As filed with the Securities and Exchange Commission on December 21, 2000
File No. 070-09607
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 5
TO FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Conectiv
Delmarva Power & Light Company
Atlantic City Electric Company
800 King Street
Wilmington, DE 19899
(Name of companies filing this statement and
addresses of principal executive offices)
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Conectiv
(address above)
(Name of top registered holding company parent of declarant)
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Philip S. Reese
Treasurer
Conectiv
(address above)
(Name and addresses of agents for service)
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The Commission also is requested to send copies of any
communications in connection with this matter to:
John N. Estes III Peter F. Clark
Judith A. Center General Counsel
William C. Weeden Randall V. Griffin
Skadden, Arps, Slate, Meagher & Flom LLP Senior Counsel
1440 New York Avenue, NW Conectiv
Washington, D.C. 20005 (address above)
<PAGE>
The Application/Declaration, as previously filed, is hereby amended as follows:
I. DESCRIPTION OF THE PROPOSED TRANSACTION...................................1
A. Introduction.........................................................1
B. Description of the Parties ..........................................3
C. Description of the Peach Bottom Assets...............................4
D. Background on the Transaction........................................6
E. Benefits of the Transaction..........................................7
II. FEES, COMMISSIONS AND EXPENSES...........................................12
III. APPLICABLE STATUTORY PROVISIONS..........................................12
IV. OTHER REGULATORY APPROVAL................................................13
V. PROCEDURE................................................................13
VI. EXHIBITS AND FINANCIAL STATEMENTS........................................14
A. EXHIBITS............................................................14
B. FINANCIAL STATEMENTS................................................15
VII. INFORMATION AS TO ENVIRONMENTAL EFFECT...................................16
<PAGE>
The Application/Declaration, as previously filed, is hereby amended and restated
as follows:
I. DESCRIPTION OF THE PROPOSED TRANSACTION
A. Introduction
This Form U-1 Application/Declaration ("Application/Declaration")
seeks approvals pursuant to Section 12(d), of the Public Utility Holding Company
Act of 1935, as amended (the "Act"), and Rule 44 thereunder, relating to the
sale of certain utility assets by Conectiv, to PECO Energy Company ("PECO").
Specifically, Conectiv and its subsidiaries, Delmarva Power & Light Company
("DPL") and Atlantic City Electric Company ("ACE," together with DPL and
Conectiv, "Applicants"), have proposed the sale of a 7.51-percent (164 MW)
ownership interest in the Peach Bottom Atomic Power Station Units 2 and 3
("Peach Bottom") to PECO, (the "Transaction"). PECO presently owns 42.49 percent
of Peach Bottom.
In exchange for their interests in Peach Bottom that are being sold to
PECO, ACE and DPL will each receive $2,550,000, plus 3.755 percent of the net
book value of the Nuclear Fuel Supplies as of the Closing Date and furthermore
PECO will assume various liabilities of ACE and DPL.1 The 3.755 percent of the
Nuclear Fuel Supplies which would qualify as Utility Assets (as defined in the
Act), as of the anticipated closing date would be worth approximately $10
million. It is estimated that the total proceeds from PECO to be shared by ACE
and DPL will be approximately $25.1 million. In addition, PECO will assume
essentially all of ACE and DPL's environmental and decommissioning liabilities
for Peach Bottom, in proportion to the ownership share being transferred. As
explained below, the Transaction is in the public interest and should be
approved as soon as practicable. DPL proposes to complete the sale of its
interests in Peach Bottom to PECO as soon as possible, and the Applicants thus
respectfully request Commission action on this Application/Declaration as soon
as possible after the outstanding regulatory approvals described in Item IV of
this Application/Declaration have been issued. ACE contemplates completing the
sale of its interest in Peach Bottom to PECO by the end of the second quarter of
2001 and therefore requests under Rule 24(c)(1) that the Commission authorize it
to complete the transaction by that time.
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1 Nuclear Fuel Supplies include the nuclear fuel assemblies in the
reactor core, natural uranium, converted uranium, enriched uranium and any other
form of any thereof, under contract or in inventory, and located at or in
transit to the Peach Bottom Station, as well as all nuclear fuel constituents in
all stages of the fuel cycle that are in the process of production, conversion,
enrichment or fabrication.
<PAGE>
The Transaction is part of several interrelated transactions, whereby
PECO and a non-utility affiliate of Public Service Electric and Gas Company
("PSE&G") agreed to buy the interests of ACE and DPL in the various jointly
owned nuclear plants ("Nuclear Assets").2 PECO will be purchasing a combined
7.51-percent ownership interest in Peach Bottom from ACE and DPL. The PSE&G
affiliate, PSEG Nuclear L.L.C. ("PSEG Nuclear"), also will be buying a combined
7.51-percent ownership interest in Peach Bottom from ACE and DPL.3 In addition,
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2 ACE and DPL each own a minority ownership share in Salem Units 1 &
2, Salem Peaking Unit, and Peach Bottom Units 2 and 3. Furthermore ACE is
selling its minority ownership share in Hope Creek Unit 1. Conectiv is conveying
all of its interests in the nuclear plants through a series of purchase
agreements dated as of September 27, 1999, as amended, which include agreements
by and between ACE and PSEG Power LLC (relating to the Salem Station); by and
between DPL and PSEG Power LLC (relating to Salem Station); by and between ACE
and PSEG Power LLC (relating to Hope Creek Station); by and among ACE, PECO
Energy Company and PSEG Power LLC (relating to Peach Bottom Station); and by and
among DPL, PECO Energy Company and PSEG Power LLC (relating to Peach Bottom
Station). The sales include the nuclear generating units themselves, the nuclear
decommissioning trust fund balances, nuclear fuel, and the associated interests
in land and other equipment, including the small turbine at Salem that is
primarily used for start-up and on-site power needs.
3 Public Service Enterprise Group Incorporated (PSEG) is an exempt
public utility holding company. PSEG has two principal direct wholly-owned
subsidiaries: PSE&G and PSEG Energy Holdings Inc. PSE&G, a New Jersey
corporation, is an operating public utility company engaged principally in the
transmission, distribution and sale of electric energy service and in the
transmission, distribution and sale of gas service in New Jersey. PSE&G supplies
electric and gas service in areas of New Jersey in which approximately 5.5
million people, about 70% of the State's population, reside. PSEG Power LLC
("PSEG Power") is a wholesale electric generation and trading company operating
in the Northeastern United States. PSEG Power is a wholly owned subsidiary of
Public Service Enterprise Group that ACE and DPL expect will own all of the
shares of PSEG Nuclear, PSEG Fossil LLC and PSEG Energy Resources & Trade LLC.
It is ACE and DPL's understanding that PSEG Power has designitated its
subsidiary, PSEG Nuclear, as the party which will actually receive the ownership
interests at closing. It is also ACE and DPL's understanding that PSEG Nuclear
ultimately will own all of PSE&G's nuclear facilities and will operate those
nuclear facilities for which PSE&G is currently the operator (PSE&G may continue
as operator for an interim period). PSEG Nuclear will engage only in wholesale
sales of electric power.
<PAGE>
PSEG Nuclear will be buying, in transactions that are separate from any
transaction for which this Application/Declaration seeks approval, the
additional Conectiv subsidiaries' minority ownership interests in other nuclear
plants. In each of the PSEG Nuclear transactions, however, the buyer is an
exempt wholesale generator ("EWG"). Therefore, no Commission approval is
required for those transactions under Section 32 of the Act. In contrast, PECO
is buying an ownership interest in Peach Bottom, not through an EWG, but as an
operating public utility. Commission approval under Section 12(d) of the Act
therefore is required for the sale to PECO.
The New Jersey Board of Public Utilities ("NJBPU") has approved the
sale of ACE's interest in Peach Bottom. The Pennsylvania Public Utility
Commission ("PaPUC") has approved the sale by ACE and DPL, and purchase by PECO,
of the Peach Bottom interests. The Virginia State Corporation Commission
("VSCC") has reviewed the proposed sale of DPL interests in the context of its
overall review and approval of DPL's plan for the functional separation of
generation assets from transmission and distribution assets. Furthermore,
pursuant to Section 32 of the Act, all four of the state commissions that
regulate ACE and DPL - the NJBPU, the Delaware Public Service Commission
("DPSC"), the Maryland Public Service Commission ("MPSC"), and the VSCC - have
addressed the related transactions in which an EWG owned by PSE&G will be buying
interests in this and other nuclear plants from ACE and DPL. Specifically, these
commissions have provided the necessary authorizations under Section 32 in
connection with the transfer of rate base generation facilities to EWGs. In sum,
the state commissions have been, and will continue to be, well informed
regarding the proposed Peach Bottom transaction.
B. Description of the Parties
On March 1, 1998, Conectiv became a registered holding company under
the Act. Conectiv has two operating public utility subsidiaries: ACE and DPL.
ACE is a New Jersey corporation that distributes and sells electricity at retail
in southern New Jersey. ACE's retail service is regulated by the NJBPU. DPL is a
Delaware and Virginia corporation that distributes and sells electricity at
retail in portions of Delaware, Maryland and Virginia, and gas at retail in New
Castle County, Delaware. DPL's retail service is regulated by the DPSC, MPSC,
and the VSCC.
<PAGE>
In addition, because of their ownership interest in Peach Bottom, both
ACE and DPL are subject to minimal regulation by the PaPUC. The PaPUC does not
regulate the electric rates of either ACE or DPL. Neither ACE nor DPL have any
retail utility customers in Pennsylvania, receive any gross operating revenue
for service rendered under a tariff filed with the PaPUC for intrastate service
within Pennsylvania, or operate any public utility facilities within
Pennsylvania. The PaPUC regulates ACE and DPL solely as holders of certificates
of public convenience and necessity regarding their partial interests in the
Peach Bottom plant, as well as certain other Pennsylvania generation assets.
The Federal Energy Regulatory Commission ("FERC") also has regulatory
authority over the wholesale sales and transmission activities of DPL and ACE.
Excluding off-system sales not subject to price regulation, the percentage of
electric and gas utility operating revenues regulated by each regulatory
commission for the four quarters ended September 30, 2000 was as follows: NJBPU,
43.5%; DPSC, 38.6%; MPSC, 14.7%; VSCC, 1.5%; and FERC, 1.7%. For the four
quarters ended September 30, 2000, DPL had total operating revenues of
approximately $2.2 billion, and ACE had total operating revenues of
approximately $1.1 billion.
Conectiv's total generation capacity is approximately 5,806 MW as of
September 30, 2000. The partial ownership interests in Peach Bottom being sold
to PECO provides approximately 2.8% of this capacity. DPL's and ACE's ownership
interests in the Nuclear Assets provided approximately 12.1% of Conectiv's total
installed capacity as of September 30, 2000.
PECO is a wholly-owned subsidiary of Exelon Corporation ("Exelon"), a
registered holding company under the Act, and is an electric and gas utility
serving 1.5 million electric customers in the five-county Philadelphia area and
400,000 natural gas customers in four suburban counties. PECO is one of the
nation's largest nuclear utility operators. As explained more fully in the
Commission's order authorizing Exelon's acquisition of PECO and Unicom
Corporation, PECO is undergoing a number of restructurings associated with the
realignment of Exelon's various utility and nonutility businesses following the
acquisition. Exelon Corp., Holding Co. Act Release No. 27256 (Oct. 19, 2000).
C. Description of the Peach Bottom Assets
The Peach Bottom nuclear power plant is located in York County,
Pennsylvania and has a summer capacity of 2,186 MW. ACE and DPL acquired their
interest in Peach Bottom on November 24, 1971, and they each own 164 MW, or 7.51
percent, of the plant. Conectiv as a whole therefore owns 328 MW, or 15.02
percent, half of which is being sold to PECO. The other co-owners of Peach
Bottom, PECO and PSE&G, each own approximately 42.49 percent of the facility.
<PAGE>
The following chart sets forth the original acquisition value and the
book value of ACE and DPL's interest in Peach Bottom before and after the
write-down.4
<TABLE>
<CAPTION>
Value of Peach Bottom Assets
Company Plant in Actual Book Actual Book Pro Forma
Service Value As Of Value As Of Without Third
Value ($)5 December 31, September 30, Quarter Write
1999 ($)6 2000 ($) Down in Book
Value ($)7
<S> <C> <C> <C> <C>
Delmarva Power & Light 49,513,500 4,689,000 4,108,000 80,496,900
Company (DPL)
Atlantic City Electricity 47,400,500 4,705,000 4,104,000 72,413,700
Company (ACE)
Total Conectiv 96,914,000 9,394,000 8,212,000 152,910,600
</TABLE>
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4 The net book value of Peach Bottom and other plant-related assets
including inventories were written down to their estimated fair market value
(net of estimated selling costs) due to impairment. The write-down took place in
the third quarter of 1999. The extraordinary charge related to impaired assets
was determined in accordance with Statements of Financial Accounting Standards
("SFAS") No. 121. The extraordinary charge was decreased by the regulatory asset
established for the amount of stranded costs expected to be recovered through
regulated electricity delivery rates.
5 This reflects the value recorded in 1974 on DPL and ACE's financial
statements for their respective ownership interest in Peach Bottom, as of the
in-service date of the facility.
6 This represents the 12/31/99 net book value per each Company's
financial statements which reflects a third quarter 1999 write-down to net
realizable value based on the purchase agreements of sale entered into that same
quarter. These agreements are attached hereto as Exhibit B-1 and Exhibit B-2
respectively.
7 This is a pro forma amount representing the net book value prior to
the third quarter 1999 write-down. This net book value prior to the third
quarter 1999 write-down is greater than the Plant in Service Value due to
several capital projects that have been undertaken since the Plant was put in
service.
<PAGE>
D. Background on the Transaction
As the Commission is well aware, the electric utility industry is in
the midst of a fundamental restructuring at both the federal and state levels.
The states in which Conectiv operates have been part of this effort. In
particular, New Jersey began retail choice on August 1, 1999. Delaware began
phasing in retail choice on October 1, 1999. Maryland began retail choice on
July 1, 2000. Virginia will begin phasing in retail choice on January 1, 2002.
In light of these state utility restructuring initiatives, and the
evolving competitive marketplace, Conectiv made the strategic decision to divest
a substantial portion of its baseload generation assets, including its partial
ownership in Peach Bottom. Towards this end, ACE and DPL commenced the process
of auctioning their relatively small minority interests in these generation
assets during the early part of 1999. The companies envisioned two parallel
auctions - one involving the fossil plants, and the other involving nuclear
plants. The fossil auction has concluded; purchase agreements were signed with
the winning bidder on January 18, 2000. The closing process has commenced. This
Application relates to the sale of the nuclear plant.
As a threshold matter, ACE and DPL's minority interests in the Nuclear
Assets are subject to certain conditions contained in certain agreements among
the co-owners. Pursuant to these agreements, ACE and DPL have the right to
transfer their interests in the co-owned Nuclear Assets to non-co-owners,
subject to a right of first refusal by each of the co-owners. Because of this
right, and because PECO and PSE&G already owned interests in the Nuclear Assets
and were familiar with those units, PECO and PSE&G were the most logical buyers
for ACE and DPL's minority interests.
Notwithstanding this, the sale process for the nuclear power plants
initially took the form of an auction to meet the requirements imposed upon ACE
by the NJBPU. Standards for the auction were approved orally by the NJBPU at a
meeting on September 17, 1999, followed by a written order dated January 4,
2000. While DPL was not subject to regulation of NJBPU, it nevertheless adopted
the same standards for the sale of its interest in Peach Bottom.
On August 30, 1999, before Conectiv began opening and evaluating any
bids, PECO and PSE&G submitted a comprehensive proposal to purchase ACE's and
DPL's interests in the Nuclear Assets. Specifically, PSEG Power offered to
acquire the combined ACE/DPL interests in Salem and also offered to purchase
ACE's interest in Hope Creek. PSEG Power and PECO each offered to purchase
one-half of the interests that ACE and DPL held in Peach Bottom.
<PAGE>
As a result of its analysis of the proposal, as well as an evaluation
of the prices, terms and conditions of recent comparable nuclear asset sales,
Conectiv postponed the auction and began negotiating with PECO and PSE&G
regarding the terms of an acquisition of the Peach Bottom interests. On
September 27, 1999, Conectiv reached agreement with PECO and PSE&G regarding the
terms governing the Transaction, cancelled the auction and entered into purchase
agreements between ACE and PECO and between DPL and PECO. These agreements are
attached hereto as Exhibit B-1 and Exhibit B-2 respectively.
ACE has sought approval from the NJBPU for the sale of its interests
to PECO and PSE&G, including approval of the process used to effect the sale. On
July 21, 2000, ACE received an order from the NJBPU granting these approvals. In
this order the NJBPU concluded that ACE's sale of its interests to PECO and
PSE&G reflects the full market value of those interests.
E. Benefits of the Transaction
The Transaction should be approved because it is the result of
arm's-length negotiations and is in the public interest. Conectiv explored
potential avenues for disposing of the Peach Bottom ownership interests,
including conducting the initial stages of an auction. Conectiv concluded that
the terms offered by PECO were superior to what it was likely to achieve at
auction and negotiated those terms on an arm's-length basis in order to maximize
benefits for all of Conectiv's stakeholders.
Based upon the advice of a consulting firm hired to advise the company
(which included the delivery of a fairness opinion to Conectiv's board of
directors), and that has reviewed several nuclear divestiture sales over the
past five years, management concluded that the Transaction presents both
shareholders and consumers with virtually unique benefits, in comparison to
other nuclear divestitures:
o Conectiv will avoid substantially all liability for the nuclear
decommissioning of Peach Bottom. In addition to removing its exposure to
the risk of future decommissioning costs, the Transaction will enable
Conectiv to avoid additional funding of the nuclear decommissioning trusts
which otherwise would likely have been required in a sale to a
non-co-owner.
<PAGE>
o Conectiv's long-term exposure to the risk of potentially costly
environmental clean-up liability is minimized because PECO and PSE&G will
assume essentially all environmental liabilities associated with the
Nuclear Assets.8
o Conectiv was not required by PECO to agree to any above-market purchased
power contracts. Such contracts have been required in certain nuclear
divestitures. Avoiding this burden directly benefits customers, because it
is the customers who would ultimately bear any increased costs.
o ACE, consistent with New Jersey state law, will apply the proceeds it
receives from the sale of the Nuclear Assets to partially offset stranded
costs it will recover from its retail customers in New Jersey.9
In addition to these specific advantages, the Transaction offers
substantive overall long-term benefits for Conectiv, adding new financial
strength and decreasing exposure to risk. As a result, Conectiv will be
well-positioned to compete in the energy marketplace. By selling approximately
708 megawatts of nuclear generation, Conectiv expects to raise cash for internal
uses, including debt repayment and new investments that more closely conform
with Conectiv's competitive strategy. Conectiv intends to retain certain
generation plants that it considers to be strategic to its energy business and
necessary to assure reliability for its customers as electricity markets become
more competitive.
In sum, the Transaction plainly benefits the interests that the Act
was designed to protect. It therefore should be approved as soon as practicable.
DPL plans to close its portion of the Transaction as soon as possible, and the
Applicants respectfully request Commission action on its sale to PECO as soon as
possible after the outstanding regulatory approvals described in Item IV of this
Application/Declaration have been issued. Applicants request that the Commission
reserve jurisdiction over the sale to PECO of ACE's interests in Peach Bottom.
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8 Conectiv will continue to assume liability for pre-closing offsite
environmental risks associated with the Nuclear Assets, though none have been
identified at this time.
9 The Transaction should not affect DPL's retail rates. Retail rates
in Delaware and Maryland are frozen for three to four years. The VSCC retains
jurisdiction over DPL's retail rates in Virginia. DPL will use the proceeds for
various activities consistent with its corporate strategy.
<PAGE>
F. Discussion of Rules 53 and 54
Rule 54 promulgated under the Act states that in determining whether
to approve the issue or sale of a security by a registered holding company for
purposes other than the acquisition of an Exempt Wholesale Generator ("EWG") or
a Foreign Utility Company ("FUCO"), or other transactions by such registered
holding company or its subsidiaries other than with respect to EWGs or FUCOs,
the Commission shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or a FUCO upon the registered holding company
system if Rules 53(a), (b), or (c) are satisfied. As demonstrated below, such
rules are satisfied.
Conectiv meets all of the conditions of Rule 53 under the Act, except
for Rule 53(a)(1). By Order dated August 17, 2000, Holding Company Release No.
35-27213 (the "August 17 Order"), the Commission authorized Conectiv to invest
up to $350 million ("EWG Project Limit") in EWGs. Conectiv has no investments in
FUCOs and does not propose to make any investments in FUCOs. Conectiv is
currently in compliance with the EWG Project Limit, in that its current
aggregate investment in EWGs as of September 30, 2000 equals approximately $79
million. Moreover, Conectiv will inform the Commission of its investments in
EWGs on an ongoing basis by filing with the Commission, as required by the
August 17 Order, quarterly certificates containing extensive information
specified in the August 17 Order concerning those investments. With respect to
the other requirements of Rule 53:
(i) Conectiv maintains books and records to identify investments in, and
earnings from, each EWG and FUCO in which it directly or indirectly
holds an interest.
(A) For each United States EWG in which Conectiv directly or
indirectly holds an interest:
(1) the books and records for such EWG will be kept in
conformity with United States generally accepted accounting
principles ("GAAP");
(2) the financial statements will be prepared in accordance with
GAAP; and
(3) Conectiv directly or through its subsidiaries undertakes to
provide the Commission access to such books and records and
financial statements as the Commission may request.
<PAGE>
(B) For each FUCO or foreign EWG which is a majority-owned subsidiary
of Conectiv:
(1) the books and records for such subsidiary will be kept in
accordance with GAAP;
(2) the financial statements for such subsidiary will be
prepared in accordance with GAAP; and
(3) Conectiv directly or through its subsidiaries undertakes to
provide the Commission access to such books and records and
financial statements, or copies thereof in English, as the
Commission may request.
(C) For each FUCO or foreign EWG in which Conectiv owns 50% or less
of the voting securities, Conectiv directly or through its
subsidiaries will proceed in good faith, to the extent reasonable
under the circumstances, to cause:
(1) such entity to maintain books and records in accordance with
GAAP;
(2) the financial statements of such entity to be prepared in
accordance with GAAP; and
(3) access by the Commission to such books and records and
financial statements (or copies thereof) in English as the
Commission may request and, in any event, will provide the
Commission on request copies of such materials as are made
available to Conectiv and its subsidiaries. If and to the
extent that such entity's books, records or financial
statements are not maintained in accordance with GAAP,
Conectiv will, upon request of the Commission, describe and
quantify each material variation therefrom as and to the
extent required by subparagraphs (a) (2) (iii) (A) and (a)
(2) (iii) (B) of Rule 53.
(ii) No more than 2% of Conectiv's domestic public utility subsidiary
employees will render any services, directly or indirectly, to any EWG
or FUCO in which Conectiv directly or indirectly holds an interest.
<PAGE>
(iii) Conectiv, in connection with any Form U-1 seeking approval of EWG or
FUCO financing, will submit copies of such Form U-1 and every
certificate filed pursuant to Rule 24 with every federal, state or
local regulator having jurisdiction over the retail rates of the
public utility companies in the Conectiv holding company system. In
addition, Conectiv will submit to each such commission copies of any
amendments to any Form U-1 seeking approval of EWG or FUCO financing
and any Rule 24 certificates required thereunder, as well as a copy of
Item 9 of Conectiv's Form U5S and Exhibits H and I thereof (commencing
with the Form U5S to be filed for the calendar year in which the
authorization therein requested is granted).
(iv) None of the provisions of paragraph (b) of Rule 53 render paragraph
(a) of that Rule unavailable for a transaction requiring Commission
approval for the issuance and sale of a security by Conectiv for
purposes other than the acquisition of an EWG or FUCO or other
transactions by Conectiv or its subsidiaries other than with respect
to EWGs or FUCOs.
(A) Neither Conectiv nor any subsidiary of Conectiv having a book
value exceeding 10% of Conectiv's consolidated retained earnings
is the subject of any pending bankruptcy or similar proceeding.
(B) Conectiv's average consolidated retained earnings for the four
most recent quarterly periods (-$14,989,000) represented an
increase of approximately $5,212,000 (or 26%) in the average
consolidated retained earnings from the previous four quarterly
periods (-$20,201,000).
(C) Conectiv did not incur operating losses from direct or indirect
investments in EWGs and FUCOs in 1999 in excess of 5% of
Conectiv's December 31, 1999 consolidated retained earnings.
As described above, Conectiv meets all the conditions of Rule 53(a),
except for clause (1). With respect to clause (1), the Commission determined in
the August 17 Order that Conectiv's financing of investments in EWGs in an
amount up to the EWG Project Limit would not have either of the adverse effects
set forth in Rule 53(c). As noted above, Conectiv has no investments in FUCOs
and has no plans to make any such investments.
<PAGE>
The August 17 Order was predicated, in part, upon the assessment of
Conectiv's overall financial condition which took into account, among other
factors, Conectiv's consolidated capitalization ratio and the recent growth
trend in Conectiv's retained earnings. As noted in the August 17 Order, at
December 31, 1999, Conectiv's common equity total capital capitalization ratio
("Common Equity Ratio") was 26.3% due to certain restructuring charges. As also
noted in the August 17 Order, Conectiv expects that the sale of certain
generating assets, including the Peach Bottom assets, will return its common
Equity Ration to above 30%. Applicants also noted in connection with the August
17 Order that ACE's Common Equity Ratio will fall from 37% at December 31, 1999
to 23% due to its issuance of transition bonds but that they estimate that ACE's
Common Equity Ratio will return to a level higher than 30% by December 31, 2004
as this debt is amortized. Applicants also noted that DPL's Common Equity Ratio
will fall from 36% at December 31, 1999 to approximately 26% as a result of an
intrasystem transfer of certain assets, as mandated by state regulatory
initiatives, but that planned sales of generation assets to non-affiliates will
cause DPL's Common Equity Ratio to return to above 30%. Since the date of the
August 17 Order there have been no adverse changes that would alter the premises
underlying that order.
Accordingly, since the date of the August 17 Order, the capitalization
and earnings attributable to Conectiv's investments in EWGs have not had any
adverse impact on Conectiv's financial integrity.
II. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses to be incurred, directly or
indirectly, by Conectiv or any associate company thereof in connection with the
proposed Transaction are estimated as follows:
Fees of Conectiv $ 0
Fees of outside counsel $ 55,000
Miscellaneous expenses $ 0
TOTAL $ 55,000
III. APPLICABLE STATUTORY PROVISIONS
The properties are utility assets within the meaning of the definition
in Section 2(a)(18) of the Act. Section 12(d) of the Act and Rule 44 under the
Act apply to the sale of the Peach Bottom interest in the ownership of electric
generating assets.
If the Commission considers the proposed future transactions to
require any authorization, approval or exemption, under any section of the Act
or any Rule or Regulation other than those cited herein above, such
authorization, approval or exemption is hereby requested.
<PAGE>
IV. OTHER REGULATORY APPROVAL
The Transaction is subject to approval by other federal and state
agencies. On or about December 14, 1999, Conectiv and PECO filed Pre-merger
Notification and Report Forms with the Antitrust Division of the Department of
Justice ("DOJ") and the Federal Trade Commission (the "FTC") pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"). On
January 4, 2000, Conectiv and PECO received early termination of the applicable
waiting period under the HSR Act. On October 20, 2000, PECO merged with and
became a subsidiary of Exelon, a registered holding company. As a result, PECO
is deemed to have a new "ultimate parent entity" for purposes of the HSR Act,
and this requires Conectiv and PECO to file a new Pre-Merger Notification and
Report Forms with the DOJ and FTC. Conectiv and PECO have made this filing and
the applicable waiting period was terminated on December 5, 2000.
The FERC has approved the Transaction. In addition, the PaPUC has
approved the purchase by PECO of interests of ACE and DPL. The VSCC has reviewed
the Transaction in the broader context of considering an overall plan for the
functional separation of generation, transmission and distribution activities
and has approved of the Transaction. The NJBPU must approve the sale of ACE's
interest in Peach Bottom. It issued its approval on July 21, 2000. Copies of all
of these applications and orders are attached as exhibits.
The Nuclear Regulatory Commission ("NRC") approved the Transaction on
April 21, 2000. This approval was granted based on the assumption that the
transfers by DPL and ACE would close simultaneously. On October 10, 2000,
requests were filed with the NRC seeking, among other things, permission to
transfer DPL's interests in Peach Bottom prior to the transfer of ACE's
interests. Copies of these requests are attached as exhibits. The NRC staff has
required a public notice and 30-day comment period in connection with the
requested changes. The comment period will expire on December 27, 2000. A copy
of NRC's action on the requested changes will be filed as an amendment to this
Application/Declaration.
Except as stated above, no state or federal regulatory agency other
than the Commission under the Act has jurisdiction over the Transaction.
V. PROCEDURE
The Commission issued a notice in this proceeding on April 14, 2000
and requested that interested persons wishing to comment or request a hearing on
the Application/Declaration submit their views to the Secretary of the
Commission by May 9, 2000. No comments were submitted to the Secretary by that
date or subsequently.
Conectiv (1) waives a recommended decision by a hearing officer or
other responsible officer of the Commission; (2) consents that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and (3) requests that there be no waiting period between the
issuance of the Commission's order and its effectiveness.
VI. EXHIBITS AND FINANCIAL STATEMENTS
A. EXHIBITS
A-1 Not Applicable........................................................
B-1 Purchase Agreement By And Among Atlantic City Electric Company, PECO
Energy Company and PSEG Power LLC, Dated as of September 27, 1999
(previously filed)....................................................
B-2 Purchase Agreement By And Among Delmarva Power & Light Company, PECO
Energy Company and PSEG Power LLC, Dated as of September 27, 1999
(previously filed)....................................................
B-3 Amendment to Purchase Agreement By And Among Atlantic City Electric
Company, PECO Energy Company and PSEG Power LLC, Dated as of October
3, 2000...............................................................
B-4 Amendment to Purchase Agreement By And Among Delmarva Power & Light
Company, PECO Energy Company and PSEG Power LLC, Dated as of October
3, 2000...............................................................
C-1 Not Applicable........................................................
D-1 NJ State Application (previously filed)...............................
D-2 NJ State Order........................................................
D-3 PA State Application (previously filed)...............................
D-4 PA State Order (previously filed).....................................
D-5 VA State Application (previously filed)...............................
D-6 VA State Order........................................................
D-7 FERC Application (previously filed)...................................
D-8 FERC Order (previously filed).........................................
D-9 NRC Application (previously filed)....................................
D-10 NRC Order (previously filed)..........................................
D-11 FTC Hart-Scott-Rodino Application (previously filed)..................
D-12 FTC Hart-Scott-Rodino Approval (previously filed).....................
D-13 NRC Application.......................................................
D-14 NRC Order (to be filed by amendment)..................................
E-1 Not Applicable........................................................
F-1 Opinions of Counsel...................................................
G-1 Not Applicable........................................................
H-1 Not Applicable........................................................
I-1 Proposed Form of Notice (previously filed)............................
B. FINANCIAL STATEMENTS
FS-1 Delmarva Power & Light Company Pro Forma Consolidated Statements of
Income................................................................
FS-2 Delmarva Power & Light Company Pro Forma Consolidated Balance
Sheets................................................................
FS-3 Atlantic City Electric Company Pro Forma Consolidated Statements of
Income................................................................
FS-4 Atlantic City Electric Company Pro Forma Consolidated Balance
Sheets................................................................
FS-5 Conectiv Pro Forma Consolidated Statements of Income..................
FS-6 Conectiv Pro Forma Consolidated Balance Sheets........................
FS-7 Conectiv Consolidated Financial Data Schedule (Exhibit FS-3 to
Conectiv's Post-Effective Amendment No. 12 to Form U-1 Declaration
under The Public Utility Holding Company Act of 1935, File No.
070-09095, and incorporated herein by reference)......................
FS-8 Notes to Financial Statements.........................................
There have been no material changes, not in the ordinary course of
business, since the date of the financial statements filed herewith.
VII. INFORMATION AS TO ENVIRONMENTAL EFFECT
The proposed transactions do not involve major federal action having a
significant effect on the human environment. No other federal agency has
prepared or is preparing an environmental impact statement with respect to the
transaction.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies
have duly caused this amended Application/Declaration to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: December 21, 2000
Conectiv
/s/ Philip S. Reese
----------------------------------------
By: /s/ Philip S. Reese
Title: Treasurer
Delmarva Power & Light Company
/s/ Philip S. Reese
----------------------------------------
By: /s/ Philip S. Reese
Title: Treasurer
Atlantic City Electric Company
/s/ Philip S. Reese
----------------------------------------
By: /s/ Philip S. Reese
Title: Treasurer
