[Federal Register Volume 70, Number 87 (Friday, May 6, 2005)]
[Notices]
[Pages 24134-24138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2198]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27964; International Series Release No. 1286]


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

April 29, 2005.
    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 May 24, 2005, 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

[[Page 24135]]

copy of any notice or order issued in the matter. After May 24, 2005 
the application(s) and/or declaration(s), as filed or as amended, may 
be granted and/or permitted to become effective.

Wisconsin Electric Power Company (70-10110)

    Wisconsin Electric Power Company (``Wisconsin Electric'') a 
Wisconsin corporation and a 3(a)(1) exempt holding company, 231 West 
Michigan Street Milwaukee, WI 53201, has filed an application 
(``Application'') with the Commission under sections 3(a)(1), 9(a)(2) 
and 10 of the Act.
    Wisconsin Electric requests approval under sections 9(a)(2) and 10 
in connection with Wisconsin Electric's lease and operation of the 
electric generation facilities owned by Port Washington Generating 
Station, LLC (``Project Company'') which are currently under 
construction. When its generating and interconnection facilities become 
operational, Project Company will be an electric utility company under 
the Act. Wisconsin Electric also requests an exemption by order under 
section 3(a)(1) from all of the provisions of the Act other than 
section 9(a)(2) of the Act.

I. Description of the Parties

A. Wisconsin Electric
    Wisconsin Electric is a wholly owned combined electric and gas 
utility company subsidiary of Wisconsin Energy Corporation (``WEC''). 
WEC is a public utility holding company exempt by order under section 
3(a)(1) of the Act under the 2000 Order. Wisconsin Electric currently 
claims an exemption under section 3(a)(1) of the Act by filing under 
rule 2. As a result of acquiring interests in two public utility 
companies, and the lease of Project Company's assets, Wisconsin 
Electric itself is a holding company as defined by section 2(a)(7) of 
the Act. Wisconsin Electric presently owns an interest in two public 
utility subsidiaries, American Transmission Company, LLC (``ATC'') and 
ATC Management Inc. (``ATC Management'').\1\ Wisconsin Electric 
generates, distributes and sells electric energy at retail and 
wholesale in Wisconsin and the upper peninsula of Michigan.\2\ 
Wisconsin Electric also purchases, distributes and sells natural gas to 
retail customers and transports customer owned gas in Wisconsin. As of 
December 31, 2004, Wisconsin Electric had 1,081,400 electric retail 
customers and 437,800 gas retail customers.
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    \1\ See HCAR No. 27329 (December 28, 2000) (``2000 Order'').
    \2\ Wisconsin Electric is subject to regulation by a number of 
regulatory bodies including the Federal Energy Regulatory Commission 
(``FERC'') under the Federal Power Act's authority to regulate 
wholesale sales of electric power, accounting and certain other 
matters. Wisconsin Electric's hydroelectric facilities are also 
regulated by FERC. Wisconsin Electric is also subject to regulation 
by the Public Service Commission of Wisconsin (``PSCW'').
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    Wisconsin Electric states that all of its generating plants are 
located in Wisconsin, except the Presque Isle plant and 12 small hydro 
plants which are located in the upper peninsula of Michigan. As of 
December 31, 2004, Wisconsin Electric operated approximately 21,900 
pole-miles of overhead distribution lines and 20,400 miles of 
underground distribution cable as well as approximately 352 
distribution substations and 267,700 line transformers.
    As of December 31, 2004, Wisconsin Electric's gas distribution 
system included approximately 8,983 miles of mains connected at 22 gate 
stations to the pipeline transmission systems of ANR Pipeline Company, 
Guardian Pipeline, L.L.C., Natural Gas Pipeline Company of America, 
Northern Natural Pipeline Company and Great Lakes Transmission Company. 
Wisconsin Electric has a liquefied natural gas storage plant which 
converts and stores in liquefied form natural gas received during 
periods of low consumption. The liquefied natural gas storage plant has 
a send-out capability of 70,000 dekatherms per day. Wisconsin Electric 
also has propane air systems for peaking purposes. These propane air 
systems will provide approximately 2,000 dekatherms per day of supply 
to the system.
    Wisconsin Electric operates two district steam systems that supply 
steam for space heating and process uses. These systems are located in 
Milwaukee and in Wauwatosa, Wisconsin and are subject to regulation by 
the PSCW.
B. ATC
    ATC is a Wisconsin limited liability company and electric public 
utility company which was formed to own all electric transmission 
facilities in Wisconsin, as well as certain very limited transmission 
facilities located in northern Illinois and the upper peninsula of 
Michigan.\3\ As of February 2004, ATC owned a total of 8,776 miles of 
transmission lines, 6,882 miles of which are located in Wisconsin, 
1,884 miles of which are located in the upper peninsula of Michigan and 
12 miles of which are located in Illinois.\4\ Wisconsin Electric states 
that it currently holds a 33.2% ownership interest in ATC as of 
December 31, 2004. Additionally, as of December 31, 2004, Edison Sault 
owns a 4.6% ownership interest in ATC.
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    \3\ Id.
    \4\ Wisconsin Electric states that a small number of miles of 
transmission lines are under construction by ATC in Minnesota.
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C. ATC Management Inc.
    ATC Management, a Wisconsin corporation, is the manager of ATC and 
as of December 31, 2004, has a nominal membership interest (a one/one 
millionth share) in ATC. Wisconsin Electric states that as of December 
31, 2004, it held a 37.8% ownership interest in ATC Management.

II. Project Company Lease

    W.E. Power, LLC (``W.E. Power'') is a Wisconsin limited liability 
company that is a wholly owned, direct subsidiary of Wisconsin Energy. 
Project Company, a Wisconsin limited liability company which is a 
wholly-owned subsidiary of W.E. Power, was formed specifically to 
develop, construct, and own a 100% interest in two 545 megawatt gas 
fired, combined cycle generating units located at Wisconsin Electric's 
existing Port Washington, Wisconsin power plant site (``Port Washington 
Units''). In addition, Project Company will develop, construct and own 
a 100% interest in certain generator interconnection equipment 
necessary to interconnect the Port Washington Units with the ATC 
transmission grid. W.E. Power does not and will not own any such 
facilities directly.
    Wisconsin Electric requests authority to enter into this lease 
transaction once the Port Washington Units are complete. The Project 
Company has entered into two facility leases (``Facility Leases'') with 
Wisconsin Electric under which the Project Company will construct the 
Port Washington Units and, upon commencement of commercial operation 
and satisfaction of certain other conditions, will lease them to 
Wisconsin Electric. The site on which the Port Washington Units will be 
built is owned by Wisconsin Electric and is leased to the Project 
Company under the ground leases. Coincident with the commencement of 
the terms of the Facility Leases, the Project Company will sublease 
back to Wisconsin Electric the real property on which the Port 
Washington Units have been constructed under the ground sublease 
agreements ground Sublease Agreements.
    Wisconsin Electric will recover lease payments in rates. Also 
recovered in rates are management costs, demolition costs and community 
impact mitigation costs. Lease payments will cover carrying costs 
during construction and

[[Page 24136]]

plant costs plus an allowed return on equity during operation. The 
lease payments will be further adjusted to incorporate capital 
improvements the Project Company is obligated to fund under most 
circumstances.
    Wisconsin Electric will make fixed payments over the terms of the 
respective Facility Leases beginning when each Port Washington Unit 
becomes operational. Each Facility Lease will be treated as an 
operating lease under regulatory accounting and as a capital lease 
under generally accepted accounting principles. Each Facility Lease is 
a ``net lease'' under which Wisconsin Electric's obligations to make 
rent payments is absolute and unconditional.

III. Section 3(a)(1) Exemption

    Wisconsin Electric requests an order of exemption under section 
3(a)(1) on the basis that its material public utilities are located 
substantially within the state of Wisconsin and derive their operating 
revenues substantially within the state of Wisconsin.\5\ Wisconsin 
Electric states that its out of state operating revenue percentages for 
the years 2004, 2003 and 2002 respectively are 5.94%, 5.69% and 5.51%. 
In addition, ATC's out-of-state operating revenue for the years 2004, 
2003 and 2002 respectively are 9.6%, 11.8% and 6.87% respectively. 
Wisconsin Electric further states that all of the operating revenue 
derived from the lease of the Port Washington Units will come from 
utility operations within Wisconsin.
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    \5\ For a discussion of the ``materiality'' and 
``substantially'' standards in the determination of exemptions under 
sections 3(a)(1) and 3(a)(2), see NIPSCO Industries, HCAR No. 26975 
(February 10, 1999).
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Ohio Valley Electric Corporation, et al. (70-10187)

    Ohio Valley Electric Corporation (``OVEC''), 3932 U. S. Route 23, 
P.O. Box 468, Piketon, OH 45661, a public utility subsidiary owned by 
American Electric Power, Inc., (``AEP'') and FirstEnergy Corp. 
(``FirstEnergy''), each a registered holding company under the Act, and 
other investor-owned utilities; and AEP MEMCo LLC, (``MEMCo''), 1 
Riverside Plaza, Columbus, OH 43215, a wholly-owned nonutility 
subsidiary of AEP have filed an application under sections 13(b) of the 
Act and rules 54, 90 and 91 under the Act.
    OVEC and its wholly-owned subsidiary, Indiana-Kentucky Electric 
Corporation (``IKEC''), own two generating stations located in Ohio and 
Indiana with a combined electric production capability of approximately 
2,256 megawatts. OVEC is owned by AEP, FirstEnergy and other investor-
owned utilities. The owners and their respective ownership percentages 
are: Allegheny Energy (3.5%), AEP (39.17%), Buckeye Power Generating, 
LLC (9.0%), The Cincinnati Gas & Electric Company, a subsidiary of 
Cinergy Corp. (9.0%), Columbus Southern Power Company, a subsidiary of 
AEP (4.3%), The Dayton Power and Light Company, a subsidiary of DPL 
Inc. (4.9%), Kentucky Utilities Company, a subsidiary of E.ON AG 
(2.5%), Louisville Gas and Electric Company, also a subsidiary of E.ON 
AG (5.63%), Ohio Edison Company, a subsidiary of FirstEnergy (16.5%), 
Southern Indiana Gas and Electric Company, a subsidiary of Vectren 
Corporation (1.5%), and The Toledo Edison Company, also a subsidiary of 
FirstEnergy (4.0%). These entities or their affiliates (collectively, 
``Sponsoring Companies'') purchase power from OVEC.
    OVEC was formed in the early 1950s by a group of holding companies 
and utilities located in the Ohio Valley region in response to the 
request of the United States Atomic Energy Commission (``AEC'') to 
supply the electric power and energy necessary to meet the needs of a 
uranium enrichment plant being built by AEC in Pikes County, Ohio. The 
Department of Energy (``DOE'') subsequently became the successor to 
AEC.
    OVEC owns two coal-fired generating stations: (i) The Kyger Creek 
Plant in Cheshire, Ohio, which has a generating capacity of 1,075 
megawatts, and (ii) the Clifty Creek Plant in Madison, Indiana, which 
has a generating capacity of 1,290 megawatts and is owned by OVEC's 
wholly-owned subsidiary, IKEC. Upon its formation, OVEC entered into 
two power sales agreements: (i) The DOE power agreement between OVEC 
and the United States (through the DOE) and (ii) the inter-company 
power agreement among OVEC and the Sponsoring Companies. Each of the 
Sponsoring Companies is either an owner of OVEC's stock or an affiliate 
of an owner. Under the power agreement with the United States, the DOE 
was entitled to essentially all of the generating capacity of OVEC's 
generating facilities. The Sponsoring Companies were granted certain 
rights to surplus energy not needed to service the DOEs Ohio enrichment 
facility. The DOE terminated its power agreement as of April 30, 2003. 
As a result, each of the Sponsoring Companies is currently entitled to 
its specified share of all net power and energy produced by OVEC's two 
generating stations, and the Sponsoring Companies are required to pay 
their share of all of OVEC's costs resulting from the ownership, 
operation and maintenance of its generating and transmission 
facilities, except those costs that were paid by the DOE.
    MEMCo is an inland marine transporter operating approximately 1,700 
barges and 40 towboats on the Ohio, Mississippi and Illinois Rivers and 
along the inter-coastal canal of the Gulf Coast. In addition to other 
services, MEMCo provides barge transportation services to associates 
and non-affiliated companies.
    OVEC states that the operation of OVEC's generating stations 
require the movement and storage of substantial quantities of coal to 
ensure the availability of power to its customers, and that barging has 
been, and continues to be, the cheapest mode of transporting bulk 
commodities such as coal.
    OVEC and IKEC were under contract for barge services from American 
Commercial Barge Line, LLC (``ACBL'') through December 31, 2003. ACBL 
declared bankruptcy in January, 2003, and MEMCo began providing barge 
services to OVEC and IKEC at cost in March 2003 pursuant to rule 
87(b)(2). MEMCo continued to provide services while OVEC and IKEC 
solicited bids for barge services from several non-affiliates, as well 
as MEMCo. MEMCo's bid at cost was lower than bids received from non-
affiliates. Accordingly, MEMCo seeks approval in this filing to provide 
barge services to OVEC and IKEC at cost in accordance with rules 90 and 
91.

National Grid Transco plc (70-10295)

    National Grid Transco plc (``NGT''), 1-3 Strand, London WC2N 5EH, 
United Kingdom, a foreign registered holding company, has filed a 
declaration (``Declaration'') under sections 6(a)(2), 12(c) and 12(e) 
of the Act and rules 42, 62 and 65 under the Act.
    By the Declaration, NGT requests various authorizations relating to 
the issuance and repurchase of certain preferred securities it would 
issue to effect a return of cash. The company also seeks authority to 
solicit shareholder consents in connection with these transactions.

I. The NGT System

    NGT's ordinary shares are listed on the London Stock Exchange, and 
its American Depositary Receipts (``ADRs'') are listed on the New York 
Stock Exchange.
A. Domestic Operations
    NGT's U.S. business is conducted through National Grid USA, a 
registered holding company and an indirect

[[Page 24137]]

wholly-owned subsidiary of NGT. National Grid USA is held directly and 
indirectly by several intermediate registered holding companies. The 
National Grid USA group of companies includes five wholly-owned 
electricity distribution companies: Niagara Mohawk Power Corporation, 
Massachusetts Electric Company, The Narragansett Electric Company, 
Granite State Electric Company, and Nantucket Electric Company; and 
four other utility companies: New England Power Company, New England 
Electric Transmission Corporation, New England Hydro-Transmission 
Corporation and New England Hydro-Transmission Electric Company, Inc. 
Through these subsidiaries, National Grid USA provides electric 
transmission and distribution services to residential, commercial, and 
industrial customers in New England and the transmission and 
distribution of electricity and the distribution of natural gas to 
residential, commercial, and industrial customers in New York.\6\
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    \6\ Collectively, National Grid USA's electric utility 
subsidiaries own and operate approximately 76,000 miles of 
transmission and distribution lines in New York and New England and 
deliver electricity to approximately 3.3 million customers in New 
York, Massachusetts, Rhode Island and New Hampshire.
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    In addition, other companies within the National Grid USA group: 
(1) Provide metering, billing, and customer services; manage, design 
and build transmission and distribution-related facilities; and (3) 
provide related products and services including energy efficiency 
programs for customers.
B. Foreign Operations
    Through its direct wholly-owned subsidiary, National Grid Holdings 
One plc (``NGH One''), and that company's subsidiary, National Grid 
Holdings Limited, NGT owns The National Grid Company plc (``NGC'') and 
certain other non-U.S. subsidiaries. NGC is engaged in the transmission 
of electricity in England and Wales. NGC owns and operates a 
transmission system consisting of approximately 4,500 route miles of 
overhead lines and approximately 410 route miles of underground cable 
together with approximately 340 substations at some 240 sites.
    Through NGH One, its subsidiary Lattice Group plc (``Lattice 
Group''), and its subsidiary Transco Holdings plc, NGT owns Transco plc 
(``Transco'') and certain other non-U.S. subsidiaries. Transco is the 
owner and operator of the majority of Great Britain's gas 
transportation and distribution system. Transco's transportation 
network comprises approximately 4,200 miles of high pressure national 
transmission pipelines and approximately 170,000 miles of lower 
pressure regional transmission and distribution systems pipelines. Gas 
is transported on behalf of approximately 70 ``shippers'' either to 
consumers or third party pipeline systems. Transco receives gas from 
several coastal reception terminals, storage sites, and onshore fields 
around Great Britain. An interconnector to Belgium links Transco's own 
gas transportation system to continental Europe. A second 
interconnector supplies gas to Eire and Northern Ireland. In addition, 
Transco is responsible for the safety, development and maintenance of 
the transportation and distribution system. The company, however, does 
not sell gas to consumers.
C. Foreign Assets Sale
    On August 31, 2004, NGT announced the sale of four U.K. gas 
distribution networks for [pound]5.8 billion in cash plus approximately 
[pound]130 million of assumed liabilities. The transactions are subject 
to certain regulatory consents and approvals including from the U.K. 
Gas and Electricity Markets Authority, the U.K. Department for Trade 
and Industry and the U.K. Health and Safety Executive. The Office of 
Gas and Electricity Markets has issued a detailed timetable that 
outlines the consent and approvals process, and NGT aims to complete 
these transactions during the summer of 2005. Completion of the 
transactions is also subject to termination rights, exercisable by each 
of NGT and the purchasers, in the event of defined circumstances 
arising which would have a material adverse impact on the distribution 
networks being sold.
    NGT has indicated that it would provide a one-time return of cash 
to its shareholders of [pound]2.0 billion from the proceeds of the 
distribution networks sales. It is expected that the profit from the 
sale will be significantly in excess of the amount being distributed to 
shareholders.
D. Return of Cash
    More specifically, NGT intends to return cash to its shareholders 
through a mechanism described below involving a pro rata issuance of 
preferred stock referred to as ``B shares.'' According to NGT, this 
method would afford its shareholders choices as to the form and timing 
of the receipt of funds. NGT would use its share premium account to 
issue the B shares to existing holders of NGT's ordinary shares 
following shareholder approval at an Extraordinary General Meeting 
(``EGM'') currently scheduled for July 25, 2005.
    NGT's issuance of B shares would be accompanied by a share 
consolidation (i.e., a reverse stock split). Shareholders would receive 
a reduced number of new NGT ordinary shares to replace their existing 
shares according to a ratio that would be set prior to the EGM. The 
ratio would be set using the trading price of NGT's shares immediately 
before announcement of the details of the transaction and would be 
designed so that, subject to normal market movements, the share price 
of the new shares immediately after the [pound]2.0 billion distribution 
would be approximately equal to the share price of the existing shares 
immediately beforehand.\7\ The priorities, preferences, voting rights 
and other terms of the NGT ordinary shares would not change as a 
consequence of the share consolidation.
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    \7\ NGT states that, if it did not combine the B share issuance 
with the consolidation, the value of its ordinary shares would, all 
things being equal, be expected to decrease by 65 pence per share 
immediately after the distribution, and NGT's per share financial 
ratios would also be affected. The company also states that the 
share consolidation would help to maintain a consistent and less 
confusing presentation of per share information to the financial 
markets.
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    The B shares would rank ahead of the ordinary shares for the 
payment of dividends and in liquidation and would vote only with 
respect to matters directly affecting the B share class. Shareholders 
would receive one B share for every ordinary share that they hold. 
Holders of NGT ADRs, which represent five NGT ordinary shares, would 
receive five B shares per ADR.
    The B shares would be listed on the London Stock Exchange.\8\ B 
share owners could elect to: (1) receive a dividend of 65 pence per 
share (``Income Election'') shortly after the EGM; (2) sell their 
shares for 65 pence per share (``Initial Capital Election'') shortly 
after the EGM; or (3) hold their shares and wait (a) to sell their 
shares for 65 pence per share at a later date (``Deferred Capital 
Election''); or (b) until NGT converts them into new NGT ordinary 
shares (``Final Maturity Election''). Shareholders that do not 
affirmatively make an election will be deemed to have selected the 
Income Election.
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    \8\ These securities would not be listed on any securities 
exchange or quoted on an inter-dealer quotation system in the U.S.
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    1. Income Elections. Shareholders choosing Income Elections would 
have all of their B shares converted into ``deferred shares'' with no 
voting rights and negligible value once the dividend is paid. NGT may 
repurchase all deferred shares in existence at any time for the 
aggregate consideration of one

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pence, and then cancel those repurchased shares.
    2. Capital Elections. Under the repurchase options, JPMorgan 
Cazenove Limited (``JPMorgan Cazenove'') would offer to buy B shares 
for 65 pence per share, free of all dealing expenses and commissions. 
The Initial Capital Election would occur shortly after the EGM. At 
present, NGT expects that JPMorgan Cazenove would offer Deferred 
Capital Elections in 2006 and 2007.
    Following completion of any repurchase offer, JPMorgan Cazenove 
would have the right to require NGT to purchase at 65 pence per B 
share, those B shares purchased from shareholders pursuant to JPMorgan 
Cazenove's repurchase offer. All B shares repurchased by NGT from 
JPMorgan Cazenove would be cancelled, and would not be held as treasury 
shares. Those shareholders electing to hold their B shares for a period 
of time (including those that select the Final Maturity Election, 
described below) would be entitled to a dividend on the B shares at a 
rate per annum of 75% of 12-month Sterling London Inter-Bank Offer Rate 
on a value of 65 pence per B share (``Continuing Dividend'').
    3. Final Maturity Elections. Under the terms and conditions of the 
B shares, NGT would convert all of the B shares outstanding after a 
certain date in 2007 (specified in the proxy materials) into ordinary 
shares. The conversion ratio would be one new ordinary share for every 
M/65 B shares, where M represents the average of the closing mid-market 
quotations in pence of the new ordinary shares on the London Stock 
Exchange, as derived from the Daily Official List (as maintained by the 
UK Listing Authority for the purposes of the Financial Services and 
Markets Act 2000, as amended) for the five business days immediately 
preceding the conversion date), fractional entitlements being 
disregarded and the balance of those shares (including any fractions) 
shall be deferred shares as described in the proxy materials. 
Conversions of the B shares would be effected by NGT through a 
reorganization of share capital that would result in the elimination of 
the B shares though their conversion into ordinary shares.

II. Proposed Transactions

    NGT requests authority under section 12(c) and rule 42 to acquire, 
retire, redeem and/or convert the B shares in connection with Initial 
Capital Elections, Deferred Capital Elections and Final Maturity 
Elections.\9\ The company also requests authority under section 6(a)(2) 
to effect the intended reverse stock split. Further, NGT requests 
authority to solicit shareholder consents with regard to the B share 
scheme under section 12(e) and rules 62 and 65. NGT states that it 
already has the necessary authority to issue the B shares.\10\
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    \9\ Not all sellers of B shares would be unaffiliated with NGT, 
so those repurchases would not be exempt under rule 42.
    \10\ Economically, the issuance of B shares constitutes a 
dividend. This dividend, however, would not be subject to section 
12(c) of the Act or rule 46 because it would be paid out of NGT's 
``distributable reserves,'' which is generally equivalent to 
unrestricted retained earnings under U.S. GAAP. The issuance of B 
shares would be subject to sections 6 and 7 of the Act. NGT, 
however, is authorized through September 30, 2007 to issue various 
types of securities, including preferred stock and securities 
convertible into common stock, subject to certain conditions. See 
HCAR No. 27898 (September 30, 2004) (``Financing Order''). NGT 
states that the B shares issuance would comply with all of the 
conditions of the Financing Order.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-2198 Filed 5-5-05; 8:45 am]
BILLING CODE 8010-01-P