SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-1/A
AMENDMENT NO. 3
TO
FORM U-1
APPLICATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NGE Resources, Inc.
One Commerce Plaza
Suite 2006A - 20th Floor
Albany, New York 12260
(Name of company or companies filing this statement and
address of principal executive offices)
Daniel W. Farley
c/o NGE Resources, Inc.
One Commerce Plaza
Suite 2006A - 20th Floor
Albany, New York 12260
Telephone: (518) 434-3014
(Names and addresses of agents for service)
Copies to:
Leonard Blum, Esq.
Huber Lawrence & Abell
605 Third Avenue
New York, New York 10158
Telephone: (212)682-6200
Joanne Rutkowski, Esq.
LeBouef, Lamb, Greene & MacRae, L.L.P.
1875 Connecticut Avenue, N.W.
Washington, D.C. 20009
Telephone: (202) 986-8000
<PAGE>
This Amendment No. 3 on Form U-1/A to the Form U-1 of NGE
Resources, Inc. is being filed for the purpose of amending Item 6
by adding the exhibit listed below.
Item 6. Exhibits and Financial Statements.
The following exhibit is being filed with this Amendment
No. 3:
NO. DESCRIPTION METHOD OF FILING
D-6 Order of the FERC. Filed herewith.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
Amendment No. 3 to be signed on its behalf by the undersigned
thereunto duly authorized.
NGE Resources, Inc.
Date: December 22, 1997 By Daniel W. Farley
Daniel W. Farley
Secretary
EXHIBIT D-6
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
New York State Electric & Gas ) Docket No. EC97-52-000
Corporation )
ORDER AUTHORIZING DISPOSITION OF
JURISDICTIONAL FACILITIES AND CORPORATE REORGANIZATION
(Issued December 16, 1997)
On August 29, 1997, as amended on November 7, 1997, New York
State Electric and Gas Corporation (NYSEG) filed an application
pursuant to Section 203 of the Federal Power Act 1/ for
Commission authorization to implement a corporate restructuring
which will result in the formation of a holding company. As a
result of the proposed restructuring, NYSEG will become a wholly-
owned subsidiary of a new holding company to be named later
(HoldCo for purposes of this order). As part of the corporate
restructuring, NYSEG also proposes to transfer certain of its
jurisdictional power sales contracts and a power sales tariff to
a subsidiary or subsidiaries of HoldCo.
Description of NYSEG's Corporate Structure
NYSEG is a public utility within the meaning of the Federal
Power Act (FPA). 2/ NYSEG provides electric and gas services to
customers in parts of central, eastern and western New York.
NYSEG has two wholly owned subsidiaries, NGE Enterprises, Inc.
(NGE) and Somerset Railroad Corporation. 3/ NYSEG's power
marketing affiliate, XENERGY, is a wholly-owned subsidiary of
NGE. NYSEG and XENERGY have received Commission authorization to
sell wholesale power at market based rates. 4/
According to the application, NYSEG is proposing to estab-
lish a holding company structure in response to directives of the
Public Service Commission of the State of New York (New York
Commission) as a means to increase competition in New York. 5/
____________________
1/ 16 U.S.C. Subsection 824b (1994).
2/ See 16 U.S.C. Subsection 824(e) (1994).
3/ Application, Exhibit B.
4/ XENERGY, Inc. and New York State Electric & Gas Corporation,
79 FERC Paragraph 61,303 (1997).
5/ Application at 14-15.
<PAGE>
NYSEG -- Docket No. EC97-52-000
Proposed Corporate Reorganization
NYSEG proposes to reorganize its corporate operations
through the creation of a holding company parent. 6/ The
corporate reorganization will be accomplished pursuant to the
terms of an Agreement and Plan of Share Exchange to be entered
into between NYSEG and HoldCo. Formation of the holding company
will be achieved through a share exchange under which each
outstanding share of NYSEG common stock will be exchanged for one
share of HoldCo common stock. None of NYSEG's other equity
securities, including cumulative preferred shares, would be
altered by the transaction. 7/
As part of the reorganization plan, NYSEG's coal-fired
generation assets are to be transferred to a subsidiary or
subsidiaries of HoldCo (collectively referred to as GenSub) and
subsequently sold through an auction. 8/ Consequently, NYSEG
seeks Commission authorization to transfer certain of its
wholesale power sales contracts and a power sales tariff
(collectively Power Sales Agreements) to GenSub. 9/ NYSEG seeks
an effective date for the transfer of the Power Sales Agreements
concurrent with the effective date of the transfer of generation
assets. 10/ In addition, NYSEG seeks Commission authorization to
transfer any new power sales tariff service agreements and
umbrella agreements that it enters into up to and until the time
NYSEG transfers its generation assets to GenSub.
____________________
6/ According to the application, HoldCo will qualify for an
exemption from registration as a holding company under the
Public Utility Holding Company Act of 1935 (PUHCA), pursuant
to section 3(a)(1) of PUHCA. (Application at 26).
7/ Application at 6.
8/ The Application states that GenSub may initially be a
subsidiary of NYSEG and, as part of the proposed
reorganization, be transferred by NYSEG to HoldCo.
(Application at 2 n.5).
9/ NYSEG states that the power sales tariff does not provide for
power sales to affiliates and that, prior to any sale of
power by GenSub to NYSEG, GenSub will make a separate filing
under Section 205 of the FPA requesting Commission acceptance
of such sale. (Application at 12).
10/ NYSEG proposes to file all necessary notices of succession
under section 35.16 of the Commission's Rules and
Regulations, 18 C.F.R. Subsection 35.16 (1997) in response to
any Commission order authorizing the holding company
formation. (Application at 8).
NYSEG -- Docket No. EC97-52-000
Notice of the Application
Notice of the application was published in the Federal
Register with comments due on or before September 29, 1997. On
September 11, 1997, the Public Service Electric and Gas Company
(PSE&G) filed a motion to intervene raising no issues. On
September 26, 1997, the New York Commission filed a notice of
intervention requesting that the Commission defer action on
NYSEG's proposed reorganization until after the effective date of
the New York Commission's decision. The New York Commission also
states that, due to continuing settlement negotiations in the
state restructuring proceeding, NYSEG should modify its
application with the Commission after such negotiations are
concluded.
Discussion
Pursuant to Rule 214 of the Commission's Rules of Practice
and Procedure, PSEG&'s motion to intervene and the New York
Commission's notice of intervention serve to make them parties to
the proceeding. 11/
As noted above, NYSEG is a public utility under the FPA. In
Central Vermont Public Service Corporation (Central Vermont), 12/
the Commission concluded that the transfer of ownership and
control of jurisdictional facilities, through a transfer of a
public utility's common stock from existing shareholders to a
newly created holding company, constitutes a disposition of
jurisdictional facilities requiring prior Commission approval
under section 203. Consistent with the Commission's holding in
Central Vermont, because NYSEG's proposed restructuring involves
the transfer of ownership of its common stock from existing
shareholders to HoldCo, the restructuring is subject to the
requirements of section 203.
Additionally, in Enron Power Marketing, Inc., the Commission
found that power sales contracts filed with the Commission
constitute jurisdictional facilities. 13/ Consequently, the
transfer or assignment of power sales contracts requires section
___________________
11/ 18 C.F.R. Subsection 385.214(a)(2) and (c)(1) (1997).
12/ 39 FERC Paragraph 61,295 (1987).
13/ 65 FERC Paragraph 61,305 at 62,405 (1993). See also Ocean
State Power, 43 FERC Paragraph 61,466 (1988) (as a result of
a change in ownership structure, the transfer of assets in
the form of power sales contracts constitutes a transaction
within the scope of section 203).
<PAGE>
NYSEG -- Docket No. EC97-52-000
203 authorization. Consistent with this finding, the transfer of
NYSEG's Power Sales Agreements requires approval pursuant to
section 203.
The proposed restructuring will not adversely affect
competition. While the proposed reorganization results in a
change of ownership or control of jurisdictional facilities, it
involves only NYSEG and its affiliates and does not itself result
in any change in the operation of NYSEG's facilities, or other
inputs that could be used as barriers to entry, that would have
an anti-competitive effect.
The proposed reorganization will not adversely affect rates
or regulation. According to the application, it is contemplated
that HoldCo will be an exempt holding company under PUHCA. 14/
After the reorganization, NYSEG will continue to be subject to
retail rate regulation by the New York Commission. This
Commission will maintain its regulatory authority over both NYSEG
and XENERGY, and will have regulatory authority over any
wholesale sales made by GenSub, to consider any and all wholesale
rate-related issues arising after the reorganization.
Finally, neither PSE&G nor the New York Commission raise
substantive issues related to the proposed reorganization. The
New York Commission, however, has asked that the Commission defer
action on NYSEG's application pending continuing negotiations in
the state proceeding. Further deferral is unnecessary since
NYSEG would need to file a further application with the
Commission under section 203 of the FPA in the event that
subsequent negotiations in NYSEG's restructuring proceeding in
the State of New York result in agreements that present material
changes affecting the instant disposition of facilities.
While HoldCo is not proposing to merge with another holding
company at this time, it is possible that in the future such a
merger may take place. In an order approving a similar holding
company formation by Illinois Power Company, the Commission
clarified its jurisdiction under section 203 regarding the effect
that mergers of public utility holding companies have on their
public utility subsidiaries. 15/ While noting that it does not
have jurisdiction over public holding company mergers or
consolidations, the Commission concluded that, ordinarily, when
public utility holding companies merge, an indirect merger
involving their public utility subsidiaries also takes place, and
that Commission approval under section 203 would be required.
Consequently, the Commission stated:
____________________
14/ Application at 15.
15/ Illinois Power Company, 67 FERC Paragraph 61,136 (1994)
NYSEG -- Docket No. EC97-52-000
We therefore will presume, subject to
rebuttal, that mergers between public utility
holding companies also accomplish an indirect
merger of their public utility subsidiaries.
If the public utilities can rebut the
presumption, we will find that jurisdiction
will not attach until such time as the public
utility subsidiaries formally merge or
consolidate their facilities. If the public
utilities cannot rebut the presumption,
section 203 approval of the indirect merger
of the public utilities will be required.
(footnote omitted) [16/]
Accordingly, NYSEG is advised that, in the event HoldCo
should seek to merge with another public utility holding company,
NYSEG and any other affected public utility are required to file
under section 203 evidence to rebut the presumption that such a
merger would not also result in an indirect merger of the public
utility subsidiaries, or, alternatively, for approval of an
indirect merger of the public utilities.
Based on the foregoing analysis, it is concluded that the
disposition of jurisdictional facilities by NYSEG in the above
described corporate restructuring is consistent with the public
interest and is hereby authorized effective concurrent with the
effective date of NYSEG's generation assets transfer to GenSub,
subject to the following conditions:
(1) The proposed transaction is authorized upon the terms
and conditions and for the purposes set forth in the
application;
(2) The Commission retains authority under section 203(b)
of the Federal Power Act to issue supplemental orders
as appropriate;
(3) the foregoing authorization is without prejudice to the
authority of the Commission or any other regulatory
body with respect to rates, service, accounts,
valuation, estimates or determinations of cost or any
other matter whatsoever now pending or which may come
before the Commission;
____________________
16/ 67 FERC at 61,354-55.
<PAGE>
NYSEG -- Docket No. EC97-52-000
(4) Nothing in this order shall be construed to imply
acquiescence in any estimate or determination of cost
or any valuation of property claimed or asserted;
(5) NYSEG shall record all costs related to the formation
of HoldCo or restructuring, and not passed on to
HoldCo, in Account 426.5, Other Deductions, of the
Commission's Uniform System of Accounts Prescribed for
Public Utilities and Licensees;
(6) In the event HoldCo should seek to merge with another
public utility holding company, the public utilities of
those companies are required to make appropriate
filings under section 203 of the Federal Power Act; and
(7) NYSEG shall promptly notify the Commission of the date
on which the disposition of the jurisdictional
facilities is consummated.
Authority to act on this matter is delegated to the
Director, Division of Opinions and Corporate Applications,
pursuant to 18 C.F.R. Subsection 375.713. This order constitutes
final agency action. Requests for rehearing by the Commission
may be filed within thirty (30) days of the date of issuance of
this order, pursuant to 18 C.F.R. Subsection 385.713.
Robert E. Cackowski
Director, Division of Opinions
and Corporate Applications
