SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27825)
Filings Under the Public Utility Holding Company Act of 1935, as amended ("Act")
March 30, 2004
Notice is hereby given that the following filing(s) has/have been made with the Commission under 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 April 20, 2004, to the Secretary, Securities and Exchange Commission, Washington, D.C. 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 April 20, 2004, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective.
Pepco Holdings, Inc., et al. (70-10217)
Pepco Holdings, Inc. ("Pepco"), a registered holding company, 701 Ninth Street, 10th Floor, Suite 1300, Washington, D.C. 20068, Conectiv, a registered holding company and subsidiary of Pepco, and Atlantic City Electric Company ("ACE"), a public utility company and direct subsidiary of Conectiv, both of 800 King Street, Wilmington, Delaware 19899 (collectively "Applicants"), have filed an application-declaration ("Application") under section 12(d) of the Act and rules 44 and 54 under the Act.
Applicants seek authority for ACE to sell distribution facilities owned by ACE that operate at 14kV and lower voltages within the city limits of Vineland, New Jersey ("Vineland"). Vineland, through a municipally-owned utility known as the Vineland Municipal Electric Utility ("VMEU"), provides distribution services to approximately two-thirds of the residences and businesses operating within the city limits. ACE provides distribution services to the remaining customers, about 5,500 customers. If the sale is approved, substantially all customers within the city limits will be served by VMEU. ACE will retain its higher-voltage transmission facilities both within and outside the city limits, which are used to deliver bulk supplies of electricity throughout southern New Jersey, including to VMEU. In addition, ACE will retain some lower voltage facilities that will be located within and pass through Vineland but will not interconnect with the current or to-be-transferred VMEU facilities.
The specific utility distribution assets to be sold have a depreciated book value of approximately $9.1 million (as of year end 2001) and include approximately 4,300 poles, less than 800 miles of primary and secondary wires attached to those poles, approximately 2,400 pad-mounted and pole-mounted transformers, street lights, underground conduit, customer service lines, and customer meters. Applicants state that detailed field inventory work is being done to identify the exact figures of the various types of assets to be transferred. Also being sold or transferred incidental to the sales transaction are accounts receivable from the transferred customers, various pole attachment agreements with third parties who have equipment attached to the transferred poles, easements and rights of way, and approximately 11 acres of unimproved land.
The total consideration for the transaction is $23.9 million, of which $9.1 million was the approximate net book value as of year-end 2001 of the assets to be transferred. Applicants are in the process of determining additions, prior retirements and post 2001 depreciation. A significant, but not specifically quantified, portion of the consideration is for the loss of future income from the customers being transferred.
The transaction is proposed following a condemnation action initiated by Vineland in a New Jersey state court. Various pleadings were filed by the city and ACE in which expert testimony was offered by both parties on the value of what was sought to be condemned based on a variety of valuation methods, including depreciated book value of the assets, replacement costs of the assets, the present value analyses of the future stream of income from the transferred customers, and other considerations. A settlement of the condemnation action was negotiated and executed on March 13, 2002. The settlement provided for the sale of assets and transfer of the customers from ACE to VMEU, effective as of a condemnation date to be selected. Between March 13, 2002, and the present, ACE has been constructing the facilities necessary to reconfigure its system and doing other work necessary to permit a smooth transition of customer records, customer billing and similar matters.
Under the transition plan, customers are being transferred to VMEU in advance of the transfer of title to the utility assets. Under the settlement agreement and the transition plan, Vineland has made payments to ACE totaling $12.4 million and is expected to make an additional payment of $11 million sometime in April 2004. Title to the utility assets has not been transferred but is expected to be transferred in early June 2004. A final payment of approximately $500,000 will be made six months after the transfer date.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland