(As filed May 3, 1999)
File No. 70-[____]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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New Century Energies, Inc.
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
or Declaration to:
William M. Dudley, Esq. William T. Baker, Jr., Esq.
New Century Energies, Inc. Thelen Reid & Priest LLP
1225 17th Street, Suite 600 40 West 57th Street
Denver, Colorado 80202-5533 New York, New York 10019
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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1.1. Background. New Century Energies, Inc. ("NCE") is a
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registered 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. These subsidiaries together serve
approximately 1.6 million electric customers in parts of
Colorado, Texas, New Mexico, Wyoming, Oklahoma, and Kansas and
approximately 1 million gas customers in parts of Colorado and
Wyoming.
NCE also engages through subsidiaries in various other
energy-related and non-utility businesses. NC Enterprises, Inc.
("Enterprises"), a wholly-owned non-utility subsidiary of NCE,
serves as the intermediate holding company for most of NCE's non-
utility subsidiaries and investments. These include New Century
International, Inc., which indirectly holds NCE's interest in
Yorkshire Electricity Group plc, a regional electric distribution
company serving parts of England; e prime, inc., which directly
and indirectly through other subsidiaries sells energy-related
products and services and engages in brokering, marketing and
trading of electricity and natural gas; Quixx Corporation, which
is engaged directly and through other subsidiaries in development
activities relating to "exempt wholesale generators" ("EWGs") and
exempt "foreign utility companies" ("FUCOs"), as defined in
Sections 32 and 33 of the Act, respectively, "qualifying
facilities," as defined under the Public Utility Regulatory
Policies Act of 1978, as amended, and other energy related
projects; Utility Engineering Corporation, which provides general
engineering, development, design, construction and other services
to both associate and non-associate companies; The Planergy
Group, Inc. and New Century-Cadence, Inc., which engage
exclusively in activities permitted under Rule 58; and Natural
Fuels Corporation, an 83.63%-owned subsidiary of Enterprises,
which is engaged in the commercialization of compressed natural
gas as a motor fuel.
1.2 General Description of Authority Sought. Enterprises,
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through a new wholly-owned subsidiary to be named New Century O&M
Services, Inc. ("NCO&M"), or one or more additional subsidiaries
of either Enterprises or NCO&M, herein requests authority to bid
on and acquire facilities, systems and related equipment, tools
and inventories owned by the federal government on military
enclaves and that are used exclusively in connection with the
delivery and distribution of electricity, natural gas, water
(including potable water and hot and chilled water), steam and
other energy products and to collect, treat, process and dispose
of solid and liquid wastes (collectively, "Military Base
Assets").(2) NCO&M proposes to bid on such assets when
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1. See New Century Energies, Inc., 65 SEC Docket 277 (August 1,
1997) (the "Merger Order").
2. Because Enterprises cannot determine at this time whether
legal or business considerations would necessitate separating the
ownership and/or operation of different groups of Military Base
Assets in different legal entities, it seeks to have the
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offered for sale by the federal government pursuant to the U.S.
Department of Defense's congressionally-mandated privatization
efforts, (3) and, if successful in acquiring such Military
Base Assets, to operate, maintain, and make capital improvements
to such assets.
NCO&M requests authorization to invest up to $150 million
(the "Investment Limitation") in Military Base Assets in one or
more transactions from time to time through December 31, 2003
(the "Authorization Period"). Such Military Base Assets may be
acquired for cash or pursuant to the terms of long-term services
agreements entered into with the Department of Defense (or a
military department thereof) under which NCO&M may agree to
credit some or all of the stated purchase price for any Military
Base Assets against future payments for essential services
provided by NCO&M. Initially, NCO&M proposes to bid on and, if
successful, acquire certain facilities, as more particularly
described below, that are located at the U.S. Department of the
Army's Fort Carson Post, which is located near Colorado Springs,
Colorado. The Applicants request that the Commission reserve
jurisdiction over the acquisition of any additional Military Base
Assets by NCO&M pending completion of the record in this
proceeding. The Applicants undertake to file a post-effective
amendment in this proceeding describing other Military Base
Assets that NCO&M may seek to acquire in the future.
1.3 Description of Fort Carson Post Proposal. NCO&M
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intends to submit a bid in response to a request for proposals by
the U.S. Department of the Army to acquire the electrical and
natural gas distribution facilities that are located at the Fort
Carson Post, located just outside Colorado Springs, about 60
miles south of Denver.(4) The Fort Carson Post covers an
area of more than 137,000 acres and includes approximately 1,860
buildings. The total daytime population of the base (active duty
military personnel, their dependents and civilian workers) is
estimated at 25,000. The electrical distribution system on the
base is served through two substations with roughly 129 circuit
miles of overhead primary distribution, approximately 18 circuit
miles of underground primary distribution, and approximately 2300
street lights. The natural gas distribution system serves
approximately 1,300 buildings throughout the base. It consists
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flexibility to organize one or more additional subsidiaries from
time to time for the purpose of carrying out the transactions
described in this Application. Accordingly, references
throughout this Application to NCO&M should be construed to
include such additional subsidiaries as Enterprises or NCO&M may
form specifically and solely for the purposes of acquiring,
owning, operating, improving and financing Military Base Assets.
3. The current military base privatization efforts by the
Department of Defense are in response to legislation, 10 U.S.C.A.
S2688 (1998), in which Congress granted the Secretary of a
military department the authority to sell electric, gas, water
and other military base distribution systems to private parties
with a view to achieving cost reductions in essential services on
military bases and a significant improvement and upgrading of
such systems by qualified parties more experienced in the
ownership, operation, and improvement of such facilities.
4. The Department of the Army also invited proposals for the
purchase of the water system at the Fort Carson Post. NCO&M's
bid does not cover the water system.
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of approximately 306,214 feet of pipe ranging from 3/4" to 10"
diameter, and includes associated metering and pressure reduction
facilities. A draft of NCO&M's bid proposal is filed
confidentially pursuant to Rule 104 as Exhibit B hereto.
If successful, NCO&M will enter into a services agreement
with the federal government having a minimum term of ten years
pursuant to which NCO&M would provide natural gas and electric
distribution services on the Fort Carson Post. As a part of the
agreement, NCO&M would agree to provide all necessary labor,
materials, tools and equipment necessary to operate, maintain,
repair, upgrade and improve the distribution systems. NCO&M
would not be able to sell the distribution systems without first
offering the federal government the option to repurchase them.
NCO&M may not use the systems to serve customers outside the Fort
Carson Post without the permission of the federal government. In
addition, any service offered to customers outside the base may
be subject to regulation by the Public Utilities Commission
of Colorado ("Colorado PUC").(5) NCO&M represents that it
will not offer electric or gas service to customers outside the
Fort Carson Post without first obtaining the further order of the
Commission in this proceeding.
NCO&M will hire and maintain a permanent on-site staff at
the Fort Carson Post of approximately nine individuals,
consisting of a manager, five linemen, two gas service
specialists and one operations technician. NCO&M will utilize
subcontractors, as needed, including PSCo, to balance the
workload and workforce. As indicated, one of the objectives of
the Department of Defense in privatizing military base
installations is to facilitate the improvement and upgrading of
existing facilities by private companies with considerable
experience in operating, maintaining and improving similar types
of assets. Thus, under the agreement that NCO&M will enter into
with the U.S. government, it is contemplated that NCO&M would be
obligated to conduct a complete physical inspection and survey of
the acquired distribution systems within the first six months of
the term of the contract with a view to identifying those
components of the systems requiring repair, replacement or
upgrade in order to ensure safety and quality of service. Such
inspections and surveys would thereafter be conducted annually
during the term of the agreement. As part of its bid proposal,
NCO&M has already identified certain components of the systems
that potentially require upgrade and/or replacement and has
prepared a conceptual 5-year capital improvement plan.
1.4 Source of Financing. By order dated April 7, 1999 in
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File No. 70-9397 (Holding Company Act Release No. 27000) (the
"Financing Order"), NCE is currently authorized to issue common
stock, short-term and long-term debt and guarantees in specified
amounts and, to the extent not exempt, to engage in intra-system
financing, from time to time through December 31, 2001. NCE
proposes to use the proceeds of securities issuances and
guarantees as authorized under the Financing Order or in
subsequent orders for the purpose of financing the purchase and
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5. NCO&M has received an opinion of counsel that it will not be
subject to regulation by the Colorado PUC as a public utility by
reason of acquiring, owning and operating the Fort Carson Post
distribution facilities.
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operation of Military Base Assets, subject to the limitations and
restrictions contained in the Financing Order or subsequent
orders.
In turn, Enterprises and NCO&M may issue debt or equity
securities of any type, including guarantees, as appropriate,
from time to time during the Authorization Period to finance the
acquisition and operation of Military Base Assets. Guarantees
may be issued by Enterprises or NCO&M or by any existing or new,
direct or indirect, subsidiary of NCO&M. Such guarantees could
be in respect of securities issued by any existing or new, direct
or indirect, special purpose subsidiary of NCO&M organized
specifically for the purpose of acquiring, owning and operating
Military Base Assets. The terms and conditions of any securities
(including guarantees) issued by Enterprises and NCO&M or any
subsidiary of NCO&M, to the extent not exempt under Rule 52
and/or Rule 45(b), shall comply with the limitations set forth in
the Financing Order.
1.5 Provision of Support Services by PSCo. As indicated,
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it is contemplated that NCO&M will utilize subcontractors to the
extent necessary to assist its permanent workforce at the Fort
Carson Post. NCO&M will also purchase administrative and
management services from New Century Services, Inc. ("NC
Services") pursuant to the standard NCE system Services Agreement
which the Commission has previously approved as a part of the
Merger Order. NCO&M also intends to enter into a support
services agreement with PSCo pursuant to which NCO&M may request
PSCo to provide personnel and other resources as are needed, from
time to time, to assist in such areas as making the physical
inspections and surveys of the distribution systems that are
described above, and maintenance, repair and improvement
activities. NCO&M will utilize a standard work order procedure
to request support services from PSCo.
An important consideration in the Department of the Army's
evaluation of bids received for the Fort Carson Post facilities
will be the experience and resources of the bidder and its
affiliates in the areas of electric and gas system operation,
maintenance and repair. Clearly, as a combination gas and
electric company that has operated in Colorado for over one
hundred years, PSCo has the requisite competencies. Further,
PSCo provides utility service in close proximity to the Fort
Carson Post. Hence, it would not be a significant burden to PSCo,
in terms of the availability or personnel and other resources, to
support NCO&M's operations.
PSCo will be reimbursed promptly for its costs incurred in
connection with rendering any services to NCO&M or its
subsidiaries. PSCo will utilize cost accounting procedures
designed to identify promptly all direct and indirect costs,
including overheads, which are applicable to the work being
performed by or with PSCo personnel, material or other assets.
All transactions between NCO&M and PSCo will be performed at cost
in compliance with Section 13 and Rules 90 and 91. Finally,
NCO&M will indemnify and hold PSCo harmless against all claims or
liabilities that may be incurred in connection with providing any
services to NCO&M.
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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 $10,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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3.1 General. Sections 9(a) and 10 of the Act are
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applicable to the acquisition by Enterprises of the securities of
NCO&M and by NCO&M of Military Base Assets.
The provision of support services by PSCo to NCO&M is
subject to Section 13(b) of the Act, but may be exempt pursuant
to Rules 87(a)(3), 87(b)(1) or 87(b)(2), as applicable. All such
services will be performed at cost, determined in accordance with
Rules 90 and 91.
3.2 Standards of Approval under Section 10. The
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transactions proposed herein involve 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(c) are met 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.(6) 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.(7)
The Fort Carson Post assets to be acquired by NCO&M consist
of electric and natural gas distribution facilities and
associated equipment. Under normal circumstances, absent a
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6. As part of the Merger Order, the Commission made findings
under Section 11(b)(1) permitting the retention of PSCo's gas
utility business as an additional integrated system.
7. See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-65
(1970), aff'd 444 F.2d 913 (D.C. Cir. 1971).
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statutory exemption, gas and electric distribution facilities
would be considered "utility assets" rather than an "interest in
[another] business" for purposes of Sections 9(a)(1) and 10 of
the Act, and the owner or operator of such facilities would be an
"electric utility company" or "gas utility company," as defined
in Section 2(a)(3) or Section 2(a)(4), as applicable. In this
case, however, the Fort Carson Post distribution facilities will
be dedicated to providing service exclusively within the
boundaries of a military base and the distribution services will
be provided exclusively to the federal government. In this
regard, the federal government is exempt from all provisions of
the Act pursuant to Section 2(c), which provides that :
No provision in this title shall apply to, or be deemed to
include, the United States, a State, or any political
subdivision of a State, or any agency, authority, or
instrumentality of any one or more of the foregoing, or any
corporation which is wholly-owned, directly or indirectly by
any one or more of the foregoing, or any officer, agent, or
employee of any of the foregoing acting as such in the
course of his official duty, unless such provision makes
specific reference thereto.
Although NCO&M does not fall within any of the enumerated
categories of persons in Section 2(c), given that the Fort Carson
Post facilities are located exclusively within the base and will
be dedicated to serving a single customer -- the federal
government -- the Commission could conclude that NCO&M is
entitled to the benefit of the exemption under Section 2(c). The
Commission could also conclude the NCO&M will function as an
agent or instrumentality of the federal government in connection
with the Fort Carson Post privatization.
The Commission has not previously addressed the status of a
private company which owns and operates electric or gas
distribution facilities located entirely inside a federal
military enclave and which provides distribution services
exclusively to the federal government. However, in a recent no-
action letter concerning the privatization of similar
distribution facilities located on a different military base, the
Division of Investment Management agreed not to recommend any
enforcement action under the Act, including Section 2(a)(3) and
Section 2(a)(4), against a subsidiary of an exempt holding
company which is proposing to bid on and acquire such assets.
See Enron Federal Solutions, Inc., SEC No-Action Letter dated
April 8, 1999, 1999 SEC No-Act. LEXIS 414. The facts and
circumstances of the present case, including the description and
uses of the Fort Carson Post distribution facilities and the
contractual undertakings between NCO&M and the Department of the
Army, are legally and factually indistinguishable from those
described in the Enron Federal Solutions letter.
Although legal and policy considerations strongly support
the conclusion that the Fort Carson Post distribution facilities
are not "utility assets," and that NCO&M therefore will not be an
"electric utility company" or gas utility company" within the
meaning of the Act, the facilities are nevertheless physically
and functionally identical to the electric and gas distribution
facilities owned and operated by PSCo which, of course, is a
public utility company. NCO&M's business, therefore, will be
"functionally related" to (and in may respects indistinguishable
from) the primary public utility business of PSCo and NCE's other
public utility subsidiaries.
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The Fort Carson Post facilities are also physically
proximate to PSCo's service area and may be operated and
maintained with some assistance provided by PSCo. However, it is
submitted that the proximity of any Military Base Assets to the
electric or gas service territory of NCE's operating subsidiaries
is irrelevant in determining whether the standards of Section
11(b)(1) will be met. In this regard, it is important to note
that, in promulgating Rule 58, which, subject to certain
limitations, allows a registered holding company to acquire the
securities of specified categories of "energy-related companies"
operating within the United States, the Commission declined to
limit the permitted energy-related activities to a registered
holding company's service territory or impose limits on
transactions with non-associate companies, as it had done in
earlier orders. Instead, the Commission focused only on whether
the permitted activities under Rule 58 are themselves so closely
related to the core operations of the registered holding company
system that they may be deemed to be "in the ordinary course of
business" of a registered holding company or otherwise
appropriate for participation by registered holding companies.(8)
For the same reason, there should be no geographic
limitation on NCO&M's ownership or operation of Military Base
Assets.
3.3 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 EWG or 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" (as defined in Rule 53(a)(1)) in EWGs and
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8. See Release Adopting Final Rule (Rule 58), 63 SEC Docket
2211 (February 14, 1997), pp. 2213 - 2216. Although the
ownership of electric and gas distribution facilities, as such,
is not permitted under Rule 58, the acquisition and operation of
many of the types of facilities (e.g., steam, hot water, cold
water, and wastewater treatment facilities) at military base
sites that are the subject of privatization efforts by the
federal government would be covered by Rule 58. The Commission
has also previously authorized registered holding companies to
acquire, own and operate such facilities, without geographic
limitation. See e.g., Cinergy Corp., et al., 63 SEC Docket 2022
(February 7, 1997).
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FUCOs exceeds 50% of its "consolidated retained earnings" (also
as defined in Rule 53(a)(1)). However, by order dated February
26, 1999, the Commission has authorized NCE to finance
investments in EWGs and FUCOs in an amount up to 100% of NCE's
"consolidated retained earnings."(9) NCE's "aggregate
investment" 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 53.8% of NCE's "consolidated retained
earnings"for the four quarters ended December 31, 1998. At the
present time, therefore, NCE satisfies all of the requirements of
Rule 53(a), as modified by the Commission's order of February 26,
1999.
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 Enterprises or its subsidiaries in assets that will be
incidental and appropriate to the conduct of businesses in the
United States that are closely related to the core operations of
NCE's existing utility and non-utility subsidiaries, and, in
addition, will provide a material benefit to the federal
government.
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.
Additionally, NCE believes that its 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.
ITEM 4. REGULATORY APPROVALS.
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No state commission and no federal commission, other than
this Commission, has jurisdiction over the proposed transactions.
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
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9. See New Century Energies, Inc., 69 SEC Docket 646.
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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.
---------------------------------
A. EXHIBITS.
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A None.
B Draft of Technical Proposal of New Century O&M
Services, Inc. for Privatization of the Natural
Gas and Electric Distribution Systems at Fort
Carson Post, Colorado. (To be filed by
amendment - confidential treatment requested
pursuant to Rule 104) (Paper format filing).
C None.
D None.
E None.
F Opinion of Counsel. (To be filed by amendment).
G Financial Data Schedule Per-Book NCE.
(Incorporated by reference to Exhibit 27 to the
Annual Report on Form 10-K of NCE for the year
ended December 31, 1999) (File No. 1-12927).
H Proposed Form of Federal Register Notice.
B. FINANCIAL STATEMENTS.
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1.1 Balance Sheet of NCE and consolidated
subsidiaries, as of December 31, 1998
(incorporated by reference to the Annual Report on
Form 10-K of NCE for the year ended December 31,
1998) (File No. 1-12927).
1.2 Statement of Income of NCE and consolidated
subsidiaries, as of December 31, 1998
(incorporated by reference to the Annual Report on
Form 10-K of NCE for the year ended December 31,
1998) (File No. 1-12927).
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2.1 Balance Sheet of NC Enterprises, Inc. and
subsidiaries, consolidated, as of December 31,
1998. (To be filed by amendment).
2.2 Statement of Income of NC Enterprises, Inc. and
subsidiaries, consolidated, as of December 31,
1998. (To be filed by amendment).
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 statement to be signed on their behalf by the
undersigned thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
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
NC Enterprises, Inc.
Date: May 3, 1999
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EXHIBIT INDEX
Exhibit Description
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H Proposed Form of Federal Register Notice.
EXHIBIT H
PROPOSED FORM OF FEDERAL REGISTER NOTICE
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
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Filings under the Public Utility Holding Company Act of 1935, as
amended ("Act")
May , 1999
--
Notice is hereby given that the following filing(s) has/have
been made with the Commission pursuant to provisions of the Act
and rules promulgated thereunder. All interested persons are
referred to the application(s) and/or declaration(s) for complete
statements of the proposed transaction(s) summarized below. The
application(s) and/or declaration(s) and any amendments thereto
is/are available for public inspection through the Commission's
Office of Public Reference.
Interested persons wishing to comment or request a hearing
on the application(s) and/or declaration(s) should submit their
views in writing by , 1999 to the Secretary,
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Securities and Exchange Commission, Washington, D.C. 20549, and
serve a copy on the relevant applicant(s) and/or declarant(s) at
the address(es) as specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate)
should be filed with the request. Any request for hearing shall
identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or
order issued in the matter. After , 1999, the
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application(s) and/or declaration(s), as filed or as amended, may
be granted and/or permitted to become effective.
* * * * * *
NEW CENTURY ENERGIES, INC., et al. (70-[ ])
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New Century Energies, Inc. ("NCE") and its wholly-owned
non-utility subsidiary, NC Enterprises, Inc. ("Enterprises"),
1225 17th Street, Denver, Colorado 80202-5533, have filed an
application or declaration pursuant to Sections 9 and 10 of the
Act and Rule 54 thereunder. Enterprises, through a new
wholly-owned subsidiary to be named New Century O&M Services,
Inc. ("NCO&M"), or one or more additional subsidiaries of either
Enterprises or NCO&M, is requesting authority to bid on and
acquire facilities, systems and related equipment, tools and
inventories owned by the federal government on military enclaves
which are used exclusively in connection with the delivery and
distribution of electricity, natural gas, water (including
potable water and hot and chilled water), steam and other energy
products and to collect, treat, process and dispose of solid and
liquid wastes (collectively, "Military Base Assets"). NCO&M
proposes to bid on such assets when offered for sale by the
federal government pursuant to the U.S. Department of Defense's
congressionally-mandated privatization efforts,1 and, if
successful in acquiring such Military Base Assets, to operate,
maintain, and make capital improvements to such assets.
NCO&M requests authorization to invest up to $150 million
(the "Investment Limitation") in Military Base Assets in one or
more transactions from time to time through December 31, 2003
(the "Authorization Period"). Such Military Base Assets may be
acquired for cash or pursuant to the terms of long-term services
agreements entered into with the Department of Defense (or a
military department thereof) under which NCO&M may agree to
credit some or all of the stated purchase price for any Military
Base Assets against future payments for essential services
provided by NCO&M. Initially, NCO&M proposes to bid on and, if
successful, acquire certain facilities, as more particularly
described below, that are located at the U.S. Department of the
Army s Fort Carson Post, which is located near Colorado Springs,
Colorado. The applicants request that the Commission reserve
jurisdiction over the acquisition of any additional Military Base
Assets by NCO&M pending completion of the record in this
proceeding. The applicants undertake to file a post-effective
amendment in this proceeding describing other Military Base
Assets that NCO&M may seek to acquire in the future.
The applicants that NCO&M intends to submit a bid in
response to a request for proposals by the U.S. Department of the
Army to acquire the electrical and natural gas distribution
facilities that are located at the Fort Carson Post, located just
outside Colorado Springs, about 60 miles south of Denver.2 The
Fort Carson Post covers an area of more than 137,000 acres and
includes approximately 1,860 buildings. The total daytime
population of the base (active duty military personnel, their
dependents and civilian workers) is estimated at 25,000. The
electrical distribution system on the base is served through two
substations with roughly 129 circuit miles of overhead primary
distribution, approximately 18 circuit miles of underground
primary distribution, and approximately 2300 street lights. The
natural gas distribution system serves approximately 1,300
buildings throughout the base. It consists of approximately
306,214 feet of pipe ranging from 3/4" to 10" diameter, and
includes associated metering and pressure reduction facilities.
--------------
1. The current military base privatization efforts by the
Department of Defense are in response to legislation, 10 U.S.C.A.
Section 2688 (1998), in which Congress granted the Secretary of a
military department the authority to sell electric, gas, water
and other military base distribution systems to private parties
with a view to achieving cost reductions in essential services on
military bases and a significant improvement and upgrading of
such systems by qualified parties more experienced in the
ownership, operation, and improvement of such facilities.
2. The Department of the Army also invited proposals for the
purchase of the water system at the Fort Carson Post. NCO&M's
bid does not cover the water system.
<PAGE>
If successful, NCO&M will enter into a services agreement
with the federal government having a minimum term of ten years
pursuant to which NCO&M would provide natural gas and electric
distribution services on the Fort Carson Post. As a part of the
agreement, NCO&M would agree to provide all necessary labor,
materials, tools and equipment necessary to operate, maintain,
repair, upgrade and improve the distribution systems. NCO&M
would not be able to sell the distribution systems without first
offering the federal government the option to repurchase them.
NCO&M may not use the systems to serve customers outside the Fort
Carson Post without the permission of the federal government.
NCE and, to the extent not exempt pursuant to Rules 52
and/or 45(b), as applicable, Enterprises and NCO&M, will issue
debt and equity securities and guarantees for the purpose of
financing the acquisition and operation of any Military Base
Assets in accordance with the authority granted by the
Commission's order of April 7, 1999 in File No. 70-9397 (Holding
Company Act Release No. 27000).
It is stated that NCO&M may utilize subcontractors to the
extent necessary to assist its permanent workforce of
approximately nine employees at the Fort Carson Post. NCO&M will
also purchase administrative and management services from New
Century Services, Inc. pursuant to the standard NCE system
Services Agreement. NCO&M also intends to enter into a support
services agreement with Public Service Company of Colorado
("PSCo"), a public-utility subsidiary of NCE, pursuant to which
NCO&M may request PSCo to provide personnel and other resources
as are needed, from time to time, to assist in such areas as
making physical inspections and surveys of the Fort Carson
distribution systems and maintenance, repair and improvement
activities. NCO&M will utilize a standard work order procedure
to request support services from PSCo. PSCo will be reimbursed
promptly for its costs incurred in connection with rendering any
services to NCO&M or its subsidiaries. PSCo will utilize cost
accounting procedures designed to identify promptly all direct
and indirect costs, including overheads, which are applicable to
the work being performed by or with PSCo personnel, material or
other assets. It is stated that all transactions between NCO&M
and PSCo will be performed at cost in compliance with Section 13
of the Act and Rules 90 and 91. Finally, NCO&M will indemnify
and hold PSCo harmless against all claims or liabilities that may
be incurred in connection with providing any services to NCO&M.
The applicants state that the acquisition of electric or gas
distribution facilities that are located on a military
reservation and which are used exclusively for the purpose of
rendering service to the federal government should, for purposes
of Sections 9(a) and 10 of the Act, be deemed to be an
acquisition of an interest in an "other" (i.e., non-utility)
business, rather than of utility assets, and that NCO&M should
not be deemed to be an "electric utility company" or a "gas
utility company" solely by reason of owning or operating such
facilities. In support of this contention, the applicants state
that the federal government is exempt from all provisions of the
Act pursuant to Section 2(c) of the Act,3 and that the Military
Base Assets will continue to be dedicated solely and exclusively
to serving the needs of the federal government and will not be
used to serve any customers outside a military base. Thus, the
applicants assert that the Commission should conclude that NCO&M
is entitled to the benefit of the federal government's exemption
under Section 2(c), and/or that it will serve as an agent or
instrumentality of the federal government within the meaning of
Section 2(c). The applicants note that the Division of
Investment Management recently agreed not to recommend any
enforcement action under the Act, including Section 2(a)(3) or
Section 2(a)(4), against a subsidiary of an exempt holding
company which is proposing to bid on and acquire similar assets
at a different military installation. See Enron Federal
Solutions, Inc., SEC No-Action Letter dated April 8, 1999, 1999
SEC No-Act. LEXIS 414. The facts presented in that letter, it is
asserted, are indistinguishable from those presented in the
present application or declaration.
Viewed as a "non-utility" interest, the applicants assert
that the ownership and/or operation of Military Base Assets is a
business which is incidental and related to NCE's primary
electric and gas utility operations and is therefore permitted
under the standards of Section 11(b)(1).
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3. Section 2(c) of the Act provides that:
No provision in this title shall apply to, or be deemed to
include, the United States, a State, or any political
subdivision of a State, or any agency, authority, or
instrumentality of any one or more of the foregoing, or any
corporation which is wholly-owned, directly or indirectly by
any one or more of the foregoing, or any officer, agent, or
employee of any of the foregoing acting as such in the
course of his official duty, unless such provision makes
specific reference thereto.
