File No. 70-9343
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM U-1
(AMENDMENT NO. 8)
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NORTHEAST UTILITIES
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-0010
NORTHEAST UTILITIES SERVICE COMPANY
NU ENTERPRISES, INC.
107 Selden Street
Berlin, Connecticut 06037
(Name of companies filing this statement
and address of principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141-0270
(Name of address of agent for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
David R. McHale Jeffrey C. Miller, Esq.
Vice President and Treasurer Assistant General Counsel
Northeast Utilities Northeast Utilities
Service Company Service Company
P.O. Box 270 P.O. Box 270
Hartford, Connecticut Hartford, Connecticut
06141-0270 06141-0270
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
BACKGROUND
1. By Order dated November 12, 1998 (HCAR No. 35-26939) in this File No.
70-9343, the Commission authorized, among other things, (i) the formation and
financing by Northeast Utilities ("NU") of a nonutility subsidiary holding
company (which is referred to therein as "Newco" but which is now known as NU
Enterprises, Inc. ("NUEI")) which will engage, through multiple subsidiaries,
in a variety of energy related and other activities and (ii) the acquisition
by NUEI of the securities of GENCO (now known as Northeast Generation
Company), Northeast Generation Services, Inc. (now known as Northeast
Generation Services Company), HEC Inc. (now known as Select Energy Services,
Inc.), Mode 1 Communications, Inc. and Select Energy, Inc. The Commission,
through subsequent orders in this file (collectively, the "Prior Orders"),
also authorized NU and NUEI to issue guarantees or provide other forms of
credit support or enhancements (collectively, "Guarantees") to or for the
benefit of NUEI, NUEI's nonutility subsidiaries ("Nonutility Subsidiaries"),
and NU's other to-be-formed direct or indirect energy-related companies, as
defined in rule 58 under the Act, in an aggregate amount not to exceed $500
million (the "Guarantee Limit"), at any one time, through December 31, 2002.
See, Order dated May 19, 1999 (HCAR No. 35-27029) and Order dated October 21,
1999 (HCAR No. 35-27093). In Post-effective Amendment No. 5 (Amendment No.
7) to this Application filed November 15, 2002, NU and NUEI sought an
extension of the date through which the Guarantees may be provided through
September 30, 2003 under the terms and conditions of the Prior Orders.
2. This post-effective amendment to the Application is filed to obtain
authorization for the extension of the Guarantee period as described above.
AMENDMENT TO THE APPLICATION
3. To reflect the foregoing, the Application/Declaration in this
proceeding, as previously amended, is further amended as follows:
The first sentence of Paragraph 8 is deleted and replaced with the
following:
"NU and NUEI also propose to issue guarantees or provide other forms of
credit support or enhancements (collectively, "Guarantees") to or for the
benefit of NUEI, the Nonutility Subsidiaries and NU's other direct and
indirect Rule 58 subsidiaries to be formed by NU, NUEI or the Nonutility
Subsidiaries (the "Guaranteed Entities") in an aggregate amount not to exceed
$500 million ("Aggregate Authorization"), through September 30, 2003 under
the terms and conditions of the orders issued by the Commission in this
File."
As of September 30, 2002, NU's Nonutility Subsidiaries consisted of
Northeast Generation Services Company, Select Energy Portland Pipeline, Inc.
(inactive), Select Energy, Inc., Select Energy New York, Inc., Select Energy
Services, Inc., Reeds Ferry Supply Corporation, HEC/Tobyhanna Energy Project,
Inc., Select Energy Contracting, Inc, Yankee Energy Services Company, R. M.
Services, Inc., ERI/HEC EFA-Med, LLC, E. S. Boulos Company, NGS Mechanical,
Inc., HEC/CJTS Energy Center LLC, Woods Electrical Co., Inc., Woods Network
Services, Inc. and Mode 1 Communications, Inc.
ITEM 2. FEES COMMISSIONS, AND EXPENSES
No additional fees, commissions or expenses will be incurred as a result of
the filing of this Amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
1. Sections 6(b) and 12(b) of the Act and sections 45 and 54 of the
related regulations of the Commission are or may be applicable to the
transactions as herein proposed. To the extent any other sections of the Act
may be applicable to the proposed transaction, the Applicants request
appropriate orders thereunder.
Other Matters
Current Financial Conditions
1. As of September 30, 2002, NU's consolidated common equity was 31.8% of
total consolidated capitalization, in excess of the benchmark set forth by
the Commission of 30%. During the Authorization Period, NU represents that
it will maintain its consolidated common equity as a percentage of total
consolidated capitalization (inclusive of short-term debt) at 30% or higher.
As of September 30, 2002, NU had a senior unsecured debt rating of "BBB" from
Standard & Poor's, and "Baa1" from Moody's
2. Except in accordance with the Act, neither NU nor any subsidiary thereof
(a) has acquired an ownership interest in an EWG or a FUCO, as defined in
Sections 32 and 33 of the Act, or (b) now is or as a consequence of the
transactions proposed herein will become a party to, or has or will as a
consequence of the transactions proposed herein have a right under, a
service, sales, or construction contract with an EWG or a FUCO. None of the
proceeds from the transactions proposed herein will be used by NU and its
subsidiaries to acquire any securities of, or any interest in, an EWG or a
FUCO.
3. NU currently meets all of the conditions of Rule 53(a), except for clause
(1). At September 30, 2002, NU's "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $448.2 million, or
approximately 65% of NU's average "consolidated retained earnings," also as
defined in Rule 53(a)(1), for the four quarters ended September 30, 2002 ($691.3
million). With respect to Rule 53(a)(1), however, the Commission has
determined that NU's financing of its investment in Northeast Generation
Company ("NGC"), NU's only current EWG or FUCO, in an amount not to exceed
$481 million or 83% of its "average consolidated retained earnings" would not
have either of the adverse effects set forth in Rule 53(c). See Northeast
Utilities, Holding Company Act Release No. 27148, dated March 7, 2000 (the
"Rule 53(c) Order"). NU continues to assert that its EWG investment in NGC
will not adversely affect the System.
4. In addition, NU and its subsidiaries are in compliance and will continue
to comply with the other provisions of Rule 53(a) and (b), as demonstrated by
the following determinations:
(i) NGC maintains books and records, and prepares financial statements, in
accordance with Rule 53(a)(2). Furthermore, NU has undertaken to provide the
Commission access to such books and records and financial statements, as it
may request;
(ii) No employees of NU's public utility subsidiaries have rendered services
to NGC;
(iii) NU has submitted (a) a copy of each Form U-1 and Rule 24 certificate
that has been filed with the Commission under Rule 53 and (b) a copy of Item
9 of the Form U5S and Exhibits G and H thereof to each state regulator having
jurisdiction over the retail rates of NU's public utility subsidiaries;
(iv) Neither NU nor any subsidiary has been the subject of a bankruptcy or
similar proceeding unless a plan of reorganization has been confirmed in such
proceeding;
(v) NU's average CREs for the four most recent quarterly periods have not
decreased by 10% or more from the average for the previous four quarterly
periods; and
(vi) In the previous fiscal year, NU did not report operating losses
attributable to its investment in EWGs/FUCOs exceeding 3 percent of NU's
consolidated retained earnings.
5. The proposed transactions, considered in conjunction with the effect of
the capitalization and earnings of NU's EWGs and FUCOs, would not have a
material adverse effect on the financial integrity of the NU system, or an
adverse impact on NU's public-utility subsidiaries, their customers, or the
ability of State commissions to protect such public-utility customers. The
Rule 53(c) Order was predicated, in part, upon an assessment of NU's overall
financial condition which took into account, among other factors, NU's
consolidated capitalization ratio and its retained earnings, both of which
have improved since the date of the order. NU's EWG investment (it has no
FUCO investment) has been profitable for all quarterly periods ending June
30, 2000 through September 30, 2002 (NGC was acquired in March 2000). As of
December 31, 1999, the most recent period for which financial statement
information was evaluated in the Rule 53(c) Order, NU's consolidated
capitalization consisted of 35.3% common equity and 64.7% debt (including
long and short-term debt, preferred stock, capital leases and guarantees).
6. NGC has made a positive contribution to earnings by contributing $126.8
million in revenues in the 12-month period ending September 30, 2002 and net
income of $29.0 million for the same period. Accordingly, since the date of
the Rule 53(c) Order, the capitalization and earnings attributable to NU's
investments in EWGs and FUCOs has not had an adverse impact on NU's financial
integrity.
ITEM 4. REGULATORY APPROVAL
Other than as set forth above, no other consent or approval of any other
State commission or any Federal commission (other than the Securities and
Exchange Commission) is required for the transactions contemplated herein.
ITEM 5. PROCEDURE
The Applicants respectfully request the Commission's approval, pursuant to
this Application, as amended, of all transactions described herein. The
current period during which Guarantees may be issued expires December 31,
2002, accordingly, the Applicants further request that the Commission issue
an order authorizing the transactions proposed herein at the earliest
practicable date, but in any event no later than December 31, 2002. The
Applicants hereby waive any recommended decision by a hearing officer or by
any other responsible officer of the Commission and waive the 30-day waiting
period between issuance of the Commission's order and the date on which it is
to become effective, since it is desired that the Commission's order, when
issued, become effective immediately. The Applicants consent that the office
of Public Utility Regulation within the Division of Investment Management may
assist in the preparation of the Commission's decision and/or order.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
F.1 Opinion of Counsel
(b) Financial Statements
The pro-forma effect on NU's financial statements of the proposed
amendments extending the period in which Guarantees may be issued by NU and
NUEI is not material and therefore no new financial statements are filed.
[SIGNATURE PAGE TO FOLLOW]
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned have duly caused this Amendment to be
signed on behalf of each of them by the undersigned thereunto duly
authorized.
Date: December 17, 2002
NORTHEAST UTILITIES
NU ENTERPRISES, INC.
NORTHEAST UTILITIES SERVICE COMPANY
/s/ Randy A. Shoop
By: Randy A. Shoop
Assistant Treasurer - Finance of Northeast Utilities
Service Company, and as Agent for the above Companies
Exhibit F.1
December 18, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: File No. 70-9343 Post-Effective Amendment No. 6 to
Application/Declaration on Form U-1
Ladies and Gentlemen:
I am Assistant General Counsel of Northeast Utilities Service Company
("NUSCO"), the service company subsidiary of Northeast Utilities ("NU"), and
I am furnishing this opinion as Exhibit F.1 to Post-effective Amendment No. 6
(Amendment No. 8) (the "Amendment") to the Application/Declaration, as
amended, on Form U-1 (the "Application") of NU, to the Commission with
respect to the issuance by NU of guarantees and other forms of credit support
for the benefit of its nonutility subsidiaries.
In connection with this opinion, I have examined or caused to be
examined by counsel associated with or engaged by me, including counsel who
are employed by NUSCO, such papers, documents, and records, and have made
such examination of law and have satisfied myself as to such other matters as
I have deemed relevant or necessary for the purpose of this opinion. I have
assumed the authenticity of all documents submitted to me as originals, the
genuineness of all signatures, the legal capacity of natural persons, and the
conformity to originals of all documents submitted to me as copies.
The opinions set forth herein are limited to the laws of the State of
Connecticut and the Commonwealth of Massachusetts and the federal laws of the
United States. I am a member of the bar of the State of New York. I am not
a member of the bar of the State of Connecticut or the bar of the
Commonwealth of Massachusetts, and do not hold myself out as an expert in the
laws of such jurisdictions, although I have made a study of relevant laws of
such jurisdictions. In expressing opinions about matters governed by the
laws of the State of Connecticut and the Commonwealth of Massachusetts, I
have consulted with counsel who are employed by NUSCO and are members of the
bars of such jurisdictions.
The opinions set forth in paragraph (b) below are subject to the effect
of bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and general principles of equity.
Based upon and subject to the foregoing, and if the proposed
transactions contemplated by the Amendment are carried out in accordance
therewith, I am of the opinion that:
(a) all Massachusetts and Connecticut laws applicable to the transactions
proposed in the Amendment will have been complied with;
(b) when issued as described in the Application, any NU or NUEI guarantee
will be a valid and binding obligation of NU or NUEI, respectively;
(c) the consummation of the transactions proposed in the Amendment by NU and
NUEI will not violate the legal rights of the holders of any securities
issued by NU or NUEI or any associate company thereof.
Very truly yours,
/s/Jeffrey C. Miller
Assistant General Counsel
Northeast Utilities Service Company