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
Federal RegisterJun 28, 1995
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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.
[[Page 33643]] ACTION: Proposed rule and rule amendments.
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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 September 26, 1995.
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 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.
\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.
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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 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
[[Page 33644]] 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\
\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)).
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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.
\4\ Pub. L. No. 101-572, 104 Stat. 2810 (codified at 15 U.S.C.
Sec. 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'').
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 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--
\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.
\7\ Section 2(a), GRAA.
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(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\
\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.''
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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 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.
\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 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. 99-186, 99 Stat. 1180 (codified at 15 U.S.C. 79k
note (1988)).
\12\ Pub. L. 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.
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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\
\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.
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Section 9(c)(3) of the Act provides an exemption from the
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 [[Page 33645]] 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\
\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.
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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, 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\
\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.
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
\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).
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(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
\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 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).
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(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
\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.
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(4) the sale, installation, and servicing of electric and gas
appliances for residential, commercial and industrial heating and
lighting; 24
\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.
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(5) the brokering and marketing of energy commodities, including
but not limited to electricity or natural or manufactured gas; 25
\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).
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(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
\26\ There are numerous instances in which the Commission has
permitted retention of interests in steam production and
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).
[[Page 33646]]
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(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
\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).
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(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
\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).
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(9) the ownership and operation of fuel procurement,
transportation, handling and storage facilities, scrubbers, and
resource recovery and waste water treatment facilities; 29
\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 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).
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(10) the production, transportation, distribution or storage of all
forms of energy other than electricity and natural or manufactured gas;
30
\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).
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(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
\31\ New England Electric System, Holding Co. Act Release No.
26277 (April 26, 1995).
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(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
\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).
(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 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.
\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.
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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- [[Page 33647]] related companies by the larger
registered systems.34 The proposed 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
\34\ As an example, the Southern Company's consolidated
capitalization was approximately $17.8 billion for the year ended
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.
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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.
\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.
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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 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
\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.
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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 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
\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
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.
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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 [[Page 33648]] 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 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.
\44\ See Holding Co. Act Release No. 26311 (June 20, 1995).
\45\ See Holding Co. Act Release No. 26312 (June 20, 1995).
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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.
\46\ See Holding Co. Act Release No. 26311 (June 20, 1995).
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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 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.
\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).
---------------------------------------------------------------------------
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
[[Page 33649]] 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 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:
Sec. 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 (Sec. 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) (Sec. 250.58(a)(1)).
3. Section 250.52 is amended by revising paragraph (b) as follows:
Sec. 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 (Sec. 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) (Sec. 250.58(a)(1)).
4. Section 250.58 is added to read as follows:
Sec. 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
(Sec. 249.308a or Sec. 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 the 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;
[[Page 33650]] 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 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 (Sec. 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 (Sec. 250.58 of this
chapter).
This form shall be filed pursuant to rule 58(c) (Sec. 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 (Sec. 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.]
Dated: June 20, 1995.
By the Commission.
Margaret H. McFarland
Deputy Secretary.
Note: This form will not appear in the Code of Federal
Regulations.
Appendix--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\1/
2\'' 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\1/2\'' 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.
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
[[Page 33651]] 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-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.
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(Date)
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(Company)
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By:______________
(Type or Print Name and Title)
[FR Doc. 95-15838 Filed 6-27-95; 8:45 am]
BILLING CODE 8010-01-P
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