Northeast Nuclear Energy Company, et al. (Millstone Nuclear Power Station, Unit 3); Order Approving Application Regarding Merger of New England Electric System and the National Grid Group PLC

NUCLEAR REGULATORY COMMISSION

[Docket No. 50-423]

Northeast Nuclear Energy Company, et al. (Millstone Nuclear Power

Station, Unit 3); Order Approving Application Regarding Merger of New

England Electric System and the National Grid Group PLC

I

Northeast Nuclear Energy Company is authorized to act as agent for

the joint owners of the Millstone Nuclear Power Station, Unit 3

(Millstone 3), and has exclusive responsibility and control over the

physical construction, operation, and maintenance of the facility as

reflected in Facility Operating License No. NPF-49. New England Power

Company (NEP), one of the joint

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owners, holds a 12.2-percent 1 possessory interest in

Millstone 3. The U.S. Nuclear Regulatory Commission issued Facility

Operating License No. NPF-49 on January 31, 1986, pursuant to Part 50

of Title 10 of the Code of Federal Regulations (10 CFR Part 50). The

facility is located in New London County, on the southern coast of the

State of Connecticut.

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\1\ A pending merger of New England Electric System with Eastern

Utilities Associates, which owns Montaup Electric Company, would

result in an increase in NEP's ownership interest in Millstone 3 to

approximately 16.2 percent.

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II

Under cover of a letter dated March 15, 1999, NEP, a subsidiary of

New England Electric System (NEES), and National Grid Group plc

(National Grid) submitted an application requesting approval of the

transfer of control of the license, to the extent held by NEP in

connection with its 12.2-percent ownership interest in Millstone 3,

regarding a proposed change in the economic ownership of NEES. The

application was supplemented May 20 and June 17, 1999 (collectively

hereinafter ``the application'').

NEP is incorporated in the Commonwealth of Massachusetts. NEES owns

all of NEP's common stock and 99.71-percent of its voting securities,

with the other 0.29-percent being owned by the public in the form of

preferred stock with common voting rights. The requested transfer

approval relates to a proposed merger in which NEES is to be acquired

by National Grid, a British company. NEES and National Grid entered

into a merger agreement on December 11, 1998.

National Grid is a public limited company incorporated under the

laws of England and Wales. It is the only transmission company in

England and Wales and is an independent company created as a result of

the privatization and restructuring of the British electric system in

1990. The application states that National Grid, with its United

Kingdom assets and through interconnections with Scotland and France

and through its acquisitions of interests in transmission systems in

other nations, is the largest privately owned transmission company in

the world.

National Grid has formed NGG Holdings LLC (NGG Holdings), a U.S.

entity that is a limited liability company organized in Massachusetts

and a wholly owned subsidiary of National Grid. NGG Holdings will merge

with and into NEES, with NEES being the surviving entity from that

transaction and maintaining its status as a U.S. entity subject to all

applicable U.S. laws and regulations. The application states that, for

tax purposes, immediately after the merger, NEES will be converted from

a Massachusetts business trust into a corporation; specifically, NEES

will be merged into a Massachusetts corporation to be named NEES

Holdings, Inc., which will then be the surviving entity. The post-

acquisition capital structure of NEES Holdings, Inc., will be identical

to the capital structure of NEES, and NEES Holdings, Inc., will become

a wholly owned indirect subsidiary of National Grid, with NEP being a

subsidiary of NEES Holdings, Inc., and thus also becoming an indirect

subsidiary of National Grid. The application also provides details

regarding several companies that will be created for various business

reasons as intermediates between National Grid and NEES Holdings, Inc.,

after the merger is approved, and all of these companies will be either

directly or indirectly wholly owned by National Grid. National Grid

will register as a public utility holding company under the Public

Utility Holding Company Act of 1935.

Approval of the indirect license transfer that would result from

the foregoing transactions was requested pursuant to 10 CFR 50.80.

Notice of the application for approval and an opportunity for a hearing

was published in the Federal Register on June 30, 1999 (64 FR 35191).

Pursuant to such notice, joint Millstone 3 owners Connecticut Light and

Power Company (CL&P) and Western Massachusetts Electric Company (WMECO)

filed a timely intervention petition and hearing request. Following the

submission of further pleadings by the applicants and petitioners, the

Commission found that the petitioners had demonstrated standing and

proffered two admissible issues (regarding foreign ownership and

financial qualifications). The Commission set the case for hearing and

issued a schedule for the proceeding. Subsequently, on November 4,

1999, the petitioners filed a notice of withdrawal of their petitions

to intervene, and the petitioners and the applicants jointly moved for

termination of the proceeding due to a settlement reached between the

parties. The Commission granted the motion on November 19, 1999. In

doing so, it noted that the staff, in its review of transfer

applications, examines financial qualifications and foreign ownership

issues, and should consider concerns specifically raised in the

proceeding relating to those matters when it takes action on the

transfer application. North Atlantic Energy Service Corp., et al.

(Seabrook, Unit 1 and Millstone Station, Unit 3), CLI-99-28, 50 NRC

______, slip op. (Nov. 19, 1999). The staff has considered those

concerns, which are addressed in the safety evaluation supporting this

Order.

Under 10 CFR 50.80, no license, or any right thereunder, shall be

transferred, directly or indirectly, through transfer of control of the

license, unless the Commission shall give its consent in writing. Upon

review of the information in the application, and other information

before the Commission, the NRC staff has determined that the proposed

merger of National Grid and NEES will not affect the qualifications of

NEP as a holder of Facility Operating License NPF-49, and that the

indirect transfer of the license, to the extent effected by the

proposed merger, is otherwise consistent with applicable provisions of

law, regulations, and orders issued by the Commission, subject to the

conditions set forth herein. The foregoing findings are supported by a

safety evaluation dated December 10, 1999.

III

Accordingly, pursuant to Sections 161b, 161i, 161o, and 184 of the

Atomic Energy Act of 1954 (AEA), as amended, 42 U.S.C. 2201(b),

2201(i), 2201(o), and 2234; and 10 CFR 50.80, It Is Hereby Ordered that

the indirect license transfer referenced above is approved, subject to

the following conditions:

(1) No later than the time the proposed merger with National Grid

is consummated, NEP shall establish and make operational a Special

Nuclear Committee, as described in the application, having the

composition, authority, responsibilities, and obligations specified in

the application, provided, however, the Special Nuclear Committee may

also have exclusive authority on behalf of NEP over taking any action

which is ordered by the NRC or any other agency or court of competent

jurisdiction. No material changes with respect to the Special Nuclear

Committee may be made without the prior written consent of the

Director, Office of Nuclear Reactor Regulation. The foregoing

provisions may be modified by the Commission upon application and for

good cause shown.

(2) The Special Nuclear Committee shall have the responsibility and

exclusive authority to ensure, and shall ensure, that the business and

activities of NEP with respect to the Millstone 3 license are at all

times conducted in a manner consistent with the protection of the

public health and safety and

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common defense and security of the United States.

(3) NEP shall provide the Director of the Office of Nuclear Reactor

Regulation a copy of any application, at the time it is filed, to

transfer (excluding grants of security interests or liens) from NEP to

its direct or indirect parent, or to any other affiliated company,

facilities for the production, transmission, or distribution of

electric energy having a depreciated book value exceeding ten percent

(10 percent) of NEP's consolidated net utility plant, as recorded on

its books of account.

(4) Should the proposed merger not be completed by December 30,

2000, this Order shall become null and void, provided, however, upon

application and for good cause shown, such date may be extended.

This Order is effective upon issuance.

For further details with respect to this Order, see the initial

application dated March 15, 1999, and the supplements dated May 20 and

June 17, 1999, and the safety evaluation dated December 10, 1999, which

are available for public inspection at the Commission's Public Document

Room, the Gelman Building, 2120 L Street, NW., Washington, DC, and

accessible electronically through the ADAMS Public Electronic Reading

Room link at the NRC Web site http://www.nrc.gov.

Dated at Rockville, Maryland, this 10th day of December 1999.

For the Nuclear Regulatory Commission.

Roy P. Zimmerman,

Acting Director, Office of Nuclear Reactor Regulation.

[FR Doc. 99-33482 Filed 12-23-99; 8:45 am]

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