[Federal Register Volume 70, Number 103 (Tuesday, May 31, 2005)]
[Notices]
[Pages 30979-30981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2725]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27973]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
May 24, 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 June 20, 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 copy of any notice or order issued in
the matter. After June 20, 2005, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted
to become effective.
KeySpan Corporation, et al. (70-10245)
KeySpan Corporation (``KeySpan''), a registered holding company
under the Act, and its direct subsidiaries, KeySpan Corporate Services
LLC (``KCS''), KeySpan Utility Services LLC (``KUS'') and KeySpan
Engineering & Survey, Inc. (``KENG'') each located at One MetroTech
Center, Brooklyn, New York (together, ``Applicants'') have filed a
declaration (``Declaration'') under section 13 of the Act and rules 54,
87, 88, 90, 91, 93 and 94. KCS, KUS and KENG (collectively, ``Service
Companies'') provide various services to KeySpan and its subsidiaries,
as described below.
A. Background and Authority Requested
KeySpan registered as a holding company under the Act on November
8, 2000, as a result of KeySpan's
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acquisition of Eastern Enterprises (now known as KeySpan New England,
LLC) and its indirect acquisition of EnergyNorth Inc. which were
authorized by the Commission in orders issued on November 7, 2000
(Holding Company Act Release Nos. 27269 and 27271), as modified by
order issued on December 1, 2000 (Holding Company Act Release No.
27287).\1\ In addition, on November 8, 2000, the Commission issued an
order (Holding Company Act Release No. 27272), as modified by the order
issued on December 1, 2000 (Holding Company Act Release No. 27286)
(collectively, ``Service Company Order''), that, among other things,
reserved jurisdiction over the allocation methodologies proposed in the
service agreements of the Service Companies and over the use of KCS and
KUS as separate service companies. In the Declaration, Applicants
request that the Commission: (1) Approve the proposed allocation
methodologies of each of the Service Companies; and (2) continue to
reserve jurisdiction over the use of KCS and KUS as separate service
companies, pending approval by the New York Public Service Commission,
upon KeySpan's petition, to eliminate the need to utilize KUS as a
separate service company.
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\1\ KeySpan directly or indirectly owns seven public-utility
companies in the northeastern United States. The Brooklyn Union Gas
Company, d/b/a KeySpan Energy Delivery New York, distributes natural
gas at retail to residential, commercial and industrial customers in
the New York City Boroughs of Brooklyn, Staten Island and Queens;
KeySpan Gas East Corporation, d/b/a KeySpan Energy Delivery Long
Island, distributes natural gas at retail to customers in New York
State located in the counties of Nassau and Suffolk on Long Island
and the Rockaway Peninsula in Queens County; KeySpan Generation LLC
owns and operates electric generation capacity located on Long
Island that is sold at wholesale to the Long Island Power Authority;
Boston Gas Company, d/b/a KeySpan Energy Delivery New England,
distributes natural gas to customers located in Boston and other
cities and towns in eastern and central Massachusetts; Essex Gas
Company, d/b/a KeySpan Energy Delivery New England, distributes
natural gas to customers in eastern Massachusetts; Colonial Gas
Company, d/b/a KeySpan Energy Delivery New England, distributes
natural gas to customers located in northeastern Massachusetts and
on Cape Cod; and EnergyNorth Natural Gas, Inc., d/b/a KeySpan Energy
Delivery New England, distributes natural gas to customers located
in southern and central New Hampshire and the City of Berlin located
in northern New Hampshire. KeySpan, through its subsidiaries, also
engages in energy related non-utility activities.
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B. Services Provided by Each Service Company
KCS provides the following services to all KeySpan system
companies: accounting, tax, auditing, treasury and finance services,
risk management, financial planning, investor relations and shareholder
services, information technology, communications and computer services,
legal and regulatory, corporate secretary functions, human resources,
environmental services, strategic planning and corporate performance,
customer services and communications and customer strategy, materials
management and purchasing, facilities management, fleet management,
security, corporate affairs, and executive and administrative services.
KCS provides the following services to all KeySpan system companies
except for the Brooklyn Union Gas Company and KeySpan Gas East
Corporation (collectively, ``New York Utilities''): gas supply
services, management and administrative functions relating to gas
operations, operations support services relating to gas operations,
field services relating to gas operations, transmission and delivery
system planning services, and gas marketing and sales services.
KUS provides the following services to the New York Utilities, over
which the New York Public Service Commission (``NYPSC'') has
jurisdiction: Gas and electric transmission and distribution systems
planning, research and development, fuel management, marketing and
sales services, meter operations, and executive and administrative
services.\2\ KUS also provides certain sales call center services to
the New York Utilities as well as to Boston Gas Company, Essex Gas
Company, Colonial Gas Company and EnergyNorth Natural Gas, Inc. (each
company does business as KeySpan Energy Delivery New England)
(collectively, ``New England Utilities''). The sales call center avoids
duplication of resources and call system technologies. The sales call
center handles call responses for lead inquiries in responses to
advertising and mailings; calls to find out the availability of gas;
calls for additional information on gas products; calls for technical
questions and inquiries; calls to request appointments with sales
representatives and/or plumbers; and calls to order meter sets from
customers, plumbers and builders.
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\2\ KUS also provides these services to KeySpan Generation LLC,
KeySpan Electric Services LLC, and KeySpan Energy Trading Services
LLC. These companies either provide services to the Long Island
Power Authority or are not subject to the jurisdiction of the NYPSC.
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KENG provides to KCS and certain other KeySpan subsidiaries general
engineering services and executive and administrative services.\3\
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\3\ According to the Applicants, KeySpan is compelled to utilize
KENG due to Title VIII, Article 145 of the New York Education Law
which generally restricts a public service corporation from
providing any engineering or survey services to third parties,
including affiliates. Nevertheless, the New York Education Law does
provide certain ``grandfather'' exemptions that allow these services
to be provided by business corporations that have been lawfully
practicing engineering or land surveying and were organized and
existing under the laws of the State of New York on April 15, 1935
and have existed continuously thereafter. KENG satisfies the
requirements of the ``grandfathering'' provisions. Accordingly,
KeySpan utilizes KENG as a separate service company to allow for the
centralized provision of engineering and surveying services.
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C. Allocation Methodologies Used by the Service Companies
Applicants state that the Service Companies allocate all their
costs to associated regulated and non-utility companies through a
tiered approach. All costs are allocated and billed at cost in
accordance with section 13 and rules 90 and 91 of the Act. Costs are
first billed directly whenever practicable, including instances when
more than one associate company is receiving the same goods or service
at the same time. Amounts that cannot be directly assigned will be
allocated to client companies by means of equitable allocation
formulae, which to the extent possible will be based on cost-causation
relationships. All other allocations will be broad based. In some
instances, each of the Service Companies' cost centers that perform
work for other service company cost centers may use a surrogate
allocation method that mimics the allocations of the receiver cost
center. Each formula will have an appropriate basis, such as meters and
square footage.
Allocation percentages will be calculated on historical data where
appropriate and updated annually.\4\ The method of assignment or
allocation of costs shall be reviewed annually or more frequently if
appropriate. If the use of a basis of allocation would result in an
inequity because of a change in operation or organization, then the
Service Companies may adjust the basis to effect an equitable
distribution.
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\4\ Due to the unique nature of KeySpan's relationship with the
Long Island Power Authority (``LIPA''), the revenues and assets
managed on its behalf will be included in the basis, with the
appropriate client company's data, in order to determine appropriate
allocations. KeySpan Electric Services LLC provides to LIPA all
operation, maintenance and construction services and significant
administrative services relating to the Long Island electric
transmission and distribution system, supplies LIPA with generating
capacity, energy conversion and ancillary services, and manages all
aspects of the fuel supply for KeySpan's generating facilities, as
well as all aspects of the capacity and energy owned by or under
contract to LIPA. KeySpan Electric Services LLC also purchases
energy, capacity and ancillary services in the open market on LIPA's
behalf.
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Applicants state that the cost of service will be determined in
[[Page 30981]]
accordance with the Act and will include all costs of doing business
incurred by the Service Companies, including a reasonable return on
capital which will reflect a capitalization of the Service Companies of
no more than ten percent equity, and all associated taxes.
Applicant's state that each Service Company will maintain an
accounting system for accumulating all costs on a project, activity or
other appropriate basis. Expenses for the department will include
salaries and wages of employees, materials, and supplies and all other
expenses attributable to the department. Labor costs will be loaded for
fringe benefits and payroll taxes. Time records of hours worked by all
Service Company employees, including all officers of the company (i.e.,
Chief Executive Officer, President and Vice Presidents) will be kept by
project and activity.
Each client company will take agreed upon services and such
additional, general, or special services as the client company may
request and which the particular Service Company concludes it is able
to perform. No amendment, alteration or rescission of an activity or
project shall release a client company from liability for all costs
already incurred by, or contracted for, the applicable Service Company
pursuant to the project or activity regardless of whether the services
associated with the costs have been completed.
Applicants state that each of the Service Companies' accounting and
cost allocation methods and procedures have been structured so as to
comply with the ``Uniform System of Accounts for Mutual Service
Companies'' established by the Commission for holding company systems.
Moreover, each of the Service Companies will file the annual report
required by the Commission pursuant to rule 94 under the Act.
Applicants represent that no change in the organization of a
Service Company, the type and character of the companies to be
serviced, the methods of allocating cost to associate companies or the
scope or character of the services to be rendered subject to section 13
of the Act, or any rule, regulation, or order thereunder, shall be made
until the Service Company shall first have given the Commission notice
of the proposed change not less than 60 days prior to the proposed
effectiveness. If, upon the receipt of a notice, the Commission shall
notify the Service Company within the 60 day period that a question
exists as to whether the proposed change is consistent with the
provisions of section 13 of the Act, or of any rule, regulation, or
order thereunder, then the proposed change shall not become effective
unless and until the Service Company shall have filed with the
Commission an appropriate declaration regarding the proposed change and
the Commission shall have permitted the declaration to become
effective.
D. Reservation of Jurisdiction Over the Use of KCS and KUS as Separate
Service Companies Pending Dissolution of KUS
Applicants state that in 1998, as a condition of the NYPSC's
approval of the formation of KeySpan as utility holding company, the
NYPSC required KeySpan to form KCS and KUS in order to provide the
services noted above. Applicants now request that the Commission
continue to reserve jurisdiction over the use of KCS and KUS as
separate service companies pending and subject to approval by the
NYPSC, upon KeySpan's petition, to eliminate the need to utilize KUS as
a separate service company. KeySpan proposes to petition the NYPSC to
allow Applicants to eliminate the need to utilize KUS as a separate
service company. The petition will generally request authorization to
utilize KCS as the single service company that would provide to the
entire KeySpan system both corporate administrative services as well as
gas marketing, gas supply, gas and electric distribution planning,
meter repair operations, and all other services currently being
provided by KUS and KCS. Key Span proposes to file this NYPSC petition
on or before December 31, 2005 and anticipates that the NYPSC will act
on this petition on or before December 31, 2006.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-2725 Filed 5-27-05; 8:45 am]
BILLING CODE 8010-01-P