-------------------- BEGINNING OF PAGE #1 -------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 250 and 259
[Release No. 35-26313; File No. S7-12-95]
RIN 3235-AG46
Exemption of Acquisition By Registered Public-Utility Holding
Companies of Securities of Nonutility Companies Engaged in
Certain Energy-Related and Gas-Related Businesses; Exemption of
Capital Contributions and Advances to Such Companies.
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule and rule amendments.
SUMMARY: The Commission is requesting comment upon proposed rule
58 and related proposed conforming amendments to rules 45(b) and
52(b) under the Public Utility Holding Company Act of 1935
("Act"). Rule 58 would exempt from the requirement of prior
Commission approval under sections 9(a)(1) and 10 of the Act,
pursuant to section 9(c)(3), the acquisition by a registered
holding company or any subsidiary company of securities of an
"energy-related company," as defined in the rule, subject to
certain investment limitations and reporting requirements. Rule
58 would also exempt from the requirement of prior Commission
approval under sections 9(a)(1) and 10, pursuant to section
9(c)(3), the acquisition by a gas registered holding company or
any subsidiary of securities of a "gas-related company," as
defined in the rule, subject to certain reporting requirements.
The proposed rule and related rule amendments will eliminate
unnecessary regulatory burdens and paperwork associated with
filings by a registered holding company for Commission approval
to invest in nonutility businesses that are closely related to a
system's core utility business.
DATES: Comments must be submitted on or before [insert date 90
days after date of publication in the Federal Register].
ADDRESSES: Comments should be submitted in triplicate to
Jonathan G. Katz, Secretary, Securities and Exchange Commission,
450 Fifth Street, N.W., Mail Stop 6-9, Washington, D.C. 20549.
Comment letters should refer to File No. S7-12-95. All comment
letters received will be available for public inspection and
copying in the Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549.
FOR FURTHER INFORMATION CONTACT: William C. Weeden, Associate
Director, Joanne C. Rutkowski, Assistant Director, Sidney L.
Cimmet, Senior Special Counsel, Robert P. Wason, Chief Financial
Analyst, or Bonnie Wilkinson, Staff Attorney, Office of Public
Utility Regulation, all at (202) 942-0545, Division of Investment
Management, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: The Commission is requesting comment
on proposed rule 58 and related amendments to rule 45(b) and rule
52(b) (17 CFR 250.45(b) and 250.52(b)) under the Public Utility
Holding Company Act of 1935 (15 U.S.C. 79 et seq.). Rule 58
would exempt from the requirement of prior Commission approval
under sections 9(a)(1) and 10 of the Act, pursuant to section
9(c)(3), the acquisition by a registered holding company or any
subsidiary company of any securities of an energy-related
company, subject to certain investment limitations and reporting
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requirements. The proposed rule defines an energy-related
company as one that derives, or will derive, substantially all of
its revenues from one or more activities specifically enumerated
in the rule, and such other activities as the Commission may,
from time to time by order upon application under sections
9(a)(1) and 10, designate as energy-related for purposes of the
rule. The exemption provided by the rule would be available only
if the aggregate investment by a registered holding company in
such energy-related companies does not exceed the greater of $50
million and 15% of the holding company's consolidated
capitalization.
Proposed rule 58 would also exempt from the requirement of
prior Commission approval under sections 9(a)(1) and 10 of the
Act, pursuant to section 9(c)(3), the acquisition by a registered
gas-utility holding company or any subsidiary company of any
securities of a gas-related company, subject to certain reporting
requirements. The proposed rule defines a gas-related company as
one that derives, or will derive, substantially all of its
revenues from one or more activities permitted under the Gas
Related Activities Act of 1990, and such other activities as the
Commission may, from time to time, by order upon application
under sections 9(a)(1) and 10 and the Gas Related Activities Act,
designate as gas-related for purposes of the rule.
The Commission is also proposing amendments to rule 45(b)
and rule 52(b) concerning financings by registered holding
company system companies: (1) to qualify the exception under
rule 45(b) to the requirement of Commission approval under
section 12(b) and rule 45(a) for capital contributions and open
account advances without interest to an energy-related subsidiary
company; and (2) to qualify the exemption provided by rule 52(b)
from the requirement of Commission approval under sections 6(a)
and 7 for issuances and sales of securities by energy-related
subsidiary companies, in each case to conform the rules to the
investment limitations of proposed rule 58.
I. Background
In recent years, the volume of applications by registered
holding companies seeking approval to engage in various
nonutility activities that complement, or are natural extensions
of, the electric and gas utility businesses has grown
dramatically.-[1]- It is evident from these filings that the
utility industry is evolving toward a broadly based energy-
related business that is no longer focused solely on the
traditional, regulated, production and distribution functions of
a utility. Today, almost all utilities engage in a variety of
other energy-related activities that involve applications of
resources and capabilities developed in the conduct of utility
operations. Many involve new uses of skills and experience
gained in utility operations, or new uses of utility
infrastructure and technology to provide services to utility as
well as nonutility customers.
II. Statutory Framework
Section 9(a)(1) of the Act, among other things, requires
prior Commission approval under the standards of section 10 for
any direct or indirect acquisition by a registered holding
-------- FOOTNOTES --------
-[1]- From 1993 through the end of 1994, for example, the
Commission reviewed approximately 122 filings under section 10
involving proposals to acquire nonutility interests, usually
through investments in nonutility subsidiaries. These filings
represented, in staff time, 13,300 hours per year, or 6.5 staff
years.
-------------------- BEGINNING OF PAGE #3 -------------------
company or any subsidiary company of any securities or an
interest in a nonutility business. Of interest here, section
10(c)(1) requires that the Commission shall not approve an
acquisition that would be detrimental to the carrying out of
section 11. Section 11(b)(1), in turn, limits the nonutility
activities of a registered holding company to those that are
"reasonably incidental, or economically necessary or appropriate"
to the company's utility business when the Commission finds such
activities to be "necessary or appropriate in the public interest
or for the protection of investors or consumers and not
detrimental to the proper functioning of [the integrated]
system." Under the orders of the Commission interpreting section
11(b)(1), a registered holding company may acquire an interest in
a nonutility business that has an operating or functional
relationship to the utility operations of the holding company
system.-[2]- The Commission has also approved the acquisition of
a nonutility interest that (1) involves the sale or lease of
products or skills of some complexity developed by the holding
company at considerable expense for the benefit of its utility
subsidiaries and not readily available to the rest of the public
from other sources; (2) generally requires little or no further
investment by the holding company; and (3) permits the
amortization of product development expenses with little or no
risk.-[3]-
To encourage energy-related activities, Congress has acted
to modify the requirements of section 11(b)(1) on several
occasions. In 1992, Congress enacted the Gas Related Activities
Act of 1990 ("GRAA")-[4]- to enable the three gas utility holding
companies then registered under the Act to participate on an
equal footing with other gas companies in the development of new
gas markets.-[5]- Congress intended to promote competition in the
natural gas markets through investment in gas production,
transportation, storage, marketing and similar activities.
The GRAA provides that the acquisition by a gas registered
company "of any interest in any natural gas company-[6]- or any
company organized to participate in activities involving the
transportation or storage of natural gas, shall be deemed, for
purposes of section 11(b)(1) of the Act, to be reasonably
incidental or economically necessary or appropriate to the
-------- FOOTNOTES --------
-[2]- See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-65
(1970), aff'd, 444 F.2d 913 (D.C. Cir. 1971); General Public
Utilities Corp., 32 SEC 807, 839 (1951).
-[3]- See Southern Co., Holding Co. Act Release No. 26211 (Dec.
30, 1994) (citing CSW Credit, Inc., Holding Co. Act Release No.
24348 (Mar. 18, 1987)).
-[4]- Pub. L. No. 101-572, 104 Stat. 2810 (codified at 15 U.S.C.
79k note (1990)).
-[5]- S. 8367 Cong. Rec. (June 20, 1990). The three gas
registered holding companies were Columbia Gas System, Inc.
("Columbia"), Consolidated Natural Gas Company ("CNG") and
National Fuel Gas Company ("NFG").
-[6]- "Natural gas company" is defined to have the same meaning
given such term under the Natural Gas Act, 15 U.S.C. 717(a) et
seq., viz., an individual or corporation engaged in the
transportation of natural gas in interstate commerce or the sale
in interstate commerce of natural gas for resale.
-------------------- BEGINNING OF PAGE #4 -------------------
operation of [the system's] gas utility companies."-[7]- The
GRAA further provides that the acquisition by a gas registered
company "of any interest in any company organized to participate
in activities (other than those of a natural gas company or
involving the transportation or storage of natural gas) related
to the supply of natural gas, including exploration, development,
production, marketing, manufacture, or other similar activities
related to the supply of natural or manufactured gas shall be
deemed, for purposes of section 11(b)(1) of the Act, to be
reasonably incidental or economically necessary or appropriate to
the operation of such gas utility companies, if --
(1) the Commission determines, after notice and opportunity
for hearing in which the company proposing the acquisition
shall have the burden of proving, that such acquisition is
in the interest of consumers of each gas utility company of
such registered company or consumers of any other subsidiary
of such registered company; and
(2) the Commission determines that such acquisition will not
be detrimental to the interest of consumers of any such gas
utility company or other subsidiary as to the proper
functioning of the registered holding company system."-[8]-
All acquisitions made pursuant to the GRAA thus remain subject to
approval under sections 9(a)(1) and 10 of the Act, and related
financings remain subject to the applicable provisions of the
Act.
In addition, free-standing legislation enacted in 1985, 1986
and 1992 addressed the ownership by registered holding companies
of interests in qualifying cogeneration facilities and qualifying
small power production facilities (collectively, "QFs"), as
defined under the Public Utility Regulatory Policies Act of 1978,
as amended ("PURPA"), in light of the requirements of section
11(b)(1) of the Act.-[9]- For purposes of the Act, a QF is a
-------- FOOTNOTES --------
-[7]- Section 2(a), GRAA.
-[8]- Section 2(b), GRAA. Section 2(c) further provides that
each determination under section (b) shall be made on a case-by-
case basis, not based on any "preset criteria." Section 2(d)
provides that "[n]othing contained herein shall be construed to
affect the applicability of any other provisions of the Act to
the acquisition or retention of any such interest by any such
company."
-[9]- PURPA appears generally in 16 U.S.C. 2601 et seq.
Section 3(18) of the Federal Power Act ("FPA"), as amended by
PURPA, defines a cogeneration facility as a facility which
produces - (i) electric energy, and (ii) steam or forms of useful
energy (such as heat) which are used for industrial, commercial,
heating, or cooling purposes. 16 U.S.C. 796(18)(A). Section
210 of PURPA encourages energy conservation by directing the
Federal Energy Regulatory Commission ("FERC") to define and to
prescribe rules that would exempt so-called "qualifying"
cogeneration facilities and "qualifying" small power production
facilities from the FPA, the Act, and certain state laws "if the
[FERC] determines such exemption is necessary to encourage
cogeneration and small power production." 16 U.S.C. 824a-
3(e)(1). The rules adopted by the FERC concerning qualifying
facilities require electric utilities to interconnect with QFs
and to offer to purchase power from, and sell power to, QFs, and
(continued...)
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nonutility interest of a registered holding company.-[10]- The
1985 amendment permitted gas registered holding companies to
acquire cogeneration QFs without regard to the requirement of a
functional relationship between the QF and the utility business
of the registered system.-[11]- The 1986 legislation provided
similar relief to electric registered holding companies.-[12]-
The two amendments thus permitted registered holding companies
and their subsidiaries to own cogeneration QFs without regard to
location.-[13]- The 1992 amendment eliminated the distinction
made in the earlier amendments between cogeneration QFs and small
power production QFs. Thus, registered holding companies and
their subsidiary companies may now own both small power
production QFs and cogeneration QFs wherever located. As in the
case of the GRAA, however, the acquisition of the securities of a
QF entity remains subject to approval under sections 9(a)(1) and
10 of the Act, and related financings by a QF subsidiary company
remain subject to the applicable provisions of the Act.
Finally, Congress in 1992 enacted legislation to promote the
development of alternative powered vehicles as a part of a
national energy policy to reduce automobile emissions.-[14]- The
legislation defines vehicular natural gas as "natural or
manufactured gas that is ultimately used as a fuel in a self-
propelled vehicle," and provides that a nonutility company that
is involved, as a primary business, in the sale of vehicular
natural gas, or the manufacture, sale, transport, installation,
servicing, or financing of equipment related to the sale for
consumption of vehicular gas is a nonutility company for purposes
of the Act and may be acquired by a gas registered holding
company in any geographic area.-[15]-
Section 9(c)(3) of the Act provides an exemption from the
-------- FOOTNOTES --------
-[9]-(...continued)
set the general standard for determining the rates for power sale
transactions with QFs. 18 CFR 292.301-308.
-[10]- Under section 210 of PURPA, a QF is exempt under the Act
from the definition of an "electric utility company" and is
entitled to other benefits under state and federal law.
-[11]- Pub. L. No. 99-186, 99 Stat. 1180 (codified at 15 U.S.C.
79k note (1988)).
-[12]- Pub. L. No. 99-553, 100 Stat. 3087 (codified at 15 U.S.C.
79k note (1988)).
-[13]- Neither bill made any allowance, however, for investments
in small power production QFs. As a result, acquisitions of such
interests remained subject to the section 11(b)(1) requirement of
functional relationship. Prior to the 1992 legislation, this
requirement barred gas registered holding companies from
investing in small power production facilities and limited
electric registered holding companies to investments located
within the service territory of their utility subsidiaries.
-[14]- See Articles IV, V and VI, Energy Policy Act of 1992, Pub.
L. 102-486, 106 Stat. 2777 (1992) (codified at 15 U.S.C. 79b
note (1992)).
-[15]- The legislation also provides that the sale or
transportation of vehicular natural gas by a company or its
subsidiary shall not be taken into consideration in determining
whether, under section 3 of the Act, such company is exempt from
registration. Id.
-------------------- BEGINNING OF PAGE #6 -------------------
requirements of section 9(a)(1) for the acquisition of "such
commercial paper and other securities, within such limitations,
as the Commission may by rules and regulations or order prescribe
as appropriate in the ordinary course of business of a registered
holding company or subsidiary company thereof and as not
detrimental to the public interest or the interest of investors
or consumers." (Emphasis added). The Commission has previously
issued orders under section 9(c)(3) exempting from section
9(a)(1) acquisitions of small amounts of securities of local
industrial development corporations, affordable housing projects,
and venture capital concerns, among others.-[16]- Because the
investments in these matters did not result in control or create
an affiliate relationship,-[17]- the Commission reasoned that
they did not contravene the requirements of section 10(c) and, by
reference, section 11(b).-[18]- The Commission has also adopted
rule 40(a)(5) under section 9(c)(3) to exempt such acquisitions
from the requirements of section 9(a)(1), provided that an
affiliate relationship does not result, and subject to certain
annual dollar limitations.-[19]-
III. Proposed Rule 58
Proposed rule 58 would exempt from the requirement of prior
Commission approval under sections 9(a)(1) and 10, pursuant to
section 9(c)(3), the acquisition by a registered holding company
or a subsidiary company of securities of an "energy-related
company" or a "gas-related company," as defined in the rule,
-------- FOOTNOTES --------
-[16]- See, e.g., Hope Gas, Inc., Holding Co. Act Release No.
25739 (Jan. 26, 1993) and Georgia Power Co., Holding Co. Act
Release No. 25949 (Dec. 15, 1993) (securities of local venture
capital companies); Georgia Power Co., Holding Co. Act Release
No. 26220 (Jan. 24, 1995) and East Ohio Gas Co., Holding Co. Act
Release No. 25046 (Feb. 27, 1990) (securities of affordable
housing partnerships); Potomac Edison Co., Holding Co. Act
Release No. 25312 (May 14, 1991) (shares of for-profit economic
development corporation).
-[17]- Section 2(a)(11) in pertinent part defines "affiliate" of
a specified company to mean:
(A) any person that directly or indirectly owns,
controls, or holds with power to vote, 5 per centum or
more of the outstanding voting securities of such
specified company; [and]
(B) any company 5 per centum or more of whose
outstanding voting securities are owned, controlled, or
held with power to vote, directly or indirectly, by
such specified company.
-[18]- The Commission has rejected the attempted use of section
9(c)(3) to circumvent the requirements of section 11(b)(1),
referenced in section 10(c)(1). See Michigan Consolidated Gas
Company, 44 S.E.C. at 366-67 ("Section 9(c)(3) cannot be employed
to evade the proscription of Section 11(b)(1) prohibiting the
acquisition by a gas utility company of an interest in a business
unrelated to its business").
-[19]- Under rule 40(a)(5), a holding company or subsidiary may
acquire annually up to $5 million of the securities of economic
development companies created under special state laws promoting
economic development, and up to $1 million annually in local
industrial or nonutility enterprises.
-------------------- BEGINNING OF PAGE #7 -------------------
subject to certain conditions. The proposed rule would not
exempt from the requirement of prior Commission authorization
under section 10 any acquisition of securities of an electric
utility company or a gas utility company within the meaning of
the Act, or exempt an energy-related or gas-related subsidiary
company from any provision of the Act.-[20]-
Proposed rule 58(a) would authorize a registered holding
company or any subsidiary thereof to acquire securities of an
energy-related company, as defined; provided that a registered
holding company's aggregate investment in such companies does not
exceed the greater of 15% of consolidated capitalization and $50
million. Proposed rule 58(b) would authorize a gas registered
holding company or any subsidiary thereof to acquire securities
of a gas-related company, as defined, without limitation. All
acquisitions pursuant to the rule would be considered to be
"appropriate in the ordinary course of business" within the
meaning of section 9(c)(3), and thus exempt from the requirements
of sections 9(a)(1) and 10.
An energy-related company is defined in proposed rule 58 as
a company that derives or will derive substantially all of its
revenues from one or more of the activities set forth in
subsections (b)(i) through (xii) and such other nonutility
activities as the Commission may from time to time, by order upon
application under sections 9(a)(1) and 10, authorize a registered
holding company to engage in, and, in so doing, designate as
energy-related for purposes of rule 58. The rule identifies the
following categories of activities as energy-related:
(1) the rendering of energy conservation and demand-
side management services;-[21]-
(2) the development and commercialization of electro-
technologies related to energy conservation, storage and
conversion, energy efficiency, waste treatment, greenhouse
gas reduction, and similar innovations;-[22]-
-------- FOOTNOTES --------
-[20]- In this regard, the Commission notes in particular that
it will have jurisdiction under sections 12(f) and 13(b) and the
rules thereunder over affiliate transactions with these companies
involving the sale of goods or services or other property. The
Commission anticipates that the proposed quarterly reporting
requirement on Form U-9C-3, discussed infra, will provide state
commissions with a valuable additional source of information on
affiliate transactions.
-[21]- See Eastern Utilities Associates, Holding Co. Act Release
No. 26232 (Feb. 15, 1995); EUA Cogenex Corp., Holding Co. Act
Release No. 25636 (Sept. 17, 1992); Northeast Utilities, Holding
Co. Act Release No. 25114-A (July 27, 1990); Entergy Corp.,
Holding Co. Act Release No. 25718 (Dec. 28, 1992).
-[22]- See Southern Co., Holding Co. Act Release No. 23888 (Oct.
31, 1985) (investment in venture to construct, own and operate
facilities for the manufacture and sale of photovoltaic cells);
Entergy Corp., Holding Co. Act Release No. 25718 (Dec. 28, 1992)
(acquisition of stock interest in company that develops,
manufactures and markets energy efficient lighting technologies);
American Electric Power Co., Inc., Holding Co. Act Release No.
25424 (Dec. 11, 1991) (acquisition of interest in company to
develop, manufacture and market electronic light bulb); Allegheny
(continued...)
-------------------- BEGINNING OF PAGE #8 -------------------
(3) the manufacture, conversion, sale and servicing of
electric and compressed natural gas powered vehicles and
ownership and operation of related refueling and recharging
equipment;-[23]-
(4) the sale, installation, and servicing of electric
and gas appliances for residential, commercial and
industrial heating and lighting;-[24]-
(5) the brokering and marketing of energy commodities,
including but not limited to electricity or natural or
manufactured gas;-[25]-
(6) the production, conversion, and distribution of
thermal energy products, such as process steam, heat, hot
water, chilled water, air conditioning, compressed air and
similar products; alternative fuels; and renewable energy
resources;-[26]-
-------- FOOTNOTES --------
-[22]-(...continued)
Power System, Inc., Holding Co. Act Release No. 26225 (Feb. 1,
1995) and General Public Utilities Corp., Holding Co. Act Release
No. 26230 (Feb. 8, 1995) (acquisition of limited partnership
interest in venture capital fund that will invest in companies
commercializing various electro-technologies).
-[23]- See Consolidated Natural Gas Co., Holding Co. Act Release
No. 25615 (Aug. 27, 1992); Central Power and Light Co., Holding
Co. Act Release No. 26160 (Nov. 18, 1994). As noted supra,
Congress has enacted legislation to promote the development of
activities related to vehicular natural gas as a part of a
national energy policy to reduce automobile emissions.
-[24]- Historically, the Commission has allowed registered
holding companies to engage in the marketing of standard
appliances. See Engineers Public Service Co., 12 S.E.C 41
(1942). As a related matter, rule 48 provides an exemption for
the acquisition of evidence of customer indebtedness in
connection with the sale of standard appliances. The Commission
has permitted the expansion of marketing and sales activities to
encompass other types of appliances and energy-utilizing
equipment. See, e.g., Consolidated Natural Gas Co., Holding Co.
Act Release No. 26234 (Feb. 23, 1995). The Commission
contemplates that subsection (b)(1)(iv) will include all present
and future types of equipment used for residential, commercial
and industrial heating and lighting.
-[25]- The Commission has authorized registered holding companies
to engage in a variety of gas and electricity brokering and
marketing activities. See, e.g., Consolidated Natural Gas Co.,
Holding Co. Act Release No. 24329 (Feb. 27, 1987) (authorizing
creation of a subsidiary to compete with independent gas
marketing companies); Entergy Corp., Holding Co. Act Release No.
25848 (July 8, 1993) (authorizing sale of consulting services to
nonaffiliates, including expertise relating to brokering of power
resources); UNITIL Corp., Holding Co. Act Release No. 25816 (May
24, 1993) (authorizing organization of a new subsidiary to serve
as power brokering agent).
-[26]- There are numerous instances in which the Commission has
permitted retention of interests in steam production and
(continued...)
-------------------- BEGINNING OF PAGE #9 -------------------
(7) the sale of technical, operational, management, and
other similar kinds of services and expertise, developed in
the course of utility operations in such areas as power
plant and transmission system engineering, development,
design and rehabilitation; construction; maintenance and
operation; fuel procurement, delivery and management;
environmental licensing, testing and remediation; and other
similar areas;-[27]-
(8) the ownership and operation of "qualifying
facilities" within the meaning of the Public Utility
Regulatory Policies Act of 1978, as amended, and facilities
necessary or incidental thereto, including thermal energy
utilization facilities purchased or constructed primarily to
enable the qualifying facility to satisfy the useful thermal
output requirements under PURPA;-[28]-
(9) the ownership and operation of fuel procurement,
transportation, handling and storage facilities, scrubbers,
and resource recovery and waste water treatment
facilities;-[29]-
-------- FOOTNOTES --------
-[26]-(...continued)
distribution businesses. See, e.g., General Public Utilities
Corp., 32 S.E.C. at 840-41. More recently, the Commission
approved an acquisition of existing steam production facilities
inside an industrial site. See Southern Co., Holding Company Act
Release No. 26185 (Dec. 13, 1994). The Commission has also
approved the development of, and limited investments in,
facilities for producing or recovering alternative fuels and
energy resources. See Southern Co., Holding Co. Act Release No.
26221 (Jan. 25, 1995); New England Electric System, Holding Co.
Act Release No. 26277 (Apr. 26, 1995).
-[27]- The Commission has authorized a number of registered
holding companies to engage in consulting activities. See, e.g.,
Southern Co., Holding Co. Act Release No. 22132 (July 17, 1981);
American Electric Power Co., Inc., Holding Co. Act Release No.
22468 (Apr. 28, 1982); Middle South Utilities, Holding Co. Act
Release No. 22818 (Jan. 11, 1983); New England Electric System,
Holding Co. Act Release No. 22719 (Nov. 19, 1982).
-[28]- Although a QF is a nonutility interest under the Act, a
subsidiary company of a registered holding company that acquires
such an interest remains subject to regulation under the Act.
The proposed rule would exempt an acquisition of the securities
of such subsidiary companies from section 9(a)(1) if the
requirements of the rule are met.
The Commission has approved acquisitions of ancillary
facilities, such as an integrated thermal host facility or fuel
handling and transportation facilities, in connection with QF
acquisitions. See Central and South West Corp., Holding Co. Act
Release No. 25399 (Nov. 1, 1991) (18-acre thermal host
greenhouse); Energy Initiatives, Inc., Holding Co. Act Release
No. 25991 (Feb. 22, 1994) (interests in fuel partnership to
supply gas to QF project).
-[29]- The Commission has authorized the retention and
acquisition of interests in such businesses in connection with
the utility operations of an integrated system. See, e.g., North
(continued...)
-------------------- BEGINNING OF PAGE #10 -------------------
(10) the production, transportation, distribution or
storage of all forms of energy other than electricity and
natural or manufactured gas;-[30]-
(11) the development and commercialization of
technologies or processes which utilize coal waste by-
products as an integral component of such technology or
process;-[31]-
(12) the ownership, sale, leasing or licensing of the
use of telecommunications facilities and equipment (such as
fiber optic lines, coaxial cable, or other communications
capacity, towers and tower sites and other similar
properties);-[32]- and
(13) such other activities and investments as the
Commission may, from time to time, upon application under
section 10 designate as energy-related for purposes of the
rule.
The last category is intended to encompass all other
activities, not specifically identified in the first twelve
categories, that the Commission may hereafter determine, by order
upon application, to be energy-related. This feature of the rule
will ensure that it does not remain static as the electric and
gas industries continue to evolve. Applications concerning
additional nonutility activities will of course be subject to
public notice in the Federal Register pursuant to rule 23. The
notice will specify that Commission approval of the application
may involve a designation of the activity in question as energy-
related for purposes of rule 58.
Proposed rule 58 defines a gas-related company as a company
that derives or will derive substantially all of its revenues
-------- FOOTNOTES --------
-[29]-(...continued)
American Co., 11 SEC 194, 225-226, 248 (1942); Arkansas Natural
Gas Corp. v. SEC, 154 F.2d 597 (5th Cir.), cert. denied, 329 U.S.
738 (1946). See also Ohio Power Co., Holding Co. Act Release No.
19594 (June 25, 1976) (rail-to-barge coal handling facility);
Middle South Utilities, Inc., Holding Co. Act Release No. 18221
(Dec. 17, 1973) (bulk oil storage facilities); Jersey Central
Power and Light Co., Holding Co. Act Release No. 24664 (June 14,
1988) (reservoir, dam and related facilities for storage and
discharge of water); New England Electric System, Holding Co. Act
Release No. 26277 (Apr. 26, 1995) (investment in venture that
would install equipment at power stations owned by nonaffiliates
to separate unburned carbon from coal ash).
-[30]- See, e.g., Lone Star Gas Corp., 12 S.E.C. 286, 298-99
(1942) (finding gasoline, oil and butane and propane production
operations to be related to retainable natural gas production
operations).
-[31]- New England Electric System, Holding Co. Act Release No.
26277 (April 26, 1995).
-[32]- See, e.g., Consolidated Gas Transmission Corp., Holding
Co. Act Release No. 23914 (Nov. 20, 1985) (lease of microwave
radio facilities); Appalachian Power Co., Holding Co. Act Release
No. 24772 (Dec. 9, 1988) (lease of optical fiber systems);
Southern Co., Holding Co. Act Release No. 26211 (Dec. 30, 1994)
(mobile radio system).
-------------------- BEGINNING OF PAGE #11 -------------------
from activities permitted under sections 2(a) and 2(b) of the
GRAA and such other nonutility activities as the Commission may,
from time to time, by order upon application under sections
9(a)(1) and 10 and section 2(b) of the GRAA, authorize a gas
registered holding company to engage in, and, in so doing,
designate as gas-related for purposes of rule 58.
The proposed rule contemplates that both energy-related and
gas-related companies will derive substantially all of their
revenues from the respective activities designated in the rule so
long as the registered holding company system holds the
investment. The Commission requests comment on whether any
special reporting requirements may be needed with respect to the
revenues derived from any other activities of such companies, to
ensure that this requirement is satisfied. The Commission also
invites specific comment on whether the proposed rule should
include other kinds or categories of energy-related activities.
The Commission believes that it is appropriate, as
contemplated by section 9(c)(3), to limit the aggregate
investment of a registered holding company in energy-related
companies pursuant to the proposed rule, to ensure that these
acquisitions are not detrimental to the public interest or the
interest of investors or consumers.-[33]- Accordingly, the
Commission proposes to limit acquisitions of the securities of
such companies to an amount equal to the greater of 15% of the
consolidated capitalization of the holding company and $50
million. Within these parameters, a registered holding company
will have discretion and flexibility to invest in energy-related
companies. In some cases, a registered holding company or its
subsidiary may acquire a limited interest and/or invest a very
small amount of capital in an energy-related company. In other
cases, those, for example, involving ownership of a QF or a steam
production plant, the acquisition may involve a large interest
and/or substantial capital outlays.
The Commission contemplates that prior investments in
energy-related companies pursuant to orders would not be counted
toward the limitation on aggregate investment in proposed rule
58. The Commission requests specific comment, however, on the
appropriateness of excluding such prior investment for purposes
of the rule.
The proposed limitation to 15% of consolidated
capitalization, as reported by the registered holding company in
its most recent Form 10-K or Form 10-Q, as applicable, affords
significant flexibility for investments in energy-related
companies by the larger registered systems.-[34]- The proposed
-------- FOOTNOTES --------
-[33]- Proposed rule 58 does not affect the Commission's
jurisdiction over the issuance and sale of securities by a
registered holding company or its subsidiary to finance
investments in an energy-related or a gas-related company. In
its review of financing applications under the standards of
section 7(d) of the Act, the Commission must consider the effect
of any financing on the consolidated capital structure of the
registered system and must examine whether the security being
sold is reasonably adapted to the underlying earning power of the
holding company's subsidiary operations. Thus, in addition to
the limitations on nonutility investments incorporated in
proposed rule 58, the Commission has other statutory means to
monitor the financial and other effects of nonutility activities
on registered systems.
-[34]- As an example, the Southern Company's consolidated
capitalization was approximately $17.8 billion for the year ended
(continued...)
-------------------- BEGINNING OF PAGE #12 -------------------
alternative limitation of $50 million is intended to benefit the
smaller registered systems.-[35]- The Commission invites
specific comment on whether the proposed investment limitations
are reasonable under the circumstances. The Commission also
requests specific comment as to whether a different measure of
financial capacity, such as consolidated retained earnings,
should be used for purposes of the rule.-[36]-
The Commission is not proposing a similar limitation upon
acquisitions of securities of a gas-related company. The
activities contemplated by the GRAA are per se closely related to
the core utility business of the gas registered holding
companies, and currently represent more than 60% of the
consolidated assets of these systems. There is no indication
that Congress intended for the Commission to place investment
limits on these activities.-[37]- Even if a limitation were
deemed appropriate, it is difficult, as a practical matter, to
select a limitation that would fairly take account of the
disparities among the gas registered holding companies as to the
nature and extent of GRAA-related investments to date.-[38]- The
Commission requests particular comment, however, as to the
appropriateness of a limitation in proposed rule 58 upon
investments in gas-related companies.
The Commission is aware that the magnitude of the
investments proposed to be exempted by rule 58 may cause concerns
as to whether these investments, together with other factors
affecting the registered holding company system, may have
potential adverse effects on the system's utility companies and
their customers. Consequently, the Commission seeks comment on
-------- FOOTNOTES --------
-[34]-(...continued)
December 31, 1994. Pursuant to proposed rule 58 and the related
proposed amendment to rule 45(b), Southern could invest up to
$2.7 billion in energy-related companies, excluding existing
subsidiaries.
-[35]- For example, the consolidated capitalization of UNITIL
Corporation, at December 31, 1994, was approximately $129.7
million. The proposed percentage limitation would allow UNITIL
to invest an amount of up to $19.451 million in energy-related
companies, excluding existing subsidiaries.
-[36]- See, e.g., rule 53, which creates a safe harbor for a
financing in connection with investments in exempt wholesale
generators if, among other conditions, aggregate investment in
exempt wholesale generators and foreign utility companies would
not exceed 50% of consolidated retained earnings.
-[37]- As noted previously, Congress intended that the GRAA, by
permitting gas registered holding companies to invest in gas
production, transportation, storage, marketing and similar
activities, would promote competition in the natural gas markets.
The Commission retains jurisdiction over the financing activities
of the gas registered holding companies, which finance the
operations of their subsidiaries at the parent company level.
-[38]- With respect to section 2(a) of the GRAA, NFG had invested
approximately $292.1 million in gas pipeline transportation and
gas storage as of December 31, 1994, whereas Columbia had
invested approximately $1.65 billion and CNG approximately $980.6
million. With respect to section 2(b), CNG had invested
approximately $876.5 million in exploration and development as of
that date, whereas Columbia had invested approximately $373.1
million and NFG approximately $237.5 million.
-------------------- BEGINNING OF PAGE #13 -------------------
whether rule 58 should include additional conditions to take
account of other adverse conditions that may be present, and what
form such conditions should take. Commenters are invited to
address the need for additional conditions to use of the rule 58
exemption based on the financial condition of the registered
holding company system, the extent of losses experienced by the
system over recent periods, prior bankruptcies of system
companies, and any other basis specified by the commenter.
The proposed rule defines the term "aggregate investment" to
mean all amounts invested or committed to be invested in energy-
related companies, for which there is recourse, directly or
indirectly, to the registered holding company. The term is
intended to have a meaning similar to that given the term in rule
53.-[39]- Aggregate investment, for purposes of rule 58, would
thus include amounts actually invested in an energy-related
company, as well as any amounts committed under the terms of
subscription agreements or stand-by or other similar capital
funding agreements.-[40]-
In addition, proposed rule 58(c) would require a registered
holding company relying upon the rule to file with this
Commission and each state commission having jurisdiction over the
retail rates of the registered system operating companies a
quarterly report disclosing acquisitions pursuant to the rule and
certain other information required by proposed Form U-9C-3,
discussed further infra. The reporting requirements are intended
to enable the Commission and the state and local regulatory
authorities to monitor energy-related and gas-related investments
and activities, including any intrasystem transactions involving
the operating companies in registered systems.
The Commission believes it is unnecessary to restrict the
extent to which an energy-related company or a gas-related
company may serve nonassociate companies.-[41]- Prior orders of
-------- FOOTNOTES --------
-[39]- See Holding Co. Act Release No. 25886 (Sept. 23, 1993),
58 FR 51488 (Oct. 1, 1993). Rule 53(a)(1)(i) (17 CFR
250.53(a)(1)(i)) defines "aggregate investment" to mean:
all amounts invested, or committed to be invested, in
exempt wholesale generators and foreign utility
companies, for which there is recourse, directly or
indirectly, to the registered holding company. Among
other things, the term includes, but is not limited to,
preliminary development expenses that culminate in the
acquisition of an exempt wholesale generator or a
foreign utility company; and the fair market value of
assets acquired by an exempt wholesale generator or a
foreign utility company from a system company (other
than an exempt wholesale generator or a foreign utility
company).
-[40]- For purposes of the rule, aggregate investment would not
include the portion of a registered holding company's book
investment in an energy-related company that is attributable to
increases in retained earnings or to indebtedness issued by any
such subsidiary with respect to which there is no recourse
directly or indirectly to the registered holding company.
"Aggregate investment" would also not include the amount invested
by one energy-related subsidiary company in another such company.
-[41]- Prior orders of the Commission have sometimes restricted
transactions on behalf of nonassociates by imposing conditions to
limit, geographically or otherwise, the operations or source of
(continued...)
-------------------- BEGINNING OF PAGE #14 -------------------
the Commission have not subjected gas-related businesses to any
restriction in this regard. In addition, the Commission recently
determined that it was appropriate to remove a percentage
limitation that had previously been imposed upon the energy
management services business of a nonutility subsidiary of a
registered holding company.-[42]- The Commission's decision was
based on a number of factors, including evidence of the
fundamental changes that the utility industry has undergone in
recent years, such that the industry no longer focuses primarily
upon the need to meet increased demand through the construction
of new generating capacity. Specifically, the Commission noted
that energy conservation and demand-side measures are today "an
important complement to the utility business," and determined
that the energy management services business would further an
important national policy, namely, the promotion of energy
conservation and efficiency.-[43]-
On the basis of the Commission's experience to date and its
assessment of the significant changes now underway in the energy
and energy services industries, the Commission believes that
energy-related businesses (as defined in the proposed rule) may
now be considered sufficiently related to the core utility
business of registered holding companies as not to require the
imposition of limitations upon transactions with nonassociates.
It is also reasonable to expect that the participation in such
activities by registered holding companies, together with exempt
holding companies and investor-owned utilities not subject to the
Act, will produce benefits to investors, consumers and the
public. Further, it does not appear that the participation of
registered holding companies will lead to a recurrence of the
evils that the Act was intended to address.
IV. Proposed Amendments to Rule 52 and Rule 45
The Commission is also requesting comment on proposed
conforming amendments to rules 52 and 45. Financings by
registered system companies of the activities of energy-related
businesses would be subject to these rules.
Rule 52, as recently amended,-[44]- exempts from the
requirement of Commission approval under sections 6(a) and 7 the
issue and sale by a nonutility subsidiary of a registered holding
company of any common stock, preferred stock, bond, note or other
form of indebtedness, subject to certain conditions. Rule 52
further exempts from the requirement of prior Commission approval
under sections 9(a)(1) and 10 the acquisition by a registered
holding company of any such security, provided that the
transaction does not involve the formation of a new subsidiary.
The Commission has proposed to amend rule 52 further to expand
-------- FOOTNOTES --------
-[41]-(...continued)
revenues of a nonutility business. See, e.g., Eastern Utilities
Associates, Holding Co. Act Release No. 24273 (Dec. 19, 1986)
(50% limitation upon energy management service activities outside
New England); National Fuel Gas Co., Holding Co. Act Release No.
24381 (May 1, 1987) (50% limitation on gas well and pipeline
construction on behalf of nonassociates); CSW Credit, Inc.,
Holding Co. Act Release No. 25995 (Mar. 2, 1994) (50% limitation
on amount of accounts receivable factored for nonassociates).
-[42]- Eastern Utilities Associates, Holding Co. Act Release No.
26232 (Feb. 15, 1995).
-[43]- Id.
-[44]- See Holding Co. Act Release No. 26311 (June 20, 1995).
-------------------- BEGINNING OF PAGE #15 -------------------
the types of securities that qualify for the exemption.-[45]-
The exemptions under rule 52(b) and 52(d), both currently in
effect and as proposed to be amended, are broader than, and thus
are inconsistent with, the exemption in proposed rule 58.
Accordingly, the Commission proposes to amend rule 52 to conform
the limitation of the rule upon the aggregate amount of such
securities that may be issued and sold by energy-related
subsidiaries and acquired by registered holding companies to the
limitation of proposed rule 58.
Rule 45(b) currently exempts from the requirement of
Commission approval under section 12(b) and rule 45(a) thereunder
certain investments by a registered holding company in its
existing subsidiaries by means of cash capital contributions or
open account advances. In particular, rule 45(b)(4), as recently
amended, exempts without limitation any capital contribution or
open account advance without interest to a subsidiary
company.-[46]- For purposes of proposed rule 58, the exemption
is over-inclusive. Accordingly, the Commission proposes to amend
rule 45(b)(4) to conform the aggregate amount of capital
contributions and open account advances that may be made to
energy-related subsidiary companies to the limitations of
proposed rule 58.
V. Proposed Quarterly Reports on Form U-9C-3
In recent years, the Commission has formalized the practice
of including in its orders approving acquisitions of nonutility
interests under section 10 a requirement for the filing of
periodic, usually quarterly, reports under rule 24.-[47]- These
reports typically provide continuous information on authorized
business activities, intercompany guaranties and billings, and
results of operations. Since these reporting obligations have
been imposed on a case-by-case basis, there are instances in
which some holding companies now must prepare and file as many as
five different periodic reports under rule 24. Proposed Form U-
9C-3 would require essentially the same information covered in
these reports, and it is intended that a holding company may file
a single Form U-9C-3 for all energy-related company subsidiaries
in lieu of the separate rule 24 certificates required under the
terms of any outstanding Commission orders. This procedure
should lessen the reporting burden for holding companies.
Moreover, a single, comprehensive report covering all energy-
related and gas-related business activities of a registered
holding company should be more useful for the state commissions,
with which the report must also be filed. The Commission
requests comment on the form and content of Form U-9C-3. In
particular, the Commission requests comment on whether a report
should be filed quarterly or on a semiannual or other basis. The
Commission also notes the need to balance, on the one hand, the
legitimate needs of regulators for information regarding
nonutility activities, and, on the other, the needs of registered
holding companies to protect from public disclosure commercially
and competitively sensitive information. In this respect, the
-------- FOOTNOTES --------
-[45]- See Holding Co. Act Release No. 26312 (June 20, 1995).
-[46]- See Holding Co. Act Release No. 26311 (June 20, 1995).
-[47]- See, e.g., Southern Co., Holding Co. Act Release Nos.
26212 (Dec. 30, 1994) and 26221 (Jan. 25, 1995); American
Electric Power Co., Holding Co. Act Release No. 26267 (Apr. 5,
1995); Entergy Corp., Holding Co. Act Release No. 25848 (July 8,
1993); Northeast Utilities, Holding Co. Act Release No. 26213
(Dec. 30, 1994).
-------------------- BEGINNING OF PAGE #16 -------------------
primary regulatory purposes of the report will be to provide
financial and other information on transactions between energy-
related company subsidiaries and their regulated associate
companies. The report does not call for information that would
be commercially sensitive, such as the identity of customers or
information regarding revenues and earnings derived from specific
business ventures. Nevertheless, there may be instances in which
a holding company feels the need to claim confidential treatment
under rule 104 for some items of information. Reasonable
requests for confidential treatment would not be precluded.
VI. Conclusion
The Commission believes that the registered holding-company
systems should be relieved of the regulatory burden of having to
file multiple applications for authority to engage in nonutility
activities, through investments in the securities of other
companies, that are of the same or similar character or type as
those the Commission has allowed in previous cases. The proposed
rules are intended to permit investments in energy-related
companies and gas-related companies, as defined, without
geographic limits or other restrictions such as have been
selectively incorporated into previous orders. The Commission
believes that the proposed limitation of rule 58 on the aggregate
amount that a registered holding company system may invest,
directly or indirectly, in energy-related companies will assure
that financial integrity of a registered holding company system
will not be impaired by investments pursuant to the rule. In
addition, the proposed reporting requirements should enable the
Commission and interested state and local regulators to monitor
the financial and other impact of such investments.
REGULATORY FLEXIBILITY ACT CERTIFICATION
Pursuant to section 605(b) of the Regulatory Flexibility
Act, 5 U.S.C. 605(b), the Chairman of the Commission has
certified that the proposed amended rule will not, if adopted,
have a significant economic impact on a substantial number of
small entities. This certification, including the reasons
therefor, may be obtained from Bonnie Wilkinson, Office of Public
Utility Regulation, Division of Investment Management, Securities
and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
COSTS AND BENEFITS
Rule 58 will substantially decrease regulatory costs for the
eleven (11) electric and three (3) gas registered holding
companies. In calendar years 1993 and 1994, 122 applications
would not have been filed had the proposed rule 58 and related
rule amendments been in place. Estimated savings per application
would have been approximately $70,000 including related legal,
accounting, and management costs. Thus, for 122 applications
filed in calendar years 1993 and 1994, the aggregate savings
would have been approximately $8,540,000 or $4,270,000,
respectively, per year. Moreover, the reduction in Commission
staff hours would have been approximately 13,300 hours per year
(6.5 staff years). The only cost to the registered holding
companies in complying with the rule will be the cost of
completing and filing Form U-9C-3 on a quarterly basis. It is
estimated that approximately 16 hours will be required to
complete each form at an estimated cost of $250 per hour.
Assuming 61 acquisition applications per year, the cost of
compliance reporting would approximate $244,000 per year.
PAPERWORK REDUCTION ACT
The proposed rule and rule amendments are subject to the
-------------------- BEGINNING OF PAGE #17 -------------------
Paperwork Reduction Act of 1980 (44 U.S.C. 79 et seq.) and will
be submitted for approval to the Office of Management and Budget.
STATUTORY AUTHORITY
The Commission is proposing to adopt rule 58 and to amend
rules 45 and 52 pursuant to sections 6, 9, 12 and 20 of the Act.
List of Subjects in 17 CFR Parts 250 and 259
Electric utilities, Holding companies, Natural gas,
Reporting and recordkeeping requirements, Securities.
Text of Proposed Rules
For the reasons set out in the preamble, chapter II, title
17, of the Code of Federal Regulations is proposed to be amended
as follows:
PART 250 --GENERAL RULES AND REGULATIONS, PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935
1. The authority citation for part 250 continues to read
as follows:
AUTHORITY: 15 U.S.C. 79c, 79f(b), 79i(c)(3) and 79t, unless
otherwise noted.
2. Section 250.45 is amended by revising paragraph (b)(4)
to read as follows:
250.45 Loans, extensions of credit, donations and capital
contributions to associate companies.
* * * * *
(b) Exceptions. * * *
(4) Capital contributions or open account advances, without
interest, by a company to its subsidiary company; Provided, That
capital contributions or open account advances to any energy-
related company subsidiary, as defined in rule 58 ( 250.58),
shall not be exempt hereunder unless, after giving effect
thereto, the aggregate investment by a registered holding company
or any subsidiary thereof in such company and all other such
energy-related subsidiary companies does not exceed the
limitation in rule 58(a)(1) ( 250.58(a)(1)).
3. Section 250.52 is amended by revising paragraph (b) as
follows:
250.52 Exemption of issue and sale of certain securities.
* * * * *
(b) Any subsidiary of a registered holding company which is
not a holding company, a public-utility company, an investment
company, or a fiscal or financing agency of a holding company, a
public-utility company or an investment company shall be exempt
from section 6(a) of the Act (15 U.S.C. 79f(a)) and rules
thereunder with respect to the issue and sale of any security of
which it is the issuer if:
(1) The issue and sale of such security are solely for the
purpose of financing the existing business of such subsidiary
company; and
(2) The interest rates and maturity dates of any debt
security issued to an associate company are designed to parallel
the effective cost of capital of that associate company;
Provided, That any security issued to an associate company by any
energy-related company subsidiary, as defined in rule 58 (
250.58), shall not be exempt hereunder unless, after giving
effect thereto, the aggregate investment by a registered holding
company or any subsidiary thereof in such subsidiary and all
other such energy-related subsidiary companies does not exceed
the limitation in rule 58(a)(1) ( 250.58(a)(1)).
4. Section 250.58 is added to read as follows:
-------------------- BEGINNING OF PAGE #18 -------------------
250.58 Exemption of investments in certain nonutility
companies.
(a) Exemption from Section 9(a). Section 9(a) of the Act
(15 U.S.C. 79i(a)) shall not apply to:
(1) The acquisition by a registered holding company, or any
subsidiary company thereof, of the securities of an energy-
related company; provided that, after giving effect to any such
acquisition, the aggregate investment by such registered holding
company or any subsidiary thereof in all such companies does not
exceed the greater of:
(i) $50 million; and
(ii) 15% of the consolidated capitalization of such
registered holding company, as reported in the registered holding
company's most recent Annual Report on Form 10-K or Quarterly
Report on Form 10-Q ( 249.308a or 249.310 of this chapter)
filed under the Securities Exchange Act of 1934, as amended (15
U.S.C. 78 et seq.); or
(2) The acquisition by a registered gas-utility holding
company, or a subsidiary company thereof, of the securities of a
gas-related company.
(b) Definitions. For purpose of this section:
(1) The term energy-related company shall mean any company
that derives or will derive substantially all of its revenues
(exclusive of revenues from temporary investments) from one or
more of the following businesses:
(i) The rendering of energy conservation and demand-side
management services;
(ii) The development and commercialization of electro-
technologies related to energy conservation, storage and
conversion, energy efficiency, waste treatment, greenhouse gas
reduction, and similar innovations;
(iii) The manufacture, conversion, sale and servicing of
electric and compressed natural gas powered vehicles and
ownership and operation of related refueling and recharging
equipment;
(iv) The sale, installation, and servicing of electric and
gas appliances for residential, commercial and industrial heating
and lighting;
(v) The brokering and marketing of energy commodities,
including but not limited to electricity or natural or
manufactured gas;
(vi) The production, conversion, and distribution of thermal
energy products, such as process steam, heat, hot water, chilled
water, air conditioning, compressed air and similar products;
alternative fuels; and renewable energy resources;
(vii) The sale of technical, operational, management, and
other similar kinds of services and expertise, developed in the
course of utility operations in such areas as power plant and
transmission system engineering, development, design and
rehabilitation; construction; maintenance and operation; fuel
procurement, delivery and management; environmental licensing,
testing and remediation; and other similar areas;
(viii) The ownership or operation of "qualifying
facilities," as defined under the Public Utility Regulatory
Policies Act of 1978, as amended ("PURPA"), and facilities
necessary or incidental thereto, including thermal energy
utilization facilities purchased or constructed primarily to
enable the qualifying facility to satisfy the useful thermal
output requirements under PURPA;
(ix) The ownership or operation of fuel procurement,
transportation, handling and storage facilities, scrubbers, and
resource recovery and waste water treatment facilities;
(x) The production, transportation, distribution or storage
-------------------- BEGINNING OF PAGE #19 -------------------
of all forms of energy other than electricity and natural or
manufactured gas;
(xi) The development and commercialization of technologies
or processes which utilize coal waste by-products as an integral
component of such technology or process;
(xii) The ownership, sale, leasing or licensing of the use
of telecommunications facilities and equipment (such as fiber
optic lines, coaxial cable, or other communications capacity,
towers and tower sites and other similar properties); and
(xiii) Such other activities and investments as the
Commission may, from time to time, upon application under section
10 of the Act (15 U.S.C. 79j) designate as energy-related for
purposes of this section.
(2) The term "gas-related company" shall mean a business
that derives or will derive substantially all of its revenues
from activities permitted under the Gas-Related Activities Act of
1990, 104 Stat. 2810, and such other activities and investments
as the Commission may, from time to time, upon application under
section 10 of the Act (15 U.S.C. 79j) or section 2(b) of the Gas
Related Activities Act, designate as gas-related for purposes of
this section.
(3) The term "aggregate investment" shall mean all amounts
invested or committed to be invested in energy-related companies,
for which there is recourse, directly or indirectly, to the
registered holding company.
(c) Report on Related Business Activities. Within 60 days
following the end of the first calendar quarter in which any
acquisition that is exempt under this section is made, the
registered holding company shall file (and thereafter
continuously file) with this Commission and with each state
commission having jurisdiction over the retail rates of the
public-utility subsidiary companies of such registered holding
company a Certificate of Notification on Form U-9C-3 ( 259.208
of this chapter).
PART 259 -- FORMS PRESCRIBED UNDER THE PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935
5. The authority citation for part 259 continues to read
as follows:
AUTHORITY: 15 U.S.C. 79e, 79f, 79g, 79j, 79l, 79m, 79n, 79q
and 79t.
6. Section 259.208 is added to read as follows:
259.208 Form U-9C-3, for notification of acquisition of
securities exempt from section 9(a) pursuant to rule 58 ( 250.58
of this chapter).
This form shall be filed pursuant to rule 58(c) ( 250.58(c)
of this chapter) as the certificate of notification of the
acquisition of securities exempted from the application of
section 9(a) of the Act pursuant to rule 58 ( 250.58 of this
chapter).
[EDITORIAL NOTE: The text of Form U-9C-3 appears in the Appendix
to this document and will not appear in the Code of Federal
Regulations.]
By the Commission.
Jonathan G. Katz
-------------------- BEGINNING OF PAGE #20 -------------------
Secretary
June 20, 1995
NOTE: This form will not appear in
Appendix the Code of Federal Regulations.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-9C-3
QUARTERLY REPORT OF INVESTMENTS IN COMPANIES ENGAGED
IN CERTAIN "ENERGY-RELATED" AND "GAS-RELATED" BUSINESSES
_________________________________________________________________
_____________________________________________
Name and Address of Registered Holding Company
GENERAL INSTRUCTIONS
1. Use of Form.
A quarterly report containing the information required by
Form U-9C-3 shall be filed by a registered holding company with
the Commission and with each state public-utility commission that
has jurisdiction over the retail rates of a public-utility
subsidiary company of the registered holding company. The report
shall be filed within 60 days following the end of each calendar
quarter commencing with the first calendar quarter in which such
registered holding company directly or indirectly acquires any
securities of any energy-related or gas-related company in
reliance upon the exemption afforded by rule 58, 17 CFR 250.58.
2. Formal Requirements.
(a) Two copies of the report on this form, including the
exhibits specified, shall be filed with the Commission, and one
copy, with exhibits, shall be filed with each of the appropriate
state commissions. At least one of the copies filed with the
Commission shall be manually signed and filed at the place
designated by the Commission for filings under the laws it
administers. The second copy shall be addressed to the Division
or Office responsible for administering the Act.
(b) The quarterly report, and where practicable all
documents filed as a part thereof, shall be on good quality,
unglazed white paper, 8 " x 11" in size. All papers included in
the quarterly report, except exhibits not especially prepared for
such purpose, shall have a margin of at least 1 " for binding,
and each copy should be firmly bound on the left side.
(c) The report shall contain the item number and caption of
each item in the form, but shall omit all instructions and text.
If any item is inapplicable or the answer thereto is negative, it
shall be so stated.
(d) The report shall identify and provide a telephone
number for a person to whom inquiries concerning the contents of
the report may be directed.
-------------------- BEGINNING OF PAGE #21 -------------------
3. Definitions.
All terms used in this form and the instructions have the
same meaning as in the Public Utility Holding Company Act of
1935, as amended, and the rules and regulations thereunder,
particularly rule 58, 17 CFR 250.58.
Item 1.
Identify the name and describe the nature of the business of
each newly formed energy-related or gas-related company whose
securities were acquired during the calendar quarter.
Item 2.
Provide the amount and type (e.g., equity or debt) of
capital invested in each energy-related or gas-related company.
Identify whether the investment is held by the top holding
company or a subsidiary thereof (other than an energy-related or
a gas-related subsidiary company). If any institutional third
party financings were used or undertaken to finance the
acquisition or ongoing business of any such company, identify
(a) the name of the institution, bank, or other third party; (b)
the amount and type of investment; and (c) the cost of capital
terms.
Item 3.
For each energy-related and gas-related company in which the
registered holding company has invested, directly or indirectly,
provide a balance sheet and a twelve months' ended income
statement.
Item 4.
Aggregate Investment Analysis:
(a) State the total investment during
the quarter of the registered
holding company or any subsidiary
thereof in all energy-related
companies.
(b) If the total investment disclosed
in Item 4(a) is greater than $50
million, state it as a percentage
of the registered holding company's
consolidated capitalization (as
reported in the registered holding
company's most recent Form 10-K or
Form 10-Q filed under the
Securities Exchange Act of 1934).
(c) State the aggregate investment to date of the
registered holding company or any subsidiary
thereof in all energy-related companies.
(d) If the aggregate investment disclosed in item 4(c)
is greater than $50 million, state it as a
percentage of the registered holding company's
consolidated capitalization (as reported in the
registered holding company's most recent Form 10-
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K or Form 10-Q filed under the Securities Exchange
Act of 1934).
(e) State the aggregate investment by
any registered gas utility holding
company in all "gas-related"
companies.
Item 5.
For each quarter following the calendar quarter, provide a
narrative description of (a) any new activities within the scope
of rule 58(b)(1) undertaken during the quarter by existing
subsidiary companies; (b) any services, goods, construction, or
other property sold to or purchased from any associate public
utility company or service company during the quarter by any
energy-related or gas-related subsidiary company, and costs
billed therefor, together with a copy of the related contract.
EXHIBIT A
For each calendar year, provide as an attachment to the
first quarterly report an organizational chart of the holding
company system that includes the percentage owned of each energy-
related or gas-related subsidiary company of the registered
holding company.
SIGNATURE
The undersigned company has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized
pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended.
__________________ __________________
(Date) (Company)
By:_______________________________
(Type or Print Name and Title)