(As filed October 13, 2000)
File No. 70-9675
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 4
on
FORM U-1/A
APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Energy East Corporation
One Canterbury Green
Stamford, CT 06904
CIS Service Bureau, L.L.C.
855 Main Street
Bridgeport, CT 06604
The Union Water-Power Company
526 Western Avenue
Augusta, ME 04330
(Names of companies filing this statement and
addresses of principal executive offices)
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Energy East Corporation
(Name of top registered holding company parent)
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Kenneth M. Jasinski
Executive Vice President
and General Counsel
Energy East Corporation
One Canterbury Green
Stamford, Connecticut 06904
(Name and address of agent for service)
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The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
William T. Baker, Jr., Esq. Adam Wenner, Esq.
J. Michael Parish, Esq. Vinson & Elkins, L.L.P.
Thelen Reid & Priest LLP 1455 Pennsylvania Avenue, N.W.
40 West 57th Street Washington, D.C. 20004-1008
New York, New York 10019
Frank Lee, Esq.
Huber Lawrence & Abell
605 Third Avenue
New York, New York 10158
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TABLE OF CONTENTS
Page
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION....................................1
A. INTRODUCTION AND GENERAL REQUEST.....................................1
1. GENERAL.........................................................1
2. GENERAL REQUEST.................................................1
B. DESCRIPTION OF THE PARTIES TO THE TRANSACTION........................1
C. INTRA-SYSTEM PROVISION OF SERVICES...................................3
1. SERVICE COMPANY.................................................3
2. PROVISION OF SERVICES BY UTILITY SUBSIDIARIES...................5
3. EXISTING AFFILIATE SERVICE AGREEMENTS...........................5
ITEM 2. FEES, COMMISSIONS AND EXPENSES.........................................8
ITEM 3. APPLICABLE STATUTORY PROVISIONS........................................8
ITEM 4. REGULATORY APPROVALS...................................................9
A. NEW YORK PUBLIC SERVICE COMMISSION ("NYPSC").........................9
B. MAINE PUBLIC UTILITIES COMMISSION ("MPUC")...........................9
C. MASSACHUSETTS DEPARTMENT OF TELECOMMUNICATIONS AND
ENERGY ("MDTE").....................................................10
D. CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL
("DPUC")............................................................10
ITEM 5. PROCEDURE.............................................................11
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.....................................11
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS...............................13
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Energy East Corporation, CIS Service Bureau, L.L.C. and Union
Water-Power Company (collectively, the "Applicants") hereby amend and restate
the Application-Declaration in this proceeding, as previously amended, in its
entirety to read as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
A. INTRODUCTION AND GENERAL REQUEST
1. GENERAL
Energy East Corporation, a New York corporation ("Energy East"), is a
registered holding company under the Public Utility Holding Company Act of 1935,
as amended (the "Act"). 1 Energy East registered with the Securities and
Exchange Commission (the "Commission") under Section 5 of the Act following its
acquisition of CMP Group, Inc., a Maine corporation ("CMP Group"), CTG
Resources, Inc. a Connecticut corporation ("CTG"), and Berkshire Energy
Resources, a Massachusetts business trust ("Berkshire"), each of which is a
public utility holding company.
2. GENERAL REQUEST
This Application/Declaration seeks the authorization and approval of
the Commission with respect to the provision of intra-system services.
Specifically, Energy East requests that the Commission approve the designation
of its wholly-owned direct subsidiary Energy East Management Corporation, a
Delaware corporation ("EE Management"), as a subsidiary service company in
accordance with the provisions of Rule 88 under the Act and the Services
Agreements (as defined below) and find that EE Management is so organized and
will conduct its operations as to meet the requirements of Section 13 of the Act
and the Commission's rules under the Act.
B. DESCRIPTION OF THE PARTIES TO THE TRANSACTION
Energy East owns, directly or indirectly, interests in the following
eight public utility companies (the "Utility Subsidiaries"), each of which will
be wholly-owned by entities within the Energy East system, except as otherwise
indicated:
o New York State Electric & Gas Corporation ("NYSEG"), a New York corporation
and a wholly-owned subsidiary of Energy East, which purchases, transmits
and distributes electricity and purchases, transports and distributes
natural gas in parts of New York.
o Maine Natural Gas, L.L.C. ("Maine Natural Gas"), formerly known as CMP
Natural Gas, L.L.C., a Maine limited liability company, which distributes
natural gas in Maine and which is a joint venture between New England Gas
Development Corp. (holding a 17% interest), a wholly-owned subsidiary of
CMP Group, and Energy East Enterprises, Inc. ("Energy East Enterprises"), a
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1 See Energy East Corporation, et al., Holding Company Act Release No. 27224
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(August 31, 2000) (the "Merger Order").
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Maine corporation (holding an 83% interest), which is a wholly-owned
subsidiary of Energy East and a public utility holding company exempt from
all provisions of the Act except Section 9(a)(2), by order issued under
Section 3(a)(1). 2
o Central Maine Power Company ("Central Maine Power"), a Maine corporation,
the common stock of which is wholly-owned by CMP Group, which is primarily
engaged in transmitting and distributing electricity in Maine.
o Maine Electric Power Company, Inc. ("MEPCo"), a Maine corporation, which
owns and operates a 345kV transmission interconnection between the Maine -
New Brunswick, Canada international border at Orient, Maine. Central Maine
Power owns a 78.3% voting interest in MEPCo with the remaining interests
owned by two other Maine utilities.
o NORVARCO, a Maine corporation, which holds a 50% general partnership
interest in Chester SVC Partnership, a general partnership which owns a
static var compensator located in Chester, Maine, adjacent to MEPCo's
transmission interconnection. NORVARCO is a wholly-owned subsidiary of
Central Maine Power.
o The Southern Connecticut Gas Company ("Southern Connecticut Gas"), a
Connecticut corporation and a wholly-owned subsidiary of Connecticut
Energy, which is primarily engaged in the retail distribution and
transportation of natural gas in parts of Connecticut.
o Connecticut Natural Gas Corporation ("Connecticut Natural Gas"), a
Connecticut corporation and a wholly-owned subsidiary of CTG Resources,
which is primarily engaged in the retail distribution and transportation of
natural gas in parts of Connecticut.
o The Berkshire Gas Company ("Berkshire Gas"), a Massachusetts gas company
and a wholly-owned subsidiary of Berkshire, which is engaged in the sale
and distribution of natural gas in western Massachusetts.
As stated above, EE Management is an existing wholly-owned direct
subsidiary of Energy East. EE Management was originally organized in 1999 to
invest the proceeds of the sale of Energy East's coal-fired generation assets in
New York. 3 EE Management's capitalization consists of 200 shares of common
stock, par value $.01 per share, of which 10 shares have been issued to Energy
East. Initially, EE Management's working capital needs will be met from the
portion of the asset sales proceeds (estimated at approximately $4 million) that
were not used to finance Energy East's acquisition of CMP Group, CTG and
Berkshire. In the future, additional working capital requirements of EE
Management will be met through intercompany borrowings from Energy East pursuant
to Rule 52(b). The cost of capital of EE Management will be a debt cost
equivalent to the effective cost of debt paid by Energy East under its revolving
credit agreement.
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2 It is contemplated that New England Gas Development will be dissolved and
that Maine Natural Gas will be converted from an LLC to a corporation that
will be wholly owned by Energy East Enterprises.
3 Most of these proceeds were used by Energy East to finance the acquisition
of CMP Group, CTG and Berkshire.
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EE Management proposes to provide its associate companies in the
Energy East system (including Energy East) with a variety of administrative,
management, and support services. Such services will be provided in accordance
with service agreements (the "Service Agreements") that EE Management will enter
into with each of its associate public utility companies and each of its
associate non-utility companies (including Energy East) that it serves. The
forms of these agreements are filed herewith as Exhibits B-1 and B-2,
respectively. A form of service agreement for the provision of services by a
Utility Subsidiary to another Utility Subsidiary or to other associate companies
is filed herewith as Exhibit B-3. An appendix entitled "Service Company Policy
and Procedures" is filed herewith as Exhibit B-4.
EE Management will be staffed by employees who will be transferred
over time from other Energy East system companies. In addition, it is
anticipated that EE Management will have access to certain employees who will
remain employees of other system companies. Employees of other system companies
who devote a portion of their time to EE Management will directly charge to EE
Management the applicable portion of such time, including appropriate
allocations of overhead costs.
A list of Energy East's other subsidiaries (the "Non-Utility
Subsidiaries") is set forth in an appendix to the Merger Order.
C. INTRA-SYSTEM PROVISION OF SERVICES
1. SERVICE COMPANY
In order to ensure adequate oversight and realize economies of scale,
certain administrative and service functions for the Energy East system will be
consolidated and provided through EE Management. As a general rule, the
individual system companies will continue to perform services that can benefit
from individualized application at the company level, with EE Management
offering system-wide coordination and strategy, oversight and other services
where economies can be captured by the centralization of services. In
particular, it is anticipated that, subject to the requirements or limitations
of state and federal law, the following classes of services may be offered by EE
Management to system companies:
o Accounting services, such as the maintenance of books and records,
preparation of financial and statistical reports, tax filings and
supervision of compliance with applicable laws and regulations;
o Audit services and management of an entity-wide framework of corporate
controls;
o Corporate planning services, such as the preparation of corporate plans,
budgets and financial forecasts, monitoring trends and evaluating business
opportunities;
o Executive services, such as providing general management and strategic
planning;
o Finance and treasury services, such as coordinating activities relating to
securities issuances, cash management services, investing activities,
monitoring capital markets, performing financial and economic analysis and
administering insurance programs;
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o Governmental affairs services, such as lobbying governmental officials and
monitoring, reviewing and researching legislation;
o Human resource services, such as establishing and administering policies
and supervision of compliance with legal requirements in the areas of
employment, compensation, benefits and employee health, welfare, and
safety, processing of payroll and employee benefit payments, and the
coordination of contract negotiation and relations with labor unions; and
o Legal services coordination among law and regulatory departments within the
Energy East system;
o Other corporate support services, which may include
information/telecommunication services, purchasing, contract
administration, and corporate communications.
Transition teams are still in the process of evaluating whether it
would be economical and effective for EE Management to provide its associate
companies with all of the listed services and whether additional services may
also be provided by EE Management. In general, it is Energy East's intention to
move administrative and corporate support functions to EE Management, unless
they can be more effectively and economically provided by Energy East's public
utility subsidiaries. EE Management will complete its evaluation of the optimum
structure for EE Management and prepare an implementation plan no later than
December 31, 2001. EE Management will also evaluate and consider all appropriate
allocation methods in determining the fairness of allocations to its associate
companies in the Energy East system (including Energy East). Upon completing
this evaluation, EE Management will submit revised Service Agreements to the
Commission in accordance with the 60-day letter procedure described below.
The Service Agreements will provide methodologies to ensure that all
client companies (including Energy East) pay to EE Management the cost of all
services, computed in accordance with the applicable rules and regulations
(including, but not limited to Rules 90 and 91) under the Act and appropriate
accounting standards. Where more than one client company (including Energy East)
is involved in or has received benefits from a service performed by EE
Management, the Service Agreements will provide that client companies will pay
their fairly allocated pro rata share in accordance with the methods set out in
appendices to the Service Agreements. Thus, charges for all services provided by
EE Management to associate utility companies and non-utility companies will be
on an "at cost" basis as determined under Rules 90 and 91 under the Act.
EE Management will maintain its accounts, cost-accounting procedures
and other records in accordance with the requirements of the Commission's
Uniform System of Accounts for Mutual Service Companies and Subsidiary Service
Companies utilizing, however, the chart of accounts specified in the FERC
Uniform System of Accounts for Public Utilities and Licensees (18 C.F.R. Part
101) . Exhibit B-4 hereto summarizes the policies and procedures that will be
used to implement the Service Agreements. EE Management will file annual reports
on Form U-13-60 in accordance with Rule 94, commencing with the report for
calendar year 2001.
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No material change in the organization of EE Management, the methods
of allocating cost to associate companies, or in the scope or character of the
services to be rendered by EE Management, subject to Section 13 of the Act, or
any rule, regulation or order thereunder, shall be made unless and until EE
Management shall first have given the Commission written notice of the proposed
change not less than 60 days prior to the proposed effectiveness of any such
change. If, upon the receipt of any such notice, the Commission shall notify EE
Management within the 60-day period that a question exists as to whether the
proposed change is consistent with the provisions of Section 13 of the Act, or
of any rule, regulation or order thereunder, then the proposed change shall not
become effective unless and until EE Management shall have filed with the
Commission an appropriate declaration regarding such proposed change and the
Commission shall have permitted such declaration to become effective.
Energy East will structure the Service Agreements so as to comply with
Section 13 of the Act and the Commission's rules and regulations thereunder.
Rule 88 (b) provides that "[a] finding by the Commission that a
subsidiary company of a registered holding company . . . is so organized and
conducted, or to be conducted, as to meet the requirements of Section 13(b) of
the Act with respect to reasonable assurance of efficient and economical
performance of services or construction or sale of goods for the benefit of
associate companies, at cost fairly and equitably allocated among them (or as
permitted by [Rule 90], will be made only pursuant to a declaration filed with
the Commission on Form U-13-1, as specified in the instructions for that form,
by such company or the persons proposing to organize it." Notwithstanding the
foregoing language, the Commission has on at least two recent occasions made
findings under Section 13(b) based on information set forth in an application on
Form U-1, without requiring the formal filing on a Form U-13-1. See UNITIL
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Corp., 51 SEC Docket 562 (Apr. 24, 1992); CINergy Corp., 57 SEC Docket 2353
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(Oct. 21, 1994). In this Application, Energy East has submitted substantially
the same application information as would have been submitted in a Form U-13-1.
Accordingly, it is appropriate to find that EE Management will be so organized
and its business will be so conducted as to meet the requirements of Section
13(b), and that the filing of a Form U-13-1 is unnecessary, or, alternatively,
that this Application should be deemed to constitute a filing on Form U-13-1 for
purposes of Rule 88.
2. PROVISION OF SERVICES BY UTILITY SUBSIDIARIES
The Utility Subsidiaries may provide to one another or to other
associate companies within the Energy East system various types of operational
services, including call center operation, customer billing, network support
services, information services, and credit and collection services, as well as
management support services similar to those to be provided by EE Management
during the transition period. As is customary among a group of affiliated
utilities, the Utility Subsidiaries may also provide maintenance and emergency
repair services and other operational services utilizing personnel with
specialized expertise. Moreover, in accordance with Rules 87, 90 and 91, certain
goods may be provided through a leasing arrangement or otherwise by one Utility
Subsidiary to one or more associate companies, and certain assets may be used by
one Utility Subsidiary for the benefit of one or more other associate companies.
All such services provided to Utility Subsidiaries or to EE Management by a
Utility Subsidiary will be rendered at cost, as determined in accordance with
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Rules 90 and 91 under the Act. 4 As appropriate, companies in the Energy East
system will enter into Service Agreements with the Utility Subsidiaries in
substantially the form filed herewith as Exhibit B-3.
Transition teams are still in the process of evaluating whether it
would be economical and effective for the Utility Subsidiaries to provide to
each other and to other associate companies all or any of the specific
categories of services enumerated above and whether additional services may also
be provided by the Utility Subsidiaries. In general, it is Energy East's
intention to eliminate areas of duplicate or overlapping operational support
functions in those cases where it can be demonstrated that combining functions
in a single Utility Company would be more effective and economical. Energy East
will complete its evaluation of the optimum structure for this shared services
concept and prepare an implementation plan no later than December 31, 2001. At
that time, Energy East will submit a revised Service Agreement to the Commission
in accordance with the 60-day letter procedure described above.
3. EXISTING AFFILIATE SERVICE AGREEMENTS
The subsidiaries of Energy East, CMP Group, CTG, Connecticut Energy,
and Berkshire currently provide a variety of services and sell goods to other
companies in the same holding company systems under agreements which in some
cases are cost-based and in other cases are market-based. As indicated above, it
is contemplated that administrative, management and other corporate support
services now provided by subsidiaries of these companies to associate companies
will be transitioned to EE Management. When that process is completed, the
existing agreements will be terminated. In addition, subsidiaries of Energy
East, CMP Group, CTG, Connecticut Energy, and Berkshire also provide specialized
types of services and goods to each other, such as maintenance of fiber optics
facilities, load forecasting, call center operations, data processing, and steam
and chilled water, under a variety of existing agreements. In general, these
agreements will remain in place after the Mergers. Energy East has determined
that most of these agreements are either exempt from the requirements of Section
13(b) of the Act or may be performed pursuant to Rule 87 and/or Section 34 of
the Act, as applicable. Filed herewith as Exhibit I (Revised) is a list of all
existing agreements for the sale of goods or services that are exempt under
these provisions.
Energy East has identified certain existing agreements for the sale of
goods or services that do not appear to fall within any statutory or
administrative exemption under the Act, as follows:
1. The Union Water-Power Company ("UWP"), a wholly owned
subsidiary of CMP Group that provides, among other things, utility construction
support services, energy efficiency performance contracting and energy use
management services, and real estate development services, is currently a party
to five agreements with Central Maine Power having various termination dates.
(See Exhibits B-5 through B-7, B-9 and B-10). Under these agreements, UWP
provides or will provide the following services:
o utility location services
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4 The cost of such services, as determined in accordance with Rules 90 and
91, will also comply with any rules or codes of conduct applicable to the
Utility Subsidiaries in New York, Maine, Connecticut or Massachusetts.
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o polesetting services
o transmission tower services (specifically, raising the height of
existing towers)
o inspection of transmission lines using infrared technology
o transformer vault repair services (purchase order)
UWP provides these services to Central Maine Power at market-based
rates which have been submitted for approval to the MPUC. UWP also provides all
of these services to unaffiliated utilities and other customers in the regular
course of its business. The rates charged by UWP are based on competitive rates
in the marketplace and are comparable to the rates charged Central Maine Power
by other unaffiliated providers of similar services.
2. CIS Service Bureau, L.L.C. ("CIS"), an indirect wholly owned
subsidiary of Connecticut Energy, provides customer information services to
Southern Connecticut Gas pursuant to an agreement under which CIS licenses the
required software from the vendor, and finances the implementation of the
customer information system, including costs of consulting services, software
modifications, and related hardware and database software licenses. (See Exhibit
B-11). CIS charges Southern Connecticut Gas a monthly fee based on the number of
Southern Connecticut Gas customers billed. The fee has a fixed and variable
component. The fixed component covers CIS's investment in the implementation of
the system (approximately $8 million) and the variable component covers CIS's
operating costs. Under this agreement, CIS must provide a certain minimum level
of service to Southern Connecticut Gas for the fixed monthly fee. The cost to
CIS to provide these services, unless Southern Connecticut Gas specifically
requests a change in the service, does not alter the fees Southern Connecticut
Gas pays under the agreement. Thus, CIS assumes the risk of providing adequate
service to Southern Connecticut Gas for the fixed price. The charges to Southern
Connecticut Gas under this agreement are lower than the cost would be if
Southern Connecticut Gas were to acquire and own the operating system on its
own. Maintenance support for the Southern Connecticut Gas customer information
system is provided by CIS utilizing Southern Connecticut Gas employees under a
DPUC-approved service contract. CIS has been requested to provide proposals for
billing solutions to NYSEG and Maine Natural Gas and may offer similar customer
information services to other associate and non-associate utilities in the
future.
3. CIS also renders billing services at market-based rates to Energy
East Solutions, LLC, a broker and marketer of electricity and natural gas that
is partly owned by Energy East Solutions, Inc., an indirect subsidiary of Energy
East, and CNE Energy Services Group, Inc., a wholly-owned subsidiary of
Connecticut Energy.
UWP and CIS request authorization pursuant to Section 13(b) and the
rules thereunder to maintain the foregoing agreements in effect through December
31, 2001. These agreements will either be terminated prior to December 31, 2001,
or, alternatively, the terms thereof will be modified to comply with the "at
cost" pricing standard of Section 13(b) of the Act and Rules 90 and 91. UWP and
CIS propose to offer similar services to those described above to other Utility
Subsidiaries in the Energy East system "at cost" as determined in accordance
with Rules 90 and 91.
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ITEM 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses incurred or to be incurred in
connection with this Application-Declaration are estimated not to exceed
$30,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Section 13 of the Act and Rules 87, 88, 90 and 91 are considered
applicable to the proposed transactions.
To the extent that the proposed transactions are considered by the
Commission to require authorization, exemption or approval under any section of
the Act or the rules and regulations other than those set forth above, request
for such authorization, exemption or approval is hereby made.
The transactions proposed herein are also subject to Rule 54, which
provides that the Commission shall not consider the effect of the capitalization
or earnings of any subsidiary of a registered holding company that is an "exempt
wholesale generator" ("EWG") or a "foreign utility company" ("FUCO") in
determining whether to approve any transaction that is unrelated to the
financing of any EWG or FUCO if Rule 53(a), (b) and (c) are satisfied. These
standards are met.
Rule 53(a)(1): Energy East's "aggregate investment" in EWGs and FUCOs
is approximately $20 million, or approximately 2.3% of Energy East's pro forma
"consolidated retained earnings" at June 30, 2000 (approximately $883 million).
Rule 53(a)(2): Energy East will maintain books and records enabling it
to identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly acquires and holds an interest. Energy East will cause
each domestic EWG in which it acquires and holds an interest, and each foreign
EWG and FUCO that is a majority-owned subsidiary, to maintain its books and
records and prepare its financial statements in conformity with U.S. generally
accepted accounting principles ("GAAP"). All of such books and records and
financial statements will be made available to the Commission, in English, upon
request.
Rule 53(a)(3): No more than 2% of the employees of the Utility
Subsidiaries will, at any one time, directly or indirectly, render services to
EWGs and FUCOs.
Rule 53(a)(4): Energy East will submit a copy of the
Application/Declaration in this proceeding and each amendment thereto, and will
submit copies of any Rule 24 certificates required hereunder, as well as a copy
of Energy East's Form U5S, to each of the public service commissions having
jurisdiction over the retail rates of the Utility Subsidiaries.
In addition, Energy East states that the provisions of Rule 53(a) are
not made inapplicable to the authorization herein requested by reason of the
occurrence or continuance of any of the circumstances specified in Rule 53(b).
Rule 53(c) is inapplicable by its terms.
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ITEM 4. REGULATORY APPROVALS
Each of the public service commissions in New York, Maine,
Massachusetts, and Connecticut exercise some degree of regulatory oversight over
transactions between regulated public utilities and their affiliates and
associate companies.
A. NEW YORK PUBLIC SERVICE COMMISSION ("NYPSC").
Generally, the NYPSC has jurisdiction under Section 110 of the New
York Public Service Law over transactions between public utilities and their
affiliates to the extent of access to the accounts or records of such affiliates
relating to any such transactions. Section 110 also provides, generally, that
all management, construction, engineering or similar contracts between a utility
and an affiliate must be filed with the NYPSC and that any charges under such
contracts may not exceed the reasonable cost of performing such service. NYSEG
and its affiliates are subject to the affiliate transaction guidelines set forth
in the Agreement Concerning the Competitive Rate and Restructuring Plan of New
York State Electric & Gas Corporation dated October 9, 1997 in Case No.
96-E-0891 (the "Plan"), which was approved by the NYPSC in Case Nos. 96-E-0891,
93-E-0960 and 94-M-0349 by Order issued and effective January 27, 1998 and
opinion issued March 5, 1998. NYSEG filed cost allocation guidelines pursuant to
Section VIII 8.f of the Plan with the NYPSC on August 20, 1998. No additional
approval of the NYPSC is required for NYSEG to enter into the Service Agreement.
B. MAINE PUBLIC UTILITIES COMMISSION ("MPUC").
The MPUC has jurisdiction under 35-A Maine Revised Statutes ss. 707.3
to review and approve all transactions between Maine public utility companies
and their affiliates under a standard that the transaction is not adverse to the
public interest. Under ss. 707.2, the MPUC may require the production of all
books, records, documents and other information relating to transactions between
a utility and its affiliates. Chapter 820 of the MPUC's Rules establishes
additional provisions governing transactions between a utility and its
affiliates, including pricing provisions relating to the provision of services.
Chapter 820 provides that any utility equipment, facility, service or personnel
used by an affiliate be charged to the affiliate at a tariffed rate if
available, at the market price if no tariffed rate exists, or otherwise at fully
distributed cost. Chapter 820 follows the principles of the rules of the Federal
Communications Commission regarding cost allocations between a utility and its
affiliates. Under Chapter 820, equipment, facilities, services or personnel of a
utility affiliate used by that utility must be priced at the same price charged
non-affiliates, or if such a price is not available, then the affiliate must
charge the market price.
In its order approving the merger of CMP Group with Energy East,
issued January 4, 2000, Exhibit D-1 hereto (together with Order on
Reconsideration, dated February 24, 2000), the MPUC imposed, as a condition of
its approval, the requirement that Energy East and its affiliates, to the extent
that their activities relate to or in any way impact the operations, costs, or
revenues of Central Maine Power in Maine, be subject to the MPUC's jurisdiction
for discovery purposes and that they participate as a party in any proceeding
when deemed necessary by the MPUC. Further, in order to assure the MPUC that it
would also retain oversight over affiliate transactions for ratemaking purposes
after completion of the CMP Group Merger, CMP Group and Energy East agreed to
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request that this Commission include, in any order approving the merger of CMP
Group and Energy East, the following language:
It is the Commission's intention that the Maine Public Utilities
Commission will retain the right to review and disallow costs of
services rendered by or to any Maine public utility company in the
Energy East Corporation registered holding company system that may be
subject to recovery in rates. 5
That request was made in Amendment No. 3 to Energy East's
Application/Declaration on Form U-1 (File No. 70-09569), filed March 3, 2000.
No additional approvals of the MPUC are required for Central Maine
Power, MEPCO, Maine Natural Gas, or NORVARCO to enter into the Service
Agreement.
C. MASSACHUSETTS DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY ("MDTE").
The MDTE has jurisdiction pursuant to Section 94B of Chapter 164 of the
Massachusetts General Laws to review and approve all contracts between Berkshire
Gas and any affiliated company pursuant to which compensation will be paid for
services rendered unless the agreement explicitly subjects the level of payment
to subsequent review by the MDTE in a base rate proceeding. The MDTE has also
adopted Standards of Conduct that include pricing conditions on transactions
between regulated utilities such as Berkshire Gas and affiliated entities. See
220 C.M.R. ss. 12.00 et seq. The MDTE's Standards of Conduct also require
Berkshire Gas to submit regular reports of its transactions with affiliates. No
additional approval of the MDTE is required for Berkshire Gas to enter into the
Service Agreement.
D. CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL ("DPUC")
The DPUC has jurisdiction under ss. 16-8c of the Connecticut General
Statutes to review affiliate transactions between a holding company or
subsidiary that is related to a public service company as necessary to protect
customers of the public service company from any adverse impacts. In its order
approving the merger of Energy East with Connecticut Energy Corporation, issued
December 16, 1999, (Docket No. 99-07-20, CNE Merger Docket), Exhibit D-2 hereto,
the DPUC imposed, as a condition of its approval, the requirement that any
modification to current cost allocation policies for Southern Connecticut Gas
resulting from the Mergers be filed for approval. The DPUC has previously
ordered that any proposed changes to existing Service Agreements between
Connecticut Energy Corporation and its subsidiaries be filed with the DPUC at
least 60 days prior to its effective date. See Docket No. 77-08-28, Reopening
May 21, 1997. In its order approving the merger of Energy East with CTG
Resources, Inc., issued January 19, 2000, (Docket No. 99-08-09, CTG Merger
Docket), Exhibit D-3 hereto, the DPUC imposed, as a condition of its approval,
the requirement that any modification to current cost allocation policies for
Connecticut Natural Gas resulting from the Mergers be filed, although without
the explicit condition that they be approved. No additional approvals of the
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5 Order Approving Request for Approval of Reorganization and Affiliated
Interest Transactions, MPUC Docket No. 99-411 at 26 (January 4, 2000).
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DPUC are required for Connecticut Natural Gas or Southern Connecticut Gas to
enter into the Service Agreement.
Except as stated above, no state or federal regulatory agency other
than the Commission under the Act has jurisdiction over the proposed
transactions.
ITEM 5. PROCEDURE
The Commission has published a notice under Rule 23 with respect to
the filing of this Application/Declaration and no request for hearing has been
made. Accordingly, the Applicants request that the Commission's order approving
this Application/Declaration be issued as soon as the rules allow, and that
there should not be a 30-day waiting period between issuance of the Commission's
order and the date on which the order is to become effective. The Applicants
hereby waive a recommended decision by a hearing officer or any other
responsible officer of the Commission and consents that the Division of
Investment Management may assist in the preparation of the Commission's decision
and/or order, unless the Division opposes the matters proposed herein.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
A. EXHIBITS.
--------
A-1 Certificate of Incorporation of Energy East Management Corporation.
(Previously filed).
A-2 By-Laws of Energy East Management adopted March 11, 1999. (Previously
filed).
B-1 Form of Service Agreement between Energy East Management and Utility
Subsidiary, including Revised Appendix A. (Revised) (Filed herewith).
B-2 Form of Service Agreement between Energy East Management and
Non-Utility Subsidiary, including Revised Appendix A. (Revised) (Filed
herewith).
B-3 Form of Service Agreement between Utility Subsidiary and other
Subsidiary or Energy East. (Previously filed).
B-4 Service Company Policies and Procedures (Revised) (Previously filed).
B-5 Agreement between UWP (On Target Division) and Central Main Power for
Utility Location Services (Previously filed) (Form SE).
B-6 Agreement between UWP (On Target Division) and Central Main Power for
Line Construction Services (Pole Setting Services) (Previously filed).
(Form SE).
B-7 Agreement between UWP (On Target Division) and Central Main Power for
Phase Raising Services (Previously filed). (Form SE).
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B-8 Deleted.
B-9 Agreement between UWP (On Target Division) and Central Main Power for
Technical Services (Infrared Inspection) (Previously filed). (Form
SE).
B-10 Purchase Order between UWP (On Target Division) and Central Maine
Power for Transformer Vault Repair Services (Previously filed). (Form
SE).
B-11 Agreement between CIS and Southern Connecticut Gas for Customer
Billing System Services (Previously filed). (Form SE).
D-1 MPUC Order in Docket No. 99-411 (January 4, 2000 Order Approving
Request for Approval of Reorganization and Affiliated Interest
Transactions and February 24, 2000 Order on Reconsideration) (filed as
Exhibit D-4 to Energy East's Amendment No. 3 to Form U-1, filed March
3, 2000, File No. 70-09569 and incorporated herein by reference).
D-2 DPUC Order in Docket No. 99-07-20 (December 16, 1999 Joint Application
of Energy East Corporation and Connecticut Energy Corporation for
approval of a change of control (filed as Exhibit D-2 to Energy East's
Amendment No. 2 to Form U-1, filed December 17, 1999, File No. 70-9545
and incorporated herein by reference).
D-3 DPUC Order in Docket No. 99-08-09 (January 19, 2000 Joint Application
of Energy East Corporation and CTG Resources, Inc. for approval of a
change of control (filed as Exhibit D-8 to Energy East's Amendment No.
2 to Form U-1, filed February 7, 2000, File No. 70-09569 and
incorporated herein by reference).
F-1 Opinion of Counsel. (Filed herewith).
F-2 Past Tense Opinion of Counsel. (To be filed pursuant to Rule 24).
H Proposed Form of Notice. (Previously filed).
I List of Existing Agreements for Sale of Goods or Services to Associate
Companies. (Revised) (Filed confidentially pursuant to Rule 104).
B. FINANCIAL STATEMENTS. (Filed herewith confidentially pursuant to Rule 104).
--------------------
FS-1 Balance Sheet of EE Management as of December 31, 1999.
FS-2 Income Statement of EE Management for the year ended December 31,
1999.
FS-3 Balance Sheet of EE Management as of June 30, 2000.
FS-4 Income Statement of EE Management for the twelve months ended June 30,
2000.
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ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The Transaction will not involve major federal action significantly
affecting the quality of the human environment as those terms are used in
Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Section
4321 et seq. ("NEPA"). First, no major federal action within the meaning of NEPA
is involved. Second, consummation of the Transaction will not result in changes
in the operations of Energy East or its subsidiaries that would have any
significant impact on the environment. To the Applicants' knowledge, no federal
agency is preparing an environmental impact statement with respect to this
matter.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned Applicants have duly caused this
Application/Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
ENERGY EAST CORPORATION
By: /s/ Robert D. Kump
---------------------------------
Name: Robert D. Kump
Title: Vice President and Treasurer
CIS SERVICE BUREAU, L.L.C.
By: /s/ Sam Bowlby
---------------------------------
Name: Sam Bowlby
Title: Secretary
THE UNION WATER-POWER COMPANY
By: /s/ John F. Fallona
---------------------------------
Name: John F. Fallona
Title: President
Date: October 13, 2000
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