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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
AMENDMENT NO. 2
TO FORM U-1
APPLICATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
BEC ENERGY
BOSTON EDISON COMPANY
800 Boylston Street
Boston, Massachusetts 02199
(Name of company or companies filing this statement and
address of principal executive offices)
BEC ENERGY
BOSTON EDISON COMPANY
c/o Theodora S. Convisser, Esq.
BOSTON EDISON COMPANY
800 Boylston Street
Boston, Massachusetts 02199
Telephone: (617) 424-2000
(Names and addresses of agents for service)
Copies to:
David A. Fine, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telephone: (617) 951-7000
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BEC Energy, a Massachusetts business trust ("Holding Company"), hereby
amends its Application on Form U-1 in File No. 70-9057 as follows:
1. "Item 1. Description of Proposed Transaction" is amended by
amending and restating the first paragraph of "Description of Proposed
Transaction" (Item 1) in its entirety as follows:
"Pursuant to Sections 9(a)(2) and 10 of the Public Utility Holding
Company Act of 1935 (the "1935 Act"), BEC Energy, a Massachusetts business
trust ("Holding Company"), hereby applies for the approval of the Securities
and Exchange Commission (the "Commission") to form a holding company structure
for Boston Edison Company ("Boston Edison"), through an Agreement and Plan of
Merger (the "Merger Agreement") among Boston Edison, Holding Company, a
Massachusetts business trust formed by Boston Edison, and Boston Edison
Mergeco Electric Company, Inc., a Massachusetts electric company ("Merger
Sub") formed by Holding Company. In addition, Holding Company hereby applies
pursuant to Section 3(a)(1) of the 1935 Act for an order exempting Holding
Company, and each of its subsidiary companies as such, from all provisions of
the 1935 Act (except for Section 9(a)(2) thereof); and Boston Edison hereby
applies, pursuant to Section 3(a)(2) of the 1935 Act, for an order exempting
Boston Edison, and each of its subsidiary companies as such, from all
provisions of the 1935 Act (except for Section 9(a)(2) thereof)."
2. "Item 1. Description of Proposed Transaction" is further amended
by amending and restating "Parties" (Item 1.A) in its entirety as follows:
"Boston Edison is an "electric utility company" as defined under Section
2(a)(3) of the 1935 Act. Boston Edison, with its wholly-owned utility
subsidiary, Harbor Electric Energy Company ("HEEC"), is currently engaged
principally in the generation, purchase, transmission, distribution and sale
of electric energy. Boston Edison provides electricity at retail to an area
of 590 square miles, solely in Massachusetts, including the City of Boston and
39 surrounding cities and towns. In 1996, Boston Edison served an average of
657,487 customers. Boston Edison also supplies electricity at wholesale for
resale to other electric utilities and municipal electric departments. In
providing this service, Boston Edison is subject to regulation by the
Massachusetts Department of Telecommunications and Energy (formerly, the
Massachusetts Department of Public Utilities) (the "Massachusetts DPU" or
"DPU") under Chapter 164 of the Massachusetts General Laws.
HEEC engages principally in the distribution of electric energy from the
Boston Edison to a large retail electric customer of Boston Edison, the
Massachusetts Water Resources Authority, for use in the construction and
operation of its wastewater treatment facilities located on Deer Island in
Boston, Massachusetts. By virtue of its ownership of HEEC, Boston Edison is
a "holding company" for the purposes of the 1935 Act. However, pursuant to
Section 3(a)(2) of the 1935 Act and Rule 2 thereunder, Boston Edison is not
regulated as a "holding company" and is exempt from all of the 1935 Act's
provisions, except Section 9(a)(2).
Through its wholly owned subsidiary, Boston Energy Technology Group
("BETG"), and BETG's subsidiaries, Boston Edison is also engaged in certain
non-utility businesses. These include Boston Edison Services, Inc., a sales
and service company, EnergyVision, LLC, an energy marketer, BecoCom, Inc. and
RCN/BETG LLC, a telecommunications venture, Northwind Boston, LLC, a district
cooling company, Coneco Corporation, an energy services provider, and Rez-Tek
International Corp., a cooling tower ozonation company (no longer active due
to sale of assets). The operations of Boston Edison's direct and indirect
subsidiaries that are
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not "public utility companies" contributed a net loss of approximately
$2,930,000 and $9,096,000 (or less than 1%) to Boston Edison's aggregate
after-tax net income in fiscal years 1996 and 1997, respectively.
Boston Edison's current corporate structure is as follows:
CURRENT CORPORATE STRUCTURE
[Graph omitted from electronic filing.] The omitted graph represents a
tree diagram of the current corporate structure, with Boston Edison Company as
the parent of the following companies: (i) Harbor Electric Energy Company,
and (ii) Boston Energy Technology Group (including Boston Edison Services,
Inc., EnergyVision, LLC, BecoCom, Inc., RCN/BETG LLC, Northwind Boston, LLC,
Coneco Corporation, and Rez-Tek International Corp.).
Holding Company and Merger-Sub were organized in Massachusetts on
March 6, 1997 and March 7, 1997, respectively, for the purpose of carrying out
the proposed transactions described in this application. Holding Company is a
direct, wholly-owned subsidiary of Boston Edison, and Merger-Sub is a direct,
wholly-owned subsidiary of Holding Company. Neither Holding Company nor
Merger-Sub owns any utility assets or currently is a "holding company" for the
purposes of the 1935 Act."
3. "Item 1. Description of Proposed Transaction" is further amended
by amending and restating the third paragraph of "The Proposed Restructuring"
(Item 1.B) in its entirety as follows:
"[Graph omitted from electronic filing.] The omitted graph represents a
tree diagram of the post-merger corporate structure, with BEC Energy as the
parent of the following companies: (i) Boston Edison Company, and (ii) Boston
Energy Technology Group (including Boston
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Edison Services, Inc., EnergyVision, LLC, BecoCom, Inc., RCN/BETG LLC,
Northwind Boston, LLC, Coneco Corporation and Rez-Tek International Corp.).
Harbor Electric Energy Company remains a subsidiary of Boston Edison Company."
4. "Item 1. Description of Proposed Transaction" is further amended
by amending and restating the last two paragraphs of "The Proposed
Restructuring" (Item 1.B) in their entirety as follows:
"The consummation of the Merger pursuant to the Plan of Merger is subject
to various conditions. These conditions include "all of the regulatory
approvals and exemptions necessary, appropriate or desirable to be obtained
prior to effectuating the Merger and the Restructuring," which include: (i)
the approval of the Commission under Section 9(a)(2) of the 1935 Act, (ii) the
granting by the Commission of exemptions under Sections 3(a)(1) and 3(a)(2) of
the 1935 Act as requested in this application, (iii) the approval of the
Federal Energy Regulatory Commission (the "FERC"), which approval was received
on September 11, 1997, (iv) the approval of the Nuclear Regulatory Commission
(the "NRC"), which approval was received on February 11, 1998, and (v) the
approval of the Massachusetts DPU, which approval was received on April 17,
1998. The Plan of Merger was approved by the affirmative vote of a majority
of the outstanding shares of Boston Edison Stock at Boston Edison's annual
meeting of shareholders held May 15, 1997.
Holding Company has filed with the Commission a Registration Statement on
Form S-4 (the "Registration Statement") under the Securities Act of 1933, as
amended which includes a Prospectus/Proxy Statement, which is being filed for
the purpose of (i) registering the Common Shares of Holding Company to be
issued in exchange for the Boston Edison Stock
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pursuant to the Merger and (ii) complying with the requirements of the 1934
Act in connection with the solicitation of proxies of Boston Edison's common
shareholders. A copy of the Registration Statement, including the
Prospectus/Proxy Statement, is filed herewith as Exhibit C-1."
5. "Item 3. Applicable Statutory Provisions" is amended by amending
and restating the first three paragraphs of "Applicable Statutory Provisions"
(Item 3) in their entirety as follows:
"Sections 9(a)(2) and 10 of the 1935 Act are applicable to the
Restructuring. The Restructuring would result in Holding Company's owning,
directly or indirectly, all of the outstanding voting securities of two
"public utility companies", Boston Edison and HEEC; and Section 9(a)(2) of the
1935 Act requires Commission approval before any person may acquire, directly
or indirectly, more than 5% of the outstanding voting securities of more than
one "public utility company". The standards for approval of a transaction
under Section 9(a)(2) of the 1935 Act are set forth in Section 10(b) and (c)
of the 1935 Act.
Sections 3(a)(1) and 3(a)(2) of the 1935 Act are also applicable. Upon
effectuation of the Restructuring, Holding Company would become a "holding
company" for purposes of the 1935 Act because of its direct ownership of all
of the voting securities of Boston Edison and HEEC, respectively, both of
which are "public utility companies" under the 1935 Act. In addition, Boston
Edison would continue to be a "holding company" because of its continued
ownership of all of HEEC's voting securities. Consequently, in order to avoid
registered holding company status under the 1935 Act, in this application
Holding Company and Boston Edison have requested that the Commission, by
order, grant each of Holding Company and Boston Edison an
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exemption pursuant to Sections 3(a)(1) and 3(a)(2) of the 1935 Act,
respectively.
For the reasons explained below, the Commission should grant approval of
the Restructuring pursuant to Section 9(a)(2) of the 1935 Act based upon the
transaction's compliance with the applicable standards of Section 10(b) and
(c) thereunder. In addition, for the reasons described below, the Commission
should by order grant Holding Company and Boston Edison exemptions pursuant to
Sections 3(a)(1) and 3(a)(2) of the 1935 Act, respectively, from all of the
provisions of the 1935 Act (except for Section 9(a)(2) thereof)."
6. "Item 3. Applicable Statutory Provisions" is further amended by
amending and restating "The Exemption under Sections 3(a)(1)" (Item 3.B) in
its entirety as follows: "B. The Exemption under Sections 3(a)(1) and
3(a)(2).
Following the Restructuring, neither Holding Company nor Boston Edison
intends to register as a holding company under the 1935 Act. As demonstrated
below, Holding Company and Boston Edison respectfully submit that they should
be granted, by Commission order, an exemption under Sections 3(a)(1) and
3(a)(2) of the 1935 Act, respectively.
1. Section 3(a)(1): Holding Company's Exemption
Section 3(a)(1) of the 1935 Act makes available an exemption from all of
the provisions of the 1935 Act (except for Section 9(a)(2) thereof) to a
"holding company" if:
such holding company, and every subsidiary company thereof which is a
public-utility company from which such holding company derives,
directly or indirectly, any material part of its income, are
predominately intrastate in character and carry on their business
substantially in a single State in which such holding company and
every such subsidiary company thereof are organized.
Holding Company believes that, following the Restructuring, Holding Company
would satisfy such requirements. Each of Holding Company, Boston Edison and
HEEC would be organized
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and carry on its business in the state of Massachusetts, and is primarily
intrastate in character.
Section 3(a) of the 1935 Act provides that, if an applicant satisfies the
objective requirements for an exemption, the applicant shall be granted the
exemption, "unless and except insofar as [the Commission] finds the exemption
detrimental to the public interest or the interest of investors or consumers."
In assessing whether a proposed exemption is "detrimental", the Commission has
focused upon the presence of state regulation, establishing that federal
intervention is unnecessary when state control is adequate. See, e.g., KU
Energy Corp., 50 SEC Docket at 299-300; CIPSCO Inc., 47 SEC Docket at 180-81.
The Commission should here find that sufficient safeguards exist under
state law to ensure that no potential adverse consequences would occur as a
result of the Restructuring. As discussed above, the Restructuring will be
submitted for approval to the Massachusetts DPU, which will review the
Restructuring pursuant to its jurisdiction under Massachusetts law; and the
Commission has relied upon the public policy decisions of state public utility
commissions when granting approval of restructuring transactions. See, e.g.,
KU Energy Corp., 50 SEC Docket at 299-300; CIPSCO Inc., 47 SEC Docket at
180-81. In addition, as discussed above, Boston Edison and HEEC would
continue to be regulated under the state utility laws of Massachusetts and the
Massachusetts DPU has the authority to insure that the unregulated affiliates
of Boston Edison would not become detrimental to the operations of the
utility. For example, pursuant to such laws, the Massachusetts DPU may
disallow, for ratemaking purposes, any excessive costs shifted to the utility
from non-regulated companies or the value of any property improperly acquired
by the utility.
2. Section 3(a)(2): Boston Edison's Exemption
Section 3(a)(2) of the 1935 Act makes available an exemption from all of
the provisions
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of the 1935 Act (except for Section 9(a)(2) thereof) to a "holding company"
if:
such holding company is predominantly a public-utility company
whose operations as such do not extend beyond the State in which
it is organized and States contiguous thereto.
Holding Company and Boston Edison believe that, following the Restructuring,
Boston Edison would satisfy such requirements. Boston Edison's operating
revenues, operating income and net income in fiscal year 1997 were
approximately $1,776,223,000, $260,850,000 and $144,642,000, respectively.
HEEC's operating revenues, operating income and net income for the same period
were approximately $7,521,000, $3,017,000 and $760,000, respectively. As a
percentage of Boston Edison's total operating revenues, operating income and
net income in fiscal year 1997, HEEC's financials represent 0.4%, 1.2%, and
0.5%, respectively. In fiscal year 1997, Boston Edison's public-utility
operations which extend beyond Massachusetts are: (i) a 5.8881% ownership
interest in Wyman Unit #4 (including a 5.8881% interest in a transmission
substation located in Yarmouth, Maine as part of this ownership interest)
which is operated by Central Maine Power Company and located in Yarmouth,
Maine; (ii) a 4.5% interest in the voting shares (and a 6.55% non-voting
interest) in the New England Hydro-Transmission Electric Company, Inc., a
Massachusetts corporation which owns the Massachusetts portions of the high
voltage direct current (HVDC) interconnection which extends to the Canadian
border; (iii) a 4.5% interest in the voting shares (and a 6.55% non-voting
interest) in the New England Hydro-Transmission Corporation, a New Hampshire
corporation which owns the New Hampshire portion of the HVDC interconnection;
(iv) a 9.5% interest in Yankee Atomic Electric Company, a Massachusetts
corporation which owns the Yankee Atomic nuclear generating station and whose
board of directors decided in 1992 to discontinue operations permanently and
decommission the station; and (v) a 9.5% interest in Connecticut Yankee Atomic
Power
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Company, a Connecticut corporation which owns the Connecticut Yankee nuclear
generating station and whose board of directors in 1996 voted to retire the
station.
Section 3(a) of the 1935 Act provides that, if an applicant satisfies the
objective requirements for an exemption, the applicant shall be granted the
exemption, "unless and except insofar as [the Commission] finds the exemption
detrimental to the public interest or the interest of investors or consumers."
In assessing whether a proposed exemption is "detrimental", the Commission has
focused upon the presence of state regulation, establishing that federal
intervention is unnecessary when state control is adequate. See, e.g., KU
Energy Corp., 50 SEC Docket at 299-300; CIPSCO Inc., 47 SEC Docket at 180-81.
The Commission should here find that sufficient safeguards exist under
state law to ensure that no potential adverse consequences would occur as a
result of the Restructuring. As discussed above, the Restructuring will be
submitted for approval to the Massachusetts DPU, which will review the
Restructuring pursuant to its jurisdiction under Massachusetts law, and Boston
Edison and HEEC would continue to be regulated under the state utility laws of
Massachusetts. Additionally, the Massachusetts DPU has the authority to
insure that the unregulated affiliates of Boston Edison would not become
detrimental to the operations of the utility."
7. "Item 4. Regulatory Approval." is amended by amending and
restating "Regulatory Approval." (Item 4) in its entirety as follows:
"The Restructuring required the approval of the Massachusetts DPU. A
copy of the Application to the Massachusetts DPU is filed as Exhibit D-1
hereto and a copy of the Massachusetts DPU's determination pursuant thereto,
dated April 17, 1998, is filed as Exhibit
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D-2 hereto. The proposed restructuring also requires approval by the FERC and
the NRC before the Merger can be consummated. A copy of the application to
the FERC is filed as Exhibit D-3 hereto, and a copy of the FERC's
determination thereto, dated September 11, 1997, is filed as Exhibit D-4
hereto. A copy of the application to the NRC is filed as Exhibit D-5 hereto,
and a copy of the NRC's determination thereto, dated February 11, 1998, is
filed as Exhibit D-6 hereto. There are no other federal or state approvals
required to effect the Restructuring."
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, each of the undersigned companies has duly caused this statement to
be signed on its behalf by the undersigned thereunto duly authorized.
BEC ENERGY
Date: May 18, 1998 By: /s/ JAMES J. JUDGE
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James J. Judge, Senior Vice
President and Treasurer
(Signature and printed name
and title of signing officer)
BOSTON EDISON COMPANY
Date: May 18, 1998 By: /s/ JAMES J. JUDGE
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James J. Judge, Senior Vice
President and Treasurer
(Signature and printed name
and title of signing officer)