(As filed March 23, 1999)
File No. 70-9199
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2
to
FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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New Century Energies, Inc.
Public Service Company of Colorado
NC Enterprises, Inc.
1225 17th Street
Denver, Colorado 80202-5533
(Names of companies filing this statement and
addresses of principal executive offices)
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New Century Energies, Inc.
(Name of top registered holding company parent)
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Teresa S. Madden
Controller
New Century Energies, Inc
1225 17th Street, Suite 900
Denver, Colorado 80202-5533
(Name and address of agents for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
James D. Albright, Esq. William T. Baker, Jr., Esq.
William M. Dudley, Esq. Thelen Reid & Priest LLP
New Century Energies, Inc 40 West 57th Street
1225 17th Street, Suite 600 New York, New York 10019
Denver, Colorado 80202-5534
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The Application or Declaration filed in this proceeding, as amended and
restated by Amendment No. 1, is hereby further amended and restated in its
entirety to read as follows:
Item 1. Description of Proposed Transaction.
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1.1. Background. New Century Energies, Inc. ("NCE") is a registered
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holding company under the Public Utility Holding Company Act of 1935, as amended
(the "Act").1 Its public-utility subsidiaries are Public Service Company of
Colorado ("PSCo"), Southwestern Public Service Company and Cheyenne Light, Fuel
and Power Company. NCE's principal non-utility subsidiaries include: New Century
Services, Inc., a subsidiary service company; NC Enterprises, Inc.
("Enterprises"), an intermediate holding company for certain of NCE's
non-utility investments and subsidiaries;2 WestGas InterState, Inc. ("WGI"), a
non-utility gas pipeline subsidiary which transports gas from the PSCo gas
system to Cheyenne Light, Fuel and Power Company; e prime, inc. ("e-prime"),
which holds investments in, among other things, pipeline and underground gas
storage businesses; and New Century International, Inc., a subsidiary through
which NCE holds indirectly a 50% interest in Yorkshire Electricity Group plc, an
electric distribution company operating in England. At December 31, 1998, NCE
reported consolidated assets of $7.67 billion, and, for the year then ended,
consolidated operating revenues of $3.61 billion, which consisted of $2.70
billion in electric revenues, $841.3 million in gas revenues, and $72.1 million
in other revenues. At December 31, 1998, NCE reported consolidated gross
electric plant of $7.1 billion and consolidated gross gas plant of $1.21
billion.
PSCo provides public-utility service to approximately 1.2 million
electric and 1.0 million gas customers in Colorado, primarily in the Denver and
Front Range metropolitan areas. For the year ended December 31, 1998, PSCo
reported operating revenues of $2.28 billion, of which $1.636 billion was
derived from electric utility operations and $640.1 million from gas utility
operations. In addition to its retail gas distribution operations, PSCo and
certain existing non-utility subsidiaries also engage in activities related to
the supply, transportation and storage of natural gas in Colorado and Wyoming,
including the provision of transportation services to nonassociate utilities.
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1 See New Century Energies, Inc., Holding Co. Act Release No. 26748
(Aug. 1, 1997), 65 SEC Docket at 278.
2 Id. at 282.
2
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NCE, PSCo and Enterprises are now seeking authorization for various
transactions, as described below, relating to the transfer, joint ownership and
leasing of certain gas transportation and related facilities that have been or
will be constructed by PSCo and certain nonassociated companies. In furtherance
of such joint undertaking, PSCo and Enterprises have agreed with Colorado
Interstate Gas Company ("CIG"), Wyoming Interstate Company ("WIC") and CIG
Resources Company ("CIGR"), all of which are direct or indirect subsidiaries of
The Coastal Corporation, to undertake the following transactions: (1)
Enterprises and CIG Gas Supply Company ("CIGGS") will form and acquire the
equity securities of and provide other funding to WYCO Development LLC ("WYCO"),
a non-utility company formed for the purpose of facilitating the transactions
described herein;3 (2) PSCo will sell to WYCO the Front Range Pipeline (as
described in item 1.3.1, below) and WIC will sell to WYCO the Powder River
Lateral Expansion (as described in item 1.3.2, below) (collectively, the
"Facilities"); and (3) WYCO will lease the Front Range Pipeline back to PSCo and
the Powder River Lateral Expansion back to WIC under separate but substantially
identical long-term lease agreements (the "Facilities Leases") (as described in
item 1.5, below).
1.2 Acquisition of Equity Securities of WYCO. Enterprises requests
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authority to acquire the equity securities of WYCO, a Colorado limited liability
company formed by Enterprises and CIGGS to facilitate the transactions described
herein. The membership interests in WYCO will be owned 50% by Enterprises and
50% by CIGGS. The Operating Agreement governing WYCO shall be in substantially
the form of Exhibit A hereto. Under the Operating Agreement, Enterprises and
CIGGS will have equal voting rights with respect to the management of the
business of WYCO and will share equally in all costs and revenues of WYCO,
except as specifically provided herein. WYCO shall be managed by a management
committee ("Management Committee") that will initially consist of one
representative and one alternate representative of each of the members.
Decisions of the Management Committee shall be made by the unanimous vote of the
representatives of the members, with certain exceptions.
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3 As described in greater detail in item 1.3, the Facilities to be
acquired and owned by WYCO will consist of interstate and intrastate pipelines,
compressors and associated equipment that will be used by PSCo and WIC to
transport gas to their respective markets and not to distribute gas at retail.
Accordingly, WYCO will not be a "gas-utility company" within the meaning of
Section 2(a)(4) of the Act.
3
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Enterprises' total investment in WYCO is estimated not to exceed $26
million, although, as explained in Item 1.6, below, WYCO may seek non-recourse
debt financing for approximately 70% of the purchase price of the Facilities
which, if obtained, would reduce the equity investments of both Enterprises and
CIGGS. The investment by Enterprises in WYCO would be in the form of
Enterprises' initial capital contribution to WYCO and subsequent cash
contributions, open account advances, or loans to WYCO, or guarantees of
borrowings by WYCO, or any combination of the foregoing. At present, NCE
proposes to provide Enterprises with the funds needed by Enterprises to fulfill
its obligations under the Operating Agreement. NCE will derive the funds needed
for such purpose from securities issuances (including issuances of guarantees)
authorized in separate proceedings4 and from other internally-generated sources
of cash.
1.3 Description of Facilities. The Facilities are generally
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described as follows:
1.3.1 Front Range Pipeline. PSCo has completed the
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construction of approximately 53 miles of 24-inch diameter natural gas pipeline
extending from an interconnection with PSCo's Chalk Bluffs measurement and
compression facilities, located just south of the Colorado-Wyoming border near
Rockport, Colorado, to an interconnection with PSCo's existing 24-inch pipeline
adjacent to PSCo's Fort St. Vrain gas-fired electric generating station, near
Platteville, Colorado (the "Front Range Pipeline"). The Front Range Pipeline
provides PSCo with additional transportation capacity from the Rockport/Chalk
Bluffs interconnection to the Platteville/Fort St. Vrain interconnection of
approximately 269,000 dekatherms (Dth) per day. CIG and WIC have also completed
construction of all necessary taps and metering facilities on their respective
pipeline systems and PSCo has completed construction of the new interconnections
at Rockport/Chalk Bluffs to accommodate the full initial design capacity from
either WIC's or CIG's pipeline system. In order to support and maintain the
initial design capacity of 269,000 Dth per day on the Front Range Pipeline, CIG,
WIC and PSCo have entered into an agreement wherein WIC and CIG have agreed to
provide pressures sufficient to effect delivery into the Front Range Pipeline.
The final cost to construct the Front Range Pipeline and the associated
facilities was approximately $22 million.
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4 In this connection, the Commission has authorized the NCE system
to undertake various financings in File No. 70-9007.
4
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By order dated June 4, 1998 (Exhibit D-2 hereto), the Colorado Public
Utilities Commission ("CPUC") granted PSCo a certificate of public convenience
and necessity to construct and operate the Front Range Pipeline, and approved
the related financing transactions that are described below.5 As indicated, PSCo
has completed construction of the Front Range Pipeline, which it placed in
service on November 1, 1998. As stated in PSCo's application to the CPUC
(Exhibit D-1 hereto), the Front Range Pipeline is necessary for operational
reasons to alleviate capacity constraints on its northern Front Range system.
The Front Range Pipeline will enable PSCo to expand its delivery capacity and
provide it and its transportation customers with access to several interstate
pipelines that intersect at the Chalk Bluffs "hub,"6 which, in turn, will
provide PSCo and its customers with much improved access to upstream gas
supplies in production areas and supply basins in the Rocky Mountain Region.
Such improved access to upstream gas supplies should lead to lower priced
supplies of gas becoming available to the Front Range market.
1.3.2 Powder River Lateral Expansion. WIC has installed and
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constructed equipment and facilities designed to provide approximately 7,400
nameplate horsepower of compression to be located near Laramie and Cheyenne,
Wyoming ("Phase I" of the Powder River Lateral Expansion), for the purpose of
expanding the WIC pipeline capacity into Powder River and expanding that portion
of its existing pipeline capacity from Laramie to Cheyenne, Wyoming. Depending
on future market conditions, WIC may install and construct additional equipment
and facilities designed to expand pipeline capacity between the Powder River
Basin and its Cheyenne, Wyoming, compressor station ("Phase II" of the Powder
River Lateral Expansion) (together, the Phase I and Phase II expansions are
referred to as the "Powder River Lateral Expansion"). WIC placed the Phase I
expansion facilities in service on November 15, 1998. Depending on market
conditions,
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5 In an order dated July 15, 1998 (Exhibit D-3), the CPUC modified the
June 4, 1998 order in certain respects, and by order dated August 28, 1998
(Exhibit D-4), the CPUC denied applications for rehearing.
6 Hubs are formed at locations where several interstate pipelines meet,
or intersect, and function as the physical transfer points between the
intersecting pipelines where shippers (i.e., buyers and sellers) and traders can
buy, sell, exchange or trade gas or pipeline capacity or other "unbundled"
services (e.g., temporary storage or parking or loaning of gas). At the Chalk
Bluffs hub, PSCo would have access to transportation (and thus upstream gas
supplies) on the CIG and WIC pipelines, as well as on the pipeline facilities of
Williams Natural Gas Company, Trailblazer Pipeline Company, KN Interstate Gas
Transmission Company and WGI.
5
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the anticipated in-service date of the Phase II expansion facilities is December
1, 1999.
Phase I of the Powder River Lateral Expansion has created additional
transportation capacity on the WIC pipeline system of 49,000 Dth per day and,
subject to future market conditions, Phase II would be designed to create
additional transportation capacity on the WIC pipeline system of 120,000 Dth per
day between the point of interconnection of the Powder River Lateral with the
pipeline system of MIGC, Inc., an interstate pipeline subsidiary of Western Gas
Resources, Inc., and the terminus of the WIC pipeline at the Chalk Bluffs hub.
These facilities will provide PSCo and other customers of WIC with access to
additional transportation capacity into the Chalk Bluffs hub, which, in turn,
will provide improved access to upstream gas supplies. The cost to construct
Phase I of the Powder River Lateral Expansion was $15 million and the estimated
cost to construct Phase II, based on the current plans for such facilities,
would be about $30 million.
1.4 Sale of the Facilities to WYCO. PSCo proposes to sell the Front
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Range Pipeline to WYCO for an amount equal to the actual total cost incurred by
PSCo, as accounted for in accordance with the "Gas Plant Instructions" of the
Uniform System of Accounts, 18 C.F.R. Part 201, which includes an allowance for
funds used during construction ("AFUDC") based on PSCo's capitalized cost of
money calculated at the lesser of PSCo's applicable AFUDC rate or the
CPUC-authorized rate of return on rate base during the period of time when the
facilities were under construction and prior to the time when they were placed
in service.
Likewise, WIC intends to sell a 100% interest in the Phase I facilities
to WYCO, and, if market conditions justify the construction of the Phase II of
the Powder River Lateral Expansion, WIC will sell an approximately 32% undivided
interest in the completed Phase II facilities to WYCO, in each case at WIC's
actual total cost. The parties intend that WYCO's investment in the Front Range
Pipeline and the Powder River Lateral Expansion facilities shall be equal. To
achieve this result, the percentage undivided interest in the Phase II
facilities to be conveyed to WYCO will be adjusted, if necessary, so that WYCO's
total investment in the Powder River Lateral Expansion facilities (i.e., Phase I
and Phase II combined) will be equal to WYCO's investment in the Front Range
Pipeline. In the event that Phase II of the Powder River Lateral Expansion is
ultimately not constructed as planned, then WYCO shall be provided an
opportunity to invest in the next expansion of the
6
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CIG or WIC pipeline systems serving the Denver area, and any subsequent
expansions, in an amount that causes the total investment of WYCO in the WIC and
CIG expansions to be equal to the total investment of WYCO in the Front Range
Pipeline facilities.
1.5 The Facilities Leases. Concurrently with the purchase from PSCo of
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the Front Range Pipeline, PSCo and WYCO will enter into a facilities lease (the
"Front Range Pipeline Lease") under which WYCO will lease the Front Range
Pipeline facilities back to PSCo. Likewise, concurrently with the purchase from
WIC of the Phase I facilities of the Powder River Lateral Expansion, WIC and
WYCO will also enter into a facilities lease (the "Powder River Lateral
Expansion Lease") under which WYCO will lease such interest in the Powder River
Lateral Expansion back to WIC. A similar lease arrangement will be entered into
between WYCO and WIC concurrently with WIC's transfer to WYCO of an undivided
interest in the Phase II facilities.
The initial term of both of the Facilities Leases will be 30 years.
Each Facilities Lease will be a "net" lease under which PSCo and WIC, as the
case may be, will be solely responsible for operations, maintenance, repair,
taxes (other than income taxes) and other costs of the leased facilities. Upon
expiration of the Facilities Leases, the Front Range Pipeline and Powder River
Lateral Expansion facilities will be sold back to PSCo and WIC, respectively, at
the net book cost. The Front Range Pipeline Lease was reviewed and approved by
the CPUC in its June 4, 1998 order authorizing PSCo to construct and operate the
Front Range Pipeline. The Powder River Lateral Expansion Lease was reviewed and
approved by the Federal Energy Regulatory Commission ("FERC"). For purposes of
financial presentation, PSCo will account for its lease obligation as long-term
debt.
1.5.1 The Front Range Pipeline Lease. Under the terms of the
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Front Range Pipeline Lease, lease payments will be cost-of-service based, and
will be calculated annually using rate of return on rate base, depreciation, and
income tax factors authorized by the CPUC.7 In the event that WYCO makes payment
of property taxes on the Front Range Pipeline, PSCo would be obligated to
reimburse WYCO for such amounts. PSCo shall be obligated to operate the Front
Range Pipeline in accordance with
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7 Because the lease payments under the Front Range Pipeline Lease will
be based on and track the depreciation rates, rate of return on rate base,
capital structure and income tax factors used by the CPUC to develop gas service
rates for PSCo, PSCo's customers will be economically neutral to the
sale/leaseback transaction.
7
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accepted industry standards and shall offer and provide gas transportation
services using such facilities in accordance with its CPUC gas tariff.
The Front Range Pipeline Lease shall be in substantially the form of
Exhibit B-1A hereto.
1.5.2 The Powder River Lateral Expansion Lease. Under the
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terms of the Powder River Lateral Expansion Lease, lease payments will be
cost-of-service based, and will be calculated annually using rate of return on
rate base, depreciation, and income tax factors authorized by the FERC. In the
event WYCO makes payment of property taxes on the Powder River Lateral Expansion
facilities, WIC will be obligated to reimburse WYCO for such amounts. WIC will
be obligated to operate the leased facilities in accordance with accepted
industry standards and shall offer and provide gas transportation services using
such facilities in accordance with its FERC gas tariff. WIC has obtained a
certificate of public convenience and necessity from the FERC for authorization
to construct and operate Phase I of the Powder River Lateral Expansion and to
provide the additional transportation services created thereby.8
The Powder River Lateral Expansion Lease shall be in substantially the
same form of Exhibit B-2 hereto.
1.6 Other Matters. As indicated, WYCO may seek third-party debt
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financing for approximately 70% of the cost of the Facilities. Any such debt
securities would be secured by the assets of WYCO, including the rental payments
under the two Facilities Leases. The Applicants believe that the issuance of
bonds, notes or other evidence of indebtedness by WYCO for the purpose of
financing its business, as described in this Application or Declaration, and the
granting of security therefor, would be exempt from the requirements of the Act
pursuant to Rule 52(b). WYCO will report any issuance of indebtedness on Form
U-6B-2.
Based on NCE's actual capitalization prior to construction of the Front
Range Pipeline at March 31, 1998, and assuming that (i) the transactions
described above are closed on December 31, 1998, (ii) the total purchase price
for both the Front Range and Powder River Lateral Expansion facilities is $50
million, (iii) WYCO obtains non-recourse debt financing for 70% of the aggregate
purchase price ($35 million), and (iv) Enterprises's 50% share of
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8 See Wyoming Interstate Company, Ltd., et al., 84 FERC P. 61,007 (July
10, 1998).
8
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WYCO's equity ($7.5 million) is funded through an equity issuance by NCE, NCE's
consolidated capitalization, on a pro forma basis, would consist of 43.6% equity
and 56.4% debt and preferred stock, versus 43.7% equity and 56.3% debt and
preferred stock at March 31, 1998.
In accordance with its existing authorization,9 New Century Services,
Inc. ("NCS"), a service company subsidiary of NCE, may agree to provide certain
categories of administrative, management, and technical services to WYCO, in
which case NCS and WYCO would enter into the standard NCE system service
agreement. CIG, WIC, or CIGR may also from time to time render services to WYCO
. Prior to providing any such services to WYCO, these companies would file with
the Commission a statement on Form U- 13E-1.
Item 2. Fees, Commissions and Expenses.
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The fees, commissions and expenses incurred or to be incurred in
connection with the transactions proposed herein are estimated at $15,000.
Item 3. Applicable Statutory Provisions.
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3.1 Sections 9(a) and 10 of the Act are applicable to NCE's and
Enterprises' direct or indirect acquisition of the limited liability company
membership interests of WYCO and to WYCO's acquisition of the Facilities.
Section 12(f) of the Act and Rule 43 thereunder are deemed applicable to the
sale of the Front Range Pipeline by PSCo to WYCO. Sections 9(a), 10 and 12(f)
and Rule 43 are deemed applicable to the lease of the Front Range Pipeline by
WYCO to PSCo and Sections 9(a) and 10 are deemed applicable to the lease of the
Powder River Lateral Expansion facilities by WYCO to WIC.
The issuance and sale of debt securities by WYCO for the purpose of
financing its business are subject to Sections 6(a) and 7 of the Act, but are
considered exempt thereunder pursuant to Section 6(b) and Rule 52(b).
Future investments by Enterprises in WYCO in the form of loans, cash
contributions or open account advances to finance WYCO's ongoing business,
including any expansions of the
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9 See New Century Energies, Inc., supra n. 1, 65 SEC Docket at 282.
9
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Facilities, would be subject to Section 9(a) and 10 or Section 12(b) and Rule
45, as applicable, but will be exempt pursuant to Rule 52 or Rule 45(b), as
applicable.
3.1.1 Standards of Approval under Section 10. The
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transactions proposed herein involve an acquisition of securities, as well as an
acquisition of an interest in an other (i.e., non-utility) business, and are
therefore subject to the approval of this Commission under Section 10. The
relevant standards for approval under Section 10 are set forth in subsections
(b), (c) and (f). In this case, the requirements of Section 10(f) will be met
upon the approval of PSCo's application to the CPUC, and there is no basis for
the Commission to make any negative findings under Section 10(b).
As applied to interests in non-utility businesses, Section 10(c)(1) of
the Act provides that the Commission shall not approve an acquisition that is
"detrimental to the carrying out of the provisions of section 11." Section
11(b)(1), in turn, directs the Commission to limit the operations of a holding
company system to a single integrated public utility system, provided that,
subject to making certain specified findings, the Commission may permit a
registered holding company to control one or more additional public utility
systems.10 Further, the Commission may permit the retention by a registered
holding company of an interest in any non-utility business that is "reasonably
incidental, or economically necessary or appropriate to the operations" of its
integrated system or systems. The Commission has interpreted Sections 10(c)(1)
and 11(b)(1), read together, as expressing a Congressional policy against
non-utility acquisitions that bear no functional relation to a holding company's
utility operations.11
As previously described, the Front Range Pipeline is designed to
transport gas into PSCo's service territory for ultimate consumption by end-use
customers served off of PSCo's gas distribution system, including fuel for
PSCo's electric generation facilities. Substantially all of the capacity
associated with this facility will be used to support PSCo's retail gas utility
and electric utility operations. The Powder River Lateral Expansion facilities
are also designed to provide
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10 In its order approving the formation of NCE, supra n. 1, the
Commission made findings under Section 11(b)(1) permitting the retention of
PSCo's gas utility business as an additional integrated system.
11 See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-65 (1070),
aff'd 444 F.2d 913 (D.C. Cir. 1971).
10
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PSCo and other customers of WIC with greater access to upstream sources of gas
supply. In the past, the Commission has held that investments in similar kinds
of fuel and fuel transportation facilities meet the standards of Section
11(b)(1).12
3.1.2 Rule 54 Analysis. The transactions proposed herein are
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also subject to Section 32(h)(4) of the Act and Rule 54 thereunder. Rule 54
provides that, in determining whether to approve any transaction that does not
relate to an "exempt wholesale generator" ("EWG") or "foreign utility company"
("FUCO"), the Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or FUCO upon the registered holding
company system if paragraphs (a), (b) and (c) of Rule 53 are satisfied.
Initially, NCE has complied or will comply with the record-keeping
requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3) on the use of
the NCE system's domestic public-utility company personnel to render services to
EWGs and FUCOs, and the requirements of Rule 53(a)(4) concerning the submission
of copies of certain filings under the Act to retail regulatory commissions.
Further, none of the circumstances described in Rule 53(b) has occurred or is
continuing. Rule 53(c) is inapplicable by its terms because the proposals
contained herein do not involve the issue and sale of securities (including any
guarantees) to finance an acquisition of an EWG or FUCO.
Rule 53(a)(1) limits a registered holding company's financing of
investments in EWGs if such holding company's "aggregate investment" in EWGs and
FUCOs exceeds 50% of its "consolidated retained earnings." NCE's "aggregate
investment" (as defined in Rule 53(a)(1)(i)) in all EWGs and FUCOs, pro forma to
include NCE's indirect investment in Yorkshire Electricity Group plc
("Yorkshire") and Independent Power Corporation plc ("IPC"), is currently equal
to 55.4% of NCE's "consolidated
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12 In its order authorizing the creation of NCE, supra n. 1, the
Commission permitted NCE to retain interests in certain non-utility gas-related
operations of WGI and e prime. See also Central and South West Corporation,
Holding Co. Act Release No. 14555 (December 28, 1961) (approving acquisition of
the stock of a gas pipeline company by a registered electric utility holding
company); and Conectiv, Inc., 66 SEC Docket 1260 (February 25, 1998)
(authorizing new registered electric utility holding company to retain interest
in a gas supply and storage company as being functionally related to holding
company's secondary gas distribution system). Further, Commission orders
approving investments by registered electric utility holding companies in fuel
and fuel related activities (including fuel transportation) were cited as
precedents for including such activities among those that "energy-related
companies," as defined in Rule 58(b), may engage.
11
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retained earnings" (as defined in Rule 53(a)(1)(ii)) for the four quarters ended
December 31, 1998.13 At the present time, therefore, NCE does not satisfy all of
the requirements of Rule 53(a).
However, even if the Commission were to take into account, on a pro
forma basis, the effect of the capitalization and earnings of EWGs and FUCOs
(including, on a pro forma basis, Yorkshire and IPC) in which NCE has invested,
it would have no basis for denying the transactions proposed herein. The
transactions proposed herein relate solely to an investment, through a
non-utility subsidiary of Enterprises, in natural gas transportation and
compression facilities that will provide additional natural gas supply and
transportation capacity needed by PSCo in connection with the conduct of its
domestic natural gas distribution and electric utility operations. All aspects
of the transactions described herein, as they relate to PSCo (including
construction of the Front Range Pipeline and the related sale/leaseback
transaction) have been approved by the CPUC.
Moreover, there has been no material impact on NCE's consolidated
capitalization by reason of the inclusion therein of the capitalization and
earnings of EWGs and FUCOs (including on a pro forma basis Yorkshire and IPC) in
which NCE has an interest. (See Financial Statements 1.3 and 1.4, showing, on a
pro forma basis, the consolidated capitalization and income of NCE).14 NCE
believes that the capitalization ratios and income levels are within acceptable
ranges. Finally, although NCE's consolidated earnings for the year ended
December 31, 1997, were negatively affected by its investment in Yorkshire, this
was solely as the result of the imposition by the United Kingdom of a one-time,
non-recurring, windfall tax on Yorkshire. Importantly, this tax did not affect
earnings from ongoing operations, and, therefore, would not have any negative
financial impact on earnings in future periods.
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13 In New Century Energies, Inc., Holding Co. Act Release No. 9341
(February 26, 1999), the Commission authorized NCE with respect to the issuance
of debt and equity securities, including guarantees, to have an aggregate
investment in FUCOs and EWGs, as calculated in accordance with Rule 53(a)(1), in
an amount up to NCE's consolidated retained earnings, as determined in
accordance with Rule 53(a)(1)(ii).
14 At December 31, 1996, which was prior to PSCo's investment in
Yorkshire and IPC, pro forma common equity as a percentage of NCE's total
consolidated capitalization was 43.8%. At March 31, 1998 (taking into account on
a pro forma basis the impact of the Front Range Pipeline transaction), common
equity represented 43.6% of NCE's total capitalization.
12
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Item 4. Regulatory Approvals.
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The construction of the Front Range Pipeline and the sale and leaseback
thereof by PSCo pursuant to the Front Range Pipeline Lease are subject to the
jurisdiction of, and have been approved by, the CPUC. The transaction may also
be subject to the filing of Pre-Merger Notification Report Forms under the
Hart-Scott-Rodino Antitrust Improvements Act and the expiration or early
termination of the required waiting period. No other state commission, and no
federal commission, other than the Commission, has jurisdiction over the
proposed transactions insofar as they concern any of the Applicants.
Item 5. Procedure.
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The Commission is requested to publish a notice under Rule 23 with
respect to the filing of this Application or Declaration as soon as practicable.
The Applicants request that the Commission's Order be issued as soon as the
rules allow and that there should not be a 30-day waiting period between
issuance of the Commission's order and the date on which the order is to become
effective. The Applicants hereby waive a recommended decision by a hearing
officer or any other responsible officer of the Commission and consents that the
Division of Investment Management may assist in the preparation of the
Commission's decision and/or order, unless the Division opposes the matters
proposed herein.
Item 6. Exhibits and Financial Statements.
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A. Exhibits.
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A Form of Limited Liability Company Operating Agreement
of WYCO Development LLC. (Previously filed.)
B-1A Revised form of Front Range Pipeline Lease
Agreement. (Previously filed.)
B-2 Form of Powder River Lateral Expansion Lease
Agreement. (Previously filed.)
D-1 Application of Public Service Company of Colorado
to The Public Utilities Commission of the State of
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Colorado (Docket No. 97A-622G). (Previously
filed.)
D-2 Order of The Public Utilities Commission of the
State of Colorado. (Previously filed.)
D-3 Ruling of The Public Utilities Commission of the
State of Colorado on Applications for Rehearing,
Reargument, or Reconsideration. (Filed herewith.)
D-4 Order of The Public Utilities Commission of the
State of Colorado Denying Applications for
Rehearing, Reargument, or Reconsideration. (Filed
herewith.)
F Opinion of Counsel. (Filed herewith.)
H Proposed Form of Federal Register Notice.
(Previously filed.)
27.A Financial Data Schedule Per Book - NCE.
(Previously filed.)
27.B Financial Data Schedule Pro Forma NCE
(Confidential Treatment Requested). (Previously
filed.)
B. Financial Statements.
--------------------
1.1 Balance Sheet of NCE and consolidated subsidiaries,
as of December 31, 1998 (incorporated by reference to
the current Report on Form 8-K of NCE dated February
23, 1999) (File No. 1-12927).
1.2 Statement of Income of NCE and consolidated
subsidiaries, as of December 31, 1998 (incorporated
by reference to the current Report on Form 8-K of NCE
dated February 23, 1999) (File No. 1-12927).
1.3 Pro Forma Capitalization of NCE and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein.
(Confidential Treatment Requested - filed pursuant to
Rule 104). (Previously filed.)
14
<PAGE>
1.4 Pro Forma Income Statement of NCE and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein.
(Confidential Treatment Requested - filed pursuant to
Rule 104). (Previously filed.)
2.1 Balance Sheet of PSCo and subsidiaries, consolidated,
as of December 31, 1998 (incorporated by reference to
the current Report on Form 8-K of PSCo dated February
23, 1999) (File No. 1-3280).
2.2 Statement of Income of PSCo and subsidiaries,
consolidated, for the year ended December 31, 1998
(incorporated by reference to the current Report on
Form 8-K of PSCo dated as of February 23, 1999) (File
No. 1-3280).
2.3 Pro Forma Capitalization of PSCo and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein
(Confidential Treatment Requested - filed pursuant to
Rule 104). (Previously filed.)
2.4 Pro Forma Income Statement of PSCo and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein
(Confidential Treatment Requested - filed pursuant to
Rule 104). (Previously filed.)
3.1 Balance Sheet of NC Enterprises, Inc. and
subsidiaries, consolidated, as of December 31,
1998. (Filed herewith.)
3.2 Statement of Income of NC Enterprises, Inc. and
subsidiaries, consolidated, as of December 31,
1998. (Filed herewith.)
3.3 Pro Forma Capitalization of NC Enterprises and
consolidated subsidiaries after giving effect to,
among other things, the transactions contemplated
herein (Confidential Treatment Requested - filed
pursuant to Rule 104). (Previously filed.)
3.4 Pro Forma Income Statement of NC Enterprises and
consolidated subsidiaries after giving effect to,
among other things, the transactions contemplated
15
<PAGE>
herein (Confidential Treatment Requested - filed
pursuant to Rule 104). (Previously filed.)
Item 7. Information as to Environmental Effects.
---------------------------------------
None of the matters that are the subject of this Application or
Declaration 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. The transaction that is the
subject of this Application or Declaration will not result in changes in the
operation of the Applicants that will have an impact on the environment. The
Applicants 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 Application or Declaration.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this Amendment
No. 2 to the Application or Declaration previously filed herein to be signed on
their behalf by the undersigned thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
PUBLIC SERVICE COMPANY OF
COLORADO
NC ENTERPRISES, INC.
By: /s/ Richard C. Kelly
-------------------------------------------
Name: Richard C. Kelly
Title: Executive Vice President,
Chief Financial Officer of
New Century Energies, Inc.;
Executive Vice President of
Public Service Company of
Colorado;
Executive Vice President of
NC Enterprises
Date: March 23, 1999
16
<PAGE>
Exhibit D-3
Decision No. C98-677
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO
DOCKET NO. 97A-622G
- --------------------------------------------------------------------------------
APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO FOR (1) A CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY TO CONSTRUCT AND OPERATE A 53-MILE LONG,
24-INCH DIAMETER NATURAL GAS PIPELINE AND APPURTENANT FACILITIES FROM ITS
EXISTING CHALK BLUFFS STATION NEAR ROCKPORT, COLORADO TO AN INTERCONNECTION WITH
ITS EXISTING 24-INCH PIPELINE LOCATED ADJACENT TO THE FORT ST. VRAIN POWER PLANT
NEAR PLATTEVILLE, COLORADO; (2) AUTHORIZATION TO SELL SUCH FACILITIES, ONCE
CONSTRUCTED, TO WYCO DEVELOPMENT LLC AND TO IMMEDIATELY LEASE SUCH FACILITES
BACK UNDER A LONG-TERM LEASE; (3) A DECLARATORY RULING THAT WYCO DEVELOPMENT LLC
WILL NOT BE A PUBLIC UTILITY; AND (4) SUCH OTHER AND FURTHER RELIEF AS THE
COMMISSION MAY DEEM NECESSARY.
- --------------------------------------------------------------------------------
RULING ON APPLICATIONS FOR REHEARING, REARGUMENT, OR RECONSIDERATION
================================================================================
Mailed Date: July 15, 1998
Adopted Date: July 8, 1998
I. BY THE COMMISSION:
- -- -----------------
A. Statement
This matter comes before the Commission for consideration of
Applications for Rehearing, Rehearing, or Reconsideration ("RRR") to Decision
No. C98-556 (mailed date of June 4, 1998). In Decision No. C98-556, we granted,
with certain conditions, the application for a Certificate of Public Convenience
and Necessity ("CPCN") to construct the Front Range Pipeline by Public Service
Company of Colorado ("Public Service" or "Company"). Those conditions included
that the Front Range Pipeline be subject to stand-alone ratemaking. Public
Service and K N Energy, Inc., K N Services, Inc., and K N Wattenberg
Transmission Limited Liability Company (collectively "KN"), filed applications
for RRR. We will grant those applications, in part, and deny them, in part, as
discussed in this order.
<PAGE>
B. Discussion
1. Application for RRR by Public Service
a. Public Service argues that the Commission lacks the
authority to condition the grant of the CPCN on stand-alone ratemaking; that we
lack the authority to require the Company to change its existing tariffed rates
and services, since the present record does not indicate that those existing
tariffs are unjust and unreasonable; and that we lack the authority to direct it
to initiate a ratemaking proceeding for services provided over the Front Range
Pipeline. We reject each of these arguments.
b. With respect to the first contention, that we lack
authority to condition the CPCN on stand-alone ratemaking, Public Service itself
cites section 40-5-103, C.R.S., which expressly references the Commission's
power to "attach to the exercise of the rights" granted by a CPCN "such terms
and conditions as in the commission's judgment may be required by the public
convenience and necessity." Decision No. C98-556 explains that the application
for authority to construct the Front Range Pipeline as an addition to the
Company's existing system under rolled-in rates did not meet the requirements of
the public convenience and necessity, and the application, on that basis, would
be denied. However, we also concluded that granting the application under the
stand-alone rate conditions specified in the Decision would meet the
requirements of the public convenience and necessity. In light of these
conclusions, stand-alone ratemaking for the Front Range Pipeline is not only
reasonably and directly related to approval of the CPCN, but is, in fact, a
prerequisite for that approval. Since the conditions imposed in Decision No.
C98-556 are directly related to the authority granted in the CPCN, we reject
Public Service's first argument.
c. The Company's second and third arguments (i.e., we lack
the authority to require the Company to change its existing tariffed rates and
services, since the present record does not indicate that those existing tariffs
are unjust and unreasonable; and we lack the authority to direct it to initiate
a ratemaking proceeding) are closely related. Decision No. C98-556, of course,
does not order Public Service to change rates for its existing system, nor does
it direct the Company to initiate a proceeding to change existing tariffs. The
Decision, after explaining that the provision of service on the new pipeline
under rolled-in rates (i.e., incorporating the Front Range Pipeline into the
existing Public Service system for ratemaking purposes) would not be in the
public interest, directs that stand-alone ratemaking would enable us to grant
the application. Since a necessary element for approval of the Front Range
Pipeline is separate rates (separate from the existing
<PAGE>
system) and since there are now no existing rates for the Front Range Pipeline,
it is necessary that Public Service initiate a ratemaking proceeding as a
condition of receiving authority to construct the pipeline. In short, these
conditions are also directly and reasonably related to the grant of the CPCN
requested by Public Service, and, therefore, are prerequisites for granting the
application. As such, we have not exceeded our authority in adopting the
conditions stated in Decision No. C98-556.
d. Public Service finally seeks reconsideration of our
denial of an Allowance for Funds Used During Construction ("AFUDC") in the sales
price to WYCO Development LLC ("WYCO"). The function of AFUDC is to provide
equity between ratepayers and the utility. The Commission's past practice has
been to allow a utility to include projects under construction within its rate
base, while at the same time requiring an imputed revenue offset to prevent
current ratepayers from paying for assets which are not yet used to provide
service. A utility is then allowed to accumulate the AFUDC and include it in the
final cost of the project. Thus a utility will recover the AFUDC from future
ratepayers once the project is placed in service.
e. As explained in our Decision, we have granted a CPCN
based on a stand-alone methodology. This approach provides, among other things,
that the Front Range Pipeline will not be included in the Company's current rate
base. As such, the traditional application of the AFUDC principle is improper in
this situation. However, since investors are supplying capital to finance the
construction of the Front Range Pipeline, the Commission finds that the
financing costs1 are a cost that may be recovered from ratepayers once the
project is placed in service. Therefore, we will modify our previous ruling and
allow for the recovery of these financing costs in the sale price of the Front
Range Pipeline in the sale/leaseback arrangement.
2. Application for RRR by KN
a. KN first suggests that the requirements of section
40-5-101, C.R.S., have not been met and that our basic findings of fact do not
support the decision to grant a CPCN in this case. For the reasons stated in
Decision No. C98-556, we will not accept this argument. With the conditions
imposed in the Decision and in this
- --------
1 Conceptually, these financing costs could be called "interest during
construction." However, the Commission realizes that the Company's financing of
the project will most likely include a mix of both debt and equity. A narrow
reading of this term could exclude the equity portion of the costs. The
Commission does not intend this result. Thus we believe the term "financing
costs" could include both the interest costs associated with any debt and any
return associated with equity.
<PAGE>
order on reconsideration, the Front Range Pipeline is in the public convenience
and necessity.
b. KN's arguments are also premised upon the construction
of its Front Runner Pipeline. The Front Runner Pipeline has not been constructed
and does not provide a basis for denying the instant application.
c. As for KN's assertions that ratepayers will be harmed
by the construction of the Front Range Pipeline, we disagree. We find that the
conditions contained in our decisions in this case (e.g., stand-alone
ratemaking) provide reasonable protections for Public Service's customers.
d. KN next challenges our decision allowing Public
Service to sell the pipeline to WYCO. Again, we disagree with KN's assertions.
The modifications to the proposed sale/leaseback arrangement (Decision No.
C98-556, pages 18-20) assure full oversight of the operations of the Front Range
by this Commission, and provide adequate protection to ratepayers. With those
modifications, Public Service will retain full operational control over the
pipeline and WYCO will perform only a financing function. As such, it will not
be a regulated public utility.
e. KN also argues that Public Service's arrangement
with WYCO is anticompetitive. However, we do not find these contentions to be
persuasive. We further note that the doctrine of regulated monopoly prevails
with respect to the Commission's regulation of Public Service, and under
existing law, the Company's operation of the Front Range Pipeline, including its
rates and conditions of service, will remain fully regulated by this Commission,
and anticompetitive practices should they result, can be dealt with under that
authority. Therefore, we do not find that competitive considerations should
result in denial of the application.
3. Tap Approval
a. KN also claims that consumers served by the existing
Public Service system will experience increased unit costs due to the unloading
of the existing system by shifting volumes to the Front Range Pipeline. If
existing transportation customers shift receipt points to flow through the
proposed pipeline, yet continue to use the existing Public Service system to
deliver the gas to the customer facilities under established transportation
rates, no increase in unit costs will occur to the remaining customers.
Transportation revenues for the existing Public Service system, under the
established "postage stamp" transportation rates, would not be
<PAGE>
reduced due to a shifting of receipt locations. The transportation customers
shifting receipt locations would simply pay the new pipeline tariff rate in
addition to the existing postage stamp rate. Similarly, revenues associated with
sales gas service on the existing Public Service system will not be eroded due
to shifting of receipt points. However, if the proposed Front Range Pipeline
were to provide service directly to a customer, bypassing the existing Public
Service system that previously delivered gas to that customer, erosion of
transportation revenue would occur and unit costs to existing customers would
increase. Discounting of a customer's rate for transportation through the
existing Public Service system due to alternatives presented by the proposed
pipeline would also occur only in potential bypass situations.
b. In its application, Public service indicated that the
Front Range Pipeline was intended to deliver gas only to the existing Public
Service system and not directly to any end-use customers. Therefore, we will
modify our approval of the application here to provide that Public Service shall
obtain Commission approval for any tap on the Front Range other than taps for
the Public Service gas delivery system. To preserve future flexibility, we will
consider the procedures to be employed in connection with requests for tap
approval at the time of such requests.
4. Public Service Clarification Issues:
a. Public Service requests clarification of a number of
issues regarding the proceeding to establish rates for the upcoming Front Range
Pipeline. First, the Company requests lessened notice requirements for the Front
Range Pipeline rate proceeding. Although this request must be reasonable,
alternate notice, if appropriate, should be proposed as a motion in the rate
proceeding docket.
b. The second request for clarification is that we conduct
an expedited proceeding, and that the filing not be subject to suspension in
order to ensure that rates will be in place by November 1, 1998, the projected
start-up date for the Front Range Pipeline. Again, these issues should be
addressed as a part of the rate proceeding docket. However, we advise the
Company that it should consider the procedural option of filing initial rates
with a burden letter. Under this option, the Company, in return for a Commission
decision not to suspend the proposed rates, would commit to an investigation of
its rates at a proceeding in which it will carry the burden of proof and commit
to a refund to customers based upon the final rates established by the
Commission.
<PAGE>
c. The third request for clarification is that the record
in the present docket be accepted into the record for the Front Range Pipeline
rate proceeding. Again, although the request might be reasonable, this
suggestion should be proposed by motion in the rate proceeding docket.
d. Fourth, Public Service requests limitations on the scope
of the Front Range Pipeline rate proceeding. The Commission agrees that the rate
proceeding is not intended to result in modification to the rates, terms,
conditions, or tariffs of the existing Public Service gas delivery system. Any
allocation of costs or other factors associated with the Front Range Pipeline
rate proceeding that impact the derivation of rates for the existing system
should be included in the general rate case for the Public Service gas delivery
system, scheduled to be filed in October 1998. The scope of the Front Range
Pipeline rate proceeding shall be limited to issues that directly affect the
rates for the Front Range Pipeline.
e. The fifth request for clarification by the Company is
that the Front Range Pipeline be allowed to be operated as a "virtual" service,
to minimize the administrative burden and facility installations necessary to
operate the pipeline as a separate service. Given that pipeline deliveries are
only intended to flow into the existing gas delivery system, the Commission
recognizes that it may not be economically or administratively efficient to
require the Company to install full inlet and outlet metering on the Front Range
Pipeline, with associated nominating and balancing requirements. However, a
minimum level of measurement information is necessary to properly allocate costs
and track actual operation of the Front Range Pipeline relative to the existing
Public Service gas delivery system. Although Public Service in its application
did not propose to install facilities to measure gas flowing into the Front
Range Pipeline separately from gas flowing into its existing gas delivery system
at Chalk Bluffs, the stand-alone authority granted requires such delineation.
The Commission, therefore, finds it appropriate to require separate measurement
of all gas flowing into the Front Range Pipeline. The measurement facilities
shall be designed and operated in a manner consistent with custody transfer
measurement standards. So long as gas is only delivered from the pipeline into
the existing Public Service gas delivery system, individual outlet measurement
on the Front Range Pipeline is not required. Further, in the Front Range
Pipeline rate filing the Company shall address equity issues between its
existing gas delivery system and the Front Range Pipeline including, but not
limited to: 1) Fuel, loss, use and unaccounted for gas associated with the Front
Range Pipeline; 2) Historic north-to-south capacity
<PAGE>
from Chalk Bluffs through the existing eight-inch line and associated piping
network, given that equilibrium pressures may cause gas to flow through the
Front Range Pipeline and the existing system according to physical flow
characteristics rather than contractual relationships.
f. Finally, Public Service requests clarification of
certain rate parameters in the upcoming proceeding. The Commission agrees that
rate flexibility is consistent with the requirement that Public Service be at
risk for under-recovery of costs. However, given the lack of historical
operating data for the proposed line, rate design under an at-risk condition is
more difficult if the straight fixed-variable ("SFV") approach, implemented for
Federal Energy Regulatory Commission jurisdictional pipelines, is not used.
Without historic operating data, rate determinations based on methodologies
other than SFV will likely require assumptions on the average transportation
throughput or load factor. Given the expected complexity in evaluation and
analysis of alternate proposals, Public Service in its rate filing for the Front
Range shall include the SFV approach based on 100 percent capacity reservation,
even if it proposes or advocates other methodologies in its filing. The
Commission makes no presumption as to the proper rate design at this time, but
requires this SFV approach as an analytical tool if other rate designs are
proposed. Although the request to allow a zero minimum rate does not appear to
be unreasonable under the at-risk conditions granted, the minimum rate should be
determined as a part of the rate proceeding docket.
C. KN Motion to Waive Rule 22(b)
KN has filed a Motion to Waive Rule 22(b) and Accept for
Filing Their Tendered Response to Request for Clarification and Application for
Rehearing, Reargument, or Reconsideration of Public Service Company of Colorado.
Good grounds having been stated, we will grant the motion.
II. ORDER
- --- -----
A. The Commission Orders That:
1. The Motion to Waive Rule 22(b) and Accept for Filing Their
Tendered Response to Request for Clarification and Application for Rehearing,
Reargument, or Reconsideration of Public Service Company of Colorado filed by K
N Energy, Inc., K N Services, Inc., and K N Wattenberg Transmission Limited
Liability Company is granted.
<PAGE>
2. The Request for Clarification and Application for
Rehearing, Reargument, or Reconsideration by Public Service Company of Colorado
is granted to the extent consistent with the above discussion and is otherwise
denied.
3. The Application of the K N Group for Reconsideration,
Reargument or Rehearing is granted to the extent consistent with the above
discussion and is otherwise denied.
4. The 20-day period provided for in section 40-6-114(1),
C.R.S., within which to file applications for rehearing, reargument, or
reconsideration begins on the first day following the Mailed Date of this
Decision.
5. This Order is effective on its Mailed Date.
B. ADOPTED IN COMMISSIONERS' WEEKLY MEETING July 8, 1998.
<PAGE>
THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO
ROBERT J. HIX
VINCENT MAJKOWSKI
R. BRENT ALDERFER
<PAGE>
Exhibit D-4
Decision No. C98-840
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO
DOCKET NO. 97A-622G
- --------------------------------------------------------------------------------
APPLICATION OF PUBLIC SERVICE COMPANY OF COLORADO FOR (1) A CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY TO CONSTRUCT AND OPERATE A 53-MILE LONG,
24-INCH DIAMETER NATURAL GAS PIPELINE AND APPURTENANT FACILITIES FROM ITS
EXISTING CHALK BLUFFS STATION NEAR ROCKPORT, COLORADO TO AN INTERCONNECTION WITH
ITS EXISTING 24-INCH PIPELINE LOCATED ADJACENT TO THE FORT ST. VRAIN POWER PLANT
NEAR PLATTEVILLE, COLORADO; (2) AUTHORIZATION TO SELL SUCH FACILITIES, ONCE
CONSTRUCTED, TO WYCO DEVELOPMENT LLC AND TO IMMEDIATELY LEASE SUCH FACILITIES
BACK UNDER A LONG-TERM LEASE; (3) A DECLARATORY RULING THAT WYCO DEVELOPMENT LLC
WILL NOT BE A PUBLIC UTILITY; AND (4) SUCH OTHER AND FURTHER RELIEF AS THE
COMMISSION MAY DEEM NECESSARY.
- --------------------------------------------------------------------------------
ORDER DENYING APPLICATIONS FOR REHEARING, REARGUMENT, OR RECONSIDERATION
================================================================================
Mailed Date: August 28, 1998
Adopted Date: August 26, 1998
I. BY THE COMMISSION:
- -- -----------------
Statement
1. This matter comes before the Commission for consideration of
applications for rehearing, reargument, or reconsideration ("RRR") to Decision
No. C98-677 filed by Public Service Company of Colorado ("Public Service" or
"Company") and K N Energy, Inc.; K N Services, Inc.; and K N Wattenberg
Transmission Limited Liability Company (collectively "KN"). Now being duly
advised in the premises, we will deny both applications for RRR.
2. The application for RRR by KN is a repetition of arguments made
in its first application for RRR (to Decision No. C98-556). KN's current
application does point out that the Federal Energy Regulatory Commission
("FERC") recently issued its decision authorizing construction of KN's Front
Runner Pipeline. However, our prior holdings, in Decision Nos. C98-556 and
C98-677, that the
<PAGE>
pendency of the Front Runner proceeding at the FERC is not cause for denial of
the Company's application in this case is unaffected by the FERC's decision. The
FERC's Front Runner decision is still not final. Specifically, the decision is
still subject to requests for reconsideration and potential judicial review.
Moreover, the Front Runner Pipeline has not been constructed at this time.
Indeed the record in this case does not indicate that KN has even commenced
construction. Therefore, we affirm our prior holding that it would be
inappropriate to deny Public Service's application in this case based upon
speculation regarding construction of the Front Runner Pipeline.
3. As stated above, the KN application for RRR is merely a
repetition of prior arguments made in its first request for reconsideration. For
the reasons stated in Decision Nos. C98-556 and C98-677, KN's application for
RRR will be denied.
4. Public Service's application objects to the directive, in
Decision No. C98-677, that it install specific facilities on the Front Range
Pipeline to measure all gas flowing into the pipeline. Decision No. C98-677
(page 10) requires that the measurement facilities shall be designed and
operated "in a manner consistent with custody transfer measurement standards."
The Company argues that the requirement for such facilities is not supported by
the evidence in this case, and will result in the needless expenditure of an
additional $150,000.1 We reject this argument.
5. Our prior decisions explain that construction of the Front
Range Pipeline can be approved only on the condition of stand-alone ratemaking
for the pipeline. The Commission recognizes that shippers will likely be billed
based on nominated volumes rather than actual Front Range Pipeline flow rates.
However, the inlet measurement requirement demands that, in ratemaking
proceedings, Public Service be able to provide the Commission highly accurate
and reliable data regarding operations on Front Range (e.g., data regarding peak
day and annual volumes). While the Company's application for RRR states that
such information will be available
- --------
1 The Commission obviously opposes "needless" expenditures in any amount.
However, we note that Public Service anticipates spending approximately
$25,000,000 to construct the Front Range Pipeline. An additional expenditure of
$150,000, especially for facilities which will ensure the availability of
reliable and accurate measurement of operations on the pipeline, is relatively
minor.
<PAGE>
without the measurement facilities ordered in Decision No. C98-677, no evidence
presented in the existing record supports such statements. Further, the accuracy
of the alternate measurement facilities discussed in the Public Service pleading
is not addressed. Therefore, given the importance of the information to be
provided by the measurement facilities to future ratemaking proceedings, we will
deny the Company's application for RRR.
II. ORDER
- --- -----
A. The Commission Orders That:
1. The application for rehearing, reargument, or reconsideration by
K N Energy, Inc.; K N Services, Inc.; and K N Wattenberg Transmission Limited
Liability Company is denied.
2. The application for rehearing, reargument, or reconsideration
by Public Service Company of Colorado is denied.
3. This Order is effective on its Mailed Date.
B. ADOPTED IN COMMISSIONERS' WEEKLY MEETING August 26, 1998.
<PAGE>
THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO
ROBERT J. HIX
VINCENT MAJKOWSKI
R. BRENT ALDERFER
( S E A L )
ATTEST: A TRUE COPY
<PAGE>
Exhibit F
New Century Energies, Inc.
1225 Seventeenth Street
Denver, Colorado 80202
March 23, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: New Century Energies, Inc.
Form U-1 Application/Declaration
(File No. 70-9199)
Dear Sirs:
I refer to the Form U-1 Application/Declaration, as amended (the
"Application"), under the Public Utility Holding Company Act of 1935, as amended
(the "Act"), filed with the Securities and Exchange Commission (the
"Commission") by New Century Energies, Inc. ("NCE"), a Delaware corporation,
Public Service Company of Colorado ("PSCo"), a Colorado corporation, and NC
Enterprises, Inc. ("NC Enterprises"), a Delaware corporation. Capitalized terms
used in this letter without definition have the meanings ascribed to such terms
in the Application.
The Application seeks authorization and approval for various
transactions relating to the purchase, sale and leaseback of a 53-mile natural
gas pipeline currently under construction by PSCo (the "Transaction"). PSCo is
proposing to sell the completed pipeline to WYCO Development LLC ("WYCO"), a
newly-formed Colorado limited liability company whose members will be NC
Enterprises and an unrelated third party, and to lease the pipeline back from
WYCO under a long-term lease agreement.
I have acted as counsel for NCE, PSCo and NC Enterprises in connection
with the Application and, as such counsel, I am familiar with the corporate
proceedings taken by NCE, PSCo and NC Enterprises in connection with the
Transaction.
I am familiar with or have reviewed those corporate records of NCE,
PSCo and NC Enterprises, and such other documents as I have deemed necessary to
review as a basis for the opinions hereinafter expressed. In such review, I have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to me as originals and the conformity with the originals of all
documents submitted to me as copies.
The opinions expressed below with respect to the Transaction described
in the Application are subject to the following further assumptions and
conditions:
(a) The Transaction shall have been duly authorized and approved,
to the extent required by the governing corporate documents
and applicable state laws, by the Boards of Directors of NCE,
PSCo and NC Enterprises.
(b) The Commission shall have duly entered an appropriate order or
orders with respect to the Transaction as described in the
Application granting and permitting the Application to become
effective under the Act and the rules and regulations
thereunder.
(c) The parties shall have obtained all consents, waivers and
releases, if any, required for the Transaction under all
applicable governing corporate documents, contracts, and
agreements, debt instruments, indentures, franchises, license
and permits.
(d) No act or event other than as described herein shall have
occurred subsequent to the date hereof which wold change the
opinions expressed above.
(e) The consummation of the Transaction shall be conducted under
my supervision and all legal matters incident thereto shall be
satisfactory to me, including the receipt in satisfactory form
of such opinions of other counsel qualified to practice in
jurisdictions pertaining to the Transaction in which I am not
admitted to practice, as I may deem appropriate.
Based upon the foregoing, and subject to the assumptions and conditions
set forth herein, and having regard to legal considerations which I deem
relevant, I am of the opinion that, in the event that the proposed Transaction
is consummated in accordance with the Application:
(a) The laws of the states of Colorado and Delaware applicable to
the proposed Transaction will have been complied with.
(b) WYCO is validly formed and duly existing under the laws of the
State of Colorado.
(c) NC Enterprises will have legally acquired a membership interest in
WYCO.
(d) The consummation of the proposed Transaction will not violate
the legal rights of the holders of any securities issued by
NCE, NC Enterprises or PSCo.
I have acted as counsel for NCE, NC Enterprises and PSCo in connection
with the Application and, accordingly, this opinion is limited to actions taken
by NCE, NC Enterprises and PSCo in connection with the Transaction.
The opinion given herein are intended solely for the use of the
Commission and may not be relied upon by any third party. I hereby consent to
the use of this opinion as an exhibit to the Application.
Sincerely,
James D. Albright
<PAGE>
Exhibit 3.1
NC Enterprises, Inc.
Unaudited Consolidated Balance Sheet
(Thousands of Dollars)
December 31, 1998
Assets
Property, plant and equipment at cost $46,352
Less: accumulated depreciation 20,453
-------------
Net plant 25,899
Construction work in progress 86
-------------
-------------
Total property, plant and equipment 25,985
-------------
Investment in Yorkshire Power and other
unconsolidated subsidiaries 340,874
Other 37,022
-------------
Total investments 377,896
-------------
Cash and temporary cash investments 33,018
Accounts receivable - net 101,063
Notes receivable from associated companies 9,000
Accrued taxes receivable 9,506
Materials and supplies 3,860
Prepaid expenses and other 10,890
-------------
Total current assets 167,337
-------------
Other 52,829
-------------
Total assets $624,047
=============
Capital and Liabilities
Common stock $155,366
Retained earnings 22,036
Accumulated comprehensive income 7,764
-------------
Total common equity 185,166
Long-term debt 2,796
Notes payable to associated companies 331,131
-------------
Total capital 519,093
-------------
Noncurrent liabilities 81
-------------
Long term debt due within one year 3,571
Accounts payable 31,605
Accounts payable to associated companies 27,905
Customer deposits 694
Other 18,719
-------------
Total current liabilities 82,494
-------------
Accumulated deferred income taxes 20,717
Other 1,662
-------------
Total deferred credits 22,379
-------------
Total capital and liabilities $624,047
=============
<PAGE>
Exhibit 3.2
NC Enterprises, Inc.
Unaudited Consolidated Statement of Income
(Thousands of Dollars)
For the year ended December 31, 1998
Operating Revenues
Electric $74,517
Gas 188,205
Other 130,496
--------------
393,218
Operating Expenses
Purchased power 73,431
Cost of gas sold 175,484
Other operating and maintenance expenses 149,000
Depreciation and amortization
6,565
Taxes other than income taxes
1,288
--------------
405,768
--------------
Operating income (loss) (12,550)
Other income and deductions
Equity in earnings of Yorkshire Power and
other unconsolidated subsidiaries 32,655
Miscellaneous income and deductions - net
6,426
--------------
39,081
Interest charges 24,304
--------------
Income before income taxes
2,227
Income tax expense (benefit) (26,634)
--------------
Net income $28,861
==============
