[Federal Register Volume 69, Number 171 (Friday, September 3, 2004)]
[Notices]
[Pages 53952-53953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2047]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27886; 3-11616]


American Electric Power Company Inc. (70-9381); Notice and Order 
for a Hearing Pursuant to Section 19 of the Public Utility Holding 
Company Act of 1935

August 30, 2004.
    This matter is before the Securities and Exchange Commission 
(``Commission'') on remand from the United States Court of Appeals for 
the District of Columbia (``Court'). The Court, in National Rural 
Electric Cooperative Association, et al. v. Securities and Exchange 
Commission, 276 F.3d 609 (D.C. Cir. 2002), considered a Commission 
order \1\ that authorized the American Electric Power Company Inc. 
(``AEP''), a holding company registered under the Public Utility 
Holding Company Act of 1935, as amended (``Act''), to acquire Central 
and South West Corporation (``CSW'').\2\ However, the Court found that 
the Commission's order did not adequately explain its determination 
that a unidirectional contract met the Act's interconnection 
requirement and that it had not made sufficient evidentiary findings 
and had not engaged in the proper legal analysis to support its 
conclusion that the resulting system would operate in a single area or 
region. The Court therefore remanded the matter for the Commission to 
provide a fuller explanation of its rationale.
---------------------------------------------------------------------------

    \1\ American Electric Power Co., Inc., and Central and South 
West Corp., Holding Co. Act Release No. 27186 (June 14, 2000). In 
addition to approving the proposed transaction, the Commission 
denied the hearing requests of the American Public Power Association 
(``APPA''), the National Rural Electric Cooperative Association 
(``NRECA''), Consumers for Fair Competition and Mr. Paul S. Davis. 
The APPA and NRECA jointly filed the petition for review that led to 
the Court of Appeals decision remanding this matter to the 
Commission.
    The merger was completed on June 15, 2000. The appeal did not 
stay the operation of the order. See section 24(b) of the Act.
    \2\ In the original proceeding, AEP and CSW, at that time each 
public utility holding companies separately registered under the 
Act, were joint applicants. AEP and CSW merged following issuance of 
the Commission's order, with AEP as the surviving registrant.
---------------------------------------------------------------------------

    Section 10(c)(1) and, by reference, section 11(b)(1), of the Act 
require the Commission to find that the utility operations to be 
acquired by a holding company, when combined with its existing 
operations, will constitute a ``single integrated public-utility 
system.'' \3\ Section 2(a)(29)(A) of the Act defines an electric 
``integrated public-utility system'' to mean,
---------------------------------------------------------------------------

    \3\ Section 10(c)(1) of the Act in pertinent part requires the 
Commission not to approve an acquisition of securities or utility 
assets that is ``detrimental to the carrying out of the provisions 
of section 11.'' Section 11(b)(1) in pertinent part limits the 
operations of a holding company system to a single integrated 
public-utility system.

[A] system * * * whose utility assets, whether owned by one or more 
electric utility companies, are physically interconnected or capable 
of physical interconnection and which under normal conditions may be 
economically operated as a single interconnected and coordinated 
system confined in its operations to a single area or region, in one 
or more States, not so large as to impair (considering the state of 
the art and the area or region affected) the advantages of localized 
management, efficient operation, and the effectiveness of 
---------------------------------------------------------------------------
regulation.

    Section 10(c)(2) of the Act further requires the Commission to find 
that a proposed acquisition will ``serve the public interest by tending 
towards the economical and the efficient development of an integrated 
public-utility system.''
    The Court of Appeals upheld the Commission's finding under section 
10(c)(2) that the merger would produce economies and efficiencies. 
However, the Court found that the Commission's order did not adequately 
justify two of its findings: (1) it did not ``provide a satisfactory 
explanation'' for the determination that a unidirectional contract path 
would ``interconnect'' AEP and CSW (together, ``Applicants''),\4\ and 
(2) it ``failed to make any evidentiary findings'' or to engage in the 
proper legal analysis to support its conclusion that the resulting 
system would operate in a ``single area or region.'' \5\ Based on these 
conclusions, the Court vacated the order and ``remanded for further 
proceedings consistent with this opinion.''
---------------------------------------------------------------------------

    \4\ National Rural Electric Cooperative Association v. SEC, 276 
F.3d at 616 (D.C. Cir. 2002).
    \5\ Id at 617.
---------------------------------------------------------------------------

    We believe further supplementation of the record is required for us 
to address the issues identified in the Court's opinion and to 
determine on remand whether the combined AEP and CSW systems meet the 
relevant standards of sections 10(c)(1) and 11(b)(1) of the Act and in 
particular, what specific facts about AEP's and CSW's electric systems 
and the geographic area covered by their systems are relevant to the 
required determinations. We recognize that parties to this proceeding 
may wish to introduce facts regarding the current state of the utility 
industry, in particular facts regarding the growth of regional 
transmission organizations and the unbundling of generation, 
transmission and distribution assets that has occurred in recent years 
that they believe are relevant to this determination. We also recognize 
that the parties may wish to introduce further facts--demographic, 
economic, and otherwise--regarding the geographic area in which the 
combined AEP-CSW system operates that they believe are relevant to this 
determination.
    Therefore, in light of the issues raised by the Court of Appeals' 
opinion, it appears to the Commission that it is appropriate in the 
public interest that a hearing be held with respect to the proposed 
transaction. The hearing shall be limited to determining whether AEP 
and CSW are interconnected, through a unidirectional contract path or 
otherwise, and whether the resulting combined system operates in a 
single area or region. Accordingly,
    It is ordered that a hearing shall be commenced, pursuant to 
section 19 of the Act and in accordance with the Commission's Rules of 
Practice,\6\ at a time and place to be fixed by further order, for the 
purpose of determining whether the AEP and CSW systems are 
interconnected and operate in the same area or region, and hence 
satisfy the requirements of sections 10(c)(1) and 11(b)(1) of the Act 
and that an Administrative Law Judge, to be designated by further 
order, preside at the hearing.
---------------------------------------------------------------------------

    \6\ 17 CFR part 201.
---------------------------------------------------------------------------

    It is further ordered that the Administrative Law Judge shall issue 
an initial decision no later than 300 days from the date of service of 
this Order.
    It is further ordered the Division of Investment Management shall 
be a party to the proceeding.
    It is further ordered that any person, other than the American 
Electric Power Company and the Division of Investment Management, who 
wishes to be heard or who otherwise desires to participate in the 
proceeding, whether as a party or as a limited participant, shall file 
a written motion seeking to do

[[Page 53953]]

so with the Secretary of the Commission in accordance with the 
requirements of Rule 210(b) of the Commission's Rules of Practice.\7\ A 
movant shall serve a copy of any such motion upon American Electric 
Power Company Inc. at the address noted below in accordance with Rule 
150(c) of the Commission's Rules of Practice, and proof of service 
shall be filed with the Secretary of the Commission contemporaneously 
with the motion.
---------------------------------------------------------------------------

    \7\ 17 CFR 201.210(b).
---------------------------------------------------------------------------

    It is further ordered that the Secretary of the Commission shall 
give notice of the hearing by mailing copies of this Notice and Order 
by certified mail to:

The American Electric Power Company, 1 Riverside Plaza, Columbus, Ohio 
43215
The American Public Power Association, 2301 M Street, NW., Washington, 
DC 20037
The National Rural Electric Cooperative Association, 4301 Wilson Blvd., 
Arlington, Virginia 22203

    It is further ordered that the Secretary of the Commission shall 
give notice to all other persons by publication of this Notice and 
Order in the Federal Register; that a copy of this Notice and Order 
shall be published in the ``SEC Docket''; and that an announcement of 
the hearing shall be included in the ``SEC News Digest.''

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2047 Filed 9-2-04; 8:45 am]
BILLING CODE 8010-01-P