[Federal Register Volume 70, Number 134 (Thursday, July 14, 2005)]
[Notices]
[Pages 40756-40757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3721]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27997]


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

July 7, 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 2, 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 August 2, 2005, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Western Massachusetts Electric Company (70-10308)

    Western Massachusetts Electric Company (``WMECO''), a public 
utility subsidiary of Northeast Utilities, a registered public utility 
holding company, has filed with the Commission an application/
declaration (``Application'') under sections 6(a) and 7 of the Act 
seeking authorization to maintain its common equity-to-total 
capitalization ratio below the Commission's threshold of 30% (the ``30% 
Threshold'') when certain Rate Reduction Bonds (non-recourse 
securitization bonds) are included in the calculation of the ratio, 
through December 31, 2006 (the ``Authorization Period''). The term 
``total capitalization'' is defined to include, where applicable, 
common stock equity (comprised of common stock, additional paid in 
capital, retained earnings, accumulated

[[Page 40757]]

other comprehensive income or loss and/or treasury stock), minority 
interests, preferred stock, preferred securities, equity linked 
securities, long-term debt (including Rate Reduction Bonds), short-term 
debt and current maturities.
    On March 7, 2000, the Commission issued an order in file 70-9541 
(HCAR 35-27147, the ``Prior Order'') granting WMECO's and its 
affiliates'' previously-submitted application/declaration (``Original 
Application'') in which the Commission recognized the fact that WMECO 
(and other affiliated utilities) would fall below the 30% Threshold 
when the impact of Rate Reduction Bonds were included in its 
capitalization calculation and authorized this through December 31, 
2004. The Commission noted that restructuring legislation in 
Massachusetts where WMECO operates allowed for the issuance of Rate 
Reduction Bonds to finance a portion of the utility's cost incurred in 
the sale of its regulatory assets and/or renegotiation of its 
obligations under purchase power contracts. Rate Reduction Bonds are 
securities issued in accordance with state law by a special purpose 
subsidiary of the utility to finance a portion of a utility's cost 
incurred in the sale of its regulatory assets and/or renegotiation of 
its obligations under purchase power contracts, and are non-recourse to 
WMECO or the NU system. As stated in the Original Application, because 
of the state-mandated divestiture of generating assets and issuance of 
Rate Reduction Bonds, NU's utilities, including WMECO, experienced a 
significant decrease in the amount of tangible assets that each owned 
and received a significant influx of cash causing each of NU's electric 
utilities to fall below the 30% Threshold when the impact of Rate 
Reduction Bonds and the effects of capital restructuring associated 
with the asset divestitures were considered. On May 17, 2001, WMECO 
Funding LLC, a subsidiary of WMECO, issued $155 million of Rate 
Reduction Bonds causing WMECO to fall below the 30% Threshold at that 
time.\1\
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    \1\ In a financing order issued July 2, 2004, HCAR No. 27868A, 
the Commission noted that WMECO's Debt/Equity Ratio had improved to 
a level of 66.6% / 33.4%.
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    The Original Application also stated that the ratings of the 
respective senior debt securities of WMECO would be unaffected or would 
be improved by the issuance of the Rate Reduction Bonds, as such bonds 
are not considered obligations of the utilities by the ratings 
agencies. The Original Application stated that the senior debt ratings 
of WMECO issued by Standard & Poor's (``S&P) were ``BBB-'' while the 
senior debt ratings of WMECO issued by Moody's Investor Service, Inc. 
(``Moody's'') were ``Baa3''. Since that time, WMECO's credit ratings 
have improved. As of the date of this filing, WMECO's senior unsecured 
debt ratings from S&P and Moody's were BBB+ and Baa2, respectively.
    By order issued December 28, 2004 the Commission authorized an 
extension for WMECO's utility affiliates, Connecticut Light and Power 
Company (``CL&P'') and Public Service of New Hampshire (``PSNH''), to 
remain below the 30% Threshold when the impact of the Rate Reduction 
Bonds is considered. The Commission reserved jurisdiction on the 
request by CL&P and PSNH to remain below the 30% Threshold through 
December 31, 2007 but granted authority beyond December 31, 2006. WMECO 
was not an applicant for that extension of authority and did not 
receive the extension granted to its utility affiliates. During the 
fourth quarter of 2004, WMECO was forecasted to be at 30.6% common 
equity ratio at year's end and to improve thereafter. WMECO's actual 
common equity ratio at December 31, 2004 was 30.7%, but at March 31, 
2005 its actual common equity ratio was at 30.8%, slightly lower than 
had been forecast.
    In preparing the budget and financing plans for WMECO for 2005, 
management noted that there is a risk that WMECO could fall below the 
30% Threshold, when the impact of the Rate Reduction Bonds is 
considered, at some point during the Authorization Period and is 
forecast to remain only slightly above 30% through December 31, 2005. 
Management's forecast does anticipate that WMECO's common equity ratio 
will end the year at 31.7%. WMECO states, however, that there is 
inherent uncertainty in forecasts, and therefore is WMECO now seeking 
authorization through the Authorization Period for its common equity 
ratio to remain below the 30% Threshold when the impact of Rate 
Reduction Bonds is considered while remaining above 30% when the impact 
of Rate Reduction Bonds is excluded.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3721 Filed 7-13-05; 8:45 am]
BILLING CODE 8010-01-P