View:
As filed with the Securities and Exchange Commission
January 5, 1996
File No. 70-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM U-1
APPLICATION AND DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________________
UNITIL CORPORATION
UNITIL RESOURCES, INC.
UNITIL SERVICE CORP.
216 Epping Road
Exeter, New Hampshire 03833
(Name of companies filing this statement and
address of principal executive offices)
UNITIL CORPORATION
(Name of top registered holding company
parent of each applicant or declarant)
Gail A. Siart
Treasurer
UNITIL CORPORATION
216 Epping Road
Exeter, New Hampshire 03833
(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
William S. Lamb, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
UNITIL Corporation, a New Hampshire corporation ("UNITIL") and a
registered holding company under the Public Utility Holding Company Act of 1935
(the"Act"), its wholly owned subsidiary, UNITIL Resources, Inc., a New
Hampshire corporation ("URI") and its service company subsidiary, UNITIL
Service Corp., a New Hampshire corporation ("UNITIL Service"), each of Exeter,
New Hampshire (collectively, the "Applicants"), hereby file this Application
and Declaration on Form U-1 (the "Application") with the Securities and
Exchange Commission (the "Commission").
The Applicants are seeking authorization from the Commission under
Sections 6(a), 7, 9(a), 10, 12 and 13(b) of the Act and Rules 45,
87, 90 and 91 thereunder for URI to expand its business activities to include
power marketing and related activities.
Item 1. DESCRIPTION OF PROPOSED TRANSACTION
A. Request for Authority for URI to Provide Power Marketing and
Related Services
As authorized by order dated May 24, 1993 (HCAR No. 25816), URI is
currently engaged in the business of providing energy related management and
consulting services to entities outside the UNITIL holding company system.
UNITIL is hereby seeking authorization for URI expand its authorized
activities to include engaging in transactions as a"marketer" of electricity
and other forms of energy. In general terms, following the
proposed expansion, URI will purchase electricity from wholesale suppliers
and resell it to utility and nonutility customers, pursuant to federal and
state regulatory authorizations, at competitive prices.
Although the transactions URI proposes to engage in may take a
variety of different forms, a typical transaction might involve the purchase
of power from a utility or nonutility generator, contracting with other
utilities for the transmission of that power, and the resale of that power
by URI to a utility or to an end-user. Power sales may be undertaken on long
or short term durations and pursuant to individualized terms and conditions,
and sales would likely be aggregated together for purposes of obtaining
competitive wholesale power supplies. In some cases, URI may acquire power
supplies and then market that power as competitively as possible, whereas in
other cases, URI may establish contracts with purchasers and then acquire
power supplies to meet the purchasers'requirements. URI anticipates that
other types of power marketing activities may develop as the market for
electric power becomes increasingly competitive.
Moreover, URI believes that in order to compete effectively with
other suppliers in the competitive marketplace who can provide a full range
of energy options to meet customer demands, URI will also need to be able to
engage in transactions for energy sources other than electricity. UNITIL and
URI therefore also seek authority to undertake competitive market transactions
involving natural gas and liquid fuels.(1) In addition, customer requirements,
particularly at the retail level are also expected to include conservation
and other technical services. URI also seeks authority to undertake such
customer services on a competitive basis, in order to be able to satisfy
customer requirements under competitive market conditions.(2)
At the outset, employees of UNITIL Service, pursuant to its
service agreement with URI, will perform the power marketing and related
activities of URI. UNITIL Service personnel have extensive knowledge of the
markets for electric power and in evaluating potential electric power
suppliers, negotiating power supply contracts and arranging for the transmission
and pooling of electric power, as a result of the fact that the UNITIL system
operating companies obtain most of their electric power supply through
competitive wholesale power purchases. URI will reimburse UNITIL Service at
cost for the services provided, as it does presently and in the same manner
as any other UNITIL affiliate company. If needed in the future, URI could
employ its own staff.
In connection with the proposed business expansion, URI must seek
authority from the Federal Energy Regulatory Commission ("FERC") to conduct
wholesale power marketing activities, and from appropriate state authorities
conduct any retail power marketing activities. Thus, URI will not enter into
any power purchase or sale contracts that are not within federal or state
regulatory purview. URI's activities in the developing wholesale and retail
markets therefore will be subject to appropriate limitations, conditions
and control as determined by federal and state law and corresponding
regulatory authorities. Specifically, pursuant to the requirements of the
regulations of the FERC, URI will be unable to purchase electric energy or
capacity from, or sell these products to, any affiliated companies in the
UNITIL holding company system unless specifically authorized by the FERC.
In addition, under FERC regulations, URI will be unable to charge competitive,
market-based rates at wholesale unless its affiliated utility companies have
filed open access transmission tariffs acceptable to the FERC, and until URI
has satisfied the FERC that it has mitigated any market power which it may
have. At the state level, URI does not plan to own any facilities for
generating, transmitting or distributing power, and therefore would not be
deemed a utility under most state laws. However, URI will only be able to
undertake retail power marketing activities in the context of state legislative
or regulatory initiatives, such as the New Hampshire Retail Wheeling Pilot
Program(3) and the Massachusetts Industry Restructuring Proceedings,(4)
effectively limiting URI's retail activities to those permitted by state
regulators. In addition, UNITIL will notify the MDPU and the NHPUC, the
two state regulatory commissions with jurisdiction over the operating public
utilities in the UNITIL holding company system, of the plan to expand URI's
business activities by providing them with a copy of this Application.
The proposed expansion of URI's activities will not result in URI
becoming an electric utility company within the meaning of section 2(a)(3)
of the Act. URI will not own or operate any facilities used for the
generation, transmission or distribution of electric energy for sale, and
will not invest, directly or indirectly, in such facilities or operations of
any third party, whether through a joint venture, partnership or debt or equity
financing. The Commission has previously indicated that marketers engaged in the
sale activities in which URI intends to engage are not electric utility
companies as defined in Section 2(a)(3) of the Act.(5)
Section 9(a)(1) of the Act provides that without prior approval
from the Commission, "it shall be unlawful for any registered holding
company or any subsidiary company thereof, . . . , to acquire, directly or
indirectly, any securities or utility assets or any other interest in any
business." The expansion of the business activities of URI to include
power marketing and related transactions appears to qualify as an acquisition
of an interest in a new business. Section 10 contains the requirements for
an application for such authorization as well as a number of standards that
must be met for approval, including that the acquisition would not be
"detrimental to the carrying out of the provisions of section 11." Finally,
Section 11(b)(1) limits UNITIL to a single integrated utility system and "such
other business as are reasonably incidental, or economically necessary or
appropriate" to the operations of the integrated public utility system of the
holding company. In addition, any services to be performed by UNITIL Service
for URI must meet the standards of Section 13 of the Act and the rules
promulgated thereunder.
Power marketing and related activities are functionally related to
the operations of UNITIL's integrated public utility system. First, UNITIL
believes that entering into this business is a significant step in allowing
it to compete in the utility industry and is thus in the best interest of
investors and consumers. As the Division of Investment Management recognized
in its recent report on the Regulation of Public Utility Holding Companies,(6)
the utility industry is undergoing dramatic changes and restructuring that
requires utility companies to expand beyond traditional utility services
in order to remain competitive. As a result:
the SEC must continue to respond flexibly to change in the
utility industry. Toward this end, the Division believes that the
registered holding companies should be permitted to invest in
diversified activities without unnecessary regulatory obstacles
and recommends consideration of a rule that would exempt,
subject to certain conditions, investments in specified energy-
related activities from prior SEC approval.(7)
A number of utility companies are expanding their non-regulated activities to
become complete "energy services companies."(8) UNITIL believes that it can
enter the power marketing and related businesses through URI competitively
based on its existing expertise. UNITIL also believes that as a result of
the power marketing activities, various sources of competitively priced
electricity will become more readily available to the wholesale electric
power market and thus to the existing UNITIL system operating companies.
Indeed, all consumers of electric power will benefit as the alternatives for
supply of electricity increase and competition among electric power suppliers
grows. Similarly, gas marketing transactions will increase competition
within the market in which FG&E's gas division operates and, as a result,
benefit the consumers of FG&E's gas services.
URI's power marketing and related activities also will benefit
the UNITIL system companies by permitting allocation of UNITIL Service's
expenses across a broader base. To the extent that these new activities
permit greater utilization of UNITIL Service's existing resources, all of the
UNITIL system companies will benefit.
Finally, the expansion into power marketing and related activities
is consistent with the requirements of Section 11(b)(1) as the Division has
recommended it be interpreted.Indeed, as recommended in the Report, the
Commission has released for public comment a proposed new Rule 58 (9), which
creates a "safe harbor" to exempt from the prior approval requirements of
Sections 9(a)(1) and 10, the acquisition of up to the greater of $50 million
or 15% of the holding company's consolidated capitalization by registered
holding companies of the securities certain "energy-related" businesses
(and, in the case of gas holding companies, gas-related businesses).(10) As
proposed, the definition of energy related activity includes"the brokering
and marketing of energy commodities, including but not limited the electricity
and natural or manufactured gas," as well as "the rendering of energy
conservation and demand-side management services." Although the rule has not
been promulgated as of yet and is thus unavailable for the Applicants,
proposed Rule 58 clearly indicates that the Commission may interpret such
marketing and services as acceptable activities within the parameters of
Section 11(b)(1) as it is currently written. Indeed, the new rule does not
contain any geographic or revenue requirements (e.g., an energy related
activity need not occur within the service territory of the holding company's
operating public utilities, nor must any percentage of operating revenues from
any energy related activity derive from services provided to associated
companies), thereby indicating that Section 11(b)(1) does not require
marketers in a registered holding company system to meet those standards.
As noted in the rule release the Commission has authorized various
registered companies to engage in a wide range of gas and some power marketing
activities in the past.(11) In addition, the Commission recently authorized
Northeast Utilities' operating utility subsidiaries and Northeast Utilities
Service Company to expand their business activities to include the marketing
and brokering of power to non-affiliates both within and outside the operating
companies' service territory.(12) Additionally, a number of other registered
holding companies have entered into the power marketing business through
their affiliated exempt wholesale generators ("EWGs").(13) Pursuant to the
terms of the Energy Policy Act of 1992 ("EPAct") and Section 32 of the Act,
an entity with EWG status, which is determined by theFERC, is not a public
utility company for purposes of the Act and may be acquired by registered
holding company systems. In a number of decisions, the FERC has noted that
the congressional conference report that accompanied EPAct specifically stated
that the "definition of an EWG has been drafted to permit an EWG to sell
wholesale power that it has not generated itself."(14) The FERC has
interpreted this language to mean that an EWG can conduct power marketing
activities involving power it did not generate, and can be certified to charge
market based rates in such transactions, without jeopardizing its status as
an EWG, subject to certain limitations established by the FERC.(15) Because
UNITIL does not currently own an interest in an EWG, it is seeking separate
Commission authorization for its power marketing activities.
Overall, authorization for URI to engage in power marketing and
related activities will aid in the development of a more competitive energy
marketplace. Participation by power and other energy marketers such as URI
will increase the likelihood that new products and services will develop as
market needs are identified and that, as a result, customer choice will
increase. Accordingly, UNITIL should be permitted to engage in competitive
energy marketing activities through URI, which will then allow URI to compete
on the same basis as other companies.
B. Request for Authority for UNITIL to Provide Indemnifications
and Guarantees to URI
URI may, from time to time, need UNITIL to indemnify third
parties, to guarantee performance of its obligations or payment of its debts
and/or to act as surety for its activities. The need for such guarantee
authority relates to the market practice pursuant to which energy marketing
companies, such as URI, demonstrate their financial credibility with customers.
Energy marketing companies, though entering into many contracts for high
volumes of gas or power, are often not highly capitalized due to the nature of
their operations. This absence of high capitalization has caused some would-be
customers to be apprehensive of the risk of dealing with such marketing
companies. However, often times such marketing companies are subsidiaries of
financially strong parent companies. Consequently, the usual method for
establishing the financial credibility of the marketing company is by the
parent (such as UNITIL) standing behind its subsidiary through guarantees,
thus allowing the subsidiary to compete effectively in increasingly deregulated
markets. The Applicants request approval through December 31, 2000 for UNITIL
to indemnify and guarantee the power and fuel transactions of URI. Such
indemnities and guarantees will not exceed more than $30,000,000 in the
aggregate outstanding at any one time.
C. Request for Authority for UNITIL Service to
Provide Services to URI
As stated above, URI will contract with UNITIL Service for personnel
to perform most of URI's marketing activities. The Applicants do not
anticipate the need to hire additional employees at the outset in order to
perform assignments obtained by URI. While UNITIL Service employees are
assigned to a URI activity, they will continue to be employees of and paid
by UNITIL Service. URI will reimburse UNITIL Service for their compensation,
including benefits, during that time pursuant to the terms of the existing
service company agreement between URI and UNITIL Service. UNITIL Service will
also continue to provide URI with accounting, credit, financial, management,
technical and clerical support in accordance with the terms and conditions of
the existing service agreement between URI and UNITIL Service. The Applicants
request authority for UNITIL Service to provide the additional services to URI,
necessary to allow URI to undertake power markets and related activities as
testified above.
D. Involvement of UNITIL System Companies with Exempt Wholesale
Generators and Foreign Utility Companies
Neither UNITIL nor any subsidiary thereof presently has, or as a
consequence of the proposed transaction will have, an interest in any 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 by URI to acquire any securities of, or any interest
in, an EWG or FUCO. Moreover, neither UNITIL nor any subsidiary thereof is,
or as a consequence of the proposed transaction will become, a party to, and
such entities do not and will not have any rights under, a service, sales or
construction agreement with any EWGs or FUCOs except in accordance with the
rules and regulations promulgated by the Commission with respect thereto.
E. Reports to be Filed with the Commission
URI will continue to file quarterly reports with the Commission
within 60 days after the end of each calendar quarter. These reports will
include the following additional information:
(1) Description of the power and other energy marketing activities
undertaken by URI, including the type of activity, the name(s)
of clients, the location(s) where the activities took place,
the nature of the legal instrument under which such activities
where performed and the compensation received during the
period;
(2) Description of expenses incurred by URI in connection with
marketing activities, during the quarter and cumulative to
date; and
(3) Description of the staffing of URI marketing projects during
the quarter, including the number and type of personnel
assigned by UNITIL Service, noting the percentage of time
committed to the projects.
In addition, URI will continue to file with the Commission an annual
report of its activities for the preceding calendar year using, where
appropriate, the Form U-13-60 reporting format pursuant to Rule 94.
Item 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the transactions
described in this Application are estimated as follows:
Commission filing fee
relating to the Application . . . . . . . . . . . . $2,000
Legal fees . . . . . . . . . . . . . . . . . . . . . $ *
Miscellaneous . . . . . . . . . . . . . . . . . . . . $ *
Total . . . . . . . . . . . . . . . . . . . . $ *
* To be filed by amendment.
Item 3. APPLICABLE STATUTORY PROVISIONS
The sections of the Act, and rules or exemptions thereunder, that
the Applicants consider applicable to the transactions described in this
Application are set forth below:
(i) Authorization for URI to provide
power and other energy marketing
services Sections 9(a) and 10
(ii) Services provided by UNITIL
Service to URI Section 13(b), Rules
87(b)(1), 90 and 91
(iii) Indemnification of third parties,
guarantees of payment and
performance, acting as a surety Sections 6(a), 7 and
12(b), Rule 45
To the extent that the transactions described in this Application
are considered by the Commission to require authorization, approval or
exemption under any section of the Act or the rules thereunder other than
those specifically referred to in this Application, UNITIL, URI and UNITIL
Service hereby request such authorization, approval or exemption.
Item 4. REGULATORY APPROVALS
The FERC has jurisdiction over any interstate wholesale power
sales by URI, and any related interstate transmission arrangements. Proposed
power marketing transactions of URI with retail customers, and rates and
terms for those transactions must meet the requirements of state law and will
require authorization by the appropriate state utility regulatory commissions.
No state regulatory body or agency and no Federal agency or commission, other
than this Commission has jurisdiction over the proposed securities and service
transactions described in this Application.
Item 5. PROCEDURE
It is requested that the Commission issue and publish no later than
January 12, 1996, the requisite notice under Rule 23 with respect to the filing
of this Application, such notice to specify a date not later than February 6,
1996, as the date after which an order granting and permitting this Application
to become effective may be entered by the Commission and that the Commission
enter not later than February 9, 1996, an appropriate order granting and
permitting this Application to become effective.
The Applicants respectfully request that appropriate and timely
action be taken by the Commission in this matter. No recommended decision by
a hearing officer or other responsible officer of the Commission is necessary
or required in this matter. The Division of Investment Management of the
Commission may assist in the preparation of the Commission's decision in this
matter. There should be no thirty-day waiting period between the issuance and
the effective date of any order issued by the Commission in this matter, and
it is respectfully requested that any such order be made effective immediately
upon the entry thereof.
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
a. Exhibits
F-1 Opinion of Counsel
(to be filed by amendment)
F-2 "Past Tense" Opinion of Counsel
(to be filed by amendment)
G-1 Proposed Form of Public Notice
b. Financial Statements
(1) UNITIL Corporation and Subsidiary Companies
Consolidated Statements of Earnings --
Nine Months Ended September 30, 1995
(2) UNITIL Corporation and Subsidiary Companies
Consolidated Balance Sheets, September 30, 1995
(3) UNITIL Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows -- Nine Months
Ended September 30, 1995
(4) UNITIL Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
Item 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this Application involve
a "major Federal action" nor do they "significantly affect the quality of
the human environment" as those terms are used in section 102(2)(C) of the
National Environmental Policy Act. None of the transactions that are the
subject of this Application will result in changes in the operation of the
company that will have an impact on the environment. The Applicants are not
aware of any Federal agency which has prepared or is preparing an environmental
impact statement with respect to the transactions which are the subject of this
Application.
NOTES
(1) Fitchburg Gas and Electric Light Company ("FG&E), an electric and gas
utility subsidiary of UNITIL, is engaged in the gas utility business. Three of
UNITIL's public utility subsidiaries, namely Concord Electric Company
("Concord"), Exeter & Hampton Electric Company ("E&H") and FG&E, currently
purchase other liquid fuels for their own use.
(2) Concord, E&H and FG&E currently provide similar services to their customers.
(3) Under the provision of NHRSA 374:26-a, enacted in June of 1995, the New
Hampshire Public Utility Commission (the "NHPUC") on November 20, 1995, in
Docket DR 95-250, issued Guidelines for a Retail Wheeling Pilot Program.
Under this program suppliers will have the opportunity, as of May 1996, to
make retail sales to a selected group of retail customers in New Hampshire
under a competitive program operated under the auspices of the NHPUC.
(4) On August 16, 1995, in Docket D.P.U. 95-30, the Massschusetts Department
of Public Utilities (the "MDPU") issued an order requiring that all electric
utilities in Massachusetts file industry restructuring plans meeting a set
of principles including customer choice and full competition in generation
markets. The three largest Massachusetts utilities are required to file these
plans February 16, 1996, with an anticipated resolution within six months.
(5) See, e.g., Enron Power Marketing, Inc. (Jan. 5, 1994);CRSS Power Marketing,
Inc. (March 31, 1994); Electric Clearinghouse, Inc. (Apr. 13, 1994); Inter-
Coast Power Marketing Co. (Dec. 6, 1994); AIG Trading Corporation (Jan. 20,
1995) and Tucson Electric Power Co. (September 26, 1995).
(6) The Regulation of Public Utility Holding Companies (June 1995)(the
"Report").
(7) Report at 87.
(8) See, e.g., Electric Utility Week, May 8, 1995 at 3 (announcing UTILICorp
United's nation wide brand name under which it will provide energy services);
The Energy Daily, August 23, 1995 at 1 (announcing formation of energy services
subsidiary by Pacific Gas & Electric Enterprises).
(9) 60 Fed. Reg. 33,642 (June 28, 1995)(the"Release").
(10) As previously discussed, the UNITIL system contains both electric and gas
operations.
(11) Release at 12, citing Consolidated Natural Gas Co., HCAR No. 24329 (Feb.
27, 1987)(authorizing gas marketing subsidiary) and Entergy Co., HCAR No. 25848
(June 8, 1993) (authorizing sale of consulting services to non affiliates,
including expertise relating to brokering of power)
(12) Northeast Utilities Service Company, HCAR No. 26359 (August 18, 1995).
Although Northeast Utilities ("NU") stated that such marketing activities will
occur principally in the New England, New York, Pennsylvania, New Jersey,
Maryland and Delaware area, no specific geographic limitations on such
activity were imposed by the Commission. It should be noted that NU's
application to the FERC for authorization to charge market based rates was
recently denied primarily because the transmission tariff filed by NU did not
follow the pro forma tariff promulgated by FERC.
(13) See e.g., CNG Power Services Corporation, 71 FERC paragraph 61,378 (1995);
Southern Energy Marketing, Inc., 71 FERC paragraph 61,376 (1995); Wholesale
Power Services, Inc. 72 FERC paragraph 61,284 (1995) (power marketing by
CINergy affiliate); and Entergy Power Marketing Corporation, 73 FERC paragraph
61,063 (1995).
(14) See, e.g., CNG Power Services Corporation, 71 FERC paragraph 61,378(1995);
LG&E Power Marketing, Inc., 60 FERC paragraph 61,083 (1994). See also, H.R.
Conf. Rep No. 102-108, 102nd Cong. 2nd Sees. 388 (1992). The EWG is defined as
"a person engaged directly, or indirectly through one or more affiliates...,
and exclusively in the business of owning or operating, or both owning and
operating, all or part of one or more eligible facilities and selling
electricity at wholesale." (emphasis added).
(15) See supra note. 13.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned companies have duly caused this Application to be
signed on their behalf by the undersigned thereunto duly authorized.
UNITIL Corporation
UNITIL Resources, Inc.
UNITIL Service Corp.
By: /s/ Gail A. Siart
Gail A. Siart
Secretary and Treasurer
UNITIL Corporation
Vice President and Treasurer
UNITIL Resources, Inc.
Senior Vice President
UNITIL Service Corp.
Date: January 5, 1996
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filing under the Public Utility Holding Company Act of 1935
______________, 1996
UNITIL CORPORATION, UNITIL RESOURCES, INC. and
UNITIL SERVICE CORP. (70- )
UNITIL Corporation ("UNITIL"), 216 Epping Road, Exeter,
New Hampshire 03833, a registered holding company, and its wholly
owned subsidiaries, UNITIL Resources, Inc. ("URI") and UNITIL
Service Corp. ("UNITIL Service"), both located at 216 Epping
Road, Exeter, New Hampshire 03833, (collectively, the
"Applicants") have filed an Application and Declaration on
Form U-1 under Sections 6(a), 7, 9(a), 10, 12(b) and 13(b) of the
Public Utility Holding Company Act of 1935 (the "Act") and Rules
45, 87(b)(1), 90 and 91 thereunder for the purpose of obtaining
authorization for (i) URI to expand its business activities to
include power marketing and related activities; (ii) UNITIL to
issue related indemnifications and guarantees and (iii) UNITIL
Service to provide related services.
As authorized by order dated May 24, 1993 (HCAR No.
25816), URI is currently engaged in the business of providing
energy related management and consulting services to entities
outside the UNITIL holding company system. The Applicants are
seeking authorization under Sections 9(a) and 10 of the Act for
URI expand its authorized activities to include engaging in
transactions as a "marketer" of electricity and other forms of
energy. In general terms, following the proposed expansion, URI
will purchase electricity from wholesale suppliers and resell it
to utility and nonutility customers, pursuant to federal and
state regulatory authorizations, at competitive prices.
Although the transactions URI proposes to engage in may
take a variety of different forms, the Applicants state that a
typical transaction might involve the purchase of power from a
utility or nonutility generator, contracting with other utilities
for the transmission of that power, and the resale of that power
by URI to a utility or to an end-user. Power sales may be
undertaken on long or short term durations and pursuant to
individualized terms and conditions, and sales would likely be
aggregated together for purposes of obtaining competitive
wholesale power supplies. In some cases, URI may acquire power
supplies and then market that power as competitively as possible,
whereas in other cases, URI may establish contracts with
purchasers and then acquire power supplies to meet the
purchasers' requirements. The Applicants anticipate that other
types of power marketing activities may develop as the market for
electric power becomes increasingly competitive.
Moreover, the Applicants believe that in order to
compete effectively with other suppliers in the competitive
marketplace who can provide a full range of energy options to
meet customer demands, URI will also need to be able to engage in
transactions for energy sources other than electricity. The
Applicants are therefore requesting authority for URI to
undertake competitive market transactions involving natural gas
and liquid fuels. The Applicants also believe that customer
requirements, particularly at the retail level, will include
conservation and other technical services and are seeking
authority for URI to undertake such customer services on a
competitive basis.
In connection with the proposed business expansion, the
Applicants state that URI will seek authority from the Federal
Energy Regulatory Commission ("FERC") to conduct wholesale power
marketing activities, and from appropriate state authorities
conduct any retail power marketing activities.
Because URI may, from time to time, need UNITIL to
indemnify third parties, to guarantee performance of its
obligations or payment of its debts and/or to act as surety for
its activities, the Applicants are requesting approval under
Sections 6(a), 7 and 12(b) and Rule 45 of the Act for UNITIL to
indemnify and guarantee the power and fuel transactions of URI
through December 31, 2000. Such indemnities and guarantees will
not exceed more than $30,000,000 in the aggregate outstanding at
any one time.
The Applicants state that initially employees of UNITIL
Service, pursuant to its service agreement with URI, will perform
the power marketing activities of URI. While UNITIL Service
employees are assigned to a URI activity, they will continue to
be employees of and paid by UNITIL Service. URI will reimburse
UNITIL Service for their compensation, including benefits, during
that time pursuant to the terms of the existing service company
agreement between URI and UNITIL Service. UNITIL Service will
also continue to provide URI with accounting, credit, financial,
management, technical and clerical support in accordance with the
terms and conditions of the existing service agreement between
URI and UNITIL Service. The Applicants request authority under
Section 13(b) and Rules 87(b)(1), 90 and 91 of the Act for UNITIL
Service to provide the additional services to URI necessary to
allow URI to undertake power markets and related activities.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.