As filed with the SEC on October 17, 2002
File No. 70-10084
United States Securities and Exchange Commission
Washington, D.C. 20549
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Pre-Effective Amendment No. 1 to Form U-1
Application/Declaration
Under the
Public Utility Holding Company Act of 1935
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Concord Electric Company Exeter & Hampton Electric Company
One McGuire Street 114 Drinkwater Road
Concord, NH 03301 Kensington, NH 03833
Unitil Corporation
6 Liberty Lane West
Hampton, NH 03842-1720
(name and principal executive office of applicants
and top registered holding company)
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Mark H. Collin
Treasurer and Secretary
Unitil Corporation
6 Liberty Lane West
Hampton, NH 03842-1720
(name and address of agent for service for all applicants)
The Commission is also requested to send copies
of any communication in connection with this matter to:
Sheri E. Bloomberg Meabh Purcell
LeBoeuf, Lamb, Greene & MacRae, L.L.P. LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street 260 Franklin Street, Suite 23
New York, NY 10019-5389 Boston, MA 02110
(212) 424-8000 (617) 439-9500
Facsimile: (212) 424-8500 Facsimile: (617) 439-0341
TABLE OF CONTENTS
Item 1. Description of the Proposed Transaction................................1
A. Introduction...........................................................1
B. General Request........................................................1
C. Background.............................................................2
D. Summary of the Proposed Transition.....................................3
E. Intended Benefits from the Merger......................................8
Item 2. Fees, Commissions and Expenses.........................................9
Item 3. Applicable Statutory Provisions........................................9
A. Applicable Provisions..................................................9
Item 4. Regulatory Approvals..................................................10
Item 5. Procedure.............................................................12
This Pre-Effective Amendment No. 1 amends and restates the
Application-Declaration previously filed on August 30, 2002 as follows:
Item 1. Description of the Proposed Transaction
A. Introduction
This Application-Declaration ("Application") seeks approvals relating
to the proposed merger (the "Merger") of Concord Electric Company ("CECo") and
Exeter & Hampton Electric Company ("E&H"), the two New Hampshire retail electric
utility subsidiaries of Unitil Corporation ("Unitil", and together with CECo and
E&H, the "Applicants"), a registered public utility holding company. Applicants
propose that upon receipt of all the necessary regulatory approvals, E&H will
merge with and into CECo to form a single retail electric utility subsidiary of
Unitil, under the new name of Unitil Energy Systems, Inc. ("UES").
The Merger is one of the elements of the Unitil system restructuring
proposal before the New Hampshire Public Utilities Commission ("NHPUC"), which
was adopted pursuant to and as required by the New Hampshire Electricity
Restructuring Law, codified at RSA 374-F. Unitil's restructuring proposal
contains four principal elements: (l) the merger of CECo and E&H into a single
distribution company, UES, that will be subject to the jurisdiction of the
NHPUC; (2) divestiture of the power supply portfolio of Unitil Power Corp.,
Unitil's power supply subsidiary, and the solicitation and acquisition by UES of
replacement sources of energy necessary for it to meet its obligation to provide
transition service and default service to its retail customers; (3)
implementation by UES of new unbundled rates to be approved by the NHPUC that
reflect the Merger and the implementation of the restructuring requirements of
New Hampshire RSA374-F; and (4) introduction of customer choice for UES's New
Hampshire customers.
B. General Request
Applicants request authorization under Sections 9(a)(2) and 10 of the
Act to effect the Merger. Applicants request authorization to amend and combine
CECo's and E&H's debt indentures into a single UES indenture and revise the
existing authorization for the Unitil system money pool, in each case to reflect
the Merger. Finally, E&H also requests authorization to solicit proxies or
consents from the holders of the outstanding shares of its preferred stock (the
"Solicitation") with respect to the approval by such holders with respect to the
Merger and related transactions and from their bondholders in connection with
consent for the indenture amendments discussed above. The proposed form of
solicitation material to be used in the Solicitation is included in Exhibit B-2
hereto and the proposed form of amended indenture for UES is included in Exhibit
B-3 hereto.
C. Background
In 1984, Unitil was formed through a statutory share exchange under
New Hampshire law as a result of which CECo and E&H became subsidiaries of
Unitil. At that time, Unitil Power Corp. ("UPC") and Unitil Service Corp.
("USC") were also formed as subsidiaries of Unitil. Fitchburg Gas and Electric
Light Company ("FG&E"), a Massachusetts combination gas and electric utility,
became a subsidiary of Unitil in 1992 as a result of a merger of a subsidiary of
Unitil into FG&E. As a result of this transaction, Unitil became a registered
holding company under the Act.
CECo is a public utility company within the meaning of the Act. CECo
is engaged in the transmission and distribution of electric energy at regulated
rates to approximately 28,000 customers in Concord and the capital region of New
Hampshire. CECo is regulated as a public utility in New Hampshire. As of June
30, 2002, CECo reported net utility plant of $37,417,000 and operating revenues
for the 12 months ended June 30, 2002 of $52,263,000.
E&H is a public utility company within the meaning of the Act. E&H is
engaged in the transmission and distribution of electric energy at regulated
rates to approximately 41,000 customers in Exeter and the seacoast region of New
Hampshire. E&H is regulated as a public utility by the New Hampshire Public
Utilities Commission. As of June 30, 2002, E&H reported net utility plant of
$43,221,000 and operating revenues for the 12 months ended June 30, 2002 of
$58,053,000.
While the utility operations of CECo and E&H are administered and
coordinated through Unitil's centralized service company, USC, and each company
has, since 1986, secured all of its requirements for electric energy from UPC,
the companies have different retail tariffs, rates and rate bases. The Merger
will result in a new unified rate structure and a single rate base,
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and the elimination of any inefficiencies and duplicative costs resulting from
the operation of the companies as two separate entities.
D. Summary of the Proposed Transaction
To accomplish the Merger, the companies will enter into a Merger
Agreement approved by their respective boards of directors. Consummation of the
transactions contemplated by the Merger Agreement will be subject to the receipt
of all necessary regulatory approvals and to the approval of the shareholders of
each company. Under the terms of the Merger Agreement, E&H will be merged with
and into CECo with CECo as the surviving corporation. In connection with the
Merger, CECo will change its name to Unitil Energy Systems, Inc. ("UES"). As a
result of the Merger, all of E&H's assets and liabilities will, by operation of
law, become the assets and liabilities of CECo.
1. Description of Outstanding Equity Securities of CECo and E&H.
CECo currently has 250,000 authorized shares of common stock (the
"CECo Common Stock"), of which 131,745 shares are issued and outstanding and
owned both of record and beneficially by Unitil; 2,250 authorized shares of
non-cumulative preferred stock (the "CECo Non-Cumulative Preferred Stock"), all
of which are issued and outstanding and none of which is owned, of record or
beneficially, by Unitil; and 15,000 authorized shares of cumulative preferred
stock (the "CECo Cumulative Preferred Stock"), of which 2,150 shares are issued
and outstanding in a single series designated the "8.70% Series," none of which
is owned, of record or beneficially, by Unitil. The CECo Non-Cumulative
Preferred Stock is entitled to vote on all matters brought before the
shareholders of CECo together with the CECo Common Stock, with each outstanding
share entitled to one vote. The CECo Non-Cumulative Preferred Stock is not
entitled to vote as a separate class. The CECo Cumulative Preferred Stock is not
entitled to vote on any matter, except as may otherwise be authorized or
required by the Business Corporation Act. Under the Business Corporation Act,
the CECo Cumulative Preferred Stock will not be entitled to vote on the Merger
and related transactions.
E&H currently has 197,417 authorized shares of common stock (the "E&H
Common Stock"), of which 195,000 shares are issued and outstanding and owned
both of record and beneficially by Unitil; and 25,000 authorized shares of
cumulative preferred stock (the "E&H Cumulative Preferred Stock"), of which a
total of 9,704 shares are issued and outstanding
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in four series as follows: 840 shares of the "5% Dividend Series", 1,680 shares
of the "6% Dividend Series", 3,331 shares of the "8.75% Dividend Series" and
3,853 shares of the "8.25% Dividend Series". None of the E&H Cumulative
Preferred Stock is owned, of record or beneficially, by Unitil. The E&H
Cumulative Preferred Stock is not entitled to vote as a separate class, unless
such a class vote is otherwise authorized or required by the Business
Corporation Act. Under the Business Corporation Act, each series of the E&H
Cumulative Preferred Stock will be entitled to vote as a separate class on the
proposed Merger with CECo, since, as described below, the terms of the Merger
Agreement provide for the issuance to the holders of the E&H Cumulative
Preferred Stock in exchange for their shares of E&H Cumulative Preferred Stock
of an equal number of shares of CECo Cumulative Preferred Stock in four new
series which will have the same terms and conditions as the existing series of
the E&H Cumulative Preferred Stock for which they will be exchanged.
The authorized and unissued shares of CECo Cumulative Preferred Stock
may be issued in series by CECo from time to time upon authorization of its
board of directors, with the terms of each new series to be approved by the vote
of two-thirds of the outstanding shares of CECo Common Stock and CECo
Non-Cumulative Preferred Stock.
As part of the approval of the Merger Agreement, the board of
directors of CECo and the holders of the CECo Common Stock and CECo
Non-Cumulative Preferred Stock will approve an amendment to the CECo Articles of
Incorporation creating the four new series of CECo Cumulative Preferred Stock to
be issued in the Merger to the holders of the E&H Cumulative Preferred Stock. As
previously noted, these four new series will have the same terms as the four
series of E&H Cumulative Preferred Stock for which they will be exchanged.
2. Terms of the Merger Agreement.
Pursuant to the Merger Agreement, upon the effectiveness of the
Merger, all of the issued and outstanding shares of E&H Common Stock will be
converted into a single share of CECo Common Stock, and each share of E&H
Cumulative Preferred Stock will be converted into a share of a new series of
CECo Cumulative Preferred Stock, each such new series of CECo Cumulative
Preferred Stock to have the same terms and conditions as the existing series of
the E&H Cumulative Preferred Stock for which they will be exchanged. The shares
of CECo Common Stock, CECo Non-Cumulative Preferred Stock and CECo Cumulative
Preferred Stock
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issued and outstanding immediately prior to the Merger will remain outstanding
and will not be affected by the Merger.
3. Amendments to Debt Indentures
E&H is party to an Indenture of Mortgage and Deed of Trust dated as of
December 1, 1952 (the "E&H Indenture"), and CECo is party to an Indenture of
Mortgage and Deed of Trust dated as of July 15, 1958 (the "CECo Indenture").
There are currently three series of bonds outstanding under each of the E&H
Indenture and the CECo Indenture.
While CECo and E&H could accomplish the Merger without combining the
two indentures, which requires the consent of bondholders under the CECo
Indenture and the E&H Indenture, doing so would result in the surviving company
having to administer two separate indentures with somewhat differing provisions.
Accordingly, in connection with the Merger, CECo and E&H are proposing to
combine, amend and restate the E&H Indenture and the CECo Indenture into a
single Indenture under which all of the currently outstanding bonds of E&H and
CECo would remain outstanding. Bondholders under the new Indenture would be
secured ratably in all of the real property assets of UES on the same terms on
which they are currently secured in the real property assets of CECo and E&H.
The consent of each bondholder under the E&H Indenture and the CECo
Indenture will be necessary to accomplish the proposed combination, amendment
and restatement of the two Indentures. Applicants request authorization to seek
such consent to the extent required under Rule 62 of the Act.
While the CECo Indenture and the E&H Indenture are largely identical
instruments, there are differences between them. As part of the combination,
amendment and restatement process, CECo and E&H propose to conform the
provisions of the Indentures. Any special provisions applicable to the separate
series of bonds under each Indenture which are contained in the Supplemental
Indentures pursuant to which those series were issued will be preserved in the
combination, amendment and restatement of the two Indentures. The proposed
combination, amendment and restatement will not effect any material economic
change in the provisions applicable to the bonds or any series thereof, such as
their respective rates of interest, maturities, amounts outstanding or
redemption features.
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4. Boards of Directors and Shareholder Approvals.
The Merger Agreement and the transactions contemplated thereby are
subject to the approval of the boards of directors of each of CECo and E&H. In
addition, the Merger Agreement and related amendments to CECo's Articles of
Incorporation are subject to the approval of the holders of the CECo Common
Stock and the CECo Non-Cumulative Preferred Stock, voting together as a single
class, and to the approval of the E&H Common Stock and each series of the E&H
Cumulative Preferred Stock, each voting as a separate class. Because Unitil
effectively controls the boards of directors of each of E&H and CECo as the
result of its ownership of all of the issued and outstanding shares of common
stock of each company, the approval of the Merger Agreement and related
amendments to CECo's Articles of Incorporation by those boards of directors is
assured. The approval of the holders of the CECo Common Stock and the CECo
Non-Cumulative Preferred Stock of the Merger Agreement and related amendments to
CECo's Articles of Incorporation is also assured, since Unitil controls the vote
of more than 99% of all such shares.
The approval of the Merger Agreement by the holders of the E&H Common
Stock is assured, since Unitil controls the vote of all of such shares. Unitil
does not, however, control the vote of any outstanding series of the E&H
Cumulative Preferred Stock. Unitil intends to solicit written consents in favor
of the Merger Agreement and related transactions from the holders of each
outstanding series of the E&H Cumulative Preferred Stock pursuant to the
Solicitation. Because neither E&H nor any series of its capital stock is
registered under the Securities Exchange Act of 1934, the Solicitation is
subject only to the requirements of New Hampshire law and the terms of E&H's
governance documents. Under Section 7.04 of the New Hampshire Business
Corporation Act (RSA 293-A:7.04), the E&H Cumulative Preferred Stock can take
action by unanimous written consent. Such action would also be consistent with
the terms of E&H's governance documents. E&H has the right to call each
outstanding series for redemption pursuant to the terms of each such series and
Unitil currently intends to cause E&H to redeem the shares of any series which
does not consent to the Merger Agreement and related transactions in accordance
with the terms of Rule 42 of the Act. Thus, the requisite consent of the E&H
Cumulative Preferred is assured.
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5. Tax and Accounting Consequences of the Merger.
The Merger has been structured to qualify for tax purposes as a
tax-free "reorganization" under Section 368(a) of the Internal Revenue Code. As
a result, no gain or loss will be recognized by CECo or E&H or the holders of
the CECo Common Stock, the CECo Non-Cumulative Preferred Stock, the CECo
Cumulative Preferred Stock, the E&H Common Stock or the E&H Cumulative Preferred
Stock. CECo and E&H expect that the Merger will qualify as a common control
merger for accounting and financial reporting purposes. The accounting for a
common control merger is similar to a pooling of interests. Under this
accounting treatment, the combination of the ownership interests of the two
companies is recognized and the recorded assets, liabilities, and capital
accounts are carried forward at existing historical balances to the consolidated
financial statements of UES (as the surviving company) following the Merger.
On a pro forma basis, giving effect to the Merger as of June 30, 2002,
UES will have total assets of approximately $112,047,000, including net utility
plant of $80,638,000, and operating revenues for the 12 months ended June 30,
2002 of approximately $110,316,000. UES's pro forma consolidation capitalization
as of June 30, 2002 (assuming the exchange of all of the E&H Cumulative
Preferred Stock for new shares of UES Cumulative Preferred Stock) will be as
follows:
------------------------- ---------------------- ---------------------
Security Amount Outstanding Percentage
------------------------- ---------------------- ---------------------
Common Stock Equity 28,411,000 35%
------------------------- ---------------------- ---------------------
Preferred Stock 1,195,000 1.5%
------------------------- ---------------------- ---------------------
Short-Term Debt 1,550,000 1.9%
------------------------- ---------------------- ---------------------
Long-Term Debt 50,000,000 61.6%
------------------------- ---------------------- ---------------------
Total: 81,156,000 100%
------------------------- ---------------------- ---------------------
6. Money Pool Matters.
CECo and E&H participate in the Until system money pool arrangement
("Money Pool") that is funded, as needed, through bank borrowings and surplus
funds invested by the
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participants in the Money Pool. See Holding Co. Act Release Nos. 35-26737 (June
30, 1997); 35-27182 (June 9, 2000); 35-27307 (Dec. 15, 2000) and 35-27345 (Feb.
14, 2001). Participation in the Money Pool, including short-term debt
borrowings, by CECo and E&H are authorized by the New Hampshire Public Utility
Commission, and therefore exempt under Rule 52. However, borrowings by and loans
to Unitil's other utility subsidiary, Fitchburg Gas and Electric Light Company
("Fitchburg"), are not exempt. Following the Merger, it is proposed that UES be
authorized to make loans to Fitchburg on the same terms as CECo's and E&H's
current authorization. All other terms, conditions and limitations under the
Money Pool orders will continue to apply without change.
E. Intended Benefits from the Merger.
By merging E&H into CECo, the Applicants will simplify the corporate
structure of Unitil's holding company system. The Merger will also permit the
achievement of cost efficiency and service quality improvements. Based upon
Unitil's already centralized service company structure, the two New Hampshire
distribution operating companies may only achieve nominal operational gains as a
result of having a single New Hampshire operating entity. However, the combined
knowledge and experience of the two companies will benefit the remaining
stand-alone company. For example, the power contract management activities will
become more streamlined by eliminating one of the two New Hampshire retail
operating companies. In the Distribution Business Development (DBD) department,
a benefit will be a decrease in administrative tasks and reporting requirements.
The decrease in tasks will not be enough to decrease the employees assigned to
this function, but will allow the current employees additional time to work on
other tasks to improve the quality of support provided to the communities that
Unitil serves. Similarly, Customer Service operations, which are currently
consolidated, will be simplified by the consolidation of two tariffs and sets of
rates into one, leading to increased operating efficiency and improved service
to customers. The Operations Systems department views the Merger as a first step
towards the consideration of a consolidated meter reading system. For the
Finance and Treasury and Regulatory Services departments, there will be a
decrease in the number of required reports, analyses, and filings, which will
also lead to greater cost efficiencies and enhanced services at the New
Hampshire utilities.
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The Applicants believe that the Merger will generate cost efficiencies
which would not be available absent the Merger, with no adverse consequences for
either customers or shareholders. The Merger will not have a negative impact on
competition or on effective local regulation. In fact, the Merger is being
undertaken in the context of, and to ensure compliance with, a state
restructuring plan designed to enhance competition. Accordingly, the Applicants
believe that the Merger is in accordance with the applicable standards of the
Act and the rules and regulations thereunder.
Item 2. Fees, Commissions and Expenses
The total fees, commission and expenses paid or incurred in connection
with the Merger and related transactions are estimated to be not more than $1
million. The portion of such fees, commissions and expenses that are expected to
be paid or incurred for the Solicitation and bondholder consent request are
estimated to be approximately $2,000. These costs are expected to consist
primarily of attorneys fees plus additional miscellaneous fees.
Item 3. Applicable Statutory Provisions
A. Applicable Provisions
Sections 6, 7, 9, 10 and 12 of the Act, and Rules 43, 44, 45, 54 and
62 thereunder are applicable to the Merger and related transactions, including
the amendment and combination of the debt indentures. The proposed transaction
involves the merger of two wholly-owned public utility subsidiaries of Unitil
Corporation and certain other related transactions. The electric utility
operations of the two companies will be unaffected by the Merger. The Merger
will allow the companies to achieve a greater level of coordination in
operations and will enable the companies to achieve greater cost efficiencies,
among other benefits. In addition, the Merger will simplify the Unitil corporate
structure. This merger of wholly-owned subsidiaries to simplify corporate
structure is consistent with existing Commission precedent (See Alliant Energy
Corporation, Holding Company Act Release No. 27456 (Oct. 24, 2001)), and is
designed to meet one of the primary goals of the Act, namely to facilitate state
regulation.
Section 12(e) of the Act and Rule 62 are applicable to the
Solicitation as well as obtaining the consent of bondholders under the two
indentures. As indicated, the holders of each outstanding series of E&H
Cumulative Preferred Stock will be asked to approve the Merger as a
9
separate class through a consent solicitation and the bondholders of the CECo
Indenture and E&H Indenture will be asked to consent to the amendment and
combination of those indentures.
B. Rule 54 Analysis
Neither Unitil nor any subsidiary thereof presently has, or as a
consequence of the proposed transactions will have, an interest in any exempt
wholesale generator ("EWG") or foreign utility company ("FUCO"), as those terms
are defined in Sections 32 and 33 of the Act, respectively. None of the proceeds
from the proposed transactions will be used to acquire any securities of, or any
interest in, an EWG or FUCO. Moreover, neither Unitil nor any of the
subsidiaries is, or as a consequence of the proposed transactions will become, a
party to, and such entities do not and will not have any rights under, a
service, sales or construction contract with any affiliated EWGs or FUCOs except
in accordance with the rules and regulations promulgated by the Commission with
respect thereto. Consequently, all applicable requirements of Rule 53(a)-(c)
under the Act are satisfied as required by Rule 54 under the Act.
Item 4. Regulatory Approvals
The federal and state regulatory requirements described below must be
complied with before the Applicants can complete the Merger and related
transactions. The Applicants currently believe that the necessary approvals can
be obtained by the fourth quarter of 2002. Except as set forth below, no
additional approvals from federal or state regulatory commissions are required
to complete the Merger and related transactions.
State Approvals
New Hampshire
CECo and E&H are subject to the jurisdiction of the New Hampshire
Commission as public utilities, and the approval of the New Hampshire Commission
is required to implement the Merger and the related transfer of all existing
franchises, rights, works and systems of CECo and E&H to UES, pursuant to RSA
374:33, 374:30 and 369:1. The NHPUC will also approve the issuance of the four
new series of preferred stock by UES in connection with the Merger. On January
25, 2001, CECo and E&H filed an application seeking the approval of the New
Hampshire Commission consistent with these requirements. The New Hampshire
proceeding is being conducted in phases: Phase I addresses the divestiture of
Unitil's power supply portfolio
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and acquisition of transition service and default service and Phase II relates
to the Merger and the realignment of Unitil's rate structure.
The NHPUC issued a written order approving Phase I settlement, with
conditions, on September 4th. The parties subsequently filed a first Amendment
to the Phase I Settlement Agreement on September 11th, which the Commission
approved in oral deliberation on September 13th. A written Order is pending.
The Parties filed the Phase II Settlement on September 3rd. The
Commission held hearings on September 10, 11, 12 and 13 and approved the Merger
Agreement in oral deliberations on September 18th. A written Order is pending.
Copies of the initial petition to the NHPUC and the Phase II settlement
agreement are filed herewith as exhibits C-1 and C-1.1, respectively. A copy of
the Oral Deliberations of the NHPUC relating to Phase II is filed herewith as
exhibit C-3.1. It is anticipated that the NHPUC's written approval order for
both phases will be issued on or before October 28, 2002.
Federal Approvals
Federal Power Act
The FERC must approve the Merger. Under Section 203 of the Federal
Power Act, the FERC is directed to approve a merger if it finds such merger
consistent with the public interest. In reviewing a merger, the FERC generally
evaluates:
o whether the merger will adversely affect competition;
o whether the merger will adversely affect rates; and
o whether the merger will impair the effectiveness of
regulation.
On August 30, 2002, the parties filed an application with the FERC
requesting approval of the Transaction under Section 203 of the Federal Power
Act. A copy of the application filed with the FERC is filed herewith as exhibit
C-2. When the FERC issues an order on the application, the parties will also
file a copy of the order.
In addition, the Applicants will file a Notice of Succession for UES
to succeed to the rate schedules and tariffs of CECo and E&H.
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Item 5. Procedure
The Applicants expect to close the proposed Merger on or about
December 1, 2002. The Applicants respectfully request that the Commission issue
and publish, not later than October 18, 2002, the requisite notice under Rule 23
with respect to the filing of this Application-Declaration, such notice to
specify a date not later than November 12, 2002 by which comments may be entered
and a date not later than November 14, 2002 as the date after which an order of
the Commission granting and permitting this Application to become effective may
be entered by the Commission. Applicants request that the notice include an
order authorizing commencement of the Solicitation and process of seeking of the
bondholder consents.
The Applicants waive a recommended decision by a hearing or other
responsible officer of the Commission for approval of the Merger and consent to
the Division of Investment Management's assistance in the preparation of the
Commission's decision. There should not be a waiting period between the issuance
of the Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
A. EXHIBITS
A-1 Articles of Incorporation of CECo. (Previously filed in
paper format on Form SE)
A-2 Bylaws of CECo, as amended. (Previously filed)
A-3 Articles of Incorporation of E&H. (Previously filed in
paper format on Form SE)
A-4 Bylaws of E&H, as amended. (Previously filed)
B-1. Proposed form of Agreement and Plan of Merger between CECo
and E&H. (Previously filed)
B-2 Proposed form of Solicitation material. (Previously filed)
B-3 Proposed form of Indenture for UES. (to be filed by
amendment)
C-1 Copy of Petition to the New Hampshire Public Utilities
Commission. (Previously filed)
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C-1.1 Settlement Agreement dated September 3, 2002 as filed with
the NHPUC.
C-2 Copy of Petition to the FERC.
C-3 Order of NHPUC (to be filed by amendment)
C-3.1 Oral Deliberations of the NHPUC.
C-4 Copy of Order of the FERC. (to be filed by amendment)
C-5 Order of the NHPUC with respect to CECo short-term debt
authority.
C-6 Order of the NHPUC with respect to E&H short-term debt
authority.
D Map of CECo and E&H Service Areas. (Previously filed in
paper format on Form SE)
E Opinion of Counsel (to be filed by amendment)
F Form of Federal Register Notice. (Previously filed)
B. FINANCIAL STATEMENTS
FS-1 Unaudited Statement of Income of CECo for the twelve months
ended June 30, 2002. (Previously filed)
FS-2 Unaudited Balance Sheet of CECo as of June 30, 2002.
(Previously filed)
FS-3 Unaudited Statement of Income of E&H for the twelve months
ended June 30, 2002. (Previously filed)
FS-4 Unaudited Balance Sheet of E&H as of June 30, 2002.
(Previously filed)
FS-5 Unaudited Pro Forma Combined Balance Sheet of UES as of
June 30, 2002. (Previously filed)
FS-6 Unaudited Pro Forma Combined Statement of Income of UES for
the twelve months ended June 30, 2002. (Previously filed)
Item 7. Information as to Environmental Effects
The Merger and related transactions do not involve a "major federal
action" nor does it "significantly affect the quality of the human environment"
as those terms are used in
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section 102(2)(C) of the National Environmental Policy Act. The Merger and
related transactions will not result in changes in the operation of the
Applicants that will have an impact on the environment. The Applicant are not
aware of any federal agency that has prepared or is preparing an environmental
impact statement with respect to the transactions that are the subject of this
Applicant-Declaration.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, Applicants have duly caused this Pre-Effective Amendment No. 1 to the
Application-Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
UNITIL CORPORATION
CONCORD ELECTRIC COMPANY
EXETER & HAMPTON ELECTRIC COMPANY
By: /s/ Mark H. Collin
--------------------
Name: Mark H. Collin
15
STATE OF NEW HAMPSHIRE
BEFORE THE
PUBLIC UTILITIES COMMISSION
- ------------------------------------------------)
CONCORD ELECTRIC COMPANY AND ) DOCKET NO. DE 01-247
EXETER & HAMPTON ELECTRIC COMPANY )
- ------------------------------------------------)
PHASE II SETTLEMENT AGREEMENT FOR
RESTRUCTURING
THE UNITIL COMPANIES
1. PREAMBLE
1.1 Purpose
This Phase II Settlement Agreement and its attachments (together, the
"Settlement") for restructuring the Unitil Companies is offered jointly by:
Concord Electric Company ("CECo"), Exeter & Hampton Electric Company ("E&H"),
Unitil Power Corp. ("UPC") (collectively "Unitil" or "the Companies"); the Staff
of the New Hampshire Public Utilities Commission ("Staff"); the Governor's
Office of Energy and Community Services ("GOECS"); the Office of the Consumer
Advocate ("OCA"); the Business & Industry Association of New Hampshire ("BIA");
Wendy Page; Representative Jeb E. Bradley and any other parties as may be
indicated by additional signature pages attached hereto (collectively "the
Parties" ). In Phase I of this proceeding, the Parties\1 presented a settlement
addressing the divestiture of Unitil's power supply portfolio (the "Divestiture
Process") and acquisition of Transition Service and Default Service (the
"Solicitation Process"). This Phase II Settlement seeks approval of the New
Hampshire Public Utilities
- -------------------------
1/ Wendy Page, who is an intervener in the proceeding and a signatory to this
Phase II Settlement, was not an intervenor in Phase I, nor a signatory to the
Phase I Settlement.
Commission ("Commission") to realign Unitil's corporate and rate structure to
provide: Customer Choice; unbundled rates and services; stable and predictable
prices for transition service; reliable and efficient cost based delivery
service; and an equitable, appropriate and balanced resolution of stranded costs
for Unitil. The Parties intend that this Settlement will result in the
resolution of Unitil's claims raised in the United States District Court in
Civil Action Nos. 97-97-JD (D.N.H.) and 97-121L (D.R.I.) ("Federal Court Case").
Upon receipt of all requested approvals in this proceeding by the Commission
(including the anticipated Phase III portion of the proceedings), and the
expiration of all periods of appeal with respect thereto, Unitil Energy Systems,
Inc. ("UES") will implement retail choice and Unitil will withdraw its
intervention in the Federal Court Case, with prejudice.
1.2 Background
1.2.1 On January 25, 2002, Unitil filed its restructuring proposal,
including a petition for expedited review of the divestiture and solicitation
processes. In the first phase of this proceeding, the Parties addressed Unitil's
proposed divestiture and solicitation processes. Following extensive
negotiations among the Parties, the Parties reached a settlement on the Phase I
issues. In the Phase I Settlement the Parties agreed to postpone the conduct of
the divestiture and solicitation requests for proposals ("RFP's") until after
the Commission has issued a final order on all other matters in this (Phase II)
case. The Phase I Settlement also provided detailed criteria and procedures for
evaluating the bids received in response to the divestiture and supply
solicitation RFPs, and for redesigned Transition and Default Services.
2
1.2.2 The Commission conducted a hearing on the Phase I Settlement on
June 6, 2002. The Phase I Settlement was unopposed and unanimously supported by
the Parties. The Commission issued an order on the Phase I issues on August 28,
2002.
1.2.3 The Parties commenced technical sessions and continued discovery
on the Phase II issues in June, 2002. On July 3, 2002, Staff, the OCA and Wendy
Page filed testimony on the Phase II issues and on July 23, 2002, the Parties
commenced settlement discussions on the Phase II topics. As a result of
extensive negotiations the Parties agreed to a resolution of all of the issues,
including: a reduction in total average rates of approximately one percent on
Choice Date as shown on Tab G; a combination of CECo and E&H into a single
distribution company, UES; the establishment of new distribution rates for this
new entity; the unbundling of the rates of UES to provide appropriate rate
recovery mechanisms and to implement customer choice; and implementation of an
Amended Unitil System Agreement to provide for the recovery of stranded costs.
1.3 Definitions
1.3.1 Choice Date. Choice Date is defined as the date on and after
which all CECo and E&H, or UES customers are allowed to choose competing
electric energy suppliers. The target for the Choice Date under this Settlement
is May 1, 2003.
1.3.2 Customer Choice. Customer Choice is defined as the ability of a
customer to choose its electric energy supplier.
1.3.3 Default Service. Default Service is defined as an electric
supply service to be offered to customers who leave Transition Service for a
competitive supply and then return for supply from UES (except that low income
customers shall be allowed to return to UES at any time during the Transition
Period).
3
1.3.4 Divestiture Date. The Divestiture Date is defined as the date
when Unitil's existing power supply and associated contracts are disposed of
through sale or otherwise to one or more third parties. The target for the
Divestiture Date under this Settlement is May 1, 2003.
1.3.5 Transition Period. The Transition Period is defined as Choice
Date through April 30, 2006.
1.3.6 Transition Service. Transition Service is defined as an electric
supply service to be offered during the Transition Period to UES' customers
(i.e., until April 30, 2005 for the G-1 group and April 30, 2006 for the non-G-1
Group) at market-based, stable, escalating prices, designed to facilitate the
transition to a competitive market.
1.3.7 Unitil Energy Systems, Inc. ("UES"). UES is the proposed
successor corporation to CECo and E&H which will combine the operations of CECo,
E&H and UPC, subject to Commission approval in Phase II.
1.4 Basis for Settlement Proposal
1.4.1 Unitil proposes to undertake a fundamental restructuring of its
businesses in order to comply with RSA 374-F, to accommodate the objectives of
the Commission in its restructuring orders, and to provide unbundled rates and
retail choice to its customers. At the same time, Unitil seeks to continue to
provide its customers with the lowest rates in the state. Among the significant
steps to be taken by Unitil in reliance on the proposed restructuring plan are:
implementing a process which Unitil intends will result in the complete,
voluntary and irrevocable divestiture of UPC's generation resource portfolio;
combination of the operations of CECo, E&H and UPC into one distribution
company; the restructuring, unbundling and resetting of retail rates; the
implementation of retail customer
4
choice; the provision by UES of Transition and Default Service and the
resolution of the Federal Court Case.
1.4.2 According to Unitil, there are unique circumstances that
distinguish it from each of the other New Hampshire utilities in many respects
and provide, therefor, a basis for adoption of the Phase II Settlement presented
herein. These circumstances include the following:
(1) Unitil is a New Hampshire corporation, headquartered in Hampton,
New Hampshire; Unitil maintains its distribution operations
centers in Concord, New Hampshire and Kensington, New Hampshire;
and Unitil will continue to operate a 24-hour customer service
center in Concord, New Hampshire.
(2) Unitil has developed and maintains an integrated service company
operation, Unitil Service Corp. ("USC"), which provides
efficiencies that benefit Unitil's regulated distribution
companies, and which will continue to provide services to UES.
CECo and E&H have not filed for base rate increases since 1984
and 1981, respectively, and maintain the lowest cost distribution
operations in New England.
(3) CECo and E&H's bundled rates have generally been the lowest or
among the lowest in New Hampshire and in the region. Thus, even
before the rate restructuring included in this Phase II
Settlement, CECo's and E&H's rates meet the near-term rate relief
principle set forth in RSA 374-F:3,XI and the Commission's Final
Plan.
5
(4) UPC was formed solely for the purpose of supplying power to CECo
and E&H. The wholesale power supply portfolio acquired by UPC has
contributed to CECo and E&H having consistently among the lowest
rates in New England.
(5) UPC provides all-requirements electric supply service to CECo and
E&H under the System Agreement, which has a seven and one-half
year notice-of-termination provision. Under this Settlement, UPC
has agreed to modify this notice provision and to divest its
generation resource portfolio as soon as practicable.
1.5 Restructuring Policy Principles are Met
The Parties agree that the Settlement is designed to meet the
objectives of the restructuring policy principles of RSA 374-F.
1.5.1 System Reliability
The Phase II Settlement will promote system reliability by
implementing rates sufficient to support the continued maintenance of a safe and
efficient distribution system and by offering Transition and Default Services to
provide all customers with reliable supplies of electricity.
1.5.2 Customer Choice
The Phase II Settlement furthers the Legislature's goal of allowing
customers to choose among electric suppliers to encourage fully competitive and
innovative markets through establishment of market-based Transition and Default
Services.
6
1.5.3 Unbundling of Services and Rates
Under the Phase II Settlement, Unitil's customers will be provided
with unbundled services and rates with clear pricing information that identifies
the cost components of generation, transmission and distribution charges.
1.5.4 Open Access to Transmission and Distribution Facilities
The Phase II Settlement will provide all of Unitil's customers with
non-discriminatory open access to its electric distribution system.
1.5.5 Universal Service
The Phase II Settlement provides that Transition and Default Services
be made available to all customers and is designed to support stability and
affordability for low income customers in those cases where they cannot
otherwise obtain competitive electric service directly from a competitive
supplier.
1.5.6 Benefits for All Customers
The Phase II Settlement will provide reduced rates, and reduced price
volatility during the Transition Period, for all of Unitil's customer classes,
and will allow for the uniform implementation of Customer Choice.
1.5.7 Full and Fair Competition
By providing market-based Transition and Default Services, the Phase
II Settlement is designed to encourage new market entrants and a range of viable
suppliers.
1.5.8 Environmental Improvement, Renewable Energy Resources and
Energy Efficiency
The Phase II Settlement, along with the Phase I Settlement and the
generic energy efficiency initiative supported by Unitil and other parties,
allows for the
7
consideration of a "Green Transition Service" proposal and supports the goals of
energy efficiency and renewable energy resources in the restructured utility
market.
1.5.9 Near Term Rate Relief
The Phase II Settlement is designed to allow Unitil to continue to
provide the lowest, or among the lowest, prices in the region, and will provide
customers with the opportunity to achieve additional savings from the
competitive market.
1.5.10 Recovery of Stranded Costs
The Settlement provides for a stranded cost recovery charge that will
allow Unitil to recover its non-mitigatable stranded cost.
1.5.11 Regionalism
The Settlement supports continued implementation of fully competitive
wholesale markets in concert with the other New England states, and is
consistent with the implementation of restructuring by other electric utilities
in New Hampshire.
1.6 Regulatory Approvals
The Parties have designed this Phase II Settlement to maximize
benefits for customers and achieve the objectives of RSA 374-F. The resulting
consolidated distribution company, UES, will be subject to the primary
jurisdiction of the Commission. In order to meet the milestones set forth in
Section 2.2 herein, and to implement customer choice by May 1, 2003, approval of
all components of the Phase II Settlement by the Commission is necessary by
October 28, 2002. If the Phase II Order is not issued on or about the end of
October, the Divestiture and Solicitation Processes in Phase III will be
delayed, which in turn will delay the FERC's approval process, with the result
that retail choice would not be offered to Unitil's customers until after June,
2003.
8
2. REVISED PROCEDURAL SCHEDULE
2.1 Three-Phased Proceeding
As in the Phase I Settlement, the Parties continue to seek in this
Phase II Settlement the Commission's approval of a three-phased proceeding. In
Phase I, the Parties sought the Commission's review and approval of a revised
schedule and procedures for conducting the portfolio divestiture and the
solicitation for Transition and Default Services. In Phase II, the Parties seek
the Commission's review and final order on most remaining issues in the case.
The Parties intent is that the Commission's Phase II Order will, among other
things: approve the Tariff attached hereto as Tab D, which implements a revised
level of distribution charges and provides for new rate components including an
External Transmission Charge, Stranded Cost Charge, Transition Service Charge,
Default Service Charge (all as hereinafter defined in Sections 3.3.5 - 3.3.10);
and Restructuring Surcharge, approve the merger of CECo and E&H and related
changes; and approve the Amended Unitil System Agreement between UES and UPC,
attached hereto as Tab A. Due to an extended period of negotiations in Phase II,
the Parties have revised the agreed upon procedural schedule for Phase II and
Phase III as shown in Section 2.2.
In Phase III, Unitil will conduct the portfolio auction and
solicitation for supplies from which to meet its Transition and Default Service
obligations. Subsequent to the initial rounds of the divestiture and supply
solicitations (and before the final round of solicitations), Unitil will make a
filing with the Commission addressing potential alternate levels of the Monthly
Payment Stream to the winning bidder(s) in the divestiture process, and
associated recommended modifications to the Stranded Cost Charges. On February
26, 2003, Unitil will present for final Commission approval the executed
agreements resulting from the divestiture and solicitation processes, including
final tariffs for Transition and Default Services.
9
2.2 Revised Schedule
The Parties seek the Commission's approval of the following revised
procedural schedule for the remainder of the proceeding:
- ----------------------------------- --------------------------------------------
PHASE II
- ----------------------------------- --------------------------------------------
September 3, 2002 Parties submit Phase II Settlement
- ----------------------------------- --------------------------------------------
September 10-13, 2002 Hearings on Phase II
- ----------------------------------- --------------------------------------------
September 20, 2002 Post-hearing comments
- ----------------------------------- --------------------------------------------
October 28, 2002 Final Order on Phase II requested
- ----------------------------------- --------------------------------------------
December 1, 2002 Upon Commission approval, implementation of
corporate combination and revised rates\2
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
PHASE III
- ----------------------------------- --------------------------------------------
November 12, 2002 Commencement of Divestiture and Solicitation
RFPs
- ----------------------------------- --------------------------------------------
January 24, 2003 Indicative Bids Due
- ----------------------------------- --------------------------------------------
January 28, 2003 Potential adjustments to Monthly Payment
Stream, if any, filed with Commission
- ----------------------------------- --------------------------------------------
January 30, 2003 Commission Order on Stranded Cost Charges
requested
- ----------------------------------- --------------------------------------------
February 7, 2003 Final Bids Due
- ----------------------------------- --------------------------------------------
February 26, 2003 Executed Contracts filed with Commission
- ----------------------------------- --------------------------------------------
February 28, 2003 File executed contracts with FERC
- ----------------------------------- --------------------------------------------
March 6, 2003 NHPUC Hearings on executed contracts
- ----------------------------------- --------------------------------------------
March 14, 2003 Final NHPUC Order on executed contracts
requested
- ----------------------------------- --------------------------------------------
April 15, 2003 Contract implementation materials submitted
to the ISO
- ----------------------------------- --------------------------------------------
May 1, 2003 Implementation of Choice, Divestiture,
Revised Rates and the Amended System
Agreement\3
- ----------------------------------- --------------------------------------------
- -------------------------
2/ Unitil seeks approval of the Amended System Agreement in Phase II. However,
the Agreement, and resulting wholesale charges, would not be implemented until
Phase III, following completion of the Portfolio Divestiture and Transition
Service Solicitation.
3/ The Phase III Schedule is contingent upon a timely Commission order on Phase
II (by October 28, 2002) and on the execution of contracts during Phase III (by
March 14, 2003), in order to allow sufficient time for FERC approval of the
portfolio sale and notifications to the ISO New England.
10
3. REQUESTED APPROVALS
For the reasons specified in Section 1.6, supra, the Parties agree
that time is of the essence and that approval of this Phase II Settlement in its
entirety by October 28, 2002 is necessary in order to successfully implement the
timelines contained herein. Specifically, the Parties seek the Commission's
approval of the following agreements as contained in the negotiated settlement
of the Phase II issues.
3.1. Combination of Unitil's New Hampshire Utility Operations
3.1.1 Subject to the required regulatory approvals listed in Section
3.1.4, Unitil agrees to combine the utility operations of CECo, E&H and UPC into
a single distribution company, UES. According to Unitil, the consolidation is
designed to lead to a more efficient and effective corporate structure resulting
in improved New Hampshire utility operations, regulatory oversight and financial
reporting. UES will provide its customers with unbundled distribution services
and will have the obligation to provide Transition Service and Default Service
from the competitive market, as more fully described in the Phase I Settlement.
3.1.2 The Parties agree that the proposed consolidation is in the
public interest. Accordingly, the Parties agree that the Commission should grant
approval of the combination of the ongoing utility operations of CECo, E&H and
UPC into UES, and the related authorizations specified in Tab B.
3.1.3 Subsequent to the merger of CECO and E&H into UES, all USC
charges for New Hampshire utility operations, including certain charges formerly
allocated to UPC, shall be charged to UES. UPC will no longer be charged for
services by USC after implementation of the merger. A portion of the USC costs
has been included in UES' test
11
year for establishing base rates. The test year costs have been reduced to
reflect the anticipated mitigation of costs related to the energy services
function resulting in a decrease of $220,000 below test year levels. The Parties
further agree that UES will be allowed to recover reasonable severance costs in
the event any of the six energy services employees of USC are severed as a
result of restructuring.
3.1.4 The merger of CECo and E&H into UES is subject to the approval
of the Securities and Exchange Commission ("SEC") under the Public Utility
Holding Company Act of 1935, as amended. The merger is also subject to approval
by the Federal Energy Regulatory Commission ("FERC") under Section 203 of the
Federal Power Act. UES will also require approval by FERC of the open access
transmission tariff ("OATT") amendments and reclassification under Section 205
of the Federal Power Act. In addition, a Notification of Succession for UES to
succeed to the tariffs and rate schedules of CECo and E&H will be filed with the
FERC.
3.2 Amended Unitil System Agreement
3.2.1 The Parties agree that the Amended Unitil System Agreement,
attached hereto at Tab A and incorporating the Parties' agreed upon revisions,
will be effective as of the Divestiture Date and will allow for a just and
reasonable recovery of Contract Release Payments ("CRP") and Administrative
Service Charges ("ASC") by UPC from UES. The Parties further agree that the
recovery of the CRP by UES from its customers reflects an equitable,
appropriate, and balanced recovery of the stranded costs of its predecessors,
CECo and E&H. The Parties also agree that recovery of the costs specified under
the ASC is just and reasonable and shall be recovered from retail customers of
UES as part of the External Transmission Charge. Accordingly the Parties agree
that the
12
Commission should approve the revised Amended Unitil System Agreement as
consistent with the public interest and RSA 374-F.
3.2.2 In order to ensure the full mitigation of stranded costs, in
addition to the planned divestiture of the UPC portfolio as proposed in the
Phase I Settlement, Unitil agrees to implement the Hydro Quebec Mitigation Plan
as set forth in Tab C. The Hydro Quebec Mitigation Plan requires Unitil to
continue to undertake efforts to market the HQ-II resource in order to offset
the costs of that obligation and to include a report to the Commission on these
mitigation efforts as part of UES' annual Stranded Cost Charge reconciliation
filing.
3.2.3 The Amended Unitil System Agreement is subject to the approval
of the FERC, which approval will be sought subsequent to the approval by the New
Hampshire Commission.
3.2.4 The Parties also seek the Commission's approval for excluding
from the Portfolio Sale RFP, on the basis of the negotiated contract buyout, the
power supply contract with the Massachusetts Municipal Wholesale Electric
Company, as more fully described in Unitil's filing and supplemental testimony,
submitted on July 15, 2002.
3.3 Establishment of Unbundled Rates for UES
3.3.1 Consolidated Rate, UES Tariff No. 1
The Parties intend for this Settlement to provide for the rates of
CECo and E&H to be unbundled and consolidated into a single new tariff, Tariff
UES No. 1, attached hereto as Tab D, under a new distribution company, UES. The
Parties agree that the Terms and Conditions and rate schedules contained in the
tariff are just and reasonable and should
13
be approved. The Report of Proposed Rate Changes reflecting the anticipated net
revenue impact by class of the proposed rates as of Choice Date is provided as
Tab F hereto.
3.3.2 Effective Date of Rate Changes
The UES Tariff No. 1 contained in Tab D will, consistent with the
schedule detailed in Section 2 above, be effective for service rendered after
December 1, 2002. However, certain rate components contained in the tariff,
specifically including the Stranded Cost Charge, Transition Service Charge,
Default Service Charge, and the External Transmission Charge, will not become
effective until the conclusion of Phase III and the implementation of Customer
Choice on May 1, 2003. In the Interim period between December 1, 2002, and May
1, 2003, the UES Tariff provides for the billing of an Interim Fuel and
Purchased Power Charge designed to reflect the merger of CECo and E&H into UES,
to implement the revised rate designs agreed to by the parties for the fully
restructured rates, and to offset the increase in distribution charges through a
corresponding decrease in power supply charges. Attached hereto as Tab G are
detailed bill comparisons reflecting the net anticipated rate changes from
November 1, 2002, to May 1, 2003 (DJD-3), from December 1, 2002 to May 1, 2003
(DJD-4) and from November 1, 2002 to December 1, 2002 (DJD-5).
3.3.3 UES' Distribution Cost of Service
The distribution rates of UES reflect a revised cost of service,
attached hereto as Tab E. The revised cost of service reflects the Parties
negotiated agreement to a total revenue deficiency of $1,985,324 (of which
$1,871,324 is to be included in distribution service rate design, and $114,000
is to be attributable to residential late payment fees, as provided in Section
3.3.4). This represents an increase of approximately 1.6 percent over
14
total test year revenues, or approximately 7.2 percent over test year
distribution revenues. The Parties have agreed to settle all of the cost of
service issues in this proceeding. By this agreement, no party represents that
it agrees in every particular with the cost of service items specified in Tab E.
Rather, in consideration of all of the cost of service elements taken as a
whole, each party is satisfied with the overall end results.
3.3.3.1 Cost of Capital
The cost of service is calculated with an overall allowed rate of
return of 8.59 percent, including a return on equity of 9.67 percent applied to
a capital structure consisting of 42 percent equity and 58 percent debt. Unitil
agrees that until a Commission decision in Unitil's next base rate case, Unitil
shall limit the cash dividends paid by UES on an annual basis to an amount no
higher than the cash dividends paid by CECo and E&H in the 2001 test year.
Unitil reserves the right to request approval from all Parties to petition the
Commission for a waiver of such limitation in the event of materially changed
circumstances. The Parties acknowledge that the capital structure reflected in
the Cost of Service calculation (Tab E, Sch. MHC 6-1) is different from the
Company's test year capital structure. By adopting this hypothetical capital
structure in the calculation, and by agreeing to the dividend limitation, the
Parties acknowledge that the Company will seek to increase the equity component
of the capital structure over time in order to insure that the Company has
continued financial flexibility and continued access to capital at reasonable
rates.
3.3.3.2 Depreciation
The Parties agree that UES' cost of service shall include a test
year depreciation expense of $5,038,718, which reflects an overall net salvage
rate of negative 20 percent and an overall plant average service life of
approximately 31 years. As reflected on
15
Schedule MHC-3-13 (revised) provided in Tab E, the test year depreciation
expense of $5,038,718 consists of two components: depreciation expense on the
test year 2001 Utility Plant as of December 31, 2001 of $4,465,756 and
amortization of the depreciation reserve indicated imbalance (deficiency of
$2,864,805) over five (5) years at a rate of $572,961 per annum. In addition,
the Parties agree that the Company will continue with the existing depreciation
systems for General Plant. The Parties further agree that the Company will
extend the lives of classes which comprise the Transportation Plant account to
reflect a composite of approximately 10 years and will use a net salvage rate of
positive twelve (12%) percent for the Transportation Plant account.
3.3.4 Residential Late Payment Fee
The Parties have agreed that Unitil should be allowed to bill a late
payment fee to residential customers of one percent per month effective December
1, 2002 in accordance with Tariff page 31 contained in Tab D, subject to the
Commission's approval of a filing by Unitil demonstrating that the rate charged
is not in excess of the costs incurred by the Company. Unitil will make this
filing at least forty-five days in advance of the implementation of the proposed
effective date. The Company will waive the residential late payment fee if the
Customer can provide evidence of their eligibility in any of the following
programs:
o Statewide Low-Income Electric Assistance Program (NHPUC Order
No.23,980)
o Federal Low Income Home Energy Assistance Program (LIHEAP)
o Temporary Assistance for Needy Families (TANF)
o Supplemental Security Income (SSI)
o Aid to the Permanently and Totally Disabled (APTD)
o Aid to the Needy Blind (ANB)
16
o Old Age Assistance (OAA)
o Subsidized School Lunch Programs
o Title XX Day Care Program
o Food Stamps
o Medicaid
o Subsidized Housing
o Women, Infant and Children Program (WIC)
3.3.5 Transition and Default Service Charges
The Parties seek approval for the Transition Service Charge ("TSC")
and the Default Service Charge ("DSC") mechanisms, as contained in Tab D. The
purpose of the TSC is to provide a mechanism by which UES will recover its costs
for providing Transition Service. The DSC is the mechanism by which UES will
recover the costs of providing Default Service to its customers. Both mechanisms
are fully reconciling. The final rate levels established for effect on May 1,
2003 will be calculated on the basis of the TS and DS solicitation in Phase III
of this proceeding, and filed with the Commission as a compliance rate schedule
at the end of Phase III.
3.3.5.1 The Parties agree that the target level for the initial
wholesale costs upon which the retail Stranded Cost Charge and the retail
Non-G-l Transition Service prices are based should be $.0625 per kWh.
3.3.5.2 The Parties agree that the ongoing administrative costs
of Transition and Default Services will not be recovered as a cost component of
these rate mechanisms, but will be recovered partially in base distribution
rates (internal company costs) and partially in the External Transmission Charge
(cost of outside services).
17
3.3.6 Stranded Cost Charge
The Parties seek approval for the Stranded Cost Charge ("SCC")
mechanism as more fully described on Tariff pages 70 and 71, contained in Tab D.
The Stranded Cost Charge ("SCC") shall be billed by the Company to all
customers taking Delivery Service from the Company. The purpose of the SCC is to
recover Contract Release Payments billed to the Company by Unitil Power Corp.
under the FERC-approved Amended Unitil System Agreement. The SCC shall also
include the Transition Service Charge balance at the end of the Transition
Period and the final fuel and purchased power balances including any associated
prior period adjustments. The SCC is fully reconciling. The actual rate levels
established for effect on May 1, 2003 will be calculated on the basis of the
portfolio sale auction in Phase III of this proceeding and filed with the
Commission as a compliance rate schedule at the end of Phase III.
3.3.7 External Transmission Charge
The parties seek approval of the External Transmission Charge ("ETC")
as more fully described in Tariff pages 72 and 73, contained in Tab D. The
purpose of the ETC is to recover, on a fully reconciling basis, the costs billed
to the Company by Other Transmission Providers as well as third party costs
billed to the Company for energy and transmission related services as specified
herein. The ETC shall include 1) charges billed to the Company by Other
Transmission Providers as well as any charges relating to the stability of the
transmission system which the Company is authorized to recover by order of the
regulatory agency having jurisdiction over such charges, 2) transmission-based
assessments or fees billed by or through regulatory agencies, 3) costs billed by
third parties for load estimation and reconciliation and data and information
services necessary for allocation and reporting of supplier loads, and for
reporting to, and receiving data from, ISO New England, 4) legal and consulting
outside services charges
18
incurred in the future acquisition of Transition Service and Default Service
supplies and related to the Company's transmission and energy obligations and
responsibilities, including legal and regulatory activities associated with the
independent system operator ("ISO"), New England Power Pool ("NEPOOL"), regional
transmission organization ("RTO") and the Federal Energy Regulatory Commission
(FERC), 5) the costs of Administrative Service Charges billed to the Company by
Unitil Power Corp. under the FERC-approved Amended Unitil System Agreement, and
6) the Restructuring Surcharge balance upon its termination. The Parties agree
that the initial rate for the ETC should be $0.00156 per kWh.
3.3.8 System Benefits Charge
The System Benefits Charge ("SBC"), as more fully described in Tariff
page 74 contained in Tab D, shall recover the costs to fund energy efficiency,
renewables, low-income customer programs and other charges as required by law,
as periodically filed and approved by the Commission. The SBC mechanism is fully
reconciling. The Company agrees to implement outreach programs for the purpose
of maximizing participation in the low-income programs.
3.3.9 Restructuring Surcharge
The Parties seek approval for the Restructuring Surcharge ("RS")
mechanism, as more fully described in Tariff page 75, contained in Tab D. The RS
will go into effect on December 1, 2002. Restructuring costs incurred following
the formation of UES will be allocated to UES and recovered through the RS. The
Restructuring Surcharge ("RS") of $0.00100 per kWh shall be billed by the
Company to all customers taking Delivery Service from the Company. The RS is a
reconciling, temporary rate for the purpose of recovering the costs of legal,
consulting, and outside services associated with the
19
planning, development and implementation of the restructuring of Concord
Electric Company, Exeter & Hampton Electric Company, Unitil Power Corp. ("UPC")
and Unitil Energy Systems, Inc. ("UES") (collectively the "Companies")
including: 1) the transaction costs of the merger and combination of the
Companies into a single distribution utility, 2) the rate case costs, including
the development of new unbundled rates and tariffs for UES including
distribution charges, stranded costs, transition service, and other rate
reconciliation mechanisms, 3) the restructuring costs, including the
restructuring of the Companies' power supply to allow for retail choice, the
divestiture of the UPC resource portfolio, and the initial solicitation and
acquisition of transition service and default service. The initial estimate of
the costs to be recovered is $2,761,000. Final costs included in the RS will be
subject to the final review and audit of the Commission, including the
demonstration by the Company of net customer benefits with respect to the
transaction costs of the merger and combination referenced in item 1) above. The
RS of $0.00100 per kWh is intended to recover the costs over a period of
approximately two years.
3.3.10 Distribution Charges
The Parties have agreed to the rate design of the distribution charges
as described on the Summary of Rates included in Tab D. The rate design
reflected in the Schedules in Tab D includes the agreement of the Parties: 1) to
reduce by one-third the differential between Block 1 and Block 2 of the
residential rate from an average of $0.01401 per kWh to $0.00934 per kWh based
on rate continuity principles; 2) to adjust the bill impacts for G-1 and G-2
class half way from the proposed rate impact to the overall rate impact for G-1
and G-2 classes, with the resulting revenue reconciled in the OL class; 3) to
eliminate the Time of Use ("TOU") rates, with the provision that metering fees
will be
20
waived for current TOU customers who take TOU service from competitive
suppliers; 4) to moderate bill impacts for the largest G-2 kilowatt hour meter
customers (over 1,000 kWh/mo) by installing demand metering; and 5) to maintain
the distribution energy charge at current levels for G-1 and G-2 classes.
3.4 Reclassification of Distribution and Transmission Plant
In Order 888, the FERC set forth a seven-factor test for determining
whether facilities used to provide access to retail customers are subject to the
ratemaking jurisdiction of FERC under the Federal Power Act or of the Commission
under state law. The Parties request as part of the approval of this Phase II
Settlement an affirmative finding and recommendation by the Commission to FERC
that the Commission's determination of the reclassification of the transmission
facilities currently owned by CECo and E&H to distribution be adopted by FERC
for ratemaking purposes.
3.5 Obligation to Serve
The Parties agree that the Commission should find that with the
exception of the provisions for Transition Service and Default Service, UES
shall have no obligations with respect to assurance of adequate and reliable
electric energy supply for its customers as of Choice Date. UES shall continue
to have the obligation to connect customers and to provide distribution service
to customers in its franchise territory, in accordance with the rules and
regulations of the Commission and the provisions of the applicable retail
tariff.
21
3.6 Future Rate Cases and Depreciation Studies
3.6.1 UES agrees that it will file with the Commission a general base
rate case in accordance with the rules of the Commission and RSA 378 et seq.,
including an updated depreciation study, no later than 5 years from the issuance
of the Commission's final order in this proceeding.
3.6.2 In conducting the depreciation study referenced in 3.6.1, UES
agrees to use the whole life methodology.
3.7 Assurances to Bidders
Consistent with the Parties' agreement in the Phase I Settlement, the
Parties request that the Commission's Phase II Order include assurances to
potential bidders that the costs incurred under, and defined in, the portfolio
sale agreement, the G-1 Transition/Default Service agreement and the Non-G-1
Transition/Default Service agreement, which agreements will be subject to final
Commission approval in Phase III, will be fully recoverable in retail rates.
4. GENERAL PROVISIONS
4.1 Unitil, and each of the Parties, expressly reserves the right to
withdraw this Phase II Settlement proposal, or its support thereof, in the event
all contemplated approvals are not provided in a reasonable time frame, or in
the event that approval of the Settlement is unacceptably conditioned by the
Commission or any other regulatory agency with jurisdiction over matters
contemplated by this Settlement.
4.2 Acceptance of this Phase II Settlement Agreement by the Commission
shall not be deemed to restrain the Commission's exercise of its authority to
promulgate future orders, regulations or rules that resolve similar matters
affecting other parties in a different
22
fashion, nor shall this Settlement be deemed to restrain the authority of the
Legislature to enact any law that would resolve the matters covered by this
Phase II Settlement in a different fashion.
4.3 The Commission's approval of this Phase II Settlement Agreement shall
endure so long as is necessary to fulfill this Phase II Settlement Agreement's
objectives and shall in no way bind the Commission to a preordained outcome in
Phase III. In the event the Commission in a subsequent phase of this proceeding
renders any part of this Phase II Settlement ineffective, CECo, E&H (or their
successor UES) and UPC shall be allowed to recover those reasonable costs for
legal, consulting and other outside services incurred in reliance upon the
Commission's approval of this Phase II Settlement absent a finding of imprudence
on the part of CECo, E&H, UPC or UES, by the appropriate regulatory authority.
4.4 The approvals contemplated by this Phase II Settlement shall not be
construed as requiring the Commission to relinquish its authority under any
state law to develop new policies and issue orders or to initiate investigations
when it deems such actions are in the public good.
4.5 The rights conferred and obligations imposed on CECo, E&H and UPC by
this Phase II Settlement shall be binding on or inure to the benefit of their
successors in interest or assignees, including UES, as if such successor or
assignee was itself a signatory hereto.
4.6 The Commission's acceptance of this Agreement does not constitute
continuing approval of, or precedent regarding, any particular principle or
issue in this proceeding, but such acceptance does constitute a determination
that (as the Parties believe)
23
the adjustments and provisions set forth herein in their totality are just and
reasonable and that the revenues contemplated by the Attachments attached to
this Agreement will be just and reasonable under the circumstances. The
Commission's approval of the rate recommendations in this Agreement shall not
constitute a determination or precedent with regard to the specific adjustments
set forth in the attachments hereto, but rather shall constitute only a
determination that the revenue requirement and rates resulting from this
Agreement are just and reasonable.
4.7 Unitil shall provide to all of the Parties copies of any filings or
submissions made pursuant to this Settlement or the Commission's final order in
this matter.
24
5. CONCLUSION
The Parties affirm that the proposed Phase II Settlement is appropriate,
just and equitable and consistent with the policy principles of RSA 374-F and
should be approved.
Entered into this 3rd day of September, 2002.
- ------------------------------- ----------------------------------
Concord Electric Company Exeter & Hampton Electric Company
---------------------------
Unitil Power Corp.
- -------------------------------- -----------------------------------
Staff of the New Hampshire New Hampshire Office of the
Public Utilities Commission Consumer Advocate
- -------------------------------- -----------------------------------
New Hampshire Governor's Office of Business & Industry Association
Energy and Community Services of New Hampshire
- --------------------------------- ---------------------------------
Wendy Page, Representative Jeb E. Bradley
By Her Attorney
New Hampshire Legal Assistance
25
ATTACHMENTS TO SETTLEMENT AGREEMENT
Tab A Revised Amended System Agreement
Tab B Merger Approvals
Tab C Hydro Quebec Mitigation Plan
Tab D Tariff UES No. 1
Tab E Revised Cost of Service Study for UES Distribution Rates
Tab F Report of Proposed Rate Changes
Tab G Bill Impacts
26
DELIBERATIONS STATEMENT
PHASE II ORDER
9-17-02
I. Procedural History
On January 25, 2002, Concord Electric Company, Exeter and Hampton
Electric Company, and Unitil Power Corp. filed with the Commission a petition
for approval of a proposal for restructuring the three Unitil Companies.
In order to deal with the numerous issues raised by the filing in an
effective and efficient way, the proceedings have been divided into three
phases. The focus of the Phase I proceedings was on how Unitil will implement
electric industry restructuring pursuant to RSA 374-F.
On May 31, 2002, a Phase I Settlement Agreement for Restructuring the
Unitil Companies was filed on behalf of Unitil, Commission Staff, the Consumer
Advocate, the Governor's Office of Energy and Community Services, the Business &
Industry Association and Rep. Jeb Bradley. Among other things, the Settlement
Agreement set forth a plan for the divestiture of Unitil's resource portfolio
and the solicitation of transition and default service. On August 28, 2002, the
Commission issued an order conditionally approving the Phase I Settlement
Agreement.
The Phase II issues include the consolidation and reorganization of the
operations of the Unitil Companies and the setting of new, unbundled rates for
the two retail electric utilities. On September 3, 2002, a Phase II Settlement
Agreement was filed. Hearings on the Phase II Settlement Agreement were held on
September 11-13, 2002. While these hearings were going on, the parties filed on
September 12 an amendment to the Phase I Settlement Agreement addressing the
Commission's conditions set forth in its Phase I order. The Commission heard
testimony on this amendment following the conclusion of the Phase II hearings,
and in a ruling announced from the bench on September 13, we approved the
amendment to the Phase I Settlement Agreement.
In Phase III, Unitil will conduct the portfolio auction and the supply
solicitation for transition and default service, subject to further proceedings
before the Commission to (i) finalize the level of the monthly payment stream to
the winning bidder(s) in the divestiture auction and, the associated stranded
cost charges and (ii) determine the final round specifications for the request
for proposals regarding the portfolio auction and supply solicitation.
II. Terms of Phase II Settlement Agreement
Today we deliberate the Phase II portion of the proceedings. In the Phase
II Settlement Agreement, the parties seek various approvals from the Commission.
First, the Commission is asked to approve the combination of the utility
operations of CEC, E&H, and Unitil Power Corp. into a single distribution
company to be called Unitil Energy Systems (UES). UES will provide its customers
with unbundled
distribution services and will have the obligation to provide transition service
and default service from the competitive market.
Second, the Commission is asked to approve an Amended System Agreement
which ultimately will be between Unitil Power Corp. and UES as a replacement for
the existing System Agreement between CEC, E&H and Unitil Power Corp.
Under the Amended System Agreement, Unitil Power Corp. will agree to
waive the minimum 7.5 year notice of termination provision, terminate its power
supply service to retail companies, and divest most of its power supply
portfolio. In exchange, UES will agree to pay to Unitil Power Corp. so-called
Contract Release Payments; and Administrative Service Charges, which include
third party and regulatory charges incurred by Unitil Power Corp. relative to
its fulfillment of its duties under the System Agreements.
Third, the Commission is asked to approve UES' new tariff, under which
UES' rates for electric service will be unbundled into separate components
related to distribution service costs, external transmission and other outside
services costs, stranded costs, systems benefits costs, transition or default
service costs, New Hampshire electricity consumption tax, and, on an interim
basis, fuel and purchased power costs and restructuring costs.
The proposed distribution charges, interim fuel and purchased power
charges, and restructuring surcharge would take effect on December 1, 2002, with
the rest of the charges to take effect on Choice Date, scheduled for May 1,
2003.
Fourth, the Commission is asked to approve new distribution rates for UES
reflecting a total revenue deficiency of $1,985,324, of which $1,871,324 is to
be included in distribution service rate design and $114,000 would be
attributable to residential late payment fees. The total revenue deficiency
represents an increase of approximately 1.6% over total 2001 test year revenues
of CEC and E&H or approximately 7.2% over their test year distribution revenues.
The cost of service is calculated with an overall allowed rate of return
of 8.59%, including a return on equity of 9.67% applied to a hypothetical
capital structure of 42% equity and 58% debt. Until UES' next rate case, the
cash dividends paid on an annual basis by UES will be limited to an amount no
higher than the cash dividends paid by CEC and E&H during the test year.
Fifth, the Commission is asked to make an affirmative finding and
recommendation to FERC that FERC adopt for ratemaking purposes the Commission's
determination of the reclassification of the transmission facilities currently
owned by CEC and E&H to distribution.
Upon receipt of all requested approvals in this proceeding by the
Commission, including the Phase III portion of the proceedings, Unitil will
withdraw its intervention in the Federal court case enjoining the implementation
of electric industry restructuring in CEC's and E&H's service territories, with
prejudice.
2
III. Commission Analysis
With respect to the merger, the record shows that (i) the merger in and
of itself will not have an adverse effect on rates, (ii) the rates under which
UES will acquire electricity will not change solely as a result of the merger
and (iii) total retail rates for UES customers following the entire.
restructuring plan are expected to be substantially the same as the existing
total retail rates. Moreover, no acquisition premium is payable, no additional
debt is being incurred in connection with the transaction, and no new facilities
are being acquired. The combined retail utilities will remain under the control
of the existing parent of CEC and E&H.
While the parties did not present quantitative information demonstrating
customer savings resulting from the merger, on a qualitative basis the merger
should lead to a simpler, more efficient and effective corporate structure
resulting in improved New Hampshire utility operations, regulatory oversight and
financial reporting. The merger is thus in the public interest.
Although the parties agree that the merger costs will be subject to the
final review and audit of the Commission, including the demonstration by the
company of net customer benefits with respect to the transaction costs of the
merger, the parties should be cautioned that internal, corporate restructuring
costs are typically borne by shareholders and the evidence presented to date for
treating Unitil's costs any differently is not persuasive.
The Amended System Agreement provides a reasonable mechanism for paying
off legitimate portfolio divestiture-related liabilities and certain on-going
power supply related costs and charges incurred by Unitil Power Corp. in
accordance with the restructuring plan. UES payment of the Contract Release
Payments and the Administrative Service Charges to Unitil Power Corp. under the
Amended System Agreement will in turn be recovered from ratepayers through the
Stranded Cost Charge and a portion of the External Transmission Charge. While
this amended arrangement does not eliminate all the friction existing along the
boundary between State and Federal jurisdiction, the Amended System Agreement,
together with other elements of the restructuring plan, is a positive
development for enhancing State decision-making authority over Unitil's New
Hampshire utility operations.
The total revenue deficiency of $1,985,324 negotiated by the parties for
purposes of determining UES' distribution rates is reasonable. The parties'
concern that UES' capital structure will be too highly leveraged is addressed in
an interesting and acceptable way through the use of a hypothetical capital
structure to determine the company's revenue requirement and Unitil's agreement
to limit the cash dividends paid by UES on an annual basis to an amount no
higher than the cash dividends paid by CECo and E&H in the 2001 test year. It
does appear appropriate that, as set forth in the Settlement Agreement, the
company seek to increase the equity component of its capital structure over time
in order to ensure that it has continued financial flexibility and continued
access capital at reasonable rates.
3
Moderation of the distribution rate impact for low usage customers as
proposed in the settlement is appropriate. Consequently, the parties' proposal
to reduce by 1/3 the differential between Block 1 and Block 2 of the residential
rate from an average of 1.401 (cent)/kWh to 0.934 (cent)/kWh based on rate
continuity principles is acceptable. Similarly, the proposal with respect to the
G-1 and G-2 classes is appropriate. It is true the Commission has not typically
looked favorably upon the elimination of Time of Use rates. However, because the
Settlement Agreement provides for the waiver of metering fees for current TOU
customers who take TOU service from competitive suppliers, elimination of TOU
rates is not inappropriate. When the issue of default service is addressed on a
statewide basis in the future, this question can be revisited.
UES Tariff No. 1, filed with the Settlement Agreement, introduces several
new rate components, including an External Transmission Charge. There are many
cost components comprising the so-called "External Transmission Charge," not
just the cost of transmission. This rate component should be renamed. In the
absence of a formal alternative offered by the parties, the charge might be
called an "External Delivery Charge" as suggested by Unitil. Should the parties
believe another name is more appropriate, they should file a letter with their
recommended alternative.
Based on the testimony presented at the hearing, the parties' proposal to
set the target level for the initial wholesale costs upon which to base the
retail stranded cost charge and the retail Non-G-1 Transition Service prices at
6.25 (cent)/kWh is reasonable.
The parties' request for an affirmative finding that Unitil's 34.5 kV
facilities currently classified as transmission should be reclassified as
distribution facilities should be granted.
IV. Action
In light of the foregoing considerations, I move that the Commission
approve the Phase II Settlement Agreement. A written order will be issued in the
near future providing greater detail regarding the background of this case and
the Commission's reasoning and rulings. Our written order will discuss, among
other things, how consistency between our Phase I orders and the Phase II order
will be achieved. As always, in the event there is a departure from the oral
deliberations, the written order will control.
4
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Concord Electric Company )
Exeter & Hampton Electric Company ) Docket No. EC02-___-000
Unitil Energy Systems, Inc. )
APPLICATION FOR APPROVAL OF INTRA-CORPORATE REORGANIZATION
Pursuant to Section 203 of the Federal Power Act\1 and Part 33 of the
Federal Energy Regulatory Commission's ("Commission") regulations thereunder,\2
Concord Electric Company ("CECo"), Exeter & Hampton Electric Company ("E&H"),
and Unitil Energy Systems, Inc. ("UES"), (jointly, "Applicants") hereby file
this application for approval of a proposed intra-corporate reorganization (the
"Reorganization"). The proposed Reorganization involves the merger of E&H into
CECo to form a single distribution utility, which will be renamed UES.
As is demonstrated below, the proposed Reorganization is consistent with
the public interest. The Reorganization will be implemented in the context of a
broader reorganization of the New Hampshire operations of the Unitil Companies
resulting from changes to New Hampshire law.
Because the Reorganization will take place entirely within the same holding
company system, it will not involve the acquisition of any new physical
facilities, nor will any previously unrelated companies be placed under common
control or otherwise become affiliated with each other. In addition, no
independent seller will be removed from the wholesale market. Therefore, there
will be no increase in market power or concentration by any party. Thus, the
Application is
- -----------------------------
1/ 16 U.S.C.ss.824b (1994).
2/ 18 C.F.R. Part 33 (2002).
not required to include any horizontal or vertical competitive analysis under
Order No. 642.\3 The Applicants request that the Commission provide for a
shortened comment period and expedited consideration and approval of the
Reorganization to permit the transaction to close by November 29, 2002.
In support hereof, the Applicants state:
I. Introduction
The Reorganization is a part of a comprehensive restructuring of the
Applicants' New Hampshire operations that is being carried out pursuant to New
Hampshire law, as more fully discussed below. The Reorganization is essentially
similar to other internal corporate reorganizations approved by the Commission.
As an internal reorganization, the proposed Reorganization should not raise
concerns of market power or other issues of interest to the Commission.\4 The
proposed Reorganization will accomplish only a change in corporate structure
and, except in the technical sense described by the Commission in Central
Vermont\5 and similar cases, will not cause a change in ultimate control of any
of the assets owned by the Applicants.\6
The Reorganization will not result in any increase in wholesale rates. Nor
will any party seek to recover any costs related to the Reorganization in
wholesale rates. At least sixty (60) days
- -----------------------------
3/ Revised Filing Requirements Under Part 33 of the Commission's Regulations,
Order No. 642, III FERC Stats. and Regs. [Regs. Preambles 1996-2000]P. 31,111 at
31,902 (2000) order on reh'g, Order No. 642-A 94 FERCP. 61,289 (2001).
4/ See, e.g., FirstEnergy Corp., 94 FERCP. 61,179 at 61,619 (2001) (finding that
Section 203 filings involving internal corporate restructuring do not change the
concentration of generation ownership in the marketplace). See also DTE Energy
Co., 91 FERCP. 61,317 (2000).
5/ Central Vermont Public Service Corp., 39 FERCP. 61,295 (1987).
6/ See Duke Energy Corp. and Nantahala Power and Light Co., 83 FERCP. 62,181
(1998).
2
prior to the effective date, the Applicants will file a Section 205 Application
to revise the Open Access Transmission Tariffs ("OATTs") of CECo and E&H, and to
seek approval for the reclassification of certain facilities from transmission
to distribution. The Section 205 Application will not lead to any rate increase
for any unrelated party. A Notification of Succession will also be filed for UES
to succeed to the tariffs and rate schedules of CECo and E&H.
In addition, the Reorganization will not have any adverse impact on
regulation since no new registered holding company will be created and,
therefore, the jurisdiction of the Securities and Exchange Commission ("SEC")
will not be an issue. The New Hampshire Public Utilities Commission and the SEC
have authority to approve or disapprove the Reorganization.
For these reasons, the Reorganization should be approved by the Commission
as being in the public interest.
II. The Unitil Companies
A. Background
Applicants are wholly-owned subsidiaries of Until Corporation ("Unitil"),
which is a registered public utility holding company under the Public Utility
Holding Company Act of 1935 ("PUHCA"), and was formed by CECo and E&H in 1984.
The following companies are also wholly-owned subsidiaries of Unitil: Fitchburg
Gas and Electric Light Company ("FG&E"), Unitil Realty Corp. ("URC"), Unitil
Power Corp. ("UPC"), Unitil Service Corp. ("USC"), and its non-regulated
business unit Unitil Resources, Inc. ("URI").
Unitil's principal business is the retail sale and distribution of
electricity in New Hampshire, and the retail sale and distribution of
electricity and gas in Massachusetts through its retail distribution
subsidiaries, CECo, E&H, and FG&E. Unitil's wholesale electric power
3
subsidiary, UPC, principally provides all of the electric power supply
requirements to CECo and E&H for resale at retail. URI conducts an energy
brokering business, as well as related energy consulting and marketing
activities through its wholly-owned subsidiary, Usource. Finally, URC and USC
provide centralized facilities and operations and management services to support
the Unitil system of companies.
CECo and E&H are subject to regulation by the New Hampshire Public
Utilities Commission ("NHPUC"), which also regulates certain activities of UPC,
including the issuance of securities and debt. FG&E is regulated by the
Massachusetts Department of Telecommunications & Energy ("MDTE"). UPC, CECo,
E&H, and FG&E are regulated by the Commission.
CECo, E&H, UPC, and FG&E are joint participants in the New England Power
Pool ("NEPOOL"). UPC acts as the agent of its New Hampshire affiliates in all
transactions, actions, deliberations and other matters involving NEPOOL or the
NEPOOL Agreement, unless the Unitil New Hampshire companies are specifically
required to act on their own behalf. The Unitil companies are listed in the
NEPOOL Roster of Participant Committee members under Unitil Corporation
Participant Companies. While the companies are NEPOOL participants, Fitchburg
owns very limited Pool Transmission Facilities ("PTF"), consisting of some 115
kV substation facilities, which are connected to transmission facilities owned
and operated by New England Power Company, a subsidiary of National Grid USA.
CECo and E&H do not own or operate any transmission facilities that are included
as PTF by NEPOOL due to the low voltage level.
B. CECo
CECo is a New Hampshire corporation and public utility primarily engaged in
the retail sale and distribution of electricity to approximately 28,000
customers in the City of Concord and
4
twelve surrounding towns, all in New Hampshire. CECo's service area consists of
approximately 240 square miles in the Merrimack River Valley of south central
New Hampshire. The service area includes the City of Concord and major portions
of the surrounding towns of Bow, Boscawen, Canterbury, Chichester, Epsom,
Salisbury and Webster, and limited areas in the towns of Allenstown, Dunbarton,
Hopkinton, Loudon and Pembroke.
CECo's 16 electric distribution substations constitute 114,290 kVA of
capacity for the transformation of electric energy from the 34.5 kV transmission
voltage to primary distribution voltage levels. CECo has in excess of 34 pole
miles of 34.5 kV electric transmission facilities. CECo also has a total of
approximately 657 pole miles of overhead electric distribution lines and a total
of approximately 44 conduit bank miles (124 cable miles) of underground electric
distribution lines. CECo has an OATT on file with the Commission, designated as
FERC Electric Tariff, Original Volume No. 2.\7 No transmission customers
currently take service under CECo's OATT. CECo is taking service pursuant to its
own tariff, as required by the Commission. CECo has five long-term firm
transmission service agreements in place, that predate its OATT.\8
C. E&H
E&H is a New Hampshire corporation and public utility primarily engaged in
the retail sale and distribution of electricity to approximately 41,000
customers in the towns of Exeter and
- -----------------------------
7/ CECo's OATT was filed on October 11, 1996, and accepted for filing on
September 11, 1998, in Docket No. OA97-5-000, with an effective date of July 9,
1996.
8/ In a May 27, 1994, order, the Commission designated service agreements with
five QF customers as follows: (1) Rate Schedule FERC No. 1 -- Wheeling Agreement
with SES Concord Co., L.P.; (2) Rate Schedule FERC No. 2 -- Wheeling Agreement
with New Hampshire Hydro Associates; (3) Rate Schedule FERC No. 3 -- Wheeling
Agreement with Concord Steam Corporation; (4) Rate Schedule FERC No. 4 --
Wheeling Agreement with Penacook Hydro Association; and (5) Rate Schedule FERC
No. 5 -- Wheeling Agreement with Briar Hydro Association. Concord Electric Co.,
67 FERCP. 61,260 (1994).
5
Hampton and in all or part of 16 surrounding towns, all in New Hampshire. E&H's
service area consists of approximately 168 square miles in southeastern New
Hampshire. The service area includes all of the towns of Atkinson, Danville,
East Kingston, Exeter, Hampton, Hampton Falls, Kensington, Kingston, Newton,
Plaistow, Seabrook, South Hampton and Stratham, and portions of the towns of
Derry, Brentwood, Greenland, Hampstead and North Hampton.
E&H's 14 electric distribution substations, including a 5,000 kVA mobile
substation, constitute 91,400 kVA of capacity for the transformation of electric
energy from the 34.5 kV transmission voltage to primary distribution voltage
levels. E&H has in excess of 69 pole miles of 34.5 kV electric transmission
facilities. E&H also has a total of approximately 750 pole miles of overhead
electric distribution lines and a total of approximately 133 conduit bank miles
of underground electric distribution lines. E&H has an OATT on file with the
Commission, which has been designated as FERC Electric Tariff, Original Volume
No. 1.\9 E&H is taking service pursuant to their own tariff, as required by the
Commission. E&H has no transmission customers taking service under its OATT.
D. UES
UES will be formed after receipt of all necessary regulatory approvals
through the merger of E&H into CECo. UES will succeed CECo and E&H in all
agreements and schedules on file with the Commission.
- -----------------------------
9/ E&H's OATT was filed on October 11, 1996, and was accepted for filing on
September 11, 1998, in Docket No. OA97-4-000, with an effective date of July 9,
1996.
6
III. The Proposed Reorganization
A. New Hampshire Restructuring
On February 28, 1997, the NHPUC issued its Final Plan in response to the
New Hampshire Electric Restructuring Law RSA 374-F, passed into law in 1996, for
New Hampshire electric utilities to transition to a competitive electric market
in the State. Northeast Utilities' affiliate, Public Service Company of New
Hampshire ("PSNH"), filed suit in U.S. District Court for protection from the
Final Plan and related orders, and was granted an indefinite stay. In June 1997,
Unitil, and other utilities in New Hampshire, intervened as plaintiffs in the
federal court proceeding. In June 1998, the federal court clarified that the
injunctions issued by the court in 1997 had effectively frozen the NHPUC's
efforts to implement restructuring. This amended injunction has been challenged
by the NHPUC, and affirmed by the First Circuit Court of Appeals. Unitil
continues to be a plaintiff-intervenor in federal district court. In October
2000, the NHPUC approved a settlement for the restructuring of PSNH, which was
implemented on May 1, 2001.
Unitil has continued to work actively to explore settlement options and to
seek a fair and reasonable resolution of key restructuring policies and issues
in New Hampshire. Applicants filed a comprehensive restructuring proposal with
the NHPUC on January 25, 2002. If approved, Applicants would withdraw their
complaint from the federal court proceeding.
The New Hampshire Proceeding is being conducted in three phases: Settlement
on Phase I of the proceeding addressing the divestiture of Unitil's power supply
portfolio and acquisition of transition service ("TS") and default service
("DS") was presented to the NHPUC on May 31, 2002. The NHPUC issued its order in
this phase of the proceeding on August 28, 2002. Phase II addressing the merger
of CECo and E&H, and the realignment of Unitil's rate structure, is anticipated
to be filed by September 3, 2002. Finally, Phase III of the proceeding
addressing the results and NHPUC approval of the RFP processes for divestiture
of Unitil's power supply portfolio, and the acquisition of TS and DS will be
concluded in March 2003,
7
followed by the implementation of Customer Choice in Unitil's New Hampshire
service territories by May 1, 2003.
Under the restructuring proposal, Applicants' customers will be allowed to
choose a competitive energy supplier, while electricity delivery services will
continue to be provided by Unitil companies. Unitil will sell UPC's portfolio of
electricity supply contracts through a competitive solicitation and recover all
residual stranded costs over a period of years. Unitil will offer customers a
three-year transition service at specified prices and a permanent default
service. These services will be procured from the competitive wholesale market.
Also as a part of the restructuring proposal, Applicants requested approval of
the reclassification of certain transmission plant owned by CECo and E&H, and of
new, consolidated tariffs and rate schedules for distribution service in New
Hampshire. Applicants also sought an increase in base rates for distribution
service. Rate levels and rate components applicable to all Unitil New Hampshire
distribution customers will change as a result and distribution rates will
increase, but overall rate levels are expected to be below rate levels in effect
at the time of the New Hampshire restructuring filing. Finally, Applicants also
proposed to combine CECo and E&H into a single distribution utility, UES.
The restructuring proposal, if approved, will go into effect in two phases,
the first phase on or before December 1, 2002, and the second phase on May 1,
2003. The first phase will consist of the implementation of the Reorganization
and revised retail rates. The second phase will consist of the implementation of
customer choice, the divestiture of UPC's portfolio of electricity supply
contracts, and the amendment of the System Agreement among the Applicants.
8
B. The Reorganization
The proposed transaction, for which Commission authorization is sought
herein,\10 is the combination of CECo and E&H into a single distribution
utility, UES. The combination is the culmination of a nearly two-decade long
process of operational consolidation that has taken place since Unitil was
created and CECo and E&H were merged into Unitil in January 1985.
To accomplish the merger of CECo and E&H, the Applicants will enter into an
Agreement and Plan of Merger ("Merger Agreement") approved by their respective
boards of directors.\11 Consummation of the transactions contemplated by the
Merger Agreement will be subject to the receipt of all necessary regulatory
approvals and to the approval of the shareholders of each company. Under the
terms of the Merger Agreement, E&H will be merged with and into CECo with CECo
as the surviving corporation. In connection with the merger, CECo will change
its name to UES. As a result of the merger, all of E&H's assets and liabilities
will, by operation of law, become the assets and liabilities of CECo.
1. Description of Outstanding Equity Securities of CECo and E&H
CECo currently has 250,000 authorized shares of common stock (the
"CECo Common Stock"), of which 131,745 shares are issued and outstanding and
owned both of record and beneficially by Unitil; 2,250 authorized shares of
non-cumulative preferred stock (the "CECo Non-Cumulative Preferred Stock"), all
of which are issued and outstanding and none of which is owned, of record or
beneficially, by Unitil; and 14,308 authorized shares of cumulative preferred
stock (the "CECo Cumulative Preferred Stock"), of which 2,150 shares are issued
and
- -----------------------------
10/ Applicants will separately request Commission authorization, to the extent
such authorization is required, of the other aspects of the restructuring.
11/ A copy of the proposed Merger Agreement is enclosed at Exhibit I.
9
outstanding in a single series designated the "8.7% Series," none of which is
owned, of record or beneficially, by Unitil. The CECo Non-Cumulative Preferred
Stock is entitled to vote on all matters brought before the shareholders of CECo
together with the CECo Common Stock, with each outstanding share entitled to one
vote. The CECo Non-Cumulative Preferred Stock is not entitled to vote as a
separate class. The CECo Cumulative Preferred Stock is not entitled to vote on
any matter, except as may otherwise be authorized or required by the Business
Corporation Act. Under the Business Corporation Act, the CECo Cumulative
Preferred Stock will not be entitled to vote on the Merger and related
transactions.
E&H currently has 197,417 authorized shares of common stock (the "E&H
Common Stock"), of which 195,000 shares are issued and outstanding and owned
both of record and beneficially by Unitil; and 25,000 authorized shares of
cumulative preferred stock (the "E&H Cumulative Preferred Stock"), of which a
total of 9,704 shares are issued and outstanding in four series as follows: 840
shares of the 5% Series, 1,680 shares of the 6% Series, 3,331 of the 8.75%
Series and 3,853 shares of the 8.25% Series. None of the E&H Cumulative
Preferred Stock is owned, of record or beneficially, by Unitil. The E&H
Cumulative Preferred Stock is not entitled to vote as a separate class, unless
such a class vote is otherwise authorized or required by the Business
Corporation Act. Under the Business Corporation Act, each series of the E&H
Cumulative Preferred Stock will be entitled to vote as a separate class on the
proposed merger with CECo, since, as described below, the terms of the Merger
Agreement provide for the issuance to the holders of the E&H Cumulative
Preferred Stock in exchange for their shares of E&H Cumulative Preferred Stock
of an equal number of shares of CECo Cumulative Preferred Stock in four new
series which will have the same terms and conditions as the existing series of
the E&H Cumulative Preferred Stock for which they will be exchanged.
10
The authorized and unissued shares of CECo Cumulative Preferred Stock
may be issued in series by CECo from time to time upon authorization of its
board of directors, with the terms of each new series to be approved by the vote
of two-thirds of the outstanding shares of CECo Common Stock and CECo
Non-Cumulative Preferred Stock.
As part of the approval of the Merger Agreement, the board of
directors of CECo and the holders of the CECo Common Stock and CECo
Non-Cumulative Preferred Stock will approve an amendment to the CECo Articles of
Association creating the four new series of CECo Cumulative Preferred Stock to
be issued in the merger to the holders of the E&H Cumulative Preferred Stock.
The four new series will have the same terms as the four series of E&H
Cumulative Preferred Stock for which they will be exchanged.
2. Terms of the Merger Agreement
Pursuant to the Merger Agreement, upon the effectiveness of the
merger, all of the issued and outstanding shares of E&H Common Stock will be
converted into a single share of CECo Common Stock. Each share of E&H Cumulative
Preferred Stock will be converted into a share of a new series of CECo
Cumulative Preferred Stock, each such new series of CECo Cumulative Preferred
Stock to have the same terms and conditions as the existing series of the E&H
Cumulative Preferred Stock for which they will be exchanged. The shares of CECo
Common Stock, CECo Non-Cumulative Preferred Stock and CECo Cumulative Preferred
Stock issued and outstanding immediately prior to the merger will remain
outstanding and will not be affected by the merger.
11
3. Boards of Directors and Shareholder Approvals
The Merger Agreement and the transactions contemplated thereby are
subject to the approval of the boards of directors of each of CECo and E&H.\12
In addition, the Merger Agreement and related amendments to CECo's Articles of
Association are subject to the approval of the holders of the CECo Common Stock
and the CECo Non-Cumulative Preferred Stock, voting together as a single class,
and to the approval of the E&H Common Stock and each series of the E&H
Cumulative Preferred Stock, each voting as a separate class. Because Unitil
effectively controls the boards of directors of each of E&H and CECo as the
result of its ownership of all of the issued and outstanding shares of common
stock of each company, the approval of the Merger Agreement and related
amendments to CECo's Articles of Association by those boards of directors is
assured. The approval of the holders of the CECo Common Stock and the CECo
Non-Cumulative Preferred Stock of the Merger Agreement and related amendments to
CECo's Articles of Association is also assured, since Unitil controls the vote
of more than 99% of all such shares.
The approval of the Merger Agreement by the holders of the E&H Common
Stock is also assured, since Unitil controls the vote of all of such shares.
Unitil does not, however, control the vote of any outstanding series of the E&H
Cumulative Preferred Stock. Unitil intends to solicit written consents in favor
of the Merger Agreement and related transactions from the holders of each
outstanding series of the E&H Cumulative Preferred Stock pursuant to the
solicitation. Because neither E&H nor any series of its capital stock is
registered under the Securities Exchange Act of 1934, the solicitation is
subject only to the requirements of New Hampshire law and the terms of E&H's
governance documents. Under Section 7.04 of the
- -----------------------------
12 See Exhibit I.
12
New Hampshire Business Corporation Act (RSA 293-A:7.04), the E&H Cumulative
Preferred Stock can take action by written consent. Such action would also be
consistent with the terms of E&H's governance documents. E&H has the right to
call each outstanding series for redemption pursuant to the terms of each such
series and Unitil currently intends to cause E&H to redeem the shares of any
series which does not consent to the Merger Agreement and related transactions
in accordance with the terms of Rule 42 of the Act. Thus, the requisite consent
of the E&H Cumulative Preferred is assured.
4. Tax and Accounting Consequences of the Merger
The merger has been structured to qualify for tax purposes as a
tax-free "reorganization" under Section 368(a) of the Internal Revenue Code. As
a result, no gain or loss will be recognized by CECo or E&H or the holders of
the CECo Common Stock, the CECo Non-Cumulative Preferred Stock, the CECo
Cumulative Preferred Stock, the E&H Common Stock or the E&H Cumulative Preferred
Stock. CECo and E&H expect that the merger will qualify as a common control
merger for accounting and financial reporting purposes. The accounting for a
common control merger is similar to a pooling of interests. Under this
accounting treatment, the combination of the ownership interests of the two
companies is recognized and the recorded assets, liabilities, and capital
accounts are carried forward at existing historical balances to the consolidated
financial statements of UES (as the surviving company) following the merger.
IV. The Proposed Reorganization Is Consistent With The Public Interest
The Commission has restated the factors it will examine in considering
transactions that are subject to Section 203 of the Federal Power Act.
Specifically, the Commission will consider: (a) the effect of the transaction on
competition; (b) the effect of the transaction on rates; and
13
(c) the effect of the transaction on regulation.\13 Consideration of these
factors shows that the Reorganization clearly warrants approval as being
consistent with the public interest.
A. The Proposed Reorganization Will Have No Adverse Effect On Competition
The proposed Reorganization will not create or enhance market power in any
market under the standards employed by the Commission. This is so for one basic
reason: the Reorganization is a purely intra-corporate transaction. It will not
increase the Unitil Companies' ownership or control of transmission or
generation facilities, nor result in any change in the operation of the
Applicants' facilities, or other inputs that could be used as barriers to entry,
that would have an anti-competitive effect. The Commission has found that such
purely intra-corporate reorganizations will not have an anti-competitive
effect.\14
B. The Proposed Reorganization Will Have No Adverse Effect On Rates
In the Merger Policy Statement, the Commission made clear that its concern
with the effect of a proposed transaction on rates is to protect ratepayers from
rate increases because of a merger.\15 The proposed Reorganization in and of
itself will not have an adverse effect on rates. The rates under which CECo's
wheeling customers obtain transmission services will not change as a result of
the Reorganization. The OATTs of CECo and E&H will be combined into one UES
OATT, under which the rate will be higher because it will include only
distribution plant. However, no customers presently take service under either
CECo or E&H's OATT. The rates under which the resulting company, UES, will
acquire electricity will also not change solely as a
- -----------------------------
13/ 18 C.F.R.ss.2.26 (2002). Inquiry Concerning the Commission's Merger Policy
Under the Federal Power Act: Policy Statement, Order No. 592, III FERC Stats. &
Regs. [Regs. Preambles]P. 31,044 (1996), recon. denied, Order No. 592-A, 79
FERCP. 61,321 (1997) ("Merger Policy Statement").
14/ See Boston Edison Co. and BEC Energy, 80 FERCP. 61,274 at 61,994 (1997). See
also Allegheny Energy Supply Co., LLC, 97 FERCP. 62,251 (2001); Cleco Corp., 86
FERCP. 62,077 (1999).
15/ See Merger Policy Statement, at 30,123.
14
result of the Reorganization. Total retail rates for UES customers following
implementation of the entire restructuring plan are expected to be substantially
the same as the existing total retail rates, which are among the lowest in the
northeast.
C. The Proposed Reorganization Will Not Affect Regulation
As the Commission explained in its Merger Policy Statement, the
Commission's primary concern with the effect of a proposed merger on regulation
involves shifts of authority between the Commission's jurisdiction and that of
the SEC or state commissions.\16 Nothing in the Reorganization will affect the
manner or the extent to which the Commission or state commissions can regulate
the transactions and facilities of the Applicants. The resulting company, UES,
will be regulated at the retail level by the NHPUC and at the wholesale level by
the Commission.
The Commission's regulation will not be impaired by the shift of any
regulatory authority. No state commission will obtain jurisdiction as a result
of the proposed Reorganization. No registered holding company will be created as
a result of the Reorganization. Additionally, Applicants agree to refrain from
invoking the Ohio Power doctrine\17 with regard to intra-corporate transactions.
In addition, the Reorganization will not interpose any wholesale seller
into a transaction that had previously been a retail sale. Therefore, the
Reorganization will not deprive any state jurisdiction over retail sales, nor
will it result in the transformation of any power sales (wholesale
- -----------------------------
16/ Merger Policy Statement, at 30,124-25.
17/ Ohio Power Co. v. FERC, 954 F.2d 779 (D.C. Cir. 1992), cert. denied, FERC v.
Ohio Power Co., et al., 506 U.S. 981 (1992).
15
or retail) into intra-divisional transfers. For that reason as well, the
Reorganization will not deprive the Commission or any state of jurisdiction.\18
V. Information Required by Part 33 of the Commission's Regulations
In support of this application, Applicants hereby submit the following
information required by Part 33 of the Commission's Regulations.
Section 33.2 (a)
Concord Electric Company Exeter & Hampton Electric Company
One McGuire Street 114 Drinkwater Rd.
Concord, NH 03301 Kensington, NH 03833
Unitil Energy Systems, Inc.
One McGuire Street
Concord, NH 03301
Section 33.2 (b)
Unitil Service Corp. Samuel Behrends IV, Esq.
Attn.: George Gantz Sonia Mendonca, Esq.
6 Liberty Lane West LeBoeuf, Lamb, Greene & MacRae LLP
Hampton, NH 03842-1720 1875 Connecticut Avenue, NW
(603) 773-6569 Washington, DC 20009
(603) 773-6769 (fax) (202) 986-8000
gantz@unitil.com (202) 986-8102 fax
sbehrend@llgm.com
sonia.mendonca@llgm.com
Rebecca L. Fowler
LeBoeuf, Lamb,
Greene & MacRae LLP
260 Franklin Street
Boston, MA 02110
(617) 439-9500
(617) 439-0341 fax
rlfowler@llgm.com
- -----------------------------
18/ See Washington Water Power Co. and Sierra Pacific Power Co., 73 FERCP.
61,218 (1995).
16
Section 33.2 (c )
A description of the Applicants is provided in Section II of this
application, and Exhibits A-F hereto.
Section 33.2 (d)
A description of jurisdictional facilities owned, operated, or controlled
by the Applicants or their parent companies, subsidiaries, affiliates, and
associate companies is set forth in Exhibit G hereto.
Section 33.2 (e)
A narrative description of the proposed transaction for which Commission
authorization is requested is provided in Section III of this application, and
Exhibit H hereto.
Section 33.2 (f)
Contracts related to the proposed transaction together with copies of all
other written instruments entered into or proposed to be entered into by the
parties to the transaction are provided as Exhibit I to this application.
Section 33.2 (g)
The facts relied upon to demonstrate that the proposed transaction is
consistent with the public interest are set forth in Section IV of this
application.
Section 33.2 (h)
Two maps showing the properties of each party to the transaction are
provided as Exhibit K to this application.
Section 33.2 (i)
The Reorganization is subject to approval by the NHPUC and the SEC. The
NHPUC is currently considering the merger and is expected to issue a final order
on or before October 28, 2002. The Applicants expect to file for approval of the
merger with the SEC in August 2002. Copies of the orders issued by such agencies
will be submitted, when available, as Exhibit L to this application.
17
Section 33.3 and 33.4
Not applicable, pursuant to Order No. 642.
Section 33.5
Attached as Attachment 1 are the pro-formed financial statements of UES.
UES will be formed upon receipt by Unitil of all the requisite approvals to
merge E&H with and into CECo, which will then change its name to UES. UES will
maintain its books in accordance with the Commission's Uniform System of
Accounts. The UES financial statements will represent the combination, without
any further adjustments, of all of the accounts of the predecessor entities, E&H
and CECo, and there will be no other effects on the Balance Sheet, the Statement
of Income, the Statement of Cash Flows, and the Statement of Retained Earnings
beyond the combination of all accounts. The pro forma financial statements
reflect the anticipated reclassification of transmission plant to distribution,
which will be further described in a forthcoming Section 205 filing.
Section 33.6
A draft form of notice suitable for publication in the Federal Register is
attached hereto. An electronic version of the draft notice is also submitted on
a 31/2" diskette.
VI. Request for Expedited Treatment
Because the Reorganization will take place entirely within the same holding
company system and, therefore, requires no horizontal or vertical competitive
analysis under Order No. 642, the Applicants request that the Commission provide
for a shortened comment period and expedited consideration and approval of the
Reorganization to permit the transaction to close by November 29, 2002.
18
VII. Conclusion
In light of the clear absence of any adverse impact on competition in any
market, any regulated cost-based rates, or the nature of regulation, the change
in ownership and disposition of jurisdictional facilities satisfies the
standards of the Merger Policy Statement. Therefore, it should be approved as
being "consistent with the public interest." Applicants respectfully request
that the Commission approve the Reorganization on an expedited basis to allow
this beneficial business transaction to be consummated. Respectfully submitted,
--------------------------------------
Samuel Behrends, IV
Sonia C. Mendonca
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1875 Connecticut Avenue, N.W.
Washington, D.C. 20009
Rebecca L. Fowler
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
260 Franklin Street
Boston, MA 02110
Attorneys for Concord Electric Company,
Exeter & Hampton Electric Company, and
Unitil Energy Systems, Inc.
Dated: August 30, 2002
19
EXHIBITS REQUIRED UNDER 18 C.F.R. ss. 33.2
Exhibit A
All business activities of the Applicants, including authorizations by
charter or regulatory approval.
The business activities of the Applicants are described in Section II of
this Application.
Exhibit B
A list of all energy subsidiaries and energy affiliates, percentage
ownership interest in such subsidiaries and affiliates, and a description of the
primary business in which each energy subsidiary and affiliate is engaged.
See attached.
Exhibit B
Unitil Corporation (Unitil or the Company) was incorporated under the laws of
the State of New Hampshire in 1984. Unitil is a registered public utility
holding company under the Public Utility Holding Company Act of 1935 (the 1935
Act), and is the parent company of the Unitil Companies. The following companies
are wholly owned subsidiaries of Unitil:
- ---------------------------------------- ---------------------------------- --------------------------------------
Unitil Corporation Subsidiaries State and Year of Organization Principal Type of Business
- ---------------------------------------- ---------------------------------- --------------------------------------
Concord Electric Company (CECo) NH - 1901 Retail Electric Distribution Utility
- ---------------------------------------- ---------------------------------- --------------------------------------
Exeter & Hampton Electric Company (E&H) NH - 1908 Retail Electric Distribution Utility
- ---------------------------------------- ---------------------------------- --------------------------------------
Fitchburg Gas and Electric Light MA - 1852 Retail Electric and Gas Distribution
Company (FG&E) Utility
- ---------------------------------------- ---------------------------------- --------------------------------------
Unitil Power Corp. (Unitil Power) NH - 1984 Wholesale Electric Power Utility
- ---------------------------------------- ---------------------------------- --------------------------------------
Unitil Realty Corp. (Unitil Realty) NH - 1986 Real Estate Management
- ---------------------------------------- ---------------------------------- --------------------------------------
Unitil Service Corp. (Unitil Service) NH - 1984 System Service Company
- ---------------------------------------- ---------------------------------- --------------------------------------
Unitil Resources, Inc. (Unitil NH - 1993 Energy Brokering and Advisory
Resources) Services
- ---------------------------------------- ---------------------------------- --------------------------------------
Unitil's principal business is the retail sale and distribution of electricity
and related services in several cities and towns in the seacoast and capital
city areas of New Hampshire, and both electricity and gas and related services
in north central Massachusetts, through Unitil's three wholly owned retail
distribution utility subsidiaries (CECo, E&H and FG&E). FG&E has a subsidiary,
Fitchburg Energy Development Company. Unitil's wholesale electric power utility
subsidiary, Unitil Power Corp., principally provides all the electric power
supply requirements to CECo and E&H for resale at retail.
Unitil has three additional wholly owned subsidiaries: Unitil Realty Corp.
(Unitil Realty), Unitil Service Corp. (Unitil Service) and Unitil Resources,
Inc. (Unitil Resources). Unitil Realty owns and manages the Company's corporate
office building and property located in Hampton, New Hampshire and leases this
facility to Unitil Service under a long-term lease arrangement. Unitil Service
provides, at cost, centralized management, administrative, accounting,
financial, engineering, information systems, regulatory, planning, procurement,
and other services to the Unitil System companies. Unitil Resources is the
Company's wholly owned non-utility subsidiary and has been authorized by the
Securities and Exchange Commission, pursuant to the rules and regulations of the
1935 Act, to engage in business transactions as a competitive marketer of
electricity, gas and other energy commodities in wholesale and retail markets,
and to provide energy brokering, consulting and management related services
within the United States. Usource, Inc. and Usource L.L.C. (Usource) are wholly
owned subsidiaries of Unitil Resources. Usource provides energy brokering
services, as well as related energy consulting and marketing services.
Exhibit C
Organizational charts depicting the Applicants' current and proposed
post-transaction corporate structures (including any pending authorized but not
implemented changes) indicating all parent companies, energy subsidiaries and
energy affiliates unless the Applicants demonstrate that the proposed
transaction does not affect the corporate structure of any party to the
transaction.
See attached.
Exhibit D
A description of all joint ventures, strategic alliances, tolling
arrangements or other business arrangements, including transfers of operational
control of transmission facilities to Commission approved RTOs, both current,
and planned to occur within a year from the date of the filing, to which the
Applicants or their parent companies, energy subsidiaries, and energy affiliates
are parties, unless the Applicants demonstrate that the proposed transaction
does not affect any of its business interests.
As required by the Commission, the Applicants have committed to
participating in the RTO that is eventually approved for the New England region.
As also described in Exhibit G, FG&E owns a 0.1822% share (approximately
1.13 MW) of the Wyman Unit No. 4 oil-fired generator, which is located in Maine.
At year-end 2001, FG&E's net book value for this asset was approximately
$81,000. FG&E has contractually divested its rights in the unit to Select
Energy, Inc., as described in Exhibit F.
FG&E owns 0.57 shares in Boundary Gas, Inc. ("Boundary Gas"), with an
original value of $57. Boundary Gas was formed by northeastern natural gas
utility companies to jointly purchase gas from Canada. The gas is imported at
Niagara, New York. FG&E has the right under the Boundary Gas agreements to
purchase 544 dth per day through January 15, 2004.
Exhibit E
The identity of common officers or directors of parties to the proposed
transaction. CECo and E&H have the same officers:
President Michael J. Dalton
Vice President Richard M. Heath
Treasurer Mark H. Collin
Asst. Treasurer Charles J. Kershaw, Jr.
Controller Laurence M. Brock
Secretary Sandra L. Whitney
Exhibit F
A description and location of wholesale power sales customers and unbundled
transmission services customers served by the Applicants or their parent
companies, subsidiaries, affiliates and associate companies.
As described in Section II herein, CECo provides wheeling services to SES
Concord Co., L.P., New Hampshire Hydro Associates, Concord Steam Corporation,
Penacook Hydro Association, and Briar Hydro Association. CECo has no wholesale
power customers. E&H has no wholesale power customers or unbundled transmission
service customers.
The wholesale power sales customers and unbundled transmission service
customers of UPC, FG&E and URI are described below:
Unitil Power Corp.
UPC is the all-requirements supplier for CECo and E&H. UPC sells wholesale power
to CECo and E&H at their delivery points in New Hampshire under its FERC
Electric Rate Schedule No. 1, the Unitil System Agreement. Beyond that, UPC very
seldom makes wholesale power sales because its entitlements are less than its
load serving obligations. UPC made no energy sales during 2001, except for its
all-requirements sales to CECo and E&H and interchange sales to NEPOOL.
Listed below are UPC's tariff customers.
- --------------------------------------------------------------------------------------------------------------------
Tariff No. Customer Date Filed Docket
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Rate Schedule 1 Concord Electric Company, Exeter & Hampton Electric 8/24/87 ER86-559-001
Company
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 2 Unitil Resources, Inc. 3/28/96 ER96-1427-000
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Central Vermont Public Service Corp 1/8/98 ER98-1359
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 New Energy Ventures, LLC 1/12/98 ER98-1194
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Montaup Electric Co. 2/11/98 ER98-1814
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Northeast Energy Services, Inc. 4/10/98 ER98-2525
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Connecticut Municipal Electric Energy Cooperative 4/10/98 ER98-2525
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 PG&E Energy Trading 6/19/98 ER98-3434
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Enserch Energy Services, Inc. 8/26/98 ER98-4362
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Commonwealth Electric Co. 8/26/98 ER98-4362
- --------------------------------------------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Engage Energy US, LP 9/23/98 ER98-4618
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 TransCanada Power Marketing, Ltd. 10/13/98 ER99-168
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Strategic Energy Ltd. 11/17/98 ER99-612
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Reliant Energy Service Inc 9/3/99 ER99-4370
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Indeck Pepperell Power Associates, Inc. 11/24/99 ER00-642
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Reading Municipal Lighting Department 8/21/01 ER01-2892
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Engage Energy America, LLC. 10/17/01 ER02-119
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Enron Power Marketing, Inc. 1/8/02 ER02-718
- --------------------------------------------------------------------------------------------------------------------
Fitchburg Gas and Electric Light Company
As described in Section II, FG&E is a subsidiary of Unitil Corporation, and is a
distribution company in north-central Massachusetts. FG&E has been restructured
and no longer manages a power supply. As part of its restructuring, FG&E sold
the entire output of its portfolio of power supply contracts for the entire
duration of each contract to Select Energy, Inc. FG&E has contracted with other
suppliers to provide retail customers of FG&E with generation services. FG&E has
several customers signed onto its market-based rate tariff, FERC Electric Tariff
No. 3. However, FG&E does not conduct wholesale power sales beyond the
continuing transfer of all of its entitlements in power contracts to Select
Energy, Inc. In addition, FG&E has two customers signed onto its Open Access
Transmission Tariff, FERC Electric Tariff No. 4. FG&E made no power sales during
2001, except for the portfolio sales to Select Energy, Inc. and interchange
sales to NEPOOL.
Listed below are FG&E's tariff customers.
- --------------------------------------------------------------------------------------------------------------------
Tariff No. Customers Date Filed Docket
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Central Maine Power Co. 1/8/98 ER98-1358
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Central Vermont Public Service Corp. 1/8/98 ER98-1358
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Enron Power Marketing, Inc. 1/12/98 ER98-1193
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 New Energy Ventures, LLC. 1/12/98 ER98-1193
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 United Illuminating Co. 1/12/98 ER98-1193
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 New England Power Company 1/12/98 ER98-1193
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Green Mountain Power 1/12/98 ER98-1193
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Montaup Electric Company 2/11/98 ER98-1813
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Northeast Energy Services Inc. 4/10/98 ER98-2526
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Connecticut Municipal Electric Energy Cooperative 4/10/98 ER98-2526
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 PG&E Energy Trading 6/9/98 ER98-3435
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Cambridge Electric Light Co. 8/26/98 ER98-4361
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Commonwealth Electric Co. 8/26/98 ER98-4361
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Enserch Energy Services, Inc. 8/26/98 ER98-4361
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 TransCanada Power Marketing, Ltd. 10/13/98 ER99-176
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Strategic Energy Ltd. 11/17/98 ER99-613
- --------------------------------------------------------------------------------------------------------------------
21
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Constellation Power Source, Inc. 3/3/99 ER99-2049
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Select Energy, Inc.* 7/15/99 ER99-3579
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Reliant Energy Services 9/3/99 ER99-4369
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Indeck Pepperell Power Associates, Inc. 11/24/99 ER00-641
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Aquila Energy Marketing, Inc. 12/22/99 ER00-887
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 New Hampshire Electric Cooperative 12/19/01 ER02-582
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 3 Great Bay Power Corporation 1/28/02 ER02-857
- --------------------------------------------------------------------------------------------------------------------
FERC Electric Tariff 4 Fitchburg Gas & Electric Light Co. 9/12/97 ER97-4622
- --------------------------------------------------------------------------------------------------------------------
1st Revised FERC Electric Pinetree Power Fitchburg, Inc. 9/27/99 ER99-4537
Tariff 4
- --------------------------------------------------------------------------------------------------------------------
1st Revised FERC Electric Massachusetts Bay Transportation Authority 4/20/00 ER00-2253
Tariff 4
- --------------------------------------------------------------------------------------------------------------------
Unitil Resources, Inc.
URI is a subsidiary of Unitil Corporation. URI has not been a NEPOOL Participant
since January 2000, and does not enter into wholesale transactions under its
market-based rate schedule, FERC Electric Rate Schedule No. 1, in Docket No.
ER97-2462-000.
Exhibit G
A description of jurisdictional facilities owned, operated, or controlled
by the Applicants or their parent companies, subsidiaries, affiliates, and
associate companies.
A description of such facilities of the Applicants is found in Section II
of this Application. As described in Section II, FG&E owns limited 115 kV
transmission facilities.
As also described in Exhibit D, FG&E owns a 0.1822% share (approximately
1.13 MW) of the Wyman Unit No. 4 oil-fired generator, which is located in Maine.
This unit is a conventional oil-fired boiler and steam turbine generating unit
originally placed in service in 1978. At year-end 2001, FG&E's net book value
for this asset was approximately $81,000. As a minority joint owner, FG&E
neither operates nor controls this unit.
Exhibit H
All jurisdictional facilities and securities associated with or affected by
the transaction.
As this transaction is a reorganization of the Company, all jurisdictional
facilities of CECo and E&H would be affected.
Exhibit I
All contracts related to the proposed transaction together with copies of
all other written instruments entered into or proposed to be entered into by the
parties to the transaction.
Attached is the proposed Agreement and Plan of Merger, which has not yet
been presented to the Companies' Boards for approval. A copy of the executed
Agreement and Plan of Merger will be filed with the Commission. The Board
Resolutions of Unitil, CECo and E&H authorizing the Reorganization have not yet
been adopted. It is anticipated that they will be adopted at the next board
meeting in September 2002. As soon as the resolutions are adopted, copies will
be filed with the Commission.
Exhibit J
The facts relied upon to demonstrate that the reorganization of CECo and
E&H into UES is in the public interest are set forth in Section I of the
Application.
Exhibit K
A general or key map showing in different colors the properties of each
party to the transaction.
See attached Service Territory Maps of CECo and E&H.
Exhibit L
Copies of the orders of the NHPUC and SEC that relate to the proposed
transaction.
Copies of the orders of the NHPUC and SEC relating to the proposed
transaction will be provided upon issuance. The NHPUC's August 28, 2002, order
in Phase I of the proceeding, as discussed in Section III.A. of this
Application, is attached.
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Concord Electric Company )
Exeter & Hampton Electric Company ) Docket No. EC02-___-000
Unitil Energy Systems, Inc. )
NOTICE OF APPLICATION FOR APPROVAL
OF INTRA-CORPORATE REORGANIZATION
Take notice that on August 30, 2002, Concord Electric Company, Exeter &
Hampton Electric Company, and Unitil Energy Systems, Inc., filed with the
Federal Energy Regulatory Commission an application pursuant to Section 203 of
the Federal Power Act and 18 C.F.R. Part 33 for authorization of an
intra-corporate reorganization. The proposed Reorganization involves the merger
of Exeter & Hampton Electric Company into Concord Electric Company to form a
single distribution company, which will be renamed Unitil Energy Systems, Inc.
Any person desiring to be heard or to protest such filing should file a
motion to intervene or protest with the Federal Energy Regulatory Commission,
888 First Street, NE, Washington, DC 20426, in accordance with Rules 211 and 214
of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and
385.214). All such motions or protests should be filed on or before ___________.
Protests will be considered by the Commission in determining the appropriate
action to be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a motion to
intervene. Copies of these filings are on file with the Commission and are
available for public inspection. This filing may also be viewed on the Internet
at http://www.ferc.fed.us/online/rims.htm (call 202-208-2222 for assistance).
Magalie R. Salas,
Secretary
CERTIFICATE OF SERVICE
I hereby certify that I have this day served the foregoing document upon:
Debra A. Howland
Executive Director and Secretary
State of New Hampshire
Public Utilities Commission
8 Old Suncook Road
Concord, NH 03301-7319
SES Concord Company, L.P.
c/o Wheelabrator Technologies Inc.
Liberty Lane
Hampton, NH 03842
Concord Steam Corporation
Attn: Mr. Peter Bloomfield, President
P.O. Box 1377
Concord, NH 03302-1377
Concord Regional Solid Waste/
Resource Recovery Cooperative
6B South Main Street
Penacook, NH 03303
New Hampshire Hydro Associates
c/o Essex Hydro Associates, L.L.C.
55 Union Street, 4th Floor
Boston, MA 02108
Penacook Hydro Association
c/o Essex Hydro Associates, L.L.C.
55 Union Street, 4th Floor
Boston, MA 02108
Briar Hydro Association
c/o Essex Hydro Associates, L.L.C.
55 Union Street, 4th Floor
Boston, MA 02108
Dated at Washington, D.C., this 30th day of August 2002.
RE CONCORD ELECTRIC COMPANY
DF 97-165
Order No. 22,706
New Hampshire Public Utilities Commission
September 4, 1997
BY THE COMMISSION:
ORDER
On August 8, 1997, Concord Electric Company (CEC) filed with the New Hampshire
Public Utilities Commission (Commission) a request that the Commission waive
N.H. Admin. Rules, Puc. 307.05, a Commission rule now awaiting repromulgation,
which limits an electric utility's short term debt to 10% of net fixed plant.
CEC seeks authorization for $8,000,000, which would exceed the 10% limit. CEC
also seeks authority to issue and sell from time to time, or renew, notes,
bonds, or other evidences of indebtedness payable less than 12 months from the
date thereof.
CEC was authorized by Order No. 19,540 (September 27, 1989) to issue and sell,
from time to time, or renew, up to $5,000,000 of short-term debt at current
interest rates. The Commission also required CEC to obtain prior approval before
incurring short-term debt in excess of the amount allowed in that order. As of
June 30, 1997, CEC had outstanding short-term debt in the amount of $3,774,678,
thus approaching the limit of $5,000,000 for short-term debt established in
Order No.19,540. CEC anticipates that it will need to exceed the $5,000,000
short-term debt limitation on or before September 15, 1997 in order to meet its
increasing interim funding requirements. Therefore, the CEC seeks approval to
issue up to an additional $3,000,000 of such indebtedness.
Because of the growth in customers and sales over the last several years,
accompanied by the need for additional capital expenditures for additions,
extensions, and betterments to its distribution property, plant, and equipment,
CEC interim funding requirements have increased. CEC seeks the requested
increase in short-term debt to support current and working capital requirements,
provide interim financing for increasing levels of capital expenditures on
distribution plant and equipment and provide the financial flexibility to plan
and optimize the benefits and timing of future long-term financings.
By vote dated August 8, 1997, CEC's Board of Directors approved the proposed
increase in short-term debt and filing of this petition, and requested that an
order nisi be issued within 30 days of the filing of this petition.
Subsequent to the issuance of Order No. 19,540, the Commission promulgated N. H.
Admin. Rules, Puc. 307.05 establishing the short-term debt limit for electric
utilities. The Commission has reviewed the filing and the responses to data
requests propounded by Staff. From the
financial statements submitted with the petition, it is evident that CEC would
exceed the 10% limitation contained in a prior rule and in the pending rule if
the additional amount CEC were to be borrowed immediately and in its entirety.
CEC has advised Staff that such is not its intent, but we recognize the need for
a company to have flexibility in its financial dealings.
We have reviewed the filing and the responses to data requests propounded by
Staff. Given the managerial and financial expertise of CEC, we will authorize
the new debt ceiling of $8,000,000. We find the proposed uses for the requested
borrowings reasonable under all of the circumstances, and in the public good.
Based upon the foregoing, it is hereby
ORDERED NISI, that Concord Electric Company be, and hereby is, authorized to
issue and sell from time to time, or renew, up to $8,000,000 of notes, bonds,
and other evidences of indebtedness payable less than 12 months from the date
thereof at current interest rates and upon terms and conditions and for the
purposes as set forth in the Concord Electric Company petition and its attached
exhibits; and it is
FURTHER ORDERED, that Concord Electric Company first obtain approval of this
Commission before incurring short-term indebtedness in excess of the amount
allowed by the terms of this order; and it is
FURTHER ORDERED, that on or before January 1st in each year, Concord Electric
Company shall file with this Commission, in accordance with Puc. 609.02, Form
F-2 "Disposition of Proceeds from Sale of Securities"; and it is
FURTHER ORDERED, that pursuant to N.H. Admin. Rules, the Petitioner shall cause
a copy of this Order Nisi to be published once in a statewide newspaper of
general circulation, such publication to be no later than September 11, 1997 and
to be documented by affidavit filed with this office on or before September 18,
1997; and it is
FURTHER ORDERED, that all persons interested in responding to this petition be
notified that they may submit their comments or file a written request for a
hearing on this matter before the Commission no later than September 25, 1997;
and it is
FURTHER ORDERED, that any party interested in responding to such comments or
request for hearing shall do so no later than October 2, 1997; and it is
FURTHER ORDERED, that this Order Nisi shall be effective October 6, 1997, unless
the Commission provides otherwise in a supplemental order issued prior to the
effective date.
By order of the Public Utilities Commission of New Hampshire this fourth day of
September, 1997.
2
Re Exeter and Hampton Electric
Company
DF 97-164
Order No. 22,705
New Hampshire Public Utilities Commission
September 4, 1997
-------------
BY THE COMMISSION:
ORDER
[1] On August 8, 1997, Exeter & Hampton Electric Company (E&H) filed with
the New Hampshire Public Utilities Commission (Commission) a request that the
Commission waive N.H. Admin. Rules, Puc 307.05, a provision in Commission rules
now awaiting repromulgation, which limits an electric utility's short term debt
to 10% of net fixed plant. E&H seeks authorization for a short-term debt limit
of $8,000,000, which would exceed the 10% limit. E&H also seeks authority to
issue and sell from time to time, or renew, notes, bonds, or other evidences of
indebtedness payable less than 12 months from the date thereof.
E&H was authorized by Order No. 19,541 (September 27, 1989) to issue and
sell, from time to time, or renew, up to $5,000,000 of short-term debt at
current interest rates. The Commission also required E&H to obtain prior
approval before incurring short-term debt in excess of the amount allowed in
that order. As of June 30, 1997 E&H had outstanding short-term debt in the
amount of $4,210,906, thus approaching the limit of $5,000,000 for short-term
debt established in Order No. 19,541. E&H anticipates that it will need to
exceed the $5,000,000 short-term debt limitation on or before September 15, 1997
in order to meet its increasing interim funding requirements. Therefore, E&H
seeks approval to issue up to an additional $3,000,000 of such indebtedness.
Because of the growth in customers and sales over the last several years,
accompanied by the need for additional capital expenditures for additions,
extensions, and betterments to its distribution property, plant, and equipment,
E&H's interim funding requirements have increased. It seeks the requested
increase in short-term debt to support current and working capital requirements,
provide interim financing for increasing levels of capital expenditures on
distribution plant and equipment and provide the financial flexibility to plan
and optimize the benefits and timing of future long-term financings.
By vote dated August 8, 1997, E&H's Board of Directors approved the
proposed increase in short-term debt and filing of this petition, and requested
that an order nisi be issued within 30 days of the filing of this petition.
Subsequent to the issuance of Order No. 19,541, the Commission
promulgated N.H. Admin. Rules, Puc 307.05 establishing the short-term debt limit
for electric utilities. The Commission has reviewed the filing and the responses
to data requests propounded by Staff.
From the financial statements submitted with the petition, it is evident that
E&H would exceed the 10% limitation contained in a prior rule and in the pending
rule if the additional amount were to be borrowed immediately and in its
entirety. E&H has advised Staff that such is not its intent, but we recognize
the need for a company to have flexibility in its financial dealings.
We have reviewed the filing and the responses to data requests propounded
by Staff. Given the managerial and financial expertise of E&H, we will authorize
the new debt ceiling of $8,000,000. We find the proposed uses for the requested
borrowings reasonable under all of the circumstances, and in the public good.
Based upon the foregoing, it is hereby
ORDERED NISI, that Exeter & Hampton Electric Company be, and hereby is,
authorized to issue and sell from time to time, or renew, up to $8,000,000 of
notes, bonds, and other evidences of indebtedness payable less than 12 months
from the date thereof at current interest rates and upon terms and conditions
and for the purposes as set forth in the Exeter & Hampton Electric Company
petition and its attached exhibits; and it is
FURTHER ORDERED, that Exeter & Hampton Electric Company first obtain
approval of this Commission before incurring short-term indebtedness in excess
of the amount allowed by the terms of this order; and it is
FURTHER ORDERED, that on or before January 1st in each year, Exeter &
Hampton Electric Company shall file with this Commission, in accordance with Puc
609.02, Form F-2 "Disposition of Proceeds from Sale of Securities"; and it is
FURTHER ORDERED, that pursuant to N.H. Admin. Rules, the Petitioner shall
cause a copy of this Order Nisi to be published once in a statewide newspaper of
general circulation, such publication to be no later than September 11, 1997 and
to be documented by affidavit filed with this office on or before September 18,
1997; and it is
FURTHER ORDERED, that all persons interested in responding to this
petition be notified that they may submit their comments or file a written
request for a hearing on this matter before the Commission no later than
September 25, 1997; and it is
FURTHER ORDERED, that any party interested in responding to such comments
or request for hearing shall do so no later than October 2, 1997; and it is
FURTHER ORDERED, that this Order Nisi shall be effective October 6, 1997,
unless the Commission provides otherwise in a supplemental order issued prior to
the effective date.
By order of the Public Utilities Commission of New Hampshire this fourth
day of October, 1997.
2