EXHIBIT D-2
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
)
SOUTH BELOIT WATER, GAS AND ) DOCKET NO. EC00-
ELECTRIC COMPANY ) ----------------
)
APPLICATION OF
SOUTH BELOIT WATER, GAS AND ELECTRIC COMPANY
FOR AUTHORIZATION TO TRANSFER
TRANSMISSION ASSETS TO AMERICAN TRANSMISSION COMPANY, LLC
South Beloit Water, Gas and Electric Company ("SBWGE") requests
authorization under Section 203 of the Federal Power Act, 16 U.S.C. ss. 824b,
and Part 33 of the regulations of the Federal Energy Regulatory Commission
("Commission" or "FERC"), 18 C.F.R. Part 33, to transfer ownership and
operational control of its jurisdictional transmission facilities to American
Transmission Company, LLC ("ATCLLC"), a transmission company created by
operation of Wisconsin law to own and operate the high-voltage transmission
system in Wisconsin. 1999 Wisconsin Act 9 ("Act 9").1/
While ATCLLC is not yet in operation, current Wisconsin law requires ATCLLC
to take steps necessary to commence operations no later than January 1, 2001.
SBWGE intends to transfer its transmission facilities to ATCLLC effective when
ATCLLC commences operations. SBWGE submits this application well in advance of
ATCLLC's anticipated commencement of operations because it wishes to secure the
regulatory approvals required to complete the divestiture of its transmission
facilities to ATCLLC.
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1/ See Wis. Stats. ss. 196.485(3m).
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On December 6, 1999, Alliant Energy Corporate Services, Inc. ("Alliant
Energy Corporate Services") filed, in Docket No. EC00-29-000, an application
with the Commission under Section 203 of the Federal Power Act to transfer to
the Midwest System Operator, Inc. (the "Midwest ISO")2/ operational control over
substantial portions of the jurisdictional transmission facilities of the
Alliant Energy Operating Companies, including SBWGE's parent, Wisconsin Power
and Light Company ("WPL")3/. On March 31, 2000 the Commission's Order in that
docket authorized the transfer of operating authority to the Midwest ISO.
On December 8, 1999, WPL filed, in Docket No. EC00-33-000, an application
with the Commission under Section 203 of the Federal Power Act to transfer to
ATCLLC the ownership of WPL's jurisdictional transmission facilities. On March
31, 2000 the Commission's Order in that docket authorized WPL's transfer of
ownership of its jurisdictional transmission facilities to ATCLLC. SBWGE
requests authorization in this application to transfer ownership and control
over the SBWGE Transmission System to ATCLLC.
ATCLLC, which is legally obligated to transfer control over its facilities
to the Midwest ISO when the Midwest ISO commences operations. The Midwest ISO
will assume control over the transmission facilities of its members' systems
rated 100 kV and higher, but it will not own transmission facilities. Assuming
receipt of required regulatory approvals, upon commencement of its operations,
the Midwest ISO will assume control over the transmission facilities of the
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2/ The Midwest ISO is an independent system operator that was established
pursuant to Commission orders in Docket Nos. ER98-1438-000 and EC98-24-000.
Midwest Independent Transmission System Operator, Inc., 84 FERC P. 61,231,
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order on reconsideration, 85 FERC P. 61,250, order on reh'g, 85 FERC P.
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61,372 (1998).
3/ For purposes of this Application, WPL, IES Utilities Inc. ("IES"), Interstate
Power Company ("IPC"), and SBWGE are collectively referred to as the "Alliant
Energy Operating Companies."
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Alliant Energy Operating Companies rated 100 kV and higher, including those
transferred to ATCLLC pursuant to this application. The Midwest ISO is not
currently scheduled to commence operations until November 1, 2001. ATCLLC, on
the other hand, will assume both ownership and control over the transmission
facilities contributed by Wisconsin utilities and will exercise control until
control is assumed by the Midwest ISO. ATCLLC is expected to commence operations
by January 1, 2001.
I. DESCRIPTION OF THE PARTIES AND THE PROPOSED TRANSACTION
A. SOUTH BELOIT WATER, GAS AND ELECTRIC COMPANY
SBWGE is an Illinois corporation and a wholly-owned subsidiary of WPL. The
issued and outstanding capitol common stock of SBWGE is beneficially owned by
WPL. WPL is a Wisconsin corporation and a wholly-owned subsidiary of Alliant
Energy Corporation ("Alliant Energy"). WPL and Alliant Energy are headquartered
in Madison, Wisconsin.
Alliant Energy was formed on April 21, 1998, as a result of the merger
among WPL Holdings, Inc., IES Industries Inc., and IPC. Alliant Energy is a
registered public utility holding company and is regulated by the Securities and
Exchange Commission ("SEC") under the Public Utility Holding Company Act of
1935. In addition to WPL, Alliant Energy has two other direct public utility
subsidiaries, IPC and IES. The Alliant Energy Operating Companies are engaged in
the production, transmission, and distribution of electricity for domestic,
commercial, and industrial use in the states of Iowa, Wisconsin, Illinois, and
Minnesota.
SBWGE provides retail electric service to fewer than 10,000 customers in
areas adjacent to the Illinois-Wisconsin State line as follows: the City of
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South Beloit, the Villages of Rockton and Roscoe, and parts of the Townships of
Rockton and Roscoe all in Winnebageo County; parts of the Townships of
Manchester and LeRoy in Boone County; and parts of the Townships of Chemung and
Hebron in McHenry County. WPL (SWBGE's parent) furnishes electric service to the
public in southern and central Wisconsin, including the City of Beloit and
surrounding areas of Rock County, Wisconsin. The area which includes the City of
Beloit, in Wisconsin, constitutes a single community or population center. The
City of South Beloit, Illinois, immediately adjoins the City of Beloit,
Wisconsin. The two cities are separated only by the State Line, which in some
areas runs down the center of a paved street. The electric distribution systems
of WPL and SBWGE are interconnected at many points along the State Line.
Physically, the entire Beloit-South Beloit-Rockton area is served by a single
integrated electric distribution system owned by WPL and SBWGE. SBWGE has no
direct employees and all operation and maintanence activities are performed by
WPL or Alliant Energy Corporate Services. WPL is SBWGE's sole supplier of
metered electric service under terms of a contract approved by both this
Commission and the Illinois Commerce Commission ("ICC").
Alliant Energy has on file with the Commission, in Docket No.
ER96-2560-000, a system coordination and operating agreement to, among other
things, govern on a single-system basis the coordinated operations and joint
planning of the Alliant Energy Operating Companies' electric transmission
facilities (the "Coordination Agreement"). In order to implement the
Coordination Agreement, and for other reasons, Alliant Energy formed a
subsidiary service company, Alliant Energy Corporate Services, to act as agent
for the Alliant Energy operating companies and to, among other things, operate
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their transmission facilities as a single integrated system pursuant to Alliant
Energy's open access transmission tariff ("OATT") on file with the Commission.
SBWGE's service area is located in the part of the Alliant Energy system
known as the "Alliant Energy - East". SBWGE's transmission system comprises less
than 1 mile of 345 kV transmission facilities, 10 miles of 69 kV transmission
facilities and one substation 4/ (the "SBWGE Transmission System").
B. AMERICAN TRANSMISSION COMPANY
As noted above, ATCLLC is a Wisconsin limited liability corporation created
by specific legislative mandate through Act 9. While beginning as an affiliated
transco wholly owned by the proposed five initial Wisconsin members, ATCLLC has
the capability to evolve into a publicly owned, multi-state transmission
company. This evolution could be accomplished through a public stock offering
that would reduce the percentage of the ATCLLC's equity owned by its member
utilities. ATCLLC also will be able to increase its membership and expand the
scope of its operations by adapting its structure as necessary to encourage
other transmission owners within the region but outside of Eastern Wisconsin to
transfer ownership of their facilities to ATCLLC.
The original owners of ATCLLC ("participants") have agreed not to sell
their equity interests in ATCLLC for a period of three years following the
initial day of operations (January 1, 2001), except that a participant may offer
all or a portion of its interest to the other participants at ATCLLC's then
existing net book value.5/ Each participant will have the right to purchase the
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4/ While SBWGE's system map identifies four substations only one (Shaw) has
contains facilities at 69 kV and above and subject to this application.
5/ Any participant, however, may transfer its interest to a 100%-owned affiliate
at any time. WPPI will be permitted, if it chooses, to transfer its interest to
another entity owned by its members. The agreement not to transfer within three
years also does not prohibit transfers of ownership by operation of law, such as
merger or consolidation, or in connection with the sale of all or substantially
all of the assets of the participant.
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offered interest to the extent of its pro rata interest. Any participant can
increase the percentage of its ownership if the other participants elect not to
participate in purchasing the offered interest.
Act 9 imposes certain ownership and governance requirements. Act 9 provides
that ATCLLC will have no less than 5 and no more than 14 managers or directors
(which may be modified by a unanimous vote of the managers or directors).6/ It
also provides that at least 4 managers or directors shall be independent, i.e.,
"not directors, employees or independent contractors of a person engaged in the
production, sale, marketing, transmission or distribution of electricity or
natural gas or of an affiliate of such a person."7/ Certain statutory
restrictions are also placed on the number of managers or directors that each
company can appoint for the ten-year period after start-up. Act 9 states that
each of the following may appoint one manager or director for a one-year term:
1) each non-transmission utility security holder that owns 10% or more of or
more of the outstanding voting securities of the ATCLLC; 2) each group of
non-transmission utility security holders that, as a group, owns 10% or more of
the outstanding voting securities; 3) each electric utility, transmission
dependent utility and retail electric cooperative that holds at least 5% equity
interest; and 4) each transmission utility security holder. 8/
ATCLLC may not sell or merge its assets with another person unless they are
sold, transferred or merged on "an integrated basis" and in a manner that
ensures that the transmission facilities in Eastern Wisconsin are planned,
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6/ Wis. Stats. ss. 196.485(3m)(c)1.
7/ Wis. Stats. ss.196.485(3m)(c)2.
8/ Wis. Stats. ss. 196.485(3m)(c)3. "Transmission utility security holder"
means "a person that is a security holder of a transmission company, is an
investor-owned transmission utility in the transmission area and has contributed
its transmission facilities to the transmission company." Wis. Stats.
196.485(1)j.
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operated, maintained and controlled as a single transmission system.9/ ATCLLC
does not seek to qualify as an ISO or RTO. As noted above, ATCLLC will satisfy
Order No. 2000 RTO requirements by joining the Midwest ISO.
As ordained by Act 9, key provisions relating to the structure and
operation of ATCLLC include:
o A requirement to contract back with contributing transmission owners
for operating and maintenance services for at least three years.
Non-supervisory utility employees will have certain job rights after
the three years;10/
o A requirement to join the Midwest ISO and apply to operate as a single
rate zone, for pricing purposes, under the Midwest ISO tariff for at
least six years;11/
o A prohibition against bypassing distribution systems and against
providing service to retail customers;12/
o A prohibition against owning generation or participating in the
wholesale power market (with specific exceptions for procuring or
reselling ancillary services, redispatch or control area
functions);13/
o The governing board will consist of representatives of member entities
and independent members elected by shareholder vote.14/
The affairs of ATCLLC will be governed by an LLC Operating Agreement, which
will be executed by all the member utilities that contribute transmission assets
or cash to ATCLLC. The LLC Operating Agreement will also establish the
respective shares of the members, their contribution obligations and their
interest in distributions. It will also place certain restrictions on the
transfer of their interests. Finally, it will provides that ATC Management Inc.
(also referred to as the Corporate Manager) will manage the Company.
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9/ Wis. Stats. ss. 196.485(3m)(a)2.a.
10/ Wis. Stats. ss.196.485(3m)(a)1.b.
11/ Wis. Stats. ss.196.485(3m)(a)1.d.-f.
12/ Wis. Stats. ss.196.485(3m)(a)2.b.
13/ Wis. Stats. ss.196.485(3m)(a)2.c.
14/ Wis. Stats. ss.196.485(3m)(c).
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C. ATC MANAGEMENT INC. - CORPORATE MANAGER (CM)
The ATCLLC will be managed by a corporate manager, ATC Management Inc. ATC
Management was organized as a corporation under Wisconsin law on June 12, 2000.
The CM will be a member of ATCLLC and will be owned by the participants. All
ATCLLC decisions will be effected through and undertaken by the CM. The CM will
employ all personnel necessary to operate the ATCLLC.15/ All of the CM's costs
and expenses will be treated as ATCLLC expenses.
Prior to its initial date of operation (January 1, 2001), CM will amend its
articles of incorporation in accordance with the Amended and Restated Articles
of Incorporation, which will provide for two classes of shares: Class A shares,
which will initially be held in substantially the same proportion that interests
are held in ATCLLC, and Class B shares, one of which will be held by each member
of ATCLLC. The Bylaws of ATC Management Inc. establish the right of the Class B
shareholders to elect the Board of Directors of the CM until a public offering,
at which time a majority of the Board would be elected by the Class A shares
held by the public. The Shareholders Agreement will be entered into by ATCLLC
and the Class B shareholders and willset forth the procedures by which those
shareholders will elect directors in accordance with Act 9.
The diagram below shows the relationship between ATCLLC and the corporate
manager. It also shows the manner in which utilities may transfer assets or cash
in exchange for membership interests in the LLC and the CM.
OWNERSHIP DIAGRAM
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[GRAPHIC OMITTED]
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15/ Mr. Jose M. Delgado has been appointed as the Chief Executive Officer of
the CM, ATC Management Inc.
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In the event the Commission requires additional information about ATCLLC,
SBWGE will provide such information as a supplement to this application.
D. THE PROPOSED TRANSACTION
SBWGE proposes to transfer its ownership and control of the SBWGE
Transmission System to ATCLLC. Upon receipt of Commission authorization to
transfer the facilities and completion of the transaction, ATCLLC will own and
operate the SBWGE Transmission System.
The transmission facilities of the SBWGE Transmission System to be
transferred to ATCLLC are described in detail in Schedule A. In sum, ATCLLC will
acquire from SBWGE transmission facilities that operate at voltages of generally
345 kV and 69 kV facilities. The SBWGE transmission facilities proposed to be
transferred include:
o Transmission lines (including towers, poles, and conductors) and
transmission substations;
o Transformers providing transformation within the bulk transmission
system and between the bulk and area transmission systems;
o Radial taps from the transmission system up to, but not including, the
facilities that establish the final connection to distribution
facilities or retail customers;
o Substations that provide primarily a transmission function; and
o Voltage control devices and power flow control devices directly
connected to the transmission system.
The original cost of the facilities of the SBWGE Transmission System at
December 31, 1999 was $ 974,068.52.
The facilities SBWGE will transfer to ATCLLC do not include distribution
facilities used to provide retail service. Distribution facilities include all
facilities with voltages below 50 kV, including the final circuit connection to
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substations providing transformation or connection to any retail customer
regardless of voltage level.
E. ATCLLC'S OPERATION OF THE TRANSMISSION SYSTEM
ATCLLC is under a statutory mandate to transfer control of its
jurisdictional facilities to the Midwest ISO. ATCLLC will own and have
operational control of its transmission system; provide ancillary services;
operate an Open Access Same-Time Information System ("OASIS") in conformance
with Order No. 889;16/ and administer its OATT. ATCLLC also will be responsible
for the maintenance of the transmission facilities under its ownership and
control.17/ ATCLLC also will assume responsibility for transmission system
planning.18/
ATCLLC will offer ancillary services under its OATT. Since ATCLLC will own
no generating facilities, it will purchase ancillary services from third parties
and resell them under its OATT. ATCLLC expects to enter into agreements to
purchase ancillary services from generators in its control area. ATCLLC will
contract for must-run operations and ancillary services from the generators
located in its control area and connected to its transmission system. ATCLLC
will not, however, engage in the purchase and sale of energy other than to
obtain necessary ancillary services required by its customers.19/ SBWGE will
become a transmission customer of ATCLLC under ATCLLC's transmission tariff.
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16/ Order No. 889, Open Access Same-Time Information System (Formerly Real-Time
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Information Network) and Standards of Conduct, FERC Stats. & Regs.
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P. 31, 035 (1996).
17/ SBWGE anticipates that ATCLLC initially will contract with SBWGE to perform
maintenance on the SBWGE Transmission System facilities transferred to ATCLLC.
18/ Section 196.485(1)(ge) and 196.485(1m)(3m) of the Wisconsin Statutes.
19/ Id.
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F. FINANCIAL ASPECTS OF THE TRANSACTION
SBWGE and ATCLLC will enter into a bill of sale governing the conveyance of
the SBWGE Transmission System. The transmission assets transferred to ATCLLC
under the bill of sale will include SBWGE's rights and interests in any
contracts under the Alliant Energy OATT. The SBWGE Transmission System will be
conveyed by SBWGE to ATCLLC at a net book value (original cost less accumulated
book depreciation) of approximately $715,888.75 as of December 31, 1999.20/
SBWGE will provide final accounting entries at a later time. At the present
time, SBWGE contemplates the following entries:
Dr. a/c 108 Accum Prov for Depreciation
Dr. a/c 111 Accum Prov for Amortization
Dr. a/c 123 Investment in Associated Cos.
Dr. a/c 102 Electric Plant Purchased or Sold
Cr. a/c 102 Electric Plant Purchased or Sold
Cr. a/c 101 Electric Plant in Service
Cr. a/c 107 Construction Work in Progress
Cr. a/c 182 Regulatory Assets
The legal structure of ATCLLC has not yet been finalized. Accordingly,
SBWGE does not yet know the extent to which tax-related accounts will be passed
through to ATCLLC. Specific accounts for which the treatment has not yet been
determined are as follows:
a/c 190 Prepaid Income Taxes
a/c 255 Accumulated Deferred Income Taxes
a/c 282 Deferred Income Taxes
ATCLLC will file to establish depreciation rates for the transmission
facilities in a filing under Section 205 of the Federal Power Act. Release of
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20/ Section 196.485(5) of the Wisconsin Statutes.
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the transmission facilities from the first mortgage indenture will take place
when the transmission facilities are transferred to ATCLLC.
G. STANDARDS OF CONDUCT
In Order No. 888, the Commission stated that "[f]unctional unbundling will
work only if a strong code of conduct (including a requirement to separate
employees involved in transmission functions from those involved in wholesale
power merchant functions) is in place."21/ SBWGE's proposed conveyance of the
SBWGE Transmission System to ATCLLC will further the Commission's objectives in
developing the Standards of Conduct. Not only will ATCLLC adopt the Standards of
Conduct set forth in the Commissioner's regulations,22/ but in accordance with
Section 37.4(c), it is espected thatAlliant Energy and ATCLLC will also have
developed procedures for implementation of the Standards of Conduct. These
procedures, which will be set forth in ATCLLC Standards of Conduct are expected
to include the following statement of policy:
It is the policy of ATCLLC to operate the Transmission System in a fair and
nondiscriminatory manner and to implement such rules and regulations in the
governance of the corporation as necessary to prevent control of the
decision-making process by the merchant function of any affiliate or any
User of the Transmission System. It is the policy of ATCLLC to own, operate
and plan the Transmission System without adverse distinction or preference
to any affiliate or Users of the Transmission System, and that investments
in new transmission facilities will be made by ATCLLC without
discrimination.
Specifically, each employee directly responsible for either SBWGE's
wholesale merchant operations or ATCLLC's transmission operations will be
required to sign a Standards of Conduct Acknowledgment and Compliance Statement,
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21/ Order No. 888, FERC Stats. & Regs. at 31,655.
22/ See 18 C.F.R. Part 37 and the Commission's February 15, 1999, order in
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Docket Nos. OA98-12-001, OA97-421-002, OA97-318-002, OA97-415-002, finding
Alliant Energy's Standards of Conduct filings acceptable.
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and abide by its terms. Managers of departments not directly responsible for
these functions will be given a copy of the Standards of Conduct and will
similarly be required to sign a Standards of Conduct Acknowledgment and
Compliance Statement and abide by its terms. These managers will also be
required to review the Standards of Conduct with all of their employees.
ATCLLC will develop procedures that will prevent access to the System
Control Center by any affiliate employee responsible for wholesale merchant
functions for the purpose of obtaining information on transmission capacity,
price, curtailments, ancillary services, scheduled maintenance and line outages.
Firewalls have been established within the Energy Management System ("EMS") to
ensure that transmission information from the EMS cannot be accessed by
wholesale merchant employees. Implementation of these measures is further
evidence of ATCLLC's commitment to further the Commission's objective to
separate transmission from wholesale merchant functions in order to ensure
non-discriminatory access to its transmission system. Approval of ATCLLC's
Standards of Conduct will be sought in a Section 205 filing.
II. THE PROPOSED TRANSACTION IS IN THE PUBLIC INTEREST
Section 203(a) of the Federal Power Act, which establishes the Commission's
jurisdiction over changes in control over facilities subject to its
jurisdiction, provides,
No public utility shall sell, lease, or otherwise dispose of...its
facilities subject to the jurisdiction of the Commission...or by any means
whatsoever, directly or indirectly merge or consolidate such facilities or
any part hereof with those of any other person, or purchase, acquire, or
take any security of any other public utility, without first having secured
an order of the Commission authorizing to do so...After notice and
opportunity for hearing, if the Commission finds that the proposed
disposition, consolidation, acquisition, or control will be consistent with
the public interest it shall approve the same.23/
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23/ 16 U.S.C. ss. 825b(a).
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SBWGE will transfer to ATCLLC ownership and control of the SBWGE
Transmission Systems, which comprises FERC-jurisdictional transmission
facilities of a value in excess of $50,000. In analyzing the effect on the
public interest of the proposed transfer of FERC-jurisdictional facilities on
the public interest, FERC will assess three distinct effects: (1) the effect on
competition; (2) the effect on rates; and (3) the effect on regulation. If the
proposed transaction is determined not to present market power concerns, to
adequately protect ratepayers, and not to impair federal and state regulation,
the transaction will be deemed to be consistent with the public interest. See,
e.g., Duke Power Co., 79 FERC 61,236 (1997). SBWGE demonstrates below that its
proposed transfer of the SBWGE Transmission System to ATCLLC is consistent with
the public interest.
A. TRANSFER OF ASSETS TO A SEPARATE COMPANY ADVANCES COMMISSION POLICIES
REQUIRING THE SEPARATION OF GENERATION AND TRANSMISSION FUNCTIONS
In Order No. 888, the Commission determined that functional unbundling of
wholesale generation and transmission services is necessary to implement
non-discriminatory open access transmission. In doing so, the Commission stopped
short of requiring corporate unbundling, which could include the establishment
of a separate corporate affiliate to manage a utility's transmission assets. The
Commission concluded "...that functional unbundling of wholesale services is
necessary to implement non-discriminatory open access transmission and that
corporate unbundling should not now be required." Order No. 888 at 31,654.
The Commission determined that three requirements are necessary to ensure
that public utilities provided non-discriminatory service: (1) a public utility
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must take transmission services (including ancillary services) for all of its
new wholesale sales and purchases of energy under the same tariff of general
applicability as do others; (2) a public utility must state separate rates for
wholesale generation, transmission, and ancillary services; and (3) a public
utility must rely on the same electronic information network that its
transmission customers rely on to obtain information about its transmission
system when buying or selling power. Order No. 888 at 31,654.
While recognizing that these requirements should give public utilities an
incentive to file fair and efficient rates, terms, and conditions, since they
will be subject to those same rates, terms, and conditions, the Commission
further concluded that functional unbundling will work only if strong
protections, including a requirement to separate employees involved in
transmission functions from those involved in wholesale power merchant
functions, are in place.
With this objective in mind, the Commission encouraged utilities to explore
whether corporate unbundling or other restructuring mechanisms may be
appropriate in particular circumstances and indicated that it would "accommodate
other mechanisms that public utilities may submit, including voluntary corporate
restructuring (e.g., separate corporate divisions, divestiture) to ensure that
open access transmission service occurs on a non-discriminatory basis." Order
No. 888 at 31,656. While the Commission did not affirmatively require actual
corporate separation of generation from transmission, the practical effect of
SBWGE's transfer of its transmission system to ATCLLC will do exactly that,
thereby achieving substantially more than that which is required by Order No.
888 and its progeny.
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ATCLLC's acquisition and operation of the SBWGE Transmission System will
exceed the functional unbundling requirements of Order No. 888 and bring with it
greater corporate and organizational separation of transmission from generation.
ATCLLC will be responsible for providing all open access transmission and
ancillary services under its OATT, and existing open access service agreements
under Alliant Energy's OATT for Alliant Energy Operating Companies customers
will be assigned to ATCLLC. After the transfer of assets, SBWGE will become a
network transmission customer of ATCLLC and will be required to secure
transmission service from ATCLLC in the same manner as unaffiliated network
transmission customers.
The current organizational separation between the employees of Alliant
Energy Operating Companies wholesale merchant function and transmission function
will be significantly strengthened beyond the requirements of Order Nos. 888 and
889 because transmission personnel will become employees of a separate company,
ATCLLC. ATCLLC will have its own board of directors.24/
ATCLLC will not be engaged in the electric power generation business, and
it will contract with Alliant Energy and others on the open market to provide
ancillary services on a least-cost basis. ATCLLC will not own distribution
facilities, and it will arrange for use of distribution only to the extent
required to provide transmission services to wholesale customers served at
voltages below 50 kV under ATCLLC Tariff. ATCLLC will focus solely on
efficiently and effectively operating and maintaining, and where necessary
expanding, its transmission system, and will be well suited to respond quickly
to customer needs.
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24/ Section 196.485(3m) of the Wisconsin Statutes.
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The restructuring of SBWGE's transmission system that is proposed here goes
well beyond the Commission's requirements for comparability and functional
unbundling. By transferring all of its transmission facilities to a separate
corporation and by agreeing to take transmission and ancillary services under
that corporation's open access tariff for the delivery of all power sold by the
SBWGE to its customers, SBWGE is going beyond what the Commission required of
public utilities in Order No. 888.
B. THE TRANSACTION MEETS THE REQUIREMENTS OF THE COMMISSION'S MERGER
POLICY STATEMENT.
The Commission Merger Policy Statement,25/ sets forth the revised criteria
and considerations for evaluating applicants under Section 203. Specifically,
the Commission examines three factors in analyzing whether a proposed
transaction is consistent with the public interest: the effect on competition,
the effects on rates, and the effect on regulation. Consideration of these
factors, to the extent those factors guide the Commission's consideration of an
intra-company divestiture proposal, further demonstrates that the transaction is
consistent with the public interest.
1. THE TRANSACTION IS PRO COMPETITIVE. The proposed transaction will not
----------------------------------
have any adverse effects on competition in the market for generation or
transmission services. The transaction does not involve any generating assets,
so the transaction will have no impact on the generation market. The transaction
does involve transmission facilities, but service over the SBWGE Transmission
System facilities contributed to ATCLLC will be provided under the ATCLLC's
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25/ Inquiry Concerning the Commission's Merger Policy Under the Federal Power
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Act: Policy Statement, Order No. 592, 61 Fed. Reg. 68,595 (1996), FERC Stats.
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& Regs. P. 31,044 (1996), order on reconsideration, Order No. 592-A, 62 Fed.
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Reg. 33,441 (1997), 79 FERC P. 61,321 (1997) ("Merger Policy Statement").
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OATT, under which all qualified transmission customers are entitled to take
transmission service. As such, ATCLLC will not have transmission market power.
SBWGE has not submitted the competitive screen analysis described in
Appendix A of the Merger Policy Statement because of the nature of SBWGE's
proposed transaction. As proposed in this application, the SBWGE Transmission
System now owned by SBWGE will be sold to ATCLLC. ATCLLC does not currently own
any generation, distribution or transmission facilities, and it will not own or
control any generation. This transmission-only transaction does not involve any
concentration of utility or other generation capacity and will lead to even more
substantial separation of transmission from generation assets. Upon completion
of the proposed transfer, SBWGE will no longer own transmission facilities. As
such, SBWGE and ATCLLC will not both be providing open access transmission
service in the same geographic market. While legal ownership will change, actual
operation of the transmission system will not change in ways that could
potentially increase market power.
ATCLLC cannot act in ways that confer greater market power than SBWGE
currently possesses, and in no event will ATCLLC own or control generation.
SBWGE's market power can only remain as is or be diminished by the transfer.
2. THE TRANSACTION WILL HAVE EITHER MINIMAL OR NO DIRECT EFFECT ON
---------------------------------------------------------------
JURISDICTIONAL RATES. SBWGE does not have any transmission or wholesale bundled
--------------------
electric customers. Consequently, there are no jurisdictional customers whose
rates can be affected by this transaction.
3. THERE WILL BE NO ADVERSE EFFECT ON REGULATION. In the Merger Policy
---------------------------------------------
Statement the Commission addressed two aspects of a transaction's effect no on
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regulation. First, in situations involving the creation of registered public
utility holding companies, the Commission required section 203 applicants to
choose between two options: (1) commit to abide by the Commission's policies
with respect to intra-system transactions within any newly-formed holding
company structure, or (2) go to hearing on the issue of the effect of the
proposed registered holding company structure on effective regulation by this
the Commission. The Commission stated that, with respect to the effect of a
merger on state regulatory authority, where a State has authority to act on a
merger, the Commission ordinarily will not set this issue for a trial-type
hearing. However, if the State lacked this authority and raised concerns about
the effect on regulation the Commission may set the issue for hearing. In this
case, SBWGE remains a part of a regulated holding company and Commission
jurisdiction is unaffected. Alliant Energy agrees to abide by the Commission's
policy on an intra-system transactions. Further, the ICC will have full
authority to regulate SBWGE and to regulate markets and distribution facilities,
after the transaction. This Commission will retain full authority to regulate
transmission service provided by ATCLLC.
The appropriate notice of this transaction will be provided to the ICC.
Transmission service to retail customers will be unaffected by this application
and retail rates will be unaffected. It is anticipated that ATCLLC will plan,
operate, and maintain the transmission system in accordance with NERC, industry,
and applicable regulatory requirements in order to ensure that reliability of
service is maintained. It is further anticipated that ATCLLC will also grant
access to its books and records to the ICC as necessary to ensure regulatory
compliance.
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ATCLLC will become a public utility upon completion of the transaction, and
its proposed rate schedules will be reviewed by the Commission under Section 205
of the Federal Power Act, and ATCLLC will otherwise by subject to regulation by
this the Commission under the Federal Power Act. Likewise, there will be no
lapse in the Commission's jurisdictional reach over SBWGE's transactions and
facilities. Further, due to its status as a public utility, any future merger,
consolidation, or disposition of ATCLLC transmission facilities will be subject
to prior Commission authorization under Section 203. This means that any future
disposition of any jurisdictional assets or service by ATCLLC or any sale of
ATCLLC will be subject in Commission jurisdiction.
III. REQUEST FOR WAIVERS
SBWGE believes that the proposed transfer to ATCLLC is comparable to the
establishment of an ISO. The Commission has held that the establishment of an
ISO is a disposition of control over jurisdictional facilities and therefore
requires Commission approval under Section 203. See Atlantic City Elec. Co., 76
FERC P. 61,306 (1996). Although the Commission has said that creation of an ISO
requires approval under section 203, the Commission has not applied the Part 33
filing requirements, which are applicable to traditional mergers and
consolidations, to the transfers of operational control of facilities to any of
the ISOs that have been filed to date. This is not surprising. The Commission
identified its eleven ISO principles in Order No. 888, and these are far more
relevant to the approval of an ISO than the information described in Part 33.
Moreover, the Commission's standard generally for compliance with Part 33
focuses on the practical question of whether the applicants have provided the
Commission with sufficient information to evaluate the proposed disposition.
Accordingly, to the extent deemed necessary, SBWGE requests waiver of the Part
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33 filing requirements. A similar waiver request was granted in Docket No.
EC00-33-000, WPL's Section 203 filing to transfer its transmission facilities to
ATCLLC.
The January 15, 1998, filing under Section 203 of the Federal Power Act
submitted by the Midwest ISO Public Utilities in Docket No. EC98-24-000 noted
that the Commission generally has not applied the filing requirements set forth
at 18 C.F.R. ss.ss. 33.2 and 33.3 to the transfers of facilities pursuant to the
establishment of an independent system operator, and requested waiver of these
regulations. The Commission granted that waiver, and the Commission should grant
a similar waiver here. Good cause exists for granting such a waiver. These
filing requirements are intended to ensure that section 203 applicants supply
the Commission with sufficient information to determine whether the proposed
transfer is consistent with the public interest. The information contained in
this application provides the Commission with sufficient information to evaluate
SBWGE's proposal to transfer the SBWGE Transmission System to ATCLLC.
Accordingly, the Commission has a sufficient record upon which it can conclude
the proposed transfer is similarly consistent with the public interest.
IV. ADDITIONAL INFORMATION REQUIRED UNDER PART 33 OF THE COMMISSION'S
REGULATIONS
A. NAMES AND ADDRESSES OF PRINCIPAL BUSINESS OFFICES
The exact name and the address of the principal business offices of
the companies involved are as follows:
South BeliotWater gas and American Transmission
Electric Company Company, LLC
---------------- ------------
222 West Washington Avenue To be determined
Madison, Wisconsin 53701
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B. NAMES AND ADDRESSES OF THE PERSONS AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS WITH RESPECT TO THE APPLICATION
The names and addresses of the persons to whom all notices and
communications with respect to this proceeding are to be sent are as
follows:
Kent M. Ragsdale Kenneth A. Goldsmith
Managing Attorney Project Manager
Alliant Energy Corporate Alliant Energy Corporate
Services, Inc. Services, Inc.
200 First Street SE 200 First Street SE
P.O. Box 351 P.O. Box 351
Cedar Rapids, IA 52406-0351 Cedar Rapids, IA 52406-0351
319.398.7765 - telephone 319.557.4167 - telephone
319.398.4533 - fax 319.398.4533 - fax
[email protected] [email protected]
C. DESIGNATION OF TERRITORIES SERVED, BY COUNTIES AND STATES
As explained in Section III, above, SBWGE requests waiver of this
requirement.
D. DESCRIPTION OF JURISDICTIONAL FACILITIES
See Schedule A.
E. DESCRIPTION OF TRANSACTION AND STATEMENT AS TO CONSIDERATION
See Section I.E., above.
F. STATEMENT OF FACILITIES TO BE SOLD
See Schedule A.
G. STATEMENT OF THE COST OF THE FACILITIES INVOLVED IN THE TRANSACTION
See Section I.C., above.
H. STATEMENT AS TO THE EFFECT OF THE TRANSACTION UPON ANY CONTRACT FOR
THE PURCHASE, SALE OR INTERCHANGE OF ELECTRIC ENERGY
The proposed transaction is expected to have no direct impact on any
contract for the purchase, sale, or interchange of electric energy. As
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<PAGE>
stated previously, there are no transmission customers served under
existing transmission agreements with SBWGE.
I. STATEMENT AS TO THE OTHER REQUIRED REGULATORY APPROVALS
In addition to the Federal Power Act ss. 203 authorization requested
herein other regulatory approvals and notifications will be required
before ATCLLC can assume ownership and control of the Transmission
Facilities, e.g., approvals from the SEC, and notification to the ICC.
SBWGE has not yet made any such filings.
J. FACTS SHOWING THAT THE PROPOSED TRANSACTION WILL BE CONSISTENT WITH
THE PUBLIC INTEREST
See Section II, above.
K. BRIEF STATEMENT OF FRANCHISES HELD
As explained in Section III, above, SBWGE requests waiver of this
requirement.
L. FORM OF NOTICE
A form of notice is appended to this Application.
V. LIST OF EXHIBITS REQUIRED BY PART 33 OF THE COMMISSION'S REGULATIONS, 18
C.F.R. SS. 33.3
EXHIBIT A. COPIES OF ALL RESOLUTIONS OF DIRECTORS
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT B. STATEMENT OF INTERCORPORATE RELATIONSHIPS
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT C. STATEMENTS A AND B, FERC FORM NO. 1
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT D. STATEMENT OF ALL KNOWN CONTINGENT LIABILITIES
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT E. STATEMENT C, FERC FORM NO. 1
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As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT F. ANALYSIS OF RETAINED EARNINGS
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT G. COPIES OF ALL APPLICATIONS FILED WITH ANY OTHER FEDERAL AND
STATE REGULATORY BODY IN CONNECTION WITH THE PROPOSED
TRANSACTION AND CERTIFIED COPIES OF EACH ORDER RELATING THERETO
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT H. COPIES OF ALL CONTRACTS WITH RESPECT TO THE TRANSACTION
As explained in Section III, above, SBWGE requests waiver of this
requirement.
EXHIBIT I. MAPS OF PROPERTY BEING CONVEYED, INTERCONNECTIONS, AND PRINCIPAL
CITIES SERVED
A map of the SBWGE facilities being transferred to ATCLLC is attached as
Schedule B.
VI. CONCLUSION.
SBWGE respectfully requests that the Commission expeditiously authorize the
transfer to ATCLLC of the facilities proposed herein under the terms and
conditions set forth in this application.
Respectfully submitted,
-------------------------------------------
Kent M. Ragsdale
Managing Attorney
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Alliant Energy Corporate Services inc.
200 First Street SE
P.O. Box 351
Cedar Rapids, IA 52406-0351
(319) 398-7765 - telephone
(319) 398-4533 - fax
[email protected] - e-mail
Attorney for South Beloit Water, Gas and Electric Company
Dated: July 31, 2000
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SCHEDULE A
LIST OF SBWGE TRANSMISSION SYSTEM FACILITIES
TO BE TRANSFERRED TO ATCLLC
<PAGE>
SCHEDULE B
MAP
<PAGE>
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
)
SOUTH BELOIT WATER, GAS AND ) DOCKET NO. EC00-
ELECTRIC COMPANY ) -----------------
)
NOTICE OF FILING
(August , 2000)
----
Take notice that on August , 2000, South Beloit Water, Gas and Electric
--
Company filed an application under Section 203 of the Federal Power Act
requesting authorization to transfer ownership and operational control of its
jurisdictional transmission facilities to American Transmission Company LLC
(ATCLLC).
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 Procedures (18 C.F.R. ss. 385.211
and 18 C.F.R. ss. 385.214). All such motions or protests should bE filed on or
before , 2000. 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 proceedings. 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. 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
