[Federal Register Volume 70, Number 132 (Tuesday, July 12, 2005)]
[Notices]
[Pages 40074-40075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13603]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27996]


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

July 6, 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 August 1, 2005, to the Secretary, Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC. 20549-9303, and serve a 
copy on the relevant applicant(s) and/or declarant(s) at the 
addressees) 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 August 1, 2005, the 
application(s) and/or declaration(s), as filed or as amended, may be 
granted and/or permitted to become effective.

Unitil Corporation, et al. (70-10310)

    Unitil Corporation (``Unitil''), a registered holding company, of 6 
Liberty Lane West, Hampton, New Hampshire 03842-1720; and its wholly-
owned public-utility subsidiaries, Fitchburg Gas and Electric Light 
Company (``Fitchburg'') and Unitil Energy Systems, Inc. (``Unitil 
Energy''); and its wholly-owned non-utility subsidiaries, Unitil Power 
Corp. (``Unitil Power''), Unitil Realty Corp. (``Unitil Realty''), 
Unitil Resources, Inc. (``Unitil Resources'') and Unitil Service Corp. 
(``Unitil Service'' and, together with Fitchburg, Unitil Energy, Unitil 
Power, Unitil Realty and Unitil Resources, the ``Subsidiaries'') (and 
the Subsidiaries together with Unitil, the ``Applicants'') have filed 
an application-declaration (``Declaration'') under Sections 6(a), 7 and 
12(b) of the Act and Rules 45, 52, 53 and 54 under the Act. Applicants 
seek authority through June 30, 2006 (the ``Authorization Period'') for 
certain hedging transactions with respect to existing indebtedness in 
order to manage and minimize interest rate costs, and certain hedging 
transactions with respect to anticipatory debt issuances in order to 
lock-in current interest rates and/or manage interest rate risk 
exposure.

Background

    The Unitil system distributes electricity in the southeastern 
seacoast and capital city areas of New Hampshire and distributes both 
electricity and natural gas in the greater Fitchburg area of north 
central Massachusetts through its two subsidiaries that are ``public 
utility companies'' within the meaning of Section 2(a)(5) of the Act 
(Fitchburg and Unitil Energy). Unitil's public utilities serve 
approximately 97, 500 electric customers and 15,000 natural gas 
customers in their franchise areas. Unitil Service provides, at cost, a 
variety of administrative and professional services on a centralized 
basis to its affiliated Unitil companies in accordance with a service 
agreement approved by the Commission. Unitil Realty owns and manages 
the Unitil's corporate office in Hampton, New Hampshire and leases this 
facility to Unitil Service under a long-term lease arrangement. Unitil 
Resources provides energy related consulting and management services to 
customers outside of the Unitil system of affiliates. Unitil Power 
formerly functioned as the full requirements wholesale power supply 
provider for Unitil Energy. In connection with the implementation of 
electric industry restructuring in New Hampshire, Unitil Power ceased 
being the wholesale supplier of Unitil Energy on May 1, 2003 and 
divested of its long-term power supply contracts through the sale of 
the entitlements to the electricity associated with those contracts.
    By order dated June 30, 2003 (HCAR No. 27691, (the ``Short Term 
Debt Order'')), the Applicants are currently authorized to make 
unsecured short-term borrowings in the amount of $55 million for Unitil 
and $35 million for Fitchburg, and to operate a Money Pool.

[[Page 40075]]

Requests Authorization

    (a) Interest Rate Hedges. Until, and to the extent not exempt 
pursuant to Rule 52, the Subsidiaries, request authorization to enter 
into interest rate hedging transactions with respect to existing 
indebtedness (``Interest Rate Hedges''), subject to certain limitations 
and restrictions.\1\ Interest Rate Hedges would be used as a means of 
prudently managing the risk associated with outstanding debt issued 
pursuant to, and subject to the limitations of, financing authority 
granted to the Applicants by the Commission under the Act or an 
applicable exemption by, in effect, synthetically (i) converting 
variable-rate debt to fixed-rate debt, (ii) converting fixed-rate debt 
to variable-rate debt, and (iii) limiting the impact of changes in 
interest rates resulting from variable-rate debt. In no case will the 
notional principal amount of any interest rate hedge exceed the face 
value of the underlying debt instrument and related interest rate 
exposure. Transactions will be entered into for a fixed or determinable 
period. Thus, the Applicants will not engage in leveraged or 
speculative derivative hedging transactions. Interest Rate Hedges 
(other than exchange-traded Interest Rate Hedges) would only be entered 
into with counterparties (``Approved Counterparties'') whose senior 
unsecured debt ratings, or the senior unsecured debt ratings of the 
parent companies providing a guarantee of the counterparties, as 
published by Standard & Poors Rating Services, are equal to or greater 
than BBB, or an equivalent rating from Moody's Investors Service or 
Fitch Inc.
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    \1\ Applicants represent that hedging transactions by Fitchburg 
and Unitil Energy may not be exempt under Rule 52 because the 
relevant public utility commissions may not have jurisdiction over 
the issuance. For example, the Massachusetts Department of 
Telecommunications and Energy does not have jurisdiction over short-
term securities issuances by public utilities. On the other hand, 
Applicants state that Unitil Energy's entry into Interest Rate 
Hedges and Anticipatory Hedges will require approval of the New 
Hampshire Public Service Commission and therefore may be exempt from 
Commission approval under Rule 52.
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    Interest Rate Hedges would involve the use of financial instruments 
commonly used in today's capital markets, such as exchange-traded 
interest rate futures contracts and over-the-counter interest rate 
swaps, caps, collars, floors, options, forwards, 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 Securities or U.S. government agency (e.g., 
Fannie Mae) obligations, or London Interbank Offered Rate--
(``LIBOR'')--based swap instruments and similar products designed to 
manage interest rate or credit risks. The transactions would be for 
fixed periods and stated notional amounts.
    (b) Anticipatory Hedges. In addition, Unitil and the Subsidiaries 
request authorization to enter into interest rate hedging transactions 
with respect to anticipated debt offerings (the ``Anticipatory 
Hedges''), subject to certain limitations and restrictions. Such 
Anticipatory Hedges (other than exchange-traded 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 (i) a forward sale of exchange-traded U.S. 
Treasury futures contracts, U.S. Treasury Securities and/or a forward-
dated swap (each a ``Forward Sale''), (ii) the purchase of put options 
on U.S. Treasury Securities (a ``Put Options Purchase''), (iii) a Put 
Options Purchase in combination with the sale of call options on U.S. 
Treasury Securities (a ``Zero Cost Collar''), (iv) transactions 
involving the purchase or sale, including short sales, of U.S. Treasury 
Securities, 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.
    Anticipatory Hedges would be executed on-exchange (``On-Exchange 
Trades'') with brokers through (i) the opening of futures and/or 
options positions traded on the Chicago Board of Trade, the New York 
Mercantile Exchange or other financial exchange, (ii) the opening of 
over-the-counter positions with one or more counterparties (``Off-
Exchange Trades''), or (iii) a combination of On-Exchange Trades and 
Off-Exchange Trades. Unitil would determine the optimal structure of 
each Anticipatory Hedge transaction at the time of execution.
    (c) General. The Applicants will comply with Statement of Financial 
Accounting Standards (``SFAS'') 133 (``Accounting for Derivative 
Instruments and Hedging Activities''), SFAS 138 (``Accounting for 
Certain Derivative Instruments and Certain Hedging Activities'') and 
SFAS 149 (``Amendment of Statement 133 on Derivative Instruments and 
Hedging Activities'') or other standards relating to accounting for 
derivative transactions as are adopted and implemented by the Financial 
Accounting Standards Board (``FASB''). The Applicants represent 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.
    Fees, commissions and other amounts payable to the counterparty or 
exchange (excluding, however, the swap or option payments) in 
connection with an interest rate risk management arrangement will not 
exceed those generally obtainable in competitive markets for parties of 
comparable credit quality.
    Applicants state that the authorization sought herein shall be 
conditioned upon Unitil, Fitchburg and Unitil Energy maintaining a 
common equity level of at least 30% of its consolidated capitalization 
during the Authorization Period.\2\ As of March 31, 2005, 40% of 
Unitil's consolidated capitalization was common equity; 42% of Unitil 
Energy's capitalization was common equity; and 35% of Fitchburg's 
consolidated capitalization was common equity.
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    \2\ Consolidated Capitalization is defined to include, where 
applicable, all common stock equity (comprised of common stock, 
additional paid-in capital, retained earnings, treasury stock and 
other comprehensive income), minority interests, preferred stock, 
preferred securities, equity-linked securities, long-term debt, 
short-term debt and current maturities.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 05-13603 Filed 7-11-05; 8:45 am]
BILLING CODE 8010-01-M