EXHIBIT D-1
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
)
WISCONSIN POWER & LIGHT ) DOCKET NO. EC00-
COMPANY ) ----------------
)
APPLICATION OF
WISCONSIN POWER & LIGHT COMPANY
FOR AUTHORIZATION TO TRANSFER
TRANSMISSION ASSETS TO WISCONSIN TRANSCO
Wisconsin Power & Light Company ("WPL") 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, 18 C.F.R. Part 33, to
transfer ownership and operational control of its jurisdictional transmission
facilities to the Wisconsin transmission company ("Wisconsin Transco"), a
transmission company created by operation of Wisconsin law to own and operate
the high-voltage transmission system in Wisconsin.
The Wisconsin statute that created the Wisconsin Transco was enacted on
October 27, 1999, and the Wisconsin Transco is not yet in operation. Wisconsin
law requires the Wisconsin Transco to take steps necessary to commence
operations no later than November 1, 2000. WPL intends to transfer its
transmission facilities to the Wisconsin Transco effective when the Wisconsin
Transco commences operations. WPL submits this application well in advance of
the Wisconsin Transco's anticipated commencement of operations because it wishes
to secure the regulatory approvals required to complete the divestiture of its
transmission facilities to the Wisconsin Transco, and also because WPL is
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required to file at this time in order to satisfy other requirements of
Wisconsin law.
On December 6, 1999, Alliant Energy filed an application with the
Commission under Section 203 of the Federal Power Act to transfer to the Midwest
System Operator, Inc. (the "Midwest ISO") 1/ operational control over
substantial portions of the jurisdictional transmission facilities of the
Alliant Energy Operating Companies. WPL requests authorization in this
application to transfer ownership and control over the WPL Transmission System
to the Wisconsin Transco, which is legally obligated to transfer control over
its facilities to the Midwest ISO when the Midwest ISO commences operations.
These two filings recognize that the Midwest ISO and the Wisconsin Transco
will have different responsibilities and will commence operations at different
times. 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 Alliant Energy Operating Companies rated 100 kV and higher,
including those transferred to the Wisconsin Transco pursuant to this
application. The Midwest ISO likely will not commence operations until some time
in 2001. Wisconsin Transco, 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. Wisconsin
Transco is expected to commence operations by November 2000.
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1/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, order
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on reconsideration, 85 FERC P. 61,250, order on reh'g, 85 FERC P. 61,372 (1998).
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In the event the Commission requires additional information about Wisconsin
Transco, WPL will provide such information as a supplement to this application.
I. DESCRIPTION OF THE PARTIES AND THE PROPOSED TRANSACTION
A. WISCONSIN POWER AND LIGHT COMPANY
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. WPL provides retail electric service to more than 401,000
customers in a 16,000 square-mile area stretching from southwest to northeast
central Wisconsin and wholesale electric capacity, energy, and transmission
services to 24 municipal electric systems in Wisconsin, one privately-owned
utility, and to 3 rural electric cooperatives ("RECs").
Alliant Energy was formed on April 21, 1998, as a result of the merger
among WPL Holdings, Inc., IES Industries Inc., and Interstate Power Company
("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 Utilities Inc. ("IES").
WPL also has a wholly-owned utility subsidiary, South Beloit Water, Gas &
Electric Company ("SBWGE"). 2/ Each of Alliant Energy Operating Companies is
engaged in the production, transmission, and distribution of electricity for
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2/For purposes of this Application, WPL, IES, IPC, and SBWGE are collectively
referred to as the "Alliant Energy operating Companies."
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domestic, commercial, and industrial use in the states of Iowa, Wisconsin,
Illinois, and Minnesota.
Alliant Energy has on file with FERC 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, Alliant Energy
formed a subsidiary service company, Alliant Energy Corporate Services, Inc.
("Alliant Energy Corporate Services"), to act as an agent for the Alliant Energy
operating companies and to, among other things, operate their transmission
facilities as a single integrated system pursuant to Alliant Energy's open
access transmission tariff ("OATT") on file with FERC.
WPL owns and operates a transmission system in the area of the Alliant
Energy system know as the "Alliant Energy - East" area comprising 100 miles of
345 kV transmission facilities, 700 miles of 138 kV transmission facilities, and
1,767 miles of 69 kV transmission facilities (the "WPL Transmission System").
B. THE WISCONSIN TRANSCO
The State of Wisconsin recently enacted legislation that formed the
Wisconsin Transco as a single-purpose transmission company. 3/ The Wisconsin
statute encourages certain public utility affiliates of holding company systems
in Wisconsin, including WPL, to transfer ownership of their transmission assets
to Wisconsin Transco. 4/ Other Wisconsin electric utilities, including retail
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3/1999 Wisconsin Act 9, Sections 2335tr to 2335uh (Assembly Amendment to
Assembly Subcommittee Amendment 1 to 1999 Assembly Bill 133).
4/Section 196.485(5) of the Wisconsin Statutes.
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and wholesale cooperatives, also may contribute their transmission assets to
Wisconsin Transco. 5/ In exchange for contributing its transmission assets, WPL
will receive capital stock in Wisconsin Transco. 6/
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5/Id. at Section 196.485(6).
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6/Id. at Section 196.485(5).
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The Wisconsin statute that created Wisconsin Transco obligates Wisconsin
Transco to plan, construct, operate, maintain, and expand its transmission
facilities to provide adequate, reliable transmission services charging a single
fee for use of its system under an open access transmission tariff to be filed
with FERC (the "Wisconsin Transco OATT"). 7/ Wisconsin Transco's statutory
mission directs it to support robust competition in energy markets, with no
favoritism towards any participant, while meeting the needs of users who are
dependent upon it. Under the provisions of the Wisconsin Transco law, Wisconsin
Transco will be required to transfer operational control of its facilities to
the Midwest ISO. 8/
Under the Wisconsin Transco law, Wisconsin Transco will be a corporation or
limited liability company, subject to the Commission's jurisdiction for rates
and access. 9/ Wisconsin Transco will have a Board of Directors of 5 to 14
members (or managers if an LLC). At least 4 directors/managers will be elected
by majority vote of the shareholders and may not be persons employed by or
engaging in natural gas or electric businesses; the remaining directors will be
appointed based on minimum ownership criteria. Each contributor of at least 10%
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7/Id. at Section 196.485(3m).
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8/Id.
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9/Id.
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to of Wisconsin Transco's assets (including smaller parties that aggregate their
shares to reach 10%) will appoint one Board member. 10/
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10/Id.
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Wisconsin Transco will have the exclusive duty to provide transmission
service in geographic areas formerly served by the utilities that have
contributed their transmission facilities to Wisconsin Transco. 11/ In areas
where control of transmission facilities are transferred directly to the Midwest
ISO, Wisconsin Transco will not have a duty to provide service. 12/ Wisconsin
law prohibits Wisconsin Transco from directly serving retail customers and
further prohibits Wisconsin Transco from bypassing distribution systems. 13/
For purposes of defining the transmission facilities to be transferred to
Wisconsin Transco, a transmission facility is defined by the Wisconsin statute
to mean a facility that is not a radial facility and is designed to operate
above 130 kv. 14/ A facility from 50 kv through 130 kv which is not a radial
facility also is presumed to be a transmission facility unless it is
demonstrated to the Public Service Commission of Wisconsin ("PSCW") that the
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11/Id. at Section 196.485(1m).
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12/Id.
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13/Id. at Section 196.485(3m).
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14/Id. at Section 196.485(5).
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facility is not a transmission facility (based on FERC's standard Seven Factor
Test). 15/ Radial facilities or those facilities designed to operate at 50 kv or
less are presumed not to be transmission facilities, unless the contrary is
demonstrated to the PSCW.
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15/In Order No. 888 the Commission established a "functional-technical" test
that evaluates facilities on the basis of seven indicators of local
distribution. These factors are: "(1) Local distribution facilities are normally
in close proximity to retail customers. (2) Local distribution facilities are
primarily radial in character. (3) Power flows into local distribution systems;
it rarely, if ever, flows out. (4) When power enters a local distribution
system, it is not reconsigned or transported on to some other market. (5) Power
entering a local distribution system is consumed in a comparatively restricted
geographic area. (6) Meters are based at the transmission/local distribution
interface to measure flows into the local distribution system. (7) Local
distribution systems will be of reduced voltage." Order No. 888 at 31,771.
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Wisconsin Transco will be obligated to honor existing collective bargaining
agreements contributing utilities have with those non-supervisory employees who
are subject to transfer to Wisconsin Transco. Initially, Wisconsin Transco is
authorized to contract with the transferring transmission utilities for
operational and maintenance services. 16/ Wisconsin law mandates that the
Wisconsin Transco is to "begin operations no later than November 1, 2000." 17/
Wisconsin Transco does not currently own or operate any facilities subject
to the Commission's jurisdiction. However, upon the grant of Commission
authorization of the transfer proposed here, Wisconsin Transco will own and
operate all transmission facilities of WPL subject to the jurisdiction of the
Commission. Wisconsin Transco also will own and operate the transmission
facilities of the other public utilities that transfer transmission facilities
to Wisconsin Transco.
C. THE PROPOSED TRANSACTION
WPL proposes to transfer its ownership and control of the WPL Transmission
System to the Wisconsin Transco. Upon receipt of Commission authorization to
transfer the facilities and completion of the transaction, Wisconsin Transco
will own and operate the WPL Transmission System.
The transmission facilities of the WPL Transmission System to be
transferred to Wisconsin Transco are described in detail in Schedule A. In sum,
Wisconsin Transco will acquire from WPL transmission facilities that operate at
voltages of generally 345 kV and 138 kV (the "WPL Bulk Transmission System") and
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16/Section 196.485(3m) of the Wisconsin Statutes.
17/Id.
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69 kV facilities (the "WPL Area Transmission System"). The WPL 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 Lines providing connections to generation sources and step-up (plant)
substations;
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;
o Voltage control devices and power flow control devices directly
connected to the transmission system; and
o The Stoughton Systems Operation Center.
The original cost of the facilities of the WPL Transmission System is
approximately $256,674,000. 18/
The facilities WPL will transfer to Wisconsin Transco 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 substations providing transformation or connection to any retail
customer regardless of voltage level.
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18/The breakdown of the total original cost of the WPL Transmission System is
$235,588,000 for lines and substations and $21,086,000 for the systems operation
center located in Stoughton, Wisconsin (the "Stoughton System Operations
Center").
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WPL currently provides transmission service to certain wholesale customers
at delivery points of less than 50 kV. In order to ensure the continuity of
service to such wholesale customers who elect to take service under the
Wisconsin Transco OATT, WPL and Wisconsin Transco may need to enter into an
agency agreement. Such an agreement likely would provide Wisconsin Transco the
use of certain WPL distribution facilities necessary to continue transmission
service to WPL wholesale customers served at delivery points whose voltages are
less than 50 kV. Transmission service to wholesale customers over these
distribution facilities would be made available under the Wisconsin Transco
OATT, and associated distribution costs are expected to be recovered in rates on
a direct assignment basis as a distribution adder. This procedure may be
necessary to ensure that existing wholesale customers served under grandfathered
transmission arrangements at voltages below 50 kV will have access to comparable
transmission service.
D. WISCONSIN TRANSCO'S OPERATION OF THE TRANSMISSION SYSTEM
Wisconsin Transco is under a statutory mandate to transfer control of its
jurisdictional facilities to the Midwest ISO. Wisconsin Transco will own and
have operational control of the transmission system contributed by Wisconsin
utilities; provide ancillary services; operate an Open Access Same-Time
Information System ("OASIS") in conformance with Order No. 889; 19/ and
administer the Wisconsin Transco OATT. Wisconsin Transco also will be
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19/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. P. 31, 035
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(1996).
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responsible for the maintenance of the transmission facilities under its
ownership and control. 20/ Wisconsin Transco also will assume responsibility for
transmission system planning. 21/
Wisconsin Transco will offer ancillary services under the Wisconsin Transco
OATT. Since Wisconsin Transco will own no generating facilities, it will
purchase ancillary services from third parties and resell them under its OATT.
Wisconsin Transco expects to enter into agreements to purchase ancillary
services from generators in its control area. Wisconsin Transco will contract
for must-run operations and ancillary services from the generators located in
its control area and connected to its transmission system. Wisconsin Transco
will not, however, engage in the purchase and sale of energy other than to
obtain necessary ancillary services required by its customers. 22/
Upon receipt of necessary regulatory approvals, Wisconsin Transco will
commence providing open access transmission service under its OATT to those
existing open access customers served by WPL under the existing Alliant Energy
OATT and to any other eligible customer requesting transmission service from
Wisconsin Transco. WPL will become a transmission customer of Wisconsin Transco
under Wisconsin Transco's transmission tariff. Where WPL is responsible for
providing transmission service agreements or tariffs predating Order No. 888
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20/WPL anticipates that Wisconsin Transco initially will contract with WPL to
perform maintenance on the WPL Transmission System facilities transferred to
Wisconsin Transco.
21/Section 196.485(1)(ge) and 196.485(1m)(3m) of the Wisconsin Statutes.
22/Id.
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("grandfathered transmission agreements"), Wisconsin Transco will make the
Wisconsin Transco transmission system available to WPL pursuant to Network
Integration Service and Operating Agreements under the Wisconsin Transco
transmission tariff in order to provide transmission service to grandfathered
customers under the grandfathered transmission agreements.
E. FINANCIAL ASPECTS OF THE TRANSACTION
WPL and Wisconsin Transco will enter into a bill of sale governing the
conveyance of the WPL Transmission System. The transmission assets transferred
to Wisconsin Transco under the bill of sale will include WPL's rights and
interests in any contracts under the Alliant Energy OATT. The WPL Transmission
System will be conveyed by WPL to Wisconsin Transco at a net book value
(original cost less accumulated book depreciation) of approximately $152.1
million as of December 31, 1998. 23/
WPL will provide final accounting entries at a later time. At the present
time, WPL 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
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23/Section 196.485(5) of the Wisconsin Statutes.
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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 Wisconsin Transco has not yet been finalized.
Accordingly, WPL does not yet know the extent to which tax-related accounts will
be passed through to Wisconsin Transco. 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
Wisconsin Transco will file to establish depreciation rates for the
transmission facilities in a filing under Section 205 of the Federal Power Act.
Release of the transmission facilities from the respective first mortgage
indentures of WPL will take place when the transmission facilities are
transferred to Wisconsin Transco.
F. 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." 24/ WPL's proposed conveyance of the WPL
Transmission System to Wisconsin Transco will further the Commission's
objectives in developing the Standards of Conduct. Not only will Wisconsin
Transco adopt the Standards of Conduct set forth in the Commissioner's
regulations, 25/ but in accordance with Section 37.4(c), Alliant Energy and
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24/Order No. 888, FERC Stats. & Regs. at 31,655.
25/See 18 C.F.R. Part 37 and the Commission's February 15, 1999, order in Docket
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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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Wisconsin Transco have also developed procedures for implementation of the
Standards of Conduct. These procedures, which are set forth in Wisconsin Transco
Standards of Conduct include the following statement of policy:
It is the policy of Wisconsin Transco 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
Wisconsin Transco 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 Wisconsin Transco without discrimination.
Specifically, each employee directly responsible for either WPL's wholesale
merchant operations or Wisconsin Transco's transmission operations will be
required to sign a Standards of Conduct Acknowledgment and Compliance Statement,
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.
Wisconsin Transco 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 Wisconsin Transco's commitment to further the Commission's
objective to separate transmission from wholesale merchant functions in order to
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ensure non-discriminatory access to its transmission system. Approval of the
Wisconsin Transco 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 FERC's
jurisdiction, provides,
No public utility shall sell, lease, or otherwise dispose ofBits facilities
subject to the jurisdiction of the CommissionBor 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 soBAfter 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. 26/
WPL will transfer to Wisconsin Transco ownership and control of the WPL
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,
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26/16 U.S.C.ss.825b(a).
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e.g., Duke Power Co., 79 FERC 61,236 (1997). WPL demonstrates below that its
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proposed transfer of the WPL Transmission System to Wisconsin Transco 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 "Bthat 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
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
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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., Bseparate 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
WPL's transfer of its transmission system to Wisconsin Transco will do exactly
that, thereby achieving substantially more than that which is required by Order
No. 888 and its progeny.
Wisconsin Transco's acquisition and operation of the WPL 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. Wisconsin Transco will be responsible for providing all open
access transmission and ancillary services under the Wisconsin Transco OATT, and
existing open access service agreements under Alliant Energy's OATT for WPL
customers will be assigned to Wisconsin Transco. WPL will remain responsible for
obtaining transmission service associated with grandfathered transmission
arrangements. After the transfer of assets, WPL will become a network
transmission customer of Wisconsin Transco and will be required to secure
transmission service from Wisconsin Transco in the same manner as unaffiliated
network transmission customers.
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The current organizational separation between the employees of WPL
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, Wisconsin
Transco. Wisconsin Transco will have its own board of directors. 27/
Wisconsin Transco 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. Wisconsin Transco 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 the Wisconsin Transco Tariff. Wisconsin
Transco 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.
The restructuring of WPL'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
WPL to their wholesale and retail customers, WPL 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.
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27/Section 196.485(3m) of the Wisconsin Statutes.
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The Commission Merger Policy Statement,28/ 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
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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 WPL Transmission
System facilities contributed to Wisconsin Transco will be provided under the
Wisconsin OATT, under which all qualified transmission customers are entitled to
take transmission service. As such, Wisconsin Transco will not have transmission
market power.
WPL has not submitted the competitive screen analysis described in Appendix
A of the Merger Policy Statement because of the nature of WPL's proposed
transaction. As proposed in this application, the WPL Transmission System now
owned by WPL will be sold to Wisconsin Transco. Wisconsin Transco 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.
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28/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. Reg.
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33,441 (1997), 79 FERC P. 61,321 (1997) ("Merger Policy Statement").
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Upon completion of the proposed transfer, WPL will no longer own transmission
facilities. As such, WPL and Wisconsin Transco 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.
Wisconsin Transco cannot act in ways that confer greater market power than
WPL currently possesses, and in no event will Wisconsin Transco own or control
generation. WPL'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
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JURISDICTIONAL RATES. This transaction will not have an impact on the wholesale
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bundled electric rates charged by WPL. The four year rate freeze commitment as
well as the other rate payer protection mechanisms offered by Alliant Energy in
its merger approval process (and accepted by FERC), remains in effect. 29/ WPL
recognizes that certain start-up costs associated with the Wisconsin Transco may
be assessed to WPL's current jurisdictional transmission customers.
Wisconsin law allows Wisconsin Transco to elect to be included in a single
system zone subject to certain provisions. 30/ Specifically, that law provides
that in the event the transmission rates of any transmission utility are 10% or
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29/IES Utilities, et al., 81 FERC P. 61,187, Opinion No. 419 (1997). Alliant
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Energy offered intervenors a number of ratepayer protection mechanisms including
a four-year rate freeze for wholesale customers, an offer for wholesale
customers to buy or lease WPL generation, and a hold harmless provision to
ensure that merger-related costs are not imposed on existing customers in
addition to their offer to reduce intervenors' contract terms or terminate the
contracts in their entirety.
30/Section 196.485(3m) of the Wisconsin Statutes.
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more below the average transmission rates in the transmission area, 31/
Wisconsin Transco shall prepare a phase-in plan for "a combined single zone rate
for the purpose of pricing network use by users of the transmission system
operated" by the MISO. 32/ The Wisconsin statute specifically requires Wisconsin
Transco to file this plan with the Commission. 33/
The rates charged for generation-based ancillary services by Alliant Energy
will remain unchanged. Since Wisconsin Transco's rates for generation based
ancillary services will simply be a pass-through on its purchased power costs,
and since it will be free to purchase ancillary services from other suppliers
where technically feasible and services are cheaper, rates for these ancillary
services will remain the same or decline. Transmission customers will benefit
from Wisconsin Transco's transmission-only business focus from both a tariff
administration and system-planning standpoint.
Many of WPL's transmission-dependent customers take service under
grandfathered transmission agreements executed prior to issuance of Order No.
888. These customers will have the right to remain under their existing
arrangements, or at their option, to contract with Wisconsin Transco for
------------------------
31/Wisconsin Statutes defines transmission area as that part of Wisconsin "that,
on January 1, 1997, was served by the Mid-America Interconnected Network, Inc.,
reliability councilB" Section 196.485(1)(g).
32/Section 196.485(3m) of the Wisconsin Statutes.
33/Id.
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unbundled transmission service under the Alliant Energy OATT. Customers who
choose to obtain transmission services under their grandfathered transmission
arrangements are free to do so, and will be included as part of the Network Load
of WPL. These customers will continue to pay the same rates, and have the same
rights and obligations as provided in their grandfathered transmission
arrangements prior to approval of this application.
The effect on rates to transmission-dependent customers who contract with
the Wisconsin Transco for network service under the Wisconsin Transco OATT is
almost entirely dependent on the individual circumstances of the customer.
Because existing arrangements provide a variety of rates for service at voltages
below 50 kV, and charges for transmission service over distribution facilities
are typically averaged rather than directly assigned, the rate impact will vary
from customer to customer. However, because the voltage differentiated feature
of the network tariff and the direct assignment of distribution costs, rates
under the Wisconsin Transco Tariff will more closely match the cost of providing
service to particular customers.
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
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
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the effect on regulation the Commission may set the issue for hearing. In this
case, WPL 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, PSCW will have full authority
to regulate WPL and to regulate markets and distribution facilities, after the
transaction. This Commission will retain full authority to regulate transmission
service provided by Wisconsin Transco.
Applications for approval of this transaction will be submitted to the
PSCW. Transmission service to retail customers will be unaffected by this
application and retail rates will be unaffected. It is anticipated that
Wisconsin Transco 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 Wisconsin Transco will also grant access to its books and records to the
PSCW as necessary to ensure regulatory compliance.
Wisconsin Transco 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 Wisconsin Transco 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
WPL's transactions and facilities. Further, due to its status as a public
utility, any future merger, consolidation, or disposition of Wisconsin Transco
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 Wisconsin Transco and any sale of Wisconsin Transco will be
subject in Commission jurisdiction.
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III. REQUEST FOR WAIVERS
WPL believes that the proposed transfer to Wisconsin Transco 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, WPL
requests waiver of the Part 33 filing requirements
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
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<PAGE>
this application provides the Commission with sufficient information to evaluate
WPL's proposal to transfer the WPL Transmission System to Wisconsin Transco.
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:
Wisconsin Power & Light Company Wisconsin Transco
------------------------------- -----------------
Wisconsin Power & Light Company To be determined
222 West Washington Avenue
Madison, Wisconsin 53701
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]
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C. DESIGNATION OF TERRITORIES SERVED, BY COUNTIES AND STATES
As explained in Section III, above, WPL 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
stated previously, transmission customers served under existing
grandfathered transmission agreements will have the right to continue
receiving transmission service under these arrangements from WPL,
which will take network integration service from Wisconsin Transco
under its proposed Tariff. Service agreements will be assigned to
Wisconsin Transco.
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 Wisconsin Transco can assume ownership and control of the
Transmission Facilities, e.g., approvals from the PSCW and the SEC,
and notification to the Nuclear Regulatory Commission. WPL 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.
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K. BRIEF STATEMENT OF FRANCHISES HELD
As explained in Section III, above, WPL 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, WPL requests waiver of
this requirement.
EXHIBIT B. STATEMENT OF INTERCORPORATE RELATIONSHIPS
As explained in Section III, above, WPL requests waiver of
this requirement.
EXHIBIT C. STATEMENTS A AND B, FERC FORM NO. 1
As explained in Section III, above, WPL requests waiver of
this requirement.
EXHIBIT D. STATEMENT OF ALL KNOWN CONTINGENT LIABILITIES
As explained in Section III, above, WPL requests waiver of
this requirement.
EXHIBIT E. STATEMENT C, FERC FORM NO. 1
As explained in Section III, above, WPL requests waiver of
this requirement.
EXHIBIT F. ANALYSIS OF RETAINED EARNINGS
As explained in Section III, above, WPL 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, WPL requests waiver of
this requirement.
EXHIBIT H. COPIES OF ALL CONTRACTS WITH RESPECT TO THE TRANSACTION
29
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As explained in Section III, above, WPL requests waiver of
this requirement.
EXHIBIT I. MAPS OF PROPERTY BEING CONVEYED, INTERCONNECTIONS,
AND PRINCIPAL CITIES SERVED
A map of the WPL facilities being transferred to Wisconsin
Transco is attached as Schedule B.
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VI. CONCLUSION.
WPL respectfully requests that the Commission expeditiously authorize the
transfer to Wisconsin Transco of the facilities proposed herein under the terms
and conditions set forth in this application.
Respectfully submitted,
---------------------------------------
Kent M. Ragsdale
Managing Attorney
Alliant Energy
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 Wisconsin Power & Light Company
Dated: December 8, 1999
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SCHEDULE A
LIST OF WPL TRANSMISSION SYSTEM FACILITIES
TO BE TRANSFERRED TO WISCONSIN TRANSCO
<PAGE>
SCHEDULE B
MAP
<PAGE>
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
)
WISCONSIN POWER & LIGHT ) DOCKET NO. EC00-
COMPANY ) ----------------
)
NOTICE OF FILING
(August , 1999)
----
Take notice that on December 8, 1999, Wisconsin Power & Light 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 the Wisconsin Transco.
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 , 1999. 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
