FILE NO. 70-9541
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT No. 1
(AMENDMENT NO. 6)
TO FORM U-1
APPLICATION/DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Northeast Utilities The Connecticut Light and
Western Massachusetts Electric Power Company
Company 107 Selden Street
One Federal Street Berlin, CT 06037
Building 111-4
Springfield, MA 01105 Public Service Company of
New Hampshire
Energy Park
780 North Commercial Street
NU Enterprises, Inc. Manchester, NH 03101-1134
Northeast Generation Company
Northeast Generation Services
Company
Select Energy, Inc Select Energy Services, Inc.
Select Energy New York, Inc. Select Energy Contracting, Inc.
E. S. Boulos Company 24 Prime Parkway
Yankee Energy Services Company Natick, MA 01760
Yankee Energy Financial Services
Company
Woods Electrical Contracting, Inc. Reeds Ferry Supply Co., Inc.
107 Selden Street 605 Front Street
Berlin, CT 06037 Manchester, NH 03102
(Names of companies filing this statement and addresses of
principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler
Senior Vice President, Secretary and General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
Jeffrey C. Miller, Esq. David R. McHale
Assistant General Counsel Vice President and Treasurer
Northeast Utilities Service Northeast Utilities Service
Company Company
107 Selden Street 107 Selden Street
Berlin, CT 06037 Berlin, CT 06037
The Application/Declaration in this File, as heretofore
amended, is hereby further amended and restated as follows:
ITEM 1
DESCRIPTION OF PROPOSED TRANSACTION
Introduction
1. Northeast Utilities ("NU"), a public utility holding
company registered under the Public Utility Holding Company Act
of 1935, as amended ("the Act"), The Connecticut Light and Power
Company ("CL&P"), Public Service Company of New Hampshire
("PSNH") and Western Massachusetts Electric Company ("WMECO"),
each an electric utility subsidiary of NU, North Atlantic Energy
Corporation ("NAEC"), formerly a utility under the Act, NU
Enterprises, Inc. ("NUEI"), a sub-holding company over certain of
NU's non-utility subsidiaries, Northeast Generation Company
("NGC"), Northeast Generation Services Company ("NGS"), Select
Energy, Inc. ("SE"), HEC Inc., now known as Select Energy
Services, Inc. ("SESI"), Select Energy Portland Pipeline, Inc.
("SEPPI"), Reeds Ferry Supply Co., Inc. ("Reeds"), Select Energy
Contracting, Inc. ("SECI") and HEC Energy Consulting Canada Inc.
("HEC Energy"), each a direct or indirect non-utility subsidiary
of NU, (collectively, the "Applicants"), submitted an
application/declaration (the "Original Application") pursuant to
Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and Rules
26(c)(3), 42, 43, 44 and 46(a) thereunder with respect to (a) the
payment of dividends to, and/or the repurchase of stock from, NU
out of capital or unearned surplus by each of CL&P, PSNH, WMECO
and NAEC, from certain restructuring proceeds, though, as a
result of the issuance of Rate Reduction Bonds (as described
herein) each of CL&P, WMECO and PSNH (collectively, the
"Utilities"), and NU , on a consolidated basis, would fall below
the Commission's common equity-to- total capitalization threshold
of 30% (the "30% Threshold"), (b) the payment of dividends to,
and/or the repurchase of stock from, NU out of capital or
unearned surplus by NUEI, the payment of dividends, and/or the
repurchase of stock out of capital or unearned surplus by each of
NGC, NGS, SE, SESI, SEPPI, Reeds, SECI and HEC Energy, in each
case from their respective parent company, (c) the payment of
dividends and/or the repurchase of stock out of capital or
unearned surplus by CL&P from certain restructuring proceeds in
accordance with the provisions of CL&P's dividend covenant under
its First Mortgage Indenture and Deed of Trust dated May 1, 1921
to the Bankers Trust Company as trustee all through December 31,
2004 (the "Initial Authorization Period"), and (d) the issuance
of additional shares by NU to the extent necessary to fulfill its
obligations under one or more forward stock purchase contracts
through June 30, 2001.
2. On March 7, 2000, the Commission issued an order
authorizing the above transactions (the "Prior Order"). This Post-
effective amendment to the Application now (i) seeks a
modification and extension through December 31, 2007 (the
"Authorization Period") of the authorization for the payment of
dividends to, and/or the repurchase of stock from, NU out of
capital or unearned surplus by NUEI, the payment of dividends to,
and/or the repurchase of stock from their respective parent
company, out of capital or unearned surplus by each of NGC, NGS,
SE, SESI and SECI, subject to the limitations set forth herein;
(ii) requests the addition of E.S. Boulos Company ("Boulos") and
Woods Electrical Contracting, Inc. ("Woods"), both wholly-owned
subsidiaries of NGS, Yankee Energy Service Company ("YESCO") and
Yankee Energy Financial Services Company ("Yankee Financial"),
both competitive subsidiaries of Yankee Energy System, Inc.,
Select Energy New York, Inc. ("SENY"), a subsidiary of SE, and
any other direct or indirect to-be-formed non-utility subsidiary
of NU, as applicants to this application for purposes of
authorizing each of them to pay dividends to, and/or repurchase
stock from their respective parent company out of capital or
unearned surplus, (NUEI, NGC, NGS, SE, SENY, SESI, Reeds, SECI,
Boulos, Woods, YESCO, Yankee Financial and any direct or indirect
non-utility subsidiary of NU collectively referred to as the
"Competitive Subsidiaries") , and (iii) seeks an extension
through the Authorization Period of the authorization granted in
the Prior Order for CL&P and PSNH to remain below the 30%
Threshold, as a result of the impact of the Rate Reduction Bonds.
The Utilities are not seeking an extension of any other
authorizations granted in the Prior Order.
3. In the Prior Order, the Commission noted that
restructuring legislation in each state in which the utility
subsidiaries of NU were located allowed for the issuance of Rate
Reduction Bonds by each Utility 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 by a
subsidiary of the Utility and are non-recourse to the Utility or
the NU system. As stated in the Original Application, because of
the mandated divestiture of generating assets and issuance of
Rate Reduction Bonds, the Utilities experienced a significant
decrease in the amount of tangible assets that each owned and
received a significant influx of cash.
4. The Original Application noted that, as a result of
increased debt from the issuance of the Rate Reduction Bonds, NU
and the Utilities would fall below the Commission's benchmark of
30% common equity-to-total capitalization ratio ("Common Equity
Ratio"). After giving effect to various restructuring
transactions, including the then-contemplated issuance of the
Rate Reduction Bonds, CL&P's pro forma Common Equity Ratio, as
reported in Exhibit K filed with the Original Application was
projected to be 19.1%, WMECO's pro forma Common Equity Ratio was
projected to be 16.6%, PSNH's pro forma Common Equity Ratio was
projected to be 14.2%, and NU's pro forma Common Equity Ratio was
projected to be 29.1%. In the Original Application, the
Applicants stated that they expected NU's Common Equity Ratio to
be above 30% by December 31, 2001 but that the Utilities expect
that their Common Equity Ratios would remain below 30%
throughout the duration of the Initial Authorization Period and
thereafter. The Commission, in the Prior Order, noted that after
the end of the Initial Authorization Period, further Commission
authority would be required if the Common Equity Ratios of any of
the Utilities would be below 30%.
5. The Original Application also stated that the ratings
of the respective senior debt securities of CL&P, WMECO and PSNH
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 CL&P,
WMECO and PSNH issued by Standard & Poor's were each "BBB-" while
the senior debt ratings of CL&P and WMECO issued by Moody's
Investor Service, Inc. were each "Baa3" and that of PSNH was
"Ba3". Since that time, the respective
credit ratings of each of the Utilities has improved as follows
(as of September 17, 2004):
Moody's Standard and Poor's Fitch
------- ------------------- ------
CL&P
Corporate A3 BBB+ N/R*
Senior Secured A2 A- A-
Senior Unsecured A3 BBB BBB+
Preferred Stock Baa2 BBB- BBB
WMECO
Corporate A3 BBB+ N/R
Senior Unsecured A3 BBB+ BBB+
PSNH
Corporate Baa1 BBB+ N/R
Senior Secured A3 BBB+ BBB+
N/R - Not rated
6. In the Original Application, CL&P, WMECO and PSNH
stated that they anticipated that all such debt would be
amortized by no later than twelve years after the respective date
when such company had issued the maximum principal amount of Rate
Reduction Bonds which it intended to issue. Thus the companies'
Common Equity Ratio would exceed 30% by no later than the end of
such 12-year period. In the Original Application, the Applicants
stated that, assuming full amortization of the Rate Reduction
Bonds by the end of the twelfth year, the Common Equity Ratio of
each Utility would reach 30% in the ninth year in the case of
CL&P and in the tenth year in the case of WMECO and PSNH. CL&P
and WMECO subsequently filed for further authorization to repay
capital to NU due to the unexpectedly high prices received for
their shares of the Millstone nuclear plant. See, generally,
File No. 70-9839. In that filing, and knowing the amortization
rates of their respective Rate Reduction Bonds, CL&P and WMECO
estimated their Common Equity Ratios would exceed 30% by December
31, 2007 and December 31, 2002, respectively. (See HCAR 35-27529,
May 16, 2002).
7. On March 30, 2001, CL&P Funding LLC, a subsidiary of
CL&P, issued approximately $1.4 billion of Rate Reduction Bonds.
On May 17, 2001, WMECO Funding LLC, a subsidiary of WMECO, issued
$155 million of Rate Reduction Bonds. On April 25, 2001, PSNH
Funding LLC, a subsidiary of PSNH issued $525 million of Rate
Reduction Bonds and on January 30, 2002, PSNH Funding LLC 2
issued $50 million of Rate Reduction Bonds. As a result of the
amortization of Rate Reduction Bonds, NU had increased its Common
Equity Ratio to above 30% by December 31, 2001, and WMECO had
increased its Common Equity Ratio to above 30% by December 31,
2002. The Common Equity Ratios of Both CL&P and PSNH, however,
remain below 30% when the impact of the Rate Reduction Bonds is
included. As of June 30, 2004, NU's Common Equity Ratio was
34.8% and WMECO's Common Equity Ratio was 34.4%, while CL&P's
Common Equity Ratio was 25.1% and PSNH's Common Equity Ratio was
29.5%. When the impact of Rate Reduction Bonds is not included in
capitalization, CL&P's Common Equity Ratio is 39.2% and PSNH's
Common Equity Ratio is 45.1%. CL&P and PSNH seek authorization
through the Authorization Period for their respective Common
Equity Ratios to remain below the 30% Threshold when the impact
of Rate Reduction Bonds is considered.
Payments of Dividends or a Stock Repurchase by Competitive
Subsidiaries
8. NU and the Competitive Subsidiaries seek a modification
and extension, through the Authorization Period, of the
authorization contained in the Prior Order for the payment of
dividends to, and/or the repurchase of stock from, the respective
parent company of each such Competitive Subsidiary, in each case
out of capital or unearned surplus, subject to the new
limitations set forth herein. The modification to the
authorization in the Prior Order is to add Boulos, Woods, SENY,
YESCO and Yankee Financial as applicants and to add the
limitations on the payment of dividends as set forth below.
There may be situations in which one or more of the Competitive
Subsidiaries will have unrestricted cash available for
distribution in excess of current and retained earnings resulting
from a disposition of assets, a restructuring or other accounting
charge that eliminated retained earnings or its normal operations
(excluding debt financing). Consistent with these considerations,
NU and the Competitive Subsidiaries seek authorization for the
payment of dividends to, and/or the repurchase of stock from, the
respective parent company of each such Competitive Subsidiary, in
each case out of capital or unearned surplus provided, however,
that, without further approval of the Commission, no Competitive
Subsidiary will declare or pay any dividend out of capital or
unearned surplus if such Competitive Subsidiary derives any
material part of its revenues from the sale of goods, services or
electricity to an associate Utility (such company referred to as
a "Non-exempt Subsidiary"). In addition, the Competitive
Subsidiaries will not declare or pay any dividend out of capital
or unearned surplus unless such Competitive Subsidiary:
(i) has received excess cash as a result of the sale of its
assets;
(ii) has engaged in a restructuring or reorganization; and/or
(iii) is returning capital to an associate company.
NU requests that the Commission reserve jurisdiction over
dividends out of capital or unearned surplus paid by any such Non-
exempt Subsidiary.
Statement Pursuant to Rule 54
9. Except in accordance with the Act, neither NU nor any
subsidiary thereof (a) has acquired an ownership interest in an
EWG or a FUCO, as defined in Sections 32 and 33 of the Act, or
(b) now is or as a consequence of the transactions proposed
herein will become a party to, or has or will as a consequence of
the transactions proposed herein have a right under, a service,
sales, or construction contract with an EWG or a FUCO. None of
the proceeds from the transactions proposed herein will be used
by NU and its subsidiaries to acquire any securities of, or any
interest in, an EWG or a FUCO.
10. NU currently meets all of the conditions of Rule 53(a),
except for clause (1). At June 30, 2004, NU's "aggregate
investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was
approximately $448.2 million, or approximately 53.6% of NU's
average "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended June 30, 2004 ($836
million). With respect to Rule 53(a)(1), however, the Commission
has determined that NU's financing of its investment in EWGs in
an amount not to exceed $1 billion would not have either of the
adverse effects set forth in Rule 53(c). (HCAR 35-27868A, July 2,
2004, the "2004 Order"). NU continues to assert that its EWG
investments will not adversely affect the System.
11. In addition, NU and its subsidiaries are in compliance
and will continue to comply with the other provisions of Rule
53(a) and (b), as demonstrated by the following determinations:
(i) NGC, NU's only EWG, maintains books and
records, and prepares financial statements, in accordance with
Rule 53(a)(2). Furthermore, NU has undertaken to provide the
Commission access to such books and records and financial
statements, as it may request;
(ii) No employees of NU's public utility subsidiaries
have rendered services to NGC;
(iii) NU has submitted (a) a copy of each Form U-1
and Rule 24 certificate that has been filed with the Commission
under Rule 53 and (b) a copy of Item 9 of the Form U5S and
Exhibits G and H thereof to each state regulator having
jurisdiction over the retail rates of NU's affected public
utility subsidiaries;
(iv) Neither NU nor any subsidiary has been the
subject of a bankruptcy or similar proceeding unless a plan of
reorganization has been confirmed in such proceeding;
(v) NU's average consolidated retained earnings
for the four most recent quarterly periods have not decreased by
10% or more from the average for the previous four quarterly
periods; and
(vi) In the previous fiscal year, NU did not
report operating losses attributable to its investment in
EWGs/FUCOs exceeding 3 percent of NU's consolidated retained
earnings.
12. The proposed transactions, considered in
conjunction with the effect of the capitalization and earnings of
NU's EWG, would not have a material adverse effect on the
financial integrity of the NU system, or an adverse impact on
NU's public-utility subsidiaries, their customers, or the ability
of State commissions to protect such public-utility customers.
The 2004 Order concerning EWG investments was predicated, in
part, upon an assessment of NU's overall financial condition
which took into account, among other factors, NU's consolidated
capitalization, consolidated net utility and consolidated total
assets.
13. The consolidated capitalization ratios of NU as of June
30, 2004, with consolidated debt including all short-term debt
and non-recourse debt of the EWG, were as follows:
As of June 30, 2004
(thousands
of dollars) %
Common shareholders' equity $2,323,458 34.8%
Preferred stock 116,200 1.7
Long-term and short-term debt 2,605,848 39.0
Rate reduction bonds 1,639,344 24.5
Total $6,684,850 100.0%
If Rate Reduction Bonds are excluded the consolidated
capitalization ratio of NU as of June 30, 2004 is as follows:
As of June 30, 2004
(thousands
of dollars) %
Common shareholders' equity $2,323,458 46.1%
Preferred stock 116,200 2.3
Long-term and short-term debt 2,605,848 51.6
Total $5,045,506 100.0%
14. NU's current EWG investment, NGC, (it has no FUCO
investment) has been profitable for all quarterly periods ending
June 30, 2000 through June 30, 2004 (NGC was acquired in March
2000). In addition, NGC has made a positive contribution to
earnings by contributing $148.7 million in revenues in the 12-
month period ending June 30, 2004 and net income of $39.4 million
for the same period.
ITEM 2
FEES, COMMISSIONS, AND EXPENSES
15. The estimated fees, commissions, and expenses paid or
incurred, or to be paid or incurred, directly or indirectly, in
connection with the proposed transactions by the Company or any
associate company thereof are estimated to be not in excess of
$25,000.
16. None of such fees, commissions, or expenses are to be
paid to any associate company or affiliate of the Companies or
any affiliate of any such associate company except for financial,
legal, and other services to be performed at cost by NUSCO, an
affiliated service company.
ITEM 3
APPLICABLE STATUTORY PROVISIONS
17. Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and
Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder are or may be
applicable to the proposed transactions. To the extent any other
sections of the Act or Rules thereunder may be applicable to the
proposed transaction, the Applicants request appropriate orders
thereunder.
ITEM 4
REGULATORY APPROVAL
18. No other state commission has jurisdiction with respect
to any aspect of the proposed transaction, and no Federal
commission other than the Securities and Exchange Commission has
jurisdiction with respect to any aspect thereof.
ITEM 5
PROCEDURE
19. The Company respectfully requests the Commission's
approval, pursuant to this Post-effective amendment to the
Application/Declaration, of the transaction as described herein,
whether under the sections of the Act and rules thereunder
enumerated in Item 3 or otherwise. The Company also requests the
Commission's approval as may be necessary of any other aspect of
the transactions described in this Post-effective amendment to
the Application/Declaration under the appropriate provisions of
the Act or rules thereunder.
20. The Company hereby waives any recommended decision by a
hearing officer or by any other responsible officer of the
Commission and waives the 30-day waiting period between the
issuance of the Commission's order and the date on which it is to
become effective, since it is desired that the Commission's
order, when issued, become effective forthwith. The Company
consents that the Office of Public Utility Regulation within the
Division of Investment Management may assist in the preparation
of the Commission's decision and/or order unless the Office
opposes the transactions covered by this Post-effective Amendment
to the Application. It is requested that the Commission issue an
order authorizing the jurisdictional transactions proposed herein
at the earliest practicable date but in any event not later than
40 days from filing date. It is further requested that (i) there
not be a recommended decision by an Administrative Law Judge or
other responsible officer of the Commission, (ii) the Office of
Public Utility Regulation be permitted to assist in the
preparation of the Commission's decision, and (iii) the
Commission's order become effective forthwith upon issuance.
ITEM 6
EXHIBITS AND FINANCIAL STATEMENTS
1. Asterisked (*) items indicate items previously filed
(a) Exhibits
*A. Pro Forma Capitalization Ratios Schedule
*F. Opinion of Counsel
*G. Financial Data Schedules
*H. Proposed Form of Notice
*H.1 Revised Proposed Form of Notice
*I. Chart Depicting Utilities' Proceeds from Restructuring
Transactions and Uses Thereof
*J. CL&P Mortgage Indenture Dividend Covenant
*K. Projected Capital Structure with Rate Reduction Bonds
ITEM 7
INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) The issuance of an order with respect to this Post-
effective Amendment to the Application/Declaration is not a major
federal action significantly affecting the quality of the human
environment.
(b) No Federal agency has prepared or is preparing an
environmental impact statement with respect to the subject
transactions.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies have
duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
NORTHEAST UTILITIES
THE CONNECTICUT LIGHT AND POWER COMPANY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
WESTERN MASSACHUSETTS ELECTRIC COMPANY
NU ENTERPRISES, INC.
NORTHEAST GENERATION COMPANY
NORTHEAST GENERATION SERVICES COMPANY
SELECT ENERGY, INC.
WOODS ELECTRICAL CONTRACTING, INC.
SELECT ENERGY SERVICES, INC.
E.S. BOULOS COMPANY, INC.
REEDS FERRY SUPPLY CO, INC.
SELECT ENERGY CONTRACTING, INC.
YANKEE ENERGY SERVICES COMPANY
YANKEE ENERGY FINANCIAL SERVICES COMPANY
By: /s/ Randy A. Shoop
Name: Randy A. Shoop
Title: Treasurer
Date: September 23, 2004
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In the Original Application, NAEC was listed as a utility;
as a result of the sale of its utility assets, NAEC is no longer
a utility for purposes of the Act. NAEC, along with SEPPI and HEC
Energy, which are now inactive, do not seek an extension of the
authorizations previously granted and are not applicants to this
post-effective amendment to the application, as amended.
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