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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27092]

Filings Under the Public Utility Holding Company Act of 1935, as

Amended (``Act'')

October 21, 1999.

Notice is hereby given that the following filing(s) has/have been

made with the Commission pursuant to provisions of the Act and rules

promulgated under the Act. All interested persons are referred to the

application(s) and/or declaration(s) for complete statements of the

proposed transaction(s) summarized below. The application(s) and/or

declaration(s) and any amendments is/are available for public

inspection through the Commission's Branch of Public Reference.

Interested persons wishing to comment or request a hearing on the

application(s) and/or declaration(s) should submit their views in

writing by November 15, 1999, to the Secretary, Securities and Exchange

Commission, Washington, DC 20549-0609, and serve a copy on the relevant

applicant(s) and/or declarant(s) at the address(es) specified below.

Proof of service (by affidavit or, in case of an attorney at law, by

certificate) should be filed with the request. Any request for hearing

should identify specifically the issues of facts or law that are

disputed. A person who so requests will be notified of any hearing, if

ordered, and will receive a copy of any notice or order issued in the

matter. After November 15, 1999, the application(s) and/or

declaration(s), as filed or as amended, may be granted and/or permitted

to become effective.

Dominion Resources Inc., et al. (70-9477)

Dominion Resources, Inc. (``DRI''), 120 Tredegar Street, Richmond,

Virginia 23219, a Virginia corporation and public utility holding

company exempt from registration under section 3(a)(1) and rule 2 under

the Act, and Consolidated Natural Gas Company (``CNG''), CNG Tower, 625

Liberty Avenue, Pittsburgh, Pennsylvania 15222, have filed an

application-declaration in connection with a proposed merger between

the two companies under sections 6(a), 7, 10 and 13(b) of the Act and

rules 54, 87, 88, 90 and 91 under the Act.

DRI and CNG have entered into an amended and restated agreement and

plan of merger (``Merger'') dated as of May 11, 1999.\1\ The Merger

contemplates a two-step transaction. In the first step, a wholly owned

subsidiary of DRI will merge (``First Merger'') with and into DRI, in

which DRI will be the surviving corporation.\2\ In the second step, CNG

will either merge (``Second Merger'') (1) with and into another wholly

owned subsidiary of DRI (``CNG Acquisition'') in a transaction in which

CNG Acquisition will be surviving corporation, or (2) with and into DRI

in a transaction in which DRI will be the surviving corporation. The

First Merger and Second Merger, are hereinafter referred to as the

``Merger,'' are each conditioned on the other occurring. As a result of

the Merger and other transactions contemplated by the Merger Agreement,

either CNG Acquisition, as the successor in interest to CNG, will

become a direct subsidiary of DRI or each of CNG's public utility

subsidiaries will become direct subsidiaries of DRI.\3\

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\1\ DRI, CNG, and their respective subsidiaries have also filed

in S.E.C. file no. 70-9517 an application-declaration related to the

financing of the proposed DRI registered holding company system and

CNG's registered holding company system. A notice of that filing is

being issued simultaneously with this notice.

\2\ As part of their approval of the Merger, DRI shareholders

approved an amendment to the DRI Articles of Incorporation to

increase the authorized shares of common stock of DRI from 300

million to 500 million.

\3\ CNG's public utility subsidiaries include: Virginia Natural

Gas, Inc. (``VNG''), Hope Gas, Inc. (``Hope''), The Peoples Natural

Gas Company (``Peoples''), and The East Ohio Gas Company (``East

Ohio'').

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In the Merger, shareholders of both DRI and CNG will have the

option to elect to receive either cash or DRI common stock in return

for each of their DRI or CNG shares, as the case may be, subject to

allocation and certain limitations. In exchange for each share of DRI

common stock held, DRI shareholders will have the option to receive

either $43.00 in cash or one share of DRI common stock. In either case,

this option is subject to the limitation that the aggregate amount of

cash to be distributed to DRI shareholders in the First Merger shall be

equal to $1,251,055,526 (plus any cash paid for fractional shares).\4\

In exchange for each share of CNG common stock held, CNG shareholders

will have the option to receive either $66.60 in cash or shares of DRI

common stock at an exchange rate, plus an amount in cash

[[Page 57911]]

equal to 1.52 multiplied by the excess, if any, of $43.816 over the

Average Price.\5\ The CNG exchange ratio will be (1) $66.60 divided by

the Average Price of DRI common stock, if the DRI Average Price is no

less than $43.816 and (2) 1.52, if the DRI Average Price is less than

$43.816. In either case, this option is subject to the proration so

that 38,159,060 shares of CNG common stock (including any fractional

shares exchanged for cash) will be converted into the right to receive

cash in the Second Merger. However, DRI may reallocate the cash and

shares of DRI commons stock to be received by CNG shareholders to

follow more closely the actual elections of CNG shareholders as long as

the reallocation does not affect the desired tax treatment of the

Second Merger.

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\4\ Under the terms of the Merger, DRI has the right to increase

this amount to $1,668,400,000.

\5\ Average Price is defined as the average market price of DRI

common stock over a twenty consecutive day trading period ending on

the tenth business day before the closing.

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Following the proposed Merger, current DRI shareholders will own

approximately 65% of the combined company and current CNG shareholders

will own approximately 35% of the combined company.

As a result of the Merger, the combined company will have pro forma

1998 assets of $28.0 billion as of March 31, 1999 and revenues of $8.8

billion for the year ended December 31, 1998. The combined company will

also have an energy portfolio of approximately 20,000 MW of domestic

power generation, 2.9 trillion cubic feet equivalent in natural gas and

oil reserves producing nearly 300 billion cubic feet equivalent

annually. It will operate a major interstate gas pipeline system and

the largest natural gas storage system in North America with

approximately 900 Bcfe of storage and will have approximately 5,000

miles of electric transmission lines. The combined company will be the

eleventh largest independent oil and gas producer in the United States,

measured by reserves.

Following completion of the Merger, DRI will register as a holding

company with the Commission under section 5 of the Act and CNG may

continue to register as a holding company with the Commission.

Parties to the Merger

DRI and Its Subsidiaries

DRI seeks authorization to retain its interest in its utility and

nonutility business and to acquire and retain the interests of CNG's

utility and nonutility business.

DRI is a diversified utility holding company \6\ whose principal

subsidiary is Virginia Electric and Power Company (``Virginia

Power''),\7\ an electric public utility company primarily engaged in

the generation, transmission, distribution and sale of electric energy

within a 30,000 square-mile area in Virginia and northeastern North

Carolina.\8\ Virginia Power operates nuclear, fossil fuel and

hydroelectric generating units with an aggregate capability of 13,635

MW. It supplies energy at retail to approximately two million customers

and sells electricity at wholesale to rural electric cooperatives,

power marketers and certain municipalities. The Virginia service area

represents 65% of Virginia's total land area and accounts for over 80%

of its population. The North Carolina service area is comprised of

retail customers located in the northeastern region of the state,

excluding certain municipalities. Virginia Power also engages in off-

system wholesale purchases and sales of electricity and purchases and

sales of natural gas. In 1998, Virginia Power accounted for $4,285

million in revenues.

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\6\ At December 31, 1998, DRI and its subsidiaries had 11,033

full time employees.

\7\ The term ``Virginia Power'' refers to the entirety of

Virginia Electric and Power Company, including its Virginia and

North Carolina operations and all of its subsidiaries. In Virginia

it trades under the name ``Virginia Power'' and in North Carolina it

trades under the name ``North Carolina Power.''

\8\ Virginia Power has made investments in some nonutility

business and supports the investment and financing needs of its

subsidiaries on a stand-alone basis.

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DRI's other major subsidiaries are Dominion Energy, Inc. (``DEI''),

an independent power and natural gas subsidiary, and Dominion Capital,

Inc. (``DCI''), a financial services company.\9\ DRI also owns and

operates a 365 MW natural gas fired generating facility in the United

Kingdom.

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\9\ DRI states that it will divest its interest in DCI and DCI's

subsidiary companies within three years following completion of the

Merger.

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DEI is primarily engaged in the competitive electric power

generation business and in the development, exploration and operation

of natural gas and oil reserves. DEI is involved in power projects in

five states in Argentina, Bolivia, Belize and Peru.\10\ Domestic power

projects include the Kincaid Power Station, a 1,108 MW coal fired

station in central Illinois; a 600 MW gas-fired peaking facility under

construction in central Illinois; two geothermal projects and one solar

project in California; three small hydroelectric projects in New York;

a waste coal-fueled project in West Virginia and a waste wood and coal-

fueled project in Maine. Additionally, DEI has interests in various

generation and small power production facilities in the United States

all of which are qualifying facilities (``QFs'') as defined in the

Public Utility Regulatory Policies Act of 1978, as amended (``PURPA''),

or exempt wholesale generators (``EWGs'') as defined in section 32

under the Act. DEI is also involved in natural gas and oil development,

exploration and production in Canada, the Appalachian Basin, the

Michigan Basin, the Illinois Basin, the Black Warrior Basin, the Uinta

Basin, the San Juan Basin and owns proven oil and natural gas reserves

of approximately 1.2 trillion cubic feet of natural gas equivalent.

DEI, through its subsidiaries, is involved in the wholesale

aggregation, marketing and trading of natural gas and storage capacity

positions, on behalf of DEI and third parties. In 1998, DEI accounted

for $383 million in revenues.

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\10\ International power projects include a hydroelectric and a

gas-fired project in Argentina, two hydroelectric projects in

Bolivia, a run-of-river hydroelectric project in Belize, and two

hydroelectric and six diesel oil-fueled projects in Peru.

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DCI is a diversified financial services holding company with

several subsidiaries in the commercial lending, merchant banking and

residential lending business.\11\ Its principal subsidiaries are First

Source Financial, LLP, First dominion Capital LLC, Saxon Mortgage, Inc.

and Stanton Associates, Inc. DCI also owns a 46% interest in Cambrian

Capital LLP. First Source Financial provides cash-flow and asset-based

financing to middle-market companies seeking to expand, recapitalize or

undertake buyouts. First Dominion Capital is an integrated merchant

banking and asset management business. Saxon Mortgage and its

affiliates originate and securitize home equity and mortgage loans to

individuals. Cambrian Capital provides financing to small and mid-sized

independent oil and natural gas producers undertaking acquisitions,

refinancings and expansions. Stanton

[[Page 57912]]

Associates, Inc. engages in real estate investment and management.

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\11\ DCI's financial activities include providing commercial

finance through senior secured loans, unsecured or subordinated debt

or mezzanine investments, bridge loans and equity investments.

Senior secured loans have a first priority lien on all assets which

includes, but is not limited to, accounts receivable, inventory,

real and personal property, equipment, trademarks, and copyrights.

Corporate finance activities include underwriting and syndication of

debt and equity instruments and debt and equity securities, managing

assets for third parties and broker-dealer operations. Consumer

finance comprises origination, purchase, securitization and

servicing of mortgages. Other operations include investments in real

estate, a lease in a hydroelectric facility, venture capital and a

portfolio of preferred and equity securities.

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DRI, either directly or indirectly is also involved in the

following business activities: oil and natural gas exploration and

development, both domestically and internationally, transportation and

processing of natural gas and the manufacture and sale of equipment

used in connection therewith, energy marketing and brokering,

telecommunications, real estate activities, energy lending, and debt

and equity financing to commercial businesses and consumers. DRI,

through DCI, also holds minority interests in various other businesses,

of which the aggregate amount of investments made by DCI at March 31,

1999, was $176 million. In 1998, DCI accounted for $409 million in

revenues.

CNG and Its Subsidiaries

CNG is engaged solely in the business of owning and holding all of

the outstanding equity securities of nineteen directly owned subsidiary

companies. CNG and its subsidiaries are engaged in all phases of the

natural gas business including: distribution, transmission, storage,

exploration and production.

VNG, Hope, Peoples and East Ohio are the four public utility

subsidiaries of CNG. Principal cities served on a retail basis include:

Cleveland, Akron, Youngstown, Canton, Warren, Lima, Ashtabula and

Marietta in Ohio; Pittsburgh (a portion), Altoona and Johnstown in

Pennsylvania; Norfolk, Newport News, Virginia Beach, Chesapeake,

Hampton and Williamsburg in Virginia; and Clarksburg and Parkersburg in

West Virginia. CNG serves approximately two million residential,

commercial and industrial gas sales and transportation to retail

customers.

CNG Transmission Corporation operates a regional interstate

pipeline system and provides gas transportation and storage services to

each of CNG's public utility subsidiaries and to non-affiliated

utilities, end-users and others in the Midwest, the mid-Atlantic states

and the Northeast. Through its wholly owned subsidiary, CNG Iroquois,

Inc., CNG Transmission Corporation holds a 16% general partnership

interest in the Iroquois Gas Transmission System, L.P., which owns and

operates an interstate natural gas pipeline extending from the Canada

United States border near Iroquois, Ontario, to Long island, New York.

The Iroquois pipeline transports Canadian gas to utility and power

generation customers in metropolitan New York and New England.

CNG Producing Company is CNG's exploration and production

subsidiary. Its activities are conducted primarily in the Gulf of

Mexico, the southern and western United States, the Appalachian region,

and in Canada.

CNG Retail Services Corporation markets natural gas, electricity

and related products and services to residential, commercial and small

industrial customers. CNG Products and Services, Inc. also provides

energy-related services to customers of CNG's local distribution

subsidiaries and others.

CNG International Corporation invests in foreign energy activities.

CNG International Corporation currently owns interests in natural gas

pipeline companies in Australia, and gas and electric utility companies

in Argentina.

Establishment of a Service Company and Service Agreement

DRI intends to establish a new direct subsidiary service company,

DRI Services, which will assume from DRI all of the service functions

currently performed for affiliates of DRI and all employees performing

those functions will become employees of DRI Services.\12\

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\12\ Initially, DRI Services will issue 100 shares of common

stock, no par value, all of which will be subscribed to DRI at $1

per share.

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It is contemplated that as a result of the Merger, some

centralization of service functions will occur. Initially, DRI and CNG

proposed to commence their combined operations with two subsidiary

service companies. Upon closing of the Merger, DRI Services and other

DRI affiliates will enter into a new single systemwide Service

Agreement with CNG, CNG Services and other subsidiaries of CNG. The new

agreement will be modeled after the current service agreement in effect

for the CNG system.\13\ The combined company will operate with two

service companies, and each DRI-CNG affiliate will have the opportunity

to elect to purchase services from either company.

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\13\ On August 26, 1966 (Holding Co. Act Release No. 15548), the

Commission authorized formation of CNG's service company. Several

amendments to the service agreement have been approved by the

Commission under ``60-day letter proceedings.''

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Over time it is anticipated that the provision of services within

the combined DRI-CNG system will be rationalized. However, in the

interim, DRI and CNG each seek authorization to engaged, through their

respective service companies, the following service activities:

accounting, auditing, legal and regulatory services, information

technology, electronic transmission and computer services, software

pooling, employee benefits and pension investment, employee relations,

operations, executive and administrative services, business and

operations services, exploration and development services, risk

management, marketing, medical services, corporate planning,

purchasing, rate structure analysis, research, tax services, corporate

secretary services, and investor relations.

Following completion of the Merger, DRI states that all services

will be provided to system companies in compliance with all applicable

provisions of the Act, including section 13(b) and rules 90 and 91

under the Act. DRI does, however, request and exemption from the at-

cost standard of section 13(b) of the Act and rules 90 and 91 under the

Act in one or more of the following situations: (1) to permit Virginia

Power to continue to provide services to exempt nonutility associate

companies which are subject to the Virginia State Corporation

Commission's 1986 settlement order; and (2) to permit Virginia Power to

provide future service arrangements to exempt nonutility associate

companies within the DRI-CNG system. Exempt nonutility associate

companies are defined as: (1) FUCOs and EWGs which do not derive any

part of their income either directly or indirectly, from the generation

and sale of electric energy within the United States; (2) EWGs which

sell electricity at market based rates that have been approved by the

Federal Energy Regulatory Commission (``FERC'') or relevant state

public utility commission, provided that the purchaser is not an

electric utility company affiliate of DRI; (3) a QF that sells

electricity exclusively at rates negotiated at arm's length to one or

more industrial or commercial customers purchasing the electricity for

their own use and not for resale, or to an electric utility company

that is not a DRI affiliate company at the purchaser's ``avoided cost''

as determined under the regulations under PURPA; and (4) an EWG or QF

that sells electricity based upon its cost of service, as approved by

the FERC or any state public utility commission having jurisdiction,

provided that the purchaser of the electricity is not an electric

utility company affiliate of DRI.

Dominion Resources, Inc. (70-9517)

Dominion Resources, Inc. (``DRI''), 120 Tredgar Street, Richmond,

Virginia 23219, a Virginia corporation and holding company exempt from

registration under section 3(a)(1) of the Act and rule 2, has filed an

application-declaration under sections 6(a), 7, 9,(a),

[[Page 57913]]

10, 12(b) of the Act and rules 42, 45, 53 and 54 under the Act.

This application-declaration is submitted in connection with DRI's

proposed acquisition of Consolidated Natural Gas Company (``CNG''), a

Delaware corporation and registered holding company (``Merger'')

(S.E.C. file No. 70-9477). As result of the Merger and other related

transactions, either (1) CNG Acquisition, as the successor in interest

to CNG, will become a direct subsidiary of DRI or (2) each of CNG's

four public utility subsidiaries will become direct subsidiaries of

DRI. Following completion of the Merger, DRI will register as a holding

company with the Commission under section 5 of the Act.

To effectuate the merger,\14\ shareholders of DRI will have the

option to receive either $43.00 in cash or one share of DRI common

stock in exchange for each share of DRI common stock held, subject to

certain cash distribution limitations. Shareholders of CNG common stock

will have the option to receive either $66.60 in cash or shares of DRI

common stock in exchange for each share of CNG common stock held,

subject to certain cash distribution limitations.

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\14\ The Merger transaction is more fully described in File No.

70-9477, which has been noticed contemporaneously.

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Applicants seek authority for: (1) DRI to issue common stock of DRI

to shareholders of CNG in connection with the Merger; (2) DRI to issue

additional equity, preferred and/or debt securities for general

corporate purposes for the period from and after the Merger through the

second anniversary of the effectiveness of the Merger (``Authorization

Date''); (3) DRI and its subsidiaries, including CNG, to maintain in

effect for the period from and after the Merger through the

Authorization Date, all existing credit facilities and financing

arrangements and to maintain outstanding all indebtedness and similar

obligations created thereunder as of the date of the closing of the

Merger (including, without limitation, any facilities, financing

arrangements, indebtedness or similar obligations incurred in

connection with or to finance the Merger) and to amend, renew, extend

and/or replace any of these credit facilities, financing arrangements,

indebtedness or similar obligations up to the aggregate dollar amounts

specified below, provided that no amendment, renewal, extension and/or

replacement which is effected following completion of the Merger shall

provide for an increase in the aggregate amount of indebtedness which

occurs after the Authorization Date, unless otherwise approved by the

Commission; (4) DRI and its subsidiaries, including CNG, to incur

additional indebtedness and similar obligations including guarantees

and other credit support; and (5) DRI to issue up to 45.5 million

shares of common stock under dividend reinvestment and stock-based

management incentive and employee benefit plans.

Issuance of Securities and Incurrence of Indebtedness

Shareholders of DRI and CNG will, in connection with the Merger, be

given the option to receive either cash or shares of DRI common stock

in exchange for each share of DRI or CNG common stock held, subject to

limitations on the aggregate amount of cash that may be distributed in

connection with Merger. Accordingly, indebtedness will be incurred to

finance cash payments to DRI and CNG shareholders in connection with

the Merger. DRI anticipates that approximately $4.5 billion will be

required to finance the cash portion of the Merger. Of this amount, $1

billion will be obtained through equity securities or securities

convertible into equity securities and the remaining financing will be

obtained through debt securities with a maturity not to exceed 50 years

and an interest rate not in excess of 500 basis points over the

comparable London Interbank Offered Rate (``LIBOR'').

DRI anticipates that cash will initially be obtained through the

issuance of commercial paper under an expanded DRI commercial paper

program backed by a combination of short-term and long-term credit

facilities similar to the types of credit facilities that DRI currently

has in place. After closing of the Merger, DRI anticipates replacing a

significant portion of the commercial paper program with proceeds from

(1) the issuance of debt, preferred and/or convertible securities, (2)

divestiture of DRI's financial serves subsidiary, Dominion Capital,

Inc. (``DCI''), and (3) the sale of other non-core assets.\15\

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\15\ DRI states that it will divest its interest in DCI and

DCI's subsidiary companies within three years following completion

of the Merger.

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At present, DRI has established various financing arrangements with

respect to its equity, preferred and debt securities

(``Securities'').\16\ DRI has entered into various credit facilities

with outside lenders, has issued debt securities, and has guaranteed or

otherwise supported the obligations of its nonutility subsidiaries. DRI

seeks authorization to maintain its, and CNG's, existing financing

arrangements and other commitments through the Authorization Date.\17\

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\16\ DRI filed a universal shelf registration with the

Commission on September 12, 1997 (Registration No. 333-35501). The

shelf registration covers equity, preferred and debt securities and

allows DRI to issue any one or more of the foregoing types of

securities provided that the aggregate principal amount of proceeds

of securities issuances that may be obtained does not exceed $950

million. As of the date of the application-declaration, DRI issued

common stock under the universal shelf registration and derived $275

million of proceeds from the issuance.

\17\ By order dated March 28, 1996 (Holding Co. Act Release No.

26500) (``Omnibus Order''), CNG was authorized to engage in various

financing and related transactions through March 31, 2001.

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DRI proposes through the Authorization Date to issue equity,

preferred and/or debt securities including, without limitation, for the

purpose of refinancing indebtedness incurred to finance the cash

component of the consideration to be paid to DRI and CNG shareholders

in connection with the Merger. DRI seeks authorization to issue the

above-mentioned securities provided that the aggregate principal amount

of the proceeds not exceed $1.5 billion and provided that the cost of

money with respect to these securities shall not exceed 500 basis

points over LIBOR.\18\

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\18\ The dividends payable on preferred stock and the interest

rate and maturity of debt securities which may be issued under this

authorization will be determined at the time of issuance and will

not exceed those generally obtainable at the time of issuance for

securities having the same or reasonably similar maturities, terms,

conditions and features issued by utility companies or utility

holding companies of reasonably comparable credit quality.

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In addition to the Securities, DRI proposes to issue other

securities (``Other Securities''). DRI currently maintains in effect

the following credit and financing facilities:

(1) DRI sells commercial paper in regional and national markets.

Proceeds of commercial paper issuances are used for general corporate

purposes and are made available to DRI's nonutility subsidiaries under

intercompany credit agreements. DRI's nonutility subsidiaries repay

these financings through cash flows and proceeds of permanent

financings. DRI's commercial paper is supported by bank lines of credit

maintained by DRI. At December 31, 1998, the aggregate outstanding

maximum face amount of DRI commercial paper was $3.1 million.

(2) DRI has entered into an Amended and Restated Credit Agreement

dated April 3, 1996 and amended by the First Amendment dated April 2,

1997 (``DRI Credit Agreement''), among DRI, the lenders identified, and

NationsBank,

[[Page 57914]]

N.A., as agent for the lenders, under which the lenders have agreed to

make loans to DRI in an aggregate principal amount not to exceed $300

million at any one time outstanding. Proceeds of the loans may be used

for general corporate purposes and to support commercial paper. The

commitment of the lenders under the DRI Credit Agreement will expire on

April 3, 2002 if not canceled or terminated.

(3) DRI has entered into a Second Amended and Restated Short-Term

Credit Agreement dated March 31, 1999 (``DRI Short-Term Credit

Agreement''), among DRI, the lenders identified, and NationsBank, N.A.,

as administrative agent for the lenders, under which the lenders have,

subject to the terms and conditions set forth in the DRI Short-Term

Credit Agreement, agreed to make loans to DRI in an aggregate principal

amount not to exceed $300 million at any one time outstanding. Proceeds

of loans may be used for general corporate purposes and to support

commercial paper. The commitment of the lenders under the DRI Short-

Term Credit Agreement will expire 364 days after the date thereof if

not canceled or terminated.

(4) DRI has in place an Indenture dated as of December 1, 1997

(``DRI Indenture'') between DRI and The Chase Manhattan Bank under

which DRI may, subject to the terms and conditions set forth in the DRI

Indenture, issue an unlimited amount of Junior Subordinated Debentures

in one or more series. As of the date of this application-declaration,

DRI has entered into a First Supplemental Indenture dated December 1,

1997 with The Chase Manhattan Bank under which DRI has issued $257.7

million aggregate principal amount of 7.83% Junior Subordinated

Debentures to Dominion Resources Capital Trust I, which has in turn

issued $250 million aggregate principal amount of Capital Securities to

investors. Proceeds of the issuance of the Capital Securities by

Dominion Resources Capital Trust I are used solely to acquire Junior

Subordinated Debentures. Payments on account of the Junior Subordinated

Debentures are used by Dominion Resources Capital Trust I to make

payments on account of the Capital Securities. Proceeds of the issuance

of the Junior Subordinated Debentures are used by DRI for general

corporate purposes including debt repayment. Amounts in respect of the

Capital Securities are guaranteed by DRI under the Capital Securities

Guarantee Agreement dated as of December 8, 1997 between DRI and The

Chase Manhattan Bank, as guarantee trustee, and the New Capital

Securities Guarantee Agreement dated as of June 18, 1998 between DRI

and The Chase Manhattan Bank, as guarantee trustee.

(5) DRI has entered into a five-year End Loaded Lease Financing

(``ELLF'') as of September 9, 1998. The ELLF is structured as an off-

balance sheet financing with a single purpose grantor trust, the

lessor, formed to purchase, improve and own certain assets which are

then leased to DRI. The lease structure is designed to permit DRI to

finance the assets on an off-balance sheet basis while allowing DRI to

maintain control of the property and retain the benefits of ownership

for tax purposes. The assets which are financed under the ELLF include

an office building and two aircraft. Payments made by DRI under this

leasing arrangement are intended to cover the periodic interest and

principal payments required to be made by the lessor which has financed

its acquisition of the lease assets. The estimated aggregate amount of

lease payment that DRI is required to make under the lease are $12.5

million.

(6) DRI has issued a note in the face amount of $28.4 million due

in 2008 which bears interest at a rate of 9.25% per year. As of

December 31, 1998, the principal balance outstanding of the note was

$18.6 million.

(7) DRI has also entered into a Guarantee Agreement dated as of

October 30, 1998 in favor of Bayerische Landesbank Girozentrale in

connection with the Pounds Sterling 33,500,000 Committed Multi-Currency

Revolving Advances Facility dated as of October 30, 1998 between DR

Group Holdings, a special purpose financing subsidiary company

organized under the laws of the United Kingdom, and Bayerische

Landesbank Girozentrale.

DRI requests Commission authorization to maintain outstanding the

Other Securities which currently total approximately $955.31 million.

DRI further requests authorization to issue additional other securities

(``Additional Other Securities'') with financing arrangements similar

to those described above in paragraphs (1) through (7), through the

Authorization Date, provided that the additional aggregate principal

amount of the Additional Other Securities shall not exceed $250

million, the cost of money shall not exceed 500 basis points above

LIBOR and the final maturity date of the Additional Other Securities

shall not exceed 50 years.

Guarantees and Other Credit Support

As of December 31, 1998, Dominion Energy, Inc. (``DEI''), a

nonutility subsidiary of DRI,\19\ had paid-in-capital from equity

investments made by DRI of $456.4 million. DRI has entered into an

Intercompany Credit Agreement dated as of August 31, 1987 between DRI

and DEI under which DEI may, subject to the terms and conditions of the

Intercompany Credit Agreement, borrow up to $350 million aggregate

principal amount at any one time outstanding from DRI. Proceeds from

borrowings may be used by DEI for general corporate and working capital

purposes. As of the date of this application-declaration, DRI has

guaranteed $122.312 million aggregate principal amount of payment

obligations of DEI and its subsidiaries.

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\19\ DEI has interests in various generation and small power

production facilities in the United States, all of which are

qualifying facilities (QFs'') as defined in the Public Utility

Regulatory Policies Act of 1978, as amended, or exempt wholesale

generators (``EWGs'') as defined in section 32 of the Act.

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DEI has also entered into an engagement letter dated July 13, 1999

with Bank of America Leasing and Capital Group, an affiliate of

NationsBank, with respect to a $825 million lease financing for the

construction and lease of ten to fourteen new gas-fired turbines and

associated equipment to be installed at various new power generation

facilities currently under development by DEI.\20\ The terms of the

engagement letter require that DRI guarantee the obligations of the

lessee under the lease financing documents.

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\20\ It is anticipated the generation facilities will be

``eligible facilities'' within the meaning of section 32(a)(2) of

the Act and their owners will qualify as EWGs.

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DRI requests authorization to maintain in place the above guarantee

and other credit support arrangements, which total approximately

$947.312 million through the Authorization Date. In addition, DRI

proposes, through the Authorization Date, to provide additional

guarantees or other credit support for DEI and it subsidiaries up to an

aggregate principal amount of $1.5 billion.

As of December 31, 1998, DCI had paid-in-capital from equity

investments made by DRI of $593.5 million. As of the date of this

application-declaration, except as described below, DRI has not entered

into any capital contribution agreement or similar arrangement which

expressly requires DRI to make additional cash capital contributions to

DCI or any of the other DCI Companies. As of the date of this

application-declaration, DRI has entered into an Intercompany Credit

Agreement dated as of December 20, 1985 between DRI and DCI under which

DCI may, subject

[[Page 57915]]

to the terms and conditions of the Intercompany Credit Agreement,

borrow up to $250 million aggregate principal amount at any one time

outstanding from DRI. Proceeds of borrowings by DCI may be used for

general corporate and working capital purposes.

As of the date of this application-declaration, DRI has guaranteed

$47.5 million aggregate principal amount of payment obligations of DCI

and its subsidiaries and has provided liquidity support under the

following agreements:

(1) Guaranty Agreement dated as of May 13, 1996 by DRI in favor of

DYNEX Capital, Inc. (formerly Resource Mortgage Capital, Inc.). The

Guaranty was given in connection with a $47.5 million promissory note

made by Dominion Mortgage Services, Inc., an indirect wholly owned

subsidiary of DRI.

(2) Support Agreement dated as of February 5, 1999 made by DRI in

favor of DCI in connection with the implementation of a $400 million

commercial paper financing program by DCI. The Support Agreement

requires DRI to maintain 100% ownership of DCI voting stock, to

maintain a net worth $100 million for DCI and to provide liquidity

support for DCI.

DRI requests authorization to maintain in place the foregoing

guarantees and other credit support arrangements for the benefit of

DCI. DRI further requests through the Authorization Date, to provide

additional guarantees or other credit support for DCI and its

subsidiaries up to an aggregate principal amount of $1.6 billion.

Incentive Compensation Plans and Employee Benefit Plans

DRI maintains a direct stock purchase plan (``Dominion Direct'')

with a dividend reinvestment feature, incentive compensation plans,\21\

and other employee benefit plans. Following the Merger, Dominion

Direct, DRI's incentive compensation plans, and other employee benefit

plans will remain in effect.

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\21\ Performance grants, restricted stock awards, goal-based

stock awards, stock options and stock appreciation rights may be

granted under the DRI incentive compensation plans.

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CNG maintains a dividend reinvestment plan (``CNG DRIP''). DRI

proposes, following consummation of the Merger, to terminate the CNG

DRIP. CNG also maintains several stock incentive plans. Following

consummation of the Merger, DRI proposes to compensate plan

participants for all benefits, grants of awards, and options with an

appropriate amount of cash. CNG also maintains employee benefit plans.

DRI proposes that following consummation of the Merger, that the

employee benefit plans be either maintained, modified to provide for

the issuance of DRI common stock in lieu of CNG common stock, or

terminated.

CNG and Its Subsidiaries

By Commission order dated March 28, 1996, (Holding Co. Act Release

No. 26500) (``Omnibus Order''), CNG was authorized to engage in various

financing and related transactions through March 31, 2001. The Omnibus

Order allows CNG financing if CNG meets the following conditions: (1)

CNG's long-term debt must be rated investment grade by at least one

nationally recognized statistical rating organization; (2) CNG's common

equity, as reflected in its most recent Form 10-K or Form 10-Q an as

adjusted to reflect subsequent events that affect capitalization, will

be at least 30% of consolidated capitalization; (3) the effective cost

of money for debt may not exceed 300 basis points over the interest

rate on United States Treasury securities of a comparable term; (4) the

effective cost of money for preferred stock and other fixed securities

may not exceed 500 basis points over the interest rate on 30-year

United States Treasury securities; (5) the maturity of debt may not be

more than 50 years; (6) issuance expenses in connection with an

offering of securities, including any underwriting fees, commissions or

other similar compensation, may not exceed 5% of the total amount of

securities being issued; (7) proceeds of the proposed financing may not

be used to invest in an EWG or a FUCO; (8) at the time of each

financing transaction, CNG must be in compliance with the requirements

of rule 53 under the Act; and (9) proceeds of the proposed financing by

subsidiaries of CNG must be used only in connection with their

respective existing businesses.

Under the Omnibus Order CNG may issue and sell common stock,

preferred stock, short-term debt, long-term debt and other securities

from time to time through March 31, 2001, provided that the aggregate

amount of short-term and revolving debt outstanding at any one time and

the aggregate amount of common stock, preferred stock, long-term debt

and other securities issued during the period shall not exceed $7

billion. All sales and issuances of common stock, short-term debt and

long-term debt by CNG subsequent to March 28, 1996 have occurred under

the Omnibus Order.

CNG issues and sells commercial paper under the Omnibus Order to

dealers at the discount rate prevailing at the date of issuance for

comparable commercial paper. The dealers reoffer this commercial paper

at a discount to investors. The amount of commercial paper outstanding

at any one time varies according to the seasonal working capital needs

of CNG. There was $558.9 million principal amount of CNG commercial

paper outstanding on December 31, 1998.

Currently outstanding under the Omnibus Order is a credit agreement

dated as of June 27, 1997 (``CNG Credit Agreement''), among CNG and

several banks with The Chase Manhattan Bank, as agent. The CNG Credit

Agreement provides a line of credit of up to $775 million as back-up

for commercial paper. No loans are currently outstanding under the

Credit Agreement.

As of December 31, 1998, CNG had an aggregate of $1,392,875

principal amount of senior debentures outstanding (excluding current

maturities). Of this amount, $950 million principal amount were issued

under an Indenture, dated as of April 1, 1995, between CNG and United

States Trust Company of New York, as trustee. The remaining

$442,875,000 principal amount was issued under an Indenture, dated as

of May 1, 1971, between CNG and The Chase Manhattan Bank, as successor

trustee.

CNG, and certain of its subsidiaries, are authorized under the

Omnibus Order to enter into guarantee arrangements, obtain letters of

credit and otherwise provide credit support with respect to the

obligations of its subsidiaries. The aggregate amount of all these

arrangements cannot exceed $2 billion. Approximately $169.3 million in

guarantees is currently outstanding.

DRI proposes to make the following modifications to the Omnibus

Order: (1) that the term of the Omnibus Order be extended through the

Authorization Date; (2) that the amount of financing permitted under

the Omnibus Order, as extended, be increased from $7 billion to $10

billion; (3) that the aggregate amount of guarantees and credit support

that may be given by CNG and its subsidiaries be increased from $2

billion to $3 billion; and (4) that CNG be authorized to give

guarantees and other credit support for the benefit of any of its

direct and indirect subsidiaries as needed to support the subsidiary's

normal course of business.

There are also several individual outstanding authorizations

granted to CNG system companies under the Act in addition to the

Omnibus Order.

[[Page 57916]]

(1) CNG Money Pool. By orders dated June 12 and July 16, 1986

(Holding Co. Act Release Nos. 24128 and 24150, respectively), as

amended by orders dated May 27, 1987 (Holding Co. Act Release No.

24399), February 14, 1990 (Holding Co. Act Release No. 25040), May 13,

1991 (Holding Co. Act Release No. 25311), April 8, 1994 (Holding Co.

Act Release No. 26021), and July 18, 1997 (Holding Co. Act Release No.

26742), the Commission authorized the establishment and operation of

the Consolidated System Money Pool.

(2) Iroquois Pipeline. By orders dated January 9, 1991, February

28, 1991, May 7, 1991, July 6, 1993, and September 12, 1996 (Holding

Co. Act Release Nos. 25239, 25263, 25308, 25845 and 26571,

respectively), the Commission authorized CNG Transmission Corporation

(``CNGT'') to provide financing to its wholly owned subsidiary, CNG

Iroquois, Inc. (``CNGI''), for use relating to CNGI's 16% general

partnership interest in Iroquois Gas Transmission System L.P.

(``Iroquois''). The interstate pipeline owned by Iroquois was completed

in 1992. Financing of CNGT's interest in Iroquois was accomplished

through the purchase by CNGT of common stock of CNGI. Related

authorizations concerning credit support expire on June 30, 2001.

(3) Hub Market Center. By order dated October 21, 1994 (Holding Co.

Act Release No. 26148), the Commission authorized CNG to provide its

subsidiary, CNG Power Company (``CNG Power'') with up to $2 million in

financing to be used by CNG Power to invest in its special purpose

wholly owned subsidiary, CNG Market Center Services, Inc. (``CNGMC'').

Financing can be provided by CNG through the purchase of CNG Power

common stock, the making of open account advances, long-term loans to

CNG Power, or any combination thereof. The authorization expires on

July 1, 2004.

(4) Energy Related Services. By orders dated August 28, 1995 and

August 27, 1997 (Holding Co. Act Release Nos. 26363 and 26757,

respectively), the Commission authorized CNG Products and Services,

Inc. (``CNGP&S'') to engage in the business of providing several

categories of energy-related services to customers of CNG's local

distribution companies and to others, primarily customers of utilities

not affiliated with CNG. CNG was authorized to provide CNGP&S with up

to $10 million of financing through the sale of debt and common stock

to its immediate parent, or through the obtaining of open account

advances from its parent. The authorization expires on December 31,

2000.

(5) Partnerships. By orders dated July 26, 1995 and December 30,

1997 (Holding Co. Act Release Nos. 26341 and 26807, respectively), the

Commission authorized a former wholly owned subsidiary of CNG, CNG

Energy Services Corporation (``Energy Services''), to acquire ownership

interests with nonaffiliates in projects that involve gas-related

activities. The dollar limit on these investments is $200 million.

Under this authorization, Energy Services formed CNG Main Pass Gas

Gathering Corporation and CNG Main Pass Oil Gathering System. In

connection with the sale of Energy Services to an unaffiliated third

party, ownership in these two companies was transferred to CNG, and the

authority to form partnerships with nonaffiliates without prior

Commission approval was transferred to CNG Producing Company. This

authorization expires on December 31, 2002.

(6) Power Services Guarantees. By order dated August 2, 1996

(Holding Co. Act Release No. 26551), the Commission authorized CNG to

issue parent guarantees up to an aggregate of $250 million on behalf of

its wholly owned subsidiary, CNG Power Services Corporation (``CNG

Power Services''). CNG Power Services is engaged in the purchase and

sale of electricity at wholesale. The authorization expires on March

13, 2001.

(7) Energy Marketing. By order dated January 15, 1997 (Holding Co.

Act Release No. 26652), the Commission authorized Energy Services to

invest up to $250 million to expand its business to market electricity

and other energy commodities and to engage in fuel management and other

incidental related activities. Energy Services was authorized to

acquire interests in other entities, including corporations,

partnerships, limited liability companies, and joint ventures. CNG

Retail Corporation was formed on January 30, 1997 under the order to

engage in the business of selling natural gas, electricity and other

products at retail. On July 29, 1998 (Holding Co. Act Release No.

26900), CNG Retail Corporation became a direct subsidiary of CNG and

succeeded to the authorizations and reporting obligations under the

order subsequent to the sale of Energy Services by CNG to an

unaffiliated party. The authorization expires on December 31, 2001.

(8) CNG International. By order dated May 30, 1996 (Holding Co. Act

Release No. 26523), the Commission authorized CNG to form CNG

International Corporation (``CNG International''), to acquire directly

or through intermediary companies interests in foreign EWGs and FUCOs.

The order also authorized CNG to provide CNG International up to $300

million credit support with respect to its investments. Jurisdiction

was retained over CNG's request to invest up to $300 million in certain

foreign energy activities including foreign gas pipelines. By

supplemental order dated October 25, 1996 (Holding Co. Act Release No.

26595), the Commission released jurisdiction over proposed investments

of up to an aggregate of $75 million in two gas pipelines, one in

Bolivia and the other in Argentina. No direct investment was made by

CNG International under this authorization, and the authorization is

regarded as having lapsed. By supplemental order dated November 19,

1996 (Holding Co. Act Release No. 26608), the Commission released

jurisdiction over a proposed investment of up to $75 million in three

gas pipelines in Australia. Approximately $38.8 million was invested in

these projects in late 1996. As a result of these transactions, CNG

International now indirectly holds a 30% ownership interest in Epic

Energy Pty Ltd., an Australian company. By supplemental order dated

February 12, 1998 (Holding Co. Act Release No. 26824), the Commission

released jurisdiction over a proposed investment of up to $165 million

by CNG International in the Alinta gas pipeline in Western Australia.

In March 1998, CNG International paid approximately $143.2 million to

acquire its 33% equity interest in the pipeline, through intermediate

companies including Epic Energy Australia Trust. By supplemental order

dated April 9, 1999 (Holding Co. Act Release No. 27002), the Commission

released jurisdiction over a proposed investment of up to $100 million

by CNG International in a gas pipeline being privatized by the state of

Victoria, Australia. CNG International was not the winning bidder for

the pipeline, and no investment will be made under this authorization.

DRI requests Commission authorization to maintain in effect the

above described CNG financing arrangements and to extend through the

Authorization Date, all of the above described authorizations which are

stated to expire prior to December 31, 2002.

Energy East Corporation, et al. (70-9545)

Energy East Corporation (``Energy East''), a New York corporation

and a public utility holding company exempt from registration under

section 3(a)(1) of the Act from all provisions of the Act, except

section 9(a)(2), and Merger Co.,

[[Page 57917]]

a Connecticut corporation wholly owned by Energy East which is not

currently subject to the Act, c/o Energy East, each at P.O. Box 1196,

Stamford, Connecticut 06904, seek an order under sections 9(a)(2) and

10 of the Act authorizing them to acquire all of the issued and

outstanding common stock of Connecticut Energy Corporation

(``Connecticut Energy''), a Connecticut corporation and a public

utility holding company exempt from registration under section 3(a)(1)

of the Act from all provisions of the Act, except section 9(a)(2).

Energy East and Merger Co. also request exemptions under section

3(a)(1) from all provisions of the Act, except section 9(a)(2), upon

consummation of the proposed transaction.

Energy East is an exempt holding company by order of the

Commission.\22\ Energy East's principal subsidiaries are New York State

Electric & Gas Corporation (``NYSEG''), a combined gas and electric

public utility company, and Energy East Enterprises, Inc.

(``Enterprises''), a non utility company which is also a public utility

holding company by virtue of its ownership of a majority of the voting

securities of CMP Natural Gas, L.L.C. (``Maine GasCO''), a gas public

utility company.

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\22\ See Energy East Corporation. Holding Co. Act Release No.

26976 (Feb. 12, 1999).

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NYSEG, a New York corporation, is engaged in generating,\23\

purchasing, transmitting, and distributing electricity, and purchasing,

transporting, and distributing natural gas. NYSEG's electric service

territory covers about 19,900 square miles and NYSEG's natural gas

service territory covers about 6,594 square miles, both in the central,

eastern, and western parts of the State of New York. NYSEG serves about

826,000 electric customers and about 244,000 natural gas customers.

NYSEG's retail electric and gas service, among other things, is

regulated by the Public Service Commission of the State of New York

(``NYPSC''), and its wholesale sales of electricity are regulated by

the Fedora Energy Regulatory Commission (``FERC'').

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\23\ NYSEG generates electricity from its 18% share of a nuclear

station and its hydroelectric stations. NYSEG has agreed to sell its

share of the nuclear station, which is expected to be completed by

early next year.

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Enterprises, a wholly owned subsidiary of Energy East, is an exempt

holding company by order of the Commission.\24\ Enterprises owns

natural gas and propane air distribution companies including a majority

of the voting securities of Maine Gas Co. Enterprises' nonutility

subsidiaries are: New Hampshire Gas Corporation, an energy services

company in New Hampshire specializing in propane air distribution

systems; Southern Vermont Natural Gas Corporation, which is developing

a combined natural gas supply and distribution project that includes an

extension of a pipeline from New York to Vermont and the development of

natural GS distribution systems in Vermont; and Seneca Lake Storage,

Inc., which proposes to own and operate a gas storage facility in New

York.

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\24\ See Energy East Corporation, Holding Co. Act Release No.

26976 (Feb. 12, 1999).

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Maine GasCo, a Maine corporation, is an emerging gas utility

company which began providing service to retail customers in May 1999.

Maine GasCo is in the process to constructing a local natural gas

distribution system in the State of Maine.

Energy East also owns several non-utility subsidiaries, including:

(1) Enterprises, which, besides serving as Main GasCo's parent, owns

natural gas and propane air distribution companies; (2) XENERGY

Enterprises; Inc., which provides energy and telecommunications

services and owns several nonutility subsidiary companies; (3) Energy

East Management Corporation, which invests the proceeds of the sale of

NGE Generation, Inc.'s generation assets; (4) Oak Merger Co., which was

formed solely for the purpose of consummating the proposed merger with

COG Resources, Inc., an exempt gas utility holding company; and (5) EE

Merger Corp., which was formed solely for the purpose of consummating

the proposed merger with and into CMP Group, Inc., an exempt electric

and gas utility holding company.

For the 12 months ended June 30, 1999, Energy East's operating

revenues and total utility plant on a consolidated basis were

approximately $2.5 billion and $2.2 billion, respectively. Also as of

June 30, 1999, Energy East had 115,878,000 outstanding shares of common

stock, $0.01 par value; 25,000,000 outstanding shares of preferred

stock subject to mandatory redemption; and 10,131,000 outstanding

shares of preferred stock redeemable solely at the option of the

subsidiary.

Connecticut Energy claims an intrastate exemption by rule 2.

Connecticut Energy wholly owns The Southern Connecticut Gas Company

(``Southern Connecticut''), a gas utility company, which is Connecticut

Energy's sole public utility subsidiary. Connecticut Energy also

directly and indirectly owns several non utility subsidiaries,

including: CNE Energy Services Group, Inc., which provides an array of

energy products and services to commercial and industrial customers,

including sales of bulk energy, operation of a liquefied natural gas

open access storage facility, and sales of natural gas for peak-shaving

and emergency deliveries; CNE Development Corporation, which is a

16.67% equity participant in East Coast Natural Gas Cooperative, LLC,

which purchases and stores gas spot supplies, provides storage service

utilization services and is involved in bundled sales; and CNE Venture-

Tech, Inc., which invests in ventures that produce or market

technologically advanced energy-related products.

Southern Connecticut, a Connecticut corporation, is engaged in the

transportation and retail distribution of natural gas in a service

territory along the southern Connecticut coast from Westport to Old

Saybrook, including Bridgeport and New Haven. Southern Connecticut

serves about 158,000 customers. Southern Connecticut is subject to

retail rate regulation, among other things, by the Connecticut

Department of Public Utility Control (``DPUC'').

For the 12 months ended June 30, 1999, Connecticut Energy's

operating revenues and total utility plant on a consolidated basis were

$230 million and $277 million, respectively. Also as of June 30, 1999,

Connecticut Energy had 10,388,000 outstanding shares of common stock,

$1 par value.

Energy East also states that the merged gas system will meet the

standards of section 2(a)(29)(B) as the gas operations of Energy East

and Connecticut Energy will be integrated. Energy East states that

Connecticut Energy's gas system and Energy East's gas system will share

a ``common source of supply'' and will be operated as a ``single

coordinated system.'' Energy East further states that Connecticut

Energy and Energy East will be able to achieve ``substantial

economies'' in gas supply through the increased purchasing power and

gas supply coordination that will result from being part of the larger

combined gas system. Finally, Energy East states that the area or

region served by NYSEG and by Southern Connecticut will not be ``so

large as to impair * * * the advantages of localized management,

efficient operation, and the effectiveness of regulation.''

Merger Co. was formed to facilitate the merger of Energy East and

Southern Connecticut. Energy East owns all of Merger Co.'s issued and

outstanding shares. Merger Co. owns no subsidiary companies.

[[Page 57918]]

Under the Agreement and Plan of Merger, dated as of April 23, 1999,

as amended as of July 15, 1999 (``Merger Agreement''), Energy East will

acquire all of the issued and outstanding common stock of Connecticut

Energy.\25\ Upon completion of the proposed transaction, Merger Co.

will be the surviving party, remain a wholly-owned subsidiary of Energy

East, and change its name to, and operate under, the name of

``Connecticut Energy Corporation.'' Southern Connecticut will become a

direct, wholly-owned subsidiary of Merger Co. and an indirect, wholly-

owned subsidiary of Energy East.

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\25\ The transaction will be accounted for as an acquisition of

Connecticut Energy by energy east under the purchase method of

accounting in accordance with generally accepted accounting

principles. A portion of the purchase price will be allocated to

nonutility assets and liabilities of Connecticut Energy based on

their estimated fair market values at the date of acquisition. As a

regulated utility, the assets and liabilities of Southern

Connecticut will not be revalued. The difference between the

purchase price, representing fair value, and the recorded amounts

will be shown as goodwill on the balance sheet of Connecticut

Energy.

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For the transaction, all outstanding shares of common stock of

Connecticut Energy (other than those held by Connecticut Energy

shareholders who have not voted in favor of the transaction and have

properly demanded dissenters' rights) will be converted into the right

to receive the merger consideration. Connecticut Energy shareholders

can elect to receive cash, Energy East shares, or a combination of cash

and Energy East shares. The cash consideration amounts to $42 in cash,

without interest, per share. The stock consideration is a number of

Energy East shares that will vary depending on the ``Average Market

Price,''which is defined in the Merger Agreement as the average of the

closing prices of Energy East shares on the New York Stock Exchange

during the 20 trading days immediately preceding the second trading day

prior to the effective time of the transaction. If the Average Market

Price is equal to or more than $23.10 per share and equal to or less

than $29.40 per share, then a Connecticut Energy share will be

exchanged for $42 worth of Energy East shares. If the Average Market

Price is less than $23.10, then a Connecticut Energy share will be

exchanged for 1.82 Energy East shares. If the Average Market Price is

more than $29.40, then a Connecticut Energy share will be exchanged for

1.43 Energy East shares.

Subject to an adjustment for tax reasons, 50% of all outstanding

Connecticut Energy shares will be converted into cash and 50% will be

converted into Energy East shares. Connecticut Energy shareholders as a

group may submit elections to convert more than half of the outstanding

Connecticut Energy shares into cash or more than half into Energy East

shares. If either cash or Energy East shares is oversubscribed, then an

equitable pro rata adjustment will be made to ensure that half of the

outstanding Connecticut Energy shares are converted into cash and half

are converted into Energy East shares.

Energy East states that the transaction will produce benefits to

the consumers of electricity and gas in the northeastern United States

by operating more cost-effectively, increasing financial flexibility

and providing strategic growth opportunities that will benefit the

combined company and its shareholders and customers. Energy East also

states that, after the transaction, the combined system will be better

positioned to take advantage of operating economies and efficiencies

through, among other measures, joint management and optimization of

their respective portfolios of gas supply, transportation, and storage

assets. Furthermore, Energy East states that the combination of the

companies' complementary expertise and infrastructure will provide the

combined system with the size and scope necessary to be an effective

participant in the emerging and increasingly competitive electric and

natural gas markets. Finally, Energy East states that the combined

system will be financially stronger and will have a broader customer

base than Connecticut Energy has as an independent entity.

The application states that, following the transaction, Energy East

and Merger Co. will each meet the requirements for an exemption under

section 3(a)(1) of the Act. It is stated that each of Energy East and

Merger Co. and their respective public utility subsidiaries will be

predominantly instrastate in character and will carry on their business

substantially in New York and Connecticut, respectively, the states in

which they are organized. It is also stated that Enterprises will

continue to be entitled to an exemption under section 3(a)(1) of the

Act as the transaction will have no impact on the status of Enterprises

as a holding company.

For the Commission by the Division of Investment Management,

under delegated authority.

Margaret H. McFarland,

Deputy Secrertary.

[FR Doc. 99-27984 Filed 10-26-99; 8:45 am]

BILLING CODE 8010-01-M