(As filed November 28, 2000)
File No. 70-9735
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM U-1/A
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Alliant Energy Corporation
Wisconsin Power and Light Company
South Beloit Water, Gas & Electric Company
222 West Washington Avenue
Madison, Wisconsin 53703
American Transmission Company LLC
c/o ATC Management Inc.
N16 W23217 Stone Ridge Drive
Waukesha, Wisconsin 53187
ATC Management Inc.
c/o Wisconsin Electric Power Company
N16 W23217 Stone Ridge Drive
Waukesha, Wisconsin 53187
(Names of companies filing this statement and
addresses of principal executive offices)
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ALLIANT ENERGY CORPORATION
(Name of top registered holding company parent)
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Edward M. Gleason, Vice President-Treasurer
and Corporate Secretary
Alliant Energy Corporation
222 West Washington Avenue
Madison, Wisconsin 53703
(Name and address of agent for service)
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The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
Barbara J. Swan, General Counsel William T. Baker, Jr., Esq.
Alliant Energy Corporation Thelen Reid & Priest LLP
222 West Washington Avenue 40 West 57th Street
Madison, Wisconsin 53703 New York, New York 10019
Daniel A. Doyle, Vice President, Chief
Financial Officer and Treasurer
ATC Management Inc.
N16 W23217 Stone Ridge Drive
Waukesha, Wisconsin 53187
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Alliant Energy Corporation ("Alliant Energy"), Wisconsin Power & Light
Company ("WPL"), South Beloit Water, Gas & Electric Company ("South Beloit"),
American Transmission Company LLC (the "Transco") and ATC Management Inc. (the
"Corporate Manager", and, together with Alliant Energy, WPL, South Beloit and
Transco, "Applicants") hereby amend their Application/Declaration on Form U-1 in
Commission file No. 70-9735 to read in its entirety as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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INTRODUCTION
A. Alliant Energy is a registered holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act").1 Its public-utility
subsidiaries are WPL, South Beloit, Interstate Power Company, and IES Utilities
Inc. The principal executive offices of Alliant Energy, WPL and South Beloit are
located at 222 West Washington Avenue, Madison, Wisconsin 53703. The Transco,
which is described in further detail below, is a Wisconsin limited liability
company which was formed on June 12, 2000 with Wisconsin Electric Power Company
("WEPCO"), a subsidiary of Wisconsin Energy Corporation ("WEC"), Wisconsin
Public Power Inc. ("WPPI") and the Corporate Manager, a Wisconsin corporation
formed on June 12, 2000, as its initial members. The principal executive
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1 See WPL Holdings, Inc., et al., Holding Co. Act Release No. 26856 (Apr.
14, 1998).
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officers of the Transco and the Corporate Manager are currently located at N16
W23217 Stone Ridge Drive, Waukesha, Wisconsin 53187. The Commission, in HCAR No.
27206 (Aug. 2, 2000), authorized, among other things, WPL to become a member of
the Transco and to acquire shares of the Corporate Manager.
B. WPL is engaged principally in the generation, purchase, distribution
and sale of electric power in 35 counties in a 16,000 square-mile area in
southern and central Wisconsin. As of December 31, 1999, WPL provides retail
electric service to approximately 407,000 customers in 599 cities, villages and
towns, and wholesale service to 24 municipal utilities, three rural electric
cooperatives, the Wisconsin Public Power Incorporated System, which provides
retail electric service to nine communities in the WPL service area, and one
privately owned utility.
C. WPL is subject to regulation as a public utility as to retail electric,
gas and water rates, service rules, issuance of securities, construction of new
facilities, transactions with affiliates and various other matters by the Public
Service Commission of Wisconsin (the "Wisconsin Commission"). It is also subject
to regulation by the Federal Energy Regulatory Commission ("FERC"). The Nuclear
Regulatory Commission ("NRC") regulates WPL in connection with its ownership
interest in the Kewaunee Nuclear Power Plant.
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D. South Beloit is a wholly-owned subsidiary of WPL that supplies retail
electric and gas services to customers in the cities of South Beloit and
Rockton, Illinois, and the adjacent rural areas. South Beloit is subject to
regulation by the Illinois Commerce Commission (the "Illinois Commission"). As
of December 31, 1999, South Beloit serves approximately 8,000 electric
customers. The service territory of South Beloit is located in Illinois and is
adjacent to the service territory of WPL in Wisconsin. The electric distribution
systems of WPL and South Beloit are interconnected at many points along the
Wisconsin-Illinois state line. The electric operations of WPL and South Beloit
are integrated and all of WPL's generating units are centrally dispatched by
Alliant Energy Corporate Services, Inc., the service company affiliate of WPL
and South Beloit.2
E. WPL owns and operates a transmission system comprising 107 miles of 345
kV transmission facilities, 758 miles of 138 kV transmission facilities, 1,908
miles of 69 kV transmission facilities and associated substations and real
property interests (the "WPL Transmission Assets"). South Beloit owns and
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2 South Beloit has no generating units.
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operates a transmission system comprising less than one mile of 345 kV
transmission facilities, 10 miles of 69 kV transmission facilities, one
substation and associated real property interests (the "South Beloit
Transmission Assets").
F. At and for the twelve months ended June 30, 2000, Alliant Energy's
consolidated assets, operating revenue and net income (all in thousands) were
$6,597,078, $2,358,409 and $177,890, respectively. At and for the twelve months
ended June 30, 2000, WPL's consolidated assets, operating revenue and earnings
available for common stock (all in thousands) were $1,779,049, $795,096 and
$67,448, respectively. At and for the twelve months ended June 30, 2000, South
Beloit's assets, operating revenue and net income (all in thousands) were
$21,494, $16,794 and $1,959, respectively.
G. Applicants request authorization for (i) WPL to transfer, directly or
indirectly, ownership and control over the WPL Transmission Assets to the
Transco; (ii) South Beloit to transfer, directly or indirectly, ownership and
control over the South Beloit Transmission Assets to the Transco; (iii) WPL and
South Beloit to receive, directly or indirectly, in exchange for such transfer,
member units of the Transco; (iv) WPL to purchase approximately 2,563 Class A
shares of the Corporate Manager;3 (v) WPL to purchase one Class B share of the
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3 The final percentage ownership interests, as well as the definitive
number of Transco member units and Corporate Manager Class A shares to be
acquired, will depend upon the actual participants in the Transco and the
Contribution Value (as defined below) of the transmission assets transferred to
the Transco by such participants.
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Corporate Manager;4 (vi) the Transco's issuance of its member units in exchange
for which the Transco will acquire either transmission assets (in the case of
all other transmission-owning Member Utilities (as defined below)) or cash (in
the case of WPPI and any other transmission-dependent Member Utilities) and
(vii) the Corporate Manager's issuance of its Class A and Class B shares in
exchange for cash payments. Because of limitations imposed by the WPL indenture
(the "Indenture"), WPL will effect the transfer of the WPL Transmission Assets
to the Transco and its acquisition of the Transco member units through a newly
created limited liability company ("NewCo") to be wholly owned by WPL. The
following steps, for which Applicants specifically seek authority, will occur
essentially simultaneously: (1) WPL will form NewCo and acquire all of its
member units for one or more cash payments; (2) NewCo will transfer to the
trustee under the Indenture cash in an amount approximately equal to WPL's
corresponding cash payment to NewCo for NewCo's member units 5; (3) upon receipt
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4 WPL will pay a purchase price for these Class A and Class B Corporate
Manager shares of $10 per share.
5 This cash payment will be equal to the "fair value" to WPL of the WPL
Transmission Assets, as is defined in, and required by, the Indenture. Such
"fair value" will approximate the Contribution Value (as defined below) of the
WPL Transmission Assets. Receipt of such cash by the trustee will permit the WPL
Transmission Assets to be released from the lien of the Indenture.
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of such payment, the trustee will release the WPL Transmission Assets from the
lien of the Indenture; (4) WPL will transfer the WPL Transmission Assets to the
Transco; and (5) the Transco will issue its member units to NewCo. WPL and South
Beloit also seek Commission authority to transfer to the Transco, from time to
time, up to $10,000,000 of transmission assets which are currently under
construction, in exchange for additional Transco member units to be issued to
NewCo or South Beloit, as the case may be.
The transfer of the WPL Transmission Assets to the Transco in exchange for
an indirect membership interest in the Transco will not be detrimental to WPL
investors. There are currently outstanding approximately $306.1 million
principal amount of WPL first mortgage bonds which are secured by permanent
additions having a depreciated book value of approximately $1.5 billion. Of this
amount, approximately $899.3 million of permanent additions (294% of the
principal amount of the bonds) were applied to the issuance of the bonds, with
the balance available for additional bonding or other applications permitted by
the Indenture. The aggregate depreciated book value of the WPL Transmission
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Assets that will be released from the lien of the Indenture is approximately
$177.7 million. Following the release of the WPL Transmission Assets from the
lien of the Indenture, WPL's outstanding bonds will be secured by permanent
additions with a depreciated book value of approximately 428% of the aggregate
principal amount of its outstanding first mortgage bonds.
With respect to the equity investors in WPL, WPL's total assets will not be
materially affected by the proposed transaction. WPL will receive indirectly an
equity interest in the Transco that approximates the value of the WPL
Transmission Assets transferred to the Transco.
H. Commission authorization through June 30, 2004 is also sought for
external financing as follows: (i) short-term debt financing by the Transco in
the form of, among other things, borrowings under a revolving credit agreement,
issuance of commercial paper or other forms of short-term financing; (ii)
long-term debt financing by the Transco in the form of debentures or other forms
of long-term debt financing; and (iii) equity financing in the form of common or
preferred stock of the Corporate Manager, other equity securities or additional
interests in the Transco. The amount of the Transco's short-term and long term
debt outstanding at any time will not exceed, in the aggregate, $400 million.
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TRANSCO LEGISLATION
I. In 1999, the state of Wisconsin enacted legislation which facilitates
the formation of the Transco as a for-profit, single-purpose transmission
company.6 The Transco will charge a single system-wide average network rate to
be phased in over five years in accordance with the Transco Legislation, and a
single system-wide average point-to-point rate for "through and out" service,
under an open access transmission tariff filed with the FERC on July 31, 2000.
Key benefits of the Transco include the elimination of rate "pancaking" among
the Transco members' multiple transmission systems; one-stop shopping for
transmission and wholesale distribution service over multiple transmission
systems; the reduction of operational barriers within the Transco service area;
and the transfer of ownership of the transmission assets from vertically
integrated utilities that will further functional unbundling. These benefits are
in keeping with the goals of the Transco Legislation and FERC policies. The
Transco Legislation, among other things, encourages public utility affiliates of
Wisconsin holding companies, including WPL, to transfer ownership of their
transmission assets to the Transco by beneficially adjusting the calculation of
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6 1999 Wisconsin Act 9, Sections 2335tr to 2335uh (Assembly Amendment to
Assembly Subcommittee Amendment 1 to 1999 Assembly Bill 133) (the "Transco
Legislation").
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an existing limit on the amount of unregulated (or non-utility) investments the
holding company system can make, after the transfer of assets to the Transco.7
The Transco will be managed by the Corporate Manager. All Transco participants
will ultimately own direct or indirect interests in the Transco and the Manager
in proportion to the value of the transmission assets or cash each participant
contributes to the Transco. Transmission-dependent utilities, as defined by the
Transco Legislation, that participate in the Transco will purchase their
interests for cash and will obtain ownership shares in proportion to their 1999
Wisconsin load ratio shares. Tax exempt transmission-dependent entities that
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7 Section 196.485(5) of the Wisconsin Statutes. This investment cap applies
to any holding company system that owns a Wisconsin public utility. Generally,
Wisconsin law limits the amount of assets that all non-utility affiliates in a
holding company system may own to an amount equal to 25% of the assets owned by
all of the electric utility affiliates within that system. Section
196.795(6m)(b) of the Wisconsin Statutes. The Transco Legislation permits an
electric utility within a holding company system to exclude certain energy
related "eligible assets" (as defined in the Wisconsin Utility Holding Company
Act) from the calculation of non-utility assets that count towards the 25% asset
cap if, among other things, each electric utility within a holding company
system that owns transmission assets in Wisconsin transfers all of those
transmission assets to the Transco before January 1, 2001 and each electric
utility within that holding company system petitions, by June 30, 2000, the
Wisconsin Commission and the FERC for authority to transfer operational control
of all of its transmission facilities in Wisconsin and the surrounding states to
the Midwest independent system operator. For purposes of the Transco
Legislation, the term "eligible assets" includes assets of a non-utility
affiliate used to, among other things, generate or transmit gas, oil,
electricity or steam energy; provide energy management services; provide
energy-related customer services; recover, produce energy from, or process waste
materials; provide telecommunication services; provide environmental engineering
services; and manufacture or sell products that filter, pump or process water or
other fluids. All such assets in the Alliant Energy System will thus not count
towards the investment cap if, among other things, WPL participates in the
Transco in accordance with the Transco Legislation.
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participate in the Transco, such as WPPI,8 will purchase their interests for
cash at a price that will keep the other participants whole, as explained
below.9
J. The Transco Legislation obligates the Transco to construct, operate,
maintain and expand its transmission facilities to provide adequate, reliable
transmission services for a single, system-wide rate for the use of its system
under an open access transmission tariff (the "Transco OATT") that has been
filed with the FERC. The Transco Legislation directs that the Transco support
robust competition in energy markets, extend no favoritism to any participant
and meet the transmission needs of all participants. Under the provisions of the
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8 WPPI is a municipal electric company owned by 30 Wisconsin municipalities
that operate electric utilities. These utilities supply electric power to more
than 100,000 customers in Wisconsin and purchase all of their electric
requirements from WPPI. WPPI was created pursuant to Wisconsin legislation and
is a non-profit, political division of the state. Section 66.073 of the
Wisconsin Statutes.
9 Alternatively, the Transco participants may agree on special allocations
of certain tax elements, rather than adjust the purchase price to be paid by
such tax exempt entities.
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Transco Legislation, the Transco will transfer the operational control of its
transmission facilities to the Midwest Independent Transmission System Operator,
Inc. (the "Midwest ISO") when the Midwest ISO becomes operational. It is
presently expected that this transfer will occur on or about November 1, 2001.
K. It is expected that the participants in the Transco and the Corporate
Manager will include, in addition to WPL and South Beloit, WEPCO, Edison Sault
Electric Company ("ESE") (a WEC subsidiary with operations solely in Michigan's
Upper Peninsula that is subject to regulation by the Michigan Public Service
Commission), WPPI, Wisconsin Public Service Corp. ("WPS"), and Madison Gas &
Electric Company ("MGE").10 All utilities participating in the Transco are
referred to herein as "Member Utilities". Other entities, both within and
outside of Wisconsin, may, in the future, decide to become members of the
Transco. The Member Utilities intend to contribute their transmission assets to
the Transco on or about January 1, 2001 (the "Operations Date").11 The
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10 The Corporate Manager will also initially own a less than 1% interest in
the Transco.
11 The Transco Legislation currently contemplates that the transfer of the
transmission assets will occur by the Operations Date. Indeed, the Transco
Legislation requires WPL to commit to transfer its transmission assets to the
Transco by January 1, 2001 in order for Alliant Energy to obtain relief from the
Wisconsin non-utility asset cap applicable to Wisconsin public utility holding
companies described in note 6 above. Moreover, it is not clear how a failure to
effect such transfer by the Operations Date would impact Alliant Energy's
position with respect to such asset cap calculation. Accordingly, the Member
Utilities are proceeding under the assumption that Transco operation will begin
on the Operations Date and are therefore making all of the requisite FERC
filings to have the Transco OATT effective as of such date.
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transmission systems of the Member Utilities are interconnected at various
points and essentially all operate as part of the same reliability and planning
council -- the Mid-America Interconnected Network, Inc. ("MAIN").12 MAIN
promotes coordinated planning, construction, operation, maintenance and use of
generation and transmission facilities by its members. The Member Utilities'
transmission systems were also planned and built on a coordinated basis pursuant
to the Wisconsin "advance planning" law in effect from 1975 until 1997. For a
map detailing the interconnection of the transmission systems of the Member
Utilities, see Exhibit E hereto.
TRANSCO OPERATIONS AND ORGANIZATION
L. The Transco will have the exclusive duty to provide transmission
service in geographic areas formerly served by the Transco members. The Transco
will not, however, have that duty in areas where control of transmission
facilities has been directly transferred to the Midwest ISO. Wisconsin law
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12 ESE is part of the East Central Area Reliability (ECAR), but is expected
to become part of MAIN by January 1, 2001.
12
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prohibits the Transco from directly serving retail customers and from bypassing
distribution systems.
M. It is expected that the transmission-owning Member Utilities and the
Transco will enter into one or more agreements ("O&M Agreements") pursuant to
which the Member Utilities will provide the Transco with "reasonable and cost
effective operations and maintenance services" for at least the first three
years after the Operations Date in accordance with the Transco Legislation.13
Services provided under the O&M Agreements will include line equipment services,
station equipment services and emergency response services. The Member Utilities
and the Transco will also enter into a one or more services agreements
("Services Agreements") pursuant to which the Member Utilities will provide the
Transco with certain services, such as control center services, real estate
services and capital project services, not covered by the O&M Agreements.
Additionally, the Member Utilities and the Transco will enter into a System
Operating Agreement ("System Operating Agreement") pursuant to which the Transco
will provide, among other things, ancillary services and control area operations
at FERC-approved rates. Finally, the Transco will provide certain services from
the Stoughton Operations Center to support Alliant Energy's operation of its
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13 Section 196.485 (3m)(a)1.b. of the Wisconsin Statutes.
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transmission facilities outside of Wisconsin and its 34.5 kV facilities in
Wisconsin that are not being transferred to the Transco. It is expected that
such operations will be governed by an agency agreement ("Agency Agreement").
Any services provided or received by WPL, South Beloit or any other Alliant
Energy affiliate pursuant to the foregoing agreements will be provided "at cost"
in accordance with Rules 90 and 91 under the Act, unless otherwise authorized or
directed by appropriate governmental or regulatory authority.
N. In accordance with the Transco Legislation, all transmission-owning
Member Utilities will transfer all transmission assets to the Transco on the
Operations Date. For purposes of establishing relative shares, the transmission
assets will be valued at their Contribution Value, defined as original cost less
accumulated deprecation, as adjusted on a dollar-for-dollar basis for deferred
taxes, excess deferred taxes and deferred investment tax credits. The resulting
shares will then be adjusted based on various factors and the level of
participation by transmission-dependent utilities which may acquire member units
in the Transco for cash based upon their 1999 Wisconsin load share ratios. It is
expected that WPL's and South Beloit's Contribution Values at December 31, 2000
will be $126,784,000 and $590,000, respectively, and their aggregate initial
interest in the Transco will approximate 26%. This ownership percentage may
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fluctuate based on various factors, including the number of participants in the
Transco.
O. WPPI, and any other transmission-dependent tax-exempt entity that
participates in the Transco, will also be members of the Transco, but will not
be contributing transmission assets. Because the participation of tax exempt
entities like WPPI will reduce the transmission revenue otherwise received by
the Transco,14 such entities will purchase their interests for a price that is
designed to keep the other participants whole. It is anticipated that funds
received from WPPI and any other tax-exempt Transco member will be used to fund
outlays necessary to pay start-up costs and construction work-in-progress or be
used as cash working capital. The tax-exempt purchase price will be recalculated
annually such that all tax-exempt participants will be required to make
additional cash contributions (or receive a refund of any "over contributed"
funds) to insure that the return otherwise payable to the other
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14 Based on FERC precedent with respect to natural gas pipelines, the
revenue requirement reflected in the Transco's FERC petition includes provision
for income taxes payable by its members with respect to Transco income. The
participation of any tax exempt entity in the Transco will reduce that revenue
requirement and therefore each tax-exempt Transco member must make contributions
to the Transco to make up for the diminished return of the other members.
Alternatively, the Transco participants may agree on special allocations of
certain tax elements, rather than adjust the purchase price to be paid by such
tax exempt entities.
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transmission-contributing participants is not diminished because of the tax
exempt entities' participation.
P. The Transco members will enter into an agreement (the "Operating
Agreement") which will govern the activities of the Transco. Because the Transco
is a manager-managed limited liability company, the Operating Agreement will
grant to the Corporate Manager full, complete and exclusive discretion to
exercise management control over the business of the Transco. The Corporate
Manager will have all powers as a manager to do all things necessary and
convenient to carry out the Transco's business. In accordance with the Operating
Agreement, all expenses of the Corporate Manager will be treated as Transco
expenses. Such expenses will be charged back to the Transco at cost in
accordance with Section 13(b) of the Act and Rules 90 and 91 thereunder. The
Corporate Manager will employ all personnel necessary to operate the Transco.
Pursuant to the Operating Agreement, the Corporate Manager's activities will be
limited to serving as manager of the Transco and any Transco subsidiaries.
Q. In accordance with the Transco's Operating Agreement, the Member
Utilities will not be permitted to sell their interests in the Transco for a
period of three years following the Operations Date, except for transfers to
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another Member Utility or an affiliate of the transferring Member Utility.15
After the three year period expires, any Transco interest may be freely
transferred, subject to any applicable legal constraints. The Member Utilities
may exchange all or a portion of their Transco member units for shares in the
Corporate Manager on a one-for-one basis at any time after the three years or,
if earlier, one year after an initial public offering by the Corporate Manager.
R. No Member Utility will be obligated to make any additional capital
contributions to the Transco or the Corporate Manager; however, there may be
optional contributions if a majority of the Corporate Manager's directors
determine that such additional capital is appropriate. The Operating Agreement
will establish a target dividend rate of 80% of the Transco's earnings, subject
to adjustment.
S. Member Utilities will also purchase shares of the Corporate Manager,
for cash, in proportion to their percentage interests in the Transco. It is
expected that WPL will pay $10 per share for an approximate 26% interest in the
Corporate Manager. The Corporate Manager will have two classes of stock: Class A
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15 The Operating Agreement defines an "affiliate" of the Member Utility as
any company within the same holding company system as defined in
ss.195.795(1)(i) of the Wisconsin Statutes.
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and Class B.16 WPL will receive approximately 26%, or 2,563 shares, of the
nonvoting Class A shares. Additionally, each Member Utility, including WPL, will
receive one Class B voting share.17 Each holder of a Class B share will be
entitled to appoint one of the Corporate Manager's directors. All Class B shares
will convert into Class A shares on the earlier of (i) the ownership by the
Corporate Manager of more than 50% of the Transco interests or (ii) the tenth
anniversary of the Operations Date, unless the Corporate Manager's Board of
Directors elects to override the conversion. Class A shares will become voting
shares upon the conversion of Class B shares to Class A shares or after the
Corporate Manager commences a public offering of its stock. Following the public
offering, the Class A shareholders will have the right to elect a majority of
the Board of Directors and the Class B shareholders will elect a minority of the
directors, but each owner of a Class B share will continue to have the right to
appoint one of the Corporate Manager's directors. Each Class A and Class B share
will be entitled to the same amount of dividends.
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16 The Class A/Class B structure ensures that the Member Utilities will
have economic interests proportionate to the value of their contribution to the
Transco while still maintaining the desired per capita voting arrangement.
17 Neither South Beloit nor ESE will receive shares in the Corporate
Manager.
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TRANSFERRED PROPERTIES
T. WPL and South Beloit propose to transfer their ownership and control of
their respective Transmission Assets to the Transco. The Transco will acquire
from WPL and South Beloit transmission facilities that operate at voltages of
345 kV, 138 kV and 69 kV. The WPL Transmission Assets and South Beloit
Transmission Assets 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 WPL's systems operation center located in Stoughton, Wisconsin.18
It is expected that, as of December 31, 2000, the original cost of the WPL
Transmission Assets and the South Beloit Transmission Assets will be
approximately $314,276,000 and $678,000, respectively. The net book value
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18 The other Member Utilities will also be contributing similar assets to
the Transco.
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(original cost less accumulated depreciation) of the WPL Transmission Assets and
the South Beloit Transmission Assets at December 31, 2000 is expected to be
approximately $177,650,000 and $439,000, respectively.
U. The facilities WPL and South Beloit will transfer to the Transco do not
include distribution facilities used to provide retail service or generation
facilities. 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.
V. WPL currently provides FERC jurisdictional transmission service to
certain customers over distribution facilities operated at voltages of less than
50 kV. The Transco will continue the provision of such service as WPL's agent.
Consequently, transmission customers that use WPL's distribution system will, in
the future, be able to secure from the Transco all necessary transmission
services over WPL's current transmission and distribution system.
W. The Transco will be under a statutory mandate to transfer operational
control of its jurisdictional facilities to the Midwest ISO. Prior to the
transfer, the Transco will have operational control of the transmission system
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contributed by Wisconsin utilities; provide ancillary services; operate an Open
Access Same-Time Information System ("OASIS") in conformance with FERC Order No.
889; and administer the Transco OATT. The Transco also will be responsible for
the maintenance of the transmission facilities under its ownership and control
and will assume responsibility for transmission system planning. After the
transfer to the Midwest ISO, the Transco will make changes to its OATT to
accommodate operational differences between the Transco and the Midwest ISO open
access transmission tariff.
X. WPL and South Beloit will each enter into a bill of sale, deeds,
easement assignments and other documentation with the Transco governing the
conveyance of their respective transmission assets. The transmission assets
transferred to the Transco will include WPL's rights and interest in any
contracts under the Alliant Energy Open Access Transmission Tariff ("Alliant
Energy OATT").
Y. In addition to the assets from WPL and South Beloit, the Transco seeks
authority to acquire transmission assets from MGE, WEPCO, WPS and ESE in
exchange for Transco member units based on the Contribution Value of such
transferred assets. For a description of these assets, including original cost,
net book value and Contribution Value, see Exhibit I hereto. The Transco also
seeks authority to acquire the incidental transmission facilities of
transmission-dependent utilities, such as WPPI's member municipal utilities. The
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Transco will assign a nominal value of $10 to each unit of membership interest
initially issued in exchange for transmission assets.
Z. The Transco will offer ancillary services under the Transco's OATT.
Because the Transco will own no generating facilities, it will purchase
ancillary services from third parties and resell them under its OATT. The
Transco expects to enter into agreements to purchase must run and ancillary
services from generators in the control areas of WEPCO, WPL, WPS and MGE. The
Transco will contract for must-run operations and ancillary services with the
generators located in its control area and connected to its transmission system.
In accordance with Wisconsin law, the Transco will not, however, engage in the
purchase and sale of energy other than to obtain necessary ancillary services
required by its customers.
AA. Upon receipt of necessary regulatory approvals, the Transco will begin
providing open access transmission service under its OATT to those existing open
access customers currently served by WPL under the existing Alliant Energy OATT
and to any other eligible customer requesting transmission service from the
Transco. WPL and South Beloit will become transmission customers of the Transco
under its transmission tariff. Where WPL is responsible for providing
transmission service under agreements or tariffs predating FERC Order No. 888
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("grandfathered agreements"), the Transco will make its transmission system
available under the Transco OATT in order to provide transmission service to
customers under the grandfathered agreements.
FINANCING
BB. The Transco will initially obtain funds externally through short-term
debt financing under a Credit Agreement between the Transco and Bank One, N.A.,
as Agent ("Credit Facility").19 The Transco now seeks to increase the
authorized principal amount of borrowings under the Credit Facility to $125
million. To provide financing for general corporate purposes, including working
capital requirements, and to fund construction spending to undertake large scale
capital improvements to the Wisconsin transmission system necessary to maintain
reliability, the Transco proposes to issue from time to time, through June 30,
2004, short-term debt consisting of borrowings under the Credit Facility, the
issuance of commercial paper or other forms of short-term financing. The
maturity of such debt will not exceed one year. The Transco seeks authority to
------------------------
19 The Commission has previously authorized borrowings of up to $30 million
under the Credit Facility. The initial Credit Facility will, however, provide
for only $25 million of borrowings. In connection therewith, Alliant Energy has
authority to deliver a guaranty agreement to the lenders under the Credit
Facility relating to up to $30 million of borrowings by the Transco under the
Credit Facility. See HCAR No. 27206 (Aug. 2, 2000).
---
23
<PAGE>
amend the Credit Facility without further Commission authorization provided that
the maturity date does not extend beyond June 30, 2004, and the aggregate
principal amount of authorized borrowings does not exceed $125 million.
CC. The Transco will sell commercial paper, from time to time, in
established domestic or European commercial paper markets to dealers at the
prevailing discount rate per annum, or at the prevailing coupon rate per annum,
at the date of issuance. It is expected that the dealers acquiring commercial
paper from the Transco will re-offer such paper at a discount to corporate,
institutional and, with respect to European commercial paper, to individual
investors.
DD. Back-up bank lines of credit for 100% of the outstanding amount of
commercial paper are generally required by credit rating agencies. The Credit
Facility will back-up the Transco's commercial paper program, thus negating the
need for additional lines of credit.
EE. The Transco also proposes to issue from time to time, through June 30,
2004, long-term debt consisting of debentures, which may be in the form of
medium-term notes, convertible debt, subordinated debt, bank borrowings, other
debt securities or other forms of long-term financing. Any long-term debt
security would have a maturity ranging from one to 50 years. Debentures and
medium-term notes would be issued under an indenture. The amount of short-term
24
<PAGE>
and long-term debt outstanding at any time, including debt under the Credit
Facility, will not exceed, in the aggregate, $400 million.
FF. Any short-term or long-term debt security or credit facility would
have such designation, aggregate principal amount, interest rate(s) or methods
of determining the same (subject to paragraph HH below), terms of payment of
interest, collateral, redemption provisions, non-refunding provisions, sinking
fund terms, conversion or put terms and other terms and conditions as the
Transco and the Corporate Manager may determine at the time of issuance.
GG. The Transco and the Corporate Manager propose to issue from time to
time through June 30, 2004 equity securities consisting of common or preferred
stock of the Corporate Manager, other equity securities or additional interests
in the Transco. The aggregate issuance price of such equity securities will not
exceed $500 million. The dividend rate on any series of preferred securities
issued by the Corporate Manager will not exceed 500 basis points over the yield
to maturity of a U.S. Treasury security having a remaining term equal to the
term of that series of preferred securities at the time of issuance. Such
preferred securities may have mandatory redemption dates.
HH. Such securities may be issued and sold pursuant to standard
underwriting agreements. Public distribution may be effected through private
25
<PAGE>
negotiations with underwriters, dealers or agents, or through competitive
bidding among underwriters. In addition, such securities may be issued and sold
through private placements or other non-public offerings to one or more persons.
All such debt instruments and stock sales will be at rates or prices and under
conditions negotiated, or based upon, or otherwise determined by, competitive
capital markets. In no event, however, will the effective cost of money on
short-term debt exceed 300 basis points over the London Interbank Offered Rate
for maturities of one year or less in effect at the time. The interest rate on
long-term debt will not exceed 500 basis points over the yield-to-maturity of a
U.S. Treasury security having a remaining term approximately equal to the
average life of such debt.
II. The Transco also requests authorization to enter into interest rate
hedging transactions with respect to existing indebtedness ("Interest Rate
Hedges"), subject to certain limitations and restrictions, in order to reduce or
manage interest rate cost. Interest Rate Hedges would only be entered into with
counterparties ("Approved Counterparties") whose senior debt ratings, or the
senior debt ratings of the parent companies of the counterparties, as published
26
<PAGE>
by Standard and Poor's Ratings Group, are equal to or greater than BBB, or an
equivalent rating from Moody's Investors Service, Fitch, or Duff and Phelps.
Interest Rate Hedges will involve the use of financial instruments commonly
used in today's capital markets, such as interest rate swaps, caps, collars,
floors, and structured notes (i.e., a debt instrument in which the principal
and/or interest payments are indirectly linked to the value of an underlying
asset or index), or transactions involving the purchase or sale, including short
sales, of U.S. Treasury obligations. The transactions would be for fixed periods
and stated notional amounts. Fees, commissions and other amounts payable to the
counterparty or exchange (excluding, however, the swap or option payments) in
connection with an Interest Rate Hedge will not exceed those generally
obtainable in competitive markets for parties of comparable credit quality.
In addition, the Transco requests authorization to enter into interest rate
hedging transactions with respect to anticipated debt offerings (the
"Anticipatory Hedges"), subject to certain limitations and restrictions. Such
Anticipatory Hedges would only be entered into with Approved Counterparties, and
would be utilized to fix and/or limit the interest rate risk associated with any
new issuance through (i) a forward sale of exchange-traded U.S. Treasury futures
contracts, U.S. Treasury obligations and/or a forward swap (each a "Forward
Sale"), (ii) the purchase of put options on U.S. Treasury obligations (a "Put
27
<PAGE>
Options Purchase"), (iii) a Put Options Purchase in combination with the sale of
call options on U.S. Treasury obligations (a "Zero Cost Collar"), (iv)
transactions involving the purchase or sale, including short sales, of U.S.
Treasury obligations, or (v) some combination of a Forward Sale, Put Options
Purchase, Zero Cost Collar and/or other derivative or cash transactions,
including, but not limited to structured notes, caps and collars, appropriate
for the Anticipatory Hedges.
Anticipatory Hedges may be executed on-exchange ("On-Exchange Trades") with
brokers through the opening of futures and/or options positions traded on the
Chicago Board of Trade ("CBOT"), the opening of over-the-counter positions with
one or more counterparties ("Off-Exchange Trades"), or a combination of
On-Exchange Trades and Off-Exchange Trades. The Transco will determine the
optimal structure of each Anticipatory Hedge transaction at the time of
execution. The Transco may decide to lock in interest rates and/or limit its
exposure to interest rate increases. All open positions under Anticipatory
Hedges will be closed on or prior to the date of the new issuance and the
Transco will not, at any time, take possession or make delivery of the
underlying U.S. Treasury Securities.
28
<PAGE>
The Applicants will comply with existing and future financial disclosure
requirements of the Financial Accounting Standards Board associated with hedging
transactions.20
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
------------------------------
The fees, commissions and expenses incurred or to be incurred in connection
with the transactions proposed herein will be filed by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
-------------------------------
Sections 6(a), 7, 9(a), 10, 11, 12 and 13 of the Act and Rules 43, 44, 54,
90 and 91 thereunder apply to the proposed transactions.
When the transmission assets of the Member Utilities are transferred from
the Member Utilities to the Transco, the Transco, and the Corporate Manager, by
virtue of its ownership interest in, and management of, the Transco, will each
become an "electric utility company" as defined in Section 2(a)(3) of the Act as
well as a "public utility company" as defined in Section 2(a)(5) of the Act.
Because Alliant Energy will be indirectly acquiring the securities of the
Transco and the Corporate Manager, and because the Transco, which may be a
subsidiary of a registered holding company, will be acquiring utility assets
------------------------
20 The proposed terms and conditions of the Interest Rate Hedges and
Anticipatory Hedges are substantially the same as the Commission has approved in
other cases. See New Century Energies, Inc., et al., Holding Co. Act Release No.
27000 (April 7, 1999); and SCANA Corporation., et al., Holding Co. Act Release
No. 27137 (February 14, 2000).
29
<PAGE>
from the Member Utilities, the transactions contemplated herein will be subject
to Section 9(a) of the Act. Thus, Applicants believe that the proposed
transactions cannot proceed without the Commission's approval pursuant to
Section 10 of the Act. The relevant statutory standards to be satisfied are set
forth in Sections 10(b), 10(c) and 10 (f) of the Act.
A. SECTION 10(b)
Section 10(b) of the Act provides that, if the requirements of Section
10(f) are satisfied, the Commission shall approve an acquisition under Section
9(a) unless the Commission finds that:
(1) such acquisition will tend towards interlocking relations or the
concentration of control of public-utility companies, of a kind or to an
extent detrimental to the public interest or the interest of investors or
consumers;
(2) in case of the acquisition of securities or utility assets, the
consideration, including all fees, commissions, and other remuneration, to
whomsoever paid, to be given, directly or indirectly, in connection with
such acquisition is not reasonable or does not bear a fair relation to the
sums invested in or the earning capacity of the utility assets to be
acquired or the utility assets underlying the securities to be acquired; or
(3) such acquisition will unduly complicate the capital structure of
the holding company system of the applicant or will be detrimental to the
public interest or the interest of investors or consumers or the proper
functioning of such holding company system.
1. Section 10(b)(1). The proposed transactions will not tend towards
interlocking relations or the concentration of control of public utility
30
<PAGE>
companies, of a kind or to an extent detrimental to the public interest or the
interest of investors or consumers.
The Corporate Manager will initially have a ten member Board of Directors.
While five directors will be appointed by the Member Utilities, four directors
will be independent, as mandated by the Transco Legislation. The remaining
director will be the chief executive officer of the Corporate Manager. The
employees of the Transco and the Corporate Manager will not be employees of any
of the Member Utilities. Therefore, any interlocking relations will be minimal,
at most.
Similarly, the proposed transactions will not tend toward any
"concentration of control of public-utility companies" that is detrimental to
the public interest, consumers or investors. The end result of the formation of
the Transco will not be the concentration of control over the Wisconsin
transmission system, but rather the dilution of control. There will be at least
five Member Utilities with input, through the Corporate Manager, over decisions
as to the management and operation of the Transco's transmission assets. One of
these Member Utilities -- WPPI -- currently has no such input. Indeed, the
creation of the Transco will encourage competition, rather than concentrate
control.
31
<PAGE>
2. Section 10(b)(2) - (a) Fairness of Consideration. Section 10(b)(2) of
the Act requires the Commission to determine whether the consideration in
connection with a proposed acquisition of securities is reasonable and whether
it bears a fair relation to the investment in and the earning capacity of the
utility assets underlying the securities being acquired. All transmission assets
that will be transferred to the Transco will be valued based on the same
methodology. This methodology is generally mandated by the Transco Legislation
and the specifics have been arrived at as the result of arms-length negotiations
among all of the Member Utilities, subject to the review and approval of the
Wisconsin Commission. Applicants further believe that such consideration bears a
fair relation to the investment in and the earning capacity of the transmission
assets to be transferred because it is based on the Contribution Value of those
assets. Because the Transco's rates will also be subject to FERC approval, it
can be expected that those rates (which will largely also be based on the same
Contribution Value) will permit the Transco to earn a fair return on them as
well. This being the case, all Member Utilities, including WPL and South Beloit,
can expect to earn a fair return on their investment.
32
<PAGE>
(b) Reasonableness of Fees. An estimate of the fees and expenses to be
paid in connection with the proposed transactions is set forth in Item 2 hereof.
The estimated amounts to be paid are fees required to be paid to governmental
bodies, fees for necessary professional services, and other expenses incurred or
to be incurred in connection with carrying out the proposed transactions.
Applicants believe that such fees and expenses are reasonable and customary for
a transaction of this kind, and that the standards of Section 10(b)(2) are thus
satisfied.
3. Section 10(b)(3) - Capital Structure. Section 10(b)(3) requires that
the Commission determine whether the proposed transactions will unduly
complicate Alliant Energy's capital structure or will be detrimental to the
public interest, the interests of investors or consumers or the proper
functioning of Alliant Energy's system. The corporate capital structure of
Alliant Energy after the consummation of the proposed transactions will not be
unduly complicated.
The ownership structure of the Corporate Manager and the Transco has been
designed to simplify management of the Transco and to facilitate public
investment in the Transco enterprise through a public offering of stock in the
Corporate Manager, such stock being more attractive to investors than would be
the equivalent LLC interests in the Transco. Although such structure introduces
33
<PAGE>
an additional corporate layer into the Alliant Energy system, the Transco and
the Corporate Manager will, as a practical matter, function as one entity. The
Corporate Manager has been introduced simply to make public investment in the
Transco enterprise more "investor-friendly".21
In any event, as set forth more fully in this Application/Declaration, the
proposed formation of the new transmission company is expected to result in
benefits to the public and to consumers and investors of the Alliant Energy
holding-company system.
B. SECTION 10(c)
Section 10(c) of the Act provides that:
Notwithstanding the provisions of subsection (b), the Commission shall
not approve:
(1) an acquisition of securities or utility assets, or of any other
interest, which is unlawful under the provisions of Section 8 or is
detrimental to the carrying out of the provisions of Section 11; or
------------------------
21 Upon transfer of its transmission assets to the Transco, and its
acquisition of ownership interests in the Transco and the Corporate Manager, WPL
will file an exemption statement on Form U-3A-2 pursuant to Rule 2 under the
Act. The Corporate Manager's ownership interests in the Transco may also
increase over time so as to render it a "holding company". In such event, it is
anticipated that the Corporate Manager will take appropriate regulatory action
which might include seeking an exemption under Section 3 of the Act, even though
it may no longer be a "subsidiary company" of Alliant Energy at that time.
34
<PAGE>
(2) the acquisition of securities or utility assets of a public
utility or holding company unless the Commission finds that such
acquisition will serve the public interest by tending towards the
economical and efficient development of an integrated public utility
system . . . .
1. Section 10(c)(1). Consistent with the standards set forth in Section
10(c)(1) of the Act, the proposed acquisition of securities will not be unlawful
under the provisions of Section 8 of the Act, or detrimental to the carrying out
of the provisions of Section 11 of the Act.
Section 8 prohibits a registered holding company or any of its subsidiaries
from acquiring, owning interests in or operating both a gas utility company and
an electric utility company serving substantially the same area if prohibited by
state law, and is thus not applicable to the transactions contemplated herein.
Section 11(a) of the Act requires the Commission to examine the corporate
structure of registered holding companies to ensure, among other things, that
unnecessary complexities are eliminated and voting powers are fairly and
equitably distributed. As discussed above, the Transco/Corporate Manager
ownership structure has been designed to facilitate public investment in the
Transco enterprise and is therefore not unnecessarily complex. Moreover, voting
powers have been fairly allocated among the Transco participants. Accordingly,
the proposed transactions meet the standards of Section 11(a) of the Act.
35
<PAGE>
2. Section 10(c)(2). As the following discussion will demonstrate, the
proposed transactions will serve the public interest by tending towards the
economical and efficient development of an integrated public utility system, as
required by Section 10(c)(2) of the Act.
(a) Efficiencies and Economies. As described more fully above, the
proposed transactions tend towards the following efficiencies and economies: (i)
greater corporate and organizational separation of transmission from generation;
and (ii) by tying together control, planning, maintenance and financial
responsibilities for the Member Utilities' transmission facilities into a single
company having an independent, streamlined and cost-efficient operation,
synergies will be created that result in better service in the region and
non-discriminatory access for all transmission users will be assured.
(b) Integrated Public Utility System. As applied to electric utility
companies, the term "integrated public utility system" is defined in Section
2(a)(29)(A) of the Act as:
a system consisting of one or more units of generating plants and/or
transmission lines and/or distributing facilities, whose utility assets,
36
<PAGE>
whether owned by one or more electric utility companies, are physically
interconnected or capable of physical interconnection and which under
normal conditions may be economically operated as a single interconnected
and coordinated system confined in its operation to a single area or
region, in one or more states, not so large as to impair (considering the
state of the art and the area or region affected) the advantages of
localized management, efficient operation, and the effectiveness of
regulation.
The Commission has previously taken notice of developments that have
occurred in the gas and electric industries in recent years, and has interpreted
the Act and analyzed proposed transactions in light of these changed and
changing circumstances. See, e.g., American Electric Power Co., HCAR No. 27186
---------------------------
(Jun. 14, 2000) ("AEP Order"); New Century Energies, Inc., HCAR No. 26748 (Aug.
--------- --------------------------
1, 1997) (approving transactions relating to combination of a Colorado gas and
electric utility company and intrastate exempt holding company and a New Mexico
electric utility company), citing Hearing on Regulation of Public Utility
Holding Companies Before Subcomm. on Telecommunications and Finance and Subcomm.
on Energy and Power of the House of Representatives Comm. on Commerce, 104th
Cong., 1st Sess. (Aug. 4, 1995) (testimony of Arthur Levitt, Chairman, SEC). See
also Rust v. Sullivan, 500 U.S. 173, 186-87 (1991) ("an agency is not required
----------------
to" establish rules of conduct to last forever, "but rather must be given ample
latitude to "adapt [its] rules and policies to the demands of changing
37
<PAGE>
circumstances.") (citations omitted); Shawmut Assn. v. SEC, 146 F.2d 791, 796-97
--------------------
(1st Cir. 1945) (an agency "is expected to treat experience not as a jailer but
as a teacher").
On the basis of the statutory definition above, the Commission has
established four standards that must be met before the Commission will find that
an integrated public utility system will result from a proposed transaction:
(1) the utility assets of the system are physically interconnected or
capable of physical interconnection;
(2) the utility assets, under normal conditions, may be economically
operated as a single interconnected and coordinated system;
(3) the system must be confined in its operations to a single area or
region; and
(4) the system must not be so large as to impair (considering the
state of the art and the area or region affected) the advantages of
localized management, efficient operation, and the effectiveness of
regulation.
Environmental Action, Inc. v. SEC, 895 F.2d 1255, 1263 (9th Cir. 1990), quoting
---------------------------------
In re Electric Energy, Inc., 38 S.E.C. 658, 668 (1958).
---------------------------
The proposed transactions satisfy all four of these requirements. In
examining proposed transactions to determine whether the integration
requirements have been satisfied, the Commission has "interpreted the Act and
analyzed transactions in the light of . . . changed and changing circumstances."
38
<PAGE>
AEP Order. Applicants believe that the Transco Legislation, as well as the
---------
recent FERC Order No. 2000, both of which strongly encourage transmission
company formation, constitute such changing circumstances which the Commission
should consider when evaluating the proposed transactions.
PHYSICAL INTERCONNECTION. In view of the above, the facts presented clearly
support a finding that the utility assets of the Transco will be "physically
interconnected or capable of physical interconnection" within the meaning of
Section 2(a)(29)(A) of the Act once the transactions contemplated herein are
completed. Indeed, as discussed in paragraph K of Item 1, the utility assets to
be owned by the Transco are already physically interconnected.
SINGLE INTERCONNECTED AND COORDINATED SYSTEM. Section 2(a)(29)(A) of the
Act requires that the utility assets, under normal circumstances, may be
"economically operated as a single interconnected and coordinated system." The
Commission has interpreted this language to refer to the physical operation of
utility assets as a system in which, among other things, the generation and/or
flow of current within the system may be centrally controlled and allocated as
need or economy directs. See UNITIL Corp., HCAR No. 25524 (Apr. 24, 1992). As
------------
discussed above, the transmission assets that will be transferred to the Transco
39
<PAGE>
will be operated in a manner that satisfies the standard of economic and
coordinated operations in Section 2(a)(29)(A) of the Act. Moreover, the proposed
transactions are expected to result in greater coordination and more efficient
allocation of the provision of transmission services within the area served by
the Transco.
SINGLE AREA OR REGION. The "single integrated system" of the Transco will
initially be the central and eastern portions of the State of Wisconsin and
small adjacent areas of the Michigan Upper Peninsula and Illinois. Through the
membership of additional transmission-owning utilities, the Transco's system may
grow to include other parts of Wisconsin and portions of other Midwestern
states.
LOCALIZED MANAGEMENT, EFFICIENT OPERATION AND EFFECTIVE REGULATION. The
creation of the Transco will not impair localized management, efficient
operation or effective regulation by reason of its size. Moreover, the
Commission's past decisions on "localized management" show that the proposed
transactions fully preserve the advantages of localized management. In such
cases, the Commission has evaluated localized management in terms of: (i)
responsiveness to local needs, see American Electric Power Co., HCAR No. 20633
---------------------------
(July 21, 1978)(advantages of localized management evaluated in terms of whether
40
<PAGE>
an enlarged system could be "responsive to local needs"); General Public
--------------
Utilities Corp., 37 S.E.C. 28, 36 (1956)(localized management evaluated in terms
---------------
of "local problems and matters involving relations with consumers"); (ii)
whether management and directors were drawn from local utilities, see Centerior
---------
Energy Corp., HCAR No. 24073 (April 29, 1986)(advantages of localized management
------------
would not be compromised by the affiliation of two electric utilities under a
new holding company because the new holding company's "management [would be]
drawn from the present management" of the two utilities); (iii) the preservation
of corporate identities, see Northeast Utilities, HCAR No. 25221 (December 21,
-------------------
1990) (utilities "will be maintained as separate New Hampshire corporations . .
. [t]herefore the advantages of localized management will be preserved");
Columbia Gas System, Inc., HCAR No. 24599 (March 15, 1988)(benefits of local
-------------------------
management maintained where the utility to be added would be a separate
subsidiary); and (iv) the ease of communications, see American Electric Power
-----------------------
Co., HCAR No. 20633 (July 21, 1978)(distance of corporate headquarters from
---
local management was a "less important factor in determining what is in the
public interest" given the "present-day ease of communications and
transportation"). These elements will all be satisfied here. The Transco is
being created in response to local needs. The Wisconsin legislature has
41
<PAGE>
determined that the Transco will improve electric service in Wisconsin. Each
local utility will elect one director to the Corporate Manager's board of
directors. Each Member Utility will continue to exist after the transmission
assets are transferred to the Transco. Finally, communication between the
Transco and its members will flow easily.22
C. SECTION 10(f)
Section 10(f) provides that
The Commission shall not approve any acquisition as to which an application
is made under this section unless it appears to the satisfaction of the
Commission that such State laws as may apply in respect of such acquisition
have been complied with, except where the Commission finds that compliance
with such State laws would be detrimental to the carrying out of the
provisions of section 11.
As discussed above, the Transco is being created pursuant to, and in
accordance with, Wisconsin law. WPL and South Beloit have filed applications
with the Wisconsin Commission and the Illinois Commission, respectively (copies
of both applications are attached hereto as Exhibits D-7 and D-9, respectively).
Thus, the requirements Section 10(f) are satisfied.
------------------------
22 In addition, under the Transco Legislation, the Transco and/or the
Midwest ISO are obligated, to the maximum extent practicable, to "eliminate[]
advantages in electric generation, wholesale and retail markets that are
otherwise related to ownership, control or operation of transmission facilities"
and "[s]atisf[y] the reasonable needs of transmission users in this state for
reliable, low-cost and competitively priced electric service". Section
196.485(3)(c) of the Wisconsin Statutes.
42
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Rule 54 Analysis. The transactions proposed herein are also subject to
----------------
Section 32(h)(4) of the Act and Rule 54 thereunder. Rule 54 provides that, in
determining whether to approve any transaction that does not relate to an
"exempt wholesale generator" ("EWG") or "foreign utility company" ("FUCO"), as
defined in Sections 32 and 33, respectively, the Commission shall not consider
the effect of the capitalization or earnings of any subsidiary which is an EWG
or FUCO upon the registered holding company system if paragraphs (a), (b) and
(c) of Rule 53 are satisfied.
Alliant Energy is in compliance with all requirements of Rule 53(a).
Alliant Energy's "aggregate investment" (as defined in Rule 53(a)(1)(i)) in all
EWGs and FUCOs at June 30, 2000 was $190 million, or about 15% of Alliant
Energy's "consolidated retained earnings" ($1,243 million for the four quarters
ended June 30, 2000 as defined in Rule 53(a)(1)(ii) and including Alliant
Energy's accumulated other comprehensive income). In addition, Alliant Energy
has complied and will comply with the record-keeping requirements of Rule
53(a)(2), the limitation under Rule 53(a)(3) on the use of the Operating
Companies' personnel to render services to EWGs and FUCOs, and the requirements
of Rule 53(a)(4) concerning the submission of copies of certain filings under
43
<PAGE>
the Act to retail regulatory commissions. Finally, none of the circumstances
described in Rule 53(b) has occurred or is continuing. Alliant Energy need not
make the affirmative demonstration contemplated by Rule 53(c) because Alliant
Energy has satisfied the requirements of Rule 53(a) and (b).
ITEM 4. REGULATORY APPROVALS.
--------------------
WPL's application to the FERC seeking authorization to transfer the WPL
Transmission Assets to the Transco has been approved. South Beloit filed a
corresponding application with the FERC with respect to the South Beloit
Transmission Assets on July 31, 2000, which application is pending. The Transco
has also filed an application with the FERC seeking approval of the Transco
OATT. In addition, the Wisconsin Commission, the Illinois Commission and the
Michigan Public Service Commission must approve certain aspects of the
transactions contemplated herein. No other state commission and, other than this
Commission, no other federal commission, has jurisdiction over the proposed
transactions. In addition, it is expected that other Member Utilities will make
the requisite state, FERC and Commission applications with respect to certain
aspects of the transactions discussed herein.
44
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ITEM 5. PROCEDURE.
---------
The Commission is requested to publish a notice under Rule 23 with respect
to the filing of this Application/Declaration as soon as practicable. The
applicants request that the Commission's Order be issued as soon as practicable
after the notice period and in any event not later than December 1, 2000 in
order to accommodate a closing before December 15, 2000. This will facilitate
the Member Utilities' meeting the January 1, 2001 deadline contemplated by the
Transco Legislation for the commencement of Transco operations and the timely
completion of the transmission asset transfers that are predicated to the
Wisconsin public utility holding companies' relief from the Wisconsin
non-utility asset cap limit.
The applicants further request that there should not be a 30-day waiting
period between issuance of the Commission's order and the date on which the
order is to become effective, hereby waive a recommended decision by a hearing
officer or any other responsible officer of the Commission, and consent that the
Division of Investment Management may assist in the preparation of the
Commission's decision and/or order, unless the Division opposes the matters
proposed herein.
45
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ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
---------------------------------
A. - EXHIBITS.
--------
A-1 Form of Articles of Organization of the Transco. - - Incorporated by
reference to Alliant Energy SEC File No. 70-9695.
A-2 Form of Operating Agreement of the Transco. - - Incorporated by reference
to Alliant Energy SEC File No. 70-9695.
A-3 Form of Articles of Incorporation of the Corporate Manager. - -
Incorporated by reference to Alliant Energy SEC File No. 70-9695.
A-4 Form of By-laws of the Corporate Manager. - - Incorporated by reference to
Alliant Energy SEC File No. 70-9695.
A-5 Form of Articles of Organization of NewCo.*
A-6 Form of Operating Agreement of NewCo.*
B-1 Form of O&M Agreements.*
B-2 Form of Services Agreements.*
B-3 Form of System Operating Agreement.*
B-4 Form of Agency Agreement.*
C Not Applicable.
D-1 Application of WPL to the FERC -- Previously filed.
D-2 Application of South Beloit to the FERC.*
D-3 Application of Alliant Energy Corporate Services, Inc. to the FERC.*
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D-4 Order of the FERC regarding WPL Application.*
D-5 Order of the FERC regarding South Beloit Application.*
D-6 Order of the FERC regarding Alliant Energy Corporate Services, Inc.
Application.*
D-7 Application of WPL to the Wisconsin Commission.*
D-8 Order of the Wisconsin Commission regarding WPL.*
D-9 Application of South Beloit to the Illinois Commission.*
D-10 Order of the Illinois Commission regarding South Beloit.*
D-11 Application of the Transco to the FERC.*
D-12 Order of the FERC regarding Transco Application.*
E Interconnection Map - to be filed pursuant to Form SE.*
F-1 Opinion of Barbara Swan, Esq.*
F-2 Opinion of DeFrees & Fiske.*
G Not applicable.
H Form of Notice.
I Description and valuation of transferred assets.*
* To be filed by amendment.
B. FINANCIAL STATEMENTS.
--------------------
1.1 Balance Sheet of Alliant Energy and consolidated subsidiaries, as of June
30, 2000 (incorporated by reference to the Quarterly Report on Form 10-Q of
Alliant Energy for the quarter ended June 30, 2000) (File No. 1-9894) --
Previously filed.
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1.2 Statement of Income of Alliant Energy and consolidated subsidiaries for the
period ended June 30, 2000(incorporated by reference to the Quarterly
Report on Form 10-Q of Alliant Energy for the quarter ended June 30, 2000)
(File No. 1-9894) -- Previously filed.
1.3 Balance Sheet of WPL, as of June 30, 2000 (incorporated by reference to the
Quarterly Report on Form 10-Q of WPL for the quarter ended June 30, 2000)
(File No. 0-337) - previously filed.
1.4 Statement of Income of WPL for the period ended June 30, 2000 (incorporated
by reference to the Quarterly Report on Form 10-Q of WPL for the quarter
ended June 30, 2000) (File No. 0-337) -- Previously filed.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
---------------------------------------
None of the matters that are the subject of this Application or Declaration
involve a "major federal action" nor do they "significantly affect the quality
of the human environment" as those terms are used in section 102(2)(C) of the
National Environmental Policy Act. The transaction that is the subject of this
Application or Declaration will not result in changes in the operation of the
Applicants that will have an impact on the environment. The Applicants are not
aware of any federal agency that has prepared or is preparing an environmental
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impact statement with respect to the transactions that are the subject of this
Application or Declaration.
49
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, as amended, the undersigned companies have duly caused this Application or
Declaration filed herein to be signed on their behalf by the undersigned
thereunto duly authorized.
ALLIANT ENERGY CORPORATION
By: /s/ Edward M. Gleason
------------------------------------
Name: Edward M. Gleason
Title: Vice President-Treasurer
and Corporate Secretary
WISCONSIN POWER AND LIGHT COMPANY
By: /s/ Edward M. Gleason
------------------------------------
Name: Edward M. Gleason
Title: Vice President-Treasurer
and Corporate Secretary
SOUTH BELOIT WATER, GAS & ELECTRIC
COMPANY
By: /s/ Edward M. Gleason
------------------------------------
Name: Edward M. Gleason
Title: Vice President-Treasurer
and Corporate Secretary
AMERICAN TRANSMISSION COMPANY LLC
By: ATC Management Inc., Its Manager
By: /s/ Daniel A. Doyle
------------------------------------
Name: Daniel A. Doyle
Title: Vice President, Chief
Financial Officer and Treasurer
50
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ATC MANAGEMENT INC.
By: /s/ Daniel A. Doyle
------------------------------------
Name: Daniel A. Doyle
Title: Vice President, Chief
Financial Officer and Treasurer
Date: November 28, 2000
51
