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File No. 70-XXXX
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Conectiv
Conectiv Energy Holding Company
Atlantic City Electric Company
ACE REIT, Inc.
Conectiv Atlantic Generation, LLC
Delmarva Power & Light Company
Conectiv Delmarva Generation, Inc.
800 King Street
Wilmington, DE 19899
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(Name of company filing this statement
and address of principal executive offices)
Conectiv
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(Name of top registered holding company parent)
Philip S. Reese
Vice President and Treasurer
Conectiv
(address above)
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(Name and address of agent of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application to:
Peter F. Clark Joyce Koria Hayes, Esquire
General Counsel 7 Graham Court
Conectiv Newark, DE 19711
(address above)
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Table of Contents
Item 1. DESCRIPTION OF PROPOSED TRANSACTIONS
A. Introduction.
B. Background and Regulatory Environment
C. Transactions related to the capitalization of Conectiv Delmarva
Generation, Inc. ("CDG") and Conectiv Atlantic Generation, LLC
("CAG") through the contribution of generating assets.
Capitalization of ACE REIT, Inc. ("ACE-REIT") through the
contribution of CAG ownership interests to ACE-REIT.
D. Dividend of Common Stock of CDG and ACE-REIT to Conectiv.
E. Approval of acquisition of CDG and ACE-REIT by CEH. Creation of
Conectiv Energy Holding Company ("CEH") and contribution of CDG
and ACE-REIT Common Stock to CEH. Determination that ACE-REIT is
not a utility holding company. Possible future activities of CEH.
F. Request for Reservation of jurisdiction pending completion of the
Record with respect to status of CDG and CAG as EWGs.
G. CEH Authority to acquire EWGs as an intermediary company.
H. Financing of CEH and financing of ACE-REIT, CAG, and CDG by CEH or
Conectiv.
1. CEH financing by Conectiv.
2. CDG, CAG, and ACE-REIT financing by CEH or Conectiv.
I. Authority for the acquisition of utility assets pursuant to a
like-kind exchange if at that time CDG is not an EWG.
J. Affiliate Transactions.
K. Authorization Period and Reporting.
L. Statement Pursuant to Rule 54.
Item 2. FEES, COMMISSION AND EXPENSES
Item 3. APPLICABLE STATUTORY PROVISIONS
Item 4. REGULATORY APPROVAL
Item 5. PROCEDURE
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
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A. Exhibits
B. Financial Statements as of December 31, 1999.
Item 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
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1(a) Description of Proposed Transactions
[ ]
(a) Furnish a reasonably detailed and precise description of the proposed
transaction, including a statement of the reason why it is desired to consummate
the transaction and the anticipated effect thereof. If the transaction is part
of a general program, describe the program and its relation to the proposed
transaction.
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A. Introduction
Conectiv, a registered holding company and a Delaware corporation, owns
all of the outstanding common stock of Delmarva Power & Light Company, a
Delaware and Virginia corporation and an operating public utility company
("Delmarva"), and of Atlantic City Electric Company, a New Jersey corporation
and an operating public utility company ("ACE"), and of certain direct and
indirect nonutility subsidiaries. (See HCAR No. 26832 dated February 25, 1998
(the "Merger Order") in File No. 70-9069.) Delmarva provides electric service in
Delaware, Maryland and Virginia and natural gas service in northern Delaware and
ACE provides electric service in New Jersey. Among the nonutility businesses
that Conectiv was permitted to retain under the Merger Order is Conectiv Energy
Supply, Inc. ("CESI")(named Delmarva Energy Company at the time of the Merger
Order and later renamed), which is currently operating as an energy marketing
company. (See order authorizing the restructuring of the Conectiv nonutility
operations and the merger into CESI of Petron Oil Company and the acquisition of
stock of Delmarva Operating Services Company during phase 1 of the restructuring
and of Atlantic Generating Inc. during phase 2 of the restructuring (HCAR No.
26953 dated December 16, 1998(1) (the "Restructuring Order"))) Conectiv also
owns Conectiv Energy, Inc., ("CEI") a previously inactive company that has
recently begun investing in two projects that will qualify as eligible
facilities. The Federal Energy Regulatory Commission ("FERC") has determined
that CEI qualifies as an exempt wholesale generator ("EWG").(2)
This filing seeks authorizations required under the Public Utility
Holding Company Act of 1935 as amended (the "Act") for the transfer of certain
generating facilities of Delmarva and ACE to affiliates that initially will be
utilities for purposes of the Act. Other generating assets will be sold to third
parties and, to the extent authorizations under the Act are required in
connection with the sales to third parties, a separate filing has been made.(3)
Conectiv's intent is to transfer the retained generating assets to affiliates
that are not engaged in the transmission and distribution
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(1) The restructuring U-1 envisioned that certain assets and contracts held by a
division of Delmarva (doing business as Conectiv Energy) would be transferred to
Conectiv Services, Inc. rather than CESI. It is now contemplated that CESI will
be engaged in energy marketing at not only the industrial and commercial level,
but also at the retail level. The Company now proposes that the assets and
contracts referred to will be transferred to CESI or a subsidiary of CESI. The
assets and contracts are not utility assets and the transfer does not require
the approval of this Commission under the Act. The assets and contracts are
utilized in an energy-related business as specified in Rule 58(b)(1)(v).
(2) The implementation of a like-kind exchange may require that CEI be sold to a
third party intermediary. Under the like-kind exchange, at a later time, CEI's
assets would be exchanged by the third party for certain generating facilities
previously transferred from Delmarva to CDG. The like-kind exchange is discussed
in more detail in Section I below.
(3) See File No. 70-9609. As discussed in more detail later, there are three
categories of generating facilities to be transferred by ACE and four categories
to be transferred by Delmarva: 1) those sold to a non-EWG third party purchaser
by Delmarva and ACE for which approval under the Act is required and requested
in File No. 70-9609; 2) those being sold to EWG third party purchasers by
Delmarva and ACE for which no approval under the Act is required; 3) those being
transferred to CDG or CAG by Delmarva or ACE and retained by the transferee and
4) those being transferred by Delmarva to CDG subject to an obligation to
transfer the facilities to an EWG third party purchaser under the terms of a
like-kind exchange agreement. The latter two types of facilities are identified
on Exhibit H-1.
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business and to convert Delmarva and ACE to "wires and pipes companies" that
provide only regulated electric transmission and distribution services and, in
the case of Delmarva, regulated gas distribution services.
The transaction to accomplish the transfer of the facilities has been
structured to maximize financing flexibility and to minimize state and federal
tax consequences. The Delmarva facilities will be transferred to Conectiv
Delmarva Generation, Inc. ("CDG"), which is a wholly-owned subsidiary of
Delmarva that was originally incorporated as a real estate investment trust(4).
In exchange for the facilities, CDG will issue new shares of common stock to
Delmarva. After the transfer of the facilities from Delmarva to CDG in exchange
for additional common equity issued by CDG, Delmarva will declare a capital
dividend to Conectiv in the form of CDG common stock. Conectiv will then fund a
new subsidiary holding company proposed to be created for this purpose to be
named Conectiv Energy Holding Company ("CEH") by contributing the CDG common
stock to CEH making CDG a direct subsidiary of CEH. CEH will become an
intermediate holding company in the Conectiv corporate family.
The ACE generating facilities to be retained will be contributed to
Conectiv Atlantic Generation, LLC ("CAG"), a new wholly-owned subsidiary of ACE
in exchange for the ownership interest in CAG. CAG will temporarily become a
wholly-owned subsidiary of ACE. ACE will then contribute the CAG ownership
interest to ACE REIT, Inc. ("ACE-REIT"), an ACE subsidiary that was also formed
to be a real-estate investment trust but was never funded and was never active.
ACE will then issue a dividend to Conectiv of ACE-REIT's common stock. Conectiv
will then contribute the ACE-REIT common stock to CEH, making ACE-REIT a direct
subsidiary of CEH and CAG an indirect subsidiary of CEH.
The following two tables illustrate the intra-corporate transfers of
the facilities and the corresponding transfers of the common equity shares
related to the Facilities:
DELMARVA FACILITIES
Step 1: Step 2:
------------
Delmarva -------------- ---------- ----
------------ Delmarva Conectiv CEH
-------------- ---------- ----
CDG CDG
Common Stock Facilities Common Common
Stock Stock
------------
CDG
------------
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(4) The company was never funded and never became operational. The company's
name was changed from DPL-REIT, Inc. to CDG in anticipation of the proposed
transfer. DPL REIT Holding Company, Inc., a shell intermediary company that
existed for a time, was merged into Delmarva so that CDG is now a wholly-owned
subsidiary of Delmarva.
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ATLANTIC FACILITIES
Step 1: Step 2:
----- ----- -----------
ACE ACE ACE-REIT
----- ----- -----------
CAG Ownership
Interest
CAG
Ownership Facilities Step 3:
Interest
-----
CAG ----- ACE-REIT -------- ACE-REIT -------
----- ACE Common Stock Conectiv Common Stock CEH
----- -------- -------
The net effect of those transactions is that Delmarva's generating facilities
will be transferred to CDG and ACE's generating facilities to CAG and the
common equity ownership related to the Delmarva and ACE generating
facilities will be transferred to CEH. CDG and CAG will own no assets other than
generation facilities and appurtenant transmission facilities and will sell
power exclusively at wholesale. Both CDG and CAG will become subsidiaries of
CEH, which will be a directly-owned subsidiary of Conectiv. In addition to the
common stock of CDG and CAG, Conectiv proposes to contribute to CEH the common
stock of CESI, a Rule 58 company and may at a future date contribute to CEH the
common stock of Atlantic Cogeneration, Inc., which is also a Rule 58 company.
The following tables show the placement of the relevant companies in
the Conectiv corporate family on a pre-reorganization and post-reorganization
basis.
PRE-REORGANIZATION
--------
Conectiv
----------- -------- ------
Delmarva ACE CESI
----------- ------ ------
----------- ------ ------------
CDG CAG ACE-REIT
----------- ------ ------------
POST-REORGANIZATION
----------
Conectiv
----------
---------- ----- -----
Delmarva ACE CEH
---------- ----- -----
------ -------- ------
CDG ACE-REIT CESI
------ -------- ------
-------
CAG
-------
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Thus, Delmarva and ACE will be solely in the transmission and distribution
business in those states in which they now operate. CEH will be an intermediate
holding company and indirectly will be in the power production and sales and
energy marketing businesses through its ownership of CDG, CAG and CESI. The
retention of these facilities in a nonregulated environment in the system made
up of Conectiv and its subsidiaries (the "System") has no financial impact and
does not subject the System to any unusual risk as would proposed investments in
foreign utilities or foreign EWGs. The operation of these facilities is part of
the business in which the System has been engaged historically. The arena has
merely changed from one of regulation to a deregulated environment.
Following its formation, CEH will issue securities to Conectiv to fund
its business and the CEH subsidiaries each will issue securities to either
Conectiv or CEH to fund its business.
The authorizations requested under the Act related to the foregoing
transactions are as follows:
1. Transactions Related to the Capitalization of CDG and CAG (referred to
collectively as the "Energy Subsidiaries").
a) A capital contribution of certain generating utility assets
by Delmarva to CDG;
b) A capital contribution of certain generating utility assets
by ACE to CAG; and the contribution of the ownership
interest in CAG to ACE-REIT establishing ACE-REIT as a
Delaware holding company; and
c) the acquisition by each of the Energy Subsidiaries of its
portion of the generating assets.
2. Dividend out of capital or unearned surplus by ACE to Conectiv of the
common stock of ACE-REIT and by Delmarva to Conectiv of the common stock of
CDG.
3. Creation of Conectiv Energy Holding Company ("CEH") and contribution of CDG
and ACE-REIT Stock to CEH. Approval of acquisition of CDG and ACE-REIT by
CEH. Determination that ACE-REIT is not a utility holding company.
4. Request for reservation of jurisdiction pending completion of the record
with respect to status of CDG and CAG as EWGs.
5. CEH authority to acquire EWGs as an Intermediary Company.
6. Financing of CEH by Conectiv and financing of CDG, CAG and ACE-REIT by CEH
or Conectiv.
7. Authority for the acquisition of utility assets pursuant to a like-kind
exchange if, at that time, CDG is not an EWG.
B. Background and Regulatory Environment
Each of the states in which Delmarva and ACE operate has enacted
legislation restructuring the electric utility industry in that state to provide
retail choice of electricity suppliers. Generally, with restructuring, the
supply component of the price charged to a customer for electricity would be
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deregulated, and electricity suppliers would compete to supply electricity to
customers. Customers would continue to pay the local utility a regulated price
for the delivery of the electricity over the transmission and distribution
system.
On August 31, 1999, the Delaware Public Service Commission ("DPSC")
issued an order with respect to Delmarva's plan for complying with the Electric
Utility Restructuring Act of 1999 (the "Delaware Act"). Retained customers with
peak monthly load of 1,000 kilowatts ("KW") or more were able to choose electric
suppliers as of October 1, 1999, customers with loads of 300KW or more were able
choose as of January 15, 2000 and all others may choose as of October 1, 2000.
The Delaware Act permits Delmarva to sell, transfer, or otherwise divest its
electric generating plants without DPSC approval after October 1, 1999. Electric
rates are unaffected by such sales. Delmarva remains the provider of default
service to customers who do not choose an alternative electricity supplier for a
period of three or four years for non-residential and residential customers,
respectively. Electric rates for these customers are fixed throughout this
transition period. Following this transition period, the DPSC may request that
Delmarva remain the provider of default service, but the service would be
provided at market-based rates.
In Maryland, as in Delaware, Delmarva's Plan for implementing Electric
Customer Choice and Competition Act of 1999, which was approved by the Maryland
Public Utility Commission on October 8, 1999, provides that rates are unaffected
by the sale or transfer of any generating assets. Delmarva will provide default
service to customers who do not choose an alternative electricity supplier from
July 1, 2000 to July 1, 2004 for residential customers and July 1, 2000 to
July 1, 2003 for others.
The Virginia Electric Utility Restructuring Act phases-in retail
electric competition beginning January 1, 2002. As part of a restructuring
application filed with the Virginia State Corporation Commission ("VaSCC"),
Delmarva is seeking approval to transfer the facilities. Approval also will be
obtained for the transfer of the facilities from Delmarva to CDG under the
Virginia Affiliates Act.
The New Jersey Board of Public Utilities ("NJBPU") issued a Summary
Order on July 15, 1999 concerning restructuring of ACE's electric supply
business. Among other matters, the Summary Order provided ACE's customers with a
choice of electricity suppliers effective August 1, 1999. However, ACE is
obligated to supply electricity to customers who do not choose an alternative
electricity supplier through July 31, 2002 under the Basic Generation
Service(5). Gains or losses on the sale of ACE's generating plants (other than
certain "mid-merit" plants) will affect the amount of stranded costs to be
recovered from customers and would not affect ACE future earnings. In the event
of a sale within four years of certain "mid-merit" plants to third parties, 50%
of any gain would reduce stranded costs and 50% would affect earnings. The
transfer to an affiliate is preapproved and does not affect stranded costs nor
future earnings. ACE is only required to file proposed accounting entries with
the NJBPU.
Under the Delaware and New Jersey electric industry restructuring
legislation, Delmarva and ACE are in the process of exiting the business of
generating electricity. Conectiv is implementing a "mid-merit" strategy through
the sale of baseload facilities and the retention of "mid-merit" facilities.
Nuclear and non-strategic baseload fossil electric generating plants that run
almost continuously to supply the base of minimum demand level for electricity
are to be sold to third parties. The mid-merit facilities to be retained and
transferred to an affiliate are comprised of
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(5) Under the terms of the Summary Order, ACE is outsourcing the Basic
Generation Service. CESI may bid to supply all or a portion of the capacity and
energy need of the Basic Generation Service.
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electric generating plants that can quickly increase or decrease their KW per
hour output level on an economic basis. These plants are generally operated
during times when demand for electricity rises and prices are higher.
Approximately 1,412 MW of net generating capacity owned by Delmarva and 1,123 of
net generating capacity owned by ACE will be transferred or sold to
non-affiliates(6). Pursuant to this application, it is proposed that
approximately 1,364 MW of net generating capacity owned by Delmarva (exclusive
of the net generating capacity subject to the like-kind exchange) and 502 MW of
net generating capacity owned by ACE will be transferred to CDG and CAG
respectively. In addition, CEI has begun making investments in the construction
of two projects involving combustion turbine generating facilities that are
compatible with Conectiv's mid-merit strategy.
C. Transactions related to the capitalization of CDG and CAG through the
contribution of generating assets. Capitalization of ACE-REIT through the
contribution of CAG's ownership interests to ACE-REIT
CDG is currently an inactive wholly-owned subsidiary of Delmarva. Delmarva
proposes to capitalize CDG through the contribution by Delmarva to CDG of
generating assets listed in Exhibit H-1 hereto. In consideration for the capital
contribution, CDG will issue common stock to Delmarva.
ACE will make a capital contribution consisting of the generating assets
listed in Exhibit H-1 (together with the generating assets transferred by
Delmarva to CDG, the "Generating Assets") to CAG, a newly established Delaware
limited liability company. ACE will then contribute the ownership interest in
CAG to another wholly-owned subsidiary, ACE-REIT, establishing CAG as an
indirect subsidiary of ACE and a direct subsidiary of ACE-REIT, which will be a
Delaware holding company. The assets so transferred will continue to be
accounted for as part of the Atlantic Utility Group (as defined in the Conectiv
Restated Certificate of Incorporation) for purposes of determining the dividend
on Conectiv Class A Common Stock so that the transfer has no impact on the
dividend for Class A Common Stock.
CDG and CAG will acquire their respective portion of the Generating Assets
so transferred and will operate the assets, selling 100% of the output to CESI,
the marketing company in the System as described below.
Delmarva's Generating Assets are encumbered by a Mortgage and Deed of Trust,
dated October 1, 1943 as supplemented by 94 indentures supplemental thereto (the
"Delmarva Mortgage"), in favor of Delmarva's bondholders. ACE's Generating
Assets are encumbered by a Mortgage, dated January 15, 1937 as supplemented by
40 indentures supplemental thereto (the "ACE Mortgage"), in favor of ACE's
bondholders. The Chase Manhattan Bank is the Successor Trustee under the
Delmarva Mortgage and Bank of New York is the Successor Trustee under the ACE
Mortgage. Delmarva and ACE are working with the Trustees to release the
Generating Assets from the liens of the mortgages, in accordance with the
provisions of the terms of the mortgages.
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(6) It is currently anticipated that approximately 127 MW of net generating
capacity owned by Delmarva will be transferred to CDG subject to an obligation
to transfer the assets to a third party in consideration for certain like-kind
assets. (The specific assets are identified on Exhibit H-1). See Item 1.I below.
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Pursuant to orders of the state commissions in which they operate and
subject to the submission of certain accounting entries to the NJBPU in the case
of ACE and approval of the VaSCC in the case of Delmarva, ACE and Delmarva each
has been authorized and pre-approved to transfer the Generating Assets at book
value to a new affiliate in the Conectiv System. Such a transfer will permit the
new affiliate to operate the assets efficiently in a competitive environment.
Ultimately CDG and CAG will need the flexibility shared by competitors in the
deregulated generating industry and can only achieve that flexibility with EWG
status as discussed below.
D. Dividend of Stock of CDG and ACE-REIT to Conectiv.
As of December 31, 1999, as a result of write-downs occurring due to state
electric industry restructuring, Delmarva has approximately $147.3 million of
retained earnings. The capital or unearned surplus account, titled "Additional
Paid in Capital" totaled approximately $528.9 million. The book value net of
deferred taxes of the CDG common stock to be transferred to Conectiv by dividend
is approximately $301.4 million (of which $26.4 million is associated with the
assets transferred and subject to the like-kind exchange) and will be paid out
of the capital or unearned surplus account, leaving all retained earnings for
the payment of dividends to preferred stockholders and to Conectiv as the holder
of all outstanding common stock. The capital dividend by Delmarva will cause the
common equity to total capitalization ratio for Delmarva to fall below 30% until
the sale of other generating facilities to third parties is completed. The
closing is scheduled for September 1, 2000 but is contingent on the prior
receipt of state regulation approvals.
As of December 31, 1999, also as a result of write-downs occurring due to
state electric industry restructuring, ACE has approximately $130.0 million of
retained earnings. The book value net of deferred taxes of the ACE-REIT stock
to be transferred to Conectiv by dividend is approximately $77.2 million and
thus, could be paid by ACE out of retained earnings. However, generally
accepted accounting principles require that the dividend be accounted for as a
dividend out of capital surplus.
Conectiv may make a capital contribution to Delmarva or ACE, if necessary,
to return the capital structure of the utility company to an appropriate
debt-equity ratio. If, however, the equity portion of the proceeds from the sale
of assets to third parties, if retained by Delmarva or ACE, is sufficient to
achieve a proper capital structure for Delmarva or ACE, as the case may be, no
capital contribution will be made by Conectiv to either ACE or Delmarva, as the
case may be.
E. Approval of Acquisition of CDG and ACE-REIT by CEH. Creation of CEH and
Contribution of CDG and ACE-REIT common stock to CEH. Determination that
ACE-REIT is not a utility holding company. Possible future activities of CEH.
Conectiv proposes to create CEH as a new subsidiary holding company for
the purpose of holding ownership and directing the activities of various
companies engaged in the generation and marketing of electricity and other forms
of energy. Conectiv proposes to transfer to CEH, through a capital contribution,
Conectiv's ownership interest in CDG and ACE-REIT. Approval of the Commission is
requested for the creation of CEH, the contribution of the Common Stock of CDG
and ACE-REIT to CEH and the acquisition of the stock by CEH. CEH will not be an
operating company, will have no employees and will function as an intermediary
holding company that will be a utility holding company until such time as CDG
and CAG are qualified as EWGs. Until such time as CDG and CAG are declared to be
EWGs, Conectiv requests that the Commission deem ACE-REIT not to be a utility
holding company solely for the purpose of section 11(b)(2) which provides that
this Commission shall take such action as it finds necessary in order that the
holding company shall cease to be a holding company with respect to each of its
subsidiary companies which itself has a subsidiary company which is a holding
company. ACE-REIT, as a Delaware holding company, is
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a company that derives its revenues solely from the ownership of the common
stock in companies doing business in other jurisdictions.(7)
Conectiv also proposes to contribute to CEH the common stock and other
securities held in CESI and at some point in the future, may contribute to CEH
common stock and other securities held in Atlantic Cogeneration, Inc. ("AGI").
Since CESI and AGI are Rule 58 companies the acquisition of the securities by
CEH is exempt from approval under Rule 58. The capital contribution of the
securities by Conectiv also requires no approval pursuant to Rule 45(b)(4).
In the Merger Order, Conectiv was authorized to retain ownership of
CESI (formerly named Delmarva Energy Company) as a Rule 58 energy marketing
company (See HCAR No. 35-26832 dated February 25, 1998). Under the subsequent
Restructuring Order, Petron Oil Corporation was merged into CESI and CESI
acquired ownership of Delmarva Operating Services Company ("DOSC"), a company
providing management services to independent production companies or EWGs.
CESI will also become the company providing energy management services
to customers. Services may include:
- Energy services to large commercial and industrial customers including
power system consulting, end-use efficiency services, customized on-site
systems services and other energy services.
- Energy management services including demand-side management and energy
audits.
- Conditioned power services that prevent, control or mitigate adverse
effects of power disturbances.
- Asset management services related to energy-related systems, facilities and
equipment including distribution systems and substations, transmission
facilities, generation facilities, boilers, chillers, and HVAC and lighting
systems and to qualifying and non-qualifying cogeneration and small power
production facilities under the Public Utility Regulatory Policies Act of
1978.
- Consulting services involving technology assessments, power factor
correction and harmonics mitigation analysis, meter reading and repair,
rate schedule design and analysis, environmental services, engineering
services, billing services, risk management services, communications
systems, information systems, data processing, system planning, strategic
planning, finance, feasibility studies, and similar services.
- Other services related to the consumption of energy and the maintenance of
property by end-users.
Currently Conectiv Solutions, CCC ("Solutions") is authorized to
engage in the business of providing these services. This Application proposes
that Solutions will withdraw from these activities and will confine its services
to those other services previously authorized.
CESI will continue to be a Rule 58 company. Substantially all revenues
will be derived from (in order of anticipated relative contribution): 1)
brokering, marketing (at wholesale and retail) and
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(7) In the National Grid Group Acquisition of New England Electric System order
(HCAR No. 35-27154 dated March 15, 2000), the Commission concluded that it could
"look through" the Intermediate Holding Companies. . . for the purposes of the
analysis under section 11(b)(2) of the Act." (Text accompanying Footnote 70). As
with National Grid, ACE-REIT "will not serve as means . . . to diffuse control
of the [Conectiv System] Rather, th[is] compan[y] will be created a
special-purpose entit[y] for the sole purpose of helping the parties capture
economic efficiencies that might otherwise be lost in a cross-[state]
transaction."
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trading transactions involving electricity and other types of energy
commodities (Rule 58(b)(1)(v)); 2) energy management or demand-side management
services (Rule 58(b)(1)(i)); and 3) the sale of technical, operational,
management, and other similar services and expertise developed in the course of
utility operations in such areas as power plant and transmission system
engineering, development and design and rehabilitation; construction;
maintenance and operation; fuel procurement, delivery and management; and
environmental licensing, testing and remediation. (Rule 58(b)(1)(vii)). To
minimize risks associated with dealing in energy commodities, CESI also will
engage in hedging and/or financial transactions associated with energy
marketing, including derivatives, future contracts, options and swaps,
including, without limitation, electric power, oil, natural and manufactured
gas, emission allowances, coal, refined petroleum products and natural gas
liquids and to provide incidental related services to customers, such as fuel
management, storage and procurement services. CESI would engage in such
activities without regard to the location or identity of customers or source of
revenues; provided, however, that only with approval of the FERC under the
Federal Power Act, will CESI sell electricity to either of Conectiv's electric
utility subsidiaries, Delmarva or ACE. CESI will have the right to sell at
retail in Delmarva's and ACE's service territories and will be assuming any
unregulated retail transactions and programs already underway at Delmarva. As
discussed below, the Energy Subsidiaries will have contracts with CESI providing
for the sale of each Energy Subsidiary's output to CESI. Delmarva and ACE also
may have contracts providing for the purchase of power from CESI. The Delmarva
purchases would constitute a portion of the power needed to meet its default
service requirements.
AGI was a nonutility subsidiary holding company that was an indirect
subsidiary of Atlantic Energy, Inc. prior to the merger that created Conectiv.
AGI and its subsidiaries develop, own and operate independent power production,
which is also a permissible energy-related activity under Rule 58(b)(1)(viii).
As noted above, under the Restructuring Order, it was contemplated that AGI
would become a subsidiary of CESI during phase 2 of the restructuring. It is now
proposed that ownership of AGI would be transferred to CEH.
F. Request for Reservation of Jurisdiction pending Completion of the Record
with Respect to Status of CDG and CAG as EWGs.
Conectiv intends for the Energy Subsidiaries (CDG and CAG) to be qualified
as EWGs for purposes of Section 32 and Rules 52 through 54 promulgated
thereunder. . If the book value of the investment in the Generating Assets at
the time of transfer is included in the "Aggregate Investment" for purposes of
Rule 53, the limit on Aggregate Investments contained in the Rule would be
exceeded even if the ACE retained earnings denied to Conectiv under merger
accounting ($225 million) is added back. Conectiv requests that the book value
of the investment in the Generating Assets at the time of transfer to the Energy
Subsidiaries be excluded for purposes of determining the Aggregate Investment in
EWGs.(8) However, Conectiv does not believe that the requisite order of the
state commissions under Section 32 (c) of the Statute will be received in a
timely manner. Therefore, Conectiv requests that the Commission reserve
jurisdiction over the requested exclusion pending completion of the record by
the filing of the requisite state orders.
- ---------------------
(8) In the order related to the acquisition of New England Electric System by
National Grid, plc, this Commission found that the Aggregate Investment in
foreign utility companies in that case was acceptable even though it equaled
more than 200% of retained earnings (footnote 45).
12
<PAGE> 13
G. CEH Authority to Acquire EWGs as Intermediary Company
Conectiv requests authorization for CEH to invest in one or more EWGs and
to consolidate or dispose of the ownership interests in any such EWG so acquired
so long as the aggregate limitation as established from time to time is not
exceeded.
H. Financing of CEH and Financing of ACE-REIT, CAG and CDG by CEH or Conectiv
Authorization is requested for CEH, ACE-REIT, CAG and CDG to engage in
certain financing until such time as CAG and CDG qualify as EWGs and the
financing of the companies can be accomplished through Rule 52 or until March
31, 2002 whichever first occurs.
1. CEH Financing by Conectiv
CEH requests authority to issue common stock or long or short-term debt
to Conectiv as necessary to fund the operations of its businesses through
March 31, 2002. Since CEH is a utility holding company under the Act, Rule 52 is
unavailable to permit financing without Commission approval. After CDG and CAG
become EWGs, Rule 52 will apply to permit future financing without further order
of the Commission. Any debt issued by CEH to Conectiv will bear interest at a
rate designed to approximate Conectiv's cost of money. Also, authorization is
requested for CEH to participate in the Conectiv System Money Pool.
2. CAG, CDG and ACE-REIT financing by CEH or Conectiv
Under the terms of the Financing Order, Conectiv has authority to
guarantee the obligations of direct and indirect subsidiaries aggregating up to
$350 million at any time outstanding. Under this authority, Conectiv may
guarantee obligations of CAG, ACE-REIT, CDG, CESI and other subsidiaries of CEH
subject to any limitations on Aggregate Investments in EWGs or Rule 58
companies. ACE-REIT, CAG and CDG request authority to issue common stock or long
or short-term debt to CEH or Conectiv as necessary to fund the operations of
their businesses through March 31, 2002. Since CAG and CDG are utility companies
under the Act, but are not subject to regulation in a state, Rule 52 is
unavailable to permit financing without Commission approval. Similarly ACE-REIT
is a utility holding company making Rule 52 unavailable. After CDG and CAG
become EWGs, Rule 52 will apply to permit future financing without further order
of the Commission. Any debt issued by CAG, CDG or ACE-REIT will bear interest at
a rate designed to approximate the lenders cost of money. Also, authorization is
requested for CAG, CDG, and ACE-REIT to participate in the Conectiv System Money
Pool until such time as CAG and CDG qualify as EWGs.
I. Authority for the acquisition of utility assets pursuant to a
like-kind exchange if at that time CDG is not an EWG
As noted in Footnotes 2 and 6 above, it is currently anticipated that
approximately 127 MW of net generating capacity owned by Delmarva will be
transferred to CDG subject to an obligation to transfer the assets to a third
party in consideration for receipt of certain like-kind assets.
The like-kind exchange agreement will enhance cash flow and utilize
certain tax efficiencies for the System. If the like-kind exchange agreements
are executed, ownership of CEI may be transferred to a third party intermediary
to facilitate the exchange and as a result, a portion of the investment to be
made by CEI in certain eligible facilities aggregating up to $350 million, for
which authorization is currently sought in File No. 70-9095 (the "New Hay Road
Facilities"), will
13
<PAGE> 14
be made by a nonaffiliated third party. The generating facilities transferred to
CDG subject to the like-kind exchange agreements will ultimately be sold to the
third party in exchange for the acquisition by CDG of either the New Hay Road
Facilities at the time when the investment in the New Hay Road Facilities equals
or approximates the value of the CDG facilities or other suitable generating
assets. If the New Hay Road Facilities are reacquired, CDG then would complete
the construction of the New Hay Road Facilities. Thus, Conectiv will ultimately
invest up to $350 million in the New Hay Road Facilities. The third party will
be an EWG so the transfer by CDG of generating assets to the third party will
not require further approvals. If CDG is an EWG at the time of the acquisition,
the investment in the New Hay Road Facilities will have been approved by the
order in File No. 70-9095. If CDG is not an EWG at the time of the reacquisition
of the New Hay Road Facilities, authorization is requested for the acquisition
of the facilities as utility assets.
J. Affiliate Transactions
All ongoing relationships between the Energy Subsidiaries or CEH and
affiliates involve the sale of electricity or natural gas or of another
commodity or service, the sale of which is normally subject to public regulation
so that under Rules 80 and 81, approval of this Commission is not required. The
sole exceptions are the form of the service agreement with Conectiv Resource
Partners, Inc. ("CRPI") and the intrasystem tax allocation agreement. The
service agreement will be executed in the form previously approved by this
Commission. The tax allocation agreement complies with Rule 45(c) and has
previously been filed with this Commission as an exhibit to the Annual Report on
Form U5-S. Approvals from the utility commissions in the states of Virginia and
New Jersey will be required for the interconnection and other agreements between
CDG and Delmarva and CAG and ACE and Virginia approval will be required for the
power purchase agreement between Delmarva and CESI.
K. Authorization Period and Reporting
Rule 24 (c)(1) under the Act provides, in pertinent part, that unless
otherwise designated in an application or declaration, every order is subject to
a requirement that the transaction proposed be carried out within 60 days of
the date of such order. To avoid the situation in which the Applicants fail to
designate an alternative period, Applicants hereby designate the period from the
date of the order in this matter to the expiration of the authority under this
order as the period in which they will carry out the transactions authorized in
this order, or previously authorized by Commission order, in accordance with the
terms and conditions of, and for the purposes as authorized by, the relevant
orders.
Applicants request that Energy Subsidiaries and CEH be authorized to
report, annually in an Annual Report on Form U- 13-60 under the Act, the
following information: (a) each investment made by Conectiv or Delmarva or ACE
in CEH, CDG, CAG or ACE-REIT during the immediately prior year; (b) a general
description of the activities of each company in the immediately prior year; and
(c) the revenues and expenses of each company during the immediately prior year.
The foregoing shall be in lieu of any certificates of completion or partial
completion otherwise required by Rule 24 under the Act. If any report contains
confidential or proprietary business or commercial information, confidential
treatment under Rule 104 under the Act may be sought at such time.
L. Statement Pursuant to Rule 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
14
<PAGE> 15
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. Conectiv is in
compliance with Rules 53(a), (b) and (c).
Rule 53(a) permits the Commission to authorize the issuance of
securities to fund the acquisition of EWGs or FUCOs if the aggregate investment
does not exceed 50% of the average consolidated retained earnings as reported
for the four most recent quarterly periods on the holding company's Form 10-K or
10-Q. Conectiv's current investment in EWGs is less than 50% of average
consolidated retained earnings as reported for the most recent quarterly
periods.
Conectiv has insignificant indirect interests in EWGs. DCTC-Burney,
Inc., an indirect subsidiary of Conectiv, holds a 45% direct and indirect
interest in Burney Forest Products, a joint venture, which is an EWG. There has
been no additional post-merger investment in this EWG by Conectiv or a
subsidiary. CEI is in the process of developing two new combustion turbine
generation facilities as discussed above. As of March 22, 2000, Conectiv's
investment in EWGs totaled $22 million.
Conectiv and its subsidiaries will maintain books and records to
identify the investments in earnings from EWGs and FUCOs in which they directly
or indirectly hold an interest, thereby satisfying Rule 53(a)(2).
In addition, the books and records of each such entity will be kept in
conformity with United States generally accepted accounting principles ("GAAP"),
the financial statements will be prepared according to GAAP, and Conectiv
undertakes to provide the Commission access to such books and records and
financial statements as it may request. Employees of Conectiv's domestic
public-utility companies will not render services, directly or indirectly, to
any EWGs or FUCOs in the Conectiv System, thereby satisfying Rule 53(a)(3).
Conectiv, in connection with any Form U-1 seeking approval of EWG and
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 System. Rule 53(a)(4) will be correspondingly satisfied.
(b) Describe briefly, and where practicable state the approximate amount of, any
material interest in the proposed transaction, direct or indirect, of any
associate company or affiliate of the applicant or any affiliate of any such
associate company.
Not applicable.
(c) If the proposed transaction involves the acquisition of securities not
issued by a registered holding company or a subsidiary thereof, describe briefly
the business and property, present or proposed, of the issuer of such
securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or disposition of
assets, describe briefly such assets, setting forth
15
<PAGE> 16
original cost, vendor's book cost (including the basis of determination) and
applicable valuation and qualifying reserves.
Not applicable.
Item 2. FEES, COMMISSIONS AND EXPENSES
Estimated fees and expenses are expected to be incurred by Applicants in
connection with the transactions described above will be filed by amendment.
Item 3. APPLICABLE STATUTORY PROVISIONS
Applicants are informed by counsel that the proposed transactions are or
may be directly or indirectly subject to Sections 6, 7, 9, 10, 11, 12, 13 and 32
of the Act and Rules 43, 45, 46, 53, and 54, under the Act.
To the extent that other sections of the Act or the Commission's rules
thereunder are deemed to be applicable to the transactions described herein,
such sections and rules should be considered to be set forth in this Item 3.
Section 9(a)(1) provides that unless the acquisition has been approved by
the Commission under Section 10, it shall be unlawful for any registered holding
company or any subsidiary company thereof "to acquire, directly or indirectly,
any securities or utility assets or any other interest in any business."
Applicants believe that the proposed transactions described herein which
are subject to Section 9(a) of the Act satisfy the standards of Section 10 of
the Act.
The transactions described herein comply with all applicable state laws
and, as described above, are in response to state laws, in particular the acts,
mandating deregulation and the introduction of competition in the retail
electrical generation market, and do not tend toward interlocking relations or
the concentration of public utility companies. Moreover, the deregulation of,
and the introduction of competition in, the retail electrical generation market
has been enacted specifically to benefit the public interest and the interests
of investors and consumers; as the transactions described herein are being
effected to comply with and to further such legislative initiatives, they
likewise should be of benefit to the public interest and the interests of
investors and consumers.
Applicants believe that the transactions described in Item 1 do not unduly
complicate the capital structure of the System and are in the public interest
and in the interest of investors and consumers. Applicants also believe that the
transactions described in Item 1 will tend toward the proper functioning of the
System in a partly deregulated, partly regulated operating environment and, as a
consequence, toward the economical and efficient development of an integrated
public utility system.
The transactions described in Item 1 are, in the context of deregulation
and competition in the retail electrical generation market, "reasonably
incidental, or economically necessary and appropriate to" the operations of a
registered electric utility holding company system such as
16
<PAGE> 17
Conectiv. These transactions will enable the System to offer competitive
generation in the deregulated retail market; thus they tend toward the
economical and efficient development of an integrated public utility system.
The various transfers of assets and equity securities and the
formation of the Energy Subsidiaries and CEH described in Item 1 would not
result in the existence of any company in the holding company system that would
unduly or unnecessarily complicate the structure, or unfairly or inequitably
distribute voting power among security holders, of the System. The creation of
the new subsidiaries is necessary to adapt to competition in the deregulated
retail generation industry and to minimize the costs of the transition to
competition. As noted in Item 1, the transfers and the formation of new
subsidiaries (a) will allow Delmarva and ACE to continue to serve the needs of
its regulated customers while gearing Conectiv for competition in the
deregulated retail generation market, (b) will remove the Generating Assets from
rate-regulated Delmarva or ACE, (c) will allow the Energy Subsidiaries to manage
and operate the Generating Assets with due regard to market considerations, and
(d) will increase the flexibility for financing activities on cost-effective
terms that reflect the costs of capital for each area of business activity.
After all transfers and actions described in Item 1 are completed, redundant
organizational structures will not remain. See National Grid Plc, HCAR No. 27,
154 (March 15, 2000); Allegheny Energy, HCAR No. 27, 101 (November 12, 1999) and
Entergy Corp., HCAR No. 25, 952 (December 17, 1993).
For all of the foregoing reasons, Applicants believe that the
transactions described in Item 1 meet the requirements of and are entirely
consistent with the principles behind Sections 9, 10 and 11 of the Act.
Conectiv expects that the distribution of the interests of CDG and
ACE-REIT to Conectiv will be a dividend out of "capital or unearned surplus"
within the meaning of Rule 46 under the Act. Applicants believe that, in the
overall context of the transactions described in Item 1, the interests of each
security holder at the time of such distributions and of the public will not be
adversely affected by such distributions. While the distributions are being
structured as such in order to minimize the tax burden on the Applicants (which
also benefits the sole common equity holder of Delmarva, ACE or CEH as the case
may be, and indirectly, the public), the distributions are fundamentally meant
to effect the transfer by Delmarva or ACE of the Generating Assets to an
affiliate in the System in accordance with the orders described herein. The
distributions will be the final step in the reduction of the capitalization of
Delmarva or ACE and the reorganization of the System, in accordance with, and
fulfillment of, the regulations and legislative policies and objectives that
culminated in deregulation of and competition in electrical generation, as
described herein. The distributions are clearly not intended to harm the
interests of Delmarva or ACE or, ultimately, Conectiv, who will continue to own
the assets transferred by such distributions. Moreover, in that the regulated
parts of Delmarva or ACE's business (transmission and distribution) which are
not subject to deregulation and competition will continue to be owned directly
by Delmarva or ACE, Delmarva or ACE and the public which each serves will not be
subject to the impact of deregulation and competition on Delmarva or ACE's
former generation business and will, to a large degree, be protected from the
uncertainties and possible losses affecting generation in a competitive and
deregulated environment. For these reasons, Applicants believe that the proposed
distributions are entirely consistent with the policies and principles behind
Section 12 of the Act
17
<PAGE> 18
and request that the proposed distributions by Delmarva and ACE to Conectiv
described in Item 1 be approved.
Item 4. Regulatory Approval.
State the nature and extent of the jurisdiction of any State commission or
any Federal commission (other than the Securities and Exchange Commission) over
the proposed transaction.
The Federal Energy Regulatory Commission has jurisdiction over the proposed
transfer of the transmission facilities associated with the generating assets.
In addition authorization is required from the VaSCC for the transfer of the
Generating Assets under the Affiliates Laws. In New Jersey, certain ACE
accounting entries must be submitted to the NJBPU. Copies of the FERC and
Virginia applications and orders will be filed herewith or by amendment.
Describe the action taken or proposed to be taken before any commission named in
answer to paragraph (a) of this item in connection with the proposed
transaction.
Applications will be filed with the FERC and VaSCC.
Item 5. Procedure.
(a) State the date when Commission action is requested. If the date is less
than 40 days from the date of the original filing, set forth the reasons
for acceleration.
Conectiv requests that the Commission issue and publish not later than
April 14, 2000 the requisite notice under Rule 23 with respect to the filing of
this Declaration. Conectiv further requests that such notice specify a date not
later than May 16, 2000 as the date after which the Commission may issue an
order granting this Application.
(b) State (i) whether there should be a recommended decision by a hearing
officer, (ii) whether there should be a recommended decision by any other
responsible officer of the Commission, (iii) whether the Division of
Corporate Regulation may assist in the preparation of the Commission's
decision, and (iv) whether there should be a 30-day waiting period between
the issuance of the Commission's order and the date on which it is to
become effective.
Conectiv waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the Division
of Investment Management may assist in the preparation of the Commission's
order; and requests that there be no waiting period between the issuance of the
Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
A - 1 Certificate of Organization of CDG
A - 2 Certificate of Organization of ACE-REIT
A - 3 Certificate of Organization of CAG
18
<PAGE> 19
B - 1 Form of Asset Transfer Agreement between Delmarva and CDG (to
be filed by amendment)
B - 2 Form of Asset Transfer Agreement between ACE and CAG (to be
filed by amendment)
D - 1 Summary Order dated July 15, 1999 issued by the NJBPU removing
generating assets from regulatory oversight.
D - 2 Application to VaSCC for Authority to Transfer Delmarva
Generating Assets (to be filed by amendment).
D - 3 Order of VaSCC authorizing implementation of restructuring (to
be filed by amendment)
D - 4 Order of the VaSCC under the Virginia Affiliates Act
authorizing asset transfer (to be filed by amendment).
D - 5 Application to FERC for approval of Transfer to an Affiliate
D - 6 FERC Order Authorizing Transfer (to be filed by amendment)
D - 7 Application to FERC for Approval of Dividend out of Capital
and Affiliate Transactions.
D - 8 FERC Order authorizing Dividends out of Capital. (to be filed
by amendment)
F Preliminary opinion of counsel (to be filed by amendment)
G Form of Federal Register notice
H-1 List of Generating Assets to be transferred
(b) Financial Statements
FS-1 Conectiv Consolidated Financial Statements, dated December 31,
1999.
FS-2 Conectiv Consolidated Financial Data Schedule (filed with
Conectiv's Form 10-K for the year ended December 31, 1999)
(included in electronic submission only)
FS-3 Delmarva Pro Forma Consolidated Balance Sheets, dated December
31, 1999.
FS-4 Delmarva Financial Data Schedule (included in electronic
submission only)
FS-5 ACE Pro Forma Consolidated Balance Sheets, dated December 31,
1999.
FS-6 ACE Financial Data Schedule (included in electronic submission
only)
Item 7. Information as to Environmental Effects.
(a) Describe briefly the environmental effects of the proposed transaction in
terms of the standards set forth in Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4312(2)(C)). If the response to this item is
a negative statement as to the applicability of Section 102(2)(C) in connection
with the proposed transaction, also briefly state the reasons for that response.
The Commission's action in this matter will not constitute major
federal action significantly affecting the quality of the human environment.
(b) State whether any other federal agency has prepared or is preparing an
environmental impact statement ("EIS") with respect to the proposed transaction.
If any other Federal agency has
19
<PAGE> 20
prepared or is preparing an EIS, state which agency or agencies and indicate the
status of that EIS preparation.
No other federal agency has prepared or is preparing an environmental
impact statement with regard to the proposed transactions.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies have
duly caused this amended Application to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: March 31, 2000
Conectiv
Atlantic City Electric Company
Delmarva Power & Light Company
ACE REIT, Inc.
Conectiv Atlantic Generation, LLC
Conectiv Delmarva Generation, Inc.
Conectiv Energy Holding Company
By: /s/ Philip S. Reese
-------------------
Philip S. Reese
Vice President and Treasurer
21
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1999
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR
DELMARVA POWER & LIGHT COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000027879
<NAME> DELMARVA POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,393,391
<OTHER-PROPERTY-AND-INVEST> 73,114
<TOTAL-CURRENT-ASSETS> 442,051
<TOTAL-DEFERRED-CHARGES> 280,270
<OTHER-ASSETS> 160,189
<TOTAL-ASSETS> 2,349,015
<COMMON> 2
<CAPITAL-SURPLUS-PAID-IN> 227,483
<RETAINED-EARNINGS> 147,288
<TOTAL-COMMON-STOCKHOLDERS-EQ> 374,773
70,000
89,703
<LONG-TERM-DEBT-NET> 917,207
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,545
0
<CAPITAL-LEASE-OBLIGATIONS> 14,175
<LEASES-CURRENT> 12,495
<OTHER-ITEMS-CAPITAL-AND-LIAB> 869,117
<TOT-CAPITALIZATION-AND-LIAB> 2,349,015
<GROSS-OPERATING-REVENUE> 2,235,523
<INCOME-TAX-EXPENSE> 95,321
<OTHER-OPERATING-EXPENSES> 1,921,262
<TOTAL-OPERATING-EXPENSES> 2,016,583
<OPERATING-INCOME-LOSS> 218,940
<OTHER-INCOME-NET> 6,118
<INCOME-BEFORE-INTEREST-EXPEN> 225,058
<TOTAL-INTEREST-EXPENSE> 82,879
<NET-INCOME> (111,443)<F1>
4,440
<EARNINGS-AVAILABLE-FOR-COMM> (115,883)<F1>
<COMMON-STOCK-DIVIDENDS> 59,428
<TOTAL-INTEREST-ON-BONDS> 78,754
<CASH-FLOW-OPERATIONS> 246,830
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes extraordinary loss of $253,622.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1999
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR
ATLANTIC CITY ELECTRIC COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000008192
<NAME> ATLANTIC CITY ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 895,193
<OTHER-PROPERTY-AND-INVEST> 110,332
<TOTAL-CURRENT-ASSETS> 340,774
<TOTAL-DEFERRED-CHARGES> 1,142,475
<OTHER-ASSETS> 76,416
<TOTAL-ASSETS> 2,565,190
<COMMON> 54,963
<CAPITAL-SURPLUS-PAID-IN> 415,795
<RETAINED-EARNINGS> 129,981
<TOTAL-COMMON-STOCKHOLDERS-EQ> 600,739
118,950
6,231
<LONG-TERM-DEBT-NET> 954,752
<SHORT-TERM-NOTES> 30,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 46,075
0
<CAPITAL-LEASE-OBLIGATIONS> 14,911
<LEASES-CURRENT> 15,480
<OTHER-ITEMS-CAPITAL-AND-LIAB> 778,052
<TOT-CAPITALIZATION-AND-LIAB> 2,565,190
<GROSS-OPERATING-REVENUE> 1,076,585
<INCOME-TAX-EXPENSE> 49,326
<OTHER-OPERATING-EXPENSES> 904,654
<TOTAL-OPERATING-EXPENSES> 953,980
<OPERATING-INCOME-LOSS> 122,605
<OTHER-INCOME-NET> 8,712
<INCOME-BEFORE-INTEREST-EXPEN> 131,317
<TOTAL-INTEREST-EXPENSE> 67,387
<NET-INCOME> 5,835<F1>
2,132
<EARNINGS-AVAILABLE-FOR-COMM> 3,703<F1>
<COMMON-STOCK-DIVIDENDS> 55,845
<TOTAL-INTEREST-ON-BONDS> 60,562
<CASH-FLOW-OPERATIONS> (33,329)<F2>
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes extraordinary loss of $58,095.
<F2>Includes $228,500 payment for termination of purchased power contract.
</FN>
</TABLE>
<PAGE> 1
Exhibit A-1
CERTIFICATE OF INCORPORATION
OF
DPL REIT, INC.
FIRST: The name of the Corporation is DPL REIT, Inc.
SECOND: The registered office of DPL REIT, Inc. in the State of
Delaware is located at 800 King Street, Wilmington, County of New Castle, 19801,
and its registered agent shall be the Corporation itself.
THIRD: The purpose of the Corporation and the nature and objects of the
business to be transacted, promoted, conducted or carried out are:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware and
maintain its status as a real estate investment trust ("REIT") within the
meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended, or
any successor statute (the "Code").
FOURTH: The total number of shares of stock that the Corporation shall
be authorized to issue is One Thousand (1,000) shares of Common Stock having a
par value of One Dollar ($1.00) per share.
FIFTH: The name and mailing address of the Incorporator of the
Corporation is:
Name Address
---- -------
Steven L. Biener P.O. Box 6066
Newark, DE 19714-6066
SIXTH: The names and mailing addresses of the sole director who shall
serve until the first annual meeting of stockholders or until his successor is
elected and qualify is:
Name Address
---- -------
Charles A. Mannix P.O. Box 231
Wilmington, DE 19899
1
<PAGE> 2
SEVENTH: The Board of Directors may make, add to, delete from, alter
and repeal any By-law of the Corporation.
EIGHTH: No director of the Corporation shall be personally liable to
the Corporation for monetary damages for breach of fiduciary duty by such
director; provided, however, that this Article EIGHTH shall not eliminate or
limit the liability of a director to the extent provided by law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit. The Corporation shall
indemnify its directors, officers, employees and agents against expenses,
judgment, fines and amounts paid in settlement actually and reasonably incurred
by them by reason of their serving in such capacity to the fullest extent
permitted by the Delaware General Corporation Law.
NINTH: The provisions of this Certificate of Incorporation are
severable, and if the Board of Directors shall determine that any one or more of
such provisions are in conflict with Part II, of Subchapter M, of Chapter 1 of
Subtitle A of the Code or any other provision of the Code applicable to REITs,
or other applicable federal or state laws, the conflicting provisions shall be
deemed never to have constituted a part of this Certificate of Incorporation,
even without any amendment to this Certificate of Incorporation; provided, that
such determination by the Board of Directors shall not affect or impair the
remaining provisions of this Certificate of Incorporation or render invalid or
improper any action taken or omitted prior to such determination. No director
shall be liable for making or failing to make such a determination.
I, the undersigned, being the Incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate of Incorporation, hereby declaring
and certifying that this is my act and deed and that the facts herein stated are
true and accordingly have hereunto set my hand and seal this 12th day of March,
1998.
/s/ Steven L. Biener
Steven L. Biener
2
<PAGE> 3
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
DPL REIT HOLDING, INC.
(a Delaware Corporation)
WITH AND INTO
DPL REIT, INC.
(a Delaware Corporation)
----------
Pursuant to Section 253 of the
General Corporation Law of Delaware
----------
DPL REIT Holding, Inc., organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That the Company was incorporated on the 12th day of March,
1998, pursuant to the General Corporation Law of the State of Delaware, the
provisions of which permit the merger of a parent corporation organized and
existing under the laws of said State into a subsidiary corporation organized
and existing under the laws of said State.
SECOND: That the Company owns 100% of the stock of DPL REIT, Inc., a
corporation incorporated on 12th day of March, 1998, pursuant to the General
Corporation Law of the State of Delaware, and having no class of stock
outstanding other than said Capital Stock.
THIRD: That the following resolutions have been adopted by the Board of
Directors of the Company by unanimous written consent on December 31, 1999:
RESOLVED, that effective upon the filing of an appropriate
Certificate of Ownership and Merger embodying these resolutions
with the Secretary of State of the State of Delaware (but subject
to the approval of the sole stockholder of the Company), the
Company merge and it hereby does merge itself into DPL REIT, Inc.,
which will assume all obligations of the Company; and
FURTHER RESOLVED, that the terms and conditions of the
merger are as follows: Upon the proposed merger becoming effective,
each outstanding share of DPL REIT, Inc. capital stock (DPL REIT
Stock"), held of record by the Company shall cease to be
outstanding, without any payment being made in respect thereof; and
each share of Common Stock of the Company shall be converted into
one (1) share of Capital Stock, $1.00 per share of DPL REIT, Inc.,
certificates for which shall be issued to the sole stockholder of
the Company upon surrender to DPL REIT, Inc. of such stockholder's
certificates formerly representing such shares of Common Stock of
the Company; and
FURTHER RESOLVED, that the proposed merger be submitted to
the sole stockholder of the Company and that upon receiving
unanimous written consent of such stockholder the proposed merger
shall be approved; and
FURTHER RESOLVED, that DPL REIT, Inc., as the surviving
corporation in the merger, shall notify each stockholder of record
of said DPL
4
<PAGE> 4
REIT, Inc. within ten days after the effective date of the
merger that the merger has become effective; and
FURTHER RESOLVED, that DPL REIT, Inc., as the surviving
corporation in the merger, shall change its name to "Conectiv
Delmarva Generation, Inc."; and
FURTHER RESOLVED, that any one or more of the President,
Vice President, General Manager or other proper officers of the
Company be, and each of them is authorized and directed on behalf
of the Company to take all such other action, including the
preparation, execution, acknowledgment, delivery and filing of
applications, certificates, undertakings, notices and other
agreements and documents, with appropriate persons, including
governmental authorities, as they may deem necessary or advisable
in order to carry out and effectuate the intent and purposes of the
foregoing resolutions; and
FOURTH That the merger evidenced by this certificate shall become
effective as of the date it is filed.
FIFTH: That the Certificate of Incorporation of DPL REIT, Inc. shall be
the Certificate of Incorporation of the surviving corporation.
SIXTH: That this merger has been adopted and approved in accordance
with Section 253 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, DPL REIT Holding, Inc., Inc., a Delaware
corporation has caused this certificate to be signed by its Vice President this
31 day of December, 1999.
DPL REIT HOLDING, INC.
By: /s/ Barbara S. Graham
---------------------------
Barbara S. Graham
Senior Vice President
ATTEST:
By: Diana C. DeAngelis
------------------------
Diana C. DeAngelis
Assistant Secretary
5
<PAGE> 1
Exhibit A-2
CERTIFICATE OF INCORPORATION
OF
ACE REIT, INC.
FIRST: The name of the Corporation is ACE REIT, Inc.
SECOND: The registered office of ACE REIT, Inc. in the State of
Delaware is located at 800 King Street, Wilmington, County of New Castle, 19801,
and its registered agent shall be the Corporation itself.
THIRD: The purpose of the Corporation and the nature and objects of the
business to be transacted, promoted, conducted or carried out are:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware
and maintain its status as a real estate investment trust ("REIT")
within the meaning of Section 856(a) of the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code").
FOURTH: The total number of shares of stock that the Corporation shall
be authorized to issue is One Thousand (1,000) shares of Common Stock having a
par value of One Dollar ($1.00) per share.
FIFTH: The name and mailing address of the Incorporator of the
Corporation is:
Name Address
---- -------
Steven L. Biener P.O. Box 6066
Newark, DE 19714-6066
SIXTH: The names and mailing addresses of the sole director who shall
serve until the first annual meeting of stockholders or until his successor is
elected and qualify is:
Name Address
---- -------
Charles A. Mannix P.O. Box 231
Wilmington, DE 19899
SEVENTH: The Board of Directors may make, add to, delete from, alter
and repeal any By-law of the Corporation.
1
<PAGE> 2
EIGHTH: No director of the Corporation shall be personally liable to
the Corporation for monetary damages for breach of fiduciary duty by such
director; provided, however, that this Article EIGHTH shall not eliminate or
limit the liability of a director to the extent provided by law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit. The Corporation shall
indemnify its directors, officers, employees and agents against expenses,
judgment, fines and amounts paid in settlement actually and reasonably incurred
by them by reason of their serving in such capacity to the fullest extent
permitted by the Delaware General Corporation Law.
NINTH: The provisions of this Certificate of Incorporation are
severable, and if the Board of Directors shall determine that any one or more of
such provisions are in conflict with Part II, of Subchapter M, of Chapter 1 of
Subtitle A of the Code or any other provision of the Code applicable to REITs,
or other applicable federal or state laws, the conflicting provisions shall be
deemed never to have constituted a part of this Certificate of Incorporation,
even without any amendment to this Certificate of Incorporation; provided, that
such determination by the Board of Directors shall not affect or impair the
remaining provisions of this Certificate of Incorporation or render invalid or
improper any action taken or omitted prior to such determination. No director
shall be liable for making or failing to make such a determination.
I, the undersigned, being the Incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate of Incorporation, hereby declaring
and certifying that this is my act and deed and that the facts herein stated are
true and accordingly have hereunto set my hand and seal this 12th day of March,
1998.
/s/ Steven L.Biener
-------------------------
Steven L. Biener
2
<PAGE> 3
CERTIFICATE OF OWNERSHIP AND MERGER
OF
ACE REIT HOLDING, INC.
(a Delaware Corporation)
WITH AND INTO
ACE REIT, INC.
(a Delaware Corporation)
----------
Pursuant to Section 253 of the
General Corporation Law of Delaware
----------
ACE REIT Holding, Inc., organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That the Company was incorporated on the 12th day of March,
1998, pursuant to the General Corporation Law of the State of Delaware (the
"GCL"), the provisions of which permit the merger of a parent corporation
organized and existing under the laws of said State into a subsidiary
corporation organized and existing under the laws of said State.
SECOND: That the Company owns 100% of the common stock of ACE REIT,
Inc., a corporation incorporated on 12th day of March, 1998 ("ACE REIT, Inc."),
pursuant to the GCL, and having no class of stock outstanding other than said
common stock.
THIRD: That the following resolutions have been adopted by the Board of
Directors of the Company by unanimous written consent on December 31, 1999:
RESOLVED, that effective upon the filing of an appropriate
Certificate of Ownership and Merger embodying these resolutions
with the Secretary of State of the State of Delaware (but subject
to the approval of the sole stockholder of the Company), the
Company merge and it hereby does merge itself into ACE REIT, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company
(the "Surviving Corporation"), which will assume all obligations of
the Company; and
FURTHER RESOLVED, that the Surviving Corporation shall
issue shares of its common stock pro rata to the holder of the
outstanding common stock of the Company, upon surrender to the
Surviving Corporation of the stock certificate formerly
representing such shares of common stock of the Company; and
FURTHER RESOLVED, that the proposed merger be submitted to
the sole stockholder of the Company and that upon receiving written
consent of such stockholder the proposed merger shall be approved;
and
FURTHER RESOLVED, that the Surviving Corporation shall
change its name to "Conectiv Atlantic Generation, Inc."; and
FURTHER RESOLVED, that any one or more of the President,
Vice President, or other proper officers of the Company be, and
each of them is authorized and directed on behalf of the Company to
take all such other action,
3
<PAGE> 4
including the preparation, execution, acknowledgment, delivery
and filing of applications, certificates, undertakings, notices
and other agreements and documents, with appropriate persons,
including governmental authorities, as they may deem necessary
or advisable in order to carry out and effectuate the intent and
purposes of the foregoing resolutions; and
FOURTH: That the sole stockholder of the Company approved the merger by
written consent on December 31, 1999.
FIFTH: That the merger evidenced by this certificate shall become
effective as of the date this certificate is filed.
SIXTH: That the Certificate of Incorporation and by-laws of ACE REIT,
Inc. shall be the Certificate of Incorporation and by-laws, respectively, of the
surviving corporation.
SEVENTH: That this merger has been adopted and approved in accordance
with Section 253 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, ACE REIT Holding, Inc., a Delaware corporation has
caused this certificate to be signed by its Vice President this 31 day of
December, 1999.
ACE REIT HOLDING, INC.
By: /s/ John C. van Roden, Jr.
--------------------------------
John C. van Roden, Jr.
Senior Vice President
ATTEST:
By: /s/ Diana C. DeAngelis
--------------------------
Diana C. DeAngelis
Assistant Secretary
4
<PAGE> 1
Exhibit A-3
CERTIFICATE OF FORMATION
OF
CONECTIV ATLANTIC GENERATION, L.L.C
The undersigned, in order to form a limited liability company under the
Delaware Limited Liability Company Act, hereby certifies as follows:
Section 1. NAME. The name of the limited liability company is Conectiv
Atlantic Generation, L.L.C. (the "Company").
Section 2. REGISTERED OFFICE AND REGISTERED AGENT. The address of the
Company's registered office in the State of Delaware is 800 King Street,
Wilmington, in the County of New Castle, 19801; and its registered agent at such
office shall be Conectiv Resource Partners, Inc. c/o Legal Department.
Section 3. LIMITATION ON PERSONAL LIABILITY OF MEMBERS AND MANAGERS.
The debts, obligations and liabilities of the Company, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no member or manager of the Company shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a member or acting as a manager of the Company.
IN WITNESS WHEREOF, the undersigned certifies that the facts stated
herein are true as of December 29, 1999.
/s/ Nina J. Hertz
-----------------------
Nina J. Hertz
Authorized Representative
<PAGE> 1
Exhibit D-1
AGENDA DATE: 07/15/99
STATE OF NEW JERSEY
Board of Public Utilities
Two Gateway Center
Newark NJ 07102
ENERGY
IN THE MATTER OF ATLANTIC CITY ) SUMMARY ORDER
-------------
ELECTRIC COMPANY'S RATE )
UNBUNDLING, STRANDED COSTS AND ) BPU DOCKET NOS. E097070455,
RESTRUCTURING FILINGS ) EO97070456, AND EO97070457
(SERVICE LIST ATTACHED)
BY THE BOARD:
This Summary Order memorializes in summary fashion the action taken by
the Board of Public Utilities ("Board") in these matters at its
specially-scheduled July 15, 1999 public agenda meeting with respect to the rate
unbundling, stranded costs and restructuring filings of Atlantic City Electric
Company ("ACE", "Atlantic" or "Company"). The Board will issue a more detailed
Decision and Order in these matters, which will provide a full discussion of the
issues as well as the reasoning for the Board's determinations.
These matters come before the Board on a record developed by
Administrative Law Judge ("ALJ") William Gural, who issued an Initial Decision
on August 17, 1998, and hearings conducted before Commissioner Carmen J. Armenti
from April 27, 1998 through May 28, 1998. Subsequent to the ALJ's Initial
Decision and the hearings before Commissioner Armenti, the Legislature passed
and Governor Whitman signed into law on February 9, 1999, the Electric Discount
and Energy Competition Act, P.L. 1999, c. 23 ("the Act").
Settlement negotiations were conducted among the parties during the
latter part of April, through the early part of June 1999. A comprehensive
settlement was not reached, but on June 9, 1999, a Stipulation was filed by ACE
on behalf of a number of parties to the proceedings ("ACE Stipulation"). The
Board determined to solicit and consider comments on the ACE Stipulation, and
established a comment deadline of June 16, 1999 for comments addressing the ACE
Stipulation, including any alternative settlement proposal(s), and a deadline of
June 18, 1999 for comments addressing any alternative settlement proposal(s). On
June 16, 1999 an alternative joint proposal was submitted by the Division of the
Ratepayer Advocate on behalf of a number of other parties to these proceedings
("RPA Stipulation").
<PAGE> 2
Based on our review of the extensive record in these proceedings, as
well as the comments submitted, the Board is not fully satisfied that either
proposal in its entirety represents an appropriate resolution of these
proceedings. The Board finds the ACE Stipulation to be overall more financially
prudent and consistent with the Act's requirements and, with the modifications
and clarifications set forth hereinbelow, provides the framework for a
reasonable resolution of these matters based upon the record before us. However,
the proponents of the RPA Stipulation and others have raised a number of
legitimate concerns regarding the ACE Stipulation which merit serious
consideration and which, where appropriate, are addressed by the modifications
and clarifications set forth below.
Accordingly, except as specifically noted below, and as will be further
explained in a detailed order which shall be issued, we hereby incorporate by
reference as if completely set forth herein as a fair resolution of the issues
in these proceedings, the elements of the ACE Stipulation and, to the extent the
Initial Decision is inconsistent herewith, it is modified to conform herewith.
The modifications and clarifications to the ACE Stipulation which we
HEREBY ORDER are summarized as follows:
Paragraph 1: The initial aggregate rate reduction, inclusive of all
unbundled rate components, to be implemented effective August 1, 1999
shall be 5% from current rates. The average distribution rate for the
Company effective on August 1, 1999 shall be 2.1384 cents per kwh. The
MTC shall be set as the residual amount necessary to achieve the rate
reduction, after accounting for other unbundled rate components
established pursuant to this Order, including the distribution rate,
regulatory asset charge, state energy taxes including sales and use
tax, corporate business tax and TEFA, societal benefits charge, NNC,
and BGS charge. The DSM and LEAC overrecovery balances, including
accrued interest, shall not be utilized to offset regulatory asset
charges but shall instead be credited to, and become the starting
balance of, the deferred balance established pursuant to
DOCKET NOS. EO97070455,
EO97070456, EO97070457
<PAGE> 3
paragraph 27. Effective no later than January 1, 2001 the Company shall
implement a further aggregate rate reduction of at least 2% relative to
current rates (bringing the total rate reduction to at least 7%).
However, to the extent that the Company completes the divestiture of
generating assets and securitization of net owned generation stranded
costs, or successfully completes a NUG contract(s) restructuring,
buyout or buydown and securitization of net NUG stranded costs prior to
January 1, 2001, it shall implement a rate reduction reflecting the
full resultant savings no later than the date of the establishment of
the resultant TBC. To the extent that such savings result in the
implementation of a further rate reduction of less than 2%, Atlantic
shall in any event reduce rates effective January 1, 2001 to achieve
the 7% total rate reduction as of that date. To the extent that the
savings resulting from divestiture and securitization of net owned
generation stranded costs, and/or NUG restructuring buyout or buydown
and securitization exceeds 2%, Atlantic shall implement a rate
reduction beyond 7% to fully pass such savings on to customers, upon
the date of the establishment of the resultant TBC. To the extent that
the sum of the unbundled rate components as of July 31, 2002 exceeds
the price cap resulting from the implementation of a 10% aggregate rate
reduction relative to April 30, 1997 rates, which unbundled rate
components are to reflect any savings which have resulted from the
buyout, buydown, or restructuring and securitization of NUG contracts
implemented pursuant to paragraph 1(c) of the Stipulation, the Company
shall, consistent with the provisions of the Stipulation, achieve
effective August 1, 2002 the mandated 10% aggregate rate reduction
relative to April 30, 1997 rates.
Paragraph 2: The initial 5% (August 1, 1999) and final 10% (August 1,
2002) rate reductions are required by the Act, and shall not be
contingent upon divestiture and securitization of generation assets.
Paragraphs 5 and 6: The floor residential service ("RS") shopping
credits shall be increased by 0.50 cents per kwh for 1999 and 2000, and
by 0.55 cents per kwh in 2001, 2002 and 2003. The floor shopping
credits for commercial and industrial Secondary and Primary voltage
tariff customers (MGS-Sec, MGS-Pri, AGS-Sec, AGS-Pri, AGT-Sec, AGT-Pri)
shall be decreased in all years by 0.1 cents per kwh.
Paragraph 7: Atlantic shall apply both NUG contract power and
to-be-divested owned generation power (prior to the closure of the sale
of the generation assets) towards the BGS supply requirement, which
power shall be credited at the net BGS price (the floor shopping credit
less
DOCKET NOS. EO97070455,
3 EO97070456, EO97070457
<PAGE> 4
transmission cost, sales and use tax, line losses, ancillary services
and capacity reserve margin). Such credited prices shall be employed
for purposes of establishing the level of the NNC and establishing the
level of owned generation revenue requirement recovery (prior to the
completion of divestiture), in accordance with this Order. Atlantic
shall utilize and open competitive bidding process for BGS supply
requirements net of NUG Power and Owned Generation (Pre-Divesture).
Paragraph 8: The 12 month minimum BGS commitments requirement for
customers returning to BGS supply shall not apply to residential
customers who return to BGS for any reason. However, the Board will
monitor this issue and request related reports from the Company, and
may revisit this issue if gaming occurs, or if it is otherwise
determined by the Board to be appropriate.
Paragraph 9: Modified in accordance with modifications to paragraph 7.
Paragraph 11: We hereby clarify the language to indicate that the Board
is not pre-judging the reasonableness and prudence of the actual
parting contracts or financial instruments that the Company may procure
in accordance with this paragraph, and that any such costs are subject
to Board review and approval.
Paragraph 12: We hereby modify the language as necessary to conform
with the modifications to paragraph 7, and further clarify that
Atlantic shall reserve the right to bid out the BGS obligation net of
NUG power or to sell NUG power to the selected BGS supplier at the net
BGS price.
Paragraph 16: The Board concurs that the Company shall be permitted the
opportunity to recover 100% of its net owned generation stranded costs
(established definitively upon completion of the divsetiture) and NUG
contract costs, however we modify the language only so far as is
necessary to conform with the differing standards for recovery of net
generation stranded costs and 100% recovery of NUG stranded costs
provided in section 13 of the Act.
Paragraph 17: We hereby clarify the language to indicate that the net
book value shall reflect the net investment in each facility,
reflective of the gross investment less depreciation reserve less
accumulated deferred income tax, and investment tax credits if
appropriate, as of the closing date(s), and to clarify that the tax
impacts with respect to taxable gains and/or losses will be
DOCKET NOS. EO97070455,
4 EO97070456, EO97070457
<PAGE> 5
considered in calculating net stranded cost,
Paragraph 18: We hereby modify the language to indicate that while the
Board supports the Company's decision to auction its generation assets,
we are not pre-judging the prudence of Atlantic in implementing the RFP
and selecting a winner bidder(s), and that such final judgement will
come at the conclusion of the separate divestiture proceeding.
Paragraph 19: The Board recognizes the benefit of expediting its review
and approval of divestiture standards, and will endeavor to accomplish
same, but modifies the language to indicate that we cannot be bound at
this time by a specific timetable.
Paragraph 20: The Board recognizes that parting contracts that make
possible or enhance the sale of generating assets can be in the public
interest, but clarify the language as necessary to indicate that the
Board is not pre-judging prudence of actual parting contracts which may
be entered into by Atlantic; such judgement will be rendered after
Board review in the context of the separate divestiture proceeding.
Paragraph 21: The transfer of Deepwater and the combustion turbines
shall occur at a transfer value equal to the net book value of the
assets at the time of the transfer. This amount is approximately $9
million higher than that provided in the Stipulation, is intended to
reflect full and fair compensation for the assets, and will avert the
need for Atlantic to take a write-off prior to the transfer. We further
modify this paragraph such that if within the four year Transition
Period any transferred asset is sold to an unaffiliated company, the
net after tax gain over the adjusted book value will be shared equally
between the Company and customers. Further, as a condition of the
transfer during the transition period, Atlantic's affiliate shall offer
capacity from the transferred units for sale within the PJM control
area at market prices, and if the capacity is sold outside the PJM
control area, the Company's affiliate shall make the capacity subject
to recall by PJM during system emergencies.
Paragraph 22: During the period between August 1, 1999 and completion
of the divestiture of generation assets, MTC revenues shall be applied
to owned generation revenue requirements, including continued
depreciation of assets, and return on investment, operating and
maintenance expenses and fuel expenses, and, between the time of
divestiture closing and time of securitization closing, MTC revenues
shall be applied to provide a return on
DOCKET NOS. EO97070455,
5 EO97070456, EO97070457
<PAGE> 6
the net owned generation stranded cost at 13.0% pre-tax. At time of the
termination of the MTC (upon the establishment of the TBC), total MTC
revenues and market revenues received from the crediting of owned
generation power to BGS in accordance with paragraph 7 (as modified)
will be reconciled to the amounts indicated, including a review of the
prudence and reasonableness of the Company's operation of the units,
and the deferred balance will be reconciled accordingly to reflect a
resulting shortfall or excess.
Paragraph 23: We modify the language to provide that, during the
Transition Period, Atlantic will only retain a portion of savings from
NUG contract buyouts, buydowns or restructurings once the 10% aggregate
rate reduction relative to April 30, 1997 rates is achieved without the
use of cost deferrals. We further clarify the language to indicate that
NUG securitization approval is contingent upon such NUG contract
buyout, buydown or restructuring being approved by the Board and found
to be consistent with the standards in sections 13 and 14 of the Act.
Paragraph 24: The Board renders no determination at this time with
respect to the securitization of restructuring-related costs of
capital. The recovery of restructuring-related costs of a capital
nature via the MTC shall be subject to a reasonableness and
verification review by the Board, and shall be net of other sources of
recovery towards such costs, including Third Party Supplier Agreement
fees. The rate of return on unamortized restructuring-related costs
collected via the MTC shall be 13.0% pre-tax.
Paragraph 25: The recovery of restructuring-related costs of an
operating nature other than consumer education costs, as listed in
Schedule D, via the MTC shall be subject to reasonableness and
verification review by the Board, and shall be net of other sources of
recovery towards such costs, including Third Party Supplier Agreement
fees.
Paragraph 26: This is not appropriate language for a Board Order. AE
may reserve all its legal rights, however the Board rejects this
paragraph.
Paragraphs 27, 28 and 29: The Board hereby modifies this paragraph to
change references from "Deferred Revenues" to "Deferred Costs," and to
provide, with respect to the rate of return on the Deferred Costs
balance, that on any accrued underrecovery balance up to $50 million,
interest will be accrued at a rate equal to the then-current cost of
medium term debt. On any accrued deferred underrecovery balance amounts
in excess of $50 million,
DOCKET NOS. EO97070455,
EO97070456, EO97070457
<PAGE> 7
such excess amounts shall accrue interest at a rate equal to the
then-current cost of mid-term debt plus 350 basis points. The Board
further modifies the language to indicate that, while the Company shall
be provided the opportunity to fully recover Deferred Costs and related
interest in accordance with the provisions of the Stipulation, as
modified herein and consistent with the Act, the Board will not bestow
on Atlantic an "absolute right" to such recovery. Finally, we hereby
clarify the language to indicate that final approval of recoverability
of the Deferred Cost balance is subject to Board review of the prudence
and reasonableness of such costs.
Paragraph 30: The Board hereby clarifies the language to indicate that
the Company shall be provided with full and timely recovery of
transition bond charges in conformance with the standards set forth in
sections 14 through 27 of the Act, and that the Company shall be
provided the opportunity for full recovery of related and applicable
taxes via a separate MTC charge with a term identical to the
securitization financing pursuant to the standards set forth in
sections 13 and 14 of the Act.
Paragraph 31: With respect to the securitization of net NUG stranded
costs related to a contract restructuring, buyout or buydown, we hereby
clarify the language to conform with the clarifications rendered in
paragraph 23.
Paragraph 32: The Board will render no determination at this time with
respect to the securitization of restructuring-related costs of
capital.
Paragraph 36: We hereby clarify the language to indicate that
imputation of tax expenses or tax benefits on a utility stand-alone
basis is for ratemaking purposes as it applies to the computation of
divestiture proceeds, MTC revenues, divestiture and NUG buyouts as a
result of these matters only, and that such treatment has no
precedential value with regard to future rate cases pertaining to the
regulated rates of Atlantic.
Paragraph 38: While we recognize the desire for and potential benefit
of expeditious review and approval of NUG contract restructuring,
buyout or buydown proposals, and will make every effort to accomplish
same, the Board cannot be bound at this time to a specific timetable.
Paragraph 43: We clarify the language to indicate that recovery via the
MTC of expenses to redeem or retire outstanding capital in connection
with the
DOCKET NOS. EO97070455,
7 EO97070456, EO97070457
<PAGE> 8
recovery of stranded costs is subject to Board review that such costs
have been reasonably and prudently incurred. We also note that
reasonably and prudently incurred capital retirement and redemption
expenses associated with a securitization financing are included within
the definition of bondable stranded costs in the Act and may therefore
be securitized and recovered via the TBC.
Paragraph 44: The Board supports the need for an annual review of the
indicated charges and related deferred costs accruals, and further
notes that periodic true-ups of the TBC are required by the Act. We
clarify, however, that to satisfy the rate reduction provisions of the
Act, the Board may or may not actually adjust the indicated charges
(other than the TBC, and the BGS price as provided in elsewhere in the
Stipulation and in this Order) during the transition period.
Paragraph 47: The Board acknowledges that the Company may reserve its
rights, however we shall not adopt this paragraph.
In summary, subject to the conditions embodied herein, the rate
discounts provided by Atlantic, all stated relative to current rates, shall be
at a minimum as follows:
August 1, 1999 5%
January 1, 2001 7%
August 1, 2002 10.2%
The average shopping credits during the Transition Period shall be, at
a minimum, as follows:
Rate Class 1999 2000 2001 2002 2003
---------- ---- ---- ---- ---- ----
RS 5.65 5.70 5.75 5.80 5.85
RS-TOU 5.10 5.15 5.20 5.25 5.30
MGS-Sec 5.35 5.40 5.50 5.60 5.70
MGS-Pri 5.18 5.23 5.33 5.43 5.53
AGS-Sec 5.30 5.35 5.45 5.55 5.65
AGS-P ri 5.07 5.12 5.17 5.22 5.27
AGT-Sec 5.05 5.10 5.15 5.20 5.25
AGT-Pri 4.95 5.00 5.00 5.00 5.00
AGT-SubT 4.30 4.30 4.30 4.30 4.30
DOCKET NOS. EO97070455,
8 E097070456, EO97070457
<PAGE> 9
AGT-Trans 4.25 4.25 4.25 4.25 4.25
TGS 4.30 4.30 4.30 4.30 4.30
SPL/CSL 2.97 3.05 3.07 3.10 3.12
DDC 3.58 3.68 3.71 3.75 3.78
System Average 5.27 5.31 5.37 5.42 5.48
Within five (5) business days of the date of this Order, the Company is
HEREBY DIRECTED to submit to the Board a tariff compliance filing addressing the
provisions of this Summary Order, and to submit to the Board schedules that show
all accounting entries that will be required with respect to the transfer of the
combustion turbine and Deepwater generating facilities as a result of this
Order, for both Atlantic and the unregulated affiliate. The Company shall
consult with Staff to assure the adequacy of the required submissions
DATED: 7/15/99 BOARD OF PUBLIC UTILITIES
BY:
/s/ HERBERT H. TATE
----------------------------------
HERBERT H. TATE
PRESIDENT
/s/ CARMEN J. ARMENTI
----------------------------------
CARMEN J. ARMENTI
COMMISSIONER
/s/ FREDERICK F. BUTLER
----------------------------------
FREDERICK F. BUTLER
COMMISSIONER
ATTEST: /s/ MARK W. MUSSER
---------------------------------
MARK W. MUSSER
SECRETARY
DOCKET NOS. EO97070455,
9 EO97070456, EO97070457
<PAGE> 1
EXHIBIT D-5
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
================================================================================
DELMARVA POWER & LIGHT COMPANY;
ATLANTIC CITY ELECTRIC COMPANY;
DPL REIT, INC.; AND DOCKET NO. EC00-______-000
CONECTIV ATLANTIC GENERATION, LLC
================================================================================
JOINT APPLICATION FOR
APPROVAL OF THE TRANSFER OF
JURISDICTIONAL TRANSMISSION FACILITIES FROM
DELMARVA POWER & LIGHT COMPANY AND
ATLANTIC CITY ELECTRIC COMPANY TO
DPL REIT, INC., AND CONECTIV ATLANTIC GENERATION, LLC
I. INTRODUCTION
Delmarva Power & Light Company ("Delmarva"), Atlantic City Electric
Company ("Atlantic"), DPL REIT, Inc. ("CDG"),(1) and Conectiv Atlantic
Generation, LLC ("CAG")(2) (collectively, "the Applicants") submit this Joint
Application under Section 203 of the Federal Power Act ("the FPA") and Part 33
of the Commission's Regulations requesting authorization and approval for
Delmarva and Atlantic to transfer certain jurisdictional
- --------
(1) The name DPL REIT, Inc. will likely be changed either immediately
before or at the close of the contemplated transaction to Conectiv
Delmarva Generation, Inc. Hence, "CDG" is used to denote the name of
that company both before and after the name change.
<PAGE> 2
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 2
- --------------------------------------------------------------------------------
transmission facilities to CDG and CAG. The Delmarva and Atlantic facilities to
be transferred are referred to herein as the "Delmarva Facilities" and the
"Atlantic Facilities, respectively. The transfer of the Facilities in the
aggregate is referred to herein as "the Facility Transfer."
The Facility Transfer is in furtherance of the plan by Conectiv, the
parent of Atlantic and Delmarva, to sell most of the Delmarva and Atlantic
generating resources to independent third parties and to transfer the remainder
of those resources to affiliates who are not engaged in the transmission and
distribution business. Conectiv's overall intent is to convert Delmarva into a
wires and pipes company which provides only regulated electric transmission and
distribution services and regulated gas distribution services. Atlantic would be
a wires company which would provide only regulated electric transmission and
distribution service.
Approvals for the sale of the Delmarva and Atlantic generating
resources and appurtenant transmission facilities to unaffiliated parties are
already pending or are to be requested in separate Section 203 applications.(3)
This Application addresses only those generating units and the appurtenant
transmission facilities that are to be transferred from Delmarva and Atlantic to
CDG and CAG.
- ----------
(2) CAG will be formed within the next several weeks. The Commission will
be given prompt notice of the formation of that entity.
(3) A filing has already been made on December 9, 1999 in Docket No.
EC00-35-000 regarding the sale of the Delmarva and Atlantic ownership
interests in the Peach Bottom and Salem nuclear units. The sale of the
Delmarva and Atlantic fossil resources to unaffiliated parties is still
under negotiation.
<PAGE> 3
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 3
- --------------------------------------------------------------------------------
The Facility Transfer is an element of the ongoing reorganization and
restructuring of the electric utility industry in the states of Delaware, New
Jersey, Maryland and Virginia in which Delmarva and Atlantic have provided
regulated retail electric service for many years. By redefining the role of
Delmarva and Atlantic as wires companies and by transferring Delmarva and
Atlantic generating resources to affiliates that will participate in the
generation market but not in the wires business, the Facility Transfer
represents a major step in the restructuring of the electricity industry in
those states. The Facility Transfer promotes state restructuring policy, does
not impair the effectiveness of regulation, and does not have an adverse impact
on any customer.
The proposed closing date for the Facility Transfer is on or about May
1, 2000. Accordingly, the Applicants request approval of the Facility Transfer,
without hearing, by April 1, 2000.
II. THE APPLICANTS
DELMARVA: Delmarva is incorporated under the laws of the State of
Delaware and the Commonwealth of Virginia, and is a regulated "public utility"
or "public service company" in Delaware, Maryland and Virginia. Delmarva is also
a public utility under Section 201 of the FPA. Delmarva provides wholesale and
retail electric services in Delaware, Maryland and Virginia. Delmarva is also a
Delaware-regulated natural gas utility, providing retail services within New
Castle County, Delaware.
<PAGE> 4
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 4
- --------------------------------------------------------------------------------
ATLANTIC: Atlantic is incorporated under the laws of the State of New
Jersey, is subject to retail rate regulation by the New Jersey Board of Public
Utilities, and provides retail electric services throughout the southern third
of New Jersey.
CDG: CDG is currently a Delmarva subsidiary incorporated in Delaware.
CDG presently holds no assets and has no current business. CDG will acquire the
Delmarva Facilities. Upon its acquisition of jurisdictional facilities and its
sales of electricity at wholesale, CGD will become a public utility under
Section 201 of the FPA.
CAG: CAG will be an Atlantic subsidiary incorporated in Delaware. CAG
will acquire the Atlantic Facilities. Upon its acquisition of jurisdictional
facilities and its sales of electricity at wholesale, CAG will become a public
utility under Section 201 of the FPA.
OTHER AFFILIATES: Other Delmarva and Atlantic affiliates involved in
the Facility Transfer are ACE REIT, Inc. ("ACE REIT"), which will temporarily
hold CAG's common stock and Conectiv Energy Holding Company ("CEH"), a
soon-to-be-incorporated intermediate holding company within the Conectiv
corporate family.(4) CEH will ultimately own the common stock of CDG, CAG and
Conectiv Energy Supply, Inc. ("CESI"), a power marketer. The foregoing companies
are or will be direct or indirect subsidiaries of Conectiv, which is
incorporated in Delaware and is a registered public utility holding company
under the Public Utility Holding Company Act of 1935 ("PUHCA"). Conectiv's
- ----------
(4) The Applicants will notify the Commission of CEH's formation, which is
expected to occur within the next several weeks.
<PAGE> 5
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 5
- --------------------------------------------------------------------------------
electric utility and other subsidiaries are described at pages 3-5 of Exhibit B
to this Application.
III. ASSET OWNERSHIP AND DIVESTITURES
Delmarva now owns 2,728 MW of generating capacity. Conectiv plans the
sale to unaffiliated third parties of about 1,312 MW of that capacity,
consisting chiefly of base load generators, which Delmarva owns in whole or in
part. The remaining 1,416 MW is to be transferred to CDG pursuant to this
Application.
Atlantic owns 1,679 MW of generating capacity. Atlantic plans the sale
to unaffiliated third parties of about 1,135 MW of that capacity, consisting
chiefly of base load generators, which it owns in whole or in part. The
remaining 544 MW is being transferred to CAG pursuant to this Application.
Delmarva and Atlantic own 1,506 miles and 948 miles of transmission
lines, respectively, operating at voltages of 69 kV or above. None of those
transmission lines is proposed to be transferred under this Application. The
jurisdictional transmission facilities that are proposed to be transferred
hereunder consist of step-up transformers and associated equipment.
The following additional information regarding gas facility ownership
is provided, although it is immaterial to the authorizations requested through
this Application. Delmarva currently owns one FERC-jurisdictional gas asset, a
4.04 mile pipeline extending from the Delaware border into Pennsylvania where it
interconnects with Texas Eastern Transmission Corporation. See Delmarva Power &
Light Company,
<PAGE> 6
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 6
- --------------------------------------------------------------------------------
Docket No. CP92-153-000, 59 FERC paragraph 61,396 (1992). This Application does
not affect that pipeline. Delmarva also owns a non-jurisdictional gas line which
lies solely within Delaware and which is used primarily to supply natural gas as
a fuel to the Hay Road and Edgemoor generation stations. Those generating
stations are being transferred to CDG, which is also acquiring a 90% interest in
the non-jurisdictional gas line. The 10% interest in the line retained by
Delmarva will be used for Delmarva's local gas distribution business, including
transportation of third-party gas under its Delaware-approved retail gas
transportation tariffs.
IV. THE FACILITY TRANSFER
1. THE TRANSFER MECHANISM: The transaction to accomplish the Facility
Transfer has been structured to maximize financing flexibility and to minimize
tax consequences. The form of transaction will be in accordance with the
following description for the Delmarva Facilities and Atlantic Facilities,
respectively.
The Delmarva Facilities will be transferred to CDG, which is a
wholly-owned subsidiary of Delmarva, and was originally incorporated as a real
estate investment trust. After the Facility Transfer from Delmarva to CDG,
Delmarva will declare a capital dividend in the form of CDG common stock, which
will be transferred to Conectiv. Conectiv will transfer the CDG common stock to
CEH, which will become an intermediate holding company in the Conectiv corporate
family.
The Atlantic Facilities will be transferred to CAG, which will
temporarily become a wholly-owned subsidiary of Atlantic. Atlantic will then
transfer its common stock in CAG
<PAGE> 7
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 7
- --------------------------------------------------------------------------------
to ACE REIT, which is now a wholly-owned subsidiary of Atlantic. Atlantic will
then cause the transfer of ACE REIT's common stock to Conectiv, which will then
transfer that common stock to CEH.
The following two tables illustrate the intra-corporate transfers of
the Delmarva Facilities and the Atlantic Facilities and the corresponding
transfers of the common equity shares related to the Facilities:
<PAGE> 8
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 8
- --------------------------------------------------------------------------------
[DELMARVA FACILITIES FLOWCHART]
[ATLANTIC FACILITIES FLOWCHART]
The net effect of those transactions is that Delmarva's generating
facilities will be transferred to CDG and Atlantic's to CAG and the common
equity ownership related to the Delmarva and Atlantic Facilities will be
transferred to CEH. CDG and CAG will own no assets other than generation
facilities and appurtenant transmission facilities and will sell power
exclusively at wholesale. Both CDG and CAG will become subsidiaries of CEH,
which will be a directly-owned subsidiary of Conectiv.(5)
The following tables show for the relevant companies the Conectiv
corporate family on a pre-reorganization and post-reorganization basis.
- ----------
(5) If these transfers require Section 203 authorization for Conectiv
affiliates other than Atlantic, Delmarva, CDG and CAG, that request is
hereby made.
<PAGE> 9
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 9
- --------------------------------------------------------------------------------
[PRE-REORGANIZATION FLOWCHART]
[POST-REORGANIZATION FLOWCHART]
Thus, Delmarva and Atlantic will be in the transmission and distribution
business in those states in which they now operate. CEH will be an intermediate
holding company and indirectly will be in the power production and sales
business through its ownership of CDG, CAG and CESI.
<PAGE> 10
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 10
- --------------------------------------------------------------------------------
2. THE FACILITIES:
The following generating units are proposed to be transferred:
<TABLE>
<CAPTION>
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Generating Station Type of Unit MW Nameplate Capacity Current Owner(6)
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Edgemoor Units 3, 4 and 5 and Coal/Oil Steam (3) Units 3-4 252 MW Delmarva
peaking unit Coal/Oil Steam (4) (combined)
Gas/Oil Steam (5) Unit 5 446.4 MW
Gas Turbine peak Peak Unit 15 MW
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Christiana Gas Turbine 56 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Madison St. Gas Turbine 14 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Tasley Gas Turbine 27 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Crisfield Oil Internal Comb. 11.4 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Bayview Oil Internal Comb. 12 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
West Sub Gas Turbine 20 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Del. City Peaking Gas Turbine 21 MW Delmarva
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Hay Road Units 1-4 Gas Turbine (1-3) 541 MW (1-4) Delmarva
Comb. Cycle (4)
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Carlls Corner Oil/Gas Turbine 83.8 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Cedar Oil Turbine 63.1 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Cumberland Oil/Gas Turbine 106.6 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Mickelton Gas Turbine 71.2 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Middle Oil Turbine 79.7 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Missouri Ave. Oil Turbine 55.8 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
Sherman Ave. Oil/Gas Turbine 84.0 MW Atlantic
- ------------------------------- ----------------------------- --------------------------------- ----------------------------
</TABLE>
The transmission assets to be transferred to CDG and CAG consist of step-up
transformers, radial lines, and associated equipment of the with those
generation assets. The specific jurisdictional assets that are to be transferred
are listed by generating station in Appendix A-3 hereto.
- ----------
(6) All the Atlantic Facilities are located in New Jersey. All the Delmarva
Facilities are located in Delaware except the Crisfield unit which is
located in Maryland, and the Tasley and Bayview units which are located
in Virginia.
<PAGE> 11
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 11
- --------------------------------------------------------------------------------
V. OTHER FILINGS
In addition to this filing, the Applicants over the next several weeks
will make the following additional filings with the Commission related to the
Facility Transfer. Delmarva and Atlantic will each file Interconnection and
Operation Agreements under the provisions of Section 205 of the FPA. Pursuant to
those Agreements, Delmarva and Atlantic will interconnect the transferred
generation units to their transmission systems. Separate Agreements will be
filed for each generation station.
As of yet, CDG and CAG do not have tariffs for the wholesale sale of
power. CDG and CAG will file proposed market-based rate tariffs with the
Commission to become effective on or before the date the Facility Transfer
actually takes place. In compliance with the order granting it market-based rate
authority, CESI will file a change of status notice to the Commission regarding
the sale of the Delmarva and Atlantic generating resources to non-affiliated
parties and the Facility Transfer to CAG and CDG.
It is contemplated that a form of power sales agreement may be created
in which CAG and CDG would sell power to CESI and that another agreement may be
created for the sale of power by CESI to Delmarva to help meet Delmarva's
default retail load obligations during the period of transition to full retail
choice in the three state jurisdictions in which Delmarva operates. The
Commission's authorization would be requested in the event an affiliate purchase
by Delmarva were to be made.
<PAGE> 12
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 12
- --------------------------------------------------------------------------------
At some point in the future, it is likely that CDG and CAG will file to
become Exempt Wholesale Generators (EWGs) under PUHCA. However, the Applicants
do not seek a ruling on EWG status at this time.
VI. THE FACILITY TRANSFER IS CONSISTENT WITH THE PUBLIC INTEREST (18
C.F.R. SECTION 33.2(j))
1. INTRODUCTION
The Commission's approval of a proposed transaction requires a finding
that it "will be consistent with the public interest." 16 U.S.C. Section 824(b).
As stated in IES Industries, Inc., et al., 65 FERC paragraph 62,191 at 64,416
(1993) (footnote omitted):
An applicant need not show that a positive benefit will result
from a proposed merger or acquisition of facilities in order
to support a public interest finding. Rather, an applicant is
required to make a full disclosure of all material facts and
to show that the disposition is consistent with the public
interest.
This public interest finding thus requires a showing of consistency or
compatibility with the public interest, not that the transaction furthers or is
the only means of achieving the public interest.(7) In its December 1996 Merger
Policy Statement ("Policy Statement"),(8) the Commission said that it would
consider three elements in evaluating merger
- ----------
(7) Pacific Power & Light Co. v. FPC, 111 F.2d 1014, 1016 (9th Cir. 1940);
Northeast Utilities Service Co. v. FERC, 993 F.2d 937, 951 (1st Cir.
1993), quoted in Entergy Services, Inc. and Gulf States Utilities Co.,
65 FERC paragraph 61,332 at 62,471 (1993). There is no requirement that
applicants make a showing of a "positive benefit of the merger." Utah
Power & Light Co., 47 FERC paragraph 61,209 at 61,750 (1989), remanded
on other grounds, Environmental Action v. FERC, 939 F.2d 1057, 1061
(D.C. Cir. 1991); Entergy Services, Inc., 62 FERC paragraph 61,073 at
61,370 (1993) (footnotes and citations omitted).
(8) Inquiry Concerning The Commission's Merger Policy Under The Federal
Power Act: Policy Statement, Order No. 592, Docket No. RM96-6-000,
Regulations Preambles, paragraph 31,044 at 30,109 (December 30, 1996).
<PAGE> 13
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 13
- --------------------------------------------------------------------------------
applications: the effects of the merger on competition, on regulation, and on
rates. Assuming those criteria apply to the Facility Transfer, the Facility
Transfer is clearly consistent with the public interest.
2. EFFECT ON COMPETITION:
(i) NO INCREASE IN MARKET CONCENTRATION: The test of whether a
transaction adversely affects competition is whether the transaction increases
market concentration above safe harbor levels in relevant markets. The planned
Facility Transfer can have no impact on market concentration since Conectiv,
through its ownership of Delmarva and Atlantic, already controls all of the
assets being transferred to other subsidiaries of Conectiv, and will continue to
control those assets through its ownership of those subsidiaries. Thus, a
threshold determination can be made that the Facility Transfer is one of those
Section 203 transactions which cannot have any effect on market concentration
and for which a market concentration analysis of the kind described in Appendix
A of the Merger Policy Statement is not required. See Appendix A of the Policy
Statement (paragraph 31,044 at 30,128, et seq.).(9)
(ii) THE FACILITY TRANSFER WILL PROMOTE COMPETITION: While the
Facility Transfer will not affect market concentration, it will enhance the
competitive process
- ----------
(9) See also the Commission's Notice of Proposed Rulemaking ("Filing
Requirements NOPR") in Docket No. RM98-4-000 to establish specific
filing requirements that are consistent with the Policy Statement
(April 16, 1998). Revised Filing Requirements Under Part 33 of the
Commission's Regulations, Notice of Proposed Rulemaking, Docket No.
RM98-4-000, 63 Fed. Reg. 20340 (April 24, 1998), Regulations
Preambles, paragraph 32,528 at 33,360 (April 16, 1998).
<PAGE> 14
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 14
- --------------------------------------------------------------------------------
and benefit consumers. For decades, Delmarva and Atlantic have been vertically
integrated utilities providing retail customers with bundled generation,
transmission and distribution services and providing wholesale customers with
bundled generation and transmission services. Through restructuring, Delmarva's
and Atlantic's intent is to eventually withdraw from the business of selling
power and to concentrate their electric public utility activities on the
transmission and distribution businesses. CDG and CAG, the affiliates acquiring
the Delmarva and Atlantic Facilities, will participate in the wholesale sales
and generation businesses, but not the transmission and distribution businesses.
This restructuring by the Conectiv companies is consistent with the
restructuring plans of the four states - New Jersey, Delaware, Maryland and
Virginia - in which the companies will operate. Those state policies favor
deregulated, competitive generation markets. The new Conectiv arrangements will
accommodate to those policies because Delmarva and Atlantic, functioning as
wires companies, will facilitate direct customer choice through the provision of
retail wheeling services. These new arrangements will also promote the policies
of this Commission, which has taken steps to encourage the establishment of
competitive power supply markets.
(III) COMPETITION WITHIN PJM: The PJM market area with which
this Facility Transfer will take place is workably competitive. See the
Commission's March 10, 1999 order approving the request of the PJM Supporting
Companies, including Delmarva and Atlantic, for market-based pricing authority
based on a finding
<PAGE> 15
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 15
- --------------------------------------------------------------------------------
that in a majority of relevant markets studied the Commission's analysis showed
results near or below the "traditional thresholds used by the Commission in
market-based pricing cases." Atlantic City Electric Company, et al., 86 FERC
paragraph 61,248 at 61,902 (1999) (ftn. omitted). That determination supports
the conclusion that the Applicants cannot exercise market power in PJM either
separately or together either before or after the Facility Transfer.
(IV) VERTICAL CONSIDERATIONS AFFECTING COMPETITION: The
Applicants have no vertical market power. The Delmarva and Atlantic transmission
systems are committed to operation and control by the PJM Interconnection,
L.L.C. ("PJM-ISO"). CDG and CAG do not have a transmission tariff because, as
previously noted, their transmission facilities will be limited to step-up
transformers and related equipment and will be used and useful only to the
associated generation stations. The Applicants also lack market power regarding
generating sites, fuel, fuel transportation facilities, or any other factors
that could create entry barriers to market participation. The Facility Transfer
cannot enhance the Applicants' vertical market power for the additional reason
that the Facility Transfer is internal to the Conectiv corporate family.
3. EFFECT ON REGULATION: The Facility Transfer does not result in
impairment of Federal regulation. In the application to merge Delmarva and
Atlantic, the so-called "Ohio Power" waiver was made concerning pre-emptive
effects of SEC jurisdiction; i.e., the commitment was made to follow in
wholesale ratemaking the
<PAGE> 16
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 16
- --------------------------------------------------------------------------------
Commission's policy regarding the treatment of the costs and revenues of
inter-affiliate transactions.(10) The Applicants hereto reaffirm that
commitment.
The Facility Transfer will also not diminish the regulatory authority
of the states of New Jersey, Delaware, Maryland and Virginia, whose regulation
over Delmarva and Atlantic will not be affected by the Facility Transfer. In
addition, the Facility Transfer is consistent with the restructuring policies of
those States or pre-existing state law.
4. EFFECT ON RATES:
The Facility Transfer will have no material effect on rates to
wholesale customers. Since this is an internal restructuring rather than a
merger of formerly independent companies, the costs to effectuate the transfer
will not be significant and should be more than offset by the achievement of
efficiencies resulting from the dedication of Delmarva and Atlantic to the
transmission and distribution businesses and the dedication of CDG and CAG to
the production business. The Facility Transfer should have no adverse effect on
operating costs because the costs associated with the Delmarva and Atlantic
Facilities transferred to CDG and CAG will no longer be recorded as costs of
Delmarva and Atlantic.
Delmarva serves seven wholesale requirements customers under a
requirements form of contract with fixed or fixed escalator demand and energy
charges without fuel clauses. An eighth contract, with Old Dominion Electric
Cooperative
- ----------
(10) Policy Statement at paragraph 30,112, 30,124-125. See also Ohio Power
Co. v. FERC, 954 F.2d 779, 782-786 (D.C. Cir. 1992), cert. denied, 498
U.S. 73 (1992).
<PAGE> 17
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 17
- --------------------------------------------------------------------------------
("ODEC"), was filed on November 30, 1999, and, if accepted by the Commission,
will result in all power sales services from Delmarva to ODEC being provided at
fixed prices without a fuel clause. The Facility Transfer can have no effect on
those eight customers.
Delmarva serves two additional wholesale customers, the Town of
Seaford, Delaware and City of Berlin, Maryland under partial requirements
contracts which contain fuel adjustment clauses and which are scheduled to
expire in 2003 and 2001 respectively. Because these customers account for a very
small percentage, less than 1% in 1998, of Delmarva's total energy sales,
Delmarva has neither the incentive nor the ability to undertake a power purchase
strategy based on the design of the two customers' FACs. Moreover, in order to
serve retail customers, the eight wholesale customers, and Seaford and Berlin,
Delmarva will replace the energy from the Delmarva Facilities either through
purchases of power in the PJM market or through a power purchase from CESI as
described above. In either case, any effect of transferring these Facilities on
fuel rates for these two customers would be miniscule.
Atlantic has no wholesale customers. Thus, the Facility Transfer should
not affect any Atlantic rate.
VII. TRANSMISSION TARIFFS
Delmarva and Atlantic have committed their facilities to the operation
and control of the PJM ISO, and thus provide open-access transmission service
through the PJM ISO transmission tariffs. CDG's and CAG's principal
"transmission" facilities will consist
<PAGE> 18
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 18
- --------------------------------------------------------------------------------
of step-up transformers, which are classified as "transmission" for Section 203
purposes and "production" for Section 205 purposes. CDG's and CAG's
"transmission" facilities are not needed by PJM to render service within PJM and
would not be needed by any market participant other than CDG and CAG.
Accordingly, CDG and CAG do not have transmission facilities to commit to the
PJM ISO or that would justify the filing of its own Order No. 888 open access
tariff.
VIII. REQUEST FOR WAIVERS
As noted above, after the Facility Transfer and upon engaging in
wholesale sales, CDG and CAG will be FPA public utilities who will sell power
under market-based rates, will not have any wholesale or retail requirements
customers, and will not make inter-affiliate power sales to Delmarva or Atlantic
unless the Commission first approves them. CEH will be a non-operating company
that owns CDG and CAG. Thus, CEH, CDG, and CAG will not own any transmission
lines nor have any franchised retail service territory, or wholesale customers
served under cost of service rates. Applicants therefore request that the
Commission grant CEH, CDG and CAG waivers of certain of its filing requirements
and grant such blanket authorizations as have been authorized in previous orders
involving sellers of power at market-based rates. Specifically, they request (1)
waiver of the accounting and other requirements of Parts 41, 101, and 141 of the
Commission's regulations; (2) permission to file an abbreviated statement with
respect to Part 45 of the Commission's regulations relating to interlocking
directorships; and (3) a blanket authorization under Part 34 of all future
issuances of securities and
<PAGE> 19
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 19
- --------------------------------------------------------------------------------
assumption of liability. See, e.g., Kincaid, 78 FERC paragraph 61,082 at 61,300
(1997); USGen Power Services, L.P., 73 FERC paragraph 61,302 at 61,847 (1995);
Harbor Generation Co., 86 FERC paragraph 61,255 at 61,920 (1999); Mobile Energy
Services Co., 86 FERC paragraph 61,196 at 61,185 (1999); and Koch Power
Louisiana, LLC, 86 FERC paragraph 61,029 at 61,128 (1999). CDG and CAG will
request a waiver of the reporting requirements of subparts B and C of Part 35 of
the Commission's regulations (except sections 35.12(a), 35.13(b), and 35.16)
when they file their applications for market-based rates.
IX. INFORMATION SUBMITTED UNDER THE ACQUISITION AND MERGER
FILING REQUIREMENTS OF 18 C.F.R. SECTION 33.2(a) THROUGH (L)
a. NAMES AND ADDRESSES OF PRINCIPAL BUSINESS OFFICES
(18 C.F.R. SECTION 33.2(a))
Delmarva Power & Light Company
800 King Street
P.O. Box 231
Wilmington, DE 19899-0231
Atlantic City Electric Company
800 King Street
P.O. Box 231
Wilmington, DE 19899-0231
DPL REIT, Inc.
800 King Street
P.O. Box 231
Wilmington, DE 19899-0231
Conectiv Atlantic Generation, LLC
800 King Street
P.O. Box 231
Wilmington, DE 19899-0231
<PAGE> 20
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 20
- --------------------------------------------------------------------------------
b. NAMES AND ADDRESSES OF PERSONS AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS (18 C.F.R. SECTION 33.2(b))
For All Applicants:
Randall V. Griffin, Esquire
Senior Counsel
CONECTIV
Legal Department
800 King Street
P.O. Box 231
Wilmington, DE 19899-0231
Telephone: (302) 429-3016
Facsimile: (302) 429-3801
E-mail: [email protected]
Carmen L. Gentile, Esquire
BRUDER, GENTILE & MARCOUX, L.L.P.
1100 New York Avenue, N.W.
Suite 510 East
Washington, D.C. 20005-3934
Telephone: (202) 783-1350
Facsimile: (202) 347-2644
E-mail: [email protected]
Mr. J. Mack Wathen
Director of Regulatory Affairs
CONECTIV
800 King Street
P.O. Box 231
Wilmington, DE 19899-0231
Telephone: (302) 429-3285
Facsimile: (302) 429-3230
c. DESCRIPTION OF TERRITORIES SERVED BY COUNTY AND STATE
18 C.F.R. SECTION 33.2(c))
Delmarva provides and/or delivers electricity at retail in Delaware,
Maryland and Virginia. The Delaware counties in which this service is provided
are New Castle, Kent and Sussex. The Maryland counties are Caroline, Cecil,
Dorchester, Harford, Kent,
<PAGE> 21
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 21
- --------------------------------------------------------------------------------
Queen Anne's, Somerset, Talbot, Wicomico and Worcester. The Virginia counties
are limited to Accomack and Northhampton. Atlantic's service area is the
southern third of New Jersey. CDG, CAG and Conectiv do not have service areas.
None of these entities, including Delmarva and Atlantic, holds hydroelectric
licenses.
d. BRIEF DESCRIPTION OF THE FACILITIES OWNED OR OPERATED FOR
TRANSMISSION OF ELECTRIC ENERGY IN INTERSTATE COMMERCE OR THE
SALE OF ELECTRIC ENERGY AT WHOLESALE (18 C.F.R.SECTION
33.2(d))
1. DELMARVA TRANSMISSION FACILITIES
See FERC Form 1 for Delmarva for year ended December 31, 1998, pages
422-427.7 for Delmarva owned transmission facilities. See Appendix A-1 hereto.
2. ATLANTIC TRANSMISSION FACILITIES
See FERC Form 1 for Atlantic for year ended December 31, 1998, pages
422-427.2 for Atlantic owned transmission facilities. See Appendix A-2 hereto.
3. CDG AND CAG TRANSMISSION FACILITIES
CDG and CAG do not currently own any transmission facilities or other
facilities for the wholesale sale of electric energy.
e. DESCRIPTION OF TRANSACTION AND CONSIDERATION (18 C.F.R.
SECTION 33.2(e))
The Application is for the internal transfer of assets among affiliates
for the purpose of and in the manner heretofore described as part of an overall
divestiture plan.
<PAGE> 22
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 22
- --------------------------------------------------------------------------------
f. STATEMENT OF JURISDICTION FACILITIES TO BE TRANSFERRED
(18 C.F.R. SECTION 33.2(f))
The Facilities include transmission facilities appurtenant to the
generating units being transferred that are included with the cost information
provided in paragraph (g) below.
<PAGE> 23
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 23
- --------------------------------------------------------------------------------
g. COST OF FACILITIES INVOLVED IN THE TRANSFER (18 C.F.R.
SECTION 33.2(g))
The attached tables show the original cost less accumulated
depreciation of the transmission plant to be transferred as part of the Facility
Transfer. The tables are compiled by unit of property. See Appendix A-3 hereto.
h. STATEMENT OF EFFECTS ON ANY CONTRACT FOR THE PURCHASE, SALE OR
INTERCHANGE OF ELECTRIC ENERGY (18 C.F.R. SECTION 33.2(h))
The transaction will not have any effect upon Delmarva's or Atlantic's
ability to meet its contractual obligations. Delmarva's and Atlantic's access to
transmission facilities in order to meet their contractual obligations will be
the same after the transaction as it was before the transaction. The transfer of
the transmission facilities is ancillary to the generating units transfers,
which are outside this Commission's jurisdiction; nevertheless, the transfer of
the generating facilities will not diminish Delmarva's and Atlantic's ability to
meet their contractual obligations. Following the Facility Transfer, Delmarva
will continue to meet its contractual obligations through power purchases.
i. STATEMENT REGARDING OTHER REQUIRED FILINGS (18 C.F.R. SECTION
33.2(i))
The other required regulatory filings are:
1. The transfer of Delmarva Facilities to an affiliate will
require approval from the Virginia State Corporation
Commission ("VSCC").
2. The transfer of Atlantic Facilities to an affiliate will
require approval from the New Jersey Board of Public Utilities
("NJBPU").
3. The transfer of Delmarva and Atlantic Facilities and stock to
affiliates within the Conectiv holding company group will
require approval by the Securities and Exchange Commission.
<PAGE> 24
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 24
- --------------------------------------------------------------------------------
4. Although not required to effectuate the transfer of the
Delmarva and Atlantic Facilities, filings will be made before
the Maryland Public Service Commission and the Delaware Public
Service Commission to obtain certain specific findings
required under section 32(c) of PUCHA, which are necessary in
order to treat existing generation facilities as "eligible
facilities" that can be held by an Exempt Wholesale Generator.
The VSCC and NJBPU will be asked to make the same findings as
part of the approvals sought in the filings referenced above.
j. PUBLIC INTEREST CONSIDERATIONS (18 C.F.R. SECTION 33.2(j))
See Part V of this Application.
k. STATEMENT OF FRANCHISES HELD (18 C.F.R. SECTION 33.2(k))
Delmarva and Atlantic franchises are attached as Appendix A-4. No other
applicant holds franchises.
l. FORM OF NOTICE FOR THE FEDERAL REGISTER (18 C.F.R. SECTION
33.2(l))
The required form of notice is attached to the filing letter.
X. REQUIRED EXHIBITS UNDER 18 C.F.R. SECTION 33.3
Board of Directors' resolutions regarding the Facility Transfer
(Exhibit A) will be furnished when issued. Exhibit B concerning control or
ownership is attached. Exhibit C journal entries are enclosed, but the
Applicants request waiver of the other requirements of Exhibit C and the
requirements of Exhibits D through F. In accordance with Exhibit G, all
regulatory filings will be provided shortly after they are made. Since this is a
transfer among affiliates, the Applicants do not have contracts with
unaffiliated parties as would be required by Exhibit H. The map required by
Exhibit I is attached.
<PAGE> 25
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 25
- --------------------------------------------------------------------------------
XI. PROCEDURAL MATTERS
1. REQUEST FOR APPROVAL WITHOUT HEARING
The Applicants request that the Commission approve the Facility
Transfer without hearing on the basis of the considerations and circumstances
set forth above and because, as shown above, the Facility Transfer will promote
competition and not adversely effect rates or regulation.
2. SERVICE
The Applicants, by overnight mail, have served a copy of this
Application, including all attached materials, on the Delaware Public Service
Commission, Maryland Public Service Commission, Virginia State Corporation
Commission, the New Jersey Board of Public Utilities, the ten Delmarva wholesale
requirement customers identified above, and the PJM-ISO.
3. CLOSING DATE
The Applicants intend to close on the transactions required to effect
the transfer as soon as practicable after receiving the last of the required
regulatory approvals. The Applicants propose to close the transfer on or about
May 1, 2000 and will advise the Commission of the closing date promptly upon its
occurrence.
XII. CONCLUSION
The Applicants jointly request the following:
<PAGE> 26
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 26
- --------------------------------------------------------------------------------
1. FINDINGS
The Facility Transfer will not have an adverse effect on competition,
regulation or rates, and fulfills all applicable requirements for authorization
under Section 203 of the Federal Power Act and Part 33 of its Regulations; and
that good cause has been shown to grant the waivers requested in Part VIII
hereof.
2. REQUESTED COMMISSION ACTIONS
The Applicants request the following actions:
1. Approval of the Facility Transfer to the full extent
required by the Federal Power Act, and any other authorizations or approvals
incidental thereto that may be required;
2. Approval of the Facility Transfer on the Application and
pleadings, without hearing;
3. Grant of the waivers requested in Part VIII hereof; and
<PAGE> 27
Delmarva Power & Light Company, et al.
Docket No. EC00-____-000 Page 27
- --------------------------------------------------------------------------------
4. Waivers of any filing requirements or other regulations as
the Commission may find necessary or appropriate to allow this Application to be
accepted for filing and granted.
Respectfully submitted,
BRUDER, GENTILE & MARCOUX, L.L.P.
Of Counsel:
By__________________________________
Randall V. Griffin Carmen L. Gentile
Senior Counsel
CONECTIV 1100 New York Avenue, N.W.
Legal Department Suite 510 East
800 King Street Washington, D.C. 20005-3934
Post Office Box 231 Telephone: 202/783-1350
Wilmington, DE 19899-0231 Facsimile: 202/737-9117
Telephone: 302/429-3016 E-mail: [email protected]
--------------------
Facsimile: 302/429-3801
E-mail: [email protected] Attorneys for Delmarva Power & Light
---------------------------- Company, Atlantic City Electric Company,
DPL REIT, Inc. and Conectiv Atlantic
Generation, LLC
DATED: December 17, 1999
<PAGE> 1
Exhibit D-7
[BRUDER, GENTILE & MARCOUX, L.L.P. LETTERHEAD]
March 1, 2000
The Honorable David P. Boergers
Secretary
Route ES-1, Room 11G-1
Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, DC 20426
Re: Delmarva Power & Light Company and
Atlantic City Electric Company
Request for Approval of Journal Entries to Reflect
Dividend Payments out of Paid-In Capital
----------------------------------------
Dear Mr. Boergers:
This letter concerns proposed dividend payments out of paid-in capital
by Delmarva Power & Light Company ("Delmarva") and Atlantic City Electric
Company ("Atlantic") in connection with their transfer of certain facilities to
their affiliates Conectiv Delmarva Generation ("CDG") and Conectiv Atlantic
Generation ("CAG"), respectively. Proposed journal entries reflecting then
available data were included in and the facility transfer to CDG and CAG are
described in the December 17, 1999 application which Delmarva and Atlantic
submitted to the Commission under Section 203 of the Federal Power Act ("FPA")
in Docket No. EC00-40-000 ("Section 203 Application"). The purpose of this
letter is to request the Commission's approval of the accounting for such
dividend payments as reflected in the journal entries (Appendix A) submitted
with the Section 203 application and a finding as part of that approval that
such payments are not prohibited by Section 305(a) of the FPA.(1)
Conversion of Delmarva and Atlantic Wires Companies: As explained in
the Section 203 application, Conectiv proposes to sell most of the Delmarva and
Atlantic generating resources (nuclear and chiefly base load fossil) to
independent third parties and to transfer the remaining resources (chiefly
intermediate and peaking) to CDG and
- --------
(1) The data for the actual journal entries would be developed when the
facility transfers are completed.
<PAGE> 2
The Honorable David P. Boergers
March 1, 2000
Page 2
- --------------------------------------------------------------------------------
CAG who are not engaged in the transmission and distribution business. The total
Delmarva and Atlantic electric generating capacity to be sold to independent
third parties is 2,447 MW. The resources to be transferred to CDG and CAG
represent 1,960 MW.
The sale of the Delmarva and Atlantic nuclear generating facilities is
the subject of pending Section 203 applications in Docket Nos. EC00-34-000 and
EC00-35-000. Delmarva and Atlantic have recently entered into purchase and sale
agreements for the sale of their non-CDG and non-CAG fossil facilities, and the
pertinent Section 203 applications for those transactions will be submitted to
the Commission within the next several weeks.
Conectiv's overall intent is to convert Delmarva and Atlantic into
wires companies that provide only regulated electric transmission and
distribution services.(2) After the sale of the 2,447 MW to third parties and
the transfer of 1,960 MW to CDG and CAG, the two utilities will own no
generating assets. They will also gradually exit from the power sales business.
For an interim period, they will continue to serve retail customers on a default
basis until those customers find new suppliers. Delmarva will also continue to
procure the power supply for existing wholesale customers, but only until those
customers' current wholesale contracts expire.(3)
The Capital Dividends: As noted, the transactions giving rise to the
capital dividends are the Delmarva and Atlantic transfer of facilities to CDG
and CAG which are described in detail on pages 6-8 of the Section 203
application.(4) Those pages include charts illustrating the common stock and
facility transfers as well as the pre-reorganization and post-reorganization
structure of the Conectiv companies. The three pages are attached as Appendix B
to this letter.
The capital dividend payments consist of (i) Delmarva's capital
dividend in the form of CDG common stock to be paid to Conectiv(5) and (ii)
Atlantic's capital dividend in the form of ACE REIT common stock to be paid to
Conectiv.(6) The Appendix A journal entries submitted with the Section 203
application do indicate that these dividends will
- ----------
(2) Delmarva will also continue to provide regulated gas distribution
services.
(3) Conectiv hopes that the sale of the nuclear facilities and the transfer
of the facilities to CDG and CAG will both be accomplished by May 1,
2000. Conectiv expects the fossil sale to third parties to be
accomplished by the fall of this year.
(4) The payment of dividends out of paid-in capital has no relationship to
the sale of the nuclear and fossil plant to independent third parties.
(5) Conectiv will then transfer the CDG common stock to Conectiv Energy
Holding Company ("CEH"), an intermediate holding company within the
Conectiv corporate family. Thus, CDG will own the former Delmarva
facilities and CEH will own CDG.
(6) Atlantic transfers facilities to CAG and then contributes the ownership
of CAG to ACE-REIT, a wholly-owned subsidiary of Atlantic. The effect
of the dividend to Conectiv of ACE-REIT stock is to transfer indirect
ownership of the facilities to Conectiv, which then contributes the
stock to CEH.
<PAGE> 3
The Honorable David P. Boergers
March 1, 2000
Page 3
- --------------------------------------------------------------------------------
be paid out of paid-in capital. However, the use of paid-in capital as the
source for the dividends is not stated explicitly in the Section 203
application. Therefore, Conectiv deemed it appropriate to make this filing with
the Commission to ensure that the Commission is apprised of all facets of the
transaction.
Like-Kind Transaction: Conectiv foresees the possibility of a
"like-kind" transaction with an unaffiliated purchaser of its fossil facilities.
Pursuant to this transaction, if it takes place, Conectiv through CDG would
retain its ownership interests in the Keystone and Conemaugh generating units
for approximately three months. Within an additional three months thereafter,
CDG would obtain replacement property in the form of a new generating unit in
exchange for its interest in Keystone and Conemaugh. If the "like-kind"
transaction takes place, the payment of dividends out of paid-in capital would
be increased as described hereinafter.
Capital Payments: The following table is based on unaudited data as of
December 31, 1999, and assumes that the above described like-kind transaction
does and does not take place. Based on those assumptions, the table shows the
effect of the accounting for the asset transfer and stock dividend as paid out
of paid-in capital as opposed to retained earnings:
<TABLE>
<CAPTION>
Capitalization as of December 31, 1999
($000)
As reported: DELMARVA ATLANTIC
-------- --------
Like-Kind No Like-Kind
<S> <C> <C> <C>
Common Stock Par Value 2 2 54,963
Additional paid-in-capital 528,893 528,893 493,007
Retained earnings 147,288* 147,288* 129,981
Total Common equity 676,183 676,183 677,951
Book Equity Transfer (amounts as of 7/31/99) 301,410 275,057 77,212
FERC Section 203 filing:
Pro forma:
Common Stock Par Value 2 2 54,963
Additional paid-in-capital 227,483 253,836 415,795
Retained earnings 147,288* 147,288* 129,981
Total Common equity 374,733 401,126 600,739
</TABLE>
* Reflects an extraordinary charge, net of income taxes, of $253.6MM
recorded in third quarter 1999.
Delmarva lacks sufficient retained earnings to support the asset transfer
whether or not the like-kind transaction takes place and must make the payment
out of paid-in capital.
<PAGE> 4
The Honorable David P. Boergers
March 1, 2000
Page 4
- --------------------------------------------------------------------------------
While Atlantic does have a sufficient level of retained earnings to support the
asset transfer, Conectiv desires to account for both transfers as a dividend out
of paid-in capital. This is a temporary situation. The sale of fossil facilities
to unaffiliated third parties will permit an increase in Delmarva and Atlantic
retained earnings (above the post-dividend level) and a reduction in debt.
The Statute: Section 305(a) of the Federal Power Act provides:
It shall be unlawful for any officer or director of any public
utility to receive for his own benefit, directly or
indirectly, any money or thing of value in respect of the
negotiation, hypothecation, or sale by such public utility of
any security issued or to be issued by such public utility or
to share in any proceeds thereof, or to participate in the
making or payment of any dividends of such public utility from
any funds properly included in capital account. 16 U.S.C. '
825d (a)(1994) (emphasis added).
Conectiv submits that Section 305(a) should not be construed as
prohibiting the payment of dividends under the circumstances presented here. As
the Commission recently noted, this statute had not previously been interpreted
by the Commission or the courts, and there are no explicit statements in the
legislative history of Section 305 which discuss the concern Congress was
seeking to address in enacting the provision. See Citizens Utilities Co., 84
FERC paragraph 61,158 at 61,864 (1998). In Citizens, the Commission examined the
practices which led to passage of the legislation, and concluded that Congress's
concern was abuses such as the failure to identify the funds from which
dividends were being paid, and the payment to holding companies of excessive
dividends by their operating companies. The Commission also commented that a
"key [Congressional] concern...was corporate officials raiding corporate coffers
for their personal financial benefit." Id. Finding no abuses, the Commission in
Citizens concluded that Section 305(a) was not applicable and approved the
dividend payments.
The Commission reached a similar result in New England Power Company
and Montaup Electric Company ("NEPCO and Montaup"), 89 FERC paragraph 61,266
(1999) concerning the need to make future dividend payments out of paid-in
capital because retained earnings had been restated as paid-in capital as a
consequence of the accounting methods used by two utilities in completing two
mergers. A second concern also implicating the utilities' capital accounts was
that the amortization of the merger acquisition premium could also affect the
ability to pay future dividends out of earnings. The two utilities asked for
permission to pay dividends out of paid-in capital up to the pre-merger level of
retained earnings and for authorization to determine earnings available to pay
dividends without regard to the amortization of the acquisition premium. Finding
that Section 305(a) did not apply because the abuses at which that statute were
directed were not present and subject to certain conditions, the Commission
authorized
<PAGE> 5
The Honorable David P. Boergers
March 1, 2000
Page 5
- --------------------------------------------------------------------------------
the payment of dividends out of capital to the extent of the pre-merger levels
of retained earnings.
No abusive condition is present here. The facility transfer does not
result in the personal financial benefit of utility company officials. Nor does
it represent a defrauding of the general public or an undermining of the
financial health of Delmarva and Atlantic. The source of funds is clearly
identified, and the reduction in each utility's capital resulting from the
dividend payment corresponds to the reduction in each utility's assets through
the transfer of facilities to CDG and CAG. Also, the sale of fossil facilities
to unaffiliated third parties will result in an increase in retained earnings as
described above. In other words, the situation at Delmarva and Atlantic is the
antithesis of the situation contemplated by Congress in adopting Section 305. As
in Citizens Utilities and NEPCO and Montaup, the use of capital or unearned
surplus by Delmarva and Atlantic to pay dividends is not the kind of practice
Section 305(a) was intended to prevent and does not raise public interest
concerns.
In fact, the transfer of facilities to CDG and CAG, inclusive of the
dividend payments, promotes the public interest. The transfer constitutes an
element of the ongoing reorganization and restructuring of the electric utility
industry in the states of Delaware, New Jersey, Maryland and Virginia in which
Delmarva and Atlantic have provided regulated retail electric service for many
years. By redefining the role of Delmarva and Atlantic as wires companies and by
transferring Delmarva and Atlantic generating resources to affiliates that will
participate in the generation market but not in the wires business, the transfer
complements the sale of Conectiv generation to third parties and represents a
major step in the restructuring of the electricity industry in those states.
This restructuring is consistent with state and federal policy favoring
structural unbundling of formerly vertically integrated utilities, promoting
retail choice, and fostering competition in electric generation. In addition, as
noted above, the source of funds for payment of the dividends is clearly
identified and the stock transfers are not intended for the disbursal of profits
to investors but merely to reflect the changed ownership of the generating
assets. Thus, the transfer of the facilities and the related capital dividends
affirmatively promotes public policy.
<PAGE> 6
The Honorable David P. Boergers
March 1, 2000
Page 6
- --------------------------------------------------------------------------------
Request for Commission Action: The Commission is respectfully asked to
approve such journal entries and dividend payments as set out herein, and the
Commission is asked to take that action on or before May 1, 2000. Conectiv
desires to accomplish the transfer of facilities from Delmarva and Atlantic to
CDG and CAG and to undertake the new supply arrangements from CDG and CAG on May
1, 2000. The Commission's consideration of this request is appreciated.
Very truly yours,
Carmen L. Gentile
-------------------------
Carmen L. Gentile
Counsel for Conectiv
CLG:mkm
Attachments
cc: See List of Recipients
<PAGE> 7
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
DELMARVA POWER & LIGHT COMPANY )
) DOCKET NO. EC00-___-000
ATLANTIC CITY ELECTRIC COMPANY )
NOTICE OF FILING
Take notice that Delmarva Power & Light Company ("Delmarva") and
Atlantic City Electric Company ("Atlantic") (collectively, "Applicants"), on
March 1, 2000, tendered for filing a request for approval regarding journal
entries reflecting dividend payments out of paid-in capital related to the
transfer of certain facilities from Delmarva and Atlantic to Conectiv Delmarva
Generating, LLC ("CDG") and Conectiv Atlantic Generating, LLC ("CAG"),
respectively ("Facility Transfer"). Journal entries based on then available data
reflecting such dividend payments were included in a December 17, 1999
application which Delmarva and Atlantic submitted to the Commission under
Section 203 of the Federal Power Act in Docket No. EC00-40-000 to accomplish the
Facility Transfer.
Delmarva and Atlantic request that the Commission approve the use of
journal entries and the related accounting reflecting the payment of dividends
out of paid-in capital in connection with the Facility Transfer. They have asked
that the Commission take this action by May 1, 2000, which is the date that the
Applicants hope to accomplish the Facility Transfer and undertake new power
supply arrangements related to the Facility Transfer.
Copies of the filing were served upon Delmarva's wholesale requirements
customers, and the Maryland People's Counsel, Maryland Public Service
Commission, Delaware Public Service Commission, New Jersey Public Service
Commission and the Virginia State Corporation Commission.
Any person desiring to be heard or to protest said filing should file a
motion to intervene or protest with the Federal Energy Regulatory Commission,
888 First Street, N.E., Washington, D.C. 20426, in accordance with Rules 211 and
214 of the Commission's Rules of Practice and Procedure (18 C.F.R. Sections
385.211 and 385.214). All such motions or protests should be filed in accordance
with Section 35.8 of the Commission's regulations. Protests will be considered
by the Commission in determining the appropriate action to be taken, but will
not serve to make protestants parties to the proceeding. Any person wishing to
become a party must file a motion to intervene. Copies of this filing are on
file with the Commission and are available for public inspection in the Public
Reference Room. This filing may also be viewed on the Internet at
http://www.ferc.fed.us/online/rims.htm (call 202/208-2222 for assistance).
David P. Boergers
Secretary
<PAGE> 1
Exhibit G
Conectiv, Delmarva Power & Light Company and Atlantic City Electric Company, et
al. ( 70- ) Notice of Proposal to Establish New Direct and Indirect Subsidiary
Holding Companies and Generation Companies, Transfer Utility Assets as Capital
Contributions to Generation Companies, Acquire Utility Assets, Finance Direct
Subsidiary Holding Company by Conectiv and Generating Companies and Indirect
Subsidiary Holding Company by Direct Subsidiary Holding Company, Authorization
for Direct Subsidiary Holding Company to Acquire Exempt Wholesale Generators and
Finding that Indirect Subsidiary Holding Company is Not Deemed a Holding Company
for Purposes of Section 11(b)(2) of the Public Utility Holding Company Act.
Conectiv, a Delaware corporation and a registered public utility
holding company; its two wholly-owned public utility companies, Delmarva Power &
Light Company ("Delmarva"), a Delaware and Virginia Corporation, and Atlantic
City Electric Company ("ACE"), a New Jersey corporation; and certain nonutility
subsidiaries (Conectiv Energy Holding Company ("CEH"); ACE REIT, Inc.
("ACE-REIT"); Conectiv Atlantic Generation, LLC ("CAG"); and Conectiv Delmarva
Generation, Inc. ("CDG"); all of 800 King Street, Wilmington, DE 19899 have
filed a declaration under Sections 6, 7, 9, 10, 11(b)(2), 12(c), 12(d) and 32
and Rules 43, 45, 46, 53 and 54 of the Public Utility Holding Company Act of
1935, as amended (the "Act").
Each of the states in which Delmarva and ACE operate has enacted
legislation restructuring the electric utility industry in that state to provide
retail choice for the generation of electricity. Generally, with restructuring,
the supply component of the price charged to a customer for electricity would be
deregulated, and electricity suppliers would compete to supply electricity to
customers. Customers would continue to pay the local utility a regulated price
for the delivery of the electricity over the transmission and distribution
system. To implement the state electric industry restructuring, Delmarva and ACE
each plan to exit the electric generation business and to be only a distributor
of electrical energy and, in the case of Delmarva, natural gas. Certain
facilities have been sold to third parties and one third-party sale is the
subject of a filing pending before the Commission. Conectiv proposes to retain
certain mid-merit facilities and seeks authority for Delmarva and ACE to
transfer the facilities to an affiliate. Approximately 1,412 MW of net
generating capacity owned by Delmarva and 1,123 of net generating capacity owned
by ACE will be transferred or sold to non-affiliates. Pursuant to this
application, it is proposed that approximately 1,364 MW of net generating
capacity owned by Delmarva with an approximate value of $275 million net of
deferred taxes and 502 MW of net generating capacity owned by ACE valued at
approximately $77 million net of deferred taxes (collectively the "Retained
Assets") will be transferred to CDG(1) and CAG respectively.
To accomplish this transfer, Delmarva and ACE will effectively spin-off
the retained generation facilities to Conectiv, by utilizing special purpose
subsidiaries to which the assets will be contributed as capital contributions.
Delmarva will contribute its share of the Retained Assets to CDG, a Delaware
corporation, and ACE will contribute its portion of the Retained Assets to CAG,
- --------------------------
(1) Approximately 127 MW of net generating capacity (with a book value of $26
million net of deferred taxes) to be transferred by Delmarva to CDG may be
subject to an obligation to transfer the facilities to a third party purchaser
in exchange for like-kind assets under a like-kind exchange agreement. The
third-party purchaser will be an EWG so further approvals will not be required
for the transfer of facilities to the third party by CDG. The assets to be
received in exchange by CDG may be the new build EWG facilities, construction of
which was initiated by CEI or other similar generating facilities (the
"Like-Kind Facilities"). Conectiv has requested authorization to invest up to
$350 million in the EWG facilities through March 31, 2002 in File No. 70-9095.
CEI will be transferred to a third party intermediary and construction will be
completed by the third party until such time as the value equals the value of
the assets to be sold by CDG. If CDG is not an EWG at the time of the
acquisition of the Like-Kind Facilities, authorization is requested for the
acquisition of the Like-Kind Facilities as utility assets.
22
<PAGE> 2
a Delaware limited liability company. ACE will then contribute the ownership of
CAG to an existing inactive, unfunded subsidiary named ACE-REIT establishing CAG
as an indirect subsidiary of ACE.
The common stock in CDG held by Delmarva and the common stock in
ACE-REIT held by ACE will be transferred to Conectiv through a dividend out of
capital or unearned surplus. Generally Accepted Accounting Principals require
that the dividend be accounted for as a dividend out of capital even if there
are sufficient retained earnings to cover the dividend. In this instance, ACE
would have sufficient retained earnings to cover the value of the ACE portion of
the Retained Assets, but Delmarva would not. Also, the capital dividend by
Delmarva will cause the common equity to total capitalization ratio for Delmarva
to fall below 30% until the sale of other generating assets to third parties is
completed. The closing of this sale is scheduled for September 1, 2000 but is
contingent on the prior receipt of certain state regulatory approvals.
Following receipt of the common stock of CDG and ACE-REIT, Conectiv
will fund a new wholly-owned subsidiary holding company (CEH) by contributing to
the subsidiary the stock of CDG and ACE-REIT. Conectiv also notes that it
intends to contribute to CEH the common stock of Conectiv Energy Supply, Inc.
("CESI"), an energy marketing company, and Atlantic Generation, Inc., another
Rule 58 company engaged in cogeneration activities. Conectiv states that in
addition to energy marketing under Rule 58(b(v), CESI will engage in energy
management and demand-side management services under Rule 58(b)(1)(i) and
technical, operational, management and other kinds of services developed in the
utility operation under Rule 58(b)(1)(vii). Upon transfer of the retained assets
to CDG and CAG, CDG and CAG will be utilities under the Act. ACE-REIT and CEH
will be utility holding companies under the Act. Conectiv requests that this
Commission find that ACE-REIT is not a utility holding company for purposes of
Section 11(b)(1) of the Act only. Conectiv also requests that CEH be authorized
to acquire exempt wholesale generators as defined in Section 32 of the Act
(EWGs) so long as the aggregate investment in EWGs does not exceed the
limitation established by Rule or Order.
Conectiv will guarantee obligations of the newly-formed companies under
the $350 million level of credit support that Conectiv is authorized to offer
subsidiaries through March 31, 2002 under Release No. 35 - 26833 dated February
26, 1998 as supplemented by Release No. 35- 27111 dated December 14, 1999.
CEH requests authority to issue common stock or long or short term debt
to Conectiv to finance its ongoing business needs until such time as CDG and CAG
are qualified as EWGs. Any debt will bear interest at a rate designed to
approximate Conectiv's cost of money. Conectiv also requests authorization for
CEH to participate in the Conectiv System Money Pool. ACE-REIT, CAG and CDG
request authority to issue common stock or long or short-term debt to CEH or
Conectiv as necessary to fund the operations of their businesses through March
31, 2002 or until such time as CAG and CDG are declared to be EWGs. Any debt
will bear interest at a rate designed to approximate the lenders cost of money.
Authorization is requested for participation by CEH, CAG, CDG, and ACE-REIT in
the Conectiv System Money Pool until such time as CAG and CDG are declared to be
EWGs.
Conectiv notes that it is the company's preference to seek EWG status
for CDG and CAG. Conectiv requests that the value of the Generating Assets at
the time of transfer to CAG and CDG be excluded from the calculation of
Aggregate Investment for purposes of Rule 53. However, since Conectiv does not
envision the timely receipt of requisite orders of state utility commission
under
23
<PAGE> 3
Section 32(c) of the Act, Conectiv requests that the Commission reserve
jurisdiction over this issue pending completion of the record.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
Jonathan G. Katz
Secretary
24
<PAGE> 1
EXHIBIT H-1
ASSETS TO BE TRANSFERRED
<TABLE>
<CAPTION>
STATION LOCATION NET INSTALLED
------- -------- CAPACITY
-----------
(KILOWATTS)
-----------
<S> <C> <C>
COAL-FIRED
Edge Moor........................... Wilmington, DE................ 260,000
Keystone*........................... Shelocta, PA.................. 63,000
Conemaugh*.......................... New Florence, PA.............. 63,000
OIL-FIRED
Edge Moor........................... Wilmington, DE................ 445,000
COMBUSTION TURBINES/COMBINES CYCLE
Hay Road............................ Wilmington, DE................ 511,000
Cumberland.......................... Millville, NJ................. 84,000
Sherman Avenue...................... Vineland, NJ.................. 81,000
Middle.............................. Rio Grande, NJ................ 77,000
Carll's Corner...................... Upper Deerfield Twp, NJ....... 73,000
Cedar............................... Cedar Run, NJ................. 68,000
Missouri Avenue..................... Atlantic City, NJ............. 60,000
Mickleton........................... Mickleton, NJ................. 59,000
Christiana.......................... Wilmington, DE................ 45,000
Edge Moor........................... Wilmington, DE................ 13,000
Madison Street...................... Wilmington, DE................ 11,000
West................................ Marshallton, DE............... 15,000
Delaware City....................... Delaware City, DE............. 16,000
Tasley.............................. Tasley, VA.................... 26,000
DIESEL UNITS
Crisfield............................ Crisfield, MD................. 10,000
Bayview.............................. Bayview, VA................... 12,000
Keystone*............................ Shelocta, PA.................. 400
Conemaugh*........................... New Florence, PA.............. 400
</TABLE>
*Assets being transferred o CDG subject to an obligation to transfer
the facilities to an EWG third party purchaser under the terms of a
like-kind exchange agreement.
<PAGE> 1
EXHIBIT FS-1
------------
CONECTIV
PRO FORMA CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999 (DOLLARS IN THOUSANDS)
-------------------------------------------------
Actual Balances Proforma
per the Proforma Balances
Unaudited Debt after
F/S Financing Financing
--------------- --------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 56,239 $ 56,239
Accounts receivable, net of allowances of
$11,564 and $4,743, respectively 544,463 544,463
Inventories, at average cost
Fuel (coal, oil and gas) 65,360 65,360
Materials and supplies 58,177 58,177
Prepaid New Jersey sales and excise taxes -- --
Deferred energy supply costs 8,612 8,612
Other prepayments 20,295 20,295
Taxes receivable 15,674 15,674
Deferred income taxes, net 25,175 25,175
---------- --------- ----------
793,995 -- 793,995
---------- --------- ----------
INVESTMENTS
Investment in leveraged leases 72,161 72,161
Funds held by trustee 173,247 173,247
Other investments 100,764 100,764
---------- --------- ----------
346,172 -- 346,172
---------- --------- ----------
PROPERTY, PLANT AND EQUIPMENT
Electric generation 1,571,556 1,571,556
Electric transmission and distribution 2,633,375 2,633,375
Gas transmission and distribution 265,708 265,708
Other electric and gas facilities 405,303 405,303
Telecommunications, thermal systems, and other
property, plant, and equipment 238,229 238,229
---------- --------- ----------
5,114,171 -- 5,114,171
Less: Accumulated depreciation 2,097,529 2,097,529
---------- --------- ----------
Net plant in service 3,016,642 -- 3,016,642
Construction work-in-progress 199,390 199,390
Leased nuclear fuel, at amortized cost 55,983 55,983
Goodwill, net 369,468 369,468
---------- --------- ----------
3,641,483 -- 3,641,483
---------- --------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Recoverable stranded costs 1,030,049 1,030,049
Deferred recoverable income taxes 93,853 93,853
Unrecovered purchased power costs 28,923 28,923
Unrecovered New Jersey state excise tax 22,567 22,567
Deferred debt refinancing costs 21,113 21,113
Deferred other postretirement benefit costs 32,479 32,479
Prepaid pension costs 35,005 35,005
Unamortized debt expense 28,045 28,045
License fees 23,331 23,331
Other 41,447 41,447
---------- --------- ----------
1,356,812 -- 1,356,812
---------- --------- ----------
TOTAL ASSETS $6,138,462 $ 0 $6,138,462
========== ========= ==========
</TABLE>
<PAGE> 2
CONECTIV
PRO FORMA CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999 (DOLLARS IN THOUSANDS)
-------------------------------------------------
Actual Balances Proforma
per the Proforma Balances
Unaudited Debt after
F/S Financing Financing
--------------- --------- ----------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CURRENT LIABILITIES
Short-term debt $ 579,688 $ 579,688
Long-term debt due within one year 48,937 48,937
Variable rate demand bonds 158,430 158,430
Accounts payable 307,764 307,764
Taxes accrued -- --
Interest accrued 41,137 41,137
Dividends payable 27,545 27,545
Deferred energy supply costs 46,375 46,375
Current capital lease obligation 28,715 28,715
Above-market purchased energy contracts
and other electric restructuring liabilities 41,101 41,101
Other 91,353 91,353
---------- --------- ----------
1,371,045 -- 1,371,045
---------- --------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Other postretirement benefits obligation 96,388 96,388
Deferred income taxes, net 730,987 730,987
Deferred investment tax credits 74,431 74,431
Regulatory liability for New Jersey income tax benefit 49,262 49,262
Above-market purchased energy contracts
and other electric restructuring liabilities 119,704 119,704
Deferred gain on termination of purchased energy contract 70,849 70,849
Long-term capital lease obligation 30,395 30,395
Other 47,447 47,447
---------- --------- ----------
1,219,463 -- 1,219,463
---------- --------- ----------
CAPITALIZATION
Common stock: $0.01 per share par value
150,000,000 shares authorized; shares outstanding --
86,173,169 in 1999, and 100,516,768 in 1998 863 863
Class A common stock, $0.01 par value;
10,000,000 shares authorized; shares outstanding --
5,742,315 in 1999, 6,560,612 in 1998 57 57
Additional paid-in capital - - common stock 1,085,060 1,085,060
Additional paid-in capital - - Class A common stock 93,738 93,738
Retained earnings (Accumulated deficit) (36,472) (36,472)
---------- --------- ----------
1,143,246 -- 1,143,246
Treasury shares, at cost:
167,514 shares in 1999; 185,030 shares in 1998 (3,446) (3,446)
Unearned compensation (1,627) (1,627)
---------- ---------- ----------
Total common stockholders' equity 1,138,173 -- 1,138,173
Preferred stock of subsidiaries:
Not subject to mandatory redemption 95,933 95,933
Subject to mandatory redemption 188,950 188,950
Long-term debt 2,124,898 2,124,898
---------- ---------- ----------
3,547,954 -- 3,547,954
---------- ---------- ----------
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $6,138,462 $0 $6,138,462
========== ========== ==========
</TABLE>
<PAGE> 3
NOTES TO EXHIBIT FS-1
Exhibit FS-1 includes the following:
I. Pro Forma Consolidated Balance Sheets for Conectiv (Exhibit FS-1). The three
(3) columns on each proforma balance sheet represent the following:
Column 1: The actual consolidated balance sheet as of December 31, 1999.
Column 2: The pro forma effects of the transfer of certain generating
assets to affiliates as described in Item 1.A. "Introduction" of this
filing.
Column 3: The Consolidated Balance Sheets as of December 31, 1999 on a pro
forma basis to include the expected effects of the transfer of certain
generating assets.
For purposes of the consolidated Conectiv pro forma Financial Statements
(Exhibit FS-1), there is no impact as all transactions are between
subsidiaries.
<PAGE> 1
EXHIBIT FS-3
------------
DELMARVA POWER & LIGHT COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
---------------------------------------------------------
Proforma
Actual Balances Proforma Balances
per the Transfer of after Transfer
F/S Assets of Assets
--------------- ----------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 648 $ 648
Accounts receivable, net of allowances of
$6,479 and $648, respectively 308,690 308,690
Intercompany loan receivable 13,473 13,473
Inventories, at average costs
Fuel (coal, oil and gas) 45,686 45,686
Materials and supplies 31,855 31,855
Prepayments 14,152 14,152
Deferred energy costs 8,612 8,612
Deferred income taxes, net 18,935 18,935
---------- --------- ----------
442,051 442,051
---------- --------- ----------
INVESTMENTS
Funds held by trustee 67,896 67,896
Other investments 1,615 1,615
---------- --------- ----------
69,511 69,511
---------- --------- ----------
PROPERTY, PLANT AND EQUIPMENT
Electric generation 1,314,657 (697,871) 616,786
Electric transmission and distribution 1,398,574 1,398,574
Gas transmission and distribution 265,708 265,708
Other electric and gas facilities 202,953 202,953
Other property, plant and equipment 5,469 5,469
---------- --------- ----------
3,187,361 (697,871) 2,489,490
Less : Accumulated depreciation 1,434,597 (342,101) 1,092,496
---------- --------- ----------
Net plant in service 1,752,764 (355,770) 1,396,994
Construction work-in-progress 64,747 64,747
Leased nuclear fuel, at amortized cost 25,592 25,592
Goodwill, net 69,850 69,850
---------- --------- ----------
1,912,953 (355,770) 1,557,183
---------- --------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Recoverable stranded costs 41,775 41,775
Deferred recoverable income taxes 71,986 71,986
Prepaid employee benefits costs 129,962 129,962
Unamortized debt expense 11,106 11,106
Deferred debt refinancing costs 7,538 7,538
Other 17,903 17,903
---------- --------- ----------
280,270 0 280,270
---------- --------- ----------
TOTAL ASSETS $2,704,785 $(355,770) $2,349,015
========== ========== ==========
</TABLE>
<PAGE> 2
DELMARVA POWER & LIGHT COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------------------------------
Proforma
Actual Balances Proforma Balances
per the Transfer of after Transfer
F/S Assets of Assets
--------------- ----------- --------------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CURRENT LIABILITIES
Short-term debt $ -- -- $ --
Long-term debt due within one year 1,545 1,545
Variable rate demand bonds 104,830 104,830
Accounts payable 207,073 207,073
Taxes accrued 31,621 31,621
Interest accrued 20,160 20,160
Dividends payable 7,027 7,027
Current capital lease obligation 12,495 12,495
Above-market purchased energy contracts
and other electric restructuring liabilities 33,109 33,109
Other 26,226 26,226
---------- ----------- ----------
444,086 444,086
---------- ----------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net 341,748 (46,668) 295,080
Deferred investment tax credits 34,823 (7,692) 27,131
Long term capital lease obligation 14,175 14,175
Above-market purchased energy contracts 0
and other electric restructuring liabilities 102,781 102,781
Other 14,079 14,079
---------- ----------- ----------
507,606 (54,360) 453,246
---------- ----------- ----------
CAPITALIZATION
Common stock, $2.25 par value; 1,000,000 shares authorized;
1,000 shares outstanding 2 2
Additional paid-in-capital 528,893 (301,410) 227,483
Retained earnings 147,288 147,288
---------- ----------- ----------
Total common stockholders' equity 676,183 (301,410) 374,773
Preferred stock not subject to mandatory redemption 89,703 89,703
Preferred securities of subsidiary trust subject to
mandatory redemption 70,000 70,000
Long-term debt 917,207 917,207
---------- ----------- ----------
1,753,093 (301,410) 1,451,683
---------- ----------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $2,704,785 $ (355,770) $2,349,015
========== =========== ==========
</TABLE>
<PAGE> 3
NOTES TO EXHIBIT FS-3
Exhibit FS-3 includes the following:
I. Pro Forma Consolidated Balance Sheets for Delmarva Power & Light Company
(Exhibit FS-3). The three (3) columns on each proforma balance sheet represent
the following:
Column 1: The actual consolidated balance sheet as of December 31, 1999.
Column 2: The pro forma effects of the transfer of certain generating
assets to affiliates as described in Item 1.A. "Introduction" of this
filing.
Column 3: The Consolidated Balance Sheets as of December 31, 1999 on a pro
forma basis to include the expected effects of the transfer of certain
generating assets.
<PAGE> 1
EXHIBIT FS-5
------------
ATLANTIC CITY ELECTRIC COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
As of December 31, 1999
----------------------------------------------------------
Proforma
Actual Balances Proforma Balances
per the Transfer of after Transfer
F/S Assets of Assets
--------------- ----------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,924 $ 7,924
Accounts receivable net of allowances
of $3,500 and $3,500, respectively 133,879 133,879
Intercompany loan receivable 73,532 73,532
Inventories, at average cost --
Fuel (coal and oil) 19,598 19,598
Materials and supplies 8,890 8,890
Deferred income taxes, net 6,245 6,245
Prepaid income taxes 88,483 88,483
Prepaid New Jersey sales and excise taxes -- --
Other prepayments 2,223 2,223
---------- ---------- ----------
340,774 340,774
---------- ---------- ----------
INVESTMENTS
Funds held by trustee 105,268 105,268
Other investments 103 103
---------- ---------- ----------
105,371 105,371
---------- ---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Electric generation 256,899 (123,981) 132,918
Electric transmission and distribution 1,224,644 1,224,644
Other electric facilities 128,388 128,388
Other property, plant, and equipment 5,772 5,772
---------- ---------- ----------
1,615,703 (123,981) 1,491,722
Less: Accumulated depreciation 626,080 (34,512) 591,568
---------- ---------- ----------
Net plant in service 989,623 (89,469) 900,154
Construction work-in-progress 46,025 46,025
Leased nuclear fuel, at amortized cost 30,391 30,391
---------- ---------- ----------
1,066,039 (89,469) 976,570
---------- ---------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Recoverable stranded costs 988,273 988,273
Unrecovered purchased power costs 28,923 28,923
Deferred recoverable income taxes 21,867 21,867
Unrecovered New Jersey state excise taxes 22,567 22,567
Deferred debt refinancing costs 13,574 13,574
Deferred other postretirement benefit costs 32,479 32,479
Unamortized debt expense 14,197 14,197
Other 20,595 20,595
---------- ---------- ----------
1,142,475 1,142,475
---------- ---------- ----------
TOTAL ASSETS $2,654,659 $ (89,469) $2,565,190
========== ========== ==========
</TABLE>
<PAGE> 2
ATLANTIC CITY ELECTRIC COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------------------------------
Proforma
Actual Balances Proforma Balances
per the Transfer of after Transfer
F/S Assets of Assets
--------------- ----------- --------------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CURRENT LIABILITIES
Short-term debt $ 30,000 $ 30,000
Long-term debt due within one year 46,075 46,075
Variable rate demand bonds 22,600 22,600
Accounts payable 62,169 62,169
Taxes accrued -- --
Interest accrued 20,182 20,182
Dividends payable 18,071 18,071
Current capital lease obligation 15,480 15,480
Deferred energy supply costs 46,375 46,375
Above-market purchased energy contracts --
and other electric restructuring liabilities 7,992 7,992
Other 31,893 31,893
---------- ---------- ----------
300,837 300,837
---------- ---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net 389,594 (11,658) 377,936
Regulatory liability for New Jersey income tax benefit 49,262 49,262
Above-market purchased energy contracts
other electric restructuring liabilities 16,921 16,921
Deferred investment tax credits 39,608 (599) 39,009
Long-term capital lease obligation 14,911 14,911
Pension benefit obligation 20,309 20,309
Other postretirement benefit obligation 42,952 42,952
Other 22,381 22,381
---------- ---------- ----------
595,938 (12,257) 583,681
---------- ---------- ----------
CAPITALIZATION
Common stock, $3 par value; shares authorized:
25,000,000 ; shares outstanding: 18,320,937 54,963 54,963
Additional paid-in capital 493,007 (77,212) 415,795
Retained earnings 129,981 129,981
---------- ---------- ----------
Total common stockholder's equity 677,951 (77,212) 600,739
Preferred stock subject to mandatory redemption 23,950 23,950
Preferred stock not subject to mandatory redemption 6,231 6,231
Preferred stock of subsidiary trusts subject to mandatory
redemption 95,000 95,000
Long-term debt 954,752 954,752
---------- ---------- ----------
1,757,884 (77,212) 1,680,672
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $2,654,659 $ (89,469) $2,565,190
========== ========== ==========
</TABLE>
<PAGE> 3
NOTES TO EXHIBIT FS-5
Exhibit FS-5 includes the following:
I. Pro Forma Consolidated Balance Sheets for Atlantic City Electric Company
(Exhibit FS-5). The three (3) columns on each proforma balance sheet represent
the following:
Column 1: The actual consolidated balance sheet as of December 31, 1999.
Column 2: The pro forma effects of the transfer of certain generating
assets to affiliates as described in Item 1.A. "Introduction" of this
filing.
Column 3: The Consolidated Balance Sheets as of December 31, 1999 on a pro
forma basis to include the expected effects of the transfer of certain
generating assets.
