780 North Commercial Street, Manchester, NH 
03101; Yankee Energy System, Inc. (``YES''), a wholly owned, direct 
holding company subsidiary of NU that claims exemption under section 
3(a)(1) by rule 2; Northeast Utilities Service Company (``NUSCO''), a 
direct, wholly owned service company subsidiary of NU; The Connecticut 
Light and Power Company (``CL&P''), a wholly owned, direct public-
utility company subsidiary of NU; Northeast Nuclear Energy Company 
(``NNECO''), a wholly owned, direct nonutility company subsidiary of 
NU; Yankee Gas Services Company (``Yankee Gas'') a wholly owned, direct 
public-utility company subsidiary of YES; The Rocky River Realty 
Company (``RR''), a wholly owned, direct nonutility subsidiary of NU; 
The Quinnehtuk Company (``Quinnehtuk''), a wholly owned, direct 
nonutility subsidiary of NU, Properties, Inc. (``Properties''), a 
wholly owned, direct nonutility subsidiary of PSNH; Yankee Energy 
Financial Services Company (``Yankee Financial''), a wholly owned, 
direct nonutility subsidiary of YES; Yankee Energy Services Company 
(``YESCO''), a wholly owned, direct nonutility subsidiary of YES; 
NorConn Properties, Inc. (``NorConn''), a wholly owned, direct 
nonutility subsidiary of YES; NU Enterprises, Inc. (``NUEI''), a wholly 
owned, direct nonutility subsidiary of NU; Northeast Generation Company 
(``NGC''), a wholly owned, direct nonutility subsidiary of NUEI; 
Northeast Generation Services Company (``NGS'') a wholly owned, direct 
nonutility subsidiary of NUEI; E.S. Boulos Company (``Boulos''), a 
wholly

[[Page 32375]]

owned, direct nonutility subsidiary of NGS; Woods Electrical Company, 
Inc. (``Woods''), a wholly owned, direct nonutility subsidiary of NGS; 
Woods Network Services, Inc. (``Woods Network''), a wholly owned, 
direct nonutility subsidiary of NUEI; Select Energy, Inc. (``Select 
Energy''), a wholly owned, direct nonutility subsidiary of NUEI; Mode 1 
Communications, Inc. (``Mode 1''), a wholly owned, direct nonutility 
subsidiary of NUEI; and Select Energy New York, Inc. (``SENY''), a 
wholly owned, direct nonutility subsidiary of Select Energy, all 
located at 107 Selden Street, Berlin, Connecticut 06037; Holyoke Water 
Power Company (``HWP''), a public-utility subsidiary of NU, One Canal 
Street, Holyoke, Massachusetts 01040; and Select Energy Services, Inc. 
(``SESI''), a wholly owned, direct nonutility subsidiary of NUEI, 24 
Prime Parkway, Natick, MA 01760, (collectively, ``Applicants'') have 
filed, under sections 6(a), 7, 9(a), 10 and 12 of the Act, and rules 
43, 45 and 54 under the Act, a post-effective amendment to a previously 
filed application.

I. Background

A. The NU System

    NU is the parent company of four electric utility companies and one 
gas utility company. For the twelve months ended December 31, 2003, 
NU's consolidated gross revenues and net income were approximately $6.1 
billion and $116.4 million, respectively. As of December 31, 2003, NU's 
consolidated capitalization consisted of: 33.5% common equity, 1.7% 
preferred stock, 25.6% of rate reduction bonds, and 39.2% long-term and 
short-term debt.\1\ Applicants state that the current corporate credit 
rating for NU is BBB+ by Standard and Poor's and Baa1 by Moody's, and 
that the ratings issued by Moody's and Standard and Poor's for NU's 
Senior Unsecured Debt were Baa1 and BBB, respectively.
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    \1\ Excluding the rate reduction bonds, NU's consolidated 
capitalization consisted of: 45% common equity, 2.3% preferred stock 
and 52.7% debt.
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    CL&P, an electric utility company, provides retail electric service 
to approximately 1.2 million customers in Connecticut. As of December 
31, 2003, CL&P's consolidated capitalization consisted of: 24.4% common 
equity, 4.1% preferred stock, 39.3% of rate reduction bonds, and 32.2% 
of long-term and short-term debt.\2\ Applicants state that the 
corporate credit rating for CL&P is BBB+ by Standard and Poor's and A3 
by Moody's, and that the credit rating for its senior secured debt is 
A-by Standard and Poor's and Fitch and A2 by Moody's. Its senior 
unsecured debt has a rating of BBB from Standard and Poor's, A3 from 
Moody's and BBB+ from Fitch. CL&P's preferred stock has a rating of 
BBB--by Standard and Poor's and Baa2 by Fitch.
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    \2\ Excluding the rate reduction bonds, CL&P's consolidated 
capitalization consisted of: 40.2% common equity, 6.7% preferred 
stock and 53.1% debt.
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    WMECO, an electric utility company, provides retail electric 
service to approximately 206,000 customers in Massachusetts. As of 
December 31, 2003, WMECO's consolidated capitalization consisted of: 
31.4% common equity, 27.5% of rate reduction bonds, and 41.1% of long-
term and short-term debt.\3\ Applicants state that the corporate credit 
rating for WMECO is BBB+ by Standard and Poor's and A3 by Moody's, and 
that the credit rating for its senior unsecured debt is BBB+ by 
Standard and Poor's and Fitch and A3 by Moody's. WMECO has no preferred 
stock outstanding.
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    \3\ Excluding rate reduction bonds, WMECO's consolidated 
capitalization consisted of: 43.4% common equity and 56.6% debt.
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    PSNH, an electric utility company, provides retail electric service 
to approximately 456,000 customers in New Hampshire. As of December 31, 
2003, PSNH's consolidated capitalization consisted of: 28.8% common 
equity, 35.8% of rate reduction bonds, and 35.4% of long-term and 
short-term debt.\4\ Applicants state that the corporate credit rating 
for PSNH is BBB+ by Standard and Poor's and Baa1 by Moody's, and that 
the credit rating for its senior secured debt is BBB+ by Standard and 
Poor's and Fitch and A3 by Moody's. PSNH has no preferred stock 
outstanding.
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    \4\ Excluding rate reduction bonds, PSNH's consolidated 
capitalization consisted of 45% common equity and 55% debt.
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    Yankee Gas, a gas utility company, is wholly owned by YES.\5\ 
Yankee Gas provides natural gas distribution service to approximately 
192,000 customers in Connecticut. As of December 31, 2003, Yankee Gas' 
consolidated capitalization consisted of: 67.5% common equity and 32.5% 
of long-term and short-term debt. Applicants state that the corporate 
credit rating for Yankee Gas is BBB+ by Standard and Poor's and Baa1 by 
Moody's. Yankee Gas has no preferred stock outstanding.
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    \5\ As of December 31, 2003, YES' consolidated capitalization 
consisted of: 67.8% common equity and 32.2% long-term and short-term 
debt. Applicants state that YES is not currently rated by Standard 
and Poor's, Moody's or Fitch.
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    HWP, an electric utility company, currently sells all of the output 
of its electricity generating station to its affiliate, Select Energy. 
As of December 31, 2003, HWP's consolidated capitalization consisted 
of: 33.1% common equity and 66.9% long-term and short-term debt. HWP is 
not rated by any rating agency.
    NU also owns, directly or indirectly, Properties, RR, Quinnehtuk 
and NorConn, which are real estate companies, NUSCO, the system's 
principal service company, NUEI, the system's nonutility holding 
company, NGC, an exempt wholesale generator, SESI, an energy services 
company acquired pursuant to Commission Order, Mode 1 and Woods 
Network, each exempt telecommunications companies, Yankee Financial, a 
financial services company and Select Energy, SENY, NGS, Woods, Boulos 
and YESCO, each companies formed or acquired pursuant to rule 58. HWP 
sells the output of its electricity generating station directly to its 
affiliate, Select Energy.

B. Current Authority

    By order dated December 28, 2000 (HCAR No. 27328) (``2000 Order''), 
the Commission authorized Applicants, through June 30, 2003 (``Prior 
Authorization Period'') and subject to certain conditions, to: (1) 
Continue participating in the NU system money pool (``NU Money Pool''); 
and (2) to the extent not exempt under rules 45(b) and 52, enter into 
short-term debt transactions through the NU Money Pool, borrowing from 
and extending credit to (and acquiring promissory notes from) each 
other. Additionally, by the 2000 Order, the Commission authorized NU 
and its utility subsidiaries to issue notes or commercial paper to 
unaffiliated third parties to evidence short-term debt up to specified 
limits (identified below) through the Prior Authorization Period.
    By order dated June 30, 2003 (HCAR No. 27693) (``2003 Order''), the 
Commission: (1) Extended the Prior Authorization Period for the 
issuance of short-term debt by NU, CL&P, WMECO, PSNH, YES, and Yankee 
Gas through June 30, 2006; (2) authorized companies to enter into 
interest rate hedging transactions related to short-term debt 
transactions through June 30, 2006; and (3) extended the authorization 
period for participation by the Applicants (other than Properties) in 
the NU Money Pool through June 30, 2004, pending the submission by the 
Applicants of a feasibility study concerning the creation of a separate 
money pool for nonutility subsidiaries of NU.

II. Requests for Authority

    Applicants request authority for NU, YES, CL&P, WMECO, and Yankee 
Gas to

[[Page 32376]]

issue and sell short-term debt securities to unaffiliated third parties 
through June 30, 2007 (``Authorization Period'') up to the following 
aggregate outstanding principal amounts: NU, $450 million; YES, $50 
million, CL&P, $450 million; WMECO, $200 million; and Yankee Gas, $150 
million (each limit, ``Aggregate Short-Term Debt Limit'').
    Applicants also request authority for CL&P, WMECO, HWP and Yankee 
Gas to issue and sell short-term debt securities to affiliates through 
the NU Money Pool through the Authorization Period in the following 
aggregate outstanding principal amounts: CL&P, $450 million; WMECO, 
$200 million; HWP, $10 million; and Yankee Gas, $150 million. These 
Money Pool borrowings would be subject to the applicable Aggregate 
Short-Term Debt Limit, if any.
    Authority is requested for Applicants other than Properties to 
continue participating in the NU Money Pool, and for Properties to 
participate in the NU Money Pool both as borrower and lender. They also 
request that the Commission release jurisdiction over the removal of 
limits on the NU Money Pool borrowings by Properties, RR, Quinnehtuk, 
Yankee Financial, YESCO, NorConn, NUEI, NGS, Boulos, Woods, Select 
Energy, SENY and SESI (collectively, ``Nonutility Subsidiaries'').
    Further, Applicants request authority for NU and certain of its 
public-utility company subsidiaries--CL&P, WMECO, and Yankee Gas 
(collectively, ``Utility Borrowers'')--to enter into Interest Rate 
Hedges (described below) through the Authorization Period.

A. General Terms and Conditions

    The proposed securities would be subject to the following financing 
parameters. Apart from the securities issued for the purpose of funding 
money pool operations, no securities would be issued in reliance upon 
the requested order, during the Authorization Period, 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 NU and YES that 
are rated, are rated investment grade. For purposes of this condition, 
a security would be considered investment grade if it is so rated 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. NU and the Utility 
Borrowers request that the Commission reserve jurisdiction over the 
issuance by NU and the Utility Borrowers of any securities that do not 
meet these conditions.
    At all times during the Authorization Period, YES, NU and their 
utility subsidiaries (with the exception of CL&P and PSHH) \6\ would 
maintain common equity of at least 30% of its consolidated 
capitalization (common equity, preferred stock, long-term debt and 
short-term debt) as reflected in the most recent form 10-K or form 10-Q 
filed with the Commission, adjusted to reflect changes in 
capitalization since the balance sheet date.
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    \6\ By Commission order dated March 7, 2000 (HCAR No. 35-27147), 
the Commission allowed CL&P and PSNH to maintain their common 
equities below 30% of their consolidated capitalizations taking into 
account their respective rate reduction bonds through December 31, 
2004. Applicants state that a separate application/declaration will 
be filed seeking extension of this authority.
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    The proceeds from the short-term debt of NU, YES and the Utility 
Borrowers would be used for: (1) General corporate purposes, including 
investments by and capital expenditures of NU and its subsidiaries, 
including, without limitation, the funding of future investments in 
exempt wholesale generators (``EWG''), foreign utility companies 
(``FUCO'') (each to the extent permitted under the Act or Commission 
order), rule 58 subsidiaries (to the extent permitted under the Act or 
Commission order), and exempt telecommunications companies (``ETCs''); 
(2) the repayment, redemption, refunding or purchase by NU or any 
subsidiary of any of its own securities from non-affiliates pursuant to 
rule 42; and (3) financing working capital requirements of NU and its 
subsidiaries. No financing proceeds would be used to acquire the 
securities of, or other interests in, any company unless the 
acquisition has been approved by the Commission in this or a separate 
proceeding or is in accordance with an available exemption under the 
Act or rules under the Act.

B. External Short-Term Debt of NU and YES

    Applicants request authority for NU and YES to issue and sell 
during the Authorization Period unsecured short-term debt in an 
aggregate principal amount at any time outstanding not to exceed $450 
million and $50 million. This short-term debt would take a variety of 
forms, including commercial paper issuances and/or unsecured notes with 
banks or other institutional lenders under credit facilities on terms 
that are generally available to borrowers with comparable credit 
ratings. All short-term debt securities issued and sold by NU and YES 
would have maturities of less than one year from the date of issuance.
    Commercial paper issued by NU and YES may be issued manually or 
through The Depository Trust Company in the form of book entry notes in 
denominations of not less than $50,000 of varying maturities. 
Applicants state that, typically, the commercial paper would be sold to 
dealers at the discount rate 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 the commercial paper would re-offer it at a discount to 
corporate and institutional investors. No commercial paper would be 
issued by NU or YES unless the issuer believes that the effective 
interest cost would be equal to or less than the effective interest 
rate at which it could issue short-term notes in an amount at least 
equal to the principal amount of commercial paper. The commercial paper 
would be publicly issued and sold without registration under the 
Securities Exchange Act of 1933 in reliance upon one or more applicable 
exemptions from registration.
    Applicants request authority through the Authorization Period for 
NU and YES to continue or establish and maintain back-up credit lines 
with banks or other institutional lenders to support their commercial 
paper program(s), and other credit arrangements and/ or borrowing 
facilities generally available to borrowers with comparable credit 
ratings, providing for revolving credit or other loans. All amounts 
drawn and outstanding under these agreements and facilities would have 
maturities less than one year from the date of draw and would be 
counted against the applicable Aggregate Short-Term Debt Limit.
    The effective cost of money on all external short-term debt of NU 
and YES would not exceed competitive market rates available at the time 
of issuance for securities having the same or reasonably similar terms 
and conditions issued by companies of comparable credit quality, 
provided that in no event would the effective cost of capital exceed 
500 basis points over the comparable term London Interbank Offered Rate 
(``LIBOR''). Issuance expenses in connection with any non-competitive 
offering of short-term debt would not exceed 5% of the principal 
amount. Specific terms of any short-term debt would be determined by NU 
at the time of issuance. A copy of any new note or loan agreement 
executed pursuant to this Authorization would be filed under cover of 
the next quarterly report under rule 24. Subject to the applicable

[[Page 32377]]

Aggregate Short-Term Debt Limit, NU and YES intend to renew and extend 
outstanding short-term debt as it matures, to refund short-term debt 
with other similar short-term debt, to repay short-term debt or to 
increase the amount of their short-term debt from time to time.

C. External Short-Term Debt of Utility Borrowers

    Applicants request authority for the Utility Borrowers to issue and 
sell short-term debt during the Authorization Period up to the 
following aggregate outstanding principal amounts: CL&P, $450 million; 
WMECO, $200 million; and Yankee Gas, $150 million. The short-term debt 
for the Utility Borrowers would take a variety of forms, including 
commercial paper issuances and/or secured or unsecured notes with banks 
or other institutional lenders under credit facilities on terms that 
are generally available to borrowers with comparable credit ratings. 
All short-term debt would have maturities of less than one year from 
the date of issuance. Applicants request that the Commission reserve 
jurisdiction over the issuance and sale of secured short-term debt 
securities by Yankee Gas, pending completion of the record.
    Commercial paper issued by a Utility Borrower hereunder may be 
issued manually or through The Depository Trust Company in the form of 
book entry notes in denominations of not less than $50,000 of varying 
maturities. Typically, this commercial paper would be sold to dealers 
at the discount rate prevailing at the date of issuance for commercial 
paper of comparable quality and maturities sold to commercial paper 
dealers generally. Applicants expect that the dealers acquiring the 
commercial paper would re-offer it at a discount to corporate and 
institutional investors. No commercial paper would be issued unless the 
Utility Borrower issuing commercial paper believes that the effective 
interest cost would be equal to or less than the effective interest 
rate at which the company could issue short-term notes in an amount at 
least equal to the principal amount of commercial paper. The commercial 
paper would be publicly issued and sold without registration under the 
Securities Exchange Act of 1933 in reliance upon one or more applicable 
exemptions from registration.
    The Utility Borrowers seek an extension through the Authorization 
Period of their authority to continue, or to establish and maintain 
back-up credit lines with banks or other institutional lenders to 
support their commercial paper program(s), and other credit 
arrangements and/or borrowing facilities generally available to 
borrowers with comparable credit ratings, providing for revolving 
credit or other loans. All amounts drawn and outstanding under these 
agreements and facilities would have maturities less than one year from 
the date of draw and would be counted against the applicable Aggregate 
Short-Term Debt Limit.
    The effective cost of money on all external short-term debt of the 
Utility Borrowers would be subject to the same financing parameters as 
NU (described above). The specific terms of a short-term debt issuance 
and sale would be determined by the respective Utility Borrower at the 
time of issuance. A copy of any new note or loan agreement executed 
pursuant to this authorization would be filed under cover of the next 
quarterly report under rule 24. Subject to the applicable short-term 
debt limit, the Utility Borrowers intend to renew and extend 
outstanding short-term debt as it matures, to refund short-term debt 
with other similar short-term debt, to repay short-term debt or to 
increase the amount of their short-term debt from time to time.

D. Money Pool

    Applicants request authority to continue operating the NU Money 
Pool through June 30, 2007, subject to the terms and conditions 
previously authorized. Applicants request authority for: (1) All 
Applicants, with the exception of NU, YES, NGC, Mode 1, Woods Network 
and NUSCO, to participate in the NU Money Pool as both lenders and 
borrowers; and (2) NU, YES, NGC, Mode 1 and Woods Network to 
participate in the NU Money Pool as lenders only. They request that the 
Commission reserve jurisdiction over participation by additional 
companies in the NU Money Pool. Applicants request that the Commission 
release jurisdiction over Applicants' request that there be no NU Money 
Pool borrowing limit imposed on the Nonutility Subsidiaries,\7\ and 
they request that no limits be placed on borrowings by NAEC and NNECO, 
which are now nonutility companies.
    The NU Money Pool would continue to be administered on behalf of 
Applicants by NUSCO on an ``at cost'' basis,\8\ under the direction of 
an officer of NUSCO. The NU Money Pool would consist principally of 
surplus funds received from the Applicants. In addition to surplus 
funds, funds borrowed by NU through the issuance of short-term notes or 
other debt, or by the selling of commercial paper (``External Funds'') 
may be a source of funds for making loans or advances to the other 
Applicants through the NU Money Pool.
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    \7\ By the 2003 Order, the Commission imposed the following 
borrowing limits: Quinnehtuk: $10 million; NUEI $100 million; NGS 
$25 million; Select $200 million; SENY $10 million; RR: $30 million; 
Yankee Financial: $10 million; NorConn: $10 million; YESCO: $10 
million; SESI $35 million; Boulos $10 million; Woods $10 million.
    \8\ NUSCO would neither lend nor borrow through the NU Money 
Pool.
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    Applicants do not propose any changes to the operation of the NU 
Money Pool as it was approved in the 2003 Order. Transactions under the 
NU Money Pool would be designed to match, on a daily basis, the surplus 
funds of the pool participants with the short-term borrowing 
requirements of the pool participants (other than the pool participants 
who are lenders only), thereby minimizing the need for short-term debt 
to be incurred by the pool participants from external sources. The pool 
participants in the NU Money Pool that are regulated utility 
subsidiaries of NU would have priority as borrowers from the NU Money 
Pool over those participants that are nonutility companies.
    The funds available through the NU Money Pool would be loaned on a 
short-term basis to those pool participants that have short-term debt 
requirements. If no short-term requirements match the amount of funds 
that are available for the NU Money Pool for the period funds are 
available, NUSCO would invest the funds, directly or indirectly, in: 
(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 obligations are rated not less than 
``A'' (or ``A-1'' or ``P-1'' or their equivalent for short term debt) 
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) other investments as are 
permitted by section 9(c) of the Act and rule 40 under the Act and, 
with respect to contributions of WMECO, and other investments approved 
by the Massachusetts Department of Telecommunications and Energy 
(``MDTE'') under Massachusetts law. NUSCO would allocate the interest 
earned on investments among the pool participants providing funds on a 
pro rata basis according to the amount of the funds provided.
    All borrowings from and contributions to the NU Money Pool

[[Page 32378]]

would be documented and evidenced on the books of those participants. 
Any pool participant contributing funds to the NU Money Pool may 
withdraw those funds at any time without notice to satisfy its daily 
need for funds. All short-term debt through the NU Money Pool (other 
than from NU's External Funds) would be payable on demand, may be 
prepaid by any borrowing pool participant at any time without penalty 
and would bear interest for both the borrower and lender, payable 
monthly, at a rate equal to the daily Federal Funds Effective Rate 
(``Fed Funds Rate'') as quoted by the Federal Reserve Bank of New York. 
Short-term debt of pool participants derived from the proceeds of 
External Funds of NU would bear interest at the same rate paid by NU on 
External Funds, and no short-term debt may be prepaid by the pool 
participant unless NU is made whole for any additional costs that it 
may incur because of prepayment. NU would be fully reimbursed for all 
costs that it incurs in relation to loans made through the NU Money 
Pool to the pool participants.

E. Interest Rate Hedges

    NU, YES and the Utility Borrowers request authority, through the 
Authorization Period, to enter into interest rate hedging transactions 
with respect to its outstanding short-term indebtedness (``Interest 
Rate Hedges''). Interest Rate Hedges, designed to reduce or manage the 
effective interest rate cost, would be entered into only with 
counterparties (``Approved Counterparties'') whose senior debt ratings, 
or the senior debt ratings of any credit support providers who have 
guaranteed the obligations of the Approved Counterparties, as published 
by S&P, are equal to or greater than BBB, or an equivalent rating from 
Moody's or Fitch, or through on-exchange transactions.
    Interest Rate Hedges would involve the use of financial instruments 
commonly used in the capital markets, as options, interest rate swaps, 
locks, caps, collars, floors, exchange-traded futures and options, and 
other similar appropriate instruments. The transactions would be for 
fixed periods and stated notional amounts as are generally accepted as 
prudent in the capital markets. In no case would the notional principal 
amount of any Interest Rate Hedge exceed that of the underlying debt 
instrument. Neither NU nor the Utility Borrowers would engage in 
speculative transactions within the meaning of the term in the 
Statement of Financial Accounting Standard 133, as amended (``FAS 
133''). Transaction fees, commissions and other amounts payable to 
brokers in connection with an Interest Rate Hedge would not exceed 
those generally obtainable in competitive markets for parties of 
comparable credit quality.
    Each Interest Rate Hedge would qualify for hedge accounting 
treatment on a continuing basis under generally acceptable accounting 
practices (``GAAP''). NU would comply with the then existing financial 
disclosure requirements of the Financial Accounting Standards Board 
associated with hedging transactions.\9\
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    \9\ Currently, FAS 133 is the applicable standard.
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Entergy Corporation (70-10202)

    Entergy Corporation (``Entergy''), a registered holding company and 
Delaware corporation, 639 Loyola Avenue, New Orleans, Louisiana 70113, 
has filed an application-declaration (``Application-Declaration'') 
under sections 6(a), 7, 9(a), 10 and 12(c) of the Act, and rules 46, 
53, and 54 under the Act.

I. Background

    Entergy is a registered holding company under the Act. Its public 
utility subsidiaries include Entergy Arkansas, Inc., Entergy Gulf 
States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., and 
Entergy New Orleans, Inc. (collectively, ``Entergy Operating 
Companies''). The Entergy Operating Companies provide public utility 
service to approximately 2.6 million electric customers in portions of 
Arkansas, Louisiana, Mississippi, and Texas and 238,000 retail gas 
customers in Louisiana. Entergy also owns all of the voting stock of 
System Energy Resources, Inc. (``SERI'') which owns and leases an 
aggregate 90% undivided interest in Grand Gulf Steam Electric 
Generating Station (nuclear) and sells all of the capacity and energy 
from that interest at wholesale to its only customers, Entergy 
Arkansas, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., and 
Entergy New Orleans, Inc. Entergy Power Inc. (``EPI''), a public 
utility company for purposes of the Act, but not for state regulatory 
purposes, is principally engaged in the business of marketing and 
selling bulk power at wholesale from its own generating resources.
    Entergy also engages through other subsidiaries in various energy-
related and nonutility businesses. Other subsidiaries include ``exempt 
wholesale generators'' (``EWGs''), ``foreign utility companies'' 
(``FUCOs''), ``exempt telecommunication companies'' (``ETCs'') 
``energy-related companies'' within the meaning of rule 58 (``Rule 58 
Companies''), and other nonregulated subsidiaries that Entergy is 
authorized by order of the Commission to acquire or own under the Act, 
(including certain subsidiary companies known as ``O&M Subs'' that 
provide operations and maintenance services for power projects to 
associate and non-associate power project, certain subsidiary companies 
known as ``New Subsidiaries'' that engage in service and project 
development activities and/or acquire or finance the acquisition of the 
securities of other subsidiary non-utility companies).
    By order dated April 3, 2001 (HCAR No. 27371) (``April 2001 
Order'') and supplemented by order dated November 25, 2002 (HCAR No. 
27608) (``November 2002 Order''), Entergy was authorized through June 
30, 2004 to: (1) Issue and sell common stock (``Common Stock'') (in 
addition to any separate authority relating to benefit and dividend 
reinvestment plans) and, issue directly or indirectly through one or 
more special purpose finance subsidiaries, unsecured long-term debt and 
preferred or equity-linked securities in an aggregate amount not 
exceeding $2 billion; (2) issue and sell short-term debt in the form of 
notes to banks or commercial paper that in the aggregate, including 
then existing authority to issue short-term notes, would not exceed an 
outstanding principal amount of $2.5 billion; (3) enter into hedging 
transactions regarding its own debt and that of its special purpose 
finance subsidiaries or the Nonutility Companies; (4) form one or more 
special purpose finance subsidiaries; and (5) guarantee the securities 
issued by the special purpose finance subsidiaries.

II. Current Requests

    Entergy requests approval for a program of external financing and 
related proposals through June 30, 2007 (Authorization Period'').

A. Financing Parameters

    1. Common Equity. Entergy represents that at all times during the 
Authorization Period, Entergy and each of the public utility subsidiary 
companies will maintain common equity of at least 30% of total 
capitalization (based upon the financial statements filed with the most 
recent quarterly report on Form 10-Q or annual report on Form 10-K).
    2. Investment Grade. Entergy represents that no guarantees or other 
securities will be issued in reliance upon the authorization to be 
granted by the Commission in this Application-Declaration, unless: (a) 
The security to

[[Page 32379]]

be issued, if rated, is rated investment grade; and (b) all outstanding 
securities of Entergy that are rated are rated investment grade 
(together, the ``Investment Grade Ratings Criteria''). For purposes of 
this provision, a security will be deemed to be rated ``investment 
grade'' if it is rated investment grade by Moody's Investors Service, 
Standard & Poor's, Fitch Ratings or any one other nationally recognized 
statistical rating organization (``NRSRO''), 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. Entergy further requests that the 
Commission reserve jurisdiction over the issuance of any guarantee or 
other security at any time that one or more of the Investment Grade 
Ratings Criteria are not satisfied.
    3. Effective Cost of Money. The interest rate on long-term debt 
will not exceed at the time of issuance the greater of (a) 500 basis 
points over U.S. Treasury securities having a remaining term comparable 
to the term of the series, if issued at a fixed rate, or 500 basis 
points over the London Interbank Offered Rate (``LIBOR'') for the 
relevant interest rate period, if issued at a floating rate, and (b) a 
gross spread over U.S. Treasury securities that is consistent with 
similar securities of comparable credit quality and maturities issued 
by other companies. The dividend rate on any series of equity-linked 
securities or preferred securities will not exceed at the time of 
issuance the greater of (a) 500 basis points over the yield to maturity 
of a U.S. Treasury security having a remaining term comparable to the 
term of the series, if issued at a fixed rate, or 500 basis points 
LIBOR for the relevant interest rate period, if issued at a floating 
rate, and (b) a rate that is consistent with similar securities of 
comparable credit quality and maturities issued by other companies. The 
effective cost of money on short-term debt authorized in this 
proceeding will not exceed the greater of (a) 500 basis points over 
LIBOR for the relevant interest rate period, and (b) rates that are 
consistent with similar loans of comparable maturities to companies of 
comparable credit quality.
    4. Issuance Expenses. The fees, commissions and expenses, including 
underwriting fees, arrangement fees and up-front fees, incurred or to 
be incurred in connection with the transactions proposed will not 
exceed 5% of the proceeds of the transactions in the case of Common 
Stock, Equity-linked Securities, Preferred Securities and Long-term 
Debt and will not exceed 5% of the commitments of the lenders in the 
case of Short-term Debt.
    5. Use of Proceeds. Entergy proposes to use the proceeds from the 
above financings for general corporate purposes, including: (a) 
Financing, in part, investments by and capital expenditures of Entergy 
and its subsidiaries; (b) the repayment, redemption, refunding or 
purchase by Entergy of any of its securities pursuant to rule 42; and 
(c) financing working capital requirements of Entergy and its 
subsidiaries. Entergy represents that no financing proceeds will be 
used to acquire the equity securities of any company unless the 
acquisition has been approved by the Commission in this proceeding or 
in a separate proceeding or is in accordance with an available 
exemption under the Act or rules, including sections 32 and 33 and rule 
58. A portion of the proceeds of the financings authorized under this 
Application-Declaration may be used to make investments in: (a) certain 
energy-related non-utility assets, which are authorized pursuant to 
Commission Order, dated January 5, 2001 (HCAR No. 27334) (``Energy 
Asset Order'') and (b) certain Energy Assets and/or Energy Asset 
Companies for which Entergy has filed a post-effective amendment to the 
Energy Asset Order. Further, Entergy represents that proceeds of 
financing to fund investments in rule 58 companies will be subject to 
the applicable limitations of that rule. Entergy states that, unless 
otherwise authorized by the Commission, the aggregate amount of 
proceeds of financing approved by the Commission in this proceeding 
which are used to fund investments in EWGs and FUCOs will not, when 
added to Entergy's ``aggregate investment'' (as defined in rule 53) in 
all the entities at any point in time, exceed 100% of Entergy's 
``consolidated retained earnings'' (also as defined in rule 53). 
Lastly, Entergy represents that it will not seek to recover through 
higher rates of any of the Entergy Operating Companies losses 
attributable to any operations of its nonutility companies. 
Specifically, related to Long-term Debt, Equity-linked Securities and 
Preferred Securities, the proceeds from these financings would enable 
Entergy to replace Short-term Debt with more permanent capital and 
provide an important source of future financing for the operations of, 
and for investments in, non-utility businesses that are exempt under 
the Act.

B. Financing Requests

    Entergy requests authority to issue and sell from time to time: (1) 
Common stock (``Common Stock'') (in addition to any separate authority 
relating to benefit and dividend reinvestment plans);\10\ (2) 
indirectly through one or more finance subsidiaries (``Finance 
Subsidiaries''), unsecured long-term indebtedness (``Long-term Debt'') 
and equity-linked securities (``Equity-linked Securities'') having 
maturities of up to 50 years, including units consisting of a 
combination of incorporated options, warrants and/or forward equity 
purchase contracts with debt, preferred stock or preferred securities; 
(3) directly or indirectly through one or more Finance Subsidiaries, 
preferred securities, including specifically trust preferred securities 
or monthly income preferred securities (``Preferred Securities'') 
having maturities of up to 50 years; and (4) unsecured short-term 
indebtedness having maturities of 364 days or less (``Short-term 
Debt'') in an aggregate principal amount at any time outstanding 
(including the aggregate outstanding principal amount of any short-term 
notes and commercial paper issued under the November 2002 Order) not to 
exceed $2.5 billion (``Short-term Debt Limit''). The aggregate amount 
of all other securities listed in 1 through 3 above not to exceed $2 
billion (``All Other Securities Limit''). In addition, Entergy requests 
authority to enter into various hedging transactions and for Finance 
Subsidiaries to pay dividends to Entergy.
---------------------------------------------------------------------------

    \10\ By order of the Commission dated March 25, 1997 (HCAR No. 
26693), as supplemented by order of the Commission dated December 
15, 2000 (HCAR No. 27300), Entergy has authority to issue and sell 
up to 30 million shares of its common stock through June 30, 2006 
under its Dividend Reinvestment and Stock Purchase Plan. Proceeds 
from the issuance and sale of shares under this plan are to be used 
for general corporate purposes, and subject to any requisite 
Commission approval, such purposes may include, but are not limited 
to, investments in subsidiaries, repayment of debt and payment of 
dividends and interest.
---------------------------------------------------------------------------

    1. Common Stock. Entergy requests authority to issue and sell 
Common Stock, or options, warrants or other stock purchase rights 
exercisable for Common Stock in accordance with the Financing 
Parameters set forth above. Public distributions may be pursuant to 
private negotiation with underwriters, dealers or agents, as discussed 
below, 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 Common Stock sales will be 
at rates or prices and under conditions negotiated or based upon, or 
otherwise determined by, competitive capital markets. Entergy seeks 
authority to issue Common Stock or options, warrants or other stock 
purchase rights exercisable for Common

[[Page 32380]]

Stock in public or privately-negotiated transactions as consideration 
for the equity securities or assets of other companies, provided that 
the acquisition of any equity securities or assets has been authorized 
in a separate proceeding or is exempt under the Act or the rules, such 
as rule 58.
    2. Long-term Debt, Equity-linked and Preferred Securities. In 
connection with the issuance of Long-term Debt, Equity-linked 
Securities or Preferred Securities by the Finance Subsidiaries, Entergy 
requests authority to issue unsecured subordinated debentures, 
unsecured promissory notes or other unsecured debt instruments 
(``Notes'') to the extent of the related issuance of the Long-term 
Debt, Equity-linked Securities or Preferred Securities in an aggregate 
amount not to exceed during the Authorization Period the All Other 
Securities Limit and in accordance with the described Financing 
Parameters. Entergy also seeks to have the flexibility to issue Long-
term Debt and/or Equity-linked Securities, indirectly through one or 
more special-purpose Finance Subsidiaries, and to issue Preferred 
Securities, indirectly through the Financing Subsidiaries.
    The Long-term Debt proposed to be issued by Entergy: (a) May be 
convertible into any other securities of Entergy; (b) may be subject to 
optional and/or mandatory redemption, in whole or in part, at par or at 
premiums above the principal amount; (c) may be entitled to mandatory 
or optional sinking fund provisions; (d) may provide for reset of the 
coupon pursuant to a remarketing arrangement; and (e) may be called 
from existing investors by a third party. The maturity dates, interest 
rates, redemption and sinking fund provisions and conversion features, 
if any, with respect to Long-term Debt of a particular series, as well 
as any associated placement, underwriting or selling agent fees, 
commissions and discounts, if any, will be established by negotiation 
or competitive bidding.
    The Equity-linked Securities and Preferred Securities may be issued 
in one or more series with rights, preferences, and priorities as may 
be designated in the instrument creating each series, as determined by 
Entergy's board of directors. Dividends or distributions on Equity-
linked Securities and Preferred Securities will be made periodically 
and to the extent funds are legally available for the purpose, but may 
be made subject to terms which allow the issuer to defer dividend 
payments for specified periods. Equity-linked Securities will be 
exercisable or exchangeable for or convertible, either mandatorily or 
at the option of the holder, into Entergy Common Stock or indebtedness 
or allow the holder to surrender to the issuer or apply the value of a 
security issued by Entergy as approved by the Commission to the 
holder's obligation to make a payment on another security of Entergy 
issued as permitted by the Commission. For example, Entergy may issue 
Common Stock or Common Stock warrants linked with debt securities. The 
holder will be obligated to pay to Entergy an additional amount of 
consideration at a specified date for the Common Stock but is 
authorized to surrender the linked debt security to or for the benefit 
of Entergy in lieu of the cash payment. Any convertible or Equity-
linked Securities will be convertible into or linked to Common Stock, 
Preferred Securities or unsecured debt that Entergy is otherwise 
authorized to issue by Commission order directly, or indirectly, 
through Financing Subsidiaries on behalf of Entergy. Any Preferred 
Securities may be convertible or exchangeable into Common Stock or 
unsecured debt that Entergy is otherwise authorized to issue by 
Commission order and may be issued in the form of shares or units.
    3. Finance Subsidiaries. Entergy requests authority to: (a) Acquire 
the equity securities of one or more special-purpose subsidiaries, 
organized solely to facilitate financing; (b) to guarantee the 
securities issued by the Finance Subsidiaries, to the extent not exempt 
pursuant to rule 45(b) and rule 52; and (c) to have the Finance 
Subsidiaries pay dividends out of capital to Entergy.
    Entergy also requests continued authority to acquire, directly or 
indirectly, the equity securities of one or more Finance Subsidiaries, 
which may be organized as corporations, trusts, partnerships or other 
entities, created specifically for the purpose of facilitating the 
financing of the authorized and exempt activities (including exempt and 
authorized acquisitions) of Entergy through the issuance of Long-term 
Debt, Equity-linked Securities or Preferred Securities, and any other 
type of security authorized by rule or order, to third parties. Entergy 
requests authority for Finance Subsidiaries to dividend (including 
dividends out of capital), loan or otherwise transfer the proceeds of 
the financings to Entergy. In the event that the Finance Subsidiaries 
loan the proceeds of the financings to Entergy, Entergy will issue 
Notes to evidence the borrowings. If required, Entergy proposes to 
guarantee, provide support for or enter into expense agreements to the 
extent of the obligations of any Finance Subsidiary that it organizes. 
Entergy states that the amount of any Long-term Debt, Equity-linked 
Securities or Preferred Securities issued by any Finance Subsidiary 
shall be counted against the All Other Securities Limit to the extent 
that Entergy guarantees the securities. Entergy further represents that 
the Finance Subsidiaries authorized under this Application-Declaration 
will not be merged or consolidated with any previously authorized 
finance subsidiary created by Entergy Louisiana, Inc., Entergy 
Mississippi, Inc., or Entergy Gulf States, Inc. under Commission orders 
dated December 29, 2003 (HCAR No. 27783) (as supplemented by order 
dated January 8, 2004 (HCAR No. 27783A), December 29, 2003 (HCAR No. 
27787) and December 29, 2003 (HCAR No. 27786).
    4. Short-term Debt. Entergy proposes to issue and sell unsecured 
Short term Debt in an aggregate principal amount at any time 
outstanding not to exceed $2.5 billion in any combination of notes to 
banks and commercial paper (including the aggregate principal amount of 
any notes and/or commercial paper issued and outstanding under the 
November 2002 Order).
    Entergy proposes to sell commercial paper, from time to time, in 
established domestic or European commercial paper markets. 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. 
Entergy expects that the dealers acquiring commercial paper from 
Entergy will reoffer the paper at a discount to corporate, 
institutional and, with respect to European commercial paper, 
individual investors. It is anticipated that Entergy's commercial paper 
will be reoffered to investors as commercial banks, insurance 
companies, pension funds, investment trusts, foundations, colleges and 
universities, finance companies and nonfinancial corporations. In 
connection with the sale of the commercial paper, Entergy may obtain 
letters of credit from one or more banks in support of the commercial 
paper obligations.
    Entergy also proposes to increase its currently established bank 
lines and establish additional bank lines as necessary to have bank 
lines in an aggregate principal amount not to exceed the proposed 
aggregate Short-term Debt Limit. Loans under these lines (which 
terminate no later than five years from the establishment of the 
facility) will have maturities not more

[[Page 32381]]

than 364 days from the date of each borrowing. Entergy proposes to 
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.
    5. Hedging. Entergy requests authority to enter into hedging 
transactions (``Interest Rate Hedges'') with respect to indebtedness of 
Entergy, and the Finance Subsidiaries in order to manage and minimize 
interest rate costs. Entergy also requests authority to enter into 
hedging transactions (``Anticipatory Hedges'') with respect to 
anticipatory debt issuances of Entergy and the Finance Subsidiaries in 
order to lock-in current interest rates and/or manage interest rate 
risk exposure, with the Interest Rate Hedges and Anticipatory Hedges to 
be entered into with respect to debt issuances in aggregate principal 
amount not to exceed $2 billion.
    Entergy seeks to enter into Interest Rate Hedges with respect to 
indebtedness of Entergy and the Finance Subsidiaries, subject to 
certain limitations and restrictions, 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, 
Fitch Investor Service, or Duff and Phelps.
    Interest Rate Hedges will involve the use of financial instruments 
and derivatives commonly used in today's capital markets, such as 
interest rate futures, 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 or agency (e.g. FNMA) obligations or LIBOR-
based swap instruments. The transactions would be for fixed periods and 
stated notional amounts. In no case will the notional principal amount 
of any Interest Rate Hedge exceed that of the underlying debt 
instrument and related interest rate exposure. Entergy 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 competitive markets for parties of 
comparable credit quality.
    In addition, Entergy requests authorization to enter into 
Anticipatory Hedges with respect to anticipated debt offerings of 
Entergy and the Finance Subsidiaries, 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: (a) A 
forward sale of exchange-traded U.S. Treasury futures contracts, U.S. 
Treasury obligations and/or a forward swap (each a ``Forward Sale''); 
(b) the purchase of put options on U.S. Treasury obligations (a ``Put 
Options Purchase''); (c) a Put Options Purchase in combination with the 
sale of call options on U.S. Treasury obligations (a ``Zero Cost 
Collar''); (d) transactions involving the purchase or sale, including 
short sales, of U.S. Treasury obligations; or (e) 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. Entergy will determine the 
optimal structure of each Anticipatory Hedge transaction at the time of 
execution. Entergy may decide to lock in interest rates and/or limit 
its exposure to interest rate increases.
    Entergy 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''). Entergy 
represents 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.

American Transmission Company, LLC, et al. (70-10214)

    American Transmission Company, LLC (``ATC''), an electric 
transmission public utility company subsidiary of Alliant Energy 
Corporation (``Alliant''), a registered holding company, and ATC 
Management, Inc. (``ATCMI''), a public utility company, corporate 
manager of ATC, and holding company subsidiary of Alliant, claiming 
exemption from registration under section 3(a)(1) by rule 2 of the Act, 
both located at N19 W23993 Ridgeview Parkway, West Waukesha, Wisconsin 
53188 (together, ``Applicants'') have filed a declaration 
(``Declaration'') under sections 6(a), 7 and 12(b) of the Act and rule 
54 under the Act.

I. Background

    In 1999, the state of Wisconsin enacted legislation (``Transco 
Legislation'') that facilitated the formation of for-profit 
transmission companies (``Transcos''). ATC was created under the 
Transco Legislation and ATCMI was created to be the general manager of 
ATC. The legislation obligates these Transcos to construct, operate, 
maintain, and expand transmission facilities to provide adequate, 
reliable transmission services under an open-access transmission 
tariff.
    By order dated December 29, 2000 (HCAR No. 27331) (``December 
Order''), the Commission authorized ATC to acquire the transmission 
assets of the subsidiaries of four investor owned public utility 
holding companies with service areas in Wisconsin and adjacent areas in 
Illinois and Michigan. The following utility companies transferred 
ownership and operation of their transmission assets to ATC in exchange 
for member interests (``Member Interests'') in ATC: Wisconsin Power and 
Light Company (``WPL'') and South Beloit Water, Gas and Electric 
Company (``South Beloit''); \11\ Wisconsin Electric Power Company and 
Edison Sault Electric Company (``Edison Sault''); \12\ Madison Gas and 
Electric Company; \13\

[[Page 32382]]

and Wisconsin Public Service Corp.\14\ Wisconsin Public Power Inc. 
(``WPPI''), a Wisconsin municipal electric company, contributed cash in 
exchange for an equity interest in ATC proportional to WPPI's load 
ratio share in Wisconsin.\15\ These entities together are referred to 
as the ``Initial Members.''
---------------------------------------------------------------------------

    \11\ See December Order. WPL and South Beloit (which are both 
subsidiary companies of Alliant) are together treated as a single 
member.
    \12\ See Wisconsin Energy Corp., HCAR No. 27329 (Dec. 28, 2000). 
Wisconsin Electric Power Company and Edison Sault Electric Company 
(which are both subsidiaries of Wisconsin Energy Corp., dba We 
Energies, an exempt holding company) are together treated as a 
single member.
    \13\ See Madison Gas and Electric Co., HCAR No. 27326 (Dec. 28, 
2000). As a result of the acquisition, Madison Gas and Electric 
Company is both a public-utility company and an exempt holding 
company.
    \14\ See WPS Resources Corporation, HCAR No. 27330 (Dec. 28, 
2000). Wisconsin Electric Power Company is a subsidiary of WPS 
Resources Corporation, an exempt holding company.
    \15\ WPPI is exempt from all provisions of the Act under section 
2(c).
---------------------------------------------------------------------------

    Applicants state that as a limited liability company, ATC may be 
formed to be ``member managed'' or ``manager managed'' according to 
Wisconsin law. Applicants state that it was decided that ATC would be 
``manager managed'' by ATCMI. In the December Order, the Commission 
authorized ATCMI to acquire a nominal interest in ATC and operate as 
the sole manager of ATC. Due to the extent of the operational control 
ATCMI has over the utility assets of ATC, the Commission found that 
both ATC and ATCMI were jurisdictional public utilities under the Act. 
ATCMI is also an intermediate holding company by virtue of its 
ownership interest in ATC and claims exemption from registration by 
rule 2 under section 3(a)(1) of the Act.
    In June 2001, eighteen more contributors, including twelve 
municipal utilities, four cooperatives, one public power entity and one 
investor-owned utility invested transmission assets and/or cash in ATC. 
Two new members joined ATC on December 31, 2002; and a third member 
joined ATC on December 31, 2003. These three members are Alger Delta 
Cooperative Electric Association; the Ontonagon County Rural 
Electrification Association and the Upper Peninsula Public Power 
Agency. These members are referred to collectively as the ``Additional 
Members.'' Effective February 1, 2002, ATC transferred operational 
control of its facilities to the Midwest Independent Transmission 
System Operator, Inc. (``MISO'').
    The Initial Members contributed cash and/or transmission assets to 
ATC and they or their associate companies received in exchange Member 
Interests in ATC proportional to their contributions. They or their 
associate companies also purchased a proportionate amount of Class A 
shares in ATCMI and one Class B share each of ATCMI.
    The Additional Members contributed cash and/or transmission assets 
to ATC and received in exchange Member Interests in ATC proportional to 
their contributions. They also purchased a proportionate amount of 
Class A shares in ATCMI.

II. Existing Authorization

    By order dated May 15, 2003 (Holding Co. Act Release No. 27678), as 
modified by an order issued on June 23, 2003 (Holding Co. Act Release 
No. 27688) (collectively, ``Prior Financing Order'') the Commission 
authorized Applicants to issue debt securities in an aggregate amount 
not to exceed $710 million at any one time outstanding, to issue member 
interests and ATCMI to issue Class A, Class B and preferred securities 
in an aggregate amount of $500 million, and guarantees and other credit 
support in an aggregate amount not to exceed $125 million, all at any 
one time outstanding through June 30, 2004.

III. Current Request

    Applicants now request financing authority from the date of the 
issuance of the order in this matter (the ``Order'') through June 30, 
2005 (``Authorization Period'') as follows:
    A. Applicants seek authority for ATC to issue debt securities in an 
aggregate amount not to exceed $710 million at any one time outstanding 
during the Authorization Period, provided that the aggregate amount of 
short-term debt issued pursuant to the requested authority will not 
exceed $200 million at any one time outstanding during the 
Authorization Period;
    B. ATC seeks authorization to issue Member Interests and ATCMI 
seeks authority to issue equity interests and preferred securities in 
an aggregate amount of $500 million at any one time outstanding during 
the Authorization Period, provided that the aggregate amount of Member 
Interests and Class A and Class B Shares outstanding at any one time 
during the Authorization Period will not exceed $393 million plus the 
value at that time of the Member Interests and Class A and Class B 
Shares outstanding as of the date of the order in this matter;
    C. Applicants request authority to provide guarantees and other 
credit support as described below in an aggregate amount not to exceed 
$125 million outstanding at any one time during the Authorization 
Period; and
    D. Applicants request authority to enter into interest rate hedging 
transactions as described below.

IV. Financing Conditions

    All requested authorization is subject to the following terms and 
conditions: (i) The maturity of short-term debt will not exceed one 
year and the maturity of long-term debt will not exceed fifty years; 
(ii) any short-term or long-term debt security or credit facility will 
have such designation, aggregate principal amount, interest rate(s) or 
methods of determining the same, terms of payment of interest, 
collateral, redemption provisions, non-refunding provisions, sinking 
fund terms, conversion or put terms and other terms and conditions as 
ATC and ATCMI might determine at the time of issuance, provided that, 
in no event, however, will the effective cost of money on short-term 
debt exceed 300 basis points over the London Interbank Offered Rate for 
maturities of one year or less in effect at the time; (iii) the 
interest rate on long-term debt will not exceed 500 basis points over 
the yield-to-maturity of a U.S. Treasury security having a remaining 
term approximately equal to the average life of the debt; and (iv) the 
underwriting fees, commissions or other similar remuneration paid in 
connection with the non-competitive issue, sale or distribution of 
securities under this Application will not exceed 7% of the principal 
or total amount of the securities being issued.
    Applicants represent that at all times during the Authorization 
Period, ATCMI and ATC will each maintain common equity of at least 30% 
of its consolidated capitalization (common equity, preferred stock, 
long-term and short-term debt). Applicants further represent that, 
other than Class A and Class B Shares and Member Interests, no security 
may be issued in reliance upon this Order, unless: (i) The security to 
be issued, if rated, is rated investment grade; (ii) all outstanding 
rated securities of the issuer are rated investment grade; and (iii) 
all outstanding rated securities of ATCMI are rated investment grade. 
For purposes of this condition, a security will be considered 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 
1934 Act. Applicants request that the Commission reserve jurisdiction 
over the issuance by ATCMI or ATC of any 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 (i) 
through (iii) above are not satisfied.

V. Specific Financing Requests

A. Short Term Debt

    Short-term debt will be unsecured and may include institutional

[[Page 32383]]

borrowings, commercial paper and privately-placed notes. ATC may sell 
commercial paper or privately placed notes from time to time, in 
established commercial paper markets. Commercial paper may be sold at a 
discount or bear interest at a rate per annum prevailing at the date of 
issuance for commercial paper of a similarly situated company. ATC may, 
without counting against the limit on financing set forth above, 
maintain back up lines of credit in connection with one or more 
commercial paper programs in an aggregate amount not to exceed the 
amount of authorized commercial paper.
    Credit lines may also be set up for use by ATC for general 
corporate purposes. Credit lines, which will not be counted against the 
financing limit, may be utilized to obtain letters of credit or may be 
borrowed against, from time to time, as it is deemed appropriate or 
necessary.

B. Long-Term Debt

    Long-term debt securities may include notes or debentures under one 
or more indentures or long-term indebtedness under agreements with 
banks or other institutional lenders directly or indirectly. Long-term 
debt may be secured or unsecured.\16\ Long-term debt may be convertible 
or exchangeable into forms of equity or indebtedness authorized in this 
filing, or into other securities or assets the acquisition of which is 
either exempt or approved by Commission order. Specific terms of any 
borrowings will be determined by ATCMI at the time of issuance and will 
comply in all regards with the parameters on financing authorization 
set forth above.
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    \16\ Debt may be secured by the assets of ATC LLC.
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C. Equity Interests

    In the event Applicants determine to seek capital through equity or 
to acquire new facilities in exchange for equity interests, ATC seeks 
authorization to issue Member Interests and ATCMI seeks authority to 
issue Class A and B Shares in an aggregate amount at any one time 
outstanding during the Authorization Period of $393 million plus the 
value at that time of any Member Interests and Class A and B Shares 
outstanding at the time of the Order.
    Member Interests may be issued in the form of member interests, 
preferred member interests or convertible member interests.
    Applicants contemplate that from time to time ATC may require an 
additional equity infusion. ATC could reduce the amount of 
distributions to Members. Each Member's equity would be increased by 
the amount of undistributed earnings on a pro rata basis. In the 
alternative, there could be a capital call for Members to make 
additional cash contributions on a pro rata basis. If a Member opts not 
to make an additional contribution, any other Member could make the 
requested contribution. Members do not, however, have the obligation to 
make additional contributions. Another possibility, therefore, would be 
for ATC to issue preferred securities that are convertible into Member 
Interests and/or Class A Shares and/or Class B Shares. The convertible 
preferred securities could be issued and sold to Members or third 
parties. The securities would have a stated par value and dividend rate 
and would be convertible into Member Interests and/or Class A and/or 
Class B Shares based on a predetermined ratio or formula. The 
conversion rights and terms and conditions for exercise of those rights 
would be set forth at the time of purchase. At the end of 2003, ATC 
made a capital call for additional contributions in the amount of $68 
million to be paid in four quarterly installments in 2004.
    ATC would issue Member Interests in exchange for cash or the 
transfer of transmission facilities to ATC by current or future 
members. The entities transferring transmission assets and their 
transferring asset values have not yet been determined. In order to 
maintain its 50/50 debt to equity ratio, ATC would reimburse the 
contributors for 50% of the net book value of the transmission assets 
contributed. In addition, ATCMI will issue to each new member of ATC 
Class A Shares in an amount that is proportional to that member's 
interest in ATC, with a par value of $0.01 per share and a sales price 
of $10 per share.
    Additionally, it is anticipated that ATC will issue Member 
Interests and ATCMI will issue Class A Shares to Wisconsin Public 
Service Corporation or its affiliate in exchange for that company's 
contribution of 50% of the ongoing cash requirements of the Arrowhead 
to Weston Transmission Line Project. Current cost estimates are 
approximately $400 million over the 2002-2008 period.\17\
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    \17\ Arrowhead-Weston is a 220-mile transmission line connecting 
Duluth, Minnesota, with Wausau, Wisconsin. The line is needed to 
accommodate electric load growth in northern Wisconsin and to 
improve reliability of the electric transmission system in the 
region. The acquisition of utility assets has been approved by the 
Public Service Commission of Wisconsin and so is exempt from section 
9(a)(1) pursuant to section 9(b)(1) of the Act.
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D. Preferred Stock

    ATCMI seeks authority to issue preferred stock or other types of 
preferred securities (including convertible preferred securities). It 
is contemplated that preferred stock or other types of preferred 
securities may be issued in one or more series with rights, 
preferences, and priorities as may be designated in the instrument 
creating series, as determined by ATCMI's board of directors, or a 
pricing committee or other committee of the board performing similar 
functions. Preferred securities may be redeemable or may be perpetual 
in duration. Dividends or distributions on preferred securities will be 
made periodically and to the extent funds are legally available for the 
purpose, but may be made subject to terms which allow Applicants to 
defer dividend payments for specified periods. Preferred securities may 
be convertible into forms of equity or indebtedness authorized in this 
filing, or into other securities or assets the acquisition of which is 
either exempt or approved by Commission order.
    Preferred securities may be sold directly or through underwriters 
or dealers in any manner. The dividend rate on any series of preferred 
securities issued by ATCMI would not exceed 500 basis points over the 
yield to maturity of a U.S. Treasury security having a remaining term 
equal to the term of that series of preferred securities at the time of 
issuance.

E. Guarantees

    Applicants request authorization to enter into guarantees, obtain 
letters of credit, enter into expense agreements or otherwise provide 
credit support with respect to the obligations of their affiliates or 
members in the ordinary course of Applicants' business, in an amount 
not to exceed $125 million outstanding at any one time during the 
Authorization Period.
    Applicants state that certain of the guarantees referred to above 
may be in support of obligations that are not capable of exact 
quantification. Applicants will determine the exposure under the 
guarantee by appropriate means including estimation of exposure based 
on loss experience or projected potential payment amounts. As 
appropriate, the estimates will be made in accordance with generally 
accepted accounting principles and/or sound financial practices.

F. Interest Rate Hedging Transactions

    ATC seeks authority to enter into interest rate hedging 
transactions with respect to existing indebtedness

[[Page 32384]]

(``Interest Rate Hedges''), subject to certain limitations and 
restrictions, in order to reduce or manage interest rate cost. Interest 
Rate Hedges will only be entered into with counterparties (``Approved 
Counterparties'') whose senior debt ratings, or the senior debt ratings 
of the parent companies of the counterparties, 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, Fitch, or Duff and 
Phelps. 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 will be for fixed periods 
and stated notional amounts. 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 competitive markets for parties of 
comparable credit quality.
    ATC also seeks authority to enter into interest rate hedging 
transactions with respect to anticipated debt offerings (the 
``Anticipatory Hedges''), subject to certain limitations and 
restrictions. Anticipatory Hedges will only be entered into with 
Approved Counterparties, and will 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 
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, caps and collars, appropriate for the Anticipatory 
Hedges.
    Applicants state that they will comply with existing and future 
financial disclosure requirements of the Financial Accounting Standards 
Board associated with hedging transactions, and that these hedging 
transactions will qualify for hedge accounting treatment under 
generally accepted accounting principles.

Cinergy Corp. et al. (70-10224)

    The Cinergy Corporation (``Cinergy''), a Delaware corporation and a 
registered holding company under the Act, its subsidiary public-utility 
company Cincinnati Gas & Electric Company, (``CG&E''), an Ohio 
corporation, both at 139 East Fourth Street, Cincinnati, Ohio 45202, 
and INOH Gas, Inc., an Indiana corporation, 2569 Handyside Avenue, 
Cincinnati, Ohio 45208, (``INOH'' and, together with Cinergy and CG&E, 
``Applicants''), have filed an application-declaration 
(``Application'') with the Commission under sections 3(a)(1) and 12(d) 
of the Act and rules 44 and 54 under the Act.
    Cinergy and CG&E request authority to sell to INOH all of the 
issued and outstanding common stock of CG&E's wholly-owned subsidiary 
Lawrenceburg Gas Company (``Lawrenceburg''), an Indiana corporation and 
gas utility company. INOH requests an order under section 3(a)(1) of 
the Act exempting it from all provisions of the Act, except section 
9(a)(2).
    CG&E is a public utility company all of whose outstanding common 
stock is owned by Cinergy. In addition to CG&E, Cinergy directly holds 
all the outstanding common stock of another public utility company, PSI 
Energy, Inc., a vertically integrated electric utility that provides 
service in north central, central and southern Indiana. Through various 
other subsidiaries, Cinergy engages in a variety of energy-related and 
other authorized non-utility businesses.
    CG&E is a combination electric and gas public utility and holding 
company that provides service in the southwestern portion of Ohio and, 
through subsidiaries, in nearby areas of Kentucky and Indiana. CG&E's 
principal subsidiary is The Union Light, Heat and Power Company, which 
provides electric and gas service in northern Kentucky. CG&E's other 
utility subsidiaries, Lawrenceburg and Miami Power Corporation, are 
insignificant to its results of operations. As of and for the year 
ended December 31, 2003, CG&E reported consolidated total operating 
revenues of approximately $2.4 billion and consolidated total assets of 
approximately $5.8 billion.
    Lawrenceburg distributes and sells natural gas to approximately 
6,100 residential, commercial, industrial and municipal customers over 
a 60-square mile area in southeastern Indiana. Lawrenceburg owns a gas 
distribution system located within Indiana consisting of 161 miles of 
mains and 26 miles of service lines. Lawrenceburg is connected with and 
sells gas at wholesale to the City of Aurora, Indiana, and is also 
connected with interstate gas pipeline systems owned by Texas Gas 
Transmission Corporation and Texas Eastern Transmission Corporation. As 
of and for the year ended December 31, 2003, Lawrenceburg had total 
operating revenues of approximately $10.9 million and total assets of 
approximately $19.4 million, including net property, plant and 
equipment of approximately $16.2 million. As a ``public utility'' under 
the laws of Indiana, Lawrenceburg is subject to regulation by the 
Indiana Utility Regulatory Commission (``IURC'') with respect to such 
matters as retail rates, service and safety standards, accounts, 
acquisitions and sales of utility properties and issuance of 
securities.
    INOH is a privately held Indiana corporation formed to acquire the 
common stock of Lawrenceburg. Upon consummation of the proposed 
transaction, Lawrenceburg will be a wholly-owned subsidiary of INOH. 
INOH owns, and upon consummation of the proposed transaction will own, 
no other public utility companies.
    CG&E and INOH have entered into a Stock Purchase Agreement, dated 
as of February 27, 2004 (``Purchase Agreement''), in accordance with 
which CG&E has agreed to sell to INOH, and INOH has agreed to purchase, 
all of the outstanding shares (``Shares'') of common stock, $50 par 
value per share, of Lawrenceburg. Subject to the terms and conditions 
of the Purchase Agreement, at the closing of the proposed transaction 
(``Closing''), INOH has agreed to pay CG&E a purchase price of 
$16,700,000 in cash for the Shares (``Purchase Price''), subject to 
potential increase or decrease to the extent that the working capital 
of Lawrenceburg at the Closing exceeds or is less than the adjusted 
working capital of Lawrenceburg as of a date shortly before signing of 
the Purchase Agreement. CG&E will use the net proceeds from the sale of 
Lawrenceburg to reduce outstanding short-term indebtedness and for 
general corporate purposes.
    Upon consummation of the proposed transaction, INOH, by virtue of 
its ownership of all of the outstanding common stock of Lawrenceburg, 
will be deemed a ``holding company'' under the Act. INOH asserts that 
it will be entitled to the exemption afforded by section 3(a)(1) of the 
Act, and accordingly requests that the Commission issue an order under 
that section of the Act exempting INOH from all provisions of the Act 
except section 9(a)(2). In

[[Page 32385]]

support of that request, INOH states that upon consummation of the 
Transaction, Lawrenceburg will constitute its only public utility 
subsidiary. Both INOH and Lawrenceburg are incorporated under the laws 
of Indiana, the same State in which all of Lawrenceburg's public 
utility operations are conducted. All of Lawrenceburg's gas 
distribution facilities, which compose substantially all of its 
physical assets, are likewise located in Indiana. Following the 
consummation of the Transaction, Lawrenceburg, as a ``public utility'' 
under Indiana law, will remain subject to extensive regulation by the 
IURC, with respect to such matters as rates, service and safety 
standards, accounting, securities issuances, and acquisitions and sales 
of utility property.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12995 Filed 6-8-04; 8:45 am]
BILLING CODE 8010-01-P